Arkansas State Claims Commission v. Duit Construction Co. , 2014 Ark. LEXIS 567 ( 2014 )

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SUPREME COURT OF ARKANSAS
No. CV-14-137
ARKANSAS STATE CLAIMS Opinion Delivered October 23, 2014
COMMISSION; ARKANSAS GENERAL
ASSEMBLY, CLAIMS REVIEW APPEAL FROM THE PULASKI
SUBCOMMITTEE; ARKANSAS COUNTY CIRCUIT COURT
GENERAL ASSEMBLY, JOINT [NO. 60-CV-13-1706]
BUDGET COMMITTEE; ARKANSAS
STATE HIGHWAY COMMISSION; HONORABLE TIMOTHY DAVIS
AND ARKANSAS STATE HIGHWAY FOX, JUDGE
AND TRANSPORTATION
DEPARTMENT
APPELLANTS
V.
REVERSED AND REMANDED;
DUIT CONSTRUCTION COMPANY, APPELLANTS’ MOTION TO DISMISS
INC. CROSS-APPEAL GRANTED; CROSS-
APPELLEE APPEAL DISMISSED.
PAUL E. DANIELSON, Associate Justice
Appellants, the Arkansas State Claims Commission (“ASCC”), the General Assembly’s
Claims Review Subcommittee, the General Assembly’s Joint Budget Committee, the
Arkansas State Highway Commission, and the Arkansas State Highway and Transportation
Department (“ASHTD”), bring this interlocutory appeal from the circuit court’s order
denying in part their motions to dismiss the complaint for declaratory judgment and the first
amended complaint for declaratory judgment of appellee Duit Construction Company, Inc.
Their sole point on appeal is that the circuit court erred in its denial because they were
entitled to sovereign immunity. Duit cross-appeals from the circuit court’s order granting in
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part the Appellants’ motions to dismiss, asserting that the circuit court erred in doing so, and
the Appellants have moved to dismiss Duit’s cross-appeal. We reverse and remand on direct
appeal and dismiss the cross-appeal.
In 2002, Duit entered into a contract with the Arkansas State Highway Commission
to complete an improvement project on Interstate 30 in Saline and Pulaski Counties. Duit
subsequently encountered what it claims were “differing site conditions,” and, in 2006, it
transmitted a “Request for Equitable Adjustment for Cost Overruns” to the ASHTD, which
denied Duit’s request. Duit then filed a complaint with the ASCC on May 5, 2011, and the
ASCC denied and dismissed Duit’s claim “for failure to prove by a preponderance of the
evidence any liability on the part of the [ASHTD].”
On January 9, 2012, the General Assembly’s Claims Review Subcommittee remanded
Duit’s claim to the ASCC for further evidence or findings. The ASCC held a partial
rehearing on remand, and it once again denied and dismissed Duit’s claim. Duit claims that
it appealed the ASCC’s second denial and dismissal to the General Assembly and that “[b]y
voice vote on March 20, 2013, a Subcommittee of the Joint Budget Committee ‘affirmed’
the ASCC’s . . . decision. The Joint Budget Committee subsequently adopted the
Subcommittee’s decision without a hearing or notice to Duit.”
Duit filed a “petition” and what it deemed a “notice of appeal” from the March 20,
2013 vote in the Pulaski County Circuit Court; it later amended that notice of appeal and
additionally petitioned the circuit court for a writ of certiorari, as well as a declaratory
judgment. In doing so, Duit challenged the constitutionality of the method by which the
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State resolves claims against it, asserting that the procedures violated the Due Process Clause
by “failing to provide a fair and impartial post-deprivation procedure for the resolution of
breach of contract claims against the State, and by discriminating against non-residents.”
The Arkansas State Highway Commission and the ASHTD moved to dismiss Duit’s
amended notice of appeal, petition for writ of certiorari, and complaint for declaratory
judgment. In their motion, they claimed that Duit’s suit was one against the State and that
they were afforded sovereign immunity from Duit’s suit pursuant to article 5, section 20, of
the Arkansas Constitution. They further contended that Duit’s suit should be dismissed for
failure to state facts or a claim upon which relief could be granted under Arkansas Rule of
Civil Procedure 12(b)(6).
Likewise, the ASCC, the Claims Review Subcommittee, and the Joint Budget
Committee also moved to dismiss Duit’s amended notice of appeal, petition for writ of
certiorari, and complaint for declaratory judgment. They similarly asserted that sovereign
immunity barred Duit’s suit, and they further averred that both this court and the federal
courts had rejected the notion that the resolution of claims against the State by the ASCC and
the General Assembly violated due process. Duit responded to the motions to dismiss, and
the circuit court held a hearing on the motions. After the hearing, Duit filed a first amended
complaint for declaratory judgment, in which it sought a declaration that the current method
of resolving contract disputes was unconstitutional and directing the State to provide Duit
with a fair, impartial, and meaningful forum in which to present its claim.
On October 21, 2013, the circuit court entered its order, in which it noted that Duit
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had withdrawn its “notice of appeal,” and it dismissed Duit’s petition for writ of certiorari.
With regard to Duit’s claim for declaratory relief, the circuit court found, in relevant part:
7. The framework for deciding contract claims against the State of Arkansas is not
violative of the Due Process Clause of the Fourteenth Amendment of the United
States Constitution. The Court finds that the General Assembly and the Joint Budget
Committee of the General Assembly are a sufficient and constitutional remedy for Due
Process Clause purposes. Thus, the Court finds the Amended Notice and Complaint
and the First Amended Complaint allegations that the current framework for deciding
claims against the State of Arkansas is facially unconstitutional are barred by Art. 5,
§ 20, Constitution of Arkansas.
8. The Amended Notice and Complaint and the First Amended Complaint, on the
other hand, present sufficient factual allegations to constitute a cause of action that the
Respondents have not been impartial with respect to the claims of non-residents.
IT IS THEREFORE ORDERED that the District Court Rule 9(f) Appeal is
hereby dismissed, that the Petition for Writ of Certiorari is hereby dismissed, and that
the Motions to Dismiss the Complaint for Declaratory Judgment and First Amended
Complaint for Declaratory Judgment are granted on the grounds that the statutory
framework for deciding claims against Arkansas is constitutional and, therefore, the
Petitioner’s claims of facial invalidity of the framework is dismissed on the grounds of
sovereign immunity, and that the statutory framework is constitutional. The Motion
to Dismiss the Complaint for Declaratory Judgment and First Amended Complaint for
Declaratory Judgment, including the motion to dismiss on grounds of sovereign
immunity, are denied only as to Petitioner’s due-process and equal-protection claims
that in-state and out-of-state contractors were treated differently. All other claims and
or requests of Petitioner are hereby dismissed with prejudice.
It is from this order that the Appellants and Duit both appeal.
I. Direct Appeal
The Appellants contend that the circuit court erroneously denied their motions to
dismiss, contending that they are entitled to sovereign immunity because Duit’s claim attempts
to control the actions of the State and subject it to monetary liability. They further assert that
no exception to the sovereign-immunity doctrine applies because Duit’s complaint does not
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meet the threshold showing required to apply the “unconstitutional act” exception. They
urge that Duit’s complaint is devoid of any factual support for its assertion that the ASCC and
the General Assembly have treated out-of-state contractors differently from in-state
contractors. They further maintain that the unconstitutional-act exception has no application
to claims seeking monetary relief against the State, but is limited in its application to claims
seeking injunctive relief.
Duit responds that a suit to enforce rights guaranteed by the United States Constitution
overcomes the bar of sovereign immunity, as does a suit for declaratory and injunctive relief
involving illegal or unconstitutional acts by the State. It contends that its complaint for relief
sufficiently averred facts in support of its claim that the State deprived it of its property
without due process of law and equal protection by failing to provide an impartial decision
maker. Duit claims that declaratory relief is the appropriate remedy in its quest to obtain an
unbiased forum for its claims against the State.
Ordinarily, an appeal may not be taken from an order denying a motion to dismiss.
See University of Arkansas for Med. Scis. v. Adams, 354 Ark. 21, 117 S.W.3d 588 (2003).
However, Arkansas Rule of Appellate Procedure–Civil 2(a)(10) (2013) provides for an
interlocutory appeal of an order denying a motion to dismiss based on the defense of
sovereign immunity. See id. The rationale justifying an interlocutory appeal is that the right
to immunity from suit is effectively lost if the case is permitted to go to trial. See id.
In reviewing a circuit court’s decision on a motion to dismiss, we treat the facts alleged
in the complaint as true and view them in the light most favorable to the party who filed the
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complaint. See, e.g., Arkansas Dep’t of Envtl. Quality v. Oil Producers of Arkansas, 2009 Ark.
297, 318 S.W.3d 570. In testing the sufficiency of the complaint on a motion to dismiss, all
reasonable inferences must be resolved in favor of the complaint, and the pleadings are to be
liberally construed. See id. However, our rules require fact pleading, and a complaint must
state facts, not mere conclusions, in order to entitle the pleader to relief. See id. Our standard
of review for the denial of a motion to dismiss is whether the circuit court abused its
discretion. See Walker v. Arkansas State Bd. of Educ., 2010 Ark. 277, 365 S.W.3d 899.
The parties do not appear to dispute that Duit’s action is one against the State, which
is ordinarily barred by the doctrine of sovereign immunity.1 Sovereign immunity is
jurisdictional immunity from suit. See Milberg, Weiss, Bershad, Hynes & Lerach, LLP v. State,
342 Ark. 303, 28 S.W.3d 842 (2000). This defense arises from article 5, section 20, of the
Arkansas Constitution, which provides: “The State of Arkansas shall never be made defendant
in any of her courts.” Id. at 320, 28 S.W.3d at 854 (quoting Ark. Const. art. 5, § 20). This
court has extended the doctrine of sovereign immunity to include state agencies. See Arkansas
Dep’t of Cmty. Corr. v. City of Pine Bluff, 2013 Ark. 36, 425 S.W.3d 731. Where the pleadings
show that the action is, in effect, one against the State, the circuit court acquires no
jurisdiction. See id. In determining whether the doctrine of sovereign immunity applies, the
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To the extent that Duit might contest this, it is clear that a judgment in Duit’s favor
would operate to control the actions of the State. Duit’s first amended complaint specifically
requests that the circuit court “require the State of Arkansas to provide Duit a meaningful and
fair forum in which to present its claims for breach of contract.” Accordingly, Duit’s suit is
barred by the doctrine of sovereign immunity unless an exception applies. See, e.g., Arkansas
Dep’t of Cmty. Corr. v. City of Pine Bluff, 2013 Ark. 36, 425 S.W.3d 731.
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court must decide if a judgment for the plaintiff will operate to control the action of the State
or subject it to liability. See Arkansas Dep’t of Envtl. Quality v. Al-Madhoun, 374 Ark. 28, 285
S.W.3d 654 (2008). If so, the suit is one against the State and is barred by the doctrine of
sovereign immunity, unless an exception to sovereign immunity applies. See id.
This court has recognized three ways in which a claim of sovereign immunity may be
surmounted: (1) where the State is the moving party seeking specific relief; (2) where an act
of the legislature has created a specific waiver of sovereign immunity; and (3) where the state
agency is acting illegally, unconstitutionally, or if a state-agency officer refuses to do a purely
ministerial action required by statute. See Board of Trustees of the Univ. of Arkansas v. Burcham,
2014 Ark. 61; Arkansas Dep’t of Cmty. Corr., 2013 Ark. 36, 425 S.W.3d 731; Arkansas Tech
Univ. v. Link, 341 Ark. 495, 17 S.W.3d 809 (2000). At issue in the instant case is whether
the last exception applies. The Appellants assert that the unconstitutional-act exception does
not apply for two reasons: (1) Duit failed to plead sufficient facts to demonstrate an
unconstitutional act; and (2) the exception does not apply to suits for monetary relief, which
the Appellants claim is the ultimate relief sought by Duit. We need only address the former.
This court has recognized that a complaint alleging illegal and unconstitutional acts by
the State as an exception to the sovereign-immunity doctrine is not exempt from complying
with our rules that require fact pleading. See Link, 341 Ark. 495, 17 S.W.3d 809. In its suit,
Duit alleged that the claims-commission process favors resident contractors over nonresident
contractors, resulting in a violation of equal protection under the Fourteenth Amendment to
the United States Constitution. “In deciding whether an equal protection challenge is
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warranted, there must first be a determination that there is a state action which differentiates
among individuals.” Pledger v. Featherlite Precast Corp., 308 Ark. 124, 135, 823 S.W.2d 852,
859 (1992) (quoting Bosworth v. Pledger, 305 Ark. 598, 604, 810 S.W.2d 918, 920 (1991)).
A careful review of Duit’s first amended complaint for declaratory judgment, however,
reveals that Duit failed to plead facts that, if proven, would demonstrate a differentiation in
the treatment of in-state and out-of-state contractors. Although Duit provides a table
demonstrating the alleged past awards and denials by the ASCC to nonresident contractors,
its complaint lacks any facts in support of its statement that “[d]uring that same period the
ASCC recommended awards of damages to Arkansas resident contractors for breach of
contract against the AHTD in amounts greater than awards to non-resident contractors.” The
mere statement that it is so, without factual support, simply fails to comport with our
fact-pleading requirements. See, e.g., Arkansas Dep’t of Envtl. Quality v. Brighton Corp., 352
Ark. 396, 102 S.W.3d 458 (2003).
For purposes of a motion to dismiss, we treat only the facts alleged in a complaint as
true, but not a party’s theories, speculation, or statutory interpretation. See Fitzgiven v. Dorey,
2013 Ark. 346, 429 S.W.3d 234. Taking only the facts alleged in Duit’s first amended
complaint for declaratory judgment as true and viewing them in the light most favorable to
Duit, we cannot say that the complaint states sufficient facts to support Duit’s allegation that
the claims-commission process treated resident and nonresident contractors differently in
violation of the Fourteenth Amendment. Accordingly, the exception to the
sovereign-immunity doctrine for unconstitutional acts is not applicable, and Duit’s equal-
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protection claim is barred by sovereign immunity. We therefore reverse the circuit court’s
denial of the Appellants’ motions to dismiss Duit’s equal-protection claim and remand for
entry of an order consistent with this opinion.
II. Cross-Appeal; Motion to Dismiss Cross-Appeal
Duit cross-appeals from the circuit court’s order that granted in part the Appellants’
motions to dismiss based on sovereign immunity, dismissing its due-process claim. Before we
can reach the merits of the cross-appeal, however, we must first address a motion by the
Appellants to dismiss Duit’s cross-appeal. In their motion, the Appellants contend that this
court should dismiss the cross-appeal because Duit seeks to appeal from what is a nonfinal
order. The Appellants aver that because the circuit court only dismissed Duit’s facial
challenge, but allowed it to proceed on its unequal-treatment claim, the circuit court’s order
adjudicated fewer than all of Duit’s claims and, therefore, the order was not final. They
further point out that the appeal is not proper under Ark. R. App. P.–Civ. 2(a)(10), as theirs
is, because that rule limits such an interlocutory appeal to the denial of a motion to dismiss or
for summary judgment on the basis of immunity and does not permit an appeal from the grant
of those motions.
We agree. In the instant case, the circuit court’s order may have dismissed Duit’s due-
process claim, but it also kept alive Duit’s equal-protection claim, by virtue of its denial in part
of the Appellants’ motion to dismiss.2 Accordingly, the order was in no way final at the time
2
In its response to the Appellants’ motion to dismiss the cross-appeal, Duit contends
that there are no unresolved claims at the circuit-court level and that its cross-appeal from the
dismissal of its claim should be heard in conjunction with the Appellants’ direct-appeal. Duit
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it was entered by the circuit court. The requirement of a final judgment is the cornerstone
of appellate jurisdiction, and this court reviews only final orders. See Robinson v. Villines, 2012
Ark. 211. For an order to be final and appealable, it must dismiss the parties from the court,
discharge them from the action, or conclude their rights to the subject matter in controversy.
See id. Stated another way, for an order to be final and appealable, the order must put the
circuit court’s directive into execution, ending the litigation, or a separable branch of it. See
id. According to the circuit court’s order, Duit’s claim that nonresident contractors were
treated differently remained viable; it had not been dismissed, and an order that contemplates
further action by a party or the court is not a final, appealable order. See id.
Because the circuit court’s order did not dispose of both of Duit’s claims, there is no
final judgment as required by Ark. R. Civ. P. 54(b). Under Rule 54(b), an order that fails
to adjudicate all of the claims as to all of the parties, whether presented as claims,
counterclaims, cross-claims, or third-party claims, is not final for purposes of appeal. See Ford
Motor Co. v. Washington, 2012 Ark. 325. Although Rule 54(b) provides a method by which
the circuit court may direct entry of a final judgment as to fewer than all of the claims, where
there is no attempt to comply with Rule 54(b), the order is not final, and we must dismiss the
appeal. See id. Our review of the instant record reveals no certification pursuant to Ark. R.
takes the position that its complaint consisted of only one claim—one for due process—and
that the circuit court’s order disposed of that single claim.
We do not agree. Although Duit argues that the complaint consisted of only one
claim against the Appellants, the circuit court’s order clearly treated Duit’s allegations as two
separate claims—one for due process and one alleging a difference in the treatment of resident
and nonresident contractors, a claim readily identifiable to this court as one alleging an equal-
protection violation.
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Civ. P. 54(b).
Nor is Duit’s cross-appeal a proper interlocutory appeal under Ark. R. App. P.–Civ.
2(a)(10). That rule permits an interlocutory appeal from “[a]n order denying a motion to
dismiss or for summary judgment based on the defense of sovereign immunity,” but Duit
seeks to appeal the circuit court’s grant in part of the Appellants’ motion to dismiss on
sovereign immunity. Since Rule 2(a)(10) does not allow an interlocutory appeal of an order
granting a motion to dismiss based on the defense of sovereign immunity, Duit’s cross-appeal
is improper under that Rule as well. For all of these reasons, we lack jurisdiction over Duit’s
cross-appeal and must dismiss it. Accordingly, we grant the Appellants’ motion to dismiss the
cross-appeal.
Reversed and remanded for entry of an order consistent with this opinion; appellants’
motion to dismiss cross-appeal granted; cross-appeal dismissed.
Special Justice J. CARTER FAIRLEY joins.
HOOFMAN, J., not participating.
Dustin McDaniel, Att’y Gen., by: Mindy D. Pipkin, Ass’t Att’y Gen., and Michelle
Davenport, for appellants.
Jack East III, for appellee.
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