City of Phoenix v. Fields

                    SUPREME COURT OF ARIZONA
                             En Banc

CITY OF PHOENIX, a municipal      )   Arizona Supreme Court
corporation; CITY of PHOENIX      )   No. CV-08-0159-PR
EMPLOYEES' RETIREMENT SYSTEM      )
BOARD,                            )   Court of Appeals
                                  )   Division One
                     Petitioners, )   No. 1 CA-SA 07-0152
                                  )
                 v.               )   Maricopa County
                                  )   Superior Court
THE HONORABLE KENNETH L. FIELDS, )    No. CV2002-020383
JUDGE OF THE SUPERIOR COURT OF    )
THE STATE OF ARIZONA, in and for )
the County of Maricopa,           )   A M E N D E D
                                  )   O P I N I O N
                Respondent Judge, )
                                  )
MARY ANN PEREZ, LOU KRAFTS,       )
SHERRY GILL, NAN NELSON, DOROTHY )
HANSEN, EVA HERNANDEZ, NORMA      )
VEACH, LILLIE DYE, NEFRETARI      )
SALAHDEEN, TERESA ANDERSON,       )
ELAINE STOCKTON, GERALDINE        )
MARTINEZ, MARIA MONTOYA, PAULINE )
HODGES, VIOLET TODD, MARTHA       )
MARTINEZ,                         )
                                  )
        Real Parties in Interest. )
                                  )
__________________________________)


    Special Action from the Superior Court in Maricopa County
              The Honorable Kenneth L. Fields, Judge

                            REMANDED
________________________________________________________________

          Opinion of the Court of Appeals, Division One
              219 Ariz. 88, 193 P.3d 782 (App. 2008)

                             VACATED
________________________________________________________________
LITTLER MENDELSON, P.C.                                   Phoenix
     By   J. Mark Ogden
          R. Shawn Oller
          J. Greg Coulter
Attorneys for City of Phoenix

KUTAK ROCK LLP                                        Scottsdale
     By   Marc R. Lieberman
          Paige A. Martin
          Jennifer L. Kraham
Attorneys for City of Phoenix Employees'
Retirement System Board

JENNINGS, STROUSS & SALMON, P.L.C.                        Phoenix
     By   Peter W. Sorensen
          Paul G. Johnson
Attorneys for Mary Ann Perez, Lou Krafts, Sherry Gill,
Nan Nelson, Dorothy Hansen, Eva Hernandez, Norma Veach,
Lillie Dye, Nefretari Salahdeen, Teresa Anderson,
Elaine Stockton, Geraldine Martinez, Maria Montoya,
Pauline Hodges, Violet Todd, and Martha Martinez

CHARLES M. BREWER, LTD.                                   Phoenix
     By   David L. Abney

And

HARALSON, MILLER, PITT, FELDMAN & MCANALLY, P.L.C.        Tucson
     By   Stanley G. Feldman
Attorneys for Amicus Curiae Arizona
Trial Lawyers Association

ARIZONA CENTER FOR LAW IN THE PUBLIC INTEREST            Phoenix
     By   Timothy M. Hogan
          Joy E. Herr-Cardillo                            Tucson
Attorneys for Amici Curiae Arizona Center
for Law in the Public Interest and the
Goldwater Institute
________________________________________________________________

H U R W I T Z, Justice

¶1        Before suing a public entity, a plaintiff must file a

notice of claim that includes “a specific amount for which the



                                2 
claim can be settled.”           A.R.S. § 12-821.01(A) (2003).             This case

applies that statutory requirement to a class claim.

                                          I.

¶2           On April 11, 2002, eight former and current Head Start

workers filed a notice of claim with the City of Phoenix (the

“City”) and the City of Phoenix Employees’ Retirement System

Board (the “Board”) on behalf of themselves and others similarly

situated (the “Class”).             The notice alleged that Head Start

workers    were    improperly       denied       various       benefits    generally

available to City employees.              An amended notice of claim was

filed on May 16, 2002, naming eight additional representatives.

Neither the City nor the Board responded to the claim within

sixty   days;     the    claim    was    thus    denied.         See   A.R.S.    § 12-

821.01(E).

¶3           On    October         21,     2002,         the      putative       class

representatives filed a complaint against the City and Board in

Maricopa   County       Superior    Court,      alleging       constructive     fraud,

breach of contract, and failure to pay wages.                          The complaint

sought certification of a plaintiff class.                      On March 5, 2007,

after   certification       of    the    class,    the    defendants      moved    for

summary judgment on the ground that the 2002 notices did not set

forth an amount for which the claims of the Class could be

settled.



                                          3 
¶4          The Class argued that the defendants had waived this

defense through undue delay in asserting it.                The superior court

found no waiver, but nonetheless denied the motion for summary

judgment,    holding     that    the   settlement     demand     requirement     of

§ 12-821.01(A) does not apply to class actions.                    The City and

Board sought special action relief in the court of appeals.

¶5          The court of appeals accepted jurisdiction and vacated

the superior court’s order.            City of Phoenix v. Fields (Perez),

219 Ariz. 88, 193 P.3d 782 (App. 2008).                    The court held that

§ 12-821.01(A) applies to class actions, id. at 94 ¶ 16, 193

P.3d   at   788,   and   that    the   notices     filed    by   the   Class   were

deficient for failure to specify an amount for which the class

claim could be settled, id. at 95-96 ¶ 22, 193 P.3d at 789-90.

¶6          The Class petitioned for review.                 We granted review

because the issue presented is of first impression and statewide

importance.        See   ARCAP    23(c).      We    have    jurisdiction       under

Article 6, Section 5(3) of the Arizona Constitution and A.R.S.

§ 12-120.24.

                                        II.

                                        A.

¶7          The    common       law    doctrine     of     sovereign     immunity

generally bars damages suits against public entities.                   See State

v. Sharp, 21 Ariz. 424, 426, 189 P. 631, 631 (1920) (adopting

common law rule).        We abandoned that broad common law doctrine

                                         4 
in Stone v. Arizona Highway Commission, 93 Ariz. 384, 387, 381

P.2d 107, 109 (1963).             But although Stone and subsequent cases

have developed a new common law of government liability, the

legislature       retains   the    power    to    modify   the   common    law   and

develop this area of the law.              See Ariz. Const. art. 4, pt. 2,

§ 18 (“The Legislature shall direct by law in what manner and in

what courts suits may be brought against the State.”); Ryan v.

State, 134 Ariz. 308, 310, 656 P.2d 597, 599 (1982) (“We do not

recoil from the thought that the legislature may in its wisdom

wish to intervene in some aspects of this development.”).

¶8           In    1984,    the    legislature         enacted   a   comprehensive

statutory scheme governing actions against public entities and

employees.        1984 Ariz. Sess. Laws, ch. 285 (the “1984 Act”) (now

codified at A.R.S. §§ 12-820 to -823).                   The 1984 Act “declared

. . . the public policy of this state that public entities are

liable for acts and omissions of employees in accordance with

the statutes and common law of this state,” id. § 1(A), and set

forth limited circumstances in which public entities would enjoy

complete   or      qualified   immunity         from   liability,    id.   § 3   (now

codified at A.R.S. §§ 12-820 to -820.05).                    The 1984 Act also

required that, before suing a public entity, a plaintiff file a

notice of claim with the entity.                  Id. § 5 (previously codified

at § 12-821 (1984)).



                                           5 
¶9                           The notice of claim requirement underwent significant

legislative revision in 1994.                                             1994 Ariz. Sess. Laws, ch. 192

(the “1994 Act”).                                              Most relevant to today’s inquiry, the 1994

Act added § 12-821.01(A), which provides:

              Persons who have claims against a public entity or a
              public employee shall file claims with the person or
              persons authorized to accept service for the public
              entity or public employee as set forth in the Arizona
              rules of civil procedure within one hundred eighty
              days after the cause of action accrues.      The claim
              shall contain facts sufficient to permit the public
              entity or public employee to understand the basis upon
              which liability is claimed.      The claim shall also
              contain a specific amount for which the claim can be
              settled and the facts supporting that amount.      Any
              claim which is not filed within one hundred eighty
              days after the cause of action accrues is barred and
              no action may be maintained thereon.[1]

                                                                         B.

¶10                          The 1984 Act did not expressly address class claims.

In Andrew S. Arena, Inc. v. Superior Court (Pima County), we

held that “A.R.S. § 12-821 does not bar class actions against

public entities,” and that “a claim against a public entity may

be presented as a class claim.”                                               163 Ariz. 423, 426, 788 P.2d

1174, 1177 (1990).                                              “If the claim is denied, the court may

thereafter entertain a class action on the claim provided that




                                                            
1
     For a general history of the notice of claim statutes, see
Andrew Becke, Comment, Two Steps Forward, One Step Back:
Arizona’s   Notice  of   Claim  Requirements   and  Statute   of
Limitations Since the Abrogation of State Sovereign Immunity, 39
Ariz. St. L.J. 247 (2007).
                                                                         6 
the case is appropriate as a class action under the applicable

principles of law.”       Id.

¶11        Arena did not address the required form of a class

claim.     Nor, because it was decided under the 1984 Act, did

Arena involve the requirement in § 12-821.01(A), added in the

1994 Act, that a notice include a “specific amount” for which

the claim can be settled.

¶12        In    Deer    Valley       Unified       School       District     No.   97    v.

Houser   (McDonald),     we     held    that       in    light    of   the    “clear     and

unequivocal” language of § 12-821.01(A), a notice of claim must

“include   a    particular      and    certain          amount    of   money   that,      if

agreed to by the government entity, will settle the claim.”                              214

Ariz. 293, 296 ¶ 9, 152 P.3d 490, 493 (2007).                               Deer Valley,

however, did not involve a class claim.                          Nor has any reported

Arizona decision other than the one below applied the 1994 Act

to class claims.

                                         1.

¶13        Applying § 12-821.01(A) to class claims is complicated

by the nature of class actions.                   Persons filing a claim with a

public entity do not yet represent a class; subsequent court

certification     of    the   class     is        required   before     the    claimants

attain representative capacity.                   See Ariz. R. Civ. P. 23(c)(1)

(requiring the superior court to “determine by order” whether an

action may be maintained as a class action); Arena, 163 Ariz. at

                                             7 
426,       788    P.2d   at     1177.        Before        certification,         the    putative

representatives have authority to settle only their individual

claims.          See 5 Jerold S. Solovy et al., Moore’s Federal Practice

§ 23.161(2)(a)            (3d     ed.        2007)         (“Moore’s”).               Even     after

certification, non-representative class members generally must

be given an opportunity to exclude themselves from the class.

Ariz. R. Civ. P. 23(c)(2).                    No settlement binds remaining class

members      until       approved       by    the        trial       court    after   appropriate

notice and hearing.             Moore’s, supra, § 23.60(8).

¶14              Thus, it is simply not possible for those filing a

purported class claim under the notice of claim statute to set

forth a “specific amount” for which the claim of the entire

class “can be settled,” as required by § 12-821.01(A).                                   Not only

do those filing the claim lack any such authority, they also

have no assurance that a class will ever be certified, how many

members of the class will opt out, or whether the superior court

will eventually approve a proposed settlement.

¶15              The City and Board nonetheless argue that we should

interpret          § 12-821.01(A)            as   requiring            that     putative      class

representatives make a sum-certain settlement demand on behalf

of     a    yet-uncertified             class       and      then       file     suit,       seeking

simultaneous class certification and settlement approval.                                       See

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618 (1997) (“[T]he

‘settlement         only’     class      has      become         a    stock    device.”).       The

                                                    8 
initial difficulty with this argument is that such a demand

would     not    comply       with    the   language         of    the   statute,   which

requires that the notice include “a specific amount for which

the   claim      can   be     settled.”        A.R.S.       § 12-821.01(A)      (emphasis

added).      At best, the approach suggested by the City and Board

would result in a notice including a sum for which the class

claims might be settled if a class is eventually certified.

¶16             Moreover, the defendants’ suggested approach conflicts

with the obvious purpose of the settlement demand requirement of

§ 12-821.01(A) – to facilitate “the possibility of settlement

prior to litigation.”                Deer Valley, 214 Ariz. at 295 ¶ 6, 152

P.3d at 492 (quoting Falcon ex rel. Sandoval v. Maricopa County,

213 Ariz. 525, 527 ¶ 9, 144 P.3d 1254, 1256 (2006)).                            A demand

on behalf of a class can be settled only after litigation, which

can be extensive in nature and uncertain in outcome, both about

the appropriateness of the class action and the reasonableness

of the settlement.            See Hanlon v. Chrysler Corp., 150 F.3d 1011,

1019 (9th Cir. 1998) (noting that courts “must pay ‘undiluted,

even heightened, attention’ to class certification requirements

in a settlement context”) (quoting Amchem, 521 U.S. at 620); In

re    Gen.    Motors    Corp.        Pick-Up        Truck   Fuel    Tank   Prods.   Liab.

Litig., 55 F.3d 768, 805 (3d Cir. 1995) (“We affirm the need for

courts    to     be    even    more    scrupulous           than   usual   in   approving

settlements where no class has yet been formally certified.”);

                                               9 
Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir. 1982) (stating

that courts permitting the use of settlement classes “are bound

to scrutinize the fairness of the settlement agreement with even

more than the usual care”); cf. 7B Charles Alan Wright, Arthur

R.    Miller    &     Mary     Kay     Kane,    Federal       Practice     and    Procedure

§ 1797.2 n.1 (3d ed. 2005) (“Wright & Miller”) (“[T]he fact that

a settlement is agreed upon prior to class certification is a

factor    weighing          against     approval      of     the   settlement.”).           We

therefore       reject       the     argument        that    § 12-821.01(A)         requires

putative class representatives to submit a settlement demand on

behalf of the class.

¶17            In      contrast,         the         Class      contends         that      the

representatives should be excused from including any specific

settlement demand in their notice of claim.                         But neither can we

accept this reading of § 12-821.01(A).                        The statute applies to

“all causes of action”; there is no exemption for putative class

claims.             A.R.S.     § 12-821.01(F)           (emphasis         added).          The

legislature          has    the    ultimate         authority      to   regulate        claims

against   public           entities,    and    we    are     not   free    to    ignore    the

language of the statute it has enacted.                       Some form of settlement

demand for a sum certain is required by § 12-821.01(A).

                                               2.

¶18            The     correct        interpretation          of    § 12-821.01(A)          is

suggested by the problems with the differing arguments of the

                                               10 
parties.       Although          the    putative     class      representatives           cannot

make a claim on behalf of the class, nothing prevents them from

including in their notice the specific amounts for which they

would settle their individual claims.                          Because, at the time of

filing the notice, each representative is authorized to act only

on    his    own   behalf,          § 12-821.01(A)        is    properly         read    in    the

context      of    a        class      claim   as     requiring           only     that       each

representative make an individual settlement demand.

¶19           We therefore hold that A.R.S. § 12-821.01(A) requires

a putative class representative to include in his notice of

claim a “specific amount” for which his individual claim can be

settled.       The notice should also include a statement that, if

litigation         ensues,          the    representative             intends       to        seek

certification          of    a   plaintiff      class.          If    a    class    is    later

certified, the notice of claim will serve as a representative

notice for other class members.                      See Arena, 163 Ariz. at 426,

788 P.2d at 1177.

¶20           This construction of § 12-821.01(A) corresponds with

our treatment of a class tax-refund claim in Arizona Department

of Revenue v. Dougherty (Ladewig), 200 Ariz. 515, 29 P.3d 862

(2001).      The issue in Ladewig was whether, as a prerequisite to

a    class   action         asserting     claims     to    tax       refunds,      each   class

member was required to file a separate administrative claim for

refund with the Department of Revenue pursuant to A.R.S. § 42-

                                               11 
1118(E) (1999).      200 Ariz. at 516-17 ¶¶ 1, 6, 29 P.3d at 863-64.

We    noted   that   A.R.S.    § 42-1118(E)   and     the    notice    of    claim

statute “share enough functional similarities that the reasoning

applied in Arena may extend not only to class actions in tax

court but also to the administrative claim process.”                  Id. at 520

¶ 16, 29 P.3d at 867.         We therefore held that the putative class

representative’s refund claim, which identified the amount of

refund she sought individually and noted her intent to pursue

claims on behalf of a class if her claim was denied, sufficed to

preserve the class claims.        Id. at 522 ¶ 24, 29 P.3d at 869.

¶21           Because of the similarities between § 42-1118(E) and

§ 12-821.01(A), we adopt the same approach here.                A class claim

meets the settlement demand requirement of § 12-821.01(A) if it

identifies the amount for which an individual putative class

representative       would    settle    his   own    claim     and    puts    the

governmental entity on notice of the claimant’s intention to

pursue a class action if his claim does not settle.

                                       III.

¶22           The notices filed by the class representatives in this

case did not include amounts for which their individual claims

could be settled and therefore failed to satisfy A.R.S. § 12-

821.01(A).        The   Class    and     amicus     Arizona    Trial     Lawyers

Association contend, however, that if the notices are deficient,



                                        12 
the   trial    court    erred   in     finding    that      the    notice    of    claim

statute defense was not waived.

¶23           The City and Board respond that we should not consider

this argument because it was not raised in the court of appeals.

Generally, we do not address arguments raised in the trial court

but not in the court of appeals.               Dombey v. Phoenix Newspapers,

Inc., 150 Ariz. 476, 482, 724 P.2d 562, 568 (1986).                         This rule,

however, “is procedural, not substantive, and may be suspended

in    our    discretion.”        Id.      Under       the    peculiar       procedural

circumstances of this case, we find it appropriate to exercise

that discretion.

¶24           The waiver issue was raised by the Class in response

to the defendants’ motion for summary judgment.                        The City and

Board responded to the waiver argument in their reply memoranda.

The trial court’s order denying summary judgment rejected the

waiver      argument,   but     concluded      that    the        settlement      demand

requirement of § 12-821.01(A) did not apply to class actions.

¶25           The City’s special action petition to the court of

appeals sought only to vacate the superior court’s ruling on the

latter issue.       Because the petition did not seek review of a

judgment, but rather only a portion of an interlocutory order,

the Class was not required in the special action to pursue its

waiver      argument.    The    court    of    appeals      held     only    that    the

superior court erred in denying summary judgment on the basis of

                                         13 
its   interpretation       of    § 12-821.01(A);         it    did    not   order   that

judgment   be      granted     in   favor    of    the    defendants,       but   rather

remanded the case to the superior court for further proceedings.

Fields, 219 Ariz. at 96 ¶ 22, 193 P.3d at 790.                         Thus, were the

superior court to enter judgment in favor of the defendants on

remand, an appeal would undoubtedly ensue in which the waiver

issue would be raised.

¶26          In    that   instance,       because        the   superior     court    has

already found no waiver, the appellate court would be required

to address that issue on the same record now before us.                              The

parties have fully briefed the issue in this court.                          Moreover,

whether a government entity has waived a § 12-821.01(A) defense

is a recurring issue of statewide importance.                        See, e.g., Yollin

v. City of Glendale, 219 Ariz. 24, 27 n.2 ¶ 4, 191 P.3d 1040,

1043 n.2 (App. 2008) (noting but not deciding waiver issue);

Jones v. Cochise County, 218 Ariz. 372, 381 ¶ 29, 187 P.3d 97,

106 (App. 2008) (finding waiver).                      We therefore exercise our

discretion to address this issue today.

                                          IV.

¶27          An assertion that the plaintiff has not complied with

the   notice      of   claim    statute     is    an   affirmative      defense     to   a

complaint.        See Pritchard v. State, 163 Ariz. 427, 432, 788 P.2d

1178, 1183 (1990).         An answer to a complaint must set forth “any

. . . matter constituting an avoidance or affirmative defense.”

                                            14 
Ariz. R. Civ. P. 8(c).                                             Defenses omitted from an answer or Rule

12 motion are therefore waived.                                                    See Wright & Miller, supra,

§ 1278                (“It             is         a       frequently        stated    proposition      of    virtually

universal                        acceptance                    .    .   .    that     a    failure     to    plead    an

affirmative defense as required by Federal Rule 8(c) results in

the waiver of that defense.”).

¶28                          The joint answer to plaintiffs’ complaint filed by the

City             and           Board               asserted          that    the    plaintiffs       had    “failed   to

exhaust                    their                administrative,               statutory,      and/or        contractual

remedies.”2                           The City and Board contend that this allegation was

sufficient to raise the notice of claim statute defense.                                                              We

today                assume,                    without            deciding,        that    this     broad     language

preserved the defense.3

¶29                          Even when a party preserves an affirmative defense in

an answer or a Rule 12(b) motion, however, it may waive that
                                                            
2
     The joint answer was filed on December 6, 2002. The Board
filed an amended answer to the original complaint on January 7,
2004, and a second amended answer on August 11, 2004.      Each
contained language similar to the original joint answer with
respect to exhaustion of “administrative” and “statutory”
remedies.
3
     On March 31, 2005, the Class filed an amended complaint.
In its answer to the amended complaint, filed on April 18, 2005,
the City alleged that plaintiffs failed to comply with “the
mandatory provisions of A.R.S. § 12-821.01.” The Board’s answer
to the amended complaint, filed the next day, similarly alleged
“fail[ure] to comply with the Notice of Claim statute, A.R.S.
§ 12-821.01.”   Such specific pleading is far better suited to
apprise a plaintiff of a notice of claim statute defense than a
general assertion of failure to exhaust administrative or
statutory remedies.
                                                                            15 
defense by its subsequent conduct in the litigation.                                                   See, e.g.,

Cont’l Bank v. Meyer, 10 F.3d 1293, 1296-97 (7th Cir. 1993)

(finding waiver of personal jurisdiction defense timely raised

in answer after party fully participated in merits of litigation

for more than two-and-one-half years without actively contesting

personal jurisdiction).                                            This rule applies to the notice of

claim statute defense.                                          See Jones, 218 Ariz. at 379-80 ¶¶ 22-23,

27,           187           P.3d             at         104-05     (finding     waiver    when   the   government

entity substantially participates in litigation).

¶30                          Any            defense            a   public      entity    may   have    as   to   the

sufficiency of a notice of claim is apparent on the face of the

notice.                      This is a matter that courts can quickly and easily

adjudicate early in the litigation.                                              See Pritchard, 163 Ariz. at

432-33, 788 P.2d at 1183-84 (noting that issue can be raised

through                    motion                   for        summary    judgment       to    which   notice    is

appended).                            Given that a government entity may entirely avoid

litigating the merits of a claim with a successful notice of

claim statute defense, waiver of that defense should be found

when the defendant “has taken substantial action to litigate the

merits of the claim that would not have been necessary had the

entity promptly raised the defense.”                                                Jones, 218 Ariz. at 380

¶ 26, 187 P.3d at 105.4


                                                            
4
     Cases involving arbitrable disputes provide a useful
      
analogy.  It is widely recognized that even when a dispute is
                                                                         16 
¶31          By   any    measure,     the     City   and   Board   substantially

participated in this litigation before raising their notice of

claim statute defenses.            After filing their original answer, the

defendants engaged in extensive briefing as to the propriety of

class certification without once suggesting that they believed

all claims of the Class were barred under § 12-821.01(A).                 After

class certification, the City and Board filed various motions,

including several motions for partial summary judgment unrelated

to the sufficiency of the notices of claim.                 The City and Board

also engaged in discovery after class certification, including

submission of Rule 26.1 disclosures that did not disclose a

§ 12-821.01(A) defense.5           The motion for summary judgment finally



_______________________________ 
subject to arbitration, that right may be waived by a party who
participates   substantially  in   litigation  without  promptly
seeking an order from the court compelling arbitration.     See,
e.g., Navieros Inter-Americanos, S.A. v. M/V Vasilia Express,
120 F.3d 304, 316 (1st Cir. 1997) (“[T]he very rationale for
arbitration may be undercut if a party is permitted to pursue a
claim through the courts and then later claim a right to
arbitration.”); Hoxworth v. Blinder, Robinson & Co., 980 F.2d
912, 925 (3d Cir. 1992) (“[D]efendants have waived whatever
right they may have had to arbitration by actively litigating
this case for almost a year prior to filing their motion to
compel arbitration.”); Van Ness Townhouses v. Mar Indus. Corp.,
862 F.2d 754, 759 (9th Cir. 1988) (implying waiver by
defendant’s active litigation of case for more than two years
before moving to compel arbitration).
 
5
     At oral argument, counsel for the City initially stated
that the parties did not exchange disclosure statements under
Arizona Rule of Civil Procedure 26.1.     After counsel for the
Class indicated that the parties had exchanged Rule 26.1
disclosures, counsel for the City stated that the statements had
                                        17 
raising the absence of a settlement demand was filed more than

four years after the date of the original complaint and more

than three years after class certification.

¶32          Typically, waiver is “a question of fact.”                     Chaney

Bldg. Co. v. Sunnyside Sch. Dist. No. 12, 147 Ariz. 270, 273,

709 P.2d 904, 907 (App. 1985).                But in this case, waiver by

conduct is apparent from the extensive litigation record below.

¶33          If the City and Board had promptly sought judicial

resolution of their § 12-821.01(A) defense, the plaintiffs would

have been spared considerable expense and the judicial system a

significant      expenditure       of   its    resources.         Perhaps    most

importantly, the non-representative members of the class would

have been alerted before class certification to the need to file

their own separate notices of claim.              See Fields, 219 Ariz. at

96 n.9 ¶ 22, 193 P.3d at 790 n.9.             We therefore hold that, even

assuming that the City and Board preserved the § 12-821.01(A)


_______________________________ 
identified only “witnesses              and   documents”    and     not     “legal
theories and liability.”

      The superior court’s Case Management Orders No. 1 and 3
state    that  the  parties  did  exchange   initial   disclosure
statements, which included “a statement of claims for relief and
defenses thereto along with a general statement of factual and
legal theories supporting such claims and defenses.” The record
includes the Class’s initial disclosure statement and two
amended disclosure statements from the Class.       Although the
record does not contain the defendants’ disclosure statements,
Case Management Order No. 3 indicates that the defendants did
provide such statements.

                                        18 
defense in their original joint answer, they waived this defense

against the claims in the original complaint by their subsequent

conduct.6

                                                                      V.

¶34                          For the reasons above, we vacate the opinion of the

court of appeals and remand to the superior court for further

proceedings                             consistent             with     this   opinion.   The   City’s

application for attorneys’ fees is denied.


                                                                  _________________________________
                                                                  Andrew D. Hurwitz, Justice

CONCURRING:

_______________________________________
Ruth V. McGregor, Chief Justice

_______________________________________
Rebecca White Berch, Vice Chief Justice

_______________________________________
Michael D. Ryan, Justice

_______________________________________
W. Scott Bales, Justice


                                                            
6
     On March 31, 2005, the Class filed an amended complaint
adding an aiding and abetting claim against the Board.      The
Board’s answer to the amended complaint, filed on April 19,
2005, expressly raised a notice of claim statute defense.   The
Board filed a motion for summary judgment asserting the absence
of a sum certain for which the aiding and abetting claim could
be settled on October 18, 2005. The superior court denied this
motion.   The parties therefore have not briefed the issue of
whether the Board waived the § 12-821.01(A) settlement demand
defense to the aiding and abetting claim, and we express no
opinion on that issue.
 

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