Allstate Ins. Co. v. O'Toole
| Decision Date | 14 June 1995 |
| Docket Number | No. CV-94-0178-PR,I-,P,I-X and B,CV-94-0178-PR |
| Citation | 896 P.2d 254,182 Ariz. 284 |
| Parties | ALLSTATE INSURANCE COMPANY, a foreign corporation; Jeff Swanty and Jane Doe Swanty, husband and wife; James Durham and Jane Doe Durham, husband and wife; Doeslack and White Corporationsetitioners, v. Hon. Thomas W. O'TOOLE, Judge of the Superior Court of the State of Arizona, in and for the County of Maricopa, Respondent, and Daniel KORMAN and Doreen Korman, husband and wife, Real Parties in Interest. |
| Court | Arizona Supreme Court |
The issue here is whether, under Rule 26.1(c) of the Arizona Rules of Civil Procedure, a trial court must automatically exclude witnesses and exhibits where no good cause for their late disclosure has been shown. In September 1992, respondents Daniel and Doreen Korman filed a complaint against his employer, Allstate Insurance Company, for wrongful termination and breach of contract. The Kormans' original attorneys withdrew from the case in late December without having answered Allstate's request for production of documents. The parties, however, stipulated to an extension of time so that the Kormans could find new counsel. The stipulation provided that the case was to proceed "without limitation" after February 9, 1993, whether or not they were represented by that date. The Kormans signed this document which was entered as a court order on January 8, 1993.
According to the stipulation, the parties were to exchange Rule 26.1 disclosure statements on or before February 22, 1993. 1 Allstate served its disclosure statement on that date; the Kormans did not. In early April, Allstate's attorneys wrote to the Kormans requesting the transcript of a certain taped conversation. The letter did not mention that the company had not yet received their disclosure statement.
On June 14, 1993, Allstate filed a motion for sanctions against the Kormans, arising out of their failure to provide a disclosure statement. 2 On June 29, the Kormans' newly obtained attorneys responded and simultaneously filed a late disclosure statement. They claimed that their clients had unintentionally failed to file on time, believing that everything except the response to Allstate's production request was "on hold" until replacement counsel could be obtained. The trial court rejected this explanation, specifically finding that the Kormans not only were without good cause in failing to file a timely disclosure statement, but also acted intentionally. Nevertheless, the court did not exclude the evidence disclosed in the June 29 statement, as requested by Allstate. It instead precluded the Kormans from conducting any further discovery. It also granted Allstate leave to continue discovery for four months and required the Kormans to pay the company's attorneys' fees and costs incurred in connection with the motion. The court's minute entry order cited Rule 26.1(g), which authorizes the imposition of discretionary sanctions. 3
Allstate requested the trial court to "clarify" in its order that the Kormans could not present at trial any witnesses or exhibits listed in their late disclosure statement. The company argued that Rule 26.1(c) mandated exclusion once the court found no good cause for the failure to timely disclose. The judge refused to impose such a penalty. His final order, dated November 23, 1993, recited those sanctions previously mentioned. Additionally, it precluded the Kormans from using any witnesses or exhibits not listed in the June 29 disclosure statement, including "but not limited to" those later revealed by them in October and November of 1993. The court did not indicate whether the latter sanction applied to evidence that could not have been disclosed in the June 29 statement because of its subsequent discovery, but both parties have assumed here that it did.
Allstate challenged the ruling in a special action petition to the court of appeals, 4 which accepted jurisdiction and held that Rule 26.1(c) of the Arizona Rules of Civil Procedure compels the exclusion of evidence unless a party seeking relief shows "good cause" for the failure to timely disclose it. Allstate Ins. Co. v. Superior Ct., 178 Ariz. 612, 615-16, 875 P.2d 845, 848-49 (Ct.App.1994). 5 The language relied on reads as follows:
In addition to any other sanction the court may impose, the court shall exclude at trial any evidence offered by a party that was not timely disclosed as required by this rule, except by leave of court for good cause shown ....
Ariz.R.Civ.P. 26.1(c) (emphasis added). Thus, the appellate court concluded, "once the trial court made the findings and conclusions it articulated in the September 23 minute entry, it had no choice but to exclude the untimely disclosed evidence." Allstate, 178 Ariz. at 615, 875 P.2d at 848. The court vacated the trial judge's order and remanded with instructions to exclude the evidence disclosed in the June 29 statement and to impose whatever additional sanctions might be appropriate under Rule 26.1(g).
The mandatory exclusion of evidence in cases where no "good cause" has been shown for the failure to timely disclose can at times bring about results that are unduly harsh, overly punitive, and inconsistent with the purposes of the new rules. For example, a party whose disclosure statement is slightly late for no reason other than inadvertence might lose the opportunity to have his or her case decided on the merits, even though a trial date is many months away and there can be no conceivable prejudice suffered by the opponent. We never intended such a result. In adopting the amendments to the rules, it was not our desire that substantive legal rights should automatically be forfeited on the basis of harmless human failings.
We believe the interpretation and application of Rule 26.1(c) should be accorded a "common sense" approach similar to that recently espoused in Bryan v. Riddel, 178 Ariz. 472, 477, 875 P.2d 131, 136 (1994). Although it is true that "[t]he purpose of the mandatory exclusionary sanction is to put 'teeth' into the disclosure requirements of Rule 26.1(a)," id. at 476, 875 P.2d at 135, and to deter parties from practicing "litigation by ambush," it was not meant to be a weapon of destruction in the hands of "win at all costs" litigators. See Ariz.R.Civ.P. 26.1 ct. cmt. While we agree with the court of appeals that there is a clear and deliberate distinction between Rules 26.1(c) and (g), see Allstate, 178 Ariz. at 615-16, 875 P.2d at 848-49, we cannot subscribe to the view that the former subsection was meant to deprive judges of all discretion to do what may be right and just in particular circumstances. We have encouraged trial courts to take firm, active roles in the application and enforcement of these procedural rules that were specifically designed to curb discovery abuse, excessive cost, and delay. We have pledged to support them if they do. We will not tie their hands by relegating to them the performance of purely ministerial and frequently counterproductive acts.
In our view, "good cause" as used in Rule 26.1(c) should be broadly interpreted to require an examination of the grounds for granting relief, rather than limiting the inquiry only to the specific reasons why evidence was not timely disclosed. Whenever possible, procedural rules should be interpreted to maximize the likelihood of a decision on the merits. See, e.g., Ariz.R.Civ.P. 1 (). The disclosure rules and sanctions were not meant to thwart that goal by encouraging litigants to lie in wait for their opponents to miss a deadline and then use that momentary transgression to get a case effectively dismissed. See Gorman v. City of Phoenix, 152 Ariz. 179, 183, 731 P.2d 74, 78 (1987). As we have said, the object of disclosure is to allow the parties "a reasonable opportunity to prepare for trial or settlement--nothing more, nothing less." Bryan, 178 Ariz. at 476 n. 5, 875 P.2d at 135 n. 5. Its intent is to eliminate, or at least reduce, hostile and unprofessional conduct in favor of voluntary cooperation and exchange of information. See Ariz.R.Civ.P. 26.1 ct. cmt. Unfortunately, some attorneys (and clients) are so accustomed to "hardball" litigation tactics that they have attempted to turn the recent rules amendments into yet another arsenal of technicalities.
Interpreting 26.1(c) to mean "good cause" for providing relief gives trial...
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