Court Opinion

ID: 9641386
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:30:27.270133+00
Date Added: 2024-06-11T18:10:37.061209
License: Public Domain

Donald L. Corbin, Justice, dissenting. I dissent because I would affirm the trial court’s order dismissing Appellants’ class-action lawsuit, on the grounds that (1) they failed to exhaust their administrative remedies under the Arkansas Administrative Procedure Act (AAPA), Ark. Code Ann. §§ 25-15-201 to -218 (Repl. 2002 & Supp. 2003), and (2) they failed to state facts demonstrating their standing as taxpayers to bring this suit. At the heart of this case is Appellants’ claim that the Arkansas Check-Cashers Act, Ark. Code Ann. §§ 23-52-101 to -117 (Repl. 2000 & Supp. 2003), is unconstitutional. They seek both a declaratory judgment and a refund of monies that they claim have been illegally exacted under the Act. I believe that their suit is premature, because Appellants failed to pursue the constitutional issue before Appellee State Board of Collection Agencies. As the majority states, some of the named Appellants in this case had previously brought a claim before the Board, seeking the release of surety bonds to fulfill a judgment they had won in the Craighead County Circuit Court against payday lender AAA Check Cashing, Inc. The named class representative in that case is Appellant Sharon McGhee. Appellants Roberto Salas and Henry Evans were also members of that class. According to the complaint filed in this case, Appellants at some point had “implored the Board to cease licensing and assisting payday lenders” in this state. Undeniably, the reason for their request was Appellants’ belief that the Act under which the Board functioned was unconstitutional. For whatever reason, however, they did not seek a ruling from the Board regarding the constitutionality of the Act. I believe they were required to do so before seeking relief from our state courts. This court has repeatedly held that a litigant must exhaust his or her administrative remedies before instituting litigation to challenge the action of an administrative agency, except where it would be futile or where there was no genuine opportunity to do so. See, e.g., Ford v. Arkansas Game & Fish Comm’n, 335 Ark. 245, 979 S.W.2d 897 (1998); Cummings v. Big Mac Mobile Homes, Inc., 335 Ark. 216, 980 S.W.2d 550 (1998); Regional Care Facilities, Inc. v. Rose Care, Inc., 322 Ark. 780, 912 S.W.2d 406 (1995). The doctrine of exhaustion of administrative remedies provides that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed statutory administrative remedy has been exhausted. Arkansas Prof'l Bail Bondsman Lic. Bd. v. Frawley, 350 Ark. 444, 88 S.W.3d 418 (2002); Cummings, 335 Ark. 216, 980 S.W.2d 550. A basic rule of administrative procedure requires that an agency be given the opportunity to address a question before a complainant resorts to the courts. Id. The failure to exhaust administrative remedies is grounds for dismissal. Douglas v. City of Cabot, 347 Ark. 1, 59 S.W.3d 430 (2001); Romine v. Arkansas Dep’t of Envtl. Quality, 342 Ark. 380, 40 S.W.3d 731 (2000). This is true even for constitutional issues. See id. (affirming the dismissal of the appellants’ suit based on their repeated failure to respond to and raise their constitutional arguments at the administrative level). This court has applied the doctrine of exhaustion of administrative remedies to declaratory-judgment actions filed under section 25-15-207 of the AAPA. For example, in Ford, 335 Ark. 245, 979 S.W.2d 897, this court affirmed the trial court’s dismissal of the appellant’s declaratory-judgment suit on the ground that he had not exhausted his administrative remedies. This court stated: “Instead of filing a declaratory-judgment action, Ford should have raised his constitutional arguments before the Commission, and then appealed the Commission’s final ruling to the circuit court pursuant to Ark. Code Ann. § 25-15-212 (Repl. 1996).” Id. at 251-52, 979 S.W.2d at 900. Similarly, in Rehab Hosp. Servs. Corp. v. Delta-Hills Health Sys. Agency, Inc., 285 Ark. 397, 687 S.W.2d 840 (1985), this court held: Declaratory judgment actions are intended to supplement rather than replace ordinary causes of action. Mid-State Const. Co. v. Means, 245 Ark. 691, 434 S.W.2d 292 (1968). As such, the parties are required to exhaust administrative remedies prior to seeking a declaratory judgment. It seems to be now a recognized doctrine that requires administrative relief to be sought before resorting to declaratory procedure, wherever administrative relief is afforded and this requirement is not one merely requiring the initiation of administrative procedure, but the administrative procedure must be pursued to its final conclusion before resort may be had to the court for declaratory relief W. Anderson, Actions for Declaratory Judgments, 204, at 433 (1951). This court likewise requires exhaustion of administrative remedies before resorting to an action for declaratory judgment. See Ragon v. Great American Indemnity Co., 224 Ark. 387, 273 S.W.2d 524 (1954). Id. at 399, 687 S.W.2d at 841-42. See also Regional Care Facilities, 322 Ark. 780, 912 S.W.2d 406. More recently, in AT&T Communications of the Southwest, Inc. v. Arkansas Pub. Serv. Comm’n, 344 Ark. 188, 40 S.W.3d 273 (2001), this court held that even though a state agency lacks authority to declare unconstitutional a state statute that it is charged with enforcing, the constitutional challenge should nonetheless be brought before that agency prior to resorting to the courts. This court explained: Our court has addressed the question of whether an administrative agency has the authority to declare a statute unconstitutional. In Lincoln v. Arkansas Public Service Commission, 313 Ark. 295, 854 S.W.2d 330 (1993), we held that to allow the Public Service Commission to declare unconstitutional a statute that it was required to enforce would violate the separation of powers doctrine. However, this does not mean that a constitutional issue should not be raised and developed at the administrative level. Id. at 196, 40 S.W.3d at 279. This court reasoned: “Raising such constitutional issues before the Commission is significant even when a statute is challenged as unconstitutional on its face, especially since the interpretation given by the agency charged with its execution is highly persuasive.” Id. at 198, 40 S.W.3d at 280 (citing Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm’n, 69 Ark. App. 323, 13 S.W.3d 197 (2000) (emphasis added)). The foregoing cases are illustrative of this court’s consistent practice of giving an agency first crack at interpreting the statutes and rules that it is charged with executing and enforcing. In doing so, this court has recognized that the agency is often in a better position of making a ruling, through its specialized knowledge and experience. Thus, even though the agency’s ruling on the constitutionality of a state statute is not binding on the courts of this state, it is undeniably valuable. It is because of this value that a litigant is required to exhaust any and every available remedy from the agency itself before resorting to the courts. In the present case, it is undisputed that some of the named Appellants in this case were already involved in a pending action before the Board at the time that this action was filed in circuit court and that the Board had not yet rendered its decision before Appellants brought this suit. The majority holds that Appellants’ suit is not barred by their failure to exhaust administrative remedies, because neither the issues nor the parties involved in the present suit are identical to those in the action before the Board. In my opinion, this holding ignores the fact that even if a similar proceeding were not already pending before the Board, Appellants were required to bring their constitutional challenge to the Board before resorting to the courts. The foregoing cases demonstrate that the doctrine of exhaustion of administrative remedies not only requires parties to follow through on matters already before the agency, it also requires them to institute such proceedings in the first place. Thus, regardless of whether the issues and the parties in the pending action before the Board were the same as those in the present suit, Appellants were required to seek a ruling on their statutory challenge from the Board before they filed suit in the circuit court. Moreover, it matters not that the Board lacks the authority to actually strike down the Check-Cashers Act as unconstitutional. Under this court’s holding in AT&T, 344 Ark. 188, 40 S.W.3d 273, Appellants were nonetheless required to raise and develop their constitutional challenge before the Board. Likewise, it is irrelevant that the Board has no jurisdiction to hear and determine an illegal-exaction claim. The heart of this claim is the constitutionality of the Act. Thus, even though the Board could not order a refund of any monies illegally exacted, it clearly has the authority to rule on the constitutional issue. I therefore disagree with Appellants that requiring them to exhaust their remedies before the Board would have been a futile act. The majority posits that I would require every taxpayer who files an illegal-exaction suit involving a state agency to first bring that claim to the agency before filing suit in circuit court. My position is not so broad. However, based on the particular circumstances of this case, where the Appellants are seeking a declaratory judgment along with a refund ofpublic monies, and where some of these Appellants, including the named representative, were already before the Board on a related issue, and where the crux of both the illegal-exaction and the declaratory-judgment claims is the constitutionality of the Board’s actions, the Appellants were required to exhaust their administrative remedies before resorting to the courts. Moreover, I find it significant that this illegal-exaction claim was not pursued until the Board’s AHO denied Appellants’ request to release the surety bonds for one of the payday lenders. Appellants had sought those surety bonds to satisfy part of the judgment granted to them against the payday lender. Thus, in my mind, the illegal-exaction claim appears to be an afterthought aimed at getting the state and the taxpayers to satisfy their judgment against the true wrongdoer. Under these unique circumstances, I would require the Appellants to first bring their claim of the unconstitutionality of the Board’s actions before the Board. The majority also notes that this court has not heretofore applied the doctrine of exhaustion of administrative remedies to illegal-exaction claims involving a state agency. I do not disagree with this observation. However, I submit that the reason that this doctrine has not been so applied is because the issue has never been squarely before us, as it is in this case. I do not view the omission of this issue in the four cases cited by the majority as indicative of this court’s prior rejection of this doctrine in illegal-exaction cases. Because I believe it is applicable in this case, I would affirm the trial court’s order of dismissal. I would also affirm the trial court’s dismissal on the ground that Appellants failed to demonstrate that they have standing to pursue this matter as an illegal exaction. Particularly, they have failed to demonstrate that public funds are at issue. This court has previously identified two types of illegal-exaction cases. See, e.g., Chapman v. Bevilacqua, 344 Ark. 262, 42 S.W.3d 378 (2001); Ghegan & Ghegan, Inc. v. Weiss, 338 Ark. 9, 991 S.W.2d 536 (1999). The type at issue in this case is the “public funds” type, where the plaintiff contends that public funds generated from tax dollars are being misapplied or illegally spent. Id. This court has explained that citizens have standing to bring a “public funds” case because they have a vested interest in ensuring that the tax money they have contributed to the state treasury is lawfully spent. Id. This court has stated that “a misapplication by a public official of funds arising from taxation constitutes an exaction from the tax payers and empowers any citizen to maintain a suit to prevent such misapplication of funds.” Farrell v. Oliver, 146 Ark. 599, 602, 226 S.W. 529, 530 (1921). See also Arkansas Assoc. of County Judges v. Green, 232 Ark. 438, 338 S.W.2d 672 (1960); Ward v. Farrell, 221 Ark. 363, 253 S.W.2d 353 (1952); Samples v. Grady, 207 Ark. 724, 182 S.W.2d 875(1944). In the present case, Appellants assert that the Board is misusing public funds. They state in their complaint that “as victims of payday loan transactions and as Arkansas taxpayers,” they are “entitled to a judgment against the [Board and its members] for the amount of public funds that have been diverted for the improper purpose of ‘licensing’ and ‘regulating’ payday lenders.” The problem with this assertion is that Appellants have not pled any facts to show that the funds used for the allegedly improper purpose of licensing and regulating the payday lenders were the result of taxpayer monies. Rather, their complaint merely contains the conclusory statements that the Board “is a public entity,” which “has used public funds to finance its operations,” and which has “employees and equipment and has a budget for its routine expenses.” They also state that the legislature has “continued to appropriate public funds to finance the Board’s Division of Check Cashing.” The State, on the other hand, asserts that the Board, although a state agency, does not expend public tax monies; rather, the Board is funded by the fees paid by the licensees — the payday lenders. The State asserts further that the fees paid to the Board are not placed in the state’s treasury and are not part of the state’s general revenue.- Thus, the State argues that the taxpayers are not the source of the funds and that, accordingly, Appellants’ status as taxpayers is irrelevant because public monies are not at stake. I believe that the State’s point is well taken. It is axiomatic that before a public-funds type of illegal exaction will be allowed to proceed, there must be facts showing that monies generated from tax dollars or arising from taxation are at stake. The statements contained in this complaint, i.e., that the Board is a public entity that has used public funds and that the legislature has continued to appropriate funds for the Board, are bare-bones allegations. Arkansas is a fact-pleading state. Scamardo v. Jaggers, 356 Ark. 236, 149 S.W.3d 311 (2004); Travelers Cas. & Sur. Co. v. Arkansas State Highway Comm’n, 353 Ark. 721, 120 S.W.3d 50 (2003). Thus, a complaint must state facts, not mere conclusions, in order to entitle the pleader to relief. Id. Moreover, even if this court were to view these allegations as facts, they are still insufficient. It is not enough for Appellants to state that the Board receives or uses public funds or that the legislature has authorized it to spend public funds. Rather, to prove their unique illegal-exaction claim, they must show that the particular funds used to license and regulate the payday lenders are public funds. There are simply no facts in their complaint to support this claim or to counter the State’s assertion that the funds used to license and regulate these lenders are gained solely from the fees charged to lenders themselves. The bottom line is that as the plaintiffs in this case, it was incumbent upon Appellants to demonstrate their standing to bring this illegal-exaction claim. Under this court’s long line of cases, this requires a showing that the alleged misused funds are generated from tax dollars or otherwise arise from taxation. Because Appellants failed to make such a showing, the trial court was correct to grant the State’s motion to dismiss the illegal-exaction claim on the ground that Appellants lacked standing to pursue such a claim. Accordingly, I dissent.