Wellness v. Arizona Doh

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ARIZONA WELLNESS CENTER SPRINGERVILLE LLC, et al.,
Plaintiffs/Appellants,

v.

ARIZONA DEPARTMENT OF HEALTH SERVICES, et al.,
Defendants/Appellees.

No. 1 CA-CV 26-0017
FILED 10-14-2026

Appeal from the Superior Court in Maricopa County
No. CV2025-006909
The Honorable Joseph C. Kreamer, Judge

AFFIRMED

COUNSEL

Sherman & Howard LLC, Phoenix
By Gregory W. Falls
Co-Counsel for Defendant/Appellee State

Taft Stettinius & Hollister LLP, Phoenix
By Craig A. Morgan, Matthew A. Hesketh, Carli J. Simkin
Co-Counsel for Defendant/Appellee State

Enara Law PLLC, Phoenix
By Ross P. Meyer, Sara N. Rock
Counsel for Plaintiff/Appellant

Osborn Maledon PA, Phoenix
By Andrew G. Pappas, Stefan D. Oakley, Eric M. Fraser
Counsel for Defendant/Appellee Dunn

Coppersmith Brockelman PLC, Phoenix
By Austin C. Yost, Kelleen Mull
Co-Counsel for Defendant/Appellee Hobbs/Campbell

Office of the Governor, Phoenix
By Noah T. Gabrielsen
Co-Counsel for Defendant/Appellee Hobbs/Campbell

MEMORANDUM DECISION

Judge Michael S. Catlett delivered the decision of the Court, in which
Presiding Judge Veronika Fabian and Judge Kent E. Cattani joined.

C A T L E T T, Judge:

¶1 In 2024, the Arizona Department of Health Services (“the
Department”) awarded Sherri Dunn, LLC (“Dunn”) a marijuana
establishment license under A.R.S. § 36-2854(A)(1)(d). Arizona Wellness
Center Springerville, LLC (“Arizona Wellness”) and Mason Cave (“Cave”)
(collectively, “the Wellness Plaintiffs”) sued the Department, the State of
Arizona, several state officials, and Dunn (collectively, “the Defendants”).
The Wellness Plaintiffs alleged the Defendants violated Arizona’s Gift
Clause and acted ultra vires by awarding Dunn the license.

¶2 The Defendants moved to dismiss those claims on several
grounds. The superior court granted that motion. Because the Wellness
Plaintiffs lack standing, we affirm.

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FACTS AND PROCEDURAL HISTORY

¶3 When reviewing a decision granting a motion to dismiss, we
view the facts in the light most favorable to the non-moving party. A. Uberti
and C. v. Leonardo, 181 Ariz. 565, 566 (1995).

I. Dunn’s Establishment License

¶4 In Arizona, a dispensary registration certificate (“DRC”) lets
a licensee dispense medical marijuana to qualified consumers. In October
2016, Dunn was one of three applicants for a DRC in La Paz County. The
Department denied all three applications, believing the law did not require
it to issue a DRC for La Paz County.

¶5 One applicant (not Dunn) challenged that decision. That
challenge made its way to the Arizona Supreme Court. See Saguaro Healing
LLC v. State, 249 Ariz. 362 (2020). The court concluded the Department had
“to issue at least one medical marijuana [DRC] in each county with a
qualified applicant” and remanded to the superior court. Id. at 366 ¶ 23.

¶6 On remand, the superior court ordered the Department to
consider the three previous applications, including Dunn’s. After
considering statutes and rules existing in October 2016, the Department
awarded Dunn a DRC.

¶7 In 2020, Arizona voters enacted the Safe and Smart Arizona
Act (“the Act”), legalizing recreational marijuana. See A.R.S. § 36-2802 et
seq. The Act required the Department to review marijuana establishment
license applications from “early applicants” between January 19, 2021 and
March 9, 2021, and issue such licenses to any qualified applicant. A.R.S.
§ 36-2854(A)(1)(d). An “early applicant” included any “nonprofit medical
marijuana dispensary that is registered and in good standing with the
[D]epartment.” A.R.S. § 36-2850(10)(b).

¶8 Shortly after obtaining a DRC, Dunn applied for an
establishment license to dispense recreational marijuana. Obtaining that
license would make Dunn a “dual license” holder, which is “an entity that
holds both a nonprofit medical marijuana dispensary registration and a
marijuana establishment license.” A.R.S. § 36-2850(9). But by the time
Dunn applied for an establishment license, the “early applicant” period had
lapsed.

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¶9 The Department denied Dunn’s application as untimely.
Dunn challenged that decision in the superior court, which affirmed the
Department’s decision. Dunn appealed to this court.

¶10 Arizona Wellness alleges the Governor’s Chief of Staff then
intervened to ensure the Department issued Dunn an establishment license.
In February 2024, while Dunn’s appeal was pending, Dunn and the
Department settled. As part of their settlement, the parties agreed that
“Dunn’s January 3, 2022 application for a Dual License is deemed to have
been complete and in compliance with the applicable statutes and rules,
including as an ‘early applicant’ under A.R.S. §§ 36-2850(10) and 36-
2854(A)(1)(d)[.]” In other words, the Department gave Dunn an
establishment license as if Dunn held a DRC in 2016.

II. Arizona Wellness’s DRC

¶11 Arizona Wellness was incorporated in 2022 and received a
DRC for Apache County on March 10, 2023. Having been created in 2022,
Arizona Wellness was ineligible to be an “early applicant” under § 36-
2854(A)(1)(d). Still, Arizona Wellness applied for an establishment license.
Arizona Wellness explained it did so because Dunn received its
establishment license after the “early applicant” period. The Department
did not process Arizona Wellness’s application; it returned the application
as untimely.

¶12 In 2024, Arizona Wellness sued the Department and asked the
court to decide (1) whether an entity automatically becomes a dual licensee
once it holds a DRC and an establishment license and (2) whether a dual
licensee can move throughout the state. Ariz. Wellness Ctr. Springerville, LLC
v. Ariz. Dep’t of Health Servs., 2026 WL 801285, at *2 ¶ 7 (Ariz. App. Mar. 23,
2026) (mem. decision). The superior court denied relief, finding that
Arizona Wellness’s DRC was invalid as of September 10, 2024.

¶13 This court affirmed, concluding that “Arizona Wellness has
not demonstrated that it would have been eligible to apply for a dual license
during an open application window.” Id. at *6 ¶ 35. Rejecting Arizona
Wellness’s argument that it “should be afforded the ‘same considerations
as Sherri Dunn’” with respect to an establishment license, the panel
explained that “the factual circumstances are different.” Id. at ¶¶ 34–35.

III. This Litigation

¶14 The Wellness Plaintiffs filed this action in February 2025.
After twice amending their complaint, the Wellness Plaintiffs asserted two

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claims against the Defendants for: (1) violating the Gift Clause and (2)
acting ultra vires by violating a court order. The second amended
complaint sought a declaration that the Defendants violated the Gift Clause
by granting Dunn an establishment license, an order revoking that license,
and a declaration that granting the license was ultra vires.

¶15 The Defendants moved to dismiss in three separate motions.
They each argued that the Wellness Defendants lacked standing to
challenge the Department’s decision granting an establishment license to
Dunn, that the Gift Clause is inapplicable to the establishment license, and
that an “ultra vires claim” is not a viable cause of action.

¶16 The superior court dismissed the Wellness Plaintiffs’ claims
with prejudice. The court “agree[d] with the Defendant[s’] arguments
down the line.” On standing, the court concluded the Wellness Plaintiffs
did not “have a real, actual, personal stake” and had not “alleged concrete
harm.” The court concluded the Wellness Plaintiffs did not establish that
they were “ever in a position to receive the license that [Dunn] received” or
“that there will be another license available.” And the court rejected the
Wellness Plaintiffs’ argument that they have taxpayer standing.

¶17 The Wellness Plaintiffs timely appealed. We have
jurisdiction. See A.R.S. § 12-2101(A)(1).

DISCUSSION

¶18 The Wellness Plaintiffs argue the court erred by dismissing
their Gift Clause and ultra vires claims. We review orders granting a
motion to dismiss de novo. State v. Ariz. Bd. of Regents, 253 Ariz. 6, 10 ¶ 8
(2022). Dismissal is appropriate only if the plaintiff cannot obtain relief
under any plausible interpretation of the facts susceptible to proof. State ex
rel. Brnovich v. Ariz. Bd. of Regents, 250 Ariz. 127, 130 ¶ 7 (2020). When
reviewing a judgment dismissing a complaint, we assume any well-pleaded
facts in the complaint are true and resolve all reasonable inferences in the
claimant’s favor. Id.

¶19 The superior court dismissed the Wellness Plaintiffs’
complaint on several grounds. We focus on standing. Because we agree
the Wellness Plaintiffs lack standing, we do not address other grounds for
dismissal. See Sears v. Hull, 192 Ariz. 65, 68 ¶ 9 (1998).

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I. Standing

¶20 The Wellness Plaintiffs contend “[t]he superior court erred as
a matter of law because [they have] standing under multiple independent
Arizona doctrines[.]” Whether a party has standing is a legal question we
review de novo. Aegis of Ariz., L.L.C. v. Town of Marana, 206 Ariz. 557, 562
¶ 16 (App. 2003).

¶21 The Arizona Constitution says that “[t]he judicial power shall
be vested in an integrated judicial department[.]” Ariz. Const. art. 6, § 1. It
also prohibits the judiciary from exercising legislative and executive
powers. Ariz. Const. art. 3. So “a litigant seeking relief in the Arizona
courts must first establish standing,” Bennett v. Napolitano, 206 Ariz. 520, 525
¶ 19 (2003), which ensures courts do not issue advisory opinions. Mills v.
Ariz. Bd. of Technical Registration, 253 Ariz. 415, 423 ¶ 23 (2022). To have
standing, “a plaintiff must allege a distinct and palpable injury.” Sears, 192
Ariz. at 69 ¶ 16. “[A] generalized harm shared by all or by a large class of
people is generally insufficient.” Mills, 253 Ariz. at 423 ¶ 24.

¶22 The Wellness Plaintiffs press three theories for standing.
First, they allege they were deprived of the “competitive and unfair
advantages” Dunn was afforded. Second, they allege they “have a direct
interest in the outcome of this litigation because” it might result in guidance
on whether the Department has authority “to award licenses in excess of its
statutory and regulatory authority.” And third, they assert that Cave has
taxpayer standing because the Department made illegal expenditures, and
Cave “utilizes [public services], which are funded by application fees from
Establishment License applications.”

¶23 None of these theories establish standing. Instead, even
taking the Wellness Plaintiffs’ allegations as true, they establish nothing
more than “a generalized harm shared by all or by a large class of people[.]”
See id.

A. Competitive and Unfair Advantages

¶24 The Wellness Plaintiffs first argue they have standing because
they were economically disadvantaged when the Department granted
Dunn an establishment license outside the early application period but
would not do the same for them. As a result, the Wellness Plaintiffs claim
they suffered a particularized economic harm. The Defendants respond
that Arizona does not recognize competitor standing, but even if it did, the
Wellness Defendants do not qualify.

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¶25 A plaintiff who suffers particularized economic harm at the
hands of a defendant may have standing. Center Bay Gardens, L.L.C. v. City
of Tempe City Council, 214 Ariz. 353, 360 ¶ 29 (App. 2007). But “[g]eneral
economic losses . . . without a particularized palpable injury to the plaintiff
are typically not sufficient to confer standing.” Id. at 358–59 ¶ 20.

¶26 Although the Wellness Plaintiffs argue they suffered
economic harm through differential treatment in favor of a competitor, their
allegations do not support standing on that basis. The Wellness Plaintiffs’
theory has two components: (1) differential treatment (2) in favor of a
competitor. Neither component shows particularized injury.

¶27 Begin with the Wellness Plaintiffs’ argument that they
experienced differential treatment. “For purposes of determining standing,
we assume that the plaintiffs are correct on the merits, although that is not
a binding or even preliminary determination.” Montenegro v. Fontes, 260
Ariz. 443, 448 ¶ 19 (2025). But we are not writing on a blank slate when it
comes to whether the Department treated Arizona Wellness differently
than Dunn. In a parallel lawsuit between Arizona Wellness and Dunn, this
court concluded that “although Arizona Wellness argues that it should be
afforded the ‘same considerations as Sherri Dunn,’ the factual
circumstances are different[,]” because Arizona Wellness would not “have
been eligible to apply for a dual license during an open application
window.” Ariz. Wellness Ctr. Springerville, 2026 WL 801285, at *6 ¶ 35. Thus,
this court concluded the superior court in that litigation did not err by
finding that “Arizona Wellness was unlikely to obtain a dual license
because the department was not accepting applications.” Id. This
conclusion undercuts the Wellness Plaintiffs’ differential treatment theory.

¶28 In any event, the merits of the Wellness Plaintiffs’ disparate
treatment theory are irrelevant to whether they have standing to assert Gift
Clause and ultra vires claims against the Defendants. Just as defendants
cannot rely on merits arguments to defeat standing, plaintiffs cannot rely
on merits arguments to generate it. See RCH Wellness Ctr. v. City of Flagstaff,
591 P.3d 916, 921 ¶ 24 (App. 2026) (concluding that the plaintiff’s “claim of
‘official discrimination’ goes to the merits of its argument that the Board
acted in an arbitrary or capricious manner or abused its discretion” and
cannot self-generate standing without some injury). In other words, even
assuming the Wellness Plaintiffs experienced differential treatment, to have
standing, they must establish that such treatment resulted in particularized
injury. The only claimed injury the Wellness Plaintiffs offer is that “the
Department provided [Dunn] competitive and unfair advantages Arizona
Wellness . . . [was] not afforded.” That alleged injury fails twice over.

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¶29 First, in RCH Wellness Center, we rejected the primary
argument the Wellness Plaintiffs make—that Center Bay supports standing
when a competitor faces increased competition from a government
decision. 591 P.3d at 920 ¶ 18. To the contrary, we explained that Center
Bay “expressly declined to consider that issue.” Id. We then found
“persuasive the majority view that the ‘particularized harm’ needed to
establish standing cannot be established by showing that a municipal land
use decision will result in increased competition from a business rival.” Id.
at ¶ 20. We see no reason why that conclusion does not similarly apply
when the Department licenses marijuana establishments.

¶30 Second, the Wellness Plaintiffs cannot allege that Arizona
Wellness ever competed with Dunn, such that issuing an establishment
license to Dunn gave it a “competitive and unfair advantage” over Arizona
Wellness. To the contrary, Arizona Wellness and Dunn never competed.

¶31 Arizona Wellness never opened a marijuana dispensary, so it
lost its DRC. See A.R.S. § 36-2803.01(C); Ariz. Wellness Ctr. Springerville, 2026
WL 801285 at *1 ¶ 2 (“Arizona Wellness’s claims are moot because its DRC
has become invalid.”). Moreover, Arizona Wellness was not incorporated
until 2022 and did not obtain a DRC until March 2023—long after the early
applicant window for establishment licenses closed. See id. at *2 ¶ 13; A.R.S.
§ 36-2854(A)(1)(d), (e). In fact, Arizona Wellness never attempted to obtain
an establishment license via either statutory method for doing so. See Ariz.
Wellness Ctr. Springerville, 2026 WL 801285 at *5 ¶ 28 (“Arizona Wellness
did not seek to obtain an establishment license by either method.”). The
Wellness Plaintiffs cannot rely on competitive injury when they cannot
allege that Arizona Wellness ever competed with Dunn.

B. Direct and Substantial Interest

¶32 The Wellness Plaintiffs’ next theory fares no better. They
posit that they have a direct and substantial interest in having the courts
determine whether the Department and other state officials acted illegally
by issuing Dunn an establishment license. In their reply brief, the Wellness
Defendants clarify that “declaratory relief from this Court that the
Department acted outside its statutory authority in” awarding Dunn a
license would redress a “structural injury.”

¶33 It is not clear what structural injury the Wellness Plaintiffs
have suffered. To the extent that injury is competitive in nature, we have
already rejected it. To the extent the Wellness Plaintiffs suggest that a
declaratory judgment saying the Department acted illegally will benefit

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them because a future court will apply that ruling and reasoning to their
benefit, that argument also fails.

¶34 Under the Uniform Declaratory Judgments Act (“UDJA”),
any party “whose rights, status or other legal relations are affected by a
statute . . . or franchise” may “obtain a declaration of rights, status or other
legal relations thereunder.” A.R.S. § 12-1832. “While broad, that language
does not permit courts to act as legislators by setting policy or issuing
advisory opinions—standing is still required.” Ariz. Creditors Bar Assoc.,
Inc. v. State, 257 Ariz. 406, 410 ¶ 12 (App. 2024). Standing exists under the
UDJA when there is “an actual controversy ripe for adjudication” and the
parties have “a real interest in the questions to be resolved.” Bd. of
Supervisors of Maricopa Cnty. v. Woodall, 120 Ariz. 379, 380 (1978); see also
Mills, 253 Ariz. at 423–24 ¶ 25.

¶35 The Wellness Plaintiffs identify no particularized interest in
the questions they want resolved. In other words, there are no existing facts
supporting the issuance of declaratory relief. In their second amended
complaint, the Wellness Plaintiffs sought a declaration that the Defendants
violated the Gift Clause, that the Defendants acted ultra vires, and that
giving Dunn an establishment license is illegal. But the Wellness Plaintiffs
did not allege that their “rights, status or other legal relations” would be
impacted in any real sense by the declaratory relief they sought. A.R.S.
§ 12–1832. And the Wellness Plaintiffs did not allege they would obtain any
real benefit or harm through such relief. See Ariz. Creditors Bar Assoc., Inc.,
257 Ariz. at 412 ¶ 20 (rejecting standing under the UDJA when “the
[plaintiffs’] interests would not have been sufficiently affected by the
narrower request for declaratory relief”). For example, obtaining the
declaratory relief requested will not make it materially more or less likely
that Arizona Wellness will ever obtain an establishment license. In fact, the
Wellness Plaintiffs “do not ask this Court to award them an Establishment
License or re-open the early applicant window on their behalf.”

¶36 The only interest the Wellness Plaintiffs identify is an interest
in “creating new law by which the Department is able [or not] to award
licenses in excess of its statutory and regulatory authority.” But we have
rejected the notion that a party has standing to obtain a declaratory
judgment based on “the downstream effects of the reasoning used to
produce it.” Id. ¶ 22. Put differently, “[a]n opinion that is advisory is no
less so because it will bind or guide future courts.” Id. Instead, standing
under the UDJA is lacking when plaintiffs “request an advisory opinion
about how the [law] works in a particular situation” they do not face. Id.

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Because the declaratory relief the Wellness Plaintiffs seek would have no
impact on their rights or legal relations, they lack standing.

C. Taxpayer Standing

¶37 That leaves only the Wellness Plaintiffs’ third theory—
taxpayer standing. The Wellness Plaintiffs assert that Cave has taxpayer
standing because he is a resident and taxpayer in Maricopa County who
utilizes public services funded with fees from establishment license
applications. Thus, they claim Cave can challenge illegal expenditures the
Department made when accepting Dunn’s application and awarding it a
license. The Defendants counter that Cave lacks taxpayer standing because
issuing a license does not involve an expenditure of funds and Cave has not
alleged that he contributed to the fund to be expended.

¶38 “A taxpayer has sufficient standing in an appropriate action
to question illegal expenditures made or threatened by a public agency.”
Smith v. Graham Cnty. Cmty. Coll. Dist., 123 Ariz. 431, 432 (App. 1979). Such
standing is based on taxpayers’ “equitable ownership of such funds and
their liability to replenish the public treasury for the deficiency which
would be caused by the misappropriation.” Ethington v. Wright, 66 Ariz.
382, 386 (1948). A taxpayer does not have standing “unless the taxpayer
and his class have sustained or will sustain some pecuniary loss” and it
“affirmatively appear[s] by the complaint that such loss will occur.”
Henderson v. McCormick, 70 Ariz. 19, 24–25 (1950).

¶39 “When there is no expenditure of funds raised by taxation, the
rationale for permitting [taxpayer] standing does not exist[.]” Dail v. City of
Phoenix, 128 Ariz. 199, 202 (App. 1980). So a claimant cannot rely on
taxpayer standing when an expenditure is made from funds not raised by
taxation. Id. (“Expenditures made under a contract from funds other than
those raised by taxation do not confer upon taxpayers the right to challenge
the contract.”). Moreover, a taxpayer does not have standing to challenge
an expenditure out of a particular fund unless he contributes to that fund.
Smith, 123 Ariz. at 433. When a taxpayer cannot incur “liability to replenish
the public treasury for an insufficiency caused by misappropriation,” his
connection “is too remote.” Id.

¶40 We need not decide whether granting an establishment
license expends funds. This is because the Wellness Plaintiffs have not
alleged that Cave contributes to the fund out of which any such expenditure
would derive.

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¶41 Any funds needed for the Department to regulate DRC and
establishment licenses come from the Smart and Safe Arizona Fund. See
A.R.S. § 36-2856(B)(1). The money for that Fund comes from, among other
sources, license application fees and excise taxes on the sale of marijuana
products. See A.R.S. § 36-2856(A) (“The smart and safe Arizona fund is
established consisting of all monies deposited pursuant to §§ 36-2853, 36-
2854, 36-2859, 42-5452 and 42-5453[.]”). Other than those excise taxes, the
Fund does not receive money through general taxation. See id. State and
county taxpayers do not pay into the Fund, and thus they have no equitable
ownership of funds contained therein and no liability for replenishing those
funds. See Smith, 123 Ariz. at 433.

¶42 In their second amended complaint, the Wellness Plaintiffs
allege only that Cave is a taxpayer residing in Maricopa County who
utilizes public services “funded by application fees from Establishment
License applications.” The Wellness Plaintiffs never allege that Cave
contributed to the Smart and Safe Arizona Fund or that he will be
responsible for replenishing it. And it is insufficient that Cave uses services
the Fund might help pay for. See A.R.S. § 36-2856(D) (instructing the state
treasurer to transfer funds “in excess of the amounts paid” to administer
the law); A.R.S. § 36-2856(E)(1) (monies transferred from the fund “may not
supplant, replace or cause a reduction in other funding sources”). Without
contributing to the Safe and Smart Arizona Fund, Cave lacks standing to
challenge expenditures out of that Fund. See Smith, 123 Ariz. at 433.

ATTORNEY FEES

¶43 The Wellness Plaintiffs seek an award of attorney fees under
A.R.S. § 12-348. Because the Wellness Plaintiffs have not “prevail[ed] by an
adjudication on the merits,” we deny their request. A.R.S. § 12-348(A).
Dunn requests an award of attorney fees under A.R.S. § 12-341.01. Because
the Wellness Plaintiffs’ action does not arise out of contract, we similarly
deny Dunn’s request. As prevailing parties, we award the Defendants their
taxable costs on appeal upon complying with ARCAP 21.

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CONCLUSION

¶44 Because the Wellness Plaintiffs lack standing, we need not
address the parties’ other arguments. We affirm the superior court’s
judgment dismissing the Wellness Plaintiffs’ claims with prejudice. We
deny the Defendants’ Joint Request for Order to Show Cause.

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

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