Burns v. The Department of Insurance

2013 IL App (1st) 122449FIRST DIVISION
FILED: September 30, 2013
No. 1-12-2449
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
JOHN T. BURNS, III, ) Appeal from the Circuit
) Court of Cook County.
Plaintiff-Appellant, )
)
v. ) No. 12-CH-5077
)
THE DEPARTMENT OF INSURANCE and )
ANDREW BORON, Acting Director of The )
Department of Insurance, ) Honorable
) LeRoy K. Martin, Jr.,
Defendants-Appellees. ) Judge Presiding.
JUSTICE HOFFMAN delivered the judgment of the court, with opinion.
Presiding Justice Connors and Justice Delort concurred in the judgment and opinion.
OPINION
¶1 The plaintiff, John T. Burns, III, appeals the circuit court order which, pursuant to section 2-
619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2012)), dismissed his
complaint for administrative review of the decision of the defendants, The Department of Insurance
and Andrew Boron, Acting Director of The Department of Insurance (Department), to revoke his
insurance producer license and impose a civil penalty of $10,000. For the reasons that follow, we
affirm the judgment of the circuit court.
¶2 The plaintiff filed a complaint for administrative review, alleging the following facts. On
March 1, 2011, the Department revoked the plaintiff's insurance producer license. On March 25, he
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requested a hearing to determine whether his license should be reinstated. The hearing was held on
August 25, with hearing officer Helen Kim presiding over the proceedings. After hearing testimony
from various individuals, Kim issued an opinion on November 10, 2011, recommending that the
plaintiff's license be revoked and that he be fined. On January 10, 2012, the Department adopted
Kim's opinion and recommendations, revoked the plaintiff's insurance producer license, and fined
him $10,000. The plaintiff requested that the Department's order be reversed and that his license be
reinstated.
¶3 The plaintiff attached Kim's November 10, 2011, opinion. According to the opinion, the
plaintiff proceeded pro se at the hearing at which several witnesses testified. While the transcripts
of the administrative hearing are not part of the appellate record, we use Kim's summary of the
proceedings to provide factual context.
¶4 Mary Lopez, an enforcement attorney for the Illinois Securities Department, testified that her
department received several complaints from investors about the plaintiff's conduct while working
for USA Retirement. The customer complaints identified the plaintiff as the one who led them to
invest in fraudulent products. Specifically, Lopez knew of at least four investors that named the
plaintiff, but she could not disclose their names because such information is confidential. The
customers told Lopez that, while they lost their life savings, the plaintiff appeared to be doing very
well, having purchased a big home and nice car while working at USA Retirement. According to
Lopez, the customers, who lost about $1 million combined, were told about the fraudulent
investment products when they initially sought estate planning or tax advice. In June 2010, the
Securities Department issued a temporary order prohibiting the plaintiff from selling or offering
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securities. After the plaintiff failed to contest the temporary order, the order became final. After the
Securities Department issued its order, the Department opened its investigation.
¶5 The plaintiff testified that he was employed by USA Retirement from November 2008
through March 2010. He obtained his insurance producer license in March 2009, but he denied that
he ever sold any insurance products. He further denied that he ever offered or sold securities to any
customer. The plaintiff was employed to hold seminars on estate planning issues and meet with
customers regarding estate planning issues. In March 2010, USA Retirement was taken into
receivership after the federal Securities and Exchange Commission filed a complaint against the
managing partners of the company. The plaintiff denied knowledge of the "four consumers" that
Lopez referred to in her testimony and denied purchasing a new home or a new car while working
at USA Retirement. He also admitted that he did not request a hearing to contest the Securities
Department's prohibition order.
¶6 Kim determined that, because the plaintiff was found by the Securities Department to have
committed fraud and other violations of the Securities Act (815 ILCS 5/12 (West 2010)), it was
within the Director's discretion to revoke his insurance producer license pursuant to section 500-
70(a)(8) of the Insurance Code (215 ILCS 5/500-70(a)(8) (West 2012)). Additionally, she
recommended that the plaintiff be assessed a civil penalty of $10,000, noting that since Lopez
testified regarding four investors, he could be assessed up to $40,000. However, Kim considered
that the plaintiff was still owed a salary and had incurred financial hardship as a result of his
employment at USA Retirement. She also found no evidence substantiating the claims that the
plaintiff purchased a larger home and nicer vehicle during his employment. On January 10, 2012,
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the Department adopted Kim's factual findings, conclusions of law, and recommendations.
¶7 On February 14, 2012, the plaintiff filed the instant action for administrative review in the
circuit court. On April 17, 2012, the defendants filed a section 2-619 motion to dismiss the
plaintiff's complaint, arguing that he failed to petition for a rehearing or to reopen the hearing
pursuant to section 2402.280 of the Administrative Code (50 Ill. Adm. Code 2402.280 (West 2012))
and, therefore, failed to exhaust his administrative remedies as required by the Department's rules.
¶8 On July 16, 2012, after hearing the matter, the circuit court granted the defendants' section
2-619 motion, agreeing with them that the plaintiff failed to exhaust his administrative remedies by
failing to file a motion for a rehearing. This appeal followed.
¶9 A section 2-619 motion to dismiss admits the legal sufficiency of the complaint and raises
defects, defenses, or other affirmative matters that appear on the face of the complaint or are
established by external submissions that act to defeat the claim. Krilich v. American National Bank
& Trust Co. of Chicago, 334 Ill. App. 3d 563, 570, 778 N.E.2d 1153 (2002). Section 2-619(a)(9),
specifically, allows dismissal when the claim asserted is barred by an affirmative matter which
avoids the legal effect of or defeats the claim. 735 ILCS 5/2-619(a)(9) (West 2012); Id. In ruling
on a motion to dismiss under section 2-619, the trial court may consider pleadings, depositions, and
affidavits. Id. The question on appeal is whether the existence of a genuine issue of material fact
should have precluded the dismissal or, absent such an issue of fact, whether dismissal is proper as
a matter of law. Id. Our standard of review of a dismissal under section 2-619 of the Code is de
novo. Id. at 569.
¶ 10 Regarding administrative proceedings conducted by the Department, section 2402.280(c) of
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the Administrative Code provides:
"A motion for a rehearing or a motion for the reopening of a hearing shall be filed
within 10 days of the date of mailing of the Director's Order. A rehearing shall be noticed
and conducted in the same manner as an original hearing. The evidence received at the
rehearing shall be included in the record for Director's reconsideration and for judicial
review. A decision or order may be amended or vacated after rehearing. " 50 Ill. Adm. Code
2402.280(c) (West 2012).
¶ 11 Further, section 3-102 of the Administrative Review Law (735 ILCS 5/3-102 (West 2012)),
provides that "[u]nless review is sought of an administrative decision within the time and in the
manner herein provided, the parties to the proceeding before the administrative agency shall be
barred from obtaining judicial review of such administrative decision." Section 3-102 further states:
"If under the terms of the Act governing the procedure before an administrative
agency[,] an administrative decision has become final because of the failure to file any
document in the nature of objections, protests, petition for rehearing or application for
administrative review within the time allowed by such Act, such decision shall not be subject
to judicial review hereunder excepting only for the purpose of questioning the jurisdiction
of the administrative agency over the person or subject matter." 735 ILCS 5/3-102 (West
2012).
¶ 12 Accordingly, the general rule is that parties aggrieved by the action of an administrative
agency cannot seek review in the courts without first exhausting all administrative remedies
available to them. Castaneda v. Human Rights Comm'n, 132 Ill. 2d 304, 308, 547 N.E.2d 4375
No. 1-12-2449
(1989). Requiring the exhaustion of remedies allows the administrative agency to fully develop and
consider the cause before it, use its expertise to resolve matters, correct its own errors, and conserve
judicial time by avoiding unnecessary or piecemeal appeals. Id. Where the administrative rules
allow for applications for rehearing, a party must do so in order to exhaust his administrative
remedies and preserve his right to seek judicial review. Id. at 321-23. However, several exceptions
have been recognized by our courts which allow a party to seek judicial review of an administrative
decision without exhausting all administrative remedies available to him, including: (1) where a
statute, ordinance or rule is attacked as facially unconstitutional; (2) where multiple administrative
remedies exist and at least one is exhausted; (3) where the agency cannot provide an adequate
remedy or where it is patently futile to seek relief before the agency; (4) where no issues of fact are
presented or agency expertise is not involved; (5) where irreparable harm will result from further
pursuit of administrative remedies; or (6) where the agency's jurisdiction is attacked because it is not
authorized by statute. Id. at 309.
¶ 13 In this case, the plaintiff admits that he never filed an application for rehearing pursuant to
section 2402.280 of the Administrative Code, but he argues that the exception allowing judicial
review where no issues of fact are presented or agency expertise is involved applies to his case. He
argues that the Department based its revocation on hearsay statements that were improperly admitted
through Lopez's testimony and whether evidence constitutes hearsay is a legal issue, not requiring
the Department's expertise or fact-finding duties. See Halleck v. Coastal Building Maintenance Co.,
269 Ill. App. 3d 887, 891, 647 N.E.2d 618 (1995) (stating "[a]lthough the admission of evidence is
ordinarily within the sound discretion of the trial court, the initial determination that a particular
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statement constitutes hearsay is a legal issue which does not require any exercise of discretion, fact
finding, or evaluation of credibility").
¶ 14 Here, however, the transcript of the administrative hearing containing the alleged hearsay
statements was not made part of the appellate record. The Department attached a copy of the
transcript to its appendix and requested that we take judicial notice of it. While Illinois Supreme
Court Rule 329 (eff. Jan. 1, 2006) permits material omissions from and improper authentication of
the record on appeal to be remedied by stipulation of the parties after the transmission of the record
to this court (see also, Chicago Title & Trust Co. v. Brooklyn Bagel Boys, Inc., 222 Ill. App. 3d 413,
417, 584 N.E.2d 142 (1991)), the plaintiff objects in his reply brief to the inclusion of the transcript.
Thus, because the parties have not stipulated to the inclusion of the transcript, we consider only the
documents in the certified record.
¶ 15 It is the appellant's burden to present a sufficiently complete record of the proceedings at trial
to support a claim of error, and in the absence of such a record on appeal, it will be presumed that
the order entered by the Department was in conformity with the law and had a sufficient factual
basis. Foutch v. O'Bryant, 99 Ill.2d 389, 391-92, 459 N.E.2d 958 (1984); In re Marriage of Baniak,
2011 IL App (1st) 092017, ¶ 30, 957 N.E.2d 469. Any doubts which may arise from the
incompleteness of the record will be resolved against the appellant. Id. Without any transcript of
the administrative hearing, under Foutch, we must presume that the Department's evidentiary rulings
conform with the law and had a sufficient factual basis. Therefore, we reject the plaintiff's
contention that the exception to the exhaustion doctrine applies.
¶ 16 Moreover, even if we were to consider the merits of the plaintiff's argument, we would not
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find that evidentiary issues fall under the exception that plaintiff raises. The cases cited in
Castaneda for this exception do not relate to evidentiary issues arising during the administrative
hearing; rather, they involved novel statutory construction issues. See, Castaneda, 132 Ill. 2d at 309
(citing Illinois Bell Telephone Co. v. Allphin, 60 Ill. 2d 350, 359, 326 N.E.2d 737 (1975) (finding
an exception to the exhaustion doctrine, which antedated the Administrative Review Law, no longer
applied but applied to the plaintiff's case as it arose before the enactment of the new law); and
McKenna v. Board of Trustees of the University of Illinois, 90 Ill. App. 3d 992, 998-99, 414 N.E.2d
123 (1980) (finding that the plaintiff's claim that the university's merit board applied wrong wage
statute was a legal issue which involved no factual questions, no agency expertise, and where further
pursuit before the board would have been futile)). Unlike in Allphin and McKenna, evidentiary
issues are not novel and allowing the Department to reconsider such issues allows it to use its
expertise and correct its own errors. Thus, the purposes of the exhaustion doctrine seem best served
by requiring that the plaintiff exhaust all administrative remedies, including filing for a rehearing,
before seeking judicial review of the evidentiary issue he raises here.
¶ 17 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 18 Affirmed.
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