Lane v. City of Tempe

• Decision Date: 24 April 2002
• Docket Number: No. CV-01-0142-PR.,CV-01-0142-PR.
• Parties: Kiera LANE, Plaintiff-Appellee, v. The CITY OF TEMPE and Daniel G. Serrano and Gwen Serrano, husband and wife, Defendants-Appellants.
• Court: Arizona Supreme Court

44 P.3d 986

202 Ariz. 306

Kiera LANE, Plaintiff-Appellee, v. The CITY OF TEMPE and Daniel G. Serrano and Gwen Serrano, husband and wife, Defendants-Appellants.

No. CV-01-0142-PR.

Supreme Court of Arizona, En Banc.

April 24, 2002.

Law Offices of John Evans, P.C., by John Evans, Scottsdale, Attorney for Appellee.

C. Brad Woodford, Tempe City Attorney, by Clifford L. Mattice, Assistant City Attorney, Tempe, Attorney for Appellants.

Van O'Steen and Partners, by Stephen I. Leshner and The Langerman Law Offices by: Amy G. Langerman, Phoenix, Attorneys for Amicus Curiae Arizona Trial Lawyers Association.

OPINION

ZLAKET, Justice.

¶ 1 Kiera Lane filed a negligence claim against the City of Tempe and its employee, Daniel Serrano, for damages arising out of an automobile accident. The only theory of liability against the City was respondeat superior. See Driscoll v. Harmon, 124 Ariz. 15, 16, 601 P.2d 1051, 1052 (1979)

("[T]he act of an employee during the course of his employment is legally the act of the employer."). Both the municipality and Serrano were represented by the same assistant city attorney.

¶ 2 Pursuant to Arizona Revised Statutes section 12-133, the case was referred to mandatory arbitration. The defendants filed a disclosure statement and answered interrogatories. Serrano was also deposed by the plaintiff. The parties filed a joint pre-hearing statement in which Lane indicated that she intended to call Serrano as a witness at the arbitration hearing. His absence, she asserted in the statement, would be construed as a waiver of the right to appeal. In the same pleading, the defendants specifically objected to this contention.

¶ 3 On the date of the hearing, Serrano was no longer employed by the City of Tempe. Although his counsel had advised him to be present, Serrano did not attend. No one had subpoenaed him. When it became obvious that he was not going to show, neither side requested a continuance to secure Serrano's presence at the hearing. His attorney actively participated in the case and several other city employees testified in person.

¶ 4 The arbitrator ultimately found Serrano to be 100% at fault and awarded the plaintiff $16,858 in damages. When the defendants filed a notice of appeal requesting a trial de novo, Lane moved to strike the pleading. She argued that Serrano's nonappearance at the hearing had waived the defendants' right to appeal. Lane's motion was granted by the superior court as to Serrano, but denied as to the City. The court thereafter entered a formal judgment against Serrano. The court of appeals affirmed this ruling, holding that Serrano had not appeared and participated as required by Rule 76(a) of the Arizona Rules of Civil Procedure.

¶ 5 We have jurisdiction pursuant to article VI, section 5(3) of the Arizona Constitution; Arizona Revised Statutes section 12-120.24; and Rule 23 of the Arizona Rules of Civil Appellate Procedure.

DISCUSSION

¶ 6 The superior court is required by statute to establish a jurisdictional limit, not exceeding fifty thousand dollars, and to formulate procedural rules for the compulsory arbitration of civil claims in Arizona. A.R.S. § 12-133(A) (Supp.2001). Because "something short of a full-blown adversary adjudicatory proceeding is a more efficient and cost-effective way of resolving such disputes," Martinez v. Binsfield, 196 Ariz. 466, 467, 999 P.2d 810, 811, ¶ 3 (2000), we have fully supported this alternative mechanism.

¶ 7 The arbitration rules have evolved over time, primarily in response to perceived weaknesses. For example, in Chevron v. Thompson, 145 Ariz. 85, 699 P.2d 1316 (App. 1985), the court of appeals identified a serious flaw in the process. Chevron filed a contract action which was referred for mandatory arbitration, but neither the company nor its counsel appeared at the subsequent hearing. Chevron thereafter appealed from an adverse arbitration award, seeking a trial de novo. The superior court dismissed the appeal. The court of appeals reversed, reluctantly observing that the arbitration rules permitted Chevron's maneuver. It stated:

Although we agree with the trial judge that apparently any party can circumvent the mandatory arbitration procedure by failing to attend the hearing and then file a notice of appeal, we have no authority to prevent such circumvention.... We urge [the legislature and supreme court] to provide safeguards to prevent future violations of the spirit of the arbitration laws.

Id. at 86, 699 P.2d at 1317.

¶ 8 In 1990 and 1991, the rules were amended to address this and other apparent deficiencies. There was increasing concern, for example, that appeals from arbitration awards were frequently used "to delay proceedings and extort settlements." Hon. Robert D. Myers, MAD Track: An Experiment in Terror, 25 Ariz. St. L.J. 11, 14 (1993). Moreover, the purposeful failure of attorneys and their clients to actively participate in arbitration hearings, relying instead on their appeal rights to secure a trial de novo, plainly resulted in a significant waste of resources.

¶ 9 Arbitration Rule 7(f), now Rule 76(f) of the Arizona Rules of Civil Procedure, was changed to require the filing of a deposit on appeal that would be forfeited by the appellant if the ensuing judgment was not at least 10% more favorable than the arbitration award. See Rule 7(f), Uniform Rules of Procedure for Arbitration (2000). More recently, the 10% threshold has been raised to 25%. See Rule 76(f), Ariz. R. Civ. Pro. (2002).

¶ 10 Arbitration Rule 7(a), now Rule 76(a) of the Arizona Rules of Civil Procedure, was amended to prevent the situation that arose in Chevron. The rule states: "Any party who appears and participates in the arbitration proceedings may appeal from the award or other final disposition...." Rule 76(a), Ariz. R. Civ. P. (2002)(emphasis added); see also Rule 7(a), Uniform Rules of Procedure for Arbitration, State Bar Committee's Note (2000)(stating that "only a party who actually appears and participates in the arbitration proceedings may take an appeal").

¶ 11 Coupled with this was a change in the language of Rule 4(j), now Rule 74(k) of the Arizona Rules of Civil Procedure, to provide that "[f]ailure to appear at a hearing or to participate in good faith at a hearing ... shall constitute a waiver of the right to appeal absent a showing of good cause." Rule 74(k), Ariz. R. Civ. Pro. (2002). These modifications were designed to facilitate the primary goal of arbitration—a reduction of costs and delay associated with litigating smaller controversies.

¶ 12 The requirements of Rule 76(a) were addressed by the court of appeals in Graf v. Whitaker, 192 Ariz. 403, 966 P.2d 1007 (App. 1998). In that case, Whitaker repeatedly failed to attend her deposition. As a sanction, she was defaulted on liability. Id. at 404, 966 P.2d at 1008, ¶ 2. This left only damages to be decided at the arbitration hearing. Although her attorney attended the hearing, Whitaker did not. Id. Her failure to appear was later construed by the superior court as a waiver of the right to appeal. Id. at 405, 966 P.2d at 1009, ¶ 4.

¶ 13 In reviewing that decision, the court of appeals correctly interpreted Uniform Rules 7(a) and 4(j) "in harmony to require more than minimal participation in arbitration proceedings; both require a party to participate in good faith in order to satisfy the spirit of the arbitration laws." Id. at 407-08, 966 P.2d at 1011-12, ¶ 18. However, it wisely remanded the matter for reconsideration because

Graf has not claimed, nor does the record indicate, that Whitaker had relevant testimony to offer at the damage hearing; nor has Graf claimed, nor does the record indicate, that Whitaker obstructed the conduct of the damage hearing to any degree by failing to accompany her lawyer to that hearing. In the absence of any showing that Whitaker did not adequately participate in the damage hearing through an appearance by counsel, we cannot agree that her absence from the damage hearing was properly considered by the superior court in deciding whether she had violated Uniform Rule 7(a).

Id. at 408, 966 P.2d at 1012, ¶ 20 (emphasis added).

¶ 14 Lane argues that Graf is distinguishable because the hearing in that case concerned only damages. Here, she claims, Serrano had relevant liability testimony to give and should have been subject to cross-examination. The record shows, however, that Serrano gave a deposition before the hearing, and Lane had the opportunity to examine him at that time. Serrano also answered interrogatories and filed a Rule 26.1 disclosure statement. Finally, his counsel appeared at the hearing, called several city employees to testify, and argued the case. Under Rule 76(a), any party who participates in arbitration proceedings has a right to appeal. Serrano clearly participated throughout much of the process.

¶ 15 Lane argues, however, that Rule 74(k) deals with a party's failure to personally appear at the arbitration hearing, and compels the result reached here by the superior court and the court of appeals. We do not agree. The language of Rule 74(k) is not specifically limited to the parties themselves. Moreover, Lane's argument hinges on an unreasonably restrictive definition of the word "appearance," something akin to "physically being there." Appearance, however, is a term of art in the law. Not only can it denote a party being physically present in court, it also refers to "[a] coming into court... as a lawyer on behalf of a party." See Black's Law Dictionary (7th ed.1999). Lawyers have been making appearances on behalf of clients from the earliest days of the profession.

¶ 16 In most cases, what constitutes good faith participation is a matter of fairness...