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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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
DAIFUKU SERVICES AMERICA CORPORATION, Plaintiff/Appellee/Appellant,
v.
CITY OF PHOENIX, et al., Defendants/Appellants/Appellees.
No. 1 CA-CV 25-0886
FILED 08-31-2026
Appeal from the Superior Court in Maricopa County No. CV2025-017493
The Honorable Frank W. Moskowitz, Judge
AFFIRMED IN PART; VACATED IN PART; REMANDED
COUNSEL
Dickinson Wright PLLC, Phoenix, AZ By Joshua Grabel and Alexander J. Daniel Co-Counsel for Plaintiff/Appellee/Appellant
Barnes & Thornburg LLP, Chicago, IL By Kevin B. Dreher, Mary Catherine Pachciarz, and Mariana Renke Co-Counsel for Plaintiff/Appellee/Appellant
Sanders & Parks, P.C., Phoenix, AZ By Shanks Leonhardt and Brittni A. Calaway Counsel for Defendants/Appellants/Appellees
Decision of the Court
MEMORANDUM DECISION
Judge Veronika Fabian delivered the decision of the Court, in which Presiding Judge Michael J. Brown and Vice Chief Judge David D. Weinzweig joined.
F A B I A N, Judge:
¶1 This case arises out of a dispute over the City of Phoenix’s recommendation to award a contract for baggage handling services at Sky Harbor Airport to third party JSM Airport Services instead of Daifuku Services America Corporation. In its final judgment, the superior court set aside the award to JSM but also found the City properly disqualified Daifuku from the bidding process. Both parties appeal. We affirm in part, vacate in part with respect to the relief granted by the superior court, and remand with instructions.
FACTUAL AND PROCEDURAL BACKGROUND
Request for Proposal
¶2 In 2024, the City of Phoenix Aviation Department (“Aviation Department”), an agency of the City of Phoenix, (collectively “the City”) issued a Request for Proposal seeking bidders for a five-year contract to provide baggage handling systems operations and services at Phoenix Sky Harbor International Airport (“the RFP”). The RFP stated: “Unless otherwise indicated, award(s) will be made to the most responsive, responsible Offeror(s) who are regularly established in the service, or providing the goods, contained in this solicitation and who have demonstrated the ability to perform in an acceptable manner.” The City received two responsive offers, one from Daifuku and one from JSM.
¶3 After interviewing both companies, the City’s evaluation panel scored the offers. JSM received an evaluation score of 850 and Daifuku received an evaluation score of 781, with JSM’s bid around $300,000 cheaper than Daifuku’s. One of the four criteria was the qualifications and experience of the companies’ proposed site manager. Daifuku scored 122.5 on this criterion. JSM, whose proposed site manager was Andy Neil, scored 157.5. The evaluation panel recommended awarding
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the contract to JSM and the City issued public notice of the recommendation.
¶4 The City later issued a notice to Daifuku that it had violated the City’s Solicitation Transparency Policy (“the Policy”) set forth in the city code and the RFP:
Commencing on the date and time a solicitation is published, potential or actual Offerors or respondents (including their representatives) shall only discuss matters associated with the solicitation with [designated City officials and their staff] at a public meeting, posted under Arizona Statutes, until the resulting contract(s) are awarded to all offers or responses are rejected and the solicitation is cancelled without any announcement by the Procurement Officer of the City’s intent to reissue the same or similar solicitation. . . .
This policy is intended to create a level playing field for all Offerors, assure that contracts are awarded in public, and protect the integrity of the selection process. OFFERORS THAT VIOLATE THIS POLICY SHALL BE DISQUALIFIED.
¶5 In its notice, the City stated it had learned “a representative from Daifuku initiated discussions with [Aviation Department] staff about the award recommendation and Daifuku’s intent to protest.” The City provided further detail:
[Aviation Department] staff provided written statements stating that on August 15, 2024 Daifuku’s On-site Manager, Jeff Triphahn, initiated discussions with them about the solicitation shortly after the Public Notice of Award Recommendation was posted recommending JSM be awarded the contract. Mr. Triphahn questioned the award to JSM by stating “there is no way [JSM] will be able to operate this system” and “we have been doing it since 2007 and why would they bring in someone new.” Mr. Triphahn further stated that “corporate will be protesting it and that they have evidence that things were done wrong.”
Daifuku’s Protest
¶6 Daifuku protested the award to JSM. Daifuku argued JSM’s bid was nonresponsive to the RFP because JSM had falsely identified Andy Neil as its site manager, even though JSM had no site manager in place.
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Daifuku attached evidence that JSM was recruiting for a site manager at Sky Harbor and that JSM had contacted Daifuku employee Heather Brown for an interview for the Phoenix site manager position. Daifuku asserted that without the points JSM earned by listing Neil as the proposed site manager, Daifuku would have a higher evaluation score than JSM and would have been awarded the contract.
¶7 Daifuku also protested the City’s disqualification notice, arguing that the City was arbitrarily enforcing the Policy and that Triphahn, the employee referenced in the notice, was not a “representative” of Daifuku or involved in the solicitation process, and his comments did not involve details of the solicitation process.
¶8 The City denied Daifuku’s first protest. It based its decision on the following reasons: 1) JSM had not informed the City of a change of the proposed site manager, 2) Daifuku had not shown JSM acted in bad faith, and 3) the City could consent to a change in site manager under the RFP if requested by JSM. The City also denied Daifuku’s second protest, stating that Triphahn attended the City’s RFP interviews as a Daifuku representative. Daifuku appealed both decisions with the City, requesting a hearing in both appeals. The City denied both appeals without a hearing.
Special Action
¶9 Daifuku then filed a special action in superior court seeking review of the City’s decisions. Daifuku argued the City had abused its discretion in recommending JSM be awarded the contract and in disqualifying Daifuku. It sought to vacate the City’s recommendation and subsequent decisions.
¶10 Daifuku applied for a temporary restraining order enjoining the City from acting on awarding the contract under the RFP. After a hearing, the superior court granted the temporary order enjoining the City from placing the contract award on the Phoenix City Council agenda or approving the contract.
¶11 The superior court held a three-day hearing and issued a final judgment thereafter. The court held that the City “acted arbitrarily and capriciously and/or abused its discretion by choosing not to investigate whether Andy Neil would be the site manager for JSM” under the RFP, but “did not act arbitrarily and capriciously and/or abuse its discretion by disqualifying [Daifuku] for violating the [Policy].” The court also ordered “the City’s procurement process and decision under the RFP [was] set aside
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as null and void,” and the temporary restraining order “vacated as moot as there is no longer a contract for the City to award under the RFP.”
¶12 The City timely appealed the judgment and Daifuku timely cross-appealed. We have jurisdiction under Article VI, Section 9 of the Arizona Constitution and A.R.S. §§ 12-120.21(A)(1) and 2101(A)(1).
DISCUSSION
¶13 We review the superior court’s grant or denial of relief in a non-statutory special action for an abuse of discretion. Files v. Bernal, 200 Ariz. 64, 65 ¶ 2 (App. 2001). We review the superior court’s interpretation of the law, including city codes, de novo but defer to the superior court’s findings of fact. See Neptune Swimming Found. v. City of Scottsdale, 256 Ariz. 551, 559 ¶ 23 (2024); W. Valley View, Inc. v. Maricopa Cnty. Sheriff’s Office, 216 Ariz. 225, 227 ¶ 7 (App. 2007). The superior court abuses its discretion “where the record fails to provide substantial support for its decision or the court commits an error of law in reaching the decision.” Files, 200 Ariz. at 65 ¶ 2.
I. The Superior Court Did Not Err in Finding that the City Acted Arbitrarily and Capriciously.
¶14 The City argues that the superior court applied an improper, less deferential standard of review when the court determined that the City abused its discretion by failing to investigate whether Neil would be JSM’s site manager.
¶15 An administrative decision by city officials is reviewed by the superior court for whether it is arbitrary or capricious. Richard E. Lambert, Ltd. v. City of Tucson Dep’t of Procurement, 223 Ariz. 184, 187 ¶ 9 (App. 2009); Ariz. R.P. Spec. Act. 4(c). A decision is arbitrary and capricious if city officials fail to conduct a “due investigation of the facts” underlying their decision. Brown v. City of Phoenix, 77 Ariz. 368, 375 (1954); see Osborn v. Mitten, 39 Ariz. 372, 377 (1932) (without an investigation into all required elements of a bid, “an award must necessarily be arbitrary and capricious”). The superior court properly analyzed the City’s decision under this standard.
¶16 The City argues that under The Ravens Group, Inc. v. United States, 78 Fed. Cl. 390 (2007), it had no affirmative duty to investigate a losing bidder’s allegations of misconduct against the winning bidder. However, Arizona courts only look to the Federal Court of Claims for guidance in “the absence of controlling state authority.” New Pueblo
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Constructors, Inc. v. State, 144 Ariz. 95, 101 (1985). Here, not only is there controlling state authority that requires due investigation into the underlying facts of bid offers, see Brown, 77 Ariz. at 375; Osborn, 39 Ariz. at 377, but the RFP itself states: “Award of the Contract resulting from the solicitation will not be made until any necessary investigation, which each Offeror agrees to permit by submitting its Offer, is made by the City as it deems necessary.”
¶17 The City did not learn there was a question about whether Neil would serve as JSM’s site manager until after the evaluation process and recommendation was complete. However, it was aware of that issue before the award was made. Nevertheless, the City did not investigate the issue beyond reviewing the protest. Therefore, the record contains substantial support for the superior court’s determination that the City abused its discretion by “choosing not to investigate whether Andy Neil would be the site manager for JSM.” See Files, 200 Ariz. at 65 ¶ 2.
¶18 The City argues that its decision was supported by the binding contractual agreement, and Neil’s confirmation at JSM’s RFP interview, that he would be site manager. However, once Daifuku provided evidence that Neil may not be JSM’s site manager, the City had an obligation to make a due investigation into the issue. See Brown, 77 Ariz. at 375; Osborn, 39 Ariz. at 377. Neil’s personal confirmation at his interview was no longer sufficient as JSM’s recruitment efforts post-dated the interview and directly contradicted it. The City could not simply rely on JSM’s or Neil’s prior promises and representations when later confronted with contrary information without further investigation. See Neptune Swimming Found., 256 Ariz. at 564 ¶ 51.
¶19 The City asserts that Brown v. City of Phoenix and Osborn v. Mitten are inapplicable because they involved awards to bidders who had less favorably priced bids, whereas here, JSM was the more favorably priced bidder. True, in both cases the supreme court held it was an abuse of discretion to award a contract to a less favorably priced bidder on responsibility grounds, without due investigation of whether the more favorably priced bidder was equally responsible. See Brown, 77 Ariz. at 375- 76; Osborn, 39 Ariz. at 380-81. However, the supreme court has emphasized the importance of investigation to make sure that all bidders are responsible bidders. Osborn, 39 Ariz. at 377 (“[T]here exists a duty upon the members of the board to make an investigation of all bidders before they can form an intelligent and sound opinion as to their fitness and qualifications to do the work. Without such investigation an award must necessarily be arbitrary and capricious.”). Even though JSM was the more favorably priced bidder,
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it still had to be a “responsible bidder” under the RFP and Arizona law. See id. And the City had a responsibility to investigate to ensure that it was. This result is reinforced by the RFP’s mandate that the award will be made to the most responsive and responsible bidder.
¶20 The City also argues that JSM has never indicated Neil would not be site manager, and even if it did, the City has the discretion to approve that change. Even though the City had discretion to approve changes to site managers, that discretion cannot be exercised in an arbitrary or capricious manner. See Brown, 77 Ariz. at 375 (even when it was within “discretionary power of the [city] council to award the lease to the less favorable bidder,” if the city decides to award to less favorable bidder without due investigation of facts, it acts arbitrarily and abuses its discretion); City of Phoenix v. Wittman Contracting Co., 20 Ariz. App. 1, 5 (1973) (where the city has the “right to reject any or all bids” the city must still not “act arbitrarily or capriciously” in doing so). Thus, to approve a change to the site manager, the City would still have to conduct a due investigation. Without that investigation there is no way to know whether the change would have been approved.
¶21 The superior court did not err in finding the City acted arbitrarily and capriciously in failing to investigate whether Neil would be site manager.
II. The Superior Court Did Not Err in Finding that the City Properly Disqualified Daifuku from the Contract Procurement Process for Violating the Policy.
¶22 Daifuku argues the record lacked substantial evidence to support the superior court’s finding that Daifuku was properly disqualified, as the only evidence presented was unreliable and contradictory. We disagree. The record contains substantial evidence to support the superior court’s determination that the City properly disqualified Daifuku. Triphahn communicated with City employees that he did not believe that JSM would be able to perform the services and that Daifuku intended to protest. Triphahn, as Daifuku’s site manager, was a representative of Daifuku. The City based its decision to disqualify Daifuku on these communications.
¶23 Daifuku’s primary argument is that the City improperly relied on emails from two employees both stating that these communications occurred on August 15, when the records show that the only communication that occurred on August 15 was prior to issuance of
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the recommendation that JSM be awarded the contract. Therefore, Daifuku asserts that the substance of the call could not have been, as the City claims, to complain about the recommendation and indicate an intent to protest. However, the phone records also reflect that Triphahn communicated with both employees after the recommendation of the award on August 15. That the employees’ initial account identified the incorrect date or time of the calls does not establish that the conversations never occurred or that their content was fabricated. The substance of what Triphahn said—questioning JSM’s ability to perform and announcing Daifuku’s intent to protest—is equally violative of the Policy whether the calls occurred on the 15th or some day thereafter. The Policy prohibits discussion of the solicitation with City staff “until the resulting contract(s) are awarded.” Similarly, the fact that one of the employees had to amend his statement to reflect that the call was an incoming as opposed to an outgoing call does not affect whether the substance of the call violated the solicitation policy.
¶24 Daifuku argues that the superior court should have allowed it to depose and call as witnesses the two City employees that Triphahn talked to resulting in Daifuku’s disqualification. Daifuku argues that the superior court’s limitation of depositions and witnesses prevented it from challenging the credibility of the employees’ statements.
¶25 “A trial court has broad discretion in matters of discovery, and its decision will not be disturbed absent a showing of an abuse of that discretion.” Lewis v. Ariz. Dep’t of Econ. Sec., 186 Ariz. 610, 616 (App. 1996). Discovery is only permitted in a special action if it raises a “material issue of fact.” Ariz. R.P. Spec. Act. 7(g). Daifuku cites no authority that allows expanding the record in a special action beyond the information presented to the decision-maker where there is no material issue of fact. Cf. Robertson v. Superior Court (Bonanno), 136 Ariz. 440, 441 (App. 1983) (in a special action reviewing the decision of a state board, “only the evidence presented to the board could be considered in reviewing its order”). The special action only determined a legal question, whether the City’s decision-making was arbitrary or capricious. The record and testimony was replete with the evidence the City had before it when making its decision.
¶26 Daifuku further complains that the administrative record was incomplete because the City denied Daifuku’s requests for a hearing where it could cross-examine the employees in question. But Daifuku never directly disputed, either in its protest or appeal, that Triphahn had made the statements. Instead, Daifuku made similar challenges to the reliability of the City employee statements as it does in this appeal. Under these
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circumstances, it was not an abuse of discretion for the City to deny Daifuku’s request for hearings.
¶27 Finally, Daifuku argues that Triphahn’s communications did not affect the Policy’s stated purpose—the integrity of the selection process—because JSM had already been recommended by the City, evidencing the City’s arbitrary enforcement of the Policy. However, the solicitation policy does not require that the communications affect the policy’s stated purpose or the integrity of the selection process. Thus, we find Daifuku’s argument unpersuasive.
III. The Superior Court Erred in Setting Aside the City’s Procurement Process as Null and Void.
¶28 The City argues that the superior court erred in voiding the City’s procurement process under the RFP because the RFP was lawful and JSM had not been disqualified. Whether the superior court erred in voiding the City’s procurement process under the RFP is an issue of law we review de novo. See Neptune Swimming Found., 256 Ariz. at 559 ¶ 23.
¶29 Although the superior court did not err in determining the City acted arbitrarily and capriciously in failing to investigate whether Neil would be JSM’s site manager, it does not necessarily follow that the “procurement process and decision under the RFP” is “null and void” or that “there is no longer a contract for the City to award under the RFP.”
¶30 Daifuku argues that superior courts have the broad ability to void procurement processes for statutory violations. However, of the cases Daifuku cites, one, Western Sun Contractors Co. v. Superior Court (City of Peoria), 159 Ariz. 223, 229 (App. 1988), did not void the procurement process and the other, Neil B. McGinnis Equipment Co. v. Riggs, 4 Ariz. App. 556, 558 (1967), only voided the call for bids because the terms of the contract itself violated Arizona law. Here, the lawfulness of the RFP has not been challenged.
¶31 In cases where Arizona appellate courts have reversed a city’s procurement award, they did not order the procurement process to begin anew but instead identified the superior alternative bidder on the record. See, e.g., City of Phoenix v. Wittman Contracting Co., 20 Ariz. App. 1, 2-6 (1973) (city enjoined from contracting with defendant on city project and ordered to enter into contract with plaintiff where application of preference statute was mandatory, preference statute directed award to lowest bidder, and if “the City had allowed the preference, [plaintiff] would have been the lowest bidder”); Schrey v. Allison Steel Mfg. Co., 75 Ariz. 282, 284-90 (1953) (city
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directed to award contract to plaintiff where plaintiff was eligible under same mandatory preference statute and would have been lowest eligible bidder); Osborn, 39 Ariz. at 374-84 (county board enjoined from entering contract with plaintiff when contract was required to be awarded to “lowest responsible bidder” and record showed there were lower responsible bidders); Brown, 77 Ariz. at 371-77 (city’s award of contract to defendant reversed when city abused its discretion to determine the highest responsible bidder and defendant’s bid was “unquestionably [financially] inferior” to plaintiff’s).
¶32 Here, unlike those cases, there is not a more qualified alternative bidder for the contract under the relevant standard because Daifuku was disqualified. The RFP states: “Unless otherwise indicated, award(s) will be made to the most responsive, responsible Offeror(s) who are regularly established in the service, or providing the goods, contained in this solicitation and who have demonstrated the ability to perform in an acceptable manner.” Although the City has abused its discretion in failing to investigate the accuracy of JSM’s proposed site manager, after a proper investigation, JSM may still be the most responsive, responsible bidder, especially considering that the evaluation panel’s determination on the other relevant factors are unchallenged. If the City determines, after due investigation, that JSM’s offer is still responsive and responsible, as the only remaining eligible bidder, JSM could properly be awarded the contract under the RFP.
¶33 Therefore, on remand, the superior court is instructed to enter an amended judgment granting Daifuku special action relief in the form of an order vacating the City’s award recommendation to JSM and compelling the City to investigate the accuracy of JSM’s offer as to its proposed site manager and then determine if JSM is the most responsive, responsible offeror under the RFP.
IV. The Parties’ Remaining Arguments are Waived or Moot.
¶34 Daifuku also argues the City’s procurement process does not have sufficiently independent review with respect to its appeal process and the Policy was impermissibly vague and arbitrarily applied to Daifuku.
¶35 Because Daifuku makes these arguments for the first time on appeal, they are waived. See Odom v. Farmers Ins. Co. of Arizona, 216 Ariz. 530, 535 ¶ 18 (App. 2007). Although Daifuku claims it challenged the propriety of the City’s appeal process in the superior court, Daifuku only challenged the denial of an administrative hearing and whether the city
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manager addressed the merits of Daifuku’s protest appeal. It did not argue, as it does now, that when “a municipality retains final authority at both tiers, through its own agents and employees” it “provides only a single substantive level of administrative review and lacks the independence required by Arizona’s state procurement code.”
¶36 The City also argues that the superior court lacked authority to enjoin the City from placing the RFP contract award on the Phoenix City Council’s agenda or approving the contract award, because these were legislative actions by a municipal corporation under A.R.S. § 12-1802(7). However, this issue is moot as the superior court vacated the temporary restraining order in connection with the final judgment. See Vinson v. Marton & Assocs., 159 Ariz. 1, 4 (App. 1988) (“A decision becomes moot for purposes of appeal where as a result of a change of circumstances before the appellate decision, action by the reviewing court would have no effect on the parties.”).
V. Attorney Fees and Costs.
¶37 Both parties request their attorney fees under A.R.S. § 12-341.01 as the action arises out of contract. Daifuku also seeks their costs incurred on appeal. Both parties achieved partial success and neither is the successful party on appeal. Therefore, we deny both parties their attorney fees and deny Daifuku its costs as it is not the successful party on appeal. See A.R.S. §§ 12-341, 341.01.
CONCLUSION
¶38 We affirm in part and vacate in part and remand with instructions.
MATTHEW J. MARTIN • Clerk of the Court FILED: JR