P & P MEHTA LLC v. Jones

• Court: Arizona Court of Appeals
• Writing for the Court: SULT
• Citation: P & P MEHTA LLC v. Jones, 123 P.3d 1142, 211 Ariz. 505 (Ariz. App. 2005)
• Decision Date: 17 November 2005
• Docket Number: No. 1 CA-SA 05-0183.,1 CA-SA 05-0183.
• Parties: P & P MEHTA LLC d/b/a Melrose Gas & Food Mart, Heeten Mehta as Agent, Petitioner, v. The Honorable Michael D. JONES, Judge of the Superior Court of the State of Arizona, in and for the County of Maricopa, Respondent Judge, Arizona Department of Liquor Licenses and Control and its Board; City of Phoenix, Real Parties in Interest.

123 P.3d 1142

211 Ariz. 505

P & P MEHTA LLC d/b/a Melrose Gas & Food Mart, Heeten Mehta as Agent, Petitioner, v. The Honorable Michael D. JONES, Judge of the Superior Court of the State of Arizona, in and for the County of Maricopa, Respondent Judge Arizona Department of Liquor Licenses and Control and its Board; City of Phoenix, Real Parties in Interest.

No. 1 CA-SA 05-0183.

Court of Appeals of Arizona, Division 1, Department C.

November 17, 2005.

Schelstraete Law Office, By Peter H. Schelstraete, Tempe, Attorneys for Petitioner.

Gary Verburg, Phoenix City Attorney, By Glen S. Hammond, Assistant City Prosecutor, Phoenix, Attorneys for City of Phoenix.

Office of the Arizona Attorney General, By Blair C. Driggs, Christopher Munns, Phoenix, Attorneys for Arizona Department of Liquor Licenses and Control.

OPINION

SULT, Judge.

¶ 1 Arizona Revised Statutes ("A.R.S.") § 12-911(A)(1) (2003) permits the superior court, while a judicial review proceeding is pending, to stay the implementation of a state administrative agency decision when it finds "good cause" to do so. What the legislature meant when it created this standard is the subject of this opinion.

¶ 2 We are asked by the City of Phoenix, intervenor in this liquor license proceeding, to adopt from the jurisprudence dealing with an original proceeding for a preliminary injunction a stringent test for stay relief that requires a substantial likelihood of success, harm to the petitioner that not only outweighs any harm accruing to other parties but is also irreparable, and some public policy rationale favoring a stay. Petitioner P & P Mehta suggests a less exacting approach which requires demonstrating only some substantive merit to the request for review and harm to the petitioner from immediate implementation of the agency decision that would be greater than any harm the agency or other parties would suffer if a stay were granted. Faced with these competing interpretations of the statutory standard, we choose that proposed by Petitioner, as we explain.

BACKGROUND

¶ 3 Petitioner, the owner of a convenience store, sought the issuance of a permanent liquor license from the Department of Liquor Licenses and Control. Petitioner had recently purchased the store and had been selling liquor under an interim permit that was based on the prior owner's license. The City of Phoenix intervened and opposed the application, arguing that important neighborhood values were significantly diminished by the sale of liquor at Petitioner's establishment. The Department agreed, denying Petitioner a license and finding that he had failed to show that the best interests of the community would be served by its issuance. However, the Department did allow Petitioner to continue operating under the interim permit in order to initiate judicial review proceedings and seek a stay of the agency decision from the superior court.

¶ 4 Petitioner timely filed a complaint for judicial review and requested a stay of the Department's decision, essentially asking to continue operating under the permit until the review could be completed. The superior court denied the request, finding that although Petitioner would be irreparably harmed if the stay was not granted, Petitioner had failed to demonstrate a substantial likelihood of success on the merits. The court also commented that the public interest supporting the Department's decision was strong, but the court did not specifically describe this interest or explain why protecting it outweighed the harm to Petitioner.

¶ 5 Petitioner brought this special action seeking review of the superior court's denial of the stay request arguing, inter alia, that the superior court had applied too stringent a standard in assessing the request. We granted an interlocutory stay of proceedings, preserving Petitioner's right to continue operating under the interim permit pending our resolution of the dispositive question; namely, what is the meaning of "good cause" in § 12-911(A)(1).

ANALYSIS

¶ 6 Judicial review of a state administrative agency's decision is governed by A.R.S. §§ 12-901 to -914 (2003). Section 12-911(A)(1) deals specifically with the superior court's power to stay the agency decision pending completion of its review. This provision permits the court

with or without bond, unless required by the statute under authority of which the administrative decision was entered, and before or after answer, to stay the decision in whole or in part pending final disposition of the case, after notice to the agency and for good cause shown ....

A.R.S. § 12-911(A)(1) (emphasis added). This statute is supplemented by Rule 3(a) of the Rules of Procedure for Judicial Review of Administrative Decisions which provides that "a motion for stay of an administrative decision shall not be granted without good cause and without reasonable notice to all parties." Rule 3(b) adds that the court may condition the stay "upon the filing of a bond ... or upon such other conditions as the court directs."

¶ 7 The superior court in this case did not rely on these authorities when it denied Petitioner's stay request. Rather, citing Shoen v. Shoen, 167 Ariz. 58, 804 P.2d 787 (App. 1990), the court applied the criteria normally employed to evaluate an application for a preliminary injunction in an original proceeding. In Shoen, dissident corporate shareholders brought an action in superior court against other shareholders and as part of the action sought a preliminary injunction to cancel the issuance of certain stock to the others. Id. In discussing the basis upon which such relief could be granted, the Shoen court delineated the "four traditional equitable criteria" that an applicant for a preliminary injunction must satisfy:

1) A strong likelihood that he will succeed at trial on the merits;

2) The possibility of irreparable injury to him not remediable by damages if the requested relief is not granted;

3) A balance of hardships favors himself; and

4) Public policy favors the injunction.

Id. at 63, 804 P.2d at 792.

¶ 8 We would not reverse the superior court for applying these criteria rather than § 12-911(A)(1) if we could conclude, as the City suggests, that the legislature intended the statute's "good cause" standard to mirror Shoen's "traditional equitable criteria." Petitioner, however, challenges this interpretation arguing that there is no basis to suppose the legislature intended such a strict standard. To resolve this dispute, we begin by examining whether the process of applying for a preliminary injunction is so similar to the process of seeking a stay of an administrative agency decision that employing the same evaluative criteria for both is a reasonable construction of legislative intent.

¶ 9 Considering the first Shoen criterion, a "strong likelihood of success," we acknowledge the appropriateness of requiring an applicant for a preliminary injunction to make such a showing when he first seeks to enjoin personal or property rights of another. A court should not wield its injunctive power to disrupt the settled rights of others without first requiring from the applicant significant evidence that he is on legally solid ground. For purposes of our analysis, the point is that because the applicant has not been subject to a prior determination on the merits of his claim, it is entirely possible that he will be able to make the requisite showing.

¶ 10 Compare this scenario to the petitioner seeking to stay an agency decision. This petitioner has just lost on the merits at the administrative level. To nonetheless require him to demonstrate at the inception of the review process a significant probability of success asks the near-impossible. Except in the most egregious instances of agency error, this effort will fail.

¶ 11 If we read § 12-911(A)(1) to nevertheless require such a showing, we effectively place the availability of stay orders out of reach in most instances. This would be equivalent to holding that the legislature created an essentially illusory remedy, and would simply not be a plausible construction of legislative intent. A standard interpretive directive to courts is to construe statutes to reach sensible results. Lake Havasu City v. Mohave County, 138 Ariz. 552, 557, 675 P.2d 1371, 1376 (App.1983). In the context of § 12-911(A)(1) "good cause," a requirement that a petitioner must show a "strong likelihood of success" is not a sensible result. We therefore decline to incorporate this requirement into the statute.

¶ 12 When we reject the first Shoen criterion, we do not suggest that the merits of a petitioner's claim of agency error are irrelevant. The legislature did not intend to confer an unconditional right to a stay or it would have said so. By conditioning a stay upon a showing of "good cause," the legislature intended that some degree of merit be demonstrated before the court would interfere with the implementation of the agency decision. What degree of merit should be required is dealt with later in this opinion.

¶ 13 We next consider the harm criterion. To require, as Shoen does, that asserted harm must qualify as "irreparable" before it can be weighed against other claims of harm seems an appropriate burden in the injunction context for the same reason as "strong likelihood of success;" that is, a court employing its injunctive power to disrupt settled rights of others should do so only for the most deserving of applicants. In the context of a request for a stay of an agency decision, however, such a burden seems unnecessary. Certainly, some degree of harm should be required in order to justify a stay, and presumably no stay would be sought in the absence of harm. But we see no compelling reason why the harm asserted should have to qualify as "irreparable" even before it can be measured against the claims of harm made by other parties.

¶ 14 In almost every review situation there will be competing harms alleged. The petitioner...