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Purnell v. Department of Insurance

Superior Court of Delaware

September 7, 2017

JOHN PURNELL, Appellant,
v.
DEPARTMENT OF INSURANCE, Appellee.

          Date Submitted: July 13, 2017

         Upon Appeal from the Delaware Insurance Commissioner's Final Decision and Order. AFFIRMED in part and REVERSED in part.

          John Purnell, pro se, Bear, DE, Appellant.

          Jessica M. Willey, Esquire, Deputy Attorney General, Delaware Department of Justice, 841 Silver Lake Boulevard, Dover, DE, Attorney for Appellee.

          OPINION

          JURDEN, P.J.

         The Delaware Department of Insurance ("Department"), under the authority of the Delaware Insurance Commissioner ("Commissioner"), administers and enforces Title 18, Chapter 43, Subchapter II of the Delaware Code relating to the regulation of bail bond agents. The Department filed a Complaint against John Purnell before the Commissioner alleging that Purnell and his bail bond company, Bail Bond Agency, Inc., violated certain provisions of the Delaware Insurance Code and no longer meet the criteria for issuance of a license. A Hearing Officer held a hearing and issued Recommended Findings, recommending that the Commissioner find that Purnell violated the Insurance Code and recommending that the Commissioner revoke Purnell's license. Ultimately, the Commissioner adopted the Hearing Officer's Recommended Findings. The Commissioner then revoked Purnell's license and imposed a fine.

         Purnell now appeals the Commissioner's September 26, 2016 Final Decision and Order.[1] For the reasons set forth below, the Commissioner's Final Decision and Order is AFFIRMED in part and REVERSED in part.

         I. BACKGROUND

         Purnell was a licensed bail agent in Delaware.[2] In June 2015, the Department examined a website, www.delawarebailbonds.com, that advertised an entity called "Delaware Bail Bonds."[3] The Department determined that the entity advertised on the website was related to Purnell and noticed that the website appeared to violate several provisions of the Insurance Code.[4]

         Additionally, during 2014-15, in a separate investigation of multiple bail agents, the Department identified Purnell as the general agent of the bail agents under investigation.[5] Bankers Insurance Company ("Bankers") forwarded documentation to the Department indicating that Purnell and his sub-agents caused losses of more than $300, 000 to Bankers.[6] By contract, Purnell was liable for those losses, but failed to pay.[7] The Department also determined that Bankers had obtained a $281, 911.89 final judgment against Purnell.[8]

         Following its investigation, the Department filed a Complaint against Purnell with the Commissioner.[9] The Complaint sets forth four counts: (1) Purnell violated 18 Del. C. § 4350(e) by using the firm or trade name "Delaware Bail Bonds, " which was not registered, licensed, or approved by the Department; (2) Purnell violated 18 Del. C. § 4350(e) by failing to display his registered name and license number on the website www.delawarebailbonds.com; (3) Purnell violated 18 Del. C. § 2304(2) by advertising the posting of bonds for as low as one percent down and by advertising attorney referral services; and (4) Purnell cannot fulfill all the criteria for issuance of a bail agent license under 18 Del. C. § 4333(c)(c)h because he has demonstrated incompetence, untrustworthiness, and financial irresponsibility in the conduct of business in this State or elsewhere, specifically through his failure to supervise his sub-agents and indemnify Bankers for its losses.[10]

         Deputy Attorney General Jessica M. Willey ("DAG Willey") sent Purnell a copy of the Complaint as well as a Notice of Hearing. The Notice of Hearing states:

[P]ursuant to 18 Del. C. §§ 2308 and 4345 and 29 Del. C Ch. 101, [a hearing] will commence on February 17, 2016, at 10:00 a.m., at the Delaware Department of Insurance .... The purpose of the hearing is to determine whether the Respondents have committed acts in violation of the Delaware Insurance Code, 18 Del. C. §§ 2304(2), 4333(c)(3)h. and 4350(e). The hearing may result in the revocation of Respondents' licenses and/or the levying of a fine pursuant to 18 Del. C. §§ 329(a) and 4354(d).[11]

         With regard to the due process rights afforded to a respondent in an administrative hearing, the Notice of Hearing specifies:

You have the right to appear in person at the hearing, to be represented by counsel or by other representatives as permitted by law, to be present during the giving of evidence, to have reasonable opportunity to inspect all documentary and other evidence, to examine and cross-examine all witnesses, to present evidence in support of the Respondents' interest and to have subpoenas issued by the Commissioner or her duly-appointed representative to compel attendance of witnesses and production of evidence on your behalf.... The decision of the Commissioner or her duly-appointed representative will be reached based upon the evidence received.[12]

         Additionally, in her cover letter, DAG Willey informed Purnell: "If you elect to contest the complaint and do not elect to have an attorney represent you, you can contact me with any questions about the hearing."[13] Purnell did not contact DAG Willey with any questions about the hearing, although his assistant did.[14]

         A Deputy Commissioner appointed a Hearing Officer, and the Hearing Officer held a hearing on February 17, 2016.[15] Purnell represented himself at the hearing. With regard to the Department's allegation that Purnell's website www.delawarebailbonds.com violates several provisions of the Insurance Code, Purnell's only defense was that the website was not supposed to be accessible to the public. In short, Dean Banks testified on behalf of Purnell that Purnell hired him to create the Delaware Bail Bonds website.[16] Purnell recognized that the website was not, or would not be, compliant with the law, so Purnell asked Banks to create a new website in 2012.[17] However, Purnell wanted keep the benefits of Delaware Bail Bonds' relatively high position on search engines.[18] Accordingly, Banks put a "redirect on Delaware Bail Bonds" with the intention that anyone attempting to access www.delawarebailbonds.com would be automatically redirected to the new website.[19] When questioned as to how the Department was able to access the website, Banks put forward a few hypotheses, but admitted that the website was maintained at Purnell's direction, rather than being shut down or updated to be compliant with Delaware law.[20]

         Following the hearing, the Hearing Officer issued his Recommended Findings, recommending that the Commissioner: (1) find Purnell in violation of the IS Del. C. §§ 2304(2) and 4350(e); (2) find that Purnell no longer meets the criteria for issuance of a license under 18 Del. C. § 4333(c)(3) h; and (3) immediately revoke Purnell's license.[21] The Hearing Officer did not recommend imposition of a financial penalty.[22]

         Purnell timely filed Exceptions to the Hearing Officer's Recommended Findings, asserting that DAG Willey misled him as to the nature of the hearing and accusing the Department of discovery and due process violations.[23] On May 26, 2016, the Commissioner issued an Interim Order remanding the case with respect to several factual and legal issues raised in Purnell's Exceptions.[24]

         The Hearing Officer gave the Department until June 24, 2016, to provide an additional written submission addressing Purnell's allegations.[25] On June 22, 2016, Purnell called the Hearing Officer, claiming to have just received the Hearing Officer's letter directing the Department to respond.[26] The Hearing Officer informed Purnell that he could not engage in a substantive discussion regarding the case in the absence of DAG Willey.[27] Purnell asked whether he would be permitted to respond, and the Hearing Officer informed Purnell that if he wished to respond, it must be in writing.[28] Purnell did not respond.[29]

         On July 19, 2016, the Hearing Officer issued Supplemental Recommended Findings and concluded that the issues raised in Purnell's Exceptions were without merit.[30] Purnell did not file exceptions to the Hearing Officer's Supplemental Recommended Findings within the twenty day time period set forth in 29 Del. C. § 10126.[31] Rather, Purnell sent an untimely letter directly to the Commissioner requesting an audio recording of the hearing.[32] In a second untimely letter, Purnell renewed his request for an audio recording of the hearing and attempted to raise purported deficiencies with the hearing transcript.[33]

         On September 26, 2016, the Commissioner issued a Final Decision and Order, adopting all but one of the Hearing Officer's recommended findings and conclusions.[34] Contrary to the Hearing Officer's recommendation, the Commissioner concluded that a financial penalty should be imposed because "[t]he type of conduct demonstrated in this case does impact Delaware consumers by virtue of the intentional and direct disregard of the Delaware Insurance Code and this office's regulatory authority."[35] Accordingly, the Commissioner imposed a $4, 000 joint and several fine on Purnell and Bail Bond Agency, Inc.[36]

         With respect to Purnell's letters, the Commissioner refused to address the substance of the allegations because "[the letters] were submitted out of time and more significantly, inappropriately directed only to me during a time when this matter was pending before me."[37] Nevertheless, the Commissioner explained that an audio recording of the hearing was not available because, although the court reporting service engaged by the Department to transcribe the hearing records audio in the process of court reporting, the audio tapes are deleted once the final transcript is issued.[38]

         Purnell filed a timely appeal of the Commissioner's Final Decision and Order to this Court.[39]

         II. STANDARD OF REVIEW

         On an appeal from a decision of an administrative agency, the Court's review is limited to determining whether the agency "exercised its power arbitrarily or committed an error of law, or made findings of fact unsupportable by substantial evidence."[40] Substantial evidence means relevant evidence that a "reasonable person might find adequate to support a conclusion."[41] The Court will not "weigh the evidence, determine questions of credibility, or make its own factual findings."[42]Moreover, the Court must "take due account of the experience and specialized competence of the agency and the purposes of the basic law under which the agency has acted."[43]

         III. DISCUSSION

         Purnell raises the following five issues on appeal: (1) the record is statutorily insufficient for appellate review; [44] (2) Purnell's due process rights were violated because he was misled by the Department as to the nature of the hearing, not given the Department's evidence prior to the hearing, and denied a recess during the hearing to examine the evidence;[45] (3) the Hearing Officer erroneously considered the "incomplete website" and the alleged losses to Bankers;[46] (4) the Commissioner's decision to impose a fine for violating 18 Del. C. § 4333(c)(3)h for "demonstrated incompetence, untrustworthiness, and financial irresponsibility in the conduct of business in Delaware and elsewhere" is not supported by substantial evidence;[47] and (5) the Hearing Officer issued his Recommended Findings and Supplemental Recommended Findings with a closed mind.[48]

         A. Record on Appeal

         Purnell's argument regarding the sufficiency of the record on appeal has two components. First, Purnell argues that the hearing transcript is incomplete because it does not contain certain statements made by Purnell.[49] Second, Purnell argues that the record is statutorily insufficient for appellate review.[50] As to the first component, Purnell alleges that hearing transcript is not accurate and "devoid of his objections and statements on at least nine (9) occasions."[51] Purnell does not allege that the transcript omits the testimony of any witness.

         When acting in its appellate capacity on an appeal from an administrative decision, the Court will not consider issues raised for the first time on appeal.[52] The court reporter issued a certified final transcript on February 24, 2016. Purnell could have-but did not-raise purported issues with the transcript either in his first set of Exceptions or in response to the Hearing Officer's Supplemental Recommended Findings. Notably, in rejecting Purnell's allegation that DAG Willey "ambushed" him at the hearing with a binder of exhibits, the Hearing Officer cited multiple times to the transcript in support of his recommended finding that Purnell's due process rights were not violated.[53] Rather than file timely exceptions to the Supplemental Recommended Findings, highlighting the purported discrepancies between the transcript and Purnell's recollection of the hearing, Purnell sent two untimely letters directly to the Commissioner. The Commissioner refused to address the substance of the allegations made in those letters because they were ex parte communications submitted beyond the statutory time limitation.[54] Since the issue was not properly raised before the Commissioner, the Court will not address it on appeal. Furthermore, for this reason, to the extent Purnell's other arguments are based on alleged omissions from the transcript, the Court will not consider them.

         As to Purnell's ancillary contention that the Commissioner effectively considered his allegations regarding the accuracy of the transcript, and therefore the Court should consider them, this contention is without merit. The Commissioner did not consider the substance of Purnell's allegations regarding the transcript. The Commissioner determined whether Purnell's request for an audio recording could be accommodated. It could not.

         As to the second component of Purnell's argument, that the record is statutorily insufficient for appellate review, Purnell argues that the lack of an audio recording violates the Administrative Procedures Act ("APA").[55] To the extent it does not conflict with Chapter 3, Title 18 of the Delaware Code, the APA governs administrative proceedings before the Commissioner.[56] Specifically, the APA provides that "[a] record from which a verbatim transcript can be prepared shall be made of all hearings in all contested cases, "[57] and the record of the case shall include "all notices, correspondence between the agency and the parties, all exhibits, documents and testimony admitted into evidence and all recommended orders, summaries of evidence and findings and all interlocutory and final orders of the agency."[58] Similarly, the Insurance Code provides that on an appeal from a decision of the Commissioner, "the Commissioner shall cause to be prepared an official record. . . which shall contain a copy of all proceedings and orders of the Commissioner appealed from and the transcript of testimony and evidence or summary record thereof."[59]

         Purnell cites Richardson v. Board of Cosmetology and Barbering[60] and highlights the APA's requirement that "[a] record from which a verbatim transcript can be prepared"[61] in support of his argument that the APA requires the Department to preserve an audio recording of the hearing. In Richardson, a cosmetologist contested a hearing officer's findings in a meeting before the Board of Cosmetology and Barbering.[62] On appeal, the record contained only minutes of the meeting rather than a verbatim transcript.[63] The Delaware Supreme Court held that the Board of Cosmetology and Barbering violated the APA by failing to retain a record of the meeting from which a verbatim transcript could be prepared.[64]

         Contrary to Purnell's argument, neither the relevant statutory provisions nor Richardson requires an audio recording of the proceedings to perfect the record for appeal. In this case, a professional court reporter was present at the February 17, 2016 hearing. On February 24, 2016, the court reporter issued a final transcript and certified that the final transcript is a true and accurate transcript of her stenographic notes taken at the hearing.[65] Therefore, on its face, the transcript is complete and sufficient for appellate review. There being no timely objection before the Commissioner to the sufficiency of the transcript, the Court finds the transcript, and the Record in this case, sufficient for appellate review.

         B. Alleged Due Process Violations

         Purnell argues that the Commissioner erred in denying his due process arguments. Specifically, Purnell maintains: (1) the Department misled him as to the nature of the hearing; (2) the Department was required to provide him with its evidence before the hearing; and (3) the Hearing Officer abused his discretion by refusing Purnell's request for a recess during the hearing to examine the Department's evidence.[66]

         1. Alleged Misrepresentations Made by the Department

         In his timely Exceptions to the Hearing Officer's Recommended Findings, Purnell alleged that prior to the hearing his office assistant called DAG Willey and DAG Willey told his assistant that the hearing was "informal" and "not like court."[67]The Commissioner remanded the matter to the Hearing Officer for further consideration of this issue.[68] In response to Purnell's allegations, the Department submitted an affidavit from a Department paralegal who participated in the disputed telephone call.[69] The paralegal averred that DAG Willey did not indicate the hearing was informal, expressly told Purnell's assistant that the hearing would be a formal administrative hearing, and expressly told the assistant that the hearing would proceed similar to a court hearing in that both parties would present evidence and have an opportunity to cross-examine witnesses.[70] This recitation is consistent with the Department's Notice of Hearing sent to Purnell along with the Complaint.[71]

         In his Supplemental Recommended Findings, which the Commissioner adopted in her Final Decision, the Hearing Officer found that DAG Willey did not mislead Purnell as to the nature of the hearing.[72] In support of this factual finding, the Hearing Officer accepted the representations of DAG Willey and the Department paralegal, who were parties to the disputed phone call, over Purnell's representations.[73] Moreover, the Hearing Officer noted that, if Purnell was truly misled by the Department, Purnell would have objected in some fashion at the hearing.[74]

         The Court finds that the Commissioner's factual finding that DAG Willey did not mislead Purnell regarding the nature of the hearing is supported by substantial evidence.

         2. The Department's Alleged Failure to Provide Its Evidence to Purnell Before Hearing

         In his timely Exceptions to the Hearing Officer's Recommended Findings, Purnell also contended that DAG Willey failed to provide him with the Department's evidence prior to the hearing and, therefore, the Department's evidence should not have been admitted at the hearing.[75] In his Supplemental Recommended Findings, the Hearing Officer recommended that the Commissioner find that Purnell never requested the Department's evidence prior to the hearing and that, even if Purnell had made such a request, there could be no discovery violation because in a civil administrative proceeding the Department would not be under an obligation to produce it.[76]

         The APA does not provide for formal discovery, and it is well-settled under Delaware law that, "[i]n an administrative hearing, due process does not require formal discovery."[77] Rather, "[d]ue process requires [only] that the notice inform the party of the time, place, and date of the hearing and the subject matter of the proceedings."[78] Therefore, the Court finds that the Commissioner did not make an error of law or abuse her discretion in adopting the Hearing Officer's recommended finding that Purnell's due process rights were not violated when the Department did not supply him with copies of its exhibits prior to the hearing.

         Purnell also argues that his due process rights were violated because he was not truly aware of the subject matter of the hearing.[79] To the extent this objection was raised at the hearing and rejected by the Hearing Officer, the Court finds that Purnell's argument is meritless and no error of law was made in rejecting the objection. Prior to the hearing, the Department sent Purnell a cover letter, a Notice of Hearing, and a copy of the Complaint. The Notice expressly indicated the time, date, and place of the hearing, and the Complaint set forth the statutory provisions the Department alleges Purnell violated and set forth in detail the factual allegations the Department believed would establish those violations.[80] Furthermore, the Complaint specifically requests that the Commissioner revoke Purnell's license and impose a financial penalty. As previously explained, DAG Willey did not mislead Purnell regarding the nature of the hearing. Therefore, any difficulties Purnell experienced in presenting his case to the Hearing Officer are of his own making and do not constitute a denial of due process.[81]

         3. The Hearing Officer's Refusal to Grant Purnell a Recess to Examine Evidence

         Finally, with respect to due process, Purnell argues that the Hearing Officer erred and violated Purnell's due process rights by denying Purnell's request for a recess to review the Department's evidence during the hearing.[82] Purnell's argument concerns the Department's Exhibit 11. Exhibit 11 consists of a two page cover letter from Bankers to the Department with attached documentation: (1) Bankers' Supervising Producer Agreement with Purnell; (2) Bankers' Sub Producer Agreements with the sub-agents supervised by Purnell; and (3) the Notice of Termination Letters Bankers sent to Purnell and his sub-agents when it terminated their respective contracts.[83] Bankers terminated Purnell's contract for cause as of March 7, 2014.[84]

         At the hearing, the Department's witness, a Department market conduct examiner, explained that Exhibit 11 is Banker's letter response to her inquiries regarding Purnell's status as a general agent.[85] The witness testified regarding the materials attached to Banker's letter, clarifying that the attachments consisted of the aforementioned agreements and correspondence between Bankers and Purnell or his sub-agents and that the termination letters included calculations of outstanding liabilities.[86] When the Department sought admission of Exhibit 11 into evidence, Purnell stated that it was "too long, " and the Hearing Officer offered him the opportunity to review it.[87] In response, Purnell stated it would take him two to three days to review.[88] The Hearing Officer stated that three days were not allotted for the hearing, but Purnell could take time to review it to determine whether he had an objection to this exhibit. The Hearing Officer added, "[w]e have all day."[89] Purnell did not take the opportunity to review the exhibit.[90] Rather, he indicated that he had no objection to its admission into evidence.[91]

         On this point, Purnell argues that the case is substantially similar to Matter of Gresick.[92] In Gresick, the Consumer Affairs Board denied Edward Gresick's request for a continuance to review evidence.[93] The Court found the Board did not abuse its discretion when, inter alia: (1) the Division of Consumer Affairs had given Gresick ample and timely notice as to the hearing schedule and the charges against him; (2) the Division arranged two pre-hearing meetings to discuss the evidence with Gresick that Gresick failed to appear at; (3) Gresick consulted an attorney before the hearing; and (4) the State might suffer prejudice if rescheduled because its witness came to the hearing voluntarily, and the Board had no subpoena power over the witness.[94]

         Purnell argues that since several of the factors present in Gresick are absent in the instant case, the Hearing Officer must have abused his discretion in refusing to grant a recess.[95] This argument is meritless. In this case, as in Gresick, the respondent was given ample and timely notice as to the hearing schedule and the charges against him. The presence or absence in this case of the other factors highlighted Gresick is not dispositive.

         Here, DAG Willey sent Purnell a Notice of Hearing, a detailed Complaint, and invited Purnell to call her if he had questions regarding the hearing. Additionally, although it is lengthy, the bulk of Exhibit 11 consists of the Supervising Producer and Sub-Producer Agreements, documents Purnell should have been familiar with. Had Purnell taken the opportunity offered to him to review Exhibit 11 during the hearing, he would have realized that most, if not all, of the attached documents were known to him. Tellingly, Purnell does not identify what objection he would have offered to the admissibility of Exhibit 11 if given the requested two to three day recess to examine it. The Court finds that the Hearing Officer did not abuse his discretion in refusing to continue the hearing based on Purnell's bare bones objection that the Department's Exhibit 11 was "too long."

         C. Whether the Hearing Officer Abused his Discretion in Considering the Department's Screenshots of www.delawarebailbonds.com and Banker's Alleged Losses

         Next, Purnell raises three arguments under the heading "[the Department] did not provide sufficient evidence regarding the complaint(s)": (1) the Commissioner's decision is not supported by substantial evidence due to the alleged "spoliation" of evidence, i.e. the court reporter's non-retention of an audio recording; (2) the Hearing Officer should not have admitted into evidence screenshots of www.delawarebailbonds.com because they were an "incomplete re-production of the purported[] 'deceptive' website"; and (3) the Hearing Officer should not have considered the Department's evidence of Purnell's liability to Bankers due to litigation between Bankers and Purnell in Florida.[96]

         As to Purnell's first argument, styled as a matter of "spoliation" of evidence to a large extent this accusation stems from Purnell's allegations regarding the completeness of the transcript, and the Court will not consider those aspects of the argument for the reasons previously discussed. Nevertheless, the Court notes that Purnell has never alleged that the transcript omits any testimony given before the Hearing Officer, nor has Purnell ever alleged that an exhibit admitted into evidence was not preserved.[97] Therefore, the Court finds Purnell's argument that "spoliation" of evidence renders the Commissioner's Final Decision unsupported by substantial evidence is meritless.

         As to Purnell's second argument, that the Hearing Officer erred in admitting screenshots of www.delawarebailbonds.com, and therefore, the violations based on the Delaware Bail Bonds website must fail for lack of substantial evidence, this argument is also without merit for the following reasons.

         At the hearing, a market conduct examiner for the Department, Keith O'Connell, testified that he examined the website advertising Delaware Bail Bonds.[98] Through Mr. O'Connell, the Department introduced screenshots of the Delaware Bail Bonds website.[99] Mr. O'Connell testified that he personally accessed the website and determined that it was related to Purnell and his company because the address and telephone number listed on the website were identical to those listed in the Department's files.[100] When the Department requested that the screenshots be admitted into evidence, Purnell stated "I have no objection to it."[101] Furthermore, in his testimony, Purnell admitted that www.delawarebailbonds.com is his website and that he is responsible for ensuring that the information on the website is correct.[102]

         Purnell's only specific argument regarding the screenshots of Delaware Bail Bonds' website is his allegation that the Department's exhibit is somehow incomplete and deceptive. Purnell implies that the omitted pages must have contained information favorable to him and concludes that "it can be surmised that evidence was created.[103] However, Purnell does not explain what information appeared on the allegedly omitted pages that would have cured the violations alleged by the Department. The Court finds that the Hearing Officer did not abuse his discretion by admitting screenshots of the Delaware Bail Bonds website into evidence.

         The legal basis for Purnell's third argument, that the Commissioner should not have considered evidence of Purnell's liability to Bankers because "the alleged loss caused by [Purnell] has not been proven by the Florida courts, "[104] is unclear. In his reply brief, Purnell restyles this argument as a matter of res judicata and argues the Commissioner "lacked subject matter jurisdiction with respect to the forfeitures" due to the prior civil litigation initiated by Bankers against Purnell in Florida.[105] In support of this argument, Purnell argues that the Department "came into privity of Bankers' legal action against the appellant in Florida" and, therefore, the doctrine of res judicata bars the Department from seeking revocation of Purnell's license and financial penalties in an administrative proceeding before the Commissioner.[106]

         Under the doctrine of res judicata, a party is foreclosed from "bringing a second suit based on the same cause of action after a judgment has been entered in a prior suit involving the same parties."[107] While the precise contours of Purnell's res judicata argument are unclear, it is clear that the doctrine is not implicated in this case. The Department is not a party to Bankers' action against Purnell in Florida, and the Department is not seeking a judgment against Purnell for the losses caused to Bankers. This case is an administrative proceeding brought by the ...


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