State v. Norene , 1969 Alas. LEXIS 197 ( 1969 )

OPINION

BONEY, Justice.

On July 3, 1969, this matter came before the whole court on a motion by respondents to vacate a stay order entered on July 2, 1969, by Chief Justice Nesbett, sitting as a single justice. That stay order suspended the effect of an injunction which had been issued by the superior court on June 27, 1969. The stay order.of the Chief Justice was issued late in the afternoon of July 2, 1969. It was considered and entered ex parte, that is, without respondents having had an opportunity to be heard.

On the morning of July 3, 1969, respondents filed with the whole court their motion to vacate the stay. It then became incumbent on the whole court to act in the matter.

No court can make time stand still. The circumstances surrounding a controversy may change irrevocably during the pendency of an appeal, despite anything a court can do. But within these limits it is reasonable that an appellate court should be able to prevent irreparable injury to the parties or the public resulting from the premature enforcement of a determination which may later be found to have been wrong. It has always been held, therefore, that, as part of its traditional equipment for the administration of justice, a federal court can stay the enforcement of a judgment pending the outcome of an appeal.

Scripps-Howard Radio v. Federal Communications Comm’n, 316 U.S. 4, 9-10, 62 S.Ct. 875, 879, 86 L.Ed. 1229, 1234 (1942) (footnote omitted) (Frankfurter, J.). The motion of the respondents raised questions about the unconstitutional application of a statute to respondents’ business, about whether the stay would inflict irreparable injury upon respondents if it were allowed to remain in effect over the Fourth of July weekend, when a large portion of respondents’ annual business is conducted, and about whether the stay of July 2, 1969, should have been entered as a matter of sound judicial discretion.

Because of the allegedly emergency nature of the motion and the danger of mooting respondents’ rights by inaction, a majority of this court voted to convene on the evening of July 3, 1969, in order to hear oral argument by each party and so that a disposition of the stay aspect of the case could be achieved before the Fourth of July weekend.

As a result of oral argument, a majority of this court agreed upon the entry of a stay order on July 4, 1969, different in nature from the stay order entered by the Chief Justice on July 2, 1969. This court’s stay order and the dissent to that order are attached as appendixes A and B, respectively.

On June 24, 1969, respondents filed suit in superior court by filing a verified complaint naming various state officials and Ace Fireworks Company as defendants.¹ The complaint was comprised of eleven pages of specific allegations which charged in brief that the State of Alaska had passed a law which was unconstitutionally discriminatory in its effect. The law complained of, AS 18.72.020(a) (1), in pertinent part reads as follows:

Regulation of sale of salable fireworks, (a) A person holding a permit required by the fire safety code may sell or offer for sale salable fireworks, if

(1) the person has submitted to the state fire marshal a policy, or a certified true copy of a policy, of public liability and products liability insurance, including both accident and occurrence coverage, provided by the wholesale company selling to the fireworks retailer, in the amount of at least $300,000 for bodily injury or death and at least $100,-000 property damage, upon which policy the state and all governmental subdivisions of the state and the permit holder shall be named as additional insureds and which shall be continuously in force while the permit holder is engaged in the retail sale of fireworks, and * * *.

This statute required the respondents to obtain the following type of insurance: (1) public liability insurance including both accident and occurrence coverage in the amounts of $300,000 for bodily injury or death and $100,000 property damage; (2) products liability insurance including both accident and occurrence coverage in the amounts of $300,000 for bodily injury or death and $100,000, property damage. These insurance policies are required to contain the following additional provisions over and above a standard insurance policy: (1) the state and all governmental subdivisions of the state shall be named as additional insureds; (2) the permit holders shall be named as additional insureds (permit holders would mean retailers who sell fireworks purchased from or sold on behalf of respondents or other wholesalers). Although this statute appears to apply equally to all persons engaged in the sale of fireworks, the respondents claimed in their verified complaint that in effect only one fireworks wholesaler could obtain the required insurance and that all others were unable to comply with the law. There were many other specific allegations in the complaint concerning how the legislature came to enact such a statute; these allegations as to the legislative motive are irrelevant at this point. The only legally relevant allegation before us is respondents’ claim that the legislature passed a law which put everyone out of business except one wholesaler, and that no valid legislative end could possibly be achieved by such a law.² This allegation was further supported by the affidavits of James E. No-rene, Von R. Baxter and Brad Phillips.

Relying on the allegations of the verified complaint and the affidavits, respondents obtained a hearing on June 25, 1969, before the superior court to determine if a preliminary injunction should be issued to halt the enforcement of the statute. In light of the impending July 4th holiday, respondents urged that very great economic harm would be suffered by them if the statute was enforced during the pendency of the suit, i. e., over the Fourth of July. At the hearing the state chose not to contradict the sworn allegations of respondents. No counter affidavits were introduced by the state. The state relied on establishing as a point of law that statutes which do not discriminate on their face should not be enjoined by the court.

On June 27, 1969, the superior court issued the preliminary injunction as requested by respondents in the hearing. The superior court’s order enjoined the state from enforcing any provision of the statute relating to the insurance requirement. Thus by this injunction respondents were to be issued the necessary permits without having obtained any insurance at all. The order of injunction specifically provided that it could be dissolved upon a showing by the state that insurance was generally available to all fireworks dealers or that other of respondents’ allegations were untrue. The superior court found that the uncontradicted allegations of respondents, if proven at trial, would necessitate a finding that the statute’s insurance provisions were unconstitutional and unenforceable. The superior court further found that grave harm would result to respondents if the insurance portion of the statute were not enjoined pending the trial.

Five days after the entry of the'preliminary injunction the state made an ex parte application to the Chief Justice of this court for an order staying the preliminary injunction.³ The state did not make a further showing in the superior court as was allowed for in the injunction. Nor did the state comply with the spirit of Supreme Court Rule 33(b), which provides in pertinent part as follows:

Applications for stay to this court or a justice thereof normally will not be entertained unless application has first been made to the superior court and has been denied.

While this rule does not require in all cases that applications for stay must be made to the superior court, the use of the word “normally” suggests that departure from the rule should be accompanied by some explanation for the failure to apply to the superior court.⁴ In the present case the state offered no satisfactory explanation for why the ex parte application was made to a justice of this court without a prior application to the superior court. In fact the state’s application for stay was so brief that it did not even include a copy of the preliminary injunction which was to be stayed. On this basis the Chief Justice issued the stay on July 2, 1969.

On July 3 respondents applied to this court for an order vacating the stay and

thus reinstating the superior court’s injunction. That evening this court held the hearing at which argument was heard from the state and respondents. Respondents during the hearing admitted that only part of the insurance requirements were the cause of the alleged discrimination. The respondents admitted that the requirement of public liability and property damage insurance in the specified amounts was not unreasonable and was not the cause of the discrimination. The thrust of respondents’ claims at the hearing was that the requirement that the state and all its political subdivisions be named as additional insureds was the cause of the discrimination. Because of this provision, respondents claimed to be unable to comply with the law.

We, at this time, do not need to decide the constitutionality of the statute in question. It is not our function to decide the merits of the complaint upon an application for stay of a preliminary injunction pending a petition for review of that preliminary injunction. It is irrelevant whether we believe or disbelieve that the legislature was taken advantage of by lobbyists for Ace Fireworks. The only question before this court is whether the superior court’s preliminary injunction was issued on a valid basis. We believe that the injunction was properly issued, although it was too broad in scope. Accordingly, by our stay order of July 4, 1969, we did, in ef-feet reinstate the injunction, but confined it to narrower terms.⁵

In order for us to reach the conclusion that the injunction was proper, besides finding the element of irreparable harm, we must decide whether respondents’ allegations, if proved at trial, would entitle them to the relief sought. A statute, fair on its face, which is discriminatory in its application or its effect is just as repugnant to the provisions of the Constitution as a law which discriminates on its face. Gomillion v. Lightfoot, 364 U.S. 339, 347, 81 S.Ct. 125, 5 L.Ed.2d 110, 117 (1960); Lane v. Wilson, 307 U.S. 268, 275, 59 S.Ct. 872, 83 L.Ed 1281, 1287 (1939); Yick Wo v. Hopkins, 118 U.S. 356, 373, 6 S.Ct. 1064, 30 L.Ed. 220, 227 (1886). Economic regulations which in effect discriminate can be validated upon a showing of an adequate legislative purpose which necessitates the discrimination. In the present case the state made no showing at all as to what state interest would be served by any of the provisions of this statute, other than the claim that all laws are to protect the public. However, respondents admitted a valid state interest would be served by certain parts of the provisions. Therefore as to these parts the injunction will continue to be stayed.

However, the trial court could have found that the requirement that the State of Alaska and its political subdivisions be named as additional insureds on such insurance policies was unreasonable and constitutionally discriminatory. This particular provision might appear to afford protection to the State of Alaska and its political subdivisions as follows: (1) It could provide insurance coverage for the State of Alaska and its political subdivisions for their negligence in so far as it may relate to fireworks. If this were the purpose of this

statutory provision, there might be no reasonable or conceivable purpose for the provision, because it might not be fair to require a businessi to buy insurance to protect the State of Alaska and political subdivisions from their own negligence. (2) Naming the State of Alaska and its political subdivisions as named insureds could conceivably give the State of Alaska a direct cause of action against the insurance carrier for damage to any of the property of the state and its subdivisions as a result of the negligence or strict liability which may be imposed upon the respondents. However, no legal advantage would be af- ' forded to the State of Alaska by such a direct action against an insurance carrier. Under a standard insurance policy, the state or its subdivisions could sue the tortfeasors for any negligence or on a strict liability theory; and if a judgment were obtained, collection could be made so that judgment would come from the fund provided by the insurance policy held by the respondents. Therefore, the trial judge might have found that this particular provision had no reasonable basis and was unreasonably discriminatory against the respondents.

If, as claimed by respondents, insurance could not be procured by them because of the portion of the statute requiring that the state and its political subdivisions be named as additional insureds, the superior court might have regarded this as requiring that a preliminary injunction should issue.

• [6] Again we note that to this date the State of Alaska has not shown how the state’s interest would be protected if such a requirement were enforced against the respondents. Upon reviewing the whole record, we find that the trial judge’s finding that respondents’ allegations justified an injunction as to this portion of the insurance requirement was not clearly erroneous. Therefore, in this respect, this court at this stage of the proceedings will not disturb the decision of the superior court.⁶

The respondents have made an adequate showing that they would suffer irreparable injury if the stay were not modified. We note that the provision of Civil Rule 65 cited by the dissent refers to the conditions under which a temporary restraining order may he issued without notice. It does not directly bear on the problem at hand: the issuance of a preliminary injunction after notice and a hearing.

This court has required, for the above reasons, that the insurance required by AS 18.72.020(a) (1) be posted by the respondents as a condition precedent to the stay being vacated, with the exception that such insurance policy need not be conditioned upon the state and its subdivisions being named as additional insureds.

It has always been the duty of courts to protect the property and liberty of the people from unconstitutional state action. In this case, the respondents were put out of business and thereby deprived of their property rights by an ex parte stay order granted by a single justice of this court without respondents having a hearing and without the justice having before him a record containing the findings, conclusions, and the injunction issued by the superior court. Regarding the importance of notice, Mr. Justice Frankfurter has stated:

No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it. Nor has a better way been found for generating the feeling, so important to a popular government, that justice has been done.

Joint Anti-Fascist Refuge Comm. v. Mc-Grath, 341 U.S. 123, 171-172, 71 S.Ct. 624, 95 L.Ed. 817, 854 (1951) (concurring). We would be remiss in the performance of our constitutional responsibilities if we did not intervene to take appropriate corrective action. Sometimes courts have not been as sensitive to the protection of property rights as they have been in the defense of personal liberty. Personal liberty means very little when one’s property rights are invaded and vice versa. We are not unmindful of the public interest in regulating fireworks and in protecting the public from their attendant physical dangers. In the stay order of the court of July 4, 1969, the public interest is accommodated along with the claims asserted by the respondents that they were suffering harms in violation of their constitutional rights.

The original stay in this case was granted with the understanding that the State of Alaska would file a petition for review to this court under Supreme Court Rule 23. As of this date, the petition for review has not been filed. If such a petition is not filed as required by the rules of this court, then the stay entered by the whole court on July 4, 1969, will be of no force or effect, and the entire preliminary injunction issued by the superior court will be operable again.

DIAMOND, J., not participating.

APPENDIX A

ORDER

After hearing and considering the argument of counsel herein on Plaintiff’s Motion to Vacate Stay;

It is the Order of the Court that the Stay remain in effect until sufficient proof is furnished to the State Fire Marshal that a policy of insurance has been obtained providing public liability and products liability including both accident and occurrence coverage in the amount of at least $300,000.00 for bodily injury or death and at least $100,000.00 property damage and which shall be continuously in force while the permit holder is engaged in the retail sale of fireworks. Such policy shall not be required to cover the state or any governmental subdivisions of the state as additional insureds, but shall cover as additional insureds, retailers who sell the products provided by plaintiffs, appellees.

APPENDIX B

NESBETT, Chief Justice, disagreeing with the order in part:

I agree that the stay should remain in effect and that the plaintiffs be required to maintain insurance in the amounts required by statute. I disagree with the order to the extent that it exempts the plaintiffs from the statutory requirement that the insurance policies name the state and political subdivisions as beneficiaries.

This court has no authority to exempt a particular litigant from the requirements of a concededly reasonable statutory requirement and thereby discriminate against all other vendors of fireworks in the state who have complied with the requirement.

Plaintiffs’ sweeping claims of fraud and conspiracy were not supported by any “specific facts” as is required by Civil Rule 65 before the extra-ordinary relief of a preliminary restraining order and temporary injunction may be granted. His claim that the members of the Alaska Legislature were misled and misguided in enacting the legislation is ridiculous and unsupported, as is his claim that Alaska’s Commissioner of Public Safety, Fire Marshal, Department of Law and Director, Division of Insurance are acting as the unwitting tools of certain master conspirators in the background. The legislation complained of was enacted in April of 1969. Plaintiffs asked for no relief in court until June 23, 1969. They have only their own delay to blame for the fact that crucial court proceedings have occurred during the height of the fireworks season.

The lower court order was sustained on unspecific, unsupported allegations and innuendo, interwoven with a specious argument that an economic emergency of the state’s making existed. No better evidence has been placed before this court. As long as any of our courts permit and give any credence to this type of practice, it will continue to be employed by some counsel for the simple reason that it often gains objectives not attainable by prescribed practice and procedure.

NESBETT, Chief Justice, disagreeing with the order in part.

I agree that the stay should remain in effect and that the plaintiffs be required to maintain insurance in the amounts required by statute. I disagree with the order to the extent that it exempts the plaintiffs from the statutory requirement that the insurance policies name the state and political subdivisions as beneficiaries.

This court has no authority to exempt a particular litigant from the requirements of a concededly reasonable statutory requirement and thereby discriminate against all other vendors of fireworks in the state who have complied with the requirement.

Plaintiffs’ sweeping claims of fraud and conspiracy were not supported by any “specific facts” as is required by Civil Rule 65 before the extraordinary relief of a preliminary restraining order and temporary injunction may be granted. His claim that the members of the Alaska legislature were misled and misguided in enacting the legislation is ridiculous and unsupported, as is his claim that Alaska’s Commissioner of Public Safety, Fire Marshal, Department of Law, and Director, Division of Insurance are acting as the unwitting tools of certain master conspirators in the background. The legislation complained of was enacted in April of 1969. Plaintiffs asked for no relief in court until June 23, 1969. They have only their own delay to blame for the fact that crucial court proceedings have occurred during the height of the fireworks season.

The lower court order was obtained on unspecific, unsupported allegations and innuendo, interwoven with a specious argument that an economic emergency of the state’s making existed. No better evidence has been placed before this court. As long as any of our courts permit and give any credence to this type of practice, it will continue to be employed by some counsel for the simple reason that it often gains objectives not attainable by prescribed practice and procedure.

NESBETT, Chief Justice, supplementing the foregoing dissent.

1 . There were ten defendants named plus fifteen defendants identified as John Doe. It was represented to this court by counsel for respondents that suit was filed immediately after respondents learned of the discriminatory effect of the law in question. Since the law does not discriminate on its face, only after respondents learned that it was impossible to comply with the law did they have reason to complain.

2 . In Morey v. Doud, 354 U.S. 457, 77 S. Ct. 1344, 1 L.Ed.2d 1485 (1957), an Illinois statute placed severe restrictions on the business of selling money orders. These restrictions did not apply to the American Express Company, but did apply to all other private companies selling money orders. The Supreme Court struck down the law because the discriminatory regulation could not achieve any conceivable, valid legislative end.

3 . The record indicates only that the application for stay was served on opposing counsel on the same day that it was granted. Sup.Ct-R. 33(a) (4) states that unless otherwise ordered the opposing party shall have 10 days to respond to an application for a stay. This rule and Sup.Ct.R. 44 do not contemplate that applications for stays can be heard before the court or a justice without allowing the opposing party any opportunity to respond to the application for stay. We do not find any order in the record shortening the time for response by respondents. Sup.Ct.R. 20(c) provides in part:

If application is made to this court or to a justice of this court for * * * any * * * relief which might have been granted by the superior court, the application shall be upon notice

Of course, it is conceivable that there may arise situations where notice to the opposing party even in the form of a telephone call is impossible. In these rare cases the stay order should recite the justification for the departure from the rules.

4 . Sup.Ct.R. 7(d) (2) and Sup.Ct.R. 33(a) (2) are to the same effect. Sup.Ct.R. 33(a) (2) provides:

The petition shall set forth with particularity why the relief sought is not available in any other court, or cannot be had through appellate processes of appeal or petition for review.

5 . This court has the power to modify an injunction during the pendency of proceedings for review. Civ.R. 62(f) provides :

Power of Supreme Court Not Limited. The provisions in this rule do not limit any power of the supreme court or of a justice thereof to stay proceedings during the pendency of an appeal or proceedings for review, or to suspend, modify, restore or grant an injunction during the pendency of an appeal or proceedings for review, or to make any order appropriate to preserve the status quo or the effectiveness of the judgment subsequently to be entered.

6 . As stated in Sup.Ct.R. 33 stays on original applications are not a matter of right but of sound discretion sparingly exercised. This court in the past has interfered with interlocutory orders of the superior court only in cases where the order to be reviewed is of substance and importance, and where justice demands an immediate review of the order. Sup.Ct. It. 24.