Medcenter One, Inc. v. North Dakota State Bd. of Pharmacy, 960299

• Citation: 561 N.W.2d 634
• Decision Date: 01 April 1997
• Docket Number: No. 960299,960299
• Parties: MEDCENTER ONE, INC., Plaintiff, Appellee and Cross-Appellant, v. NORTH DAKOTA STATE BOARD OF PHARMACY, Defendant, Appellant and Cross-Appellee. Civil
• Court: United States State Supreme Court of North Dakota

Page 634

561 N.W.2d 634

1997 ND 54

MEDCENTER ONE, INC., Plaintiff, Appellee and Cross-Appellant, v. NORTH DAKOTA STATE BOARD OF PHARMACY, Defendant, Appellant

and Cross-Appellee.

Civil No. 960299.

Supreme Court of North Dakota.

April 1, 1997.

Timothy D. Lervick (argued), of Rolfson Schulz Lervick & Geiermann Law Offices, P.C., Bismarck, for plaintiff, appellee, and cross-appellant.

David A. Lindell (argued), Special Assistant Attorney General, and William F. Lindell (appearance), Washburn, for defendant, appellant, and cross-appellee.

MESCHKE, Justice.

¶1 The North Dakota State Board of Pharmacy appealed a summary judgment declaring a pharmacy owned by Medcenter One, Inc., exempt from the pharmacist-ownership requirements of NDCC 43-15-35(5). Medcenter cross-appealed from the trial court's refusal to award Medcenter attorneys' fees under NDCC 28-32-21.1. We hold Medcenter's failure to exhaust administrative remedies does not preclude this declaratory judgment construing the unambiguous language of the statute to exempt Medcenter's pharmacy from the pharmacist-ownership requirements. We also hold Medcenter is not entitled to attorneys' fees. We therefore affirm.

¶2 Since before 1963, Medcenter, a nonprofit corporation, has continuously operated a pharmacy at its hospital under permits renewed annually by the Board. In 1963, the Legislature adopted NDCC 43-15-35(5), which, with two exemptions in a grandfather clause, mandates that a licensed pharmacist own a majority interest in any pharmacy business for it to obtain or renew its annual permits:

The board shall issue a permit to operate a pharmacy, or a renewal permit, upon satisfactory proof of all of the following:

* * * * *

5. The applicant for such permit is qualified to conduct the pharmacy, and is a licensed pharmacist in good standing or is a partnership, each active member of which is a licensed pharmacist in good standing, or a corporation or association, the majority stock in which is owned by licensed pharmacists in good standing, or a limited liability company, the majority membership interests in which is owned by licensed pharmacists in good standing, actively and regularly employed in and responsible for the management, supervision, and operation of such pharmacy.

* * * * *

The provisions of subsection 5 shall not apply to the holder of a permit on July 1, 1963, if otherwise qualified to conduct the pharmacy, provided that any such permit holder who shall discontinue operations under such permit or fail to renew such permit upon expiration shall not thereafter be exempt from the provisions of such subsection as to such discontinued or lapsed permit. The provisions of subsection 5 shall not apply to hospital pharmacies furnishing service only to patients in such hospital.

¶3 After remodeling and reorganization, Medcenter decided to expand its pharmacy at the hospital on January 1, 1996, to make retail sales to the general public. Medcenter notified the Board about the planned expansion of services, and that Medcenter believed its expanded pharmacy would still be exempt from the statutory requirement for majority ownership by licensed pharmacists.

¶4 In September 1995, the Board's legal counsel informed Medcenter that the

exemption for community/retail pharmacies set forth in N.D.C.C. 43-15-35 would [not] be available to Medcenter One Hospital Pharmacy. Before July 1, 1963, there were two type of pharmacy permits for two types of pharmacy practice, one for hospitals serving only patients in that hospital and one for community/retail pharmacies. When N.D.C.C. 43-15-35 was amended effective July 1, 1963, the legislature recognized that distinction in permits and pharmacy practice and codified that distinction by providing that N.D.C.C. 43-15-35 does not apply to hospital pharmacies furnishing service only to patients in such hospital or to community/retail pharmacies holding a permit on July 1, 1963. It is my opinion that Bismarck Hospital Pharmacy was the beneficiary of the hospital exemption since that was the type of pharmacy practice it was engaged in on July 1, 1963. It is my opinion that Medcenter One Pharmacy is not now (32 years later) entitled to an additional exemption for community/retail pharmacies, because it was not engaged in that type of practice on July 1, 1963. On July 1, 1963, Bismarck Hospital held a hospital pharmacy permit and not a community/retail pharmacy permit. In summary, I believe that the proposed pharmacy to be known as "Health Systems Pharmacy" which will include retail sales to persons other than patients of your hospital must comply with N.D.C.C. 43-15-35(5).

* * * * *

If you disagree with my opinion or if you want a formal Board hearing on this matter, please let the Board or I know. Upon the filing of a formal application or other appropriate pleadings, this matter can be scheduled for a formal hearing perhaps at the next meeting of the Board of Pharmacy.

¶5 Instead of seeking administrative remedies, Medcenter sued for declaratory relief, asserting its proposed expansion was exempt from the pharmacist-ownership requirements of NDCC 43-15-35(5). The Board answered that Medcenter's pharmacy was not exempt, and that Medcenter had failed to exhaust its administrative remedies.

¶6 The trial court granted summary judgment to Medcenter, ruling, "[s]ince this case is nothing more than statutory interpretation of an unambiguous statute, the exhaustion [of administrative remedies] doctrine has no application" because it is "the court's primary [role] in statutory construction." The court concluded that the unambiguous language of NDCC 43-15-35 did not differentiate between hospital and retail pharmacy permits and held that Medcenter, as the continuous holder of a permit since before 1963, was exempt from the pharmacist-ownership requirements. The court also denied Medcenter's request for attorneys' fees.

¶7 We review this declaratory judgment under the summary judgment standards of NDRCivP 56. Summary judgment is a procedure for promptly deciding an action without a trial if, after viewing the evidence and possible inferences in the light most favorable to the party opposing the motion, there is no genuine dispute about the material facts or the inferences from the undisputed facts, or if only a question of law is involved. Pear v. Grand Forks Motel Assocs., 553 N.W.2d 774 (N.D.1996). A party resisting summary judgment must present admissible and competent evidence, by affidavit or otherwise, that shows a genuine issue of material fact. Pear. As we explained in Pear, summary judgment is proper when a party fails to raise a factual dispute about an element essential to that party's claim.

¶8 The Board contends the trial court erred in deciding Medcenter was not required to exhaust administrative remedies before suing for declaratory relief. Medcenter responds it was not required to exhaust administrative remedies because the interpretation of an unambiguous statute is purely a question of law.

¶9 The declaratory judgment act, NDCC Ch. 32-23, is remedial and is to be liberally construed to settle uncertainty concerning rights, statuses, and other legal relations. NDCC 32-23-12; In Interest of McMullen, 470 N.W.2d 196 (N.D.1991). Under NDCC 32-23-02, "[a]ny person ... whose rights, status, or other legal relations are affected by a statute ... may have determined any question of construction ... arising under the ... statute ... and may obtain a declaration of rights, status, or other legal relations thereunder."

¶10 We outlined in McMullen, 470 N.W.2d at 198-99, the basic framework from Iverson v. Tweeden, 78 N.D. 132, 48 N.W.2d 367, 370 (1951), for assessing the suitability of declaratory relief:

The requisite precedent facts or conditions which the courts generally hold must exist in order that declaratory relief may be obtained may be summarized as follows: (1) there must exist a justiciable controversy; that is to say, a controversy in which a claim of right is asserted against one who has an interest in contesting it; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy, that is to say, a legally protectible interest; and (4) the issue involved in the controversy must be ripe for judicial determination.

Ripeness is a corollary to exhaustion of administrative remedies, see 2 Am.Jur.2d Administrative Law § 505 (1994), and is the crux of our procedural analysis in this action.

¶11 Before someone may sue for declaratory relief, generally, the exhaustion of administrative remedies is required. E.g., Tooley v. Alm, 515 N.W.2d 137 (N.D.1994). The exhaustion requirement serves the dual objectives of preserving agency authority and promoting judicial efficiency. See 5 Stein, Mitchell, Mezines, Administrative Law § 49.01 (1997). The doctrine preserves agency authority by recognizing the agency's initial decisionmaking responsibility. Id. The requirement for exhaustion is particularly weighty when the agency's decision involves factual issues or administrative expertise. See Medical Arts Clinic, P.C. v. Franciscan Initiatives, Inc., 531 N.W.2d 289 (N.D.1995). The exhaustion prerequisite establishes an efficient method for dispute resolution by giving the agency a chance to correct its mistakes before being sued. Id. If the agency has an opportunity to correct its own errors, a judicial controversy may be mooted or, at a minimum, piecemeal appeals may be avoided. See 5 Stein, Mitchell, Mezines at § 49.01. And, where the dispute is not resolved at the administrative level, the exhaustion of remedies will generally develop a complete record for judicial review, especially in technical or complex factual situations. See Medical Arts. These factors recognize a vital role for exhaustion of administrative remedies in the relationship between the executive and the judicial branches of government.

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