The Arizona Supreme Court holds that amendments to A.R.S. § 12-910(F) did not eliminate substantial-evidence review for the superior court and confirms that appellate courts review such questions under ordinary appellate standards.

About a decade ago, a dispute arose out of the Arizona Racing Commission’s determinations regarding which party would receive a horse-racing license. The details of the dispute matter little here. Deferring to the Commission’s factual findings, the superior court eventually concluded that the Commission’s decision was supported by “substantial evidence” and affirmed it. The case proceeded to the court of appeals, and then to the Arizona Supreme Court.

The Court accepted review to clarify the proper framework of review under A.R.S. § 12-910(F). Section 12-910(F) provides in relevant part that a “court shall affirm the agency action unless the court concludes that the agency’s action is contrary to law, is not supported by substantial evidence, is arbitrary and capricious or is an abuse of discretion.” It further provides that in a regulated-party proceeding, “the court shall decide all questions of law. . . without deference” to the agency. In 2021, the Legislature added that in a regulated-party proceeding, “the court shall decide all questions of fact without deference” to the agency.

The Court sought to answer three questions: 1) did the Legislature’s 2021 amendment eliminate substantial-evidence review, 2) what standard of review applies to an administrative agency’s factual findings in a regulated-party proceeding, and 3) do appellate courts independently review factual findings de novo?

In answering the first two questions presented, the Court held that the 2021 amendment did not eliminate substantial-evidence review, because the amendment eliminated only deference to agency factfinding but left intact the substantial-evidence clause. Rather, the Court explained, the 2021 amendment changed who determines the facts upon which the substantial-evidence review is conducted—it is now the courts. In essence, “the court independently determines the facts, then applies the governing standard to the agency’s action based on those facts.”

The Court then clarified four additional points implicated in the case: 1) the “agency action” in § 12-910 refers to the final administrative decision, 2) a “regulated party” invoking § 12-910(F) must identify the specific factual findings it contests, 3) mixed questions of fact and law raised under § 12-910(F) are decided independently by the courts, and 4) the statute’s “no deference” commands are absolute, regardless of whether the question involves agency expertise.

Lastly, the Court answered the third question presented by holding that nothing in § 12-910(F) displaces traditional appellate review of superior court decisions; the court of appeals must defer to the trial court’s factual findings if they are reasonably supported by the record and review questions of law de novo, as usual.

Vice Chief Justice Lopez authored the Court’s unanimous Opinion.

Posted by: Jacob Abrahamian