Ghost Player, L.L.C. and CH Investors, L.L.C. vs. State of Iowa

IN THE SUPREME COURT OF IOWA
No. 14–0339
Filed February 27, 2015
GHOST PLAYER, L.L.C. and CH INVESTORS, L.L.C.,
Appellants,
vs.
STATE OF IOWA,
Appellee.
Appeal from the Iowa District Court for Polk County, Mary Pat
Gunderson, Judge.
Claimants of tax credits appeal a district court ruling dismissing
their claim for tax credits because the claimants failed to exhaust their
administrative remedies. AFFIRMED.
J. Campbell Helton and Van T. Everett of Whitfield & Eddy, P.L.C.,
Des Moines, for appellant Ghost Player, L.L.C.
Richard O. McConville of Coppola, McConville, Coppola, Carroll,
Hockenberg & Scalise, P.C., West Des Moines, for appellant CH
Investors, L.L.C.
Jeffrey S. Thompson, Solicitor Attorney General, and Adam P.
Humes, Assistant Attorney General, for appellee.

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WIGGINS, Justice.
Claimants of tax credits under Iowa Code sections 15.391–.393
(2009) brought an action in district court to collect certain tax credits it
contended the State owed the claimants. The district court dismissed
the claimants’ petition on the grounds it did not have the authority to
hear the case because the claimants failed to exhaust their
administrative remedies. We agree with the district court decision
dismissing the petition because the actions taken by the agency in
denying the credits was other agency action, requiring the claimants to
exhaust their administrative remedies. Failure to exhaust those
administrative remedies deprives the district court of the authority to
hear the case. We further conclude the district court was correct in
finding the process used by the agency in processing the claimants’ claim
for tax credits did not offend Due Process Clauses of the Iowa or United
States Constitutions. Accordingly, we affirm the decision of the district
court.
I. Background Facts and Proceedings.
On January 8, 2009, the Iowa Department of Economic
Development (IDED) and Ghost Player, L.L.C. executed a contract for tax
credits under the Film, Television, and Video Project Promotion Program.
See Iowa Code § 15.391. CH Investors, L.L.C. is a third-party beneficiary
to the contract.1 The contract included a “description of the project to be
completed[,] . . . the terms and conditions for receipt of the tax credits[,]
. . . and the repayment requirements or other penalties imposed in the
event the [film producers failed to] fulfill its obligations” under the
contract; all of these terms were required by Iowa Administrative Code
1For the sake of brevity we will refer to both parties as “Ghost Player.”

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261—36.5(2) (2008). The contract included a clause stating, “Any IDED
determinations with respect to compliance with the provisions of this
Contract and the Funding Agreements shall be deemed to be final
determinations pursuant to Section 17A of the Code of Iowa (2005).”
Under the contract, Ghost Player believed it would receive certain
tax credits for the project Field of Dreams Ghost Player, a documentary
film they produced highlighting the lives of the men who portrayed the
ghost baseball players in the movie Field of Dreams filmed in Dyersville.2
After completing the film, Ghost Player submitted its request for the film
tax credits and supporting materials.
On December 20, 2010, the IDED declined to issue the contracted
twenty-five percent tax credit for some of the expenditures and
investments of Ghost Player. Ghost Player objected to the agency’s
decision and submitted additional information for the IDED’s
consideration. The IDED reviewed the materials and on June 29, 2011,
revised its tax credit determination, but still did not provide a tax credit
for all of Ghost Player’s expenditures and investments. Ghost Player
submitted further information after the IDED’s second determination in
an attempt to gain further tax credits. The IDED did not change its
position after receiving this information and issued its final
determination on the film tax credits the agency would issue to Ghost
Player on February 22, 2012.
After receiving the final determination and believing the IDED had
breached the parties’ contract by failing to issue tax credits for all of
Ghost Player’s qualified expenditures, Ghost Player filed a breach of
contract action in district court on November 6, 2013. The State filed a
2Upon release, the project was titled Ghost Player: Relive the Magic.

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motion to dismiss, arguing the district court lacked authority to hear the
claim because Ghost Player was first required to seek relief under the
Iowa Administrative Procedure Act.
This district court granted the motion to dismiss. It held the
action complained of by Ghost Player falls squarely within the definition
of “other agency action,” and Ghost Player would have a full and fair
opportunity to raise the necessary issue and present evidence through a
section 17A.19(7) hearing. See Iowa Code § 17A.19(7) (explaining the
process for judicial review of an agency decision). Ghost Player appeals.
II. Issue.
The first issue we must decide is whether the district court
correctly decided it did not have the authority to hear the case because
Ghost Player failed to exhaust its remedies under the chapter 17A, the
Iowa Administrative Procedure Act.
Because we decide this issue adverse to Ghost Player, we must
also deal with Ghost Player’s constitutional issues raised on appeal. The
only issue Ghost Player raised in the district court was that the failure of
the IDED to have administrative rules in place deprived it of due process.
Thus on appeal, while Ghost Player raised other challenges, we will only
decide the due process issue.
III. Scope of Review.
The State moved to dismiss Ghost Player’s petition on the grounds
Ghost Player did not exhaust its administrative remedies. When a party
fails to exhaust all of its required administrative remedies, the court has
no authority to hear the case, and if a party properly raises the
challenge, the court must dismiss the case. Keokuk County v. H.B., 593
N.W.2d 118, 123 (Iowa 1999). We review the authority of the district
court to hear a case for correction of errors at law. Reg’l Ret. Living, Inc.

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v. Bd. of Review, 611 N.W.2d 779, 781 (Iowa 2000) (per curiam). We
review Ghost Player’s constitutional claim de novo. Hensler v. City of
Davenport, 790 N.W.2d 569, 578 (Iowa 2010).
IV. Whether the District Court Had the Authority to Hear This
Case in Light of the State’s Claim that Ghost Player Should Have
Exhausted Its Administrative Remedies.
Iowa began the Film, Television, and Video Project Promotion
Program in 2007. See 2007 Iowa Acts ch. 162 §§ 1–13 (codified at Iowa
Code §§ 15.391–.393).3 The program offered two transferable tax credits,
a qualified expenditure tax credit and an investment tax credit. Id.
§ 15.393(2)(a)(1)–(3), (b)(1)–(2).
To obtain a tax credit, the taxpayer must register the project with
the IDED. See id. § 15.393(1). The Code sets up minimal criteria for
registration and allows the IDED to establish other criteria by rule. See
id. After a project is registered, the taxpayer may qualify for credits if the
expenditures and investments meet the conditions set forth in the Code.
Id. § 15.393(2), (4).
To administer the program, the IDED passed a rule requiring a
taxpayer to enter into a contract with the IDED setting forth the terms
and conditions under which the tax credit would be issued. Iowa Admin.
Code r. 261—36.5. The Code gave the IDED the obligation to verify the
eligibility of the credit, and if verified issue the credit. Iowa Code
§ 15.393(2)(a)(3), (b)(2).
Consistent with the IDED’s obligation to verify and issue the tax
credit, the contract entered into between Ghost Players and the IDED
stated:
3The legislature repealed the Film Program in 2012. See 2012 Iowa Acts ch.
1136, § 38.

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Final Authority. The IDED shall have the authority to
reasonably assess whether the Recipient has complied with
the terms of this Contract. Any IDED determinations with
respect to compliance with the provisions of this Contract
and the Funding Agreements shall be deemed to be final
determinations pursuant to Section 17A of the Code of Iowa
(2005).
The IDED did not promulgate any rules dealing with the procedures for
claiming a credit, for the IDED to verify a credit, or for a party to contest
a decision concerning a credit within the agency.
Chapter 17A of the Code classifies three types of agency action.
They are rulemaking, contested cases, or other agency action. Sindlinger
v. Iowa State Bd. of Regents, 503 N.W.2d 387, 389 (Iowa 1993). Neither
party contends the IDED’s refusal to honor all the tax credits claimed
involves rulemaking. Both the Code and this court have defined a
contested case proceeding as one “in which the legal rights, duties or
privileges of a party are required by Constitution or statute to be
determined by an agency after an opportunity for an evidentiary
hearing.” Iowa Code § 17A.2(5); accord Smith v. Iowa Bd. of Med.
Exam’rs, 729 N.W.2d 822, 826 (Iowa 2007). There is no claim in this
appeal the IDED actions were a contested case proceeding.
The dispute in this appeal is whether the IDED’s refusal to honor
all the tax credits Ghost Player claimed is other agency action. Other
agency action is action taken by an agency that is “neither rulemaking
nor a contested case.” Smith, 729 N.W.2d at 826. In other words,
“agency action taken without a hearing required by a statute or
constitution or action taken after a required hearing that does not rise to
the level of an evidentiary hearing is other agency action.” Id.
We begin our analysis with a brief review of our prior cases
applying the definition of other agency action. In an early case, we

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decided whether a professor’s claim for payment of unused and
accumulated sick leave, and another faculty member’s claim that the
Iowa State Board of Regents (Regents) violated the collective bargaining
agreement by refusing to arbitrate tenure rights was other agency action
requiring the claimants to exhaust their administrative remedies prior to
bringing an action in district court. Allegre v. Iowa State Bd. of Regents,
319 N.W.2d 206, 207 (Iowa 1982). There we held the legislature, by
statute, intended the board to first pass on the payment of unused or
accumulated sick leave. Id. at 208. Therefore, the Regents must first
pass on the issue and the claimants were required to exhaust their
administrative remedies prior to bringing an action in district court. Id.
As to the collective bargaining issue, we held the employee also had to
exhaust his administrative remedies before going to district court
because the legislature, by statute, recognized the Regents’ right to carry
out the responsibilities regarding collective bargaining. Id. at 209.4
In a 1986 opinion, we held a contract dispute between an outside
contractor and the Regents concerning overage charges on the
construction of a basketball arena was not other agency action. Jones v.
Iowa State Bd. of Regents, 385 N.W.2d 240, 240, 242 (Iowa 1986). We
distinguished Jones from Allegre because Jones did not involve an
intrafamily dispute with an ongoing relationship. Id. It is also
interesting to note that neither party cited any legislative procedure
requiring the Regents to pass on overage charges as part of its statutory
duty or expertise.
4In a later case, we disapproved of any suggestion made in Allegre that any
action or inaction by an agency is reviewable only under the procedures of chapter 17A.
Papadakis v. Iowa State Univ. of Sci. & Tech., 574 N.W.2d 258, 260 (Iowa 1997).

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In 1987, we decided a University of Iowa employee’s claim under
the Iowa Civil Rights Act could proceed to district court without first
exhausting her administrative remedies by presenting the claim to the
Regents. Jew v. Univ. of Iowa, 398 N.W.2d 861, 865 (Iowa 1987). In
reaching this conclusion, we agreed with the employee that the civil
rights claim bore little relation to the Regents’ statutory mandate or
supposed area of expertise. Id. at 864–65. We also emphasized the
legislature devised a separate statutory procedure designed to process
civil rights claims in the Code. Id. at 865. Notably, both parties agreed
the employee needed to exhaust her administrative remedies by
presenting her breach of contract claims to the Regents’ before filing in
district court. Id. at 863.
For the same reasons we articulated in Jew, we held a university
professor must exhaust his administrative remedies by presenting his
breach-of-contract claim to the Regents before filing with the district
court. Genetzky v. Iowa State Univ., 480 N.W.2d 858, 861 (Iowa 1992).
However, in 1997, we allowed a university employee to bring a claim for
failure to pay long-term disability without first presenting it to the
Regents. Hornby v. State, 559 N.W.2d 23, 25 (Iowa 1997). As in Jew, we
decided this case on the basis that the legislature devised a separate
statutory procedure designed to process wage claims. Id. We held the
employee’s claim was a wage claim and the employee was not required to
exhaust her administrative remedies by presenting her wage claim to the
Regents prior to filing in district court under the wage payment collection
statues. Id. at 25–26.
Finally, in the most recent case on this issue, we held a university
faculty member must exhaust his administrative remedies by presenting
his employment contract dispute to the Regents, prior to filing with the

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district court. Papadakis v. Iowa State Univ. of Sci. & Tech., 574 N.W.2d
258, 260 (Iowa 1997). In reaching this conclusion, we held if the action
or inaction of the agency in question bears a discernible relationship to
the statutory mandate of the agency as evidenced by express or implied
statutory authorization, a party must first present the claim to the
agency for other agency action before the party can proceed to district
court. Id. Here, we replaced the intrafamily test applied in Jones with
the discernable relationship test.
Applying our caselaw to the present appeal, we find the review of
the tax credits by the IDED is other agency action requiring Ghost
Players to seek judicial review under chapter 17A of the Iowa Code. The
legislature mandated the IDED to verify the eligibility of the credit and if
verified issue the credit. Iowa Code § 15.393(2)(a)(3), (b)(2).5 The
language of the contract reinforced this mandate. The mandate of
sections 15.393(2)(a)(3) and (b)(2) squarely fall within the definition and
test as to whether an agency’s action or inaction qualifies as other
agency action. The duty to verify and issue the credits bears a
discernible relationship to the statutory mandate of the IDED as
evidenced by the express statutory authorization. Additionally, the
legislature has not devised a separate remedial statutory scheme to
process a claim for film tax credits.
Accordingly, the district court did not have the authority to hear
this case because Ghost Player failed to exhaust its administrative
5At the time, the Code provided, “After verifying the eligibility for a tax credit
under this paragraph ‘a’, the department of economic development shall issue a film,
television, and video project promotion program tax credit certificate to be attached to
the person’s tax return.” Iowa Code § 15.393(2)(a)(3). “After verifying the eligibility for a
tax credit under this paragraph ‘b’, the department of economic development shall issue
a film, television, and video project promotion program tax credit certificate to be
attached to the person’s tax return.” Iowa Code § 15.393(2)(b)(2).gf

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remedies. Thus, we affirm the district court’s decision dismissing Ghost
Player’s petition.
V. Whether Ghost Player Was Deprived Due Process Because
the IDED Failed to Have Administrative Rules in Place.
In the papers filed by Ghost Player in the district court, it failed to
cite either the Iowa or the United States Constitution in support of its
due process argument. In reaching its decision, the district court only
stated,
Next, Plaintiffs argue they will be denied due process
because there are no administrative rules in place to process
claims which IDED has wrongly decided. They claim they
did not receive a full and fair hearing on the merits of the
case.
It too, did not cite either the State or Federal Constitution.
On appeal, Ghost Player’s claim concerns its procedural due
process rights contained in the Due Process Clauses of the Fourteenth
Amendment to the United States Constitution and article I, section 9 of
the Iowa Constitution. In its brief, Ghost Player cites cases applying the
Federal Constitution or cases applying the Iowa Constitution in the same
manner as the Federal Constitution. When a party makes both a state
and federal constitutional argument and only argues the federal
constitutional standard, we have discretion to consider a different
standard under our state constitution and may apply the federal
standard more stringently. State v. Dewitt, 811 N.W.2d 460, 467 (Iowa
2012). In this case, we decline to exercise our discretion to consider a
different standard, and we will not apply the federal standard more
stringently under our state constitution.
The United States Supreme Court has stated that we decide what
process is due under the Constitution by balancing three competing

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interests. Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 903,
47 L. Ed. 2d 18, 33 (1976). These interests are:
First, the private interest that will be affected by the official
action; second, the risk of an erroneous deprivation of such
interest through the procedures used, and the probable
value, if any, of additional or substitute procedural
safeguards; and finally, the Government’s interest, including
the function involved and the fiscal and administrative
burdens that the additional or substitute procedural
requirements would entail.
Id. Just because another procedure may seem fairer or wiser, does not
mean the procedure provided violates due process. Bowers v. Polk Cnty.
Bd. of Supervisors, 638 N.W.2d 682, 691 (Iowa 2002).
Although not citing Mathews, we have previously balanced these
competing interests in another case involving other agency action.
Sindlinger, 503 N.W.2d at 389–90. There we looked at the legislative
mandate to see if a contested case procedure was required. Id. Having
determined a contested case proceeding was not required, we looked at
the process provided to see how it affected the private interest and if the
procedure offended the right of due process. Id. at 390. We concluded
the informal hearing process did not offend due process. Id.
Applying these principles to this case, we first note the legislature
did not mandate a contested hearing process to review and award tax
credits. Additionally, the Code and the contract set forth the process for
obtaining the tax credits. All that was required of the IDED was to
review the claim and make a determination as to the amount of the
credit. As the record demonstrates, if the claimant was unhappy with a
determination by the IDED, the claimant could present further
documentation to the IDED.

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The IDED reviewed all the subsequent documentation presented
and changed the award of tax credits when it deemed it was required to
do so based on Ghost Player’s submissions. This informal procedure did
not offend the due process guaranteed under the State and Federal
Constitutions because it correctly balanced the interests set forth in
Mathews. 424 U.S. at 335, 96 S. Ct. at 903, 47 L. Ed. 2d at 33; see also
Sindlinger, 503 N.W.2d at 389–90.
Additionally, Ghost Player argues by not having a hearing before
the IDED, the judicial review process will offend due process. First, we
cannot decide if the appeal process will offend due process because we
are not fortunetellers who can predict what will occur in a judicial review
process. We can say with certainty that when a party requests judicial
review of other agency actions the district court “may hear and consider
such evidence as it deems appropriate.” Iowa Code § 17A.19(7). This
means at the judicial review proceeding, the court should have the
agency file and any testimony that will shed light on what actually
occurred at the agency level. The purpose of this section is for the
district court to determine what actually occurred at the agency level to
facilitate a meaningful review of the agency’s action. Sindlinger, 503
N.W.2d at 390. In any event, we need not say more about the process
provided at the judicial review proceedings until such time as it has
taken place.
VI. Disposition.
We agree with the decision of the district court dismissing Ghost
Player’s petition on the grounds the IDED actions regarding the review
and awarding the requested tax credits was other agency action and
required Ghost Player to exhaust its administrative remedies prior to
filing a case in district court. Consequently, the district court was

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without authority to hear the case. We further conclude the district
court was correct in finding the process used by the IDED in processing
the claim did not offend the right of due process under the State or
Federal Constitutions. Therefore, we affirm the decision of the district
court.
AFFIRMED.

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