Montana Vending, Inc. v. Coca-Cola Bottling Co., 02-106.

• Decision Date: 09 October 2003
• Docket Number: No. 02-106.,02-106.
• Citation: 2003 MT 282,78 P.3d 499,318 Mont. 1
• Parties: MONTANA VENDING, INC., a Montana corporation, Plaintiff, v. The COCA-COLA BOTTLING COMPANY OF MONTANA, a corporation; BCI Coca-Cola Bottling Company of Los Angeles, a corporation; Pepsi-Cola Bottling Company of Great Falls, a corporation; Admiral Beverage Corporation, a corporation; Pepsico, Inc., a corporation; and The Great Falls Public School District, Defendants.
• Court: Montana Supreme Court

78 P.3d 499

2003 MT 282

318 Mont. 1

MONTANA VENDING, INC., a Montana corporation, Plaintiff, v. The COCA-COLA BOTTLING COMPANY OF MONTANA, a corporation; BCI Coca-Cola Bottling Company of Los Angeles, a corporation; Pepsi-Cola Bottling Company of Great Falls, a corporation; Admiral Beverage Corporation, a corporation; Pepsico, Inc., a corporation; and The Great Falls Public School District, Defendants.

No. 02-106.

Supreme Court of Montana.

Argued and Submitted July 18, 2002.

Decided October 9, 2003.

For Plaintiff: Alexander Blewett, III, and Christopher D. Meyer (argued), Hoyt & Blewett, Great Falls, Montana.

William P. Conklin (argued), Conklin, Nybo, Leveque & Lanning, Great Falls, Montana, for Coca-Cola Companies.

Jeanne M. Bender, Kyle A. Gray (argued), and Michelle M. Milhollin, Holland & Hart, Billings, Montana, for Pepsi-Cola and Admiral Beverage.

James R. Walsh and Dennis P. Clarke, Smith, Walsh, Clarke & Gregoire, Great Falls, Montana, for Pepsico.

Charles R. Johnson (argued), Marra, Wenz & Johnson, Great Falls, Montana, for Great Falls Public School District.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Pursuant to Rule 44(c) of the Montana Rules of Appellate Procedure, Judge Sam E. Haddon of the United States District Court for the District of Montana, Great Falls Division, certified two questions to this Court. By order dated March 7, 2002, Judge Haddon recused himself, and Chief Judge Donald W. Molloy of the United States District Court for the District of Montana, Missoula Division, now presides over the case.

¶ 2 The two certified questions presented by the United States District Court are:

¶ 3 (1) Are the Great Falls Public School District's actions of entering into exclusive agreements for the sale of soft drink products in its facilities legislative actions for which a school district is immune from suit under § 2-9-111, MCA (2001)?

¶ 4 (2) Is the Great Falls Public School District subject to suit under the Montana Unfair Trade Practices Act, § 30-14-101, MCA (2001), et. seq., as a "person" engaged as a "business" as defined in the Act?

¶ 5 We answer both these questions in the negative and hold that the Great Falls Public School District is neither immune from suit under § 2-9-111, MCA, for entering into exclusive agreements for the sale of soft drink products, nor a "person" engaged as a "business," as defined in § 30-14-202(2) and (7), MCA, of the Montana Unfair Trade Practices Act (MUTPA).

¶ 6 According to the facts submitted by the United States District Court, the Board of Trustees of the Great Falls Public School District (hereinafter, Board of Trustees and School District) discussed the possibility of an exclusive soft drink contract as a method of enhancing the School District's nontax revenue at a public meeting on January 15, 1999. On July 1, 2000, the Board of Trustees adopted Policy Nos. 7210 and 7332. Policy No. 7210 provides, in pertinent part, that "[t]he District will seek and utilize all available sources of revenue for financing its educational and related programs. This includes revenues from nontax, local, state and federal sources." Policy No. 7332 provides, in relevant part, that "[r]evenue enhancement through a variety of District-wide and District approved marketing activities, including but not limited to advertising, corporate sponsorship, signage, etc., is a Board-approved venture."

¶ 7 In March 2001, the School District entered into "exclusive" agreements with Coke and Pepsi. Under the terms of those agreements, Coke and Pepsi agreed to pay $250,000 each, or $500,000 total, in annual installments of $50,000, to the School District for the exclusive right to provide vending machines and sell soft drink products at the School District's facilities over the next ten years.

¶ 8 Prior to June 2001, Montana Vending, Inc. (Montana Vending), supplied soft drink products and vending machines at the School District for about twenty years. After entering these exclusive contracts with Coke and Pepsi, the School District terminated its relationship with Montana Vending. Soft drink products are now sold exclusively by Coke and Pepsi through vending machines owned by them. The School District does, however, provide electricity to operate the machines, liability insurance for the facilities housing the machines, and custodial services to maintain the facilities housing the machines.

¶ 9 The School District entered into these exclusive agreements with Coke and Pepsi without a public bidding process or public request for proposal. Although Montana Vending was in a position to entertain any proposal made by the School District, it was not afforded an opportunity to participate in or compete for the "exclusive right" to sell soft drink products at the School District's facilities. ¶ 10 On August 28, 2001, Montana Vending brought suit against the Coke and Pepsi companies, among others, in state district court, alleging they had violated Montana's Unfair Trade Practices Act and caused Montana Vending great economic injury.¹ Coke and Pepsi filed a notice to remove the action to federal district court. Montana Vending subsequently dismissed its claim without prejudice and refiled its complaint in state district court, alleging violations of MUTPA and naming the School District as a defendant.

¶ 11 Coke, Pepsi, and the other named defendants again sought to remove the matter to federal district court on the basis that the School District had been fraudulently joined. At a hearing on January 24, 2002, the United States District Court concluded that the two questions of law presented above were of "essentially first impression" and would determine whether that court had jurisdiction. It therefore certified these questions to this Court.

DISCUSSION

¶ 12 Are the Great Falls Public School District's actions of entering into exclusive agreements for the sale of soft drink products in its facilities legislative actions for which a school district is immune from suit under § 2-9-111, MCA (2001)?

¶ 13 As a governmental entity pursuant to § 2-9-111(1)(a), MCA, the School District claims immunity for entering the exclusive contracts with Coke and Pepsi for the sale of soft drink products in its facilities. It argues that the Board of Trustees was acting in a legislative capacity in adopting enabling policies and ultimately authorizing the execution of beverage contracts to fund educational and related programs, and thus should be held immune for its actions.

¶ 14 Section 2-9-111(2), MCA, provides that "a governmental entity is immune from suit for a legislative act or omission by its legislative body, or any member or staff of the legislative body, engaged in legislative acts." A legislative act includes actions by a school board that result in adoption of school board policies pursuant to § 20-3-323(1), MCA; however, it does not include administrative actions undertaken in the execution of a law or policy. Section 2-9-111(1)(c)(i)(C) and (1)(c)(ii), MCA.

¶ 15 In Dagel v. City of Great Falls (1991), 250 Mont. 224, 819 P.2d 186, this Court addressed the statutory requirements of § 2-9-111, MCA, as amended by the Legislature in 1991. We noted that the legislative purpose of the amendment was partly to clarify "that governmental entities are not immune under the legislative immunity statute for nonlegislative actions." Dagel, 250 Mont. at 232, 819 P.2d at 191. In so noting, we concluded that harassment by a supervisor employed by the City of Great Falls resulting in an employee's constructive discharge was clearly not a "legislative act" for which immunity could be claimed. Dagel, 250 Mont. at 233, 819 P.2d at 191.

¶ 16 Following Dagel, this Court had the opportunity to examine whether a teacher was immune from suit under § 2-9-111, MCA, for her allegedly negligent actions of throwing a shot put on a school playground, striking and injuring a student. Hedges v. Swan Lake and Salmon Prairie School District No. 73 (1992), 253 Mont. 188, 832 P.2d 775 (Hedges II). In Hedges II, we concluded there was no immunity for the school district or any member of its staff because there were no actions by the school board which resulted in the adoption of school board policy. Hedges II, 253 Mont. at 195, 832 P.2d at 778. As a result, there was no legislative act as defined in § 2-9-111(1)(c)(i)(C), MCA (1991), and thus, no immunity.

¶ 17 In this case, the School Board adopted Policy Nos. 7210 and 7332 for the purpose of raising revenue from nontax sources. The exclusive agreements with Coke and Pepsi entered into some nine months later was in furtherance of this objective. Although the School District asserts these agreements resulted in the adoption of a school board policy, and therefore, come within the sphere of actions which are immunized by § 2-9-111(2), MCA, it has provided no authority which would compel such a conclusion. Neither does the plain meaning of the immunity statute support the School District's assertion. For purposes of this case, the statute defines legislative actions as those which "result in the creation of law," § 2-9-111(1)(c)(i)(A), MCA, or which "result in the adoption of school board policies," § 2-9-111(1)(c)(i)(C), MCA. Thus, these provisions immunize a legislative body's adoption or enactment of policy in furtherance of its constitutional or statutory duties. Here, the School District is insulated from legal challenge for its decision to enhance nontax revenue by way of commercial engagements, the essence of Policy Nos. 7210 and 7332.

¶ 18 It does not follow from this statutory language, however, that actions taken by a school district to effectuate the policies it has adopted are also immunized. Indeed, § 2-9-111(1)(c)(ii), MCA, clearly states otherwise, providing that "administrative acts undertaken in the execution of a law or public policy" are not immunized. See also Kiely Const. LLC v. City of Red Lodge, 2002 MT 241, ¶ 83, 312 Mont....