AZAPP Blog

Stewart v. Carroll (3/13/07): Division One Holds That Provisions of Arizona’s Juror-Exemption Statute Allowing Prospective Jurors 75 and Older to Opt Out of Jury Service and Prohibiting Public disclosure of Prospective Jurors’ Medical Statements Do Not Violate the Arizona Constitution.

Arizona Revised Statute § 21-202(C) allows a prospective juror at least seventy-five years of age to submit a written request to be excused from jury service. Upon service of a written request, the court is required to excuse the prospective juror. Subsection (B)(1) of that statute requires that documents submitted by a prospective juror in support of a claim of a mental or physical condition that would excuse the juror from service shall not be disclosed to the general public. On May 4, 2005, Mr. Stewart asked the municipal court to declare these provisions unconstitutional because they violate his Arizona constitutional rights to due process and a fair jury trial. The court denied the motion. Mr. Stewart then filed a petition for special action with the superior court, which accepted jurisdiction but denied relief. The Court of Appeals affirmed.

With respect to the opt-out provision, the Court of Appeals applied the three-part test set out in Duren v. Missouri, 439 U.S. 357 (1979) for establishing a prima facie violation of a defendant’s federal constitutional Sixth Amendment right to a jury selected from a fair cross-section of the community. In so doing, the Court rejected Stewart’s argument that it should interpret Arizona’s right to jury trial provision more broadly than the federal provision. The Duren test requires a defendant to show:
(1) that the group alleged to be excluded is a “distinctive” group in the community; (2) that the representation of this group in venires from which juries are selected is not fair and reasonable in relation to the number of such persons in the community; and (3) that this underrepresentation is due to systematic exclusion of the group in the jury-selection process.
The Court held that Stewart failed to meet the first requirement because age by itself does not generate sufficiently similar attitudes and ideas to constitute a “distinctive group” for purposes of the Duren test.

The Court also rejected Stewart’s assertion that the confidentiality provision of the juror-exemption statute violates his “state open justice rights – Article 2, § 11.” The Court acknowledged that Arizona’s constitution mandates public judicial proceedings, but found that the confidentiality provision did not run afoul of this constitutional requirement. Rather, the confidentiality provision accommodates the legitimate personal privacy rights of prospective jurors.

Judge Norris authored the unanimous opinion, joined by Presiding Judge Timmer and Judge Johnsen.

Kim v. Mansoori (3/23/07): Division Two Holds That a Court May Not Certify an Attorney Fee Claim as a Final Judgment Pursuant to Rule 54(b) in Advance of a Related Judgment Regarding the Merits.

The plaintiffs, Mr. and Mrs. Kim, filed a breach of contract action and claim for attorneys’ fees against the seller and his real estate agent Haider Mansoori for allegedly breaching a purchase contract for approximately forty acres of vacant land. Mansoori filed a motion for partial summary judgment on the attorneys’ fees claim asserted against him, arguing that the Kims could not be awarded attorney fees under A.R.S. § 12-341.01 because the action did not “aris[e] out of a contract.” The trial court granted Mansoori’s motion, finding the Kims would not be entitled to attorneys’ fees under § 12-341.01 because “there is no[] contract between Mansoori and Kim.” The trial court further directed the entry of judgment pursuant to Ariz. R. Civ. P. 54(b), purportedly making the judgment final and appealable. The Kims appealed the propriety of the trial court’s Rule 54(b) certification of the claims as a final judgment.
The Court of Appeals held that Ariz. R. Civ. P. 54(g), which governs the procedure for claiming and being awarded attorneys’ fees, expressly precludes a determination on an attorney fee request prior to a decision on the merits. It further held that Rule 54(b) does not authorize certification of a type of final judgment – a judgment on an attorney fee claim preceding a decision on the merits – that is expressly forbidden in Rule 54(g). The Court of Appeals explained that the 1999 amendment to Rule 54(b), which discusses attorneys’ fees, merely allowed a determination of attorneys’ fees to be made after a judgment on the merits and did not contemplate or address a determination of attorneys’ fees before a judgment on the merits. Accordingly, the trial court erred when it certified as final a judgment on an attorneys’ fee claim pursuant to Rule 54(b) in advance of a “related judgment regarding the merits of [the] cause.” In light of that, the Court of Appeals determined that it lacked jurisdiction over the appeal, and dismissed it.
The decision was authored by Judge Eckerstrom; Judges Brammer and Espinosa concurred.

William Wayne Roubos, et al v. Hon. Leslie Miller (3/20/07): Supreme Court Affirms That Party That Prevails in a Civil Infraction Proceeding Brought by a City May Recover Attorneys’ Fees

The City of Tucson cited Defendants for violating the Tucson City Code. Defendants were found not responsible after a civil infraction hearing in Tucson City Court. Defendants sought attorneys’ fees pursuant to A.R.S. § 12-348(A)(1), which provides that a court shall award fees to any party that prevails in a “civil action brought by the state or a city, town or county against the party.” Subsection (H) of the same statute exempts from the fee provision “proceedings brought by a city or town or county … pursuant to traffic ordinances or to criminal proceedings.” The magistrate denied Defendants’ request for attorneys’ fees, holding that the proceeding was not a “civil action.” The superior court affirmed the city court’s ruling on appeal, but the court of appeals reversed. See Roubos v. Miller. This appeal followed.

Justice Berch, writing for a unanimous panel, rejected Tucson’s contention that a “civil infraction proceeding” is not a “civil action” for purposes of A.R.S. § 12-348. Noting that a civil action is commonly understood to be any action that is not a criminal prosecution, the court refused to carve out civil infraction proceedings from civil actions. The court wrote that the city obtained the benefit of the lower civil standard of proof, but incurred the burden of paying fees in which it failed to meet that standard. The court rejected Tucson’s argument that subsection (H) excepts civil infraction proceedings from the fees provision, stating that the legislature did not specifically list civil infraction proceedings among the several proceedings listed in subsection (H). The court denied Defendants request for fees on appeal, finding that they failed to request fees in their response to the petition for review.

Fleischman v. Protect Our City (03/14/07): In Striking Down the City of Phoenix's Procedure for Supplementing Petition Signature Sheets, the Arizona Supreme Court Holds that It has Concurrent, Not Exclusive Jurisdiction with the Courts of Appeals Over Actions Challenging the Certification of Signatures for a Ballot Measure and Such Actions Must, in the Future, Be Filed with the Relevant Court of Appeal

Protect Our City sought to include an initiative measure concerning the enforcement of federal immigration laws on the 2006 ballot. After the Phoenix City Clerk determined that POC's petition sheets did not contain enough valid signatures to qualify for placement on the ballot, it issued a certificate of insufficiency. POC then submitted supplemental signatures pursuant to a Phoenix City Code provision authorizing a one-time supplementation of signatures if the City Clerk deems an initiative petition insufficient for lack of valid signatures. Fleishman challenged the Clerk's certification under ARS 19-121(B), which provides that once a petitioner receives a receipt after filing a petition and tendering petition sheets to the secretary of state "no additional petition sheets may be accepted for filing." The superior court concluded that Phoenix City Code provisions conflict with state law and are invalid insofar as they permit the filing of supplemental signatures. POC appealed to the Supreme Court.

The Court first addressed whether its jurisdiction over the appeal was exclusive or concurrent with that of the court of appeals. ARS 19-121.03(B), under which POC appealed the superior court's decision, provides that in actions challenging the certification of signatures for a ballot measure "[e]ither party may appeal to the supreme court within ten calendar days after judgment." Though more specific than the general statute providing that the courts of appeals have appellate jurisdiction "in all actions and proceedings originating in or permitted by law to be appealed from the superior court, except" in capital cases, A.R.S. 12-120.21(A)(1), the Court concluded that 12-121.03(B) did not give the Supreme Court exclusive jurisdiction. This is so, said the Court, because as in Perini Land & Dev. Co. v. Pima County, 170 Ariz. 380 (1982), the Court does not interpret statutes vesting appellate jurisdiction in the Court as vesting exclusive jurisdiction unless there is an express intention to do so. Compare A.R.S. 19-121.03(B) with e.g., Ariz. Const. art. 6, section 5(2) (providing for "original and exclusive" in Supreme Court over "causes between counties"). In the future, a party should file its action in the court of appeals.

Despite this, the Court considered POC's appeal, primarily because it was announcing a new rule, but also because election matters require timely determinations and other city codes contain provisions similar to the one at issue. The Court then affirmed the superior court's decision striking down the portion of the Phoenix City Code that permits supplementing petitions as conflicting with Arizona law that prohibits supplementation. The Court rejected POC's argument that because cities have authority to set forth the procedure for verifying signatures, it should also have authority to modify the procedure for filing signatures, noting that verification and filing are two separate processes, and Arizona law grants discretion to cities only over the verification process.

Justice Bales authored the opinion for a unanimous court.

In Re MH 2006-000490 (3/22/07): Division One Rules Doctor’s Finding of Mental Retardation Is Insufficient Basis to Order Involuntary Mental Health Treatment

A man who was ordered to undergo involuntary mental health treatment appealed the ruling on the ground that one of two physicians who submitted an affidavit in support of the order had diagnosed him as having mental retardation but not a “mental disorder” under A.R.S. § 36-533(B). By statute, “mental disorder” is defined to exclude “[c]onditions that are primarily those of drug abuse, alcoholism or mental retardation.” A.R.S. § 36-501(26)(a). On appeal, the Court of Appeals agreed that the diagnosis of mental retardation was an insufficient basis under A.R.S. § 36-539(B) to order involuntary treatment. The court therefore reversed and remanded.

Judge Barker wrote the opinion for the unanimous panel; Judge Snow and Judge Kessler concurred.

Patterson v. Thunder Pass, Inc. (03/08/07): Division One Holds that Tavern was Properly Held Exempt from Dramshop Liability when Drunk Driving Accident Occurred After Tavern Staff Confiscated Drunk Patron’s Car Keys and Drove Her Home.

Defendant Thunder Pass operates a tavern in Mesa. A patron became intoxicated at the tavern and drove erratically in the parking lot. Tavern staff confiscated her keys, called a cab (which never came), and finally drove her home, returning her keys to her when she was home. Unbeknownst to the Thunder Pass staff, the drunk patron returned the same night to the tavern’s parking lot and drove away in her car. Speeding the wrong way down the street, she crashed into a car driven by Patterson. Patterson sued Thunder Pass for negligence, negligence per se and respondeat superior. Thunder Pass filed a motion for summary judgment, arguing that it had fulfilled its duty by driving the patron home, and that the patron’s return to the bar was an unforeseeable superseding event that negated any alleged negligence on the part of the tavern. The trial court granted the motion, agreeing that the drunk patron’s immediate return to the tavern was “not reasonably foreseeable,” and reasoning that the injury to Patterson was the result of the patron’s “independent action,” which constituted a superceding intervening cause of the accident. The Court of Appeals agreed with the trial court on both counts. The Court held that the tavern employees fulfilled their duty of care by “separating [the patron] from her vehicle and arranging for, as well as subsequently providing, the safe transportation of [the patron] to her residence.” The Court also held that “[the patron’s] decision to return that night to retrieve her vehicle while she was still intoxicated was unforeseeable and extraordinary and thus constituted a superseding, intervening event of independent origin that negated any negligence on the part of the tavern or its employees.”

The decision was authored by Judge Winthrop and joined by Judges Erlich and Weisberg.

State v. Rayes (3/20/07): Supreme Court Holds Ineffective Assistance Claims Can Only be Raised in Rule 32 Proceedings

Anthony Reynaga, the real party in interest in this review of a special action decision, was charged with theft and indicted for armed robbery in separate incidents. The State, via the Maricopa County Attorney, offered pleas in both cases. Defense counsel never responded and later told the court that a clerical error had prevented her from receiving the offers. The offers had expired by their own terms by the time she learned of them at the trial management conference. After a request from the defense to reinstate the plea offers, the State refused. The Superior Court, however, found that counsel's error was "excusable neglect" and ordered the offers reinstated. After the court refused to reconsider its order, the State filed a special action in the Court of Appeals.

The Court of Appeals accepted jurisdiction and then granted relief under State v. Donald, 198 Ariz. 406 (App. 2000), finding that failure to communicate the plea was ineffective assistance of counsel, notwithstanding the superior court's "excusable neglect" finding. The Court of Appeals went on to hold, however, that Donald was wrong in holding that reinstatement of a plea is a permissible remedy for ineffective assistance of counsel during the plea process. The Court of Appeals thus directed the parties to return to the plea negotiation stage.

The Supreme Court, in a unanimous decision by Justice Hurwitz, vacated the decision of the Court of Appeals. The Court first noted that the Court of Appeals was correct insofar as it concluded that excusable neglect does not permit the superior court to order reinstatement of a plea under Donald. The Supreme Court then held that the record before it did not, indeed could not, establish ineffective assistance, because the case was at such an early stage. Relying on the fact that "ineffective assistance" Strickland v. Washington, 466 U.S. 668 (1984), requires a showing of prejudice to the defendant, the Court reasoned that no prejudice can be demonstrated where, as here, the defendant has not yet been found guilty. Accord State v. Spreitz, 202 Ariz. 1 (2002). The Court, explicitly held "that a defendant may bring ineffective assistance of counsel claims only in a Rule 32 post-conviction proceeding--not before trial, at trial, or on direct review."

Allstate Indemnity Co. v. Ridgely(3/15/07): Division Two Holds That The “Sham Affidavit” Rule Applies Where A Party/Witness’ Deposition Testimony Contradicts The Party/Witness’ Earlier Affidavit, But Declines To Apply The Rule In This Case

Lisa Ridgley filed a wrongful death claim against Nicholas Perrow, who hosted a party during which Ridgley’s son was fatally shot. Perrow was hosting the party at the home of Donald and Garnett Sloane, Perrow’s grandparents. The Sloanes were the named insureds in Allstate homeowners and umbrella policies. Allstate suspected that Perrow might have been living with his uncle, not the Sloanes, at the time of the shooting, and eventually procured a sworn statement from Perrow during which he stated that he was no longer a permanent resident of the Sloans’ home. Allstate then filed a declaratory judgment action against Perrow and Ridgely seeking a determination that Perrow was not a “member of the household” for coverage purposes. Perrow did not answer and eventually was defaulted. Ridgley’s counsel deposed Perrow and, during his deposition, Perrow testified that during the time of the shooting, he considered the Sloans’ house his primary residence.

Ridgley filed a motion to exclude Perrow’s ex pate statement taken by Allstate and to dismiss the declaratory judgment action. Allstate cross-moved for summary judgment, arguing Perrow was not covered by the policy because he was not a resident of the Sloanes’ home. The trial court granted summary judgment to Allstate, relying on the “sham affidavit” rule in refusing to consider Perrow’s deposition testimony because it was given after the sworn statement.

The Court of Appeals, Division Two, reversed and remanded. The Court noted that the sham affidavit rule states that when a party’s affidavit is submitted to defeat summary judgment and contradicts the party’s own deposition testimony, it should be disregarded in deciding the motion, citing Wright v. Hills, 161 Ariz. 583, 780 P.2d 416 (App. 1989) (abrogated on other grounds). The Court did not find Wright dispositive, however, because it held that a party’s prior deposition testimony cannot be contradicted by the party’s subsequent affidavit submitted to defeat summary judgment. The present issue was “whether a former party’s/witnesses prior sworn statement or affidavit can be contradicted by subsequent deposition testimony to defeat summary judgment.” The Court therefore examined federal and out-of-state cases for guidance.

These persuasive authorities, when applying the sham affidavit rule, have given greater weight to deposition testimony than to affidavits, because deposition testimony is subject to cross-examination and is adversarial in nature. The Court also cited a Seventh Circuit case, involving witnesses’ affidavits contradicted by their subsequent deposition testimony, that held that “though the timing is reversed, the rule is the same” and that the witnesses’ “;[s]elf-serving affidavits’ . . . [could] not defeat a motion for summary judgment.” Darnell v. Target Stores, Inc. 16 F.3d 174 (7th Cir. 1994). Finally, the court noted that whether an affidavit is a sham affidavit “must be dealt with on a case-by-case basis.”

In this case, the Court noted that Perrow’s deposition was not taken in response to a motion for summary judgment, and therefore was not “apparently directed at ‘thwarting the purposes of Rule 56.’” Ridgely did not have any part in procuring Perrow’s change in testimony, and the “increased reliability” of deposition testimony favored not excluding that testimony. Based on these facts, the Court concluded that “the purposes underlying the sham affidavit rule do not support applying the rule in this case.”

Judge Howard authored the opinion, with Judge Pelander, Chief Judge, and Judge Vasquez concurring.

Parker v. McNeill (3/08/07): Division One Holds that Superior Court May Award Costs and Expenses, But Not Attorneys’ Fees, Incurred Before and in the Course of Prior Appeal, to Party Who Failed to Request Costs and Fees in Prior Appeal

In a settlement agreement regarding child-rearing expenses, former spouses Parker and McNeill had agreed to a provision granting attorneys’ fees in the event of a default. Parker later sued for unpaid child health-care expenses, but the superior court ruled that the claim was time-barred. On appeal (the “prior appeal”), the Court of Appeals concluded that the claim was not necessarily time-barred because of evidence of a signed writing acknowledging the debt, and thus remanded for further proceedings. After the remand, Parker and McNeill stipulated to the entry of a money judgment in Parker’s favor. Parker then sought attorneys’ fees, costs and expenses incurred before and in the first appeal, and after remand to the trial court. The superior court denied the request for pre-remand costs and fees because Parker had failed to request these reimbursements before or in connection with her prior appeal pursuant to Ariz. R. Civ. App. P. Rule 21. Parker again appealed.

The Court of Appeals upheld the denial of attorneys’ fees incurred before and during the prior appeal. Parker’s failure to request the fees on appeal, or by written motion filed and served before oral argument or submission of the appeal, constituted a failure to comply with Rule 21(c)(1). The later request for these fees was therefore properly denied. Under Rule 21(a), however, a request for costs incurred is permissive, not mandatory; failure previously to request these costs, therefore, did not bar the superior court from later awarding these costs after remand. An award to Parker of other expenses incurred before or during the first appeal would also be permissible notwithstanding Parker’s failure previously to request an award of these expenses. The Court of Appeals therefore reversed in part, affirmed in part, and remanded to the trial court for further proceedings.

Presiding Judge Norris wrote the opinion; Judges Barker and Thompson concurred.

Carlson v. The Arizona State Personnel Board, et al (3/6/07): Division One Holds That Employee’s Due Process Right to Adequate Notice Was Violated When Board Upheld His Termination on Grounds Not Alleged in Dismissal Notice.

ADEQ issued to Carlson a Notice of Charges of Misconduct and a Notice of Dismissal, both alleging that Carlson had violated the department’s sexual harassment policy. After a post-termination hearing, a hearing officer concluded that Carlson’s conduct did not constitute sexual harassment, but did violate several Standards of Conduct for state employees. The hearing officer concluded that Carlson could be dismissed for violations not specifically charged in the Notice of Dismissal because the notices stated that ADEQ had authority to dismiss Carlson pursuant to A.R.S. § 41-770 and the Standards of Conduct. Despite Carlson’s objections that he had not received adequate notice of the charges upon which his dismissal was based, the Board adopted the hearing officer’s findings of fact and conclusions of law. Carlson filed an administrative review complaint; the superior court rejected Carlson’s due process claim and affirmed the Board’s decision. This appeal followed.

The court of appeals concluded that that the hearing officer erred by upholding Carlson’s dismissal based on conduct never alleged by ADEQ before the post-termination hearing. The court held that if ADEQ wanted to rely on additional grounds other than those in the Notice of Charges, “it should have set forth with reasonable specificity the amended factual basis and the statutory grounds for its decision in its Notice of Dismissal or a supplemental notice sufficiently in advance of the post-termination hearing to allow Carlson the opportunity to prepare his defense.” The court further held that the Board exceeded its statutory authority by substituting its own reasons for dismissal in place of those asserted by ADEQ. The court vacated the superior court’s decision and remanded for further proceedings.

Judge Gaines concurred with the result and agreed that the notices were insufficient to support the rationale of the hearing officer’s recommendation, but questioned whether the remand would serve a useful purpose or lead to any different result.

Judge Hall authored the opinion, with which Judge Timmer concurred; Judge Gaines authored a special concurrence.

Burk v. State of Arizona(3/6/07): Division One Upholds Grant of Judicial Immunity to Employee of Court's Conciliation Services

Plaintiff-Appellant Angela Burk appealed from the superior court's dismissal of her 42 USC 1983 claim. In 2004, Burk had petitioned the superior court to modify the parenting schedule for her daughter. The court ordered a report prepared by Cathy Culek, an employee of its conciliation services. Burk's complaint alleged that Culek's report violated her Free Exercise rights because the report was, according to Burk, "intentionally designed to ensure that [the daughter] attended the Church of Jesus Christ of Latter Day Saints." The superior court granted the State's motion to dismiss on the ground that Culek had judicial immunity from Burk's claims.

Division One affirmed. In an opinion by Judge Timmer, the Court first reiterated that judicial immunity is not limited to judges and that officers serving the judiciary are immune from suit where such immunity is required to ensure "principled and fearless decision-making by that officer." See Acevedo v. Pima County Adult Prob. Dep't., 142 Ariz. 319, 321, 322, 690 P.3d 38, 40, 41 (1984). Rejecting Burk's contention that Culek's actions here were not entitled to immunity because discriminatory acts are outside the court's jurisdiction, the Court relied chiefly on Mireles v. Waco, 502 U.S. 9 (1991) and held that the superior court clearly had subject matter jurisdiction over the request to modify parenting schedules and that even if true, the allegations of illegal discrimination did not overcome the application of judicial immunity.

The Court also relied on Mireles in rejecting Burk's claim that Culek was not immune because her actions exceeded the scope of the authority she was granted by the court when she delved into Burk's religious beliefs. The Court held that the superior court's order was a "judicial act" which cloaked Culek in immunity, and that a similar argument was rejected in Mireles. See Mireles, 502 U.S. at 12-13.

Finally, the Court rejected as without foundation and against public policy the argument that because the superior court ultimately did not rely on Culek's report, Culek forfeited judicial immunity.

Judges Norris and Johnsen joined in Judge Timmer's opinion.

Deer Valley Unified School District v. Houser/McDonald (2/26/07): Supreme Court Holds That A Claim Letter Sent to a Public Entity Containing Qualifying Language Regarding Damage Claims Fails to Satisfy the Requirements of Arizona’s Notice of Claim Statute.

Pamela McDonald, a former school administrator, sent a “claim letter” to Deer Valley Unified School District No. 97 (the “District”) pursuant to Arizona Revised Statutes (A.R.S.) section 12-821.01, asserting that the District had wrongfully terminated her employment in violation of the Arizona Employment Protection Act. McDonald’s letter identified the following claim amounts:

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

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

3. General damages, compensating Ms. McDonald for damages to her reputation of employment in an amount of no less than $200,000.00.

After receiving no response to her letter, McDonald filed a complaint in superior court. The District moved for dismissal for failure to comply with Arizona’s Notice of Claim statute, A.R.S. § 12-821.01. The superior court denied the District’s motion, and the District petitioned for special action to the court of appeals. The court of appeals declined to accept jurisdiction, and the District petitioned the Supreme Court for review. The Supreme Court granted review and reversed the superior court’s order denying the District’s motion to dismiss.

A.R.S. § 12-821.01 mandates that any party wishing to bring a claim against a public entity must provide a notice of claim to the entity setting forth the factual basis for the claim and “a specific amount for which the claim can be settled and the facts supporting that amount.” The Supreme Court held that this clear and unequivocal statutory language does not permit a claimant to include qualifying language that makes it impossible for a public entity to calculate the specific amount for which the claim will settle. Ms. McDonald’s claims for approximate damages of $35,000 or more per year, and no less than $300,000 in compensatory damages and $200,000 in general damages did not satisfy this requirement. In so holding, the Court declined to adopt a “reasonableness standard” with respect to the “specific amount” requirement of A.R.S. § 12-821.01, and expressly disapproved of the analysis of the court of appeals in Young v. City of Scottsdale, 193 Ariz. 110, 970 P.2d 942 (App. 1998).

Chief Justice McGregor authored the opinion for a unanimous court.

Twin Peaks Construction, Inc. v. Weatherguard Metal Construction, Inc. (2/27/07): Finding No Conflict Between Two Provisions Governing the Regulation of Contractors, a Unanimous Division Two Panel Affirms Award For Subcontractor Against Contractor

Weatherguard Metal was a subcontractor for Twin Peaks on a project for the City of Bisbee. After Twin Peaks was paid for the project, it refused to pay the entire amount it owed to Weatherguard for Weatherguard's services. Weatherguard filed an administrative complaint with the Arizona Registrar of Contractors, asserting that Twin Peaks had violated ARS 32-1154(A)(11) when it refused to pay Weatherguard. Twin Peaks pressed the administrative law judge to dismiss Weatherguard's claim, citing ARS 32-1153, which prevents an unlicensed contractor from bringing an action to collect for work performed. Rejecting Twin Peaks' defense, the ALJ concluded that by its terms, section 1153 applies only to civil, not administrative, actions. Twin Peaks appealed. The appellate court affirmed the ALJ's decision, noting that the text of 32-1153 limits it applications to "any action in any court of the state for collection of compensation." Because Weatherguard had only filed an administrative complaint against Twin Peaks -- an action to which Weatherguard was not a party -- the limitations of section 1153 did not apply. The court did not reach Weatherguard's assertion that it was, in fact, licensed to perform the work for Bisbee project.

Judge Espinosa authored the opinion in which Presiding Judge Eckerstrom and Judge Brammer concurred.

Weatherguard v. D. R. Ward (02/27/07):Division One Holds That A Subcontractor Is Required to Arbitrate a General Contractor’s Indemnity Claim Against It Where the Subcontract Expressly Incorporates “General Conditions,” Which in Turn Incorporate The Arbitration Provision of the Prime Contract Between the General Contractor and The Homeowners

In 1993, D.R. Ward Construction Company, a general contractor, signed a contract to construct a home for the Gaskins, and the parties entered into a prime contract. The prime contract contained an arbitration provision requiring all claims or disputes between the parties “arising out of or relating to the” contract or “the breach thereof” to be decided by arbitration. Ward and Weatherguard Roofing Company, Inc. later entered into a subcontract pursuant to which Weatherguard would perform waterproofing and roofing. This subcontract expressly incorporated by reference certain “General Conditions,” which in turn purported to incorporate the arbitration provision of the prime contract.

The house was completed in 1995, and in 2002, the Gaskins notified Ward of a claim that construction defects had caused water intrusion and mold damage. In May 2003, the Gaskins served a demand for arbitration on Ward and sought damages. Ward asserted that the subcontractors, including Weatherguard, were liable for the defects and demanded indemnification from and arbitration with the subcontractors.
Ward asserted that provisions in the subcontract’s “general conditions,” which were contained in a document separate from – but referenced in – the subcontract, gave Ward the right to demand arbitration and required the subcontractor’s to “prepare and present Contractor’s case, to the extent the proceedings are related to Subcontractor’s claims under this Subcontract.” Before the arbitration took place, however, Ward settled with the Gaskins. After the settlement, Weatherguard requested the superior court to stay the arbitration, asserting that Weatherguard had not agreed to arbitrate any dispute between it and Ward. The Superior Court denied the request for a stay.

The Court of Appeals affirmed, and held that “[b]ecause Weatherguard’s subcontract with Ward expressly incorporated the general conditions, and the general conditions incorporated the arbitration provision of the prime contract, Weatherguard was required to arbitrate Ward’s indemnity claim against it.” In so holding, the Court rejected, inter alia, Weatherguard’s argument that even if the general conditions became part of the subcontract, the general conditions did not incorporate by reference, and thus did not bind Weatherguard to, the arbitration provision in the prime contract. The Court declined to follow this stricter approach, finding instead that “no specific word or phrase – such as a specific reference to arbitration – is required” in order to incorporate an arbitration provision by reference. Rather, courts “must examine the language used by the parties and construe their words as imposing obligations or granting rights that ‘reasonably appear to have been intended by the parties.’”

Judge Norris authored the opinion, with Judge Timmer, Presiding Judge, and Judge Johnsen concurring.