City of Phoenix v. Fields – 1/22/2009
Arizona Supreme Court Holds that the Notice of Claim Statute, A.R.S. 12-821.01(A), Requires a Putative Class Representative to Include in His Notice of Claim (1) a “Specific Amount” for Which His Individual Claim Can Be Settled and (2) a Statement that, If Litigation Ensues, The Representative Intends to Seek Certification of a Plaintiff Class.
Eight Head Start workers filed a notice of claim with the City of Phoenix and the City of Phoenix Employees’ Retirement System Board on behalf of themselves and others similarly situated (the “Class”). Their notice alleged that Head Start workers were improperly denied various benefits generally available to City employees. An amended notice of claim was later filed naming eight additional representatives. Neither the City nor the Board responded to the claim within sixty days; the claim was thus denied by inaction. See A.R.S. § 12-821.01(E). The workers, as putative class representatives, filed a complaint against the City in Maricopa County Superior Court and sought certification of a plaintiff class. After the Superior Court granted certification, the City moved for summary judgment on the ground that the representatives’ notices of claim failed to comply with A.R.S. § 12-821.01(A) by not setting forth a “specific amount” for which the claims of the Class could be settled. The Superior Court denied the motion for summary judgment, holding that the settlement demand requirement of § 12-821.01(A) did not apply to class actions. In response, the City sought special action relief in the Arizona Court of Appeals.
The Court of Appeals accepted jurisdiction and vacated the Superior Court’s order. See City of Phoenix v. Fields, 219 Ariz. 88, 193 P.3d 782 (App. 2008). The Court of Appeals held that § 12-821.01(A) applies to class actions, and that the notices filed by the Class were deficient for failure to specify an amount for which the class claim could be settled. The Class then petitioned for review by the Supreme Court of Arizona.
Because the issue presented was one “of first impression and statewide importance,” the Supreme Court granted review, vacated the Court of Appeals’ opinion, and remanded. The Supreme Court began by noting that “[a]pplying A.R.S. § 12-821.01(A) to class claims is complicated by the nature of class actions.” For example, “it is simply not possible for those filing a purported class claim under the notice of claim statute to set forth a ‘specific amount’ for which the claim of the entire class ‘can be settled,’ as required by § 12-821.01(A)[:] Not only do those filing the claim lack any such authority, they also have no assurance that a class will ever be certified, how many members of the class will opt out, or whether the superior court will eventually approve a proposed settlement.” The Court acknowledged, however, that A.R.S. § 12-821.01 by its terms “applies to ‘all causes of action’; there is no exemption for putative class claims.” A.R.S. § 12-821.01(F) (emphasis added). In balancing these competing concerns, the Court ultimately concluded that “[a]lthough the putative class representatives cannot make a claim on behalf of the class, nothing prevents them from including in their notice the specific amounts for which they would settle their individual claims.” In other words, “[a] class claim meets the settlement demand requirement of § 12-821.01(A) if it identifies the amount for which an individual putative class representative would settle his own claim and puts the governmental entity on notice of the claimant’s intention to pursue a class action if his claim does not settle.” Because the representatives’ notices of claim contained no “specific amount” for which they would settle their individual claims, their notices did not comply with A.R.S. § 12-821.01(A).
The Court agreed with the representatives, however, that the City’s notice of claim statute defense had been waived by the City’s conduct in the litigation below. Although the Court assumed for purposes of analysis that the City had initially preserved the affirmative defense by properly asserting it in its answer, the City subsequently waived the defense by failing to assert it in the ensuing litigation. Indeed, the City’s motion “raising the absence of a settlement demand was filed more than four years after the date of the original complaint and more than three years after class certification.” Therefore, even though the representatives had failed to comply with the notice of claim statute, the City waived this defense.
Justice Hurwitz authored the unanimous opinion.