McCarthy and Associates v. Bureau of Professional and Occupational Affairs – Cmwlth. Court – April 16, 2021 – memorandum opinion**
Held: Three-year unexplained delay in imposing a penalty on individual principal of now defunct accountancy firm rather than the firm itself was enough to establish undue delay and prejudice and properly invoke doctrine of laches against BPOA.
From the opinion--
Undue delay - “Delay in the administrative process, especially in the area of professional licensing, has become a serious concern for all involved, and this Court has not and will not condone or excuse improper delays,” especially when “the petitioner [] has [] met [its] burden of proving prejudice.” Jackson v. State Real Estate Commission, 456 A.2d 1169, 1170-71 (Pa. Cmwlth. 1983).
It is clear that the defense of laches is available as a defense in an administrative disciplinary action. However, it is equally clear that for the defense of laches to apply, more than mere passage of time must be shown. It is required that the person asserting the defense show harm or prejudice resulting from the delay. As an affirmative defense, the petitioner has the burden of proving the delay and the resultant prejudice.
Id. at 1170.
In Fumo v. Insurance Department, 427 A.2d 1259, 1263 (Pa. Cmwlth. 1981), this Court referred to a delay of three years in instituting license disciplinary action as “seemingly dilatory conduct.” Likewise, in Fumo v. State Real Estate Commission, 481 A.2d 1257, 1259 (Pa. Cmwlth. 1984),7 in commenting on a three- year lapse of time in commencing license revocation proceedings, this Court stated that “we certainly do not condone what appears to be an inordinate delay.” Pursuant to this case law, we conclude that the three-year passage of time from when the prosecutorial branch of the Department of State obtained information that enabled it to readily verify Petitioner’s noncompliance with the CPA Law, to when it issued the Rule to Show Cause on behalf of the Commonwealth, constituted a sufficient period of delay for purposes of laches.
There are no findings of fact or explanation of record that could reasonably account for the delay. In its brief, the Board simply notes the administrative division within the Department of State. . . . Standing alone, the internal operational affairs amongst the divisions within an administrative body, their interactive features, and the process through which administrative enforcement actions are pursued cannot excuse the delay. If it could, then, conceivably, there would be no such thing as undue delay in the law of laches in disciplinary actions because most—if not all—of enforcement-related administrative agencies are separated and parsed along the lines of investigatory, prosecutorial, and adjudicatory functions.
Therefore, we conclude that Petitioner has established that there was undue delay in this disciplinary action, and the dispositive issue ineludibly becomes whether Petitioner sustained the prejudice necessary to bar the Board’s disciplinary action against its license.
Prejudice - Petitioner was placed in the uncanny situation of defending a disciplinary proceeding in circumstances where it was entirely unclear who or what entity will be legally responsible for the civil penalty and, should it not be paid, who or what entity will bear the legal repercussions. . . . The Commonwealth instituted a disciplinary action against Petitioner’s accountancy firm license at a time when it was defunct and had ceased operations for approximately three years, having foregone its license for out-of-business status. For all intents and purposes, at least in this licensing matter, Petitioner was effectively “dissolved,” to borrow a term from corporate law. Indeed, in its January 23, 2020 order, when the Board “levie[d] a civil penalty of $1,000.00 against the accounting firm certificate and license of Petitioner, License Number AF054824,” (Board’s decision at Final Order), that license was extinguished and did not exist for over four years. As such, Petitioner was placed in the uncanny situation of defending a disciplinary proceeding in circumstances where it was entirely unclear who or what entity will be legally responsible for the civil penalty and, should it not be paid, who or what entity will bear the legal repercussions. . . . We believe that Petitioner has established prejudice because he was forced to defend a disciplinary proceeding where a civil penalty was imposed on a defunct accountancy firm license in a pseudo-like fashion, whereupon the Board basically attempted to “pierce the corporate veil” and hold Petitioner’s principal liable for civil penalties in his individual and personal capacity for conduct that he committed in his capacity as a corporate officer. See The Village at Camelback Property Owners Association, Inc. v. Carr, 538 A.2d 528, 532 (Pa. Super. 1988)
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**An unreported, non-precedential Commonwealth Court case can be cited for its persuasive value but is not binding precedent. See 210 Pa. Code § 69.414(b) and Pa. R.A.P. 3716
