NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2797-19
MARLENE CARIDE,
COMMISSIONER, NEW
JERSEY DEPARTMENT OF
BANKING AND INSURANCE,
Petitioner-Respondent,
v.
ANDREW TEPEDINO,
Respondent,
and,
MICHAEL TEPEDINO &
SONS INSURANCE AGENCY,
Respondent-Appellant.
____________________________
Submitted October 28, 2021 – Decided November 18, 2021
Before Judges Whipple and Geiger.
On appeal from the New Jersey Department of Banking
and Insurance, Docket No. OTSC #E17-57.
Christopher Gillin-Schwartz, attorney for appellant.
Andrew J. Bruck, Acting Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Jeffrey S. Posta, Deputy Attorney
General, on the brief).
PER CURIAM
Appellant Michael Tepedino & Sons Insurance Agency (MTS) appeals
from a January 27, 2020 final decision and order of the Commissioner of the
New Jersey Department of Banking and Insurance (Department), which held
MTS vicariously liable for Andrew Tepedino's (Tepedino) fraudulent conduct
violating several statutes and regulations; imposed civil monetary penalties and
a statutory surcharge; awarded statutory attorney's fees; and revoked Tepedino's
insurance producer license. We affirm.
We derive the following facts from the record. MTS primarily sells
property and casualty insurance and is owned by Michael Tepedino. During the
period relevant to this matter, Andrew Tepedino (who is Michael Tepedino's
son) was a licensed resident insurance producer and had an office inside the
agency. Tepedino used MTS's bank accounts, telephones, reception staff,
letterhead, mailing address, fax machine, and reference number. He worked
under an employment contract for MTS to sell car insurance prior to 2012 but
did not have an active contract with the agency in 2012.
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From January 2009 to May 30, 2011, MTS contracted with Midland
National Life Insurance Company (Midland) to sell annuity products. Tepedino
was the only person at MTS that sold annuities. On May 31, 2011, Midland and
Tepedino began to contract directly.
Before September 25, 2012, Tepedino met with J.S., an eighty-one-year-
old man who owned annuities through a separate life insurance company. On
September 25, 2012, Tepedino attempted to sell annuities to J.S. and fabricated
several aspects of the application to receive a substantial commission. To that
end, Tepedino used MTS's fax machine and reference number to submit annuity
forms to Midland on behalf of J.S. The annuity forms falsely stated J.S.'s
household income, expenses, disposable income, net worth, and real estate
holdings. Other forms submitted for the same purpose contained an incorrect
Social Security number, address, phone number, and date of birth for J.S. They
also contained false statements regarding J.S.'s finances and existing life
insurance and annuity contracts. Tepedino falsely certified that he "determined
that all questions are answered fully, completely, and accurately as supplied by
the applicant." J.S. also alleged he did not sign the forms and Tepedino forged
his signature. The annuity application documents were faxed on MTS letterhead.
A-2797-19
3
Tepedino provided additional false information about J.S. to Midland in a
recorded phone conversation and in faxed documents. Midland paid Tepedino
$63,490.02 in commissions for the annuity policies sold to J.S.
J.S. reported the falsehoods to Midland. Midland would have declined to
issue annuity contracts to J.S. had accurate information been supplied regarding
his age and financial condition. Indeed, J.S.'s age exceeded the maximum age
for the sale of this type of annuity in New Jersey.
On December 20, 2012, J.S. filed a complaint with the Department
regarding Tepedino's conduct during the sale of the Midland annuities. In his
complaint, J.S. stated that Tepedino sold him unsuitable annuities, provided
incorrect account information, and attempted to sell him a reverse mortgage. In
response to the complaint, the Department issued an Order to Show Cause
(OTSC) against Tepedino and MTS (collectively respondents). MTS claimed it
was unaware of Tepedino's dealings with J.S. and did not share in the
commissions.
The contractual relationship between Tepedino and Midland was
terminated on January 25, 2013. Midland did not recoup the commissions from
Tepedino. J.S. was credited all monies back by Midland.
A-2797-19
4
In an amended OTSC, the Department alleged respondents violated: the
New Jersey Insurance Producer Licensing Act of 2001 (Producer Act), N.J.S.A.
17:22A-26 to -481; the Insurance Producer Licensing regulations, N.J.A.C.
11:17-1.1 to -7.7; the Insurance Producer Standards of Conduct, N.J.A.C.
11:17A-1.1 to -4.12; the New Jersey Insurance Fraud Prevention Act (Fraud
Act), N.J.S.A. 17:33A-1 to -30; and the New Jersey Trade Practices Act,
N.J.S.A. 17B:30-1 to-63. The Department sought civil penalties and revocation
of Tepedino's producer's license.
Respondents filed answers denying the Department's allegations and the
matter was transmitted to the Office of Administrative Law (OAL) as a contested
case. The matter was assigned to an Administrative Law Judge (ALJ) for
hearing.
The parties proceeded with cross-motions for summary decision. The
Department sought summary decision on all counts of the OTSC, contending
there were no genuine issues of material fact. MTS opposed the Department's
motion and cross-moved for summary decision. Tepedino also opposed the
Department's motion and requested dismissal of the charges brought against
1
The Department alleged respondents violated N.J.S.A. 17:22A-40(a)(2), (5),
(7), (8), (10), and (16).
A-2797-19
5
him, contending the charges were time-barred. He also alleged J.S. was not
innocent, had financial problems, and wanted a "get rich quick" scheme. 2
MTS argued it only had an employment contract with Tepedino to sell
property and casualty insurance products and Tepedino's sales of Midland
products were outside the scope of the employment agreement. MTS also
claimed that Tepedino's conduct with J.S. was not insurance-related because it
was not related to the insurance products sold by MTS.
Following supplemental briefing, the ALJ heard oral argument on April
12, 2019, which included telephonic sworn testimony by Tepedino. At the ALJ's
request, the Department provided an allocation of the penalties sought from
respondents under the various counts contained in the OTSC.
The ALJ issued a thirty-seven-page May 23, 2019 order that: (1) denied
summary decision to respondents on all counts; (2) granted partial summary
decision to the Department on counts one, two, three, five, and six of the OTSC;
(3) granted summary decision to the Department on count eight of the OTSC for
violations of N.J.S.A. 17:33A-4(a)(4)(b), except those related to the alleged
2
In her order granting partial summary decision, the ALJ questioned the
veracity of Tepedino's counterstatement of facts, stating it was "impossible to
reconcile Tepedino's statements that in 2012, he knew that J.S. was in dire
financial straits and also believed that J.S. had assets of close to $12 million and
monthly income of more than $100,000."
A-2797-19
6
forgery of J.S.'s signature; (4) denied summary judgment to the Department on
counts four, seven, and the aforestated portion of count eight related to the
alleged forgery of J.S.'s signature; (5) ordered respondents to pay $26,000 in
fines and statutory surcharge and $27,400 in attorney's fees and costs of
investigation to the Department; and (6) ordered the matter proceed to hearing
on the remaining charges.
The ALJ was not persuaded by MTS's argument that annuity products sold
by Tepedino were outside the scope of MTS's business. The ALJ reasoned that
because Midland had a contract with MTS previously, MTS did sell annuity
products at one point and the business was not exclusively focused on selling
property and casualty products. The ALJ determined that MTS was vicariously
liable for Tepedino's conduct, its employee.
On June 28, 2019, the Department formally withdrew counts four and
seven and the charge of forgery of J.S.'s signature under count eight. On July 1,
2019, the ALJ closed the record and issued an Initial Decision reflecting her
partial summary decision order. The ALJ concluded that neither Tepedino nor
MTS "gave an adequate explanation of the change in contractual relationships
from between Midland and [MTS] to between Midland and Tepedino."
A-2797-19
7
MTS filed exceptions to the Initial Decision that asserted: (a) granting
summary decision to the Department was error because there were genuine
issues of material fact regarding whether Tepedino's actions were undertaken
within the scope of his employment by MTS; (b) the civil penalties imposed
against MTS were excessive; and (c) there was no legal basis for the award of
attorney's fees and costs of investigation against MTS.
On January 27, 2020, the Commissioner issued a fifty-two-page final
decision and order that incorporated and adopted the findings of fact and
conclusions set forth in the Initial Decision, except as expressly modified. More
specifically, the Commissioner adopted the ALJ's conclusion that MTS was
vicariously liable for the conduct of Tepedino, its employee. She also adopted
the ALJ's conclusion that as to count one, respondents violated N.J.S.A. 17:22A-
40(a)(2), (5), and (7), N.J.A.C. 11:17A-2.8, and N.J.S.A. 17B:30-6. As to count
two and paragraph one of count eight, respondents violated N.J.S.A. 17:22A-
40(a)(2), (5) (7), (8), and (16), N.J.A.C. 11:4-2.8(a)(3), and N.J.S.A. 17:33a-
4(A)(4)(B). The Commissioner also found respondents violated N.J.S.A.
17B:30-6. As to count three and the related violation alleged in paragraph two
of count eight, the Commissioner adopted the ALJ's conclusion that respondents
violated N.J.S.A. 17:22A-40(a)(2), (5) (7), (8), and (16), and N.J.S.A. 17:33a-
A-2797-19
8
4(A)(4)(B), and N.J.A.C. 11:4-2.8(a)(3). As to count five and the related
violation alleged in count eight, the Commissioner adopted the ALJ's conclusion
that respondents violated N.J.S.A. 17:22A-40(a)(2), (5) (7), (8), and (16),
N.J.S.A. 17:33a-4(A)(4)(B), N.J.A.C. 11:4-2.8(a)(3), and N.J.A.C. 11:4-
2.8(a)(3). As to count six, and the related violation alleged in count eight, the
Commissioner adopted the ALJ's conclusion that respondents violated N.J.S.A.
17:22A-40(a)(2), (5) (7), (8), and (16), N.J.A.C. 11:4-2.8(a)(3), and N.J.A.C.
11:4-2.8(a)(3).
With respect to imposing joint and several liability for the civil monetary
penalties, the Commissioner explained:
[I]t is undisputed that Tepedino was employed by MTS
prior to and at the time of the sale of Midland annuity
products to [J.S.], to sell insurance products. In
addition, it is undisputed that Midland and MTS had a
contract in place from January 6, 2009 to May 30, 2011
relating to the sale of annuity products, during which
time Tepedino was the only MTS employee to sell said
products. Also undisputed is that on May 31, 2011,
Midland and Tepedino signed a contract to do business,
while Tepedino was employed at MTS. The ALJ found
that no evidence was presented to indicate any change
of contractual relationship between MTS and Tepedino
upon the commencement of Tepedino's contract with
Midland. In fact, the record substantiates Tepedino's
continued employment with MTS while conducting
business with Midland, as the documentary evidence
submitted shows that after May 31, 2011, when
Tepedino and Midland entered into a contract,
A-2797-19
9
Tepedino used (1) MTS's bank account as a pass
through for Midland client funds; (2) MTS's fax
machines and MTS's cover pages to transmit
documentations to Midland for [J.S.'s] [a]nnuity
[a]pplications . . . ; (3) the MTS office address to
correspond with Midland regarding [J.S.'s] [a]nnuity
[a]pplications . . .; and (4) MTS letterhead to
communicate with Midland regarding [J.S.'s] [a]nnuity
[a]pplications . . . .
[(Citations omitted).]
The Commissioner further highlighted that the activity was surely
"insurance-related" because MTS sold Midland products when the two
companies "had a contract in place" for at least the previous five years.
"Therefore, MTS did, in fact, sell annuity contracts, and its business was not
limited to only property and casualty products."
The Commissioner ultimately concluded that MTS was vicariously liable
for the acts of Tepedino, its employee, citing N.J.A.C. 11:17-2.10(a)(4) ("filing
a notice of agency contract shall be deemed to mean that the producer is that
company's agent for all kinds or lines of insurance for which the company and
producer are jointly authorized") and N.J.A.C. 11:17A-1.6(c) ("Licensed
partners, officers and directors, and all owners with an ownership interest of
[ten] percent or more in the organization shall be held responsible for all
insurance related conduct of the organization licensee, . . . and its employees.").
A-2797-19
10
The Commissioner applied the principle that an employer is vicariously liable
for the actions of their employee if the employee was acting within the scope of
their employment. The Commissioner found "[t]he evidence presented clearly
demonstrate[d] that Tepedino was holding himself out as an employee of MTS
when he conducted business with Midland on behalf of [J.S.]."
The Commissioner next addressed the civil penalties and attorney's fee
award recommended by the ALJ. As part of her analysis in setting the civil
monetary penalties, the Commissioner considered the Kimmelman 3 factors.
As to factor one, good or bad faith, the Commissioner agreed with the ALJ
that Tepedino's bad faith was clear based on his choice of an elderly victim and
the misstatement of material facts to induce the sale of the annuities. The
Commissioner also agreed that MTS's negligence was bad faith because their
"employee was conducting insurance-related business from [their] office, using
[their] resources, including [their] bank account, to conduct fraudulent activity."
Thus, factor one weighed in favor of a monetary penalty against MTS.
3
Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123 (1987). The Court
enumerated seven factors to be considered in setting civil penalties: (1) good or
bad faith of the violator; (2) ability to pay; (3) amount of profits from the illegal
activity; (4) injury to the public; (5) duration of the conduct; (6) existence of
criminal or treble damages actions; and (7) past violations. Id. at 137-39.
A-2797-19
11
As to factor two, ability to pay, the Commissioner again agreed with the
ALJ that both Tepedino and MTS should be assessed monetary penalties, finding
neither had provided any information showing an inability to pay penalties. The
Commissioner concluded that neither Tepedino nor MTS satisfied their burden
of proving an inability to pay civil penalties. This factor weighed in favor of
imposing a monetary penalty against MTS.
As to factor three, amount of profits realized from the unlawful activity,
the Commissioner concurred with the ALJ that this factor weighs in favor of a
monetary penalty against Tepedino "because his fraudulent actions generated
$63,490.02 in commissions, none of which was returned to Midland."
As to factor four, the injury to the public, the ALJ and the Commissioner
found that Tepedino injured the public based on Midland's expenditures to make
the victim whole after the fraud occurred. Regarding MTS, the ALJ found that
deterrence only occurred if the agency is penalized for the actions of its
employees. The Commissioner emphasized the importance of public trust in
insurance providers and the need to punish MTS for its failure to supervise its
employee.
As to factor five, the duration of the fraudulent conduct, the fraudulent
activities took place between September and December 2012. The ALJ noted
A-2797-19
12
that Tepedino admitted that his misconduct would never have been discovered
but for J.S.'s complaint to the Department. The Commissioner was unpersuaded
by MTS's argument that it had no knowledge of the fraud until J.S. filed his
complaint, noting that the short duration of the fraudulent scheme resulted from
J.S.'s diligence, not because of any militating actions taken by MTS. This too
weighed in favor of penalizing both respondents.
As to factor six, neither Tepedino nor MTS had been criminally charged
or assessed other penalties related to this matter. This weighed in favor of a
monetary penalty since neither had yet "paid a price" for the unlawful conduct.
As to factor seven, respondents had no prior violations. This factor
weighed against imposing a significant monetary penalty.
Upon balancing the aggravating and mitigating factors, the Commissioner
concluded that monetary penalties should be assessed against respondents in
amounts "substantially higher . . . than those recommended by the ALJ." The
Commissioner explained that Tepedino took advantage of J.S.'s "trust and sold
him an inappropriate annuity product that was not suited to his needs" and
"repeatedly submitted . . . documents . . . containing false and misleading
information in order to collect a commission on the sale that Tepedino was not
A-2797-19
13
forced to return." Tepedino's fraudulent conduct occurred while in MTS's
employ, rendering MTS vicariously liable for the penalties.
The Commissioner imposed separate joint and several civil penalties
under the Producer Act and the Fraud Act because the Acts "serve different
remedial purposes and insurance producers who commit insurance fraud will
face civil penalties under both [Acts]." The penalties totaled $45,000.4 The
Commissioner noted the penalties are "far less than the maximum that could be
imposed" and were consistent with prior decisions.
The Commissioner revoked Tepedino's producer's license. This appeal
followed.
MTS raises the following points for our consideration:
A. THERE IS A GENUINE ISSUE OF MATERIAL
FACT REGARDING TEPEDINO'S STATUS AS AN
EMPLOYEE WITH THE AGENCY AND THE
COMMISSIONER ERRED AS A MATTER OF LAW
FINDING VICARIOUS LIABILITY IN A
SUMMARY DECISION.
B. THE COMMISSIONER WAS WITHOUT
SUBSTANTIAL BASIS TO AWARD JOINT AND
4
The Commissioner added a $5,000 penalty for count one, a violation of the
Producer Act, two $5,000 penalties for count two and the first paragraph of count
eight, violations of the Fraud Act and Producer Acts, two $5,000 penalties for
count three (Producer Act) and paragraph two of count eight (Fraud Act), two
$5,000 penalties for count five and paragraph four of count eight, and two
$5,000 penalties for count six and paragraph five of count eight.
A-2797-19
14
SEVERAL LIABILITY FOR CIVIL PENALTIES
AND MODIFY THE AMOUNT TO $45,000.
C. THE ATTORNEY'S FEES AWARD IN THIS
MATTER ARE INCONSISTENT WITH R.P.C. 1.5
AND THE STANDARD OF REASONABLENESS.
We find no merit in these arguments and affirm substantially for the
reasons expressed by Commissioner Marlene Caride in her comprehensive and
well-reasoned written decision. We add the following comments.
A.
Our scope of review of an administrative agency's final decision is limited.
In re Herrmann, 192 N.J. 19, 27 (2007). "[A]n appellate court reviews agency
decisions under an arbitrary and capricious standard." Zimmerman v. Sussex
Cnty. Educ. Servs. Comm'n, 237 N.J. 465, 475 (2019). "An administrative
agency's final quasi-judicial decision will be sustained unless there is a clear
showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair
support in the record." Herrmann, 192 N.J. at 27-28. The party challenging the
administrative action bears the burden of making that showing. Lavezzi v. State,
219 N.J. 163, 171 (2014) (citing In re J.S., 431 N.J. Super. 321, 329 (App. Div.
2013)).
When reviewing an agency's final determination, we examine:
A-2797-19
15
(1) whether the agency's action violates express or
implied legislative policies, that is, did the agency
follow the law;
(2) whether the record contains substantial evidence to
support the findings on which the agency based its
action; and
(3) whether in applying the legislative policies to the
facts, the agency clearly erred in reaching a conclusion
that could not reasonably have been made on a showing
of the relevant factors.
[Allstars Auto Grp., Inc. v. N.J. Motor Vehicle
Comm'n, 234 N.J. 150, 157 (2018) (quoting In re
Stallworth, 208 N.J. 182, 194 (2011)).]
Where an agency's decision satisfies these criteria, we accord substantial
deference to the agency's fact-finding and legal conclusions, recognizing "the
agency's 'expertise and superior knowledge of a particular field.'" Circus
Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 10 (2009)
(quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)).
See also In re Request to Modify Prison Sentences, 242 N.J. 357, 390 (2020)
("Wide discretion is afforded to administrative decisions because of an agency's
specialized knowledge").
That said, an appellate court is "in no way bound by the agency's
interpretation of a statute or its determination of a strictly legal issue."
Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973). However, "[a]n
A-2797-19
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administrative agency's interpretation of a statute it is charged with enforcing is
entitled to great weight." In re Saddle River, 71 N.J. 14, 24 (1976) (citation
omitted). Moreover, we give great deference to an agency's "interpretation and
implementation of its rules enforcing the statutes for which it is responsible."
In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 489 (2004).
"Deference controls even if the court would have reached a different result in
the first instance." Herrmann, 192 N.J. at 28.
Here, the ALJ granted a partial summary decision to the Department and
denied the cross-motions for summary decision. The summary decision became
final when the Department withdrew its remaining claims. The standard for
summary decision motions is similar to summary judgment motions in Superior
Court. Summary decision "may be rendered if the papers and discovery which
have been filed, together with the affidavits, if any, show that there is no genuine
issue as to any material fact challenged and that the moving party is entitled to
prevail as a matter of law." N.J.A.C. 1:1-12.5(b).
B.
MTS argues the Commissioner lacked a substantial basis to impose joint
and several liability for the civil penalties. MTS contends the Kimmelman
A-2797-19
17
analysis was flawed because it was not bifurcated between respondents. We
disagree.
Administrative agencies have "broad discretion in determining the
sanctions to be imposed for a violation of the legislation [they] are charged with
administering." In re Scioscia, 216 N.J. Super. 644, 660 (App. Div. 1987).
"When resolution of a legal question turns on factual issues within the special
province of an administrative agency, those mixed questions of law and fact are
to be resolved based on the agency's fact finding." Campbell v. N.J. Racing
Comm'n, 169 N.J. 579, 588 (2001) (citing Boss v. Rockland Elec. Co., 95 N.J.
33, 42 (1983)). "The Commissioner's expertise in the field of insurance must be
given great weight." In re Aetna Cas. & Sur. Co., 248 N.J. Super. 367, 376
(App. Div. 1991) (citing IFA Ins. Co. v. N.J. Dep't of Ins., 195 N.J. Super. 200,
206-07 (App. Div. 1984)).
Here, MTS does not contest that insurance statutes and regulations were
violated and that Tepedino engaged in fraud. Instead, MTS claims it should not
be liable for the insurance-related fraud committed by its employee, Tepedino,
the son of MTS's proprietor. Vicarious liability for the insurance-related act of
an employee is well established. Tepedino was employed by MTS both prior to
and at the time of the fraud sale of annuities to J.S. Tepedino had an office at
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MTS, and routinely used its fax machine, telephone, letterhead, mailing address,
receptionists, and bank account to conduct business.
While Tepedino eventually contracted directly with Midland, he presented
no convincing evidence indicating any change in the contractual relationship
between MTS and Tepedino when that occurred. On the contrary, Tepedino's
employment by MTS continued and he still used MTS's bank account for
Midland client funds, its fax machine, office address, and letterhead to
correspond with and convey documents to Midland regarding J.S.
"An employer shall be responsible for the insurance-related conduct of an
employee." N.J.A.C. 11:17-2.10(b)(4). In turn, "all owners with an ownership
interest of [ten] percent or more in the organization shall be held responsible for
the insurance related conduct of the organization[']s . . . employees." N.J.A.C.
11:17A-1.6(c). The Commissioner correctly noted that an employer is
vicariously liable for the tortious actions of its employee when acting within the
scope of his or her employment. Carter v. Reynolds, 175 N.J. 402, 408-09
(2003) (citing Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587, 619 (1993)); see also
Restatement (Second) of Agency § 219 (Am. Law Inst. 1958). The record
supported that Tepedino was holding himself out as an employee of MTS when
he conducted business on behalf of J.S. with Midland.
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The Commissioner also found that MTS, "[a]n employing producer cannot
avoid responsibility by turning a blind eye to the fraudulent conduct of an
employee taking place in their offices and through the use of the employing
producer's resources." The record supports the Commissioner's determination
that MTS is vicariously liable for Tepedino's conduct under these circumstances,
thereby justifying joint and several liability for the civil penalties imposed , in
order to deter future misconduct by MTS and the industry as a whole.
C.
MTS next argues that the civil penalties imposed are excessive. We
disagree. We accord deference to the review of disciplinary sanctions imposed
by an agency. Herrmann, 192 N.J. at 28. Therefore, "appellate review of an
agency's choice of sanction is limited." In re License Issued to Zahl, 186 N.J.
341, 353 (2006). A reviewing court "will modify a sanction 'only when
necessary to bring the agency's action into conformity with its delegated
authority.'" Id. at 353-54 (quoting In re Polk License Revocation, 90 N.J. 550,
578 (1982)). We therefore review administrative sanctions to determine whether
the sanction "is so disproportionate to the offense, in light of the circumstances,
as to be shocking to one's sense of fairness." Herrmann, 192 N.J. at 28-29.
A-2797-19
20
Insurance producers "act in a fiduciary capacity and [are] held to a high
standard of conduct." In re Comm'r of Banking & Ins., 98 N.J. Super. 263, 268
(App. Div. 1967). Civil monetary penalties "deter future unlawful behavior by
the [violator] and those similarly situated." Kimmelman, 108 N.J. at 129. The
Commissioner considered and weighed the Kimmelman factors and determined
that respondents should incur a monetary penalty for each statutory violation.
N.J.S.A. 17:22A-45(c) authorizes the Commissioner to levy penalties, not
to exceed $5,000 for the first offense and not to exceed $10,000 for each
subsequent offense. The Fraud Act authorizes the Commissioner to impose a
$5,000 civil penalty on the first offense, $10,000 on the second offense, and
penalties not to exceed $15,000 for each subsequent offense in addition to
restitution. N.J.S.A. 17:33A-5(c). A statutory surcharge of $1,000 is also
permitted. N.J.S.A. 17:33A-5.1.
The Commissioner increased the civil penalties from $26,000 to $45,000
based on her decision to impose fines under both the Producer Act and the Fraud
Act because they serve different purposes. The Commissioner was within her
statutory authority to do so and provided a litany of OAL decisions to support
her choice to impose harsher penalties and further deter insurance fraud of this
kind.
A-2797-19
21
We discern no abuse of discretion. The civil penalties were within
statutory limits. Midland refunded the purchase price of the annuities to J.S.,
not Tepedino or MTS. In turn, Midland paid Tepedino $63,490.02 in
unrecovered commissions for the annuity policies sold to J.S. Considering the
amounts involved, the civil penalties do not shock our sense of fairness. On the
contrary, they were not excessive or otherwise arbitrary, capricious, or
unreasonable.
D.
Finally, MTS contends that the attorney's fees awarded are inconsistent
with RPC 1.5 and are unreasonable. MTS argues the ALJ granted petitioner's
request for attorneys' fees in a "summary fashion without any discussion or
findings as to the 'reasonableness' of the fee." Defendant suggests a hearing
should have been conducted to evaluate the reasonableness of $27,400 fee award
and submits the Commissioner utilized the time extensions to "craft a defense"
to the fee decision which violated the reasonableness standard. Specifically ,
defendant complains the investigator's time is not broken down in one-tenth of
an hour increments, one entry out of hundreds does not have a description, and
attorney time descriptions lack detail. We are unpersuaded.
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When authorized by statute, courts are authorized to award reasonable
attorneys' fees to the prevailing party. R. 4:42-9(a)(8). The Commissioner may
also order reimbursement of the costs of investigation and prosecution for
violations of the Producer Act. Pursuant to N.J.S.A. § 17:22A-45(c) "the
commissioner or the court, as the case may be, may order restitution of moneys
owed any person and reimbursement of the costs of investigation and
prosecution, as appropriate." The Fraud Act also permits the Commissioner to
order reimbursement costs and attorneys' fees. N.J.S.A. 17:33A-5(c).
The first step in calculating a fee award under a fee-shifting statute is to
determine the "lodestar," which is arrived at by multiplying the number of hours
reasonably expended by a reasonable hourly rate. Rendine v. Pantzer, 141 N.J.
292, 334-35 (1995). The statute does not require the time expended by attorneys
or investigators to be broken down into fractions of an hour.
Here, the Commissioner found the hours expended and the hourly rates
reasonable. After determining each attorney's years of experience, she used the
Department of Labor Fee Schedule to calculate the hourly rate. The Department
submitted voluminous logs reflecting the time expended. The Commissioner
approved the requested 84.8 hours, which was less than actual hours expended
by Department attorneys.
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MTS objects to a single entry that does not include a description of the
service performed. This minor omission does not warrant denying imposition
of reasonable costs of investigation.
We conclude that the Commissioner properly reviewed the attorneys' fees
and costs of investigation and awarded reasonable fees and costs. We discern
no abuse of discretion.
Affirmed.
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MARLENE CARIDE, ETC. VS. ANDREW TEPEDINO (NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE)
Combined Opinion