A. Gallo & Company et al. v. The Department of Revenue Services (2014)

MEMORANDUM OF DECISION

The plaintiffs,¹ beverage distributors, appeal from a declaratory ruling issued by the defendant department of revenue services (DRS) on June 1, 2012.   The ruling concluded that the “handling fee” provided for in Connecticut's “Bottle Bill” is not an allowable withdrawal from the special account that these distributors are required to establish under Connecticut law.

By way of background, while the Bottle Bill became effective on January 1, 1980, it was amended by the General Assembly in Public Acts 08–1 (Special November Session), 09–1, and 10–25.   Under the current law (since 2010, in the jurisdiction of DRS), the distributors (for these purposes known as “deposit initiators”) must establish a special interest-bearing account for each of the 5 cents deposited for each beverage container sold by the deposit initiator.   General Statutes §§ 22a–244(a), 22a–245a(a).

These funds become “a special fund in trust for the state.”  Id. Reimbursement of the refund value “shall be paid from the deposit initiator's special account ․” § 22a–245a(b)(1).   The “balance outstanding in the special account” is to be paid by the deposit initiators to DRS for deposit in the General Fund. § 22a–245a(d)(2).²

The deposit initiator is required to submit a quarterly report that sets forth the following information:  (A) the balance in the special account at the beginning of the quarter;  (B) all deposits credited to the account during the quarter, including all refund values paid to the deposit initiator and all interest, dividends or returns received on the account;  (C) all withdrawals from the account during the quarter, including all service charges and overdraft charges on the account and all payments made pursuant to subsection (d) of this section, and (D) the balance in the account at the close of the quarter. § 22a–245a(c)(2).

These provisions do not explicitly resolve the status of the handling fee paid by the deposit initiators to the retailer as set forth in § 22a–245(d).³  The relationship between the handling fee and the special account was first questioned by these plaintiffs in a declaratory judgment action in Superior Court in 2009, but was eventually held to be moot when the legislature transferred enforcement from the department of environmental protection (DEP) to DRS. See A. Gallo & Co. v. McCarthy, Superior Court, judicial district of Hartford, Docket No. 09 5032448 (September 1, 2011) [52 Conn. L. Rptr. 500].⁴

On December 2, 2011, the plaintiffs requested a declaratory ruling of DRS pursuant to § 4–176.   On February 1, 2012, DRS notified the plaintiffs that it would issue a declaratory ruling on or before June 1, 2012.   Subsequently, the intervening plaintiffs were added to the declaratory ruling request.

On June 1, 2012, DRS issued its declaratory ruling, rejecting the position of the plaintiffs, as follows:  “[DRS] may not lawfully issue the declaratory ruling that the Petitioners seek;  because the handling fee that a deposit initiator is required by Conn. Gen.Stat. § 22a–245(d) to pay to any dealer or operator of a redemption center is not an allowable withdrawal from the special account that the deposit initiator is required to establish pursuant to Conn. Gen.Stat. § 22a–245a(a).”  (Exhibit E, p. 2, attached to 2/14/14 Joint Stipulation of Facts.)

DRS reasoned that the statutes allow only the reimbursement of the refund value and the payment of the quarterly outstanding value to the state to be withdrawn from the special account.  “No other ‘pay-out’ “ is set forth in the statutes.  Id., p. 3. The declaratory ruling continued:  “The allowable ‘debits' to the special account are set forth in Conn. Gen.Stat. § 22a–245a(c)(1)(C).  These are limited to withdrawals, service charges, overdraft charges, and payments made pursuant to Conn. Gen.Stat. § 22a–245a(d).  A ‘withdrawal’ has to be restricted to payments made under Conn. Gen.Stat. § 22a–245a(b)(1).   This is necessarily so, because there are only two species of ‘payment’ in this system[,]” namely, the reimbursement of the refund value and the payment to the state.  Id., pp. 3–4.

The rationale for this conclusion is that the General Assembly intended a limited withdrawal from the special fund so that the amount of payment to the state would not be otherwise reduced.  Id. If any reference to the legislative history becomes necessary, DRS relies on the statement of the proponent of the 2009 amendment, Senator Williams, President Pro Tempore of the Senate, who stated:  “[U]nder the language here along with statutes that are already law that any handling fees and other expenses of any kind are not subtracted from the refund value, are not subtracted from the escheats for the purposes of counting the escheat and finding out how much we have or for the purposes of paragraph (d) within section 15 and the rest of section 15.”   Id., p. 6.

This declaratory judgment action was subsequently commenced in this court.   As the plaintiffs have met the requirements of §§ 4–176 and 4–183(a) and (c) and are aggrieved, the court has subject matter jurisdiction to consider this appeal.

Before considering the plaintiffs' specific claims, the court notes the standard applicable to review of administrative decisions.

“[J]udicial review of [an administrative agency's] action is governed by the Uniform Administrative Procedure Act, General Statutes § 4–166 et seq.   (UAPA) ] ․ and the scope of that review is very restricted ․ [With regard to questions of fact], [n]either [our Supreme Court] nor the trial court may retry the case or substitute its own judgment for that of the administrative agency ․” (Citation omitted;  internal quotation marks omitted.)  Goldstar Medical Services, Inc. v. Dept. of Social Services, 288 Conn. 790, 833, 955 A.2d 15 (2008).

“The substantial evidence rule governs judicial review of administrative fact-finding ․ Substantial evidence exists if the administrative record affords a substantial basis of fact from which the fact in issue can be reasonably inferred ․ This substantial evidence standard is highly deferential and permits less judicial scrutiny than a clearly erroneous or weight of the evidence standard of review ․ The burden is on the [plaintiffs] to demonstrate that the [agency's] factual conclusions were not supported by the weight of substantial evidence on the whole record.”  (Citation omitted;  internal quotation marks omitted.)  Sams v. Dept. of Environmental Protection, 308 Conn. 359, 374, 63 A.3d 953 (2013).

“Even as to questions of law, [t]he court's ultimate duty is only to decide whether, in light of the evidence, the [agency] has acted unreasonably, arbitrarily, illegally, or in abuse of its discretion ․ Conclusions of law reached by the administrative agency must stand if the court determines that they resulted from a correct application of the law to the facts found and could reasonably and logically follow from such facts.”  (Emphasis in original;  internal quotation marks omitted.)  Id., 410.

“[Similarly], this court affords deference to the construction of a statute applied by the administrative agency empowered by law to carry out the statute's purposes ․ Cases that present pure questions of law, however, invoke a broader standard of review than is ․ involved in deciding whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally or in abuse of its discretion ․ Furthermore, when a state agency's determination of a question of law has not previously been subject to judicial scrutiny ․ the agency is not entitled to special deference ․” (Internal quotation marks omitted.)  Chairperson, Connecticut Medical Examining Board v. Freedom of Information Commission, 310 Conn. 276, 281, 77 A.3d 121 (2013).

Further:  “Resolution of this appeal entails interpretation of the aforementioned statutory provisions.   The following well settled principles of statutory interpretation govern our review ․ Because statutory interpretation is a question of law, our review is de novo ․ When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature ․ In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply ․ In seeking to determine that meaning, General Statutes § 1–2z directs us first to consider the text of the statute itself and its relationship to other statutes.   If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered ․ The test to determine ambiguity is whether the statute, when read in context, is susceptible to more than one reasonable interpretation ․ When a statute is not plain and unambiguous, we also look for interpretive guidance to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common-law principles governing the same general subject matter ․

“[P]ursuant to § 1–2z, [the court is] to go through the following initial steps:  first, consider the language of the statute at issue, including its relationship to other statutes, as applied to the facts of the case;  second, if after the completion of step one, [the court] conclude[s] that, as so applied, there is but one likely or plausible meaning of the statutory language, [the court] stop[s] there;  but third, if after the completion of step one, the court] conclude[s] that, as applied to the facts of the case, there is more than one likely or plausible meaning of the statute, [the court] may consult other sources, beyond the statutory language, to ascertain the meaning of the statute.

It is useful to remind ourselves of what, in this context, we mean when we say that a statutory text has a plain meaning, or, what is the same, a plain and unambiguous meaning.  [Our Supreme Court] has already defined that phrase.   By that phrase we mean the meaning that is so strongly indicated or suggested by the language as applied to the facts of the case, without consideration, however, of its purpose or the other, extratextual sources of meaning ․ that, when the language is read as so applied, it appears to be the meaning and appears to preclude any other likely meaning ․ Put another way, if the text of the statute at issue, considering its relationship to other statutes, would permit more than one likely or plausible meaning, its meaning cannot be said to be plain and unambiguous.

(Emphasis in original;  internal quotation marks omitted.)  Lagueux v. Leonardi, 148 Conn.App. 234, 239–41 A.3d (2014).

Turning to the issues, the court concludes that in light of the use of the word “all withdrawals” in § 22a–245a(c)(2)(C) without any further definition, there is more than one plausible meaning for “handling fee” under § 22a–245(d).  Thus it is appropriate to consult the statutory scheme, any Supreme Court determination and the relevant legislative history of § 22a–245(d) and § 22a–245a.

The court agrees with DRS's declaratory ruling that the statutory scheme supports an interpretation that the handling fee is not one of the items that may be withdrawn from the special account.   Our Supreme Court made this very point as quoted above.   The proponent of the 2008 bill, Senator Williams, also stated, as indicated, that the handling fee is not to be subtracted from this special fund.

The court disagrees with the contentions raised by the plaintiffs and intervenors.   The claim is made that by § 22a–245a(c)(2)(C), a deposit initiator must account for “all withdrawals[.]”  The argument is made that this leaves open the possibility that the handling fee is a permitted withdrawal.   But the legislation, as indicated, only contemplates two withdrawals:  the repayment of the refund value and the payment over to the state treasury.

The specific statement of Senator Williams must take precedence over the statements of Senators Harp and Harris and Representative Staples, who only indicate that the reporting requirement is to determine what is legitimately due to the state.   In addition, in both 2008 and 2009, legislation that did not involve handling fees, was passed concerning the Bottle Bill, while the General Assembly was aware of the DEP ruling regarding handling fees.⁵  Our Supreme Court has stated:  “[T]he inference of legislative concurrence with the agency's interpretation [is] to be drawn from legislative silence concerning that interpretation, especially where the legislature makes unrelated amendments in the same statute.”  (Internal quotation marks omitted.)   Hansen v. Gordon, 221 Conn. 29, 36, 602 A.2d 560 (1992).

The plaintiffs express concerns that DRS's interpretation places burdens on their revenue stream and thus diminishes their incentive to encourage the recycling goals of the Bottle Bill. The answer to this is two-fold.   The Bottle Bill of 1980 did not envision that there would be any special fund at all, drawn from the unredeemed deposits.   Thus, the legislature intended that the handling fee be paid directly by the deposit initiators as the statutes were originally enacted.   Secondly, the deposit initiators receive from the retailer a bottle that has been returned and they may make use of that bottle in its recycled form.

The court concludes that the handling fee may not be charged against the special fund as the statutes are now written.  “The intent of the legislature, as [our Supreme Court] has repeatedly observed, is to be found not in what the legislature meant to say, but in the meaning of what it did say ․ It is axiomatic that the court itself cannot rewrite a statute to accomplish a particular result.   That is the function of the legislature.”  (Internal quotation marks omitted.)  Southwick at Milford Condominium Assn., Inc. v. 523 Wheelers Farm Road, Milford, LLC, 294 Conn. 311, 321, 984 A.2d 676 (2009).

Accordingly, the appeal is dismissed without costs to either party.

Henry S. Cohn, Senior Judge

FOOTNOTES

FN1. The named plaintiff is A. Gallo & Company, a beer distributor in Connecticut.   The full list of plaintiffs and intervening plaintiffs is set forth in the Joint Stipulation of Facts (filed February 14, 2014)..  FN1. The named plaintiff is A. Gallo & Company, a beer distributor in Connecticut.   The full list of plaintiffs and intervening plaintiffs is set forth in the Joint Stipulation of Facts (filed February 14, 2014).

FN2. See A. Gallo & Co. v. Commissioner of Environmental Protection, 309 Conn. 810, 828, 73 A.3d 693 (2013):  “As previously stated, the 2008 act contained no provision allowing distributors to withdraw funds from the special accounts for any purpose other than to reimburse retailers for the redeemed beverage containers in an amount equal to the refund value and to pay service and overdraft charges on the special accounts.”.  FN2. See A. Gallo & Co. v. Commissioner of Environmental Protection, 309 Conn. 810, 828, 73 A.3d 693 (2013):  “As previously stated, the 2008 act contained no provision allowing distributors to withdraw funds from the special accounts for any purpose other than to reimburse retailers for the redeemed beverage containers in an amount equal to the refund value and to pay service and overdraft charges on the special accounts.”

FN3. This fee amounts in some instances to 1.5 cents and in other instances 2 cents..  FN3. This fee amounts in some instances to 1.5 cents and in other instances 2 cents.

FN4. Jurisdiction over the Bottle Bill was in DEP at the time of the 2008 legislation.   DEP opined that the deposit initiators were required to account for the unredeemed funds and were not permitted to charge this fund for the handling fee.   This led to the initial declaratory judgment action..  FN4. Jurisdiction over the Bottle Bill was in DEP at the time of the 2008 legislation.   DEP opined that the deposit initiators were required to account for the unredeemed funds and were not permitted to charge this fund for the handling fee.   This led to the initial declaratory judgment action.

FN5. “It's my understanding that [DEP], which is charged under this section with creating the form upon which this information is reported, is just seeking the nickels out and the nickels back to the deposit initiator.   52 S. Proc., Pt. 2, 2009 Special Sess., p. 410.  (Remarks of Senator Harris).”  (Internal quotation marks omitted.)  (Exhibit E, p. 6, attached to 2/14/14 Joint Stipulation of Facts.).  FN5. “It's my understanding that [DEP], which is charged under this section with creating the form upon which this information is reported, is just seeking the nickels out and the nickels back to the deposit initiator.   52 S. Proc., Pt. 2, 2009 Special Sess., p. 410.  (Remarks of Senator Harris).”  (Internal quotation marks omitted.)  (Exhibit E, p. 6, attached to 2/14/14 Joint Stipulation of Facts.)

Cohn, Henry S., J.