Court Opinion

ID: 6336032
Source: CourtListenerOpinion
Date Created: 2022-04-28 17:02:21.187981+00
Date Added: 2024-06-11T09:23:32.755601
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                               DIVISION ONE

                           RONALD A. SIMMS,
                      Plaintiff/Appellee-Cross Appellant,

                                      v.

                ARIZONA RACING COMMISSION;
                 JEREMY E. SIMMS, an individual;
        TP RACING, LLLP, a limited liability limited partnership,
         and BELL RACING, LLC, a limited liability company,
                Defendants/Appellants-Cross Appellees.

                           No. 1 CA-CV 18-0546
                             FILED 4-28-2022

           Appeal from the Superior Court in Maricopa County
                        No. LC2016-000505-001
             The Honorable Dawn M. Bergin, Judge Retired

                     VACATED AND REMANDED

                                 COUNSEL

Dentons US, LLP, Phoenix
By Paul K. Charlton, Karl M. Tilleman, Douglas D. Janicik
Co-Counsel Plaintiff/Appellee/Cross Appellant Ronald A. Simms

Greenberg Traurig, LLP, Phoenix
By Nicole M. Goodwin
Co-Counsel for Plaintiff/Appellee/Cross Appellant Ronald A. Simms

Orrick Herrington & Sutcliffe, LLP, Los Angeles, California
By Stacy W. Harrison, Nathan J. Novak
Co-Counsel for Plaintiff/Appellee/Cross Appellant Ronald A. Simms

Stinson, LLP, Phoenix
By Michael C. Manning, James M. Torre
Counsel for Defendants/Appellants/Cross Appellees Jeremy E. Simms, TP Racing
LLLP, Bell Racing LLC
                         SIMMS v. SIMMS, et al.
                          Opinion of the Court

Gammage & Burnham, PLC, Phoenix
By Camila Alarcon, Christopher L. Hering
Counsel for Defendant/Appellant/Cross Appellee Arizona Racing Commission

                                OPINION

Presiding Judge David D. Weinzweig delivered the opinion of the Court, in
which Judge Jennifer M. Perkins and Judge James B. Morse Jr. joined.

W E I N Z W E I G, Judge:

¶1           This appeal marks another chapter in the protracted and
acrimonious feud between brothers Jeremy (“Jerry”) and Ronald (“Ron”)
Simms over the rights to Turf Paradise. Their fraternal animus has
spawned a vast web of administrative duels, lawsuits and appeals. This
chapter requires us to decide when the Arizona Racing Commission may
accept and decide appeals of licensing decisions made by the Arizona
Department of Gaming’s director.

             FACTS AND PROCEDURAL BACKGROUND

¶2           We recount the facts in the “light most favorable to the
Commission’s decision.” DeGroot v. Ariz. Racing Comm’n, 141 Ariz. 331, 334
(App. 1984).

      A.     Turf Paradise and the Simms Brothers

¶3            Turf Paradise is a thoroughbred and quarter horse racetrack
located about 25 miles from downtown Phoenix. Jerry and Ron acquired
Turf Paradise in 2000 through a limited partnership, TP Racing, L.L.L.P.
(“TPR”). Jerry held a 55 percent interest in TPR; Ron and Ron’s trust held
a 32 percent interest. Jerry and Ron formed J & R Racing, LLC (“J & R”) to
serve as TPR’s general partner, imbued with exclusive authority to manage
TPR’s affairs. Jerry and Ron each owned a 50 percent interest in J & R. Ron
owned his through RASCD, Inc.

¶4            Jerry and Ron’s business relationship deteriorated and then
disintegrated, ending in a pair of 2010 lawsuits asserting competing claims
and counterclaims. Jerry and TPR sued Ron and one of Ron’s corporations
for defaulting on a promissory note associated with a land transfer. Ron
responded with 40 counterclaims, including claims for breach of contract
and breach of fiduciary duty. The superior court issued two injunctions in
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                          SIMMS v. SIMMS, et al.
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those lawsuits; the first prevented Jerry from exceeding his managerial
authority under J & R’s operating agreement, Simms v. Simms, 1 CA–CV 11–
0525, 2012 WL 2795978 (Ariz. App. July 3, 2012); the second prevented Jerry
from removing J & R as TPR’s general partner without justification, TP
Racing, L.L.L.P. v. Simms, 232 Ariz. 489 (App. 2013).

      B.     Ron Loses His License and Is Ousted

¶5            The quarrel then shifted to the administrative arena. TPR
asked the Arizona Department of Racing (“ADOR”) to renew its three-year
racing permit in 2012. During the renewal process, ADOR Director Bill
Walsh learned that Ron’s individual racing license had expired and ordered
that Ron “may not take part in, directly or indirectly, or have any personal
interest in the operation of [TPR].” Director Walsh said ADOR was
concerned about Ron’s “fitness” to participate in TPR and promised to
“thoroughly scrutinize[]” Ron’s future license applications. Years later, the
superior court in this case would receive evidence that Jerry sparked or
stoked Ron’s regulatory troubles by delivering ten binders of adverse
information to Director Walsh.

¶6            Ron formally applied for a new racing license in November
2013. Unbeknownst to Ron, Director Walsh decided to deny Ron’s
application and solicited input from Jerry’s attorney in drafting the “notice
of denial.” Jerry’s attorney was pleased with Director Walsh’s draft and
privately praised him for an “A+ job.” Director Walsh’s final notice of
denial listed ten grounds for rejecting Ron’s application. Walsh also
warned that TPR’s “application for renewal of its three year permit” would
be considered only after Ron was removed from any role in or connection
to the business.

¶7            Given the denial of Ron’s application, the superior court
dissolved both injunctions against Jerry and TPR. Just hours later, the TPR
partners (absent Ron) voted to dissociate Ron from TPR and replace J & R
as general partner with Bell Racing, a new company Jerry had formed. Jerry
assumed control of Turf Paradise with these maneuvers, at least for the time
being.

      C.     The Office of Administrative Hearings, Arizona
             Department of Gaming and Arizona Racing Commission

¶8          Ron appealed the denial of his racing license. See A.R.S. § 5-
104(D). The Office of Administrative Hearings held a 21-day hearing over
ten months before an administrative law judge (“ALJ”). In June 2015, the
ALJ recommended that Director Walsh’s decision be reversed and Ron be
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                          SIMMS v. SIMMS, et al.
                           Opinion of the Court

issued a racing license. Among his findings and conclusions, the ALJ
determined that Ron was “qualified to be licensed by ADOR,” “has
sufficient good repute and moral character to satisfy the statutory
requirement for a license,” and “did not violate the racing laws” or the
Commission’s regulations “when he was previously licensed or granted a
permit.”

¶9             At that point, Arizona law required “the director” to reject or
modify the ALJ’s decision. See A.R.S. § 5-104(D) (“The decision of the
administrative law judge becomes the decision of the director unless
rejected or modified by the director within thirty days.”). Two weeks after
the ALJ’s decision, however, the legislature refashioned ADOR into a
division of the Arizona Department of Gaming (“ADOG”).                   This
administrative shuffle meant that ADOG’s director considered the ALJ’s
decision rather than Director Walsh. The ALJ’s decision then became
ADOG’s final decision (hereinafter, the “ADOG Decision”) because
ADOG’s director did not reject or modify the ALJ’s decision “within thirty
days” after its release. See id.

¶10            Jerry and TPR appealed the reversal of Ron’s license denial to
the Commission under A.R.S. § 5-104(D), urging the Commission to “reject
and reverse” the ADOG Decision “pursuant to Ariz. Admin. Code R9-2-
124(A), A.R.S. § 5-104(D), and A.R.S. § 41-1092.08(C).” Ron moved to
dismiss the appeal for lack of “standing,” arguing that neither Jerry nor TPR
was a “person aggrieved” under the Commission’s rules. See Ariz. Admin.
Code R19-2-124(A)(1). The Commission rejected Ron’s argument, voting 3-
2 that Jerry and TPR had “aggrieved person status.”

¶11           The Commission held a hearing and received extensive
briefing from the parties before reversing the ADOG Decision, again
“denying [Ron] an owner’s license to participate in or be employed at any
horse race track licensed to operate in the State of Arizona.” The
Commission found that Ron did “not have sufficient good repute and moral
character to satisfy the statutory requirement for a license and that granting
[Ron] a license would not serve the best interest of the safety, welfare,
economy, health and peace of the people of the State.” See A.R.S. § 5-
108(A)(1)(b), (h). The Commission also found that Ron violated Arizona’s
racing laws when he was previously licensed, A.R.S. § 5-108(A)(1)(c);
willfully violated the Commission’s rules and regulations, A.R.S. § 5-
108(A)(1)(g); knowingly made false statements of fact to ADOR, A.R.S. § 5-
108(A)(3); did not meet “his monetary obligations in connection with racing
meetings,” A.R.S. § 5-108(A)(4); and failed to inform ADOR in writing of
material changes in his license application, A.R.S. § 5-108(A)(1)(j).

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                          SIMMS v. SIMMS, et al.
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      D.     The Superior Court

¶12            Ron timely appealed the Commission’s decision to the
superior court, raising 25 procedural, evidentiary and constitutional
arguments. See A.R.S. §§ 41-1092.08(H), 12-905(A). As relevant here, Ron
argued that the Commission erred by hearing Jerry and TPR’s appeal
because neither had standing as “persons aggrieved,” that ADOR and the
Commission deprived Ron of due process and equal protection in the first
instance, and that the Commission’s decision was unsupported by
sufficient evidence.

¶13            The superior court heard oral argument. It also reviewed
written memoranda, the administrative record and supplemental evidence
of the parties, but held no evidentiary hearing. See A.R.S. § 12-910(A), (B).
The court then vacated the Commission’s decision and reinstated the
ADOG Decision, reasoning that Jerry and TPR did not “qualify as
aggrieved persons” under R19-2-124(A)(1). The court did not define the
term “person aggrieved,” but rejected the dictionary “definition of
‘aggrieved’ [as] entirely too broad and therefore unworkable,” and found
the Commission’s rule “is not designed” to resolve or “delve into whatever
disputes exist between the partners.”

¶14          Because it vacated and reversed the Commission’s decision
on standing grounds, the superior court did not decide whether the
Commission erred on the merits or violated Ron’s constitutional rights. The
court did, however, reject Ron’s due process arguments against former
ADOR Director Walsh, reasoning that Ron had no constitutionally
protected property interest in a racing license and that “Walsh was not
acting in a quasi-judicial capacity when he denied Ron’s license.” Ron
sought nearly $11 million in attorney fees and costs, which the court
described as “patently unreasonable” and awarded Ron $225,000 in fees
and costs.

¶15           The Commission, Jerry, Ron and TPR timely appealed and
cross-appealed, asserting errors at every stage of the licensure process,
beginning with former Director Walsh’s original denial and ending with
the superior court’s reversal of the Commission’s decision. We have
jurisdiction. See A.R.S. § 12-913.

                              DISCUSSION

¶16           The superior court determined that Jerry and TPR lacked
standing to appeal the ADOG Decision to the Commission. Arizona courts,
however, are “not constitutionally constrained” to impose standing
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                           SIMMS v. SIMMS, et al.
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minimums, and this case does not present the doctrine of prudential
standing, which cautions Arizona courts to “exercise restraint [and] refrain
from issuing advisory opinions” to ensure that “cases [are] ripe for
decision” and “issues [are] fully developed between true adversaries.” City
of Surprise v. Ariz. Corp. Comm’n, 246 Ariz. 206, 209, ¶8 (2019).

¶17            Even so, the Commission must follow the administrative
rules it promulgates, including limitations on who may appeal rulings to
the Commission. Cochise Cty. v. Ariz. Health Care Cost Containment Sys., 170
Ariz. 443, 445 (App. 1991) (“An administrative agency must follow the rules
it promulgates.”); cf. Ariz. Dep’t of Water Res. v. McClennen, 238 Ariz. 371,
376, ¶ 29 (2015) (distinguishing the concept of standing from “the question
of who is statutorily authorized, as an ‘interested person,’ to file objections
in an ADWR administrative proceeding”).

¶18          At issue here is Arizona Administrative Code R19-2-
124(A)(1), “Appeal of Director’s Rulings,” which provides:

              A person aggrieved by a ruling of the Director may
              appeal to the Commission. An appeal shall be filed in
              writing to the office of the Commission within 30 days
              after service of the Director’s ruling.

¶19           Arizona courts interpret the Commission‘s rules de novo,
using the standard rules and tools of statutory construction. Saguaro
Healing LLC v. State, 249 Ariz. 362 (2020). The “fundamental purpose” of
this exercise is to ascertain the Commission’s intent. Marlar v. State, 136
Ariz. 404, 410-411 (App. 1983). We accord no “deference to any previous
determination that may have been made on the question by the
[Commission].” A.R.S. § 12-910(E).

¶20          We must determine what the Commission meant when it
issued R19-2-124(A)(1), limiting prospective challengers to “person[s]
aggrieved,” and then we must decide whether Jerry and TPR so qualified.
At the outset, we recognize that “person aggrieved” is ambiguous here
because the Commission never defines it and the term is “subject to more
than one reasonable meaning.” See McClennen, 238 Ariz. at 375, ¶ 24. For
several reasons, however, we hold that Jerry and TPR were “person[s]
aggrieved” under the Commission’s regulations.

¶21            First, we interpret the Commission’s administrative rules to
“further the statutory policy” contained in its enabling statute. See Cooke v.
Ariz. Dep’t of Econ. Sec., 232 Ariz. 141, 144, ¶ 13 (App. 2013) (quoting Marlar,
136 Ariz. 404, 411 (App. 1983)). The legislature created the Commission to
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                          SIMMS v. SIMMS, et al.
                           Opinion of the Court

“protect and promote public health, safety and the proper conduct of racing
and pari-mutuel wagering.” A.R.S. § 5-104(A)(2). The legislature broadly
authorized the Commission to “hear any appeal of a decision of the
[ADOG] director” and imbued the Commission with ultimate control to
“approve or reject [the director’s] decisions.” See A.R.S. § 5-104(B) (“The
director is subject to ongoing supervision by the commission, and the
commission may approve or reject decisions of the director in accordance
with rules established by the commission.”); see also A.R.S. § 5-104(D) (“The
commission may hear any appeal of a decision of the director in accordance
with [the Uniform Administrative Hearing Procedures Act].”).

¶22           A broad definition of “person aggrieved” is therefore
appropriate to ensure the Commission receives the information and
opportunity it requires to discharge its codified job description. See
Goodman, 136 Ariz. at 205 (the legislature intended for the Commission “to
strengthen the regulation of the racing industry in Arizona”). A narrow
interpretation, by contrast, would diminish the Commission’s plenary
statutory authority, possibly shielding an ADOG director’s licensing
decisions from Commission scrutiny. See Goodman, 136 Ariz. at 205 (the
legislature intended for the Commission “to strengthen the regulation of
the racing industry in Arizona”).

¶23             Long ago, our supreme court interpreted the identical phrase
“person aggrieved” in a comparable administrative context. Mendelsohn v.
Superior Court, 76 Ariz. 163, 166 (1953). At issue there was a statute
authorizing only a “person aggrieved” to appeal the issuance of a liquor
license. Id. at 166. At the outset, the court recognized that “person
aggrieved” has no meaning “[a]part from its syntactical and sociological
setting.” Id. at 166 (addressing transfer of liquor license and noting, “There
is nothing intrinsic and peculiar to the phrase, qua phrase, that leads one
unwaveringly to one conclusion or the other.”). With that backdrop, the
court declined to limit “the right of appeal to the applicant while denying
it to the citizens” because that interpretation “would run counter to the
spirit of strict regulation permeating the whole of the Act.” Id. at 170.

¶24           So too here. Arizona’s strict regulation of gaming and horse
racing likewise supports greater Commission oversight and a more robust
definition of “person aggrieved” to “assur[e] ample opportunity for
investigation of the qualifications of the applicant and the exigencies of the
public.” Mendelsohn, 76 Ariz. at 169.

¶25            Second, a narrow definition of “person aggrieved” would
conflict with the Commission’s other rules, which describe and contemplate

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                          SIMMS v. SIMMS, et al.
                           Opinion of the Court

an expansive regulatory role. See A.A.C. R19-2-101(E) (“The Commission
may sustain, reverse, or modify any penalty or decision imposed by the
Director.” (emphasis added)); A.A.C. R19-2-124(A)(3) (“When an appeal is
filed, the Commission shall review the record and may affirm, reverse, or
modify the Director’s ruling or conduct other proceedings the Commission
deems appropriate.” (emphasis added)). These “statutorily authorized
regulation[s] [are] unambiguous [and] ‘we apply [them] without further
analysis.’” See Silver v. Pueblo Del Sol Water Co., 244 Ariz. 553, 558, ¶ 16
(2018) (quoting Glazer v. State, 237 Ariz. 160, 163, ¶ 12 (2015)).

¶26            Third, although “person aggrieved” is undefined, the
Commission’s rules broadly define “person” to include owners,
nominators, lessees and lessors. R19-2-102(30), (38), (44). Just as important,
by using “person aggrieved,” rather than “applicant aggrieved” or “party
aggrieved,” the Commission intended a “broader” pool of prospective
challengers, beyond “only a person whose application had been denied.”
See Mendelsohn, 76 Ariz. at 169-170. “Had the [Commission] meant to limit
the right [to appeal] . . . it could have used, and doubtless would have used,
a more limited term.” Id. For instance, the word “applicant” appears over
100 times in the Commission’s rules. Furthermore, the Commission limits
who may appeal the director’s “final decision concerning a breeder’s
award” to an “aggrieved party.” R19-2-116(D)(10) (also titled “Appeal of
Director’s Rulings”).

¶27           Jerry and TPR also contend they were “aggrieved” because
Ron’s licensure troubles threatened TPR’s then-pending application to
renew its racing permit. See, e.g., A.R.S. §§ 5-108(A)(2)(e) (Commission may
decline to renew an organization’s racing permit if substantial evidence
exists that its owners, “officers, managerial employees, directors or
substantial stockholders have[] committed acts of moral turpitude in this
state or have willfully violated a material racing statute of this state or a
material rule or regulation of the commission”); -108.05(C) (authorizing
revocation of license held by an organization “controlled or operated
directly or indirectly by” a person who violates A.R.S. § 5-115). On this
record, however, the inverse appears true. Once Ron’s license was
reinstated, TPR could renew its racing permit and move forward.

¶28            More compelling, however, Jerry and TPR assert a genuine,
specific interest in vacating/reversing the reinstatement of Ron’s license.
They contend Ron has already used the reinstatement decision as a sword
in court, claiming it proves that Jerry and TPR engaged in fraud. They also
argued to the Commission that Ron had commenced a court proceeding
with his license reinstated to remove Jerry from TPR’s management,

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                           SIMMS v. SIMMS, et al.
                            Opinion of the Court

dissolve the company and sell its assets, including Turf Paradise. These
allegations would support the Commission’s determination that Jerry and
TPR were “person[s] aggrieved” by the ADOG Decision. See Aggrieved,
Black’s Law Dictionary (11th ed. 2019) (listing definitions for “aggrieved,”
including “having legal rights that are adversely affected,” “having been
harmed by an infringement of legal rights,” “angry or sad on grounds of
perceived unfair treatment”). In sum, Jerry and TPR qualify as “person[s]
aggrieved” under the Commission’s rules.1

       A.     Due Process Claims—Former Director Walsh

¶29           The superior court rejected Ron’s due process claim against
the Commission based on former Director Walsh’s conduct, finding that (1)
Ron had no constitutionally “protectable property interest” in a license he
“seek[s] but do[es] not have,” and (2) “Walsh was not acting in a quasi-
judicial capacity when he denied Ron’s license.”

¶30            Ron contends this was error. We need not reach the merits of
his argument, which is moot because Ron already received a fair and
impartial hearing before the ALJ. BT Capital, LLC v. TD Serv. Co. of Ariz. 229
Ariz. 299, 300-01, ¶ 9 (2012) (“[A] case becomes moot when an event occurs
which would cause the outcome of the appeal to have no practical effect on
the parties.”) (quoting Sedona Private Prop. Owners Ass’n v. City of Sedona,
192 Ariz. 126, 127, ¶ 5 (App. 1998)); see Horne v. Polk, 242 Ariz. 226, 234 (2017)
(holding that the proper remedy for a due process violation based on bias
is a new “determination by a neutral decision maker”). Ron seeks to defend
the ALJ’s decision here.

1      Ron cites McClennen, 238 Ariz. 371, for the proposition that “person
aggrieved” is a “term of art recognized by courts as narrowing the field of
prospective applicants to those who fall within the relevant statute’s ‘zone
of interest.’” But the supreme court in McClennen applied fundamental
principles of statutory construction, as we do here. Indeed, the court
distinguished the concept of “standing” from “the question of who is
statutorily authorized, as an ‘interested person,’ to file objections in an
[Arizona Department of Water Resources’] administrative proceeding
under § 45–172(A).” 238 Ariz. at 376, ¶ 29. Beyond that, McClennen never
mentioned, much less applied, the “zone of interest” test.

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                         SIMMS v. SIMMS, et al.
                          Opinion of the Court

      B.     Attorney Fees

¶31           We vacate the superior court’s award of attorney fees against
the Commission because Ron has not “prevail[ed] by an adjudication on the
merits.” A.R.S. § 12-348(A); accord Horne v. Polk, 242 Ariz. 226, 234, ¶ 31
(2017). We likewise deny Ron’s request for attorney fees on appeal under
A.R.S. § 12-348(A)(2). Jerry and TPR did not request fees and costs.

                             CONCLUSION

¶32           For the reasons set forth above and in our separate
memorandum decision, see Ariz. R. Sup. Ct. 111(g), (h), we vacate the
superior court’s order and remand for further proceedings consistent with
this opinion and the decision.

                          AMY M. WOOD • Clerk of the Court
                          FILED: AA

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