Counties often conclude that when there has been a criminal court conviction, an ALJ has no jurisdiction to review any aspect of the case in a subsequent state hearing. This is not necessarily true.

An Administrative Law Judge’s authority to review the conviction will depend on whether it resulted from a verdict after trial, a guilty plea or a nolo contendere ("no contest") plea. This Notes discusses the ramifications of a prior conviction with a discussion of collateral estoppel when the issue at hearing is either an overpayment or an Intentional Program Violation (IPV). It will also discuss restitution related issues in overpayment cases and issues involving a superior court judge’s failure to order an IPV disqualification and the county’s failure to then timely impose disqualification penalties.

General Principles of Collateral Estoppel

The principles of collateral estoppel will determine what effect, if any, the actions of a court should have in a later state hearing. The following excerpts from our Division’s Paraphrased Regulations discuss the general principles of collateral estoppel and what elements must be present before a prior court conviction can become binding in the state hearing.

Collateral estoppel precludes a party to an action from relitigating in a second proceeding matters litigated and determined in a prior proceeding by a court of competent jurisdiction. (Teitelbaum Furs, Inc. v. Dominion Ins. Co. Ltd. (1962) 58 Cal.2d 601, 25 Cal.Rptr. 559, 375 P.2d 439, Clark v. Lesher (1958) 46 Cal.2d 874, 239 P.2d 865)

The principles of collateral estoppel apply to the decisions of administrative agencies when the agencies are acting in a judicial or quasi-judicial capacity. (Hollywood Circle, Inc. v. Department of Alcoholic Beverage Control (1961) 55 Cal.2d 728, 13 Cal.Rptr. 104, 361 P.2d 712; People v. Sims (1982) 32 Cal.3d 468, 186 Cal.Rptr. 77)

In order for the principles of collateral estoppel to apply, three elements must be present:

1. the issue decided at the previous proceeding is identical to the one which is sought to be relitigated;
2. the previous proceeding resulted in a final judgment on the merits; and
3. the party against whom collateral estoppel is asserted was a party or in privity with a party at the prior proceeding. (People v. Taylor (1974) 12 Cal.3d 686, 117 Cal.Rptr. 70)

We will now discuss collateral estoppel’s impact on overpayment and IPV cases. This newsletter addresses issues that frequently occur in state hearings and is not intended to be a comprehensive discussion of collateral estoppel.

Where the Claimant Has Been Found Guilty After Trial

If a claimant has been found guilty of welfare fraud, it is important to know which specific issues were addressed at trial before one can determine what effect that trial’s determinations should have in the subsequent state hearing. If an issue raised at that trial is identical to an issue raised by the claimant at the state hearing, collateral estoppel would apply and a request for hearing should be dismissed as to that issue.

For example, a judge or jury may have found a person committed welfare fraud by not reporting that the father of aided children was in the home during March 1997 through February 1998. If a claimant requests a hearing to dispute that the father was in the home during that time period, such issue would be dismissed in a state hearing if the decision were final, i.e., the claimant’s time to appeal that court determination had expired.

However, there may be other issues that were not decided in the court trial.

For example, if a court found that the father was in the claimant’s home during March 1997 through February 1998, but did not discuss whether there was an overpayment, an ALJ could determine if an overpayment occurred, and if so, the amount of overpayment. While the ALJ would be bound by the finding that the father was in the home during the period determined at the court trial, the ALJ could conclude that the county overpayment determination was incorrect for several reasons:

• The amount of overpayment calculated by the county might be incorrect because the county made mathematical errors in the overpayment calculation.
• The county may have collected child support for the common children of the claimant and their father and not credited the support payment in the overpayment calculation.
• There may be no overpayment based on deprivation because the father of the aided children was not employed during the period at issue.
• If the father of the aided child was in the home and had income but worked less than 100 hours per month, there would almost certainly be an overpayment, but the amount of overpayment would be based on unreported income and not on lack of deprivation.

If the county alleged an overpayment because of the father’s presence in the home during March 1998 through May 1998, an ALJ could decide that issue because the court trial only found the father to be in the home for the months preceding March 1998 and did not decide his whereabouts in March through May 1998.

Where the Claimant Has Pled Guilty to Welfare Fraud

While collateral estoppel applies to a conviction after trial, it does not apply to a guilty plea. In Teitelbaum, the Supreme Court held that a guilty plea is admissible in a subsequent civil trial as an admission, but such plea is not conclusive for the purpose of applying the doctrine of collateral estoppel. In the case of Pease v. Pease, (1988) 201 Cal. App. 3d 29, 266 Cal.Rptr. 762 the California Court of Appeal held that a trial court in a civil proceeding could not give collateral estoppel effect to a criminal conviction involving the same issues when the conviction resulted from a guilty plea.

The court stated in Pease: " When a plea of guilty has been entered in the prior action, no issues have been ‘drawn into controversy’ by a ‘full presentation’ of the case. It may reflect only a compromise or a belief that paying a fine is more advantageous than litigation. Considerations of fairness to civil litigants and regard for the expeditious administration of criminal justice combine to prohibit the application of collateral estoppel against a party who, having pleaded guilty to a criminal charge, seeks for the first time to litigate his cause in a civil action".

For example, if a claimant pled guilty to a count of welfare fraud for not reporting the father of aided children in the home, the claimant would be entitled to a state hearing on that issue. If the county alleged that the claimant was overpaid because she did not report the father’s presence in the home from March 1997 through February 1998, the county would be required to prove the father was in the home for the period at issue. At the state hearing, as part of its case the county could introduce the reporter’s transcript of the guilty plea from court into evidence as an admission by the claimant that the father was in the home. The claimant would be entitled to submit evidence to establish that the father was not in the home and to submit evidence, including testimony, to rebut her guilty plea.

As in the case of conviction after trial, the county would have to prove its case regarding issues not necessarily decided in the court trial such as the amount of overpayment if such amount was not established at trial.

Where the Claimant Has Pled Nolo Contendere

In County of Los Angeles v. Civil Service Commission, (1995) 39 Cal. App. 4^th 620, 46 Cal. Rptr. 256, the California Court of Appeal held that evidence of a nolo contendere or no contest plea is inadmissible as evidence in a subsequent administrative proceeding. The court upheld a hearing officer who would not admit evidence of a deputy sheriff’s nolo plea for receiving stolen property when the Los Angeles County sheriff’s department wanted to fire the deputy sheriff for receiving stolen property.

The court stated that "… when the conviction is based on a nolo contendere plea, its reliability as an indicator of guilt is substantially reduced, both because of the defendant’s reservations about admitting guilt for all purposes and because the willingness of the district attorney to agree to and the court to approve the plea tends to indicate weakness in the available proof of guilt."

In summary, if the claimant has appeared in Superior Court on a welfare fraud issue, the county first must determine if the issue decided in court is identical to an issue at state hearing.

If the issue at hearing is identical to an issue decided in court, the county must determine if the issue was decided by court trial, guilty plea or no contest plea. If the specific issue was decided by verdict, collateral estoppel would apply to that issue as long as the decision as final, and the ALJ would dismiss the hearing request as to that issue.

If the issue was decided via guilty plea, the claimant would have a right to a state hearing on such issue, but the county could submit evidence of the guilty plea as an admission. Such a plea is likely to be considered strong but not necessarily conclusive evidence. The claimant could rebut such a plea and prevail on such issue in the state hearing.

If a claimant has pled no contest to welfare fraud in court, such evidence could properly be excluded in a state hearing. Even if the nolo plea is admitted into evidence by an ALJ, it should be given no evidentiary weight.

Finally, a claimant would be entitled to a state hearing on any issue that was not decided in court even if another issue was decided by trial or was resolved by a guilty or no contest plea.

Restitution Orders

The issue of collateral estoppel does not apply where a court orders a criminal defendant to pay restitution in a specific amount.

In Shor v. McMahon (1990) 223 Cal.App. 3^rd 70, 272 Cal.Rptr. 632, the California Court of Appeals held that a Superior Court order of restitution did not collaterally estop the CDSS (or the county as agent of CDSS) from seeking to collect a larger amount from the overpaid AFDC recipient in an administrative proceeding.

The court determined that the first element of collateral estoppel was not met because the issues in the criminal proceeding and in the administrative proceeding were not identical. In the criminal proceeding, the court did not determine how much Ms. Shor had been overpaid. Instead, the court "necessarily determined" the appropriate amount of restitution to be paid as a condition of probation. That sum is not necessarily equal to the full amount of overpayment. In a criminal proceeding, the individual’s finances may be a factor in determining the amount of restitution. In the administrative proceeding, the financial ability of a claimant to repay an overpayment is not a factor except to the extent that the county may determine its costs would outweigh the amount that could be collected. Since collateral estoppel did not apply in Shor, the county was permitted to demand the claimant repay $21,919 even though the court only ordered restitution of $6841.

There may be other issues, such as compromise of a debt or equitable estoppel, raised by a claimant when the county seeks to recoup an amount higher than the amount stated in the restitution order. This Notes does not address those issues.

In some cases, after a county has already gone to court and obtained a conviction for welfare fraud, the county seeks to impose an IPV upon the individual. The individual then requests a state hearing disputing the disqualification. The following discussion addresses the ALJ’s jurisdiction in these cases.

If a Superior Court Judge orders the county to disqualify a person in either CalWORKs or Food Stamps, an ALJ has no authority to review such an order regardless of whether the conviction followed a court trial, a guilty plea or a nolo contendere plea. The county may disqualify the individual for the time period established by the judge. Of course, if the county sought to disqualify the individual for a time period in excess of that ordered in Superior Court, an ALJ could limit the county disqualification to the time period ordered by the Superior Court Judge.

In both Food Stamps (MPP §20-300.42) and CalWORKs (MPP §20-354.2), if a disqualification is ordered by a court of appropriate jurisdiction, but the date for initiating the disqualification period is not specified, the county shall initiate the disqualification within 45 days of the date the disqualification was ordered.

For example, if on June 16, a Superior Court Judge ordered a six month CalWORKs disqualification without specifying when the disqualification was to begin, the latest day the county could initiate disqualification would be August 1 assuming the individual was otherwise eligible for CalWORKs. If the county proposed to begin the six-month disqualification effective October 1, an ALJ could order the county to limit its disqualification to four months (i.e. from October through January). The county could recoup any excess aid issued for August and September as an overpayment caused by county error in failing to impose a disqualification for those months.

If the Superior Court Judge Fails To Impose a Disqualification

Because of the difference in regulations, it may be important to determine if the case is a Food Stamp case or a CalWORKs case.

MPP §20-300.1 defines an IPV for Food Stamp purposes as having intentionally made a false or misleading statement or misrepresented, concealed or withheld facts, or committed any act which constitutes a violation of the Food Stamp Act….

This regulation does not specify who makes the determination of an IPV or how such determination is made.

MPP § 20-300.39 states that if the accused (Food Stamp) household member is found guilty of an IPV by the court, and the court fails to impose a disqualification penalty, the county shall impose a disqualification period in accordance with the penalties specified in the Food Stamp IPV regulations, unless contrary to court order.

MPP §20-351.1 (i) in pertinent part defines an IPV for CalWORKs purposes as a determination made by a state or federal court, including any determination made on the basis of a plea of guilty or nolo contendere, that an individual has made a false or misleading statement…..

MPP §20-353.8, which is a CalWORKs regulation is identical to §20-300.39 except it refers to accused individual instead of accused household member.

If a Superior Court Judge finds an IPV based on either a conviction after trial or via a guilty plea, but fails to impose a penalty, there is an IPV regardless of whether the case is Food Stamps or CalWORKs. In either case, an ALJ’s jurisdiction is limited to reviewing whether the county imposed the proper IPV penalty and has done so in a timely fashion. The ALJ may not determine whether or not an IPV occurred.

However, if the individual has pled nolo contendere to welfare fraud, an IPV has been established for CalWORKs, but not for Food Stamps. This is so because §20-351.1 (i) states that for CalWORKs purposes, a determination of an IPV includes a nolo contendere plea. There is no such provision in §20-300.1 regarding the determination of an IPV for Food Stamps.

Thus, if the county establishes that the individual has pled nolo contendere to welfare fraud in CalWORKs, the county may introduce that plea into evidence in the state hearing if a claimant requests a hearing to dispute any penalty imposed by the county after the nolo plea. The ALJ would have no jurisdiction to review whether an IPV occurred. The ALJ could review if the county properly imposed the penalty.

However, the county may not impose an IPV penalty based upon a nolo plea to a charge of welfare fraud in Food Stamps when the trial judge does not impose a penalty. The county would have to request an Administrative Disqualification hearing and present clear and convincing evidence that an IPV occurred, or obtain a waiver.