Indep. Ins. Agents of Ohio v. Duryee , 95 Ohio App. 3d 7 ( 1994 )

I must respectfully dissent from the majority opinion because I am compelled to conclude that plaintiff is precluded from claiming in the instant declaratory judgment action that the insurance statutes in question are unconstitutional on nondelegation grounds, as plaintiff could have and should have litigated this issue in the first instance in Indep. Ins. Agentsof Ohio, Inc. v. Fabe (1992), 63 Ohio St.3d 310, 587 N.E.2d 814 ("Independent Ins. Agents I"), its previous declaratory judgment action. Since the majority opinion appears to allow plaintiff to litigate the issue ad infinitum by way of declaratory judgment action, I simply cannot join it.

In In re Christ Hosp. (Mar. 24, 1994), Franklin App. No. 93AP-800, unreported, at 9-10, 1994 WL 97229, we recently recognized the common-sense principle that:

"* * * Though there is some question whether constitutional issues should be raised before an administrative agency incapable of ruling on the issue, see, e.g., In the Matter of:Hal Artz Lincoln-Mercury, Inc. (Sept. 24, 1992), Franklin App. No. 91AP-1493, unreported [1992 WL 246014] (1992 Opinions 4238, 4252-4253), it is abundantly clear in any event thatconstitutional issues should be raised at the earliest time,lest they be waived for future litigation under principles ofres judicata. National Amusements, Inc. v. Springdale (1990),53 Ohio St.3d 60 [558 N.E.2d 1178.] * * *" (Emphasis added.)

Though Christ Hosp. involved successive administrative appeals instead of successive declaratory judgment actions, as is the case here, the Ohio Supreme Court dealt with facts similar to the instant action in Cincinnati ex rel. Crotty v.Cincinnati (1977), 50 Ohio St.2d 27, 4 O.O.3d 83,361 N.E.2d 1340. There, Cincinnati citizens brought suit, alleging that the state water fluoridation laws violated both the First Amendment and the Equal Protection Clause. The Ohio Supreme Court, however, held that the suit was barred under res judicata because the constitutional issues could have been raised as defenses in an earlier court proceeding involving the enforcement of the fluoridation laws against Cincinnati.

A holding of similar import is found in the persuasive opinion of the United States Sixth Circuit Court of Appeals inCanton v. Maynard (C.A.6, 1985), 766 F.2d 236. There, after the city of Canton lost a state court administrative proceeding challenging an Ohio Environmental Protection Agency water fluoridation order, the city then turned around and sued in federal court under Section 1983, Title 42, U.S. Code, now claiming that the same agency order violated the Equal Protection Clause. Construing Ohio law on res judicata and the two branches of that concept — claim preclusion and issue preclusion — the Sixth Circuit Court of Appeals found that Ohio has consistently applied the claim preclusion branch of resjudicata to issues which could have been raised as defenses to a plaintiff's claim in an earlier action. Id. at 238, citingStromberg v. Bd. of Edn. of Bratenahl (1980), 64 Ohio St.2d 98,100, 18 O.O.3d 343, 344, 413 N.E.2d 1184, 1186 (per curiam);Johnson's Island, Inc. v. Bd. of Trustees of Danbury Twp. (1982), 69 Ohio St.2d 241, 244-246, 23 O.O.3d 243, 245-246,431 N.E.2d 672, 674-676; Swenson v. Cresop (1876),28 Ohio St. 668. Indeed, applying Norwood v. McDonald (1943),142 Ohio St. 299, 27 O.O. 240, 52 N.E.2d 67, which the majority relies on so much in the instant case, the Sixth Circuit Court of Appeals found that Canton had presented the "same cause of action" in the prior state court proceeding because the "facts necessary to sustain the claim" were exactly the same and had not changed. Rather, the city's newly minted equal protection argument was "* * * nothing more than a defense to enforcement of the fluoridation law that could have been raised in state court. The factualissues in the cases are identical; the only question is thelegal implication of those facts." (Emphasis added.) Id. at 238.

The instant case presents a nearly identical scenario. InIndependent Ins. Agents I, plaintiff brought a declaratory judgment action to challenge the state's interpretation of R.C.3905.01(B) because, at the request of the Superintendent of Insurance, 1988 Ohio Atty.Gen.Ops. No. 88-056 had been issued. That opinion in effect allowed banks to sell insurance through agencies that they owned. As a consequence, the superintendent issued Bulletin 89-1, which followed that opinion closely. Plaintiff's declaratory judgment action therefore challenged the official state interpretation of these statutes and was tried on stipulated facts in the common pleas court. That court accepted plaintiff's interpretation and held that bank "affiliates" could not sell insurance under the insurance statutes. However, on appeal to this court, we reversed and held that the foregoing statutes contained no per se disqualification of such affiliates. The Ohio Supreme Court ultimately affirmed the judgment of this court.

Plainly, plaintiff could have presented the argument in the trial court, in this court, or in the Ohio Supreme Court that the state's interpretation of the insurance statutes in question was unconstitutional on nondelegation grounds. In the trial court, this would have been an alternative theory made along with plaintiff's statutory construction arguments. On appeal, the argument could have been raised defensively in the event that this court or the Ohio Supreme Court affirmed the judgment of the trial court. It is improper to suggest that, since plaintiff failed to bring the argument in the trial court, this would preclude this court or the Ohio Supreme Court from considering it.⁸ The nondelegation doctrine is a challenge to the "facial validity" of a statute, requiring the court to theoretically examine the statutes and regulations as against the established constitutional doctrine. As such, this purely legal question did not have to be raised in the trial court as a prerequisite to appellate consideration. In re Hal ArtzLincoln-Mercury, Inc. (Sept. 24, 1992), Franklin App. No. 91AP-1493, unreported, 1992 WL 246014, citing Cleveland Gear Co.v. Limbach (1988), 35 Ohio St.3d 229, 520 N.E.2d 188, andComTech Systems, Inc. v. Limbach (1991), 59 Ohio St.3d 96,570 N.E.2d 1089. In other words, the nondelegation issue was not a challenge to the constitutionality of a statute as applied, such as discriminatory enforcement under the Equal Protection Clause, which would require evidence in order to rule upon the challenge. Accordingly, one must conclude that plaintiff could have presented its nondelegation argument in Independent Ins.Agents I.

Moreover, plaintiff should have presented that argument in that litigation. Under the "cause of action" analysis undertaken in Canton v. Maynard, supra, the "facts" of the instant case are the same between the parties and the only question concerns the "legal implications" of those facts. Hence, plaintiff was required by law to assert the instant nondelegation argument during prosecution of its "cause of action" challenging the state's official interpretation of the insurance statutes in question in Independent Ins. Agents I. There is simply no merit to distinguishing statutory interpretation "claims" from constitutional "claims," as the majority opinion apparently does here.⁹ As is evident, these issues are purely legal questions that lawyers can efficiently and effectively present in one declaratory judgment action.¹⁰ Since plaintiff failed to do so in its first declaratory judgment action, one can only conclude that this constitutional claim is precluded from being asserted at this late date.

Indeed, in Johnson's Island, supra, the Ohio Supreme Court made no such distinction¹¹ but instead expressly held in paragraph one of the syllabus:

"When in a prior injunction action brought to enjoin the defendant landowner's violation of a zoning law, the defendant asserts the affirmative defense of nonconforming use, but doesnot assert the unconstitutionality of the law, the landowner is, on the principle of res judicata, barred from later bringing a declaratory judgment action alleging such law to be unconstitutional." (Emphasis added.)

On balance, both substantial justice and judicial economy would be served if we conclude that plaintiff could have and should have alleged its nondelegation grounds in the first instance in its prior declaratory judgment action. Any other conclusion would allow a party to simply drag on purely legal challenges to prevent enforcement of a statute or regulation, limited only by litigation resources, creativity and the relatively weak rules on bringing frivolous claims. The "nondelegation of legislative power" argument here was discredited generally at the federal level after the Great Depression and New Deal "switch in time" of the United States Supreme Court. Indeed, Schechter Poultry Corp. v. United States (1935), 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, was the last federal case to invalidate an Act of Congress based on such reasoning.¹² Moreover, wins on this ground have been few and far between in Ohio as well. We should be wary of a rule which allows parties to continually bring anything in the way of constitutional arguments through declaratory judgment actions.

How many separate claims can be concocted on the basis of constitutional arguments in successive declaratory judgment actions under the majority opinion? The answer is "too many." The approach taken by the majority allows the party willing to litigate and litigate and litigate to ultimately prevail, at least to some degree — regardless of the outcome on the merits of the litigation. That result is both unfair and unsound and I cannot agree with it.

Accordingly, I would overrule plaintiff's assignments of error and affirm.

⁸ The majority opinion states that: "To be a bar to a subsequent suit, a matter must have been put into issue in the first action and determined by that court." Moreover, the majority opinion states that the "Supreme Court ordinarily does not consider constitutional issues neither raised nor determined in the court below." While in isolation these statements are true, the real issue in this case is whether it was necessary tobring the constitutional claim in the first declaratory judgmentaction. The majority simply cites the Norwood case and Civ.R. 18, the permissive joinder rule, to bolster the conclusion that plaintiff had a right to bring a declaratory judgment action on its own terms to challenge the statutory interpretation on constitutional grounds.

⁹ As noted by one eminent observer, to ask what might have been litigated in a former action is "to leave the workaday world and enter the wondrous realm of words." Cleary, Res Judicata Reexamined (1948), 57 Yale L.J. 339, 343.

¹⁰ As noted by the Supreme Court of Ohio in IndependentInsurance Agents I, 63 Ohio St.3d at 312-313,587 N.E.2d at 815-816, this case involves a "turf battle" between commercial interests with "sophisticated legal and legislative advisors." There should be no doubt that armies of lawyers thought out the possible constitutional claims and how they could secure the most favorable result for their client, given the resources at hand. We must be mindful however of the scarce judicial resources that can be severely taxed by the creative imaginations of counsel.

¹¹ Thus, while one could make the argument that all constitutional claims have to be brought in one lawsuit but statutory interpretation claims are separate for res judicata purposes, the Johnson's Island case made no such distinction. There is nothing in reasoning in the majority opinion that would not limit all constitutional claims to one suit.

¹² I Rotunda Nowak, Treatise on Constitutional Law (1992) 397, 398, 398, Section 4.8, fn. 4.