Falcone Brothers & Associates, Inc. v. City of Tucson
240 Ariz. 482
| Ariz. Ct. App. | 2016Background
- Falcone Brothers contracted with City of Tucson for a road-improvement project and later claimed roughly $2.5 million in extra costs and damages arising from plan errors and unforeseen utility/subterranean conflicts.
- The contract incorporated Tucson’s Procurement Code (Chapter 28), which prescribed a multi-step administrative claims process culminating in a director of procurement decision declared "final," and purported to limit judicial review to a 30‑day special action in superior court.
- Falcone submitted a § 12‑821.01 notice of claim, participated in the City’s administrative process, and had its claim denied by a contract officer, a hearing officer recommendation, and then by the procurement director on April 20, 2015.
- Instead of filing the special action the Code required, Falcone filed a civil complaint in superior court alleging breach of contract and unjust enrichment; the City moved to dismiss for lack of jurisdiction, res judicata, and collateral estoppel.
- The trial court granted dismissal under Rule 12(b)(1); the court of appeals reversed, holding the City’s ordinance and contractual attempt to make the director’s decision binding (and restrict review to special action) were invalid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether superior court has jurisdiction over Falcone's breach‑of‑contract claim | Falcone: superior court has original jurisdiction for contract claims; administrative special action is not required | City: contract/ordinance required exhaustion and special-action review; director's decision is final | Held: Superior court has jurisdiction; city cannot limit state-court jurisdiction by ordinance or contract |
| Validity of Procurement Code provision making director's decision final and limiting review to special action | Falcone: code is invalid because the City adjudicated its own contract and denied neutral decisionmaker; thus cannot oust de novo trial | City: code modeled on state procurement scheme and creates exclusive administrative remedy | Held: Provision invalid — City's scheme provided only one tier of review by the City and deviated from state law, so it cannot bind parties or limit judicial review |
| Whether Falcone was required to exhaust administrative remedies by filing a special action in superior court | Falcone: all administrative remedies were exhausted when director issued decision; certiorari/special action is not an administrative remedy | City: Falcone failed to exhaust and must pursue the special action route | Held: Exhaustion does not require filing a special action; Falcone exhausted administrative remedies upon the director's decision |
| Preclusive effect (res judicata/collateral estoppel) of the procurement director's decision | Falcone: director's decision is not statutorily final or made by an independent tribunal; thus not preclusive | City: decision should have preclusive effect; Falcone must accept administrative finality absent special action | Held: No preclusive effect — director's decision lacked statutory finality and was issued by an interested party, so res judicata/collateral estoppel do not bar the superior-court action |
Key Cases Cited
- Richard E. Lambert, Ltd. v. City of Tucson Dept. of Procurement, 223 Ariz. 184 (App. 2009) (discussing procurement-code special-action practice; court previously declined to decide propriety of that procedure)
- R.L. Augustine Constr. Co. v. Peoria Unified Sch. Dist. No. 11, 188 Ariz. 368 (1997) (invalidated administrative scheme where the purchasing entity also served as final decisionmaker)
- Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588 (App. 2009) (contractual attempt to limit superior-court de novo review and make administrative decision binding is void)
- Stant v. City of Maricopa Emp. Merit Bd., 234 Ariz. 196 (App. 2014) (distinguishing commencement of special actions/appeals for appellate‑jurisdiction purposes)
- Hooters of Am., Inc. v. Phillips, 173 F.3d 933 (4th Cir. 1999) (arbitration agreement unenforceable where employer controls selection of arbitrators and scheme lacks neutrality)