Suarez v. Office of Administrative Hearings

California Court of Appeal Dec 2, 2004 No. B169508Published

Before: Armstrong

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Holding. The court held that the Department of Real Estate's internal audit and enforcement manuals are protected by the official information privilege under Evidence Code section 1040 because the public interest in maintaining the confidentiality of investigative techniques outweighs the licensee's need for disclosure.

Issues

Whether the trial court erred in finding that the DRE's internal manuals were privileged and not subject to discovery.
Whether the trial court properly balanced the public interest in confidentiality against the licensee's interest in disclosure under Evidence Code section 1040.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Disclosure of the information is against the public interest because there is a necessity for preserving the confidentiality of the information that outweighs the necessity for disclosure in the interest of justice”

“The trial court order reveals that the court carefully balanced the public’s need for confidentiality with Bennett’s need for disclosure.”

Opinion

ARMSTRONG, J.

Appellant James Bennett has a real estate broker’s license. In February of 2001, after an audit, the Department of Real Estate (DRE) accused him of fraud in connection with two mortgages. The charges did not arise out of the audit. An amended accusation added charges which did arise out of the audit. They generally concerned record-keeping irregularities in trust accounts, alleging, for instance, that one account showed an overage of $22,575, and that Bennett had violated various regulations by

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maintaining separate records which failed to reflect the dates funds were received and deposited, along with other details, by failing to maintain a monthly reconciliation of the separate records with a control record for the trust account, and by failing to advise the parties in writing that he was the owner of the agency holding the escrow.

After the initial accusation was filed, Bennett made a discovery request, seeking a variety of DRE documents. He made another such request after the amended accusation was filed. Among other things, he asked for the DRE’s Audit Manual and Enforcement Deputy Manual. The DRE produced some files, but not those manuals.

Bennett brought a motion to compel production of the manuals. He argued that the manuals were relevant because “a good portion of the concerned accusation deals with an alleged violation of trust account record keeping and fund management. This alleged violation was purportedly discovered by [the DRE] during an audit under the guidelines provided by the Department of Real Estate. Thus the specific steps and procedures used by [the DRE] pursuant to the DRE Audit Manual will necessarily affect the outcome of his audit.”

The administrative law judge reviewed the manuals in camera, then ordered the majority of pages in each manual disclosed. The DRE challenged that order by filing a petition for writ of mandamus and/or prohibition in the superior court, contending that Bennett’s motion was both untimely and nonmeritorious. The DRE argued, inter alia, that the manuals were protected under Evidence Code section 1040.

The DRE supported its petition with declarations from its Chief Auditor, Fa-Chi Lin, and from William Moran, the Assistant Commissioner in charge of the DRE’s Enforcement Section and Mortgage Lending Section.

Suarez v. Office of Administrative Hearings

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ARMSTRONG, J.

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