470 P.3d 636
Ariz.2020Background
- ADHS administers the Arizona Medical Marijuana Act (AMMA) and issues limited nonprofit dispensary registration certificates under A.R.S. § 36-2804(C) (one certificate per ten pharmacies, but exception to "ensure" at least one per county with an approved applicant).
- ADHS performs an annual review (record date here May 31, 2016) to determine whether it may issue new certificates and then opens an application period (here July 18–29, 2016) using that review to prioritize allocations under Ariz. Admin. Code R9-17-303.
- La Paz County had a dispensary as of the May 31 record date, but during the open application period that dispensary relocated out of the county, leaving La Paz without a dispensary.
- Saguaro Healing applied timely for a certificate for La Paz, satisfied application requirements, but ADHS denied issuance because it had prioritized allocations based on the pre-application annual review that showed every county then had a dispensary.
- Trial court dismissed Saguaro’s special action; court of appeals affirmed. The Arizona Supreme Court granted review and held ADHS’s interpretation violated § 36-2804(C), reversed and remanded, and awarded attorney fees to Saguaro.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 36-2804(C) allows ADHS discretion to deny a county without a dispensary a certificate when issuance would exceed the 1:10 ratio | Saguaro: “may” is mandatory here—§ 36-2804(C) requires ADHS to exceed the ratio if necessary to ensure at least one dispensary in a county with a qualified applicant | State/ADHS: “may” is permissive; § 36-2804(C) sets only a maximum and does not impose a minimum obligation to issue extra certificates | Court: “may” is mandatory in context; ADHS must issue a certificate to a qualified applicant when issuing otherwise would ensure a county has at least one dispensary |
| Whether ADHS’s use of pre-application annual-review data to prioritize allocations (thus denying Saguaro) comported with § 36-2804(C) and R9-17-303 | Saguaro: ADHS must account for county status during the application process; if a county lacks a dispensary during the application period and there is a qualified applicant, ADHS must issue a certificate | ADHS: Prioritizing based on the record-date annual review was reasonable, fair, and practical; rules allow ADHS to determine allocations in advance and to publicize priorities before applications | Court: ADHS’s application/interpretation of R9-17-303 conflicted with § 36-2804(C); it could not use pre-application data to deny a qualified applicant from a county without a dispensary; agency action reversed and remanded |
Key Cases Cited
- Gutierrez v. Indus. Comm’n of Ariz., 226 Ariz. 395 (2011) (courts interpret statutes and rules de novo and apply same rules to both)
- Stambaugh v. Killian, 242 Ariz. 508 (2017) (words in statutes read in context)
- United States v. Rodgers, 461 U.S. 677 (1983) (meaning of discretionary words like "may" depends on context)
- DBT Yuma, L.L.C. v. Yuma Cty. Airport Auth., 238 Ariz. 394 (2015) (courts may look to dictionary definitions when statutory terms lack definitions)
- Ariz. Bd. of Regents ex rel. Ariz. State Univ. v. Ariz. State Pers. Bd., 195 Ariz. 173 (1999) (agency rule that conflicts with statute must yield)
- Cochise Cty. v. Ariz. Health Care Cost Containment Sys., 170 Ariz. 443 (1991) (scope of agency power is defined by statute and cannot be expanded by agency fiat)