In Mills v. Arizona Board of Technical Registration,[1] the Arizona Supreme Court considered whether plaintiffs had to exhaust their administrative remedies before they could file suit in Arizona trial court. The court unanimously held in that in this particular instance they did not.[2]

Greg Mills is an engineer who creates electronic circuits for clients through his consulting firm Southwest Engineering Concepts (collectively, “Mills”).[3] The Arizona Board of Technical Registration (the “Board”) regulates several professions, including engineer[NC1] s.[4] A customer complained to the Board about Mills’ fees and his failing to register as an engineer, which led to the Board starting an investigation.[5] After the investigation, the Board determined that Mills had engaged in “engineering practices” and advertised as an engineer without registering with the Board.[6] Such violations are class two misdemeanors that subject offenders to fines and incarceration.[7]

The Board offered to resolve the complaint informally. That offer would have required Mills sign a consent agreement stating that he violated the law, agree to stop working until he and his firm properly registered with the Board, and pay a $3,000 fine.[8] Mills refused to sign the agreement, and the Board invited him to meet and discuss the investigation.[9] Mills declined to attend the meeting, but the Board met and re-offered a consent agreement to Mills with identical terms, except it doubled the fine.[10] Mills responded by filing suit in Arizona Superior Court, alleging that the statutes governing the Board, both facially and as applied, violated multiple provisions of the Arizona Constitution and seeking declaratory and injunctive relief.[11]

The superior court dismissed Mills’ complaint, rulingit lacked subject matter jurisdiction because Mills failed to exhaust administrative remedies.[12] The superior court also ruled that the claims were not ripe and Mills did not have standing, as the Board had not yet initiated and completed formal proceedings against him.[13] The Arizona Court of Appeals affirmed, and Mills appealed.[14]

On appeal, the Arizona Supreme Court clarified the doctrine of administrative exhaustion in Arizona. It explained that failing to exhaust administrative remedies does not deprive the superior court of jurisdiction.[15] Rather, agencies can raise it as an affirmative defense.[16] That defense was not available to the Board in this case, however, because Mills had no “statutorily prescribed administrative remedy” to exhaust.[17] In so holding, the court rejected the Board’s argument that Mills could only bring suit once the Board initiated and completed formal proceedings against him.[18] In its view, any other outcome would make the statutes authorizing the court to review final agency decisions superfluous.[19] But the court noted that the Board’s favored interpretation of the statute would leave Mills stuck in “legal limbo.”[20] Unlike the statutes governing other professional boards, there is no requirement that the Board of Technical Registration initiate formal proceedings if informal efforts fail to resolve a complaint.[21] Therefore, Mills was unable to know with certainty whether he had to register as an engineer with the Board.[22] Such an outcome would contradict the Uniform Declaratory Judgment Act, which allows people affected by a statute to “obtain a declaration of rights, status or other legal relations thereunder.”[23]

The court was further persuaded that Mills’ lawsuit was appropriate because the remedy he sought—a declaration that the statutes at issue are unconstitutional either facially or as applied and an injunction against their enforcement—could only be ordered by a court.[24] State agencies have the power to determine the application of the constitution to their actions, but they do not have power to determine whether legislation is unconstitutional.[25] Accordingly, requiring Mills to raise his claims in a proceeding before the Board would be “pointless because the Board is powerless to resolve those challenges.”[26]

The court cabined its holding a bit, explaining that raising constitutional claims did not always relieve litigants of the requirement that they exhaust their administrative remedies.[27] The court was not entirely clear on when exhaustion is required, but one such circumstance is when constitutional issues are “‘inextricably intertwined’ with government benefits for which administrative remedies exist.”[28] The legislature could also condition jurisdiction on administrative exhaustion by statutorily providing an administrative remedy to pursue.[29]

The court closed its opinion with a brief discussion of standing and ripeness.[30] Unlike the federal Constitution, the Arizona Constitution does not require a case or controversy for a claim to be justiciable.[31] Standing and ripeness are prudential concerns that ensure courts are not issuing advisory opinions concerning hypothetical issues or adjudicating cases that are not between true adversaries.[32] These concerns did not counsel against justiciability for three of Mills’ four claims.[33]

For the first three claims—facial, as-applied, and void for vagueness challenges to the statutes governing the Board—the court ruled that there is [NC2] an actual controversy because there is an existing threat to Mills’ right to speak about his business, be clearly advised about what type of engineers need to be registered, and his right to earn a living.[34] The ongoing threat of the investigation and offered consent agreements constitutes a controversy, despite the Board’s failure to initiate formal proceedings.[35] The court held that the fourth claim—that the Board’s power to adjudicate facts usurps the Arizona Constitution’s separation of powers scheme—was different.[36] Without the Board initiating a formal process, any adjudication of this claim would be “speculative,” and that risked a scenario where the parties were not true adversaries.[37]

The court chose not to address two issues that were raised by the Board in defense and remanded the case for further proceedings.[38]

In sum, this case signifies a reluctance by the Arizona Supreme Court to allow a state agency to leave regulated parties in limbo. Absent some sort of indication that the legislature meant to require litigants to exhaust administrative remedies and provided them an avenue for doing it, Arizona courts will not read statutes governing agencies as precluding judicial review. Litigants raising constitutional claims against state agencies will not always be able to file suit, however, as they will still be limited by prudential standing and ripeness concerns.

[1] 514 P.3d 915 (Ariz. 2022).

[2] Id. at 919.

[3] Id. at 918.

[4] Id. (citing A.R.S. §§ 32-101 to -113).

[5] Id. at 919.

[6] Id.

[7] Id. (citing A.R.S. §§ 32-141, -145).

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id. at 920.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id. at 921.

[18] Id. at 920.

[19] Id.

[20] Id. at 921.

[21] Id.

[22] Id.

[23] Id. (citing A.R.S. § 12-1832).

[24] Id. at 922.

[25] Id.

[26] Id.

[27] Id.

[28] Id. (quoting Moulton v. Napolitano, 73 P.3d 637, 643 (Ariz. App. 2003)).

[29] Id. at 922-23.

[30] Id.at 923-25.

[31] Id. at 923.

[32] Id.

[33] Id. at 924-25.

[34] Id. The court ruled only that the claims could go forward. At the time of this publication, the claims are still being litigated.

[35] Id.

[36] Id. at 925.

[37] Id.

[38] Id.

 

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