AZAPP Blog

Mendoza v. McDonald’s Corp. (7/7/09):  Arizona Court of Appeals Division One Orders a New Trial on an Employee’s Compensatory and Punitive Damages Claims Arising out of McDonald’s Bad Faith Handling of Her Workers’ Compensation Claim.

Maria Mendoza (“ Mendoza”) injured her arm while working at a McDonald’s restaurant.  Although McDonald’s initially placed Mendoza on temporary total disability benefits, it delayed in authorizing carpal tunnel surgery and for a time terminated her disability benefits.  Eventually, an administrative law judge found that Mendoza was entitled to total disability benefits and awarded her psychological and pain management treatment.  Mendoza thereafter filed a lawsuit against McDonald’s, claiming that McDonald’s acted in bad faith in handling her workers’ compensation claim.  Following trial, a jury awarded Mendoza $250,000 in compensatory damages, but did not award her punitive damages.  This appeal followed.

The Arizona Appeals Court ordered a new trial on compensatory and punitive damages (McDonald’s did not contest liability).  First, the Court held that the trial court should have instructed the jury that Mendoza is entitled to any damages for pain and suffering, past and future medical expenses, and lost earnings proximately caused by McDonald’s bad faith, as opposed to the injury itself.  Next, the Court concluded that the trial court should not have allowed McDonald’s to withhold certain portions of its claims adjuster’s files as privileged because McDonald’s had affirmatively alleged that its actions were subjectively reasonable.  Thus, McDonald’s had raised a defense that implicitly incorporated the advice of counsel and could not deny Mendoza the opportunity to explore the foundation for McDonald’s assertions.  Third, the Court explained that the trial court should have instructed the jury that “punitive damages may be assessed against an insurer for the actions of its attorney if those actions were taken in furtherance of the insurer’s business and within the scope of the attorney’s agency.”  Lastly, the Court held that the trial court should have given preclusive effect to the compensability determinations of the administrative law judge.

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

Arizona Early Childhood Development & Health Board v. Brewer (7/24/2009): Arizona Supreme Court Holds That the Arizona Legislature Exceeded Its Authority When It Transferred $7 million in Interest Income Earned on Revenue From the Early Childhood Development & Health Fund Into the State’s General Fund.   

In addressing the deficit in Arizona’s 2009 budget, the legislature transferred $7 million in interest income earned on revenue from the Early Childhood Development & Health Fund (the “Fund”) into the state’s general fund.  The Early Childhood Development & Health Board (the “Board”) brought a special action alleging that the transfer was unconstitutional.

The Arizona Supreme Court accepted jurisdiction and ordered that the $7 million be returned to the Fund, along with the interest that would have been earned on that amount.  In reaching its decision, the Court addressed two measure passed by the voters of the state: the Voter Protection Act and the Arizona Early Childhood Development and Health Initiative (the “Early Childhood Initiative”).   

The Voter Protection Act limits the legislature’s ability to amend initiatives approved by the voters and to divert or appropriate funds “created or allocated to specific purpose” by those measure to situations in which the legislature achieves a three-fourths majority vote of each house, and the action furthers the purpose of the initiative.  The Court found that the legislature unconstitutionally diverted the funds from a specific purpose without the requisite three-fourths majority vote.

The Early Childhood Initiative, at A.R.S. § 8-1181, established a tax on tobacco products to support early childhood development and health programs created by the Board.  The statute delineates the control and distribution of income from this tax and states that “interest and other income from investments of monies in any account shall be credited to that account except as otherwise provided by law.”  The Court found that, when read in context, this language provides the legislature solely with the authority to credit interest and other income to a Fund account other than the account of origin, rather than the authority to transfer interest and income from funds generated by the tobacco tax to the general fund.  The Court reasoned that permitting the legislature to sweep these funds into the general fund is inconsistent with the purpose of the Early Childhood Initiative: to invest in early childhood health and education programs by dedicating funding to these programs. 

Justice Ryan authored the opinion, Justices McGregor, Berch, Hurwitz and Bales concurred. 

Chavez v. Brewer (7/21/2009): Arizona Court of Appeals Division One Holds That the Political Question Doctrine Does Not Preclude Judicial Review of Arizona Secretary of State’s Certification of Voting Machines and That a Private Right of Action Exists to Claim That Voting Machines Do Not Comply With Statutory Requirements.

Arizona adopted A.R.S. § 16-442, requiring that the Secretary of State designate voting machines “certified for use.” Appellants brought an action seeking declaratory, injunctive, and mandamus relief, alleging that two of the machines Secretary Brewer certified did not fulfill the statutory requirements. Secretary Brewer moved to dismiss the action, asserting that the trial court had no authority under the separation of powers doctrine to determine what voting machines must be used. After oral argument, the trial court exercised judicial restraint and granted the Secretary’s motion to dismiss, refusing to “substitute its opinion for those experts . . . who participated in the process.”

The Arizona Appeals Court vacated the trial court’s order in part, affirmed in part, and remanded the case for further proceedings. The Court held that judicial review of the certification process for the voting machines was “not a political question implicating the principle of separation of powers,” in part because the authority to certify was not “constitutionally committed to the secretary of state,” but was only prescribed by statute. The judiciary had the authority to construe the statute scheme because the issue was whether the Secretary complied with the statutory requirements when she certified the machines. The detailed statutes set out the procedure that must be followed to certify the machines, giving the court “judicially discoverable or manageable standards to resolve this controversy.”

The Court rejected the Secretary’s argument that there was no private right of action under Arizona law because federal courts had already held that there was no private right of action under the federal Help America Vote Act (HAVA). The Court stated that it was not bound by federal case law construing HAVA, and that Arizona case law implies a private right of action, especially when the focus of the statute is to protect the rights of individuals.

The Court further held that appellants had no grounds for relief based on the right to “purity of elections” guaranteed in Article 7, Section 7 of the Arizona Constitution, because appellants had not claimed that the alleged improper certification of the voting machines was due to a failure of the legislature to enact laws guaranteeing pure elections. The Court held, however, that the requirement in Article 2, Section 21 of the Arizona Constitution that elections be “free and equal” is “implicated when votes are not properly counted,” and that appellants may be entitled to injunctive relief if they can show that a significant number of votes will not be properly counted by the voting machines. The Court stated that the appellants could proceed on their claim because they had described sufficient allegations in their complaint that, if true, would entitle them to relief under Article 2, Section 21 of the Arizona Constitution. The Court refused to decide whether appellants’ equal protection claim should be dismissed as legally insufficient, because it could not be determined at that stage of the proceedings.

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

Salt River Sand and Rock Company v. Dunevant (6/30/09):  Arizona Court of Appeals Division One Holds that Trial Courts Possess Discretion to Condition a Stay of Execution of Judgment on a Supersedeas Bond in an Amount Different from the Judgment Amount.

Gravel Resources of Arizona obtained an $18.5 million judgment against Salt River Sand and Rock Company (“SRSR”).  SRSR thereafter requested that the trial court condition stay of execution on the posting of a $5.5 million supersedeas bond and alternate security because SRSR would suffer undue financial harm if required to pay the full judgment amount.  The trial court denied SRSR’s request, reasoning that trial courts do not possess discretion to set the bond amount below the judgment amount based on inability to pay.  SRSR filed a petition for special action.

The Arizona Appeals Court accepted special action jurisdiction and granted relief, holding that trial courts possess discretion to set the bond amount at less than the judgment amount where the judgment debtor demonstrates that posting a full supersedeas bond would subject it to undue financial harm.  In fashioning alternate security, the trial court should consider the collectable value of the judgment debtor’s assets as of the date of judgment, including the liquidity of the judgment debtor’s assets and the amount the judgment debtor could pay without suffering undue harm.  Generally, the alternate security should preserve the status quo and not be jeopardized pending appeal.  The Court determined that SRSR had met its burden of showing undue harm and remanded the case to the trial court for consideration of SRSR’s proposed alternate security.

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

Tarron v. Bowen Machine & Fabricating, Inc. (7/7/2009):  Division One of the Arizona Court of Appeals Reverses Summary Judgment and Holds That Right to Control Under the Borrowed Servant Doctrine Is a Question of Fact.

James Tarron, an employee of Phelps Dodge, was injured on the job as a result of the negligence of workers loaned to Phelps Dodge by Bowen Machine & Fabricating.  Tarron sued Bowen, claiming that Bowen was vicariously liable for its workers’ negligence.  The trial court granted partial summary judgment to Tarron on the vicarious liability issue, and, after a jury trial, Bowen appealed.

The Court of Appeals reversed.  Under the borrowed servant doctrine, Bowen, the general employer, is not liable for its employees’ negligence unless Bowen had the right to control the particular work that caused the accident.  Testimony in the case strongly suggested that Phelps Dodge, the special employer, had the right to control the negligent employees, but the contract between Phelps Dodge and Bowen provided that Bowen had “exclusive right to control” its employees’ work.  Unlike the trial court, the Court of Appeals concluded that the contract provision was not dispositive on the right-to-control issue.  The contract did, however, make right to control a fact question, thus defeating Bowen’s claim that it was entitled to summary judgment.  The Court noted also that a general employer and a special employer can have joint control over a worker, but that too is a question of fact. 

Judge Barker authored the opinion; Judges Hall and Thompson concurred.

Tarron v. Bowen Machine & Fabricating, Inc. (7/7/2009):  Division One of the Arizona Court of Appeals Reverses Summary Judgment and Holds That Right to Control Under the Borrowed Servant Doctrine Is a Question of Fact.

James Tarron, an employee of Phelps Dodge, was injured on the job as a result of the negligence of workers loaned to Phelps Dodge by Bowen Machine & Fabricating.  Tarron sued Bowen, claiming that Bowen was vicariously liable for its workers’ negligence.  The trial court granted partial summary judgment to Tarron on the vicarious liability issue, and, after a jury trial, Bowen appealed.

The Court of Appeals reversed.  Under the borrowed servant doctrine, Bowen, the general employer, is not liable for its employees’ negligence unless Bowen had the right to control the particular work that caused the accident.  Testimony in the case strongly suggested that Phelps Dodge, the special employer, had the right to control the negligent employees, but the contract between Phelps Dodge and Bowen provided that Bowen had “exclusive right to control” its employees’ work.  Unlike the trial court, the Court of Appeals concluded that the contract provision was not dispositive on the right-to-control issue.  The contract did, however, make right to control a fact question, thus defeating Bowen’s claim that it was entitled to summary judgment.  The Court noted also that a general employer and a special employer can have joint control over a worker, but that too is a question of fact. 

Judge Barker authored the opinion; Judges Hall and Thompson concurred.

Salt River Sand and Rock Company v. Dunevant (6/30/09):  Arizona Court of Appeals Division One Holds that Trial Courts Possess Discretion to Condition a Stay of Execution of Judgment on a Supersedeas Bond in an Amount Different from the Judgment Amount.

Gravel Resources of Arizona obtained an $18.5 million judgment against Salt River Sand and Rock Company (“SRSR”).  SRSR thereafter requested that the trial court condition stay of execution on the posting of a $5.5 million supersedeas bond and alternate security because SRSR would suffer undue financial harm if required to pay the full judgment amount.  The trial court denied SRSR’s request, reasoning that trial courts do not possess discretion to set the bond amount below the judgment amount based on inability to pay.  SRSR filed a petition for special action.

The Arizona Appeals Court accepted special action jurisdiction and granted relief, holding that trial courts possess discretion to set the bond amount at less than the judgment amount where the judgment debtor demonstrates that posting a full supersedeas bond would subject it to undue financial harm.  In fashioning alternate security, the trial court should consider the collectable value of the judgment debtor’s assets as of the date of judgment, including the liquidity of the judgment debtor’s assets and the amount the judgment debtor could pay without suffering undue harm.  Generally, the alternate security should preserve the status quo and not be jeopardized pending appeal.  The Court determined that SRSR had met its burden of showing undue harm and remanded the case to the trial court for consideration of SRSR’s proposed alternate security.

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

Cannon v Hirsch Law Office et al (7/14/2009):  Arizona Court of Appeals Division One Holds that an Attorney’s Alleged Negligence While Representing a Creditor in Non-Adversarial Portions of Bankruptcy Proceedings Does Not Occur in the Course of “Litigation” as that Term Is Used For Purposes of the Accrual of an Attorney Malpractice Action

In May 2004 Cannon retained Hirsch to protect her interests as a creditor in a Chapter 13 bankruptcy action filed by the Vaughns.  Hirsch attended the meeting of creditors on Cannon’s behalf and filed a stipulation for relief from the automatic stay in bankruptcy court, which would allow Cannon to foreclose upon her secured collateral.  Hirsch then engaged auctioneers to retrieve and sell the collateral at public auction.  The collateral was sold on September 30, 2004, and Hirsch delivered the funds to Cannon.  From that date through November 5, 2004, Hirsch sent Cannon correspondence related to the sale of the collateral.  During the same time frame, the Vaughn’s Chapter 13 was converted to a Chapter 7.  On October 25, 2004, a meeting of creditors on the Chapter 7 petition was held, and the deadline to file a complaint objecting to the discharge of the debtor expired on December 27, 2004.  On January 4, 2005, the Vaughns were granted a discharge.  Hirsch did not file any objection to the discharge.

Cannon filed a lawsuit on January 3, 2007, alleging legal malpractice. The trial court granted Hirsch’s motion for summary judgment, noting that Cannon’s malpractice claim was barred by the two-year statute of limitations.  In so ruling, the trial court made a preliminary finding that the alleged malpractice did not occur “during the course of litigation” and thus Cannon’s cause of action accrued when she found out about the sale of the printing equipment in November of 2004.

On de novo review, Division One reversed and remanded.  The Court began by noting that generally, a claim for malpractice accrues when the client knows or should know of his attorney’s negligent conduct.  When the alleged malpractice occurs during the course of litigation, however, Arizona courts have held that the injury is not ascertainable until the appellate process is completed or is waived by a failure to appeal.  Thus, it is only in the context of “litigation” that accrual of the cause of action is deferred until the litigation is finally resolved. 

The Court examined the nature of a bankruptcy proceeding, found that a bankruptcy does not involve adversarial proceedings until “a creditor files a complaint,” and determined that Hirsch’s alleged negligence did not occur in the course of “litigation” because no complaint had been filed.

The Court remanded, however, on issues relating to the “discovery rule,” i.e. determining when the actionable negligence existed and when Cannon discovered or should have discovered that she had been injured by the negligence.  In this regard, the Court held that the negligence was actionable when Cannon sustained non-speculative and non-contingent damages – on December 27, 2004, when the Vaughns were granted a discharge.  As to the second issue, the Court noted that the record was silent regarding when Cannon knew or should have known that Hirsch failed to file an objection before December 27, 2004.  For this reason, the Court held there was no sufficient basis to conclude as a matter of law that Cannon knew or should have known, before January 4, 2005, of Hirsch’s failure to file an objection on December 27, 2004. 

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

Keystone Floor & More, LLC v. Arizona Registrar of Contractors (7/02/2009): Arizona Court of Appeals Division One Holds That Superior Court Judicial Review of Administrative Disciplinary Action Against Licensed Contractor Does Not Arise Out of Contract For Purposes of Attorneys' Fees Award Under A.R.S. § 12-341.01. 

The Arizona Registrar of Contractors ("ROC") issued a citation and complaint charging a licensed contractor ("Contractor") with statutory violations stemming from a tile installation project for a private party ("Customer").  The ROC complaint alleged wrongful or fraudulent conduct, failure to perform work in a workmanlike manner, and failure to take appropriate corrective action.  After a hearing, an administrative law judge ("ALJ") found the ROC had proved two of the three charged violations, and recommended revocation of the Contractor's license.  The ROC adopted the ALJ's decision and ordered the revocation of Contractor's license. 

Contractor filed a complaint in Superior Court against the ROC and Customer seeking judicial review of the ROC decision under the Arizona Administrative Review Act, A.R.S. § 12-901 et. seq.  The ROC appeared in the Superior Court proceeding as a nominal party only.  Customer, in answering the complaint, asserted that the action arose out of contract and requested an award of attorneys' fees under A.R.S. § 12-341.01(A) (allowing fee award to successful party in an action arising out of contract).

 After briefing and oral argument, the Superior Court affirmed the ROC decision.  Customer then applied for an award of attorneys' fees under § 12-341.01(A) for fees incurred in connection with the Contractor’s appeal to Superior Court.  Over Contractor's objection, the Superior Court granted Customers' fee application.  Contractor appealed the fee award.

 The Court of Appeals reversed the fee award.  The Court held that, unlike the administrative proceeding below, the Superior Court review of the ROC decision did constitute an "action" as contemplated by § 12-341.01 (the “fee statute”).  That action, however, did not arise out of contract for purposes of the fee statute.  The fee statute does not apply to purely statutory causes of action.  Although the contract between Contractor and Customer was a factual predicate to the action, it was not the essential basis of the action.  Instead, Contractor's violations of its statutory duties as a contractor provided the basis of the action.  Although a breach of contract suit against Contractor would arise out of contract under the fee statute, the disciplinary action did not.

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

East v. Matthews (6/23/2009):  Division One of the Arizona Court of Appeals Holds That the Arizona Child Support Guidelines Require Courts to Consider the Standard of Living that the Child Would Have Had if the Parents Lived Together Even if the Child Was Born Out of Wedlock and the Parents Never Lived Together.  

East brought a paternity action against Matthews after the birth of their daughter.  The family court determined that Matthews made approximately $10,000,000 per year and ordered him to pay East $1,561 per month in child support, the presumptive amount under the Arizona Child Support Guidelines (the “Guidelines”) for parents with a combined gross income of $20,000 or more per month.  In making this award, the family court relied on Edgar v. Johnson, 152 Ariz. 236 (App. 1986), which held that once it is determined that the non-custodial parent has sufficient income to provide for the child’s needs, the child support awarded is determined by the needs of the child and not by the non-custodial parent’s income.  The family court also accepted Matthews’ argument that the lifestyle that the child would have lived if she lived with both of her parents was irrelevant because she never lived with both parents.  East appealed, arguing that the family court abused its discretion when it precluded her from introducing evidence to support a child support award of more than the presumptive $1,561 per month.   

The Arizona Appeals Court agreed with East, held that the family court erred, and remanded the case for a redetermination of an appropriate amount of child support.  The Court reasoned that it was improper to rely on Edgar, as that case was decided before the Guidelines were adopted and is no longer good law.  The Court further reasoned that the trial court erred in ignoring the standard of living the child would have had if the parents lived together.  Under the Guidelines, an award of more than the presumptive amount can be made if “a higher amount is in the best interests of the child[], taking into account such factors as the standard of living the child[] would have enjoyed if the parents and child[] were living together . . . .”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Carbajal v. The Industrial Commission of Arizona (6/15/2009): Arizona Supreme Court Holds That Attendant Care Services Provided By Spouse May Be Compensable Under Arizona’s Workers’ Compensation Statute.

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

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

Vice Chief Justice Berch authored the unanimous opinion.

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

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

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

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

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