Premium Leaf v. Adhs ( 2019 )


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  •                       NOTICE: NOT FOR OFFICIAL PUBLICATION.
    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
    AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
    IN THE
    ARIZONA COURT OF APPEALS
    DIVISION ONE
    PREMIUM LEAF, INC., Plaintiff/Appellant,
    v.
    ARIZONA DEPARTMENT OF HEALTH SERVICES, et al.,
    Defendants/Appellees.
    No. 1 CA-CV 18-0433
    FILED 12-12-2019
    Appeal from the Superior Court in Maricopa County
    No. CV2017-001137
    The Honorable Sherry K. Stephens, Judge
    AFFIRMED
    COUNSEL
    Wilenchik & Bartness, P.C., Phoenix
    By Dennis I. Wilenchik, Ross P. Meyer
    Counsel for Plaintiff/Appellant
    Arizona Attorney General’s Office, Phoenix
    By Aubrey Joy Corcoran, Louis Frank Caputo, III, J. Nicholas Bacon
    Counsel for Defendants/Appellees Arizona Department of Health Services and
    Dr. Cara Christ
    Conant Law Firm, PLC, Phoenix
    By Paul A. Conant
    Counsel for Defendant/Appellee Buds & Roses, Inc.
    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    MEMORANDUM DECISION
    Judge Lawrence F. Winthrop delivered the decision of the Court, in which
    Presiding Judge Jennifer B. Campbell and Judge Michael J. Brown joined.
    W I N T H R O P, Judge:
    ¶1             Premium Leaf, Inc. (“Premium”) appeals the superior court’s
    dismissal of its complaint for failure to state a claim against the Arizona
    Department of Health Services and its director, Dr. Cara Christ,
    (collectively, the “Department”) and Buds & Roses, Inc. (“B & R”)
    (collectively, the “Appellees”).       Premium argues the Department
    wrongfully awarded a medical marijuana dispensary registration certificate
    to B & R and alleges B & R’s proposed dispensary location did not comply
    with local zoning restrictions at the time B & R submitted its registration
    certificate application. Premium also contends the Department’s actions in
    awarding the certificate frustrated the purpose of the Arizona Medical
    Marijuana Act (“AMMA”) and created two classes of applicants, between
    which the rules were applied inconsistently.
    ¶2           Because Premium failed to state a claim upon which relief
    could be granted, we affirm the superior court’s dismissal with prejudice.
    FACTS AND PROCEDURAL HISTORY
    ¶3            The Department is tasked with administering and
    implementing the AMMA. See Arizona Revised Statutes (“A.R.S.”) sections
    36-2801(4), -2803.1 The AMMA requires nonprofit medical marijuana
    dispensaries2 to register with the Department, and it limits the number of
    1      Absent material changes from the relevant date, we cite the current
    version of all statutes, regulations, and rules.
    2       “’Nonprofit medical marijuana dispensary’ means a not-for-profit
    entity that acquires, possesses, cultivates, manufactures, delivers, transfers,
    transports, supplies, sells or dispenses marijuana or related supplies and
    educational materials to cardholders.” A.R.S. § 36-2801(12).
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    PREMIUM LEAF v. ADHS, et al.
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    dispensary registration certificates issued statewide to one per every ten
    registered retail pharmacies.3 A.R.S. § 36-2804(A), (C).
    ¶4             The Department made its first allocation of dispensary
    registration certificates in 2012. See Compassionate Care Dispensary, Inc. v.
    Ariz. Dep’t of Health Servs., 
    244 Ariz. 205
    , 209, ¶ 6 (App. 2018). Periodically,
    the Department must evaluate whether it may issue additional certificates
    for potential dispensaries. Arizona Administrative Code (“A.A.C.”) R9-17-
    303(A). If additional certificates may be issued, priority is given first to
    counties without a dispensary and then to geographical units called
    Community Health Analysis Areas (“CHAAs”) with the most registry
    identification cards issued to qualifying patients. A.A.C. R9-17-101(8), R9-
    17-303(B).
    ¶5            When the Department determines additional dispensary
    registration certificates can be issued, individuals interested in operating a
    nonprofit medical marijuana dispensary must submit an application for a
    dispensary registration certificate to the Department. A.R.S. § 36-
    2804(B)(1)(b). The application must contain, among other information, the
    proposed location of the dispensary and, if the city or town has enacted
    zoning restrictions applicable to dispensaries, “a sworn statement
    certifying that the registered nonprofit medical marijuana dispensary is in
    compliance with the restrictions.” Id. at § 36-2804(B)(1)(d). To satisfy this
    requirement, regulations mandate an applicant provide:
    [A] sworn statement signed and dated by the [principal
    officers of the proposed dispensary] certifying that the
    dispensary is in compliance with any local zoning restrictions;
    [and]
    Documentation from the local jurisdiction where the
    dispensary’s proposed physical address is located that:
    a. There are no local zoning restrictions for the dispensary’s
    location, or
    3      “Pharmacy” means a retailer “where drugs, devices, poisons or
    related hazardous substances are offered for sale or retail.” A.R.S. § 32-
    1901(71) (also including locations “in which the profession of pharmacy is
    practiced”; any place displaying the words “pharmacist,” “drugstore,” or
    the like; and locations “where the characteristic symbols of pharmacy” are
    exhibited). Pharmacies must be registered according to A.R.S. § 32-1929.
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    b. The dispensary’s location is in compliance with any local
    zoning restrictions[.]
    A.A.C. R9-17-304(C)(5)-(6).
    ¶6            After all applications have been submitted, the Department
    conducts a multi-stage review to determine which of the potential
    dispensaries should ultimately be awarded the certificate. See A.A.C. R9-
    17-107. First, the Department conducts an administrative completeness
    review, in which it verifies that the application contains all required
    information and documents; if anything is missing, the Department must
    provide the applicant with written notice and time to correct the deficiency.
    See A.A.C. R9-17-107(A), (C). All applications deemed administratively
    complete then move on to a substantive review, during which the
    Department determines whether the information contained in the
    application is what the applicant represents it to be. See A.A.C. R9-17-
    107(D). At this point, the Department may complete an inspection of the
    proposed dispensary site or make a written request for more information
    from the applicant. Id.
    ¶7            If multiple applications are deemed administratively and
    substantively complete, priority is given to the applicant whose proposed
    dispensary location will provide services to the most qualifying patients
    based on the number of registered medical marijuana cardholders and
    other dispensaries operating within ten miles of the applicant’s proposed
    dispensary location. A.A.C. R9-17-303(B)(2). If multiple applicants tie
    within a 0.1% margin based on these parameters, the Department will select
    one of the qualifying dispensaries at random. Id. at -303(B)(4).
    ¶8              After applying for and receiving a registration certificate, a
    proposed dispensary must apply for approval to operate. A.A.C. R9-17-
    305. There, the potential dispensary must provide, among other things,
    “documentation issued by the local jurisdiction to the dispensary
    authorizing occupancy of the building as a dispensary . . . such as a
    certificate of occupancy, a special use permit, or a conditional use permit.”
    Id. at -305(A)(2).
    ¶9            In 2016, the Department announced it would accept
    applications for thirty-one new dispensary registration certificates. One of
    these additional certificates was assigned to CHAA 70, for which both
    Premium and B & R applied. The certificate was ultimately awarded to
    B & R.
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    ¶10            CHAA 70 is located in the City of Mesa, but B & R’s proposed
    location within CHAA 70 is on a Maricopa County island4 and is therefore
    governed by Maricopa County zoning restrictions. The relevant zoning
    restriction here, Maricopa County Zoning Ordinance (“Zoning Ordinance”)
    804.2(45)(a), states: “Medical Marijuana Dispensaries shall not be located
    within 1,500 feet of any other Medical Marijuana Dispensary.” The County
    zoning form that is available to applicants for a dispensary registration
    certificate provides two options to establish compliance with zoning
    regulations:
    □ There are no local zoning restrictions for a proposed
    dispensary at the above location.
    OR
    □ The location of the proposed dispensary is in compliance
    with local zoning restrictions related to where a dispensary
    may be located.
    ¶11            At the time of the application, B & R’s proposed dispensary
    address was already housing an existing dispensary. When B & R obtained
    the county zoning form for its certificate application, the zoning authority
    that issued the form marked the form’s latter option with an asterisk. Below
    the asterisk, the zoning authority typed:
    ALTHOUGH THIS LOCATION IS CORRECTLY ZONED,
    ANY EXISTING MEDICAL MARIJUANA FACILITY
    CURRENTLY OPERATING AT THIS LOCATION WOULD
    NEED TO VACATE THE LOCATION BEFORE THIS
    APPLICANT WOULD BE PERMITTED TO OPERATE THERE
    SO THAT TWO DISPENSARIES DO NOT OPERATE THAT
    [sic] THE SAME LOCATION.
    In addition, the zoning authority had handwritten next to the statement:
    “zoning is C-2,” which was the correct zoning classification for the location
    of a dispensary. See Zoning Ordinance 804.2(45) (listing medical marijuana
    4      A county island is an unincorporated pocket of land surrounded by
    a municipality, multiple municipalities, or a municipality and a reservation,
    which is not governed by the laws of the surrounding municipality. See
    generally Sanderson Lincoln Mercury, Inc. v. Ford Motor Co., 
    205 Ariz. 202
    , 206,
    ¶ 12 (App. 2003) (explaining that although a county island is surrounded
    by an incorporated municipality, it is not part of the municipality).
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    dispensary facilities as a permitted within C-2 Intermediate Commercial
    Zoning Districts).
    ¶12            When B & R was later awarded the dispensary registration
    certificate from the Department for CHAA 70, the dispensary formerly
    operating in B & R’s proposed location moved to another CHAA and B & R
    began to operate out of the proposed location. Premium argues that by
    using an existing dispensary’s address in its application, B & R’s proposed
    location did not comply with all local zoning restrictions because the
    location was within 1,500 feet of another dispensary—the dispensary
    currently operating at that location. Based on this, Premium contends
    B & R’s application should have been rejected. Premium claims it was the
    only applicant whose proposed location fully complied with all local
    zoning ordinances.
    ¶13            Premium filed suit against the Department, alleging the
    Department’s decision to award B & R the dispensary registration
    certificate violated the AMMA and harmed Premium by denying it the
    opportunity to receive the certificate. The Department moved to dismiss
    the complaint, arguing that Premium failed to state a claim on which relief
    could be granted because the complaint rested on an erroneous
    interpretation of the AMMA. The Department argued that Premium was
    conflating the zoning requirements for obtaining a registration certificate
    (“Step 1”) with the zoning requirements for obtaining approval to operate
    (“Step 2”). Compare A.A.C. R9-17-304(C)(6) (requiring documentation by
    the local jurisdiction that the proposed dispensary location meets any local
    zoning restrictions in order to apply for a dispensary registration certificate)
    with A.A.C. R9-17-305(A)(2) (requiring documentation by the local
    jurisdiction authorizing occupancy of the building as a dispensary in order
    to obtain approval to operate).
    ¶14             The superior court granted the Department’s motion to
    dismiss in part, but declined to dismiss in full, reasoning that Premium’s
    allegations against the Department rested heavily on the content of B & R’s
    zoning form, which at the time had not been provided to the court. Taking
    all facts alleged in the complaint as true, the court observed that the yet-to-
    be-provided zoning form could include express language alerting the
    Department to the fact that B & R’s proposed location was not in
    compliance with local zoning requirements.5 At the Department’s request,
    5     At this early stage, Premium was not aware of the exact location
    B & R had given on its application; however, after evaluating properties
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    the court found that B & R was an indispensable party under Arizona Rule
    of Civil Procedure (“Rule”) 19 and directed Premium to join B & R in an
    amended complaint. Premium filed its First Amended Complaint, which
    included the local zoning form from B & R’s certificate application as an
    exhibit, and joined B & R as a defendant in the action. The Department
    again moved to dismiss the action for failure to state a claim, arguing
    B & R’s zoning form demonstrated the proposed location was in
    compliance with local zoning restrictions and was sufficient zoning
    documentation for the certificate allocation stage.
    ¶15            This time, the superior court dismissed the action in full,
    finding B & R’s zoning document sufficient and stating the Department
    “was not required to do more” to verify the zoning information at this first
    stage of the dispensary application process. The court explained, “The
    zoning document was sufficient on its face and the Department could rely
    on the local zoning authority’s determination of compliance . . . .” The court
    noted that additional zoning verification would not have been required
    until Step 2 of the dispensary authorization process (application for
    approval to operate), which step was not at issue for the claims made in the
    amended complaint.
    ¶16           Premium now argues the superior court erred in its
    understanding of what is required at each step of the dispensary
    registration process and maintains that B & R’s application should have
    been denied at Step 1 based on noncompliance with local zoning
    restrictions. Premium seeks permanent mandatory injunctive relief
    ordering the Department to revoke its issuance of the CHAA 70 certificate
    to B & R and to reallocate the certificate to Premium.
    ¶17           We have jurisdiction of Premium’s timely appeal pursuant to
    A.R.S. § 12-2101(A)(1).
    available for use as a dispensary, Premium deduced B & R had either
    applied with an address located only 130 feet from an existing dispensary
    or with an address of an existing dispensary. Premium later confirmed
    B & R had applied with the address of an existing dispensary.
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    ANALYSIS
    I.      Standard of Review
    ¶18             “We review de novo a dismissal for failure to state a claim.”6
    Baker v. Rolnick, 
    210 Ariz. 321
    , 324, ¶ 14 (App. 2005). In reviewing, we
    “assume all the facts alleged in the complaint are true.” Republic Nat’l Bank
    of N.Y. v. Pima Cty., 
    200 Ariz. 199
    , 201, ¶ 2 (App. 2001). We will not affirm
    a dismissal “unless satisfied as a matter of law that plaintiffs would not be
    entitled to relief under any interpretation of the facts susceptible of proof.”
    Fidelity Sec. Life Ins. Co. v. Ariz. Dep’t of Ins., 
    191 Ariz. 222
    , 224, ¶ 4 (1998).
    ¶19           We will affirm an agency’s decision unless it is “contrary to
    law, is not supported by substantial evidence, is arbitrary and capricious or
    is an abuse of discretion.” A.R.S. § 12-910(E).
    II.     B & R’s County Zoning Form
    ¶20             Premium argues that the Department’s actions were arbitrary
    and capricious because it was aware or should have been aware that B & R’s
    proposed dispensary location was not in compliance with local zoning
    restrictions at the time B & R submitted its application, as shown by the
    inclusion of qualifying language on B & R’s county zoning form. Further,
    Premium contends the Department was aware or should have been aware
    that B & R falsely claimed its proposed location was compliant with all local
    zoning restrictions. Premium maintains that its complaints pertain only to
    consideration of B & R’s application in Step 1 (the certificate allocation
    process) and that it makes no arguments regarding Step 2 (the approval to
    operate). In contrast, the Department argues that B & R’s zoning form
    fulfilled the requirements for Step 1 and that Premium is conflating the level
    of zoning verification required at each of the Steps.
    ¶21           The question before us, then, is whether the completed county
    zoning form—with its supplemental language—was sufficient to show
    B & R’s location was in compliance with local zoning restrictions as
    required in Step 1.
    6      In general, consideration of extrinsic evidence converts a Rule
    12(b)(6) motion to a summary judgment motion; however, there are two
    exceptions to this general rule: (1) a court may consider material which is
    properly submitted as part of the complaint; and (2) a court may take judicial
    notice of matters of public record. See Coleman v. City of Mesa, 
    230 Ariz. 352
    ,
    356, ¶ 9 (2012).
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    ¶22           This court has previously considered the difference in zoning
    requirements mandated by Steps 1 and 2 of the dispensary registration
    process. In Compassionate Care Dispensary, Inc. v. Arizona Department of
    Health Services, we clarified:
    [T]he application for a certificate—step one—requires
    documentation from the local jurisdiction that “[t]he
    dispensary’s location is in compliance with any local zoning
    restrictions.” A.A.C. R9-17-304(C)(6). The application to
    operate—step two—requires documentation from the local
    jurisdiction “authorizing occupancy of the building,” such as
    a certificate of occupancy or CUP.7 A.A.C. R9-17-305(A)(2).
    244 Ariz. at 212, ¶ 21 (second alteration in original).
    ¶23          Premium has never argued B & R should have obtained a
    CUP or other certificate of occupancy and we do not suggest that such
    documentation is the issue now; however, our decision in Compassionate
    Care confirms that Step 1, on its plain language, requires the proposed
    location be compliant with zoning restrictions, while Step 2 requires
    documentation authorizing occupancy of the location. Id. As such, Step 1 of
    the application process “requires only a statement that the location
    complies, generally, with local zoning restrictions.” Id. at 214, ¶ 30.
    ¶24            Here, the county zoning form, as submitted, was sufficient to
    show the proposed location complied, generally, with the local zoning
    requirements. The option marked on the form was: “The location of the
    proposed dispensary is in compliance with local zoning restrictions related
    to where a dispensary may be located.” Although the option was marked
    with an asterisk, the supplemental language added below reiterated: “this
    location is correctly zoned” and “zoning is C-2” (the appropriate zoning
    classification for a medical marijuana dispensary). See Zoning Ordinance
    804.2(45). Additional qualifying language focused on the proposed
    dispensary’s ability to obtain approval to operate, noting: “[A]ny existing
    medical marijuana facility currently operating at this location would need
    to vacate the location before this applicant would be permitted to operate there
    so that two dispensaries do not operate that [sic] the same location.”
    (emphasis added). Issues with a proposed dispensary’s potential ability to
    operate (Step 2 of the process) do not require rejection of the application at
    Step 1. See Compassionate Care, 244 Ariz. at 213, ¶ 22 (“The statutes and
    regulations do not require the Department to reject the initial application
    7      CUP is an acronym for Conditional Use Permit.
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    for a dispensary registration certificate because it lacks [documentation
    necessary for Step 2].”). Because the regulations at issue for compliance
    with Step 1 require only that an applicant provide documentation from the
    local jurisdiction that its proposed location complies, generally, with local
    zoning restrictions, and because B & R provided such documentation,
    Premium’s argument fails as a matter of law. See A.A.C. R9-17-304(C)(6)(b);
    Compassionate Care, 244 Ariz. at 214, ¶ 30.
    ¶25           Premium, however, contends we must consider the
    incremental stages of review within Step 1 (the administrative
    completeness review and the substantive review to determine accuracy of
    application information) in order to evaluate whether the Department’s
    actions in awarding the certificate were arbitrary and capricious.8 See
    A.A.C. R9-17-107(A), (C). Premium argues that while B & R’s county
    zoning form was sufficient to satisfy the requirements of the administrative
    completeness review within Step 1, the Department should have found the
    form insufficient during the substantive review of Step 1 based on the
    form’s qualifying language.
    ¶26             In support of this argument, Premium relies on Waltz Healing
    Center, Inc. v. Arizona Department of Health Services, in which the Department
    disqualified an applicant at the certificate allocation stage because the
    zoning letter provided with the application was dated four years prior to
    the application submission. 
    245 Ariz. 610
    , 612-13, ¶¶ 4, 7 (App. 2018). The
    Department examined the letter in its Stage 1 review and eventually
    disqualified the applicant because “the 2012 letter . . . said nothing about
    whether the . . . dispensary location was in compliance with zoning in
    2016.” Id. at 614, ¶ 14. Premium argues the Department rejected the
    application in Waltz because the proposed dispensary’s location failed to
    meet local zoning restrictions. But, as the court noted in Waltz, the
    Department “denied Waltz’s application because Waltz did not fully
    respond to the Department’s [previous] request for information. In
    particular, the Department identified Waltz’s failure to provide . . .
    documentation from the local jurisdiction addressing zoning restrictions.”
    Id. at 613, ¶ 7. In Waltz, the Department did not reevaluate the zoning
    authority’s determination of current compliance; rather, the Department
    8      “An agency acts arbitrarily and capriciously when it does not
    examine the relevant data and articulate a satisfactory explanation for its
    action including a rational connection between the facts found and the
    choice made.” Compassionate Care, 244 Ariz. at 213, ¶ 25 (quoting Motor
    Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut. Auto. Ins., 
    463 U.S. 29
    , 43 (1983))
    (internal quotation marks omitted).
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    PREMIUM LEAF v. ADHS, et al.
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    found the application incomplete because the expired letter, on its face, was
    not current documentation that the proposed location complied with local
    zoning restrictions. See id. at 614, ¶ 12; see also A.A.C. R9-17-304(C)(6). The
    decision in Waltz supports our conclusion that during the administrative
    and substantive review stages of Step 1, the Department merely verifies the
    application includes facially-valid documentation that the location
    complies, generally, with local zoning restrictions.
    ¶27           Here, the department did not act arbitrarily or capriciously in
    relying on the county zoning form’s assurance that the location complied
    with local zoning restrictions. The administrative completeness review of
    Step 1 required the Department to check that the application contained all
    necessary documents and information, while the substantive review
    allowed the Department time to make a “request for more information,” as
    it did in Waltz, or “complete an inspection” if needed. See A.A.C. R9-17-
    107(A), (C). The substantive review stage of Step 1 is not, as Premium
    argues, a time for the Department to “make its own evaluation of whether
    the proposed address [meets] the standard of ‘substantively compliant’”
    with all applicable local zoning ordinances. Documentation of compliance
    from the local zoning authority is required with an application precisely
    because the Department is not in the position to make evaluations of
    compliance with all local zoning ordinances for every certificate
    application.9 The Department may rely on the local zoning authority’s
    representations of compliance with local restrictions at the certificate
    application stage.
    ¶28            Premium contends that “[c]consistent with principles of due
    process . . . ADHS’ review obligations were greater and more involved”
    than simply receiving the local zoning form and deeming it acceptable. We
    disagree. B & R’s county zoning form provided up-to-date confirmation
    that the location was correctly zoned, qualified only by language about the
    proposed dispensary’s eventual ability to operate, and the Department
    could rely on that representation during the certificate allocation process.
    Because Premium’s claim is based on a nonexistent, higher duty read into
    the rules through its own interpretation of “substantive review,” its
    argument fails as a matter of law.
    9      The AMMA gives cities, towns, and counties the ability to enact
    reasonable zoning regulations applicable to dispensaries. A.R.S. § 36-
    2806.01. Those local entities are in the best position to ensure compliance
    with the regulations they implement.
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    ¶29            Premium asserts that this court’s recent ruling in JH2K I, LLC
    v. Arizona Department of Health Services supports the argument that the
    Department has an enhanced duty to verify actual compliance with zoning
    restrictions during the substantive review stage of Step 1. 
    246 Ariz. 307
    ,
    309, ¶ 4 (App. 2019). In JH2K I, the Department determined JH2K’s
    application was not substantively complete because it was missing
    verification that the proposed location was “at least 500 feet from a private
    school or a public school that existed before the date the dispensary
    submitted the initial dispensary registration certificate application.” 
    Id.
    (quoting A.A.C. R9-17-321(A)). Although JH2K tried to submit additional
    documentation that it met the distance requirement, the Department
    eventually denied the application finding that, when measured from
    property line to property line, the proposed location was within 500 feet of
    a school. 
    Id.
    ¶30           Premium argues JH2K I confirms the Department must
    conduct its own evaluation of zoning compliance during the Step 1
    substantive review stage of the certificate application process. However,
    we find JH2K I distinguishable from the case at hand. The distance
    requirement at issue in JH2K I was not merely a local zoning restriction;
    instead, it was a condition explicitly mandated by the AMMA and related
    administrative code. See A.R.S. § 36-2804(B)(1)(b)(ii) (stating the physical
    address of the dispensary given on a certificate application may not “be
    within five hundred feet of a public or private school existing before the
    date of the nonprofit medical marijuana dispensary application.”); A.A.C.
    R9-17-322(A)(1) (“The Department shall deny an application for a
    dispensary registration certificate or a renewal if . . . the physical address of
    the building . . . is within 500 feet of a private school or a public school that
    existed before the date the dispensary submitted the initial dispensary
    registration certificate application[.]”).
    ¶31            Under A.A.C. R9-17-322(A)(1), the Department had a clear,
    affirmative duty to deny JH2K’s certificate application if the proposed
    location was not an appropriate distance from surrounding schools. See id.
    The AMMA and related rules gave the Department notice of the school
    distance requirement and of the Department’s responsibility to specifically
    enforce that separation at the certificate application stage. See id. In
    contrast, distance requirements mandated by local ordinances are not
    explicitly included in the AMMA or related rules, so the Department may
    not be immediately aware of specific local separation requirements that
    apply to proposed dispensaries. In B & R’s case, the supplementary
    language on the zoning form did not cite which local zoning ordinance was
    at issue or even explain what distance was mandated by local restrictions
    12
    PREMIUM LEAF v. ADHS, et al.
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    between dispensaries.        Nonetheless, Premium contends that the
    supplementary language was included so that the Department itself could
    evaluate if the location was compliant with local zoning restrictions. If this
    were true, it would require the Department to research applicable zoning
    restrictions specific to each locality and evaluate zoning compliance for
    every application, which would essentially render the required
    documentation of compliance from the local zoning authority superfluous.
    We cannot accept such a counterintuitive interpretation of the application
    requirements.
    ¶32           More to the point, unlike the applicant’s proposed location in
    JH2K I—which could never physically be brought into statutory or
    administrative compliance—the supplemental language provided by the
    county on B & R’s form correctly confirmed appropriate zoning and noted
    a path of operational compliance once the existing dispensary at the subject
    location moved to a different location.
    III.   Frustrating the Purpose of the 2016 Allocation
    ¶33           Next, Premium argues that by awarding the dispensary
    registration certificate to B & R, whose proposed location would replace an
    existing dispensary, the Department frustrated the purpose of the AMMA10
    and of the 2016 certificate allocation process. Premium asserts that “the
    purpose and goal of the 2016 certificate allocation process . . . was to provide
    a second dispensary in the 31 CHAAs with the highest patient cardholder
    populations” based on the regulatory scheme in A.A.C. R9-17-303, “which
    scored certificate applicants in Step One almost entirely according to the
    number of patient card-holders served by the proposed dispensary’s
    location.” See A.A.C. R9-17-303. Accordingly, Premium maintains that the
    2016 allocation was meant to add a dispensary to those CHAAs with a high
    10      We give primary consideration to the potential frustration of the
    2016 certificate allocation process rather than frustration of the purpose of
    the AMMA as a whole. “[T]he purpose of [the AMMA] is to protect patients
    with debilitating medical conditions, as well as their physicians and
    providers, from arrest and prosecution, criminal and other penalties and
    property forfeiture if such patients engage in the medical use of marijuana.”
    Ariz. Sec’y of State, 2010 Publicity Pamphlet 73 (2010),
    https://apps.azsos.gov/election/2010/info/PubPamphlet/english/e-
    book.pdf. The Department’s actions in awarding a dispensary registration
    certificate to a proposed dispensary that would replace an existing
    dispensary did not contravene this purpose.
    13
    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    patient population density in order to serve more patients, which the
    Department failed to do by instead substituting one dispensary for another.
    ¶34             The relevant rule, A.A.C. R9-17-303(B), explains that if
    additional dispensary registration certificates are available after certificates
    are allocated to counties that do not already contain a dispensary, then
    “[t]he Department shall prioritize and assign a dispensary registration
    certificate allocation to a CHAA based on which CHAA has the most
    registry identification cards issued to qualifying patients who reside within
    the CHAA.” A.A.C. R9-17-303(B)(2)(a). But the AMMA does not ensure
    every CHAA will have a requisite number of dispensaries. See generally
    A.R.S. §§ 36-2801 to -2819. Rather, the rules purposefully grant dispensaries
    the flexibility to move to a different CHAA from that in which their original
    certificate was issued. See A.A.C. R9-17-306(B)(1)(b) (“A dispensary may
    change [its] location . . . [a]fter the first three years after the Department
    issues a dispensary registration certificate to the dispensary, to another
    location in the state[.]”). Considering these rules together, we recognize
    that the process for allocating dispensary registration certificates must
    coexist with the ability for current dispensaries to move. See State ex rel.
    Larson v. Farley, 
    106 Ariz. 119
    , 122 (1970) (“[A] statute should be explained
    in conjunction with other statutes to the end that they may be harmonious
    and consistent.”). The existing dispensary that B & R replaced had the
    ability to move at any time after three years, and the Department was not
    obligated to award the registration certificate to ensure that two
    dispensaries would operate in CHAA 70. Premium’s claim that the
    Department’s actions frustrated the purpose of the 2016 certificate
    allocation process fails.
    IV.    Due Process and Two Classes of Applicants
    ¶35             Premium argues that in accepting B & R’s certificate
    application, the Department created two classes of applicants—those
    affiliated with existing dispensaries and those who were not—and applied
    the rules inconsistently between them. Appellees contend this argument
    was waived because it was not pled in Premium’s complaint and was raised
    for the first time in Premium’s motion for reconsideration of the superior
    court’s dismissal.
    ¶36            On appeal, we generally do not consider arguments raised for
    the first time in a motion for reconsideration because “the prevailing party
    below is routinely deprived of the opportunity to fairly respond.” Evans
    Withycombe, Inc. v. W. Innovations, Inc., 
    215 Ariz. 237
    , 240, ¶ 15 (App. 2006).
    14
    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    However, we find this argument was briefly raised during the hearing for
    the motion to dismiss and so we address the validity of the claim.
    ¶37           In support of its argument, Premium maintains that an
    “applicant[] in collusion with an existing dispensary” would receive an
    advantage when the Department measured the density of qualifying
    patients around the proposed location because use of an existing
    dispensary’s address would capitalize on the high patient population
    around the current dispensary. Premium suggests B & R was able to
    “artificially capture the existing dispensary’s surrounding patient
    population,” which in Premium’s view was “the only determinative criteria
    in [B & R’s] ultimate selection to receive the certificate.”11
    ¶38           We find Premium’s claim fails because it does not allege any
    facts to support a conclusion that the Department treated applicants
    inconsistently. Rather, Premium’s argument seems to admit that the
    Department treated applicants the same, suggesting the Department
    measured the patient cardholder population that would be served by each
    proposed location and awarded the certificate to the proposed location that
    would cover the most existing patients. Nothing in the AMMA or related
    rules prohibits an applicant from contracting with an existing dispensary to
    take over its space. Similarly, nothing prevented Premium itself from
    seeking to contract with a current dispensary to take over an existing space
    and benefit from any qualifying patients already in that area. Because
    Premium did not allege any set of facts that would support a claim of
    inconsistent treatment, its argument fails as a matter of law.
    11     Premium also claims B & R should have been given the lowest
    possible score for patient population covered because B & R’s proposed
    location would cover the exact patient population already covered by the
    existing dispensary at that address.           See A.A.C. R9-17-303(B)(2)(c)
    (prioritizing allocation of the certificate to the proposed location that will
    provide services to the most qualifying patients). The argument falls short,
    however, as Premium later admits that the “two dispensaries could not and
    would not ever simultaneously exist [at the same location].” As the
    proposed dispensary and existing dispensary could not simultaneously
    operate at the same location, each would instead be capitalizing on the
    surrounding patient population at a different time. B & R’s score was based
    on the qualifying patients that its location would cover if it were to not only
    obtain the dispensary registration certificate but also the approval to legally
    operate.
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    PREMIUM LEAF v. ADHS, et al.
    Decision of the Court
    V.     Right to Amend Complaint
    ¶39            Finally, Premium alleges that before a motion to dismiss for
    failure to state a claim should have been granted, Premium should have
    been given the opportunity to amend its complaint. But Premium never
    moved to file a second amended complaint, nor did it request or argue for
    leave to amend its complaint in its motion for reconsideration. See
    Blumenthal v. Teets, 
    155 Ariz. 123
    , 131 (App. 1987) (When “the plaintiff did
    not file any motion to amend the complaint[,] [t]he failure of the trial court
    to allow plaintiff to amend the complaint was not error.”). Accordingly, we
    will not reverse the court’s decision based on the lack of opportunity to
    amend the complaint.
    VI.    Costs on Appeal
    ¶40          B & R requested its costs incurred on appeal under A.R.S.
    §§ 12-341 and -342. We grant B & R its costs associated with this appeal
    pursuant to A.R.S. § 12-341, contingent on its compliance with Arizona Rule
    of Civil Appellate Procedure 21(a).
    CONCLUSION
    ¶41           For the foregoing reasons, we affirm the superior court’s
    dismissal of Premium’s first amended complaint in its entirety, with
    prejudice, for failure to state a claim.
    AMY M. WOOD • Clerk of the Court
    FILED: AA
    16