Herrick's Aero-Auto-Aqua Repair Service v. State, Dept. of Transp. and Public Facilities, AERO-AUTO-AQUA
| Citation | 754 P.2d 1111 |
| Decision Date | 29 April 1988 |
| Docket Number | AERO-AUTO-AQUA,No. S-1857,S-1857 |
| Parties | HERRICK'SREPAIR SERVICE; Walker's Preflight; American Pacific Aviation; Alaskan Sky-Craft; North Echelon; St. Cloud Aviation; Burl A. Rogers; Ketchum Air Service, Inc.; M.R. Borer Aircraft Services; Aero Twin, Inc.; Sunset Aircraft Services; Northern Aircraft Maintenance; the Hangar Group, Inc., d/b/a Northshore Aviation; and Aircraft Maintenance Unlimited, Appellants, v. STATE of Alaska, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, Appellee. |
| Court | Supreme Court of Alaska (US) |
Robert H. Wagstaff, Anchorage, for appellants.
Gail T. Voightlander, Asst. Atty. Gen., Anchorage, and Grace Berg Schaible, Atty. Gen., Juneau, for appellee.
Before MATTHEWS, C.J., and RABINOWITZ, BURKE, COMPTON and MOORE, JJ.
This case raises questions of equal protection of law between airplane repair businesses who lease land at Anchorage International Airport, who feel they have been unfairly required to meet certain insurance and permitting requirements of the airport, and itinerant mechanics at the airport who are subject to no airport regulations. In their attempt to force the itinerant mechanics to comply with the airport regulations, and as a result incur the same regulatory costs, the lessees allege discriminatory enforcement of the regulations on the part of the airport. The lessees also allege the airport breached its lease agreement with them.
The State of Alaska owns the Anchorage International Airport and operates the facility through its Department of Transportation and Public Facilities (DOT). DOT leases property on the airport grounds to businesses supplying various aircraft and passenger services. The specific services provided by Herrick's Aero-Auto-Aqua Repair Service and the other appellants in this case (hereinafter lessees) are mechanical maintenance and airframe repair. According to provisions in their lease agreements the lessees must provide insurance against public liability for their business activity and indemnify the airport for any damages caused. The lease agreement also restricts the type of business the lessees can pursue on their leaseholds.
Another group of businesspeople also provides mechanical and airframe maintenance services at Anchorage International Airport. These people are mobile or itinerant mechanics who provide services from their vehicles at their customers' tie-downs and slips, 1 and have not obtained the statutorily required permits to conduct business on airport property. DOT knows that these itinerant mechanics are operating at the airport and has taken no action against them.
The lessees argue that these facts give rise to three causes of action. First, lessees allege that equal protection under law guaranteed by the Alaska constitution 2 is denied them by enforcement of 17 AAC 40.040(f) and (h) 3 against them, but not itinerant mechanics. Second, lessees allege that equal protection under law is denied them by the fact that DOT, through discriminatory enforcement of 17 AAC 40.360(20), 4 requires them to provide comprehensive public liability insurance, but does not require itinerant mechanics to provide the same. Finally, lessees allege that DOT's failure to enforce 17 AAC 40.040 is a breach of the lease agreement between them. The lessees claim that, as a consequence of DOT's activity, they have been damaged to the extent of fees and insurance premiums paid and business lost because of their inability to price services competitively with the itinerant mechanics. 5
After lessees filed their complaint, both sides moved for summary judgment on all issues. The trial court granted summary judgment to the lessees on the issue of the permit requirement, ordering DOT to enforce the requirement of 17 AAC 40.040 "to the extent that [DOT] is fiscally capable to enforce the statutes and regulations applicable to their activities consistent with [DOT's] other duties to the public." But the trial court refused to either order the regulations enforced against the itinerants or prohibit enforcement against the lessees. DOT does not appeal the summary judgment against it. However, the lessees do appeal the trial court's refusal to grant the relief requested. The trial court granted summary judgment to DOT on the breach of contract issue and the lessees appeal that ruling also.
A bench trial was held to determine whether the lessees had been denied equal protection under law by the insurance requirements of 17 AAC 40.360(20). The court applied the "rational basis test" articulated by the United States Supreme Court and concluded that the financial impact on DOT of enforcing the law was a sufficient ground to justify requiring only lessees provide insurance coverage.
In reviewing equal protection claims under the Alaska constitution this court uses a " 'uniform-balancing' test which place[s] a greater or lesser burden on the state to justify a classification depending on the importance of the individual right involved." Alaska Pacific Assur. Co. v. Brown, 687 P.2d 264, 269 (Alaska 1984) (citing State v. Erickson, 574 P.2d 1 (Alaska 1978)). See also Wise, Northern Lights--Equal Protection Analysis in Alaska, 3 Alaska L.Rev. 1, 29-35 (1986). The minimum burden the state must meet is the rational basis test described in Isakson v. Rickey, 550 P.2d 359 (Alaska 1976). Brown, 687 P.2d at 269. This rational basis test questions whether the classification is "reasonable, not arbitrary" and rests "upon some ground of difference having a fair and substantial relation to the object of the legislation." Isakson, 550 P.2d at 362. Under this test, we will not "hypothesize facts which will sustain otherwise questionable legislation." 6 Id. Thus, the minimum burden that the state must meet when defending legislation challenged on equal protection grounds under the Alaska constitution is greater than that required under the United States Constitution. The burden on the state increases in proportion to the primacy of the interest involved. Eventually this burden reaches the functional equivalent of the federal compelling state interest test in those cases where fundamental rights and suspect categories are at issue. Brown, 687 P.2d at 269. 7
The case at bar deals with legislation of economic and commercial interest. Such legislation is traditionally subject to the lowest level of scrutiny. See Isakson v. Rickey, 550 P.2d at 363 (). See also Exxon Corp. v. Eagerton, 462 U.S. 176, 195-96, 103 S.Ct. 2296, 2308, 76 L.Ed.2d 497, 513 (1983); Minnesota v. Clover Leaf Creamery Co., 449 U.S. at 461-63, 101 S.Ct. at 722-23, 66 L.Ed.2d at 667-68. As a result of classifying the lessees' economic interest at the low end of this spectrum, DOT need only show that its objectives were legitimate. Brown, 687 P.2d at 269. With regard to the permit requirement of AS 17 AAC 40.040(f) and (h), DOT fails to meet this burden.
First, DOT argues that there was a sufficient showing of financial impact on the state to justify DOT's enforcement policy. However, in Brown we wrote:
Although reducing costs to taxpayers or consumers is a legitimate government goal in one sense, savings will always be achieved by excluding a class of persons from benefits they would otherwise receive. Such economizing is justifiable only when effected through independently legitimate distinctions.
687 P.2d at 272 (footnote omitted). Thus, cost savings alone are not sufficient government objectives under our equal protection analysis.
Second, DOT argues that the regulation is cumbersome to enforce because itinerant mechanics are difficult to identify and there are so many entrances to the airport that airport authorities could not possibly monitor the comings and goings of itinerant mechanics. This argument simplifies to an admission that security at the airport has been poor in the past and as a result DOT cannot be expected to change its policies now to meet constitutional requirements. However, we cannot allow an agency's substandard performance to define constitutional requirements. Nor are regulations to be enforced only where enforcement is convenient.
Finally, DOT argues that 17 AAC 40.070 (Eff. 4/27/79) allows it to make exceptions to the regulations on a showing of "good cause." This argument, however, begs the question of what constitutes "good cause." "Good cause" certainly cannot be defined as a standard in derogation of constitutional requirements, and the constitution requires a rational basis justification. If the actions of DOT fail to meet the rational basis test, then they must also fail to meet the "good cause" test.
Having concluded that DOT has shown no rational basis for discriminating between lessees and itinerant mechanics in its permit requirements, we turn to the question of DOT's insurance requirements. First we must determine whether DOT's construction of the regulation is reasonable. See Rose v. State, Commercial Fisheries Entry Comm'n, 647 P.2d 154, 161 (Alaska 1982) ().
17 AAC 40.360 provides initially:
[T]he words "lease," "lessor" and "lessee" in this section shall be understood to include reference to "permit," "permittor," and "permittee," respectively, where applicable.
The term "where applicable" suggests a factual analysis. Subsection (20) of this section requires "lessees" to provide insurance against comprehensive public liability, products liability, and property damage. 8 The record indicates that itinerant mechanics repair and replace airplane components in public areas on airport property. Thus itinerant mechanics may incur liability identical to that incurred by lessees, the state's potential exposure to liability...
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