Petition for Declaratory Ruling

2016 SD 21
South Dakota Supreme Court·Decided March 9, 2016·Published

Opinion

#27463-rev & rem-SLZ 2016 S.D. 21

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

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IN RE: PETITION FOR DECLARATORY RULING RE: SDCL 62-1-1(6)

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APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES COUNTY, SOUTH DAKOTA

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THE HONORABLE MARK BARNETT Judge

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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.

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CONSIDERED ON BRIEFS

ON NOVEMBER 30, 2015

OPINION FILED 03/09/16

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 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

1. The issue involves the definition of “earnings” in SDCL 62-1-1(6). SDCL 62-

1-1 defines terms used throughout the title on workers’ compensation.

2. The record suggests that the exclusion of discretionary bonuses may often result in only a minor difference in benefits.

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

3. Insurance Benefits Inc. also appeared.

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.

Decision

[¶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 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-

4. SDCL 1-26-14 is nearly identical to MSAPA § 7. SDCL 1-26-15 is nearly identical to MSAPA § 8. The second and fourth sentences of SDCL 1-26-15 were added by the Legislature.

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