The Alaska Supreme Court has upheld a lower court’s decision dismissing a lawsuit filed by JBG Memorial, LLC (JBG), a landlord, against the State of Alaska, Department of Transportation and Public Facilities (DOT&PF), and the Department of Family and Community Services (DFCS). The core of the case revolves around a dispute over office space leased by DFCS and the state’s procurement process. The Supreme Court found that JBG failed to exhaust necessary administrative remedies before bringing the case to court, and thus the superior court was correct in dismissing the case.
The Lease and the Waiver
The story begins in March 2008, when JBG leased office space on Fourth Avenue in Anchorage to DFCS for 15 years. The lease was set to expire in February 2023, with options for DFCS to renew for three additional five-year periods. The lease also included a provision stating that if DFCS remained in the space after the lease expired, it would convert to a month-to-month tenancy.
About ten months before the lease was set to expire, DFCS sought a waiver to bypass the standard competitive bidding process for acquiring new leased space. The agency wanted to move to the Anchorage Business Park. In its waiver application, DFCS cited building maintenance issues at the Fourth Avenue property and the Anchorage Business Park’s proximity to key service centers for its clients.
In August 2022, the DOT&PF commissioner approved the single-source procurement waiver, concluding that competitive bidding was impractical and that the waiver was in the state’s best interest. In October 2022, a DOT&PF contracting officer informed JBG that DFCS would not be renewing the lease and planned to vacate in the first quarter of 2023. The officer also stated that if a new space wasn’t secured before the lease expired, DFCS would remain in a month-to-month holdover status at the Fourth Avenue property.
JBG’s principal requested details about DFCS’s new space, whether it would be acquired through a public procurement process, and how long DFCS would remain in holdover status. However, the contracting officer said that he was “not able to provide . . . more details at [that] time.”
Because the state would not provide further information about the new lease, JBG filed a public records request in January 2023. The state did not respond before the JBG lease expired in February. When the lease did expire, DFCS remained in possession of the Fourth Avenue property, triggering the month-to-month tenancy. In June 2023, the state entered into a lease with JL ABP, LLC (the JL lease) for the Anchorage Business Park office space. Two days later, the state released the records requested by JBG in January.
The Lawsuit and Its Dismissal
In July 2023, JBG filed a complaint in superior court, seeking to prevent DOT&PF and DFCS from terminating the JBG lease, to have the JL lease declared void, and to compel the state to follow proper bid solicitation procedures. JBG also filed a motion for a preliminary injunction in August, seeking to prevent the state from terminating the lease with JBG until the lawsuit was resolved. JBG argued that it would suffer irreparable harm in the form of lost rent and the loss of the opportunity to competitively bid on the lease.
The state moved to dismiss JBG’s complaint, arguing that JBG had failed to exhaust administrative remedies. JBG admitted that it had not exhausted these remedies but argued that its failure was excused.
In November, the superior court granted the state’s motion to dismiss, agreeing that JBG had failed to exhaust its administrative remedies. The court divided JBG’s claims into two categories: claims related to the JBG lease and claims related to the JL lease. The court examined each set of claims under the framework set out in *Bruns v. Municipality of Anchorage*, which explained when the exhaustion of administrative remedies may be excused. The court considered factors such as lack of meaningful access, bias, futility, or the possibility of irreparable harm.
The superior court found that JBG’s claims regarding the JBG lease did not excuse its failure to exhaust administrative remedies. The court also determined that JBG’s failure to exhaust administrative remedies was not excused as to the JL lease, as the relief JBG sought was within the scope of what it could have sought administratively. The court also concluded that the allegations of bias within the administrative appeal process did not excuse JBG’s failure to exhaust.
The court granted the state’s motion to dismiss, and the state subsequently moved for attorney’s fees, which the court also granted. JBG then appealed to the Alaska Supreme Court.
The Supreme Court’s Decision
The Alaska Supreme Court upheld the superior court’s decision. The Supreme Court reviewed the lower court’s decision *de novo*, meaning it applied the same legal standards as the lower court.
Key Findings of the Supreme Court:
* Failure to Exhaust Remedies: The Supreme Court affirmed that JBG was required to exhaust administrative remedies. The court outlined the administrative processes available to JBG under Alaska law, including the avenues for claims related to its existing contract with DFCS and the subsequent JL lease. The DOT&PF commissioner would have been the final decision-maker in any such administrative claims.
* No Excuse for Non-Exhaustion: JBG conceded that it had not exhausted its administrative remedies. The Supreme Court found that JBG had not presented sufficient facts to excuse its failure to do so. The court examined whether JBG had been denied meaningful access to administrative review procedures, whether the administrative process was biased, and whether pursuing administrative remedies would have been futile.
* Meaningful Access: The court found that JBG had notice of the administrative processes available to it. The court stated that JBG knew as early as October 2022 that the state would not renew the lease, and the procurement code provided a path for JBG to pursue administrative review at that time.
* Bias: The court rejected JBG’s arguments that the administrative process was biased. The court found that the allegations of bias did not implicate the DOT&PF commissioner, who would have been the final decision-maker in the administrative appeal. The court reasoned that the fact that the commissioner had approved the waiver did not automatically mean that he had prejudged the issue.
* Futility: The court also rejected JBG’s argument that exhausting administrative remedies would have been futile. The court stated that JBG had not explained how its inability to obtain relief on its preferred timeline rendered exhaustion futile.
* Attorney’s Fees: The Supreme Court also affirmed the superior court’s decision to award attorney’s fees to the state. The court found that the state was the prevailing party because JBG had failed to exhaust its administrative remedies.
In Conclusion
The Alaska Supreme Court’s decision underscores the importance of exhausting administrative remedies before seeking judicial review. The court found that JBG had failed to demonstrate any valid reason for not exhausting those remedies and, as a result, the lawsuit was properly dismissed.