SUPREME COURT OF ARIZONA
En Banc
KIERA LANE, )
)
) Arizona Supreme Court
Plaintiff-Appellee, ) No. CV-01-0142-PR
)
v. ) Court of Appeals
) Division One
THE CITY OF TEMPE and DANIEL ) No. 1 CA-CV 99-0445
G. SERRANO and GWEN SERRANO, )
husband and wife, ) Maricopa County Superior Court
) No. CV 98-90924
)
Defendants-Appellants. ) O P I N I O N
)
______________________________)
Appeal from Superior Court of Maricopa County
The Honorable Robert H. Oberbillig, Judge
REVERSED AND REMANDED
_________________________________________________________________
Opinion of the Court of Appeals, Division One
199 Ariz. 370, 18 P.3d 164 (App. 2001)
VACATED
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Law Offices of John Evans, P.C. Scottsdale
By: John Evans
Attorney for Appellee
C. Brad Woodford, Tempe City Attorney Tempe
By: Clifford L. Mattice, Assistant City Attorney
Attorney for Appellants
Van O’Steen and Partners Phoenix
By: Stephen I. Leshner
and
The Langerman Law Offices
By: Amy G. Langerman
Attorneys for Amicus Curiae Arizona Trial Lawyers Association
_________________________________________________________________
Z L A K E T, Justice
¶1 Kiera Lane filed a negligence claim against the City of
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Tempe and its employee, Daniel Serrano, for damages arising out of
an automobile accident. The only theory of liability against the
City was respondeat superior. See Driscoll v. Harmon, 124 Ariz.
15, 16, 601 P.2d 1051, 1052 (1979)(“[T]he act of an employee during
the course of his employment is legally the act of the employer.”).
Both the municipality and Serrano were represented by the same
assistant city attorney.
¶2 Pursuant to Arizona Revised Statutes section 12-133, the
case was referred to mandatory arbitration. The defendants filed
a disclosure statement and answered interrogatories. Serrano was
also deposed by the plaintiff. The parties filed a joint pre-
hearing statement in which Lane indicated that she intended to call
Serrano as a witness at the arbitration hearing. His absence, she
asserted in the statement, would be construed as a waiver of the
right to appeal. In the same pleading, the defendants specifically
objected to this contention.
¶3 On the date of the hearing, Serrano was no longer
employed by the City of Tempe. Although his counsel had advised
him to be present, Serrano did not attend. No one had subpoenaed
him. When it became obvious that he was not going to show, neither
side requested a continuance to secure Serrano’s presence at the
hearing. His attorney actively participated in the case and
several other city employees testified in person.
¶4 The arbitrator ultimately found Serrano to be 100% at
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fault and awarded the plaintiff $16,858 in damages. When the
defendants filed a notice of appeal requesting a trial de novo,
Lane moved to strike the pleading. She argued that Serrano’s
nonappearance at the hearing had waived the defendants’ right to
appeal. Lane’s motion was granted by the superior court as to
Serrano, but denied as to the City. The court thereafter entered
a formal judgment against Serrano. The court of appeals affirmed
this ruling, holding that Serrano had not appeared and participated
as required by Rule 76 (a) of the Arizona Rules of Civil Procedure.
¶5 We have jurisdiction pursuant to article VI, section 5(3)
of the Arizona Constitution; Arizona Revised Statutes section 12-
120.24; and Rule 23 of the Arizona Rules of Civil Appellate
Procedure.
DISCUSSION
¶6 The superior court is required by statute to establish a
jurisdictional limit, not exceeding fifty thousand dollars, and to
formulate procedural rules for the compulsory arbitration of civil
claims in Arizona. A.R.S. § 12-133 (A) (Supp. 2001). Because
“something short of a full-blown adversary adjudicatory proceeding
is a more efficient and cost-effective way of resolving such
disputes,” Martinez v. Binsfield, 196 Ariz. 466, 467, 999 P.2d 810,
811, ¶ 3 (2000), we have fully supported this alternative
mechanism.
¶7 The arbitration rules have evolved over time, primarily
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in response to perceived weaknesses. For example, in Chevron v.
Thompson, 145 Ariz. 85, 699 P.2d 1316 (App. 1985), the court of
appeals identified a serious flaw in the process. Chevron filed a
contract action which was referred for mandatory arbitration, but
neither the company nor its counsel appeared at the subsequent
hearing. Chevron thereafter appealed from an adverse arbitration
award, seeking a trial de novo. The superior court dismissed the
appeal. The court of appeals reversed, reluctantly observing that
the arbitration rules permitted Chevron’s maneuver. It stated:
Although we agree with the trial judge that apparently
any party can circumvent the mandatory arbitration
procedure by failing to attend the hearing and then file
a notice of appeal, we have no authority to prevent such
circumvention. . . . We urge [the legislature and supreme
court] to provide safeguards to prevent future violations
of the spirit of the arbitration laws.
Id. at 86, 699 P.2d at 1317.
¶8 In 1990 and 1991, the rules were amended to address this
and other apparent deficiencies. There was increasing concern, for
example, that appeals from arbitration awards were frequently used
“to delay proceedings and extort settlements.” Hon. Robert D.
Myers, MAD Track: An Experiment in Terror, 25 Ariz. St. L.J. 11,
14 (1993). Moreover, the purposeful failure of attorneys and their
clients to actively participate in arbitration hearings, relying
instead on their appeal rights to secure a trial de novo, plainly
resulted in a significant waste of resources.
¶9 Arbitration Rule 7(f), now Rule 76(f) of the Arizona
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Rules of Civil Procedure, was changed to require the filing of a
deposit on appeal that would be forfeited by the appellant if the
ensuing judgment was not at least 10% more favorable than the
arbitration award. See Rule 7(f), Uniform Rules of Procedure for
Arbitration (2000). More recently, the 10% threshold has been
raised to 25%. See Rule 76(f), Ariz. R. Civ. Pro. (2002).
¶10 Arbitration Rule 7(a), now Rule 76(a) of the Arizona
Rules of Civil Procedure, was amended to prevent the situation that
arose in Chevron. The rule states: “Any party who appears and
participates in the arbitration proceedings may appeal from the
award or other final disposition . . . .” Rule 76(a), Ariz. R.
Civ. P. (2002)(emphasis added); see also Rule 7(a), Uniform Rules
of Procedure for Arbitration, State Bar Committee’s Note
(2000)(stating that “only a party who actually appears and
participates in the arbitration proceedings may take an appeal”).
¶11 Coupled with this was a change in the language of Rule
4(j), now Rule 74(k) of the Arizona Rules of Civil Procedure, to
provide that “[f]ailure to appear at a hearing or to participate in
good faith at a hearing . . . shall constitute a waiver of the
right to appeal absent a showing of good cause.” Rule 74(k), Ariz.
R. Civ. Pro. (2002). These modifications were designed to
facilitate the primary goal of arbitration–-a reduction of costs
and delay associated with litigating smaller controversies.
¶12 The requirements of Rule 76(a) were addressed by the
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court of appeals in Graf v. Whitaker, 192 Ariz. 403, 966 P.2d 1007
(App. 1998). In that case, Whitaker repeatedly failed to attend
her deposition. As a sanction, she was defaulted on liability.
Id. at 404, 966 P.2d at 1008, ¶ 2. This left only damages to be
decided at the arbitration hearing. Although her attorney attended
the hearing, Whitaker did not. Id. Her failure to appear was later
construed by the superior court as a waiver of the right to appeal.
Id. at 405, 966 P.2d at 1009, ¶ 4.
¶13 In reviewing that decision, the court of appeals
correctly interpreted Uniform Rules 7(a) and 4(j) “in harmony to
require more than minimal participation in arbitration proceedings;
both require a party to participate in good faith in order to
satisfy the spirit of the arbitration laws.” Id. at 407-08, 966
P.2d at 1011-12, ¶ 18. However, it wisely remanded the matter for
reconsideration because
Graf has not claimed, nor does the record indicate,
that Whitaker had relevant testimony to offer at the
damage hearing; nor has Graf claimed, nor does the record
indicate, that Whitaker obstructed the conduct of the
damage hearing to any degree by failing to accompany her
lawyer to that hearing. In the absence of any showing
that Whitaker did not adequately participate in the
damage hearing through an appearance by counsel, we
cannot agree that her absence from the damage hearing was
properly considered by the superior court in deciding
whether she had violated Uniform Rule 7(a).
Id. at 408, 966 P.2d at 1012, ¶ 20 (emphasis added).
¶14 Lane argues that Graf is distinguishable because the
hearing in that case concerned only damages. Here, she claims,
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Serrano had relevant liability testimony to give and should have
been subject to cross-examination. The record shows, however, that
Serrano gave a deposition before the hearing, and Lane had the
opportunity to examine him at that time. Serrano also answered
interrogatories and filed a Rule 26.1 disclosure statement.
Finally, his counsel appeared at the hearing, called several city
employees to testify, and argued the case. Under Rule 76(a), any
party who participates in arbitration proceedings has a right to
appeal. Serrano clearly participated throughout much of the
process.
¶15 Lane argues, however, that Rule 74(k) deals with a
party’s failure to personally appear at the arbitration hearing,
and compels the result reached here by the superior court and the
court of appeals. We do not agree. The language of Rule 74(k) is
not specifically limited to the parties themselves. Moreover,
Lane’s argument hinges on an unreasonably restrictive definition of
the word “appearance,” something akin to “physically being there.”
Appearance, however, is a term of art in the law. Not only can it
denote a party being physically present in court, it also refers to
“[a] coming into court . . . as a lawyer on behalf of a party.”
See Black’s Law Dictionary (7th ed. 1999). Lawyers have been
making appearances on behalf of clients from the earliest days of
the profession.
¶16 In most cases, what constitutes good faith participation
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is a matter of fairness and common sense. There can be no rigid
test. For instance, in Sabori v. Kuhn, 199 Ariz. 330, 18 P.3d 124
(App. 2001), the defendant, who resided outside of Arizona, failed
to personally appear for an arbitration hearing. Unlike the
present case, he had not been deposed, nor had he answered
interrogatories. He tried to participate by telephone, but the
arbitrator refused to permit it. Even though the court of appeals
agreed “that when a party to an accident contests liability and has
relevant first-hand testimony to offer on the subject, that party
must make himself available for cross-examination at the
arbitration hearing, unless mutually satisfactory alternative
arrangements have been made,” it held that the defendant had not
waived the right of appeal because his counsel had appeared and
participated at the hearing, and the defendant had made a good
faith effort to do so, albeit by telephone. Id. at 332, 18 P.3d at
126, ¶¶ 9-10.
¶17 We do not hold today that the physical appearance of a
party at an arbitration hearing is never required to satisfy Rule
74(k). It is not our intention to turn the clock back to a time
before Chevron, when parties and their attorneys failed to attend
hearings at all, or simply put on de minimus cases. A good faith
effort at appropriate participation is a factual determination to
be made on a case-by-case basis. In some situations, a personal
appearance may be necessary. This, however, is not one of those
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instances.
¶18 Lane’s argument that she was unable to receive a fair
hearing because of a denial of cross-examination falls far short of
the mark. Completed discovery should have provided her with the
information needed from Serrano. She had his deposition testimony
and answers to interrogatories. She also had a disclosure
statement from him. With all of this in hand, Lane was able to win
the case in front of the arbitrator. We fail to see what more she
would have gained by cross-examining Serrano again, and she has not
shown us how his presence would have made a significant difference
in either the conduct of the proceedings or their outcome.
¶19 Finally, we note that both sides had an equal chance to
secure Serrano’s appearance at the hearing. It is significant that
neither party subpoenaed him or moved for a continuance when his
absence became apparent. The issuance of subpoenas is expressly
authorized in arbitration proceedings. See Rule 74(c), Ariz. R.
Civ. Pro. (2001).1
¶20 Lane contends that the joint pre-hearing statement gave
Serrano and the City of Tempe specific notice of her desire to call
him as a witness, and warned of the consequences if he failed to
1
Lane’s contention that formal service of process would
undermine the goals of the arbitration scheme by creating added
delay and expense is exaggerated. We do not believe that it will
or should be necessary to subpoena parties very often, assuming
attorneys act like professionals, discuss hearings in advance,
and agree to cooperate in the presentation of witnesses and other
evidence.
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appear. The defendants claim that this “notice” was nothing more
than a tactic, an attempt to transform the proceeding into a
binding arbitration. This finger pointing is not helpful. What
seems clear is that the plaintiff had no pre-hearing commitment
from the defense to produce Serrano. Thus, she should have taken
independent steps to secure his presence. See Merryman v. Sears,
50 Ariz. 412, 415, 72 P.2d 943, 944 (1937)(“[I]f one expects to
make a witness of an adversary, he should take proper measures by
subpoena, or interrogatories, as the case may require, to procure
such testimony.”).
CONCLUSION
¶21 Serrano adequately participated in the proceedings and
appeared at the hearing through counsel. We find that he did not
waive his right to appeal the arbitration award. The decision of
the court of appeals is vacated, and the matter is remanded to the
superior court for a trial de novo.
_______________________________
THOMAS A. ZLAKET, Justice
CONCURRING:
____________________________________
CHARLES E. JONES, Chief Justice
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_____________________________________
RUTH V. MCGREGOR, Vice Chief Justice
____________________________________
STANLEY G. FELDMAN, Justice
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