2014 VT 59


Luck Brothers, Inc. v. Agency of
Transportation (2013-249)
 
2014 VT 59
 
[Filed 13-Jun-2014]
 
NOTICE:  This opinion is subject
to motions for reargument under V.R.A.P. 40 as well as formal revision before
publication in the Vermont Reports.  Readers are requested to notify the
Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by mail at: Vermont
Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors
in order that corrections may be made before this opinion goes to press.
 
 

2014 VT 59

 

No. 2013-249

 

Luck Brothers, Inc.


Supreme Court


 


 


 


On Appeal from


     v.


Superior Court, Washington Unit,


 


Civil Division


 


 


Agency of Transportation


December Term, 2013


 


 


 


 


Robert
  R. Bent, J.


 

David Bond of Fead Construction Law, PLC, South Burlington,
for Plaintiff-Appellant.
 
William H. Sorrell, Attorney General, and Toni Hamburg
Clithero, Assistant Attorney General,
  Montpelier, for Defendant-Appellee.
 
 
PRESENT:  Reiber, C.J., Dooley, Skoglund, Robinson and
Crawford, JJ.
 
 
¶ 1.            
REIBER, C.J.   Plaintiff Luck Brothers, Inc., a construction
company that rebuilt a portion of Main Street in the City of Barre pursuant to
a contract with defendant Vermont Agency of Transportation, appeals from the
superior court’s decision granting the Agency’s motion to dismiss Luck Brothers’
lawsuit on grounds that the company failed to exhaust its administrative
remedies before pursuing a remedy in the superior court.  In its complaint, Luck
Brothers alleged counts sounding in breach of contract and negligent
misrepresentation, among others, but also sought a declaratory ruling that it
had no obligation to exhaust administrative remedies because the Agency’s claims
process did not comport with the requirements of the Administrative Procedure
Act or due process.  We affirm the superior court’s decision, but clarify the
standard of review in appeals to the Vermont Transportation Board from Agency
determinations under the claims process for construction contracts.
¶ 2.            
The following facts are undisputed.  In 2011, the Agency advertised for
bids to reconstruct a half-mile section of North Main Street in downtown
Barre.  Luck Brothers submitted the low bid of $10,615,573 and was awarded the
contract for the project, which it commenced in the summer of 2011.  In June
2012, Luck Brothers submitted a claim to the Agency seeking approximately $855,000
in additional compensation beyond the bid amount based on alleged differing
site conditions from those assumed in the contract.  One year later, Luck
Brothers submitted a supplemental claim, making the total claim approximately $1.1
million.
¶ 3.            
The claim was submitted pursuant to the parties’ contract, which
incorporated, among other things, the Agency’s 2006 Standard Specifications for
the Construction Book, http://vtranscontracts.vermont.gov/construction-contracting/2006-standard-specifications,
and the General Special Provisions for those Specifications, dated December 7,
2010, http://vtranscontracts.vermont.gov/sites/aot_contract_administration/files/documents/2006GenSpecs.pdf. 
 The Specifications included provisions mandating a dispute resolution process
for resolving claims regarding federal-aid highway construction contracts administered
by the Agency, such as the instant one.
¶ 4.            
 Under these provisions, claims for additional compensation must be
submitted first to the Agency’s Construction Engineer, and in the event the
claim is denied, to the Agency’s Director of Program Development. 
Specifications, § 105.20.  If the Director denies the claim, the contractor may
appeal to the statutorily created Transportation Board.  See 19 V.S.A. § 3
(“A transportation board is formed to be attached to the agency of
transportation.”).
¶ 5.            
On September 7, 2012, less than three months after submitting its
$855,000 claim, Luck Brothers filed a complaint against the Agency in superior
court seeking, among other things, declaratory relief and compensatory
damages.  Substantively, the complaint alleged breach of contract, negligent
misrepresentation, and breach of an implied warranty on the part of the Agency,
and sought penalties under the Prompt Pay Act.  In support of these claims, Luck
Brothers alleged that it incurred significant, unexpected additional costs as
the direct result of the Agency’s failure to inform bidders of material
information that it was aware of concerning subsurface water conditions and
deteriorating sewer lines.
¶ 6.            
Procedurally, the complaint sought a declaratory ruling that Luck
Brothers had no obligation to exhaust its administrative remedies with respect
to its claims against the Agency because those remedies were inadequate and did
not comport with the requirements of due process.  In support of this claim,
Luck Brothers stated that the Transportation Board was empowered to provide
only appellate, as opposed to original, jurisdiction over its contract dispute,
and that neither the Legislature through the enabling statute nor the Agency
through rulemaking had provided a valid or enforceable administrative
proceeding for initially adjudicating contract disputes.  The complaint stated
that the provisions in the Specifications governing contract disputes were
“laden with ambiguity,” established unreasonably short deadlines for
contractors to make claims, and imposed unreasonably burdensome requirements relating
to such claims.
¶ 7.            
The Agency moved to dismiss the complaint on grounds of sovereign
immunity and failure to exhaust administrative remedies.  In an April 5, 2013
decision, the superior court declined to address the Agency’s sovereign
immunity argument, but granted its motion to dismiss based on Luck Brothers’
failure to exhaust its administrative remedies.  In dismissing the complaint on
these grounds, the court reasoned as follows:
Nothing in the case law or Vermont
statutes precludes the [Transportation] Board from adjudicating Luck’s claims
in a manner that affords both parties due process.  The Board itself has ruled
in a separate case that its historical practice and future intention is to
accord the parties before [it] in these types of disputes due process.  Counsel
for Luck . . . at the court’s January 22, 2013 hearing on the pending motion
candidly stated that the prior three cases he took to the Board were resolved
generally in conformity with the contractor’s due process rights.
  In these circumstances, the court fails
to perceive any legitimate basis to exempt Luck from the obligation to exhaust
administrative remedies by proceeding to the Board.  If a specific due process
issue emerges, it can be raised before the Board and on appeal from any
decision of the Board under [Vermont Rule of Civil of Procedure] 74.  If Luck
believes that one or more provisions of the contract are void, it can raise
those issues before the Board as well.  If Luck believes that the [Agency] has
breached its duty of good faith and fair dealing (such as by manipulating its
decisionmaking or delaying it unreasonably), that too can be raised before the
Board.
The court also found unavailing
any facial challenge grounded on the absence of rulemaking, stating that Luck
Brothers’ objection on that count was related to the terms of the contract, but
that due process was afforded in the administrative proceedings before the
Transportation Board rather than in the contract’s dispute resolution process. 
Accordingly, the court dismissed Luck Brothers’ suit for lack of jurisdiction.
¶ 8.            
On appeal, Luck Brothers states the following claims of error: (1) the
Agency’s contractual claims process, on its face, does not afford constitutionally
required due process protections; (2) because of the inadequacies of the claims
process, it was not required to exhaust its administrative remedies; (3) the
superior court erred in dismissing its rulemaking challenge; (4) the court
erroneously conflated its due-process and breach-of-contract claims; and (5)
the court abused its discretion by refusing to allow it to obtain discovery
with respect to its jurisdictional issues.
¶ 9.            
Luck Brothers first contends that the superior court erred by focusing
on the due process protections available in proceedings before the
Transportation Board rather than in the claims process involving the Agency’s
Construction Engineer and Director of Program Development.  According to Luck
Brothers, the question of whether contractors are entitled to due process at
the Agency level depends on whether one views the Engineer’s and Director’s
decisions as quasi-judicial adjudications or merely executive-level
decision-making. In Luck Brothers’ view, if those decisions are in fact
executive-level determinations rather than quasi-judicial adjudications, they
may not be accorded any deference in a hearing before the Board, which must
proceed on a clean slate.  Luck Brothers states that, in light of the superior
court’s apparent approval of a previous Board decision in another case describing
its review of contractual disputes as something less than de novo and
nondeferential, the court erred in concluding that due process protections at
the Board level were constitutionally sufficient.
¶ 10.        
While we agree with some of the points made in this analysis, ultimately
we conclude that the superior court properly dismissed this case based on Luck
Brothers’ failure to exhaust its administrative remedies.  “The constitutional
right to due process guarantees certain procedural protections before the
government may deprive an individual of a protected property right.”  In re
Miller, 2009 VT 112, ¶ 9, 186 Vt. 505, 989 A.2d 982.  A contractor’s right
to payment under a contract with the state is a property interest entitled to
due process protections.  See Gen. Elec. Co. v. N.Y. State Dep’t of Labor,
936 F.2d 1448, 1453 (2d Cir. 1991) (“It is well established that a contractor
has a right to timely payment for work it performs under a contract with a
state agency, and that such a right is a property interest protected by the due
process clause.”).  “Fundamentally, due process requires notice and an
opportunity to be heard at a meaningful time in a meaningful manner.”  Miller,
2009 VT 112, ¶ 9 (quotation omitted).  The United States Supreme Court has
emphasized that procedural due process is a flexible concept that “calls for
such procedural protections as the particular situation demands.”  Mathews
v. Eldridge, 424 U.S. 319, 334 (1976) (quotation omitted).
¶ 11.        
Although the Agency is statutorily authorized to award contracts “on
terms as it deems to be in the best interest of the state, for the
construction, repair, or maintenance of transportation related facilities,” 19
V.S.A. § 10(1), Vermont statutes do not require the use of any particular terms
or conditions in such contracts, and the Agency has not formally adopted rules
to that effect.  As noted above, the internal dispute resolution process is
mandated by Agency Specifications generally incorporated into construction
contracts that are awarded based on a public bid process.  Under that process,
the Construction Engineer evaluates claims for additional compensation beyond
the winning bid, Specifications, § 105.20(c), and in the event the
Engineer denies the claim, the Director of Program Development “act[s] as
referee in all questions of dispute arising under the terms of the Contract.”  Id.
§ 105.02(a).  Although the secretary of the Agency has broad authority to
conduct hearings “[i]n the administration of the laws relating to highways,” 19
V.S.A. § 7a(a), the Specifications do not provide contractors with a right
to a hearing in the internal claims process before the Engineer or Director.
¶ 12.        
If the Director denies a claim, contractors may appeal to the Transportation
Board, which is made up of seven members who are appointed by the governor with
the advice and consent of the senate and “whose interests and expertise lie in
various areas of the transportation field.”  19 V.S.A. § 3.  The Board is
legislatively vested with “[t]he regulatory and quasi-judicial functions
relating to transportation.”  Id. § 5(a).  The members of the Board
or a designated hearing officer may hear quasi-judicial matters and make
findings.  Id. § 5(c).  The superior court may review final orders
of the Board “on the record . . . pursuant to Rule 74 of the Vermont Rules of
Civil Procedure.”  Id.
¶ 13.        
The Board is specifically charged with providing “appellate review . . . regarding
legal disputes in the execution of contracts awarded by the agency.”  Id.
§ 5(d)(4).  Based on this language, we recently held “that the Board’s
appellate jurisdiction unquestionably extends to breach of contract cases
involving the Agency’s transportation decisions.”  Earth Constr., Inc. v.
State Agency of Transp., 2005 VT 82, ¶ 6, 178 Vt. 620, 882 A.2d 1172 (mem.)
(“Considering the breadth of this delegated quasi-judicial authority, we
conclude that the unambiguous language providing for appellate jurisdiction
over ‘legal disputes in the execution of contracts’ encompasses disputes
involving breach of contract.”).
¶ 14.        
The nature of the Board’s review of contract issues is not entirely
clear, as discussed by the superior court in reviewing recent Board decisions
in another case, In re TB-386 Miller Construction (Jan. 24, 2013).  In
that case, which involved a legal dispute in the execution of an Agency
construction contract, the Agency argued that the contractor was not entitled
to a “new trial” before the Board because the Board was statutorily authorized
to provide only on-the-record appellate review rather than a “contested case”
under the Administrative Procedures Act.  See 3 V.S.A. § 801(b)(2)
(defining contested case); 3 V.S.A. § 809 (setting forth notice and
hearing requirements of contested case).  The contractor argued that it was
entitled to a contested hearing before the Board because no due process
protections were afforded at the Agency level in its dispute resolution claims
process.
¶ 15.        
In response to these arguments, the Board stated that its historical
practice since enactment of the enabling legislation was to provide de novo
review of Agency contract decisions to ensure that the appealing parties were
afforded procedural due process.  The Board stated that, given the inadequate
record produced at the Agency level, it needed to create a record to enable it
to make an informed decision and to provide a record for the superior court in
the event of an appeal.  After reviewing its statutorily authorized powers that
are consistent with contested-case hearings, the Board concluded that parties appealing
Agency contract decisions were entitled to a review of factual and legal issues
by a disinterested tribunal in a de novo hearing.
¶ 16.        
The Board, however, appeared to modify this assessment of its standard
of review in response to the Agency’s motion to clarify and reconsider the
initial decision.  In this later decision in Miller, the Board confirmed
its prior ruling that contract appeals are contested cases, but, citing several
of our past decisions, concluded that its review of such appeals was on the
record rather than de novo.  Nonetheless, the Board emphasized that, to satisfy
due process, it had the authority to supplement a scant Agency record by
allowing or requiring the production of additional documents, the taking of
depositions, and the presentation of live testimony.  The Board concluded that
such a process was consistent with the Board’s historic practice.  In the end, according
to the Board, it would require such additional information as needed to allow
it to determine whether the Director’s decision was reasonable.
¶ 17.        
We recognize that the Board’s decision in Miller was not appealed
to the superior court and is not directly at issue here.  Nevertheless, the
Board’s understanding of its standard of review is critical in this case
because of Luck Brothers’ due process challenge and the superior court’s
reliance upon Miller in rejecting that challenge and dismissing Luck
Brothers’ suit.
¶ 18.        
  To summarize, Luck Brothers has asserted a facial challenge to the Agency’s
claims process, arguing that it is void and unenforceable because it was not
formally promulgated by rule and does not provide the due process protections
required by law.  Luck Brothers further contends that the Board’s review of its
contract dispute cannot provide the constitutionally required due process
protections because of the Board’s pronounced deferential, on-the-record review
of a presumptively biased Agency decision lacking such protections.  In short,
according to Luck Brothers, it is not required to exhaust its administrative
remedies because those remedies are inadequate.
¶ 19.        
For the reasons stated below, we uphold the superior court’s
determination that Luck Brothers must exhaust its administrative remedies
before bringing its contract dispute before the superior court.  As noted, the
Legislature has explicitly empowered the Transportation Board to adjudicate
legal disputes concerning the execution of state contracts.  We have
“underscore[d] the importance of prior adjudication by administrative bodies.” 
C.V. Landfill, Inc. v. Envtl. Bd., 158 Vt. 386, 389, 610 A.2d 145, 147
(1992); see In re State Aid Highway No. 1, Peru, 133 Vt. 4, 8, 328 A.2d
667, 669 (1974) (“[P]roceedings under various declaratory judgment statutes
cannot be substituted for adequate and available remedies of review . . . of
decisions by administrative tribunals.”); cf. Molesworth v. Univ. of Vt.,
147 Vt. 4, 7, 508 A.2d 722, 723 (1986) (“Where . . . the Legislature has
delegated authority to the Trustees of the University of Vermont to determine
eligibility for reduced tuition charges . . . the declaratory judgments vehicle
can not be used to frustrate that legislative choice.”).  Accordingly, we have
“consistently held that when administrative remedies are established by statute
or regulation, a party must pursue, or ‘exhaust,’ all such remedies before
turning to the courts for relief.”  Jordan v. State Agency of Transp,
166 Vt. 509, 511, 702 A.2d 58, 60 (1997).  
¶ 20.        
“This long-settled rule of judicial administration serves the dual
purposes of protecting the authority of the administrative agency and promoting
judicial efficiency.”  Id. at 512, 702 A.2d at 60; see Weinberger v.
Salfi, 422 U.S. 749, 765 (1975) (“Exhaustion is generally required as a
matter of preventing premature interference with agency processes, so that the
agency may function efficiently and so that it may have an opportunity to
correct its own errors, to afford the parties and the courts the benefit of its
experience and expertise, and to compile a record which is adequate for
judicial review.”).  Hence, we generally will not interfere with an agency’s
decisions regarding issues within its legislatively permitted jurisdiction
“unless and until all administrative remedies have been invoked.”  Jordan,
166 Vt. at 512, 702 A.2d at 60.  Indeed, exhaustion of administrative remedies
is a presumed requirement, and the burden is on the party seeking to bypass the
administrative process to show that it fits within an exception to this general
rule.   Id.
¶ 21.        
Exhaustion of administrative remedies is often required even when a
party asserts constitutional challenges to administrative proceedings.  This is
so because, beyond mere adjudication of a dispute, administrative processes
serve to develop a record that can better inform a fair resolution of the
case.  Town of Bridgewater v. Dep’t of Taxes, 173 Vt. 509, 511-12, 787
A.2d 1234, 1237-38 (2001) (mem.); see Travelers Indem. Co. v. Wallis,
2003 VT 103, ¶ 17, 176 Vt. 167, 845 A.2d 316 (stating that constitutional
claims often involve weighing of competing interests that would be informed by
how legislatively authorized administrator weighs those interests).  Generally,
“a facial challenge to the governing statute, or to rules adopted pursuant to
that statute, may be allowable in a declaratory judgment action,” but “use of a
declaratory judgment action to attack the application of the statute in
particular cases is not appropriate.”  Wallis, 2003 VT 103, ¶¶ 18-19
(concluding that appellant could bring declaratory judgment action to facially
challenge statute, but not to challenge legality of Department of Labor and
Industry’s general practices with respect to interim orders); see Williams
v. State, 156 Vt. 42, 53-54, 589 A.2d 840, 847 (1990) (stating that
although commissioner of Department of Motor Vehicles was “not authorized to
rule upon the constitutionality of the statutes he is bound to
administer,” he had jurisdiction to consider parties’ claims that statutes were
administered in unconstitutional manner); Alexander v. Town of Barton,
152 Vt. 148, 151, 565 A.2d 1294, 1296 (1989) (stating that while administrative
agencies cannot rule on constitutionality of legislation, they can adjudicate
constitutional questions in determining validity of statutorily delegated
agency practices); Christian Bros. Inst. of N.J. v. N. N.J. Interscholastic
League, 432 A.2d 26, 29 (N.J. 1981) (stating that administrative agency may
rule on constitutional issues relevant and necessary for resolution of
questions within scope of its jurisdiction).
¶ 22.        
In this case, Luck Brothers does not directly challenge the validity of
any statute.  Instead, it challenges the Agency’s internal process for dealing
with claims involving construction contracts.  Indirectly, however, Luck
Brothers is also challenging the administrative process as a whole regarding
construction contract claims, including review before the Transportation
Board.  The company argues that, taking into account the Board’s revised view
in Miller, wherein they adopted an on-the-record standard of review
regarding construction contract disputes, a contractor is precluded from
getting a hearing that affords all of the due process protections, including a
full opportunity to present its case before a neutral decision maker.  Because
Luck Brothers is arguing that the entire process is constitutionally flawed,
and because the Board has struggled to construe its role under the enabling
act, we address and clarify its standard of review in this opinion.  Based on
that standard, articulated below, we conclude that Luck Brothers cannot
demonstrate a lack of due process so as to allow it to avoid exhausting
legislatively established administrative remedies.   
¶ 23.        
As a preliminary matter, we agree with Luck Brothers that the Agency
evaluation of construction-contract claims is not adjudicative in nature, but
rather an executive-level, contract-dispute-resolution process that is neither set
forth in formal Agency rules nor part of legislatively authorized
administrative adjudicative proceedings.  The Agency does not point to any
provisions in the Specifications or elsewhere that establish a formal process
or due process protections regarding determinations by the Engineer and
Director on such claims.  In short, the claims process is not adjudicative in
nature.
¶ 24.        
Consequently, we also agree with Luck Brothers that the only
legislatively authorized adjudicative administrative process—review by the
Transportation Board—must provide contractors with a non-deferential standard
of review that affords due process protections.  Because the Agency evaluation
of contract claims is an internal, informal dispute-resolution process that
does not require any due process protections, the Board owes no deference to an
Agency decision to reject a contract claim, beyond the persuasive value of the
decision.  Cf. Gryl v. Shire Pharm. Grp. PLC, 298 F.3d 136, 145 (2d Cir.
2002) (stating that agency “no-action letters constitute neither agency
rule-making nor adjudication and thus are entitled to no deference beyond
whatever persuasive value they might have”); Potier v. Comm’r of Ins.,
753 So. 2d 305, 309 (La. Ct. App. 1999) (stating that decision of patient
compensation fund to fund estate was not adjudicative in nature and therefore
“not entitled to the deference normally afforded administrative agency
determinations”).
¶ 25.        
The Agency claims that it is entitled to deference because of its
special expertise in construction contracts, but as the superior court pointed
out, the Board itself has specialized expertise concerning industry norms, the
doctrines that have arisen around them, and the highly fact-specific nature of
the issues and disputes typically arising from construction contracts.  See 19
V.S.A. § 3 (requiring governor to appoint so far as possible “board members
whose interests and expertise lie in various areas of the transportation
field”).  The Board is well equipped to review both technical factual issues
surrounding construction contracts and legal questions concerning the alleged
breach of such contracts.  See Earth Constr., 2005 VT 82, ¶ 9
(noting that “the Board has historically exercised authority to resolve
questions integral to the breach of contract determination,” and that “the
Transportation Board presumably possesses expertise” in “specialized field of
transportation” and “in assessing standards of contract performance that are
often implicated in legal disputes over the breach of contract”).
¶ 26.        
The Agency also asserts, as it did in the Miller case before the
Board, that the enabling legislation plainly accords the Board only limited
on-the-record “appellate review.”  See 19 V.S.A. § 5(d)(4) (stating that
Board shall “provide appellate review . . . regarding legal disputes in the
execution of contracts awarded by the agency”).  We disagree.  Appellate courts
normally apply a “nondeferential on-the-record standard of
review . . . to lower court determinations regarding
questions of law or mixed questions of law and fact.”  State v. Madison,
163 Vt. 360, 371, 658 A.2d 536, 543 (1995).  By contrast, nothing in the
enabling statute here restricts the Board’s review to the record produced in
the Agency.  Indeed, to the contrary, the statute explicitly empowers the Board
to hold evidentiary hearings, to issue subpoenas for the testimony of witnesses
or the production of evidence, to make findings, to issue orders and decrees,
and to render judgments.  See 19 V.S.A. § 5(c), (f).  When the record from
the Agency is insufficient for the Board to make an informed decision, it may
enhance the record to accomplish that end.
¶ 27.        
Thus, the enabling statute establishes a standard of review somewhere in
between a de novo hearing that treats the agency decision as non-existent and “usual
appellate review, since the board may evaluate evidence in record form, as well
as receive direct testimony.”  In re Wheelock, 130 Vt. 136, 140, 287
A.2d 569, 572 (1972) (describing review by Employment Security Board as set
forth in 21 V.S.A. § 1344); see Madison, 163 Vt. at 368-69, 658
A.2d at 542 (noting that courts and commentators have distinguished between
terms “hearing de novo” or “trial de novo” and term “review de novo”).  Review
before the Transportation Board, although it does not necessarily involve a
full-blown hearing and does not treat the Agency’s decision as if it did not
exist, is essentially de novo review.  See Madison, 163 Vt. at 370, 658
A.2d at 543 (defining term “review de novo” as “a nondeferential review that
generally relies on, but is not restricted to, the record”); 3 C. Koch,
Administrative Law and Practice § 10.2, at 18 (2d ed. 1997) (stating that de
novo judicial review of agency decision is usually based on original
administrative record).
¶ 28.        
The Board in Miller felt compelled to define its review as
deferential, on-the-record review based on several of our prior decisions, but
those cases are distinguishable.  In each of them, we construed the standard of
review applied by a court to a legislatively authorized administrative
decision.  See Ketchum v. Town of Dorset, 2011 VT 49, ¶ 16, 190 Vt.
507, 22 A.3d 500 (mem.) (concluding that superior court provides on-the-record
review of town selectboard’s legislatively authorized decision to reclassify town
road, where enabling statute was silent on standard of review); Rhoades
Salvage/ABC Metals v. Town of Milton Selectboard, 2010 VT 82, ¶¶ 9-10,
188 Vt. 629, 9 A.3d 685 (mem.) (concluding that superior court provided
on-the-record review of town selectboard’s decision to deny junkyard permit, where
enabling statute was silent on standard of review); GP Burlington S., LLC v.
Dep’t of Taxes, 2010 VT 23, ¶ 16, 187 Vt. 421, 996 A.2d 180 (rejecting
taxpayer’s claim that it was entitled to de novo review by superior court of
appeal from Department of Taxes’ denial of tax refund, where statute was silent
on standard of review);  Town of Victory v. State, 2004 VT 110,
¶¶ 14, 17, 177 Vt. 383, 865 A.2d 373 (concluding that superior court’s
review of land value set by division of property valuation is deferential
arbitrary-and-capricious standard under statute that authorized “appeal” to
superior court and was silent on standard of review); Conservation Law
Found. v. Burke, 162 Vt. 115, 126, 645 A.2d 495, 501-02 (1993) (concluding
that superior court’s review of Agency of Natural Resources’ decision to grant
air pollution control permit for medical waste incinerator is deferential
on-the-record standard under statute authorizing review as occurring “by
appeal”).
¶ 29.        
Apart from any reliance on “the ability of parties to develop facts
before the agency,” Burke, 162 Vt. at 126, 645 A.2d at 502, our holdings
in these cases were grounded on separation-of-powers principles precluding
courts from acting as superagencies in areas in which agencies are
legislatively authorized to deal with matters within their specialized
expertise.  See Town of Victory, 2004 VT 110, ¶ 17 (stating that
presumption against de novo court review of executive agency decision “is
rooted in the separation of powers between the judicial and executive branches”
and recognition of agency’s legislatively granted authority to deal with
matters in which it has specialized expertise); Burke, 162 Vt. at 126,
645 A.2d at 502 (“[T]he superior court is not a higher environmental agency
entrusted with the power to make environmental law and policy de novo or with
the power to apply the policy it develops to the facts it finds.”).  That is
not a concern in this case, where we are considering the standard of review of
an agency’s informal dispute-resolution decision by a legislatively established
administrative Board with specialized expertise in the matter being reviewed.
¶ 30.        
Here, the Board is empowered to require development of the record, and
we have determined that it must apply a de novo, nondeferential standard of
review to the Agency dispute-resolution decisions under the Agency’s
administrative-claims process.  Given these due process protections, we discern
no basis to allow Luck Brothers to avoid that legislatively authorized administrative
review and have its contract dispute reviewed initially in the superior court. 
None of the exceptions claimed by Luck Brothers exempts it from having its claim
reviewed first by the Transportation Board after the Engineer and Director have
rendered their determinations.
¶ 31.        
Regarding Luck Brothers’ argument that the Agency was required to engage
in formal rulemaking to establish procedures for its claim process, that
argument falls away in light of our determination that the claims process is
not primarily adjudicative in nature and that contractors can obtain procedural
due process protections in an appeal to the Transportation Board under the
standard of review outlined above.  Luck Brothers argues that the Agency was
required to adopt rules for its claim process pursuant to 3 V.S.A.
§ 831(a) because “due process” directs the agency to do.  That argument is
unavailing for the reasons stated above, even assuming that rulemaking
otherwise would have been required.  Cf. Wallis, 2003 VT 103, ¶ 18 n.5
(concluding that alleged failure to provide, by rule, standard beyond that set
out in statute was not challenge to validity or applicability of rule as set
forth in 3 V.S.A. § 807).  By the same token, Luck Brothers cannot prevail
on its argument that the Agency decisionmakers in the claims process are not
neutral adjudicators.
¶ 32.        
Nor can Luck Brothers avoid administrative review based on the lack of
time deadlines for decisionmaking within the claims process or on alleged ex
parte communications between the Agency decisionmakers and others who influence
their decisions.  As for the latter point, the record on review by the
Transportation Board is not necessarily limited to that submitted by the Agency,
but rather “consists of all documents and materials directly or indirectly
considered by agency decision-makers,” including “all documents considered by
the agency employees whose input reached the decisionmaker.”  Burke, 162
Vt. at 127, 645 A.2d at 502 (quotations omitted) (emphasis in original).
¶ 33.        
As for Luck Brothers’ assertions concerning delay in the decisionmaking
by the Engineer and Director, such assertions were neither pled in Luck
Brothers’ complaint nor raised in its memorandum in opposition to the Agency’s
motion to dismiss as a basis to avoid exhausting administrative remedies.  Luck
Brothers generally argued that the absence of deadlines for the Engineer and
Director compromised the adequacy of the claims resolution process, but did not
contend that the delay in this case had been so extensive as to warrant direct
resort to the courts.  And, in fact, the record is not entirely clear as to
when Luck Brothers’ claim was fully submitted.  It appears from the record that
Luck Brothers’ initial claim was not fully submitted until June 2012. 
According to the Agency, that claim included over 350 pages of documentation
and argument.  Yet, less than three months later, Luck Brothers initiated its suit
in the superior court.  In July 2013, Luck Brothers submitted a supplemental
claim that, according to the State, increased the total documentation of the
claim to more than 600 pages.
¶ 34.        
Given the absence of a factual basis in the record to support an
argument that Luck Brothers did not specifically raise below, we decline to
consider the argument.  See State v. Ben-Mont Corp., 163 Vt. 53, 61, 652
A.2d 1004, 1009 (1994) (“To properly preserve an issue for appeal a party must
present the issue with specificity and clarity in a manner which gives the
trial court a fair opportunity to rule on it.”).  Moreover, we decline to
permit Luck Brothers to adjudicate its breach-of-contract action in the first
instance in superior court—in contradiction of the Legislature’s will—based
solely on the fact that the Agency has not established deadlines for the claims
process.  See Kiewet W. Co. v. City and Cnty. of Denver, 902 P.2d 421,
424 (Colo. App. 1994) (stating that “courts imply an obligation on the part of
the government officials to act on the contractor’s claim with reasonable
dispatch” and thus “have generally allowed the contractor to avoid complying
with these [administrative] procedures only after it has initiated the
processing of a claim and the government official or officials have
unreasonably delayed acting on the claim”).
¶ 35.        
Finally, we discern no basis to conclude that the superior court abused
its broad discretion in staying discovery during the pendency of Luck Brothers’
facial challenge to the Agency’s claims process.  See V.R.C.P. 26(c)-(d)
(stating that trial court has authority to control sequence and timing of
discovery and to stay discovery).  Luck Brothers’ extensive discovery request
was aimed at showing the lack of due process provided by the Agency’s claims
process.  As explained above, however, we agree with the superior court that
the due process protections to which Luck Brothers is entitled are provided in
review by the Transportation Board.  Accordingly, discovery into the lack of
due process protections in the claims process was unnecessary to address Luck
Brothers’ facial due process challenge.
Affirmed.
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Chief
  Justice

 

