Poulson v. Ofack – 3/17/2009

March 20, 2009

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

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

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

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