California License Law Blog : California License Lawyer & Attorney : Fredrick M. Ray Law Firm : Professional Licensing Revocation & Suspension : CA License Law Blog

On January 1, 2012, the California Board of Registered Nursing was dissolved by a sunset provision in its authorizing statute.  California licensing boards, by law, must be renewed by legislation periodically.  The California Board of Registered Nursing, or BRN, was to expire on January 1, 2012, unless new legislation was enacted, which is typically a routine matter.  In October 2011, Governor Brown refused to sign Senate Bill 538, which would have extended the authority of the BRN for another four years.  He did this because there were provisions in the bill to authorize the BRN to have its own sworn peace officers as investigators, which would impose further financial burdens on the state by expanding pension liabilities.  The BRN currently employs Department of Consumer Affairs (DCA) investigators to handle its investigations.

The last time this happened prominently, in 2008, the Dental Board and Vocational Nursing Board, among others, were sunset.  However, the legislature passed emergency legislation to continue those boards as bureaus (with their boards converted to advisory committees) until they could be reauthorized as boards.  No such legislation has been enacted to continue the Board of Registered Nursing as a bureau.

In order to continue its licensing and enforcement functions, the Board of Registered Nursing has renamed itself the Registered Nursing Program within the Department of Consumer Affairs.  To attempt to solve the sunset problem, the BRN authorized an Interagency Agreement between BRN and DCA before the sunset date to transfer the powers of the BRN to the DCA, which has in turn delegated those powers to the executive officer of the Registered Nursing Program acting on behalf of the DCA.  Interestingly, the Interagency Agreement cites no statutes, regulations or case law authorizing this action between the two agencies.

There exists a genuine issue as to whether the newly constituted Registered Nursing Program acts with any lawful authority.  It appears that in the coming weeks or months, the legislature should act upon new legislation to reauthorize the BRN without its own investigators.  However, troubling jurisdictional questions will cloud all nursing discipline orders issued and other such actions taken in this interim period.  Since having come under scrutiny in recent years for being perceived as lax in disciplining nurses, the BRN, having filed thousands of discipline cases, seems to have too many cases in its pipeline to halt license discipline litigation during this period of uncertainty.  Under what jurisdictional authority the "program" will act seems to have been left to license lawyers, administrative law judges and perhaps ultimately to the courts to sort out.   

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In California, the Office of Administrative Hearings (OAH) hears all professional license discipline or denial cases, except for liquor license and attorney discipline hearings.  The same administrative court hears cases for such varied occupations as physicians, architects, dentists, insurance brokers and engineers.  A panel of about 75 administrative law judges (ALJs), working our of four OAH offices in Sacramento, Oakland, Los Angeles and San Diego, hears thousands of cases each year.  Administrative licensing agencies such as the Medical Board of California, the Dental Board of California and the Department of Insurance delegate the job of hearing disciplinary hearings to these judges, while retaining final decision-making authority.   

When a licensing agency issues an accusation (the start of a formal disciplinary case) or a statement of issues (a formal license denial case), and the licensee has requested a hearing, the case is typically filed with OAH for adjudication.  Once OAH receives the filing, it assumes jurisdiction over the case which continues until the case is settled, the accusation is withdrawn, or a panel judge issues a proposed decision.   The presiding judge of a particular OAH office, or an ALJ acting temporarily on her or his behalf, addresses any logistics issues that arise.  Before the hearing date itself (the trial to decide the case), a hearing judge is assigned.  However, the assigned judge can be changed even shortly before the start of the hearing.

A hearing can be held at one of the courtrooms available at one of OAH's offices, or sometimes in a remote location (typically a borrowed conference room in a state or federal building) for the convenience of the parties or witnesses.  Occasionally, a party or witness, complying with applicable rules and with the agreement of the parties, appears by telephone.  I have seen an OAH hearing held in a state mental hospital, a federal office building, and even at a prison.  As long as a quiet room with adequate seating and tables is available and a court reporter can get to the location, it can be used for an OAH hearing.

OAH is different than any other court in that OAH is a state agency that other state agencies hire to hear their cases.  ALJs produce "proposed decisions" that can be adopted, changed or rejected then decided differently by licensing agencies.  Although a very high percentage of proposed decisions are adopted as written, occasionally a decision is rewritten or even decided differently by the agency.  Therefore, for ALJs to do their job, they must be "in tune" with the agencies for whom they decide cases.  Licensing agencies issue disciplinary guidelines to guide ALJs to decide cases consistently on common fact patterns, however, in reality most disciplinary guidelines are not specific enough to provide clear guidance.  It is definitely an art for a judge to intuit the wishes of a distant licensing board or agency head to reach a decision consistent with the agency's own thinking.

Having seen hundreds of ALJ decisions adopted or rejected by agencies, patterns tend to form.  For agencies particularly that have a high volume of cases or an elected agency head, a higher percentage of decisions seem to be adopted.  If many decisions are rejected, the burden of deciding those cases upon the administrative agency would be great.  Agencies with relatively few disciplinary cases can review them with greater care and more easily reject or modify those decisions.  Also, in the case of some agencies, the agency may prefer to leave the burden of the decision upon the ALJ, who is not subject to political pressure or public scrutiny, rather than to alter the decision to have a greater hand in the decision.  

For self-represented litigants (individuals without an attorney), and inexperienced attorneys as well, a common mistake is to think that OAH proceedings are just informal meetings.  Indeed, these are trials that require pre-planning and organization, legal research, questioning of witnesses, objections to evidence, and arguments.  The primary "law firm" that prosecutes cases at OAH, the California Department of Justice, has hundreds of well trained Deputy Attorneys General.

OAH decisions are often published on the internet by the particular licensing agency for whom cases have been heard.  I strongly advise unrepresented litigants to search out those decisions to review them before deciding to proceed without an attorney.  It is not uncommon that administrative decisions are 10, 15, 20 pages or more, discussing a range of factual and legal issues.  Reviewing these decisions, the complexity of these administrative proceedings becomes apparent.

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In 2010, all 50 states were required to implement the SAFE Act, with a compliance deadline of December 31, 2010.  With the passing of this deadline, individuals acting as Mortgage Loan Originators who are either California Department of Real Estate (DRE) licensed real estate brokers or salespeople, or are employed by a lender licensed by the California Department of Corporations, must complete a 20 hour approved course for the initial application, 8 hours of continuing education for renewal, pass the SAFE MLO test, and undergo a background check.  Applicants begin by completing the extensive Nationwide Mortgage Licensing System, or NMLS, application.  For anyone coming from a broker-dealer background, this application will look familiar, as it is the equivalent of FINRA's form U-4 or U4.   For individuals who are applying to be mortgage loan originators, it is called the MU4 or MU-4.

For those who have passed the coursework and test, challenges may arise in background checks.  In addition to a criminal record background check, the SAFE Act requires that all applicants permit their credit to be checked as well.  Regulators will be looking for bankruptcies, unsatisfied liens, judgments, and other evidence of prior financial mismanagement.  Currently, these cases are reaching the legal departments of the DRE and DOC, and may result in the first litigated administrative MLO endorsement cases.

The SAFE Act contains certain prohibitions for issuance of the endorsement.  If an applicant has been ever convicted of a felony involving fraud, dishonest, breach of trust, or money laundering, they cannot get an MLO endorsement.  Also, the SAFE Act bars issuance of an MLO endorsement if someone has been convicted of any felony within the prior seven years.  Apparently, individuals who have criminal records, but are not barred from issuance of the MLO endorsement by these rules, will be evaluated on a case-by-case basis, just as they are for any state occupational licenses. 

Also, the SAFE Act requires applicants to submit to credit checks to determine if an applicant has demonstrated "financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that applicants will operate honestly, fairly, and effectively".  So how bad must your credit be to run afoul of the SAFE Act?  No one will exactly know until these cases are litigated.  It seems likely that if someone's credit is bad enough, the licensing agency will want to see an explanation of the misfortune that occurred.  Clearly, the person whose credit was trashed due to medical bills will do better than a compulsive gambler.  Also, credit can be cleaned up.  NMLS websites actively encourage applicants to check their credit first and clean up their credit reports before applying.  

Review of credit reports by state agencies to make licensing decisions is a new, and uncomfortable area.  The poor credit criteria draws a correlation between financial mismanagement and dishonesty that is a difficult analogy.  My suspicion is that absent unsatisfied judgments or liens that cast an applicant in an appalling light, this criteria alone, without some prior criminal misconduct, will be a difficult standard to apply to deny the endorsement.

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California's insurance brokers are licensed and disciplined by the Insurance Commissioner through the Department of Insurance (DOI).  It has been my experience that the Department of Insurance takes a firm stance in disciplining its licensees.  In my view there are three reasons that account for this: 1) the Insurance Commissioner is an elected public official who has political concerns should his Department be perceived as being weak in disciplining licensees, 2) the legacy of  the Insurance Commissioner Chuck Quackenbush scandal in 2000, and 3) the subsequent enactment of Insurance Code section 12921 which makes the Insurance Commissioner solely responsible for the administrative settlements.  There are particular public protection issues relative to insurance brokers, because theft of premium monies and the failure to bind insurance, which leaves consumers unprotected and vulnerable, are constant problems.

The DOI also has some powerful tools in its tool chest, including Insurance Code section 1669, which allows for summary revocation of a license (that is, revocation without a hearing), as well as summary denial of a license application, where a licensee or license applicant has been convicted of a felony, has lost another occupational license, or has been convicted of a criminal violation of the Insurance Code.  The Insurance Code also permits the DOI to revoke a license when a licensee is "not of good business reputation" or it is simply "against the public interest" for them to have a license.   No profession, not even physicians, is subject to such vague and broad standards of discipline.

Despite these considerable legal hurdles, we have found that licensees and license applicants can be successfully represented before the DOI.  In the case of the Order of Summary Revocation, the DOI will consider a timely filed Petition for Reconsideration under Government Code section 11521.  In cases where a licensee or applicant is entitled to a hearing, the DOI tends to respect the outcome of administrative hearings, and is very receptive to a strong showing of character fitness or rehabilitation by its licensees or license applicants.  In most of the cases we have handled, those cases that were not dismissed resulted in license restriction.  License restriction by the DOI is less onerous that license probation typically used by other licensing agencies and usually requires little of the licensee or license applicant beyond compliance with all laws until the license restriction is lifted.  Restriction can later be lifted by a petition to the DOI, clearing the insurance broker's license of discipline.

The pitfalls of a license denial or license discipline case usually arise at the beginning of the case.  License applicants, seeking to avoid disclosure of past indiscretions, sometimes file false or incomplete applications that do not list prior convictions.  Current licensees either fail to notify the DOI of changes to their background information, fail to respond to a demand for information, or make statements that are later used against them.  It is absolutely critical that a license applicant or licensee handle all communications with DOI properly, employing honesty and sincere cooperation in most cases, but exercising one's right to remain silent in cases that can lead to criminal charges, and of course carefully choosing one's words in all communications.  The words of the Miranda warning are true here - everything you say can be used against you in a court of law.

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Unfortunately, a large percentage of individuals facing license discipline fail to hire an experienced license law attorney.  The result is often that the disciplinary hearing is lost.  While the loss of an administrative hearing is tragic, it is not the end of the case.  The Administrative Procedure Act and California law give the licensee some options after a lost hearing.

The first option is reconsideration.  The Administrative Procedure Act permits a licensee or license applicant to ask the administrative agency to reconsider its decision before the decision becomes final.  The petition for reconsideration can be an opportunity, if the agency allows it, to produce additional evidence that was not available at the administrative hearing.  Reconsideration also gives the agency another opportunity to decide the case where the agency feels the outcome was too harsh.

Once an administrative decision has become final, the next step is an appeal to Superior Court, called a writ of administrative mandamus.  The writ process allows a Superior Court judge to review the case record and determine if the agency abused its discretion.  A Superior Court judge can also stay, or stop, the imposition of  a penalty (such as license revocation) while the writ is pending.  The judge can remand a case back to the agency for proceedings in line with the judge's decision.  Sometimes the licensing agency will settle a case once the writ is granted, to save time and money, rather than send the case through the administrative discipline proceess again.  The deadline to file a writ of administrative mandamus is generally 30 days after the effective date of the decision.

If a writ was not filed or was not successful, the final option is a petition for reinstatement of a lost license.  Some health care licensing agencies require a three year wait before applying for reinstatement, although most agencies permit a petition for reinstatement to be filed after one year.  Some agencies decide these petitions by a short hearing in front of the Board, but some submit the cases to a full-blown hearing before an administrative law judge.  The agency hearing the petition for reinstatement focuses upon the licensee's rehabilitation, education and personal enrichment activities after the loss of a license.  The petition for reinstatement is not an opportunity to again fight the lost battle over a license.

All in all, licensees get the best legal value from hiring an attorney as soon as possible after a problem starts.  When a lawyer takes a case at the appellate level, significant irreversible damage may have already been done.  Nevertheless, a valuable license can be saved even after a loss at hearing by a skilled aggressive attorney.

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