State v. 6635 N. 19TH Ave., Inc.

Decision Date20 December 2016
Docket NumberNo. 1 CA-CV 15-0550,1 CA-CV 15-0550
PartiesSTATE OF ARIZONA ex rel. MARK BRNOVICH, Attorney General, Petitioner/Appellee, v. 6635 N. 19TH AVENUE, INC., an Arizona corporation, Respondent/Appellant.
CourtArizona Court of Appeals

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2015-000074

The Honorable Lori Horn Bustamante, Judge

AFFIRMED

COUNSEL

Arizona Attorney General's Office, Phoenix

By Alyse Meislik, Evan G. Daniels, Oramel H. Skinner

Counsel for Petitioner/Appellee

McGill Law Firm, Scottsdale

By Gregory G. McGill

Counsel for Respondent/Appellant

MEMORANDUM DECISION

Judge Maurice Portley1 delivered the decision of the Court, in which Presiding Judge Kent E. Cattani and Judge Lawrence F. Winthrop joined.

PORTLEY, Judge:

¶1 Respondent 6635 N. 19th Avenue, Inc. appeals the superior court's order requiring it to comply with a demand for information made by the State of Arizona under the Arizona Consumer Fraud Act. See Ariz. Rev. Stat. ("A.R.S.") § 44-1521 et seq.2 For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 This case involves an action by the State to compel pre-complaint discovery in a potential consumer fraud case. The Arizona Consumer Fraud Act ("CFA") makes it unlawful to use "any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact" when selling or advertising merchandise, which includes real estate or services. A.R.S. §§ 44-1521(5), -1522(A); see generally Shaw v. CTVT Motors, Inc., 232 Ariz. 30, 31, ¶ 10 (App. 2013). The CFA is broadly drafted "to eliminate unlawful practices in merchant-consumer transactions." Id. at 32, ¶ 11 (quoting Madsen v. W. Am. Mortg. Co., 143 Ariz. 614, 618 (App. 1985)). And the Arizona Attorney General is authorized by statute to enforce the CFA, including to "engage in extensive pre-complaint discovery" if it has reasonable cause to believe a person3 has violated theCFA. A.R.S. § 44-1524; People ex rel. Babbitt v. Herndon, 119 Ariz. 454, 456 (1978).

¶3 Here, as part of its investigation of whether 6635 N. 19th Avenue, Inc., d/b/a Woodbridge Apartments ("Woodbridge") had, or was violating the CFA, the Attorney General issued a Civil Investigative Demand ("CID") to Woodbridge on October 1, 2014 concerning its multi-family residential complex known as Woodbridge Apartments ("the Complex"). After determining that Woodbridge's response was not fully compliant, the Attorney General filed a petition on January 9, 2015 in the superior court ("the Petition") for an order to show cause to enforce the CID. See A.R.S. § 44-1527.

¶4 As part of the hearing, the parties stipulated to the admission of Exhibits 1-24, which included court documents filed in other proceedings, pictures of and news reports about the Complex, a consumer complaint submitted to the Attorney General's Office, and examples of Woodbridge's internet advertisements depicting clean apartments and offering a "warm and inviting atmosphere." Later, Special Agent Melissa Opp testified that as part of her investigation she met with several Bhutanese-speaking tenants4 at the Complex, and those tenants consented to an inspection of three occupied apartments. Based on her observations of the apartments, as well as the common areas that she was able to observe while she walked from one apartment to another, Opp testified the following conditions likely existed at the Complex: non-working air conditioning, sparking electrical outlets, low water pressure, flea and/or bedbug infestation(s), cockroach infestation(s), bees near apartment entrances, holes in walls, sewer back-up, and leaking faucets and bathtubs.

¶5 After the hearing, the parties filed their written closing arguments, and Woodbridge moved to suppress Opp's testimony alleging her visit was an illegal search under the Fourth Amendment to the United States Constitution. While waiting on the briefing on the suppression motion, the superior court granted the Petition, making findings of fact and conclusions of law, and ruling Woodbridge was in contempt until it complied with the CID, and prohibited Woodbridge from advertising or renting any apartments until its compliance. The court subsequently denied Woodbridge's motion to suppress. And, after briefing on the request for fees, the court entered its final judgment ordering Woodbridgeto pay the State $36,000 in attorneys' fees. See A.R.S. § 44-1534(A). Woodbridge filed a notice of appeal, and we have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) and/or (4).

DISCUSSION
I. Denial of the Motion to Suppress

¶6 Woodbridge argues that the superior court erred by denying its motion to suppress Opp's search of the Complex as a violation of its rights under the Fourth Amendment to the United States Constitution. We disagree.

¶7 We review the denial of a motion to suppress for an abuse of discretion, but we review constitutional and purely legal issues de novo. State v. Allen, 216 Ariz. 320, 323, ¶ 11 (App. 2007). "As a general rule, a warrant must be obtained to search an area in which an individual has a reasonable expectation of privacy." State v. Flores, 195 Ariz. 199, 203, ¶ 11 (App. 1999) (citations omitted). Woodbridge's challenge, as a result, depends on whether it "had a reasonable expectation of privacy in the areas of search, in relation to the items seized." See State v. Main, 159 Ariz. 96, 98 (App. 1988).

¶8 Woodbridge did not have a privacy interest in the curtilage to a tenant's front door. See State v. Olm, 223 Ariz. 429, 433, ¶ 13 (App. 2010) ("[N]o Fourth Amendment violation occurs when an officer, without a warrant, crosses the curtilage to knock on the front door to ask questions of the resident."); U.S. v. Perea-Rey, 680 F.3d 1179, 1189 (9th Cir. 2012) ("[T]he knock and talk exception authorizes officers to enter the curtilage to initiate a consensual conversation with the residents of the home."); see also City of Seattle v. McCready, 877 P.2d 686, 690 (Wash. 1994) (holding that a tenant necessarily possesses the authority to consent to a visitor's entry onto the common areas leading to an apartment). As a result, Opp did not need a warrant to approach a tenant's front door and knock on it.

¶9 Additionally, Woodbridge did not have a privacy interest in leased residences. See Chapman v. U.S., 365 U.S. 610, 616-17 (1961); see also Camara v. Mun. Ct. of City and Cty. of San Francisco, 387 U.S. 523, 540 (1967) (recognizing that consent of the landlord was insufficient to authorize inspection of leased premises without a warrant); accord People v. M. Santulli, LLC, 910 N.Y.S.2d 336, 339 (N.Y. App. Term. 2010) ("[A] landlord does not have a reasonable expectation of privacy with respect to property that he has rented to a tenant, and that is occupied by that tenant"); Jackson v. Davis, 530 F. Supp. 2, 5 (E.D. Tenn. 1981) (noting that any expectation ofprivacy in leased premises is that of the tenant, not the landlord); McCready, 877 P.2d at 689-90 (holding that because tenants, not landlords, have a privacy interest in leased premises, they may consent to search despite landlord's objection); In re Dwelling Located at 728 Belmont Ave., 210 S.E.2d 73, 76-77 (N.C. App. 1974) (discussing that tenants in possession and control of leased premises have rights superior to landlord); cf. State v. Lucero, 143 Ariz. 108, 109-10 (1984) (holding that person whose name appeared on a storage locker's rental agreement, was responsible for payment of its rent, and held a set of keys to the locker had apparent authority to consent to the locker's search). Thus, a tenant could agree to have Opp enter the apartment, look around, and inspect the apartment. Because the tenants consented to the entry and inspection by Opp, the superior court properly denied the motion to suppress.5

II. The CID Order

¶10 Woodbridge also challenges the superior court's decision to grant enforcement of the pre-complaint CID based on the admitted exhibits and testimony. We find no abuse of discretion.

¶11 The Attorney General can issue an administrative subpoena as part of its CFA investigation. A person or entity may resist an administrative subpoena on several grounds, including that: (i) there is no reasonable cause to believe there has been a violation of the CFA; (ii) the inquiry is not within the agency's scope of authority; (iii) the request is too vague or seeks irrelevant information; and (iv) the summons is being used for an improper purpose, such as to harass or put pressure on the investigated party to settle a collateral dispute. Herndon, 119 Ariz. at 456 (citing United States v. Powell, 379 U.S. 48, 57-58 (1964)). Although due process may require "an opportunity to present every available defense," it is a flexible concept depending on the nature of the proceeding. Herndon,119 Ariz. at 457 (citing Morrissey v. Brewer, 408 U.S. 471, 481 (1972)). And a pre-complaint discovery enforcement hearing is not a "case or suit," that resolves the ultimate issue of liability or guilt or is governed by the Arizona Rules of Civil Procedure. Id. at 457-58 (analogizing an enforcement hearing to a preliminary hearing in a criminal case).

A. Reasonable Cause

¶12 Woodbridge argues that the CID was not supported by reasonable cause. Woodbridge also contends that "reasonable cause" must be determined by an objective standard. See Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229 Ariz. 377, 412, ¶ 121 (App. 2012) (discussing "reasonable cause" under A.R.S. § 29-833(B)).6

¶13 In determining whether there is reasonable cause, the only issue before the superior court is whether the State has "sufficient evidence to satisfy a judge that it is reasonable to believe that there has been a violation of the [CFA]." Herndon, 119 Ariz. at 458. The "level of proof need not establish probable cause,...

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