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Possible Changes Coming For Challenges To State Agency Decisions

December 1, 2022

By Terri Jo Neff |

The Arizona Supreme Court will issue a ruling in the next few months that could allow complaints to be resolved and enforced by state agencies even if the agency did not have authority to impose a penalty or sanction in the first place.

On Nov. 15, the justices conducted oral arguments in a dispute between Legacy Foundation Action Fund and the Arizona Citizens Clean Elections Commission over nearly $100,000 in penalties imposed in 2015 against Action Fund for alleged violations related to election finance reports and political ads.

The Legacy Foundation Action Fund unsuccessfully challenged the Clean Elections Commission’s authority during agency-level proceedings, including an argument that the Commission lacked subject matter jurisdiction. Subject matter jurisdiction is a legal requirement that a given court or government agency has the authority to hear the matter brought before it.

Attorneys for the Action Fund did not timely appeal the issue, waiting instead until 2018 to revive the jurisdictional issue when the Commission sought to collect the penalty.

Earlier this year, the Arizona Court of Appeals issued a split opinion which held in part that the “need for finality” with a decision of an Arizona administrative agency can be more important than whether the agency actually had authority to issue the decision in the first place.

The opinion also noted a judgment by a state-chartered agency such as the Clean Elections Commission is not a legal nullity if the party failed to raise the jurisdictional issue in a timely appeal.

However, a strongly worded dissenting opinion by Judge Cynthia Bailey noted that while Legacy Foundation Action Fund forfeited several appellate rights by not filing its appeal on time, “it did not, and could not, forfeit” its right to challenge the Commission’s subject-matter jurisdiction.

“Subject-matter jurisdiction can neither be waived nor conferred by stipulation. A court simply cannot hear a case over which it has no jurisdiction,” Bailey wrote, adding that “under Arizona statutes and rules, the potential injustice when an agency acts beyond its statutory authority outweighs any interest in finality and judicial economy.”

Bailey’s dissent opinion closely aligns with arguments put forth in an amicus (friend-of-the-court) brief filed with the Arizona Supreme Court by the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.

The Goldwater Institute is a nonpartisan public policy and research foundation whose priorities include the defense of individual rights against Arizona’s various state agencies which often operate outside the boundaries of evidentiary and procedural protections.

In the brief, attorney Timothy Sandefur cites prior court decisions in Arizona—some dating back to the 1920s—which have led to established case law that a judgment issued by a court, tribunal, or agency that lacks jurisdiction is void ab initio, or legally null.

“This has always been the rule in Arizona…and it should not be altered now,” Sandefur wrote, pointing out that Action Fund’s only opportunity to have its jurisdictional challenge heard was by the Commission itself, “which is not a judicial body, but a party to this dispute.”

And to elevate finality in litigation over validity as the court of appeals did “is to elevate form over substance and – alarmingly – efficiency over legitimacy,” the brief states.

Sandefur urged the Arizona Supreme Court justices to reject establishing a new legal standard for jurisdiction, especially in light of the burden it will create for people trying to defend themselves when agencies overstep their bounds, Sandefur wrote.

That burden “is likely to fall hardest on unsophisticated and unrepresented parties, particularly small business owners, workers, and entrepreneurs, who are often subjected to enforcement by regulatory agencies and often lack the wherewithal to obtain legal representation,” he added.

A decision from the Arizona Supreme Court is expected in Spring 2023.

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