Jones v. State, No. 91,389 (KS 4/22/2005), 91,389

• Decision Date: 22 April 2005
• Docket Number: No. 91,389,91,389
• Parties: ANGELA M. JONES, <I>Appellant,</I> v. STATE OF KANSAS, <I>Appellee,</I> and EMPIRE INSURANCE COMPANY, d/b/a/ EMPIRE INDEMNITY COMPANY, <I>Defendant.</I>
• Court: Kansas Supreme Court

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ANGELA M. JONES, Appellant, v. STATE OF KANSAS, Appellee, and EMPIRE INSURANCE COMPANY, d/b/a/ EMPIRE INDEMNITY COMPANY, Defendant.

No. 91,389

Supreme Court of Kansas

Opinion filed: April 22, 2005.

SYLLABUS BY THE COURT

1. When a motion to dismiss has been granted in the district court, an appellate court is required to assume the facts alleged by the plaintiff are true, along with any inferences that can reasonably be drawn from them. The appellate court must then decide whether those facts and inferences state a claim on plaintiff's theory or any other possible theory.

2. The Kansas Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA) applies to all agencies and all proceedings for judicial review and civil enforcement of agency actions not specifically exempted by statute. It establishes the exclusive means of judicial review of agency actions.

3. Only actionable claims that fall outside the authority of an agency to grant can support a court action separate from the KA.

4. In a case involving a breach of contract claim against a state agency, K.S.A. 77-612 permits a person to file a petition for judicial review under the KJRA only after exhausting all administrative remedies available within the agency whose action is being challenged and within any other agency authorized to exercise administrative review.

5. The failure of the Kansas Department of Social and Rehabilitation Services to obtain insurance for foster parents qualifies as an "agency action" under K.S.A. 77-602(b)(3). As such, its judicial review is governed by K.S.A. 77-613(d)(1) and (2).

Review of the judgment of the Court of Appeals in an unpublished opinion filed July 30, 2004. Appeal from Shawnee district court; JAMES M. MACNISH, JR., judge. Judgment of the Court of Appeals affirming the district court is affirmed. Judgment of the district court is affirmed. Opinion filed April 22, 2005.

Carl A. Gallagher, of McAnany, Van Cleave & Phillips, P.A., of Kansas City, argued the cause and was on the briefs for appellant.

Danny J. Baumgartner, litigation attorney, of Kansas Department of Social and Rehabilitation Services, argued the cause, and C. William Ossmann, chief litigation attorney, of Kansas Department of Social and Rehabilitation Services, was with him on the briefs for appellee.

The opinion of the court was delivered by

BEIER, J.:

This appeal concerns exhaustion of remedies under the Kansas Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA), K.S.A. 77-601 et seq.

Plaintiff-appellant Angela Jones brought this declaratory judgment action against the Kansas Department of Social and Rehabilitation Services (SRS), the State of Kansas, and Empire Insurance Company, d/b/a Empire Indemnity Company (Empire) without first attempting to exhaust her administrative remedies. The district court dismissed her claim against the State, and the Court of Appeals affirmed. We granted plaintiff's petition for review. SRS and Empire are not parties to this appeal.

Plaintiff was sexually assaulted by the son of her foster parents, Wes and Linda Kress, in August 1996. State law permits SRS to provide liability insurance for foster parents, see K.S.A. 75-5328a, and plaintiff alleges the Kresses had provided care for plaintiff in reliance upon SRS's agreement to obtain such insurance.

The assault prompted plaintiff to sue the Kresses. During the pendency of that lawsuit, the Kresses and plaintiff learned for the first time that SRS had failed to name the Kresses as insureds on an Empire liability policy. Plaintiff took judgment against the Kresses in the amount of $100,000. The Kresses assigned to plaintiff any breach of oral contract action they would have for the failure to provide insurance coverage. The record on appeal contains no date for the filing of the lawsuit against the Kresses, no date for the entry of plaintiff's judgment against them, and no date for the Kresses' assignment to plaintiff.

Plaintiff filed no administrative claim of any type. Rather, she pursued this independent declaratory judgment action, filing her amended petition on December 19, 2001. She alleged breach of contract against SRS in the first count of her petition and bad faith against Empire in the second count. On the breach of contract claim, plaintiff sought a declaration of the existence and validity of the contract to provide insurance to the Kresses; $100,000 in damages; and interest, costs, and fees. Only plaintiff's claim against the State is before us at this stage of the appeal.

The district court ruled on the State's motion to dismiss that plaintiff had not exhausted her administrative remedies as required by the KJRA. It therefore dismissed the claim against the State for lack of jurisdiction.

The Court of Appeals determined that the KJRA applies to all state agencies unless specifically exempted by statute. Because SRS is not exempt, it agreed with the district court that plaintiff, as the Kresses' assignee, had to exhaust her administrative remedies before seeking court review of her contract claim based on SRS's failure to obtain insurance for the Kresses. Jones v. State, No. 91,389, unpublished opinion filed July 30, 2004.

Before this court, plaintiff argues that the KJRA could not be her exclusive remedy because the State cannot provide the retroactive insurance coverage she seeks. She also argues that no responsibility to exhaust administrative remedies ever arose, because SRS's failure to obtain insurance for the Kresses was a mere oversight, not a deliberate administrative decision that amounted to a final agency action triggering KJRA provisions. She seeks reversal of the district court's decision so that her declaratory judgment action may proceed on its merits. In the alternative, if this court decides that the KJRA is applicable, she seeks a remand instructing SRS to provide her with an official notice of denial of insurance coverage so that she may challenge that denial administratively and then, if necessary, in court.

When a motion to dismiss has been granted in the district court, we are required to assume the facts alleged by the plaintiff are true, along with any inferences that can reasonably be drawn from them. We must then decide whether those facts and inferences state a claim on plaintiff's theory or any other possible theory. See McCormick v. Board of County Comm'rs, 272 Kan. 627, 634, 35 P.3d 815 (2001). If so, the decision of the district court must be reversed.

Plaintiff cites Heiland v. Dunnick, 270 Kan. 663, 19 P.3d 103 (2001), to support her argument that the KJRA is not her exclusive remedy. We observed in Heiland that "[o]nly actionable claims which fall outside the authority of an agency to grant can support a separate action by an aggrieved party," Heiland, 270 Kan. at 668 (quoting Douglass v. Kansas State University, 22 Kan. App. 2d 171, 174, 915 P.2d 782 [1996]), and that judicial review of certain agency actions can be permitted without exhaustion of administrative remedies. See 270 Kan. at 668-69; see also Lindenman v. Umscheid, 255 Kan. 610, 619-20, 875 P.2d 964 (1994) (tort claims for wrongful acts could not be addressed by agency); Wright v. Kansas Water Office, 255 Kan. 990, 992-93, 881 P.2d 567 (1994) (constitutional claim could not be addressed administratively).

These are correct statements of Kansas law, but they do nothing for plaintiff in this case. She is wrong when she characterizes the remedy she seeks as retroactive insurance coverage. The Kresses assigned or attempted to assign plaintiff a breach of contract claim, and the damages from that breach have been set at $100,000. Plaintiff does not seek insurance coverage. She seeks payment of the $100,000. The KJRA was her exclusive avenue into court for a breach of contract action against a state agency. See Schall v. Wichita State University, 269 Kan. 456, 482-83, 7 P.3d 1144 (2000) (KJRA applied to contract action brought by employee against agency employer); Reifschneider v. Kansas State Lottery, 266 Kan. 338, 340-41, 969 P.2d 875 (1998) (plaintiffs could not bring separate contract action against Kansas Lottery when sole remedy was through KJRA); Gaskill v. Fort Hays State Univ., 31 Kan. App. 2d 544, 546, 70 P.3d 693 (2003) (KJRA was professor's exclusive remedy for contract action against state university); Douglass, 22 Kan. App. 2d at 173 (KJRA applied to contract action brought by university professor).

This holding mirrors the pertinent statutory language. K.S.A. 77-606 states: "[T]his act establishes the exclusive means of judicial review of agency action." (Emphasis added.) The definition of "agency action" in K.S.A. 77-602(b)(3) includes an agency's "performance of, or failure to perform, any other duty, function or activity, discretionary or otherwise." Assuming all of plaintiff's facts to be true, as we must, SRS failed to perform its contractual duty to provide insurance coverage to the Kresses. This qualified as an "agency action" under the statutory definition, which draws no distinction between accidental and deliberate agency behavior.

We also agree with the Court of Appeals that SRS is not exempt from coverage of the KJRA. K.S.A. 77-603(a) states: "This act applies to all agencies and all proceedings for judicial review and civil enforcement of agency actions not specifically exempted by statute from the provisions of this act." K.S.A.77-603(c) sets forth specific exemptions, and...