THIS OPINION HAS BEEN AMENDED

This dispute between insurers shows that you need to be careful drafting your Damron paperwork – unless you can convince the Court of Appeals to give you a do-over.

Roman was injured in an accident at a road-construction site on the Loop 101. He sued the general contractor (DBA Contracting) and the Arizona DOT. The situation was routine: subs were required to add the general to their insurance policies while DBA had excess coverage. DBA tendered the defense to subcontractors. They refused it. DBA and the ADOT did a Damron that involved stipulating to a judgment, paying some of it, and assigning their rights (and that of Colorado Casualty, DBA’s insurer, which paid its part of the settlement) to Roman.

Colorado Casualty then sued the subs and their carriers to recover what it had paid. Roman  intervened, arguing that Colorado Casualty had assigned its rights to him, and filed cross- and counterclaims against it and the subs/insurers (which did not include a bad-faith claim). Roman and Colorado Casualty then settled with everyone except subcontractor Safety Control and its insurer, Employers’ Mutual, against which they moved for summary judgment. They hadn’t worked out their own differences yet but agreed to do so after judgment on the merits. The court granted summary judgment, awarding money and saying “Roman and Colorado Casualty shall resolve their dispute concerning this award amongst themselves.”  Safety Control and Employers appealed.

They argued, firstly, that the judgment wasn’t valid because the real party in interest wasn’t identified. The court said that the purpose of the rule (17) requiring a real party in interest is to let the defendant know what defenses it has, and that since the appellants hadn’t been prevented from raising anything the judgment was valid. An issue that would have interested us – how a defendant can be bound by a judgment that can’t be satisfied – apparently wasn’t raised (perhaps the claimants had offered some sort of escrow arrangement).

Employers also argued that the Damron was collusive because Colorado Casualty agreed to defend DBA when Employers refused to and that the agreement was therefore intended not to protect DBA from liability but merely to shift liability for the settlement from Colorado Casualty to Employers. The court ruled that an insurer can’t escape the consequences of denying its contractual obligation simply because another steps in, and that the agreement shifted the liability for settlement to where it should have been in the first place.

The court next holds, however, that there is an issue of fact about whether the judgment “arose out of” Safety Control’s operations, a coverage requirement. Nothing in the judgment, the agreement, or the record established in any detail how the accident occurred or why Safety Control was negligent. But for some reason the court remands with directions that the trial court “shall conduct whatever proceedings it deems appropriate to resolve that issue.” The opinion does not explain why this particular summary-judgment appeal merits special remand instructions (nor why the Damron parties can’t end-run them with some redrafting).

The opinion also addresses a few issues relevant on remand but unimportant for purposes of precedent.

The court finishes by denying everybody’s request for fees “without prejudice to a request for fees incurred in this appeal to be filed by the prevailing party on remand before the superior court.” In other words, Colorado Casualty could get fees for losing an appeal caused by its own failure to make a proper record.

Is this the new standard? When the Court of Appeals finds that an issue of fact prevents summary judgment does it now remand for a specific finding and make a fee award that can charge an appellant money for successfully pointing out that its opponent wasn’t entitled to judgment the first time? The theory, apparently, is that winners below are entitled to a Mulligan but that winners above can be penalized for making them take it.

(link to opinion)

This discovery dispute involves the extent of a trial court’s jurisdiction over a related administrative proceeding.

The plaintiff, Crain (Buttrick is John Buttrick, the Maricopa County judge; this is a special action), was a railroad employee injured on the job. He sued the railroad under the FELA. His union’s collective bargaining agreement with BNSF requires injured employees to submit certain medical notices regularly. After he filed suit Crain stopped doing so. BNSF scheduled an administrative hearing into this “misconduct” by its employee, under procedures authorized by federal railway-labor law and the contract. Crain countered with a motion for protective order asking the court to rule that BNSF couldn’t require the notices or discipline him for not submitting them. The trial court ruled that he didn’t have to submit them but could be disciplined if he didn’t participate in the hearing. He didn’t; BNSF fired him and filed this special action.

The Court of Appeals holds that the administrative proceedings, “which are conducted under the auspices of the Railway Labor Act, 45 U.S.C. §§ 151-164, fall outside the scope of actions that the superior court is granted jurisdiction to entertain.”

The parties apparently argued the case on the basis that the Act either did or didn’t preempt State authority. The Court of Appeals says that preemption is not the issue because all that’s in the state court is a personal-injury case, not the regulated employment matters. “The pertinent question, therefore, is not what the court can and cannot do under the Railway Labor Act, but whether the trial court’s jurisdiction extends to the conduct of an independent proceeding with a dignity of its own.” The answer is no, the court can’t interfere with the administrative proceedings any more than the administrative hearing officer could interfere with the court case. “Although Arizona courts have broad powers, both express and inherent, to control the course of their own proceedings, those powers do not create jurisdiction to control independent proceedings conducted under the authority of a separate sovereign.”

Along the way the court says that Crain had produced all “necessary documents” required by the Rules of Civil Procedure but that BNSF’s insistence on contractual notices was not a “mere pretext” for getting more because it needed information regarding possible accommodations for Crain’s alleged disabilities. The court did this as a further, and unnecessary, way to distinguish one of Crain’s cases. The impulse is one we see from time to time: to insist that justice, not merely law, is on your side. (That the two must be the same – and that if they are not then we might as well retire all the judges and go back to being ruled by tribal elders – is a point sometimes elusive.) But the court makes clear that its holding is based on law, not facts. If a court doesn’t have jurisdiction then logically it would seem to be for the administrative proceeding to decide whether a contractual request is proper.

(link to opinion)