The Supreme Court holds that the superior court can adjudicate a challenge to an agency’s subject matter jurisdiction in a collateral proceeding because a judgment entered by a tribunal lacking subject matter jurisdiction is void.

In 2014, an attorney for a gubernatorial campaign filed a complaint with the Citizen’s Clean Election Commission alleging that a political action committee violated portions of the Citizens Clean Elections Act. The political action committee challenged the Commission’s subject matter jurisdiction to investigate questions involving contributions to candidates not participating in clean elections funding. The Commission determined that it had jurisdiction and authorized an investigation.

The attorney that filed the complaint withdrew it and asked the Commission to refrain from further action. The Commission denied the request, determined that the PAC had violated the Act, and assessed a penalty. Upon appeal to the Office of Administrative hearings, an ALJ found that the Commission had subject matter jurisdiction but sustained the appeal and rescinded the penalty because the Commission had failed to prove a violation and because the order was defective. The commissioners voted to issue a final administrative order that rejected the ALJ’s disposition, affirmed the Commission’s previous order, and reinstated the penalty. The PAC’s appeal to the superior court was rejected as untimely, and the court of appeals and Supreme Court affirmed.

The PAC next filed this special action complaint in superior court challenging the Commission’s subject matter jurisdiction, and the Commission simultaneously sued to enforce the penalty. The superior court consolidated the cases and entered summary judgment for the Commission, rejecting one basis for the PAC’s subject-matter challenge on its merits and finding that issue preclusion applied to the other two bases.

The court of appeals affirmed in a split decision, but for a different reason. The majority adopted the Restatement (Second) of Judgments § 12 and held that the PAC was precluded from collaterally attacking the Commission’s final administrative order on jurisdictional grounds. The dissenting judge disagreed, reasoning that Restatement § 12 is inconsistent with Arizona law.

On appeal, the Supreme Court agreed with the dissenting judge who reasoned that, although Arizona courts generally follow the Restatement when it reflects sound legal policy and no contrary controlling authority exists, Arizona law has consistently recognized that a judgment issued by a court or agency that lacked subject matter jurisdiction is void and subject to attack at any time, including in a collateral proceeding.

The Court next considered whether the superior court had correctly applied issue preclusion to uphold the Commission’s determination that it possessed subject matter jurisdiction. The Court found that, under the circumstances, issue preclusion did not apply because the commissioners themselves had performed the investigation, prosecution, and adjudication of the complaint, even after the complainant withdrew it, depriving the PAC of a full and fair adjudication of the issue. Those three functions may be performed by different employees of the same agency, but entrusting them to the same individual or group of individuals violates a party’s Fourth Amendment due process right to have a neutral adjudication in appearance and reality. The Court noted that the Commission was motivated at least in part by two pending lawsuits in which the Commission was either a party or had filed an amicus brief. Both lawsuits raised the issue of whether the Commission had subject matter jurisdiction to investigate questions concerning campaign contributions to non-participating candidates. The opportunity the PAC had to appeal the Commission’s decision to an ALJ did not cure the due process violation because a reviewing court would be obligated to give deference to the Commission’s decision to reject the ALJ’s conclusions.

The Court vacated the court of appeals’ opinion, reversed the superior court’s judgment, and remanded the case to the superior court to determine whether the Commission had subject matter jurisdiction without giving preclusive effect to the final administrative decision.

Justice Timmer authored the opinion; Justices Brutinel, Bolick, Beene, Montgomery, and Pelander joined. Justices Lopez and King recused themselves from the case, and Justice Pelander (Ret.) was designated to sit in the matter.

Disclosure: Osborn Maledon attorneys were involved with this case.

Posted by: Heather Robles