Professional Documents
Culture Documents
v.
and
No. CV-18-0137-SA
Filed March 28, 2019
COUNSEL:
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.
I. BACKGROUND
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CITY OF SURPRISE v. ACC/LAKE PLEASANT, et al.
Opinion of the Court
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.
II. DISCUSSION
A. Jurisdiction
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CITY OF SURPRISE v. ACC/LAKE PLEASANT, et al.
Opinion of the Court
B. Standing
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statute, if valid, would give the Commission the authority to void the City’s
condemnation action. Further, standing is suggested by Arizona’s
declaratory judgment statute, which provides that a party whose “rights,
status or other legal relations are affected by a statute” may seek declaratory
relief regarding the statute’s construction. A.R.S. § 12-1832; see also id.
§ 12-1842 (“This article is declared to be remedial; its purpose is to settle
and to afford relief from uncertainty and insecurity with respect to rights,
status and other legal relations; and is to be liberally construed and
administered.”); Dobson, 233 Ariz. at 122 ¶ 11; cf. Merrill v. Phelps, 52 Ariz.
526, 529 (1938) (noting that action under the declaratory judgment statute
was “the simplest and the best way” of resolving conflicting claims
regarding statutory and constitutional authority of public officials). The
Commission’s indirect assertion of regulatory authority over the City is
sufficient injury to provide standing.
C. Standard of Review
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A.A.C. R14-2-402(D)(1) provides that “[a] utility shall not abandon, sell,
lease, transfer, or otherwise dispose of its facilities or operation without first
obtaining authority therefor from the Commission.” The City argues
§ 40-285(A) does not apply because the statutory language does not
reference condemnation proceedings and because a condemnation is
neither a sale nor other voluntary transfer, as the statute otherwise
contemplates. The Commission asserts that the phrase “or otherwise
dispose of” is sufficiently broad to include a transfer resulting from a
condemnation. Because § 40-285(A) does not expressly include transfers
through condemnation proceedings, we must decide whether
condemnations are included by the phrase “or otherwise dispose of.”
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CITY OF SURPRISE v. ACC/LAKE PLEASANT, et al.
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concluded that the general statute was therefore not a restriction on the city,
nor did it prevent the city from exercising its right of eminent domain, id.
at 87.
¶21 The partial dissent does not dispute that the City has the right
to condemn public utilities. Nor does it dispute that if a public utility
refuses to cooperate in a sale of its assets, the City may invoke its power of
eminent domain. Nonetheless, relying on dicta in a case from another
jurisdiction, the dissent draws a line between contested and uncontested
condemnations, giving the Commission authority over the latter but not the
former. Effectively, the dissent empowers the Commission to veto a
municipal corporation’s eminent domain decision based only on the
determination that it is not sufficiently adversarial. This approach makes
sense only if we accept the dissent’s selective use of dictionary definitions,
see infra ¶ 42 (defining the power of eminent domain by selecting one of six
entries for a term, ignoring the more relevant entries with contrary
implications), and its strained application of the general terms canon, see
Scalia & Garner, supra, at 101–03 (general terms canon instructs that terms
like “all persons” and “any property” not be arbitrarily limited, but does not
apply when context provides “some indication to the contrary” (emphasis
added)). This we decline to do.
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Opinion of the Court
¶24 The dissent worries that our decision risks leaving Circle City
customers (here, the developer) without service. Regardless, our
constitution and our legislature bestowed the exclusive authority to
regulate municipal utilities upon municipalities, along with the authority
to condemn the property of public service corporations. See Ariz. Const.
art. 15, §§ 2, 3 (excluding municipal corporations from the Commission’s
regulatory authority); § 9-511 (empowering municipal corporations to own,
operate, and condemn utilities). This Court should not rewrite § 40-285(A)
to expand the regulatory authority of the Commission.
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Opinion of the Court
¶28 Our decision today does not preclude the Commission from
continuing to regulate any portion of Circle City’s service area left unserved
following the City’s condemnation. The Commission can issue a new
CC&N to a public utility if the City declines to provide water service to
customers in Circle City’s service area, including the developer who
originally contracted with Circle City. See § 9-516(D) (“[I]f [after the
condemnation] the city or town refuses to provide utility service to a
portion or part of the area or territory previously authorized to the public
utility, the [Commission] may issue a new certificate of convenience and
necessity or franchise to a public utility to provide utility service in that
portion or part of the area or territory.”). The Commission simply has no
role to play in condemnations.
III. CONCLUSION
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CITY OF SURPRISE V. ACC/LAKE PLEASANT, et al.
JUSTICE BOLICK, CONCURRING IN PART AND IN THE RESULT
¶32 I wish I could share the majority’s certitude that this scenario
is resolved through clear statutory language. But neither the statutes
creating the Commission’s authority to protect water consumers nor those
pertaining to a municipality’s eminent domain authority speak directly to
this circumstance.
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
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JUSTICE BOLICK, Concurring in Part and Dissenting in Part
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JUSTICE BOLICK, Concurring in Part and Dissenting in Part
necessary hearings and orders to make sure that sale by the utility will not
leave persons served neither by the utility nor the municipality.” Id. at 12;
see also Pueblo Del Sol Water Co. v. Ariz. Corp. Comm’n, 160 Ariz. 285, 286
(App. 1988) (“[T]he Commission should examine all the evidence available
to it to determine whether or not the transfer is detrimental to the public
interest.”). It appears that is exactly the role the Commission was
attempting to fill in this case.
¶40 If the City and Circle City voluntarily entered into eminent
domain proceedings in order to divest the developer of valuable water
rights, there could be a collision between the City’s eminent domain
powers, which are beyond the Commission’s jurisdiction, and the
Commission’s broad authority under § 40-285(A) that ensures that
customers’ service rights are protected in a voluntary transfer of assets. In
such circumstances, the remedy of approving a new CC&N under
§ 9-516(D) may prove illusory because no other provider might exist to
provide such services; only the remedy of disapproval would preserve the
customers’ rights. See Babe Invs., 189 Ariz. at 151 (noting § 40-285
“prevent[s] . . . impairment of service to the public”). And the “public use”
requirement of eminent domain, Bailey v. Myers, 206 Ariz. 224, 230 ¶ 23
(App. 2003), is not a substitute for the public-interest objectives served by
§ 40-285(A). Reading the statutes to permit a municipality and a water
company to extinguish contracted water services by agreeing to proceed
through eminent domain rather than a sale of assets would defeat the
important consumer protection purpose of § 40-285(A). See James P. Paul
Water Co. v. Ariz. Corp. Comm’n, 137 Ariz. 426, 429 (1983) (“[T]he public
interest is the controlling factor in decisions concerning service of water by
water companies.”).
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
¶43 A decision by the New Mexico Supreme Court that I, like the
majority, deem highly persuasive, appears to be the only decision to
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
expressly contemplate this scenario. In United Water New Mexico, Inc. v. New
Mexico Public Utility Commission, the court applied a statute similar to § 40-
285(A), construing the terms “sell, lease, rent, purchase or acquire” as
“address[ing] voluntary acts by a public utility.” 910 P.2d 906, 909–10 (N.M.
1996). The court held that a “forced condemnation of a utility by a
municipality is not a voluntary, affirmative act of that utility,” and therefore
the public utility commission had no authority over it. Id. In contrast to the
apparent situation here, the utility in that case vigorously contested the
condemnation. Id. at 911. In fact, the court premised its decision entirely
on the involuntary nature of the transaction, and expressly reserved “the
issue of a utility agreeing with a municipality to submit willingly to a
condemnation action in lieu of a consensual sale simply to avoid”
commission approval. Id. at 909 n.4. Like the New Mexico Supreme Court,
we should not foreclose a case where the use of eminent domain may
constitute a wholly voluntary transaction.
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
Weisman, 505 U.S. 577, 595 (1992). The majority errs in holding that an
exercise of a municipality’s eminent domain power categorically
evaporates the Commission’s consumer protection authority even if the
transaction is voluntary and designed to eliminate valuable water rights.
The parties vigorously dispute whether those rights exist, and the record
does not yet illuminate whether the transfer of assets here is truly
involuntary. That is because the City launched a preemptive strike to
foreclose the Commission’s inquiry into that very question. The majority
vindicates the City’s actions by short-circuiting the Commission’s
jurisdiction over the public utility which otherwise would have continued
until the acquisition was consummated. With great respect to my
colleagues, I dissent from the majority’s decision to prematurely terminate
the Commission’s inquiry.
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