In re Primrose Sch. of Arden Hills

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In the Matter of the Appeal by Primrose School of Arden Hills and Shoreview of the Order of License Revocation.

No. A23-0496

Court of Appeals of Minnesota

April 22, 2024

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

Department of Human Services File No. 37862

Michael Fondungallah, Fondungallah & Kigham, LLC, St Paul, Minnesota (for relator Primrose School of Arden Hills and Shoreview)

Keith Ellison, Attorney General, R.J. Detrick, Assistant Attorney General, St. Paul, Minnesota (for respondent Minnesota Department of Human Services)

Considered and decided by Slieter, Presiding Judge; Wheelock, Judge; and Schmidt, Judge.

WHEELOCK, Judge

Relator childcare facility challenges the amended final order of the commissioner of human services that imposed a fine and conditional license for relator's violation of the Minnesota Department of Human Services Background Studies Act (BSA), Minn. Stat. §§ 245C.01-.34 (2022), and withholding or providing false or misleading information during an investigation. Relator argues that the amended final order was (1) affected by an error of law, (2) not supported by substantial evidence, and (3) arbitrary or capricious. We affirm.

FACTS

On June 29, 2021, respondent Minnesota Department of Human Services (DHS) sent a licensor to conduct an unscheduled "early and often" review (the "on-site review")^[1]of relator Primrose School of Arden Hills and Shoreview (Primrose). Primrose is a childcare center that serves roughly 200 children and opened in 2019. Primrose is owned and operated by Saleem Karmaliani,^[2] who operates several childcare centers in Minnesota.

During the licensor's visit, she observed a child in a classroom alone with an adult who was not a member of Primrose's staff, and the child had not been signed out of Primrose at the time. The person with the child was a behavioral therapist from the Lovaas Institute. Lovaas employs certified mental-health providers and is authorized by the state to provide direct therapy for children in schools, preschools and daycares. To maintain its certification, Lovaas must complete background checks for all of the providers it employs. The child had been attending Primrose for only one week at the time of the licensor's visit, and the child's mother had emailed the Primrose director to request that the therapist from Lovaas be allowed to work with the child in a Primrose classroom during the day. The therapist worked with the child on three occasions at Primrose, including the day of the licensor's visit.

During the on-site review, the licensor confirmed with Primrose staff that no Primrose staff had either signed the child out for the therapy session or supervised the therapist and the child during their session. The licensor also confirmed with the Primrose director that the therapist did not have a DHS background study initiated by Primrose and independently confirmed that the therapist did not have a DHS background study initiated by any other organization.

On July 1, 2021, the licensor conducted an exit interview over the phone with Karmaliani and the Primrose director, at which time the licensor informed them that there would be a $200 fine for failure to conform with the background-study requirements^[3] for the Lovaas therapist who worked with the child. After hearing this, Karmaliani stated to the licensor that a Primrose staff member was present in the classroom with the therapist and the child at "that time." Karmaliani then offered to provide video footage of the hallway outside the classroom to support this statement. The licensor explained to him that the footage would need to cover the duration of the therapist's work with the child on that day to avoid the fine.

Later that day, Karmaliani emailed the licensor four brief surveillance video clips of the hallway outside of the classroom in which the therapist and the child met. He asserted that the videos were taken during the time of the licensor's visit and that they would show that a Primrose staff person was present while the therapist worked with the child. However, the videos did not cover the duration of the therapy session; instead, they contained only a few minutes of footage that showed one of the Primrose teachers entering the classroom and the licensor appearing to observe the room about two minutes later. The video clips did not show the therapist and the child entering the classroom to start the therapy session or the teacher-who, Karmaliani asserted, had been with the therapist and child throughout the session-leaving the classroom. Karmaliani later explained that the cameras are motion activated and do not record constantly.

After the exit interview with Karmaliani and the Primrose director on July 1, the licensor opened an investigation into Primrose based on Karmaliani's assertion that a teacher was present with the therapist and the child. The licensor determined that (1) during the exit interview, Karmaliani claimed a Primrose staff person was present in the room with the therapist and the child; (2) during the on-site review, the licensor did not see anyone else in the classroom when she observed it through a window in the classroom door; and (3) the videos Karmaliani provided did not support his claim. As part of the investigation, the licensor interviewed the Lovaas therapist, who stated that Primrose did not provide staff to supervise her and the child during their work. The licensor also interviewed the Primrose teacher shown in the videos whom Karmaliani had identified as the Primrose staff person present in the room with the therapist and the child. The teacher stated that she did not supervise the child when she entered the classroom during the therapist's work with the child and that she only went into the classroom briefly to collect some games and activities.

On August 8, 2021, the licensor conducted a second interview with Karmaliani and informed him that DHS intended to take licensing action because Karmaliani provided false and misleading information when he said that a Primrose staff person was present the entire time the therapist provided services to the child on the day of the on-site review. DHS revoked Primrose's license in September 2021. Primrose appealed the order and requested a contested-case hearing.

An administrative law judge (ALJ) conducted an evidentiary hearing in February 2022 and issued findings of fact, conclusions of law, and a recommendation two months later. The ALJ found that the therapist was not affiliated with Primrose and thus that DHS failed to meet its burden to establish reasonable cause to believe that Primrose violated the background-study requirements. The ALJ also determined that DHS failed to meet its burden to establish reasonable cause to believe that Primrose knowingly provided false or misleading information to DHS, finding that the licensor did not clarify what Karmaliani meant by his use of the phrase "that time" during the exit interview on July 1. The ALJ further determined that DHS refused to accept Primrose's offered proof of parental consent to services and the care plan for the child. Based on these findings, the ALJ determined that DHS had no grounds to sanction Primrose, DHS imposed an unnecessarily severe sanction given that no harm came to the child, and the sanction deprived children and parents of what DHS had called a "great program."

DHS's attorney filed exceptions to the ALJ's decision,^[4] but due to an administrative error, the commissioner of human services did not receive the exceptions before the agency issued a final order in August 2022 in which the commissioner adopted the ALJ's findings, conclusions, and recommendation to rescind the revocation. DHS's attorney filed a request for reconsideration of the final order, drawing attention to the filed exceptions.

In November 2022, the commissioner issued an amended final order in which the agency reversed course, adopting many of the DHS attorney's exceptions, amending the findings of fact based on review of the exceptions, and imposing sanctions on Primrose. The commissioner determined, based on the amended findings of fact, that the therapist was affiliated with Primrose, Primrose did not satisfy the exceptions to the background-study requirements, and Primrose provided false or misleading information during an investigation. The commissioner determined, however, that the initial sanctions imposed were too harsh, and she rescinded the revocation of the license and instead ordered Primrose to pay the $200 fine and operate with a conditional license for one year. Primrose requested that the commissioner reconsider the amended final order, but the commissioner declined to do so and affirmed it.

Primrose appeals by writ of certiorari.

DECISION

MAPA governs our review of the decision of an administrative agency after a contested-case hearing. See Minn Stat. § 14.63. An appellate court "may reverse or modify the [agency's] decision if the substantial rights of the petitioners may have been prejudiced" by the agency's findings, inferences, or conclusions because they were affected by an error of law, unsupported by substantial evidence in view of the entire record, or arbitrary or capricious. Minn. Stat. § 14.69(d)-(f); Johnson v. Minn. Dep't of Hum. Servs., 565 N.W.2d 453, 457 (Minn.App. 1997). "Agency decisions enjoy a presumption of correctness and warrant deference by courts." In re Appeal by Waters, 977 N.W.2d 874, 885 (Minn.App. 2022) (quoting Kind Heart Daycare, Inc. v. Comm'r of Hum. Servs., 905 N.W.2d 1, 9 (Minn. 2017)).

An agency bears the burden of proof when it must "demonstrate reasonable cause for action taken." Minn. Stat. § 245A.08, subd. 3(a) (2022...