Department of Human Resources v. Thompson

HOLLANDER, Judge. The Child Care Administration of the Department of Human Resources (“CCA”), appellant, denied the application for a family day care registration submitted by Shirley Thompson, appellee. CCA’s decision was predicated on an administrative investigation of child abuse conducted by the Department of Social Services (“DSS”) and a finding by DSS that appellee’s husband had abused the couple’s daughter. We now confront the issue of a litigant’s right to challenge, at a day care registration hearing, a prior administrative finding of child abuse when no quasi-judicial or judicial tribunal ever determined that the abuse actually occurred and the litigant never had an opportunity to contest the administrative finding.

Ms. Thompson appealed CCA’s denial of the day care registration to the Office of Administrative Hearings (“OAH”), and the Administrative Law Judge (“ALJ”) affirmed CCA’s decision. Thereafter, Ms. Thompson appealed the ALJ’s decision to the Circuit Court for Baltimore County. That court reversed the ALJ’s decision and remanded the case for a new hearing. This appeal followed.

CCA presents three questions for our review: “I. Whether the Circuit Court erred in holding that, pursuant to COMAR 07.04.03.01B, the Secretary of Human Resources had delegated her authority to make licensing decisions to the Office of Administrative Hearings rather than delegating her authority to review those decisions.” ¹⁸¹ “II. Whether the Circuit Court erred in remanding the case to the Office of Administrative Hearings to take additional evidence that was not presented to the agency when it made its decision.” “III. Whether the issue of whether the [child] abuse occurred was properly before the Administrative Law Judge.” We answer the first two questions in the negative and the remaining question in the affirmative. For the reasons we discuss below, we hold that, under the particular circumstances of this case, Ms. Thompson was entitled to contest the earlier administrative finding of abuse at her day care registration hearing.

Further, we conclude that the decision of the ALJ was erroneous, arbitrary, and capricious and prejudiced substantial rights of appellee. Accordingly, we shall affirm the decision of the circuit court. Factual Summary On April 9, 1992, Ms. Thompson filed an application with CCA for a family day care registration. As required, her application listed other members of her household, including her husband, Henry Thompson.

In response to the application’s question “[h]ave you or any other persons living in the family day care home been reported for child abuse or neglect?” Ms. Thompson responded “No.” Ms. Thompson then signed and dated the authorization permitting CCA access to child abuse records in order to evaluate her suitability as a day care provider. In the course of processing Ms. Thompson’s application, CCA received from Baltimore County DSS a Child Protective Services (“CPS”) clearance advising that DSS had a 1986 closed protective services case involving the Thompsons. Patricia Perry, a CCA licensing agent, discussed the DSS response with the Thompsons, and told them that CCA needed more information in order to proceed with the application process. Perry’s investigation revealed that Mr. Thompson was identified as the “person ... responsible for child abuse or neglect” of the Thompsons’ then teenage daughter. ¹⁸² Ms. Thompson signed additional consent forms to permit DSS to release additional information from the CPS file to CCA.

DSS provided CCA with two reports detailing the. allegations of abuse. One report described an incident that occurred on March 25, 1985 when the principal of Owings Mills Senior High School referred a matter of suspected sexual abuse to DSS. According to that report, the school nurse intercepted a note written to Laura Thompson. “The gist of the notes was encouraging Laura Thompson to seek help from a counselor due to the problems with her father, that is, sex abuse.” The school was also concerned because Laura had suffered a broken collar bone one and one-half months before. DSS coordinated an investigation with a detective from the Youth Bureau, and they interviewed Laura Thompson, Laura Thompson’s grandfather, Ms. Thompson, and Mr. Thompson.

Although Mr. Thompson strenuously denied all allegations of child abuse, DSS concluded that the abuse was indicated. Nevertheless, the juvenile court never adjudicated the Thompson’s daughter as a Child In Need of Assistance (“CINA”). Further, neither of the Thompsons’ two children was ever removed from the Thompsons’ home. Additionally, Mr. Thompson was never criminally charged or prosecuted.

In addition to gathering and evaluating the reports, Perry spoke with Mark Vidor, the Division Supervisor of CPS; Perry’s supervisor spoke with Toni Greenberg, the continuing protective services worker at the time of the alleged child abuse. Perry also visited the Thompson home and interviewed Mr. Thompson on several occasions. On June 26, 1992, following its investigation and subsequent evaluation, CCA issued a letter denying Ms. Thompson’s application, based on COMAR 07.04.01.08A(9). That regulation provides that CCA may deny a certificate of registration if “an evaluation of the information provided in records of child abuse and neglect reveals that the applicant ... or a resident is identified as responsible for child abuse or neglect, or is currently under investigation for alleged acts of child abuse or neglect.” The denial explained that CCA’s decision ¹⁸³ was “consistent with the State’s mandate to protect the child and to resolve all doubts in favor of the child.” Ms. Thompson appealed the denial on July 15, 1992.

Perry later received a letter from Laura Thompson Morrison, the Thompson’s daughter who was the alleged victim of abuse. The letter, received on July 29, 1992, supported Ms. Thompson’s application for a family day care registration. Morrison stated: I am writing this letter so that my mom, Shirley Yvonne Thompson can obtain her babysitting license to babysit in her home. It has come to my attention that the reason for this letter has to do with what happened eight (8) years ago.

I intentionally told that my father had sexually and physically abused me. My father and I don’t have the best of relationship, but I was willing to do anything to get attention from him. My dad worked alot and when he got home in time for dinner, he was tired. So every time I got into trouble, I at least got some attention from him....

I’m sorry if my childhood antics have caused any problems. I do hope this letter helps my mom obtain her license and in no way should reflect on the love and care she can give to any children that are placed in her home ’and care. Perry discussed the letter with Vidor, and after further review, CCA affirmed its denial of Ms. Thompson’s application. Thereafter, on August 26,1992, OAH heard Ms. Thompson’s appeal.

At the hearing, CCA presented testimony and exhibits regarding its evaluation of the CPS record and the CPS investigation that resulted in the DSS finding of “abuse indicated.” Ms. Thompson and her husband testified in support of appellee’s case. Morrison, however, was in Oklahoma, and Ms. Thompson offered Morrison’s testimony via telephone because she could not afford to fly Morrison to Maryland. CCA objected to the telephone testimony, and the ALJ denied appellee’s request to present her daughter’s testimony by telephone, stating: ¹⁸⁴ [T]he determination to be made by this forum is whether the agency correctly applied State regulations in reaching its decision. That determination is limited to an examination of the basis for the agency’s decision to deny the application.

Counsel, however, is challenging the actual findings and requests that this forum reinvestigate the allegations and make a determination of whether abuse actually occurred. Such a finding is beyond the scope of this proceeding and it is for this reason that the request for presentation of telephonic testimony was denied. On September 10, 1992, OAH upheld CCA’s denial of Ms. Thompson’s application. Ms. Thompson appealed to the circuit court, and on November 24, 1993, that court heard argument.

On February 4, 1994, the circuit court reversed OAH and remanded the case for a new hearing. Discussion I. The Day Care Regulatory Scheme Family day care registrations are governed by Md.Code Ann., Family Law Art. (“F.L.”) §§ 5-550 through 5-557 (1991 Repl.Vol.) and regulations found at COMAR 07.04.01 et seq. The statutory scheme is designed, inter alia, to safeguard children in day care homes. F.L. § 5—550(b)(1).

To that end, “a provider may not operate a family day care home unless both the provider and the home have met the requirements for registration as set forth in [COMAR 07.04.01] and the provider possesses a valid certificate of registration.” CO-MAR 07.04.01.03. In order to obtain a family day care registration, an applicant must identify all residents in the home and submit a “signed and notarized permission to examine records of child abuse and neglect for information about the applicant ... and residents.” COMAR 07.04.01.04. After receiving the application and accompanying documentation, CCA must then determine whether the applicant has complied with the requirements of CCA’s regulations by: (1) Evaluating the application and required documentation; ¹⁸⁵ (2) Interviewing the applicant; (3) Inspecting the home proposed for use as a family day care home; (4) Evaluating the information provided by State and federal criminal background investigations; and (5) Evaluating the information provided from records of child abuse and neglect. COMAR 07.04.01.06A.

Based on its investigation, CCA may either grant or deny the registration certificate. In the case sub judice, CCA denied Ms. Thompson’s registration based on COMAR 07.04.01.08A(9), which provides: A. The Office may deny a certificate of registration if: (9) An evaluation of the information provided in records of child abuse and neglect reveals that the applicant, any substitute designated on the application form, or a resident is identified as responsible for child abuse or neglect, or is currently under investigation for alleged acts of child abuse or neglect. The family day care registration scheme provides for an administrative, adjudicatory hearing when CCA denies issuance of a requested license. See Weiner v. Md. Insur.

Admin., 337 Md. 181 , 652 A.2d 125, 127 (1995) (“It is well settled that a party is entitled to a quasi-judicial hearing before an administrative agency ... if that type of hearing is required by statute or regulation or mandated by constitutional due process concerns.”); Sugarloaf Citz. Ass’n v. N.E. Md. Waste Disposal Auth., 323 Md. 641, 652 , 594 A.2d 1115 (1991). Accordingly, pursuant to COMAR 07.04.03.03A, Ms. Thompson appealed CCA’s denial of the day care registration to OAH. COMAR provides: “A hearing shall be held when an applicant or provider requests a hearing to contest ... [t]he denial of an applicant for registration.” When Ms. Thompson appealed, the ALJ was required to hold a “contested ease” hearing, pursuant to the Adminis ¹⁸⁶ trative Procedure Act, Md.Code Ann., State Gov’t Art. (“S.G.”) §§ 10-201 through 10-225 (1993 Repl.Vol., 1994 Cum.Supp.). 1 Section 10-202(d)(l) of the State Government Article defines a contested case as follows: (c) Contested case.—“Contested case” means a proceeding before an agency to determine: (1) a right, duty, statutory entitlement, or privilege of a person that is required by statute or constitution to be determined only after an opportunity for an agency hearing; or (2) the grant, denial, renewal, revocation, suspension, or amendment of a license that is required by statute or constitution to be determined only after an opportunity for an agency hearing. 2 As the OAH proceeding constituted a “contested case” hearing, the parties were entitled to an adversary hearing, with various trial-like procedures and safeguards.

Sugarloaf, 323 Md. at 651 , 594 A.2d 1115 ; S.G. § 10-213 (1993 Repl.Vol., 1994 Cum.Supp.). 3 Specifically, COMAR 07.04.03.07B provides: B. At the hearing, the appellant and a representative of the Office may present witnesses, documentary evidence, and oral argument and may cross-examine any witness. A document introduced into evidence by a party may be examined by the opposing party. After the OAH hearing, the ALJ is empowered to make the agency’s final decision. Moreover, the ALJ decision is directly appealable to the circuit court.

COMAR 07.04.03.01 states: ¹⁸⁷ A. This chapter applies to hearings concerning actions taken by the Child Care Administration which adversely impact on family day care registrations, such as registration denials, revocations, suspensions, reductions in capacity, or limitations on the ages or numbers of children who may be admitted to a family day care home. B. The Secretary of Human Resources has delegated authority to the administrative law judges of the Office of Administrative Hearings to make the final decisions of the Secretary on those actions listed in § A, above. A decision by the administrative law judge of the Office of Administrative Hearings in a family day care registration case is the final decision of the highest administrative authority in the case and this is directly appealable to the circuit court in the jurisdiction where the family day care home is located, pursuant to State Government Article, [§ 10-222], Annotated Code of Maryland. In making the final decision, the ALJ is required to consider the entire record of the hearing.

Further, the ALJ must decide whether CCA complied with applicable state regulations. In pertinent part, COMAR 07.04.03.08 provides: A. The administrative law judge shall: (1) Base the decision on the complete record; and (2) Determine whether the Office correctly applied State regulations in effect at the time it reached its decision. (Emphasis added).

II

Judicial Review of the ALJ Decision An administrative decision in a contested case is subject to challenge through judicial review. S.G. § 10-222 (1993 Repl.Vol., 1994 Cum.Supp.). 4 Pursuant to COMAR, Ms. Thompson appealed the ALJ’s decision directly to the circuit court; no other agency action occurred after the OAH hearing. Compare, e.g., Anderson v. Dep’t of Public Safety, 330 Md. 187, 193-94 , 623 A.2d 198 (1993) and Dep’t of Health & Mental ¹⁸⁸ Hygiene v. Shrieves, 100 Md.App. 283, 303-04 , 641 A.2d 899 (1994) (review of ALJ decision by agency Board or Secretary constituted final agency action) with the case sub judice. S.G. § 10-205 (1993 Repl.Vol., 1994 Cum.Supp.) 5 provides: (1) An agency or an official or employee of an agency may delegate to the Office of Administrative Hearings the authority that the agency, official, or employee has to hear particular contested cases.

(2) An agency, by regulation, may delegate to the Office of Administrative Hearings the authority to issue the final administrative decision of the agency in a contested case. See Anderson, 330 Md. at 192 , 623 A.2d 198 . In the instant case, OAH conducted an evidentiary hearing at which witnesses testified and exhibits were presented. After the evidentiary hearing, the ALJ made findings of fact and conclusions of law.

The ALJ’s decision constituted the final order of the administrative agency and we shall apply the well established principles of judicial review to the ALJ decision. Our role in reviewing an administrative decision “is precisely the same as that of the circuit court.” Shrieves, 100 Md.App. at 303-04 , 641 A.2d 899 (citing Baltimore Lutheran High Sch. Ass’n, Inc. v. Emp’t Security Admin., 302 Md. 649, 662 , 490 A.2d 701 (1985)); see also, Anderson, 330 Md. at 212 , 623 A.2d 198 . This means we must review the administrative decision itself.

Pub. Svce. Comm’n v. Baltimore Gas & Elec. Co., 273 Md. 357, 362 , 329 A.2d 691 (1974); State Election Bd. v. Billhimer, 72 Md.App. 578, 586 , 531 A.2d 1298 (1987), rev’d on other grounds, 314 Md. 46 , 548 A.2d 819 , cert. denied, 490 U.S. 1007 , 109 S.Ct. 1644 , 104 L.Ed.2d 159 (1988); see also Dep’t Econ. & Emp’t Dev’t v. Hager, 96 Md.App. 362 , 625 A.2d 342 (1993). ¹⁸⁹ Although a reviewing court may only affirm an administrative agency’s decision on the same grounds found by the agency, United Steelworkers of America v. Bethlehem Steel Corp., 298 Md. 665, 679 , 472 A.2d 62 (1984) (citing cases), the decision of an agency is prima facie correct.

On appeal, the agency decision must be viewed in the light most favorable to the agency. Bd. of Educ. v. Paynter, 303 Md. 22, 35-36 , 491 A.2d 1186 (1985). See also, Md. State Police v. Lindsey, 318 Md. 325, 333 , 568 A.2d 29 (1990) (agency decision is presumptively correct and test is whether there is substantial evidence to conclude that a reasoning mind reasonably could have reached the factual conclusion the agency reached); Bulluck v. Pelham Wood Apts., 283 Md. 505, 511-13 , 390 A.2d 1119 (1978). It is well settled that “the reviewing court should not substitute its judgment for the expertise of those persons who constitute the administrative agency from which the appeal is taken.” Paynter, 303 Md. at 35 , 491 A.2d 1186 (emphasis in original).

See also, Dep’t of Health & Mental Hygiene v. Reeders Mem’l Home, Inc., 86 Md.App. 447, 452 , 586 A.2d 1295 (1991); Howard County v. Davidsonville Civic & Potomac River Ass’ns, Inc., 72 Md.App. 19, 34-35 , 527 A.2d 772 , cert. denied, 311 Md. 286 , 533 A.2d 1308 (1987). Deference to the agency’s findings is based upon the recognition of the agency’s expertise. Upon appellate review, courts bestow special favor on an agency’s interpretation of its own regulation. Recognizing an agency’s superior ability to understand its own rules and regulations, a “court should not substitute its judgment for the expertise of those persons who constitute the administrative agency from which the appeal is taken.” Reeders, 86 Md.App. at 453 , 586 A.2d 1295 (quoting Bulluck, 283 Md. at 513 , 390 A.2d 1119 ).

See also, Hanson v. D.C. Rental Housing Comm’n, 584 A.2d 592, 595 (D.C.App.1991) (Court of Appeals must defer to an agency’s interpretation of its own regulations where that interpretation is reasonable); Kenneth Culp Davis & Richard J. Pierce, Jr., 1 Administra ¹⁹⁰ tive Law Treatise, § 6.10 at 282 (3d ed. 1994) (courts defer to agency interpretation of regulations because the agency typically is in a superior position to determine what it intended when it issued a rule). S.G. § 10-222(h) governs the standard of judicial review in connection with administrative adjudications. Section 10-222(h) provides: In a judicial proceeding under this section, the court may: (1) remand the case for further proceedings; (2) affirm the final decision; or (3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision: (i) is unconstitutional; (ii) exceeds the statutory authority or jurisdiction of the final decision maker; (in) results from an unlawful procedure; (iv) is affected by any other error of law; (v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or (vi) is arbitrary or capricious. See also, Md. State Police v. Lindsey, 318 Md. 325, 332-34 , 568 A.2d 29 (1990); State Election Bd. v. Billhimer, 314 Md. 46 , 548 A.2d 819 (1988).

To the extent the issues on appeal turn on the correctness of an agency’s findings of fact, such findings must be reviewed under the substantial evidence test. Billhimer, 314 Md. at 58-59 , 548 A.2d 819 (1988). Substantial evidence is “ ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Supervisor of Assessments v. Group Health Ass’n, Inc., 308 Md. 151, 159 , 517 A.2d 1076 (1986) (quoting Bulluck, 283 Md. at 512 , 390 A.2d 1119 ). See also, Dashiell v. Dep’t of Health & Mental Hygiene, 327 Md. 130, 137 , 607 A.2d 1249 (1992).

In contrast to factual challenges, the substituted judgment standard is used with respect to a claim that the agency erred as a matter of law. ¹⁹¹ Reeders, 86 Md.App. at 452 , 586 A.2d 1295 . See also, Perini Services, Inc. v. Health Resources Planning Comm’n, 67 Md.App. 189, 201 , 506 A.2d 1207 , cert. denied, 307 Md. 261 , 513 A.2d 314 (1986). A challenge as to a regulatory interpretation is, of course, a legal issue. Id.

(“The substituted judgment test is the analysis employed when we interpret the requirements of ... COMAR.”) In Caucus Distributors, Inc. v. Md. Securities Comm’r, 320 Md. 313 , 577 A.2d 783 (1990), the Court described the review process under § 10-215(g), the predecessor to § 10-222(h), as follows: In determining whether an agency’s decision is supported by substantial evidence, we are mindful that substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. In applying the substantial evidence test, we must not substitute our judgment for the expertise of the agency, for the test is a deferential one, requiring “restrained and disciplined judicial judgment so as not to interfere with the agency’s factual conclusions.” This deference applies not only to agency fact-finding, but to the drawing of inferences from the facts as well. When, however, the agency’s decision is predicated solely on an error of law, no deference is appropriate and the reviewing court may substitute its judgment for that of the agency.

Id., at 323-24, 577 A.2d 783 (citations omitted). In sum, modification or reversal of the agency’s decision is only appropriate when the petitioner has demonstrated that substantial rights of the petitioner have been prejudiced by one or more of the causes specified in § 10-222(h). Bernstein v. Real Estate Comm’n, 221 Md. 221, 230 , 156 A.2d 657 (1959), appeal dismissed, 363 U.S. 419 , 80 S.Ct. 1257 , 4 L.Ed.2d 1515 (1960).

III

Whether Child Abuse Occurred Was A Matter For ALJ’s Determination The ALJ concluded that the issue of whether Mr. Thompson abused his daughter was beyond the scope of the day care ¹⁹² licensing hearing. Appellee claims that when a day care license is at stake, the applicant is entitled to challenge a prior DSS finding of “abuse indicated” if the prior administrative finding is the basis for denial of the license. Appellant claims, on the other hand, that an applicant is only entitled to challenge whether DSS correctly followed CPS regulations. 6 Circuit Court Judge James T. Smith opined that “the ALJ’s conclusion of law that the CCA ‘... properly and correctly applied the applicable regulation, COMAR 07.04.01.08A, in reaching its decision to deny [Ms. Thompson’s] application’ ... is supported by the record below.” In a sound and well-reasoned opinion, Judge Smith further held that the ALJ “failed to recognize [her] ultimate responsibility, and thereby ... erred as a matter of law.” Accordingly, he reversed and remanded for a new hearing, in order to allow Ms. Thompson to present testimony from the alleged abuse victim. Judge Smith said: Although determining whether the CCA correctly applied State regulations was a subject for [the ALJ’s] review and consideration, the ALJ also was required to make the ultimate decision, namely,