Compulsory Arbitration Attorneys' Fees Award Sanction

Plaintiff sued the defendant for injuries suffered in an auto accident. The defendant served a $9,501 (including taxable costs) offer of judgment (Rule 68(f))upon the plaintiff which was not accepted. Plaintiff was later awarded $12,000 plus $374.01 in taxable costs in compulsory arbitration. The defendant then appealed to superior court where in a trial de novo the jury awarded plaintiff $8,604. The trial court added $946.10 in taxable costs. The trial court then determined that under rule 77(f) of the Arizona Rules of Civil Procedure the defendant had failed to beat the arbitration award by 23% or more and awarded plaintiff an additional $8,784 in attorneys' fees as a sanction. Finally, the trial court awarded the defendant $572 in rule 68(f) sanctions. The defendant appealed and the Arizona Court of Appeals affirmed.

On appeal the defendant argued that the trial court should have deducted the rule 68(f) sanctions before awarding the rule 77(f) sanctions. Had this been done defendant would have beat the 23% requirement and plaintiff would not be entitled to the rule 77(f) sanctions. The court of appeals noted that both rules 77 and 68 were enacted to encourage settlement and avoid needless litigation. Rule 68(f) states "the determination whether a sanction should be imposed after an arbitration hearing should be made by reference to the judgment ultimately entered whether on the award . . . or after an appeal of an award pursuant to rule 77." The court found that first awarding rule 77(f) sanctions results in an apples to apples comparison (offer of judgment to judgment) and not an apples to oranges (offer of judgment to pre-sanction award) comparison and best serves the purpose of both rules.

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