JAMES M. STUDLEY v. ALASKA PUBLIC OFFICES COMMISSION
Supreme Court No. S-15757
THE SUPREME COURT OF THE STATE OF ALASKA
January 27, 2017
No. 7148
Superior Court No. 1JU-13-00669 CI
Nоtice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.us.
Appearances: Fred W. Triem, Petersburg, for Appellant. Joanne M. Grace, Assistant Attorney General, Anchorage, Janell M. Hafner, Assistant Attorney General, and Craig W. Richards, Attorney General, Juneau, for Appellee.
Before: Stowers, Chief Justice, Fabe, Winfree, Maassen, and Bolger, Justices.
WINFREE, Justice.
I. INTRODUCTION
A self-employed real estate broker ran as a candidate for local elective office. The broker sought a blanket exemption from Alaska‘s financial disclosure requirements to avoid reporting his clients’ identities and the income earned from them. The Alaska Public Offices Commission denied the broker‘s request and assessed a $175 civil penalty for his failure to comply with the candidate reporting requirements. On appeal the superior court upheld the Commission‘s ruling. The broker now appeals the superior court‘s decision, contending the disclosure requirements violate his duty to maintain client confidentiality, infringe his clients’ privacy rights under the Alaska Constitution, and impair several personal constitutional rights. We affirm the superior court‘s decision upholding the Commission‘s ruling.
II. FACTS AND PROCEEDINGS
In 2012 James Studley, a real estate broker operating through a self-owned corporation, ran for a borough assembly seat. As a candidate for public office Studley was subject to Alaska‘s financial disclosure laws, administered and enforced by the Alaska Public Offices Commission. He was required to file a Public Official Financial Disclosure Statement reporting the source of any income exceeding $1,000 earned during the prior calendar year and the nature of the services rendered.1 Because Studley owned the corporation through which he operated, he was self-employed for purposes of the disclosure laws and so was required to report his actual client names as the income “source.”2
Studley submitted his calendar year 2011 disclosure statement in July 2012 and amended it three times. On the line for identifying clients Studley provided no details, but he made notes essentially stating that he was prohibited by law from disclosing the information. Under a general entry he titled “Real Estate Sales” Studley reported “$20,000 - $50,000” in income. During this process Studley contacted the Commission and directed it to four real estate statutes that he said should provide “an exemption from disclosing confidential financial information.”3 Studley stated: “These statutes specifically prohibit release of any financial information regarding my clients or customers without prior written approval or at the direction of the judicial system by court order.”
Campaign disclosure regulations permit a candidate to request a reporting exemption or a waiver.4 The Commission asked Studley to provide the required information for making an exemption request, including the name, mailing address, and email address of thе person making the request; the provision under which the exemption was sought; the reasons for requesting the exemption; and a
In a subsequent exchange Studley provided the Commission a copy of the Alaska Real Estate Commission pamphlet he had referred to as “AS 08-4145” and stated that no information about a client may be disclosed without court order. Studley provided two hypothetical examples to illustrate how disclosing the existence or details of a broker-client relationship might harm a client. Studley‘s first example discussed how a buyer might be able to infer that a couple is divorcing from client disclosures and use that as negotiating leverage in a purchase; his second outlined privacy concerns for a person selling real property while filing for bankruptcy. He did not assert that these were actual client situations he faced.
Later that day Studley sent the Commission another response asserting that he was “not required” to file the disclosures because “I receive my money from my various owned companies and I have listed both of my companies that pay me my income.” He explained that: “all of my clients are with contracts to my companies and not to me personаlly“; “Alaska real estate law requires a court order or subpoena before I (a Broker) can release confidential information“; and “the legal system seems to weigh towards protecting the personal rights of all Alaskans[‘] financial data.”
The following week Commission staff denied Studley‘s exemption request. The Commission explained that the four statutes Studley cited “do not provide any statutory reason that would exempt you as a candidate[] from disclosing real estate transactions that provided you income.” Noting that “the value of real estate transactions is a public process and your involvement and [c]ommissions from this public process [are] ascertainable already from other sources,” the Commission concluded that the transactions did not “fall under a constitutionally protected zone of privacy.” The Commission observed that “the public‘s right to know the sources of your income outweigh[s] any reason you may have to keep these matters private.” The denial also informed Studley that he could appeal the staff‘s decision directly to the Commission‘s appointed members within 30 days.
Studley took no action to appeal. The Commission then sent him a “Notice of Penalty” informing him that civil penalties are assessed for filing incomplete disclosure statements, and that he was subject to fines accrued daily from the decision date until the election date. The penalty was $10 per day, for a total of $350. Studley was given 30 days to pay the penalty or appeal to the Commission.
Studley appеaled the penalty, requesting a hearing and stating that he was “not allowed” to comply with the disclosure laws “on reporting contractual agreements.” At the hearing the commissioners located a real estate statute defining “confidential information”7 and took note of Studley‘s arguments that the required disclosures violated his clients’ constitutional privacy rights.
The Commission later issued a “Final Order” ruling that none of the real estate statutes
Studley requested reconsideration.8 The Commission addressed Studley‘s request at a subsequent meeting, ultimately denying it for failure to provide a basis for reconsideration.
Studley had not been represented by an attorney during his Commission interactions; he retained counsel and filed аn appeal with the superior court after the Commission denied his request for reconsideration. Studley cited the real estate statute establishing a licensee‘s duty to maintain a client‘s confidential information learned during representation,9 and the statutory “confidential information” definition examined at his Commission hearing.10 Studley also asserted that the required disclosures would violate his clients’ constitutional privacy rights and would infringe on several of his own constitutional rights.
The superior court concluded that Studley “has not shown that he was called upon to disclose any confidential information” and that he “never made any specific assertion that any particular client‘s information should be kept confidential.” The court rejected Studley‘s constitutional claims, explaining that “Studley did not demonstrate . . . that release of information about his clients would violate any of his clients’ privacy rights [or that] his rights under any of the[ ] [asserted] constitutional provisions were violated.” Observing that Studley “provided no basis upon which [the Commission] could hаve granted him an exemption,” the court affirmed the Commission‘s decision.
Studley now appeals the superior court‘s decision with two “principal questions” for our review. First, do “real estate regulations that require a broker not to release confidential client information conflict with the [Commission‘s] regulations that demand this disclosure by a broker who runs for public office?” (Emphasis in original.) Second, was Studley‘s “constitutional right of candidacy improperly conditioned upon relinquishment of his constitutional right of privacy and the rights of privacy of his clients[, or u]pon possible loss of his license and of his profession?”
III. STANDARD OF REVIEW
“When the superior court has acted as an intermediate court of appeal, we review the merits of the administrative agency‘s decision without deference to the superior court‘s decision.”11 “[W]e give deference to [an] agency‘s interpretation of a statute] so long as it is reasonable, when the interpretation at issue implicates agency expertise or the determination of fundamental рolicies within the scope of the agency‘s statutory functions.”12 But we will substitute our own judgment for questions of law “when the statutory interpretation does not involve agency expertise, or the agency‘s specialized knowledge and experience would not be particularly probative.”13 “In such cases we ‘adopt the rule of law that is most persuasive in light of precedent, reason, and policy.’ ”14 Questions of constitutional interpretation are
IV. DISCUSSION
A. Candidates Must Report Sources And Amounts Of Income But May Seek An Exemption When Privacy Concerns Arise.
1. Disclosure requirements
Under Alaska law a candidate for elective office, including municipal office, must file a statement disclosing “income sources and business interests.”16 A municipal candidate must disclose this information when declaring candidacy or submitting other required filings.17 The statement must provide “sources of income over $1,000” for the preceding calendar year, including “each source of the income” and the corresponding “amount of income” earned from the source, which “may be stated in a range rather than as an exact amount.”18 A candidate is considered self-employed when the candidate owns a controlling interest in an income-deriving entity, such as a partnership or a corporation.19 A self-employed candidate‘s source of income is the entity‘s individual “client or customer.”20 Disclosure statements are available to the public.21
2. Disclosure exemptions
A candidate required to file a disclosure statement may request exemptions from reporting.22 Among other items, a candidate may request to keep “the name of an individual who was a source of income” or “the amount of income” earnеd confidential.23 “The person requesting any exemption has the burden of proving each fact necessary to show that an exemption . . . is applicable.”24 A candidate may seek an exemption under
B. Studley Did Nоt Demonstrate He Was Entitled To An Exemption.
1. We regard Studley‘s assertions as arguments for an exemption.
Studley argues that candidate disclosure requirements “compete” with his statutory duty as a real estate agent to keep client information confidential, and that reporting the information would violate his clients’ privacy rights under the Alaska Constitution. Studley claims that his right to stand for elective office was conditioned upon the surrender of his right to practice as a real estate broker and that his equal protection rights were violated. He also contends he does not need to show that his clients’ information is confidential on a “case-by-case” basis. We consider these contentions together as an argument that Studley was entitled to a financial disclosure reporting exemption.
As a candidate requesting an exemption it was Studley‘s burden to “prov[e] each fact necessary” to show that a reporting exemptiоn applied.27 Contending that he “cannot know the circumstances of each client, [but] can envision or anticipate circumstances in which disclosure would be detrimental,” Studley offers four “possible examples” where disclosure could be detrimental to a client.28 Studley argues that such hypothetical examples should suffice for an exemption, quoting Falcon v. Alaska Public Offices Commission29 for the proposition that “a case-by-case determination would be excessively burdensome.” Studley offered the Commission no facts pertaining to his оwn situation supporting a reporting exemption.
We conclude that Studley‘s hypothetical scenarios are an insufficient basis for an exemption from the financial disclosure requirement.30 Under
Studley was in the best position to investigate his clients’ circumstances and present facts showing an applicable exemption. But there is no evidence that Studley tried to determine whether any client‘s name or commission amount could be legally protected from disclosure. Studley‘s case is distinguishable from Falcon; that case was decided before an exemption process existed, and real estate transactions have fewer privacy considerations than healthcare.32 Because Studley offered no facts showing an applicable exemption with respect to any of his claims, he failed to meet his burden.
3. Studley did not demonstrate that the required information was uniformly confidential and that disclosure was uniformly prohibited by law.
Studley contends that he is under a statutory duty not to disclose confidential information, including client names and derived earnings. We consider this to be an argument that disclosure of a self-employed real estate agent‘s clients’ information is always prohibited by law for purposes of Alaska‘s election disclosure regime.33
Alaska Statute 08.88.620(4) рrohibits a broker from “disclosing confidential information from or about [a] represented person without written consent, except under a subpoena or another court order, even after termination of the . . . relationship.”34 “[C]onfidential information” is defined in
(A) the licensee acquired during the course of the licensee‘s relationship as a licensee with the person;
(B) the person reasonably expects to be kept confidential;
(C) the person has not disclosed or authorized to be disclosed to a third party;
(D) would, if disclosed, operate to the detriment of the person; and
(E) the person is not оbligated to disclose to the other party in a real estate transaction . . . .35
The legislature‘s conjunctive use of the word “and” indicates that all five conditions must be satisfied to meet the “confidential information” definition.36 Here Studley failed to make the required showing.37
Studley argues that a real estate broker‘s clients reasonably expect their names and the broker-client relationship to be kept confidential because Alaska is a “non-disclosure state” and the information “is not part of the public record.” He further contends that a candidate for elected office cannot be expected to determine whether clients disclosed his representation to third parties, which would render the information non-confidential under
But client names and real estate broker commissions are frequently disclosed to third parties. The Commission observes that disclosure of a client‘s identity “is generally necessary to enter into a purchase contract of sale, execute a deed, and close the transaction.” And during the January 2013 Commission meeting Studlеy admitted that he reveals his commission amount directly to counter parties in real estate transactions. Such disclosures are commonplace in land sale contracts, which generally include “the identity of the buyer and seller, the price to be paid, the time and manner of payment, and the property to be transferred.”38 Much of this information is also disclosed to third parties when real estate transactions are recorded.39
We do not suggest there can never be a transaction where а client‘s identity or the amount of the broker‘s commission is intended to be confidential. But we will not assume that all real estate broker‘s commissions and clients’ identities must be and are always confidential. And because Studley has not shown that any of his clients’ names or his derived income were previously undisclosed to third parties, we affirm the superior court‘s decision that he was not “prohibited by law . . . from reporting” this information to the Commission.40
Studley also argues that the “crux of the problem is that a broker cannot know for certain what information is detrimental to a client, or whether the release of information will not work a detriment to a client in the future.” He lists four “circumstances” in which he “can envision or anticipate” disclosures could be detrimental.41 But as noted earlier hypothetical scenarios do not show that disclosure would be detrimental to a real estate broker‘s actual clients. Alaska Statute 08.88.695(2) plainly requires that a disclosure actually be detrimental for the information to be confidential.42 The mere possibility of
Studley relies on Falcon to argue that his clients’ “sensitive personal information” should be protected “from publiс disclosure.”43 In Falcon we held that physicians did not need to “report[] the names of individual patients” because of the “significant privacy interest” at stake in many physician-client relationships.44 But unlike Falcon where “[e]ven visits to a general practitioner may cause particular embarrassment or opprobrium,” we do not conclude that the disclosure of buyers and sellers of real estate will be similarly detrimental.45 In this case there is no indication of broad classes of clients who must uniformly be protected from election disclosure laws, and
4. Studley has not demonstrated that the disclosures would violate his clients’ constitutional privacy rights.
In addition to his statutory argument Studley contends that disclosing his clients’ names and derived income would violate his clients’ constitutional privacy rights.47 Studley again relies on Falcon to argue that his clients’ personal information should be kept confidential.48
But just as with Studley‘s statutory argument, his constitutional privacy argument fails because he relies solely on generalized hypotheticals. If Studley had any specific client relationships where a constitutional right of privacy was a concern, it was his obligation to bring the facts of those relationships to the Commission‘s attention and request an exemption. But Studley brought no specific requests.
We held in Falcon that disclosing the identities of physicians’ patients could not be required until the Commission promulgated regulations “provid[ing] a method for exempting certain classes of patients . . . or for determining whether certain patients fall within special or sensitive classes.”49 But the broker-client relationship is not like the physician-client relationship we addressed in Falcon, where because of “specialized practice[s], the disclosure of the patient‘s identity also reveals the nature of the treatment, and the particular type of treatment is one which patients would normally seek to keep private.”50 Studley does not present “classes of clients” who might have a common interest in privacy; he instead presents four unique circumstances that do not lend themselves to ready classification and are best dealt with on a case-by-case basis. And the Commission‘s regulations provide Studley with a method of preserving his clients’ confidentiality.51 Because no blanket exemption exists, we affirm the superior court‘s rejection of Studley‘s clients’ constitutional claims.
C. Studley‘s Remaining Personal Constitutional Claims Fail.
Studley also argues that his own constitutional right to privacy would be infringed by the required candidacy financial disclosures. But the required disclosures are neither “personal” nor “intimate,” and Studley, at least with respect to potential conflicts of interest, has “waived his right to privacy by
Studley also asserts that he has been “whipsawed” by “dueling” requirements, arguing that his statutory duty of confidentiality irreconcilably competes with the candidate disclosure laws, setting an “unconstitutional condition” that impairs his constitutional right of cаndidacy. He contends that his right to stand for election is infringed because abiding by the disclosure requirements could subject him to discipline, suspension, or loss of his broker‘s license. Studley argues that this violates his equal protection and substantive due process rights and acts as a barrier to his candidacy.
But the constitutional rights of self-employed real estate brokers like Studley who run for public office are protected. A broker may stand for elective office by either making the required disclosures or proving an exеmption applies.53 And Studley‘s right of candidacy was not impaired; he stood for election to the borough assembly and could have avoided any penalty by following the Commission‘s procedures. Studley‘s remaining personal constitutional arguments are all without merit. We affirm the superior court‘s decision on those issues.
V. CONCLUSION
We AFFIRM the superior court‘s decision affirming the Commission‘s final order and civil penalty.