Std. of Review: Administrative Decisions, Statutory Interpretation

Ford Contracting, Inc. v. Kentucky Transportation Cabinet
COA PUB 2/7/2014

ACREE, CHIEF JUDGE: Ford Contracting, Inc. appeals the February 21, 2012 order of the Franklin Circuit Court reversing in part and affirming in part the 2010 Final Order of the Kentucky Transportation Cabinet. Having carefully reviewed the record and the arguments of the parties, we affirm in part, reverse in part, and remand for additional proceedings.

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Ford is correct that judicial review of an administrative decision focuses on arbitrariness. Kaelin v. City of Louisville, 643 S.W.2d 590, 591 (Ky. 1982). One component of arbitrariness review is “whether determinations are supported by substantial evidentiary support.”10 Hilltop Basic Resources, Inc. v. County of Boone, 180 S.W.3d 464, 467 (Ky. 2005). Thus, this Court generally confines its review to: (1) whether the findings of fact are supported by substantial evidence of probative value; and (2) whether the administrative agency applied the correct rule of law to the facts. Board of Com’rs of City of Danville v. Davis, 238 S.W.3d 132, 135 (Ky. App. 2007). While we are bound by the subordinate facts found by the hearing officer, we are not bound by the hearing officer’s legal conclusions. See id.

The other two considerations are: “(1) whether an action was taken in excess of granted powers[; and] (2) whether affected parties were afforded procedural due process[.]” Hilltop, 180 S.W.3d at 467. Neither of these is at issue in this case.

Our review, however, is altered when the agency denies relief to the party saddled with the burden of proof. Bourbon County Bd. of Adjustment v. Currans, 873 S.W.2d 836, 838 (Ky. App. 1994). In such a case, “the failure to grant administrative relief to one carrying the burden is arbitrary [only] if the record compels a contrary decision in light of substantial evidence therein.” Id.

Not infrequently, contestants appear at the judicial level arguing that the administrative decision is not supported by substantial evidence when the board has offered no relief in the first instance. In other words, the board has ruled that the one having the burden of proof— usually the applicant—has failed. In such cases, attention should be directed to the administrative record in search of compelling evidence demonstrating that the denial of the relief sought was arbitrary. The argument should be that the record compels relief. The argument that there is no substantial evidence to support nonrelief is an anomaly.

Id. Evidence is compelling if it is so overwhelming that no reasonable person could fail to reach the same conclusion. Greene v. Paschall Truck Lines, 239 S.W.3d 94, 108 (Ky. App. 2007) (citation omitted).

Furthermore, it is basic hornbook law that the “trier of facts is afforded great latitude in its evaluation of the evidence heard and the credibility of witnesses appearing before it.” Bowling v. Natural Resources and Environmental Protection Cabinet, 891 S.W.2d 406, 409-10 (Ky. App. 1994). “To put it simply, ‘the trier of facts in an administrative agency may consider all of the evidence and choose the evidence that he believes.’” Id. (citation omitted). This Court may not reconsider or “pass upon the credibility of witnesses, and the weight of the evidence” for these functions rest within the “exclusive province of the administrative trier of fact.” Id.

Finally, statutory interpretation is an issue of law and, accordingly, we review the circuit court’s statutory construction de novo. See Cumberland Valley Contractors, Inc. v. Bell County Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).

Appeals of Administrative Rulings: Timely filing required (limitation of actions)


From Gallien v. Kentucky Board of Medical Licensure, COA, Published, 3/25/2011

In this case, the Order of Suspension was mailed to Appellant on April 25, 2007. However, she did not file her petition for judicial review until August 18, 2008 – nearly 18 months later. This delay is fatal to Appellant’s appeal. Our precedent holds that “[w]here an appeal is filed in the circuit court by grant of a statute, as in this case, the parties must strictly comply with the dictates of that statute.” Spencer County Preservation, Inc. v. Beacon Hill, LLC, 214 S.W.3d 327, 329 (Ky. App. 2007). This is because “[a]n appeal from an administrative decision is a matter of legislative grace and not a right, and thus the failure to strictly follow statutory guidelines for the appeal is fatal.” Id.; see also Bd. of Adjustments of City of Richmond v. Flood, 581 S.W.2d 1, 2 (Ky. 1978); Ky. Unemployment Ins. Comm’n v. Providian Agency Group, Inc., 981 S.W.2d 138, 139-40 (Ky. App. 1998); Taylor v. Duke, 896 S.W.2d 618, 621 (Ky. App. 1995). The circuit court concluded that it lacked jurisdiction to consider Appellant’s petition for judicial review because the petition had not been timely filed within the statutory 30-day period; thus, dismissal was merited. This conclusion was the correct one.



ADMINISTRATIVE/REGULATORY LAW: Commonwealth, Energy and Environmental Cabinet v. Spurlock (COA 1/22/2010)

Commonwealth, Energy and Environmental Cabinet v. Spurlock
2008-CA-001184 01/22/2010 2010 WL 199411

Opinion by Judge Thompson; Judges Caperton and Wine concurred. The Court reversed and remanded orders of the circuit court declaring that the Energy and Environmental Cabinet’s final orders entered against appellee, based on his failure to respond to the Cabinet’s orders, were void. The Court first held that the trial court properly utilized a de novo standard of review. However, the Court then held that Commonwealth of Kentucky, Natural Resources and Environmental Protection Cabinet v. Kentec Coal Co., Inc., 177 S.W.3d 718 (Ky. 2005), was distinguishable on its facts. Because the notice provided by the Cabinet incorrectly advised appellee that he was not entitled to an administrative hearing absent prepayment of penalties, appellee was entitled to request a formal hearing accompanied by a proper request for a waiver from the prepayment provisions.

ADMINISTRATIVE LAW – Gov’t disability retirement and workers compensation benefits: Mitchell Metzinger v. Kentucky Retirement Systems, et al. (SC 8/27/2009)

Mitchell Metzinger v. Kentucky Retirement Systems, et al.
2007-SC-000363-DG August 27, 2009
Opinion by Justice Scott. All sitting; all concur.

Metzinger, an electrician employed by the city of Louisville, was
injured on the job. He applied for disability retirement and workers’
compensation benefits and filed a civil suit against the
tortfeasor–Louisville Gas & Electric. As part of a global
settlement, LG&E and the city agreed to purchase an annuity for
Metzinger. Later, when Kentucky Retirement Systems calculated
Metzinger’s monthly disability retirement award, it reduced the award
by the amount on the monthly annuity payment. Metzinger objected, but
the award was upheld by the Board, the circuit court and the Court of
Appeals. On appeal, Kentucky Retirement Systems argued that KRS 61.607
permits it to take into account monthly workers’ compensation benefits
therefore, any payments that were voluntarily exchanged for a right to
payment to monthly workers’ compensation benefits should also be taken
into account.

The Supreme Court reversed, holding that Kentucky Retirement
Systems’ interpretation of the statute was contrary to its plain
language. The Court noted that if the General Assembly has intended to
broaden the scope of the agency’s consideration of workers’
compensation benefits under KRS 61.607, it could have done so.

ADMINISTRATIVE LAW – Occupations & Professions – Medical licensure: (SC 5/21/2009)

Eric C. Norsworthy, MD v. Kentucky Board of Medical  Licensure (KBML)
2008-SC-000918-1 May 21, 2009
Opinion and order of the Court. All sitting; all concur.

A KBML panel restricted a doctor’s license to treating only male patients after a sexual misconduct complaint was lodged against him by a female patient (the sixteenth such complaint in 19 years). The doctor appealed the decision to the circuit court, where he also sought injunctive relief during the pendency of the appeal. The circuit court granted the injunction, holding restricting his license amounted to irreparable injury. The Court of Appeals reversed, holding that the circuit court abused its discretion when it found that the injury to the doctor rose to the level to justify an injunction. The doctor then sought review by the Supreme Court under CR 65.09. The Supreme Court denied the request to reinstate the injunction after applying the tripartite test from Maupin (1: irreparable harm if relief not granted; 2: substantial possibility appellant will ultimately prevail on merits; 3: injunction will not harm other parties or disserve public). The Court noted that mere economic and reputational injury are generally not irreparable and the proof did not support the doctor’s claims that the restriction would result in the loss of 70% of his patients and force him to close his practice. The Court also held that the circuit court abused its discretion when it decided there was a substantial possibility that the doctor would ultimately prevail on the merits. The Court found that the lower court had based its determination on the doctor’s assertion that the complainant’s medical chart listed medications used to treat bipolar schizophrenic disorders.

Lastly, the Court held that the circuit court abused its discretion when it balanced the equities in the doctor’s favor based on a) the mere fact that a large group of women traveled a long way to support the doctor at his hearing and b) the circuit court’s mistaken belief that no other complaints had been filed against the doctor since the complaint in question. Further, the Court noted that under the “unclean hands” doctrine, the doctor was not entitled to equitable relief since he had been indicted on nine felony charges that he improperly accessed the complainant’s electronic prescription records after she filed her complaint against him and was no longer his patient.

ADMINISTRATIVE LAW – Government retirement, changing options after check issued: Bob Lawson v. Kentucky Retirement Systems, et al. (SC 5/21/2009)

Bob Lawson v. Kentucky Retirement Systems, et al.
2007-SC-000540-DG May 21, 2009
Opinion by Justice Noble. All sitting.

Lawson retired from employment with the state after 26 years. He selected a retirement benefit payment option and signed a form acknowledging that under KRS 61.590(3) he could not change his payment option after the first payment “had been issued.” Prior to receiving his first check, Lawson realized he had misunderstood the terms of the payment option and contacted KERS to obtain paperwork to make a change. KERS advised Lawson that since the initial check had been printed by the State Treasurer’s office, no change would be permitted. Lawson began the appeals process, and KERS prevailed before the hearing officer and Board, as well as at the circuit court and Court of Appeals levels.

The Supreme Court affirmed the Court of Appeals’ ruling that KRS 65.590 was neither void for vagueness nor required defining regulation under KRS 13A.100. However, the Court reversed the Court of Appeals’ findings that KERS had correctly applied 61.590(3) and had not misled Lawson. The Court held that payment is “issued” when the check is delivered to the payee—as such, Lawson should have been allowed to change his payment option. Justice Abramson (joined by the Chief Justice) concurred in result only, contending that inasmuch as state workers’ retirement rights have been deemed an “inviolable contract,” contract law requires that the ambiguity contained in 61.590(3) be construed against the drafter (i.e. the Commonwealth). The minority disagreed with the majority’s conclusion that Lawson had either been misled by KERS or that KERS was negligent in their handling of Lawson’s retirement process.

REGULATORY LAW (PROFESSIONS): Physician permitted to use physical therapy billing codes: Dubin Orthopaedic Center PSC v. State Board of Physical Therapy (SC 4/23/2009)

Dubin Orthopaedic Center PSC v. State Board of Physical Therapy
2007-SC-000756-DG April 23, 2009
Opinion by Justice Abramson. All sitting, all concur.

The State Board of Physical therapy sought to enjoin Appellant—an orthopedic surgeon—from using AMA billing codes related to physical therapy, citing KRS 327.020(3) which prohibits anyone other than board-licensed physical therapists from calling themselves physical therapists or billing for physical therapy services. The trial court denied the Board’s request for injunctive relief, but the Court of Appeals reversed, holding that while Appellant was authorized to provide the type of treatment he did, KRS 327.020 still applied to him, precluding Appellant from using the insurance codes or the phrase “physical therapy” when describing his services.

The Supreme Court reversed the Court of Appeals, citing the plain language of KRS 327.020(1), which states “nothing contained in this chapter shall prohibit any person licensed in this state under any other law from engaging in the practice for which such person is duly licensed.” The Court added that the statute’s purpose is to protect the public against unqualified providers, not to protect physical therapists against competition from other qualified health care providers.

DISABILITY RETIREMENT (GOV’T) – “Residual functioning capacity”; “treating physician rule” rejected: Kentucky Retirement Systems v. Sandra Bowens (SC 4/23/2009)

Kentucky Retirement Systems v. Sandra Bowens
2007-SC-000509-DG April 23, 2009
Opinion by Justice Scott. All sitting; all concur.

Kentucky Retirement Systems denied employee’s application for disability retirement and she sought judicial review in Franklin Circuit Court— which affirmed the Board’s decision. The Court of Appeals affirmed in part and vacated in part.

The Supreme Court affirmed the portion of the Court of Appeal’s decision that held that KRS 61.600 implicitly requires that the cumulative effect of the claimant’s ailments be considered when determining the claimant’s “residual functioning capacity.” In this case, the Hearing Officer had fragmented claimant’s several ailments and determined that no single condition permanently prevented claimant from being able to work. The Supreme Court held that failure to apply the “cumulative effect rule” rendered the Board’s decision arbitrary. However, the Supreme Court reversed the Court of Appeals’ adoption of the federal “treating physician rule” which states that the opinions of treating physicians should be given greater weight than opinions of non-examining physicians as long as the treating physician’s opinions were supported by substantial evidence. The Court held such a rule was not within the state’s statutory scheme and infringed upon the well-settled principle that the trier of fact may give evidence the weight it deems appropriate. The case was remanded back to the Board for further review of evidence under the “cumulative effect” standard.

ADMINISTRATIVE LAW – Liquor licensing and minimum distance between establishments per local ordinance: Louisville / Jefferson County Metro Govt. v. TDC Group, LLC, d/b/a Molly Malone’s & Alcoholic Beverage Control Board (SC 2/19/2009)

Louisville / Jefferson County Metro Govt. v. TDC Group, LLC, d/b/a Molly Malone’s & Alcoholic Beverage Control Board
2007-SC-000315-DG 2/19/2009
2007-SC-000581-DG 2/19/2009
Opinion by Justice Noble; Justice Abramson not sitting.

Molly Malone’s (a restaurant in Louisville) sought to replace its restaurantdrink license with a retail liquor drink license. The AlcoholicBeverage Control (ABC) administrator denied the request after hedetermined Molly Malone’s was within 700 feet of otherestablishments having a retail liquor license, which is prohibited byKRS 241.075. Molly Malone’s appealed to the ABC Board, whoconcluded the statute’s requirement that the measurement be takenalong the “shortest route of ordinary pedestrian travel” meant aroute that is both safe and lawful. The Board determined that theroute measured by the administrator was incorrect and that theproper route—as advocated by Molly Malone’s– was greater than700 feet, and ordered the application granted. The Court ofAppeals affirmed on different grounds, ruling that theadministrator’s route was neither unsafe nor unlawful—but held thestatute unconstitutionally violated the prohibition on speciallegislation found in Sections 59 and 60 of the KentuckyConstitution.

The Supreme Court affirmed, but on different grounds than theCourt of Appeals– declining to address the issue of the statute’sconstitutionality, despite Molly Malone’s arguments that the Courtwas required to do so. The Court held that the Board was incorrectwhen it read KRS 189.570(6)(a) to prohibit crossing the streetwhere the administrator did when making his measurement.However, while the Court found the Board’s determination that theroute was unlawful was incorrect, it also found its determination thatthe route was unsafe was supported by substantial evidence.Accordingly, the Court held that the Board’s decision to adopt themeasurement proposed by Molly Malone’s was proper, as was itsdecision to grant the application.

Administrative Law – due process, appeals following hearing: Commonwealth, Cabinet for Health and Family Services v. Gambrel’s Food Mart, Inc. (C0A 8/28/2009)

Commonwealth, Cabinet for Health and Family Services v. Gambrel's Food Mart, Inc.
2008-CA-001243 8/28/09 2009 WL 2633576

Opinion by Judge Stumbo; Chief Judge Combs and Senior Judge Buckingham concurred.
The Court affirmed a judgment of the circuit court holding that appellee should not be disqualified from participating as a vendor in Kentucky’s Women, Infants and Children (WIC) program. The Court first held that 902 KAR 4:040 Section 11(1)(b) and the federal WIC regulation, specifically 7 C.F.R. § 246.18(a)(1)(ii)(G) (2009), gave the vendor a right to an administrative hearing. The Court then held that the circuit court had jurisdiction over the matter. While the state regulation did not mention appeal to a court, because appellant was appealing not only its disqualification but also arguing the Cabinet was acting arbitrarily and in violation of the Kentucky and U.S. Constitutions, judicial review was proper. The Court then held that by allowing appellant a hearing but then not allowing review of the determination that there would be inadequate participant access if appellant were disqualified, the Cabinet acted arbitrarily. The Court ultimately held that the hearing officer relied upon substantial evidence in determining that there would be inadequate participant access if appellant were disqualified and therefore, the circuit court properly upheld that finding.