Court Opinion

ID: 6352851
Source: CourtListenerOpinion
Date Created: 2022-06-23 15:02:51.49918+00
Date Added: 2024-06-11T09:13:35.588380
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                   SUMMARY
                                                                June 23, 2022

                                2022COA67

No. 21CA0466, Colo. Div. of Ins. v. Statewide Bonding —
Insurance — Colorado Division of Insurance — Immigration
Delivery Bonds; Constitutional Law — Sixth Amendment —
Federal Supremacy — Preemption

     As a matter of first impression, a division of the court of

appeals concludes that the Colorado Division of Insurance’s

jurisdiction to investigate and regulate Colorado-licensed insurance

producers that provide immigration bonds is not preempted by

federal law.
COLORADO COURT OF APPEALS                                        2022COA67

Court of Appeals No. 21CA0466
State of Colorado Division of Insurance
Case No. IN-2019-E-001

Colorado Division of Insurance,

Petitioner-Appellee,

v.

Statewide Bonding, Inc., Non-resident Insurance Producer No. 476070 and
Brian Jerome Cole,

Respondents-Appellants.

            ORDER AFFIRMED IN PART AND REVERSED IN PART,
                AND CASE REMANDED WITH DIRECTIONS

                                   Division III
                          Opinion by JUDGE SCHUTZ
                       Welling and Taubman*, JJ., concur

                           Announced June 23, 2022

Philip J. Weiser, Attorney General, Heather Flannery, Senior Assistant Attorney
General, Christopher J.L. Diedrich, Senior Assistant Attorney General, Kyle
McDaniel, Assistant Attorney General, Denver, Colorado, for Petitioner-Appellee

Sheila H. Meer P.C., Sheila H. Meer, Diana R. M. Schanz, Denver, Colorado, for
Respondents-Appellants

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2021.
¶1    In this case involving immigration delivery bonds,

 respondents, Statewide Bonding, Inc. (Statewide) and Brian Jerome

 Cole (collectively, Respondents), appeal the final agency order

 issued by the Commissioner of Insurance (Commissioner).1 The

 Commissioner upheld the decision of an administrative law judge

 (ALJ) finding that Respondents violated Colorado’s insurance

 statutes and regulations and assessing civil penalties against them.

 As a matter of first impression, we conclude that the

 Commissioner’s jurisdiction, as delegated to the employees at the

 Colorado Division of Insurance (Division), to investigate and

 regulate Colorado-licensed insurance producers that provide

 immigration bonds is not preempted by federal law.

¶2    Respondents also appeal that portion of the Commissioner’s

 order reversing the ALJ’s award of attorney fees in favor of

 Respondents and against the Division. We affirm in part and

 reverse in part.

 1 The Commissioner is the head of the Colorado Division of
 Insurance. § 10-1-104(1), C.R.S. 2021. The Division of Insurance
 is housed within the Department of Regulatory Agencies and is
 charged with the execution of the laws relating to insurance and
 has a supervising authority over the business of insurance in this
 state. § 10-1-103(1), C.R.S. 2021.

                                   1
                       I.   Immigration Bonds

¶3    To better understand the issues presented on appeal, it is

 useful to briefly summarize the purpose and operation of

 immigration delivery bonds. When an undocumented immigrant

 has been civilly detained by Immigration and Customs Enforcement

 (ICE), an immigration judge has the authority to release the

 immigrant from custody pending the completion of the deportation

 proceedings. An immigration delivery bond, much like a traditional

 criminal bail bond, is the mechanism used to help ensure the

 immigrant appears at any subsequent hearings.

¶4    There are two ways an eligible immigrant can post the bond

 and be released until a hearing. See Off. of Enf’t & Removal

 Operations, U.S. Dep’t of Homeland Sec., ERO 11301.1, Bond

 Management Handbook 5-6 (Aug. 19, 2014). First, an immigrant

 bond sponsor — usually a United States citizen closely related to

 the immigrant — can pay the full price of the bond, in cash, directly

 to ICE. Alternatively, a sponsor can purchase a surety bond

 through an agent,2 acting on behalf of an insurance company, and

 2In Colorado, the agent is referred to as an “insurance producer.”
 See § 10-2-103(6), C.R.S. 2021.

                                   2
 become a co-obligor on the bond. In these circumstances, the

 sponsor pays a premium — generally, a percentage of the total bond

 amount — to an agent. In turn, the agent becomes obligated to

 ensure the immigrant is present at the hearing, and if the

 immigrant fails to appear, the insurance company3 is obligated to

 pay the total amount of the bond to ICE.

¶5    Typically, whoever pays the bond premium for the immigrant

 is also required to pledge collateral to the insurance company to

 protect the insurance company against loss in the event the

 immigrant fails to appear. The collateral, which can be real or

 personal property, is provided to the agent posting the bond and

 can be executed upon by the insurance company if the immigrant

 does not appear.

¶6    With this general understanding of immigration bonds, we

 turn to the facts that gave rise to this dispute.

                            II.   Background

¶7    In December 2017, the Division received a complaint from a

 Colorado state probation officer expressing concern that an

 3In Colorado, the insurance company is also sometimes referred to
 as the “surety” or “insurer.” See § 10-2-103(6.5), C.R.S. 2021.

                                    3
 undocumented immigrant under the officer’s supervision was

 possibly being “extorted” by Libre by Nexus, Inc. (Libre), a company

 involved in posting the immigrant’s bond. Upon receipt of the

 complaint, the Division began investigating the subject transaction.

                         A.   The Investigation

¶8    A senior investigator (Investigator) with the Division accessed

 publicly available online information about Libre and searched the

 National Association of Insurance Commissioners website for

 insurance license records. The Investigator’s online search revealed

 news articles critical of Libre for allegedly taking advantage of

 undocumented immigrants in ICE custody. The National

 Association of Insurance Commissioners website contained no

 information that Libre was licensed or had a certificate of authority

 to transact insurance business in any state.

¶9    The Investigator also had a copy of the immigration bond,

 which had been attached to the complaint. The Investigator saw

 that the bond had been digitally signed and posted by Cole as the

 obligor and agent. Statewide, the company for which Cole served as

 president, was listed as the “Agent-Bonding Company.” At the time

                                    4
  of posting the bond, Respondents were both licensed by the Division

  as nonresident insurance producers.

¶ 10   Yet unlike typical immigration bond arrangements, this bond

  identified an insurance company, Financial Casualty & Surety, Inc.

  (FCS), as the obligor. FCS was not licensed or authorized to

  conduct the business of insurance in Colorado. Moreover, in a

  separate immigration bond securitization and indemnity agreement,

  Libre was identified as an indemnitor on the bond. In this

  agreement, Libre agreed to pay the premium and provide collateral

  for the bond to Statewide. But instead of Libre posting collateral or

  paying the premium to Statewide, the undocumented immigrant

  contractually agreed to lease an ankle monitor from Libre. Under

  this contract, the immigrant agreed to pay various fees including a

  GPS activation fee of $460, $420 per month to lease the ankle

  monitor, and a daily insurance rate.

                B.    The Inquiry Letters and Responses

¶ 11   Upon learning this information, the Investigator sent an

  inquiry letter requesting Respondents to provide information related

  to the undocumented immigrant’s bond, information regarding their

  relationship with FCS and Libre, and a list identifying all

                                    5
  immigration bonds they had posted that were indemnified by FCS.

  Respondents answered most of the questions but objected to the

  requests for information related to immigration bonds it posted that

  FCS had agreed to indemnify, alleging that the inquiry was

  overbroad and unduly burdensome.

¶ 12   After receiving their responses, the Investigator sent a second

  inquiry letter to Respondents, focusing on their transactions in

  Colorado in connection with FCS and Libre. The second inquiry

  requested more information related to the lack of collateral, how

  Cole would obtain the funds to pay the bond to ICE if payment

  became necessary, and who would instruct the immigrant about

  where to appear in court. The inquiry letter also requested

  documentation related to all immigration bonds for which Cole

  acted as agent for FCS, all correspondence between Cole and FCS

  for such bonds, all contracts or correspondence between Libre or its

  principal and Cole, the identity of all states in which Cole was

  licensed and where Libre or its principal served as indemnitor for

  bonds posted by Cole, and details of every immigration bond with a

  Colorado connection posted by Cole and indemnified by Libre or its

  principal.

                                    6
¶ 13   Respondents objected to most of the requests on the grounds

  that the Division had exceeded its authority because its

  investigation was preempted by federal immigration law. The

  Division disagreed with the objection but granted Respondents an

  additional opportunity to provide complete responses.

¶ 14   Instead of providing the requested information or asking for a

  modified inquiry, Statewide surrendered its Colorado license to act

  as a non-resident insurance producer on July 30, 2018. Cole

  subsequently surrendered his Colorado license to act as a non-

  resident insurance producer on August 10, 2018.

¶ 15   The Division then advised Respondents that the surrender of

  their licenses did not deprive the Division of its authority to enforce

  the state’s insurance licensing laws, which included investigating

  allegations of wrongdoing and imposing penalties for violation of

  those laws. Again, the Division requested complete responses to its

  second inquiry letter. Respondents again rejected the Division’s

  request, stating that because the inquiries appeared to be targeted

  at Libre, not Respondents, Colorado’s producer licensing laws did

  not apply.

                                     7
¶ 16   The Division then sent Respondents a formal notice that they

  had violated Colorado law by not providing complete responses to

  the Division’s written inquiries and provided another opportunity

  for them to respond. Respondents declined to do so.

                  C.   The Administrative Proceedings

¶ 17   On December 4, 2018, the Division filed a formal notice of

  charges with the Office of Administrative Courts (OAC), alleging that

  Respondents had failed to provide a complete and accurate

  response to the Division’s second written inquiry. The Division

  sought to impose a civil penalty against each respondent plus a

  fifteen percent surcharge.

¶ 18   Respondents moved for summary judgment, arguing that

  federal immigration law preempted the Division’s authority to

  further investigate the complaint. The ALJ denied the motion,

  stating that Respondents’ preemption argument “miss[ed] the

  point,” because the real issue was whether Respondents, as

  Colorado licensees, were obligated to respond to the Division’s

  inquiries about their business practices, not whether the Division

  had authority to regulate Respondents’ issuance of federal

  immigration bonds. The ALJ concluded the Division had not

                                    8
  exceeded the scope of its regulatory authority when issuing its

  second inquiry letter.

            D.    The Division’s Unasserted Claim of Privilege

¶ 19   With summary judgment denied, Respondents served the

  Division with requests for it to produce its entire investigative file in

  preparation for the hearing. The Division responded by stating that

  it was “producing documents relevant to the case . . . up to the

  issuance of the second inquiry letter.” That same day, the Division

  filed a motion for a protective order to shield from discovery any

  portion of its file created after the issuance of the second inquiry

  letter. Respondents then filed a motion to compel disclosure of the

  entire file because portions had been redacted and not listed on the

  Division’s privilege log. The ALJ granted the Division’s motion, yet

  in its notice of compliance, the Division moved for a second

  protective order, revealing for the first time that it had “redacted,

  withheld, or excluded from production” certain portions of the file

  that had been created before the issuance of the second inquiry

  letter. More specifically, the Division had retained documents

  related to the reporting of the suspicious immigration bond but had

                                      9
  not listed the withheld documents on its privilege log or otherwise

  disclosed their existence.

¶ 20   The ALJ ordered the fifteen pages of newly disclosed

  documents to be produced for an in camera review. After

  completing their review, the ALJ granted the Division’s second

  motion for a protective order.

                    E.    The Administrative Hearing

¶ 21   A two-day administrative hearing was held before the ALJ.

  Following the hearing, the ALJ issued the initial decision, finding

  that the second inquiry letter, although extensive in its requests,

  was a valid exercise of the Division’s “legitimate regulatory

  authority.” The ALJ concluded that the letter was not “arbitrary,

  capricious, unduly burdensome, or otherwise an abuse of

  discretion” because (1) the Division’s investigation was not

  preempted by federal law; (2) public sources of information raised

  the possibility that Libre and its principal were financially exploiting

  vulnerable undocumented immigrants; and (3) there were

  continuing questions about the propriety of Respondents’

  involvement with FCS and Libre. Because Respondents had not

  provided a complete and accurate response to the Division’s second

                                    10
  inquiry letter, the ALJ imposed a civil penalty of $500 against each

  respondent plus the statutory surcharge.

¶ 22   The ALJ also ordered the Division to pay Respondents’

  attorney fees of $1,567.50 as a sanction for its misrepresentation

  that it had produced its entire file up to the date the second inquiry

  letter was issued when, in fact, fifteen pages of documents had been

  withheld and not disclosed on its privilege log or otherwise.

             F.    The Commissioner’s Final Agency Order

¶ 23   Respondents and the Division then filed exceptions to the

  ALJ’s initial decision. After a review, the Commissioner issued a

  final agency order upholding the monetary sanctions against

  Respondents and reversing the ALJ’s attorney fee award against the

  Division. The Commissioner concluded that the ALJ did not abuse

  their discretion by concluding that the Division’s authority to

  conduct the investigation was not preempted by federal law and the

  inquiry letters were a reasonable exercise of its regulatory authority.

  Thus, because Respondents’ failure to respond to the inquiry letters

  was not disputed, the Commissioner upheld the fine and surcharge

  imposed on them.

                                    11
¶ 24          The Commissioner rejected, however, the ALJ’s findings and

  conclusions regarding the misrepresentations made by the Division

  concerning the undisclosed initial complaint documents, and the

  ALJ’s corresponding imposition of sanctions upon the Division. The

  Commissioner set aside the sanctions, concluding that because

  “[R]espondents were not legally entitled to the disputed information

  and the Division had a basis to withhold it,” coupled with the

  context of the misrepresentations, no sanction was warranted

  under C.R.C.P. 11 or 37. Respondents now appeal these portions of

  the final agency order.

       III.     Is the Division’s Jurisdiction to Investigate This Complaint
                                 Preempted by Federal Law?

¶ 25          Respondents assert that the Division’s jurisdiction was

  preempted because Congress intended to exclusively occupy the

  field of immigration bonding when enacting 8 U.S.C. § 1103(a)(3)4

  4 8 U.S.C. § 1103(a) describes the general powers of the Secretary
  of Homeland Security. Subsection (1) grants the Secretary the
  authority to administer and enforce laws relating to the immigration
  and naturalization of aliens, and subsection (3) grants the Secretary
  the authority to “establish such regulations; prescribe such forms of
  bond, reports, entries, and other papers; issue such instructions;
  and perform such other acts as he deems necessary for carrying out
  his authority under the provisions of this chapter.”

                                          12
  and because the state statutes at issue conflict with federal law.

  They contend that 31 U.S.C. §§ 9304-9305 and related regulations

  vest the Secretary of the Treasury with federal surety bonding

  authority, including the right to discipline and revoke surety

  certificates.

                        A.    Standard of Review

¶ 26   A reviewing court may reverse an administrative agency’s

  determination if the court finds that the agency exceeded its

  constitutional or statutory authority. § 24-4-106(7), C.R.S. 2021;

  Ohlson v. Weil, 953 P.2d 939, 941 (Colo. App. 1997). Because

  Respondents pose a jurisdictional question, we review the

  Commissioner’s conclusion of law de novo. Colo. Dep’t of Lab. &

  Emp. v. Esser, 30 P.3d 189, 193-94 (Colo. 2001).

                              B.   Analysis

¶ 27   As a predicate matter, there is no doubt that absent

  preemption by the federal government, the Division had subject

  matter jurisdiction to investigate the complaint. Title 10 of the

  Colorado Revised Statutes sets forth a comprehensive regulatory

  scheme by which the Division, through its Commissioner, is

  charged with supervising the business of insurance in Colorado.

                                    13
  §§ 10-1-103 to -104, C.R.S. 2021. The Commissioner’s key duties

  include generally supervising the business of insurance in the state

  to ensure that it is conducted in accordance with state law and in a

  manner that protects the public. § 10-1-108(7)(a), C.R.S. 2021.

  This involves investigating and examining reliable information that

  pertains to possible violations of insurance laws, including those

  committed by state-licensed insurance producers. See § 10-1-

  108(5).

¶ 28   As defined in title 10, an insurance producer is “[a] person [or

  business entity] who solicits, negotiates, effects, procures, delivers,

  renews, continues, or binds . . . [p]olicies of insurance for risks

  residing, located, or to be performed in [Colorado].” § 10-2-

  103(6)(a)(I), C.R.S. 2021. Insurance producers must be licensed in

  Colorado to conduct business in the state. See § 10-2-401(1),

  C.R.S. 2021.

¶ 29   The Commissioner’s authority to investigate and discipline

  licensed insurance producers’ conduct can be delegated to the

  Division and exercised by its employees under section 10-1-104(2),

  C.R.S. 2021. This investigative and disciplinary authority extends

  to licensee conduct that suggests

                                     14
       (1) a lack of continued fitness for licensure, § 10-2-801(1)(m),

          C.R.S. 2021; see § 10-2-404(1)(h), C.R.S. 2021 (initially

          issuing a license requires verification that an applicant is

          “competent, trustworthy, and of good moral character and

          good business reputation”);

       (2) the “[c]ommission of any unfair trade practice or fraud,” § 10-

          2-801(1)(h); and

       (3) “[t]he use of fraudulent, coercive, or dishonest practices or

          demonstrating incompetence, untrustworthiness, or financial

          irresponsibility in this state or elsewhere,” § 10-2-801(1)(i).

¶ 30     Here, because both Cole and Statewide were Colorado-licensed

  non-resident insurance producers when the investigation was

  conducted, the plain language of these statutes unambiguously

  permitted the Division to investigate Respondents’ conduct and

  relationship to activities potentially violative of Colorado insurance

  laws, subject to any valid claim of preemption. See Bd. of

  Accountancy v. Arthur Andersen, LLP, 116 P.3d 1245, 1247-48

  (Colo. App. 2005) (a regulatory entity that authorizes investigations

  of “persons” rather than just “licensees” means that agency has

  authority to investigate whether a person violated the laws, even if

                                       15
  the license has lapsed or expired). The relationship between Cole,

  Statewide, FCS, and Libre created concern and called into question

  Respondents’ fitness to be licensed as insurance producers in

  Colorado, thus precipitating the next steps of the investigation.

  Thus, under Colorado law, the Division was acting within its

  subject matter jurisdiction in conducting this investigation. But

  Respondents argue that these state laws are preempted by federal

  law addressing the issuance and regulation of immigration bonds.

¶ 31   The Supremacy Clause of the United States Constitution

  provides that federal law is the “supreme Law of the Land.” U.S.

  Const. art. VI, cl. 2. Thus, Congress has the authority to preempt

  state law. Arizona v. United States, 567 U.S. 387, 399 (2012).

  When assessing any preemption question, we adhere to two

  fundamental principles. First, Congress’s purpose in enacting the

  federal legislation is controlling. Fuentes-Espinoza v. People, 2017

  CO 98, ¶ 22. Second, we must presume that Congress did not

  intend to preempt the historic police powers of the state unless that

  was the clear and manifest purpose of the federal legislation. Id.

¶ 32   In addition to these general guiding preemption principles, in

  the context of insurance-related legislation, federal law provides

                                    16
  another central principle. Under the McCarran-Ferguson Act,

  Congress has expressly provided that

            [t]he business of insurance, and every person
            engaged therein, shall be subject to [state
            laws] which relate to the regulation . . . of such
            business. . . . No Act of Congress shall be
            construed to invalidate, impair, or supersede
            any law enacted by any State for the purpose
            of regulating the business of insurance . . .
            unless such Act specifically relates to the
            business of insurance . . . .

  15 U.S.C. § 1012(a)-(b). The Supreme Court has interpreted this

  statute to mean that a state’s authority to regulate insurance will

  not be deemed preempted unless Congress has expressly stated

  such intent or a federal law directly conflicts with continued

  regulation by the state. See generally Humana Inc. v. Forsyth, 525

  U.S. 299 (1999). This concept is known as reverse preemption.

  See, e.g., Allen v. Pacheco, 71 P.3d 375, 381-84 (Colo. 2003)

  (defining reverse preemption in the context of whether an

  arbitration provision of the Colorado Health Care Availability Act

  was preempted by the Federal Arbitration Act).

¶ 33   There are three types of federal preemption: express, field, and

  conflict. Fuentes-Espinoza, ¶ 23 (citing Arizona, 567 U.S. at 399).

  As its name implies, express preemption occurs when Congress

                                    17
  enacts legislation that, on its face, expressly preempts state law. Id.

  Respondents concede there is no express preemption in this case.

¶ 34   Instead, Respondents argue that the concepts of field

  preemption and conflict preemption preclude the Division’s exercise

  of jurisdiction. Field preemption occurs when Congress enacts

  legislation that is so pervasive that it leaves no room for state action

  or is so dominant that it precludes the enforcement of state laws on

  the same subject. Id. There are two types of conflict preemption:

  when simultaneous compliance with both state and federal law is

  impossible, and “where the challenged state law ‘stands as an

  obstacle to the accomplishment and execution of the full purposes

  and objectives of Congress.’” Id. (quoting Arizona, 567 U.S. at 399).

¶ 35   With these concepts in mind, we turn to the federal legislation

  related to immigration bonds that Respondents cite in support of

  their preemption argument. As a starting point, there is no dispute

  that federal law controls the requirements for the posting and

  enforcement of federal immigration bonds. 8 U.S.C. § 1103(a)(3); 31

  U.S.C. §§ 9304-9308. But it is equally clear that the Division was

  not seeking to investigate or regulate these topics. Rather, the

  Division was exercising its authority to investigate and regulate

                                    18
  those persons or companies that choose to provide insurance in the

  State of Colorado.

¶ 36   In its effort to suggest that these activities are preempted,

  Respondents rely on 31 U.S.C. §§ 9304-9308. But none of these

  statutory provisions reflect a congressional desire to occupy the

  field of regulating insurance companies, and none of these

  provisions conflict with the enforcement of Colorado statutes and

  regulations that prohibit Colorado-licensed insurance producers

  from engaging in fraudulent, dishonest, coercive, or illegal business

  practices.

¶ 37   For instance, 31 U.S.C. § 9304, on which Respondents rely,

  specifies that,

               (a) [w]hen a law of the United States
               Government requires or permits a person to
               give a surety bond through a surety, the
               person satisfies the law if the surety bond is
               provided for the person by a corporation --

               (1) incorporated under the laws of--

               ....

               (B) a State . . . ;

               (2) that may under those laws guarantee--

               (A) the fidelity of persons holding positions of
               trust; and

                                       19
               (B) bonds and undertakings in judicial
               proceedings . . . .

  Nothing in this statute precludes the Division from investigating

  licensed insurance producers in Colorado. Indeed, the statute

  contemplates that surety bonds will continue to be regulated by

  state law.

¶ 38   Similarly unavailing is Respondents’ reliance on

       (1) 31 U.S.C. § 9305, which sets solvency requirements for

          sureties posting federal bonds and authorizes the Secretary

          of the Treasury to revoke a surety’s authority to do business

          if it falls below a particular solvency standard;

       (2) 31 U.S.C. § 9306, which addresses when a surety may

          issue sureties outside the state in which it is incorporated

          or has its principal office; and

       (3) 31 U.S.C. § 9308, which authorizes the federal government

          to impose sanctions against those who violate the

          previously discussed statutes.

¶ 39   Nor is preemption warranted by 8 C.F.R. 103.6(a), (b) (2021),

  which describe the types of sureties that may be used in posting

                                     20
  immigration bonds and ICE’s authority to decline bonds from

  sureties if certain conditions exist.

¶ 40   Similarly misplaced is Respondents’ reliance on 31 C.F.R.

  § 223.5(b) (2021), which provides,

             [n]o bond is acceptable if it has been executed
             . . . by a company or its agent in a State where
             it has not obtained that State’s license to do
             surety business. Although a company must be
             licensed in the State or other area in which it
             executes a bond, it need not be licensed in the
             State or other area in which the principal
             resides or where the contract is to be
             performed.

  Nothing about this regulation, or any of the other cited statutes or

  regulations, suggests that the federal government intended to usurp

  the states’ traditional authority to regulate insurance producers and

  insurers that are licensed to conduct business in their states.

  Indeed, the regulations clearly reflect that the federal government

  contemplates that states will continue to license insurance them.

  Such licensure would be meaningless if the issuing state did not

  also retain the authority to investigate and regulate insurance

  producers that engage in fraudulent or otherwise improper conduct.

  See, e.g., Alvarez v. Ins. Co. of N. Am., 667 F. Supp. 689, 695 (N.D.

  Cal. 1987) (In interpreting 31 C.F.R. 223.5 (1987) and related

                                     21
  regulations, the court concluded that they “do not demonstrate an

  intention to occupy the field completely. There is no stated

  intention to preempt state regulation of sureties. The regulations

  themselves incorporate state law.”).

¶ 41   Although not cited in their opening brief, at oral argument

  Respondents argued that the Colorado Supreme Court’s decision in

  Fuentes-Espinoza, 2017 CO 98, supports their assertion of field and

  conflict preemption in this case. We are not persuaded.

¶ 42   In Fuentes-Espinoza, the defendant argued that the state

  statute under which he was convicted, which made it a crime to

  provide transportation to an undocumented immigrant who was

  travelling in Colorado or elsewhere in the United States, conflicted

  with federal immigration laws. Id. at ¶ 10. The supreme court

  noted that the Immigration and Nationality Act (INA) established a

  comprehensive federal framework for penalizing the transportation

  and concealment of undocumented immigrants. Id. at ¶¶ 45-49.

  The court noted the extensive statutory scheme evidenced

  “Congress’s intent to maintain a uniform, federally regulated

  framework for criminalizing and regulating the transportation,

  concealment, and inducement of unlawfully present [undocumented

                                   22
  immigrants], and this framework is so pervasive that it has left no

  room for the states to supplement it,” thereby creating field

  preemption. Id. at ¶¶ 50-51. In addition, the supreme court

  concluded that the Colorado statute criminalized a different range

  of conduct and provided for different levels of punishments than

  those specified in the INA. Id. at ¶¶ 54-59. Because of the

  comprehensive nature of the INA, and the inherent conflicts

  between it and the Colorado criminal statute at issue, the supreme

  court concluded the Colorado statute was also preempted under the

  doctrine of conflict preemption. Id. at ¶ 60.

¶ 43   In contrast to the situation in Fuentes-Espinoza, the

  authorities cited by Respondents do not suggest that Congress

  intended to occupy the field of regulating sureties to the exclusion

  of the states. To the contrary, many of the very authorities cited by

  Respondents expressly contemplate that the states will continue to

  regulate and license companies that provide surety bonds.

  Similarly, Respondents have failed to demonstrate the continued

  regulation of insurance companies by the states that license them

  will frustrate Congress’s purposes in regulating the manner in

  which immigration bonds are posted. For these reasons, we

                                    23
  conclude that neither field nor conflict preemption precludes the

  Division’s enforcement action and corresponding investigation in

  this case.

¶ 44     In sum, Congress has not manifested its intention to displace

  Colorado’s continued regulation of its licensed insurance producers

  and insurers, irrespective of whether those insurance providers

  participate in the issuance of immigration bonds. Because there is

  no federal preemption, and because Colorado law unambiguously

  permits the Division to investigate state-licensed insurance

  producers for potential violations of state insurance law, the

  Commissioner correctly concluded that the Division had jurisdiction

  to investigate Respondents and their relationship to FCS and Libre.

       IV.   The Division Reasonably Exercised its Statutory Authority

¶ 45     Respondents next contend that the Commissioner committed

  reversible error by affirming the ALJ’s conclusion that the Division’s

  second inquiry letter was a reasonable exercise of regulatory

  authority under Colorado law. We disagree.

                          A.    Standard of Review

¶ 46     In the context of reviewing a final agency action, we are

  mindful that a final agency order typically arises, as it did in this

                                     24
  case, out of the agency’s review of an ALJ’s decision. When

  reviewing an ALJ’s decision, the Commissioner may not set aside

  the ALJ’s findings regarding evidentiary facts unless those facts are

  contrary to the weight of the evidence, and the Commissioner must

  defer to the ALJ’s assessment of the credibility of the testimony and

  the weight to be given to the evidence. § 24-4-105(15)(b), C.R.S.

  2021; Koinis v. Colo. Dep’t of Pub. Safety, 97 P.3d 193, 195 (Colo.

  App. 2003). However, the Commissioner may substitute their

  judgment for the ALJ’s decision with respect to an ultimate

  conclusion of fact as long as the decision has a reasonable basis in

  law. Koinis, 97 P.3d at 195.

¶ 47   Appellate review of the Commissioner’s decision is governed by

  section 24-4-106(7). That statute permits a court to reverse an

  administrative agency order only “if it finds that the agency acted

  arbitrarily or capriciously, made a decision that is unsupported by

  the record, erroneously interpreted the law, or exceeded its

  authority.” Koinis, 97 P.3d at 195. Where, as here, a party

  challenges the Commissioner’s ultimate conclusion of fact, a

  reviewing court must determine whether substantial evidence in the

  record as a whole supports that conclusion. Id.

                                    25
                              B.    Analysis

¶ 48   Colorado Division of Insurance Regulation 1-1-8(5), 3 Code

  Colo. Regs. 702-1, requires that “every person shall provide a

  complete and accurate response to any inquiry from the Division

  within twenty (20) calendar days from the date of the inquiry.” The

  regulation defines “complete and accurate” as “a written response

  that includes all of the information, documents and explanation

  requested in the Division’s inquiry. If the requested information is

  not available, the response shall include a detailed explanation of

  why it cannot be provided.” Id. at Reg. 1-1-8(4)(A).

¶ 49   In Charnes v. DiGiacomo, the court held that an administrative

  subpoena for records is enforceable if three criteria are met: “(1) the

  investigation is for a lawfully authorized purpose; (2) the

  information sought is relevant to the inquiry; and (3) the subpoena

  is sufficiently specific to obtain documents which are adequate but

  not excessive for the inquiry.” 200 Colo. 94, 101, 612 P.2d 1117,

  1122 (1980) (citing Okla. Press Publ’g Co. v. Walling, 327 U.S. 186

  (1946)). Respondents contend that the “compulsory nature” of the

  Division’s second inquiry letter practically served as a documentary

  subpoena, and therefore the requests should have been reviewed

                                    26
  under the Charnes standard instead of under an administrative

  investigative inquiry standard. The Division contends that

  Respondents failed to adequately preserve this issue for appeal.

  While the Division’s lack of preservation assertion has arguable

  merit, we view the Charnes analytic framework to be useful in

  evaluating the propriety of an agency inquiry letter that contains a

  sanction for noncompliance.

¶ 50   Respondents argue that the Division’s second inquiry letter

  fails all three prongs of Charnes because (1) the Division’s authority

  to issue inquiry letters is authorized through a regulation

  promulgated by the Division itself and not by statute; (2) the

  requested information was irrelevant to its inquiry because the

  questions made it “evident to Respondents that the Division was not

  investigating Respondents’ ‘fitness for licensure,’ but was

  investigating their participation in the Federal Immigration Bond

  Program”; and (3) the requested information was an “enormous

  fishing expedition” that was overly broad and unduly burdensome.

¶ 51   In Charnes, the court held that the Department of Revenue did

  not exceed the scope of its authority when issuing a subpoena for a

                                    27
  taxpayer’s bank records because the statute granted the director

  the authority

            to enforce the state tax laws[;] [the] subpoena
            seeking information to enforce the tax laws
            [was] a ‘lawfully authorized purpose[;]’
            [i]nformation relating to the correctness of the
            taxpayer’s return or the amount of the
            taxpayer’s income [was] ‘relevant’ to [the]
            enforcement of the tax laws . . . [;] and the
            [agency] limited the scope of the [subpoenaed]
            records by subject[,] date, [and] the documents
            sought.

  612 P.2d at 1123.

¶ 52   Although the Commissioner’s analysis did not cite Charnes,

  we conclude the decision supports the Commissioner’s conclusion

  that the Division did not exceed its authority when issuing its

  second inquiry letter. First, based on the previously cited statutes,

  the Division has the authority to investigate possible violations of

  Colorado insurance law and the power to promulgate rules to do so.

  Moreover, the Division’s inquiry letter had a lawfully authorized

  purpose because it was issued within the scope of the agency’s

  statutory duty to investigate complaints related to the conduct of a

  licensee. Colo. Med. Bd. v. McLaughlin, 2019 CO 93, ¶ 38. Second,

  the Commissioner found a reasonable basis for each item in the

                                    28
  second inquiry letter based upon the scope of the legitimate

  investigation. Third, the Commissioner found record support for

  the ALJ’s findings and conclusions of law that Respondents failed to

  establish that the second inquiry letter was unduly burdensome,

  oppressive, or an abuse of the Division’s discretion.

¶ 53   The Division contends we should analyze the second letter as

  an investigative inquiry letter, the enforceability of which is

  assessed under a more relaxed standard than a subpoena. To

  determine whether an investigative inquiry is within an agency’s

  authority, the demand must not be too indefinite, and the

  information sought must be relevant. See Eddie’s Leaf Spring Shop

  & Towing LLC v. Colo. Pub. Util. Comm’n, 218 P.3d 326, 335 (Colo.

  2009). Considering the more rigorous analysis we have already

  conducted under a subpoena theory, we necessarily conclude the

  demand was not too indefinite, and the information sought was

  relevant to determining Respondents’ potentially violative conduct

  and their relationship with third parties that may have been

  engaged in improper conduct.

¶ 54   Therefore, we affirm the Commissioner’s conclusion that the

  second inquiry letter was a reasonable exercise of the Division’s

                                     29
  investigative authority because it is based in the law and is

  supported by substantial evidence in the record.

       V.    Commissioner’s Reversal of ALJ’s Rule 11 Sanctions

¶ 55   Respondents next assert that the Commissioner’s reversal of

  the ALJ’s order imposing sanctions against the Division was an

  abuse of discretion. We agree.

                        A.    Standard of Review

¶ 56   Recall that the Commissioner may not set aside the ALJ’s

  findings regarding evidentiary facts unless those facts are contrary

  to the weight of the evidence, and the Commissioner must defer to

  the ALJ’s assessment of the credibility of the testimony and the

  weight to be given to the evidence. Koinis, 97 P.3d at 195.

  However, the Commissioner may substitute their own judgment for

  the ALJ’s decision with respect to an ultimate conclusion of fact as

  long as the decision has a reasonable basis in law. Id.

                              B.   Analysis

¶ 57   The ALJ concluded that the Division violated C.R.C.P. 11 when

  it falsely represented that it had produced the entire investigative

  file up to the issuance of the second inquiry letter. Despite making

  this representation, the Division had not, in fact, disclosed the

                                    30
  existence of fifteen pages of its file related to the initial reporting of

  the Respondents’ allegedly fraudulent activity. Moreover, the

  Division did not reference the withheld fifteen pages on a privilege

  log.

¶ 58     As an initial matter, we point out that the Colorado Rules of

  Civil Procedure apply to the “extent practicable in administrative

  hearings.” M.G. v. Colo. Dep’t of Hum. Servs., 12 P.3d 815, 818

  (Colo. App. 2000); Dep’t of Pers. & Admin. Cts. Rule 15, 1 Code

  Colo. Regs. 104-1. Neither party argued that Rules 11 and 26 did

  not apply to this administrative hearing. Therefore, we proceed in

  our review of this issue through the lens of C.R.C.P. 11 and

  C.R.C.P. 26(b)(5)(A).

¶ 59     C.R.C.P. 26(b)(5)(A) requires that “[w]hen a party withholds

  information required to be disclosed or provided in discovery by

  claiming that it is privileged . . . , the party shall make the claim

  expressly and shall describe the nature of the documents . . . .”

  (Emphasis added.) Thereafter, if an opposing party contests the

  claim of privilege, the party claiming privilege is required to present

  the information to the court for inspection. Id.

                                      31
¶ 60   This rule is designed to allow for the protection of privileged

  information, while at the same time ensuring that the litigants and

  the court know what, if any, documents have been withheld and the

  legal and factual basis for withholding them. Id. (The withholding

  party “shall describe the nature of the documents, communications,

  or things not produced or disclosed in a manner that, without

  revealing information itself privileged or protected, will enable other

  parties to assess the applicability of the privilege or protection.”);

  see also Smithkline Beecham Corp. v. Apotex Corp., 193 F.R.D. 530,

  534 (N.D. Ill. 2000) (“[T]he description of each document and its

  contents [submitted pursuant to Fed. R. Civ. P. 26(b)(5)] must be

  sufficiently detailed to allow the court to determine whether the

  elements of [the privilege] have been established. Failing this, the

  documents must be produced.”); Kelso v. Rickenbaugh Cadillac Co.,

  262 P.3d 1001, 1003 (Colo. App. 2011) (stating that when state civil

  procedure rules are “substantially similar” to federal rules of civil

  procedure, the case law interpreting the federal rule is persuasive in

  a court’s analysis of the state rule). Moreover, the “failure to

  produce a privilege log can result in a waiver of any protection

                                     32
  afforded to [the subject] documents.” Emp.’s Reinsurance Corp. v.

  Clarendon Nat’l Ins. Co., 213 F.R.D. 422, 428 (D. Kan. 2003).

¶ 61   Candor from the litigants and their counsel is essential to this

  process. If one party unilaterally withholds a document from

  disclosure but fails to reveal the existence of the document on a

  privilege log, the opposing party has no way to know the withheld

  document exists, much less the ability to assess and contest any

  claim of privilege that has been asserted.

¶ 62   Rule 11 provides as follows:

            The signature of an attorney constitutes a
            certificate by him that he has read the
            pleading; that to the best of his knowledge,
            information, and belief formed after reasonable
            inquiry, it is well grounded in fact and is
            warranted by existing law or a good faith
            argument for the extension, modification, or
            reversal of existing law, and that it is not
            interposed for any improper purpose, such as
            to harass or to cause unnecessary delay or
            needless increase in the cost of litigation. . . .
            If a pleading is signed in violation of this Rule,
            the court, upon motion or upon its own
            initiative, shall impose upon the person who
            signed it, a represented party, or both, an
            appropriate sanction, which may include an
            order to pay to the other party or parties the
            amount of the reasonable expenses incurred
            because of the filing of the pleading, including
            a reasonable attorney’s fee . . . .

                                      33
  C.R.C.P. 11(a).

¶ 63   At the administrative hearing, the Division argued that it was

  justified in withholding the documents, and that it was appropriate

  not to identify them on the privilege log because to do so would

  have jeopardized the effectiveness of its investigations and the

  integrity of the privilege.

¶ 64   The ALJ rejected these arguments on multiple grounds. The

  ALJ correctly concluded that the clear purpose of section 10-4-

  1003(8)(a), C.R.S. 2021, which is the statutory foundation of the

  privilege claimed by the Division, is to protect the anonymity of

  those who report fraudulent insurance practices. And the ALJ also

  correctly concluded that the general document description

  mandated by Rule 26(b)(5)(A) would not compromise that central

  purpose. Thus, the ALJ found the Division’s proffered justification

  for not listing the withheld documents on a privilege log unavailing.

  These legal conclusions and factual findings are amply supported

  by the record and the applicable law.

¶ 65   The ALJ also reasoned that although the Division’s second

  motion for a protective order was ultimately granted, that did not

  vitiate the Division’s misrepresentation in its earlier motion for a

                                    34
  protective order that it had produced its entire file up until the date

  of the second inquiry letter. Based upon this affirmative

  misrepresentation, the ALJ concluded the Division had violated

  Rule 11 and ordered it to pay $1,567.50 to Respondents as

  compensation for their attorney fees expended because of the

  violation.

¶ 66   The Commissioner rejected and set aside the ALJ’s findings

  and conclusions of law, reasoning that “the conduct at issue here is

  not legally sufficient to satisfy the standard for imposing sanctions

  under C.R.C.P. 11.” Rather than focusing on Rule 11, the

  Commissioner stated that the “core dispute — regarding disclosure

  of the Division’s file and whether portions of the Division’s file were

  the proper subject of a protective order — was properly and fully

  resolved by the ALJ under the discovery rules.” Citing no authority,

  the Commissioner stated, “in seeking the protective order, the

  Division’s motion was not required to address privilege issues

  related to portions of the investigative file that were subject to

  discovery.”

¶ 67   Because the ALJ ultimately determined that the fifteen pages

  could be withheld, the Commissioner concluded no sanctions were

                                     35
  warranted under C.R.C.P. 37. And because the Division’s original

  disclosures included generalized assertions of privilege, and the

  misrepresentation was made in the context of a motion for a

  protective order, the Commissioner concluded the Division’s

  misrepresentation should not be governed by Rule 11 and to the

  extent Rule 11 applied, the misrepresentation was not so egregious

  as to warrant sanctions.

¶ 68   We conclude the Commissioner’s decision on this issue does

  not give appropriate deference to the evidentiary factual findings

  made by the ALJ, and it disregards the ALJ’s ultimate conclusion of

  fact without a reasonable basis in law.

¶ 69   Irrespective of whether the motion for a protective order, which

  contained the misrepresentations, is characterized through the lens

  of a discovery dispute or general motion practice, the mandates of

  Rule 11 apply to all representations made by counsel in their filings

  with the ALJ. See Jensen v. Matthews-Price, 845 P.2d 542, 544

  (Colo. App. 1992) (“[A]n attorney or litigant who signs a motion or

  other paper has the same obligation as the signer of a pleading to

  ensure that the document is factually and legally justified.”). The

  ALJ, with record support, found the statement in the Division’s

                                   36
  motion that it had produced the entirety of its file up until the

  issuance of the second letter was false. The Commissioner pointed

  to no reason why the ALJ’s factual conclusion was not supported by

  the record. Moreover, the representation was certainly material

  and, for the reasons previously described, critical to the discovery

  process. A party cannot be excused from such an affirmative

  misrepresentation simply because it ultimately prevails on the

  dispute that gave rise to the filing of the motion in which the

  misrepresentation was made. See In re Trupp, 92 P.3d 923, 930

  (Colo. 2004). Thus, the imposition of sanctions against the Division

  was well within the ALJ’s discretionary authority. The

  Commissioner’s contrary conclusion is not grounded in a

  reasonable basis in law.

¶ 70   For all of these reasons, we reverse the Commissioner’s

  decision to set aside the ALJ’s Rule 11 sanctions.

                     VI.   Non-Party Findings of Fact

¶ 71   Finally, Respondents contend that the Commissioner erred

  when affirming the ALJ’s findings and conclusions relating to FCS,

  Libre, and Libre’s principal. They argue that these non-parties were

  entitled to “due notice” before the ALJ issued the initial decision,

                                    37
  and that because Respondents are collaterally prejudiced by these

  findings and conclusions, they have standing to assert this issue on

  appeal.

¶ 72   We reject this contention on multiple grounds. First, FCS,

  Libre, and Libre’s principal are not parties to this appeal. Nor were

  they parties to the underlying administrative action. § 24-4-106(4)

  (“[I]f such agency action occurs in relation to any hearing pursuant

  to section 24-4-105, then the person [seeking judicial review] must

  also have been a party to such agency hearing.”).

¶ 73   Second, Respondents failed to preserve this issue for appeal.

  Arguments never presented to, considered by, or ruled upon by a

  trial court may not be raised for the first time on appeal. Est. of

  Stevenson v. Hollywood Bar & Cafe, Inc., 832 P.2d 718, 721 n.5

  (Colo. 1992). Moreover, a reviewing court is not required to address

  specific arguments not made to the Commissioner on appeal from

  an ALJ. See City & Cnty. of Denver v. Indus. Claim Appeals Off., 58

  P.3d 1162, 1165 (Colo. App. 2002).

¶ 74   Therefore, we decline to address this issue.

                                    38
                            VII. Conclusion

¶ 75   Pursuant to section 24-4-106(7)(b), we reverse that portion of

  the Commissioner’s order setting aside the ALJ’s award of attorney

  fees and remand with instructions to reinstate the ALJ’s ruling.

  The order is otherwise affirmed.

       JUDGE WELLING and JUDGE TAUBMAN concur.

                                     39