Opinion
No. A06-1731.
Filed August 1, 2007.
Appeal from Commissioner of Commerce, File No. 3-1011-16696-2.
Lindsay G. Arthur Jr., Kirsten J. Hansen, Arthur, Chapman, Kettering, Smetak Pikala, P.A., (for relator Midwest Oil of Minnesota, LLC).
Lori Swanson, Attorney General, Christopher M. Kaisershot, Assistant Attorney General, (for respondent Minnesota Department of Commerce).
Randy V. Thompson, Nolan, MacGregor, Thompson Leighton, (for amicus curiae Minnesota Service Station Association).
Brendan R. Tupa, Entrepreneurs Free Markets, PLC, and Timothy Sandefur (pro hac vice), (for amicus curiae Pacific Legal Foundation).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Relator retail-gasoline-station company appeals from the state's imposition of a $140,000 civil penalty for violating a Minnesota statute that prohibits offering gasoline for sale at a retail price that is lower than a statutory minimum price, arguing that the agency's refusal to consider additional evidence or to grant a rehearing was arbitrary and capricious, that the findings are not supported by substantial evidence, and that the statute under which the penalty is imposed is unconstitutional, both facially and as applied to relator. We affirm.
FACTS
Relator Midwest Oil of Minnesota, LLC, operates retail gasoline stations in Anoka, Albert Lea, and Oakdale. In February 2005, respondent Minnesota Department of Commerce began receiving complaints that Midwest Oil was selling gasoline at a price lower than that permitted by Minn. Stat. § 325D.71 (2006), which prohibits offering gasoline at a price lower than the minimum price allowed by application of a statutory formula. Based on these complaints, the department requested that Midwest Oil supply it with pricing information for a two-week period in February 2005. Midwest Oil did not respond to the department's request.
On March 15, 2005, a department investigator met with Naomi Isaacson, chief executive officer of Midwest Oil; and Rebekah Brown, Midwest Oil's attorney; to discuss the pricing requirements of section 325D.71. On March 17, 2005, the department requested that Midwest Oil provide additional documents, and the parties agreed that Midwest Oil would submit the documents by April 6. On April 7, attorney Brown requested a 90-day extension, which the department denied. On April 8, the department issued an administrative subpoena, seeking the identities of Midwest Oil's employees and information regarding Midwest Oil's pricing. On April 22, Midwest Oil provided a partial response to the subpoena.
On June 27, 2005, the department served Midwest Oil with notice of and an order for a hearing. A prehearing conference was held, at which attorney Christopher Sandberg appeared for Midwest Oil. The administrative-law judge (ALJ) scheduled a hearing for October 2005 and informed counsel that "the parties should take these deadlines seriously because the hearing [will] not likely be continued given the Department's concerns about competitive harm."
On October 14, 2005, attorney Sandberg filed a notice of withdrawal, stating that attorney Joshua Kanassatega was now representing Midwest Oil. On October 17, 2005, a hearing was held, at which Isaacson, who is an attorney licensed to practice in Minnesota, attended without counsel for Midwest Oil. At the hearing, attorney Kanassatega told the ALJ that he was not representing Midwest Oil, and Isaacson moved for a continuance to permit Midwest Oil to retain new counsel. The ALJ denied Isaacson's motion, and Isaacson left the hearing.
The hearing proceeded without Midwest Oil's participation. The state offered the testimony of two department investigators and three retail-gasoline-station owners, who testified that Midwest Oil's sale of gasoline below the statutory minimum price had harmed their businesses. After the hearing, the ALJ found that Midwest Oil sold gasoline below the statutory minimum price for 145 days at the Anoka station, for 81 days at the Albert Lea station, and for 67 days at the Oakdale station. Consequently, the ALJ recommended that the department take disciplinary action against Midwest Oil.
After the ALJ filed her recommendation with the department, the deputy commissioner of the department, to whom the commissioner had delegated authority to make the final decision, notified the parties of their right to file exceptions and argument regarding the ALJ's recommendation. In response, Midwest Oil filed a notebook of charts and exhibits and requested that the deputy commissioner consider this new evidence or refer the case back to the ALJ.
In a February 23, 2006 order, the deputy commissioner adopted the ALJ's findings of fact and conclusions of law, denied Midwest Oil's request for a rehearing, and ordered Midwest Oil to pay a fine of $140,000. The deputy commissioner denied Midwest Oil's request for a rehearing because, although Midwest Oil "had numerous opportunities to be heard," it "fired its attorney on the eve of the hearing, then abandoned the hearing and failed to participate." The deputy commissioner also refused to consider Midwest Oil's evidence, noting that the statute and the applicable administrative rules prohibit the introduction of evidence after the ALJ has filed her recommendation. Noting that the record contained evidence of a total of 293 violations, that Midwest Oil failed to cooperate with discovery, and that Midwest Oil's violations were "willful, continuing, and egregious," the deputy commissioner determined that Midwest Oil's actions "warrant a substantial penalty" and imposed the fine.
Midwest Oil filed an appeal with the deputy commissioner, and an appeal hearing was held, at which Midwest Oil requested that the matter be remanded to the ALJ for a one-day hearing, that the fine be reduced to $5,000, and that the imposition of the fine be stayed for one year as an "incentive" to Midwest Oil to avoid future violations. The deputy commissioner denied Midwest Oil's requests and affirmed the fine. This certiorari appeal follows.
DECISION
On review of a contested-case hearing, this court may affirm or remand for further proceedings, or it may reverse or modify the agency's decision if the substantial rights of the relator have been prejudiced because the decision is
(a) in violation of constitutional provisions; or
(b) in excess of the statutory authority or jurisdiction of the agency; or
(c) made upon unlawful procedure; or
(d) affected by other error of law; or
(e) unsupported by substantial evidence in view of the entire record as submitted; or
(f) arbitrary or capricious.
Minn. Stat. § 14.69 (2006). We defer to the agency's factual findings, and we will affirm those findings if the record contains substantial evidence supporting them. City of Moorhead v. Minn. Pub. Utils. Comm'n, 343 N.W.2d 843, 846 (Minn. 1984). Substantial evidence is "(1) such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; (2) more than a scintilla of evidence; (3) more than some evidence; (4) more than any evidence; or (5) the evidence considered in its entirety." Minn. Ctr. for Envtl. Advocacy v. Minn. Pollution Control Agency, 644 N.W.2d 457, 466 (Minn. 2002). But we will reverse an agency's conclusions if those conclusions are arbitrary or capricious, that is, if the agency failed to articulate a rational connection between the facts found and the choice made. In re Excess Surplus Status of Blue Cross Blue Shield of Minn., 624 N.W.2d 264, 277 (Minn. 2001).
I.
Midwest Oil argues first that the deputy commissioner's refusal to consider its "binder of material" was arbitrary and capricious. The deputy commissioner refused to consider the documents in Midwest Oil's binder because he determined that Midwest Oil was prohibited from introducing evidence after the ALJ filed her recommendation. In a contested case, the evidentiary record closes with the submission of any written memoranda and any late-filed exhibits that all parties and the ALJ have agreed may be accepted, and the filing of a transcript of the contested-case hearing. Minn. R. 1400.7800, subp. J (2005). The parties may "file exceptions and present argument" concerning the ALJ's recommendation and those filings are made a part of the record. See Minn. Stat. § 14.61 (2006). But no evidence that has not been agreed to may be submitted after the evidentiary record closes. See In re Blue Cross Blue Shield, 624 N.W.2d at 274 (noting that the agency must make the final decision on the basis of the record as transmitted by the ALJ); see also Minn. R. 1400.8100, subp. 1 (2005) (providing that no information outside the record shall be considered by the ALJ or by the agency).
We agree with the deputy commissioner that the statute and the applicable rules prohibit the introduction of new evidence after the evidentiary record closes. The documents that Midwest Oil sought to have the deputy commissioner consider detail gasoline prices in the Minneapolis-St. Paul metropolitan area, gasoline-terminal prices, and competitors' prices. The documents in the binder are, therefore, evidence. And because the parties and the ALJ did not agree to accept this evidence, it is inadmissible. See Minn. R. 1400.7800, subp. J. Consequently, we conclude that the deputy commissioner's decision not to consider the documents was not arbitrary or capricious.
II.
Midwest Oil argues next that the deputy commissioner's refusal to grant a rehearing before the ALJ was arbitrary and capricious. The deputy commissioner denied Midwest Oil's request for a rehearing because he determined that "the record is replete with repeated delaying tactics," noting that "the record indicates that [Midwest Oil] is now represented by its fourth attorney since commencement of this matter."
Midwest Oil has cited no authority, and we have found none, that determines when an agency should grant a request for a rehearing. But Midwest Oil has not explained why the documents in the binder could not have been produced at the hearing that was held. Indeed, Midwest Oil abandoned the hearing without introducing any evidence. We also note that the ALJ expressly cautioned the parties to take the deadlines "seriously" because additional continuances would likely not be granted. Under these circumstances, we conclude that the deputy commissioner's decision to deny Midwest Oil's request for a rehearing was not arbitrary or capricious.
III.
Midwest Oil argues next that the deputy commissioner's findings of fact are unsupported by substantial evidence in the record, arguing specifically that the documents in its binder contradict the evidence presented at the hearing. But as we have already determined, the deputy commissioner properly did not consider the documents that Midwest Oil sought to introduce after the evidentiary record closed. Further, the deputy commissioner's findings were based on the Midwest Oil pricing data submitted during the department's investigation, the complaints received by the department, and the testimony of two department investigators and three retail-gasoline-station owners. We conclude, therefore, that there is substantial evidence in the record that supports the deputy commissioner's findings.
IV.
Midwest Oil argues that the ALJ's refusal to grant a continuance was arbitrary and capricious. An ALJ should grant a continuance if the party seeking the continuance has established "good cause" for that continuance. Minn. R. 1400.7500 (2005). The substitution of counsel is a good cause if substitution was "required." Id. Although Midwest Oil asserts on appeal that it decided to replace its counsel because it was dissatisfied with its previous attorney's performance, Midwest Oil made no such claim before the ALJ; indeed, at the hearing, Isaacson refused to offer any reason why Midwest Oil chose to replace its attorney, citing attorney-client privilege. And we note that, in any event, the failure to adequately prepare for a hearing does not constitute good cause for a continuance. Id. Thus, we conclude that the ALJ's refusal to grant a continuance was not arbitrary or capricious.
V.
Midwest Oil argues finally that Minn. Stat. § 325D.71 is both facially unconstitutional and unconstitutional as applied to it. Whether a statute is constitutional is a question of law, which we review de novo. Hamilton v. Comm'r of Pub. Safety, 600 N.W.2d 720, 722 (Minn. 1999). The power to declare a statute unconstitutional is exercised cautiously. In re Haggerty, 448 N.W.2d 363, 364 (Minn. 1989). Thus, a statute is presumed constitutional unless the party challenging the statute can prove beyond a reasonable doubt that the statute violates a provision of the constitution. Snyder v. City of Minneapolis, 441 N.W.2d 781, 788 (Minn. 1989).
Midwest Oil's argument regarding the constitutionality of section 325D.71 is very brief. It asserts that the lack of a requirement in section 325D.71 that the state must prove that a retailer intends to harm competition unconstitutionally deprives the retailer of its Fourteenth Amendment due-process rights, relying on the supreme court's decision in Twin City Candy Tobacco Co. v. A. Weisman Co., 276 Minn. 225, 149 N.W.2d 698 (1967). But Midwest Oil fails to state whether it contends that section 325D.71 implicates a fundamental right or a suspect classification that would require application of a strict-scrutiny standard of review. See Doll v. Barnell, 693 N.W.2d 455, 461 (Minn.App. 2005) (discussing this standard of review for constitutional challenges), review denied (Minn. June 14, 2005). And assuming that Midwest Oil does not contend that section 325D.71 implicates a fundamental right or a suspect classification and that, therefore, a rational-basis standard of review applies, Midwest Oil has also failed to address whether section 325D.71 serves a public purpose; whether section 325D.71 is unreasonable, arbitrary, or capricious; or whether there is a rational connection between the means employed by section 325D.71 and the end result. See Fed. Distillers, Inc. v. State, 304 Minn. 28, 46, 229 N.W.2d 144, 158 (1975) (discussing rational-basis review of an economic regulation).
To successfully meet its burden, a party challenging the constitutionality of a statute must support its claim with adequate briefing, including constitutional analysis. See Ganguli v. Univ. of Minn., 512 N.W.2d 918, 919 n. 1 (Minn.App. 1994) (declining to address claims that the defendant violated the plaintiff's substantive and procedural due-process rights because the plaintiff did not support those claims with constitutional analysis or citation); see also State, Dep't of Labor Indus. by the Special Comp. Fund v. Wintz Parcel Drivers, Inc., 558 N.W.2d 480, 480 (Minn. 1997) (noting that although a constitutional claim may have merit, the claim would not be addressed "in the absence of adequate briefing"). We conclude that Midwest Oil has not met its burden of demonstrating a violation of a constitutional provision.