Ariz. Cred. B. Ass'n, Inc. v. State

549 P.3d 205

ARIZONA CREDITORS BAR ASSOCIATION, INC., et al., Plaintiffs/Appellants/Cross-Appellees,

v.STATE of Arizona, Defendant/Appellee/Cross-Appellant.

Arizonans Fed Up With Rising Healthcare, et al., Intervenors/Appellees /Cross-Appellants.

No. 1 CA-CV 22-0765

Court of Appeals of Arizona, Division 1.

Filed April 30, 2024

Appeal from the Superior Court in Maricopa County, No. CV2022-015921, The Honorable John L. Blanchard, Judge. AFFIRMED

Snell & Wilmer L.L.P., Phoenix, By Brett Johnson, Benjamin W. Reeves, Tracy A. Olson, Ryan Hogan, Charlene A. Warner, Counsel for Plaintiffs/Appellants /Cross-Appellees

Arizona Attorney General’s Office, Phoenix, By Hayleigh S. Crawford, Luci Danielle Davis, Counsel for Defendant/Appellee/Cross-Appellant

Barton Mendez Soto, Tempe, By Jacqueline Mendez Soto, James E. Barton, II, Daniella Fernandez Lertzman, Counsel for Intervenors/Appellees/Cross-Appellant

Goldwater Institute, Phoenix, By Christina Sandefur, Timothy Sandefur, Counsel for Amicus Curiae of Goldwater Institute, Greater Flagstaff Chamber of Commerce, Bruce Ash, and Mark and Virginia Blosser

Gray Reed & McGraw LLP, Dallas, Texas, By S. GregWhite, Angela Laughlin Brown, Jim Moseley, Counsel for Amicus Curiae ACA International, Inc.

Maxwell & Morgan, P.C., Mesa, By Chad M. Gallacher, Counsel for Amicus Curiae Community Associations Institute

Judge Maria Elena Cruz delivered the opinion of the Court, in which Presiding Judge David D. Weinzweig and Judge Michael S. Catlett joined.

OPINION

CRUZ, Judge:

¶1 Arizona Creditors Bar Association, Inc., Protect Our Arizona PAC, Absolute Resolutions Investments, LLC, Hameroff Law Group, P.C., Desert Ridge Community Association, Augusta Ranch Community Master Association, Bauhinia, LLC, and Cash Time Title Loans, Inc. (collectively "Judgment Creditors"), appeal from the superior court’s denial of their request for permanent injunction or declaratory relief. The State of Arizona ("State") and Arizonans Fed Up with Rising Healthcare (Healthcare Rising AZ) ("Sponsoring Organization") cross-appeal from the superior court’s denial of their respective motions to dismiss for lack of standing. We affirm.

FACTUAL AND PROCEDURAL HISTORY

¶2 Arizona voters approved Proposition 209, also known as the "Predatory Debt Collection Act" ("the Act"), in November 2022. The new law amended Arizona Revised Statutes ("A.R.S.") sections 12-1598.10, 33-1101, 33-1123, 33-1125, 33-1126, 33-1131, and 44-1201. It lowered the interest rate cap on medical debt, increased the amount of the homestead exemption, increased the dollar value of personal property and assets exempt from creditor claims, and increased the amount of exempt earnings in garnishment actions.

¶3 The Act includes a provision—labeled a "Saving Clause"—to address when the Act applies. The Saving Clause states that, "[t]his act applies prospectively only." It then lists three things "it does not affect": (1) "rights and duties that matured" before its effective date; (2) "contracts entered into" before its effective date; and (3) "the interest rate on judgments that are based on a written agreement entered into" before its effective date.

¶4 The Judgment Creditors are businesses involved in various facets of debt enforcement who filed a complaint and motion for temporary restraining order challenging the Act’s constitutionality, more specifically alleging its Saving Clause was vague and unintelligible.

¶5 The Judgment Creditors argued the Saving Clause fails because it does not spell out whether it applies when a judgment predates the Act but a wage garnishment proceeding to enforce that judgment post-dates the Act. And they argued that, because the Saving Clause is unconstitutional, the whole Act must fail. If their constitutional claims failed, they alternatively asked the superior court for a declaratory judgment explaining how the Act applies, if at all, to a post-Act garnishment proceeding to enforce a pre-Act judgment.

¶6 The State and the Sponsoring Organization alleged the Judgment Creditors lacked standing to raise their constitutional challenges. The superior court ultimately found the Act’s Saving Clause constitutional and denied the Judgment Creditors’ request for a permanent injunction or declaratory relief.

¶7 The Judgment Creditors timely appealed. The State and the Sponsoring Organization timely cross-appealed. We have jurisdiction pursuant to A.R.S. §§ 12-2101(A)(1) and -2101(A)(5)(b).

DISCUSSION

[1–4] ¶8 Questions of standing and ripeness are reviewed de novo. Brush & Nib Studio, LC v. City of Phoenix, 247 Ariz. 269, 279, ¶ 34, 448 P.3d 890, 900 (2019). Similarly, we review the constitutionality of statutes de novo. State v. Burke, 238 Ariz. 322, 325, ¶ 4, 360 P.3d 118, 121 (App. 2015). We review a denial of injunctive relief for an abuse of discretion. Cnty. of Cochise v. Faria, 221 Ariz. 619, 621, ¶ 6, 212 P.3d 957, 959 (App. 2009). The hearing on a preliminary injunction may be consolidated with the hearing on the merits. Ariz. R. Civ. P. 65(a)(2)(A). "We defer to the court’s findings of fact unless clearly erroneous, but we review de novo its legal conclusions." Flying Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, 47, ¶ 9, 156 P.3d 1149, 1152 (App. 2007).

¶9 The Arizona Constitution provides that "[t]he judicial power shall be vested in an integrated judicial department[.]" Ariz. Const. art. 6, § 1. As a component of the judicial department, the superior court has jurisdiction over "[c]ases and proceedings" and only when jurisdiction is not vested elsewhere. Ariz. Const. art 6, § 14(1). The Arizona Constitution prohibits the judicial department from exercising the powers vested in the legislative and executive branches and vice versa. Ariz. Const. art. 3.

I. Standing and Ripeness

¶10 The State and the Sponsoring Organization cross-appeal the superior court’s denial of their motions to dismiss for lack of standing and ripeness. They argue the Judgment Creditors’ challenge to the Act’s constitutionality relies on hypothetical scenarios and that any alleged harm is -speculative.

[5–7] ¶11 Standing is a tool courts use to ensure they exercise only "the judicial power"—that they act like courts. Standing ordi- narily requires a plaintiff to "allege a distinct and palpable injury." Sears v. Hull, 192 Ariz. 65, 69, ¶ 16, 961 P.2d 1013, 1017 (1998). "An allegation of generalized harm that is shared alike by all or a large class of citizens generally is not sufficient to confer standing." Id.

[8–12] ¶12 The Judgment Creditors have asserted claims under the Uniform Declaratory Judgments Act ("UDJA"). That statute says that any party "whose rights, status or other legal relations are affected by a statute" may bring an action to determine the statute’s "validity." A.R.S. § 12-1832. While broad, that language does not permit courts to act as legislators by setting policy or issuing advisory opinions—standing is still required. See Mills v Anz Bd. of Tech Registration, 253 Ariz. 415, 423, ¶ 25, 514 P.3d 915, 923 (2022). Our supreme court, however, has broadened the standing requirement for a declaratory judgment. To have standing under the UDJA, there must instead "be an actual controversy ripe for adjudication" and "parties with a real interest in the questions to be resolved." Bd. of Supervisors of Maricopa Cnty. v. Woodall, 120 Ariz. 379, 380, 586 P.2d 628, 629 (1978); see also Mills, 253 Ariz. at 423-24, ¶ 25, 514 P.3d at 923-24. Unlike in federal court, actual injury is not required. Mills, 253 Ariz. at 424, ¶ 29, 514 P.3d at 924 ("Mills is not required to suffer an actual injury before his [declaratory judgment] claims become justiciable."). "[D]eclaratory relief should be based on an existing state of facts, not those which may or may not arise in the future." Land Dept v. O’Toole, 154 Ariz. 43, 47, 739 P.2d 1360, 1364 (App. 1987). But if actual injury is missing, standing for a declaratory judgment still exists if "an actual controversy exists between the parties." Mills, 253 Ariz. at 424, ¶ 29, 514 P.3d at 924.

A. Constitutional Claims

[13] ¶13 In their verified complaint, the Judgment Creditors alleged they are in the business of debt collection and have engaged in and plan to continue to engage in conduct proscribed by the Act. They alleged they are unable to comply with the new law and that they face monetary harm and risk of penalties under federal law. And they alleged that they have had to divert current resources to clear confusion and educate their membership on the exposure the Act creates. These allegations, even when admitted into evidence, did not establish that the Judgment Creditors suffered a distinct and palpable injury due to the Saving Clause.

¶14 The Judgment Creditors are in the debt collection business, yet none established¹ they were garnishing wages under the Act based on a pre-Act judgment or that they would soon do so. Put differently, none of the Judgment Creditors had engaged in conduct impacted by the vagueness or unintelligibility of the Saving Clause. Conceding this hole in their argument, the Judgment Creditors asserted there was standing because if they take a wrong step under the Act, they could face future liability under the federal Fair Debt Collection Practices Act ("FDCPA"). But even if potential future liability under a separate statute passed by a different sovereign (here, the federal government) can suffice to establish actual injury, the Judgment Creditors did not establish that any of them had been threatened with an FDCPA claim, let alone that such a claim had been filed or successfully litigated against them because of the constitutional infirmities they claim with the Saving Clause. Any future liability based on the FDCPA, therefore, was too far removed and too speculative for standing based on injury. See Klein v. Ronstadt, 149 Ariz. 123, 124, 716 P.2d 1060, 1061 (App. 1986) (explaining that the plaintiff must demonstrate an "actual, concrete harm" that is not "merely...