Laurence v. Salt River Project Agricultural Improvement & Power District, No. CV-21-0292-PR (April 28,  2023) (J. Timmer) https://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2023/CV210292PR.pdf

WHERE TORT CLAIM AGAINST EMPLOYEE IS DISMISSED FOR REASONS UNRELATED TO MERITS OF CASE RESPONDEAT SUPERIOR CLAIM AGAINST EMPLOYER IS STILL VALID/CONVERSELY WHERE EMPLOYEE IS DISMISSED BECAUSE CLAIM AGAINST EMPLOYEE LACKS MERIT RESPONDEAT SUPERIOR CLAIM AGAINST EMPLOYER ALSO FAILS

Plaintiffs father and son were involved in a car accident where they claimed the defendant Salt River Project Agricultural Improvement & Power District's [SRP] driver's negligence caused them injury.  SRP is a political subdivision of the State and as such was timely served with a Notice of Claim  (A.R.S. § 12-821.01). The employee driver was not. Plaintiffs sued the driver and SRP. The father's claim against the driver was dismissed on summary judgment due to failure to timely serve that driver with a Notice of Claim. The son's claim survived as he was still a minor and not required to serve a Notice of Claim until 180 days after reaching majority.  SRP then moved for partial summary judgment on the father's claim based upon the holding in DeGraff v. Smith, 62 Ariz. 261 (1945)—dismissal of the employee with prejudice eliminates respondeat superior claim against employer.  The trial court granted the motion. The Arizona Court of Appeals affirmed. The Arizona Supreme Court reversed and remanded the court of appeals decision and vacated the decision of the trial court.

The Arizona Supreme Court set forth five reasons to support the following holding:

If the claim against the employee was dismissed for lacking

merit, the court must also dismiss the respondeat superior

claim. But if the claim against the employee was dismissed

for reasons unrelated to its merits, the respondeat superior

claim remains viable. In arriving at this answer, we overrule in

substantial part DeGraff v. Smith, 62 Ariz. 261 (1945).1

First, the court found that DeGraff was wrongly decided because its holding was based upon the assumption that a dismissal with prejudice is always an adjudication on the merits. It is not. As here, the defendant driver was dismissed on the procedural failure to timely serve a Notice of Claim, not upon a finding the driver was not negligent.

Second, DeGraff has already been abrogated in part in Kopp v. Physician Group of Arizona, Inc., 244 Ariz. 439 (2018) where our supreme court held a settlement with the doctor in a medical negligence claim resulting in a dismissal with prejudice of the doctor did not bar claims against the defendant hospital for its independent negligence.

Third, DeGraff conflicts with existing case law and an Arizona statute (A.R.S. § 12-2506(D)(2)) which recognize that an employer is vicariously liable for its employees “tortious acts, not the employee's adjudicated liability.”

Fourth, DeGraff conflicts with the principal that employers sued under a theory of respondeat superior cannot assert defenses personal to the employee.

Fifth, DeGraff violates the public policy of putting procedural rules ahead of substantive rights. “But because persons and entities do not rely on procedural rules to know their substantive rights and order their affairs accordingly, overruling DeGraff and its progeny will not disrupt any ongoing or future private or governmental affairs.”

Justice Montgomery wrote a concurring opinion and Justices Lopez, Beene and Keene dissented.