Falcone Bros. v. City of Tucson (CA2 8/25/16)

It will, we hope, surprise no one that a city can’t make ordinances or contracts that tell the Superior Court what its jurisdiction and rules should be.

Plaintiff contractor had a claim against the City arising out of a construction contract. The contract said that, pursuant to the City’s Procurement Code, Plaintiff could submit its claim to various levels of the City bureaucracy and then, if they denied it, file a special action within thirty days. The City denied Plaintiff’s claim; instead of filing a Special Action Plaintiff filed a Notice of Claim and then sued the City. The City moved to dismiss for lack of subject-matter jurisdiction, which the trial court granted.  Plaintiff appealed.

The Court of Appeals reverses.

First, though, it corrects something it said in an earlier case. Lambert (2009) was another Tucson contractor case; that contractor did file the “special action” and won it; the City appealed. The opinion – in one of those throw-away lines that nobody pays much attention to, apparently not even the court – based its jurisdiction on what’s now 12-2101(A)(1). But that requires that the action have originated in the Superior Court, which – our Supreme Court decided in 1930 – an action to review another tribunal’s decision didn’t. Because of Lambert’s questionable jurisdiction, “we do not rely on that case as precedent.” (Strange that nobody at the court caught the issue then. In any event, this illustrates one reason why rote statements of jurisdiction – or rote statements of anything, and our courts do a lot of things by rote – are a poor idea.)

Plaintiff argued that the City’s scheme violated due process. The opinion mentions the argument but does not address it since it can decide the case more narrowly.

“Only statutes and court rules govern special actions.” “[A] city has no authority to limit the jurisdiction of the state’s courts” unless a statute lets it. The City’s Procurement Code at that time was modeled after the State’s, which says that cities may adopt it. But under the State code claims decisions can ultimately be reviewed under the Administrative Procedures Act, which doesn’t apply to cities. The City didn’t argue that the State Procurement Code, by allowing cities to adopt it, modified the Administrative Procedures Act to allow the same thing (and the opinion mentions the idea mostly to cast doubt on it). What the City did didn’t even conform to the State code, which provides for review at  two separate levels of government. Under the City’s system, at least in this contract (the opinion suggests that it might have been a departure from the norm) final “review” of a contract claim against the City was done by the City bureaucrat who signed the contract.  

The City argued that its procedure was authorized by the statute that says, basically, that claimants must exhaust administrative remedies before asserting a claim against a government entity. But that statute “merely establishes the time for filing a notice of claim,” it “does not give cities authority to establish unlimited administrative-claims processes.”

“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.” (Whether or not it’s a great argument it’s the City’s best and the court spends the most time on it. Why was it left for oral argument? The opinion suggests in several places – and perhaps the quoted sentence was intended as one of them – that the appeal was not particularly artful.) “The Procurement Code itself distinguished the process here from arbitration.” And as an arbitration agreement the contract would be unconscionable because the City alone picks the “arbitrator” and because the City could accept, reject, or modify the “arbitrator’s” decision.

The court also mentions, if only to rule out, the possibility that the City’s procedures might have had statutory certiorari in mind. But that’s discretionary and has no time limit; ordinances and contracts purporting to change that are invalid.

The City also argued that under cases such as Hurst (App. 1979) its administrative decision must be deemed “just, reasonable, and lawful” and therefore given conclusive effect absent special action under the contract/ordinance. But those cases involved statutes that specifically permitted the decision and provided for judicial review.

Finally, the City argued that Plaintiff did not exhaust administrative remedies, as required by the statute mentioned above. The court disagrees. Plaintiff did everything required except file the “special action.” Even were the ordinance and contract valid, a special action is not an administrative remedy.

Reversed and remanded for further proceedings – i.e., litigation of the contract claim.

(Opinion: Falcone Bros. v. City of Tucson)