Session January 19, 2017
from the Chancery Court for Davidson County No. 15-89-IV
Russell T. Perkins, Chancellor.
contested case hearing, an administrative law judge
("ALJ"), acting on behalf of the Tennessee Board of
Cosmetology, revoked a cosmetologist's license based upon
evidence that he had assisted in the procurement of
reciprocity licenses in exchange for cash. The ALJ also
assessed civil penalties against the cosmetologist in the
amount of $20, 000. The cosmetologist filed a request for
judicial review, and the chancery court affirmed the decision
of the ALJ. We have concluded that the ALJ's decision is
supported by substantial and material evidence and that none
of the grounds raised by the cosmetologist justify reversal
under the deferential standard of review described in Tenn.
Code Ann. § 4-5-322(h).
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Sharp, Jr., and Natalie R. Sharp, Nashville, Tennessee, for
the appellant, Lee Phan.
Herbert H. Slatery, III, Attorney General and Reporter;
Andrée Blumstein, Solicitor General; and R. Mitchell
Porcello, Senior Counsel, for the appellee, Tennessee
Department of Commerce and Insurance.
D. Bennett, J., delivered the opinion of the court, in which
Frank G. Clement, Jr., P.J., M.S., and W. Neal McBrayer, J.,
D. BENNETT, JUDGE.
and Procedural Background
Phan held a cosmetology license issued by the Tennessee Board
of Cosmetology ("the Board"), part of the Tennessee
Department of Commerce and Insurance ("the
Department"). On July 19, 2013, the Board sent Mr. Phan
a letter informing him that it had opened a complaint against
him based on allegations that he had "fraudulently
assisted in the procurement of licenses in exchange for
cash." The Board voted to authorize a contested case
against Mr. Phan at a meeting on November 4, 2013. On January
31, 2014, the Department filed a notice of hearing and
charges with the Board against Mr. Phan. The notice stated
that Mr. Phan's conduct constituted a violation of Tenn.
Code Ann. § 62-4-127(b) and that a hearing would be held
on May 9, 2014.
Contested Case Hearing
contested case was heard by an ALJ on May 9 and 22, 2014. The
Department presented testimony by the Board's executive
director, Roxana Gumicio, who testified about the two ways to
obtain licensure from the Board: (1) by completing the
required number of educational hours (to be a cosmetologist,
manicurist, or other type of license holder) and passing
exams, or (2) by reciprocity, for persons with an active
license in another state. To verify a person's
qualifications for licensure by reciprocity in Tennessee, the
other state must send proof of licensure directly to the
Gumicio testified that, in 2012, the Board asked one of its
employees, Latrisha Johnson, "to produce some files that
she herself entered, and the explanation that she gave was
that she destroyed them." Ms. Johnson was a licensing
technician who processed reciprocity licenses. The Board
thereafter found that Ms. Johnson had been buying and selling
prescription drugs using the state e-mail system, was
irresponsible, and exhibited "unacceptable conduct in
the management of the licensing files that she was entrusted
to." Ms. Johnson subsequently resigned prior to being
terminated. The Board sent letters out to the affected
licensees requesting documentation of their education and
licensure in other states to support their reciprocity
licenses. In most cases, either the licensees provided the
necessary documentation to support their licensure in
Tennessee or the Board obtained the information from the
other state where the Tennessee licensee had received his or
her license. Ms. Gumicio testified that those who could not
produce documents to support their reciprocal licensure were
given the opportunity to have a hearing on their case. The
Board revoked the reciprocal licenses of any persons who
could not produce documents to establish their licensure in
Department then presented ten witnesses who testified through
a Vietnamese interpreter that they gave Mr. Phan money,
ranging from $2, 000 to $6, 500, to obtain their
cosmetologist, manicurist, or aesthetician licenses by
reciprocity without completing any educational work or having
licensure in another state.
Department also called Mr. Phan as a witness. Mr. Phan
testified that he was a licensed cosmetologist and that he
had recently become a licensed cosmetology instructor. Early
in his testimony, Mr. Phan gave the following responses:
Q. Did you offer to help anyone obtain a cosmetology license
in the state of Tennessee?
Q. Did you offer to help anyone obtain a cosmetology license
through the reciprocity application process in Tennessee?
A. Yes. After-if they complete their education, then I will
Q. How did you help them?
A. I just showed them.
Q. What did you show them?
A. Just to show, do this, do that, translate for them.
Q. So you would help them by translating [for] them?
Q. Did you ever provide an application or form for someone to
fill out for a cosmetology license?
point in the hearing, the ALJ interjected with a reminder
about her previous instructions concerning Mr. Phan's
constitutional rights and stated to Mr. Phan's attorney
that "if you feel like that you need to instruct him in
any way, then you can let me know." Thereafter, Mr. Phan
gave the following testimony:
Q. Did you ever make copies of identifying documents for any
individuals such as a Social Security card or driver's
license? A. Fifth Amendment.
Q. Did you ever fill out any applications for any individual
for a cosmetology license in the state of Tennessee?
A. Fifth Amendment.
Q. Did you ever pay someone at the State of Tennessee to
process cosmetology license applications?
A. Fifth Amendment.
Q. Did you ever obtain licenses for anyone through
reciprocity in the State of Tennessee?
A. Fifth [A]mendment.
Q. Have you ever taken any money in exchange for a
cosmetology license from any individual in the state of
A. Fifth Amendment.
Phan's attorney conferred with him, and the questioning
continued as follows:
Q. Mr. Phan, have you ever taken any money from any
individual in any amount in exchange for a cosmetology
Phan denied receiving money from all but one of the ten
witnesses who testified against him. He stated that he
accepted $2, 000 from Thuy Nguyen to pay for tuition at the
World Academy in Little Rock, Arkansas. As to another
witness, Peter Pham, Mr. Phan stated that he told Mr. Pham
that his niece should send the application and $2, 000 to the
BN Career Institute in Houston, Texas. Asked if he received
any money from BN Career Institute, Mr. Phan testified that,
"if the person goes to school and completes, then they
[the school] give me money, but I never did collect on the
money." The Department's attorney asked Mr. Phan if
he took any of the ten witnesses to a bank to complete an
application or have anything notarized. Mr. Phan invoked his
Fifth Amendment rights. Mr. Phan also testified that he
referred students to the Academic World of Cosmetology in
Little Rock, Arkansas, a school that offered cosmetology
classes in Vietnamese. He denied ever receiving any money
from the school or sending any money to the school. Mr. Phan
could not recall whether he had sent the school money on
behalf of a student.
Phan expressly denied receiving money for arranging for
licenses to be issued to the ten witnesses who testified
against him. He also denied knowing Latrisha Johnson.
defendant's case began with further testimony by Ms.
Gumicio. She answered questions about the Department's
database, known as the Regulatory Board System
("RBS"). A licensed technician, like Ms. Johnson,
would enter notes and information into the RBS. Certain
information must appear in the RBS for a license to be issued
to an applicant. Mr. Phan then questioned Ms. Gumicio about a
letter the Department sent to Ms. Johnson on March 13, 2012,
particularly the following paragraph regarding the results of
an internal audit:
Based upon concerns regarding the missing reciprocal licensee
records and your use of Ms. Buttrey's computer without
her knowledge and in her absence from her work area, the
department's Internal Audit team recently conducted an
audit of the reciprocal licenses issued during the time
period of July 1, 2011 through March 8, 2012. Of the five
hundred ninety-nine (599) licensees sampled, one hundred
fifty-six (156) licensee files were missing. Of the four
hundred forty-three (443) licensee files reviewed,
twenty-five (25) files had insufficient documentation to
support approval of the license or otherwise questionable
Gumicio stated that the licenses of the witnesses who had
testified in this case fell within the July 1, 2011 to March
8, 2012 time period.
Phan's request, the Department produced RBS printouts for
the witnesses in this case. Mr. Phan's attorney stated
that Ms. Johnson's employee identification number
("CE number") appeared on the RBS screen shots for
all seventeen of the former licensees who completed
affidavits used in the case against Mr. Phan.
entered an initial order on January 5, 2015, revoking Mr.
Phan's cosmetology license and assessing civil penalties
against him in the amount of $20, 000. This order became
final on January 20, 2015. The ALJ denied Mr. Phan's
petitions for stay of the initial order and the final order
on January 21, 2015.
Phan filed a petition for judicial review in the chancery
court on January 21, 2015. He filed a motion for a stay of
the effectiveness of the final administrative order on the
same day, and the trial court denied this motion on February
4, 2015. Mr. Phan also filed a Motion to Correct or
Supplement the Record, or Alternatively to Take Additional
Proof on March 13, 2015. The trial court granted Mr.
Phan's motion as to those corrections or additions that
the Department did not contest, but it excluded all other
items requested as corrections or additions by Mr. Phan. The
court denied Mr. Phan's request to present additional
evidence or to "present to this Court proof of alleged
irregularities in procedure before the agency pursuant to
Tenn. Code Ann. § 4-5-322(g)."
hearing on Mr. Phan's petition for judicial review was
held on April 17, 2015. In its memorandum and final order
entered on February 23, 2016, the trial court affirmed the
Board's decision to revoke Mr. Phan's license and to
assess civil penalties against him in the amount of $20, 000.
Mr. Phan appeals.
Phan has raised five issues on appeal: (1) Whether the
ALJ's order revoking his cosmetology license is void for
lack of subject matter jurisdiction or violations of the Open
Meetings Act; (2) whether the ALJ's order was obtained
through statutory or constitutional violations that denied
Mr. Phan due process; (3) whether the ALJ exceeded her
authority by imposing a civil penalty in excess of the
statutory maximum and related to violations not included in
the notice of hearing and charges; (4) whether the ALJ's
decision was supported by substantial and material evidence
in light of the entire record; and (5) whether the Department
prosecuted the case against Mr. Phan with knowledge that some
or all of the alleged violations were not grounded in fact or
law, thereby warranting an award of attorney fees and costs
pursuant to Tenn. Code Ann. § 4-5-325.
review of the final decision of an administrative agency is
governed by the Tennessee Uniform Administrative Procedures
Act ("UAPA"), Tenn. Code Ann. § 4-5-101 et
seq. See Story v. Civil Serv. Comm'n, No.
M2010-01214-COA-R3-CV, 2011 WL 2623904, at *2-3 (Tenn. Ct.
App. July 5, 2011). The UAPA limits our scope of review as
The court may affirm the decision of the agency or remand the
case for further proceedings. The court may reverse or modify
the decision if the rights of the petitioner have been
prejudiced because the administrative findings, inferences,
conclusions or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(5) (A) Unsupported by evidence that is both substantial and
material in the light of the entire record.
(B) In determining the substantiality of evidence, the court
shall take into account whatever in the record fairly
detracts from its weight, but the court shall not substitute
its judgment for that of the agency as ...