496707578_4e07b872d8During the recently concluded November term, the Illinois Supreme Court heard oral argument in Stone Street Partners, LLC v. City of Chicago Department of Administrative Hearings, a decision from the First District of Division One. Stone Street poses a question with possibly serious implications for administrative law in Illinois: do corporations have to be represented by attorneys in administrative hearings? Our data analytic preview of the oral argument in Stone Street is here. Our detailed summary of the underlying facts and lower court opinions is here.

Stone Street began in 1999 when a Chicago City building inspector found various building code violations in one of the plaintiff’s buildings. The City sent the notice of violation to the property address, rather than to the plaintiff’s business address or registered agent. Nevertheless, someone – a non-lawyer – did appear at the hearing on the plaintiff’s behalf. The plaintiff was found liable and fined. The administrative judgment was filed with the Circuit Court in 2004 and recorded in 2009. The plaintiff claimed to have found out about all this in 2011 when it obtained a copy of the judgment via a FOIA request. The plaintiff moved to set aside the administrative order based on lack of notice, claiming that the person who appeared at the administrative hearing had no authority to represent the plaintiff. The administrative hearing officer refused to disturb the judgment, and when the plaintiff sought administrative review, the circuit court granted defendant’s motion to dismiss. The Appellate Court reversed in part, holding as a non-attorney, the corporation’s purported agent couldn’t validly represent the corporation in the 1999 hearings.

Counsel for the City led off the argument at the Supreme Court, noting that Department of Administrative Hearings handles half a million hearings a year. Counsel argued that the Appellate Court’s holding that corporations must be represented by attorneys in all cases was a senseless burden on Illinois business. The proceedings are simple – there are very few motions, a presumption against discovery, and the issues are largely factual. For that reason, counsel argued, the proceedings do not typically call for specialized legal skill. Counsel compared the hearings to small claims court, where non-lawyers are allowed to appear even though legal issues of tort and contract arise. Chief Justice Garman asked whether a nonlawyer could represent an individual. Counsel answered yes, although the Appellate Court’s decision was specific to corporations, the rules governing the hearings are the same for all parties. Counsel argued that the average judgment in the Department is $454, and 87% of all judgments are under $10,000. For that reason, there was no justification for a different rule than the one which prevails in small claims. Justice Karmeier wondered whether anyone could appear, claim to be representing the corporation, and admit violations. Counsel argued that that isn’t a concern, since an appearance is a representation under oath that the person has authority to represent the corporation. Counsel pointed out that the Appellate Court hadn’t argued that the plaintiff’s representative lacked authority – it held that the person couldn’t appear at all since he wasn’t an attorney. If somebody did appear without authority, counsel argued, the corporation would have a remedy against that person directly.

Counsel for the plaintiff was next. This was not a minor ticket for parking in front of a fire hydrant, counsel argued. Counsel explained that because notice had been sent to the property rather than the plaintiff, the caretaker for the incapacitated owner of the company had wound up appearing. No one knew much about what had happened at the hearing, since the record had been destroyed. Justice Thomas asked whether affirming would establish a blanket rule for all corporations. Counsel suggested that although such a rule might be proper, the case could also be decided in a way limited to its facts. Justice Thomas asked whether the plaintiff was arguing lack of authority, or that the caretaker’s appearance had amounted to the practice of law. Counsel responded that the appearance was the practice of law, but it was nevertheless possible for the Court to resolve the case narrowly. Justice Thomas asked counsel what a narrowly tailored decision would look like. Counsel said that the Court might hold that on the facts of the case, an appearance amounted to the practice of law. Justice Thomas said that he was still having trouble seeing how an affirmance would be anything other than a blanket rule. Counsel answered that the Department’s jurisdictional limit was $50,000. Fourteen percent of their cases involve judgments over $10,000 – 80,000 cases in 2013. Small claims cases don’t require an attorney, but that rule is made pursuant to the rulemaking authority of the Supreme Court. Chief Justice Garman asked whether, if this was unauthorized practice of law, the judgment was void or voidable. Counsel answered void, although he didn’t think the Court ever needed to reach that issue, since the plaintiff was never properly served. The unauthorized practice of law can’t waive improper service. Justice Theis asked whether every Department hearing where a non-attorney appeared for a corporation resulted in a void judgment. Counsel said yes. Chief Justice Garman asked about the caretaker’s entry of appearance. Counsel suggested that the Court look at the small claims statute. In order to represent a corporation, a person must be an officer or director. The Department’s rule just says an “agent” of the corporation may appear, without requiring any proof of authority – and there was no evidence in the record that the plaintiff had given the caretaker any authority. Justice Thomas asked whether any of the cross-claim issues were addressed by the Appellate Court, and counsel answered no. Justice Thomas asked whether the Court could send the matter back to the Appellate Court. Counsel said yes, although the plaintiff would prefer that the Court resolve all issues itself.

In rebuttal, counsel for the City argued that the administrative record had been destroyed in comformance with the Local Records Act, and both the plaintiff and the Appellate Court agreed that everything necessary to decide the case was still available. Counsel argued that if the case was ultimately decided strictly on its facts, the judgment of the Appellate Court must be vacated, since the Court held that all corporations must be represented at all times in hearings by attorneys. According to counsel, parties concerned about possible significant exposures are always free to retain an attorney – they just aren’t required to. Counsel concluded by noting the statement of plaintiff’s counsel that all decisions of the Department where corporations were represented by non-lawyers were void. He argued that the plaintiff has a putative class action pending against the City making that claim.

We expect Stone Street to be decided in four to six months.

Image courtesy of Flickr by UmJaneDoan (no changes).