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City of Surprise v. Arizona Corporation Commission

Supreme Court of Arizona

March 28, 2019

City of Surprise, an Arizona Municipal Corporation, Petitioner,
v.
Arizona Corporation Commission; Tom Forese, in His Official Capacity As a Member of the Arizona Corporation Commission; Bob Burns, in His Official Capacity As a Member of the Arizona Corporation Commission; Andy Tobin, in His Official Capacity As a Member of the Arizona Corporation Commission; Boyd W. Dunn, in His Official Capacity As a Member of the Arizona Corporation Commission; and Justin Olson, in His Official Capacity As a Member of the Arizona Corporation Commission, Respondents, and Lake Pleasant 5000, L.L.C., an Arizona Limited Liability Company; Harvard Investments, Inc., a Nevada Corporation; and Circle City Water Company, L.L.C., an Arizona Limited Liability Company, Real Parties in Interest.

          Special Action from the Arizona Corporation Commission No. W-03510A-18-0095.

         ORDER MODIFIED COUNSEL:

          Andrew M. Jacobs (argued), Timothy J. Sabo, Snell & Wilmer L.L.P., Phoenix; and Robert Wingo, Surprise City Attorney, Surprise, Attorneys for City of Surprise.

          Andy M. Kvesic (argued), Robin R. Mitchell, P. Robyn Poole, Arizona Corporation Commission Legal Division, Phoenix, Attorneys for Arizona Corporation Commission, Commissioner Tom Forese, Commissioner Bob Burns, Commissioner Andy Tobin, Commissioner Boyd W. Dunn, and Commissioner Justin Olson.

          Dale S. Zeitlin (argued), Zeitlin & Zeitlin, P.C., Phoenix; and Garry D. Hays, Law Offices of Garry Hays, Phoenix, Attorneys for Lake Pleasant 5000, L.L.C. and Harvard Investments, Inc.

          Meghan H. Grabel (argued), Osborn Maledon, P.A., Phoenix, Attorney for Circle City Water Company, L.L.C.

          Christina Estes-Werther, General Counsel, League of Arizona Cities and Towns, Phoenix, Attorney for Amicus Curiae League of Arizona Cities and Towns.

          VICE CHIEF JUSTICE BRUTINEL authored the opinion of the Court, in which CHIEF JUSTICE BALES and JUSTICES TIMMER, GOULD, LOPEZ and PELANDER (Retired) joined. JUSTICE BOLICK filed an opinion concurring in part and dissenting in part.

          BRUTINEL VICE, CHIEF JUSTICE

         ¶1 The Arizona Corporation Commission ("Commission") has broad authority under A.R.S. § 40-285(A) to approve the sale or disposition of a public service corporation's assets. In this special action, we hold that § 40-285(A) does not give the Commission power over a city's exercise of eminent domain. Accordingly, we vacate the portion of the Commission's March 30, 2018 order requiring the public utility to apply for Commission approval of the proposed condemnation.

         I. BACKGROUND

         ¶2 In October 2017, the City of Surprise ("City") entered into a letter of intent with Circle City Water Company, L.L.C. ("Circle City"), documenting the City's intent to condemn substantially all the assets of Circle City, including the right to almost four thousand acre-feet of water per year from the Central Arizona Project ("CAP"). Pursuant to statute, Surprise voters authorized the condemnation and the Surprise City Council approved the filing of a condemnation action. A residential developer contends that Circle City is obliged under an existing contract to allocate its CAP water for a planned development. Upon inquiry by the developer, the City advised that it has no obligation to provide water under the existing contract. The developer then asked the Commission to enter an order preventing the sale of Circle City's CAP allocation to the City.

         ¶3 The Commission opened an investigation. On March 30, 2018, the Commission ordered Circle City to file an application under § 40-285 and Arizona Administrative Code ("A.A.C.") R14-2-402(D), seeking Commission authorization "to abandon, sell, lease, transfer, or otherwise dispose of its utility." At the time of the order, the Commission was aware that the negotiations between the City and Circle City were intended to result in condemnation, not a sale. Circle City filed the application under protest. Commission staff determined that Circle City did not fully comply with the March 30 order by failing to include a copy of the draft condemnation agreement between Circle City and the City. At the Commission's direction, Circle City provided a copy of the draft agreement under seal. The Commission then required Circle City to confirm in writing whether the City would assume Circle City's water contract with the developer.

         ¶4 Shortly thereafter, the City filed this special action, alleging the Commission acted without jurisdiction in entering the March 30 order. This Court stayed further administrative proceedings pending resolution of this case.

         ¶5 We accepted jurisdiction over this special action to clarify the scope of the Commission's authority over eminent domain proceedings pursuant to A.R.S. § 40-285(A). We have jurisdiction pursuant to article 6, section 5(1) of the Arizona Constitution and A.R.S. §§ 12-2001 and 12-2021.

         II. DISCUSSION

         A. Jurisdiction

         ¶6 This Court has original jurisdiction to issue "mandamus, injunction and other extraordinary writs to state officers." Ariz. Const. art. 6, § 5(1); see also A.R.S. §§ 12-2001, -2021. Such jurisdiction is discretionary and is requested through a special action petition. Dobson v. State ex rel. Comm'n on Appellate Court Appointments, 233 Ariz. 119, 121 ¶ 6 (2013). Special action jurisdiction is appropriate in cases that involve "purely legal questions of statewide importance" or that require an "immediate and final resolution," id. at 121 ¶¶ 7-8, and particularly appropriate when a defendant "has proceeded or is threatening to proceed without or in excess of jurisdiction or legal authority," Ariz. R.P. Spec. Act. 3(b). But special action jurisdiction is not appropriate when parties have an "equally plain, speedy, and adequate remedy by appeal." Id. 1(a).

         ¶7 Here, the scope of Commission authority involves a purely legal question of statutory interpretation: whether the Commission has exceeded its statutory authority. The City cannot presently appeal the Commission's order because it is not a party to the administrative proceedings, and the City has no other means to challenge the Commission's actions. For those reasons, special action review is appropriate. See Ariz. Corp. Comm'n v. State ex rel. Woods,171 Ariz. 286, 288 (1992) (granting special action review because "this court can best serve the public ...


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