In 2003, the Town of Florence annexed a large piece of property and entered a development agreement with its property owner allowing the owner to develop the property as residential and also to operate a copper mine. The owner’s plan was to mine the copper and then build houses over the mine. Years later the Town changed its mind and decided it no longer wanted a copper mine within the Town’s limits. Owner’s successor (through a bankruptcy) later moved forward with developing the mine and not the homes. And, although owner did not feel it was necessary and later withdrew the request, the owner applied for rezoning and a special use permit for the mining operation.
The Town filed suit arguing a zoning ordinance adopted years after the agreement barred mining on the property. The court of appeals held the owner had a vested right, and the Town could not unilaterally rescind the prior agreement. Using alliterative words of flout, foist, fully and formally, the court holds the Town to its agreement: “We do not discount the tension between yesterday’s binding promises and today’s public opinion, but having agreed to the Development Agreement in 2003, the Town must comply with its terms.” The court also rejected the Town’s argument that the owner abandoned the mining rights.
The court of appeals concludes with affirming a $1.7 million award of attorney fees to the owner. The court approves of the superior court judge who had “used high-stakes or bet-the-company litigation as a barometer to determine the amount of fees. . . ” But how is this barometer a standard? Should there not be more analysis of a large statutory award of fees intended “to mitigate the burden of the expense of litigation.” A.R.S. § 12-341.01. No China Doll or lodestar calculation? We cannot tell whether it is reasonable to make such fee award to a copper company in a case that appears to be neither complex nor novel.
Bad faith claims have recurring themes and evidence on both sides. This appeal is from a jury verdict in favor of a health insurer. The insured suffered from multiple sclerosis and purchased a health care plan in 2015. Before and after he purchased the plan, he received infusion treatments with a “controversial” drug. His medical provider submitted an authorization request and the insurer incorrectly stated that the provider was out-of-network and denied the request. After several weeks of back-and-forth exchanges between the insured, his provider, and the insurer, the infusion treatment was later approved. The insured argued the delay caused a significant relapse, and sued the insurer for bad faith. The defense argued the initial denial was a good-faith mistake; the medical provider cancelled the prior authorization and failed to provide information necessary to initiate and timely process the claim; and, the insured could have accepted a low-cost dose directly from his provider that would have cost approximately $150. Jury agreed and found for the insurer. The insured challenged several jury instructions and evidentiary rulings. The court of appeals held the jury may be instructed on contract defenses including waiver (the waiver defense was focused on the provider cancelling the authorization request). Although there is no “comparative bad faith,” whether the insured breached the contract or there are other contract defenses, such defenses may be considered by the jury when deciding whether the insurer’s conduct was reasonable. A closely related issue follows. The insured challenged a mitigation of damages instruction, but because the jury returned a defense verdict, the court did not consider it. It did, however, consider the insured’s negligent conduct in a footnote stating “UCATA may permit a defendant’s intentional conduct (bad faith) to be compared to a plaintiff’s negligence.” Thus, while there is no “comparative bad faith” because an insured cannot commit bad faith, the court’s footnote suggests comparative fault may still be in play. Less interesting are evidentiary challenges. One involving call logs without foundation, and the second, the inadmissibility of coverage guides from another plan for a different year. All of which were properly excluded.
Our curiosity is piqued whenever we see “affirmed in part; vacated in part and remanded,” and we expect something interesting is coming. So often we find ourselves disappointed – as we do here. It isn’t the court’s fault. The shallowness comes from the parties. The court tells us very little about the underlying dispute between the Zablotnys and their homeowners association the Sycamore Hills Estates Homeowners Ass’n. The Zablotnys sued the Association for breaching the CC&Rs for some reason the court does not explain. The case is settled and as part of the settlement, a consent judgment is entered. Two years later the Association changes its mind. The Association argues the judgment was beyond the scope of the pleadings because it can be characterized as a declaratory judgment and should not have been entered. Although the Association stipulated to it, it argues the court did not have jurisdiction to do what it asked. The Association then argues it really did not have authority to enter into such a settlement.
The court of appeals holds the trial court had authority to hear the underlying case; the parties had agreed to the stipulated judgment to resolve the dispute; and thus, the judgment was not void for lack of jurisdiction. As for the ultra vires challenge by the Association against itself, it’s a corporation and Arizona statutes limit challenges for lack of authority. A member can challenge the corporation’s action, but the corporation cannot challenge itself. Finally, the trial court had entered a supplemental award of fees against the Association before the time had expired for the Association to file a response. (Why wasn’t this fixed earlier when the court of appeals told the parties they had to go back to the trial court and get a final judgment because the first one wasn’t signed? ) The trial court is directed to give the Association the opportunity to be heard on this. We expect there will be more litigation because when the Association proclaims it acted without authority, it is sending its members a litigation invitation.