Rader v. Greenberg Traurig (CA1 6/23/15)

The court denies “cross-jurisdictional tolling.”

Plaintiffs’ investment failed. Other investors filed a class action in federal court; when it eventually settled these plaintiffs opted out. But in the mean time the statute of limitations against the law firm that had written the offering materials had expired. They sued it anyway, arguing that the statute was tolled during the time they were members of the class. The trial court dismissed. The Court of Appeals affirms.

Plaintiffs argued that Arizona should adopt “cross-jurisdictional tolling,” which means that a class action filing in another jurisdiction can toll the statute. They began by arguing that Arizona has already adopted “inter-jurisdictional tolling,” i.e., an attempted class action in the same jurisdiction tolls the statute until class status is denied. The U.S. Supreme Court adopted that in a case called American Pipe but not all the states have. Arizona cases have referred to American Pipe a few times and one case, to decide a certified question from the Ninth Circuit, assumed that it would apply. But the Court of Appeals points out that even that case expressly did not decide whether it actually does. And it wouldn’t apply even if Arizona had adopted in since in this case the class action was certified as such and was a federal case, not one in this jurisdiction.

The jurisdiction problem is solved by cross-jurisdictional tolling, which some states have adopted. But none of those states has applied it where certification was granted.

Plaintiffs cite some federal cases in which allowed tolling even though certification was granted but the court distinguishes them because the federal system lacks a savings statute. Arizona has one, which both parties said doesn’t apply. “[B]y enacting this general Arizona savings statute, the Legislature adopted a form of cross-jurisdictional tolling, just not in the form Appellants claim should apply to their claims here.” In other words, the tolling statute can apply to filings in other jurisdictions but doesn’t include class actions. The court declines to read class actions into the statute; the wording isn’t there and the statute “involve[s] ‘very delicate policy decisions that properly belong to the legislative branch of government.’”

The analysis isn’t the best organized we’ve seen but generally gets the job done. What we’re not clear on is the court’s attitude toward the savings statute. The court says things apparently intended to imply – or that in any event do imply, whether intended or not – that the savings statute as written would indeed apply, that this opinion should not be read as authority that it doesn’t, and that what the plaintiffs are losing is their argument that something new needs to be added to Arizona law. If so, we applaud the court for limiting the analysis to the argument.

(link to opinion)

Phillips v. Garcia (CA1 6/9/15)

The moral being that its better to follow the rules in the first place than to make up arguments about them later.

Though it has been made more complicated over the years, procedure after compulsory arbitration isn’t rocket science. The arbitrator makes a decision; the winner then prepares a form of award and, if there’s no appeal, can get it reduced to judgment. But Phillips tried to skip a step: after winning an arbitration he had the arbitrator sign something he called a “judgment.” Ten months later, when he tried to enforce his “judgment,” Garcia moved to dismiss; under Rule 76d the court “shall” do that if the award isn’t reduced to judgment in 120 days. The trial court denied the motion.

Which creates an interesting procedural situation. Garcia of course argued that the “judgment” was invalid. But if there’s no judgment, how can there be an appeal? As the Court of Appeals points out, the mere denial of a motion to dismiss is interlocutory. It solves the problem by using its discretion to treat the “appeal” as a special action.

Addressing the merits, it then explains the conclusion it has already signaled, viz., that Phillip’s “judgment” was not, in its words, a “true judgment.” (There was, of course, either a judgment or there wasn’t; “true judgment” is redundant and potentially confusing.) It wasn’t a judgment because under Rule 58 only judges and commissioners can issue those.

Phillips argued that since Rule 76 actually says that what’s needed is an “award or other final decision” he had an adequate “final decision” in the form of a “mislabeled award.” He had a case (Bittner 1995) holding in effect that a mislabeled award can still be an award. But the issue here is whether a mislabeled award can be a judgment.

Phillips also argued 12-133E: “The award has the effect of a judgment on the parties unless reversed on appeal.” The court “harmonizes” the relationship between Rule 76 and 12-133E by deciding that the rule requires an affirmative judicial act – the entry of a “true judgment” – and that this “advances the intent” of the statute and is consistent with the statute because it doesn’t render any part of it meaningless. The court does not explain the remaining meaning, if any, of “the award has the effect of a judgment.” The court’s analysis here is conclusory, the sort of thing one reads expecting eventually to reach the meat of and never does. The conclusion is arguably correct but requires wading farther into the deep water of court rule-procedural statute relationships that the court seems willing to go.

The court then adds that in 2007 the present version of the rule replaced older language that was (though the court doesn’t put it this way) much more consistent with the statute. That indicates, the court concludes, that the Supreme Court intended an “affirmative act.” While correct, that begs the question of why the Supreme Court’s intent is more important than the Legislature’s (for purposes of this analysis it may indeed be but that isn’t something that should just go without saying).

The court remands for dismissal without prejudice, that being the flavor of dismissal both parties indicated at oral argument would be warranted if Garcia prevailed.

(link to opinion)

Burch v. Myers (CA1 6/4/15)

This case answers the question Lund v. Myers left undecided – whether moving to disqualify a firm that used inadvertently-produced privileged documents waives the privilege to them – and discusses the basis for disqualification.

This is actually the same case, up for yet another appeal after the Supreme Court remanded to the trial court. For some reason this opinion doesn’t say that (though you can catch it if you know the first case and read very carefully between a few lines), preferring to recite the facts at length despite being the third opinion to do so. 

Briefly, then: The context is a brother-v.-sister conservatorship controversy that has thrashed around our courts for several years, involving a varying cast of lawyers and fueled by the millions of grandpa Disney’s dollars that they’re really fighting about. Law Firm A had represented brother. Down the line a few years, Firm B subpoenaed its file. Firm A, for some reason thinking that B was taking over as counsel for its client, responded by sending B its whole file. Turns out that brother did indeed have another lawyer but it wasn’t Firm B, which instead represented sister. When brother’s lawyer found out about this he notified Firm B that parts of the file were privileged. But when that discussion lapsed Firm B disclosed the file to all parties and made some use of it. Brother moved to disqualify Firm B. That resulted in Lund, which is mostly about the procedure for getting a ruling on the documents. On remand the trail court disqualified Firm B, from which the case comes up again.

The Court of Appeals’ opinion in Lund had said that brother did not waive the privilege by moving to disqualify but the Supreme Court declined to comment, deeming that an issue for the trial court. The Court of Appeals now holds that no, brother did not waive the privilege. “[A] motion to disqualify neither establishes a cause of action nor defeats a claim of liability; it is not a claim or affirmative defense and does not have any apparent direct impact upon the merits of the underlying litigation. Reliance upon privileged information in support of a motion to disqualify does not place that information ‘at issue relevant to the case,’ as the phrase is contemplated under Arizona law, and does not impliedly waive privilege as to the opposing party.”  Since these are legal, not factual, conclusions it isn’t clear why the Supreme Court preferred not to address them.

As for the motion to disqualify Firm B, “when faced with a motion to disqualify premised upon the abuse of privileged information disclosed inadvertently, the trial court must: (1) determine whether the documents at issue are in fact privileged; (2) determine whether the receiving party exercised an unfair advantage over the documents, such as reviewing, copying, or distributing them in violation of Rule 26.1(f)(2) and ER 4.4(b); and (3) review the privileged information objectively, in light of the context of the case, to determine whether the receiving party possibly gained an unfair tactical advantage [proof of actual advantage is not required] . . .” The court can consider in mitigation whether the information was significant or already known and should consider alternatives to disqualification, which is disfavored. 

On this basis the trial court was within its discretion to disqualify Firm B.

[link to opinion]