January 6, 2022

By Timothy Sandefur

This week the Goldwater Institute filed a brief urging the Arizona Supreme Court to review a case involving the rights of businessman Greg Mills, whose freedom to practice his trade as an electronics engineer has been crippled by overzealous bureaucrats who say he must get their permission before he runs his business. The case has important implications for any Arizonan who is forced to reckon with the power of administrative agencies in order to practice their profession.

Mills ran a successful business helping design computer circuits for spacecraft—until state officials notified him that he’s required to get a “certificate of registration” from the Board of Technical Registration, first. He replied that the registration requirement doesn’t apply to him…and that’s when the trouble really began, because that triggered a showdown over the procedures whereby Arizonans can challenge the authority of the state’s administrative agencies—one that threatens to deprive the Grand Canyon State’s citizens of the opportunity to enforce legal limits on bureaucratic power.

Normally, if a state agency brings an enforcement action against you, you’ll have an opportunity to make your arguments at an administrative hearing—after which you can appeal to a state court, if necessary. But if you think the agency is acting outside of its authority, there’s no need to go to an agency hearing; instead, you can file your own lawsuit, arguing that the agency is exercising power that the law doesn’t give it.

That’s what Mills did. Represented by our friends at the Institute for Justice, he filed a case asking a state judge to decide whether the Board had jurisdiction over his business in the first place. But the Arizona Court of Appeals threw his case out, on the grounds that he hadn’t gone through a Board hearing first. Citing the so-called exhaustion requirement, the judges claimed Mills had filed his lawsuit too early.

But as we argue in our brief, that ruling ignores the difference between cases that concede an agency’s jurisdiction—which do have to go through an administrative hearing first—and cases that challenge the agency’s jurisdiction—which do not. That distinction is important, because agency hearings can be expensive and time-consuming, and it makes no sense to force someone whose business falls outside an agency’s authority to first submit to that authority, and only challenge it afterwards.

The U.S. Supreme Court said that in a famous 2012 case called Sackett v. EPA. There, the Environmental Protection Agency sent the Sackett family a notice claiming they had violated the Clean Water Act by interfering with a “wetland.” They asked for a hearing on the question of whether their property was actually a “wetland,” but the EPA said no. It said they had to wait until the EPA sued them, instead—which might not happen for years, even though the agency was assessing fines against them to the tune of $75,000 per day.

The Supreme Court rejected the EPA’s argument: as soon as the agency asserted jurisdiction over the Sacketts, the Court said, they were entitled to a hearing. In a later case called Hawkes Engineering, the Court reiterated the point: when an agency asserts jurisdiction, people have the right to go to court to challenge that, even if the agency hasn’t actually enforced the law against them.

Obviously federal law is different from Arizona law, but as we argue in our brief in Greg Mills’s case, the issue is the same: Mills should be free to file a lawsuit challenging the Board’s jurisdiction without first accepting that jurisdiction.

That point is reinforced by recent changes to Arizona state law, too, which say that if a person does appeal an agency’s decision, all legal and factual questions must be decided all over again by the judge—and the person has the right to add new evidence to the record, too. These changes, which were adopted just this past spring, marked a crucial step in reining in the state’s administrative agencies and ensuring better due process for all Arizonans. Given these new protections, it makes no sense to force Mills to undergo a full hearing, only to do it all over again on appeal—when the real question in the case is whether the Board has authority here to begin with.

To do otherwise—and force people to undergo the time and expense of an agency hearing before they can challenge the agency’s authority—would likely deprive many Arizonans of the opportunity to defend their rights against the bureaucracy. Many people, perhaps most, lack the time and money to undertake such a burden, and will simply cave in when agencies overstep their bounds. That’s bad for business owners like Greg Mills—and for everybody else.

You can read our brief here.

Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.

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