Court Opinion

ID: 9843725
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:42:33.172053+00
Date Added: 2024-06-11T09:16:53.658587
License: Public Domain

*552MARING, Justice,
dissenting.
[¶ 44] Because I am of the opinion the Bureau must prove a violation of N.D.C.C. § 65-05-33 by clear and convincing evidence, I respectfully dissent.
I
[¶ 45] The sections of N.D.C.C. § 65-05-33, pertinent to this case provide:
1. A person who claims benefits or payment for services under this title or the employer of a person who claims benefits or payments for services is guilty of a class A misdemeanor if the person or employer does any one or more of the following:
a. Willfully files a false claim or makes a false statement in an attempt to secure payment of benefits or payment for services.
b. Willfully misrepresents that person’s physical condition, including deceptive conduct which misrepresents that person’s physical ability.
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3. In addition to any other penalties provided by law, the person claiming benefits or payment for services in violation of this section shall reimburse the bureau for any benefits paid based upon the false claim or false statement and, if applicable, under section 65-05-29 and shall forfeit any additional benefits relative to that injury.'
N.D.C.C. § 65 — 05—33(l)(a)—(b), (3). The Bureau, as the party alleging a violation of N.D.C.C. § 65-05-33 in this case, has the burden of proof. See North Cent. Good Samaritan Center v. N.D. Dept. of Human Servs., 2000 ND 96, ¶ 20, 611 N.W.2d 141 (“It is ‘well-settled’ the moving party has the burden of proof in administrative hearings.”). Although the legislature has provided that preponderance of the evidence is the burden of proof a claimant must meet when the burden is on the claimant to show an entitlement to benefits, see N.D.C.C. § 65-01-11, the legislature has not specified what burden of proof is on the Bureau when it alleges a violation of N.D.C.C. § 65-05-33. Therefore, this Court may supply the standard. See Steadman v. S.E.C., 450 U.S. 91, 95-96, 101 S.Ct. 999, 67 L.Ed.2d 69 (1981) (“Where Congress has not prescribed the degree of proof which must be adduced ... in an administrative proceeding, this Court has felt at liberty to prescribe the standard, for ‘it is the kind of question which has traditionally been left to the judiciary to resolve.’ ”).
[¶ 46] N.D.C.C. § 65-05-33 does not specifically mention the words “fraud,” or “deceit,” subsections a and b of N.D.C.C. § 65-05-33(1) are substantially similar to the definition of fraud and deceit applied in other civil contexts. See, e.g., Gershman v. Engelstad, 160 N.W.2d 80, 85 (N.D.1968) (“In order to sustain an action for fraud, plaintiffs must show that the defendant made a false representation of a material fact, knowing it to be false, or made a representation as of knowledge, when he did not in fact know, with intent to induce the plaintiffs to rely on it, and, further, that the plaintiffs did in fact rely on it to their damage.”); N.D.C.C. § 9-03-08 (listing “[t]he suggestion as a fact of that which is not true by one who does not believe it to be true” and “[a]ny other act fitted to deceive” as acts that constitute actual fraud when done “with intent to deceive another party thereto or to induce him to enter into the contract”); N.D.C.C. § 9-10-02 (listing “[t]he suggestion as a fact of that which is not true by one who does not believe it to be true” and “[t]he suppression of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact” as acts constituting deceit). The burden of proof *553generally applicable in a civil case is preponderance of the evidence. See Steckler v. Steckler, 492 N.W.2d 76, 80 (N.D.1992). However, when fraud or deceit is alleged in a civil case, it must be proved by clear and convincing evidence. See Wagner v. Wagner, 2000 ND 132, ¶ 12, 612 N.W.2d 555; Sargent County Bank v. Wentworth, 500 N.W.2d 862, 875 (N.D.1993); State Bank of Kenmare v. Lindberg, 471 N.W.2d 470, 474-75 (N.D.1991); Fitzgerald v. Balkowitsch, 288 N.W.2d 761, 763 (N.D.1980). Because of the similarities between N.D.C.C. § 65-05-33(1) and the civil definitions of fraud and deceit, and because the legislature has not provided a burden of proof for showing a violation of N.D.C.C. § 65-05-33, it, therefore, follows that the burden of proof this Court should supply is the same burden of proof applicable to an allegation of fraud or deceit in other civil contexts, i.e., clear and convincing evidence. In Varbel v. Sandia Auto Electric, 128 N.M. 7, 988 P.2d 317 (1999), the Court of Appeals of New Mexico reached the same conclusion in interpreting a statute similar to N.D.C.C. § 65-05-33:
The Act defines “fraud” as “the intentional misrepresentation of a material fact resulting in workers’ compensation or occupational disablement coverage, the payment or withholding of benefits or an attempt to obtain or withhold benefits. The intentional misrepresentation of a material fact may occur through the conduct, practices, omissions or representations of any person.” NMSA 1978, § 52-5-1.3(F) (1990). This is not unlike the definition of fraud New Mexico courts have applied in other contexts. See, e.g., Cargill v. Sherrod, 96 N.M. 431, 432-33, 631 P.2d 726, 727-28 (1981) (“Actionable fraud consists of misrepresentation of a fact, known to be untrue by the maker, and made with an intent to deceive and to induce the other party to act in reliance thereon to his detriment.”). It is generally for the fact finder to determine whether fraud was proved.
A finding of fraud normally requires proof by clear and convincing evidence. For evidence to be clear and convincing, it must instantly tilt the scales in the affirmative when weighed against the evidence in opposition and the fact finder’s mind is left with the abiding conviction that the evidence is true. Thus, coupled with our whole record review, we must determine whether the fact finder could properly determine that the clear and convincing evidence standard was met.
128 N.M. 7, 988 P.2d 317, 320-21 (1999) (citations and internal quotation marks omitted).
[¶ 47] Two primary reasons have been advanced by courts for relying on the clear and convincing evidence burden of proof in civil cases involving allegations of fraud. See Roger D. Colton, Heightening the Burden of Proof in Utility Shutoff Cases Involving Allegations of Fraud, 33 Howard L.J. 137, 147 (1990). The first reason is there exists a natural presumption that individuals are honest and act with correct motives which can only be overcome by clear and convincing evidence to the contrary. See Rhoads v. Harvey Publications, Inc., 145 Ariz. 142, 700 P.2d 840, 844 (1984); Peters v. Woodman Accident & Life Co., 170 Neb. 861, 104 N.W.2d 490, 497 (1960). The second reason advanced by some courts is that fraud falls into a class of civil cases which carry with them a stigma of bad faith and a judgment which is akin to a finding of guilt. See Riley Hill Gen. Contractor, Inc. v. Tandy Corp., 303 Or. 390, 737 P.2d 595, 603 (1987); Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 457-58 (1980). There is no authority which indicates these reasons *554are not equally applicable to a case in which an individual is alleged to have fraudulently obtained workers’ compensation benefits. In fact, a case brought by the Bureau against a claimant for a violation of N.D.C.C. § 65-05-33 is an especially strong candidate for the application of the clear and convincing standard of proof when one considers that a claimant who is found to have violated N.D.C.C. § 65-05-33 may also be subjected to a criminal prosecution and found guilty of a class A misdemeanor or a class C felony. See N.D.C.C. § 65-05-33(1), (2); see also Wangen, at 457 (stating that the clear and convincing evidence standard has been required in cases involving fraud and civil actions involving criminal acts). Furthermore, due to the natural presumption against fraud, requiring the Bureau to prove a violation of N.D.C.C. § 65-05-33 by clear and convincing evidence is consistent with the legislature’s practice of requiring presumptions under the Workers Compensation Act to be rebutted by clear and convincing evidence. See N.D.C.C. § 65-05-15(1) (period of acute care for some compensable injuries “is presumed to be sixty days ... absent clear and convincing evidence to the contrary”); N.D.C.C. § 65-05-15(3) (aggravation benefits are presumed payable on a fifty percent basis unless the presumption is rebutted with “clear and convincing evidence to the contrary”); N.D.C.C. § 65-05-35(2) (a claim presumed closed may not be reopened “unless the presumption is rebutted by clear and convincing evidence that the work injury is the sole cause of the current symptoms”).
II
[¶ 48] Relying on Steadman v. S.E.C., 450 U.S. 91, 95-96, 101 S.Ct. 999, 67 L.Ed.2d 69 (1981), the majority rejects the clear and convincing evidence burden of proof for a violation of N.D.C.C. § 65-05-33 because it concludes N.D.C.C. § 65-05-33 “does not provide a specific standard differing from the general standard of a preponderance of the evidence specified for judicial review of an administrative agency’s findings of fact in N.D.C.C. ch. 28-32.” See Majority Opinion at ¶¶ 29-30 (emphasis added).
[¶ 49] The issue in Steadman was whether in administrative hearings, violations of antifraud provisions of federal securities law must be proved by clear and convincing evidence rather than by a preponderance of the evidence. See 450 U.S. at 92, 101 S.Ct. 999, 67 L.Ed.2d 69. In resolving this issue, the Court quoted the following language from section 7(c) of the Administrative Procedure Act:
“Except as otherwise provided by statute, the proponent of a rule or order has the burden of proof. Any oral or documentary evidence may be received, but the agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetitious evidence. A sanction may not be imposed or rule or order issued except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence.”
See Steadman, at 98, 101 S.Ct. 999, 67 L.Ed.2d 69 (quoting section 7(c), 5 U.S.C. § 556(d)). The Court reasoned that “[t]he language of the statute itself implies the enactment of a standard of proof.” Id. Because the legislative history of section 7(c) specifically stated that Congress intended this standard to be preponderance of the evidence, the Court held preponderance of the evidence was the applicable standard of proof for violations of anti-fraud provisions of federal securities law. See id. at 102-03, 101 S.Ct. 999, 67 L.Ed.2d 69.
[¶ 50] In contrast to the Administrative Procedure Act at issue in Steadman, *555North Dakota’s Administrative Agencies Practice Act, N.D.C.C. ch. 28-32, does not contain a provision similar to section 7(c), 5 U.S.C. § 556(d), from which a standard of proof can be implied. Rather, N.D.C.C. ch. 28-32 only contains provisions governing the standards for judicial review of administrative findings of fact. See N.D.C.C. §§ 28-32-19, 28-32-21.3 In Steadman, the Court rejected the petitioner’s argument that section 7(c) of the Administrative Procedure Act was merely a judicial review provision and went to great lengths to distinguish section 7(c) from the judicial review provision of that Act:
Unlike § 10(e), the APA’s explicit “Scope of review” provision that declares that agency action shall be held unlawful if “unsupported by substantial evidence,” § 7(c) provides that an agency may issue an order only if that order is “supported by and in accordance with ... substantial evidence” (emphasis added). The additional words “in accordance with” suggest that the adjudicating agency must weigh the evidence and decide, based on the weight of the evidence, whether a disciplinary order should be issued. The language of § 7(c), therefore, requires that the agency decision must be “in accordance with” the weight of the evidence, not simply supported by enough evidence to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury. Obviously, weighing evidence has relevance only if the evidence on each side is to be measured against a standard of proof which allocates the risk of error. Section 10(e), by contrast, does not permit the reviewing court to weigh the evidence, but only to determine that there is in the record such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. It is not surprising, therefore, in view of the entirely different purposes of § 7(c) and § 10(e), that Congress intended the words “substantial evidence” to have different meanings in context. Thus, petitioner’s argument that § 7(c) merely establishes the scope of judicial review of agency orders is unavailing.
Steadman, at 98-100, 101 S.Ct. 999, 67 L.Ed.2d 69 (citations, footnotes, and quotation marks omitted). Furthermore, the Court in Steadman distinguished a prior case in which it required findings of fact at a deportation proceeding to be established by clear and convincing evidence on the basis that “deportation proceedings were not subject to the [Administrative Procedure Act], and the Immigration and Nationality Act (INA) did not prescribe a standard of proof, only the scope of judicial review.” Steadman, at 102 n. 22,101 S.Ct. 999, 67 L.Ed.2d 69.
[¶ 51] Thus, as Steadman illustrates, the fact that N.D.C.C. §§ 28-32-19 and 28-32-21 limit the scope of judicial review of an agency’s findings of fact to whether the findings are supported by a preponderance of the evidence, in no way precludes the application of the clear and convincing evidence burden of proof to a hearing before the Bureau on a violation of N.D.C.C. § 65-05-33. See Steadman, at 102 n. 22, 101 S.Ct. 999, 67 L.Ed.2d 69. Furthermore, if the legislature did truly intend to provide a burden of proof in N.D.C.C. ch. *55628-32, it seems odd that it would choose to do so in statutes governing judicial review of administrative agency decisions, see N.D.C.C. §§ 28-32-19, 28-32-21, but make no mention of any burden of proof in the statute governing the procedure for the presentation of evidence at administrative hearings, see N.D.C.C. § 28-32-11.1, or in the statute requiring administrative agencies to make findings of fact, see N.D.C.C. § 28-32-13.4 Cf. Steadman, at 100 n. 20, 101 S.Ct. 999, 67 L.Ed.2d 69 (“[I]t is implausible to think that the drafters of the APA would place a scope-of-review standard in the middle of a statutory provision designed to govern evidentiary issues in adjudicatory proceedings.”). In concluding the legislature has provided a standard of proof through the enactment of N.D.C.C. §§ 28-32-19 & 28-32-21, the majority opinion “overlooks the different functions of initial decision making and judicial review of it.” Steadman, at 100 n. 20, 101 S.Ct. 999, 67 L.Ed.2d 69; see also Hopper v. Indus. Commission, 27 Ariz.App. 732, 558 P.2d 927, 929 (1976) (“It is beyond question in this jurisdiction that a claim of fraud must be established by clear and convincing evidence. The purpose of the ‘clear and convincing’ standard is to guide the trier of fact in the consideration of the evidence. It is not a test to be applied by an appellate court in passing on the sufficiency of the evidence.” (citations omitted)); Fitzgerald v. Balkowitsch, 288 N.W.2d 761, 763 n. 3 (N.D.1980) (“It should be noted that proof of fraud by clear and convincing evidence is a standard to be utilized by the trial court in its determination of whether or not fraud has been committed. This court, as an appellate court, reviews the findings of the trial court, utilizing the Rule 52(a), N.D.R.Civ. P., ‘clearly erroneous’ standard.”).
III
[¶ 52] Because the legislature has not provided a standard of proof applicable at a hearing before the Bureau on an alleged violation of N.D.C.C. § 65-05-33, this Court may supply one. See Steadman, 450 U.S. at 95-96, 101 S.Ct. 999, 67 L.Ed.2d 69 (“Where Congress has not prescribed the degree of proof which must be adduced ... in an administrative proceeding, this Court has felt at liberty to prescribe the standard, for ‘it is the kind of question which has traditionally been left for the judiciary to resolve.’ ”). Based on the similarities between N.D.C.C. § 65-05-33 and the definitions of fraud and deceit in other civil contexts, the correct standard of proof to apply is clear and convincing evidence. Because the Bureau did not apply this standard, I would reverse and remand for findings of fact under the correct standard of proof.
[¶ 53] Mary Muehlen Maring

. Section 28-32-46, N.D.C.C., provides additional grounds for a court to reverse an administrative agency decision, effective August 1, 2001. Sjostrand filed his notice of appeal on January 26, 2001, therefore, former N.D.C.C. §§ 28-32-19 and 28-32-21 apply rather than N.D.C.C. §§ 28-32-46, 28-32-49. See Henderson v. N.D. Dept, of Transp., 2002 ND 44, ¶ 6 n. 2, 640 N.W.2d 714 (noting that the date the appeal from an administrative agency decision is filed determines whether the new version of N.D.C.C. § 28-32-46 applies).

. Sections 28-32-11.1 and 28-32-13, N.D.C.C., were renumbered as N.D.C.C. §§ 28-32-35 and 28-32-39, effective August 1, 2001. The former version of these statutes are cited to because the hearing before the Bureau in this case took place prior to August 1, 2001.