Court Opinion

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Date Created: 2014-07-15 09:02:55.591709+00
Date Added: 2024-06-11T09:43:38.364170
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OSCN Found Document:BEACHNER CONSTRUCTION CO., INC. v. STATE ex rel. OFFICE OF STATE FINANCE

	
				

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BEACHNER CONSTRUCTION CO., INC. v. STATE ex rel. OFFICE OF STATE FINANCE2014 OK CIV APP 3316 P.3d 229Case Number: 111076Decided: 10/16/2013Mandate Issued: 01/03/2014DIVISION IITHE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION IICite as: 2014 OK CIV APP 3, 316 P.3d 229
BEACHNER CONSTRUCTION COMPANY, INC., 
Plaintiff/Appellant,v.THE STATE OF OKLAHOMA ex rel. OFFICE OF STATE 
FINANCE, as successor through reorganization of DEPARTMENT OF CENTRAL SERVICES, 
Defendant/Appellee.

APPEAL FROM THE DISTRICT COURT OFOKLAHOMA COUNTY, 
OKLAHOMA
HONORABLE LISA T. DAVIS, TRIAL JUDGE

REVERSED AND REMANDED FOR FURTHER 
PROCEEDINGS

Gerald G. Stamper, Christopher A. Barrow, Alexis L. Casady-Cohen, BARROW 
& GRIMM, P.C., Tulsa, Oklahoma, for Plaintiff/AppellantKimberlee D. 
Williams, GENERAL COUNSEL, DEPARTMENT OF CENTRAL SERVICES, Oklahoma City, 
Oklahoma, for Defendant/Appellee

JOHN F. FISCHER, PRESIDING JUDGE:
¶1 Plaintiff/Appellant Beachner Construction Company, Inc. appeals the 
decision of the district court dismissing its cause of action against the State 
of Oklahoma, ex rel. Office of State Finance, as successor through 
reorganization of the Department of Central Services (collectively DCS) for 
breach of contract, or in the alternative quantum meruit.1 The appeal has been assigned 
to the accelerated docket pursuant to Oklahoma Supreme Court Rule 1.36(b), 12 
O.S.Supp. 2008, ch. 15, app. 1, and the matter stands submitted without 
appellate briefing. We reverse and remand finding Beachner was not required to 
exhaust its administrative remedies before seeking redress in the district 
court.
BACKGROUND
¶2 In February 2006, Beachner was awarded a public improvement contract with 
the Construction and Properties Division of DCS, on behalf of the Oklahoma 
Conservation Commission (OCC), for the fixed sum of $2,276,837.25 on the West 
Commerce Tar Creek Abandoned Mine Lands Reclamation Project. The contract 
required Beachner to achieve substantial completion of the project in 360 
days.
¶3 In its Petition filed in April 2012, Beachner described the project area 
as approximately 186 acres of land which had been used for deep shaft mining for 
lead deposits. The mining process left massive mounds of chat (the crushed 
residue from the smelting process), many open and unfilled mine shafts and heavy 
concrete remains of the foundations of the mining equipment. Beachner alleged it 
contracted to fill the abandoned mines with the mounds of chat and other 
materials, dispose of the remaining chat, fill existing ponds, remove existing 
structures, grade the entire surface to specified elevations and establish a 
heavy grass cover. Pursuant to the contract, Charles Nuttle, a full-time 
employee of OCC, was present on the Project at all times to observe Beachner's 
work and provide direction as necessary.
¶4 In its Petition, Beachner alleged multiple delays were caused by incorrect 
instructional drawings provided by the project design company Benham Companies, 
L.L.C. Beachner alleged that in April 2006 OCC held the first of several 
meetings to discuss problems with the instructional drawings and the resulting 
disruption of Beachner's work. Beachner claimed it continued to work during the 
interruption, but such work was inefficient and expensive. Over the following 
months, Benham purportedly provided three revised versions of the drawings, 
which Beachner claimed were all inaccurate and would not produce the results 
requested by DCS/OCC.
¶5 Beachner alleged that in August 2006 Nuttle orally directed Beachner's 
project superintendant to disregard the Benham drawings and perform the work in 
accordance with Nuttle's oral instructions. Beachner claimed change orders were 
never provided by DCS or OCC regarding the oral instruction revisions, but the 
changes were recorded by Beachner in detailed notes of the construction 
meetings. Beachner indicated formal change orders were executed and approved by 
DCS concerning the grass cover for the project. Beachner stated the project was 
completed in April 2008. Beachner filed the present action seeking to recover 
the full amount of the costs associated with the additional labor and services 
provided to complete the project in the amount of $929,896, which DCS and OCC 
purportedly refused to pay.
¶6 DCS filed a motion to dismiss arguing Beachner was required to exhaust its 
administrative remedies before jurisdiction would lie with the district court. 
DCS argued Beachner could receive adequate relief through the administrative 
appeal process set forth in O.A.C. 580:20-1-22. DCS claimed the Administrative 
Law Judge (ALJ) was not limited to the remedy set forth in O.A.C. 
580:20-1-22(e)(7). DCS suggested the rule contemplated that claims, including 
those seeking monetary compensation, would be resolved through the 
administrative process. DCS argued the district court thus lacked subject matter 
jurisdiction over the dispute.
¶7 In response to DCS's quest for dismissal, Beachner contended it was not 
required to pursue its administrative remedies, as the administrative appeal 
process would be ineffective, futile, and would deprive Beachner of due process 
based upon the bias of DCS. Beachner noted the ALJ, pursuant to O.A.C. 
580:20-1-22(e)(7), only possessed authority to recommend to DCS that the 
contractor's appeal be dismissed or that the contract award be cancelled and 
rebid, and that nothing in the rule granted the ALJ the authority to grant the 
contractor's appeal or recommend an award of damages. Beachner indicated that 
pursuant to the rule, the final decision maker in consideration of any claim is 
the Director of DCS, or the highest ranking DCS employee. Beachner argued any 
administrative hearing would be futile, because the construction administrator 
that initially denied Beachner additional compensation had recently been named 
the interim administrator of DCS. Beachner suggested presenting the same issues 
to DCS for a fourth time would not result in a different decision.
¶8 Beachner further claimed the administrative process would be ineffective, 
because DCS had not been granted the power or authority to award monetary 
damages to a contractor by statute or administrative rule. Finally, Beachner 
argued resolution of its claim through the administrative process would violate 
its right to due process, as DCS, which had a financial interest in the outcome 
of Beachner's claim, would be the final arbiter of the contractual dispute.
¶9 The district court granted DCS's motion to dismiss finding that DCS had 
the authority to authorize the payment of money damages to Beachner, and thus 
complete and adequate relief could be obtained through the pending 
administrative proceedings. It is from such order of dismissal Beachner 
instituted the present appeal.
STANDARD OF REVIEW
¶10 Appellate courts review de novo a district court's dismissal of an 
action for lack of subject matter jurisdiction. Samson Res. Co. v. Newfield 
Exploration Mid-Continent Inc., 2012 OK 68, ¶ 10, 281 P.3d 1278, 1281. "Motions to 
dismiss are generally viewed with disfavor. The purpose of a motion to dismiss 
is to test the law that governs the claim in litigation rather than to examine 
the underlying facts of that claim." Rogers v. Quiktrip Corp., 2010 OK 3, ¶ 4, 230 P.3d 853, 856.
ANALYSIS
¶11 In Lone Star Helicopters, Inc. v. State, 1990 OK 111, 800 P.2d 235, Lone Star had entered 
into a contract with the Oklahoma Teaching Hospitals and the Department of Human 
Services (collectively the State) to provide transportation for medical 
emergencies. Lone Star alleged the State had cancelled its helicopter service 
contract after Lone Star had begun performance. Lone Star initially instituted 
an administrative appeal pursuant to the rules promulgated by the Office of 
Public Affairs. Lone Star abandoned the administrative process before the agency 
entered a final opinion alleging the State did not have the authority to award 
breach of contract damages. The Oklahoma Supreme Court declared that:

Exhaustion of an administrative remedy is generally a prerequisite for 
    resort to the courts, but the doctrine will not bar a district court action 
    that bypasses the agency's own rule-prescribed mode for processing a 
    complaint if the administrative remedy is unavailable, ineffective or 
    would be futile to pursue.
Id. ¶ 6, 800 P.2d at 237. In considering the relief afforded by the 
administrative remedy in Lone Star, the Supreme Court concluded:

Clearly, then, the administrative review process does not provide an 
    adequate avenue of relief to the plaintiff for resolution of this dispute. 
    Although the rules may have been broad enough to provide Company some form 
    of relief from the effect of an unlawful or unauthorized contract 
    termination, we hold that the exhaustion-of-remedies doctrine is not 
    invocable as a bar to the instant action for recovery of damages from breach 
    of contract.
Id. ¶ 7, 800 P.2d at 238. The Supreme Court clarified the general rule 
on exhaustion of administrative remedies in Waste Connections, Inc. v. 
Oklahoma Dep't of Envtl. Quality, 2002 OK 94, 61 P.3d 219 by holding that:

In cases in which exhaustion of remedies is not required by statute, this 
    Court has held that the requirement to exhaust administrative remedies is a 
    prudential rule, rather than a jurisdictional bar. The exhaustion rule 
    "presents a remedial barrier to judicial proceedings when an agency's 
    rule-prescribed administrative review process is not pursued to conclusion." 
    In such cases, the exhaustion requirement is discretionary with the court 
    and may be excused if the administrative remedy is unavailable, ineffective 
    or would have been futile to pursue.
Id. ¶ 8, 61 P.3d at 223 (citations omitted).
¶12 At the time the parties entered into the contract in question, DCS was 
charged with certain duties in the construction, improvement or utilization of 
buildings or land owned by the State:

The Construction and Properties Division of the Department of Central 
    Services shall:
1. Maintain a comprehensive master plan for utilization and construction 
    of buildings for state agencies, capital improvements, and utilization of 
    land owned by this state;
2. Review and approve all construction plans and specifications to ensure 
    compliance with good construction practices and space standards, costs of 
    project, proposed construction timetables, and agency need for the project, 
    except as otherwise provided in subsection B of this section;
3. Inspect prior to acceptance and final payment all completed projects 
    for which the Division issued bid solicitations to ensure compliance with 
    the plans and specifications of the project;
4. Provide assistance to state agencies when a state agency desires to 
    hire a consultant or construction manager for a project. Except as provided 
    by subsection B of this section, the Division shall award and execute 
    contracts to consultants and construction managers that provide services to 
    state agencies for construction projects;
5. Develop and issue solicitations for award of state agency contracts 
    for construction. The Division shall have final approval authority for 
    contracts and contract documents. Neither the Division nor any state agency 
    shall, for performance of work that requires that a contractor be licensed 
    by this state, issue a solicitation to, or make a contract with, a 
    contractor not licensed by this state;
6. Review inspections performed by consultants and construction managers 
    during construction, primary inspections when consultants or construction 
    managers are not used, and final inspections after completion;
7. Recommend standards, including, but not limited to, building codes, 
    space utilization, material testing, indexes of efficiency, economy, and 
    effectiveness, pursuant to rules the Director promulgates;
8. Monitor construction projects to ensure maximum efficiency in the 
    expenditure of state funds for construction;
9. Report fraud or waste in any construction project by written 
    notification with documentation for the report to the Attorney General. The 
    Attorney General shall take appropriate action to protect the interest of 
    the state; and
10. Prequalify as good and sufficient insurance carriers, bonding 
    companies and surety companies to meet provisions of Sections 1 and 134 of 
    this title. The Director shall promulgate rules to establish criteria to 
    determine whether a carrier or company is good and sufficient. The 
    prequalification requirement and process shall not violate the provisions of 
    Section 135 of this title.
61 O.S.Supp. 2006 § 204(A). 
The Director of DCS was further directed to promulgate certain rules, including: 
"Specifying provisions the Division of a state agency shall follow to adhere to 
acquisition, contract, contract management and other provisions of this title." 
61 O.S.Supp. 2006 § 209(11).
¶13 The Oklahoma Supreme Court has consistently upheld the notion that an 
agency may only exercise those powers granted by statute:

An administrative agency may not under the guise of its rule making power 
    exceed the scope of its authority and act contrary to the statute which is 
    the source of its authority. Its authority to make rules for its various 
    procedures does not include authority to make rules which extend their 
    powers beyond those granted by statutes.
Adams v. Professional Practices Comm'n, 1974 OK 88, ¶ 11, 524 P.2d 932, 934. In City of 
Hugo v. State ex rel. Pub. Emp. Relations Bd., 1994 OK 134, 886 P.2d 485, the Supreme Court 
recognized the existence of implied powers in limited circumstances:

We recognize that an officer or an agency may have implied powers not 
    granted by statute. The authority will be implied if necessary for the due 
    and efficient exercise of powers expressly granted or if it may be fairly 
    implied from the statutory language. However, an agency created by statute 
    may exercise only those powers granted and may not expand those powers by 
    its own authority.
Id. ¶ 15, 886 P.2d at 492.
¶14 Title 580 of the Oklahoma Administrative Code contains the agency rules 
applicable to DCS. Chapter 20, subchapter 1 contains the specific rules 
governing construction contracting. As recognized by DCS, the rule specifically 
concerning contractor appeals with DCS can be found at O.A.C. 580:20-1-22. In 
accordance with this rule, Beachner submitted notice of its protest to DCS. Rule 
580:20-1-22(c) provides:

The Director will review the protest and determine to hear the appeal or 
    assign the appeal to an administrative law judge the Department retains.

(1) If the appeal is assigned to an administrative law judge, the 
        administrative law judge shall review the appeal for legal authority and 
        jurisdiction.
(2) If legal authority and jurisdictional requirements are met, the 
        administrative law judge shall conduct an administrative hearing in 
        accordance with the Administrative Procedures Act, 75 O.S. Section 309 
        et seq., and provide proposed findings of fact and conclusions of law to 
        the Director.
(3) If the protest is heard by the Director, the Director shall have 
        all powers granted by law including all powers delegated to the 
        administrative law judge by this 
  section.
DCS assigned the appeal to an administrative law judge.
¶15 Oklahoma Administrative Code 580:20-1-22(e) requires the ALJ to conduct 
the administrative hearing in accordance with the Administrative Procedures Act. 
Pursuant to O.A.C. 580:20-1-22(e)(6), the ALJ is afforded discretion to:

(A) Establish a scheduling order;
(B) Establish reasonable procedures such as authorizing pleadings to be 
    filed by facsimile or electronic mail;
(C) Rule on all interlocutory motions, including requests for a temporary 
    stay of the contract award pending a final order from the Director;
(D) Require briefing of any or all issues;
(E) Conduct hearings;
(F) Rule on the admissibility of all evidence;
(G) Question witnesses; and
(H) Make proposed findings of fact and conclusions of law to the 
    Director.
In rendering an opinion, the ALJ's authority is described as follows: "The 
Administrative Law Judge may recommend that the Director deny the contactor's 
appeal or that the contract award be cancelled and rebid." O.A.C. 
580:20-1-22(e)(7). Title 580:20-1-22(f) provides: "If the Director denies a 
contractor's appeal, the contractor may appeal pursuant to provisions of 75 
O.S., Section 309 et seq. of the Administrative Procedures Act."
¶16 Upon thorough review of both the Public Building Construction and 
Planning Act, 61 O.S.Supp.2006 § 202 et seq., and the DCS rules on 
Construction Contracting, O.A.C. 580:20-1-1 et seq., this Court finds no 
authority for the ALJ to recommend or the Director of DCS to grant an award of 
monetary damages to a contractor for breach of contract. Although the Director 
of DCS possesses the authority to enter contracts for construction projects, 
monitor the projects, make recommendations and supervise such projects on behalf 
of Oklahoma State agencies, one cannot imply the legislature intended to grant 
the Director of DCS the quasi-judicial authority to award damages in a 
contractual dispute.
¶17 In the present case, Beachner is solely seeking monetary damages from DCS 
based upon alleged breaches of the contract by DCS. Because DCS has not been 
granted the authority from the Oklahoma Legislature to award monetary damages in 
relation to construction projects, just as in Lone Star, the 
administrative process available to Beachner "does not provide an adequate 
avenue of relief to the plaintiff for resolution of this dispute." Lone 
Star, 1990 OK 111, ¶ 7, 800 
P.2d at 238. As such, exhaustion of Beachner's administrative remedies would be 
ineffective and futile to remedy the purported breach of contract by DCS and 
damages allegedly flowing therefrom. Accordingly, Beachner was not required to 
exhaust its administrative remedies before seeking redress before the district 
court.
CONCLUSION
¶18 Upon thorough review of both the Public Building Construction and 
Planning Act, 61 O.S.Supp.2006 § 
202 et seq., and the DCS rules on Construction Contracting, O.A.C. 
580:20-1-1 et seq., this Court finds no authority for the ALJ to 
recommend or the Director of DCS to grant an award of monetary damages to a 
contractor for breach of contract. As such, exhaustion of Beachner's 
administrative remedies would be ineffective and futile to remedy the purported 
breach of contract by DCS and damages allegedly flowing therefrom. Accordingly, 
Beachner was not required to exhaust its administrative remedies before seeking 
redress before the district court. The decision of the district court dismissing 
Beachner's Petition for lack of subject matter jurisdiction is reversed, and 
this case is remanded for further proceedings.

¶19 REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.

BARNES, V.C.J., and WISEMAN, J., concur.

FOOTNOTES

1 The 
former Department of Central Services is now the Office of Management and 
Enterprise Services, Division of Capital Assets 
Management.

Citationizer© Summary of Documents Citing This DocumentCite
Name
Level
None Found.Citationizer: Table of AuthorityCite
Name
Level
Oklahoma Supreme Court Cases CiteNameLevel 1990 OK 111, 800 P.2d 235, 61 OBJ        2893, Lone Star Helicopters, Inc. v. StateDiscussed at Length 1994 OK 134, 886 P.2d 485, 65 OBJ        4025, City of Hugo v. State ex rel. Public Employees Relations Bd.Discussed 1974 OK 88, 524 P.2d 932, ADAMS v. PROFESSIONAL PRACTICES COMMISSIONDiscussed 2002 OK 94, 61 P.3d 219, WASTE CONNECTIONS, INC. v. OKLAHOMA DEPARTMENT OF ENVIRONMENTAL QUALITYDiscussed 2010 OK 3, 230 P.3d 853, ROGERS v. QUIKTRIP CORP.Discussed 2012 OK 68, 281 P.3d 1278, SAMSON RESOURCES CO. v. NEWFIELD EXPLORATION MID-CONTINENT, INC.DiscussedTitle 61. Public Buildings and Public Works CiteNameLevel 61 O.S. 204, Duties of Department of Real Estate ServicesCited 61 O.S. 209, Adoption of RulesCited 61 O.S. 202, DefinitionsCited