Laurel Racing Ass'n v. Video Lottery Facility Location Commission

ELDRIDGE, J. The parties in this case have presented statutory interpretation and constitutional issues arising under the recently enacted Maryland legislation authorizing a limited number of “video lottery terminals,” in “video lottery facilities,” at five Maryland locations. 1 We shall not, however, be able to reach the issues debated by the parties. Under the relevant statutes, jurisdiction lies with the State Board of Contract Appeals. The Circuit Court should not have exercised jurisdiction in this matter until the statutorily prescribed administrative remedy had been exhausted and a final decision rendered by the Board of Contract Appeals. ⁴⁴⁸ I. Article XIX of the Maryland Constitution, entitled “Video Lottery Terminals,” was proposed by Ch. 5 of the 2007 Special Session of the General Assembly, and was ratified by Maryland voters at the general election held on November 4, 2008. Article XIX provides, inter alia, that the State may issue up to five video lottery operation licenses throughout the State, that the State may not authorize more than 15,000 video lottery terminals in the State, and that “a video lottery operation license only may be awarded for a video lottery facility in” five specified locations.

One of the five specified locations is “Anne Arundel County, within 2 miles of MD Route 295.... ” The constitutional amendment also provides that “the State may not award more than one video lottery operation license in a single county or Baltimore City.” Finally, the constitutional provision mandates that “[a] video lottery facility shall comply with all applicable planning and zoning laws of the local jurisdiction.” 2 ⁴⁴⁹ In addition to proposing Article XIX of the Maryland Constitution, the General Assembly enacted Ch. 4 of the 2007 Special Session. This statute implemented the constitutional amendment and was contingent upon voter ratification of the constitutional amendment. Since the constitutional amendment was ratified by the voters, Ch. 4 became operative. Ch. 4 both added new provisions and amended existing provisions in several Articles of the Maryland Code.

The new provisions, which are pertinent in the case at bar, are codified in Maryland Code (1984, 2004 Repl.Vol., 2008 Supp.), Title 9, Subtitle 1A, §§ 9-1A-01 through 9-1A-36, of the State Government Article. 3 Section 9-1A-36 (a) through (f) of the State Government Article establishes the “Video Lottery Facility Location Commission” (hereafter sometimes referred to as the “Location Commission” or the “Commission”) consisting of seven members. The section prescribes the method of appointment and the qualifications for members of the Location Commission, provides for the expenses and staff of the Commission, and authorizes the Commission to award not more than five video lottery operation licenses through a competitive bidding process. Section 9-1A-36 (f) through (i) reflects the limitations set forth in the constitutional amendment as well as more detail concerning the bidding process for video lottery operation licenses, the locations of video lottery facilities, and the maximum number of video lottery terminals at each of the five locations. ⁴⁵⁰ With respect to Anne Arundel County, § 9-1A-36 (h)(1)® and (i)(l)(i) authorize the Video Lottery Facility Location Commission to award a maximum of 4,750 video lottery terminals at a single location in Anne Arundel County within 2 miles of MD Route 295. Section 9-1A-36 (i)(3)(i) and (r) of the State Government Article sets forth a termination date for the Video Lottery Facility Location Commission and provides that, under certain circumstances after the Location Commission’s termination, the State Lottery Commission “may allocate or reallocate video lottery terminals” to licensees.

Section 9-1A-36 (k) enumerates various factors which should be considered by the Location Commission in awarding a license. Section 9-1A-36 (n) provides that, “[ajfter award of a video lottery operation license under this section, the State Lottery Commission shall be responsible for all matters relating to regulation of the licensee.” The provision which is most pertinent to the statutory interpretation and constitutional arguments by the parties in this case is § 9-1A-36 (j) of the State Government Article which states as follows: “(j) Bids and initial fees.—(1) A bid submitted for a video lottery operation license at a video lottery destination location under this section shall be submitted by February 1, 2009, and shall include an initial license fee in the bid of at least $3,000,000 for each 500 video lottery terminals included in the bid. (2) All initial license fees submitted under this subtitle shall accrue to the Education Trust Fund established under § 9-1A-30 of this subtitle. (3) A bid submitted for a video lottery operation license under this section shall provide for at least $25,000,000 in direct investment by the applicant in construction and related costs for each 500 video lottery terminals contained in the proposed bid that shall be prorated based on the exact number of video lottery terminals contained in the bid.” ⁴⁵¹ Section 9-1A-30 of the State Government Article, referred to in paragraph (2) of the above-quoted subsection, establishes the Education Trust Fund, consisting of certain revenues anticipated under the Video Lottery Terminals program, provides that money in the Education Trust Fund “shall be invested and reinvested” by the State Treasurer, delineates the education programs for which the funds should be used, and states in § 9-1A-30 (d) that “[e'jxpenditures from the Education Trust Fund shall be made each fiscal year in accordance with the State budget.” Finally, § 9-1A-36 (o) of the State Government Article sets forth the only statutory remedy, contained in Chs. 4 and 5 of the 2007 Special Session, which is granted to an unsuccessful bidder for a video lottery license.

Subsection (o) states as follows: “(o) Review of bid -process.—An unsuccessful bidder for a video lottery operation license under this section may seek, under Title 15 of the State Finance and Procurement Article, review by the State Board of Contract Appeals of the awarding of the video lottery operation license by the Video Lottery Facility Location Commission.” Under Title 15 of the State Finance and Procurement Article, in § 15-223(a), a final administrative decision, rendered by the State Board of Contract Appeals, “is subject to judicial review in accordance with Title 10, Subtitle 2, of the State Government Article,” which is the State Administrative Procedure Act.

II

The facts in this case are undisputed. On December 19, 2008, the Video Lottery Facility Location Commission promulgated a “Request for Proposals for Video Lottery Operation Licenses,” and set February 2, 2009, as the deadline for the submission of bids. 4 Section 3.10 of the Request for Proposals ⁴⁵² was entitled “License and Application Fees,” and stated in § 3.10.1 as follows: “3.10.1 Initial License Fee A proposal submitted for an Operation License at a Video Lottery Facility Location shall include an Initial License Fee with the proposal of at least $3,000,000 for each 500 Video Lottery Terminals included in the proposal, that shall be prorated based on the exact number of VLTs [Video Lottery Terminals] contained in the proposal. The Initial License Fee shall be in the form of a certified check payable to the ‘State of Maryland/State Lottery Agency’ or a wire/electronic transfer and will be deposited by the Location Commission into a bank account of the State.” The Request for Proposals further provided: “3.10.1.2 Disposition—Refund to Unsuccessful Applicant The Initial License Fee will be refunded to an unsuccessful Applicant, provided that Applicant has properly fulfilled all requirements of the RFP [Request for Proposals] process and paid all License fees, within forty-five (45) days after the award of a License to another Applicant, unless Applicant challenges the award of the License as stated in Section 3.2.3. Any interest earned thereon will be retained by the State.” Reflecting § 9-1A-36 (o) of the State Government Article, the Request for Proposals prescribed the recourse available to unsuccessful applicants: “3.2.3 An unsuccessful Applicant for a Video Lottery Operation License may seek, under Title 15 of the State Finance and Procurement Article, review by the State Board of Contract Appeals of the awarding of the Video Lottery Operation License by the Location Commission.” During January 2009, the Location Commission responded to several questions posed by potential applicants for licenses. ⁴⁵³ The Commission’s answers were sent to all persons and entities which had received a copy of the Request for Proposals.

With regard to the submission of the initial license fee, the Commission stated, and reiterated numerous times, that the initial license fee “must be paid in a single total payment” with the application for a license. The Location Commission also answered questions relating to a possible refund of the initial license fee to unsuccessful applicants. In particular, the following question was posed and answered as follows: “QUESTION: If an Applicant is awarded a license and then cannot get zoning for the property through no fault of the Applicant, will the Initial License Fee be refunded? “ANSWER: The Location Commission may consider such requests under extraordinary circumstances, in the Location Commission’s discretion.” According to the Location Commission, the plaintiff-appellant Laurel Racing Association did not, prior to February 2, 2009, ask for any explanation of this answer or otherwise question the Location Commission regarding the criteria or standards used to determine if a refund of the initial license fee would be available. On February 2, 2009, Laurel Racing Association submitted to the Location Commission an application for a video lottery operation license for the Anne Arundel County location.

Although § 9-1A-36 (j)(l) required that the applicant “shall include an initial license fee in the bid of at least $3,000,000 for each 500 video lottery terminals included in the bid,” Laurel Racing Association’s submission did not include the $28.5 million dollar initial license fee for the 4,750 terminals requested. Except for the absence of the initial license fee, Laurel Racing Association’s application complied with the statute and the Request for Proposals. Laurel Racing Association’s bid included the following statement explaining the absence of the initial license fee: “Applicant is not able to provide an Initial License Fee at this time due to market conditions. Applicant will endeavor ⁴⁵⁴ to provide the Initial License Fee on or before its supplemental filing on April 15, 2009.” After February 2, 2009, representatives of Laurel Racing Association contacted the Location Commission’s “Procurement Officer” on several occasions to request direction on how to submit the initial license fee.

The Procurement Officer’s response was that the deadline had passed. At about 10:00 A.M. on February 12, 2009, the Video Lottery Facility Location Commission unanimously rejected Laurel Racing Association’s bid on the ground that the Association had failed to submit the initial license fee. Also on February 12, 2009, Laurel Racing Association instituted the present action by filing in the Circuit Court for Anne Arundel County a complaint against the Video Lottery Facility Location Commission and the Maryland State Lottery Commission, seeking a declaratory judgment and injunctive relief. 5 Laurel Racing Association, on February 18, 2009, filed a “Protest” with the Location Commission, and the Association on February 23, 2009, filed a notice of appeal to the State Board of Contract Appeals. The Association, in its notice of appeal, stated that the notice was filed in an excess of caution and to preserve its rights, but that the Association was of the view that the Board of Contract Appeals lacked jurisdiction to review the decision by the Location Commission.

The State filed in the Circuit Court a motion to dismiss this action or, alternatively, to stay the judicial action “pending completion of ongoing administrative proceedings concerning the same subject matter.” 6 As a further alternative, the State filed a motion for summary judgment. The case was submitted to the Circuit Court on a stipulation of facts, affidavits, other documents, and oral argument by each side. ⁴⁵⁵ Laurel Racing Association argued that, under the statutory language, the initial license fees paid by unsuccessful applicants for video operation licenses were not refundable. According to the Association, § 9-1A-36 (j)(2) required that all initial license fees would become part of the Education Trust Fund, and § 9-1A-30 (d) required that any expenditures from the Education Trust Fund be made only in accordance with the State budget. Laurel Racing Association maintained that, because the initial license fee is not refundable to an unsuccessful applicant, the statute effects an unconstitutional taking of the Association’s property in violation of Article III, § 40, of the Maryland Constitution.

The Association also advanced other constitutional arguments, including the contention that the statute violates due process principles embodied in Article 24 of the Maryland Declaration of Rights. The State argued that the Board of Contract Appeals had exclusive or primary jurisdiction over an unsuccessful applicant’s complaints, that Laurel Racing Association should not be able to bypass the jurisdiction of the Board of Contract Appeals by bringing an action for a declaratory judgment and injunctive relief, and that the Association, before maintaining a judicial action, should be required to exhaust the administrative remedy and obtain a final administrative decision by the Board of Contract Appeals. The State alternatively argued that the Association, by failing to submit its statutory interpretation and constitutional arguments to the Location Commission on or before February 2, 2009, had waived those arguments. Turning to the merits, the State disagreed with the Association’s interpretation of the statutory provisions.

Moreover, the State argued that, even if the Association’s interpretation were correct, there would be no violation of the Association’s constitutional rights because the Association did not pay the initial license fee. The Circuit Court rendered a written opinion which qualified as a declaratory judgment. The court initially rejected the State’s argument based on the State Board of Contract Appeals’ jurisdiction and exhaustion of the administrative remedy before the Board of Contract Appeals. According to ⁴⁵⁶ the Circuit Court, “jurisdiction of the Maryland State Board of Contract Appeals does not apply to disputes that arise prior to the awarding of the video lottery operation license.” The Circuit Court seemed to be of the view that, when there is an administrative process for dealing with a disputed matter before a government unit, when the head of the government unit makes a decision adverse to the plaintiff, but when the head of the unit has not yet rendered a decision from which there is a right of appeal and an adjudicatory hearing before an independent administrative agency having exclusive or primary jurisdiction, a circuit court may entertain an action and resolve the dispute as long as the court acts prior to the time when the government unit renders a decision triggering the right to an adjudicatory hearing before the independent agency.

The Circuit Court cited no authority in support of its theory. The Circuit Court also rejected the State’s waiver argument. Nonetheless, the Circuit Court agreed with the State’s statutory interpretation and constitutional arguments. The court held that the “initial license fees are refundable in the event an applicant is not awarded a license.” Alternatively, the court held “that even if the initial license fees were determined to be non-refundable to unsuccessful applicants,” there would be no violation of Laurel Racing Association’s constitutional rights.

The Circuit Court denied the State’s motion to dismiss and motion to stay judicial proceedings, denied the plaintiffs request for preliminary and permanent injunctions, and granted the State’s motion for summary judgment. Laurel Racing Association filed a notice of appeal and, prior to any proceedings in the Court of Special Appeals, filed in this Court a petition for a writ of certiorari. The State did not file a notice of appeal from those portions of the declaratory judgment which were adverse to the State. See Joseph H. Munson Company v. Secretary of State, 294 Md. 160, 167-170 , 448 A.2d 935, 939-941 (1982), affirmed, 467 U.S. 947 , 104 S.Ct. 2839 , 81 L.Ed.2d 786 (1984).

The State also did not oppose the grant of certiorari, but, instead, filed a cross-petition for a ⁴⁵⁷ writ of certiorari. This Court granted both the petition and the cross-petition. Laurel Racing v. Video Lottery, 408 Md. 148 , 968 A.2d 1064 (2009). The parties’ arguments in this Court, with one exception, are essentially the same as their arguments in the Circuit Court.

The one exception is that “[t]he State Defendants do not seek review by this Court of the circuit court’s denial of their motion to dismiss or stay the case under the doctrine of administrative exhaustion.” (State’s cross-petition for a writ of certiorari at 8, n. 4). As pointed out in the opening paragraph of this opinion, we shall not reach any of the issues argued in this Court by the parties. Rather, the dispositive issue is the one abandoned by the State, namely whether primary or exclusive jurisdiction over the dispute lies with the Board of Contract Appeals, and whether the Laurel Racing Association was required to exhaust its administrative remedy before the Board of Contract Appeals.

III

A. Preliminarily, the State’s abandonment of its exclusive or primary jurisdiction and exhaustion of administrative remedies argument has no effect upon this Court’s obligation to consider the issue. Recently in University System v. Mooney, 407 Md. 390, 401 , 966 A.2d 418, 424 (2009), Judge Battaglia for the Court reiterated the controlling principle: “Although we usually will not consider an issue that has not been raised below, there is ‘a limited category of issues, in addition to jurisdiction, which an appellate court ordinarily will address even though they were not raised by a party.’ Moats v. City of Hagerstown, 324 Md. 519, 525 , 597 A.2d 972, 975 (1991). One of these issues is the exhaustion of administrative remedies, which we will address when raised for the first time before us, or on our own initiative. See Furnitureland South, Inc. v. Comptroller of Treasury of ⁴⁵⁸ State, 864 Md. 126 , 132, 771 A.2d 1061, 1065 (2001); Montgomery County v. Broadcast Equities, Inc., 360 Md. 438 , 450-451 & n. 7, 452, 758 A.2d 995 , 1002 & n. 7, 1003 (2000); Maryland Reclamation Associates, Inc. v. Harford County, 342 Md. 476 , 490 n. 10, 677 A.2d 567 , 574 n. 10 (1996).” In Furnitureland South, Inc. v. Comptroller, 364 Md. 126 , 771 A.2d 1061 (2001), the State Comptroller filed in the Circuit Court for Anne Arundel County an action for a declaratory judgment, and neither the parties nor the Circuit Court at any time in the litigation raised or mentioned any issue concerning exhaustion of administrative remedies.

Nevertheless, this Court vacated the Circuit Court’s judgment and ordered that the case be dismissed because of the Comptroller’s failure to exhaust administrative and judicial review remedies, holding as follows ( 364 Md. at 132 , 771 A.2d at 1065 ): “Although no party has raised any question regarding the invocation and exhaustion of administrative remedies, and the propriety of a declaratory judgment action, these are issues which this Court will address sua sponte.” This principle of Maryland administrative law was discussed at some length in Board of Education for Dorchester County v. Hubbard, 305 Md. 774, 786-787 , 506 A.2d 625, 631 (1986): “Where ... the administrative remedy is deemed to be primary [or exclusive], this Court has generally held that it must be pursued and exhausted before a court exercises jurisdiction to decide the controversy. Wash. Sub. San.

Comm’n v. Mitchell & Best, supra, 303 Md. at 553-554, 495 A.2d 260 [30]; Md. Comm’n on Human Rel. v. B.G. & E. Co., 296 Md. 46, 50 , 459 A.2d 205, 208 (1983); Md. Comm’n on Human Rel. v. Beth. Steel, 295 Md. 586, 592 , 457 A.2d 1146, 1149 (1983), and cases there cited. As explained in Sec., Dep’t of Human Res. v. Wilson, supra, 286 Md. at 645, 409 A.2d 713 , ‘when the Legislature enacts a comprehensive remedial scheme in which a claim is to be determined by an administrative agency and reviewed in an administrative appeal before judicial review is available, it establishes, as ⁴⁵⁹ public policy, that such a procedure produces the most efficient and effective results. In order to effectuate this public policy, trial courts generally should not act until there has been compliance with the statutory comprehensive remedial scheme.’ “While the failure to invoke and exhaust an administrative remedy does not ordinarily result in a trial court’s being deprived of fundamental jurisdiction, nevertheless, because of the public policy involved, the matter is for some purposes treated like a jurisdictional question.

Consequently, issues of primary jurisdiction and exhaustion of administrative remedies will be addressed by this Court sua sponte even though not raised by any party. See, e.g., Comm'n on Human Rel. v. Mass Transit, 294 Md. 225, 232 , 449 A.2d 385 (1982); Sec., Dep’t of Human Res. v. Wilson, supra, 286 Md. at 645 , 409 A.2d 713 .” B. As earlier discussed, the special statutory remedy for “[a]n unsuccessful bidder for a video lottery operation license under” § 9-1A-36 is “review by the State Board of Contract Appeals” pursuant to Title 15 of the State Finance and Procurement Article. See § 9-1A-36 (o) of the State Government Article. This is the only remedy set forth in the Video Lottery Terminals subtitle of the State Government Article, § § 9-1A-01 through 9-1A-36, for an unsuccessful applicant for a video lottery operation license.

Moreover, in § 9-1A-02 (a) of the subtitle, the General Assembly stated, without qualification, that “[tjhis subtitle is ... exclusive in its effect.” (Emphasis added). Section 9-1A-36 (o) of the State Government Article incorporates by reference the provisions of Title 15 of the State Finance and Procurement Article relating to review by the Board of Contract Appeals, or the “Appeals Board” as the Code sometimes refers to it. See Maryland Code (2001, 2006 Repl.Vol.), § § 15-201 through 15-212, 15-220, 15-221, and 15-223 of the State Finance and Procurement Article. Sec ⁴⁶⁰ tion 15-211(a) of the State Finance and Procurement Article provides that the “Appeals Board shall have jurisdiction to hear and decide all appeals arising from the final action of a unit” from which an appeal to the Appeals Board may be taken, and § 15-211(b) states that a “decision of the Appeals Board is final, subject to any judicial review.” Sections 15-212 and 15-221 of the same Article delineate the broad authority of the Appeals Board with regard to hearings, subpoenas, the right to compel the testimony of witnesses, etc. Under § 15-228(a) of the State Finance and Procurement