STATE OF ARIZONA, ET AL., Plаintiffs/Appellants, v. ARIZONA BOARD OF REGENTS, ET AL., Defendants/Appellees.
No. CV-21-0134-PR
SUPREME COURT OF THE STATE OF ARIZONA
Filed April 5, 2022
253 Ariz. 6 | 507 P.3d 500
Appeal from the Superior Court in Maricopa County, The Honorable Christopher T. Whitten, Judge, No. TX2019-000011. AFFIRMED IN PART & REMANDED. Opinion of the Court of Appeals, Division One, 251 Ariz. 182 (App. 2021) VACATED.
COUNSEL:
Mark Brnovich, Arizona Attorney General, Joseph A. Kanefield, Chief Deputy and Chief of Staff, Brunn (“Beau“) W. Roysden, III, Solicitor General, Michael S. Catlett, Deputy Solicitor General, Phoenix; and Brian M. Bergin (argued), Brent Demmitt, Bergin Frakes Smalley & Oberholtzer PLLC, Phoenix, Attorneys for State of Arizona and Mark Brnovich
Paul F. Eckstein, Joel W. Nomkin (argued), Shane R. Swindle, Thomas D. Ryerson, Austin C. Yost, Perkins Coie LLP, Phoenix, Attorneys for Arizona Board of Regents and John P. Creer
Brett W. Johnson, Colin P. Ahler, Tracy A. Olson, Snell & Wilmer LLP, Phoenix, Attorneys for Arizona Board of Regents
David J. Cantelme, D. Aaron Brown, Cantelme & Brown P.L.C., Tempe, Attorneys for Amicus Curiae Vince Leach
JUSTICE LOPEZ authored the opinion of the Court, in which CHIEF JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, and JUSTICES BOLICK, BEENE, MONTGOMERY, and JUDGE STARING joined.*
¶1 We consider the scope of three statutes the Attorney General invoked to challenge an agreement the Arizona Board of Regents (“ABOR“) entered into with a private company for the latter to construct and oрerate a hotel and conference center on ABOR-owned property. We conclude that (1) to initiate an action under
BACKGROUND
¶2 The challenged agreement between ABOR and Omni Tempe, LLC (“Omni“) became effective on February 28, 2018. The
¶3 The Attorney General‘s Office ultimately discovered the Omni Deal. Although the parties dispute when the Attorney General‘s knowledge of the Omni Deal became legally relevant, it is undisputed that an email thread linking to online articles referring to the Omni Deal as a bad “tax break” was generated by and between Attorney General‘s Office attorneys on January 11, 2018. The articles suggested that Omni would be shielded from up to $21 million in taxes that it would otherwise have to pay the City of Tempe because Omni would be making “payments in lieu of taxes” to ASU. In the email thread, one assistant attorney general characterized the “in lieu of” payments as “pretty suspicious.”
¶4 The Attorney General filed a three-count complaint against ABOR on January 10, 2019, seeking to void the transaсtion or subject the property to taxes. Count I alleges that the lease between Omni and ABOR is subject to taxation because the constitutional exemption from taxation that ABOR enjoys cannot apply to a commercial enterprise like the Omni Deal. Counts II and III seek quo warranto relief alleging that ABOR was unlawfully exercising its official franchise by entering into this lease. On April 3, 2019, the Attorney General filed an amended complaint adding Count IV, which seeks to enjoin the illegal payment of public monies under the Attorney General‘s authority as authorized by
¶5 ABOR moved to dismiss Counts I–III, and the tax court granted those motions after finding that the Attorney General lacked the authority to bring each claim. ABOR also moved for summary judgment on Count IV arguing that it was barred by a one-year statute of limitations. The tax court agreed and ruled that because the claim accrued on January 11, 2018 – the date of the email exchange at the Attorney General‘s Office – and Count IV did not “relate back” to the original complaint, it was barred for untimeliness. The tax court‘s final judgment included an award to ABOR of $979,758 in attorney fees and $2,356.62 in taxable costs. The court of appeals affirmed the tax court‘s judgment, State v. Ariz. Bd. of Regents, 251 Ariz. 182, 190 ¶ 36 (App. 2021), and the Attorney General timely petitioned this Court.
¶6 We granted review to determine whether the Attorney General is authorized to bring Counts I–III, and whether Count IV was timely filеd. These are issues of statewide importance over which we have jurisdiction pursuant to
DISCUSSION
¶7 Our constitution limits the Attorney General‘s authority to bring claims as delineated by statute. State ex rel. Brnovich v. Ariz. Bd. of Regents, 250 Ariz. 127, 130 ¶ 8 (2020); see also
¶8 We first consider whether the Attorney General had the authority to bring Counts I–III in his initial complaint against ABOR. We review an order granting a motion to dismiss for failure to state a claim under Arizona Rule of Civil Procedure 12(b)(6) de novo. Cox v. Ponce ex rel. Cty. of Maricopa, 251 Ariz. 302, 304 ¶ 7 (2021).
A.
¶9 Count I seeks declaratory and injunctive relief against ABOR. The Attorney General asserts that the ABOR-owned property on which the Omni hotel and conference center is to be built is subject to taxation; thus, the property must either be taxed or the agreement voided. The Attorney General argues that he has the authority to bring this claim under
¶10 The Attorney General does not dispute that state property is exempt from taxation. See
¶11 Notwithstanding the Attorney General‘s inability to identify an applicable tax law under title 42 or 43 that he is authorized to enforce here, he argues that because the purpose of the Omni Deal is to evade taxes, the property leased is subject to taxation. He relies on the
B.
¶12 The Attorney General filed Counts II–III pursuant to his quo warranto authority. Both counts allege that ABOR unlawfully usurped or exercised state franchises by exceeding its statutory authоrity to “[p]urchase, receive, hold, make and take leases and long-term leases of and sell real and personal property for the benefit of this state and for the use of the institutions under its jurisdiction.”
¶13 Under the quo warranto statute,
¶14 Our interpretation finds contextual support in other quo warranto sections. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 167 (2012) (“Context is a primary determinant of meaning.“). For instance,
¶15 Moreover, we have recognized the Attorney General‘s authority to bring a quo warranto challenge for “exercising” an unlawful franchise. See, e.g., Donaghey v. Attorney General, 120 Ariz. 93, 94 n.1 (1978) (discussing the “long established principle” that the Attorney General may be compelled tо initiate a quo warranto action if “a franchise is being unlawfully exercised” or usurped); State ex rel. Pickrell v. Town of Scottsdale, 99 Ariz. 103, 104 (1965) (using quo warranto challenge to set aside Town‘s annexation of an area that was outside of the Town‘s statutorily defined jurisdiction to do so).
¶16 Although the Attorney General may bring a quo warranto action challenging a person‘s unlawful holding or exercise of a public office or franchise, such authority is not unlimited. Only ultra vires acts performed by a public official, office, or franchise – i.е., acts outside the confines of the finite authority granted to the entity by our legislature – are subject to quo warranto challenge. Cf., e.g., Pawn 1st, LLC v. City of Phoenix, 242 Ariz. 547, 551–52 ¶ 11 (2017) (stating that variance grants in excess of the board of adjustment‘s statutory authority are “ultra vires and invalid as a matter of law“). Whether the public office or franchise made wise decisions within the otherwise lawful exercise of its authority cannot be challenged in a quo warranto action.
¶17 In Brnovich, we declined to adopt a sweeping interрretation of another statutory source of the Attorney General‘s authority,
¶18 We decline to adopt a broader reading of
C.
¶19 Although we conclude that the Attorney General was authorized to bring a quo warranto action challenging ABOR‘s unlawful
¶20 Count II seeks quo warranto relief to prevent a “conveyance to evade taxation,” which is the same conduct alleged to support Count I. As noted, supra ¶¶ 9–11, no conveyance is made to evade taxation as part of the Omni Deal because there is no applicable tax to evade. Thus, Count II fails as a matter of law.
¶21 Count III, however, properly seeks quo warranto relief. The Attorney General alleges that the lease portion of the Omni Deal is not for the “benefit of this state and for the use of the institutions under its jurisdiction,” as required by
II.
¶22 We next consider the timeliness of Count IV, which the Attorney General filed in an amended comрlaint on April 3, 2019. Neither party disputes that the Attorney General had the authority to bring this claim. Under
A.
¶23
An action brought pursuant to this article is subject to title 12, chapter 7, article 2. If the action is brought by the attorney general, the action must be brought within five years after the date an illеgal payment was ordered and
§ 12-821.01 does not apply to the action.
¶24 Statutory provisions should be read in context to determine meaning, with an aim at effectuating the legislature‘s intent. Stambaugh, 242 Ariz. at 509 ¶ 7. “[W]e may also consider statutes that are in pari materia – of the same subject or general purpose – for guidanсe and to give effect to all of the provisions involved.” Id.
¶25 The legislature‘s intent in enacting
¶26 The court of appeals concluded that the five-year limitations period in
¶27 It is true that tying
¶28 In considering two plausible interpretations of a statute, we will not credit one that leads to absurd results. See State ex rel. Montgomery v. Harris, 237 Ariz. 98, 101 ¶ 13 (2014). We are unpersuaded that the legislature intended to set an additional time constraint that applies only to claims brought by the Attorney General. Instead, it is more likely that the legislature aimed to provide sufficient time for the Attorney General to investigate and recover illegally paid public funds and to shield the Attorney General‘s enforcement authority from collateral litigation about the accrual date. We also agree with the Attorney General that it would be illogical for the legislature, in exempting such public-monies claims from
¶29 Our conclusion that
¶30 Thus, we conclude that Count IV was subject to a five-year statute of limitations from “thе date of an illegal payment of public monies” and remand for further proceedings.
B.
¶31 Although we reverse the trial court‘s grant of summary judgment as to Count IV, we pause to clarify our interpretation of Arizona Rule of Civil Procedure 15(c) and how it applies to this case. The Attorney General argues that his amended complaint adding Count IV was timely even under the one-year statute of limitations if the claim accrued on January 11, 2018 (as the tax court and the court of appeals ruled) because the amended complaint “relates back” to the original complaint filed on January 10, 2019.
¶32 Rule 15(c) provides that: “An amendment relates back to the date of the original pleading if the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set forth, or attempted to be set forth, in the original pleading.” Here, the court of appeals concluded that the amended сomplaint did not relate back to the original complaint because the operative facts supporting Count IV differed from those supporting Counts I–III. Ariz. Bd. of Regents, 251 Ariz. at 189 ¶¶ 26–27. This conclusion is flawed, however, because it interprets the rule in a manner contrary to its text: a claim relates back if it arises out of the “same transaction” as the original complaint. In this case, Count IV arises out of the Omni Deal which, although complex, is the same discrete transaction set forth in the original сomplaint as the basis for Counts I–III.
¶33 We acknowledge that some federal courts have fashioned a fact-based test to interpret the federal counterpart to our Rule 15(c) and consider whether the new claim arises from the same core of operative facts as the original. See, e.g., Echlin v. PeaceHealth, 887 F.3d 967, 978 (9th Cir. 2018) (reasoning that “an amendment will not relate back where the amended complaint ‘had to include additional facts to support the [new] claim‘” even if it arises from the same general transaction (quoting Williams v. Boeing Co., 517 F.3d 1120, 1133 (9th Cir. 2008))). Although we recognize the persuasive value of federal courts’ interpretation of a federal procedural rule, it is “not binding in the construction of our rule.” Flynn v. Campbell, 243 Ariz. 76, 80 ¶ 9 (2017) (quoting Orme Sch. v. Reeves, 166 Ariz. 301, 304 (1990)).
¶34 Here, we depart from the federal interpretation and clarify that our inquiry is transaction-based where the new claim is alleged to arise from the “same transaction.” This approach is more closely moored to the rule‘s text and is consistent with our jurisprudenсe interpreting it. “It is only when the amendment seeks relief with respect to a transaction or event which was not the ‘basis of the original complaint’ that the doctrine of relation back is considered inapplicable.” Marshall v. Superior Court, 131 Ariz. 379, 383 (1982); see also Barnes v. Vozack, 113 Ariz. 269, 272 (1976) (recognizing that an amended complaint relates back to the original complaint if “[i]t was based upon the conduct, transaction and occurrence set forth in the original pleading“). In this case, the court of appeals relied uрon Barnes for its conclusion that Count IV and Counts I–III alleged separate transactions. Ariz. Bd. of Regents, 251 Ariz. at 189 ¶ 27. But, as we did in Marshall, we distinguish Barnes on its facts because the original and amended complaints alleged separate transactions – the sale of stock to plaintiff and a false statement in a registration form. Marshall, 131 Ariz. at 383 (“[T]here was no relation back [in Barnes] where the original complaint alleged fraud in the sale of stock to plaintiff and the amended complaint alleged fraud in defendant‘s application for a registration exemption.“). Thus, becаuse all of the counts here arise from the Omni Deal, Count
CONCLUSION
¶35 For the reasons set forth above, we vacate the court of appeals’ opinion, affirm the tax court‘s dismissal of Counts I and II, reverse the dismissal of Count III, reverse the tax court‘s grant of summary judgment on Count IV, reverse the tax court‘s award of attorney fees as premature, and remand for further proceedings consistent with this opinion.