State v. Maryland State Family Child Care Ass'n

SALMON, J. This appeal concerns the validity of Executive Order 01.01.2007.14, which was signed by Governor Martin O’Malley on August 7, 2007, and published in the Maryland Register on August 31, 2007. At the request of the appellees (who will be identified infra.), the Circuit Court for Cecil County, on November 2, 2007, granted a preliminary injunction prohibiting Governor O’Malley and the State of Maryland from enforcing or carrying out the terms of the executive order. Governor O’Malley and the State filed a timely appeal along with a motion for a stay of the injunction. Because the circuit court did not act on the motion for a stay in a timely manner, the appellants sought a stay in this court.

We granted that stay. I Background The Executive Order here at issue concerns Maryland’s Purchase of Care Program (“POC Program”). The POC Program is designed to allow the State to give financial support to working families in Maryland who have child care expenses. The POC Program is administered by the local departments of social services.

COMAR 13A.14.06.06 A-B 11 H. All participation is voluntary. Once a child care center or family child care provider elects to participate in the program, it must abide by the rules and regulations of the program, which are determined by the Maryland State Department of Education. These rules and regulations establish a reimbursement rate. That rate is set according to the family’s ⁴²⁷ income, the family size, and the geographic area of the state.

See COMAR 13A.14.06.03. The POC Program regulations also establish the terms and conditions of reimbursement. For example, a provider is only paid for a fixed number of vacation days and for a prescribed number of days after a family gives notice that it is leaving the child care center or family child care provider. COMAR 13A.14.06.11H.

The POC Program regulations set a “co-pay” for each family, based upon the family’s size and income level. If, however, the child care center or the family child care provider charges more than the reimbursement rate plus the co-pay established by the State, it is allowed to charge the parents that additional amount. Thus, the relationship between the family child care provider and the State is essentially a contractual relationship, in that the provider may choose to accept (or reject) the terms and conditions that are set by the State. Likewise, the relationship between the family child care provider who elects to participate in the POC Program and the parents is essentially contractual in nature.

The family uses the POC Program voucher as a partial payment for the family’s child care expense, and the family child care provider accepts that voucher, subject to the rules and regulations of the POC Program. In addition to providing funding for the children of working parents in licensed child care centers and with licensed family child care providers, the POC Program also provides funding for what is called “informal care,” i.e., care provided by relatives of the children for whom care is given. These “informal care” providers are generally not required to be licensed by the State, so long as they are only caring for children who are their relatives. “Informal care” providers are reimbursed at a much lower rate than family child care providers. See COMAR 13A.14.06.06.C and 11A-G. II The Executive Order The Executive Order here at issue reads in material part as follows: ⁴²⁸ A. The State shall recognize a provider organization designated by a majority of the registered and registration exempt family child care providers who participate in the State’s Child Care Subsidy Program known as the [POC], voting in a mail ballot election, as the representative of the POC providers in the State.

A provider organization may petition for certification by submitting a petition for representation to the official or officials designated by the Governor to administer this Order. The petition must be accompanied by a showing of interest supported by 30 percent of the providers in the appropriate unit indicating their desire to be represented by the petitioner for the purpose of collective bargaining ... Any interested organization that wishes to intervene must submit a petition of intervention which must be accompanied by a showing of interest supported by 10 percent of the providers in the appropriate bargaining unit indicating their desire to be exclusively represented by the intervener for the purpose of collective bargaining, which petition must be filed within 15 days of notice of the pending election petition. B. Certification of a provider majority bargaining representative shall continue so long as such organization satisfies the criteria of this Order and subsequent guidelines applicable to certification.

A petition to decertify an existing majority bargaining representative may be filed in the same manner as a petition for certification, as provided in Section A of this Order, except that no ■ decertification petition may be filed for any bargaining unit if 1) A majority bargaining representative for that bargaining unit has been certified within the preceding 2 years; or 2) The bargaining unit has in effect a valid memorandum of understanding that, by its terms, does not exceed 8 years in duration; provided that the limitation imposed by this paragraph shall not bar the filing of a decertification petition within the 80-day period immediately preceding the expiration of such memorandum of understanding. ⁴²⁹ C. The State, through the Governor, shall designate appropriate representatives to meet and confer with the provider representative concerning the terms and conditions of the participation of family child care providers in the POC Program, including reimbursement rates under the POC Program, payment procedures, and benefits. Any agreement reached shall be reduced to writing. If any of the provisions of the agreement require legislative action, the parties will jointly seek the enactment of such legislation. D. Nothing in this Order shall in any way diminish or infringe on any rights, responsibilities, power or duties conferred by the Constitution of the State of Maryland and the Annotated Code of Maryland.

The designation of representatives by the Department under this Order does not prevent the designated provider organization or any other organization or individual from communicating with any State official on matters of interest, including appearing before or making proposals to the Department at a public meeting or hearing or at any other Department forum. This Order does not mandate participation by any child care provider. Ill After issuance of the Order quoted above, only one candidate, the Service Employees International Union (“SEIU”), through its affiliate Kids First Maryland, SEIU Local 500, petitioned to be certified as the negotiating representative of POC providers. On August 20, 2007, SEIU Local 500 supplied the requisite documentation of support (at least 30% of all POC providers), whereupon the Secretary of the Department of Labor, Licensing and Regulations (“DLLR”) notified the MSFCCA (Maryland State Family Child Care Association) and other provider organizations of SEIU’s petition. 1 No other organization sought to intervene in the election. ⁴³⁰ Beginning on September 7, 2007, DLLR administered an election to designate a certified bargaining representative for POC providers.

The election was held at the expense of the SEIU and was overseen by the American Arbitration Association. Votes were due on September 24, 2007. Immediately after the election the American Arbitration Association certified to the Secretary of DLLR that SEIU had received 1,357 votes out of 1,694 cast. The SEIU local was therefore selected as the certified, non-exclusive representative of POC providers.

Meanwhile, on September 20, 2007, the MSFCCA filed a complaint in the Circuit Court for Cecil County to prevent the designation of a rival labor organization as the representative of POC providers under the Executive Order. The MSFCCA was joined as a plaintiff in the complaint by nine of its members, along with Delegate Michael D. Smigiel, Sr. and Senator Allan H. Kittleman, two members of the Maryland General Assembly. The plaintiffs sought a temporary restraining order (“TRO”), a preliminary injunction against implementation of the Executive Order, as well as a judgment declaring that the Executive Order was “void ab initio and unenforceable.” The Circuit Court for Cecil County held a hearing on October 4 and 5, 2007, concerning the issue of whether a preliminary injunction should be granted. At the conclusion of the hearing, the circuit court took the matter under advisement and, on November 2, 2007, granted the plaintiffs a preliminary injunction prohibiting the enforcement of the Executive Order.

The circuit court found that the Executive Order constituted a regulation as defined in the Administrative Procedure Act (APA). See Md.Code (2004 Repl.Vol.), sections 10-101 et. seq. of the State Government Article. Relying on Delmarva Power & Light Comp. v. Public Service Comm., 370 Md. 1 , 803 A.2d 460 (2002), the circuit court opined that the Executive Order at issue was invalid and should have “no force or effect” ⁴³¹ because it had not been enacted in compliance with the APA. The court concluded its written opinion with these words: This court has been called upon to grant or not grant a preliminary injunction in this matter pending a trial on a complaint for declaratory judgment.

For the reasons already stated it appears that the plaintiffs would have a real probability of prevailing in such an action. It would also appear that since [the plaintiffs] would prevail, the Executive Order at issue would be void ab initio. In weighing the likely injuries to the parties it appears that no injury would occur to the defendants by granting the injunction. If the court’s findings in this case are overturned on appeal or simply not followed by the declaratory judgment court, the process set out in the Executive Order could begin anew with elections held and an exclusive bargaining representative concerning procedures and policies would most likely be void and their having already been wrongly implemented could adversely affect some of the POC providers not in agreement with those procedures and/or policies.

POC providers adversely affected by such wrongly implemented policies and procedures or those whose voices were not heard due to the implementation of the Executive Order could suffer irreversible economic injury. Additionally, an injury can almost be presumed if an agency of the state is operating on an Executive Order which is of no force or effect but with which POC providers are expected to comply- This in no way implies that the stated objective of the Executive Order is “wrongful.” On its face it appears to be a very rational, logical approach to deal with the POC providers scattered all over the state and something with which either the executive or legislative branch, or both, should be concerned. The “wrongfulness” simply applies to the method by which implementation was attempted. Finally, the public interest is best served when representatives and agencies of the state are operating under lawful orders and by lawful means.

The public interest is not ⁴³² served when a state agency or unit operates, at least in part, pursuant to an invalid rule or order. The circuit court, in a footnote to its opinion and order, provided the following comment: What really seems to be of concern is the following. Plaintiff MSFCCA views this Executive Order as a way for those in the executive branch to require representation by the [SEIU], thereby seriously weakening the power of [the MSFCCA] in representing its members. Testimony was also presented which indicated the SEIU and AFSCME (American Federation of State, County, and Municipal Employees) had divided up the states for representation in these types of matters with SEIU having Maryland.

Plaintiff MSFCCA believes that there will be a negative effect in the short and long run that as members of the SEIU they will have to pay union dues, will have to compete internally with relative providers receiving payment vouchers, and will have to have the issue of medical insurance to providers adequately handled. They believe that their voice will not be heard and/or considered by the executive branch. In many ways this seems to really be a battle between the plaintiff MSFCCA and the SEIU, i.e., between two unions OR, between two organizations OR, between one union and one organization, however, one cares to categorize these units. (Emphasis added.) As phrased by the Governor, the question raised in this appeal is: Did the circuit court err when it issued a preliminary injunction barring the Governor from implementing his preferred mechanism for selecting a non-exclusive negotiating partner, where the record did not reveal any legally cognizable injury to Appellees as a result of the challenged Executive Order, the Executive Order is within the Governor’s constitutional and statutory authority, and the Executive Order furthers both important governmental interests and the public interest? ⁴³³ We shall answer that question in the affirmative and reverse the circuit court.

IV The appellees in this case are the MSFCCA, nine of its members, Delegate Michael Smigiel, Sr. and Senator Allan Kittleman. The appellants are Governor Martin O’Malley and the State of Maryland. Seiu, as an amicus curiae, has filed a brief in support of appellants’ position. In order to preliminarily enjoin the Governor’s chosen approach to obtain the input of child care providers concerning the POC Program, it was necessary to find that the plaintiffs met four requirements: 1) plaintiffs had a “real probability of prevailing on the merits, not merely a remote possibility of doing so”; 2) lesser injury would be done to the Governor by granting the injunction than would result to plaintiffs by denying it; 3) that plaintiffs would suffer irreparable injury unless the injunction was granted; and 4) that the public interest favored an injunction.

Fogle v. H & G Rest., Inc., 337 Md. 441, 455-56 , 654 A.2d 449 (1995). The burden of proving facts sufficient to satisfy each of those factors rested on the plaintiffs, and the “failure to prove the existence of even one of the four factors will preclude the grant of preliminary [injunctive] relief.” Id. at 456 , 654 A.2d 449 . V Likelihood of Success The circuit court, as mentioned supra, ruled that the appellees had a “real probability” of obtaining a permanent injunction because, in the court’s view, the executive order issued by the Governor constituted a “regulation” within the meaning of the APA, yet the Governor had not complied with the requirements of the APA. The APA’s definition of a regulation is set forth in S.G. section 10-101(g).

Section 10-101(g) reads: (1) “Regulation” means a statement or an amendment or repeal of a statement that: ⁴³⁴ (1) has general application; (ii) has future effect; (iii) is adopted by a unit to: 1. detail or carry out a law that the unit administers; 2. govern organization of the unit; 3. govern the procedure of the unit; or 4. govern practice before the unit; and (iv) is in any form, including: 1. a guideline; 2. a rule; 3. a standard; 4. a statement of interpretation; or 5. a statement of policy. (2) “Regulation” does not include: (i) a statement that: 1. concerns only internal management of the unit; and 2. does not affect directly the rights of the public or the procedures available to the public; (ii) a response of the unit to a petition for adoption of a regulation, under § 10-123 if this subtitle; or (iii) a declaratory ruling of the unit as to a regulation, order, or statute, under Subtitle 3 of this title. (3) “Regulation”, as used in §§ 10-110 and 10-111.1, means all or any portion of a regulation. (Emphasis added.) Important for our purposes is the part of the above definition that states that to be a regulation within the meaning of the APA, the statement must be “adopted by a unit.” Appellants contend that the executive order was not “adopted by a unit” and therefore it was not 1) a “regulation” and 2) because it was not a regulation, the Governor did not have to abide by the rule-making requirements of the APA.

Section 10 — 101(i) of the State Government Article provides: ⁴³⁵ (i) Unit — “Unit” means an officer or unit authorized by law to adopt regulations. The parts of the APA dealing with rule-making are set forth in S.G. (2004 RepLVol.), sections 10-101-189 (hereinafter “subtitle 1”). Section 10-102 provides: (a) In general. — Except as otherwise expressly provided by law, this subtitle applies to: (1) each unit in the Executive Branch of the State government; and (2) each unit that: (i) is created by public general law; and (ii) operates in at least 2 counties.

(b) Exclusions. — This subtitle does not apply to: (1) a unit in the Legislative Branch of the State government; (2) a unit in the Judicial Branch of the State government; (3) the Injured Workers’ Insurance Fund; (4) a board of license commissioners; or (5) the Rural Maryland Council. (Emphasis added.) Appellees contend that the sections of the APA that deal with rule-making (S.G. § § 10-101-139) all apply to the Governor. 2 If appellees are right, then several significant conditions and requirements would have had to be met before Executive Order 01.01.2007.14 could become effective. Those conditions were summarized by Chief Judge Robert Murphy, speaking for the Court, in Department of Health and Mental Hygiene v. Chimes, Inc., 343 Md. 336, 339-40 , 681 A.2d 484 (1996): ⁴³⁶ The APA requires State agencies to submit proposed regulations to the Attorney General for approval as to legality, § 10-107(b) of the State Government Article, and also to the Joint Committee on Administrative, Executive, and Legislative Review (AELR Committee) for preliminary review 15 days prior to publication. § 10-110(b). The agency must publish the proposed regulation in the Maryland Register and may adopt the regulation 45 days later. § 10-111(a)(1).

For 30 out of the 45 days, the agency must accept public comment on the proposed regulation. § 10-111(a)(3). The AELR Committee may delay adoption of the regulation to allow more time for review. § 10-lll(a)(2)(i). The AELR Committee considers whether the regulation is in conformity with the statutory authority of the agency and the legislative intent of the statute under which the regulation is promulgated. § 10-lll.l(b). If the AELR Committee votes to oppose adoption of the regulation, the agency may withdraw or modify the regulation, or submit it to the Governor for approval. § 10-lll.l(c)(2).

The Governor may then order the agency to withdraw, modify, or adopt the regulation. § 10-lll.l(c)(3). Notice of the adoption of the regulation must be printed in the Maryland Register. § 10-114. This process is commonly known as “notice and comment” rule-making. The APA also provides for “Emergency Adoption” of regulations.

If an agency deems it necessary, § 10-111(b)(1) allows immediate adoption of regulations by submitting the regulation and a fiscal impact statement to the AELR Committee. A majority of the AELR Committee or the chair or co-chair may approve the regulation. § 10-lll(b)(2)(i). A public hearing must be held at the request of any member of the AELR Committee. § 10-lll(b)(2)(ii)---- (Emphasis supplied.) Although it is not determinative of the issue here presented, it is worth noting that the Chimes Court read the statute as meaning that subtitle 1 of the APA applied to agencies of the ⁴³⁷ Executive Branch. 3 The Governor is not an agency in the executive Branch-he is its head. The legislative purpose of the APA was summarized in Chimes, supra, as follows: In 1952, the Commission on Administrative Organization of the State, appointed by Governor McKeldin, recommended adoption of the 1946 Model State Administrative Procedure Act (MSAPA) “due to the end that administrative agencies may be subjected to essential controls but not unduly hampered in the performance of their functions.” Seventh Report of the Commission on Administrative Organization of the State 70 (1952).

That statute was designed to ensure that “certain basic principles of common sense, justice and fairness,” including notice to interested parties, are applied in administrative procedures, id., “without unduly restricting the agencies in the performance of their various tasks.” Id. at 8; see also Maryland Code (1995 Repl.Vol., 1995 Supp.) § 10-201 of the State Government Article (declaration of policy); Commission to Revise the Administrative Procedure Act, Initial Report on Subtitles 2 and 4 of the APA 2 (1992). The Maryland Adminis ⁴³⁸ trative Procedure Act (APA), adopted by Ch. 94 of the Acts of 1957 and based on the MSAPA, therefore, sought to balance the State’s interest in efficient administration against the individuals’ interest in fairness. Cf Bonfield, State Administrative Rule-making § 1.2.2 (1986 & Supp. 1993) (discussing the 1981 MSAPA); Woodland Private Study Group v. State, 109 N.J. 62 , 533 A.2d 387, 393 (1987) (in determining whether the intra-agency statements exception from the New Jersey APA applies, the court focuses upon “whether the agency’s interest in streamlined procedure is outweighed by the importance of the interests that are affected.”); see also Emma Ah Ho v. Cobb, 62 Haw. 546 , 617 P.2d 1208, 1213 (1980) (discussing the federal APA contracts exceptions). 343 Md. at 338 , 681 A.2d 484 (emphasis added) (footnotes omitted). While the appellees all contend that the circuit court was correct when it ruled that sections of the APA dealing with rule-making are applicable to the Governor of the State, they argue, in the alternative, that even if the APA is inapplicable, the Executive Order is invalid because that order “has no foundation in the Maryland Constitution or statutes.” The MSFCC and its nine members also argue, but Delegate Smigiel and Senator Kittleman do not, that plaintiffs are likely to prevail for still another reason, i.e., because the Executive Order creates a mechanism for price fixing among independent child care providers and therefore violates federal laws prohibiting price-fixing.

Appellants,' not surprising, contend that all appellees’ arguments are without merit and, as a consequence, there is no likelihood that plaintiffs will succeed on the merits. A. Applicability of the APA to the Governor Governor O’Malley contends that, rather than being a unit of the Executive Branch, he is its head. See Maryland Constitution, Article II, section 1, which establishes the Gover ⁴³⁹ nor as the chief executive of the State. The appellees contend that Governor O’Malley is a “unit” in the Executive Branch. 4 As mentioned earlier, for the rule-making sections of the APA to be here applicable, the Governor must be “an officer or unit authorized by law to adopt regulations.” SG § 10-101(i).

The Governor is not authorized by law to issue regulations as defined in section 10 — 101(g) regarding the POC Program. As the appellees point out, there are sections of the Maryland Code that state that the Governor is allowed to issue “regulations” under certain limited circumstances. The “regulation” to which appellees direct our attention appears in the Public Safety Article of the Maryland Code. Those sections are: Section 13-211(a)(1) and (2) (the Governor may adopt regulations concerning issuance of service medals of appropriate designs to officers and enlisted individuals in the organized militia who have completed 5 years or more of continuance service); Section 13-213(a) (“The Governor may adopt regulations that provide for the retirement of officers and enlisted individuals” in the State militia); Section 13-502(a)(l) (“the Governor may adopt regulations to carry out this Title