Notice of Claim Deadline Tolled Until Failure of Mediation

Standard Constr. Co. Inc. v. State, No. 1 CA-CV 19-0411 (App. Div. I, September 3, 2020) (J. Swann) https://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2019-0411.pdf

WHERE PARTIES ARE CONTRACTUALLY OBLIGATED TO SUBMIT TO ALTERNATIVE DISPUTE RESOLUTION NOC DEADLINE IS TOLLED UNTIL ADR PROCEDURE IS “EXHAUSTED”

Contractor sues City of Glendale for breach of contract. Before suit contractor exercises his unilateral right to require both parties participate in nonbinding mediation. The mediation failed. Contractor serves a notice of claim [NOC} withing 180 days of the conclusion of the failed mediation and files suit within the one year statute of limitations. The City moved to dismiss under Rule 12(b)(6) “Failure to State a Claim” Ariz. R. Civ. Pro. arguing the NOC deadline ran from the date the State Engineer denied the Contractor's claim. Contractor appeals and the Arizona Court of Appeals reverses and remands.

Accrual  is delayed,  however,  when  the parties  are  contractually  obligated  to submit to non-judicial  dispute resolution processes—A.R.S. §12-821.01(C) provides that “any claim  that must  be  submitted  to a  binding or nonbinding dispute resolution process or an administrative claims  process  or  review process pursuant  to   a . . . contractual   term   shall   not   accrue . . . until all such procedures, processes or remedies have been exhausted” and  “a  final decision or notice of disposition is issued in [the] alternative dispute resolution procedure, administrative claim process or review process,” or until such later time as the parties may agree .This  tolling  provision recognize[s]  the  tension  between  the  purposes  of  alternative  dispute resolution  procedures  and  the  time  limits  of  claims  statutes,  and . . . preserve[s] the public policies inherent in both.”  Tolling  ensures  that  the parties' opportunity to engage in the alternative dispute resolution process is  meaningful, which advances our state's strong public policy of encouraging  settlement.