Arizona Court of Appeals Division One Holds that Statutory Procedure for Awarding State Trust Lands Grazing Lease Satisfies the Enabling Act and Arizona’s Constitution.

The Knights held a state trust lands grazing lease for land adjacent to property they owned near Springerville, Arizona.  Shortly before the lease expired, WildEarth filed an application with the Arizona Land Department to lease the same land.  The Land Department issued a Notice of Conflicting Applications and requested that each applicant submit a statement of equities to determine which applicant had the highest and best bid.  The Land Department’s Director of Natural Resources Division reviewed the parties’ statements and conducted a three-day property visit.  The Director then concluded that the equities favoring the Knights outweighed WildEarth’s offer of additional rent.  The Land Department Commissioner reviewed the information and then directed the parties to submit sealed bids for additional rent.

The Knights administratively appealed the Commissioner’s order requiring sealed bids.  An Administrative Law Judge (“ALJ”) recommended that the Commissioner’s order for sealed bids be rescinded and that the Knight’s lease be renewed.  The Commissioner accepted the ALJ’s recommendation.  WildEarth then filed a complaint in superior court.

The superior court affirmed the Commissioner’s decision.  Although the court denied the Knights’ request for an award of attorneys’ fees, it awarded the Knights’s costs in an amount that included expert witness fees.  WildEarth timely appealed, arguing that (1) the statutory process for awarding leases of state trust lands violated the Enabling Act and the Arizona Constitution; (2) the Commissioner’s determination to award the lase to the Knights was arbitrary and capricious; and (3) the superior court erred by including the Knights’ expert witness fees in the cost award.  The Knights cross-appealed, contending that the superior court erred by denying their requests for attorneys’ fees under A.R.S. §12-348. 

The Arizona Court of Appeals affirmed the judgment but vacated the Knights’ cost award to the extent in included expert witness fees.  The Enabling Act requires that any sale or lease of trust lands be made to the highest and best bidder at a public auction.  This requirement is incorporated into the Arizona Constitution.  A disposition that is not made in substantial conformity with this requirement is null and void.  The Court held that the procedures followed, in this case, satisfied the highest and best bidder requirement under the Enabling Act because they included an assessment of who was willing to pay the highest rent.

The Court also concluded that the Commissioner’s decision to award the lease to the Knights was not arbitrary, capricious, or an abuse of discretion, because it was made after a thorough investigation and review and substantial evidence, supported the commissioner’s decision. 

Finally, the Court upheld the denial of the Knights’ request for attorneys’ fees.  A.R.S. § 12-348 provides that a court “shall award fees and other expenses to any party other than [a government entity] that prevails by an adjudication on the merits in . . . [a] court proceeding to review a state agency decision.”  A.R.S. § 12-348(A)(2), (E)(4).  Fees and other expenses include “reasonable expenses of expert witnesses . . . which the court finds to be directly related to an necessary for the presentation of the party’s case and reasonable and necessary attorney fees.” A.R.S. § 12-348(I)(1).  A.R.S. § 12-348 does not authorize courts to require any entity other than a governmental entity to pay a fee award to the prevailing party and does not authorize an award for a private party intervening on behalf of the state.  Because WildEarth is not a governmental entity, the trial court properly denied the Knights’ request for attorneys’ fees under A.R.S. § 12-348.  And because §12-348 draws no distinction between awards for fees and other expenses, the court erred by awarding the Knights costs that included expert witness fees.  Accordingly, the Court vacated the cost award to the extent it included expert witness fees.

Judge Cattani authored the opinion; Judges Thompson and Hall concurred.