Dowling v. Stapley (4/16/2009)

April 23, 2009

Arizona Court of Appeals Division One Holds That Public Official Displaced by Receivership Lacks Standing to Assert Rights in Her Official Capacity.

The Maricopa County Regional School District Superintendent was named as a party to litigation concerning alleged mismanagement of the District.  After court-ordered receivers assumed management of the District, the Superior Court dismissed the Superintendent as a party.  The remaining parties then agreed to a settlement including, among other terms, a stipulated judgment against the District for funds owed to Maricopa County and an agreement to close the District’s financially challenged schools for homeless children.  The Superior Court approved the stipulation and entered judgment over the objection of the Superintendent, who then appealed.

The Superintendent argued on appeal that the Superior Court erred by appointing the receivers, whose actions (including approval of the settlement) she claimed were therefore void.  She argued further, among other issues, that the Superior Court erred by (1) granting a motion to strike motions by the Superintendent to dissolve the receivership and to review certain actions of the receivers, (2) denying the Superintendent’s motion to intervene, and (3) approving the settlement and stipulated judgment.

The Court of Appeals held that it lacked jurisdiction over the Superior Court’s order appointing the receivers because the order had not been timely appealed.  The time to appeal had not been tolled by the Superintendent’s filing of a motion to alter or amend the order, because the Superintendent had abandoned that motion without asking for a ruling on it, and had failed to appeal a subsequent order which replaced two of the receivers and thus necessarily denied the motion to alter or amend the prior order.  In addition, the Superintendent had previously accepted the benefits of the receivership order and was therefore estopped from appealing it.

The Superior Court did not abuse its discretion by granting the Motion to Strike because the Superintendent was no longer a party to the litigation, and had agreed to recuse herself from the District Board.  A person for whom a receiver is appointed does not retain the right to move to dissolve the receivership.  The appointment and termination of receivership is governed by principles of equity.  Rule 66(c)(4), Ariz. R. Civ. P.  Once the receivers were appointed, they stood in the Superintendent’s shoes with all rights, causes, and remedies which had been available to her, including the right to bring or defend claims for the District.  The Superintendent was not an indispensable party.

Because the receivers stood in the Superintendent’s shoes, the Superior Court did not err by concluding that the Superintendent did not have a substantial right to intervene in her official capacity.  Nor did the court abuse its discretion by disallowing the intervention on a permissive basis.  Because of the receivers’ appointment, the Superintendent lacked standing to oppose the settlement agreement on behalf of the District or on behalf of her view of the interests of the District’s students.  Permitting intervention against the wishes of the District receivership board would have resulted in undue delay or prejudice to the parties rights.

In view of its other determinations, and because the Superintendent did not have a direct, substantial, and immediate right that was prejudiced by the judgment, the Court concluded that the Superintendent did not have standing to challenge the settlement.  The Court, therefore, declined to consider the request to reverse the Superior Court’s approval of the settlement.

Judge Kessler wrote the opinion, joined by Judges Norris and Gemmill.