Do corporations need an attorney in administrative review hearings?

On a record that was incomplete and where the City of Chicago had destroyed much of the hearing material, a divided Supreme Court reaffirmed the basic principle that due process in an administrative hearing specifically requires a definite charge, adequate notice, and a full and impartial hearing. Stone Street Partners, LLC, v. The City of Chicago Department of Administrative Hearings, 2017 IL 117720 ¶34. The divided Supreme Court, however, specifically declined to decide whether a corporation must be represented at an administrative hearing by a licensed attorney.

This case involved a 1999 administrative finding by the City that there were building code violations in one of Stone Street’s buildings and imposed a monetary fine that eventually resulted in the City placing a lien on the property. Stone Street first asked the City’s Department of Administrative Hearings in 2011 to vacate the 1999 order. The Department denied the request – saying it lacked jurisdiction to vacate an order that old. In a four-count complaint that sought: 1) administrative review of the denial; 2) a declaratory judgment that the City’s judgment recorded in 2009 was void because the initial judgment had expired, and was not revived, was the product of proceedings involving unauthorized practice of law, and was entered against a non-existing entity; 3) slander of title, and 4) that the City acted maliciously and engaged in the unauthorized practice of law because the initial administrative complaint was neither drafted by nor prosecuted by a licensed attorney.1

The City held administrative hearings in August and September 1999. At the September hearing a man named Keith Johnson filed a written Appearance on behalf of Stone Street without checking any of the boxes on the form Appearance indicating his capacity of representation. Johnson was not an attorney and was neither employed by nor affiliated with Stone Street; rather he was the caretaker for the father of one of Stone Street’s principals.

The Circuit Court dismissed the Complaint. A divided Appellate Court determined that Stone Street had not been afforded the necessary notice and opportunity to be heard. The Appellate Court also opined that Stone Street had not waived any objection to proper notice because the person who appeared at one of the initial hearings was not a licensed attorney.

Relying upon Downtown Disposal Services, Inc., v. City of Chicago (2012 IL 112040), “the Appellate Court held that nonattorneys (sic) cannot represent corporations in administrative hearings” particularly where there is testimony from sworn witnesses, interpretation of laws and ordinances, and where a punitive fine could be imposed. Id. The Appellate Court upheld the dismissal of Count I (lack of jurisdiction for the hearing panel to vacate the 1999 order) and Count III (Slander of Title). The Appellate Court reversed dismissal of Count II and held that the 1999 judgment was void because Stone Street had not received the requisite notice.

The sole issue before the Supreme Court was whether Count II should have been dismissed or whether Stone Street should have been allowed to proceed with its request for declaratory relief and to remove the cloud on title to its property.

The City urged the Supreme Court to reject the Appellate Court’s holding that it had not provided Stone Street with proper notice and that the appearance of a lay person for Stone Street did not waive Stone Street’s objection to notice. The City based its argument on its view that administrative hearings of this type did not require specialized legal skill or training. Alternatively, the City argued that even if Johnson’s appearance constituted the unauthorized practice of law the Supreme Court should exercise its inherent authority to regulate the practice of law and find that corporations do not need to be represented in administrative hearings by licensed attorneys. As another alternative, the City argued that if lay representation of corporations should be prohibited in administrative hearings, that prohibition should be only prospective.

The Supreme Court agreed “that Johnson’s status is central to the viability of the claims asserted by Stone Street in count II of its complaint.” Even though it found Johnson’s role in the case to be critical, the Supreme Court disagreed with the City’s position that the viability of Stone Street’s cause of action turns on whether laypersons may represent corporations in administrative proceedings without violating the prohibition of the unauthorized practice of law. The Supreme Court majority reasoned it need not consider the issue because “Johnson did not represent Stone Street in any capacity.” (Id. emphasis in original). In an accompanying footnote, the Supreme Court “vacate[d] those portions of the appellate court’s opinion which address that issue.”

By the time of the Circuit Court proceedings both Johnson and his principal were deceased and not available to explain his appearance. The Supreme Court found nothing in the record to explain why Johnson appeared for Stone Street or any evidence that Stone Street granted any authority to Johnson.

The Supreme Court found the notice requirements were a jurisdictional prerequisite to conducting the initial hearing. Therefore, since Stone Street had not received any notice of the initial hearing, it affirmed the Appellate Court’s finding that the City had not obtained jurisdiction over Stone Street and the order finding a violation and imposing a fine was void. Additionally, the Supreme Court held the 2009 judgment recorded against Stone Street’s property was null and void because the 1999 judgment on which it was based had expired and was no longer enforceable.

In a vigorous dissent, Justice Freeman (joined by Justices Burke and Theis) disagreed with the majority’s decision to not address the unauthorized practice of law issue and the finding that the issue was immaterial to its ultimate decision. The dissent also criticized the majority’s decision to invalidate a final administrative order “based on an incomplete and inadequate record.” The dissent would “hold that the representation of a corporation at Department proceedings does not constitute the practice of law.” The dissent argued the Court should pass on this issue when it was part of the Appellate Court’s reasoning for invalidating the 1999 Order and because the parties addressed the issue. The dissent argued that his put the issue before the Court for resolution at this time with the prospect of needing to address the issue at some point in the future.

The dissent cited Downtown Disposal for the proposition that the Supreme Court has the inherent authority to regulate the practice of law. But, the dissent distinguished Downtown Disposal – a case where Downtown’s non-attorney president had drafted and prosecuted a complaint in an administrative review proceeding filed in the Circuit Court. Looking at similar proceedings, the dissent noted that the City’s Department has its own procedural rules and that the Illinois Administrative Practice Act, the Illinois Code of Criminal Procedure, and the Illinois Code of Civil Procedure “do not apply to Department proceedings.” The dissent also noted significant differences between the City’s rules and civil procedure: discovery and the issuance of subpoenas require leave from the hearing officer; prehearing and post-hearing motions and motions to set aside an order are limited. The formal and technical rules of evidence do not apply and hearsay evidence is allowed if it is of the type upon which people would normally rely. The dissent termed these rules and regulations as being “more akin to the rules that apply to small claims proceedings in the circuit court” where those Supreme Court Rules (281-288) allow a corporation to appear through certain non-attorney employees or officers, even where there may be a jury trial. A corporate defendant against municipal violations before the Department is in much the same position as a corporate defendant in a small claims proceeding “where it can be represented by a nonattorney (sic).”

The dissent would also find that Johnson’s conduct at a hearing, even if he had presented photographic evidence on behalf of Stone Street, would not have required a lawyer’s expertise. Accordingly, the dissent would not find Johnson guilty of the unauthorized practice of law.

More will likely come on this issue. 

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1. Count IV was not pursued on appeal.