Rocco Altobelli, Inc. v. State, Dept. of Commerce

• Decision Date: 22 November 1994
• Docket Number: No. C3-94-1024,C3-94-1024
• Citation: 524 N.W.2d 30
• Parties: ROCCO ALTOBELLI, INC., et al., Petitioners, v. STATE of Minnesota, DEPARTMENT OF COMMERCE, Respondent.
• Court: Minnesota Court of Appeals

Page 30

524 N.W.2d 30

ROCCO ALTOBELLI, INC., et al., Petitioners, v. STATE of Minnesota, DEPARTMENT OF COMMERCE, Respondent.

No. C3-94-1024.

Court of Appeals of Minnesota.

Nov. 22, 1994.

Syllabus by the Court

1. Petitioners did not have standing to invoke this court's original jurisdiction pursuant to Minn.Stat. §§ 14.44 and 14.45 (1992).

2. This court gives great deference to an administrative agency's expertise, especially when the legislature has decided not to overrule an administrative rule which has existed for over thirty years.

3. Administrative convenience is a rational basis to justify the exemption from certain tax payments.

Lawrence R. Commers, Michael R. Gray, Susan M. Swift, Tim A. Staum, Mackall, Crounse & Moore, Minneapolis, for petitioners.

Hubert H. Humphrey, III, Atty. Gen., John Garry, Asst. Atty. Gen., St. Paul, for respondent.

Timothy J. Shields, Shields Legal Services, P.A., Hopkins, amicus curiae, for Independent Cosmetologists and Barbers Assoc.

Considered and decided by HARTEN, P.J., and HUSPENI and DAVIES, JJ.

OPINION

HUSPENI, Judge.

Petitioners seek to invoke this court's original jurisdiction pursuant to Minn.Stat. §§ 14.44 and 14.45 (1992) to challenge the validity of Minnesota Rule 2642.0400, subp. 6 (1986) as promulgated by the Minnesota Department of Commerce. Petitioners claim that the rule is invalid because (1) it exceeds the scope of the enabling statute, and (2) it violates the equal protection clauses of the state and federal constitutions. We declare the rule valid.

FACTS

Minnesota first began to regulate the hair care industry by creating the State Board of Hairdressing and Beauty Culture Examiners (Board) in the 1920's. See St.1927, § 5846-27-s 5846-47, Laws 1927, c. 245, § 21. In 1963, the Board issued the following rule:

Rented boothspaces in a beauty shop. Persons who rent this space as a booth in a beauty shop, must register same in their own name, pay the prescribed fee and be responsible for the booth and hold a manager-operator license.

4 MCAR § 10.040(I) (1978).

In 1981, the Minnesota legislature amended the statutes governing the regulation of the hair care industry and placed the responsibility of regulation with the Office of Consumer Services of the Department of Commerce (DOC). Act of June 1, 1981, ch. 357, §§ 31-48, 115, 1981 Minn.Laws 1990, 2015-26, 2055. ¹ In transferring power from the Board to the DOC, the legislature provided:

Subdivision 1. Authorization. The director, as successor to the board of cosmetology examiners, shall be deemed to be a continuation of the former authority and not a new authority for the purpose of succession to all the rights, powers, duties and obligations of the board of cosmetology examiners * * *

Subd. 2. Effect of rules transferred. All rules heretofore promulgated under the authority of a power, duty, or responsibility transferred * * * to the director shall remain in full force until modified or repealed in accordance with law by the director.

Minn.Stat. § 155A.17 (Supp.1981). The act also provided for the creation of the Minnesota Cosmetology Advisory Council (Council) which was to consist of industry representatives and consumers. Minn.Stat. § 155A.06, subd. 1 (Supp.1981). The act further required the DOC to consult with the Council prior to promulgating any cosmetology rules. Id. at subd. 4.

In 1982, the DOC published its first set of proposed rules. After conducting public hearings in St. Paul, Duluth, and Mankato, the DOC adopted the following rule:

Booth license. A Minnesota licensed cosmetologist or manicurist manager may lease work space from a licensed salon and operate that space as an independent business upon obtaining a booth license. An applicant for a booth license shall meet the following requirements:

A. The applicant shall hold a current Minnesota manager license.

B. The applicant shall provide documentation of leased work space from a licensed Minnesota salon. The work space shall be at least 50 square feet for a cosmetologist or 35 square feet for a manicurist. * * *

C. The applicant shall provide evidence of coverage by professional liability insurance in the amount required for salon licensees. It shall be acceptable for the salon owner's professional liability policy to cover the booth licensee.

D. The applicant shall be responsible for operating his or her work space in full compliance with these rules.

Minn.R. 2640.4100, subp. 7 (1983).

In 1986, the DOC published a set of proposed amendments to the cosmetology rules. Minn.R. 2640.4100, subp. 7 ² was amended to provide:

Independent contractor. A cosmetologist, esthetician, or manicurist, licensed by the state of Minnesota may lease work space from a licensed salon for use as an independent business if the following conditions are met:

A. the lessee shall have a current Minnesota manager's license;

B. the leased work space shall be at least 50 square feet for a cosmetologist or esthetician and 35 square feet for a manicurist;

C. the lessee shall have professional liability insurance in the amount required for salon licenses. It is acceptable for the salon owner's professional liability policy to provide coverage to the lessee;

D. the lessee shall comply with all requirements of this chapter regarding the operation of the leased space as if the space were a salon; and

E. the owner and/or manager of the salon from whom the space is leased must confirm that the lessee is in compliance with the requirements of this subpart prior to entering into the lease and at all times during its term.

Minn.R. 2640.4100, subp. 7 (1985).

In the requisite Statements of Need and Reasonableness (SONAR), the DOC explained the elimination of the booth license requirement as follows:

The requirement for booth licenses is being deleted from the cosmetology rules as unnecessary and a regulatory burden. The objective of the cosmetology rules is to assure that cosmetology and related services are performed in a safe manner and under healthy conditions. * * *

The amendment to this subpart, therefore, is designed to recognize a booth licensee's actual status as an independent contractor and limit the requirements of his or her activities in ways which are designed to protect the health and safety of the practitioner's clients but do not impose unnecessary or new bureaucratic administrative requirements.

SONAR at 7. The amendments received the approval of the Council, as well as industry associations including the Minnesota Hairdressers and Cosmetologist Association. SONAR at 1, 2. The DOC adopted the amended rules, which became effective September 8, 1986. 11 Minn.Reg. 389, 392 (1987). The "independent contractor" rule remains in place at present. Minn.R. 2642.0400, subp. 6 (1993).

ISSUES

1. Do petitioners have standing to invoke this court's jurisdiction under Minn.Stat. §§ 14.44 and 14.45 (1992)?

2. Does Minn.R. 2642.0400, subp. 6 exceed the Department of Commerce's statutory authority?

3. Does the rule violate the equal protection clause of either the Minnesota or the United States Constitution?

ANALYSIS

I.

The legislature has granted this court "original jurisdiction to determine the validity of an agency's rules, including amendments." Minnesota Chamber of Commerce v. Minnesota Pollution Control Agency, 469 N.W.2d 100, 102 (Minn.App.1991) (citing Minn.Stat. § 14.44), pet. for rev. denied (Minn. July 24, 1991). This court has described declaratory judgment actions brought under Minn.Stat. § 14.44 as "pre-enforcement" challenges. Id. Such actions "question[ ] the process by which the rule was made and the rule's general validity before it is enforced against any particular party." Manufactured Housing Institute v. Pettersen, 347 N.W.2d 238, 240 (Minn.1984).

Before this court may address the substance of petitioners' claims, we must determine whether petitioners have standing. See Minnesota Educ. Ass'n v. Minnesota Board of Educ., 499 N.W.2d 846, 849 (Minn.App.1993). This court may consider the validity of a rule only "when it appears that the rule, or its threatened application, interferes with or impairs, or threatens to interfere with or impair the legal rights or privileges of the petitioner." Minn.Stat. § 14.44 (1992); see also Minnesota Educ. Ass'n, 499 N.W.2d at 849.

The Minnesota Supreme Court has explained the standing requirement in a declaratory judgment action as follows:

Complainant must prove his possession of a legal interest or right which is capable of and in need of protection. * * * Although complainant need not necessarily possess a cause of action * * * as a basis for obtaining declaratory relief, nevertheless he must, as a minimum requirement, possess a bona fide legal interest which has been, or * * * is about to be, affected in a prejudicial manner.

State ex rel. Smith v. Haveland, 223 Minn. 89, 92, 25 N.W.2d 474, 477, 174 A.L.R. 544, 547 (1946) (footnote omitted). Petitioners "must have a direct interest in the validity of that [rule] which is different in character from the interest of the citizenry in general." Arens v. Village of Rogers, 240 Minn. 386, 390, 61 N.W.2d 508, 512 (1953), cert. denied, 347 U.S. 949, 74 S.Ct. 680, 98 L.Ed. 1096 (1954). The mere possibility of injury in and of itself is insufficient to confer standing. See Byrd v. Independent School Dist. No. 194, 495 N.W.2d 226, 231 (Minn.App.1993) ("Because IBEW's 'injury' is speculative, we conclude IBEW lacks standing to pursue its claims."), pet. for rev. denied (Minn. Apr. 20, 1993). See also Sierra Club v. Morton, 405 U.S. 727, 738, 92 S.Ct. 1361, 1368, 31 L.Ed.2d 636 (1972) ("[A] mere 'interest in a problem,' no matter how longstanding the interest * * * is not sufficient by itself to render the organization 'adversely affected' or 'aggrieved.' "). Ultimately, "in order to invoke the jurisdiction of the court, [petitioners must] be able to show that the statute is, or is about to be, applied to [their] disadvantage." St. Paul Area Chamber of...