MEMORANDUM in SUPPORT of RESPONDENTS' RCW 34.12 REQUEST - 4 Ryan, Swanson &
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F\LED rf(; f~ 2 1m JUN Y,\' A q: l\ 1 3 I i 4 5 i 6 7 BEFORE THE INSURANCE COMMISSIONER OF THE STATE OF WASHINGTON 8 In the Matter of 9 NO. 13-0108 CHARLES D. OLIVER, AMERICAN EQUITY 10 ADVISORY GROUP, LLC, AND "TI-IE CHUCK MEMORANDUM IN SUPPORT OF OLIVER TEAM," RESPONDENTS' RCW 34.12 11 REQUEST Respondents. 12 13 FACTS 14 Charles D. Oliver ("Oliver") is a Florida resident. His wholly owned company, 15 American Equity Advisory Group, LLC ("American Equity") is a foreign limited liability 16 company. Both Oliver and American Equity have, in the past, held Washington non-resident 17 licenses although neither does now. 18 The Commissioner has issued a cease and desist order against both Oliver and 19 American Equity relating to certain isolated events occurring in 2009. Oliver and American 20 Equity dispute that they violated any Washington insurance statutes. Rather than ignore the 21 cease & desist order and in an effort to clear their names, Oliver and American Equity both 22 requested a fair hearing and made a separate written request that an administrative law judge 23 be assigned under RCW 34.12. The written request referenced RCW 48.04.010(5) which 24 provides: 25 A licensee under this title may request that a hearing authorized under this section be presided over by an administrative law judge assigned under 26 MEMORANDUM IN SUPPORT or RESPONDENTS' RCW 34,12 REQUEST - 1 Ryan, Swanson & Cloveland, PLLC 1201 Tl1ml Avenue, SUite 3400 1I~ Seattle, WA 98101,3034 8156.1502 ORIGINAl. 206.464.4224 I Fax 206.583.0359 Chapter 34.12 RCW. Any such reguest shall not be denied. (Emphasis supplied). 2 Following receipt of respondents' written request for the appointment of an RCW 3 34.12 administrative law judge ("ALJ"), orc Hearing Examiner Patricia Petersen initiated a 4 "scheduling conference" during which she questioned respondents' right to appointment of 5 the requested administrative law judge to preside over the hearing of the dispute. Hearing 6 Examiner Petersen implied: (I) whether the respondents were entitled to an appointment of an 7 RCW 34.12 administrative law judge was within the discretion of the Insurance 8 Commissioner, not a matter of right; (2) that if respondents were not licensees at the time of 9 their request, that RCW 48.04.010(5) did not apply to them; and further (3) that no other 10 authority entitled them to the requested appointment. Hearing Officer Petersen indicated that II she was inclined to disallow respondents' request and proceed forward with scheduling a 12 hearing before her, but allowed respondents to submit a brief on the subject if they did so 13 within four days. Request for a short time extension was denied. This Memorandum is 14 intended as respondents' response. 15 LAW 16 A. Impartiality and the avoidance of the appearance of partiality are integral to the 17 integrity of administrative proceedings. 18 If respondents right to contest the charges brought by the Washington State Insurance 19 Commissioner ("Department" or "Commissioner") in an administrative hearing exists, then 20 the exercise ofthat right entitles them to a proceeding that is fundamentally fair and free from 21 all appearance of impartiality. The right to administrative hearings involving governmental 22 adjudicative actions is rooted in constitutional due process considerations. Where, as here, 23 state agencies are empowered to administratively enforce statutes or impose sanctions against 24 individuals, those persons aggrieved by such action are entitled to a hearing. This action is an 25 26 MEMORANDUM IN SUPPORT OF RESPONDENTS' RCW 34.12 REQUEST - 2 Ryan, Swanson & Cleveland, PLLC 1201 Third Avenue, SUlta3400 al~ Seattle, WA 98101·3034 815635,02 206.464.4224 I Fax 206.583.0359 I adjudicative hearing. See RCW 34.05.010(1)(2) and (3). Adjudicative actions in Washington 2 are governed by the Washington Administrative Procedures Act ("APA"). RCW 34.05 et seq. 3 The cease and desist order issued by the Commissioner here expressly provided: 4 Respondents have the right to demand a hearing pursuant to RCW 48.04 and 5 34.05. Cease and Desist Order dated April 4, 2013 6 Respondents timely exercised their right and demanded a hearing. 7 Implicit in the hearing process is the concept that an aggrieved persons who dispute 8 the allegations made against them have an opportunity to present their case with the 9 expectations that a trier of fact will receive all the evidence without preconditioned views and 10 independently and fairly decide the matter. An adjudicative proceeding which does not II ensure impartiality and avoidance ofpartiality is no hearing at all. 12 Several circlUllstances and facts underlying the cease and desist order and the 13 Department's actions to date have raised concerns about its impartiality and fairness. We 14 believe respondents' concerns are well grounded in fact. Given these concerns, having the 15 Commissioner's own hearing examiner preside over the hearing seems antithetic to traditional 16 notions of fairness. This is especially so inasmuch as our legislators have provided a 17 mechanism to avoid any appearance ofpartiality. 18 B. RCW 34.1 2 ensures independence and impartial administrative proceedings. 19 RCW 34.010 was enacted to ensure the appearance of impartiality. The legislative 20 history surrounding this statute makes clear the state's intent to make available hearing 21 officers independent of state administrative agencies to hear matters pertaining to adjudicative 22 actions of those agencies. See Exhibit A (ESHB 10 I). The statute was the result of a 23 Washington State Bar Association task force study and recommendation which concluded that 24 the creation of an independent office of administrative hearings was "essential" to avoid 25 conduct which "violates the appearance of fairness and is contrary to basic concepts of fair 26 MEMORANDUM IN SUPPORT OF RESPONDENTS' RCW 34.12 REQUEST - 3 Ryan, Swanson & Cleveland, PLLC 1201 Third Avenue, Suite 3400 B~ Seattle, WA 98101·3034 81563502 206.11·64.4224 I Fax 206.583.0359 play." See Exhibit B (WSBA Task Force presentation to the House of Representatives 2 regarding House Bill 101, by Robert A. Felthous, Chairman at p. 6). The Independent 3 Business Association reached the same conclusion: 4 The need for disinterested and objective third parties to gather facts and issue 5 an objective opinion on a contested case is essential to equitable justice. Independent Business Association letter submission dated January 27, 1981. 6 See Exhibit C. 7 C. RCW 48.04.010 does not selectively limit availability ofRCW 34.12 ALJ's only to current licensees. 8 On its face, RCW 34.12 applies to all adjudicative proceedings of state administrative 9 agencies 1 without regard to the class or particular attributes ofpersons against whom agencies 10 have taken adjudicative type actions. Persons aggrieved by state administrative actions which II give rise to rights to a hearing do not have to meet any personal prerequisites in order to be 12 entitled to the protections ofRCW 34.12. 13 The Commissioner argues that these respondents are not entitled to appointment of a 14 RCW 34.12 ALJ because respondents are not now licensees, and alleges that they were not 15 licensed at the time of the events alleged in the cease and desist order which respondents 16 contest. This argument is flawed. It misses both the point and purpose of RCW 34.12. If, by 17 mere allegations, the Commissioner could disqualify the respondents from RCW 34.12 18 protections, then the very purpose of the statute could be circumvented. There are numerous 19 scenarios under which aggrieved persons can vindicate themselves and disprove allegations 20 made by the Department which is the purpose of an impartial hearing on the merits. What if, 21 contrary to the allegations of the cease and desist order, an aggrieved person was properly 22 licensed? What if the actual facts ultimately demonstrated no license was required? What if 23 the allegations underlying the Department's action were substantively wrong, or barred by the 24 25 1 Note: By express exclusion, a few agencies are exempt from RCW 34.12. The Department, 26 however, is no! exempt. MEMORANDUM IN SUPPORT OF RESPONDENTS' RCW 34.12 REQUEST - 4 Ryan, Swanson &. Clevel<md, PLLC . 1201 Third Avenue, Suite 3400 a~ Seattle, WA 98101·3034 815635.02 206.464.4224 I Fax 206.583,0359 1 statute of limitations? Any of these outcomes would vindicate the person aggrieved at a 2 hearing. Requiring proof and weighing evidence of licensing status of respondents at this 3 stage is wrong. It renders illusory the protections of RCW 34.12 and undermines the notion 4 of fair play that the statute was intended to secure. 5 RCW 48.04.010 does not limit RCW 34.12.010. Any person aggrieved "by any, 6 threatened act, or failure of the Commissioner to act" is entitled to a fair hearing so long as 7 such failure is deemed an act under any provision of the insurance code. 8 RCW 48.04.010(1), (2). The statute is generically partly entitled: "Hearings." Nothing about 9 the title of the statute supports the proposition that RCW 34.12 appointed ALJ's are not 10 available in all adjudicative proceedings ofthe Department. II Narrowly construing RCW 48.04.010(5) to mean that only aggrieved persons who are 12 also licensees are entitled to appointment of RCW 34.12 administrative law judges is contrary 13 to all legislative history, the language of RCW 34.12 itself, numerous provisions of the APA 14 and fundamental notions of fairness. Such construction would essentially give the 15 Commissioner the power to prosecute individuals after their licenses lapse without providing 16 the protections and rights available to all other aggrieved persons.