DRAFT 5/17/22 4:36 PM IN THE SUPREME COURT OF THE STATE OF OREGON OREGON TRUCKING ASSOCIATIONS, INC., an Oregon nonprofit corporation; AAA OREGON/IDAHO, an Oregon nonprofit corporation; OREGON-COLUMBIA CHAPTER OF THE ASSOCIATION; REDMOND HEAVY HAULING; GORDON WOOD INSURANCE & FINANCE; PROPERTY CASUALTY INSURERS ASSOCIATION OF AMERICA; NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES; and OREGON MUTUAL INSURANCE COMPANIES, Plaintiffs- Respondents, Petitioners on Review, v. DEPARTMENT OF TRANSPORTATION and DEPARTMENT OF ADMINISTRATIVE SERVICES, Defendants- Appellants, Respondents on Review. Marion County Circuit Court No. 12c16207 Appellate Court No. A157244 S 4853-0264-5592v.1 0049158-000005
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DRAFT 5/6/23 4:02 PM
IN THE SUPREME COURT OF THE STATE OF OREGON
OREGON TRUCKINGASSOCIATIONS, INC., an Oregon nonprofit corporation; AAA OREGON/IDAHO, an Oregon nonprofit corporation; OREGON-COLUMBIA CHAPTER OF THE ASSOCIATION; REDMOND HEAVY HAULING; GORDON WOOD INSURANCE & FINANCE; PROPERTY CASUALTY INSURERS ASSOCIATION OF AMERICA; NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES; and OREGON MUTUAL INSURANCE COMPANIES,
Plaintiffs-Respondents,Petitioners on Review,
v.
DEPARTMENT OF TRANSPORTATION and DEPARTMENT OF ADMINISTRATIVE SERVICES,
Defendants-Appellants, Respondents on Review.
Marion County CircuitCourt No. 12c16207
Appellate Court No. A157244
S
PETITION FOR REVIEW
Petition for Review of the decision of the Court of Appeals on Appealfrom the judgment of the Circuit Court for Marion County
Opinion Filed: November 15, 2017Author of Opinion: Duncan, J., pro tempore
Concurring Judges: DeVore, P.J., James, J.
PETITIONERS ON REVIEW INTEND TO FILE A BRIEF ON THE MERITSDecember 2017
Attorneys for Plaintiffs-Respondents, Petitioners on Review
Ellen F. Rosenblum, OSB #753239Attorney GeneralEmail:[email protected] Gutman, OSB #160599Email: [email protected] C. Moan, OSB 924077Senior Assistant Attorney GeneralEmail: [email protected] Appellate Division1162 Court St., NESalem, OR 97301Telephone: 503-378-4402Facsimile: 503-378-6306
Attorney for Defendants-Appellants, Respondents on Review
Roy Pulvers, OSB No. 833570Email: [email protected] S. Garfield, OSB #093634Email: [email protected] Q. Barnard, OSB #122775Email: [email protected] & KNIGHT LLP2300 US Bancorp Tower111 SW Fifth AvenuePortland, OR 97204Telephone: 503-243-2300Facsimile: 503-241-8014
Louis A. Santiago, OSB No. 783610SANTIAGO LAW FIRM, LLC9220 SW Barbur Blvd., Ste 119-284Portland OR 97219Telephone: 503-380-5320Email: [email protected]
PETITION FOR SUPREME COURT REVIEW.................................................1
I. HISTORICAL AND PROCEDURAL FACTS RELEVANT TO REVIEW....................................................................................................1
A. Historical Facts: The Challenged Transaction.................................1
B. Procedural Facts: The Proceedings Below.....................................4
II. LEGAL QUESTIONS PRESENTED AND PROPOSED RULES OF LAW.....................................................................................................5
III. IMPORTANCE OF THE LEGAL QUESTIONS......................................6
A. This case presents new and important issues of statutory, common law, and constitutional construction in the context of an important government action......................................................6
B. This case presents issues overlapping those already pending in this Court..........................................................................................9
C. This case meets additional criteria for review...............................10
IV. HOW THE COURT OF APPEALS ERRED..........................................11
A. The Court of Appeals misread ORS 366.395(1)............................11
B. The executive branch may not self-deal with trust assets..............12
V. CONCLUSION........................................................................................16
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TABLE OF AUTHORITIES
Page
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PETITION FOR SUPREME COURT REVIEW
Plaintiffs-Respondents (“Plaintiffs”) petition this Court to review the
decision of the Court of Appeals in Oregon Trucking Associations, Inc. v.
Department of Transportation, 288 Or App 822, ___ P3d ___ (2017)
(“Decision”). A copy of the Decision is attached to this Petition.
I. HISTORICAL AND PROCEDURAL FACTSRELEVANT TO REVIEW
A. Historical Facts: The Challenged Transaction
The Legislative Assembly requires The Department of Transportation
(“ODOT”) to maintain records containing information about drivers. ORS
802.200. The Legislative Assembly also requires ODOT to make “personal
information” from driver records available for a variety of uses, including to
businesses that acquire and distribute the personal information in large volumes.
ORS 802.179(13). ODOT fulfilled this obligation by establishing the Real-
Time Access to Driver Records program, which provided an electronic
government portal for real-time access to the personal information. Chaimov
Dec., ¶ 2, Ex. 1.
The Department of Administrative Services (“DAS”) wanted to improve
the State’s websites and lit upon sales of personal information in driver records
as the source to pay for the improvements. DAS obtained the statutory
authority to collect a “convenience fee” for “state agencies” providing
information through an electronic government portal. ORS 182.132(3)(a).
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There were, however, two impediments to DAS’s plan to collect a convenience
fee for access to the personal information in ODOT’s driver records. First, the
Legislative Assembly has limited the amount ODOT may charge for providing
access to personal information to the “actual cost in making [the] personal
information available[.]” ORS 802.183(1). ODOT could not, therefore, fund
improvements in websites by collecting a convenience fee or otherwise raising
the price of electronic access to personal information.
Second, even if ODOT could charge more than ODOT’s cost for
providing access to personal information through an electronic government
portal, the revenues from providing access are assets of the Highway Trust
Fund and may not be used to improve other agencies’ websites. See Op Atty
Gen 6329, 1989 WL 439832, p. 1 (June 16, 1989) (proceeds from sales of
information in records “accrue to the Highway [Trust] Fund and are
constitutionally dedicated to highway purposes”).
To circumvent these problems, ODOT and DAS devised a transaction to
take the right to provide electronic access to personal information out of the
Highway Trust Fund. First, ODOT provided itself the ability to transfer the
right to provide access by declaring the right to be surplus property under
ORS 366.395(1).1 ODOT determined that, because ODOT could not profit
1 See 38 Op Atty Gen 890, __ (1977) (referring to ORS 366.395 as “surplus property” statute”).
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from the right to provide electronic access, the right was “no longer needed,
required or useful for department purposes”:
“Unlike DAS, ODOT has not been authorized by the legislature to charge a “convenience fee” for providing convenient electronic access to services or records; its statutory ability to charge for access to driver records was more limited. Thus, unlike DAS, ODOT was not in a position to profit from the right to provide electronic access on its own.” Declaration of ___ McClellan, ¶29; _____.
Typically, ODOT maximizes the return to the Highway Trust Fund by
putting a surplus trust asset up for bid. Obtaining the best possible return for
the Highway Trust Fund occurs whether the trust asset is real property, OAR
734-035-0120(1) (ODOT accepts “most advantageous bid”), or personal
property, see ORS 279A.280(1)(a) (providing limited list of surplus properties
that may be sold without competitive bid).
Instead of putting the right to provide electronic access up for bid, ODOT
conveyed the right directly to DAS. _____________. Instead of setting a price
for the right that would provide the best possible return for the Highway Trust
Fund, DAS asked another representative of the executive branch of state
government, a professor at Portland State University, to “determine the fair
value” for DAS to pay ODOT. __________. The “fair value” the professor
determined did not take into account the trust nature of Highway Trust Fund
assets. The price determined to be “fair” simply represented the “average
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price” (weighted for population) charged by other states that provide electronic
access to their records. Valuation of Fair Value of DMV Records, p. 17;
Correspondence from Tom McClellan to Wally Rogers, May 7, 2013; Chaimov
Dec., ¶ 11, Ex. 9.
DAS then transferred the right to provide electronic access to personal
information to a private entity that, in return, (1) pays DAS the “fair value”
DAS pays over to ODOT, and (2) provides the State with improved websites.
___. The private entity is able to provide the improved websites by charging
purchasers the statutorily authorized “convenience fee” on top of the “fair
value” DAS pays to ODOT. Businesses like Plaintiffs that used to be able to
obtain personal information through ODOT’s Real-Time Access to Driver
Records program for $2 per record, now pay almost $10 per record. ___.
B. Procedural Facts: The Proceedings Below
Plaintiffs brought this action under the Uniform Declaratory Judgments
Act. The trial court decided the case on cross-motions for summary judgment,
entering a judgment in favor of Plaintiffs that declared:
1. ODOT lacked the authority to transfer the right to provide
electronic access to DAS; and
2. The gain DAS receives in exchange for the right to provide
electronic access is an asset of the Highway Trust Fund. ER-___.
The trial court then stayed the judgment pending appeal. Dkt. __.
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The Court of Appeals reversed the trial court’s judgment and remanded
the case to the trial court to direct Plaintiffs to bring DAS’s contractor into the
case, and then to enter a judgment declaring lawful ODOT’s transfer of the
right to provide access and DAS’s use of DAS’s gain for other than trust
purposes. 288 Or App at 835.
II. LEGAL QUESTIONS PRESENTED ANDPROPOSED RULES OF LAW
First Question Presented:
Does ODOT’s inability to profit from the use of an asset of the Highway
Trust Fund permit ODOT to treat the asset as surplus property, i.e. “no longer
needed, required for department purposes” under ORS 366.395(1)?
Proposed Rule of Law:
No. The inability to profit from the use of an asset of the Highway Trust
Fund does not permit ODOT to treat the asset as “no longer needed, required
for department purposes” under ORS 366.395(1).
Second Questions Presented:
Does DAS owe the obligations of a trustee to the beneficiaries of the
Highway Trust Fund?
Proposed Rule of Law:
Yes, as a constituent agency of the executive branch, DAS owes the
obligations of a trustee to the beneficiaries of the Highway Trust Fund.
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ODOT’s conveying an asset of the Highway Trust Fund to DAS does not cause
DAS to take the asset free of trust obligations.
Third Questions Presented:
What are the terms under which DAS may acquire an asset of the
Highway Trust Fund?
Proposed Rule of Law:
DAS may not acquire a Highway Trust Fund asset free of trust
obligations because the transaction would constitute a breach of loyalty to the
beneficiaries of the Highway Trust Fund. If DAS could acquire a Highway
Trust Fund asset, any gain from use of the asset would belong to the Highway
Trust Fund.
III. IMPORTANCE OF THE LEGAL QUESTIONS
A. This case presents new and important issues of statutory, common law, and constitutional construction in the context of an important government action
This case presents for the first time the issue of the nature of the
executive branch of state government and its constituent entities: When the
Legislative Assembly declares assets to be held in trust, are the obligations of a
trustee owed solely by a specific agency within the executive branch or by the
entire branch? The answer to that question leads to a second issue of first
impression: the scope of the State’s authority as trustee of a statutory trust to
enter into a self-dealing transaction with the assets of the trust.
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The assets of the Highway Trust Fund are “held as a trust,” ORS
366.505(2), with uses dedicated to highway purposes. Or Const Art IX, §3a.
ODOT transferred a trust asset to DAS, which then transferred the asset for
more than DAS paid ODOT for the asset—a gain DAS kept rather than return
to the Highway Trust Fund. This case challenges the lawfulness of the
transaction between ODOT and DAS and DAS’s ability to retain the gain DAS
obtained from the trust asset.
In broad outlines, this case involves a situation this Court has dealt with
before: the State’s taking assets from a trust fund to pay for general
government services. E.g., Eckles v. State of Oregon, 306 Or 380, ___, 760 P2d
846 (1988), appeal dism’d, 490 US 1032, 109 S Ct 1928, 104 L Ed 2d 400
(1989) (State unlawfully transferred moneys from trust fund to General Fund).
This case differs from most previous cases about statutory trust funds,
because, in those previous cases, the action the State took was to change the
terms of the trust. Eckles, 306 Or at ___ (statutory change); Tillamook Co . v .
State Board of Forestry , 302 Or 404 , 413-14, 730 P2d 1214 ( 1986 ) (statutory
change); Arken v. City of Portland, 351 Or 113, ___, 263 P3d 975, adhered to
on recons, 351 Or 404, 268 P3d 567 (2011) (agency order).2 Here, the case
involves the scope of the obligations the State owes when the State deals with
the trust for itself. 2 This case does not involve a change to the terms of a trust because the Legislative Assembly declined the Governor’s request to amend the law to change the terms of the Highway Trust Fund. 2011 House Bill 2064 (App-1).
in the best interests of the beneficiaries”; citation omitted).
The Court of Appeals assumed DAS owes the beneficiaries of the
Highway Trust Fund the obligations of a trustee, but concluded the obligations
do not include looking out for the best interests of the beneficiaries. The Court
of Appeals relied on Comment c(7) to Restatement (Third) of Trusts
(“Restatement”) §78(1) and (2), which sanctions a “transaction * * * [that is]
consistent with the purposes of each fiduciary relationship and for a
consideration that is fair to the beneficiaries of the relationships.” Because
DAS pays ODOT the price an employee of the executive branch said was
“fair,” DAS’s realizing a gain for itself (instead of for the Highway Trust Fund)
was permissible. 282 Or App at 832.
The key problem with the Court of Appeals’ reliance on Comment c(7),
which no party raised, is that the kind of transaction Comment c(7) covers is a
different kind of transaction from the transaction between ODOT and DAS.
The transaction Comment c(7) addresses is between two trusts for which the
same person serves as trustee. In that situation, “fair” is an appropriate standard
for evaluation of the transaction because the trustee does not gain from the
transaction.
The rule, however, is different when a person deals with a trust for which
the person serves as trustee.” Restatement §78(2) provides:
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“Except in discrete circumstance, the trustee is strictly prohibited from engaging in transactions that involve self-dealing or that otherwise involve or create a conflict between the trustee’s fiduciary duties and personal interests.
Then Attorney General Kulongoski made this specific point with respect
to the Public Employee Retirement Board and the Public Employee Retirement
Fund:
“[A] trustee may not, consistent with the duty of loyalty, appropriate trust assets for the trustee’s use, engage in self-dealing either in the trustee’s own interest or the interests of third parties, commingle trust funds with other funds, compete with the trust or engage in any activity involving trust assets that is not for the exclusive benefit of the beneficiaries.” 46 Op Atty Gen 506, 509 (1993).
There are exceptions to the rule against self-dealing; however, those
exceptions expressly omit the exception on which the Court of Appeals relied.
According to Comment d to Restatement §78(2), the exceptions to the ban on
self-dealing are found in “Comments c(4) – c(6) or c(8)”—not c(7). The
exceptions, which involve unique transactions, such as the trustee’s depositing
trust funds in a “regulated financial-services institution” with which the trustee
is affiliated, Comment c(6), do not apply here.
As a result, “fair[ness]” does not play a role in whether a trustee’s own
transaction with a trust is lawful. According to Comment b to Restatement
§78(1) and (2):
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“[I]t is immaterial that the trustee may be able to show that the action in question was taken in good faith, that the terms of the transaction were fair, and that no profit resulted to the trustee. A trustee, therefore, commits a breach of trust by purchasing trust property, even as the highest bidder at a public auction; otherwise the possibility of purchase by the trustee would create a temptation for the exercise of less than the trustee’s best efforts and business judgment on behalf of the trust to determine whether the sale is appropriate and to obtain the most favorable price and terms from others for the trust property.”
Thus, if DAS, like ODOT, is a trustee of the Highway Trust Fund, DAS cannot
take the right to provide electronic access for itself, or, if DAS can, DAS must
provide any gain to the Highway Trust Fund.
After assuming DAS is a trustee, the Court of Appeals then assumed
DAS is not a trustee. Basing its decision on a Court of Appeals decision that
involved the transfer of a Highway Trust Fund asset to a private party, Nortman
v. City of Portland, 90 Or App 520, 522, 752 P2d 1272 (1987), the Court of
Appeals concluded that “once the license was sold to DAS, it was no longer a
part of the highway fund[.]” 282 Or App at 834.
Whatever the merits of Nortman, neither Nortman nor any other case
stands for the proposition that a transfer of a trust asset from one agency of the
executive branch to another removes the trust nature of the asset. First, the
Legislative Assembly does not designate any specific agency as the trustee of
the Highway Trust Fund. ORS 366.505(2) is a general declaration of a trust.
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Cf. 537.341 (designating Water Resources Department as public’s “trustee” of
certificates for in-stream water rights). Thus, the Legislative Assembly must
intend, at a minimum, for the executive branch as a whole to owe the
obligations of a trustee.
Second, agencies of the executive branch are not independent actors.
ODOT and DAS, like the other agencies within the executive branch, are under
the control of a single decision-maker: the Governor. Or Const Art V, §1
(“The cheif [sic] executive power of the State, shall be vested in a Governor”);
25 Op Atty Gen 139, ___ (1951) (“The executive department is under the
control of the governor”). See also Frohnmayer v. SAIF, 294 Or 570, 660 P2d
1061 (1983) (trust nature of the Industrial Accident Fund did not permit SAIF
Corporation to hire counsel to assert legal position different from position of
State as a whole). This unitary nature of the executive branch means the
executive branch cannot remove an asset from trust by transferring the asset
between constituent entities.
V. CONCLUSION
The tenor of the Court of Appeals opinion suggests Plaintiffs should not
complain about a transaction that brings into the Highway Trust Fund more
money than if the transaction had not occurred. 282 Or App at 827 (noting
amount ODOT will receive from DAS). To be sure, this case is, in part, about
money. The gain ODOT receives is not as much as DAS receives from the very
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same asset ODOT conveyed to DAS. DAS’s gain should, therefore, go to the
Highway Trust Fund. More fundamentally, no transaction, if unlawful, is worth
even the largest financial gain. That is the essence of a trustee’s duty of loyalty
and the ultimate importance of this case and Plaintiffs’ Petition.
Attorneys for Plaintiffs-Respondents, Petitioners on Review
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CERTIFICATE OF COMPLIANCE WITH BRIEF LENGTH AND TYPE SIZE REQUIREMENTS
Brief length
I certify that (1) this brief complies with the word-count limitation in
ORAP 5.05(2)(b) and (2) the word-count of this brief (as described in ORAP
5.05(2)(a)) is [not to exceed 10,000] words.
Type size
I certify that the size of the type in this brief is not smaller than 14 point
for both the text of the brief and footnotes as required by ORAP 5.05(4)(f).
s/ Gregory A. Chaimov Gregory A. Chaimov, OSB #822180
Attorneys for Plaintiffs-Respondents, Petitioners on Review
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CERTIFICATE OF FILING AND SERVICE
I hereby certify that on the 20th day of December, 2017, I filed the foregoing PETITION FOR REVIEWwith the State Court Administrator by using the court’s electronic filing system, and that I served the same on:
[Click Here and Type], OSB #[Type Bar #][Address]Telephone: [Click Here and Type][Email address]
by mailing two copies thereof in a sealed, postage prepaid envelope, certified by me as such, placed in a sealed envelope addressed to them at the address set forth, and deposited in the United States Post Office at Portland, Oregon, on the 20th day of December, 2017, with the postage prepaid.
I hereby certify that on the 20th day of December, 2017, I filed the original of the foregoing PETITION FOR REVIEW by using the court’s electronic filing system; I served the same on:
[Type Atty Name], OSB #[Bar #][Address]Telephone: [Click Here and Type][Email address]
by using the court’s electronic filing system; and I served:
[Type Atty Name], OSB #[Bar #][Address]Telephone: [Click Here and Type][Email address]
by first class mail, postage prepaid.
4853-0264-5592v.1 0049158-000005
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Dated this 20th day of December, 2017.
s/ Gregory A. Chaimov Gregory A. Chaimov, OSB #82218-Of Attorneys for Plaintiffs-Respondents,