Opinion ID: 1742462
Heading Depth: 3
Heading Rank: 1

Heading: Purely Prospective Ruling Doctrine

Text: As a general rule this court's decisions are given retroactive effect. State v. Baird, 654 N.W.2d 105, 110 (Minn. 2002). [7] But this court has recognized limited exceptions to the general rule where special circumstances exist. Id. at 110-11. This purely prospective ruling doctrine requires that three factors be present: First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied,    or by deciding an issue of first impression whose resolution was not clearly foreshadowed   . Second, it has been stressed that we must    weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.    Finally, we have weighed the inequity imposed by retroactive application, for [w]here a decision of this court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the `injustice or hardship' by a holding of nonretroactivity. Hoff v. Kempton, 317 N.W.2d 361, 363 (Minn.1982) (quoting Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971)). We have emphasized that this doctrine has been applied in only very limited situations. Turner v. IDS Fin. Servs., Inc., 471 N.W.2d 105, 108 (Minn.1991). Kmart bases its request for a purely prospective ruling on a series of tax court decisions that said tenant-paid real estate expenses are not required to be produced under the 60-day rule. The first decision on this point was a 2001 order on a motion for reconsideration in another Kmart case. Douglas County, 2001 WL 40361. The tax court said: The value of the property, as determined under the income approach, requires capitalizing the value of the income stream from the property after the expenses that reduce the income stream are deducted. Since expenses that are paid by the tenant do not reduce the income to the landlord, those expenses are not relevant in calculating the value of the property. Id. at . Although the court concluded that Kmart's failure to provide tenant paid business expenses related to real estate did not provide a basis to dismiss the petition, it dismissed the petition on other grounds. Id. at , 5. Thus the language concerning tenant-paid real estate expenses was not dispositive. In another order published on the same day, the tax court denied St. Louis County's motion to dismiss one of Kmart's four petitions. St. Louis County, 2001 WL 40370 at . The court held that Kmart's failure to produce tenant-paid real estate expenses did not require dismissal under the 60-day rule. [8] Id. But the court provided no reasoning for this conclusion other than a citation to Douglas County. Id. The other eight decisions that Kmart cites were either decided after the expiration of the 60-day deadline following Kmart's filing of its 2002 petition, [9] or do not support the interpretation of the 60-day rule that Kmart proposes. [10] Even if the conclusions stated in Douglas County and St. Louis County could be characterized as being clearly established, we conclude that they do not qualify as the type of precedent on which litigants may rely for retroactivity purposes. Although the tax court is described as a court, it is an administrative agency within the executive branch. See Wulff v. Tax Court of Appeals, 288 N.W.2d 221, 222-25 (Minn.1979) (distinguishing the tax court from judicial courts and upholding the constitutionality of the tax court statute, as against claimed violation of separation of powers, on the grounds that the taxpayer has the opportunity to elect to proceed in district court and because the tax court decisions are subject to judicial review of right in this court). As such, its decisions have little, if any, precedential effect. See Sprint Spectrum LP v. Comm'r of Revenue, 676 N.W.2d 656, 661 (Minn.2004) (characterizing decisions of the tax court as being nonbinding when in conflict with decisions of this court); In re Whitehead, 399 N.W.2d 226, 229 (Minn. App.1987) (recognizing that if a tax court's departure from a previous practice is sufficiently supported by reason or explanation, an administrative agency is not bound to rigid adherence to precedent). [11] The dissent relies on the two court of appeals decisions to support the proposition that there are some limits on the ability of an agency to depart from precedent, but those cases only require that there be a reasonable basis for any departure. The conclusion that precedent was based on an erroneous interpretation of a statute surely provides a reasonable basis to depart. Here, it is unclear whether the tax court is departing from Douglas County and St. Louis County because, as noted, the interpretation of the 60-day rule in those cases was not clear. But, to the extent the tax court did depart, it did so by correctly interpreting the 60-day rule, which provided a reasonable basis for departure and prevented its decision from being arbitrary or capricious. We conclude that the decisions of the tax court do not qualify as precedent for purposes of retroactivity analysis. This conclusion is reinforced by the fact that the tax court serves as an alternative venue to the district court for chapter 278 petitions. [12] Decisions of district courts likewise are not regarded as precedent for retroactivity purposes. See In re Appeal of the Crow Wing County Att'y, 552 N.W.2d 278, 280 n. 2 (Minn.App.1996). Because the tax court serves the same function as district courts in adjudicating property tax appeals, its decisions should not have greater precedential effect than decisions of the district court. Moreover, even if the doctrine of stare decisis were to apply to some orders of the tax court, it would not apply to orders which are in conflict with the express provisions of statutory law. Murphy Motor Freight Lines, Inc. v. Witte Transp. Co., 260 Minn. 440, 453, 110 N.W.2d 296, 305 (1961) (citing 2 Kenneth Culp Davis, Administrative Law Treatise § 17.07 (1st ed.1958)). As in Sprint, where we held that a tax court case is nonbinding if it directly contradicts a previous holding of this court, see Sprint, 676 N.W.2d at 661, a tax court case (like Douglas County and St. Louis County ) is nonbinding if it directly contradicts a statute. Thus, where the tax court incorrectly interprets a statute in one case, that interpretation does not override the statute in future cases. And, of course, decisions of the tax court have no binding effect on this court when we are ultimately called on to interpret a statute. Care Inst., Inc.-Maplewood v. County of Ramsey, 576 N.W.2d 734, 738 n. 4 (Minn.1998). The dissent expands on Kmart's arguments by referring to the test for retroactivity of administrative agency decisions followed by a line of federal cases. These cases were not discussed by the parties, likely because they have no application to an administrative agency's interpretation of the plain meaning of a statute. The dissent fails to distinguish between different types of administrative actions. Some administrative actions involve the agency's quasi-legislative power to make policy, including rules or regulations, within the framework of an enabling statute. See Minn.Stat. § 14.05 (2004); St. Paul Area Chamber of Commerce v. Minn. Pub. Serv. Comm'n; 312 Minn. 250, 260-61, 251 N.W.2d 350, 357-58 (1977) (stating when an agency acts in a legislative capacity, its decisions will be upheld [on judicial review] unless shown to be in excess of statutory authority or resulting in unjust, unreasonable, or discriminatory [decisions] by clear and convincing evidence.). Other administrative actions involve the agency's quasi-judicial powers to adjudicate cases. Minn. Stat. § 14.58 (2004); St. Paul Area Chamber of Commerce, 312 Minn. at 259-61, 251 N.W.2d at 356, 358 (stating when an agency acts in a judicial capacity, its decision will be reviewed under the substantial-evidence standard). The cases cited by the dissent in support of a prospective test do not involve a change in an agency's interpretation of a statute when made in its quasi-judicial capacity, but a change in the agency's interpretation or application of its own policies, rules or regulations, made in a quasi-legislative capacity. E.g., Williams Natural Gas Co. v. Fed. Energy Regulatory Comm'n, 3 F.3d 1544, 1546, 1552 (D.C.Cir. 1993) (addressing precedent permitting utilities to recover increases in natural gas costs under an automatic purchase gas adjustment policy devised by the agency); Chang v. United States, 327 F.3d 911, 915-16 (9th Cir.2003) (involving the retroactive application of amendments to rules promulgated by the agency); Farmers Tel. Co. v. Fed. Communications Com'n, 184 F.3d 1241, 1243 (10th Cir.1999) (reviewing agency's interpretation of its own regulations); Laborers' Int'l Union of North America, AFL-CIO v. Foster Wheeler Corp., 26 F.3d 375, 385-86 (3d Cir.1994) (approving the retroactive application of an agency decision that reversed agency practices that were not dictated by statute). Obviously, agency decisions based on its own policies, rules and regulations should have greater precedential effect, but even here an agency is not arbitrary or capricious when it reverses a past policy on a reasonable basis. The only federal decision that appears to discuss this prospectivity test in the context of an agency's interpretation of a statute is Microcomputer Technology Inst. v. Riley, 139 F.3d 1044 (5th Cir.1998). The court began with two analyses to determine its scope of review: If the language of the statute plainly resolves the point, we of course must enforce it.    But if the statute is ambiguous, we must defer to reasonable interpretations made by the agency charged with administering it. 139 F.3d at 1047. The court then determined that although some parts of the agency decision were required by the plain language of the statute, other parts were left open by the statute and were within the policymaking authority of the agency. Id. at 1049. The court only addressed the issue of retroactivity in connection with the latter parts of the agency decision that involved agency policymaking. Id. at 1049-50. As applied here, there is no claim that the legislature's enactment of the 60-day rule left open any question of policy for the tax court to decide. In fact, the tax court is not even charged with the exclusive administration of the 60-day rule. As noted, the tax court is only one adjudicative body that may hear claims under chapter 278, as an alternative to the district court. Because we hold that the plain words of the 60-day rule require production of tenant-paid real estate expenses, we conclude that the federal prospectivity test does not apply to any changes the tax court may have made in its interpretation of the 60-day rule concerning tenant-paid real estate expenses. Any other conclusion would enable an executive branch administrative agency to ignore or amend the plain language of a statute enacted by the legislature, in contravention of separation of powers. For all these reasons we decline to extend the purely prospective ruling doctrine to decisions of the tax court.