HB2599 - 552R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 12-348, Arizona Revised Statutes, is amended to read:

START_STATUTE12-348. Award of fees and other expenses against the state or a city, town or county; reduction or denial of award; application; basis for amount of award; source of award; definitions

A. In addition to any costs that are awarded as prescribed by statute, a court shall award fees and other expenses to any party other than this state or a city, town or county that prevails by an adjudication on the merits in any of the following:

1. A civil action brought by this state or a city, town or county against the party.

2. A court proceeding to review a state agency decision pursuant to chapter 7, article 6 of this title or any other statute authorizing judicial review of agency, city, town or county decisions. A licensee that prevails in an appeal of an agency's final decision following a conference pursuant to section 41-1092.08, subsection I is entitled to recover reasonable attorney fees and costs incurred during all stages of the proceeding.

3. A proceeding pursuant to section 41-1034.

4. A special action proceeding brought by the party to challenge an action by this state or a city, town or county against the party.

5. An appeal by this state to a court of law from a decision of the personnel board under title 41, chapter 4, article 6.

6. A civil action brought by the party to challenge the seizure and sale of personal property by this state or a city, town or county.

7. A civil action brought by the party to challenge a rule, decision, guideline, enforcement policy or procedure of a state agency or commission that is statutorily exempt from the rulemaking requirements of title 41, chapter 6 on the grounds that the rule, decision, guideline, enforcement policy or procedure is not authorized by statute or violates the Constitution of the United States or this state.

B. In addition to any costs that are awarded as prescribed by statute, except as provided in subsection C of this section, a court may award fees and other expenses to any party, other than this state or a city, town or county, that prevails by an adjudication on the merits in an action brought by the party against this state or a city, town or county challenging:

1. The assessment, collection or refund of taxes or in an action brought by this state or a city, town or county against the party to enforce the assessment or collection of taxes or the denial of a refund.

2. The adequacy or regularity of notice of delinquent taxes.

3. The regularity of sales of property for delinquent taxes.

C. The court in its discretion may deny the award provided for in this section or may reduce the award if it finds that any of the following applies:

1. During the course of the proceeding the prevailing party unduly and unreasonably protracted the final resolution of the matter.

2. The reason that the party other than this state or a city, town or county has prevailed is an intervening change in the applicable law.

3. The prevailing party refused an offer of civil settlement that was at least as favorable to the party as the relief ultimately granted.

D. A party may apply pursuant to the applicable procedural rules for an award of attorney fees and other expenses authorized under this section and shall include as part of the application evidence of the party's eligibility for the award and the amount sought, including an itemized statement from the attorneys and experts stating the actual time expended in representing the party and the rate at which the fees were computed.

E. The court shall base any award of fees as provided in this section on prevailing market rates for the kind and quality of the services furnished, except that:

1. The award of attorney fees may not exceed the amount that the prevailing party has paid or agreed to pay the attorney or a maximum amount of $350 per hour.

2. An award of fees against this state or a city, town or county shall not exceed $125,000 for fees incurred at each level of judicial appeal.

3. For each calendar year beginning from and after December 31, 2015, the attorney general shall adjust the income dollar amounts for maximum awards made pursuant to subsection B of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts may not be revised below the amounts prescribed in the prior calendar year.

F. The particular state agency over which a party prevails shall pay the fees and expenses awarded as provided in this section from any monies appropriated to the agency for that purpose. If no agency is involved or if an agency fails or refuses to pay fees and other expenses within thirty days after demand by a person who has received an award pursuant to this section, and if no further review or appeals of the award are pending, the person may file a claim for the fees and other expenses with the department of administration, which shall pay the claim within thirty days, in the same manner as an uninsured property loss under title 41, chapter 3.1, article 1. If, at the time the agency failed or refused to pay the award, it had appropriated monies either designated or assignable for the purpose of paying awards, the legislature shall reduce the agency's operating appropriation for the following year by the amount of the award and shall appropriate the amount of the reduction to the department of administration as reimbursement for the loss.

G. A city, town or county shall pay fees and expenses awarded as provided in this section within thirty days after demand by a party who has received an award if no further review or appeal of the award is pending.

H. This section does not:

1. Apply to an action arising from a proceeding before this state or a city, town or county in which the role of this state or a city, town or county was to determine the eligibility or entitlement of an individual to a monetary benefit or its equivalent, to adjudicate a dispute or issue between private parties or to establish or fix a rate.

2. Apply to proceedings brought by this state pursuant to title 13 or 28.

3. Entitle a party to obtain fees and other expenses incurred in making an application for an award pursuant to this section for fees and other expenses.

4. Apply to proceedings involving eminent domain, foreclosure, collection of judgment debts or proceedings in which this state or a city, town or county is a nominal party.

5. Personally obligate any officer or employee of this state or a city, town or county for the payment of an award entered under this section.

6. Apply, except as provided in subsection A, paragraph 5 of this section, to proceedings involving the personnel board under title 41, chapter 4, article 6.

7. Apply to proceedings brought by a city, town or county pursuant to title 13 or 28.

8. Apply to proceedings brought by a city, town or county on collection of taxes or pursuant to traffic ordinances or to criminal proceedings brought by a city, town or county on ordinances that contain a criminal penalty or fine for violations of those ordinances.

I. For the purposes of this section:

1. "Fees and other expenses" means the reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test or project that the court finds to be directly related to and necessary for the presentation of the party's case and reasonable and necessary attorney fees, and in the case of an action to review an agency decision pursuant to subsection A, paragraph 2 of this section, all fees and other expenses that are incurred in the proceedings in which the decision was rendered.

2. "Licensee" has the same meaning prescribed in section 41-1092.

2. 3. "Party" means an individual, partnership, corporation, limited liability company, limited liability partnership, association or public or private organization.

3. 4. "State" means this state and any agency, officer, department, board or commission of this state.

4. 5. "Taxes" includes all taxes and related levies and assessments addressed in section 12-163. END_STATUTE

Sec. 2. Section 41-1009, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1009. Inspections and audits; applicability; exceptions

A. An agency inspector, auditor or regulator who enters any premises of a regulated person for the purpose of conducting an inspection or audit shall, unless otherwise provided by law:

1. Present photo identification on entry of the premises.

2. On initiation of the inspection or audit, state the purpose of the inspection or audit and the legal authority for conducting the inspection or audit.

3. Disclose any applicable inspection or audit fees. Notwithstanding any other law, a regulated person being inspected or audited is responsible for only the direct and reasonable costs of the inspection or audit and is entitled to receive a detailed billing statement as described in paragraph 5, subdivision (e) of this subsection.

4. Afford an opportunity to have an authorized on-site representative of the regulated person accompany the agency inspector, auditor or regulator on the premises, except during confidential interviews.

5. Provide notice of the right to have on request:

(a) Copies of any original documents taken by the agency during the inspection or audit if the agency is allowed by law to take original documents.

(b) A split of any samples taken during the inspection if the split of any samples would not prohibit an analysis from being conducted or render an analysis inconclusive.

(d) Copies of any documents to be relied on to determine compliance with licensure or regulatory requirements if the agency is otherwise allowed by law to do so.

(e) A detailed billing statement that provides reasonable specificity of the inspection or audit fees imposed pursuant to paragraph 3 of this subsection and that cites the statute or rule that authorizes the fees being charged.

6. Inform each person whose conversation with the agency inspector, auditor or regulator during the inspection or audit is tape recorded that the conversation is being tape recorded.

7. Inform each person who is interviewed during the inspection or audit that:

(a) Statements made by the person may be included in the inspection or audit report.

(b) Participation in an interview is voluntary, unless the person is legally compelled to participate in the interview.

(c) The person is allowed at least twenty-four hours to review and revise any written witness statement that is drafted by the agency inspector, auditor or regulator and on which the agency inspector, auditor or regulator requests the person's signature.

(d) The agency inspector, auditor or regulator may not prohibit the regulated person from having an attorney or any other experts in their field present during the interview to represent or advise the regulated person.

8. at the end of the inspection, review, with an AUTHORIZED on-site representative of the regulated person, the positive and negative findings of the inspection and what agency actions the regulated person can expect.

B. On initiation of an audit or an inspection of any premises of a regulated person, an agency inspector, auditor or regulator shall provide the following in writing:

1. The rights described in subsection A of this section and section 41-1001.01, subsection C.

2. The name and telephone number of a contact person who is available to answer questions regarding the inspection or audit.

3. The due process rights relating to an appeal of a final decision of an agency based on the results of the inspection or audit, including the name and telephone number of a person to contact within the agency and any appropriate state government ombudsman.

4. A statement that the agency inspector, auditor or regulator may not take any adverse action, treat the regulated person less favorably or draw any inference as a result of the regulated person's decision to be represented by an attorney or advised by any other experts in their field.

5. A notice that if the information and documents provided to the agency inspector, auditor or regulator become a public record, the regulated person may redact trade secrets and proprietary and confidential information unless the information and documents are confidential pursuant to statute.

6. The time limit or statute of limitations applicable to the right of the agency inspector, auditor or regulator to file a compliance action against the regulated person arising from the inspection or audit, which applies to both new and amended compliance actions.

C. An agency inspector, auditor or regulator shall obtain the signature of the regulated person or on-site representative of the regulated person on the writing prescribed in subsection B of this section and section 41-1001.01, subsection C, if applicable, indicating that the regulated person or on-site representative of the regulated person has read the writing prescribed in subsection B of this section and section 41-1001.01, subsection C, if applicable, and is notified of the regulated person's or on-site representative of the regulated person's inspection or audit and due process rights. The agency inspector, auditor or regulator may provide an electronic document of the writing prescribed in subsection B of this section and section 41-1001.01, subsection C and, at the request of the regulated person or on-site representative, obtain a receipt in the form of an electronic signature. The agency shall maintain a copy of this signature with the inspection or audit report and shall leave a copy with the regulated person or on-site representative of the regulated person. If a regulated person or on-site representative of the regulated person is not at the site or refuses to sign the writing prescribed in subsection B of this section and section 41-1001.01, subsection C, if applicable, the agency inspector, auditor or regulator shall note that fact on the writing prescribed in subsection B of this section and section 41-1001.01, subsection C, if applicable.

D. An agency that conducts an inspection shall give a copy of the inspection report to the regulated person or on-site representative of the regulated person either:

1. At the time of the inspection.

2. Notwithstanding any other state law, within thirty working days after the inspection.

3. As otherwise required by federal law.

E. The inspection report shall contain alleged deficiencies identified during an inspection. Unless otherwise provided by state or federal law, the agency shall provide the regulated person an opportunity to correct the alleged deficiencies unless the agency documents in writing as part of the inspection report that the alleged deficiencies are:

1. Committed intentionally.

2. Not correctable within a reasonable period of time as determined by the agency.

3. Evidence of a pattern of noncompliance.

3. the same alleged deficiencies previously identified in an inspection report or other written notice at the same location within the last two years.

4. A risk SIGNIFICANT impact to any person, the public health, safety or welfare or the environment.

F. If the agency is unsure whether a regulated person meets the exemptions in subsection E of this section, the agency shall provide the regulated person with an opportunity to correct the alleged deficiencies.

G. If the agency allows the regulated person an opportunity to correct the alleged deficiencies pursuant to subsection E of this section, the regulated person shall notify the agency when the alleged deficiencies have been corrected. Within thirty days after receipt of notification from the regulated person that the alleged deficiencies have been corrected, the agency shall determine if the regulated person is in substantial compliance and notify the regulated person whether or not the regulated person is in substantial compliance. If the regulated person fails to correct the alleged deficiencies or the agency determines the alleged deficiencies have not been corrected within a reasonable period of time, the agency may take any enforcement action authorized by law for the alleged deficiencies.

H. If the agency does not allow the regulated person an opportunity to correct alleged deficiencies pursuant to subsection E of this section, on the request of the regulated person, the agency shall provide a detailed written explanation of the reason that an opportunity to correct was not allowed.

I. An agency decision pursuant to subsection E or G of this section is not an appealable agency action.

J. At least once every month after the commencement of the inspection, an agency shall provide a regulated person with an update on the status of any agency action resulting from an inspection of the regulated person. An agency is not required to provide an update after the regulated person is notified that no agency action will result from the agency inspection or after the completion of agency action resulting from the agency inspection.

K. For agencies with authority under title 49, if, as a result of an inspection or any other investigation, an agency alleges that a regulated person is not in compliance with licensure or other applicable regulatory requirements, the agency shall provide written notice of that allegation to the regulated person before issuing the inspection report or any other agency communication or action relating to the allegation. The notice shall contain the inspection report must contain the requirements prescribed in subsection e of this section and the following information:

1. A citation to the statute, regulation, license or permit condition on which the allegation of noncompliance deficiency is based, including the specific provisions in the statute, regulation, license or permit condition that are alleged to be violated.

2. Identification of any documents relied on as a basis for when determining the allegation of noncompliance deficiency.

3. An explanation stated with reasonable specificity of the regulatory and factual basis known at the time of inspection for the allegation of noncompliance deficiency.

4. Instructions for obtaining a timely opportunity to discuss the alleged violation deficiencies with the agency within two business days of receipt of the inspection report and before any further agency action relating to the alleged deficiencies.

L. Subsection K of this section applies only to inspections or any other investigations necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements. Subsection K of this section does not apply to an action taken pursuant to section 11-871, 11-876, 11-877, 49-457.01, 49-457.03 or 49-474.01. Issuance of a notice an inspection report under subsection K of this section is not a prerequisite to otherwise lawful agency actions seeking an injunction or issuing an order if the agency determines that the action is necessary on an expedited basis to abate an imminent and substantial endangerment to public health or the environment and documents the basis for that determination in the documents initiating the action.

M. This section does not authorize an inspection or any other act that is not otherwise authorized by law.

N. Except as otherwise provided in subsection L of this section, this section applies only to inspections necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements applicable to a licensee and audits pursuant to enforcement of title 23, chapters 2 and 4. This section does not apply:

1. To criminal investigations, investigations under tribal state gaming compacts and undercover investigations that are generally or specifically authorized by law.

2. If the agency inspector, auditor or regulator has reasonable suspicion to believe that the regulated person may be engaged in criminal activity.

3. To the Arizona peace officer standards and training board established by section 41-1821.

4. To certificates of convenience and necessity that are issued by the corporation commission pursuant to title 40, chapter 2.

O. If an agency inspector, auditor or regulator gathers evidence in violation of this section, the violation may be a basis to exclude the evidence in a civil or administrative proceeding.

P. Failure of an agency, board or commission employee to comply with this section:

1. May subject the employee to disciplinary action or dismissal.

2. Shall be considered by the judge and administrative law judge as grounds for reduction of any fine or civil penalty.

Q. An agency may make rules to implement subsection A, paragraph 5 of this section.

R. Nothing in this section shall be used to exclude evidence in a criminal proceeding.

S. Subsection A, paragraph 7, subdivision (c) and subsection E of this section do not apply to the department of health services for the purposes of title 36, chapters 4 and 7.1.

T. Subsection B, paragraph 5 and subsection E of this section do not apply to the corporation commission for the purposes of title 44, chapters 12 and 13.

U. Except as otherwise prescribed by this section and notwithstanding any other law:

1. This section applies to all state agencies that conduct inspections and audits.

2. If a conflict arises between the rights afforded a regulated person pursuant to this section and the rights afforded a regulated person pursuant to another statute, this section governs. END_STATUTE

Sec. 3. Section 41-1030, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1030. Invalidity of rules not made according to this chapter; prohibited agency action; prohibited acts by state employees; enforcement; notice

A. A rule is invalid unless it is consistent with the statute, reasonably necessary to carry out the purpose of the statute and is made and approved in substantial compliance with sections 41-1021 through 41-1029 and articles 4, 4.1 and 5 of this chapter, unless otherwise provided by law.

B. An agency shall not base a licensing decision in whole or in part on a licensing requirement or condition that is not specifically authorized by statute, rule or state tribal gaming compact. A general grant of authority in statute does not constitute a basis for imposing a licensing requirement or condition unless a rule is made pursuant to that general grant of authority that specifically authorizes the requirement or condition.

C. An agency shall not base a decision regarding any filing or other matter submitted by a licensee on a requirement or condition that is not specifically authorized by a statute, rule, federal law or regulation or state tribal gaming compact. A general grant of authority in statute does not constitute a basis for imposing a requirement or condition for approval of a decision on any filing or other matter submitted by a licensee unless a rule is made pursuant to that general grant of authority that specifically authorizes the requirement or condition.

D. An agency shall not:

1. Make a rule under a specific grant of rulemaking authority that exceeds the subject matter areas listed in the specific statute authorizing the rule.

2. Make a rule under a general grant of rulemaking authority to supplement a more specific grant of rulemaking authority.

E. This section may be enforced in a private civil action and relief may be awarded against the state. The court may award reasonable attorney fees, damages and all fees associated with the license application to a party that prevails in an action against the state for a violation of this section.

F. A state employee may not intentionally or knowingly violate this section. A violation of this section is cause for disciplinary action or dismissal pursuant to the agency's adopted personnel policy.

G. This section does not abrogate the immunity provided by section 12-820.01 or 12-820.02.

H. An agency shall prominently print the provisions of subsections B, E, F and G of this section on all license applications, except license applications processed by the corporation commission.

I. The license application may be in either print or electronic format. END_STATUTE

Sec. 4. Repeal

Section 41-1033, Arizona Revised Statutes, as amended by Laws 2021, chapter 405, section 23, is repealed.

Sec. 5. Section 41-1033, Arizona Revised Statutes, as amended by Laws 2021, chapter 340, section 1, is amended to read:

START_STATUTE41-1033. Petition for a rule or review of an agency practice, substantive policy statement, final rule or unduly burdensome licensing requirement; notice

A. Any person may petition an agency to do either of the following:

1. Make, amend or repeal a final rule.

2. Review an existing agency practice or substantive policy statement that the petitioner alleges to constitute a rule.

B. An agency shall prescribe the form of the petition and the procedures for the petition's submission, consideration and disposition. The person shall state on the petition the rulemaking to review or the agency practice or substantive policy statement to consider revising, repealing or making into a rule.

C. Not later than sixty days after submission of the petition, the agency shall either:

1. Reject the petition and state its reasons in writing for rejection to the petitioner.

2. Initiate rulemaking proceedings in accordance with this chapter.

3. If otherwise lawful, make a rule.

D. The agency's response to the petition is open to public inspection.

E. If an agency rejects a petition pursuant to subsection C of this section, the petitioner has thirty days to appeal to the council to review whether the existing agency practice or substantive policy statement constitutes a rule. The council chairperson shall place this appeal on the agenda of the council's next meeting if at least three council members make such a request of the council chairperson within two weeks after the filing of the appeal. the petitioner's appeal may not be more than five double-spaced pages.

F. A person may petition the council to request a review of a final rule based on the person's belief that the final rule does not meet the requirements prescribed in section 41-1030. a petition submitted under this subsection may not be more than five double-spaced pages.

G. A person may petition the council to request a review of an existing agency practice, substantive policy statement, final rule or regulatory licensing requirement that the petitioner alleges is not specifically authorized by statute, exceeds the agency's statutory authority, is unduly burdensome or is not demonstrated to be necessary to specifically fulfill a public health, safety or welfare concern. On receipt of a properly submitted petition pursuant to this section, the council shall review the existing agency practice, substantive policy statement, final rule or regulatory licensing requirement as prescribed by this section. a petition submitted under this subsection may not be more than five double-spaced pages. This subsection does not apply to an individual or institution that is subject to title 36, chapter 4, article 10 or chapter 20.

H. If the council receives information contained in the petition that indicates how alleges an existing agency practice or substantive policy statement may constitute a rule, that a final rule does not meet the requirements prescribed in section 41-1030 or that an existing agency practice, substantive policy statement, final rule or regulatory licensing requirement exceeds the agency's statutory authority, is not specifically AUTHORIZED by statute or does not meet the guidelines prescribed in subsection G of this section, or if the council receives an appeal under subsection e of this section, and at least four three council members request of the chairperson that the matter be heard in a public meeting:

1. Within ninety days after receipt of receiving the fourth third council member's request, the council shall determine whether any of the following applies:

(a) The agency practice or substantive policy statement constitutes a rule.

(b) The final rule meets the requirements prescribed in section 41-1030.

(c) An existing agency practice, substantive policy statement, final rule or regulatory licensing requirement exceeds the agency's statutory authority, is not specifically authorized by Statute or meets the guidelines prescribed in subsection G of this section.

2. Within ten days after receipt of receiving the fourth third council member's request, the council shall notify the agency that the matter has been or will be placed on an the council's agenda for consideration on the merits.

3. Not later than thirty days after receiving notice from the council, the agency shall submit a statement of not more than five double-spaced pages to the council that addresses whether any of the following applies:

(a) The existing agency practice, or substantive policy statement constitutes a rule.

(b) The final rule meets the requirements prescribed in section 41-1030.

(c) An existing agency practice, substantive policy statement, final rule or regulatory licensing requirement exceeds the agency's statutory authority, is not specifically authorized by statute or meets the guidelines prescribed in subsection G of this section.

I. AT THE HEARING, THE COUNCIL SHALL ALLOCATE THE PETITIONER AND THE AGENCY AN EQUAL AMOUNT OF TIME FOR ORAL COMMENTS NOT INCLUDing ANY TIME SPENT ANSWERING QUESTIONS RAISED BY COUNCIL MEMBERS. THE COUNCIL MAY ALSO ALLOCATE TIME FOR MEMBERS OF THE PUBLIC who have AN INTEREST IN THE ISSUE TO PROVIDE ORAL COMMENTS.

I. J. For the purposes of subsection H of this section, the council meeting shall not be scheduled until the expiration of the agency response period prescribed in subsection H, paragraph 3 of this section.

J. K. An agency practice, substantive policy statement, final rule or regulatory licensing requirement considered by the council pursuant to this section shall remain in effect while under consideration of the council. If the council determines that the agency practice, or substantive policy statement or regulatory licensing requirement exceeds the agency's statutory authority, is not authorized by statute or constitutes a rule or that the final rule does not meet the requirements prescribed in section 41-1030, the practice, policy statement, rule or regulatory licensing requirement shall be considered void. If the council determines that the existing agency practice, substantive policy statement, final rule or regulatory licensing requirement is unduly burdensome or is not demonstrated to be necessary to specifically fulfill a public health, safety or welfare concern, the council may shall modify, revise or declare void any such existing agency practice, substantive policy statement, final rule or regulatory licensing requirement. IF AN AGENCY decides TO FURTHER PURSUE A practice, SUBSTANTIVE POLICY STATEMENT OR REGULATORY LICENSING REQUIREMENT THAT HAS BEEN DECLARED VOID OR HAS BEEN MODIFIED OR REVISED BY THE COUNCIL, THE AGENCY MAY DO SO only PURSUANT TO A NEW RULEMAKING.

K. L. A council decision pursuant to this section shall BE MADE BY A MAJORITY OF THE COUNCIL MEMBERS who are PRESENT AND VOTING ON THE ISSUE AND SHALL include findings of fact and conclusions of law, separately stated. Conclusions of law shall specifically address the agency's authority to act consistent with section 41-1030. NOTWITHSTANDING ANY other law, THE COUNCIL may NOT BASE ANY DECISION CONCERNING AN AGENCY'S COMPLIANCE WITH THE REQUIREMENTS OF SECTION 41-1030 IN ISSUING A FINAL RULE OR SUBSTANTIVE POLICY STATEMENT ON WHETHER ANY PARTY OR PERSON COMMENTED ON THE RULEMAKING OR SUBSTANTIVE POLICY STATEMENT.

L. M. A decision by the council pursuant to this section is not subject to judicial review, except that, in addition to the procedure prescribed in this section or in lieu of the procedure prescribed in this section, a person may seek declaratory relief pursuant to section 41-1034.

M. N. Each agency and the secretary of state shall post prominently on their websites notice of an individual's right to petition the council for review pursuant to this section. END_STATUTE

Sec. 6. Section 41-1092, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1092. Definitions

In this article, unless the context otherwise requires:

1. "Administrative law judge" means an individual or an agency head, board or commission that sits as an administrative law judge, that conducts administrative hearings in a contested case or an appealable agency action and that makes decisions regarding the contested case or appealable agency action.

2. "Administrative law judge decision" means the findings of fact, conclusions of law and recommendations or decisions issued by an administrative law judge.

3. "ADVERSELY affected party" means:

(a) An INDIVIDUAL who both:

(i) Provides evidence of an actual injury or economic damage that the INDIVIDUAL has suffered or will suffer as a direct result of the action and not due to being a competitor or a general taxpayer.

(ii) Timely submits comments on the license application that include, with sufficient specificity, the questions of law that are the basis for the appeal.

(b) A group or association that identifies, by name and physical address in the notice of appeal, a member of the group or association who would be an adversely affected party in the INDIVIDUAL'S own right.

3. 4. "Appealable agency action" means an action that determines the legal rights, duties or privileges of a party, including the administrative completeness of an application other than an application submitted to the department of water resources pursuant to title 45, and that is not a contested case. Appealable agency actions do not include interim orders by self-supporting regulatory boards, rules, orders, standards or statements of policy of general application issued by an administrative agency to implement, interpret or make specific the legislation enforced or administered by it or clarifications of interpretation, nor does it mean or include rules concerning the internal management of the agency that do not affect private rights or interests. For the purposes of this paragraph, administrative hearing does not include a public hearing held for the purpose of receiving public comment on a proposed agency action.

4. 5. "Director" means the director of the office of administrative hearings.

5. 6. "Final administrative decision" means a decision by an agency that is subject to judicial review pursuant to title 12, chapter 7, article 6.

7. "Licensee" means any INDIVIDUAL or business entity that has applied for or has been issued a license by a state agency to engage in any business or activity in this state and that is subject to a licensing decision.

6. 8. "Office" means the office of administrative hearings.

7. 9. "Self-supporting regulatory board" means any one of the following:

(a) The Arizona state board of accountancy.

(b) The barbering and cosmetology board.

(d) The Arizona state boxing and mixed martial arts commission.

(e) The state board of chiropractic examiners.

(f) The state board of dental examiners.

(g) The state board of funeral directors and embalmers.

(h) The Arizona game and fish commission.

(i) The board of homeopathic and integrated medicine examiners.

(j) The Arizona medical board.

(k) The naturopathic physicians medical board.

(l) The Arizona state board of nursing.

(m) The board of examiners of nursing care institution administrators and assisted living facility managers.

(n) The board of occupational therapy examiners.

(o) The state board of dispensing opticians.

(p) The state board of optometry.

(q) The Arizona board of osteopathic examiners in medicine and surgery.

(r) The Arizona peace officer standards and training board.

(s) The Arizona state board of pharmacy.

(t) The board of physical therapy.

(u) The state board of podiatry examiners.

(v) The state board for private postsecondary education.

(w) The state board of psychologist examiners.

(x) The board of respiratory care examiners.

(y) The state board of technical registration.

(z) The Arizona state veterinary medical examining board.

(aa) The acupuncture board of examiners.

(bb) The Arizona regulatory board of physician assistants.

(cc) The board of athletic training.

(dd) The board of massage therapy. END_STATUTE

Sec. 7. Section 41-1092.03, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1092.03. Notice of appealable agency action or contested case; hearing; informal settlement conference; applicability

A. Except as provided in subsection D of this section, an agency shall serve notice of an appealable agency action or contested case pursuant to section 41-1092.04. The notice shall:

1. Identify the statute or rule that is alleged to have been violated or on which the action is based.

2. Identify with reasonable particularity the nature of any alleged violation, including, if applicable, the conduct or activity constituting the violation.

3. Include a description of the party's right to request a hearing on the appealable agency action or contested case.

4. Include a description of the party's right to request an informal settlement conference pursuant to section 41-1092.06.

B. A party may obtain a hearing on an appealable agency action or contested case by filing a notice of appeal or request for a hearing with the agency within thirty days after receiving the notice prescribed in subsection A of this section. The notice of appeal or request for a hearing may be filed by a party whose legal rights, duties or privileges were determined by the appealable agency action or contested case. A notice of appeal or request for a hearing also may be filed by a party who will be adversely affected by the appealable agency action or contested case and who exercised any right provided by law to comment on the action being appealed or contested, provided that the grounds for the notice of appeal or request for a hearing are limited to issues raised in that party's comments. The notice of appeal or request for a hearing shall identify the party, the party's address, the agency and the action being appealed or contested and shall contain at least the following:

1. A concise statement of the reasons for the appeal or request for a hearing.

2. detailed and complete information regarding all questions of law that are the basis for the appeal.

3. all relevant supporting documentation.

4. how the party is an adversely affected party, if applicable.

C. The agency shall notify the office of the appeal or request for a hearing and the office shall schedule an appeal or contested case hearing pursuant to section 41-1092.05, except as provided in section 41-1092.01, subsection F, if a lawful party files the notice of appeal or request for a hearing, the agency may require a bond or other security, not more than $50,000, based on the record of the noticed appeal or request for a hearing that would cover the agency's reasonable costs for the appeal, if the party should lose the appeal.

C. d. If good cause is shown an agency head may accept an appeal or request for a hearing that is not filed in a timely manner.

D. E. This section does not apply to a contested case if the agency:

1. Initiates the contested case hearing pursuant to law other than this chapter and not in response to a request by another party.

2. Is not required by law, other than this chapter, to provide an opportunity for an administrative hearing before taking action that determines the legal rights, duties or privileges of an applicant for a license. END_STATUTE

Sec. 8. Section 41-1092.07, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1092.07. Hearings

A. A party to a contested case or appealable agency action may file a nonperemptory motion with the director to disqualify an office administrative law judge from conducting a hearing for bias, prejudice, personal interest or lack of technical expertise necessary for a hearing.

B. The parties to a contested case or appealable agency action have the right to be represented by counsel or to proceed without counsel, to submit evidence and to cross-examine witnesses.

C. The administrative law judge may issue subpoenas to compel the attendance of witnesses and the production of documents. The subpoenas shall be served and, on application to the superior court, enforced in the manner provided by law for the service and enforcement of subpoenas in civil matters. The administrative law judge may administer oaths and affirmations to witnesses.

D. All parties shall have the opportunity to respond and present evidence and argument on all relevant issues. All relevant evidence is admissible, but the administrative law judge may exclude evidence if its probative value is outweighed by the danger of unfair prejudice, by confusion of the issues or by considerations of undue delay, waste of time or needless presentation of cumulative evidence. The administrative law judge shall exercise reasonable control over the manner and order of cross-examining witnesses and presenting evidence to make the cross-examination and presentation effective for ascertaining the truth, avoiding needless consumption of time and protecting witnesses from harassment or undue embarrassment.

E. All hearings shall be recorded. The administrative law judge shall secure either a court reporter or an electronic means of producing a clear and accurate record of the proceeding at the agency's expense. Any party that requests a transcript of the proceeding shall pay the costs of the transcript to the court reporter or other transcriber.

F. Unless otherwise provided by law, the following apply:

1. A hearing may be conducted in an informal manner and without adherence to the rules of evidence required in judicial proceedings. Neither the manner of conducting the hearing nor the failure to adhere to the rules of evidence required in judicial proceedings is grounds for reversing any administrative decision or order if the evidence supporting the decision or order is substantial, reliable and probative.

2. Copies of documentary evidence may be received in the discretion of the administrative law judge. On request, the parties shall be given an opportunity to compare the copy with the original.

3. Notice may be taken of judicially cognizable facts. In addition, notice may be taken of generally recognized technical or scientific facts within the agency's specialized knowledge. the parties shall be notified either before or during the hearing or by reference in preliminary reports or otherwise of the material noticed including any staff memoranda or data and they shall be afforded an opportunity to contest the material so noticed. The agency's experience, technical competence and specialized knowledge may be used in the evaluation of the evidence. An agency-issued license that substantially complied with the applicable licensing requirements establishes a prima facie demonstration that the license meets all state and federal legal and technical requirements and the license would protect public health, welfare and the environment. an adversely affected party may rebut a prima facie demonstration by presenting clear and convincing evidence demonstrating that one or more provisions in the license violate a specifically applicable state or federal requirement. if an adversely affected party rebuts a prima facie demonstration, the applicant or licensee and the agency director may present additional evidence to support issuing the license.

4. On application of a party or the agency and for use as evidence, the administrative law judge may permit a deposition to be taken, in the manner and on the terms designated by the administrative law judge, of a witness who cannot be subpoenaed or who is unable to attend the hearing. the administrative law judge may order subpoenas for the production of documents may be ordered by the administrative law judge if the party seeking the discovery demonstrates that the party has reasonable need of the materials being sought. All provisions of law compelling a person under subpoena to testify are applicable. Fees for attendance as a witness shall be the same as for a witness in court, unless otherwise provided by law or agency rule. Notwithstanding section 12-2212, subpoenas, depositions or other discovery shall not be permitted except as provided by this paragraph or subsection C of this section.

5. Informal disposition may be made by stipulation, agreed settlement, consent order or default.

6. Findings of fact shall be based exclusively on the evidence and on matters officially noticed.

7. A final administrative decision shall include findings of fact and conclusions of law, separately stated. Findings of fact, if set forth in statutory language, shall be accompanied by a concise and explicit statement of the underlying facts supporting the findings. Conclusions of law shall specifically address the agency's authority to make the decision consistent with section 41-1030.

G. Except as otherwise provided by law:

1. At a hearing on an agency's denial of a license or permit or a denial of an application or request for modification of a license or permit, the applicant has the burden of persuasion.

2. At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.

3. At a hearing on an agency's imposition of fees or penalties or any agency compliance order, the agency has the burden of persuasion.

4. At a hearing held pursuant to chapter 23 or 24 of this title, the appellant or claimant has the burden of persuasion.

H. Subsection G of this section does not affect the law governing burden of persuasion in an agency denial of, or refusal to issue, a license renewal. END_STATUTE

Sec. 9. Section 41-1092.08, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1092.08. Final administrative decisions; review; exception

A. The administrative law judge of the office shall issue a written decision within twenty days after the hearing is concluded. The written decision shall contain a concise explanation of the reasons supporting the decision, including the findings of fact and conclusions of law. The administrative law judge shall serve a copy of the decision on the agency all parties to the contested case or appealable agency action. On request of the agency, the office shall also transmit to the agency the record of the hearing as described in section 12-904, except as provided in section 41-1092.01, subsection F.

B. Within thirty days after the date the office sends a copy of the administrative law judge's decision to the head of the agency, executive director, board or commission, the head of the agency, executive director, board or commission may review the decision and accept, reject or modify it. If the head of the agency, executive director, board or commission declines to review the administrative law judge's decision, the agency shall serve a copy of the decision on all parties. If the head of the agency, executive director, board or commission rejects or modifies the decision, the agency head, executive director, board or commission must file with the office, except as provided in section 41-1092.01, subsection F, and serve on all parties a copy of the administrative law judge's decision with the rejection or modification and a written justification setting forth the reasons for the rejection or modification of each finding of fact or conclusion of law. If there is a rejection or modification of a conclusion of law, the written justification shall be sent to the president of the senate and the speaker of the house of representatives.

C. A board or commission whose members are appointed by the governor may review the decision of the agency head, as provided by law, and make the final administrative decision.

D. Except as otherwise provided in this subsection, if the head of the agency, the executive director or a board or commission does not accept, reject or modify the administrative law judge's decision within thirty days after the date the office sends a copy of the administrative law judge's decision to the head of the agency, executive director, board or commission, as evidenced by receipt of such action by the office by the thirtieth day, the office shall certify the administrative law judge's decision as the final administrative decision. If the board or commission meets monthly or less frequently, if the office sends the administrative law judge's decision at least thirty days before the next meeting of the board or commission and if the board or commission does not accept, reject or modify the administrative law judge's decision at the next meeting of the board or commission, as evidenced by receipt of such action by the office within five days after the meeting, the office shall certify the administrative law judge's decision as the final administrative decision.

E. For the purposes of subsections B and D of this section, a copy of the administrative law judge's decision is sent on personal delivery of the decision or five days after the decision is mailed to the head of the agency, executive director, board or commission.

F. The decision of the agency head is the final administrative decision unless either one of the following applies:

1. The agency head, executive director, board or commission does not review the administrative law judge's decision pursuant to subsection B of this section or does not reject or modify the administrative law judge's decision as provided in subsection D of this section, in which case the administrative law judge's decision is the final administrative decision.

2. The decision of the agency head is subject to review pursuant to subsection C of this section.

3. the licensee accepts the administrative law judge's decision concerning the appeal of a licensing decision as final pursuant to subsection i of this section.

G. If a board or commission whose members are appointed by the governor makes the final administrative decision as an administrative law judge or on review of the decision of the agency head, the decision is not subject to review by the head of the agency.

H. A party may appeal a final administrative decision pursuant to title 12, chapter 7, article 6, except as provided in section 41-1092.09, subsection B and except that if a party has not requested a hearing on receipt of a notice of appealable agency action pursuant to section 41-1092.03, the appealable agency action is not subject to judicial review. The license is not stayed during the appeal unless the affected individual who has appealed applies to the superior court for an order requiring a stay pending final disposition of the appeal as necessary to prevent an imminent and substantial endangerment to public health and the environment. the court shall determine the matter under the standards applicable for granting preliminary injunctions.

i. Notwithstanding any other law, for any appealable agency action or contested case involving a licensing decision, the licensee may accept the decision not more than ten days after receiving THE ADMINISTRATIVE LAW JUDGE's written decision. if the licensee accepts the administrative law judge's written decision, the decision shall be certified as the final decision by the office. If the licensee does not accept the administrative law judge's written decision as the final decision in the matter, the head of the agency, executive director, board or commission may review the decision and accept, reject or modify the decision. If the head of the agency, executive director, board or commission intends to reject or modify the decision, the parties shall meet and confer, within thirty days after receiving the administrative law judge's decision pursuant to subsection a of this section, concerning the agency's proposed modifications to the findings of fact and conclusions of law. within twenty days after conferring, the head of the agency, executive director, board or commission shall file its final decision in accordance with subsection b of this section.

I. j. This section does not apply to the Arizona peace officer standards and training board established by section 41-1821. END_STATUTE

Sec. 10. Title 41, chapter 6, Arizona Revised Statutes, is amended by adding article 12, to read:

ARTICLE 12. DISPUTE RESOLUTION

START_STATUTE41-1094. Dispute resolution; agency actions; informal and judicial appeals; definitions

A. The applicant or licensee and the agency shall first seek in good faith to informally resolve any dispute involving an interim agency action. If the dispute cannot be resolved informally within thirty days after the interim agency action, the applicant or licensee may submit a written statement describing the dispute and the applicant's or licensee's proposed resolution of the dispute to the agency within thirty days after the expiration of the period to informally resolve the dispute. Within forty-five days after receiving the applicant's or licensee's statement and proposed resolution, the agency shall deliver or mail a written response to the applicant or licensee. If the applicant or licensee is not satisfied with the agency's written response, the applicant or licensee may submit a written request for a final interim agency action decision from the director. Within twenty days after receiving the applicant's or licensee's written request for a final interim agency action decision, the director shall select the applicant's, licensee's or agency's proposed resolution or an alternative resolution and shall issue a written explanation of the final interim agency action decision. Deadlines under this subsection may be extended by agreement between the applicant or licensee and the agency. The applicant or licensee may accept the director's final interim agency action decision or submit a written request for dispute resolution before a qualified professional pursuant to subsections b and c of this section, within twenty days after receiving the director's written final interim agency action decision.

B. Except as provided in subsection a of this section, any adversely affected party may submit a written request to the agency for dispute resolution before a qualified professional within thirty days after an agency's appealable agency action. The person who requests the dispute resolution before a qualified professional shall pay the full cost of the services provided by the qualified professional for the dispute resolution. The payment for the services shall be deposited in the appeals program fund established pursuant to subsection I of this section. The qualified professional shall be paid from the appeals program fund. Payment of the cost of the services provided by the qualified professional is eligible for credit against the person's liability. The agency may require an appropriate bond or other security requirement of not more than $25,000, based on the record of the dispute that would cover the agency's reasonable costs for the appeal, if the party should lose the appeal. The agency shall maintain a list of and contact with at least eight qualified professionals to conduct dispute resolutions. The parties shall mutually select a qualified professional.

C. the inclusion of a qualified professional on the agency's list maintained under subsection B of this section is not deemed to be employment by the agency. If the parties cannot agree on a qualified professional who is on the agency's list, the parties shall mutually select a qualified professional who is not on the list and who otherwise meets the requirements in subsection K of this section. Within twenty days after the selection of a qualified professional, the person who requested the dispute resolution shall submit to the qualified professional and to the agency a written statement including at least:

1. a brief summary that describes the dispute.

2. detailed and complete information regarding all questions of law that are the basis for the appeal.

3. the person's proposed resolution of the dispute.

4. all relevant supporting documentation.

5. how the appealing party is an adversely affected party, if applicable.

D. Within forty-five days after the person submits the written statement, the agency shall provide to the person and to the qualified professional the agency's written response to the submittal, the agency's proposed resolution of the dispute and any relevant supporting documentation. An agency-issued license that substantially complied with the applicable licensing requirements establishes a prima facie demonstration that:

1. the license meets all state and federal legal and technical requirements.

2. the license would protect public health, welfare and the environment.

E. An adversely affected party may rebut a prima facie demonstration by presenting clear and convincing evidence that demonstrates that one or more provisions in the license violate a specifically applicable state or federal requirement. If an adversely affected party rebuts a prima facie demonstration, the applicant or licensee and the agency director may present additional evidence to support the license issuance.

F. The qualified professional shall review the submittals and recommend a resolution of the dispute to the director within thirty days after receiving the agency's response. The qualified professional's recommendation shall be limited in scope to the agency decision. The qualified professional, the agency or the person who requested the dispute resolution may request a meeting with all of the parties before the qualified professional issues the recommended resolution. Within forty-five days after receiving the qualified professional's recommendation, the director shall select the resolution of the dispute that is proposed by the qualified professional, the person who requested the dispute resolution, the agency or some combination of these resolutions and shall issue a final written resolution to the person and the qualified professional that contains the factual, technical and legal grounds for the decision. By agreement, the parties may modify any time limits prescribed by this subsection. If the final written resolution is to be of general applicability, the agency shall issue a substantive policy statement or commence the rulemaking process under this chapter.

G. For an applicant or licensee who pursues the procedures in this section, the time is tolled for compliance with any investigation, corrective action, remediation, closure or other requirement that is associated with the subject of the dispute resolution processes until the date of the director's written decision in subsection a of this section and the director's final written resolution in subsections c and D of this section and any related appeals are concluded. The time for compliance may not be tolled under this subsection if the applicant or licensee who pursues the procedures in this section is subject to an administrative order or judicial order, judgment or decree for the site that is the subject of the dispute.

H. Any applicant, licensee or adversely affected party who obtains a final written resolution from the agency under subsection F of this section may commence a civil action in superior court against the agency pursuant to title 12, chapter 7, article 6. An agency's final written resolution in subsection f of this section constitutes a final administrative decision pursuant to title 12, chapter 7, article 6. A civil action may not be commenced before sixty days after the plaintiff has given notice to the agency of the plaintiff's intent to file. The license is not stayed during the appeal unless the affected person who has appealed applies to the superior court for an order requiring a stay pending final disposition of the appeal as necessary to prevent an imminent and substantial endangerment to public health and the environment. The court shall determine the matter under the standards applicable for granting preliminary injunctions.

I. An agency shall establish or use an existing appeals program fund for the purpose of implementing and administering this section. The fund consists of legislative appropriations and any fees collected under subsection b of this section. The agency shall administer the fund. Monies in the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations.

J. Subsections b and c of this section do not apply to contested cases or appealable agency actions of agencies identified in section 41-1092.02.

K. For the purposes of this section:

1. "Adversely affected party" means:

(a) any INDIVIDUAL who both:

(i) Provides evidence of an actual injury or economic damage that the INDIVIDUAL has suffered or will suffer as a direct result of the action and not due to being a competitor or a general taxpayer.

(ii) Timely submits comments on the license application that include, with sufficient specificity, the questions of law that are the basis for the appeal.

(b) A group or association that identifies, by name and physical address in the notice for appeal, a member of the group or association who would be an adversely affected party in the individual's own right.

2. "Appealable agency action":

(a) Means An action that determines the legal rights, duties or privileges of a party and that is not a contested case.

(b) Does not include:

(i) interim orders by self-supporting regulatory boards, rules, orders, standards or statements of policy of general application that are issued by an administrative agency to implement, interpret or make specific the legislation enforced or administered by it or clarifications of interpretation.

(ii) Rules concerning the internal management of the agency that do not affect private rights or interests.

3. "Contested Case" means any proceeding, including ratemaking, except ratemaking pursuant to article XV, COnstitution of Arizona, price fixing and licensing, in which the legal rights, duties or privileges of a party are required or allowed by law, other than this chapter, to be determined by an agency after an opportunity for an administrative hearing. For the purposes of this paragraph, administrative hearing does not include a public hearing held for the purpose of receiving public comment on a proposed agency action.

4. "Director" means the agency head.

5. "Interim agency action" means A preliminary decision by the agency that may adversely affect the legal rights, duties or privileges of an applicant or licensee if included in an appealable agency action.

6. "Qualified professional":

(a) Means An individual who holds a bachelor's degree, master's degree, doctoral degree or juris doctor degree, who has at least five years of professional experience in an area related to the dispute and, if applicable, who holds a Professional registration.

(b) Shall not have:

(i) Be a current employee of a party to the dispute resolution or the agency or have been an employee of a party to the dispute resolution or the agency within one year before the date of the request for dispute RESOLUTION.

(ii) Have been an employee during the preceding year of a firm assisting a party to the dispute resolution or the agency.

(c) Participate in the dispute resolution if the qualified professional has a pecuniary or proprietary interest, either direct or indirect, in the matter being disputed. END_STATUTE

Sec. 11. Section 49-114, Arizona Revised Statutes, is amended to read:

START_STATUTE49-114. Appeals of agency decisions; definition

a. Notwithstanding any other administrative proceeding established in this title or by rule, all appealable agency actions as defined in section 41-1092 and contested cases as defined in section 41-1001 for federally delegated programs shall be governed by title 41, chapter 6, article 10.

B. Notwithstanding any other administrative proceeding established in this title or by rule, all appealable agency actions as defined in section 41-1092 and contested cases as defined in section 41-1001 for nonfederally delegated programs and the determinations in section 49-298, subsection a, shall be governed by title 41, chapter 6, article 12.

c. For the purposes of this section, "nonfederally delegated programs" includes department programs under chapter 1, article 1, chapter 2, article 3, and chapter 4 of this title. END_STATUTE