IN THE



## A RIZONA 

## C OURT OF 

## A PPEALS

D IVISION O NE

STATE OF ARIZONA, et al.
, Plaintiff s /Appellant s ,

v.

ARIZONA BOARD OF R EGENTS, et al.
, Defendant s /Appellee s

.
No. 1 CA

- TX 20

- 0003

Appeal from the Superior Court in Maricopa County

No

. TX2019

- 000011 The Honorable Christopher T. Whitten
, Judge

AFFIRMED

COUNSEL
Arizona Attorney General’s Office , Phoenix By Brunn W. Roysden III, Robert J. Makar , Michael S. Catlett
, Katlyn J. Divis Counsel for Plaintiff/Appellant State of Arizona

Snell & Wilmer LLP
, Phoenix By Brett W

. Johnson, Colin P. Ahler, Tracy Olson Co

- C ounsel for Defendant/Appellee ABOR

Perkins Coie LLP , Phoenix By Paul F. Eckstein, Joel W. Nomkin , Shane R. Swindle, Thomas D. Ryerson, Austin C. Yost Co

- Counsel for Defendant s /Appelle e s ABOR
, et al. FILED 4-20-2021STATE, et al. v. ABOR, et al. O pinion of the Court

2 Kolodin Law Group PLLC
, Phoenix By Alexander Kolodin, Chris Ford, Christopher Vis k ovi c Amic u s Curiae for Senator Vince Leach

OPINION
Presiding Judge Jennifer M. Perkins delivered the opinion of the Court, in which Judge David B. Gass and Judge Michael J. Brown joined.

P E R K I N S , Judge:

¶1 The Arizona Attorney General’s Office (“AGO”) sued to enjoin an agreement by the Arizona Board of Regents (“ABOR”) and a private company to build and operate a hotel and conference center on state property

. The tax co urt ruled the AGO’s amend ed claim under our constitution’s Gift Clause was untimely and thus granted summary judgment on that claim. The court dismissed the remaining claims
, finding the AGO lacked statutory authority to bring them. The AGO appeals from the tax court’s resulting entry of judgment for ABOR and Arizona State University Vice President John Creer.

¶2 We agree with the tax court that a one

- year statute of limitations period applies to bar the AGO’s Gift Clause claim. In doing so
, we conclude the AGO had sufficient information to prompt an investigation more than a year before it attempted to bring this claim and that the claim does not relate back to the original comp laint. We also agree with the tax court that the AGO lacked statutory authority or independent quo warranto authority to bring the remaining claims. Finally, we conclude the AGO failed to establish the attorneys’ fees awarded to ABOR and Creer

were unreaso nable

. We affirm the tax court’s judgment.

FACT UAL AND PROCEDURAL BACKGROUND

¶3 ABOR owns about ten acres of land on the southeast corner of Mill Avenue and University Drive
, in Tempe. ABOR’s land , like all state

owned property, is exempt from property taxes. See Ariz. Const. art. 9
, § 2(1); see also A.R.S. § 42

- 1 1 102(A). This case concerns an agreement ABOR struck with Omni Hotels Corporation (“Omni”) to grant Omni an option to build and operate a hotel and conference center. ABORSTATE, et al. v. ABOR, et al. Opinion of the Court

3 first publicly discussed its intent to develop and/or lease this land during a June 2016 meeting.

¶4 Four months later , ABOR, Omni, and the City of Tempe signed a term sheet containing some of the deal’s terms. ABOR agreed to lease 1.6 acres to Omni and contribute up to $1 9.5 million towards constructing a conference center next to the hotel. ABOR would retain ownership of both the hotel and conference center until the 60

- year lease term expired
, when Omni could exercise an option to purchase the hotel and conference center for a nominal amount . Omni agreed to prepay some
rent at roughly $85 per square foot and make additional yearly payments
as rent instead of property taxes. Finally, ABOR agreed to build a parking
structure directly abutting the complex and granted Omni ex clusive use of about one

- fifth of the parking spaces.

¶5 On January 11, 2018
, the City of Tempe reached a final agreement with Omni to develop a hotel and conference center on ABOR’s property. The agreement included $21 million in sales tax relief. On that same day
, AGO attorneys internally circul ated a letter to the editor of the Arizona Republic discussing the Omni transaction

. One AGO attorney wrote that the Omni transaction sounded “ pretty s uspicious. ” On February 28, 2018, ABOR and Omni signed a n “ option to lease” allowing Omni to exercise the lease if ASU agreed to build the parking structure

. ¶6 T he AGO filed a three

- count complaint on January 10, 2019

. Count I sought declaratory and injunctive relief
, alleging the lease improperly exempt e d the hotel and conference center from property taxes. Count II sought quo warranto relief to void the transaction because it constituted an improper exercise of ABOR’s power to enter into leases for public purposes

. Count III sought quo warranto and declaratory relief that the lease was illegal because it lacked a public purpose under A.R.S. § 15

- 1625

. ¶7 Extensive motion practice ensued , including several motions to dismiss . The tax court ultimately granted ABOR’s motion to dismiss the three counts in the complaint, ruling the AGO lacked authority to bring the m

. By that time
, the AGO had filed an amended complaint add ing a fourth count against ABOR and Creer. Count IV alleged several compon ents of the transaction violated the Arizona Constitution’s Gift Clause and constituted an illegal payment of public money, which the AGO is empowered to police. See A.R.S. § 35

- 212. After substantial discovery, the AGO and ABOR filed cross motions for sum mary judgment on ABOR’s contention that a statute of limitations barred Count IV

.STATE, et al. v. ABOR, et al. Opinion of the Court

4 ¶8 After hearing argument, t he t ax c ourt granted summary judgment in ABOR’s favor . The court ruled Count IV was untimely because the AGO had actual knowledge more than one year before filing the amended complaint that ABOR would spend public funds to construct the conference center

. As the court stated, “ [n] ot only did [the AGO] have enough information to trigger a duty to investigate, [it ] was investigating a Gift Clause claim involving the ABOR/Omni Deal more than a year before it filed the instant claim.” The tax court also held Count IV did not relate back to the filing of the original complain t

. ¶9 The t ax c ourt issued its final judgment in February 2020

. In that judgment , the court dismissed the AGO ’s claim against Creer on the basis he could not be personally liable for any violation of A.R.S. § 3 5

- 212

. The court award ed ABOR and Creer $979,758 in attorney s’ fees and $2,3 56.62 in taxable costs. T he AGO timely appealed
, and we have jurisdiction under A.R.S. § 12

- 2101(A)(1).

DISCUSSION

¶10 T he AGO argues the tax court erred in granting summary judgment to ABOR on the G ift C lause claim, erred in dismissing the three claims in the or iginal complaint, and awarded excessive attorneys’ fees

.

I. Summary Judgment on the Gift Clause Claim

¶11 We review the tax court’s grant of summary judgment de novo

. Calpine Const. Fin. Co. v. Ariz

. Dep ’ t of Revenue , 221 Ariz. 244, 247, ¶ 12 (App. 2009).

A. Statute of Limitations

¶12 The tax court ruled Count IV was untimely under the one

- year limitation s period for claims against public entities

. See A.R.S. § 12

- 821. The AGO contends the tax court incorrectly barred Count IV under the one

- year limitation s period because A.R.S. § 35

- 212(E) gives the AGO five years to

sue after an illegal payment is ordered

. We review issues of statutory interpretation de novo

. Id.

¶13 Under § 35

- 212(E),

A n action brought pursuant to this article is subject to title 12, chapter 7, article 2. If the action is brought by the attorney general, the action must be brought within five years afte rSTATE, et al. v. ABOR, et al. Opinion of the Court

5 the date an illegal payment was ordered and [A.R.S.] § 12

- 821.01 does not apply to the action.
( Sections 12

- 820 to

- 826 fall within title 12, chapter 7, article 2 ). T he AGO relies on ly on the second sentence of § 35

- 212(E)

. But the first sentence of § 35

- 212(E) expressly subjects an y action to enjoin illegal payment s to chapter 7, article 2 of Title 12, which includ es the one

- year limitations period for suits against public entities and employees

. See A.R.S. § 12

- 821. The second
sentence is a statute of repose (not a statute of limitations) which bars any suit by the AGO filed more than five years after an illegal payment is ordered. See A.R.S. § 35

- 212(E)

. “[S] tatutes of repose differ in purpose and operation from statutes of limitations. ” Albano v. Shea Homes Ltd. P’ship , 227 Ariz. 121, 127, ¶ 23 (2011). Statutes of limitations begin running “ after an in jury occurs and is (or reasonably should have been) discovered

. . . But

a statute of repose is intended to establish a l imit beyond which no suit may be pursued and sets a period of time within which claims must be brought regardless of when the cause of action may accrue. ” Id. ( internal quotations and citations omitted)

. ¶14 T he AGO argues § 12

- 821 does not apply to any claim brought by the attorney general and contends such claims are only subject to the five

- year period specified in the second sentence of § 35

- 212(E). W hen construing two statutes , we will try to harmonize and give effect to all the ir provisions. State v. Bowsher , 225 Ariz. 586, 589, ¶ 14 (2010). Section 35

- 212(E) first explicitly invokes the article in Title 12 , which contains the generally applicable limitations period for claims against public entities and employees

. It then provi des a single exception from Title 12 for claims brought by the attorney general : the notice of claim statute. See A.R.S. § 12

- 821.01. Thus, by its plain language, a suit initiated by the AGO to invalidate an illegal payment of public funds remains subject to each of the other provisions within § § 12

- 820 to

- 826. Applying that principle here, Count IV is subject to the one

- year limitations period in § 12

- 821.

B. Accrual

¶15 The AGO next argues Count I V was timely because it accrued within one year of filing the amended complaint

. A s pertinent here, a claim accrues when a reasonable person would have been on notice to investigate. See Cruz v. City of Tucson , 243 Ariz. 69, 7 2 , ¶ 8 (App. 2017). See A.R.S. § 12

- 821.01(B) (“For the purposes of this section, a cause of action accrues when the damaged party realizes he or she has been damaged and knows or reasonably should know the cause, source, act, event, instrumentality orSTATE, et al. v. ABOR, et al. Opinion of the Court

6 condition that caused or contributed to the damage.”)

. The AG O first questioned whether ABOR’s commercial development implicated the Gift Clause on January 11, 2018, when senior AGO attorneys circulated an internal legal memorandum and an opinion editorial on the t opic

. And one of the AGO’s attorney s specifically called the transactio n “ pretty suspicious.” By that time, term sheets outlining the transaction were publicly accessible and the finalized option agreement, executed in February 2018, contained all the prov isions the AGO would later challenge. On this record, the AGO had notice to investigate any Gift Clause claim long before April 3, 2018 (one year before the AGO filed its amended complaint )

. ¶16 The AGO argues, however, that when the claim accrued is a questi on of fact and the tax court erred in denying discovery to address whether ABOR’s conduct tolled the limitation s

. Though juries normally decide when a claim accrues as a factual matter, summary judgment is appropriate when no genuine issue of material fact exists
, and the questions can be resolved on the law. See Doe v. Roe , 191 Ariz. 313, 323, ¶ 32 (1998) ; s ee also Thompson v. Pima Cnty. , 226 Ariz. 42, 47, ¶ 14 (App. 2010). And a court may properly enter summary judgment when the plaintiff can not reasonably justify its failure to investigate. See Walk v. Ring , 202 Ariz. 310, 316, ¶ 23 (2002).

¶17 To be sure, the AGO did not obtain all documents related to the transaction contemplated between Omni and ABOR until after April 3, 2018. But the AGO und isputedly knew about the transaction and could have asked for copies of the ag reements before that date. Indeed, the AGO affirmatively opted against requesting copies of the documents out of a desire

— as one AGO attorney put it

— not to “poke the bear.” The t ax court thus appropriate ly determined Count IV ’ s accrual date as a matter of law

. ¶18 The tax court allowed limited discovery into whether the AGO knew or should have known enough to investigate a claim under the Gift Clause . In doing so, the court denied th e AGO’s request for ABOR’s “entire file on the Omni deal, including deal drafts and communications.” The AGO argued ABOR officials made public statements concealing the true nature of the Omni agreements
, the file might contain evidence ABOR fraudulently concealed details of those agreements
, and ABOR’s concealment would have tolled the statute of limitations. But the court noted the AGO already possessed enough evidence to raise the argument in summary judgment briefing.STATE, et al. v. ABOR, et al. Opinion of the Court

7 ¶19 The AGO does not spe cify a basis on which this court could conclude the tax court abused its discretion by denying the AGO’s request for ABOR’s “entire file” on the transaction. See State v. Connor , 215 Ariz. 553, 557, ¶ 6 (App. 2007) (abuse of discretion standard applies to review of discovery rulings). We find no abuse of discretion here.

C. Relation Back

¶20 T he AGO also argues Count IV was timely because it relates back to the filing of the original complaint

. Count IV relates back if it arises out of the same conduct, transacti on, or occurrence set forth in the original complaint

. See Ariz. R. Civ. P. 15(c). We review the interpretation of a court rule de novo

. Flynn v. Campbell , 243 Ariz. 76, 80, ¶ 7 (2017). Rule 15(c) seeks “to ameliorate the effect of the statute of limitations .” Id. at ¶ 10

. ¶21 An amend ed claim that introduces new facts may relate back if those facts relate to the transaction at issue in the original pleading

. See Servs. Holding Co. v. Transamerica Occidenta l Life Ins. Co. , 180 Ariz. 198, 20 8 (App. 1994). Likewise, an amendment that changes a claimant’s legal theory may relate back if “the factual situation . . . remains the same and has been brought to the defendant’s attention by the original pleading.” Mar shall v. Super ior Ct

. , 131 Ariz. 379, 383 (1982). But an amendment does not relate back if it “ seeks relief with respect to a transaction or event which was not the basis of the original complaint.” Id

. (citations omitted).

¶22 T he AGO contends Count IV should relate back because it arises out of the overall ABOR

- Omni transaction the AGO challenged in the original complaint

. We disagree

. ¶23 Our supreme court’s decision in Barnes v. Vozack , 113 Ariz. 269 (1976), illustrates the distinction between an amended claim based on the

same transaction or event and an amended claim based on a different transaction or event. The plaintiff in Barnes originally alleged the defendants committed common

- law fraud when they sold him stock. Id. at 271. The plaintiff later amended his complaint to add two claims

. Id. The first new claim alleged the defendants’ misrepresentations also violated a statute barring fraud in the sale of stock

. Id. The second claim alleged the defendants made misrepresentations in violation o f another statute when they applied to the state for an exemption permitting the stock sale. Id. The court held the first new claim related back but the second did not. Id. at 272. The statutory stock

- fraud claim relied on the same facts as the common

- law fraud alleged in the original complaint. Id. But the exemption filing at issue in the second new claim was not mentioned in the original complaint, andSTATE, et al. v. ABOR, et al. Opinion of the Court

8 the statute on which that claim was based did not apply to misrepresentations made in the sale of stock. Id. “Although a fraudulent practice, [the misrepresentations made in the exemption filing were] not a part of the same conduct, transaction or occurrence which was the basis for the original complaint for fraud in the sale of stock.” Id.

¶24 The amendment did not necessarily relate back under Rule 15(c)(1) simply because Count IV asserted a claim tangentially related to those alleged in the AGO’s original complaint

. Like the second new claim in Barnes , Count IV alleged facts not pled in the original complaint and
, based on those facts, introduced a new claim based on legal authorities also absent in the original complaint

. ¶25 Counts I

, II , and III alleged the deal effectively constituted ABOR

- approved tax evasion. Count I claimed the for

- profit enterprise did not qualify for tax

- exempt status under any statutory or constitutional exemption. Count II claimed ABOR exceeded its statutory authority by conveying property to avoid taxes

. Count III claimed the property should

car ry ad valorem taxes because ABOR is not “receiving and holding” the property as required by § 15

- 1625, which allows ABOR to enter into leases and long

- term leases “for the benefit of this state and for the use of the institutions under its jurisdiction.” A .R.S. § 15

- 1625(B)(4)

. The AGO thus crafted each original claim to address the property’s tax

- exempt status and the State’s potentially lost/uncollectable tax revenue.

¶26 Count IV did not turn on the alleged diversion of property tax revenues, the concern ar ticulated throughout the original complaint. Rather
, Count IV centered on element s of the overall ABOR

- Omni transaction that were not at issue

— let alone mentioned

— in the original complaint

. T he AGO ’s amended complaint introduced 17 pages of additional facts in support of its new claim, including that ABOR agreed to contribute $19.5 million toward Omni’s construct ion of the conference center and agreed to build a parking garage with more than 200 spaces dedicated for Omni’s use

. T h e AGO alleged that ABOR agreed to accept below

- market rent payments from Omni for the leased pr operty

. And the AGO a lso a rgue d that the “additional rent” Omni agreed to pay ABOR cannot be considered a public benefit because those payments would have been o therwise collected as ad valorem taxes.
¶27 To prove Count IV
, the AGO would have to show that those elements of the transaction lack ed a public purpose or the consideration received by ABOR was disproportionate to what it agreed to give Omni

. See Cheatham v. DiCiccio , 240 Ariz. 314, 318, ¶ 10 (2016). Th o se are differentSTATE, et al. v. ABOR, et al. Opinion of the Court

9 inquir ies than the implications of tax evasion and misuse of ABOR’s authority that underl ay Counts I
, II , and III

. ¶28 In essence , although the amended complaint introd uced new facts relating to the ABOR/Omni deal raised in the original complaint
, the operative facts supporting Count IV (ABOR’s direct and indirect payments to Omni) do not fall within that factual overlap. We agree w ith the tax court that Count IV does not relate back to the original complaint and affirm entry of summary judgment dismissing Count IV against ABOR and Creer

.

II. Dismissal of Counts I , II , and III

¶29 T he AGO also challenges the tax court ’s dismiss al of Counts I , II , and III based on its conclusion that the AGO lacked statutory authority to bring the claims. We review dismissal of a claim under Rule 12 (b)(6) de

novo

. Shepherd v. Costco Wholesale Corp.
,

__ _ Ariz.

_ __ ,

_ __, ¶ 11 , 482 P.3d 390, 392 (2021).

¶30 I n Count I
, the AGO claimed ABOR abused its tax

- exempt status and improperly diverted property tax revenues

. T he AGO believes it has independent authority to bring that claim pursuant to A.R.S. § 42

- 1004(E) ( authorizing AGO to enforce payment of taxes)

. But any p roperty owned by ABOR is exempt from taxation. Ariz. Const. a rt. 9, § 2(1) ; see also City of Tempe v. Del E. Webb Corp. , 13 Ariz. App. 597, 598 (App. 1971). T axes are levied upon land itself and not its separate legal interests ; any property held by ABOR remain s tax

- exempt

. See Recreation C tr s

. of Sun City, Inc. v. Maricopa Cnty

. , 162 Ariz. 281, 288 (1989). Th e hotel and conference center

are thus tax

- exempt

. We agree with the tax court that our constitution’s exemption from taxation attaches unconditionally to all federal, state , county, and municipal property. Because the property is and will remain
tax

- exempt, the AGO is left without a tax provision to enforce

. The court thus di d not err in dismissing Count I

. ¶31 T he AGO claims to have independent authority to bring Counts II and III under the quo warranto statute. In A.R.S. § 12

- 2041
, the AGO is authorized to bring an action “against any person who usurps, intrudes into or unlawfu lly holds or exercises any public office or any franchise within this state.” In Count II
, the AGO accuse d ABOR of “unlawfully usurping at least two different franchises of the State” by making a conveyance (the lease) to evade taxes. Counts II and III also alleged ABOR exceeded its authority to enter into leases. But § 15

- 1625(B)(4) empower s ABOR to “[p]urchase, receive, hold, make and take leases and long

- termSTATE, et al. v. ABOR, et al. Opinion of the Court

10 leases of

. . . real and personal property for the benefit of this state and for the use of t he institutions under its jurisdiction.”

¶32 More importantly, t he quo warranto statute enables the AGO to challenge a person’s right to hold office but not how th at person exercises th at office’s powers

. See State ex re l . Woods v. Block , 189 Ariz. 269, 274 (1997)

. B ecause the AGO lacked authority under the quo warranto statute to bring Counts II and III

, the tax court did not err in dismissing them

.

III. Attorneys’ Fees

¶33 Finally, the AGO objects to the tax court’s fee award, arguing broadly that the award is e xcessive. Under A.R.S. § 12

- 348.01
, the successful part y in a lawsuit between governmental entities is entitled to reasonable attorneys’ fees. We re view fee awards for an abuse of discretion and will affirm if any reasonable basis supports the court’s decision. City of Tempe v. State
, 237 A r iz. 360, 367, ¶ 28 (App. 2015). Once ABOR established an entitlement to fees , the burden shifted to the AGO to s how that ABOR’s fee request was improper or unreasonable

. See id. at 3 68 , ¶ 32.

¶34 The AGO presents to us the same broad arguments it made to the tax court. The tax court was unpersuaded by the AGO ’s contention that ABOR’s attorneys charged an excessive hour ly rate

. We are similarly unpersuaded

. The S tate B ar survey cited by AGO fails to prove ABOR’s attorneys were unreasonably overpaid

. The survey only shows that ABOR’s attorneys charge (much) more th an average , hardly unsurprising for attorneys the tax court described as “at or near the top of the bar.”

¶35 T he AGO could have objected to particular line items or specific categories of time entries in ABOR’s billing records. Instead, the AGO invited the tax court to determine what numb er of billed hours were reasonable because “it is impracticable [for the AGO ] to tease out what a reasonable number of hours would be for this assignment.” But the AGO carries the burden to establish the unreasonableness of ABOR’s fee request
, and it cannot shift that burden onto the court. T he AGO simply failed to
meet its burden in the tax court

. And it provide d us with no analysis of how the tax court abused its discretion . W e will not upset the tax court’s rulin g.STATE, et al. v. ABOR, et al. Opinion of the Court

11 CONCLUSION

¶36 We affirm th e tax court’s judgment. ABOR requests attorneys ’ fees under § 12

- 348.01. Creer requests attorneys’ fees under the same section and A.R.S. § 12

- 349(A)(1). We deny Creer’s request under § 12

- 349(A)(1) but otherwise grant these request s for reasonable fees upon compliance with ARCAP 21.