Insurance companies complain that our courts are too hard on them. Once in a while, though, something like this comes along.

Monterey, a home-builder, sued one of its subs, BBP Concrete. Federated insured BBP. Federated denied coverage but defended BBP under a reservation of rights. Eventually, Monterey and BBP decided to resolve disputes they had against each other by agreeing that nobody would pay anything to anybody.

Federated then moved to intervene to pursue a subrogation claim against Monterey, arguing that it should recover the costs and fees it had spent defending BBP because Monterey’s claim was, according to Federated, groundless. The trial court denied intervention, figuring that Federated could bring the subro claim as a separate action; the Court of Appeals reversed and remanded with instructions that require the trial court to allow the intervention.

The court held, first, that the settlement between BBP and Monterey did not bind Federated, even though a subrogee stands in the shoes of the subrogor and even though the Monterey-BBP settlement specifically released the defense costs. The court cited cases from other jurisdictions for the proposition that once the tortfeasor is informed of the subrogation rights, they cannot be released by the insured. This is a novelty to Arizona law; whether the cases cited actually stand for that proposition on these facts is an exercise we leave for the reader.

Next, the court decided what Federated really wanted — even though it had never thought to ask for it — was a reasonableness hearing under USAA v. Morris, 154 Ariz. 113, and that Morris required that it get one.  (Morris allows the insured to settle a claim without the insurer’s approval when the insurer reserves its rights.) This is true even though the settlement did not result in any additional liability to Federated. At the hearing the burden will be on Monterey to prove, under the court’s new subrogation law, that it did not have notice of the subro claim (which it clearly did according to the facts recited by the court) and/or that, under Morris, the settlement was reasonable. If it fails to prove these things, Federated can proceed with its claim (which will presumably requre proving that Monterey’s claim was meritless).

This of course gives the insurer the best of both worlds. It can deny coverage yet still prevent or manipulate settlement by using the threat of subrogation for defense costs. And this is done under the cover of a case — Morris — that was supposed to prevent it from doing just this sort of thing.

Tilly sued Delci for personal injury; Delci got summary judgment because, apparently, Tilly failed to respond to a boilerplate Request for Admission that he wasn’t injured (and you wondered why insurance defense counsel used those things). Tilly appealed, arguing that because the summary judgment was tied up with his (egregious) failures to make discovery, the ruling was a sanction and the trial court should therefore have considered a less drastic alternative and whether the problems were his fault or his attorney’s. The Court of Appeals upheld the summary judgment.

Far from being too severe, the judge’s various rulings illustrate the lengths to which trial courts are willing to go to accommodate plaintiffs who can’t/won’t/don’t know how to respond to discovery, even after long delays and several warnings.

The problem comes with the discussion in a footnote. Substantive footnotes are dangerous. Too often, they are things that the court has only half thought through but just can’t bear to edit out. (Courts rarely edit well.) Other times, the judge has thought things through perfectly well, knows that the footnote is the important part of the opinion, but doesn’t want to call attention to it just yet.

Footnote 4 looks like the former variety. Tilly had opposed the motion for summary judgment by telling the court that he had now responded to the discovery requests; he did not tell the court what his responses said nor why they raised a question of fact. The Court of Appeals said that “This is not a case where the trial judge could have independently searched the record and discovered evidence that placed factual matters in dispute, to the extent that such a search was required.” Footnote 4 discusses whether such a search is ever required.

What do we know so far? That this case is not about whether a trial court need search the record to find questions of fact. So isn’t the footnote dicta? Yes. So why the footnote? Well, for some reason someone had clearly put in some time researching the issue, and it would have been a shame to waste that, right?

Here’s what the footnote says:

There are differing views expressed [on whether the trial court need do a search]. Compare [several cases saying “no”] with [a couple of cases saying “yes”]. From our perspective, whether such a search is required, either by the trial court or on appeal, depends on ‘the volume and complexity’ of the specific litigation in which the motion for summary judgment is filed.

Huh? Whether a court has a legal duty to do something depends on how hard the judge will have to work? If so, what is the standard for determining how hard is too hard?

The footnote actually cites a case for this nonsense. But that case said that because of the “volume and complexity” of modern litigation, cases saying that a court must search the record itself are “contrary to modern authority.” We know that because footnote 4 already quoted it to that effect, as one of the cases saying a court needn’t do a search. So how does a a case squarely on one side of the question — and which the court just quoted as being on one side of the question — suddenly become authority for the court’s new, equivocal position?

Yes, its dicta; yes, its nonsense; yes, its easy to see that its both. But that won’t stop the next guy who fouls up his summary judgment defense from citing it as authority that the court ought to do his work for him.