Reliable Contracting Co. v. Maryland Underground Facilities Damage Prevention Authority

McDonald, j. Underground infrastructure, such as the cables and pipes that distribute water, gas, electricity, and other substances essential to modern life, is susceptible to damage during excavations. To prevent such incidents, State law has established a “one-call system,” sometimes referred to as “Miss Utility.” Maryland Code, Public Utilities Article (“PU”), § 12-101 et seq. Under that law, advance notice must be given to the one-call system of certain types of excavation so that the location of nearby pipes, cables, and related struc ⁷¹⁰ tures can be identified and marked.

Those who fail to do so and damage underground pipes or cables are subject to civil penalties assessed by Respondent Maryland Underground Damage Prevention Authority (“the Authority”). This case arose when the Authority cited Petitioner Reliable Contracting Company, Inc., (“Reliable Contracting”) for violating the statute and imposed a civil monetary penalty. Reliable Contracting challenges the constitutionality of the statutory provisions that empower the Authority to adjudicate violations and assess penalties. It argues that the statutory scheme violates the separation of powers set forth in the Maryland Constitution because it vests judicial power in a non-judicial body — the Authority.

Reliable Contracting also contends that the statute fails to provide adequate guidance to the Authority for the assessment of penalties, which would also render it unconstitutional under a prior decision of this Court. We hold that the statutes that govern the Authority suffer from neither constitutional defect. Like many other administrative agencies, the Authority’s quasi-judicial powers are limited and subject to judicial review. It is true that the statute authorizing the Authority to impose civil penalties does not itself specify the criteria for the Authority to consider in setting the amount of a civil monetary penalty.

However, the General Assembly has enacted a general statute providing criteria for assessment of civil penalties by State administrative agencies when no other statute or regulation does so. Although the Authority itself questions whether that statute applies to it, we agree with the Court of Special Appeals that it does. I Background A. Statutory Framework One-Call System to Protect Underground Facilities In the modern world, electricity, gas, oil, water, sewage, and other substances are transmitted underground via pipes, ca ⁷¹¹ bles, and accessories that are subsumed under the generic statutory phrase “underground facilities.” 1 Damage or dislocation of underground facilities can result in death or injury to individuals, damage to property, and the loss of essential public services. 2 To protect underground facilities, the General Assembly has enacted a comprehensive statutory scheme for regulating excavation or demolition that could damage them. PU § 12-101 et seq.

The statute applies to all excavation or demolition unless the “excavation or demolition is performed or to be performed: (1) entirely on the land on which the private residence of the owner or lessee is located; and (2) without the use of machinery.” PU § 12-103. The statute creates a one-call system, colloquially known as “Miss Utility,” which notifies owners of underground facilities of a planned demolition or excavation that may affect those facilities. PU § 12 — 101(i) (definition of “one-call system”). Anyone who intends to perform a covered excavation or demolition must notify the one-call system in advance.

PU § 12-124(a). After notifying the one-call system, “[a] person may begin excavation or demolition only after the person receives notification from the underground facilities information exchange system of the one-call system confirming that all applicable owner-members have” marked any facilities or parts of facilities they have in the vicinity of the excavation or demolition. PU § 12-127(a). “If a person knows or has reason to know that an underground facility in the area of a planned or ongoing excavation or demolition is not marked as ⁷¹² required by this subtitle, the person may not begin or continue the excavation or demolition unless the person” takes certain precautions not relevant here. PU § 12-127(e). 3 The Authority The statute creates the Authority to carry out certain enforcement and public education facets of the one-call system.

The Authority consists of nine members appointed by the Governor from lists submitted by organizations representing various types of stakeholders. PU § 12-107. 4 The members serve staggered two-year terms. “On the recommendation of the Authority, the Governor may remove a member for incompetence or misconduct.” PU § 12-107(e). In carrying out its functions under the statute, the Authority is authorized to conduct hearings, at which testimony is to ⁷¹³ be given under oath and recorded. PU § 12-113(a).

The statute authorizes the Authority to issue subpoenas in conjunction with its hearings and its members may administer the oath to witnesses. PU § 12-113(b)-(c). The Authority’s decisions are to be made in writing and are subject to judicial review in accordance with the State Administrative Procedure Act. PU § 12 — 113 (d) — (e).

To the extent that the Authority requires funding to carry out its responsibilities, the General Assembly has directed the Authority not to look to appropriations in the State budget, but rather to obtains funds from “(1) a federal or State grant; (2) filing fees and administrative fees for complaints heard by the Authority ...; and (3) any other source.” PU § 12-111(a); see also PU § 12-106. Enforcement of the One-Call System by the Authority The Authority is charged with enforcing compliance with the notice provisions of the one-call system. It conducts hearings on complaints of violations, may assess a civil penalty when a violation is found, and may also enter into settlements in lieu of assessing a civil penalty. PU § 12-112(a).

For performing “an excavation or demolition without first providing the [required] notice ... and damaging], dislocating], or disturbing] an underground facility,” the Authority may assess a penalty of up to $2,000 for a first offense and up to $4,000 for each subsequent offense. PU § 12-135(a)(l). 5 Other violations of the one-call system are subject to a civil penalty of up to $2,000. PU § 12-135(a)(3). The Authority may also require a violator to participate in special training or adopt certain procedures to mitigate damage, in addition to or in lieu of a monetary penalty.

PU § 12-135(a)(2). As noted ⁷¹⁴ above, the Authority’s decisions are subject to judicial review. PU§ 12 — 113(e). In addition to its enforcement function, the Authority also administers a special, non-lapsing fund devoted to public education and the development of safety procedures.

PU § 12-117. 6 B. Facts and Procedural History In February 2013, a local utility notified the Authority that Reliable Contracting had violated the statute by undertaking an excavation without using the one-call system and, as a result, had damaged the utility’s facilities. On April 16, 2013, after an investigation, the Authority notified Reliable Contracting that it would assess a civil monetary penalty of $2,000 for a violation of PU § 12-124(a) (excavating without notifying the one-call system) and a penalty of $1,000 for a violation of PU § 12-127(e) (excavating with knowledge of an underground facility and without following proper procedures). The Authority indicated that the $1,000 penalty would be waived if Reliable Contracting completed damage prevention training offered by the Maryland Damage Prevention Committee. The notice stated that Reliable Contracting had the right to a formal hearing before the Authority.

Reliable Contracting requested a hearing. At the hearing in September 2013, it did not contest any of the Authority’s findings; instead, it challenged the constitutionality of the Authority’s enabling statute. Specifically, Reliable Contracting asserted that, in permitting the Authority to adjudicate violations and assess civil penalties, the statute conferred judicial power on a non-judicial body and thereby violated the separation of powers required by the State Constitution. Reliable Contracting also asserted that the statute failed to provide adequate guidance to the Authority for assessment of such penalties.

On September 16, 2013, the Authority issued ⁷¹⁵ a written decision that confirmed its earlier finding of violations and imposition of penalties, and that notified Reliable Contracting of its right to seek judicial review. The Authority did not explicitly address Reliable Contracting’s constitutional arguments. Reliable Contracting petitioned for judicial review in the Circuit Court for Anne Arundel County, reiterating the constitutional argument it had made to the Authority. On June 9, 2014, the Circuit Court issued a memorandum opinion and order rejecting those arguments and upholding the Authority’s decision. 7 The Circuit Court held that the Legislature could confer quasi-judicial adjudicatory powers on an entity outside the judiciary so long as there was an opportunity for judicial review by a court, and observed that the Authority’s statute allowed for such review.

The Circuit Court also held that the grant of discretion to the Authority to assess civil monetary penalties without detailed guidance was acceptable because the Authority regulated in the area of public health and safety. Reliable Contracting then appealed its constitutional claims to the Court of Special Appeals, which affirmed the Circuit Court. 222 Md.App. 683 , 114 A.3d 303 (2015). The intermediate appellate court agreed with the Circuit Court that, “because the court has the opportunity to review the Authority’s decision and render a final decision, the delegation of quasi-judicial adjudicatory power to the Authority is not unconstitutional.” 222 Md.App. at 697 , 114 A.3d 303 . However, in contrast to the Circuit Court, the Court of Special Appeals did not decide whether “the statute’s limitation on the circumstances in which the Authority has discretion to impose a civil penalty, along with the availability of judicial review of the Authority’s decisions, would lead to the conclusion that the discretion given to the Authority is constitutional.” Id. at 700 , ⁷¹⁶ 114 A.3d 303 .

Instead, the Court of Special Appeals held that Maryland Code, State Government Article (“SG”), § 10-1001 8 provided the necessary standards to guide the Authority’s exercise of discretion. Id. at 700-02, 114 A.3d 303 . 9 II Discussion The material facts in this case are undisputed and the only issues concern the alleged constitutional defects in the Authority’s enabling statute. Accordingly, we consider the merits of the lower courts’ resolution of those issues without deference. See Schisler v. State, 394 Md. 519, 535 , 907 A.2d 175 (2006).

We consider first the contention that the Authority’s statute violates separation of powers in delegating judicial power to a non-judicial body. Second, we consider the argument that the statute fails to provide adequate guidance for the imposition of civil penalties. A. Whether the Authority’s Enabling Act is Unconstitutional Article IV, § 1, of the Maryland Constitution provides, in pertinent part, “The Judicial power of this State is vested in ⁷¹⁷ a Court of Appeals, such intermediate courts of appeal as the General Assembly may create by law, Circuit Courts, Orphans’ Courts, and a District Court.” This is the Judicial Vesting Clause of the Maryland Constitution, analogous to Article III, Section 1, of the federal Constitution. Article 8 of the Maryland Declaration of Rights states “That the Legislative, Executive and Judicial powers of Government ought to be forever separate and distinct from each other; and no person exercising the functions of one of said Departments shall assume or discharge the duties of any other.” This is the Separation of Powers clause — an explicit statement of the principle of separation of powers that is only implicit in the federal Constitution. 10 The Judicial Vesting Clause, together with the Separation of Powers Clause, “forbids any power in the Legislature to clothe administrative boards with any judicial authority.” Dal Maso v. Board of County Commissioners, 182 Md. 200 , 34 A.2d 464 (1943).

However, administrative bodies may exercise quasi-judicial authority, which essentially consists of deciding questions of fact and law subject to judicial review. Heaps v. Cobb, 185 Md. 372, 378-79 , 45 A.2d 73 (1945). “[T]he existence of [separation of powers] does not itself inhibit the delegation to an administrative agency of a blend of executive or legislative powers with powers judicial in nature; the determining factor is not so much the specific powers granted to the administrative agency, but rather the relationship of the courts to the exercise of that power.” County Council for Montgomery County v. Investors Funding Corp., 270 Md. 403, 436 , 312 A.2d 225 (1973). The availability of judicial review is ⁷¹⁸ key because “the dangers inherent in government by administrative bodies lie[s] not in the blending of powers in a single body but in permitting that body’s power to be beyond check or review.” Insurance Commissioner v. National Bureau of Casualty Underwriters, 248 Md. 292, 299 , 236 A.2d 282 (1967). The parties agree that the Investors Funding case provides a useful point of comparison.

That case concerned Chapter 93A of the Montgomery County Code, entitled “Fair Landlord-Tenant Relations,” which created a Commission on Landlord-Tenant Affairs (“Commission”) that had the authority to enforce the provisions of Chapter 93A through any appropriate means, including powers: (1) to impose a civil penalty not exceeding $1,000; (2) to award money damages not exceeding $1,000; (3) to award payments for temporary substitute housing; (4) to terminate leases; (5) to order repairs; (6) to order the return of security deposits and rental monies paid. Investors Funding, 270 Md. at 426-27 , 312 A.2d 225 . A number of landlords in the County, including Investors Funding Corporation, sought a declaratory judgment that the ordinance was unconstitutional. The landlords alleged that Chapter 93A “vest[ed] in an administrative body judicial powers reserved exclusively to the courts by Article IV, § 1 of the Maryland Constitution.” Id.

Because prior cases had allowed for an administrative agency to adjudicate cases as long as the courts had the power to review the agency’s decisions, the landlords suggested five additional considerations that might serve as indicia of judicial power: “(1) the power to make a final rather than an initial determination; (2) the power to make binding judgments; (3) the power to affect the personal or property rights of private persons; (4) the exercise of power formerly held by a court; and (5) the fashioning of remedies which are judicial in nature.” Id. at 436, 312 A.2d 225 . ⁷¹⁹ This Court responded to those arguments as follows: (1) the Commission had no power to make a final determination because its decisions were subject to judicial review; (2) the Commission had no power to make binding judgments because litigants must go to court to enforce compliance with the Commission’s orders; (3) the power to affect the personal or property rights of private persons was delegated based on a legislative finding of public interest in landlord-tenant relations; (4) the exercise of power formerly held by a court was not dispositive; and (5) the Commission’s power to fashion remedies was incidental to its regulatory powers. Id. at 437-41 , 312 A.2d 225 . The Court’s analysis of these five points in Investors Funding underscores the core rule arising out of the Court’s prior cases: an administrative agency, as part of its administrative functions, may decide cases within the area delegated to it by the legislature as long as its decisions are subject to judicial review. See Maryland Aggregates Ass’n v. State, 337 Md. 658, 675-79 , 655 A.2d 886 (1995).

Hence, in this case, the Authority’s ability to hold hearings and impose monetary penalties is not an unconstitutional vesting of judicial power in a non-judicial body. The Authority may decide individual cases, but its decisions are subject to judicial review. PU § 12-113(e). Its power is not judicial, but quasi-judicial, and delegation of quasi-judicial power to an agency does not violate Article IV, § 1 of the Maryland Constitution or Article 8 of the Maryland Declaration of Rights.

Reliable Contracting argues that the Authority’s power is wholly judicial rather than quasi-judicial, even though the Authority’s decisions are subject to judicial review, because the Authority does nothing but issue and decide citations. That is, the Authority’s power to fashion remedies is not incidental to its regulatory powers, because it has no other regulatory functions. 11 It merely decides cases. ⁷²⁰ This contention is not entirely accurate. The legislative history of the Authority’s enabling statute indicates that it was created to serve certain educational functions as well. Although the statutory one-call system has existed since 1974, 12 the Authority was not established until 2010.

Chapter 635, Laws of Maryland 2010. That 2010 amendment was intended to satisfy standards for federal grants set forth in the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006, 49 U.S.C. § 60134 , which required “public education” efforts as well as enforcement through civil penalties by a state authority. See Revised Fiscal and Policy Note to Senate Bill 911 (April 8, 2010); Bill Review Letter of Attorney General Douglas F. Gansler to Governor Martin O’Malley concerning Senate Bill 911 (May 12, 2010). In that regard, the Authority administers a special fund devoted to public education and outreach and it is authorized to allow a violator to mitigate a penalty by participating in special training, adopting safety procedures, and carrying out similar measures devised by the Authority.

Even if Reliable Contracting’s description of the Authority’s function were accurate, the Authority’s power would still be quasi-judicial. The essence of quasi-judicial power is not that it is accompanied by other powers; it is that it is limited and initial, rather than plenary and ultimate in its sphere. The Maryland judiciary has general jurisdiction, and its final decisions are final; it may decide all cases of State law, and no other adjudicative body may reverse its judgments on the basis of State law. By contrast, the Authority’s jurisdiction is sharply limited by statute, and its decisions are subject to ⁷²¹ affirmation or reversal by the courts.

Thus, the Authority has quasi-judicial, rather than judicial, power, and the delegation of quasi-judicial authority does not violate Article IV, § 1 of the Maryland Constitution or Article 8 of the Maryland Declaration of Rights. B. Whether There are Guidelines for Exercise of the Authority’s Discretion Because agencies with quasi-judicial authority must be subject to judicial review, the Investors Funding decision held that an agency with the power to impose a civil penalty up to a specified amount must be given guidelines for determining the penalty. Without such guidelines, there is no way for a reviewing court to determine whether the agency assessed a proper penalty. Investors Funding, 270 Md. at 441 , 312 A.2d 225 . 13 Reliable Contracting contends that the statute creating the Authority has no such guidelines. 14 The Authority responds that there are detailed provisions specifying the circumstances when a penalty may be assessed, which is accurate but beside the point.

The question in this case is not whether the statute provides adequate notice of the conduct that might subject an entity to a penalty, but whether the statute provides adequate guidance to the Authority and a reviewing court in order for the court to review the Authority’s assessment of that penalty. 1. SG § 10-1001 As noted above, the Court of Special Appeals held that the necessary guidelines are to be found in SG § 10-1001, which instructs an administrative agency to consider (1) the serious ⁷²² ness of the violation, (2) the intent (“good faith”) of the violators, and (3) any past history of violations. There is obviously little to quarrel with in these common sense criteria and SG § 10-1001 would thus appear to put the issue to rest. But, by its terms, SG § 10-1001 applies only to an officer or entity in the executive branch of State government and the Authority appears to be reluctant to embrace State agency status.

Reliable Contracting is, of course, happy to agree that the statute does not apply to the Authority. Further analysis is therefore necessary. 2. Factors that Determine Whether an Entity is a State Agency To decide whether the Authority’s discretion is guided by SG § 10-1001 we must determine whether it is a State agency for the purposes of that statute. 15 This Court has noted that “there is no single test for determining whether a statutorily-established entity is an agency or instrumentality of the State for a particular purpose. All aspects of the interrelationship between the State and the statutorily-established entity must be examined in order to determine its status.” AS.

Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35 , 464 A.2d 1068 (1983); see also Central Collection Unit v. DLD Associates LP, 112 Md.App. 502, 505-09 , 685 A.2d 873 (1996). A few examples are instructive. In Moberly v.