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In re Petition for Declaratory Ruling

Supreme Court of South Dakota

March 9, 2016


         Considered on Briefs November 30, 2015

         As Corrected June 3, 2016.


         JAMES D. LEACH, Rapid City, South Dakota, Attorney for petitioner and appellant James D. Leach.

         NAOMI R. CROMWELL of Tieszen Law Office, LLC Pierre, South Dakota, Attorneys for appellee Associated School Boards of South Dakota.

         MICHAEL S. MCKNIGHT LAURA K. HENSLEY of Boyce Law Firm, LLP Sioux Falls, South Dakota, Attorneys for appellees First Dakota Indemnity and Dakota Truck Underwriters.

         ZINTER, Justice. SEVERSON, WILBUR, and KERN, Justices, concur. GILBERTSON, Chief Justice, concurs in result in part and dissents in part.


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          ZINTER, Justice

          [¶1] Attorney James Leach petitioned the Department of Labor for a declaratory ruling regarding the application of a statute. The statute governs the " earnings" used to calculate the " average weekly wage" in workers' compensation cases. Leach contended that discretionary bonuses should be included in the calculation. The Department ruled that only non-discretionary bonuses should be included, and Leach appealed to circuit court. The court, sua sponte, dismissed the appeal because it concluded that the Department lacked jurisdiction to issue such rulings. Leach now appeals to this Court. We reverse and remand to consider the appeal on the merits.

         Facts and Procedural History

          [¶2] James Leach is a South Dakota attorney who, among other things, represents clients in workers' compensation cases. Settlement agreements in those cases must be approved by the Department. Leach disagrees with the Department's interpretation of a statute under

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which the Department excludes discretionary bonuses from the " earnings" used to calculate an injured worker's " average weekly wage." [1] However, Leach has been unable to challenge the Department's interpretation in actual cases because employers moot the issue by stipulating to include discretionary bonuses in the calculation.[2] Because this controversy is recurring but evading judicial review, Leach petitioned the Department for a declaratory ruling on the proper method of calculating average weekly wages under the governing statute.

          [¶3] The Department accepted the petition and gave public notice of a hearing to consider the question. Appellees, Associated School Boards of South Dakota Workers' Compensation Trust Fund and First Dakota Indemnity and Dakota Truck Underwriters appeared in opposition to Leach's interpretation of the statute.[3] At the hearing, Leach presented argument supporting the inclusion of discretionary bonuses in the calculation. Appellees argued against the inclusion. The Department received evidence in the form of an affidavit from James Marsh, the Director of the Division of Labor and Management within the Department of Labor. Marsh indicated that a Department policy (based on an interpretation of the statute) required employers and insurers to exclude discretionary bonuses from the calculation. Marsh also indicated that the Department would not approve benefits unless the employer followed its policy. Thus, the wage calculation issue arises every time an injured worker, who has received a timely discretionary bonus, receives disability benefits.

          [¶4] Following the hearing, the Department issued a declaratory ruling that discretionary bonuses may not be included in the calculation. On appeal, the circuit court, sua sponte, dismissed the appeal for lack of jurisdiction. The court ruled that, in the absence of an actual case, the Department was without subject matter jurisdiction to issue declaratory rulings. The court further concluded that because the Department had no jurisdiction, the court had no jurisdiction to consider the appeal. Nevertheless, the court vacated the declaratory ruling in addition to dismissing the appeal. Leach now appeals to this Court, raising the question whether the Department had subject matter jurisdiction to issue the declaratory ruling.


          [¶5] This case was resolved below by the circuit court's determination that the Department had no jurisdiction to entertain the declaratory ruling, and therefore, the circuit court had no jurisdiction to entertain the appeal. If there was no jurisdiction in the tribunals below, there is likely no jurisdiction to consider this appeal. Therefore, we must first determine the jurisdiction of all three tribunals. See Sioux City Boat Club v. Mulhall, 79 S.D. 668, 672, 117 N.W.2d 92, 94 (1962) (" Where the want of jurisdiction appears on the face of the record or from a geographical or other fact of which this [C]ourt may take judicial notice, it becomes the duty of this [C]ourt to determine whether it has jurisdiction as a condition precedent to its right to decide the issues involved." ).

          [¶6] The South Dakota Constitution delegates to the Legislature the authority

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to determine this Court's and the circuit court's appellate jurisdiction. " The Supreme Court shall have such appellate jurisdiction as may be provided by the Legislature . . . . The circuit courts have such appellate jurisdiction as may be provided by law." S.D. Const. art. V, § 5. In 1966, the Legislature enacted three jurisdictional statutes pertaining to proceedings under SDCL chapter 1-26, the Administrative Procedure Act (APA). One governs jurisdiction of agencies to issue declaratory rulings, one governs jurisdiction of the circuit courts to consider appeals of agency decisions, and one governs this Court's jurisdiction to consider appeals from the circuit courts on agency determinations. See 1966 S.D. Sess. Laws ch. 159, § § 8, 15, 16, which are codified at SDCL 1-26-15, SDCL 1-26-30, and SDCL 1-26-37 respectively. Thus, the jurisdictional questions in this case are matters of statutory interpretation, a matter we review de novo. See Wheeler v. Cinna Bakers, LLC, 2015 S.D. 25, ¶ 4, 864 N.W.2d 17, 19.

         Jurisdiction of Agencies to Issue Declaratory Rulings

          [¶7] The APA contains two statutes authorizing declaratory rulings. SDCL 1-26-15 authorizes declaratory rulings by agencies on statutes, rules, and agency orders. And SDCL 1-26-14 authorizes declaratory rulings by circuit courts on agency rules. Both provisions were taken almost verbatim from the Revised Model State Administrative Procedure Act of 1961 (MSAPA).[4] See Revised Model State Admin. Procedure Act § § 7-8 (Unif. Law Comm'n 1961).

          [¶8] A comparison of the two statutes reveals a clear difference in the standing required for persons requesting declaratory rulings from administrative agencies and declaratory rulings from courts. To request a declaratory ruling from a court, SDCL 1-26-14 requires an actual case or controversy. The plaintiff must allege that the administrative " rule, or its threatened application, interferes with or impairs, or threatens to interfere with or impair, the legal rights or privileges of the plaintiff." Id. In contrast, the Legislature excluded this actual case or controversy language from the statute authorizing declaratory rulings by agencies. SDCL 1-26-15 requires agencies to adopt rules permitting anyone other than penitentiary inmates to request " declaratory rulings as to the applicability of any statutory provision or of any rule or order of the agency." [5] In accordance with this statute, the Department adopted a rule permitting the

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filing of petitions requesting " a declaratory ruling concerning the applicability of a statutory provision or of a rule or order made by the department." ARSD 47:01:01:04.[6] And like its authorizing statute, the rule does not contain an actual case or controversy requirement. On the contrary, instead of requiring an actual case or controversy, the rule permits petitions to merely " contain all the pertinent facts necessary to inform the secretary of the nature of the rulings requested." Id. Thus, the Department has routinely issued declaratory rulings based on hypothetical facts.[7]

          [¶9] The underlying question, however, remains one of statute: whether SDCL 1-26-15 authorizes agencies to issue declaratory rulings absent an actual case or controversy. " When engaging in statutory interpretation, we give words their plain meaning and effect, and read statutes as a whole, as well as enactments relating to the same subject." Citibank, N.A. v. S.D. Dep't of Revenue, 2015 S.D. 67, ¶ 12, 868 N.W.2d 381, 387. Here, in adopting the APA, the Legislature included case or controversy language in the statute authorizing declaratory rulings by courts while simultaneously excluding that language in the statute authorizing declaratory rulings by agencies. " [E]very word excluded from a statute must be presumed to have been excluded for a purpose." Magellan Pipeline Co. v. S.D. Dep't of Revenue & Regulation, 2013 S.D. 68, ¶ 9, 837 N.W.2d 402, 404. Considering these statutes together as a part of the same act, we conclude that by excluding the case or controversy language from SDCL 1-26-15, the Legislature excluded an actual case or controversy requirement in agency declaratory proceedings. Appellees' request to read an actual case or controversy requirement in SDCL 1-26-15 would require that we insert SDCL 1-26-14's case or controversy language into SDCL 1-26-15. " However, when this Court interprets legislation, it 'cannot add language that simply is not there.'" State v. Hatchett, 2014 S.D. 13, ¶ 14, 844 N.W.2d 610, 615 (quoting Rowley v. S.D. Bd. of Pardons & Paroles, 2013 S.D. 6, ¶ 12, 826 N.W.2d 360, 365). See also Voss v. Ralston ( In re Voss's Adoption ), 550 P.2d 481, 485 (Wyo. 1976) (" Words may not be inserted in a statutory

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provision under the guise of interpretation." ). We further note that this difference in the statutes was not inadvertent. At the time the APA was adopted, the Legislature was clearly concerned about the scope of those who would be authorized to request declaratory rulings. Although the Legislature followed the model act in excluding the case or controversy requirement from SDCL 1-26-15, it added a non-model act restriction prohibiting penitentiary inmates from requesting those rulings.

          [¶10] The decisions of other courts support our conclusion. In Power Authority of State of New York v. New York State Department of Environmental Conservation, 58 N.Y.2d 427, 448 N.E.2d 436, 438-39, 461 N.Y.S.2d 769 (N.Y. 1983), the New York Court of Appeals reversed a lower court's holding that agencies had jurisdiction to issue declaratory rulings " only if they are based upon the actual facts, established or conceded, of genuine question, dispute or controversy." The Court of Appeals held that under statutory language like SDCL 1-26-15,[8] agency declaratory rulings may be based on " any state of facts described by a petition" including " an assumed state of facts[.]" Id. at 439. Like we do today, the New York Court reasoned: " Notably absent from [New York's statutory] language is any limitation to agreed or proved facts or 'genuine' questions, disputes or controversies." Id. The Court also observed that the New York administrative provision was unlike declaratory judgments actions in courts. Id. See also City of Des Moines v. Pub. Emp't Relations Bd., 275 N.W.2d 753, 758 (Iowa 1979) (stating that Iowa's then verbatim adoption of § 8 of MSAPA " contemplates declaratory rulings by administrative agencies on purely hypothetical sets of facts . . . . And it provides that such rulings will be the subject of judicial review." ) (citations omitted); Matrix Funding Corp. v. Auditing Div. of Utah State Tax Comm'n, 912 P.2d 960, 961 (Utah 1996) (holding that the " hypothetical posture of a case does not, by itself, prevent [the court] from reviewing an administrative declaratory order." ). Federal courts have also concluded that the similar unrestricted language in the Federal Administrative Procedure Act does not require an actual case or controversy for agency declaratory rulings.[9] See Tenn. Gas Pipeline Co. v. Fed. Power Comm'n, 606 F.2d 1373, 1380, 197 U.S.App.D.C. 1 (D.C. Cir. 1979) (concluding that agencies may issue " an advisory opinion or abstract declaration without regard to the existence of an actual controversy." ); N.C. Util. Comm'n v. Fed. Commc'n Comm'n, 537 F.2d 787, 791, n.2 (4th Cir. 1976) (stating that federal agencies are not restricted to adjudicating only cases or controversies).

          [¶11] Appellees, however, argue that language expressing a case or controversy requirement need not be in SDCL 1-26-15 because the requirement is inherent. Appellees rely on Boever v. South Dakota

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Board of Accountancy, 526 N.W.2d 747, 750 (S.D. 1995), in which we concluded that an action for declaratory judgment was not ripe because it was based on future injuries that would not likely occur. Boever, however, does not apply because it involved a request for declaratory relief in a court under South Dakota's Uniform Declaratory Judgment Act--SDCL chapter 21-24. Id. at 749-50. And that act, like SDCL 1-26-14, contains language requiring an actual case or controversy in requests for the construction of statutes.[10] Appellees' other cases suffer from the same infirmity. See Campbell v. Fritzsche, 78 S.D. 593, 596, 105 N.W.2d 675, 676 (1960) (holding that courts should not issue advisory opinions); Steinmetz v. State, DOC Star Acad., 2008 S.D. 87, ¶ 17, 756 N.W.2d 392, 399 (holding that the matter was not ripe for review by a court); Kneip v. Herseth, 87 S.D. 642, 654, 214 N.W.2d 93, 100 (1974) (upholding a declaratory judgment by a court ).[11]

          [¶12] Appellees finally argue that our interpretation of SDCL 1-26-15 leads to an absurd result. Appellees contend that any person could demand an agency declaratory ruling on any issue no matter how speculative or remote. However, many courts conclude that administrative agencies retain discretion to deny ...

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