Compulsory Arbitration Sanctions in Arizona Mandatory

Poulson v. Ofack, __Az. Adv. Rep. __, 1 CA-CV 07-0499 (App. Div. I, March 17, 2009) (Justice Brown)

Plaintiff sued the defendant for injuries sustained in an auto accident. The case was subject to compulsory arbitration. Defendant appealed the arbitrator's $39,000 award. Just before trial plaintiff disclosed additional medical records and bills totaling nearly $5,000.

Defense counsel objected to the timeliness but also acknowledged no prejudice provided his expert could review the records and raised the question of being sanctioned if he didn't beat the $39,000 number by 25% in light of these new special damages. The trial court agreed and refused to sanction the defense when the jury returned a verdict of $30,000.

The court noted that ARS 12-133 (I) and Rule 77 (f) Rules of Civil Procedure mandate the trial court award cost, fees and sanctions if the result of an appeal from arbitration is not at least a 25% improvement for the party appealing unless the award “would create such a substantial economic hardship as not to be in the interest of justice.”

On appeal the defendant argued that having to pay sanctions for not beating the arbitration number although not a “financial” hardship was unfair since the jury heard “a different case” and the trial court should have discretion under the language of the statute to deny the sanctions under these circumstances.

The Court of Appeals disagreed finding the mandatory sanction can only be excused for demonstrated “financial” hardship. Further the arbitration scheme contemplates that the trial on appeal may involve new facts and new legal arguments. There are no rules or court decisions that prohibit this. Late disclosure of evidence carries with it the potential for discovery and disclosure sanctions which could have been sought here. Blocking the mandatory application of arbitration statute sanctions is not one of them.

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