BLACK DIAMOND PEST CONTROL, INC., AND KEITH DUNCAN v. COMMONWEALTH OF KENTUCKY, DEPARTMENT OF AGRICULTURE
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RENDERED: August 1, 2003; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-001370-I
BLACK DIAMOND PEST CONTROL,
INC., AND KEITH DUNCAN
v.
MOVANTS
ON MOTION FOR RELIEF UNDER CR 65.07
FROM FRANKLIN CIRCUIT COURT
HONORABLE WILLIAM L. GRAHAM
ACTION NO. 02-CI-01446
COMMONWEALTH OF KENTUCKY,
DEPARTMENT OF AGRICULTURE
RESPONDENT
OPINION AND ORDER
GRANTING CR 65.07 RELIEF
** ** ** ** **
BEFORE:
GUIDUGLI, KNOPF AND SCHRODER, JUDGES.
GUIDUGLI, JUDGE.
Black Diamond Pest Control, Inc.,
(hereinafter “Black Diamond”) and Keith Duncan (hereinafter
“Duncan”) have moved this Court for interlocutory relief
pursuant to CR 65.07 from the Franklin Circuit Court’s order
denying injunctive relief in the underlying pending action.
A
three-judge panel previously granted Black Diamond and Duncan’s
motion for emergency relief to preserve the status quo until
oral arguments could be heard, and ordered that no further
action be taken against Black Diamond or Duncan pending further
order of this Court.
Having considered the parties’ pleadings,
the oral arguments, and the applicable case law, we grant the
motion for CR 65.07 interlocutory relief.
Black Diamond provides pest control services in both
Kentucky and Indiana, and has been doing business in the
Commonwealth for fifty years.
In Kentucky, Black Diamond
receives over $1,000,000 in annual revenue and employs twentytwo people.
Duncan serves as Black Diamond’s president.
Pursuant to KRS 217B.515, Black Diamond obtained, and held for
thirteen years, a structural pest control license.
KRS
217.535(5) requires that each applicator, or license holder of a
structural pest control firm, must register annually and pay an
annual $100 fee.
302 KAR 31:025 §3(1) provides that the
expiration date of each license is June 30 of each year.
In 2002, the Department of Agriculture did not send a
license renewal application packet to Black Diamond as had been
done in previous years.
In June, Duncan contacted the
Department to request his packet.
A facsimile cover sheet from
Debbie Armstrong of the Department of Agriculture reveals that
the registration packet was faxed to Duncan on June 10, 2002.
Upon receipt, Duncan claimed that he completed the registration
form and mailed the form as well as a check for the $100 annual
fee to the Department of Agriculture.
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Black Diamond’s checkbook
register reveals that check number 15666, dated June 14, 2002,
was made payable to the Commonwealth of Kentucky and was in the
amount of $100.
The Department apparently never received the
registration form or the $100 check.1
On August 13, 2002, the
Department sent Duncan a letter stating that his license had not
been renewed by June 30, meaning that his license had lapsed and
that he had to take and pass another licensing examination
before a new license could be issued.
Furthermore, the
Department stated that the letter served as a cease and desist
order, prohibiting Black Diamond from doing business in Kentucky
until it had a valid license.
Duncan had sent a letter to the
Department the previous day, explaining the situation and
enclosing another check for $100.
The Department responded by
letter dated September 6, 2002, stating that Duncan had to
retake and pass the licensing examination before he could obtain
a new license and returning the $100 check.
Black Diamond and Duncan filed a Verified Petition for
Declaration of Rights and Complaint for Injunctive Relief with
the Franklin Circuit Court on October 30, 2002, seeking a
declaration that the regulations promulgated by the Department
conflicted with KRS Chapter 217B and were therefore
unenforceable.
The trial court denied their motion for a
temporary restraining order as well as their motion for
1
Black Diamond’s June 2002 bank statement reveals that check number 15666 had
not cleared as of June 28, 2002.
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reconsideration of the denial.
Black Diamond and Duncan then
sought a temporary injunction pursuant to CR 65.04 on April 23,
2003, arguing that the Department’s regulations impermissibly
expanded its authority beyond that contemplated by the statute
and that the Department acted contrary to its prior
administrative precedent without providing any reason.
On June
18, 2003, the trial court entered an order denying the motion
for a temporary injunction, essentially finding that Black
Diamond and Duncan failed to show a substantial likelihood that
they would prevail on the merits.
This CR 65.07 motion for
interlocutory relief followed.
CR 65.04(1) sets out the substantive elements required
to establish a right to injunctive relief:
A temporary injunction may be granted during
the pendency of an action on motion if it is
clearly shown by verified complaint,
affidavit, or other evidence that the
movant’s rights are being or will be
violated by an adverse party and the movant
will suffer immediate and irreparable
injury, loss, or damage pending a final
judgment in the action, or the acts of the
adverse party will tend to render such final
judgment ineffectual.
In Maupin v. Stansbury, Ky.App., 575 S.W.2d 695 (1978), this
Court set forth a three-prong test to determine whether a
plaintiff is entitled to temporary injunctive relief.
In order
to establish entitlement to such relief, a plaintiff must show:
1) that he will suffer irreparable injury; 2) that the weight of
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the equities involved is in his favor; and 3) that he has
presented a substantial question in that the complaint raises a
serious question requiring a trial on the merits.
Because there
is no real argument but that Black Diamond and Duncan have met
the first two prongs and because the trial court did not address
those prongs, we shall confine our discussion to whether Black
Diamond and Duncan have met the third prong and have presented a
substantial question in their complaint.
In the matter before us, the trial court concluded
that Black Diamond and Duncan failed to present a substantial
legal question as to why the license should not have been
revoked.
In the trial court below and before this Court, Black
Diamond and Duncan have presented several arguments as to why
they are entitled to prevail on the merits, including the
constitutionality of the regulations, which they argue go beyond
the scope of the Department’s statutory authority because the
regulations authorize a stricter penalty than the statute.
Black Diamond and Duncan also argue that the Department deviated
from its prior, more lenient policy without giving any reason
for doing so and that the mailbox rule operated to protect them.
We believe that Black Diamond and Duncan have at least presented
a substantial question in their argument regarding the
constitutionality of the regulations.
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KRS 217B.535 requires every person to have a license
prior to engaging in structural pest control in the
Commonwealth.
KRS 217B.535 requires each license holder to
register annually and to pay a $100 annual fee.
The failure to
register and to pay the annual fee is considered a violation of
the statute pursuant to KRS 217B.550(4), for which violation the
Department of Agriculture may suspend, revoke or modify the
license.
KRS 217B.545(1).
However, the license holder is
allowed ten days from receipt of the notification of the
proposed suspension, revocation or modification to request a
hearing.
KRS 217B.545(2).
Pursuant to KRS 217B.050(1), the Department of
Agriculture is to enforce the provisions of KRS Chapter 217B and
has the authority to promulgate regulations to carry out the
chapter’s provisions.
302 KAR 31:025 §3 addresses license
renewal, and provides that the failure to submit a renewal
registration form and the $100 fee by July 1 results in the
lapse of the license.
Before a new license may be issued, the
license holder must take and pass a licensing examination.
Additionally, 302 KAR 31:030 §2(1)(d) imposes an administrative
fine of $100 for the violation of KRS 217B.550(4), which
addresses the failure to submit the registration form and pay
the $100 renewal fee.
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In our view, Black Diamond and Duncan have presented a
substantial question as to whether the regulations the
Department promulgated to enforce the provisions of KRS Chapter
217B impermissibly expand its authority beyond that permitted by
the statute.
KRS 217B.990 provides only for a monetary fine for
violations, and KRS 217B.545 provides that the Department “may”
suspend, revoke or modify a license for the failure to submit
the registration form and pay the annual renewal fee.
However,
the Department’s own regulations take away the discretion
afforded by the statute by requiring that a license lapse upon
the failure to timely submit the registration form and renewal
fee.
Furthermore, there is no provision in the statute that
would require a license holder to retake the licensing
examination for the failure to timely submit the required form
and renewal fee.
Therefore, it appears that the Department’s
regulations go beyond the scope of the statute in providing much
harsher penalties for license holders who fail to timely submit
their renewal registration form and annual fee.
For the forgoing reasons, Black Diamond and Duncan’s
CR 65.07 motion for interlocutory relief is hereby GRANTED and
the Franklin Circuit Court is DIRECTED to immediately enter a
temporary injunction pursuant to CR 65.04 prohibiting the
Department from taking further action against Black Diamond or
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Duncan pending a final judgment.
The trial court shall also set
an appropriate bond in this matter.
ALL CONCUR.
ENTERED: _August 1, 2003
/s/ Daniel T. Guidugli
JUDGE, COURT OF APPEALS
ORAL ARGUMENT FOR MOVANTS:
ORAL ARGUMENT FOR RESPONDENT:
Robert A. Donald, III
Louisville, KY
Mark Farrow
Frankfort, KY
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