Northwest Airlines v. MET. AIRPORTS

• Decision Date: 16 December 2003
• Docket Number: No. A03-494.,A03-494.
• Citation: 672 N.W.2d 379
• Parties: NORTHWEST AIRLINES, INC., Appellant, v. METROPOLITAN AIRPORTS COMMISSION, Respondent.
• Court: Minnesota Court of Appeals

672 N.W.2d 379

NORTHWEST AIRLINES, INC., Appellant, v. METROPOLITAN AIRPORTS COMMISSION, Respondent.

No. A03-494.

Court of Appeals of Minnesota.

December 16, 2003.

Thomas Tinkham, Daniel J. Brown, John Rock, Dorsey & Whitney, LLP, 50

South Sixth Street, Suite 1500, Minneapolis, MN 55402 (for appellant)

Edward M. Laine, Connie A. Lahn, Bray M. Dohrwardt, Oppenheimer Wolff & Donnelly, LLP, 3300 Plaza VII, 45 South Seventh Street, Minneapolis, MN 55402 (for respondent)

Considered and decided by Randall, Presiding Judge, Minge, Judge, and Poritsky, Judge.¹

OPINION

RANDALL, Judge.

Appellant contests the district court's dismissal of its declaratory judgment action, in which appellant sought a determination that Ordinance 87, enacted and enforced by respondent, violated Minn.Stat. § 473.651 (2002) and is beyond respondent's authority under Minn.Stat. § 473.651. Appellant argues that it is challenging the validity of a legislative act, and thus the doctrine of exhaustion does not apply and the district court is not deprived of subject matter jurisdiction. We affirm.

FACTS

In 1943, the Minnesota Legislature created the Metropolitan Airports Commission (respondent) to promote safe and efficient air travel throughout the state of Minnesota. 1943 Minn. Laws ch. 500, § 1. Respondent owns and operates the Minneapolis-St. Paul International Airport (MSP) as well as a system of six reliever airports in the Minneapolis-St. Paul metropolitan area. The reliever airports generally serve smaller corporate and private aircraft. They are designated as "reliever airports" because they relieve traffic and congestion from MSP, which is dedicated primarily to commercial airline operators such as Northwest Airlines (appellant).

Pursuant to Minn.Stat. § 473.651 (2002), respondent is specifically empowered to determine the charges for tenants at the airports that it operates. Under Minn. Stat. § 473.608, subd. 13(b) (2002), respondent can use funds received from any source to pay the costs of operating, maintaining, and improving any of the properties. Additionally, respondent has the power to adopt ordinances pursuant to Minn.Stat. § 473.608, subd. 17 (2002).

Due to a growing disparity between reliever airports' revenues and expenses, respondent's Board of Commissioners adopted Ordinance 87 on September 21, 1998. This ordinance established rates at reliever airports for tenants who have signed leases that contain "rental adjustment" clauses that allow respondent to amend rent unilaterally. The ordinance imposed a yearly rent increase for the approximately 800 reliever-airport tenants who have the "rental adjustment" provisions in their leases. In 2007, the yearly rent increases cease, and the rents are adjusted according to the Consumer Price Index for the Minneapolis-St. Paul area. In determining the rates for Ordinance 87, respondent sought input from many sources, including appellant and other MSP tenants. Appellant chose not to participate in the hearings.

Ordinance 87 became effective on January 1, 1999. By October 2002, appellant began to express its dissatisfaction with the level of subsidization received by the reliever airports. Appellant complained that since the inception of Ordinance 87, the reliever airports have been operated each year at multi-million dollar deficits. Because rates charged to reliever-airport tenants do not cover the total operating costs of the reliever airports, revenues arising out of MSP operations are used to subsidize the costs of operating the reliever airports. Thus, appellant claimed that this deficiency results in tenants and users at MSP paying much higher rents and fees to subsidize operations of reliever airports.

To correct the situation, appellant sought a declaration in district court that Ordinance 87 is invalid because it does not comply with Minn.Stat. § 473.651. This statute requires that rental rates must be "established with due regard to the value of the property and improvements used and the expense of operation to the corporation." Appellant argued that it is in direct competition with reliever-airport tenants, and that subsidization of reliever airports puts appellant at a "competitive disadvantage." The district court determined that appellant did not exhaust the administrative remedy provided by Minn. Stat. § 473.608, subd. 17(6), and thus the court dismissed the case for lack of subject matter jurisdiction. This appeal followed.

ISSUE

Did the district court commit reversible error by dismissing appellant's case for lack of subject matter jurisdiction because appellant did not exhaust its administrative remedies?

ANALYSIS

Appellant argues that because it is challenging the validity of a legislative act, the doctrine of exhaustion does not apply and the district court is not deprived of subject matter jurisdiction. Whether subject matter jurisdiction exists is a question of law that this court reviews de novo. Kellar v. Von Holtum, 605 N.W.2d 696, 700 (Minn.2000).

The Uniform Declaratory Judgment Act provides that

Any person interested under a deed, will, written contract or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.

Minn.Stat. 555.02 (2002). A justiciable controversy must exist before the courts have jurisdiction to render a declaratory judgment. St. Paul Area Chamber of Commerce v. Marzitelli, 258 N.W.2d 585, 587 (Minn.1977). A justiciable controversy exists when there is a genuine conflict in the tangible interests of opposing litigants. Leffler v. Leffler, 602 N.W.2d 420, 422 (Minn.App.1999) (quotation omitted).

Respondent does not challenge appellant's claim that there is a justiciable controversy. In fact, respondent concedes that appellant may have a cause of action. What respondent argues is that a declaratory judgment action now is not the appropriate cause of action, and that the cause in controversy can be pursued by appellant only after the proper administrative remedy has been exhausted.

Courts generally require that before judicial review of administrative proceedings will be permitted, the appropriate channels of administrative appeal must be followed. City of Richfield v. Local No. 1215, Intl. Assn. of Fire Fighters, 276 N.W.2d 42, 51 (Minn.1979); Stephens v. Bd. of Regents of Univ. of Minn., 614 N.W.2d 764, 774 (Minn.App.2000),review denied (Minn. Sept. 26, 2000). Courts require exhaustion of administrative remedies to protect the autonomy of administrative agencies and to promote judicial efficiency. Zaluckyj v. Rice Creek Watershed Dist., 639 N.W.2d 70, 75 (Minn.App. 2002) review denied (Minn. Apr. 16, 2002). The record produced during the administrative process facilitates judicial review and may also reduce the need to resort to judicial review. Id. But, exhaustion of administrative remedies need not be pursued if it would be futile to do so. McShane v. City of Faribault, 292 N.W.2d 253, 256 (Minn.1980).

Here, respondent argues that appellant has an administrative remedy under Minn.Stat. 473.608, subd. 17(6) (2002). This statute states:

Any person substantially interested or affected in rights as to person or property by a rule, regulation or ordinance adopted by the corporation (respondent), may petition the corporation for reconsideration, amendment, modification, or waiver of it. The petition shall set forth a clear statement of the facts and grounds upon which it is based. The corporation shall grant the petitioner a public hearing within 30 days after the filing of the petition.

Minn.Stat. 473.608, subd. 17(6). Because appellant filed a declaratory judgment action rather than filing a petition to commence its available administrative remedy under this statute, the essence of the appeal is that, given the concurrent applicability of Minn.Stat. 473.608, subd. 17(6), and Minn.Stat. 555.02, should the principal of exhaustion of remedies be applied to this litigation?

Appellant argues that even though Minn.Stat. § 473.608, subd. 17(6), provides an administrative remedy, appellant is not required to exhaust its administrative remedies because the statute is permissive rather than mandatory. The statute states that "[A]ny person substantially interested or affected in rights as to person or property by a rule, regulation or ordinance adopted by the corporation (respondent), may petition the corporation...." Minn.Stat. § 473.608, subd. 17(6) (emphasis added). Appellant argues that "may" is permissive and "shall" is mandatory, and thus the exhaustion of administrative remedies is not required under the statute.

Case law supports the district court's ruling that Minn.Stat. § 473.608, subd. 17(6) is mandatory rather than permissive. In Counties of Blue Earth v. Minn. Dept. of Labor Indus., 489 N.W.2d 265 (Minn. App.1992), the Prevailing Wage Statute provided that "[A] person aggrieved by a decision of the commissioner after reconsideration may within 20 days after the decision petition the commissioner for a public hearing as in a contested case under sections 14.57 to 14.61." Minn.Stat. § 177.44, subd. 4 (1990). The court in Counties of Blue Earth held that under this statute, the counties were required to exhaust their administrative remedies before bringing an action to enjoin enforcement of the prevailing wage rate. Counties of Blue Earth, 489 N.W.2d at 268.

The statute in Zaluckyj, also contains language similar to Minn.Stat. § 473.608, subd. 17(6). The statute at issue in Zaluckyj stated that "[A]n individual or an entity interested in or affected by a drainage system may file a petition to repair the drainage system." Minn.Stat. § 103E.715, subd. 1 (2000). Zaluckyj, 639 N.W.2d at 75. Although the...