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Studley v. Alaska Public Offices Commission

Supreme Court of Alaska

January 27, 2017

JAMES M. STUDLEY, Appellant,

         Appeal from the Superior Court No. 1JU-13-00669 CI of the State of Alaska, First Judicial District, Juneau, Philip M. Pallenberg, Judge.

          Fred W. Triem, Petersburg, for Appellant.

          Joanne M. Grace, Assistant Attorney General, Anchorage, and Craig W. Richards, Attorney General, Juneau, for Appellee.

          Before: Stowers, Chief Justice, Fabe, Winfree, Maassen, and Bolger, Justices.


          WINFREE, Justice.


         A self-employed real estate broker ran as a candidate for local elective office. The broker sought a blanket exemption from Alaska's financial disclosure requirements to avoid reporting his clients' identities and the income earned from them. The Alaska Public Offices Commission denied the broker's request and assessed a $175 civil penalty for his failure to comply with the candidate reporting requirements. On appeal the superior court upheld the Commission's ruling. The broker now appeals the superior court's decision, contending the disclosure requirements violate his duty to maintain client confidentiality, infringe his clients' privacy rights under the Alaska Constitution, and impair several personal constitutional rights. We affirm the superior court's decision upholding the Commission's ruling.


         In 2012 James Studley, a real estate broker operating through a self-owned corporation, ran for a borough assembly seat. As a candidate for public office Studley was subject to Alaska's financial disclosure laws, administered and enforced by the Alaska Public Offices Commission. He was required to file a Public Official Financial Disclosure Statement reporting the source of any income exceeding $1, 000 earned during the prior calendar year and the nature of the services rendered.[1] Because Studley owned the corporation through which he operated, he was self-employed for purposes of the disclosure laws and so was required to report his actual client names as the income "source."[2]

         Studley submitted his calendar year 2011 disclosure statement in July 2012 and amended it three times. On the line for identifying clients Studley provided no details, but he made notes essentially stating that he was prohibited by law from disclosing the information. Under a general entry he titled "Real Estate Sales" Studley reported "$20, 000 - $50, 000" in income. During this process Studley contacted the Commission and directed it to four real estate statutes that he said should provide "an exemption from disclosing confidential financial information."[3] Studley stated: "These statutes specifically prohibit release of any financial information regarding my clients or customers without prior written approval or at the direction of the judicial system by court order."

         Campaign disclosure regulations permit a candidate to request a reporting exemption or a waiver.[4] The Commission asked Studley to provide the required information for making an exemption request, including the name, mailing address, and email address of the person making the request; the provision under which the exemption was sought; the reasons for requesting the exemption; and a certification that all facts given were true.[5] Studley responded by providing some of the requested information, including his name, mailing address, email address, and a certification that the information was true and accurate. Citing "AS 08-4145, " he gave as the reason for his request that the statute does "not allow any financial disclosure or information that would be considered financially harmful to a client."[6]

         In a subsequent exchange Studley provided the Commission a copy of the Alaska Real Estate Commission pamphlet he had referred to as "AS 08-4145" and stated that no information about a client may be disclosed without court order. Studley provided two hypothetical examples to illustrate how disclosing the existence or details of a broker-client relationship might harm a client. Studley's first example discussed how a buyer might be able to infer that a couple is divorcing from client disclosures and use that as negotiating leverage in a purchase; his second outlined privacy concerns for a person selling real property while filing for bankruptcy. He did not assert that these were actual client situations he faced.

         Later that day Studley sent the Commission another response asserting that he was "not required" to file the disclosures because "I receive my money from my various owned companies and I have listed both of my companies that pay me my income." He explained that: "all of my clients are with contracts to my companies and not to me personally"; "Alaska real estate law requires a court order or subpoena before I (a Broker) can release confidential information"; and "the legal system seems to weigh towards protecting the personal rights of all Alaskans['] financial data."

         The following week Commission staff denied Studley's exemption request. The Commission explained that the four statutes Studley cited "do not provide any statutory reason that would exempt you as a candidate[] from disclosing real estate transactions that provided you income." Noting that "the value of real estate transactions is a public process and your involvement and [c]ommissions from this public process [are] ascertainable already from other sources, " the Commission concluded that the transactions did not "fall under a constitutionally protected zone of privacy." The Commission observed that "the public's right to know the sources of your income outweigh[s] any reason you may have to keep these matters private." The denial also informed Studley that he could appeal the staff's decision directly to the Commission's appointed members within 30 days.

         Studley took no action to appeal. The Commission then sent him a "Notice of Penalty" informing him that civil penalties are assessed for filing incomplete disclosure statements, and that he was subject to fines accrued daily from the decision date until the election date. The penalty was $10 per day, for a total of $350. Studley was given 30 days to pay the penalty or appeal to the Commission.

         Studley appealed the penalty, requesting a hearing and stating that he was "not allowed" to comply with the disclosure laws "on reporting contractual agreements." At the hearing the commissioners located a real estate statute defining "confidential information"[7] and tooknoteof Studley's arguments thattherequired disclosures violated his clients' constitutional privacy rights.

         The Commission later issued a "Final Order" ruling that none of the real estate statutes Studley cited prohibited the required disclosures. The Commission found that Studley "violated the reporting statute by not filing a complete [disclosure] report, " but reduced his civil penalty to $175 because he was an "inexperienced filer." The order informed Studley that he could request reconsideration within 15 days and that he could appeal to the superior court within 30 days.

         Studley requested reconsideration.[8] The Commission addressed Studley's request at a subsequent meeting, ultimately denying it for failure to provide a basis for reconsideration.

         Studley had not been represented by an attorney during his Commission interactions; he retained counsel and filed an appeal with the superior court after the Commission denied his request for reconsideration. Studley cited the real estate statute establishing a licensee's duty to maintain a client's confidential information learned during representation, [9] and the statutory "confidential information" definition examined at his Commission hearing.[10] Studley also asserted that the required disclosures would violate his clients' constitutional privacy rights and would infringe on several of his own constitutional rights.

         The superior court concluded that Studley "has not shown that he was called upon to disclose any confidential information" and that he "never made any specific assertion that any particular client's information should be kept confidential." The court rejected Studley's constitutional claims, explaining that "Studley did not demonstrate . . . that release of information about his clients would violate any of his clients' privacy rights [or that] his rights under any of the[ ] [asserted] constitutional provisions were violated." Observing that Studley "provided no basis upon which [the Commission] could have granted him an exemption, " the court affirmed the Commission's decision.

         Studley now appeals the superior court's decision with two "principal questions" for our review. First, do "real estate regulations that require a broker not to release confidential client information conflict with the [Commission's] regulations that demand this disclosure by a broker who runs for public office?" (Emphasis in original.) Second, was Studley's "constitutional right of candidacy improperly conditioned upon relinquishment of his constitutional right of privacy and the rights of privacy of his clients[, or u]pon possible loss of his license and of his profession?"


         "When the superior court has acted as an intermediate court of appeal, we review the merits of the administrative agency's decision without deference to the superior court's decision."[11] "[W]e give deference to [an] agency's interpretation of a statute] so long as it is reasonable, when the interpretation at issue implicates agency expertise or the determination of fundamental policies within the scope of the agency's statutory functions."[12] But we will substitute our own judgment for questions of law "when the statutory interpretation does not involve agency expertise, or the agency's specialized knowledge and experience would not be particularly probative."[13] "In such cases we 'adopt the rule of law that is most persuasive in light of precedent, reason, and policy.' "[14] Questions of constitutional interpretation are also reviewed de novo under the substitution of judgment standard.[15]


         A. Candidates Must Report Sources And Amounts Of Income But May Seek An Exemption When Privacy Concerns Arise.

         1. Disclosure requirements

         Under Alaska law a candidate for elective office, including municipal office, must file a statement disclosing "income sources and business interests."[16] A municipal candidate must disclose this information when declaring candidacy or submitting other required filings.[17] The statement must provide "sources of income over $1, 000" for the preceding calendar year, including "each source of the income" and the corresponding "amount of income" earned from the source, which "may be stated in a range rather than as an exact amount."[18] A candidate is considered self-employed when the candidate owns a controlling interest in an income-deriving entity, such as a partnership or a corporation.[19] A self-employed candidate's source of income is the entity's individual "client or customer."[20] Disclosure statements are available to the public.[21]

         2. Disclosure exemptions

         A candidate required to file a disclosure statement may request exemptions from reporting.[22] Among other items, a candidate may request to keep "the name of an individual whowasasourceofincome"or "theamountof income" earned confidential.[23]"The person requesting any exemption has the burden of proving each fact necessary to show that an exemption . . . is applicable."[24] A candidate may seek an exemption under 2 AAC 50.775(c)(1) when "prohibited by law . . . from reporting" the information, or under 2 AAC 50.775(c)(2) when disclosure "would violate rights of the source under state or federal statutes or constitutions."[25] Although the superior court baseditsdecision on a different provision, [26] both parties relied on these two provisions and we accept them as the relevant authorities for this appeal.

         B. Studley Did Not Demonstrate He Was Entitled To An Exemption.

         1. We regard Studley's assertions as arguments for an exemption.

         Studley argues that candidate disclosure requirements "compete" with his statutory duty as a real estate agent to keep client information confidential, and that reporting the information would violate his clients' privacy rights under the Alaska Constitution. Studley claims that his right to stand for elective office was conditioned upon the surrender of his right to practice as a real estate broker and that his equal protection rights were violated. He also contends he does not need to show that his clients' information is confidential on a "case-by-case" basis. We consider these contentions together as an argument that Studley was entitled to a financial disclosure reporting exemption.

         2. Exemption requests must be supported by facts; hypothetical scenarios are insufficient.

         As a candidate requesting an exemption it was Studley's burden to "prov[e] each fact necessary" to show that a reporting exemption applied.[27] Contending that he "cannot know the circumstances of each client, [but] can envision or anticipate circumstances in which disclosure would be detrimental, " Studley offers four "possible examples" where disclosure could be detrimental to a client.[28] Studley argues that such hypothetical examples should suffice for an exemption, quoting Falcon v. Alaska PublicOffices Commission[29] for the proposition that "a case-by-case determination would be ...

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