PARAGON v. STATE

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

PARAGON SKYDIVE, LLC, Plaintiff/Appellant,

v.

STATE OF ARIZONA, et al., Defendants/Appellees.

No. 1 CA-CV 25-0483
FILED 07-31-2026

Appeal from the Superior Court in Maricopa County
No. CV2023-010887
The Honorable Christopher A. Coury, Judge

AFFIRMED IN PART; VACATED AND REMANDED IN PART

COUNSEL

Womble Bond Dickinson LLP, Phoenix
By Daniel P. Crane, Lucas Hickman
Counsel for Plaintiff/Appellant

Lewis Brisbois Bisgaard & Smith LLP, Phoenix
By Bruce C. Smith, Sean P. Healy
Counsel for Defendants/Appellees State of Arizona and Arizona Department of
Transportation

PARAGON v. STATE, et al.
Decision of the Court

MEMORANDUM DECISION

Judge D. Steven Williams delivered the Court’s decision in which Presiding
Judge Daniel J. Kiley and Judge Cynthia J. Bailey joined.

W I L L I A M S, Judge:

¶1 Paragon Skydive, LLC (“Paragon”) appeals from the superior
court’s judgment following the dismissal of Paragon’s claims for damages
and declaratory relief against the State of Arizona, et al. (“the State”). For
the following reasons, we affirm in part, vacate in part, and remand for
proceedings consistent with this decision.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 The Arizona Department of Transportation (“ADOT”) owns
and sponsors the Grand Canyon National Park Airport (“the Airport”), a
public-use airport.1 In August 2013, Paragon, an Arizona company, applied
to ADOT to open a commercial skydiving operation at the Airport.

¶3 In June 2015, the Federal Aviation Administration (“the
FAA”) “performed an inspection at the Airport to evaluate the feasibility of
integrating skydiving into ground and flight airport operations.” In
September 2015, the FAA issued a safety risk assessment, identifying
certain actions the Airport needed to take to mitigate safety risks before
introducing “parachuting operations.”

¶4 In March 2016, ADOT and Paragon entered a lease
agreement.2 In December 2016, Paragon filed a complaint with ADOT’s
Civil Rights Office (“the Civil Rights Office”), alleging discrimination. After
investigating Paragon’s claims, the Civil Rights Office issued a report in
February 2017, finding ADOT had imposed “unjust and unfair” fees and
“discriminatory unwritten rules” on Paragon in violation of Grant

1 A sponsor, in this context, is the owner of a public-use airport that
applies to the federal government for financial assistance. 49 U.S.C.
§ 47102(26).

2 Over subsequent years, the parties both extended and amended the
lease.

2

PARAGON v. STATE, et al.
Decision of the Court

Assurance 22, which prohibits economic discrimination. 3 The Civil Rights
Office also concluded the Airport manager had engaged in unprofessional
and dishonest communications with Paragon. In October 2017, an ADOT
senior auditor determined ADOT had imposed some improper fees and
recommended that ADOT refund approximately $3,200 to Paragon.

¶5 In January 2018, Paragon filed an informal complaint with the
FAA, alleging ADOT had violated Grant Assurance 22 by requiring
Paragon to obtain certain skydiving insurance. Two months later, Paragon
filed another informal complaint with the FAA, alleging ADOT had
unlawfully imposed a gross-receipts fee on Paragon’s skydiving sales. In
December 2019, Paragon filed a formal complaint with the FAA, reasserting
the allegations raised in its informal complaints as well as numerous other
claims, including challenging ADOT’s restriction of its services to only
tandem skydives.

¶6 On January 21, 2022, the FAA issued its Director’s
Determination, finding ADOT had violated Grant Assurance 22 by: (1)
“unjustly” requiring Paragon to obtain “high and unreasonable” skydiving
liability insurance, (2) restricting Paragon’s skydiving operations, including
by forbidding solo jumps, and (3) imposing a 10% gross-receipts fee on
Paragon “compared to [the] established 1.5% fee imposed on similarly-
situated air tour operators.” ADOT appealed. In March 2023, the FAA’s
Associate Administrator issued the agency’s Final Decision, affirming the
Director’s finding that ADOT had violated Grant Assurance 22 by imposing
certain insurance requirements and restricting solo jumps, but overturning
the Director’s determination concerning the gross-receipts fee.

3 “Grant Assurances” are obligations airport owners or sponsors must
agree to before accepting funds from FAA-administered airport financial
assistance programs. “These obligations require the recipients to maintain
and operate their facilities safely and efficiently and in accordance with
specified conditions.” FAA, Grant Assurances (Obligations),
https://faa.gov/airports/aip/grant_assurances (last visited July 28, 2026).

Among other things, Grant Assurance 22 requires airport sponsors
to: (1) make airports available for public use, “without unjust
discrimination to all types, kinds and classes of aeronautical activities,” and
(2) “[c]harge reasonable, and not unjustly discriminatory, prices for each
unit or service.” FAA, Assurances: Airport Sponsors,
https://www.faa.gov/airports/aip/grant_assurances/assurances-
airport-sponsors-2025 (last visited July 28, 2026).

3

PARAGON v. STATE, et al.
Decision of the Court

¶7 Meanwhile, Paragon provided ADOT with a notice of claim
on July 19, 2022, and an amended notice of claim on June 2, 2023. As
outlined in its amended notice of claim, Paragon asserted that:

ADOT’s wrongful conduct has caused Paragon substantial
harm that entitles Paragon to monetary damages for the
claims described above. ADOT has needlessly, and
admittedly, discriminated against, harassed, and oppressed
Paragon since 2013. ADOT unjustly prevented Paragon from
commencing operations for three years, which has caused
Paragon to lose revenue estimated at over $2,000,000.
Moreover, through just enforcement of provisions the FAA
has now determined (and confirmed) are unlawful, ADOT
has improperly collected, or caused Paragon to incur, fees and
expenses in excess of $255,000.

Given these alleged damages, Paragon demanded $275,000 to settle its
claims.

¶8 The State did not respond to Paragon’s notices of claim. In
July 2023, Paragon filed a complaint against the State, alleging a breach of
the implied covenant of good faith and fair dealing (Count 1), economic
duress (Count 2), unjust enrichment (Count 3), and conversion (Count 4).
Paragon alleged that ADOT’s conduct caused it damages exceeding
$300,000. Apart from its claims for damages, Paragon sought declaratory
relief (Count 5) “confirming that the [lease] provisions the FAA determined
violated Grant Assurance 22 are unenforceable and that ADOT cannot
continue to impose unlawful restrictions on Paragon.”

¶9 The State moved to dismiss the complaint, arguing: (1)
Paragon failed to comply with the statutory requirements for notices of
claim, (2) Paragon failed to file the complaint within one year after the cause
of action accrued, and (3) the doctrine of res judicata precluded Paragon
from relitigating claims already subject to a final determination by the FAA.
In response to the State’s timeliness arguments, Paragon clarified that it did
not seek “damages based on discrimination from 2016 or 2017”; rather, it
sought only “damages for ADOT continuing to impose” requirements
found unlawful by the FAA. According to Paragon, “[g]oing through the
FAA complaint process was necessary to establish which of ADOT’s actions
were unlawful,” and because the FAA found some of ADOT’s conduct
unlawful, Paragon was entitled, “at a minimum,” to “seek damages from
2022 forward.” With respect to ADOT’s contention that it failed to provide
the requisite factual support for its settlement demand, Paragon pointed to

4

PARAGON v. STATE, et al.
Decision of the Court

the Civil Rights Office’s findings of discrimination and the FAA’s
determinations of grant assurance violations as “provid[ing] ADOT more
than enough facts to understand the basis upon which its liability is
asserted.” Finally, Paragon rejected ADOT’s res judicata argument,
acknowledging that “common facts underlie this action” and the “prior
administrative proceedings,” but asserting “the legal issues are dissimilar.”

¶10 After reviewing the parties’ full briefing, the superior court
dismissed Counts 1 through 4, finding Paragon’s notices of claim statutorily
non-compliant. Because the notice of claim statute applies only to claims for
damages, not those for declaratory relief, Home Builders Ass’n of Cent. Ariz.
v. Kard, 219 Ariz. 374, 381, ¶ 31 (App. 2008), the court found the notice of
claim deficiencies did not compel the dismissal of Count 5. The court also
determined that Paragon timely filed its complaint within a year of the FAA
entering its Final Decision and that the doctrine of res judicata did not bar
declaratory relief. Accordingly, the court denied the State’s motion to
dismiss with respect to Count 5.

¶11 Thereafter, the State again moved to dismiss. In its reply in
support of the motion to dismiss, the State argued that the superior court
lacked subject-matter jurisdiction over Paragon’s claim for declaratory
relief “because Congress gave the FAA exclusive jurisdiction in [sic] to
determine compliance with grant assurances, and only federal courts of
appeals have jurisdiction to review the FAA’s determinations.”

¶12 Because the State raised the subject-matter jurisdiction
argument for the first time in its reply, the superior court granted Paragon
an opportunity to file supplemental briefing on the issue. In response,
Paragon pointed to the parties’ lease, which expressly states that Arizona
law “govern[s] the terms and interpretations” of the contract, and argued
the superior court has “subject matter jurisdiction to evaluate whether the
contract at issue violates federal law . . . where the FAA has already
determined the contract at issue does violate federal law.” Paragon further
asserted that “Congress did not intend to federally preempt the entire field
as to all legal relations with federally funded airports, and the declaratory
relief . . . [sought] would not create an irreconcilable conflict with nor
frustrate the objectives of the Federal Aviation Act.”

¶13 Before ruling on the State’s second motion to dismiss, the
superior court took judicial notice that the FAA had closed Paragon’s
complaint. Pointing to FAA regulations authorizing the Director to
determine whether “there has been compliance with a corrective action
plan, and when areas of noncompliance have been corrected,” the court

5

PARAGON v. STATE, et al.
Decision of the Court

noted that on December 9, 2024, the Director “sent an order” to ADOT
finding “that ADOT has adequately addressed all of the violations.” The
court then granted the State’s second motion to dismiss, finding the court
lacked “subject matter jurisdiction to adjudicate the single claim remaining
in [the] case, or to make the requested declaration.”

¶14 Upon the dismissal of all of Paragon’s claims, the State
requested an award of its attorneys’ fees and costs. The superior court
awarded the State reduced attorneys’ fees of $100,000 and taxable costs of
$467.32.

¶15 The superior court then entered a final judgment
incorporating its dismissal rulings and its award of attorneys’ fees and
costs. Paragon timely appealed. We have jurisdiction under Article 6,
Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21 and
-2101(A)(1).

DISCUSSION

I. Dismissal Rulings

A. Claims for Damages

¶16 Paragon challenges the superior court’s dismissal of its claims
for damages. Contrary to the court’s findings, Paragon contends that its
notices of claim complied with the statutory requirements and “provided
ADOT more than sufficient information to evaluate” its claims and decide
whether “to resolve the dispute for a payment of $275,000 (or negotiate
from there).”

¶17 Although the State moved to dismiss Paragon’s complaint
under Arizona Rule of Civil Procedure (“Rule”) 12(b)(6), it attached various
exhibits to its motion. The superior court, in its dismissal ruling, did not
exclude the State’s exhibits from consideration. In fact, the court stated it
“reviewed, at length, the exhibits submitted by” the State. Because the court
did not exclude from consideration extrinsic evidence that was not central
to the claims outlined in the complaint, including an audit and analysis
report of charges ADOT imposed on Paragon from March 2016 through
March 2017, the State’s submission of the extraneous documents converted
the motion to dismiss to one for summary judgment. See Ariz. R. Civ. P.
12(d) (“If, on a motion [asserting failure to state a claim upon which relief
can be granted], matters outside the pleadings are presented to, and not
excluded by, the court, the motion must be treated as one for summary
judgment under Rule 56. All parties must be given a reasonable

6

PARAGON v. STATE, et al.
Decision of the Court

opportunity to present all the material that is pertinent to the motion.”);
Strategic Dev. & Constr., Inc. v. 7th & Roosevelt Partners, LLC, 224 Ariz. 60, 63,
¶ 8 (App. 2010) (explaining “Rule 56 treatment is not required when the
court does not rely on the proffered extraneous materials”); see also Elm Ret.
Ctr., LP v. Callaway, 226 Ariz. 287, 289, ¶ 7 (App. 2010) (holding a court may
consider a document that “is central” to a claim “without converting a
motion to dismiss to a motion for summary judgment”). 4

¶18 In reviewing a grant of summary judgment, we view the facts
and the reasonable inferences to be drawn from those facts in the light most
favorable to the non-moving party. Normandin v. Encanto Adventures, LLC,
246 Ariz. 458, 460, ¶ 9 (2019). “We determine de novo whether any genuine
issues of material fact exist and whether the [superior] court correctly
applied the law.” Diaz v. Phoenix Lubrication Serv., Inc., 224 Ariz. 335, 338,
¶ 10 (App. 2010); see also Ariz. R. Civ. P. 56(a) (“The court shall grant
summary judgment if the moving party shows that there is no genuine
dispute as to any material fact and the moving party is entitled to judgment
as a matter of law.”). We likewise review de novo issues of statutory
construction. City of Mesa v. Ryan, 258 Ariz. 297, 299, ¶ 8 (2024).

i. Supporting-Facts Requirement

¶19 “Before initiating an action for damages against a public
entity,” a claimant must provide a statutorily compliant notice of claim.
Deer Valley Unified Sch. Dist. No. 97 v. Houser, 214 Ariz. 293, 294, ¶ 1 (2007).
Under Arizona’s notice of claim statute, A.R.S. § 12-821.01(A), a claimant
must provide a notice of claim to the public entity within 180 days after the
cause of action accrues. Apart from prescribing the proper timing and
method for submission, A.R.S. § 12-821.01(A) specifies that:

4 To the extent Paragon contends the superior court improperly
considered ADOT’s exhibits without: (1) expressly converting the motion
to dismiss to one for summary judgment, and (2) granting Paragon the
opportunity “to produce responsive material,” we note that Paragon filed
a response and never requested a delay or any other relief. See Workman v.
Verde Wellness Ctr., Inc., 240 Ariz. 597, 602, ¶ 15 (App. 2016) (explaining the
“reasonable opportunity requirement inherent in Rule 12(b) is satisfied
when a party had the opportunity to file a written response or reply”)
(citation modified); see also Ariz. R. Civ. P. 56(d)(1) (“If an opposing party
cannot present evidence essential to justify its opposition [to a motion for
summary judgment], it may file a request for relief and expedited
hearing.”).

7

PARAGON v. STATE, et al.
Decision of the Court

The claim shall contain facts sufficient to permit the public
entity . . . to understand the basis on which liability is claimed.
The claim shall also contain a specific amount for which the
claim can be settled and the facts supporting that amount.

(emphasis added). Together, these statutory mandates allow a public entity
“to investigate and assess liability” and “realistically consider a claim.” Deer
Valley, 214 Ariz. at 295–96, ¶¶ 6, 9 (citation modified); see also Backus v. State, 220 Ariz. 101, 105–06, ¶ 17 (2009) (“Armed with [a sum certain demand and
supporting facts], the public entity can decide whether and how to
investigate the claim, at what level of damages to attempt to resolve the
claim, and how to take the claim into account in planning and budgeting
activities.”).

¶20 The failure to file a statutorily compliant notice of claim bars
the claim. Deer Valley, 214 Ariz. at 295, ¶ 6; see also City of Mesa, 258 Ariz. at
298, ¶ 1 (“If a notice of claim fails to comply with [A.R.S.] § 12-821.01(A),
the person is barred from suing the public entity or employee on the
claim.”). “Actual notice and substantial compliance do not excuse failure to
comply with the statutory requirements of A.R.S. § 12-821.01(A).” Falcon ex
rel. Sandoval v. Maricopa Cnty., 213 Ariz. 525, 527, ¶ 10 (2006). We review de
novo whether a notice of claim complies with the statutory requirements.
Jones v. Cochise Cnty., 218 Ariz. 372, 375, ¶ 7 (App. 2008).

¶21 To satisfy A.R.S. § 12-821.01’s supporting-facts requirement, a
claimant need not disclose sufficient facts to support the amount claimed,
nor legal theories, mathematical formulas, calculations, itemized damages,
or trial level proof. See Backus, 220 Ariz. at 106, ¶ 22 (“If the legislature had
intended to require that a notice contain facts ‘sufficient’ to support the
amount claimed, it would have said so.”); see also Yollin v. City of Glendale,
219 Ariz. 24, 32, ¶ 23 (App. 2008) (stating the notice of claim statute does
not require “theories” or “itemization”); Havasupai Tribe of Havasupai Rsrv.
v. Ariz. Bd. of Regents, 220 Ariz. 214, 226, ¶ 42 (App. 2008) (“[S]ection
12-821.01 does not require a notice to contain facts sufficient to prove a
claim.”); Jones, 218 Ariz. at 377, ¶ 17 (holding A.R.S. § 12-821.01 “does not
require the notice of claim to provide a specific calculation for each possible
basis for or element of damage—only a total amount”). Instead, the
supporting-facts requirement simply “compels claimants to provide a
factual foundation to permit the entity to evaluate the amount claimed.”
City of Mesa, 258 Ariz. at 300, ¶ 12 (citation modified); see also Yollin, 219
Ariz. at 32, ¶ 25 (“The claim statute anticipates that government entities will
investigate claims, and the supporting facts requirement is intended to be a

8

PARAGON v. STATE, et al.
Decision of the Court

relatively light burden on claimants, just enough to facilitate the
government’s investigation.”).

¶22 While the statutory obligation to present facts supporting the
sum certain demanded “ensures that claimants will not demand
unfounded amounts,” Deer Valley, 214 Ariz. at 296, ¶ 9, A.R.S. § 12-821.01
“does not call for [judicial] inquiry into the reasonableness of a sum certain
demand,” Yollin, 219 Ariz. at 32, ¶ 23. In fact, except for “the narrow
circumstance when no facts are provided,” id. (emphasis added), even a
“meager” factual recitation, Vasquez v. State, 220 Ariz. 304, 309, ¶ 15 (App.
2008), “laden with questionable inferences,” Yollin, 219 Ariz. at 33, ¶ 31,
satisfies the statutory threshold. In other words, a notice of claim need not
contain facts that “prove the amount of the settlement demand” or even
“demonstrate that the settlement demand is reasonable.” Havasupai Tribe,
220 Ariz. at 229, ¶ 53. Rather, a notice of claim, “read as a whole,” need only
provide some facts corroborating or substantiating the amount of money
sought. Id.; Yollin, 219 Ariz. at 35, ¶ 36 (“All a court must do is determine if
the notice provides supporting facts to permit a governmental entity to
investigate and substantively evaluate the factual basis for the sum
certain.”).

¶23 Two Arizona Supreme Court opinions, read in tandem,
clarify A.R.S. § 12-821.01’s supporting-facts requirement. First, in Deer
Valley, the claimant, an assistant high school principal, provided a notice of
claim letter to her former employer, alleging the school district had
wrongfully terminated her employment. 214 Ariz. at 294, ¶ 2. Explaining
she had been given the choice of accepting a teaching position “at a
substantially lower salary or being fired,” the claimant identified her
settlement demand as follows:

1. All economic damages arising as a result of [the
claimant’s] removal from the [assistant principal] position
in an amount anticipated to be approximately $35,000.00
per year or more going forward over the next 18 years;

2. Compensatory damages for emotional distress suffered as
a result of the wrongful termination in an amount no less
than $300,000.00;

3. General damages, compensating [the claimant] for
damage to her reputation of employment in an amount of
no less than $200,000.00.

9

PARAGON v. STATE, et al.
Decision of the Court

Id. at 294–95, ¶¶ 2–3. The supreme court determined that the claimant’s
“repeated use of qualifying language ma[de] it impossible to ascertain the
precise amount for which the [school district] could have settled her claim.”
Id. at 296, ¶ 10. While holding the notice of claim statutorily noncompliant
on that basis, the supreme court also noted that the “letter provided no
additional information” to support the claims for compensatory and
reputational damages: “[T]he claim letter does not provide any facts
supporting the claimed amounts for emotional distress and for damages to
[the claimant’s] reputation.” Id. at 295, 297, ¶¶ 3, 11 n.3 (emphasis in
original).

¶24 More recently, in Backus, our supreme court revisited A.R.S.
§ 12-821.01’s supporting-facts requirement and determined the “approach
that best furthers legislative intent is to allow a claimant to decide what facts
support the amount claimed and to disclose those facts as part of the notice
of claim.” 220 Ariz. at 106, ¶ 23 (emphasis added). Because “only the
claimant knows which facts he regards as supporting the amount claimed,”
the supreme court reasoned “the statutory requirement that the claim
include the facts supporting the amount claimed must refer to the view of
the claimant, rather than to that of the public entity.” Id. (emphasis added).
Accordingly, the supreme court held that a claimant complies with the
supporting-facts requirement “by providing the factual foundation that the
claimant regards as adequate to permit the public entity to evaluate the
specific amount claimed.” Id. at 106–07, ¶ 23 (emphasis added). In
establishing this standard, the supreme court explained that a claimant
need not “provide an exhaustive list of facts; as long as a claimant provides
facts to support the amount claimed, he has complied with the supporting-
facts requirement of the statute, and courts should not scrutinize the
claimant’s description of facts to determine the ‘sufficiency’ of the factual
disclosure.” Id. at 107, ¶ 23. “Because the facts must be those that the
claimant views as supporting the amount claimed, the claimant does not
face the risk of having a valid claim dismissed for failure to meet a public
entity’s view of which facts the claimant should have disclosed.” Id. at ¶ 24
(citation modified).

¶25 In this case, Paragon detailed the State’s alleged wrongdoing
in its notices of claim, asserting that: (1) ADOT thwarted its efforts to open
a skydiving operation at the Airport for nearly three years after it filed its
initial application by imposing “ever-shifting” requirements; (2) ADOT
engaged in high-pressure tactics during contract negotiations and, over
Paragon’s objections, incorporated lease provisions that violated FAA grant
assurances; (3) ADOT employees threatened, sexually harassed, bullied,
and discriminated against Paragon employees, leading Paragon to file a

10

PARAGON v. STATE, et al.
Decision of the Court

formal complaint with the Civil Rights Office; (4) the Civil Rights Office
found ADOT had imposed unfair and unjust fees and engaged in other
misconduct; (5) ADOT refused to refund the improper fees and continued
bullying tactics during negotiations to extend and amend the lease—
demanding new, unlawful lease provisions, including requiring an
“unprecedented new insurance policy offered by only one broker”—and
(6) the FAA determined that ADOT had violated grant assurances by
unlawfully imposing certain insurance requirements and restricting
Paragon’s services.

¶26 Paragon also outlined each of its prospective legal claims and
tethered them to supporting facts: (1) Economic Duress and Coercion –
“Paragon has been forced to incur aircraft tie down fees, pay for improperly
required insurance, [and] incur additional expenses for discriminatory
employee reporting policies”; (2) Breach of the Implied Covenant of Good
Faith and Fair Dealing – “ADOT required Paragon to enter into the 2018
Lease knowing that Paragon could not satisfy the ADOT-required
insurance terms. . . . Paragon is [] entitled to recover its costs and fees that
ADOT knew or should have known were unlawful in the 2016 and 2018
Leases including . . . the deposit ADOT impermissibly required from
Paragon;” and (3) Alternative Unjust Enrichment and Conversion Claims –
“[A]ll of the fees Paragon [has] paid served to enrich ADOT to Paragon’s
detriment and without any valid justification. Paragon believes it will
recover those harms under a duress or breach of the implied covenant
claim, but if a Court does not permit recovery under either of those theories,
then ADOT has been unjustly enriched . . . . [and] ADOT’s conversion of
Paragon’s property (money) has directly harmed Paragon.”

¶27 After reviewing Paragon’s notices of claim, the superior court
found they wholly failed to comply with the supporting-facts requirement:

Neither of the Notices contain any breakdown or calculation
of the $255,000 in fees and expenses allegedly incurred.
Neither of the Notices reference any exhibits thereto. And
neither of the Notices provides any facts or discussion about
how [Paragon] reached its estimate of $2,000,000 in lost
revenues. Although the law provides a very permissive
standard and does not require exhaustive recitation or
calculation of damages, some facts are required. [Paragon]
provided no facts to support the amounts claimed. There was
nothing to support the specific amounts requested. Nor has
[Paragon] suggested that it somehow provided this factual

11

PARAGON v. STATE, et al.
Decision of the Court

information in documents given to [the State] with the
Notices.

¶28 To be sure, Paragon did not explain how it estimated lost
revenues of approximately $2,000,000 or calculated $255,000 in allegedly
improper, unfair, and discriminatory fees and requirements. But it was not
required to do so. Instead, to comply with A.R.S. § 12-821.01(A), Paragon
simply had to present some facts supporting its settlement demand of
$275,000.

¶29 Unlike the claimant in Deer Valley, who provided no facts to
support two discrete portions of her settlement demand, here, Paragon
detailed ADOT’s allegedly improper conduct and identified various fees,
restrictions (permitting only tandem skydiving, not solo), and requirements
that it claimed were both unlawful and imposed in a discriminatory
manner. Given that the settlement demand ($275,000) exceeds the alleged
unlawful fees, restrictions, and requirements ($255,000), Paragon arguably
failed to put forward facts demonstrating the reasonableness of its settlement
demand. But again, it was not required to do so. See City of Mesa, 258 Ariz.
at 300, ¶ 10 (explaining the demand of an unreasonable sum certain does
not run afoul of A.R.S. § 12-821.01: “The settlement amount . . . can be a
pie-in-the-sky number.”). Paragon’s factual recitation, though perhaps less
than robust, both supported the sum certain demand and adequately
facilitated the State’s investigation. Stated differently, Paragon’s notices of
claim provided the State with ample opportunity to review the claimed
basis for liability, investigate the claims and evaluate their merits, decide
whether to pay the settlement demand, and engage in any necessary
financial planning and budgeting. See Jones, 218 Ariz. at 376, ¶ 12 n.4; see
also Yollin, 219 Ariz. at 33, ¶ 29.

¶30 In sum, although Paragon did not itemize its damages or
present a formula for how it calculated its settlement demand, its notices of
claim provided supporting facts that allowed the State to substantively
investigate the claims and evaluate the settlement offer. Therefore,
applying the claimant point-of-view standard established by our supreme
court in Backus, we conclude Paragon complied with the statutory
supporting-facts requirement.

ii. Timeliness Requirements

¶31 Apart from contesting the notices of claim as factually
deficient, the State argues that dismissal of Paragon’s claims for damages
was warranted because Paragon untimely filed both its notices and its

12

PARAGON v. STATE, et al.
Decision of the Court

complaint. Though briefed, the superior court did not decide the timeliness
issue, but we will affirm the dismissal ruling if “correct for any reason.”
Fappani v. Bratton, 243 Ariz. 306, 309, ¶ 8 (App. 2017).

¶32 As noted by the superior court, Paragon, in response to the
State’s motion to dismiss, “reduced the scope of its [alleged] damages,”
clarifying that it did not seek “damages based on discrimination from 2016
or 2017”; rather, it sought only “damages for ADOT continuing to impose”
unlawful requirements. Consistent with this narrowed scope, Paragon, in
its opening brief, states that it “asserted damages dating back to the
beginning of the FAA complaint process (in 2018).” But despite seemingly
disclaiming any right to recover damages sustained before 2018—both in
the superior court and on appeal—Paragon argues in its reply brief that its
claims for unlawful fees and charges imposed in 2016 and 2017, as well as
“pre-operations” lost revenue, “are not barred.”

¶33 Section 12-821.01(A) bars any claim against a public entity
unless a notice of claim is filed “within one hundred eighty days after the
cause of action accrues.” Likewise, A.R.S. § 12-821 precludes any action
against a public entity that is not “brought within one year after the cause
of action accrues.”

¶34 For purposes of both statutes, “a cause of action accrues when
the damaged party realizes he or she has been damaged and knows or
reasonably should know the cause, source, act, event, instrumentality or
condition that caused or contributed to the damage.” A.R.S. § 12-821.01(B);
see also Liberti v. City of Scottsdale, 258 Ariz. 496, 502, ¶ 19 (App. 2024) (“The
accrual date marks the beginning of both a notice of claim’s limitations
period and the complaint’s one-year statute of limitations.”). But accrual is
delayed when the parties “must” submit a claim to either a dispute
resolution proceeding or an administrative review process. A.R.S.
§ 12-821.01(C); Standard Constr. Co., Inc. v. State, 249 Ariz. 559, 562, ¶ 7 (App.
2020). In such circumstances, A.R.S. § 12-821.01(C) suspends accrual until
the “processes or remedies have been exhausted.” Under this tolling
provision, “[t]he time in which to give notice of a potential claim and to sue
on the claim shall run from the date on which a final decision or notice of
disposition is issued.” A.R.S. § 12-821.01(C). In this way, A.R.S. § 12-821.01
“ensures that the parties’ opportunity to engage” in dispute resolution or
an administrative review process “is meaningful.” Standard Constr., 249
Ariz. at 562, ¶ 7.

¶35 “To determine whether a claim is time-barred, we must
consider: (1) the cause of action’s accrual date, (2) the applicable limitations

13

PARAGON v. STATE, et al.
Decision of the Court

period, (3) the date the plaintiff filed his or her claim, and (4) any possible
tolling or suspending of the limitations period.” France v. Ariz. Cntys. Ins.
Pool, 254 Ariz. 151, 153, ¶ 8 (App. 2022). “When a cause of action accrued is
generally a question of fact for the jury, but it may be decided as a matter
of law if the record shows when the plaintiff unquestionably was aware of
the necessary facts underlying his or her cause of action.” Cruz v. City of
Tucson, 243 Ariz. 69, 71–72, ¶ 7 (App. 2017) (citation modified). We review
de novo “questions of law concerning a cause of action’s accrual and statutes
of limitations.” Liberti, 258 Ariz. at 501, ¶ 17.

¶36 In this case, we need not determine when Paragon first
realized it sustained economic damages or knew or should have known that
the State caused it harm because, without question, it had such knowledge
when the Civil Rights Office issued its investigative report on February 15,
2017. Despite the Civil Rights Office’s express findings that ADOT had
engaged in unlawful, discriminatory conduct—and subsequent
admonition that Paragon should “file a new complaint directly with the
[FAA]” if it had any further issues—Paragon, inexplicably, did not file a
complaint with the FAA until January 2018. Meaning, after it undoubtedly
had the requisite knowledge of harm, Paragon waited more than 10 months
to avail itself of the FAA’s administrative review process. Because more
than 180 days elapsed between the February 2017 accrual date and
Paragon’s January 2018 filing of an informal complaint seeking
administrative review from the FAA, Paragon’s notices of claim, to the
extent they sought to recover damages sustained before 2018, were
untimely. Simply put, Paragon is time-barred from recovering damages for
alleged harm sustained before the administrative review process
commenced in January 2018.

¶37 The remaining question is whether Paragon’s filing of its first
informal complaint with the FAA—initiating the administrative review
process—tolled the accrual date for its cause of action for damages
sustained thereafter. The State contends that no federal or state law or
regulation suspended the accrual date in this case.

¶38 While this court has held that A.R.S. § 12-821.01(C)’s tolling
provision applies when a party chooses to pursue administrative review,
even if the party could have bypassed the review process altogether, Standard
Constr., 249 Ariz. at 563, ¶ 8 (noting the “statute does not restrict itself to
claims that automatically must be submitted” and refusing to “add such
qualifying language” in construing the statute because doing so would
“discourage settlement, in direct contravention of the statute’s public policy
goals” (citation modified)), in this case, the mandatory exhaustion of

14

PARAGON v. STATE, et al.
Decision of the Court

administrative remedies doctrine compelled Paragon to seek administrative
review before pursuing litigation—necessarily tolling the limitations
period, Ariz. Dep’t of Rev. v. Dougherty, 200 Ariz. 515, 522, ¶ 25 (2001) (“[T]he
statute of limitations is tolled while the claimant exhausts his or her
administrative remedies.”).

¶39 Under the doctrine of exhaustion of remedies, “litigants may
not seek judicial relief for a supposed or threatened injury until the
prescribed administrative remedy has been exhausted.” Moulton v.
Napolitano, 205 Ariz. 506, 511, ¶ 9 (App. 2003) (citation modified). Applying
this principle “allow[s] an administrative agency to perform functions
within its special competence—to make a factual record, to apply its
expertise, and to correct its own errors so as to moot judicial controversies.”
Id. (citation modified). Thus, the “doctrine promotes both judicial economy
and administrative agency autonomy by preventing premature judicial
intervention in inchoate administrative proceedings.” Id. (citation
modified).

¶40 “If parties have statutory recourse to an administrative
agency that has authority to grant appropriate remedies, they must
scrupulously follow the statutory procedures.” Id. (citation modified). “A
party’s failure to exhaust administrative remedies deprives the superior
court of authority to hear the party’s claim.” Hamilton v. State, 186 Ariz. 590,
593 (App. 1996).

¶41 “To resolve whether an exhaustion of administrative
remedies is required, the court must decide whether an administrative
agency has original jurisdiction over the subject matter.” Moulton, 205 Ariz.
at 511, ¶ 10. Put another way, the court must determine whether the
legislature has specifically empowered the agency to act. Id.

¶42 For alleged federal grant assurance violations, federal statutes
and regulations provide only one recourse—administrative review.
Specifically, the Airport and Airway Improvement Act of 1982 (“the Act”),
Pub. L. No. 97-248, 96 Stat. 324 (recodified as amended at 49 U.S.C.
§§ 47101–146), grants exclusive jurisdiction to the FAA, under the direction
of the Secretary of Transportation, to enforce compliance with federal grant
assurances. 49 U.S.C. §§ 46101, 47122; see also Asheville Jet, Inc. v. City of
Asheville, 689 S.E.2d 162, 167 (N.C. App. 2010) (holding the “FAA has sole
jurisdiction to make the initial determination concerning an airport’s
alleged violation of grant assurances”); Town of Fairview v. U.S. Dep’t of
Transp., 201 F.Supp.2d 64, 69–70 (D. D.C. 2002) (explaining the “proper
recourse” for any complaint alleging the failure to comply with grant

15

PARAGON v. STATE, et al.
Decision of the Court

assurances is an FAA administrative review proceeding). In fact, the Act
provides no private cause of action, or any remedy to a party reporting a
grant assurance violation. See Northwest Airlines, Inc. v. Cnty. of Kent, Mich.,
955 F.2d 1054, 1058–59 (6th Cir. 1992) (“Congress intended that there would
be no private right of action under [the Act]”); New England Legal Found. v.
Mass. Port Auth., 883 F.2d 157, 168–70 (1st Cir. 1989) (holding no private
right of action exists under the Act); Four T’s, Inc. v. Little Rock Mun. Airport
Comm’n, 108 F.3d 909, 915–16 (8th Cir. 1997) (holding that Congress
intended to establish an administrative enforcement scheme rather than a
private right of action under the Act).

¶43 At its core, Paragon’s complaint presents a contract dispute
between an airport owner and a tenant. But Paragon predicates its claims
for damages on ADOT’s alleged violations of FAA grant assurances.
Indeed, both the notices of claim and the complaint allege grant assurance
violations throughout, with Paragon contending that ADOT imposed fees,
requirements, and restrictions in violation of Grant Assurance 22’s
prohibition on economic discrimination. Because the FAA had exclusive
jurisdiction to determine whether ADOT violated a grant assurance—
laying the factual predicate for the contract claims—Paragon had to seek
administrative relief from the FAA before bringing its claims for damages
in the superior court. 5

¶44 Accordingly, Paragon’s filing of its first informal complaint
with the FAA triggered A.R.S. § 12-821.01’s tolling provision, so a cause of
action for damages Paragon sustained after January 2018 did not accrue
until the FAA issued its Final Decision in March 2023—marking the end of
the administrative review process. Cf. Watkins v. Arpaio, 239 Ariz. 168, 171,
¶ 10 n.4 (App. 2016) (recounting that several Arizona cases have applied a
“variety of the ‘continuing wrong’ doctrine,” wherein a plaintiff who did
not timely pursue litigation upon discovering harm from a wrongful act
nonetheless “may recover damages suffered during the limitations period
immediately preceding [the] filing of the complaint”). Therefore, for
damages allegedly sustained after January 2018, Paragon timely submitted
its notices of claim (July 2022 and June 2023) under A.R.S. § 12-821.01(A)
and timely filed its complaint (July 2023) under A.R.S. § 12-821.

¶45 In sum, because more than 180 days elapsed between the
accrual of Paragon’s cause of action for damages allegedly sustained before

5 Notably, despite finding grant assurance violations, the Civil Rights
Office, in its investigative report, repeatedly stated that it lacked the
requisite expertise to make such determinations.

16

PARAGON v. STATE, et al.
Decision of the Court

2018 and Paragon’s filing of a complaint for administrative review with the
FAA, Paragon is time-barred from seeking recovery for such damages.
However, Paragon’s initiation of the administrative review process tolled
the accrual of its cause of action for damages sustained after January 2018,
and Paragon timely filed both its notices of claim and its complaint within
the requisite statutory periods after the FAA issued its Final Decision.
Therefore, because Paragon provided the facts it regarded as supporting its
sum certain demand for settlement, satisfying the supporting-facts
component of A.R.S. § 12-821.01’s notice of claim requirements, Paragon’s
claims for damages were subject to dismissal only to the extent they sought
damages sustained before 2018. For these reasons, we vacate the superior
court’s ruling and remand for proceedings consistent with this decision. 6

B. Claim for Declaratory Relief

¶46 Paragon challenges the superior court’s dismissal of its claim
for declaratory relief on grounds of lack of subject matter jurisdiction.
Although Paragon acknowledges the FAA’s “exclusive jurisdiction” to
monitor and enforce compliance with grant assurances, it contends the
superior court has the authority to declare certain provisions of the parties’
lease agreement unenforceable because the FAA has “already determined”
the provisions violate Grant Assurance 22.

¶47 “Subject matter jurisdiction is the power of a court to hear and
determine a controversy.” Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588,
594, ¶ 13 (App. 2009) (citation modified). We review de novo whether a
superior court has the authority to hear a case relating to a specific subject
matter. Buehler v. Retzer ex rel. Indus. Comm’n, 227 Ariz. 520, 521, ¶ 4 (App.
2011).

¶48 Under the doctrine of preemption, federal law prevails over
state law when Congress demonstrates an intent for federal supremacy.
Sunbird Air Servs., Inc. v. Beech Aircraft Corp., 789 F.Supp. 360, 362 (D. Kan.
1992). Apart from “express language” limiting state authority, “state action
may be foreclosed by implication from the depth and breadth of a
congressional scheme that occupies the legislative field or because of a

6 Although the State asserted, in its initial motion to dismiss, that
Paragon’s claims were subject to dismissal on res judicata grounds, it has
abandoned that claim on appeal, so we need not address it. See Ritchie v.
Krasner, 221 Ariz. 288, 305, ¶ 62 (App. 2009) (explaining the failure to raise
an argument or claim on appeal constitutes abandonment and waiver of the
claim).

17

PARAGON v. STATE, et al.
Decision of the Court

conflict with a congressional enactment.” Lorillard Tobacco Co. v. Reilly, 533
U.S. 525, 541 (2001) (citation modified). “Courts are reluctant to infer
preemption,” so “the party claiming that Congress intended to preempt
state law” bears the burden of proof. Sunbird Air, 789 F.Supp. at 362.

¶49 Applying these principles here, the Act clearly grants the FAA
exclusive jurisdiction to enforce grant assurances, thereby preempting state
court action in that sphere. But the Act delegates only limited powers to the
FAA; it does not authorize the agency to address contract disputes between
a federally funded airport and a third party, or award damages arising out
of an airport sponsor’s violation of grant assurances. See Platinum Aviation
and Platinum Jet Ctr. BMI v. Bloomington-Normal Airport Auth., Ill., Final
Decision and Order of the FAA (Docket No. 16-06-09), 2007 WL 4854321, at
*15, *18, *35 (Nov. 28, 2007) (“Nor does the FAA enforce contract terms
between parties to an agreement when the FAA is not a party to that
agreement. Rather, the FAA enforces the grant agreements it enters into
with airport sponsors.”); 49 U.S.C. § 47107(g); see also Boca Airport, Inc. v.
F.A.A., 389 F.3d 185, 191 (D.C. Cir. 2004) (explaining state courts, “rather
than the FAA,” provide the proper forum for resolving contractual disputes
arising out of leases). Indeed, the “sole power of the FAA to penalize” grant
assurance violations “is through the withholding of grant funds to the
offending authority.” Asheville Jet, 689 S.E.2d. at 172.

¶50 While the federal government occupies the entire field of
regulating and enforcing grant assurances, the Act does not expressly state,
or even contemplate, that FAA administrative review proceedings “are the
sole remedy available to resolve conflicts between federally funded airports
and tenants.”7 Id. at 168. In fact, rather than wholly supplanting state law,
the federal code expressly recognizes and preserves existing statutory and
common law remedies, 49 U.S.C. § 40120(C) (“Additional remedies. A
remedy under this part is in addition to any other remedies provided by
law.”), such that state courts retain “broad authority to decide contractual
disputes [between airports that receive FAA-funding and their tenants]
under state law,” Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 222 (1995)
(explaining that the “preemption prescription” under federal law “bars
state-imposed regulation of air carriers, but allows room for court
enforcement of contract terms set by the parties themselves”); see also
Sunbird Air, 789 F.Supp. at 362–63 (explaining “the allowance of state

7 To this point, the Director’s Determination stated that the FAA
would not “attempt to negotiate a remedy” or otherwise intervene in the
parties’ contract dispute, specifically noting that the FAA “does not have
the authority to award restitution, damages or attorney fees.”

18

PARAGON v. STATE, et al.
Decision of the Court

remedies” neither “frustrate[s] the objectives” of federal law nor “create[s]
an irreconcilable conflict” between federal and state law because the “FAA
does not have the power to assess damages for past wrongs”). Thus, despite
federal preemption over the enforcement of grant assurances, states may
grant damages for the violation of such regulations. Abdullah v. Am. Airlines,
Inc., 181 F.3d 363, 376 (3rd Cir. 1999).

¶51 In this case, Paragon did not seek a declaratory judgment that
ADOT is ineligible for FAA grant-funding. Nor did Paragon seek a state
court order modifying or even revisiting the FAA’s determination of grant
assurance violations. Instead, Paragon sought a judicial declaration that
certain provisions of the parties’ lease—those that the FAA found violated
Grant Assurance 22—are unenforceable.

¶52 Because the superior court has authority over “[c]ases and
proceedings in which exclusive jurisdiction is not vested by law in another
court,” Ariz. Const. art. 6, § 14(1), and the “power to declare” a party’s
rights under a contract, A.R.S. §§ 12-1831, -1832, it has jurisdiction to
determine the enforceability of a lease, even one between a federally-
funded airport and a tenant. See Falcone Bros. & Assocs., Inc. v. City of Tucson,
240 Ariz. 482, 487–88, ¶ 13 (App. 2016) (“When an action presents a
traditional contract claim and no statute gives another entity exclusive
jurisdiction over the matter, the superior court retains jurisdiction to resolve
the claim.”). Therefore, given Paragon’s framing of the issue, at this stage
of the proceedings, there is no basis to conclude that the superior court lacks
subject matter jurisdiction over the claim for declaratory relief.

¶53 Finally, the State argues the superior court lacks the authority
to declare the parties’ rights under the lease because the FAA Director
found that a draft lease submitted by ADOT contained none of the
offending provisions previously found to violate Grant Assurance 22.
Contrary to the State’s contention, the FAA Director’s finding that the
prospective lease complies with ADOT’s grant assurance obligations does
not vitiate Paragon’s request for a declaration that the current lease contains
unenforceable provisions. See Platinum Aviation, FAA 16-06-09, 2007 WL
4854321, at *18 (“The FAA neither approves nor monitors terms of
agreements between airport [owners] and airport tenants.”). If the superior
court determines, on remand, that the challenged lease is no longer in effect,
Paragon’s claim for declaratory relief may be subject to dismissal as moot,
but not for lack of subject matter jurisdiction.

19

PARAGON v. STATE, et al.
Decision of the Court

II. Attorneys’ Fees

¶54 Paragon challenges the superior court’s attorneys’ fees award
to the State. The court awarded the State attorneys’ fees under A.R.S.
§ 12-341.01, which authorizes the award of attorneys’ fees to “the successful
party” in any action “arising out of a contract,” and the parties’ lease, which
provides that the “prevailing party” to any legal action arising out of the
contract “shall be entitled to recover . . . reasonable attorney’s fees.”

¶55 Without question, this litigation arose out of the parties’ lease
agreement, but at this stage of the proceedings, the State is no longer the
successful or prevailing party. Therefore, we vacate the superior court’s
award of attorneys’ fees and costs to the State.

CONCLUSION

¶56 Both parties request an award of attorneys’ fees on appeal
pursuant to A.R.S. § 12-341.01(A) and the lease agreement. Because Paragon
has prevailed on appeal, we award its reasonable attorneys’ fees and costs
upon compliance with ARCAP 21. We deny the State’s request.

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

20