John Nash v. Arkansas Elevator Safety Board and Arkansas Department of Labor
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SUPREME COURT OF ARKANSAS
No. 06-1257
JOHN NASH,
Opinion Delivered June 21, 2007
APPELLANT,
VS.
AR KAN S AS E L E V ATO R S A F E T Y
BOARD AND ARKANSAS DEPARTMENT
OF LABOR,
APPELLEES,
APPEAL FROM THE PULASKI COUNTY
CIRCUIT COURT,
NO. CV 05-4697, CV 05-9138,
HON. WILLARD PROCTOR, JR.,
JUDGE,
AFFIRMED.
JIM GUNTER, Associate Justice
This appeal arises from an order of the Pulaski County Circuit Court affirming two
administrative decisions of Appellee Arkansas Elevator Safety Board (Board) in response to
requests for variances made by Appellant John Nash. We affirm the Board’s rulings.
Appellant John Nash is the part owner of a Little Rock warehouse where a freight
elevator, built in 1926, was used for commercial purposes and was in continuous operation.
The AS 746 elevator serviced the warehouse, and according to the records of Appellee
Arkansas Department of Labor (“DOL”), there was not an injury or accident involving the
elevator. On October 21, 2002, Larry Smothers, chief elevator inspector for the DOL, “red
tagged” the elevator because it had not been inspected and because its operating permit had
expired. As a result, the DOL ordered Nash to cease its operation for failure to have its
required safety inspections, safety tests, and operating permit. The DOL’s records reflected
that the last operating permit for the elevator expired on November 30, 2000, and there had
been no safety inspections since November 1990. Further, there had been no full-load safety
test since 1987.
On June 3, 2004, Nash presented his petition to the Board, requesting that the elevator
be reclassified as a material lift. In his petition, Nash argued for a variance to allow the
elevator to operate because of undue hardship and noncompliance because of its existing
conditions. The petition suggested that, after a proposed expenditure of $4,000 to $5,000 for
maintenance, the elevator would be put in a reasonably safe condition. By a letter dated August
26, 2004, the DOL notified Nash that the variance request would be heard by the Board at its
September 23, 2004 meeting.
At the September 23, 2004 hearing, Nash testified that the elevator was essential to the
operation of the warehouse and that the value of the warehouse was reduced significantly
without its use. He stated that he believed Mike Lanford, a licensed elevator inspector, could
update the elevator and return the elevator to safety specifications. Nash further stated that
repairs would cost $4,000 to $5,000, as opposed to $90,000 for a new freight elevator. The
Board orally denied the request for the variance and voted to approve the operation of the
elevator if it substantially complied with the provisions of the American Society of Mechanical
Engineers Safety Code for Existing Elevators, ASME A-17.3-1992, by making eleven safety
corrections listed in Smothers’s report. The Board agreed to reconsider the variance request
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at the next Board meeting.
The Board’s next meeting took place on November 3, 2004, where Nash requested that
the Board reconsider its September 23, 2004 decision. There was some testimony concerning
the conversion of the elevator to a material lift and whether the Elevator Safety Code would
apply. At the end of the hearing, the Board denied the requested variance, stating that the
elevator must meet the standards of ASME A17.3-1992; that it cannot meet those standards
without the eleven corrections listed in Smothers’s report of September 21, 2004; and that
reasonable safety cannot be assured without meeting the standards of the code.
At the meeting of the Board on February 18, 2005, the Board approved the order
prepared by the DOL with respect to Nash’s written request for a variance to operate the
elevator. Also, on February 18, 2005, the Board refused to approve the order granting a
variance to operate the elevator as a material lift, continuing the matter until Smothers could
provide the Board with pictures and a recommendation regarding the proposed classification
of the Board. The Board’s November 3, 2004 order was entered on February 22, 2005.
A third meeting was held on June 9, 2005. The Board again rejected Nash’s arguments
and entered an order on June 9, 2005 ruling that “reasonable safety can be assured by allowing
this elevator to operate as a material lift upon compliance of certain conditions,” which
included the eleven items identified in Smothers’s report, such as (1) installing hoistway gates
on all floors with electrical and mechanical locks seven feet high; (2) installing a car gate with
electrical and mechanical locks; (3) installing car and machine-room lighting; (4) guarding
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machine from the back of the car; (5) removing water from pit and repairing elevator
equipment; (6) installing all junction-box covers–hoistway, machine room, and machine; (7)
installing fire extinguisher in machine room; (8) locking machine-room door; (9) clearing for
governor in overhead to work; (10) enclosing hoistway sidewall and top, and closing all holes
in walls; and (11) passing complete safety test, five years full load and all safety devices. The
Board also conditioned the variance upon compliance with prohibiting the elevator’s use by
passengers, removing all controls from the car to outside the car, and posting a conspicuous
sign stating, “No Passengers Allowed by Law–Material Lift Only.” The Board granted Nash’s
request for a variance. The Board’s order was entered on June 9, 2005.
On July 7, 2005, Nash filed a petition for judicial review of the Board’s administrative
adjudication, pursuant to the provisions of Ark. Code Ann. § 20-24-119 (Repl. 2005) and of
the Administrative Procedure Act, specifically codified at Ark. Code Ann. § 25-15-212 (Repl.
2002), with the Pulaski County Circuit Court. On July 12, 2006, the circuit court entered an
order, ruling that (1) there was substantial evidence in the record to support the Board’s finding
that there was no undue hardship; (2) there was substantial evidence to support the Board’s
finding that granting Nash’s variance requests without conditions would not be reasonably safe;
(3) Nash’s constitutional challenges were not raised at the administrative level and were barred;
(4) the Board did not err in considering Smothers’s inspection report even though Nash had
not received a copy prior to the hearing; and (5) the evidence does not support an allegation
of discrimination with respect to conditions imposed on him. Nash timely filed a notice of
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appeal on August 9, 2006. On May 17, 2006, we issued a per curiam opinion ordering Nash
to rebrief for his failure to comply with Ark. Sup. Ct. R. 4-1 (2006). Nash v. Arkansas
Elevator Safety Board, ___ Ark. ___, ___ S.W.3d ___ (May 17, 2007). Nash has submitted
a new brief, and we now consider the merits of his appeal.
For his first point on appeal, Nash argues that the Board erred in finding that there was
no undue hardship in its February 22, 2005 order. Specifically, Nash contends that there was
no substantial evidence to support the Board’s finding and that the Board “operates now as an
insuror against any ‘possibility’ of an injury.” Nash also contends that the elevator’s being
“reasonably safe” is the current standard, and in his view, the Board’s position of “protection
against ‘any possibility’ of an injury is an extreme requirement.”
In response, the Board argues that it did not err in finding no undue hardship with
respect to Nash’s initial variance request. The Board asserts that its finding was supported by
substantial evidence. The Board agrees that “the only evidence presented by the Appellant to
support a claim of undue hardship were the hearsay statements of counsel for the Appellant.”
The Board concedes that it did not object to the introduction or consideration of this hearsay
evidence.
Review of administrative agency decisions, by both the circuit court and appellate
courts, is limited in scope. Arkansas Dep’t of Corr. v. Bailey, ___ Ark. ___, ___ S.W.3d ___
(Jan. 25, 2007). The standard of review to be used by both the circuit court and the appellate
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court is whether there is substantial evidence to support the agency’s findings. Id. Thus, the
review by appellate courts is directed not to the decision of the circuit court, but rather to the
decision of the administrative agency. Id. The circuit court or appellate court may reverse the
agency decision if it concludes:
(h) [T]he substantial rights of the petitioner have been prejudiced because
the administrative findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the agency's statutory authority;
(3) Made upon unlawful procedure;
(4) Affected by other error or law;
(5) Not supported by substantial evidence of record; or
(6) Arbitrary, capricious, or characterized by abuse of discretion.
Ark. Code Ann. § 25-15-212(h) (Repl. 2002).
An administrative agency’s interpretation of its own regulation will not be overturned
unless it is clearly wrong. Dukes v. Norris, ___ Ark. ___, ___ S.W.3d ___ (May 3, 2007).
We have recognized that administrative agencies, due to their specialization, experience, and
greater flexibility of procedure, are better equipped than courts to analyze legal issues dealing
with their agencies. Id.
The authority of the Arkansas General Assembly to regulate elevators is found at Ark.
Code Ann. §§ 20-24-101–20-24-120 (Repl. 2005). Specifically, the legislature created the
Elevator Safety Board in Section 2 of Act 189 of 1963, codified at Ark. Code Ann. § 20-24106 (Repl. 2005), and the Board is responsible for the “[r]ules and regulations prescribing
minimum safety requirements for all existing elevators . . . .” Ark. Code Ann. § 20-24-
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107(c)(4).
Under the Board’s regulations, there is a standard for elevators installed prior to August
27, 1963. Those regulations provide in pertinent part:
(1) All elevators, escalators, and dumbwaiters installed and in existence
prior to August 27, 1963, shall conform to the requirements of The American
Society of Mechanical Engineers Safety Code for Existing Elevators, ASME
A17.3-1992, except as provided in Rule (f)(1)(a)(ii) and (f)(1)(a)(iii), below.
These standards are hereby adopted by reference and incorporated herein.
Notwithstanding any provision of ASME A17.3-1992 to the contrary, the
following provisions shall apply to all elevators, escalators, and dumbwaiters
installed prior to August 27, 1963, as applicable[.]
....
(ii) The owner or operator of any elevator subject to Rule (f)(1)(A)(i)
above shall have two (2) years from the effective date of these regulations to
comply.
Id.
Arkansas Code Annotated § 20-24-106(d) confers upon the Board the power to grant
exceptions and variations in certain circumstances. That statutory provision provides:
(d) The board shall also have the power in any particular case to grant
exceptions and variations which shall only be granted when it is clearly
evident that they are necessary in order to prevent undue hardship or when the
existing conditions prevent compliance with the literal requirements of the
rules and regulations. In no case shall any exception or variation be granted
unless, in the opinion of the board, reasonable safety will be secured thereby.
Id. (emphasis added).
With this precedent in mind, we turn to the present case to determine whether Nash’s
petition to the Board for a variance establishes an undue hardship that is “clearly evident”
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under Ark. Code Ann. § 20-24-106(d). Here, the Board, in its February 22, 2005 order, made
the following conclusion of law:
2. The evidence of an undue hardship before the board is that the cost
of compliance to this commercial enterprise would be close to $60,000, which
Petitioner claims is approximately one-third the value of the warehouse.
....
4. The Board concludes that there is no undue hardship.
Because our standard of review requires us to review the agency’s decision, we agree
with the Board’s conclusions on the undue-hardship issue. Nash failed to present any evidence
regarding the cost of bringing the elevator up to code, the cost of a new elevator, or the value
of the warehouse property. Nash’s counsel, in his arguments to the Board, revealed that “it
[would] cost ninety thousand to replace this elevator and about sixty to seventy thousand I
think to make the changes that he [Smothers] recommends, and this warehouse is simply not
worth that.” However, Smothers testified in the following colloquy:
Steve Kinzler: [Board member]: So Larry, you are also saying to make
these eleven improvements, it may not be sixty thousand that he has already
incurred. It may be forty or fifty thousand.
Allen Gaulding [Board member]: He is going to have to spend some
money.
Steve Kinzler: Oh yeah, it’s definitely going to be an expense.
Larry Smothers: It’s still going to be expensive, but it won’t be no fifty
or sixty thousand dollars.
At the hearing, Nash testified about addressing Smothers’s list of problems with the elevator,
stating, “I’m not sure what the difference of the cost is, I understood the gates and locks, the
first two or three items on that list of eleven, and Mr. Smothers, they were the one[s] that
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would run it up to about sixty thousand dollars, ah, just to make those changes [sic].”
This conflicting evidence fails to prove that Nash would suffer an undue hardship for
the following reasons. First, Nash’s counsel’s statements constitute hearsay, and while hearsay
is admissible in an agency decision, it does not constitute substantial evidence. Garner, supra.
Second, Smothers, DOL’s chief elevator inspector, testified that he believed that bringing the
elevator up to code would not cost the $60,000 that Nash anticipated. Third, Nash gave his
estimate, but he did not provide any estimates of a new elevator, costs of repair, or value of
the property. Because Nash failed to prove that he suffered a clearly evident undue hardship,
pursuant to Ark. Code Ann. § 20-24-106(d), we affirm the Board’s findings on this issue.
Further, the Board argues that its decision should be affirmed based upon the statutory
requirement of Ark. Code Ann. § 20-24-106(d). Specifically, the Board contends that its
decision should be upheld on the basis of reasonable safety, as there is substantial evidence to
support its findings.
Variances shall not be granted unless, in the opinion of the Board, reasonable safety will
be secured. Ark. Code Ann. § 20-24-106(d). Additionally, Ark. Code Ann. § 20-24-112(a)(3)
requires the owner or lessee of every freight elevator to be inspected once a year.
With these statutory provisions in mind, we turn to the present case. Here, in its June
9, 2005 order, the Board made the following findings:
3. The standards of ASME A17.3-1992 are the least stringent safety
standards applicable to any elevator in Arkansas. Elevator AS 746 does not
currently meet those standards. The elevator cannot substantially meet those
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standards without correcting the eleven safety violations listed in Mr.
Smothers’s report of September 21, 2004.
....
5. Elevator ASW 746 does not currently meet the standards of ASME
A17.3-1992. The elevator cannot substantially meet those standards without
correcting the eleven (11) safety violations listed in Mr. Smothers’s report of
September 21, 2004.
6. The board concludes that reasonable safety cannot be assured without
meeting the standards of ASME A17.3-1992.
We agree with the Board’s findings. According to Smothers, the 1926 elevator had not
been inspected since 1990, which was twelve years before Smothers conducted his inspection
in 2002, at which time the elevator was “red tagged,” or taken out of service. Smothers
testified that he had worked in the elevator field for twenty-seven years, and his opinion as to
the safety of the unit was that “[he] would not allow it to operate at all.” Further, he added
that in order to operate as a materials lift, it would “have to have a fully enclosed hoistway
door and car gate with mechanical and electrical locks.” The pictures and video submitted as
exhibits supported Smothers’s testimony, and as the circuit court’s order reflected, there was
two feet of water in the pit of the elevator. Therefore, based upon this evidence, the Board
properly found that the elevator was not reasonably safe.
We note that it is well settled that administrative agencies are better equipped than
courts, by specialization, insight through experience, and more flexible procedures to
determine and analyze underlying legal issues; and this may be brought up in a contest between
opposing forces in a highly charged atmosphere. Baxter v. Arkansas State Bd. of Dental
Examiners, 269 Ark. 67, 598 S.W.2d 412 (1980). This recognition has been asserted, as
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perhaps the principal basis for the limited scope of judicial review of administrative action and
the refusal of the court to substitute its judgment and discretion for that of the administrative
agency. Id. Based upon this precedent, we defer to the Board’s expertise on the matter, and
for the foregoing reasons, we affirm the Board’s rulings.
For his second point on appeal, Nash argues that the Board and circuit court erred in
refusing to allow the requested variances, or exceptions to the code, regarding an elevator that
was in existence prior to the code. Specifically, Nash contends that the legislature adopted a
“grandfather principle” for existing elevators, found at Ark. Code Ann. § 20-24-106(d). Nash
also asserts that there were “procedural irregularities” that supported “a showing of
discriminatory treatment.”
In response, the Board argues that the term, “grandfather
principle,” is confusing and that Ark. Code Ann. § 20-24-106(d) applies “as equally to new
construction as to existing elevators.” Further, citing Ark. Code Ann. § 20-24-106(b), the
Board asserts that it has specific authority to adopt standards for existing elevators.
The Board has the specific authority to adopt standards for existing elevators. Ark.
Code Ann. § 20-24-106(b). The statute upon which Nash relies is Ark. Code Ann. § 20-24106(d), which authorizes the Board to approve a variance when (1) it is “clearly evident” that
it is necessary in order to prevent undue hardship or (2) when the existing conditions prevent
compliance with the literal requirements of the rules and regulations. The statute also provides
that variances will not be issued unless “reasonable safety will be secured.” Id.
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First, we address Nash’s argument regarding the eleven safety violations. Here, the
Chief Elevator Inspector testified that the eleven corrections would bring the elevator in
compliance with minimum safety standards established by ASME A17.3-1992, for existing
elevators installed prior to August 27, 1963. At the Board’s hearing held on November 3,
2004, the following colloquy occurred:
Denise Oxley: Now, um your recommendations, you made eleven
recommendations, which the board should have about safety. . . . Ok, would that
get the elevator, those eleven recommendations, substantially in compliance with
A17.3?
Larry Smothers: It most likely would. . . . It would get it close.
According to the DOL’s Elevator Safety Code No. 14, which was promulgated by the
Board and the DOL, any existing elevator, which was installed prior to August 27, 1963,
“shall” conform to ASME A17.3-1992. Further, any elevator that was installed prior to August
27, 1963, that “does not have a current operating permit and has been out of operation for over
twelve (12) months shall conform” to Rule (d)(1), which provides the minimum standards for
newly constructed elevators. We do not find any authority that provides a lesser standard for
elevators installed prior to August 27, 1963. According to subsection (f) of the Elevator Safety
Code, those existing elevators, including the elevator in the present case, must be brought up
to code. This procedure guarantees “reasonable safety” under Ark. Code Ann. § 20-24-106(d).
Thus, we conclude that the Board did not err in conditioning its approval for Nash’s variance
upon correcting the eleven code violations.
Second, we consider Nash’s arguments regarding the “procedural irregularities” in the
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case that are allegedly “proof of discrimination.” Nash relies upon Garner v. Foundation Life
Insurance Co., 17 Ark. App. 13, 702 S.W.2d 417 (1986), for the proposition that “procedural
irregularities could support a showing of discriminatory treatment.” Specifically, Nash points
to (1) the report made by Smothers regarding the eleven violations; (2) his absence from the
Board meeting on February 18, 2005; (3) a blank tape of the hearing on September 23, 2004;
and (4) “the complete turn around in Mr. Smothers’s testimony on the application of the code.”
In response, the Board argues that Nash did not request the report in advance; that Nash had
knowledge of the February 18, 2005, meeting; and that Nash never requested the Board to
settle the record.
We will examine each of Nash’s allegations of error. First, we disagree with Nash’s
argument that Garner, supra, is on point. In Garner, appellant contended that the court erred
in taking additional evidence beyond the agency’s record. However, the court of appeals held
that the evidence, which was not presented to the Commission but could have been, was
improperly admitted by the circuit court. Here, Smothers’s inspection report was actually
made on September 21, 2004, two days prior to the Board’s meeting. Nash and his counsel
attended the meeting and were given a copy of the report, and no prior request was made under
Ark. Code Ann. § 25-15-208(a)(3). Nash requested an additional hearing, which was granted,
and the next hearing was held on November 3, 2004. Thus, the Board did not err in
considering Smothers’s inspection report.
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Second, Nash claims that there is a “procedural irregularity” in the February 18, 2005
meeting because the Board conducted a hearing. We note that Nash’s argument was not raised
below. We have said that the issue must be preserved at the agency level. See Arkansas
Contractors, supra. However, even if this argument were preserved, Nash admitted to Denise
Oxley in the June 9, 2005 hearing that he had notice of the meeting, but he believed “just the
orders would be presented . . . .” The Administrative Procedures Act requires only that Nash
had notice and the opportunity to participate. Ark. Code Ann. § 25-15-209(a).
Third, Nash claims that there was an additional procedural irregularity because the
tapes of the September 23, 2004, hearing were blank, and consequently, a transcript of that
hearing was unavailable. Here, the tape of the September 24, 2004 hearing is blank, and a
portion of the transcript of the hearing on November 3, 2004, is incomplete. Nash never
requested any ruling from the Board on the transcript issue, nor did he request the Board to
settle the record. No such request was made at the June 9, 2005 hearing. On June 8, 2005,
the circuit court entered an order, finding the record of the administrative proceedings
incomplete. A supplement to the record was filed on June 24, 2005, and February 8, 2006.
The circuit court’s action cured any deficiencies. Based upon the foregoing conclusions, we
affirm the Board’s findings on these procedural-irregularity issues.
For his third point on appeal, as well as second point on appeal, Nash argues that the
Board erred in conditioning the approval of his second variance to operate Nash’s elevator as
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a material lift. Specifically, Nash contends that such refusal of the Board is “contrary to
substantial evidence” and constitutes “unlawful discrimination.” Nash asserts that Smothers’s
testimony between the first hearing and the last hearing on the material-lift issue “has been
substantially different for this petitioner as opposed to others . . . .” The Board responds,
arguing that it did not err in conditioning a variance approval to operate Nash’s elevator as a
material lift upon correcting eleven code violations. The Board contends that its decision is
supported by substantial evidence.
To the extent that Nash’s discrimination claim raises a constitutional issue, we cannot
reach the merits of his point on appeal. There is no ruling or order for this court to review, and
we will not address these points. See Arkansas Contractors Licensing Bd. v. Pegasus
Renovation Co., 347 Ark. 320, 64 S.W.3d 241 (2001) (holding that an appellant must obtain
a ruling from the Board in order to preserve an argument, even a constitutional one, for an
appeal from an administrative proceeding). We have held many times that it is the appellant’s
obligation to raise such matters first to the administrative agency and obtain a ruling. Id. See
also Franklin v. Arkansas Dep’t of Human Servs., 319 Ark. 468, 892 S.W.2d 262 (1995)
(declining to review appellant’s arguments that she was denied due process and her right to a
hearing under Ark. Code Ann. § 25-15-208 where such arguments were not made to the
administrative tribunal); Wright v. Arkansas State Plant Bd., 311 Ark. 125, 842 S.W.2d 42
(1992) (declining to reach “several arguments” that were not raised before the Board);
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Alcoholic Bev. Control Div. v. Barnett, 285 Ark. 189, 685 S.W.2d 511 (1985) (declining to
reach a challenge to the timing of two local option elections because the argument was not
raised before the Board). The rationale behind this rule is that, if the appellate court were to
set aside an administrative determination on a ground not presented to the agency, it would
usurp the agency’s function and deprive the agency of the opportunity to consider the matter,
make its ruling, and state the reasons for its action. See Wright, supra.
We note, as the Board suggests, that it has granted a variance of reclassification of an
elevator to a material lift in four prior cases. One such case before the Board was Peterson
Farms, Inc., #3519, in which numerous modifications were made “to insure that no passengers
ride this elevator.” Here, we agree that the Board did not err in conditioning a variance
approval to operate Nash’s elevator as a material lift upon correcting the eleven code violations
recommended in Smothers’s report. Thus, for the foregoing reasons, we affirm the Board’s
findings.
Affirmed.
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