Director, Division of Child Care and Early Childhood Education, Department of Human Services v. Jackie Logue

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

JOHN B. ROBBINS, JUDGE

DIVISION III

DIRECTOR, DIVISION OF CHILD

CARE AND EARLY CHILDHOOD

EDUCATION, DEPARTMENT OF

HUMAN SERVICES

APPELLANT

V.

JACKIE LOGUE

APPELLEE

CA 01-334

OCTOBER 3, 2001

APPEAL FROM THE WASHINGTON

COUNTY CIRCUIT COURT,

SECOND DIVISION, [NO. CIV98-602]

HONORABLE KIM M. SMITH

CIRCUIT JUDGE

REVERSED

This is an appeal by appellant Arkansas Department of Human Services (DHS). DHS obtained an order from an administrative law judge, assigned to the Division of Child Care and Early Childhood Education, that revoked appellee Jackie Logue's license to operate the Kidsland Day Care. Logue appealed to Washington County Circuit Court, and it reversed the findings made by the administrative law judge. DHS filed a timely appeal to us. We affirm and reinstate the administrative law judge's decision and reverse the circuit court decision.

The standard of review in this area of the law is well-developed. This court's review is limited in scope and is directed not to the decision of the circuit court, but to the decision of the administrative agency. Tomerlin & All Arkansas Bail Bond Co., Inc. v. Nickolich, 342 Ark. 325, 331, 27 S.W.3d 746, 749 (2000) (citing Arkansas Bd. of Exam'rs v. Carlson, 334Ark.

614, 976 S.W.2d 934 (1998)); Arkansas Dep't of Human Servs. v. Thompson, 331 Ark. 181, 959 S.W.2d 46 (1998). Our review is limited to ascertaining whether there is substantial evidence to support the agency's decision. Id. That is so because administrative agencies are better equipped by specialization, insight through experience, and more flexible procedures than courts, to determine and analyze legal issues affecting their agencies. McQuay v. Arkansas State Bd. of Architects, 337 Ark. 339, 989 S.W.2d 499 (1999).

Such decisions will be upheld if they are supported by substantial evidence and are not arbitrary, capricious, or characterized by an abuse of discretion. McQuay, supra. We review the entire record in making this determination. Carlson, supra; Thompson, supra; Arkansas Alcoholic Beverage Control Bd. v. Muncrief, 308 Ark. 373, 825 S.W.2d 816 (1992). The Arkansas Supreme Court set forth the following test for determining whether substantial evidence supports the agency's decision:

Substantial evidence has been defined as valid, legal, and persuasive evidence that a reasonable mind might accept as adequate to support a conclusion, and force the mind to pass beyond conjecture. The challenging party has the burden of proving an absence of substantial evidence. To establish an absence of substantial evidence to support the decision the challenging party must demonstrate that the proof before the administrative tribunal was so nearly undisputed that fair-minded persons could not reach its conclusion. The question is not whether the testimony would have supported a contrary finding but whether it supports the finding that was made. It is the prerogative of the agency to believe or disbelieve any witness and to decide what weight to accord the evidence.

Arkansas State Police Comm'n v. Smith, 338 Ark. 354, 362, 994 S.W.2d 456, 461 (1999) (citations omitted).

Administrative actions may be considered arbitrary and capricious where they are not supported by any rational basis. Partlow v. Arkansas State Police Comm'n, 271 Ark. 351, 609 S.W.2d 23 (1980). To set aside an agency decision as arbitrary and capricious, the party challenging the action must prove that it was willful and unreasoned action, without consideration and with a disregard of the facts and circumstances of the case. Id. The requirement that an administrative decision not be arbitrary and capricious is less demanding than the requirement that it be supported by substantial evidence. Beverly Enterprises-Ark., Inc. v. Arkansas Health Servs. Comm'n, 308 Ark. 221, 824 S.W.2d 363 (1992). An action is not arbitrary simply because the reviewing court would have found differently. Arkansas State Police Comm'n v. Smith, 338 Ark. 354, 994 S.W.2d 456 (1999).

We first examine how this case was initiated and how it proceeded. DHS sought revocation of Logue's daycare license for failure to comply with regulations that required a certain ratio of adults to children in daycare operations. Logue ran the daycare in her home in Springdale, Arkansas. She obtained a license in 1996, which permitted her to provide daycare for up to sixteen children. Monitoring visits conducted on August 5, September 18, and October 3, 1997, evidenced that she was out of compliance. In November 1997, DHS placed Logue's license on a one-year provisional status due to those three founded complaints that she was not maintaining proper ratio. The provisional status was not appealed.

Monitoring visits were conducted again on February 4 and 12, 1998, and Logue was out of compliance with regulations on those dates as well. The violations did not solelypertain to the ratio regulation; they included failure to maintain safety requirements and failure to maintain medical records. DHS informed Logue on February 26, 1998, that it revoked her family home daycare license. Logue sought an administrative review of this decision. Four follow-up monitoring visits came in the interim, and Logue was in compliance on those dates. However, on April 20, 1998, she was not.

On May 8, 1998, the administrative law judge (ALJ) heard testimony from case workers and from Logue, in which she did not deny that the violations occurred. Logue's assertion was that the violations, which she stated were supported by reasonable excuses, were not so severe as to warrant revocation of her license. The ALJ issued an opinion that found that the other deficiencies, unrelated to the adult-to-child ratio, were excusable violations. However, because of a demonstrated pattern of noncompliance with the ratio requirements, her license was revoked for a period of at least one year, leaving Logue the responsibility of seeking reinstatement of her license after that time. The ALJ's May 11, 1998, letter opinion discussed his decision on the ratio issue and stated in pertinent part:

The ratios provided in the regulations are sufficiently liberal so as to allow a day care operation to exist with only minimal supervision of children. The failure to meet these liberal standards is a danger to the health and safety of the children. It is true that emergencies may arise in the day care setting in which ratios may not be met for short periods of time. However, none of the situations in which Ms. Logue found herself could be described as emergencies, and it appeared that without threat of revocation, Ms. Logue did not truly believe that she should strictly follow these regulations.

The ALJ's decision became effective on May 13, 1998. On June 8, 1998, Logue appealed to Washington County Circuit Court. Briefs were submitted to the circuit judgeby both parties on the issue of the substantiality of the evidence to support revocation of her daycare license, after which the circuit judge informed the parties that he would rule. Then, additional counsel was employed by Logue, who was permitted to file an additional brief, without objection from DHS. This additional brief argued that the statute that granted the authority to revoke Logue's license (1) was unconstitutionally vague, (2) permitted an absolute, unregulated, and undefined power to an administrative agency that was an unlawful delegation of legislative power, and (3) provided no discernible standard by which to measure regulation violations. The additional brief further asserted that the trial court was bound to follow a Pulaski County Circuit Court decision where the circuit judge there held that the DHS regulations failed to specifically categorize violations so as to inform the persons bound by the rules what conduct was prohibited, and that the facts, in any event, did not substantially support revocation.

On these briefs and the record of the administrative hearing, the circuit judge entered an order on November 29, 2000, reversing the administrative order, finding that the decision was made on unlawful procedure with no discernible standard, it was arbitrary, and it was relevant that DHS had not sought to enjoin Logue's operation of her daycare pending the appeal to circuit court, thus essentially working an estoppel against DHS's position on appeal. The circuit court made no finding regarding whether the administrative decision was supported by substantial evidence. DHS filed the present appeal to us and argues that the ALJ's decision was supported by substantial evidence and that it followed proper procedure. Logue argues the same points as presented in her supplemental brief to the circuit court.

We focus our review on the substantiality of the evidence to support the action taken by the agency, and DHS argues that there was ample evidence to support the agency determination. We agree. Inasmuch as there were uncontested violations of the ratio regulations, though the parties disagreed as to the severity of the violations and whether a sanction of this magnitude was warranted, and there exists statutory authority in DHS to revoke upon such violations, which authority was not challenged at the agency level, we hold that there was substantial evidence that supported revocation of Logue's daycare license and that the ALJ did not act in an arbitrary or capricious manner.

Though Logue argues that the circuit court was correct in its findings and conclusions, we cannot address these assertions because the propriety of the statutes and regulations themselves and how they are applied was not raised by Logue before the agency. Therefore, these bases for reversal of the administrative ruling are not preserved for appellate review. Brown v. Arkansas State Heating, Ventilation, Air Conditioning & Refrigeration Licensing Bd., 336 Ark. 34, 984 S.W.2d 402 (1999). In Arkansas Cemetery Bd. v. Memorial Properties, Inc., d/b/a North Hills Memorial Gardens, 272 Ark. 172, 616 S.W.2d 713 (1981), our supreme court held that this is essential to a judicial review under the Arkansas Administrative Procedures Act. The supreme court quoted from a decision of the United States Supreme Court in Unemployment Comm'n v. Aragan, 329 U.S. 143, 67 S. Ct. 245, 91 L. Ed. 136 (1946):

A reviewing court usurps the agency's function when it sets aside the administrative determination upon a ground not theretofore presented and deprives the Commissionof an opportunity to consider the matter, make its ruling, and state the reasons for its action.

Arkansas Cemetery Bd. v. Memorial Properties, Inc. d/b/a North Hills Memorial Gardens, 272 Ark. at 173, 616 S.W.2d at 713 (1981); see also Arkansas Beverage Control Div. v. Barnett, 285 Ark. 189, 685 S.W.2d 511 (1985). Our supreme court has repeatedly held that it will not set aside an administrative determination upon a ground not presented to the agency based upon this reasoning. Franklin v. Arkansas Dep't of Human Servs., 319 Ark. 199, 892 S.W.2d 262 (1995); Riverways Home Care v. Arkansas Health Servs. Comm'n, 309 Ark. 452, 831 S.W.2d 611 (1992); Arkansas Cemetery Bd. v. Memorial Properties, Inc., supra.

The agency is the only forum where a full development of the facts and law can occur; without that complete development of the facts and arguments below, this court cannot fulfill its reviewing function. AT&T Communications of the Southwest, Inc. v. Arkansas Pub. Serv. Comm'n, 344 Ark. 188, 40 S.W.3d 273 (2001). Raising issues before the agency is significant even when a statute is challenged as unconstitutional, because the interpretation given by the agency charged with its execution is highly persuasive. See Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 69 Ark. App. 323, 13 S.W.3d 197 (2000).

We reverse the circuit court's order and reinstate the administrative agency's opinion in its entirety.

Baker and Roaf, JJ., agree.