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Utah Supreme Court Clarifies Administrative Agencies’ Fact Finding Duty and the Standard of Review for Administrative Appeals

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Former Counsel
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By: Graham Gilbert

In McElhaney v. City of Moab, 2017 UT 65, —- P.3d —-, the Utah Supreme Court held that an adjudicative land use decision, and likely all administrative decisions subject to substantial evidence review on appeal, must include findings of fact sufficient to permit meaningful appellate review.  In McElhaney, the owners of a single-family home filed a conditional use permit application with the City of Moab requesting permission to operate a bed and breakfast in their residential neighborhood.  Moab’s City Council denied the application.  While each councilmember explained the rationale behind his or her vote, the Council did not make explicit factual findings in support of its decision.  The McElhaney’s appealed to the district court.  The district court overturned the Council’s denial and the City appealed.

The Utah Supreme Court heard the City’s appeal and remanded the case to the Council to make additional findings of fact.  In its opinion, the Court first clarified Utah’s case law regarding whether it reviews the intermediate court’s decision or the agency’s decision on appeal.  The Court held that it reviews the intermediate court’s decision.  It affords no deference to the lower court and determines whether the court correctly decided whether the administrative decision was arbitrary, capricious or illegal.

Next, the Court analyzed whether the Council made adequate findings of fact to support its decision.  By way of background, Utah’s land use act provides that “if the reasonably anticipated detrimental effects of a proposed conditional use cannot be substantially mitigated by the proposal or the imposition of reasonable conditions to achieve compliance with applicable standards, the conditional use may be denied.”  Utah Code § 10-9a-507(2)(b).  Under the land use act, a final decision of the land use authority is valid if it is supported by substantial evidence and not illegal.  Utah Code § 10-9a-801(3)(c).  In its decision, the Council did not make findings of fact related to the reasonably anticipated detrimental effects of the application and why the effects could not be substantially mitigated.  Additionally, the Council failed to make findings regarding whether the application complied with standards set forth in the City Code.  The Court remanded the case so that the Council could make findings of fact and conclusions of law sufficient to permit appellate review.

The key holding of McElhaney is that an adjudicative land use decision must be supported by findings of fact and conclusions of law that are sufficiently detailed to permit meaningful appellate review.  The Court’s opinion raises two questions – does the holding apply outside of land use decisions and does it require written findings of fact.  The scope of the holding is informed by the Court’s rationale.  In its opinion, the Court explained that “substantial evidence” (which is the term used by the legislature to guide judicial review of land use decisions) is a term of art that presupposes that an administrative agency will make findings capable of review on appeal.  This rationale indicates that any time the legislature mandates substantial evidence review on appeal, the administrative agency is required to make findings that will permit meaningful appellate review.  While there is no doubt that findings are required, the Court’s opinion refers to both findings and written findings.  But, in the clearest statements of its holding, the Court only states that findings of fact are required.  It never expressly requires that the findings be in writing.

The Court’s clarification that it reviews the district court’s decision has already been applied in two subsequent cases –Outfront Media, LLC v. Salt Lake City Corp., 2017 UT 74, —- P.3d —- and Baker v. Park City Municipal Corporation, 2017 UT App 190, —- P.3d —-. McElhaney and Outfront Media contain important advice for the unwary litigant.  A hasty litigant could interpret the Court’s lack of deference to lower court decisions to mean that the intermediate court does not play a meaningful role in appellate review of an administrative decision.  But in McElhaney and Outfront Media, the Court emphasized that the parties must make and preserve arguments at both the fact-finding and intermediate court levels.  It also explained that the intermediate court’s decision plays an important role by requiring the parties to develop, narrow, and refine their arguments. Baker didn’t elaborate on McElhaney.  It simply applied McElhaney’s key holding that an appellate court reviews the district court’s decision, and not the city council’s decision, when reviewing an adjudicative land use decision.