author: JUSTICE LEAPHART JUSTICE GRAY,

text:
    ADAM GANZ, Plaintiff and Appellant, v. UNITED STATES CYCLING FEDERATION; MISSOULA DOWNTOWN ASSOCIATION; AND JOHN DOES, as employees and/or agents of United States Cycling Federation, and/or Missoula Downtown Association, Defendants and Respondents.
    No. 95-044.
    Submitted on Briefs July 27, 1995.
    Decided October 3, 1995.
    52 St.Rep. 1030.
    903 P.2d 212.
    273 Mont. 360.

      For Appellant: Thomas J. Beers, Larry Howell; Connell, Beers & Alterowitz, Missoula.
    For Respondents: Gary L. Graham; Garlington, Lohn & Robinson, Missoula.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Adam Ganz appeals from a jury verdict, Fourth Judicial District Court, Missoula County, in favor of defendants United States Cycling Federation and Missoula Downtown Association. We affirm in part, reverse in part and remand.

The following issues are raised on appeal:

1. Did the District Court err in instructing the jury that the internal USCF documents be considered only for the purpose of showing the knowledge of the USCF at the time of the incident?

2. Did the District Court err in refusing to admit the “Guidelines to Risk Management” as an exhibit?

3. Did the District Court err in giving a jury instruction which allowed the jury to consider the USCF’s customary practices at other cycling events?

4. Did the District Court err in refusing to give Plaintiff’s Proposed Jury Instruction Number 18?

5. Did the District Court err in refusing to instruct the jury that Ganz was not negligent?

6. Did the District Court err in refusing to grant Plaintiff’s motion for a directed verdict on the issue of negligence?

7. Did the cumulative effect of the District Court’s errors deny Ganz a fair trial?

8. Did the District Court err in giving the “but for” causation instruction instead of the “substantial factor” causation instruction?

On July 16,1988, Adam Ganz (Ganz) was injured during a “warmup lap” at the Great Western Stage Race when he crashed while attempting to avoid an eleven-year-old child who had entered the race course. The Great Western Stage Race was a “criterium” race, a circuit race held on a small track entirely closed to traffic. The race was held in Missoula, Montana and was sponsored by the Missoula Downtown Association (MDA) and sanctioned by the United States Cycling Federation (USCF). The MDA is made up of the business, professional, and service community in the downtown Missoula area. The USCF is the national organization that governs amateur bicycle racing in the United States.

Pat Simmons, the executive director of the MDA, applied for and was granted a permit by the USCF for the Great Western Stage Race. The permit named Simmons as the individual promoter and MDA as the promoting organization. Simmons was not familiar with or personally involved in the safety precautions for the race. According to the permit, the promoter’s responsibilities included conducting the competition with qualified officials and taking proper safety precautions to protect the personal welfare of both the athletes and the spectators.

The MDA left the safety precautions to a race subcommittee that actually organized and conducted the race. The subcommittee arranged for a chief referee, arranged for marshals, and determined the site of the race. This subcommittee included Mary Cheryl (Hall) Larango, the bicycle coordinator for the City of Missoula, who was responsible for obtaining barricades, cones, and equipment from the City of Missoula. Mesh fencing was installed at the start/finish line, and barricades were placed at the street corners and alleys on the course. Larango testified that Michael Copeland, the chief referee, and Carl Ammons, the chief judge, were in charge of the setup and safety arrangements for the race. Larango was the supplies coordinator, while Ammons was in charge of the technical aspects of the race. Larango was also responsible for recruiting volunteers who served as marshals at the race.

Ammons testified that although he was the only USCF official who was involved in planning the race, he tried to “stay out of being involved with the race as much as possible.” Instead of riding in this particular race himself, Ammons agreed to be the chief judge.

On the morning of the race, the marshals were instructed as to their duties by Copeland, and Larango reiterated these directions to the volunteers. The marshals were stationed throughout the course, and at intersections, to keep the course clear from pedestrians, dogs, and vehicles. Marshals Chris Buzan, Marie Ange Buzan, Trina Polzin and her son were stationed at the corner where the incident occurred. Chris Buzan testified that he thought Larango was in charge of the race and only remembers Larango giving instructions to the marshals. He testified that ‘We had help with barricades and so on, but there were only so many of us and we did the best we could with what we had.” Chris Buzan and Marie Ange Buzan testified that they never left their assigned corners during the event, but that they did not see the incident.

At trial, Ganz introduced a number of documents prepared by the USCF, or at the direction of the USCF, that set forth various safety guidelines and directions for conducting criterium bicycle races. The court instructed the jury that this evidence could only be considered for “the purpose of showing the knowledge available to USCF at the time of the incident in question.”

The pre-trial order made it clear that the defendants did not allege contributory negligence. The court also ruled, prior to trial, that the theory of assumption of the risk could not be raised. At trial, as a stipulated compromise, the parties agreed that the verdict form would provide that Ganz must only show negligence on the part of any defendant or its representatives. Thus, the jury was only asked to determine whether the MDA, the USCF, or any representative of the MDA or the USCF including marshals, volunteers, or race officials were negligent. The jury returned a verdict that none of the defendants was negligent. Ganz appeals from this verdict.

1. Did the District Court err in instructing the jury that the internal USCF documents be considered only for the purpose of showing the knowledge of the USCF at the time of the incident?

At trial, Ganz sought to introduce several internal USCF documents which discussed safety considerations associated with criterium bicycle races. The first document, Plaintiff’s Trial Exhibit Number 15, was captioned “Elements of a Safety Guideline” and was prepared by a safety consulting firm. The second, Plaintiff’s Trial Exhibit Number 16, was titled “United States Cycling Federation Cycling Event Standards & Safety Manual” and is similar to Exhibit Number 15. This document is on USCF letterhead and is dated March 31, 1986, and denominated as a draft outline. The final document,. Plaintiff’s Trial Exhibit Number 17, is a 138 page document titled “United States Cycling Federation Cycling Safety Manual” that was prepared in 1987 but was not adopted by the USCF. The jury was instructed that “Plaintiff’s Exhibits 15,16, and 17 are admitted solely for the purpose of showing the knowledge available to the USCF at the time of the incident in question.” We determine that the jury should not have been limited to considering these exhibits solely for the purpose of showing the knowledge available to the USCF at the time of the incident and, therefore, hold the instruction was in error.

The exhibits should have been admitted without restriction to potentially contest the argument that safety precautions were not feasible, and potentially as an admission that the safety precautions at the Missoula race were inadequate. Although these documents were in “draft” form, they are tantamount to intracorporate communications or interdepartmental memoranda; that is, documents which were never intended for publication. Haines Pipeline Constr. Co. v. Montana Power Co. (1991), 251 Mont. 422, 427, 830 P.2d 1230, 1234 (holding that intracorporate communications concerning matters relevant to the issue should have been admitted as an admission); Cech v. State (1979), 184 Mont. 522, 531, 604 P.2d 97, 101-02 (holding that interdepartmental memorandum stating that the dangerous situation “could very easily be fixed” was admissible to show the feasibility of installing a guardrail). Ganz argues that these documents should have also been admitted to determine the USCF’s duty. We disagree. The existence of a duty is a legal question for the court, not the jury, to determine. Roy v. Neibauer (1981), 191 Mont. 224, 226, 623 P.2d 555, 556. Breach of that duty is a question for the jury.

2. Did the District Court err in refusing to admit the “Guidelines to Risk Management” as an exhibit?

Ganz attempted to offer Plaintiff’s Trial Exhibit Number 2, a USCF document titled “United States Cycling Federation Guidelines to Risk Management,” through the testimony of Andy Bohlmann. Bohlmann was the Director of Technical Services for the USCF from 1984 to 1990. The document appears to be the culmination of earlier drafts of the safety manual; virtually the same language was before the jury in the draft safety manual, Trial Exhibit Number 17. This document, Trial Exhibit Number 2, was distributed in 1989, a year after the incident in question, by the USCF to its district representatives. Soon after its distribution, the use of the manual was discontinued.

The transcript indicates that Ganz moved to admit the exhibit over the defendants’ objection. The court questioned Ganz’s counsel at length as to the possible theories of admissibility of the exhibit. The court concluded that foundation for the exhibit had not been laid and informed counsel that the right questions had not yet been asked. Ganz’s counsel continued to question the witness and, through further questioning, elicited the substance of the exhibit. The witness testified that the manual was prepared, adopted, and distributed and that shortly thereafter its use was discontinued. After asking the additional questions which, along with Trial Exhibit Number 17, established that safety manuals had been prepared, and later abandoned, Ganz did not again move to admit Trial Exhibit Number 2. Since the exhibit was not re-offered, the court did not make a final ruling as to its admissibility. Rather, immediately before final jury instructions were given, and just after a discussion was held off the record, the court stated that, “for record purposes,” Trial Exhibit Number 2 was refused based on “insufficient foundation.” This ruling was based on the initial offer of the exhibit. Although the substance of the exhibit was elicited through testimony, no subsequent offer of the exhibit was made by counsel. Thus, counsel’s failure to re-offer the exhibit discharges us from further addressing this issue on appeal.

3. Did the District Court err in giving a jury instruction which allowed the jury to consider the USCF’s customary practices at other cycling events?

Ganz argues that the District Court erred in giving its Jury Instruction Number 3, which provided:

Customary methods of conduct are not controlling on the question of negligence but are merely one of the factors to be considered in determining whether or not ordinary care has been exercised.

The court adapted this instruction from the Defendants’ Proposed Jury Instruction Number 10, which provided that “Customary acts and practices are one of the factors to be considered in determining whether reasonable care has been exercised.”

The court refused to give defendants’ instruction, instead, it looked to the source of the defendants’ proposed instruction, McCollum v. D & M Lumber Co. (1971), 156 Mont. 335, 479 P.2d 458, and instructed directly from the language oí McCollum. This instruction is inapplicable in this situation. Evidence of custom is admissible to show the customary practices of an industry, as a whole, not one particular member of that industry. Here, the only evidence of custom in directing amateur bicycle races is the USCF’s own custom; there are no other non-party members of the same industry. Thus, the only “customary” practices that the jury could use to compare the defendants’ conduct in the Missoula race would be with other conduct of the same defendant.

As the self-described national governing body for the sport of amateur bicycle racing, the USCF is the only entity that directs and controls the sport of amateur cycling in the United States. The USCF elects a board of directors, appoints committees, promulgates the “Rule Book,” trains officials, and approves all permits for all sanctioned bicycle races. Evidence of the safety precautions usually undertaken by the USCF at small criterium bicycle races is entirely self-serving and is not admissible to show the industry custom — the USCF is the “industry.” Thus, we hold that the District Court erred in giving its Jury Instruction Number 3.

4. Did the District Court err in refusing to give Plaintiff’s Proposed Jury Instruction Number 18?

The evidence established that there was a non-party child who darted onto the race course. Anticipating that the defendants might attempt to blame another person, including the child who entered the race course, Ganz offered Plaintiff’s Proposed Jury Instruction Number 18, MPI 2.09, which provided that:

More than one person may be liable for causing an injury. A defendant may not avoid liability by claiming that some other person, whether or not named as a defendant in this action, helped cause the injury.

Our standard of review for discretionary trial court rulings is whether the district court abused its discretion. Barthule v. Karman (1994), 268 Mont. 477, 487, 886 P.2d 971, 977. In Barthule, we held that it is not reversible error for a district court to refuse an offered instruction unless the refusal affects the substantial rights of the party who proposed the instruction. Barthule, 886 P.2d at 977 (citing Cottrell v. Burlington Northern R.R. Co. (1993), 261 Mont. 296, 306, 863 P.2d 381, 387). Here, however, we determine that the District Court’s refusal to give the proposed instruction did affect Ganz’s substantial rights. The jury knew that the child entered the race course. As a result, the jury was presented with the potential fault of a non-party and was not instructed that a defendant may not avoid liability by claiming that some other person helped cause the injury.

Ganz’s proposed instruction was an accurate statement of Montana law, and clearly was applicable in light of the undisputed evidence that the accident occurred when an unnamed child entered the race course. Ganz anticipated that defense counsel might point a finger at the child. In closing argument, that is precisely what occurred. Defense counsel stated “If, in your view somebody needs to be blamed, there’s a youngster who darted out onto the raceway. We’re not suggesting that, but if you’re the type of person that needs to fix fault someplace, I would suggest that as a possibility.” Had the offered instruction been given, the jury would have known that it was not to consider the negligence of a non-party. Newville v. State, Dep’t of Family Servs. (1994), 267 Mont. 237, 255-56, 883 P.2d 793, 804. We hold, therefore, that the District Court erred in failing to give Plaintiff’s Proposed Instruction Number 18. In failing to give the proposed instruction, the District Court virtually invited the improper statement made by defense counsel during the closing argument. The court’s refusal to give Plaintiff’s Proposed Instruction Number 18, combined with the defense’s closing argument allowed the jury to divert its attention from considering the conduct of the defendants, and invited the jury to entertain the idea that a non-party child may have been at fault.

5. Did the District Court err in refusing to instruct the jury that Ganz was not negligent?

The District Court refused to give Plaintiff’s Proposed Instruction Number 12, which, in part, provided:

Adam Ganz was not negligent in the manner in which he was riding before the accident, in the action he took to avoid the spectator or pedestrian, or in any other action he took leading up to the accident.

The pre-trial order made it clear that the defendants did not allege contributory negligence and, prior to trial, the court also ruled that the theory of assumption of the risk could not be raised. In the opening statement, the defendants stated “We will not present any evidence that Mr. Ganz did anything wrong.” Further, during trial, the court instructed the jury:

Before I recess you for the day, I wanted to read you a brief instruction that I just drafted. It relates to the witness that testified regarding reaction times. You are advised that the evidence from a witness that related to the scientific basis for a bike racer’s reaction time is to be used only to weigh the testimony of other witnesses. This evidence is not to be used in any manner to determine if the Plaintiff, Adam Ganz, was negligent in any manner, because any possible negligence on the part of the Plaintiff is not an issue in this lawsuit.

The fact that the defendants did not place Ganz’s negligence at issue, and that the court admonished the jury that biker’s reaction times and Ganz’s “possible” negligence were not issues, makes the court’s refusal to give the proposed instruction puzzling. Despite the court’s admonishment and the defendants’ stipulation that Ganz’s negligence was not an issue, the way that the evidence and the testimony unfolded throughout the trial, the issue of bike racer’s (i.e. Ganz’s) reaction times and the question of Ganz’s “possible negligence” may have been on the minds of the jurors. Although we do not hold the court’s refusal of Plaintiff’s Proposed Instruction Number 12 to be reversible error, the court, on retrial, should avoid the inconsistencies created between the pretrial order (which does not allege any negligence by Ganz) and the court’s admonition to the jury concerning Ganz’s “possible negligence.”

Based on our resolution of issues one through five, it is unnecessary for us to address issues six through eight.

Affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion.

JUSTICES TRIEWEILER, NELSON and HUNT concur.

JUSTICE GRAY,

concurring in part and dissenting in part.

I concur in the Court’s opinion on issues two, four and five, specially concur on issue three, and dissent on issue one.

With regard to issue three, relating to the jury instruction on customary practices, I agree with the result the Court reaches but not with all that is said. First, it is important to note that Ganz made no objection to any of the evidence introduced on the customary practices of the USCF. Thus, that evidence was properly before the jury for its consideration. Under that circumstance, it ordinarily would be appropriate to instruct the jury on that theory of the defense, under our usual rules requiring jury instruction on theories of the case supported by the evidence. See Buhr v. Flathead County (1994), 268 Mont. 223, 235, 886 P.2d 381, 388.

However, Ganz argues, the Court determines and I agree, that McCollum, is not authority for the customary practices instruction given here; that case involved the usual situation of industry-wide customary practices used as a factor in determining the negligence of the defendant, a member or constituent part of that industry. The USCF cites to no authority for the proposition that where, as here, the defendant essentially is “the industry’ at issue, it remains appropriate to instruct on that defendant’s customary practices as the relevant industry practices. This is the basis on which I would reverse the District Court on this issue.

I dissent from the Court’s discussion and resolution in issue one that the District Court improperly limited the jurys consideration of “internal USCF documents.” Plaintiff’s Trial Exhibit No. 15, the “Elements of a Safety Guideline,” is — as its very name reflects — an outline for a safety guideline; it is not a substantive guideline. Moreover, the exhibit was neither prepared, nor adopted, by the USCF. Plaintiff’s Trial Exhibit 16, the so-called manual, is denominated as a draft outline. It is neither a final, nor an adopted, outline. Plaintiff’s Trial Exhibit 17 is another draft manual — prepared in sections by different people and never adopted by USCF. I cannot understand how these latter unadopted draft documents can be relevant — as the Court states it — “potentially as an admission that the safety precautions at the Missoula race were inadequate.”

Nor do the cases cited by the Court support its reversal of the District Court’s limiting instruction relating to these exhibits. The issue in both Haines and Cech related to the admissibility of evidence under the Montana Rules of Evidence rather than whether a court abused its discretion by limiting the purposes for which the jury could consider evidence already admitted. In neither case was the document or material at issue in draft or “nonadopted” form. Finally, we determined that the document in Haines was admissible specifically because it was relevant to MPC’s knowledge about the course of action it chose to follow. Here, the “knowledge” aspect of our conclusion in Haines clearly, and properly, was covered by the District Court’s instruction that the exhibits could be considered for the purpose of showing the USCF’s knowledge at the time of the incident at issue.

CHIEF JUSTICE TURNAGE joins in the foregoing.


source: Caselaw Access Project

license: Public Domain

text:
    RAVALLI COUNTY FISH AND GAME ASSOCIATION, INC., MONTANA WILDLIFE FEDERATION, INC., SKYLINE SPORTSMEN CLUB, INC., and ANACONDA SPORTSMEN CLUB, INC., Plaintiffs and Appellants, v. MONTANA DEPARTMENT OF STATE LANDS, MONTANA BOARD OF LAND COMMISSIONERS and GEORGE MADDEN, Defendants and Respondents.
    No. 94-564.
    Submitted on Briefs May 26, 1995.
    Rehearing Denied October 26, 1995.
    Decided September 29, 1995.
    52 St.Rep. 996.
    903 P.2d 1362.
    273 Mont. 371.

      For Appellants: Jack R. Tuholske, Esq., Missoula.
    For Respondents: Patrick G. Frank, Esq., W. Carl Mendenhall, Esq.; Worden, Thane & Haines, Missoula; Tommy H. Butler, Esq., Special Ass’t Attorney General, Helena.
    For Amicus Curiae: Thomas France, Esq., Debbie Musiker, Esq., Missoula (for National Wildlife Federation); John E. Bloomquist, Esq.; Doney, Crowley & Shontz, Helena (for Montana Stockgrowers Assoc., Montana Woolgrowers Assoc, and Bitterroot Stockgrowers); Alan L. Joscelyn, Esq., Helena (for Seeley Lake Elem. School Dist. and Brady Combined School Dist.)
   JUSTICE LEAPHART

delivered the Opinion of the Court.

The Ravalli County Fish And Game Association, Inc., Montana Wildlife Federation, Inc., Skyline Sportsmen Club, Inc., and Anaconda Sportsmen Club, Inc. (collectively, the Sportsmen) appeal from a Twenty-First Judicial District Court, Ravalli County, order granting the Montana Department Of State Lands’ (DSL), Montana Board Of Land Commissioners’, and George Madden’s (Respondents) motion for summary judgment in a Montana Environmental Policy Act (MEPA) action. We reverse.

FACTUAL BACKGROUND

Bighorn sheep (bighorn) are native to much of Montana but, with the settlement of the west, they were eliminated from most of their former ranges. In response to their diminished numbers, efforts have been made to reintroduce the bighorn to some of their former ranges. One such area is the Sula State Forest (Sula) and adjacent lands near the East Fork of the Bitterroot River. The presence of the bighorn adds ecological, aesthetic and economic values to the areas and communities adjacent to bighorn ranges. Along with its suitability as bighorn habitat, the Sula has a long history of livestock grazing. At issue is an alleged conflict between the grazing of domestic sheep and the health and survival of the bighorn on the adjacent range.

Until the beginning of 1991, Ralph Shoberg maintained grazing permits with the DSL on trust lands within the Sula. Shoberg grazed cattle on his permit areas. In January 1991, Shoberg transferred his permits to George R. Madden (Madden). Madden subsequently changed from grazing cattle to grazing domestic sheep. A public controversy arose regarding Madden’s grazing of domestic sheep upon trust lands because of the potential adverse affects on the bighorn. Evidence in the record suggests that mixing domestic sheep and bighorn can decimate the bighorn population through the spread of pneumonia and/or other diseases to the bighorn. On October 31, 1991, under the threat of a lawsuit, the DSL agreed to prepare an environmental review of the permits pursuant to MEPA. Prior to 1991, the DSL had not prepared an environmental assessment (EA) or environmental impact statement (EIS) on Madden’s cattle grazing permits.

The DSL issued an EA on July 17, 1992 which included six alternatives. Appellants, private parties and state entities, submitted comments to the DSL about the EA. On September 30,1992, the DSL issued a revised EA. On December 30, 1992, DSL commissioner Dennis Casey issued a decision notice which ended the EA process and allowed Madden’s grazing leases to remain in effect until 1999, the leases’ existing renewal date. With the intent to reduce the threat of transferring disease from the domestic sheep to the bighorn, the decision notice required certain measures, such as sheep dogs and grazing dates. Because Casey approved the revised EA, MEPA requirements were satisfied and no EIS was required.

On May 12, 1993, the Sportsmen filed the instant action in the District Court. On August 20, 1993, Respondents moved to dismiss the Sportsmen’s claims pursuant to Rule 12(b)(6), M.R.Civ.P., for failure to state a claim upon which relief could be granted. On November 23,1993, the District Court stated that it intended to treat this motion as a Rule 56, M.R.Civ.P., motion for summary judgment. On August 10,1994, the District Court granted Respondents’ motion for summary judgment on all counts. This appeal followed.

The Sportsmen present three issues for review:

1. Did the District Court err in holding that the DSL complied with MEPA?
2. Does the DSL have a fiduciary duty towards Montana’s wildlife which, under the facts of the instant case, requires the protection of the bighorn by implementing license conditions to protect the bighorn?
3. Did the District Court improperly refuse to consider affidavits, exhibits, and depositions submitted by the Sportsmen in support of their claims that the DSL unlawfully and arbitrarily violated MEPA and its trust duties toward wildlife?

STANDARD OF REVIEW

We review summary judgment orders de novo. Spain-Morrow Ranch Inc. v. West (1994), 264 Mont. 441, 444, 872 P.2d 330, 331-32.

Summary judgment is proper only when no genuine issue of material fact exists and the moving party is entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P. The initial burden is on the moving party to establish that there is no genuine issue of material fact; and once met, the burden shifts to the party opposing the motion to establish otherwise.

Spain-Morrow Ranch, 872 P.2d at 331-32 (citations omitted).

We review MEPA decisions to determine “whether the record establishes that the agency acted arbitrarily, capriciously, or unlawfully.” North Fork Preservation Assoc. v. Dept. of State Lands (1989), 238 Mont. 451, 458-59, 778 P.2d 862, 867. In North Fork we divided our review into two parts: Whether the agency acted unlawfully, and whether the agency acted arbitrarily or capriciously. North Fork, 778 P.2d at 867.

To evaluate the lawfulness of the DSL’s actions, we look to the laws and regulations governing the DSL’s MEPA review process. North Fork, 778 P.2d at 867. We therefore review §§ 75-1-101 et seq., MCA, and §§ 26.2.641 et seq., ARM. Because MEPAis modeled after the National Environmental Policy Act (NEPA), when interpreting MEPA, we find federal case law persuasive. Kadillak v. Anaconda Co. (1979), 184 Mont. 127, 137, 602 P.2d 147, 153.

DISCUSSION

NEPA requires that an agency take a “hard look” at the environmental impacts of a given project or proposal. See Kleppe v. Sierra Club (1976), 427 U.S. 390, 410, n.21, 96 S.Ct. 2718, 2730, 49 L.Ed.2d 576, 590. NEPAis essentially procedural; it does not demand that an agency make particular substantive decisions. Stryker’s Bay Neighborhood Council v. Karlen (1980), 444 U.S. 223, 227-28, 100 S.Ct. 497, 499-500, 62 L.Ed.2d 433, 437. MEPA requires that an agency take procedural steps to review “projects, programs, legislation, and other major actions of state government significantly affecting the quality of the human environment” in order to make informed decisions. Section 75-1-201(1)(b)(iii), MCA; See § 26.2.643, ARM.

Both parties ask us to determine whether an environmental review document is necessary for the renewal or assignment of a grazing lease. Pursuant to § 77-6-205(1), MCA, a grazing lease holder:

who has paid all rentals due the state or who has voluntarily terminated a lease under 77-6-116 is entitled to have the lease renewed for a period not to exceed the maximum lease period provided in 77-6-109 at any time within 30 days prior to its expiration or within 30 days following voluntary termination if no other applications for lease of the land have been received 30 days prior to the expiration of the lease or within 30 days following voluntary termination. The renewal must be at the full market rental rate established by the board [, taking into account recommendations of the state land board advisory council,] for the renewal period and subject to any other conditions at the time of the renewal imposed by law as terms of the lease.

Section 77-6-208, MCA, provides for assignment of leases to state lands. The DSL rules regarding the general requirements of the environmental review process state that:

(5) The agency is not required to prepare an EA or an EIS for the following categories of action:
....
(e) ministerial actions: actions in which the agency exercises no discretion, but rather acts upon a given state of facts in a prescribed manner ....

Section 26.2.643(5), ARM. The Sportsmen correctly argue that the renewal and assignment of a lease, permit, license, etc., pursuant to § 26.2.642(1), ARM, involves state action. Generally, state action significantly affecting the quality of the human environment requires MEPA analysis. See § 75-1-201(1)(b)(iii), MCA. However, where a license renewal or assignment merely maintains the status quo we conclude that the renewal or assignment of a grazing lease pursuant to § 77-6-205(1), MCA, is a ministerial action that requires no environmental analysis. See NRDC v. Berklund (D.C. Cir. 1979), 609 F.2d 553, 558. Absent a change in use or condition which significantly affects the quality of the human environment, the renewal or assignment of a grazing lease or permit is generally a ministerial act and does not trigger MEPA analysis.

However, if a changed use or condition under a state lease or permit significantly affects the quality of the human environment, then the state’s allowing that change in use or change in condition is a major state action pursuant to MEPA, triggering the MEPA review process. The United States Supreme Court has observed that “major federal actions” include the “expansion or revision of ongoing programs.” Andrus v. Sierra Club (1979), 442 U.S. 347, 363 n.21, 99 S.Ct. 2335, 2344, 60 L.Ed.2d 943, 955; citing S. Rep. No. 91-296, p.20 (1969). “[I]f an ongoing project undergoes changes which themselves amount to ‘major Federal actions,’the operating agency must prepare an EIS.” Upper Snake River Chapter of Trout Unlimited v. Hodel (9th Cir. 1990), 921 F.2d 232, 234.

The DSL correctly argues that if an agency does not have an affirmative statutory duty to act, the failure to act does not trigger NEPA. Defenders of Wildlife v. Andrus (D.C. Cir. 1980), 627 F.2d 1238, 1248-50. However, if an agency’s duty to avoid environmental harm is mandatory, then the agency’s inaction constitutes an action for NEPA purposes. See Sierra Club v. Hodel (10th Cir. 1988), 848 F.2d 1068, 1090-91. Based on the requirements of §§ 77-6-201(2), -206 and -210, MCA, the DSL has the duty to manage agricultural, grazing, and other surface leased land to protect the best interests of the state, under the multiple use concept, which necessarily includes considering consequences to wildlife and the environment. See § 77-1-203, MCA. When the DSL is made aware of changes in the existing conditions or uses relating to an operation under a lease or permit, and those changes have the potential to significantly affect the quality of the human environment, then the DSL must, pursuant to MEPA, evaluate those changes for significant impacts. In the instant case substantial questions remain as to what impact grazing domestic sheep will have on the bighorn population.

The plaintiff need not show that significant effects will in fact occur, but if the plaintiff raises substantial questions whether a project may have a significant effect, an EIS must be prepared.

LaFlamme v. Federal Energy Regulatory Commission (9th Cir. 1988), 852 F.2d 389, 397.

Particularly in light of MEPA’s statutory goal of promoting efforts which will prevent or eliminate damage to the environment, § 75-1-102, MCA, and the conflicting evidence in the record, the DSL failed to sufficiently explain and substantiate its December 30, 1992 decision to allow Madden to continue grazing sheep adjacent to the bighorn range without proceeding with an EIS. Further, it failed to sufficiently evaluate the significance of the impacts that domestic sheep would cause to the bighorn. Both the revised EA and the DSL’s brief to this Court concede that the revised EA did not address the significance of impacts. An EIS must be prepared for state actions that significantly affect the quality of the human environment. Section 75-1-201(1)(b)(iii), MCA. “In order to implement [MEPA], the agency shall determine the significance of impacts associated with a proposed action.” Section 26.2.644(1), ARM. The Sportsmen correctly point out that the DSL did not complete MEPA’s mandatory “significant impacts” analysis. Because the DSL did not in the first instance adequately determine and consider the significance of the impacts associated with grazing domestic sheep on lands adjacent to bighorn, the DSL acted arbitrarily and capriciously and unlawfully when it concluded that changes to Madden’s grazing plan reduced the probable significant impact to the bighorn.

The District Court was incorrect in agreeing with the DSL that it was not required to engage in a significant impacts analysis on the theory that it was doing a voluntary as opposed to a mandatory EA. Based on our above holding, full compliance with MEPA is mandated in this case. Furthermore, we find no provisions in MEPA, the administrative rules, or case law providing for partial compliance with the law when compliance with the law is purportedly voluntary.

We do not here decide whether grazing domestic sheep adjacent to the Sula bighorn range is appropriate or not, but rather, whether the DSL’s environmental review was sufficient. In the instant case, given the potential adverse impact on the bighorn, the change from grazing cattle to grazing sheep altered the existing permit to such an extent that allowing the change constituted a major state action. Thus, MEPA was triggered by DSL’s awareness of the change from grazing cattle to grazing sheep adjacent to bighorn range. See Andrus, 442 U.S. at 363 n.21, 99 S.Ct. at 2344 n.21. Since the DSL failed to engage in a significant impacts analysis, the matter must be remanded for preparation of an EIS. See Sierra Club v. U.S. Forest Service (9th Cir. 1988), 843 F.2d 1190. In Sierra Club, the Forest Service decided not to prepare an EIS with regard to certain timber sales. The plaintiffs challenged that decision because the environmental assessment did not adequately discuss the relevant criteria in the federal regulations. The Ninth Circuit held that the standard for determining “if an action will significantly affect the quality of the human environment is whether the plaintiff has alleged facts which, if true, show that the ... [action (or inaction)] may significantly degrade some human environmental factor.” Sierra Club, 843 F.2d at 1193; quoting Foundation for North Am. Wild Sheep v. U.S. Dep’t of Agriculture (9th Cir. 1982), 681 F.2d 1172, 1177-78. “A determination that significant effects on the human environment will in fact occur is not essential. ... If substantial questions are raised whether a project may have a significant effect upon the environment, an EIS must be prepared.” Id.; quoting Foundation, 681 F.2d at 1178. The Sierra Club court concluded:

Because substantial questions have been raised concerning the potential adverse effects of harvesting these timber sales, an EIS should have been prepared.... The Forest Service’s decision not to do so was unreasonable.... It failed to account for factors necessary to determine whether significant impacts would occur. Therefore its decision was not “fully informed and well-considered.” [Friends of] Endangered Species [v. Jantzen], [(9th Cir. 1985)] 760 F.2d [976], 986 (quoting Vermont Yankee, [Nuclear Power v. Natural Resources Defense Council, Inc. (U.S. Dist. 1978)], 435 U.S. [519], at 558, 98 S.Ct. [1197], 1219). [Other citations omitted.]

Sierra Club, 843 F.2d at 1195. Although the standard is now arbitrary and capricious rather than “reasonable,” the Ninth Circuit’s remedy of remanding for an EIS is still appropriate. The DSL’s own records evidence the potential harm in changing from cattle to sheep in this particular area. Based on this record of conflicting evidence, substantial questions remain and the DSL must comply with the requirements of MEPA and complete an EIS. It must look further at the grazing license and grazing practices to determine the significance of allowing a change from grazing cattle to grazing sheep. Implicit in the requirement that an agency take a hard look at the environmental consequences of its actions is the obligation to make an adequate compilation of relevant information, to analyze it reasonably and, perhaps most importantly, not to ignore “pertinent data.” See Sierra Club v. United States Army Corps of Engineers (2nd Cir. 1982), 701 F.2d 1011, 1029. The DSL did not follow MEPA’s implicit mandate that it take a hard look by completing a significant impacts analysis: The District Court therefore erred in granting summary judgment to Respondents.

It is particularly important that the DSL establish a full and complete record on review. The United States Supreme Court has addressed an agency’s failure to create an adequate record:

If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.

Florida Power and Light Co. v. Lorion (1985), 470 U.S. 729, 744, 105 S.Ct. 1598, 1607, 84 L.Ed.2d 643, 656. Along these lines, the Hodel court concluded that:

[w]ithout an administrative record, courts are left to rationalize the agency’s decision — a form of review which abandons standards in favor of predilections. “This kind of speculation regarding the basis for an agency’s decision not to prepare an EIS is precisely what NEPA was intended to prevent.”

Hodel, 848 F.2d at 1093; quoting LaFlamme v. F.E.R.C. (9th Cir. 1988), 842 F.2d 1063, 1070. Due to the lack of a proper significant impacts analysis, the record does not uphold the DSL’s decision. The record essentially consists only of the revised EA and Decision Notice. This put the District Court in the untenable position of basing its review on a meager administrative record.

Madden suggests that if we adopt the Sportsmen’s argument we will be imposing a requirement that a full EIS be completed “on every renewal and assignment of every license and lease of state land.” We are not here imposing such a requirement with regard to lease renewals or assignments. Under the facts of this case, it is not the lease renewal or assignment that triggers MEPA analysis. Rather, it is the DLS’s awareness of Madden’s change of use from grazing cattle to grazing sheep adjacent to bighorn range in the face of evidence that such a change in use may adversely affect the bighorn. An EIS is required only when there is a substantial question as to whether the change of use may have a significant effect upon the human environment. We conclude that once the DSL became aware of this change in use, the DSL’s allowing the change of use constituted a major governmental action and its duty to fully comply with MEPA was triggered. In the instant case, the DSL failed to satisfy its MEPA duties when it rendered a decision without adequately considering the significant impacts of its actions in accordance with § 75-1-201, MCA. MEPA does not require that agency actions not impact the human environment. MEPA does require that agencies assess their actions so as to make an informed decision. A corollary to an informed decision is public education and input.

Even after fully complying with MEPA procedure, an agency may determine that an action will result in significant impacts and then, nonetheless, approve the action under MEPA. The agency, however, is then accountable for its decision.

An “agency must supply a convincing statement of reasons why potential effects are insignificant.” The Steamboaters v. F.E.R.C. [9th Cir. 1985], 759 F.2d [1382,] 1393. While it is true that mitigation measures can justify an agency’s conclusions that a project’s impact is not significant, an agency must explain exactly how the measures will mitigate the project’s impact. Id. at 1394; Jones v. Gordon, [(9th Cir. 1986)], 792 F.2d [821], 829.

LaFlamme, 852 F.2d at 399.

In the instant case, the DSL did not engage in “significance of impacts” analysis. Accordingly it was unable to take the requisite hard look and it is impossible for this Court or the District Court to determine whether the adverse impacts have been compensated for or not.

Finally, the goal of maximizing income derived from school trust lands does not exempt the DSL or any agency from complying with applicable environmental laws. The DSL strenuously argues that its ability to modify the leases at issue is limited by its state land trust duty to maximize the income derived from trust lands. In addition, the Seeley Lake and Brady School Districts and the Montana Stockgrowers, Woolgrowers, and Bitterroot Stockgrowers Associations, filing as amicus curiae in support of the DSL, conclude that the state’s trust obligation to secure the greatest dollar value for school trust lands is predominant. School trust lands need not be used exclusively for grazing or agriculture. See Title 77, Chapter 1, Part 4, § 77-6-209, and Title 77, Chapter 6, MCA. For instance, the Sportsmen suggest that there is precedent for the DSL and the Department of Fish, Wildlife, and Parks to agree to a plan whereby a portion of Sula bighorn hunting permit fees could go to the school trust. This would generate funds for the school trust and, assuming such hunting is ecologically sound, protect the bighorn herd. Finally, we note that neither the DSL nor the amicus curiae suggest why or how domestic sheep grazing generates more money for the school trust than cattle grazing. The Sportsmen and the record (sparse as it is) suggest that alternative uses to grazing may increase the value earned for the trust. Income is “a” consideration — not “the” consideration regarding school trust lands: Maximizing income is not paramount to the exclusion of wildlife or environmental considerations in the MEPA context. Sections 75-1-102, -103, and -105, MCA.

[i]t is the continuing responsibility of the state of Montana to use all practicable means consistent with other essential considerations of state policy to improve and coordinate state plans, functions, programs, and resources to the end that the state may: (a) fulfill the responsibilities of each generation as trustee of the environment for succeeding generations.

Section 75-1-103(2), MCA (emphasis added). The DSL, and not this Court, is in the best position to consider alternatives as part of its MEPA analysis.

MEPA requires that an agency be informed when it balances preservation against utilization of our natural resources and trust lands. The DSL may not, as here, reach a decision without first engaging in the requisite significant impacts analysis. The record in its present form, convinces us that the DSL by not first conducting an appropriate analysis under MEPA, arbitrarily, capriciously and unlawfully allowed Madden to change use from grazing cattle to grazing sheep adjacent to bighorn range. Therefore, we conclude that the DSL must complete an EIS to comprehensively review the environmental impacts resulting from this change of use adjacent to bighorn range.

Because of our holding in this issue, we need not consider issues two and three.

Reversed and remanded to the District Court for an order requiring preparation of an EIS.

JUSTICES HUNT, NELSON and TRIEWEILER concur.

JUSTICE GRAY,

dissenting.

I must respectfully dissent from most of the Corut’s opinion and from the result it reaches. My main problems with the opinion are its overbreadth and its lack of clarity concerning which MEPA statutes or regulations the Court determines DSL actually violated here. If the Court made even a passing analysis of Montana law in resolving this case in favor of appellants, I undoubtedly would join in the opinion; I cannot do so as the opinion is written.

I agree that the standard of review of the MEPA decision at issue in this case is the “unlawful or arbitrary and capricious” standard set forth in North Fork. Unfortunately, the Court does not clearly apply that standard in resolving this case.

I also agree that, in Kadillak, we stated that it was appropriate to look to federal interpretations of NEPAin interpreting MEPA. However, nothing in Kadillak or any other source authorizes this Court to dispense altogether with applying Montana law and merely apply broad statements from selected federal cases to the factual scenario before us without any discussion of how and why those statements are applicable here. The result of this approach by the Court is a lack of analysis regarding which particular provisions of MEPA and the controlling regulations have been violated and a total lack of guidance to state agencies attempting to comply with the critically important MEPA and to state courts attempting to ensure such compliance. I cannot agree.

The lack of specificity in the opinion makes it difficult to craft an appropriate dissent. Thus, I offer only the following concerns and questions about the authorities on which the Court relies in resolving this case.

The Court’s primary thesis about MEPA appears early in — and permeates — its opinion. According to the Court, the guiding premise of MEPA is that “[generally, state action significantly affecting the quality of the human environment requires MEPA analysis.” Section 75-1-201(1)(b)(iii), MCA, is cited for this proposition. The problem with the Court’s approach is that “generalizing” about this pivotal statute is both misleading and erroneous.

The statute actually says that, “to the fullest extent possible!,] ... all agencies of the state ... shall include in every recommendation or report on proposals for projects, legislation, and other major actions of state government significantly affecting the quality of the human environment” a detailed statement regarding environmental impacts and effects. Section 75-1-201(1)(b)(iii), MCA. The Court does not analyze the meaning of “to the fullest extent possible.” More importantly, nowhere does the Court establish that any “recommendation or report on a proposal” for a major action of state government is at issue in this case.

Most important of all, the Court never bothers to apply the definition of “action,” vis-a-vis § 75-1-201(1)(b)(iii), MCA, which is found in § 26.2.642(1), ARM, to DSL’s “allowing” of a change of use after a grazing permit is in place and the change of use has occurred. An “action,” insofar as it is relevant here, is “a project or activity involving the issuance of a lease, permit, license, certificate, or other entitlement for use or permission to act” by the agency. Section 26.2.642(1), ARM. As the Court concedes, no activity involving the issuance of a lease is at issue here. Thus, this straightforward definition simply does not support the Court’s conclusion that “if a changed use or condition ... significantly affects the quality of the human environment, then the state’s allowing that change in use or change in condition is a major state action pursuant to MEPA, triggering the MEPAreview process.” Nor does the Court provide any other support — under MEPA or otherwise — for this proposition.

Instead, the Court cites to one United States Supreme Court case and one Ninth Circuit Court of Appeals case which it apparently believes support its conclusion. Neither case does so even through the broad language quoted, much less through an actual application of those cases to the facts presently before us.

It is true that in Andrus v. Sierra Club (1979), 442 U.S. 347, 99 S.Ct. 2335, 60 L.Ed.2d 943, the United States Supreme Court observed that major federal actions include the “expansion or revision of ongoing programs;” it did so in the context of resolving the issue of whether appropriation requests constitute “proposals for major federal actions” under NEPA. It concluded that appropriation requests were requests to fund action already proposed, rather than proposals for major government actions to be taken in the future. Sierra Club, 442 U.S. at 361-63, 99 S.Ct. at 2343. Sierra Club has no direct applicability here; it leaves unanswered, as does this Court, the specific question of what constitutes an expansion or revision of an ongoing program. Sierra Club does point out, however, that the “proposal” language in NEPA — like that in MEPA — is intended to have some meaning, a meaning never addressed by this Court in the present case. Indeed, this Court’s purpose in quoting from Sierra Club — other than to insert broad and inapposite language — remains a mystery.

Similarly, the Court’s reliance on Upper Snake River Chapter of Trout Unlimited v. Hodel (9th Cir. 1990), 921 F.2d 232, is misplaced. While that opinion does state that “if an ongoing project undergoes changes which themselves amount to ‘major Federal actions,’ the operating agency must prepare an EIS,” the Ninth Circuit was referring to the definition of “major Federal action” contained in NEPA. Whatever the definition under NEPA, the case before us is governed initially by the specific definition of “action” contained in § 26.2.642, ARM. Even accepting the Ninth Circuit’s broad language, however, this Court does not apply the quoted language to the facts before us. It does not specify how, in this case, a change in an ongoing project exists, much less how such a change amounts to state action as “action” is defined in § 26.2.642(1), ARM, or to “major” state actions as the term is used in § 75-1-201(1)(b)(iii), MCA.

Moreover, I note that in Upper Snake River, the Ninth Circuit concluded, applying the NEPA definitions, that the Bureau of Reclamation’s reduction of the flow of water from the Palisades Dam on the South Fork of the Snake River in Idaho was not a major federal action. Upper Snake River, 921 F.2d at 234. It reached that conclusion in advance of any consideration of whether the action at issue had a significant effect on the environment and, indeed, declined to reach the “significant effect” issue “because the reduction does not constitute a ‘major Federal action’ within the meaning of the statute.” Upper Snake River, 921 F.2d at 234. Thus, to the extent Upper Snake River has any application here, it clarifies that a court must first determine whether the action at issue comes within the controlling definitions of “major action;” only when that question is answered in the affirmative may the court proceed to questions involving the significance of any impacts or effects from the action at issue. In the case before us, the Court essentially turns the questions around and becomes mired in the “significance” questions prior to having applied the controlling definitions to determine whether the “action” at issue triggers MEPA analysis at all.

Finally, with regard to Upper Snake River, I reiterate that the Ninth Circuit concluded that the Bureau of Reclamation’s substantial reduction in water flow from the Palisades Dam did not constitute a major federal action under NEPA. How, then, even assuming identical controlling definitions, can DSL’s “nonaction” in this case constitute a major action of state government? The Court does not explain.

The Court notes its agreement with DSL’s argument that, if an agency does not have an affirmative duty to act, the failure to act does not trigger NEPA or, presumably, MEPA. It then quotes from Sierra Club v. Hodel (10th Cir. 1988), 848 F.2d 1068, for the proposition that “if an agency’s duty to avoid environmental harm is mandatory, then the agency’s inaction constitutes an action for NEPA purposes.” The Court does not explain how the case relates to the situation before us and it is my view that the case is, like those referenced above, inapplicable here.

In Sierra Club, the agency’s mandatory environmental duty did not spring from NEPA itself. There, the Tenth Circuit determined that the Secretary’s nondegradation duty toward wilderness study areas was mandatory under the Federal Land Policy Management Act of 1976. Sierra Club, 848 F.2d at 1075. In addition, the court determined that, even if the Secretary’s activity amounted to “nonaction” under the language of NEPA § 102(2)(c), requiring an EIS in advance of “major Federal actions,” a Council on Environmental Quality (CEQ) regulation specifically made the Secretary’s failure to act a “major federal action” for NEPA purposes. Sierra Club, 848 F.2d at 1091.

No regulation corresponding to the CEQ regulation at issue in Sierra Club — which made the “nonaction” a major federal action triggering NEPA — is involved in this case. Thus, I cannot see how Sierra Club has any application here or how it supports in any way the Court’s conclusion that “[w]hen the DSL is made aware of changes in the existing conditions or uses relating to a lease or permit, and those changes have the potential to significantly affect the quality of the human environment, then the DSL must, pursuant to MEPA, evaluate those changes for significant impacts.”

Under the Court’s decision in this case, what are state agencies or district courts to make of the clear thrust of the regulations implementing MEPA which focus on MEPA being triggered for “proposed actions”? "What, for example, is the meaning of § 26.2.641, ARM, captioned Policy Statement Concerning MEPA Rules, which states that in order to fulfill the statutorily-stated purpose of MEPA, agencies must conform to the rules at §§ 26.2.642 et seq., ARM, “prior to reaching a final decision on proposed actions covered by MEPA”? Or the definition of an EA at § 26.2.642(9), ARM, as an analysis of a “proposed action to determine whether an EIS is required” or to serve one of the other purposes described in § 26.2.643(2), ARM? Or the general requirements of the environmental review process set forth in § 26.2.643, ARM, which repeatedly specify “proposed action”? Or, critically, the requirement in § 26.2.644, ARM, setting forth the criteria to be used in determining “the significance of impacts associated with a proposed action.” How and when does a nonaction or a nondecision after a change of use in a state grazing permit come within the “proposed action” language which permeates the controlling regulations and the legislative policy statement in § 75-1-201(1)(b)(iii), MCA? The Court never explains, and I submit that the Court’s decision today provides state agencies with no basis for evaluating when, under MEPA and the controlling regulations, MEPA will be triggered.

Finally, I feel compelled to comment on the ease with which the Court concludes not only that MEPA was triggered, but also that an EIS must be prepared. Again, the Court relies for its conclusion on broad statements from United States Courts of Appeal decisions holding that an EIS is required whenever a person alleges facts which, if true, show that the action/inaction “may” significantly degrade some human environmental factor. Again, no Montana statutes or regulations are cited or applied. Specifically, for example, the Court does not explain how the cases upon which it relies square with the clear language in § 75-1-201, MCA, that a detailed environmental statement is required for proposals for major state actions “significantly affecting the quality of the human environment.” Nor does it address in any way the criteria set forth in § 26.2.643, ARM, for when a state agency must prepare an EIS, in particular the mandate that an EIS is required when “the proposed action is a major action of state government significantly affecting the quality of the human environment.” Section 26.2.643(1)(b), ARM. How does the “significantly affecting” language in the Montana statute and regulation support the Court’s conclusion that an EIS is required whenever an action (or, according to the Court, inaction) may significantly affect the environment? Are state agencies to totally disregard MEPA statutes and regulations hereafter? The Court does not explain.

I close by restating here what I stated at the outset: the troubling aspects of the Court’s opinion in this case are its lack of analysis of Montana statutes and regulations and the resulting lack of guidance for all concerned in these important matters involving our cherished environment. If a case can be made under MEPA for the Court’s decision here, the Court has not made it. For that reason, I cannot join in the Court’s opinion. I dissent.

CHIEF JUSTICE TURNAGE joins in the foregoing dissent of JUSTICE GRAY.

      . The real issue here is not whether the DSL can modify a lease but rather can the DSL, without conducting a significant impacts analysis, allow a lessee to unilaterally change the use from cattle to sheep adjacent to bighorn range.


author: JUSTICE NELSON

text:
    KATHRYN PIKE, Plaintiff/Appellant, v. BURLINGTON NORTHERN RAILROAD COMPANY, Defendant/Respondent.
    No. 95-235.
    Submitted on Briefs August 24, 1995.
    Decided September 29, 1995.
    52 St.Rep. 1005.
    903 P.2d 1352.
    273 Mont. 390.

      For Appellant: Elizabeth A. Best, Best Law Offices, Great Falls.
    For Respondent: Jeff Hedger, Kroschel & Yerger, Billings.
   JUSTICE NELSON

delivered the Opinion of the Corut.

Kathryn Pike (Pike) appeals from the March 9, 1995 order of the Twelfth Judicial District Court, Hill County, granting Burlington Northern Railroad’s (BN) motion under Rule 12(b)(1), M.R.Civ.P., and dismissing her complaint for lack of subject matter jurisdiction. We reverse and remand for further proceedings consistent with this opinion.

The sole issue to be decided in this appeal is whether Pike’s state law and federal claims of sex discrimination are preempted by the Railway Labor Act (RLA), 45 U.S.C. § 151, et. seq.?

Background

Pike was employed as a carman at BN’s diesel shop from May 1977, until August 10, 1992. The Brotherhood Railway Carmen’s Division, Transportation Communications International Union (the Union) and BN were parties to a collective bargaining agreement which was in force at the time of the events alleged in Pike’s complaint. She was a member of the Union.

Pike claims her employment was wrongfully terminated on August 10, 1992. She alleges that when BN closed its Havre diesel shop, the five carmen who were employed were given an option to transfer to other locations or to exercise their seniority in the Montana district. Pike, apparently the only female carman, contends she had been advised she would not be placed in a carman position because she was not qualified to operate an all terrain vehicle. Pike alleges that this reason was merely a pretext and that she was actually denied her position and terminated because of her gender in violation of the provisions of the Montana Human Rights Act, § 49-1-102, MCA, et. seq., and Title VII, 42 U.S.C. §§ 2000(e), et. seq.

In dismissing her complaint, the District Court ruled that Pike’s dispute with BN fit within the definition of a “minor” dispute under the RLA, 45 U.S.C. § 151, et. seq. Relying principally on Consolidated Rail Corp. v. Railway Labor Executives’ Ass’n (1989), 491 U.S. 299, 109 S.Ct. 2477, 105 L.Ed.2d 250, the District Court determined that Pike’s was a “minor” dispute because it did not seek to create contractual rights but to enforce them; it concerned the interpretation or application of a collective bargaining agreement; and it was inextricably intertwined with the grievance machinery of the collective bargaining agreement or the RLA.

Having made that determination, the court, again relying on Conrail, concluded Pike’s discrimination claims were subject to the exclusive jurisdiction of the National Railroad Adjustment Board (NRAB) and the court’s subject matter jurisdiction over her claims was preempted by the RLA. It is from this decision that Pike appeals.

Standard of Review

The District Court concluded, as a matter of law, it did not have subject matter jurisdiction over Pike’s sex discrimination claims. Our review of the legal conclusions of a trial court is plenary; we simply determine whether the court’s interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. In this case, we hold that the District Court erred in its legal conclusion that it did not have subject matter jurisdiction over Pike’s state law and federal sex discrimination claims.

Issue

Did the District Court err in determining that Pike’s state law and federal claims of sex discrimination are preempted by RLA, 45 U.S.C. § 151, et. seq.?

Discussion

BN argues that the District Court correctly categorized Pike’s discrimination claims as falling within the definition of a “minor” dispute, and thus, subject to the mandatory and exclusive arbitration procedures of the RLA. While BN does not dispute Pike’s right to make a substantive statutory discrimination claim under Title VII, it argues that her claim is, nevertheless, a “minor” dispute over which the court has no subject matter jurisdiction. Moreover, BN maintains that Pike is substantively preempted from pursuing her state law claim even in arbitration because those claims are “inextricably intertwined with the express and implied provisions of the collective bargaining agreement ... [and] ... [s]he must pursue the [state law] claim under the substantive provisions of the [collective bargaining agreement] and the RLA or Title VII.”

Pike, on the other hand, maintains the RLA does not preempt claims for unlawful discrimination, and because her right to be free from unlawful discrimination derives from statute, that right cannot be bargained away as part of a collective bargaining agreement. Pike also argues that, under the District Court’s analysis, an unlawful discrimination claim cannot be classified as either a “minor” or a “major” dispute, in any event, and that since her claims derive from statute, as opposed to contract, her state law claim is not preempted by the RLA.

Since the District Court determined that Pike’s claims were preempted by the RLA, it is instructive to commence our resolution of the issue in dispute with a brief discussion of that Act and the interpretative case law. Congress’ purpose in enacting the RLA was to promote stability in labor-management relations by providing a comprehensive framework for resolving labor disputes. Hawaiian Airlines, Inc., v. Norris (1994) _ U.S. _, 114 S.Ct. 2239, 2243, 129 L.Ed.2d 203, _ (citing Atchison, T. & S.F.R. Co. v. Buell (1987), 480 U.S. 557, 562, 107 S.Ct. 1410, 1414, 94 L.Ed.2d 563, 571 and 45 U.S.C. § 151a.) There are two classes of disputes distinguished in the RLA. The first class of disputes are deemed “major” disputes and arise “out of the formation or change of collective bargaining agreements covering rates of pay, rules, or working conditions.” Atchison, 480 U.S. at 562-63, 107 S.Ct. at 14 14-15 (quoting Detroit & T.S.L.R. Co. v. Transportation Union (1969), 396 U.S. 142, 145 n. 5, 90 S.Ct. 294, 296 n.5, 24 L.Ed.2d 325, 329 n.5). The second class of disputes, “minor” disputes, are those “growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions.” Atchison, 480 U.S. at 563, 107 S.Ct. at 1414. “Major” disputes seek to create contractual rights, while “minor” disputes seek to enforce them. Conrail, 491 U.S. at 302, 109 S.Ct. at 2479 (citing Elgin, J. & E.R. Co. v. Burley (1945), 325 U.S. 711, 723, 65 S.Ct. 1282, 1289-90, 89 L.Ed. 1886, 1894).

A “minor” dispute, which is how the District Court characterized Pike’s claims, must be dealt with through the railroad’s internal dispute resolution processes. If not settled there, then it must be settled through compulsory and binding arbitration under the exclusive jurisdiction of NRAB or before an adjustment board established by the employer and the union representing the employee. Conrail, 491 U.S. at 303-304, 109 S.Ct. at 2480-81. Judicial review of the arbitration decision is extremely narrow. Union Pacific R. Co. v. Sheehan (1978), 439 U.S. 89, 91, 99 S.Ct. 399, 401, 58 L.Ed.2d 354, 357.

Accordingly, if Pike’s sex discrimination claims are properly categorized as a “minor” dispute, and thus subject to the mandatory arbitration provisions of the RLA, then the District Court was correct in its conclusion that it did not have subject matter jurisdiction over her lawsuit. However, our review of federal case authority, and most recently, the United States Supreme Court’s decision in Hawaiian Airlines, leads us to conclude Pike’s sex discrimination claims are not properly classified as either a “minor” or “major” dispute which are preempted by the RLA. Rather, we agree with Pike that her state law and federal rights to be free from unlawful sex discrimination are independent of the collective bargaining agreement, derive from statute, and cannot be bargained away as part of a collective bargaining agreement. Thus, her claims are not preempted by the RLA.

Pike relies primarily on Alexander v. Gardner-Denver Co. (1974), 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147, and its progeny, although that case did not arise under the RLA. In Gardner-Denver, the petitioner (Alexander), alleging that he was unlawfully discharged because of his race, filed a grievance under the collective bargaining agreement to which his employer and his union were parties. Following adverse rulings in his arbitration hearing and before the EEOC, Alexander filed a complaint in federal district court alleging race discrimination in violation of Title VII of the Civil Rights Act of 1964. Gardner-Denver, 415 U.S. at 38-43, 94 S.Ct. at 1015-1017.

In reversing lower court rulings that Alexander was bound by the arbitration decision and had no right to sue under Title VII, the United States Supreme Court held that an employee’s right to sue under a Title VII discrimination claim is not foreclosed by prior submission of the claim to binding arbitration in accordance with a collective bargaining agreement. The Court recognized that claims of unlawful employment discrimination under Title VII could be adjudicated in different forums. Gardner-Denver, 415 U.S. at 47, 94 S.Ct. at 1019. In the non-judicial forum, an arbitrator has the authority to resolve questions of contractual rights under the collective bargaining agreement while, in the court system, the judiciary reviews statutory rights independent of that agreement. Gardner-Denver, 415 U.S. at 49, 94 S.Ct. at 1011. “The distinctly separate nature of these contractual and statutory rights is not vitiated merely because both were violated as a result of the same factual occurrence.” Gardner-Denver, 415 U.S. at 50, 94 S.Ct. at 1020. “Both rights have legally independent origins and are equally available to the aggrieved employee.” Gardner-Denver, 415 U.S. at 52, 94 S.Ct. at 1021.

The Court emphasized that, notwithstanding a collective bargaining agreement clause against discrimination, an employee’s rights under Title VII are not part of the collective bargaining process and cannot be prospectively waived. Gardner-Denver, 415 U.S. at 52, 94 S.Ct. at 1021.

Title VII’s strictures are absolute and represent a congressional command that each employee be free from discriminatory practices. Of necessity, the rights conferred can form no part of the collective-bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title VII. In these circumstances, an employee’s rights under Title VII are not susceptible of prospective waiver. [Citation omitted.]

Gardner-Denver, 415 U.S. at 51, 52, 94 S.Ct. at 1021.

The arbitrator’s task is to effect the intent of the parties under the collective bargaining agreement (primarily in accordance with “the law of the shop, not the law of the land,” Gardner-Denver, 415 U.S. at 57, 94 S.Ct. at 1023), and he has authority to resolve only questions of contractual rights, rather than the requirements of legislation. Gardner-Denver, 415 U.S. at 53-54, 56-57, 94 S.Ct. at 1022-1023, 1023-1024. On the other hand, an employee’s claim under Title VII is a statutory right independent of the arbitration process making arbitration a “comparatively inappropriate” forum for the resolution of such claims. Gardner-Denver, 415 U.S. at 54, 56, 94 S.Ct. at 1023. “[T]he resolution of statutory or constitutional issues is a primary responsibility of courts, and judicial construction has proved especially necessary with respect to Title VII, whose broad language frequently can be given meaning only by reference to public law concepts.” Gardner-Denver, 415 U.S. at 57, 94 S.Ct. at 1024.

Similarly, in Barrentine v. Arkansas-Best Freight Systems, Inc. (1981), 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (citing Gardner-Denver), the Supreme Court held that petitioner’s wage claims under FLSA are not barred by the prior submission of their grievance to contractual dispute resolution procedures — arbitration being designed to protect contractual rights as opposed to statutory rights. Barrentine, 450 U.S. at 737, 742-45, 101 S.Ct. at 1443, 1446-47. Again, the Supreme Court noted that an arbitrator, unlike a federal judge, has no institutional obligation to enforce federal legislative policy. Barrentine, 450 U.S. at 744-45, 101 S.Ct. at 1446-47. See also, McDonald v. City of West Branch, Michigan (1984), 466 U.S. 284, 104 S.Ct. 1799, 80 L.Ed.2d 302 and Wilko v. Swan (1953), 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (applying the same logic in the context of other federal statutes).

In Atchison, a case decided in 1987, the Supreme Court again determined that a statutory claim was not subject to a collective bargaining agreement’s binding arbitration clause — this time, in a case involving the RLA. In that case, the Court held that the fact an injury was caused by conduct that may have been subject to arbitration under the RLA does not deprive a railroad employee of his right to bring a FELA action for damages. Atchison, 480 U.S. at 564-65, 107 S.Ct. at 1415-16. Citing McDonald, Barrentine, and Gardner-Denver, the Court reiterated that, while the RLA “minor” disputes remedy may be exclusive in some circumstances, that is not the case where the employee’s claim is based on a statute that is designed to guarantee minimum substantive rights. Atchison, 480 U.S. at 565, 107 S.Ct. at 1415-16. Title VII is such a statute, having been enacted by Congress “to assure equality of employment opportunities by eliminating those practices and devices that discriminate on the basis of race, color, religion, sex, or national origin.” Gardner-Denver, 415 U.S. at 44, 94 S.Ct. at 1017.

Notwithstanding the line of authority of the above cases, BN argues that although the RLA does not substantively preempt Title VII, under federal law Pike’s Title VII claim must, nevertheless, be pursued in the RLA arbitration forum. BN relies on Gilmer v. Interstate/Johnson Lane Corp. (1991), 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26, and cases incorporating its rationale which, at first blush, appear to evidence a decided shift from the Court’s reasoning in Gardner-Denver.

Gilmer involved an age discrimination claim which, under Gilmer’s NYSE securities representative registration agreement, was subject to compulsory arbitration. Gilmer, 500 U.S. at 21, 111 S.Ct. at 1649. After first filing his claim with the EEOC, Gilmer sued in federal district court alleging a violation of the Age Discrimination in Employment Act (ADEA). Citing Gardner-Denver, the trial court denied the employer’s demand for compulsory arbitration. Gilmer’s agreement, however, was not limited to contract-based claims pursuant to a collective bargaining agreement, but also mandated arbitration for statutory claims. Gilmer, 500 U.S. at 35, 111 S.Ct. at 1657.

The Court held that Gilmer’s ADEA claim was subject to compulsory arbitration pursuant to the Federal Arbitration Act (FAA). Gilmer, 500 U.S. at 24-29. In distinguishing the Gardner-Denver line of cases, however, the Gilmer Court noted several important distinctions which are germane to our resolution of the issue in the instant case. First, the Court noted that the Gardner-Denver cases did not involve the issue of the enforceability of an agreement to arbitrate statutory claims, but rather, involved the “quite different” issue of whether arbitration of contract-based claims precluded subsequent judicial review when the employees had not agreed to arbitration of their statutory claims and the arbitrators were not authorized to resolve those claims. Gilmer, 500 U.S. at 35, 111 S.Ct. at 1657.

Here, while the BN-Union collective bargaining agreement is not a part of the record on appeal, neither party has suggested in their briefs that Pike’s statutory discrimination claims were specifically made subject to any agreement to arbitrate, and, it is undisputed that Pike has not, in fact, arbitrated her claims.

Second, the Gilmer Court stated that because the Gardner-Denver cases arose in the context of collective bargaining agreements, the claimants were represented by their unions in the arbitration proceedings and there was, therefore, an important concern over the “tension between collective representation and individual rights,” a concern not applicable in Gilmer. Gilmer, 500 U.S. at 35, 111 S.Ct. at 1657.

Since Pike’s dispute also arises in the context of a collective bargaining agreement, the important concern distinguishing the Gardner-Denver cases from Gilmer is present here. Even if Pike is entitled to be represented by counsel of her choice at the arbitration hearing, the arbitrator’s source of authority is the collective bargaining agreement, and his task is to effectuate the intent of the parties (BN and the Union) by interpreting the agreement in accordance with the law of the shop and the various needs of the employer and the union, rather than in accordance with the law of the land. Gardner-Denver, 415 U.S. at 53, 56-57, 94 S.Ct. at 1022, 1023-1024. Accordingly, the tension between contractual and statutory objectives remains. Gardner-Denver, 415 U.S. at 57, 94 S.Ct. at 1024.

Third, the Court noted that contrary to Gilmer, the Gardner-Denver line of cases was not decided under the FAA which, as the Court noted, reflects a “liberal federal policy favoring arbitration agreements.” Gilmer, 500 U.S. at 25, 111 S.Ct. at 1651 (citing Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth, Inc. (1985), 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444, and Moses H. Cone Memorial Hospital v. Mercury Construction Corp. (1983), 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765.) Similarly here, the FAA is not applicable to Pike’s claim.

While Gilmer may evidence a narrowing of the Supreme Court’s rationale as expressed in the Gardner-Denver cases, the Gilmer Court did not overrule the latter authority, but rather, carefully distinguished cases involving agreements to arbitrate statutory rights subject to the FAA from cases arising in the context of a collective bargaining agreement which neither involve an agreement to arbitrate statutory rights nor the application of the FAA. Inasmuch as Pike’s case falls into the latter category rather than the former, we conclude that Gardner-Denver and its progeny control. We further conclude that the RLA does not mandate arbitration of Pike’s Title VII claims.

Our determination in that regard is further reinforced by the Supreme Court’s recent decision in Hawaiian Airlines, a case which squarely addressed the scope of federal preemption under the RLA. That state court case involved an employee’s claims which were based upon federal and state statutes, but which the employer and trial court characterized as a “minor” dispute under the RLA.

In that case, Norris, an aircraft mechanic for Hawaiian Airlines (HAL), was terminated after refusing to sign a maintenance record, as required by his collective bargaining agreement, for a plane he considered unsafe and after reporting his concerns to the Federal Aviation Administration. His separate state court suits under the Federal Aviation Act and state whistleblower protection law were dismissed as being preempted by the RLA’s mandatory arbitration mechanism for “minor” disputes. Hawaiian Airlines, 114 S.Ct. at 2241-43. On granting certiorari, the Supreme Court affirmed the Hawaiian Supreme Court’s reversal of the trial court’s decision, holding that the RLA did not preempt Norris’ state law causes of action. Hawaiian Airlines, 114 S.Ct. at 2251.

Citing Conrail and Atchison, among other cases, the Court noted that the “minor” disputes contemplated by the RLA are those grounded in the collective bargaining agreement, i.e., those involving the interpretation or application of existing labor agreements. Hawaiian Airlines, _ U.S. at _, _, 114 S.Ct. at 2245, 2247. Furthermore, the RLA’s mechanism for resolving “minor” disputes through arbitration does not preempt causes of action to enforce rights and obligations that exist independently of the collective bargaining agreement. Hawaiian Airlines, _ U.S. at _, _, 114 S.Ct. at 2246-47 (citing Atchison, 480 U.S. 557, 107 S.Ct. 1410, 94 L.Ed.2d 563 and Barrentine, 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641). Substantive protections provided by state law, independent of whatever labor agreement might govern, are not preempted by the RLA. Hawaiian Airlines, _ U.S. at _, 114 S.Ct. at 2246 (citing Missouri Pacific R. Co. v. Norwood (1931), 283 U.S. 249, 51 S.Ct. 458, 75 L.Ed. 1010).

Noting that the preemption standard leading to Atchison was virtually identical to that employed in cases involving § 301 of the Labor Management Relations Act (LMRA), the Court then went on to adopt the framework used in Lingle v. Norge Division of Magic Chef, Inc. (1988), 486 U.S. 399, 108 S.Ct. 1877, 100 L.Ed.2d 410, as being appropriate for addressing preemption under the RLA. Hawaiian Airlines, _ U.S. at _, 114 S.Ct. at 2249. Under Lingle, the question is whether the plaintiff’s state law claims are independent of the collective bargaining agreement. While recognizing that “the state-law analysis might well involve attention to the same factual considerations as the contractual determination ..., the Court disagreed that

such parallelism rendered] the state-law analysis dependent upon the contractual analysis. For while there may be instances in which the National Labor Relations Act pre-empts state law on the basis of the subject matter of the law in question, § 301 pre-emption merely ensures that federal law will be the basis for interpreting collective-bargaining agreements, and says nothing about the substantive rights a State may provide to workers when adjudication of those rights does not depend upon the interpretation of such agreements. In other words, even if dispute resolution pursuant to a collective-bargaining agreement, on the one hand, and state law, on the other, would require addressing precisely the same set of facts, as long as the state-law claim can be resolved without interpreting the agreement itself, the claim is ‘independent’ of the agreement for § 301 purposes”.

Hawaiian Airlines, _ U.S. at _, 114 S.Ct. at 2248-49 (quoting Lingle, 486 U.S. at 408-10.) We have heretofore adopted the Lingle standard in the context of an employee’s wrongful discharge claim based upon allegations of the employer’s sexual harassment and discrimination, and held that her claim was not preempted by the LMRA, although her employment was governed by a collective bargaining agreement. Foster v. Albertsons, Inc. (1992), 254 Mont. 117, 835 P.2d 720.

Similarly, in the instant case, utilizing the test set forth in Lingle, we conclude that Pike’s claim of sexual discrimination is independent of the collective bargaining agreement, and does not require interpretation of that agreement. Rather, whether BN terminated Pike because of her gender and whether the reason which it offered as a basis for that termination was pretextual and in violation of Pike’s substantive rights to be free from sexual discrimination under the Montana Human Rights Act, is purely a factual question, the resolution of which requires only the factual inquiry into BN’s motive for discharging her. Hawaiian Airlines, __ U.S. at __, 114 S.Ct. at 2251.

Accordingly, we hold that Pike’s statutory right to litigate her Title VII sex discrimination claim in court is not foreclosed by the arbitration provisions of the RLA, nor is her state law claim of sex discrimination preempted substantively by that Act. Here, the source of Pike’s right to be free from sexual discrimination is not the collective bargaining agreement. Rather that source is found in federal and state law. It is clear that “minor” disputes are subject to the mandatory dispute resolution provisions of the RLA. However, it is also clear that where the employee’s claim arises independently of the contractual provisions of the collective bargaining agreement and is, instead, grounded in the employee’s independent statutory right under federal and state law to be free from sexual discrimination, then her right to litigate that claim in a judicial forum is not preempted by the RLA. Conrail does not control. Neither that case, nor Elgin, involved preemption analysis and neither involved claims deriving from statutory grounds independent of the collective bargaining agreement. Hawaiian Airlines, _ U.S. at _, _, 114 S.Ct. at 2249-51.

Finally, we note BN’s reliance on various federal circuit court decisions including, among others, Alford v. Dean Witter Reynolds (5th Cir. 1991), 939 F.2d 229; Bender v. A.G. Edwards & Sons, Inc. (11th Cir. 1992), 971 F.2d 698; Hirras v. Nat’l R.R. Passenger Corp. (5th Cir. 1994), 10 F.3d 1142, vacated and remanded (1994), _ U.S. _, 114 S.Ct. 2732, 129 L.Ed.2d 855, on remand (5th Cir. 1995), 39 F.3d 522 (withdrawn on denial of rehearing and reh. en banc), superseding opinion, (5th Cir. 1995), 44 F.3d 278; and Croston v. Burlington Northern Railroad Co. (9th Cir. 1993), 999 F.2d 381. In light of the manner in which the Supreme Court distinguished the Gardner-Denver line of cases in Gilmer and our conclusion that Pike’s case fits within the former rather than the latter line of authority, and in view of the Court’s decision in Hawaiian Airlines, we do not find the cases cited by BN persuasive.

We hold that the District Court erred in determining that Pike’s state law and federal claims of sex discrimination are preempted by RLA, and we reverse and remand for further proceedings consistent with this opinion.

JUSTICES GRAY, HUNT, TRIEWEILER and LEAPHART concur.


text:
    LAURIE SIMPSON DAGEL, Plaintiff and Respondent, v. FARMERS INSURANCE GROUP OF COMPANIES/FARMERS INSURANCE EXCHANGE, Defendant and Appellant.
    No. 94-624.
    Submitted on Briefs June 15, 1995.
    Rehearing Denied November 2, 1995.
    Decided September 29, 1995.
    52 St.Rep. 1023.
    903 P.2d 1359.
    273 Mont. 402.

      For Appellant: Lyman H. Bennett, III, Morrow, Sedivy & Bennett, Bozeman.
    For Respondent: John C. Doubek, Kirk S. Bond, Small, Hatch, Doubek & Pyfer, Helena.
   JUSTICE NELSON

delivered the Opinion of the Court.

The plaintiff, Laurie Simpson Dagel (Dagel), brought an action in the District Court against Farmers Insurance Group of Companies and Farmers Insurance Exchange (Farmers) seeking the benefits of the uninsured motorist provision of the motor vehicle insurance policy issued to her by Farmers. The District Court for the First Judicial District, Lewis and Clark County, granted summary judgment in favor of Dagel. Farmers appeals. We affirm.

We address the following issue on appeal:

Did the District Court err in determining that Dagel was not required to exhaust the policy limits for uninsured motorist coverage of the insurance policy on the vehicle she was operating prior to making a claim for benefits under her own policy’s uninsured motorist provision?

Background Facts

On January 18,1990, Dagel was involved in a two-vehicle accident in Helena, Montana. The car Dagel was driving was struck from behind by another vehicle after Dagel stopped to allow a pedestrian to cross the street. It was later determined that the vehicle that struck Dagel and the vehicle’s driver were uninsured.

Northern Ford, the owner of the car driven by Dagel, was covered by an insurance policy issued by Employer’s Mutual Companies (Mutual). This policy included uninsured motorist coverage with a policy limit of $50,000. Dagel asserted a claim against Mutual under the uninsured motorist provision of Mutual’s policy. Eventually, a settlement was negotiated between Dagel and Mutual in the amount of $30,000; $20,000 less than the available policy limits.

At the time of the accident, Dagel had a motor vehicle insurance policy with Farmers. The policy included uninsured motorist coverage, with a policy limit of $100,000. Dagel asserted a claim against Farmers, seeking the benefits of the uninsured motorist provision.

On February 18, 1994, Farmers filed a motion seeking summary judgment pursuant to Rule 56, M.R.Civ.P. Farmers contended that because Dagel settled for less than the limits for uninsured motorist coverage on the policy issued by Mutual, Dagel could not recover under the uninsured motorist provision of the policy issued by Farmers.

Farmers cited the following language from the uninsured motorist portion of Farmers’ policy to support its claim:

We will pay under this coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements.

Farmers contended that this language prohibited payment of benefits to Dagel under the uninsured motorist provision of the policy issued to Dagel by Farmers because Dagel did not “exhaust” the limits of the uninsured motorist coverage of the Mutual policy.

On March 1, 1994, Dagel filed a cross-motion for summary judgment on the issue of Farmers’ liability under its policy. Oral arguments were heard on June 24, 1994. On September 9, 1994, the District Court issued its Order on Motions for Summary Judgment denying Farmers’ motion and granting Dagel’s cross-motion on the issue of liability.

Farmers subsequently filed a Motion for Clarification regarding the computation of damages and the District Court issued its Order on Motion for Clarification on December 8, 1994. Farmers appeals both orders.

Standard of Review

Our standard in reviewing a grant of summary judgment is the same as that initially utilized by the district court. Youngblood v. American States Ins. Co. (1993), 262 Mont. 391, 394, 866 P.2d 203, 204 (citing McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 892, 894). Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Youngblood, 866 P.2d at 204.

In Montana, the interpretation of an insurance contract is a question of law. Wellcome v. Home Ins. Co. (1993), 257 Mont. 354, 356, 849 P.2d 190, 192 (citing Truck Ins. Exchange v. Waller (1992), 252 Mont. 328, 331, 828 P.2d 1384, 1386). We review district court conclusions of law to determine if the court’s interpretation of the law is correct. Nimmick v. State Farm Mut. Auto. Ins. Co. (1995), 270 Mont. 315, 318, 891 P.2d 1154, 1156 (citing Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603).

Discussion

Did the District Court err in determining that Dagel was not required to exhaust the policy limits for uninsured motorist coverage of the insurance policy on the vehicle she was operating prior to making a claim for benefits under her own policy’s uninsured motorist provision?

Montana’s uninsured motorist statute, § 33-23-201, MCA, bases payment of uninsured motorist benefits on two conditions: (1) the claimant is legally entitled to recover damages from the owner or operator of the uninsured vehicle; and (2) the driver of the vehicle is uninsured. Hubbel v. Western Fire Ins. Co. (1985), 218 Mont. 21, 23, 706 P.2d 111, 112 (citing Oleson v. Farmers Insurance Group (1980), 185 Mont. 164, 166, 605 P.2d 166, 167). The language “legally entitled to recover” means that the insured must have a cause of action against the tort-feasor and must be able to establish fault and the existence of damages. State Farm v. Estate of Braun (1990), 243 Mont. 125, 128, 793 P.2d 253, 254. The basic purpose of the uninsured motorist statute is to provide protection for the automobile insurance policyholder against the risk of inadequate compensation for injuries or death caused by the negligence of financially irresponsible motorists. Hubbel, 706 P.2d at 113 (citing Sullivan v. Doe (1972), 159 Mont. 50, 60, 495 P.2d 193, 198). We have previously stated that this Court does not support provisions placed on uninsured motorist coverage which restrict or thwart available liability coverage that the insured would be entitled to in an accident. Guiberson v. Hartford Cas. Ins. Co. (1985), 217 Mont. 279, 289, 704 P.2d 68, 74.

Farmers admits that if Dagel had exhausted coverage on the Mutual policy, there would be no question that the uninsured motorist coverage provided by the Farmers’ policy would be available to Dagel. Farmers contends that the uninsured motorist coverage under Farmers’ policy was unavailable to Dagel because Dagel settled with Mutual for an amount less than the available liability limits under Mutual’s policy. Dagel did not “exhaust” Mutual’s policy limits as required by Farmers’ policy. We do not address Farmers’ contention that Mutual’s policy is “primary” and Farmers’ policy is “excess,” as we find the interpretation of the exhaustion clause to be the dispositive issue in this case.

Dagel contends that the exhaustion clause in Farmers’ policy is unenforceable here because of the language of the clause itself. The clause provides:

We will pay under this coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements. [Emphasis added.]

Dagel argues that the only possible claim she could have made against a bodily injury liability policy would have been against one held by the driver of the other vehicle.

We find Dagel’s argument persuasive. In this case there was no other bodily injury liability policy in effect that applied to Dagel’s injuries because the driver of the other vehicle was uninsured. In interpreting insurance contracts, the words of the policy are to be understood in their usual meaning; common sense controls. Duensing v. Traveler’s Companies (1993), 257 Mont. 376, 381, 849 P.2d 203, 206 (citing James v. Prudential Ins. Co. (1957), 131 Mont. 473, 477, 312 P.2d 125, 127).

The Farmers’ policy defines an “uninsured motor vehicle” as one which is “not insured by a bodily injury liability bond or policy at the time of the accident.” Accordingly, under Farmers’ own definition, since the vehicle that injured Dagel was uninsured, there was no bodily injury liability bond or policy applicable to Dagel’s injuries at the time of the accident. Exclusions and words of limitation in a policy must be strictly construed against the insurer. Leibrand v. Nat. Farmers Union (1995), [272 Mont. 1], 898 P.2d 1220, 1223, (citing Bauer Ranch, Inc. v. Mountain West Farm Bureau (1985), 215 Mont. 153, 156, 695 P.2d 1307, 1309).

Accordingly, we hold that the District Court correctly determined that the exhaustion clause in the Farmers’ policy was inapplicable in the present case and that Dagel is entitled to recover under the uninsured motorist provision of the Farmers’ policy.

Since neither party argued either for or against the District Court’s determination of the portion of damages to be allocated to Farmers, we have not and will not address that issue.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, TRIEWEILER and LEAPHART concur.