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Oregon Trucking Associations, Inc. v. Department of Transportation and Department of Administrative Services

Supreme Court of Oregon

January 10, 2019

OREGON TRUCKING ASSOCIATIONS, INC., an Oregon nonprofit corporation; AAA Oregon/Idaho, an Oregon nonprofit corporation; Oregon-Columbia Chapter of the Association; Redmond Heavy Hauling; Gordon Wood Insurance & Finance; Property Casualty Insurers Association of America; National Association of Mutual Insurance Companies; and Oregon Mutual Insurance Companies, Petitioners on Review,
v.
DEPARTMENT OF TRANSPORTATION and Department of Administrative Services, Respondents on Review.

          Argued and submitted September 14, 2018

          On review from the Court of Appeals. CC 12C16207, CA A157244 [*]

          Gregory A. Chaimov, Davis Wright Tremaine LLP, Portland, argued the cause and fled the briefs for petitioners on review.

          Rolf C. Moan, Assistant Attorney General, Salem, argued the cause and fled the brief for respondents on review. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

          Julia E. Markley, Perkins Coie LLP, Portland, fled the brief on behalf of amicus curiae NICUSA, Inc. Also on the brief were Courtney R. Peck, Perkins Coie, and Louis Santiago, Santiago Law, LLC, Portland.

         [364 Or. 211] Before Walters, Chief Justice, and Balmer, Nakamoto, Flynn and Nelson, Justices, and Linder and Kistler, Senior Justices pro tempore.[**]

         The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.

         Case Summary: Plaintiffs were awarded a judgment declaring that the Oregon Department of Transportation (ODOT) was without lawful authority to sell the Department of Administrative Services (DAS) State Highway Fund prop-erty-a license to provide real-time electronic access to driver records-and that the use to which DAS puts the license violates the Oregon Constitution's mandate that revenue from fund assets be used strictly for highway purposes. ODOT and DAS (defendants) appealed that judgment, and the Court of Appeals reversed. Held: The ability to provide real-time electronic access to driver records is not "needed" or "required" under ORS 366.395(1), and ODOT is not precluded from considering its inability to profit from an unnecessary asset when determining whether it is "useful" for department purposes under ORS 366.395(1). Moreover, DAS is not a trustee of the highway fund, and, once it obtained the license from ODOT, it was free to use the license in ways that did not benefit highways.

         The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.

          [364 Or. 212] WALTERS, C. J.

         The Oregon Department of Transportation (ODOT) owns driver records, [1] which are considered to be assets of the State Highway Fund (highway fund) and subject to use restrictions set out in Article IX, section 3a, of the Oregon Constitution.[2] Pursuant to ORS 366.395, [3] ODOT sold the Department of Administrative Services (DAS) an exclusive license to provide real-time electronic access (electronic access) to those driver records. Plaintiffs challenge both ODOT's statutory authority to grant the license and the use to which DAS has put it. For the reasons that follow, we agree with the Court of Appeals that plaintiffs' challenge is not well-taken, and we affirm its decision.

         The facts in this case are undisputed.[4] ODOT owns driver records and must make copies of them available to certain persons, including those who are authorized to obtain driver records and resell them (disseminators). ORS 802.179(13). For the copies it provides, ODOT is permitted to charge a fee "reasonably calculated to reimburse [ODOT] for its actual cost in making [driver records] available." ORS 802.183(1). Before 2006, ODOT provided copies of individual driver records to disseminators on a special type of data cartridge that was delivered by courier. In 2006, ODOT began providing disseminators with electronic access to driver records through the American Association of Motor [364 Or. 213] Vehicle Administrators (AAMVA) network. Under that system, disseminators paid a $2.00 per record fee, which represented ODOT's cost in making driver records available.[5]Disseminators also paid an initial access fee and annual subscription fee, but ODOT did not share in or collect the latter.

         In 2009, the legislature wanted to increase electronic governmental service, and it tasked DAS with developing and funding a state government internet portal. Following the lead of other states, DAS considered using a "self-funded" model for that service, a model that would include obtaining a license from ODOT to provide electronic access to driver records and charging disseminators convenience fees for that access. DAS was cognizant, however, of a constitutional limitation on the use of assets of the highway fund. Specifically, Article IX, section 3a, paragraph (1)(b), of the Oregon Constitution mandates that the revenue from "[a]ny tax or excise levied on the ownership, operation or use of motor vehicles" be used "exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas" within the state. Consequently, DAS and ODOT requested an opinion from the Attorney General's office on the constitutionality of the anticipated licensing arrangement. The Attorney General agreed that the proposed arrangement would implicate Article IX, section 3a, but opined that it would be permissible "as long as [ODOT] receives fair market value" for the license.[6] Attorney General Letter of Advice to Tom McClellan (Op-2010-4) (Aug 25, 2010).

         In accordance with the Attorney General's advice, ODOT obtained an expert opinion as to the fair market value of a 10-year "limited, exclusive license" to provide electronic access to driver records and then sold that license to DAS. ODOT retained ownership of the driver records and the right to provide means of access other than electronic [364 Or. 214] access, such as the right to provide records via mail, over the telephone, or in-person at Driver and Motor Vehicle Services (DMV), the department of ODOT responsible for driver records. In exchange for the license, DAS agreed to pay ODOT the fair-market value of the license-then $4.63 per record-plus ODOT's per-record cost of production- then $2.00 per record-for a total payment of $6.63 per record.[7]

         The license permits DAS to sublicense its rights and obligations to others, and DAS did just that, sublicensing its rights to NICUSA, the company that DAS enlisted to build the state internet portal. Through that portal, NICUSA provides electronic access to driver records and, pursuant to the sublicense agreement, charges a fee equal to what DAS pays for the license ($6.63 per record) plus an additional $3.00 per record convenience fee. The former amount/fee ultimately goes to ODOT and into the highway fund to be used in accordance with Article IX, section 3a, and is predicted to produce $55 million dollars over the life of the license. The latter amount/fee is retained by NICUSA at least in part to recoup its costs in creating and maintaining the state internet portal. The end result is that disseminators pay $9.63 per record, $6.63 of which goes to ODOT and $3.00 of which NICUSA keeps.

         Plaintiffs-which include nonprofit corporations representing their members' interests-claim that the licensing agreements have harmed them because, among other adverse effects, they have to pay disseminators an increased amount for driver records.[8] Plaintiffs brought a declaratory [364 Or. 215] judgment action against ODOT and DAS (defendants) seeking a declaration that ODOT did not have statutory authority to sell the license to DAS and that the licensing agreement violated trust principles and Article IX, section 3a. Plaintiffs filed a motion for summary judgment, arguing that they were entitled to a judgment that the license was void; defendants filed a cross-motion for summary judgment, arguing that they were entitled to a judgment that the license was valid. The trial court agreed with plaintiffs and granted their motion. The trial court declared (1) that ODOT "lacked the authority" to grant the license to DAS and (2) that the $3.00 convenience fee charged by NICUSA must be used "only for purposes authorized by Article IX, section 3a of the Constitution." The trial court stayed the judgment pending appeal.

         Defendants appealed, and the Court of Appeals reversed. Oregon Trucking Assns. v. Dept. of Transportation, 288 Or.App. 822, 824, 407 P.3d 849 (2017). The court first concluded that the license is "intangible property created from the bundle of rights associated with ownership of the driver records." Id. at 829. The court then addressed the statutory authority under which ODOT acted when it sold the license to DAS. Id. ORS 366.395(1) provides that ODOT "may sell, lease, exchange or otherwise dispose" of property that is, "in the opinion of [ODOT], no longer needed, required or useful for department purposes." ORS 366.395(2) further provides that ODOT "may sell, lease, exchange or otherwise dispose of such real or personal property in such manner as, in the judgment of [ODOT], will best serve the interests of the state and will most adequately conserve highway funds."

         In analyzing whether the requirements set forth in ORS 366.395(1) were met, the court noted that defendants, as part of their cross-motion for summary judgment, had submitted an affidavit from the DMV administrator. Oregon Trucking Assns., 288 Or.App. at 829. The administrator had averred that "[i]t is ODOT's opinion that the Exclusive License, and the rights represented therein, are not 'needed, required or useful for department purposes'" because the value of the license, if it remained in ODOT's possession, was "negligible, if not nonexistent." Based on the affidavit, the court determined that ODOT had developed the requisite [364 Or. 216] opinion under ORS 366.395(1) that the license was "no longer needed, required or useful," that ODOT's opinion was reasonable, and that ODOT's agreement with DAS thus was permitted by ORS 366.395. Oregon Trucking Assns., 288 Or.App. at 830. The court did not address whether the sale of the license also met the requirements of ORS 366.395(2) because, in the court's view, ODOT was required to satisfy only subsection (1) of ORS 366.395 to lawfully transfer the property at issue. Id. at 829.

         The court then considered whether Article IX, section 3a, of the Oregon Constitution prohibited the sale. Id. at 833. The court began with a point on which the parties agreed: ODOT was required to obtain the fair market value of the license to compensate the highway fund for the sale of its asset. Id. The disagreement, the court observed, was whether the fund indeed had received fair market value. Id. Siding with defendants on that issue, the court rejected plaintiffs' argument that, because NICUSA sells driver records at $9.63 per record, the value that DAS paid ODOT for the license could not have been the fair market value. Id. at 834. The court explained that plaintiffs' argument "conflates what ODOT sold to DAS with what NICUSA sells to disseminators: a license for the right to provide commercial electronic access to driver records versus a driver record." Id. The court also rejected plaintiffs' argument that DAS, as a state agency and purported trustee of the highway fund, is required to treat its sublicense with NICUSA as an asset of the highway fund and put all revenue it receives from that asset, including the $3.00 portal fee NICUSA charges, to highway fund uses. Id. Once the license was sold to DAS, the court determined, it ceased to be highway fund property, and thus the revenue generated by the license after the sale was not a highway fund asset subject to trust principles and the restrictions of Article IX, section 3a. Id. at 834-35.[9]

         [364 Or. 217] Plaintiffs sought review in this court, and we allowed their petition. Plaintiffs' arguments are three-fold: (1) ODOT lacked statutory authority to transfer the license to DAS; (2) the gain that DAS receives from its sublicense agreement with NICUSA must be used for highway purposes; and (3) ODOT did not receive fair market value for the license, thus violating Article IX, section 3a. We address each argument in turn.

         I. ODOT'S AUTHORITY TO TRANSFER THE LICENSE

         ORS 366.395 authorizes ODOT to sell or lease highway fund property:

"(1) The Department of Transportation may sell, lease, exchange or otherwise dispose or permit use of real or personal property, including equipment and materials acquired by the department, title to which real or other property may have been taken either in the name of the department, or in the name of the state, and which real or personal property is, in the opinion of the department, no longer needed, required or useful for department purposes * * *. The department may exchange property as provided in subsection (3) of this section regardless of whether the property is needed by, required by or useful to the department if, in the judgment of the department, doing so will best serve the interests of the state.
"(2) The department may sell, lease, exchange or otherwise dispose of such real or personal property in such manner as, in the judgment of the department, will best serve the interests of the state and will most adequately conserve highway funds or the department's account or fund for the real or personal property. In the case of real property, interest in or title to the same may be conveyed by deed or other instrument executed in the name of the state, by and through the department. All funds or money derived from the sale or lease of any such property shall be paid by the [364 Or. 218] department to the State Treasurer with instructions to the State Treasurer to credit such funds or moneys:
"(a) To the highway fund; or
"(b) To the department's account or fund for the property. The State Treasurer shall credit the funds and moneys so received as the department shall direct.
"(3) Property described in subsection (1) of this section may be exchanged for other property or for services. As used in this subsection, 'services' includes, but is not limited to, public ...

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