Joshua Tree v. State ( 2023 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
JOSHUA TREE HEALTH CENTER, LLC, et al., Plaintiffs/Appellants,
v.
STATE OF ARIZONA, et al., Defendants/Appellees.
No. 1 CA-CV 22-0427
FILED 5-9-2023
Appeal from the Superior Court in Maricopa County
No. CV2020-004281
The Honorable Joseph P. Mikitish, Judge
AFFIRMED
COUNSEL
Wilenchik & Bartness, P.C., Phoenix
By Dennis I. Wilenchik, Ross P. Meyer
Counsel for Plaintiffs/Appellants
Sherman & Howard L.L.C., Phoenix
By Gregory W. Falls, Matthew A. Hesketh, Jake Tyler Rapp
Counsel for Defendants/Appellees
JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
OPINION
Vice Chief Judge David B. Gass delivered the opinion of the court, in which
Judges Brian Y. Furuya and Samuel A. Thumma joined.
G A S S, Vice Chief Judge:
¶1 Four nonprofit entities (Joshua Tree Health Center, LLC;
Cactus Wren Health Center, LLC; Saguaro Health Center, LLC; and Desert
Tortoise Health Center, LLC (the health centers)), appeal the superior
court’s grant of summary judgment for three state defendants (State of
Arizona, the Arizona Department of Health Services (the Department), and
the Department’s Director, Don Herrington). We affirm.
FACTUAL AND PROCEDURAL HISTORY
¶2 In 2010, Arizona voters passed the Arizona Medical
Marijuana Act (the Act), authorizing the Department to administer a
medical marijuana program. White Mountain Health Ctr., Inc. v. Maricopa
Cnty., 241 Ariz. 230, 233 ¶ 3 (App. 2016). Under the Act, a nonprofit entity
seeking to operate a dispensary must properly apply for and obtain a
dispensary registration certificate from the Department. A.R.S. § 36-2804.A.
The Act prohibits the Department from issuing more than one certificate for
every ten registered and permitted pharmacies in Arizona with one
exception—the Department may exceed the 1:10 limit if a qualified
applicant properly applies for a certificate in a county without a dispensary,
sometimes called an empty county. A.R.S. § 36-2804.C; Saguaro Healing, LLC
v. State, 249 Ariz. 362, 365 ¶ 17 (2020).
¶3 The Department established rules regulating the certificate
allocation process. See, e.g., Ariz. Admin. Code R9-17-303 (2020) (Rule 303).
Rule 303(A) directs the Department to review current certificates “[e]ach
calendar year” to “determine if the Department may issue additional
dispensary registration certificates” under A.R.S. § 36-2804.C. See also
Saguaro Healing, 249 Ariz. at 365–66 ¶ 20. If the annual review reveals either
a dispensary-to-pharmacy ratio of less than 1:10 or an empty county exists,
the Department must open an application period. Id. at 366 ¶ 22. The
2
JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
Department also must return applications and fees submitted outside an
application period. Rule 303(F). 1
¶4 From 2017 to 2021, the Department neither reviewed
certificates nor opened an application period. In 2019, three of the health
centers applied to open dispensaries in three empty counties: La Paz,
Apache, and Santa Cruz. In 2020, these three health centers again applied
to open dispensaries in these three counties, this time joined by the fourth
health center, which applied to open a dispensary in empty Greenlee
County. The health centers, however, did not submit these applications
within an application period. As a result, the Department returned their
applications and fees.
¶5 In 2020, the health centers filed a complaint seeking a
declaratory judgment and mandamus relief, including an order
“compelling” the Department to accept and process their 2019 and 2020
applications. The health centers argued the Act requires the Department to
“issue a . . . certificate to a qualified applicant if [the Department] may issue
a [certificate].”
¶6 The parties cross-moved for summary judgment based on
stipulated facts. The Department argued mandamus relief was
inappropriate because, under Rule 303(F), the Department could accept
applications only during an application period. In granting summary
judgment for the Department, the superior court noted the health centers
“may validly complain that the Department has been derelict in its duties
by failing to conduct a necessary review of dispensaries in each county and
open the application process.” Even so, the superior court found the health
centers had “no legal basis” to insist the Department substantively review
the applications they filed outside an application period.
¶7 This court has jurisdiction over the health centers’ timely
appeal under article VI, section 9, of the Arizona Constitution, and A.R.S.
§§ 12-120.21.A.1 and -2101.A.1. The health centers abandoned their
declaratory relief claims on appeal but continue to press for mandamus
relief.
1 In January 2021, the Department made changes, not relevant here,
that led to re-lettering subsection (E) as subsection (F). This opinion uses
the current letter to avoid confusion. Additionally, this court recognizes,
and the Department confirmed during oral argument, an internal reference
error in Rule 303(F). The rule should reference subsection (A), not (B).
3
JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
ANALYSIS
¶8 Summary judgment is appropriate when “no genuine
dispute as to any material fact” exists and “the moving party is entitled to
judgment as a matter of law.” Ariz. R. Civ. P. 56(a); see also Orme Sch. v.
Reeves, 166 Ariz. 301, 305 (1990). “This court reviews a grant of summary
judgment de novo, viewing the facts and reasonable inferences in the light
most favorable to the party opposing the motion and will affirm for any
reason supported by the record, even if not explicitly considered by the
superior court.” CK Fam. Irrevocable Tr. No. 1 v. My Home Grp. Real Est. LLC,
249 Ariz. 506, 508 ¶ 6 (App. 2020) (as amended).
I. The Department acted within its rulemaking authority under the
Act when it established the application process under Rule 303,
including when it accepts and rejects applications.
¶9 For the first time on appeal, the health centers argue the
Department exceeded its rulemaking authority under the Act when it
adopted Rule 303. The health centers alternatively argue the Department
“must accept an application” outside the Rule 303 application window
when an empty county exists.
¶10 The Department argues the health centers waived any
challenge to the validity of Rule 303 because they stipulated to Rule 303’s
notice provisions and recognized the Department must comply with the
Act and its own rules. To avoid waiver, a party generally must timely
present legal theories to the superior court to give it a chance to rule.
Contreras Farms Ltd. LLC v. City of Phoenix, 247 Ariz. 485, 489 ¶ 13 (App.
2019).
¶11 During oral argument before this court, the health centers
cited several places where they allegedly contested the Department’s
rulemaking authority in superior court. Those citations, however, refer to
arguments about whether the Department’s rules track the Act. They do not
question the Department’s authority to adopt rules regulating when the
Department may accept applications. The health centers, thus, did not
timely present any challenges to the Department’s authority to adopt Rule
303 to the superior court. See id.; Hess v. Purcell, 229 Ariz. 250, 254 ¶ 18
(parties waive undeveloped arguments). Even so, we exercise our
discretion to address the health center’s arguments on the merits. See Odom
v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535 ¶ 18 (App. 2007).
¶12 Agencies may establish rules “for the complete operation and
enforcement of legislation.” Shelby Sch. v. Ariz. State Bd. of Educ., 192 Ariz.
4JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
156, 165 ¶ 35 (App. 1998) (quoting Boyce v. City of Scottsdale, 157 Ariz. 265,
268 (App. 1988)). The Legislature need not “expressly set forth all authority
granted to an agency.” Ariz. Cannabis Nurses Ass’n v. Ariz. Dep’t of Health
Servs., 242 Ariz. 62, 67 ¶ 15 (App. 2017). A statute’s silence on an issue does
not mean the agency lacks authority to act. Id. Rather, an agency can take
actions “reasonably implied” from the “statutory scheme as a whole.” Id.(quoting Longbridge Inv. Co. v. Moore, 23 Ariz. 353, 356 (App. 1975)).
¶13 Under that statutory scheme, the Department has broad
rulemaking authority, including authority to implement procedural rules
such as Rule 303. The Department “must enact rules to implement and
administer” the Act. Saguaro Healing, 249 Ariz. at 363 ¶ 2. And the
Department “may make and amend rules necessary for the proper
administration and enforcement of the laws relating to the public health.”
A.R.S. § 36-136.G. Under the Act, the Department also must “adopt rules . .
. [g]overning [dispensaries] to protect against diversion and theft without
imposing an undue burden on [dispensaries] . . . including[] [t]he manner
in which the department considers applications for and renewals of
registration certificates.” A.R.S. § 36-2803.A.4(a).
¶14 The Department must address those issues through rules. The
Department, thus, has authority to establish rules for when the Department
will invite new applications and when it will reject them to ensure the
Department complies with the 1:10 limit and empty county provisions. See
A.R.S. § 36-2804.C. The Department decided: (1) it would not invite
applications during time frames where it could not possibly issue any
certificates; (2) it would review certificate registrations annually; (3) after its
annual review, if it could award additional certificates, it would open the
application period timely; and (4) how it would prioritize awards when it
has multiple qualified applicants. See Rule 303. These rules are reasonable
under the Act, which requires the Department to “enact rules to implement
and administer the [A]ct.” Saguaro Healing, 249 Ariz. at 363 ¶ 2.
¶15 The health centers argue the Act leaves the Department no
discretion to determine when it accepts applications because it must
comply with the 1:10 limit and empty county provisions. At bottom, the
health centers argue the Department must accept applications any time
these circumstances occur. The health centers do not explain why this
reading would render the 1:10 limit and empty county provisions
meaningless, and we find no reason supporting their contention. See Mejak
v. Granville, 212 Ariz. 555, 557 ¶ 9 (2006) (holding courts must interpret
statutes “so that no provision is rendered meaningless, insignificant, or
void”). And a rolling application process could unduly burden nonprofit
5
JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
dispensaries by requiring them to keep track of registered pharmacies and
empty counties rather than rely on the Department to announce it is
accepting applications. Establishing rules regulating when the Department
may accept applications, thus, avoids placing an undue burden on
dispensaries.
¶16 The health centers also argue the phrase “to protect against
diversion and theft” in A.R.S. § 36-2803.A.4(a) limits the Department’s
authority to control the application process for those purposes alone. But
nothing in the Act does so. Rather, the Act specifies rules the Department
must make to implement the Act in addition to rules it makes under its broad
rulemaking authority generally. Requiring the Department to “protect
against diversion and theft without imposing an undue burden on
nonprofit medical marijuana dispensaries” does not prohibit it from
establishing an application period. See A.R.S. § 36-2803.A.4(a).
¶17 For these reasons, the Department had the authority under
the Act to establish rules regulating when to accept applications. Rule 303,
thus, complies with the Act, and the health centers have not shown Rule
303 is invalid. The health centers have, however, shown the Department
failed to follow its rules by not reviewing certificates from 2017 to 2021. The
next question then becomes whether mandamus relief is appropriate as a
remedy for that failure.
II. Mandamus relief is inappropriate.
¶18 The health centers, under a theory of mandamus relief, ask
this court to order the Department to accept and review their 2019 and 2020
applications. The health centers argue mandamus is appropriate because
they have “a clear right to” such relief, the Department “had a legal duty
to” accept and review these applications, and no other adequate remedy
exists. See Sines v. Holden, 89 Ariz. 207, 209 (1961). The Department argues
mandamus relief is inappropriate because the health centers had no clear
right to the requested relief because the Department has no discretion to
accept applications outside an application period. And the health centers
concede the Department must follow the Act and its own rules.
¶19 The Arizona Supreme Court has recognized mandamus relief
is “an extraordinary remedy . . . to compel a public officer to perform an act
which the law specifically imposes as a duty.” Bd. of Educ. v. Scottsdale Educ.
Ass’n, 109 Ariz. 342, 344 (1973); see also A.R.S. § 12-2021. Mandamus relief is
inappropriate if the applicable statute is silent on an issue, or the public
officer has discretion in addressing the issue. See, e.g., Ponderosa Fire Dist. v.
6
JOSHUA TREE, et al. v. STATE, et al.
Opinion of the Court
Coconino Cnty., 235 Ariz. 597, 603 ¶ 30 (App. 2014) (affirming denial of
mandamus relief and refusing to broaden the statute beyond its express
terms); Sensing v. Harris, 217 Ariz. 261, 264 ¶ 6 (App. 2007) (affirming denial
of mandamus relief because mandamus relief is generally not appropriate
for discretionary decisions).
¶20 The issue before us is whether the Act and the Rules impose
a duty on the Department to accept applications outside the application
period. Indeed, whether mandamus relief would be appropriate if the
Department failed to open an application period under Rule 303 is not
before us. The Act did not require the Department to accept the health
centers’ applications in 2019 and 2020. As a result, the health centers have
shown no basis for their requested mandamus relief. See Ponderosa Fire Dist.,
235 Ariz. at 601 ¶ 19 (holding mandamus relief is appropriate only when a
law specifically requires a public officer to act). On this record, the health
centers have shown no error in the superior court granting the Department
summary judgment on their claim for mandamus relief.
CONCLUSION
¶21 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
7