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JH2K I LLC v. Arizona Department of Health Services

Court of Appeals of Arizona, First Division

March 12, 2019

JH2K I LLC, Plaintiff/Appellant,
v.
ARIZONA DEPARTMENT OF HEALTH SERVICES, Defendant/Appellee.

          Appeal from the Superior Court in Maricopa County No. LC2017-000218-001 The Honorable Patricia A. Starr, Judge

          Barrett & Matura, Scottsdale By Jeffrey Matura, Melissa J. England, Tabitha R. Myers Counsel for Plaintiff/Appellant

          Sherman & Howard LLC, Phoenix By Gregory W. Falls, Matthew A. Hesketh Counsel for Defendant/Appellee

          Judge Randall M. Howe delivered the opinion of the Court, in which Presiding Judge Paul J. McMurdie and Judge Jennifer B. Campbell joined.

          OPINION

          HOWE, Judge

         ¶1 JH2K I, LLC appeals the superior court's judgment upholding the Arizona Department of Health's final decision denying JH2K's application for a medical marijuana dispensary registration certificate under the Department's interpretation of the Arizona Medical Marijuana Act ("AMMA") and its corresponding regulations. JH2K argues, among other things, that the Department abused its discretion because it (1) imposed a requirement that applies exclusively to an application to operate and open a dispensary and (2) improperly expanded the definition of "school" to encompass the surrounding property.

         ¶2 We affirm the superior court's judgment. The Department did not abuse its discretion in requiring JH2K to submit documentation showing its compliance with the distance requirement because the AMMA's plain language and corresponding regulations require it. The Department also properly interpreted the meaning of "school" because the term's plain and ordinary meaning includes a school's property boundaries.

         FACTS AND PROCEDURAL HISTORY

         ¶3 In 2010, Arizona voters passed Proposition 203, now codified as the AMMA, A.R.S. §§ 36-2801 to -2819. The AMMA granted the Department rulemaking authority to enact regulations to implement and enforce the act. The AMMA requires prospective nonprofit medical marijuana dispensaries to register with the Department by filing an application for a medical marijuana dispensary registration certificate. In June 2016, the Department announced that it would be accepting dispensary registration applications.

         ¶4 JH2K applied for a registration certificate, but the Department determined that its application was not substantively complete. The Department sent JH2K a formal request for information, saying that "some items need to be corrected or are missing" from its application. The Department identified 17 missing items in JH2K's application packet. Citing A.A.C. R9-17-321(A), the 17th item listed in the request said that "[a] dispensary shall be located at least 500 feet from a private school or a public school that existed before the date the dispensary submitted the initial dispensary registration certificate application." JH2K responded to item 17 by attaching a computer-generated map showing that the distance between the proposed dispensary building and the nearest school's administration building was 513.75 feet. Nevertheless, the Department denied JH2K's application because it determined that, when measured from property line to property line, the proposed dispensary location was within 500 feet of a Pima County junior high school.

         ¶5 JH2K protested the denial of its application and sought administrative review before an administrative law judge ("ALJ"). Upon receiving notice of an evidentiary hearing, the Department conducted additional research to confirm the distance between the school and JH2K's proposed dispensary location. A team leader from the Department's Bureau of Special Licensing visited the site and used a rolling measuring device to verify the distance between the property line of the proposed dispensary location and a chain-link fence abutting the school's basketball court and determined that the distance measured 424 feet. The team leader then confirmed through Google Maps that the distance between the two respective property lines was less than 500 feet. The Department also telephoned Pima County officials to inquire about the distance between the two properties. Pima County verified that the distance was less than 500 feet. In addition, the Department learned that Pima County determined distances between properties by measuring from property line to property line.

         ¶6 At the evidentiary hearing, JH2K argued that applicants are not required to demonstrate at the initial application stage that a proposed dispensary is at least 500 feet from a school. JH2K further argued that the distance between a proposed dispensary and the nearest school should be measured from building structure to building structure and that the Department arbitrarily expanded the definition of a "school" to include all surrounding grounds. The Department argued, however, that both "statute and rule" mandate an application for a registration certificate to contain documentation that the physical address of a proposed dispensary location is at least 500 feet from a private or public school. A branch chief from the Department's Division of Licensing also testified that the Department consistently measured distance from property line to property line.

         ¶7 After the hearing, the ALJ recommended affirming the denial of JH2K's application. The Director adopted the recommendation, with minor modifications, and affirmed the denial. JH2K then appealed the decision to the superior court, ...


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