Opinion
No. 1 CA-CV 15-0550
12-20-2016
STATE OF ARIZONA ex rel. MARK BRNOVICH, Attorney General, Petitioner/Appellee, v. 6635 N. 19TH AVENUE, INC., an Arizona corporation, Respondent/Appellant.
COUNSEL Arizona Attorney General's Office, Phoenix By Alyse Meislik, Evan G. Daniels, Oramel H. Skinner Counsel for Petitioner/Appellee McGill Law Firm, Scottsdale By Gregory G. McGill Counsel for Respondent/Appellant
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2015-000074
The Honorable Lori Horn Bustamante, Judge
AFFIRMED
COUNSEL Arizona Attorney General's Office, Phoenix
By Alyse Meislik, Evan G. Daniels, Oramel H. Skinner
Counsel for Petitioner/Appellee McGill Law Firm, Scottsdale
By Gregory G. McGill
Counsel for Respondent/Appellant
MEMORANDUM DECISION
Judge Maurice Portley delivered the decision of the Court, in which Presiding Judge Kent E. Cattani and Judge Lawrence F. Winthrop joined. PORTLEY, Judge:
The Honorable Maurice Portley, Retired Judge of the Court of Appeals, Division One, has been authorized to sit in this matter pursuant to Article VI, Section 3 of the Arizona Constitution.
¶1 Respondent 6635 N. 19th Avenue, Inc. appeals the superior court's order requiring it to comply with a demand for information made by the State of Arizona under the Arizona Consumer Fraud Act. See Ariz. Rev. Stat. ("A.R.S.") § 44-1521 et seq. For the following reasons, we affirm.
We cite the current version of any statute unless otherwise stated.
FACTS AND PROCEDURAL HISTORY
¶2 This case involves an action by the State to compel pre-complaint discovery in a potential consumer fraud case. The Arizona Consumer Fraud Act ("CFA") makes it unlawful to use "any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact" when selling or advertising merchandise, which includes real estate or services. A.R.S. §§ 44-1521(5), -1522(A); see generally Shaw v. CTVT Motors, Inc., 232 Ariz. 30, 31, ¶ 10 (App. 2013). The CFA is broadly drafted "to eliminate unlawful practices in merchant-consumer transactions." Id. at 32, ¶ 11 (quoting Madsen v. W. Am. Mortg. Co., 143 Ariz. 614, 618 (App. 1985)). And the Arizona Attorney General is authorized by statute to enforce the CFA, including to "engage in extensive pre-complaint discovery" if it has reasonable cause to believe a person has violated the CFA. A.R.S. § 44-1524; People ex rel. Babbitt v. Herndon, 119 Ariz. 454, 456 (1978).
"Person," is broadly defined in the CFA to include "any natural person, . . . partnership, domestic or foreign corporation, any company, trust, business entity, or association, any agent, employee, salesman, partner, officer, director, member, stockholder, associate or trustee." See A.R.S. § 44-1521(6).
¶3 Here, as part of its investigation of whether 6635 N. 19th Avenue, Inc., d/b/a Woodbridge Apartments ("Woodbridge") had, or was violating the CFA, the Attorney General issued a Civil Investigative Demand ("CID") to Woodbridge on October 1, 2014 concerning its multi-family residential complex known as Woodbridge Apartments ("the Complex"). After determining that Woodbridge's response was not fully compliant, the Attorney General filed a petition on January 9, 2015 in the superior court ("the Petition") for an order to show cause to enforce the CID. See A.R.S. § 44-1527.
¶4 As part of the hearing, the parties stipulated to the admission of Exhibits 1-24, which included court documents filed in other proceedings, pictures of and news reports about the Complex, a consumer complaint submitted to the Attorney General's Office, and examples of Woodbridge's internet advertisements depicting clean apartments and offering a "warm and inviting atmosphere." Later, Special Agent Melissa Opp testified that as part of her investigation she met with several Bhutanese-speaking tenants at the Complex, and those tenants consented to an inspection of three occupied apartments. Based on her observations of the apartments, as well as the common areas that she was able to observe while she walked from one apartment to another, Opp testified the following conditions likely existed at the Complex: non-working air conditioning, sparking electrical outlets, low water pressure, flea and/or bedbug infestation(s), cockroach infestation(s), bees near apartment entrances, holes in walls, sewer back-up, and leaking faucets and bathtubs.
Two Bhutanese-speaking translators were present during Opp's meeting with the tenants.
¶5 After the hearing, the parties filed their written closing arguments, and Woodbridge moved to suppress Opp's testimony alleging her visit was an illegal search under the Fourth Amendment to the United States Constitution. While waiting on the briefing on the suppression motion, the superior court granted the Petition, making findings of fact and conclusions of law, and ruling Woodbridge was in contempt until it complied with the CID, and prohibited Woodbridge from advertising or renting any apartments until its compliance. The court subsequently denied Woodbridge's motion to suppress. And, after briefing on the request for fees, the court entered its final judgment ordering Woodbridge to pay the State $36,000 in attorneys' fees. See A.R.S. § 44-1534(A). Woodbridge filed a notice of appeal, and we have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) and/or (4).
DISCUSSION
I. Denial of the Motion to Suppress
¶6 Woodbridge argues that the superior court erred by denying its motion to suppress Opp's search of the Complex as a violation of its rights under the Fourth Amendment to the United States Constitution. We disagree.
¶7 We review the denial of a motion to suppress for an abuse of discretion, but we review constitutional and purely legal issues de novo. State v. Allen, 216 Ariz. 320, 323, ¶ 11 (App. 2007). "As a general rule, a warrant must be obtained to search an area in which an individual has a reasonable expectation of privacy." State v. Flores, 195 Ariz. 199, 203, ¶ 11 (App. 1999) (citations omitted). Woodbridge's challenge, as a result, depends on whether it "had a reasonable expectation of privacy in the areas of search, in relation to the items seized." See State v. Main, 159 Ariz. 96, 98 (App. 1988).
¶8 Woodbridge did not have a privacy interest in the curtilage to a tenant's front door. See State v. Olm, 223 Ariz. 429, 433, ¶ 13 (App. 2010) ("[N]o Fourth Amendment violation occurs when an officer, without a warrant, crosses the curtilage to knock on the front door to ask questions of the resident."); U.S. v. Perea-Rey, 680 F.3d 1179, 1189 (9th Cir. 2012) ("[T]he knock and talk exception authorizes officers to enter the curtilage to initiate a consensual conversation with the residents of the home."); see also City of Seattle v. McCready, 877 P.2d 686, 690 (Wash. 1994) (holding that a tenant necessarily possesses the authority to consent to a visitor's entry onto the common areas leading to an apartment). As a result, Opp did not need a warrant to approach a tenant's front door and knock on it.
¶9 Additionally, Woodbridge did not have a privacy interest in leased residences. See Chapman v. U.S., 365 U.S. 610, 616-17 (1961); see also Camara v. Mun. Ct. of City and Cty. of San Francisco, 387 U.S. 523, 540 (1967) (recognizing that consent of the landlord was insufficient to authorize inspection of leased premises without a warrant); accord People v. M. Santulli, LLC, 910 N.Y.S.2d 336, 339 (N.Y. App. Term. 2010) ("[A] landlord does not have a reasonable expectation of privacy with respect to property that he has rented to a tenant, and that is occupied by that tenant"); Jackson v. Davis, 530 F. Supp. 2, 5 (E.D. Tenn. 1981) (noting that any expectation of privacy in leased premises is that of the tenant, not the landlord); McCready, 877 P.2d at 689-90 (holding that because tenants, not landlords, have a privacy interest in leased premises, they may consent to search despite landlord's objection); In re Dwelling Located at 728 Belmont Ave., 210 S.E.2d 73, 76-77 (N.C. App. 1974) (discussing that tenants in possession and control of leased premises have rights superior to landlord); cf. State v. Lucero, 143 Ariz. 108, 109-10 (1984) (holding that person whose name appeared on a storage locker's rental agreement, was responsible for payment of its rent, and held a set of keys to the locker had apparent authority to consent to the locker's search). Thus, a tenant could agree to have Opp enter the apartment, look around, and inspect the apartment. Because the tenants consented to the entry and inspection by Opp, the superior court properly denied the motion to suppress.
Woodbridge suggests it was denied due process because the court did not first rule on the motion to suppress before granting the Petition. There is, however, no requirement that the court first rule on the motion filed after written closing arguments before ruling on the substantive issue. More importantly, because Woodbridge raises the issue without any supporting legal authority, we will not address it. See Cullum v. Cullum, 215 Ariz. 352, 355 n.5, ¶ 14 (App. 2007); MT Builders, L.L.C. v. Fisher Roofing, Inc., 219 Ariz. 297, 304 n.7, ¶ 19 (App. 2008) (stating that reference to appellate argument in one-sentence footnote without analysis is insufficient to present an argument on appeal).
II. The CID Order
¶10 Woodbridge also challenges the superior court's decision to grant enforcement of the pre-complaint CID based on the admitted exhibits and testimony. We find no abuse of discretion.
¶11 The Attorney General can issue an administrative subpoena as part of its CFA investigation. A person or entity may resist an administrative subpoena on several grounds, including that: (i) there is no reasonable cause to believe there has been a violation of the CFA; (ii) the inquiry is not within the agency's scope of authority; (iii) the request is too vague or seeks irrelevant information; and (iv) the summons is being used for an improper purpose, such as to harass or put pressure on the investigated party to settle a collateral dispute. Herndon, 119 Ariz. at 456 (citing United States v. Powell, 379 U.S. 48, 57-58 (1964)). Although due process may require "an opportunity to present every available defense," it is a flexible concept depending on the nature of the proceeding. Herndon, 119 Ariz. at 457 (citing Morrissey v. Brewer, 408 U.S. 471, 481 (1972)). And a pre-complaint discovery enforcement hearing is not a "case or suit," that resolves the ultimate issue of liability or guilt or is governed by the Arizona Rules of Civil Procedure. Id. at 457-58 (analogizing an enforcement hearing to a preliminary hearing in a criminal case).
A. Reasonable Cause
¶12 Woodbridge argues that the CID was not supported by reasonable cause. Woodbridge also contends that "reasonable cause" must be determined by an objective standard. See Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229 Ariz. 377, 412, ¶ 121 (App. 2012) (discussing "reasonable cause" under A.R.S. § 29-833(B)).
Despite Woodbridge's argument, we find no basis for adopting the "reasonable cause" objective standard for assessing attorneys' fees under A.R.S. § 29-833(B) to CFA pre-complaint discovery investigations or discovery enforcement proceedings.
¶13 In determining whether there is reasonable cause, the only issue before the superior court is whether the State has "sufficient evidence to satisfy a judge that it is reasonable to believe that there has been a violation of the [CFA]." Herndon, 119 Ariz. at 458. The "level of proof need not establish probable cause, but must constitute a sufficient preliminary showing upon which a reasonable person could conclude that the statute's limits on the investigative authority granted have been met." State ex rel. Goddard v. W. Union Fin. Servs., Inc., 216 Ariz. 361, 368, ¶ 36 (App. 2007). The superior court assumes the accuracy of the State's evidence and does not weigh or resolve conflicts in the evidence. Herndon, 119 Ariz. at 458 (recognizing that the reasonable cause determination "is relatively uncomplicated"). Here, because the Attorney General presented evidence of potential consumer fraud based on the stipulated exhibits and Opp's testimony, there was sufficient evidence for the court to require Woodbridge to comply with the pre-complaint discovery in order to allow the Attorney General to then determine if there was sufficient evidence to bring a CFA action.
¶14 Woodbridge also claims the State's authority to investigate should be limited by the number of complaints, and argues that the CID is too broad given the one tenant complaint. The CFA does not limit, however, the State's investigative powers based on the number or substance of written consumer complaints, or other information that the Attorney General may have that spurs an investigation. See generally A.R.S. § 44-1521 et seq. Moreover, in the context of an investigative enforcement proceeding, the issue is not whether the evidence is true or unrefuted, or otherwise would be inadmissible, but whether there is enough evidence upon which a reasonable person could conclude that there is evidence of consumer fraud requiring further investigation. See Herndon, 119 Ariz. at 457-58; see also People ex rel. MacFarlane v. Am. Banco Corp., 570 P.2d 825, 831 (Colo. 1977) (holding that hearsay evidence is admissible on the issue of "reasonable grounds" in an enforcement procedure under the Consumer Protection Act).
We note that Woodbridge stipulated to the admission of the State's documentary evidence and consequently has waived on appeal the issue of its admissibility. See Pulliam v. Pulliam, 139 Ariz. 343, 345-46 (App. 1984); see also Amparano v. ASARCO, Inc., 208 Ariz. 370, 374, ¶ 13 (App. 2004).
¶15 Woodbridge also challenges Opp's testimony. The superior court, however, had discretion to determine whether Opp was competent to testify, see Bd. of Regents of the Univ. & State Colleges of Ariz. v. Cannon, 86 Ariz. 176, 178 (1959) (affirming the trial court's decision to permit testimony by a lay person in a condemnation case), and to determine the weight and credibility of her testimony. See Sandretto v. Payson Healthcare Mmgt, Inc., 234 Ariz. 351, 359, ¶ 24 (App. 2014). Given that the court had the ability to review the exhibits and listen to Opp while she was testifying, the court did not abuse its discretion by adopting Opp's testimony.
¶16 Additionally, Woodbridge argues that its advertisements were mere "puffery." Even if true, the resolution of whether the advertisements are puffery and have no effect on a consumer will have to be resolved at a separate proceeding, if filed by the Attorney General, to determine whether the State has proven that Woodbridge violated the CFA. See Law v. Sidney, 47 Ariz. 1, 4 (1936). Because the nature of the advertisements is beyond the scope of the discovery enforcement proceeding, the superior court did not err by considering the stipulated exhibits in the enforcement proceeding.
¶17 Woodbridge also suggests the State is required to demonstrate actual deception, consumer reliance, and damages. We disagree that such is the standard in a discovery enforcement proceeding. See A.R.S. § 44-1522(A); People ex rel. Babbitt v. Green Acres Trust, 127 Ariz. 160, 168 (App. 1980) ("[R]eliance or actual deception or damage is not a prerequisite to a consumer fraud action brought by the attorney general."); cf. Kuehn v. Stanley, 208 Ariz. 124, 129, ¶ 16 (App. 2004) (discussing elements of a private cause of action under the CFA, which includes reliance and damages). Woodbridge also suggests that conduct "in connection with" a sale or advertisement of merchandise necessarily limits application of the CFA to Woodbridge's pre-lease representations. See A.R.S. § 44-1522(A). Woodbridge makes its argument without proper legal authority, and we find no legal support for its argument. Cf. Schmidt v. Am. Leasco, 139 Ariz. 509, 511 (App. 1983) (consumer fraud found in post-sale leasing arrangements, based on billing recreational vehicle owner for damages that should have been paid by renters); Howell v. Midway Holdings, Inc., 362 F. Supp. 2d 1158, 1164-65 (D. Ariz. 2005) (consumer fraud based on lessor's alteration of lease agreement after lessees signed it).
Superseded by statute on other grounds, 1981 Ariz. Sess. Laws, ch. 295, § 5, as recognized in State ex rel. Corbin v. Pickrell, 136 Ariz. 589, 592 (1983).
Woodbridge relies on Womack v. Bank of Am., N.A., 1 CA-CV 07-0141, 2000 WL 35725366 (Ariz. App. Nov. 20, 2000) (mem. decision). Because Womack is a memorandum decision issued before January 1, 2015, it has no precedential value and may not be cited for persuasive value. See Ariz. R. Sup. Ct. 111(c)(1)(C).
¶18 Finally, Woodbridge asserts that the Attorney General failed to identify a specific target of the investigation. See W. Union Fin. Servs., 216 Ariz. at 367, ¶ 32. Woodbridge, however, was identified as a specific target in the CID and the enforcement petition. Moreover, Woodbridge does not develop an argument to the contrary, and has waived the issue on appeal. See MacMillan v. Schwartz, 226 Ariz. 584, 591, ¶ 33 (App. 2011).
B. Scope of the CID
¶19 Woodbridge asserts the CID was "odious, overbroad and oppressive" and suggests the information sought "goes way beyond" the purported deceptions. Undoubtedly, investigations that are "for purely speculative purposes are odious and oppressive and should not be tolerated by law." Herndon, 119 Ariz. at 456 (quoting Wales v. Tax Comm'n, 100 Ariz. 181, 183-84 (1966)); see also W. Union Fin. Servs., 216 Ariz. at 369, ¶ 38 ("Subpoenas that are overbroad are not enforceable."). However, Woodbridge presented testimony at the hearing that it would take a year to pull together the requested information listed in the CID. After listening to the testimony and cross-examination, and determining the credibility of the witnesses, see Gutierrez v. Gutierrez, 193 Ariz. 343, 347, ¶ 13 (App. 1998), the superior court determined that the CID was not too overbroad or oppressive, or should be limited or quashed. Because the court made a factual determination based on witness credibility, we find no abuse of discretion.
¶20 Woodbridge also claims the State had a retaliatory motive for pursing the CID, as evidenced by the year-and-a-half delay between the Attorney General's receipt of the consumer complaint and when it filed the Petition. Although there was some time between the complaint and the enforcement petition, we note that the Attorney General filed the Petition about three months after the CID. Moreover, the Attorney General interviewed tenants, collected municipal actions, and other exhibits that were stipulated into the record. Additionally, we recognize that dilatory conduct cannot estop the State from pursuing statutory remedies available to it. See Nat'l Advert. Co. v. Ariz. Dep't of Transp., 126 Ariz. 542, 544 (App. 1980); but see Freightways, Inc. v. Ariz. Corp. Comm'n, 129 Ariz. 245, 248 (1981) (holding that estoppel will be applied to the state when justice dictates and the state's exercise of governmental powers and sovereignty will not be affected). Consequently, because the superior court did not find any factual basis for a retaliatory motive for the enforcement proceeding, we find no abuse of discretion.
At the appellate oral argument, Woodbridge suggested that the Attorney General was conducting the investigation as a ploy for collection purposes. There was, however, nothing in the record to support the argument.
C. Findings of Fact and Conclusions of Law
¶21 Woodbridge argues that the superior court erred in adopting the findings of fact and conclusions of law that were proposed by the State in its closing argument. A superior court may adopt proposed findings of fact and conclusions of law that a party submits "if those findings are consistent with the ones that [the court] reaches independently after properly considering the facts." Elliott v. Elliott, 165 Ariz. 128, 134 (App. 1990). Woodbridge does not argue or imply the court failed to reach its findings and conclusions independently. Thus, to the extent Woodbridge urges that the court's findings and conclusions were inadequate, it waived the issue by failing to specifically object to the proposed findings and conclusions, or argue they were inadequate or erroneous to the superior court, either in the closing argument or after the filing of the signed ruling. See id. (appellant raised insufficiency of findings in post-judgment motion).
In its brief, and during the appellate oral argument, Woodbridge argued that the Ninth Circuit Court of Appeals disapproved of the practice by district courts to adopt verbatim a party's proposed findings of fact, and that we should follow its procedural guidance. See e.g., Fed. Trade Comm'n v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1215 (9th Cir. 2004); Indus. Bldg. Materials, Inc. v. Interchem. Corp., 437 F.2d 1336, 1339 (9th Cir. 1970). However, the Ninth Circuit did not adopt one procedural rule, and has stated "this practice does not by itself constitute reversible error." Hagans v. Andrus, 651 F.2d 622, 626 (9th Cir. 1981). In fact, the United States Supreme Court has recognized that when a court adopts proposed findings verbatim, "the findings are those of the court and may be reversed only if clearly erroneous." Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 572 (1985); see also Mattel, Inc. v. Hyatt, 664 F.2d 757, 759 (9th Cir. 1981). Accordingly, absent clear error, we must accept the findings of fact and conclusions of law signed by the superior court.
III. Attorneys' Fees
¶22 Woodbridge argues that the attorneys' fees award was excessive and not supported by the record. We review an award of attorneys' fees for abuse of discretion. Geller v. Lesk, 230 Ariz. 624, 627, ¶ 8 (App. 2012). "An abuse of discretion occurs when there is no evidence to support a holding or the court commits an error of law when reaching a discretionary decision." Dowling v. Stapley, 221 Ariz. 251, 266, ¶ 45 (App. 2009).
¶23 An attorneys' fees award must be reasonable. Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 185-86 (App. 1983). When analyzing an application for attorneys' fees, the superior court must determine whether the hourly billing rate and the hours expended are reasonable. Id. at 187-88. Here, the State's application disclosed the type of legal services provided, the dates the service was provided, the attorney providing the service, and the time spent thereon with sufficient details for the court to assess the reasonableness of the time incurred. The record indicates the court fully and carefully considered the reasonableness of the State's request, and, after consideration, awarded less than the amount requested. On this record, we find no reversible abuse of discretion.
Woodbridge maintains that the State was required to allocate fees among claims, but the authority it cites does not apply to a statutory pre-suit discovery litigation. See Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 419-21, ¶¶ 19-25 (App. 2010). --------
¶24 Finally, Woodbridge argues that it was denied due process because the superior court did not hold a hearing on the State's fee application. Arizona does not require a hearing, and any request for argument can be waived by the court. Moreover, the authority Woodbridge cites is not persuasive on the issue of attorneys' fees, as opposed to monetary or other sanctions. See Miranda v. S. Pac. Transp. Co., 710 F.2d 516, 522-23 (9th Cir. 1983) (due process requires notice, an opportunity to respond, and a hearing before imposing monetary sanctions against attorneys); Boddie v. Conn., 401 U.S. 371 (1971) (due process prohibits state from denying indigents access to courts to seek dissolution of marriage); Weiss v. Burr, 484 F.2d 973, 984-85 (9th Cir. 1973) (due process requires that contemnor be accorded reasonable notice and an opportunity to be heard if the trial judge did not personally observe the matter on which contempt is based). Consequently, the court did not violate Woodbridge's due process in making the fee award.
¶25 The State requests attorneys' fees on appeal pursuant to A.R.S. § 44-1534. We exercise our discretion and will award the State its reasonable attorneys' fees and costs on appeal upon compliance with Arizona Rule of Civil Appellate Procedure 21.
CONCLUSION
¶26 For the foregoing reasons, we affirm the judgment.