Court Opinion

ID: 2792678
Source: CourtListenerOpinion
Date Created: 2015-04-10 12:07:26.982625+00
Date Added: 2024-06-11T12:21:55.919561
License: Public Domain

FIRST DIVISION
                             PHIPPS, C. J.,
                    ELLINGTON, P. J., and MCMILLIAN, J.

                    NOTICE: Motions for reconsideration must be
                    physically received in our clerk’s office within ten
                    days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules/

                                                                     March 27, 2015

In the Court of Appeals of Georgia
 A14A2119. STATE OF GEORGIA, EX REL., RALPH T.
     HUDGENS, COMMISSIONER OF INSURANCE FOR THE
     STATE OF GEORGIA v. SUN STATES INSURANCE
     GROUP, INC.
 A14A2120. REGULATORY TECHNOLOGIES, INC. v. STATE
     OF GEORGIA, EX REL., RALPH T. HUDGENS,
     COMMISSIONER OF INSURANCE FOR THE STATE OF
     GEORGIA.

      PHIPPS, Chief Judge.

      The State of Georgia, on the relation of the Commissioner of Insurance, Ralph

T. Hudgens, served as liquidator of International Indemnity Company (“IIC”), an

insurance company in liquidation pursuant to the Insurers Rehabilitation and

Liquidation Act (the “Act”). Regulatory Technologies, Inc. (“Reg. Tech”) assisted in

the liquidation of the IIC estate. Sun States, Inc. (IIC’s sole shareholder) sought relief

from the trial court requiring the liquidator to be liable for money that Sun States
alleged was wrongfully taken out of the IIC estate, and requiring the liquidator to pay

its attorney fees.

      In Case No. A14A2119, the State of Georgia on the relation of the

Commissioner of Insurance, Ralph T. Hudgens, as liquidator of IIC, appeals the trial

court’s denial of its motion to dismiss on the basis of sovereign immunity. In Case

No. A14A2120, Reg Tech joins in the appeal filed by the State of Georgia. For the

reasons set forth below, we affirm the judgment in part, reverse the judgment in part,

and remand the case.

      “We review de novo a trial court’s denial of a motion to dismiss based on

sovereign immunity grounds, which is a matter of law. However, factual findings by

the trial court in support of its legal decision are sustained if there is evidence

authorizing them.”1

      Pursuant to the Act,2 in January 2001 the Commissioner of Insurance of the

State of Georgia, then John W. Oxendine,3 was appointed by the superior court as the

      1
        Ga. Dept. of Corrections v. James, 312 Ga. App. 190, 193 (718 SE2d 55)
(2011) (punctuation and footnote omitted).
      2
          See OCGA § 33-37-1 et seq.
      3
       During the pendency of this matter in the lower court, Ralph T. Hudgens
became the Commissioner of Insurance for the State of Georgia (in January 2011),
and by operation of law, Hudgens was substituted for Oxendine as a party to this

                                          2
liquidator of IIC.4 The liquidator then appointed a deputy liquidator (Donald Roof)

and an assistant deputy liquidator (Harry Sivley) to act for him in the liquidation of

the IIC estate.5 Sivley was the co-founding principal and chief executive officer of

Reg Tech, and according to Sivley, Reg Tech was an “integrated financial services

company formed to assist in the supervision, conservation, rehabilitation and

liquidation, of financial institutions and insurance companies.” Reg Tech assisted in

the liquidation of IIC.

      After the liquidation of IIC was concluded, in March 2008 the State of Georgia

on the relation of the liquidator (hereinafter “state/liquidator”) sought an order from

the trial court approving the final accounting of the assets and expenses of the

liquidated estate and discharging the liquidator, deputy liquidator and assistant deputy

liquidator.6 Sun States, the sole shareholder of IIC, objected to the application for

discharge, to the extent of “any other distributions to [Sivley] or [Reg Tech] or their

action. See OCGA §§ 33-37-17 (a); 9-11-25 (d).
      4
          See OCGA § 33-37-17 (a).
      5
          See OCGA § 33-37-20 (a).
      6
        See OCGA § 33-37-45 (a), pertinently providing, “When all assets justifying
the expense of collection and distribution have been collected and distributed under
this chapter, the liquidator shall apply to the court for discharge.”

                                           3
affiliates.”7 Sun States complained about, inter alia, administrative expenses8 charged

to the IIC estate, and asked the court to appoint an independent auditor to review “the

change and allocation of administrative costs by Reg Tech and its affiliates and

contractors to the IIC Estate.”

      The court appointed an auditor, and almost sixteen months later (in February

2010), the auditor submitted a report to the court.9 The state/liquidator filed a

modified accounting and application for discharge, incorporating some, but not all,

of the credits (in the amount of $210,260.24) the auditor opined were due the IIC

estate. In response, the trial court ordered the liquidator to provide certain

explanations and additional data to the auditor, and ordered the auditor to supplement

his report if he deemed it necessary based on the additional information. In February

2012, as ordered, the state/liquidator supplemented its modified accounting and

application and provided additional information to the auditor, and further agreed that

      7
        Sun States moved to intervene, but the motion was not granted or otherwise
ruled on.
      8
        The statutory provision for the priority of distribution of claims identifies nine
classes of claims, of which the “[c]osts and expenses of administration during
rehabilitation and liquidation” is the first class in the order of distribution of claims,
and “shall be paid in full or adequate funds retained for such payment before the
members of the next class receive any payment.” OCGA § 33-37-41.
      9
          See OCGA § 33-37-48.

                                            4
additional credits should be made to the IIC estate (in the amount of $433,569.71).

But the state/liquidator continued to refute allegations that the IIC estate had been

charged excessive administrative expenses in the form of contract compensation,

payroll, or overhead expenses for Reg Tech. The state/liquidator asserted that Reg

Tech and/or Sivley had drawn funds directly from the IIC estate during the liquidation

process to cover the costs of administration expenses, and that it had been done with

little or no oversight from the liquidator. The auditor’s supplemental report, however,

continued to raise issues as to these administrative expenses (payroll expenses,

overhead expenses and contractual compensation expenses).

      In August 2012, a joint pretrial order was entered. Therein, Sun States stated

that it sought an order “surcharging” the liquidator, deputy liquidator, assistant deputy

liquidator, and Reg Tech for excessive overhead expenses, over-allocation of

contractual compensation, and excessive salary and benefits to Reg Tech personnel

– matters identified in the audit. Sun States also sought attorney fees. The

state/liquidator then moved to join Reg Tech as an indispensable party to the

litigation; the trial court granted the motion, designating Reg Tech as a “respondent

to the pending objection by shareholder [Sun States] to the Liquidator’s Modified

Accounting.” Approximately nine months later (in June 2013), the state/liquidator

                                           5
moved to dismiss Sun States’s claims against it, asserting that they were claims for

a money judgment against the state; the state/liquidator asserted that the claims were

barred by the doctrine of sovereign immunity.

      The trial court ruled that the State of Georgia, through the Act, had waived

sovereign immunity to the extent that the court could order the liquidator to “repay,”

or in other words to put back into, the liquidation estate any administrative expenses

that were excessive or had been improperly removed from the IIC estate. The trial

court also ruled that it had the authority to award attorney fees to Sun States (and

thus, would permit evidence on the issue of attorney fees at trial).

                                Case No. A14A2119

      1. The state/liquidator contends that the trial court erred by denying its motion

to dismiss and in finding that sovereign immunity was waived by the Act. We agree.

      “[S]overeign immunity protects from tort liability the State itself, including its

agencies and instrumentalities[.]”10 “Suits against public employees in their official

capacities are in reality suits against the state and, therefore, involve sovereign

immunity. The doctrine of sovereign immunity, also known as governmental

      10
        Shekhawat v. Jones, 293 Ga. 468, 470 (1) (746 SE2d 89) (2013) (citation
omitted).

                                          6
immunity, protects all levels of governments from legal action unless they have

waived their immunity from suit.”11

      Article I, Section II, Paragraph IX (e) of the Georgia Constitution
      provides that “[t]he sovereign immunity of the state and its departments
      and agencies can only be waived by an Act of the General Assembly
      which specifically provides that sovereign immunity is thereby waived
      and the extent of such waiver.” In this regard, implied waivers of
      governmental immunity should not be favored. This does not mean,
      however, that the Legislature must use specific “magic words” such as
      “sovereign immunity is hereby waived” in order to create a specific
      statutory waiver of sovereign immunity.12

A government waives sovereign immunity when an Act’s language provides both that

sovereign immunity is waived, and the extent of any waiver.13

      Even assuming that the trial court was correct that the Act impliedly provided

that sovereign immunity was waived by the provisions of the Act which give the

supervising court “wide” powers in reviewing expenses and permit the court to audit

      11
        Cameron v. Lang, 274 Ga. 122, 126 (3) (549 SE2d 341) (2001) (punctuation
and footnote omitted).
      12
       Colon v. Fulton County, 294 Ga. 93, 95 (1) (751 SE2d 307) (2013) (citations
and punctuation omitted).
      13
           See Ga. Dept. of Corrections, supra at 194 (1), n. 17.

                                            7
the books of the estate in liquidation,14 provide that the results of any such audit are

to be filed with the court,15 mandate that at the end of the liquidation the liquidator

shall apply to the court for discharge,16 and authorize the supervising court to grant

the discharge and make any other orders as may be deemed appropriate,17 the Act fails

to state the extent of any waiver except where the damage, loss, injury or liability

claimed was caused by the intentional or willful and wanton misconduct of the

receiver or an employee of the receiver, which exception this opinion addresses in

Division 2, infra.18

      14
           OCGA § 33-37-48.
      15
           Id.
      16
           OCGA § 33-37-45 (a).
      17
           Id.
      18
       See OCGA § 33-37-8.1 (b), which provides:
      The receiver and his or her employees shall have official immunity and
      shall be immune from suit and liability, both personally and in their
      official capacities, for any claim for damage to or loss of property,
      personal injury, or other civil liability caused by or resulting from any
      alleged act, error, or omission of the receiver or any employee arising
      out of or by reason of their duties or employment, provided that nothing
      in this provision shall be construed to hold the receiver or any employee
      immune from suit or liability for any damage, loss, injury, or liability
      caused by the intentional or willful and wanton misconduct of the

                                           8
      In this case, the trial court relied, in part, on Colon v. Fulton County,19 to

conclude that sovereign immunity was waived by the Act. In Colon, the Supreme

Court of Georgia held that where, as in that case, the legislature had

      specifically created a right of action against the government that would
      otherwise be barred by sovereign immunity, and ha[d] further expressly
      stated that an aggrieved party was entitled to collect money damages
      from the government in connection with a successful claim under the
      statute, there can be no doubt that the Legislature intended for sovereign
      immunity to be waived with respect to the specific claim authorized
      under the statute.20

      In Colon, the statutory provision that granted a public employee the right to

bring an action against his employer for retaliation specifically provided that the

waiver was limited to injunctive relief, reinstatement of the employee to employment,

reinstatement of fringe benefits and seniority rights, compensation for lost wages,

      receiver or any employee.

Pursuant to OCGA § 33-37-8.1 (a) (2), the term “employees” means “all present and
former special deputies and assistant special deputies appointed by the Commissioner
and all persons whom the Commissioner, special deputies, or assistant special
deputies have employed to assist in a delinquency proceeding under this chapter.”
      19
           Supra.
      20
           Id. at 95-96 (1) (citations omitted).

                                             9
benefits, other remuneration, and any other compensatory damages allowable at law.21

In City of Atlanta v. Barnes,22 upon which the Supreme Court relied in Colon,23 a tax

statute which provided the right to bring an action for a tax refund against a

governmental body established that the extent of the waiver was the amount of the

refund, and thus, sovereign immunity was waived.24 And in Williamson v. Dept. of

Human Resources,25 another case upon which the Supreme Court relied in Colon,26

the Fair Employment Practices Act27 (“FEPA”), which created a right of action

against the state, as an employer, for discrimination on the basis of an employee’s

      21
           Id. at 96 (1); OCGA § 45-1-4 (e).
      22
        276 Ga. 449 (578 SE2d 110) (2003), overruled on other grounds as stated in
Sawnee Electrical Membership Corp. v. Ga. Dept. of Revenue, 279 Ga. 22, 25 (3), n.
1 (608 SE2d 611) (2005).
      23
           Supra at 95 (1).
      24
          City of Atlanta, supra at 451 (3) (pertinent tax statute provided: “Any
taxpayer whose claim for refund is denied by the governing authority of the county
or municipality or whose claim is not denied or approved by the governing authority
within one year from the date of filing the claim shall have the right to bring an action
for a refund in the superior court of the county in which the claim arises.”).
      25
           258 Ga. App. 113 (572 SE2d 678) (2002).
      26
           Supra at 95 (1).
      27
           See OCGA § 45-19-20 et seq.

                                           10
disability,28 provided that such action could result in a judgment for, inter alia, hiring,

reinstatement, or upgrading of employees with or without back pay; the extension of

the full and equal enjoyment of the advantages, facilities, privileges, and services of

the respondent; and restoration of employment benefits not otherwise specified in the

code section.29 The FEPA also provided that any monetary award ordered shall be for

actual damages only.30 Thus, the state by legislative act had specifically waived its

sovereign immunity to the extent of the action authorized by the FEPA.31

       In this case, none of the provisions of the Act upon which the trial court based

its judgment that the state had waived sovereign immunity, either independently or

collectively, provide the extent of any such waiver of sovereign immunity, i.e., any

specific relief recoverable by an aggrieved party, such as the right to collect money

damages from the government in connection with a successful claim under the Act.32

Therefore, the trial court’s order is reversed to the extent of its judgment: (1) that the

       28
            OCGA §§ 45-19-21 (a) (3); 45-19-36 (b).
       29
            Williamson, supra at 116 (1); OCGA § 45-19-38 (c).
       30
            OCGA § 45-19-38 (d).
       31
            Williamson, supra.
       32
            See Colon, supra at 95-96 (1); City of Atlanta, supra; Williamson, supra.

                                            11
government waived sovereign immunity pursuant to the specified provisions of the

Act; (2) that those specified provisions authorized the trial court to order the

liquidator to repay the liquidation estate administrative expenses that were allegedly

wrongfully removed from the liquidation estate; and (3) that attorney fees may be

awarded to Sun States under the specified provisions.

      2. The state/liquidator contends that the trial court erred by finding that OCGA

§ 33-37-8.1 (b) did not apply to an application for discharge. However, the trial court

made no such finding.

      After concluding that the State, through the specified “statutory framework”

of the Act, waived sovereign immunity, the trial court turned to a specific provision

of the Act, OCGA § 33-37-8.1 (b). Without concluding that the statute was not

applicable in the case, the court stated that “even if OCGA § 33-37-8.1 (b) were

applicable to objections regarding a Liquidator’s application for discharge, it provides

no immunity ‘for any damage, loss, injury, or liability caused by the intentional or

willful and wanton conduct of the receiver or any employee.’”

      The court concluded that (during the course of the hearing on the liquidator’s

request for discharge) evidence could be introduced to show that the intentional or

wanton conduct of the liquidator or his deputies permitted the payment of excessive

                                          12
or improper administrative expenses of the IIC estate. The court cited the following

as a basis for its ruling: the close and longstanding relationship between the former

Insurance Commissioner (who was the liquidator) and Reg Tech (whose principal

was Sivley, the assistant deputy liquidator); Sivley’s company, Reg Tech, had been

permitted to charge millions of dollars against the IIC estate pursuant to what was

“essentially” an oral business arrangement; Sivley and Reg Tech had been provided

“great latitude” to charge expenses against the IIC estate with little or no

contemporaneous review from the liquidator as to the propriety of the charges or their

amounts; the record suggested that the books involving this liquidation were in

disarray; it took a lengthy time to complete the court-ordered audit, in part, because

key records were lacking; and, years after seeking a discharge, the liquidator

continued to discover significant new expenses and accounting issues related to the

IIC estate.

      We construe the court’s language concerning the applicability of OCGA § 33-

37-8.1 (b) as the court reaching an alternative basis upon which to deny the

state/liquidator’s motion to dismiss, not as a ruling that OCGA § 33-37-8.1 (b) did

not apply to this matter. The state/liquidator opposed Sun States’s argument that

OCGA § 33-37-8.1 did not apply. Accordingly, the trial court’s ruling that it would

                                         13
consider further evidence in connection with the applicability of OCGA § 33-37-8.1

(b) to this matter is affirmed, and we remand this case to the trial court for

consideration of Sun States’s objections related thereto and to the relief Sun States

seeks in accordance with OCGA § 33-37-8.1 (b).

                                Case No. A14A2120

      3. In light of the conclusions reached in Divisions 1 and 233 in Case No.

A14A2119, we need not address Reg Tech’s arguments in Case No. A14A2120; Reg

Tech had joined in the appeal filed by the State of Georgia. The judgment of the trial

court is affirmed in part, reversed in part, and the case is remanded as set forth in

Case No. A14A2119.

      Judgment in Case No. A14A2119 affirmed in part and reversed in part, and

case remanded. Ellington, P.J., concurs. McMillian, J., concurs in Division 1 and

concurs in judgment only as to Division 2.

      Judgment in Case No. A14A2120 affirmed in part and reversed in part, and

case remanded. Ellington, P.J., and McMillian, J., concur.

      33
           Supra.

                                         14