Associated Press, Inc. v. Montana Department of Revenue

• Decision Date: 20 June 2000
• Docket Number: No. 99-175.,99-175.
• Citation: 300 Mont. 233,2000 MT 160,4 P.3d 5
• Court: Montana Supreme Court
• Parties: The ASSOCIATED PRESS, INC., a New York not-for-profit corporation registered to do business in Montana; the Missoulian; the Great Falls Tribune; the Billings Gazette; KULR-TV; the Daily Interlake; KTVQ-TV; the Montana Newspaper Association; and the Montana Freedom of Information Hotline, Inc., Petitioners and Appellants, v. MONTANA DEPARTMENT OF REVENUE, Respondent and Respondent.

4 P.3d 5

2000 MT 160

300 Mont. 233

The ASSOCIATED PRESS, INC., a New York not-for-profit corporation registered to do business in Montana; the Missoulian; the Great Falls Tribune; the Billings Gazette; KULR-TV; the Daily Interlake; KTVQ-TV; the Montana Newspaper Association; and the Montana Freedom of Information Hotline, Inc., Petitioners and Appellants, v. MONTANA DEPARTMENT OF REVENUE, Respondent and Respondent.

No. 99-175.

Supreme Court of Montana.

Submitted and Argued November 4, 1999.

Decided June 20, 2000.

Karl J. Englund, Attorney at Law, Missoula, Montana, Thomas Beers, Beers Law Offices, Missoula, Montana, For Appellants.

Brenda Gilmer, Montana Department of Revenue, Helena, Montana, For Respondent.

Justice JIM REGNIER delivered the Opinion of the Court.

¶ 1 The Associated Press, Inc., the Missoulian, the Great Falls Tribune, the Billings Gazette, KULR-TV, the Daily Interlake, KTVQ-TV, the Montana Newspaper Association, and the Montana Freedom of Information Hotline, Inc. (Appellants) appeal from the judgment entered in favor of the Montana Department of Revenue (Department) by the First Judicial District Court, Lewis and Clark County. We reverse and remand.

¶ 2 We restate the issues presented on appeal as follows:

¶ 3 1. Whether Rule 42.2.701, ARM, violates Article II, Section 9 of the Montana Constitution?

¶ 4 2. Whether the Department may declare coal severance tax information confidential when it had been disclosed for a number of years prior to the promulgation of Rule 42.2.701, ARM?

¶ 5 3. Whether Rule 42.2.701, ARM, violates the public records statutes?

BACKGROUND

¶ 6 In 1975 the Montana Legislature enacted a coal severance tax. See § 15-35-103, MCA. To facilitate collection of the coal severance tax, each coal mine operator is required to provide the Department with a quarterly statement containing the tonnage produced, the average Btu value of the production, the contract sales price received for the production, and such other information as the Department may require. See § 15-35-104, MCA.

¶ 7 Following the enactment of the coal severance tax, the information provided to the Department by the coal mine operators was routinely made available to the public in the form of quarterly coal severance tax collection summaries prepared by the Department. The information contained in these summaries included the name of the coal company, the location of each coal mine by county, the total tons produced by each mine, the amount of tonnage exempt from taxation for each mine, the taxable production for each mine, the average contract sales price per ton for each mine, the total coal severance tax paid by each mine, the incentive tax credit (now expired), and the net tax paid by each mine.

¶ 8 On November 15, 1993, the Department adopted Rule 42.2.701, ARM, which declared information, such as tax returns, that taxpayers are required to provide to the Department and Department-prepared documents that identify taxpayers to be confidential. Pursuant to the adoption of the rule, the Department changed the quarterly coal severance tax collection summaries to include only the name of the coal company, the location of each coal mine by county, the total tons produced by each mine, the average sales price per ton for all Montana coal mines combined, and the total tax paid by all Montana coal mines combined.

¶ 9 On January 3, 1994, a Helena law firm representing the Montana Freedom of Information Hotline requested copies of the 1992 and 1993 quarterly coal severance collection summaries from the Department on behalf of the Associated Press pursuant to Article II, Section 9 of the Montana Constitution. Relying on recently adopted Rule 42.2.701, ARM, the Department denied the request on February 10, 1994, claiming that it had a responsibility to protect the privacy rights of all Montana taxpayers. However, in light of the public's interest in this information, the Department indicated that it would be releasing a summary of statistical information including the total tons of coal mined by each company and the average price of coal and the total amount of severance tax paid for all Montana coal mines.

¶ 10 On July 14, 1994, Appellants filed an Application for Writ of Mandate and Petition for Declaratory Judgment, requesting the following relief:

1. A writ of mandate compelling the Department to provide Appellants with information and documents contained in the Department's files that were provided to the Department pursuant to § 15-35-104, MCA.

2. An order declaring the provisions of Rule 42.2.701, ARM, to be invalid because it conflicts with § 2-6-102, MCA.

3. An order declaring the provisions of Rule 42.2.701, ARM, to be unconstitutional.

4. An award of reasonable attorney fees and costs to Appellants pursuant to § 2-3-221, MCA.

5. Any other relief the District Court deems just and proper.

The Department responded to the Appellants' application by alleging, inter alia, that it failed to state a claim upon which relief could be granted and should be dismissed.

¶ 11 Subsequently, both parties moved for summary judgment regarding the validity of Rule 42.2.701, ARM. Appellants alleged that Rule 42.2.701, ARM, violates the public's constitutionally guaranteed "right to know" in two respects. First, 42.2.701, ARM, conflicts with Montana's public records statutes, which allow citizens the right to examine and copy all records held by the government. Second, Rule 42.2.701, ARM, directly conflicts with Article II, Section 9 of the Montana Constitution, which guarantees the public the right to inspect documents held by state agencies unless the demands of individual privacy clearly exceed the merits of public disclosure.

¶ 12 Regarding the constitutionality of Rule 42.2.701, ARM, the Department contended that it was validly enacted as an interpretive rule pursuant to its general rule-making authority under § 15-1-201, MCA, with respect to supervision of the administration of all revenue laws of the state, and as such, it is constitutional. The Department also asserted that its purpose for adopting the rule was to inform the public of the Department's procedures regarding the confidentiality of certain tax information.

¶ 13 The Department also asserted that Appellants were asking the District Court to ignore the taxpayers' right to privacy guaranteed by Article II, Section 10 of the Montana Constitution. The Department went on to state that prior to authorizing release of the requested information, the District Court must first determine whether a privacy interest exists and if it does, then balance that interest against the public's right to know. Further, the Department alleged that whether or not the taxpayers have a subjective expectation of privacy in the requested information is a factual question, necessitating the denial of summary judgment.

¶ 14 After the motions for summary judgment had been fully briefed and orally argued by the parties, the District Court entered its Decision and Order denying summary judgment in all respects. The basis for the District Court's denial was that the issue of whether the taxpayers have a subjective expectation of privacy involves questions of fact, requiring an evidentiary hearing to determine the issue.

¶ 15 More than a year after the District Court had entered its Decision and Order, Appellants filed a Motion for Reconsideration. The basis for this motion was the Appellants' belief that the District Court's Decision and Order failed to address several dispositive arguments. Appellants stated that this case concerns the issue of whether Rule 42.2.701, ARM, is an invalid infringement on the public's statutory and constitutional right to examine government records. Appellants went on to state that they were not challenging whether they were entitled to receive the information at issue; they were simply challenging the rule itself on constitutional and statutory grounds. Appellants argued, inter alia, that Rule 42.2.701, ARM, is facially unconstitutional because it fails to provide for a case-by-case determination concerning whether the demands of individual privacy clearly exceed the merits of public disclosure.

¶ 16 The Department opposed the Motion for Reconsideration on the grounds that Appellants' motion was not allowed under the Montana Rules of Civil Procedure; if allowed by Rules 59 or 60, M.R.Civ.P., it was time-barred; and Appellants had failed to provide the District Court with any new reasoning or legal precedent upon which the District Court should alter its decision. The Department also asserted that the District Court had previously determined Rule 42.2.701, ARM, to be valid as a matter of law. The Department further argued that the requisite balancing test was the foundation for the rule.

¶ 17 After the Motion for Reconsideration had been fully briefed by the parties, the District Court entered an Order denying the motion based upon its conclusion that the motion was untimely and without merit. At a subsequent scheduling conference, the District Court set the evidentiary hearing concerning the issue of the taxpayers' subjective right of privacy for August 27, 1998.

¶ 18 Prior to the evidentiary hearing, the parties submitted proposed findings of fact and conclusions of law. In addition, the District Court entered a Pre-Trial Order, which was approved by the parties. Several witnesses testified at the hearing, including the former director of the Department during the time Rule 42.2.701, ARM, was promulgated; the former bureau chief for the Natural Resource Corporation Taxation Division of the Department; a certified public accountant; representatives from several Montana coal companies; and the Montana bureau chief for the Associated Press. At the conclusion of the hearing, the District Court offered the parties the opportunity to submit supplemental proposed findings of fact and conclusions of law within 30 days, which the parties did.

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