Opinion
No. 2042 C.D. 2013
06-26-2014
Kim Cesare Auto Sales, Inc. and Linda's Notary Service, Petitioners v. Department of Transportation, Respondent
BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE ANNE E. COVEY, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE SIMPSON
Kim Cesare Auto Sales, Inc. (Business) and Linda's Notary Service (Notary), (collectively, the Cesares) petition for review from the order of the Secretary of the Department of Transportation (Secretary) that denied their exceptions and affirmed the Department of Transportation's (PennDOT) termination of their agent services agreements. The Cesares raise several procedural and substantive challenges to the Secretary's order. Primarily, the Cesares assert PennDOT violated their procedural due process rights. Specifically, they argue the grounds for termination the Secretary ultimately upheld were not included in the termination notice. Upon review, for the following reasons, we reverse.
Kim Cesare operates the Business, and his wife, Linda Cesare, serves as a notary for the Business.
I. Background
Kim Cesare is the president of Business, an automobile dealership. His wife, Linda Cesare, is the sole proprietor of Notary, which is located at the dealership. The Cesares maintained their businesses for over 30 years, and they continue to operate. When PennDOT began requiring agreements to authorize agents to issue title and tags to customers, the Cesares executed the agent services agreements. Thereafter, the agreements were renewed for consecutive three-year terms through 2016.
PennDOT previously issued licenses to agents. This changed when the legislature amended Section 7501 of the Vehicle Code, 75 Pa. C.S. §7501, requiring PennDOT to enter contracts for agent services. See Act of December 9, 2002, P.L. 1278.
Agents, like Business and Notary, are required to comply with Title 67, Chapter 43 of the Vehicle Code, pertaining to title and registration. Agents and their employees are also required to attend training relevant to their agent services. Agents must receive basic training within one year of executing a contract. Agents are required to complete refresher courses every two years thereafter.
Relevant here, PennDOT provides training regarding proof of identification requirements to accompany a title or registration transaction. Between 2006 and 2009, the requirements for proofs of identification changed to restrict and reject types of identifications that were previously acceptable (e.g., passports).
In January 2006, with the exception of military identification (ID), PennDOT began requiring a valid Pennsylvania-issued ID card, including a driver's license, a government-issued ID card, or valid photo exempt ID card. Accordingly, agents were no longer permitted to process transactions for out-of-state residents. Reproduced Record (R.R.) at 32a.
In June 2008, PennDOT alerted agents that non-government issued licenses were no longer acceptable as proof of identification. In July 2009, after reminding agents of the 2006 changes to proof of identification requirements, PennDOT's newsletter advised agents that copies of both the front and the back of the credentials must be submitted to PennDOT with applications.
To alert agents of changes in requirements, PennDOT periodically circulates updates. In January 2006, PennDOT sent all agents a newsletter containing the updates by mail, and by email if it had an agent's email address. After January 2006, the newsletters were sent to agents with email addresses by email. Updates and fact sheets were also posted on PennDOT's website. Both the basic training and the advanced refresher classes for agents included the fact sheets containing the proof of identification requirements for issuing titles and tags.
Starting in 2006, PennDOT began requiring agents to submit an email address to receive updates. Reproduced Record (R.R.) at 31a.
Under an agent service agreement, PennDOT, through its Bureau of Motor Vehicle Services (Bureau), had the power to conduct unannounced audits of agents' files and records during regular business hours.
The Bureau conducted an audit of Business and Notary on August 26, 2009 (Audit). During the Audit of Business, auditors confiscated 27 transaction files that contained copies of unacceptable proof of identification documents and 71 transaction files that contained incomplete supporting documents with the motor vehicle paperwork. See Hr'g Officer's Proposed Report, 3/14/03, Finding of Fact (F.F.) No. 14. During the Audit of Notary, auditors confiscated 50 transaction files that contained copies of unacceptable proof of identification documents and 154 transaction files that contained incomplete supporting documents with the motor vehicle paperwork. F.F. No. 15.
The Audit and subsequent investigation further revealed the Cesares did not complete the required training.
After the Audit, on October 2, 2009, PennDOT issued an Order of Immediate Termination of both agent services agreements under Paragraph 30 of the agreements for fraudulent record-keeping (Termination Notice). R.R. at 382a-83a, 442a-43a. As to Business, the Termination Notice also cited violations of Paragraph 29(54) (failure to maintain proper records), R.R. at 382a, which is not a basis for termination. The Termination Notice stated no other termination grounds. Also, it did not contain any appeal instructions. Rather, the notice advised the Cesares they could request a meeting with PennDOT to present mitigating circumstances. Although PennDOT conducted a meeting at the Cesares' request, where the Cesares sought a lesser penalty, PennDOT never responded to their mitigation request.
PennDOT explains it did not render a decision as to mitigation as was its custom because Business and Notary appealed to the trial court, which stayed the terminations.
Business and Notary directly appealed the terminations to the Northampton County Court of Common Pleas (trial court). The trial court entered a stay, allowing operations to resume. PennDOT moved to quash the Cesares' appeals, arguing the trial court lacked jurisdiction. After denying the motions, the trial court held a full hearing on the merits. On July 20, 2011, the trial court held PennDOT improperly terminated the agent services agreements, and it vacated the terminations. Notably, the trial court concluded PennDOT did not substantiate the fraudulent record-keeping violations.
Previously, former Section 7503 of the Vehicle Code, 75 Pa. C.S. §7503, provided for the right of appeal of license disputes to the courts of common pleas. When the Cesares appealed in 2009, this Court had not determined the propriety of jurisdiction in the courts of common pleas.
PennDOT appealed the trial court's order to this Court. Months later, PennDOT moved to vacate the trial court's order based on lack of jurisdiction.
The two matters, Kim Cesare Auto Sales, Inc. v. Department of Transportation, Bureau of Motor Vehicles, (Pa. Cmwlth., No. 1575 C.D. 2011), and Linda's Notary Service v. Department of Transportation, Bureau of Motor Vehicles, (Pa. Cmwlth., No. 1576 C.D. 2011), were consolidated by order filed October 19, 2011.
After argument, this Court agreed the trial court lacked subject matter jurisdiction pursuant to Heller v. Department of Transportation, Bureau of Motor Vehicles, 26 A.3d 538 (Pa. Cmwlth. 2011) (filed July 20, 2011). In a single-judge opinion, then-President Judge Leadbetter vacated the trial court's order, and transferred the matter to PennDOT's administrative docket under 42 Pa. C.S. §5103(a) (relating to erroneously filed appeals).
After the transfer to PennDOT, a hearing officer conducted another full hearing on the merits. The parties stipulated to the bases for termination stated in the Termination Notice. The parties essentially presented the same witnesses they presented to the trial court. Both Cesares testified on behalf of Business and Notary. On PennDOT's behalf, Hiral Patel, who performed the Audits, and Susan Wilson, who manages agent services, testified.
Significantly, at the start of the hearing, counsel for PennDOT stated that the conduct also constituted "good cause" grounds for terminating the agent services agreements. R.R. at 16a. Specifically, after acknowledging "good cause" did not appear in the Termination Notice, counsel advised PennDOT "is going to argue that the conduct of the [Cesares] was also grounds for a termination, pursuant to Paragraph 33 of the [agent services agreements], which would be Good Cause shown." Id. Counsel for the Cesares objected to its addition when the case was in litigation for over two years based on fraudulent conduct. He sought a continuance to enable him to defend the Cesares on that new basis. However, the hearing officer proceeded with the hearing, recognizing it as a possible "legal issue." Id. at 25a. She noted that after hearing evidence, she may later allow the record to remain open to address good cause. Id.
As to Business, Patel testified that in at least nine transactions, the records contained unacceptable proofs of identification. In two of the transactions, Business accepted "non-government (fraudulent) issued" Pennsylvania ID cards. F.F. No. 24t. In the remaining seven transactions, Business accepted invalid forms of ID, which were apparent from the distorted pictures, inaccurate font size, and in one instance, the back of the card included language that is not part of a Pennsylvania ID card.
As to Notary, Patel testified that, in at least 12 transactions, the records contained unacceptable proofs of identification. In two of the transactions, Notary accepted invalid ID cards which were apparent from the distorted pictures. In seven of the transactions, Notary accepted invalid ID cards, which were apparent on their face because they included the language "Non-Government Issued Photo ID." F.F. No. 24u. In the remaining three transactions, she accepted invalid ID cards, which were apparent from the face of the card.
PennDOT also submitted evidence of the training materials that cover acceptable proofs of identification. Among the evidence submitted were parts of PennDOT's voluminous training manual. The Cesares' counsel requested time to review the contents of the manual with his clients before agreeing to its admission.
The hearing officer allowed the record to remain open for 30 days "[w]hich will give each of you an opportunity to look through the training manual. If you feel you need another hearing to call another witness, notify the docket clerk in writing." R.R. at 186a. Approximately six weeks later, the hearing officer reconvened the hearing at the Cesares' request to admit their testimony as to the training materials, and their knowledge of same. PennDOT also presented a witness, Penny Bernard, regarding her role as overseer of training courses and dissemination of training materials, including proof of identification updates.
After post-hearing briefing, the hearing officer determined PennDOT properly terminated the agent services agreements. Importantly, the hearing officer did not find merit in the fraudulent record-keeping violations, the only basis for termination cited in the Termination Notice. She reasoned "an element of fraud that is lacking in the case against [the Cesares]— [is] scienter: guilty knowledge, intent to deceive." See Proposed Report at 9. Because she found the Cesares did not know the proofs of identification were fraudulent when they accepted them, she concluded they lacked deceitful intent. Nonetheless, the hearing officer determined PennDOT had "good cause" for terminating the agent services agreements, and upheld their termination on that basis.
As to "good cause," the hearing officer found "[a]t the June 5, 2012, hearing the Bureau raised for the first time the defense that it had good cause to terminate the Agreements pursuant to paragraph 33 of the Agreements (Hr'g Tr. at 16)." See Proposed Report, F.F. No. 22 (emphasis added). However, she noted:
The Cesares had a full and fair opportunity to present evidence in opposition to the Bureau's argument that the Agreements could also be terminated for good cause. In addition to the full day hearing that was conducted on June 5, 2012, I also permitted the record to remain open (Hr'g Tr. at 25, 184-90) for almost two months and conducted a second hearing at the Cesares' request on July 31, 2012.See Proposed Report at 9 n.1. Ultimately, the hearing officer concluded PennDOT established good cause because the Cesares accepted improper proofs of identification.
The Cesares filed exceptions to the hearing officer's proposed report. First, they argued the trial court's order had preclusive effect. They then challenged due process as PennDOT provided no notice of "good cause" grounds for termination. The Cesares also challenged PennDOT's failure to consider mitigation of the penalty. Lastly, they asserted PennDOT did not establish that either Business or Notary knowingly accepted improper proofs of identification.
The Secretary denied the Cesares' exceptions, and adopted and made final the hearing officer's report upholding the terminations.
The Cesares filed a petition for review, seeking reversal of the Secretary's order on multiple grounds. The Cesares also requested a stay of enforcement, which this Court granted. In the memorandum accompanying the order granting stay, the Court noted the Cesares presented a potentially meritorious defense on due process grounds as to the inadequacy of notice for the termination. See Kim Cesare Auto Sales, Inc. & Linda's Notary Serv. v. Dep't of Transp., Memorandum and Order (Pa. Cmwlth., No. 2042 C.D. 2013, filed February 14, 2014) (Quigley, S.J.).
Our review is limited to determining whether constitutional rights were violated, whether errors of law were committed, or whether necessary findings of fact were supported by substantial evidence. Gutman v. Dep't of Transp., 16 A.3d 566 (Pa. Cmwlth. 2011).
II. Discussion
The Cesares challenge the Secretary's order upholding termination of their agent services agreements on several bases, all of which were preserved during the administrative proceeding. First, they argue that the trial court's decision on the merits in the Cesares' favor, after a full hearing, had legally preclusive effect that bound the Secretary. The special circumstances and timing of this case render Heller inapposite. Next, they challenge the due process of the notice when PennDOT did not specify good cause until the first day of the administrative hearing. They also argue that because the conduct did not rise to the level of fraud, termination was too harsh a sanction, and PennDOT should have considered mitigating circumstances. In addition, the Cesares contend the decision is not supported by substantial evidence.
A. Jurisdiction
First, the Cesares maintain the trial court had concurrent jurisdiction with the Secretary. Therefore, the trial court's decision in their favor should have preclusive effect. The Cesares assert the concepts of res judicata and collateral estoppel apply to the trial court's decision.
Technical res judicata provides that where a final judgment on the merits exists, a future lawsuit on the same cause of action is precluded. J.S. v. Bethlehem Area Sch. Dist., 794 A.2d 936 (Pa. Cmwlth. 2002). Collateral estoppel acts to foreclose litigation in a subsequent action where issues of law or fact were actually litigated and necessary to a previous final judgment. Id.
Technical res judicata requires the coalescence of four factors: (1) identity of the thing sued upon or for; (2) identity of the causes of action; (3) identity of the persons or parties to the action; and, (4) identity of the quality or capacity of the parties suing or being sued. Id.
Similar to res judicata, collateral estoppel prevents relitigation of issues in a subsequent case where: (1) the issue decided in the prior case is identical to that of the subsequent case; (2) the prior case resulted in a final judgment on the merits; (3) the party against whom the doctrine is asserted was a party in the prior case; and, (4) the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action. Rue v. K-Mart Corp., 713 A.2d 82 (Pa. 1998); Benginia v. Workers' Comp. Appeal Bd. (City of Scranton), 805 A.2d 1272 (Pa. Cmwlth. 2002).
For either collateral estoppel or res judicata principles to apply, the decision that has the alleged preclusive effect must be issued by a tribunal of competent jurisdiction. R/S Fin. Corp. v. Kovalchick, 716 A.2d 1228 (Pa. 1998); Tobias v. Halifax Twp., 28 A.3d 223, 226 (Pa. Cmwlth. 2011) ("Under the doctrine of res judicata, or claim preclusion, an action is barred because it is grounded [...] upon a claim which was the subject of a prior adjudication by a court of competent jurisdiction") (emphasis added). That prerequisite is lacking here. Heller.
In Heller, when asked to determine whether a court of common pleas has jurisdiction over termination of agent services agreements, this Court determined that such matters are appealable to PennDOT. The Cesares argue Heller is distinguishable on its facts. We remain unpersuaded.
In Heller, this Court squarely rejected that jurisdiction over a contract termination rested with a court of common pleas. Analyzing Section 1377 of the Vehicle Code, 75 Pa. C.S. §1377 (relating to the right to appeal from PennDOT final orders to the courts of common pleas), this Court held PennDOT did not issue a final appealable order. We explained that while termination of contract may qualify as a sanction, it is not a final agency order. Moreover, final agency orders, where no statutory appeal process lies, are properly appealed pursuant to Section 702 of the Administrative Agency Law, 2 Pa. C.S. §702. Although this Court noted that neither party presented any evidence to the Heller trial court, and that no hearing was held, that a hearing was held here does not alter the legal analysis on the jurisdiction issue.
Unique to this case is that the trial court's order in the Cesares' favor was issued the same date as this Court decided Heller. Thus, at the time the trial court held the hearing, and PennDOT submitted its evidence and argued its theory of the case, the parties proceeded under the belief that the trial court had jurisdiction. However unfortunate the timing, Heller dictates the jurisdictional issue before us. Because it did not have subject matter jurisdiction, the trial court's findings are not binding on PennDOT.
Further, this Court vacated the trial court's order, and transferred the case to PennDOT's administrative docket. Once this Court vacated it, the trial court's order no longer constitutes legal authority. Reading City Dev. Auth. v. Lucabaugh, 829 A.2d 744 (Pa. Cmwlth 2003).
Unlike transfers for improvident appeals in federal court, the provisions regarding transfer of matters to the administrative docket do not provide that the transcript and pleadings in the erroneously filed action accompany the transfer. Compare Section 5103(b) of the Judicial Code, 42 Pa. C.S. §5103(b) with Section 5103(a) of the Judicial Code, 42 Pa. C.S. §5103(a).
An appeal of termination of an agent service agreement must first be filed in PennDOT's administrative docket. Heller; see also Moore, t/a Jack Rabbit Auto Tags & License Serv. v. Dep't of Transp., 989 A.2d 49 (Pa. Cmwlth. 2009) (Moore I) (single judge op., Pellegrini, J.) (explaining agent agreement is a license, the termination of which requires an administrative hearing under the Administrative Agency Law).
Lack of subject matter jurisdiction is non-waivable. Dep't of Transp., Bureau of Traffic Safety v. Weaver, 414 A.2d 144 (Pa. 1980). "When a court takes action beyond the power conferred on it by law (its jurisdiction), its action is a nullity ...." Barnes v. McKellar, 644 A.2d 770, 773 (Pa. Super.), appeal denied, 652 A.2d 834 (Pa. 1994). Because the trial court lacked jurisdiction, and this Court vacated its order, its determination was not binding on the Secretary and was incapable of having legally preclusive effect.
B. Due Process Violations
The Cesares next argue that the terminations of their agent services agreements violated their due process rights because they did not receive proper notice of the termination grounds. There is no dispute the Secretary upheld termination of the agreements on the sole basis of good cause. There is also no dispute that when PennDOT issued the Termination Notice in 2009, it set forth a single ground for termination: fraudulent record-keeping. Despite concluding that PennDOT did not establish fraud, the hearing officer upheld termination under the late-asserted "good cause" grounds. The Cesares contend upholding termination on that basis violated their due process rights, and was not cured by the reconvened hearing. Based on the unique procedural backdrop, and special circumstances here, we agree.
The Cesares have a protected property interest in their agent services agreements that implicates constitutional due process, as such an agreement is a license. Moore I. Any adverse government decision with respect to a license must be subject to review, under due process and the Pennsylvania Constitution. Phila. Entm't & Dev. Partners L.P. v. Pa. Gaming Control Bd., 34 A.3d 261, 276 (Pa. Cmwlth. 2011) (noting that "some form of due process is required when an administrative agency revokes one's right to transact business in the Commonwealth").
The termination clause of the agent services agreements states the agreement may be terminated for "good cause." Specifically, "paragraph 33 of the Agreements provides that [PennDOT] may terminate operation of the agent or service for certain types of conduct and for 'good cause shown.'" F.F. No. 11. However, the term "good cause" is not defined in the agreements. In its entirety, Paragraph 33 states:
[PennDOT] may also terminate this Agreement at any time for good cause shown, including, but not limited to, misrepresentation or fraud in the Contractor's application which formed the basis for this contract, or if the agent services is operated, managed, controlled or affiliated with a person who has been convicted of a felony involving dishonesty or breach of trust, who has had an agent, card agent, messenger service, or on-line messenger contract terminated by [PennDOT] in the past, or who would be ineligible to be authorized to engage in providing agent services.R.R. at 259a, 296a.
In Moore v. Department of Transportation, Bureau of Motor Vehicles, 19 A.3d 1200 (Pa. Cmwlth. 2011) (Moore II), this Court defined "good cause" in the context of terminating an agent service agreement as a "legally sufficient reason" for termination. Moore II, 19 A.3d at 1207. As both parties cite Moore II in support of their positions, we examine its application to the facts here.
In Moore II, the owner of an auto tag and license service entered into an agreement with PennDOT similar to the agreements here. Id. at 1202. During an audit, the Bureau discovered 10 transactions in which the owner accepted invalid driver's licenses as proofs of identification. Id. at 1203. The audit further revealed, as in the present case, that some of the owner's employees did not attend the required agent training. Id. Initially, PennDOT terminated the agreement on the grounds of fraudulent record-keeping. But, like here, the hearing officer found that while the owner's conduct did not rise to the level of fraud, PennDOT had good cause to terminate under Paragraph 33. Id.
Unlike the instant case, in Moore II, the Secretary remanded specifically to allow a hearing on the issue of good cause after the hearing officer upheld termination on that basis. In Moore II, this Court reasoned that the availability of that administrative hearing prior to an appeal cured any alleged due process violation.
PennDOT appears to concede that due process was lacking in that the Cesares had no prior notice of the "good cause" ground for termination prior to the first day of the administrative hearing. However, relying on Moore II, PennDOT asserts the potential violation of due process was cured because the hearing officer adjourned the hearing to allow the Cesares to address the good cause argument. Careful review of the transcript does not support PennDOT's characterization.
PennDOT raised the "good cause" issue for the first time at the outset of the administrative hearing on June 5, 2012. At that time, the hearing officer declined to continue the hearing to a later date for that purpose and noted it was "a matter of law." R.R. at 25a. The reason for the readjournment was to allow the parties to review the voluminous training manual PennDOT submitted, to submit evidence regarding its contents, and, if necessary, to refute its contents. Id. at 186a. There is no indication at the end of the hearing that the reason for the adjournment was to take evidence regarding "good cause." Id. at 184a-90a. Indeed, it was never clear during the hearing that the hearing officer allowed "good cause" as an amendment to the termination grounds set forth in the Termination Notice issued more than two years and eight months earlier.
PennDOT also cites Moussa v. Department of Transportation, (Pa. Cmwlth., No. 2565 C.D. 2010, filed December 6, 2011), an unreported panel decision, for its persuasive value. Moussa involves termination of an agent services agreement on facts similar to those presented here.
In Moussa, PennDOT terminated the agent's agreement based on acceptance of improper proofs of identification discovered in an audit. As in this case, in Moussa, the hearing officer did not find sufficient evidence of fraud. However, the hearing officer found the conduct, substantiated by the record, constituted good cause for termination. This Court then evaluated whether termination based on good cause was appropriate in the absence of fraud.
Moussa does not hold that agents are not entitled to notice of good cause grounds in the termination notice. Construing the case most favorably to PennDOT, Moussa indicates that accepting improper proofs of identification, if proven by substantial evidence, may constitute good cause for termination.
However, the agent in Moussa did not raise a due process challenge like the Cesares do here. Instead, the agent in Moussa relied solely on an argument that PennDOT lacked sufficient evidence to support the underlying violations. Therefore, the due process question presented here was neither before this Court, nor addressed by this Court, in Moussa. Thus, we did not address in Moussa the critical question presented here of whether PennDOT may add a ground for termination not included in the initial Termination Notice, almost three years later.
Due process invokes justice and fairness in proceedings, necessitating largely fact-specific evaluation. Here, the Cesares argue that shutting down their businesses, and effectively ending their livelihood, when they had no notice of the grounds until the beginning of the administrative hearing, violated their due process rights. In light of the atypical procedural history here, we agree.
The concept of due process is a flexible one and imposes only such procedural safeguards as the situation warrants. Burger v. Bd. of Sch. Dirs. of McGuffey Sch. Dist., 839 A.2d 1055 (Pa. 2003); LaFarge Corp. v. Dep't of Ins., 735 A.2d 74 (Pa. 1999); D.Z. v. Bethlehem Area Sch. Dist., 2 A.3d 712 (Pa. Cmwlth. 2010). Notice is an integral component of due process. Pa. Bankers Ass'n v. Dep't of Banking, 981 A.2d 975 (Pa. Cmwlth. 2009). However, due process notice requirements are flexible and non-technical, such that no particular form of notice or procedure is necessary. Harrington v. Dep't of Transp., Bureau of Driver Licensing, 763 A.2d 386 (Pa. 2000). Where a constitutionally protected property interest is at stake, due process requires sufficient notice of the conduct that forms the basis for a deprivation so that the respondent may adequately prepare a defense. Id. In assessing an alleged denial of procedural due process, demonstrable prejudice is a key factor. D.Z.
Unlike the facts presented in other decisions of this Court, the parties here fully litigated the merits pursuant to a specific theory of the case predicated on fraudulent conduct. After that litigation, where it did not prevail based upon insufficient evidence to support the grounds charged, PennDOT raised good cause. In so doing, PennDOT attempted to take a second bite of the apple.
A party's ability to adequately defend charges encompasses notice of the conduct complained of, as well as the facts and legal standards applicable to that conduct. In this case, notice of a new legal basis for termination on the date of the administrative hearing is inadequate for a number of reasons.
First, the parties fully litigated the merits of the case previously only as to the grounds cited in the Termination Notice. Second, the parties entered a Joint Stipulation of Facts on May 29, 2012, a week before the administrative hearing, in which the grounds for termination are cited, again, without reference to good cause. Third, advising a party on the date of hearing as to an additional termination ground does not permit counsel sufficient time to adequately prepare a defense. For that reason, counsel for the Cesares specifically objected to introduction of "good cause" as new grounds for termination. R.R. at 18a. Lastly, it was not clear that the good cause ground remained viable at the close of the first day of hearing. The hearing officer did not continue the hearing, but she also did not advise that she would consider good cause. See id. at 184a-90a. PennDOT did not raise the point again at the conclusion of the hearing, and it was not the reason stated by the hearing officer for reconvening the hearing six weeks later. Id.
The flexibility within due process is sufficiently expansive to protect the Cesares from the late-asserted termination ground of good cause. Here, PennDOT raised the late-asserted ground almost three years after PennDOT issued the Termination Notice on October 2, 2009. PennDOT offered no reason for such a delay, and none excuses the late-added termination ground in this case.
We hold the Cesares did not receive adequate notice of the good cause ground to prepare an adequate defense. The Cesares suffered prejudice because the hearing officer determined there was insufficient evidence to support the one ground in the Termination Notice, fraudulent record-keeping, yet, she upheld termination of the agent services agreements.
In light of the excessive delay between the Termination Notice, and PennDOT's verbal notice of the good cause ground at the administrative hearing, we do not believe the prejudice exacted here may be cured by a subsequent hearing. In contrast to Moore II, the Cesares were not afforded a subsequent hearing dedicated to the good cause issue at the administrative level. Moreover, the issue presented in Moore II differs from that presented here because there the owner challenged the hearing officer's ability to raise "good cause" on its own motion. Here, PennDOT sought to add new grounds for termination after a full hearing on the merits, and after significant unexcused delay. Thus, Moore II focused on the hearing officer's alleged violation of due process, which the Secretary cured, rather than inadequacy of an agency's notice of charges. Accordingly, this case is both factually and legally distinguishable from Moore II.
III. Conclusion
Under the unique procedural and factual circumstances of this case, this Court concludes PennDOT violated the Cesares' procedural due process rights in upholding termination of their agent services agreements based on good cause. Given the years that elapsed between the Termination Notice and PennDOT's verbal attempt to amend the termination grounds, a subsequent hearing on good cause would not mend the damage inflicted by the delay in notice here.
For the foregoing reasons, we reverse the Secretary's order. Accordingly, the agent services agreements of Business and Notary remain in place through their respective renewal dates in 2016.
As we reverse the Secretary's order on due process grounds, we need not address the Cesares' remaining arguments. --------
/s/_________
ROBERT SIMPSON, Judge Judge Cohn Jubelirer did not participate in the decision in this case. ORDER
AND NOW, this 26th day of June, 2014, the order of the Secretary of the Department of Transportation is hereby REVERSED.
/s/_________
ROBERT SIMPSON, Judge