Thigpen v. Best Home Care LLC

Full title: Christopher Thigpen, Relator, v. Best Home Care LLC, Respondent…

Court: Court of Appeals of Minnesota

Date published: Jul 29, 2024

No. A23-1544 (Minn. Ct. App. Jul. 29, 2024)

Opinion

A23-1544

07-29-2024

Christopher Thigpen, Relator, v. Best Home Care LLC, Respondent, Department of Employment and Economic Development, Respondent.

Russell Squire, Southern Minnesota Regional Legal Services, Inc., St. Paul, Minnesota (for relator) Best Home Care LLC, North St. Paul, Minnesota (respondent employer) Keri A. Phillips, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent department)

WORKE, Judge

This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).

Department of Employment and Economic Development File Nos. 48894042-5, 49097671-4, 48681520-5, and 49097672-4

Russell Squire, Southern Minnesota Regional Legal Services, Inc., St. Paul, Minnesota (for relator) Best Home Care LLC, North St. Paul, Minnesota (respondent employer)

Keri A. Phillips, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent department)

Considered and decided by Schmidt, Presiding Judge; Worke, Judge; and Kirk, Judge.^[*]

WORKE, Judge

Relator challenges the determination of an unemployment-law judge (ULJ) that he was overpaid unemployment benefits through misrepresentation, and the imposition of statutory penalties. Relator argues that the ULJ (1) issued a decision that was unsupported by substantial evidence, (2) failed to apply a burden of proof, (3) denied relator due process, and (4) imposed an excessive fine in violation of the Eighth Amendment. We affirm.

FACTS

In March 2020, relator Christopher Thigpen applied for unemployment benefits with respondent Department of Employment and Economic Development (DEED). Thigpen received weekly benefits from March 2020 through September 19, 2020. Between September 20, 2020, and September 4, 2021, Thigpen received weekly Pandemic Emergency Unemployment Compensation benefits. And between September 5, 2021, and March 19, 2022, Thigpen again received unemployment benefits. Thigpen was employed by respondent Best Home Care LLC while receiving unemployment benefits. Instead of disclosing his employment during this period to DEED, Thigpen repeatedly informed DEED that he was not employed.

In November 2022, following an evidentiary hearing, the ULJ determined that Thigpen was overpaid unemployment benefits. Thigpen requested reconsideration. Following another evidentiary hearing, the ULJ decided that Thigpen, through misrepresentation, received an overpayment of benefits. Thigpen petitioned for a writ of certiorari.

DECISION

This court may affirm the ULJ's decision, remand for further proceedings, or modify the decision if the substantial rights of the petitioner may have been prejudiced because the ULJ's

findings, inferences, conclusions, or decisions are (1) in violation of constitutional provisions; (2) in excess of the statutory authority or jurisdiction of the department; (3) made upon unlawful procedure; (4) affected by other error of law; (5) unsupported by substantial evidence in view of the hearing record as submitted; or (6) arbitrary or capricious.

Minn. Stat. § 268.105, subd. 7(d) (2022).

An applicant who receives unemployment benefits to which he is not entitled must repay the overpayment. Minn. Stat. § 268.18, subd. 1(a) (2022). When the overpayment of unemployment benefits is the result of the applicant's misrepresentation, "the commissioner must issue a determination of overpayment penalty assessing a penalty equal to 40[%] of the amount overpaid." Id., subd. 2(a) (2022). "An applicant has committed misrepresentation if the applicant is overpaid unemployment benefits by making a false statement or representation without a good faith belief as to the correctness of the statement or representation." Id.

Substantial evidence

"A ULJ's factual findings are viewed in the light most favorable to the decision and will not be disturbed on appeal if there is substantial evidence to sustain those findings." Godbout v. Dep't of Emp. &Econ. Dev., 827 N.W.2d 799, 801 (Minn.App. 2013). We defer to the ULJ's credibility determinations. Icenhower v. Total Auto., Inc., 845 N.W.2d 849, 855 (Minn.App. 2014), rev. denied (Minn. July 15, 2014). But "[q]uestions of law are reviewed de novo." Builders Commonwealth, Inc. v. Dep't of Emp. &Econ. Dev., 814 N.W.2d 49, 56 (Minn.App. 2012).

In Cash v. Commissioner of Economic Security, we affirmed the decision that Cash committed fraud and was disqualified from receiving benefits after he failed to report income when he filed for unemployment benefits. 352 N.W.2d 535, 536-37 (Minn.App. 1984). Cash claimed that this failure was because of a "misunderstanding . . . caused by comments of a department employee." Id. at 536. In affirming the rejection of that claim, this court stated that whether Cash intentionally misrepresented his income was a question of credibility that is within the fact-finder's discretion. Id. at 537; see also Burnevik v. Dep't of Econ. Sec., 367 N.W.2d 681, 683 (Minn.App. 1985) (stating that determination whether claimant obtained benefits by fraud involves credibility of claimant's testimony). We defer to the ULJ's credibility determinations. Icenhower, 845 N.W.2d at 855.

We will not disturb a ULJ's factual findings when the evidence substantially sustains them. Godbout, 827 N.W.2d at 801. Substantial evidence is relevant evidence that a reasonable person might accept as adequate to support a conclusion. Moore Assocs., LLC v. Comm'r of Econ. Sec., 545 N.W.2d 389, 392 (Minn.App. 1996).

The record shows that the ULJ's decision was supported by substantial evidence. Thigpen's employment records show that he was employed while he received unemployment benefits. And Thigpen does not dispute that he failed to report income from his employment to DEED. Thigpen testified to his reasons for not reporting his income, but the ULJ rejected this testimony as not credible. Therefore, substantial evidence shows that Thigpen misrepresented his employment status while he received unemployment benefits.

Burden of proof

Thigpen argues that because Minn. Stat. § 268.069, subd. 2 (2022), is silent as to the applicable burden of proof that DEED must satisfy to establish misrepresentation, his constitutional rights were violated.

"The applicable standard of proof is a legal question [that this court] review[s] de novo." Vermillion State Bank v. Tennis Sanitation, LLC, 969 N.W.2d 610, 626 (Minn. 2022). "All issues under the Minnesota Unemployment Insurance Law¹ are determined by a preponderance of the evidence." Minn. Stat. § 268.031 (2022).

1 See Minn. Stat. § 268.001 (2022) (stating that Chapter 268 "will be known and may be cited as . . . 'Minnesota Unemployment Insurance Law'").

At the March 2023 hearing, the ULJ correctly stated that "[t]he facts in this case will be determined by a preponderance of the evidence." The ULJ explained: "This means that evidence in support of a fact is more convincing and has a greater probability of truth than the evidence opposing the fact." The applicable burden of proof is the preponderance-of-the-evidence standard. Therefore, the ULJ applied the proper standard of proof.

Due process

Thigpen argues that the ULJ erred by applying the preponderance-of-the-evidence standard, contending that the appropriate standard for determining misrepresentation overpayments is the clear-and-convincing standard.

Thigpen claims that because the misrepresentation proceeding involved fraud, it should be considered quasi criminal in nature, which requires application of the clear-and-convincing-evidence standard. We are not persuaded.

Minnesota courts use both preponderance-of-the-evidence and clear-and-convincing-evidence as evidentiary standards in civil cases. Vermillion State Bank, 969 N.W.2d at 626. When a fact is more probable than not, the preponderance-of-the-evidence standard has been satisfied. Id. When "the truth of the facts asserted is 'highly probable,'" the clear-and-convincing-evidence standard has been satisfied. Id. (quotation omitted).

Generally, "the legislature has the power to determine the standard of proof in a statutorily created cause of action." State by Humphrey v. Alpine Air Prods., Inc., 500 N.W.2d 788, 790 (Minn. 1993).

In Humphrey, the supreme court interpreted the language of Addington v. Texas, 441 U.S. 418, 424 (1979), regarding the clear-and-convincing-evidence standard, stating that it "mean[s] that the standard of proof in a fraud [or other quasi-criminal wrongdoing] case does not need to be higher than preponderance of the evidence, although the individual states are free to use a higher standard depending upon the views of their legislatures and common law traditions." Id. at 793. The supreme court held "that unless otherwise indicated by the legislature, the standard of proof in all fraud cases is the preponderance of the evidence standard." Id. at 791.

The supreme court also considered whether "the Due Process Clause require[d] that the standard of proof in a consumer fraud action be the clear and convincing evidence standard," and determined that it did not because the higher standard of proof "is only used when a right of particular importance is at stake." Id. The higher standard of proof is triggered when the loss involved is "more than money." Id.

The applicable standard of proof in this matter, correctly applied by the ULJ, was the preponderance-of-the-evidence standard. Thigpen was not denied due process when the ULJ did not apply the clear-and-convincing-evidence standard.

Misrepresentation penalty

Thigpen argues that the 40% penalty imposed pursuant to Minn. Stat. § 268.18, subd. 2 (2022), violates his constitutional right against excessive fines. Thigpen claims that the penalty imposed by the ULJ "far exceeds Minnesota's financial fine limits in criminal law for misdemeanor and gross misdemeanor offenses."

Both the United States and Minnesota Constitutions prohibit the government from imposing excessive fines. U.S. Const. amend. VIII; Minn. Const. art. I, § 5. A civil sanction implicates the excessive-fines clause "when the sanction cannot fairly be said to serve a solely remedial purpose but rather can only be explained as serving either retribution or deterrent purposes as well." Wilson v. Comm'r of Revenue, 656 N.W.2d 547, 553 (Minn. 2003). This court reviews a claim of the constitutional protection against excessive fines as a question of law. Id. at 552.

Section 268.18 provides two procedures for the repayment of unemployment benefits that an applicant was not entitled to. First, subdivision 1, provides that:

(a) Any applicant who . . . has received any unemployment benefits that the applicant was held not entitled to, is overpaid the benefits, and must promptly repay the benefits to the trust fund.

(b) If the applicant fails to repay the unemployment benefits overpaid, including any penalty and interest assessed . . . the total due may be collected by the methods allowed under state and federal law.

Minn. Stat. § 268.18, subd. 1 (2022). Subdivision 1 serves a remedial purpose-the repayment of unemployment benefits an applicant was not entitled to. See Wilson, 656 N.W.2d at 553.

Subdivision 2, however, serves a purpose beyond that of a solely remedial purpose-the repayment of unemployment benefits an applicant was not entitled to and a 40% penalty. See id. Subdivision 2 provides that if the overpayment of unemployment benefits is the result of the applicant's misrepresentation, "the commissioner must issue a determination of overpayment penalty assessing a penalty equal to 40[%] of the amount overpaid. This penalty is in addition to penalties under section 268.183." Minn. Stat. § 268.18, subd. 2(a). Because we cannot fairly say that the 40% penalty under section 268.18, subdivision 2, serves a solely remedial purpose, the penalty implicates the excessive-fines clause.

To determine whether the 40% penalty is excessive under the United States and Minnesota Constitutions, we must apply a proportionality analysis. See Wilson, 656 N.W.2d at 554-55.

A fine is unconstitutionally excessive if it is grossly disproportional to the gravity of the offense. Id. at 554. When reviewing proportionality, appellate courts consider three factors:

(1) the gravity of the offense compared to the harshness of the penalty; (2) comparison of the contested penalty with other penalties imposed for other offenses in the same jurisdiction; and (3) comparison of the contested fine with fines imposed for the same offense in other jurisdictions.

Wendell v. Comm'r of Revenue, 7 N.W.3d 405, 416 (Minn. 2024).

First, the harshness of the penalty is proportional to the gravity of the offense. A legislatively imposed penalty is "presumed constitutional, and [individuals] challenging a punishment under [the excessive-fines clause], bear a heavy burden of showing that our culture and laws emphatically and well nigh universally reject" the challenged penalty. State v. Hassan, 977 N.W.2d 633, 641 (Minn. 2022) (quotation omitted). "The Legislature is the best arbiter of Minnesota's 'culture' because it is constituted to respond to the will and consequently the moral values of the people." Id. at 641-42 (quotation omitted). Misrepresentation when filing for unemployment benefits creates unnecessary delay and waste of government resources associated with the investigation to identify and correct the overpayment of benefits to applicants who are not entitled to receive those benefits. We conclude that the 40% penalty added to the amount of benefits overpaid to an applicant due to the applicant's misrepresentations is proportionate to the harm caused.

Second, the 40% penalty under section 268.18, subdivision 2, is comparable and proportional to the penalties for similar offenses involving fraud in Minnesota. Minn. Stat. § 289A.60, subd. 6(a) (2022), imposes a penalty equal to 50% of the tax, "[i]f a person, with intent to evade or defeat a tax or payment of tax . . . files a false or fraudulent return." A 50% penalty also applies when "a person files a false or fraudulent return that includes a claim for refund." Id., subd. 6(b) (2022). We conclude that the 40% penalty for misrepresentation is comparable and proportional to penalties for fraudulent tax returns and refunds.

Finally, the 40% penalty imposed under section 268.18, subdivision 2, is comparable and proportional to the penalties imposed for similar offenses in other jurisdictions.

For example, in Michigan, "[i]f the unemployment agency determines that an amount has been obtained or withheld [because] of the intentional failure to comply with this act, the unemployment agency may recover the amount obtained [because] of the intentional failure to comply plus damages equal to [three] times that amount." Mich. Comp. Laws Ann. § 421.54(a)(i) (West 2022).

Also, in Indiana, if a person knowingly "falsifies . . . a material fact . . . that would disqualify the individual for benefits . . . or render the individual ineligible for benefits . . . the individual forfeits any wage credits earned" and is subject to the following penalties: "(1) For the first instance, an amount equal to [25%] of the benefit overpayment. (2) For the second instance, an amount equal to [50%] of the benefit overpayment. (3) For the third and each subsequent instance, an amount equal to [100%] of the benefit overpayment." Ind. Code Ann. § 22-4-13-1.1(a)(3), (b) (West 2022). Because the 40% penalty under section 268.18, subdivision 2, is comparable and proportional to the penalties for similar offenses in other jurisdictions, it is constitutional as applied to Thigpen.

Affirmed.

^[*] Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.