AZAPP Blog

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

17 Applicants Being Considered by Commission to Replace Justice McGregor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ritchie v. Krasner (4/21/2009):  Arizona Court of Appeals Division One Holds That Even Absent a Formal Doctor-Patient Relationship, a Doctor Conducting an Independent Medical Examination Owes a Duty of Reasonable Care to His or Her Patient.

In April 2000, Jeremy Ritchie injured his back and his worker’s compensation carrier retained Defendant Scott Krasner to perform an independent medical examination (“IME”) on him.  Prior to the IME, Ritchie signed a notice stating “no Doctor/Patient relationship exists between you and Dr. Krasner.”  After conducting the IME, Krasner concluded that Ritchie was not seriously injured.  Ritchie’s condition, however, deteriorated, until he had back surgery.  In the eight months before he had surgery, an undiagnosed spinal cord compression caused spinal cord deterioration, resulting in “central pain syndrome.”  He was prescribed narcotic painkillers for that condition.  In 2002, he filed a complaint for medical malpractice against various defendants, including Krasner.  Ritchie died of an accidental overdose in 2002, after which his relatives took over as Plaintiffs and added a claim for wrongful death.  A jury awarded Plaintiffs $5 million, and assigned 28.5% of the fault to Krasner.  Krasner timely appealed.     

The Arizona Appeals Court affirmed.  Citing Stanley v. McCarver, 208 Ariz. 219, 92 P.3d 849 (2004), the Court explained that a duty may arise even in the absence of a formal relationship, and listed the factors courts consider in determining whether a duty exists.  The court explained that, like in Stanley, Krasner agreed to examine Ritchie and report on his condition, and Ritchie relied on that report, and thus concluded that a doctor conducting an IME, such as Krasner, must “conform to the legal standard of reasonable conduct in light of the apparent risk” which in Krasner’s case included “ a duty to conform to the legal standard of care for one with his skill, training, and knowledge.”  Id. at 224, ¶ 16, 92 P.3d at 854.  The Court also explained that the Restatement (Second) of Torts § 342A (1965) supported the existence of a duty because Krasner rendered services to Ritchie on behalf of his worker’s compensation carrier, and Ritchie relied on Krasner’s findings.  The Court further found that public policy favored the existence of a duty.  

Krasner also raised a number of secondary issues, claiming that: (1) the trial court should have allowed the jury to see the disclaimer signed by Ritchie on a limitation of liability defense; (2) the jury erred by finding that Krasner was partially the proximate cause of Ritchie’s injury, by improperly apportioning fault, and by awarding an excessive verdict; (3) the trial court erred by failing to give jury instructions on intervening/superseding cause; (4) the trial court erred in several evidentiary rulings; (5) Plaintiffs engaged in misconduct by asking the jury to apportion no blame to one of the defendants; (6) Plaintiffs’ claim was barred by the statute of limitations for malpractice actions; (7) Krasner was entitled to absolute immunity as a “witness”; and (8) Maricopa County’s jury selection process is unconstitutional because the panel was not selected on a county-wide basis.  The Court rejected all of these arguments. 

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

Queiroz v. Harvey (4/28/2009):  Arizona Supreme Court Holds That Agent’s Inequitable Conduct May be Imputed To the Principal Whether or Not the Principal Knew of the Agent’s Misconduct

Daniel Harvey listed land for sale.  Ivo Queiroz, through his agent, Charles Harrison, offered to purchase the land.  Harvey counter-offered and Queiroz accepted.  Harvey and his agent later became concerned because Harrison had not timely sent the $1,000 earnest money as required by the contract, and repeated efforts to reach Harrison were unavailing.  Harvey’s agent therefore told the escrow agent that the contract was cancelled.  Either that night or the next day, Harrison learned that Harvey had cancelled the contract, and on the next Monday morning, Harrison took two money orders amounting to $1,000 to a branch of the escrow company.  Several hours later, Harvey’s written notice of the cancellation arrived at another branch of the escrow agent’s office.  Harvey’s agent returned Harrison’s earnest money, informing him that the contract had been cancelled.

Queiroz sued Harvey, seeking specific performance of the contract.  The case was tried to the bench,  The Superior Court found that Harrison acted inequitably and thus denied Quieroz specific performance.  Among other things, the court found that Harrison had not testified truthfully about a variety of issues.  The Court of Appeals reversed and remanded, holding that an agent’s fraudulent or dishonest acts could not be attributed to a principal for purposes of an equitable defense absent personal involvement or knowledge of the principal.   

The Supreme Court, reviewing for abuse of discretion, vacated the Court of Appeals opinion and affirmed the judgment of the Superior Court.  Citing the Restatement (Third) of Agency, the Court began its opinion by stating that under “ordinary principles” of agency law, “an agent’s acts bind the agent’s principal.”  The Court also cited two out-of-state cases holding that a principal seeking specific performance may be bound by an agent’s inequitable conduct.  The Supreme Court found inapposite the cases on which the Court of Appeals relied, and rejected Queiroz’s equitable argument that the courts should protect “innocent principals.”  In this regard, the Court found “[a]s between the principal who has retained an unscrupulous agent and innocent third party who relies on the agent’s misrepresentations, it is the third party who deserves protection.”

Finally, Quieroz sought review of whether Harrison’s conduct was actually inequitable.  The Supreme Court deferred to the Superior Court in this regard and concluded that the evidence supported the Superior Court’s finding that Harrison acted inequitably.

Justice Ryan authored the opinion for a unanimous court.