City of Surprise v. Ariz. Corp.

• Decision Date: 28 March 2019
• Docket Number: No. CV-18-0137-SA,CV-18-0137-SA
• Citation: 246 Ariz. 206,437 P.3d 865
• Parties: CITY OF SURPRISE, an Arizona Municipal Corporation, Petitioner, v. ARIZONA CORPORATION COMMISSION; Tom Forese, in His Official Capacity As a Member of the Arizona Corporation Commission; Bob Burns, in His Official Capacity As a Member of the Arizona Corporation Commission; Andy Tobin, in His Official Capacity As a Member of the Arizona Corporation Commission; Boyd W. Dunn, in His Official Capacity As a Member of the Arizona Corporation Commission; and Justin Olson, in His Official Capacity As a Member of the Arizona Corporation Commission, Respondents, and Lake Pleasant 5000, L.L.C., an Arizona Limited Liability Company; Harvard Investments, Inc., a Nevada Corporation; and Circle City Water Company, L.L.C., an Arizona Limited Liability Company, Real Parties in Interest.
• Court: Arizona Supreme Court

246 Ariz. 206

437 P.3d 865

CITY OF SURPRISE, an Arizona Municipal Corporation, Petitioner,

v. ARIZONA CORPORATION COMMISSION; Tom Forese, in His Official Capacity As a Member of the Arizona Corporation Commission; Bob Burns, in His Official Capacity As a Member of the Arizona Corporation Commission; Andy Tobin, in His Official Capacity As a Member of the Arizona Corporation Commission; Boyd W. Dunn, in His Official Capacity As a Member of the Arizona Corporation Commission; and Justin Olson, in His Official Capacity As a Member of the Arizona Corporation Commission, Respondents,andLake Pleasant 5000, L.L.C., an Arizona Limited Liability Company; Harvard Investments, Inc., a Nevada Corporation; and Circle City Water Company, L.L.C., an Arizona Limited Liability Company, Real Parties in Interest.

No. CV-18-0137-SA

Supreme Court of Arizona.

Filed March 28, 2019

Andrew M. Jacobs (argued), Timothy J. Sabo, Snell & Wilmer L.L.P., Phoenix; and Robert Wingo, Surprise City Attorney, Surprise, Attorneys for City of Surprise

Andy M. Kvesic (argued), Robin R. Mitchell, P. Robyn Poole, Arizona Corporation Commission Legal Division, Phoenix, Attorneys for Arizona Corporation Commission, Commissioner Tom Forese, Commissioner Bob Burns, Commissioner Andy Tobin, Commissioner Boyd W. Dunn, and Commissioner Justin Olson

Dale S. Zeitlin (argued), Zeitlin & Zeitlin, P.C., Phoenix; and Garry D. Hays, Law Offices of Garry Hays, Phoenix, Attorneys for Lake Pleasant 5000, L.L.C. and Harvard Investments, Inc.

Meghan H. Grabel (argued), Osborn Maledon, P.A., Phoenix, Attorney for Circle City Water Company, L.L.C.

Christina Estes-Werther, General Counsel, League of Arizona Cities and Towns, Phoenix, Attorney for Amicus Curiae League of Arizona Cities and Towns

VICE CHIEF JUSTICE BRUTINEL authored the opinion of the Court, in which CHIEF JUSTICE BALES and JUSTICES TIMMER, GOULD, LOPEZ and PELANDER (RETIRED) joined. JUSTICE BOLICK filed an opinion concurring in part and dissenting in part.

VICE CHIEF JUSTICE BRUTINEL, opinion of the Court:

¶1 The Arizona Corporation Commission ("Commission") has broad authority under A.R.S. § 40-285(A) to approve the sale or disposition of a public service corporation’s assets. In this special action, we hold that § 40-285(A) does not give the Commission power over a city’s exercise of eminent domain. Accordingly, we vacate the portion of the Commission’s March 30, 2018 order requiring the public utility to apply for Commission approval of the proposed condemnation.

I. BACKGROUND

¶2 In October 2017, the City of Surprise ("City") entered into a letter of intent with Circle City Water Company, L.L.C. ("Circle City"), documenting the City’s intent to condemn substantially all the assets of Circle City, including the right to almost four thousand acre-feet of water per year from the Central Arizona Project ("CAP"). Pursuant to statute, Surprise voters authorized the condemnation and the Surprise City Council approved the filing of a condemnation action. A residential developer contends that Circle City is obliged under an existing contract to allocate its CAP water for a planned development. Upon inquiry by the developer, the City advised that it has no obligation to provide water under the existing contract. The developer then asked the Commission to enter an order preventing the sale of Circle City’s CAP allocation to the City.

¶3 The Commission opened an investigation. On March 30, 2018, the Commission ordered Circle City to file an application under § 40-285 and Arizona Administrative Code ("A.A.C.") R14-2-402(D), seeking Commission authorization "to abandon, sell, lease, transfer, or otherwise dispose of its utility." At the time of the order, the Commission was aware that the negotiations between the City and Circle City were intended to result in condemnation, not a sale. Circle City filed the application under protest. Commission staff determined that Circle City did not fully comply with the March 30 order by failing to include a copy of the draft condemnation agreement between Circle City and the City. At the Commission’s direction, Circle City provided a copy of the draft agreement under seal. The Commission then required Circle City to confirm in writing whether the City would assume Circle City’s water contract with the developer.

¶4 Shortly thereafter, the City filed this special action, alleging the Commission acted without jurisdiction in entering the March 30 order. This Court stayed further administrative proceedings pending resolution of this case.

¶5 We accepted jurisdiction over this special action to clarify the scope of the Commission’s authority over eminent domain proceedings pursuant to A.R.S. § 40-285(A). We have jurisdiction pursuant to article 6, section 5(1) of the Arizona Constitution and A.R.S. §§ 12-2001 and 12-2021.

II. DISCUSSION

A. Jurisdiction

¶6 This Court has original jurisdiction to issue "mandamus, injunction and other extraordinary writs to state officers." Ariz. Const. art. 6, § 5 (1); see also A.R.S. §§ 12-2001, -2021. Such jurisdiction is discretionary and is requested through a special action petition. Dobson v. State ex rel. Comm'n on Appellate Court Appointments , 233 Ariz. 119, 121 ¶ 6, 309 P.3d 1289, 1291 (2013). Special action jurisdiction is appropriate in cases that involve "purely legal questions of statewide importance" or that require an "immediate and final resolution," id. at 121 ¶¶ 7–8, 309 P.3d at 1291, and particularly appropriate when a defendant "has proceeded or is threatening to proceed without or in excess of jurisdiction or legal authority," Ariz. R.P. Spec. Act. 3(b). But special action jurisdiction is not appropriate when parties have an "equally plain, speedy, and adequate remedy by appeal." Id. 1(a).

¶7 Here, the scope of Commission authority involves a purely legal question of statutory interpretation: whether the Commission has exceeded its statutory authority. The City cannot presently appeal the Commission’s order because it is not a party to the administrative proceedings, and the City has no other means to challenge the Commission’s actions. For those reasons, special action review is appropriate. See Ariz. Corp. Comm'n v. State ex rel. Woods , 171 Ariz. 286, 288, 830 P.2d 807, 809 (1992) (granting special action review because "this court can best serve the public interest and principles of judicial economy by resolving fundamental legal questions regarding the Commission’s constitutional power at this time").

B. Standing

¶8 The Commission asserts that the City lacks standing to bring this action and the City’s case is not ripe for decision. This Court is "not constitutionally constrained to decline jurisdiction based on lack of standing" because the Arizona Constitution, unlike the Federal Constitution, contains no "case or controversy" requirement. Sears v. Hull , 192 Ariz. 65, 71 ¶ 24, 961 P.2d 1013, 1019 (1998). Whether to deny standing in Arizona is a matter of "prudential or judicial restraint." Dobson , 233 Ariz. at 122 ¶ 9, 309 P.3d at 1292 (quoting Armory Park Neighborhood Ass'n v. Episcopal Cmty. Servs. in Ariz. , 148 Ariz. 1, 6, 712 P.2d 914, 919 (1985) ). Our courts exercise restraint to ensure they "refrain from issuing advisory opinions, that cases be ripe for decision and not moot, and that issues be fully developed between true adversaries." Bennett v. Brownlow , 211 Ariz. 193, 196 ¶ 16, 119 P.3d 460, 463 (2005).

¶9 The Commission argues that because it has taken no action against the City and has not attempted to "regulate the condemnation," the City has not suffered any injury. But its March 30 order requiring Circle City to file an application pursuant to § 40-285"for authority to abandon, sell, lease, transfer, or otherwise dispose of its utility" in the face of the City’s proposed condemnation constitutes an injury to the City. While facially directed only at Circle City, the assertion of authority under that statute, if valid, would give the Commission the authority to void the City’s condemnation action. Further, standing is suggested by Arizona’s declaratory judgment statute, which provides that a party whose "rights, status or other legal relations are affected by a statute" may seek declaratory relief regarding the statute’s construction. A.R.S. § 12-1832 ; see also id. § 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."); Dobson , 233 Ariz. at 122 ¶ 11, 309 P.3d at 1292 ; cf. Merrill v. Phelps , 52 Ariz. 526, 529, 84 P.2d 74 (1938) (noting that action under the declaratory judgment statute was "the simplest and the best way" of resolving conflicting claims regarding statutory and constitutional authority of public officials). The Commission’s indirect assertion of regulatory authority over the City is sufficient injury to provide standing.

C. Standard of Review

¶10 We review the interpretation of statutes de novo, seeking to effectuate the legislature’s intent. Stambaugh v. Killian , 242 Ariz. 508, 509 ¶ 7, 398 P.3d 574, 575 (2017). If the statute is subject to only one reasonable interpretation, we apply it without further analysis. Id. To make this determination, we look to the statute’s words and context. Id. If the statute is susceptible to more than one reasonable interpretation, we consider secondary interpretive principles such as "the context of the statute, the language used, the subject matter, its historical background, its effects and consequences, and its spirit and purpose." State ex rel. Polk v. Campbell , 239 Ariz. 405, 406 ¶ 5, 372 P.3d 929, 930 (2016) (quoting Ariz. Citizens Clean Elections Comm'n v. Brain , 234 Ariz. 322, 325 ¶ 11, 322 P.3d 139, 142 (2014) ).

D. Commission Authority Over Condemnation Proceedings

¶11 The Commission argues it has authority to regulate condemnations under § 40-285(A) and A.A.C....