Is the Minnesota Commerce Department Out of Control?

Most of what happens behind the scenes at state agencies stays behind the scenes. The gears of government grind on, leaving taxpayers little choice but to trust that officials act in their best interest.

But three recent legal cases involving the Minnesota Department of Commerce have provided ammunition for critics of the entrenched administrative state and unelected regulators that run it.Rothman

“Court opinions and other legal filings published in the past several months have afforded Minnesotans a stark look at the internal operations of the Minnesota Department of Commerce,” Rep. Tony Albright (R-Prior Lake) and Rep. Kelly Fenton (R-Woodbury) wrote in a letter to Gov. Mark Dayton.

“They paint a disturbing picture of dubious motivation and disregard for the law, in which the good work of public servants is overshadowed by the inappropriate behavior of a few high-level officials. These conclusions come not just from adverse parties, but from state and federal judges of high regard. “

Legal decisions issued by a federal judge and two administrative law judges have led to accusations at the State Capitol of abuse of authority, “rogue actions” by officials and intentional First Amendment rights violations against the state agency that regulates insurers.

The concerns arise from a Commerce Department probe into Safelite Auto Glass’s billing practices. The agency’s Director of Investigations Martin Fleischhacker opened the case upon reporting a personal claim to Safelite in which he “could not recall exactly what the Safelite representative said” but he “felt like I was being pressured” . The agency pursued the investigation despite having received no consumer complaints against Safelite or evidence of harm to consumers, according to court documents.

Commerce Commissioner Mike Rothman told KSTP-TV the agency stands up “for consumers and small businesses in Minnesota, and we thought Safelite was steering business to the larger insurance companies and was not complying with regulations.”

But U.S. District Court Judge Susan Nelson found Commerce officials pursued a baseless investigation into the glass replacement company’s billing procedures that was predicated on “financially-motivated complaints from competitors.” The court record shows the state agency also shared confidential information and updates on the investigation with Safelite’s competitors, who hoped to benefit financially.

“This lack of evidence…calls into question the DOC’s purported interest in preventing consumer deception,” Nelson wrote in a January decision against the agency.

DOC logoThe federal court overturned a Commerce Department consent order that barred Safelite from administering claims on free-speech grounds, citing “the imminent threat of future prosecution and the self-censorship—or chilling effect—such a threat creates.”

Republican lawmakers have urged Gov. Dayton to crack down on the Commerce Department for an “unconstitutional attack on Minnesota consumers and businesses.” They say Rothman should be fired.

“The rulings show that certain unelected officials at the Department of Commerce view some laws as mere suggestions rather than appropriate limits on their power,” said Fenton, Vice Chair of the House Commerce and Regulatory Reform Committee that oversees the department. “Agencies cannot engage in abusive and anti-consumer behavior without consequence.”

Legislators have also flagged a related administrative law case the Commerce Department brought against Safelite shortly after the company sought to defend itself against the agency in federal court.

Ultimately, Administrative Law Judge James LaFave recommended dismissal of all charges, finding “the Department’s argument is not supported by the facts.” Yet after nearly two years in court, the agency still fought to keep the case alive.

A different administrative law court slapped down yet another attempt by Rothman to twist department regulations to coerce insurance companies “to collect and report data on the gender and sexual orientation of their governing boards and suppliers,” according to the legislators’ letter.

Rothman insisted the insurers’ personal data was within “the Commissioner’s powers to conduct investigations” for a wideranging diversity program in collaboration with California, New York, Oregon, Washington and the District of Columbia.

During oral arguments, commerce officials “could not identify any particular data that the Commissioner could not demand,” according to the December 2016 final decision rebuking the regulatory agency.

“The suggestion that an insurance company does not undertake any activity that is beyond the reach of the Commissioner to inquire upon, as much as the Commissioner wishes, and as often as he wishes, is very troubling,” Administrative Law Judge Eric Lipman wrote. “…The Department is unlawfully enforcing, or attempting to enforce a policy or similar pronouncement as though it were a duly adopted rule.”

There’s been no response from Gov. Dayton to the accusations of abuse of authority and regulatory overreach at the Commerce Department or appeal to remove Rothman from office.