Simms v. Simms

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

RONALD A. SIMMS, Plaintiff/Appellant/Cross-Appellee,

and

ARIZONA DEPARTMENT OF GAMING, Defendant/Appellee,

v.

JEREMY E. SIMMS, et al., Defendants/Appellees/Cross-Appellants.

No. 1 CA-CV 23-0139
FILED 03-18-2025

Appeal from the Superior Court in Maricopa County
No. LC2016-000505-001
The Honorable Timothy J. Thomason, Judge, Retired

VACATED AND REMANDED
 COUNSEL

Stinson LLP, Phoenix
By James M. Torre, Michael Vincent
Co-Counsel for Defendants/Appellees/Cross-Appellants TP Racing, LLLP,
Jeremy E. Simms, and Bell Racing, LLC

Michael C. Manning, PLLC, Phoenix
By Michael C. Manning
Co-Counsel for Defendants/Appellees/Cross-Appellants TP Racing, LLLP,
Jeremy E. Simms, and Bell Racing, LLC

Law Offices of Thomas A. Zlaket, PLLC, Tucson
By Thomas A. Zlaket
Co-Counsel for Plaintiff/Appellant/Cross-Appellee Ronald A. Simms

Cole Pedroza, LLP, San Marino, CA
By Nathan J. Novak
Co-Counsel for Plaintiff/Appellant/Cross-Appellee Ronald A. Simms

Greenberg Traurig, LLP, Phoenix
By Dominic Emil Draye, Matthew P. Hoxsie
Co-Counsel for Plaintiff/Appellant/Cross-Appellee Ronald A. Simms

Ballard Spahr, LLP, Phoenix
By John G. Kerkorian, Michael Stephen Myers
Counsel for Defendant/Appellee Arizona Department of Gaming

Gammage & Burnham, PLC, Phoenix
By Christopher L. Hering, Jacqueline E. Marzocca
Counsel for Defendant/Appellee/Cross-Appellant Arizona Racing Commission

Pacific Legal Foundation VA, Arlington, VA
By Aditya Dynar
Counsel for Amicus Curiae Pacific Legal Foundation

Arizona State University, Phoenix
By Ilan Wurman
Counsel for Amicus Curiae Ilan Wurman

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 SIMMS v. SIMMS, et al.
Opinion of the Court

OPINION

Judge Michael S. Catlett delivered the opinion of the Court, in which
Presiding Judge Angela K. Paton and Judge James B. Morse Jr. joined.

C A T L E T T, Judge:

¶1 Arizona law now instructs courts to withhold deference to
administrative agencies on questions of law and fact when reviewing
agency action involving regulated parties. In 2018, the legislature amended
the statute governing judicial review such that, in regulated-party
proceedings, courts decide questions of law without deference. A.R.S. § 12-
910(F); 2018 Ariz. Sess. Laws, ch. 180, § 1 (2d Reg. Sess.) (H.B. 2238). Three
years later, the legislature again amended that statute such that, in
regulated-party proceedings, courts decide questions of fact without
deference. 2021 Ariz. Sess. Laws, ch. 281, § 1 (1st Reg. Sess.) (S.B. 1063).
This court has not—until now—fleshed out these changes.

¶2 This is the latest chapter in a feud between brothers Ronald
Simms (“Ron”) and Jeremy Simms (“Jerry”) over Turf Paradise, a horse-
racing track in Phoenix. In 2013, Ron asked the Arizona Department of
Racing (“Racing Department”) for a racing license. The Racing Department
denied that request. Ron appealed to an Administrative Law Judge
(“ALJ”). He recommended Ron receive a license. The Arizona Department
of Gaming (“Gaming Department”) accepted that recommendation. Jerry
then appealed to the Arizona Racing Commission (“the Commission”),
which denied a license after concluding Ron lied to the Racing Department.
The parties then traveled to the superior court, this court, the supreme
court, and back to the superior court. They now return here after the
superior court affirmed the Commission’s decision. Applying the new
framework for reviewing agency action, we vacate and remand to enter
judgment for Ron.

FACTS AND PROCEDURAL HISTORY

I.

¶3 Turf Paradise is a thoroughbred and quarter-horse racetrack
in Phoenix. In 2000, a group of investors including Ron and Jerry acquired

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Turf Paradise through TP Racing, L.L.L.P. (“TP Racing”). Jerry and Ron
formed J & R Racing, LLC to manage TP Racing’s affairs.

¶4 Jerry and Ron bought most of the land under Turf Paradise
through their entities, J. Simms Enterprises (Jerry) and Bruin Corp. (Ron).
For partnership in TP Racing, Ron and Jerry had those entities lease that
land to TP Racing. Neither Jerry nor Ron contributed any actual capital.

¶5 In May 2000, the Racing Department’s then-director issued
horse-racing licenses to Jerry and Ron and a racing permit to TP Racing.
Later that year, the Governor replaced that director after the Arizona
Republic ran a story about Jerry’s business dealings in California.

¶6 The Racing Department’s new director then further
investigated TP Racing’s capital structure and land ownership. As a result,
the Racing Department required Jerry to own 50% of TP Racing, as its
managing partner. During that investigation, the Racing Department
acknowledged that “unlicensed entities” owned land under the racetrack.
To remedy that issue, the Racing Department asked that “land currently
held by Bruin Corporation and J. Simms Enterprises LLC necessary” for
racing “be transferred without encumbrance to [TP Racing].”

¶7 For tax reasons, Jerry and Ron could not deed that land to TP
Racing. Instead, they signed notes payable equal to the land’s purchase
price. Those notes were their capital contributions, but Jerry and Ron could
pay off the notes by transferring the land to TP Racing.

¶8 Three years later, the Racing Department reviewed TP
Racing’s permit. During that review, Jerry and Ron agreed to transfer all
land under the racetrack to TP Racing. Specifically, Jerry would transfer J.
Simms Enterprises, LLC’s land to pay off his $14 million note to TP Racing.
That transaction would replace “a note (for which no payment was likely
to be demanded by [TP Racing]) with real estate essential to its operations.”
TP Racing would give Bruin Corp. non-essential land in return for land
under the track. Consistent with those plans, Jerry had J. Simms
Enterprises, LLC give its land under the track to TP Racing to pay off his
note, and Ron had Bruin Corp. trade its land under the track for land
elsewhere under Turf Paradise. Because Bruin Corp. swapped one piece of
land for another, Ron still owed on his note.

¶9 Things remained peaceful for seven years. But that changed
in 2010, when Jerry complained that Ron had not paid off his note with
Bruin Corp.’s land. Jerry wrote that “[i]f you recall, all of us agreed and
expected that the land I utilized for a 1031 exchange as well as the land you

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utilized for a 1031 exchange would ultimately be . . . rolled into Turf
Paradise. I did that. So far you have not.” Jerry also recounted that “[a]ll
that was ever contemplated [was] that the track would own the property,”
and “[t]hen the track would not have to worry about collecting a $4,635,000
note from you.” Finally, Jerry thought Ron “had the best of both worlds”
because if Bruin Corp.’s property value increased, Ron could pay off the
note, and if it decreased, Ron could “roll” the property into TP Racing. Ron
claims he then offered Bruin Corp.’s land to pay off his note, but Jerry
“responded with a host of new and extortionate conditions,” which Ron
refused.

¶10 Litigation ensued, including two lawsuits and two
injunctions against Jerry. See Simms v. Simms, 2012 WL 2795978, at *1 ¶ 1
(Ariz. App. July 3, 2012) (mem. decision) (enjoining Jerry from exceeding
his managerial authority); TP Racing, L.L.L.P. v. Simms, 232 Ariz. 489, 492
¶¶ 5–6 (App. 2013) (enjoining Jerry from removing TP Racing’s general
partner without justification); see also Simms v. Rayes, 234 Ariz. 47 (App.
2014); T.P. Racing L.L.L.P. v. Simms, 2016 WL 423803 (Ariz. App. Feb. 4, 2016)
(mem. decision).

II.

¶11 In 2012, TP Racing asked to renew its permit. During that
process, the Racing Department’s Director, Bill Walsh, discovered that
Ron’s license had expired. But that discovery was no happenstance.
Instead, there was “evidence that Jerry sparked or stoked Ron’s regulatory
troubles by delivering ten binders of adverse information to Director
Walsh.” Simms v. Ariz. Racing Comm’n, 253 Ariz. 214, 216 ¶ 5 (App. 2022).
Because Ron lacked a license, Director Walsh ordered that he “not take part
in, directly or indirectly, or have any personal interest in the operation of
[TP Racing].” Id. And he threatened to closely scrutinize Ron’s future
applications. Id.

¶12 Undeterred, Ron applied for a license. The Racing
Department denied that request, but only after input from Jerry’s counsel.
In so doing, the Racing Department relied on statements Ron made to the
Racing Department thirteen years earlier and his alleged failure to disclose
exactly how he could pay off his note to TP Racing. Without a license, the
Racing Department warned Ron that he could no longer participate in TP
Racing.

¶13 That effectively ended Ron’s involvement in TP Racing. The
superior court dissolved the injunctions against Jerry, and TP Racing’s

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partners dissociated Ron. They instead installed Bell Racing (a new entity
Jerry formed) as TP Racing’s general partner. “Jerry assumed control of
Turf Paradise with these maneuvers, at least for the time being.” Id. ¶ 7.

III.

¶14 Ron appealed to the Office of Administrative Hearings. It
assigned an ALJ, who held a 21-day hearing. See A.R.S. § 5-104(D). The
ALJ issued a 23-page decision recommending that Ron receive a license.
The ALJ found that Ron truthfully testified that he told the Racing
Department that he could pay off his note with cash or by giving land to TP
Racing. In other words, the Racing Department knew Ron could pay off his
note with Bruin Corp.’s land. Regarding Bruin Corp., the ALJ found that,
until 2006, Ron incorrectly told the Racing Department that his wife owned
Bruin Corp. But the ALJ found Ron truthfully explained his misstatements,
so they were not knowingly false.

¶15 In July 2015, the legislature moved the Racing Department
under the Gaming Department. 2015 Ariz. Sess. Laws, ch. 19, § 2 (1st Reg.
Sess.) (S.B. 1480). As a result, the Gaming Department’s director—not
Director Walsh—considered the ALJ’s recommendation. After the Gaming
Department left the ALJ decision untouched for 30 days, it became the
Gaming Department’s decision (“Gaming Decision”). See A.R.S. § 5-104(D).

IV.

¶16 Jerry and TP Racing appealed to the Racing Commission. It
allowed briefing on whether to uphold the Gaming Decision. Later, all the
racing commissioners but one voted to deny Ron a license.

¶17 In its decision, the Commission modified five of the ALJ’s
factual findings and four of his legal conclusions, and it added its own legal
conclusion. The Commission found that, until 2006, Ron said his wife
owned Bruin Corp. After 2006, though, Ron admitted he owned Bruin
Corp. The Commission acknowledged that, even after Ron told the
Department he owned Bruin Corp., the Department raised no concern for
seven years. But to explain that indifference, the Commission said the
Racing Department thought Bruin Corp.’s only relationship to TP Racing
was that of a landlord leasing non-essential land, so Ron’s wife did not need
a license. The Commission reversed the ALJ’s finding that Ron truthfully
explained why he said his wife owned Bruin Corp. But the Commission
did not decide “who, in fact, owned Bruin from 2000 to 2006.”

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¶18 The Commission then addressed whether Ron disclosed how
he could pay off his note to TP Racing. The Commission again reversed the
ALJ’s credibility finding. It found that Ron’s “testimony regarding the
conversation with [Racing Department] representatives in 2000” was not
credible because Ron “presented no extrinsic evidence or witness testimony
corroborating” that testimony. The Commission concluded that Ron
provided “no credible evidence” supporting that the Racing Department
knew that “the makers of the promissory notes” (Jerry and Ron) could pay
off their notes with land. But the Commission did not decide whether Ron
and Jerry agreed Ron could pay off his note that way.

¶19 Based on its findings, the Commission concluded that Ron
lied to the Racing Department and did not tell it about material changes in
the information he provided “in the application for a license or permit.”
The Commission also concluded Ron did not show that he “met his
monetary obligations in connection with racing meetings held in this State.”
So the Commission denied Ron a license.

¶20 Vice Chair Feldmeier dissented. He thought it was
“important to retain” the ALJ’s decision for six reasons, including that
“after the lengthy hearing . . . [the ALJ] provided numerous reasons why
[Ron] should receive” a license. He thought Bruin Corp.’s ownership
became irrelevant when Ron admitted ownership in 2006, and that
ownership only became relevant again when Jerry encouraged Director
Walsh to deny Ron a license. And he stated, “this has been a witch hunt all
along, and it’s about [Jerry] doing whatever he can to prevent [Ron] from
getting his license. That’s what it comes down to.”

V.

¶21 Ron appealed to the superior court, arguing Jerry and TP
Racing lacked standing to challenge the Gaming Decision. Ron also
claimed the Commission did not give him due process, and the record did
not adequately support the Commission’s licensing decision. The superior
court sided with Ron, concluding Jerry and TP Racing lacked standing.
Jerry, TP Racing, and the Commission (“Commission Parties”) appealed.

¶22 This court vacated and remanded. In doing so, this court
concluded Jerry and TP Racing had standing because they were “‘person[s]
aggrieved’ under the Commission’s rules.” Simms, 253 Ariz. at 220 ¶ 28. It
then rejected part of Ron’s due process claim based on Jerry’s ex parte
contacts with Director Walsh, explaining “Ron already received a fair and
impartial hearing before the ALJ.” Id. ¶ 30. It then remanded Ron’s due

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process claim because it could not “meaningfully consider the issues on this
record.” Simms v. Ariz. Racing Comm’n, 2022 WL 1256594, *1 ¶ 4 (Ariz. App.
Apr. 28, 2022) (mem. decision). With that conclusion, this court did not
address Ron’s merits challenge to the licensing decision. Id.

VI.

¶23 Back in the superior court, the parties briefed Ron’s due
process claim and his claim challenging the licensing decision. But the
court rejected both. It concluded Ron did not carry his “substantial burden
of showing the facts presented rise to the level of a” due process violation.
And it rejected his challenge to the licensing decision. In so doing, the court
viewed the “evidence in the light most favorable to affirming the
Commission’s decision” and asked whether substantial evidence supports
it. After concluding substantial evidence supported the Commission’s
decision, the court affirmed.

¶24 Ron appeals, and the Commission Parties cross-appeal. We
have jurisdiction. See A.R.S. § 12-913.

DISCUSSION

¶25 Ron raises two main challenges. One, he challenges the
Commission’s decision denying a license, asking us to reverse based on the
judicial review standards in § 12-910(F) (we call that subsection “910(F)”).
Two, he challenges whether the Commission gave him due process. In their
cross-appeal, the Commission Parties argue the superior court erred in
concluding the Commission must provide due process when resolving new
license requests. Because we decide the licensing issue against the
Commission Parties, we do not address the parties’ due process arguments.

I.

¶26 Ron argues the superior court erred by reviewing the
Commission’s decision for substantial evidence. For example, the court
thought it “must consider whether” substantial evidence supported “the
Commission’s reasons for denying Ron’s license,” but it also said it would
“not give deference to any factual finding” the Commission made. To Ron,
that “makes no sense.” Instead, he suggests reviewing courts no longer
defer to agencies in any respect; instead, they adopt the ALJ’s factual
findings so long as substantial evidence supports them.

¶27 For their part, the Commission Parties urge that reviewing
courts review agency decisions for substantial evidence. Because the

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agency decision here is the Commission’s decision, they argue we must
review it, not the ALJ’s decision, for substantial evidence. They posit that
whether substantial evidence exists is a legal question, so the amendment
eliminating deference to agency factfinding is inapplicable. And they assert
that substantial evidence supports the Commission’s factual findings and
its decision.

¶28 Neither side is quite right. On one hand, the Commission
Parties are correct that the agency decision here is the Commission’s
decision, not the ALJ’s. But they are incorrect that we review the
Commission’s decision for substantial evidence and that the amendments
to 910(F) play no role. On the other hand, Ron is correct that 910(F) now
says reviewing courts do not defer when “the regulated party” raises fact
questions, which applies here. But Ron is mostly incorrect that reviewing
courts instead defer to ALJ factual findings.

A.

¶29 The amendments to 910(F) reshaped how courts review
agency action. To explain in what way, we recount how judicial review
worked before those amendments and how it works now.

1.

a.

¶30 Before 2018, reviewing courts would sometimes defer to an
agency’s legal interpretations. See, e.g., Marlar v. State, 136 Ariz. 404, 411
(App. 1983); Indus. Comm’n v. Harbor Ins. Co., 104 Ariz. 73, 76 (1968). To be
sure, courts often said that “the ultimate responsibility for interpreting a
statute or regulation rests with the courts[.]” Marlar, 136 Ariz. at 411. And
“[w]hen an administrative decision [was] based on an interpretation of law,
we [would] review it de novo.” Saldate v. Montgomery, 228 Ariz. 495, 498 ¶ 10
(App. 2012) (citation omitted). But courts occasionally deferred. For
example, our supreme court once said that “the construction placed on a
statute by the executive body which administers it, if acquiesced in for a
long period of time, will not be disturbed unless such construction is
manifestly erroneous.” Harbor Ins., 104 Ariz. at 76. Similarly, this court said
an agency’s interpretation of a regulation it implements is “entitled to great
weight.” Marlar, 136 Ariz. at 411.

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b.

¶31 Now, in regulated-party cases, reviewing courts do not defer
to an agency’s legal interpretations. As 910(F) puts it, “[i]n a proceeding”
involving “the regulated party,” courts “decide all questions of law.”
Questions of law include “the interpretation of a constitutional or statutory
provision or a rule adopted by an agency[.]” A.R.S. § 12-910(F). And
reviewing courts no longer defer even when an agency has interpreted a
statute or regulation in the same way for a long time. Id. (instructing courts
to decide “all” legal questions “without deference to any previous
determination that may have been made on the question by the agency”);
see also Batty v. Ariz. Med. Bd., 253 Ariz. 151, 154 ¶ 11 (App. 2022). Put
differently, reviewing courts have the final say on what the law is.

2.

a.

¶32 Before 2021, courts were highly deferential when reviewing
fact questions under 910(F). See e.g., Gaveck v. Ariz. State Bd. of Podiatry
Exam’rs, 222 Ariz. 433, 436 ¶ 11 (App. 2009); Horne v. Polk, 242 Ariz. 226, 230
¶ 13 (2017). Reviewing courts had to “defer to the agency’s factual findings
and affirm them if supported by substantial evidence.” Gaveck, 222 Ariz. at
436 ¶ 11 (citing Webb v. State ex rel. Ariz. Bd. of Med. Exam’rs, 202 Ariz. 555,
557 ¶ 7 (App. 2002)); Horne, 242 Ariz. at 230 ¶ 13 (“The court affirms the
agency’s factual findings if they are supported by substantial evidence[.]”).
That meant reviewing courts would affirm if, viewing the facts favorably to
the agency, there was “evidence which would permit a reasonable person
to reach the [agency’s] result.” Sierra Club—Grand Canyon Ch. v. Ariz. Corp.
Comm’n, 237 Ariz. 568, 575, ¶ 22 (App. 2015) (citation omitted); Hirsch v.
Ariz. Corp. Comm’n, 237 Ariz. 456, 459 ¶ 2 n.2 (App. 2015). And courts had
to affirm agency findings even “if either of two inconsistent factual
conclusions [were] supported by the record.” E. Vanguard Forex, Ltd. v. Ariz.
Corp. Comm’n, 206 Ariz. 399, 409 ¶ 35 (App. 2003) (citing DeGroot v. Ariz.
Racing Comm’n, 141 Ariz. 331, 336 (App. 1984)). Under those standards, the
agency almost always won.

b.

¶33 Section 910(F) now instructs that “[i]n a proceeding brought
by or against the regulated party, the court shall decide all questions of fact
without deference to any previous determination that may have been made
on the question by the agency.” This means what it says—reviewing courts
no longer defer on fact questions in proceedings involving “the regulated

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party.” A.R.S. § 12-910(F). As we recently explained, “Arizona’s courts
have afforded deference to the factual findings of an administrative agency.
But the legislature has now indicated otherwise[.]” Batty, 253 Ariz. at 155
¶ 11 n.2 (internal citations omitted); see also Marsh v. Atkins, 256 Ariz. 233,
236 ¶ 10 (App. 2023) (“[I]n reviewing the evidence, no deference can be
given to the agency’s factual findings.”).

¶34 Applying the new language, when a regulated party
challenges agency factual findings, reviewing courts no longer review for
substantial evidence. See A.R.S. § 12-910(F). They instead review “the
administrative record and supplementing evidence,” and determine
independently whether the required quantum of evidence (usually, a
preponderance of the evidence) supports a challenged factual finding. Id.
Reviewing courts no longer ask whether a reasonable person viewing the
evidence to favor the agency might make the same finding—they instead
independently review it. That is, they decide anew whether the record
sufficiently supports the finding. If so, they affirm it. If not, they disregard
it. Put differently,

[i]n a true de novo review, we are not limited to considering
whether there was sufficient evidence to support the
[agency’s] findings nor whether the [superior] court erred in
its determination. Rather, in a true de novo review, we use
the assignments of error as a guide to the factual issues in
dispute and make an independent factual determination
based upon the record.

Slack Nursing Home, Inc. v. Dep’t. of Soc. Servs., 528 N.W.2d 285, 293 (Neb.
1995) (interpreting a statute like 910(F)).

¶35 We acknowledge that independently reviewing factual
findings may feel foreign to reviewing courts, but that is what the
legislature desired when it instructed that “the court shall decide all
questions of fact without deference.” A.R.S. § 12-910(F); S. Ariz. Home
Builders Ass’n v. Town of Marana, 254 Ariz. 281, 286 ¶ 31 (2023) (“Statutory
interpretation requires us to determine the meaning of the words the
legislature chose to use.”). We do not suggest, however, that reviewing
courts must make their own factual findings. The record will usually
include the ALJ’s written decision with factual findings and legal
conclusions. A.R.S. § 41-1092.08(A). If an agency rejects or modifies that
decision, it will provide “a written justification setting forth the reasons for”
doing so. A.R.S. § 41-1092.08(B). As has always been true, a regulated party
challenging agency action must identify those factual findings with which

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it disagrees and explain why, thus creating a “question of fact.” See A.R.S.
§§ 12-909(A), 12-910(F). Reviewing courts should independently resolve
those fact questions based on the administrative record.

¶36 When an agency modifies an ALJ’s factual finding without
adequate support, a reviewing court has two options—it can disregard the
modified factual finding or adopt the ALJ’s original finding if the record
instead supports it. But in all cases involving “the regulated party,”
reviewing courts must decide each “question of fact” without deferring to
the agency, just as 910(F) instructs.

c.

¶37 The Commission Parties urge that judicial review mostly
remains the same. Section 910(F) authorizes reviewing courts to “affirm,
reverse, modify or vacate and remand the agency action.” (Emphasis added.)
And it then instructs them to affirm unless “the agency’s action 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(F) (emphasis added). The
Commission Parties urge the status quo because that second sentence still
requires review for substantial evidence. The Commission Parties take that
to mean we still review all aspects of the agency decision for substantial
evidence in all cases. But that argument ignores the distinction between the
“agency action” and the “administrative decision.”

¶38 The second sentence in 910(F) requires courts to review “the
agency’s action,” not the agency’s administrative decision. An “appealable
agency action” is “an action” determining a party’s “legal rights, duties or
privileges[.]” A.R.S. § 41-1092(4). An “administrative decision,” on the
other hand, is “any decision, order or determination” that an agency
renders if it “affects the legal rights, duties or privileges of persons” and
terminates administrative proceedings. A.R.S. § 12-901(2). When an
agency takes an “appealable agency action,” that starts the administrative
review process, and when an agency issues an “appealable administrative
decision,” that usually ends it. See A.R.S. §§ 41-1092.02(A), 41-1092.03(B),
41-1092.08(A); see also A.R.S. § 5-104(D) (“The [racing] commission may
hear any appeal of a decision of the director in accordance with title 41,
chapter 6, article 10.”). So the agency action is not the administrative
decision—the two are distinct.

¶39 After administrative review ends, judicial review begins. See
A.R.S. § 41-1092.08(H). With certain exceptions, 910(F) governs the scope
of that review. A.R.S. §§ 12-910(C), (D). But, in describing such review,

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910(F) references only “the agency action.” It does not reference the
administrative decision terminating administrative review. Based on that
text, reviewing courts determine whether substantial evidence supports the
agency action, not the agency decision. And because the agency action is
not the same as the administrative decision, requiring courts to review the
agency action for substantial evidence does not also require them to review
all aspects of the administrative decision for substantial evidence.

¶40 But they should reference the administrative decision when
undertaking review. When reviewing agency action, courts need to know
the agency’s reasons for taking or upholding (or not) an agency action. The
ALJ and agency must issue written decisions making or modifying findings
of fact and conclusions of law. A.R.S. § 41-1092.08(A)–(B). And the final
administrative decision is what tells reviewing courts how the agency
justified the challenged action. See A.R.S. §§ 41-1092.08(H), 12-904(A), 12-
910(A). But using the justifications in the administrative decision to review
agency action does not make the administrative decision the agency action
referenced in § 12-910(F)—the agency action and the administrative
decision remain distinct. See A.R.S. § 12-904(B) (differentiating between the
“[t]he original agency action from which review is sought” and “the
decision by the [ALJ] and any revisions or modifications to the decision”).

¶41 When reviewing agency action, courts also need to know
what standard of review to apply. Before 2021, in regulated and non-
regulated party proceedings alike, they reviewed fact questions for
substantial evidence because that was the only standard in 910(F)—not
because the administrative decision is the agency action. The legislature
has now instructed that, when “the regulated party” challenges “the agency
action,” reviewing courts must decide legal and factual questions without
deferring to the agency. A.R.S. § 12-910(F). In so doing, the legislature
exempted fact findings in certain administrative decisions, when
challenged, from substantial evidence review. So, in regulated-party
proceedings, reviewing courts independently review legal and factual
questions in the administrative decision before asking whether the decision
provides substantial evidence for the agency action. That is the only way
for the second, third, and fourth sentences in 910(F) to each do work in
regulated-party proceedings. See Bilke v. State, 206 Ariz. 462, 464 ¶ 11 (2003)
(“The court must give effect to each word of the statute.”).

¶42 The Commission Parties also argue substantial evidence
review still applies to fact questions because whether such evidence exists
is a legal question we review independently. That argument’s main
premise is sound—substantial evidence is a legal question reviewed de

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novo. Brown v. Ariz. Dep’t of Real Est., 181 Ariz. 320, 323 (App. 1995) (citation
omitted) (“Whether substantial evidence supports the decision is a question
of law[.]”). But the conclusion the Commission Parties draw from it—that
substantial evidence review is non-deferential—is wrong.

¶43 Yes, reviewing courts engage in substantial evidence review
de novo. But that does not mean such review is non-deferential. Quite the
opposite. Courts have repeatedly referred to substantial evidence review
as deferential. See, e.g., Siler v. Ariz. Dep’t of Real Est., 193 Ariz. 374, 382 ¶ 41
(App. 1998) (“[T]he record must be viewed with deference to the factual
findings with inquiry into whether substantial evidence supports those
findings.”); In re Non-Member of State Bar of Ariz., Van Dox, 214 Ariz. 300, 305
¶ 19 (2007) (“Because substantial evidence supports the Hearing Officer’s
finding, we defer to it.”); see also Horne, 242 Ariz. at 230 ¶ 13 (referring to
substantial evidence review as “deferential”). Even the Commission Parties
tacitly recognize that substantial evidence review involves deference. They
call it “a low threshold” and “limited,” which are just different ways of
saying deferential. But they fail to recognize that, if reviewing courts still
apply substantial evidence review in regulated-party proceedings, those
courts will still defer when resolving fact questions. And that would
disregard the legislature’s instruction to ditch deference. See A.R.S. § 12-
910(F).

¶44 What is more, adopting a “substantial evidence is not
deference” approach would make other parts of § 12-910 null or
superfluous. Again, when a regulated party is involved, courts must decide
all questions of law “without deference.” A.R.S. § 12-910(F); Silver v. Pueblo
Del Sol Water Co., 244 Ariz. 553, 561 ¶ 28 (2018) (“The amendment [to § 12-
910(F)] prohibits courts from deferring to agencies’ interpretations of
law.”). Legal interpretations, like substantial evidence, are reviewed de
novo. Eaton v. Ariz. Health Care Cost Containment Sys., 206 Ariz. 430, 432 ¶ 7
(App. 2003) (citing Jones v. County of Coconino, 201 Ariz. 368, 370 ¶ 10 (App.
2001)). Using the Commission Parties’ logic, we could still defer when
answering legal questions so long as we did so during independent review.
For example, during de novo review, this court could revert to giving “great
weight” to agency interpretations of regulations they implement. Marlar,
136 Ariz. at 411. But, in applying that standard—even during de novo
review—we would defer. And doing so would disregard the legislature’s
instruction to interpret the law “without deference.” A.R.S. § 12-910(F).
Succinctly put, applying deferential standards during independent review
is still deference.

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¶45 Applying substantial evidence to fact questions in regulated-
party proceedings would also make § 12-910(G) superfluous. When the
legislature eliminated deference on legal questions, it added § 12-910(G).
2018 Ariz. Sess. Laws, ch. 180, § 1. That provision states that, in certain
health care appeals, the court must affirm the agency action unless it “is not
supported by substantial evidence, is contrary to law, is arbitrary and
capricious or is an abuse of discretion.” A.R.S. § 12-910(G). In those
appeals, we review the agency action like we did before the amendments
to 910(F), even when a “regulated party” is involved. If the Commission
Parties are correct that judicial review also remains the same in all other
regulated-party proceedings, it is hard to see what work § 12-910(G) does.
See Nicaise v. Sundaram, 245 Ariz. 566, 568 ¶ 11 (2019).

¶46 Acknowledging the 2021 amendment must do some work,
the Commission Parties suggest that non-deferential review is triggered
only if the superior court had to make new factual findings. Nothing in the
statute supports that position. Rather, 910(F) states that deference does not
apply “[i]n a proceeding brought by or against the regulated party[.]” A
“proceeding” is “[a]n act or step that is part of a larger action.” Proceeding,
Black’s Law Dictionary (11th ed. 2019). When a party seeks judicial
review—in the superior or appellate court—that is a “proceeding.” See
Waetzig v. Halliburton Energy Servs., Inc., ___ U.S. ___, ___, 2025 WL 608110,
*6 (Feb. 26, 2025) (“These definitions suggest that the term ‘proceeding’
encompasses all steps in an action[.]”). And, once there is a proceeding, the
statute’s text imposes only one more condition for non-deferential review—
the proceeding must be “brought by or against the regulated party.” A.R.S.
§ 12-910(F). The Commission Parties would add another condition—the
superior court had to make new factual findings—thereby limiting the 2021
amendment to a subset of regulated-party proceedings. If the legislature
wanted to limit non-deferential review in that manner, it would have said
so. We will not write-in missing conditions. City of Phoenix v. Butler, 110
Ariz. 160, 162 (1973) (internal citation omitted) (“[T]he courts [do not]
rewrite statutes.”).

d.

¶47 Ron argues that, in regulated-party proceedings, we should
instead defer to the ALJ’s factual findings. But that argument slants too far
the other way. Under 910(F), judicial review applies to “the agency action.”
Again, an “agency action” triggers a regulated party’s ability to pursue
administrative review. A.R.S. §§ 41-1092.03(B); § 41-1092(4). Although the
ALJ’s recommendation is created during the administrative review process
and becomes part of the record, it is not “the agency action” courts review.

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3.

a.

¶48 Moving on from factual findings, agency action sometimes
hinges on the legal effect of those findings—called mixed questions of law
and fact. Arizona courts have long refused to defer on how to apply the
law to facts. See, e.g., Red Rover Copper Co. v. Indus. Comm’n, 58 Ariz. 203,
214 (1941). For example, over eighty years ago, our supreme court asked
whether the Industrial Commission could apply equitable principles. Id.
Concluding the Commission could, the court reasoned that if the
Commission “errs in its application of these rules its action is subject to
review[.]” Id. And the court was confident such review would be
meaningful because, while courts defer to the commission’s factual
findings, they had “never hesitated to consider the question of whether the
law was properly applied to those facts independently.” Id. Taking that
cue, this court later confirmed that we “substitute our judgment for agency
conclusions regarding the legal effect of its factual findings.” Sanders v.
Novick, 151 Ariz. 606, 608 (App. 1986) (citing Gardiner v. Ariz. Dep’t of Econ.
Sec., 127 Ariz. 603, 606 (App. 1980)); see also Winters v. Ariz. Bd. of Educ., 207
Ariz. 173, 178 ¶ 14 (App. 2004) (refusing to defer to the Board of Education’s
conclusion that a teacher engaged in unprofessional conduct).

b.

¶49 Reviewing courts still independently review mixed
questions. If anything, 910(F) now dictates we do so. By requiring non-
deferential review of factual and legal questions, the statute likely requires
non-deferential review of mixed questions. See Guerrero-Lasprilla v. Barr, 589 U.S. 221, 227 (2020) (“We conclude that the phrase ‘questions of law’”
includes “the application of a legal standard to undisputed or established
facts.”). But, regardless, nothing in 910(F) displaces the historical practice
of independently deciding mixed questions. See Sanders, 151 Ariz. at 608;
Winters, 207 Ariz. at 178 ¶ 14.

4.

a.

¶50 At times, agency action turns on witness credibility. Courts
have always refrained from second-guessing ALJ credibility findings. See
W. States Petroleum, Inc. v. Ariz. Dep’t of Env’t Quality, 232 Ariz. 252, 253 ¶ 7
(App. 2013) (“Issues regarding witness credibility are for the ALJ to decide,
not the superior court or this court.”) (citation omitted); Siler, 193 Ariz. at

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382 ¶ 41 (“On questions of credibility, the administrative hearing officer is
the proper judge.”). That makes sense because the ALJ is the one who “had
the opportunity to look the witness in the eye and reach a conclusion with
respect to his veracity or lack thereof.” Adams v. Indus. Comm’n, 147 Ariz.
418, 421 (App. 1985).

¶51 This court has, however, allowed agencies to second-guess
ALJ credibility findings, even when agencies do not see or hear from any
witnesses (on a cold record). See Ritland v. Ariz. State Bd. of Med. Exam’rs,
213 Ariz. 187, 191 ¶ 12 (App. 2006). In Ritland, this court attempted to
reconcile “deference to the trier of fact with the [agency’s] duty and
authority to render the final decision.” 213 Ariz. at 191 ¶ 11. It held that
agencies are “not bound by the ALJ’s findings of fact, including those
related to credibility.” Id. ¶ 12. But recognizing “the importance of the
ALJ’s observation of the demeanor and attitude of the witnesses,” it
instructed agencies to give ALJ credibility findings “greater weight than
other findings of fact more objectively discernible from the record.” Id.
¶ 13. It also instructed agencies not to reject ALJ credibility findings
without including “factual support” for doing so. Id. ¶ 14. And, while
reviewing courts should scrutinize an agency’s “disagreements with an
ALJ’s credibility findings,” we said courts should not reverse when “there
is substantial evidence” supporting those disagreements. Id. at 191–92 ¶ 15.

b.

¶52 As revised, 910(F) puts courts in a difficult position when
reviewing credibility findings in regulated-party proceedings. As
explained, agencies—not ALJs—are responsible for issuing final
administrative decisions subject to judicial review. But witness credibility
is a question of fact, so 910(F) no longer allows reviewing courts in
regulated-party proceedings to defer when agencies modify an ALJ’s
credibility finding. Cf. State v. Harrison, 111 Ariz. 508, 509 (1975) (“The
credibility of witnesses is an issue of fact to be resolved by the jury[.]”); State
v. Hernandez, 112 Ariz. 246, 248 (1975) (“[T]he credibility of witnesses when
their stories conflict is a question of fact for the jury.”); Logerquist v. McVey, 196 Ariz. 470, 488 ¶ 52 (2000) (noting the jury determines the credibility of
testimony as an issue of fact). Section 910(F) instead requires reviewing
courts to resolve credibility disputes without deferring to anyone.

¶53 But that creates challenges because reviewing courts are ill-
equipped to make credibility findings on a cold record. See Brooks v. Indus.
Comm’n, 24 Ariz. App. 395, 397 (1975) (“[W]here the credibility of witnesses
is an issue, it is almost impossible to make that judgment from a written

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record.”). Plus, our supreme court and the United States Supreme Court
have suggested that reversing credibility determinations on a cold record
raises due process concerns. See Pima Cnty. Juv. Action No. J-63212–2, 129
Ariz. 371, 375 (1981) (holding that a reviewing court “violated the Due
Process Clause of the Fourteenth Amendment” because it “necessarily
rejected the referee’s credibility assessments without having personally
heard the disputed testimony”); United States v. Raddatz, 447 U.S. 667, 681
n.7 (1980) (“[W]e assume it is unlikely that a district judge would reject a
magistrate’s proposed findings on credibility . . . and substitute the judge’s
own appraisal; to do so without seeing and hearing the witness . . . whose
credibility is in question could well give rise to serious questions[.]”); cf.
Johnson v. Finn, 665 F.3d 1063, 1074 (9th Cir. 2011) (citations omitted)
(“Taking the Supreme Court’s various hints, [five circuits] have all held that
a district judge may not reject the credibility finding of a magistrate judge
without holding a new evidentiary hearing.”).

¶54 We resolve the conundrum this way: When an agency does
not hear live testimony before modifying an ALJ’s credibility finding or
making their own, a reviewing court defers only to the ALJ’s credibility
finding unless it is clearly erroneous. Harte–Hanks Commc’ns, Inc. v.
Connaughton, 491 U.S. 657, 688 (1989) (quoting Bose Corp. v. Consumers Union
of U.S., Inc., 466 U.S. 485, 499–500 (1984)) (“[C]redibility determinations are
reviewed under the clearly-erroneous standard because the trier of fact has
had the ‘opportunity to observe the demeanor of the witnesses[.]’”).

¶55 This solution has at least four benefits. First, the ALJ’s
credibility finding is part of the administrative record, so deferring to that
finding follows 910(F)’s instruction to “review[] the administrative record.”
Second, deferring to the ALJ recognizes that reviewing courts are ill-
equipped to determine credibility on a cold record. See Brooks, 24 Ariz. App.
at 397. Third, deferring avoids the serious constitutional questions that
would arise if reviewing courts were to make credibility findings on a cold
record. See Sandra R. v. Dep’t of Child Safety, 248 Ariz. 224, 230 (2020)
(citation omitted) (“[I]f possible, we will construe [a statute] to avoid
rendering it unconstitutional.”); J-63212–2, 129 Ariz. at 375; Raddatz, 447
U.S. at 681 n.7. And fourth, deferring aligns with prior caselaw saying that
“[i]ssues regarding witness credibility are for the ALJ to decide, not the
superior court or this court”—caselaw that remains valid. W. States
Petroleum, 232 Ariz. at 253 ¶ 7 (quoting Siler, 193 Ariz. at 382 ¶ 41).

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5.

a.

¶56 That leaves agency discretion and expertise. The
legislature—within certain bounds—may delegate discretion to an agency
in implementing a law. In other words, “the legislature may not delegate
the authority to enact laws to a government agency, but it can give agencies
discretion as to execution of the laws.” Lewis v. Ariz. Dep’t of Econ. Sec., 186
Ariz. 610, 615 (App. 1996); see also Loper Bright Enters. v. Raimondo, 603 U.S.
369, 394 (2024) (“In a case involving an agency, of course, the statute’s
meaning may well be that the agency is authorized to exercise a degree of
discretion.”). When a statute grants agency discretion, reviewing courts
determine the outer bounds of that discretion (a legal question) and then
whether the agency acted within those bounds. See Lewis, 186 Ariz. at 615;
Loper Bright, 603 U.S. at 395. Traditionally, reviewing courts defer when
deciding whether an agency acted within its discretion. See Kisor v. Wilkie, 588 U.S. 558, 633 (2019) (Kavanaugh, J., concurring) (“[A] judge” can
“engage in appropriately rigorous scrutiny of an agency’s interpretation of
a regulation,” and defer “to an agency’s reasonable policy choices within
the discretion allowed by a regulation[.]”).

¶57 Agency action also sometimes involves expertise. This court
has long recognized that reviewing courts “may not function as a ‘super
agency’ and substitute its own judgment for that of the agency where
. . . agency expertise [is] involved.” DeGroot, 141 Ariz. at 336.

b.

¶58 Deference to agency discretion and expertise still plays a role
in regulated-party proceedings under 910(F). Although reviewing courts
must decide all legal and factual questions without deferring, if an agency
uses discretion or expertise in other ways, reviewing courts can defer on
those matters.

¶59 An example may help illustrate. The Commission has
discretion to make certain licensing and permitting decisions. For example,
the Commission “may refuse to approve” a permit to hold a racing meeting
if “[t]he granting of a permit . . . in the locality set out in the application is
not in the public interest or convenience.” A.R.S. § 5-108(A)(2)(c) (emphasis
added). So even when a permit in the locality requested is not in the public
interest, the Commission “may” still grant the permit. See A.R.S. § 5-
108(A)(2)(c). And when exercising that discretion, the Commission can use
expertise about where racing meetings should be located.

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Opinion of the Court

¶60 Imagine the Commission decides that a particular locality is
not in the public interest, but it still grants a permit. In making that
decision, the Commission made factual findings about the “locality set out
in the application.” It also interpreted the phrase “locality” or “public
interest or convenience.” And it applied its factual findings to the statutory
standard to conclude the permit is not in the public interest. But, even after
that conclusion, it still exercised discretion to grant the permit.

¶61 If that action is challenged, a reviewing court would not defer
to the Commission’s factual findings, legal interpretations, or applications
of law to fact. But assuming the reviewing court agrees—without
deferring—that the locality is not in the public interest, it could then defer
to the Commission’s discretionary decision to grant the permit.

B.

¶62 In short, the framework for reviewing agency action in
regulated-party proceedings is this: First, a reviewing court should
determine whether “the regulated party” is challenging agency action.
Second, it should identify the agency action at issue. Third, it should
determine whether the administrative decision terminating administrative
review contains legal conclusions, factual findings, mixed questions of law
and fact, or relies on agency discretion or expertise. When “the regulated
party” challenges conclusions of law, factual findings, or mixed questions
of law and fact, the reviewing court must not defer to the agency in
resolving those challenges. Instead, it must independently resolve them.
After doing so, the reviewing court should ask whether the administrative
decision adequately supports the agency action. Ordinarily, that will
require the reviewing court to determine whether its independent factual
and legal conclusions, along with any unchallenged agency conclusions,
provide substantial evidence supporting the agency action.

II.

¶63 We now apply that framework to the agency action here.

A.

¶64 We first ask whether Ron is “the regulated party.” We need
not pause long here because the Commission Parties do not dispute that
Ron is “the regulated party.” So the amendments to 910(F) apply.

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Opinion of the Court

B.

¶65 We next identify the agency action. Again, an “appealable
agency action . . . determines the legal rights, duties or privileges of a
party[.]” A.R.S. § 41-1092(4).

¶66 Recall that Ron applied for a license in November 2013. At
that time, Arizona law provided that “[t]he director [of the Racing
Department] shall license personnel and shall regulate and supervise all
racing meetings[.]” A.R.S. § 5-104(B) (2013). And it explained when the
Racing Department “may deny or refuse to renew a license.” A.R.S. § 5-
108(A)(3), (A)(4) (2013); see also A.R.S. § 5-101(10) (2013) (defining
“Department” as “the Arizona department of racing”).

¶67 In its notice, the Racing Department relied on § 5-108 to deny
Ron a license, and it gave reasons for its denial. It also acknowledged that
“[a] person to whom a license has been denied may request a hearing on
this determination as an ‘appealable agency action’ pursuant to A.R.S. § 41-
1092.” (Emphasis added). Ron requested a hearing, so the administrative
review process began. But, at least in this case, nothing that occurred
during that process changes that the “agency action” we review is the
Racing Department’s license denial. See A.R.S. § 41-1092(4).

¶68 To determine whether substantial evidence supports that
agency action, we review the justifications in the Commission’s
administrative decision. See Sec. and Exch. Comm’n v. Chenery Corp., 318 U.S.
80, 95 (1943) (“[A]n administrative order cannot be upheld unless the
grounds upon which the agency acted in exercising its powers were those
upon which its action can be sustained.”); see also Madsen v. Fendler, 128
Ariz. 462, 466 (1981) (a court reviewing an agency action “is limited to the
questions properly raised before the administrative hearing”).

C.

¶69 Whether that decision justifies the agency action here turns
mostly on factual findings. The decision does not rely on agency discretion
or expertise. Thus, under 910(F), we decide whether to affirm the license
denial by reviewing the administrative record and deciding all questions of
law and fact without deferring to the Commission.

1.

¶70 The Commission’s decision mostly relies on A.R.S. §§ 5-
108(A)(3) and 5-108(A)(4). The former section says, “The department may

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Opinion of the Court

deny . . . a license . . . for any person who has made a knowingly false
statement of a material fact to the department.” A.R.S. § 5-108(A)(3). The
latter says, “The department may deny . . . a license . . . if the applicant has
failed to meet any monetary obligation in connection with any racing
meeting held in this state.” A.R.S. § 5-108(A)(4). Both sections give the
Commission discretion to deny a license, but only when the applicant has
engaged in prohibited conduct.

¶71 For Ron to have made a knowingly false statement of material
fact, he had to (1) make a statement, (2) that was false, (3) while knowing it
was false, and (4) that was material to the Racing Department. See A.R.S.
§ 5-108(A)(3). For Ron to have breached a monetary obligation, he had to
(1) breach, (2) a monetary obligation, (3) in connection with, (4) any racing
meeting, (5) held in this State. See A.R.S. § 5-108(A)(4). Whether Ron
engaged in prohibited conduct raises fact questions, which we
independently decide. A.R.S. § 12-910(F); supra ¶ 34.

2.

¶72 The Commission found Ron knowingly made three false
statements: (1) he did not disclose that he could pay off his note payable by
causing Bruin Corp. to transfer land to TP Racing (“Note-Land Swap
Option”); (2) he lied about his wife owning Bruin Corp.; and (3) he lied
about Bruin Corp.’s relationship to TP Racing. The Commission also found
that Ron did not prove that he met all monetary obligations regarding
racing meetings. Ron challenges each of those findings and conclusions.

a.

¶73 First, the Commission found that Ron did not tell the Racing
Department about the Note-Land Swap Option.

i.

¶74 Contrary to that finding, Ron (or his agents) disclosed the
Option. The Commission did not dispute that the Racing Department knew
that Ron signed a promissory note as his capital contribution. The
Commission instead found that Ron did not tell the Racing Department that
he could pay off that note with land. We resolve that question differently.

¶75 Ron testified he told the Racing Department about the Note-
Land Swap Option in 2000. After hearing that testimony, the ALJ found it
credible. But the Commission concluded otherwise on a cold record.
Whether Ron was credible is a fact question (which the Commission

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Opinion of the Court

admitted during oral argument), so we no longer defer to the Commission.
See A.R.S. § 12-910(F). Instead, we defer to the ALJ because he “saw
witnesses, heard evidence and the manner in which it was given, and
weighed that evidence before reaching a decision.” Ohlmaier v. Indus.
Comm’n, 161 Ariz. 113, 119 (1989); see supra ¶ 54. There is no basis in this
record to conclude that the ALJ erred. We, therefore, adopt the ALJ’s
finding that Ron credibly testified that he told the Racing Department about
the Note-Land Swap Option in 2000.

¶76 But even without that credibility finding, plenty of evidence
corroborates Ron’s testimony. To start, several TP Racing executives
confirmed the Note-Land Swap Option’s existence and purpose. For
example, Buzz Alston, TP Racing’s counsel, testified that “Jerry and Ron
were going to . . . convey their land to [TP Racing] and their notes would be
extinguished[.]” John Mangum, another lawyer for TP Racing, had a
similar understanding. Patty Chakour, TP Racing’s Chief Financial Officer,
said she “view[ed] Ron’s note as a placeholder . . . securing his promise to
put the Bruin land into” TP Racing.

¶77 In 2000, TP Racing’s outside auditors documented the Note-
Land Swap Option and the Racing Department’s role in it. The auditors
explained the arrangement this way: “If Jerry does not give [TP Racing] the
Land at the end of agreement He [sic] would have to pay [TP Racing] the
$14,065,000 and [Ron] would have to pay [TP Racing] $4,635,000.” And the
auditors documented that the Note-Land Swap Option existed because the
Racing Department “required [Jerry] to be a 50% owner of TP Racing[.]”

¶78 Then, in 2003, TP Racing applied to renew its permit. During
that process, TP Racing provided the Racing Department with a balance
sheet. It listed “Notes Receivable – Related Parties” for $18,700,000 (the
combined amount of Jerry and Ron’s notes) to end 2002. While
interviewing a TP Racing representative, a Racing Department investigator
asked whether that amount was “related to the 1031 property exchanges
that you and the group affected to buy Turf back in June 2000 . . . because it
is the same amount as the Section 1031[.]” The representative confirmed
the amount was the same and it was “tied in” to the 1031 exchange.

¶79 During the permitting process, the Racing Department also
hired a certified public accountant (“CPA”). He reported back with
findings and recommendations. In so doing, he viewed the option for Jerry
and Ron to pay off their notes with land as beneficial to TP Racing.

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¶80 In his report, the CPA explained that “when horses race at
Turf Paradise, they actually run on property owned by three separate
entities.” He observed that the land is “leased back to [TP Racing] through
three separate lease agreements.” But that arrangement would change. He
explained that, because of meetings with the Racing Department, TP Racing
would “accept[] the land owned by J. Simms Enterprises in exchange for a
$14,065,000 note owed to [TP Racing] by [Jerry].” And TP Racing would
receive land “which is essential to [its] operations” while giving Bruin Corp.
land which is non-essential to racing. Following those transactions, TP
Racing would directly own all essential real estate.

¶81 The CPA also noted that retiring the notes receivable would
improve TP Racing’s finances. He explained that TP Racing’s “audited
financial statements include $18,700,000 in current assets for notes
receivable from [Jerry] and [Ron].” He confirmed those notes were
unsecured and had not been paid off for three years, and he thought, given
Jerry and Ron’s significant net worth, “it is unlikely that [TP Racing] would
make a demand for any significant payment under these notes” any time
soon. He reiterated that, due to meetings with the Racing Department, TP
Racing would “accept[] land owned by J. Simms Enterprises, LLC . . . for
the $14,065,000 note owed” by Jerry. And he explained why doing so
would improve TP Racing’s finances: it would replace “a note (for which
no payment would likely be demanded by [TP Racing]) with real estate
essential to its operations.”

¶82 Three days later, the Racing Department sent the Commission
a written report about TP Racing’s permit. The report attached the CPA’s
findings and recommendations. It disclosed that two entities leased land
required for racetrack operations to TP Racing. Those two parcels, “owned
by unlicensed entities, divide the actual track and auxiliary areas.” To
extend TP Racing’s permit, the report recommended that those two parcels
“be transferred without encumbrance to [TP Racing].”

¶83 Shortly thereafter, Jerry caused J. Simms Enterprises to deed
its land to TP Racing in exchange for cancelling Jerry’s note. Similarly, Ron
caused Bruin Corp. to trade land under the racetrack for land that is not.
Neither transaction bothered the Racing Department. Rather, it encouraged
those transactions to renew TP Racing’s permit because they ensured TP
Racing owned all land under the racetrack and, as to Jerry’s transaction,
traded a note receivable for a current asset.

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Opinion of the Court

¶84 Finally, Jerry confirmed everyone knew about the Note-Land
Swap Option. In 2010, Jerry demanded that Ron pay off his promissory
note by having Bruin Corp. transfer land to TP Racing. Jerry wrote,

If you will recall, all of us agreed and expected that the land I
utilized for a 1031 exchange would ultimately be . . . rolled
into Turf Paradise. I did that. So far, you have not[.] All that
was ever contemplated is that the track would own the
property. Surely you can find a way to accomplish the
transaction. Then the track . . . would not have to worry about
collecting a $4,635,000 note from you.

(Emphasis added). Given the other evidence discussed, it is improbable
that “all of us” did not include the Racing Department. In sum, the Racing
Department knew that Jerry and Ron could pay off their promissory notes
by having their entities transfer land to TP Racing.

ii.

¶85 Next, we turn to materiality. Even if Ron did not disclose the
Note-Land Swap Option, we conclude that failure was immaterial because
it would not have impacted the Racing Department’s decisions.

¶86 Ordinarily, whether the failure to do something is material is
a question of fact. See J.W. Hancock Enters., Inc. v. Registrar of Contractors,
126 Ariz. 511, 514 (1980) (“The findings of fact also clearly establish that
appellant failed to conform to specifications. Whether such failure was
material is also a question of fact.”); Hill v. Jones, 151 Ariz. 81, 86 (App. 1986)
(“Unless reasonable minds could not differ, materiality is a factual matter
which must be determined by the trier of fact.”). But one could argue—
Ron’s counsel did at oral argument—that materiality is a mixed question of
law and fact. Either way, we determine materiality de novo. See A.R.S. § 12-
910(F); supra ¶¶ 34, 49.

¶87 Materiality is “an objective standard.” Hirsh v. Ariz. Corp.
Comm’n, 237 Ariz. 456, 463 ¶ 27 (App. 2015). A statement is material if it is
significant enough to affect the outcome of the agency’s decision. Cf. id. at
463–64 ¶ 27 (internal quotation marks omitted) (quoting Trimble v. Am. Sav.
Life Ins. Co, 152 Ariz. 548, 553 (App. 1986)) (“The requirement of materiality
is satisfied by a showing of substantial likelihood that, under all the
circumstances, the misstated or omitted fact would have assumed actual
significance in the deliberations of a reasonable buyer.”); A.R.S. § 13-2701(1)
(“‘Material’ means that which could have affected the course or outcome of
any proceeding or transaction.”). Applying that standard, a statement is

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material if it was significant enough to affect the outcome of the Racing
Department’s licensing and permitting decisions in 2000 or 2003. Put
differently, materiality hinges on whether the withheld information would
have made the Racing Department less likely to grant Ron a license and TP
Racing a permit.

¶88 We conclude the Racing Department would have granted
Ron a license even if it knew about the Note-Land Swap Option. As
explained, the Racing Department knew Jerry and Ron gave promissory
notes for their capital contributions. The CPA who reviewed TP Racing’s
finances reported back that TP Racing was not likely to demand repayment
of those notes anytime soon. But, because of meetings with the Racing
Department, TP Racing agreed to accept land from J. Simms Enterprises to
pay off Jerry’s $14 million note. TP Racing would also accept Bruin Corp.’s
land under the racetrack for non-essential land. The CPA thought both
transactions would be beneficial—they would ensure TP Racing owned all
land under the racetrack and improve TP Racing’s finances.

¶89 There is no evidence the Racing Department thought Ron’s
note was any different than Jerry’s. In fact, Jerry confirmed in 2010 that
both notes were the same. And, though Jerry’s note was larger than Ron’s,
nothing supports that the Racing Department would not have viewed the
Note-Land Swap Option the same as Jerry’s transaction—positively. After
all, the Note-Land Swap Option would have the same benefits. It would
allow Ron to transfer land under Turf Paradise (even if not essential to
horse racing) and allow TP Racing to exchange a note receivable for a
current asset, thereby improving TP Racing’s finances. Even if the Racing
Department did not know about the Note-Land Swap Option, disclosure
would have made the Racing Department more likely (not less) to grant
Ron a license and TP Racing a permit. Thus, any failure to disclose the
Note-Land Swap Option was immaterial.

b.

¶90 Second, the Commission found Ron violated § 5-108(A)(3) by
telling the Racing Department until 2006 that his wife owned Bruin Corp.
Ron unquestionably made false statements about Bruin Corp.’s ownership.
But we must determine whether those false statements were made
knowingly and were material. See A.R.S. § 5-108(A)(3).

i.

¶91 We begin with the “knowing” requirement. That issue
presents a fact question, which we review de novo. See State v. Romero, 248

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Ariz. 601, 604, ¶ 12 (App. 2020) (whether the defendant knowingly engaged
in conduct is a fact question because it “refers to factual knowledge”);
A.R.S. § 12-910(F); supra ¶ 34.

¶92 Ron testified to the ALJ that his false statements about Bruin
Corp.’s ownership were simply mistaken. He explained that they stemmed
from thinking about Bruin Corp.’s ownership from a family standpoint, not
a legal one. The ALJ found Ron’s explanation credible.

¶93 Even if that explanation was credible, we disagree that it
makes Ron’s misstatements unknowing. The term “knowingly” means
“only a knowledge that the facts exist that bring the act or omission within
the provisions of the statute using such word.” A.R.S. § 1-215(17)(a). This
court has equated “knowingly” with “willfully.” State v. Burke, 238 Ariz.
322, 326–27 ¶ 8 (App. 2015). And “willfully” is defined as “with respect to
conduct or to a circumstance described by a statute defining an offense, that
a person is aware or believes that the person’s conduct is of that nature or
that the circumstance exists.” A.R.S. § 1-215(42).

¶94 Ron’s explanation—that he was thinking about Bruin Corp.
from a family standpoint, not a legal one—suggests that, from a legal
standpoint, he knew his wife did not own Bruin Corp. There is also little
doubt that Ron had access to information about who owned Bruin Corp.
That makes Ron’s misstatements objectively knowing, even if he
subjectively mistook the information sought.

ii.

¶95 We next decide whether Ron’s misstatements were material.
Starting in 2006, Ron accurately disclosed that he owned Bruin Corp. So we
focus on whether knowing that Ron, rather than his wife, owned Bruin
Corp. was material to the Racing Department’s licensing or permitting
decisions from 2000 to 2006. We conclude such knowledge was immaterial
because it would not have affected the outcome of those licensing and
permitting decisions.

¶96 In fact, by inaccurately disclosing that his wife owned Bruin
Corp., Ron made it less likely that the Racing Department would grant TP
Racing a permit and more likely his wife would come under scrutiny. As
discussed, in 2000, Bruin Corp. owned land under the racetrack at Turf
Paradise and leased it to TP Racing. The Racing Department approved that
arrangement, despite that a non-licensed entity held land under the
racetrack beyond TP Racing’s control.

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¶97 Ron later had Bruin Corp. trade that land for non-essential
land. But before that happened, the Racing Department’s CPA flagged
whether several unlicensed entities and individuals should be licensed. He
identified Ronald A. Simms Perpetual Asset Shield Trust, Bruin Corp., J.
Simms Enterprises, LLC, TP Plaza LLLP, and Ron’s wife as unlicensed
“related parties.” He explained that Ron’s wife was “the owner of Bruin
Corporation and a guarantor of [TP Racing’s] long-term bank debt.”
Because J. Simms Enterprises and Bruin Corp. agreed to transfer all
essential land to TP Racing, the CPA concluded they would “no longer
[have] any significant operating influence over” TP Racing. When
completed, those transactions “would leave only Ronald A. Simms
Perpetual Asset Shield Trust and [Ron’s wife] as unlicensed entities that
could have an influence over [TP Racing’s] operations.” But because
“Ronald A. Simms Perpetual Asset Shield Trust is 100% controlled by a
current licensee, [Ron], and [Ron’s wife is] only a guarantor of [TP Racing’s]
debt by virtue of her marriage to [Ron], it would appear, from a general
business perspective, to be unnecessary to license those entities.”

¶98 The CPA recommended that the Racing Department
“determine if [Ron’s wife], Bruin Corporation and J. Simms Enterprises,
LLC are required to be licensed.” He explained that Ron’s wife “owns 100%
of Bruin [Corp.] and is a guarantor of [TP Racing’s] bank debt” and neither
was licensed. But TP Racing “is in the process of acquiring all real estate
necessary for its daily operations,” so “J. Simms Enterprises will no longer
have any association with [TP Racing] and Bruin [Corp.] will own and lease
land to [TP Racing] which is non-essential to horse racing operations.” And
he concluded that “[t]his course of action would appear to alleviate any
need to license these entities and [Ron’s wife.]” The Racing Department did
not raise any licensing issues to the Commission.

¶99 Despite believing Ron’s wife owned 100% of an entity that
controlled land under the racetrack, the Racing Department did not require
her to be licensed. In truth, Ron owned 100% of Bruin Corp., and so, like
Ronald A. Simms Perpetual Asset Shield Trust, Bruin Corp. was “100%
controlled by a current licensee, [Ron],” making it “unnecessary to license”
that entity. Although Ron’s wife guaranteed TP Racing’s debt, the Racing
Department knew she had done so, yet it did not require her to be licensed.
Finally, the Commission found that, after Bruin Corp. transferred land
under the racetrack to TP Racing, “there was no further concern over the
ownership of Bruin and its authority over the race track until the denial of
Mr. Simms’ license application.” We agree with that finding, but the
conclusion we draw from it is that Ron’s knowing misstatements about who
owned Bruin Corp. were immaterial.

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c.

¶100 Third, the Commission found that Ron made this
misstatement of material fact to the Racing Department: “Bruin was
nothing more than a landlord with respect to the race track.” We conclude
that statement was neither false nor material.

¶101 It was true because Bruin Corp. was, in fact, only a landlord
in relation to the racetrack. The record does not suggest that Bruin Corp.
ever had anything but a landlord-tenant relationship with TP Racing. That
Ron and TP Racing agreed that Ron could pay off his promissory note with
Bruin Corp.’s land—an arrangement the Racing Department knew about—
did not make Bruin Corp. more than a landlord to the racetrack. The
Commission concluded that it “need not (and does not) decide whether an
oral agreement existed between [Ron] and [Jerry] that would have
permitted [Ron] to pay off his promissory note by transferring the Bruin
land to TP.” It is hard to square that non-conclusion with the Commission’s
conclusion that Bruin Corp. was more than a landlord.

¶102 After Bruin Corp. transferred land under the racetrack, Bruin
Corp. had no relationship—landlord or otherwise—to the racetrack.
Instead, if anything, Bruin Corp. was TP Racing’s landlord as to land
elsewhere within the Turf Paradise complex. Thus, Bruin Corp. was never
anything more than a landlord vis-à-vis the racetrack, making Ron’s
statement about it true.

¶103 On materiality, the Racing Department knew how Ron and
Jerry could pay off their promissory notes. See supra ¶ 84. And yet the
Racing Department did not object. If nothing else, Ron and Jerry’s ability
to control their related entities’ land and swap TP Racing’s note receivables
for current assets comforted the Racing Department. So Ron’s statements
about Bruin Corp.’s relationship with the racetrack were immaterial.

d.

¶104 Finally, the Commission concluded that it could not
determine whether Ron met all “monetary obligation[s] in connection with
any racing meeting held in this state.” A.R.S. § 5-108(A)(4). The
Commission could not do so, it thought, because of “ongoing civil litigation
about whether [Ron] failed to pay off the promissory note he gave to” TP
Racing. The Commission instead concluded that Ron failed to show he
satisfied § 5-108(A)(4).

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¶105 That conclusion requires us to interpret the phrase “in
connection with any racing meeting held in this state.” We do so de novo.
See A.R.S. § 12-910(F); supra ¶ 31. The phrase “racing meeting” is defined
as “a number of days of racing allotted by the commission in one permit.”
A.R.S. § 5-101(25). Applying that definition, Ron could only violate § 5-
108(A)(4) by breaching a monetary obligation in connection with racing
days allotted in TP Racing’s permit. The record does not support that Ron’s
promissory note was made in connection with racing days allotted in TP
Racing’s permit. Rather, the promissory note was Ron’s capital
contribution. Ron did not violate § 5-108(A)(4).

D.

¶106 Our last task is to decide whether the Commission’s decision
provides substantial evidence supporting the Racing Department’s denial
of Ron’s license application. To repeat, “[s]ubstantial evidence is evidence
which would permit a reasonable person to reach the” agency’s result.
Sierra Club-Grand Canyon Ch., 237 Ariz. at 575 ¶ 22.

¶107 We have found that Ron did not make a knowingly false
statement of material fact or breach a monetary obligation in connection
with any race meeting. Without Ron doing one of those two things, the
Racing Department lacked discretion to deny Ron a license. The
Commission’s decision and the record do not support that Ron otherwise
did anything allowing the Racing Department to deny him a license.
Neither the Commission’s decision nor the record provides substantial
evidence supporting the agency action here.

ATTORNEY FEES AND COSTS

¶108 Ron requests attorney fees and costs from the Commission
under A.R.S. §§ 12-341, 12-348, and 12-2030. As the prevailing party on
appeal, Ron is entitled to recover his appellate attorney fees and costs from
the Commission under §§ 12-341 and 12-348(A)(2) upon compliance with
Arizona Rule of Civil Appellate Procedure 21.

CONCLUSION

¶109 Why would the legislature instruct courts to independently
answer legal and factual questions when reviewing agency action? This
case might demonstrate why. At the start, Jerry’s counsel provided the
Racing Department with evidence against Ron and then helped draft the
document denying Ron’s license. Simms, 253 Ariz. at 216 ¶¶ 5–6. During
the Commission proceedings, Jerry had contact with various

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commissioners. Simms, 2022 WL 1256594, at *1 ¶¶ 2–3. Those proceedings
produced an administrative decision setting aside the ALJ’s credibility
findings and relying on statements Ron made over a decade prior, despite
that, in the interim, the Racing Department repeatedly granted Ron a
license. Under the old regime, with deference to agency factfinding, we
probably would have to affirm the agency action here. Under the new
regime, with full-throated review of agency factfinding, the Racing
Department’s action cannot stand.

¶110 Although we cannot order the Commission to grant Ron a
license, we vacate the superior court’s judgment and remand to enter
judgment for Ron on his challenge to the license denial. We deny all
unresolved requests for judicial notice.

MATTHEW J. MARTIN • Clerk of the Court
FILED: TM

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