Tp Racing v. Simms ( 2016 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
TP RACING, L.L.L.P., an Arizona limited liability limited partnership;
Plaintiff/ Appellee,
v.
RONALD A. SIMMS;
Defendant/Appellant.
RONALD A. SIMMS, a married man dealing with his sole and separate
property; RONALD A. SIMMS AS TRUSTEE OF RONALD A. SIMMS
PERPETUAL ASSET SHIELD TRUST; RONALD A. SIMMS AS TRUSTEE
OF RAS TRUST; and RASCD INC., a California corporation;
Counter-Claimants/Appellants.
v.
JEREMY ELLIS SIMMS and SERENA SIMMS, husband and wife; J&R
RACING, LLC, an Arizona corporation; and TP RACING, L.L.L.P.;
Counter-Defendants/Appellees.
No. 1 CA-CV 14-0348
FILED 2-4-2016
Appeal from the Superior Court in Maricopa County
No. CV2010-022308, CV2010-022311 (Consolidated)
The Honorable Sam J. Myers, Judge
AFFIRMED
COUNSEL
Greenberg Traurig, LLP, Phoenix
By E. Jeffrey Walsh, Nicole M. Goodwin
Co-Counsel for Appellants
Orrick, Herrington & Sutcliffe, LLP, Los Angeles
By Marshall B. Grossman, Stacy W. Harrison
Co-Counsel for Appellants
Stinson Leonard Street, LLP, Phoenix
By Michael C. Manning, James M. Torre, Stefan Palys
Counsel for Appellees TP Racing, LLLP, Jeremy Ellis Simms, Serena Simms and
J. Simms Enterprises, LLC
Graif Barrett & Matura, PC, Phoenix
By E. Scott Dosek
Counsel for Appellee J&R Racing, LLC
MEMORANDUM DECISION
Judge Peter B. Swann delivered the decision of the court, in which
Presiding Judge Kenton D. Jones and Judge Kent E. Cattani joined.1
S W A N N, Judge:
¶1 We are asked to consider whether the superior court abused
its discretion by dissolving preliminary injunctions that had protected the
authority and interest of a limited partner in a partnership engaged in
horse racing, a state-regulated activity. We hold that the court did not
abuse its discretion. After the injunction issued, the pertinent regulatory
agency determined that the partner’s license had lapsed, that he was
1 This is an appeal from an order dissolving preliminary injunctions
in a multi-party litigation. Our caption above, which should be used in all
future filings in this matter, identifies only the parties that appeared in
this appeal.
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ineligible for a new license, that he could not continue to participate in the
partnership, and that his continued participation threatened the
partnership’s pending permit-renewal application. The court properly
refrained from deciding the merits of the agency’s determinations in view
of administrative and declaratory-judgment proceedings on those issues
pending elsewhere, and properly reweighed the equities to reflect the shift
in the parties’ relative hardships.
FACTS AND PROCEDURAL HISTORY
¶2 This appeal arises from a long-standing dispute between
two brothers, Jerry Simms and Ron Simms, regarding their respective
interests in a horse-racing facility owned and operated by TP Racing,
LLLP. At the times relevant to this appeal, TP Racing had several limited
partners, including Jerry (55% ownership), Ron (18% ownership), and one
or more trusts for which Ron is trustee (14% ownership) (referred to
herein, collectively and individually, as “the Trusts”). TP Racing’s sole
general partner, responsible for its management, was J&R Racing, LLC
(0.9% ownership). J&R Racing is owned in equal parts by Jerry and
RASCD, Inc., a corporation for which Ron is the sole officer and
shareholder. Jerry is J&R Racing’s manager and has authority to make its
day-to-day business decisions, but RASCD’s consent is required for all
other decisions.
¶3 In 2010, TP Racing commenced two actions (later
consolidated) against Ron and a company owned by Ron. In response,
Ron, RASCD, and the Trusts asserted claims against Jerry related to his
management of TP Racing in his role as J&R Racing’s manager. During
the course of the litigation, Ron and RASCD obtained two preliminary
injunctions. First, the court entered an injunction -- clarified after remand
in Simms v. Simms, 1 CA-CV 11-0525, 2012 WL 2795978 (Ariz. App. July 3,
2012) (mem.decision) -- that prevented Jerry from exceeding his
managerial authority under J&R Racing’s operating agreement. Second,
after Jerry claimed without lawful justification to have been substituted
for J&R Racing as TP Racing’s general partner, the court entered an
injunction -- affirmed in TP Racing, L.L.L.P. v. Simms, 232 Ariz. 489 (App.
2013) -- that prevented Jerry and TP Racing from engaging in future
removal processes.
¶4 Meanwhile, TP Racing applied to the Arizona Department of
Racing (“ADOR” or “the Department”) for renewal of its racing permit.
In connection with that matter, TP Racing provided the Department with
information that it claimed would justify revocation of Ron’s racing
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license. Soon thereafter, by letter dated November 18, 2013, the
Department’s Director informed TP Racing that the Department had
discovered Ron did not hold a current license. The Director stated “As
such Ronald Simms may not take part in, directly or indirectly, or have
any personal interest in the operation of TP Racing LLLP.”
¶5 Jerry and TP Racing immediately moved the court to
dissolve or suspend the preliminary injunctions, arguing that Ron’s lack of
licensure made compliance with the injunctions unlawful and impossible.
Ron and his entities opposed the motion, and Ron applied to the
Department for a new license. By letter dated November 27, the Director
informed the parties that it had received Ron’s application. The Director
further stated that his intent in the November 18 letter “was to prevent
[Ron] from being involved in any day-to-day decisions that could impact
the operation of [TP Racing’s] current race meeting,” and he “did not
mean to imply that the race meeting should be halted because of this
issue.”
¶6 On December 6, the Director denied Ron’s license
application. The notice of denial included the following statement:
Because Ronald Simms’s application for a racing
license is denied and he does not currently have a racing
license, Arizona law prohibits Ronald Simms from being a
limited partner in TP Racing, or acting in any capacity or in
any way with respect to TP Racing, whether individually or
through any entity. (A.R.S. §§ 5-107.01, -108.03, and A.A.C.
R19-2-106(A)). This prohibition applies to Ronald Simms
personally as well as to any trust for which Ronald Simms
acts as trustee, and to any corporation, such as RASCD, Inc.,
in which Ronald Simms is an officer, director, or substantial
stockholder.
The Director repeated this statement in a contemporaneous letter to the
parties, and added:
[I]t is critical that Ronald Simms’s participation in TP Racing,
in any capacity, be addressed prior to the consideration of
TP Racing’s application for renewal of its three-year permit.
The Director further stated that his previous correspondence “was written
to assure everyone that the intent of the Arizona Department of Racing
(ADOR) was not to imperil the ongoing Turf Paradise meeting,” and that
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the letter did not “imply that Ronald Simms really did not require an
ADOR license to participate in racing in Arizona.”
¶7 On December 31, Ron filed a superior court special action
against the Director and the Department, seeking a declaration that he
was not required to be licensed to hold his interest in TP Racing or
continue his participation in the partnership, and that even if he were
required to be licensed, the defendants had exceeded their authority by
forcing him to forfeit his interest. Ron also initiated an administrative
appeal from the denial of his license application.
¶8 On January 8, the Director informed the Department’s
Commission of the lapse and denial of Ron’s license, and of the Director’s
statement to the parties that Ron could not participate in TP Racing’s
decisions. In a separate report dated the same day, the Director
recommended that TP Racing’s permit renewal application be granted.
¶9 Later that month, on January 22, the court held oral
argument on Jerry and TP Racing’s motion to dissolve or suspend the
preliminary injunctions. By order filed January 28, the court granted the
motion. The court held:
Ron disputes that he needs a racing license to enforce
contract rights that do not involve his participation in racing
meetings. See A.R.S. §§ 5-101(20), (23). The Court agrees
with TP Racing that Ron paints the Preliminary Injunctions
with too fine a brush. The purpose of the first Preliminary
Injunction (entered July 13, 2011; modified on remand
February 20, 2013) was to enforce § 5.1 of the J&R Racing
(“J&R Racing”) Operating Agreement. The purpose of the
second Preliminary Injunction (entered February 15, 2012)
was to enforce the contractual right of Ron, through RASCD,
Inc. (“RASCD”) to participate in decisions affecting TP
Racing. To this end, Ron argues the Director (i) wrongfully
concluded that Ron participates in racing meetings such that
he is required to be licensed, see A.R.S. § 5-107.01(B), and (ii)
lacked authority to divest Ron of ownership interests related
to TP Racing. See Ariz. Downs v. Turf Paradise, Inc., 140 Ariz.
438, 444 (App. 1984). Ron also argues the Director was
incorrect in determining that Ron’s racing license expired in
June 2012. The Court finds that these issues, i.e., Ron v.
ADOR, are more appropriately adjudicated in other forums.
The dispute in this forum involves Ron v. TP Racing. The
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Court must accord great weight to the Director’s
interpretation of statutes and ADOR regulations, regardless
that Ron’s economic or contract rights might be adversely
impacted. To do otherwise would effectively stay the
Director’s determinations while Ron seeks relief elsewhere;
clearly this would put TP Racing between the proverbial
rock and hard place, particularly in the face of the Director’s
mandate that TP Racing address Ron’s participation in TP
Racing prior to consideration of its permit renewal
application.
(Footnotes omitted.) In connection with its finding that “Ron v. ADOR”
issues should be adjudicated in other forums, the court noted the existence
of both the administrative appeal and the declaratory judgment special
action, which remained pending before a different division of the court.
¶10 Immediately upon receiving the January 28 ruling, a
majority of TP Racing’s partners voted to dissociate Ron, the Trusts,
RASCD, J&R Racing, and all other entities affiliated with Ron, for the
stated purpose of “end[ing] Ron’s illegal participation in TP Racing, and
to continue the business of TP Racing without Ron.” Jerry promptly sent
letters to Ron and to the Director informing them of the dissociation. Jerry
further informed the Director that TP Racing had a new general partner,
which was a company owned and operated by him. The Director
transmitted Jerry’s correspondence to the Commission, attaching it to a
memorandum dated February 18. On February 18, the Commission held
a hearing on TP Racing’s permit-renewal application and voted to grant it.
¶11 On March 4, Ron and his affiliates moved the court to
reconsider its ruling dissolving the injunctions, or, alternatively, to stay
the effect of the ruling pending an appeal. Ron argued that newly
disclosed evidenced showed that Jerry had improperly influenced the
Director, and that the Department had since acted in a manner
inconsistent with the Director’s determinations. The court held oral
argument on Ron and RASCD’s motion on April 2, and denied it on
April 11. The court ruled that the Director’s determination that Ron could
not hold an interest or participate in TP Racing was “not . . . so far off-the-
mark as to be inherently corrupt and undeserving of deference.” The
court further held that the Director’s determination “has not been
disavowed by either the Director or ADOR.”
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¶12 The court entered a signed order dissolving the injunctions
on May 20. Ron and his affiliates timely filed a notice of appeal, and
unsuccessfully moved this court to stay the dissolution order.
¶13 A month after the appellants filed their notice of appeal in
this matter, the superior court declined to exercise jurisdiction in the
declaratory judgment special action. A year later, after holding a series of
hearings, the Office of Administrative Hearings (“OAH”) recommended
that the Director’s denial of Ron’s license application be reversed. The
OAH subsequently certified the decision as final (a classification that the
appellees dispute), and the Department of Gaming’s Racing Division
(ADOR’s successor under 2015 Ariz. Sess. Laws, ch. 19, § 10 (1st Reg.
Sess.)) awarded Ron a conditional temporary license.2
JURISDICTION AND STANDARD OF REVIEW
¶14 A.R.S. § 12-2101(A)(5)(b) provides that “[a]n appeal may be
taken to the court of appeals from the superior court . . . [f]rom an
order . . . dissolving an injunction.” The appellees contend, however, that
the appeal is moot because the parties that were protected under the
injunctions have been dissociated from the partnership. In these
circumstances, we disagree. The dissociation was the direct result of the
injunctions’ dissolution. The appellants sought to avoid dissociation by
moving for a stay, first in the superior court and then in this court. The
denial of those procedural motions cannot serve as a substitute for
appellate review on the merits, even if a reversal would create logistical
challenges.
2 We take judicial notice of the OAH and agency records on the
appellants’ motion. See Ariz. R. Evid. 201(b)(2) (“The court may judicially
notice a fact that is not subject to reasonable dispute because it . . . can be
accurately and readily determined from sources whose accuracy cannot
reasonably be questioned.”); Jarvis v. State Land Dep’t, 104 Ariz. 527, 530
(“This is an official act of a state agency, the records of which we take
judicial notice.”). We sua sponte take judicial notice of the filings in the
declaratory judgment special action. See In re Sabino R., 198 Ariz. 424
(App. 2000) (holding that “[i]t is proper for a court to take judicial notice
of its own records or those of another action tried in the same court,” and
an appellate court may “take judicial notice of anything of which the trial
court could take notice, even if the trial court was never asked to take
notice”).
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¶15 We review the court’s decision to dissolve the injunctions for
an abuse of discretion. See Town of Tortolita v. Napolitano, 199 Ariz. 556,
559-60, ¶ 10 (App. 2001). An injunction should be dissolved when “it
appears that there is not sufficient grounds for the injunction,” Ariz. R.
Civ. P. 65(c), because of “changed circumstances or changes in the law,”
Nu-Tred Tire Co. v. Dunlop Tire & Rubber Corp., 118 Ariz. 417, 420 (App.
1978).
DISCUSSION
¶16 The appellants correctly assert that “[t]he facts that
warranted issuance and affirmance of [the] preliminary injunctions”
remained unchanged. But there was a new fact -- Ron’s purported
inability to participate in the business of TP Racing. The Director
determined that Ron’s racing license had expired, that he would not be
granted a new license, and that his lack of license disqualified him and his
entities from continued involvement in TP Racing. The Director also
indicated that TP Racing’s pending permit-renewal application would be
adversely affected if Ron continued to participate in the partnership.
¶17 The appellants contend that the superior court
inappropriately deferred to the Director’s conclusions. But the court
expressly declined to decide whether the Director’s determinations were
substantively correct, explaining that “these issues, i.e., Ron v. ADOR, are
more properly adjudicated in other forums.” The court’s restraint was
appropriate. Ron had initiated separate proceedings attacking the merits
of the Director’s decisions: consistent with A.R.S. § 5-104(D), he had taken
an administrative appeal from the Director’s denial of his license
application; and, consistent with A.R.S. § 41-1034, he had filed a
declaratory judgment special action regarding the Director’s conclusion
that he required a license to continue his participation in TP Racing. The
Department was a party to those proceedings, which remained pending at
all relevant times. The Department was not, however, joined in the action
involving the injunctions. In view of the procedural posture of the various
disputes, the court appropriately declined to decide the merits of Ron’s
claims against the Department.
¶18 The question before the court was not the validity of the
Director’s determinations and admonition, but their effect. The court was
required to assess whether the Director’s actions altered the legal
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justification for the preliminary injunctions.3 See Nu-Tred, 118 Ariz. at 420.
Imposition of a preliminary injunction depends upon consideration of
four traditional equitable criteria: the movant’s likelihood of success on
the merits, the movant’s likelihood of irreparable harm if injunctive relief
is not granted, the balance of hardships as between the parties, and public
policy. Shoen v. Shoen, 167 Ariz. 58, 63 (App. 1990). Of these factors,
relative hardship is the most important. Id. To obtain injunctive relief, the
movant must show “either 1) probable success on the merits and the
possibility of irreparable injury; or 2) the presence of serious questions
and ‘the balance of hardships tips sharply’ in his favor.” Id. (citation
omitted).
¶19 Here, the Director’s actions radically altered the balance of
hardships that had originally justified the injunctions. The injunctions
were fashioned to protect Ron from being deprived of his authority and
interest in TP Racing. But the Director’s determinations created a
competing need to protect TP Racing from the loss of a permit essential to
its operations. The Director’s conclusion that Ron could no longer
participate in TP Racing, and his warning that Ron’s continued
participation could affect TP Racing’s permit, shifted the balance of
hardships from Ron’s favor to TP Racing’s favor. The Director’s actions
created a compelling risk of harm to TP Racing: if TP Racing were not
allowed to alter Ron’s interest, its pending permit-renewal application
would likely be denied. Such a denial, when finalized, would prevent TP
3 Contrary to the appellants’ contention, this analysis did not require
the court to grant “expedited discovery” or set an evidentiary hearing. To
be sure, “a party opposing a preliminary injunction must be given a
reasonable opportunity to present oral testimony where there are
disputed issues of material facts.” McCarthy W. Constructors, Inc. v.
Phoenix Resort Corp., 169 Ariz. 520, 526 (App. 1991). But this was not such
a case. The facts relevant to the issue before the court were limited to
those concerning the occurrence of the Director’s decisions. The parties
did not dispute the fact of the Director’s actions. Further, Ron and RASCD
were not deprived of the opportunity to conduct discovery concerning the
circumstances surrounding the Director’s decisions -- they in fact
conducted discovery and presented the results to the court in their motion
for reconsideration. And though they contend on appeal that “there were
still outstanding discovery disputes” (apparently concerning drafts and
other communications regarding the Director’s denial of Ron’s license
application) at that time, they do not explain the eventual results of those
discovery requests.
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Racing from conducting its business. See A.R.S. § 5-107.01 (“A person,
association or corporation shall not hold any racing meeting without
having first obtained and having in full force and effect a permit that is
issued by the department.”); A.R.S. § 41-1092.11(A) (providing that when
license-renewal application is denied, existing license continues until
denial becomes final after review or expiration of time for seeking review).
TP Racing therefore faced a significant threat of irreparable harm – a risk
that also imperiled Ron’s economic interests.
¶20 The appellants contend that the Department’s conduct
showed in retrospect that the threat of harm was illusory. They note (as
they did in their motion for reconsideration) that the Director, when
recommending that the Commission grant TP Racing’s permit-renewal
application, cited a financial investigation report that considered Ron’s
personal financial position. They also note the Director’s statement in his
November 27 letter that Ron’s lack of license would not impact TP
Racing’s race meeting. These arguments disregard material facts. In his
December 6 letter, the Director expressly clarified that his previous
correspondence was not meant to imply that Ron’s lack of a license was
without consequence. Moreover, at the time the Commission voted on TP
Racing’s application, it was well aware that Ron and his entities had been
dissociated from the partnership -- not only had the Director provided the
Commission with a copy of Jerry’s correspondence describing the
dissociation, but Jerry and TP Racing’s counsel had provided copies of the
documents effecting the dissociation. And at the hearing on TP Racing’s
application, the Commission specifically considered the impact of Ron’s
dissociation on TP Racing’s financial viability and the old financial
investigation report and declined Ron’s request to condition permit
approval on the assumption that he continued to hold an interest in the
partnership. On this record, we find no support for the appellants’
contention that TP Racing would have obtained a permit even if the
injunctions had remained in place.
¶21 Of course, the risk of harm that continuing the injunctions
posed to TP Racing was only part of the inquiry -- the court also had to
consider the risk of harm that dissolution of the injunctions would create
for Ron. Accordingly, though the court was not in a position to decide the
merits of the Director’s determinations (as we have explained), it was
required to gauge the probability of Ron’s practical ability in the short
term to continue to hold an interest in a viable TP Racing. Such predictive
interlocutory analyses play a role in nearly every case in which the court is
asked to determine whether a preliminary injunction should be imposed
or maintained. “The trial court often must quickly make a decision
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concerning the merits in the preliminary injunction phase of litigation, . . .
and in doing so focuses primarily on balancing the four equitable criteria.”
Powell-Cerkoney v. TCR-Montana Ranch Joint Venture, II, 176 Ariz. 275, 280
(App. 1993). This matter was atypical only in the sense that the court’s
predictive analysis was focused on proceedings pending in other forums.
¶22 The court noted that it gave “great weight to the Director’s
interpretation of statutes and ADOR regulations,” and that “the Director’s
determination [that Ron could not participate in TP Racing without a
license was] not so far off-the-mark as to be inherently corrupt and
undeserving of deference” even assuming that it was the product of
improper influence. We conclude that the court analyzed the situation
correctly based on the information available at the time. Though courts
have final authority on issues of statutory construction, an agency’s
interpretation is entitled to considerable weight. Better Homes Constr., Inc.
v. Goldwater, 203 Ariz. 295, 299, ¶ 15 (App. 2002).
¶23 The court’s decision to give weight to the Director’s
conclusion regarding the effect of Ron’s failure to hold a license was
proper because his legal interpretation was facially tenable. (It was also,
as the court noted, consistent with previous administrative decisions and
with statements attributable to Ron.) In holding that Ron and his entities
could no longer participate in TP Racing, the Director relied on A.R.S. § 5-
107.01, A.A.C. R19-2-106(A), and A.R.S. § 5-108.03. Section 5-107.01(B) sets
forth a non-exhaustive list of a wide range of individuals -- from
“manager[s]” to “groom[s],” and “jockey[s]” to “food and beverage
concessionaire[s]” and “any other person or official the department deems
proper” -- who must obtain a license before participating in racing
meetings. (Emphasis added.) Regulation 19-2-106(A) provides that “[a]
person who participates in any capacity in a race meet” must obtain a
license, unless the person is a county-fair-meet volunteer or a less-than-
10% stockholder of a permitee or licensee. (Emphasis added.) Finally, § 5-
108.03(C) provides that “a person . . . shall be considered as itself holding
or having any ownership interest held directly or indirectly by its
affiliates.” Like the superior court, we do not decide whether the
Director’s interpretation of these statutes and rule was correct. But in
view of the authorities’ breadth, the court acted well within its discretion
when it found that dissolution of the injunctions was warranted. As the
court recognized, whether the Director’s interpretation was the product of
undue influence was beyond the scope of its inquiry in these
circumstances. Further, to the extent that the interpretation was claimed
to be based upon improper licensing determinations, the court did not err
in giving weight to the agency action in view of the Department’s
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considerable discretion to grant or deny license applications. See A.R.S.
§ 5-108(A)(1).
¶24 The appellants finally contend that the court failed to make
express findings and conclusions as required under Ariz. R. Civ. P. 52(a).
We disagree. The court enumerated the Director’s determinations,
acknowledged the pending administrative and declaratory judgment
proceedings, reweighed the appropriate equitable considerations in view
of the new facts, and explained its reasoning.
CONCLUSION
¶25 For the foregoing reasons, we affirm the order dissolving the
preliminary injunctions. We express no opinion as to whether the
appellants may be entitled to relief based on events that occurred after
entry of the dissolution order.
¶26 Some of the appellees request an award of attorney’s fees
and costs on appeal under A.R.S. §§ 12-341 and -341.01, and some also
request fees under the TP Racing partnership agreement. Our review of
the agreement (as provided in connection with the motion to dissolve the
injunctions) reveals no contract provision authorizing a fee award, and in
our discretion we decline to award fees under A.R.S. § 12-341.01. The
appellees are entitled to an award of costs under A.R.S. § 12-341 upon
their compliance with ARCAP 21.
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