IN THE

SUPREME COURT OF THE STATE OF ARIZONA

SAGUARO HEALING LLC, 

Plaintiff/Appellant, 

v.

STATE OF ARIZONA, ET AL. 

Defendants/Appellees. 

No. CV-19-0129-PR

Filed August 20, 2020

Appeal from the Superior Court in Maricopa County

The Honorable John R. Hannah, Jr., Judge

No. CV2017-054686

REVERSED AND REMANDED

Memorandum Decision of the Court of Appeals, 

Division One

No. 1 CA-CV 18-0242

Filed March 28, 2019

VACATED

COUNSEL:

Mark Brnovich, Arizona Attorney General, O.H. Skinner, Solicitor General, 

Louis Caputo (argued), Aubrey Joy Corcoran, Assistant Attorneys General, 

Phoenix, Attorneys for the State of Arizona, et al.

Ryan J. Lorenz (argued), Sean M. Carroll, Andrew B. Turk, Christopher T. 

Curran, Clark Hill PLC, Scottsdale, Attorneys for Saguaro Healing, LLC
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

2

JUSTICE BEENE authored the Opinion of the Court, in which VICE CHIEF 

JUSTICE TIMMER and JUSTICES BOLICK, GOULD, LOPEZ, and 

PELANDER (RETIRED) joined.∗ JUSTICE MONTGOMERY concurred in 

part and dissented in part.

JUSTICE BEENE, Opinion of the Court:

¶1 We address whether the Arizona Department of Health 

Services’ (“ADHS”) interpretation of Arizona Administrative Code R9-17-

303, which governs ADHS’s allocation of marijuana dispensary registration 

certificates, violates A.R.S. § 36-2804(C). We conclude § 36-2804(C) requires 

ADHS to issue at least one dispensary registration certificate in each county 

with a qualified applicant. Accordingly, we hold that ADHS’s 

interpretation of R9-17-303, which led it to deny a certificate to a qualified 

applicant from a county without a dispensary, violated the statute.

BACKGROUND

¶2 Pursuant to its rulemaking authority, ADHS must enact rules 

to implement and administer the Arizona Medical Marijuana Act 

(“AMMA”). See A.R.S. §§ 36-136(G), -2803; Ariz. Admin. Code R9-17-301 

to -323. Under the AMMA, an individual or entity must apply to ADHS for 

a dispensary registration certificate before ADHS may approve the 

individual or entity to operate a dispensary. Ariz. Admin. Code R9-17-

304(C)–(D), -305(A). ADHS may only issue a limited number of certificates. 

§ 36-2804(C).

¶3 Each year, ADHS must review existing dispensary certificates 

to determine if it may issue additional certificates under § 36-2804. SeeAriz. 

Admin. Code R9-17-303. Once ADHS determines it can do so, individuals 

or entities interested in operating a medical marijuana dispensary may 

apply to ADHS for a dispensary registration certificate. Id. at -303, -304. 

ADHS must initially prioritize the allocation of certificates to counties 

without a dispensary and then to geographic regions called Community 

 

∗ Chief Justice Robert Brutinel has recused himself from this case. 

Pursuant to article 6, section 3 of the Arizona Constitution, the Honorable 

John Pelander, Justice of the Arizona Supreme Court (Retired), was 

designated to sit in this matter.
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

3

Health Analysis Areas (“CHAAs”) with the most registry identification 

cards issued to qualifying patients. Id. at -303.

¶4 Here, based on the annual review data collected before May 

31, 2016, ADHS performed its priority analysis and determined on June 16, 

2016, it could issue new registration certificates. See id. at (A). ADHS 

announced it would accept applications for new certificates between July 

18 and July 29, 2016. Because every county had at least one dispensary 

during the annual review period, ADHS announced it would allocate the 

registration certificates based on other factors set forth in R9-17-303. See id. 

at (B)(1), (2). Saguaro Healing LLC (“Saguaro”) timely applied for a 

certificate, indicating that its dispensary would be in CHAA 36, located in 

La Paz County.

¶5 During the application period, the only dispensary in La Paz 

County relocated out of the county. However, because the annual review 

data still reflected a dispensary in La Paz County, ADHS did not consider 

the vacancy when prioritizing registration certificates.1 As a result, 

although Saguaro was the only applicant for La Paz County, and ADHS 

notified Saguaro that its application was complete and complied with the 

applicable laws and rules, ADHS did not issue a certificate to Saguaro, and 

La Paz County was left without a dispensary.

¶6 Saguaro filed a complaint for special action alleging that 

ADHS should have prioritized its issuance of registration certificates based 

on the dispensaries’ status sixty days after the application period opened 

pursuant to R9-17-303. The trial court dismissed the complaint because R9-

17-303(B) “does not say when, during the process of issuing new 

certificates, [ADHS] must determine how certificates will be allocated.” It 

noted that for practicality and fairness, ADHS “decided to determine 

[prioritization] before the beginning of the application period instead of 

waiting until the deadline for actually making the allocation.”

¶7 The court of appeals affirmed. Saguaro Healing LLC v. State, 

No. 1 CA-CV 18-0242, 2019 WL 1410627, at *1 ¶ 1 (Ariz. App. Mar. 28, 2019) 

(mem. decision). We granted review to determine whether ADHS’s 

application of R9-17-303 as interpreted violated § 36-2804(C), an issue of 

 

1 For ADHS to determine the number of dispensaries in a given 

county, it need only review the interactive CHAA map on ADHS’s website. 

See Medical Marijuana - Dispenaries - Map Your CHAA, Arizona Department 

of Health Services, https://www.azdhs.gov/licensing/medicalmarijuana/index.php#dispensary-map-chaa (last visited Aug. 17, 2020).
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

4

statewide importance. We have jurisdiction pursuant to article 6, section 

5(3) of the Arizona Constitution.

DISCUSSION

¶8 Pursuant to § 36-2804(C):

[ADHS] may not issue more than one nonprofit medical 

marijuana dispensary registration certificate for every ten 

[registered] pharmacies . . . within the state except that the 

department may issue nonprofit medical marijuana 

dispensary registration certificates in excess of this limit if 

necessary to ensure that the department issues at least one 

nonprofit medical marijuana dispensary registration 

certificate in each county in which an application has been 

approved.

¶9 We are asked to decide whether § 36-2804(C) grants ADHS 

discretion to deny a registration certificate to a county without a dispensary 

if issuing it would exceed the one-in-ten ratio. 2

¶10 We interpret statutes and administrative rules de novo, 

“apply[ing] the same rules in construing both statutes and rules.” Gutierrez 

v. Indus. Comm’n of Ariz., 226 Ariz. 395, 396 ¶ 5 (2011) (citation omitted). We 

do not defer to the agency’s interpretation of a rule or statute. A.R.S. § 12-

910(E); see also Stambaugh v. Killian, 242 Ariz. 508, 512 ¶ 21 (2017).

A.

¶11 The State argues § 36-2804(C) “imposes only a maximum—

not a minimum—number of dispensaries.” It asserts that ADHS has 

discretion to exceed that maximum for a county without a dispensary but 

that § 36-2804(C) does not require it. The State rests its conclusion on the 

second use of the word “may” in the statute. We disagree with its 

interpretation.

¶12 Although “[t]he word ‘may,’ when used in a statute, usually 

implies some degree of discretion,” this principle “can be defeated by 

indications of legislative intent to the contrary or by obvious inferences 

from the structure and purpose of the statute.” United States v. Rodgers, 461 

 

2 The one-in-ten ratio provides that ADHS “may not issue more than 

one nonprofit medical marijuana dispensary registration certificate for 

every ten [registered] pharmacies” operating in Arizona. § 36-2804(C).
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

5

U.S. 677, 706 (1983). “Words in statutes should be read in context in 

determining their meaning.” Stambaugh, 242 Ariz. at 509 ¶ 7.

¶13 Here, the words “if necessary to ensure” indicate that “may” 

is not permissive in this context. The dictionary definitions of “necessary” 

and “ensure” support this conclusion. See Necessary, Merriam-Webster’s 

Collegiate Dictionary (11th ed. 2003) (“[A]bsolutely needed : required.”); 

Ensure, Merriam-Webster’s Collegiate Dictionary (11th ed. 2003) (“[T]o 

make sure, certain, or safe : guarantee.”); see also DBT Yuma, L.L.C. v. Yuma 

Cty. Airport Auth., 238 Ariz. 394, 396 ¶ 9 (2015) (“Absent statutory 

definitions, courts generally give words their ordinary meaning and may 

look to dictionary definitions.” (internal citation omitted)). Accordingly, 

although “may” often indicates discretion, here the words “if necessary to 

ensure” indicate that ADHS is required to issue “at least one . . . certificate 

in each county in which an application has been approved.” § 36-2804(C). 

In this context, “may” requires ADHS to issue a registration certificate it 

ordinarily would not be able to issue to “ensure” that there is a medical 

marijuana dispensary in each county.

¶14 Further, the interplay between subsections (B) and (C) 

supports the construction that “may” is mandatory. Subsection (B) requires 

ADHS to issue a registration certificate if the applicant satisfies the 

statutory requirements. Subsection (C) sets the maximum number of 

permissible dispensaries that ADHS “may not” exceed. However, 

subsection (C) provides one exception, that ADHS “may” exceed the 

maximum to ensure a county has at least one dispensary. “May” in § 36-

2804(C) is a counterpoint to “may not” in the subsection and serves to 

remove the cap on dispensaries when keeping it would deprive a county of 

a dispensary. Accordingly, when subsections (B) and (C) are read together, 

ADHS must certify all qualified applicants until it reaches the limit of one 

dispensary for every ten pharmacies.

¶15 Finally, interpreting “may” as mandatory in this context 

furthers the AMMA’s purpose to aid individuals with “debilitating medical 

conditions” by ensuring access to a dispensary in each county. See A.R.S. 

§ 36-2801(15) (“‘Qualifying patient’ means a person who has been 

diagnosed by a physician as having a debilitating medical condition.”); see 

also Ariz. Sec’y of State, 2010 Publicity Pamphlet 73 § 2(G) (2010), 

https://apps.azsos.gov/election/2010/info/PubPamphlet/english/ebook.pdf; A.R.S. § 36-2804.02(A)(3)(e), (f) (indicating legislative intent to 

ensure access to medical marijuana by allowing caregivers and patients the 

ability to grow their own medical marijuana when a dispensary is not 

operating within twenty-five miles of the patient’s home).
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

6

¶16 The State alternatively argues that A.R.S. § 36-2803.01, 

enacted in 2019 and effective April 2020, supports its construction that the 

use of “may” in § 36-2804(C) is permissive. However, § 36-2803.01 does not 

apply to this case. To begin, § 36-2803.01 was not in effect when Saguaro 

applied for a registration certificate. Further, § 36-2803.01 deals with 

prioritization, while § 36-2804(C) concerns the number of certificates ADHS 

may issue. When §§ 36-2803.01 and -2804 are read together, the legislature 

is permitting more dispensaries in high density areas, while also 

prioritizing counties without dispensaries. Finally, § 36-2803.01 does not 

address § 36-2804(C)’s mandate that ADHS exceed the typical one-in-ten 

ratio for a county without a dispensary or whether ADHS can use its annual 

review data to deny a registration certificate to a qualified applicant for a 

county without a dispensary.

¶17 At bottom, § 36-2804(C) requires ADHS to deny a registration 

certificate if the maximum number of dispensaries exists and all counties 

have a dispensary. But if the maximum number of dispensaries exists and 

one or more counties do not have a dispensary, ADHS must grant a 

certificate to a qualified applicant, thus allowing a dispensary in a county 

without one.

B. 

¶18 Because “may” is not discretionary in this context, ADHS’s 

application of R9-17-303 as interpreted conflicts with § 36-2804(C) and 

cannot stand. See Ariz. Bd. of Regents ex rel. Ariz. State Univ. v. Ariz. State 

Pers. Bd., 195 Ariz. 173, 175 ¶ 9 (1999) (“[I]f an agency rule conflicts with a 

statute, the rule must yield.”).

¶19 Although the AMMA allows ADHS to adopt rules governing 

dispensaries, see § 36-2803(A)(4)(a), “[t]he scope of an agency’s power is 

measured by statute and may not be expanded by agency fiat,” Cochise 

County v. Ariz. Health Care Cost Containment Sys., 170 Ariz. 443, 445 (App. 

1991). Here, ADHS’s power to adopt and interpret its rules is confined by 

§ 36-2804(C), which commands ADHS to “ensure” that every county with 

a qualified applicant has at least one dispensary.

¶20 In its current form, ADHS’s rule does not conflict with § 36-

2804(C), but in this case, ADHS’s interpretation and application of its rule 

contravenes the statute’s requirement that ADHS issue a medical marijuana 

dispensary registration certificate to a qualified applicant from a county 

without a dispensary. ADHS’s rule provides that each year it will review 

current valid dispensary registration certificates to decide if it will issue 

additional certificates in accordance with § 36-2804(C). Ariz. Admin. Code 
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

7

R9-17-303(A). If, based on the annual review, ADHS determines it may 

issue more certificates, it will open the application process. Id. at (A)(1). 3

¶21 The rule provides that sixty working days after ADHS begins 

accepting applications, ADHS shall determine how it will prioritize the 

applications. Id. at (c). However, in this case, ADHS interpreted R9-17-303 

as allowing it to prioritize the allocation of new registration certificates 

based on the annual review data gathered before the opening of the 

application period—thereby creating a conflict with the statute. Our 

dissenting colleague would defer to ADHS to determine when it may 

prioritize applications. We do not defer to ADHS in this case because 

although R9-17-303 requires that ADHS conduct an annual review, the 

application prioritization must comply with the statute’s goal of ensuring 

one dispensary in each county with a qualified applicant. Deferring to 

ADHS here would clearly be contrary to law. See § 12-910(E) (“The court 

shall affirm the agency action unless the court concludes that the agency’s 

action is contrary to law, is not supported by substantial evidence, is 

arbitrary and capricious or is an abuse of discretion.” (emphasis added)).

¶22 We agree with our dissenting colleague that “a dispensary 

can still leave a county regardless of when the prioritization or allocation 

process occurs.” Infra ¶ 32. But the statute requires that ADHS issue 

registration certificates, and necessarily open the application process, under 

two distinct circumstances: (1) if the allocation of dispensary certificates is 

below the one-in-ten ratio or (2) a county does not have a dispensary. § 36-

2804(C). Accordingly, ADHS cannot use data obtained from the annual 

review for prioritization if it would result in denying a dispensary to a 

county without one during the application process. At minimum, if there 

is a qualified applicant for a county without a dispensary during the 

application process, as occurred here, the statute requires ADHS to issue a 

registration certificate to that applicant. Therefore, ADHS’s application of 

R9-17-303 as interpreted, which caused it to deny a certificate to a qualified 

applicant from a county without a dispensary, violated § 36-2804(C). It is 

axiomatic that an agency’s application of its rule must be consistent with 

Arizona law.

 

3 ADHS apparently interprets R9-17-303 to allow it to open the 

application process only if there is a new dispensary registration certificate 

available under § 36-2804(C)’s one-in-ten ratio. However, § 36-2804(C) 

commands ADHS to exceed the ratio to ensure one dispensary in each 

county; therefore, to comply with the statute ADHS must open the 

application process whenever there is a county without a dispensary during 

the annual review.
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

Opinion of the Court

8

CONCLUSION

¶23 For the foregoing reasons, we conclude § 36-2804(C) requires 

ADHS to issue at least one medical marijuana dispensary registration 

certificate in each county with a qualified applicant. We also conclude that 

ADHS’s interpretation of R9-17-303 contrary to this statutory mandate 

violates § 36-2804(C). Accordingly, we vacate the court of appeals’ 

decision, reverse the trial court’s order dismissing Saguaro’s complaint, and 

remand to the trial court to consider Saguaro’s special action consistent 

with this opinion. We grant Saguaro’s request for attorney fees pursuant to 

A.R.S. § 12-348(A). 
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

9

MONTGOMERY, J., concurring in part and dissenting in part:

¶24 Because bad facts make for bad law and an exception should 

not become the basis for a rule, I would have declined review of the petition 

in this case. Nevertheless, the matter is before us, and while I agree with 

the majority’s interpretation of § 36-2804(C) at ¶¶ 11–14, I respectfully 

dissent from ¶¶ 15–23 involving the application of the statute to the facts of 

this case and the conclusion.

I.

¶25 The crux of the issue before us actually concerns when ADHS 

can determine whether a county is lacking a dispensary and prioritize the 

allocation of available registration certificates. That Saguaro was unable to 

receive a certificate—which was never available—was not due to any 

unlawful, groundless, arbitrary, or capricious action by ADHS nor a result 

of an interpretation of a rule inconsistent with § 36-2804(C). Instead, it was 

simply a consequence of an administrative agency exercising broadly 

delegated legislative authority to govern a complex certificate allocation 

process. In fact, the AMMA itself provides the necessary recourse where a 

county may be without a dispensary until the next allocation period.

II.

¶26 In this case, ADHS conducted an annual review of existing 

AMMA dispensary certificates with a record information date of May 31, 

2016. The review established that every county had at least one licensed 

dispensary and, in compliance with § 36-2804(C), ADHS determined that it 

would issue thirty-one additional certificates. Accordingly, ADHS posted 

the following on its website on June 16, 2016:

The Department will accept dispensary registration certificate 

applications from July 18 – July 29, 2016. During this 

allocation, 31 dispensary registration certificates will be 

available. The “record date” for the allocation will be May 31, 

2016. Because there are no available counties as of the record 

date, the Department will not allocate certificates under R9-

17-303(B)(1). Update - The top 31 CHAAs prioritized under 

R9-17-303(B)(2) will be made available by June 16. Any 

certificates not allocated under R9-17-303(B)(2) will be 

allocated under R9-17-303(B)(3). 
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

10

¶27 Given that La Paz County had a dispensary in CHAA 36, it 

was not among the thirty-one CHAAs listed on June 16.4 On or about July 

19, two days into the open application period, the dispensary operating in 

CHAA 36 relocated from La Paz County to a CHAA in Maricopa County.

¶28 Even though CHAA 36 was not allocated a registration 

certificate, Saguaro went ahead and submitted an application during the 

open period for the CHAA anyway. Unsurprisingly, and consistent with 

the notice provided for the application process, ADHS did not allocate a 

registration certificate to Saguaro. ADHS notified Saguaro on October 6, 

2016, that it would not be issued a certificate, and Saguaro subsequently 

brought a special action complaint against ADHS. The trial court ultimately 

dismissed the complaint on ADHS’s motion, which the court of appeals 

affirmed. 

III.

¶29 The majority concludes that ADHS’s interpretation of R9-17-

303 is inconsistent with § 36-2804(C) for two reasons. First, the majority 

asserts that ADHS may not determine how to prioritize available 

certificates until sixty working days after the open application period 

begins. Supra ¶ 21. Second, the majority declares that ADHS’s 

prioritization process “must comply with the statute’s goal of ensuring one 

dispensary in each county with a qualified applicant.” Supra ¶ 21.

A.

¶30 Addressing the second reason first, by faulting ADHS’s 

prioritization process because a county ended up without a dispensary after 

following a rule the majority acknowledges is valid, supra ¶ 20, the majority 

is effectively requiring ADHS to accommodate applications for certificates 

whenever a county no longer has a dispensary. There is no basis in the 

regulatory framework established pursuant to the AMMA to support this 

directive. The majority reads too much into § 36-2804(C) and does not fully 

account for the fact that the AMMA addresses the possibility that a 

dispensary may not be operating in a county. Specifically, § 36-

 

4 Aside from the fact that La Paz County had a dispensary with a 

registered certificate as of May 31, because La Paz County CHAAs 35, 36, 

and 37 had fewer qualifying patients with registry identification cards than 

the other CHAAs prioritized under R9-17-303(B)(2), they would not have 

otherwise qualified for a certificate.
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

11

2804.02(A)(3)(e), (f) permits individual qualified patients and caregivers to 

grow marijuana if a “dispensary is not operating within twenty-five miles 

of the qualifying patient’s home.” See also § 36-2801(1)(a)(ii), (b)(ii) (each 

permitting a qualified patient and caregiver, respectively, to cultivate 

marijuana). Moreover, there is simply no authoritative source to conclude 

that § 36-2804(C) was intended to make dispensaries ubiquitous in Arizona.

B. 

¶31 The majority’s assertion that ADHS cannot prioritize 

certificates until sixty days after it begins to accept applications is also 

unsupported by any statute or rule in the AMMA regulatory framework. 

The rule cited, R9-17-303(A)(1)(c), provides:

Sixty working days after the date the Department begins 

accepting applications, the Department shall determine if the 

Department received more dispensary registration certificate 

applications that are complete and in compliance with A.R.S. 

Title 36, Chapter 28.1 and this Chapter to participate in the 

allocation process than the Department is allowed to issue.

There is no reference to the prioritization process, let alone any direction as 

to when it must occur. The rule simply provides a deadline to ensure the 

allocation process occurs within the statutory timeframe for issuing 

registration certificates. See § 36-2804(B).

¶32 The prioritization process is set forth at R9-17-303(B), which 

directs ADHS to allocate certificates based on prioritization criteria if “the 

Department receives, by 60 working days after the date the Department 

begins accepting applications, more dispensary registration certificate 

applications . . . than the Department is allowed to issue.” Nowhere in the 

rules or § 36-2804(C) is ADHS required to wait until after the application 

period to prioritize available certificates. Even by rewriting the rule to fix 

this unique circumstance, the majority will not preclude a similar situation 

in the future because a dispensary can still leave a county regardless of 

when the prioritization or allocation process occurs. 

¶33 “In circumstances like these, in which the [people have] not 

spoken definitively to the issue at hand, ‘considerable weight should be 

accorded to an executive department’s construction of a statutory scheme 

it is entrusted to administer.’” Ariz. Water Co. v. Ariz. Dep’t of Water Res., 

208 Ariz. 147, 154 ¶ 30 (2004) (quoting Chevron, U.S.A., Inc. v. Nat. Res. Def. 
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

12

Council, Inc., 467 U.S. 837, 844 (1984)). Even if the Court is not required to 

give deference to ADHS’s interpretation of the statute and rules in question, 

an agency action should be affirmed “unless the court concludes that the 

agency’s action is contrary to law, is not supported by substantial evidence, 

is arbitrary and capricious or is an abuse of discretion.” § 12-910(E).

1.

¶34 To conclude that ADHS acted contrary to law, the majority 

reads a timing prohibition into the rules that does not exist in order to 

accomplish a statutory goal that is not supported when considering the 

entirety of the regulatory framework. The fact that the information known 

as of the record date later changed does not place ADHS’s interpretation of 

R9-17-303 in conflict with § 36-2804(C). It simply means that under these 

rather exceptional circumstances, the sole applicant for La Paz County—

which knew a month in advance of the application process that it could not 

receive a certificate—was not allocated one. Therefore, the consequence of 

determining that each county had a licensed dispensary in advance of the 

application period is not contrary to § 36-2804(C) but is actually addressed 

by the AMMA where qualified patients and caregivers may not be near an 

operating dispensary.

2.

¶35 There was reasonable information from which ADHS based 

its determination for prioritizing the allocation of available certificates. An 

agency’s consideration of facts and circumstances must look at “the 

relevant data and articulate a satisfactory explanation for its action 

including a rational connection between the facts found and the choice 

made.” Compassionate Care Dispensary, Inc. v. Ariz.Dep’t of Health Servs., 244 

Ariz. 205, 213 ¶ 25 (App. 2018) (quoting Motor Vehicle Mfrs. Ass’n of U.S. v. 

State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983) (internal quotation marks
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

13

omitted)). 5 By grounding its analysis in the available facts and 

circumstances as of the record date, ADHS established a fair and 

transparent process that avoided arbitrary decision making. 

¶36 Providing notice of the allocation priorities in advance of 

accepting applications also involves simple fairness to those deciding 

whether to apply in the first place, especially when considering what is 

required for an application. Pursuant to § 36-2804(B), an applicant must 

provide information regarding the name and location of the dispensary and 

certify that it meets all local zoning requirements, provide personal 

identifying information for each principal owner and/or board member to 

facilitate a criminal background check, provide personal identifying 

information for each dispensary agent, provide a copy of all operational 

procedures to ensure compliance with ADHS governance rules, and pay 

$5,000. Waiting to prioritize and publicize the availability of certificates 

until well after aspiring certificate recipients have had to prepare and 

submit all the necessary paperwork renders the filing of an application akin 

to buying a lottery ticket for $5,000.

¶37 Even Saguaro recognizes that “[t]he subsection (B)(2) 

prioritization is complex and time-consuming. It is within ADHS’s 

discretion and performance of its duties under subsection (B)(2) to get a 

head start and identify the CHAAs with high patient populations and fewer 

dispensaries during the subsection (A) review.” To calculate the number of 

available certificates as required by § 36-2804(C), ADHS had to first verify 

whether each county had a licensed dispensary, which it did, and then 

identify the number of pharmacies registered, permitted, and operating. 

 

5 In other contexts, agencies have received generous latitude for the 

rules they create when implementing their legitimate statutory authority. 

E.g., Silver v. Pueblo Del Sol Water Co., 244 Ariz. 553 (2018) (upholding 

Arizona Department of Water Resources’s regulations and procedures for 

determining statutorily required finding and interpretation of “legal 

availability” to determine adequate water supply for proposed 

development); Facilitec, Inc. v. Hibbs, 206 Ariz. 486 (2003) (Arizona 

Department of Administration’s internal delegation of quasi-judicial 

authority upheld in keeping with statutory authority); Goodman v. Superior 

Court, 136 Ariz. 201 (1983) (Racing Commission regulations generally 

upheld within new statutory authority); Cleckner v. Ariz. Dep’t of Health 

Servs., 246 Ariz. 40, 44 ¶ 16 (App. 2019) (ADHS regulations that narrowed 

the scope of midwife practice were upheld despite a statute seemingly 

meant to allow a broader scope of practice).
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

14

Then, given the available information, ADHS had to determine which 

criteria for prioritizing the allocation of available certificates would apply. 

In this case, that meant reviewing the number of qualified patients residing 

in each CHAA and ranking the CHAAs accordingly.

¶38 Had the information available as of the May 31, 2016 record 

date revealed that there was no dispensary in La Paz County, and ADHS 

then neglected or simply refused to allocate a registration certificate, 

Saguaro would have a sound and persuasive claim and the majority’s 

analysis and application of § 36-2804(C) would be entirely correct.

3.

¶39 ADHS’s determination in advance of the application process 

that there were no certificates to allocate by county is entitled to deference 

unless the determination was “arbitrary, capricious, or . . . an abuse of 

discretion.” Silver, 244 Ariz. at 557 ¶ 9 (quoting J.W. Hancock Enters., Inc. v. 

Registrar of Contractors, 126 Ariz. 511, 513 (1980)). An agency action is 

arbitrary and capricious when taken “without consideration and in 

disregard for facts and circumstances.” Maricopa Cty. Sheriff’s Office v. 

Maricopa Cty. Emp. Merit Sys. Comm’n, 211 Ariz. 219, 223 ¶ 17 (2005)

(quoting Maricopa County v. Gottsponer, 150 Ariz. 367, 372 (App. 1986)). But, 

“where there is room for two opinions, the action is not arbitrary or 

capricious if exercised honestly and upon due consideration, even though 

it may be believed that an erroneous conclusion has been reached.” Id.

(quoting Gottsponer, 150 Ariz. at 372).

¶40 Given the objective and accurate data as of the record date, 

the complex process for determining prioritizations under the 

circumstances, and the establishment of a process that was objectively fair 

and transparent for all applying for available certificates, there is nothing 

arbitrary or capricious about ADHS’s determination.

III.

¶41 Lastly, article 3 of the Arizona Constitution commands that 

“no one of such departments shall exercise the powers properly belonging 

to either of the others.” Therefore, we should be even more hesitant to offer 

our own “fix” for unique issues within the administration of a complex 

regulatory framework where the responsibility is expressly delegated by 

the legislative authority to an executive agency. That the majority finds no 

fault with the rule itself, supra ¶ 20, reveals that the Court simply disagrees 
SAGUARO HEALING LLC v. STATE OF ARIZONA, et al.

JUSTICE MONTGOMERY, concurring in part, dissenting in part

15

with how an executive agency is carrying out its delegated authority. Given 

the recent passage of § 36-2803.01 addressing allocation priorities and 

geographic displacement of dispensaries, the legislature has demonstrated 

its ability to provide direction to ADHS in allocating registration 

certificates. We need not do so.

IV.

¶42 ADHS’s prioritization of available registration certificates in 

advance of the application process was a reasonable and practical exercise 

of its delegated responsibility to govern the certificate allocation process. 

Similarly, its determination that no certificate was available for La Paz 

County for purposes of allocating registration certificates was not arbitrary, 

capricious, or an abuse of discretion. Again, while I would not have 

granted review in the first place, I would affirm the court of appeals’ 

decision.