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White Mountain Health Center, Inc. v. Maricopa County

Court of Appeals of Arizona, First Division

December 20, 2016

WHITE MOUNTAIN HEALTH CENTER, INC., an Arizona non-profit corporation, Plaintiff/Appellee,
MARICOPA COUNTY; WILLIAM MONTGOMERY, ESQ., Maricopa County Attorney, Defendants/Appellants, STATE OF ARIZONA ex rel. MARK BRNOVICH,

         Appeal from the Superior Court in Maricopa County No. CV2012-053585 The Honorable Michael D. Gordon, Judge


          White Berberian PLC, Tempe By Steven M. White, Anne M. Brady Co-Counsel for Plaintiff/Appellee.

          ACLU Criminal Law Reform Project, New York, NY By Ezekiel R. Edwards, Emma A. Andersson Co-Counsel for Plaintiff/Appellee, Pro Hac Vice.

          ACLU Foundation of Arizona, Phoenix By Daniel Joseph Pochoda Co-Counsel for Plaintiff/Appellee.

          Maricopa County Attorney's Office, Phoenix By Thomas P. Liddy, Bruce P. White, Joseph I. Vigil Counsel for Defendants/Appellants Maricopa County, William Montgomery.

          Arizona Attorney General's Office, Phoenix By Charles A. Grube, Brian P. Luse Counsel for Intervenor/Appellant State of Arizona.

          Yavapai County Attorney's Office, Prescott By Benjamin D. Kreutzberg Counsel for Amicus Curiae Yavapai County Attorney.

          Kercsmar & Feltus PLLC, Scottsdale By Todd Feltus Counsel for Amicus Curiae Judicial Watch, Inc.

          Presiding Judge Donn Kessler delivered the opinion of the Court, in which Judge Peter B. Swann and Chief Judge Michael J. Brown joined.



         ¶1 In 2012, White Mountain Health Center, Inc. ("White Mountain") sought county zoning approval to establish a medical marijuana dispensary ("MMD") pursuant to the Arizona Medical Marijuana Act ("AMMA"), Arizona Revised Statutes ("A.R.S.") sections 36- 2801 to -2819 (2014 and Supp. 2015).[2] Maricopa County refused to issue the necessary zoning documents and White Mountain filed suit. These three consolidated appeals followed. In the first appeal (1 CA-CV 12-0831, the "Preemption Appeal"), Appellants[3] seek reversal of the superior court's partial summary judgment for White Mountain and denial of the Appellants' motions for summary judgment, in which the court held that the Controlled Substances Act ("CSA"), 21 U.S.C. §§ 801 to 971 (West 2016), does not preempt the AMMA. In the second appeal (1 CA-CV 13-0697, the "Zoning Appeal"), the County challenges the summary judgment in favor of White Mountain, in which the court struck the Maricopa County Zoning Ordinance ("MCZO") "Second Text Amendment"[4] as it applied to MMDs. In the third appeal (1 CA-CV 14-0372, the "Attorneys' Fees Appeal"), the County seeks to reverse the court's $5000 sanction against the County pursuant to A.R.S. § 12-349 (2016).

         ¶2 For the reasons that follow, we affirm the superior court's rulings except the sanctions imposed against the County. First, the CSA does not preempt the AMMA to the extent the AMMA requires the County to pass reasonable zoning regulations for MMDs and process papers concerning zoning compliance or requires the State to issue documents to allow MMDs to operate. Second, the court did not exceed its authority in striking the Second Text Amendment to the extent the amendment applied to MMDs. Finally, we reverse the award of $5000 in sanctions against the County because the County did not unreasonably expand or delay the proceedings or defend a claim without substantial justification.


         I. Background

         A. AMMA and Regulations

         ¶3 In 2010, Arizona voters passed Proposition 203, now codified as the AMMA. Ariz. Sec'y of State, State of Arizona Official Canvass at 15 (2010); State v. Okun, 231 Ariz. 462, 464, ¶ 4 (App. 2013). The AMMA decriminalizes and provides protections against discrimination under state law for the medical use and possession, cultivation, and sale of marijuana under the circumstances described in the AMMA. See, e.g., A.R.S. §§ 36-2802, -2811, -2813, -2814; see also Ariz. Sec'y of State, Ballot Proposition Guide at § 2(D), (G) (2010). The AMMA granted the Arizona Department of Health Services ("ADHS") rulemaking authority to promulgate regulations in order to implement and administer the AMMA. A.R.S. §§ 36-136(F) (Supp. 2012), -2803. Those regulations are found in the Arizona Administrative Code ("A.A.C.") at sections R9-17-101 to R9-17-323.[5] No party challenges the validity or construction of the ADHS regulations.

         ¶4 The AMMA also empowers ADHS to establish the system to register MMDs throughout the state and track compliance with statutory requirements. A.R.S. § 36-2803. To this end, ADHS may approve at least one MMD per county, but no more than one MMD for every ten pharmacies in an area. A.R.S. § 36-2804(C). The AMMA also authorizes cities, towns, and counties to "enact reasonable zoning regulations that limit the use of land for [MMDs] to specified areas in the manner provided in title 9, chapter 4, article 6.1, and title 11, chapter 6, article 2." A.R.S. § 36-2806.01 (internal citations omitted).

         ¶5 Both the AMMA and ADHS regulations require an entity seeking to become an MMD to first register with ADHS by filing an application for a "registration certificate." A.R.S. § 36-2804; A.A.C. R9-17-304. The application must include, among other things, "a sworn statement certifying" that the MMD is in compliance with zoning restrictions "[i]f the city, town or county . . . has enacted zoning restrictions." A.R.S. § 36-2804(B)(1)(d). ADHS regulations also require that an application must include "[documentation from the local jurisdiction where the [MMD]'s proposed physical address is located [stating] that: a. There are no local zoning restrictions for the [MMD's] location, or b. The [MMD's] location is in compliance with any local zoning restrictions." A.A.C. R9-17-304(C)(6).

         ¶6 Once the application for a registration certificate is filed, ADHS must review and allocate the certificates pursuant to A.A.C. R9-17-303. If ADHS allocates a registration certificate to an applicant and the applicant is compliant with the regulations, ADHS shall issue the applicant a certificate. A.A.C. R9-17-107(F)(1), (2). Only upon ADHS' allocation and issuance of a registration certificate may a proposed MMD apply to operate an MMD. See A.A.C. R9-17-305(A). [6]

         B. CHAA system

         ¶7 To allocate MMD certificates, ADHS utilizes the preexisting Community Health Analysis Areas ("CHAA") system. A.A.C. R9-17-101(7). Arizona contains 126 CHAAs, and some CHAAs are in overlapping local jurisdictions such as cities and unincorporated portions of counties. The parties stipulated that nothing explicitly requires an MMD in every CHAA.

         C. MCZO

         ¶8 The MCZO is a permissive zoning ordinance, such that if a particular land use is not explicitly permitted, it is prohibited. In response to the AMMA, the County amended the MCZO in 2010 to create a special use category that permitted MMDs in certain commercially-zoned districts (the "First Text Amendment"). The First Text Amendment also contained a "poison pill" provision instructing: "[t]his provision shall not be construed as permitting any use or act which is otherwise prohibited by law."

         ¶9The Maricopa County Attorney publicly opposed the AMMA, opined that county employees who processed applications for MMDs could be subject to federal prosecution, and advised the County to stop accepting applications for MMDs in unincorporated Maricopa County. The County amended the MCZO again in 2011 (the "Second Text Amendment"). The Second Text Amendment only permitted MMDs in Industrial 3 ("IND-3") zones in unincorporated Maricopa County, precluded special use permits for MMDs, and contained a slightly different poison pill provision. The new provision specified that, as to IND-3 zones, a "building or premise shall be used only for industrial use not in conflict with any federal law, state law or Maricopa County Ordinance." Although IND-3 zoning existed in unincorporated Maricopa County, CHAA 49[7] did not contain any IND-3 zones.[8]

         II. White Mountain's Complaint

         ¶10 In May 2012, White Mountain applied for a registration certificate for CHAA 49. In response, ADHS issued a "Notice of Deficiencies" because White Mountain had not submitted the necessary zoning documentation from the County confirming that either no local zoning restrictions existed or that White Mountain was in compliance with applicable restrictions. See A.A.C. R9-17-107(G)(4), R9-17-304(C)(6). White Mountain was the only applicant for a registration certificate in CHAA 49. As the State stipulated and the superior court found, ADHS would have issued the registration certificate to White Mountain but for the lack of necessary zoning documentation from the County.

         ¶11 White Mountain filed a complaint in superior court against the County, ADHS, and its Director in his official capacity, [9] alleging that White Mountain could not obtain the necessary zoning documentation because the County refused to issue it. The State stipulated that "the only deficiency in [White Mountain's] application [was] the lack of documentation from Maricopa County." White Mountain attached to its complaint a copy of a letter from the Maricopa County Attorney's Office that stated:

[T]he County is not issuing zoning verification for [MMDs] due to the fact that doing so would potentially subject the County and its employees to prosecution under federal law. . . . the County will not be accepting any further applications for [MMDs] or cultivation sites, further processing any pending applications, or issuing any certificates, permits or other authorizations or justification for [MMDs] or cultivation sites until the threat of federal prosecution is conclusively removed.

         ¶12 White Mountain sought declaratory relief regarding its compliance and/or need to comply with the zoning verification requirement. In Count 1, White Mountain sought a declaration that: (1) there were no local or county zoning restrictions for MMDs in CHAA 49; (2) the County had not enacted "reasonable" restrictions; or (3) White Mountain had complied with all requirements for obtaining an MMD registration certificate. In its answer, the County "admitted] that Maricopa County and its employees [would] not take any action that would be in violation of federal law."

         ¶13 In Count 2, White Mountain sought injunctive relief to prevent ADHS from withdrawing its application for a registration certificate due to the lack of required documentation from the County. Finally, in Count 3, White Mountain sought mandamus relief to order: (1) the County to provide the necessary documentation stating that there were either no zoning restrictions or that White Mountain was in compliance; and (2) ADHS to issue a registration certificate to White Mountain.

         III. The Preliminary Injunction

         ¶14 In response to White Mountain's request for injunctive relief, the superior court entered a preliminary injunction enjoining ADHS from withdrawing or denying White Mountain's application based on White Mountain's failure to provide the zoning verification. The State did not seek appellate relief from the injunction. See A.R.S. § 12-2101(A)(5)(b) (2016) (authorizing an appeal from the grant or denial of injunctive relief).

         IV. Motions for Summary Judgment

         A. Federal Preemption

         ¶15 White Mountain then moved for partial summary judgment seeking, among other things, a court order directing the County to issue the zoning documentation.[10] The County filed a cross-motion for summary judgment, asserting "the relief sought [was] preempted by the laws of the United States" and that the court could not order declaratory relief to "compel" a public lawyer, here the Maricopa County Attorney, to give a "certain legal opinion." It maintained that a mandatory injunction requiring compliance with the AMMA "would require county employees to subject themselves to the risk of criminal prosecution by the United States" and specifically that County employees "could be held liable as aiders or abettors" under the CSA. Ultimately, the County argued that (1) because the County and its employees could not comply with both the AMMA and the CSA, the relief sought was preempted ("impossibility preemption"); and (2) the AMMA was preempted because it created an obstacle to enforcement of the CSA ("obstacle preemption").[11]

         ¶16 The State intervened, counterclaimed for declaratory relief, and moved for summary judgment, arguing White Mountain's requested relief was preempted by the CSA. It asserted all relevant provisions of the AMMA authorizing the running of MMDs were barred by obstacle preemption.

         ¶17 The parties agreed the CSA neither expressly preempts state law nor occupies the whole field. The superior court determined neither obstacle preemption nor impossibility preemption applied, but the court limited relief to simply ordering the County to issue zoning documentation stating that either no relevant zoning requirements existed or White Mountain had complied with them. The court entered a final signed judgment pursuant to Arizona Rule of Civil Procedure 54(b), granting White Mountain's motion for partial summary judgment and mandamus relief, denying Appellants' cross-motions for summary judgment, and denying the State's counterclaim for declaratory relief. Thereafter the County filed a document with the court that indicated the County's compliance with the court's mandamus order. However, on the form it provided to White Mountain to submit to ADHS, rather than checking either box on the ADHS form indicating White Mountain was in compliance with the local zoning regulations or that no such zoning existed, the County responded by indicating "N/A" for each option. The County and the State timely filed separate notices of appeal from the 54(b) judgment, thus beginning the Preemption Appeal.

         B. Declaratory Relief and the Second and Third Text Amendments

         ¶18 While the Preemption Appeal was pending, and after the County's execution of the ADHS zoning form indicating that neither the compliance nor absence of zoning restrictions applied, White Mountain and the County moved for summary judgment on the Second Text Amendment. White Mountain argued the Second Text Amendment violated the AMMA by effectively banning MMDs from CHAA 49, and generally because of the poison pill provision. The County argued the Second Text Amendment was a valid legislative act, the AMMA did not preempt local regulation with respect to land use for MMDs, and permitted uses in particular zoning districts must be consistent county-wide.

         ¶19 In granting White Mountain's motion and denying the County's motion, the superior court recognized its duty to give broad deference to the County when the County's zoning powers were challenged, but it noted that a county could not use its zoning powers to violate state law. It observed that when state law and a zoning ordinance conflict and the two cannot be harmonized, state law controls. The court declared the Second Text Amendment unreasonable and void because it violated the AMMA both by (1) prohibiting MMDs under the poison pill provision and (2) limiting MMDs to IND-3 districts although no IND-3 district existed in CHAA 49. As the court summarized, a "County zoning ordinance that poses a categorical prohibition of Medical Marijuana violates" the AMMA, which grants local jurisdictions only the limited power to enact "reasonable zoning regulations that limit the land for [MMDs] to specified areas . . . .”

         ¶20 The superior court then ordered supplemental briefing on the effect of striking the Second Text Amendment. White Mountain argued that by striking the Second Text Amendment, the First Text Amendment would be automatically reinstated or revived, or alternatively, that all MMD zoning restrictions would be eliminated from the MCZO. The County argued that because the MCZO is a permissive ordinance, that is, unless a use is permitted it is prohibited, and none of the zones other than IND-3 permits MMDs, MMDs are prohibited in those other zones. It also argued that the striking of the Second Text Amendment could not revive or automatically renew the First Text Amendment. According to the County, this resulted in the rest of the Second Text Amendment staying in place and thus, MMDs were prohibited because they were not listed as permitted uses and such a result would not violate the AMMA.

         ¶21 The superior court held that the doctrine of automatic revival would not revive the First Text Amendment, but it also held that after striking the Second Text Amendment, no zoning restrictions for MMDs in unincorporated Maricopa County existed beyond limitations within the AMMA regarding locations near schools. The court concluded White Mountain "ha[d] otherwise fully complied with local zoning restrictions, because there [were] none, " and ordered ADHS to process White Mountain's application for a registration certificate. It further enjoined ADHS from denying the application based on White Mountain's failure to provide evidence of compliance with zoning ordinances because, again, "there [were] none." The court later amended that judgment to provide that it had only struck the Second Text Amendment as it specifically applied to MMDs. The County and the State timely appealed, starting the Zoning Appeal.

         ¶22 In response to the superior court's judgment that the Second Text Amendment was void, the County amended the MCZO again (the "Third Text Amendment"). The Third Text Amendment restricted MMDs to Commercial 2 and 3 ("C-2, " "C-3") and IND-1, -2, and -3 zoning districts. The poison pill provision from the First Text Amendment, directing that the "provision shall not be construed as permitting any use . . . otherwise prohibited or made punishable by law, " remained in the Third Text Amendment. Additionally, the County provided that in the event the superior court's ruling on the Second Text Amendment was overturned, the Third Text Amendment would no longer be effective and the MCZO would revert back to the Second Text Amendment.

         V. Attorneys' Fees, Costs, and Sanctions

         ¶23 White Mountain sought attorneys' fees and costs from the County. The superior court awarded White Mountain $190, 000 in fees, $3700.02 in costs, and $5000 in sanctions against the County pursuant to A.R.S. § 12-349. The court found that White Mountain was entitled to sanctions pursuant to A.R.S. § 12-349 because the County unreasonably expanded and delayed the proceedings and because the court's earlier ruling on preemption, adverse to the County, rendered the County's opposition to the requested relief "without substantial justification."

         ¶24 The County timely appealed, starting the Attorneys' Fees Appeal. We consolidated the three appeals, and we have jurisdiction to resolve the appeals from each of the final judgments pursuant to A.R.S. §§ 12-120.21 (2016) and -2101(A)(1) (2016).


         I. Preemption Appeal

         ¶25 In the Preemption Appeal, Appellants contend the CSA preempts all provisions of the AMMA. However, the only issue raised in the superior court, and the only issue we will address, is whether the actions the AMMA required the State and the County to take in this case―for the County, approving zoning for specific areas for MMDs, processing zoning documents, and taking action pursuant to zoning laws to ensure MMDs meet other zoning requirements, and for the State, processing White Mountain's application to operate an MMD―are impliedly preempted because such relief allegedly conflicts with the CSA. See County of San Diego v. San Diego NORML, 165 Cal.App.4th 798, 815-18 (2008) (stating county lacks standing to raise constitutional infirmities of state medical marijuana laws except to the extent the laws require it to take specific action).

         ¶26 The State argues the court erred by requiring it to process White Mountain's applications because such relief thwarts federal public policy and "Arizona courts are bound to deny injunctive aid to unlawful marijuana businesses." The County argues the court erred by: (1) requiring it to issue zoning verification documents required by A.A.C. R9-17-304(C)(6) because such relief is preempted by the CSA; and (2) not dismissing the complaint to the extent the complaint sought an order challenging the Maricopa County Attorney's advice to the County, because he was "performing a discretionary role in providing legal advice to the County.... [and] mandamus relief does not lie to challenge his advice to his public client." For the following reasons, we conclude the relief ordered consistent ...

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