Opinion
A157244
11-15-2017
OREGON TRUCKING ASSOCIATIONS, INC., an Oregon nonprofit corporation; AAA Oregon/Idaho, an Oregon nonprofit corporation; Oregon-Columbia Chapter of the Association ; Redmond Heavy Hauling; Gordon Wood Insurance & Finance; Property Casualty Insurers Association of America; National Association of Mutual Insurance Companies; and Oregon Mutual Insurance Company, Plaintiffs-Respondents, v. DEPARTMENT OF TRANSPORTATION and Department of Administrative Services, Defendants-Appellants.
Rolf C. Moan, Assistant Attorney General, Salem, argued the cause for appellants. With him on the briefs were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General. Gregory A. Chaimov, Portland, argued the cause for respondents. With him on the brief was Davis Wright Tremaine LLP. Louis A. Santiago, Roy Pulvers, Garrett S. Garfield, Nellie Q. Barnard, and Holland & Knight LLP filed the brief amicus curiae for NICUSA, Inc.
Rolf C. Moan, Assistant Attorney General, Salem, argued the cause for appellants. With him on the briefs were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.
Gregory A. Chaimov, Portland, argued the cause for respondents. With him on the brief was Davis Wright Tremaine LLP.
Louis A. Santiago, Roy Pulvers, Garrett S. Garfield, Nellie Q. Barnard, and Holland & Knight LLP filed the brief amicus curiae for NICUSA, Inc.
Before DeVore, Presiding Judge, and James, Judge, and Duncan, Judge pro tempore.
James, J., vice Flynn, J. pro tempore.
DUNCAN, J. pro tempore.
This declaratory judgment action concerns agreements between the two defendants—Oregon Department of Transportation (ODOT) and Oregon Department of Administrative Services (DAS)—and between DAS and a private company, NICUSA, that allow NICUSA to make Oregon driver records available electronically, for a fee, to companies authorized to receive and resell them (disseminators). Plaintiffs sought declarations that ODOT lacked authority to sell DAS an exclusive license to provide electronic access to driver records, and that it was violating its trust fund obligations to the State Highway Fund (highway fund). Defendants appeal from a declaratory judgment in favor of plaintiffs, following the grant of plaintiffs' motion for partial summary judgment. Defendants assign error to the trial court's grant of plaintiffs' motion for partial summary judgment and its denial of defendants' cross-motion for summary judgment. Because we agree with defendants that the trial court erred in both respects, we reverse and remand.
Three of the named plaintiffs in this case, Oregon Trucking Associations, Inc., Oregon-Columbia Chapter of the Associated General Contractors of America, and Property Casualty Insurers Association of America, are organizations representing the interests of their members, and have not alleged any way in which their own "rights, status, or other legal relations" have been affected. ORS 28.020. The Uniform Declaratory Judgments Act, ORS 28.010 to 28.160, requires that, "to bring a declaratory action regarding a [law], a plaintiff must show that it is a 'person' and that it has some 'right[ ], status or other legal relation [ ]' that is 'affected by' the" law. MT & M Gaming, Inc. v. City of Portland , 360 Or. 544, 554, 383 P.3d 800 (2016) (quoting ORS 28.020 (omissions in MT & M Gaming, Inc. ). ORS 28.020"does not allow an organization to assert the rights of its members[.]") Oregon Taxpayers United PAC v. Keisling , 143 Or.App 537, 544, 924 P.2d 853 (1996). When we refer to plaintiffs, we refer only to the remaining named plaintiffs, all of which alleged some way in which they are affected by the laws in question.
In an appeal from a judgment resulting from cross-motions for summary judgment, in which appellants have assigned error to the trial court's rulings on both motions, both rulings are subject to review. Adair Homes, Inc. v. Dunn Carney , 262 Or.App 273, 276, 325 P.3d 49, rev den , 355 Or. 879, 333 P.3d 333 (2014). We review each motion to determine "whether there are any disputed issues of material fact and whether either party was entitled to judgment as a matter of law." Vision Realty, Inc. v. Kohler , 214 Or.App 220, 222, 164 P.3d 330 (2007).We begin by setting out the relevant statutory and constitutional provisions. Article IX, section 3a, of the Oregon Constitution, requires revenues collected from certain motor-vehicle-related taxes and fees to "be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas" within the state. ORS 366.505(1) establishes that the "State Highway Fund shall consist of" listed funds and revenues, which include the funds and revenues referred to in Article IX, section 3a. Another provision of ORS 366.505 provides that the highway fund "shall be deemed and held as a trust fund, separate and distinct from the General Fund, and may be used only for the purposes authorized by law and is continually appropriated for such purposes." ORS 366.505(2).
ORS 366.395 provides, in part:
"(1) The Department of Transportation may sell, lease, exchange or otherwise dispose or permit use of real or personal property, * * * which * * * is, in the opinion of the department, no longer needed, required or useful for department purposes, except that real property may be leased when, in the opinion of the department, such real property will not be needed,
required or useful for department purposes during the leasing period."
The relevant facts are undisputed. ODOT, through its Motor Vehicle Services Division (DMV) maintains driver records and other information. It makes certain records available to those who are authorized by law to obtain them. See, e.g ., ORS 802.179 (authorizing or requiring disclosure of personal information contained in motor vehicle records under specified conditions). Before the transactions at issue here, the fee for obtaining a driver record was $2.00, or $1.50 for a query that failed to return a record. ORS 802.183(1) provides that ODOT may set fees at a level that is "reasonably calculated to reimburse" the agency "for its actual cost" of providing "personal information" to those authorized to obtain it under ORS 802.179. The driver records are assets of the highway fund. In 2006, ODOT made driver records available to disseminators electronically via a nonprofit organization, AAMVA, which provided real-time electronic access to driver records through a secure network. Disseminators who accessed driver records electronically through AAMVA paid the per-record fee set by ODOT: $0.50 in 2006, and later, $2.00. Disseminators paid AAMVA a one-time fee to initiate the service, and annual fees to maintain access. ODOT did not collect any other fee for the records, and did not collect a fee for access to the records.
Plaintiffs allege in their complaint that the records are assets of the fund. In defendants' answer, they admit that the records are assets of the fund, "to the degree that Highway Fund monies are used to generate, receive, compile, maintain and disseminate such data." For purposes of this opinion, we assume that the records are assets of the fund, but, to the extent that that determination involves legal questions, we express no opinion on those questions.
In 2009, DAS was tasked with developing and funding a state government internet portal. It considered the example of a number of other states that had created a "self-funded" internet presence through fees for electronic access to driving records, including a "convenience fee" that helps to pay for the portal. DAS also obtained authority in consultation with the Electronic Government Portal Advisory Board, to collect, or authorize collection of, "convenience fees" for accessing information via the state's internet portal. DAS approached ODOT to determine whether Oregon driver records could be used as part of a plan to self-fund the state's internet portal.
ODOT eventually decided to create a "limited, exclusive license to provide [c]ommercial [e]lectronic [a]ccess to [driver records] through" a state internet portal. In an interagency agreement, ODOT sold that license to DAS. That agreement describes the license as "intangible personal property of" the highway fund.
The license has the following characteristics: It includes restrictions relating to access to, and use of, the data made available through the license. Electronic access to driver data is limited to DMV-approved disseminators. Other means of access to driver data, including multiple means provided by DMV, such as mail, telephone request, and direct access via a DMV terminal, are not licensed—that is, DMV continues to provide access through those means. Ownership of driver data or driver records remains with DMV, and it controls who may access them. DAS may sublicense its rights and obligations to another. Neither DAS nor its sublicensee acquires ownership of the data or records. Neither DAS nor its sublicensee may modify, store, or maintain the driver data that is transmitted to DMV-approved disseminators. The license is exclusive, which means that the rights licensed to DAS may not be sublicensed by ODOT or DMV to anyone else.
ODOT sold that license to DAS for an amount that an expert calculated to be the fair market value of the license. Dr. Jenny Liu, Assistant Director of the Northwest Economic Research Center at Portland State University, is an environmental and resource economist with a focus in transportation economics. Liu calculated the fair market value of the license to be a per-record fee of $4.63 per record. In addition, ODOT receives the $2.00 per record reimbursement for its cost of producing the record. The $4.63 per record license payments are credited to the highway fund. Based on payments generated through this arrangement, ODOT estimates that the highway fund will receive $55 million over the course of the 10-year license.
The calculated value of the license is sometimes referred to as the fair value, and sometimes as the fair market value. In Liu's report, she explains that, in this instance, they are equivalent.
The value was originally calculated to be $4.68 per record. The agreement requires the value to be periodically recalculated, and it has since been reduced to $4.63 per record. Throughout this opinion, we use that updated figure.
DAS contracted with a company, NICUSA, to create and maintain an internet portal for the state. DAS sublicensed the license it obtained from ODOT to NICUSA. NICUSA developed and hosts the state's internet portal. As part of those services, it provides electronic access to driver records for disseminators. NICUSA's agreement with DAS (master agreement) allows it to collect a $3.00 per record convenience fee for records provided through its electronic access. The convenience fee compensates NICUSA for services provided to all state agencies, not just ODOT and DMV.
Plaintiffs filed this action for declaratory judgment, alleging that they are affected by the sale of the exclusive license, the master agreement, and the unauthorized use of proceeds from the sale of driving records. Plaintiffs are companies that have alleged adverse effects, such as having to pay disseminators increased costs for driver records. Plaintiffs sought declarations that ODOT lacked authority to sell DAS the exclusive license and that ODOT was violating its trust fund obligations to the highway fund.
Plaintiffs filed a motion for partial summary judgment, seeking to resolve all issues except the remedies. Defendants filed a cross-motion for summary judgment, seeking a judgment declaring that the transfer of the license did not violate the constitution or state law. The trial court granted plaintiffs' partial summary judgment motion and denied defendants' motion. The court agreed with defendants that some of plaintiffs' requested remedies were not ripe, and it issued a judgment declaring (1) that ODOT "lacked the authority to enter into the * * * Grant of License" interagency agreement with DAS to provide commercial electronic access to driver records, and (2) that "[d]efendants must use the $3 portal fee * * * only for purposes authorized by Article IX, section 3a [,] of the Constitution." The court granted defendants' request for a stay. Defendants appealed.
Reprising arguments they made to the trial court, defendants argue on appeal that ODOT had authority to sell the license to DAS for the agreed-on price; all of the money from the sale of the license goes to the highway fund as required; ODOT did not violate any trust obligations to the highway fund; and DAS's agreement with NICUSA does not violate Article IX, section 3a. Based on those arguments, defendants contend that the trial court erred when it granted plaintiffs' motion for partial summary judgment, and when it denied defendants' motion for summary judgment.
Plaintiffs argue in response that the trial court correctly ruled on the summary judgment motions, and correctly declared the rights of the parties. They urge us to affirm the trial court's judgment.
We begin by reiterating the nature of the license that ODOT sold to DAS. Plaintiffs and defendants sometimes characterize it differently. There is no factual dispute about the agreement between ODOT and DAS—their interagency agreement is in the record, and the parties make no factual arguments about its interpretation. Defining the nature of the asset, then, is a legal question, based on the undisputed terms of the license that are in the record. It is, as defendants consistently describe it, a limited, exclusive license to provide commercial electronic access to Oregon driver records. The agreement did not transfer ownership of the records themselves. The license is intangible property created from the bundle of rights associated with ownership of the driver records. See, e.g. , Raymond T. Nimmer, 1 Information Law § 2:3 (2017) (describing "property rights that arise in information" as including: integrity—control over alteration or destruction; use; disclosure; copying; access; transmission —the right to regulate electronic distribution; and transfer).
With a clear understanding of what the exclusive license is, we next consider the statutory authorization that defendants identify for ODOT's sale of the license. Defendants argue that ODOT had statutory authority to sell the license under ORS 366.395(1) and under ORS 366.395(2). Because we agree that ODOT had statutory authority under the former provision, we need not consider its authority under the latter.
ORS 366.395(1) provides that the department "may sell, lease, exchange, or otherwise dispose or permit use of" property that is, "in the opinion of the department , no longer needed, required or useful for department purposes ." (Emphases added.) We note that the text uses words that grant the department discretion concerning the necessity or usefulness of the property, and concerning how the property relates to the department's purposes. It does not require, for property to be transferred, that the property intrinsically lack value or usefulness. In support of their motion for summary judgment, defendants submitted an affidavit from the DMV administrator, McClellan, showing that ODOT had formed the opinion required for authorization to transfer property under that provision. Specifically, he averred, "It is ODOT's opinion that the Exclusive License, and the rights represented therein, are not 'needed, required or useful for department purposes.' " According to McClellan, in ODOT's view, the value of the license to the highway fund, if the license remained in ODOT's possession, was "negligible," or "nonexistent." Although plaintiffs may dispute the reasonableness of that opinion, that it was ODOT's opinion is uncontroverted.
Applying ORS 366.395(1) to the property at issue, defendants argue that ODOT formed the required opinion, and that, if its opinion must also be reasonable, it has also satisfied that requirement. ODOT had concluded that the rights that made up the license were not needed, required, or useful for its purposes, for the period of the license. It continues to own the records and data, and it continues to provide driver records to requestors by methods other than the electronic access covered by the license. And, regardless of the method of accessing a record, ODOT continues to receive the per-record reimbursement for the cost associated with providing it. With the sale of the license, in addition to that reimbursement, the highway fund is also credited with the per-record sale price of the license when driver records are provided electronically.
Defendants argue on appeal that ODOT satisfied the requirements for authorization to transfer the license under ORS 366.395(1), and the trial court therefore erred by concluding that ODOT lacked authority to do so. Plaintiffs contend to the contrary that the trial court correctly granted its motion for partial summary judgment because the transaction between ODOT and DAS was not authorized under ORS 366.395(1) because ODOT's opinion was not reasonable, or because the transaction involved "self-dealing." We agree with defendants.
Plaintiffs argue that ODOT cannot rely on ORS 366.395(1) to authorize the sale because it could not reasonably conclude that the license lacked usefulness. As support, plaintiffs assert that ODOT was using the license—"ODOT was already making money by selling electronic access to driver records" for $2 per record. As we will explain, that argument conflates the sale of records and the sale of the license, and it disregards the modifying phrase "for department purposes" in ORS 366.395(1).Plaintiffs argue that the license was, in fact, useful, because ODOT "was already making money by selling electronic access to driver records" for $2.00 per record, and that "that access still generated roughly $2.5 million per year." Similarly, plaintiffs argue that "the fact that access ODOT sells for $2 per record can be sold for almost $10 per record reaffirms that, as a matter of law, record access is not of 'negligible, if not nonexistent' value." But ODOT does not sell the right to provide electronic access to driver records for $2 per record. It sold—and continues to sell—driver records for $2 per record. Regardless of the access method, ODOT charges an amount that is reasonably calculated to reimburse the highway fund for the cost of producing the record. ODOT was not, therefore, in the usual sense of the phrase, "making money" on those transactions. Moreover, they do not demonstrate that ODOT was making use of the exclusive license, and therefore could not reasonably conclude that the license was not needed, required, or useful for department purposes.
Plaintiffs also argue that ODOT's conclusion that the license lacked usefulness was unreasonable because ODOT could have attempted to create a different arrangement with DAS that would have allowed a portal provider to collect a convenience fee that would go to only highway fund purposes. But, that does not mean that ODOT could not reasonably conclude that the license was, at the time, no longer needed, required, or useful for department purposes. First, that such an attempt would have been successful is speculative. There is no evidence that DAS would have agreed to such an alternative arrangement. It is undisputed that DAS had been specifically tasked with development and implementation of a state internet portal, and sought a way to make it self-funded. Moreover, ODOT was not required to pursue an alternative arrangement, and, if ODOT was not required to—and did not choose to—pursue it, then that course of action was not a department purpose. As an example, if ODOT determined, in a matter that was within its discretion, that it would not build a road on particular property that it owned, the fact that construction of a road on that property would be legally possible would not preclude a determination by ODOT that the property was no longer needed, required, or useful for department purposes.
Of course, there could be many variables in such a hypothetical circumstance that could affect the determination, but which are not germane here.
Plaintiffs also argue that DAS owes trust obligations to the highway fund, and that, therefore, it would have been required to assist ODOT in obtaining additional revenue for the highway fund. In general, "[t]rusts are to be administered in accordance with the trust instrument, and trusts created by statute, like the trust that establishes the fund here, 'are administered as express trusts, the terms of which are either set forth in statute or are supplied by the default rules of general trust law.' " White v. Public Employees Retirement Board , 351 Or. 426, 433-34, 268 P.3d 600 (2011) (quoting Restatement (Third) of Trusts § 4 comment g (2003)). It is undisputed that ODOT owes trust obligations to the highway fund. We need not decide whether DAS owed a duty to the highway fund, however, because, even if it did, DAS could choose a course of action that would benefit both the highway fund—providing that fund with an estimated additional $55 million over 10 years—and the state as a whole, by devising a self-funding way to develop, operate, and maintain the state's internet portal. See Restatement (Third) of Trusts § 78 comment c(7) (2007) ("The duty of loyalty does not preclude trustees in their fiduciary capacity from dealing with other trusts[,] * * * including trusts and estates of which the trustee is a fiduciary. Any such sale, * * * or other transaction, however, must be consistent with the purposes of each fiduciary relationship and for a consideration that is fair to the beneficiaries of the relationships.") Plaintiffs argue that Eckles v. State of Oregon is to the contrary, but that case is inapposite as it was resolved on impairment of contract grounds, not on the basis of trust obligations. 306 Or. 380, 386-87, 760 P.2d 846 (1988) (rejecting trust obligation argument because the legislature could, "[w]ithin constitutional limitations, * * * dispose of the assets of a statutory [trust] fund in any manner that it sees fit"). ODOT was authorized under ORS 366.395(1) to sell the license.The next question, then, is whether constitutional provisions nevertheless prohibited the sale. Defendants argue that ODOT's sale of the license to DAS did not violate Article IX, section 3a. The parties agree that ODOT was required to obtain for the highway fund the fair market value of the exclusive license, to compensate the highway fund for the sale of its asset. Defendants argue that the uncontroverted evidence in the record shows that ODOT did obtain fair value for the license, and that all of the payment for the license goes to the highway fund. Defendants argue that the trial court erred in concluding to the contrary.
Article IX, section 3a, provides, in part:
"(1) Except as provided in subsection (2) of this section, revenue from the following shall be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state:
"(a) Any tax levied on, with respect to, or measured by the storage, withdrawal, use, sale, distribution, importation or receipt of motor vehicle fuel or any other product used for the propulsion of motor vehicles; and
"(b) Any tax or excise levied on the ownership, operation or use of motor vehicles.
"(2) Revenues described in subsection (1) of this section:
"(a) May also be used for the cost of administration and any refunds or credits authorized by law."
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Plaintiffs, however, argue that the trial court did not err, because the sale violated Article IX, section 3a, in two ways. First, plaintiffs argue that ODOT did not receive fair market value in exchange for the license. Second, they argue that the $3 portal fee is derived from the license and, therefore, must be credited to the highway fund or used for highway fund purposes.
Defendants point to the 29-page valuation report from Liu, which is uncontroverted in the record, as establishing that ODOT obtained fair value for the license. Defendants submitted evidence that the price ODOT and DAS agreed on is a fair price for the license, and plaintiffs submitted no other evidence of the value of the license. ODOT and DAS arranged to have an economist, Liu, determine how to calculate a fair market value for the license, and then calculate that value. Liu decided on a method for calculating the value of the license based on a population-weighted national average price per driver record, not including the convenience fee. ODOT and DAS agreed on a per-record price for the license that matched the value calculated by Liu as a fair market value for the license. Plaintiffs point to no evidence to dispute Liu's valuation of the license.
Plaintiffs argue, however, that, because NICUSA ultimately sells driver records to disseminators for a per-record price of $9.63, that shows, as a matter of law, that the license was not sold for fair market value. But, again, that argument conflates what ODOT sold to DAS with what NICUSA sells to disseminators: a license for the right to provide commercial electronic access to driver records versus a driver record. DAS, and ultimately NICUSA, purchased a license allowing it to be the exclusive provider of commercial electronic access to Oregon driver records. For that right, it pays a license fee to ODOT on a per-record basis. What it sells to disseminators is the data in the driver records, provided via electronic access for which NICUSA charges a convenience fee.
Relatedly, plaintiffs argue that, because DAS is also a state agency, DAS must treat the license as a highway fund asset, and, therefore, put all revenue derived from it, including the $3 convenience fee, to highway fund uses. Defendants counter that the highway fund receives all revenue from the sale of the license , and that, once the license was sold to DAS, it was no longer a part of the highway fund, so that additional revenue derived from it is not highway fund revenue.
Defendants are correct. After a highway fund asset is sold, it ceases to be highway fund property, and income derived from it is not required to be expended for highway fund purposes. In Nortman v. City of Portland , the state had purchased land using highway funds. 90 Or.App 520, 522, 752 P.2d 1272 (1987). It then leased part of the land to the City of Portland, which subsequently sublet its interest to third parties. Nortman , 90 Or.App at 522-23, 752 P.2d 1272. The city used the money from the subleases to construct, among other things, a covered play area at a school. Id . The plaintiff argued that it would be illegal for the city to spend the income from the subleases for nonhighway fund purposes, because those funds were constitutionally dedicated to the highway fund. We rejected that argument, noting that "[f]rom all that appears on the face of plaintiff's pleading, [the] city intends to spend money that it acquired from subleasing property to third parties. There are no facts pleaded even colorably showing illegality." Id . at 523, 752 P.2d 1272. Similarly, here, once the license was sold to DAS, it was no longer a part of the highway fund for the term of the license. The revenue generated from the license after it was sold to DAS is not revenue from a highway fund asset, and is not required to be paid into the highway fund.
In sum, ODOT had statutory authorization to sell the license; it submitted unrebutted evidence that it received fair value for the license; the sale did not violate Article IX, section 3a ; and the $3 convenience fee is not required to be expended for highway fund purposes. Consequently, the trial court erred by granting plaintiffs' partial motion for summary judgment and by denying defendants' motion.
Finally, we must consider the appropriate disposition. Defendants and amicus NICUSA argue that the trial court erred by not requiring NICUSA to be joined as a necessary party under ORS 28.110, although they suggest that, if we reverse and remand, we need not address the issue. Plaintiffs argue that NICUSA is not a necessary party. The Declaratory Judgments Act requires that "all persons shall be made parties who have or claim any interest which would be affected by the declaration and no declaration shall prejudice the rights of persons not parties to the proceeding." ORS 28.110. We have construed that provision to mean that a trial court lacks authority to enter a final declaratory judgment unless all necessary parties have been joined. Kaiser Foundation Health Plan of the Northwest v. Doe , 138 Or.App 428, 432, 908 P.2d 850 (1996) ( Kaiser ). Because NICUSA has a legal interest in the license that is the subject of the dispute, and because the master agreement between NICUSA and DAS—which is the source of the $3 convenience fee—is part of the subject matter at issue, NICUSA is a necessary party. See, e.g. , Miller v. Shenk , 272 Or.App 12, 18-19, 354 P.3d 732 (2015) (in action to determine whether plaintiffs had implied easement over defendants' property, owners of adjacent property with express easement over same property were necessary parties).
Ordinarily,
"the remedy in a case in which a necessary party has not been joined is to remand with instructions to dismiss the action unless the necessary party is joined within a reasonable time. In some cases, however, the appellate courts have determined that the absent party's interests were protected by one of the named parties and remanded with instructions simply to add the absent party before entering final judgment."
Nolan v. Jackson National Life Ins. Co. , 155 Or.App 420, 430-31, 963 P.2d 162 (1998). Here, it appears that defendants may have adequately protected NICUSA's interests, which would permit entry of a final judgment in accordance with this opinion, provided that NICUSA is first joined as a party. See id. at 432-33, 963 P.2d 162 (remanding with instructions for "the trial court to dismiss the claim unless" the necessary party is joined, and if it is joined, to "enter judgment in accordance with this opinion unless it determines that there is insufficient identity of interest between" the newly-joined party and the party that may have protected its interests); Kaiser , 138 Or.App at 432, 908 P.2d 850 (same disposition). Accordingly, we reverse and remand for the trial court to dismiss the claim unless NICUSA is joined within a time to be set by the trial court, and, if NICUSA is joined, for the trial court to proceed to enter declaratory judgment consistent with this opinion unless it determines that there is insufficient identity of interests between defendants and NICUSA.
Reversed and remanded.