IN THE SUPREME COURT OF THE STATE OF OREGON
OREGON TRUCKINGASSOCIATIONS, INC., an Oregonnonprofit corporation; AAAOREGON/IDAHO, an Oregonnonprofit corporation; OREGON-COLUMBIACHAPTER OF THEASSOCIATION; REDMOND HEAVYHAULING; GORDON WOODINSURANCE & FINANCE;PROPERTY CASUALTY INSURERSASSOCIATION OF AMERICA;NATIONAL ASSOCIATION OFMUTUAL INSURANCECOMPANIES; and OREGONMUTUAL INSURANCECOMPANIES,
Plaintiffs-Respondents,
Petitioners on Review,
v.
DEPARTMENT OFTRANSPORTATION andDEPARTMENT OFADMINISTRATIVE SERVICES,
Defendants-Appellants,Respondents on Review. / Marion County Circuit
Court No. 12c16207
Appellate Court No. A157244
S
PETITION FOR REVIEW
Petitionfor Review of the decision of the Court of Appealson Appeal
from the judgment of theCircuit Court for Marion County
Opinion Filed: November 15, 2017
Author of Opinion: Duncan, J., pro tempore
Concurring Judges: DeVore, P.J., James, J.
PETITIONERS ON REVIEW INTEND TO FILE A BRIEF ON THE MERITS
December 2017
Gregory A. Chaimov, OSB #822180Email:
Davis Wright Tremaine LLP
1300 SW 5th Ave, Ste 2400
Portland, Oregon 97201
Telephone: 503-778-5328
Facsimile: 503-778-5299
Attorneys for Plaintiffs-Respondents, Petitioners on Review / Ellen F. Rosenblum, OSB #753239
Attorney General
Email:
Benjamin Gutman, OSB #160599
Email:
Rolf C. Moan, OSB 924077
Senior Assistant Attorney General
Email:
DOJ Appellate Division
1162 Court St., NE
Salem, OR 97301
Telephone: 503-378-4402
Facsimile: 503-378-6306
Attorney for Defendants-Appellants, Respondents on Review
Roy Pulvers, OSB No. 833570
Email:
Garrett S. Garfield, OSB #093634
Email:
Nellie Q. Barnard, OSB #122775
Email:
HOLLAND & KNIGHT LLP
2300 US Bancorp Tower
111 SW Fifth Avenue
Portland, OR 97204
Telephone: 503-243-2300
Facsimile: 503-241-8014
Louis A. Santiago, OSB No. 783610
SANTIAGO LAW FIRM, LLC
9220 SW Barbur Blvd., Ste 119-284
Portland OR 97219
Telephone: 503-380-5320
Email:
Attorneys for Amicus Curiae NICUSA
4853-0264-5592v.1 0049158-000005
1
TABLE OF CONTENTS
Page
PETITION FOR SUPREME COURT REVIEW
I.HISTORICAL AND PROCEDURAL FACTS RELEVANT TO REVIEW
A.Historical Facts: The Challenged Transaction
B.Procedural Facts: The Proceedings Below
II.LEGAL QUESTIONS PRESENTED AND PROPOSED RULES OF LAW
III.IMPORTANCE OF THE LEGAL QUESTIONS
A.This case presents new and important issues of statutory, common law, and constitutional construction in the context of an important government action
B.This case presents issues overlapping those already pending in this Court
C.This case meets additional criteria for review.
IV.How the Court of Appeals erred
A.The Court of Appeals misread ORS 366.395(1)
B.The executive branch may not self-deal with trust assets
V.CONCLUSION
TABLE OF AUTHORITIES
Page
4853-0264-5592v.1 0049158-000005
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PETITION FOR SUPREME COURT REVIEW
Plaintiffs-Respondents (“Plaintiffs”) petition this Court to review the decision of the Court of Appeals in Oregon Trucking Associations, Inc. v. Department of Transportation, 288 Or App 822, ___ P3d ___ (2017) (“Decision”). A copy of the Decision is attached to this Petition.
- HISTORICAL AND PROCEDURAL FACTS
RELEVANT TO REVIEW
A.Historical Facts: The Challenged Transaction
The Legislative Assembly requires The Department of Transportation (“ODOT”) to maintain records containing information about drivers. ORS 802.200. The Legislative Assembly also requires ODOT to make “personal information”from driver records available for a variety of uses, including to businesses that acquire and distribute the personal information in large volumes. ORS 802.179(13). ODOT fulfilled this obligation by establishing the Real-Time Access to Driver Records program, which provided an electronic government portal for real-time access to the personal information. Chaimov Dec., ¶2, Ex.1.
The Department of Administrative Services (“DAS”) wanted to improve the State’s websites and lit upon sales of personal information in driver records as the source topay for the improvements. DAS obtained the statutory authority to collect a “convenience fee” for “state agencies”providing information through an electronic government portal. ORS 182.132(3)(a). There were, however, two impediments to DAS’s plan to collect a convenience fee for access to the personal information in ODOT’s driver records. First, the Legislative Assemblyhas limited the amount ODOT may charge for providing access to personal information to the “actual cost in making [the] personal information available[.]” ORS 802.183(1). ODOT could not, therefore, fund improvements in websites by collecting a convenience fee or otherwise raising the price of electronic access to personal information.
Second, even if ODOT could charge more than ODOT’s cost for providing access to personal information through an electronic government portal, the revenues from providing access are assets of the Highway Trust Fund and may not be used to improve other agencies’ websites. SeeOp Atty Gen 6329, 1989 WL 439832, p.1 (June 16, 1989) (proceeds from sales of information in records “accrue to the Highway [Trust] Fund and are constitutionally dedicated to highway purposes”).
To circumvent these problems, ODOT and DAS devised a transaction to take the right to provide electronic access to personal information out of the Highway Trust Fund. First, ODOT provided itself the ability to transfer the right toprovide access by declaring the right to be surplus property under ORS366.395(1).[1] ODOT determined that, because ODOT could not profit from the right to provide electronic access, the right was “no longer needed, required or useful for department purposes”:
“Unlike DAS, ODOT has not been authorized by the legislature to charge a “convenience fee” for providing convenient electronic access to services or records; its statutory ability to charge for access to driver records was more limited. Thus, unlike DAS, ODOT was not in a position to profit from the right to provide electronic access on its own.” Declaration of ___ McClellan, ¶29; _____.
Typically, ODOT maximizes the return to the Highway Trust Fund by putting a surplustrust asset up for bid. Obtaining the best possible return for the Highway Trust Fund occurs whether the trust asset is real property, OAR 734-035-0120(1) (ODOT accepts “most advantageous bid”), or personal property, see ORS 279A.280(1)(a) (providing limited list of surplus properties that may be sold without competitive bid).
Instead of putting the right to provide electronic access up for bid, ODOT conveyed the right directly to DAS. ______. Instead of setting a price for the right that would provide the best possible return for the Highway Trust Fund, DAS asked another representative of the executive branch of state government, a professor at Portland State University, to “determine the fair value” for DAS to pay ODOT. ______. The “fair value” the professor determined did not take into account the trust nature of Highway Trust Fund assets. The price determined to be “fair” simply represented the “average price” (weighted for population) charged by other states that provide electronic access to their records. Valuation of Fair Value of DMV Records, p. 17; Correspondence from Tom McClellan to Wally Rogers, May 7, 2013; Chaimov Dec., ¶11, Ex.9.
DAS then transferred the right to provide electronic access to personal information to a private entity that, in return, (1) pays DAS the “fair value” DAS pays over to ODOT, and (2) provides the State with improved websites. ___. The private entity is able to provide the improved websites by charging purchasers the statutorilyauthorized “convenience fee” on top of the “fair value”DAS pays to ODOT. Businesses like Plaintiffs that used to be able to obtain personal information through ODOT’s Real-Time Access to Driver Records program for $2 per record, now pay almost $10 per record. ___.
B.Procedural Facts: The Proceedings Below
Plaintiffs brought this action under the Uniform Declaratory Judgments Act. The trial court decided the case on cross-motions for summary judgment, entering a judgment in favor of Plaintiffs that declared:
1.ODOT lacked the authority to transfer the right to provide electronic access to DAS; and
2.The gain DAS receivesin exchange for the right to provide electronic access is an asset of the Highway Trust Fund. ER-___.
The trial court then stayed the judgment pending appeal. Dkt. __.
The Court of Appeals reversed the trial court’s judgment and remanded the case to the trial court to direct Plaintiffs to bring DAS’s contractor into the case, and then to enter a judgment declaring lawful ODOT’s transfer of the right to provide access and DAS’s use of DAS’s gain for other than trust purposes. 288 Or App at 835.
- LEGAL QUESTIONS PRESENTED AND
PROPOSED RULES OF LAW
First Question Presented:
Does ODOT’s inability to profit from the use of an asset of the Highway Trust Fund permit ODOT to treat the asset as surplus property, i.e.“no longer needed, required for department purposes” under ORS 366.395(1)?
Proposed Rule of Law:
No. The inability to profit from the use of an asset of the Highway Trust Fund does not permit ODOT to treat the asset as “no longer needed, required for department purposes” under ORS 366.395(1).
Second Questions Presented:
Does DAS owe the obligations of a trustee to the beneficiaries of the Highway Trust Fund?
Proposed Rule of Law:
Yes, as a constituent agency of the executive branch, DAS owes the obligations of a trustee to the beneficiaries of the Highway Trust Fund. ODOT’s conveying an asset of the Highway Trust Fund to DAS does not cause DAS to take the asset free of trust obligations.
Third Questions Presented:
What are the terms under which DAS may acquire an asset of the Highway Trust Fund?
Proposed Rule of Law:
DAS may not acquire a Highway Trust Fund asset free of trust obligations because the transaction would constitute a breach of loyalty to the beneficiaries of the Highway Trust Fund. If DAS could acquire a Highway Trust Fund asset, any gain from use of the asset would belong to the Highway Trust Fund.
- IMPORTANCE OF THE LEGAL QUESTIONS
A.This case presents new and important issues of statutory, common law, and constitutional construction in the context of an important government action
This case presents for the first time the issue of the nature of the executive branch of state government and its constituent entities: When the Legislative Assembly declares assets to be held in trust, arethe obligations of a trustee owed solely by a specific agency within the executive branch or by the entire branch? The answer to that question leads to a second issue of first impression: the scope of the State’s authority as trustee of a statutory trust to enter into a self-dealing transaction with the assets of the trust.
The assets of the Highway Trust Fund are “held as a trust,” ORS 366.505(2), with uses dedicated to highway purposes. Or Const Art IX, §3a. ODOT transferred a trust asset to DAS, which then transferred the asset for more than DAS paid ODOT for the asset—a gain DAS kept rather than return to the Highway Trust Fund. This case challenges the lawfulness of the transaction between ODOT and DAS and DAS’s ability to retain the gain DAS obtained from the trust asset.
In broad outlines, this case involves a situation this Court has dealt with before: the State’staking assets from a trust fundto pay forgeneral government services. E.g., Eckles v. State of Oregon, 306 Or 380, ___, 760P2d 846 (1988), appeal dism’d, 490 US 1032, 109 S Ct 1928, 104 L Ed 2d 400(1989) (State unlawfully transferred moneys from trust fund to General Fund).
This case differs from mostprevious cases about statutory trust funds, because, in those previous cases, the action the State took was to change the terms of the trust. Eckles, 306 Or at ___ (statutory change); TillamookCo.v.StateBoardofForestry,302Or404,413-14, 730P2d1214(1986) (statutory change); Arken v. City of Portland, 351 Or 113, ___, 263 P3d 975, adhered to on recons,351 Or 404, 268 P3d 567 (2011) (agency order).[2] Here, the case involves the scope of the obligations the State owes when the State deals with the trust for itself.
Occasionally, an Attorney General has addressed the circumstances under which ODOT may dispose of property as surplus. 35 Op Atty Gen 56 (1970) (donation of park property to federal agency for inclusion in national monument). This Court, however, has never addressed the scope of ODOT’s authority to dispose of Highway Trust Fund assets. ODOT’s power to dispose of Highway Trust Fund assets is important for this Court to address because the Highway Trust Fund is one of the State’s largest collections of trust assets: roughly $2 billion in assets. Annual Financial Report, p. vii (ODOT Dec 31, 2016), Because ODOT disclaims any obligation “to seek to increase the highway fund,” McClellan Dec., ¶29, Dkt. __, all assets in the Highway Trust Fund are at risk of disposal. Thus, there are $2 billion in trust assets at risk of being disposed of as surplus upon ODOT’s determination that ODOT cannot profit from the assets.
No Oregon court has addressed whether, for a statutory trust in general or the Highway Trust Fund in particular,the obligations of a trustee apply to the entire executive branch or just specific agencies within the executive branch. Regardless of whether this Court addresses the broader or narrower issue, the answer will inform the scope of obligations applicable tothe many other statutory trust funds—trust funds as diverse as the Disabilities Trust Fund, the Health Care Trust Fund, the Police Memorial Trust Fund, and the Unemployment Compensation Trust Fund. Whether this Court addresses statutory trust funds under common law trust principles or evaluates the nature of the executive branch under Oregon’s constitution, the result of the analysis will necessarily apply to all other statutory trust funds. If this Court does no more than interpret which agencies the Legislative Assembly designated as trustees of the Highway Trust Fund, the method of analysis will, at a minimum, provide valuable guidance for the analysis of the statutes creating the other trust funds.
Even though the issuesthe Petition raises have not arisen often, a decision on the issues is important to the public. If the transaction stands, ODOT and DAS will have created amodel for any other trustee to transfer assets out of trust to another agency for use for non-trust purposes. Addressing the issues the Petition raises willeliminate the model before another trustee makes us of it.
B.This case presents issues overlapping those already pending in this Court
If granted, Plaintiffs’ Petition would put before this Court a second case on the issue of the nature and scope of the Highway Trust Fund. This Court already has before it AAA Oregon/Idaho Auto Source, LLC v. State of Oregon, Supreme Court Case No. S065394 (petition filed Nov. 3, 2017). That case presents the issue of whether revenues from a particular tax become part of the Highway Trust Fund. By granting Plaintiffs’ Petition, this Court would have before it the opportunity to address both sides of the Highway Trust Fund: the requirements for an asset to enter the Highway Trust Fund and the requirements for an asset to exit the Highway Trust Fund.
C.This case meets additional criteria for review.
The case was decided on summary judgment, so the issues are purely legal, without disputed issues of fact. The legal issues are properly preserved: the trial court did not issue an opinion, but the issues the Petition raises are the issues the Court of Appeals addressed.
The issues cannot be addressed by legislation. As noted on page 7, the Legislative Assembly declined to adopt the law DAS requested; the challenged transaction proceeded anyway. The issues cannot be addressed by rulemaking because the questions raised are statutory and constitutional.
An amicus curiae, the private party with which DAS contracted to obtain the improved websites,appeared in the Court of Appeals. The only factor that might militate against review is the additional issue of the absence in the trial court of DAS’s contractor. Although the agreement between ODOT and DAS expressly disclaimed third-party rights, the Court of Appeals concluded that the private party should have been joined in the action. 282 Or App at ___. Absence from the trial court did not, however, adversely affect the private party’s rights. The Court of Appeals determined that ODOT and DAS, whose interests were aligned with those of the private entity, adequately protected the private party’s rights. As a result, the only action required with respect to the private party, regardless of the outcome of review by this Court, is Plaintiffs’ bringing the private party into the case prior to entry of judgment on remand.
- How the Court of Appeals erred
Two fundamental errors of analysis led the Court of Appeals to the wrong conclusion. The first error was the (apparent) failure to consider the surplus property statute, ORS 366.395(1), in the context of other statutes that govern ODOT’s (and other agencies’) authority to convey assets out of trust. The second error was to relyon a proposition of trust law that no party cited and that, by its terms, does not apply to this case.
A.The Court of Appeals misread ORS 366.395(1)
ORS 366.395(1) authorizes ODOT to “dispose or permit use of *** personal property***which ***is, in the opinion of the department, no longer needed, required or useful for department purposes[.]” Based on this standard, the Court of Appeals ruled ODOT was free to convey out of trust an asset ODOT was using—providing access through an electronic government portal—but from which ODOT could not make a profit. 282 Or App at 831.