Kansas Racing Management, Inc. v. Kansas Racing Com'n

• Decision Date: 27 February 1989
• Docket Number: Nos. 62681,62682,s. 62681
• Citation: 770 P.2d 423,244 Kan. 343
• Parties: KANSAS RACING MANAGEMENT, INC., and Wyandotte County Economic Development Commission, Inc., Appellants, v. KANSAS RACING COMMISSION; Sunflower Racing, Inc.; The Racing Association of Kansas East, Inc.; Kansas Greyhound Racing, Inc.; Greyhound Racing Charities of Kansas, Inc.; Alabama/Kansas, Inc.; and Kansas Racing Charities, Inc., Appellees.
• Court: Kansas Supreme Court

Page 423

770 P.2d 423

244 Kan. 343

KANSAS RACING MANAGEMENT, INC., and Wyandotte County Economic Development Commission, Inc., Appellants, v. KANSAS RACING COMMISSION; Sunflower Racing, Inc.; The Racing Association of Kansas East, Inc.; Kansas Greyhound Racing, Inc.; Greyhound Racing Charities of Kansas, Inc. Alabama/Kansas, Inc.; and Kansas Racing Charities, Inc., Appellees.

Nos. 62681, 62682.

Supreme Court of Kansas.

Feb. 27, 1989.

Syllabus by the Court

1. It is the duty of the court to reconcile different statutory provisions so as to make them consistent, harmonious, and sensible. General and special statutes should be read together and harmonized whenever possible, but to the extent a conflict between them exists, the special statute will prevail, unless it appears the legislature intended to make the general statute controlling.

2. The Kansas Open Records Act, K.S.A. 45-215 et seq., is a general act that allows the courts to order disclosure of a public agency's criminal investigation reports, with certain stated exceptions. The Kansas Parimutuel Racing Act, K.S.A.1988 Supp. 74-8801 et seq., is a specific act that allows the Kansas Racing Commission to disclose the substance of a criminal investigation report it has received for use in determining the qualifications of applicants for licenses.

3. Subject to specified restrictions, disclosure of Kansas Bureau of Investigation investigative reports to racing license applicants is permitted both under K.S.A.1988 Supp. 74-8804(n) and (o ) and under the Kansas Open Records Act, K.S.A. 45-215 et seq. The Kansas Racing Commission may disclose any information contained in the law enforcement agency's report that it determines is in the public interest, if disclosure of that information does not violate the provisions of K.S.A.1988 Supp. 45-221(a)(10)(A)-(E) by (1) interfering with prospective law enforcement action; (2) exposing the identity of a confidential source or undercover agent; (3) revealing a confidential investigative technique or procedure not known by the applicant; or (4) endangering the life or safety of a person.

4. To establish a property interest in a particular benefit, one must have a "legitimate claim of entitlement to it." Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). A person's interest in a benefit becomes a property interest for due process purposes if there are rules or mutually explicit understandings that support the claim of entitlement to the benefit and that the person may invoke at a hearing. Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972).

5. Since the discretion of the Kansas Racing Commission to grant a license to conduct racing activities is unrestricted by K.S.A.1988 Supp. 74-8813, no applicant can claim an entitlement or property interest in acquiring an organization license. The choice of one applicant over another, or the decision not to issue a license to any applicant is fully discretionary and limited only by the arbitrary and capricious standard of K.S.A.1988 Supp. 74-8813(v) and K.S.A.1988 Supp. 74-8815(m).

6. Jurisdiction for the Kansas Racing Commission to review a license after it has been granted is contained in the Kansas Parimutuel Racing Act, specifically K.S.A.1988 Supp. 74-8813(i), which provides that the Commission "may review an organization license more often than annually upon its own initiative or upon the request of any interested party." The legislature intended that the Commission have continuing jurisdiction to review a license if there are claims that the license holder has failed to comply with all the provisions of the law or the Commission's rules and regulations, or has failed to meet the statutory requirements for the issuance of a license.

7. When a change in the law merely affects the remedy or law of procedure, all rights of action will be enforced under the new procedure without regard to whether they accrued before or after such change of law. Nitchals v. Williams, 225 Kan. 285, 291, 590 P.2d 582 (1979).

8. The arbitrary and capricious test relates to whether a particular action should have been taken or is justified, such as the reasonableness of an agency's exercise of discretion in reaching a determination or whether the agency's action is without foundation in fact. Pork Motel, Corp. v. Kansas Dept. of Health & Environment, 234 Kan. 374, 381, 673 P.2d 1126 (1983). Arbitrary or capricious conduct may be shown where an administrative order is not supported by substantial evidence. U.S.D. No. 461 v. Dice, 228 Kan. 40, 50, 612 P.2d 1203 (1980).

9. This court may not try a case de novo or substitute its judgment for that of an administrative agency. In re Certif. of Need App. by Community Psychiatric Centers, Inc., 234 Kan. 802, Syl. p 2, 676 P.2d 107 (1984). A rebuttable presumption of validity attaches to all actions of an administrative agency and the burden of proving arbitrary and capricious conduct lies with the party challenging the agency's actions.

Ronald E. Manka, of Lathrop Koontz & Norquist, of Kansas City, Mo., argued the cause and William G. Howard, Overland Park, was with him on the consolidated briefs for appellant Kansas Racing Management, Inc.

George Maier, Jr., Kansas City, argued the cause and was on the consolidated briefs for appellant The Wyandotte County Economic Development Com'n, Inc.

Janet A. Chubb, Asst. Atty. Gen., argued the cause and Warran D. Wiebe, Asst. Atty. Gen., was with her on the brief for appellee Kansas Racing Com'n.

Daniel B. Denk, of McAnany, Van Cleave & Phillips, P.A., Kansas City, argued the cause and was on the consolidated brief for appellee The Racing Ass'n of Kansas East, Inc.

Robert J. Vancrum, of Gage & Tucker, Overland Park, was on the consolidated brief for appellee Sunflower Racing, Inc.

LOCKETT, Justice:

Appellants, Kansas Racing Management, Inc., (KRM) and The Wyandotte County Economic Development Commission, Inc., (WCEDC) appeal from an administrative adjudication of the Kansas Racing Commission (Commission) awarding conditional licenses to appellees The Racing Association of Kansas East, Inc., (TRAK East) and Sunflower Racing, Inc., (Sunflower) under the Kansas Parimutuel Racing Act (Act), K.S.A.1988 Supp. 74-8801 et seq. Appellants claim: (1) the Commission's refusal to disclose Kansas Bureau of Investigation (KBI) investigative reports to appellants and the Commission's failure to provide appellants an opportunity to present evidence and witnesses regarding those reports violated statutory law and appellants' due process rights under the Kansas and United States Constitutions; (2) the Commission erred in ruling it lacked jurisdiction to consider an alleged conflict of interest involving one of the principals of Sunflower and the Kansas Attorney General; (3) K.S.A.1988 Supp. 74-8813(a) and 74-8815(c) were improperly retroactively applied to require appellants to pay the cost of KBI background investigations; and (4) the Commission's grant of conditional facility owner and facility manager licenses to Sunflower and a conditional organization license to TRAK East was arbitrary, capricious, or an abuse of its discretion. Pursuant to our limited scope of review and after careful consideration of all points raised on appeal, we affirm.

In 1986, the Kansas Constitution was amended to allow the legislature to "permit, regulate, license and tax ... the operation or conduct, by bona fide nonprofit organizations, of horse and dog racing and parimutuel wagering thereon." Kan. Const. art. 15, § 3b. Subsequently, the 1987 legislature enacted the Kansas Parimutuel Racing Act, K.S.A.1987 Supp. 74-8801 et seq., effective May 28, 1987, which governs racing activities in the state. The Act creates the Kansas Racing Commission, whose duties include the granting of organization and facility licenses for horse or greyhound racing.

The Act requires any nonprofit organization desiring to conduct racing to obtain a license from the Commission. In addition to conducting races, the Act allows a nonprofit organization to construct and own the racetrack facility or contract with a person, partnership, corporation, or association, the State of Kansas, or any political subdivision of the state (a nonprofit group) to construct and/or own the racetrack facility for the nonprofit organization to conduct racing.

The Act grants the Commission broad discretion in the grant or denial of organizational licenses. K.S.A.1988 Supp. 74-8813(e) provides that,

"[i]f an application is found to be in compliance [with the provisions of the Act] and the commission finds that the issuance of a license would be within the best interests of horse and greyhound racing within this state from the standpoint of both the public interest and the horse or greyhound industry, as determined solely within the discretion of the commission, the commission may issue an organization license to the applicant." (Emphasis supplied.)

In other words, the Commission is not statutorily required to grant an organizational license even though the applicant is found to be in compliance with statutory requirements.

At the time appellants filed their applications, K.S.A.1987 Supp. 74-8813 and 74-8815 set out the procedure for submission of an application for licensure to the Commission. All applicants were required to pay a nonrefundable $5,000 application fee (K.S.A.1987 Supp. 74-8813[a] and 74-8815[c], and to deposit $500,000 (K.S.A.1987 Supp. 74-8813[b] and 74-8815[d] to be held by the state treasurer and refunded to the applicant, with interest, if no license was awarded.

Acting upon recommendations of the Commission, the 1988 session of the Kansas Legislature made significant changes in the Act. Although the original legislation (K.S.A.1987 Supp. 74-8813[e] and 74-8815[e] required that the denial of an organization or an owners' license by the Commission be in accordance with the Kansas...