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Lietz v. State ex rel. Department of Family Services

Supreme Court of Wyoming

November 27, 2018

LUCY LIETZ, Appellant (Respondent),
v.
STATE OF WYOMING ex rel. DEPARTMENT OF FAMILY SERVICES, Appellee (Petitioner).

          Appeal from the District Court of Laramie County The Honorable Thomas T.C. Campbell, Judge.

          Representing Appellant: Mitchell E. Osborn, Attorney at Law, Cheyenne, Wyoming.

          Representing Appellee: Peter K. Michael, Wyoming Attorney General; Daniel E. White, Deputy Attorney General; Elizabeth C. Gagen, Senior Assistant Attorney General; Van E. Snow, [*] Assistant Attorney General. Argument by Ms. Gagen.

          Before DAVIS, C.J., and BURKE [†] , FOX, KAUTZ, and BOOMGAARDEN, JJ.

          DAVIS, CHIEF JUSTICE

         [¶1] This appeal involves Lucy Lietz's nearly nine year effort to challenge her termination by the Wyoming Department of Family Services (DFS). DFS dismissed Ms. Lietz from her position as a fraud investigator when it discovered that she signed daycare logs for her grandchildren that resulted in overpayment of DFS child care benefits to daycare providers in the amount of $196.95. Ms. Lietz appealed, and the Office of Administrative Hearings (OAH) reversed. DFS appealed, and the district court found that the OAH erred as a matter of law because it failed to apply the Life Care Centers of America, Inc. v. Dexter, 2003 WY 38, 65 P.3d 385 (Wyo. 2003), good faith standard in evaluating whether DFS had cause to terminate Ms. Lietz's employment. On remand, the OAH again found in favor of Ms. Lietz. DFS appealed, and the district court again reversed, finding that the OAH had improperly substituted its judgment for that of DFS. Ms. Lietz timely appeals from the district court's determination. We reverse the district court and reinstate the OAH decision.

         ISSUE

         [¶2] Both parties present several issues, which we consolidate into the following issue and sub-issues:

Was the OAH's determination that DFS lacked good cause for dismissing Ms. Lietz supported by substantial evidence and in accordance with the law?
A. Does the good faith standard require notice and an opportunity to be heard beyond that which is contained in the employment contract?
B. What is the role of the fact-finder in evaluating cause under the good faith standard?
C. Was the OAH's determination that DFS lacked good cause for dismissing Ms. Lietz supported by substantial evidence?

         FACTS

         [¶3] Lucy Lietz, a fraud investigator, worked for DFS for just short of 25 years when it terminated her employment. The series of events that led to her termination began in May of 2010, when Ms. Lietz learned that her pregnant daughter was drunk and was driving with her three children from Fort Collins, Colorado, toward Casper. Ms. Lietz called in a REDDI report, and knowing that her daughter would be arrested, headed south on I-25 from Casper so that she could meet up with law enforcement and take her grandchildren if necessary. As she anticipated, her daughter was arrested, and Ms. Lietz began caring for her three grandchildren that night. The children were 9 years, 6 years, and 18 months old at the time.

         [¶4] Ms. Lietz immediately sought daycare for the children. Because daycare for a child under the age of two is expensive, she applied for daycare benefits through DFS. In addition, because one of the children had a hereditary illness that required daily medication, Ms. Lietz applied for Medicaid benefits. Ms. Lietz was also eligible for benefits under the POWER program, which pays cash directly to family members who care for children who would otherwise go to foster care. Ms. Lietz testified that she did not apply for POWER benefits because she did not need the money to pay for the children's daily needs. That program would have paid Ms. Lietz approximately $550 per month during the time she had the children, for a total of over $3, 000.

         [¶5] In late 2010, DFS received a "complaint" asking how Megan Juarez's (Ms. Lietz's daughter) children could be receiving public assistance when she did not have the children with her. Michelle Rossetti, Ms. Lietz's supervisor, was assigned to investigate. Ms. Rossetti set out to determine whether the children (and Ms. Lietz) were eligible for benefits. Ms. Lietz was eligible for benefits, including financial assistance for her grandchildren's daycare during the time she was working or engaged in an otherwise approved activity.[1]

         [¶6] However, during her investigation, Ms. Rossetti discovered that "there were days in which Ms. Lietz was not in an approved activity and yet DFS had paid for daycare." On eight days between June and October, Ms. Lietz was not engaged in an approved activity (she had taken personal, sick or vacation leave on those days rather than working) and therefore she was not eligible for DFS assistance. Nevertheless, she signed daycare time logs approving DFS payment for daycare on those days, which resulted in an overpayment of benefits actually due by DFS to the daycare providers of $196.95. Ms. Rossetti concluded her investigation without speaking with Ms. Lietz. Based upon her findings, on January 4, 2011, DFS placed Ms. Lietz on administrative leave, and on January 21, 2011, notified Ms. Lietz of its intent to dismiss her from her employment because she engaged in "an act of intent to fraud the Child Care Program."

         [¶7] Ms. Lietz immediately repaid the $196.95 overpayment and responded to the DFS intent-to-dismiss letter. In her response, Ms. Lietz admitted that she made a mistake when she signed the daycare logs without reviewing them, she explained that she signed the logs without thinking because she was under a lot of pressure caring for all three children and with her daughter in jail, but "vehemently disagree[d]" with DFS's allegations of fraud and theft. On February 10, 2011, DFS dismissed Ms. Lietz.

         [¶8] Ms. Lietz requested a hearing before the OAH, and the OAH hearing examiner reversed the dismissal. The State appealed that decision, and the district court reversed, directing the OAH to apply the good faith standard set forth in Life Care Centers of America, Inc. v. Dexter, 2003 WY 38, 65 P.3d 385 (Wyo. 2003). On remand, the OAH again found in favor of Ms. Lietz. The State appealed, and the district court again reversed, finding that the OAH erred as a matter of law when it concluded that DFS failed to follow procedural requirements and because it substituted its own discretion for that of DFS. The district court also found that DFS met the Life Care good faith standard. Ms. Lietz timely appealed.

         STANDARD OF REVIEW

         [¶9] The Wyoming Administrative Procedure Act establishes the scope of this Court's review:

(c) To the extent necessary to make a decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. In making the following determinations, the court shall review the whole record or those parts of it cited by a party and due account shall be taken of the rule of prejudicial error. The reviewing court shall:
(i) Compel agency action unlawfully withheld or unreasonably delayed; and
(ii) Hold unlawful and set aside agency action, findings and conclusions found to be:
(A) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law;
(B) Contrary to constitutional right, power, privilege or immunity;
(C) In excess of statutory jurisdiction, authority or limitations or lacking statutory right;
(D) Without observance of procedure required by law; or
(E) Unsupported by substantial evidence in a case reviewed on the record of an agency hearing provided by statute.

Wyo. Stat. Ann. § 16-3-114(c) (LexisNexis 2017).

         [¶10] When we consider an appeal from a district court's review of an administrative agency's decision, we are not bound by the conclusions of the district court. Reynolds v. West Park Hosp. Dist., 2010 WY 69, ¶ 6, 231 P.3d 1275, 1277 (Wyo. 2010); Guier v. Teton Cty. Hosp. Dist., 2011 WY 31, ¶¶ 12-13, 248 P.3d 623, 629-30 (Wyo. 2011). We consider the case "as if it came to us directly from the agency." State ex rel. Wyoming Workers' Comp. Div. v. Brewbaker, 972 P.2d 962, 964 (Wyo. 1999). We defer to the agency's findings of fact, and we affirm those findings if they are supported by substantial evidence. Dale v. S & S Builders, LLC, 2008 WY 84, ¶ 22, 188 P.3d 554, 561 (Wyo. 2008); Dep't of Revenue & Taxation of State of Wyo. v. Casper Legion Baseball Club, Inc., 767 P.2d 608 (Wyo. 1989).

         [¶11] When we review a claim that an agency determination is not "supported by substantial evidence, we determine if there is 'such relevant evidence as reasonable minds would accept as adequate to support a conclusion.'" Employment Sec. Comm'n of Wyoming v. W. Gas Processors, Ltd., 786 P.2d 866, 870-71 (Wyo. 1990) (quoting Southwest Wyoming Rehab. Ctr. v. Emp. Sec. Comm'n of Wyo., 781 P.2d 918, 921 (Wyo. 1989)). "Findings of fact are supported by substantial evidence if, from the evidence preserved in the record, we can discern a rational premise for those findings." Coggins v. State ex rel. Dept. of Workforce Serv., Workers' Comp. Div., 2018 WY 77, ¶ 10, 421 P.3d 555, 559 (Wyo. 2018) (internal citations and quotation marks omitted). We "review an agency's conclusions of law de novo, and '[w]e will affirm an agency's legal conclusion only if it is in accordance with the law.'" Guier, ¶ 13, 248 P.3d at 630 (quoting DC Prod. Serv. v. Wyo. Dep't of Employment, 2002 WY 142, ¶ 7, 54 P.3d 768, 771 (Wyo. 2002)).

         DISCUSSION

         I. Was the OAH's determination that DFS lacked good cause for dismissing Ms. Lietz supported by substantial evidence and in accordance with the law?

         [¶12] We begin our analysis with the employment contract. In Wyoming, employment is presumed to be at-will. Ormsby v. Dada Kepner Co. of Wyo., Inc., 997 P.2d 465, 469, 471 (Wyo. 2000) ("Even employment at-will rests upon a unilateral contract in which the employer offers employment and the employee accepts by performing the work."). However, the "at-will presumption may be rebutted by a showing that the parties entered into an express or implied agreement which prohibited the employer from discharging the employee without just cause." Boone v. Frontier Refining, Inc., 987 P.2d 681, 685 (Wyo. 1999).

         [¶13] In the private employment context, an express or implied agreement between the employer and employee may provide the terms of the employment contract. Ormsby, 997 P.2d at 471 ("we recognize a contract in every employment situation"). We frequently examine language of employee handbooks to determine the terms of the employment contract and whether they provide that an employee may be discharged only for cause. See, e.g., Ormsby, 997 P.2d at 471; Brodie v. Gen. Chem. Corp., 934 P.2d 1263, 1266 (Wyo. 1997); Mobil Coal Producing, Inc. v. Parks, 704 P.2d 702, 707 (Wyo. 1985). In the public employment context, personnel rules often form the terms of the employment contract. See Abell v. Dewey, 870 P.2d 363, 369-71 (Wyo. 1994). We have also recognized that specific statutes or departmental personnel manuals may set forth terms of a public employment contract. See, e.g., Hoff v. City of Casper-Natrona Cty. Health Dep't, 2001 WY 97, ¶ 16, 33 P.3d 99, 103 (Wyo. 2001) (health department personnel manual and separate disclaimer formed employment contract); Seyfang v. Bd. of Trustees, Washakie Cty. Sch. Dist. No. 1, 563 P.2d 1376, 1381 (Wyo. 1977) (legislature created property interest in continued employment for tenured teachers).

         [¶14] Here, DFS agrees that the employment contract in this case consists of the State Personnel Rules. The relevant rules provide:

Section 1. Reasons for Discipline.
(b) An agency head may discipline a permanent employee for cause including, but not limited to ...

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