Original Author: Barry Greller<\/p>\n
Revised 2014 by Stephen Swanson<\/a><\/p>\n Revised 2022 by Tara Kalar<\/a><\/p>\n Download a PDF of Chapter 10<\/a><\/p>\n Chapter Contents<\/p>\n Under the Administrative Procedure Act (APA), contested cases are not governed by the strict rules of evidence that apply to the trial of cases in Minnesota courts.<\/a>[1]<\/a><\/sup> Rather, the APA provides that agencies \u201cmay admit and give probative effect to evidence which possesses probative value commonly accepted by reasonable prudent persons in the conduct of their affairs.\u201d<\/a>[2]<\/a><\/sup> The rules of the Office of Administrative Hearings (OAH) echo this standard and specifically provide that admissible evidence may include \u201creliable\u201d hearsay.<\/a>[3]<\/a><\/sup> Under this relaxed standard of admissibility, courts will generally not disturb agency decisions that rest on evidence that is not admissible under the formal rules of evidence, including the hearsay rule, unless the evidence is \u201cinherently unreliable\u201d and the agency\u2019s use of the evidence constitutes an abuse of discretion.<\/a>[4]<\/a><\/sup> In practice, however, APA contested cases are heard by administrative law judges (ALJs) and tried by attorneys trained in the formal rules of evidence. As a consequence, with the exception of admissible hearsay, most of the formal rules of evidence tend to be argued and applied to help distinguish evidence that does not possess \u201cprobative value.\u201d In addition, the rules of evidence are frequently a useful basis for arguing that a particular piece of evidence is \u201cunreliable\u201d and should be excluded from the hearing record.<\/p>\n The rules of the OAH provide that all parties to a contested case have the right to present evidence, including rebuttal evidence.<\/a>[5]<\/a><\/sup> In receiving evidence, ALJs and agencies are required to \u201cgive effect to the rules of privilege recognized by law.\u201d<\/a>[6]<\/a><\/sup> Presumably, agencies must recognize the constitutional privileges construed by case law,<\/a>[7]<\/a><\/sup> as well as those established by statute.<\/a>[8]<\/a><\/sup> In addition, evidence that is incompetent, irrelevant, immaterial, or unduly repetitious is to be excluded by the ALJ or by the agency.<\/a>[9]<\/a><\/sup> Here again the formal rules of evidence form the framework for arguing that particular evidence or testimony should be excluded as prejudicial, confusing, or a waste of time.<\/a>[10]<\/a><\/sup> ALJs are no more receptive to unnecessary or repetitive evidence than trial court judges and will generally sustain proper objections that serve to expedite hearings and maintain a clear record.<\/p>\n <\/p>\n Although agencies are permitted to receive hearsay and other evidence that would not be admissible in a court of law, they must not base their decisions solely on evidence that would be inadmissible in a civil or criminal trial. This is what is commonly referred to as the \u201cresiduum rule.\u201d<\/p>\n The residuum rule was developed by courts in jurisdictions outside Minnesota to counterbalance the relaxed rules of admissibility applicable in administrative proceedings.[11]<\/a><\/sup> Under the residuum rule, when all the evidence received by an agency has been sifted through by a reviewing court, there must be present at least a residuum or residue of legally competent evidence that supports the agency\u2019s findings.[12]<\/a><\/sup><\/p>\n Although the Minnesota cases do not specifically refer to the residuum rule, the Minnesota Supreme Court has observed that administrative agencies may not rest their decisions solely on hearsay or other incompetent evidence.[13]<\/a><\/sup> The source of the requirement that there be a minimum of legally sufficient evidence to support an agency\u2019s decision appears to be the \u201csubstantial evidence\u201d requirement. The APA provides that an agency decision may be reversed or modified by a reviewing court if it is \u201cunsupported by substantial evidence in view of the entire record as submitted.\u201d[14]<\/a><\/sup> The court has apparently concluded that substantial evidence to support an agency decision means that some minimal amount of legally admissible evidence must be present in the hearing record. However, in light of the considerable criticism of the residuum rule leveled by commentators and its rejection by the drafters of the model APA, the vitality of the rule in Minnesota may be in doubt.[15]<\/a><\/sup> Reliability may be based on the presence of corroborating evidence or on the circumstances under which the hearsay statement was made.[16]<\/a><\/sup> This approach is consistent with the APA\u2019s evidentiary standard[17]<\/a><\/sup> that evidence of probative value should be admitted in administrative cases regardless of its technical admissibility under the formal rules of evidence. [18]<\/a><\/sup><\/p>\n However, in light of the requirement of the existing Minnesota decisions that a minimum amount of admissible evidence is needed to support an agency decision on appeal, there are circumstances in which a party is obliged to object to evidence that is clearly admissible under the relaxed rules governing administrative hearings. For example, the Minnesota Supreme Court has stated that \u201cin the absence of a special statute, an administrative agency cannot, at least over objection , rest its finding of fact solely on hearsay evidence which is inadmissible in a judicial proceeding.\u201d[19]<\/a><\/sup> This statement by the court suggests that the failure to object to hearsay may have the effect of allowing the agency to base its decision on hearsay evidence.<\/a>[20]<\/a><\/sup> Furthermore, the general rule is that hearsay evidence that is not objected to may not be the basis for a claim of error on appeal.<\/a>[21]<\/a><\/sup> Consequently, by failing to object to hearsay evidence, a party may waive the right to raise the argument that the evidence is not \u201csubstantial\u201d on appeal.<\/a>[22]<\/a><\/sup><\/p>\n Given the partial recognition that the residuum rule has received in Minnesota, it seems prudent for a party to make a timely and specific objection to legally inadmissible evidence, at least when the evidence relates to a critical part of the contested case and it is unlikely that admissible evidence can be produced. This is true even though the evidence is \u201cadmissible\u201d under the APA or the OAH rules. The failure to object may have the consequence of converting hearsay or other objectionable evidence into \u201csubstantial evidence\u201d that will support the agency\u2019s decision on appeal.<\/a>[23]<\/a><\/sup> Nonetheless, even if Minnesota would follow the modern trend in rejection of the residuum rule, reliance on uncorroborated hearsay for proof of significant facts invites reversal.<\/a>[24]<\/a><\/sup> For example, the Minnesota Court of Appeals reversed a student expulsion by a school district that was based on the objected-to hearsay testimony of two police officers relating what non-testifying witnesses had told them.<\/a>[25]<\/a><\/sup> The court noted that the allegations of the non-testifying witnesses were contradictory and held that the decision was not supported by substantial evidence.<\/p>\n The term burden of proof<\/em> is often used loosely to refer both to the requirement that one party to a proceeding must bear the burden of proving the truth of a particular fact and to the kind of proof that must be offered to meet that party\u2019s burden.[26]<\/a><\/sup> As used here, burden of proof<\/em> refers solely to the former concept. The term standard of proof<\/em> is used to refer to the quantity and quality of evidence needed to satisfy a party\u2019s burden of proof on a particular issue.<\/p>\n The rules of the OAH specify that \u201c[t]he party proposing that certain action be taken must prove the facts at issue . . . unless the substantive law provides a different burden.\u201d[27]<\/a><\/sup> In short, under the OAH rules, it is the proponent of a particular action who must bear the ultimate burden of persuading the finder of fact that the evidence supports that action. A prima facie case will shift the burden of proof to the opposing party.[28]<\/a><\/sup><\/p>\n It is not always easy to determine the proponent of a certain action. Under the OAH rules, it is the action of the agency in issuing a notice of and order for hearing that commences a contested case.[29]<\/a><\/sup> This, however, does not mean that the agency will always be considered the proponent of the action sought merely because it initiated the contested case proceeding.<\/p>\n In occupational licensing matters, for example, a distinction can be drawn between contested cases involving parties who presently hold a license and those involving parties seeking initial licensure. Where a party possesses a license and the agency wishes to take it away (by suspension or revocation) or to impose a penalty on the licensee,[30]<\/a><\/sup> it is generally recognized that the agency is seeking action and must bear the burden of proof.[31]<\/a><\/sup> Where, however, someone seeks a license for the first time, he or she must normally show compliance with certain minimum requirements imposed by law or rule on all license applicants, such as age, education, experience, successful completion of an examination, or payment of required fees. In the latter situation, it is the applicant who seeks action by the agency, in the form of a determination that a license should be granted, and it is generally held that the applicant has the burden of proof.[32]<\/a><\/sup><\/p>\n In a case involving a license application by a hospital seeking to extend the service area for its non-emergency ambulance services, the Minnesota court of appeals rejected an effort by the applicant to shift the burden of proof to the licensing agency. Under the applicable statute, the hospital had the burden of showing a need for the extended services based on five factors. No evidence was submitted with respect to two of the factors. The hospital argued on appeal that the agency\u2019s finding of a lack of need for the extended services was unsupported by \u201cany\u201d evidence as to these two factors. The court rejected this ploy, noting that where an agency\u2019s decision is based on a license applicant\u2019s failure to submit evidence, \u201cit is not proper for the applicant to seek reversal on the ground that the decision is not supported by evidence it had the burden to present.\u201d[33]<\/a><\/sup><\/p>\n In one case, the Minnesota Supreme Court held that a city seeking a state permit to encroach on public waters had the burden of proving that the application should be granted.[34]<\/a><\/sup> The court first observed that the general rule in administrative cases is that \u201can applicant for relief, benefits, or a privilege has the burden of proof.\u201d[35]<\/a><\/sup> As such, the court stated: \u201cIn this state the burden of proof generally rests on the one who seeks to show he is entitled to the benefits of a statutory provision.\u201d[36]<\/a><\/sup><\/p>\n It should be noted that the ultimate burden of proof that the OAH rules place on the proponent of a particular action is distinct from the so-called \u201cburden of going forward\u201d with evidence,[37]<\/a><\/sup> which the rules apparently do not address. The burden of going forward with evidence will generally be governed by the substantive law and may shift back and forth between the parties during the presentation of evidence in a case.[38]<\/a><\/sup> For example, proof of discrimination in the trial of cases under the Minnesota Human Rights Act[39]<\/a><\/sup> may require a shift in the burden of production from the complainant to the alleged violator and back again to the complainant.[40]<\/a><\/sup> The ultimate burden of persuasion, however, always rests with the party seeking to prove discrimination.[41]<\/a><\/sup> In addition, in the case of family foster care and day care licenses issued by the department of human services, the concept of shifting burdens of proof has been adopted by statute.<\/a>[42]<\/a><\/sup> It is not unusual in cases with pro se parties that a represented agency will be asked to proceed first even though the pro se party has the burden of proof.<\/p>\n Under the OAH rules, the party with the burden of proof \u201cmust prove the facts at issue by a preponderance of the evidence<\/em>, unless the substantive law provides a different . . . standard.\u201d<\/a>[43]<\/a><\/sup> This standard of proof applies to all contested cases unless a constitutional provision, statute, or case law requires the application of an alternate standard.<\/a>[44]<\/a><\/sup><\/p>\n In Minnesota, some of the most troublesome cases involving a determination of the proper standard of proof have involved disciplinary matters against persons holding occupational licenses issued by the state. Basically, the argument put forward by licensees is that because licensing proceedings entail a severe penalty, the possible loss of the licensee\u2019s livelihood, the licensing body should be required to prove misconduct by a higher standard than a preponderance of the evidence. Because the OAH rules permit a different standard of proof when the \u201csubstantive law\u201d so provides,<\/a>[45]<\/a><\/sup> arguments concerning the proper standard may be based on both statutory interpretation and constitutional grounds.<\/p>\n The reported Minnesota licensing cases dealing with standard of proof have focused on the proof required to sustain disciplinary action against attorneys at law.<\/a>[46]<\/a><\/sup> The proper standard has been described as \u201cclear and convincing evidence,\u201d \u201cfull, clear, and convincing,\u201d \u201ccompetent and substantial,\u201d and \u201ca strong and convincing showing.\u201d<\/a>[47]<\/a><\/sup> Similar standards apply to the discipline of a judge.<\/a>[48]<\/a><\/sup> The argument based on these decisions has been that if attorneys can be disciplined only on a clear and convincing showing, it is unfair or even unconstitutional to discipline real estate brokers or insurance agents on a mere preponderance of the proof. Unfortunately, this argument ignores the fact that attorney disciplinary proceedings, which are under the supervision and control of the judiciary, have historically been regarded as unique.<\/a>[49]<\/a> <\/sup><\/p>\n There is nothing in the APA to suggest that the legislature intended to import the standards applied in attorney disbarment cases into contested cases involving licenses issued by the executive branch. When given the opportunity to determine the standard applicable in SEC proceedings against persons in the investment business, the United States Supreme Court construed the federal APA to require no more than proof by a preponderance of the evidence, even where the grounds for discipline included allegations of fraud.<\/a>[50]<\/a><\/sup> State courts have expressly followed the preponderance standard in proceedings against a real estate broker\u2019s license,<\/a>[51]<\/a><\/sup> in proceedings against a physician\u2019s license,<\/a>[52]<\/a><\/sup> and in proceedings to dismiss a teacher.<\/a>[53]<\/a><\/sup> It has also been held that the preponderance standard governs \u201cinformal hearings\u201d which are not required under the federal APA.<\/a>[54]<\/a> <\/sup><\/p>\n The Minnesota Court of Appeals addressed this issue in the case of In re Schultz<\/em>, concluding summarily that a preponderance of the evidence standard governs disciplinary proceedings against a licensed dentist.<\/a>[55]<\/a><\/sup> After noting that the general standard of proof in administrative cases is a preponderance of the evidence,<\/a>[56]<\/a><\/sup> the court concluded that because the substantive law provides no different standard, the preponderance standard applies to dental licensing cases.<\/a>[57]<\/a><\/sup> The court disposed of the dentist\u2019s claim that a clear and convincing evidence standard should have been applied in summary fashion and, because the parties raised the issue for the first time on appeal, the court did not discuss the constitutionality of applying the preponderance standard in the occupational licensing context.<\/a>[58]<\/a><\/sup><\/p>\n In In re Wang<\/em>, the Minnesota Supreme Court confirmed the application of a preponderance of the evidence standard in professional licensing proceedings involving disciplinary action against a licensed dentist.<\/a>[59]<\/a><\/sup> However, the court admonished that in applying a preponderance standard in a professional licensing matter, the agency\u2019s decision must be supported by evidence of considerable weight:<\/p>\n Even so, these proceedings brought on behalf of the state, attacking a person\u2019s professional and personal reputation and character and seeking to impose disciplinary sanctions, are no ordinary proceedings. We trust that in all professional disciplinary matters, the finder of fact, bearing in mind the gravity of the decision to be made, will be persuaded only by evidence with heft. The reputation of a profession, and the reputation of a professional as well as the public\u2019s trust are at stake.<\/a>[60]<\/a><\/sup><\/p><\/blockquote>\n In Wang<\/em>, the supreme court reversed the decision of the ALJ, the agency and the court of appeals, holding that in light of the record as a whole and the seriousness of the charges, the decision was unsupported by substantial evidence.<\/a>[61]<\/a><\/sup> Hence, although the court affirmed the use of a preponderance standard in non-attorney professional disciplinary matters, it is apparent that the court will carefully scrutinize the record in these proceedings to assure that findings upon which disciplinary action is based are \u201creasonable in the context of the record as a whole, having in mind, as a reasonable person would, the seriousness of the matter under review.\u201d<\/a>[62]<\/a><\/sup><\/p>\n In In re Insurance. Agents\u2019 Licenses of Kane<\/em>,<\/a>[63]<\/a><\/sup> the Minnesota Court of Appeals did address the constitutionality of applying the preponderance standard to non-attorney licensing matters. In this case, insurance agents facing disciplinary action argued that application of the preponderance of the evidence standard violated equal protection since their licenses could be revoked pursuant to a lower standard of proof, while attorneys\u2019 licenses could only be revoked upon a showing of clear and convincing evidence of misconduct. Citing Wang<\/em>,<\/a>[64]<\/a><\/sup> the court rejected the agents\u2019 equal protection arguments based on the unique sui generis nature of attorney disciplinary hearings and society\u2019s heightened interest in the outcome of attorney discipline.<\/a>[65]<\/a><\/sup> The court held that these distinctions provide a rational basis for employing the clear and convincing standard in attorney licensing proceedings and the preponderance of the evidence standard in other licensing proceedings.<\/a>[66]<\/a><\/sup><\/p>\n Finally, in In re Medical License of Friedenson<\/em>,<\/a>[67]<\/a><\/sup> the Minnesota Court of Appeals held that the preponderance of the evidence standard applies to professional disciplinary proceedings against a licensed medical doctor. As in Schultz<\/em>, the court noted that the general standard of proof in administrative proceedings is preponderance of the evidence unless the substantive law establishes a different burden.<\/a>[68]<\/a><\/sup> As the statute governing the Board of Medical Practice\u2019s discipline of medical doctors is silent regarding the standard of proof, the court applied the preponderance standard.<\/a>[69]<\/a><\/sup> In Uckun v. State Bd. of Med. Practice<\/em>,<\/a>[70]<\/a><\/sup> the Minnesota Court of Appeals found that the State Board of Medical Practice properly applied the preponderance of the evidence standard of proof in its temporary suspension of a licensed medical doctor. This is the first time that the court addressed the correct standard to be applied in temporary suspensions of physician licenses pending contested case hearings.<\/p>\n In light of Schultz, Wang, Kane <\/em>and Friedenson<\/em>, the standard of proof to be applied in non-attorney licensee disciplinary cases under the APA is clearly a preponderance of the evidence. The determination of the appropriate standard necessarily involves a delicate balancing of the public\u2019s right to be protected against unscrupulous or unreliable licensees and the individual\u2019s right to pursue his or her livelihood in the absence of clear proof that the exercise of that right is a threat to the public.<\/a>[71]<\/a><\/sup><\/p>\n The APA provides that administrative agencies, in deciding contested cases, may take notice of facts if they are \u201cjudicially cognizable facts\u201d or if they are \u201cgeneral, technical or scientific facts\u201d within the specialized knowledge of the agency.[72]<\/a><\/sup> This type of notice, commonly referred to as official or administrative notice, is parallel to but broader than the concept of judicial notice utilized by the courts.<\/p>\n Under the APA, agencies are not limited to taking notice of facts that could properly be noticed by a court. Because agencies are considered to be experts in their individual areas of practice, the APA permits agencies to take notice of facts within their specialized knowledge.[73]<\/a><\/sup> However, because the vast majority of contested cases are heard and initially decided by ALJs,[74]<\/a><\/sup> it is necessary to consider whether administrative judges, who may not possess the same specialized knowledge as the agency, are entitled to take notice of facts within the agency\u2019s specialized knowledge in rendering their decisions.<\/p>\n At first blush, the rules of the OAH appear to restrict official notice by ALJs to those facts that could be noticed by a court. The OAH rules relating to evidence in contested cases provide that the judge may \u201ctake notice of judicially cognizable facts but shall do so on the record and with the opportunity for any party to contest the facts so noticed.\u201d[75]<\/a> <\/sup>This rule appears to narrow the scope of official notice by the ALJ to less than what the APA permits when the agency makes its decision. Such an inconsistency could lead to substantial deviation between the ALJ\u2019s initial decision and the agency\u2019s final decision, as the agency would be permitted to consider additional \u201cfacts\u201d when it decides the case. The result would be a weakening of the value of the ALJ\u2019s decision and a tendency to make the administrative process appear \u201cstacked\u201d in favor of the agency.<\/p>\n Read properly, however, the above rule is not a limitation on the ALJ\u2019s role but is merely a statement that the concept of judicial notice is recognized in administrative cases. This interpretation is made clear by the rule governing the basis for the judge\u2019s recommended decision, which states, \u201cThe judge and agency may take administrative notice of general, technical, or scientific facts within their specialized knowledge in conformance with Minnesota Statutes, section 14.60.\u201d[76]<\/a><\/sup><\/p>\n The authority of the ALJ to take notice of facts should be coextensive with that of the agency to avoid needless inconsistency in the decision-making process or three reasons.<\/p>\n First, the APA favors the use of ALJs who do in fact possess \u201cexpertise in the subject to be dealt with in the hearing.\u201d[77]<\/a><\/sup> Second, through its use of divisions, the OAH attempts to assign ALJs to cases that, at least in a general way, are within their individual fields of expertise. Finally, because noticed facts are part of the record and may be rebutted, there is no substantial harm caused by permitting the ALJ to take notice of all the facts the agency intends to take notice of in rendering its decision, even if they are not facts within the individual judge\u2019s specialized knowledge.<\/p>\n There are limitations on the use of official notice under the APA. Assuming that a fact falls within the scope of the APA\u2019s official notice provision (judicially noticeable or within agency expertise), it is nonetheless generally recognized that unless a fact is of common or general knowledge, only \u201clegislative\u201d (as opposed to \u201cadjudicative\u201d or \u201clitigation\u201d) facts are a proper subject of official notice.[78]<\/a><\/sup> For example, although an agency might have sufficient specialized knowledge to take notice that the release of a particular chemical into public waters would be a source of pollution, it could hardly be permitted to take notice, based on its own investigation or \u201cknowledge,\u201d that the respondent in a particular contested case had, in fact, released that pollutant into state waters. The latter type of fact, which is peculiar to the conduct of an individual litigant, must obviously be proved by specific admissible evidence.[79]<\/a><\/sup><\/p>\n A further limitation on the use of official notice is the necessity that noticed facts be made a part of the hearing record. The APA requires that parties \u201cbe notified in writing either before or during hearing, or by reference in preliminary reports or otherwise, or by oral statement in the record\u201d of the facts that the agency intends to officially notice.[80]<\/a><\/sup> Similarly, the OAH rules limit the use of official notice by the ALJ to notice that is taken \u201con the record.\u201d\n
10.1 Rules of Evidence in Administrative Adjudication<\/h2>\n
10.2 Residiuum Rule<\/h2>\n
10.3 Burden of Proof and Standards of Proof<\/h2>\n
10.3.1 Burden of Proof<\/h3>\n
10.3.2 Standard of Proof<\/h3>\n
10.4 Official Notice<\/h2>\n