486 P.3d 1140
Ariz. Ct. App.2021Background
- Arizona Board of Regents (ABOR) agreed with Omni Hotels to develop a hotel and conference center on ~10 acres of state-owned (tax-exempt) land in Tempe; deal included a 60-year lease with a nominal purchase option, ABOR contribution up to $19.5 million toward a conference center, ABOR-built parking with spaces reserved for Omni, and rent/prepayments in lieu of property taxes.
- ABOR first discussed the project publicly June 2016; a term sheet was public by October 2016; the City of Tempe and Omni executed a final agreement Jan. 11, 2018; ABOR and Omni executed an option-to-lease Feb. 28, 2018.
- The Arizona Attorney General (AGO) filed suit Jan. 10, 2019 alleging: Counts I–III (tax-exemption and quo warranto theories challenging the transaction) and later amended to add Count IV (Gift Clause claim under Ariz. Const.) against ABOR and ASU VP Creer.
- The tax court dismissed Counts I–III, holding the AGO lacked statutory/quo warranto authority to bring them, and granted summary judgment for ABOR and Creer on Count IV as untimely under the one-year limitations period for suits against public entities; it also denied relation-back and denied tolling.
- The court awarded ABOR and Creer attorneys’ fees (~$980,000); AGO appealed. The appellate court affirmed on all issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 35-212(E)’s five-year period governs AGO’s Gift Clause suit or the one-year limitations in § 12-821 controls | § 35-212(E) provides the AGO five years to sue for illegal payments; § 12-821 should not apply to AGO actions | § 35-212(E) incorporates Title 12, ch.7, art.2 (which includes § 12-821); the five‑year sentence is a statute of repose, not a replacement of § 12-821 | One-year limitations under § 12-821 applies; the five-year clause is a statute of repose and does not displace § 12-821 |
| When Count IV accrued (notice to investigate) and whether discovery/tolling issues precluded summary judgment | Claim accrued within one year of filing; AGO lacked key documents before that date and ABOR’s conduct may have concealed facts (tolling) | AGO had public term sheets and an internal AGO memo calling the deal suspicious by Jan 2018; AGO could have sought documents earlier and intentionally chose not to | Claim accrued more than one year before filing; no genuine issue of material fact on accrual; no tolling; summary judgment proper |
| Whether Count IV relates back to the original complaint under Rule 15(c) | Count IV arises from same ABOR–Omni transaction and thus should relate back | Count IV relies on distinct operative facts (direct payments, garage, rent structure) and legal theory (Gift Clause) not pled originally | Amendment does not relate back; Count IV asserts different operative facts and legal theories than Counts I–III |
| Whether AGO had statutory authority to bring Counts I–III (tax enforcement and quo warranto) | AGO has independent authority to enforce tax collection (§ 42-1004(E)) and to seek quo warranto (§ 12-2041) | ABOR property is constitutionally tax-exempt; quo warranto challenges office-holding not exercise of statutory powers; AGO lacks authority for these claims | Dismissal affirmed: no tax-enforcement basis (property is tax-exempt) and quo warranto does not authorize challenging ABOR’s exercise of lease powers |
| Reasonableness of attorneys’ fees awarded to ABOR and Creer | Award is excessive given prevailing-rate comparisons | Fees were reasonable given the complexity and attorney quality; AGO failed to detail specific unreasonable entries | Fee award affirmed; AGO did not meet burden to show fees unreasonable |
Key Cases Cited
- Calpine Const. Fin. Co. v. Ariz. Dep't of Revenue, 221 Ariz. 244 (App. 2009) (standard of review for summary judgment in tax-court context)
- Albano v. Shea Homes Ltd. P’ship, 227 Ariz. 121 (2011) (distinguishing statutes of repose from statutes of limitations)
- Cruz v. City of Tucson, 243 Ariz. 69 (App. 2017) (accrual occurs when a reasonable person is on notice to investigate)
- Walk v. Ring, 202 Ariz. 310 (2002) (summary judgment appropriate when plaintiff cannot reasonably justify failure to investigate)
- Barnes v. Vozack, 113 Ariz. 269 (1976) (relation‑back principle: amendments based on distinct transactions do not relate back)
- Cheatham v. DiCiccio, 240 Ariz. 314 (2016) (analysis for Gift Clause/public-purpose and disproportionate consideration inquiry)
- State ex rel. Woods v. Block, 189 Ariz. 269 (1997) (quo warranto limits challenge to right to hold office, not manner of exercising powers)
- Recreation Ctrs. of Sun City, Inc. v. Maricopa Cnty., 162 Ariz. 281 (1989) (tax exemption attaches to property and its legal incidents)
- State v. Bowsher, 225 Ariz. 586 (2010) (statutory harmonization principles)
- City of Tempe v. State, 237 Ariz. 360 (App. 2015) (standards for awarding attorneys’ fees between governmental entities)