McMahon v. Iowa Dept. of Transp., Motor Vehicle Div.

• Decision Date: 21 September 1994
• Docket Number: No. 93-797,93-797
• Citation: 522 N.W.2d 51
• Parties: Barry Lee McMAHON, Appellee, v. IOWA DEPARTMENT OF TRANSPORTATION, MOTOR VEHICLE DIVISION, Appellant.
• Court: Iowa Supreme Court

Page 51

522 N.W.2d 51

Barry Lee McMAHON, Appellee, v. IOWA DEPARTMENT OF TRANSPORTATION, MOTOR VEHICLE DIVISION, Appellant.

No. 93-797.

Supreme Court of Iowa.

Sept. 21, 1994.

Bonnie J. Campbell, Atty. Gen., David A. Ferree, Sp. Asst. Atty. Gen., and Mark Hunacek, Asst. Atty. Gen., for appellant.

Carter Stevens of Beecher, Rathert, Roberts, Field, Walker & Morris, P.C., Waterloo, for appellee.

Considered by McGIVERIN, C.J., and CARTER, LAVORATO, SNELL and TERNUS, JJ.

SNELL, Justice.

The Iowa Department of Transportation (DOT) appeals from the Black Hawk County District Court's decision to reverse an administrative law court's revocation of Barry Lee McMahon's (McMahon) personalized license plates. The district court held that the DOT's procedure for determining a revocation of personalized license plates when they carry a sexual connotation was arbitrary and capricious. McMahon asserts that the DOT's procedure is violative of equal protection because it distinguishes between offensive plates based on whether they are grounded on a legitimate purpose. On appeal, the DOT argues that its procedure for approving and revoking personalized license plates is reasonable and the equal protection clause grants it broad discretion in pursuing legitimate state interests. We reverse.

I. Factual Background

In 1986, the DOT issued personalized license plates to McMahon which read "3MTA3." When viewed in a mirror, the plates read "EATME." The DOT subsequently received two complaints about the plates, one through the office of the county treasurer and another through the Iowa State Patrol.

On October 24, 1991, the DOT sent a letter to McMahon giving him notice that it had received a complaint about his license plates and asking him to provide a legitimate reason for requesting the character configuration. McMahon informed the DOT that the configuration stood for a Wisconsin company named "3 Men Technical Associate to the 3rd Power." On December 31, 1991, the DOT wrote McMahon another letter informing him that it had determined that the complaint was valid and asking him to voluntarily surrender his plates to the local county treasurer. The DOT noted in this letter that if McMahon was uninterested in acquiring new personalized plates, it would refund the vanity plate fee since the DOT had erred originally in issuing the plates.

On February 7, 1992, the DOT sent McMahon an official notice revoking his registration certificate and license plates because it had determined the plates were offensive. McMahon requested an administrative hearing. The administrative law judge held in McMahon's favor on the ground that the DOT's reason for revoking the license, as embodied in the February 7 notice, was too vague.

On May 21, 1992, the DOT sent McMahon another official notice which revoked the plates because, when viewed in a mirror, the plate's characters conveyed a message with a sexual connotation. Specifically, the DOT quoted from a slang dictionary defining the phrase in explicit and offensive sexual terms. See Johnathan Green, Dictionary of Contemporary Slang (1985).

After a second administrative hearing, requested by McMahon and held on July 28, 1992, the administrative law judge held in the DOT's favor. The judge found that the plates had a sexual connotation and therefore revocation of the plates was proper. This decision was affirmed on administrative appeal.

McMahon subsequently petitioned for judicial review. While this petition was pending, McMahon filed two documents entitled "Request for Admissions" and "Application to Present Additional Evidence." By these two documents, McMahon sought to present evidence that the DOT had previously issued license plates reading "LICKHER" and "3MTA30."

The DOT responded to McMahon's requests by asserting that the law does not provide litigants with a right of discovery in judicial review actions and does not allow courts to consider evidence other than that in the administrative record. However, subject to objection and in the interests of expediting the matter, the DOT admitted the issuance of the named license plates.

Upon judicial review, the district court referred specifically to the additional evidence McMahon presented in his post-administrative adjudication documents, and held in his favor. The court held that the method the DOT employs to determine whether to revoke a license is arbitrary and unreasonable since the DOT may fail to revoke an offensive license plate if it has a legitimate alternative meaning.

II. Standard of Review

When a party appeals a district court review of an agency ruling, we will not disturb the agency's findings of fact if substantial evidence supports them. Iowa Code § 17A.19(8)(f) (1993); Ginsberg v. Iowa Dep't of Transp., 508 N.W.2d 663, 664 (Iowa 1993). "Evidence is substantial when a reasonable mind could accept it as adequate to reach the same findings [as the agency]." Freeland v. Employment Appeal Bd., 492 N.W.2d 193, 196 (Iowa 1992). In addition, we review the district court's legal determinations for misapplication of the law. Freeland, 492 N.W.2d at 196; Henry v. Iowa Dep't of Transp., 426 N.W.2d 383, 385 (Iowa 1988). The district court itself acts in an appellate capacity to review agency determinations for legal error and we apply the standards of section 17A.19(8) to determine whether we agree with the court's conclusions. Henry, 426 N.W.2d at 385.

III. Facts Outside Administrative Record

The DOT argues that the district court's reliance on evidence which the administrative law judge did not consider was error since statutes and case law mandate that the court act in an appellate capacity when reviewing agency decisions. McMahon argues that even though it was improper for the district court to consider the additional evidence, a remand back to the agency would have wasted time since the additional evidence would not have changed the administrative law judge's decision.

It was clearly improper for the district court to consider the additional evidence. Iowa Code section 17A.19(7) (1993) provides for two different district court treatments of evidence the parties wish to present for the first time after an agency has entered a final decision. If the case involves judicial review of agency action in a "contested case," "a court shall not itself hear any further evidence with respect to those issues of fact whose determination was entrusted by ... statute to the agency in that contested case proceeding." Id. In such cases, the law limits court review to the agency's record. Heartland Lysine v. Department of Revenue and Fin., 503 N.W.2d 587, 588 (Iowa 1993); Mary v. Iowa Dep't of Transp., 382 N.W.2d 128, 131 (Iowa 1986); Maschino v. Geo. A. Hormel & Co., 372 N.W.2d 256, 258 (Iowa 1985). If the case involves judicial review of "other agency action," the reviewing court may consider "such evidence as it deems appropriate." Iowa Code § 17A.19(7); Krause v. State ex rel. Iowa Dep't of Human Servs., 426 N.W.2d 161, 165 (Iowa 1988).

A "contested case" is "a proceeding in which 'the legal rights, duties or privileges of a party are required by ... statute to be determined by an agency after an opportunity for an evidentiary hearing.' " Purethane, Inc. v. Iowa State Bd. of Tax Review, 498 N.W.2d 706, 708 (Iowa 1993) (quoting Iowa Code § 17A.2(2)). In cases involving revocation of an individual's license plates, a permitee is entitled to an evidentiary hearing in which an administrative law judge sits as finder of fact and renders a determination regarding the person's legal rights. See 761 Iowa Admin.Code 400.56(321) (1994). Therefore, the case at issue is a "contested case" within the definition of Iowa Code chapter 17A.

Section 17A.19 provides a specific mechanism for the admission of additional evidence following a final agency determination. The section requires a party to apply to the district court for admittance of such evidence before the date set for consideration of the party's petition for judicial review. Iowa Code § 17A.19(7). If the court determines that the additional evidence is material and the party had good reason for failing to present the evidence before the agency, section 17A.19(7) requires the court to remand the matter to the agency for a new determination. Id.

This statutory mandate does not allow a reviewing court itself to consider evidence the parties failed to present before the agency when the matter is a "contested case." The district court acted improperly in considering this additional evidence. Although the court erred, we do not need to remand this matter to the district court for further proceedings. Mary, 382 N.W.2d at 131. Instead, we will review the agency action as the district court should have pursuant to sections 17A.19(7) and (8). Mary, 382 N.W.2d at 131.

In response to McMahon's request for admission of the additional evidence, we find that the existence of license plates reading "LICKHER" and "3MTA30" is not material to a determination of this matter. See Iowa Code § 17A.19(7); Avery v. Peterson, 243 N.W.2d 630, 634 (Iowa 1976). Moreover, no showing was made to justify the failure to present this evidence at the agency hearing. See Hollensbe v. Iowa Dep't of Job Service, 418 N.W.2d 77, 80 (Iowa App.1987). Therefore, remand to the agency is not necessary.

IV. DOT Revocation Policy and Procedure

Iowa Code section 321.34(5) provides the statutory authority for the issuance of personalized license plates. The DOT rules governing special registration plates are located at 761 Iowa Admin.Code 400.41 (1994). Rule 400.41(2)(d)(5) provides:

No combination of characters shall be issued which is sexual in connotation; defined in dictionaries as a term of vulgarity, contempt, prejudice, hostility, insult, or racial or ethnic degradation; recognized as a swear word; considered to be offensive; or a foreign word falling in any of these categories.

Rule 400.41(7) provides that "[s]pecial...