T & M Machines, L.L.C. v. Atty. Gen. , 2020 Ohio 551 ( 2020 )

[Cite as T & M Machines, L.L.C. v. Atty. Gen., 2020-Ohio-551.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
T & M Machines, LLC et al., :
Plaintiffs-Appellants, : No. 19AP-124
(C.P.C. No. 18CV-1135)
v. :
(REGULAR CALENDAR)
[Dave Yost] Attorney General :
of Ohio et al.,
:
Defendants-Appellees.
:
D E C I S I O N
Rendered on February 18, 2020
On brief: Donald J. Malarcik, for appellants.
On brief: Dave Yost, Attorney General, Matthew T. Green,
and C. Patrick Denier, for appellee Attorney General of Ohio
Dave Yost. Argued: Matthew T. Green.
On brief: Dave Yost, Attorney General, Charles E. Febus, and
Joseph E. Schamansky, for appellees Ohio Department of
Public Safety and Ohio Liquor Control Commission. Argued:
Joseph E. Schamansky.
APPEAL from the Franklin County Court of Common Pleas
BEATTY BLUNT, J.
{¶ 1} Plaintiffs-appellants, T & M Machines, LLC ("T & M Machines"), T & M
Merchandising, Inc. ("T & M Merchandising"), and Loyal Order of Moose, Middletown
Lodge No. 501 (the "Moose Lodge") (collectively "appellants"), appeal from a judgment of
the Franklin County Court of Common Pleas granting the Civ.R. 12(B)(1) and (6) motions
to dismiss of defendants-appellees, Ohio Attorney General ("OAG"), Ohio Department of
No. 19AP-124 2
Public Safety ("ODPS"), and Ohio Liquor Control Commission ("OLCC"). For the following
reasons, we affirm.
I. Facts and Procedural History
{¶ 2} Appellant T & M Machines filed a complaint on February 6, 2018 against
OAG and OLCC in the common pleas court. Count 1 seeks a declaratory judgment that
certain Electronic Raffle Machines ("ERMs") which are leased to various charitable
organizations by T & M Machines are "raffles" permitted to be used by charitable
organizations, pursuant to R.C. 2915.092, and not a "scheme of chance" prohibited by
R.C. 2915.02(A)(2). Count 1 also seeks a declaration that the ERMs are not gambling
devices prohibited by Ohio Adm.Code 4301:1-1-53. Count 2 seeks preliminary and
permanent injunctions enjoining the OAG and OLCC from taking criminal, civil, and/or
administrative action against the use of ERMs. The original complaint was also
accompanied by a motion for a temporary restraining order, which was denied by the trial
court.
{¶ 3} Subsequently, on April 4, 2018, an amended complaint was filed. The
amended complaint added T & M Merchandising and the Moose Lodge as plaintiffs and
added ODPS as a defendant, but otherwise seeks the same relief as that requested in the
original complaint.
{¶ 4} According to the amended complaint, Moose Lodge is a 501(c)(3) non-profit
fraternal organization holding a liquor license issued by the OLCC and bingo licenses
issued by the OAG. The Moose Lodge uses ERMs for charitable fundraising purposes.
T & M Machines leases ERMs to qualified veteran and fraternal organizations in Ohio,
including the Moose Lodge. T & M Merchandising holds a license issued by the OAG to
manufacture and distribute bingo supplies. T & M Merchandising also manages and
services ERMs, and manages the revenue generated by ERMs.
{¶ 5} It is further alleged in the amended complaint that on March 23, 2018, ODPS
issued a warning to the Moose Lodge regarding its use of ERMs and threatened criminal,
civil, and/or administrative action against the Moose Lodge if it continued to use ERMs.
It is alleged that ODPS charged another charitable organization with gambling offenses
No. 19AP-124 3
related to the use of very similar or identical ERMs leased by T & M Merchandising1 in
State (ODPS) v. Fraternal Order of Eagles, Clinton Cty. M.C. No. CRB1601342A.
Appellants assert that because the ERMs they provide, manage, service, and/or use are
similar if not identical to those used by the Eagles in the Clinton County case, the Moose
Lodge faces a real threat of criminal, civil, or administrative action by ODPS in addition
to the threat of having its liquor license and/or bingo license revoked by OLCC and/or the
OAG, respectively.
{¶ 6} On April 18, 2018, OAG filed a motion to dismiss pursuant to Civ.R. 12(B)(1)
and (6). OLCC and ODPS filed a similar joint motion to dismiss on May 9, 2018.
{¶ 7} On February 6, 2019, the trial court issued a decision and entry granting the
motions to dismiss. The court concluded the claims of appellants were premature and,
therefore, not justiciable. The court further concluded appellants' claims were subject to
dismissal for failure to exhaust administrative remedies. This timely appeal of the trial
court's judgment followed.
II. Assignment of Error
{¶ 8} Appellants assign the following sole error for our review:
The Trial Court erred in granting Appellees' Motion2 to Dismiss
Appellants' Amended Verified Complaint.
III. Law and Analysis
A. Standard of Review
{¶ 9} Appellants assert the trial court erred in granting the motions to dismiss,
which were filed pursuant to Civ.R. 12(B)(1) and (6). Civ.R. 12(B)(1) requires dismissal
where the trial court lacks jurisdiction over the subject matter of the litigation. A court
presented with a motion to dismiss for lack of subject-matter jurisdiction must determine
whether the complaint states any cause of action cognizable by the forum. State ex rel.
Bush v. Spurlock, 42 Ohio St.3d 77, 80 (1989); PNC Bank, N.A. v. Botts, 10th Dist. No.
1 Based upon the allegations in paragraphs 3 and 10 of the amended complaint, that appellant T & M
Machines is the entity that leases the ERMs to qualified veteran and fraternal organizations, it appears
appellants meant T & M Machines, not T & M Merchandising.
2 As noted above, notwithstanding appellants' reference in the singular form, there were two separate
motions to dismiss filed: one filed by OAG on April 18, 2018 and one filed by OLCC and ODPS jointly on
May 9, 2018.
No. 19AP-124 4
12AP-256, 2012-Ohio-5383, ¶ 21. Subject-matter jurisdiction is " 'a condition precedent
to the court's ability to hear the case. If a court acts without jurisdiction, then any
proclamation by that court is void.' " Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-
1980, ¶ 11, quoting State ex rel. Tubbs Jones v. Suster, 84 Ohio St.3d 70, 75 (1998); State
ex rel. Ohio Democratic Party v. Blackwell, 111 Ohio St.3d 246, 2006-Ohio-5202, ¶ 8. In
deciding a motion to dismiss for lack of subject-matter jurisdiction, the trial court may
consider evidence outside of the complaint. Brown v. Ohio Tax Commr., 10th Dist. No.
11AP-349, 2012-Ohio-5768, ¶ 14, citing Cerrone v. Univ. of Toledo, 10th Dist. No. 11AP-
573, 2012-Ohio-953, ¶ 5; Southgate Dev. Corp. v. Columbia Gas Transm. Corp., 48 Ohio
St.2d 211 (1976), paragraph one of the syllabus.
{¶ 10} A motion to dismiss under Civ.R. 12(B)(6) for failure to state a claim on which
relief can be granted tests the sufficiency of the complaint. Volbers-Klarich v. Middletown
Mgt., Inc., 125 Ohio St.3d 494, 2010-Ohio-2057, ¶ 11. In order for a court to dismiss a case
pursuant to Civ.R. 12(B)(6) "it must appear beyond doubt from the complaint that the
plaintiff can prove no set of facts entitling him to recovery." O'Brien v. Univ. Community
Tenants Union, Inc., 42 Ohio St.2d 242 (1975), syllabus. The court must presume all factual
allegations contained in the complaint are true and draw all reasonable inferences in favor
of the non-moving party. Ford v. Brooks, 10th Dist. No. 11AP-664, 2012-Ohio-943, ¶ 4,
citing Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192 (1988). In considering a Civ.R.
12(B)(6) motion to dismiss, a trial court may not rely on allegations or evidence outside the
complaint. State ex rel. Fuqua v. Alexander, 79 Ohio St.3d 206, 207 (1997).
{¶ 11} When reviewing a judgment rendered on either a Civ.R. 12(B)(1) or (6)
motion to dismiss, our standard of review is ordinarily de novo. Pankey v. Ohio Dept. of
Rehab. & Corr., 10th Dist. No. 13AP-701, 2014-Ohio-2907, ¶ 7; Foreman v. Ohio Dept. of
Rehab. & Corr., 10th Dist. No. 14AP-15, 2014-Ohio-2793, ¶ 9, citing Perrysburg Twp. v.
Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, ¶ 5. However, a trial court's dismissal of a
declaratory judgment action is reviewed under an abuse of discretion standard. Mid-Am.
Fire & Cas. Co. v. Heasley, 113 Ohio St.3d 133, 2007-Ohio-1248, paragraph two of the
syllabus, following Bilyeu v. Motorists Mut. Ins. Co., 36 Ohio St.2d 35, 37 (1973).
{¶ 12} The abuse of discretion standard applies to the review of a trial court's
holding regarding justiciability; however, once a trial court determines that a matter is
No. 19AP-124 5
appropriate for declaratory judgment, its holding regarding questions of law are reviewed
on a de novo basis. Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, ¶ 13;
Youngstown City School Dist. Bd. of Edn. v. State, 10th Dist. No. 17AP-775, 2018-Ohio-
2532, ¶ 8. The abuse of discretion standard likewise applies to the review of a trial court's
dismissal of a declaratory judgment action based on the conclusion that proceeding with
the action would have been improper because the plaintiff failed to exhaust its
administrative remedies. One Energy Ents., LLC v. Ohio Dept. of Transp., 10th Dist. No.
17AP-829, 2019-Ohio-359, ¶ 57, citing SP9 Ent. Trust v. Brauen, 3d Dist. No. 1-14-03,
2014-Ohio-4870, ¶ 14, citing Arnott at ¶ 13.
{¶ 13} An abuse of discretion connotes more than an error of law or judgment; it
implies that the court's action was unreasonable, arbitrary, or unconscionable. Blakemore
v. Blakemore, 5 Ohio St.3d 217, 219 (1983). "An appellate court may find an abuse of
discretion when the trial court 'applies the wrong legal standard, misapplies the correct
legal standard, or relies on clearly erroneous findings of fact.' " Bellamy v. Montgomery,
10th Dist. No. 11AP-1059, 2012-Ohio-4304, ¶ 7, quoting Thomas v. Cleveland, 176 Ohio
App.3d 401, 2008-Ohio-1720, ¶ 15 (8th Dist.).
{¶ 14} As noted previously, the trial court's decision granting the motions to dismiss
was based on two grounds: one, appellants' claims were not ripe for review and, therefore,
not justiciable in nature; and two, appellants failed to exhaust their administrative
remedies prior to filing their action for declaratory judgment. We address each of these
grounds in turn as follows.
B. Declaratory Judgment — Justiciability and Ripeness
{¶ 15} A declaratory judgment action is a civil action and provides a remedy in
addition to other legal and equitable remedies available. Victory Academy of Toledo v.
Zelman, 10th Dist. No. 07AP-1067, 2008-Ohio-3561, ¶ 8, citing Aust v. Ohio State Dental
Bd., 136 Ohio App.3d 677, 681 (10th Dist.2000). R.C. Chapter 2721, the Declaratory
Judgments Act, is remedial in nature; its purpose is to settle and afford relief from
uncertainty and insecurity with respect to rights, status, and other legal relations and it is
to be liberally construed and administered. Swander Ditch Landowners' Assn. v. Joint Bd.
of Huron & Seneca Cty. Commrs., 51 Ohio St.3d 131, 134 (1990), citing Radaszewski v.
Keating, 141 Ohio St. 489, 496 (1943).
No. 19AP-124 6
{¶ 16} R.C. 2721.03 provides that any person "whose rights, status, or other legal
relations are affected by a constitutional provision, statute, [or] rule" may have determined
"any question of construction or validity arising under the instrument, constitutional
provision, statute, [or] rule * * * and obtain a declaration of rights, status, or other legal
relations under it." Thus, the construction and interpretation of statutes is a recognized
function of declaratory action. Town Ctrs. Ltd. Partnership v. Ohio State Atty. Gen., 10th
Dist. No. 99AP-689 (Apr. 4, 2000). The essential elements for declaratory relief are: (1) a
real controversy exists between the parties, (2) the controversy is justiciable in character,
and (3) speedy relief is necessary to preserve the rights of the parties. Aust at 681.
{¶ 17} For a real controversy to exist so as to satisfy the first element, "there must
be a 'genuine dispute between parties having adverse legal interests of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment.' " Town Ctrs., quoting
Wagner v. Cleveland, 62 Ohio App.3d 8, 13 (8th Dist.1988). As for the second element, a
controversy is justiciable when it presents "issues that are ripe for judicial resolution and
which will have a direct and immediate impact on the parties." Cristino v. Ohio Bur. of
Workers' Comp., 10th Dist. No. 13AP-772, 2014-Ohio-1383, ¶ 22, citing Stewart v. Stewart,
134 Ohio App.3d 556, 558 (4th Dist.1999). The United States Supreme Court developed
the following two-prong test to determine whether a controversy is justiciable in character:
"first to determine whether the issues tendered are appropriate for judicial resolution, and
second to assess the hardship to the parties if judicial relief is denied at that stage." Toilet
Goods Assn., Inc. v. Gardner, 387 U.S. 158, 162 (1967). Ripeness is a question of timing,
and the "ripeness doctrine seeks to prevent courts from engaging in premature
adjudication." Johnson v. Ferguson-Ramos, 10th Dist. No. 04AP-1180, 2005-Ohio-3280,
¶ 22, citing State ex rel. Elyria Foundry Co. v. Indus. Comm., 82 Ohio St.3d 88, 89 (1998).
Such "premature claims are not 'justiciable.' " Id., quoting Stewart at 558.
{¶ 18} We have previously stated that in determining whether an issue is ripe for
review, a court must weigh the following: (1) the likelihood that the alleged future harm
will occur, (2) the likelihood that delayed review will cause hardship to the parties, and
(3) whether the factual record is sufficiently developed to provide fair resolution. State
ex rel. Keller v. Columbus, 164 Ohio App.3d 648, 2005-Ohio-6500, ¶ 20 (10th Dist.),
citing Ohio Forestry Assn., Inc. v. Sierra Club, 523 U.S. 726 (1998). "In general, a claim
No. 19AP-124 7
that rests upon future events that may not occur at all, or may not occur as anticipated, is
not considered ripe for review." Id., citing Eagle Fireworks, Inc. v. Ohio Dept. of
Commerce, 4th Dist. No. 03CA28, 2004-Ohio-509, citing Texas v. United States, 523 U.S.
296 (1998).
{¶ 19} In this case, appellants assert the controversy between themselves and
appellees is a real one, justiciable in nature and therefore ripe for review, because
appellees have taken a definitive position on the use of ERMs in the case Ohio Veterans
& Fraternal Charitable Coalition v. Attorney General of Ohio (the "OVFCC Litigation"),
which is currently pending before the Supreme Court of Ohio.3 Appellants argue that
because ERMs they use are identical to ERMs at issue in the OVFCC Litigation, the position
taken by appellees in that case results in actual harm to appellants because they are " 'next
in line' to be targeted for their use of the same machines used by OVFCC." (Appellant's
Brief at 17-18.)
{¶ 20} Yet, as the trial court correctly observed, the final position of appellees
regarding ERMs leased, managed, and/or owned by appellants in this case is currently
unknown as there is no evidence in the record showing whether ERMs used by appellants
are identical, or even substantially similar, to those at issue in the OVFCC Litigation.
Furthermore, even if ERMs used by appellants are assumed to be identical to those at issue
in the OVFCC Litigation, at best the harm alleged by appellants is premised on "future
events that may not occur at all, or may not occur as anticipated." Keller at ¶ 20. Such
future events cannot form the basis for a claim that is ripe for judicial review. Id.{¶ 21} Moreover, as the trial court also correctly observed, even if it is true that
appellants might be "next in line" to be targeted by appellees in an action to revoke or
suspend appellants' bingo and/or liquor licenses, there would be no delayed review causing
hardship to appellants. This is so because it is undisputed that any revocation or
suspension of those licenses is subject to administrative review.
{¶ 22} Thus, the trial court correctly determined that appellants' claims for
declaratory judgment and injunctive relief were premature, and the trial court's finding that
the present case did not present a real or justiciable controversy because it was not ripe for
review was not an abuse of discretion.
3 The OVFCC Litigation has been assigned Case No. 2019-0016 in the Supreme Court of Ohio.
No. 19AP-124 8
C. Declaratory Judgment — Doctrine of Exhaustion
{¶ 23} In addition to the requirement that a claim be ripe prior to its being suitable
for declaratory adjudication, a plaintiff is not entitled to declaratory relief where a direct
appeal to the common pleas court of the declaration sought exists from the administrative
process. Schomaeker v. First Natl. Bank of Ottawa, 66 Ohio St.2d 304, 310-12 (1981).
This is known as the doctrine of exhaustion, which "requires a person to exhaust
administrative remedies before seeking relief from the judicial system." Brown v. Levin,
10th Dist. No. 11AP-349, 2012-Ohio-5768, ¶ 25, citing Derakhshan v. State Med. Bd. of
Ohio, 10th Dist. No. 07AP-261, 2007-Ohio-5802, ¶ 23. The purpose of the doctrine " 'is
to allow an administrative agency to apply its expertise in developing a factual record
without premature judicial intervention in administrative processes.' " Id., quoting
Nemazee v. Mt. Sinai Med. Ctr., 56 Ohio St.3d 109, 111 (1990); see also Myers v.
Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938) ("the long settled rule of judicial
administration [is] that no one is entitled to judicial relief for a supposed or threatened
injury until the prescribed administrative remedy has been exhausted"). Thus, where an
administrative proceeding is applicable to a particular action, a plaintiff "is not entitled to
a declaratory judgment where failure to exhaust administrative remedies is asserted and
maintained." Schomaeker at paragraph three of the syllabus (holding that declaratory
relief was unavailable where the plaintiff-landowner was "entitled under R.C. Chapter 2506
to appeal the order of a planning commission granting a variance").
{¶ 24} Notwithstanding the foregoing, a plaintiff need not exhaust administrative
remedies prior to instituting a declaratory judgment action "if there is no administrative
remedy available which can provide the relief sought, * * * or if resort to administrative
remedies would be wholly futile." Karches v. Cincinnati, 38 Ohio St.3d 12, 17 (1988), citing
Kaufman v. Newburgh Hts., 26 Ohio St.2d 217 (1971), and Glover v. St. Louis-San
Francisco Ry. Co., 393 U.S. 324 (1969). See also State ex rel. Teamsters Local Union No.
436 v. Bd. of Cty. Commrs., 132 Ohio St.3d 47, 2012-Ohio-1861, ¶ 24 (noting "parties need
not pursue their administrative remedies if doing so would be a futile or a vain act").
Additional exceptions to the doctrine of exhaustion of administrative remedies include if
the available remedy is onerous or unusually expensive, or if the plaintiff is contesting the
No. 19AP-124 9
validity or constitutionality of a statute. Karches at 17; Fairview Gen. Hosp. v. Fletcher, 63
Ohio St.3d 146, 149 (1992).
{¶ 25} Here, appellants assert they need not exhaust their administrative remedies
because two of the foregoing exceptions apply: first, because appellees have taken a
definitive position regarding the ERMs in the OVFCC Litigation, pursuing administrative
avenues for relief would be wholly futile; and second, pursuing administrative remedies
would be onerous and unusually expensive. We are not persuaded by these arguments for
the following reasons.
{¶ 26} As discussed in the foregoing section, the OVFCC Litigation is currently
pending before the Supreme Court. Unless and until that court issues a decision on the
matter, the final position of appellees regarding the ERMs at issue in that case is unknown.
In the absence of a final position on the part of appellees in that matter, appellants'
contention that pursuing administrative remedies would be a futile or vain act lacks merit.
{¶ 27} Likewise, appellants' assertion that pursuing administrative remedies would
be onerous and unusually expensive is unfounded. As the trial court observed, if appellants
are truly concerned about expense, they are free to await the decision rendered by the
Supreme Court in the OVFCC Litigation. Furthermore, the parties agree that at the time
appellants filed their complaint in the within matter, appellants were already involved in
active administrative proceedings with ODPS which raise the same issues as those raised
in this matter. Thus, as the trial court aptly pointed out, it is not the pursuit of
administrative remedies which will result in onerous and unusual expense for appellants;
rather, it is the pursuit of the instant action which will do so.
{¶ 28} Based on the foregoing, the trial court's conclusion that appellants failed to
exhaust their administrative remedies prior to filing their claim for declaratory judgment
and that none of the exceptions to the exhaustion doctrine applied in this case was not an
abuse of discretion.
{¶ 29} In summation, the trial court did not abuse its discretion when it found the
claims of appellants were premature, not ripe for review, and therefore not justiciable.
Neither did the trial court abuse its discretion when it found appellants' claims were
subject to dismissal for failure to exhaust administrative remedies. Therefore, it was not
No. 19AP-124 10
error for the trial court to grant the motions to dismiss, and we overrule appellants' sole
assignment of error.
IV. Disposition
{¶ 30} For the foregoing reasons, we find the trial court did not err in dismissing
appellants' claims for declaratory relief and injunctive relief. Accordingly, we overrule
appellants' sole assignment of error and affirm the judgment of the Franklin County Court
of Common Pleas.
Judgment affirmed.
SADLER, P.J., and DORRIAN, J., concur.
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