Direct Models Scores Preliminary Legal Victory in License Dispute

As detailed in Cohen’s order, Direct Models was initially licensed by the Commissioner in February 2005 and the Commissioner “continuously granted respondent’s subsequent license renewal applications from 2006 through 2017.” The last of those routinely issued renewals covered the period from November 1, 2017, to October 21, 2018.

In August 2018, rather than renew the license again, the Commissioner neither granted nor denied the agency’s application to renew its license, instead serving a “Statement of Issues” on Direct Models in November of that year. Later, in July 2019, the Commissioner filed the Statement with the OAH “determine whether the Commissioner may deny the license renewal application.”

While processing the renewal application, the Commissioner issued Direct Models a 60-day provisional license in October of 2018. From that month through March of this year, the Commissioner “routinely issued respondent successive provisional licenses valid, variously, for 30, 60, or 90 days,” as Cohen noted in his order.

On April 1 of this year, Direct Models through its attorney, emailed the Commissioner with a request to issue another provisional license. Three weeks later, the Commissioner denied Direct Model’s request without explanation.

Direct Models then filed a petition for a writ of mandate in the Superior Court of California, which was heard in May of this year. According to Cohen’s order, Direct Model’s petition “asserted the Commissioner’s failure to issue a provisional license was an abuse of discretion, ‘arbitrary, capricious, lacking in evidentiary support, contrary to public policy, unlawful, and procedurally unfair.’”

The Superior Court granted the writ to Direct Models, ultimately leading to the hearing before Judge Cohen.

In his order, Cohen stated that the Commissioner “offered no evidence to demonstrate what facts the Commissioner considered when she exercised her discretion not to issue another provisional license, instead relying entirely on legal argument. Direct Models, for its part, introduced evidence at the hearing “intended to show the Commissioner should have exercised her discretion to grant the provisional license.”

In a press release hailing the decision, Direct Models said that while the hearing before Judge Cohen was originally “scheduled for a number of days,” the hearing lasted only a few hours after Barton Jacka, an attorney with the Division of Labor Standards Enforcement (DSLE) who represented the Commissioner at the hearing, “was unable or unwilling to present any evidence to demonstrate what facts the DLSE, an office of the government of the State of California, considered when it exercised its discretion not to issue another provisional license.”

In lieu of offering such evidence, Jacka instead chose to argue that the Commissioner “lacked power under the governing statute to issue respondent another provisional license after March 30, 2021, and, therefore, she did not abuse her discretion when she declined to do so.”

That argument didn’t sail with Cohen, however.

“Issuing a provisional license is discretionary during a pending new license or renewal application process,” Cohen wrote. “But where the Commissioner, rather than issue a renewed license, invokes the administrative hearing process by filing a Statement of Issues, it cannot, unless evidence establishes cause, deprive a licensee of continued licensure merely by refusing a ‘bridge’ license, i.e., a provisional license or a series of provisional licenses, to the licensee before the Statement of Issues is heard and a decision issues. Any other ruling would render the requirements of sections 1700.8, 1700.21, and 1700.22 meaningless and would vitiate Legislative intent.”

Cohen also held that because the Commissioner “offered no evidence to dispute that she issued sequential provisional licenses over the course of two years, and no evidence to show the Commissioner considered facts that would cause her to alter this pattern, there is no basis to support a finding that the Commissioner’s denial of respondent’s application for a further provisional license was not an abuse of discretion.”

Direct Model’s attorney, Richard Freeman, applauded Cohen’s ruling.

“We are extremely pleased that the erudite Administrative Law Judge recognized that the Labor Commissioner acted arbitrarily and capriciously in April, 2021 when she refused to issue a continuing Provisional License while the administrative process that the Labor Commissioner herself had initiated was pending,” Freeman said. “We appreciate that the ALJ saw the actions of the Labor Commissioner as a clear abuse of her discretion.”

“It is indeed gratifying that the Labor Commissioner has been ordered to issue a further license to Direct Models as it combats her efforts to revoke its permanent license,” Freeman added. “We feel this is a positive sign of the good things to come for the agency as well as anyone doing business in California.”

Cohen’s order does not fully resolve the matter of the Statement of Issues the Commissioner filed with OAH in 2018. In his order, Cohen wrote that if a decision regarding the Statement of Issues “has not issued prior to the expiration of that provisional license, the Commissioner may issue a subsequent provisional license or, in the exercise of her discretion, decline to do so,” adding that if the Commissioner declines to issue another provisional license at that time, “she may initiate another OAH hearing to address whether she has properly exercised her discretion.”

Cohen later added that while the “Commissioner’s exercise of discretion may be broader in granting or denying a provisional license than it is in granting or denying a license renewal, that discretion may still be abused.”

“Issued without any factual basis, and while a Statement of Issues is pending a hearing that will, presumably, yield substantive findings in support of a decision,” Cohen wrote, “the Commissioner’s denial without supporting evidence of a provisional license or a series of provisional licenses extending until a decision on the Statement of Issues case issues is and will continue to be an abuse of discretion.”

Read Cohen’s order in full here.