Opinion
Supreme Court No. S-12805.
November 12, 2008.
Appeal from the Superior Court of the State of Alaska, First Judicial District, Juneau, Larry R. Weeks, Judge, Superior Court No. 1JU-05-731 CI.
Robert S. Spitzfaden, Gruening Spitzfaden, APC, Juneau, for Appellants.
Kristen Pettersen Miller, Dillon Findley, P.C., Juneau, for Appellee.
Before: Fabe, Chief Justice, Matthews, Eastaugh, Carpeneti, and Winfree, Justices.
NOTICE
Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
I. INTRODUCTION
The City of Hoonah taxes the sale of services. In 2004 it assessed this tax against Tok River Outfitters for the sale of two guided bear hunts conducted in September 2004. John Erickson and his son Chris Erickson operate and own Tok River Outfitters. They protested the assessment and filed a superior court appeal after the city's Sales Tax Appeal Board rejected their protest. Their appeal challenged the assessment for the two hunts and also argued that the city's tax ordinance was unconstitutional and contrary to statute because it taxed services provided wholly or partly outside the city. When the city refunded the disputed tax on the two hunts and forgave the Ericksons' tax liability through September 2004, the superior court dismissed the Ericksons' appeal as moot. On appeal to us, the Ericksons argue that it was error to dismiss their case. We affirm the dismissal of the dispute about the tax assessed for the two hunts, because that dispute was mooted by the city's forgiveness of the disputed tax liability as to those hunts and because the public interest exception does not justify review of the mooted issues. We also affirm the dismissal of the Ericksons' general challenge to the tax because it is necessarily an as-applied challenge, and a different superior court lawsuit, scheduled for trial in early 2009, will provide the necessary factual context for a knowledgeable resolution of that challenge.
II. FACTS AND PROCEEDINGS
Some of the facts determined by the City of Hoonah Sales Tax Appeal Board and by the superior court are disputed on appeal, but the result we reach here does not require us to resolve those disputes or discuss the facts in great detail. In summarizing the facts for purposes of this appeal, we do not mean to bind the parties or the superior court in the pending superior court proceeding or any other proceeding from litigating and resolving material fact disputes.
Hoonah's city council adopted a new tax code in 2003. Among other things, the new tax code imposed a general sales tax on the selling price of all "retail sales within the city," and defined "retail sales within the city" to include "[a]ll retail sales by a seller within the city of services to be provided or performed in whole or in part within the city, regardless of the buyer's place of residence; or buyer's physical location upon acceptance of the offer, or exchange of consideration."
Hoonah Municipal Code (HMC) 04.04.020(M)(3).
John Erickson was the longstanding owner and operator of Tok River Outfitters, an unincorporated guiding service operating out of Hoonah. He is Chris Erickson's father. Chris had worked for his father as a guide, and in 2004 became the owner or co-owner of Tok River Outfitters. There are unresolved questions about what business responsibilities John retained after Chris became an owner and whether John and Chris together own one business or two. These questions have no bearing on the issues now before us.
In 2004 Hoonah requested sales tax returns for guiding services provided by Tok River Outfitters. The Ericksons did not comply and argued that the tax did not apply to them because their bear-hunt guiding business was being coordinated out of Chris's Juneau residence. The city ultimately assessed taxes of $8,370.04 against the Ericksons in July 2004 for the period April 1, 2003 to March 31, 2004. The Ericksons appealed to the Hoonah Sales Tax Appeal Board, which determined at its September 16, 2004 meeting that any tax incurred before August 18, 2004 by these taxpayers for bear-hunt guiding services was "waived."
In September 2004 Chris guided a brown bear hunt for an out-of-state client. Chris later asserted that the client fully prepaid for this hunt before August 18, 2004. While this hunt was in progress or shortly after it ended, the same client paid for a black bear hunt. Chris provided most, if not all, of the guiding services for the two hunts in September 2004. The Ericksons each filed a September 2004 sales tax return that did not list services for which the client had fully prepaid before August 18. The city then assessed a joint sales tax deficiency of $587.32 against John and Chris for the hunts.
The Ericksons paid the disputed amount under protest and appealed to the city's treasurer. In 2005 the sales tax appeal board rejected their appeal.
The Ericksons then sued the City of Hoonah in the superior court. Their complaint sought relief from any sales tax for the period before October 1, 2004; it also sought a declaration that the sales tax violated AS 29.45.650(a), article X of the Alaska Constitution, and the Commerce Clause of the United States Constitution. The superior court converted the civil action into an administrative appeal. After the Hoonah Sales Tax Appeals Board ruled, the superior court heard two appeals of the case, and in an order remanding to the tax appeals board for a second time, held that taxing hunting expeditions that occur beyond the city borders "is not inappropriate." That order was entered in case number 1JU-05-731 CI.
Ultimately, the city informed the Ericksons by letter that it had "elected to forgive" the Ericksons' sales tax liability through September 2004. The city then refunded the amounts the Ericksons had paid under protest. As a result, the city neither retained any disputed tax attributable to sales of services provided before October 2004, nor sought to tax the Ericksons on the sales of the two September bear hunts. The city accordingly asked the superior court to dismiss the case as moot. Over the Ericksons' objections, the superior court concluded that the city's forgiveness of the disputed sales tax liability and the court's prior determination that taxing hunting and fishing expeditions was "appropriate" left no dispute on which relief could be granted. The superior court therefore dismissed the case as moot and awarded the Ericksons appellate attorney's fees of $500.
The Ericksons then commenced this appeal, challenging both the dismissal and the fees award.
In October 2007 the city filed a complaint in superior court against the Ericksons and Tok River Outfitters for recovery of delinquent sales taxes, penalties, and interest from 2005 onward. The complaint also sought injunctive relief. That lawsuit, 1JU-07-906 CI, is still in progress, according to the parties on appeal. We have also been informed that the trial of that case is presently scheduled for January 2009.
III. DISCUSSION
A. Standard of Review
The Ericksons raise numerous issues on appeal relating to the decisions of the city's Sales Tax Appeal Board and the validity of the city's sales tax ordinance in imposing a sales tax on services rendered at least partly outside the city or in interstate commerce. They also argue that the superior court erred by dismissing the action as moot.
We apply our independent judgment to issues of mootness "because as a matter of judicial policy, mootness is a question of law." It is not necessary to discuss the standard of review for any other issue relating to the city's tax because the issue of mootness disposes of those issues.
Clark v. State, Dep't of Corr., 156 P.3d 384, 386 (Alaska 2007); see also Akpik v. State, Office of Mgmt. Budget, 115 P.3d 532, 534 (Alaska 2005); Ulmer v. Alaska Rest. Beverage Ass'n, 33 P.3d 773, 776 (Alaska 2001).
We review an award of attorney's fees for abuse of discretion. We will hold that a court has abused its discretion if, after reviewing the whole record, we are left with a definite and firm conviction that the court erred in its ruling. B. Mootness of Main Dispute
Stalnaker v. Williams, 960 P.2d 590, 597 n. 10 (Alaska 1998) (reviewing for abuse of discretion superior court's Appellate Rule 508(e) awards of attorney's fees granted in administrative appeals).
id.
We have stated that a "claim is moot where a decision on the issue is no longer relevant to resolving the litigation, or where it has lost its character as a `present, live controversy,' that is, where a party bringing the action would not be entitled to any relief even if he or she prevailed."
Clark, 156 P.3d at 387 (internal quotations and citations omitted).
The Ericksons argue that the superior court erred in holding that the case was moot. They contend that the court erred in reasoning that the case was mooted by the city's forgiveness of the pre-October 2004 tax and by the superior court's previous ruling that there was "sufficient nexus" between the transactions and the city to subject the Ericksons to the city's sales tax. They reason that the case is not moot "when to reach a mootness finding the Court must decide a substantive issue." They argue that the case is not moot because substantive issues have not been resolved and because they can still secure relief if the case is resolved in their favor. Thus, they assert that: (1) if they prevail and the court determines that they operated two separate businesses, John would have no tax liability; (2) if the court determines that Hoonah is only allowed to tax services rendered within the city, they cannot be taxed for services rendered outside the city; (3) if they prevail on the argument that the city is bound by the August 18, 2004 meeting, the city will only be allowed to tax the first $5,000 of any hunt; (4) if there is no basis for the board's tax decision, they will owe no taxes; and (5) if they are allowed to pursue their superior court action, they can seek injunctive and declaratory relief, remedies that would result in actual relief if the tax is declared illegal and Hoonah is permanently enjoined from taxing them.
The primary appellate dispute is whether the city improperly taxed the sales of the two guided bear hunts Chris conducted in September 2004. Those were the only two hunts in issue after the city previously forgave all tax liability for periods before August 18, 2004, and were the only two hunts in issue in the superior court suit brought by the Ericksons. Consequently, after the city forgave any sales tax liability of the Ericksons and their guide business for hunts conducted through September 2004, no live dispute remained about whether the ordinance applied to the sales of those two hunts. The Ericksons' pre-October 2004 exposure to the tax for sales of guiding services was therefore moot.
It similarly does not matter when or where the sales of those two hunts were made, when or where any of the services were provided, or whether Chris, John, or both, provided those services. The Ericksons' challenge to the taxes assessed on the sales of those two hunts is fact intensive, raising questions about Chris and John's roles, where the sales were consummated, where the services were provided, the nexus to the City of Hoonah, and the potential for duplicative taxation by other tax jurisdictions.
But none of those disputes needs to be decided with respect to the now-forgiven tax assessments for sales made before the end of September 2004.
The Ericksons' original complaint, filed in April 2005, sought injunctive and declaratory relief prohibiting the city from enforcing the tax or collecting taxes from the Ericksons for the period before October 2004. The Ericksons argued that they owed no sales taxes for any period through September 2004. The sales tax appeal board had previously concluded that the city could collect taxes for April 1, 2003, through August 30, 2004, and denied a refund of the tax assessment for September 2004.
Because Hoonah "elected to forgive the Ericksons' sales tax liability for the period up to and including September 2004," the Ericksons received most of the relief they originally sought — relief from paying taxes for any period through September 2004. The city argues that because the city forgave the taxes that were at issue in the Ericksons' superior court case, the Ericksons could not obtain any further relief with respect to tax liability for sales before October 2004. We agree.
The city also contends that "[s]ince the scope of the appeal was limited to taxes arising during the month of September 2004 and periods prior, the city's forgiveness of those taxes rendered all matters that were at issue in the appeal moot." We agree that the main focus of the Ericksons' case was on the September 2004 hunts. But the Ericksons' case also raised more general challenges to the sales tax. The dismissal prevented the Ericksons from continuing to seek either an injunction prohibiting the city from enforcing the tax or a judgment declaring the ordinance invalid. The Ericksons argue that if the superior court were to find in their favor and award injunctive or declaratory relief, they would "secure actual relief." But we have stated that "[m]ootness is particularly important in a case seeking a declaratory judgment because there is an added risk that the party is seeking an advisory opinion." That is essentially what the Ericksons are seeking here. As they argue in their reply brief, they are seeking a judgment to "resolve not just the September, 2004 tax, but to definitely resolve the validity of the sales tax ordinance" and to decide their future legal relationship with the city.
Kodiak Seafood Processors Ass'n v. State, 900 P.2d 1191, 1195 (Alaska 1995); see also Hayes v. Charney, 693 P.2d 831, 834 (Alaska 1985) (dismissing as moot challenge to legislative council contract because legislative session was over and the contract at issue had been fully performed, so opinion by court "would be advisory only"). Advisory opinions are to be avoided. Earth Movers of Fairbanks, Inc. v. State, Dep't of Transp. Pub. Facilities, 824 P.2d 715, 718 (Alaska 1992) (citing Gieffels v. State, 552 P.2d 661, 664-65 (Alaska 1976) ( disapproved/overruled on other grounds)).
The Ericksons' general challenges to the tax turn on the city's power to tax guiding services that are provided in whole or in part outside the city. These are as-applied challenges that are potentially fact-dependent. Based on the evidence in the record about past hunts and the two September 2004 hunts, we are unwilling to say that the superior court erred in declining to reach the merits of the Ericksons' contentions concerning their post-September 2004 guiding services.
It is unclear what standard we should apply in reviewing the mootness dismissal of an as-applied challenge to a municipal ordinance. Because we reach the same conclusion whether we review for abuse of discretion or de novo, we do not need to decide here which standard applies.
Because the city resolved the tax issue raised by the Ericksons' original case by forgiving any taxes owed through September 2004 and the only relief the Ericksons could receive is an advisory opinion, the Ericksons' claims are technically moot.
C. Public Interest Exception to the Mootness Doctrine
Even if a case is technically moot, courts may choose to address issues that satisfy the public interest exception to the mootness doctrine. We consider three factors in determining whether the public interest exception applies: (1) whether the disputed issues are capable of repetition; (2) whether the mootness doctrine, if applied, may cause review of the issues to be repeatedly circumvented; and (3) whether the issues presented are so important to the public interest as to justify overriding the mootness doctrine.
Maness v. Daily, 184 P.3d 1, 8 (Alaska 2008) (citing Wetherhorn v. Alaska Psychiatric Inst., 156 P.3d 371, 380-81 (Alaska 2007)); Kodiak Seafood Processors Ass'n, 900 P.2d at 1196.
Maness, 184 P.3d at 8; Kodiak Seafood Processors Ass'n, 900 P.2d at 1196.
The Ericksons argue that all three factors are satisfied here. They contend that the issues are capable of repetition because the city continues to tax the Ericksons and has brought a civil suit to collect more taxes; that the issues may evade review because the city could again forgive taxes, as it did here, in order to argue that the issues are moot; and that the public interest overrides the mootness doctrine because "[t]he public has an overriding interest in not paying invalid sales taxes."
As the Ericksons point out, the city continues to rely on the sales tax and has filed a complaint seeking judgment against the Ericksons for taxes on sales of services for the years 2005 and thereafter. Certainly the city's actual assessment of the tax against the Ericksons' post-September 2004 sales demonstrates that the legal issues can repeat. This satisfies the first factor.
The second factor could be met if the city were to forgive assessed sales taxes whenever the assessments are challenged, especially if a thwarted challenge attempts to raise questions about the constitutional and statutory validity of assessing the tax against sales of services partly performed outside the city. But because the city sued the Ericksons in 2007 to enforce the sales tax for post-September 2004 sales and that proceeding is scheduled for trial in 2009, it is unlikely the city will try to repeatedly circumvent judicial resolution of the legal issues the Ericksons wish to raise. It appears that the Ericksons will be able to raise in that lawsuit all of the issues they seek to raise here. Presuming the reasons the city gave for forgiving the taxes in this case (the length of litigation and the prospect of a third board hearing on the same hunts) are not pretextual, there is no reason to think the controlling issues will continue to evade review.
As to the third factor, the issue of the validity of the city's tax is no doubt of general public interest, and that interest is not limited to the Ericksons' dispute. Residents of Hoonah have an interest in the validity of Hoonah's tax, and travel and adventure providers operating out of Hoonah have an interest in the legality of the taxes levied against them. The legality of a tax is similar to other issues that this court has considered important enough to override the mootness doctrine, such as the legal powers of public officials. But the Ericksons' theories of invalidity largely turn on the circumstances of their guiding business. Their as-applied challenge is fact specific and is best considered in context of developed facts. The present case provides a poor vehicle for that consideration, because the only meaningful record concerns the two September 2004 hunts for which the city forgave any sales tax. Important as the validity issues are, the opportunity to decide them in another proceeding that is neither mooted nor advisory makes the third factor largely irrelevant.
See, e.g., Fairbanks Fire Fighters Ass'n, Local 1324 v. City of Fairbanks, 48 P.3d 1165, 1169 (Alaska 2002); Legislative Council v. Knowles, 988 P.2d 604, 606-07 (Alaska 1999); Kodiak Seafood Processors Ass'n, 900 P.2d at 1196.
On balance, the three factors do not compel a conclusion that the public interest exception applies. We therefore conclude both that the exception does not apply, and that the superior court did not err in declining to reach the merits of the Ericksons' mooted issues.
We note that we are also unconvinced any benefit could result from reversal. The present appeal could at most conclude that the superior court should not have dismissed the declaratory relief portion of the Ericksons' challenge to the ordinance. That conclusion would simply require a remand to the superior court. Remand would, at best, lead to consolidation with the pending superior court proceeding in which the validity of the ordinance as applied to the Ericksons' activities after September 2004 will soon be litigated. Consolidation would add nothing useful to the resolution of those issues. And given the pending superior court proceeding, remand without consolidation would lead to parallel and duplicative actions.
The extent of the factual disputes regarding the Ericksons' guiding services militates against determining in this appeal the as-applied validity of the ordinance for periods after September 2004.
D. Attorney's Fees Award
The superior court awarded the Ericksons appellate attorney's fees of $500. The Ericksons argue that the superior court lacked the information necessary to make a knowledgeable award and abused its discretion by awarding Alaska Appellate Rule 508(e) fees without giving them an opportunity to submit evidence of their actual fees or argue for a larger award. They also assert that the extensive proceedings should have demonstrated to the superior court that their legal fees "clearly were in the tens of thousands of dollars."
The city responds that the award was discretionary and that there is no basis for awarding additional attorney's fees, given that the Ericksons lost their "central legal argument." This latter contention by the city, according to the Ericksons, apparently refers to the superior court's ruling that the sales tax did not violate the Dormant Commerce Clause of the United States Constitution.
The superior court did not specify the basis for its attorney's fee award, but the court characterized it as an award "on appeal." Appellate Rule 508(e) therefore applies. A superior court acting as an intermediate appellate court has broad discretion to award costs, including attorney's fees, under Appellate Rule 508(e).
Alaska Rule of Appellate Procedure 508(e) provides:
(e) Attorney's Fees. Attorney's fees may be allowed in an amount to be determined by the court. If such an allowance is made, the clerk shall issue an appropriate order awarding fees at the same time that an opinion or an order under Rule 214 is filed. If the court determines that an appeal or cross-appeal is frivolous or that it has been brought simply for purposes of delay, actual attorney's fees may be awarded to the appellee or cross-appellee.
Cleaver v. State, Commercial Fisheries Entry Comm'n, 48 P.3d 464, 470 (Alaska 2002); Municipality of Anchorage, Police Fire Ret. Bd. v. Coffey, 893 P.2d 722, 731 (Alaska 1995).
We conclude that there was no abuse of discretion either in awarding attorney's fees of $500 or in awarding that amount without first asking the Ericksons to submit evidence of the fees they actually incurred during the administrative appeal. No doubt the Ericksons incurred substantial appellate attorney's fees, and no doubt the amount was increased by the remands to the sales tax appeal board for additional determinations. But the amount of the award was consistent with our own practice of awarding a prevailing party only partial or even token attorney's fees on appeal. Our own awards under Rule 508(e) typically vary between $500 and $1,500, within the broad discretion of the assigned justice. Such awards are not based on the fees actually incurred by the prevailing party, or on the considerations applicable under Alaska Civil Rule 82, and are made without giving the parties an opportunity to show their actual fees. Neither the amount awarded nor the practice followed by the superior court here suggests an abuse of discretion for an award under Rule 508(e).
Moreover, even though the superior court did not err in treating the Ericksons as the prevailing parties on appeal after the city forgave their tax liability, the amount of disputed taxes actually in controversy was relatively small. And, as the city contends, the Ericksons' broader challenge to the validity of a tax on sales of guiding services performed outside the city was largely based on their claim the tax violated the Dormant Commerce Clause of the United States Constitution. The superior court effectively rejected that contention in concluding that there was a nexus between the services provided and the city sufficient to justify the sales tax. The superior court was entitled to take into account that circumstance and the relatively modest amount of taxes at stake when it exercised its discretion in deciding what amount of attorney's fees to award.
IV. CONCLUSION
For these reasons, the order dismissing the superior court appeal as moot and awarding the Ericksons attorney's fees of $500 is AFFIRMED.