COMMISSIONER DEPARTMENT OF BANKING AND INSURANCE v. CAPITAL BONDING CORPORATION et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1903-04T31903-04T3

COMMISSIONER OF THE DEPARTMENT

OF BANKING AND INSURANCE,

Petitioner-Respondent,

v.

CAPITAL BONDING CORPORATION and

VINCENT J. SMITH,

Respondents-Appellants.

 

Submitted April 25, 2006 - Decided August 1, 2006

Before Judges Kestin, Hoens and R. B. Coleman.

On appeal from the New Jersey Department of Banking and Insurance.

Wilentz, Goldman & Spitzer, attorneys for appellants (Darren M. Gelber, of counsel and on the brief).

Zulima V. Farber, Attorney General, attorney for respondent (Patrick DeAlmeida, Assistant Attorney General, of counsel; Kristine A. Maurer, Deputy Attorney General, on the brief).

PER CURIAM

Capital Bonding Corporation ("CBC") and Vincent J. Smith ("Smith") (collectively, the appellants) appeal from the November 17, 2004 final agency decision of the Commissioner (the "Commissioner") of the Department of Banking and Insurance (the "Department") revoking their limited insurance representative registrations and imposing fines and penalties on them for violations of the New Jersey Insurance Producer Licensing Act (IPLA), N.J.S.A. 17:22A-1 to -25, and the New Jersey Insurance Producer Licensing Act of 2001 (IPLA(2001)), N.J.S.A. 17:22A-26 to -48. We affirm.

The following facts are derived from the record on appeal. At all times relevant to the issues on appeal, CBC was in the business, inter alia, of marketing bail bonds and immigration bonds in twenty-five states, including New Jersey. Smith was and is the owner and chief operating officer of CBC. Both CBC and Smith were licensed to engage in these businesses by virtue of their registration as resident limited insurance representatives, see N.J.S.A. 17:22A-16, -29, for several independently owned and operated surety companies that were authorized to underwrite these bonds. See N.J.A.C. 11:17-2.11(a). CBC and Smith remained authorized to engage in the bail bond and immigration bond business until their registrations were terminated on December 31, 2003.

In August 2001, the Commissioner filed an Order to Show Cause seeking to revoke appellants' limited insurance representative registrations and to assess them with fines and penalties. That Order to Show Cause included a single count seeking relief based on a series of nineteen checks issued by appellants between November 26, 1999 and July 19, 2001 to the New Jersey Bail Fund with a face amount totaling $856,728.57, which were returned upon presentment for insufficient funds. Although it initially appeared that appellants and the Commissioner would resolve the issues raised in the Order to Show Cause, they were unable to do so. On May 28 2003, the Commissioner filed an amended pleading asserting additional violations and seeking additional penalties.

The Amended Order to Show Cause included the original allegation from the August 2001 Order to Show Cause as Count One. In addition, that pleading added four more counts. Count Two asserted that between September 1, 1999 and August 31, 2001, appellants had issued "a minimum" of 3,006 other checks in the total face amount of $17,625,626.18 and each of which was returned when presented for insufficient funds. Count Three asserted that appellants, serving as the Program Administrator for several sureties, had been appointed as the general agent for those sureties. Count Three further alleged that while serving in that capacity, appellants had agreed to "accept responsibility for all losses arising out of all bail claims" but had routinely engaged in the practice of failing to pay bail forfeiture judgments in violation of IPLA and IPLA(2001). Count Four alleged that, on February 27, 2003, appellants had issued thirty-three checks to the Bail Fund in the total amount of $84,750, all of which were returned when presented for insufficient funds. Count Five asserted that, following an August 30, 2002 settlement with the Immigration and Naturalization Service (INS), appellants, acting as the agent for sureties issuing immigration bonds, had issued two checks which were returned when presented for insufficient funds. Count Five further asserted that appellants issued three other checks to INS in varying amounts which were not honored because of stop payment orders.

On July 2, 2004, the Administrative Law Judge ("ALJ") to whom the matter had been assigned granted the motion filed by the Department for a summary decision and issued her findings and conclusions on each of the counts in the Amended Order to Show Cause. For purposes of this appeal, we need only summarize those findings and conclusions briefly. The ALJ first noted that Counts One, Four and Five presented similar allegations and she elected to consider them together for purposes of her analysis. She first observed, as to Count One, that the Department had provided evidence of nineteen checks that were returned and that these appellants had disputed four of those checks. The ALJ accepted appellants' position as to the four checks, found that appellants had issued fifteen checks totaling $722,478.57, for which they lacked sufficient funds, and concluded that this violated IPLA and IPLA(2001). Turning to Count Four, the ALJ found that appellants had issued thirty-three checks to the Bail Fund between January 2003 and March 2003 in the amount of $84,750 that were returned for insufficient funds and concluded that this also violated IPLA and IPLA(2001). Concerning Count Five, the ALJ found that the Department had not produced any evidence demonstrating why the appellants had ordered that payment be stopped on three of the checks paid to INS, resulting in a failure of proofs, but that the two checks issued to INS, each in the amount of $500,000 and each of which was returned for insufficient funds, constituted adequate proof of a lack of adequate safeguards in violation of IPLA and IPLA(2001). As for Count Three, the ALJ rejected the argument raised by appellants that bail forfeiture payments on behalf of certain of the sureties had been stayed by orders of rehabilitation entered in other states and concluded that the overdue bond forfeiture judgments in the amount of $9,958,847 violated IPLA and IPLA(2001) as well.

The ALJ concluded that the violations were substantial and that, although revocation of appellants' registrations was warranted, she would not recommend revocation because those registrations had previously been terminated. She then concluded that penalties were appropriate and recommended that a penalty of $2,000 be imposed for each of the fifteen checks in Count One, a penalty of $5,000 be imposed for the thirty-five checks represented by Counts Four and Five, and that a penalty of $5,000 be imposed for seven of the unpaid bail forfeiture judgments. She therefore recommended that a total penalty of $240,000 be imposed, together with $2,525 representing the costs of prosecution.

Both parties filed exceptions to the ALJ's Initial Decision and the matter was then considered by the Commissioner. In her November 17, 2004 decision, the Commissioner modified certain portions of the Initial Decision. In summary, as to Count One, she modified the number of checks involved, increasing the total to sixteen and the face amount to $726,728.57 by conforming the pleadings to the proofs. She concluded, contrary to the ALJ, that the evidence was insufficient to demonstrate that appellants' behavior was willful or that the appellants had misused money that belonged to others, as defined in two subsections of IPLA. See N.J.S.A. 17:22A-17a(1), (5). She therefore dismissed the charges based on these two subsections. Nevertheless, noting that appellants acknowledged being aware that checks should clear when presented and that they conceded that their financial practices were, at a minimum, "careless," the Commissioner concluded that appellants' issuance of these sixteen checks included within Count One demonstrated financial irresponsibility in violation of IPLA. See N.J.S.A. 17:22A-17a(20).

As to Count Four, the Commissioner adopted the factual findings of the ALJ in large part and concluded that the thirty-three checks issued to the Bail Fund in 2003 constituted fraud, in violation of IPLA(2001). N.J.S.A. 17:22A-40a(8), -40a(16). She based this conclusion on the fact that appellants issued these checks at a time when they knew that the checks they had issued between 1999 to 2001 were already the subject of the initial Order to Show Cause. Moreover, appellants had agreed to cease the practice of issuing checks on accounts with insufficient funds prior to issuing the thirty-three checks identified in Count Four.

As for Count Five, in which appellants were charged with violations based on the INS checks, the Commissioner affirmed both the ALJ's decision that there was a failure of evidence about the checks for which payment was stopped and her decision about the two checks paid in settlement to INS without sufficient funds. The Commissioner reasoned that the settlement checks were drawn on the same account that had been used for the other rejected checks. She concluded that these checks, paid as part of the INS settlement, were knowingly drawn on that account, and therefore constituted both fraud and financial irresponsibility in violation of IPLA(2001). N.J.S.A. 17:22A- 40a(8), -40a(16).

Finally, on Count Three, the Commissioner analyzed the appellants' Program Administrator Agreements with the sureties and their obligations to make the payments for the bail forfeiture judgments. She first reasoned that the facts did not establish fraud, and she therefore reversed the ALJ's Initial Decision to the contrary. See N.J.S.A. 17:22A-17a(4), -17a(16). Nevertheless, she concluded that appellants had willfully failed to pay into the so-called "Build-Up" accounts and therefore lacked the means to make the forfeiture payments, that they failed to pay over to the State in satisfaction of the bail forfeiture judgments those sums that they had accrued in the Build-Up accounts and that they "extensively and repeatedly failed to fulfill their fiduciary duties under [their agreements]" with the bond sureties. The Commissioner concluded that these facts constituted violations of IPLA, N.J.S.A. 17:22A-17a(1), -17a(20), and IPLA(2001), N.J.S.A. 17:22A-40a(8).

Having made her findings and conclusions, the Commissioner then considered the appropriate penalties. She first addressed the appropriate penalties and fines, referring to the factors set forth by our Supreme Court in Kimmelman v. Henkels & McCoy Ins. Co., 108 N.J. 123 (1987). She modified the calculation of the penalty for Count One to reflect the additional checks, assessing the sum of $2,000 for each of the sixteen checks issued between 1999 and 2001. She agreed with the ALJ's analysis of the penalty to be imposed on Counts Four and Five. Respecting Count Three, however, she concluded that the ALJ erred in assessing a penalty for only seven of the unpaid forfeiture judgments. She reasoned that there were 747 unpaid judgments and that the Department sought a penalty of $5,000 for each of these judgments. Reasoning that such a penalty, which would total $3,735,000, was permitted by the statute, she concluded that it would, nevertheless, be inappropriate. After considering the Kimmelman factors, she concluded that a penalty on Count Three of $1 million was appropriate. Finally, the Commissioner determined that revocation of appellants' limited insurance representative registrations was appropriate in light of the substantial nature of the violations "so as to protect the public interest from such willful, repetitive, irresponsible, untrustworthy and fraudulent behavior and to serve as a deterrent to others." In so concluding, she rejected arguments raised by appellants that she lacked authority to revoke based on the earlier termination of the licenses.

On appeal, CBC and Smith argue that the Commissioner's decision as to each of the Counts of the Amended Order to Show Cause was arbitrary, capricious and unreasonable, that her findings of fact are not supported by substantial credible evidence, that the penalties are excessive and that, as a result, the decision and order should be reversed in its entirety.

We begin with a recitation of the standard of review that applies to the issues before us on appeal. The role of an appellate court in reviewing the actions of an administrative agency is limited. In re Taylor, 158 N.J. 644, 656 (1999); Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). We will not upset the determination of an administrative agency absent a showing that it was arbitrary, capricious, or unreasonable, that it lacked fair support in the evidence, or that it violated legislative policies. In re Musick, 143 N.J. 206, 216 (1996); Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963). Further, decisions of administrative agencies carry with them a presumption of reasonableness. See City of Newark v. Natural Res. Council, 82 N.J. 530, 539, cert. denied, 449 U.S. 983, 101 S. Ct. 400, 66 L. Ed. 2d 245 (1980). We will not vacate an agency's determination because of doubts as to its wisdom or because the record may support more than one result. See generally Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980); De Vitis v. N.J. Racing Comm'n, 202 N.J. Super. 484, 489-90 (App. Div.), certif. denied, 102 N.J. 337 (1985).

With these guiding principles in mind, we turn to the arguments advanced on appeal. Appellants' attack on Count One is limited in scope. They concede that they issued fourteen of the sixteen checks on which the Commissioner based her findings. Moreover, they explicitly state that they have no objection to the Commissioner's conclusion that issuing these checks that failed to clear when presented constituted financial irresponsibility, see N.J.S.A. 17:22A-17a(20), and that they have no objection to the imposition of a fine of $2,000 for each of these checks. Their sole argument on appeal as to Count One is that the Commissioner's inclusion of two additional checks that were not identified in the Order to Show Cause violated their due process rights.

We note, first, that appellants raised this objection when they appealed from the ALJ's Initial Decision. As a part of her analysis of Count One, the Commissioner found as a matter of fact that the particular checks were identified in the motion for summary decision and that appellants "had ample opportunity to dispute these checks" and did not. She concluded that, in adding these two checks to the group included in Count One, she was simply conforming the pleading to the proofs. On appeal, we are asked to reject this reasoning and to conclude that due process required a precise articulation of the specific list of checks in the initiating pleading.

We decline to adopt appellants' reasoning. Rather, we conclude that due process requires notice in accordance with the applicable sections of the Administrative Procedure Act ("APA"), N.J.S.A. 52:14B-1 to -25. More particularly, all that the relevant provision of the APA requires by way of notice is: "(3) A reference to the particular sections of the statutes and rules involved; (4) A short and plain statement of the matters asserted . . . ." N.J.S.A. 52:14B-9(b). In light of this language, we find no basis on which to conclude, contrary to the Commissioner's interpretation, that due process required a specific reference to each of these checks in place of a "short and plain statement." Ibid. We do not understand the constitutional requirement that one be given "meaningful notice," see In re Commitment of E.D., 183 N.J. 586, 548 (2005), to require more in this context. As the Supreme Court has held: "Due process requires that the person in question receive a notice that sufficiently defines the issue to permit him or her a fair opportunity to prepare and to defend against the accusation." Id. at 547 (citing McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 559 (1993)).

As the Commissioner noted, these two checks were described in the motion for summary decision as being part of the proofs supporting Count One. Appellants offered no defense to these checks or, for that matter, to the overwhelming majority of the others identified in Count One. We therefore discern no constitutional infirmity in the Commissioner's inclusion of the two additional checks as a part of the factual basis for her finding that appellants had engaged in the violations set forth in Count One.

Appellants next attack the Commissioner's decision on Counts Four and Five. They do not challenge the Commissioner's factual findings that in 2003, they issued a total of thirty-five checks, comprised of thirty-three issued to the Bail Fund and two issued to INS in furtherance of the settlement agreement, all of which failed to clear on first presentment. Nor do they challenge the Commissioner's conclusion that issuing these checks constitutes financial irresponsibility in violation of IPLA(2001). See N.J.S.A. 17:22A-40a(8). Rather, they argue that her conclusion that these facts demonstrate fraud as defined by the statute, see N.J.S.A. 17:22A-40a(16), is in error.

Appellants raise two arguments in support of this point. They first rely on a regulation that imposes a small fine for payment of a licensing fee with a check that does not clear, see N.J.A.C. 11:17D-2.4(a)3, as evidence that the Department does not regard use of such a check as serious. They further reason that because the Commissioner concluded that the same behavior did not amount to fraud or to a willful violation in the context of the checks that supported the findings on Count One, her different conclusion on Counts Four and Five cannot be sustained. We disagree with both parts of appellants' analysis.

Appellants' reliance on the regulation imposing a small penalty for issuing a check to the Department in payment of a licensing fee that is returned for insufficient funds is meritless. The imposition of a fee or fine in the event of an apparently isolated, specific use of a returned check cannot in any sense be equated with appellants' repeated and on-going pattern of issuing checks to the Bail Fund or to the INS that were returned for insufficient funds. There is nothing in the cited regulation that suggests that repeated use of checks that will not clear when first presented is, or was ever regarded as, an insignificant matter.

Nor is the Commissioner's conclusion on Counts Four and Five contrary to her analysis of Count One. Fundamental to the Commissioner's analysis of Counts Four and Five was her finding that in 2003, when the thirty-five checks were issued, appellants were already on notice that it was financially irresponsible, and a violation of IPLA, to issue checks that would not clear when first presented. As she noted, by 2003, appellants had already been served with the initial Order to Show Cause identifying this practice in the Bail Fund context as the basis for license proceedings and had worked to resolve that dispute. Likewise, by 2003, appellants had reached a settlement of a similar dispute with INS. The thirty-three checks issued to the Bail Fund and the two checks issued to INS as part of that settlement, therefore, were issued in plain knowledge that to do so when insufficient funds would be available was a violation of the statute. All thirty-five checks were drawn almost contemporaneously on the same account as the earlier disputed checks. They were drawn at a time when the balance in the account was not sufficient to meet these obligations.

In defense of these counts, appellants asserted that they were initiating measures to ensure that sufficient funds would be available, but the Commissioner found no evidence that they had actually done so. The Commissioner concluded that these were knowing violations, because appellants were repeating behavior in 2003 that mirrored the inappropriate behavior of 1999 to 2001. These factual findings, in her view, demonstrated fraud. Our review of the record reveals that the factual findings are supported by substantial credible evidence. Our analysis of the Commissioner's reasoning offers no basis on which to reach a contrary conclusion of law. Engaging in repeated acts with the knowledge that they are violations of the statute suffices to prove fraud.

Appellants attack the Commissioner's findings and conclusions on Count Three on two grounds. First, they argue that the Commissioner erred in her interpretation of the meaning of the Program Administrator Agreements to the extent that she concluded that appellants had a duty to make payments to satisfy the bail forfeiture judgments. In support of this argument, they point to language in the agreements obligating the sureties to make payments in the event of a shortfall, asserting that the Commissioner overlooked this language in her analysis.

We find no merit in this argument. The language of the agreements required appellants to create Build Up funds, segregated from other funds, for the purpose of paying bail forfeiture judgments. The Agreements further required that, in the event that the Build Up funds were insufficient to cover the amount of any bail forfeiture judgment, appellants would pay the difference from general operating funds. In fact, the language relied upon by appellants follows these provisions, providing that, in the event that appellants are unable to pay the bail forfeiture judgments after exhausting the Build Up funds and their general operating funds, that the sureties will do so, subject to the sureties' right to require appellants to repay the amount of the shortfall. Appellants' focus on the last of these provisions does not undercut, but rather supports, the Commissioner's conclusion that the relationship between appellants and the sureties is a fiduciary one.

Second, appellants argue that the Commissioner erred in failing to recognize that stay orders entered by rehabilitators in other states not only protected certain of the sureties with which appellants contracted but also prohibited appellants from making any payments in violation of those orders. They rely for support on our decision addressing the scope of these stay orders in terms of comity as they affect the operation of the trial courts. See Aly v. E.S. Sutton Realty, 360 N.J. Super. 214 (App. Div. 2003). There is nothing in the record that suggests that the stay orders prevented appellants from paying the bail forfeiture judgments. To the extent that appellants were required by the terms of their agreements with the sureties to maintain Build Up funds and to make payments from those funds, or to supplement those funds from their general operating funds, the stay orders would not prevent them from disbursing those funds. Moreover, as the Commissioner pointed out, the stay orders were issued well after the time when appellants were required, but had failed, to make payments on the bail forfeiture judgments. We discern from the record no basis on which to conclude that the Commissioner erred in her analysis of the effect of the stay orders.

Finally, appellants attack the penalties imposed, arguing that the Commissioner lacked the authority to revoke their limited registrations and that the monetary penalties imposed were arbitrary and capricious. We reject both of these arguments.

We first note that our Supreme Court has recently addressed an appeal of a license revocation sanction imposed by the Board of Medical Examiners. See In re License Issued to Zahl, 186 N.J. 341, 353-54 (2006). In Zahl the Court observed:

Our appellate review of an agency's choice of sanction is limited. Courts generally afford substantial deference to the actions of administrative agencies such as the Board. Matturi v. Bd. of Trs. of the Judicial Ret. Sys., 173 N.J. 368, 381 (2002). Deference is appropriate because of the "expertise and superior knowledge" of agencies in their specialized fields, Greenwood v. State Police Training Center, 127 N.J. 500, 513 (1992), and because agencies are executive actors, Matturi, supra, 173 N.J. at 381 (stating that "courts have only a limited role to play in reviewing the actions of other branches of government") (alteration in original)(citation omitted); Public Service Electric & Gas Co. v. New Jersey Department of Environmental Protection, 101 N.J. 95, 103 (1985)("In light of the executive function of administrative agencies, the judicial capacity to review administrative actions is limited.")(citation omitted). As such, the Court will modify a sanction "only when necessary to bring the agency's action into conformity with its delegated authority. The Court has no power to act independently as an administrative tribunal or to substitute its judgment for that of the agency. It can interpose its views only where it is satisfied that the agency has mistakenly exercised its discretion or misperceived its own statutory authority."

In re Polk License Revocation, 90 N.J. 550, 578 (1982).

This Court also has noted: "It has been stated that the test in reviewing administrative sanctions is 'whether such punishment is so disproportionate to the offense, in light of all the circumstances, as to be shocking to one's sense of fairness.'" Ibid. (quoting Pell v. Bd. of Educ., 313 N.E.2d 321 (N.Y. 1974)(internal quotation marks and citation omitted)); see also In re Markoff License Revocation, 299 N.J. Super. 607, 613 (App. Div. 1997)(affirming Board's decision not to reinstate physician's license because sanction did not "shock one's sense of fairness")(citing Polk, supra, 90 N.J. at 578).

[Id. at 353-54.]

We review appellants' arguments about the sanctions imposed in light of this most recent guidance.

Appellants' challenge to the revocation of their registrations is based in part on their arguments that the record does not support the Commissioner's findings of any serious statutory violation, an attack we have already rejected. They further argue that the appropriate penalty is a small monetary fine, asserting that revocation should be reserved for "gross and pervasive" conduct and is therefore inappropriate in these circumstances. We disagree. The Commissioner's power to impose sanctions, as defined by IPLA and IPLA(2001), is broad in scope. See N.J.S.A. 17:22A-17a (IPLA); N.J.S.A. 17:22A-40a (IPLA(2001)). Each provision authorizing sanctions expressly permits revocation. Ibid. In light of the applicable standard of review, see Zahl, supra, 186 N.J. at 353-54; In re Scioscia, 216 N.J. Super. 644, 660 (App. Div.), certif. denied, 107 N.J. 652 (1987), we will not overturn a sanction imposed by an administrative agency unless it is necessary to conform the agency's action with its delegated authority. See Polk, supra, 90 N.J. at 578.

Nothing in this record suggests that the penalties here imposed are "disproportionate" or "shocking." See Zahl, supra, 186 N.J. at 354 (quoting Polk, supra, 90 N.J. at 578). In particular, we are guided by the fact that this industry is one that uniquely affects the public interest and that the Commissioner is charged with the duty to protect the public welfare. See, e.g., Sheeran v. Nationwide Mutual Ins. Co., 80 N.J. 548, 559 (1979). We regard insurance agents and limited insurance representatives like appellants as fiduciaries in the conduct of their business, obligated to exercise good faith and reasonable skill in their dealings. See Weinisch v. Sawyer, 123 N.J. 333, 340 (1991). Trustworthiness, integrity, and competence are important to this industry and we traditionally hold insurance producers to high standards of conduct. See In re Commissioner of Banking v. Parkwood Co., 98 N.J. Super. 263, 268 (App. Div. 1967).

Viewed against this background, appellants' course of conduct, in which they repeatedly and knowingly issued checks to the Bail Fund and to INS that would not be honored and in which they failed and refused to pay bail forfeiture judgments when due, amply supported the Commissioner's conclusion that revocation was an appropriate part of the sanction to be imposed. We find nothing arbitrary or capricious in the Commissioner's decision to do so and we find nothing disproportionate between the findings of fact and the sanction imposed.

Nor do we find that the Commissioner's evaluation of the appropriate monetary sanctions was arbitrary or capricious. Apart from their continued assertion that the facts do not support the Commissioner's findings at all, which we have rejected, the essence of appellants' challenge to the monetary penalties rests on the fact that the Commissioner imposed a greater penalty for the several violations than the one recommended by the ALJ. Pointing out that the total fine the Commissioner imposed was five times that recommended by the ALJ, appellants urge us to conclude that it was therefore unreasonable. Both IPLA and IPLA(2001) explicitly empower the Commissioner to impose a fine of "up to $5,000" for a first violation and "not exceeding $10,000" for each subsequent violation of the statute in addition to or as an alternative to other penalties. See N.J.S.A. 17:22A-17b, -45c. The fines imposed by the Commissioner for each violation are well within this range.

Our Supreme Court has held that administrative penalties "must be tested for reasonableness as applied to the specific facts involved" and has cautioned that an unreasonable administrative penalty constitutes a due process violation. See In re Garay, 89 N.J. 104, 115 (1982). The Court has also set forth factors to be reviewed in determining whether any particular fine is appropriate. See Kimmelman, supra, 108 N.J. at 137-39. We need not address the Kimmelman factors at length, in light of the fact that the Commissioner did so explicitly in her written final decision. Rather, we conclude that the appropriate focus here is not on the difference in the magnitude of the penalties recommended by the ALJ and those imposed by the Commissioner, but on the relationship between the behaviors set forth in the several counts and the fines imposed.

Appellants only challenge two aspects of the penalties imposed. They attack the imposition of any penalty for the two additional checks in Count One and the increased magnitude of the penalty imposed on Count Three. Because we have concluded that the Commissioner's inclusion of the two additional checks on Count One was permissible, and because she imposed a penalty of $2,000 for each of these checks, which appellants do not otherwise challenge, we find no ground for relief on this aspect of the appeal.

As to Count Three, the ALJ assessed a penalty of $5,000 for each of seven violations. It appears that she based her penalty, therefore, on the assumption that because there were seven bail sureties to which appellants were contractually obligated, the failure to pay bail forfeiture judgments constituted a single violation of the statute as to each of the sureties. The Commissioner, however, correctly concluded that the failure to pay each bail forfeiture judgment was a separate violation. She reasoned that the penalty of $5,000 for each of the 747 unpaid judgments, which would be permitted under the statute, would result in an unreasonable penalty in the aggregate. It was this reasoning that supported her decision to reduce that sum and to impose instead the $1 million penalty for Count Three. Although the penalty on Count Three greatly exceeded the one that the ALJ recommended, it was well within the range permitted and far less than the one that the Commissioner declined to assess. Viewed in that light, the penalties are well within the Commissioner's discretion, amply supported by the facts in the record and reasonable.

Affirmed.

 

Because of IPLA(2001), CBC and Smith were required to secure insurance producer licenses by January 1, 2004. See N.J.S.A. 17:22A-29; N.J.A.C. 11:17-2.1(a). Smith did not apply for this license and the application filed by CBC for a license was denied. The record on appeal refers to an appeal of the denial and to an OAL proceeding related to the CBC application, but does not reveal the outcome of that matter.

In 2001, Karen Suter was the Commissioner. She instituted the proceedings against appellants by serving and filing the initial order to show cause. By 2003, the Commissioner was Holly J. Bakke and it was she who issued both the Amended Order to Show Cause and the final agency decision, which is the subject of this appeal. Throughout this opinion, we will refer to the Commissioner without distinguishing between the two different individuals who served in that capacity, as their separate identities are not relevant to the issues we address.

The checks identified in the August 2001 Complaint bore the following numbers: 04830, 05277, 08236, 08659, 08702, 09033, 09814, 11171, 11172, 11218, 11433, 11585, 11614, 11655, 11740, 11830, 12222, 12271 (referred to, improperly, as 112271), and 12737.

The Amended Order to Show Cause refers to six sureties (Aegis, Connecticut, Highlands, Northwestern, Sirius America, and Legion Insurance Co.) as well as to an "unknown carrier."

The ALJ concluded that Count Two should be dismissed. Because the Commissioner sustained this conclusion and because the Department has not cross-appealed from this decision, we need not address that count further.

The Commissioner made a variety of alterations to the ALJ's Initial Decision in order to correct the citations to IPLA or to IPLA(2001). In particular, she corrected citations based on the effective dates of IPLA, the repeal of that statute and the effective dates thereafter for IPLA(2001). We need not set each of these forth at length as they are not disputed on appeal.

The undisputed checks are: Check Nos. 04830, 05277, 08236, 08659, 09033, 09814, 11218, 11585, 11614, 11655, 11740, 11830, 12271 (improperly referred to in the Order to Show Cause as 112271) and 12737 totaling $651,728.57. The disputed checks are numbered 12272 and 09792. As the Department points out, there were actually twenty-one checks that were part of the evidence offered on Count One. There were the fourteen undisputed checks, the two disputed checks, the four checks that appellants proved to the ALJ's satisfaction were not appropriate for inclusion in Count One and one check that the Department did not include in the summary disposition application.

In part, the Department's brief on appeal relies on language included in the Administrative Code that permits amendments to pleadings. See N.J.A.C. 1:1-6.2. We decline to rest our decision on that ground, given that the language of the regulation itself refers to an exception where "constitutional principle[s]" would otherwise preclude an amendment. In light of the fact that appellants' argument is constitutional in nature, reliance on the regulation begs the question.

Appellants assert in their brief on appeal that Count Three was directed only at CBC. In actuality, Count Three was directed to both CBC and to Smith, who was specifically identified in this count as its active officer. In that capacity, Smith is responsible for the actions of the corporate entity. See N.J.A.C. 11:17A-1.6(c).

(continued)

(continued)

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A-1903-04T3

August 1, 2006