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IN THE MATTER OF PROCEEDINGS OF COMMISSIONER OF BANKING AND INSURANCE, A-3308-09T4. (2011)

Court: Superior Court of New Jersey Number: innjco20110615419 Visitors: 4
Filed: Jun. 15, 2011
Latest Update: Jun. 15, 2011
Summary: NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION PER CURIAM. On a prior appeal we considered, among other issues not pertinent here, an order of the Commissioner of the Department of Banking and Insurance awarding Prime Insurance Syndicate, Inc., $512,583.91 in restitution. In re Licenses of Krauze , Nos. A-1844-06 and A-1139-07 (App. Div. Aug. 17, 2009). The order, which was entered on Prime's motion, amended a final order in an administrative enforcement action commenced b
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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

On a prior appeal we considered, among other issues not pertinent here, an order of the Commissioner of the Department of Banking and Insurance awarding Prime Insurance Syndicate, Inc., $512,583.91 in restitution. In re Licenses of Krauze, Nos. A-1844-06 and A-1139-07 (App. Div. Aug. 17, 2009). The order, which was entered on Prime's motion, amended a final order in an administrative enforcement action commenced by the Commissioner against Henry J. Krauze, who formerly held an insurance producer's license and an interest in United Risk Management (URM). We vacated the restitution award and remanded.

Our remand was for a limited purpose. We did not direct the Commissioner to reconsider the restitution award reversed and vacated by our decision. Instead, we vacated that order and remanded "to allow the Commissioner to decide whether to exercise [the Commissioner's] inherent power" to reopen the administrative enforcement proceeding. Id. at 17. On remand, the Commissioner concluded that the circumstances did not warrant reopening of the administrative proceeding. Prime now appeals, and we affirm.

We summarize the pertinent facts and procedural history stated in our prior decision. As noted above, the restitution order we reversed amended the Commissioner's final order in the administrative enforcement action. While the enforcement action was pending, Prime was litigating a civil action in federal district court to recover damages from Krauze, his associates and URM. At the conclusion of the enforcement action and after several iterations, the Commissioner entered an order addressing restitution. In its final form, the order linked Krauze's obligation to pay restitution to Prime with the outcome of Prime's federal suit. The Commissioner reasoned that an administrative enforcement against a licensee "is generally not the appropriate forum in which to determine the amount of restitution owed to a party injured as a result of the regulatory violations except where the amount owed[:] is not contested; is confirmed by either stipulation or an admission in the evidentiary record; or is capable of being determined within the confines of the administrative proceeding on the alleged regulatory violations." Id. at 9, 15. Furthermore, the Commissioner's findings with respect to the $512,583.91 ceiling on restitution were neither detailed nor definitive. Id. at 15-17. Accordingly, the final order directed Krauze to pay restitution "in an amount and at a time as determined by the [federal court] up to $512,583.91." Id. at 14.

Prime did not succeed in its action against Krauze in district court. Prime's only success was to obtain a default judgment against other defendants in excess of $600,000. Accordingly, under the Commissioner's final order, Krauze was not obligated to pay restitution to Prime.

Having failed to obtain a judgment against Krauze in the federal civil action, Prime sought further relief from the Commissioner in the already concluded enforcement action. Despite the Commissioner's prior reservations about exercise of his discretionary authority to award restitution and ambivalence about the amount of restitution, the Commissioner entered the order we vacated on the prior appeal. Id. at 15. That order made Krauze jointly and severally liable with URM and his former associates for $512,583.91 in restitution to Prime.

We concluded that under these circumstances, the Commissioner's reliance on the default judgment against Krauze's associates and URM and the decision to make Krauze jointly and severally liable for the maximum amount of restitution specified in the final order was "an arbitrary exercise of the Commissioner's discretion to award `appropriate' restitution." Id. at 16. Although we vacated the order for that reason, we noted that "Krauze's favorable result in the federal litigation [was] a new development that would warrant exercise of the Commissioner's inherent power to reopen and rehear the question of restitution owed by Krauze." Id. at 17. Thus, we remanded for only one purpose — "to allow the Commissioner to decide whether to exercise that inherent power." Ibid.

Pursuant to our mandate, on remand Prime had the burden of demonstrating circumstances warranting reopening of the enforcement action to award restitution. On January 28, 2010, the Chief of Legislative and Regulatory Affairs for the Department advised the parties that the Commissioner had elected not to reopen the matter. On March 10, 2010, the Acting Commissioner elaborated. He explained that following our remand, Prime simply sought restitution from Krauze in the amount of $512,583.91. Quite correctly, the Acting Commissioner noted that our decision did not permit that approach. The Acting Commissioner further explained that because Prime had a default judgment against Krauze's former associates and URM, he had determined it was not appropriate to reopen the enforcement action to adjudicate the question of restitution from Krauze.

On appeal, Prime argues:

I. STANDARD OF REVIEW. II. THE COMMISSIONER[`]S DECISION SHOULD BE REVERSED BECAUSE IT WAS ARBITRARY, CAPRICIOUS, UNREASONABLE AND NOT SUPPORTED BY SUBSTANTIAL CREDIBLE EVIDENCE IN THE RECORD. III. THE COMMISSIONER SHOULD BE EQUITABLY ESTOPPED FROM DENYING PRIME RESTITUTION.1 IV. THE COMMISSIONER'S DECISION ON REMAND WAS BEYOND THE SCOPE OF THE APPELLATE DIVISION'S DECISION TO REMAND. V. THE COMMISSIONER'S DECISION TO VACATE THE AWARD FOR RESTITUTION WITHOUT AFFORDING PRIME A RIGHT TO BE HEARD VIOLATED PRIME'S RIGHTS TO DUE PROCESS AND FUNDAMENTAL FAIRNESS. VI. THIS COURT SHOULD EXERCISE ITS ORIGINAL JURISDICTION TO ORDER THE COMMISSIONER TO REINSTATE HIS AWARD OF RESTITUTION TO PRIME IN THE AMOUNT OF $512,583.91.

After considering the foregoing issues in light of the arguments, the record and our prior decision, we conclude that they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We discern no abuse of the Commissioner's discretionary authority or disregard of this court's mandate.

Affirmed.

FootNotes


1. While this appeal was pending and after Prime filed its main brief, Prime moved to file a supplemental brief expanding its argument on estoppel to address the significance of a settlement reached in a civil case filed in State court. We denied that motion because Prime had not included the settlement agreement or any order indicating that the litigation was settled and completed. Thereafter, Prime did not file a motion documenting the facts it asserted in support of its motion to file a supplemental brief.

At oral argument before this court, Prime again raised the settlement. Having no indication that Prime raised the issue of settlement before the Commissioner, we decline to consider the claim. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).

Source:  Leagle

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