This one is hard to believe.

In 2002, the (then) Presiding Judge of the Maricopa County Superior Court changed the jury selection process. The court, according to the opinion, didn’t bother to give the public or the Bar any notice.  (Sound incredible and ridiculous? Then you don’t understand the degree to which the courts are bureaucracies unto themselves and you haven’t known many Presiding Judges.) People didn’t find out about it until 2006. Then they began to object that the new system violates the jury statues. (Their argument is good enough to make it doubly astonishing that the court slipped this in without telling anyone. Although not ruling on whether the new system violated the statutes, the opinion describes the system [albeit briefly] and quotes the statutes in full. Whether these deliberate dicta are intended to signal something remains to be seen.)

In April 2006 the (current) Presiding Judge ordered, in three of the cases in which the issue had been raised, that that issue alone be heard by an out-county judge. In August a Pinal County judge ordered that the issue, which had by then been brought up in thirty-seven cases, be given its own cause number, that objectors to the new system would be Petitioners, and that those defending it would be Respondents. Yes, he turned thirty-seven motions into their own lawsuit. (How could thirty-seven lawyers – or even a few, assuming some consolidation of representation – sit in a courtroom and not see the problems with that? We’re charitably going to assume that all, or at least a few, or at least one of the “Respondents’” lawyers saw the problem and realized that it could be to their advantage not to mention it.)

Over a year later, the judge from Pinal ruled in favor of the new system. (One assumes that the thirty-seven cases were on hold in the mean time. Civil lawyers are used to waiting but eleven of the cases were criminal.  Did they all just wait a year for a ruling on some motions in a combined civil/criminal “proceeding” of some sort?) The “Respondents” appealed.

At that point, good sense began to break out: the First Division dismissed the appeal for lack of jurisdiction.

There was neither a final judgment nor a judgment with Rule 54(b) language. You can’t have an appeal without one of those, as all involved should have learned in about their fourteenth minute of law school. All that had happened was a ruling on some motions. Couldn’t anyone have seen that this would be a problem for an appeal? Shouldn’t they at least have filed a special action instead? That wouldn’t have succeeded, either, but would have made more sense than most of what had happened so far.

The court recognized but declined to use its discretion to rule on the matter as a special action. No action had ever been created in the court below in any manner recognized by the Rules. The situation was more like a certified question than than a special action; the appellate courts have no authority to take certified questions from the Superior Court. And if its ruling were against the new jury procedure, that would still leave for resolution the question of whether litigants in any of the individual cases had been prejudiced.

The court dismissed without prejudice, pointing out that the thing to do would be to seek relief in the individual cases.

The opinion is written in an eyebrows-mildly-raised sort of way. Maybe getting something so out of the ordinary put the judges in a good mood. But they had to be wondering “What were they thinking down there? Was anybody thinking down there?”

In fairness, there may well be some extenuating circumstances that don’t appear in the opinion. It surely can’t be true that so many people could make so many mistakes that were just plain dumb.

[THIS OPINION WAS REVERSED AND REMANDED BY THE ARIZONA SUPREME COURT ON 2/12/10. That opinion is here.]

In the last few days, both divisions of the Court of Appeals have issued opinions discussing the economic loss rule.

We will not comment on Valley Forge Insurance v. Sam’s Plumbing, L.L.C. (CA2 3/19/09) since an AzAppBlog writer was among the many lawyers involved, in one way or another, in the six or eight or more pieces of litigation that arose out of that accident (see our FAQ).

Design Alliance designed apartments that Flagstaff Affordable Housing built. The design violated federal handicap-accessibility  requirements. FAH was required to remedy the problem at considerable expense so it sued for, among other things, negligence.

Design Alliance moved to dismiss, arguing that the economic loss rule barred the claim. That rule, established in Arizona by the First Division in  Carstens v. City of Phoenix, 206 Ariz. 123, says that there can be no recovery for economic loss absent personal injury or property damage. The trial court granted the motion.

On appeal, the court reversed.

The relationship between architect and owner is one between professional and client. Professionals owe special duties to their clients. Therefore, the owner’s claim against the architect is based in tort, not contract.

If that reasoning seems a bit sketchy to you, it apparently did to the court, too, which may explain why the opinion states it in a few sentences then spends most of the remaining thirteen pages of the opinion trying to justify it. In ruling, apparently, that the economic loss rule does not apply to claims against professionals, all the court really says is that it knows a tort when it sees one and it sees one in that situation.

The plaintiff also sued in contract but that claim had lapsed under the statute of repose. The defendant argued that to allow a negligence claim would “eviscerate” the statute. The court’s response was, basically, “So what?”

The real problem is that the economic-loss rule has sat uneasily in Arizona law. Carstens dealt with a government entity, which courts almost never look at the same way they look at you and me. Since then, though, other types of defendants have tried to use it to escape what would previously have been accepted as negligence claims.

Valley Forge contains a more extensive analysis – and criticism – of Carstens, an analysis the Flagstaff Affordable Housing court did not need or care to make. But both cases rule in favor of claimants, reversing trial court decisions, and together they should considerably dampen defendants’ enthusiasm for the economic loss rule.

When is a good result a bad result?

This was a motor-vehicle accident case. Plaintiff’s medical bills were $17,000; the arbitrator awarded her $39,000; Defendant appealed. Four days before trial, Plaintiff disclosed additional medical bills of $5,000; over objection, the trial court let them in. The jury awarded $30,000 – on $22,000 in medical bills, not bad work by the defense.

Because the verdict was not twenty-five percent more favorable than the award, though, Plaintiff moved for statutory sanctions (including almost $24,000 in attorneys fees). The trial court denied them. The possibility of sanctions had come up during the argument about the newly-disclosed bills and the court indicated, then and in denying Plaintiff’s motion, that it would not be fair to sanction the Defendant when it had allowed Plaintiff to increase the amount of the claim.

The Court of Appeals reversed. Under the statute (12-133), sanctions are mandatory unless they would cause “substantial economic hardship.” There was none of that here since Defendant’s insurance carrier was paying.

The language of the statute is clear. The problem with the opinion is its implication (paragraph 13) that the legislature intended this result. We think it highly unlikely that legislators foresaw courts allowing plaintiffs to add new things to a claim yet holding defendants to the standard of the old claim. It would be more correct to say that the statutory language allows this and that the legislature, which could change the statute if it wished, has not done so.

Its easy to suggest in retrospect,  especially since we don’t know the facts of the case, that the arbitration award wasn’t really bad enough to warrant appeal, particularly with a claimant who was still treating, and that the defendant should have moved for new trial and appealed the evidentiary ruling in response to the claim for sanctions. But trial judges should know that a statute that says “shall” is going to be held to mean “shall” unless it gives a clear exception. The idea of balancing the unfairness is of course a favorite of trial courts but it shouldn’t take retrospect to know that they can’t do so using discretion they don’t have.  If the plaintiff’s attorney nearly tripled his fee by sandbagging the defense, CA1 isn’t the court to blame.