Opinion ID: 2325741
Heading Depth: 2
Heading Rank: 1

Heading: Command Influence

Text: Respondents' threshold claim, and the only one decided by the earlier reviewing courts, is that the MIA's hearing on the Commissioner's Cease-and-Desist Order was contrary to the Court of Special Appeal's discussion of Maryland law in its opinion in Mayer. In Mayer, a police sergeant filed an administrative grievance challenging the results of a promotional examination resulting in his classification as qualified, rather than well qualified as required for promotion to lieutenant. Mayer, 143 Md.App. at 264-65, 794 A.2d at 706-07. The basis for Mayer's grievance was that the raters who evaluated his performance were incompetent or otherwise unqualified to judge him on specific areas of proficiency. Mayer, 143 Md.App. at 267, 794 A.2d at 708. The County Director of the Office of Human Resources (OHR) denied Mayer's grievance in a written Step II response (according to the County Administrative Procedures), and Mayer appealed that decision by requesting a Step III hearing. Mayer, 143 Md.App. at 267-68, 794 A.2d at 708. The hearing officer assigned to Mayer's Step III appeal was the subordinate of the County Director who denied Mayer's grievance at the Step II level. Mayer, 143 Md.App. at 268, 794 A.2d at 708. Mayer objected to the hearing officer's appointment, arguing that a subordinate of the Director would be under command influence and loath to render a decision adverse to that of her superior and therefore would not be impartial, or at least would not appear to be impartial. Id. The Step III hearing officer affirmed the Step II written denial of Mayer's grievance. Id. Mayer appealed the Step III hearing to the Board of Appeals, which affirmed the OHR's actions, and then to the Circuit Court for Montgomery County, which also affirmed. Mayer, 143 Md.App. at 269-70, 794 A.2d at 709-10. The Court of Special Appeals reversed, concluding that there is a substantial likelihood that the hearing officer's view of the case will be tainted and that he therefore will not render an impartial decision; and if there is no actual partiality, the process appears not to be impartial. Mayer, 143 Md.App. at 277, 794 A.2d at 714. In reaching that conclusion, the Court of Special Appeals noted as significant that the Step II responder and the Step III hearing officer engaged in nearly an identical adjudicatory-type function. Mayer, 143 Md.App. at 280, 794 A.2d at 715. In this case, the intermediate appellate court distinguished the facts in Mayer from those in our opinions in Spencer and Consumer Publishing, where we held that a combination of adjudicative and investigative functions within an agency was permissible. Respondents maintain their view that the ADIC was under the command influence of the Commissioner, who initiated the original investigation and issued the Cease-and-Desist Order; therefore, the hearing on the administrative appeal was unfair, or gave the appearance of being unfair. The MIA counters that the Commissioner was authorized by the Insurance Article expressly to delegate the hearing to an ADIC and that a theory of command influence does not apply to hearings where the material facts are not in dispute and the ADIC was called upon to decide questions of law solely. We agree with the MIA that a theory of command influence does not apply to the facts of the present case and the delegation of the hearing and final decision-making to the ADIC was proper. The due process concerns expressed by the Court of Special Appeals in Mayer were generated by a very specific factual and procedural scenario not analogous to the circumstances in the instant case. Unlike Mayer, the ADIC's hearing was not an identical adjudicatory-type function to what the Commissioner engaged in leading to the issuance of the Cease-and-Desist Order. The Commissioner initiated the market conduct investigation into the PFCs' finance practices and, upon concluding the report of the investigation, issued the Cease-and-Desist Order. The Commissioner's actions were ex parte in large part Respondents' demand for a hearing as to the Cease-and-Desist Order initiated the administrative adjudicatory process contemplated by the regulatory scheme. The ADIC's hearing was a contested case hearing with trial type procedures, including pre-trial notice, evidence, privileges, cross-examination, and burdens of proof. Maryland Code (1957, 2009 Repl. Vol.) State Gov't Art., §§ 10-208, 10-213, 10-217. The fact-finding investigation and Cease-and-Desist Order engaged in by the Commissioner were not an identical function to the contested case hearing held by the ADIC; therefore, the predicate facts and procedures in Mayer are distinguishable from those in the present case. Moreover, Mayer involved a hearing officer who was obliged to resolve disputed questions of fact. Here, the ADIC was called upon to decide only questions of law. [8] Respondents argue that this is a distinction without significance; we do not agree. As recognized by the Court of Special Appeals in Mayer, judicial review of an agency action on a question of law engages a generally non-deferential standard of review. 143 Md.App. at 271, 794 A.2d at 710 (In contrast to the deferential review accorded to an agency's factual findings, questions of law receive no deference on review; we are not bound by the agency's interpretation of law.) (citing Caucus Distribs. v. Md. Sec. Comm'r, 320 Md. 313, 324, 577 A.2d 783, 788 (1990)). Judicial review of agency fact-finding, on the other hand, is given significant deference. Milliman, Inc. v. Md. State Ret. Pension Sys., 421 Md. 130, 152, 25 A.3d 988, 1001 (2011) ([A] reviewing court must defer to the agency's fact-finding and drawing of inferences if they are supported by the record.) (quoting Motor Vehicle Admin. v. Shea, 415 Md. 1, 14, 997 A.2d 768, 775-76 (2010)) (internal quotations omitted). Were the ADIC subject to the Commissioner's command influence, and Respondents have not shown that she was, judicial review would cure any errors of law. [9] Respondents requested twice that the Commissioner transfer the administrative appeal to the OAH for hearing and decision, and twice the Commissioner denied that request. Under the State Administrative Procedures Act (APA), the decision to delegate a case to the OAH for hearing and a proposed or final administrative decision lies solely within the discretion of the agency, although the particular facts of a given case may compel a specific choice if fundamental fairness demands. State Gov't Art., § 10-205(a). [10] For example, in Spencer, several members of the Board of Pharmacy, having been involved in failed settlement negotiations with Spencer, refused to recuse themselves from the hearing on the merits that ensued. 380 Md. at 520-22, 846 A.2d at 343-45. Spencer requested that the hearing be transferred to the OAH, was denied, and, on judicial review, argued that the refusal to transfer her case was a violation of due process. Spencer, 380 Md. at 524, 846 A.2d at 346. We held that the decision whether to transfer a case to the OAH was within the agency's discretion, and would be reviewed under the arbitrary and capricious standard. Spencer, 380 Md. at 531, 846 A.2d at 350. ([A]n agency's prerogative with respect to case referral to OAH is similar in scope to that of the prerogative in determining the severity of sanctions, or to that of forgoing prosecution of a particular individual.). Even though the members of the Board in Spencer erred in not recusing themselves from hearing Spencer's matter, we concluded that this error alone was not so egregious a problem that it could not be cured on remand by anything other than a delegation to the OAH to hold a new hearing. 380 Md. at 527, 846 A.2d at 344-49. In the present case, there has been no showing of fraud or egregious behavior on behalf of the agency that would persuade us that the Commissioner, the ADIC, or the MIA acted arbitrarily or capriciously. Spencer, 380 Md. at 533, 846 A.2d at 352. The Commissioner was authorized by the State APA either to hold a hearing or delegate all or part of the hearing and decision-making responsibilities to the OAH. State Gov't Art., § 10-205(a). The Commissioner was authorized, also by statute, to delegate internally the hearing and decision-making responsibilities to the ADIC. Ins. Art., § 2-210(d). The Commissioner initiated an investigation and issued a Cease-and-Desist Order based on his findings. Although the Commissioner did participate in the resultant hearing as a witness, he was questioned by both the MIA and Respondents about his reasons for issuing the Cease-and-Desist Order; his view of, and the alleged former position of the MIA, on the use of the Rule; his role in the MIA's relevant legislative advocacy; and his view on the practice regarding premium refunds on policies voided ab initio. The transcripts of the MIA hearing do not indicate any episodic or systemic impropriety on the part of the Commissioner or the ADIC. Respondents argue that the influence of the Commissioner was entwined impermissibly with the ADIC's conduct of the hearing. Section 2-209 of the Insurance Article allows specifically the Commissioner to testify and offer other proper evidence about [the] information obtained during an examination. Ins. Art., § 2-209(d)(1), (d)(2). Notwithstanding that the ADIC was appointed by the Commissioner, without some additional evidence, we shall not assume that the ADIC, who is authorized to preside over hearings at the MIA, is unable to resist command influence in any given case and, therefore, unable to provide a fair hearing to Respondents. Respondents maintain that they were not afforded a fair hearing because it is improper generally for an agency to conduct a hearing after the agency head issues an ex parte order. We, as well as our intermediate appellate court brethren, have held in numerous cases that the combination of adjudicatory and investigatory functions in an agency is not, per se, a violation of due process. Consumer Publ'g Co., 304 Md. at 763, 501 A.2d at 64-65; Morgan, 387 Md. at 194, 874 A.2d at 959-60; State Bd. of Physicians v. Bernstein, 167 Md.App. 714, 894 A.2d 621 (2006); Rosov v. Md. State Bd. of Dental Exam'rs, 163 Md.App. 98, 877 A.2d 1111 (2005). These cases relied on the U.S. Supreme Court's decision in Withrow v. Larkin, 421 U.S. 35, 95 S.Ct. 1456, 43 L.Ed.2d 712 (1975). In Withrow, a physician argued that a state board violated his due process when the board conducted a hearing on charges it investigated before authorizing the bringing of charges. 421 U.S. at 40, 95 S.Ct. at 1461, 43 L.Ed.2d at 720. The U.S. Supreme Court rejected the physician's argument, reasoning that: [t]he contention that the combination of investigative and adjudicative function necessarily creates an unconstitutional risk of bias in an administrative adjudication . . . must overcome a presumption of honesty and integrity in those serving as adjudicators; and it must convince that, under a realistic appraisal of psychological tendencies and human weakness, conferring investigative and adjudicative powers on the same individuals poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented. 421 U.S. at 47, 95 S.Ct. at 1464, 43 L.Ed.2d at 723-24. Further, the Court found that [i]t is also very typical for the members of administrative agencies to receive the results of investigations, to approve the filing of charges or formal complaints instituting enforcement proceedings, and then to participate in the ensuing hearings. Withrow, 421 U.S. at 56, 95 S.Ct. at 1469, 43 L.Ed.2d at 729. The Court held that the combination of adjudicatory and investigatory functions does not violate due process. Id. The Court left open, however, the possibility that, in special circumstances, the combination of functions may present a risk of unfairness [that] is intolerably high. Withrow, 421 U.S. at 58, 95 S.Ct. at 1470, 43 L.Ed.2d at 730. In Consumer Publishing, we upheld the Consumer Protection Division's investigation, filing of charges, and adjudication of allegedly deceptive advertising of diet pills in Maryland newspapers. 304 Md. at 737, 501 A.2d at 51-52. The statutory enumeration of the express and implied powers of the Consumer Protection Division included: receiving and investigating consumer complaints; investigating possibly unfair or deceptive trade practices; seeking a temporary or permanent injunction; and exercising and performing any other function, power and duty appropriate to protect and promote the welfare of consumers. Consumer Publ'g, 304 Md. at 745, 501 A.2d at 55. We concluded that the Consumer Protection Division's actions did not exceed the tolerance of Withrow because the Consumer Protection Division of the Office of the Attorney General received the results of the investigation and approved the filing of charges, but did not officiate at the hearing. Consumer Publ'g, 304 Md. at 763, 501 A.2d at 64-65. Rather, a law school professor was appointed by the Chief of the Consumer Protection Division (to whom the Attorney General delegated the responsibility) to sit as a special hearing officer, pursuant to then-existing statutory authority. Consumer Publ'g, 304 Md. at 769, 501 A.2d at 68. Conversely, the hearing officer did not participate in the investigation; therefore, there was no evidence of impropriety violative of due process. Consumer Publ'g, 304 Md. at 763, 501 A.2d at 64-65. Consumer Publishing also alleged irregularity because the Attorney General of Maryland issued a press release on the same day the charges were filed, thereby supplying evidence that the Attorney General prejudged the merits of the case. Consumer Publ'g, 304 Md. at 764, 501 A.2d at 65. Unimpressed, we found the issuance of the press release, concurrent with issuing charges, did not violate due process. Id. (citing Roberts v. Morton, 549 F.2d 158, 164 (10th Cir.1976)), cert. denied, 434 U.S. 834, 98 S.Ct. 121, 54 L.Ed.2d 95 (1977). Even had the press release revealed that the Attorney General somehow prejudged the case, that alone did not rise necessarily to the level of a due process violation. Consumer Publ'g, 304 Md. at 766, 501 A.2d at 66 (citing Shaughnessy v. United States, 349 U.S. 280, 75 S.Ct. 746, 99 L.Ed. 1074 (1955)). Bias that rises to the level of a due process violation required [s]tatements on the merits by those who must make factual determination on contested fact issues . . . where fact finding is critical. Id. (citing Staton v. Mayes, 552 F.2d 908, 914 (10th Cir. 1977)), cert. denied, 434 U.S. 907, 98 S.Ct. 309, 54 L.Ed.2d 195 (1977). In Morgan, the Consumer Protection Division's investigation into, and hearing on charges of, improper home appraisals, passed muster when we found circumstances similar to those in Consumer Publishing. 387 Md. at 195, 874 A.2d at 960. Morgan did not meet the Withrow burden that a party alleging a violation of due process must overcome a presumption of honesty and integrity in those serving as adjudicators. Id. In Morgan, there was no evidence or allegations of any facts or circumstances presenting an elevated risk of unfairness Morgan's argument rested instead on the per se invalidity of the Consumer Protection Division's general internal procedures for investigating, prosecuting, and adjudicating cases. Id. The present case falls squarely within the core reasoning of Consumer Publishing, Morgan, and Withrow. We proceed from the presumption that the ADIC conducted the MIA hearing with honesty and integrity, absent evidence to the contrary (having the Commissioner's legal advisor at her side is insufficient). The record does not reflect that the ADIC participated in the investigation or issuance of the Cease-and-Desist Order. Although the Commissioner participated as a witness at the hearing to explain his rationale for the Cease-and-Desist Order, there is no evidence in the record that he (or his legal advisor) participated in the ultimate administrative decision-making process or influenced improperly the ADIC. [11] Simply because the ADIC was delegated by the Commissioner to conduct the hearing does not make her a fortiori a slavish lapdog subject to the Commissioner's will. [12] Respondents simply have not overcome the presumption that the ADIC was a proper delegee of the hearing and decision-making responsibilities. Respondents rest, as Morgan did, on the per se, blanket inability of an agency to hear fairly a contested case, after it investigates and issues a Cease-and-Desist Order. The argument that the Commissioner prejudged the merits of the eventual hearing is not persuasive, because the Commissioner delegated properly the hearing and decision-making responsibilities to the ADIC; therefore, the Commissioner was not a person who must make factual determinations on contested fact issues . . . where fact finding is critical. There were no material factual disputes to be resolved at the administrative hearing. Moreover, as discussed supra, there is no tangible evidence of actual or perceived command influence. Finally, even if the appearance of command influence existed, as Respondents allege, the reviewing court's non-deferential standard of review of the issues of law decided by the ADIC would ensure that any errors of law would be considered fairly. Having resolved that the Circuit Court and the Court of Special Appeals erred in how they decided the only question reached by those courts, from among the several placed before them, we, in the exercise of our discretion (and because the other questions presented were pressed by the parties below and may fairly be decided on the record made), shall decide the other questions presented.