State Compensation Fund v. Yellow Cab Co.

• Decision Date: 26 November 1999
• Docket Number: No. 1 CA-CV 99-0108.,1 CA-CV 99-0108.
• Parties: STATE COMPENSATION FUND, an agency of the State of Arizona; and Travelers Indemnity Company, Plaintiffs, Counterdefendants-Appellees, Cross-Appellants, v. YELLOW CAB COMPANY OF PHOENIX, an Arizona corporation; Arnett Cab Service, Inc., an Arizona corporation; Yellow Cab of Tucson dba Para Transit; Greater Phoenix Transportation Company, Inc., dba Courier Transportation, an Arizona corporation, Defendants, Counterplaintiffs-Appellants, Cross-Appellees.
• Court: Arizona Court of Appeals

3 P.3d 1040

197 Ariz. 120

STATE COMPENSATION FUND, an agency of the State of Arizona; and Travelers Indemnity Company, Plaintiffs, Counterdefendants-Appellees, Cross-Appellants, v. YELLOW CAB COMPANY OF PHOENIX, an Arizona corporation; Arnett Cab Service, Inc., an Arizona corporation; Yellow Cab of Tucson dba Para Transit; Greater Phoenix Transportation Company, Inc., dba Courier Transportation, an Arizona corporation, Defendants, Counterplaintiffs-Appellants, Cross-Appellees.

No. -0108.

Court of Appeals of Arizona, Division 1, Department C.

November 26, 1999.

Review Denied May 23, 2000.¹

Jardine, Baker, Hickman & Houston, P.L.L.C. by Gerald T. Hickman, Phoenix, and Teilborg, Sanders & Parks, P.C. by Mark G. Worischeck, Phoenix, for Appellees.

Jennings, Strouss & Salmon, P.L.C. by John J. Egbert, Michael R. Palumbo, Phoenix, for Appellants.

OPINION

TOCI, Judge.

¶ 1 The State Compensation Fund ("the Fund") and Travelers Indemnity Company ("Travelers") sued four corporations (collectively "Yellow Cab"), alleging that Yellow Cab taxi drivers were employees covered by workers' compensation and that Yellow Cab had failed to pay necessary insurance premiums. The trial court concluded that Central Management Co. v. Industrial Comm'n, 162 Ariz. 187, 781 P.2d 1374 (App.1989), which affirmed an award of workers' compensation benefits to a taxi driver, required a finding that Yellow Cab drivers were employees and not independent contractors. We reverse summary judgment for the Fund and Travelers ("the insurers"), however, because Central Management is not dispositive, and genuine issues of material fact exist. We also reverse the award of attorney's fees to the insurers. In the cross-appeal, we reverse the order denying the insurers' motion to amend to add a party defendant and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 From 1986 to 1993, Yellow Cab purchased workers' compensation insurance from the Fund, and in 1994, from Travelers. Yellow Cab did not, however, purchase workers' compensation insurance for taxi drivers. After this court's decision in Central Management, the Fund informed Yellow Cab that it must pay workers' compensation insurance premiums for drivers and include the drivers' compensation in payroll documents. It audited Yellow Cab and calculated unpaid premiums for 1990 to 1993 at over $3.3 million. Travelers sought over $1.1 million in premiums for 1994.

¶ 3 When Yellow Cab failed to pay, the insurers filed suit for breach of contract. Yellow Cab filed a counterclaim seeking a declaratory judgment that its drivers were independent contractors and that the insurers were not entitled to workers' compensation premiums.

¶ 4 The trial court granted partial summary judgment to the insurers on the issue of the drivers' status. When the insurers filed a second motion for summary judgment related to damages, Yellow Cab opposed it and sought a continuance pursuant to Arizona Rule of Civil Procedure 56(f) to conduct additional discovery. The trial court, however, denied a continuance and granted summary judgment to the insurers. It also granted summary judgment against Yellow Cab on its counterclaims. Finally, the trial court denied the insurers' motion to amend the complaint.

II. DISCUSSION

A. Standard of Review

¶ 5 Normally when this court reviews a grant of summary judgment, it takes the facts in the light most favorable to the non-moving party and affirms if the evidence produced in support of the defense or claim has so little probative value that no reasonable person could find for its proponent. See Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990)

. We review de novo the trial court's application of the law and its determination whether genuine issues of material fact preclude summary judgment. Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App.1993).

¶ 6 The insurers contend, however, that a different standard should apply here because the case concerns workers' compensation. We acknowledge that workers' compensation premiums are at issue and that when reviewing an Industrial Commission award to an injured worker, we view the administrative law judge's fact findings in favor of sustaining the award and search the record for sufficient evidence to support the findings. See Anton v. Industrial Comm'n, 141 Ariz. 566, 569, 688 P.2d 192, 195 (App.1984)

. But, a dispute over the insurers' liability for premiums bears little, if any, relationship to whether the evidence supports an Industrial Commission award to a worker. Thus, we will apply the normal summary judgment standard and review de novo whether the trial court correctly applied the law, taking the facts most favorably to Yellow Cab. See Gonzalez, 178 Ariz. at 97,

870 P.2d at 1193.

B. Status of Taxi Drivers as Independent Contractors or Employees

¶ 7 The insurers' motion for summary judgment contended that the right-to-control test governs the central issue of the drivers' status and that this court "ha[d] already performed this exact analysis in a case involving a virtually identical taxi cab company." They cited Central Management and claimed that this court had found as a matter of law that cab drivers were employees. The trial court agreed, concluding that Central Management was "dispositive" and compelled a finding that the drivers were employees for purposes of the insurance premiums. The court also enumerated fourteen factual findings in support of its conclusion.

¶ 8 We disagree that Central Management compels a finding that Yellow Cab drivers are employees. There, this court "recognize[d] that an appellate court may make an independent determination of whether a claimant is an independent contractor as a conclusion of law based on the totality of facts and circumstances." 162 Ariz. at 189, 781 P.2d at 1376. But, that statement was in the context of an injured worker who had filed a claim for benefits; at the end of the decision, we simply found adequate evidence to support the Industrial Commission award without making an independent finding as a matter of law that the driver was an employee. Id. at 192, 781 P.2d at 1379. Therefore, Central Management did not establish that all taxi drivers are employees.

¶ 9 Furthermore, in Central Management, we found indicia of control in the employer's provision of training and performance evaluations, denial of dispatch service to a deficient driver, and assignment of the driver to cab stands and restricted work areas. 162 Ariz. at 191-92, 781 P.2d at 1378-79. Here, these indicia either do not exist or are disputed. And, although the insurers argue that Yellow Cab merely drew "semantic distinctions" without substance between its practices and those in Central Management, we conclude that the trial court improperly drew inferences from the facts favorable to the insurers and ignored other facts supported by affidavit or deposition testimony that distinguish Yellow Cab's policies and practices from those in Central Management.

¶ 10 For example, the court found that Yellow Cab "possessed the right to hire, discipline and fire drivers," yet Yellow Cab's statement of facts clearly disputed these conclusions. Moreover, unlike the cab company in Central Management, Yellow Cab entered Independent Contractor Agreements with drivers and in turn granted them a license to use trade names and logos. It did not control the hours or the places where the drivers worked or their manner of dress. It did not control the fares charged or require drivers to account for them; it did not sanction drivers for failing to respond to dispatch calls. It did not pay the drivers anything; instead, the drivers paid it for services such as dispatch communications and use of the trade name or vehicle lease. Yellow Cab did not prevent drivers from hiring others to drive for them or from driving for other companies.

¶ 11 Summary judgment is not intended to resolve factual disputes nor is it an occasion for weighing the evidence. Nicoletti v. Westcor, Inc., 131 Ariz. 140, 142, 639 P.2d 330, 332 (1982). Rather, if more than one reasonable inference may be drawn from a material fact, summary judgment should not be granted. United Bank v. Allyn, 167 Ariz. 191,195, 805 P.2d 1012, 1016 (App.1990). "Any evidence or reasonable inference contrary to the material facts—i.e., the facts which the moving party needs to show his entitlement to judgment—will preclude summary judgment." Id.

¶ 12 Santiago v. Phoenix Newspapers, Inc., 164 Ariz. 505, 794 P.2d 138 (1990), supports our conclusion. There, our supreme court found disputed fact questions existed on whether a newspaper delivery driver was an independent contractor or a servant for whom his employer was vicariously liable. "Whether an employer-employee relation exists may not be determined as a matter of law [on summary judgment] in either side's favor, because reasonable minds may disagree on the nature of the relationship." Id. at 513, 794 P.2d at 146. See also Livingston v. Citizen's Utility, Inc., 107 Ariz. 62, 65, 481 P.2d 855, 858 (1971)

(summary judgment reversed because unless only one reasonable inference can be drawn from the evidence, the issue is one for the jury).

¶ 13 The insurers contend that if we reverse summary judgment, they may be denied insurance premiums for years during which they were liable for payment of workers' compensation claims. After oral argument in this matter, the insurers filed a request that we take judicial notice that they had on several occasions paid workers' compensation benefits to Yellow Cab drivers. In effect, the insurers argue that because the taxi drivers' entitlement to workers' compensation benefits has already been determined, Yellow Cab should be estopped from asserting that any of its drivers are independent contractors. Even if we were inclined to take judicial notice of these facts, for the following reasons, it would not affect the outcome of this...