Culver v. Maryland Insurance Commissioner

SALMON, J. The Maryland Insurance Administration (“MIA”) revoked Allan J. Culver’s insurance producer’s license. Culver sought judicial review before the Circuit Court for Baltimore City, which affirmed the MIA’s order of revocation. Three issues are presented by Culver in this appeal: ⁶⁴⁸ I. Whether the trial court erred in holding [that] [appellant was not entitled to a “contested hearing” pursuant to [Section 2-210 of the Insurance Article of the Maryland Code].

II

Whether the trial court erred [in] affirming the revocation of [appellant’s] license entered in excess of the statutory authority granted to [the MIA].

III

Whether the trial court erred [in] affirming an order' of [the MIA] revoking [appellant’s license which was unsupported by substantial evidence. I. FACTS Anyone selling insurance in Maryland must be licensed as an insurance producer by the MIA. 1 Culver, while an attorney admitted to practice in Maryland, submitted his application for a license to sell insurance on August 10, 2001. On the application, Culver informed the MIA that he was under investigation by the Attorney Grievance Commission of Maryland (“AGC”). The MIA decided to put Culver’s application on hold until the AGC concluded its investigation.

As a result of the AGC’s investigation, legal proceedings were brought against Culver; the proceedings were concluded by an opinion by the Maryland Court of Appeals. See Attorney Grievance Comm’n v. Culver, 371 Md. 265 , 808 A.2d 1251 (2002). The Court held that Culver had violated Maryland Rules of Professional Conduct (“MRPC”) 1.5(c), as adopted by Maryland Rules 16-812 (Fees) and 16-607(b)(2) (Commingling of funds), during the course of his representation of a client. Id. at 275-76 , 808 A.2d 1251 .

Culver was suspended indefi ⁶⁴⁹ nitely from the practice of law but was granted the right to seek reinstatement after thirty days. Id. at 284 , 808 A.2d 1251 . On February 12, 2008, which was about four months after the effective date of his suspension, Culver’s license to practice in Maryland was reinstated. By letter dated March 17,2003, Culver informed the MIA of the outcome of the disciplinary proceedings and his reinstatement.

His letter advised that the AGC was still investigating another matter involving his conduct. On May 2, 2003, the MIA issued Culver an insurance producer’s license. The other matter that the AGC was investigating involved allegations stemming from Culver’s representation from 1993 to 1994 of a female client who was seeking a divorce. That investigation led to charges that were ultimately considered by the Court of Appeals.

See Attorney Grievance Comm’n v. Culver, 381 Md. 241 , 849 A.2d 423 (2004). The Court held that Culver had violated MRPC 1.2 (Scope of representation), 1.3 (Diligence), 1.5, 1.7 (Conflict of interest), 1.15 (Safekeeping property), 3.1 (Meritorious claims and contentions), 3.2 (Expediting litigation), 3.3 (Candor toward the tribunal), 3.4 (Fairness to opposing party and counsel), and 8.4 (Misconduct). Id. at 259-88 , 849 A.2d 423 . Among other things, the Court ruled: (1) Culver’s sexual intercourse with his client while representing her in a divorce case violated several rules; (2) Culver’s advice to his client to obtain credit card loans in order to pay legal fees with the intent of having the debt discharged in bankruptcy was fraudulent conduct; and (3) Culver violated rules governing fees and payments from his client.

The Court of Appeals disbarred Culver from the practice of law in Maryland effective May 13,2004. On December 9, 2004, the MIA revoked Culver’s insurance producer’s license. Intending to challenge the revocation, Culver asked for an evidentiary “contested hearing” to be held by the Office of Administrative Hearings (“OAH”). The MIA moved for summary disposition of the matter.

The Administrative Law Judge (“ALJ”) assigned to the matter refused to issue the subpoena requested by Culver and sent the parties a ⁶⁵⁰ letter advising that the “contested hearing” requested was being converted to a “motions hearing.” The motions hearing was held before the ALJ on April 13, 2005. 2 The MIA argued that the decision of the Court of Appeals disbarring Culver indicated that he was untrustworthy and, therefore, did not meet the statutory requirements for a licensed insurance producer. Culver countered by declaring his desire to contest the findings of fact that had already been made by the Court of Appeals. The ALJ agreed with MIA that, in light of the facts as established by the most recent Court of Appeals decision involving appellant’s actions, an evidentiary hearing was unnecessary. The ALJ issued a recommendation for summary disposition in favor of the MIA.

The ALJ ruled: After considering the arguments of the parties, I find that there are no material facts needing to be developed at a hearing on the merits. Although the Respondent [Culver] may dispute the facts the Court of Appeals decided in his disbarment proceeding, I have no authority to retry that case. The question now becomes whether the MIA is entitled to prevail as a matter of law. I find that the Administration has established that it was justified in revoking the Respondent’s license to act as an insurance producer in this State.

The extensive findings of the Court of Appeals show that the Respondent committed numerous acts evidencing dishonesty, untrustworthiness and serious breaches of the fiduciary duty owed to his clients. Moreover, the Court found that the Respondent exhibited an unwillingness to accept responsibility for his egregious misconduct. The Court also found that the Respondent showed no remorse and, instead, attempted to minimize the seriousness of his actions. ⁶⁵¹ In conclusion, I find that the undisputed facts are that the Respondent violated the provisions of Section 10-126(a) and (f) of the Insurance Article, Annotated Code of Maryland. ... Culver filed exceptions to the recommended order.

The MIA held oral arguments on the exceptions and considered legal arguments but did not allow Culver to present evidence. On July 14, 2005, the MIA issued its final order of revocation. Culver filed a petition for judicial review in the Circuit Court for Baltimore City. The circuit court affirmed the MIA’s order on December 12.

II

THE REVOCATION OF CULVER’S INSURANCE PRODUCER’S LICENSE In its final order of revocation, the MIA concluded that Culver violated Sections 10 — 126(a)(2), 10-126(a)(3), 10-126(a)(13), and 10-126(f) of the Insurance Article of the Maryland Code (2003 Repl.Vol.). Section 10-126 reads, in pertinent part: (a) Grounds. — The Commissioner may deny a license to an applicant under §§ 2-210 through 2-214 of this article, or suspend, revoke, or refuse to renew or reinstate a license after notice and opportunity for hearing under §§ 2-210 through 2-214 of this article if the applicant or holder of the license: (1) has willfully violated this article or another law of the State that relates to insurance; (2) has intentionally misrepresented or concealed a material fact in the application for a license; (3) has obtained or attempted to obtain a license by misrepresentation, concealment, or other fraud; (13) has otherwise shown a lack of trustworthiness or incompetence to act as an insurance producer; ... (f) Report of adverse administrative action. — (1) Within 30 days after the final disposition of the matter, an insur ⁶⁵² anee producer shall report to the Commissioner any adverse administrative action taken against the insurance producer: ... (ii) by another governmental unit in this State.

(Emphasis added.) Regarding the requirement set forth in 10-126(f) to report an adverse administrative action, the MIA held that “[t]he Respondent’s failure to notify the Administration of his disbarment could only be deliberate, and his suggestion that he did not personally notify the Administration because he was aware that his disciplinary action was being monitored by the MIA is itself deceitful.” The agency found that “Respondent advised the Administration of a pending matter before the Attorney Grievance Commission in his application letter, albeit cryptically, but did not follow up once the matter was decided against him, disbarring him from the practice of law.” The MIA noted that Culver’s response to a question on his license application regarding AGC proceedings read as follows: I deny I have committed any ethical or disciplinary rule violation in any matter currently being investigated. Since these matters are confidential in nature I refer you to the [AGC] for any additional information that may be needed. The MIA adopted the ALJ’s findings and conclusions “[i]nsofar as they are consistent with this Final Order.” The MIA explicitly “rejected] Respondent’s argument that ‘[t]he 2004 Court of Appeals opinion does not apply or even attempt to establish any of the findings of fact that are determinative in this insurance revocation proceeding [and that the] Court’s opinion is in no way dispositive of the facts or the claims against Culver in this proceeding.’ ” III. STANDARD OF REVIEW In Maryland Aviation Administration v. Noland, 386 Md. 556, 571-72 , 873 A.2d 1145 (2005), the Court said: A court’s role in reviewing an administrative agency adjudicatory decision is narrow; it is limited to determining ⁶⁵³ if there is substantial evidence in the record as a whole to support the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.

In applying the substantial evidence test, a reviewing court decides whether a reasoning mind reasonably could have reached the factual conclusion the agency reached. A reviewing court should defer to the agency’s fact-finding and drawing of inferences if they are supported by the record. A reviewing court must review the agency’s decision in the light most favorable to it; the agency’s decision is prima facie correct and presumed valid, and it is the agency’s province to resolve conflicting evidence. Despite some unfortunate language that has crept into a few of our opinions, a court’s task on review is not to substitute its judgment for the expertise of those persons who constitute the administrative agency.

Even with regard to some legal issues, a degree of deference should often be accorded the position of the administrative agency. Thus, an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts. Furthermore, the expertise of the agency in its own field should be respected. (Citations and quotations omitted) (latter emphasis added).

IV

COLLATERAL ESTOPPEL A. Collateral estoppel, or issue preclusion, bars a party from re-litigating an issue that he or she has already litigated unsuccessfully in another action. Collateral estoppel is of the “nonmutual” variety if one of the parties in the present suit was neither a party nor in privity with a party to the prior action. Nonmutual collateral estoppel may arise in two circumstances: Offensive use of nonmutual collateral estoppel occurs when a plaintiff seeks to foreclose a defendant from relitigating an issue the defendant has previously litigated unsuccessfully ⁶⁵⁴ in another action against a different party. Defensive use of nonmutual collateral estoppel occurs when a defendant seeks to prevent a plaintiff from relitigating an issue the plaintiff has previously litigated unsuccessfully in another action against a different party.

Welsh v. Gerber Prods., Inc., 315 Md. 510 , 518 n. 6, 555 A.2d 486 (1989). The Court of Appeals has recognized defensive nonmutual collateral estoppel but has “yet to formally embrace offensive nonmutual collateral estoppel.” Rourke v. Amchem Prods., Inc., 384 Md. 329, 349 , 863 A.2d 926 (2004). In Rourke , the Court rejected the use of offensive nonmutual issue preclusion where the pertinent issue — the applicability of a contractual arbitration clause — had been previously litigated in Virginia. In Amchem Products, Inc. v. Newport News Circuit Court Asbestos Cases, 264 Va. 89 , 563 S.E.2d 739 (2002), the Virginia Supreme Court had already ruled on the arbitration clause issue.

The Court of Appeals determined that “[wjhether and how far to depart from the traditional requirement of collateral estoppel that there be mutuality of parties has been, and ought to remain, a policy decision for each State to make.” 384 Md. at 349 , 863 A.2d 926 . Applying full faith and credit to the Virginia decision, the Court held that a Maryland court must treat the judgment precisely the same as it would be treated in a Virginia court, and that requires that we apply the preclusion rules that would be applied in Virginia____As the parties agree that Virginia continues to require mutuality as part of its collateral estoppel law and would therefore not give preclusive effect to its Amchem judgment in a second action by different plaintiffs, and clearly would not, and could not, give preclusive effect to it against defendants who were not parties, or in privity with parties, in the Virginia action, the Circuit Court and the Court of Special Appeals were correct in not giving preclusive effect to it in this action. Rourke, 384 Md. at 351-52 , 863 A.2d 926 . Thus, the Court of Appeals holding was based on conflict of laws considerations rather than on the merits of offensive ⁶⁵⁵ nonmutual collateral estoppel as a rule of law. 3 The Court did include, however, the following comment: The Supreme Court, as an aspect of Federal law, has departed from the mutuality requirement, although in Parklane Hosiery Co., Inc., v. Shore, 439 U.S. 322 , 99 S.Ct. 645 , 58 L.Ed.2d 552 , it expressed some concerns about, and refrained from blessing the broad application of, offensive non-mutuality.

The Court articulated two reasons posited for why offensive and defensive non-mutuality should not be treated the same. First, “offensive use of collateral estoppel does not promote judicial economy in the same manner as defensive use does.” Id. at 329 , 99 S.Ct. at 650 , 58 L.Ed.2d at 561 . The Court explained that, whereas defensive collateral estoppel gives a plaintiff a strong incentive to join all potential defendants in the first action, if possible, offensive collateral estoppel creates a contrary incentive: “[s]ince a plaintiff will be able to rely on a previous judgment against a defendant but will not be bound by that judgment if the defendant wins, the plaintiff has every incentive to adopt a 'wait and see’ attitude, in the hope that the first action by another plaintiff will result in a favorable judgment.” Id. at 330 , 99 S.Ct. at 651 , 58 L.Ed.2d at 561 . ⁶⁵⁶ A second argument against offensive non-mutual