AZAPP Blog

Carondelet Health Network v. Atteberry (6/12/2009): Arizona Court of Appeals Division Two Holds That the Physician-Patient Privilege Does Not Protect a Patient's Identity From Disclosure, Where Such Disclosure Would Not Lead to the Revealing of Confidential Medical Information.

Petitioner, Carondelet Health Network, filed a special action challenging the respondent judge’s order to disclose the identity of a hospital patient. The patient’s identity was sought in a medical malpractice trial because he may have witnessed malpractice that caused the death of his hospital roommate. Carondelet claimed that disclosure of the patient’s identity would violate the physician-patient privilege.

The Court of Appeals accepted jurisdiction, but denied relief.  The Court explained that the purpose of the physician-patient privilege, as codified at A.R.S. §§ 12-2235 and 12-2292, is to promote full disclosure of medical conditions and to encourage the procurement of medical treatment. The Court found that Petitioner’s reliance on Ziegler v. Superior Court, 131 Ariz. 250, 640 P.2d 181 (1982) was misplaced. The Court stated that Ziegler only stands “for the proposition . . . that the physician-patient privilege protects a patient’s identity when its revelation would inevitably expose information about the patient’s medical history, condition, or treatment, and potentially reveal information the patient had divulged in confidence.” The Court held that a patient’s name may be revealed if it would not reveal details of the patient’s ailments, and that conversely, a patient’s ailments may be disclosed if it would not reveal the patient’s identity.. The Court found that the trial court’s order to disclose the patient’s identity was appropriate because the parties were not seeking to discover the contents of the patient’s confidential medical records.  

The Court rejected Petitioner’s arguement that disclosure of a patient’s identity would inevitably lead to disclosure of the patient’s medical information, because the patient’s status as a witness would lead to an inquiry into his ability to remember the events and thus into his physical and mental condition. The Court reasoned that “the patient-as-witness is no differently situated than any other eyewitness,” and that the trial court could “fashion such protections as it deems appropriate under the circumstances” to protect the patient’s confidential medical information.

Judge Vásquez authored the opinion; Judges Eckerstrom and Brammer concurred.

Watts v. Arizona Department of Revenue ( 5/26/2009): Arizona Court of Appeals Division One Holds that Purchases of Water Trucks and Water Wagons for Lease Do Not Qualify for Pollution Control Income Tax Credit.

Taxpayers filed refund claims under A.R.S. §§ 43-1081 and -1170, which provide income tax credits for expenditures “to purchase real or personal property that is used in the taxpayer’s trade or business in this state to control or prevent pollution.”  Taxpayers claimed they were entitled to the credit for purchases of water trucks and water wagons that their company leased to others.  The equipment, although suitable for dust control on construction sites, also was leased for other purposes. 

The state tax department denied the refund claims on the grounds that the taxpayers failed to use the equipment in their business to control or prevent pollution, and because the equipment was attached to a motor vehicle.  Taxpayers appealed and the cases were consolidated and transferred to the Arizona Tax Court.  On cross-motions for summary judgment, the Tax Court ruled in favor of the State and entered judgment.  Taxpayers appealed.

The Court of Appeals affirmed the Tax Court judgment.  Construing the tax credit statutes strictly against the credits, the Court found the refund claims precluded by the plain language of the statutes.  The credit did not apply because the taxpayers did not use the equipment in their trade or business to prevent pollution, but instead leased the equipment to others, who may or may not use the equipment to prevent or control pollution. 

The Court further found that the Legislature had expressly made retroactive a statutory amendment excluding tax credits for pollution control equipment attached to motor vehicles.  In addition, the legislative history indicated that the amendment was intended to clarify that taxpayers were never entitled to a credit for pollution control equipment attached to a motor vehicle.  Even assuming that the taxpayers’ rights to a refund had accrued prior to filing their refund claims, the rights had not vested prior to the legislative amendment because the taxpayers had not yet filed refund claims.

Presiding Judge Thompson authored the opinion; Judges Kessler and Downie concurred.

Castro v. Ballesteros-Suarez ( 6/18/09):  Court of Appeals Division One Holds that a Widow Found by a Preponderance of the Evidence to Have Feloniously and Intentionally Killed Her Husband Is Not Entitled to Life Insurance Proceeds.

Decedent was shot to death in his home, and his death was later ruled a homicide.  Decedent’s widow was a suspect in his murder and a beneficiary of his life insurance policies.  After the widow requested life insurance proceeds, two insurance companies filed interpleader actions.  During ensuing discovery, the widow repeatedly invoked her Fifth Amendment privilege against self incrimination.  Following a bench trial, the trial court found that a preponderance of the evidence supported that widow was guilty of the felonious and intentional killing of decedent, and therefore the slayer statute prevented her from receiving any of the life insurance proceeds.  This appeal followed.

The Arizona Appeals Court held that the slayer statute (A.R.S. § 14-2803) barred widow from receiving any of decedent’s life insurance proceeds.  There was substantial circumstantial evidence – including the testimony of a detective, widow’s forgery of a beneficiary form, and widow’s invocation of her Fifth Amendment privilege – to support a finding that widow was criminally accountable for decedent’s death.  Although widow may not have been the actual killer, the slayer statute applies equally to an accomplice to homicide.  The Court also explained that the slayer statute may be invoked without probable cause to arrest; all that is required is that the trier of fact find by a preponderance of the evidence that the person is criminally accountable for the decedent’s death.  Finally, because the slayer statute expressly states that “a killer cannot profit from that person’s wrong,” the Court rejected widow’s argument that she possessed a community property interest in the proceeds.

Judge Portley authored the opinion; Judges Hall and Brown concurred.   

Paczosa v. Cartwright Elementary School Dist. ( 6/23/2009):  Division One of the Arizona Court of Appeals Holds That School District Administrators Who Fail to Sign New Employment Contracts Are Not Entitled to Return to Positions as Tenured Teachers.

Plaintiffs Paczosa and Faulkner (“Plaintiffs”) served as principals in the Cartwright Elementary School District (the “District”) during the 2006-2007 school year.  Their 2006-2007 contracts stated that if the Board did not intend to offer them a contract for the next fiscal year, it was required to notify them of this decision by April 15, 2007, or else the current contract would be extended automatically by one year.  The contracts also included a provision that permitted them to receive retirement benefits over the pay periods of one, two, or three contract years immediately prior to the termination of their employment.  In January 2007 Plaintiffs notified the District that they intended to take their retirement benefits and spread them over the last 3 years of their employment.  In May 2007, the District offered Plaintiffs contracts as principals for the 2007-2008 year that included modified retirement benefits.  Plaintiffs did not sign these contracts and notified the District that they planned to continue working under their 2006-2007 contracts.

Plaintiffs filed a declaratory judgment action against the District seeking a declaration that their 2006-2007 employment contracts had been automatically extended, that they were entitled to the retirement benefits in the 2006-2007 contracts, and that they had three-year contracts of employment.  The parties filed cross-motions for partial summary judgment on the issue of whether Plaintiffs were entitled to continued employment as tenured teachers.  The Superior Court granted the District’s motion, ruling that Plaintiffs were not entitled to continued employment as tenured teachers.  Plaintiffs appealed.

The Arizona Appeals Court affirmed, ruling that Plaintiffs were not entitled to be returned to their prior positions as tenured teachers because the statutes do not provide tenure for administrators, and the District was under no obligation to return them to the classroom.  The Court also held that Plaintiffs’ contracts had not been automatically extended, reasoning that because the Board intended to offer Plaintiffs new, 2007-2008 contracts, the April 15, 2007 deadline was inapplicable.  The Court further held that the language of the retirement benefits provision in Plaintiffs’ 2006-2007 contracts limited those benefits to one fiscal year, thereby permitting the Board to change the benefits offered in the 2007-2008 contract, and that Plaintiffs did not have three-year employment contracts by virtue of their decision to participate in the three-year retirement benefits option. 

Judge Barker authored the opinion, Judges Weisberg and Gemmill concurred. 

As a result of an industrial injury, Carbajal requires full-time care and intermittent attendant care.  His employer, and the employer’s workers’ compensation carrier, paid for attendant care for Carbajal, along with other services.  When the attendant care provider was not available, Carbajal’s spouse provided supervision and care for Carbajal.  The carrier rejected Carbajal’s request for payment for the services provided by his spouse, and an Administrative Law Judge agreed.  On special action appeal, the court of appeals upheld the denial.

The Arizona Supreme Court reversed, holding that the compensability of services “depends on the nature of the care provided and not the status or identity of the service provider.”  For services to be compensable, the services must be included in a list of categories of treatment, and they must be “reasonably required.”  A.R.S. § 23-1062(A).  First, the Court held that palliative care like that provided by Mrs. Carbajal was included within the compensable categories of care. Second, because compensability turned on the nature of the care and not the status of the provider, the Court reasoned that the fact that Mrs. Carbajal was not a licensed health care provider was immaterial.  Finally, the Court remanded to the Administrative Law Judge to resolve whether the services Mrs. Carbajal provided were “reasonably required.”

Vice Chief Justice Berch authored the unanimous opinion.

Johnson v. State ( 6/18/2009):  Arizona Court of Appeals Division One Holds That Trial Court Properly Excluded Evidence of Subsequent Remedial Measures Under Rule 407.

In December 2003, Mark Johnson (“Decedent”) died after rear-ending a dump truck that had been exiting a mining pit at an intersection.  After the accident, but without knowledge of the accident, the State installed a truck-crossing sign and a variable message board to warn drivers that trucks would be crossing or entering the intersection.  Decedent’s parents, the Johnsons, brought a wrongful death suit against the State, alleging that it negligently designed the intersection and failed to take reasonable measures to eliminate the dangerous conditions of the intersection.  The State denied liability and claimed that Decedent was comparatively negligent.  The jury returned a defense verdict.  The Johnsons filed a motion for new trial challenging, among other things, the trial court’s exclusion of evidence concerning the State’s installation of warning signs.  The trial court denied the motion, and the Johnsons timely appealed.

The Arizona Appeals Court affirmed.  The Court began by holding that evidence of the State’s installation of warning signs was inadmissible under Ariz. R. Evid. 407 because it was a “subsequent remedial measure.”  The fact that the State was not aware of the accident when it installed the signs was irrelevant because Rule 407 applies whenever “measures are taken” “after an event,” regardless of whether those measures are taken in response to the event.  The Court further explained that its holding supported the policy underlying Rule 407, which is to encourage defendants to make safety changes without fearing potential claims. 

The Court then held that the exclusion in Rule 407 allowing the introduction of “evidence of subsequent measures when offered for another purpose” did not apply in this case.  First, evidence of the sign installation could not be introduced to refute the State’s comparative negligence affirmative defense because that defense is inextricably intertwined with the State’s negligence, and thus the remedial measures evidence “constitutes direct proof of the defendant’s alleged primary negligence.”  Second, the evidence could not be introduced to refute the State’s defense that the danger was open and obvious because the Johnson’s had other evidence to rebut that defense.  Finally, the Court rejected the Johnson’s argument that the evidence was admissible to establish the State’s knowledge of the dangerous conditions, explaining that the State’s knowledge was an element of negligence, and thus did not constitute “another purpose.” 

Judge Barker authored the opinion; Presiding Judge Weisberg and Judge Downie concurred.

Huerta v. Superior Court (6/16/2009): Arizona Court of Appeals Division One Holds That a Party Whose Case is Consolidated With Another May Not Exercise a Peremptory Change of Judge if a Party on the Same Side in the Other Case Has Already Exercised a Peremptory Change of Judge.

Petitioner, the son of the decedent in a probate case, exercised a peremptory change of judge pursuant to Rule 42(f)(1), Ariz. R. Civ. P.  In a separate action, Petitioner filed a civil complaint alleging conversion of estate assets.  Over petitioner’s objection, the Superior Court consolidated the probate and civil cases.  Petitioner then sought a change of judge in the consolidated proceeding.  The Superior Court denied the request on the ground that Petitioner had already exercised his “first and only” peremptory challenge as a matter of right.  Petitioner sought special action review.

The Court of Appeals accepted jurisdiction but denied relief and affirmed.  Rule 42(f)(1)(A) provides that “each side” in a superior court action is entitled to one peremptory change of judge.  The rule, however, specifies that “each action, whether single or consolidated, shall be treated as having only two sides” and allows a judge to grant additional peremptory changes of judge only if “two or more parties on [the] side have adverse or hostile interests.”  Because the “adverse or hostile interests” standard was not met, Petitioner’s second peremptory change of judge was properly denied under the plain language of the rule.  Moreover, the rule would prohibit the second peremptory challenge, in the absence of “adverse or hostile interests,” even if the first challenge had been brought by a different party on the same side before the consolidation.

 Presiding Judge Johnsen authored the opinion; Judges Winthrop and Norris concurred.

County of Cochise v Faria.  (6/16/2009):  Arizona Court of Appeals Division Two Clarifies Meaning of A.R.S. § 11-830(A)(2) and Holds that Feed Lot Operations are Not “General Agricultural Uses” Exempt from County Zoning.

Appellants, the Farias, operated a dairy farm in Cochise County on which they built feeding pens in 2006 on land zoned RU-4 (Rural District).  The County claimed that the feeding pens constituted an unauthorized commercial feed lot, in violation of the zoning rules.  After the Farias lost several administrative proceedings (all while continuing to operate the feeding operations), the County invoked its zoning power under A.R.S. § 11-821(B) and sued for an injunction.  The Farias counterclaimed for declaratory relief.  The Superior Court granted summary judgment in favor of the County and enjoined the Farias from using the pens constructed in 2006.  The Farias appealed.

The Court of Appeals affirmed the Superior Court’s decision.  The Farias claimed that the feeding pens were “general agricultural” uses and thus exempt from county zoning ordinances under A.R.S. § 11-830(A)(2).  Applying traditional standards of statutory construction, the Appeals Court noted that the exemption in § 11-830(A)(2) must be considered in pari materia with the provisions of  § 11-821.01(A) specifically requiring counties to designate areas for, among other things, “commercial feed lots.”  Reasoning that the legislature, by virtue of enacting specific provisions for feed lots, could not have intended to include such lots under the category of “general agricultural purposes,” the Court of Appeals held that the County had the power to regulate the feeding pens under § 11-830(A)(2).

Judge Howard authored the opinion in which Chief Judge Pelander and Judge Espinosa concurred.

Aida v. Maricopa County ( 6/11/2009):  Arizona Court of Appeals Division One Holds That a Tax Discrimination Claim May Be Based on the Initial Values Assessed.

Appellees Taxpayers sued Appellant Maricopa County for property tax discrimination in violation of the Uniformity Clause of the Arizona Constitution, which states that “all taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax.”  Ariz. Const. art. 9 § 1.  During the 1995-1996 tax period, the County valued Taxpayers’ properties at 100% of their full cash value while rolling over valuations on similar properties, resulting in valuations less than full cash value.  Taxpayers prevailed on summary judgment.  The court awarded Taxpayers a portion of their requested costs and $30,000 in attorneys’ fees, but denied their expert witness costs.  The County timely appealed the grant of summary judgment, and Taxpayers timely cross-appealed the costs and fees awards.

The Arizona Appeals Court affirmed the summary judgment but vacated and remanded the costs award.  Citing Aileen H. Char Life Interest v. Maricopa County, 208 Ariz. 386, 93 P.3d 486 (2004), the Court first held that tax discrimination applies with respect to initial values assessed by the County, not just final tax values or taxes actually paid.  The Court noted two practical problems with requiring evidence of final tax values to establish tax discrimination: (1) final tax values resolved through administrative appeals are based on evidence from the initial valuation; and (2) if a taxpayer appeals the administrative appeal to the State Board of Equalization, the taxpayer must still use evidence from the initial valuation.  Consequently, evidence surrounding the initial valuation is necessary to demonstrate any tax discrimination.

The Court then held that a reasonable jury could not have found in favor of the County on Taxpayer’s tax discrimination claim.  Discriminatory valuation requires proof that (1) taxing officials acted deliberately and systematically, and (2) their conduct resulted in “greatly disproportionate tax treatment” within a class of property.  The Court held that the County’s conduct was deliberate and systematic, a finding consistent with Aileen Char.  The Court rejected the County’s argument that its conduct was based on a coding mistake, noting that the County did not merely make an appraisal error, but repeatedly applied a wholly different valuation procedure to properties within the same class.  The Court also held that the County’s conduct caused a great inequality – Taxpayers’ property was valued at 100% of its full cash value while the favored properties were valued at only 56% of full cash value.  The fact that only a small percentage of the class was favored was irrelevant to the inequality analysis. 

Finally, the Court affirmed the $30,000 award of attorneys’ fees, holding that the $30,000 statutory limit in A.R.S. 12-348 applied to each judicial level of appeal.  It also affirmed the trial court’s denial of an award of expert witness fees.  It vacated and remanded the costs award, however, because Taxpayers’ were entitled to recover all costs that were not contested.

Presiding Judge Portley authored the opinion; Judges Barker and Gemmill concurred.

Arpaio v. Davis (6/2/09):  Arizona Court of Appeals Division One Affirms that Arizona Supreme Court Rule 123 Governs Requests for Judicial Records and a Presiding Judge May Appoint Another Judge on the Same Court to Perform an Administrative Review of Requested Records.

Sheriff Arpaio’s office sent several judicial records requests to the Maricopa County Superior Court.  The requests were made under Arizona’s Public Records Law and asked for all e-mails, memoranda, notes, and letters to or from various court personnel for the period of time from November 1, 2007, to December 7, 2007.  The requests contained no other limiting criteria.  The Court Administrator denied the requests on multiple grounds:  (1) they should have been made under Supreme Court Rule 123; (2) they lacked sufficient specificity; (3) they would create an undue financial burden and interfere with the court’s operations; and (4) they sought documents that were judicial work product or administrative records, which are not subject to public inspection.  Thereafter, the Sheriff filed a formal Request for Administrative Review.  Judge Norman Davis conducted a review on the merits and upheld the denial of the records request.  This special action followed.

The Arizona Appeals Court affirmed that Rule 123 governs requests for judicial records.  The Court concluded that Rule 123 is consistent with other public records laws in that the rule strikes an appropriate balance between the public’s interest in providing access to court records and the government’s interest in avoiding requests that impose an undue financial burden, are duplicative, or substantially interfere with court operations.  The Court further concluded that Judge Davis properly performed the administrative review because, contrary to the Sheriff’s argument, Judge Davis is not a subordinate employee of the presiding judge; Judge Davis is independently elected and his resulting decision was not subject to approval by the presiding judge.  Lastly, the Court found that Judge Davis did not abuse his discretion in upholding the Maricopa County Superior Court’s refusal to comply with the records request because an excessive amount of the court’s time would have been required to review the thousands of documents that fell within the Sheriff’s overbroad requests.

Judge Orozco authored the opinion; Judges Swann and Norris concurred.

State v. Western Union Financial Services, Inc. (06/03/2009): Arizona Supreme Court Holds That State Lacks In Rem Jurisdiction To Issue Warrants Seizing Money Transfers Sent From Other States to Mexico.

As part of its law enforcement efforts against human smuggling and drug trafficking, the State obtained a warrant for the seizure of person-to-person wire transfers made through Western Union, initiated in twenty-eight states other than Arizona to certain locations in Sonora, Mexico.  The State’s affidavit in support of the warrant application alleged that many of these out-of-state transfers involved funds from racketeering activities in Arizona, although the affidavit did not identify any specific person, property, or transactions.

After an evidentiary hearing, the superior court quashed the warrant, holding that the court lacked jurisdiction to seize transfers from other states to Sonora, that the State failed to show probable cause regarding any particular transfer, and that the warrant violated the Commerce Clause.  The Court of Appeals vacated, holding that because Western Union was subject to general personal jurisdiction in Arizona, “its debts [in the form of electronic credits in its system] can be considered within this state for purposes of in rem jurisdiction.”  Therefore, the appeals court held that the Attorney General could seize transfers that were neither to nor from a person in Arizona.

In a 4-1 decision, the Arizona Supreme Court reversed.  The Court concluded that in rem jurisdiction could only be justified if the property subject to the warrant was present within Arizona.  Thus, the “primary question” was whether “a money transfer sent from a state other than Arizona to a recipient in Sonora, Mexico” is “located within this state for purposes of in rem jurisdiction.”

The State argued that Arizona could seize the out-of-state transfers, relying on the “Harris fiction” “that a debt follows the debtor and is located wherever the debtor can be found.”  See Harris v. Balk, 198 U.S. 215 (1905). The State contended that because Western Union was located in and subject to jurisdiction in Arizona, so were the “debts” or “electronic credits.”

The Court rejected the State’s arguments.  First, the Court distinguished Harris factually, analogizing Western Union to a courier “who has agreed to deliver a package containing cash from Colorado to Mexico.”  Arizona courts could not exercise in rem jurisdiction over the package while it was outside Arizona, even though Western Union is subject to personal jurisdiction in Arizona.  Second, the Court explained that while Harris may have once been useful for determining quasi in rem jurisdiction, it has since been replaced by the “minimum contacts” analysis.  Finally, the Court held that funds from a wire transfer initiated in another state by a non-resident and transmitted to another non-resident in a foreign country were not “present” in Arizona, even though Western Union was subject to general personal jurisdiction in Arizona, and even if the funds allegedly resulted from illegal conduct in Arizona.

Judge Espinosa dissented, reasoning that the electronic credits existed wherever Western Union was located because a recipient could “go to any Western Union station and instantly receive the money.”   He wrote that, as a fact of Western Union’s business, “the funds must be at that location, both conceptually and physically.”  He further argued that because significant parts of the smuggling and drug operations took place in Arizona, Arizona was likely the only state with sufficient contacts to the electronic credits, and thus had the power to exercise in rem jurisdiction over them.

Justice Hurwitz authored the majority opinion in which Chief Justice McGregor, Justice Ryan, and Justice Bales all joined.  Vice-Chief Justice Berch recused herself; Judge Espinosa, sitting by designation, dissented.

King v. Titsworth (6/04/2009):  Division One of the Arizona Court of Appeals Holds That a Request for Attorneys’ Fees Must Be Made in the Pleadings Under Ariz. R. Civ. P. 54(g)(1).

After the Kings filed a complaint against Titsworth for breach of a settlement agreement, Titsworth answered pro per.  His answer did not include a request for attorneys’ fees.  Titsworth subsequently retained counsel, but never moved to amend his answer to include a request for attorneys’ fees.  Titsworth prevailed at trial and filed an application for attorneys’ fees pursuant to Arizona Rule of Civil Procedure 54(g) and A.R.S. § 12-341.01.  The Kings opposed the motion, arguing that Titsworth had failed to include a request for attorneys’ fees in his pleadings, as required by Rule 54(g)(1).  The trial court awarded Titsworth attorneys’ fees and the Kings appealed.

The Arizona Court of Appeals vacated the trial court’s award of fees, holding that pursuant to Rule 54(g)(1), “a claim for attorneys’ fees shall be made in the pleadings.”  The Court cited Rule 7(a), which defines “pleadings” to include a complaint, an answer, a counterclaim, a cross-claim, a third-party complaint, a third-party answer, and a reply.  Because Titsworth’s first claim for attorneys’ fees was made in a motion filed pursuant to Rule 54(g)(2), the trial court erred in awarding him fees. 

Judge Barker authored the opinion, Judges Thompson and Timmer concurred. 

Batty v. Glendale Union High School Dist. No. 205 (6/02/2009): Arizona Court of Appeals Division One Holds that Notice of Claim Against School District Must Be Served on the District Governing Board, Not Superintendent.

Plaintiff filed suit against a school district (“District”) for injuries allegedly resulting from an accident on school grounds.  The District moved for summary judgment, alleging that Plaintiff had failed to comply with A.R.S. § 12-821.01(A) by not serving a notice of claim on the District’s governing board.  The superior court granted summary judgment to the District.  Plaintiff appealed.

Section 12-821.01(A) requires filing a notice of claim against a public entity within 180 days after a cause of action accrues.  Rule 4.1(i), Ariz. R. Civ. P., provides that service on a governmental subdivision of the state is effected by delivery “to the chief executive officer, the secretary, clerk, or recording officer thereof.”  The Arizona Supreme Court has held that a county board of supervisors constitutes the county “chief executive officer” (“CEO”) for purposes of Rule 4.1(i).  Falcon ex rel. Sandoval v. Maricopa County, 213 Ariz. 525, 531 ¶ 34, 144 P.3d 1254, 1260 (2006).

The Court of Appeals affirmed summary judgment for the District.  The Court rejected Plaintiff’s argument that he satisfied § 12-821.02(A) by serving the District superintendent, who Plaintiff claimed was the District’s CEO for purposes of Rule 4.1(i).  The Court held that the decision in Falcon was controlling, and that the District governing board thus constituted the District CEO for purposes of Rule 4.1(i).  The Court also rejected Plaintiff’s argument that Falcon did not apply retroactively, reasoning that the Arizona Supreme Court had applied its ruling retroactively in the Falcon decision itself.     

Presiding Judge Weisberg wrote the opinion; Judges Gemmill and Barker concurred.

Cardi Am. Corp. v. All Am. House & Apartment Movers, L.L.C. (5/26/2009):  Arizona Court of Appeals Division Two Holds That Where a Lease Provides for Its Termination at the Lessor ’s Option on Condemnation of the Property, the Lessee Has No Right to Compensation for the Taking if the Option is Exercised.

Appellant All American leased property owned by Appellee Cardi.  Although the lease was to expire in 2015, it stated:  “Should all or a substantial portion of the premises . . . be taken by eminent domain, then Landlord may elect to, at its sole discretion, terminate this Lease.”  In January 2008, pursuant to a condemnation complaint, an order was entered allowing the State to take possession of the property All American was leasing.  Cardi then mailed a notice to All American terminating the lease.  In the condemnation proceeding, Cardi moved for partial summary judgment against All American based on the termination clause.  The court granted Cardi’s motion, finding that All American had no compensable interest in the property after Cardi exercised its option to terminate the lease.  All American timely appealed. 

The Arizona Appeals Court affirmed.  The Court explained that a tenant generally has a compensable interest in the unexpired term of a lease upon condemnation.  Citing State v. Starzinger, 179 N.W.2d 761 (Iowa 1970), however, the Court also explained that when a lease provision gives the lessor the option of terminating upon condemnation, and that option is exercised, the lessee is barred from sharing in the damages awarded for the condemned property.  Accordingly, the Court held that Cardi’s termination of the lease based on the termination provision extinguished All American’s rights to compensation upon condemnation.

The Court rejected All American’s argument that the termination clause was ineffective and redundant because eminent domain naturally terminates a lease.  The court explained that it must consider all provisions of a lease when ascertaining the parties’ intent, and will not assume that the parties would include an inherently redundant or ineffective clause.          

Presiding Judge Eckerstrom authored the opinion; Judges Brammer and Vasquez concurred.

Jordan v. Hon. Rea/Romine (05/29/2009):  Division One of the Arizona Court of Appeals Holds That a Court May Order an Objecting Parent to Pay Child Support to Cover Private Religious School Tuition After Determining Such a School Placement Is in the Child’s Best Interest.

A father with joint custody of his two children filed a petition to modify child support payments, including a reduction of his obligation to pay tuition for them to attend a private religious school.  A commissioner ruled that Father was required to pay the tuition based on the parents’ pattern and practice of sending their children to private religious school before and after their divorce.  The commissioner found that neither parent could modify the schooling choice without consent of the other or a court order.  Father’s appeal of the commissioner’s ruling is still pending.  Father subsequently filed a petition in family court to enforce the parties’ parenting plan, arguing that the commissioner’s ruling violated the parenting plan’s terms and his constitutional right to direct his children’s education and upbringing .  Judge Rea ruled Father’s favor, reduced Father’s child support obligations, and required Mother to select a different school.  Mother filed a special action petition.  The Arizona Appellate Court accepted jurisdiction.

Division One of the Arizona Court of Appeals vacated the family court’s order.  First, the Court held that a private religious school could not be precluded from consideration solely because it is religious school, reasoning that the parties’ parenting plan provided for mutual cooperation as to the children’s education and religious upbringing and gave neither parent the ability to object to placement in a private religious school.  Second, the Court held that a best interest standard applies when determining a child’s school placement.   The Court identified numerous factors to be considered in making the best interests determination, including those set forth in A.R.S. § 25-403(A).  Finally, the Court held that, notwithstanding a parent’s objection, the superior court may order the objecting parent to participate in paying for private religious school tuition if the court concludes that it is in the best interests of the children to attend such a school.  The Court noted, however, that a superior court can also decline to order these expenses based on the parents’ inability to pay the tuition.

Judge Barker authored the opinion, Judges Weisberg and Gemmill concurred. 

Douglas v. Governing Board of Window Rock (5/28/2009):  Court of Appeals Division One Holds That Acceptance of Rule 68 Offer of Judgment Encompasses Both Individual and Class Claims Unless the Offer Specifies Otherwise.

Plaintiffs sued the Governing Board of Window Rock, both individually and as representatives of a class.  Prior to obtaining class certification, Plaintiffs executed a Rule 68 Offer of Judgment from the Defendant.  Plaintiffs then moved to certify the class, the trial court decreed their motion moot, and this appeal followed.

Division One of the Court of Appeals dismissed Plaintiffs’ appeal for lack of jurisdiction.  The Court found that Plaintiffs were not “aggrieved parties” with standing to appeal because they voluntarily stipulated to the judgment.  The Court of Appeals rejected Plaintiff’s argument that the Rule 68 Offer of Judgment resolved only their individual claims and not their claims as class representatives.  The Court held that a Rule 68 Offer of Judgment encompasses all claims unless the offer specifically says otherwise.

Judge Barker authored the opinion, with Judges Weisberg and Gemmill concurring.

Kline v. Kline (5/21/09):  Court of Appeals Division One Holds That an Award of Spousal Maintenance by Default Judgment is Invalid Under ARFLP 44(G) Where the Pleading Requesting Spousal Maintenance Is Never Served, Unless the Lack of Service Causes No Prejudice.

Wife filed a petition for dissolution of marriage, which she served on Husband.  Wife amended the petition, and for the first time asserted a specific demand for spousal maintenance, but failed to serve Husband with the amended petition.  Thereafter, Wife served a petition for temporary orders, seeking a temporary award of spousal maintenance.  Husband’s counsel appeared at the evidentiary hearing and expressly confirmed his knowledge of the request for spousal maintenance.  Husband failed to respond to Wife’s petitions, Wife filed for entry of a default judgment, and the trial court entered default judgment, including an award for spousal maintenance.  This appeal followed.

The Arizona Appeals Court affirmed both the default award of spousal maintenance and the default judgment.  First, the Court found that while the trial court’s entry of a default judgment ordinarily cannot be appealed, Husband’s appeal could proceed because he challenged the validity of the default judgment under ARFLP 44(G), which is analogous to ARCP 55 (allowing appeals addressing the validity of default judgments). 

Addressing the merits, the Court held that an award of spousal maintenance by default is not valid under ARFLP 44(G) when the specific demand for maintenance is contained in a pleading that was never served, unless the lack of proper service does not prejudice the defaulting party.  The Court concluded that Wife’s first amended petition was the only basis for the spousal maintenance award and that wife had failed to properly serve the amended petition.  Nonetheless, the Court found that Husband was not prejudiced because Husband’s counsel acknowledged at the hearing on Wife’s petition for temporary orders that the first amended petition contained a request for spousal maintenance.  Because Husband had notice that Wife sought spousal maintenance prior to default, he could not benefit from ARFLP 44(G)’s protections.

Judge Swann authored the opinion; Judges Orozco and Irvine concurred.    

Douglas v. Governing Board of Window Rock (5/28/2009):  Court of Appeals Division One Holds That Acceptance of Rule 68 Offer of Judgment Encompasses Both Individual and Class Claims Unless the Offer Specifies Otherwise.

Plaintiffs sued the Governing Board of Window Rock, both individually and as representatives of a class.  Prior to obtaining class certification, Plaintiffs executed a Rule 68 Offer of Judgment from the Defendant.  Plaintiffs then moved to certify the class, the trial court decreed their motion moot, and this appeal followed.

Division One of the Court of Appeals dismissed Plaintiffs’ appeal for lack of jurisdiction.  The Court found that Plaintiffs were not “aggrieved parties” with standing to appeal because they voluntarily stipulated to the judgment.  The Court of Appeals rejected Plaintiff’s argument that the Rule 68 Offer of Judgment resolved only their individual claims and not their claims as class representatives.  The Court held that a Rule 68 Offer of Judgment encompasses all claims unless the offer specifically says otherwise.

Judge Barker authored the opinion, with Judges Weisberg and Gemmill concurring.

Cardi Am. Corp. v. All Am. House & Apartment Movers, L.L.C. (5/26/2009):  Arizona Court of Appeals Division Two Holds That Where a Lease Provides for Its Termination at the Lessor ’s Option on Condemnation of the Property, the Lessee Has No Right to Compensation for the Taking if the Option is Exercised.

Appellant All American leased property owned by Appellee Cardi.  Although the lease was to expire in 2015, it stated:  “Should all or a substantial portion of the premises . . . be taken by eminent domain, then Landlord may elect to, at its sole discretion, terminate this Lease.”  In January 2008, pursuant to a condemnation complaint, an order was entered allowing the State to take possession of the property All American was leasing.  Cardi then mailed a notice to All American terminating the lease.  In the condemnation proceeding, Cardi moved for partial summary judgment against All American based on the termination clause.  The court granted Cardi’s motion, finding that All American had no compensable interest in the property after Cardi exercised its option to terminate the lease.  All American timely appealed. 

The Arizona Appeals Court affirmed.  The Court explained that a tenant generally has a compensable interest in the unexpired term of a lease upon condemnation.  Citing State v. Starzinger, 179 N.W.2d 761 (Iowa 1970), however, the Court also explained that when a lease provision gives the lessor the option of terminating upon condemnation, and that option is exercised, the lessee is barred from sharing in the damages awarded for the condemned property.  Accordingly, the Court held that Cardi’s termination of the lease based on the termination provision extinguished All American’s rights to compensation upon condemnation.

The Court rejected All American’s argument that the termination clause was ineffective and redundant because eminent domain naturally terminates a lease.  The court explained that it must consider all provisions of a lease when ascertaining the parties’ intent, and will not assume that the parties would include an inherently redundant or ineffective clause.          

Presiding Judge Eckerstrom authored the opinion; Judges Brammer and Vasquez concurred.

In re MH (3/26/2009):  Division One Holds That A.R.S. § 36-533, Addressing Psychiatric Examinations Required For Involuntary Treatment, Requires a Personal Examination of the Patient

MH was ordered to be detained and evaluated to determine whether he should be required to undergo involuntary psychiatric treatment.  He was admitted to a hospital after resuming his medication.  At the hospital, he was evaluated by two doctors, including Dr. Kamala Premkumar.  After those evaluations, the hospital’s medical director filed a petition for court-ordered treatment, alleging that MH was persistently or acutely disabled and attaching the affidavits of the two treating doctors.  At the competency hearing, the Court found that MH was persistently or acutely disabled, in need of treatment, and unwilling or unable to accept voluntary treatment.  The Court ordered that MH complete inpatient/outpatient psychiatric treatment.  MH appealed, arguing that Dr. Premkumar did not examine him as required by statute, and as a result, the State’s evidence was insufficient to sustain the court’s order.

Division One vacated the involuntary treatment order.  Reviewing for clear error, the Court began by noting that involuntary treatment proceedings must strictly follow the statutory requirements set forth in A.R.S. §§ 36-501 – 550.08.  The process for involuntary treatment begins with the petition for evaluation.  An “evaluation” is defined as “a professional multidisciplinary analysis . . . carried out by . . . two licensed physicians, who shall be qualified psychiatrists, if possible . . . and who shall examine and report their findings independently. . . .”  An “examination” is defined as “an exploration of the person’s past psychiatric history and of the circumstances leading up to the person’s presentation, a psychiatric exploration of the person’s present mental condition and a complete physical examination.”  If the evaluation determines that as a result of a mental disorder the patient is “a danger to self or others, is persistently or acutely disable or is gravely disabled,” the medical director at the evaluating agency can file a petition for involuntary treatment.  The petition shall be accompanied by the affidavits of the two physicians who conducted the evaluation.

At MH’s competency hearing, Dr. Premkumar testified that MH was asleep when she tried to examine him and that she was unable to wake him.  She stated that his medication’s side-effects likely contributed to MH’s inability to engage in the examination.  She admitted that she did not conduct a physical exam.  Thus, her affidavit submitted with the petition was not based on a personal examination, but on information Dr. Premkumar received from reviewing the petition and MH’s recent medical records. 

The Court concluded that A.R.S. § 36-533 “requires the physician to personally examine the patient.”  The court so found based on the language of the statute, including its requirement of a “complete physical examination,” which in the psychiatric context includes “observing the patient’s demeanor and physical presentation,” which clearly would require a personal examination.  The court also cited analogous cases in the workmen’s compensation context.

Judge Portley authored the opinion, with Judges Thompson and Swann concurring.

Ariz. Minority Coalition for Fair Redistricting v. Ariz. Independent Redistricting Comm’n (5/20/2009):  Arizona Supreme Court Upholds Plan for Legislative Districts.

The Arizona Independent Redistricting Commission (“Commission”), whose  sole task is to draw congressional and state legislative districts, was created by an initiative-based constitutional amendment.  The process by which members are appointed to the Commission and the procedure that the Commission must follow when drawing districts are described in detail in the constitutional provisions.  See Ariz. Const. art 4, pt. 2. 

There are four steps in the redistricting process.  First, the Commission must create “districts of equal population in a grid-like pattern across the state.”  Id. § 1(14).  Next, the Commission must make adjustments to those districts “as necessary to accommodate” six listed goals.  Id.  The third phase requires the Commission to advertise its draft map for thirty days to allow for public and legislative comment.  Id. §1(16).  Finally, the Commission establishes final district boundaries.  Id. 

The Court first concluded that that it would review the Commission’s redistricting plans under the normally deferential standard accorded legislative decisions.  The Court then addressed the Coalition’s challenges to the second and third phases of the Commission’s state legislative district plan.

In making adjustments to districts during the second phase of the process, the Commission must accommodate six goals.  Id. § 1(14).  The Coalition argued that the Commission had failed to accommodate one goal:  “To the extent practicable, competitive districts should be favored where to do so would create no significant detriment to the other goals.”  Id. § 1(14)(F).  The Court rejected the Coalition’s argument and concluded that there was sufficient evidence in the record that the Commission had considered competitiveness in its deliberative process.

The Coalition also argued that, although the Commission may have considered competitiveness, it failed to follow the constitutional procedure because it did so only after the thirty-day advertisement period.  The Court concluded that the Coalition’s reading of the Constitution to require adjustments before the advertisement period was “overly technical.”  Because the Commission had again advertised its plan after considering all six goals, the procedure complied with the constitutional provisions. 

Finding no procedural deficiencies in the Commission’s process, the Court considered whether the final redistricting plan complies with the Constitution’s substantive requirements.  In light of the Coalition’s failure to show that the Commission’s plan lacks a reasonable basis, the Court concluded that the plan complied with the Constitution. 

Chief Justice McGregor authored the opinion; Vice Chief Justice Berch and Justice Ryan concurred.

Justice Hurwitz concurred in part with the Court’s decision and concurred in the result.  He disagreed with the Court’s characterization as “overly technical” the requirement that the Commission consider all six goals before advertising its plan.  Instead, he said, the plain language of the constitutional provisions mandates such consideration before the Commission may move to the advertisement phase.

Justice Hurwitz’s opinion was joined by Judge Vásquez, who was sitting by designation in place of Justice Bales, who recused himself from this case.  

Holland v. Hurley (5/19/2009): Arizona Court of Appeals Division Two Holds That Single Sale to Arizona Through Online Auction Site Does Not Constitute Purposeful Availment Sufficient to Confer Personal Jurisdiction on Out-of-State Seller

Plaintiff, an Arizona resident, purchased from Defendant, a Michigan resident, a 1976 Cadillac sedan through an eBay online auction.  Plaintiff took delivery in Michigan and had the car transported to Arizona.  After discovering that the vehicle required repairs, Plaintiff filed suit in Arizona, alleging that Defendant’s eBay listing included misrepresentations.

The trial court granted Defendant’s motion to dismiss for lack of personal jurisdiction in Arizona.  Plaintiff appealed.

The Arizona Court of Appeals, Division Two, affirmed.  The Court agreed that Plaintiff had failed to carry his burden to demonstrate Defendant’s purposeful availment of the Arizona market, as necessary for a finding of specific personal jurisdiction.  There was no evidence in the record of any other sales by Defendant to Arizona.

The Court declined to find that, by listing an item for sale on eBay, a seller purposefully avails himself of the market in all 50 states for purposes of personal jurisdiction.  The Court also declined to adopt the “sliding scale” test for minimum contacts through Internet activity set forth by Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).  That sliding scale varies depending on whether an Internet site is active or passive.  The Court found the Zippo test inapplicable because Defendant did not own eBay or exercise control over its level of interactivity.

The Court also declined to apply the “purposeful direction” test for minimum contacts adopted by Calder v. Jones, 465 U.S. 783 (1984), for cases involving intentional torts.  The Court found that Plaintiff had not urged application of that test below or on appeal, and that the record was inadequate to apply the test.

Finally, the trial court did not err in denying Plaintiff’s request to allow discovery relating to personal jurisdiction.   Plaintiff had failed to request any discovery on that issue during the nearly three months that passed between the filing of the Answer and the motion to dismiss, or in the subsequent nearly three months before the hearing on the motion to dismiss.  The trial court thus did not abuse its discretion by denying Plaintiff’s untimely request to conduct discovery.

Chief Judge Pelander wrote the opinion, joined by Judge Howard.  Judge Espinosa separately concurred, stating that a single sale through a “nationally promoted and nationally available forum such as eBay” may well constitute purposeful availment in all 50 states, but that he could not reach that conclusion from the bare record presented. 

Egan v. v. Hon. Fridlund-Horne/Hochmuth (04/14/2009): Arizona Court of Appeals Division One Holds That a Court Must Presume That a Biological Parent’s Decision Whether to Allow a Former Same-Sex Partner to Have Visitation with a Child Is Made in the Child’s Best Interest.

Egan and Hochmuth ended a seventeen-year same-sex relationship.  During their relationship, the couple had a child; Egan gave birth to the child after the couple’s mutual friend donated sperm.  The couple raised the child together for seven years until they decided to separate.  Following the separation, Egan and Hochmuth initially shared equal time with the child.  Later, Egan became concerned with the arrangement and Hochmuth agreed to reduce visitation to Sunday through Thursday, every other week.  After Egan further reduced Hochmuth’s visitation schedule, Hochmuth filed a petition for “custody/visitation” as a person standing “in loco parentis” under A.R.S. § 25-415(C).  The parties stipulated that Hochmuth had “in loco parentis” status.  At an evidentiary hearing, the court heard testimony from both Hochmuth and Egan, among others.  In its ruling, the court found that the parties were equally involved with the child’s upbringing, that the child was doing well in school, and that the only evidence of negative impact of the equal time arrangement was Egan’s own testimony that the child had suffered a “breakdown.”  The court granted Hochmuth visitation rights using a visitation plan that divided the child’s time equally between Egan and Hochmuth.  Egan filed a special action to challenge the superior court’s order.

Division One of the Court of Appeals accepted jurisdiction and vacated the superior court’s order granting visitation rights.  Section 25-415(C) gives a court the power to grant visitation rights to a person standing in loco parentis.  As an initial matter, the Court rejected Egan’s contention that A.R.S. § 25-415 requires a nonparent to establish a complete denial of visitation rights; Hochmuth’s claim for visitation could go forward even though Egan granted some visitation rights.

The Court next determined whether the superior court gave sufficient weight and procedural protections to Egan’s preferences as a parent in light of Egan’s constitutional right to raise her child.  For guidance, the Court examined decisions addressing these constitutional issues in the context of grandparent-visitation cases.  In those cases, courts are directed to apply a presumption that a fit parent’s decisions regarding visitation are in a child’s best interests, and give added weight to the parent’s decisions regarding visitation. 

Hochmuth asserted that the principles from the grandparent cases should not apply to her situation because she is in a substantively different position with respect to the family unit than a typical grandparent.  The Court disagreed.  Although a court should consider “the nature and quality of the relationships” when making visitation decisions, the Court held that “Hochmuth’s relationships with Egan and the child, standing alone, are not a sufficient basis” to overcome the presumption that a fit parent’s visitation decision is in the child’s best interests.  The Court reasoned that nothing in the language or legislative history of A.R.S. § 25-415(C) suggested that the legislature meant to limit the “fit parent presumption.”  Finally, the Court held that Hochmuth was not a “parent” under Arizona domestic relations statutes and therefore did “not enjoy the same legal rights as Egan.”  The evidence of Hochmuth’s relationship with Egan and the child were relevant to determining the proper scope of visitation, but such evidence did not entitle Hochmuth to visitation as a matter of right.

The Court therefore applied the principles from the grandparent cases, holding that a trial court considering a petition for in loco parentis visitation under A.R.S. § 25-415(C) must apply four procedural and evidentiary safeguards:  the court must (1) apply the fit parent presumption; (2) “give ‘some special weight’ to the parent’s” decision “whether visitation is in the child’s best interests and give ‘significant weight’ to the parent’s voluntary agreement to permit some visitation;” (3)  “consider the best interest factors listed in [Arizona statutes];” and (4) “take into consideration other relevant best interests factors such as the degree to which the parent has consented to and fostered the nonparent’s relationship with the child, including any agreements the parties made as to visitation arrangements.”  The Court concluded that the superior court failed to apply any presumption or significant weight to Egan’s visitation decisions, and that the court abused its discretion by granting Hochmuth parenting rights “practically to the same extent as Egan.”

Judge Barker concurred in the judgment only.  In his view, the lower court should have rejected the parties’ stipulation that Hochmuth qualified as a person standing “in loco parentis” under A.R.S. § 25-415.  That statute defines a person standing “in loco parentis,” in part, as “a person who has been treated as a parent by the child.”  According to Judge Barker, the term “parent,” as defined when the statute was adopted, “has number and gender limitations: one man as a father and one woman as a mother.”  Because the legislature has never modified this definition, reasoned Judge Barker, the parties cannot circumvent that definition by way of stipulation.  Thus, because Egan was the child’s female mother, Judge Barker would have found that Hochmuth could not be “treated as a parent.”

Judge Brown authored the opinion in which Judge Downie concurred; Judge Barker concurred in the judgment.

Howell v. Hodap/Johnson (05/12/2009):  Division One of the Arizona Court of Appeals Holds That Claim Preclusion Bars State Law Claims That Could Have Been Asserted in a Federal Court Cause of Action.

In March 2003, officers with the Prescott Area Narcotics Task Force, including Officers Hodap and Johnson, arrived at the home of Patti and Robert Howell to execute a search warrant.  When nobody answered the door, the officers used a battering ram to enter the premises, startling the Howells awake.  Frightened, Robert Howell fired a warning shot toward the door just as the officers entered.  The shot came within inches of one of the officers.  Both Robert and Patti Howell sustained injuries when the officers removed them from their home and handcuffed them.  The Howells were both taken to the police station while their investigation was completed.  No charges were ever filed against Patti Howell; the charges filed against Robert Howell were eventually dropped. 

In December 2003, the Howells filed a lawsuit in Yavapai County Superior Court against Hodap and Johnson, among other, asserting the following claims for relief: violations of their rights under the Arizona Constitution, on the basis of substantive due process violations, unreasonable search and seizure, excessive force, and unconstitutional arrest; negligence; intentional infliction of emotional distress; negligent infliction of emotional distress; false arrest; assault and battery; and violation of A.R.S. § 13-3916.  Before the trial could be held, the Howells filed a lawsuit in federal court asserting similar claims for relief:  violations of their rights under 42 U.S.C. § 1983, on the basis of substantive due process violations, unreasonable search and seizure, excessive force, and unconstitutional arrest, and interference with their right to a fair trial.  The defendants prevailed on all of the claims in the federal district court; three were decided on summary judgment and the rest by the jury.  

Johnson then filed a motion for summary judgment in the state court proceeding on grounds of issue preclusion and claim preclusion.  Hodap filed a motion for summary judgment arguing issue preclusion and joined Johnson’s supplemental briefing on claim preclusion. The trial court denied these motions.  Before trial, the trial court granted the defendants’ motions for judgment as a matter of law on the substantive due process, unconstitutional arrest, judicial deception, false arrest of Robert Howell and assault claims.  The court also determined that Hodap was liable for Patti Howell’s false imprisonment.  At trial, the jury returned verdicts in favor of the defendants. 

On appeal, defendants argue that the trial court erred in failing to apply the doctrine of claim preclusion.   The Arizona Appeals Court agreed, affirming the entry of judgment in favor of Johnson and Hodap and vacating the entry of judgment in favor of Patti Howell.  Addressing the necessary elements for claim preclusion, the Court explained that the issue in the case was whether the federal court case involved the same claims or causes of action as the state court case, and noted that the Arizona Supreme Court has not yet articulated the appropriate test for making this determination.  As a result, the Court looked to Ninth Circuit law.  The Ninth Circuit cases also discuss a variety of tests for determining whether a subsequent case involves the same claims, but the Court noted that the key issue in all of the Ninth Circuit cases is whether the two cases arise out of the “same nucleus of facts.”  Applying this test to the facts at hand, the Court held that the federal and state court actions arise out of the same transactional nucleus of facts, and the claims brought under Arizona law in the state court could have been brought in the federal court action. The Court further explained that the state tort claims also arise out of the same transactional nucleus of facts, even though the legal theories are different from those asserted in the federal cause of action. 

Judge Barker authored the opinion, Judges Weisberg and Gemmill concurred. 

17 Applicants Being Considered by Commission to Replace Justice McGregor

Seventeen individuals have applied to fill the supreme court vacancy that will be created when Justice McGregor retires in June.  The applicants are Eddward P. Ballinger Jr., Robert M. Brutinel, Kent E. Cattani,Norman J. Davis, Philip G. Espinosa, John C. Gemmill, Philip L. Hall, Lisa G. Tewksbury Hauser, Wallace R. Hoggatt, Robert C. Houser Jr., Diane M. Johnsen, Stephen H. Lesher, A. John Pelander III, Jose H. Robles, Thomas M. Ryan, Ann A. Scott Timmer and Lawrence F. Winthrop. Their applications for the position can be viewed online at http://www.supreme.state.az.us/jnc/.

The Commission on Appellate Court Appointments will review the applications and hear comments at a public meeting on June 3. The meeting will be held at the Arizona State Courts Building in Phoenix, 1501 W. Washington, Conference Room 345, starting at 10:00 a.m. Citizens may address the commission at that time or send written comments to 1501 W. Washington, Suite 221, Phoenix, AZ, 85007 or to jnc@courts.az.gov. Comments must be received by May 29 to be considered. Anonymous comments cannot be considered.

At the June 3 meeting the commission will decide which applicants will be interviewed for the opening. The selected applicants will be interviewed on June 29. After the interviews the commission will recommend at least three nominees to Governor Jan Brewer, who will appoint the new justice.

Quintero v. Rodgers (5/12/2009):  Arizona Court of Appeals Division One Holds That Arizona’s Survival Statute Precludes Loss of Enjoyment of Life Damages, but Allows Punitive Damages.

Defendant Matthew Rodgers’ vehicle collided with another vehicle that then collided with Luis Soto’s vehicle.  Soto sued Rodgers, but subsequently died in an unrelated workplace accident.   Plaintiff Elizabeth Quinter, his widow and personal representative of his estate, accordingly substituted herself in his place.  Rodgers moved for partial summary judgment, arguing that (1) Quintero could not claim damages for Soto’s loss of enjoyment of life or punitive damages under Arizona’s survival statute, and (2) the trial court should not allow Quintero to argue punitive damages to the jury because she had not met the required clear and convincing threshold.  The court granted Rodger’s motion without explanation, and Quintero timely appealed.

The Arizona Appeals Court affirmed in part and reversed in part.  The Court affirmed with respect to loss of enjoyment of life damages, holding that Arizona’s survival statute, A.R.S. § 14-3110, precludes such damages because it states that “upon death of the person injured, damages for pain and suffering of such injured person shall not be allowed.”  The Court explained that loss of enjoyment damages are a form of pain and suffering damages.  The Court rejected Quintero’s argument that they are a separate type of damages, and in doing so distinguished Ogden v. J.M. Steel Erecting, Inc., 201 Ariz. 32, 31 P.3d 806 (App. 2001), because that case did not find that loss of enjoyment damages are distinct from pain and suffering damages.

The Court, however, reversed with respect to punitive damages, holding that such damages are not precluded by § 13-3110 because they are not aimed at compensation, and therefore do not fall within the pain and suffering language of the statute.  The Court also held that there was sufficient evidence of Rodgers’ recklessness to submit the issue of punitive damages to the jury.   

Judge Irvine authored the opinion; Presiding Judge Winthrop and Judge Hall concurred.

New Sun Business Park, LLC v. Yuma County (5/5/2009): Arizona Court of Appeals Division One Holds that the County Board of Supervisors Must Appoint Both County Zoning Inspectors and Deputy County Zoning Inspectors, But, Under the Circumstances of this Case, the Deputy County Zoning Inspector Acted in a De Facto Capacity.

After Ron Van Why, a deputy county zoning inspector, issued zoning complaints against it, New Sun Business Park filed a complaint in the trial court claiming that the County Board of Supervisors had failed to properly appoint Van Why and the County Zoning Inspector.  The trial court initially issued a writ of mandamus, but later dismissed New Sun Business Park’s complaint after the Yuma County filed a motion to dismiss.  This appeal followed.

The Arizona Appeals Court first concluded that the County Board of Supervisors had properly appointed the County Zoning Inspector pursuant to a county ordinance which provided that the county planning and zoning director is also the county zoning inspector.  This remained true even after the County Board of Supervisors replaced the ordinance with an unrelated ordinance which no longer mentioned the county zoning inspector position because the County Board of Supervisors did not repeal the zoning ordinances or transfer the duties of the county zoning inspector to other county officers.

 The Appeals Court next held that A.R.S. § 11-808(A), which provides that a county zoning ordinance “may establish the position of county zoning inspector, and such deputy inspectors as may be required, who shall be appointed by the board,” requires that the county board of supervisors appoint both the county zoning inspector and all deputy county zoning inspectors.  Finally, the Court concluded that although the county board of supervisors had not appointed Ron Van Why, he acted in a de facto capacity because enforcement of the zoning regulations serves the public interest and no one was previously aware that he had not been validly appointed.  Consequently, the complaints that Ron Van Why issued were valid.

Judge Gemmill authored the opinion; Judges Norris and Kessler concurred.

Engel v. Landman (4/30/2009): Arizona Court of Appeals Division One Holds that (1) Family Court Erroneously Attributed Hypothetical Income and Childcare Expenses to a Voluntarily Unemployed Parent Because the Arizona Child Support Guidelines Do Not Support the Use of Hypothetical Attribution to Increase the Support Burden on the Employed Parent, and (2) the Court Further Erred in the Method It Used to Calculate the Father’s Stock Option Income.

The parties were divorced pursuant to a consent decree, which provided that Mr. Engel would pay child support in the amount of $2,000 per month, an amount slightly higher than the Arizona Child Support Guidelines mandated.  Mr. Engel then filed a petition to modify child support.  In support of his contention that there had been the necessary continuing and substantial change of circumstances, he presented evidence that Ms. Landman’s investment assets had substantially increased as a consequence of her receipt of an inheritance from her father and an annuity from his former employer.  The court ultimately found that Ms. Landman’s monthly income, excluding spousal maintenance, exceeded $13,000. Because she was voluntarily unemployed, Mr. Engel also sought to attribute income to her in an amount equal to her earning potential as an accountant.  Ms. Landman argued that any income the court chose to attribute to her should be offset by the childcare costs that would be necessitated by full-time employment, so much so that the result might be an increase, not decrease, in child support.  The court ultimately adjusted the child support order downward.  It also awarded Ms. Landman her attorneys’ fees.  Mr. Engel in turn filed a motion for new trial.  Before the court ruled on the motion for new trial, however, Mr. Engel filed a notice of appeal on July 19, 2007.  Ms. Landman filed a notice of cross-appeal on August 14, 2007.  On September 11, 2007, the court ruled on Mr. Engel’s motion for new trial.  On October 9, 2007, Mr. Engel filed a supplemental notice of appeal from the September 11 order and from the earlier order modifying his support obligation.  Mr. Engel then pursued this appeal, and Ms. Landman cross-appealed.       

The Arizona Appeals Court vacated the family court’s rulings concerning the parties’ income and Ms. Landman’s attributed childcare costs and remanded for a recalculation.  Before reaching the merits, the Court concluded that Mr. Engel’s initial notice of appeal was premature because he had filed his notice while his own motion for new trial was still pending before the superior court.  Nevertheless, his October 9, 2007 supplemental notice of appeal following the signed minute entry disposing of the motion for new trial conferred jurisdiction on Court.  See Baumann v. Tuton, 180 Ariz. 370, 884 P.2d 256 (App. 1994).  For the same reason that Mr. Engel’s first notice of appeal was premature, Ms. Landman’s notice of cross-appeal was premature.  But unlike Mr. Engel, she never filed a supplemental notice of cross-appeal from the September 11 order.  Thus, the Court did not consider her cross-appeal.  Turning to the merits, the Court concluded that the family court had erred in attributing hypothetical income and childcare expenses to Ms. Landman, even though she was voluntarily unemployed, because the result of such attribution was to increase, not decrease, the amount of child support owed by the working parent, Mr. Engel.  The Court held that the Arizona Child Support Guidelines, see A.R.S. § 25-320 app. (2007), do not allow hypothetical attribution “to transform a decision to remain unemployed into an increase in child support received.”  The Court also held that the family court had erred in computing Mr. Engel’s income from his matured, unexercised, vested stock options.  To capture the income, the family court adopted the following formula from an out-of-state judicial opinion: Each option grant is valued on the most recent date for which an option could be exercised minus the price on the date the option was granted.  Using this formula, the family court then calculated Mr. Engel’s stock option income for options granted in the years 2004 through 2006.   The Court ultimately rejected this formula because it makes the interest of the child dependent on market fluctuations that have no actual impact on the funds available to support the children; child support obligations, according to the Court, should not be governed by the volatility of the marketplace, and the implicit assumption in the family court’s formula that options will appreciate year to year does not comport with the realities of the market.  The Court declined to articulate a formula that must be employed in every case, but it noted that “one approach that serves the purposes of the Guidelines and reflects economic reality is to examine the value the parties placed on the stock options when they entered into their employment compensation agreement.”  This amount, “though not conclusive, purports to represent the amount that both Father and his company thought was a fair value of Father’s work during the year at issue.”                            

Judge Swann authored the opinion; Judges Brown and Barker concurred. 

Jilly v. Hon. Rayes/Carter (04/30/2009):  Division One of the Arizona Court of Appeals Holds That A.R.S. § 12-2603 Does Not Conflict With the Arizona Supreme Court’s Rulemaking Authority.

In February 2008, Plaintiffs filed an action for medical malpractice against Defendants.  Defendants filed a motion to enforce, asking the trial court to require Plaintiffs to comply with A.R.S. § 12-2603, and certify whether expert opinion testimony was necessary to prove the standard of care and/or liability in the case.  Plaintiffs opposed the motion, arguing that the statute is unconstitutional because it infringes on the Arizona Supreme Court’s rulemaking authority.  The trial court denied Defendants’ motion, ruling that A.R.S. § 12-2603 conflicts with Arizona Rule of Civil Procedure 16(c) and 26.2(b).  The trial court reasoned that because the statute required Plaintiffs to disclose their expert, their expert was known to the Defendants and could therefore be subject to deposition.   Defendants filed a special action petition.

The Arizona Appeals Court accepted jurisdiction and reversed the trial court’s decision.  The Court upheld the constitutionality of A.R.S. §12-2603, finding that it does not conflict with the Arizona Supreme Court’s rulemaking authority.   A.R.S. § 12-2603 provides that a plaintiff suing a health care professional must certify whether expert opinion testimony is necessary to prove the health care professional's standard of care or liability, and, if expert opinion testimony is necessary, requires service of a "preliminary expert opinion affidavit" with the initial disclosures, unless the court extends the time for compliance under certain circumstances. Rule 16(c) of the Arizona Rules of Civil Procedure provides that the disclosure of standard of care and causation expert witnesses shall be made within 30-90 days after the pretrial scheduling conference. 

The Court reasoned that because A.R.S. § 12-2603 only requires a preliminary expert opinion affidavit, and does not require that the expert who provides that affidavit provide expert opinion testimony at trial, and because it grants the court discretion to extend the timeframe for compliance with the statutory requirements, the statute does not conflict with the rulemaking authority of the Arizona Supreme Court.      

Judge Thompson authored the opinion, Judges Portley and Swann concurred. 

Sage v. Blagg Appraisal Co. (4/30/2009):  Arizona Court of Appeals Division One Holds That an Appraiser Retained by a Lender to Appraise a Home in Connection with the Granting of a Purchase-Money Mortgage May Be Liable to the Prospective Buyer for Failure to Exercise Reasonable Care in Performing the Appraisal.

Plaintiff Shari Sage purchased a home for $605,200.  Her lender retained Defendant Blagg Appraisal Company, Ltd. (“Blagg”) to perform the appraisal on the home.  Blagg never interacted with Sage, and submitted the appraisal only to the lender.  Sage, however, asked the lender to provide her with a copy of the appraisal, which she received prior to closing.  The appraisal stated that the livable area of the home was 2,440 square feet and estimated its value to be $620,000.  A year and a half later, Sage obtained another appraisal stating that the livable area of the home was only 1,871 square feet.  Sage sued Blagg for negligently misrepresenting the value of her home at the time of purchase, claiming that she would not have purchased it had the appraisal been accurate.  Both parties moved for summary judgment as to whether Blagg owed Sage a duty.  The Court granted Blagg’s motion, and Sage timely appealed.

The Arizona Appeals Court reversed and remanded.  Citing the Restatement (Second) of Torts § 522 (1977), and Standard Chartered PLC v. Price Waterhouse, 190 Ariz. 6, 945 P.2d 317 (App. 1997), the Court explained that a professional owes a duty to a plaintiff when it supplies information to a third party for use in a business transaction, the professional knows the third party intends to supply the information for the benefit of a limited group of persons, and the plaintiff is a member of that group.  The Court held that the facts supported an inference that Blagg knew the lender intended to provide the appraisal to Sage because Sage had a right to request the appraisal.  The Court also noted that public policy, the realities of the loan/purchase transaction, and evolving industry standards supported its conclusion that an appraiser owes a duty not only to the lender that contracts for the appraisal, but also the prospective borrower.

The Court rejected Blagg’s argument that this case is governed by Kuehn v. Stanley, 208 Ariz. 124, 91 P.3d 346 (App. 2004), and Hoffman v. Greenberg, 159 Ariz. 377, 767 P.2d 725 (App. 1988), noting that those cases are factually distinguishable.  The Court also rejected Blagg’s argument that it owed no duty because the loan transaction was distinct from the purchase transaction, explaining that the two transactions are closely related.  Additionally, the Court rejected Blagg’s argument that it owed no duty under Restatement § 522 because an appraiser may not know that the lender will supply the appraisal to a purchaser.  The Court explained that the Restatement does not require that an appraiser know that the lender will supply the information, only that it intends to supply the information.

Presiding Judge Johnsen authored the opinion; Judges Winthrop and Norris concurred.

Arizona Association of Providers for Persons with Disabilities v. State of Arizona (4/30/09): Arizona Court of Appeals Division One Holds That Department of Economic Security Decision To Reduce Rates Paid to Service Providers and Suspend Certain Services for Developmentally Disabled Individuals Did Not Violate State or Federal Law.

After the Arizona legislature required significant budget cuts in early 2009, the Arizona Department of Economic Security (“DES”) suspended certain services and reduced by ten percent the rate it pays to providers of other services that DES provides to developmentally disabled individuals.  DES did not suspend any services provided pursuant to the federal Medicaid program, but did reduce rates paid to providers of some of those services.  A group of providers and individuals who receive services filed suit seeking temporary and permanent injunctive relief on the basis that the rate cuts and service suspensions violated state and federal law.  After an expedited hearing, the superior court issued a preliminary injunction prohibiting the State from enforcing the suspensions of services or the rate cuts.  The State appealed the grant of the preliminary injunction.

In a unanimous Per Curiam opinion, the Court reversed the superior court, holding that the plaintiffs “failed to present substantial evidence to support the proposition that by imposing the service suspensions and the rate reductions, the State at this time has violated or is likely to violate state or federal law.”  First, the Court disposed of the State’s various jurisdictional arguments, concluding that (1) all but one of the plaintiffs had standing to seek relief; (2) the plaintiffs were not required to exhaust administrative remedies in this case; and, (3) the court had the power to review the legality of DES’s budget reduction decisions. 

Second, the Court held that, although the rate reductions and service suspensions threatened great hardship on the plaintiffs, the budget decisions did not violate state law.  The Court explained that individuals receiving services pursuant to an “Individual Support Plan” are not legally entitled to those services if the state has not appropriated sufficient funds.  Furthermore, the Court reasoned that the rate reductions complied with state law because the laws dictating a process for rate structures did not apply to one-time, emergency fiscal adjustments.  Finally, the Court was not convinced that the legislature improperly delegated to DES the duty of choosing specific cuts; the legislature was within its power to direct each agency to choose how a specific budget reduction would be allocated.

Third, the Court held that the plaintiffs failed to demonstrate a likely violation of federal law.  Many Plaintiff-Providers offered both state-only services and Medicaid-based services.  The plaintiffs argued that the combination of service suspensions and the ten-percent rate cut would impair the ability of those providers to continue offering sufficient Medicaid services, thus likely causing a violation of Arizona’s obligation under federal law to ensure qualified individuals receive Medicaid services.  The Court disagreed, holding that there was not substantial evidence to show that the network of providers would fail to provide sufficient Medicaid services, or that the state would fail to provide out-of-network services in the event the network was insufficient.  Therefore, the Court found that the rate reductions and service suspensions should not have been preliminarily enjoined.  The Court admonished the State, however, that if evidence came to light that the budget cuts in fact did impair the existing network of Medicaid providers, and the state fails to ensure out-of-network services, the plaintiffs could return to court with the new evidence.

Judges Johnsen, Winthrop, and Norris concurred in the Per Curiam opinion.

Modular Mining Systems, Inc. v. Jigsaw Technologies, Inc. et al (4/30/2009):  Arizona Court of Appeals Division Two Holds That Trial Court, In Trade Secrets Case, Properly Concluded Injunctive Relief Moot Where Defendants Voluntarily Ceased Use of Alleged Trade Secret Upon Learning Plaintiff Considered The Material a Trade Secret.

Modular Mining Systems, Inc. (Modular) manufactures a mine-management system known as “Dispatch.”  Dispatch is a combination of hardware and software that gathers data about a mine’s equipment and calculates the equipment’s optimal use.  The Dispatch system consists of a central server and one or more field units that are attached to mobile mining equipment.  Two former Modular employees formed Jigsaw Technologies Inc. (Jigsaw), which eventually manufactured a mine-management product called “MineOps.”  MineOps competes directly with Dispatch. 

Modular filed suit in 2004, naming Jigsaw and individual defendants.  Modular sought a preliminary injunction and alleged, inter alia, a violation of Arizona’s Uniform Trade Secrets Act and breach of employment agreements.  The trial court denied the injunction in May 2005 after a five-day hearing.  In August 2007, Modular amended its complaint and sought only injunctive relief.  Modular contended Jigsaw had misappropriated two computer codes and used them to allow Jigsaw’s field units to communicate with Modular’s field units aboard certain vehicles at two mines in Peru and Argentina.  Modular sought to enjoin Jigsaw from using these computer codes.

Jigsaw moved for summary judgment on all of Modular’s claims in January 2008.  Jigsaw asserted that it had been unaware Modular considered the computer codes at issue to be trade secrets until Jigsaw deposed Modular’s expert in February 2008.  Upon learning that Modular considered the computer codes to be trade secrets, it immediately discontinued their use and implemented an alternate procedure that was published and thus not a trade secret.  Jigsaw also asserted that the Dispatch systems, in any event, would be decommissioned in both mines by the end of 2008.  Modular did not dispute that Jigsaw was using the computer codes at only the two specified mines or that both mines stopped using Dispatch in 2008.  The trial court granted Jigsaw’s summary judgment motion in its entirety, concluded Modular’s claim for injunctive relief was moot, and awarded Jigsaw its requested attorneys’ fees in the amount of $510,561.50 under A.R.S. § 12-341.01 and § 44-404.  Modular appealed.

Division Two affirmed.  Reviewing de novo whether the grant of summary judgment was proper, the Court’s opinion focused on Modular’s argument that the trial court erred in finding its request for injunctive relief moot.  The issue of injunctive relief is moot when the “events make it absolutely clear the allegedly wrongful behavior could not be reasonably expected to recur.”  Although the mere cessation of illegal conduct does not necessarily render a case moot, the necessary determination is that “there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.”  Factors that may point to a danger of future violations include past violations, involuntary cessation of the violations, and their continuance in disregard of the lawsuit. 

On appeal, Modular contended that its expert contraverted Jigsaw’s assertion that Jigsaw’s discontinuance of the command codes at issue in the future rendered its use of Modular’s computer codes moot.  Quoting at length from the expert’s affidavit, the Court found that the expert’s statement failed to create a genuine issue of material fact because: (1) the substance of the expert’s statements did not provide any evidence contraverting Jigsaw’s factual assertions that it had stopped using the computer codes once it learned Modular considered them to be trade secrets; (2) the expert’s statement that there was a possibility that Jigsaw could benefit from its past use of Modular’s trade secrets was irrelevant to Modular’s claim for injunctive relief, and (3) the expert’s statements were dependent on additional research and further discovery, language which would be appropriate for a Rule 56(f) motion, but which did not demonstrate a genuine factual dispute.   The Court concluded that in general, Modular failed to produce any evidence suggesting there was any reason or likelihood that Jigsaw would revert to using the previous configuration procedure.

Finally, the Court affirmed award of attorneys fees to Jigsaw under § 12-341.01.  It rejected Modular’s arguments that while Jigsaw was entitled to fees incurred in connection with the claims for breach of employment agreements, Jigsaw could not obtain its fees incurred in defending Modular’s trade secret claim, which does not arise out of contract.  The Court agreed with Jigsaw that Modular’s claims were “inextricably interwoven,” and thus the trial court did not abuse its discretion in awarding fees.

Judge Espinosa authored the opinion, with Judges Howard and Pelander concurring.

Hughes Custom Building, L.L.C. v. Davey (5/7/2009): Arizona Court of Appeals Division Two Holds That Economic Loss Doctrine Does Not Bar Homebuilder’s Negligence Claim Against Engineering Firm For Damages From Soil Subsidence to Homes That Were Sold by Homebuilder

A buyer sued a homebuilder for structural damage to a home because of allegedly improper site preparation and soil subsidence.  After settling that suit, the homebuilder brought a malpractice action against the engineering firm allegedly responsible for the site preparation.  The trial court granted motions for summary judgment in favor of the engineering firm on the grounds that (1) the homebuilder did not have “standing” to assert damages for loss of home values suffered by the homeowners, and (2) the economic loss doctrine barred the homebuilder’s claims for negligence and breach of implied warranty.

The Court of Appeals reversed and remanded.  Under the economic loss doctrine, courts consider whether a claim sounds in contract or tort based on consideration of three factors: (1) the nature of the defect causing the loss, (2) how the loss occurred and (3) the type of loss for which the plaintiff seeks redress. 

The third factor looks in part at whether “other property” was damaged.  For this analysis, the damaged home is not considered part of the same property (the lot) that was the subject of the engineering contract.  Accordingly, this factor weighs heavily toward allowing a claim in tort.  Likewise, the first factor favors allowing a tort claim; the defect presented a safety hazard for the home occupants.  Lastly, although the loss did not result from a sudden calamity or accident, but instead was slowly manifested, this factor was outweighed by the other factors favoring allowance of an action in tort.  

The economic loss doctrine therefore did not bar the homebuilder’s negligence claim.  And the homebuilder had standing to sue for the damages that it had incurred as a result of the engineering firm’s alleged negligence, despite that the homebuilder’s damages resulted indirectly as a result of its legal obligations to the home buyers.  Because the builder did not address its dismissed implied warranty claim on appeal, the court found that it had waived any appeal of that dismissal.

Judge Brammer wrote the opinion for the unanimous panel; Judges Eckerstrom and Vásquez concurred.