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COURT OF APPEALS DECISION DATED AND RELEASED October 25, 1995 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and Rule
809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-2390
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT II
SUBURBAN LABORATORIES
OF WISCONSIN, INC.,
Plaintiff-Respondent,
v.
WISCONSIN DEPARTMENT
OF NATURAL RESOURCES,
Defendant-Appellant.
APPEAL from orders of
the circuit court for Waukesha County:
ROGER P. MURPHY, Judge. Affirmed.
Before Anderson, P.J.,
Nettesheim and Snyder, JJ.
NETTESHEIM, J We
previously granted the Department of Natural Resources' (DNR) petition for
leave to appeal certain nonfinal orders favorable to Suburban Laboratories of
Wisconsin, Inc. (Suburban-Wisconsin).
The challenged orders: (1)
denied the DNR's motion to dismiss the action, (2) granted Suburban-Wisconsin a
temporary injunction preventing the DNR from ordering the resampling of certain
prior tests performed by Suburban-Wisconsin and from sending letters to
Suburban-Wisconsin's customers questioning the accuracy of the test results,
and (3) denied the DNR's motions for reconsideration.
On appeal, the DNR contends
that the exhaustion of administrative remedies doctrine precludes
Suburban-Wisconsin's action because a contested case hearing is presently
pending on the administrative level.
Alternatively, the DNR contends that the action should be dismissed because: (1) Suburban-Wisconsin failed to join
necessary parties, and (2) the circuit court misused its discretion in issuing
the temporary injunction. We reject the
DNR's arguments. We affirm the nonfinal
orders.
Background
Suburban-Wisconsin is an
analytical laboratory certified under the Wisconsin Laboratory Certification
Program, Wis. Adm. Code ch. NR 149, to perform chemical tests on
soil and ground water samples submitted from leaking underground storage tank
(LUST) sites. Suburban Laboratories,
Inc. is a separate analytical laboratory located in Hillside, Illinois
(Suburban-Illinois). While
Suburban-Wisconsin and Suburban-Illinois share some common officers, the two
are separate corporate entities and operate two distinct laboratories.
In 1993, the DNR
received test results produced by Suburban-Illinois from a LUST site in
Milwaukee. The DNR interpreted this
data as producing inconsistent results, reading some of the data to say that
the site was still contaminated and other data to say that the site was
clean. As a result, the DNR was
concerned that Suburban-Illinois had used analytical methods which did not
comply with the Wisconsin Administrative Code.
Following its review of
the Suburban-Illinois data, the DNR issued Suburban-Illinois a notice of
noncompliance on March 29, 1994. This
notice stated that the data did not comply with Wis. Adm. Code ch. NR 149.
Apparently considering Suburban-Illinois and Suburban-Wisconsin as a
single entity, or otherwise believing that the deficiencies in
Suburban-Illinois' testing procedures were also present in Suburban-Wisconsin's
procedures, the DNR also began writing letters to certain of
Suburban-Wisconsin's customers whose site assessments were then under
evaluation by the DNR. These letters
variously advised the customers that “Suburban Laboratory” was in
noncompliance, that the DNR was temporarily deferring action regarding the
data, and that if the customer wished to resample using a different laboratory,
the DNR would consider the new data for review.
Thereafter, during late
May 1994, the DNR performed laboratory audits at both the Suburban-Wisconsin
and Suburban-Illinois facilities. As a
result, the DNR sent Suburban-Illinois a letter dated May 31, 1994, stating that
the audits revealed that the data produced was inaccurate. The letter indicated that, in the future,
the DNR would accept only those samples reported as “contaminated” and would
reject those samples reported as “clean.”
On July 14, 1994, both
Suburban-Wisconsin and Suburban-Illinois petitioned the DNR for a contested
case hearing as to the validity of the DNR's actions. On August 3, 1994, the DNR granted the petition. That matter is presently pending before the
DNR.
In addition, on August
8, 1994, Suburban-Wisconsin brought the instant action challenging the DNR's
actions on a variety of grounds.[1] Suburban-Wisconsin sought a declaratory
judgment regarding the validity of the DNR's actions and a temporary and
permanent injunction barring the DNR from ordering resampling of
Suburban-Wisconsin's laboratory samples previously submitted and from sending
further letters to Suburban-Wisconsin's customers questioning the integrity of
its laboratory and testing results.
At the hearing on the
temporary injunction, the DNR moved to dismiss the action, contending that
Suburban-Wisconsin had failed to exhaust its administrative remedies and to
join necessary parties. At the
conclusion of the hearing, the trial court denied the DNR's motion to dismiss
and granted Suburban-Wisconsin a temporary injunction pending completion of the
administrative proceedings. The trial
court later denied the DNR's motions for reconsideration.
The DNR appeals. Additional facts will be recited as we
address the appellate issues.
Discussion
1. Temporary Injunction/Exhaustion
of Administrative Remedies
The DNR first argues
that Suburban-Wisconsin failed to exhaust its administrative remedies because
the contested case proceeding before the DNR has not been completed. Thus, the DNR contends that the trial court
was without jurisdiction in this case.
The exhaustion of
administrative remedies is a doctrine of judicial restraint which provides that
judicial relief will be denied until the parties have completed the
administrative proceedings. Nodell
Inv. Corp. v. City of Glendale, 78 Wis.2d 416, 424, 254 N.W.2d 310, 315
(1977). The basic premise of the
exhaustion rule is that the administrative remedy is available relatively
rapidly on a party's initiative and will protect the party's claim of
right. Id. However, there are numerous exceptions to
the rule. See id.
at 424-25, 254 N.W.2d at 316. Courts
may assume jurisdiction of a case notwithstanding a party's failure to exhaust
its administrative remedies where the reasons supporting the requirement are
lacking. Id. at 425-26,
254 N.W.2d at 316.[2]
The reasons a trial
court might excuse the exhaustion requirement are the following:
(1) The
agency has no jurisdiction to act in the matter.
(2) The
administrative action is fatally void.
(3) A
question of law is involved in which the administrative agency's expertise is
not an important factor.
(4) A
substantial constitutional question is involved.
(5) The
administrative remedy is inadequate to avoid irreparable harm.
(6) Recourse to the administrative rule would be a
futile or useless act.
Id. at
425 n.12, 254 N.W.2d at 316.
We now consider whether
any of these exceptions applied in this case.
However, we will answer this question by addressing another issue which
the DNR raises: whether the trial court
misused its discretion in choosing to issue the temporary injunction. We address these issues in a single
discussion because one of the relevant factors on both issues was whether
Suburban-Wisconsin would suffer irreparable harm if the injunction was not
issued. If so, the issuance of a
temporary injunction would be appropriate, and, at the same time, one of the
recognized exceptions to the exhaustion doctrine would have been established.
The decision to grant or
deny a temporary injunction is a discretionary determination for the trial
court. Spheeris Sporting Goods,
Inc. v. Spheeris on Capitol, 157 Wis.2d 298, 305-06, 459 N.W.2d 581,
585 (Ct. App. 1990). The party seeking
the temporary injunction must demonstrate a reasonable probability of success
on the merits, an inadequate remedy at law and irreparable harm. Id. at 306, 459 N.W.2d at 585;
see § 813.02, Stats.[3] This case focuses on the irreparable harm
factor. The requirement of irreparable
harm is met by a showing that without the temporary injunction to preserve the
status quo, the permanent injunction sought would be rendered futile. Werner v. A.L. Grootemaat & Sons,
Inc., 80 Wis.2d 513, 520, 259 N.W.2d 310, 314 (1977).
A trial court
determination whether to apply the exhaustion of administrative remedies
doctrine is also discretionary. See
Town of Menasha v. B & B Race Car Eng'g, 172 Wis.2d 419, 424,
493 N.W.2d 250, 252 (Ct. App. 1992).
A trial court misuses
its discretion when it fails to make a record of the factors relevant to this
determination, fails to consider the proper factors or clearly gives too much
weight to one factor. Spheeris,
157 Wis.2d at 306, 459 N.W.2d at 585.
In this case, we conclude that the trial court did not misuse its
discretion in refusing to adhere to the exhaustion doctrine and in choosing to
grant the temporary injunction.
The parties did not offer
formal evidence at the temporary injunction hearing. Instead, Suburban-Wisconsin stood on its pleadings, an affidavit
of one of its officers and its brief, which included additional factual
backdrop to the injunction request.
Although the DNR opposed the temporary injunction request, it had not as
of the time of the hearing filed any responsive pleading. Nor did the DNR present any
counter-affidavits or dispute the factual backdrop to the case as set out in
Suburban-Wisconsin's brief. Instead,
the DNR argued that the trial court should dismiss the action because
Suburban-Wisconsin had failed to exhaust its administrative remedies and
because Suburban-Wisconsin had failed to join certain necessary parties.
We summarize the
information which Suburban-Wisconsin provided to the trial court in support of
its motion for temporary injunction.
The DNR had begun contacting Suburban-Wisconsin's customers questioning
the validity of the test results before it had even audited the
Suburban-Wisconsin laboratory. In
addition to questioning the integrity of Suburban-Wisconsin's laboratory
procedures, the letters suggested that Suburban-Wisconsin's customers might
want to consider taking their business elsewhere. The DNR's later sampling of Suburban-Wisconsin's data involved
less than .1% of the laboratory's projects, while the DNR's resampling order
would affect thousands of LUST sites requiring the expenditure of millions of
dollars. Finally, despite its actions,
the DNR had not decertified the Suburban-Wisconsin laboratory.
Based on these facts,
Suburban-Wisconsin argued that the continuation of the DNR's actions could
potentially ruin Suburban-Wisconsin's business before the contested case or
judicial proceedings were completed.
The trial court agreed and issued the temporary injunction.
Given the economic peril
to Suburban-Wisconsin, we see no misuse of discretion by the trial court in
choosing to issue the temporary injunction.
Such judicial intervention appeared necessary to maintain the status quo
and to prevent irreparable harm to Suburban-Wisconsin. The temporary injunction avoided the
prospect of Suburban-Wisconsin's unnecessary economic collapse in the event of
a favorable ruling in the contested case hearing. The injunction also served to make the future judicial review of
the DNR's actions more meaningful. See
Aqua-Tech, Inc. v. Como Lake Protection & Rehabilitation Dist.,
71 Wis.2d 541, 552, 239 N.W.2d 25, 31 (1975).
Without the temporary injunction, any eventual success by
Suburban-Wisconsin in the ultimate trial of this case would likely have been a
Pyrrhic victory.
The DNR also argues that
the temporary injunction was unnecessary.
It bases this argument on its representation to the trial court that it
had decided to take a different approach to the problem which it had not
previously proposed to Suburban-Wisconsin.
Under this approach, the DNR stated that it would await the completion
of the contested case hearing before making any further decisions on
site-closure requests by Suburban-Wisconsin's customers based on tests obtained
before May 31, 1994.[4] In addition, the DNR stated that it would
no longer initiate contact with Suburban-Wisconsin's customers. Thus, the DNR argued that the temporary
injunction was unnecessary.
We see no misuse of
discretion by the trial court's issuance of the temporary injunction despite
the DNR's promises. Obviously, the
trial court was not obligated to accept the DNR's promises to cease and desist
from the offending conduct. We conclude
that the DNR's promises augured more for the injunction than against it.
We conclude that the
trial court properly exercised its discretion in not applying the exhaustion of
administrative remedies doctrine and in choosing to issue the temporary
injunction.
The DNR also raises
objections to the manner in which the trial court conducted the temporary
injunction hearing. Specifically, the
DNR contends that the trial court failed to take evidence, hear arguments or
make findings of fact and conclusions of law, and applied the wrong legal standards
when issuing the injunction.
As to the procedural
aspects of these arguments, we deem them waived. As we have already noted, the DNR never objected to the manner in
which the trial court conducted the hearing or received the relevant factual
information. Instead, as we have noted,
the DNR chose instead to defend on the basis of the exhaustion of
administrative remedies doctrine and Suburban-Wisconsin's failure to join
certain additional parties.
Moreover, even if we did
not invoke waiver, we would affirm the procedure used by the trial court in
this case. As to the taking of
evidence, the law accords discretion to a trial court as to whether such is
necessary in support of a motion for a temporary injunction. Bloomquist v. Better Business Bureau,
17 Wis.2d 101, 104, 115 N.W.2d 545, 547 (1962). As to the hearing argument, we observe that the entire proceeding
consisted of attorneys' arguments with interjections and questions by the trial
court.
On a substantive level,
the DNR contends that the trial court failed to make formal findings of fact
and conclusions of law in support of its decision pursuant to § 805.17(2), Stats.
However, the Wisconsin Supreme Court has held that this statute is
directive only and the failure to state separate findings of fact and
conclusions of law is not reversible error.
Hochgurtel v. San Felippo, 78 Wis.2d 70, 85-86, 253 N.W.2d
526, 532 (1977). Although the trial
court's ruling was not lengthy, the court clearly stated its legal conclusion
that the temporary injunction was necessary to protect Suburban-Wisconsin from
irreparable harm.
As to the lack of
factual findings, we may affirm a trial court ruling if the record demonstrates
that the court reached a result which the evidence would sustain if there was a
specific finding. Id. at
86, 253 N.W.2d at 533. Here, it is
abundantly clear from the entire record that Suburban-Wisconsin had established
the factual underpinning for the issuance of the temporary injunction. This is especially so where the DNR took no
serious issue with the factual information presented, but rather defended on
the grounds of exhaustion of administrative remedies and nonjoinder of
necessary parties.
2.
Joinder of Necessary Parties
Next, the DNR argues
that the trial court did not have jurisdiction because Suburban-Wisconsin
failed to join necessary interested parties to the action pursuant to §
806.04(11), Stats. The DNR contends that Suburban-Wisconsin was
required to join the various affected site owners, their environmental
consultants[5] and
Suburban-Illinois as added parties. The
DNR bases its argument on § 806.04(11), which provides: “When declaratory relief is sought, all
persons shall be made parties who have or claim any interest which would be
affected by the declaration, and no declaration may prejudice the right of
persons not parties to the proceeding.”
The DNR contends that
the site owners and environmental consultants should have been joined to the
action because they “have a substantial interest in determining whether
Suburban's laboratory data is reliable and acceptable to the DNR” and “whether
resampling should be required.” We
disagree that the inclusion of this class was required in this case. When an administrative agency's actions are
challenged, the declaratory judgment statute does not require that every person
or entity whose interests are affected must be made a party. See Barry Lab., Inc. v.
Wisconsin State Bd. of Pharmacy, 26 Wis.2d 505, 512, 132 N.W.2d 833, 836-37
(1965); see also North Side Bank v. Gentile, 129 Wis.2d
208, 215-17, 385 N.W.2d 133, 136-38 (1986) (creditors not necessary parties to
action where their interests were sufficiently represented by bankruptcy
trustee).
The law also holds that
the number of potential additional parties implicated by the prospect of
joinder is a relevant consideration. In
White House Milk Co. v. Thomson, 275 Wis. 243, 81 N.W.2d 725
(1957), the supreme court rejected the application for intervention by a dairy
cooperative in a declaratory action challenging the constitutionality of a
statute regulating dairy prices.[6] The court noted that if joinder was
required, it could involve thousands of dairy farmers as parties. Id. at 249, 81 N.W.2d at
729. The court said that such an
interpretation of the joinder provisions of the statute “would render the
Uniform Declaratory Judgments Act unworkable as a procedural device for
securing a determination of the validity of a statute or ordinance.” Id.
The same reasoning
applies here. The record reveals that
the DNR resampling order could potentially affect thousands of
Suburban-Wisconsin's customers. Joinder
of that many parties would be unworkable.
White House Milk also
holds that if a named party in a declaratory action can adequately represent
the interests of those with similar or collateral interests, such is
sufficient. See id.
at 249-50, 81 N.W.2d at 729. We see no
reason why Suburban-Wisconsin is not fully capable of adequately representing
the interests of its customers who wish to retain its services. Conversely, if there are Suburban-Wisconsin
customers who now align themselves with the DNR on this question, we see no
reason why the DNR cannot adequately represent those sentiments. We hold that Suburban-Wisconsin's customers
were not necessary parties to this declaratory action.
The DNR also maintains
that Suburban-Illinois should have been joined to this action because it is a
party in the contested case hearing and because, if not joined, the DNR may be
required to relitigate the facts and legal issues if a separate action is
brought by Suburban-Illinois. We are
not persuaded, however, that the DNR ever raised this specific issue to the
trial court.
The DNR's initial motion
to dismiss the complaint generically alleged that Suburban-Wisconsin had failed
to join all necessary parties. However,
the motion did not specify those unjoined parties. At the hearing, the DNR made only casual reference to the absence
of necessary parties, but it again never identified who the necessary parties
were.[7] In its reconsideration motion and brief in
support, the DNR renewed this challenge and, for the first time, identified
these additional necessary parties as the site owners and their environmental
consultants. Notably absent from this
recital was Suburban-Illinois.
During the
reconsideration hearing, the topic of Suburban-Illinois did arise. However, this was not in the context of any
discussion concerning necessary parties to the action. Rather, the role of Suburban-Illinois arose
when the DNR and Suburban-Wisconsin were debating whether the data which
Suburban-Wisconsin had submitted to the DNR was in error. The DNR alluded to a Milwaukee site from
which Suburban-Illinois had produced a suspect sample. Suburban-Wisconsin's attorney responded that
the Illinois laboratory was not his client and that any defects in the Illinois
laboratory did not establish that Suburban-Wisconsin's samples were
suspect. The DNR replied that the
procedures in both laboratories were the same.
Despite the fact that
this exchange suggested certain commonality between Suburban-Wisconsin and
Suburban-Illinois, it was not offered in any context which addressed necessary
parties to the action. A party must
make an argument with sufficient prominence such that the trial court
understands that it is being requested to make a ruling. State v. Salter, 118 Wis.2d
67, 79, 346 N.W.2d 318, 324 (Ct. App. 1984).
From our examination of the DNR's written submissions and oral
statements to the trial court, we are not satisfied that the issue of
Suburban-Illinois as a necessary party was ever raised with sufficient
prominence such that the trial court understood that a ruling on that question
was required. We deem the appellate
argument waived.
CONCLUSION
We affirm the trial
court's denial of the DNR's motion to dismiss this action. We affirm the trial court's issuance of the
temporary injunction order. We remand
for further future proceedings.
By the Court.—Orders
affirmed.
Not recommended for
publication in the official reports.
[1] Suburban-Wisconsin alleged that the DNR: (1) deprived Suburban-Wisconsin of due process, (2) based its actions on improperly promulgated rules, (3) exceeded its statutory authority, (4) acted arbitrarily and capriciously, and (5) violated its own procedures.
[2] The case law has not held that the failure to exhaust administrative remedies results in a trial court's loss of subject matter jurisdiction. Nodell Inv. Corp. v. City of Glendale, 78 Wis.2d 416, 425 n.11, 254 N.W.2d 310, 315 (1977). Unless exclusive jurisdiction is given to an administrative agency by a statute, a court has subject matter jurisdiction regardless of whether a litigant ought to exhaust the available administrative remedies before submission to the courts. Id.
[3]
Section 813.02, Stats.,
provides, in part:
Temporary injunction; when granted. (1) (a) When it appears from a party's pleading that the party is entitled to judgment and any part thereof consists in restraining some act, the commission or continuance of which during the litigation would injure the party, or when during the litigation it shall appear that a party is doing or threatens or is about to do, or is procuring or suffering some act to be done in violation of the rights of another party and tending to render the judgment ineffectual, a temporary injunction may be granted to restrain such act.
[4] When a party submits a closure plan, it is seeking a determination by the DNR that the site is not contaminated based on test data.