ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
Gregory F. Zoeller Peter G. Tamulonis
Attorney General of Indiana Peter A. Velde
Eric D. Johnson
Frances Barrow Indianapolis, Indiana
Deputy Attorney General
Indianapolis, Indiana
Julie E. Lang
Deputy Attorney General
Indianapolis, Indiana FILED
Apr 14 2010, 2:08 pm
CLERK
In the of the supreme court,
court of appeals and
tax court
Indiana Supreme Court
No. 49S00-0812-CV-00649
ROBERT E. CARTER, JR., DIRECTOR, DNR,
AND INDIANA DEPARTMENT OF NATURAL
RESOURCES,
Appellants (Defendants below),
v.
NUGENT SAND COMPANY, ALICE G. JULIUS,
ANNETTA RAINES, MILDRED RAUTH,
SANDRA M. GOINS, PAULA C. GOODWIN,
ANNA J. GOODWIN, REA E. GOGAN, MELISSA
F. HAFENBREIDEL, AND PAULA C. GOODWIN,
AS PERSONAL REPRESENTATIVE OF THE
ESTATE OF CHARLES N. GOODWIN,
Appellees (Plaintiffs below).
Appeal from the Marion Superior Court, No. 49D02-0710-PL-42564
The Honorable Kenneth H. Johnson, Judge
On Direct Appeal
April 14, 2010
Shepard, Chief Justice.
Landowners and lessees obtained state approval a decade ago to dig a channel from the
Ohio River to a nearby lake so that they could use the lake for a sand and gravel operation. They
now seek judicial relief from conditions imposed within their 1999 permits. We conclude that
that the present action should be dismissed for failure to exhaust administrative remedies.
Facts and Procedural History
Alice G. Julius and others (collectively, “landowners”) own 156.2 acres of land adjoining
the Ohio River in Utica, Indiana. Nugent Sand Company is a Kentucky partnership engaged in,
among other things, the business of salt, sand, and gravel stockpiling and transportation. In May
1999, Nugent Sand leased the 156.2 acres for use in its commercial barge operations. The
acreage contained a 50-acre man-made body of water, standing about 200 feet inland from the
Ohio River. (App. at 11, 48.)
Nugent sought and acquired a permit from the Department of the Army, Corps of
Engineers, because the excavation would connect the lake to the Ohio River, a navigable
waterway. It also obtained certificates of regulatory approval from the Indiana Department of
Natural Resources because the construction would take place in a floodway and involved
construction of an access channel. Among the conditions contained in DNR‟s granted
certificates were provisions mandated by a section of the Indiana Code: “If a channel will: (A)
connect to a navigable river or stream; and (B) create additional water areas that will be
connected to the navigable river or stream; dedicate any water created to general public use.”
Ind. Code § 14-29-4-5(2) (2008); (App. at 95.)
Following these approvals, Nugent Sand spent substantial sums to facilitate its operations
on the leased premises. It excavated a channel through the Ohio River‟s bank to the man-made
lake to accommodate a commercial barge operation, which included navigating towboats and
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barges up to 195 feet in length and 35 feet in width through the lake. It also built a dock in the
lake for unloading barges.
Around 2005, boaters began entering the lake for recreational purposes through the
excavated channel. Many of the boaters created traffic and barge obstructions for Nugent Sand‟s
operations by tying boats together, swimming in the lake, and engaging in various forms of
raucous behavior. Nugent Sand posted and attempted to enforce “No Trespassing” and “Danger
Barge Operations” signs at the entrance of the channel. The efforts to remove these unauthorized
persons were largely unsuccessful. Third-party harbor boats subsequently began to decline to
work in the lake, and a number of Nugent‟s own employees became apprehensive because of the
heightened risk of property damage and serious bodily injury.
Nugent Sand contacted DNR about the unauthorized boaters. Specifically, it complained
that people and boats prevented it from “conducting business operations on its own schedule,”
that it had scheduled nighttime barge operations “at additional costs and expenses,” and further
warned that such unauthorized traffic posed a serious danger to Nugent and the public at-large.
(App. at 15–17, 179.) DNR replied that the waters were considered public and that the DNR did
not intend to take action. DNR employees provided similar statements to citizens who called to
inquire about the status of the lake. Nugent Sand then complained that the information regarding
the DNR‟s position spread, prompting a further increase in visiting boaters.
Nugent Sand requested a meeting with Robert Carter, DNR Director. Although such a
meeting was held and further discussions occurred with the DNR‟s Deputy Director and General
Counsel, the Department ultimately declined to alter its position about public access.
Nugent Sand and the landowners filed a complaint against DNR for declaratory and
injunctive relief, seeking a declaration that the lake and channel were private property and an
injunction barring DNR from informing that the lake and channel were open to the public. DNR
moved to dismiss, contending that Nugent failed to exhaust its administrative remedies. The trial
court denied the motion.
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Nugent Sand moved for summary judgment, arguing essentially that the lake and the
channel were private property from which they could exclude the public and that any attempt to
force them to dedicate the property for public use without compensation would be an
unconstitutional taking. (App. at 245–276.) DNR‟s response contended that Nugent exchanged
providing public access to the lake and channel as a condition for digging the channel, and the
public gained access to the property by virtue of Indiana statute as well as various common law
principles. (App. at 290–313.) On October 28, 2008, the trial court agreed with Nugent Sand
and entered a permanent injunction.
As the trial court held unconstitutional one of the statutes under which DNR had acted
during the permitting process, DNR filed an appeal directly with this Court. Ind. Appellate Rule
4(A)(1)(b).
The Takings Claim
Whether there is a winning takings claim at the heart of Nugent Sand‟s situation is
doubtful. To be sure, we have known since at least 1922 that a taking of private property within
the meaning of the Fifth Amendment may occur even if the government has not actually taken
possession of the land. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). As Justice
Holmes wrote, “if regulation goes too far it will be recognized as a taking.” Id. at 415. The
general standard for assessing whether a regulatory taking of private property for public purpose
within the meaning of the Fifth Amendment remains the one outlined by the Court in Penn
Central Transp. Co. v. New York, 438 U.S. 104 (1978). A regulation effects a taking of private
property only when it deprives an owner of all or substantially all economic or productive use of
the property. Id. at 127. It seems apparent that this standard is not met by the situation that gives
rise to this litigation.
Even where there has not been a total deprivation, however, a Fifth Amendment violation
may occur when the government requires that an owner dedicate an easement allowing public
access as a condition to obtaining a development permit. Such an exaction must be roughly
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proportional both in nature and extent to the impact of the development for which the permit is
required. Lingle v. Chevron, 544 U.S. 528 (2005). While this would be a more plausible claim
in the present situation, it is difficult to see that extracting public access as a condition to
authorizing a major water project connecting to one of the nation‟s great rivers is not
proportional and reasonably connected to the enterprise contemplated.
Doubtful as the takings claim may be, we conclude that the constitutional question need
not be adjudicated in light of DNR‟s contention that it was entitled to a dismissal.
Exhaustion of Administrative Remedies
The Department urges that it was entitled to a dismissal because Nugent Sand failed to
exhaust available administrative remedies.
The basis of this argument is that remedies have existed and that the permits themselves
informed Nugent Sand of the processes by which it could appeal any condition contained in the
two permits. The permits notified Nugent of the procedures available under 312 Ind. Admin.
Code 3-1, which affords a person the opportunity to request for a “Quasi-declaratory judgment”
under 312 I.A.C. 3-1-15 by requesting the department “to interpret a statute or rule administered
by the department as applicable to a specific factual circumstance.” (See App. at 92, 98, Notices
of Right to Administrative Review.) If the person seeking the request is aggrieved by the
response, that person may file a petition for administrative review under Ind. Code § 4-21.5-3.
312 I.A.C. 3-1-15(d). “This section does not excuse a person from a requirement to exhaust
another administrative remedy provided by statue or rule.” 312 I.A.C. 3-1-15(e).
DNR maintains that instead of filing the present court action, Nugent should have
undertaken these remedies for an interpretation of the dedication to public use requirement of
Ind. Code § 14-29-4-5(2) and the application of this statue to the property at issue.
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“It has long been Indiana law that a claimant within an available administrative remedy
must pursue that remedy before being allowed access to the judicial power.” Advantage Home
Health Care, Inc. v. Ind. State Dept. of Health, 829 N.E.2d 499, 503 (Ind. 2005) (citations
omitted). Our General Assembly has codified this general jurisprudential rule of administrative
law through Ind. Code § 4-21.5-5-4, which provides: “A person may file a petition for judicial
review under this chapter only after exhausting all administrative remedies available within the
agency whose action is being challenged[.]”
This Court has articulated the reasoning behind the policy of requiring pursuit of
administrative remedies before resort to the courts. In Turner v. City of Evansville, we said:
Premature litigation may be avoided, an adequate record for judicial review may
be compiled and agencies retain the opportunity and autonomy to correct their
own errors. Even if the ground of complaint is the unconstitutionality of the
statute, which may be beyond the agency‟s power to resolve, exhaustion may still
be required because „administrative action may resolve the case on other grounds
without confronting broader legal issues.‟
740 N.E.2d 860, 862 (Ind. 2001) (quoting State Bd. of Tax Comm‟rs v. Montgomery, 730
N.E.2d 680, 684 (Ind. 2000)). Where such an administrative remedy is readily available, filing a
declaratory judgment action is not a suitable alternative. Advantage Home Health Care, Inc.,
829 N.E.2d at 503.
Nugent Sand maintains it had no notice that it might need to invoke administrative
processes because the terms imposed by DNR–requiring Nugent Sand to dedicate the pre-
existing lake to general public use–are not set forth in the approvals, and it was only after the
period for appeal expired that it became clear that DNR was going to declare all additional
waters created by the project to be declared to public use. (Appellees‟ Br. at 33.) Nugent Sand
cites Bartholomew County Beverage v. Barco Beverage, 524 N.E.2d 353 (Ind. Ct. App. 1988)
for support.
In Barco, two alcohol distributors, Barco and BCB, became engaged in a competitive
pricing competition and Barco suffered losses after drastically reducing its prices. Id. at 354.
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Barco filed an action, claiming among other things that BCB engaged in illegal pricing practices,
and the trial court returned a jury verdict in favor of Barco. Id. at 354–55.
On appeal, BCB argued that the court should have dismissed the action as barred under
the doctrine of exhaustion. The Court of Appeals disagreed, and held that the trial court did not
err by allowing Barco to proceed. Id. at 356. The court reasoned that the exhaustion doctrine
was inapplicable because no administrative procedure exists for persons harmed by a violation of
the criminal portions of the Alcoholic Beverages Act, Ind. Code §§ 7.1-5-1-1 to 7.1-5-11-16,
observing that the Alcoholic Beverages Commission did not have the power to award damages to
a party aggrieved under the Act. Id. at 355–56.
By contrast, Nugent Sand had an administrative remedy. Indeed, each permit contained
information about how to appeal. (See App. at 91–102.) Moreover, the terms imposed by DNR,
“requiring all additional waters created by this project be dedicated to the public as required
under IC-14-29-4,” were explicitly set forth in the “Special Conditions” section of the approval
documents. (See App. at 94–95, 100–101.) As for whether this language was adequate to alert
Nugent to the fact that it was giving up exclusive use by virtue of obtaining the permits, there
might have been some basis for debating whether the statute and the permit conditions applied to
the channel and the lake or just to the channel. But Nugent has forcefully insisted that it gave up
nothing at all (“even a single boater getting „in the way‟. . . is an unacceptable interference,”
Appellees‟ Br. at 26) when the statute is plain that at least the channel (“all additional waters”)
were being dedicated to public use. DNR gave plain enough notice.
Other Arguments Against Dismissal
Nugent Sand also contends that the trial court had discretion to dismiss the present case
or retain it, citing Scales v. State, 563 N.E.2d 664 (Ind. Ct. App. 1990). There, the trial court
dismissed a declaratory judgment filed in the midst of an administrative appeal from an order to
cease coal mining operations. The Court of Appeals affirmed the dismissal, saying that the trial
court had not “abused its discretion.” Id. at 665. While Nugent is correct to cite this phrase as
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part of the standard of review, the larger picture is that courts do not generally entertain requests
for declaratory relief “if the result is to bypass available administrative procedures.” Id. at 666–
67. Dismissal was the right result in Scales, and that is the appropriate outcome here, where the
available process was ignored a decade ago.1
Likewise, Nugent has argued that its case should not be subject to dismissal because at
least one of the issues (here, statutory construction or constitutional violations) falls within the
“primary jurisdiction” of the courts rather than with the government agency, citing Austin Lakes
Joint Venture v. Avon Utilities, Inc., 648 N.E.2d 641 (Ind. 1996). Austin Lakes, however, was a
lawsuit for breach of contract and fraud between two private parties. This Court noted that “we
believe the doctrine [of primary jurisdiction] will generally be found not applicable when one of
the parties before the court is the agency to which the issue would be referred.” Id. at 648. Here,
the defendant is DNR, the agency that imposed the permit condition of dedication of waters to
public use.
Conclusion
We reverse the trial court and remand with directions to grant the Department‟s motion to
dismiss.
Sullivan, Boehm, and Rucker, JJ., concur. Dickson, J., concurring in result.
1
The Scales court relied on Thompson v. Medical Licensing Bd., 180 Ind. App. 333, 346, 389 N.E.2d 43, 51 (1979).
Scales, 563 N.E.2d at 666. There, the Court of Appeals said: “Allowing the Declaratory Judgment Act to be used
as a vehicle to bypass the administrative process created by statute can seriously weaken the effectiveness of that
process.”
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