County Of LA PAZ v. YAKIMA COMPOST Co. Inc.
| Decision Date | 22 June 2010 |
| Docket Number | Cause No. CV20030119,1 CA-CV 08-0759 |
| Parties | COUNTY OF LA PAZ, Plaintiff/Counterdefendant/ Appellant/Cross-Appellee,v.YAKIMA COMPOST COMPANY, INC., a Washington corporation; YAKIMA COMPANY, INC., a Washington corporation; Defendants/Counterclaimants/ Appellees/Cross-Appellants,LINCOLN GENERAL INSURANCE COMPANY, a Pennsylvania corporation,Defendant/Appellee. |
| Court | Arizona Court of Appeals |
Munger Chadwick, P.L.C.
By Michael J. Meehan, Of Counsel Attorneys for County of La Paz
Gallagher & Kennedy, P.A.
By Mark A. Fuller Glen Hallman Attorneys for Yakima Compost Company and Yakima Company
Lewis Brisbois Bisgaard & Smith, L.L.P.
By Dominique Barrett Karen L. Karr Attorneys for Lincoln General Insurance Company
Appeal from the Superior Court in La Paz County.
The Honorable Michael J. Burke, Judge
AFFIRMED
DEPARTMENT C
¶1 This breach-of-contract action arises from performance of a contract between the County of La Paz (the "County") and Yakima Compost Company, Inc. and Yakima Company, Inc. (collectively "Yakima") in which Yakima agreed to receive and process sewer sludge on county land for twenty-five years. The County appeals from a $9.2 million judgment entered after a jury returned a verdict in the form of special interrogatories in favor of Yakima. The County also appeals the trial court's rulings that denied its post-trial motion for judgment as a matter of law, new trial, and remittitur and reaffirmed a judgment as a matter of law in favor of Lincoln General Insurance Company ("Lincoln"), which served as surety on a bond required by the parties' contract. Yakima cross-appeals that portion of the judgment that terminated the contract in light of Yakima's recovery of lost future profits. For the reasons that follow, we affirm.
¶2 On September 17, 2002, the County and Yakima executed the Regional Sludge Drying Facility Operation Agreement (the "Agreement"), which permitted Yakima to receive sewage sludge Page 3
from wastewater treatment facilities located inside and outside Arizona and process it by solar drying on county land for an initial period of twenty-five years. The Agreement recited that the sludge drying facility would be located temporarily on a county landfill, the facility would be relocated within three years, and the County was "diligently pursuing acquisition of a permanent site." Among other provisions, the Agreement required Yakima to provide a closure plan to the County for approval prior to operation, furnish the County a $1 million performance bond (the "Bond") within sixty days, and comply with all local, state, and federal environmental laws.
¶3 Soon after execution of the Agreement, disputes arose between the parties, which culminated in initiation of this lawsuit by the County on May 15, 2003, a counterclaim filed by Yakima on June 9, 2004, and the County's joinder of Lincoln, surety under the Bond, as a defendant on February 3, 2005. After the parties engaged in extensive discovery, and the trial court denied the County's multiple motions for summary judgment, the case proceeded to a jury trial in August 2007. During trial, the trial court granted Lincoln's motion for judgment as a matter of law ("JMOL"), ruling the County did not present any evidence regarding Lincoln's breach of its obligations under the Bond and that Yakima's breach of the Agreement was still anissue to be determined. The trial court denied the County's motion for JMOL on Yakima's counterclaim.
¶4 The jury returned special interrogatory answers finding that (1) Yakima did not materially breach the Agreement, (2) the County was not damaged by any breach by Yakima, (3) the Agreement did not permit the County to terminate after three years, (4) the County breached the Agreement, (5) Yakima was damaged by the County's breach, and (6) Yakima's damages totaled $9.2 million. On January 25, 2008, the trial court entered a judgment awarding Yakima $9.2 million in damages, but ordered that the Agreement be terminated because the jury had awarded Yakima damages for lost future profits. Additionally, the court awarded Yakima $750,000 in attorneys' fees and $10,000 in costs. The court also awarded Lincoln $45,795.44 in attorneys' fees. Thereafter, the County filed a motion seeking relief from the judgment in the alternative forms of JMOL, new trial, and/or remittitur. In a detailed ruling, the trial court denied the County's motion. This timely appeal and cross-appeal followed.
¶5 The County argues the trial court committed reversible error by denying its motion for JMOL or new trial urged onseveral bases, which we address in turn.2 We review the court's JMOL ruling de novo and view the evidence and all reasonable inferences from the evidence in the light most favorable to Yakima as the nonmoving party. Hudgins v. Sw. Airlines, Co., 221 Ariz. 472, 486, 1 37, 212 P.3d 810, 824 (App. 2009). We review the court's refusal to grant a new trial for an abuse of discretion. Jd.
¶6 The County argues it was entitled to JMOL because Yakima failed to comply with Arizona Revised Statutes ("A.R.S.") section 12-821.01(A) (2003), which bars a lawsuit against a public entity unless the claimant notifies the entity of its claim within 180 days of the claim's accrual date.3Alternatively, the County contends the court erred by refusing Page 6
to submit the issue to the jury, thereby requiring a new trial. Yakima counters, among other things, the trial court correctly denied JMOL and a new trial because the County waived the statutory compliance issue as a matter of law by failing to assert it until raising it in a motion for partial summary judgment filed on November 17, 2006, approximately thirty months after initiation of the counterclaim.
¶7 The County waived the statutory-compliance issue by failing to assert it in either a reply to the counterclaim or a motion filed pursuant to Arizona Rule of Civil Procedure ("Rule") 12(b). As our supreme court noted last year, lack of compliance with § 12-821.01(A) is an affirmative defense that a governmental entity waives by failing to assert it in an answer or a Rule 12(b) motion. City of Phoenix v. Fields, 219 Ariz. 568, 574, 1 27, 201 P.3d 529, 535 (2009); see also Pritchard v. State, 163 Ariz. 427, 432, 788 P.2d 1178, 1183 (1990). In the present case, the County elected not to challenge Yakima's counterclaim via a Rule 12(b) motion. And although the County raised a number of affirmative defenses in its reply to the counterclaim, it failed to raise lack of compliance with A.R.S. § 12-821.01(A). For this reason alone, the trial court correctly ruled that the County had waived the issue.
¶8 The County does not contest it failed to preserve the statutory compliance defense in its reply or a Rule 12(b) motion but instead argues it nevertheless preserved the defense by raising it in a disclosure statement provided to Yakima on October 27, 2004, four months after Yakima filed its counterclaim.4 Even assuming the County could preserve its defense by raising it in a disclosure statement, the court was not precluded from finding waiver because the County actively litigated the counterclaim for an extended period before asserting its defense in the motion for summary judgment. We are guided by the supreme court's decision in Fields, which held that even when a party properly preserves its notice of claim statutory defense in an answer or Rule 12(b) motion, "it may waive that defense by its subsequent conduct in the litigation." 219 Ariz. at 574, 1 29, 201 P.3d at 535. The court reasoned that any challenge to the sufficiency of a notice is facially apparent and can be quickly and easily adjudicated early in the case, thereby avoiding protracted litigation. Jd. at 575, 1 30, 201 P.3d at 536. Consequently, the court held that a government entity waives the defense by taking substantial action to litigate the merits of a claim that would have been unnecessary Page 8
had the entity promptly asserted the defense. Jd. Because the city in Fields had engaged in discovery and motion practice unrelated to the sufficiency of the notices of claim for four years before raising the defense in a motion for summary judgment, the court held that the city had waived the defense as a matter of law. Jd. at 11 31-33; see also Jones v. Cochise County, 218 Ariz. 372, 380-81, 11 27-29, 187 P.3d 97, 105-06 (App. 2008) ().
¶9 Like the defendants in Jones and Fields, the County actively defended the counterclaim by engaging in extensive pretrial discovery and by filing motions unrelated to the notice of claim statutory defense. Nevertheless, the County attempts to distinguish these cases by asserting that unlike the situations in Fields and Jones, discovery was necessary to precisely identify the accrual date of Yakima's counterclaim before the County could raise the statutory defense in its motion for partial summary judgment filed November 17, 2006. The record does not support this argument. The County identified accrual dates in its disclosure statement submitted four months after Yakima filed its counterclaim. No reason appears why the County could not have then moved the court todismiss the counterclaim for lack of compliance with A.R.S. § 12-821.01(A). Moreover, the County substantially litigated issues related to the counterclaim that were unrelated to the accrual issue. For example, the County moved to strike Yakima's damages expert witness on November 18, 2005 and, as reflected in its March 22, 2006 Rule 16(b) scheduling conference memorandum, retained its own expert witness on Yakima's damages and disclosed that expert's report. The County also deposed Yakima's damages expert on September 20, 2006. Therefore, even assuming...
To continue reading
Request your trial