Falcone Brothers & Associates, Inc. v. City of Tucson

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO

FALCONE BROTHERS & ASSOCIATES, INC.,
AN ARIZONA CORPORATION,
Plaintiff/Appellant,

v.

CITY OF TUCSON,
AN ARIZONA MUNICIPAL CORPORATION,
Defendant/Appellee.

No. 2 CA-CV 2015-0212
Filed August 25, 2016

Appeal from the Superior Court in Pima County
No. C20152217
The Honorable Richard S. Fields, Judge
The Honorable Richard E. Gordon, Judge

REVERSED AND REMANDED

COUNSEL

Carmichael & Powell, P.C., Phoenix
By David J. Sandoval
Counsel for Plaintiff/Appellant

Michael G. Rankin, Tucson City Attorney
By Stacy Stauffer, Principal Assistant City Attorney, Tucson
Counsel for Defendant/Appellee
 FALCONE BROS. v. CITY OF TUCSON
Opinion of the Court

OPINION

Chief Judge Eckerstrom authored the opinion of the Court, in which
Presiding Judge Vásquez and Judge Miller concurred.

E C K E R S T R O M, Chief Judge:

¶1 Following a contractual dispute regarding a road-
improvement project, appellant Falcone Brothers and Associates,
Inc. (Falcone) filed a civil complaint against appellee City of Tucson
(City). The City maintained that the action was barred because the
issues already had been decided by the City’s director of
procurement and that Falcone had refused to challenge the
director’s “administrative decision” by special action as required by
the parties’ contract and the City’s code. We conclude that neither
the contract nor the City code can direct judicial review of a
breach-of-contract claim by special action; therefore, we reverse the
trial court’s order granting the City’s motion to dismiss and remand
the case for further proceedings.

I. Factual and Procedural Background

¶2 In 2012, Falcone and the City executed a contract that
incorporated chapter 28 of the Tucson Code, a chapter also known
as the Procurement Code. Under the applicable version of that code,
a dispute regarding a contract would be decided first by a contract
officer from the City’s Procurement Department. Tucson, Ariz.,
Code (“TC”) §§ 28-76, 28-91 to 28-93 (1987 & Supp. 2007). 1 An

1 The contract here incorporated and modified the City’s
“Standard Specifications” to create what was nominally a three-step
process of dispute resolution. The first step required submission of
a claim to the Tucson Department of Transportation (TDOT) for a
“‘field’ level” review. The second and third steps involved “review”
by the Procurement Department and City Attorney’s Office,
respectively. In light of the contract’s amendment to § 105-18(C) of
the Standard Specifications, however, no process was provided for a
decision by TDOT. The only decision described in the contract was

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Opinion of the Court

aggrieved party then could file an appeal with the City’s director of
procurement. TC § 28-94. If the director assigned the claim to a
hearing, the director would appoint a hearing officer to conduct the
proceeding and make a recommendation, which included proposed
findings and conclusions. See TC §§ 28-94(3), 28-96, 28-113,
28-114(1). The Procurement Code broadly authorized the director to
“affirm, modify, or reject the hearing officer’s recommendation in
whole or in part, . . . remand the matter to the hearing officer with
instructions, or make any other appropriate disposition.” TC
§ 28-114(2). The Procurement Code specified that “[a] decision by
the director shall be final.” TC § 28-115. Under TC §§ 28-117 and
28-118, the director’s final decision could only be challenged by
“special action review” in the superior court filed within thirty days.
The Procurement Code stated that “[e]xhaustion of the procedures
set forth in this Code shall be a condition precedent to seeking
judicial review,” TC § 28-117, and that the code “provide[d] the
exclusive procedure for asserting a claim or cause of action against
this city” that arose from a procurement contract. TC § 28-118.

¶3 According to Falcone, the company suffered
approximately $2.5 million in damages from the construction
project. Those damages included the additional costs that Falcone
incurred from errors in the plans it had relied on to formulate its bid,
as well as unforeseeable utility conflicts and subterranean structures
for which the City bore responsibility.

¶4 In 2014, Falcone submitted a notice of claim pursuant to
A.R.S. § 12-821.01, expressly reserving its right to file a civil suit. In
the notice, the company maintained “the claim procedure set forth
in the Contract [w]as illegal and unenforceable,” but Falcone
nonetheless agreed to participate in the City’s administrative

one “made by the Procurement Department’s Contract Officer in
accordance with” the Procurement Code. We further note that the
City’s brief does not refer to any independent decision by TDOT.
Instead, the City states that Falcone brought “its original contract
claim [in] the Procurement Department.” We therefore understand
the City’s contract officer as either issuing or participating in the
initial decision.

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Opinion of the Court

proceedings. In the first stage of that process, a City contract officer
rejected Falcone’s claim in its entirety. After Falcone appealed, a
hearing officer conducted an evidentiary hearing and recommended
to the director that the claim be denied. The director then issued a
decision on April 20, 2015, denying Falcone any additional
compensation.2

¶5 Despite the limitation in TC § 28-117, Falcone did not
seek special action relief from this decision. Instead, the company
filed a complaint in the superior court asserting claims of breach of
contract and unjust enrichment. The City filed a motion under
Rule 12(b)(1), Ariz. R. Civ. P., to dismiss the complaint on three
grounds: failure to exhaust administrative remedies, res judicata,
and collateral estoppel. The trial court granted the motion after oral
argument, stating that the grounds for its decision were “stated on
the record.” Neither party provided a transcript of the hearing.
This appeal by Falcone followed.

II. Appellate Jurisdiction

¶6 With respect to the procedures applicable to a case such
as this, both parties have cited this court’s opinion in Richard E.
Lambert, Ltd. v. City of Tucson Department of Procurement, 223 Ariz.
184, 221 P.3d 375 (App. 2009). There, the aggrieved contractor
pursued an appeal in the superior court that was characterized as a
“special action” under the City’s Procurement Code. Lambert, 223
Ariz. 184, ¶¶ 4-5, 221 P.3d at 377-78. We expressly declined to
address whether this procedure was proper. Id. n.1. We also
implied that we had appellate jurisdiction over the resulting
judgment from the superior court under the former A.R.S.

2The parties have failed to provide accurate record citations
showing whether this item is included in the record on appeal. See
Ariz. R. Civ. App. P. 13(a)(5), (7)(A), (b)(1). Yet no dispute exists
regarding the date or nature of the director’s decision.

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Opinion of the Court

§ 12-2101(B), which was later renumbered § 12-2101(A)(1). 3 See
Lambert, 223 Ariz. 184, ¶ 5, 221 P.3d at 378.

¶7 That provision allows an appeal to this court when an
action is “commenced in a superior court.” § 12-2101(A)(1).
However, neither an appeal nor a special action in the superior court
is “commenced” there within the meaning of this statute. Stant v.
City of Maricopa Emp. Merit Bd., 234 Ariz. 196, ¶¶ 7-8, 319 P.3d 1002,
1004-05 (App. 2014). Accordingly, because Lambert did not identify
a proper ground for appellate jurisdiction, we do not rely on that
case as precedent.

¶8 The present case differs from Lambert because Falcone
filed a civil complaint in the superior court. The case therefore
“commenced” in that court pursuant to § 12-2101(A)(1), and the trial
court’s dismissal order is a “final judgment” subject to appeal. Id.
Although the court’s order initially lacked certification pursuant to
Rule 54(c), Ariz. R. Civ. P., we have stayed the appeal and revested
jurisdiction in the superior court to obtain such certification.
See Ariz. R. Civ. App. P. 3; Madrid v. Avalon Care Ctr.-Chandler,
L.L.C., 236 Ariz. 221, ¶ 5, 338 P.3d 328, 330-31 (App. 2014). With a
formal judgment now included in the record on appeal, we have
appellate jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-
2101(A)(1).

III. Discussion

¶9 As it did below, Falcone claims on appeal that the
“administrative process” prescribed by the City violates Falcone’s
constitutional rights to due process and a jury trial. Specifically,
Falcone maintains that the City’s director of procurement is not a
neutral arbiter of the City’s contract disputes and that the limited
process of review afforded by the City denies an aggrieved party the
opportunity for “a de novo review of the facts” by an impartial
decision-maker. In light of these alleged constitutional defects,
Falcone asserts that the trial court erred in granting the City’s

3Anderson v. Valley Union High Sch., Dist. No. 22, 229 Ariz. 52,
¶ 3 & n.1, 270 P.3d 879, 881 & n.1 (App. 2012).

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motion to dismiss and that the “civil complaint was appropriately
filed and should be tried on its merits.”

¶10 Rule 12(b)(1) allows a trial court to dismiss an action for
lack of subject matter jurisdiction. When, as here, a trial court’s
disposition of such a motion does not resolve any disputed
jurisdictional facts, we review the court’s ruling de novo. See Church
of Isaiah 58 Project of Ariz., Inc. v. LaPaz County, 233 Ariz. 460, ¶ 9 &
n.4, 314 P.3d 806, 808-09 & 809 n.4 (App. 2013).

¶11 As our supreme court established in R.L. Augustine
Construction Co. v. Peoria Unified School District No. 11, “[w]e will not
reach a constitutional question if a case can be fairly decided on
nonconstitutional grounds.” 188 Ariz. 368, 370, 936 P.2d 554, 556
(1997). Following that precedent, we avoid Falcone’s constitutional
arguments and decide the present case on a narrow basis. Our
analysis that follows will establish, first, that Falcone properly
asserted a contract claim in the superior court that is subject to trial
on a de novo basis; second, the City’s Procurement Code was invalid
insofar as it attempted to make the director’s decision binding and to
limit access to the superior court by restricting parties to special
action review; and third, none of the doctrines identified in the
City’s motion to dismiss would bar Falcone’s action.

A. Superior Court Jurisdiction

¶12 The superior court’s jurisdiction is provided by our
state constitution and statutes. Grosvenor Holdings, L.C. v. Figueroa,
222 Ariz. 588, ¶ 13, 218 P.3d 1045, 1052 (App. 2009); see Ariz. Const.
art. VI, §§ 14, 16, 18. The court is one of general jurisdiction, State
ex rel. Neely v. Brown, 177 Ariz. 6, 8, 864 P.2d 1038, 1040 (1993), with
original jurisdiction to resolve contract disputes in which the
amount in controversy is at least $1,000. See Ariz. Const. art. VI,
§ 14(3). Because the present contract claim exceeds this amount, the
superior court has jurisdiction over the case.

¶13 “[A] city has no authority to limit the jurisdiction of the
state’s courts.” Tempe Life Care Vill., Inc. v. City of Tempe, 148 Ariz.
264, 266, 714 P.2d 434, 436 (App. 1985). A superior court’s
jurisdiction can only be limited by law, not by a city’s charter or an

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agreement between two parties. See Grosvenor, 222 Ariz. 588, ¶ 21,
218 P.3d at 1053-54; Tempe Life Care Vill., 148 Ariz. at 266, 714 P.2d at
436. When an action presents a traditional contract claim and no
statute gives another entity exclusive jurisdiction over the matter,
the superior court retains jurisdiction to resolve the claim.
See Campbell v. Mountain States Tel. & Tel. Co., 120 Ariz. 426, 432, 586
P.2d 987, 993 (App. 1978). We therefore must examine whether the
City’s Procurement Code is supported by any enabling legislation
and, if not, whether it is nevertheless enforceable as a matter of
contract.

B. Procurement Code Validity

1. Legal Authorization

¶14 At oral argument, the City failed to identify any specific
law authorizing its Procurement Code. Instead, the City referred to
the general provisions from article XIII, § 2 of the Arizona
Constitution and A.R.S. §§ 9-137 and 9-499.01. The City also
observed in passing that its Procurement Code is modeled after the
state procurement code, A.R.S. §§ 41-2501 to 41-2673.

¶15 We recognize that § 41-2501(C) allows “political
subdivisions” such as cities to “adopt all or any part” of the state
procurement code. See City of Tucson v. Fleischman, 152 Ariz. 269,
272, 731 P.2d 634, 637 (App. 1986) (“The general rule is that cities are
political subdivisions of the state.”); cf. Model Procurement Code for
State & Local Governments § 1-104, Alternative B (Am. Bar Ass’n
2000) (“All political subdivisions and other local public agencies of
this State are authorized to adopt all or any part of this Code and its
accompanying regulations.”). Section 41-2614 of our state code
provides that a final administrative decision concerning
procurement is subject to judicial review under the Administrative
Review Act (ARA), A.R.S. §§ 12-901 to 12-914. And, consistent with
the City’s position, judicial review under the ARA is initiated by
filing a notice of appeal in the superior court. See §§ 12-904, 12-905.
Although the ARA generally is inapplicable to cities, see § 12-901(1);
Stant, 234 Ariz. 196, ¶ 10, 319 P.3d at 1005, a specific statute could
authorize cities to adopt it. See Augustine, 188 Ariz. at 371, 936 P.2d
at 557. It therefore could be argued that the City’s Procurement

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Code was an analogous local version of the state code, and
consequently authorized by § 41-2501(C). See Model Procurement
Code for State & Local Governments § 1-104 cmt. to Alternative B
(noting that application or adoption of model code requires “various
sections of this Code . . . to be adjusted” for local governments).
Because the City has developed no such contention on appeal,
however, we need not address the numerous legal issues that might
attend this line of argument.

¶16 Ultimately, we conclude the City’s Procurement Code
was neither an adoption of nor a permissible extension of the state
procurement code because the City’s Procurement Code shared the
same essential defect identified in Augustine. There, our supreme
court explained that the state procurement code normally provides a
“two-tiered administrative process” of review prior to possible court
action. Augustine, 188 Ariz. at 370, 936 P.2d at 556. Under that
system, a contract claim first is reviewed by the governmental unit
that purchased the goods or services. Id. A second level of review
then occurs with the director of the department of administration.
Id. In this way, the state procurement code creates a “dual entity
scheme” of review in which “the purchasing agency and the director
are separate entities.” Id. Augustine expressly noted that it did not
address the situation where the department of administration was
also the purchasing entity. Id. at 370 n.1, 936 P.2d at 556 n.1.

¶17 In Augustine, the state board of education had
attempted to create a review process consistent with the state
procurement code. See id. at 370, 936 P.2d at 556. But that process
deviated from the state code insofar as it allowed the governing
boards of school districts to resolve their own contract disputes.
“[W]hile structured as a two-tiered process in form, in substance [it]
provide[d] a one-tier process in which the purchasing body
constitute[d] both the first and second tier.” Id.

¶18 The City’s process here shared the same critical defect.
The director of procurement executed the contract with Falcone. A
City contract officer served as the first administrative adjudicator in
the procurement dispute. See TC §§ 28-91 to 28-93. The second level
of administrative review then took place before a hearing officer
selected by the City’s procurement director. See TC §§ 28-94, 28-96,

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28-113. But that hearing officer made only recommended findings
and conclusions; the City’s procurement director retained the
ultimate decision-making authority in the proceeding. See TC
§§ 28-114, 28-115.4

¶19 These are the same operative facts as in Augustine, 188
Ariz. at 370, 936 P.2d at 556. Despite its formalities, the City’s
process provided only one level of administrative review in which
the City, through its agents and employees, acted as “both the
first-tier reviewer and the second-tier final decision maker.” Id.; see
also State ex rel. Thomas v. Schneider, 212 Ariz. 292, ¶ 16, 130 P.3d 991,
995 (App. 2006) (“Like other legal entities, a city ‘can only act
through its agents.’”), quoting Samaritan Found. v. Goodfarb, 176 Ariz.
497, 502, 862 P.2d 870, 875 (1993). The City, through its director of
procurement, was a party to the contract under review.
See Augustine, 188 Ariz. at 370, 936 P.2d at 556. Thus, as Augustine
established, the City’s scheme was inconsistent with Arizona’s
procurement code. The City failed to “adopt” the state procurement
code within the meaning of § 41-2501(C).

¶20 The City alternatively asserts that the administrative
review process under its Procurement Code is authorized by a
portion of our notice-of-claim statute, § 12-821.01(C). Yet this statute
does not serve as enabling legislation. Section 12-821.01(C) merely
establishes the time for filing a notice of claim. The provision
specifies the “accru[al]” date for claims against public entities that
must first be submitted to a non-judicial review process “pursuant
to a statute, ordinance, resolution, administrative or governmental
rule or regulation, or contractual term.” Id. The statute does not
give cities authority to establish unlimited administrative-claims
processes; rather, the law presumes that authority for the particular
claims process exists in another source, such as a statute or contract.

4 We note that the process has changed materially due to
amendments to the Procurement Code in 2015. See Tucson, Ariz.,
Ordinance No. 11296, § 1 (Aug. 5, 2015). Our analysis does not
address the present code.

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2. Contractual Authorization

¶21 At oral argument, the City suggested its administrative
review process is enforceable as an arbitration agreement because
the parties mutually agreed to be bound by this alternative dispute
resolution process. Putting aside the fact that the Procurement Code
itself distinguished the process here from arbitration, see TC §§ 28-
94, 28-98, we are not persuaded by the City’s contractual argument.
The enforceability of an arbitration provision is determined by
considering the provision as an independent agreement, separate
from the underlying contract. Stevens/Leinweber/Sullens, Inc. v. Holm
Dev. & Mgmt., Inc., 165 Ariz. 25, 29-30, 795 P.2d 1308, 1312-13 (App.
1990). “An arbitration provision is not valid or enforceable where ‘a
ground exists . . . at law or in equity for the revocation of a
contract,’” Austin v. Austin, 237 Ariz. 201, ¶ 12, 348 P.3d 897, 902
(App. 2015), quoting A.R.S. § 12-3006(A), such as substantive
unconscionability. Clark v. Renaissance W., LLC, 232 Ariz. 510, ¶ 8,
307 P.3d 77, 79 (App. 2013). For example, arbitration agreements are
unconscionable and unenforceable when they give an employer
unrestricted control over the selection of arbitrators such that the
employer’s own managers can serve as the sole decision makers in
the dispute. Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938-40 (4th
Cir. 1999).

¶22 In this case, the City’s director of procurement not only
selected the hearing officer, without any apparent constraints on this
appointment power, TC § 28-113, but the director also retained the
authority to reject that hearing officer’s recommendation, modify it,
“or make any other appropriate disposition.” TC § 28-114(2). Such
a one-sided scheme is invalid because it denies the other party a
neutral, unbiased decision maker. See Hooters of Am., 173 F.3d at 940;
cf. Stevens/Leinweber/Sullens, Inc., 165 Ariz. at 30, 795 P.2d at 1313
(finding arbitration agreement unenforceable when one party’s
discretion over dispute-resolution process was “grossly
inequitable”). In short, the same self-dealing feature that made the
City’s process of administrative review deviate from the state
procurement code also rendered that process unenforceable as a
matter of contract law.

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¶23 In the absence of any statutory or contractual
authorization, the City therefore could not render binding decisions
in its contractual disputes or limit aggrieved parties to “special
action review” under TC § 28-117.5 When no statutory authority
exists for review before the superior court, an agreement purporting
to create such review is invalid and unenforceable. Grosvenor, 222
Ariz. 588, ¶¶ 14-16, 218 P.3d at 1052. Similarly, unless an ordinance
concerning judicial review “is supported by and implicates a statute
that expressly gives the superior court subject matter jurisdiction,”
such an ordinance is invalid. Id. ¶ 26.

¶24 Applying these principles in Grosvenor, we held void a
contractual provision that attempted to limit the superior court’s
role in a contract action. Id. ¶ 28. The provision there essentially
transformed “a de novo complaint” for breach of contract into
“nothing more than a request for review under the ARA.”
Grosvenor, 222 Ariz. 588, ¶ 21, 218 P.3d at 1054. In effect, the parties’
contract waived the right to a jury trial by making the county’s
administrative decision final and subjecting that decision only to a
limited form of judicial review in the superior court. See id. ¶¶ 3-7.
In Grosvenor, we held this provision void despite the fact that it had
been negotiated by sophisticated parties. Id. ¶ 28 & n.4.

¶25 Here, as in Grosvenor, the superior court’s jurisdiction
over the contract claim could not be limited by the City. Nor could
the City limit the trial court’s role in that action, effectively denying
Falcone a trial de novo on its breach-of-contract claim. Although the
City’s ordinance was patterned after the state procurement code, the
ARA’s provision limiting the scope of judicial review did not apply
because the ordinance failed to conform to the state code. Special
action review likewise did not apply, because the City’s
administrative review process made “the interested party . . . the

5Because Falcone otherwise participated in the review process
prescribed by the Procurement Code, we need not decide whether
the City could compel participation in that process as a mere
condition of bringing suit. We further note that the City has not
argued Falcone waived any challenge to the administrative review
process by entering into the underlying contract with the City.

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adjudicator of contract obligations,” Augustine, 188 Ariz. at 370, 936
P.2d at 556, without any legal authority. Only statutes and court
rules govern special actions in the superior court. See Schoenberger v.
Bd. of Adjustment of City of Phx., 124 Ariz. 528, 530, 606 P.2d 18, 20
(1980); see also Seisinger v. Siebel, 220 Ariz. 85, ¶¶ 7-8, 203 P.3d 483,
486-87 (2009). Without a lawful administrative review process in
place, the City could neither effectuate a waiver of trial rights nor
shield itself from de novo review of contract claims. Cf. Tempe Life
Care Vill., 148 Ariz. at 266, 714 P.2d at 436 (distinguishing a “charter
city’s enforcement of its ordinances” from “a ruling made by a state
administrative agency”). Just as the contractual provisions in
Grosvenor were invalid and unenforceable, TC §§ 28-117 and 28-118
were similarly invalid insofar as they designated special action
review in the superior court the exclusive avenue for judicial relief.

¶26 Moreover, to the extent the City believed a special
action was available under our general certiorari statute, A.R.S.
§ 12-2001, see Ariz. R. P. Spec. Act. 1(b), we note that certiorari does
not exist as a matter of right; it is discretionary with the superior
court. See Bilagody v. Thorneycroft, 125 Ariz. 88, 92, 607 P.2d 965, 969
(App. 1979); see also Book Cellar, Inc. v. City of Phoenix, 139 Ariz. 332,
336, 678 P.2d 517, 521 (App. 1983); Estrin v. Superior Court, 96 P.2d
340, 342 (Cal. 1939).6 In addition, no time limit exists for a certiorari
action; the doctrine of laches serves as the only limitation.
Schoenberger, 124 Ariz. at 530, 606 P.2d at 20. An ordinance
purporting to place a time limit on a certiorari action is invalid. Id.
Accordingly, TC § 28-117 neither created a right of review in the
superior court nor limited the time for judicial review to occur, and
Falcone was not required to seek relief through a void ordinance.
See Manning v. Reilly, 2 Ariz. App. 310, 312, 408 P.2d 414, 416 (1965).

6 “Our constitutional and statutory provisions relative to
certiorari are comparable to those of California and other
neighboring states.” Hunt v. Norton, 68 Ariz. 1, 5, 198 P.2d 124, 126
(1948).

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C. The City’s Arguments

1. Exhaustion of Administrative Remedies

¶27 Contrary to the City’s assertion, the exhaustion doctrine
does not support the dismissal of the present case. This doctrine
generally provides that a party must exhaust all available
administrative remedies before seeking relief in the courts. See Sw.
Soil Remediation, Inc. v. City of Tucson, 201 Ariz. 438, ¶ 12, 36 P.3d
1208, 1212 (App. 2001). But the doctrine “must be applied in each
case with an ‘understanding of its purposes and of the particular
administrative scheme involved.’” Farmers Inv. Co. v. Ariz. State
Land Dep’t, 136 Ariz. 369, 373, 666 P.2d 469, 473 (App. 1982), quoting
McKart v. United States, 395 U.S. 185, 193 (1969). “The basic purpose
of the doctrine is to allow an administrative agency to perform
functions within its special competence—to make a factual record, to
apply its expertise, and to correct its own errors so as to moot
judicial controversies.” Id., quoting Parisi v. Davidson, 405 U.S. 34, 37
(1972).

¶28 Assuming for the purpose of argument that the City’s
Procurement Code is valid, the fact remains that Falcone exhausted
all administrative remedies in this case. When the procurement
director issued his or her decision, the matter became complete for
administrative purposes. “The administrative remedy that must be
exhausted is the main event.” Sw. Paint & Varnish Co. v. Ariz. Dep’t
of Envtl. Quality, 194 Ariz. 22, ¶ 15, 976 P.2d 872, 875 (1999). No
request for rehearing was required in order for the matter to be
exhausted. Id.

¶29 Although the City maintains Falcone failed to exhaust
administrative remedies because it did not file a special action in the
superior court, as prescribed by TC § 28-117, the City overlooks the
fact that certiorari is not an “administrative” remedy that must be
exhausted before a party may seek relief in court. “According to the
doctrine of exhaustion of remedies, ‘litigants may not seek judicial
relief for a supposed or threatened injury until the prescribed
administrative remedy has been exhausted.’” Moulton v. Napolitano, 205
Ariz. 506, ¶ 9, 73 P.3d 637, 642 (App. 2003), quoting Medina v. Ariz.
Dep’t of Transp., 185 Ariz. 414, 417, 916 P.2d 1130, 1133 (App. 1995)

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(emphasis added). All administrative remedies were exhausted in
this case upon the director’s decision, even assuming arguendo that
the exhaustion doctrine applied.

2. Res Judicata, Collateral Estoppel

¶30 Relying on Guertin v. Pinal County, 178 Ariz. 610, 875
P.2d 843 (App. 1994), and Hurst v. Bisbee Unified School District No.
Two, 125 Ariz. 72, 607 P.2d 391 (App. 1979), the City maintains that
the procurement director’s decision should be given finality and that
Falcone’s contract claim should be dismissed as an impermissible
collateral attack on that decision. Citing Hurst, 125 Ariz. at 75, 607
P.2d at 394, the City specifically asserts that Falcone’s due process
argument is precluded because the administrative decision “is
conclusively presumed to be just, reasonable and lawful” in the
absence of a special action taken under TC § 28-117. The cases cited
are inapt for several reasons.

¶31 First, the cases are distinguishable because they
involved entities that were authorized by statute to conduct a
non-judicial review in the first instance. See Guertin, 178 Ariz. at 611
n.1, 875 P.2d at 844 n.1; Hurst, 125 Ariz. at 76, 607 P.2d at 395. The
City is a municipal corporation, City of Tucson v. Rineer, 193 Ariz.
160, ¶ 2, 971 P.2d 207, 208-09 (App. 1998), and lacks legal authority
for its administrative scheme here.

¶32 A second, yet related, distinguishing factor concerns
finality. Collateral estoppel requires, among other things, “a valid
and final decision on the merits.” Aldabbagh v. Ariz. Dep’t of Liquor
Licenses & Control, 162 Ariz. 415, 418, 783 P.2d 1207, 1210 (App.
1989), quoting Gilbert v. Bd. of Med. Exam’rs, 155 Ariz. 169, 174, 745
P.2d 617, 622 (App. 1987). Both Guertin and Hurst involved statutes
that granted a right of judicial review to parties but otherwise gave
finality to the non-judicial decisions that had been issued. See
Guertin, 178 Ariz. at 611-12, 875 P.2d at 844-45; Hurst, 125 Ariz. at 73-
75, 607 P.2d at 392-94.

¶33 The City’s Procurement Code, by contrast, lacks a
statutory right of judicial review. Section 28-117 of the Procurement
Code is a nullity, as we explained above, because a city can neither

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Opinion of the Court

authorize a special action in the superior court nor limit the time for
filing one. Furthermore, no statute here prescribed judicial review
as a party’s “exclusive remedy.” Guertin, 178 Ariz. at 612, 875 P.2d
at 845. Thus, even assuming the City’s procurement director was
empowered to make findings in this matter, no law makes those
findings binding or gives them preclusive effect in a contract action
filed in the superior court. In short, the director’s decision lacks
statutory finality. See Campbell v. Superior Court, 18 Ariz. App. 287,
288, 289, 501 P.2d 463, 464, 465 (1972).

¶34 The City’s argument suffers a third flaw insofar as the
authorities it relies on upheld decisions that were made after “a full
and fair opportunity to litigate the issue.” Guertin, 178 Ariz. at 612,
875 P.2d at 845. Collateral estoppel only applies when a prior
proceeding affords a “full and fair opportunity” for litigation.
Aldabbagh, 162 Ariz. at 418, 783 P.2d at 1210, quoting Gilbert, 155 Ariz.
at 174, 745 P.2d at 622. Here, as we previously explained, the City’s
administrative proceeding allowed the City to adjudicate its own
contract dispute. Preclusion of claims “naturally presupposes the
opportunity to raise [them] and have [them] timely decided by a
competent . . . tribunal.” Gibson, 411 U.S. at 577. Thus, neither res
judicata nor collateral estoppel forecloses an argument “that the
administrative body itself was unconstitutionally constituted” and
“incompetent by reason of bias to adjudicate the issues . . . before it,”
id., as Falcone contends here.

¶35 We interpret Hurst as being consistent with this
authority. Implicit in that opinion are the dual premises that an
aggrieved teacher could challenge, by way of her statutory right of
appeal, a governing board’s decision on the grounds that it was
unconstitutional or procedurally unlawful and that this process
provided the teacher a full and fair opportunity to litigate any claims
concerning due process or bias. See Hurst, 125 Ariz. at 73-75, 607
P.2d at 392-94. In essence, Hurst was a case in which statutes made
the governing board’s decision final and conclusive in the absence of
an appeal. See Campbell, 18 Ariz. App. at 289, 501 P.2d at 465.
Unlike Hurst, however, there is no basis to presume the City’s
process is lawful or regular, because that process is neither

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Opinion of the Court

statutorily created nor subject to an appeal in which aggrieved
parties may challenge the fairness of that system.

IV. Disposition

¶36 For the foregoing reasons, the trial court’s order
dismissing the complaint is reversed and the case remanded for
further proceedings consistent with this opinion. We deny Falcone’s
request for attorney fees, which is made without reference to any
statute or contractual provision that would authorize such an award.
See Ariz. R. Civ. App. P. 21(a)(2); Ezell v. Quon, 224 Ariz. 532, ¶ 31,
233 P.3d 645, 652 (App. 2010). We grant Falcone’s request for costs,
subject to its compliance with Rule 21(b).

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