author: CADY, Justice.

text:
    NORTHERN NATURAL GAS COMPANY, Appellant, v. IOWA UTILITIES BOARD, a Division of the Iowa Department of Commerce, Appellee. Office of Consumer Advocate, a Division of the Iowa Department of Justice, Aquila, Inc., d/b/a Aquila Networks, Inc., f/k/a UtiliCorp United, Inc., d/b/a Peoples Natural Gas, a Delaware Corporation, Intervenors-Appellees.
    No. 03-0056.
    Supreme Court of Iowa.
    May 12, 2004.

      J. Gregory Porter, Omaha, Nebraska, and Sheila K. Tipton of Dorsey & Whitney L.L.P., Des Moines, for appellant.
    David J. Lynch and Cecil I. Wright, Des Moines, for appellee Iowa Utilities Board.
    John R. Perkins and Jennifer C. Easier, Des Moines, for intervenor Office of Consumer Advocate.
    Richard W. Lozier, Jr. of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, and Michael S. Degan of Blackwell Sanders Peper Martin, L.L.P., Omaha, Nebraska, for intervenor Aquila, Inc.
   CADY, Justice.

In this appeal, we review a decision by the district court that affirmed a decision by the Iowa Utilities Board that ordered Northern Natural Gas Company to pass a tax refund to Peoples Natural Gas Company, n/k/a Aquila, Inc., for distribution to Iowa customers. We affirm the judgment of the district court.

I. Background Facts and Proceedings.

Northern Natural Gas Company is a Delaware corporation with its principal place of business in Omaha, Nebraska. It is engaged in the transportation and sale of natural gas in interstate commerce for resale. Northern Natural Gas Company (NNG-1) was originally incorporated in 1930, and operated under its corporate name for fifty years. It did, however, develop various divisions or operating groups over time, including Peoples Natural Gas Company.

On March 28, 1980, NNG-1 changed its company name to InterNorth, Inc. (Inter-North). It also changed the name of its natural gas group operating units to Northern Natural Gas Company (NNG-2), a division of InterNorth, Peoples Natural Gas Company (Peoples), a division of In-terNorth, and Energy Systems Company, a division of InterNorth. Under this new structure, InterNorth continued to operate the company’s piped distribution facility under the name Northern Natural Gas Company. Peoples also continued to operate the bulk of the retail customer business. The NNG-2 division purchased gas from producers and supplied it to distributors, including Peoples. Peoples then sold the gas to the ultimate customers, including Iowa customers.

This corporate arrangement continued until December 20, 1985, when InterNorth sold the assets of Peoples to UtiliCorp United, Inc. (UtiliCorp), a Missouri corporation, pursuant to a written purchase agreement. NNG-2 continued to supply gas to Peoples, who continued to sell the gas to the ultimate customer. UtiliCorp later transferred Peoples to Aquila, Inc. (Aquila).

On April 17, 1986, InterNorth changed its name to Enron Corporation (Enron). On December 81, 1990, the board of directors of Enron discontinued NNG-2 as a division of Enron, and conveyed its assets to a newly formed subsidiary of Enron named Northern Natural Gas Company (NNG-3). It then sold NNG-3 to Dynegy, Inc. (Dynegy) on January 31, 2002, and Dynegy sold NNG-3 to MidAmerican Energy Holdings Company on August 16, 2002.

The circumstances responsible for the dispute in this case surround a refund ordered by the Federal Energy Regulatory Commission (FERC) of a tax imposed by the State of Kansas on gas producers, which the producers in turn passed on to their distributor customers, who passed the tax to the retail customer. Producer prices for natural gas at all relevant times were regulated by the National Gas Policy Act of 1978 (NGPA), which established maximum prices producers could charge their pipeline customers for natural gas. See 15 U.S.C. § 3311 (1988). The NGPA, however, permitted producers to charge more than the maximum levels to recover their payment of a state severance tax. Id. § 3320. Kansas imposed an ad valo-rem tax on natural gas producers, which the producers considered to be a severance tax and adjusted customer prices upward to recover payment of the tax.

Kansas began to levy its tax on the producers prior to 1983, and the producers passed the tax through increased prices to the pipeline distributors, which at the time included NNG-2, a division of InterNorth. NNG-2 paid the tax and adjusted its prices to effectively pass the tax to its customers, which included Peoples, a division of InterNorth. Peoples then adjusted its retail prices charged to retail consumers to recover the adjustment by NNG-2. In effect, the retail consumer ultimately paid the tax.

In 1993, following a long course of protracted litigation, the FERC held that the ad valorem tax levied by Kansas was not a recoverable severance tax under the NGPA. See Colorado Interstate Gas Co., 65 F.E.R.C. ¶ 61,292 at 62,370-72, 1993 WL 561251 (1993). It ordered producers to refund payments they received from pipelines to recover the tax. Id. at 62,373. The commission further required interstate pipelines to “pass through any ad valorem tax refunds they receive from first sellers.” Id. at 62,374. The objective was to pass the refund to those customers, through the chain of sales, who had actually been overcharged.

The refund order by FERC was affirmed on judicial review. See Pub. Serv. Co. of Colorado v. Fed. Energy Regulatory Comm’n, 91 F.3d 1478 (D.C.Cir.1996). However, the court of appeals ordered the refunds retroactive to October 4, 1983, the date when the parties were placed on notice that the tax may not be recoverable. Id. at 1490. The FERC then entered an order establishing the procedures and timetable for producers to refund the tax to pipelines, and the pipelines to, in turn, refund the tax to their customers. See Pub. Serv. Co. of Colorado, 80 F.E.R.C. ¶ 61,264 (1997).

As a part of the refund distribution process, producers paid NNG-3 a lump sum amount representing its total refund. NNG-3 then divided and paid proportional shares of this refund to its various customers during the relevant period of time, with one exception. NNG-3 allocated and retained approximately $3,150,000 of the refunds representing the tax paid by Peoples from October 4, 1983, until December 20, 1985, when it was sold to UtiliCorp. Of this amount, $825,000 related to sales by Peoples to Iowa customers during the two-year period when NNG-2 and Peoples were both divisions of InterNorth and the sales between NNG-2 and Peoples constituted intracorporation transfers.

NNG-3 did not withhold the refund from Peoples because it believed the Iowa retail customers were not entitled to receive a refund, but instead claimed that Aquila, as the successor of UtiliCorp, was responsible to pay the refund to the Iowa customers pursuant to the terms of the written agreement for the sale of Peoples from InterNorth to UtiliCorp. More importantly, NNG-3 claimed FERC had no jurisdiction to order it to pass the refund on to Aquila for payment to Iowa customers.

FERC eventually determined it did not have jurisdiction over intradivision corporation sales, and consequently, held it had no jurisdiction to order NNG-3 to flow through the tax refunds to Aquila, as a successor of Peoples. See N. Natural Gas Co., 101 F.E.R.C. ¶ 61,382, at 62,591 (2002). The commission later indicated the issue may be one for the Iowa Utilities Board (Utilities Board) to resolve. Id.; see also N. Natural Gas Co., 104 F.E.R.C. ¶ 61,164 (2003).

After FERC declined jurisdiction, the consumer advocate division of the Iowa Department of Justice filed an application with the Utilities Board to initiate an investigation into the retention of the tax by NNG-3. The Utilities Board requested the parties to respond to its inquiry, and the matter ultimately proceeded to hearing. Additionally, litigation was commenced by Aquila in the State of Nebraska against NNG-3 in an effort to resolve the claim by NNG-3 that Aquila was contractually obligated to pay the refund to its customers.

The Utilities Board held it had jurisdiction over the refund sought by the consumer advocate because the transactions between NNG-2 and Peoples from 1983 to 1985 took place within a single corporate structure that also sold gas to Iowa customers. The board also found the retention of the tax by NNG-3 violated the refund order entered by FERC. The board ordered NNG-3 to pay Aquila the retained portion of the refund associated with retail sales to Iowa customers, and directed Aquila to submit a refund plan. The district court affirmed the order on judicial review.

NNG-3 filed an appeal and has raised three assignments of error. First, it claims the Utilities Board’s jurisdiction under Iowa Code section 476.1 (2001), as previously interpreted by the board, is limited to that portion of the business of the corporation that is actually engaged in retail sales, and the board had no jurisdiction over divisions of a corporation, such as NNG-2, that are not engaged in retail sales. Thus, NNG-3 asserts that neither FERC nor the board have jurisdiction to order it to pass through the refund. Second, NNG-3 claims it has not violated the FERC refund order because the order does not apply to intradivision transfers. Finally, it claims the board’s refund order was unreasonable because the board refused to defer to the Nebraska proceedings between Aquila and NNG-3.

II. Standard of Review.

Our review of agency action is circumscribed by the standards set forth in Iowa Code section 17A.19. See Garcia v. Naylor Concrete Co., 650 N.W.2d 87, 89 (Iowa 2002). The party challenging the action has the burden of showing the agency action was invalid. Iowa Code § 17A.19(8)(a).

III. Jurisdiction.

The question of jurisdiction by the Utilities Board over this controversy is one of statutory interpretation. Iowa Code section 476.1 provides:

The utilities board ... shall regulate the rates and services of public utilities to the extent and in the manner hereinafter provided.

The same section then defines a “public utility” to

include any person, partnership, business association, or corporation ... owning or operating any facilities for:
1. Furnishing gas by piped distribution system ... to the public for compensation.

We have generally interpreted this section to mean that the Utilities Board has jurisdiction to regulate a business entity that furnishes gas by piped distribution to the public in such a manner that the public interest is affected. Iowa State Commerce Comm’n v. N. Natural Gas Co., 161 N.W.2d 111, 115 (Iowa 1968) [hereinafter ISCC ] In ISCC, a wholesale pipeline company, Northern National Gas Company (Northern), also engaged in retail sales to Iowans through a wholly owned subsidiary, Peoples Natural Gas Company (Peoples). Id. at 112. Additionally, it engaged in a direct line tap operation that served farm, industrial, and commercial users. Id. The Utilities Board, then known as the State Commerce Commission, sought to regulate the direct tap business. Id. Northern maintained that the commission had no jurisdiction over this portion of its business. Id. As a background matter, we indicated that the portion of the retail business operated by Northern through Peoples was subject to regulation by the commission, and that the only issue we faced in the case was whether the board also had jurisdiction to regulate Northern in its direct line sales to commercial, industrial, and farm users. See id. at 113.

Northern argued in ISCC that the meaning of the term “public utility” should center on the concept of “furnishing gas” only to the extent that an indefinite public has a right to demand the service. Id. This approach is recognized to be the traditional analysis. 64 Am.Jur.2d Public Utilities § 2, at 449 (2001). Yet, we rejected the approach in ISCC and instead analyzed a variety of factors that centered on the nature of the actual operations conducted and its effect on the public interest. Consequently, we held that Northern was a “public utility” subject to regulation by the commission based on its direct tap business. See id. at 117. At the same time, we made no effort to impose jurisdiction over Northern as a corporation beyond what was necessary to protect the retail consumer. Jurisdiction of the commission was extended only as necessary to address the public interest implicated.

The practical approach followed in ISCC is compatible with the overall approach to the regulation of gas utilities in the United States and the interplay of state and federal regulation. The NGPA confers exclusive jurisdiction upon FERC “over the transportation and sale of natural gas in interstate commerce for resale.” Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300-01, 108 S.Ct. 1145, 1151, 99 L.Ed.2d 316, 325-26 (1988). Beyond this point, regulation complements state jurisdiction, to avoid gaps that would allow “private interests to subvert the public welfare.” Fed. Power Comm’n v. Louisiana Power & Light Co., 406 U.S. 621, 631, 92 S.Ct. 1827, 1833, 32 L.Ed.2d 369, 379-80 (1972). Both the federal act and cases interpreting it recognize that states are free to regulate the natural gas industry by state utility commissions or boards in retail sales to ultimate customers. See id.

The Utilities Board has never considered its jurisdiction over the actions of a subsidiary or division of a corporation to be broad enough to reach a parent corporation when a subsidiary company or division of the corporation actually operates the facility that supplies gas to retail consumers. See In re Peoples Natural Gas Co., 59 P.U.R.4th 93, 102 (Iowa S.C.C. 1984). Thus, it has treated divisions of the corporation as separate entities, and limits the imposition of its jurisdiction over the division or entity that provides the direct sale to the user. Id. Likewise, the FERC does not recognize jurisdiction over intra-division transfers within a corporation. The federal commission does not consider such transfers within the same corporation to be sales or resales under the NGPA. See N. Natural Gas, 101 F.E.R.C. ¶ 61,-382, at 62,591.

NNG-3 seizes on this treatment of divisions within corporations to support its claim that the Utilities Board has no jurisdiction in this case to order it to pass the refund to Peoples. It argues that the board only has jurisdiction over the successor to the Peoples division, the entity that sold the gas to the Iowa consumers. It asserts that there is no jurisdiction over the successor to the NNG-2 division that transferred the gas to Peoples. It argues that the jurisdiction of the board lies exclusively with the corporate division that sells the gas to the public.

To respond to these arguments, we return to our statute. Section 476.1(1) gives the Utilities Board authority to regulate public utilities and defines a public utility as any person or business entity owning or operating any facility that sells piped gas to the public. We think it is important to observe that this statute includes both the owner and the operator of a facility, and the various types of business entities included within the definition include corporations. Id. Thus, the statute clearly includes the corporate owner of a facility, not just the operator.

We next turn to our ISCC case to highlight some important observations. First, we never implied that the Utilities Board’s jurisdiction under the statute was limited to the actual division of the corporation that operated the direct sales business. Instead, we indicated in ISCC that the board regulated Northern’s retail gas business conducted “through Peoples National Gas Company (a wholly-owned subsidiary).” 161 N.W.2d at 112. Second, although the case dealt with the question whether there were enough direct sales by Northern to the public to make its rates and methods of operation a public concern and public interest, the practical analysis we adopted made it clear that we ultimately look to the nature of the particular business operation to determine if a public utility exists. Id. at 113-17. Third, we rejected the notion that a business could avoid state regulation of a public interest through its operational methods and practices. See id. Finally, we observed that the federal authorization to regulate a wholesale pipeline company is not necessarily comprehensive, but some dual regulation between federal and state agencies is contemplated. See id. at 118.

We think the statute and the approach adopted in ISCC means that the Utilities Board in this case not only had jurisdiction over the Peoples division during the critical timeframe, as the operator of the business that sold gas to Iowa consumers, but also over InterNorth, the owner of the facilities that sold gas to Iowa consumers. In other words, because InterNorth was a public utility (as the owner of facilities distributing gas to Iowa consumers through its Peoples division), the board would have had jurisdiction over Inter-North to the extent necessary to regulate the rates of Peoples. Certainly, if there had been no corporate reorganizations and sales, and the refund had been made to NNG-2, a division of InterNorth, the board would have had jurisdiction to order InterNorth to transfer the refund on its corporate books to Peoples as part of the board’s authority to regulate the rates of Peoples through its jurisdiction over the owner (InterNorth) of the facilities furnishing gas to Iowa consumers. NNG-3, as the successor in interest to NNG-2, now holds money that it admits should ultimately be refunded to Iowa consumers. Thus, NNG-3 is likewise subject to the board’s jurisdiction for the sole purpose of ordering the transfer of the refund monies to the corporate successor to Peoples. Retail consumers in Iowa have been denied refunds solely because a particular corporate arrangement removed the original sale from federal jurisdiction. But that same corporate arrangement subjected In-terNorth to the board’s jurisdiction and now subjects NNG-3 to the board’s jurisdiction for the limited purpose of directing that NNG-3 pay the refund to Aquila.

IV.FERC Order.

NNG-3 asserts the FERC refund order does not require it to pass the refund on to the successor of Peoples, and cannot be used as the basis for the Utilities Board to order a refund. We agree that the FERC order does not require NNG-3 to transfer the refund for the disputed two-year period to Aquila. However, the only reason for this result is that FERC has concluded it has no jurisdiction over the transfer from NNG-2 to Peoples. The order otherwise culminates years of litigation over a refund intended to be passed through the pipeline to the ultimate user who paid the tax. Moreover, the order recognizes the refund process would necessarily involve both federal and state agencies to fully carry it out. Thus, once the Utilities Board assumed jurisdiction, the FERC order properly served as the basis for its action. See Hill v. Kansas Gas Serv. Co., 323 F.3d 858, 861-62 (10th Cir.2003) (describing a similar assumption of jurisdiction by the Kansas Corporation Commission, an analogue to the Utilities Board).

V. Resolution of Contract Action.

NNG-3 claims the Utilities Board acted unreasonably by failing to defer to the outcome of the Nebraska litigation over the refund before exercising its jurisdiction. We disagree. Cf. Edward Rose Bldg. Co. v. Cascade Lumber Co., 621 N.W.2d 193, 195-96 (Iowa 2001) (describing general principles of comity between courts of different states). The refund order issued by the board does not impair any potential contract rights NNG — 3 may have to require Aquila to pay the refund, and for NNG-3 to seek reimbursement. See generally State, Dep’t of Human Servs. ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 149-50 (Iowa 2001) (discussing general principles and theories relating to recovery for unjust enrichment).

VI. Conclusion.

We affirm the decision of the district court.

AFFIRMED.


source: Caselaw Access Project

author: WIGGINS, Justice.

license: Public Domain

text:
    Allan L. BERGER and Jennifer L. Berger, Appellants, v. IOWA DEPARTMENT OF TRANSPORTATION, Appellee.
    No. 02-2079.
    Supreme Court of Iowa.
    May 12, 2004.
    James C. Larew of Larew Law Office, Iowa City, for appellants.
    Thomas J. Miller, Attorney General, and David A. Ferree, Special Assistant Attorney General, for appellee.
   WIGGINS, Justice.

Allan and Jennifer Berger (Bergers) owned property adjacent to Highway 1, near Iowa City, Iowa. In connection with a rebuilding and widening project of Highway 1, the Bergers and the Iowa Department of Transportation (IDOT) entered into early negotiations for the acquisition of the Bergers’ property. In connection with the acquisition, the Bergers were given notice of relocation eligibility and an offer of relocation assistance. The IDOT refused to negotiate the relocation assistance with the Bergers. The Bergers filed an administrative appeal on the offer of relocation assistance. During the pen-dency of the appeal, the IDOT removed the rebuilding and widening project for Highway 1 from its five-year highway program. Even though the IDOT removed the Highway 1 project from its five-year highway program, the Bergers contended they were still entitled to compensation for relocation assistance. On administrative appeal, the agency decided the Bergers were not displaced persons entitled to compensation for relocation assistance for the reason that the IDOT removed the Highway 1 project from its five-year highway program, and the Bergers’ property would not be acquired by the IDOT. The Bergers sought judicial review of the agency’s decision in district court. The district court agreed with the agency that the Bergers were not entitled to compensation for relocation assistance. In district court, the Bergers also raised the issue of agency bias. The district court concluded given that the Bergers did not raise the issue of agency bias at the agency level, the Ber-gers waived this error on judicial review. The Bergers appealed the district court’s decision. Because we agree the Bergers are not entitled to compensation for relocation assistance and they failed to preserve the issue of agency bias, we affirm the district court.

I. Background Facts and Proceedings.

The Bergers, licensed veterinarians, purchased property along Highway 1, near Iowa City, Iowa. The Bergers made major revisions to the property to accommodate their home and a veterinarian clinic, which became Jennifer’s full-time veterinary practice. While Allan also worked part-time at the clinic, he was employed full time as a research scientist at the University of Iowa.

In May and June 2000, the Bergers reviewed the IDOT’s plans for a project to rebuild and widen Highway 1. The plans indicated the Bergers’ house and clinic would have to be demolished.

In October of 2000, Allan received a job offer, which would require him to move to Champaign, Illinois. The Bergers contacted the IDOT to request an early acquisition of their property. The Bergers made this request because they contended they were unable to sell their property “for its highest and best use” as a result of the announced highway project. An IDOT representative responded to the Bergers’ request in a letter dated October 9, 2000, informing the Bergers the IDOT will proceed to make an early purchase of their property, but cautioned them not to move, rent, or purchase any other replacement property until they have talked with a relocation agent.

On June 22, 2001, the IDOT made an offer to purchase the Bergers’ property for $205,000. Additionally, the IDOT sent a notice of relocation eligibility and made an offer of relocation assistance for the purchase of replacement housing. The Ber-gers appealed the offer of relocation assistance to the agency on July 26, 2001. On August 7, 2001, during the pendency of the appeal, the IDOT informed the Bergers that the Highway 1 improvement project was no longer in the IDOT’s five-year plan; therefore, the project was delayed. As a result, the Berger’s property would no longer need to be acquired and they would not be entitled to relocation assistance.

On August 17, 2001, the Bergers replied to the August 7, 2001, letter and stated: ‘Your sudden announcement of an ‘indefinite delay’ surely must be viewed as an abandonment of the present acquisition process.” The Bergers also asked to be reimbursed for their expenses. In a January 7, 2002, letter to the Bergers, the IDOT reaffirmed its position that the Highway 1 project was not included in the five-year highway program and there would be no reason to acquire the Bergers’ property. In a January 25, 2002, letter and a March 29, 2002, e-mail to the Ber-gers, the IDOT again stated that the Highway 1 project was not going forward and their property was not going to be acquired. In spite of these repeated notices, the Bergers demanded a hearing on their appeal contending they should be awarded compensation for relocation assistance.

An administrative hearing took place on April 30, 2002, before a three-member review committee. Richard Kautz, district 6 engineer for IDOT, chaired the review committee. By reason of his position with the IDOT, Kautz had personal knowledge of the Highway 1 project, independent from the evidence presented at the review committee hearing. At the review committee hearing, the Bergers requested $922,082 in relocation assistance. The review committee issued its decision on May 24, 2002, denying the Bergers’ claim for relocation assistance on the grounds the Bergers were not displaced persons as defined by the administrative rules but awarded them $2,855.05 for expenses they had incurred in connection with the notice of relocation eligibility the Bergers received in June 2000. The district court affirmed the review committee’s decision. The Bergers filed a motion to amend and enlarge the district court’s findings of fact and conclusions of law, which was denied. The Bergers appeal.

II. Were the Bergers Entitled to Relocation Assistance?

The Fifth Amendment to the United States Constitution and article I, section 18 of the Iowa Constitution provide that private property cannot be taken for public purposes without just compensation. U.S. Const, amend. V; Iowa Const, art. I, § 18. In addition to the payment of just compensation for the value of the property taken in a condemnation proceeding, Iowa law also provides for relocation assistance to individuals who are displaced from their property. Iowa Code § 316.3(1) (2001). Relocation assistance compensation is not considered compensation for the value of any real property acquired through condemnation or damages to the remaining real property as a result of the condemnation. Id. § 316.2(3).

Chapter 316 of the Iowa Code contains Iowa’s relocation assistance law. Id. § 316.1. The legislature delegated to the IDOT the authority to promulgate administrative rules necessary to effect the provisions of chapter 316. Id. § 316.9. The legislature also delegated to the IDOT the power to set up an appeals process to determine the eligibility of an aggrieved person for relocation assistance. Id. § 316.9(4). The decision rendered in the review process is the final agency action of the displacing agency. Id.

Pursuant to section 316.9, the IDOT promulgated the administrative rules for real property acquisition and relocation assistance in chapter 761-111 of the Iowa Administrative Code. The rules incorporated the October 1997 edition of section II of the manual entitled “Uniform Manual, Real Property Acquisition and Relocation Assistance” by reference. Iowa Admin. Code r. 761-111.1 (1997). The appeal regarding relocation assistance is made to the agency whose determination is being appealed. Iowa Admin. Code r. 761-lll.l(2)(d). Because the IDOT made the determination regarding the Bergers’ relocation assistance, the appeal was heard by the IDOT. Pursuant to the uniform manual, the IDOT appointed a three-person review committee to decide the appeal. Iowa Admin. Code r. 761~111.6(6).

The Iowa Administrative Procedure Act contains the standards under which we review the district court’s decisions on judicial review of agency action. Locate.Plus.Com, Inc. v. Iowa Dep’t of Transp., 650 N.W.2d 609, 612 (Iowa 2002). “The agency decision itself is reviewed under the standards set forth in section 17A.19(10).” Mosher v. Dep’t of Inspections & Appeals, 671 N.W.2d 501, 508 (Iowa 2008). We determine whether our application of the standards set forth in section 17A.19(10) would produce the same result as reached by the district court in its application of the standards. Id. The Bergers argue that the IDOT’s review committee misapplied the law to the facts in their appeal. Because the legislature clearly vested the IDOT with the authority to apply the law to the facts under Iowa Code section 316.9, the agency’s decision can only be reversed based upon an irrational, illogical, or wholly unjustifiable application of the law to the facts. Iowa Code § 17A.19(10)(m).

The review committee concluded the Bergers were not displaced persons, thus they were not entitled to compensation for relocation assistance. The Bergers argue otherwise. The Bergers contend they are displaced persons under the rules adopted by the IDOT pursuant to Iowa Code section 316.9. Rule 761-111.2(7) defines displaced person as follows:

(a) Generally. A person who moves from real property or moves the person’s personal property from real property in either of the following circumstances:
(i) As a direct result of a written notice of intent to acquire, the initiation of negotiations for, or the acquisition of, the real property in whole or in part for a program or project undertaken with federal financial assistance.
(ii) The person moved or moved the person’s personal property from real property on which the person is either a residential tenant or conducts a small business, a farm operation, or a business as defined in paragraph 111.2(3)(d), as a direct result of rehabilitation or demolition for a program or project undertaken with federal financial assistance in a case in which the head of the displacing agency determines that the displacement is permanent.

Iowa Admin. Code r. 761-111.2(7)(a )(i), (ii). The record before the review committee clearly establishes the Bergers are not displaced persons because they never moved from their real property or moved personal property from their real property under the circumstances enumerated in rule 761-111.2(7)(a)(i) or (ii).

The Bergers contend in spite of the fact they have not moved from their real property or moved personal property from their real property, rule 761-111.2(7)(c )(ix) requires the agency to provide compensation for relocation assistance. According to the rule, the term “displaced person” does not include:

A person who, after receiving a notice of relocation eligibility (described in sub-rule 111.203(2)), is notified in writing that he or she will not be displaced for the program or project. Such notice shall not be issued unless the person has not moved and the agency agrees to reimburse the person for any expenses incurred to satisfy any binding contractual relocation obligations entered into after the effective date of the notice of relocation eligibility.

Iowa Admin. Code r. 761 — 111.2(7)(c )(ix).

The review committee found that the IDOT’s letters of August 7, 2001, January 7, 2002, and January 25, 2002, together with the March 29, 2002, e-mail satisfied the notice provisions of rule 761-111.2(7)(c )(ix); therefore, the Bergers were not displaced persons under the rule. The Bergers contend the only notice that would disqualify them from being a displaced person is a notice stating unequivocally that their property will never be used in rebuilding or widening Highway 1.

We can only overturn the decision of the review committee if its application of the law to the facts is irrational, illogical, or wholly unjustifiable. Under this standard of review, the reviewing court must be deferential to the agency’s action because the legislature decided that the agency’s expertise justifies vesting primary jurisdiction over this matter in the discretion of the agency rather than in the court. Arthur E. B onfield, Amendments to Iowa Administrative Procedure Act, Report on Selected Provisions to Iowa State Bar Association and Iowa State Government 70 (1998). Applying this standard, we find no basis to reverse the agency’s determination that the correspondence between the IDOT and the Bergers satisfied the notice requirements of rule 761 — 111.2(7)(c )(ix). The agency has the expertise to interpret the rule in light of the language used in the correspondence between the IDOT and the Bergers. We cannot say the IDOT’s application of the law to the facts by the review committee was irrational, illogical, or wholly unjustifiable. If the Bergers’ property was not going to be taken for the rebuilding or widening of Highway 1, the Bergers should not be entitled to compensation for relocation assistance. To hold otherwise would mean that the IDOT must pay the Bergers compensation for relocation assistance when the IDOT has no intention of taking their property. To pay the Bergers for relocating when they still have the economic benefits of the ownership of their property would be irrational, illogical, and wholly unjustifiable.

The Bergers argue that if they are not given assurances that their property will never be taken for the rebuilding or widening of Highway 1, the present value of their property will be negatively impacted. All persons who own property adjacent to Highway 1 are in the same predicament. The fact that the IDOT agreed to an early acquisition at the Bergers’ request, and presented the Bergers with a notice of relocation eligibility, which was lawfully rescinded, should not put the Bergers in a better position than any other person who owns property adjacent to Highway 1. If Highway 1 is widened or rebuilt in the future and the Bergers’ property is impacted by the project, at that time the Bergers will be compensated for the taking and receive any relocation assistance to which they may be entitled under the law.

III. Was the Decision-Making Body Properly Constituted?

The Bergers challenged the participation of Kautz to serve on the review committee. At the time of the review committee hearing, Kautz was a district 6 engineer for the IDOT. His area of coverage included the county in which the Ber-gers’ property was located. Due to his position as district engineer, he had some personal knowledge of the Highway 1 project.

The Bergers claim that Kautz’s participation on the review committee was improper under Iowa Code section 17A.19(10)(e). If the agency action was “[t]he product of decision making undertaken by persons who were improperly constituted as a decision-making body, were motivated by an improper purpose, or were subject to disqualification,” the Bergers may be entitled to relief. Iowa Code § 17A.19(e). The district court concluded the Bergers failed to preserve error on this issue before the agency. We agree.

Although Bergers’ counsel queried Kautz regarding his knowledge of the Highway 1 project at various points during the review committee hearing, Bergers’ counsel never moved to recuse Kautz from the proceedings. The Bergers were required to raise the issue of the alleged bias in the agency proceeding, so it could have been addressed by the review committee. See Council Bluffs Cmty. Sch. Dist. v. City of Council Bluffs, 412 N.W.2d 171, 173 (Iowa 1987). The failure to raise the issue before the agency waives this error on appeal. See Tussing v. George A. Hormel & Co., 417 N.W.2d 457, 458 (Iowa 1988).

IV. Conclusion.

Because we find the district court’s application of the law to the facts was not irrational, illogical, or wholly unjustifiable, and that the Bergers failed to preserve their error regarding agency bias, we affirm the judgment of the district court.

AFFIRMED.

      . Unless otherwise noted, this reference and all references from this point forward to the administrative code are to the rules found in the October 1997 edition of section II of the Uniform Manual, Real Property Acquisition and Relocation Assistance.


author: CARTER, Justice.

text:
    IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Lynn Jay IRWIN III, Respondent.
    No. 03-2027.
    Supreme Court of Iowa.
    May 12, 2004.

      Norman G. Bastemeyer and Charles L. Harrington, Des Moines, for complainant.
    Brent B. Green of Duncan Green Brown Langeness & Eckley, P.C., Des Moines, for respondent.
   CARTER, Justice.

This matter is before us for a review of the findings and recommendation of the Grievance Commission pursuant to Iowa Court Rule 35.10. The matter was submitted to that commission on a lengthy and detailed stipulation of the facts involving the allegations of the complaint filed against respondent, Lynn Jay Irwin III, by the Iowa Supreme Court Board of Professional Ethics and Conduct.

Included in that stipulation was a recommendation for sanction approved by the board. The general nature of the complaints against respondent involved allegations that, while employed as a salaried attorney for a Des Moines law firm, he failed to remit fees he collected to the firm, as required by the conditions of his employment. The stipulation recited that respondent and the law firm at which he is employed had a verbal agreement that he would receive a monthly salary of $4000 and additional compensation in the amount of fifty percent of all legal fees collected for his work in excess of $100,000 annually. It states that:

Although Respondent denies certain allegations of the complaint, he acknowledges that if the matter were to proceed to evidentiary hearing before the Grievance Commission, he could not successfully defend the charges.
If the complaint herein proceeded to hearing, the testimony and evidence could establish by a convincing preponderance of the evidence that the respondent, Lynn Jay Irwin III, committed the ethical violations charged in each count of the complaint.

The stipulation states that the following factual scenarios occurred, each of which is the subject of an alleged ethical violation in the board’s complaint:

1. Sometime in 1998 respondent, while employed at the law firm, settled a personal injury case for Jennifer Dennis. He retained approximately $73,000 of the fee received from the client and deposited it in a trust account at the Iowa State Bank that had been opened in his own name. He did not inform the bookkeeper at the firm about this transaction and he did not list the trust account on his Combined Statement and Questionnaire filed with the Client Security and Attorney Disciplinary Commission pursuant to Iowa Supreme Court Rule 39.11.
2. Sometime in 1997 respondent, while employed at the law firm, settled a personal injury action for Patricia Brit-tain and ultimately received a one-third contingency fee of $16,666.67, which was deposited in his personal bank account.
3. In November 1998 respondent, while employed at the law firm, represented Scott Warner in defending a criminal charge. He received a fee of $3000, which he retained for his own use. Although the fee was not completely earned when received, it was not deposited in a client trust account.
4. In March 1999, while employed at the law firm, respondent represented Linda Hoover on an OWI charge and received a fee of $500. He deposited that fee in his personal account and did not advise the firm.
5. In February 1999 respondent, while employed at the law firm, represented John Withers on an OWI charge and received a flat fee of $750. Respondent retained this fee for his personal use without the knowledge of the firm.
6. In April 1999 respondent, while employed at the law firm, represented Bradley Moore on an OWI charge and was paid a fee of $500. He retained all of that fee for his own use without the knowledge of the firm.
7. In October 1997, while employed at the law firm, respondent represented John Stokka in a stock-foreclosure and bankruptcy-related matter. He received three checks, each in the amount of $600. One of the checks was payable to the law firm and was credited to its trust account. The other two checks were negotiated by respondent for his own use.
8. In August 1997, while employed at the law firm, respondent represented Donna Mills on a criminal charge in Woodbury County. Mills was an employee of the Watson Law Firm. She and respondent agreed that others at the law firm would not be advised concerning this transaction. Respondent received a fee from Mills in the sum of $1000 and retained the proceeds for his own use without the knowledge of the law firm.
9. Sometime in 1998 respondent, while employed at the law firm, negotiated a settlement of a personal-injury claim for Katie Helt. He received a contingent fee of $2500, which he retained for his own use without informing the firm.
10.During the time that respondent worked at the law firm, he performed legal services for the owner of an optical company to whom respondent owed money. These services were accepted in payment of respondent’s personal obligation in a barter transaction carried on without the knowledge of the law firm.

With respect to each of these transactions, the stipulation recites that respondent believed that he could “moonlight” and earn extra money on his own time as long as he met his minimum obligation to the firm.

The stipulation refers to the following facts as mitigating circumstances. Respondent eventually returned the $16,666.67 fee on the Brittain matter to the law firm. Later, in response to an action brought against him by the law firm, he settled all existing claims of the firm based on the foregoing conduct. Respondent had no record of ethical violations prior to the transactions involved in the present complaint and has been active in bar activities seeking to promote the administration of justice. Several lawyers submitted affidavits to the commission attesting to respondent’s reputation for truth, veracity, and general moral character. His former wife submitted a similar affidavit.

At the conclusion of the stipulation, it is recited:

The parties recommend that the conduct of Respondent would warrant indefinite suspension of his license to practice law in the State of Iowa, with no possibility of reinstatement for at least two years.

Based on the stipulation, the Grievance Commission found that the actions stipulated to on each occasion involved a willful misappropriation of funds due his employer. These acts were found to be a violation of DR 1-102(4) of the Iowa Code of Professional Responsibility for Lawyers, which prohibits conduct involving dishonesty, fraud, deceit, or misrepresentation. The commission also noted in its findings respondent’s violation of DR 9-102, requiring the deposit of unearned fees in a trust account, and his failure to acknowledge a secret trust account in the annual questionnaire required by Iowa Court Rule 39.11.

On the issue of appropriate discipline, the commission stated that it

considered the Stipulation to be akin to a plea agreement and as such, use of a stipulation in lieu of a hearing is arguably an important procedure for the effective and efficient administration of the Iowa attorney disciplinary process. The Commission further believe[s] that under the present body of law, the Ethics Board’s agreement to enter into the Stipulation in the present matter should be accorded due consideration by the Commission. Accordingly, the Commission recommends pursuant to its acceptance of the Stipulation that Respondent’s license to practice law in the State of Iowa be suspended indefinitely, with no possibility of reinstatement for at least two years.

Pursuant to Iowa Court Rule 35.10, we review the proceedings before the commission and the commission’s recommendations de novo. This rule provides that “[u]pon such review de novo the supreme court may impose a lesser or greater sanction than the discipline recommended by the Grievance Commission.” Id. We agree with the findings of the Grievance Commission that the stipulated facts establish by a convincing preponderance of the evidence that respondent is guilty of the disciplinary violations that it found to have occurred. He could not have reasonably believed that he could “moonlight” to the extent shown by the evidence given the terms of his employment contract with the firm. Moreover, there is evidence of an intentional concealment of his diversion of attorney fees from the firm to himself.

With respect to the proper discipline to be imposed, we have noted in several cases that it is almost axiomatic that the licenses of lawyers who convert funds entrusted to them should be revoked. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Williams, 675 N.W.2d 530, 533 (Iowa 2004); Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Bell, 650 N.W.2d 648, 652 (Iowa 2002); Comm. on Prof'l Ethics & Conduct v. Ottesen, 525 N.W.2d 865, 866 (Iowa 1994). We have said that this is so because dishonesty is a trait that should disqualify the dishonest person from the practice of law. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Carr, 588 N.W.2d 127, 130 (Iowa 1999). This principle has been adhered to in several cases in which lawyers have been found guilty of converting funds properly due to their own law firms. See Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Schatz, 595 N.W.2d 794, 796 (Iowa 1999); Carr, 588 N.W.2d at 130; Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Sylvester, 548 N.W.2d 144, 147 (Iowa 1996); Comm. on Prof'l Ethics & Conduct v. Piazza, 405 N.W.2d 820, 824 (Iowa 1987). In each of these proceedings, the license of the offending lawyer was revoked. Given the very serious and pervasive nature of respondent’s violations in the present case, we can see no reason why his disposition should not be the same as that which was employed in the cited cases.

We are mindful of the deference that the Grievance Commission gave to the stipulation entered into by the Iowa Supreme Court Board of Professional Ethics and Conduct. It is, as the commission noted, in the interest of the expeditious disposition of these cases to accept the recommendations of the agency charged with prosecuting the ethical violations of lawyers. Notwithstanding this fact, we have precedent for rejecting stipulated dispositions of the type proposed in the present case. In Committee on Professional Ethics & Conduct v. Oehler, 350 N.W.2d 195, 199 (Iowa 1984), a number of alleged disciplinary violations were submitted to the Grievance Commission on a stipulation of facts, which included a recommendation for a two-year suspension of the license of the offending attorney. As in the present case, the Grievance Commission recommended the sanction suggested in the stipulation. Given the seriousness of the violations that had occurred, this court declined to accept that recommendation and revoked the license of the offending attorney. Id. We are persuaded that we should act similarly in the present case.

For all of the reasons stated in this opinion, the license of respondent, Lynn Jay Irwin III, is revoked effective with the filing of this opinion. We assess the costs to respondent as provided in Iowa Court Rule 35.25(1).

LICENSE REVOKED.


author: STREIT, Justice.

text:
    In the Interest of S.A.J.B., Minor Child, J.E.B., Father, Appellee, v. K.C., Mother, Appellant.
    No. 03-1364.
    Supreme Court of Iowa.
    May 12, 2004.

      Derek E. Johnson, Iowa City, for appellant.
    Richard E. Boresi of King, Smith & Boresi, Cedar Rapids, for appellee.
    Barbara Connolly, Cedar Rapids, for minor child.
   STREIT, Justice.

An indigent mother wants a court-appointed attorney to help fight the termination of her parental rights. The father of the child initiated the termination so his new wife could adopt. The district court refused to appoint the mother an attorney at public expense.

The sole question in this appeal is whether an indigent parent has a right to have an attorney appointed, at public expense, to help defend against an involuntary termination of parental rights brought under Iowa Code chapter 600A. We hold the equal protection clause of the Iowa Constitution guarantees this right.

I. Facts and Prior Proceedings

James and Krista are the biological parents of Shi Anne, a three-year old. James and Krista were never married. Shi Anne lives with James and his wife, Cynthia.

In July 2003, James asked the district court to terminate Krista’s parental rights. James alleged Krista had abandoned Shi Anne. In his petition — filed pursuant to Iowa Code chapter 232 (2003) — James also indicated Cynthia wanted to adopt his daughter.

The next month, an Iowa Legal Aid attorney appeared on Krista’s behalf for the limited purpose of helping her obtain court-appointed counsel. Krista pointed out chapter 232, under which the petition was brought, guaranteed her counsel at public expense. See Iowa Code § 232.113(1) (“If the parent desires but is financially unable to employ counsel, the court shall appoint counsel.”). Anticipating James might move to amend his petition to state a claim under chapter 600A, Krista argued the equal protection and due process clauses of the state and federal constitutions would still guarantee her counsel at public expense.

As anticipated, James amended his petition to chapter 600A. He did not resist Krista’s request for counsel.

The district court denied Krista’s request. The court found Krista was indigent, but ruled there was no legal authority in chapter 600A to authorize appointment of counsel at public expense.

The case is now before us on interlocutory appeal. James has not filed a brief in this matter.

II. Standard of Review

Appellate review of constitutional claims is de novo. In re C.M., 652 N.W.2d 204, 209 (Iowa 2002).

III. Merits

Krista maintains the equal protection and due process clauses of the federal and state constitutions required the court to appoint counsel at public expense. See U.S. Const, amend. XIV, § 1; Iowa Const. art. I, §§ 6, 9. We were presented with these same arguments over twenty years ago. See In re Jacobs, 309 N.W.2d 481, 482-83 (Iowa 1981). In Jacobs, however, the parent requesting counsel at public expense did not establish his indigency, and so we did not reach the merits. Id. at 484. In the case at bar, however, the district court expressly found Krista indigent, and her financial status is not challenged on appeal. We may now squarely address the merits of her arguments.

Krista’s equal protection argument is two-fold: she maintains the district court’s failure to appoint counsel (1) unjustifiably discriminates against indigent parents facing involuntary termination of their parental rights in chapter 600A proceedings, in favor of those in chapter 232 proceedings, and (2) denies indigent parents in 600A terminations the same access to courts enjoyed by those who can afford private counsel. Krista also asserts due process requires she receive counsel at public expense. Because we find Krista’s first equal protection argument has merit, we do not address her other claims.

Equal Protection

“Iowa has alternative statutory proceedings for terminating parent-child relationships.” In re J.L.L., 414 N.W.2d 133, 133 (Iowa 1987). Under Iowa Code chapter 232, several parties, including the county attorney and the department of human services, may petition the district court to terminate a parent-child relationship. Iowa Code § 232.111(1). Once filed, generally only the county attorney may present evidence in support of the petition. Id. § 232.114(1). But see id. § 232.114(2) (attorney general may be substituted in limited circumstances). This procedure, which we shall refer to as a “232 termination,” “calls for the furnishing of an attorney at public expense when requested by indigent parties.” J.L.L., 414 N.W.2d at 134; Iowa Code § 232.113(1).

Another termination procedure, utilized in adoption proceedings, is contained in Iowa Code chapter 600A. Pursuant to chapter 600A, “a parent or prospective parent” may petition a juvenile court to terminate parental rights. Iowa Code § 600A.5(1); see, e.g., In re R.K.B., 572 N.W.2d 600, 601 (Iowa 1998). This procedure, which we shall characterize as a “600A termination,” is prosecuted by the private party filing the petition, not the county attorney. Chapter 600A “omit[s] the express necessity of counsel at public expense....” J.L.L., 414 N.W.2d at 134.

As previously indicated, Krista’s first equal protection argument alleges the foregoing legislative framework unjustifiably discriminates against indigent parents who must defend against involuntary 600A terminations, because there is no provision in Iowa Code chapter 600A for court-appointed counsel. Krista points out similarly situated parents in 232 terminations are afforded counsel at public expense.

Because the question before us remains open under the federal constitution, we first focus upon Krista’s state constitutional claim. See Chester James Antieau & William J. Rich, Modem Constitutional Law § 29.34, at 199-200, 200 n. 47 (2d ed.1997) (recognizing United States Supreme Court has yet to rule on an equal protection challenge to such legislative frameworks); In re Adoption of K.A.S., 499 N.W.2d 558, 563 (N.D.1993) (resolving nearly identical question first under state equal protection clause); Zockert v. Fanning, 310 Or. 514, 800 P.2d 773, 777 (1990) (same); cf. Iowa Motor Vehicle Ass’n v. Bd. of R.R. Comm’rs, 207 Iowa 461, 466-68, 221 N.W. 364, 367 (1928) (analyzing state equal protection claim before the federal claim). The Iowa Equal Protection Clause states:

All laws of a general nature shall have a uniform operation; the general assembly shall not grant to any citizen, or class of citizens, privileges or immunities, which, upon the same terms shall not equally belong to all citizens.

Iowa Const. art. I, § 6. In Racing Association of Central Iowa v. Fitzgerald, 675 N.W.2d 1 (Iowa 2004) (hereinafter RACI II), we recently explained, in depth, the nature of equal protection analysis under the Iowa Constitution. In analyzing claims under the Iowa Equal Protection Clause, we independently apply federal principles. RACI II, 675 N.W.2d at 6. That is,

federal decisions are persuasive, but not binding, on this court in its consideration of claims based on the Iowa Constitution. ... [Independent application ... might result in a dissimilar outcome from that reached by the Supreme Court in considering the federal constitutional claim. This result is particularly possible in view of the “the ill-defined parameters of the equal protection clause.”

Id. (quoting Miller v. Boone County Hosp., 394 N.W.2d 776, 781 (Iowa 1986)). Our review, then, is not dependent upon a “view of the reach of [the federal constitution].” Cf. Delaware v. Prouse, 440 U.S. 648, 653, 99 S.Ct. 1391, 1396, 59 L.Ed.2d 660, 667 (1979) (United States Supreme Court may review state court decision “where the state constitutional holding depended upon the state court’s view of the reach of [the federal constitution]”).

In analyzing equal protection claims, we have repeatedly held parental rights are fundamental rights. See, e.g., Santi v. Santi, 633 N.W.2d 312, 317 (Iowa 2001) (“[T]he parenting right is a fundamental liberty interest that is protected against unwarranted state intrusion.” (Emphasis in original, citation omitted.)); Callender v. Skiles, 591 N.W.2d 182, 190 (Iowa 1999); In re Bruce, 522 N.W.2d 67, 72 (Iowa 1994); Olds v. Olds, 356 N.W.2d 571, 574 (Iowa 1984). This principle is consistent with federal authority. Troxel v. Granville, 530 U.S. 57, 65, 120 S.Ct. 2054, 2060, 147 L.Ed.2d 49, 56 (2000) (a parent’s interest in custody of a child “is perhaps the oldest of the [recognized] fundamental liberty interests”); M.L.B. v. S.L.J., 519 U.S. 102, 119, 117 S.Ct. 555, 565, 136 L.Ed.2d 473, 489 (1996) (even in cases which have yielded divided opinions, United States Supreme Court “was unanimously of the view that ‘the interest of parents in their relationship with their children is sufficiently fundamental to come within the finite class of liberty interests protected by the Fourteenth Amendment’ ” (quoting Santosky v. Kramer, 455 U.S. 745, 774, 102 S.Ct. 1388, 1405, 71 L.Ed.2d 599, 620 (1982) (Rehnquist, J., dissenting))). Because the challenged statutory scheme involves a fundamental right, “to withstand challenge under our state constitution, the infringement on parental liberty interests implicated by the statute must be ‘narrowly tailored to serve a compelling state interest.’” Santi, 633 N.W.2d at 318 (quoting State v. Klawonn, 609 N.W.2d 515, 519 (Iowa 2000)); see also In re A.C., 415 N.W.2d 609, 615-16 (Iowa 1987). When this stringent review of legislation, commonly known as “strict scrutiny,” is applied, we will not presume legislation constitutional. In re Detention of Williams, 628 N.W.2d 447, 452 (Iowa 2001).

In order to determine if the disparity in the current statutory framework is narrowly tailored to serve a compelling state interest, we must first discuss In re J.L.L., 414 N.W.2d 133 (Iowa 1987). J.L.L. also involved an equal protection challenge to the lack of a provision for appointing counsel at public expense in Iowa Code chapter 600A.

In J.L.L., a mother and father voluntarily agreed in writing to release custody of their child to an uncle. 414 N.W.2d at 134. The uncle filed a petition for termination of parental rights pursuant to Iowa Code chapter 600A. Id. On appeal, the mother claimed her equal protection and due process rights were violated, because the court did not appoint her an attorney at public expense. Id. We rejected these claims. Id. In doing so, we seized upon the fact the proceedings were voluntary. The mother had consented, in “unequivocal” fashion, to the termination. Id. at 135. We wrote:

[I]t was appropriate for the legislature to distinguish between voluntary and involuntary terminations and to provide for counsel at public expense only where the proceedings are involuntary
For a combination of reasons we feel obliged to reject the mother’s contention. Most important is the distinctive nature of a voluntary proceeding .... There is [a pecuniary] advantage to the public in providing for a more simple and less expensive proceeding in uncontested terminations.

Id. at 134-35 (emphasis added). As the italicized portions of the foregoing excerpt make clear, our decision upholding denial of counsel at public expense in J.L.L. was predicated upon a determination that the chapter 600A proceeding in that case was voluntary. Implicitly, then, in J.L.L. we left open the question of whether a denial of court-appointed counsel in an involuntary 600A termination proceeding contravenes the Iowa Equal Protection Clause.

Two state supreme courts have concluded similar statutory frameworks violated state equal protection provisions textually similar to Iowa’s article I, section 6. K.A.S., 499 N.W.2d at 563-67; Zockert, 800 P.2d at 776-79. In K.A.S., for exam-pie, it was argued that denying counsel to indigent parents in involuntary 600A terminations furthered the state’s “compelling interest in conserving ... fiscal resources.” 499 N.W.2d at 565. The North Dakota Supreme Court rejected this argument, and held a state’s pecuniary interest in not providing counsel at public expense is legitimate but not compelling. Id.; cf. M.L.B., 519 U.S. at 121, 117 S.Ct. at 566, 136 L.Ed.2d at 491 (reiterating view that mere pecuniary concerns are “unimpressive when measured against the stakes for the defendant”). Nor is such a legislative framework narrowly tailored to further a pecuniary interest; the State could develop measures to recoup these costs, if it desired to do so. K.A.S., 499 N.W.2d at 565; cf. Iowa Code § 910.2 (providing for reimbursement in criminal cases). We agree, and add that this proffered interest, standing alone, fails to adequately explain why counsel is provided in 232 terminations but not 600A terminations. On such an analysis, there would appear to be no reason to provide for counsel at public expense in any termination case. But see Lassiter v. Dep’t of Soc. Servs., 452 U.S. 18, 31-32, 101 S.Ct. 2153, 2161-62, 68 L.Ed.2d 640, 652 (1981) (automatic denial of counsel in all termination proceedings would deny due process).

A more sophisticated argument, also advanced in K.A.S., attempts to justify the difference on the ground that in 600A terminations the state is not an active participant. 499 N.W.2d at 565. Therefore, it is argued, the legislature might legitimately decide only indigents “who must overcome the vast resources of the state” deserve counsel appointed at public expense. Id.

It is true the county attorney generally prosecutes 232 terminations, and not 600A terminations. Iowa Code § 232.114(1). This argument, however,

understates the actual involvement of the state.... “A stepparent adoption differs from other parental termination cases in that it is not an action brought by the state and argued by state attorneys. But neither is the adoption proceeding a purely private dispute. The state is called upon to exercise its exclusive authority to terminate the legal relationship of parent and child.... ”

K.A.S., 499 N.W.2d at 565-66 (quoting In re Jay, 150 Cal.App.3d 251, 197 Cal.Rptr. 672, 680 (1983)). We agree. Even though James, a private party, brings the action, the state is an integral part of the process in a 600A termination. Although a 600A termination is

initiated by private parties as a prelude to an adoption petition, rather than by a state agency, the challenged state action remains essentially the same: [the respondent] resists the imposition of an official decree extinguishing, as no power other than the State can, her parent-child relationships.

M.L.B., 519 U.S. at 117 n. 8, 117 S.Ct. at 564 n. 8, 136 L.Ed.2d at 488 n. 8 (emphasis added). On further inspection, then, the apparent distinction in the level of state action between 232 and 600A terminations disappears.

We conclude there is no narrowly tailored compelling state interest to deny counsel at public expense to indigent parents facing an involuntary termination of their parental rights under Iowa Code chapter 600A. The statutory framework thus fails to withstand strict scrutiny, and runs afoul of the Iowa Equal Protection Clause. Iowa Const. art. I, § 6; K.A.S., 499 N.W.2d at 566 (“denying an indigent parent court-appointed counsel in a [private termination proceeding] serves no compelling state interest and would deny that parent equality of the privilege of counsel which is granted, upon the same terms, to other indigent parents”); Zockert, 800 P.2d at 778 (same). Put simply, the legislative framework is unconstitutionally underinclusive, insofar as the legislature has withheld the privilege of counsel at public expense to parents facing involuntary 600A terminations. K.A.S., 499 N.W.2d at 566 (“exelud[ing] indigent parents in an adoption proceeding from the class of indigent parents entitled to counsel creates an impermissible, underinclu-sive legislative classification, because the classification does not include all who are similarly situated”).

“Where a statute is defective because of underinclusion there exist two remedial alternatives: a court may either declare it a nullity and order that its benefits not extend to the class that the legislature intended to benefit, or it may extend the coverage of the statute to include those who are aggrieved by exclusion.” Welsh v. United States, 398 U.S. 333, 361, 90 S.Ct. 1792, 1807-08, 26 L.Ed.2d 308, 331 (1970) (Harlan, J., concurring). The latter remedy is appropriate in this case: on remand, Krista should be appointed counsel at public expense. To deny counsel in all termination proceedings would contravene legislative intent. See Iowa Code § 600A.1 (provisions of chapter 600A shall be liberally construed, and interests of parents of child “be given due consideration in this interpretation”); cf. In re Chambers, 261 Iowa 31, 34-35, 152 N.W.2d 818, 821 (1967) (extending statutory right to counsel to appellate level, in part, on liberality grounds); Zockert, 800 P.2d at 779 (“lawmakers have disclosed no intent to deny [the] privilege [of counsel] but, rather, an intent that parents enjoy the privilege when faced with a termination.... ”). It would also call into question the constitutionality of those proceedings. See Lassiter, 452 U.S. at 31-32, 101 S.Ct. at 2161-62, 68 L.Ed.2d at 652 (although federal Due Process Clause does not mandate appointment of counsel in all termination proceedings, trial courts must not automatically deny counsel, but instead engage in a two-prong balancing test); K.A.S., 499 N.W.2d at 567 (“If a statute is susceptible of two constructions, one of which would render it of doubtful constitutionality and one of which would not, the latter must be adopted.”). The district court is reversed, and on remand Krista should be appointed counsel at public expense. See Iowa Code ch. 13B (outlining responsibilities of the state public defender). Given this conclusion, we need not rule on Krista’s other constitutional claims.

IV. Conclusion

We hold the Iowa Equal Protection Clause guarantees an indigent parent the right to counsel in an involuntary termination of parental rights proceeding brought pursuant to Iowa Code chapter 600A. The district court’s ruling to the contrary must be reversed, and on remand counsel shall be appointed for Krista at public expense. We do not reach Krista’s other equal protection and due process claims.

REVERSED AND REMANDED.


text:
    STATE of Iowa, Appellant, v. James Craig DAVIS, Appellee.
    No. 03-0888.
    Supreme Court of Iowa.
    May 12, 2004.

      Thomas J. Miller, Attorney General, Mary E. Tabor, Assistant Attorney General, and Alan M. Wilson, County Attorney, for appellant.
    Allan C. Orsborn and Ryan J. Mitchell of Orsborn, Bauerle, Milani & Grothe, L.L.P., Ottumwa, for appellee.
   WIGGINS, Justice.

An Iowa trial information charged defendant, James C. Davis, a Missouri resident, with crimes he allegedly committed on property that spanned the Iowa-Missouri border. A Missouri judge, based on the application of a Missouri prosecutor and an Iowa sheriff, issued a search warrant for defendant’s property, which was located in Missouri. The defendant moved to suppress the evidence seized because a defect existed in the application for the search warrant. The State resisted the motion to suppress contending there was no defect in the application, and if there was a defect, the good faith exception to the exclusionary rule would allow the admission of the evidence. The district court concluded there was a defect in the application making the search warrant invalid. The district court further concluded the Iowa courts do not recognize the good faith exception to the exclusionary rule and sustained defendant’s motion to suppress. On appeal, we find that the good faith exception to the exclusionary rule as recognized by Missouri is applicable to this Iowa prosecution and reverse.

I. Background Facts and Proceedings.

Defendant is a Missouri resident. After the defendant’s father died, defendant’s brother, Bobby Davis, and defendant’s mother, June Davis, made over forty complaints to law enforcement officers in Wayne County, Iowa, concerning acts of vandalism to their property, which spans the Iowa-Missouri border. The complaints included fences being cut multiple times, fires being set on the property, and property missing from the premises.

Because the Davis property was remote and five miles in length, it was difficult for the police to investigate. Regardless, they used surveillance at times, but no leads formed because of their efforts. On August 23, 2001, the authorities received a break in the case when an anonymous informant called to report that defendant had just left a farm field in the area where the vandalism occurred. The caller informed the police that defendant was driving a four-wheel all terrain vehicle and carrying several items in its front basket. Matt Davis, a family member, corroborated the anonymous tip by reporting the same incident.

Accordingly, the police investigation focused on defendant, who was involved in an ongoing dispute with his brother and mother over his father’s estate. The next logical step in the investigation was to search defendant’s premises in Putnam County, Missouri, for any evidence that would connect him with the crimes. On September 6, 2001, Sheriff Davis of Wayne County, Iowa, met with Putnam County, Missouri, prosecutor, James Garrett, to obtain a warrant to search defendant’s premises. Garrett prepared the application for the search warrant. The application stated Garrett was duly sworn when he signed the application, but it was not verified. Sheriff Davis testified he did not see anyone administer the oath to Garrett when Garrett signed the application. Attached to the application was an affidavit, signed by Sheriff Davis. Garrett, who was also a notary public, verified Sheriff Davis’s affidavit. Sheriff Davis presented the application to a judge from the associate circuit court of Putnam County, Missouri. After reviewing the application, the court concluded, “there is probable cause to believe the allegations of the [application] to be true and probable cause for the issuance of a search warrant herein.”

The search of defendant’s property took place on September 7, 2001. Sheriff Jason Knight, from Putnam County, Missouri, served the warrant and participated in the search. Iowa law enforcement authorities also participated in the search. The law enforcement personnel seized many items, including a saw, vice grips, bolt cutters, and wire cutters. After the search, Sheriff Knight gave the seized property to the Iowa law enforcement authorities for processing. The Iowa Department of Criminal Investigation (DCI) made lead impressions of the cutting instruments and compared the impressions with the wire samples from the cut fences, but the results were inconclusive. Upon defendant’s request, the Iowa authorities returned the seized items to the defendant. After the authorities returned the items to the defendant, a criminologist from the DCI found wire samples that he had failed to compare with the impressions made from the wire cutters seized pursuant to the first warrant. Sheriff Davis still had the impressions in his possession and returned them to the DGI. The DCI made a positive comparison with the lead impressions and the wire samples.

On this basis, Sheriff Davis secured a second warrant, following the same procedure as was followed in obtaining the first warrant. On May 30, 2002, Garrett prepared the application for the second search warrant. The application stated Garrett was duly sworn when he signed the application, but it was not verified. Once again, Sheriff Davis did not see anyone administer the oath to Garrett. Attached to the second application was an affidavit signed by Sheriff Davis. Garrett, who was also a notary public, verified Sheriff Davis’s affidavit. The second application essentially listed the same tools as were seized pursuant to the first search warrant. Additionally, the second application contained information about a cattle head gate, which someone took from the property in January 2002. The same judge, who approved the issuance of the first warrant, approved the issuance of the second warrant. The judge based her finding of probable cause partly on the DCI’s report, which found a positive comparison between the lead impressions and the wire samples. Authorities from Iowa and Missouri executed the search warrant on May 31, 2002. The sheriff listed the head gate, bolt cutters, tin snips, and pliers in the inventory of items seized during the search.

A trial information filed in the Iowa district court charged defendant with two counts of criminal mischief and one count of ongoing criminal conduct. Defendant pled not guilty to the charges and moved to suppress the evidence seized during the searches of his property. In his motion, the defendant argued numerous grounds for suppression of the evidence. The State filed a resistance to defendant’s motion. On May 5, 2003, the district court granted the motion to suppress. The district court noted that pursuant to Missouri law, “any peace officer or prosecuting attorney” may apply for a search warrant. When Sheriff Davis went outside his jurisdiction, however, he was no longer a peace officer and therefore, could not make an application for a search warrant. Although the Putnam County prosecutor also signed the application for the search warrant, he was not under oath at the time, making his application unverified. Pursuant to Missouri law, a court cannot issue a search warrant based on an unverified application. The district court next concluded that since Iowa law does not recognize a good faith exception to the exclusionary rule for officers who believe they are executing a valid search warrant, the court had no other choice but to suppress the evidence. The State sought discretionary review of the suppression ruling, and this court granted the State’s application.

II. Issues.

The State claims the procedure used by the Missouri prosecutor complied with the Missouri warrant statute governing the issuance of search warrants. In the alternative, if a defect occurred in the application process, the good faith exception to the exclusionary rule as applied by the Missouri courts does not require the suppression of the evidence. Defendant argues otherwise in his brief. He also claims the affidavit to the September 2001 application lacked probable cause to believe evidence of a crime might be located on the property to be searched, thus the Missouri court should not have issued the first search warrant.

III. Standard of Review.

Because the defendant’s challenge to the finding of probable cause by the court when it issued the first warrant is on constitutional grounds, our review is de novo. State v. Seager, 571 N.W.2d 204, 207 (Iowa 1997). We do not make an independent determination of probable cause, but only determine whether the issuing court had a substantial basis for finding the existence of probable cause. State v. Green, 540 N.W.2d 649, 655 (Iowa 1995). In determining whether a substantial basis existed for finding probable cause, we are limited to consideration of only that information, reduced to writing, which the applicant presented to the court at the time of the application for the warrant. State v. Gogg, 561 N.W.2d 360, 363 (Iowa 1997).

The challenge to the statutory sufficiency of the application for issuance of the warrant is for correction of errors at law. State v. Beckett, 532 N.W.2d 751, 753 (Iowa 1995).

IV. The Challenge to the Finding of Probable Cause.

We use the totality of the circumstances standard enunciated in Illinois v. Gates, 462 U.S. 213, 238-39, 103 S.Ct. 2317, 2332, 76 L.Ed.2d 527, 548 (1983), to determine whether probable cause has been established for the issuance of a search warrant. The existence of probable cause to search a particular area depends on whether a person of reasonable prudence would believe that evidence of a crime might be located on the premises to be searched. Gogg, 561 N.W.2d at 363. The task of the judge issuing the search warrant is “to make a practical, commonsense decision whether, given all the circumstances set forth in the affidavit” presented to the judge, there is a fair probability that law enforcement authorities will find evidence of a crime at a particular place. Gates, 462 U.S. at 238-39, 103 S.Ct. at 2332, 76 L.Ed.2d at 548. A finding of probable cause depends on “a nexus between criminal activity, the things to be seized and the place to be searched.” Green, 540 N.W.2d at 655. In making that determination, the judge may rely on reasonable, common-sense inferences from the information presented. Id. Close questions are resolved in favor of the validation of the warrant. State v. Poulin, 620 N.W.2d 287, 290 (Iowa 2000). In reviewing the court’s determination, we draw all reasonable inferences to support a court’s finding of probable cause. State v. Padavich, 536 N.W.2d 743, 747 (Iowa 1995). Considering the totality of the circumstances, the affidavit supported the Missouri court’s conclusion that probable cause existed for the issuance of the search warrant permitting the search of defendant’s property.

The verified affidavit signed by Sheriff Davis attached to the application for the search warrant stated that some person or unknown persons committed approximately forty acts of vandalism to the Iowa property. These acts included numerous field fences being cut, fires being set, and theft of property. These acts of vandalism revolved around a dispute over the Clifford Davis estate.

The affidavit disclosed that on July 24, 2001, the sheriff investigated fence cutting on the vandalized property. Someone made numerous cuts in the fence and pulled fence posts from the ground. The damaged fence was located in a remote area adjacent to the west side of defendant’s property. Access to the area could only be made with the aid of an ATV four-wheeler through the defendant’s property or by a dirt road on the Iowa-Missouri state line. At the time of the report, the sheriff discovered recent ATV tracks in the defendant’s field.

The affidavit also revealed that on August 23, 2001, a confidential informant observed the defendant trespassing on the informant’s property, which borders the property where the vandalism took place. The informant observed the defendant driving an ATV four-wheeler at the time. The informant advised the officers that the defendant had no legitimate basis to be in this area as he was trespassing on the informant’s property. When confronted by the informant, the defendant appeared to be surprised. The informant observed numerous items in the basket of the ATV, but was unable to identify any of these items. The informant noted the probate court had scheduled a hearing in the estate matter and that the acts of vandalism occurred at or near the time of the hearing. The sheriff confirmed in the affidavit that the confidential informant had provided reliable information to law enforcement in the past concerning numerous acts of vandalism that had occurred.

Shortly after the informant contacted the authorities, Matt Davis, who is on the same side of the family dispute as the defendant, called the Wayne County Sheriffs office and reported that he had observed the defendant in the area of the vandalized property, and that he and his father did not want to be blamed for anything that was done that day. Matt Davis also revealed to the sheriff that someone had told him the defendant was involved in earlier property damage at the vandalized premises.

On August 26, 2001, Sheriff Davis investigated an arson complaint, which occurred on the vandalized property. The sheriff determined two bales of hay had been deliberately set on fire. These bales were located at the entrance to the field located on the state-line road where the confidential informant had seen the defendant turning three days earlier.

This information was sufficient for the judge to find probable cause existed that defendant was involved in these crimes, and there may be evidence of such crimes on defendant’s premises.

V. The Challenge to the Search Warrant Application.

The statute applicable to the issuance of search warrants in Missouri provides that “[a]ny peace officer or prosecuting attorney may make application ... for the issuance of a search warrant. Mo.Rev.Stat. § 542.276(1) (2001). The application is required to ‘be verified by the oath or affirmation of the applicant.’ ” Mo.Rev.Stat. § 542.276.2(6). As used in section 542.276(1), “the term ‘peace officer’ means a police officer, member of the highway patrol to the extent otherwise permitted by law to conduct searches, sheriff or deputy sheriff.” Mo.Rev.Stat. § 542.261. Finally, a written application for a search warrant that is not verified is invalid. Mo. Rev.Stat. § 542.276.10(2).

The district court determined the warrants were invalid because Sheriff Davis did not have law enforcement power in Missouri and therefore, did not have authority to make the applications for the search warrants. The court further concluded that even though the Missouri prosecutor did have authority to make the applications for the search warrants, he failed to have his statements in the applications verified by oath or affirmation. Therefore, the search warrants were invalid because the applications did not meet the statutory requirements as provided by Missouri law. On appeal, the State argues the district court erred because the Missouri statutes allowed an Iowa peace officer to make the applications for the search warrants with the cooperation of a Missouri prosecutor who signed the applications. The defendant responds to this argument by asserting that the Missouri statutes do not allow an Iowa peace officer to make applications for search warrants. He further argues that because the prosecutor did not verify the applications for the search warrants by oath or affirmation, the warrants were invalid. Neither side has provided us with Missouri law squarely on point. Although both arguments have some merit, we find it unnecessary to decide how a Missouri appellate court would decide this issue, because of the following discussion regarding the good faith exception to the exclusionary rule.

The Supreme Court adopted a good faith exception to the Fourth Amendment exclusionary rule when an officer executing a search warrant relies on the warrant in good faith, even though a court later holds the warrant to be invalid. United States v. Leon, 468 U.S. 897, 922, 104 S.Ct. 3405, 3420, 82 L.Ed.2d 677, 698 (1984). In holding the good faith exception did not apply to this search, the district court relied on State v. Prior, 617 N.W.2d 260 (Iowa 2000). In Prior we applied the exclusionary rule because the warrant lacked probable cause violating the Fourth Amendment to the United States Constitution and article I, section 8 of the Iowa Constitution. 617 N.W.2d at 263-68. In Prior we rejected the good faith exception as

the best way to protect the integrity of the judicial process and an individual’s right under our state constitution to be free from government conduct ultimately determined to be unlawful. Accordingly, even if the search of [defendant] was conducted by officers within the framework of the good faith doctrine recognized in Leon, the exclusionary rule nevertheless applies to [defendant’s] claim under our state constitution.

Id. at 268.

The defects of which the defendant complains in this case do not rise to the level of constitutional defects, but are defects based upon the statutory requirements for an application for a warrant. Article I, section 8 of the Iowa Constitution requires that “no warrant shall issue but on probable cause, supported by oath or affirmation, particularly describing the place to be searched, and the persons and things to be seized.” Iowa Const, art. I, § 8. A judicial officer issued these search warrants on probable cause, supported by the oath of Sheriff Davis, particularly describing the place to be searched, and the items to be seized. These searches did not violate defendant’s constitutional rights as guaranteed by the Iowa Constitution. The district court’s reliance on Prior was misplaced.

This, however, does not complete our analysis. Our court has rejected the good faith exception when an application for a search warrant failed to meet the statutory requirements for issuance. Beckett, 532 N.W.2d at 755. In Beckett we rejected the good faith exception because recognizing it would effectively defeat the purpose of Iowa Code section 808.3 and make a failure to comply with the statute of no consequence. Id.

The Missouri courts have taken the opposite view and have adopted the good faith exception to the exclusionary rule when a defect exists in the application for a warrant. State v. Brown, 708 S.W.2d 140, 145 (Mo.1986); State v. Sweeney, 701 S.W.2d 420, 426 (Mo.1986). In Sweeney the Missouri Supreme Court stated:

Assuming arguendo the warrant might be found to be invalid under the statute, the Fourth Amendment exclusionary rule would not bar the prosecution’s introduction of evidence seized by officers who in this case acted in reasonable reliance on a search warrant issued by a detached and neutral judge. We do not find that the issuing judge abandoned his judicial role in a manner that would require invocation of the exclusionary rule; nor was the warrant so facially deficient as to preclude the same. Finally, the circumstances indicated that the officers were justified in their objective good faith reliance on this warrant.

Sweeney, 701 S.W.2d at 426 (citations omitted). In Brown the Missouri Supreme Court reaffirmed its position stating:

Assuming arguendo the search warrant was invalid because it was issued without a verified application in proper form, should the items seized pursuant to that arguably invalid warrant have been excluded in the prosecution’s case-in-chief? In [Leon] the United States Supreme Court provided for a good-faith exception to the traditional Fourth Amendment exclusionary rule. Noting that the exclusionary rule is not an express provision of the Fourth Amendment but instead is a judicially created remedy, the Court, evaluating the costs and benefits of suppressing reliable physical evidence, came down on the side of admitting inherently trustworthy tangible evidence rather than upon the side of uncertain deterrence of police misconduct. The teaching of Leon’s good-faith exception is that evidence seized pursuant to a warrant issued by a detached and neutral magistrate should not be excluded, irrespective of the actual validity of the warrant, so long as the officer conducting the search acted in objectively reasonable reliance on that warrant.

Brown, 708 S.W.2d at 145 (citations omitted).

In Iowa we refuse to apply the good faith exception to the exclusionary rule when a defect exists in the application for a warrant to protect the integrity of the statutes passed by our legislature. The Missouri courts, on the other hand, do not take the same approach in protecting their statutes. The search warrants met all the requirements of the Fourth Amendment to the United States Constitution and article I, section 8 of the Iowa Constitution because they were issued on probable cause, supported by the oath of Sheriff Davis, and particularly described the place to be searched and the things to be seized. We do not have any concerns regarding the trustworthiness of the evidence seized. We see no reason to give greater protection to the integrity of the Missouri statutes than the Missouri courts do under similar circumstances. For these reasons, we believe that the good faith exception as recognized by the Missouri courts applies to the Missouri searches, and the district court should have overruled defendant’s motion to suppress.

VI. Disposition.

Because we find that the good faith exception to the exclusionary rule as recognized by Missouri applies to the Missouri search warrants, defendant’s motion to suppress should have been overruled. Therefore, we reverse the order of the district court and remand for further proceedings consistent with this opinion.

REVERSED AND CASE REMANDED.