Arizona Supreme Court Announces Guidelines for Notice of Claim in Class Action

City of Phoenix vs. Fields, __Az. Adv. Rptr__, No. Cv-08-0159-PR (S. Ct., January 22, 2009)(Justice Hurwitz)
APPLICATION OF NOC “SPECIFIC AMOUNT” REQUIREMENT APPLIED TO CLASS ACTIONS

Former and current Head Start workers filed a notice of claim with the City of Phoenix on April 11, 2002 alleging they were denied benefits generally available to all City employees. The claim was deemed denied after 60 days with no response from the City.

Plaintiffs then filed a class action lawsuit and the class was certified. The defendant City then moved for summary judgment claiming the notice of claim served by plaintiffs did not comply with Ariz. Rev. Stat. Ann. 12-821.01.(A) in that it did not set forth an “amount for which the claims could be settled.”

Because it is impossible for a potential class representative to set forth an amount for which the claims can settle before suit is filed and the class certified, the trial court held the specific amount requirement of the notice of claim statute doesn't apply to class actions. The court of appeals disagreed and dismissed the case because the notice failed to specify a settlement figure.

The Arizona Supreme Court first noted that the state legislature did not consider the complications of class actions in drafting the notice of claim statute. It then noted the impossibility of the specific amount requirement in the class action context. It focused particularly upon the fact that the purpose of the notice of claim statute was to facilitate pre litigation settlement whereas by its very nature a class action cannot be settled until after litigation and class certification. Litigation it noted which “can be extensive in nature and uncertain in outcome, both about the appropriateness of the class action and the reasonableness of the settlement.”

Hence the court's compromise was to hold that “[a]lthough the putative class representative 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. . . . A.R.S. Sec. 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 representative intends to seek certification . . . the notice of claim will serve as a representative notice for other class members.”

Here this was not done. So the court then turned to the plaintiffs' waiver argument. First the court noted that a deficiency in a notice of claim is an affirmative defense which must be plead in the Answer. Any deficiency in the notice should be apparent on the face of the notice; a matter the courts “can quickly and easily adjudicate early in the litigation.” Hence even when properly pled in the Answer the Supreme Court held that “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.'”

Here the court found the defendants extensive 4 year litigation of the certification issue without a peep about the notice of claim and the filing of numerous motions for partial summary judgment on issues unrelated to the notice of claim constituted a waiver of this defense.