Arizona Court of Appeals, Division One, holds that the prospect of increased competition from a business rival is insufficient to confer standing to challenge a municipal land-use decision.

An existing marijuana dispensary operator challenged a Board of Adjustment decision upholding a city zoning interpretation that allowed a competitor to proceed with opening a nearby dispensary. The operator’s sole alleged injury was the threatened loss of its dominant market position. The superior court dismissed for lack of standing.

The Arizona Court of Appeals affirmed. Under A.R.S. § 9-462.06(K), only a person “aggrieved” by a board of adjustment decision may seek superior court review. The Court held that the threat of increased business competition cannot establish the “particularized harm” required for standing, joining the majority of jurisdictions that have reached the same conclusion.

The Court also rejected a separate argument that the appellant had standing as a victim of “official discrimination.” The city had previously told the appellant that a competing use arising after application submission would defeat a dispensary’s compliance with the Code’s separation requirements; the city then interpreted the Code the opposite way when the competitor applied. The Court held that this inconsistency went to the merits of the appellant’s challenge, not to standing, and that a plaintiff cannot rely on the merits of its claims to clear the threshold standing requirement.

Finally, the Court addressed a procedural issue. The Court held that because the city and Board of Adjustment answered the complaint before joining the competitor’s Rule 12(b)(6) motion to dismiss, their joinder in the motion should have been brought as a Rule 12(c) motion for judgment on the pleadings. The Court nonetheless declined to set aside the dismissal, reaffirming that technical pleading errors will not warrant reversal where dismissal was otherwise appropriate.

Judge Kiley authored the opinion, in which Judges Williams and Bailey joined.

Posted by:  Molly Walker