Wooley v. State Farm Fire and Cas. Ins. Co.Wooley v. State Farm Fire and Cas. Ins. Co.
Charles C. Foti, Jr., Attorney General, Jill L. Craft, Assistant Attorney General, Colleen Noel Wertz, Assistant Attorney General; Charles H. Braud, for respondent.
M. Dwayne Johnson, Shannan Sweeney Rieger, Charles S. McCowan, Jr., Baton Rouge, for amicus curiae Louisiana Chemical Association.
Alfred William Speer, II, Thomas Taylor Townsend, Natchitoches, for amicus curiae Louisiana Legislature.
Mary Florence Quaid, Baton Rouge, Alfred William Speer, II, for amicus curiae Louisiana House of Representatives.
Jerry J. Guillot, Baton Rouge, Glenn Alan Koepp, for amicus curiae Louisiana Senate.
Paul R. Baier, for amicus curiae Paul R. Baier.
KIMBALL, Justice.
At issue in this appeal is the constitutionality of the provisions of Act 739 of 1995 and Act 1332 of 1999, which, inter alia, create the Division of Administrative Law (hereinafter “DAL“), transfer the authority to conduct adjudications for certain agencies to the DAL, provide that the agencies shall have no authority to override the decision or order of the administrative law judge (hereinafter “ALJ“) employed by the DAL, and preclude the
FACTS AND PROCEDURAL HISTORY
In February 1996, State Farm Fire and Casualty Insurance Company (hereinafter “State Farm“) filed a Rental Condominium Unitowners’ policy form (hereinafter “RCU form“) with the Commissioner of Insurance (hereinafter “Commissioner“) for his review and approval pursuant to
State Farm then requested an adjudicatory hearing which was subsequently conducted by an ALJ employed by the DAL. After a hearing held on May 18, 1998, the ALJ specifically found that the RCU form complied in wording and meaning with the applicable law and issued a decision and order in favor of State Farm, ordering the Department of Insurance to approve the RCU form as submitted by State Farm.
Thereafter, the Commissioner filed a petition for judicial review of the ALJ‘s order in the Nineteenth Judicial District Court. In his petition, the Commissioner asserted the order of the ALJ was erroneous and requested that the district court uphold the Commissioner‘s decision to disapprove the RCU form submitted by State Farm. State Farm subsequently filed a peremptory exception of no right of action, arguing that the Commissioner had no right to judicial review of the ALJ‘s ruling based upon the recently enacted Act 1332 of 1999, which was codified by
The Commissioner appealed. The court of appeal affirmed the judgment of the district court, finding that the district court committed no error in granting the exception of no right of action and, further, that it did not err in dismissing the Commissioner‘s suit without allowing him to amend his petition to assert the unconstitutionality of the Act. Brown v. State Farm Fire & Cas. Co., 00-0539 (La.App. 1 Cir. 6/22/01), 804 So.2d 41. In reaching its decision, the court of appeal reasoned that the Department of Insurance is a juridical person, and, as such, does did not have the same rights as an individual:
Louisiana Constitution art. 1, § 22 guarantees the Department of Insurance through its commissioner an adequate remedy by due process of law and justice for injury to the Department or its rights. As a matter of law and of Constitutional interpretation, however, we cannot say the legislature has afforded the Department of Insurance an inadequate remedy when the Department as a juridical person has no more rights than the law allows. We do not believe the Louisiana Constitution imbues a juridical person, the Department of Insurance through its commissioner, with the same constitutionally protected rights reserved to the individual and for the good of the whole. Seeart. 1, § 1 andart. 1, § 24 of theLouisiana Constitution (1974). The Louisiana Constitution provides inart. 1, § 1 that government is founded on the will of the people alone. The Legislature, speaking for the people, has elected to limit the right to seek judicial review by the Department of Insurance under the circumstances of this case.
Id. at p. 6, 804 So.2d at 45-46 (footnote omitted).
The Commissioner also argued that he should have been allowed to amend his petition to challenge the constitutionality of
While the Commissioner alleges he should have been allowed to amend his petition to allege a usurpation of the rights of the judiciary, nothing in the record or briefs explain how he could successfully amend a petition for judicial (appellate) review to cumulate or substitute some type of ordinary proceeding, nor is the permissibility of such amendment apparent to this court....
Where it is not apparent how the grounds of State Farm‘s objection of no right of action can be removed by amendment, we cannot conclude the trial court erred in failing to allow the Commissioner to amend his petition to allege the unconstitutionality of the LAPA. We are not obligated to speculate on how the Commissioner‘s petition might be successfully amended. We also observe that the Commissioner appears to have an adequate remedy at law in this regard by filing a declaratory judgment action or some other type proceeding.
Id. at pp. 7-8, 804 So.2d at 47.
This court denied the Commissioner‘s application for a writ of certiorari. Brown v. State Farm Fire & Cas. Co., 01-2504 (La.12/7/01), 803 So.2d 37.
Thereafter, on December 10, 2002, the Commissioner filed the instant “Petition for Preliminary and Permanent Injunctions and Petition for Declaratory Judgment” against State Farm, the Honorable Murphy J. Foster in his capacity as Governor of Louisiana (hereinafter “Governor“), Anne Wise in her capacity as Director of the Division of Administrative Law and Allen Reynolds in his capacity as Director of the Department of State Civil Service (hereinafter jointly “DAL“). Essentially, the Commissioner sought preliminary and permanent injunctive relief to prohibit enforcement of Act 739 of 1995 and Act 1332 of 1999, to quash and enjoin the ALJ ruling approving the RCU policy, and to bar State Farm‘s use of the RCU policy until it complies with the law and has been approved by a lawful order of the Commissioner or a final decision has been rendered on the merits by the judicial branch. The Commissioner also sought a declaratory judgment that Act 739 of 1995 and Act 1332 of 1999 are unconstitutional. Specifically, the Commissioner alleged that Act 739 of 1995 is unconstitutional in that it: (1) violates the separation of powers article by vesting judicial power in executive branch employees; (2) violates
After various hearings and a trial on the Petition for Preliminary and Permanent Injunctive Relief and Declaratory Judgment, the district court granted permanent injunctive relief and entered declaratory judgment in favor of the Commissioner. The judgment of the district court states, in pertinent part:
IT IS HEREBY ORDERED, ADJUDGED AND DECREED, that a DECLARATORY JUDGMENT is rendered in favor of Petitioner and against Defendants in the following particulars:
Declaratory Judgment is hereby rendered pursuant to
La. C.C.P. Art. 1871 through1883 , in favor of Petitioner and against the Defendants declaring Act. No. 739 of the 1995 Regular Session of the Louisiana Legislature unconstitutional, null and void in that the Act violates the separation of powers article,Article II, Section 1 andSection 2 , which expressly provides that the powers of government are divided among three branches: the executive, the legislative and the judicial branch; and further, that no branch, nor any person holding office in one of them, shall exercise any of the power belonging to the other branches, by vesting judicial power in executive branch employees; and further, the Act violatesArticle V, Section 22 , which mandates an elected judiciary, by providing for the hiring of non-elected judges; by providing that such executive judges are civil service employees and as such cannot be removed from their position except for cause as provided for in the laws governing such employees and by providing that the opinions rendered by such executive judges are specifically exempt from serving as grounds for removal by the appointing authority thereby rendering such executive judges completely and totally unaccountable to the electorate for the decisions they render even as to matters involving questions of law and public policy; and further, the Act divests the district courts of original jurisdiction in violation ofArticle V, Section 16 by creating a new and independent judiciary within the executive branch without any limitation on the matters which may be heard by the civil service employees employed as judges, more particularly, the Act divests the judicial branch of its inherent power to decide matters involving questions of law; and further, the Act violatesArticle V, Section 1 , which provides that the judicial power of the State is to be vested in the Supreme Court, Courts of Appeal, District Courts and other courts as may be authorized by the constitution, by the unfetteredtransfer of judicial power to the executive branch, and the Act further violates Article V, Section 1 by the creation of a court which is not “a court authorized by the constitution“; and further, the Act confers power vested in an elected official and holder of a constitutionally created office to a non-elected administrative law judge. The divestiture of power delegated to the Commissioner of Insurance is a violation ofArticle IV, Section 1B which provides in pertinent part that the functions, powers, duties and responsibilities allocated by the constitution to the Commissioner of Insurance shall not be affected or diminished except as authorized byArticle IV, Section 20 , which does not provide for the transfer of any of the powers of the Commissioner of Insurance to a division of the Department of State Civil Service. The power of the Legislature to enact laws is controlled by the parameters set forth in the Constitution. By enacting Act 739, the Legislature has usurped powers belonging to the judicial branch and transferred those powers to the executive branch. The Legislature is not empowered to enact acts that diminish the power of a co-equal branch of government. Therefore, Act 739 is ultra vires, and any actions taken pursuant to its provisions are null and void and of no effect.Declaratory Judgment is hereby rendered pursuant to
La. C.C.P. Arts. 1871 through1883 in favor of Petitioner and against the Defendants declaring that Act No. 1332 of the 1999 Regular Session of the Louisiana Legislature is unconstitutional, null and void in that the Act violates the separation of powers article,Article II, Section 1 andSection 2 , which expressly provides that the powers of government are divided among three branches: the executive, the legislative and the judicial branch; and further, that no branch, nor any person holding office in one of them, shall exercise any of the power belonging to the other branches, by vesting judicial power in executive branch employees; more particularly, the Act is in violation ofArticle II, Section 1 because it does not provide for a check on the powers exercised by the executive court, by making its rulings non-reviewable by the judicial branch, in those circumstances involving a ruling that is adverse to the agency-party; and further, the Act is in violation ofArticle II, Section 1 and2 because it diminishes the power of the judicial branch to decide matters involving questions of law; and further, the Act is in violation ofArticle V, Section 2 insofar as it precludes the judicial branch from exercising its inherent supervisory power to issue writs of certiorari and review, if the person seeking review of a ruling is the agency-party to the administrative proceeding, and precludes the judicial branch from issuing such writs ex proprio motu, impinging on the inherent power of the judicial branch to exercise oversight over inferior tribunals; and further the Act is in violation ofArticle I, Section 2 ,Article I, Section 3 andArticle I, Section 22 in that it denies the citizens and insurance-buying consumers of Louisiana, through the party duly elected to represent and protect their interests and to take all steps necessary thereto, access to the courts, a right not denied to foreign insurers. Therefore, Act 1332 is utlre vires [sic], and any actions taken pursuant to its provisions are null and void and of no effect.Declaratory Judgment is hereby rendered pursuant to
La. C.C.P. Arts. 1871 through1883 in favor of Petitioner and against the Defendants declaring that the ruling of the AdministrativeLaw Judge, Division of Administrative Law is ultre vires [sic], null and void and of no effect having been rendered by an entity without constitutional authority to make final, binding decisions on questions of law and public policy; and further, it is hereby declared, adjudged and decreed that the phrase “this entire policy shall be void” and the phrase “you or any other insured” in lieu of “the insured” as applied to all perils and coverage sections is contrary to law, more specifically, LSA-R.S. 22:636.2 ,LSA-R.S. 22:691E andLSA-R.S. 22:691.2 in that such language is less beneficial to the insured.IT IS FURTHER ORDERED, ADJUDGED AND DECREEDED [sic] that PERMANENT INJUNCTIVE [sic] RELIEF is granted in favor of the Petitioner and against the Defendants in the following particulars:
Defendants are hereby permanently restrained, enjoined and prohibited from carrying out, implementing, enforcing, and/or utilizing the provisions of Acts 1995, No. 739 and Act 1999, No. 1332 as regards matters arising from the Office of the Commissioner of Insurance and/or Louisiana Department of Insurance, insofar as the Division of Administrative Law is without authority to interpret laws governing the regulation of insurance, and further is without authority to order the Commissioner and/or the Department of Insurance to comply with its interpretations of law and/or public policy in that such decisions are to be made by persons who are accountable to the electorate and in the final instance by the judicial department, which is the branch of government vested by
Article I of the Louisiana Constitution with the power to declare what the law is.IT IS FURTHER ORDERED, ADJUDGED AND DECREEDED [sic] that the Order of the Administrative Law Judge, Division of Administrative Law finding as a matter of law that State Farm‘s RCU policy is a “standard fire policy” and ordering the approval of the policy is hereby quashed and permanently restrained and enjoined.
IT IS FURTHER ORDERED, ADJUDGED AND DECREEDED [sic] that Defendant, State Farm, is hereby permanently restrained, enjoined and prohibited from issuing, delivering or otherwise using the RCU form in Louisiana until such policy has the policy [sic] is brought into compliance with the law and has been approved by order of the Commissioner of Insurance as provided for in
LSA-R.S. 22:620 .
In oral reasons for judgment, the district court explained its judgment as follows:
On June 22, 2001 the Court of Appeal, First Circuit issued a ruling finding that pursuant to Acts 1999, No. 1332, amending and reenacting
LSA-R.S. 49:964 and49:992 , the [Commissioner] was an agency party to the proceeding before the [DAL] and therefore did not have a right to seek judicial review of an adverse ruling, even though those matters involved only questions of law, and that the [Commissioner] had adequate remedy at law in that he could file a declaratory judgment challenging the statutory scheme creating the [DAL] and request an order enjoining the order of the [ALJ] to approve the State Farm RCU policy.In its ruling, the Court of Appeal, First Circuit noted that it was within the legislative scheme to allow a juristic person such as State Farm the right of appeal but to deny the agency represented by a duly elected officer the right of appeal, directing its intent to put finality to the proceeding.
The evidence discloses and the court finds that Act 739 was adopted in the 1995 Regular Session of the Louisiana Legislature. The Act allowed the [Governor] to appoint a Director, defendant herein Ann Wise, and authorized her to employ administrative law judges. There was no requirement that the administrative law judges have expertise or experience with respect to any area of regulation. The court further finds that the administrative law judges, of which there are thirteen, were not prior to their appointment required to be active or retired judges nor active or retired attorneys but were subject to all of the rights and benefits and emoluments of employeeship under the civil service rule after a two-year probationary period.
The court further finds that of the thirteen administrative law judges duly appointed, that nine were, in fact, or had been attorneys. Four, however, had been employed by the Department of Public Safety and Corrections as law enforcement officers, not having law degrees or other qualifications with respect to dispute resolution, arbitration, mediation or counseling. They were, nonetheless, “grandfathered” in by the executive.
Also with respect to Section 992 of the Act, with the exception of certain expressly named agencies, all adjudicatory functions of the various state agencies were transferred to the [DAL] effective on October 1, of 1996, divesting each such agency of its authority to issue final decisions or orders supplanting their authority to override the decision of an administrative law judge employed by the [DAL].
The Louisiana legislature enacted Act 1332 in 1999 to bar an agency party to a proceeding held before the [DAL] from seeking judicial review of an adverse ruling, including cases which only involve questions of law.
As part of the executive branch, an administrative agency is responsible for implementing and enforcing specific areas of law within its expertise, as well as final adjudicatory decisions or orders involving elements of policy making and exercising the discretion committed to the administrative agency in pursing the goals for which it is responsible.
Consequently, it is sometimes necessary for the exercise of a quasi-judicial power within the executive branch to be based upon a need for an agency‘s specialized knowledge and expertise in the area, subject to its regulatory jurisdiction. The agency has the full authority to delegate the conducting of adjudicatory hearings to a subordinate officer because the agency head is responsible for making the ultimate decision.
By enacting Act 739 of 1995, the legislature created an insular body of non-elected judges within the civil service department in the executive branch with the authority to render final adjudicatory decisions or orders with respect to regulatory law where they had no specialized knowledge, expertise or experience, nor were they accountable to the electorate for the decisions they made in cases before them, all without judicial review in the instances where the decisions were adverse to the agency.
The court finds, having conducted a hearing, a trial, and having, at the request of the [DAL], visited that agency, that the [DAL] judges hold themselves out as judges. There is a judge‘s entrance. Some of them appear in the Baton Rouge Bar Association booklet in robes. They address each other as judges, and they exercise power that is reserved to the judiciary without being
subject to the Supreme Court in its judicial functions, and without being subject to the judicial counsel for its quasi-judicial functions. They are not accountable to the public because they have not been elected, but are under the tutelage and direct supervision of the governor and his other subordinates.
This court further finds that the officer of the [Commissioner] is, indeed, a constitutionally created office vested with the power and obligation to regulate the business of insurance, which has been defined as effected with the public interest. He is required and takes all necessary steps to protect the public interest.
The court further finds that pursuant to the decision of an [ALJ], the commissioner was ordered to approve a policy that contained, in his view, provisions in violation of the law contrary to his sworn duty to uphold and administer the provisions of the code to protect the public interest.
Defendants have appealed directly to this court.
PRELIMINARY MATTERS
In order to properly analyze the many issues presented by this case, we must first discuss the creation of the office of the Commissioner of Insurance, and the history of the Administrative Procedure Act and ALJs.
The Commissioner of Insurance
Prior to 1956, the Secretary of State was the ex-officio insurance commissioner of Louisiana. Employers-Commercial Union Ins. Co. v. Bernard, 303 So.2d 728, 730 (La.1974). The 1921 Constitution, however, gave the legislature the power to create a separate office for the insurance commissioner.
By Act 609 of 1960, the legislature again proposed a constitutional amendment to add the Commissioner of Insurance to the constitutional elective offices. Id. at 113. This time the amendment was approved by the voters and the Commissioner of Insurance was created as a constitutionally elective officer in the executive branch at that time. Thus,
The executive department shall consist of a Governor, Lieutenant Governor, Comptroller, Treasurer, Secretary of
State, Register of the Land Office, Commissioner of Agriculture and Immigration, Commissioner of Conservation, Commissioner of Insurance and Custodian of Voting Machines....
(Emphasis added). The 1921 Constitution provided that the legislature could not consolidate the office of the Commissioner of Insurance with any other office and stated that the Commissioner of Insurance was to be elected for a term of four years.
At the Constitutional Convention of 1973, the delegates determined to propose to the voters that the office of the Commissioner of Insurance be continued as a constitutional elective office. There was strenuous debate, however, on the issue of whether the duties and functions of the Commissioner should be specified in the new constitution, or whether the duties and functions should continue to be only statutorily defined. See Records of the Louisiana Constitutional Convention of 1973: Convention Transcripts, Vol. VI, pp. 644-63. For example, delegates rejected the following proposal:
Section 11. Powers and Duties of the Commissioner of Insurance
Section 11. There shall be a department of insurance headed by the commissioner of insurance, who shall administer the insurance code. The department shall exercise such functions and the commissioner shall have such other powers and perform such other duties as may be authorized by this constitution or provided by statute.
Id. at p. 644. Delegate Stagg explained the several amendments that were to be offered as follows:
The difference between this proposal and the reason why there are three amendments before you instead of just one, is because there is a philosophical dispute going on among those who propose the amendments. The other sets of amendments gives to the insurance commissioner the responsibility for regulatory and other functions. A third one says that he shall administer the rate-making and regulatory functions related to insurance. This is the difference between or among the amendments. One of them permits the insurance commissioner simply to administer the insurance code and that the regulatory and rate-making matters are carried on like they are now by the casualty and surety rating bureau. This convention will have to decide how we shall administer the insurance because the proposers of these amendments have not agreed.
Id. After considerable debate on the above proposal, it was rejected, in part because many delegates believed the amendment did not give sufficient rate-making power to the Commissioner, while other delegates apparently believed the wording contained in the proposal was too broad. Id. at pp. 644-49. Two other proposals that more specifically enunciated the powers of the Commissioner were similarly rejected after lengthy debate. Id. at pp. 649-53, 657-61. One of the rejected proposals would have given the Commissioner the constitutional authority to “administer the Insurance Code” and made him responsible “for all regulatory and other functions of the state relating to insurance and all of its phases.” Id. at p. 649. Another of the rejected proposals would have given the Commissioner the authority to “administer the insurance
The proposal that was finally adopted by the delegates, and ultimately approved by the voters, stated:
Section 12. Powers and duties of the commissioner of insurance
Section 12. There shall be a department of insurance headed by the commissioner of insurance. The department shall exercise such functions and the commissioner shall have such powers and perform such duties as may be authorized by this constitution or provided by statute.
Id. at p. 654. In explaining this amendment, delegate Casey stated:
Let‘s lay it on the line that as this amendment is present right now, today, the legislature and the legislature alone, unless we put something else someplace in this constitution, will enunciate those duties and functions of the commissioner of insurance and will enunciate the functions of the department of insurance. That is what the law is today and has been previously and frequently mentioned, that really is all that today‘s constitution does is establish a commissioner of insurance and says he‘s elected for four years. The entire functions are set forth only by statute and by law. I submit to you that this is the simplest and I would hope the best method of accomplishing this end. If you wish, on the other hand, that the commissioner of insurance would have regulatory functions, let it be clearly understood that you don‘t vote for my amendment.
Id. The debate continued, in part, as follows:
Delegate Arnette: So, if your amendment is adopted, what we‘ve got is a situation of a statewide elected official with no power. Is that as it is now? ...
Delegate Casey: Mr. Arnette, if this amendment is adopted, it merely says that the legislature by statute will establish the duties and functions of that officer and of that department. This is done in many, many other cases, that we are giving to the legislature the prerogative to establish the duties and functions of certain activities or agencies of the state.
*
Delegate Juneau: Mr. Chairman and fellow delegates ... Do you want to elect a commissioner of insurance who really doesn‘t have the true responsibility with regard to insurance and that‘s rates? That‘s what it‘s really all about.... If you adopt the amendment, you have in essence a commissioner of insurance who really doesn‘t have the authority.... We‘ve got them hanging in space with no authority.
*
Delegate Jenkins: Mr. Chairman, delegates, ... Well, our theory is if we give all of this power to one man, he will, as many people have said, be an absolute czar. He will be allowed to run on a plank promising to the people all sorts of things which he can deliver only by seriously injuring or curtailing the services of this occupation, this profession. You need in something with such tremendous power some system of checks and balances.... Let‘s have a commissioner of insurance elected by the people, but let‘s give the legislature some authority to alter his functions and responsibilities as changing times and new information dictate, rather than once and for all setting him up as a czar over this industry.
Consequently,
There shall be a Department of Insurance, headed by the commissioner of insurance. The department shall exercise such functions and the commissioner shall have powers and perform duties authorized by this constitution or provided by law.
The Administrative Procedure Act and ALJs
Congress enacted the federal Administrative Procedure Act (hereinafter “APA“) in 1946. I KENNETH CULP DAVIS & RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 1.4, at 14 (3d ed.1994). The major effects of the APA were threefold: (1) to fulfill the political will for reform; (2) to improve and strengthen the administrative process; and (3) to maintain the basic limits on judicial review of administrative action. KENNETH CULP DAVIS, HANDBOOK ON ADMINISTRATIVE LAW § 2, at 9 (1951). The APA represented a compromise between those who believed the role of the hearing officer should be an integrated part of the process of executive branch enforcement, and those who believed hearing officers should follow a more formal judicial model. Jay S. Bybee, Agency Expertise, ALJ Independence, and Administrative Courts: The Recent Changes in Louisiana‘s Administrative Procedure Act, 59 La. L.Rev. 431, 443 (1999). Federal ALJs are under the control of the agencies that hired them. Id. at 444.
In 1961, the National Conference of Commissioners on Uniform State Laws published the Model State Administrative Procedure Act, which was based upon the federal APA. Id. Louisiana‘s Administrative Procedure Act was adopted in 1967 and is based on this 1961 Model State Act. Id. at 444-45. The 1961 Model State Act made no recommendations regarding ALJs; consequently, Louisiana‘s first enactment of the LAPA Act included no reference to hearing officers. Id. Thus, prior to the recent amendment at issue, the original role of ALJs in the LAPA was implicit rather than explicit. Id. at 452. Additionally, ALJs were employed by their respective agencies in the executive branch of our government and worked exclusively for that agency. Id. at 431.
In 1995, the legislature enacted Act 739, which created the Division of Administrative Law in the Department of State Civil Service. The Act provides that the DAL shall commence and handle all adjudications in the manner required by the LAPA, that the ALJ shall issue the final decision or order and the agency shall have no authority to override the decision or order, that the governor shall appoint, and the Senate confirm, a director for DAL, who, in turn, shall employ the ALJs, and that the current ALJs employed by the various affected agencies shall be transferred to and employed in the DAL. Additionally, Act 1332 of 1999 amended the law to provide that no agency or official thereof shall be entitled to judicial review of an adjudication.
DISCUSSION
As outlined above, it is the two recent amendments that are alleged to be, and have been declared, unconstitutional. Statutes, of course, are presumed constitutional and the constitutionality of a statute should be upheld whenever possible. State Civil Serv. Com‘n v. Department of Pub. Safety Dir., 03-1702, p. 7 (La.4/14/04), 873 So.2d 636, 641. Because it exercises the entire legislative power of the state, the legislature is permitted to
Initially, we note that the judgment of the district court appears to have declared Act 739 of 1995 unconstitutional in its entirety. While this Act created the DAL, specified that the DAL shall commence and handle all adjudications as prescribed by the LAPA, and transferred certain employees who had previously handled adjudications from affected agencies to the DAL, it did not alter the types of decisions made by executive branch employees or the manner in which the adjudications themselves are conducted.5 A review of the history of the LAPA and ALJs in Louisiana and this court‘s prior jurisprudence reveals that the legislature‘s creation of a system of administrative law, and its ALJs, to adjudicate regulatory matters is not per se unconstitutional. Similarly, we find that the creation of the DAL and its central panel of ALJs is not per se unconstitutional.
The district court declared Act 739 unconstitutional on various grounds, including the fact that the Act violates
A distinct line among the powers of the judicial, legislative, and executive branches has never been drawn with precision. State v. Umezulike, 03-1404, p. 4 (La.2/25/04), 866 So.2d 794, 797; Safety Net for Abused Persons v. Segura, 96-1978, p. 4 (La.4/8/97), 692 So.2d 1038, 1041.
The authority of ALJs is provided by
D. The administrative law judge shall have the authority to:
(1) Regulate the adjudicatory proceedings assigned to him.
(2) Issue such decisions and orders as are necessary to promote a fair, orderly, and prompt adjudication.
(3) Exercise those powers vested in the presiding officer in the Administrative Procedure Act.
(4) If the parties do not object, conduct adjudications or conferences in person or by telephone, video conference, or similar communication equipment, and administer oaths in such proceedings.
(5) Continue an adjudication in any case when a party or subpoenaed necessary witness has been called to service in the uniformed services as defined in
R.S. 29:403 , including but not limited to a proceeding pursuant toR.S. 32:667 .
In the instant case, the ALJ conducted an adjudication to determine whether State Farm‘s RCU policy form complied with applicable sections of the Insurance Code and issued a decision and order granting relief to State Farm and ordering the Department of Insurance to approve the RCU policy form as submitted by State Farm. It does not appear that the ALJ exercised any authority beyond that granted him by
A quasi-judicial function is one that involves the use of some discretion, but is of a different type than a judicial decision. Hood Motor Co., Inc. v. Lawrence, 320 So.2d 111, 115 n. 4 (La.1975).
The exercise of quasi-judicial functions does not make ALJs Article V judges. See Albe at p. 8, 700 So.2d at 828. The facts so heavily relied upon by the district court that the ALJs are often referred to as judges, that some wear robes, and that they use a “judge‘s entrance” does not automatically vest them with the exercise of judicial power. The testimony in the record reveals that ALJs do not have the power to enforce their decisions and orders, a power that unquestionably lies in Article V courts. The ALJs simply are not constitutionally allowed to exercise the judicial power of the state and Act 739 does not impermissibly attempt to authorize the exercise of judicial power. The ALJs make administrative law rulings that are not subject to enforcement and do not have the force of law.
Turning to the issue of whether Act 739 divests the district courts of original jurisdiction, we find that because the approval of insurance policy forms is not a civil matter within the meaning of
In Moore v. Roemer, this court addressed the constitutionality of an Act that vested in administrative hearing officers the “exclusive original jurisdiction” to adjudicate workers’ compensation claims. 567 So.2d at 77. We concluded the Act was an unconstitutional divestiture of the district courts’ original jurisdiction over all civil matters, in part because “[w]orker‘s compensation claims, from their inception through the Constitutional Convention of 1974 were brought at the district court level.” Id. at 80. We reasoned that because workers’ compensation claims had always been brought in the district courts, the delegates and the voters knew that workers’ compensation was a civil matter over which the district courts had original jurisdiction. Id. Thus, we concluded that claims for workers’ compensation were civil matters contemplated by
Similarly, in Pope v. State, this court was faced with the issue of whether a Department of Public Safety and Corrections
In contrast to the two cases discussed above, in American Waste we were faced with the issue of whether the legislature could validly provide that appeals of final decisions or orders of the Department of Environmental Quality (hereinafter “DEQ“) in a permit or enforcement action would bypass the district court to lodge directly in the court of appeal. 588 So.2d at 368. In concluding that the legislative provision was constitutionally valid, we disagreed with the court of appeal‘s conclusion that the statute at issue was in contravention of the grant of original jurisdiction in all civil matters to the district courts. Id. We found that DEQ determinations are not civil matters within the meaning of
In the instant case, we conclude that adjudications relating to the approval of insurance policy forms, including a determination of whether a form violates the law pursuant to
Turning now to the issue of whether the Act violates the constitutional mandate of an elected judiciary, we find that because the executive branch ALJs employed by the DAL do not exercise
Certain judicial power may be delegated without any abdication of the judge‘s fundamental responsibility for deciding cases. Delegation of power to conduct evidentiary hearings and to prepare proposed findings of fact and recommendations for disposition based on the evidence and the arguments is not inconsistent with the constitution and laws which vest the judicial power in judges of enumerated courts, as long as the judges retain the responsibility for making ultimate decisions in the case.
398 So.2d at 1105 (emphasis added). Similarly, in O‘Reilly, we stated that the provision at issue clearly “allows the commissioner to exercise a portion of judicial power restricted by
In addition to the grounds discussed above, the district court found that “[t]he divestiture of power delegated to the Commissioner of Insurance is a violation of
It is also submitted that the enactment of
In an adjudication commenced by the division, the administrative law judge shall issue the final decision or order, whether or not on rehearing, and the agency shall have no authority to override such decision or order.
The enactment of this provision represents a change in our law. It has been explained by a former professor of law as follows:
This is a remarkable provision. It makes an ALJ‘s decision unreviewable by the agency itself. This means, in contrast to our years of believing that executive agencies should appropriately promulgate and enforce regulations, the ultimate power to interpret agency regulations and to enforce or not enforce laws and regulations has been turned over to the state‘s ALJs. No longer do agency heads have the ability to reverse — under any circumstances, with or without explanation — an ALJ‘s decision.
Jay S. Bybee, Agency Expertise, ALJ Independence, and Administrative Courts: The Recent Changes in Louisiana‘s Administrative Procedure Act, 59 La. L.Rev. 431, 455 (1999) (footnotes omitted). While we agree that this particular provision effectuates a change in the law, there is no indication of a constitutional impediment to the change. Our constitution allows the legislature to define the powers and duties of the Commissioner and it has evidenced a clear intent to make the Commissioner‘s decision subordinate to that of the ALJ. The legislative history of Act 739 reveals that the legislature desired to transfer the ALJs previously employed by the various agencies to a central division to remove the ALJs from the direct influence of the agency heads and to give them a measure of independence. The legislature believed it unlikely that ALJs could render impartial and independent decisions while depending on their agencies for their livelihoods.
As mentioned previously, the district court declared Act 739 unconstitutional on a myriad of grounds, most of which are
The district court similarly declared Act 1332 of 1999 unconstitutional on several grounds, including separation of powers. Act 1332 amended and reenacted portions of the LAPA to provide that no agency or official thereof, or other person acting on behalf of an agency or official shall be entitled to judicial review of an adjudication proceeding. The Commissioner asserts that this Act is unconstitutional because it vests civil service employees of an executive agency with the power to make the initial interpretation of law, and then precludes judicial control or oversight. The Commissioner contends that it is the ultimate function of the courts to determine the legality of an ALJ‘s administrative decisions.
A plain reading of Act 1332 makes it clear that no agency or official is entitled to judicial review of an adjudication proceeding. The legislative history of this provision reveals that it was enacted to promote fairness to prevailing private litigants and prevent them from having to compete against the power and financial resources of the state. After much consideration, we conclude that under the particular factual circumstances presented in this matter, the Commissioner has not shown Act 1332 to be unconstitutional.11
Without a right of access to the courts pursuant to
In Louisiana Riverboat Gaming Commission, this court was faced with the question of whether the Gaming Enforcement Division of the Louisiana State Police (hereinafter “the Division“) had the right to seek judicial review of a decision of the Louisiana Riverboat Gaming Commission (hereinafter “the Commission“) under the applicable statutory provision. 94-1872 at p. 1, 655 So.2d at 293. Specifically, the case involved an application to the Division for a license to conduct gaming activities on a riverboat. The Division denied the request. Pursuant to statutory authority, the applicant appealed the Division‘s denial of its application to the Commission, which reversed the Division‘s decision and ordered the Division to issue the requested license. This court ultimately determined the legislature did not intend for the Division to have the right to appeal decisions of the Commission. Id. at p. 20, 655 So.2d at 303. In reviewing administrative law principles and the rights of agencies to appeal adverse decisions of another agency, we quoted the following from Pritchard v. State, Division of Vocational Rehabilitation, 540 P.2d 523, 529 (Wy.1975):
We recognize the concept which holds that if an “agency” is given a specific right to appeal to the court, such a grant is within the power of the legislature and must be honored. But there must be an applicable appeal procedure spelled out in the statute. It cannot be inferred and, as here, where the statute specifically excludes an agency‘s right of appeal, there cannot be any question but that the agency enjoys no such appellate privileges.
Louisiana Riverboat Gaming Com‘n at p. 12, 655 So.2d at 299. Because the legislature elected not to give the Division the right to appeal decisions of the Commission, we declined to create such a right. Id.
Following the established principle that appeals by state agencies of decisions made by other agencies are disfavored in the absence of a statutory right of appeal, we conclude that the Commissioner is not entitled to appeal the decision of the ALJ. We see no constitutional impediment to the legislature‘s decision to deny such an appeal right to the Commissioner. We have already recognized that the ALJ did not exercise judicial power when he interpreted the law relating to a traditionally regulatory matter, and the Commissioner has not shown how the lack of a right to appeal changes the nature of the power exercised by the ALJ. We discern no violation of the requirement of separation of powers. Instead of viewing the Commissioner‘s lack of a right to appeal the ALJ‘s adverse decision as a usurpation of judicial power, we view it as a lack of procedural capacity on the part of the Commissioner. The legislature has chosen to deny the right of judicial review to one executive branch office when another executive branch office has ruled against it. Essentially, the legislature has chosen to allow the ALJs to adjudicate, and in some cases to finally adjudicate, various matters concerning the insurance industry in this state and to reduce the Commissioner‘s ability to regulate insurance by prohibiting him from overriding the ALJs decision or order and from seeking judicial review of an
We note, however, that the Commissioner is not without the prospect of a judicial remedy. Nothing in the Acts at issue evidences an intent to deprive the Commissioner of the right to seek a declaratory judgment on the proper interpretation of our insurance laws. Thus, it is possible that the Commissioner could bring an action for declaratory judgment under a district court‘s original jurisdiction when he believes a legal issue was wrongly decided by an ALJ. While it is questionable whether he could change the result of the underlying adjudication, it appears he may be entitled to a declaratory judgment regarding the legal controversy at issue. The district court, acting under its original jurisdiction, would not, of course, owe any deference to the ALJ‘s decision and order on the merits of the underlying matter. In contrast, however, all ALJs owe deference to judgments of the courts and must apply the law on the merits of the underlying matter as interpreted by the courts once they rule on the issue. The Commissioner has the additional possible remedy of petitioning the legislature for redress.
We recognize that the district court declared Act 1332 unconstitutional on several grounds. While we have discussed the most important grounds in detail, we have thoroughly considered each of its grounds and the arguments of the Commissioner and we find no merit to them. Consequently, we conclude the district court erred in declaring Act 1332 of 1999 unconstitutional.
We are left with that portion of the district court‘s judgment declaring the decision and order of the ALJ in the underlying matter null and void because it was rendered by an entity without constitutional authority to make final decisions and declaring that the RCU form submitted by State Farm is contrary to law, and granting a permanent injunction against defendants from enforcing and utilizing the provisions of Act 739 of 1995 and Act 1332 of 1999, permanently enjoining the ALJ‘s decision and order, and permanently enjoining State Farm from issuing the disputed RCU form in Louisiana until it is approved by the Commissioner. In addressing these remaining portions of the judgment, we note that State Farm filed a peremptory exception of res judicata, which the district court denied. State Farm argues that its exception of res judicata should have been granted because, as between State Farm and the Commissioner, the rulings of the administrative law judge and of the courts in the previous litigation preclude the Commissioner from litigating the claims in this proceeding against State Farm. State Farm further contends it should not have to relitigate the constitutional issues which could have been addressed in the prior proceedings and that the legality of the RCU form has been established in a final judgment.
The res judicata statute,
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at
the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment. (2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
Pursuant to this statute, then, a second action is precluded when all of the following criteria are satisfied: (1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit existed at the time of final judgment in the first litigation; and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation. Burguieres v. Pollingue, 02-1385, p. 8 (La.2/25/03), 843 So.2d 1049, 1053. The first two requirements mandate the existence of a valid and final judgment. For res judicata purposes, a valid judgment “is one rendered by a court with jurisdiction over both the subject matter and the parties after proper notice was given.” Id. Similarly, a final judgment “is one that disposes of the merits in whole or in part.” Id. We believe that these requirements presuppose that the judgment at issue was one wherein judicial power was exercised by an Article V tribunal. While our courts routinely discuss the res judicata effect to be given certain rulings made by workers’ compensation hearing officers, see e.g. Jackson v. Iberia Parish Gov‘t, 98-1810 (La.4/16/99), 732 So.2d 517, the workers’ compensation hearing officers have been given constitutional authority to hear matters that would otherwise arise under the district courts’ original jurisdiction. See
We do find, however, that the judgment of the court of appeal in Brown v. State Farm Fire & Cas. Co., 00-0539 (La.App. 1 Cir. 6/22/01), 804 So.2d 41, writ denied 01-2504 (La.12/7/01), 803 So.2d 37, became final once we denied the Commissioner‘s writ application. McGrail v. Lee, 02-1496 (La.7/3/03), 852 So.2d 990 (per curiam); Rivet v. State, Dept. of Transp. and Dev., 96-0145, p. 6 (La.9/5/96), 680 So.2d 1154, 1158. The final judgment, though, was that the Commissioner had no right to appeal the decision and order of the ALJ; consequently, the court of appeal itself had no appellate jurisdiction because the district court had none.14Metro Riverboat Assoc., Inc. v. Louisiana Gaming Control Bd., 01-0185, p. 10 (La.10/16/01), 797 So.2d 656, 663. The court of appeal had no jurisdiction for the purpose of determining the merits of the parties’ arguments outside of those relating to the courts’ appellate jurisdiction. Id. Accordingly, any statements made by the court of appeal that were not related to the jurisdictional issue were dicta.
Turning again to the judgment of the district court, we reverse, for all the reasons discussed herein, that portion declaring the decision and order of the ALJ in the underlying matter null and void on the grounds that it was rendered by an entity without constitutional authority to make final decisions. Similarly, we reverse the district court‘s grant of injunctive relief against defendants as it relates to the carrying out, implementing, enforcing and/or utilizing the provisions of the Acts at issue based on our conclusion that the Acts have not been proven to be constitutionally infirm. We further find that the Commissioner‘s attempt to secure injunctive relief against the decision and order of the ALJ in the underlying matter is improper because the Commissioner has not adequately shown on the record how irreparable injury, loss, or damage may occur such that an injunction would be properly issued.
While the judgment of the district court is somewhat broad and confusing, it does appear that the district court granted declaratory judgment relating to the merits of the RCU policy form dispute. Because the Commissioner did request declaratory judgment and because we herein recognized the possibility that the Commissioner might be entitled to a declaratory judgment in a case such as this where the dispute is in a regulatory context, but involves a purely legal question, we will remand this narrow issue to the court of appeal and allow it to consider whether the Commissioner is entitled to seek declaratory judgment regarding whether the RCU form complies with the law and whether the district court correctly determined that it does not. The court of appeal is specifically referred to this court‘s recent opinion in Prator v. Caddo Parish, 04-0794 (La.12/1/04), 888 So.2d 812, and asked to determine whether the Commissioner is entitled to seek declaratory judgment regarding the issue of whether State Farm‘s RCU policy form, as submitted, complies with the applicable laws. If the court of appeal determines that the Commissioner is so entitled, then it shall review the judgment of the district court on this issue and render a judgment on the merits of the dispute.
DECREE
For all the reasons discussed above, we find the Commissioner has not satisfied his burden of proving that the legislature‘s enactment of Act 739 of 1995 and Act 1332 of 1999 is in violation of any constitutional provision. Consequently, the judgment of the district court declaring these Acts unconstitutional, null and void in their entirety is reversed, vacated, and set aside. The judgment of the district court declaring the decision and order of the ALJ null and void on the ground that it was rendered by an entity without constitutional authority is similarly reversed, vacated, and set aside. The judgment of the district court granting permanent injunctive relief on various grounds in favor of the Commissioner is reversed, vacated, and set aside. The case is remanded to the court of appeal for further proceedings consistent with this opinion.
REVERSED IN PART, VACATED IN PART, SET ASIDE IN PART; AND REMANDED TO THE COURT OF APPEAL.
WEIMER, J., concurs and assigns reasons.
WEIMER, J., concurring.
The determination by the Commissioner of Insurance which is at issue in this matter — approval or disapproval of an insurance policy form — is a regulatory matter or administrative law matter as opposed to a “civil matter” pursuant to
Notes
A. (1) No basic insurance policy form, other than surety bond forms, or application form where written application is required and is to be attached to the policy, or be a part of the contract or printed life or health and accident rider or endorsement form shall be issued, delivered, or used unless it has been filed with and approved by the commissioner of insurance.
(2) For purposes of this Section, a basic insurance policy form shall include a certificate of coverage, any other evidence of coverage, or a subscriber agreement.
(3) This Section shall not apply to policies, riders, or endorsements designed to delineate the coverage for and used with relation to insurance upon a particular subject or which relate to the manner of distribution of benefits or to the reservation of rights and benefits under such policy, and which is used at the request of the individual policyholder, contract holder, or certificate holder.
(4) Any insurer may insert in its policies any provisions or conditions required by its plan of insurance or method of operation which are not prohibited by the provisions of this Code.
B. Every such filing shall be made not less than forty-five days in advance of any such issuance, delivery, or use. At the expiration of forty-five days the form so filed shall be deemed approved unless prior thereto it has been affirmatively approved or disapproved by order of the commissioner of insurance. The commissioner of insurance may extend by not more than an additional fifteen days the period within which he may so affirmatively approve or disapprove any such form, by giving notice of such extension before expiration of the initial thirty-day period. At the expiration of any such period as so extended, and in the absence of such prior affirmative approval or disapproval, any such form shall be deemed approved. The commissioner of insurance may withdraw any such approval at any time for cause. Approval of any such form by the commissioner of insurance shall constitute a waiver of any unexpired portion of such initial fifteen-day waiting period.
C. The commissioner of insurance‘s order disapproving any such form or withdrawing a previous approval shall state the grounds therefor.
D. No such form shall knowingly be so issued or delivered as to which the commissioner of insurance‘s approval does not then exist.
E. The commissioner of insurance, may, by order, exempt from the requirements of this Section for so long as he deems proper, any insurance document or form or type thereof as specified in such order, to which in his opinion this Section may not practicably be applied, or the filing and approval of which are, in his opinion, not desirable or necessary for the protection of the public.
F. Insurers negotiating with and insuring special commercial entities shall be exempt from the form filing and approval requirements of this Section. The commissioner shall adopt rules and regulations necessary for the implementation of this Subsection including a provision defining special commercial entities which qualify for exemption. The definition of exempt commercial policyholder shall be reviewed periodically by the commissioner. This Subsection shall apply only to commercial property and casualty insurance. The regulations required by this Subsection shall be adopted no later than April 1, 2000.
No agency or official thereof, or other person acting on behalf of an agency or official thereof shall be entitled to judicial review under this Chapter.
Nothing in this Section shall affect the right to or manner of judicial appeal in any adjudication, irrespective of whether or not such adjudication is commenced by the division or by an agency. However, no agency or official thereof, or other person acting on behalf of an agency or official thereof, shall be entitled to judicial review of a decision made pursuant to this Chapter.
After the first election of state officials following the effective date of this constitution, the legislature may provide, by law enacted by two-thirds of the elected members of each house, for appointment, in lieu of election, of the commissioner of agriculture, the commissioner of insurance, the superintendent of education, the commissioner of elections, or any of them. In that event, the legislature shall prescribe qualifications and method of appointment and by similar vote, may provide by law for the merger or consolidation of any such office, its department, and functions with any other office or department in the executive branch. No action of the legislature pursuant hereto shall reduce the term or compensation of any incumbent elected official. By law enacted by two-thirds of the elected members of each house, the legislature may reestablish any such office as elective and, in that event, shall prescribe qualifications.
All courts shall be open, and every person shall have an adequate remedy by due process of law and justice, administered without denial, partiality, or unreasonable delay, for injury to him in his person, property, reputation, or other rights.