Sky Lakes Medical Center v. Dept. of Human Services, 484 P.3d 1107

In 2017 DAS solicited proposals to build-and-lease an office for DHS in Klamath Falls; Klamath Falls Holdings (KFH) and Sky Lakes responded.
KFH’s proposal acknowledged the site was Mixed Use and would require a future conditional use permit (CUP); DAS deemed KFH’s RFP response acceptable and awarded the project to KFH.
DAS and DHS executed a build‑to‑suit lease (later amended) that included a lessor covenant that the premises "as of the Rental Commencement Date" would comply with all applicable local laws and that a CUP would be obtained before occupancy.
Sky Lakes petitioned for judicial review claiming DAS failed to make the land‑use compatibility findings required by ORS 197.180 and OAR 125‑110‑0001; Sky Lakes later sought to amend to challenge the earlier notice of award and procurement.
The circuit court deferred to DAS’s interpretation of OAR 125‑110‑0001 and upheld the lease approval and the adopted findings; it denied leave to file the second amended petition as untimely.
The Court of Appeals affirmed: DAS’s interpretation of the rule was plausible and entitled to deference, and the proposed procurement challenge did not relate back and was time‑barred.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether OAR 125‑110‑0001 requires present, issued local land‑use approval before DAS may approve a lease	Sky Lakes: compatibility must exist at the time of agency approval; a covenant tied to future compliance is insufficient	DAS: rule allows proof that use is allowed by zoning and may be conditioned on future local review (e.g., CUP); a lease covenant tied to rental commencement suffices	Held: DAS’s interpretation is plausible and entitled to deference; compatibility may be shown by allowed use plus covenant/CUP before occupancy
Whether the court erred denying leave to file a second amended petition challenging the February 2018 notice of award	Sky Lakes: its second amended petition relates back to the timely amended petition and should be allowed	DAS: the notice of award is a separate final order; the procurement challenge is a different occurrence and was filed after the 60‑day statutory deadline	Held: The procurement challenge did not relate back under ORCP 23(C) and was untimely under ORS 183.484(2); denial affirmed

Don’t Waste Oregon Com. v. Energy Facility Siting, 320 Or 132 (Or. 1994) (agency’s plausible interpretation of its own rule is entitled to judicial deference)
State v. Gaines, 346 Or 160 (Or. 2009) (statutory interpretation requires reading text in context)
Force v. Dept. of Rev., 350 Or 179 (Or. 2011) (context includes other parts of the statute)
Halperin v. Pitts, 352 Or 482 (Or. 2012) (later‑enacted statute can inform interpretation of earlier statute)
State v. Dickerson, 356 Or 822 (Or. 2015) (legal terms are given established legal meanings)
State v. Lovaina‑Burmudez, 257 Or App 1 (Or. App. 2013) (appellate review principles for alternative grounds and procedural timeliness)
Sky Lakes Medical Center, Inc. v. Klamath Falls, 299 Or App 343 (Or. App. 2019) (affirming city council’s approval of KFH’s CUP application)