DA 19-0456
08/25/2020
IN THE SUPREME COURT OF THE STATE OF MONTANA
2020 MT 217 Case Number: DA 19-0456
MOODY’S MARKET, INC.; LIQUID ENGINEERING CORP.;
STIEG RANCH LLC; Z INC.; STORY DISTRIBUTION
CO.; VINTON CONSTRUCTION; MONTANA ROOFING
CONTRACTORS ASSOCIATION, INC.; ACE ROOFING,
LLC; CORY SIMONS CONSTRUCTION, INC.; and
NATIONAL FEDERATION OF INDEPENDENT BUSINESS,
Plaintiffs and Appellants,
v.
MONTANA STATE FUND, MONTANA BOARD OF
INVESTMENTS and STATE OF MONTANA,
Defendants and Appellees.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and For the County of Lake, Cause No. DV-18-12
Honorable John W. Larson, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
David M. McLean, Ryan C. Willmore, McLean & Associates, PLLC, Missoula,
Montana
For Appellee Montana State Fund:
Curt Drake, Andres Haladay, Drake Law Firm, P.C., Helena, Montana
For Appellees State of Montana and Montana Board of Investments:
Timothy C. Fox, Montana Attorney General, J. Stuart Segrest, Civil Bureau Chief,
Helena, Montana
Submitted on Briefs: May 13, 2020
Decided: August 25, 2020
Filed:
cir-641.—if
__________________________________________
Clerk
.
Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Moody’s Market, Inc., Liquid Engineering Corp., Stieg Ranch, LLC, Z Inc.,
Story Distributing Co., Vinton Construction, Montana Roofing Contractors Association,
Inc., Ace Roofing, LLC, Cory Simons Construction, Inc., and National Federation of
Independent Business (collectively, the “Policyholders”) appeal the orders of the
Twentieth Judicial District Court, Lake County, granting the Montana State Fund
(State Fund), the Montana Board of Investments (BOI), and the State of Montana’s (State)
motions to dismiss the Policyholders’ Complaint, denying the Policyholders’ motion for
leave to amend the Complaint, and entering final judgment against the Policyholders. We
address the following issues which we find to be dispositive:
Issue One: Are the Policyholders’ declaratory judgment claims justiciable, when
they seek a declaration as to the constitutionality of statutes that are no longer in
effect?
Issue Two: Did the District Court err in denying the Policyholders’ motion to amend
their Complaint to name individual members of the State Fund Board of Directors
and the BOI?
¶2 We affirm the District Court’s dismissal of the Policyholders’ Complaint and its
denial of their motion to amend.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 On November 6, 2017, the Montana Legislature met in special session to address
budgetary issues regarding the State’s General Fund shortage. The General Fund shortage
was caused by various factors, including an unpredictably expensive forest fire season.
The Governor of Montana’s Proclamation calling the special session announced the
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session’s scope, including “Legislation authorizing a management fee on excess
investment holdings of the [] State Fund to offset state fire costs.”
¶4 During the special session, the Legislature passed Senate Bill No. 4 (SB 4), which
enacted § 17-1-512, MCA (2017), and amended § 39-71-2320, MCA, authorizing the
imposition of a three-percent “management rate” on certain BOI portfolios, including the
State Fund, and required the funds be transferred to the State’s fire suppression account
“by April 1, 2018, and April 1, 2019.” The legislation provided that both
§ 17-1-512, MCA, and the amendment to § 39-71-2320, MCA, would terminate on June 30,
2019.
¶5 The Policyholders maintain workers’ compensation insurance coverage for their
employees through the State Fund, for which they pay premiums. On January 22, 2018,
the Policyholders filed a Complaint pursuant to Montana’s Uniform Declaratory
Judgments Act, § 27-8-101, et seq., against the State Fund, BOI, and the State. The
Policyholders sought a declaration that § 17-1-512, MCA, and the amended
§ 39-71-2320, MCA, violated several provisions of the United States and
Montana Constitutions.1 The Policyholders’ Complaint also sought a permanent injunction
enjoining the statutes’ enforcement and authorization.
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The Policyholders’ Complaint alleged the following three counts: (1) violation of
Mont. Const. Art. VIII, § 13; (2) violation of Mont. Const. Art. II, § 31, and U.S. Const. Art. I,
§ 10; (3) violation of Mont. Const. Art. II, § 29, and U.S. Const. amend. V.
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¶6 On March 6, 2018, the State Fund, BOI, and the State jointly moved to dismiss the
Policyholders’ Complaint for lack of standing. On August 2, 2018, the Policyholders
moved for leave to amend their Complaint. In addition to the three original counts seeking
declarations that the legislation violated provisions of the Montana and United States
Constitutions, the Policyholders sought to add a fourth count against individual members
of the State Fund Board of Directors and the BOI, alleging breach of fiduciary duties, duties
of loyalty, and statutory duties. On August 2, 2018, the State Fund filed an additional
motion to dismiss the Complaint pursuant to M. R. Civ. P. 12(b)(6), asserting the
Policyholders’ Complaint failed to state a claim against the State Fund upon which relief
can be granted.
¶7 On June 17, 2018, the District Court issued an “Opinion [and] Order Granting
Defendant State Fund’s Motion to Dismiss and Denying [Policyholders’] Motion to
Amend.” The District Court concluded that “[Policyholders] will not be injured because
SB 4 explicitly provides ‘[t]he state fund may not raise rates or reduce dividends to offset
real or estimated losses associated with the 3% management rate transfer.’” Therefore, the
District Court reasoned that the Policyholders lacked standing to bring their claims because
SB 4 “insulates [the Policyholders] from any injury that would give rise to a justiciable
controversy.” The District Court also denied the Policyholders’ motion for leave to amend
their Complaint after concluding that the proposed amendment did not cure the
Policyholders’ lack of standing and that the individual State Fund board members were
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immune from liability pursuant to § 2-9-103, MCA, because they were acting in their
capacity as State employees.
¶8 On July 8, 2019, the District Court issued an “Opinion [and] Order Granting
Defendant State of Montana and Montana Board of Investments’ Motion to Dismiss.” As
it pertained to the State and the BOI, the District Court again held that the Policyholders
lacked standing to bring their claims because SB 4 “insulates [the Policyholders] from any
injury that would give rise to a justiciable controversy.” On July 11, 2019, the
District Court entered final judgment against the Policyholders.
¶9 While the legislation was in effect, funds totaling approximately $28,000,000 were
transferred from the State Fund to the fire suppression account in March of 2018 and 2019.
On June 30, 2019, § 17-1-512, MCA, and the amendment to § 39-71-2320, MCA, were
terminated pursuant to the terms of SB 4.
STANDARDS OF REVIEW
¶10 “Issues of justiciability . . . are questions of law, for which our review is de novo.”
City of Missoula v. Fox, 2019 MT 250, ¶ 7, 397 Mont. 388, 450 P.3d 898.
¶11 A district court’s denial of a motion to amend pleadings is reviewed for an abuse of
discretion. Farmers Coop. Ass’n v. Amsden, LLC, 2007 MT 286, ¶ 12, 339 Mont. 445,
171 P.3d 690. A district court abuses its discretion if it acts arbitrarily, without
employment of conscientious judgment, or in excess of the bounds of reason resulting in
substantial injustice. Bardsley v. Pluger, 2015 MT 301, ¶ 10, 381 Mont. 284, 358 P.3d 907.
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DISCUSSION
¶12 Issue One: Are the Policyholders’ declaratory judgment claims justiciable, when
they seek a declaration as to the constitutionality of statutes that are no longer in
effect?
¶13 In their opening brief on appeal, the Policyholders summarize this case as follows:
The central issue in this case is whether [SB 4] (later codified at
§ 17-1-512, [MCA,] but since been terminated), authorizing monies held in
trust by the [State Fund] and the [BOI] to be transferred to the Montana Fire
Suppression Account or any other account of the State[ ], is unconstitutional;
and whether the taking of [State Fund’s] private trust funds by way of a
pretext ‘management fee’ as mandated by § 17-1-512[, MCA,] represents a
taking without just compensation.
¶14 The Policyholders’ original Complaint, which was the subject of the State Fund,
BOI, and the State’s joint motion to dismiss, sought declaratory relief only. In invoking
the District Court’s jurisdiction, it explicitly stated: “This case is brought pursuant to
Montana’s Uniform Declaratory Judgment[s] Act pursuant to § 27-8-101, [MCA,]
[et seq.]” The three counts in the Complaint asserted violations of several provisions of
the Montana and United States Constitutions, and sought the court’s declaration to that
effect.
¶15 Because the statutory scheme at issue was still in effect at the time the District Court
ruled on the State Fund, the BOI, and the State’s motions to dismiss, the District Court
based its ruling on its conclusion that the Policyholders lacked standing to bring their
claims. We do not address the District Court’s standing determination, however, because
since the District Court’s ruling was issued the statutory scheme was terminated pursuant
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to its own terms. Therefore, we conclude that the Policyholders’ declaratory judgment
action is not justiciable.
¶16 “The judicial power of Montana’s courts, like the federal courts, is limited to
‘justiciable controversies.’” Plan Helena, Inc. v. Helena Reg’l Airport Auth. Bd.,
2010 MT 26, ¶ 6, 355 Mont. 142, 226 P.3d 567 (citing Greater Missoula Area Fed’n. v.
Child Start, Inc., 2009 MT 362, ¶ 22, 353 Mont. 201, 219 P.3d 881). “A justiciable
controversy is one upon which a court’s judgment will effectively operate, as distinguished
from a dispute invoking a purely political, administrative, philosophical or academic
conclusion.” Clark v. Roosevelt Cty., 2007 MT 44, ¶ 11, 336 Mont. 118, 154 P.3d 48.
¶17 The Policyholders seek reversal of the District Court’s dismissal of their Complaint
which was based on their alleged lack of standing. Assuming, for the sake of argument,
that the Policyholders had standing to initiate their declaratory judgment action challenging
the constitutionality of § 17-1-512, MCA (2017), and amended § 39-71-2320, MCA, the
constitutionality of these statutes became an academic conclusion when the statutes were
terminated. The statutes are neither constitutional nor unconstitutional because they are no
longer statutes. Thus, we would be remanding this cause to the District Court so it could
render an advisory opinion as to the constitutionality of a statutory scheme that is no longer
in effect.
¶18 Although this appeal was taken after the statutory scheme at issue was terminated,
the parties limit their arguments on appeal to the narrower issue of standing and do not
address the broader issue of justiciability, a threshold question which this Court must raise
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and address sua sponte even if it has not been raised by the litigants. Plan Helena, ¶ 13.
Because the Policyholders’ declaratory judgment action does not present a justiciable
controversy, we must dismiss the appeal as it pertains to this issue. Plan Helena, ¶ 12
(Once a court no longer has before it a justiciable case or controversy, it is required to
dismiss the action at that point).
¶19 Issue Two: Did the District Court err in denying the Policyholders’ motion to amend
their Complaint to name individual members of the State Fund Board of Directors
and the BOI?
¶20 M. R. Civ. P. 15 governs the amendment of pleadings. Under M. R. Civ. P. 15(a),
a court should “freely” give leave to amend “when justice so requires.”
See also Farmers Coop., ¶ 12. However, M. R. Civ. P. 15(a) does not require a court to
“automatically grant a motion to amend.” Bardsley, ¶ 20 (quoting Kershaw v.
Mont. Dep’t of Transp., 2011 MT 170, ¶ 25, 361 Mont. 215, 257 P.3d 358). Leave to
amend is properly denied when the amendment is futile or legally insufficient to support
the requested relief. Ally Fin., Inc. v. Stevenson, 2018 MT 278, ¶ 21, 393 Mont. 332,
430 P.3d 522 (citing Hobble-Diamond Cattle Co. v. Triangle Irrigation Co.,
249 Mont. 322, 325, 815 P.2d 1153, 1155-56 (1991)).
¶21 The Policyholders sought leave to amend their Complaint to assert claims against
individual members of the State Fund Board of Directors and the BOI, alleging breach of
fiduciary duties, duties of loyalty, and statutory duties. The Policyholders argue the
District Court abused its discretion by denying their proposed amendment seeking to assert
claims against individual State Fund and BOI board members. We disagree.
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¶22 The District Court correctly determined the Policyholders’ proposed amendment is
futile because the State Fund and BOI board members are statutorily immune from liability.
See § 39-71-2318, MCA (“The members of the board, the executive director, and
employees of the state fund are not liable personally, either jointly or severally, for any
debt or obligation created or incurred by the state fund.”); § 2-15-1808(4), MCA
(designating BOI as a quasi-judicial board); Eklund v. Trost, 2006 MT 333, ¶ 22,
335 Mont. 112, 151 P.3d 870 (citing § 2-9-112, MCA) (providing that individual members
of a governmental board exercising quasi-judicial authority are entitled to immunity from
suit). We have previously recognized that when a proposed defendant “enjoys statutory
immunity from liability,” it is futile to name the defendant as a party to the action.
Emanuel v. Great Falls Sch. Dist., 2009 MT 185, ¶ 20, 351 Mont. 56, 209 P.3d 244. We
affirm the District Court’s denial of the Policyholders’ proposed amendment to their
Complaint.
CONCLUSION
¶23 Because the Policyholders’ declaratory judgment claims challenging the
constitutionality of § 17-1-512, MCA (2017), and amended § 39-71-2320, MCA, do not
present a justiciable controversy, their appeal as to the District Court’s dismissal of their
Complaint is dismissed. We affirm the District Court’s denial of the Policyholders’ motion
for leave to amend their Complaint to add claims against individual members of the
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State Fund Board of Directors and the BOI because the individual board members are
statutorily immune. 2
/S/ JAMES JEREMIAH SHEA
We Concur:
/S/ MIKE McGRATH
/S/ LAURIE McKINNON
/S/ INGRID GUSTAFSON
/S/ BETH BAKER
/S/ DIRK M. SANDEFUR
/S/ JIM RICE
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To the extent that the Policyholders assert that they have suffered damages by the actions of the
State, State Fund, and/or the BOI, this Opinion does not address, nor does it foreclose, an action
for damages, or any other viable claim for relief. The only issues decided by this Opinion are
whether the Policyholders’ declaratory judgment claims as to the constitutionality of the statutes
at issue are justiciable, and whether their claims against individual members of the State Fund
Board of Directors and the BOI are barred because of statutory immunity.
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