Cottonwood Hills, Inc. v. State, Department of Labor & Industry, Unemployment Insurance Division , 238 Mont. 404 ( 1989 )

No. 8 9 - 1 0 5
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
COTTONWOOD HILLS, INC.,
a Montana corporation,
plaintiff and Appellant,
-vs-
STATE OF MONTANA, DEPARTMENT OF LABOR &
INDUSTRY, UNEMPLOYMENT INSURANCE DIVISION,
and WORKERS' COMPENSATION DIVISION,
Defendant and Respondent.
APPEA.L FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Karl P. Seel; White & Seel, Bozeman, Montana
For Respondent:
James Scheier, Agency Legal Services, Helena, Montana
Submitted on Briefs: June 30, 1 9 8 9
Decided: August 11, 1989
Mr. Chief Justice J. A. Turnage delivered the Opinion of the Court.
The District Court, Eighteenth Judicial District, dismissed
the complaint of Cottonwood Hills, Inc., which sought money damages
and judicial review of a workersf compensation action. Cottonwood
Hills, Inc., appeals.
The issue on appeal is whether the District Court abused its
discretion by granting defendantsfmotion to dismiss the complaint.
We affirm.
Cottonwood Hills, Inc. (Cottonwood), is a closely-held family
corporation. In April 1985 Cottonwood hired several workers/con-
tractors to build a pro shop at the public golf course near
Bozeman, Montana. It is the characterization of these workers
which was at the heart of this dispute.
In January 1987 the Unemployment Insurance Division (UID) of
the Department of Labor and Industry (Department) notified
Cottonwood that it would be the subject of an audit. As a result
of that audit, UID determined that Cottonwood was not paying the
proper rate of unemployment insurance contributions. The UID
found that three of Cottonwood's workers must be characterized as
employees, not independent contractors, and thus additional
premiums were owed. The Uninsured Employersf Fund and the State
Compensation Insurance Fund (State Fund) assessed additional
premiums and penalties against Cottonwood. Cottonwood appealed
that decision.
A contested case hearing as allowed under section 2-4-601 et
seq, MCA, was held before the Employment Relations Division of the
Department on April 19, 1988. A decision was issued upholding the
additional assessments made by the UID. The Board of Labor Appeals
affirmed the findings and decision on July 8, 1988.
During the same time period, Cottonwood requested a contested
case hearing before the Division of Workersf Compensation (DWC) of
the Department. Hearing was held February 10, 1988, and a proposed
order issued on March 30, 1988, in favor of the DWC and UID. The
administrator of the DWC upheld the assessments made by the State
Fund and Uninsured Employers' Fund in a final order dated October
14, 1988.
On August 11, 1988, Cottonwood filed a complaint in District
Court. The complaint contested the final decisions of the DWC and
the UID, alleged that they had not dealt with Cottonwood in good
faith and requested money damages. The defendants (DWC, UID, the
Department and the State) moved to dismiss the complaint as filed
in an improper forum. The District Court granted defendants'
motion. Cottonwood appeals.
For this Court to reverse the District Court's grant of this
motion, Cottonwood must make a showing that the District Court
abused its discretion by dismissing the complaint. Gold Reserve
Corporation v. McCarty (Mont. 1987), 744 P.2d 160, 44 St.Rep. 1723.
Cottonwood is unable to make that showing.
We conclude the District Court properly dismissed Cottonwood's
complaint.
Procedures for judicial review of administrative rulings are
found in Part 7, Montana Administrative Procedure Act ( M A P A ) ,
sections 2-4-701 through -711, MCA. Additionally, there are
detailed review provisions set forth under the "Unemployment
Insurancew statutes which govern the initial dispute in this case.
Specifically applicable are section 39-51-1109 (tax appeals);
section 39-51-2403 (decisions of appeals referee); and section 39-
51-2404, (appeal to board) . Compliance with the procedures is
mandatory because only after the procedures have been followed is
the District Court vested with jurisdiction. F.W. Woolworth
Company v. Employment Security Division (Mont. 1981), 627 P.2d 851,
38 St.Rep. 694.
The proper procedure for review of administrative rulings
adverse to Cottonwood is set forth below.
Pursuant to section 39-51-1109, MCA, Cottonwood already
requested a hearing before an appeals referee to contest UID1s
additional assessment. See also, sections 39-51-2403 and -2404,
MCA.
Pursuant to section 39-51-2404, MCA, Cottonwood then appealed
the decision of the appeals referee to the Board of Labor Appeals.
At this juncture, Cottonwoodlsproper review procedure was to file
a petition (not a complaint) with the District Court. This
Cottonwood failed to do.
Section 39-51-2410 (2), MCA, states that the petition "which
need not be verified but which shall state the grounds upon which
a review is sought, shall be served upon the commissioners of Labor
and Industry and all interested parties ... The District Court
would then review the matter to determine if the findings of the
Board of Labor Appeals were based on substantial credible evidence.
Cottonwood failed to follow the correct procedure. Dismissal of
the complaint on that issue was proper and is hereby affirmed.
Regarding the DWC decision, Cottonwood also is in error. Any
appeal of a workersv compensation decision must be filed with the
Workers1 Compensation Court and not the District Court. Section
39-71-2041, MCA; section 24.29.207(2), A.R.M. The District Court
specifically cited these sections when it noted that the review of
the DWC decision was not properly before it. We agree and affirm
the dismissal as to that issue.
We note that dismissal of the complaint seeking money damages
was also proper. Cottonwood alleged that the defendants had
breached the covenant of good faith and fair dealing which attached
to their contract (the workersv compensation insurance policy
issued by State Fund to Cottonwood in 1986). The District Court
noted that claims for breach of the covenant or !'bad faithvv are
also tort actions in Montana. Gates v. Life of Montana Insurance
Co. (1983), 205 Mont. 304, 668 P.2d 213. We agree.
It is well-settled law that all tort claims against the State
must first be filed with and reviewed by the Department of
Administration. See, section 2-9-101, MCA, et seq., the State Tort
Claims Act. Such was not done in this case, and the District Court
had no jurisdiction to review the matter. It was properly
dismissed.
We note that dismissal of the claim alleging breach of the
covenant of good faith and fair dealing was not challenged by
Cottonwood on appeal, and, therefore, its dismissal would have been
upheld in any event.
Cottonwood is unable to show any abuse of discretion in the
District Court's order of December 12, 1988, dismissing its
complaint.
Judgment affirmed.
Chief Justice
e-,
We concur:
Justices