Blue Spirits Distilling, LLC v. Wash. State Liquor & Cannabis Bd.

• Decision Date: 22 December 2020
• Docket Number: No. 53341-3-II,53341-3-II
• Citation: 15 Wash.App.2d 779,478 P.3d 153
• Court: Washington Court of Appeals
• Parties: BLUE SPIRITS DISTILLING, LLC, Appellant, v. WASHINGTON STATE LIQUOR & CANNABIS BOARD, Respondent.

15 Wash.App.2d 779

478 P.3d 153

BLUE SPIRITS DISTILLING, LLC, Appellant,

v.WASHINGTON STATE LIQUOR & CANNABIS BOARD, Respondent.

No. 53341-3-II

Court of Appeals of Washington, Division 2.

Filed December 22, 2020

Maren Roxanne Norton, Chauncey Alan Maclean, Anne Marie Dorshimer, Stoel Rives LLP, 600 University St., Ste. 3600, Seattle, WA, 98101-4109, for Appellant.

Leah E. Harris, Washington State Attorney General's Office, 800 5th Ave., Ste. 2000, Seattle, WA, 98104-3188, for Respondent.

PUBLISHED OPINION

Worswick, J. ¶ 1 Blue Spirits Distilling LLC, appeals the trial court's orders denying Blue Spirits's motion for summary judgment and granting the Washington State Liquor and Cannabis Board's motion to dismiss Blue Spirits's lawsuit for failure to state a claim. In the wake of our decision in Washington Restaurant Association ,¹ Blue Spirits filed a lawsuit in superior court, seeking a refund of fees it paid to the Washington State Liquor and Cannabis Board. Blue Spirits neither sought a declaratory judgment in superior court nor pursued its claim under the Administrative Procedure Act (APA).² The trial court denied Blue Spirits's motion for summary judgment and granted the Board's CR 12(b)(6) motion for dismissal because Blue Spirits's claim was not properly before it.

¶ 2 On appeal, Blue Spirits argues that it brought a cognizable claim in superior court because (1) its lawsuit fell under exceptions to the rule that the APA establishes the exclusive means of judicial review of agency actions, (2) exhaustion of administrative remedies would have been futile, and (3) this case presents only issues of law. It also seeks attorney fees. The Board, in addition to arguing that Blue Spirits failed to exhaust its administrative remedies, claims that Blue Spirits has abandoned its claim for refund of one category of fees.

¶ 3 We hold that the trial court did not err when it denied Blue Spirits's motion for summary judgment because Blue Spirits did not exhaust its administrative remedies under the APA. And because the CR 12(b)(6) motion was based on the same legal grounds as the denial of summary judgment, we hold that the trial court did not err in dismissing the lawsuit. Accordingly, we affirm the trial court's orders and deny Blue Spirits's request for attorney fees.

FACTS

¶ 4 RCW 66.24.140 grants the Washington State Liquor and Cannabis Board authority to collect a $2,000 fee each year to license distillers in the state. The Board has also adopted WAC 314-28-070, which expands the amount of required fees on licensed distillers.

¶ 5 Among the fees the Board authorized in WAC 314-28-070 were an annual fee of 10 percent of a distiller's gross spirits revenue on spirits sold for "on- or off-premises consumption during the first twenty-seven months of licensure and five percent of their gross spirits revenues to the board in the twenty-eighth month and thereafter" (10 percent fee), and a fee of "seventeen percent of their gross spirits revenue to the board on sales to customers for off-premises consumption" (17 percent fee). Former WAC 314-28-070(3) (2018).³ In August 2017, we published a decision invalidating the 10 percent fee and calling into question the 17 percent fee. Wash. Rest. Ass'n , 200 Wash. App. at 131, 401 P.3d 428.

¶ 6 Blue Spirits is a licensed distiller in Washington State. Since 2012, in addition to the $2,000 annual license fee, Blue Spirits has paid the 10 percent and 17 percent fees. After our decision in Washington Restaurant Association , Blue Spirits engaged in two parallel actions: it corresponded with the Board regarding these fees, and it filed a lawsuit in superior court for a refund.

A. Administrative Timeline

¶ 7 During September 2017, the Board was conducting an audit of Blue Spirits. On September 20, Blue Spirits sent a letter to the Board requesting a refund based on our decision in Washington Restaurant Association for all fees it paid, except the $2,000 annual license fee. Although the Board did not directly respond to the request, the Board's audit cover letter alluded to the fact that its authority to collect the 17 percent fee was questionable.

¶ 8 On April 9, 2018, the Board issued Blue Spirits's audit results in which the Board admitted to "the removal of the [10 percent] distributor fee assessment due to the recent court decision," but claimed that it lacked the authority to refund the 17 percent fees. Clerk's Papers (CP) at 325-26. The audit cover letter stated that it would not "alter the audit results based on speculation about the potential for the rules to be invalidated." CP at 326. On April 25, Blue Spirits responded to the audit results with a request for hearing before the Board, citing Washington Restaurant Association , and requesting a full refund of fees beyond the $2,000 license fee. Our record is silent as to any further administrative proceedings.⁴

B. Judicial Timeline

¶ 9 On September 20, 2017, the same day it sent the letter to the Board, Blue Spirits filed a lawsuit for damages in superior court, seeking a refund. In November, Blue Spirits filed a motion for summary judgment, arguing that it was entitled to relief because both the 10 percent and 17 percent fee rules were invalid. The Board responded that, among other things, Blue Spirits had failed to exhaust its administrative remedies. The trial court denied the motion in a March 2018 letter opinion. In May 2018, the trial court issued an order denying Blue Spirit's motion for summary judgment, ruling that Blue Spirits had "not demonstrated a procedural mechanism by which the Court may grant the requested relief," and the court had "no power at this stage in the litigation to compel any refund." CP at 319.

¶ 10 Blue Spirits then moved for discretionary review of the order denying its motion for summary judgment. A commissioner of this court denied review.

¶ 11 The Board then moved in the trial court to dismiss Blue Spirits's claim under CR 12(b)(6). The court dismissed the complaint without prejudice.

¶ 12 Blue Spirits appeals the trial court's order denying its motion for summary judgment and the order granting the Board's motion to dismiss.

ANALYSIS

I. BLUE SPIRITS'S MOTION FOR SUMMARY JUDGMENT

¶ 13 Blue Spirits argues that because it brought a cognizable claim for a refund, the trial court erred when it denied Blue Spirits's motion for summary judgment. We disagree.

A. Legal Principles

¶ 14 We review de novo a grant or denial of summary judgment, performing the same inquiry as the trial court.

Ruvalcaba v. Kwang Ho Baek , 175 Wash.2d 1, 6, 282 P.3d 1083 (2012). We review the facts and inferences in the light most favorable to the nonmoving party. Ruvalcaba , 175 Wash.2d at 6, 282 P.3d 1083. We review issues of law de novo. Kaplan v. Nw. Mut. Life Ins. Co. , 115 Wash. App. 791, 800, 65 P.3d 16 (2003). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c).

¶ 15 Issues of statutory interpretation are questions of law that we review de novo. Fortgang v. Woodland Park Zoo , 187 Wash.2d 509, 518, 387 P.3d 690 (2017). When interpreting a statute, our purpose is to discern and implement the intent of the legislature. City of Spokane v. County of Spokane , 158 Wash.2d 661, 673, 146 P.3d 893 (2006). When statutory language is plain on its face, we derive legislative intent from the statute's plain language and ordinary meaning. Spokane , 158 Wash.2d at 673, 146 P.3d 893 ; Cent. Puget Sound Reg'l Transit Auth. v. WR-SRI 120th N. LLC , 191 Wash.2d 223, 233-34, 422 P.3d 891 (2018). Our inquiry ends where the language of the statute is plain and unambiguous. HomeStreet, Inc. v. Dep't of Revenue , 166 Wash.2d 444, 451, 210 P.3d 297 (2009).

¶ 16 With limited exceptions, the APA establishes the exclusive means for judicial review of agency action. RCW 34.05.510. "Agency action" is defined as "licensing, the implementation or enforcement of a statute, the adoption or application of an agency rule or order, the imposition of sanctions, or the granting or withholding of benefits." RCW 34.05.010(3). Two exceptions to the APA's rule of exclusivity are at issue here. First, RCW 34.05.510(1) provides that the APA's review procedures "do not apply to litigation in which the sole issue is a claim for money damages or compensation and the agency whose action is at issue does not have statutory authority to determine the claim." RCW 34.05.510(1) (emphasis added). Second, a party need not exhaust any or all administrative remedies upon a showing that the exhaustion of remedies would be futile. RCW 34.05.534(3)(b).

¶ 17 Exhaustion of administrative remedies is required when: "(1) a claim is cognizable in the first instance by an agency alone; (2) the agency has clearly established mechanisms for the resolution of complaints by aggrieved parties; and (3) the administrative remedies can provide the relief sought." Milligan v. Thompson , 90 Wash. App. 586, 596, 953 P.2d 112 (1998). A party is required to exhaust administrative remedies after a final agency order or action. "An agency action is ‘final’ when it ‘imposes an obligation, denies a right, or fixes a legal relationship as a consummation of the administrative process.’ " Wells Fargo Bank, N.A. v. Dep't of Revenue , 166 Wash. App. 342, 356, 271 P.3d 268 (2012) (internal quotation marks omitted) (quoting Bock v. State Bd. of Pilotage Comm'rs , 91 Wash.2d 94, 99, 586 P.2d 1173 (1978) ).

B. Exhaustion of Administrative Remedies

¶ 18 Blue Spirits argues that because this action falls under the exemptions found in RCW 34.05.510(1) and RCW 34.05.534(3), it was not required to bring a claim under the APA to obtain a refund, and therefore, the exhaustion of administrative remedies rule does not apply. First, Blue Spirits argues that it was not subject to APA proceedings—and therefore summary judgment was improper—because "the sole issue is a claim for money damages or compensation and the [Board] does...