OMAHA EXPOSITION AND RACING, INC., APPELLEE, v. NEBRASKA STATE RACING COMMISSION ET AL., APPELLEES, AND HALL COUNTY LIVESTOCK IMPROVEMENT ASSOCIATION AND NEBRASKA THOROUGHBRED BREEDERS ASSOCIATION, APPELLANTS.
No. S-19-020
Nebraska Supreme Court
September 18, 2020
307 Neb. 172
Administrative Law: Judgments: Appeal and Error. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record. - ____: ____: ____. When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.
- Statutes: Appeal and Error. Statutory interpretation presents a question of law, for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.
- Jurisdiction: Appeal and Error. A jurisdictional question which does not involve a factual dispute is determined by an appellate court as a matter of law.
- Jurisdiction: Words and Phrases. Subject matter jurisdiction is the power of a tribunal to hear and determine a case in the general class or category to which the proceedings in question belong and to deal with the general subject matter involved.
- Actions: Jurisdiction. Lack of subject matter jurisdiction may be raised at any time by any party or by the court sua sponte.
- ____: ____. A court action taken without subject matter jurisdiction is void.
Administrative Law: Jurisdiction: Appeal and Error. Where a district court has statutory authority to review an action of an administrative agency, the district court may acquire jurisdiction only if the review is sought in the mode and manner and within the time provided by statute. - Appeal and Error. The right of appeal in Nebraska is purely statutory.
- Jurisdiction: Statutes: Appeal and Error. The requirements of a statute underlying a right to appeal are mandatory and must be complied with before the appellate court acquires jurisdiction of the subject matter of the action.
- Statutes: Legislature: Intent. In construing a statute, a court must determine and give effect to the purpose and intent of the Legislature as ascertained from the entire language of the statute considered in its plain, ordinary, and popular sense.
- Administrative Law: Jurisdiction: Appeal and Error. In analyzing the requirements to initiate judicial review under the Administrative Procedure Act, for a district court to acquire jurisdiction to review a final decision of an administrative agency, the appellant must file the petition and serve summons.
- Jurisdiction. Parties cannot confer subject matter jurisdiction upon a judicial tribunal by either acquiescence or consent, nor may subject matter jurisdiction be created by waiver, estoppel, consent, or conduct of the parties.
- Administrative Law: Parties: Appeal and Error. Determining whether an agency acted beyond its role as a neutral fact finder to qualify as one of the “parties of record” under
Neb. Rev. Stat. § 84-917 (Reissue 2014) requires looking at the nature of the administrative proceeding under review. - Administrative Law: Words and Phrases. An administrative agency is a neutral factfinding body when it is neither an adversary nor an advocate of a party.
- Administrative Law: Parties. When an administrative agency acts as the primary civil enforcement agency, as distinguished from determining the rights of two or more individuals in a dispute before such agency, it is more than a neutral factfinding body.
- ____: ____. An agency that is charged with the responsibility of protecting the public interest, and not merely determining the rights of two or more individuals in a dispute, is more than a neutral factfinding body.
- Administrative Law: Parties: Appeal and Error. When evaluating whether an agency is a neutral fact finder under
Neb. Rev. Stat. § 84-917(2)(a) (Reissue 2014), courts look to the agency‘s actions as to the dispute at issue, the statutory basis upon which the agency was
Administrative Law. Where an agency acts beyond the role of a neutral fact finder due to its responsibility to the public interest, its role as the primary civil enforcement entity, or its licensing and credentialing function, the agency takes some action or is required to make some consideration beyond merely resolving a dispute between outside parties.
Appeal from the District Court for Lancaster County: SUSAN I. STRONG, Judge. Vacated and dismissed.
Cathy S. Trent-Vilim, John M. Walker, and Daniel J. Waters, of Lamson, Dugan & Murray, L.L.P., for appellant Hall County Livestock Improvement Association.
O. William VonSeggern for appellant Nebraska Thoroughbred Breeders Association.
Christopher D. Jerram, Raymond E. Walden, and Michael T. Gibbons, of Woodke & Gibbons, P.C., L.L.O., for appellee Omaha Exposition and Racing, Inc.
Tara Tesmer Paulson, of Rembolt Ludtke, L.L.P., for appellee Nebraska Horsemen‘s Benevolent and Protective Association, Inc.
HEAVICAN, C.J., MILLER-LERMAN, CASSEL, STACY, FUNKE, PAPIK, and FREUDENBERG, JJ.
FUNKE, J.
This case concerns moneys accumulated from deductions of horseracing wagers under
BACKGROUND
Appellant NTBA is a nonprofit corporation formed to promote breeding of thoroughbred horses in Nebraska. Appellant Hall County Livestock Improvement Association, doing business as Fonner Park, is a nonprofit corporation for the promotion of agriculture, fairs, and horseracing. Fonner Park is licensed and authorized to operate as a horseracing track and participate in the simulcasting of horseraces in Grand Island, Nebraska. Fonner Park and Agricultural Park, a Nebraska racetrack located in Columbus, Nebraska, account for 90 percent of all live horseracing in Nebraska.
Omaha Exposition and Racing, Inc. (OER), is a nonprofit corporation and is licensed and authorized for horseracing and simulcasting services. OER operates and does business as Horsemen‘s Park in Omaha, Nebraska, and Lincoln Race Course in Lincoln, Nebraska. Horsemen‘s Park and Lincoln Race Course hold live races each year, but most of their revenues are derived from simulcasting. The facilities at Horsemen‘s Park and Lincoln Race Course are owned by HBPA, which is a member of OER and holds two of the four OER governing board seats. HBPA is a nonprofit corporation representing a majority of all licensed owners and trainers that race thoroughbred horses at Nebraska licensed racetracks.
Nebraska horseracing tracks are statutorily required to deduct a percentage of all wagers made at their tracks to promote and preserve agriculture, horse breeding, and horseracing in Nebraska.1 These deducted amounts are to be distributed
Prior to the 1990‘s, each horseracing track in Nebraska had individual bookkeepers, including HBPA who used its bookkeeper to distribute purse awards at the tracks. In 1996, Ak-Sar-Ben, an Omaha racetrack, closed and the remaining tracks determined it would be economically beneficial to transfer their bookkeeping duties to a single bookkeeper, the one used by HBPA. NTBA alleges this system was approved by the Commission and worked without issue until the current dispute arose in 2017.
In 1998, because the majority of live horseracing occurred at only a few of the parks, the presidents of HBPA and NTBA entered into an agreement for the redistribution of a portion of the funds collected from the statutorily required deductions from wagers on simulcast races. That year, the amount deducted from simulcast races totaled approximately $175,000. The parties agreed to distribute $80,000 to Fonner Park, $25,000 to Agricultural Park, and $70,000 to a now-relocated Lincoln racetrack. Appellants allege that until 2017, the parties continued to allocate a portion of funds deducted from simulcast races to individual racetracks by determining what an equitable amount of breeder purses were to be and HBPA‘s bookkeeper paying out those amounts.
By a letter in June 2017, HBPA advised NTBA that the bookkeeper, at HBPA‘s direction, was suspending distribution of the deducted funds because Fonner Park failed to contribute its share. According to Fonner Park, this alleged deficit was
On July 7, 2017, NTBA submitted an emailed request to be on the agenda for the upcoming Commission meeting. In the email, NTBA asked the Commission to order “the HBPA[‘s] Purse Bookkeeper to pay all NTBA accumulated funds in the Purse Bookkeeper[‘]s possession to the [NTBA].” In a subsequent email, NTBA modeled the statutory language for the deducted funds and described “NTBA accumulated funds” as “funds generated for our breeders’ awards, purse supplements, and purses.” NTBA also asked the Commission to order that all future deducted funds by Nebraska racetracks be paid over to NTBA and its bookkeeper for allocation and disbursement.
The Commission held hearings on NTBA‘s request at its meetings on July 20, October 25, and December 19, 2017. On February 21, 2018, the Commission issued an order granting NTBA‘s request. The order stated that the Commission‘s statutory authority to enforce all state laws covering horseracing extended to enforcement of the deduction statutes and determination of a proper custodian of the funds generated. The Commission found that the current structure wherein the HBPA bookkeeper collected and distributed the funds allowed for the potential of future conflicts such as underpayment or misappropriation. Finding NTBA is the proper entity to serve as custodian of the funds, the Commission directed that all current deducted funds held by HBPA and its bookkeeper be transferred to NTBA and that all future funds deducted by any Nebraska racetracks be paid to NTBA.
Additionally on March 1, 2018, OER filed a copy of a summons for NTBA addressed to “Linda F. Hoffman & Zack Mader.” However, no return receipt was filed. On March 22, NTBA filed an answer.
After a hearing on the matter, the district court reversed and vacated the Commission‘s order. The court found the Commission lacked statutory authority to appoint a custodian of the funds and require payment of the funds by Nebraska racetracks to that appointed entity. The court explained that the statutes governing the deduction of the funds are unambiguous and that the Legislature did not empower any entity other than the licensed racetracks with responsibility to collect the funds or delegate custody of the funds to anyone other than the licensed racetracks. The court additionally determined that the past practice of subsidizing other racetracks by allowing NTBA to allocate a portion of the generated funds based on its determination of what was equitable was contrary to the statutory directive that the funds be distributed at the racetrack where they were generated. Accordingly, the court concluded that the Commission erred in appointing NTBA as custodian and granting NTBA the authority to collect and determine distribution of the deducted funds.
Appellants assign, consolidated and restated, that the district court erred by (1) considering the petition for further review while lacking subject matter jurisdiction due to OER‘s failure to sufficiently serve NTBA and the Commission, (2) determining the Commission did not have authority to appoint a custodian of the deducted funds, (3) reaching the issue of where the deducted funds may be used when the issue was not brought before the Commission, and (4) determining all deducted funds must be used at the racetrack where the funds are generated.
STANDARD OF REVIEW
[1,2] A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act (APA) may be reversed, vacated, or modified by an appellate court for errors appearing on the record.4 When reviewing an order of a district court under the APA for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.5
[3] Statutory interpretation presents a question of law, for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.6
[4] A jurisdictional question which does not involve a factual dispute is determined by an appellate court as a matter of law.7
ANALYSIS
Before we can consider whether the Commission was authorized to appoint NTBA as the custodian of the funds and
Appellants claim that the district court lacked subject matter jurisdiction due to insufficiencies in OER‘s service of NTBA and the Commission under
SUBJECT MATTER JURISDICTION
Contrary to appellees’ arguments, under the APA, service of necessary parties in a petition for further review is an issue of subject matter jurisdiction.10
[5-7] Subject matter jurisdiction is the power of a tribunal to hear and determine a case in the general class or category to which the proceedings in question belong and to deal with the general subject matter involved.11 Lack of subject matter jurisdiction may be raised at any time by any party or by the
[8] Where a district court has statutory authority to review an action of an administrative agency, the district court may acquire jurisdiction only if the review is sought in the mode and manner and within the time provided by statute.14
[9-11] The right of appeal in Nebraska is purely statutory.15 The requirements of a statute underlying a right to appeal are mandatory and must be complied with before the appellate court acquires jurisdiction of the subject matter of the action.16 In construing a statute, a court must determine and give effect to the purpose and intent of the Legislature as ascertained from the entire language of the statute considered in its plain, ordinary, and popular sense.17
[12] In analyzing the requirements to initiate judicial review under the APA, we have held that for a district court to acquire jurisdiction to review a final decision of an administrative agency, the appellant must file the petition and serve summons.18 Section
Because
Sufficiency of OER‘s Service of NTBA
Appellees do not contest that OER failed to serve NTBA within 30 days of the filing of the petition. Instead, appellees claim NTBA voluntarily appeared by filing its answer and submitted itself to the district court‘s authority.
Appellees’ argument is premised on the proposition that service of nongovernmental parties of record is an issue of only personal and not subject matter jurisdiction. As discussed, this proposition is incorrect and the service of nongovernmental parties of record under
[13] Parties cannot confer subject matter jurisdiction upon a judicial tribunal by either acquiescence or consent, nor may
Because NTBA was a party of record to the agency action and it is undisputed that OER did not serve NTBA within 30 days of filing the petition, the district court lacked subject matter jurisdiction to consider the petition.
Sufficiency of OER‘s Service of Commission
Similarly, OER‘s service of the Commission was insufficient and also deprived the district court of subject matter jurisdiction.
The required means and manner of service of an agency under the APA depends on whether the agency was a party of record to the proceedings. When determining whether the agency is a party of record,
Appellants argue that OER‘s service on the Commission was insufficient because the Commission acted beyond a neutral factfinding body, making it a necessary party of record and requiring service of the Attorney General within 30 days of the filing of the petition. Because OER failed to serve the Attorney General in accordance with
[14-17] Determining whether an agency acted beyond its role as a neutral fact finder to qualify as one of the “parties of record” under
[18,19] When evaluating whether an agency is a neutral fact finder under
For instance, in McDougle v. State ex rel. Bruning,31 the Division of Public Health of the Department of Health and Human Services revoked a practitioner‘s licenses to practice as a mental health practitioner and as a provisional alcohol and drug counselor after previously adopting regulations on statutorily impermissible unprofessional conduct of a licensee, conducting an investigation as to the practitioner‘s possible violations of the regulation, recommending the Attorney General file a petition for disciplinary action, and holding a hearing before the department‘s chief medical officer and director. In re 2007 Appropriations of Niobrara River Waters32 involved a challenge to the Department of Natural Resources’ issuance of closing notices for the purpose of administering water, and the department sought to advocate for the validity of its administration. In In re Application of Metropolitan Util. Dist.,33 a utilities district applied to the Nebraska Public Service Commission (PSC) for certification as a competitive natural gas provider, the PSC had authority to approve or
In the current action, the Commission was not merely determining the rights of two or more individuals in a dispute. It was also acting pursuant to its claimed licensing and credentialing authority to approve a custodian of the funds based upon the public interest.
NTBA requested that funds deducted under
The Commission‘s statutory purpose is to provide statewide regulation of horseracing in order to prevent and eliminate corrupt practices and fraudulent behavior, and thereby maintain a high level of integrity and honesty in the horseracing
Under this authority, the Commission adopted an administrative regulation, which states:
Each Association shall have a bookkeeper, approved by the Commission, whose duty it is to keep and preserve books which will reflect the deposits or other credits and withdrawals or other charges that may be made by an owner or other licensee. Said bookkeeper shall have an office at the track and said office shall be open on each racing day during the hours specified by the Commission. Said bookkeeper must also furnish such reports and information as may be required by the Commission or its representatives.42
In reviewing NTBA‘s request, the Commission considered whether to approve NTBA and its appointed bookkeeper for the management of the deducted funds or to maintain its alleged approval of HBPA‘s bookkeeper for such management. The Commission based its ruling on consideration of either
In arguing the Commission was acting as a neutral fact finder, appellees note the Commission held evidentiary hearings where interested parties made appearances, exhibits were received, and the parties briefed their arguments. However, such procedures and similarities to the judicial process do not necessitate that the Commission was acting as a neutral fact finder.
In Shaffer v. Nebraska Dept. of Health & Human Servs.,43 a Medicaid recipient was denied the continuation of coverage for private duty nursing services by a managed care organization because the managed care organization deemed the services were not medically necessary. The recipient appealed to the Department of Health and Human Services (DHHS), which held a hearing where the parties appeared before a DHHS hearing officer, presented testimony and evidence, and submitted arguments.44 Based upon the record made at the hearing, DHHS’ director of the Division of Medicaid & Long-Term Care concluded that the services were not medically necessary and agreed with the managed care organization‘s denial of coverage.45 While DHHS’ order involved a dispute between two or more parties and was the result of an evidentiary hearing, we determined DHHS’ involvement
The Commission‘s actions in the instant case are similar to DHHS’ actions in Shaffer. The Commission was acting under broad regulatory, enforcement, and licensing authority. The Commission adopted and promulgated rules that require racetracks to have bookkeepers and which require the Commission‘s approval of those bookkeepers. In approving NTBA as the custodian of the funds and the use of its bookkeeper while revoking the approval of HBPA‘s bookkeeper, the Commission considered the potential effect its decision would have on the horseracing industry and its exposure to potential mistake, corrupt practices, and fraud.
This case is distinguishable from Metropolitan Util. Dist. v. Aquila, Inc.47 There, a dispute between a utilities district and Aquila, Inc., two distributers of natural gas which both had contracts with the same natural gas supplier, arose over the utilities district‘s proposed construction of a gas main extension.48 Aquila argued in a complaint before the PSC that the utilities district‘s extension violated
There are no such limiting statutes that restrained the Commission‘s consideration in approving a bookkeeper and custodian of the deducted funds. The Commission was generally charged with overseeing the horseracing industry to ensure all funds received by the Commission are properly distributed, licensing and credentialing horseracing entities, enforcing horseracing statutes and regulations, and establishing rules and regulations governing horseracing and the licensing of horseracing associations.54 Additionally, in the requirement of the Commission‘s approval of racetracks’ bookkeepers, the Commission was not limited in its evaluation to specific statutorily prescribed factors.
For the reasons stated above, we find that the Commission was acting beyond its neutral factfinding role when it considered NTBA‘s request to approve NTBA and its bookkeeper as the custodian of the deducted funds and revoke the previous approval of HBPA. Therefore, the Commission was a party of record and appellees were required to serve summons on the
Appellees contend that OER complied with
In analyzing the service of an agency under
[A] plaintiff may elect to have service made by . . . :
. . . .
(c) Certified mail service which shall be made by (i) within ten days of issuance, sending the summons to the defendant by certified mail with a return receipt requested showing to whom and where delivered and the date of delivery, and (ii) filing with the court proof of service with the signed receipt attached[.]
In order for the district court to obtain subject matter jurisdiction, OER was required to serve the Commission within 30 days of filing the petition as provided by
Though perhaps not the only method available to challenge the Commission‘s order, a petition for judicial review was the method chosen by OER. As a result, OER was obligated to bring the action in compliance with
Because the district court lacked subject matter jurisdiction to consider OER‘s petition for judicial review, we, in turn, lack jurisdiction to consider the district court‘s review.58 Even when appellate jurisdiction is lacking, however, we have the power to vacate a void order and, if necessary, to remand the cause with appropriate directions.59 As a result, we must vacate the order of the district court.
In vacating the order of the district court, we make no determination as to the merits of the Commission‘s order, whether the Commission had authority to consider NTBA‘s request, whether the Commission had authority to appoint
CONCLUSION
OER failed to seek district court review of the Commission‘s order in the mode and manner provided by
VACATED AND DISMISSED.
PAPIK, J., concurring.
Nebraska‘s Administrative Procedure Act (APA) allows those aggrieved by decisions of state agencies to seek review of those decisions in district court. See
But the interpretation of the APA we embraced in Concordia Teachers College affects more than just those concerned with consistent use of legal terminology. As this case illustrates, application of the Concordia Teachers College rule can preclude judicial review in cases in which judicial review would be available if service of summons were, as in other contexts, a matter of personal jurisdiction. Here, NTBA and the
While dictated by Concordia Teachers College and its progeny, this strikes me as a strange outcome. One would expect the purpose of a requirement that parties be served with a summons to be to ensure that parties involved have notice of the proceedings and an opportunity to participate before the court takes action that potentially affects the outcome of the agency proceedings in which they had an interest. But when parties make a general appearance within the time before which summons must be served, as the NTBA and the Commission did here, there is no need to worry about whether those parties received adequate notice. And I cannot conceive of any other reason why a district court should be precluded from exercising judicial review when a party who was not served with a summons nonetheless willingly engages on the merits in a judicial review proceeding. As far as I can tell, our interpretation of the APA in Concordia Teachers College has established, at best, a counterintuitive exception to the general rule that effective service is a requirement of personal rather than subject matter jurisdiction, and, at worst, a jurisdictional trap. See, e.g., J.S. v. Grand Island Public Schools, 297 Neb. 347, 899 N.W.2d 893 (2017) (citing Concordia Teachers College v.
Given the important role of judicial review of administrative agency actions, this strikes me as a particularly unfortunate area for counterintuitive rules or jurisdictional traps. While usually belonging to the executive branch, administrative agencies that promulgate rules and regulations and adjudicate violations of those rules and regulations also exercise functions that appear to be more legislative or judicial in character. See Arlington v. FCC, 569 U.S. 290, 304 n.4, 133 S. Ct. 1863, 185 L. Ed. 2d 941 (2013) (explaining that administrative agency actions can take “‘legislative’ and ‘judicial’ forms“). So how is the exercise of all these powers by the same entity not, as James Madison famously wrote, “the very definition of tyranny“? See The Federalist No. 47 at 298 (James Madison) (Clinton Rossiter ed., 2003) (“accumulation of all powers, legislative, executive, and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny“). While different jurists would surely offer different answers to that question, one that is commonly offered is that courts, through judicial review provisions, can hold agencies in check. See, e.g., Brietta R. Clark, APA Deference After Independent Living Center: Why Informal Adjudicatory Action Needs a Hard Look, 102 Ky. L.J. 211, 229 (2014) (“judicial review helps guard against abuse of power and arbitrariness“); Robert J. Pushaw, Jr., Justiciability and Separation of Powers: A Neo‑Federalist Approach, 81 Cornell L. Rev. 393, 471 (1996) (“[i]n fact, the huge growth of executive agencies has not resulted in tyranny primarily because of congressional oversight and judicial review“). At the risk of stating the obvious, courts cannot perform this important function if they do not acquire subject matter jurisdiction.