American Power Products v. CSK (3/23/17)

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On the interplay between 12-341.01 and contractual fee provisions.

The case  arose out of a contract that gave a right to attorney fees to the prevailing party; the phrase was not defined but the contract applied Arizona law. During trial of cross-claims CSK’s was dismissed and the parties apparently agreed that American would get judgment of at least $10,000 (we will use round numbers). That’s what the jury awarded, though American had sought $5 million. CSK had made a $1 million OJ. But the trial court found that American was the successful party and awarded it $775,000 in fees. The Court of Appeals affirmed that. The court reasoned that the contract did not define or limit “prevailing party” and that applying OJ law, which is for contracts now part of the statute, would change the contract, which the statute itself prohibits.

The Supreme Court reverses. “To the extent prior case law broadly precludes application of § 12-341.01 whenever the parties’ contract contains an attorney fee provision, regardless of its content, scope, and other provisions in the contract, we disagree. Rather, § 12-341.01 ‘is inapplicable by its terms if it effectively conflicts with an express contractual provision governing recovery of attorney’s fees.’” “Thus, rather than being completely supplanted by any attorney fee provision in the parties’ contract, the statute — consistent with its plain language — applies to ’any contested action arising out of contract’ to the extent it does not conflict with the contract.”

Justice Timmer dissents, basically agreeing with the Court of Appeals.

Remanded for the trial court to determine fees incurred before the offer (which American gets) and after the offer (which CSK gets).

(Opinion: American Power Products v. CSK)

Boswell v. Fintelmann (CA1 3/9/17)

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A brief opinion issued to discuss the nature of dismissal of a malpractice action for failure to file an expert affidavit.

Plaintiff sued his eye doctors without an affidavit. The trial court ordered him to file one; he didn’t. The court dismissed with prejudice. Plaintiff appealed.

The Court of Appeals first notes that it reviews the matter de novo. The court said the same thing earlier this year (Romero v. Hasan) but cited a 12(b)(6) case. Perhaps feeling the problem with that, the court adds that de novo review is appropriate because failure to file the affidavit “is a pleading failure.”

Plaintiff apparently wanted to make a number of arguments but was pro se and didn’t know how. Some of them the court says he waived, others it rejects summarily.

But, though its not clear that this is among the arguments Plaintiff tried to make, the court concludes that dismissal should have been without prejudice. Such a dismissal “is not tantamount to dismissal for failure to prosecute.”  The dismissal order cited Rule 37(b)(2) but the court says that it is not “a sanction for a discovery violation” and that in any event the rule doesn’t allow dismissals with prejudice for violation of 12-2603. The court apparently thinks these things self-evident as it does not explain them, which again makes us wonder — admittedly without knowing — whether the issue was argued on appeal.

In fairness, the court also mentions the right answer, which is that dismissal is without prejudice because the expert-affidavit statute, 12-2603(F), says so.

Judgment changed to without prejudice and affirmed as modified.

(Opinion: Boswell v. Fintelmann, et al.)

Gullet v. Kindred Nursing Centers (CA2 2/15/17)

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The court discusses whether an arbitration agreement is unconscionable and allows discovery on the issue.

Plaintiff’s father died in a nursing home. Plaintiff sued for, among other things, violation of the Adult Protective Services Act. Defendant moved to compel arbitration, the father having signed an arbitration agreement upon admission. Plaintiff argued that the agreement was substantively unconscionable and that discovery should be allowed on whether it was procedurally unconscionable. The trial court granted the motion; Plaintiff appealed.

On substantive unconscionability the Court of Appeals affirms.

Plaintiff argue that the agreement unreasonably restricted discovery. It allowed standard paper discovery but with limits different from the rules of procedure, allowed depositions of six fact witnesses and two experts, and such other discovery as the parties or arbitrator thought “necessary and proper.” “The amount of discovery is not so low and the burden to obtain more so high that the Agreement denies litigants the opportunity to conduct discovery sufficient to adequately arbitrate [sic]  . . .”

Plaintiff also argued that the agreement was unfair because the arbitration agency used by Defendant – and thus arguably financially biased toward it – supplied the list of arbitrators. But the parties could agree to use other arbitrators and, if they didn’t agree, could use the each-pick-your-own-and-they-pick-a-third process. This was not “fundamentally unfair.”

On procedural unconscionability the court reverses. Plaintiff had no evidence of it but said that was because his father was dead so he needed to do discovery to find out if there was any. The court agrees. When he signed the agreement Plaintiff’s father was “a man requiring in-patient care because of serious health problems . . . who died approximately one month later.” That’s enough for the court to decide, analogizing to summary-judgment cases, that Plaintiff should have a chance to explore the issue.

“On the issue of procedural unconscionability, we vacate and remand . . .” Well, no. “Vacate” is something the Supreme Court occasionally does to opinions from the middle courts but not something they can do to this trial court’s ruling. Its reversed but its still on the record. Odd – telling, perhaps? – that such a mistake got through.

(Opinion: Gullet v. Kindred Nursing Centers)