Court Opinion

ID: 9748949
Source: CourtListenerOpinion
Date Created: 2023-08-27 16:18:22.540426+00
Date Added: 2024-06-11T07:25:40.883327
License: Public Domain

RAKER, J.,
dissenting, BELL, C.J., joining.
The majority in this case asserts that the State Board of Education (“SBE”) “was well within its discretion to proceed in the manner it did-adjudicating the cases before it and offering ‘guidance’ to other applicants, rather than proceeding with more formal and binding regulations.” Maj. op. at 346, 929 A.2d at 126. I disagree. The declaratory rulings issued by SBE resulted in regulations in effect, if not name. The policies adopted within those rulings are meant to have general and widespread application, and, in my opinion, should have been the subject of formal rulemaking procedures.
Prior to issuing its declaratory rulings in these cases, SBE had never interpreted Md.Code (1978, 2006 Repl.Vol.) § 9-109(a) of the Education Article.1 See Maj op. at 336, 929 A.2d at 120. In its rulings, which provided neither the legislative components of formal rulemaking, nor the quasi-judicial components of administrative adjudications, SBE created policies interpreting § 9-109(a) that it intended to apply to every school board in the State. In my opinion, these policies should not have been adopted through a declaratory ruling.
*358This Court has never addressed when, if, or to what extent agencies may implement policies through declaratory rulings. Our cases addressing situations when agencies must proceed through formal rulemaking, as opposed to adjudication, are, however, instructive on this point.
We have noted that agencies do not possess absolute discretion to establish policy through ad hoc adjudication alone. In CBS v. Comptroller, 319 Md. 687, 575 A.2d 324 (1990), we addressed the Comptroller of the Treasury’s decision to change the method by which it calculated corporate taxes for out-of-state businesses. We held that it was error for the Comptroller to change its methods through adjudication, and required the agency to engage in formal rulemaking procedures. We acknowledged initially “that the administrative process is enhanced when an agency is allowed substantial flexibility to decide between establishing policy by way of rule or by way of adjudication.” Id. at 687, 694, 575 A.2d 324, 327. We noted that discretion to choose may, however, be abused, explaining as follows:
“As a number of the cases requiring rulemaking indicate, this mode of procedure adds an aspect of fairness when an agency intends to make a change in existing law or rule. That fairness is produced by prospective operation of a new rule and by the public notice, public hearing, and public comment processes that accompany rulemaking, but that are sometimes absent from administrative adjudication. The advantages of rulemaking in certain circumstances reinforce the view that this procedure may sometimes be required.”
Id. at 695-96, 575 A.2d at 328 (internal citations omitted). While we refused to adopt an “all-encompassing” rule dictating when rulemaking is required, we concluded that “when a policy of general application, embodied in or represented by a rule, is changed to a different policy of general application, the change must be accomplished by rulemaking.” Id. at 696, 575 A.2d at 328.
*359In Dept. of Health v. Chimes, 343 Md. 336, 681 A.2d 484 (1996), we addressed the Developmental Disabilities Administration’s decision to implement a growth cap to control costs for community-based health care providers. We explained that both the statute underlying the program and its implementing regulations required DDA to limit expenditures. Therefore, the “ ‘growth cap’ merely effectuated these policies, but did not change the law.” Id. at 346, 681 A.2d at 489. Formal rulemaking was therefore not required. We stated as follows:
“DDA did not formulate new rules of widespread application, change existing law, or apply new standards retroactively to the detriment of an entity that had relied upon the agency’s past pronouncements. The ‘growth cap’ at issue here applied only to a limited number of providers in their capacity as contractors with a state agency pursuant to contracts between the parties subject to termination by either side.”

Id.

Similarly, in MD HMO’s v. Cost Review, 356 Md. 581, 741 A.2d 483 (1999), we addressed the Health Services Cost Review Commission’s decision to adopt an inflation adjustment system (“IAS”) which was applied to particular health facilities on a case-by-case basis. Although we found formal rulemaking procedures unnecessary, we noted that the underlying adjudication did not involve the formulation of new rules, a change in existing law, or the application of standards that had a retroactive effect. Id. at 602, 741 A.2d at 494. We explained as follows:
“The IAS is simply a methodology, long in use, to effectuate the law. It reflects policies set forth by the General Assembly. It is a starting point from which the Commission proceeds case-by-case in order to take into account the individualized costs and needs of the particular hospitals.”
Id. See also Balto. Gas & Elec. v. Public Serv. Comm’n, 305 Md. 145, 169, 501 A.2d 1307, 1319 (1986) (finding rulemaking unnecessary because the adjudication was not one “in which *360materially modified or new standards were applied retroactively to the detriment of a company that had relied upon the Commission’s past pronouncements”); Consumer Protection v. Consumer Pub., 304 Md. 731, 756, 501 A.2d 48, 61 (1985) (finding formal rulemaking unnecessary because the adjudication “did not change existing law or even formulate rules of widespread application”).
Alternatively, in Massey v. Secretary, Dept. of Public Safety and Correctional Services, 389 Md. 496, 886 A.2d 585 (2005), we found that formal rulemaking procedures were required after addressing the validity of certain directives adopted by the Department of Public Safety and Correctional Services. The appellant was an inmate in the Maryland State prison system who had been subjected to discipline and had lost diminution credits after being found to have violated the challenged directives. Before this Court, the appellant argued that the directives at issue were regulations that should have been subjected to formal rulemaking procedures. We agreed. Judge Wilner, writing for the Court, explained as follows:
“[The challenged directives] constitute statements that have general application throughout all of the correctional institutions in DOC and apply to all inmates in those institutions; they have future effect; they were adopted by a ‘unit’ to carry out laws that the unit administers; and they are in the form of rules, standards, statements of interpretation, and statements of policy.”
Id. at 507-508, 886 A.2d at 592. We noted further that the directives were not exempt from formal rulemaking as regulations concerning only the internal management of the Division of Correction. Because the directives were regulations, and had not been adopted through formal rulemaking procedures, we held them to be invalid. Id. at 500, 886 A.2d at 587.
The above cases demonstrate that administrative agencies do not possess unfettered discretion to issue policies through whatever procedure they choose. We have noted repeatedly that an administrative agency’s discretion should be limited where it (1) changes existing law, (2) applies new standards *361retroactively, or (3) creates rules of widespread application. Further, we have concluded that an agency must engage in formal rulemaking when it changes existing laws or creates new standards that have retroactive effect. CBS, 319 Md. at 696, 575 A.2d at 328.
The majority states that formal rulemaking was unnecessary in this case because the “rulings at issue here were specific to three individual cases that happened to involve some common issues relating to the construction of ED § 9-109.” Maj. op. at 346, 929 A.2d at 126. I disagree. It is clear that in issuing its declaratory rulings, SBE created new policies of general and widespread application where none existed before. SBE should have engaged in formal rulemaking procedures.
As noted, prior to issuing these declaratory rulings, SBE had never interpreted § 9-109(a). With limited input from the parties involved, and none from outside parties with an interest in the interpretation of § 9-109(a), SBE adopted a general formula to determine the appropriate amount of funding to be disbursed to public charter schools, required that each “charter agreement must be completed within 30 calendar days from the date of the decision approving the charter application,” and mandated that the “total average per pupil amount shall be adjusted by a 2% reduction as a reasonable cost to the charter school for these required central office functions.” These are not rulings “specific to three individual cases.” SBE noted as much when it stated as follows: ‘We have issued this Opinion as guidance and direction not only to the parties in this appeal but also to the other charter school applicants and local school systems in Maryland ...”
Formal rulemaking was necessary to create the policies at issue. A declaratory ruling, which failed to provide even the quasi-judicial protections of an administrative adjudication, was an inappropriate mechanism for the formation of such widespread policies.2 As the Attorney General noted in an *362opinion letter to Audie G. Klingler, D.C. President of the State Board of Chiropractic Examiners:
“The history of [Md.Code (1984, 2004 Repl.Vol., 2006 Cum.Supp.) § 10-304 et seq. of the State Government Article] suggests that it was not intended as an alternative to rulemaking when the issue before an agency applies generally to all those subject to its regulatory jurisdiction. Rather, the declaratory ruling procedure was meant to enable persons concerned with a more narrowly focused issue to obtain binding advice about their particular situation.
* * *
The declaratory ruling procedure of the APA is not likely to be a satisfactory alternative to rulemaking if the issue before the agency affects all persons subject to the agency’s jurisdiction equally; if the issue affects persons not directly subject to the agency’s jurisdiction; if the adjudicative facts presented by the petitioner are probably insufficient to allow informed resolution of the issue; and if the legislative *363facts that are essential to resolving the issue are disputed. Professor Bonfield, a leading scholar of state administrative law, suggests that an agency should decline to issue a declaratory ruling “where the ruling, though technically binding only on the agency and petitioner, would necessarily determine the legal rights of other parties who have not filed such a petition, and who are opposed to the resolution of the issue by declaratory ruling procedures ... or who are unrepresented in that declaratory ruling procedure.’ A. Bonfield, The Iowa Administrative Procedure Act, 60 Iowa L.Rev. at 819 (emphasis in original).”
76 Op. Att’y Gen. 3, 15-17 (1991).
The APA provides rulemaking procedures to ensure “fairness and mature consideration of rules of general application.” 75 Op. Att’y Gen. 37, 43 (1990). The Act serves the important function of safeguarding public rights and educating administrative lawmakers. Id. The policies enumerated by SBE in its declaratory rulings are the type contemplated in the APA’s rulemaking procedures. Accordingly, I would reverse the judgments of the Court of Special Appeals and remand with directions to affirm the judgments of the Circuit Courts for Baltimore City and Prince George’s County.
Chief Judge BELL has authorized me to state that he joins in this dissenting opinion.

. Unless otherwise noted, all subsequent statutory references herein shall be to Md.Code (1978, 2006 Repl.Vol.) § 9-109(a) of the Education Article.

. The majority states that “declaratory rulings are treated more in the nature of contested case adjudications than the adoption of a regula*362tion.” Maj. op. at 345, 929 A.2d at 126. The majority is correct to the extent that both administrative adjudications and declaratory rulings focus on grievances particular to the parties involved. Declaratory rulings differ, however, from adjudications in other respects—most importantly, in the process each provides.
Md.Code (1984, 2004 Repl.Vol., 2006 Cum.Supp.) § 10-301 et seq. of the State Government Article allows an agency to issue binding declaratory rulings that explain how it would apply a regulation, order, or statute to a particular party's grievance. The Attorney General has explained this procedure as follows:
"Ordinarily, a declaratory ruling is premised upon the petitioner's assertion of the adjudicative facts underlying the petition. SG § 10-305(b) states that 'a declaratory ruling binds the unit and the petitioner on the facts set forth in the petition.’ As one commentator observed, 'ordinarily declaratory orders should be issued only where critical facts are clear and cannot be altered by subsequent events.’ 1 C. Koch, Administrative Law and Practice § 2.40, at 106 (1985).”
76 Op. Att'y Gen. 3, 16 (1991).
Where an administrative agency engages in adjudication to resolve a contested case, the proceedings are quasi-judicial and adversarial in nature. See Weiner v. Maryland Ins., 337 Md. 181, 193, 652 A.2d 125, 131 (1995). As opposed to declaratory rulings, which proceed on a given set of facts, adjudicatory hearings involve trial-type procedures and safeguards. See C.S. v. P.G. County Social Services, 343 Md. 14, 32-33, 680 A.2d 470, 479 (1996).