author: KALITOWSKI, Judge.

text:
    William J. HEMPEL, et al., Appellants, v. CREEK HOUSE TRUST, et al., Respondents, Judith Anna Ingemann f/k/a Judith Anna Seymour, Respondent, and all other persons unknown claiming any right, title, estate, interest, or lien in the real property described in the complaint here, Defendants.
    No. A06-2473.
    Court of Appeals of Minnesota.
    Dec. 31, 2007.

      Roger J. Magnuson, David Y. Trevor, Dorsey & Whitney LLP, Minneapolis, MN, for appellants.
    Lisa M. Agrimonti, Jesse R. Orman, Margaret Savage, Briggs and Morgan, Minneapolis, MN, for respondents Creek House Trust, et al.
    Glenn A. Bergman, Jared M. Goerlitz, Peterson Fram & Bergman, P.A., St. Paul, MN, for respondent Judith Anna Ingem-ann.
    Considered and decided by RANDALL, Presiding Judge; KALITOWSKI, Judge; and HUDSON, Judge.
   OPINION

KALITOWSKI, Judge.

Appellants William J. and Kay L. Hem-pel challenge the district court’s grant of summary judgment to respondents Creek House Trust and Judith Anna Ingemann on appellants’ claim for “specific performance/breach of contract/damages” and their request for a declaratory judgment, arguing that (1) the district court incorrectly determined that their claim of breach of a right-of-first-refusal agreement was barred by the six-year limitations period in Minn.Stat. § 541.05, subd. 1 (1992); and (2) they were entitled to a declaratory judgment clarifying the current status of the agreement. Appellants also argue that the district court erred in denying their motion to amend their complaint to add an additional defendant.

FACTS

This case involves two adjacent parcels of land: (1) the parcel owned by appellants, the Hempel property; and (2) the parcel owned by respondents, the Creek House property, or subject property. Pri- or to 1981 both properties were owned by respondent Judith Anna Ingemann (fVa Judith Anna Seymour). On February 3, 1981, Ingemann sold the Hempel property to William and Nancy Harris. As part of the sale, Ingemann gave the Harrises a right of first refusal on the subject property:

If [Ingemann] receives a bona fide written offer for the purchase of the Subject property or any portion thereof, [Ingem-ann] shall not accept such offer without first offering to sell the same to Harris on the same terms and conditions set forth in said offer less any real estate broker’s commission which [Ingemann] would be obligated to pay if [Ingemann] accepted said offer. Written notice of said offer shall be given by [Ingemann] to Harris and Harris shall have 2 weeks thereafter to exercise the said right of first refusal by giving written notice thereof to [Ingemann]. If Harris does not so exercise said right of first refusal, [Ingemann] shall be free to accept said offer. If [Ingemann] does not accept said offer, Harris shall again have the same right of first refusal with respect to any subsequent offer for the purchase of the Subject Property or any portion thereof.

The parties further agreed that “[t]he right of first refusal hereby granted to Harris shall be binding upon [Ingemann] and [Ingemann’s] heirs and assigns and shall inure to the benefit of Harris and Harris’ heirs and assigns.” The right-of-first-refusal agreement was recorded in Chisago County February 6,1981.

The Hempel property was conveyed from the Harrises to James and Mary Lande in 1982 and the Harrises specifically assigned their right of first refusal to the Landes. In 1985 the Landes conveyed the Hempel property to appellants with a specific assignment of the right of first refusal. All conveyances of the Hempel property were recorded in Chisago County-

On July 17, 1992, respondent Ingemann conveyed the subject property to William and Jean West by a warranty deed that did not mention the right of first refusal. There is a factual dispute as to whether the Wests knew of the right-of-first-refusal agreement at the time of the conveyance. On the same date, Ingemann executed a document that stated: “Right of First Refusal has lapsed. Said William R. Harris is now deceased and said Nancy R. Harris no longer resides at neighboring property and to the best of my ability can not [sic] locate her.” Ingemann admits that notice was not furnished to Nancy R. Harris or appellants. The warranty deed conveying the subject property to the Wests and the “lapse statement” were recorded in Chisa-go County on July 22, 1992. Jean West conveyed the subject property to the Creek House Trust October 20, 2004. The Creek House trustees claim that they made no offer to purchase the subject property and that their mother, Jean West, conveyed it to them as a gift.

Appellants discovered in January 2004 that Ingemann had transferred the subject property. On October 31, 2005, appellants filed a complaint against Ingemann, the Creek House Trust, and any unknown persons claiming a right to the subject property. Appellants included a request for a declaratory judgment under Minn.Stat. § 555.01 (2004), and a claim for “specific performance/breach of contract/damages.”

Respondent Creek House Trust moved for summary judgment. The trust argued that appellants’ claim for specific performance/breach of contract/damages was barred by the six-year statute of limitations for contract claims because appellants were “seeking damages and specific performance based on a contract that was breached, if at all, more than 13 years ago.” Respondent trust further argued that the request for a declaratory judgment should not be granted because appellants did not meet the statutory prerequisites for relief under Minn.Stat. § 555.01.

The district court granted the trust’s motion on May 12, 2006, holding that there were no genuine issues as to any material facts and that the claim for specific performance/breach of contract/damages failed as a matter of law as time-barred because “in July of 1992 the [appellants] could have initiated a breach of contract action against Ingemann and that action would have survived a motion to dismiss.” The court also denied the request for a declaratory judgment stating that “this claim cannot stand on its own.”

More than five months after respondents filed the summary judgment motion, and only three days before it was granted, appellants filed a motion to amend their complaint to add Jean West as a defendant. Appellants alleged that West’s 2004 transfer of the subject property to the Creek House Trust was an additional breach of the obligations contained in the right of first refusal. Respondent trust argued that the motion should be denied as it lacked merit, was untimely, and would cause it prejudice.

The district court denied appellants’ motion to amend on June 6, 2006, stating that “[although the Court finds there would be little prejudice to [respondents] ... because there was undue delay by [appellants] and because it would be futile ..., it is appropriate to deny [appellants’] motion.”

On July 24, 2006, Ingemann, the only remaining defendant, moved to dismiss appellants’ claims against her with prejudice. The district court incorporated its summary judgment findings and granted her motion on September 26, 2006. This appeal follows from that judgment.

ISSUES

1. When does the statute of limitations for a claimed breach of a right-of-first-refusal agreement begin to run?

2. Should Minnesota adopt the “discovery rule” to toll the running of the statute of limitations for a claimed breach of a right-of-first-refusal agreement until the right-holder has notice of the breach?

3. Should the statute of limitations have been tolled as a result of respondents’ alleged fraudulent concealment?

4. Is appellants’ claim timely because the appropriate statute of limitations for a right-of-first-refusal claim is 40 years as provided in the Marketable Title Act?

5. Did the district court abuse its discretion by denying appellants’ motion to amend their complaint?

6. Did the district court err in refusing to hear appellants’ request for a declaratory judgment regarding the current status of their right of first refusal?

ANALYSIS

The standard of review applicable to a grant of summary judgment is whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Wallin v. Letourneau, 534 N.W.2d 712, 715 (Minn.1995). If no material facts are at issue on appeal, the reviewing court need only determine “whether the district court erred in applying the law to determine the accrual of the cause of action and the running of the statute of limitations.” Peterson v. Johnson, 720 N.W.2d 833, 837 (Minn.App.2006) (quotation omitted). A challenge to the district court’s application of a statute of limitations is a question of law to be reviewed de novo. Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn.1998).

I.

Appellants contend that the district court erred in finding that their claims based on the 1992 conveyance were barred by the six-year statute of limitations period of Minn.Stat. § 541.05, subd. 1 (1992). Appellants argue that their claim for breach of a right of first refusal did not accrue until they received notice that the right was activated by a third party’s bona fide written offer to purchase the subject property. We disagree.

Appellants maintain that the right of first refusal is dormant until notice of an offer to purchase is given. Thus, on the facts here, they claim they had no basis to bring a lawsuit because the statute never started to run absent their notice of the 1992 sale. Appellants are correct that the right of first refusal is activated when the right-holder receives notice of an offer to purchase the subject property. See, e.g., Dyrdal v. Golden Nuggets, Inc., 689 N.W.2d 779, 784 (Minn.2004) (holding that a right of first refusal “ripens into an option when the owner receives a bona fide third party offer and notifies the holder of the right”); Park-Lake Car Wash, Inc. v. Springer, 352 N.W.2d 409, 411 (Minn.1984) (distinguishing a right-first-refusal agreement from an option contract because the former requires a condition precedent: “the owner must have received a bona fide offer from a third party which he or she is willing to accept”). But the right of first refusal is breached when the required notice is not given because that is when appellants’ claim would survive a motion to dismiss.

In support of their argument that their claim did not accrue, appellants rely on an Indiana case that states that holders of a right of first refusal are “not entitle[d] ... to take any action until they receive[] notice of the offer.” McGehee v. Elliott, 849 N.E.2d 1180, 1189 (Ind.Ct.App.2006). But the McGehee court did not hold that plaintiffs are precluded from bringing a claim until they have notice. Rather, the court held that right-holders are precluded from exercising their right until they have notice because, until they have notice of the proposed sale, they do not yet have the option to purchase the subject property. When notice is given to its holder, the right of first refusal is “transmuted into an option,” but the lack of notice completes the breach of the right-of-first-refusal agreement and creates a cause of action. Id. at 1188-89 (quotation and citation omitted). The McGehee court stated, “the only time limitation at that point [is] the statute of limitations on a breach of contract action,” rejecting the argument that a claim for a breach of a right-of-first-refusal agreement must be brought within the time limitations the agreement provided for exercising the option to purchase. Id. at 1189 (citation omitted).

Appellants cite other cases from foreign jurisdictions, but those focus on the triggering and exercising of a right of first refusal and do not discuss whether the limitations period only begins to run after notice is given. See Pincus v. Pabst Brewing Co., 893 F.2d 1544, 1550-53 (7th Cir.1990) (determining what constitutes proper notice); John D. Stump & Assoc., Inc. v. Cunningham Mem. Park, Inc., 187 W.Va. 438, 419 S.E.2d 699, 704-06 (1992) (determining what constitutes proper notice); New Haven Trap Rock Co. v. Tata, 149 Conn. 181, 177 A.2d 798, 800 (1962) (holding notice triggers the option); Webb v. Reames, 326 S.C. 444, 485 S.E.2d 384, 385-86 (Ct.App.1997) (declaring a perpetual right of first refusal with a fixed purchase price was void for violating the rule against perpetuities). None of the cases cited by appellant held that the running of the statutory period was tolled until notice was given.

Statutes of limitations serve dual purposes: “the repose of the defendant and the fair and effective administration of justice.” Dalton v. Dow Chemical Co., 280 Minn. 147, 153 n. 2, 153 N.W.2d 580, 584 n. 2 (1968). Minnesota courts interpreting Minn.Stat. § 541.05 have held that the statute begins to run when the cause of action accrues, meaning when a plaintiffs claim would survive a defendant’s motion to dismiss for failure to state a claim upon which relief can be granted (the “damage” rule). See Antone v. Mirviss, 720 N.W.2d 331, 335 (Minn.2006) (applying the rule to a claim for legal malpractice); Juster Steel v. Carlson Cos., 366 N.W.2d 616, 618 (Minn.App.1985) (holding that a breach of contract claim must be brought within six years of the action causing the breach).

We reject appellant’s argument that the damage rule is inappropriate for a claim alleging a breach of a right-of-first-refusal agreement. A right-of-first-refusal agreement is a contract and the party with the right is damaged when it is breached. Here the district court correctly granted respondent’s motion for summary judgment because “in July of 1992 the [appellants] could have initiated a breach of contract action against Ingemann and that action would have survived a motion to dismiss.” Thus the six-year limitations period applicable to contract actions expired in July of 1998 and appellants’ subsequent attempt to bring forth a claim was time-barred. Minn.Stat. § 541.05, subd. 1.

II.

Appellants also contend that the district court erred in concluding that their claims based on the 1992 conveyance were barred by the six-year statute of limitations, arguing that this court should apply the “discovery rule,” recognized in other jurisdictions, to toll the limitations period until the right-holder knew or reasonably should have known the subject property had been sold. We disagree. Minnesota courts “have declined to adopt the discovery rule” even when confronted with arguments that it would be unfair because the injured party did not have any knowledge of the relevant facts until after their claim was time-barred. Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn.1999) (determining that the statutory . period began to run when plaintiffs claim would have survived a 12(b)(6) motion); see also Antone, 720 N.W.2d at 335-36 (holding that a claimant was barred by a statute of limitations from seeking damages for legal malpractice where the attorney negligently prepared an antenuptial agreement although this negligence was not discovered until the marriage was dissolved 12 years after the agreement’s creation); Molloy v. Meier, 679 N.W.2d 711, 722 (Minn.2004) (reaffirming the “longstanding principle” that the statute of limitations for medical malpractice claims based on failures to diagnose begins to run at the time of the misdiagnosis). Rather, as explained above, Minnesota has applied the damage rule to the running of a statutory limitations period. Dalton, 280 Minn. at 153, 158 N.W.2d at 584.

Ignorance of the damage does not toll the limitations period unless the action involves continuing negligence, trespass, or fraud by the defendant. Id. at 153, 158 N.W.2d at 584. “This is upon the theory that ignorance is the result of want of diligence, and the party cannot take advantage of his own fault.” Schmucking v. Mayo, 183 Minn. 37, 39, 235 N.W. 633, 633 (1931). In addition, Minnesota courts have declined to read a discovery requirement into a statutory limitations period because “where the legislature intends the limitation period to be contingent upon the knowledge of the aggrieved party, it has so provided.” Juster Steel, 366 N.W.2d at 618 (quoting Murphy v. Country House, Inc., 307 Minn. 344, 348, 240 N.W.2d 507, 510 (1976)). Accordingly, we decline appellants’ invitation to adopt the discovery rule here.

III.

Appellants argue that under the doctrine of fraudulent concealment, the limitations period here did not run while facts related to the claim were concealed from the right-holder. This issue was not presented to the district court. Generally, this court will not consider matters not argued and considered in the court below. Thiele v. Stick, 425 N.W.2d 580, 582 (Minn.1988). And Minnesota courts have declined to address a fraud claim not presented to the district court. See, e.g., Ketterer v. ISD No. 1, 248 Minn. 212, 215, 79 N.W.2d 428, 432 (1956). We conclude that given the fact-intensive nature of a fraud claim, we will not address appellants’ fraudulent concealment claim for the first time on appeal.

IV.

Appellants argue in the alternative that the Marketable Title Act (MTA) provides the appropriate statute of limitations and that claims brought within 40 years are timely under the MTA. Minn.Stat. § 541.023 (1992). We disagree.

The MTA applies “against a claim of title based upon a source of title.... ” Minn.Stat. § 541.023, subd. 1. “[T]he words ‘source of title’ ... shall mean any deed, judgment, decree, sheriffs certificate, or other instrument which transfers or confirms, or purports to transfer or confirm a fee simple title to real estate -” Id., subd. 7 (emphasis added). The MTA does not operate offensively to provide foundation for new title, but defensively to protect preexisting claims of title. Padrnos v. City of Nisswa, 409 N.W.2d 36, 38 (Minn.App.1987), review denied (Minn. Sept. 23, 1987).

A “right of first refusal” is defined as a “potential buyer’s contractual right to meet the terms of a third party’s higher offer.” Black’s Law Dictionary (8th ed.2004) (emphasis added). And even when the right ripens into an option to purchase the subject property it remains “only a right in personam to buy at his election.” Shaughnessy v. Eidsmo, 222 Minn. 141, 145, 23 N.W.2d 362, 365 (Minn.1946).

Appellants do not and cannot allege that the right-of-first-refusal agreement granted them a fee simple interest in the subject property. Rather, appellants stated in their complaint that they “have a valid and enforceable right of first refusal on the subject property.” But this right only grants the holder the option of purchasing the property if the owner of the subject property receives an offer from a third-party purchaser. M.L. Gordon Sash & Door Co. v. Mormann, 271 N.W.2d 436, 439-41 (1978). And even when a right of first refusal ripens into an option, this does not convey title. See id. at 439 (“An option to purchase land does not before acceptance vest in the holder of the option an interest in the land.”). We conclude that appellant’s claim is not governed by the MTA because it is not based on a “source of title” and the statute is not to be invoked offensively.

V.

Appellants argue that the district court abused its discretion in denying their motion to amend their complaint “to add Jean V. West as a defendant and ... to clarify that the declaratory relief sought by Plaintiffs will include an allegation that the 2004 transfer from Jean V. West to the Creek House Trust was in breach of the right of first refusal.” We disagree.

Amendments should be freely granted except when they would result in prejudice to the other party. Minn. R. Civ. P. 15.01. But when the amendment, if adopted, would modify the district court’s scheduling order, “a showing of good cause” is required. Minn. R. Civ. P. 16.02. And a party must act with due diligence in attempting to amend its complaint. Meyer v. Best W. Seville Plaza Hotel, 562 N.W.2d 690, 694 (Minn.App.1997), review denied (Minn. June 26, 1997). The district court has broad discretion to grant or deny leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of discretion. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

Appellants did not show good cause for their delay. The district court stated “it is unclear ... why [appellants] did not include proposed Defendant Jean West in their original Complaint.” Appellants knew when they filed their complaint that Ingemann had conveyed the subject property to the Wests and that the Creek House Trust was the current record owner. But appellants named only Ingemann and the Creek House Trust as defendants. Appellants did not file their motion requesting Jean West be joined as a defendant until five months after respondent trust had moved for summary judgment and nearly two months after the scheduling order’s deadline to join additional parties had passed. And appellants failed to show good cause for modifying the scheduling order. On this record we conclude that the district court acted within its discretion in denying appellants’ motion to amend their complaint.

VI.

Appellants argue that the district court erred in declining to clarify the current validity of the right-of-first-refusal agreement under the Uniform Declaratory Judgments Act (UDJA). Minn.Stat. § 555.01 (2004). We agree.

“Any person interested under a ... written contract ... may have determined any question of construction or validity arising under the ... contract ... and obtain a declaration of rights, status, or other legal relations thereunder.” Minn. Stat. § 555.02 (2004). “A contract may be construed either before or after there has been a breach thereof.” Minn.Stat. § 555.03 (2004). The UDJA’s purpose “is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations; and is to be liberally construed and administered.” Minn.Stat. § 555.12 (2004).

“The main characteristic of the declaratory judgment which distinguishes it from other judgments is that, by the act authorizing it, courts are empowered to adjudicate upon disputed legal rights whether or not further relief is or could be claimed.” Ketterer, 248 Minn. at 226, 79 N.W.2d at 439.

A justiciable controversy exists [in a declaratory judgment action] if the claim: (1) involves definite and concrete assertions of right that emanate from a legal source, (2) involves a genuine conflict in tangible interests between parties with adverse interests, and (3) is capable of specific resolution by judgment rather than presenting hypothetical facts that would form an advisory opinion.

Onvoy, Inc. v. ALLETE, Inc., 736 N.W.2d 611, 617-18 (Minn.2007). Here a declaratory judgment was appropriate because the claim of right is based in contract. In addition, the claim involves a genuine conflict between adverse parties, as indicated by the assignment to appellants and filing of the right of first refusal when appellants purchased their property, and the filing of the “lapse” document by respondent In-gemann. Finally, a declaratory judgment would resolve the dispute because the parties would know if a right of first refusal continues to encumber the subject property-

The district court granted respondent’s motion for summary judgment “as a matter of law” on appellant’s claim seeking declaratory judgment because “[p]ursuant to Minnesota caselaw, this claim cannot stand on its own.” The district court cited Alliance Stability v. Metro. Council and Vrieze v. New Century Homes, Inc. for the proposition that a declaratory judgment is precluded unless the request is coupled with a valid additional cause of action. 671 N.W.2d 905, 916 (Minn.App.2003); 542 N.W.2d 62, 67 (Minn.App.1996). But in Alliance Stability the court determined that a declaratory judgment was inappropriate because a private right of action did not exist under the statute the claimants argued was violated. 671 N.W.2d at 915 n. 8. And in Vrieze, claimants were not entitled to a declaratory judgment because their underlying claims were barred because of the discretionary immunity doctrine. 542 N.W.2d at 67.

We conclude that although the UDJA “cannot create a cause of action that does not otherwise exist,” the eases cited by the district court are not controlling because here, the district court was not required to “create” a cause of action. See Alliance Stability, 671 N.W.2d at 916 (discussing the UDJA). The fact that appellant’s claimed breach based on the 1992 conveyance is time-barred by a statute of limitations does not determine whether appellants still have a right of first refusal.

A district court, in an exercise of its discretion, “may refuse to render or enter a declaratory judgment or decree where such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy giving rise to the proceeding.” Minn.Stat. § 555.06 (2004). But here, two inconsistent documents were before the district court: the right-of-first-refusal agreement and the lapse statement. Because a declaratory judgment clarifying the right-of-first-refusal agreement’s status would eliminate uncertainty, we conclude that the district court’s refusal to enter a declaratory judgment constituted an abuse of its discretion. We therefore reverse the district court and remand for further proceedings clarifying the parties’ current rights and obligations under the right-of-first-refusal agreement.

DECISION

We affirm the district court’s determination that appellants’ claims were barred by the applicable statute of limitations and its denial of appellants’ motion to amend their complaint. We reverse and remand the district court’s refusal to hear appellants’ request for a declaratory judgment.

Affirmed in part, reversed in part, and remanded.

      . We note that although it is undisputed that all documents relevant to the breach of the right-of-first-refusal agreement were properly filed, the issue of whether this constituted constructive notice for appellants was neither presented to nor addressed by the district court and we do not address it here.


source: Caselaw Access Project

author: SHUMAKER, Judge.

license: Public Domain

text:
    INDEPENDENT SCHOOL DISTRICT NO. 281, Robbinsdale, Minnesota, Relator, v. MINNESOTA DEPARTMENT OF EDUCATION, Respondent.
    No. A07-1.
    Court of Appeals of Minnesota.
    Jan. 8, 2008.

      Stephen M. Knutson, Peter A. Martin, Knutson, Flynn & Deans, P.A., Mendota Heights, MN, for relator.
    Lori Swanson, Attorney General, Martha J. Casserly, Assistant Attorney General, St. Paul, MN, for respondent.
    Considered and decided by KLAPHAKE, Presiding Judge; SHUMAKER, Judge; and WORKE, Judge.
   OPINION

SHUMAKER, Judge.

Relator Independent School District No. 281 appeals from an order by respondent the MDE, which concluded that the district violated Minn.Stat. §§ 125A.03 and 125A.18 (2006) and 34 C.F.R. § 300.309 (2006) by its policy of unilaterally limiting the special instruction and services, particularly extended school year (ESY) services, it made available to all disabled, nonpublic-school students in the district. The MDE’s order required the district to take the following corrective action: (1) prepare, and provide to the MDE for pre-approval, a memorandum regarding the rights of nonpublic students residing in the district to a free appropriate public education (FAPE) and addressing the rights to special education and related services, including ESY, which would then be distributed to specified school personnel and (2) provide parents of all disabled, nonpublic-school students in the district with a redacted copy of the complaint decision and a letter, to be preapproved by MDE, explaining their “right to request an [individualized educational program (IEP)] meeting to discuss special education services including ESY and any necessary compensatory education.”

On appeal, the district seeks reversal of the MDE’s decision on several grounds, contending that (1) the MDE lacked authority to review the district’s provision of ESY services for all nonpublic-school students with disabilities in the district, because the MDE’s investigation arose from a complaint from one child’s parent; (2) the MDE erroneously interpreted Minnesota law when it determined that the district had violated Minn.Stat. §§ 125A.03 and 125A.18 by its policy of unilaterally limiting the special instruction and services, particularly ESY services, to disabled, nonpublic-school students residing in the district; (3) Minn.Stat. § 125A.18 does not apply to the complainant’s child, because it only applies to students who attend classes part time in the school district and during the regular school day; (4) the MDE lacked authority to address violations based solely on state law; (5) the MDE’s decision is arbitrary, capricious, and not grounded in substantial evidence because the record does not indicate that any parents of private-school students, other than complainant, sought ESY services from the district; and (6) the MDE’s decision was untimely.

FACTS

During the 2005-06 school year, the complainant’s child attended third grade at a nonpublic school in the district, where the student was voluntarily enrolled. In February 2006, the district determined that the student met state eligibility criteria in the area of “other health disabilities” and needed special education and related services. Accordingly, the district prepared an IEP, describing the special education services the student would receive. The goals of the student’s IEP were to increase math and organizational skills by providing for 30 minutes per week of direct math instruction, 10 minutes per week of indirect math services, 20 minutes per week of indirect occupational therapy, and 10 minutes per week of indirect organization skills service at a public school in the district. The student’s IEP indicated that ESY services were not required.

In May 2006, the complainant asked the district to determine if the child was eligible for ESY services during the summer of 2006. In a May 22, 2006 email, the district’s special-education director denied the complainant’s request, explaining that (1) “[i]n the case of students that attend private or non-public schools we do not provide summer services for students with disabilities because our obligation for service is met by the commitment of resources during the school year” and (2) “[s]tudents attending private schools do not have an individual right to special education services.”

Ultimately, the district agreed to provide some ESY services, specifically 60 minutes of math for four weeks. The district contends that the complainant agreed to these services and declined additional ESY services; but, the complainant claims that this was all the district would provide. The complainant contracted with a private school for additional summer services.

In a complaint filed July 21, 2006 with the MDE, the student’s parent asserts that the district failed to provide appropriate ESY services to the student and violated federal and state law by denying ESY services to disabled, nonpublic-school students residing in the district. As a remedy, the complainant requested that the district reimburse her for tuition from the private school instruction the student received during the summer of 2006. In response, the district claimed that the complainant had agreed that the ESY services were sufficient, the student had completed the ESY program successfully, and that none of the other 17 special-education students enrolled in nonpublic schools during the 2005-06 school year requested or received ESY services.

In its November 3, 2006 decision, the MDE concluded that the district’s policy of unilaterally limiting the special instruction and services, particularly ESY services, violated Minn.Stat. §§ 125A.03 and 125A.18 (2006) and 34 C.F.R. § 300.309 (2006). The MDE determined, however, that the district had provided appropriate ESY services to the student during the 2006 summer, even though it had misunderstood nonpublic-school students’ rights to a FAPE. Thus, the district was not ordered to reimburse complainant for the tuition expenses.

The MDE’s decision ordered other corrective action. In so ruling, the MDE noted that the district contended that no other disabled, nonpublic-school students who received ESY services during the 2005-06 school year and no parents, other than the complainant, had sought ESY services. But the MDE surmised that this “lack of requests [was] likely due to the District’s stated position on ESY for nonpublic students and not a lack of interest.” Consequently, as corrective action, the MDE ordered the district to prepare a memorandum, which was to be disseminated to specified personnel, regarding the FAPE rights of nonpublic-school students residing in the district and addressing their rights to special education and related services, including ESY services. The district was also ordered to provide parents of all disabled, nonpublic-school students in the district with a redacted copy of the complaint decision and a letter, which was also subject to the MDE’s pre-approval, explaining the parents’ “right to request an IEP meeting to discuss special education services including ESY and any necessary compensatory education.” This appeal followed.

ISSUES

I. Does the MDE have authority to investigate the district’s provision of ESY services for all nonpublic-school students with disabilities in the district and order corrective action, based on a complaint only from one student’s parent?

II. Does Minnesota law require school districts to provide special instruction and services to students with disabilities attending nonpublic schools?

III. Does Minn.Stat. § 125A.18 (2006) apply if the student is not attending classes part time in the school district during the regular day?

IV. Does the MDE have authority to address violations based solely on state law?

V. Was the MDE’s investigation and decision arbitrary, capricious, and not grounded in substantial evidence, where the MDE ordered corrective action, despite the lack of indication in the record that any parents of nonpublic-school students, other than complainant, sought ESY services from the district?

VI. Was the MDE’s decision arbitrary, capricious, and not grounded in substantial evidence, because it was untimely?

ANALYSIS

The scope of review on appeal from an agency decision is narrow. “When reviewing agency decisions we adhere to the fundamental concept that decisions of administrative agencies enjoy a presumption of correctness, and deference should be shown by courts to the agencies’ expertise and their special knowledge in the field of their technical training, education, and experience.” In re Excess Surplus Status of Blue Cross & Blue Shield of Minn., 624 N.W.2d 264, 278 (Minn.2001) (quotation omitted). “The decision of an administrative agency will not be reversed unless it reflects an error of law, the determinations are arbitrary and capricious, or the findings are unsupported by the evidence.” Special Sch. Dist. No. 1 v. E.N., 620 N.W.2d 65, 68 (Minn.App.2000) (quotation omitted).

I.

The district argues that the MDE lacks authority to review its provision of ESY services for all disabled, nonpublic-school students in the district, because the MDE’s investigation arose from a complaint from only one student’s parent. We disagree and conclude that the MDE has the general authority and responsibility to investigate the legality of the district’s policies and, when necessary, to order corrective action to address the provision of appropriate services to children with disabilities in the future.

One purpose of the IDEA is “to ensure that all children with disabilities have available to them a [FAPE] that emphasizes special education and related services designed to meet their unique needs and prepare them for further education, employment, and independent living.” 20 U.S.C. § 1400(d)(1)(A) (Supp.V.2005). The IDEA defines “FAPE” as meaning

special education and related services that—
(A) have been provided at public expense, under public supervision and direction, and without charge;
(B) meet the standards of the State educational agency;
(C) include an appropriate preschool, elementary school, or secondary school education in the State involved; and
(D) are provided in conformity with the individualized education program required under section 1414(d) of this title.

20 U.S.C. § 1401(9) (Supp.V.2005). If necessary to ensure a FAPE, the school district must provide ESY services to students with disabilities. 34 C.F.R. § 300.309 (2006); Minn. R. 3525.0755, subp. 1 (2005).

There are two methods for resolving disputes over special education services: (1) an impartial due process hearing under 20 U.S.C. § 1415(f) (Supp.V.2005) and Minn.Stat. § 125A.091, subd. 12 (2006); and (2) the administrative complaint procedure, in which a complaint is filed with the state educational agency (SEA), which in Minnesota is the MDE. See Megan C. v. Indep. Sch. Dist. No. 625, 57 F.Supp.2d 776, 780 (D.Minn.1999) (explaining that “two separate, distinct, and important remedies” exist for disputes with school districts over the appropriate special education services for children with disabilities). Either an “an individual or organization” may file a written complaint with the MDE. 34 C.F.R. § 300.662(a) (2006). The due process hearing procedure, meanwhile, is markedly different, because only parents or school districts have standing to assert a claim — a restriction that does not apply to the administrative complaint procedure. 20 U.S.C. § 1415(f); Minn.Stat. 125A.091, subd. 12. In this case, the complaining parent opted for the administrative complaint procedure by filing a complaint with the MDE on July 21, 2006.

Under the administrative complaint procedure, the MDE must, within 60 days, (1) determine whether an investigation is necessary, and if so, carry out an independent on-site investigation; (2) allow the complainant an opportunity to provide more information; (3) review all relevant information and determine whether the educational agency is violating IDEA; and (4) issue a written decision that addresses the complaint’s allegations. 34 C.F.R. § 300.661(a) (2006). If the MDE finds “a failure to provide appropriate services,” the MDE must address:

(1) How to remediate the denial of those services, including as appropriate, the awarding of monetary reimbursement or other corrective action appropriate to the needs of the child; and
(2) Appropriate future provision of services for all children with disabilities.

34 C.F.R. § 300.660(b)(1), (2) (2006). Thus, these regulations obligate the MDE to address appropriate future provision of services for all children with disabilities when violations are found.

Here, the MDE concluded that the district did not fail to provide services to the complainant’s child, because it ultimately agreed to provide reasonable ESY services to the student. The MDE did, however, conclude that the district’s policy of unilaterally limiting the special instruction and services, such as ESY services, provided to disabled, nonpublic-school students in the district violated the law. Based, on this violation, the MDE ordered corrective action.

Framing its argument as one of standing, the district contends that the complainant-parent in this case had no authority to seek education relief on behalf of the children of other parents. The regulations governing the administrative complaint procedure, however, explicitly authorize individuals and organizations to file complaints. 34 C.F.R. § 300.662(a). And, Minnesota courts have previously upheld an MDE decision which was issued in response to a complaint filed on behalf of dozens of preschool students attending one daycare by an advocate, who was not a parent. Indep. Sch. Dist. No. 709 v. Bonney, 705 N.W.2d 209 (Minn.App.2005). Thus, notwithstanding that parents have an independent stake in their children’s education and participate in IEP meetings, other individuals and organizations can raise issues and seek remedies for violations of special education services requirements through the administrative complaint procedure. Compare Winkelman ex rel. Winkelman v. Parma City Sch. Dist., — U.S. -,-, 127 S.Ct. 1994, 2004, 167 L.Ed.2d 904 (2007) (indicating that parents of special-education students have an independent stake in the substantive decisions regarding their children), and 34 C.F.R. § 300.344(a)(l)(2006) (providing that the IEP team includes the child’s parents), and 34 C.F.R. § 300.345 (2006) (addressing parent participation), with 34 C.F.R. § 300.662(a) (specifying that individuals and organizations can file a complaint).

Moreover, because the regulations specifically permit the MDE to address the “[a]ppropriate future provision of services for all children with disabilities,” the MDE did not exceed its authority or responsibility by considering, and addressing, the district’s practice of denying ESY services to all disabled, nonpublic-school students in the district. 34 C.F.R. § 300.660(b)(2).

Because the MDE has general supervisory authority to address the appropriate future provision of services for all children with disabilities when it has found a failure to provide appropriate services, the MDE must, by implication, necessarily also have the general supervisory authority to address the appropriate future provision of services for all children with disabilities when the district’s stated policy violates the law by expressly precluding such services. We conclude that these regulations are not intended to prohibit the MDE from requiring the district to take the corrective steps ordered here in an effort to ensure that children with disabilities in the district are provided appropriate special education services in the future.

With regard to the parents, we note that the MDE has merely required the district to provide the parents with a redacted copy of the MDE’s decision in this matter and to “explain [] the parents’ right to request an IEP meeting to discuss special education services including ESY and any necessary compensatory education.” The decision does not require, as the district contends, the district to hold meetings with a group of parents, or with individual parents, nor does the decision order the district to provide particular services to any individual student. Rather, the decision merely requires the district to give these parents accurate notice of rights they already possess.

II.

The district also contends that the MDE erroneously interpreted Minnesota law when it determined that the district had violated Minn.Stat. §§ 125A.03 and 125A.18 (2006) by limiting special instruction and services to disabled, nonpublic-school students in the district. In so arguing, the district contends that nonpublic-school students do not have an individual right to a FAPE.

This court reviews questions of statutory construction de novo. Bonney, 705 N.W.2d at 214 (citing St. Otto’s Home v. Minn. Dep’t of Human Servs., 437 N.W.2d 35, 39-40 (Minn.1989)). On review, we are “not bound by an agency’s interpretation of a statute.” Id. (citing St. Otto’s Home, 437 N.W.2d at 39-40). But, the agency’s interpretation is entitled to some deference “where the statutory language is technical in nature, and the agency’s interpretation is longstanding.” E.N., 620 N.W.2d at 68. If the statute is unambiguous, this court applies its plain meaning. Id. at 69; Kersten v. Minn. Mut. Life Ins. Co., 608 N.W.2d 869, 874-75 (Minn.2000). Furthermore, statutory language must be viewed in its proper context. Chiodo v. Bd. of Educ. of Special Sch. Dist. No. 1, 298 Minn. 380, 382, 215 N.W.2d 806, 808 (1974) (“[Wjords of a statute are to be viewed in their setting, not isolated from their context.”).

The federal IDEA does not require school districts to provide a FAPE to disabled students voluntarily enrolled in nonpublic schools. 20 U.S.C. § 1412(a)(10)(C)(i) (Supp V.2005). Rather, the IDEA only requires districts to provide services proportional to those provided to public-school students. 20 U.S.C. § 1412(a)(10)(A)(i)(I) (Supp.V.2005); 34 C.F.R. § 300.453(a)(1) (2006). But, the federal law represents minimum requirements, and states are free to impose additional requirements for special education services. Bonney, 705 N.W.2d at 214; 34 C.F.R. § 300.453(d) (2006) (“State and local educational agencies are not prohibited from providing services to private school children with disabilities in excess of those required by this part, consistent with State law or local policy.”).

In its complaint decision, the MDE concluded that “[t]he District violated Minn. Stat §§ 125A.03 and 125A.18 when it limited special instruction and services provided to all non-public school students residing in the District.” Minn. Stat § 125A.03(a) requires the district to “provide special instruction and services ... for all children with a disability,” and defines “special instruction and services” as meaning “a free and appropriate public education provided to an eligible child with disabilities and includes special education and related services defined in the Individuals with Disabilities Education Act, sub-part A, section 300.24.” Minn.Stat. § 125A.18, referred to in this opinion as the shared-time statute, governs the provision of special instruction and services for students with disabilities attending nonpublic schools, stating that “[n]o resident of a district who is eligible for special instruction and services under this section may be denied instruction and sewice on a shared time basis consistent with section 126C.19, subdivision 4, because of attending a nonpublic school.... ” Minn.Stat. § 125A.18 (emphasis added).

The district contends, based on the absence of the word “special” from the second reference to “instruction and service,” that the shared-time statute does not require the district to provide “special instruction and service” to disabled students attending nonpublic schools; rather, the district urges that under this statute such students would only be eligible for “instruction and service,” apparently meaning non-special education instruction and services. In support of its argument, the district directs this court to the previous version of the shared-time statute. Before the statute was amended in 1998, the statute now known as section 125A.18 provided: “No resident of a district who is eligible for special instruction and services pursuant to this section shall be denied provision of this instruction and service on a shared time basis because of attendance at a nonpublic school.... ” Minn.Stat. § 120.17, subd. 9 (1996) (emphasis added).

When this court interprets a Minnesota statute, it construes words and phrases “according to rules of grammar and according to their common and approved usage.” Minn.Stat. § 645.08(1) (2006). One rule of construction directs that “general words are construed to be restricted in their meaning by preceding particular words.” Minn.Stat. § 645.08(3) (2006). “If a statute, construed according to ordinary rules of grammar, is unambiguous, a court may engage in no further statutory construction and must apply its plain meaning.” Bonney, 705 N.W.2d at 214 (citing State by Beaulieu v. RSJ, Inc., 552 N.W.2d 695, 701 (Minn.1996)).

Applying these rules, we conclude that the shared-time statute, Minn.Stat. § 125A.18, is unambiguous and prohibits school districts from denying special education instruction and services to children with disabilities enrolled in nonpublic schools. The general term “instruction and service” is restricted in its meaning by the preceding particular term, “special instruction and services.” We note further that if the second reference to “instruction and service” does not refer back to the first reference to “special instruction and services,” it is completely unclear what this second reference to “instruction and service” means. If the legislature had intended the meaning advanced by the district then the legislature would have so directed.

Because we conclude that the language is not ambiguous, we may not consider the legislative history arguments presented by both parties. See Minn.Stat. § 645.16 (2006) (providing that, where language is unclear, courts may look to several factors to discern its meaning); ILHC of Eagan, LLC v. County of Dakota, 693 N.W.2d 412, 419 (Minn.2005) (“When a statute’s meaning is plain from its language as applied to the facts of the particular case, a judicial construction is not necessary.”); see also Kersten, 608 N.W.2d at 874-75 (“When the language of the statute is plain and unambiguous, it manifests the legislative intent and we must give the statute its plain meaning.”).

III.

The district next argues that, even if the MDE’s interpretation of MinmStat. § 125A.18 is correct, the statute is inapplicable here because the student was not enrolled in or taking classes part time at a public school and because the ESY services sought by the student would be given during the summer, not the regular school day.

Shared-time pupils are defined as “those pupils who attend public school programs for part of the regular school day and who otherwise fulfill the requirements of section 120A.22 by attendance at a nonpublic school.” Minn.Stat. § 126C.01, subd. 8 (2006). Schools receive funding, or shared-time aid, for such pupils. Minn. Stat. § 126C.19, subd. 1 (2006); Minn.Stat. § 126C.01, subd. 7 (2006).

Although the district contends that the complainant’s child was not a shared-time pupil, the record reveals that the student was in fact attending classes at one of the district’s elementary schools. The student’s IEP, dated March 17, 2006, provided for 30 minutes per week of direct math instruction, 10 minutes per week of indirect math services, 20 minutes per week of indirect occupational therapy, and 10 minutes per week of indirect organization skills service at the district public school. Therefore, the student was a shared-time pupil.

The district also contends that it need not provide ESY services, because the services for the student, a shared-time pupil, would have been during the summer, which is not during the regular school day. This argument ignores Minnesota law which requires that school districts provide special instruction and services to all children with disabilities in the district. Minn. Stat. § 125A.03(a). “Special instruction and services” means a FAPE. Id. And, if necessary to ensure a FAPE, the school district must provide ESY services to students with disabilities. 34 C.F.R. § 300.309; Minn. R. 3525.0755, subp. 1. ESY services means “special education and related services” provided to disabled children “beyond the normal school year.” 34 C.F.R. § 300.309(b)(1)®. Accordingly, we conclude that Minn.Stat. § 125A.18 applies to nonpublic-school students with disabilities, like the complainant’s child, and entitles them to special instruction and services, including ESY services.

IV.

The parties agree that the IDEA regulations require the MDE to “[r]eview all relevant information and make independent determination as to whether the public agency is violating a requirement of Part B of the [IDEA] or [the IDEA regulations].” 34 C.F.R. § 300.661(a)(3). But, the district argues that the MDE lacks authority to address special education violations beyond federal law and based solely on violations of state law. The district’s violations in this case were premised on state law.

The IDEA regulations incorporate state law. Michael C. ex rel. Stephen C. v. The Radnor Twp. Sch. Dist., 202 F.3d 642, 652 (3rd Cir.2000). Special education and related services must meet the SEA’s standards. 34 C.F.R. § 300.13(b) (2006); see also 34 C.F.R. § 300.220(a) (2006) (requiring a local education agency to have “policies, procedures, and programs that are consistent with the State policies and procedures” when providing for the education of children with disabilities in its district). And, a FAPE means special education and related services that meet the SEA’s standards. 20 U.S.C. § 1401(9)(B). If a state statute requires a district to provide educational services that exceed the minimum federal standards, those state standards are enforceable through the IDEA. CJN by SKN v. Minneapolis Pub. Sch., 323 F.3d 630, 639 (8th Cir.2003); Bonney, 705 N.W.2d at 214. Therefore, we conclude that the MDE has the authority to enforce state laws that exceed the minimum federal standards.

V.

“The decision of an administrative agency will not be reversed unless it reflects an error of law, the determinations are arbitrary and capricious, or the findings are unsupported by the evidence.” E.N., 620 N.W.2d at 68 (quotation omitted). “When an agency performs the quasi-judicial function of receiving and weighing evidence, making factual findings, and applying a prescribed standard to reach a conclusion, a reviewing court applies the ‘substantial-evidence test.’ ” Hurrle v. County of Sherburne ex rel. Bd. of Comm’rs, 594 N.W.2d 246, 249 (Minn.App.1999). Under the substantial-evidence test, the reviewing court “evaluate[s] the evidence relied upon by the agency in view of the entire record as submitted.” Cable Commc’ns Bd. v. Nor-West Cable Commc’ns P’ship, 356 N.W.2d 658, 668 (Minn.1984). Substantial evidence is defined as: “(1) such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; (2) more than a scintilla of evidence; (3) more than some evidence; (4) more than any evidence; or (5) the evidence considered in its entirety.” Minn. Ctr. for Envtl. Advocacy v. Minn. Pollution Control Agency, 644 N.W.2d 457, 464 (Minn.2002). If an agency engages in reasoned decision-making the reviewing court will affirm, even though it may have reached a conclusion different from the agency’s conclusion. Cable Commc’ns Bd., 356 N.W.2d at 669.

“The right of due process, as effectuated by the concomitant right to a hearing in certain circumstances, was never intended to operate for the benefit of legislatively created bodies.” State ex rel. Indep. Sch. Dist. No. 276 v. Dep’t of Educ., 256 N.W.2d 619, 625 (Minn.1977). Therefore, since Minnesota school districts do not have a right to due process, the process due to them is entirely statutory.

When investigating a matter, the MDE must “[r]eview all relevant information and make an independent determination as to whether the [school district] is violating a requirement of Part B of the [IDEA] or [the IDEA regulations].” 34 C.F.R. § 300.661(a)(3). The district claims that the MDE’s decision is arbitrary, capricious, and not grounded in substantial evidence because the record does not indicate that any parents of private school students, other than complainant, sought ESY services from the district. Indeed, the record indicates that no other parents of private-school students requested ESY services during the 2005-06 school year. The MDE concluded that this “lack of requests is likely due to the District’s stated position on ESY for non-public students and not to a lack of interest.”

Here, the MDE identified the district’s policies based on the email from the district’s special-education director to the complainant. The MDE concluded that the district’s policies violated the law by “limiting] special instruction and services provided to all non-public school students residing in the District” and “unilaterally limiting] the ESY services available to all disabled non-public school students residing in the District.” After finding such a violation, the MDE has authority to fashion the appropriate corrective action to address the violation. See 34 C.F.R. § 300.660(b)(2) (requiring the MDE to address the “[appropriate future provision of services for all children with disabilities”). Moreover, the provision of ESY services is not predicated on a parent’s request for such services. See 34 C.F.R. § 300.309(a)(2) (2006) (“Extended school year services must be provided only if a child’s IEP team determines, on an individual basis ... that the services are necessary for the provision of FAPE to the child.”). Thus, the MDE was not required to find that other nonpublic-school students sought, and were denied, ESY services, before it could order corrective action.

VI.

Lastly, the district argues that the MDE violated the IDEA by failing to comply with the 60-day decision deadline. The MDE is required to issue its final decision within 60 days after a complaint is filed, unless “exceptional circumstances exist with respect to a particular complaint.” 34 C.F.R. §§ 300.661(a), (b)(1).

The original deadline for the final decision was September 19, 2006. The MDE provided notice to the parties on September 19, 2006, informing them that it was extending the deadline of issue its final decision due to the “systemic nature of complaint.” The notice did not explain why the complaint was viewed as “systemic” or identify a new deadline. In a letter dated October 19, 2006, the district objected to the MDE’s characterization of the complaint as “systemic,” because only one parent had filed a complaint, the complaint involved only ESY services for nonpublic-school students, and the district was not aware of any way in which other students were affected.

The MDE contends that an extension of the deadline was necessary in this case because the complaint raised concerns about similarly situated students who were denied services; the district’s application of the law, as explained in its response to the complaint, was contrary to the MDE’s interpretation of state law; and the MDE had to fashion an appropriate remedy for students who may have been affected by the district’s misapplication of the law. The MDE also points out that the district also requested a 10-day extension of its deadline in responding to the complaint. These factors were “exceptional circumstances” which permit an extension.

Furthermore, the district has not shown how, or even if, the district was harmed by the late decision. The complaint dealt with the provision of ESY services, most of which would seemingly be provided during the summer months, not the regular school year. Given the concerns raised about the provision of services for other students and the extension provided to the district, we conclude that the MDE’s extension of the deadline was not arbitrary, capricious, or otherwise in violation of the law.

DECISION

When the MDE receives a written complaint regarding a dispute over the provision of special education services, it has the general authority and responsibility to investigate the complaint, assess the local school district’s policies raised therein, and, if necessary, order corrective action to address the provision of appropriate services to children with disabilities in the future.

Minn.Stat. § 125A.18 (2006) prohibits school districts from denying special education instruction and services to children with disabilities enrolled in nonpublic schools and entitles them to special instructions and services, including extended school year services.

States are free to impose additional requirements for special education services, beyond the minimum requirements specified by the federal IDEA, and the MDE has the authority to enforce state laws that exceed the minimum federal standards in its administrative complaint procedure.

In addition, we conclude that the MDE was not required to find that other nonpublic-school students sought, and were denied, ESY services, before it could order corrective action to be taken and that the deadline extension was not arbitrary, capricious, or otherwise in violation of the law.

Affirmed.

      . The current version of the United States Code includes all changes through January 2, 2006, and is the version applicable to the facts at hand.

      . The Federal Department of Education issued new IDEA regulations effective Oct. 13, 2006. See 71 Fed.Reg. 46540 (Aug. 14, 2006). The alleged violations in this case occurred during the summer of 2006, and therefore the new regulations do not apply to this matter.

      . The MDE concluded that the district’s policy violated Minn.Stat. §§ 125A.03 and 125A.18 and 34 C.F.R. § 300.309. The violation of 34 C.F.R. § 300.309, however, was based on the MDE’s interpretation of state law.


author: HUSPENI, Judge.

text:
    AUTO OWNERS INSURANCE CO., Respondent, v. STAR WINDSHIELD REPAIR, INC., as Intended Assignee of A & E Construction Supply, Inc., et al., Appellant.
    No. A07-972.
    Court of Appeals of Minnesota.
    Jan. 8, 2008.

      William A. Moeller, Jill K. Baker, Blethen, Gage & Krause, PLLP, Mankato, MN, for respondent.
    Charles J. Lloyd, Livgard & Rabuse, P.L.L.P., Minneapolis, MN, for appellant.
    Considered and decided by DIETZEN, Presiding Judge; ROSS, Judge; and HUSPENI, Judge.
   OPINION

HUSPENI, Judge.

Appellant challenges the district court’s award of summary judgment to respondent, arguing that the court incorrectly permanently enjoined arbitration proceedings, and incorrectly determined that respondent’s nonassignment clause prevented assignment of postloss proceeds. Because we conclude that the Minnesota No-Fault Automobile Insurance Act, MinmStat. §§ 63B.41-.71 (2006 & Supp. 2007) permits district courts to determine coverage issues, that the nonassignment clause is enforceable, and that respondent did not waive its right to nonassignment, we affirm.

FACTS

The dispute in this case involves ten customers of appellant Star Windshield Repair, Inc. who were insured by respondent Auto Owners Insurance Co. As payment for windshield-repair work, Star Windshield accepted an assignment of each customer’s insurance proceeds. After Star Windshield billed Auto Owners, the insurance company sent Star Windshield a payment for less than the amount billed.

To determine the amount owed, Star Windshield attempted to initiate arbitration under the Minnesota No-Fault Automobile Insurance Act (the act). In response, Auto Owners filed a declaratory-judgment action seeking a declaration that the nonassignment clause in its insurance contract prevented the customers from assigning the payment to Star Windshield. The district court issued a temporary restraining order, enjoining the arbitration proceeding.

Star Windshield moved to dismiss the declaratory-judgment action. The company argued that arbitration was mandatory under the act and that the district court therefore lacked subject-matter jurisdiction to rule on the nonassignment clause. The district court denied the motion.

Auto Owners then moved for summary judgment, arguing that the nonassignment provision in the insurance contracts prevented the customers from assigning the proceeds. Star Windshield argued in response that Minnesota law permits the assignment of postloss property insurance proceeds even when a policy includes a nonassignment clause.

The district court granted Auto Owners’ motion for summary judgment, and in an accompanying memorandum, reasoned that the plain language of the nonassignment clause prevented assignment of rights under the policy. In addition, the district court stated that even if Star Windshield had been assigned the proceeds, it did not have the power to enforce its rights directly against Auto Owners. Star Windshield now appeals.

ISSUES

1. Was the district court required to compel arbitration under the Minnesota No-Fault Automobile Insurance Act?

2. Does the nonassignment clause prevent assignment of the right to an undetermined amount of postloss proceeds?

3. Did Auto Owners waive its rights under the nonassignment clause when it sent a payment directly to Star Windshield?

ANALYSIS

I.

The Minnesota No-Fault Automobile Insurance Act requires “the mandatory submission to binding arbitration of all cases at issue where the claim at the commencement of arbitration is in an amount of $10,000 or less against any insured’s reparation obligor for no-fault benefits or comprehensive or collision damage coverage.” Minn.Stat. § 65B.525 (2006). The first issue in this case — which the parties frame in terms of subject-matter jurisdiction — is whether the district court may rule on legal questions before compelling arbitration under the act. This issue involves a question of law, which we review de novo. See Olmanson v. LeSueur County, 693 N.W.2d 876, 879 (Minn.2005) (reviewing question of law de novo).

When should legal questions be submitted to arbitration? The general rule is that an issue should first be submitted to arbitration if it is “reasonably debatable” whether the issue is covered by the arbitration clause in a contract. See State v. Berthiaume, 259 N.W.2d 904, 909 (Minn.1977) (stating that arbitrator should decide issue of whether dispute is arbitrable if issue is reasonably debatable); Cmty. Partners Designs, Inc. v. City of Lonsdale, 697 N.W.2d 629, 632 (Minn.App.2005) (same); see also State by Sundquist v. Minn. Teamsters Pub. & Law Enforcement Employees Union Local No. 320, 316 N.W.2d 542, 544 (Minn.1982) (stating that generally arbitrator is final judge of law and fact).

But auto-insurance cases are treated differently. In those cases, the district court must resolve coverage disputes in order to protect parties “from the burden of unauthorized arbitration of both the coverage dispute and the merits of the insured’s claim.” U.S. Fid. & Guar. Co. v. Fruchtman, 263 N.W.2d 66, 71 (Minn.1978). Thus, “it is not inappropriate for the parties to seek ... a judicial determination of coverage prior to arbitration.” Myers v. State Farm Mut. Auto. Ins. Co., 336 N.W.2d 288, 291 (Minn.1983).

The same standard applies in no-fault-arbitration cases, where arbitration is required by statute rather than contract. See Johnson v. Am. Family Mut. Ins. Co., 426 N.W.2d 419, 421 (Minn.1988) (holding that courts must determine legal issues in no-fault-arbitration cases). Arbitration is only mandatory under the act if there is a “claim ... for no-fault benefits or comprehensive or collision damage coverage.” MinmStat. § 65B.525. Thus, by the text of the statute, the district court must determine whether the claim and the benefits exist before compelling arbitration. Furthermore, in no-fault arbitration, the courts have a duty to provide consistent statutory interpretation. Johnson, 426 N.W.2d at 421. Therefore, district courts have an additional reason for determining legal questions before compelling arbitration.

Star Windshield argues that the law recently changed. In Ill. Farmers Ins. Co. v. Glass Serv. Co., the supreme court stated that the act “deprives district courts of subject matter jurisdiction over a certain type of dispute — claims for comprehensive benefits of $10,000 or less.” 683 N.W.2d 792, 800 (Minn.2004). Star Windshield interprets this language too broadly, however. In Ill. Farmers Ins. Co., the issue was whether the insurance company could waive its right to arbitration under the act. Id. Because the act involved “subject matter jurisdiction,” it could not be waived. Id. But nothing in the opinion suggests that a district court may not rule on coverage or legal issues as a screening measure to consistently prevent unauthorized arbitration. In fact, in Ill. Farmers Ins. Co., the supreme court remanded the case to the district court to determine whether arbitration should be compelled under the facts of the case. Id. at 807.

In this case, Auto Owners has raised a coverage dispute. It requested a declaratory judgment that it was not required to pay money to Star Windshield under the terms of the insurance contract. This is the type of issue that can be judicially determined prior to arbitration. See Myers, 336 N.W.2d at 290-91 (permitting prior judicial determination of whether un-derinsured-motorist provision in policy applied to passenger in car that struck tree). Therefore, the district court properly ruled on the coverage issue before deciding whether to compel arbitration.

II.

The standard insurance contract used by Auto Owners states, “No interest in this policy may be assigned without our written consent.” Star Windshield argues that this provision did not prevent the policyholder from assigning the proceeds. According to Star Windshield, Minnesota law permits the assignment of postloss property-insurance proceeds even when a policy includes a nonassignment clause. The interpretation of a contract provision involves a question of law, which we review de novo. Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 311 (Minn.2003).

In this case, the parties do not dispute that the insurance contract contains a sufficiently definite nonassignment clause. Instead, Star Windshield argues that the nonassignment clause should not apply to postloss assignment of proceeds. We note initially what we consider to be an overarching principle that threads through Minnesota appellate court opinions that have addressed the issue of nonassignment clauses in insurance policies. The principle is that insurers should not have to do business with parties with which the insurer has not chosen to enter a contractual relationship. This principle, although not explicitly set forth in most case law, is illustrated with special clarity where an insurer, as here, is compelled to negotiate with a non-contractual party issues involving the actual dollar amounts owed on a claim.

Review of case law both informs our decision here and assists in our harmonization of precedent that both parties cite to support their opposite positions in addressing the issue of nonassignment clauses.

As a preliminary matter, we note that the Ill. Farmers Ins. Co. decision does not support Star Windshield’s argument that postloss proceeds are assignable. 683 N.W.2d at 792. The issue of whether post-loss proceeds were, in fact, assignable was not discussed by the supreme court. Id. It was not necessary to address that issue because it was not raised. Id. Although the supreme court references Minnesota’s statutory scheme for automobile insurance, the reference does nothing to bolster the strength of Star Windshield’s reliance on that case. See id. at 792 (stating that “[b]y forbidding deductibles Minnesota’s statutory scheme for automobile insurance essentially removes the auto glass customer from the payment process” and that “[a]s a result, auto glass companies routinely bill their customers’ insurance companies directly”).

In this court’s decision in In re Estate of Sangren, we permitted the assignment of insurance proceeds despite the presence of a nonassignment clause. 504 N.W.2d 786, 790 (Minn.App.1993), review denied (Minn. Oct. 28, 1993). But that case does not establish a general rule permitting the assignment of insurance proceeds. Instead, our decision was based on waiver. Id. Because the insurance company had failed to assert its right to nonassignment, the insurance company could not change its mind four months later and attempt to enforce the nonassignment clause. Id. Thus, the nonassignment clause was not enforced because it was waived. Id.

In Liberty Mut. Ins. Co. v. Am. Family Mut. Ins. Co., the supreme court held that a nonassignment clause prevented an attempted assignment of an insured’s existing claim for benefits. 463 N.W.2d 750, 755-56 (Minn.1990). In that case, a driver, who had been involved in an automobile accident, settled with the insurer for another driver who was found to be 85 percent at fault. Id. at 752. As part of the settlement, the driver that was 15% at fault assigned to the other driver’s insurer his right to recover on his own uninsured/underinsured policy, up to $115,000. Id. at 752-53. The supreme court held that this assignment was not an assignment of the personal-injury action itself and thus not an assignment prohibited by law. Id. at 755. Nonetheless, the supreme court concluded that the nonassignment clause prohibited the assignment. Id. at 756.

In Liberty Mut., the supreme court noted that it was not, in that case, deciding whether a prohibition against assignment is enforceable in all circumstances. Id. But the supreme court noted that permitting assignment “raises the same problems of champerty and maintenance that are present in the assignment of a personal injury claim.” Id. The supreme court suggested that public policy would be advanced by enforcing the no-nassignment clause. Id. Although the supreme court used narrow language in Liberty Mut., its reasoning is generally applicable to the case before us. It is difficult to imagine an assignment of post-loss proceeds that does not raise the public-policy concerns associated with cham-perty and maintenance. In this case, Star Windshield has attempted to purchase the policyholders’ ability to collect against the insurance company. If such assignments were permitted, the insurance company would face additional risk that it expressly avoided through the language of the contract. Because of the public policy against champerty, as expressed in Liberty Mut., a nonassignment clause can properly restrict the assignment of postloss proceeds.

In Reitzner v. State Farm Fire & Cas. Co., this court applied Liberty Mut. for the proposition that insurance proceeds could be assigned despite the presence of a no-nassignment clause. 510 N.W.2d 20, 26 (Minn.App.1993). But the language in the insurance contract in Reitzner was crucial. In Reitzner, this court addressed the effect of the following language in an insurance policy: “Assignment of this policy shall not be valid unless [State Farm gives its] written consent.” Id. In Reitzner, the vendee of a contract for deed had purchased fire insurance covering the property. Id. at 22. Following a fire that destroyed the property, that vendee conveyed his interest in the property to the plaintiff. Id. at 23. And both the vendor and vendee assigned their “insurance rights in regard to the fire loss” to the plaintiff. Id. The Reitzner court rejected an argument that the plaintiff did not have standing to pursue the insurance proceeds, explaining that the assignment was not precluded by the language of the State Farm policy:

[Reitzner] did not receive a pure assignment of the policy, but rather, received an assignment of the proceeds due under the policy should the claim be successful. An assignment of insurance monies due on a successful claim does not require the insurance company’s written consent. An insurance company has a right to put in its policy a provision that the policy cannot be assigned without its consent, but an insured can put in a claim under a policy and promise the claimed proceeds to another without first checking with the company.

Id. at 26. In Reitzner, the insurance contract prohibited only the assignment of the “policy” itself. In this case, the insurance contract prohibits the assignment of any “interest in this policy.” Thus, the language of the nonassignment clause here has a considerably broader sweep. In addition, we note that in Reitzner, unlike in this case, there was no indication that the amount payable by the insurer would be challenged or that the assignee would be in a position to contest that amount.

In Wilkie v. Becker, the supreme court upheld the assignment of proceeds from a farm auction. 268 Minn. 262, 267-68, 128 N.W.2d 704, 707-08 (1964). Although the assignment was upheld, that case did not involve a nonassignment clause. In upholding the assignment, the supreme court expressly noted that a contract could prevent assignment of money due under a contract if the parties manifested their intention that the contract not be assignable. Id. at 267, 128 N.W.2d at 707. Thus, Wilkie also supports the view that a nonas-signment clause can limit the assignment of postloss proceeds.

Finally, we note that the seminal case of Windey v. N. Star Farmers Mut. Ins. Co., 231 Minn. 279, 43 N.W.2d 99 (1950), also supports our conclusion. In Windey, North Star issued an insurance policy covering loss or damage to a farm building by windstorm. 231 Minn. at 281, 43 N.W.2d at 100. The policy provided that it would be void if the policy was assigned -without the written consent of the insurance company. Id. The owners of the farm building agreed to sell the farm building to Windey. Id. at 281, 43 N.W.2d at 100-01. Under the agreement, the owners were “to apply the proceeds of the insurance in the event of loss upon the unpaid purchase price.” Id. at 283, 43 N.W.2d at 101. Before the sale was completed, the building was destroyed by a windstorm. Id. at 282, 43 N.W.2d at 101. Subsequently, the owners conveyed the deed, and Windey provided payment to the owners. Id.

The supreme court concluded that the provision in the agreement to sell the property was not an assignment. Id. at 283, 43 N.W.2d at 101. The agreement gave Windey “no rights against the insurer, but only against the vendors so far as concerned the application of the proceeds in case of loss or damage.” Id. at 283, 43 N.W.2d at 101-02. Effectively, Windey and the owner entered into a contract that was completely independent of the insurance contract. The contract “did not constitute an assignment of either the policy or the proceeds thereof.” Id. at 283, 43 N.W.2d at 101. Instead, it simply gave Windey the right to recover against the owners. Thus, the nonassignment clause had no application in that case.

Although the supreme court found no actual assignment, it nevertheless went on to state in dicta that

[a]ssignment, after loss, of the proceeds of insurance does not constitute an assignment of the policy, but only of a claim or right of action on the policy. Such an assignment does not void the policy under a provision that if it is assigned without the insurer’s consent it shall become void.

Id. at 283, 43 N.W.2d at 102. Because there was no assignment at issue, this reasoning was not necessary to the supreme court’s decision. Furthermore, we again note that the policy in this case does more than just limit the assignment of the policy. It prohibits the assignment of any “interest in” the policy. In addition, although Windey permitted an assignment, the opinion contains no indication that the parties disputed the amount due under the assignment, nor is there any indication that the insurer would in any way be compelled to negotiate with the assignee — a party with whom it had no contractual relationship.

The law regarding nonassignment clauses was recently revisited in Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267 (Minn.2004). In Travertine, the supreme court addressed a “management agreement” under which James E. Lennon was to provide management services to Travertine Corp. 683 N.W.2d at 269. The agreement contained a nonas-signment clause limiting Lennon’s ability to assign his rights under the management agreement. Id. at 269-70. Lennon then attempted to assign his right to compensation under the agreement to Lexington-Silverwood as part of the settlement of an unrelated dispute. Id. at 270. When Lexington-Silverwood attempted to collect the compensation due to Lennon, Travertine asserted its rights under the nonassignment clause. Id.

The primary issue in Travertine was whether the language in the nonassignment provision was sufficiently clear to invalidate the attempted assignment. Id. at 270-74. The court held that “[w]hen a contract prohibits assignment in very specific and unmistakable terms, any purported assignment is void.” Id. at 273. Thus, the supreme court concluded that the no-nassignment clause in the management agreement was sufficiently specific and contained unmistakable terms that were definite enough to limit Lennon’s ability to assign his rights. Id. at 274.

Travertine also acknowledged the general rule that money due under an existing contract is assignable. See id. at 272 (citing Wilkie, 268 Minn. at 267, 128 N.W.2d at 707). But the court went on to emphasize that this general rule only applies when the parties have not included something in the contract — such as a nonassignment clause — manifesting their intention that the contract be non-assignable. Id. We note, also, that in Travertine there was no indication that the amount due the assignor was fixed. The record in that case indicates that the attempted assignment was of a percentage of the company’s net profits. Id. at 269-70. It is very possible that this amount would have been disputed.

In the case before us, the parties do not dispute that the insurance contract contains a sufficiently definite nonassignment clause. But Star Windshield, despite arguing that postloss proceeds should be assignable, also recognizes that the amount of those proceeds is not yet fixed. In fact, Star Windshield’s attempt to “fix” those proceeds would compel Auto Owners to do business with a party with whom Auto Owners has not chosen to contract. Thus, even if a public-policy limitation on nonas-signment clauses permitted the assignment of fixed postloss proceeds, it would not apply to the case before us. Therefore, because we conclude that Travertine controls our analysis, we conclude that Auto Owners can assert its rights under the nonassignment clause and that the assignment to Star Windshield is invalid.

We see no basis upon which to distinguish this case from those cases reflecting the tradition of Minnesota contract law simply because one of the parties here is an insurance company. In Vetter v. Sec. Cont’l Ins. Co., the supreme court noted that insurance policies — such as the one in this case — are treated like ordinary contracts unless a statutory limitation applies. 567 N.W.2d 516, 521 (Minn.1997). The supreme court then went on to explain that “in the absence of a contractual provision to the contrary, an obligor on a contract may assign all beneficial rights to another, or may delegate his or her duty to perform under the contract to another, without the consent . of the obligee.” Id. (emphasis added). Thus, the court anticipated that a contractual provision could limit a policyholder’s ability to assign insurance proceeds.

We conclude that Minnesota case law fully supports and is fully consistent with our conclusion that a nonassignment clause can limit the assignment of postloss insurance proceeds, such as the amount due for the windshields in this case.

III.

Finally, we address Star Windshield’s contention that Auto Owners waived its rights under the nonassignment clause when it made a payment directly to Star Windshield. Waiver of rights under a contract ordinarily involves a question of fact. Fedie v. Mid-Century Ins. Co., 681 N.W.2d 815, 819 (Minn.App.2001), review denied (Minn. Oct. 16, 2006). Summary judgment is appropriate only when no genuine issue of material fact exists. Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783, 788 (Minn.2005).

The rights provided in a no-nassignment clause can be waived. Sangren, 504 N.W.2d at 790. The waiving party must make a voluntary and intentional relinquishment or abandonment of a known right. Id.

In this case, the record shows that Star Windshield billed Auto Owners directly for its work. Auto Owners then made a payment directly to Star Windshield. Auto Owners objected to the assignment only after Star Windshield disputed the amount of the payment. An insurance company has constructive knowledge of its right to nonassignment. Id.

Nonetheless, Auto Owners did not make a voluntary and intentional relinquishment of its rights. Auto Owners’ conduct was compelled by statute. Under the Unfair Claims Practices Act, it is an “unfair settlement practice” for an insurance company to fail to “provide payment to the insured s chosen vendor based on a competitive price that is fair and reasonable within the local industry at large.” Minn.Stat. § 72A.201, subd. 6(14) (2006). Thus, Auto Owners was required to provide Star Windshield with a competitive payment. Auto Owners alleges that it complied with this obligation when it offered a payment derived from a cost survey based on quotations from three other auto glass installers. Because Auto Owners’ action was compelled by statute, the company did not voluntarily and intentionally relinquish its right to nonassignment. Therefore, no genuine issue of material fact exists as to waiver and the district court properly granted summary judgment.

DECISION

Because Minnesota’s No-Fault Automobile Insurance Act permits district courts to resolve coverage disputes, and because the nonassignment clause in respondent insurer’s policy is enforceable, and was not waived, the district court properly granted summary judgment.

Affirmed.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

      . Indeed, public policy would almost certainly prohibit enforcement of a nonassignment clause in the hypothetical case of an insured receiving a check from an insurer and endorsing that check over to a third person.