Carranza v. Madrigal, 717 Ariz. Adv. Rep. 23 (July 22, 2015) (J. Brutinel)

WHILE TRIAL COURT MUST GIVE REAL PARTY IN INTEREST REASONABLE TIME TO SUBSTITUTE INTO CASE THE SUBSTITUTION MUST BE DONE IN BY A RULE 15(a) MOTION TO AMEND AND SUCH A MOTION MAY BE DENIED FOR UNJUST DELAY AND PREJUDICE TO ADVERSE PARTY

Attorney Fitzhugh filed a wrongful death lawsuit on behalf of the Madrigal's but then withdrew. Attorney Slomski took over the case and ultimately obtained a $3 million settlement.  Fitzhugh then claimed his fee contract with the Madrigal's entitled him to 25% of the fee. He assigned this claim to Carranza who sued to recover the 25%.  Madrigal challenged Carranza's right to take an assignment of the claim. Carranza eventually moved to substitute Fitzhugh into the case as the real party in interest, but did not do so by way of a Rule 15(a) Motion to Amend the Complaint.  In granting Madrigal's motion for summary judgment the trial court found both the contractual language allocating 25% of the fee to Fitzhugh as well as the assignment to Carranza unethical and found undue delay by Fitzhugh in attempting to substitute in as the real party in interest. The trial court found this delay unfairly prejudicial to Madrigal and dismissed the lawsuit. The Arizona Court of Appeals affirmed in part but reversed as to the denial of the motion to substitute based upon Rule 17(a)'s requirement that a party be given a reasonable period of time to substitute in. The Arizona Supreme Court affirmed the trial court and reversed the court of appeals ruling on the motion to substitute.

The Arizona Supreme Court acknowledged that rule 17(a) requires the trial court to give a party a reasonable period of time to substitute into an action as the real party in interest. However, the court further found that rule 17(a) does not provide a vehicle for accomplishing the actual substitution. Instead this must be done by way of a Rule 15(a) Motion to Amend, which was not done here. The dismissal of the lawsuit was appropriate on this basis.

Further, even if the court were to treat the motion for substitution as a motion to amend, the trial court properly exercised its discretion in determining that Fitzhugh had known of the need to substitute for over a year and for tactical reasons choose not to and that this provided the trial court a basis to deny a motion to amend due to unfair and unreasonable delay and prejudice to the adverse party Madrigal.