AZAPP Blog

In re the Matter of the Jury Selection Process in Maricopa County (2/26/09): Arizona Court of Appeals Division One Holds It Has No Jurisdiction to Review Mass Compilation of Issues Submitted Under One Cause Number.

Pursuant to A.R.S. §§ 21-312 & 313, the jury selection process must be random.  In 2002, the Maricopa County Superior Court instituted a new jury selection system that regionalized the jury selection process, rather than having it be county wide.  In 2006, when the details of the new system became public, the Maricopa County Superior Court was deluged with motions in over thirty separate cases arguing the new system violated the requirements of A.R.S. §§ 21-312 & 313.  In an exercise in judicial economy, Presiding Judge Barbara Rodriguez combined the separate motions under one new cause number, and submitted the issue to Pima County Judge William O’Neil, who found the jury selection system did not violate the statutory scheme.

On appeal, Arizona Court of Appeals Division One held that it had no jurisdiction to review this ruling.  The Court found no party had provided the court with authority giving it jurisdiction, because this case was neither an appeal from a final judgment, nor a declaratory action.  In addition, the court held the below ruling could not be certified for appeal under Rule of Civil Procedure 54(b), because the ruling did not finally resolve any one claim at issue, which Rule 54 requires.

The Court noted it could exercise its discretion to take special action jurisdiction where it does not have appellate jurisdiction.  However, the Court declined to do so in this case, because it felt granting special action jurisdiction would be an improper circumvention of the Rules of Civil Procedure for creating an appealable action.  The Court also noted that, even if it did accept jurisdiction, it would be limited to reviewing whether the jury selection system breached the statutory requirement to be random, but would have no ability to determine if any individual party was actually prejudiced by any alleged breach.  Without knowing which parties were prejudiced, the Court would have no basis to award relief.  Accordingly, the Court dismissed the appeal without prejudice for lack of jurisdiction.

Judge Daniel Barker authored the opinion, with Presiding Judge Brown and Judge Gemmill concurring.

Maximov v. Maximov (3/26/2009): Arizona Court of Appeals Division One Holds that Family Court Has Authority to Modify Temporary Family Support Retroactively to a Date Before the Petition to Modify Was Filed. 

The family court ordered Mr. Maximov to pay Mrs. Maximov $7,500 per month from April through September 2006 for spousal maintenance and child support.  The court stated that this order of temporary support was “without prejudice” and subject to reconsideration for overpayment.  On September 11, 2006, Mr. Maximov moved to modify the amount of temporary support, claiming among other things that he could not afford to pay the amount ordered.  The court granted the motion and retroactively reduced the amount.  Mrs. Maximov appealed.        

The Arizona Appeals Court affirmed.  Although Mr. Maximov declined to participate in the appeal, the Court nevertheless rejected Mrs. Maximov’s argument that A.R.S. § 25-327(A), which specifies that modifications “are effective on the first day of the month following the notice of the petition of modification,” precluded retroactive modification.  The Court found that the plain language of A.R.S. § 25-327(A) applies only to a “decree” awarding maintenance or support.  “By its plain terms, therefore, § 25-327(A) does not apply to pre-decree temporary orders for family support.”  Furthermore, temporary support is explicitly authorized by A.R.S. § 25-315.  See also Ariz. R. Family Law P. 81(A) (permitting certain nunc pro tunc orders).  The Court also rejected Mrs. Maximov’s argument that good cause must be shown for a retroactive modification.  A.R.S. § 25-315 does not require a showing of good cause, and in any event, good cause was shown because the family court specifically found after examining Mr. Maximov’s finances that he could not afford $7,500 per month in support.                                   

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

In Re MH 2008-001188 (3/26/2009): Arizona Court of Appeals Division One Holds That Finding That a Person Is Unwilling or Unable to Accept Voluntary Treatment, as Required For Court-Ordered Involuntary Mental Health Treatment, Need Not Be Alleged in Physicians’ Affidavits or Stated Verbally by Court if Found in Written Order and Supported by Substantial Evidence on the Record

 Doctors petitioned the superior court to order mental health treatment of a patient who had been diagnosed with bipolar disorder, and had a history of substance abuse and recent suicide attempts.  The superior court issued a detention order for treatment and a notice of hearing.  After hearing, the court ordered involuntary treatment in a combined inpatient-outpatient program for 365 days. 

The patient appealed, arguing (1) that she had demonstrated a willingness to comply with voluntary treatment, (2) that the physicians’ affidavits and addenda supporting the petition did not specifically allege that she was unable or unwilling to accept voluntary treatment, and (3) that the superior court did not state on the record that she was unwilling or unable to accept voluntary treatment. 

Before ordering involuntary treatment, the superior court must find, inter alia, clear and convincing evidence that a patient is either unwilling or unable to accept voluntary treatment.  A.R.S. § 36-540(A).  Although a petition for court-ordered treatment must allege that the patient is unable or unwilling to accept voluntary treatment, id. § 36-533(A)(3), the physicians’ affidavits accompanying the petition need not discuss this issue, id. § 36-533(B). 

In this case, the superior court did not state verbally its finding that the patient was unable or unwilling to accept voluntary treatment.  But a trial judge’s statement, or lack thereof, will not detract from his express finding of statutory grounds in his formal written order.  Because the evaluating physicians’ documentation met statutory requirements, and because the superior court made the necessary findings in its written order, which were backed by substantial evidence, the Court of Appeals affirmed.

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

Jones v. Paniagua (3/26/09): Arizona Court of Appeals Division One Holds that the Number of Valid Signatures Required for a Valid Referendum Petition is Based on the Number of Votes Cast at the Most Recent Mayoral or City Council Election.

The Phoenix City Council approved an amendment and zoning change to the City’s General Plan Land Use Map to allow for the development of duplexes and apartments.  Jones submitted an application for referendum to challenge the change.  Pursuant to Phoenix City Charter Ch. XVI, § 3, the Clerk required the referendum petition to contain 9,798 valid signatures, which is ten percent of the total number of votes cast at the last mayoral election.  Jones argued, in response, that, pursuant to A.R.S. § 19-142(A), a valid referendum petition required only 2,727 signatures, ten percent of the votes cast at the more recent city council run-off election.  Jones obtained 8,000 signatures, but the Clerk rejected the petition.  Jones filed a complaint for special action, requesting, among other things, that the trial court order the clerk to calculate the required number of signatures as 2,727, and that the trial court award Jones his attorneys’ fees.  The trial court awarded Jones relief on the merits and awarded him attorneys’ fees.  This appeal followed.

The Arizona Appeals Court first concluded that Phoenix City Charter Ch. XVI, § 3, which requires that valid referendum petitions contain signatures equaling at least ten percent of the votes cast at the most recent mayoral election, conflicts with the plain meaning of A.R.S. § 19-142(A), which states that the number of signatures required for a valid referendum petition shall be calculated based on the number of votes cast at the most recent mayoral or city council election.  A.R.S. § 19-142(A), as a state statute, supercedes the Phoenix City Charter.  And because Phoenix had held a city council election since the time it had held a mayoral election, Jones was only required to collect 2,727 signatures, ten percent of the number of votes cast at the city-council election.  Because Jones had collected 8,000 signatures, his referendum petition was valid.

Next, the Appeals Court held that Jones was entitled to an award of his attorneys’ fees pursuant to A.R.S. § 12-2030, which directs courts to award attorneys’ fees to a successful party in a mandamus action.  The Court explained that Jones’ lawsuit could still be a mandamus action despite the fact that his lawsuit was brought as a statutory special action.  The Court then concluded that Jones’ lawsuit was indeed a mandamus action – and thus that Jones was entitled to an award of attorneys’ fees – because Jones filed a complaint for special action requiring the Clerk to perform his duties by calculating the required the number of referendum petition signatures at 2,727.

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

Flagstaff Affordable Hous. Ltd. P’ship v. Design Alliance Inc. ( 3/24/2009):  Arizona Court of Appeals Division One Holds That the Economic Loss Doctrine Does Not Bar Professional Negligence Claims Against Architects.

In 1995, Plaintiff Flagstaff Affordable Housing Limited Partnership (“Owner”) contracted with Defendant Design Alliance, Inc. (“Architect”) for the design of apartments.  The apartments ultimately were constructed in accordance with Architect’s plans and specifications.  In 2004, Owner was forced to remedy design deficiencies in the apartments.  Owner subsequently brought claims for breach of contract and professional negligence against Architect, seeking economic losses as compensatory damages.  Architect filed a motion to dismiss, arguing that the contract claim was barred by the statute of repose and the professional negligence claim was barred by the economic loss doctrine.  Owner agreed that the contract claim was untimely, but disputed the application of the economic loss doctrine to its professional negligence claim.  The trial court granted Architect’s motion to dismiss, and Owner timely appealed.

The Arizona Appeals Court reversed and remanded, holding that the economic loss doctrine does not bar professional negligence claims against design professionals.  It first explained that the economic loss doctrine, which precludes an aggrieved party from recovering economic damages in tort unless accompanied by physical harm to either person or property, has only been applied in Arizona in construction defect and product liability cases.  The Court explained that those cases provide no guidance because they involve actual physical defects, unlike professional negligence claims involving negligent design.  The Court then looked to the underlying purpose of the economic loss rule – which is to differentiate between tort, or duty-based recovery, and contract, or promise-based recovery.  Because professionals owe special duties to their clients, regardless of the existence of a contractual relationship, the Court found that there was no need to distinguish between tort and contract actions in professional negligence claims, and therefore the economic loss rule was not implicated.  The Court explained that applying the economic loss doctrine to architects would actually erode their duties implied by law to use ordinary skill, care, and diligence.  The court further noted that the doctrine had not been applied to professional negligence claims against other professionals, such as attorneys or accountants.

The Court rejected Architect’s argument that Owner was merely seeking benefit-of-the-bargain damages such as those in construction defect cases, explaining that this case is not similar to construction defect cases because it involves negligent design, not negligence construction.  The Court also rejected Architect’s argument that the statute of repose, A.R.S. § 12-552, applied, noting that the statute explicitly covers only contract claims, not professional negligence claims.

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

Scottsdale Insur. Co. v. Cendejas   (03/03/2009):  Arizona Court of Appeals Division One Holds That a Rule 26(b)(5) Notice of Nonparty At Fault Must State Specific Facts  Establishing Defendant’s Claim That the Designated Parties Were at Fault. 

Plaintiff Scottsdale Insurance Company (“SIC”) brought suit against Anthony Cendejas for reimbursement of money SIC paid its insured for fire damage to his home allegedly caused by Cendejas.  Cendejas timely filed a Notice of Non-Party at Fault naming Oxley Construction Company, L.L.C. along with a general category of subcontractors:

“[a]ny subcontractor retained by Oxley Construction . . . who performed work on the subject property as part of the original construction of the subject property in such a way as to cause or contribute to the condition of the subject property, if any, which may have caused or contributed to the fire at the subject property.”

During a deposition after the deadline for noticing Non-Parties at Fault had passed, one of Defendant’s experts testified that attic insulation in the home had been installed backwards, which contributed to the rapid acceleration of the fire’s development.  Plaintiff SIC then moved to strike Cendejas’ Notice of Non-Party at Fault as untimely.  The trial court granted SIC’s motion to strike, and ultimately granted summary judgment in favor of SIC for the full amount of its claim, including taxable costs, Rule 68 sanctions, expert witness fees, and prejudgment interest.  Cendejas timely appealed.

On appeal, Appellants argued that his Notice of Non-Party at Fault was timely and sufficient under Rule 26(b)(5) because the defense of improper insulation installation fit within the broad language of their disclosure.  Moreover, Appellants cited Rosner v. Denim & Diamonds, Inc., 188 Ariz. 431, 937 P.2d 353 (App. 1996) for the proposition that a defendant need not specifically identify the non-party at fault in order to satisfy Rule 26(b)(5).  The Court of Appeals rejected this argument because Rule 26(b)(5) requires a party to “provide the identity, location, and the facts supporting the claimed liability” of the named nonparty.  Appellants’ notice did not do so.  Unlike in this case, in Rosner, the Defendant went to great lengths to investigate and identify a non-party at fault, but could not do so.  The parties in that case stipulated that none of them could identify the other tortfeasors specifically.  Moreover, the Defendant in Rosner specifically described the acts of the unidentified additional tortfeasors, although not able to provide their names.  In the present case, Cendejas did not provide any facts in their Notice establishing their claim that a subcontractor had improperly installed insulation that resulted in a more rapid spreading of the fire.  Moreover, because Appellants’ expert had completed his investigation more than a year before the SIC complaint had been filed, Appellants had sufficient information available to them to include specific facts within their Notice.  Thus, the Court of Appeals affirmed the trial court’s ruling striking Cendejas’ Notice of Non-Party at Fault and granting summary judgment to SIC.

Judge Weisberg authored the opinion; Presiding Judge Johnsen and Judge Orozco concurred.

Green v. Garriott ( 3/12/2009):  Arizona Court of Appeals Division One Holds that A.R.S. § 43-1183, Which Establishes a State Income Tax Credit For Corporate Scholarship Contributions, Is Constitutional.

A.R.S. § 43-1183 establishes a dollar-for-dollar tax credit for corporate contributions to a school tuition organization (“STO”).  An STO is a charitable 501(c)(3) organization that allocates at least 90% of its annual revenue for educational scholarships or tuition grants to children.  To qualify under the statute, STOs may only provide assistance to students whose family income does not exceed 185% of the income limit to qualify for reduced price lunches.  Plaintiffs sued Gale Garriott in his official capacity, seeking a declaration that § 43-1183 violates the Establishment Clause of the U.S. Constitution, Article 2, § 12, and Article 9, § 10 of the Arizona Constitution, and §§ 20 and 26 of the Arizona’s Enabling Act.  The trial court concluded that the statute is constitutional and this appeal followed.

The Arizona Appeals Court first explained that the statute does not run afoul of the federal Establishment Clause so long as it has a secular purpose, neither advances nor inhibits religion, and does not foster government entanglement with religion.  The Court concluded that the statute has the secular purpose of improving education by raising tuition scholarships for children in Arizona.  The Court also concluded that the statute neither advances nor inhibits religion because (1) it does not provide aid directly to religious schools; (2) the corporate taxpayer is the one who decides whether to make a contribution, which particular STO receives a contribution, and the amount of a contribution; because parents of qualified children decide which school their children will attend; and (3) the statute does not differentiate between sectarian and non-sectarian schools.  Finally, the Court concluded that the statute does not foster government entanglement because the State’s involvement is merely administerial in nature and does not require the State to get involved with the religious or non-religious nature of STO’s or private schools.

Next, the Arizona Appeals Court held that A.R.S. § 43-1183 does not offend Article 2, § 12 or Article 9, § 10 of the Arizona Constitution.  The Court reasoned that A.R.S. § 43-1183 is significantly analogous to the statutory scheme upheld in Kotterman v. Killian, 193 Ariz. 273, (1999), which held that the government does not impose a tax by declining to collect potential revenue and that a tax credit does not amount to the laying of a tax by increasing the tax liability of those who choose not to take advantage of it. 

Lastly, the Court held that A.R.S. § 43-1183 does not violate §§ 20 and 26 of Arizona’s Enabling Act because neither section touches upon tax credits that provide educational opportunities in private schools.

Judge Kessler dissented in part and concurred in part.  While Judge Kessler agreed that A.R.S. § 43-1183 does not violate the Arizona Constitution or Arizona’s Enabling Act, he disagreed that the statute does not violate the federal Establishment Clause.  Judge Kessler concluded that the statute does not have a purely secular purpose and is not neutral with regard to religion.

Judge Gemmill authored the opinion joined by Judge Norris; Judge Kessler dissented in part and concurred in part.

Cain et al. v. Horne/Geroux et al. (03/25/2009):  Arizona Supreme Court Holds That School Voucher Programs Violate Article 9, Section 10 of the Arizona Constitution.

In 2006, the Legislature enacted two programs that appropriated state monies to allow students to attend private schools of their choice instead of the public school in their school district.  The Arizona Scholarship for Pupils with Disabilities, codified at A.R.S. §§ 15-891 to 15-891.06, offers pupils with disabilities the opportunity to attend any public school of the pupil’s choice or to receive a scholarship to any qualified school of the pupil’s choice.  The Displaced Pupil’s Grant Program, codified at A.R.S. §§ 15-817 to 15-817.07,  permits the state to pay $5,000, or the cost of tuition and fees, whichever is less, for children in foster care to attend the private primary or secondary school of their choice.  Both sectarian and non-sectarian schools may participate in both programs (the “voucher programs”), and under both, the parents or legal guardians of the pupils select the school their children will attend.

Plaintiffs filed suit in Maricopa County Superior Court seeking to enjoin the implementation of the voucher programs alleging that they were unconstitutional under Article 2, Section 12 and Article 9, Section 10 of the Arizona Constitution.  Article 2, Section 12 prohibits public money from being “appropriated to any religious worship, exercise, or instruction, or to the support of any religious establishment.”   Article 9, Section 10 provides that “no tax shall be laid or appropriation of money made in aid of any church, or private or sectarian school, or any public service corporation.’ 

Defendant and other intervenors moved for judgment on the pleadings, which the superior court granted.  On appeal, the Arizona Court of Appeals held that the voucher programs did not violate Article 2, Section 12 of the Arizona Constitution, which it termed the “Religion Clause,” but did violate Article 9, Section 10 of the Arizona Constitution, which it termed the “Aid Clause.” Defendant appealed the finding that the voucher programs violated the Aid Clause; Plaintiffs cross-appealed the finding that the voucher programs did not violate the Religion Clause.

The Supreme Court held that the voucher programs violate Article 9, Section 10 of the Arizona Constitution (the Aid Clause) and therefore did not reach the question of whether they violated Article 2, Section 12.  On appeal, Defendant and Intervenors argued that under the Court’s prior case law, the Aid Clause should be interpreted in the same manner as the federal Establishment Clause, and therefore, the voucher programs are saved by fact that parents choose which schools to send the money to.  The Court disagreed, reasoning that the Aid Clause encompasses more than the Religion Clause (which has been interpreted in the same manner as the federal Establishment Clause) and that the two clauses serve different purposes.  While the Aid Clause seeks to protect public schools by prohibiting the appropriation of public funds to private schools, the Religion Clause addresses the issue of separation of church and state.  The Court distinguished the voucher programs from the program in Kotterman v. Killian, where tax credits for contributions to organizations that provide scholarships to private schools were found constitutional, because the voucher programs use funds withdrawn from the public treasury as opposed to tax credits.  The Court further disagreed with Defendant and Intervenors’ argument that under the true beneficiary theory, the pupils are the beneficiaries of the public funds, not the schools.  The Court explained that applying this theory would nullify the Aid Clause’s clear prohibition against the use of public funds to aid private or sectarian education.           

Justice Ryan authored the opinion, Justices Berch, Hurwitz, and Bales and Judge Timmer concurred.  Chief Justice McGregor did not participate in the case. 

Lee v. Industrial Comm’n, (3/12/09): Arizona Court of Appeals Division One Holds That Self-Insured Employer Does Not Have To Pay the Attorney’s Fees of a Claimant Who Successfully Litigates a Workers’ Compensation Claim That Results Only In Reimburseent to the Employer’s Short Term Disability Fund.

Banner Health self-insures its workers’ compensation claims and its short-term disability benefits.  Claimant, an employee of Banner, injured her knee while at work in 1998.  She received some workers’ compensation benefits and returned to work.  In 2005, she stopped work because of her knee and underwent surgery.  Claimant petitioned to have her 1998 industrial injury claim reopened, and at the same time she applied for short-term disability benefits.  After Banner denied her petition to reopen, Claimant requested a hearing before the Industrial Commission of Arizona and retained an attorney to assist her on a contingent fee basis.  While the workers’ compensation claim was pending, Banner paid her short-term disability benefits.  Eventually, an administrative law judge (“ALJ”) granted her petition to reopen the 1998 claim and awarded her workers’ compensation benefits.  In accordance with a waiver Claimant signed when she applied for short-term disability benefits, the award was used to reimburse Banner for the amounts it paid for Claimant’s short-term disability benefits.  Claimant subsequently asked the ALJ to award her payment for attorney’s fees.  The ALJ denied the request and affirmed it on administrative review.  This special action followed.

Judge Irvine, writing for a 2-1 majority, held that, at least for self-insurers like Banner, the denial of attorneys’ fees was appropriate.  Banner argued that only the claimant had an obligation to pay any contingent fee.  Claimant argued that Banner, as the disability benefits provider, should help pay because it benefited from her litigation of the workers’ compensation claim.  Specifically, Claimant argued that the “common fund doctrine” should apply.  Under that equitable rule, when someone hires an attorney in an effort to preserve a common fund, “that person may be entitled to have their attorney’s fees paid out of that fund.”  Hobson v. Mid-Century Ins. Co., 199 Ariz. 525, 531, 19 P.3d 1241, 1247 (App. 2001).  The majority rejected the Claimant’s argument, reasoning that the Claimant had been fully compensated already.  In addition, as a self-insurer, Banner did not stand to gain from the Claimant’s successful litigation because Banner simply transferred funds from its workers’ compensation division to its short-term disability benefits division.

Judge Orozco writing in dissent would have held that any time a worker successfully litigates a workers’ compensation claim, and the resulting award reimburses a short-term disability benefits carrier, attorneys’ fees should be deducted from the reimbursement.  The dissent reasoned that the majority’s refusal to apply the common fund doctrine will discourage attorneys from taking workers’ compensation cases on a contingency basis, and will discourage workers from pursuing workers’ compensation claims if they receive short-term disability benefits.  In addition, the dissent thought A.R.S. § 23-1069, which authorizes the ICA to grant reasonable attorneys’ fees in workers’ compensation cases, indicated that the legislature intended attorneys’ fees to be paid out of workers’ compensation awards.

Judge Irvine authored the opinion; Judge Hall concurred.  Judge Orozco authored the dissent.

Valley Forge Insurance Co. v. Sam's Plumbing, LLC (3/19/2009): Arizona Court of Appeals Division Two Holds that Claim for Property Damage Resulting from Deficient Contractual Performance May Be Actionable in Tort Under Economic Loss Rule Even Absent Damage to Other Personal Property.

A gas explosion caused severe damage to a shopping mall in Pinal County, but did not cause bodily injury or damage to the insured’s personal property.  The insurer paid $1.1 million to the insured for business interruption losses and property damage, and then brought a subrogated negligence claim against the plumbing company ("Sam's”) that allegedly caused the explosion. 

Sam's moved for summary judgment, arguing that under the "Economic Loss Rule," any claim against it sounded in contract only and not in tort.  The Superior Court granted summary judgment, finding that, under Carstens v. City of Phoenix, 206 Ariz. 123, 75 P.3d 1081 (App. 2003), the damage to the building was not "qualifying property damage" for the purpose of bringing a negligence claim. 

The insurer appealed, arguing that the “Economic Loss Rule” did not apply because the plumbing company’s negligence had not simply caused physical harm to the piping system — the “subject of th[e] bargain” with the tenant — but instead caused extensive damage to the shopping center building.  The Court of Appeals agreed, reversed and remanded. 

A plaintiff generally may recover in tort for negligently caused property damage.  When the damaged property is the subject of a warranty or contract, however, courts must determine on a case-by-case basis whether any action for the property damage sounds in contract or tort. 

Courts consider three non-dispositive factors to determine whether tort or contract law should apply to a particular claim: (1) the nature of the defect causing loss, (2) how the loss occurred, and (3) the type of loss for which the plaintiff seeks redress.  Salt River Project Agric. Improvement & Power Dist. v. Westinghouse Elec. Corp., 143 Ariz. 368, 376, 694 P.2d 198, 206 (1984), abrogated on other grounds by Phelps v. Firebird Raceway, Inc., 210 Ariz. 403, 111 P.3d 1003 (2005).  The first factor turns on whether quality or safety concerns are primarily implicated, the second factor looks to whether the loss results from a slow deterioration or a sudden accident or calamity, and the third factor examines the nature of the loss claimed as well as any other contemporaneous losses.  If damage occurs suddenly and accidentally and the defect poses an unreasonable risk of danger to people or other property, the claim will sound in tort even if the only property damaged is the defective product itself.

Here, the allegedly negligent work did not merely fall below contractual expectations.  Instead, the work endangered persons and property in the vicinity and resulted in the sort of sudden calamity that is the hallmark of tort liability.  The resulting damage was not limited to the gas lines themselves but extended to other surrounding property. 

The court rejected the per se approach, reflected in Division One's decision in Carstens, that in an action between homebuyer and builder, only bodily injury and damage to personal property —as distinct from damage to the structure — are actionable in tort.  Salt River adopted a fact-specific factors analysis, not a bright line rule.  The dangerousness of the defect is a key factor.  Salt River also demonstrates, contrary to Carstens, that a claim may sound in tort when only the defective property itself is damaged.  143 Ariz. 378-79, 694 P.2d at 208-09.

The trial court therefore erred by granting summary judgment on the basis that the insurer's subrogree had suffered no personal injury or personal property loss.

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

Backus v. State of Arizona (3/19/2009):  Supreme Court Holds That a Claimant Under Arizona’s Notice of Claim Statute Complies With the “Supporting Facts” Requirement by Providing “the Factual Foundation That the Claimant Regards as Adequate to Permit the Public Entity to Evaluate the Specific Amount Claimed.”

Section 12-821.01 of the Arizona Revised Statutes requires a claimant to file a notice of claim before suing a public entity.  One of the requirements is that the claimant set forth “a specific amount for which the claim may be settled and the facts supporting that amount” (the “supporting-facts requirement”).

Gerald Dunford and Vickie Johnson died while in the custody of the Arizona Department of Corrections (ADOC).  Their families filed notices of claim with the State alleging wrongful death and setting forth specific settlement numbers.  Dunford’s notice, relying on mortality tables, stated that 58-year old Dunford had a life expectancy of 23.6 years and stated that his daughter was claiming $21,500 per year for the loss of her father, for a total of $507,400.  Johnson’s notice of claim noted that Ms. Johnson had six children, that she died as a result of the negligence of ADOC, and stated a settlement total of $2,000,000.

The two cases were consolidated on appeal.  The trial court dismissed both for failing to contain facts supporting the specific amount for which the claims could be settled with the State.  The Court of Appeals reversed, concluding that a claimant satisfies the supporting-facts requirement if the claimant provides “any facts to support the proposed settlement amounts, regardless of how meager.”  The Supreme Court vacated the Court of Appeals opinion, and likewise reversed the trial court judgment in the two consolidated cases.

The Court began its analysis by setting forth basic statutory interpretations principles.  Noting that clear and unequivocal language is determinative of a statute’s construction, the Court concluded that the statutory language imposing the supporting-facts requirement is not clear and unequivocal.  The Court thus considered “other factors” to reach “the interpretation that best furthers the intent of legislature.”  Citing the session laws as evidence of intent, the Court found that “the rule is [governmental] liability and immunity is the exception.”  In addition, the statute is also meant to “allow the public entity to investigate and assess liability, . . . permit the possibility of settlement prior to litigation, and . . . assist the public entity in financial planning and budgeting.” 

Keeping this intent in mind, the Court held that “a claimant complies with the supporting-facts requirement . . . by providing the factual foundation that the claimant regards as adequate to permit the public entity to evaluate the specific amount claimed.”  The standard does not require a claimant to provide an exhaustive list of facts, and courts “should not scrutinize the claimant’s description of facts to determine ‘sufficiency’ of the factual disclosure.”  This standard, the Court commented, avoids two negative results:  (1) by the time a trial judge decides whether a particular claim satisfies the supporting-facts requirement, the time to file a claim letter will usually have expired given the statute’s relatively short time limits; (2) even in those cases in which a trial judge finds that the notice of claim has met the supporting-facts requirement, all parties may have been exposed to considerable expense and delay in resolved the “satellite litigation.”

Chief Justice McGregor authored the opinion for a unanimous Court.

Davis v. Chino Grande, LLC (3/19/2009): Arizona Supreme Court Holds Landowners Have No Interest in the Potential Future Use of Groundwater That Is Severable From the Overlying Land.

Merwyn Davis sued, inter alia, Chino Grande to invalidate a commercial water rights reservation on his ranch that severed the future rights to ground water from the rights to the overlaying land.  The trial court granted summary judgment in favor of Davis, but the Court of Appeals vacated the trial court’s ruling.

The Arizona Supreme Court vacated the Court of Appeals’ decision and remanded the case to the trial court.  The Supreme Court, relying on existing precedent, affirmed that “there is no right of ownership of groundwater in Arizona prior to its capture and withdrawal from the common supply and that the right of the overlaying land owner is simply to the usufruct of the water.”  Town of Chino Valley v. City of Prescott, 131 Ariz. 78, 82, 638 P.2d 1324, 1328 (1981).  Therefore, the Court concluded landowners do not have a real interest in the potential future use of groundwater, but only an “unvested expectancy.”  Further, the Court found no precedent that allowed the “unvested expectancy” in water to rights to be severed from the overlaying land.  The Court also noted that allowing the severance of water rights is inconsistent with the language of the Groundwater Management Act (“GMA”), which requires the permission of the landowner to transport water off of a property.  A.R.S. § 45-555(A).  This GMA provision would not make sense if the legislature intended groundwater rights to be severable from land ownership.

Justice Bales authored the Court’s unanimous opinion.

Pipher v. Loo (3/10/09): Division One Holds That Expert’s Opinion Based on Expert’s Own Experience in Field, Experience With Plaintiff’s Type of Injury, and Knowledge of Other Testimony in the Case Had Sufficient Foundation and Reliability to Be Admitted to Jury.

Dr. Loo gave Pipher dental treatment which required anesthesia.  During the treatment, Pipher suffered injury to his lingual nerve.  Pipher brought suit, alleging that Loo’s administration of anesthetic breached the standard of care and that his breach caused Pipher’s injury.  During trial, the court excluded from evidence two portions of Pipher’s causation expert’s videotaped testimony.  First, the court excluded the expert’s statement that, in his own dental practice, he followed the standard of care that Pipher’s standard-of-care expert described in earlier testimony.  Second, the court excluded the expert’s testimony that if Loo had followed the standard of care, then there would not have been injury to Pipher’s nerve.  In addition, the court overruled Pipher’s hearsay objection to the testimony of Loo’s standard-of-care expert.  After the jury returned a defense verdict, the court awarded Loo costs under Rule 68(d), Arizona Rules of Civil Procedure.  Pipher appealed the admission of Loo’s expert’s testimony, the exclusion of Pipher’s expert’s testimony, and the Rule 68 award.

Judge Irvine, writing for a unanimous court, affirmed the admission of Loo’s expert’s testimony, reversed the exclusion of some of Pipher’s expert’s testimony, vacated the judgment and the Rule 68 award, and remanded for a new trial.

Addressing the admission of Loo’s expert’s testimony first, the Court held that the trial court did not abuse its discretion in allowing the testimony.  Under Arizona Rule of Evidence 703, an expert may offer an opinion based on otherwise inadmissible information if that information is of a type reasonably relied upon by experts in the same field in forming opinions or inferences on the subject.  In his testimony, Loo’s expert relied on various sources to form his opinion, including his own laboratory research and clinical experience.  The Court rejected Pipher’s argument that the expert’s opinions were based on inadmissible hearsay.  Because no evidence suggested that the expert’s opinion was based on unreliable or untrustworthy sources, the Court held that the trial court was within its discretion to allow the testimony.

Turning to the exclusion of Pipher’s causation expert’s testimony, the Court first affirmed the exclusion of the expert’s testimony that he followed in his own practice the standard of care that Pipher’s standard-of-care expert had previously described.  The Court held that exclusion was in accordance with the rule in Arizona medical malpractice cases that each side is presumptively limited to one independent expert on an issue, such as the definition of the standard of care.  Pipher already had an expert offer testimony on the standard of care; because Pipher did not show good cause for a second expert on the same issue, the trial court properly excluded that portion of the second expert’s testimony. 

The Court held, however, that it was improper to exclude the causation expert’s testimony that Pipher’s injury would not have occurred if Loo had followed the standard of care.  At trial, Loo objected because the testimony was about the standard of care, and, alternatively, because the expert’s opinion was speculative, lacked sufficient foundation, and had an inadequate basis under Arizona Rules of Evidence 702 and 703.  The Court rejected both arguments.  First, the Court reasoned that the expert’s discussion of the standard of care was merely a “predicate to his opinion that Dr. Loo’s violation of the standard of care caused Pipher’s injury.”  Thus, the testimony concerned causation and could not be excluded based on Loo’s first argument. 

Second, the Court concluded that the expert’s opinion was based on an adequate foundation and had sufficient basis to be presented to the jury.  Although no scientific study supported the expert’s opinion, the Court reasoned that the opinion was sufficiently reliable because it was based on extensive experience in the field and with the specific injury at issue.  Furthermore, adequate foundation existed because the expert relied on the testimony of Pipher’s other expert witness and on Pipher’s personal description of Loo’s actions.  Quoting Logerquist v. McVey, 196 Ariz. 470, 188, 1 P.3d 113, 131 (2000), the Court held that this was enough to survive the trial court’s “preliminary assessment of testimonial reliability.”  Remaining “questions about the accuracy and reliability” of the expert’s testimony “go to the weight and credibility of the witness’ testimony and are questions of fact.”  Id.  Thus, the trial court abused its discretion by excluding the expert’s opinion from the jury.  Because the error caused the exclusion of Pipher’s most important causation evidence, the Court vacated the judgment and remanded for a new trial.

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

Seisinger v. Siebel (03/13/2009): Arizona Supreme Court Holds That A.R.S. § 12-2604(A) Does Not Violate the Separation of Powers Provision of the Arizona Constitution.

In August 2004, Seisinger filed a medical malpractice action against Dr. Siebel relating to a spinal epidural and disclosed a retired anesthesiologist as an expert witness.  Siebel filed a motion in limine to preclude his testimony because A.R.S. § 12-2604(A), which governs the qualifications of expert witnesses in medical malpractice cases, requires an expert witness in a medical malpractice case to have recently practiced or taught in the in the same health profession as the defendant.  Seisinger argued that A.R.S. § 12-2604(A) conflicts with Arizona Rule of Evidence 702, and therefore violates the separation of powers clause of the Arizona Constitution.  The trial court granted Siebel’s motion, ruling that the statute was not unconstitutional.   When Seisinger did not produce another expert witness, the trial court granted Seibel’s motion to dismiss.  Seisinger timely appealed.  The Arizona Appeals Court reversed, holding that § 12-2604(A) violates the separation of powers doctrine because it conflicts with Rule 702 and does not establish substantive rights.  

The Arizona Supreme Court vacated the opinion of the Appellate Court, holding that while § 12-2604(A) conflicts with Rule 702, it does not violate the constitutional separation of powers doctrine.  The majority reasoned that § 12-2604(A) places requirements in addition to those in Rule 702 on expert witnesses in medical malpractices cases.  Because a witness who would otherwise be qualified under Rule 702 is precluded from testifying in a medical malpractice cases unless he or she also meets the requirements of § 12-2604(A), the majority determined that rule and statute directly conflict.

The Court then examined whether § 12-2604(A) is substantive or procedural, explaining that if the statute is substantive in nature, it prevails under the doctrine of separation of powers.  Justice Hurwitz, writing for the majority, noted that under Arizona common law – developed long before the adoption of the Rules of Evidence –the standard of care in medical malpractice must be given by an expert witness who is a physician.  He also reasoned that § 12-2604(A) modifies the common law to increase a plaintiff’s burden of production with respect to the standard of care.  Therefore, the majority concluded, the requirement of expert physician testimony in medical malpractice cases is a substantive component of medical malpractice law and does not offend the separation of powers doctrine.  The majority went to find that the statute did not retroactively apply to Seisinger’s claim and vacated the trial court’s judgment and remanded for further proceedings.

Judge Eckerstrom, sitting by designation in the case, concurred in part and concurred in the result.  He explained that he agrees with the majority that § 12-2604(A) directly conflicts with Rule 702; but unlike the majority, he would find that the statute is an unconstitutional violation of the separation of powers doctrine.  Judge Eckerstrom pointed to a number of prior Arizona Supreme Court cases that addressed alleged conflicts between statutes and the Arizona Rules of Evidence, noting that in each case, the Court assumed that the pertinent evidentiary rule fell within the Court’s constitutionally endowed judicial power, and thus, to the extent the statute at issue conflicted with the rule, the Court found that it was unconstitutional.  Disagreeing with both the majority’s decision to conduct the substantive/procedural analysis and the result of that analysis, he stated that “while § 12-563 sets forth substantive law by specifying what must be proven, § 12-2604(A) prescribed the method by which litigants must prove their entitlement to relief under that substantive law.”  Therefore, he concluded, § 12-2604(A) is procedural in nature, and is “an unconstitutional encroachment” by the legislature on the powers of the judicial branch.         

Justice Hurwitz wrote for the majority of the Court.  Judge Eckerstrom, sitting by designation, concurred in part and concurred in the result.        

Poulson v. Ofack (3/17/2009): Arizona Court of Appeals Division One Holds That Attorneys’ Fees and Taxable Costs Must Be Awarded Against Parties Who Appeal an Arbitration Award but Fail to Better Their Position by Twenty-Three Percent as A.R.S. § 12-133(I) Requires.

Clayton and Shelly Poulson filed suit against Jean Ofack for damages suffered in an automobile accident.  The case was subject to compulsory arbitration, and the arbitrator ruled in favor of the Poulsons.  Ofack exercised her right to appeal the arbitration award and receive a de novo jury trial.  Four days before trial, the Poulsons disclosed additional medical treatment invoices, totaling approximately $5,000.  The medical treatment was received after the arbitration award, but months before trial.  Notwithstanding the delay in disclosure, the trial court ultimately admitted the invoices.  The jury found in favor of the Poulsons and awarded them damages, including an additional $5,000 representing the amount of the delinquently disclosed medical invoices.  Because Ofack’s appeal had not succeeded in reducing the arbitration award by twenty-plus percent, A.R.S. § 12-133(I) required that fees and costs be awarded to the Poulsons.  The trial court, however, declined to award fees and costs because the Poulsons had violated the disclosure rules.  The Poulsons appealed.       

The Arizona Appeals Court reversed and remanded for further proceedings.  The Court concluded that the plain language of A.R.S. § 12-133(I) requires that fees and taxable costs be awarded against a party, such as Ofack, who appeals an arbitration award but fails to better her position by the statutorily required percentage.  The statute permits only one exception, namely, when the trial “court finds on motion that the imposition of the costs and fees would create such a substantial economic hardship as not to be in the interest of justice.”  A.R.S. 12-133(I).  Despite Ofack’s argument to the contrary, the exception was designed to avert “financial” hardship, not hardship caused merely by disclosure violations.  Because Ofack conceded that she did not face any “actual economic hardship” in light of the award, the exception did not apply.  The Court thus reversed and remanded the matter to the trial court for a determination of fees and costs.                           

Judge Brown authored the opinion; Judges Timmer and Norris concurred. 

Thomas v. Thomas(3/17/2009):  Arizona Court of Appeals Division One Holds That a Trial Court in a Marriage Dissolution Case Does Not Have Jurisdiction in Post-Decree Proceedings over Property Intentionally Omitted from a Decree of Dissolution.

Husband and Wife divorced and stipulated to a decree of dissolution in January 1998.  The parties intentionally omitted a condo purchased during their marriage from the decree.  In September 1998, Husband signed a quitclaim deed conveying the condo to Wife pursuant to an agreement between the parties, and Wife recorded the deed in October 1998.  Husband claimed the recordation was fraudulent.  In October 2005, Husband filed a motion to show cause in the dissolution action asking the trial court to, among other things, award him one-half of the equity in the condo.  After a hearing on the motion, Wife raised whether the Court had jurisdiction over the condo.  The trial court determined that it had jurisdiction and ordered Wife to convey to Husband a one-half interest after Husband satisfied certain conditions.  Wife timely appealed.

The Arizona Appeals Court vacated the trial court’s ruling on the condo, holding that following entry of the dissolution decree, the condo was no longer marital property and thus was not subject to a post-decree reallocation.  The Court began by explaining that a trial court in a dissolution proceeding is only vested with jurisdiction provided by law, and under A.R.S. § 25-318(A), courts only have jurisdiction over “community, joint tenancy and other property held in common.”  It then looked to A.R.S. § 25-318(D), which states that any such property “for which no provision is made in the decree shall be from the date of the decree held by the parties as tenants in common, each possessed of an undivided one-half interest.”  Based on the plain language of the statute, the condo was transmuted to separate property because it was intentionally omitted from the dissolution decree, and the trial court lacked jurisdiction over it.

The Court rejected Husband’s argument that Wife’s allegedly fraudulent procurement of the quitclaim deed could not divest him of his community property, explaining that the condo had transmuted to separate property after it had been acquired as community property.  The Court also rejected Husband’s argument that he was entitled to Rule 60(c) relief to resolve issues over omitted property, because the property was intentionally omitted from the decree.

Judge Brown authored the opinion; Presiding Judge Portley and Judge Johnsen concurred

Hart v. Hart (3/3/2009): Arizona Court of Appeals Division One Holds That Family Court Erred in Its Child-Custody Order by (1) Failing to Make “Specific Findings on the Record About All Relevant Factors and the Reasons for Which the Decision Is in the Best Interests of the Child,” As Required by A.R.S. § 25-403(B), and (2) Failing to Apply the Correct Legal Standard in Ordering that Parenting Time Be Supervised.

Michael Hart filed a petition to modify his custody arrangements with his two minor children, over whom his former spouse, Kari Hart, had sole legal and primary physical custody.  In modifying custody, the family court stated that the best interests of the children would be served by living with their father in Arizona and for the mother to have only supervised parenting time in the summer and on school breaks.  In reaching this conclusion, the court stated that the mother had “left the children alone after school on weekdays and at other times when Mother [was] with her new boyfriend;” that the mother “had moved the children into a ‘small apartment,’ which required a change of schools;” and that “the court was concerned that Mother posed nude with her boyfriend on an adult website.”  The mother appealed.       

The Arizona Appeals Court vacated the order and remanded for further proceedings.  The Court found two errors in the order.  First, the Court explained, the “family court’s findings d[id] not refer to the absence or presence of any of the ten enumerated statutory factors listed in A.R.S. § 25-403(A).”  A.R.S. § 25-403(B) explicitly requires the family court to “make specific findings regarding all relevant factors and the reasons the decision is in the best interest of the child.”  Therefore, because the family court failed to make these “specific findings on the record,” the Court vacated the order.  Second, the Court found that the family court, in ordering that the mother’s parenting time be supervised, applied the wrong legal standard.  To impose supervision, the family court must not only decide that supervision is in the best interests of the child, as it did, but also that the absence of supervision (i) “would endanger seriously the child’s physical, mental, moral or emotional health,” under A.R.S. § 25-411(D), or (ii) “the child’s physical health would be endangered or the child’s emotional development would be significantly impaired” under A.R.S. § 25-410(B).  The family court applied neither standard, and therefore the Court vacated the order imposing supervision as well.                 

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

Zenith Electronics Corp. v. Hon. Eddward Ballinger (3/05/2009): Arizona Court of Appeals Division One Holds That Superior Court Did Not Abuse Its Discretion In Allowing Post-Judgment Intervention By a Non-Party Under Arizona Rule of Civil Procedure 24(b) 

Barbara Cassidy filed a wrongful death lawsuit against Zenith, alleging that a defective Zenith television caused a fire that killed Cassidy’s father.  During the litigation, Zenith produced a number of documents through discovery subject to a very broad protective order.  After the case was dismissed by stipulation on May 1, 2008, Public Citizen, a public interest organization, learned of the lawsuit.  On June 11, 2008, Public Citizen filed a motion to intervene under Arizona Rule of Civil Procedure 24(b) for the limited purpose of gaining access to certain materials that Zenith had produced to Cassidy pursuant to the protective order.  The superior court granted the motion to intervene, and Zenith sought special action relief. 

The Court of Appeals took jurisdiction and affirmed the superior court’s granting of the motion to intervene.  The Court explicitly confined its analysis to “the propriety of intervention” because “the superior court has not yet ordered any disclosure [of documents from the litigation.”  Because no Arizona case has discussed post-judgment intervention for the specific purpose of gaining access to discovery materials subject to a continuing protective order, the court reviewed federal cases analyzing the federal counterpart to Rule 24(b).  The analysis under Rule 24(b) focuses on two issues:  timeliness and commonality. 

A court ruling on a motion for permissive intervention must “decide as an initial matter whether the motion is timely.”  This requires a showing of justification for failure to request intervention sooner.  The Court looked to a First Circuit case in which the First Circuit identified four factors relevant to timeliness:  (1) how long the intervenor knew or should have known that the parties no longer adequately protected its interest, (2) prejudice to the existing parties from the intervenor’s delay, including whether intervention would impact the settlement and the intervenor’s reasons for seeking to participate, (3) prejudice to the intervenor if intervention were not permitted, and (4) whether the intervention concerns interests of the public.  Here, Public Citizen moved for intervention after it learned of the Cassidy settlement, and the mere fact that the motion was filed post-judgment was not determinative.  Also, Public Citizen sought to intervene for a limited purpose, not to disrupt the settlement.  Finally, Public Citizen sought to assert a public interest, not represented by Cassidy or Zenith, associated with possibly defective Zenith televisions.

The second requirement of Rule 24(b) is that Public Citizen’s “claim or defense and the main action have a question of law or fact in common.”  Finding no Arizona cases on point, and noting that federal cases vary in how expansively they define “commonality,” the court held that the common question of law here “involves the propriety of the protective order and the extent to which it may be modified at this stage of the proceedings.”

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

Vig v. Nix Project II Partnership (3/5/2009):  Arizona Court of Appeals Division One Holds That an Affidavit Is Proper Under A.R.S. § 33-422 When It Is Furnished to the Buyer at Least Seven Days Before Closing and Contains Sufficient Information to Put the Buyer on Inquiry Notice of All Relevant Conditions.

AA American Development Corporation (“American”) submitted an offer to Nix Project II Partnership (“Nix”) for the purchase of a large undeveloped property.  Nix accepted the offer and a 30-day inspection period commenced.  On June 7, 2005, Nix’s real estate agent faxed an affidavit of disclosure to American’s real estate agent, indicating that there was no legal access to the property.  The real estate agent acknowledged receipt, but American neither acknowledged the affidavit of disclosure nor exercised its right of rescission.  After six extensions of the time for closing, American assigned its interest in the transaction to Vig.  The escrow officer then sent a copy of the affidavit of disclosure to Vig.  Ten months after escrow closed, Vig brought an action against Nix for breach of contract and statutory rescission on the basis that Nix’s affidavit of disclosure did not comply with A.R.S. § 33-422.  The trial court held that the affidavit of disclosure complied with § 33-422 and this appeal followed.

The Arizona Appeals Court first held that an affidavit of disclosure complies with A.R.S. § 33-422 so long as it is furnished to the buyer at least seven days before closing, and that the buyer’s failure to formally acknowledge receipt has no legal significance.  Second, the Court held that so long as the affidavit of disclosure is self-explanatory and puts the buyer on inquiry notice, it complies with § 33-422.  Finally, the Court explained that a nominee of rights and obligations under a contract is bound by the nominor’s waiver of a right of rescission for non-compliance with § 33-422.  Because Nix furnished an affidavit of disclosure to American at least seven days before closing and marked a box on the affidavit clearly indicating that there was no legal access to the property, American waived Vig’s right to rescission by failing to rescind the transaction within five days after it received the affidavit of disclosure.

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

Langerman Law Offices, P.A. v. Glen Eagles at the Princess Resort, LLC (3/3/2009):  Arizona Court of Appeals Division One Holds That a Plaintiff’s Attorney Has No Common-Law Charging Lien on a Judgment if Sanctions Awarded Under Arizona Rule of Civil Procedure 68(g) Exceed the Plaintiff’s Award, Resulting in a Net Judgment in Favor of the Defendant.

Plaintiff Langerman Law Offices P.A. (“Langerman”) represented Kari Killian on a contingent fee basis in a lawsuit against Defendant Glen Eagles at the Princess Resort (“GlenEagles”).  Killian was awarded $100,000 in damages and $21,756.91 in costs.  Notwithstanding this victory for the plaintiff, the Court awarded GlenEagles $151,891.69 in sanctions under Ariz. R. Civ. P. 68(g) because Killian rejected an offer of settlement that exceeded the jury award.  Killian subsequently filed for bankruptcy, and she and GlenEagles entered into a settlement agreement in which they agreed to have their awards offset, leaving GlenEagles with an unsecured claim for 30,134.78.  Thereafter, Langerman asserted a claim against GlenEagles for the amounts awarded to Killian under the theory that it had an attorneys’ charging lien on those awards.  The trial Court dismissed the suit and Langerman timely appealed.

The Arizona Appeals Court affirmed, holding that Langerman had no charging lien because the net judgment was in favor of GlenEagles, not Killian.  The Court rejected Langerman’s argument that there were really three separate judgments in the case, finding that there was only a single judgment containing three different awards that offset each other in favor of GlenEagles.  The Court also discussed the purpose of charging liens – which is to prevent dishonest clients from absconding with judgments without paying their lawyers – and found that there could be no charging lien in this case because there was no award with which Killian could have absconded, given that she was the net loser in the case.  Moreover, citing numerous cases from other jurisdictions, the court explained that the fact that the superior court did not offset the awards in the final judgment was irrelevant because it did not alter the reality that there was a single judgment favoring GlenEagles.

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

City of Phoenix v. Johnson (3/3/2009): Arizona Court of Appeals Division One Holds that Defendant in Condemnation Action is Entitled to Immediate Disbursement of Money Paid Into Court by City/Condemnor, Despite Appeal by City, Because the Automatic Stay Under Rule 62(g) Conflicts With the Condemnation Statute, Which Controls

The City of Phoenix ("City") filed a condemnation action to acquire property for the light rail transit project.  A jury verdict awarded the property owner ("Johnson") approximately $1 million for the taking.  Under protest, the City paid the amount of the judgment to the Superior Court Clerk and argued in its notice of payment that the court should not release the funds because the automatic stay provision, Rule 62(g), Ariz. R. Civ. P., would apply once the City filed a notice of appeal.  Johnson filed an application for release of the funds held by the court and the City filed its notice of appeal two weeks later. The trial court issued a post-judgment order rejecting the City's argument that payment to Johnson should be stayed under Rule 62(g) and releasing the funds to Johnson.  The City amended its notice of appeal to include the post-judgment order.

The Court of Appeals affirmed the post-judgment order.  The court found that, under the circumstances, Rule 62(g) conflicts with A.R.S. § 12-1127(B).  Rule 62(g) provides for an automatic stay of money judgments against a political subdivision of the state upon the filing of an appeal.  A.R.S. § 12-1127(B), however, provides for the immediate disbursement of money paid into the court, upon application, to the defendant in a condemnation action.  Because the statute and rule cannot be harmonized, and because the statute is substantive and not procedural, the statute governs to the exclusion of the rule.  Substantive rights created by statute cannot be enlarged or diminished by rules promulgated by the state Supreme Court.

The court addressed the remaining appeal issues through an unpublished memorandum decision.

Judge Barker wrote the opinion; Judges Brown and Reeves concurred.

Monterey Homes Ariz., Inc. v. Federated Mut. Ins. Co. (2/10/2009):  Arizona Court of Appeals Division One Holds That an Insurer Defending Under a Reservation of Rights and Seeking to Assert a Subrogation Claim That Has Been Released by the Insured in a Settlement Agreement May Intervene to Contest Whether the Insured Gave Appropriate Notice of the Settlement Agreement and Whether the Settlement Was Reasonable.

In 2004, Monterey Homes Arizona, Inc. and a related entity (collectively “Monterey”) were named as defendants in a construction defect suit brought by homeowners.  Monterey filed a third-party complaint alleging indemnity claims against several of its subcontractors including BBP Concrete Company, Inc. (“BBP”), which then tendered its defense to its insurer, Federated Mutual Insurance Company (“Federated”) under a “complete reservation of rights.”  BBP denied the third-party claims and requested attorneys’ fees under A.R.S. § 12-341.01, which Federated believed would be recovered due to its contention that the third-party claims were meritless.  In 2007, BBP entered into a walk-away settlement with Monterey without Federated’s consent in which the parties agreed to “no indemnity or defense payments”.  Asserting that it had become subrogated to BBP’s rights to recover the “defense payments” from Monterey, Federated moved to intervene.   The superior court denied intervention and Federated appealed.   

The Arizona Appeals Court reversed and remanded, holding that Federated was entitled to intervene as a matter of right pursuant to Ariz. R. Civ. P. 24(a).  The court explained that under United Services Automobile Ass’n v. Morris, 154 Ariz. 113, 741 P.2d 246 (1987), Federated was entitled to intervene in order to contest both the appropriateness of the notice given by BBP of the settlement agreement, and the reasonableness of the settlement agreement itself.   The Court held that although Federated’s subrogation rights could not limit BPP from entering into a settlement that released those rights because there was a reservation of rights, the principles set forth in Morris allowed it to contest whether it had been given appropriate notice of the settlement and whether the settlement was reasonable and prudent under the circumstances.

The Court rejected Monterey’s argument that simply by defending BBP under a reservation of rights, Federated necessarily forfeited its subrogation rights and that intervention by Federated was therefore futile.

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

Fidelity National Title Co. v. Town of Marana (2/13/2009):  Arizona Court of Appeals Division Two Holds that the Time for Filing a Referendum Petition Challenging a Zoning Ordinance Begins To Run When the Ordinance is Approved.

On October 2, 2007, the Town of Marana (“Marana”) approved an ordinance changing the zoning on a piece of land that Fidelity National Title Co. (“Fidelity”) owns.  The ordinance stated that the time for challenging the ordinance by referendum would not begin to run until after Marana filed a waiver with the County Recorder.  Nessinger, thereafter, obtained a referendum petition, which stated that the deadline for filing was November 8, 2007.  Marana, however, contacted Nessinger and informed her that she did not have to file the referendum until after Marana filed its waiver.  Marana filed the waiver on November 8, 2007, and on that date Nessinger obtained an amended referendum petition, which stated that the deadline for filing was December 10, 2007.  Nessinger filed the petition on that date.  Marana accepted and certified the petition.  Fidelity challenged the petition in Pima County Superior Court as untimely.  The trial court found for Nessinger and this appeal followed.

The Court of Appeals explained that according to Pioneer Trust Co. v. Pima County, 168 Ariz. 61, 811 P.2d 22 (1991), and A.R.S. § 19-142(D), the date that triggers the 30-day period for challenging a rezoning is the date when the town council initially approves the ordinance.  The language of § 19-142(D) does not grant the state’s subdivisions with the power to deviate from this bright-line rule.  The Court of Appeals reasoned that while all interested parties can easily ascertain the initial approval date of an ordinance, the alternative triggering event that Marana adopted does not share the same virtue.  The bright-line rule also provides uniformity.  Because Nessinger did not file her petition within 30 days after Marana approved the rezoning, Nessinger’s petitioner was untimely.

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

Patches v. Industrial Commission of Arizona (2/24/2009):  Arizona Court of Appeals Division One Holds That Housekeeping Services Are Not Compensable Services Under Arizona’s Workers’ Compensation System

Sharon Patches (“claimant”) was employed by the City of Phoenix as a police lieutenant.  She was injured on the job and filed a workers’ compensation claim, which was accepted for benefits.  The claimant’s injuries ultimately left her severely physically restricted.  Her physicians recommended that she be provided with house-keeping services.  Claimant sought these benefits from the carrier, SCF Arizona, who denied the claim, asserting that house-keeping services are not covered medical expenses under A.R.S. § 23-1062(A).  Claimant eventually requested and received a hearing, and the Administrative Law Judge (ALJ) denied her request for relief.  On administrative review, the ALJ summarily affirmed the award, and claimant brought a special action.

Reviewing Arizona’s worker’s compensation statute de novo, Division one affirmed.  The court reviewed the plain language of A.R.S. § 23-1062(A), and held that housekeeping services did not, as claimant asserted, constitute “other treatment” within the meaning of the statute.  Noting that benefits under the workers’ compensation statute are not coextensive with tort damages, the court reasoned that (1) the statute does not mention house-keeping services expressly and (2) while the absence of such express language “does not itself dispose of claimant’s position, the absence of any statutory language identifying a category of services within which housekeeping could credibly fit ends the inquiry.” The court noted that an extension of the meaning of “other treatment” is for the legislature to decide, not the courts.  The court also reviewed recent cases deeming other classes of expenses outside the scope of “other treatment,” including child care costs and compensation for a spouse who provides attendant care services for the injured claimant.

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

In Re MH 2008-000438 ( 2/10/2009): Arizona Court of Appeals Division One Holds that Court-Ordered Examinations Pursuant to A.R.S. § 36-533 Must Be In-Person Physical Examinations.

John Doe failed to take medication for bipolar disorder and exhibited signs of mania.  A state health agency therefore petitioned for a court-ordered psychiatric evaluation of Mr. Doe, which was granted.  After Mr. Doe was evaluated by two doctors, and both concluded that Mr. Doe was persistently or acutely disabled, the state filed a petition for involuntary treatment.  At the hearing on the petition, one of the doctors admitted that she did not personally examine Mr. Doe; rather, she had based her conclusions solely on pleadings and the evaluation of another doctor.  The court nevertheless granted the petition and ordered both inpatient and outpatient treatment for a period not to exceed one year.  Mr. Doe appealed.        

The Arizona Appeals Court vacated the order.  The Court concluded that the statutes governing involuntary treatment proceedings require that at least two physicians personally examine a patient and conclude that he or she is disabled.  See A.R.S. §§ 36-533(B), 36-501(14).  The Court noted that this construction furthered the statutory purpose “‘to prevent professional mental health evaluators, whether consciously or otherwise, from simply ratifying or ‘rubber-stamping’ one another’s findings.’”  Because the second doctor failed to examine Mr. Doe personally, the Court vacated the involuntary treatment order.              

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

Koepnick v. Arizona State Land Department ( 2/26/2009):  Arizona Court of Appeals Division One Affirms a Decision by the State Land Department Reclassifying Trust Lands in Pinal County from Agricultural to Commercial.

The Arizona-New Mexico Enabling Act of 1910 granted almost 10 million acres of land to the State of Arizona to be held in trust to support the state’s public schools.  Trust lands are administered by the Arizona State Land Department, under the direction of the Commissioner, who must classify and appraise state lands for purposes of sale, lease, and granting of rights-of-way.  Among the classifications, which are assigned based on the land’s highest and best use, are agricultural and commercial.

Max Koepnick held leases to 900 contiguous acres of trust lands in Pinal County, which had been classified as agricultural lands and used as such by Koepnick and his predecessors for more than 50 years.  In 2006, prompted by significant residential and commercial growth in the area, the Commissioner reclassified the leased lands from agricultural to commercial, canceling Koepnick’s leases by operation of law.  Koepnick successively appealed to the Arizona Land Board of Appeals, the Superior Court, and the Court of Appeals, all of which affirmed the Land Department’s decision.

Koepnick first argued that the Department was prohibited from classifying lands as commercial when the intended future use of the lands was for both commercial and residential development.  The Court of Appeals rejected this argument because the statutory definition of “commercial lands” includes lands principally used for “business.”  Development of land, whether for commercial or residential use, is a business use and therefore “falls squarely within the commercial classification.” 

Koepnick next argued that in reclassifying the leased lands as commercial, the Commissioner violated fiduciary duties owed to the land trust and duties owed to Koepnick as lessee of the lands.  The basis for Koepnick’s argument was an alleged quid pro quo between the Land Department and Pinal County:  the Land Department’s reclassification would allow Pinal County to obtain a right-of-way across the leased lands without having to reimburse Koepnick for damage to extensive improvements, and Pinal County would rezone the lands to allow for future development.  Evidence was presented to the Land Board of Appeals that would support a finding that the Land Department struck a deal with Pinal County as alleged by Koepnick.  The Court of Appeals, however, deferred to the factual findings of the Board, which had concluded, on sound evidence, that the Commissioner’s reclassification decision was based on the highest and best use of the lands and was in the best interest of the trust. 

The Court of Appeals noted that this case presented a situation in which the Commissioner’s duties to the trust and its beneficiaries conflicted with his duties to the lessee of the lands. While the Commissioner must maximize revenue for the trust, he need not focus on generating the highest immediate revenue, but is empowered to formulate detailed plans for future use of lands.  On the other hand, the Commissioner owes a duty to a lessee to ensure the lessee is reimbursed by his successor for approved improvements placed on state lands.  In this case, the Commissioner’s plan did not provide an immediate successor to the leased lands and therefore deferred reimbursement to Koepnick for his improvements.  Ultimately, however, the court held that the Commissioner’s resolution of this conflict was appropriate.   

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

In Re MH 2007-001895 (2/10/2009): Arizona Court of Appeals Division One Holds That the Trial Court Has Discretion to Decide Whether an Interpreter is Qualified.

Upon petition for court-ordered psychiatric treatment of  L.R., a mental health evaluation hearing was held by the trial court.  Prior to the hearing, L.R. requested a Spanish interpreter.  When the hearing was to begin, no interpreter was present; therefore, the hearing time was pushed back so that an interpreter could arrive.  When the hearing resumed, the trial court indicated that an interpreter from Language Line, a company that provides telephonic translation services, would perform the interpretation services.  L.R. objected to the use of the Language Line interpreter on various grounds, including the interpreter’s qualifications.  The trial court permitted the interpreter to provide interpretation services for the hearing. 

On the merits, the court ruled that L.R. was persistently and acutely disabled as a result of a mental disorder and ordered psychiatric treatment.   L.R. timely appealed, arguing that her due process rights and her right to a fair hearing were violated because the interpreter was only “court-qualified” and not “court-certified.”  She also argued on appeal that there is no way to know whether she received a continuous simultaneous interpretation of the hearing proceedings because the transcript of the proceedings indicates that the interpreter occasionally asked the participants to speak up, and as a result, certain words or phrases were “indiscernible” to the transcriber.

The Arizona Appeals Court affirmed.  The Court concluded that L.R. had the burden of showing that the interpreter was deficient and that an unfair hearing resulted.  The Court found that L.R. failed to meet this burden as she cited no legal authority for her contention that an interpreter must be “court-certified.”  In the absence of any other authority, the Court applied A.R.S. § 12-241, which provides that the court may appoint interpreters “who may be summoned in the same manner as witnesses, and shall be subject to the same penalties for disobedience.”  The decision regarding whether an interpreter is qualified rests within the discretion of the trial court.  The Court found no abuse of discretion by the trial court in finding the interpreter qualified.    

Addressing L.R.’s argument regarding the continuous simultaneous translation of the hearing, the Court noted that this argument was raised for the first time on appeal and therefore was waived.  The Court further noted that even if the argument had not been waived, L.R.’s argument was not supported by the record because the interpreter’s request that the participants speak up demonstrates only that the interpreter could not hear what was said; it does not demonstrate that the parties or the court were unable to hear the interpreter.  Furthermore, the hearing was recorded by audio or videotape, making it L.R.’s responsibility to clarify the record in the lower court; something she did not do.  

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