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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Varilek v. City of Houston (06/25/2004) sp-5822

Varilek v. City of Houston (06/25/2004) sp-5822

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA


LARRY R. VARILEK,                       )
                              )    Supreme Court No. S-10814
             Appellant,                 )
                              )    Superior Court No.
     v.                       )    3PA-01-1252 CI
                              )
CITY OF HOUSTON and                          )    O P I N I O N
MATANUSKA-SUSITNA                  )
BOROUGH,                                           )    [No. 5822
                              - June 25, 2004]
                              )
             Appellees.                 )
________________________________)

          Appeal  from the Superior Court of the  State
          of  Alaska, Third Judicial District,  Palmer,
          Eric Smith, Judge.

          Appearances:   Larry  R.  Varilek,  pro   se,
          Houston.   Richard  A.  Weinig,  Pletcher   &
          Weinig,  Anchorage,  for  Appellee  City   of
          Houston.   Elizabeth  D. Friedman,  Assistant
          Borough   Attorney,  and   Teresa   Williams,
          Borough   Attorney,  Palmer,   for   Appellee
          Matanuska-Susitna Borough.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          CARPENETI, Justice.

I.   INTRODUCTION

          Larry  Varilek sued Matanuska-Susitna Borough  and  the

City  of Houston  claiming that their enforcement of certain land

use  ordinances violated his constitutional rights.  The superior

court  dismissed the claim because Varilek failed to exhaust  his

administrative remedies prior to bringing suit.  Varilek  asserts

that he was unable to exhaust administrative remedies because  he

was  unable  to  pay  the boroughs mandatory $200  administrative

filing fee.  Because Varileks access to the legal system in  this

case  is  contingent  on  payment of the boroughs  administrative

fees,  an absolute requirement that such fees be paid, without  a

process  for  waiver upon a showing of indigency,  would  violate

Varileks  right to procedural due process if Varilek is  in  fact

indigent.  Because it is unclear whether Varilek is indigent,  we

vacate   the   superior  courts  dismissal  and  remand   for   a

determination of that issue.

II.  FACTS AND PROCEEDINGS

          Larry Varilek operated a metal recycling business in an

area  denominated  as  a holding district  within  the  municipal

boundaries  of  the Matanuska-Susitna Borough  and  the  City  of

Houston.   Under  Matanuska-Susitna  Borough  Code  17.41.530(B),

development within the holding district will be permitted through

a  conditional use approval process.  Varilek did not  receive  a

conditional  use  permit  for  his business.   Borough  officials

issued Varilek a notice of violation of zoning and land use codes

regulating junk and trash and governing the disposal of scrap  or

junked  cars.   The  borough  then issued  an  Enforcement  Order

requiring  Varilek  to  remedy the violations  specified  in  the

notice.

          Varilek  sued,  claiming that the boroughs  regulations

and  their  enforcement were unconstitutional  on  a  variety  of

grounds.  The defendants moved to dismiss, claiming that  Varilek

failed  to exhaust his administrative remedies before he  brought

suit.  Varilek responded that exhaustion was not required because

he  was  challenging the laws as facially unconstitutional.   The

superior  court  rejected this argument  and  dismissed  Varileks

claims  without  prejudice,  strongly  implying  that  he  should

attempt  to  exhaust his administrative remedies before  refiling

his  case.   On  appeal, this court upheld that decision  in  all

respects.1

          Varilek   then  apparently  attempted  to  appeal   the

          boroughs Enforcement Order to its Board of Adjustment and

Appeals.   However, such appeals require a $200  filing  fee,  to

defray  the administrative cost of the appeal including, but  not

limited  to, preparation of the transcript.  Claiming  indigence,

Varilek requested a fee waiver, but his request was denied.   The

borough  admits that it has no provision for waiving the required

administrative  fee.   Varilek  then  filed  a  new  lawsuit   on

essentially  the same grounds as Varilek I.  This time,  however,

he  claimed that his attempt to file an administrative grievance,

plus the boroughs refusal to waive its filing fees, meant that he

had  either effectively exhausted his administrative remedies  or

was  excused  from  doing  so.  At the same  time,  Varilek  also

appealed the boroughs fee-related dismissal of his administrative

grievance,  claiming  that  the dismissal  denied  his  right  to

procedural due process and equal protection.  The superior  court

consolidated  Varileks  new civil suit with  his  appeal  of  the

administrative fee decision.

          The  borough and city moved to dismiss Varileks lawsuit

for  failure to exhaust administrative remedies and on collateral

estoppel grounds.  The superior court found that the parties  and

issues  were  identical  to those in  Varileks  first  case.   It

therefore   held  Varilek  to  be  collaterally   estopped   from

relitigating his complaint.  Alternatively, the court found  that

Varilek  had again failed to exhaust his administrative remedies.

The   court  thus  dismissed  the  civil  suit  portion  of   the

consolidated case.  Varilek appeals this dismissal.

          In its subsequent review of the boroughs administrative

fee,  the  superior court found that Varileks underlying property

interest in obtaining review of [the boroughs enforcement  order]

is   outweighed  by  the  Boroughs  interest  in  defraying   the

administrative cost of the appeal.  The court also found that the

borough  did  not  violate Mr. Varileks equal  protection  rights

because  the  filing  fee requirement . .  .  does  not  facially

discriminate one class of individuals from another.  The superior

court   thus   affirmed  the  boroughs  refusal  to   waive   its

administrative filing fee.  Varilek also appeals this decision.

          We consider both of Varileks claims here  the dismissal

of  his  civil  suit  on  collateral  estoppel  grounds  and  the

determination  that  he  failed  to  exhaust  his  administrative

remedies.

III. STANDARD OF REVIEW

          We  review  decisions granting or  denying  motions  to

dismiss de novo.2  We also apply a de novo standard of review  to

questions  of  law, including constitutional law3 and  adopt  the

rule  of  law  that  is  most persuasive in light  of  precedent,

reason, and policy.4  Whether res judicata or collateral estoppel

applies is a question of law,5  as is the determination whether a

claim  requires the exhaustion of administrative  remedies.6   On

the   other  hand,  whether  available  administrative   remedies

actually were exhausted is a question of fact that we review  for

abuse  of  discretion.7  We will reverse a ruling  for  abuse  of

discretion  only  when left with a definite and firm  conviction,

after  reviewing the whole record, that the trial court erred  in

its ruling.8

IV.  DISCUSSION

     A.   Because  the  City  of  Houston Had  No  Role  in  this

          Controversy,  It  Is  Dismissed  from  this  Case  with

          Prejudice.

          In  all proceedings before the superior court and  this

court,  the city has concurred with the boroughs legal arguments.

However,  the  city  also claims that it  has  no  role  in  this

controversy, and notes that Varilek does not allege action by the

city or seek determination that any ordinance established by  the

City  of  Houston [is] unconstitutional.  Accordingly,  the  city

argues  that it should be dismissed from this case.  The  borough

has not opposed the citys argument.

          In  support  of its dismissal, the city has asked  this

court  to  take judicial notice of two facts pursuant  to  Alaska

          Rule of Evidence 201.  Evidence Rule 201(b) allows us to take

judicial  notice  of  facts not subject  to  reasonable  dispute.

Facts  are  not  subject to reasonable dispute if  (1)  generally

known  within  this state, or (2) capable of accurate  and  ready

determination   by  resort  to  sources  whose  accuracy   cannot

reasonably  be  challenged.  The city explains that  Houston  and

Matanuska-Susitna are separate political entities, one a city and

one  a borough, and that the city is within the geographic limits

of  the borough.  These facts are of general knowledge, and  thus

may be judicially noticed.

          The  city also asks us to take judicial notice  of  the

fact that all of the laws challenged by Varilek in this case  are

borough, not city, ordinances.  This can be easily ascertained by

reviewing Varileks pleadings:  All of the statutes Varilek  cites

are  in  fact borough ordinances, despite the fact that  many  of

them  refer  to or regulate the city.9  Moreover, under  Evidence

Rule 202 this court may take judicial notice (with or without the

request   of   a   party)   of  [d]uly  enacted   ordinances   of

municipalities or other governmental subdivisions.  This includes

Alaskas  geographic and political boundaries.10  Accordingly,  we

take judicial notice of the above facts.

          We  can  properly  dismiss all claims against  a  party

pursuant  to  Alaska Rule of Civil Procedure 21, which  allows  a

court to drop misjoined parties on motion of any party or of  its

own  initiative at any stage of the action.  Since the city  does

not have any interest or role in this case, we dismiss all claims

against the city.11

     B.   Varileks  Legal Claims Are Not Precluded by  Collateral

          Estoppel.

          The doctrine of collateral estoppel or issue preclusion

renders an issue of fact or law conclusive, and thus prevents its

relitigation between the same parties.12  For collateral estoppel

to  apply, four requirements must be met:  (1) the party  against

whom  preclusion is sought must have been a party in  a  previous

          action (2) in which the identical issue was decided (3) by a

final  judgment on the merits (4) that depended on resolution  of

the issue.13

          Although  we have not ruled on the issue, other  courts

generally do not consider dismissals without prejudice  (such  as

the  dismissal of Varileks first lawsuit) to be preclusive  final

judgments on the merits.14  Furthermore, in his previous lawsuit15

Varilek argued that he was not required to exhaust administrative

remedies, while in the present case Varilek has argued  that  the

boroughs filing fees prevented him from exhausting administrative

remedies.  Thus, Varileks second case cannot be dismissed on  the

same  grounds as his first.  For this reason as well,  collateral

estoppel should not preclude Varileks claims.

     C.   Non-Waivable   Administrative   Filing   Fees   Violate

          Procedural Due Process if They Deny Indigent  Litigants

          Access to the Courts.

          Varilek  claims that the boroughs refusal to waive  his

filing  fees violated his constitutional right to procedural  due

process.  The superior court rejected this claim, and upheld  the

boroughs  decision as constitutional.  The superior court  relied

upon  our decision in Midgett v. Cook Inlet Pre-Trial Facility,16

which  is  based on the United States Supreme Courts decision  in

Mathews v. Eldridge.17  Under Midgett, the determination of  what

constitutes due process (and thus whether it was denied) involves

balancing:   (1)  the private interest affected by  the  official

action; (2) the risk of an erroneous deprivation of such interest

through  the procedures used and the probable value, if  any,  of

additional  or  substitute procedural  safeguards;  and  (3)  the

governments  interest,  including the fiscal  and  administrative

burdens  that  additional  or substitute procedural  requirements

would entail.18

             Addressing  the first Midgett factor,  the  superior

court  rejected  Varileks due process claim in  part  because  it

found his interest in the case was not compelling because it is a

          property interest.  The court based this conclusion in part on

Boddie v. Connecticut.19  Boddie discussed an indigents right  to

the  judicial process unhampered by excessive fees.  The  Supreme

Court  only applied this right to cases where the judicial system

holds  a  monopoly on the avenues of adjustment of a  fundamental

human relationship, such as divorce.20  Because the superior court

interpreted  our  decision in In re K.A.H.21  as  adopt[ing]  the

rationale  of Boddie, and because Varileks interest in this  case

is  only economic, the superior court concluded that Varilek  has

no  constitutional right of fee-less access to the legal  system.

We cannot agree.

          Alaska  is  not precluded from offering greater  rights

and  legal protections to its citizens than those offered by  the

federal government.22  Accordingly, we have not limited the right

to  access  Alaskan  courts without fees  to  indigents  claiming

fundamental family interests.  Rather, we have widened the  right

of access to the judicial system beyond the Boddie line of cases.

          In  Bush v. Reid, a parolees suit for personal injuries

from  an  automobile accident was dismissed based  on  a  statute

suspending  the  civil rights of a convict.23  We  noted  that  a

personal injury lawsuit constituted only a property interest and,

unlike  divorces,  automobile accidents  can  often  be  resolved

privately,  without  resort  to  the  state.24   Nonetheless,  we

recognized  that parties are not always successful  in  mediating

their  conflicts and that it is sometimes necessary to resort  to

the legal process.25  Although only Bushs property interests were

at  stake,  we held that the very quality of his future existence

may be dependant upon the outcome of the case, and the denial  of

access  to  the  court would constitute a grievous  loss  of  his

property  interests.26  Varileks property interests in this  case

include  his business and livelihood, the loss of which certainly

might affect the quality of his future existence.

          Similarly,  in Patrick v. Lynden Transport, Inc.,27  we

explicitly held that access to the courts to litigate a  property

          interest is an important right.28  The superior courts application

of the first Midgett factor thus substantially underestimates the

value  of  the  private interest affected by the  boroughs  rule.

Furthermore,  in  this case it is the state, and  not  a  private

individual   or   entity,  that  allegedly   threatens   Varileks

livelihood.  This case thus does not involve, as was at issue  in

K.A.H.,  the private structuring of individual relationships  and

repair of their breach,29 for which the judicial system should be

the last resort.

          In  K.A.H., we upheld a trial courts decision  to  deny

reimbursement  to an attorney for personal funds he  advanced  an

indigent client prior to a favorable settlement.30  The funds were

meant  to cover the clients living expenses, not litigation costs

or   fees,  and  as  such  were  prohibited  by  Alaska  Rule  of

Professional  Conduct 1.8(e).  The attorney argued  that  barring

him from advancing living expenses to indigent litigants amounted

to  an unconstitutional interference with the indigents right  to

access  the  court,31  by  impos[ing]  a  financial  hardship  on

plaintiffs that forces them to settle disputes rather than endure

the  potentially prolonged litigation process.32  Rejecting  this

contention,  we noted that Boddies holding was limited  to  cases

involving  state controls or intrusions on family  relationships,

which were not at issue in K.A.H.33  However, we clearly indicated

that  in Alaska the right of access to the courts is greater than

that guaranteed by Boddie.  As we explained,

          [W]hereas Bush, Boddie, and Patrick  involved

          direct impediments to court access, this case

          does   not.   The  statute  in  Bush   flatly

          prohibited  parolees from filing  suit.   The

          statutes in Boddie and Patrick imposed  court

          fees  that denied indigent plaintiffs  access

          to   the   courts.   Such  fees   have   been

          characterized as insurmountable barrier[s] to

          filing  suit.  By contrast, nothing  in  Rule

          1.8(e)    expressly    prohibits    potential

          plaintiffs  from  filing  suit  or   requires

          plaintiffs to pay for court access.[34]

Accordingly, we disagree with the superior courts conclusion that

K.A.H.  models Alaskas right of court access on the  same  narrow

standard  used by the federal courts.  An indigent whose business

or  property interests are threatened by an administrative action

originally filed by a government agency need not be litigating  a

fundamental family matter in order to have a right of  access  to

the  courthouse.   Since prohibitive filing fees  should  not  be

allowed  to  hamper an indigent litigants access to  the  justice

system in such situations,35 it follows that such fees should also

not  be allowed to hamper his access to an administrative process

if such access is a prerequisite to judicial relief.36

          The  Midgett test also requires analysis of the  states

interests  in its existing laws, the costs of changing them,  and

the  viability of alternatives to the laws at issue.  A reviewing

court  must address the probable value, if any, of additional  or

substitute  procedural safeguards . . . and . . . the fiscal  and

administrative  burdens that additional or substitute  procedural

requirements  would  entail.37   The  superior  court  explicitly

concluded  that  the  boroughs  interest  in  charging   a   $200

administrative  fee  to all claimants was of  utmost  importance.

While  the  borough has an interest in collecting fees to  defray

the cost of the administrative appeals process, a $200 fee is not

critical  to  the  boroughs  ability to  conduct  these  appeals,

particularly  when other options might accommodate  Varileks  and

the  boroughs  competing interests, such as reduced or  graduated

fees for indigent claimants or an installment payment plan.38  The

superior  court  did  not address potential alternatives  to  the

citys mandatory fee policy, nor did it weigh the benefit of  such

fees   against  the  social  costs  inherent  in  a  policy  that

effectively prohibits indigents from protecting their rights  and

interests  against  state  actions.  We  cannot  agree  with  the

          superior courts conclusion that in situations such as this, a

$200  fee  imposed on an indigent person is so  nominal  that  it

minimally  impedes [the] appellants opportunity to seek appellate

review,  and  [that] the probable value of additional  procedural

safeguards  is minimal.  Accordingly, we hold that  the  boroughs

refusal  to  offer  any  alternative to a  $200  filing  fee  for

administrative actions amounts to an unconstitutional  denial  of

due  process  to indigent claimants.  The only question  then  is

whether Varilek is in fact indigent.

          The  superior court made no findings of fact  regarding

Varileks ability to pay the boroughs filing fee.  While  a  court

might  rightfully  be  skeptical that a  person  who  is  both  a

business  owner and a property owner is unable to pay  a  fee  of

$200,  there  is  nonetheless some  support  in  the  record  for

Varileks  indigence.  That support includes  the  fact  that  the

superior  court itself waived its filing fees for  Varilek  based

upon  his  low  income.  But because the record is incomplete  in

this  regard, we remand for factual findings related  to  whether

Varilek  can  afford  to  pay the filing  fees  or  whether  this

requirement  prevents  him from pursuing his  claim  through  the

courts.

     D.   Varileks  Other  Constitutional  Claims  Need  Not   Be

          Addressed.

          In  Varilek  I, the superior court refused  to  address

Varileks  constitutional claims, as did we.   We  explained  that

these claims contained implicit allegations of non-constitutional

administrative  error.   Addressing  such  claims  require[s]   a

factual   context  [that]  would  have  been   supplied   by   an

administrative  appeal.  And an administrative reversal  of  such

error might moot Varileks entire case.39  Since Varilek has yet to

pursue  his administrative appeal it remains premature to address

his  other constitutional claims.  It should be noted that  since

these  claims were not properly before the court in this  appeal,

the  borough was not obligated to brief these issues and  it  did

          not waive any defenses by declining to do so preemptively.



V.   CONCLUSION

          Because  the  city  played  no  role  in  enacting   or

enforcing  the  legislation  challenged  in  this  case,  it   is

dismissed from this case with prejudice.

          Because  access to the boroughs administrative  appeals
process  requires  a flat fee from all appellants  regardless  of
their  wealth,  and  because this process is  a  prerequisite  to
accessing  the  legal  system, the boroughs policy  violates  the
procedural due process rights of indigent litigants.  Because  it
is  unclear  in  the  present case whether  Varilek  is  actually
indigent,  we  REMAND  to  the  superior  court  for  a   factual
determination  of  this  question  and  further  proceedings   in
accordance with this opinion.
_______________________________
     1     Varilek  v.  City  of  Houston  and  Matanuska-Susitna
Borough (Varilek I), 2002 WL 539034 (Alaska, April 10, 2002).

     2     McElroy v. Kennedy, 74 P.3d 903, 906 (Alaska 2003); In
re Life Ins. Co. of Alaska, 76 P.3d 366, 368 (Alaska 2003).

     3     R & Y, Inc. v. Municipality of Anchorage, 34 P.3d 289,
293 (Alaska 2001).

     4    Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).

     5    McElroy, 74 P.3d at 906.

     6     Bruns v. Municipality of Anchorage, Anchorage Water  &
Wastewater Util., 32 P.3d 362, 366 (Alaska 2001).

     7    Id.

     8     Betz  v. Chena Hot Springs Group, 742 P.2d 1346,  1348
(Alaska 1987).

     9    See http://ordlink.com/codes/matanusk/index.htm.

     10     See  McGee v. State, 614 P.2d 800, 808 (Alaska  1980)
(taking  judicial  notice of fact that  Mile  206  of  Richardson
Highway is within boundaries of Fourth Judicial District).

     11     The  city  moved for dismissal only from  the  action
related to the boroughs administrative decision, and the superior
court  granted its motion.  While there is no indication  in  the
record  that the city moved for dismissal in response to Varileks
civil suit, we find that dismissal is appropriate given that  the
cases  are consolidated and the city has no interest or stake  in
either action.

     12    McElroy, 74 P.3d at 907.

     13     Jackinsky  v.  Jackinsky, 894 P.2d 650,  654  (Alaska
1995).

     14     See, e.g., Cooter & Gell v. Hartmarx Corp., 496  U.S.
384,  396-97  (1990) (holding that under Federal Rules  of  Civil
Procedure,  dismissal without prejudice does not  operate  as  an
adjudication upon the merits, and that even when dismissed  claim
was  so unfounded as to merit Rule 11 sanctions, litigant was not
precluded  from  refiling  it);  Pilots  Point  Marina,  Inc.  v.
Cazzani  Power  Boat Mfg., Inc., 745 A.2d 782,  784  (R.I.  2000)
(dismissal  of  claim  without  prejudice  where  claimant  lacks
capacity  to sue is not final judgment on merits); Eastern  Idaho
Agric. Credit Assn v. Neibaur, 987 P.2d 314, 320 (Idaho 1999)  (A
dismissal  without  prejudice usually does not  result  in  issue
preclusion.).

     15     Varilek  v.  City  of  Houston and  Matanuska-Susitna
Borough, 2002 WL 539034, *1 (Alaska, April 10, 2002).

     16    53 P.3d 1105 (Alaska 2002).

     17    424 U.S. 319 (1976).

     18    Midgett, 53 P.3d at 1111 (adopting test articulated in
Mathews).

     19    401 U.S. 371 (1971).

     20    Id. at 382-83.

     21    967 P.2d 91 (Alaska 1998).

     22    Bush v. Reid, 516 P.2d 1215, 1219-20 (Alaska 1973).

     23    Id.

     24    Id. at 1217-18.

     25    Id. at 1218.

     26    Id. at 1218-19.

     27    765 P.2d 1375 (Alaska 1988).

     28    Id. at 1379.  Although this decision was grounded in an
equal protection analysis, its reasoning is equally applicable to
a due process inquiry.

     29     Bush  v.  Reid, 516 P.2d at 1218 (quoting  Boddie  v.
Connecticut, 401 U.S. at 375).

     30    K.A.H., 967 P.2d at 97-98.

     31    Id. at 92.

     32    Id. at 94.

     33    Id. at 94-95.

     34    Id. (internal citations omitted).

     35     Bush  v.  Reid, 516 P.2d 1215, 1217-18 (Alaska  1973)
(citing Boddie v. Connecticut, 401 U.S. 371 (1971)).

     36     See, e.g., Bustamante v. Alaska Workers Comp. Bd., 59
P.3d  270,  273  (Alaska 2002) (dismissal of indigent  appellants
appeal  of  administrative decision for failure to pay transcript
costs was abuse of discretion).

     37    Midgett v. Cook Inlet Pre-Trial Facility, 53 P.3d 1105,
1111 (Alaska 2002).

     38    Varilek complains only of a [t]otal denial of access to
review  based upon the inability to pay a lump sum . . .  and  he
proposes  a payment schedule where the fee is paid over a  period
of time, i.e., $25.00 per month.

     39     Varilek I, 2002 WL 539034, at *1 (Alaska,  April  10,
2002).