Compassionate v. adhs/nelson ( 2015 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
COMPASSIONATE CARE DISPENSARY, INC., an Arizona nonprofit
corporation,
Plaintiff/Appellant,
v.
ARIZONA DEPARTMENT OF HEALTH
SERVICES, an agency of the State
of Arizona; CORY NELSON,1
Interim Director of the Arizona Department of Health Services,
in his official capacity,
Defendants/Appellees
No. 1 CA-CV 13-0133
FILED 3-24-2015
Appeal from the Superior Court in Maricopa County
No. CV2012-057041
The Honorable Michael D. Gordon, Judge
REVERSED AND REMANDED
1 Effective March 4, 2015, Cory Nelson was appointed as Interim
Director, replacing Director Will Humble. Pursuant to Rule 25(e)(1) of the
Arizona Rules of Civil Procedure, the case caption is amended to reflect this
change.
COUNSEL
K.L. Ward & Associates, PLLC, Chandler
By Kathryne L. Ward
Counsel for Plaintiff/Appellant
Sherman & Howard L.L.C., Phoenix
By Gregory W. Falls and Michael W. Wright
Counsel for Defendants/Appellees
MEMORANDUM DECISION
Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Patricia A. Orozco joined.
B R O W N, Judge:
¶1 Compassionate Care Dispensary, Inc., (“CCD”) appeals the
superior court’s dismissal of its complaint against the Arizona Department
of Health Services and its director (collectively “the Department”) relating
to CCD’s application to operate a medical marijuana dispensary. Because
we conclude that the allegations of the complaint were sufficient to state
claims against the Department for a declaratory judgment and writ of
mandamus, we reverse and remand for further proceedings in the superior
court.
BACKGROUND
¶2 In 2011, the Department began accepting applications from
entities seeking certification to operate nonprofit medical marijuana
dispensaries. Pursuant to regulations promulgated by the Department,
only one dispensary registration certificate was to be awarded for each
Arizona Community Healthcare Analysis Area, or “CHAA,” of which there
are 126. As part of the application, prospective dispensary operators were
required to submit documentation from the local jurisdiction indicating
that the proposed dispensary location was in compliance with local zoning
laws and ordinances.
¶3 CCD sought a medical marijuana dispensary registration
certificate to operate a dispensary in the Winslow CHAA, and started its
application process by applying for a Conditional Use Permit (“use
2
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
permit”) from the City of Winslow (“the City”) to operate a dispensary at
1600 East Second Street. As part of the application process, CCD principals
attended community meetings and public hearings, obtained engineering
and environmental impact reports, submitted sworn attestations, and
underwent significant criminal background investigations. In May 2011,
the City’s Office of Planning and Development granted CCD a
nontransferable use permit for the Second Street Location.
¶4 As a result of unrelated litigation, dispensary certificate
application allocations throughout the state were stayed until May 2012.
CCD alleges that, when the stay was lifted, three prospective operators
applied for a certificate in the Winslow CHAA: CCD, The Medicine Room,
LLC (“TMR”),2 and Green Cross Medical (“GCM”). Both CCD and GCM
applied using the Second Street location. TMR applied using a location at
701 Mike’s Pike, for which a different entity, Pursuit for Life (“PFL”), had
previously obtained a use permit. The Winslow City Planner (“city
planner”) signed a “zoning clearance letter” in the form required by the
Department on behalf of CCD, TMR, and GCM stating that each entity’s
proposed dispensary location complied with all City zoning requirements;
however, according to CCD, the city planner signed the forms for TMR and
GCM under the false premise that the use permits for the two locations
were transferable.
¶5 The Department initially determined that all three applicants
had satisfied the regulatory requirements and listed three proposed
dispensary applicants on its website. Because the Department had
determined that three applicants met the requirements of Arizona
Administration Code (“A.A.C.”) R9-17-302(A), the Department was set to
conduct a lottery to randomly allocate a certificate to one of the applicants
pursuant to A.A.C. R9-17-302(B)(16) (2011).3
¶6 CCD, however, objected to the action taken by the city
planner. Counsel for CCD contacted the City and alleged that the use
2 We are unable to discern from the record before us whether this is
the actual legal name of the entity that filed the application. Pursuant to
Arizona Revised Statutes (“A.R.S.”) section 36-2810, the Department is
generally prohibited from disclosing the contents or any supporting
information of an application to operate a dispensary.
3 The regulations have been amended twice since CCD began the
application process for a dispensary registration certificate. Unless
otherwise stated, we refer to the 2011 version of the Regulations.
3
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
permits previously obtained by CCD and PFL were nontransferable and
could not be used by other applicants to satisfy City zoning requirements.
The Winslow City Attorney (“city attorney”) agreed with CCD’s
interpretation.
¶7 On May 25, 2012, before any lottery was held, the city attorney
contacted GCM, TMR, and the Department to inform them that neither
GCM nor TMR was in compliance with the City’s zoning restrictions. In
the course of litigation between GCM and a former owner of the Second
Street location, the city attorney signed an affidavit stating that (1) the City’s
use permits are nontransferable; (2) neither GCM nor TMR held use permits
for their proposed locations; and (3) neither applicant had complied with
the City’s zoning ordinances, which required each applicant to obtain a use
permit before the proposed dispensary location could be deemed properly
zoned. In addition, the city attorney clarified that the Department’s form
“document of compliance” was “confusing” and that the intent of the City’s
ordinance was always to require potential applicants to individually obtain
a use permit before the proposed location could be deemed properly zoned.
¶8 On June 18, 2012, counsel for CCD sent a letter to the
Department alleging that neither GCM nor TMR had obtained a use permit
for their proposed locations and thus neither was in compliance with the
City’s zoning ordinance. On or about July 18, 2012, the Arizona Medical
Marijuana Program, a division of the Department, sent a letter to GCM,
which stated in part as follows:
The [Department] has received a letter from the Winslow City
Attorney dated May 25, 2012, indicating that you have not
obtained a Conditional Use Permit as required by the
Winslow City Zoning Code. Based on this information from
your local zoning jurisdiction, you are not in compliance with
Arizona Administrative Code [] R9-17-304(C)(5)-(6).
The letter explained further that GCM’s dispensary application was
“inadvertently deemed substantively complete,” and that GCM could
either withdraw its application or it would be denied.
¶9 As the scheduled lottery date approached, counsel for CCD
contacted counsel for the Department, demanding that the Department take
similar action and notify TMR of its incomplete application. In an email
sent the morning of August 8, 2012, the scheduled lottery date, the
Department’s counsel stated that the Department “did reach out” to the city
attorney and, as a result, he reversed his position on TMR’s zoning issue.
4
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
Counsel for CCD immediately contacted the city attorney, who “denied this
interpretation of his statements,” and reaffirmed the position set forth in his
affidavit and his May 25 letter. Counsel for CCD then unsuccessfully
attempted to discuss the matter further with representatives from the
Department and the Department’s counsel. The Department conducted the
lottery as scheduled and, as the randomly chosen applicant, TMR was
awarded a dispensary certificate for the Winslow CHAA.
¶10 CCD sued the Department, alleging it took inconsistent
positions regarding the applicants for the Winslow CHAA and acted to the
detriment of CCD by contacting the city attorney to attempt to influence
him to change his position and thereby support TMR’s application. CCD
alleged that the Department acted wrongfully, arbitrarily, and capriciously
in failing and refusing to deny TMR’s application. CCD thus sought (1) a
declaratory judgment ruling that the Department improperly accepted
TMR’s application, and (2) a writ of mandamus under the Rules of
Procedure for Special Actions ordering the Department to void the lottery
results and award a dispensary certificate to CCD, plus damages, attorneys’
fees, and costs.4
¶11 In response, the Department filed a motion to dismiss under
Arizona Rule of Civil Procedure (“Rule”) 12(b)(6), arguing that CCD’s
complaint should be dismissed because (1) the award of a dispensary
registration certificate is not a “final decision” and therefore not subject to
administrative or judicial review; and, (2) even assuming the award was a
final decision, CCD did not exhaust its administrative remedies and thus
lacked standing to judicially challenge the Department’s decision to include
TMR in the lottery. Alternatively, the Department asserted it has absolute
and qualified immunity, and CCD failed to join the successful applicant
(TMR), an indispensable party.
¶12 Following oral argument on the motion, the superior court
determined that CCD had standing to assert its claim because, assuming
the Department wrongfully accepted TMR’s application, “there would
have been no lottery at all and [CCD] would have been awarded the
Registration Certificate,” and thus CCD suffered harm. The court rejected
the Department’s argument that CCD failed to exhaust its administrative
remedies because the court concluded—and the parties agreed—CCD did
not have an administrative remedy under the Arizona Medical Marijuana
4 CCD also sought a temporary restraining order and preliminary
injunction, which the court later denied without prejudice. CCD does not
challenge that ruling in this appeal.
5
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
Act (“AMMA”), A.R.S. §§ 36-2801 through -2819. The court then dismissed
the complaint with prejudice, finding that CCD did not have a property
right in the award of a registration certificate and therefore was owed no
due process. Based on that determination, the court also dismissed CCD’s
claim for special action mandamus relief, concluding that without a
“substantive right grounded in statute,” special action relief could not be
granted. CCD’s timely appeal followed.
DISCUSSION
A. Statutory Background
¶13 The AMMA provides for, among other things, the registration
and certification of nonprofit medical marijuana dispensaries. A.R.S. § 36-
2804. The Department, as the agency charged with implementing the
AMMA, was required to adopt regulations governing “the manner in
which the [D]epartment shall consider applications for . . . registration
certificates.” A.R.S. § 36-2803(A)(4)(a). In 2011, the Department adopted
A.A.C. R9-17-101 through R9-17-323 (the “Regulations”).
¶14 The AMMA restricts the number of registration certificates
the Department may issue. A.R.S. § 36-3804(C). Pursuant to the
Regulations in place at the time CCD applied for a registration certificate,
the Department could issue only one registration certificate per CHAA.
A.A.C. R9-17-101(7), -303(B). The Regulations include step-by-step
instructions about the manner in which the Department accepts, reviews,
and awards dispensary registration certificates. See A.A.C. R9-17-302
through -304.
¶15 An entity seeking to obtain a dispensary registration
certificate must submit to the Department an application form along with
substantial documentation regarding the entity’s officers or members,
proposed location, and business plan, together with a $5,000 application
fee. A.A.C. R9-17-304(D). An applicant must also submit “[d]ocumentation
from the local jurisdiction where the dispensary’s proposed physical
address is located that: (a) [t]here are no local zoning restrictions for the
dispensary’s location; or (b) [t]he dispensary’s location is in compliance
with any local zoning restrictions[.]” A.A.C. R9-17-304(D)(6). See also
A.R.S. § 36-2804(B)(1)(d) (prospective nonprofit medical marijuana
dispensary must submit “a sworn statement certifying that the registered
non-profit medical marijuana dispensary is in compliance with the [zoning]
restrictions,” if any).
6
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
¶16 The Department begins its allocation of one dispensary
registration certificate per CHAA by opening the application period and
accepting applications.5 Once the application period has closed, the
Department reviews the applications. If the Department determines that
only one dispensary registration certificate application for a particular
CHAA “is complete and in compliance with” the AMMA and the
Regulations, then the Department “shall allocate the dispensary
registration certificate for the CHAA to that applicant[.]” A.A.C. R9-17-
303(E)(1). If the Department receives more than one application that meets
all requirements, the successful applicant is selected by a random drawing,
or lottery. A.A.C. R9-17-303(E)(2).
¶17 If the Department determines that an application is complete
and compliant with the AMMA and the Regulations, but the applicant is
not chosen through the random selection process, the corresponding
written notice to the applicant “is not a denial and is not considered a final
decision of the Department subject to administrative review[.]” A.A.C. R9-
17-107(G)(3). Likewise, the Department’s failure to award a certificate is
not a “final decision” subject to judicial review by the superior court under
the Administrative Remedy Act, A.R.S. §§ 12-901 through -914. A.R.S. § 36-
2804.05(G).
B. Claim For Special Action/Mandamus
¶18 The superior court dismissed CCD’s claim for special action
mandamus relief because CCD failed to alleged facts sufficient to show that
CCD had a substantive right grounded in statute.6 On appeal, CCD argues
5 Ariz. Admin. Code R9-17-302 was repealed after the Department
allocated all initial certificates. See A.A.C. R9-17-303(A) (2015) (“Each
calendar year beginning in 2013, the Department shall review current valid
dispensary registration certificates to determine if the Department may
issue additional dispensary registration certificates pursuant to A.R.S. § 36-
2804(C)”).
6 As a threshold matter, a party bringing a special action in superior
court must have standing to do so. Sears v. Hull, 192 Ariz. 65, 68, ¶ 9-11, 961
P.2d 1013, 1016 (1998). Standing requires a plaintiff to allege a “distinct and
palpable injury” that is particularized or personal to the plaintiff. Id. at 69,
¶ 16, 961 P.2d at 1017. The superior court determined that CCD had
standing to bring an action against the Department because, assuming that
the Department arbitrarily included TMR in the lottery for the Winslow
7
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
that the superior court’s reasoning “misconstrue[d] the nature of special
actions.” CCD also asserts that it properly stated a claim for special action
relief because a government agency may not act arbitrarily or capriciously
in the exercise of its duties. The Department argues that the superior court’s
dismissal of CCD’s claim for special action relief was appropriate because
(1) CCD is not entitled to special action relief because it has no substantive
property right in a certificate, and (2) the Department’s decision to accept
TMR’s application is discretionary and not appropriate for special action
review.
¶19 There are two forms of special action relief. See Ariz. R.P.
Spec. Act. 1; Circle K Convenience Stores, Inc. v. City of Phoenix, 178 Ariz. 102,
103, 870 P.2d 1198, 1199 (App. 1993). Statutory special actions provide a
legal avenue for mandatory judicial review pursuant to laws that
“expressly authorize[] proceedings under certiorari, mandamus, or
prohibition[.]” Ariz. R.P. Spec. Act. 1(b). Nonstatutory special actions
provide an avenue for discretionary judicial review, encompassing the
traditional writs of mandamus, certiorari, and prohibition. Circle K
Convenience Stores, 178 Ariz. at 103, 870 P.2d at 1199; Ariz. R.P. Spec. Act.
1(a).7 Nonstatutory special actions constitute a limited form of review in
which the only questions that may be raised are:
CHAA, CCD “would have been awarded the Registration Certificate” and,
thus, suffered harm sufficient to provide standing. The Department does
not challenge this determination through cross-appeal or otherwise.
7 Rule 1(a) provides in pertinent part as follows:
Relief previously obtained against a body, officer, or person
by writs of certiorari, mandamus, or prohibition in the trial or
appellate courts shall be obtained in an action under this Rule,
and any reference in any statute or rule to any of these writs,
unless excepted in the next subsection, shall be deemed to
refer to the special action authorized under this Rule. Special
forms and proceedings for these writs are replaced by the
special action provided by this Rule, and designation of the
proceedings as certiorari, mandamus, or prohibition is neither
necessary nor proper.
8
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
(a) Whether the defendant has failed to exercise discretion
which he has a duty to exercise; or to perform a duty required
by law as to which he has no discretion; or
(b) Whether the defendant has proceeded or is threatening to
proceed without or in excess of jurisdiction or legal authority;
or
(c) Whether a determination was arbitrary and capricious or
an abuse of discretion.
Ariz. R.P. Spec. Act. 3. Unlike a statutory special action, for which the right
to review is granted by statute, the superior court has the discretion to deny
jurisdiction over a nonstatutory special action. See Bilagody v. Thorneycroft,
125 Ariz. 88, 92, 607 P.2d 965, 969 (App. 1979) (“As a general rule, an
appellate court’s decision regarding whether or not it will entertain the
merits of a non-statutory special action is a discretionary one.”). “[W]hen a
special action is initiated by complaint in superior court the judge must first
exercise his discretion and decide whether to consider the case on its
merits.” Id. Here, the superior court did not expressly accept jurisdiction
over CCD’s special action complaint. However, because the court denied
CCD’s special action for failure to plead a substantive right, we presume
that the superior court implicitly exercised its discretion to accept
jurisdiction but then denied relief. Because no party claims error in the
superior court’s exercise of special action jurisdiction, the question is
whether the superior court erred in denying relief.
¶20 We review de novo the grant of a motion to dismiss a
complaint under Rule 12(b)(6). Sw. Non–Profit Hous. Corp. v. Nowak, 234
Ariz. 387, 390, ¶ 10, 322 P.3d 204, 207 (App. 2014). In reviewing the
dismissal of a complaint for failure to state a claim, we accept as true the
facts alleged in the complaint and will affirm the dismissal if the plaintiff
would not be entitled to relief under any interpretation of the facts
susceptible of proof. Fidelity Sec. Life Ins. Co. v. State Dep’t. of Ins., 191 Ariz.
222, 224, ¶ 4, 954 P.2d 580, 582 (1998). “However, we do not accept as true
allegations consisting of conclusions of law, inferences or deductions that
are not necessarily implied by well-pleaded facts, unreasonable inferences
or unsupported conclusions from such facts, or legal conclusions alleged as
facts.” Jeter v. Mayo Clinic Arizona, 211 Ariz. 386, 389, ¶ 4, 121 P.3d 1256,
1259 (App. 2005). We may consider the complaint’s exhibits, or public
records regarding matters referenced in a complaint, without converting a
Rule 12(b)(6) motion into a summary judgment motion. See Strategic Dev. &
9
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
Constr., Inc. v. 7th & Roosevelt Partners, LLC, 224 Ariz. 60, 63-64, ¶¶ 10-13,
226 P.3d 1046, 1049–50 (App. 2010).
¶21 Citing Book Cellar, Inc. v. City of Phoenix, 139 Ariz. 332, 678 P.2d
517 (App. 1983), the superior court concluded that “the Rules of Procedure
for Special Actions do not create substantive rights” and, because CCD had
no property right in the award of a certificate, the court could not grant
special action relief. However, neither Book Cellar nor any other authority
supports the court’s conclusion that a claim for nonstatutory special action
relief cannot be asserted absent a “substantive” statutory right. Indeed, a
person may state a claim for nonstatutory special action relief, even without
an independent, substantive right. Ariz. R.P. Spec. Act. 2(a) (“Any person
who previously could institute an application for a writ of mandamus . . .
may institute proceedings for a special action.”). A writ of mandamus
allows a “party beneficially interested” in an action to compel a public
official or board “to perform an act" imposed by law. A.R.S. § 12–2021; Bd.
of Ed. of Scottsdale High Sch. Dist. No. 212 v. Scottsdale Ed. Ass’n, 109 Ariz. 342,
344, 509 P.2d 612, 614 (1973) (“Mandamus is an extraordinary remedy
issued by a court to compel a public officer to perform an act which the law
specifically imposes as a duty.”). The term “party beneficially interested”
is “applied liberally to promote the ends of justice.” Barry v. Phx. Union High
Sch., 67 Ariz. 384, 387, 197 P.2d 533, 534 (1948).
¶22 Generally, mandamus does not lie if the public officer “has
any discretion as to what shall be done” Graham v. Moore, 56 Ariz. 106, 109,
105 P.2d 962, 964 (1940). However, a public officer “has no discretion to
proceed arbitrarily.” Ariz. R.P. Spec. Act. 3, State Bar Comm. Note; see also
Tobin v. Rea, 231 Ariz. 189, 194, ¶ 14, 291 P.3d 983, 988 (2013)
(“Misapplication of law or legal principles constitutes an abuse of
discretion.”). Thus, an action for mandamus may still be brought “if it
clearly appears that the officer has acted arbitrarily and unjustly and in the
abuse of discretion[.]” Collins v. Krucker, 56 Ariz. 6, 13, 104 P.2d 176, 179
(1940). Rule 3(c) specifically provides that the question of “whether a
determination was arbitrary and capricious or an abuse of discretion” may
be raised through special action.8
8 We reject the Department’s argument, made for the first time on
appeal, that the CCD’s complaint failed to reference Rule 3. The complaint
stated in part that the action was brought “pursuant to the Rules of
Procedure for Special Actions, including, but not limited to, Rule 2.” That
allegation, together with the request for mandamus relief and specific
10
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
¶23 CCD alleged in its complaint that the City adopted a zoning
ordinance requiring dispensary certificate applicants to obtain a use permit
for their proposed dispensary locations before the City would provide the
zoning compliance documentation required in R9-17-304(D)(6).9 CCD
admits that the city planner signed a zoning clearance letter on behalf of all
three applicants, but alleges that the city attorney avowed that the approval
was made in error and that neither TMR nor GCM obtained a use permit to
operate a medical marijuana dispensary prior to submitting their
applications. CCD also alleged that the Department acted arbitrarily when,
after receiving written notification from the city attorney and CCD claiming
that neither GCM nor TMR had obtained use permits from the City, the
Department chose to address only GCM’s deficiency, providing notification
that GCM’s application was inadvertently deemed complete but was in fact
incomplete because GCM did not obtain a use permit as required, with
specific reliance on the May 25 letter written by the city attorney. For
purposes of this appeal, we accept the validity of these factual allegations.
See Fidelity Sec. Life Ins. Co., 191 Ariz. at 224, ¶ 4, 954 P.2d at 582.
¶24 CCD does not allege that any statute or regulation provides
authority for special action relief. And, the superior court specifically found
that CCD has no administrative remedy whatsoever, a finding not
challenged here. As such, CCD necessarily seeks nonstatutory special
action relief and must plead facts sufficient to show that the Department’s
conduct comes within the Rule 3 categories of questions that may be raised
in a special action. Assuming the truth of CCD’s well-pleaded factual
allegations, as we must, CCD has alleged facts sufficient to state a claim
under Rule 3(c) that the Department acted arbitrarily and capriciously or
abused its discretion (1) when it failed to reject TMR’s application
notwithstanding its awareness that the City had determined that TMR did
not in comply with local zoning requirements; and (2) when the
Department rejected GCM’s application for lack of zoning compliance but
not TMR’s. Cf. Senner v. Bank of Douglas, 88 Ariz. 194, 199, 354 P.2d 48, 52
(1960) (holding that “mandamus is a proper remedy where the Commission
has clearly abused its discretion in refusing to accept for filing articles of
incorporation, or amendments thereto, on the ground that the proposed
assertions that the Department acted arbitrarily, were sufficient to put the
Department on notice of the special action relief CCD was seeking.
9 Section 36-2806.01 permits cities, towns and counties to “enact
reasonable zoning regulations that limit the use of land for registered
nonprofit medical marijuana dispensaries to specified areas[.]”
11
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
corporate name is deceptively similar to the names of other existing
corporations”).
C. Claim for Declaratory Judgment
¶25 CCD also sought a declaration that TMR’s application was
submitted without a “bona fide zoning clearance” letter from the City and
therefore should not have been included in the lottery for the Winslow
CHAA. For reasons similar to those discussed above, we conclude the
superior court erred in dismissing CCD’s claim for a declaratory judgment.
¶26 Like the claim for special action relief, CCD alleged that the
Department arbitrarily and unreasonably exercised its discretion when it
included TMR in the lottery for the Winslow CHAA but excluded GCM.
The Department is responsible for reviewing dispensary registration
certificate applications and determining whether they are “complete and in
compliance with A.R.S. Title 36, Chapter 28.1” and the corresponding
regulations. A.A.C. R9-17-302(A), -304(A). Section 36-2804(B)(1)(d)
requires a “sworn statement certifying that the registered nonprofit medical
marijuana dispensary is in compliance” with local zoning restrictions, if
any. In furtherance of this statutory requirement, R9-17-304(D)(6) similarly
requires documentation from the local jurisdiction that the “dispensary’s
location is in compliance with any local zoning restrictions[.]”
¶27 The superior court concluded that CCD had no state-created
property right in obtaining a dispensary registration certificate for the
Winslow CHAA and thus dismissed CCD’s complaint, finding that without
a property right, neither CCD’s procedural due process nor its substantive
due process arguments presented a claim upon which relief could be
granted. In doing so, the superior court relied on Grand Canyon Pipelines,
Inc. v. City of Tempe, 168 Ariz. 590, 593, 816 P.2d 247, 250 (App. 1991), in
which this court upheld the dismissal of an unsuccessful bidder’s claim for
damages, holding “a bidder has no claim of entitlement to a public works
contract, and, therefore, no property interest in the contract” because
“Arizona law recognizes a public body’s discretion to reject all bids.”
¶28 Grand Canyon is distinguishable because the unsuccessful
bidder in that case sought only damages; it did not assert a claim for
declaratory relief. See id. at 591, 816 P.2d at 248 (unsuccessful bidder sought
“consequential and compensatory damages” for alleged violation of its
constitutional due process rights). While a plaintiff seeking damages for an
alleged procedural due process violation must plead facts sufficient to show
a liberty or property interest to survive a Rule 12(b)(6) motion to dismiss,
12
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
Board of Regents v. Roth, 408 U.S. 564, 569–70 (1972), a plaintiff seeking
declaratory relief need only plead “sufficient facts to establish that there is
a justiciable controversy.” Planned Parenthood Ctr. of Tucson, Inc. v. Marks,
17 Ariz. App. 308, 310, 497 P.2d 534, 536 (1972). We therefore need not
decide whether CCD has a property right in the award of a dispensary
registration certificate.10
¶29 The Declaratory Judgment Act is remedial and should be
broadly construed. A.R.S. § 12-1842 (“This article is declared to be remedial;
its purpose is to settle and to afford relief from uncertainty and insecurity
with respect to rights, status and other legal relations; and is to be liberally
construed and administered.”); A.R.S. § 12-1831 (“Courts of record within
their respective jurisdictions shall have power to declare rights, status, and
other legal relations whether or not further relief is or could be claimed.”);
Yes on Prop 200 v. Napolitano, 215 Ariz. 458, 468, ¶ 29, 160 P.3d 1216, 1226
(App. 2007). “For a justiciable controversy to exist, a complaint must assert
a legal relationship, status or right in which the party has a definite interest
and an assertion of the denial of it by the other party.” Land Dep’t v. O’Toole,
154 Ariz. 43, 47, 739 P.2d 1360, 1364 (App. 1987). A controversy is not
justiciable when a defendant entity or official has no power to deny the
plaintiff’s asserted interests, and a well-plead claim for declaratory relief
must name an entity or official that has the ability to control
implementation of the statute or regulation. Morris v. Fleming, 128 Ariz. 271,
273, 625 P.2d 334, 336 (App. 1980); Riley v. Cochise County, 10 Ariz. App. 55,
60, 455 P.2d 1005, 1010 (1969). There is no requirement that a party seeking
only a declaratory judgment allege facts to support a due process claim.
¶30 CCD alleged that the Department acted arbitrarily when it
allowed TMR’s application to be included in the lottery even though TMR
had not obtained a use permit as required by the City. CCD also alleged
that the Department acted capriciously when it denied GCM’s application
for failure to obtain a use permit, but failed to deny TMR’s application for
the same reason. Because CCD would have been awarded the dispensary
certificate for the Winslow CHAA but for the Department’s alleged
10 In its prayer for relief, CCD requested “damages” but alleged no
substantive basis for its request. On appeal, neither parties’ briefs reference
the request for damages nor do they include any authority suggesting that
damages may be awarded in connection with claims for declaratory
judgment and mandamus. Based on the superior court record, CCD has
failed to allege any substantive ground supporting its request for damages.
Therefore, at this juncture of the litigation, there is no pending claim for
damages.
13
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
arbitrary acceptance of TMR’s application, CCD has alleged a harm
sufficient to establish a justiciable controversy under the Declaratory
Judgment Act. Thus, with or without a property right in the award of a
certificate, dismissal at this stage of the litigation was unjustified.
D. Additional Grounds for Dismissal
¶31 Dismissal of CCD’s complaint was not appropriate for any of
the additional grounds asserted in the Department’s motion to dismiss. See
Sw. Non–Profit Hous. Corp, 234 Ariz. at 390–91, ¶ 10, 322 P.3d at 207–08
(“Although we ‘uphold dismissal only if the plaintiffs would not be entitled
to relief under any facts susceptible of proof in the statement of the claim,’
. . . we may affirm if the dismissal is correct for any reason[.]”) (internal
citations omitted).
1. Statutory Immunity
¶32 As alternative grounds for dismissal, the Department argues
that A.R.S. §§ 12-820.01 and -820.02 provide the Department with either
absolute or qualified statutory immunity from suit. Section 12–820.01(A)(2)
absolutely immunizes a public entity from liability for any act or omission
of an employee constituting “[t]he exercise of an administrative function
involving the determination of fundamental governmental policy.”
Section 12–820.02(A)(5) provides public entities and public employees with
qualified immunity from liability for, among others, “the issuance of . . .
any permit, license, certificate, approval, order or similar authorization[,]”
unless the public employee in question intended to cause injury or was
grossly negligent. Contrary to the Department’s assertions, these statutes
apply only to suits “against public entities and public employees for money
damages.” See Zeigler v. Kirschner, 162 Ariz. 77, 84, 781 P.2d 54, 61 (App.
1989). As explained above, CCD has not alleged any substantive claim that
would entitle it to an award of damages; its claims are based on declaratory
and special action relief, neither of which permits recovery of damages.
Accordingly, these statutes do not insulate the Department from the claims
asserted by CCD.
2. Failure to Join an Indispensable Party
¶33 The Department also argues that dismissal was warranted
based on CCD’s failure to join the successful applicant (identified by CCD
14
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
as TMR)11 as a party to the litigation. Following a hearing on CCD’s
unsuccessful application for temporary restraining order and preliminary
injunction, the superior court ordered that TMR, pursuant to Rule 19(a) “be
advised” by the Department that TMR was “to appear in this Court for a
Return Hearing” on CCD’s application for order to show cause. The court’s
order also stated that CCD would be given leave to amend its complaint
“after [TMR] appears at the return hearing” and that the Department was
to provide copies of the complaint and related documents to TMR. The
court noted further that “in the absence of the above orders, [CCD] will be
denied the due process that may be required to resolve the issue.” The
Department then “served” TMR by “email and first class mail.” TMR did
not appear at the hearing, and the court proceeded to hear arguments on
the Department’s motion to dismiss. At the end of the hearing, the superior
court commented that “the other side needs to be involved,” undoubtedly
in reference to TMR.
¶34 “The compulsory joinder of parties under [Arizona Rules of
Civil Procedure] Rule 19 entails a three-step analysis.” Copper Hills
Enterprises, Ltd. v. Arizona Dep’t of Revenue, 214 Ariz. 386, 392, ¶ 22, 153 P.3d
407, 413 (App. 2007). “The court must determine: (1) if complete relief can
be accorded in the party’s absence; (2) whether there is a substantial risk
that the existing parties could be subjected to multiple or inconsistent
obligations; and (3) whether the absent party, if joinder is not feasible, is
indispensable.” Id. Stated differently, the test of indispensability “is
whether the absent person’s interest in the controversy is such that no final
judgment or decree could be entered, doing justice between the parties
actually before the court and without injuriously affecting the rights of
others not brought into the action.” Gila Bend v. Walled Lake Door Co., 107
Ariz. 545, 549, 490 P.2d 551, 555 (1971). If the court determines that joinder
is required, then the court “shall order that the person be made a party.”
Ariz. R. Civ. P. 19(a). If such person “cannot be made a party, the court
shall determine whether in equity and good conscience the action should
proceed among the parties before it, or should be dismissed, the absent
person being thus regarded as indispensable.” Ariz. R. Civ. P. 19(b).
¶35 On a procedural basis, the record before us does not justify
dismissal on the grounds of failure to join an indispensable party. The
record clearly indicates that the superior court was concerned about
proceeding with the litigation in the absence of TMR, the successful
11 Citing its statutory obligation to keep the contents of applications
confidential, the Department informed the superior court it could not
disclose the name of the successful applicant.
15
COMPASSIONATE v. ADHS/NELSON
Decision of the Court
applicant. However, the superior court never explicitly ordered that TMR
be made a party. Nor does the record indicate whether TMR properly could
be made a party. As such, the court did not consider whether the joinder
of TMR was indispensable. Because these determinations must be made by
the superior court in the first instance, the Department is not entitled to
dismissal as a matter of law based on failure to join an indispensable party.
CONCLUSION
¶36 Viewing the allegations of the complaint in the light most
favorable to CCD, we hold that the superior court erred in dismissing
CCD’s claims for declaratory relief and mandamus. We therefore reverse
the court’s order of dismissal and remand for further proceedings. By
concluding that CCD has stated claims upon which relief may be granted
sufficient to defeat the Department’s motion to dismiss, we express no
opinion concerning the ultimate merit of such claims, any defenses that may
be available, or the remedies CCD seeks.
:ama
16