Broadway Child Care Ctr., Inc. v. Minn. Dep't of Human Servs.

955 N.W.2d 626

BROADWAY CHILD CARE CENTER, INC., et al., Appellants,

v.MINNESOTA DEPARTMENT OF HUMAN SERVICES, Respondent.

A20-0004

Court of Appeals of Minnesota.

Filed January 11, 2021

L.1. Rhyddid Watkins, Martin Hild, P.A., Aurora, Colorado (for appellants)

Keith Ellison, Attorney General, Drew D. Bredeson, Assistant Attorney General, St. Paul, Minnesota (for respondent)

Considered and decided by Bratvold, Presiding Judge; Segal, Chief Judge; and Kirk, Judge.^*

BRATVOLD, Judge

Appellants Broadway Child Care Center Inc., Central Childcare Center Inc., and Madina Academy Central Inc. (collectively, "the childcare centers") sought discretionary review under Minn. Stat. § 15.474, subd. 2 (2018), of orders denying their requests for attorney fees and expenses under the Minnesota Equal Access to Justice Act (MEAJA), Minn. Stat. § 15.471 -.474 (2018). We granted review and consolidated the appeals.

MEAJA generally provides that a prevailing party may recover attorney fees and expenses upon a showing that the state's position was "not substantially justified." Minn. Stat. § 15.472(a). But MEAJA excludes some persons as parties eligible to seek fees. Minn. Stat. § 15.471, subd. 6 (defining "party"). We determine that MEAJA excludes a person providing services under licensure by the Minnesota Department of Health (MDH) or respondent Minnesota Department of Human Services (DHS) from seeking attorney fees in a matter involving the license applicable to those services. Id. , subd. 6(c). Because the childcare centers are persons providing services under a DHS license and they requested fees incurred in contested-case proceedings involving the temporary suspension of the licenses applicable to those services, we affirm the orders denying their fee requests.

FACTS

In May and June 2019, DHS received reports of suspected licensing violations at the childcare centers and responded by conducting site visits in May and June 2019. During these visits, DHS employees found "significant instances of non-compliance with health and safety standards." After the June site visits, DHS issued orders of temporary and immediate suspension (TIS) of the childcare centers’ licenses. The TIS orders included findings of specific violations for the childcare centers. In general, DHS found that classrooms did not have adequate staff distribution and were over capacity. DHS also found the childcare centers lacked records for children under their care and had no documents showing training for some staff. Based on these findings, DHS determined that "the health, safety, and rights of children in [the child care centers’] care are in imminent risk of harm." The TIS orders provided that, at the close of business on June 14, 2019, the childcare centers were "prohibited from providing child care."

The childcare centers filed administrative appeals and requested contested-case hearings. The childcare centers disputed the DHS findings and responded, for example, that each center had the required child records and staff training documents. Before the hearings concluded, the childcare centers produced documents to DHS. As DHS reviewed these documents, the contested-case proceedings commenced for Broadway and Central.

On August 2, 2019, DHS lifted the TIS orders and asked the administrative law judge (ALJ) to dismiss the contested-case proceedings. DHS's written request stated that information provided by the childcare centers had shown "sufficient compliance" and that there was "no longer an imminent risk of harm to children served by the program[s]." The ALJ dismissed the contested-case proceedings against the childcare centers.

The childcare centers timely applied for attorney fees of $46,825 under MEAJA, and DHS opposed the applications. After a hearing, the ALJ denied the applications for attorney fees in a written decision. The ALJ gave three independent reasons for the denials: first, the childcare centers were not a "party" as defined by MEAJA. This reason is the heart of this appeal and applies an exclusion provided by Minn. Stat. § 15.471, subd. 6(c). The ALJ explained:

Here, [DHS] granted [the childcare centers] [ ] license[s] to provide childcare services, and the TIS directly relates to the provision of those services. [The childcare centers] fall[ ] squarely into this exclusion and cannot be considered [ ] part[ies] for purposes of MEAJA.

Second, the ALJ determined that the childcare centers were not prevailing parties in the contested-case proceedings. Third, the ALJ determined that DHS's position was substantially justified because "it cannot be said that the violations alleged by [DHS] are incapable of placing children in imminent risk of harm."¹

As mentioned above, we granted discretionary review.² Because our review of the ALJ's first reason resolves this appeal, we need not reach the ALJ's other reasons for denying the fee applications.

ISSUE

Does MEAJA exclude a person providing services under a DHS license from seeking attorney fees when a party in a matter that involves suspending the license applicable to the services provided?

ANALYSIS

The legislature adopted MEAJA in 1986. See 1986 Minn. Laws ch. 377, §§ 1-7 at 197-200 (then codified at Minn. Stat. §§ 3.761 -.765 (1986)). The law was modeled on the federal Equal Access to Justice Act (FEAJA). Haymes, 444 N.W.2d at 258 ; see generally Pub. L. 96-481, tit. II, 94 Stat. 2325 (1980) (adopting FEAJA). Congress enacted FEAJA "to eliminate the barriers that prohibit small businesses and individuals from securing vindication of their rights in civil actions and administrative proceedings brought by or against the Federal Government." Scarborough v. Principi , 541 U.S. 401, 406, 124 S. Ct. 1856, 1861, 158 L.Ed.2d 674 (2004) (quoting H.R. Rep. No. 96-1005, at 9 (1980)).

MEAJA provides that an ALJ shall award attorney fees and other expenses to a "party," other than the state, if the party (a) prevails in a civil action or contested-case proceeding brought by or against the state, and (b) shows that the position of the state was "not substantially justified," unless (c) "special circumstances make an award unjust." Minn. Stat. § 15.472(a). MEAJA is an exception to the general rule that a party is not entitled to attorney fees and costs in actions against the state acting in its sovereign capacity. Lund v. Comm'r of Pub. Safety , 783 N.W.2d 142, 143 n.1 (Minn. 2010). Because MEAJA is a limited waiver of sovereign immunity, courts strictly construe its language. See Donovan Contracting v. Minn. Dep't of Transp. , 469 N.W.2d 718, 720 (Minn. App. 1991) (citing Ruckelshaus v. Sierra Club , 463 U.S. 680, 682, 103 S. Ct. 3274, 3278, 77 L.Ed.2d 938 (1983) ), review denied (Minn. Aug. 2, 1991).

MEAJA defines "party" as having three separate requirements. First, MEAJA provides that a party is "a person named or admitted as a party, or seeking and entitled to be admitted as a party, in a court action or contested-case proceeding, or a person admitted by an administrative law judge for limited purposes, and who is" a small business with 500 or fewer employees and whose annual revenues did not exceed $7,000,000 at the time of the proceeding. Minn. Stat. § 15.471, subd. 6(a). Second, MEAJA provides that a party includes partners, officers, shareholders, members, or owners of a qualifying small business. Id. , subd. 6(b). Here, the parties on appeal agree that the childcare centers satisfy the first and second requirements of the statutory definition.³

The parties disagree, however, about how to interpret and apply the third requirement of the statutory definition, which provides a party does not include

a person providing services pursuant to licensure or reimbursement on a cost basis by the Department of Health or the Department of Human Services, when that person is named or admitted or seeking to be admitted as a party in a matter which involves the licensing or reimbursement rates, procedures, or methodology applicable to those services.

Id. , subd. 6(c). For ease of reference, we will refer to Minn. Stat. § 15.471, subd. 6(c), as "subdivision 6(c)" or "the exclusion."

The childcare centers argue that the exclusion bars only those providing services under an MDH license or those providing services under reimbursement on a cost basis by DHS. They also contend that because they do not provide these types of services, the exclusion does not apply to them. DHS argues that the exclusion bars those providing services under DHS or MDH licenses from seeking fees in matters involving the applicable license, and that this exclusion applies to the childcare centers’ contested-case proceedings challenging the TIS orders that suspended their DHS licenses.

Whether the childcare centers are excluded by subdivision 6(c) from the definition of parties that may seek fees under MEAJA section 15.472(a) presents a question of statutory interpretation that we review de novo. A.A.A. v. Minn. Dep't. of Human Servs. , 832 N.W.2d 816, 819 (Minn. 2013). When interpreting statutes, we seek "to ascertain and effectuate the intention of the legislature." Id. at 828 ; see Minn. Stat. § 645.16 (2018) ("The object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature.").

The first step in interpreting a statute is to determine whether the language is clear and unambiguous. A.A.A. , 832 N.W.2d at 819. If the "legislature's intent is clearly discernable from plain and unambiguous language, statutory construction is neither necessary nor permitted and [we] apply the statute's plain meaning." Am. Tower, L.P. v. City of Grant , 636 N.W.2d 309, 312 (Minn. 2001). A statute is ambiguous if, as applied to the facts of the case, it is susceptible to more than one reasonable interpretation. Staab v. Diocese of St. Cloud , 813 N.W.2d 68, 72-73 (Minn. 2012). If the statute is ambiguous, then we may look beyond the statutory language to determine legislative intent. A.A.A. , 832 N.W.2d at 819 ; see generally ...