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SUPREME COURT OF ARIZONA

En Banc

KIERA LANE, )

)

) Arizona Supreme Court

Plaintiff-Appellee, ) No. CV-01-0142-PR

)

v. ) Court of Appeals

) Division One

THE CITY OF TEMPE and DANIEL ) No. 1 CA-CV 99-0445

G. SERRANO and GWEN SERRANO, )

husband and wife, ) Maricopa County Superior Court

) No. CV 98-90924

)

Defendants-Appellants. ) OPINION

)

______________________________)

Appeal from Superior Court of Maricopa County

The Honorable Robert H. Oberbillig, Judge

REVERSED AND REMANDED

_________________________________________________________________

Opinion of the Court of Appeals, Division One

199 Ariz. 370, 18 P.3d 164 (App. 2001)

VACATED

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Law Offices of John Evans, P.C. Scottsdale

By: John Evans

Attorney for Appellee

C. Brad Woodford, Tempe City Attorney Tempe

By: Clifford L. Mattice, Assistant City Attorney

Attorney for Appellants

Van O’Steen and Partners Phoenix

By: Stephen I. Leshner

and

The Langerman Law Offices

By: Amy G. Langerman

Attorneys for Amicus Curiae Arizona Trial Lawyers Association

_________________________________________________________________

Z L A K E T, Justice

¶1 Kiera Lane filed a negligence claim against the City of
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Tempe and its employee, Daniel Serrano, for damages arising out of

an automobile accident. The only theory of liability against the

City was respondeat superior. See Driscoll v. Harmon, 124 Ariz.

15, 16, 601 P.2d 1051, 1052 (1979)(“[T]he act of an employee during

the course of his employment is legally the act of the employer.”).

Both the municipality and Serrano were represented by the same

assistant city attorney.

¶2 Pursuant to Arizona Revised Statutes section 12-133, the

case was referred to mandatory arbitration. The defendants filed

a disclosure statement and answered interrogatories. Serrano was

also deposed by the plaintiff. The parties filed a joint prehearing statement in which Lane indicated that she intended to call

Serrano as a witness at the arbitration hearing. His absence, she

asserted in the statement, would be construed as a waiver of the

right to appeal. In the same pleading, the defendants specifically

objected to this contention.

¶3 On the date of the hearing, Serrano was no longer

employed by the City of Tempe. Although his counsel had advised

him to be present, Serrano did not attend. No one had subpoenaed

him. When it became obvious that he was not going to show, neither

side requested a continuance to secure Serrano’s presence at the

hearing. His attorney actively participated in the case and

several other city employees testified in person.

¶4 The arbitrator ultimately found Serrano to be 100% at
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fault and awarded the plaintiff $16,858 in damages. When the

defendants filed a notice of appeal requesting a trial de novo,

Lane moved to strike the pleading. She argued that Serrano’s

nonappearance at the hearing had waived the defendants’ right to

appeal. Lane’s motion was granted by the superior court as to

Serrano, but denied as to the City. The court thereafter entered

a formal judgment against Serrano. The court of appeals affirmed

this ruling, holding that Serrano had not appeared and participated

as required by Rule 76 (a) of the Arizona Rules of Civil Procedure.

¶5 We have jurisdiction pursuant to article VI, section 5(3)

of the Arizona Constitution; Arizona Revised Statutes section 12-

120.24; and Rule 23 of the Arizona Rules of Civil Appellate

Procedure.

DISCUSSION

¶6 The superior court is required by statute to establish a

jurisdictional limit, not exceeding fifty thousand dollars, and to

formulate procedural rules for the compulsory arbitration of civil

claims in Arizona. A.R.S. § 12-133 (A) (Supp. 2001). Because

“something short of a full-blown adversary adjudicatory proceeding

is a more efficient and cost-effective way of resolving such

disputes,” Martinez v. Binsfield, 196 Ariz. 466, 467, 999 P.2d 810,

811, ¶ 3 (2000), we have fully supported this alternative

mechanism.

¶7 The arbitration rules have evolved over time, primarily
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in response to perceived weaknesses. For example, in Chevron v.

Thompson, 145 Ariz. 85, 699 P.2d 1316 (App. 1985), the court of

appeals identified a serious flaw in the process. Chevron filed a

contract action which was referred for mandatory arbitration, but

neither the company nor its counsel appeared at the subsequent

hearing. Chevron thereafter appealed from an adverse arbitration

award, seeking a trial de novo. The superior court dismissed the

appeal. The court of appeals reversed, reluctantly observing that

the arbitration rules permitted Chevron’s maneuver. It stated:

Although we agree with the trial judge that apparently

any party can circumvent the mandatory arbitration

procedure by failing to attend the hearing and then file

a notice of appeal, we have no authority to prevent such

circumvention. . . . We urge [the legislature and supreme

court] to provide safeguards to prevent future violations

of the spirit of the arbitration laws.

Id. at 86, 699 P.2d at 1317.

¶8 In 1990 and 1991, the rules were amended to address this

and other apparent deficiencies. There was increasing concern, for

example, that appeals from arbitration awards were frequently used

“to delay proceedings and extort settlements.” Hon. Robert D.

Myers, MAD Track: An Experiment in Terror, 25 Ariz. St. L.J. 11,

14 (1993). Moreover, the purposeful failure of attorneys and their

clients to actively participate in arbitration hearings, relying

instead on their appeal rights to secure a trial de novo, plainly

resulted in a significant waste of resources.

¶9 Arbitration Rule 7(f), now Rule 76(f) of the Arizona
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Rules of Civil Procedure, was changed to require the filing of a

deposit on appeal that would be forfeited by the appellant if the

ensuing judgment was not at least 10% more favorable than the

arbitration award. See Rule 7(f), Uniform Rules of Procedure for

Arbitration (2000). More recently, the 10% threshold has been

raised to 25%. See Rule 76(f), Ariz. R. Civ. Pro. (2002).

¶10 Arbitration Rule 7(a), now Rule 76(a) of the Arizona

Rules of Civil Procedure, was amended to prevent the situation that

arose in Chevron. The rule states: “Any party who appears and

participates in the arbitration proceedings may appeal from the

award or other final disposition . . . .” Rule 76(a), Ariz. R.

Civ. P. (2002)(emphasis added); see also Rule 7(a), Uniform Rules

of Procedure for Arbitration, State Bar Committee’s Note

(2000)(stating that “only a party who actually appears and

participates in the arbitration proceedings may take an appeal”).

¶11 Coupled with this was a change in the language of Rule

4(j), now Rule 74(k) of the Arizona Rules of Civil Procedure, to

provide that “[f]ailure to appear at a hearing or to participate in

good faith at a hearing... shall constitute a waiver of the

right to appeal absent a showing of good cause.” Rule 74(k), Ariz.

R. Civ. Pro. (2002). These modifications were designed to

facilitate the primary goal of arbitration–-a reduction of costs

and delay associated with litigating smaller controversies.

¶12 The requirements of Rule 76(a) were addressed by the
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court of appeals in Graf v. Whitaker, 192 Ariz. 403, 966 P.2d 1007

(App. 1998). In that case, Whitaker repeatedly failed to attend

her deposition. As a sanction, she was defaulted on liability.

Id. at 404, 966 P.2d at 1008, ¶ 2. This left only damages to be

decided at the arbitration hearing. Although her attorney attended

the hearing, Whitaker did not. Id. Her failure to appear was later

construed by the superior court as a waiver of the right to appeal.

Id. at 405, 966 P.2d at 1009, ¶ 4.

¶13 In reviewing that decision, the court of appeals

correctly interpreted Uniform Rules 7(a) and 4(j) “in harmony to

require more than minimal participation in arbitration proceedings;

both require a party to participate in good faith in order to

satisfy the spirit of the arbitration laws.” Id. at 407-08, 966

P.2d at 1011-12, ¶ 18. However, it wisely remanded the matter for

reconsideration because

Graf has not claimed, nor does the record indicate,

that Whitaker had relevant testimony to offer at the

damage hearing; nor has Graf claimed, nor does the record

indicate, that Whitaker obstructed the conduct of the

damage hearing to any degree by failing to accompany her

lawyer to that hearing. In the absence of any showing

that Whitaker did not adequately participate in the

damage hearing through an appearance by counsel, we

cannot agree that her absence from the damage hearing was

properly considered by the superior court in deciding

whether she had violated Uniform Rule 7(a).

Id. at 408, 966 P.2d at 1012, ¶ 20 (emphasis added).

¶14 Lane argues that Graf is distinguishable because the

hearing in that case concerned only damages. Here, she claims,
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Serrano had relevant liability testimony to give and should have

been subject to cross-examination. The record shows, however, that

Serrano gave a deposition before the hearing, and Lane had the

opportunity to examine him at that time. Serrano also answered

interrogatories and filed a Rule 26.1 disclosure statement.

Finally, his counsel appeared at the hearing, called several city

employees to testify, and argued the case. Under Rule 76(a), any

party who participates in arbitration proceedings has a right to

appeal. Serrano clearly participated throughout much of the

process.

¶15 Lane argues, however, that Rule 74(k) deals with a

party’s failure to personally appear at the arbitration hearing,

and compels the result reached here by the superior court and the

court of appeals. We do not agree. The language of Rule 74(k) is

not specifically limited to the parties themselves. Moreover,

Lane’s argument hinges on an unreasonably restrictive definition of

the word “appearance,” something akin to “physically being there.”

Appearance, however, is a term of art in the law. Not only can it

denote a party being physically present in court, it also refers to

“[a] coming into court . . . as a lawyer on behalf of a party.”

See Black’s Law Dictionary (7th ed. 1999). Lawyers have been

making appearances on behalf of clients from the earliest days of

the profession.

¶16 In most cases, what constitutes good faith participation
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is a matter of fairness and common sense. There can be no rigid

test. For instance, in Sabori v. Kuhn, 199 Ariz. 330, 18 P.3d 124

(App. 2001), the defendant, who resided outside of Arizona, failed

to personally appear for an arbitration hearing. Unlike the

present case, he had not been deposed, nor had he answered

interrogatories. He tried to participate by telephone, but the

arbitrator refused to permit it. Even though the court of appeals

agreed “that when a party to an accident contests liability and has

relevant first-hand testimony to offer on the subject, that party

must make himself available for cross-examination at the

arbitration hearing, unless mutually satisfactory alternative

arrangements have been made,” it held that the defendant had not

waived the right of appeal because his counsel had appeared and

participated at the hearing, and the defendant had made a good

faith effort to do so, albeit by telephone. Id. at 332, 18 P.3d at

126, ¶¶ 9-10.

¶17 We do not hold today that the physical appearance of a

party at an arbitration hearing is never required to satisfy Rule

74(k). It is not our intention to turn the clock back to a time

before Chevron, when parties and their attorneys failed to attend

hearings at all, or simply put on de minimus cases. A good faith

effort at appropriate participation is a factual determination to

be made on a case-by-case basis. In some situations, a personal

appearance may be necessary. This, however, is not one of those
1 Lane’s contention that formal service of process would

undermine the goals of the arbitration scheme by creating added

delay and expense is exaggerated. We do not believe that it will

or should be necessary to subpoena parties very often, assuming

attorneys act like professionals, discuss hearings in advance,

and agree to cooperate in the presentation of witnesses and other

evidence.

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instances.

¶18 Lane’s argument that she was unable to receive a fair

hearing because of a denial of cross-examination falls far short of

the mark. Completed discovery should have provided her with the

information needed from Serrano. She had his deposition testimony

and answers to interrogatories. She also had a disclosure

statement from him. With all of this in hand, Lane was able to win

the case in front of the arbitrator. We fail to see what more she

would have gained by cross-examining Serrano again, and she has not

shown us how his presence would have made a significant difference

in either the conduct of the proceedings or their outcome.

¶19 Finally, we note that both sides had an equal chance to

secure Serrano’s appearance at the hearing. It is significant that

neither party subpoenaed him or moved for a continuance when his

absence became apparent. The issuance of subpoenas is expressly

authorized in arbitration proceedings. See Rule 74(c), Ariz. R.

Civ. Pro. (2001).1

¶20 Lane contends that the joint pre-hearing statement gave

Serrano and the City of Tempe specific notice of her desire to call

him as a witness, and warned of the consequences if he failed to
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appear. The defendants claim that this “notice” was nothing more

than a tactic, an attempt to transform the proceeding into a

binding arbitration. This finger pointing is not helpful. What

seems clear is that the plaintiff had no pre-hearing commitment

from the defense to produce Serrano. Thus, she should have taken

independent steps to secure his presence. See Merryman v. Sears,

50 Ariz. 412, 415, 72 P.2d 943, 944 (1937)(“[I]f one expects to

make a witness of an adversary, he should take proper measures by

subpoena, or interrogatories, as the case may require, to procure

such testimony.”).

CONCLUSION

¶21 Serrano adequately participated in the proceedings and

appeared at the hearing through counsel. We find that he did not

waive his right to appeal the arbitration award. The decision of

the court of appeals is vacated, and the matter is remanded to the

superior court for a trial de novo.

_______________________________

THOMAS A. ZLAKET, Justice

CONCURRING:

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CHARLES E. JONES, Chief Justice
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RUTH V. MCGREGOR, Vice Chief Justice

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STANLEY G. FELDMAN, Justice