by Cleveland Ferguson, III
In American jurisprudence, the standard or burden of proof in a particular type of proceeding is based upon society’s level of concern with the degree of accuracy in the factual findings delivered by the trier of fact.1 The traditional “preponderance of the evidence” standard allows parties—usually engaged in a civil dispute best settled by monetary compensation—to share equally the risk in proving their claims and affirmative defenses.2 Cases in which one party has accused another of a civil wrong with more severe implications, such as fraud, require proof by clear and convincing evidence. Finally, in a criminal case, our society imposes almost the entire risk of error upon itself by requiring the state to prove the guilt of the accused beyond a reasonable doubt.
In civil actions under federal law, the preponderance of the evidence standard generally is used, except certain situations that require clear and convincing evidence. The U.S. Supreme Court has held that the higher, intermediate, clear and convincing standard is reserved for cases “where particularly important individual interests or rights are at stake”3 such as hearings to terminate parental rights,4 involuntary commitment proceedings,5 civil fraud,6 and disbarment.7 The clear and convincing standard of proof encompasses “that measure or degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.”8 Notably, the Supreme Court has expressly approved the use of the preponderance of the evidence standard in agency actions that may result in civil penalties being levied upon an individual.9
In Florida administrative law, the preponderance standard is also the norm. Applicants for permits or licenses have the burden of demonstrating entitlement thereto by a preponderance of the evidence.10 Proof by clear and convincing evidence is required only when an agency seeks to take “penal” action against a licensee or permittee.11 Until 1996, only when an agency action may have resulted in revocation or suspension of a license did Florida courts hold that a “loss of livelihood” would result and property rights would be significantly infringed upon, requiring proof by clear and convincing evidence.
The recent trend in Florida administrative law has been an expansion of the concept of when agency action is penal or may result in a loss of livelihood. Recent decisions have significantly altered the test for when agency action requires proof by clear and convincing evidence. This article will examine this trend and point out some practical consequences of raising the bar to the clear and convincing height.
Department of Banking & Finance v. Osborne Stern
In 1996, the Florida Supreme Court held for the first time that the imposition of an administrative fine, without action against a license or permit, is penal in nature and implicates significant property rights. Department of Banking & Finance v. Osborne Stern, 670 So. 2d 932 (Fla. 1996). In Osborne Stern, an applicant for registration to deal in securities was denied on the basis of violation of statutory prohibitions against dealing in securities without having previously registered with the state. The department also sought to impose administrative fines against the applicant for the same statutory violations. In the recommended order, the hearing officer (now administrative law judge or ALJ) stated that the applicant had the burden of proving entitlement to registration by a preponderance of the evidence. The ALJ also held that the department had the burden of proving its allegations, which would allow imposition of civil fines, by a preponderance of the evidence. The ALJ found that the applicant had not satisfied his burden, but that the department had met its burden. The department’s final order denied registration and imposed the civil fines.12
On appeal, the First District Court of Appeal reversed the final order, reasoning that when an agency seeks to revoke an existing license based on violations of statutory prohibitions, the agency must prove the violations by clear and convincing evidence. Thus, the court concluded, the same burden of proof should apply when an applicant is being denied a license in the first instance based on violations of the same or similar statutes, assuming that the applicant is otherwise qualified for a license. The court also included the imposition of fines within the clear and convincing umbrella. The following question was certified as being of great public importance:
In denying an application for registration to sell securities and imposing civil fines for alleged violations of provisions in chapter 517 regulating the sale of securities, is the department of banking and finance required to prove such allegations by clear and convincing evidence?13
The Florida Supreme Court accepted certiorari and rephrased the above question into two parts. First, must the department prove by clear and convincing evidence that an applicant has violated a statute in order to deny an application on that basis? Second, must the department prove by clear and convincing evidence that an applicant violated a statute in order to impose administrative fines? The court said no and yes.14
As for denying the application for registration, the court adopted the reasoning of Judge Booth, who had dissented below, and found that the applicant carries the burden of proof throughout an application proceeding. Engaging in an occupation is a “privilege rather than a right,” the court held, and agencies have broad discretion to regulate professions. The court saw no reason to extend the clear and convincing standard to license applications.15
As for imposing civil fines, however, the court took a different track. Administrative fines, the court broadly held, “are generally punitive in nature.” Further, “unlike the denial of an applicant’s registration, an administrative fine deprives the person fined of substantial rights in property.” Finally, the court held that “because the imposition of fines under section 517.221(3), like license revocation proceedings, are penal in nature and implicate significant property rights, the extension of the clear and convincing evidence standard to justify imposition of such a fine is warranted.”16
Latham v. Florida Commission on Ethics
In 1997, the First District Court of Appeal was faced with a question of first impression—the correct burden of proof in proceedings before the Florida Commission on Ethics. Latham v. Florida Commission on Ethics, 694 So. 2d 83 (Fla. 1st DCA 1997). In Latham, a former member of the Florida Parole Commission was found to have violated F.S. §112.313(6), by the Commission on Ethics.17 The commission recommended that the Governor impose a civil penalty of $2,500 as well as a public censure and reprimand.18
Latham appealed, asserting among other grounds that the incorrect burden of proof had been used below. The court, relying on case law and the ethics code itself, found that clear and convincing evidence would be required before the ethics commission could recommend penalties based on a finding of corruption. The court, citing Osborne Stern, held that it is the nature of the proceeding and its consequences that determine the burden of proof required. The court recognized that the Florida Supreme Court in Osborne Stern, for the first time, had found that the potential for imposition of a fine alone required clear and convincing evidence. Then the court went further. The Latham court stated that “personal wealth” is entitled to the benefit of the clear and convincing evidence standard. Going as far as invoking a quotation from The Holy Scriptures, the Latham court found that having a “good name” was just as much a “loss of livelihood” if not more so, than possessing a professional license, and was entitled to the added protection afforded licensees.19
Osborne Stern and Latham
Osborne Stern appears to have been broadly interpreted by the Latham court. While both Osborne Stern and Latham agree that imposition of fines requires clear and convincing evidence, Latham goes on to require clear and convincing evidence when a person’s future chances of earning a living are implicated. Latham extends the benefit of the clear and convincing standard to a person’s reputation. This interpretation raises the question of when does a person’s reputation become a property right worthy of protection by the clear and convincing standard? Does reputation only exist once a license application is approved or public office achieved? If a person’s “good name” is as important or more important than mere money, should not a denial of a license based on a violation of law require a higher standard of proof than an administrative fine when no licensed occupation is involved?
According to Osborne Stern, until a license is obtained, engaging in a particular occupation is a privilege rather than a right. Thus, an applicant may be denied an occupational license, and suffer a complete loss of livelihood and damage to reputation, if an agency proves a violation of law by a preponderance of the evidence. However, if the person holds a license, the violation must be proven by clear and convincing evidence.
According to Latham, if a person holds no license and is not applying for a license, the person’s reputation deserves increased protection against agency action. Thus, if the applicant in Osborne Stern had been prosecuted for statutory violations prior to having applied for registration to sell securities, Latham would have required the agency to meet the clear and convincing evidence standard. If the agency were unable to do so, could the applicant then have applied for registration without having to worry about the charges, or could the agency have raised the violations anew? Another question raised by Latham is whether an agency must have clear and convincing evidence to administer even the least “penal” discipline against a licensee, even if no fine is involved, based on the possible loss of reputation.
Latham does have some aspects that may limit its wholesale application. Arguably, the case only applies to public officials accused of corruption under F.S. §112.317. Also, since Latham was fined, the opinion’s mentioning Latham’s “good name” and loss of stature in the community was mere dicta. Thus, if Latham is read narrowly, the clear and convincing standard is not applicable to everyone who may suffer a loss of reputation as a result of agency action, but only public officials accused of corruption who may be fined as a result. This reading, however, is more restrictive than Osborne Stern, which applies the clear and convincing standard any time an administrative fine may be levied.
Practical Effects of the Clear, Convincing Standard
Requiring agencies to prove cases by clear and convincing evidence may serve to protect an individual subject to the penal process, but in the long run may actually result in less protection for the public. For the lawyer representing an administrative agency, the standard of proof determines the preparation required to prosecute a case. The higher the standard, the more preparation is necessary. This could affect the number of cases tried and lead to overall frustration of the ability to enforce state statutes and agency rules. Certainly state budgets are not prepared with standards of proof in mind, but for smaller agencies and more routine functions conducted by larger ones, having the intermediate standard of proof apply to many more administrative actions will have an effect.20 Another potential consequence of broadening the application of clear and convincing evidence is the cheapening of its protection for, in the words of the U.S. Supreme Court, the “particularly important individual interests or rights.”
Osborne Stern and Latham have unequivocally extended the clear and convincing burden of proof to all cases in which administrative fines may possibly be assessed. Arguably, these cases also require the heightened standard to be used by agencies in all actions which may result in a loss of reputation, except for license application denials. While this added protection for individuals faced with prosecution appears beneficial, a near across-the-board use of the clear and convincing standard may reduce effective agency enforcement. q
1 See In re Winship, 397 U.S. 358, 370 (1970).
2 See Addington v. Texas, 441 U.S. 418, 423 (1979).
3 Herman & MacLean v. Huddleston, 9 U.S. 375, 389-90 (1983).
4 Santosky v. Kramer, 455 U.S. 745, 769 (1982).
5 See Addington, 441 U.S. at 427.
6 See, e.g., Wilcox v. First Interstate Bank, 815 F.2d 522, 533 (9th Cir. 1987).
7 See, e.g, In re Thalheim, 853 F.2d 383 (5th Cir. 1988); see also Razatos v. Colorado Sup. Ct., 746 F.2d 1429 (10th Cir. 1984), cert. denied, 471 U.S. 1016 (1985). See also Florida Bar v. Rayman, 238 So. 2d 594 (Fla. 1970); State ex. Rel. Florida Bar v. Bass, 106 So. 2d 77 (1958).
8 State v. Addington, 588 S.W.2d 569, 570 (Tex. 1979).
9 United States v. Regan, 232 U.S. 37, 48-49 (1914).
10 Florida Dep’t of Transportation v. J.W.C., 396 So. 2d 778 (Fla. 1st D.C.A. 1981).
11 See Ferris v. Turlington, 510 So. 2d 292, 295 (Fla. 1987) (“In a case where the proceedings implicate the loss of livelihood, an elevated standard is necessary to protect the rights and interests of the accused.”).
12 See Osborne Stern & Co. v. Department of Banking & Finance, 647 So. 2d 245 (Fla. 1st D.C.A. 1994), for a discussion of proceedings below.
14 Department of Banking & Finance v. Osborne Stern, 670 So. 2d 932, 933 (Fla. 1996).
15 Id. at 934.
16 Id. at 935.
17 Latham, 694 So. 2d at 83.
19 “A good name is better than fragrant oil.” Id. at 86 (quoting The Holy Scriptures, Ecclesiastes 7:1 (Jewish Publication Society 1985)).
20 Consider the Florida Elections Commission (FEC). The FEC was created by statute within the Department of State to determine violations of Florida’s Election Code. In 1997, the Florida Legislature made the FEC an independent agency. The FEC has jurisdiction over candidates, political action committees, domestic corporations, and elected officials. The FEC has many duties, among them penalizing delinquent campaign reports filed with the Department of State’s Division of Elections by assessing fines.
All fines assessed for the late filing of campaign treasurer’s reports are calculated according to Fla. Stat. §106.07(8)(b), which calls for fines of $50 a day not to exceed 25 percent of the total receipts or expenditures for the period covered by the late report. These fines are routine. Two or three dozen of these cases appear on the FEC docket each month. Nearly all are adopted without a hearing. Appeals based upon unusual circumstances are provided for in §106.07(8)(c). Those cases have been adjudicated using the traditional preponderance of the evidence. Florida Statutes provide that the commission can only waive fines in whole or part based upon unusual circumstances. Otherwise, fines must be assessed at the statutory rate.
If Osborne Stern is regarded as the standard, these fines of $50 a day are punitive in nature by virtue of being fines; thus, the due process protections of the intermediate standard must be employed. Instead of voting on these cases via a monthly listing, commission staff would have to prepare a case against each candidate. Expenses involving discovery, travel, and witnesses would increase exponentially for all sides. Employing the intermediate standard would not be useful in these cases because most respondents do not appear before the commission. Those that do have accumulated tens of thousands of dollars in fines and ask the commission to mitigate a portion of them.
Cleveland Ferguson III is staff counsel for the Water and Wastewater Division of the Florida Public Service Commission. He received his B.S. in legal studies from Nova Southeastern University in 1994 and his J.D. from Florida State University College of Law in 1997, where he was a member of the national mock trial team and research editor for The Journal of Land Use & Environmental Law. Mr. Ferguson expresses appreciation to Robert C. Downie of Brown, Ward & Van Leuven, P.A., for his assistance in preparing this article.
This column is submitted on behalf of the Administrative Law Section, Robert M. Rhodes, chair, and Robert C. Downie II, editor.