Aded v. Clinton Presidential Foundation

• Court: Arkansas Supreme Court
• Writing for the Court: Jim Gunter
• Citation: Aded v. Clinton Presidential Foundation, 216 S.W.3d 119, 364 Ark. 40 (Ark. 2005)
• Decision Date: 27 October 2005
• Docket Number: No. 05-104.,05-104.
• Parties: ARKANSAS DEPARTMENT OF ECONOMIC DEVELOPMENT and Larry Walther, Director, Appellants, v. The WILLIAM J. CLINTON PRESIDENTIAL FOUNDATION, Appellee.

216 S.W.3d 119

ARKANSAS DEPARTMENT OF ECONOMIC DEVELOPMENT and Larry Walther, Director, Appellants, v. The WILLIAM J. CLINTON PRESIDENTIAL FOUNDATION, Appellee.

No. 05-104.

Supreme Court of Arkansas.

October 27, 2005.

Mike Beebe, Att'y Gen., by: Mark A. Hagemeier and Patricia V. Bell, Ass't Att'ys Gen., Little Rock, for appellant.

Rose Law Firm, by: M. Jane Dickey, Amy Lee Stewart, and Amanda K. Wofford, Little Rock, for appellee.

JIM GUNTER, Justice.

This appeal arises from an order of the Pulaski County Circuit Court, granting declaratory judgment in favor of appellee, The William J. Clinton Presidential Foundation (Foundation), against appellants, Arkansas Department of Economic Development and its director, Larry Walther, in his official capacity (jointly ADED), on the issue of ADED's decision to deny the Foundation's application for a tax-incentive program. We affirm the circuit court's ruling.

ADED has the statutory authority for administering the Arkansas Advantage Program (Advantage Program), as provided by the Arkansas Enterprise Zone Act of 1993 (AEZA), codified at Ark.Code Ann. § 15-4-1701 et seq. (Repl.2000 and Supp. 2001). The Advantage Program is a tax-incentive program that is designed to draw businesses to Arkansas by providing a refund for sales-and-use taxes for "any legitimate business enterprise" that meets one of the nine classifications enumerated in Ark.Code Ann. § 15-4-1704(b). The AEZA authorizes the ADED to oversee the implementation and operation of the Advantage Program. Ark.Code Ann. § 15-4-1703.

The Foundation is an Arkansas nonprofit corporation that was created in 1997. The Foundation chose to construct the William J. Clinton Presidential Center and Park in downtown Little Rock. The Foundation's articles of incorporation provide its purposes, which are "to establish and support a Presidential archival depository, ... to house and preserve the books, correspondence, documents, papers, pictures, photographs, and other memorabilia of William J. Clinton, the President of the United States of America, as well as other objects or materials related to the papers or events of the official or personal life of William J. Clinton that have historical or commemorative value, and to undertake and support research and educational activities on policy and historical issues related to the life and work of William J. Clinton." The Foundation, which is housed in the Presidential Center and Park in downtown Little Rock, has offices and employees in Arkansas and New York, and it is involved in projects throughout the country and around the world. According to the Foundation's complaint, these projects include "responding to challenges of the global neighborhood; responding to the challenge of September 11; promoting reconciliation and cooperation among the world's ethnic, racial, and religious groups; promoting economic empowerment through opportunity and responsibility; and supporting a new generation of leaders."

In August 2001, ADED received the Foundation's initial application for the Advantage Program. However, the Foundation's initial application was incomplete because a requisite Standard Industrial Classification Code was not included. ADED did not process the first application, and it is not at issue in the present appeal. On May 1, 2002, the Foundation submitted a second application for tax incentives under the Advantage Program. This application contained the code number 6732, a code which includes establishments primarily engaged in the management of funds of trusts and foundations organized for religious, educational, charitable, or nonprofit research purposes.

On May 24, 2002, ADED denied the Foundation's application. James Pickens, the former director of ADED, wrote a letter to the Foundation in which he stated that the Advantage Program was not available to nonprofit entities. ADED cited the following reasons for denying the Foundation's application: (1) the Advantage Program was limited to for-profit businesses, according to the Black's Law Dictionary definition of a "legitimate business enterprise;" (2) the Foundation was already exempt from paying corporate income tax, and ADED determined that the law "clearly intended to benefit businesses with income and income tax liability in order to take advantage of such benefits;" and (3) accepting the application would conflict with ADED's interpretation of the Emergency Clause of Act 1130 of 1990, particularly the terms, competitive and invest.

On June 5, 2002, the Foundation wrote ADED and requested a hearing under the Arkansas Administrative Procedure Act to review its decision to deny the Foundation's application. ADED replied, concluding that "current law does not, in our legal opinion, afford an administrative hearing to review our decision" because "[t]here is no provision under the [AEZA] providing for notice and hearing in this circumstance."

On July 18, 2002, after ADED's decision, the Foundation filed a complaint against ADED and Pickens, in his official capacity, regarding the denial of the application. In its complaint, the Foundation sought declaratory judgment that the Advantage Program under the AEZA applies to nonprofit as well as for-profit entities. The Foundation also alleged that, in denying the Foundation's application, ADED violated and exceeded its statutory authority under the AEZA. Further, the Foundation averred that ADED's denial of the Foundation's application was arbitrary and capricious. Finally, the Foundation alleged that ADED's denial of the Foundation's application was an error of law because "[t]he Foundation will be liable under Ark. Code Ann. § 26-51-304 for Arkansas income tax if any of its funds earn interest," and the Foundation "can use income tax credits authorized by the Advantage Program to offset tax liability on any interest income."

The parties filed cross-motions for summary judgment. On October 13, 2004, the circuit court entered an order, granting summary judgment in favor of the Foundation and reversing the decision of ADED. In its conclusion, the circuit court ruled:

The court therefore finds and hereby declares that under the clear language of the Arkansas Enterprise Zone Act, at the time of plaintiff's application and defendant's rejection of the same, a "business" or "business enterprise" may be either for-profit or nonprofit. The court further finds that defendant ADED acted in a manner that was arbitrary and capricious, to the detriment of the plaintiff, in determining that the Arkansas Enterprise Zone Act excluded nonprofit corporations from its benefits, and in therefore rejecting plaintiff's otherwise compliant application for benefits under that Act. Plaintiff's motion for summary judgment is granted; Defendant's cross-motion for summary judgment is denied. Defendant is ordered to approve plaintiff's application made under Ark.Code Ann. § 15-4-1701 et seq., such that the Revenue Division of the Department of Finance and Administration shall authorize a refund of sales and use taxes imposed on plaintiff's project and any income tax credits for which plaintiff may be eligible in accordance with § 15-4-1704(h), subject only to plaintiff's continuing compliance with the AEZA in accordance with this order.

ADED timely filed its notice of appeal on November 2, 2004.

Before we consider ADED's arguments on appeal, we note the procedural posture of this case and the applicable standard of review. In oral argument, ADED conceded that there was no adjudication by the agency, and therefore, the Administrative Procedure Act did not apply. Under the Administrative Procedure Act, "[a]djudication" is defined as an "agency process for the formulation of an order." Ark. Code Ann. § 25-15-202(1) (Repl.2002). "Order" is defined as "the final disposition of any agency in any matter other than rule making, including licensing and rate making, in which the agency is required by law to make its determination after notice and hearing." Ark.Code Ann. § 25-15-202(5) (Repl.2002). Where there has been no adjudication before the administrative agency, there has been no "final agency action" to be reviewed pursuant to Ark. Code Ann. § 25-15-212. Here, ADED concedes that there was no adjudication, and moreover, a complaint for declaratory judgment, naming ADED as the defendant, was filed by the Foundation after ADED's denial of the Foundation's application. Both parties then filed cross-motions for summary judgment, and the circuit court ruled in favor of the Foundation. Because there is no ADED decision before us, we shall review the circuit court's order.

We recently articulated our standard of review in summary-judgment cases in Rice v. Tanner, 363 Ark. 79, 210 S.W.3d 860 (2005), where we stated:

Summary judgment is to be granted by a trial court only when it is clear that there are no genuine issues of material fact to be litigated, and the party is entitled to judgment as a matter of law. Once the moving party has established a prima facie entitlement to summary judgment, the opposing party must meet proof with proof and demonstrate the existence of a material issue of fact. On appellate review, we determine if summary judgment was appropriate based on whether the evidentiary items presented by the moving party in support of its motion leave a material fact unanswered. This court views evidence in a light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party. Our review is not limited to the pleadings, as we also focus on the affidavits and other documents filed by the parties. After reviewing undisputed facts, summary judgment should be denied if, under the evidence, reasonable persons might reach different conclusions from those undisputed facts.

Rice, supra (citations omitted).

For its first point on appeal, ADED argues the circuit court erred in ruling that ADED's interpretation of the AEZA applied only...