Mississippi State Law Assignment 3 of 3

Case Study:  Understanding Application

You were just provided the following case study within your course, however, we have also provided it here for reference.  Please answer the multiple choice questions that follow the case study in the "Comments" section below.

By now, you are very familiar with Chet and Fred’s shortcomings. They are not actively malicious and fraudulent in what they do. They are more negligent and a little lazy. But, in the eyes of the law, the line between malicious intent and negligence is very fine – a violation is a violation, no matter how it is committed.

If you recall, this point about negligence versus malicious intent came up in an earlier case study. Fred had forgotten to provide complete disclosures in a refinance transaction and the borrower sued S & L Associates.

At the time, S & L decided to appeal the ruling about the penalty fee that the Department was assessing them for the violation that Fred committed. In S & L’s view, Fred’s violation was a result of negligence, rather than outright fraud, so they should be forgiven part of the penalty.

In that case study, we skipped over the appeal and penalty part of the process because it was beyond the scope of that section of our course.

In this case study, though, we are going to take a look at that part of the process, as well as what other actions the Department decided to take. The Department hit S & L and Fred pretty hard. 

First, the Department assessed a penalty of $10,000 against S & L for Fred’s failure to fully disclose in the refinance transaction. S & L co-owner Bev and Fred felt this was too high. They felt that the fine should be, at most, less than half of that. Bev received the notice about the penalty from the Department on October 15^th. After talking to Fred about the situation, Bev decided they were going to file an appeal, asking for the fine to be lowered to $4,000.

But, as per usual in the S & L office, there was a miscommunication between Bev and Fred. Each thought that the other was going to file the written form for appeal. Consequently, the appeal was not filed until October 26^th. Once Bev filed the appeal, she told Fred not to worry, because they were still well within the 30-day filing timeframe.

At the same time, Fred was hit with a notice that Department would be filing an order to suspend his license in light of this recent negligence. Fred knew that he only had ten days to file a petition for a hearing to contest the order. So he got right on it and filed.

Meanwhile, the appeal from S & L asking that the penalty fine be reduced was denied and the Department filed the penalty for final judicial review – seeking the full $10,000 amount. 

Feeling that the Department was trying to single S & L out, Bev decided to attend the hearing called by Chancery Court of the First Judicial District of Hinds County to determine the merits of the Department’s penalty. Bev argued that the fine was exorbitant – far beyond any reasonable legal limit for the negligent offense Fred had committed. She requested that the fine be lowered to $4,000, the same amount that she suggested in her original appeal. This request was denied.

Once the hearing was concluded, the court came back with the verdict that the Department’s penalty was justified and properly filed. Thus, S & L had to pay the entire $10,000 penalty fine for Fred’s negligence.

While all of this was going on, Fred was embroiled in a battle to keep his license from being suspended. After the trouble Fred had been having over the past year or so, the hearing did not go well for him, and the Department went through with its suspension of Fred’s license. They issued the suspension on December 15^th. Fred was notified on December 16^th, but did not stop doing origination business until December 20^th – partly because the certified letter sat on his desk for two days before he opened it and partly because he wanted to finish up some end-of-year business.

Let’s take a closer look at the situation and see what we can learn from it.

Questions:

          1.  Why was S & L’s original appeal against the penalty fine denied?

A.   Because it was filed too late.

B.   Because the difference between the penalty fine the Department was seeking and what S & L wanted to pay was too great.

C.   Because the Department was trying to single S & L out as some sort of example.

D.   Because the court always tends to side with the Department in such situations, unless blatant favoritism or harassment is evident.

          2. Which of the following best sums up the fine levied against S & L for
               Fred’s offense?

A.   The fine was too high given the offense that Fred committed was one of negligence, not outright fraud. The Department was well beyond the allowed maximum for a violation of the chapter.

B.   The fine was too low given the nature of Fred’s offense. The Department was too far below the legal minimum and should have doled out a stiffer fine to S & L.

C.   The fine was actually well within the Department’s authority and probably about right given Fred’s history of negligence.

3. Why was S & L’s second appeal to lower the fine to $4,000 denied at the hearing?

A.   Because it was the same appeal that the company had already filed.

B.   Because it was too low a fine for Fred’s offense.

C.   Because Fred had to be present to at the hearing to file the appeal personally.

D.   Because the purpose of the hearing was not to negotiate a new penalty amount.



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