Arizona Supreme Court Resets Arizona Judicial Review: No Deference to Agency Fact-Finding in Regulated‑Party Cases, Substantial‑Evidence Review Retained

By Ryan J. Regula and Charlene Anne Warner

The Arizona Supreme Court has clarified how courts must review administrative decisions under A.R.S. § 12‑910(F) after the 2021 amendments, holding that substantial‑evidence review remains intact but that superior courts must now independently decide all questions of law and fact without deference to agency determinations in proceedings brought by or against a regulated party. The Court further held that appellate courts do not redo that independent fact-finding de novo; instead, they defer to the superior court’s factual findings if reasonably supported by the record while independently reviewing the legal question whether the agency’s action satisfies § 12‑910(F). The decision vacates a court of appeals ruling, reverses a superior court affirmance of the Arizona Racing Commission, and remands for application of the now‑clarified framework. 

Bottom line: Arizona has ended deference to agency fact-finding in regulated‑party judicial reviews while preserving the substantial‑evidence yardstick against facts independently found by the superior court.  

Background and Posture

The case arises from a long‑running licensing dispute over a Phoenix horse‑racing permit. An Administrative Law Judge (ALJ) recommended granting Ronald A. Simms’s application, which became a final agency decision by inaction, after which the Arizona Racing Commission rejected the ALJ recommendation and denied a license in November 2016. The superior court affirmed without an evidentiary hearing on substantial‑evidence grounds; the court of appeals vacated and directed entry of judgment for Simms; the Supreme Court granted review to resolve three recurring questions of statewide importance under amended § 12‑910(F). 

What the Court Held

The Court held the 2021 amendment did not eliminate the statute’s substantial‑evidence clause, which remains “categorical” and “mandatory.” The amendment changed who finds the facts: in a proceeding brought by or against a regulated party, the superior court must decide all questions of fact and law without deference to any prior agency determination, then assess whether the final agency action is supported by substantial evidence on the facts the court itself has found. The Court rejected both the agency’s view that substantial‑evidence review necessarily entails deference to agency fact-finding and the applicant’s view that non‑deferential fact-finding is incompatible with substantial‑evidence review. It also rejected arguments narrowing “regulated party” to the agencies listed in subsection (D) and confirmed subsection (F) applies broadly to any authorized judicial review. The Court clarified that “agency action” refers to the reviewable final administrative decision and that regulated parties must identify the contested findings they place at issue. 

Standards of Review Now in Arizona Administrative Cases

At the superior court, questions of law, questions of fact, and mixed questions are reviewed independently, without deference to the agency, even where the agency has specialized expertise; however, courts may not substitute their own policy judgment where the Legislature has vested discretionary choice with the agency. After independently finding the facts, the superior court must affirm unless the agency action is contrary to law, unsupported by substantial evidence on those court‑found facts, arbitrary and capricious, or an abuse of discretion. 

On appeal, appellate courts do not conduct de novo fact-finding under § 12‑910(F); rather, they defer to the superior court’s factual findings if reasonably supported by the record and review de novo the legal question whether, on those findings, § 12‑910(F) is satisfied.  

Role of the ALJ Record and Credibility Findings

The Office of Administrative Hearings and its ALJs are not “the agency,” so the no‑deference command does not run to ALJ determinations as such; ALJ findings are part of the record the superior court may weigh in exercising independent judgment. A reviewing court may give ALJ credibility determinations persuasive weight because ALJs observe live testimony, but that is an evidentiary assessment, not a statutory deference rule. On appeal, any superior‑court treatment of ALJ credibility determinations is reviewed under ordinary deferential standards for facts if supported by the record.

Practical Implications for Regulated Entities and Agencies

For regulated parties, the amendment, as construed, materially strengthens the forum for factual disputes by moving fact-finding authority to the superior court, which can hold evidentiary hearings and reach independent determinations on contested findings identified in the notice of appeal. Litigants should build a meticulous administrative record, crisply identify disputed findings, and be prepared to supplement with targeted evidence at the superior court. 

For agencies, the decision heightens the need to issue final decisions that cogently justify departures from ALJ recommendations and that clearly articulate the evidentiary and legal basis for final action, because the “agency action” reviewed is the final administrative decision and its stated rationale. Agencies should expect more petitions for review and evidentiary hearings, and should plan for increased litigation demands where credibility and complex fact issues are central. Appellate strategy will pivot to preserving and defending the superior court’s factual findings while framing legal issues cleanly for de novo review.

Key Nuances and Open Questions

The Court underscored that subsection (G) in health‑care appeals preserved the pre‑2018 framework for that specific category, confirming the Legislature can and has carved out exceptions; parties should evaluate whether their matters fit within specialized review tracks. The Court also emphasized that the no‑deference rule is absolute for law and fact, with no expertise exception, but it does not license courts to replace agency policy choices where statutes confer discretion, preserving a meaningful boundary between judicial review and administration. Future litigation will likely refine how superior courts weigh ALJ credibility findings and manage evidentiary supplementation efficiently.

What Clients Should Do Now

Entities and other regulated businesses contemplating challenges to licensing, permitting, or enforcement actions should reassess litigation posture under § 12‑910(F), and consider whether factual disputes are better developed for independent resolution in the superior court. 

Agencies should update decision templates, train decision‑makers on record‑building and explanation duties, and audit current matters for vulnerability under the clarified standard.