Nolan v. 2600 Holdings

686 S.W.3d 499

2024 Ark. 50

Bennett Scott "Storm" NOLAN II and River Valley Production, LLC, d/b/a River Valley Relief Cultivation, Appellants

v.2600 HOLDINGS, LLC d/b/a Southern Roots Cultivation, et al., Appellees

No. CV-22-739

Supreme Court of Arkansas.

Opinion Delivered: April 11, 2024

APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, FOURTH DIVISION [NO. 60CV-21-582], HONORABLE HERBERT T. WRIGHT, JR., JUDGE

Smith, Cohen & Horan, PLC, Fort Smith, by: Matthew T. Horan and Stephen C. Smith; and Quattlebaum, Grooms & Tull PLLC, Little Rock, by: Joseph R. Falasco, for appellants.

Hall Booth Smith, P.C., Little Rock, by: Abtin Mehdizadegan and Joseph C. Stepina, for appellee 2600 Holdings, LLC, d/b/a Southern Roots Cultivation.

RHONDA K. WOOD, Associate Justice

₁2600 Holdings, LLC, one of the appellees¹ and an unsuccessful applicant for a cultivation license, petitioned the circuit court for relief mainly to require the Arkansas Medical Marijuana Commission to strip Bennett Scott "Storm" Nolan II of his cultivation license. The State and Nolan claimed that Nolan was an indispensable party under Rule 19(a) of the Arkansas Rules of Civil Procedure. Appellant Nolan filed multiple motions seeking joinder under Rule 19 and intervention under Rule 24 as well as a motion for a ₂new trial. The circuit court denied Nolan’s motions and ultimately granted summary judgment for 2600 Holdings. Nolan appeals. Because we find that Nolan was an indispensable party under Rule 19(a)(2), we reverse and remand. We vacate the November 3, 2022 order granting summary judgment to 2600 Holdings because it was entered without Nolan, an indispensable party. We thus do not address his remaining issues as they are now moot.

I. Factual Background & Procedural History

This case is one of many arising from the medical marijuana licensing process that followed the passage of Amendment 98, several of which have surrounded the Commission’s decision to grant a license to Nolan.² The Commission is authorized under Amendment 98 to issue between four and eight cultivation licenses. Ark. Const. amend. 98, § 8(j). The Commission issued Nolan a license in 2020.

In early 2021, 2600 Holdings filed suit against the Commission, the Arkansas Department of Finance and Administration, and the Arkansas Alcoholic Beverage Control Division (collectively, "State"). In its amended complaint, 2600 Holdings mainly alleged that Nolan’s application did not comply with the minimum merit selection criteria and that ₃the Commission violated its own rules and the Arkansas Constitution when it awarded Nolan a license.

Nolan was not named as a defendant, nor was he joined as a party in the suit. The complaint sought a declaratory judgment and a writ of mandamus ordering the Commission to strip Nolan of the license and award it to the next highest scoring applicant from the reserve pool. The State moved to dismiss, arguing that the suit was barred by sovereign immunity and that 2600 Holdings had failed to include Nolan, who was an indispensable party. The circuit court denied the motion to dismiss, and the State brought an interlocutory appeal. We affirmed in part and dismissed in part. Ark. Dep’t of Fin. & Admin. v. 2600 Holdings, LLC, 2022 Ark. 140, 646 S.W.3d 99. We dismissed the claim for declaratory judgment, holding that 2600 Holdings "failed to plead that the State’s actions [were] illegal or unconstitutional," and thus the declaratory-judgment claim was barred by sovereign immunity. Id. at 7–8, 646 S.W.3d at 103–04. Yet we found that sovereign immunity did not preclude the petition for writ of mandamus. Id. at 5, 646 S.W.3d at 102.

On October 25, 2022, 2600 Holdings moved for summary judgment and to expedite the briefing schedule. The circuit court granted the motion to expedite and ordered the State to file a response by October 31. The Attorney General’s Office, which had been representing the State, moved to withdraw as counsel because "recent disagreements by the Defendants regarding the best course of action in this case" had given rise to "an unwaivable conflict of interest." The circuit court denied the motion to withdraw. The State then filed a response to summary judgment and opposed it on multiple grounds, one being that Nolan was an indispensable party required to be joined under Rule 19.

₄On the same day the State filed its response, Nolan moved to enter the case as a party. Nolan styled this motion as a "motion to intervene" but mainly argued that he was an indispensable party under Rule 19(a). The circuit court denied Nolan’s motion and the following day it granted 2600 Holdings’ motion for summary judgment. The circuit court found that in awarding the license to Nolan, the Commission exceeded its discretion, did not act within its ministerial duty, and violated the Arkansas Constitution and its own rules.

Nolan filed a second motion, arguing his right to participate as a party under both Rule 19 and Rule 24 as well as a motion for a new trial. The circuit court also denied these motions. Nolan appeals. The State did not appeal the grant of summary judgment.

II. Jurisdiction and Standard of Review

[1] Orders that, in effect, determine the action and prevent a judgment from which an appeal might be taken are appealable. Ark. R. App. P.-Civ. 2(a)(2); see also Duffield v. Benton Cnty. Stone Co., Inc., 369 Ark. 314, 316, 254 S.W.3d 726, 728 (2007). Because this case was previously before this court, as a subsequent appeal we have jurisdiction under Arkansas Supreme Court Rule 1-2(a)(7). We review the circuit court’s interpretation of our rules de novo. JurisDictionUSA, Inc. v. Loislaw.com, Inc., 357 Ark. 403, 409, 183 S.W.3d 560, 564 (2004). We have explained in the context of intervention that a circuit court’s decision to allow a party to intervene as a matter of right is reviewed de novo, but the circuit court’s decision on timeliness will not be reversed absent an abuse of discretion. Compare Fort Smith Sch. Dist. v. Deer/Mt. Judea Sch. Dist., 2014 Ark. 486, at 6, 450 S.W.3d 239, 243 (explaining timeliness standard), with Certain Underwriters at Lloyd’s, London v. Bass, 2015 Ark. 178, at 8–9, 461 S.W.3d 317, 323 (establishing the de novo standard for the factors on intervention ₅as a matter of right). In the context of joinder under Rule 19(a), this court likewise has not given discretion to the circuit court as the rule requires an indispensable party "shall be joined." See, e.g., Stone v. Washington Reg’l Med. Ctr., 2017 Ark. 90, at 11, 515 S.W.3d 104, 111.

III. Rule 19

We begin with Nolan’s third point on appeal because it is dispositive. Nolan argues that the circuit court erred when it denied his motion to join as an indispensable party under Rule 19(a) of the Arkansas Rules of Civil Procedure. Rule 19 governs the mandatory joinder of parties to a civil suit, where they are needed for a "just adjudication" of the controversy before the court. Rule 19(a) states:

A person … shall he joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter, impair or impede his ability to protect that interest, or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. If he has not been joined, the court shall order that he be made a party.

(Emphasis added.)

[2] The purpose underlying the rule is to ensure that "all persons who will be necessarily and materially affected by its result" shall "be made parties to an action." Smith v. Moore, 49 Ark. 100, 103, 4 S.W. 282, 283 (1887) (interpreting a predecessor of Rules 19 and 24); see also Morgan v. Turner, 2010 Ark. 245, at 14, 368 S.W.3d 888, 897 ("[W]hen a plaintiff fails to join an indispensable party, the court should order that the indispensable party be joined.").

[3] ₆2600 Holdings contends we cannot consider this because Rule 19 can be argued only by the parties. But we have noted that Rule 19, like its counterpart in the Federal Rules of Civil Procedure, "does not condition [the] authority [to join an indispensable party] on a motion by a party" but instead "appears to authorize the joinder of indispensable parties by the courts sua sponte." Vibo Corp. Inc. v. State ex rel. McDaniel, 2011 Ark. 124, at 27, 380 S.W.3d 411, 428. This court was emphatic enough about the issue to reverse and remand for the circuit court to consider joinder of indispensable parties "though General Tobacco did not preserve the issue of indispensable parties for our review." Id. at 28, 380 S.W.3d at 428. We have consistently recognized the importance of joinder of indispensable parties by the circuit courts. See, e.g., Ark. State Med. Bd. v. Bolding, 324 Ark. 238, 242, 920 S.W.2d 825, 827 (1996); Arnold v. Spears, 343 Ark. 517, 524–25, 36 S.W.3d 346, 350 (2001); see also State ex rel. Robinson v. Craighead Cnty. Bd. of Election Comm’rs, 300 Ark. 405, 412, 779 S.W.2d 169 (1969) ("When a mandamus action is brought in a case such as this, courts will have to see that all necessary parties are joined under ARCP Rule 19.").

Even so, joinder under Rule 19(a) was squarely before the circuit court. The State first raised it in its motion to dismiss. The State raised the issue a second time in its response to summary judgment, which, notably, was filed the same day that Nolan filed his first motion seeking to be made a party. There is no question that the circuit court had the issue of joinder properly before it by a party, and by Nolan, but also had its own duty to consider the issue.

2600 Holdings next argues that Nolan cannot appeal from the denial of another party’s request for relief. But again, while Nolan’s motion was titled as one for intervention, ₇the substance of it argued Rule 19(a) and that h...