In re Stratton Corp.

Annotate this Case
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 90-278


Appeal of Stratton Corporation               Supreme Court

                                             On Appeal from
                                             Windham Superior Court

                                             June Term, 1991


Arthur J. O'Dea, J.

Alan B. George of Carroll, George & Pratt, Rutland, for appellant

Robert E. Woolmington of Witten, Saltonstall & Woolmington, P.C.,
  Bennington, for appellees Stratton Area Citizens Committee and
  Uptegroves

Jeffrey L. Amestoy, Attorney General, and William Griffin, Chief
  Assistant Attorney General, Montpelier, for appellee State


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


     DOOLEY, J.   Appellant, the Stratton Corporation (Stratton), appeals
the Windham Superior Court's dismissal of its challenge to a proposed rule
of the Vermont Water Resources Board reclassifying a portion of Kidder
Brook.  We conclude that dismissal was proper and affirm.
     On March 3, 1989, appellees William and Elizabeth Uptegrove and the
Stratton Area Citizens Committee filed a petition with the Board, seeking
reclassification of Kidder Brook, an upland stream located in the towns of
Jamaica and Stratton, from Class B to Class A.  On May 16, 1989, the Board
initiated rulemaking proceedings, as required by the Vermont Water Pollution
Control Act, 10 V.S.A. {{ 1250-1254.  In accordance with the procedures for
rulemaking set forth in the Vermont Administrative Procedures Act at 3
V.S.A. {{ 836-843, the Board published a proposed rule to reclassify the
brook, held a public hearing on June 27, 1989, and set a July 6, 1989,
deadline for public comment.
     At the June 27 hearing, Stratton asserted that the Due Process Clause
of the United States Constitution required the Board to conduct formal,
trial-like proceedings rather than an informal rulemaking procedure.
Stratton based this assertion on property rights in the land adjoining the
brook and its plans for future development of the area.  The Board rejected
Stratton's due process argument and proceeded to hear testimony from propo-
nents and opponents of reclassification, including representatives of
Stratton.  The Board extended the public comment period to July 20th to
allow Stratton time to file additional written materials.  On July 19, 1989,
Stratton filed testimony of its consulting engineer detailing its permits
and land development plans which would be threatened by the
reclassification.
     In all, Stratton presented approximately 125 pages of written testimony
and supporting materials.  It stated that it owned property on both sides of
Kidder Brook and that it held six Act 250 land-use permits involving these
properties.  According to Stratton, these permits would be subject to
revocation or modification if the proposed reclassification were adopted.
Further, Stratton had long-term plans for development in the Kidder Brook
area.  It was about to request an Act 250 permit to construct 498 homes and
an 18-hole golf course in the area.  Stratton claimed that these plans could
be significantly affected or prevented by the reclassification.
     On July 27th, the Board voted unanimously to proceed with adoption of
the proposed rule to reclassify, and subsequently issued a written explana-
tion and a denial of Stratton's request to reopen the proceedings.  In
response to Stratton's due process claim, the Board stated that it was
"simply not convinced that reclassification of Kidder Brook to Class A
[would] substantially affect any existing permit or development on lands
owned by the Stratton Corporation."  In support of this conclusion, the
Board noted that Stratton's testimony, with one exception, showed only
"generalized uneasiness" about the effect of the reclassification.  The
exception involved a contingency plan to build an on-site sewage disposal
facility if its proposal to transfer wastewater to another area were not
approved.  The Board found this contingency need to be speculative.
Overall, the Board found that "there [was] no material issue of fact in
dispute among the parties to this proceeding."
     Stratton appealed the reclassification to the Windham Superior Court,
alleging that the Board's actions were arbitrary, unreasonable, and
"contrary to law."  In subsequent filings, as well as in its brief to this
Court, Stratton clarified that its only claim on appeal was that the Board
should have conducted "a trial-type hearing to adjudicate disputed facts"
raised by the petition.  On motion of the Board, appearing through the
Attorney General, and the other appellees, the superior court dismissed
Stratton's appeal, concluding that it was an attack on a rule which under
the Administrative Procedures Act, 3 V.S.A. { 807, must be brought as an
action for declaratory judgment in Washington Superior Court.
     On appeal, Stratton argues that the court's jurisdictional decision was
incorrect.  Stratton further argues that even if the reclassification
decision is rulemaking under the applicable statute, it can appeal the
reclassification decision under 10 V.S.A. { 1270 and contest whether it was
entitled to an adjudicative hearing as a matter of due process.  The
Attorney General, supported by the petitioners below, argues that reclass-
ification is done by a rulemaking proceeding, 10 V.S.A. { 1253(c), and the
exclusive method to challenge the validity of a rule is by declaratory
judgment action in Washington Superior Court as provided in 3 V.S.A. { 807.
     Ordinarily, we prefer to decide a jurisdictional issue rather than
reach the merits.  This case represents an exception to that preference for
two reasons.  First, while the parties have labeled the issue as juris-
dictional, it is really one of venue.  Since Stratton has limited its
appeal solely to a question of law about the procedure used in reaching the
reclassification decision, the issue in either proceeding would be the
same. (FN1) In the Windham Superior Court, it would have to show that the Board
acted "contrary to law." 10 V.S.A. { 1270.  In the Washington Superior
Court, it would need to show that the rule interferes with its "legal
rights."  3 V.S.A. { 807.  We fail to see any relevant difference in
Stratton's burden.  Under modern pleading and civil procedure rules, it is
of no consequence that one proceeding is labeled an appeal and the other an
action for a declaratory judgment.  See V.R.C.P. 1, 2 (there is one form of
action known as a "civil action" applicable in suits of a civil nature and
appeals from agencies).  The relief sought by Stratton in either proceeding
would be the same.
     Second, the jurisdictional and substantive issues are interrelated.
Stratton argues that the Board's proceeding was not rulemaking because of
limits imposed by the Due Process Clause of the Fourteenth Amendment, and
that it had a right to appeal from what was actually adjudication.  Because
this issue could affect the proper method of resolving this dispute, we
conclude that it is better to decide the underlying substantive issue to
bring about an efficient and complete end to this litigation.
     In evaluating the merits, we turn first to the statutory scheme around
which this dispute revolves.  The Vermont Water Pollution Control Act
provides that the State's surface waters are classified as either Class A,
B, or C.  10 V.S.A. { 1252(a).  The system establishes water quality
standards to meet federal law.  See In re Town of Sherburne, 154 Vt. at 601,
581 A.2d  at 277.  The classifications relate to water quality and suitable
uses.  Class "A" waters are the highest quality, "(1) [s]uitable for public
water supply with disinfection when necessary; character uniformly excel-
lent; or (2) [h]igh quality waters which have significant ecological value."
Class "B" waters are "[s]uitable for bathing and recreation, irrigation and
agricultural uses; good fish habitat; good aesthetic value; acceptable for
public water supply with filtration and disinfection."  Class "C" waters are
of lesser quality.  10 V.S.A. { 1252(a).
     All waters located above 2500 feet altitude are designated Class A.  10
V.S.A. { 1253(a).  All remaining waters, "unless otherwise classified by the
[Board] prior to July 1, 1971, are designated Class B waters . . ."  10
V.S.A. { 1253(b).  Hence, only those portions of Kidder Brook located below
2500 feet are at issue here.
     Section 1253(c) provides that the Board
         may on its own motion, and shall upon petition by a
         state agency, a municipality or thirty or more persons
         in interest alleging that it or they suffer injustice or
         inequity as a result of the classification of any
         waters, initiate a rulemaking proceeding to reclassify
         all or any portion of the affected waters in the public
         interest.  In the course of this proceeding, the board
         shall comply with the provisions of [the Vermont Admin-
         istrative Procedures Act] and hold a public hearing
         convenient to the waters in question.  If the board
         finds that the established classification is contrary to
         the public interest and that reclassification is in the
         public interest, it shall file a final proposal of re-
         classification in accordance with 3 V.S.A. { 841.  If
         the board finds that it is in the public interest to
         change the classification of any pond, lake or reservoir
         designated as Class A waters . . ., it shall so advise
         and consult with the department of health and shall
         provide in its reclassification rule a reasonable
         period of time before the rule becomes effective.
         (Emphasis added.)

Subsection (e) provides that when the Board is considering reclassification
to class A, "[n]otwithstanding the provisions of subsection (c)" the Board
need only determine whether the reclassification is in the public interest.
Subsection (f) sets forth ten factors for consideration in determining the
public interest.
     The statutory language makes clear that the Legislature intended that
the reclassification process be "a rulemaking proceeding" and labeled a
resulting reclassification decision a "rule."  See In re Town of Sherburne,
154 Vt. 596, 599 n.3, 581 A.2d 274, 276 n.3 (1990).  On its face, the
statute declines to treat reclassification as a "contested case," subject to
the formal, adjudicative provisions of the Vermont Administrative Procedure
Act, 3 V.S.A. {{ 809-813.  The question before us is whether this choice
denies Stratton due process of law.
     Due process requirements apply to the procedures that must be used in
reaching agency determinations only if they are adjudicative, rather than
rulemaking or legislative, in nature.  Bi-Metallic Investment Co. v. State
Bd. of Equalization, 239 U.S. 441, 446 (1915).  In Bi-Metallic, the Court
distinguished between an adjudication based on the particular facts con-
cerning specific parties, and a legislative or rulemaking decision, which
is made on the basis of general facts, and has a broad, prospective effect.
Id.  Only the former triggers procedural due process concerns.  Id.
     In his recent treatise, Professor Koch articulated three factors for
assessing whether an agency action is rulemaking or adjudication:  (1)
whether the inquiry is of a generalized nature, rather than having "a
specific, individualized focus"; (2) whether the inquiry "focuses on
resolving some sort of policy-type question and not merely resolution of
factual disputes"; and (3) whether the result is of "prospective applica-
bility and future effect."  1 C. Koch, Administrative Law & Practice { 2.3,
at 61-62 (1985).  A review of these factors supports our conclusion that
reclassification is a rulemaking decision.
     First, the reclassification inquiry involves examination of generalized
issues beyond the scope of the immediate parties, see 10 V.S.A. { 1253 (e),
rather than issues of fact focused primarily on the rights and duties of
these parties.  See Hercules, Inc. V. EPA, 598 F.2d 91, 118 (D.C. Cir.
1978).  The ten criteria the Board must consider in determining the appro-
priate classification of the waters relate to the interests of all citizens
of the state, not only landowners adjacent to the waters.  See 10 V.S.A. {
1253(e).  As the New York Court of Appeals instructed:
         A judicial type of hearing would, of course, be appro-
         priate when punishing individual violations, while it
         would be manifestly inappropriate in connection with
         the adoption of a water classification affecting many
         municipalities, individuals and industries.  (Emphasis
         in original.)

Town of Waterford v. Water Pollution Control Board, 5 N.Y.2d 171, 184, 156 N.E.2d 427, 433 (1959); see also Niagra of Wisconsin Paper Corp. v.
Wisconsin Dep't of Natural Resources, 84 Wis. 2d 32, 54, 268 N.W.2d 153,
163 (1978) (water quality standards measure the water itself and do not
focus on any polluter).
     In considering this first factor, Professor Koch notes, the "result of
rulemaking has no direct force of its own except to set some norm which
affects a subsequent decision."  1 C. Koch, Administrative Law & Practice {
2.3, at 61 (1985).  This is exactly the effect of the Board's classifica-
tion.  It determines the quality standards to which the water must be
managed, but leaves actual management to the Secretary of Natural
Resources.  10 V.S.A. { 1258; see also 2 W. Rodgers, Environmental Law: Air
and Water { 4.16(A)(2), at 247 (1986) (water quality standards are justified
as "study and planning, not as enforcement tools").
     Second, the Board's determination involves a policy question concerning
the level of quality of a public waterway in the public interest, rather
than resolution of a discrete factual dispute.  In many states, classifi-
cation is done by the Legislature and not the executive branch.  See, e.g.,
38 Me. Rev. Stat. Ann. {{ 464 - 470 (classifying all the waters of the State
of Maine); Shirley v. New Hampshire Water Pollution Comm'n, 100 N.H. 294,
297, 124 A.2d 189, 193 (1956) (upholding legislative classification of
Piscataquog River against constitutional challenge).  The New Hampshire
Court noted that the classification process involved weighing all public
benefits in light of the impact on private rights.  Id. at 298, 124 A.2d  at
194.  Classification also involves technical expertise and judgment.  See 1
F. Grad, Treatise on Environmental Law { 3.04, at 3-404 (1991).  Scientific,
economic and technical factors pertaining to an overall usage plan are
generally not adjudicative facts conducive to resolution in a trial-type
hearing.  South Terminal Corp. v. Environmental Protection Agency, 504 F.2d 646, 660 (1st Cir. 1974).
     Finally, the reclassification decision is a rule of prospective appli-
cability.  Although it may well affect future land uses, it does not address
past conduct.  As the Board found, its impact on development of surrounding
lands is speculative.  The Board also found that reclassification did not
directly affect any existing permits, including Act 250 permits.  Stratton
has not demonstrated those findings were wrong.
     Stratton emphasizes that it is the principal land owner affected, and
that reclassification will greatly impact its development plans.  This alone
does not turn the Board's action into a "contested case."  As Justice Holmes
observed, general rules "are passed that affect the person or property of
individuals, sometimes to the point of ruin, without giving them a chance to
be heard.  Their rights are protected in the only way that they can be in a
complex society, by their power, immediate or remote, over those who make
the rule."  Bi-Metallic, 239 U.S.  at 445.  The classification decision
affects the public generally.  Stratton's interest may be different from
that of other members of the public, but it has no right to turn a public
issue into a private contest.  See Hercules, Inc. v. Environmental
Protection Agency, 598 F.2d  at 118 (the fact that plaintiff is the only
producer of a chemical subject to an EPA water quality standard does not
give it a right to an adjudicatory hearing on the standard); Anaconda Co. v.
Ruckelshaus, 482 F.2d 1301, 1306 (10th Cir. 1973) (the fact that plaintiff
alone is involved with emission standard is not conclusive since "there are
many other interested parties and groups who are affected and are entitled
to be heard").  Nor does Stratton have the right to redirect the focus from
the public interest factors specified by the Legislature to how reclassifi-
cation will affect its private development plans.
     We have no difficulty concluding that a reclassification determination
under 10 V.S.A. { 1253 is a policy-based rule of general applicability, and
not an adjudication of particular parties' rights.  See Ratepayers Coalition
of Rochester v. Rochester Electric Light & Power Co., 153 Vt. 327, 332, 571 A.2d 606, 609 (1989).  The Legislature is free, if it chooses, to require
that reclassification decisions be made pursuant to more formal, trial-type
procedures.  See generally, Shapiro, The Choice of Rulemaking or Adjudica-
tion in the Development of Administrative Policy, 78 Harv. L. Rev. 921
(1965).  Nothing in the federal constitution, however, compels it to do so.
     Since the superior court dismissed the case on the pleadings alone, we
can affirm the dismissal on the grounds that Stratton failed to state a
claim upon which relief could be granted.  See Gochey v. Bombardier, Inc.,
153 Vt. 607, 613, 572 A.2d 921, 925 (1990) (decision of trial court may be
affirmed on any legal ground).  We conclude that even if we view the record
and the evidence before the Board in the light most favorable to Stratton,
it could not prevail on its due process argument as a matter of law.  See
Bargman v. Brewer, 142 Vt. 367, 370, 454 A.2d 1253, 1256 (1983).  The
superior court did not err in dismissing the action.
     Affirmed.
                                        FOR THE COURT:




                                        Associate Justice



FN1.    The only difference is that, in an appeal, Stratton is bound by the
record.  10 V.S.A. { 1270; In re Town of Sherburne, 154 Vt. 596, 603, 581 A.2d 274, 278 (1990).  In a challenge to a rule, Stratton is free to build
another record.  Apparently, Stratton is satisfied by the record below and
does not seek an opportunity to make a new record.  Thus, the difference
between the two routes is insignificant.