Ariz. Creditors Bar Ass’n, Inc. v. State – 4/30/2024

June 21, 2024

Arizona Court of Appeals, Division One holds that a party has standing in a facial constitutional challenge—even without a distinct and palpable injury—if the parties have an interest in the outcome of the constitutional claims and the challenger is within the regulated community.

A group of businesses involved in various aspects of debt enforcement (the “Judgement Creditors”) challenged Proposition 209, the Predatory Debt Collection Act.  The Act contains numerous provisions to protect debtors, such as increasing the value of exempt earnings in garnishment actions and increasing the dollar value of assets exempt from creditor claims.  The Act also included a “Saving Clause” that exempts certain debts from its application.  Judgment Creditors asserted facial challenge to the entire Act based on the Saving Clause’s purported vagueness, and sought a declaratory judgment specifying how the Saving Clause applies to a post-Act garnishment proceeding to enforce a pre-Act judgment.

The superior court found the Saving Clause to be constitutional and denied the Judgment Creditors’ request for permanent injunction or declaratory relief.  The superior court also denied the State’s motion to dismiss that asserted that the Judgment Creditors lacked standing. 

The court of appeals affirmed.  The Court first found that the purported vagueness of the Saving Clause had not caused the Judgment Creditors a distinct and palpable injury.  Nevertheless, the Judgment Creditors’ challenge presented an actual controversy because the Judgment Creditors are regulated parties within the group of businesses affected by the Act and all parties have an interest in the outcome of the constitutional claims.  Therefore, the Judgment Creditors have standing to seek a declaratory judgment as to their facial constitutionality challenge. 

In contrast, however, the Court found that the Judgment Creditors lacked standing on their narrower request for a declaratory judgment explaining whether and how the Act applies to a post-Act garnishment proceeding on a pre-Act judgment.  Because neither the Judgment Creditors nor the State had a cognizable interest in the outcome of that claim, the declaratory judgment would constitute an advisory opinion.

The Court also found that the Judgment Creditors’ constitutional challenge based on the Saving Clause failed.  Because the Judgment Creditors did not establish that the Saving Clause is unconstitutional for all garnishment proceedings, they could not succeed on their facial challenge.  Moreover, the Saving Clause’s “prospective-only” application is not unconstitutionally vague because it fits within the ordinary retroactivity framework and includes examples consistent with Arizona courts’ interpretation of prospective application of laws in similar contexts.

Judge Cruz authored the opinion, in which Judges Weinzweig and Catlett joined.

Posted by: Sarah Pook Lawson