Kindsgrab v. State of North Carolina Board Of Barber Examiners

NO. COA13-1321

NORTH CAROLINA COURT OF APPEALS

Filed: 7 October 2014

HANS KINDSGRAB,
Petitioner-Appellant,

v. Wake County
No. 12 CVS 16903
STATE OF NORTH CAROLINA BOARD OF
BARBER EXAMINERS,
Respondent-Appellant.

Appeals by petitioner and respondent from orders entered 3

May 2013 and 11 September 2013 by Judge Howard E. Manning, Jr.,

in Wake County Superior Court. Heard in the Court of Appeals 23

April 2014.

Harris & Hilton, P.A., by Nelson G. Harris, for petitioner-
appellant.

N.C. Board of Barber Examiners, by W. Bain Jones, Jr., and
Allen, Pinnix & Nichols, P.A., by M. Jackson Nichols and
Catherine E. Lee, for respondent-appellant.

McCULLOUGH, Judge.

Hans Kindsgrab (“petitioner”) appeals from the Order On

Petition For Judicial Review filed 11 September 2013. The State

of North Carolina Board of Barber Examiners (“respondent” or

“the Board”) appeals from the interlocutory order denying its

Motion To Dismiss Petition For Judicial review filed 3 May 2103

and from the Order On Petition For Judicial Review filed 11
 -2-
September 2013. For the following reasons, we affirm in part

and reverse in part.

I. Background

Petitioner is an owner of Maybe Someday, Inc., which owns

and operates franchises of “The Barbershop – A Hair Salon for

Men” at three locations in the triangle area – Cary, Durham, and

Raleigh. At all times relevant to this appeal, each location

held a Cosmetic Arts Salon License issued by the North Carolina

State Board of Cosmetic Art Examiners.

In 2012, an investigation by barber examiner William Graham

revealed that the Cary and Raleigh locations displayed barber

polls and advertised barber services without barber permits and

without licensed barbers on the premises. As a result, Graham

issued “Notice[s] Of Violation[s]” to the Raleigh and Cary

locations on 31 July 2012 specifying fraudulent

misrepresentation in violation of N.C. Gen. Stat. § 86A-20 and

N.C. Admin. Code tit. 21, r. 6O.0107. Following the notices

issued by Graham, on 7 September 2012, the Board sent petitioner

a Notification of Probable Cause to Fine and ordered petitioner

to pay civil penalties, attorney’s fees, and costs.

By letter to the Board dated 2 October 2012, petitioner

requested an administrative hearing to contest the fraudulent
 -3-
misrepresentation charges. On 3 October 2012, the Board

responded to petitioner by letter providing notice that an

administrative hearing had been scheduled for 22 October 2012.

The hearing took place as scheduled.

Following the 22 October 2012 hearing, the board issued its

Final Decision on 6 November 2012. Among the conclusions issued

by the board were the following:

10. Petitioner must comply with the
statutes and administrative rules concerning
barber shops, barbering services and use of
a barber pole.

11. The preponderance of the evidence
established that it [sic] the Board properly
cited Petitioner for misrepresenting itself
as a barber shop or barber salon when it
failed to have a barber shop permit and a
licensed barber at each of its franchise
locations in Cary and Raleigh.

The Board then ordered petitioner to “pay one thousand dollars

($1,000.00) in civil penalties for fraudulent misrepresentations

concerning attempts to barber and provide barber services

without a shop permit and a licensed barber on the premises at

the Cary and Raleigh locations[, five hundred dollars ($500.00)

per location,]” and to “pay one thousand six hundred fifty

dollars ($1,650.00) in attorney’s fees and costs for services

rendered by the Board Counsel and staff.”
 -4-
On 3 December 2012, petitioner filed a Petition For

Judicial Review in Wake County Superior Court seeking review of

the Board’s Final Decision. After numerous motions by both

sides attempting to settle the record, on 26 April 2013,

respondent filed a Motion To Dismiss Petition For Judicial

Review on the basis that petitioner failed to “specifically

state the grounds for exception[.]” Respondent’s motion to

dismiss came on to be heard with the motions to settle the

record on 3 May 2013. Following the hearing, the trial court

filed an order denying respondent’s motion to dismiss.

Respondent’s Petition For Judicial Review came on to be

heard in Wake County Superior Court before the Honorable Howard

E. Manning, Jr., on 4 September 2013.

In an Order On Petition For Judicial Review filed 11

September 2013, the trial court affirmed the Board’s Final

Decision in part and reversed in part. Specifically, the trial

court found the Board’s findings to be supported by substantial

evidence and found the board’s conclusions to be supported by

the findings of fact and the whole record. The trial court also

made the following more specific findings:

4. The Court affirms in part Paragraph 1
of the Order portion of the Final Agency
Decision which holds that Petitioner’s
businesses, The Barber Shop – A Hair Salon
 -5-
For Men, were providing barber services
without a barber shop permit and a licensed
barber on the premises at Respondent’s Cary
and Raleigh locations.

5. The Court affirms in part the Final
Agency Decision, which holds that Petitioner
is not allowed to use or display a barber
pole for the purpose of offering barbering
services, and Petitioner is ordered to
remove the barber pole unless licensed by
Respondent Board.

6. The Court affirms in part the Final
Agency Decision which holds that
Petitioner’s businesses, advertising of its
services as a barber shop is a
misrepresentation and confusing and
deceptive to the consuming public, and
Petitioner is ordered to remove and cease
such advertisements unless licensed by
Respondent Board.

7. The Court reverses in part the Final
Agency Decision in its imposition of fines
because the Court concludes that Respondent
Board does not have the statutory authority
to impose fines on persons or entities not
licensed by the Board.

8. The Court reverses in part the Final
Agency Decision in its imposition of
attorney fees and costs for services
rendered by the Board Counsel and staff
because the Court concludes that Respondent
Board does not have the statutory authority
to impose such fees and costs on persons or
entities not licensed by the Board.

Based on these findings, the trial court ordered the imposition

of civil penalties and the award of attorney’s fees and costs
 -6-
for services be reversed. Both petitioner and respondent

appealed.

II. Discussion

“When reviewing a superior court order concerning an agency

decision, we examine the order for errors of law. The process

has been described as a twofold task: (1) determining whether

the trial court exercised the appropriate scope of review and,

if appropriate, (2) deciding whether the court did so properly.”

Poarch v. N.C. Dep’t of Crime Control & Pub. Safety, _ N.C. App.

_, _, 741 S.E.2d 315, 318 (2012) (quotation marks and citations

omitted).

A. Petitioner’s Appeal

The sole issue raised on appeal by petitioner is whether

the trial court exceeded the permissible scope of review when it

ordered him to remove the barber pole and cease advertising

barber services unless licensed by the Board. Petitioner

contends the trial court did and that those portions of the

trial court’s order must be reversed. We agree.

N.C. Gen. Stat. § 150B-51 governs the scope of judicial

review of an agency decision. It provides in pertinent part:

(b) The court reviewing a final decision
may affirm the decision or remand the case
for further proceedings. It may also reverse
or modify the decision if the substantial
 -7-
rights of the petitioners may have been
prejudiced because the findings, inferences,
conclusions, or decisions are:

(1) In violation of constitutional
provisions;

(2) In excess of the statutory authority
or jurisdiction of the agency or
administrative law judge;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence
admissible under G.S. 150B-29(a),
150B-30, or 150B-31 in view of the
entire record as submitted; or

(6) Arbitrary, capricious, or an abuse of
discretion.

(c) In reviewing a final decision in a
contested case, the court shall determine
whether the petitioner is entitled to the
relief sought in the petition based upon its
review of the final decision and the
official record. With regard to asserted
errors pursuant to subdivisions (1) through
(4) of subsection (b) of this section, the
court shall conduct its review of the final
decision using the de novo standard of
review. With regard to asserted errors
pursuant to subdivisions (5) and (6) of
subsection (b) of this section, the court
shall conduct its review of the final
decision using the whole record standard of
review.

N.C. Gen. Stat. § 150B-51 (2013).

Pursuant to N.C. Gen. Stat. §§ 86A-5 & -27, the Board has

the power to assess civil penalties. See N.C. Gen. Stat. § 86A-
 -8-
5(a)(6) (2013). The Board does not, however, have the power to

issue injunctions. Thus, in accordance with its powers, the

Board did not enjoin petitioner, but simply found petitioner was

properly cited for fraudulent misrepresentations and ordered

petitioner to pay civil penalties, attorney’s fees, and costs.

As detailed more fully above, petitioner petitioned the

trial court to review the Board’s assessment of civil penalties,

attorney’s fees, and costs. Upon reviewing the case, the trial

court reversed portions of the Board’s Final Decision and held

the Board did not have the statutory authority to impose civil

penalties, attorney’s fees, and costs on non-licensees. The

trial court did, however, affirm the Board’s conclusions that

petitioner was subject to the Barber Act, Chapter 86A of the

General Statues, and violated certain rules related to

advertising barber services. Yet, in addition to affirming

those portions of the Board’s Final Decision related to

advertising, the trial court ordered petitioner to remove the

barber pole and cease advertising barber services unless

licensed by the Board.

Defendant now contends the decretal portions of the trial

court’s order ordering the removal of the barber pole and
 -9-
cessation of advertising barber services were beyond the scope

of the trial court’s review.

Although the Barber Act provides an avenue for the Board to

seek an injunction in superior court, see N.C. Gen. Stat. § 86A-

20.1 (2013) (“The Board . . . may apply to the superior court

for an injunction to restrain any person from violating the

provisions of this Chapter or the Board's rules.”), respondent

concedes that it did not pursue that avenue, nor raise the issue

in the underlying contested case. Nevertheless, citing In re

Alamance County Court Facilities, 329 N.C. 84, 94, 405 S.E.2d

125, 129 (1991) (“Generally speaking, the scope of a court's

inherent power is its ‘authority to do all things that are

reasonably necessary for the proper administration of

justice.’”) (quoting Beard v. N.C. State Bar, 320 N.C. 126, 129,

357 S.E.2d 694, 696 (1987)), respondent contends that it was

within the inherent power of the court to enjoin petitioner from

displaying the barber pole and advertising barber services. We

disagree.

Given that N.C. Gen. Stat. § 86A-20.1 provides an avenue

for respondent to seek an injunction and respondent did not

pursue that avenue, we hold the trial court, acting on its own

to issue relief outside the authority of the Board, acted
 -10-
outside the scope of review provided in N.C. Gen. Stat. § 150B-

51. The only issues before the trial court for review were

those issues decided by the Board – the assessment of civil

penalties, attorney’s fees, and costs. As a result, we reverse

those portions of the trial court’s order that mandate

petitioner remove the barber pole and cease advertising barber

services.

B. Respondent’s Appeal

In respondent’s appeal, respondent first argues the trial

court erred in its 3 May 2013 order by denying its Motion To

Dismiss Petition For Judicial Review. Specifically, respondent

contends dismissal was appropriate because petitioner failed to

make specific exceptions to the Board’s Final Decision.

N.C. Gen. Stat. § 150B-46 governs the contents of petitions

for judicial review from final agency decisions. It provides,

“[t]he petition shall explicitly state what exceptions are taken

to the decision or procedure and what relief the petitioner

seeks.” N.C. Gen. Stat. § 150B-46 (2013). This Court has

recognized that “‘[e]xplicit’ is defined in this context as

‘characterized by full clear expression: being without vagueness

or ambiguity: leaving nothing implied.’” Gray v. Orange County

Health Dept., 119 N.C. App. 62, 70, 457 S.E.2d 892, 898 (1995)
 -11-
(quoting Vann v. N.C. State Bar, 79 N.C. App. 173, 173-74, 339

S.E.2d 97, 98 (1986)). Applying that definition of explicit in

both Gray and Vann, this Court held the trial courts erred in

denying the respondents’ motions to dismiss because the

petitions at issue were not “sufficiently explicit” to allow

effective judicial review where the petitioners did not except

to particular findings of fact, conclusions of law, or

procedures. Gray, 119 N.C. App. at 71, 457 S.E.2d at 899, Vann,

79 N.C. App. at 174, 339 S.E.2d at 98.

Respondent now argues for a similar result in the present

case because petitioner did not take exception with specific

findings of fact, conclusions of law, or procedures. Respondent

claims petitioner made only general assertions of error that

fail to meet the required standards of specificity under N.C.

Gen. Stat. § 150B-46. We disagree.

Although petitioner did not except to specific findings or

conclusions by the Board, petitioner clearly stated exceptions

to the Board’s Final Decision. These exceptions include the

following:

a. Petitioner is not a licensed or
registered barber (hereinafter “a
Licensee”), and the Board’s powers over
individuals who are not Licensees are
limited to making a criminal referral
alleging a violation of N.C.G.S. § 86A-20,
 -12-
or seeking injunctive relief from the Court
as provided for under N.C.G.S. § 86A-20.1.
The Board’s imposition of fines and costs on
Petitioner is beyond the power granted by
the General Assembly; the Final Decision is
in excess of the statutory authority or
jurisdiction of the Board, and, in
accordance with N.C.G.S. § 150B-51(b)(2),
the Final Decision must be reversed.

b. Even if N.C.G.S. § 86A-27 applies to
individuals who are not Licensees, N.C.G.S.
§ 86A-27(d) specifically provides that the
Board may only impose fees and costs on “the
licensee”, and Petitioner is not a Licensee.
Under the circumstances, imposition of costs
and attorney’s fees on Petitioner is in
excess of the statutory authority or
jurisdiction of the Board, and, in
accordance with N.C.G.S. § 150B-51(b)(2),
the Final Decision must be reversed.

c. N.C.G.S. § 86A-14 provides:

The following persons are exempt from the
provisions of this Chapter while engaged
in the proper discharge of their duties:

. . . .

(5) Persons who are working in licensed
cosmetic shops or beauty schools and are
licensed by the State Board of Cosmetic
Art Examiners.

As the Board recognizes, each of Maybe
Someday’s locations has a Cosmetic Arts
Salon License through Petitioner, and,
therefore, in accordance with the provisions
of N.C.G.S. § 86A, Petitioner is exempt from
the provisions of the Barber Act. Under the
circumstances, the Final Decision is in
excess of the statutory authority or
jurisdiction of the Board, and, in
 -13-
accordance with N.C.G.S. § 150B-51(b)(2),
and [sic] it must be reversed.

d. A primary basis for the Board’s
contention that Petitioner was “attempting
to barber by fraudulent misrepresentations”
is that Maybe Someday’s locations have a
“barber pole” in the reception area, without
a barber permit for the shop. With respect
to the use of the “barber pole”, the Board
holds that 21 NCAC 06Q.0101 “states that no
person shall use or display a barber pole
for the purpose of offering barbering
services to the consuming public without a
barber shop permit.” In fact, 21 NCAC
06Q.0101 does not state anything of the
sort. The cited section of the North
Carolina Administrative Code simply provides
“[e]very establishment permitted to practice
barbering shall display at its main entrance
a sign which is visible from the street, and
whose lettering is no small[er] than three
inches, stating ‘barber shop,’ ‘barber
salon,’ ‘barber styling’ or similar use of
the designation, ‘shop, salon or styling’ or
shall display a ‘barber pole’ . . [. .]”
Thus, the cited section of the North
Carolina Administrative Code imposes
obligations on barbers, it does not prohibit
any act by individuals who are not
Licensees.

. . . .

Under the circumstances, the Final Decision,
in accordance with the provisions of
N.C.G.S. § 150B-51(b)(2), and/or N.C.G.S. §
150B-51(b)(4), and/or N.C.G.S. § 150B-
51(b)(6), must be reversed.

Considering these exceptions in the context of the

petition, we find the Petition For Judicial Review “sufficiently
 -14-
explicit” to allow effective judicial review. Thus, we hold the

trial court did not err in denying respondent’s motion to

dismiss.

In the second issue raised by respondent on appeal,

respondent argues the trial court erred in concluding that

“Respondent Board does not have the statutory authority to

impose such fines on persons or entities not licensed by the

Board.” Upon review of the statutes, regulations, and relevant

law, we agree.

Among the powers and duties assigned to the Board is the

power “to assess civil penalties pursuant to [N.C. Gen. Stat. §]

86A-27.” N.C. Gen. Stat. § 86A-5(a)(6). N.C. Gen. Stat. § 86A-

27(a) in turn provides, in pertinent part, “[t]he Board may

assess a civil penalty not in excess of five hundred dollars

($500.00) per offense for the violation of any section of this

Chapter or the violation of any rules adopted by the Board.”

N.C. Gen. Stat. § 86A-27 (2013).

A plain reading of N.C. Gen. Stat. § 86A-27(a) reveals no

indication that the imposition of civil penalties is limited

solely to licensees. In fact, as respondent points out, where

portions of the statute are intended to apply exclusively to

licensees, the statute unambiguously provides for it; for
 -15-
example, N.C. Gen. Stat. § 86A-27(d), which governs the

assessment of attorney’s fees and costs in Board proceedings,

provides that “[t]he Board may in a disciplinary proceeding

charge costs, including reasonable attorneys' fees, to the

licensee against whom the proceedings were brought.” N.C. Gen.

Stat. § 86A-27(d) (emphasis added). Where there is no limiting

language in N.C. Gen. Stat. § 86A-27(a), we will not read

limiting language into the statute.

Moreover, N.C. Gen. Stat. § 86A-27(c) provides that “[t]he

Board shall establish a schedule of civil penalties for

violations of this Chapter and rules adopted by the Board.” The

Board has done so beginning with N.C. Admin. Code tit. 21, r.

6O.0101. As argued by respondent, the rules promulgated by the

Board pursuant to the Administrative Procedure Act, Chapter 150B

of the General Statutes, indicate that fines may be imposed on

non-licensees. See N.C. Admin. Code tit. 21, r. 6O.0102 (June

2014) (setting forth a schedule of civil penalties for operating

a barber shop without first filing an application for a barber

shop license or without a valid permit).

Particularly relevant to this case, the schedule of civil

penalties provides that “[t]he presumptive civil penalty for

barbering or attempting to barber by fraudulent
 -16-
misrepresentations . . . : 1st offense $500.00.” N.C. Admin.

Code tit. 21, r. 6O.0107 (June 2014). A subsequent regulation

explains that

[e]xcept as provided in Chapter 86A of the
General Statutes, the Board:

(1) will find fraudulent
misrepresentation in the following
examples:

(a) An individual or entity operates
or attempts to operate a barber
shop without a permit;

(b) An individual or entity advertises
barbering services unless the
establishment and personnel
employed therein are licensed or
permitted;

(c) An individual or entity uses or
displays a barber pole for the
purpose of offering barber
services to the consuming public
without a barber shop permit[.]

. . . .

N.C. Admin. Code tit. 21, r. 6Q.0101 (June 2014). Thus, it is

clear from the Board rules that civil penalties may be assessed

for violations by an “individual or entity”, not just against

those licensed by the Board.

In response to respondent’s argument, petitioner argues

that if the Board has statutory authority to impose civil

penalties on non-licensees, that authority is unconstitutional
 -17-
because it constitutes a grant of judicial power to the Board

that is not “reasonably necessary” to accomplish the Board’s

purpose.

North Carolina’s Constitution provides that “[t]he

legislative, executive, and supreme judicial powers of the State

government shall be forever separate and distinct from each

other.” N.C. Const. art. I, § 6. As our Supreme Court

explained in State, ex rel Lanier, Comm’r of Ins. v. Vines, 274

N.C. 486, 164 S.E.2d 161 (1968),

The legislative authority is the authority
to make or enact laws; that is, the
authority to establish rules and regulations
governing the conduct of the people, their
rights, duties and procedures, and to
prescribe the consequences of certain
activities. Usually, it operates
prospectively. The power to conduct a
hearing, to determine what the conduct of an
individual has been and, in the light of
that determination, to impose upon him a
penalty, within limits previously fixed by
law, so as to fit the penalty to the past
conduct so determined and other relevant
circumstances, is judicial in nature, not
legislative.

Id. at 495, 164 S.E.2d at 166. Our Constitution, however, also

provides that “[t]he General Assembly may vest in administrative

agencies established pursuant to law such judicial powers as may

be reasonably necessary as an incident to the accomplishment of

the purposes for which the agencies were created.” N.C. Const.
 -18-
art. IV, § 3. “Whether a judicial power is ‘reasonably

necessary as an incident to the accomplishment of the purposes

for which’ an administrative office or agency was created must

be determined in each instance in the light of the purpose for

which the agency was established and in the light of the nature

and extent of the judicial power undertaken to be conferred.”

Lanier, 274 N.C. at 497, 164 S.E.2d at 168.

What began as a narrow interpretation of “reasonably

necessary” in Lanier has since become more liberal, permitting

administrative agencies guided by proper standards to exercise

discretion in assessing civil penalties. See In re Appeal from

Civil Penalty Assessed for Violations of Sedimentation Pollution

Control Act, 324 N.C. 373, 381-82, 379 S.E.2d 30, 35 (1989).

Applying the less mechanical approach in In re Civil Penalty,

our Supreme Court upheld a civil penalty imposed by the North

Carolina Department of Natural Resources and Community

Development for violations of the Sedimentation Pollution

Control Act as reasonably necessary. Id.

As petitioner states, “[t]he purposes of the Board are to

license barbers and to prevent anyone who is not licensed as a

barber from practicing barbering.” See N.C. Gen. Stat. § 86A-1
 -19-
(2013). As with most agencies, these purposes serve to protect

the public.

Now on appeal, petitioner contends the Board has all the

tools necessary to accomplish its purposes by referring non-

licensees engaged in the practice of barbering for criminal

prosecution pursuant to N.C. Gen. Stat. § 86A-20 and seeking to

enjoin non-licensees from practicing barbering pursuant to N.C.

Gen. Stat. § 86A-20.1. While we recognize that N.C. Gen. Stat.

§§ 86A-20 & -20.1 provide means to accomplish the Board’s

purposes, they are not the exclusive means. As the Court noted

in In re Civil Penalty, other avenues to prohibit violations,

such as injunctions, take time during which irreparable damage

may occur. “The power to levy a civil penalty is therefore a

useful tool, since even the threat of a fine is a deterrent.”

324 N.C. at 381, 379 S.E.2d at 35.

Similarly, in this case we hold that the imposition of

civil penalties on non-licensees is reasonably necessary for the

Board to serve its purpose of preventing non-licensees from

engaging in the practice of barbering.

III. Conclusion

For the reasons discussed above, we affirm the trial court

in part and reverse in part.
 -20-
Affirmed in part; reversed in part.

Judges CALABRIA and ELMORE concur.