IN COURT OF APPEALS
Filed January 23, 2007
Office of Administrative Hearings
File No. 12-6326-16910-CV
Alan W. Weinblatt, Jyotsna Asha Sharma, Luke M. Kuhl, Weinblatt & Gaylord, PLC, 111 East Kellogg Boulevard, Suite 300, St. Paul, MN 55101 (for relator)
Swanson, Attorney General, Kenneth E. Raschke, Jr., Assistant Attorney General,
Considered and decided by Randall, Presiding Judge, Halbrooks, Judge, and Stoneburner, Judge.
S Y L L A B U S
The use of a penalty matrix by the Minnesota Office of Administrative Hearings in assessing penalties in a Minnesota Fair Campaign Practices Act case, to ensure consistency, does not constitute unpromulgated rulemaking.
O P I N I O N
Respondent filed a complaint with the Minnesota Office of Administrative Hearings in response to campaign materials prepared and disseminated by relator. The complaint alleged violations of the Minnesota Fair Campaign Practices Act, specifically Minn. Stat. §§ 211B.04 and .06 (2004). The office of administrative hearings found relator in violation of section 211B.06 because of three statements included on a campaign flyer. Relator was assessed an $800 penalty. We affirm.
Relator Jim Bernstein (“Bernstein”) was a candidate in the
During his campaign for election, Bernstein distributed flyers and published campaign advertisements. On October 12, 2005, Fine filed a complaint with the office of administrative hearings (“OAH”) against Bernstein, alleging that Bernstein violated the Minnesota Fair Campaign Practices Act, specifically Minn. Stat. §§ 211B.04 and .06 (2004), by preparing and disseminating campaign materials without a disclaimer and containing false statements.
Bernstein’s flyer compared his positions to Fine’s positions on seven park-related issues. Fine first saw the flyer in October 2005, and subsequently spoke with people, including reporters, about what he considered to be false statements in the flyer. Fine did not distribute rebuttal materials or respond to the flyer with his own campaign materials, explaining that, “I feel it’s below me to talk about negative things, and I’m above that. I consider statements that are absolutely false about me to have to respond to those issues is below me.”
The evidentiary hearing was held on
October 31 and
(1) More funding for speedy removal of trees infected by Dutch Elm disease and replant new trees? – Doesn’t Support;
(2) Provide superintendent with a $500,000 slush fund? – Yes!; and
Fund and finish
The OAH fined Bernstein $800 for the violations. Pursuant to Minn. Stat. § 211B.36, subd. 5 (2004), Bernstein appealed by certiorari to this court.
I. Did the OAH err in concluding that three statements in a campaign flyer violated Minn. Stat. § 211B.06 (2004)?
II. Does the OAH’s use of a penalty matrix constitute unpromulgated rulemaking in violation of the Minnesota Administrative Procedures Act?
are presumed correct, and this court defers to an agency’s expertise and its
special knowledge in the field of its technical training, education, and
experience. Reserve Mining Co. v.
Herbst, 256 N.W.2d 808, 824
In a hearing before an ALJ panel, the complainant bears the burden of proof, and a violation of Minn. Stat. § 211B.06 (2004), relating to false statements in campaign materials, must be proved by clear and convincing evidence. Minn. Stat. § 211B.32, subd. 4 (2004). To prove that Bernstein violated Minn. Stat. § 211B.06, Fine needed to prove by clear and convincing evidence that the campaign materials distributed by Bernstein contained false statements, and either that Bernstein knew the statements to be false, or that he recklessly disregarded whether the statements were false.
The OAH determined that three statements included on Bernstein’s flyer violated Minn. Stat. § 211B.06, subd. 1. Bernstein argues that the OAH’s conclusion is based on erroneous findings that Bernstein made false statements and that the statements were made with actual malice.
Minn. Stat. § 211B.06, subd. 1 states:
A person is guilty of a gross misdemeanor who intentionally participates in the preparation, dissemination, or broadcast of paid political advertising or campaign material with respect to the personal or political character or acts of a candidate . . . that is designed or tends to elect, injure, promote, or defeat a candidate for nomination or election to a public office . . . that is false, and that the person knows is false or communicates to others with reckless disregard of whether it is false.
(Emphasis added.) A violation of Minn. Stat. § 211B.06,
subd. 1, requires a finding of both a false statement and actual malice or
reckless disregard. Riley v. Jankowski, 713 N.W.2d 379, 399 (Minn. App. 2006), review denied (
The OAH concluded that “[Fine] has shown by clear and convincing evidence that [Bernstein] violated Minn. Stat. § 211B.06, subd. 1, by preparing and disseminating campaign material that contained [three] false statements that [Bernstein] knew were false or communicated to others with reckless disregard of whether they were false . . . .” The panel also found that “[t]he violations were multiple and were committed knowingly or with reckless disregard of the truth.”
A. Political Speech
Bernstein argues that his
statements, made during an election campaign, criticizing his opponent, an
elected public official, are completely protected by the First Amendment. The First Amendment to the United States
Constitution provides in relevant part that, “Congress shall make no law . . .
abridging the freedom of speech, or of the press . . . .” U.S. Const. amend. I. These First Amendment protections apply with
equal force to the States. Alexander v. City of St. Paul, 303
The seminal case of N.Y. Times v. Sullivan highlighted our
“profound national commitment to the principle that debate on public issues
should be uninhibited, robust, and wide-open . . . .” 376
Bernstein is correct in his
assertion that political speech receives greater protection under the First
Amendment; however, the liberty of speech is
not an absolute right. Near v.
It is a fundamental principle, long established, that the freedom of speech . . . which is secured by the Constitution, does not confer an absolute right to speak or publish, without responsibility, whatever one may choose, or an unrestricted and unbridled license that gives immunity for every possible use of language and prevents the punishment of those who abuse this freedom.
B. Opinion or Fact
Bernstein argues that the OAH erred in categorizing his
statements as actionable statements of fact rather than as protected statements
of opinion. The First Amendment protects
statements of opinion. Hunt v.
statement in question is not necessarily the literal phrase published but
rather what a reasonable reader would have understood the author to have
of opinion, rhetoric, and figurative language are generally not actionable if,
in context, the audience would understand the statement is not a representation
of fact.” Jadwin v. Minneapolis Star & Tribune Co., 390 N.W.2d 437, 441 (
Throughout his brief, Bernstein
relies upon Kennedy v. Voss, a
Minnesota Supreme Court decision stating that the statute is “directed against
the evil of making false statements of fact and not against criticism of a
candidate or unfavorable deductions derived from the candidate’s conduct.” 304 N.W.2d 299, 300 (
Bernstein argues that his
statements, similar to those in Kennedy,
are his unfavorable deductions, based on Fine’s public record of action and
inaction. Contrary to Bernstein’s assertion,
we conclude that Kennedy differs from
the present case in several respects.
First, the predecessor statute used in Kennedy required only a finding of a false statement. 304 N.W.2d at 300. Second, the appellant in Kennedy was seeking to void the election results.
1. “More funding for speedy removal of trees infected by Dutch Elm disease and replant new trees? – Doesn’t Support”
Bernstein argues that this statement is neither precise nor verifiable since the degree of one’s support is neither quantifiable nor provable. Additionally, Bernstein argues that his statement appeared in a campaign flyer, where criticisms are expected. The OAH, however, simply found the statement to be a false fact. We agree.
Consistent with Bernstein’s argument, the statement is neither precise nor specific, as ordinary minds could disagree with the meaning of “more.” However, evidence established that Fine fully supported $800,000 in increased funding in 2004 and an additional $1 million in 2005 for the Park Board’s project. These were verifiable facts in Park Board records. Bernstein testified to reviewing Park Board records, and claimed that “more funding” meant that Fine did not support “more” funding than the $1 million of additional funding recommended by Park Board staff. Bernstein’s purported meaning of “more” is not evident from the context, is disingenuous, and not likely to be the ordinary meaning attached to the statement by a reasonable person. A reasonable person would have read the statement and understood that Bernstein was referring to Fine’s support of “additional” funding, which is a fact that could be – and was – proven false because of Fine’s actual support of increased funding in both 2004 and 2005. Bernstein could have expressed an opinion about Fine’s overall support for tree removal projects, but his actual statement was properly characterized as an assertion of fact that was known to be false.
2. “Provide Superintendent with a $500,000 slush fund? – Yes!”
Bernstein argues that this statement is an expression of opinion about the lack of adequate parameters or guidelines for spending. The OAH found the statement to be a false factual assertion, because the fund was not an undesignated fund and the superintendent was not authorized to spend $500,000 without supervision. We agree. The parties do not dispute that Fine supported the 2005 budget, which contained a provision for an “investment” or “innovation” fund. Sufficient information was available from the Park Board regarding the nature of the fund, including that Fine supported the 2005 budget, that the superintendent could only make expenditures of up to $50,000 without Park Board approval, and that the fund was never authorized. The OAH emphasized that the term “slush fund” carries a negative connotation to the reasonable person. “Today the phrase [slush fund] always carries connotations of moral impropriety, and sometimes of legal impropriety.” Bryan A. Garner, A Dictionary of Modern Legal Usage 813 (2d ed. 1995).
Again, Bernstein could have expressed an opinion about Fine’s support of discretionary funds, but a reasonable reader would understand the statement, in this context, to be a factual description of a particular fund and the fact is false. Fine did not support a “slush fund,” as a reasonable person understands that term.
3. “Fund and finish
Bernstein argues that whether something is a “priority” is a matter of opinion and unverifiable. The OAH found this to be a false statement given evidence showing that the project had been one of the Park Board’s highest priorities for several years. We agree.
In general, “priority” can be a
subjective term. Here, the Park Board
utilized a priority ranking scheme for projects. It was documented in Park Board records that
the Lake-of-the-Isles project had always been an “A” priority project. In this context, “priority” has a specific
factual meaning. The evidence
illustrated that Fine voted in favor of the project receiving the highest
priority level and, further, that he attempted to obtain additional funding
through his membership on the Minneapolis Board of Estimate and Taxation. These two facts are readily ascertainable
from Park Board official records. The truth or falsity of the statement was
demonstrable and verifiable. Bernstein’s
We understand Bernstein’s argument that “mere opinions” are protected. But in examining the statements and giving due deference to the credibility determinations made by the OAH, it was not unreasonable for the OAH to characterize the challenged statements as “facts.”
C. Actual Malice or Reckless Disregard
“Actual malice” is a term of art; it means that the defendant acted “with knowledge that [the publication] was false or with reckless disregard of whether it was false or not.” For example, as the Supreme Court has noted, a statement may have been made with actual malice if it “is fabricated by the defendant, is the product of his imagination, . . . is based wholly on an unverified anonymous telephone call [or if] the publisher’s allegations are so inherently improbable that only a reckless man would have put them in circulation.” Moreover, “actual malice” does not mean that the defendant acted with ill will or spite.
Notably, the standard for “reckless disregard for truth” is a subjective one; reckless disregard does not mean “recklessness” in the ordinary sense of extreme negligence. Instead, “reckless disregard” requires that a defendant make a statement while subjectively believing that the statement is probably false.
v. Peterson, 668 N.W.2d 642, 654-55 (
whether Bernstein knew that the statement was false or made the statement with reckless disregard as to whether or not it was false.
1. “More funding for speedy removal of trees infected by Dutch Elm disease and replant new trees? – Doesn’t Support”
During 2004, the Park Board incurred unexpectedly high costs associated with the removal of trees affected by Dutch Elm disease. To remedy the problem, the Park Board approved $800,000 of additional funding in 2004 and increased funding by $1 million in 2005. Fine supported and voted in favor of both increases.
Having reviewed Park Board records, Bernstein
testified that he could not find any evidence of Fine supporting additional
funds above the amounts recommended
by Park Board staff. Bernstein
apparently planned to propose funding above
Park Board staff recommendations. The
statement in Bernstein’s campaign literature did not make this
distinction. Instead, the flyer stated that Fine doesn’t support more funding (period!), when, in fact, Fine actually had supported additional funding in both 2004 and 2005. Bernstein knew that his statement was false or made the statement with reckless disregard of whether or not it was false.
2. “Provide Superintendent with a $500,000 slush fund? – Yes!”
At the end of 2004, Park Board staff presented a recommended budget for 2005. The recommended budget contained a $500,000 “investment” or “innovation” fund for capital improvement projects. The fund’s purpose was to provide the superintendent with the ability and authority to undertake projects with quick paybacks, i.e., projects that would save the Park Board money in the near future by way of decreased operating costs. The Park Board, including Fine, supported the recommended 2005 budget, with the inclusion of the investment fund. The investment fund, however, was never formally voted upon, after being tabled by the administration and finance committee.
Bernstein testified to reviewing Park Board records regarding the investment fund and deciding to identify it as a “slush fund” in his campaign materials. Bernstein utilized this terminology because of his belief in the discretionary nature of the fund and the lack of accountability attached to spending the fund money. At trial, however, Bernstein acknowledged that the superintendent could only spend $50,000 per project from the fund.
Bernstein relied upon widely distributed literature published by Minneapolis Citizens for Park Board Reform, a citizens’ group advocating for a new Park Board, discussing the investment fund which Fine had made no effort to refute. However, Bernstein knew at the time he published his flyer that the proposal for the fund had been tabled and that the superintendent’s discretionary authority was limited to $50,000. Bernstein knew that his statement was false or made the statement with reckless disregard for whether or not it was false.
“Fund and finish
During the last five years, the Lake-of-the-Isles restoration project has been a “top priority” item for the Park Board before the state legislature. Fine testified to attending various neighborhood, legislative, and Park Board meetings focusing on this project. Fine also advocated for the project through his position on the Minneapolis Board of Estimate and Taxation.
Bernstein consulted Park Board online
records, following which he concluded that because Fine had not “proposed any
additional funding to fix
D. Arbitrary and Capricious
Bernstein argues that the OAH’s decision was arbitrary and capricious. An agency’s ruling is arbitrary and capricious if it
(a) relied on factors not intended by the legislature; (b) entirely failed to consider an important aspect of the problem; (c) offered an explanation that runs counter to the evidence; or (d) the decision is so implausible that it could not be explained as a difference in view or the result of the agency’s expertise.
White v. Minn. Dep’t of Natural Res., 567 N.W.2d 724, 730 (Minn. App. 1997) (quotation omitted), review denied (Minn. Oct. 31, 1997). “[T]he agency’s conclusions are not arbitrary and capricious so long as a rational connection between the facts found and the choice made has been articulated.” Blue Cross & Blue Shield, 624 N.W.2d at 277 (quotation omitted).
Bernstein argues that the OAH decision was inconsistent, “attempt[ing] to issue Solomonic ‘divide the baby in half’ decisions, finding some statements to be in violation and others not . . . .” We find the decision neither arbitrary nor capricious. As previously discussed, the OAH based its findings of actual malice or reckless disregard on Bernstein’s testimony that he read and reviewed Park Board records. Adequate relevant evidence is in the record to support the OAH decision.
On writ of certiorari, we determine
whether the agency violated the constitution, exceeded its authority, engaged
in unlawful procedure, erred as a matter of law, issued a decision unsupported
by substantial evidence, or acted arbitrarily or capriciously.
An ALJ panel finding violations
of Minnesota Statute chapter 211A or 211B may impose sanctions ranging from
issuance of a reprimand to imposition of a maximum civil penalty of $5,000. Minn. Stat. § 211B.35, subd. 2 (2004). The OAH developed the penalty matrix as
guidance “in order to assure some consistency from one case to the next.”
The OAH recognizes that “[e]very case is different, and each penalty will be
selected to reflect the specific facts of the case.”
The matrix provides a range of
penalties for infractions based on the gravity and willfulness of the violation
3. Factors. (a) If a statute or rule gives an agency discretion over the amount of a fine, the agency must take the following factors into account in determining the amount of the fine:
(1) the willfulness of the violation;
(2) the gravity of the violation, including damage to humans, animals, and the natural resources of the state;
(3) the history of past violations;
(4) the number of violations;
(5) the economic benefit gained by the person by allowing or committing the violation; and
(6) other factors that justice may require.
The OAH argues in the alternative, if the matrix is considered an unpromulgated rule, that Bernstein’s penalty still should not be vacated. The penalty imposed upon Bernstein, $800, was within, and at the low end, of the statutorily provided range. The OAH found that Bernstein’s “violations were multiple, done knowingly or with reckless disregard of the truth.” Since the factors used to determine Bernstein’s penalty, willfulness and gravity of the violation, are consistent with those mandated in Minn. Stat. § 14.045, subd. 3(a), we conclude the penalty is valid.
Bernstein argues that the penalty matrix is unconstitutional because it “levies penalties for ‘negligent,’ ‘ill-advised,’ ‘ill-considered,’ and ‘inadvertent’ violations.” But a violation of Minn. Stat. § 211B.06 requires a showing of a false statement and actual malice or reckless disregard. Bernstein was not fined on the basis of any statement found to be “negligent” or “inadvertent.” Reckless disregard requires a showing of more than negligence. Riley, 713 N.W.2d at 399.
The penalty assessed on Bernstein was within the statutorily prescribed limits of $0 to $5,000. The OAH’s use of the penalty matrix as guidance for consistency, coupled with the recognition that each case is fact specific, did not constitute de facto rulemaking.
D E C I S I O N
It was neither arbitrary nor capricious for the OAH to find that Bernstein acted with actual malice or reckless disregard by publishing and disseminating false factual statements. The finding of statutory violations is affirmed.
The use of a penalty matrix by the OAH did not constitute unpromulgated rulemaking. The penalty imposed was proper.
 It is unclear from his brief, but Bernstein does not appear to challenge the constitutionality of Minn. Stat. § 211B.06. Instead, Bernstein merely claims that his statements were protected under the First Amendment. The constitutionality of Minn. Stat. § 211B.06 has not been challenged; therefore, the issue is not addressed here.
 The Park Board’s priority ranking system is as follows: “A” (top priority); “B” (secondary priority); and “E” (monitor and assist efforts of others).
 Bernstein, in a reply brief, seeks to limit the issues on appeal to those raised in his petition for writ of certiorari and moves to strike portions of Fine’s brief that raise new issues. In his brief, Fine discusses three statements found by the OAH not to be in violation of Minn. Stat. § 211B.06, and the issue of section 211B.04, presence of a disclaimer. Fine does not fully brief these matters and, for the most part, raises these remarks as comparisons in his discussion of the issues before the court. Fine failed to file a notice of review pursuant to Minn. R. Civ. App. P. 106. (“A respondent may obtain review of a judgment or order entered in the same action which may adversely affect respondent by filing a notice of review with the clerk of the appellate courts.”). Since Fine failed to file a notice of review, only the issues raised by relator are before this court.
 The campaign matrix is not set out in chapter 14. The matrix is available at the OAH website (http://www.oah.state.mn.us/faircampaign/CampaignPenaltyMatrix.htm).