Opinion ID: 2514099
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: Budget's principal contention is that DOL's adoption of the total purchases method of calculating Budget's rental fleet size under the IRP was the promulgation of a rule under the APA and, therefore, should have gone through proper rule making procedures, rather than having been adopted through adjudication. See RCW 34.05.310.350; former RCW 34.05.356 (1998); RCW 34.05.360-.395. Under Washington's APA, promulgation of a rule requires the agency to engage in certain specified procedures, such as publishing the proposed rule, giving notice of a public hearing, providing a precise explanatory statement, and maintaining a rule making file. Id. None of these procedures were complied with in this case. The remedy when an agency has made a decision which should have been made after engaging in rule making procedures is invalidation of the action. Hillis v. Dep't of Ecology, 131 Wash.2d 373, 399-400, 932 P.2d 139 (1997); RCW 34.05.570(2)(c). However, it is axiomatic that [f]or rule making procedures to apply, an agency action or inaction must fall into the APA definition of a rule. Failor's Pharmacy v. Dep't of Soc. & Health Servs., 125 Wash.2d 488, 493, 886 P.2d 147 (1994). For an agency policy to qualify as a rule under the APA, two elements are required by statute: Rule means any agency order, directive, or regulation of general applicability (a) the violation of which subjects a person to a penalty or administrative sanction; (b) which establishes, alters, or revokes any procedure, practice, or requirement relating to agency hearings; (c) which establishes, alters, or revokes any qualification or requirement relating to the enjoyment of benefits or privileges conferred by law; (d) which establishes, alters, or revokes any qualifications or standards for the issuance, suspension, or revocation of licenses to pursue any commercial activity, trade, or profession; or (e) which establishes, alters, or revokes any mandatory standards for any product or material which must be met before distribution or sale. RCW 34.05.010(16). Budget contends there is no real dispute that the `total purchases standard' adopted by the Department of Licensing (DOL) and applied to Budget ... is a rule. Supp. Br. of Budget Rent A Car Corp. at 1. Specifically, Budget argues that DOL's order is one of general applicability... that establishes, alters, or revokes any qualification or requirement relating to the enjoyment of benefits or privileges conferred by law. Supp. Br. of Budget Rent A Car Corp. at 4; see also McGee Guest Home, Inc. v. Dep't of Soc. & Health Servs., 142 Wash.2d 316, 12 P.3d 144 (2000). The Department disagrees, contending that the Department did not create any new standard, formula or requirement, but simply applied and interpreted the ... IRP. Supp. Br. of State of Wash. Dep't of Licensing at 4. We agree. DOL was simply stating its interpretation of the statutory phrase total number of passenger cars in the fleet, not creating a rule. This conclusion is supported by our recent decision in McGee, 142 Wash.2d 316, 12 P.3d 144, and that case's discussion of our earlier decision in Failor's Pharmacy, 125 Wash.2d at 497, 886 P.2d 147. In McGee, we addressed the question of whether Department of Social & Health Sevices (DSHS) invalidly established a rule by adopting a two tiered reimbursement scheme for congregate care facilities (CCF), which care for mentally ill wards of the State. McGee, 142 Wash.2d at 321, 12 P.3d 144. The regulation guiding DSHS in how it should reimburse CCFs was broad, stating only that the rates would be established by the Department. The sole statutory requirement was that the rates be reasonable. RCW 74.08.045; see also McGee, 142 Wash.2d at 327, 12 P.3d 144. The principal question posed in McGee, particularly at the Court of Appeals level, was whether Failor's Pharmacy, 125 Wash.2d at 497, 886 P.2d 147, was applicable to McGee `s facts. In Failor's Pharmacy, we invalidated a two tiered reimbursement scheme for pharmacies filling Medicaid prescriptions. The DSHS rule provided a two factor process for establishing reimbursement rates for pharmacies. Rates were to be calculated on the basis of `(1) actual or estimated cost for pharmacies to acquire drug ingredients, and (2) a dispensing fee.' McGee, 142 Wash.2d at 322, 12 P.3d 144 (quoting Failor's Pharmacy, 125 Wash.2d at 491, 886 P.2d 147). In administering this Medicaid program, however, [DSHS] used a multitiered reimbursement system based on the number of prescriptions filled annually, but failed to adopt a rule in accordance. Id. We held that DSHS had functionally added a third requirement to the two requirements set out in the ... regulations, and thus had improperly established, altered, or revoked a qualification for the enjoyment of a benefit. Id. at 323, 12 P.3d 144. The Court of Appeals in McGee distinguished Failor's Pharmacy, determining that DSHS had not established a rule by adopting its reimbursement scheme for CCFs. We described the Court of Appeals' decision: The Court of Appeals reasoned that since there were no factors beyond reasonable laid out for the Department to use by statute or by rule in determining the payment rates offered to congregate care facilities, the Department had not changed any qualifications for benefits in adopting the tiered system. Id. at 323, 12 P.3d 144. We ultimately affirmed the Court of Appeals on a simpler statutory basis, but noted that the Court of Appeals' analysis of Failor's and the APA is reasonable. Id. Much like in McGee, in this case there were no additional requirements added to the IRP by the Department. The requirement under the IRP is that a percentage of revenue generated in a particular state be applied to the total of all passenger cars in the fleet. DOL, by giving its interpretation of the phrase total .... fleet, cannot reasonably be said to have establishe[d], alter[ed], or revoke[d] any qualification or requirement relating to the enjoyment of benefits or privileges conferred by law. RCW 34.05.010(16). The requirement arose from the terms of the IRP, not by action of DOL. Budget's lone argument in favor of a contrary position is that because there was testimony at the administrative hearing that other states may be interpreting the IRP differently, and not using the total purchases manner of fleet calculation, DOL either altered or established a new requirement under the IRP. Supp. Br. of Budget Rent A Car Corp. at 5. We find this argument wholly unpersuasive. Budget's argument focuses on its expectations and the fact that because it, and perhaps some other states, disagree with the DOL's interpretation of the IRP, DOL created a new requirement under the IRP. Without a prior differing interpretation of the IRP from DOL, Budget's expectations are irrelevant. In deciding this case, we are not unmindful of the consequences were we to adopt a very broad interpretation of rule (in line with Budget's argument), and the fact that it would all but eliminate the ability of agencies to act in any manner during the course of an adjudication. The simplest and most rudimentary interpretation of a statute or regulation would require an agency to go through formal rule making procedures. While it is true that the APA is designed to provide greater public and legislative access to administrative decision making, RCW 34.05.001, we believe it is equally true that the APA's provisions were not designed to serve as the straitjacket of administrative action.
In addition to invalidating DOL's total purchases formula because DOL failed to engage in rule making, the Court of Appeals also determined that the Department's manner of computing Budget's rental fleet size is inconsistent with the clear terms of the IRP. Budget Rent A Car, 100 Wash.App. at 388, 997 P.2d 420. The Department contests this determination. Accordingly, we must next address whether [t]he agency has erroneously interpreted or applied the law. RCW 34.05.570(3)(d). As previously noted, article XI, section 1116 of the IRP sets forth a two step process to determine how many vehicles should be registered in a particular state:  First, divide the revenue obtained for the preceding year from rental operations in a single state by the total revenue of the company in all states;  Second, take the resulting percentage and multiply it by the total number of passenger cars in the fleet and that number shall be the number of rental passenger cars that shall be fully registered in the jurisdiction. The Department argues that the phrase total number of passenger cars in the fleet includes the total of all vehicles purchased during the assessment year, (e.g., total purchases) regardless of how many vehicles were for rent at a particular time. Budget, however, contends that the total fleet size is the average number of vehicles owned by Budget that were for rent at a particular point in time. Due to Budget's turning of its rental vehicles, a calculation under the Department's standard would result in a far greater number of vehicles being registered in Washington than under Budget's calculation. Words in a statute are given their ordinary and common meaning absent a contrary statutory definition. John H. Sellen Constr. Co. v. Dep't of Revenue, 87 Wash.2d 878, 882, 558 P.2d 1342 (1976). Courts may resort to dictionaries to ascertain the common meaning of statutory language. Id. at 883, 558 P.2d 1342. The Director relied upon the dictionary definition of the word total in her determination that the total purchases was the appropriate calculation standard under the IRP. Citing to Black's Law Dictionary, the Director noted that the common meaning of the term `total' is whole, not divided, lacking no part, entire, full, complete, the whole amount. Pet. for Review at 27. According to the Department, this language indicates that every vehicle that has been a part of Budget's fleet should be included in the calculation of its fleet size. The Department, however, fails to address the word fleet, which is also included within the IRP provision at issue. The dictionary definition of the term fleet is a group (as of airplanes or trucks) comparable to a fleet of ships, which in turn is defined as a number of warships under a single command: a naval force. Webster's Third New International Dictionary 868 (1993). The ordinary and common meaning of the phrase total ... fleet indicates that the appropriate calculation is the number of vehicles Budget had under its control at any given time. Indeed, were the Department's interpretation of this phrase reasonable, sunken warships would be considered a part of the Navy's total fleet. Clearly this is not the case. At most, the statutory phrase total... fleet is ambiguous in this context. An ambiguity arises when a term is fairly susceptible to two or more reasonable interpretations. Schelinski v. Midwest Mut. Ins. Co., 71 Wash.App. 783, 787, 863 P.2d 564 (1993). [4] When construing ambiguous statutory language, this Court's goal is to carry out the intent of the Legislature. Seven Gables Corp. v. MGM/UA Entm't Co., 106 Wash.2d 1, 6, 721 P.2d 1 (1986). When determining intent, this Court interprets the language at issue in the context of the entire statute. In re Sehome Park Care Ctr., Inc., 127 Wash.2d 774, 778, 903 P.2d 443 (1995). As a general matter, when statutory language is ambiguous, courts give some deference to the agency's interpretation, if the law being interpreted is within the agency's expertise. Waste Mgmt. of Seattle, Inc. v. Utils. & Transp. Comm'n, 123 Wash.2d 621, 627-28, 869 P.2d 1034 (1994). But an `administrative determination will not be accorded deference if the agency's interpretation conflicts with the relevant statute.' Senate Republican Campaign Comm. v. Pub. Disclosure Comm'n, 133 Wash.2d 229, 241, 943 P.2d 1358 (1997) (quoting Cowiche Canyon Conservancy v. Bosley, 118 Wash.2d 801, 815, 828 P.2d 549 (1992)). This deference to administrative findings is set against the rule that courts strictly interpret ambiguities in statutes imposing taxes in favor of the taxpayer. Sacred Heart Med. Ctr. v. Dep't of Revenue, 88 Wash.App. 632, 636-37, 946 P.2d 409 (1997). Legislative intent, gleaned from the language and purpose of the IRP, leans against the Department's interpretation. The Director of the DOL recognized that the IRP was initially conceived and drafted in the early 1970s as an equitable way to apportion license fees among the states and to provide for reciprocity for commercial and rental fleet vehicles. Pet. for Review at A15. DOL's interpretation of the phrase total number of passenger cars in the fleet greatly detracts from the equitable nature of the IRP. By utilizing a total purchases standard there will be double counting. For instance, if Budget turns its vehicles two times a year it will have, under DOL's standard, a fleet size two times larger than the number of vehicles Budget has as a part of its fleet at any given time. Furthermore, contrary to the position taken by the Director of DOL, the IRP did signify a departure from the traditional [t]ransactional focus of Washington vehicle tax law. DOL Final Order at 1.3. The IRP, by focusing on revenues in its determination of apportionment, and thereby creating a system whereby nonrevenue producing vehicles are not factored into apportionment, moves rental vehicles under the IRP away from traditional Washington vehicle tax law. Indeed, in 1992, the Legislature specifically exempted rental vehicles from the Motor Vehicle Excise Tax and instead imposed a sales tax on each rental transaction originating in Washington, regardless of where the vehicle is registered. See former RCW 82.44.023 (1992), repealed by Laws of 2000, ch. 1, § 3; former RCW 82.08.020 (1992). This is not to say, however, that we believe Budget's interpretation is the most reasonable reading of the IRP. While there are no cases dealing with the provision of the IRP at issue here, there was testimony given at the administrative hearing regarding another meaning of the phrase total ... fleet. Under the highest fleet or North Carolina system, utilized by Hertz Rent-a-Car, Administrative R. at 418-24, 636-45, 729-44, the number of cars in the total ... fleet is the highest number of vehicles in the fleet at any given time during the course of the year, rather than the average number of cars. This results in a number higher than that obtained under Budget's average fleet size, but considerably less than under the Department's total purchases calculation. Indeed, the ordinary and common meaning of the words total and fleet when considered on a yearly basis, suggests that the Legislature intended that the vehicle registration requirement be calculated using the largest number of vehicles offered for rental during the preceding year. We believe this interpretation of the phrase total ... fleet best reflects legislative intent to provide an equitable way to apportion fees, particularly since apportionment is predicated on revenue from rentals under the IRP. [5]