Department of Natural Resources v. Heller

BATTAGLIA, Judge. This case arises out of an administrative hearing addressing a complaint filed by James Heller against the Department of Natural Resources pursuant to the Maryland Whistleblower Statute, Md.Code (1993, 1997 Repl.Vol., 2001 Supp.), § 5-301, ¹⁵² et seq. of the State Personnel and Pensions Article, alleging retaliatory disciplinary action. The Department of Natural Resources (“DNR”) requests this Court to review the decision of the Court of Special Appeals which found, in contradiction to the findings of the Administrative Law Judge, that James Heller made protected disclosures regarding alleged fiscal improprieties and that the Administrative Law Judge erroneously precluded Respondent from introducing evidence relevant to the merits of the underlying sexual harassment claim. We reverse.

Facts On October 18, 1998, Respondent began working as the manager of the Somers Cove Marina (“Somers Cove”) in Crisfield, Maryland. At that time, he was informed by his direct supervisor, Joseph Ward, Park Service Supervisor, and Mr. Ward’s supervisor, Daryl DeCesare, Regional Manager for the Eastern Region, Department of Natural Resources, that the marina had posted a loss the previous fiscal year and that some of his responsibilities were to identify the reasons for the loss and to make the marina profitable. From November 1998 through April 2001, Mr. Heller, Mr. Ward, and Mr. DeCesare exchanged numerous memoranda concerning the Somers Cove budget and the use of funds generated by the marina. Respondent discovered that DNR made several payments to the Great Hope Golf Course (“Great Hope”), totaling $53,600, pursuant to an agreement between DNR and Somerset County by which DNR would receive discounted vouchers for rounds of golf at Great Hope to be sold at Somers Cove for a profit.

Respondent also noted that in fiscal year (“FY”) 1998, $25,859 was charged to Somers Cove to purchase a truck for the marina, but sometime thereafter, the truck was transferred to Janes Island State Park where Mr. Ward served as Park Manager. Respondent also found that $80,000 in revenue generated by Somers Cove had not been credited to Somers Cove’s operating account. In FY 1998 and 1999, various summaries of receipts and corresponding cash register tapes, credit card receipts, and ¹⁵³ bank deposit tickets were found at Somers Cove, evidencing moneys which had not been credited to Somers Cove’s revenue account but had remained in a DNR clearing account until the supporting documentation was received and processed. When this occurred, Somers Cove was credited with the entirety of the revenue.

On January, 18, 1999, Mary Taylor was hired by DNR to work at Somers Cove as an office secretary to report directly to Respondent. On April 9, 2001, Ms. Taylor met with Mr. Ward and expressed her feelings of discomfort about working alone with Respondent because she felt threatened and intimidated and was being sexually harassed. Mr. Ward instructed her to put her concerns in writing; Ms. Taylor did so in a letter dated April 11, 2001. Mr. Ward forwarded this letter to Mr. DeCesare.

On April 14, 2001, Mr. DeCesare and Mr. Ward met with Respondent and informed him that he could not work in the same office as Ms. Taylor and that Mr. Ward would be assuming Ms. Taylor’s daily supervision. Approximately two weeks later, Mr. DeCesare temporarily reassigned Respondent to Pocomoke River State Park and forwarded Ms. Taylor’s complaint to DNR’s Equal Employment Opportunity Office (“EEO Office”). William Bias, Chief of the Office of Fair Practice, DNR, investigated Ms. Taylor’s claims of sexual harassment. In his report dated May, 30, 2001, Mr. Bias concluded that there was probable cause to conclude that Ms. Taylor had been discriminated against because of her gender, after having interviewed Mr. Ward, Mr. DeCesare, Lieutenant Colonel Alphonso Hawkins, Assistant Superintendent, State Forest and Park Service (“SFPS”), Lindley Sterling, a seasonal employee at Somers Cove and Ms. Taylor’s coworker, Ms. Taylor, and Respondent.

Although Respondent denied Ms. Taylor’s allegations, Mr. Bias found that Ms. Taylor was credible and that Respondent was not. He recommended the following actions be taken by management: (1) transfer Respondent to another location; (2) issue Respondent a written reprimand for his actions empha ¹⁵⁴ sizing the seriousness of the offense and DNR’s zero tolerance policy with respect to sexual harassment; (3) require Respondent to attend sexual harassment training; and (4) advise Respondent not to retaliate against Ms. Taylor. Mr. Bias also noted that the Office of Fair Practice would conduct periodic reviews to ensure that the suggested corrective actions had been implemented. On June 21, 2001, Colonel Richard Barton, Superintendent of the State Forest and Park Service and Respondent’s appointing authority, issued a written reprimand to Respondent based upon Mr. Bias’s determination of probable cause.

Respondent was permanently transferred from Somers Cove, required to attend sexual harassment training, prohibited from having any contact with Ms. Taylor and prohibited from visiting Somers Cove. Respondent was not demoted in grade and did not incur any loss of pay. Respondent filed an administrative appeal of the disciplinary action with the head of his unit at DNR and the Secretary of Budget and Management, pursuant to Sections 11-109 and 11-110 of the State Personnel and Pensions Article. 1 He ¹⁵⁵ thereafter settled and dismissed the appeal prior to it being heard by the Office of Administrative Hearings (“OAH”). Pursuant to that settlement, Respondent agreed to a permanent assignment to another state park and retained his ability to seek redress through a “whistleblower” action.

In his separate “whistleblower” action under Section 5-301 et seq. of the State Personnel and Pensions Article (“Whistle-blower Act”), 2 filed with the Secretary of the Department of Budget and Management (“DBM”), Respondent alleged that the June 21, 2001 disciplinary action was not a consequence of the probable cause finding of sexual harassment, but was retaliatory for the protected disclosures that Respondent alleged to have made regarding purported fiscal irregularities in the implementation of Somers Cove’s operating budget. Specifically, Respondent listed several discrete allegations of fiscal improprieties and illegalities that he asserted he had raised ¹⁵⁶ previously with SFPS management. He stated that he had discovered and reported to SFPS management that: (1) $80,000 in revenues generated by Somers Cove in FY 1998 were not credited by DNR to Somers Cove’s operating account, but rather were diverted by DNR for other departmental uses; (2) approximately $24,000 from Somers Cove’s budget was used to purchase a vehicle that DNR subsequently and improperly transferred for use at Janes Island State Park; and, (3) DNR improperly transferred $40,000 from the Somers Cove budget to the Great Hope Golf Course, a facility owned and operated by the Somerset County Commissioners. The DBM denied his whistleblower claim; Respondent appealed to the Office of Administrative Hearings (“OAH”), and an evidentiary hearing was held by Administrative Law Judge (“ALJ”) Lorraine Fraser on January 14 and 15, 2003.

Respondent’s case, in direct and rebuttal, consisted of his own testimony, as well as the testimonies of State Senator James Lowell Stoltzfus and Delegate Charles Andrew McClenahan in his case in chief. DNR presented the testimonies of Gregory J. Cunningham, DNR’s Director of Audit and Management Review and Colonel Barton. Respondent testified that when he was hired by DNR as manager of Somers Cove, he was informed of a $197,000 net operating loss posted by Somers Cove for FY 1998 and that he tried to determine why Somers Cove was not generating profits. According to Respondent, this investigation led him to focus his attention on the three issues raised in his complaint: the payments to Great Hope, the purchase of the truck which was later transferred to Janes Island, and the diversion of Somers Cove revenues by DNR for other departmental purposes.

He stated that he reached the conclusion that the revenues generated by Somers Cove, known as “attainment,” were being improperly diverted by DNR or were not being credited by DNR to the Somers Cove account. ¹⁵⁷ Respondent testified that in late 1998, he brought these issues to the attention of Mr. Ward, Mr. DeCesare, and Pam Lunsford, the assistant to the SFPS budgetary officer. To corroborate his assertion that he had made his concerns known to his superiors, Respondent presented a January 13, 2000 memorandum addressed to Mr. Ward and Mr. DeCesare, which detailed the budgetary issues at Somers Cove and asserted that the marina was being used as a “cash cow.” In the memorandum, Respondent noted that although the marina was producing revenues in FY 1999 in excess of $600,000, Somers Cove’s operating budget was only $405,000. Similar statements were made in a February 18, 2000 memorandum to Jim Dunmyer, DNR Assistant Secretary, which was also introduced into evidence by Respondent. Respondent also offered, and the ALJ received, several other documents, which included: a February 14, 2000 memorandum from himself to Mr. Ward and Mr. DeCesare, in which he alleged that “Annapolis had taken $228K for FY 99’s attainment”; Respondent’s performance evaluation signed July 19, 2000 stating that if DNR would comply with the applicable statute governing the Somers Cove Improvement Fund, it would enable Respondent to better perform his duties; and a November 6, 2000 memorandum from Respondent to Mr. Ward in which Respondent raised questions about the Somers Cove budget.

During Respondent’s case in chief, he attempted to introduce evidence impeaching the credibility of the allegations made by Ms. Taylor, which went beyond what was contained in Mr. Bias’s report, as part of his effort to prove that the sexual harassment claims were pretextual. ALJ Fraser explained, at that time, ruling on an objection by DNR to the admission of a document which purported to relate to Ms. Taylor’s conduct in the workplace, that the context of the whistleblower claim was not the appropriate proceeding in which to challenge the merits of the underlying sexual harassment claim. ALJ Fraser stated that Respondent could only challenge the sexual harassment charge in an appeal of the disciplinary action. Also, when, during the direct examination of Respondent, Respondent’s counsel asked whether he had ¹⁵⁸ sexually harassed Ms. Taylor, ALJ Fraser again sustained DNR’s objection to the question.

Respondent also presented the testimony of Senator James Lowell Stoltzfus and Delegate Charles Andrew McClenahan, both of whom stated their belief that Respondent had done a good job as manager of the marina. Both Senator Stoltzfus and Delegate McClenahan testified that Mr. DeCesare told them that Respondent was removed because of financial mismanagement of Somers Cove. In response to the evidence adduced by Respondent, DNR presented testimony from Gregory Cunningham, who testified as an accounting expert, and Colonel Barton, who instituted the disciplinary action against Respondent. Mr. Cunningham, as part of the investigation into Respondent’s whistleblower complaint, had performed an internal review of the specific allegations of fiscal mismanagement raised by Respondent.

Mr. Cunningham also prepared a report of his findings, which was admitted into evidence. In both the report and his testimony, Mr. Cunningham opined that there was no merit to any of Respondent’s allegations. With respect to the allegation that DNR had unlawfully diverted $80,000 from Somers Cove for other departmental purposes, Mr. Cunningham testified that DNR had not diverted these funds but that the funds had been held in DNR’s clearing account pending DNR’s receipt of certain Somers Cove credit card receipts and deposit tickets as proof of revenue. As stated by Mr. Cunningham, under DNR’s accounting procedures, transmittal of the receipts and deposit tickets is a prerequisite for DNR to transfer the funds from the clearing account where they are initially deposited to the Somers Cove revenue account.

Mr. Cunningham noted that the entirety of Somers Cove’s revenue was transferred from the clearing account to the Somers Cove revenue account immediately after DNR received the necessary documentation from Somers Cove. Regarding Respondent’s allegation that DNR improperly transferred a vehicle purchased with Somers Cove funds to ¹⁵⁹ Janes Island, Mr. Cunningham stated that, in accordance with long-standing DNR policy, the Secretary of DNR and SFPS management have the authority to assign vehicles based on need. Moreover, Mr. Cunningham testified that he had learned through interviews with SFPS management that Respondent had permitted the vehicle to be transferred because there was another vehicle available for his use at Somers Cove. Concerning the allegations regarding the payments made to Great Hope, Mr. Cunningham explained that the monetary transfers from Somers Cove to Great Hope were completed pursuant to a lawful Memorandum of Agreement (“MOA”) executed in 1995 between DNR and Great Hope.

The MOA was not renewed when it expired in 1998 because it was not financially advantageous to Somers Cove. Mr. Cunningham also addressed Respondent’s allegation that DNR was using Somers Cove as a “cash cow” because the budget did not reflect the entirety of the marina’s revenue from the fiscal year immediately prior by explaining that DNR establishes the budgets for its units two years in advance. Mr. Cunningham also testified that DNR did not divert the excess Somers Cove revenue, but rather placed the funds in a reserve account solely for Somers Cove’s use. He further stated that the current balance in the account was approximately $250,000.

DNR also presented evidence that Respondent could not have had a reasonable belief in the merit of his allegations concerning the illegal diversion of funds from Somers Cove. Colonel Barton testified that on various occasions when Respondent first began his employment at Somers Cove, he spoke with Respondent and provided explanations for the budgeting issues identified by Respondent. Colonel Barton also stated that when Respondent was hired, he spoke with Respondent about the structure of Somers Cove’s operating budget and how the excess funds generated by the marina were placed in a reserve account. DNR also introduced memoranda from Mr. Ward to Respondent dating from 1999 and 2000 in which Mr. Ward explained that Somers Cove was ¹⁶⁰ operating in the red because of significant deficit spending in previous years and urging Respondent to focus on operating Somers Cove within its budget.

Moreover, DNR introduced a memorandum from February 2000 in which Respondent acknowledged that the budget was prepared two years in advance. Addressing the contention that the sexual harassment claim was pretextual, Colonel Barton testified that he based his decision to discipline Respondent only on the probable cause findings contained in Mr. Bias’s report. He also stated that he did not play any role in the initiation of the claim against Respondent, did not personally investigate the claim, and had no knowledge that Respondent had previously asserted that Ms. Taylor had made inappropriate advances toward him. On cross-examination, when asked whether he knew if Mr. Ward or Mr. DeCesare had encouraged Ms. Taylor to pursue the harassment charges, Colonel Barton stated that his knowledge was limited to that contained in Mr. Bias’s report and that from the report he knew that Mr. Ward had told Ms. Taylor to document her problems in writing and advised Ms. Taylor of the proper procedure for filing a complaint with DNR’s EEO.

With respect to the decision to discipline Respondent, Colonel Barton testified that the decision was his alone and that he did not consult with any of his subordinates or Respondent’s supervisors prior to determining the proper action. He also stated that he did not seek advice from his superiors other than to obtain their consent in the discipline. Colonel Barton asserted that his conversations with Respondent concerning the budgetary issues at Somers Cove did not influence his decision to discipline Respondent in any way. Cross-examination of Colonel Barton initially focused on the merits of the underlying sexual harassment charge.

Respondent’s counsel asked Colonel Barton what Respondent had done to violate the State’s sexual harassment policy. Once again, the ALJ sustained an objection and explained that the merits of the sexual harassment claim were not at issue in the whistleblower case, although she remarked that Respondent ¹⁶¹ would be permitted to introduce evidence that Colonel Barton’s decision was based on something other than Mr. Bias’s probable cause finding. Respondent’s counsel did not question Colonel Barton further as to his knowledge of the sexual harassment allegations other than to confirm that Colonel Barton did not personally investigate the claim. During re-direct of Colonel Barton, ALJ Fraser admitted Mr. Bias’s report into evidence on the condition that it was not admitted for the truth of Ms. Taylor’s allegations, but rather solely as evidence of what Colonel Barton relied upon when he decided to discipline Respondent.

In rebuttal, Respondent once again testified. Counsel asked him if he knew whether Mr. Ward or Mr. DeCesare had investigated allegations that Respondent had previously raised concerning Ms. Taylor’s conduct towards him to which DNR objected. Respondent’s counsel then proffered that Respondent would testify that prior to Ms. Taylor’s complaint in April of 2001, Respondent had complained to Messrs. Ward and DeCesare that Ms. Taylor had acted inappropriately toward him and had used profanity in the workplace.

As counsel proffered, Respondent would have further testified that in response to Respondent’s allegations, Mr. Ward and Mr. DeCesare told him not to pursue complaints against Ms. Taylor or she would do the same against him. Also, as part of his proffer, Respondent’s counsel identified eight documents which collectively evidenced that: Respondent had cautioned Ms. Taylor on several occasions in 2000 on maintaining an unprofessional demeanor in the workplace; Respondent had informed Messrs. Ward and DeCesare in 2000 about Ms. Taylor’s alleged improper conduct; and, Mr. Ward informed Respondent that he should be aware that Ms. Taylor might file a claim against him. Although ALJ Fraser sustained DNR’s objection to the admissibility of the documents, she noted that the documents introduced as part of the proffer, with the exception of a October 13, 2000 memorandum in which Mr. Ward warned Respondent that Ms. Taylor might file charges against him, had already been admitted into ¹⁶² evidence because they were admitted in conjunction with Mr. Bias’s report.

The October document was admitted thereafter without objection and Respondent rested his case. On May 27, 2003, ALJ Fraser issued her opinion. The ALJ found that Respondent had failed to meet his burden of proof that he was transferred in reprisal for his disclosure that funds were being improperly diverted from Somers Cove for other uses. In particular, ALJ Fraser noted that Respondent testified that he informed Mr. Ward, Mr. DeCesare, Pam Lunsford, and James Dunmyer of fiscal wrongdoing, but he could not corroborate his assertion that he in fact made those specific disclosures to those individuals.

Moreover, ALJ Fraser noted that Respondent’s testimony as to the disclosures was vague and that he could not recall specific dates or times and what was said and by whom. ALJ Fraser also found that Respondent was not a credible witness because he lied about informing a member of the public about the alleged fiscal improprieties. Furthermore, ALJ Fraser determined that Respondent never disclosed the information to an individual in a position to address the problem. Thus, ALJ Fraser concluded that Respondent’s disclosures were not protected.

Furthermore, the ALJ found that Colonel Barton was a credible witness when he testified that he based his decision to discipline Respondent solely on Mr. Bias’s probable cause report and did not consider Respondent’s allegations of budgetary or fiscal mismanagement and that Respondent failed to introduce evidence to the contrary. Also, based on Mr. Cunningham’s testimony regarding the merit of Respondent’s budgetary concerns, ALJ Fraser found that Respondent’s allegations of fiscal impropriety were meritless. ALJ Fraser ultimately concluded that DNR did not violate Section 5-305 of Maryland’s Whistleblower Statute. 3 ¹⁶³ Respondent filed a petition for judicial review in the Circuit Court for Somerset County citing three grounds for reversal of the ALJ’s decision: the ALJ’s finding that Respondent did not make a protected disclosure was contrary to law and contradicted by undisputed evidence; the ALJ’s refusal to allow Respondent to introduce evidence that the sexual harassment claim was specious and pretextual; and, the ALJ’s requirement that Respondent prove that his disclosures were well-founded as opposed to whether they were based on reasonably held beliefs. Judge J. Owen Wise examined ALJ Fraser’s decision and determined that she was not in error in finding that Respondent did not make a protected disclosure and that Respondent was not disciplined in reprisal for his alleged disclosures.

Moreover, Judge Wise found that Respondent had relinquished his right to challenge the underlying sexual harassment claim when he settled his disciplinary appeal such that Mr. Heller could not collaterally attack it through his whistleblower claim. Judge Wise concluded that the ALJ did not erroneously preclude Respondent from litigating the merits of the sexual harassment claim. Thereafter, Respondent filed his notice of appeal to the Court of Special Appeals. In a reported opinion, the Court of Special Appeals reversed the decision of the ALJ and the Circuit Court’s affirmance of that decision.

The Court of Special Appeals disagreed with the ALJ’s conclusion that Respondent’s allegations of fiscal impropriety were not protected disclosures. The intermediate appellate court also held that Respondent reasonably believed that he was reporting a violation by DNR officials of the statute governing DNR’s budgetary practices. The Court of Special Appeals also determined that the ALJ erred by prohibiting Respondent from ¹⁶⁴ challenging the merits of the underlying sexual harassment claim. On April 11, 2005, DNR filed a petition for writ of certiorari and presented this Court with the following questions, which we have reformulated for clarification purposes: 1.

Did the ALJ erroneously determine that Respondent did not make protected disclosures as defined by Maryland’s Whistleblower Statute? 2. Should the ALJ have permitted Respondent to introduce evidence challenging the merits of Ms. Taylor’s sexual harassment allegations, where the ALJ determined such evidence to be irrelevant to the question of whether the agency decision maker committed an act of reprisal against Respondent and where the merits of Ms. Taylor’s allegations had previously been resolved in a settlement of a disciplinary appeal filed by Respondent? 4 On June 9, 2005, we granted the petition and issued the writ. Department of Natural Resources v. Heller, 387 Md. 462 , 875 A.2d 767 (2005). We conclude that ALJ Fraser’s determination that Respondent’s allegations regarding alleged fiscal impropriety did not constitute protected disclosures under the Maryland Whistle-blower Act, is supported by substantial evidence and is not premised on an erroneous interpretation of the law.

More ¹⁶⁵ over, we hold that ALJ Fraser did not erroneously exclude Respondent’s proffered evidence relating to the merits of the underlying sexual harassment claim. Therefore, we reverse the decision of the Court of Special Appeals. Standard of Review Section 10-222 of the Maryland Administrative Procedure Act, Md.Code (1984, 2002 Repl.Vol.), § 10-222 of the State Government Article, delineates that a court, upon judicial review of an administrative agency’s decision, may decide to: (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; (iii) 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 and capricious. Md.Code (1984, 2004 Repl.Vol.), § 10-222(h) of the State Government Article.

In Maryland Aviation Administration v. Noland, 386 Md. 556, 571-72 , 873 A.2d 1145, 1154-55 (2005), Judge Eldridge, writing for this Court, thoroughly examined the standard of review of an adjudicatory decision by an administrative agency, stating: A court’s role in reviewing an administrative agency adjudicatory decision is narrow, United Parcel v. People’s Counsel, 336 Md. 569, 576 , 650 A.2d 226, 230 (1994); it ‘is limited to determining 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 ¹⁶⁶ upon an erroneous conclusion of law.’ United Parcel, 336 Md. at 577 , 650 A.2d at 230 . See also Code (1984, 1995 Repl.Vol.), § 10-222(h) of the State Government