Saguaro Healing LLC v. State of Arizona

IN THE
SUPREME COURT OF THE STATE OF ARIZONA

SAGUARO H EALING LLC,
Plaintiff/Appellant,

v.

STATE OF ARIZONA, ET AL.
Defendants/Appellees.

No. CV-19-0129-PR
Filed August 20, 2020

Appeal from the Superior Court in Maricopa County
The Honorable John R. Hannah, Jr., Judge
No. CV2017-054686
REVERSED AND REMANDED

Memorandum Decision of the Court of Appeals,
Division One
No. 1 CA-CV 18-0242
Filed March 28, 2019
VACATED

COUNSEL:

Mark Brnovich, Arizona Attorney General, O.H. Skinner, Solicitor General,
Louis Caputo (argued), Aubrey Joy Corcoran, Assistant Attorneys General,
Phoenix, Attorneys for the State of Arizona, et al.

Ryan J. Lorenz (argued), Sean M. Carroll, Andrew B. Turk, Christopher T.
Curran, Clark Hill PLC, Scottsdale, Attorneys for Saguaro Healing, LLC
 SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.
Opinion of the Court

JUSTICE BEENE authored the Opinion of the Court, in which VICE CHIEF
JUSTICE TIMMER and JUSTICES BOLICK, GOULD, LOPEZ, and
PELANDER (RETIRED) joined. ∗ JUSTICE MONTGOMERY concurred in
part and dissented in part.

JUSTICE BEENE, Opinion of the Court:

¶1 We address whether the Arizona Department of Health
Services’ (“ADHS”) interpretation of Arizona Administrative Code R9-17-
303, which governs ADHS’s allocation of marijuana dispensary registration
certificates, violates A.R.S. § 36-2804(C). We conclude § 36-2804(C) requires
ADHS to issue at least one dispensary registration certificate in each county
with a qualified applicant. Accordingly, we hold that ADHS’s
interpretation of R9-17-303, which led it to deny a certificate to a qualified
applicant from a county without a dispensary, violated the statute.

BACKGROUND

¶2 Pursuant to its rulemaking authority, ADHS must enact rules
to implement and administer the Arizona Medical Marijuana Act
(“AMMA”). See A.R.S. §§ 36-136(G), -2803; Ariz. Admin. Code R9-17-301
to -323. Under the AMMA, an individual or entity must apply to ADHS for
a dispensary registration certificate before ADHS may approve the
individual or entity to operate a dispensary. Ariz. Admin. Code R9-17-
304(C)–(D), -305(A). ADHS may only issue a limited number of certificates.
§ 36-2804(C).

¶3 Each year, ADHS must review existing dispensary certificates
to determine if it may issue additional certificates under § 36-2804. See Ariz.
Admin. Code R9-17-303. Once ADHS determines it can do so, individuals
or entities interested in operating a medical marijuana dispensary may
apply to ADHS for a dispensary registration certificate. Id. at -303, -304.
ADHS must initially prioritize the allocation of certificates to counties
without a dispensary and then to geographic regions called Community

∗ Chief Justice Robert Brutinel has recused himself from this case.
Pursuant to article 6, section 3 of the Arizona Constitution, the Honorable
John Pelander, Justice of the Arizona Supreme Court (Retired), was
designated to sit in this matter.
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Opinion of the Court

Health Analysis Areas (“CHAAs”) with the most registry identification
cards issued to qualifying patients. Id. at -303.

¶4 Here, based on the annual review data collected before May
31, 2016, ADHS performed its priority analysis and determined on June 16,
2016, it could issue new registration certificates. See id. at (A). ADHS
announced it would accept applications for new certificates between July
18 and July 29, 2016. Because every county had at least one dispensary
during the annual review period, ADHS announced it would allocate the
registration certificates based on other factors set forth in R9-17-303. See id.
at (B)(1), (2). Saguaro Healing LLC (“Saguaro”) timely applied for a
certificate, indicating that its dispensary would be in CHAA 36, located in
La Paz County.

¶5 During the application period, the only dispensary in La Paz
County relocated out of the county. However, because the annual review
data still reflected a dispensary in La Paz County, ADHS did not consider
the vacancy when prioritizing registration certificates. 1 As a result,
although Saguaro was the only applicant for La Paz County, and ADHS
notified Saguaro that its application was complete and complied with the
applicable laws and rules, ADHS did not issue a certificate to Saguaro, and
La Paz County was left without a dispensary.

¶6 Saguaro filed a complaint for special action alleging that
ADHS should have prioritized its issuance of registration certificates based
on the dispensaries’ status sixty days after the application period opened
pursuant to R9-17-303. The trial court dismissed the complaint because R9-
17-303(B) “does not say when, during the process of issuing new
certificates, [ADHS] must determine how certificates will be allocated.” It
noted that for practicality and fairness, ADHS “decided to determine
[prioritization] before the beginning of the application period instead of
waiting until the deadline for actually making the allocation.”

¶7 The court of appeals affirmed. Saguaro Healing LLC v. State,
No. 1 CA-CV 18-0242, 2019 WL 1410627, at *1 ¶ 1 (Ariz. App. Mar. 28, 2019)
(mem. decision). We granted review to determine whether ADHS’s
application of R9-17-303 as interpreted violated § 36-2804(C), an issue of

1 For ADHS to determine the number of dispensaries in a given
county, it need only review the interactive CHAA map on ADHS’s website.
See Medical Marijuana - Dispenaries - Map Your CHAA, Arizona Department
of Health Services, https://www.azdhs.gov/licensing/medical-
marijuana/index.php#dispensary-map-chaa (last visited Aug. 17, 2020).
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Opinion of the Court

statewide importance. We have jurisdiction pursuant to article 6, section
5(3) of the Arizona Constitution.

DISCUSSION

¶8 Pursuant to § 36-2804(C):

[ADHS] may not issue more than one nonprofit medical
marijuana dispensary registration certificate for every ten
[registered] pharmacies . . . within the state except that the
department may issue nonprofit medical marijuana
dispensary registration certificates in excess of this limit if
necessary to ensure that the department issues at least one
nonprofit medical marijuana dispensary registration
certificate in each county in which an application has been
approved.

¶9 We are asked to decide whether § 36-2804(C) grants ADHS
discretion to deny a registration certificate to a county without a dispensary
if issuing it would exceed the one-in-ten ratio. 2

¶10 We interpret statutes and administrative rules de novo,
“apply[ing] the same rules in construing both statutes and rules.” Gutierrez
v. Indus. Comm’n of Ariz., 226 Ariz. 395, 396 ¶ 5 (2011) (citation omitted). We
do not defer to the agency’s interpretation of a rule or statute. A.R.S. § 12-
910(E); see also Stambaugh v. Killian, 242 Ariz. 508, 512 ¶ 21 (2017).

A.

¶11 The State argues § 36-2804(C) “imposes only a maximum—
not a minimum—number of dispensaries.” It asserts that ADHS has
discretion to exceed that maximum for a county without a dispensary but
that § 36-2804(C) does not require it. The State rests its conclusion on the
second use of the word “may” in the statute. We disagree with its
interpretation.

¶12 Although “[t]he word ‘may,’ when used in a statute, usually
implies some degree of discretion,” this principle “can be defeated by
indications of legislative intent to the contrary or by obvious inferences
from the structure and purpose of the statute.” United States v. Rodgers, 461

2 The one-in-ten ratio provides that ADHS “may not issue more than
one nonprofit medical marijuana dispensary registration certificate for
every ten [registered] pharmacies” operating in Arizona. § 36-2804(C).
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Opinion of the Court

U.S. 677, 706 (1983). “Words in statutes should be read in context in
determining their meaning.” Stambaugh, 242 Ariz. at 509 ¶ 7.

¶13 Here, the words “if necessary to ensure” indicate that “may”
is not permissive in this context. The dictionary definitions of “necessary”
and “ensure” support this conclusion. See Necessary, Merriam-Webster’s
Collegiate Dictionary (11th ed. 2003) (“[A]bsolutely needed : required.”);
Ensure, Merriam-Webster’s Collegiate Dictionary (11th ed. 2003) (“[T]o
make sure, certain, or safe : guarantee.”); see also DBT Yuma, L.L.C. v. Yuma
Cty. Airport Auth., 238 Ariz. 394, 396 ¶ 9 (2015) (“Absent statutory
definitions, courts generally give words their ordinary meaning and may
look to dictionary definitions.” (internal citation omitted)). Accordingly,
although “may” often indicates discretion, here the words “if necessary to
ensure” indicate that ADHS is required to issue “at least one . . . certificate
in each county in which an application has been approved.” § 36-2804(C).
In this context, “may” requires ADHS to issue a registration certificate it
ordinarily would not be able to issue to “ensure” that there is a medical
marijuana dispensary in each county.

¶14 Further, the interplay between subsections (B) and (C)
supports the construction that “may” is mandatory. Subsection (B) requires
ADHS to issue a registration certificate if the applicant satisfies the
statutory requirements. Subsection (C) sets the maximum number of
permissible dispensaries that ADHS “may not” exceed. However,
subsection (C) provides one exception, that ADHS “may” exceed the
maximum to ensure a county has at least one dispensary. “May” in § 36-
2804(C) is a counterpoint to “may not” in the subsection and serves to
remove the cap on dispensaries when keeping it would deprive a county of
a dispensary. Accordingly, when subsections (B) and (C) are read together,
ADHS must certify all qualified applicants until it reaches the limit of one
dispensary for every ten pharmacies.

¶15 Finally, interpreting “may” as mandatory in this context
furthers the AMMA’s purpose to aid individuals with “debilitating medical
conditions” by ensuring access to a dispensary in each county. See A.R.S.
§ 36-2801(15) (“‘Qualifying patient’ means a person who has been
diagnosed by a physician as having a debilitating medical condition.”); see
also Ariz. Sec’y of State, 2010 Publicity Pamphlet 73 § 2(G) (2010),
https://apps.azsos.gov/election/2010/info/PubPamphlet/english/e-
book.pdf; A.R.S. § 36-2804.02(A)(3)(e), (f) (indicating legislative intent to
ensure access to medical marijuana by allowing caregivers and patients the
ability to grow their own medical marijuana when a dispensary is not
operating within twenty-five miles of the patient’s home).

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Opinion of the Court

¶16 The State alternatively argues that A.R.S. § 36-2803.01,
enacted in 2019 and effective April 2020, supports its construction that the
use of “may” in § 36-2804(C) is permissive. However, § 36-2803.01 does not
apply to this case. To begin, § 36-2803.01 was not in effect when Saguaro
applied for a registration certificate. Further, § 36-2803.01 deals with
prioritization, while § 36-2804(C) concerns the number of certificates ADHS
may issue. When §§ 36-2803.01 and -2804 are read together, the legislature
is permitting more dispensaries in high density areas, while also
prioritizing counties without dispensaries. Finally, § 36-2803.01 does not
address § 36-2804(C)’s mandate that ADHS exceed the typical one-in-ten
ratio for a county without a dispensary or whether ADHS can use its annual
review data to deny a registration certificate to a qualified applicant for a
county without a dispensary.

¶17 At bottom, § 36-2804(C) requires ADHS to deny a registration
certificate if the maximum number of dispensaries exists and all counties
have a dispensary. But if the maximum number of dispensaries exists and
one or more counties do not have a dispensary, ADHS must grant a
certificate to a qualified applicant, thus allowing a dispensary in a county
without one.

B.

¶18 Because “may” is not discretionary in this context, ADHS’s
application of R9-17-303 as interpreted conflicts with § 36-2804(C) and
cannot stand. See Ariz. Bd. of Regents ex rel. Ariz. State Univ. v. Ariz. State
Pers. Bd., 195 Ariz. 173, 175 ¶ 9 (1999) (“[I]f an agency rule conflicts with a
statute, the rule must yield.”).

¶19 Although the AMMA allows ADHS to adopt rules governing
dispensaries, see § 36-2803(A)(4)(a), “[t]he scope of an agency’s power is
measured by statute and may not be expanded by agency fiat,” Cochise
County v. Ariz. Health Care Cost Containment Sys., 170 Ariz. 443, 445 (App.
1991). Here, ADHS’s power to adopt and interpret its rules is confined by
§ 36-2804(C), which commands ADHS to “ensure” that every county with
a qualified applicant has at least one dispensary.

¶20 In its current form, ADHS’s rule does not conflict with § 36-
2804(C), but in this case, ADHS’s interpretation and application of its rule
contravenes the statute’s requirement that ADHS issue a medical marijuana
dispensary registration certificate to a qualified applicant from a county
without a dispensary. ADHS’s rule provides that each year it will review
current valid dispensary registration certificates to decide if it will issue
additional certificates in accordance with § 36-2804(C). Ariz. Admin. Code
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Opinion of the Court

R9-17-303(A). If, based on the annual review, ADHS determines it may
issue more certificates, it will open the application process. Id. at (A)(1). 3

¶21 The rule provides that sixty working days after ADHS begins
accepting applications, ADHS shall determine how it will prioritize the
applications. Id. at (c). However, in this case, ADHS interpreted R9-17-303
as allowing it to prioritize the allocation of new registration certificates
based on the annual review data gathered before the opening of the
application period—thereby creating a conflict with the statute. Our
dissenting colleague would defer to ADHS to determine when it may
prioritize applications. We do not defer to ADHS in this case because
although R9-17-303 requires that ADHS conduct an annual review, the
application prioritization must comply with the statute’s goal of ensuring
one dispensary in each county with a qualified applicant. Deferring to
ADHS here would clearly be contrary to law. See § 12-910(E) (“The court
shall affirm the agency action unless the court concludes that the agency’s
action is contrary to law, is not supported by substantial evidence, is
arbitrary and capricious or is an abuse of discretion.” (emphasis added)).

¶22 We agree with our dissenting colleague that “a dispensary
can still leave a county regardless of when the prioritization or allocation
process occurs.” Infra ¶ 32. But the statute requires that ADHS issue
registration certificates, and necessarily open the application process, under
two distinct circumstances: (1) if the allocation of dispensary certificates is
below the one-in-ten ratio or (2) a county does not have a dispensary. § 36-
2804(C). Accordingly, ADHS cannot use data obtained from the annual
review for prioritization if it would result in denying a dispensary to a
county without one during the application process. At minimum, if there
is a qualified applicant for a county without a dispensary during the
application process, as occurred here, the statute requires ADHS to issue a
registration certificate to that applicant. Therefore, ADHS’s application of
R9-17-303 as interpreted, which caused it to deny a certificate to a qualified
applicant from a county without a dispensary, violated § 36-2804(C). It is
axiomatic that an agency’s application of its rule must be consistent with
Arizona law.

3 ADHS apparently interprets R9-17-303 to allow it to open the
application process only if there is a new dispensary registration certificate
available under § 36-2804(C)’s one-in-ten ratio. However, § 36-2804(C)
commands ADHS to exceed the ratio to ensure one dispensary in each
county; therefore, to comply with the statute ADHS must open the
application process whenever there is a county without a dispensary during
the annual review.
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Opinion of the Court

CONCLUSION

¶23 For the foregoing reasons, we conclude § 36-2804(C) requires
ADHS to issue at least one medical marijuana dispensary registration
certificate in each county with a qualified applicant. We also conclude that
ADHS’s interpretation of R9-17-303 contrary to this statutory mandate
violates § 36-2804(C). Accordingly, we vacate the court of appeals’
decision, reverse the trial court’s order dismissing Saguaro’s complaint, and
remand to the trial court to consider Saguaro’s special action consistent
with this opinion. We grant Saguaro’s request for attorney fees pursuant to
A.R.S. § 12-348(A).

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JUSTICE MONTGOMERY, concurring in part, dissenting in part

MONTGOMERY, J., concurring in part and dissenting in part:

¶24 Because bad facts make for bad law and an exception should
not become the basis for a rule, I would have declined review of the petition
in this case. Nevertheless, the matter is before us, and while I agree with
the majority’s interpretation of § 36-2804(C) at ¶¶ 11–14, I respectfully
dissent from ¶¶ 15–23 involving the application of the statute to the facts of
this case and the conclusion.

I.

¶25 The crux of the issue before us actually concerns when ADHS
can determine whether a county is lacking a dispensary and prioritize the
allocation of available registration certificates. That Saguaro was unable to
receive a certificate—which was never available—was not due to any
unlawful, groundless, arbitrary, or capricious action by ADHS nor a result
of an interpretation of a rule inconsistent with § 36-2804(C). Instead, it was
simply a consequence of an administrative agency exercising broadly
delegated legislative authority to govern a complex certificate allocation
process. In fact, the AMMA itself provides the necessary recourse where a
county may be without a dispensary until the next allocation period.

II.

¶26 In this case, ADHS conducted an annual review of existing
AMMA dispensary certificates with a record information date of May 31,
2016. The review established that every county had at least one licensed
dispensary and, in compliance with § 36-2804(C), ADHS determined that it
would issue thirty-one additional certificates. Accordingly, ADHS posted
the following on its website on June 16, 2016:

The Department will accept dispensary registration certificate
applications from July 18 – July 29, 2016. During this
allocation, 31 dispensary registration certificates will be
available. The “record date” for the allocation will be May 31,
2016. Because there are no available counties as of the record
date, the Department will not allocate certificates under R9-
17-303(B)(1). Update - The top 31 CHAAs prioritized under
R9-17-303(B)(2) will be made available by June 16. Any
certificates not allocated under R9-17-303(B)(2) will be
allocated under R9-17-303(B)(3).

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JUSTICE MONTGOMERY, concurring in part, dissenting in part

¶27 Given that La Paz County had a dispensary in CHAA 36, it
was not among the thirty-one CHAAs listed on June 16. 4 On or about July
19, two days into the open application period, the dispensary operating in
CHAA 36 relocated from La Paz County to a CHAA in Maricopa County.

¶28 Even though CHAA 36 was not allocated a registration
certificate, Saguaro went ahead and submitted an application during the
open period for the CHAA anyway. Unsurprisingly, and consistent with
the notice provided for the application process, ADHS did not allocate a
registration certificate to Saguaro. ADHS notified Saguaro on October 6,
2016, that it would not be issued a certificate, and Saguaro subsequently
brought a special action complaint against ADHS. The trial court ultimately
dismissed the complaint on ADHS’s motion, which the court of appeals
affirmed.

III.

¶29 The majority concludes that ADHS’s interpretation of R9-17-
303 is inconsistent with § 36-2804(C) for two reasons. First, the majority
asserts that ADHS may not determine how to prioritize available
certificates until sixty working days after the open application period
begins. Supra ¶ 21. Second, the majority declares that ADHS’s
prioritization process “must comply with the statute’s goal of ensuring one
dispensary in each county with a qualified applicant.” Supra ¶ 21.

A.

¶30 Addressing the second reason first, by faulting ADHS’s
prioritization process because a county ended up without a dispensary after
following a rule the majority acknowledges is valid, supra ¶ 20, the majority
is effectively requiring ADHS to accommodate applications for certificates
whenever a county no longer has a dispensary. There is no basis in the
regulatory framework established pursuant to the AMMA to support this
directive. The majority reads too much into § 36-2804(C) and does not fully
account for the fact that the AMMA addresses the possibility that a
dispensary may not be operating in a county. Specifically, § 36-

4 Aside from the fact that La Paz County had a dispensary with a
registered certificate as of May 31, because La Paz County CHAAs 35, 36,
and 37 had fewer qualifying patients with registry identification cards than
the other CHAAs prioritized under R9-17-303(B)(2), they would not have
otherwise qualified for a certificate.
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JUSTICE MONTGOMERY, concurring in part, dissenting in part

2804.02(A)(3)(e), (f) permits individual qualified patients and caregivers to
grow marijuana if a “dispensary is not operating within twenty-five miles
of the qualifying patient’s home.” See also § 36-2801(1)(a)(ii), (b)(ii) (each
permitting a qualified patient and caregiver, respectively, to cultivate
marijuana). Moreover, there is simply no authoritative source to conclude
that § 36-2804(C) was intended to make dispensaries ubiquitous in Arizona.

B.

¶31 The majority’s assertion that ADHS cannot prioritize
certificates until sixty days after it begins to accept applications is also
unsupported by any statute or rule in the AMMA regulatory framework.
The rule cited, R9-17-303(A)(1)(c), provides:

Sixty working days after the date the Department begins
accepting applications, the Department shall determine if the
Department received more dispensary registration certificate
applications that are complete and in compliance with A.R.S.
Title 36, Chapter 28.1 and this Chapter to participate in the
allocation process than the Department is allowed to issue.

There is no reference to the prioritization process, let alone any direction as
to when it must occur. The rule simply provides a deadline to ensure the
allocation process occurs within the statutory timeframe for issuing
registration certificates. See § 36-2804(B).

¶32 The prioritization process is set forth at R9-17-303(B), which
directs ADHS to allocate certificates based on prioritization criteria if “the
Department receives, by 60 working days after the date the Department
begins accepting applications, more dispensary registration certificate
applications . . . than the Department is allowed to issue.” Nowhere in the
rules or § 36-2804(C) is ADHS required to wait until after the application
period to prioritize available certificates. Even by rewriting the rule to fix
this unique circumstance, the majority will not preclude a similar situation
in the future because a dispensary can still leave a county regardless of
when the prioritization or allocation process occurs.

¶33 “In circumstances like these, in which the [people have] not
spoken definitively to the issue at hand, ‘considerable weight should be
accorded to an executive department’s construction of a statutory scheme
it is entrusted to administer.’” Ariz. Water Co. v. Ariz. Dep’t of Water Res.,
208 Ariz. 147, 154 ¶ 30 (2004) (quoting Chevron, U.S.A., Inc. v. Nat. Res. Def.
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JUSTICE MONTGOMERY, concurring in part, dissenting in part

Council, Inc., 467 U.S. 837, 844 (1984)). Even if the Court is not required to
give deference to ADHS’s interpretation of the statute and rules in question,
an agency action should be affirmed “unless the court concludes that the
agency’s action is contrary to law, is not supported by substantial evidence,
is arbitrary and capricious or is an abuse of discretion.” § 12-910(E).

1.

¶34 To conclude that ADHS acted contrary to law, the majority
reads a timing prohibition into the rules that does not exist in order to
accomplish a statutory goal that is not supported when considering the
entirety of the regulatory framework. The fact that the information known
as of the record date later changed does not place ADHS’s interpretation of
R9-17-303 in conflict with § 36-2804(C). It simply means that under these
rather exceptional circumstances, the sole applicant for La Paz County—
which knew a month in advance of the application process that it could not
receive a certificate—was not allocated one. Therefore, the consequence of
determining that each county had a licensed dispensary in advance of the
application period is not contrary to § 36-2804(C) but is actually addressed
by the AMMA where qualified patients and caregivers may not be near an
operating dispensary.

2.

¶35 There was reasonable information from which ADHS based
its determination for prioritizing the allocation of available certificates. An
agency’s consideration of facts and circumstances must look at “the
relevant data and articulate a satisfactory explanation for its action
including a rational connection between the facts found and the choice
made.” Compassionate Care Dispensary, Inc. v. Ariz. Dep’t of Health Servs., 244
Ariz. 205, 213 ¶ 25 (App. 2018) (quoting Motor Vehicle Mfrs. Ass’n of U.S. v.
State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983) (internal quotation marks

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JUSTICE MONTGOMERY, concurring in part, dissenting in part

omitted)). 5 By grounding its analysis in the available facts and
circumstances as of the record date, ADHS established a fair and
transparent process that avoided arbitrary decision making.

¶36 Providing notice of the allocation priorities in advance of
accepting applications also involves simple fairness to those deciding
whether to apply in the first place, especially when considering what is
required for an application. Pursuant to § 36-2804(B), an applicant must
provide information regarding the name and location of the dispensary and
certify that it meets all local zoning requirements, provide personal
identifying information for each principal owner and/or board member to
facilitate a criminal background check, provide personal identifying
information for each dispensary agent, provide a copy of all operational
procedures to ensure compliance with ADHS governance rules, and pay
$5,000. Waiting to prioritize and publicize the availability of certificates
until well after aspiring certificate recipients have had to prepare and
submit all the necessary paperwork renders the filing of an application akin
to buying a lottery ticket for $5,000.

¶37 Even Saguaro recognizes that “[t]he subsection (B)(2)
prioritization is complex and time-consuming. It is within ADHS’s
discretion and performance of its duties under subsection (B)(2) to get a
head start and identify the CHAAs with high patient populations and fewer
dispensaries during the subsection (A) review.” To calculate the number of
available certificates as required by § 36-2804(C), ADHS had to first verify
whether each county had a licensed dispensary, which it did, and then
identify the number of pharmacies registered, permitted, and operating.

5 In other contexts, agencies have received generous latitude for the
rules they create when implementing their legitimate statutory authority.
E.g., Silver v. Pueblo Del Sol Water Co., 244 Ariz. 553 (2018) (upholding
Arizona Department of Water Resources’s regulations and procedures for
determining statutorily required finding and interpretation of “legal
availability” to determine adequate water supply for proposed
development); Facilitec, Inc. v. Hibbs, 206 Ariz. 486 (2003) (Arizona
Department of Administration’s internal delegation of quasi-judicial
authority upheld in keeping with statutory authority); Goodman v. Superior
Court, 136 Ariz. 201 (1983) (Racing Commission regulations generally
upheld within new statutory authority); Cleckner v. Ariz. Dep’t of Health
Servs., 246 Ariz. 40, 44 ¶ 16 (App. 2019) (ADHS regulations that narrowed
the scope of midwife practice were upheld despite a statute seemingly
meant to allow a broader scope of practice).
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JUSTICE MONTGOMERY, concurring in part, dissenting in part

Then, given the available information, ADHS had to determine which
criteria for prioritizing the allocation of available certificates would apply.
In this case, that meant reviewing the number of qualified patients residing
in each CHAA and ranking the CHAAs accordingly.

¶38 Had the information available as of the May 31, 2016 record
date revealed that there was no dispensary in La Paz County, and ADHS
then neglected or simply refused to allocate a registration certificate,
Saguaro would have a sound and persuasive claim and the majority’s
analysis and application of § 36-2804(C) would be entirely correct.

3.

¶39 ADHS’s determination in advance of the application process
that there were no certificates to allocate by county is entitled to deference
unless the determination was “arbitrary, capricious, or . . . an abuse of
discretion.” Silver, 244 Ariz. at 557 ¶ 9 (quoting J.W. Hancock Enters., Inc. v.
Registrar of Contractors, 126 Ariz. 511, 513 (1980)). An agency action is
arbitrary and capricious when taken “without consideration and in
disregard for facts and circumstances.” Maricopa Cty. Sheriff’s Office v.
Maricopa Cty. Emp. Merit Sys. Comm’n, 211 Ariz. 219, 223 ¶ 17 (2005)
(quoting Maricopa County v. Gottsponer, 150 Ariz. 367, 372 (App. 1986)). But,
“where there is room for two opinions, the action is not arbitrary or
capricious if exercised honestly and upon due consideration, even though
it may be believed that an erroneous conclusion has been reached.” Id.
(quoting Gottsponer, 150 Ariz. at 372).

¶40 Given the objective and accurate data as of the record date,
the complex process for determining prioritizations under the
circumstances, and the establishment of a process that was objectively fair
and transparent for all applying for available certificates, there is nothing
arbitrary or capricious about ADHS’s determination.

III.

¶41 Lastly, article 3 of the Arizona Constitution commands that
“no one of such departments shall exercise the powers properly belonging
to either of the others.” Therefore, we should be even more hesitant to offer
our own “fix” for unique issues within the administration of a complex
regulatory framework where the responsibility is expressly delegated by
the legislative authority to an executive agency. That the majority finds no
fault with the rule itself, supra ¶ 20, reveals that the Court simply disagrees
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 SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.
JUSTICE MONTGOMERY, concurring in part, dissenting in part

with how an executive agency is carrying out its delegated authority. Given
the recent passage of § 36-2803.01 addressing allocation priorities and
geographic displacement of dispensaries, the legislature has demonstrated
its ability to provide direction to ADHS in allocating registration
certificates. We need not do so.

IV.

¶42 ADHS’s prioritization of available registration certificates in
advance of the application process was a reasonable and practical exercise
of its delegated responsibility to govern the certificate allocation process.
Similarly, its determination that no certificate was available for La Paz
County for purposes of allocating registration certificates was not arbitrary,
capricious, or an abuse of discretion. Again, while I would not have
granted review in the first place, I would affirm the court of appeals’
decision.

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