Arkansas Lottery Commission v. Alpha Marketing/Dissent Danielson
PAUL E. DANIELSON, Justice, dissenting. I respectfully, but most vigorously, dissent. To simply say that the majority has erred in its reversal on the issue of the Commission's waiver of sovereign immunity is but an understatement, as the record and this court's case law make it abundantly clear that the Commission indeed waived sovereign immunity.
First and foremost, I must point out that the majority errantly reverses the circuit court's waiver ruling on an argument that was neither raised to, nor ruled on by, the circuit court. The majority holds that the Commission's answer to the second amended complaint superseded and replaced its prior two answers; however, a review of the record reveals that the argument was not raised by the Commission to the circuit court, nor was it ruled on by the circuit court. But even more perplexing is the fact that the majority bases its reversal on the Commission's answer to the second amended complaint, an answer that was filed after the hearing at which the circuit court orally denied the Commission's motion to dismiss, finding that the Commission had already waived sovereign immunity.[1] Such timing would likely explain the Commission's failure to raise the argument to the circuit court.
There is too the fact that our case law makes clear that the majority's reversal is in error. This court has held that sovereign immunity is jurisdictional immunity from suit. See Milberg, Weiss, Bershad, Hynes, & Lerach, LLP v. State, 342 Ark. 303, 28 S.W.3d 842 (2000). The defense arises from article 5, § 20, of the Arkansas Constitution, which provides that "[t]he State of Arkansas shall never be made a defendant in any of her courts." Id. at 320, 28 S.W.3d at 854 (quoting Ark. Const. art. 5, § 20). We have extended the doctrine of sovereign immunity to include state agencies. See Arkansas Dep't of Cmty. Corr. v. City of Pine Bluff, 2013 Ark. 36, ___ S.W.3d ___. Where the pleadings show that the action is, in effect, one against the State, the circuit court acquires no jurisdiction. See id. In determining whether the doctrine of sovereign immunity applies, the court must decide if a judgment for the plaintiff will operate to control the action of the State or subject it to liability. See id. If so, the suit is one against the State and is barred by the doctrine of sovereign immunity, unless an exception to sovereign immunity applies. See id. This court has recognized three ways in which a claim of sovereign immunity may be surmounted: (1) where the State is the moving party seeking specific relief, (2) where an act of the legislature has created a specific waiver of sovereign immunity, and (3) where the state agency is acting illegally or if a state-agency officer refuses to do a purely ministerial action required by statute. See id. At issue here is whether the first exception to sovereign immunity applies.
Alpha Marketing claimed, and the circuit court found, that the Commission waived its immunity when it subjected itself to the circuit court's jurisdiction by seeking affirmative relief. The only exception to total and complete sovereign immunity that we have recognized occurs when the State is the moving party seeking specific relief. See LandsnPulaski, LLC v. Arkansas Dep't of Correction, 372 Ark. 40, 269 S.W.3d 793 (2007). In that instance, this court has held that the State is prohibited from raising the defense of sovereign immunity as a defense to a counterclaim or offset. See id.
In LandsnPulaski, the appellant urged that the Arkansas Department of Correction ("ADC") had not merely filed an answer, but had sought affirmative relief from the circuit court when it requested "all other appropriate relief." 372 Ark. at 44, 263 S.W.3d at 796. This court noted that the ADC had clearly asserted the defense of sovereign immunity in its answer and disagreed that "all other appropriate relief" was specific:
LandsnPulaski argues that the phrase "all other appropriate relief" is a request for affirmative relief that waived the ADC's sovereign immunity. However, in order to waive sovereign immunity, the request for relief must be specific. See Fireman's Ins. [Co. v. Arkansas State Claims Comm'n, 301 Ark. 451, 784 S.W.2d 771 (1990)]. Because "all other appropriate relief" is not a request for specific relief, we hold that the ADC did not waive its sovereign immunity and is therefore immune from suit.
Id., 269 S.W.3d at 796–97.
The apposite question, then, appears to be: did the Commission make a request for specific relief? Like the circuit court, I conclude that it did. A review of the Commission's answer reveals that it pled, as an affirmative defense:
Pleading affirmatively, Plaintiff is legally ineligible to use "Arkansas Lottery," "Lottery Arkansas," and "Arkansas Lotto" as trademarks. Plaintiff's registration of these trademarks is contrary to law, and the registrations should be canceled.
WHEREFORE, Defendant Arkansas Lottery Commission requests that this Court deny Plaintiff any relief and enter a declaratory judgment canceling Alpha Marketing's registration of the trademarks "Arkansas Lottery," "Lottery Arkansas," and "Arkansas Lotto" and for all other just and proper relief.
When considering whether the State has sought specific relief, this court has drawn a distinction between the simple filing of an answer, asserting sovereign immunity and praying for "all other appropriate relief," and the filing of an answer, a compulsory counterclaim, and a third-party complaint, concluding that the latter filing operated as a request for affirmative relief. See LandsnPulaski, supra; see also Travelers Cas. & Sur. Co. v. Arkansas State Highway Comm'n, 353 Ark. 721, 120 S.W.3d 50 (2003); Arkansas Game & Fish Comm'n v. Lindsey, 299 Ark. 249, 771 S.W.2d 769 (1989); Arkansas Game & Fish Comm'n v. Lindsey, 292 Ark. 314, 730 S.W.2d 474 (1987).
As set forth above, the Commission specifically asserted in its original answer that Alpha Marketing's trademarks were contrary to law, and it specifically requested that the trademarks' registrations be canceled and that a declaratory judgment be entered to that effect. In its motion to dismiss the amended complaint, the Commission again asserted that Alpha Marketing's complaint for declaratory judgment "should be dismissed because Alpha Marketing's trademark registration was improperly granted and not entitled to trademark protection."[2] Likewise, in its answer to the amended complaint, the Commission stated that it had "taken the position that the plaintiff has no right to exclusive use of the [trademarks]," and further, that "the plaintiff was legally ineligible to use [the trademarks], that the plaintiff's registration of these trademarks is contrary to law, and that the registrations should be cancelled."[3] Finally, the Commission continued to assert the invalidity of the trademarks in both its motion to dismiss the second amended complaint and brief-in-support, as well as in its arguments to the circuit court at the hearing of May 15, 2012.
The Commission's filings in the instant case were quite clearly more than "a purely defensive action." LandsnPulaski, 372 Ark. at 44, 269 S.W.3d at 796. Alpha Marketing's original complaint sought solely to have its trademarks declared valid and a declaration that it was entitled to the exclusive use thereof. The Commission, while named as a defendant, was under no obligation to challenge the validity of the trademarks at issue and could have simply invoked its immunity, but it did not. On the contrary, it chose to seek specific relief in its original answer, thereby waiving its immunity. It should be clear to anyone who has actually reviewed the complaints, answers, and motions to dismiss in this case, that the Commission fully intended to litigate the validity of the trademarks at issue. Here, the Commission answered the complaint, admitted jurisdiction, specifically asserted the trademarks' invalidity, requested a declaratory judgment to that effect, and continued throughout the litigation to argue against the merits of Alpha Marketing's claim of its trademarks' validity. The Commission's requests for relief were not made as alternative requests for relief to a defense of sovereign immunity; they were specific requests for relief in the first instance. Such assertions, as requests for specific and affirmative relief, operated to waive the Commission's entitlement to sovereign immunity.
While the Commission asserts that, even if any waiver had occurred, the scope of that waiver should be strictly limited to Alpha Marketing's request for declaratory relief, that contention was not raised to, or ruled on by, the circuit court. This court has held that it will not consider arguments raised for the first time on appeal; nor will it consider arguments when a party has failed to obtain a ruling from the circuit court. See Beverly Enters.-Arkansas, Inc. v. Thomas, 370 Ark. 310, 259 S.W.3d 445 (2007).
Last, but certainly not least, both the majority and the concurring opinion display a fundamental misunderstanding of the doctrine of sovereign immunity and how it can be waived. In equating the doctrines of sovereign immunity and charitable immunity, both wholesale adopt and apply, with little to no discussion, this court's analysis in Seth v. St. Edward Mercy Medical Center, 375 Ark. 413, 291 S.W.3d 179 (2009). In Seth, this court held that the hospital's failure to plead the defense of charitable immunity until its amended answer and motion for summary judgment did not operate to waive its immunity defense. This court observed that charitable immunity was an affirmative defense required by Arkansas Rule of Civil Procedure 8 to be specifically asserted in a responsive pleading, and, because it was not a defense listed in Ark. R. Civ. P. 12(h)(1), it could be raised in an amended answer under Ark. R. Civ. P. 15., and not be considered waived.[4]
In direct contrast is the defense of sovereign immunity. The majority and concurring opinion fail to recognize that whether a waiver of sovereign immunity has occurred has absolutely nothing to do with when the defense was pled or if it even was. As already noted, the defense of sovereign immunity is waived, among two other ways, by the State's seeking of specific relief. Once the State has sought that specific relief, the defense of sovereign immunity has been waived, period. It cannot be "unwaived" simply by pleading sovereign immunity in a subsequent pleading! Such a tenet is simply nonsensical and completely upends our well-settled law regarding sovereign immunity.
In its answer to the initial complaint, the Commission challenged the validity of the trademarks at issue and specifically requested a declaratory judgment to that effect—in other words, it quite clearly sought specific and affirmative relief. Whether it subsequently removed its specific request for relief from its later pleadings is simply irrelevant. It is because the Commission sought specific relief from the circuit court that the waiver occurred and it was prohibited from employing the defense of sovereign immunity. For that reason, the circuit court did not abuse its discretion in denying the Commission's motion to dismiss on the basis of waiver, and I would affirm the circuit court's orders.
CORBIN and GOODSON, JJ., join.
- ↑ As demonstrated by the record, the hearing at which the circuit court issued its ruling was held on May 15, 2012; the Commission did not file its answer to the second amended complaint until after that hearing, on May 29, 2012. I find it exceptionally generous of, and certainly bad precedent for, the majority to allow the Commission to meritoriously remedy its prior waiver by filing a new pleading after having the benefit of the circuit court's ruling.
- ↑ Notably, the Commission's answer to the initial complaint made absolutely no mention of sovereign immunity. Moreover, the Commission's motion to dismiss the amended complaint did not assert sovereign immunity with respect to Alpha Marketing's request for declaratory relief; instead, it did so solely in defense of Alpha Marketing's claim for trademark infringement.
- ↑ It was not until the Commission filed its motion to dismiss the second amended complaint that it asserted dismissal of Alpha Marketing's second amended complaint, in its entirety, on the basis of sovereign immunity.
- ↑ The court qualified this holding by stating that it could be raised in an amended answer, "unless there is a motion to strike the pleading, and the court finds that prejudice results." Seth, 375 Ark. at 419, 291 S.W.3d at 184.