Opinion
2012 CA 0034
04-10-2013
GREGORY S. FONTENOT AND FBAC, LLC (F/K/A FONTENOT & ASSOCIATES, LLC) v. THE LOUISIANA BOARD OF ETHICS, FRANK P. SIMONEAUX, TERRY BACKHAUS, JULIE E. BLEWER, REV . GAIL BOWMAN, GARY G. HYMEL, JEAN INGRASSIA, DR. LOUIS LEGGIO, DR. CEDRIC LOWREY, M. BLAKE MONROSE, SCOTT SCHNEIDER, AND GROVE STAFFORD
R. Gray Sexton Jennifer L. Jackson Baton Rouge, Louisiana Counsel for Plaintiffs/Appellants Gregory S. Fontenot, et al. Kathleen M. Allen Mike Dupree Baton Rouge, Louisiana and Harry J. Philips, Jr. William H. L. Kaufman Baton Rouge, Louisiana Counsel for Defendant/Appellee Louisiana Board of Ethics, et al.
NOT DESIGNATED FOR PUBLICATION
On Appeal from the 19th judicial District Court
In and for the Parish of East Baton Rouge
Trial Court No. 604,322
The Honorable Timothy E. Kelley, Judge Presiding
R. Gray Sexton
Jennifer L. Jackson
Baton Rouge, Louisiana
Counsel for Plaintiffs/Appellants
Gregory S. Fontenot, et al.
Kathleen M. Allen
Mike Dupree
Baton Rouge, Louisiana
and
Harry J. Philips, Jr.
William H. L. Kaufman
Baton Rouge, Louisiana
Counsel for Defendant/Appellee
Louisiana Board of Ethics, et al.
BEFORE: PARRO, HUGHES, AND WELCH, JJ.
HUGHES , J.
This is an appeal from a district court judgment sustaining an exception of lack of subject matter jurisdiction, filed by the Louisiana Board of Ethics (the "Board"), and dismissing the plaintiffs' petition for declaratory and injunctive relief, which had sought a ruling that the Board lacks jurisdiction over the plaintiffs, who assert they are not public officials or employees. For the reasons that follow, we reverse and remand, with instructions.
FACTS AND PROCEDURAL HISTORY
The Board issued charges against the plaintiffs on May 20, 2011, stating that the plaintiffs herein were "contracted as . . . insurance consultants] for Jefferson Parish government" and that the plaintiffs received things "of economic value," i.e., payments from various named insurance companies, for services the plaintiffs rendered to those companies at times when those insurance companies had or were seeking "a contractual, business or financial relationship with [the plaintiffs'] agency, Jefferson Parish government." The actions of the plaintiffs were asserted to be in violation of the Code of Governmental Ethics (the "Ethics Code"), as stated in LSA-R.S. 42:1111(C)(2)(d), 1112(B)(5), and 1115.
We note that, pursuant to LSA-R.S. 42:1141(C), although charges are issued by the Board, a public hearing on such charges would be conducted by the Ethics Adjudicatory Board (the "EAB"), within the Louisiana Division of Administrative Law, in accordance with the Louisiana Administrative Procedure Act. See LSA-R.S. 42:1134(K); LSA-R.S. 42:1141(C)(3)(a). See also LSA-R.S. 49:992.1; LSA-R.S. 49:994(E). In the instant case, the charges were issued against the plaintiffs by the Board, but the plaintiffs' district court petition was filed prior to a hearing before the EAB.
The plaintiffs, Gregory S. Fontenot and FBAC, LLC (hereinafter "Fontenot LLC"), formerly known as Fontenot & Associates, LLC, filed suit in the district court against the Board and its individual members on August 15, 2011, seeking to have the defendants enjoined from prosecuting the charges filed against them and requesting judgment be rendered declaring: (1) that, as a result of 2008 La. Acts, 1st Extraordinary Session, No. 23, the Board no longer has original, exclusive jurisdiction over the interpretation and application of the Ethics Code; (2) that LSA-R.S. 42:1102(18)(a)(iii) is unconstitutionally vague and overly broad, as interpreted and applied by the Board to the plaintiffs; (3) that the Board does not have jurisdiction over the plaintiffs; (4) that the Board's charges, as provided to the plaintiffs, did not comply with LSA-R.S. 42:1141(C)(3)(b)(i) and are in violation of the due process provisions of the United States and the Louisiana Constitutions; and (5) that the plaintiffs are not public employees.
Plaintiffs further allege the following facts: (1) Gregory S. Fontenot is an insurance producer licensed by the Louisiana Department of Insurance to sell casualty, property, accident and health, and life insurance in Louisiana; (2) Mr. Fontenot is president of FBAC, LLC, which is an insurance producer licensed by the Louisiana Department of Insurance to sell casualty, property, accident and health, and life insurance in Louisiana; (3) for the years 2006, 2007, 2008, 2009, and 2010, Fontenot LLC contracted with Jefferson Parish to perform insurance benefits consulting, with Fontenot LLC agreeing to "perform all necessary professional services to select health and welfare benefits" for Jefferson Parish employees; (4) the necessary documents for these contracts were executed by Mr. Fontenot in his capacity as president of Fontenot LLC; (5) one or more of the contracts called upon Fontenot LLC to perform Governmental Accounting Standards Board-related services; (6) on September 11, 2008 a competitor of the plaintiffs, John Millet, requested an advisory opinion from the Board regarding a contractual relationship Fontenot LLC had with St. John the Baptist Parish to perform Governmental Accounting Standards Board actuarial evaluations; (7) despite a letter from Mr. Fontenot purportedly "clarifying the inaccuracies and misstatements made in John Millet's request," the Board issued a December 3, 2008 advisory opinion stating that, for purposes of fulfilling the St. John the Baptist Parish contract, the plaintiffs were public employees; (8) in April of 2010 Fontenot LLC requested another advisory opinion from the Board as to whether it was a public employee under the Ethics Code; (9) that request for an advisory opinion ultimately resulted, in May of 2010, in Fontenot LLC conceding, "[b]ecause of commercial reasons . . . [and] for purposes of having its Request for Advisory Opinions heard at the Ethics Board's May 2010 meeting," that it was a public employee; (10) the May 2010 concession pertained only to Fontenot's future business arrangements with Jefferson Parish, and with other parish and local governments, and did not pertain to any past conduct of Fontenot LLC; (11) the May 2010 concession did not concede that Mr. Fontenot was a public employee; (12) during the May 2010 Board meeting, Board Chairman Frank Simoneaux objected to the concession because Board members had not had an opportunity to review any potential contract between Fontenot LLC and Jefferson Parish to determine if Fontenot LLC would be engaged in the performance of a governmental function for Jefferson Parish; and (13) at the time of the May 2010 concession, the plaintiffs did not know that the Board had received a complaint about the plaintiffs, and plaintiffs did not know that the Board had voted, on the day before the hearing, to conduct an investigation into the complainant's allegations.
Plaintiffs allege, in their district court petition, both constitutional and statutory challenges to the filing of administrative charges against them by the Board, which charges would be subject to a hearing before the Ethics Adjudicatory Board (the "EAB"). In Paragraph 6 of their petition, the plaintiffs contend that the Board purports to exercise jurisdiction over them in violation of LSA-R.S. 42:1102(18)(a)(iii) and that the Board's interpretation and application of the definition contained in that provision is "unconstitutionally vague and overly broad." In Paragraph 7 of the plaintiffs' petition, they allege that the Louisiana Supreme Court has held that a petition, alleging "well-pleaded constitutional violations" by the Board in purporting to apply the Ethics Code, pleads matters within the original, exclusive jurisdiction of the district court and not within the exclusive jurisdiction of the Ethics Board. Plaintiffs further allege, in Paragraph 7, that the "actions of the Ethics Board . . . violate Article 10, Section 21 of the Louisiana Constitution and violate the due process articles of the United States and Louisiana Constitutions." In Paragraph 48 of their petition, the plaintiffs allege that the Board's notice and charges do not comply with the "statutory due process requirements" of LSA-R.S. 42:1141 (C)(3)(b)(i), requiring the Board to include in the charges a plain, concise, and definite written statement of the essential facts of the alleged violations. Plaintiffs further assert, in Paragraph 52 of their petition, that LSA-R.S. 42:1102(18)(a)(iii)'s inclusion, within the definition of "public employee," of anyone, whether compensated or not, who is "[e]ngaged in the performance of a governmental function" is "unconstitutionally vague and overbroad, as . . . applied" to the plaintiffs. Plaintiffs also contend, in Paragraph 53, that the Board's interpretation and application of the relevant provisions of the Ethics Code are "clearly arbitrary and unreasonable and have no substantial relation to the government's legitimate interest" in administering the Ethics Code to officials and employees of the state and its political subdivisions. Plaintiffs maintain that to the extent that any state statute may be construed to allow the Board to exercise authority over private citizens, who are not public officials or employees, such a statute is unconstitutional, as exceeding the constitutional mandate of LSA-Const. Art. X, § 21.
In response to the plaintiffs' petition, the defendants filed dilatory, declinatory, and peremptory exceptions pleading the objections of prematurity, lack of subject matter jurisdiction, and no cause of action. Following a September 22, 2001 hearing, the district court sustained the defendants' objection of lack of subject matter jurisdiction and stated that all other matters were moot; a judgment was signed on October 6, 2011, dismissing the plaintiffs' petition with prejudice.
The plaintiffs appealed the judgment of dismissal, and, on appeal, assert that the district court erred in dismissing their petition for lack of subject matter jurisdiction, contending they sufficiently alleged that the Board "grossly exceeded its constitutional and statutory authority by exercising jurisdiction over them, private persons not subject to the Ethics Code or the Ethics Board's jurisdiction."
LAW AND ANALYSIS
The objections that may be raised through the declinatory exception include, but are not limited to, the court's lack of jurisdiction over the subject matter of the action. All objections which may be raised through the declinatory exception, except the court's lack of jurisdiction over the subject matter of the action, are waived unless pleaded therein. LSA-C.C.P. art. 925(C). A court's power to grant relief is premised upon its subject matter jurisdiction over the case or controversy before it, which cannot be waived or conferred by consent. Louisiana Land Acquisition, LLC v. Louisiana Department of Environmental Quality, 2011-2037 (La. App. 1 Cir. 7/18/12), 97 So.3d 1144, 1145, writ granted in part, 2012-1872 (La. 11/16/12), 103 So.3d 358. A judgment rendered by a court that has no jurisdiction over the subject matter of the action or proceeding is void. LSA-C.C.P. art. 3.
The appeal of a decision declining subject matter jurisdiction asserts legal error. See Exxon Pipeline Company v. Louisiana Public Service Commission, 98-1737 (La. 3/2/99), 728 So.2d 855, 859. Questions of law are reviewed by an appellate court de novo. See Price v. Roy O. Martin Lumber Company, 2004-0227 (La. App. 1 Cir. 4/27/05), 915 So.2d 816, 824, writ denied, 2005-1390 (La. 1/27/06), 922 So.2d 543.
An administrative agency or board has only the power and authority expressly granted by the constitution or statutes. Hearings and determinations by administrative agencies and boards are often described as quasi-judicial, for, like the courts, these bodies adjudicate important rights. However, while the adjudicative and fact-finding powers exercised by these agencies and boards mimic those exercised by courts, the agencies are not authorized to exercise "judicial power" under LSA-Const. Art. V, § 1. Provisions of the Louisiana Constitution granting quasi-judicial authority to administrative agencies and boards are exceptions to the general rule that district courts have jurisdiction over all civil matters, and, as such, are narrowly construed. In re Arnold, 2007-2342 (La. App. 1 Cir. 5/23/08), 991 So.2d 531, 535-36.
Article V, Section 1, provides: "The judicial power is vested in a supreme court, courts of appeal, district courts, and other courts authorized by this Article."
The Louisiana Constitution provides, in Article X, Section 21, as follows:
The legislature shall enact a code of ethics for all officials and employees of the state and its political subdivisions. The code shall be administered by one or more boards created by the legislature with qualifications, terms of office, duties, and
powers provided by law. Decisions of a board shall be appealable, and the legislature shall provide the method of appeal.
Pursuant to the authority of LSA-Const. Art. X, § 21, the legislature enacted a Code of Governmental Ethics, LSA-R.S. 42:1101 et seq., which provided for the creation of the Louisiana Board of Ethics in LSA-R.S. 42:1132. The Board is charged with enforcing the Ethics Code and establishing procedures to be followed; all proceedings of the Board are subject to and in accordance with the provisions of the Administrative Procedure Act. In re Arnold, 991 So.2d at 536. As stated in LSA-R.S. 42:1101, the purpose of the Ethics Code is to further the public interest by ensuring that the law protects against conflicts of interest on the part of Louisiana's public officials and state employees by establishing ethical standards to regulate the conduct of those persons. To this end, the eleven-member Board is given the authority, in LSA-R.S. 42:1134, to investigate and pursue formal charges through either public or private hearings against an individual or entity for alleged violations of the Ethics Code. A determination that the accused has violated a provision of law within the jurisdiction of the Board must be based on competent evidence presented at a duly noticed public hearing, conducted by the EAB. Upon finding a violation of the Ethics Code, the Board has the authority to impose various penalties on the responsible party. In re Arnold, 991 So.2d at 536. See also LSA-R.S. 42:1141 et seq.
Revised Statute 42:1101(B) provides:
It is essential to the proper operation of democratic government that elected officials and public employees be independent and impartial; that governmental decisions and policy be made in the proper channel of the governmental structure; that public office and employment not be used for private gain other than the remuneration provided by law; and that there be public confidence in the integrity of government. The attainment of one or more of these ends is impaired when a conflict exists between the private interests of an elected official or a public employee and his duties as such. The public interest, therefore, requires that the law protect against such conflicts of interest and that it establish appropriate ethical standards with respect to the conduct of elected officials and public employees without creating unnecessary barriers to public service. It is the purpose of this Chapter to implement these policies and objectives..
The plaintiffs in this case were charged with violations of LSA-R.S. 42:1111(C)(2)(d), LSA-R.S. 42:1112(B)(5), and LSA-R.S. 42:1115, which provide:
§ 1111. Payment from nonpublic sources
* * *
C. Payments for nonpublic service.
* * *
(2) No public servant and no legal entity in which the public servant exercises control or owns an interest in excess of twenty-five percent, shall receive any thing of economic value for or in consideration of services rendered, or to be rendered, to or for any person during his public service unless such services are:
* * *
(d) Neither performed for nor compensated by any person from whom such public servant would be prohibited by R.S. 42:1115(A)(1) or (B) from receiving a gift.
§ 1112. Participation in certain transactions involving the governmental entity
* * *
B. No public servant ,except as provided in R.S, 42:1120. shall participate in a transaction involving the governmental entity in which, to his actual knowledge, any of the following persons has a substantial economic interest:
* * *
(5) Any person who is a party to an existing contract with such public servant, or with any legal entity in which the public servant exercises control or owns an interest in excess of twenty-five percent, or who owes any thing of economic value to such public servant, or to any legal entity in which the public servant exercises control or owns an interest in excess of twenty-five percent, and who by reason thereof is in a position to affect directly the economic interests of such public servant.(Emphasis added.) The terms "public employee" and "public servant" are defined in LSA-R.S. 42:1102, as follows:
§1115. Gifts
A. No public servant shall solicit or accept, directly or indirectly, any thing of economic value as a gift or gratuity from any person or from any officer, director, agent, or employee of such person, if such public servant knows or reasonably should know that such person:
(1) Has or is seeking to obtain contractual or other business or financial relationships with the public servant's agency, or
(2) Is seeking, for compensation, to influence the passage or defeat of legislation by the public servant's agency.
B. No public employee shall solicit or accept, directly or indirectly, anything of economic value as a gift or gratuity from any person or from any officer, director, agent, or employee of such person, if such public employee knows or reasonably should know that such person:
(1) Conducts operations or activities which are regulated by the public employee's agency.
(2) Has substantial economic interests which may be substantially affected by the performance or nonperformance of the public employee's official duty.
(18) (a) "Public employee" means anyone, whether compensated or not, who is:Plaintiffs contend that, to the extent these statutes may be construed to allow the Board to exercise authority over them, as private citizens who are not public employees or public servants, the statutes are unconstitutional, as exceeding the constitutional mandate of LSA-Const. Art. X, § 21.
(i) An administrative officer or official of a governmental entity who is not filling an elective office.
(ii) Appointed by any elected official when acting in an official capacity, and the appointment is to a post or position wherein the appointee is to serve the governmental entity or an agency thereof, either as a member of an agency, or as an employee thereof.
(iii) Engaged in the performance of a governmental function.
(iv) Under the supervision or authority of an elected official or another employee of the governmental entity.
(b) However, "public employee" does not mean anyone whose public service is limited to periodic duty in the National Guard pursuant to 32 U.S.C.A. 502.
(c) A public employee shall be in such status on days on which he performs no services as well as days on which he performs services. The termination of any particular term of employment of a public employee shall take effect on the day the termination is clearly evidenced.
(19) "Public servant" means a public employee or an elected official.
In Anzelmo v. Louisiana Commission on Ethics for Public Employees, 435 So.2d 1082, 1084 (La. App. 1 Cir.), writ denied, 441 So.2d 1220 (La. 1983) (citing Kane v. Louisiana Commission on Governmental Ethics, 250 La. 855, 199 So.2d 900, 903 (1967)), this court stated, "There is no language in [LSA-Const. Art. X, § 21] which forbids the promulgation of a code of ethics that is applicable to persons other than public servants. 'The Legislature is supreme except when restricted by the Constitution; it may do everything that the Constitution does not prohibit.'" Unlike the federal constitution, the state constitution's provisions are not grants of power but instead are limitations on the otherwise plenary power of the people exercised through the legislature. To hold legislation invalid under the constitution, it is necessary to rely on some particular constitutional provision that limits the power of the legislature to enact such a statute. Statutes are presumed constitutional unless fundamental rights, privileges, or immunities are involved. This presumption is especially forceful in the case of statutes enacted to promote a public purpose. The burden of proving that an act is unconstitutional is upon the party attacking the act. This is a heavy burden. It is not enough for a person challenging a statute to show that its constitutionality is fairly debatable; it must be shown clearly and convincingly that it was the constitutional aim to deny the legislature the power to enact the statute. To successfully challenge a legislative act as unconstitutional, the challenger must show that no circumstances exist under which the act would be valid. St. Mary Anesthesia Associates, Inc. v. Hospital Service Dist. No. 2 of Parish of St. Mary, 2001-2852 (La App. 1 Cir. 12/20/02), 836 So.2d 379, 384-85, writ denied, 2003-0220 (La. 3/28/03), 840 So.2d 577.
Article X, Section 21, of the Louisiana Constitution, requires the legislature to "enact a code of ethics for all officials and employees of the state and its political subdivisions." However, nothing in Article X, Section 21, or elsewhere in the constitution, expressly prohibits the legislature from enacting ethics laws that regulate the conduct of other persons who enter into contracts with State government or otherwise transact business with the State; therefore, such legislation would not be a per se violation of the Louisiana Constitution. See Anzelmo v. Louisiana Commission on Ethics for Public Employees, 435 So.2d at 1084.
Nevertheless, the plaintiffs have asserted, in their district court petition, the unconstitutionality of the Ethics Code, in any application to them, as violative of the due process protections found in both the Louisiana and the U.S. Constitutions, as well as asserting the unconstitutional overbreadth and lack of a substantial relationship to the government's legitimate interests. The plaintiffs have further asserted statutorily-based arguments against the application of the Ethics Code to them. The jurisprudence holds that a determination of the application or interpretation of the Ethics Code is within the grant of exclusive jurisdiction of the administrative agency, while a constitutional challenge may only be decided by the district court. See In re Arnold, 991 So.2d at 537. To the extent that the plaintiffs have asserted constitutional challenges to the Ethics Code, the district court has subject matter jurisdiction to adjudicate these claims, and the district court's ruling to the contrary was in error.
However, courts of this state have long adhered to the principle that constitutional questions should be avoided when a case can be disposed of on non-constitutional grounds. Constitutional issues should only be addressed when the resolution of such issues is necessary to decide the case. Before reaching constitutional issues, a court should first determine whether the case may be disposed of on non-constitutional grounds. See M.J. Farms, Ltd. v. Exxon Mobil Corporation, 2007-2371 (La. 7/1/08), 998 So.2d 16, 25 (citing Sims v. Mulhearn Funeral Home, Inc., 2007-0054 (La. 5/22/07), 956 So.2d 583, 588; Ring v. State, Department of Transportation & Development, 2002-1367 (La. 1/14/03), 835 So.2d 423, 428; and Cameron Parish School Board v. ACandS, Inc., 96-0895 (La. 1/14/97), 687 So.2d 84, 87).
After a thorough review of the record presented in this case, we conclude that there are grounds upon which this case could be decided without reaching the constitutionality of the Ethics Code provisions. The EAB has jurisdiction to decide whether the charges brought by the Board validly assert a cause of action against the plaintiffs. The plaintiffs contend the Ethics Code does not apply to them, It is possible that a ruling by the EAB in favor of the plaintiffs would render the present district court case, asserting constitutional challenges to the Ethics Code, moot. Therefore, we uphold the district court decision, insofar as the court determined the case was not ripe for adjudication in its current procedural posture, and we remand the matter to the district court with instructions to hold the case in abeyance until the EAB rules on any pleadings the plaintiffs have filed or may file, which assert that the charges brought by the Board do not validly assert a cause of action against them.
We distinguish this case, on its facts, from the decisions rendered by this court in both In re Arnold, supra, and Attorney in Private Practice v. Louisiana Board of Ethics, 2011-1545 (La. App. 1 Cir. 4/9/13) (record sealed). In both Arnold and Attorney, there were other factors at issue that were found to preclude an initial ruling by the Board of Ethics on the issue of subject matter jurisdiction. In Arnold, the parties under investigation by the Board were State legislators, whose participation in certain House discussions was questioned by the Board, despite the mandate of Louisiana Constitution Article III, Section 8, stating, "No member [of the legislature] shall be questioned elsewhere for any speech in either house." In Attorney, the party under Board investigation was an attorney in private practice, whose ethical conduct was alleged to have been under the exclusive regulation of the Louisiana Supreme Court, pursuant to Louisiana Constitution Article V, Section 5(B), stating, "The supreme court has exclusive original jurisdiction of disciplinary proceedings against a member of the bar." In the instant case, there are no constitutional provisions potentially conflicting with that governing the Ethics Board, Louisiana Constitution Article X, Section 21, which would bar an initial determination on the issue of subject matter jurisdiction by the Board. In this case, the issue is purely factual, for purposes of determining the subject matter jurisdiction of the Board, i.e., whether, based on the facts of this case, the parties under investigation can be considered either a "public servant" or a "public employee" for purposes of LSA-R.S. 42:1111(C)(2)(d), 1112(B)(5), or 1115. The Ethics Board has jurisdiction, as an initial matter, to review the interpretation and application of the provisions of the Ethics Code. Duplantis v. Louisiana Board of Ethics, 2000-1750 (La. 3/23/01), 782 So.2d 582, 592. Until a plaintiff has exhausted his available remedies before an administrative agency, he cannot resort to the courts. See Daily Advertiser v. Trans-La, 612 So.2d 7, 30 (La. 1993). Therefore, in order to contest the exercise of the Ethics Board's jurisdiction in this case, an objection to the Board's jurisdiction, pursuant to LSA-C.C.P. art. 925, should have been raised before the Board, particularly since, in this case, there is a dearth of factual information contained in the administrative record. We further note that where a lack of subject matter jurisdiction is not apparent from the pleadings, the burden to offer evidence in support of the exception is on the party raising it, pursuant to LSA-C.C.P. art. 930. See Crockett v. State Through Department of Public Safety and Corrections, 97-2528 (La. App. 1 Cir. 11/6/98), 721 So.2d 1081, 1084. Any hearing by the Board on the issue of its jurisdiction should be conducted prior to, and separately from, a hearing on the merits of the charges.
CONCLUSION
For the reasons assigned, the judgment of the district court sustaining the Louisiana Board of Ethics' exception of lack of subject matter jurisdiction and dismissing the suit is reversed, and the case is remanded to the district court with instructions to hold further district court proceedings in abeyance, as stated herein. All costs of this appeal, in the amount of $1,610.82, are to be borne by the Louisiana Board of Ethics.
REVERSED AND REMANDED WITH INSTRUCTIONS.