Nelson v. Schlener

• Decision Date: 10 February 2014
• Docket Number: A13-0936
• Parties: Chad Nelson, Respondent, v. Troy Schlener, Relator, Carla Brown, et al., Respondents, Minnesota Department of Human Services, Respondent.
• Court: Minnesota Court of Appeals

Chad Nelson, Respondent, v. Troy Schlener, Relator,Carla Brown, et al., Respondents,Minnesota Department of Human Services, Respondent.

A13-0936

STATE OF MINNESOTA IN COURT OF APPEALS

Filed February 10, 2014

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2012).

Reversed and remanded

Johnson, Judge

Department of Human Services

Seth Leventhal, Leventhal pllc, Minneapolis, Minnesota (for relator)

Lori Swanson, Attorney General, Kristyn M. Anderson, Assistant Attorney General, St. Paul, Minnesota (for respondent Minnesota Department of Human Services)

Considered and decided by Johnson, Presiding Judge; Hudson, Judge; and Smith, Judge.

UNPUBLISHED OPINION

JOHNSON, Judge

Troy Schlener is a defendant in a putative class action in which it is alleged that, while he was employed by the Department of Human Services (DHS), he accessed the driving records of approximately 1,100 individuals without authorization. Schlener requested that the department indemnify him for the costs of his defense and for any liability imposed on him in the class action. The department denied his request. In this appeal, Schlener seeks judicial review of the department's denial by way of a writ of certiorari. We conclude that the agency record does not contain substantial evidence to support the department's reasons for denying Schlener's request. Therefore, we reverse and remand with directions for DHS to grant his request.

FACTS

In July 2011, Sarina L. Turner, a DHS privacy officer, sent a letter to Chad Nelson, a Minnesota resident, to inform him that his driver's license record had been accessed without authorization by a person previously employed by DHS.

In February 2013, Nelson commenced an action in the United States District Court for the District of Minnesota concerning the unauthorized access of his driver's license record. In March 2013, Nelson served and filed an amended complaint in which he alleged claims against Schlener, DHS, the State of Minnesota, and four other individuals who are officers or employees of DHS. In his amended complaint, Nelson alleges that, "as a result of Defendant Schlener's conduct, Defendant DHS sent out approximately 1,100 data-breach letters informing the subjects of Defendant Schlener's queries that anemployee of DHS had engaged in 'unauthorized access of your private information.'" Nelson's complaint alleges four theories of relief in six counts, including claims under the federal Driver's Privacy Protection Act (DPPA), 18 U.S.C. § 2721 (2012), and the Minnesota Government Data Practices Act (MGDPA), Minn. Stat. ch. 13 (2012). In his prayer for relief, Nelson seeks, among other things, damages of at least $2,750,000 under the DPPA, which provides for liquidated damages of $2,500 for each violation of the act. See 18 U.S.C. § 2724(b)(1). Nelson also seeks attorney fees under three fee-shifting statutes.¹

On April 2, 2013, an attorney representing Schlener sent a letter to the attorney general to request that the state assume responsibility for Schlener's defense and indemnify him in connection with the putative class action pursuant to section 3.736, subdivision 9, of the Minnesota Statutes. On April 9, 2013, an employee of the office of the inspector general of DHS's licensing division sent a three-sentence e-mail message to six other employees of DHS stating that Schlener had searched the records of eight persons named Chad Nelson between March and May of 2011 and that the most recent background study on a person named Chad Nelson was completed in 2008. Based on those two facts, the author of the e-mail concluded that Schlener's "access to ChadNelson's information was not within the scope of his employment as a background study research staff."

On April 23, 2013, DHS responded to Schlener's attorney in a letter from Charles Johnson, DHS's chief financial and operating officer. Johnson's letter stated that DHS was considering denying the request for defense and indemnification on the ground that Schlener engaged in conduct that was outside the scope of his employment. Johnson's letter stated that Schlener could submit a written response to the letter or could request a meeting within three days. On April 26, 2013, Schlener's attorney submitted a three-page letter that sought to justify Schlener's request for indemnification. That same day, the employee in the inspector general's office sent a slightly longer follow-up e-mail message in which she provided additional information about Schlener's searches of driving records for persons named Chad Nelson and two other persons with the last name Nelson.

On May 6, 2013, DHS's chief compliance officer, Gregory Gray, sent Schlener a one-page letter stating that DHS had concluded that Schlener's actions were outside the scope of his employment and, thus, that his request for defense and indemnification was denied. The letter explained that Schlener "acted based solely on personal motivation and not in furtherance of [his] duties as a Department employee."

Schlener appeals the denial of his request for defense and indemnification by way of a writ of certiorari.

DECISION

Schlener argues that DHS erred by denying his request for defense and indemnification with respect to the putative class action. DHS's denial of Schlener's request for defense and indemnification under section 3.736, subdivision 9, is a quasi-judicial decision. See State v. Tokheim, 611 N.W.2d 375, 378 (Minn. App. 2000). A quasi-judicial decision of a state administrative agency may be reviewed by this court by way of a writ of certiorari. In re Haymes, 444 N.W.2d 257, 259 (Minn. 1989); Tokheim, 611 N.W.2d at 378. We do not apply chapter 14 of the Minnesota Statutes because this is not an appeal from an administrative proceeding conducted pursuant to the Minnesota Administrative Procedures Act (MAPA).

A.

Before analyzing the merits of the parties' arguments, we must determine which documents are properly included in the agency record. In Schlener's reply brief, he argues that DHS has improperly placed documents before this court by two means. Schlener's argument is well founded in both respects.

First, Schlener contends that DHS added two documents to the agency record in an untimely manner such that they should not be considered by the court. On July 1, 2013, DHS served and filed an itemized statement of the agency record, which lists nine documents. On July 24, 2013, Schlener filed his appellate brief. On August 7, 2013, DHS served and filed an amended itemized statement of the agency record, which lists two additional documents: an undated one-page form requesting an internal auditor'sexamination of Schlener's computer and e-mail account,² and a three-page memorandum from the internal auditor to the human resources department summarizing that examination, dated July 28, 2011.³ DHS filed its responsive appellate brief shortly thereafter and referred to the two additional documents in the amended itemized statement of the agency record. As a result of DHS's amendment, the agency record changed between the filing of Schlener's initial brief and the filing of DHS's responsive brief.

An agency must file an itemized statement of the agency record within 30 days after the service of a petition for writ of certiorari "[u]nless the time is extended by order of the court on a showing of good cause." Minn. R. Civ. App. P. 115.04, subd. 3. One of the purposes of subdivision 3 is "to defer briefing until the contents of the record are known to the parties." Minn. R. Civ. App. P. 115.04, 2009 advisory committee cmt. In this case, DHS did not timely file an itemized statement of the agency record thatincluded the tenth and eleventh documents. In addition, DHS did not attempt to show good cause and obtain a court order allowing an extension of the 30-day deadline. Thus, the tenth and eleventh documents are not properly part of the agency record and are stricken from respondent's amended itemized statement of the agency record.

Second, Schlener contends that DHS improperly appended a four-page document to its brief that is not part of the agency record. Indeed, the four-page document is not included in either DHS's original or amended itemized statement of the agency record. At oral argument, DHS's attorney conceded that the four-page document was not relied on by the department's decisionmaker. Thus, the four-page document is not properly before the court and is stricken from respondent's appendix.

B.

The statute under which Schlener seeks defense and indemnification provides as follows:

The state shall defend, save harmless, and indemnify any employee of the state against expenses, attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the employee in connection with any tort, civil, or equitable claim or demand, . . . arising out of an alleged act or omission occurring during the period of employment if the employee provides complete disclosure and cooperation in the defense of the claim or demand and if the employee was acting within the scope of employment. . . . This subdivision does not apply in case of malfeasance in office or willful or wanton actions or neglect of duty . . . .

Minn. Stat. § 3.736, subd. 9 (2012). For purposes of this opinion, we assume that the common law of agency provides guidance for the determination whether an employee was acting within the scope of his or her employment when the employee engaged in theconduct for which the employee later was sued. Under the common law of agency, "A principal does not have a duty to indemnify an agent against losses caused by unauthorized action taken by the agent that did not benefit the principal or losses caused solely by wrongful acts committed by the agent." Restatement (Third) of Agency § 8.14 cmt. d. (2006)

C.

This court's certiorari review of a quasi-judicial decision is limited to whether the decision is "unconstitutional, outside the...