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Anderson v. Wisconsin Department of Financial Institutions

Court of Appeals of Wisconsin, District II

June 26, 2019

Gregory A. Anderson, Petitioner-Appellant,
v.
Wisconsin Department of Financial Institutions, Respondent-Respondent.

          APPEAL from an order of the circuit court for Manitowoc County No. 2017CV61: MARK ROHRER, Judge. Reversed and cause remanded with directions.

          Before Neubauer, C.J., Gundrum and Hagedorn, JJ.

          HAGEDORN, J.

         ¶1 The constitution limits the power of the state to take someone's property. At a minimum, constitutional due process requires the state to provide notice and an opportunity to be heard. This case concerns whether sufficient notice was provided when the Wisconsin Department of Financial Institutions (DFI) notified Gregory A. Anderson that he was liable for more than three million dollars due to his alleged involvement in unlawful securities transactions.

         ¶2 In its notice, DFI informed Anderson that he had thirty days to "request a hearing" or its allegations would be deemed proven and the threatened punishment would become fixed. Anderson-on day number thirty-mailed a certified letter requesting a hearing. DFI denied Anderson's request for a hearing on the grounds that DFI needed to receive the request by the thirtieth day. No grace, no exceptions.

         ¶3 The notice Anderson received tracks the language of Wis.Stat. § 551.604(2) (2017-18).[1] However, this recently modified statute (and hence, the notice) is less than clear on precisely what Anderson was supposed to do by the thirtieth day. While DFI offers a plausible reading in defense of its position, we conclude that the notice Anderson received was inadequate. If the state is going to take Anderson's property, it must tell him with reasonable clarity what he needs to do and by when. The notice failed in this basic task and therefore violated Anderson's due process protections. Accordingly, we reverse and remand.

         BACKGROUND

         ¶4 On October 24, 2016, DFI issued a summary order alleging that Anderson participated in the offer and sale of unregistered securities and directing him to cease and desist from engaging in unlawful activities of this kind.[2] The order further proposed the entry of a final order requiring Anderson to pay restitution in excess of three million dollars and a civil penalty of twenty-five thousand dollars.

         ¶5 Regarding what Anderson needed to do to challenge this and by when, the order stated as follows:

         D. Notice of Hearing Rights

(a.) PLEASE TAKE NOTICE that you have the right to request a hearing. Every request for a hearing shall be in the form of a petition filed with the Division, pursuant to Wis. Admin. Code § DFI-Sec 8.01. A petition for a hearing to review an order shall:
(1) Plainly admit or deny each specific allegation, finding or conclusion in the order and incorporated papers. However, if the petitioner lacks sufficient knowledge or information to permit an admission or denial, the petition shall so state, and that statement shall have the effect of a denial; and
(2) State all affirmative defenses. Affirmative defenses not raised in the request for hearing may be deemed waived.
(b.) PLEASE TAKE FURTHER NOTICE that, within 15 days after receipt of a request in a record from you, the matter will be scheduled for a hearing, pursuant to Wis. Stats. §§ 551.604(2) and (3).
(c.) PLEASE TAKE FURTHER NOTICE that if you do not request a hearing and none is ordered by the Administrator within 30 days after the date of service of this order, the findings of fact, conclusions of law, and summary and proposed orders, including the imposition of a civil penalty or requirement for payment of restitution, disgorgement, interest, or the costs of investigation sought in a statement in the order, becomes final by operation of law, pursuant to Wis.Stat. § 551.604(2).

         ¶6 On the thirtieth day-November 23, 2016-Anderson requested a hearing in a letter sent to DFI through certified mail, in part apologizing "for the late reply on this matter" and noting that he had been dealing with a major family health issue.[3] DFI received the request on November 28, 2016. Thereafter, DFI notified Anderson that his request was denied as untimely because it was received after the thirty-day period had expired. DFI then entered a final order adopting the factual and legal allegations that were set forth in the summary order, including the restitution and civil penalty obligations. Anderson sought a rehearing, which DFI denied. Anderson then sought judicial review, which the circuit court denied. He now appeals.

         STANDARD OF REVIEW

         ¶7 On appeal from administrative review, we consider the agency's decision, not that of the circuit court. Zimbrick v. LIRC, 2000 WI.App. 106, ¶9, 235 Wis.2d 132, 613 N.W.2d 198');">613 N.W.2d 198. "Whether a notice is sufficient to provide due process presents a question of law, and our review is therefore de novo." Homeward Bound Servs., Inc. v. OIC, 2006 WI.App. 208, ¶39, 296 Wis.2d 481, 724 N.W.2d 380.

         DISCUSSION

         ¶8 Anderson asserts that his request for a hearing was timely. But, he adds, even if it was not, DFI failed to provide him with constitutionally adequate notice.[4] DFI responds that Anderson's request was untimely and that its notice comported with due process because it informed Anderson what he had to do to request a hearing and preserve his rights.

         ¶9 No one disputes that Anderson was sufficiently apprised of the fact that he had until November 23, 2016, to request a hearing.[5] What is less clear from the language of the notice is when a request for a hearing would be considered effective. Anderson contends that, absent specific instructions to the contrary, he complied by sending his request via certified mail on the thirtieth day. DFI argues that the notice clearly provided that a request would only become effective when it was received by DFI. From the perspective of a reasonable person in Anderson's position, however, DFI's conclusion is far from obvious.

         ¶10 DFI's argument rests on a multiple-step analysis involving the language of Wis.Stat. § 551.604(2) and Wis. Admin. Code § DFI-Sec 8.01 (Sept. 2010)[6], the two provisions cited in the notice. These provisions read:

An order under sub. (1) is effective on the date of issuance. Upon issuance of the order, the administrator shall promptly serve each person subject to the order with a copy of the order and a notice that the order has been entered. The order must include a statement of any civil penalty, restitution, disgorgement, interest, or costs of investigation the administrator will seek, a statement of the reasons for the order, and notice that, within 15 days after receipt of a request in a record from the person, the matter will be scheduled for a hearing. If a person subject to the order does not request a hearing and none is ordered by the administrator within 30 days after the date of service of the order, the order, including the imposition of a civil penalty or requirement for payment of restitution, disgorgement, interest, or the costs of investigation sought in a statement in the order, becomes final as to that person by operation of law. If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend it until final determination.

         Sec. 551.604(2) (emphasis added).

Every request for a hearing shall be in the form of a petition filed with the division. A petition for a hearing to review an order shall:
(1) Plainly admit or deny each specific allegation, finding or conclusion in the order and incorporated papers. However, if the petitioner lacks sufficient knowledge or information to permit an admission or denial, the petition shall so state, and that statement shall have the effect of a denial; and
(2)State all affirmative defenses. Affirmative defenses not raised in the request for hearing may ...

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