State, Department of Transportation & Public Facilities & Operations, Division of Airport Leasing v. Neal

693 P.2d 822, 1984 Alas. LEXIS 371

• Court: Alaska Supreme Court
• Decided: December 28, 1984
• Docket: No. 7547
• Status: Published

Opinions

MATTHEWS, Justice.

This appeal concerns the State Department of Transportation and Public Facilities’ (DOT/PF) termination of a permit to provide porter services at the Anchorage International Airport. Nathaniel Neal obtained a five year, non-exclusive permit to provide services at the Anchorage airport, terminable by the state on ten days’ notice. DOT/PF terminated the permit with adequate notice. Neal filed suit, claiming that DOT/PF’s regulations entitled him to a pre-termination hearing and that the cancellation constituted a breach of contract. DOT/PF appeals from the superior court’s grant of partial summary judgment requiring it to reinstate Neal’s right to conduct his porter service pending an administrative hearing on the issue of whether his permit should be cancelled. We reverse.

I. FACTUAL AND PROCEDURAL BACKGROUND

Nathaniel Neal operated a skycap porter service at the Anchorage International Airport from 1954 to 1981. Until 1979, he operated this business in accordance with a contract with several airlines. Neal had no direct arrangements with the state permitting him to operate his porter service, but leased space in the airport for use as a baggage storage room.

In 1978, Neal filed suit against the airlines in a contract dispute. In October, 1979, the airlines cancelled Neal’s contract.

Despite the cancellation, Neal continued to operate his porter service without explicit authorization from anyone. In March, 1980, he was informed by Claude Millsap, the new State Director of Airport Leasing, that he would need to obtain an agreement with the state in order to continue his operations. He wrote a letter applying for the exclusive privilege of operating a porter service at the airport. Millsap responded with a “letter of non-objection” expressing the state’s non-objection to Neal’s operation of a baggage service from April 1, 1980, to April 1, 1985, but refusing the request for an exclusive right. The letter provided that the “non-objection” could be revoked by the state for any reason and at any time on ten days’ written notice. Neal signed and returned the letter, agreeing to its conditions.

Since 1975, Neal had leased space from the airport to use for a baggage storage service. The final lease for part of this space expired on February 15, 1981. The lease for the remainder of the space expired on October 1, 1981, but included a special covenant allowing either party to cancel on thirty days’ notice.

On March 23,1981, Millsap wrote to Neal informing him that the state had decided to put the exclusive right to operate a porter and baggage storage service in the original terminal building up to bid.¹ Millsap therefore stated that his 1980 letter of non-objection, as well as Neal’s lease for storage space, would be terminated effective May 31, 1981.

Neal submitted a bid for the porter service concession. The bid opening was conducted on April 22,1981. Neal was not the successful bidder. He promptly took action. Neal filed this case in superior court on April 28,1981, seeking an injunction and a declaration that he was the only qualified bidder. On April 30, 1981, Neal filed a notice of appeal with the DOT/PF appealing from the award of the contract “to a person other than himself.” On May 11, 1981, Neal filed another notice of appeal with the DOT/PF. The full text of the May 11th notice of appeal is set forth in the margin.²

Neal received a hearing on his notices of appeal on May 26, 1981. At the hearing he described the history of his development of the porter service and his arrangement with the airlines, and argued that he had been unfairly deprived of a franchise like that granted to other concession operators at the airport. He protested the cancellation of his right to operate a business that he had built up over 27 years. He also claimed that the bid process was unfair because it did not account for the skill and experience needed to run a porter business successfully.

The hearing officer found that the bidding procedure had been properly conducted. He also found that the notice provision of the letter of non-objection requiring ten days’ notice of revocation had been satisfied. He recommended denying Neal’s appeal. That recommendation was adopted, and the concession was awarded to the high bidder.

Neal amended his complaint in this case four times. In the fourth amended complaint filed October 7, 1982, he alleged that the state had failed to notify him of his right to a hearing regarding termination, and had further failed to provide him with a fair hearing.³

The parties filed cross-motions for summary judgment. The trial court found that Neal was improperly deprived of his right to an administrative hearing prior to the termination of his right to operate a porter service. It therefore granted Neal’s motion for partial summary judgment and ordered that the privilege of operating the porter service be restored to Neal. It denied DOT/PF’s summary judgment motion.

On appeal, DOT/PF asserts that it was not required to hold a hearing and that, in any event, Neal received a sufficient hearing on May 26, 1981.

II. RIGHT TO A HEARING UNDER DOT/PF REGULATIONS

Under 17 AAC 40.382,

[bjefore the termination or cancellation of a lease or other interest granted under this chapter, the department [of Transportation and Public Facilities] will provide the lessee with notice and an opportunity to be heard.

The interests granted under Chapter 40 of 17 AAC (which concern aviation) include leases, easements, rights-of-way, privileges, and permits. The trial court concluded that the state’s 1980 letter of non-objection granted Neal a privilege under Chapter 40. It held that the terms of 17 AAC 40.382 entitled Neal to a hearing before that privilege could be terminated.

DOT/PF contends that it was not required to afford Neal a hearing because his interest was expressly terminable on ten days’ notice. It argues that 17 AAC 40.382 does not require a hearing when a lease or agreement is terminable by its terms at any time and for any reason.

The terms of the regulation clearly require that DOT/PF provide the holder of any interest an opportunity to be heard and to present reasons why the state should not terminate that interest. An opportunity to be heard does not become meaningless because DOT/PF may terminate on ten days’ notice. DOT/PF could not have terminated Neal’s privilege for discriminatory or bad faith reasons. See Mitford v. de Lasala, 666 P.2d 1000 (Alaska 1983). Neal’s statements, both at his May 26 hearing and in his original complaint, indicate that he believed that he was the victim of collusion between the state and the airlines. Those allegations are tantamount to a charge of bad faith, and if Neal had proven them, the termination of his right to conduct his porter service would have been invalid. We conclude that 17 AAC 40.382 gave Neal the right to a hearing.⁴

III. OPPORTUNITY FOR HEARING

Neal’s May 11th notice of appeal complained both of the termination of his right to operate a porter service and the failure to award him the new contract.⁵ Neal alleges “collusion of these airlines with state officials which is in reality causing a scheme to be practiced by which he is deprived of his only means of making a living....” and complains of a “right” that “has been taken away from Nathaniel Neal.” The prayer for relief states a request for a hearing where Neal can present evidence “showing why he should not be deprived of his right to operate the service which he has operated throughout the years.”

On May 26 a hearing on both notices of appeal was held. Neal testified at length about his belief that he had been badly treated, both by the airlines and by the state. Neal’s counsel stressed the arbitrariness of the treatment Neal had received and the unfairness of the DOT/PF’s decision to cancel his right to operate the porter service. The state attempted to establish that Neal had received his alleged ill treatment at the hands of the airlines, rather than the state. No evidence offered by Neal was excluded.

The hearing officer’s findings were primarily directed to the question of the award of the new contract. No findings were made concerning bad faith or discrimination. However, the hearing officer did note that an appropriate notice of termination of Neal’s interest was given.

We have reviewed the record of the hearing. The standard of review of administrative adjudications is that findings of fact will be set aside unless supported by substantial evidence on the whole record. City of Fairbanks v. APUC, 611 P.2d 493, 495 (Alaska 1980). The record does not contain substantial evidence of bad faith or discrimination on the part of the state. The lack of findings by the hearing officer on these points is unimportant because findings favorable to Neal would not have been sustainable.

IV. CONCLUSION

For the reasons stated, Neal was not deprived of his right to a hearing. He requested and received a hearing at which he failed to present evidence that proved that his termination was illegal.

The judgment of the superior court is REVERSED and the case is REMANDED for further proceedings consistent with this opinion.

1 . In early 1981 Neal had submitted a successful bid for the exclusive right to provide porter services in the new Satellite Terminal Building.

2 . NOTICE OF APPEAL

TO: The Department of Administration State of Alaska ATTENTION: Patrick Ryan

Deputy Commissioner

NOTICE IS HEREBY GIVEN that Nathaniel Neal appeals from the expressed intention of awarding the bid for airport leasing to the alleged highest bidder and requests an opportunity for a hearing on the matter for the following reasons:

1. The awarding to the highest bidder is contrary to AS 37.05.240 and to AAC 15.100 inasmuch as these make no provision for the award as indicated the plans are being made to award.

2. The type of service as to be rendered here involves more than a merely simple lease and should not be controlled completely by the amount of money offered.

3. The aggrieved bidder, Nathaniel Neal, in view of having no other means of livelihood and having performed this service for 27 years should be given credit for his experience and should have been treated like the other parties who started out when he did 27 years ago but were given franchises which they were allowed to sell and were not put to the burden of having to compete each year in order to keep up their services. This right has been taken away from Nathaniel Neal.

4. Nathaniel Neal already has the personnel and the equipment with which to continue to perform these services and this should be taken into consideration.

5. Nathaniel Neal has a business license for the performance of this service and this likewise should be taken into consideration as there is no showing that any of the other bidders are licensed to perform the service. Appellant calls attention to the fact that in the past certain airlines have been given franchises and unfettered control over porter service activities at the airport without the payment of any sums whatsoever to the state of Alaska and appellant alleges that it is the influence of these airlines and collusion of these airlines with State officials which is in reality causing a scheme to be practiced by which he is deprived of his only means of making a living which he has had for the past 27 years.

WHEREFORE, appellant prays for a full hearing on this matter and an opportunity to present evidence showing why he should not be deprived of his fight to operate the service which he has operated throughout the years.

3 . In a separate action, Neal appealed DOT/PF’s decision after his hearing to the superior court. The court upheld the Department's decision, and Neal did not appeal that ruling.

4 . The trial court held that Neal was entitled to a hearing at which he could raise “questions of fact regarding the question of whether the plaintiffs privilege must under the law be revoked and if not legally required questions of policy regarding whether the plaintiff's privilege should be revoked." We conclude that Neal was not entitled to a hearing to argue that DOT/PF should not have put the porter service contract up for bid for policy reasons. The purpose of an adjudicative hearing is to determine specific facts, not to decide broad questions of policy. See K. Davis, Administrative Law of the 70’s § 7.00-11, at 275 (1976).

5 . The two issues are interrelated. A wrongful termination of Neal's right to operate the porter service could be remedied by reinstatement of the right. This could only be accomplished if the new contract was not awarded to another bidder.