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Jerrel v. State (3/24/00) sp-5254
Jerrel v. State (3/24/00) sp-5254
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
DAN JERREL and VIOLA JERREL, )
) Supreme Court No. S-8436
Appellants, )
) Superior Court No.
v. ) 3AN-95-767 CI
)
STATE OF ALASKA, DEPARTMENT ) O P I N I O N
OF NATURAL RESOURCES, )
) [No. 5254 - March 24, 2000]
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Peter A. Michalski, Judge.
Appearances: Robert C. Erwin, Law Offices of
Robert C. Erwin, Anchorage, for Appellants. John T. Baker,
Assistant Attorney General, Anchorage, and Bruce M. Botelho,
Attorney General, Juneau, for Appellee.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
FABE, Justice.
EASTAUGH, Justice, with whom CARPENETI,
Justice, joins, dissenting.
I. INTRODUCTION
State regulations require that holders of state grazing
leases mark their livestock. When neighbors complained about the
horses on Dan and Viola Jerrel's grazing leases, the Department of
Natural Resources terminated the leases on the ground that the
Jerrels had failed to brand their horses. Yet neither Alaska
statutes nor relevant regulations require that horses be marked
with a brand so that these marks may be visible at twenty feet.
Because DNR's ad hoc interpretation of the livestock marking
requirement is a regulation that was not adopted in accordance with
the Administrative Procedure Act, we reverse.
II. FACTS AND PROCEEDINGS
Dan and Viola Jerrel have ranched horses in Alaska since
1963. In that year, the Jerrels entered into a lease with the
State for use of ranch land in the Ohlson Mountain area northwest
of Homer. [Fn. 1] During the next eleven years, the Jerrels signed
three other leases for land in the same area. [Fn. 2] Each lease
obligates the Jerrels to abide by state land use regulations.
In 1987 Ohlson Mountain area landowners complained to
authorities about loose horses causing property damage and posing
a safety hazard on their lands. They alleged that these horses
belonged to the Jerrels, but the horses could not be identified
definitively because they were not marked.
In January 1988 three DNR officials met with the Jerrels
and the complaining landowners to discuss various problems,
including identification of the horses. In March DNR notified the
Jerrels of the complaints and recommended that they deal with the
roaming horses, perhaps by fencing. In April and June DNR
officials met with the Jerrels to discuss land conditions and
compliance with the lease terms, but they did not discuss marking
of the Jerrels' horses.
In November 1989 a neighboring landowner, Ed Bailey,
threatened to sue the State for failure to hold the Jerrels
responsible for their horses. In December Bailey complained to the
State's ombudsman investigator. Bailey also complained to DNR that
the Jerrels had not complied with an Alaska regulation requiring
that livestock on state grazing leases be marked or branded. In
reply DNR informed Bailey that it did not enforce the marking
requirements because of the lack of personnel and funding:
You referred to the requirement under
regulations [sic] 11 AAC [Alaska Administrative Code] 60.070 to
properly identify animals on grazing leases. This regulation has
been in effect since 4/16/70 but due to lack of personnel and
funding has never been enforced. Statewide enforcement of this
regulation would affect reindeer herds as well as conventional
grazing, requiring a significant increase in staffing and funding
to administer.
In February and March 1990 Bailey wrote to DNR's
commissioner requesting that it take action against the Jerrels.
On May 14, DNR officials met with Bailey and other area residents
to "discuss their concerns."
As a result of its investigation, the state ombudsman
chastised DNR for inefficient enforcement of the Jerrels' lease
requirements. The ombudsman recommended that DNR review the lease
files for violations, and, "[i]f remedial action as stipulated in
the lease agreements (30 days after notification) is not taken by
the Jerrels, termination proceedings should begin and be followed
through diligently."
Prior to receiving the ombudsman's final report, DNR sent
notice to the Jerrels on June 28, requiring them to comply with 11
AAC 60.070 [Fn. 3] by marking their horses and registering the mark
with the State Division of Agriculture. The letter further
elaborated that the marks must be visible from a distance of twenty
feet:
The Division of Land and Water Management
requires (regardless of the method used) that [the] mark must be
plainly distinguishable from a distance of 20 feet. Failure to
comply within 30 calendar days after service of this written notice
shall result in appropriate action including, but not limited to,
forfeiture of your leases.
The Jerrels received the letter on July 13.
Shortly after receiving DNR's letter, David Jerrel, the
son of Dan and Viola, met with a DNR official to discuss tagging
the horses. David proposed a marking system consisting of large
plastic tags attached to the horses' manes with monofilament
fishing line. The DNR official believed that David Jerrel was
acting in good faith to comply with the regulations, and the
hearing officer later agreed that "David Jerrel appears to have put
a lot of effort into developing this means of marking and it seems
like a feasible method."
But on August 10, in response to the ombudsman's report,
DNR informed the ombudsman that if the Jerrels did not register a
brand, it would terminate their leases. And just two weeks later,
on August 24, the agency informed the Jerrels that it had
terminated the Jerrels' leases because they had not marked their
horses. The termination letter informed the Jerrels that they
could request reconsideration if they registered a mark with the
Division of Agriculture and proved that their animals were marked.
In September the Jerrels requested an agency hearing and
notified DNR that they had marked their horses and registered the
mark with the Division of Agriculture. But the Division of
Agriculture rejected the Jerrels' method of marking -- plastic tags
-- as impermanent and informed them that they would have to brand
or tattoo their horses instead. The director of the Division of
Agriculture specified use of a hot brand "that must be burned into
the hide of the animal," but added that if the Jerrels were opposed
to branding, "the animals may be permanently tattooed, which
satisfies the requirement." In response, the Jerrels then proposed
an ear tattoo to satisfy the marking requirement. But after
writing to inform the neighboring landowners of this proposal and
expressing "hope [that] you find this acceptable," the Division of
Agriculture rejected the tattoo proposal. It cited concerns of the
neighboring landowners that an ear tattoo was unacceptable because
it was not clearly visible from a distance.
After a two-day hearing, Hearing Officer Timothy
Middleton issued a decision suggesting that DNR give the Jerrels
two months to brand or mark their horses. If they failed to do so,
he recommended forfeiture of the leases. The decision discussed
the merits of a number of marking and branding methods, including
hot branding, "freeze dry" branding, ear and lip tattooing, and
tagging. The hearing officer acknowledged testimony presented by
the Jerrels that branding decreased the value of show horses.
Hearing Officer Middleton proposed that DNR require the Jerrels to
hot brand the bulk of their horses but permit them to mark up to
eight horses with a plastic tag and a lip tattoo. He also
invalidated DNR's requirement that all marks be visible from twenty
feet, noting that DNR had never validly promulgated this distance
visibility requirement as a regulation.
In November 1993 the Jerrels informed DNR that they had
marked the horses. But they failed to provide proof of these
markings and eventually said that they had moved the horses to
Montana. They offered no verification of the move, and state
investigations indicated that the horses probably remained in
Alaska.
On November 23, 1994, the commissioner of DNR rejected a
number of Hearing Officer Middleton's findings and conclusions and
terminated the Jerrels' leases. After they requested
reconsideration and their request was denied, the Jerrels appealed
the ruling to the superior court. Superior Court Judge Peter A.
Michalski affirmed the commissioner's decision. The Jerrels
appeal.
III. DISCUSSION
A. Standard of Review
In this case we review whether DNR was required to comply
with the procedures prescribed in Alaska's Administrative Procedure
Act (APA). [Fn. 4] This inquiry requires us to examine the meaning
of the term "regulation" as defined by the APA in AS
44.62.640(a)(3). [Fn. 5] Statutory interpretation is a question of
law to which we apply our independent judgment. [Fn. 6] "The
standard is appropriate where the knowledge and experience of the
agency is of little guidance to the court or where the case
concerns 'statutory interpretation or other analysis of legal
relationships about which courts have specialized knowledge and
experience.'" [Fn. 7]
The dissent argues for the application of the deferential
standard of review that is appropriate when we review an agency's
interpretation of its own regulation. [Fn. 8] But the threshold
question in this case is whether the APA applies to DNR's action.
Because we must decide whether DNR's twenty-foot visibility
requirement is a regulation, we do not defer to the agency's
interpretation. [Fn. 9]
B. Principles of Estoppel Do Not Bar DNR from Enforcing
Marking Requirements.
The Jerrels first argue that DNR's failure to enforce the
marking regulation for twenty years estops DNR from enforcing it
now. DNR responds that it cannot be estopped from enforcing the
regulation merely because of its previous inaction. We agree with
DNR on this point.
First, the statutory terms of the grazing leases bar the
Jerrels' estoppel claims. Each of the leases includes a clause
providing that "[n]o failure on the part of Lessor to enforce any
covenant or provision herein contained . . . shall discharge or
invalidate such terms or covenants or affect the right of the
Lessor to enforce the same in the event of any subsequent breach or
default."
Second, Alaska law does not support the Jerrels' claim
that DNR is foreclosed from enforcing the marking provisions. To
prove a claim of equitable estoppel, a plaintiff must show: "(1)
assertion of a position by conduct or word, (2) reasonable reliance
thereon, and (3) resulting prejudice." [Fn. 10] The Jerrels fail
to meet the first requirement. Although DNR stated several times
that it had not enforced the marking requirement in the past, it
never affirmatively asserted by word or conduct that it would never
enforce the marking requirement. In fact, DNR notified the Jerrels
several times that it was currently enforcing the requirements and
that they should mark their horses. Consequently, there was no
basis for the Jerrels' reliance on DNR's past nonenforcement.
Finally, the superior court correctly noted that the
policy implications of allowing the Jerrels' estoppel claim to
proceed would be disturbing: "[I]t would be a dangerous precedent
to rule that because a statute or regulation went unenforced in the
past, for whatever reason, present and future violations could not
be sanctioned." Accordingly, we hold that DNR's failure to enforce
the regulation in the past did not estop it from enforcing the
marking regulations.
C. DNR Did Not Promulgate the Twenty-Foot Visibility
Requirement in Accordance with the APA.
The Jerrels entered into four grazing leases with the
State of Alaska and concede that the marking requirements of 11 AAC
60.070 apply to the three most recent leases. We must consider
whether DNR acted within its authority in its interpretation and
enforcement of the marking requirements. [Fn. 11]
DNR relied on 11 AAC 60.070 in requiring the Jerrels to
mark their horses. That regulation requires that holders of state
grazing leases mark their animal in accordance with AS 03.40.010 -
03.40.270 and allows DNR to require that the holders mark the
livestock through tagging, dyeing, or another marking method:
All livestock permitted on a state grazing
lease shall be properly identified and such identification
registered in accordance with AS 03.40.010 - 03.40.270. In
addition, the director may require that the livestock be tagged,
dyed, or otherwise marked as a control on numbers permitted on a
lease in accordance with the annual operating plan.
In turn, AS 03.40.020 deals generally with marking of livestock and
sets out procedures for recording a unique brand or mark with the
State. If an owner wishes to establish a record of ownership,
"[t]he owner may brand or mark an animal on either side with the
owner's brand or mark. The animal shall be branded or marked so
that the brand or mark shows distinctly." [Fn. 12]
The regulation contains neither a requirement of minimum
visibility nor a mandate of permanence. Yet, in its June 28, 1990
letter to the Jerrels, DNR stated that the Jerrels must use a mark
"plainly distinguishable from a distance of twenty feet." When the
Jerrels responded by proposing plastic mane tags, which would have
been visible from twenty feet, they were informed by DNR that the
tags were insufficiently permanent. At the point that it informed
the Jerrels of this permanence requirement, however, DNR retreated
from its twenty-foot visibility requirement, informing the Jerrels
that if they opposed branding, permanent tattoos would be an
acceptable substitute. Yet when the Jerrels proposed ear tattoos,
DNR again reversed its position in response to complaints from the
neighboring landowners and insisted on brands that would meet the
twenty-foot visibility requirement.
The Jerrels contend that in creating the twenty-foot
visibility rule, DNR did not interpret its existing marking
regulations but rather "established new ones without following the
proper procedures." [Fn. 13] DNR responds that its expertise
allows it the power to make policy rules interpreting regulations.
We agree with the Jerrels.
Administrative agencies must comply with the APA
guidelines when issuing regulations pursuant to delegated statutory
authority. [Fn. 14] The label an agency places on a policy or
practice does not determine whether that rule falls under the APA;
[Fn. 15] the legislature intended for the term "regulation" to
encompass a variety of statements made by agencies. [Fn. 16]
Rather, we look to the character and use of the policy or rule. In
determining which policies fall under the APA, one of the statutory
"indicia of a regulation is that it implements, interprets or makes
specific the law enforced or administered by the state agency."
[Fn. 17] A regulation also "affects the public or is used by the
agency in dealing with the public." [Fn. 18] Under these
standards, we believe that the twenty-foot visibility requirement
is a regulation.
DNR concedes that it did not promulgate the twenty-foot
visibility requirement in accordance with the APA. It claims that
it did not need to comply with the APA because the twenty-foot
visibility requirement is an informal "policy rule" rather than a
regulation. But the requirement includes both core characteristics
of a regulation. First, DNR developed the visibility requirement
precisely in order to interpret, make specific, and implement the
statutory requirement that a mark or brand "show[] distinctly."
[Fn. 19] Second, the agency used this requirement not as an
internal guideline [Fn. 20] but rather as a tool in dealing with
the public. It actually based its decision to terminate the
Jerrels' leases upon the fact that the Jerrels did not comply with
its "policy." Since the twenty-foot visibility regulation did not
satisfy the procedural standards of the APA, it is invalid. [Fn.
21]
The dissent appears to draw comfort from the fact that
DNR's response was "tailored to the Jerrels' livestock," [Fn. 22]
and thus did not affect the public. But it is the fact that DNR
has singled out the Jerrels that concerns us in this case. An
agency should not have unfettered discretion to vary the
requirements of its regulations at whim. The APA accordingly
requires state agencies to follow a rule-making procedure before
they may alter or amend the substance of their regulations. "The
courts have usually rejected arguments that . . . discretion to
proceed by ad hoc orders rather than by rules is necessary to
permit an agency to make decisions finely tuned to the facts and
circumstances of an individual case." [Fn. 23] When an agency is
freed from the requirement of having to make general rules, this
invites the possibility that state actions may be motivated by
animosity, favoritism, or other improper influences. [Fn. 24]
The dissent also argues that because DNR had already
issued a marking regulation, its adoption of the twenty-foot
visibility requirement "did not alter the substance of what the
Jerrels were already required to do" but merely "specified how they
were to comply with the regulation." [Fn. 25] But the APA does not
recognize the dissent's proposed distinction between promulgating
new regulations and supplementing or making more specific existing
ones. Indeed, the statute defines regulations subject to the act
as including "the amendment, supplement, or revision" of a rule or
regulation in order to "make specific" the law enforced. [Fn. 26]
Because the twenty-foot requirement "supplemented," "revised," and
"made specific" the marking requirements of 11 AAC 60.070, DNR was
required to follow APA procedures. [Fn. 27]
DNR argues in the alternative that even if the twenty-
foot visibility requirement is invalid, it acted within its
authority in terminating the Jerrels' leases because they did not
mark their horses at all. But DNR's shifting interpretations of
the meaning of the marking requirements hampered the Jerrels'
attempts at compliance. And although the dissent argues that the
Jerrels' failure "to follow any reasonable, effective alternative"
[Fn. 28] to branding justified DNR's cancellation of the leases,
this statement ignores the finding of the hearing officer. Hearing
Officer Middleton found that the tagging method proposed by the
Jerrels "seem[ed] like a feasible method." [Fn. 29] Indeed, until
August of 1990, DNR believed that the Jerrels had worked in good
faith with DNR to come up with a feasible marking method.
Moreover, the Director of Agriculture offered the Jerrels the
option of tattoos in lieu of brands in October 1990 and withdrew
that offer only after learning that it would be unacceptable to the
neighboring landowners. As Greek Taylor, Natural Resource Manager
with the State Division of Lands, testified at the June 1992
hearing:
Q: At any time during the course of your
dealing with David [Jerrel], over the course of that summer, did he
seem less than cooperative?
A: Absolutely not.
Q: Did he seem like he was sincerely working
toward fulfilling the requirements concerning marking the
livestock?
A: Yes.
Thus, the evidence does not support the dissent's view that the
Jerrels failed to make a good faith attempt to comply with the
regulation.
IV. CONCLUSION
We hold that DNR was not estopped from enforcing the
marking requirement. But because DNR's requirement that the
Jerrels brand their horses so that the marks may be visible at
twenty feet was not promulgated under the APA, we REVERSE the
decision of the superior court to terminate the Jerrels' leases for
noncompliance with that requirement. [Fn. 30]
EASTAUGH, Justice, with whom CARPENETI, Justice, joins, dissenting.
I. INTRODUCTION
Because I think the Department of Natural Resources (DNR)
had authority to require the Jerrels to mark their horses visibly
and permanently, I dissent.
The Jerrels kept about thirty-five horses on DNR grazing
leaseholds. DNR received complaints alleging that the Jerrels
allowed their horses to run wild through the countryside,
destroying neighbors' lawns and fields, breaking fences,
endangering traffic, instigating threatening situations, imperiling
children, and possibly causing a shootout and a death.
In response to the complaints, DNR, through its Division
of Land and Water Management, invoked 11 Alaska Administrative Code
(AAC) 60.070 (1970) and required the Jerrels to mark their horses
by means plainly distinguishable at twenty feet. DNR eventually
terminated the Jerrels' leases because they failed to mark their
horses. After a hearing, DNR concluded that even absent the
twenty-foot visibility requirement, only branding provided a
sufficient means of identification. The Jerrels again failed to
comply and DNR affirmed the termination.
This court reverses, holding that the DNR's Division of
Land and Water Management's "ad hoc interpretation of the livestock
marking requirement is a regulation that was not adopted in
accordance with the Administrative Procedure Act." [Fn. 1] The
court also rejects DNR's alternative argument that it permissibly
terminated the leases because the Jerrels did not mark their horses
in any fashion. [Fn. 2]
I disagree with both of the court's conclusions.
II. DISCUSSION
A. Standard of Review
Whether agency action is a regulation is a question of
law that does not involve agency expertise. [Fn. 3] We therefore
substitute our judgment for that of the agency. [Fn. 4] An
agency's interpretation of its own regulation, however, is reviewed
under a reasonable basis standard and is normally given effect
unless it is plainly erroneous or inconsistent with the regulation.
[Fn. 5] And we describe an agency's discretionary decision that
does not require formal procedures as "quasi-executive" and apply
an abuse of discretion standard. [Fn. 6]
B. DNR's Action Was Not a "Regulation."
Did DNR's interpretation of its requlation offend the
Administrative Procedure Act [APA]? The answer lies in whether the
interpretation was itself a "regulation." [Fn. 7]
The statutory authority for the state's governance of its
leased grazing lands lies in AS 38.05.020, which permits DNR's
commissioner to "establish reasonable procedures and adopt
reasonable regulations necessary to carry out" the lands chapter,
and AS 38.05.070, which requires the director of DNR's Division of
Lands (now the Division of Land and Water Management) to determine
the limitations, conditions, and terms of state leases.
Those two statutes gave DNR authority to determine
reasonable lease conditions and to adopt reasonable regulations.
DNR duly promulgated the regulation disputed here, 11 AAC 60.070,
some seventeen years before the present dispute arose. The first
sentence of that regulation states that all livestock on a state
grazing lease "shall be properly identified" and that the
identification shall be registered in accordance with AS 03.40.010-
.270. The second sentence delegates discretion to the division
director who, under his proprietary authority, "may require" that
livestock on a state grazing lease "be tagged, dyed, or otherwise
marked as a control on numbers permitted on a lease in accordance
with the annual operating plan." [Fn. 8]
All four of the Jerrels' leases required the leaseholder
to comply with regulations promulgated under the lands chapter.
When applying 11 AAC 60.070 to the Jerrels, the division
stated that to be "properly identified," the Jerrels' range horses
must be identifiable at a distance of twenty feet. The court here
decides that the division's application of 11 AAC 60.070 to the
Jerrels was a "regulation." In doing so, it states that "DNR
developed the visibility requirement precisely in order to
interpret, make specific, and implement the statutory requirement
that a mark or brand 'show[] distinctly.'" [Fn. 9] But I think
more analysis is required to decide the issue presented. In
numerous cases we have undertaken a more analytical approach before
deciding whether an agency's action is a regulation that must be
promulgated under the APA. [Fn. 10] Today's opinion fails to note
the substantive distinctions between agency action that is
regulatory and agency action that simply interprets an existing
regulation and applies that regulation to the circumstances at
hand. It also fails to note the distinction between the regulatory
authority of DNR and the proprietary authority of the DNR division
charged with managing these leases. To adequately analyze DNR's
action here, we must address those distinctions.
Agency action creates a regulation when it establishes a
future course of conduct, has the effect of a standard of general
application, or makes an addition of substance to an existing
policy or regulation. [Fn. 11] But agency action does not create
a regulation when it implements existing policy decisions and is
not plainly erroneous or inconsistent with an existing regulation.
[Fn. 12] And agency action does not constitute a regulation when
it merely conditions an existing right. [Fn. 13]
The agency's action here was not the equivalent of a new
regulation. The division did not create a standard of general
application when it wrote its June 28, 1990, letter to the Jerrels,
or at any later time in dealing with the Jerrels. The June 28
letter simply stated that the division "requires (regardless of the
method used) that your mark must be plainly distinguishable from a
distance of 20 feet." It referred to "your" mark, not the marks of
all leaseholders. It did not publish that letter and there is no
evidence it has since relied on it with respect to other
leaseholders, or has treated it as having general application.
Rather, as the court acknowledges, the marking requirement was in
response to circumstances specific to the Jerrels' horses, namely
the complaints of neighbors that the horses were loose and created
hazards. [Fn. 14]
Moreover, the marking requirement applied to the Jerrels
did not establish a future course of conduct; DNR did not issue a
directive requiring all leaseholders to brand their livestock or
adhere to a twenty-foot visibility standard, regardless of their
livestock's history or characteristics. Instead, the agency simply
applied existing agency policy -- that all livestock on state
grazing leases be marked for identification -- to the circumstances
presented. It did not intimate that it would impose the same
technical requirements on all leaseholders, regardless of
circumstances. Indeed, a twenty-foot visibility might be needless
for docile and easily gathered species, and insufficient for beasts
more feral than the Jerrels'. And hot-branding would be useless
for species with long coats. The very reason why the division even
acted here, to deal with claims that these leaseholders' animals
were dangerous and destructive, suggests a case-specific
interpretation of the existing marking regulation. And the court's
own characterization of the interpretation as "ad hoc" [Fn. 15] is
at odds with an intent to adopt a twenty-foot visibility
requirement of general application.
For similar reasons, I disagree with the court's
assertion that the division's action was a regulation because it
affected the public. [Fn. 16] Its "ad hoc" interpretation [Fn. 17]
was adopted for a specific purpose. The interpretation tailored to
the Jerrels' livestock does not affect the public. DNR's directive
here was not directed to the public, but to the Jerrels only: the
twenty-foot visibility requirement was expressed in an agency
letter sent only to the Jerrels; branding was recommended as a
result of the Jerrels' individualized agency hearing; and DNR
Commissioner Noah affirmed that recommendation after reviewing the
Jerrels' particular circumstances. DNR did not publish or
communicate to the public either the twenty-foot visibility
requirement or the branding requirement. And DNR did not require
other leaseholders or "the public" to abide by either standard.
DNR's actions do not govern the actions of any individuals aside
from the Jerrels. [Fn. 18]
DNR's existing policy, reflected in 11 AAC 60.070,
requires identification "so that the brand or mark shows
distinctly." [Fn. 19] It requires all livestock on a state grazing
lease to be "properly identified." [Fn. 20] Requiring the Jerrels
to brand or visibly mark their horses is neither plainly erroneous
nor inconsistent with that regulation.
Under the regulation and the terms of their lease, the
Jerrels were already obliged to identify their livestock.
Requiring branding, as opposed to allowing a different type of
marking, did not affect or add to the substance of that obligation.
Requiring branding merely altered the way in which the Jerrels had
to satisfy that obligation. The regulation gave the division
discretion to require an adequate method of marking. This
discretion allowed the division to administer state leases and to
prevent activities on its leaseholds from harming the public. It
also gave the division the flexibility to respond to specific
circumstances arising on state leases.
The court also reasons that because the division's
visibility requirement "supplemented," "revised," and "made
specific" the marking requirements of 11 AAC 60.070, DNR was
required to follow APA procedures. [Fn. 21] First, as discussed
above, the division's requirement did not alter the substance of
what the Jerrels were already required to do, although it specified
how they were to comply with the regulation. Second, even if the
division's action were an additional requirement, 11 AAC 60.070
authorizes it to impose additional marking requirements on a lease-
specific basis. [Fn. 22] DNR's commissioner interpreted 11 AAC
60.070 as giving the division proprietary authority, as a lessor,
to impose additional marking requirements on particular leases. He
stated:
"In addition," the regulation expressly
provides for the director of the Division of Land to impose
supplementary, lease-specific marking requirements. If the
director decides to impose extra marking requirements on a
particular lease, he must do so by giving notice to the lessee in
question, not by adopting a regulation of general applicability.
11 AAC 58.580. I find that the Division of Land was within its
legal rights as lessor to impose the additional requirement that
whatever mark the Jerrels used must be visible at 20 feet.
Although an agency's characterization of whether it has effectively
adopted a new regulation is not entitled to deference, I agree with
the commissioner's reasoning because it accords with our previous
distinctions between regulatory and non-regulatory agency action.
It also accords with the distinction between delegated sovereign
and proprietary authority.
The legislature delegated no sovereign authority to the
division -- the entity that the court here holds created a
"regulation." [Fn. 23] As the commissioner noted in his decision,
when the legislature gave the division responsibility for leasing
state-owned land, it granted the division no powers beyond the
proprietary authority available to any private landowner, including
the ability to enter into and terminate contracts pertaining to
those lands. [Fn. 24] The division was acting here in its
proprietary role as the lessor of state lands.
We have described an agency's discretionary decision that
did not require formal procedures as "quasi-executive." [Fn. 25]
This court has previously stated that "DNR regularly makes
decisions that are quasi-executive in nature and do not constitute
regulation under the APA even when one or more indices of a
regulation are present." [Fn. 26] And when an agency makes quasi-
executive discretionary decisions authorized by the legislature we
review only for abuse of discretion. [Fn. 27] The court should
therefore review the division's action here only for abuse of
discretion.
The remaining question is whether the division abused its
discretion. I conclude that requiring the Jerrels to visibly mark
their livestock was a reasonable and not arbitrary exercise of
administrative discretion. The complaints concerning the Jerrels'
horses warranted a visibility requirement and justified the
division's conclusion that it was necessary to be able to identify
the beasts from a reasonably safe distance. In requiring permanent
and visible marks, the division could permissibly consider the
danger that large, ill-tamed animals pose to observers trying to
discern small marks, the Jerrels' past failures to contain and
account for their horses, and the need to identify the horses to
determine under- or over-utilization and to create a range
conservation plan. Given these circumstances, the division could
justifiably invoke the regulation and its own discretion to require
visible markings in a form that prevented their removal or
transfer. DNR here concluded that branding was practical because
it was both permanent and visible. A practical solution to a
problem is reasonable and not arbitrary. [Fn. 28]
The court's holding here would require DNR to promulgate
a new regulation each time it deals with leaseholders who do not
wish to follow state regulations or the terms of their leases.
According to the court, to lawfully manage the Jerrels' lease, DNR
should have promulgated a specifically tailored regulation allowing
hot-branding of horses or a specific twenty-foot visibility
requirement. I would not saddle DNR with such an obligation. Such
a requirement would seem to mandate promulgating immutable
standards such as a ten-foot visibility requirement for Shetland
ponies and sheep, a twelve-foot standard for calves, and a thirty-
foot standard for longhorn steers. The legislature apparently
disagreed with any such notion when it gave DNR and the division
discretion to manage individual leases and to set the terms and
conditions of those leases. That discretion is not unbridled, but
it was not exceeded here. The court's holding today effectively
prevents agencies from interpreting their own regulations or
contracts and from exercising their delegated discretion to resolve
disputes, unless they promulgate new regulations filling the
inevitable interstices in existing regulations.
C. DNR Did Not Err when It Terminated the Jerrels' Leases
for Failing to Comply with 11 AAC 60.070.
The court rejects DNR's argument that the Jerrels' total
failure to mark their animals justified terminating the leases.
[Fn. 29] The Jerrels' failure had two effects. It prolonged the
difficulties in holding them responsible for their animals. And
their failure to follow any reasonable, effective alternative -- a
mark large enough to be read by an observer at a safe distance and
permanent enough to prevent identity-switching -- confirms that a
permanent, visible mark was a reasonable, permissible,
administrative choice within the agency's discretion.
The court asserts that DNR's "shifting interpretations"
of the meaning of the marking requirement hampered the Jerrels'
attempts at compliance and thus that their total non-compliance
must be excused. [Fn. 30] But DNR only "shifted" its meaning to
allow the Jerrels to propose a feasible alternative. The Jerrels
bore the responsibility for identifying some other method of
equivalent visibility and permanence that would satisfy DNR's duty
to administer these leases and protect other persons and
landowners. Before mandating branding, DNR allowed the Jerrels two
years to propose a workable alternative. The Jerrels proposed
tattooing and a plastic tagging method. After seriously
considering these alternatives, the hearing officer ultimately
rejected them as not sufficiently permanent or visible. [Fn. 31]
The fact that DNR gave the Jerrels two years to come up with an
alternative solution -- from 1990 to 1992 -- does not excuse the
Jerrels' complete failure to provide evidence that their horses had
been branded. Even after the branding requirement was clarified,
the Jerrels were given two more years to comply before the leases
were finally terminated in 1994. The court's opinion notes that
DNR believed that the Jerrels worked with it in good faith until
1990. [Fn. 32] But by failing to consider the Jerrels' subsequent
four years of promises, delays, and total non-compliance before DNR
terminated the leases, the court fails to give the required
deference to permissible agency action.
The court's opinion expresses concern that DNR "singled
out" the Jerrels and implies that DNR varied "the requirements of
its regulations at a whim." [Fn. 33] First, DNR did not single out
the Jerrels. Their actions prompted individualized attention. DNR
had authority to interpret its regulation as it did, and a duty to
rein in the Jerrels' animals. The record strongly suggests that
DNR worked in good faith, dealing patiently with both the Jerrels
and their neighbors. Second, unless DNR had absolutely no
authority to interpret its regulation on a lease-by-lease basis, it
seems inconsistent to reason that a requirement specific to the
Jerrels could somehow be a regulation of general application.
D. The Jerrels' Other Arguments Fail.
Given this conclusion, I would reach the Jerrels' Open
Meetings Act [Fn. 34] and due process arguments because they would
no longer be moot.
There was no Open Meetings Act violation; DNR simply
listened to public complaints about loose horses. Any information
gathered by DNR as a result of those investigations was not
conclusive on any issue in dispute before the hearing officer or
the commissioner.
The Jerrels did not preserve their procedural due process
issues at the agency stage. They first raised them in their reply
brief in their superior court appeal. That is too late. They did
not claim, at a time when the agency could do something about it,
either that DNR gave them inadequate notice or that the hearing was
deficient. I would not consider the due process issues to be so
important as to establish plain error that could justify reviewing
these unpreserved issues. In any event, the Jerrels received a
full hearing before a hearing officer and had an opportunity to
present evidence bearing on, among other things, what marks and
brands might be sufficient. And they had ample opportunity
following the hearing officer's decision to fulfill the branding
requirement.
IV. CONCLUSION
I would therefore affirm.
FOOTNOTES
Footnote 1:
Lease 19581 is dated November 18, 1963. It covers 1,015 acres
and extends until November 2018.
Footnote 2:
Lease 21412 is dated January 3, 1964. It covers 440 acres and
extends until July 2001. Lease 52922 is dated October 28, 1970.
It covers 290 acres and extended until April 1998. Lease 59221 is
dated January 12, 1974. It covers 2,040 acres and extends until
July 2001.
Footnote 3:
11 AAC 60.070 (1997) requires that:
All livestock permitted on a state grazing
lease shall be properly identified and such identification
registered in accordance with AS 03.40.010 - 03.40.270. In
addition, the director may require that the livestock be tagged,
dyed, or otherwise marked as a control on numbers permitted on a
lease in accordance with the annual operating plan.
Footnote 4:
AS 44.62.
Footnote 5:
See Matanuska-Susitna Borough v. Hammond, 726 P.2d 166, 182
(Alaska 1986).
Footnote 6:
See Payton v. State, 938 P.2d 1036, 1041 (Alaska 1997)
("[I]nsofar as our review [of an agency's regulation] requires us
to determine the meaning of [a statute], we exercise our
independent judgment." [Fn. 1]).
Footnote 7:
Madison v. Alaska Dep't of Fish & Game, 696 P.2d 168, 173
(Alaska 1985) (quoting Earth Resources Co. v. State, Dep't of
Revenue, 665 P.2d 960, 965 (Alaska 1983)).
Footnote 8:
Dissent at 19 (citing Board of Trade, Inc. v. State, Dep't of
Labor, Wage & Hour Admin., 968 P.2d 86, 89 (Alaska 1998)).
Footnote 9:
See Kelly v. Zamarello, 486 P.2d 906, 911 (Alaska 1971). In
Kelly, we set out a procedure for the interpretation of
administrative regulations. That procedure calls for the
deferential standard of review only after a determination that "an
administrative regulation has been adopted in accordance with the
procedures set forth in the Administrative Procedure Act." Id.
Footnote 10:
Municipality of Anchorage v. Schneider, 685 P.2d 94, 97
(Alaska 1984).
Footnote 11:
The Jerrels contest the regulations' applicability to the
first lease, Lease 19581. We need not reach the merits of this
question, however, because we ultimately conclude that DNR was
without authority to require the Jerrels to brand their horses as
a requirement of any of their leases.
Footnote 12:
AS 03.40.020.
Footnote 13:
The Jerrels also argue that an employee -- and not the
director -- of DNR made the 20-foot visibility requirement, making
the decision invalid. But the Jerrels did not raise this issue in
their opening brief. Under Alaska Rule of Appellate Procedure
212(c)(3), the reply brief "may raise no contentions not previously
raised in either the appellant's or appellee's briefs." We
accordingly find that the Jerrels have waived this employee-
director argument.
Footnote 14:
AS 44.62.640 defines "regulation" as:
"[E]very rule, regulation, order, or standard
of general application or the amendment, supplement, or revision of
a rule, regulation, order, or standard adopted by a state agency to
implement, interpret, or make specific the law enforced or
administered by it, or to govern its procedure, except one that
relates only to the internal management of a state agency; . . .
"regulation" includes "manuals," "policies," "instructions,"
"guides to enforcement," "interpretative bulletins,"
"interpretations," and the like, that have the effect of rules,
orders, regulations, or standards of general application, and this
and similar phraseology may not be used to avoid or circumvent this
chapter; whether a regulation, regardless of name, is covered by
this chapter depends in part on whether it affects the public or is
used by the agency in dealing with the public.
See also Kenai Peninsula Fisherman's Coop. Ass'n, Inc. v. State,
628 P.2d 897, 904 (Alaska 1981).
Footnote 15:
See, e.g., Gilbert v. State, Dep't of Fish & Game, 803 P.2d
391, 396-97 (Alaska 1990) (rejecting agency's argument that its
mixed stocks regulation management was a "policy" and instead
classifying it as a regulation subject to the APA because it
contained indicia of regulations).
Footnote 16:
See Messerli v. Department of Natural Resources, 768 P.2d
1112, 1117 (Alaska 1989) (noting that Alaska law takes an
"expansive view" of the term "regulation"), overruled on other
grounds by Olson v. State, Dep't of Natural Resources, 799 P.2d 289
(Alaska 1990); see also Kenai Peninsula, 628 P.2d at 905.
Footnote 17:
Kenai Peninsula, 628 P.2d at 905; see also AS 44.62.640(a)(3);
Gilbert, 803 P.2d at 396.
Footnote 18:
AS 44.62.640(a)(3); see also Gilbert, 803 P.2d at 396; Kenai
Peninsula, 628 P.2d at 905.
Footnote 19:
AS 03.40.020.
Footnote 20:
See Messerli, 768 P.2d at 1118 (acknowledging the internal
management exception to the requirements of APA).
Footnote 21:
See Wickersham v. State Commercial Fisheries Entry Comm'n, 680
P.2d 1135, 1140 (Alaska 1984) ("When a policy is invalidly
promulgated under the APA, generally the appropriate remedy is to
invalidate the offending policy until the procedures required by
the APA are observed.").
Footnote 22:
Dissent at 24.
Footnote 23:
Alfred C. Aman, Jr. & William T. Mayton, Administrative Law
sec.
3.2, at 78 (1993).
Footnote 24:
See Alfred C. Aman, Jr. & William T. Mayton, Administrative
Law sec. 3.1, at 73 (1993) (quoting Yick Wo v. Hopkins, 118 U.S.
356,
373 (1885)).
Footnote 25:
Dissent at 26.
Footnote 26:
AS 44.62.640.
Footnote 27:
See AS 44.62.640; Gilbert, 803 P.2d at 396-97 (When "the Board
policy makes more specific the law enforced or administered and the
policy affects the public, . . . we conclude that the policy in
question falls squarely within the definition of a 'regulation'
contained in AS 44.62.640(a)(3) and, therefore, it is required to
be implemented pursuant to the APA.") (internal punctuation
omitted).
Footnote 28:
Dissent at 29.
Footnote 29:
Although the hearing officer required branding of some horses,
he recognized the decrease in value that branding causes and
recommended that the Jerrels be allowed to mark up to eight
potential show horses with plastic tags and lip tattoos.
Footnote 30:
Our conclusion that DNR did not comply with the APA makes it
unnecessary to reach the Jerrels' claims that the branding
requirement conflicted with applicable statutes, that termination
of their leases violated their due process rights under both the
Alaska and Federal Constitutions, or that the May 14 meeting with
neighboring landowners violated the Open Meetings Act.
FOOTNOTES (Dissent)
Footnote 1:
See Slip Op. at 2.
Footnote 2:
See Slip Op. at 15-16.
Footnote 3:
See Kachemak Bay Watch, Inc. v. Noah, 935 P.2d 816, 825-26
(Alaska 1997).
Footnote 4:
See id. at 821.
Footnote 5:
See Board of Trade, Inc. v. State, Dep't of Labor, 968 P.2d
86, 89 (Alaska 1998).
Footnote 6:
See Kodiak Seafood Processors Ass'n v. State, 900 P.2d 1191,
1197 (Alaska 1995) (citing Olson v. State, Dep't of Natural
Resources, 799 P.2d 289, 292-93 (Alaska 1990)); see also Kachemak
Bay Watch, 935 P.2d at 825.
Footnote 7:
See AS 44.62.640(a)(3).
Footnote 8:
11 AAC 60.070 provides in full:
All livestock permitted on a state grazing
lease shall be properly identified and such identification
registered in accordance with AS 03.40.010-03.40.270. In
addition, the director may require that the livestock be tagged,
dyed or otherwise marked as a control on numbers permitted on a
lease in accordance with the annual operating plan.
Footnote 9:
Slip Op. at 13.
Footnote 10:
See, e.g., Kachemak Bay Watch, 935 P.2d 816; Usibelli Coal
Mine, Inc. v. State, Dep't of Natural Resources, 921 P.2d 1134
(Alaska 1996); Gilbert v. State, Dep't of Fish & Game, 803 P.2d 391
(Alaska 1990); State v. Northern Bus Co., 693 P.2d 319 (Alaska
1984); Kenai Peninsula Fisherman's Coop. Ass'n v. State, 628 P.2d
897 (Alaska 1981); State v. Tanana Valley Sportsmen's Ass'n, 583
P.2d 854 (Alaska 1978).
Footnote 11:
See Gilbert, 803 P.2d at 396-97 (concluding that agency policy
limiting fishery before escapement goals were met was regulation
because it modified commercial fishery limits); Kenai Peninsula
Fisherman's Coop., 628 P.2d at 905-06, 905 n.20 (holding that
agency classification was regulation subject to APA because it
intended to regulate future conduct affecting fishery rights by
establishing salmon use priority); Tanana Valley Sportsmen's Ass'n,
583 P.2d at 858-59 (holding that verbal requirement of "need" not
contained in hunting regulation was addition of substance and thus
regulation under APA).
Footnote 12:
See Usibelli Coal Mine, 921 P.2d at 1148-49, 1149 n.24
(holding that agency decision calculating royalties was not
regulation because it did not involve making of policy decisions
and did not make addition of substance); Northern Bus Co., 693 P.2d
at 323 (concluding that agency directive to use certain standard in
awarding contracts was not regulation when agency had repeatedly
required that standard and when standard was consistent with
existing regulation).
Footnote 13:
See Messerli v. Department of Natural Resources, 768 P.2d
1112, 1117-18 (Alaska 1989) (concluding that policy manual was not
regulation because definitions in manual merely conditioned
already existing right), overruled on other grounds by Olson v.
State, Dep't of Natural Resources, 799 P.2d 289, 292-93 (Alaska
1990) (holding that rational basis test used in Messerli was
incorrect and employing abuse of discretion standard of review for
discretionary acts not requiring formal procedures to allow
agencies latitude to act commensurate with their discretion).
Footnote 14:
See Slip Op. at 13-14.
Footnote 15:
See Slip Op. at 2.
Footnote 16:
See Slip Op. at 13-14.
Footnote 17:
Slip Op. at 2.
Footnote 18:
See Kodiak Seafood Processors, 900 P.2d at 1197 (agency action
was not regulation when it affected only one individual).
Footnote 19:
AS 03.40.020; see 11 AAC 60.070.
Footnote 20:
11 AAC 60.070.
Footnote 21:
Slip Op. at 15.
Footnote 22:
See 11 AAC 60.070.
Footnote 23:
See AS 38.05.035.
Footnote 24:
See AS 38.05.005 (establishing Division of Lands); AS
38.05.020(b)(1) (stating that DNR Commissioner may adopt reasonable
regulations); AS 38.05.035 (showing that Division of Lands director
has not been delegated regulatory authority).
Footnote 25:
See Kachemak Bay Watch, 935 P.2d at 825; Kodiak Seafood
Processors, 900 P.2d at 1197.
Footnote 26:
Kachemak Bay Watch, 935 P.2d at 825-26.
Footnote 27:
See id. (holding that DNR's exercise of task assigned to it by
legislature invariably involved exercise of agency discretion and
did not constitute regulation under APA nor abuse of discretion);
Kodiak Seafood Processors, 900 P.2d at 1197-98 (holding that
issuance of commercial fishing permit for closed waters to one
individual was not regulation and was not abuse of discretion).
Footnote 28:
See State v. Anderson, 749 P.2d 1342, 1346 (Alaska 1988)
(holding that agency's practical method for accomplishing its goal
of safe disposal systems was reasonable and not arbitrary).
Footnote 29:
See Slip Op. at 15-16.
Footnote 30:
See id.
Footnote 31:
Although he noted that the tagging alternative "seems like a
feasible method," the hearing officer ultimately recommended that
the Jerrels be required to hot brand most of their horses because
"none of the other methods offers sufficient means of
identification." He recommended that the Jerrels be allowed to
identify up to eight horses, whose show value would be reduced by
a hot brand, with tags and permanent tatoos. These particularized
alternatives were not specified by the regulation, either, and
would seem to violate the same promulgation standards the court
relies on today.
Footnote 32:
See Slip Op. at 16.
Footnote 33:
Slip Op. at 14.
Footnote 34:
See AS 44.62.310-.312.
