SUPREME COURT OF ARIZONA 

En Banc 

4501 NORTHPOINT LP, a limited ) 

partnership, ) Arizona Supreme Court 

 ) No. CV-05-0124-PR 

 Plaintiff-Appellant, ) 

 ) Court of Appeals 

 v. ) Division One 

 ) No. 1 CA-TX 02-0027 

MARICOPA COUNTY, ) 

 ) Arizona Tax Court 

 Defendant-Appellee. ) No. TX99-000408 

 ) 

__________________________________) O P I N I O N 

Appeal from the Arizona Tax Court 

The Honorable Paul A. Katz, Judge 

REMANDED 

Opinion of the Court of Appeals, Division One 

209 Ariz. 569, 105 P.3d 1188 (App. 2005) 

VACATED 

FENNEMORE CRAIG, P.C. Phoenix 

 By Paul J. Mooney 

 Jim L. Wright 

 Paul Moore 

Attorneys for 4501 Northpoint LP 

ANDREW THOMAS, MARICOPA COUNTY ATTORNEY Phoenix 

By Richard W. Garnett 

Attorneys for Maricopa County 

 

B A L E S, Justice 

¶1 Section 12-348(B) of the Arizona Revised Statutes 

(“A.R.S.”) (2003) authorizes an award of attorneys’ fees to a 

taxpayer who “prevails by an adjudication on the merits” in an 
2

action challenging the assessment or collection of taxes. In 

this case, we hold that a taxpayer who accepts an offer of 

judgment in the taxpayer’s favor under Rule 68 of the Arizona 

Rules of Civil Procedure has prevailed by an adjudication on the 

merits and is therefore eligible for a fee award under § 12-

348(B). 

I. 

¶2 For purposes of property tax valuation, Maricopa 

County set the full cash value of a theater complex owned by 

4501 Northpoint LP (“Northpoint”) at $13,597,923 for the 2000 

tax year. Northpoint challenged this assessment by filing an 

action in the tax court. Less than two months before the 

scheduled trial, the County made a settlement offer to reduce 

the valuation to $12,000,000, but Northpoint rejected this 

offer. The parties continued pre-trial discovery. 

¶3 When the trial was slightly more than a month away, 

the County made Northpoint an offer of judgment pursuant to Rule 

68. The County offered to reduce the full cash value to 

$12,000,000 and to pay Northpoint’s costs but not attorneys’ 

fees. 

¶4 Rule 68 allows either party to serve upon the adverse 

party an offer to allow judgment to be entered in accordance 

with the terms of the offer. Ariz. R. Civ. P. 68(a). If the 

offeree accepts the offer, the court will subsequently enter a 
3

corresponding judgment. Id. 68(b). If the offeree rejects the 

offer and does not later obtain a more favorable judgment in the 

case, the offeree must pay sanctions to the offeror. Id. 68(d). 

These sanctions include reasonable expert witness fees and 

double the taxable costs incurred by the offeror after making 

the offer, as well as post-offer prejudgment interest on 

unliquidated claims. Id. 

¶5 Special procedures apply if, as in this case, the 

action involves a claim for attorneys’ fees. In that event, 

Rule 68(c)(1) directs that the offer shall set forth separately 

the amount of any monetary award to be made on the asserted 

causes of action and the amount of attorneys’ fees to be awarded 

if the offer is accepted. The offeree then has three options: 

1) reject the offer, 2) fully accept the offer, or 3) partially 

accept the offer as it concerns the monetary award on the causes 

of action while reserving the right to apply to the court for a 

determination of the amount of attorneys’ fees, if any, to be 

awarded. Id. 68(c)(2), (3). After the court determines the fee 

issue, judgment is entered reflecting that determination along 

with the parties’ agreed upon monetary award. Id. 68(c)(3). 

¶6 Pursuant to Rule 68(c)(3), Northpoint partially 

accepted the County’s offer of judgment. Northpoint accepted 

the offer insofar as the County agreed to reduce the full cash 

value of the property to $12,000,000, and Northpoint applied to 
4

the court for attorneys’ fees under A.R.S. §§ 12-348(B) and 12-

349 (providing for fee awards for unjustified actions). The 

County opposed any award to Northpoint and also sought an award 

of fees it incurred after its initial settlement offer or, 

alternatively, an award under § 12-349 for fees incurred in 

responding to Northpoint’s fee request. 

¶7 The tax court ruled that Northpoint’s acceptance of 

the County’s Rule 68 offer of judgment was not an adjudication 

on the merits. Accordingly, Northpoint could not recover fees 

under § 12-348(B). The tax court also denied each party’s 

request for a fee award under § 12-349. 

¶8 Northpoint appealed the denial of fees under § 12-

348(B). A divided panel of the court of appeals affirmed, 

stating that entry of a judgment pursuant to Rule 68 does not 

reflect any substantive determination of issues by the trial 

court and therefore is not an adjudication on the merits that 

allows a fee award under § 12-348(B). 4501 Northpoint LP v. 

Maricopa County, 209 Ariz. 569, 574, ¶ 17, 105 P.3d 1188, 1193 

(App. 2005). In dissent, Judge Winthrop noted that Northpoint 

had achieved substantive relief in its favor through the Rule 68 

judgment, which sufficed to make Northpoint eligible for a 

discretionary fee award under § 12-348(B). Id. at 574-76, ¶¶ 

20-27, 105 P.3d at 1193-95. 

¶9 Because the meaning of the phrase “prevails by an 
5

adjudication on the merits” as used in § 12-348(B) is an issue 

of statewide importance and “no Arizona decision controls the 

point of law in question,” we granted Northpoint’s petition for 

review. ARCAP 23(c)(3). We have jurisdiction pursuant to 

Article 6, Section 5(3), of the Arizona Constitution and A.R.S. 

§ 12-102. The issue is one of statutory construction and is 

reviewed de novo. City of Tucson v. Clear Channel Outdoor, Inc., 

209 Ariz. 544, 547, ¶ 8, 105 P.3d 1163, 1166 (2005). 

II. 

¶10 In A.R.S. § 12-348, the legislature has authorized 

courts to award attorneys’ fees and other expenses to certain 

parties who prevail by an adjudication on the merits in 

specified proceedings against the State or a city, town, or 

county. At issue here is § 12-348(B)(1), which provides as 

follows: 

In addition to any costs which are awarded 

as prescribed by statute, a court may award 

fees and other expenses to any party, other 

than this state or a city, town or county, 

which prevails by an adjudication on the 

merits in an action brought by the party 

against this state or a city, town or county 

challenging: 

1. The assessment or collection of taxes or 

in an action brought by this state or a 

city, town or county against the party to 

enforce the assessment or collection of 

taxes. 

¶11 Another subsection of § 12-348 provides that courts 
6

shall award fees and expenses to non-governmental parties who 

prevail “by an adjudication on the merits” in particular actions 

involving public entities. See A.R.S. § 12-348(A)(1)-(6).1 

¶12 The phrase “prevails by an adjudication on the merits” 

is not defined in § 12-348. Nor is it defined in other statutes 

in which it is used. See, e.g., A.R.S. §§ 6-131 (authorizing 

fee awards to state banking department), 12-2030 (authorizing 

fee awards to prevailing non-governmental parties in mandamus 

actions), 49-471.01 (authorizing fee awards to persons who 

prevail in court actions against counties regarding air 

pollution regulations). 

¶13 Our prior decisions, however, offer some guidance on 

the proper interpretation of § 12-348. We have recognized that 

the statute reflects an express legislative intent “to reduce 

the economic deterrents individuals faced in contesting 

government actions, magnified by the disparity between the 

resources and expertise of the government and individuals.” 

Wilderness World, Inc. v. Dep’t of Revenue, 182 Ariz. 196, 202, 

895 P.2d 108, 114 (1995) (quoting Ariz. Tax Research Ass’n v. 

Dep’t of Revenue, 163 Ariz. 255, 258, 787 P.2d 1051, 1054 

 

1 Such actions include the defense of civil actions, court 

proceedings to review state agency decisions, declaratory 

judgment actions regarding state rulemaking, special actions 

brought to challenge an action by the State against the party, 

judicial appeals by the State from personnel board decisions, and 

civil actions brought by the party to challenge the seizure of 

personal property. A.R.S. § 12-348(A)(1)-(6). 
7

(1989)). Accordingly, “[c]ompelling policy reasons” indicate 

that fees generally should be awarded under § 12-348(B) when 

taxpayers successfully challenge the government’s wrongful 

imposition of taxes. Id. 

¶14 We also have held that a party, in order to “prevail” 

by an adjudication on the merits, must secure a final resolution 

of the case in the party’s favor. Scottsdale Healthcare, Inc. 

v. Ariz. Health Care Cost Containment Sys. Admin., 206 Ariz. 1, 

8-9, ¶ 29, 75 P.3d 91, 98-99 (2003) (denying fee request as 

premature under § 12-348(A)(2) for parties who obtained remand 

for further trial court proceedings). A party does not prevail 

in this sense merely by obtaining interim or interlocutory 

relief in a case in which further proceedings are necessary. 

See id. 

¶15 The County does not dispute that Northpoint has 

obtained a favorable final judgment, but nevertheless argues 

that it has not prevailed “by an adjudication on the merits.” 

The term “adjudication” is generally used to refer both to the 

legal process of resolving a case and to a judgment. Black’s 

Law Dictionary 45 (8th ed. 2004). The term “adjudication” thus 

encompasses the entry of a judgment that determines claims in a 

case, but “adjudication” does not necessarily mean that this 

determination must follow a trial or even a hearing. Cf. Ariz. 

R. Civ. P. 54(b) (noting that an order or decree that 
8

“adjudicates fewer than all of the claims or the rights and 

liabilities of fewer than all the parties” is subject to 

revision absent Rule 54(b) certification). 

¶16 Outside of the context of § 12-348, courts often 

describe a judgment as being “on the merits” if it finally 

resolves an action in a manner that precludes later relitigation 

of the claims involved. See, e.g., Gould v. Soto, 14 Ariz. 558, 

561-62, 133 P. 410, 411-12 (1913); Restatement (Second) of 

Judgments (“Restatement”) § 19 cmt. a (1982). Such a judgment 

may result from an actual trial on the substantive issues but it 

need not do so. Restatement § 19 cmt. a.2

¶17 A judgment may also be “on the merits” and thus have 

claim preclusive effect when it results from the stipulation of 

the parties, see Suttle v. Seely, 94 Ariz. 161, 163-64, 382 P.2d 

570, 572 (1963), or various pre-trial rulings. E.g., Union 

Interchange, Inc. v. Van Aalsburg, 102 Ariz. 461, 464, 432 P.2d 

589, 592 (1967) (noting that summary judgment is a judgment on 

the merits and a bar to a later suit on the same cause of 

action); Roden v. Roden, 29 Ariz. 549, 553, 243 P. 413, 415 

(1926) (observing that “[a] judgment of dismissal ‘with 

 

2 The Restatement (First) of Judgments §§ 48, 49 (1942) 

provided that judgments rendered “on the merits” would have claim 

preclusive effect and identified such judgments as based on 

substantive law rather than merely on rules of procedure. 

Because the phrase “on the merits” now may refer to judgments 

that bar the relitigation of a claim while not directly passing 

on its substance, the Restatement has abandoned the phrase as 

“possibly misleading.” Restatement § 19 cmt. a. 
9

prejudice’ is the same as a judgment for defendant upon the 

merits, and, of course, is res judicata as to every matter 

litigated”) (citation omitted); In re Forfeiture of $3,000.00 

U.S. Currency, 164 Ariz. 120, 121, 791 P.2d 646, 647 (App. 1990) 

(holding that involuntary dismissal on substantive grounds was 

“on the merits” for purposes of A.R.S. § 12-504). 

¶18 It makes sense to interpret “adjudication on the 

merits” as used in § 12-348 to similarly include judgments that 

finally determine the claims involved. After all, a party that 

obtains a judgment in its favor that bars relitigation by an 

opposing governmental party has, in substance, won on the merits, 

whether or not the judgment has followed a full trial. Reading 

“adjudication on the merits” more narrowly would, by denying 

fees to taxpayers who have successfully challenged the 

imposition of taxes, unduly “penalize[] [the taxpayer] for 

winning.” Wilderness World, Inc., 182 Ariz. at 202, 895 P.2d at 

114. 

III.

¶19 We next consider if a judgment entered pursuant to 

Rule 68 is an “adjudication on the merits.” By making a Rule 68 

offer, the County agreed to allow judgment to be entered against 

it determining that the cash valuation of the property was 

$12,000,000 for the 2000 tax year and that the taxpayer was 

entitled to a refund of excess taxes paid on the challenged 
10

higher valuation. The judgment entered after Northpoint 

accepted the offer would, under ordinary principles of claim 

preclusion, prevent either Northpoint or the County from 

relitigating the claims involved. See Restatement § 18 

(discussing how plaintiff’s original claim “merges” into 

judgment in his favor and defendant cannot later avail himself 

of defenses that might have been raised in original action); see 

also Hanley v. Mazda Motor Corp., 609 N.W.2d 203, 208 (Mich. Ct. 

App. 2000) (holding that Rule 68 judgment functions as an 

adjudication on the merits for purposes of claim preclusion). 

¶20 We hold that because a Rule 68 judgment in the 

taxpayer’s favor is a final resolution that is binding on the 

County, it is an “adjudication on the merits” for purposes of 

§ 12-348. The court of appeals, however, interpreted § 12-348 

as allowing a fee award only if the court enters a judgment 

based on the court’s consideration of evidence or the substance 

of the claims involved. In reaching this conclusion, the court 

of appeals noted that § 12-348 allows fees for taxpayers who 

prevail by an adjudication and this statute, unlike A.R.S. § 12-

341.01, does not allow a fee award merely because a party is 

“successful.” 4501 Northpoint, 209 Ariz. at 571-72, ¶¶ 7-8, 105 

P.3d at 1190-91. 

¶21 The cases principally relied on by the court of 

appeals, however, simply recognize that a party is not eligible 
11

for a fee award under § 12-348 merely because the party has 

prevailed in obtaining interim or interlocutory relief. See 

Columbia Parcar Corp. v. Ariz. Dep’t of Transp., 193 Ariz. 181, 

185, ¶¶ 20-21, 971 P.2d 1042, 1046 (App. 1999) (holding 

plaintiff ineligible for fee award based on trial court ruling 

that remanded matter for further administrative hearings); State 

ex rel. Corbin v. Challenge, Inc., 151 Ariz. 20, 28, 725 P.2d 

727, 735 (App. 1986) (denying fee request as premature where 

party obtained reversal of summary judgment on appeal and case 

was remanded for further proceedings). In this respect, § 12-

348 differs from § 12-341.01, which allows, in some 

circumstances, fee awards to parties that are “successful” in 

obtaining interim relief. Wagenseller v. Scottsdale Mem’l 

Hosp., 147 Ariz. 370, 393-94, 710 P.2d 1025, 1048-49 (1985) 

(allowing fee award under § 12-341.01 for interlocutory appeal 

that “finally determine[d] an issue of law sufficiently 

significant that the appeal may be considered as a separate 

unit”). 

¶22 The Columbia Parcar and Challenge, Inc. opinions 

illustrate that fees should not be allowed under § 12-348(B) 

based on an interim decision because either party could still 

ultimately prevail on the merits. This proposition is not 

inconsistent, however, with reading § 12-348(B) to allow fees 

based on a Rule 68 judgment, which is a final resolution of the 
12

merits of the action, not an interim decision. 

¶23 The County, like the court of appeals, also notes that 

entry of a Rule 68 judgment does not reflect any determination 

by the court on the substance of issues, but instead simply 

reflects the court’s perfunctory act performed pursuant to the 

parties’ agreement. The fact that a Rule 68 judgment is entered 

as a result of the parties’ agreement, however, does not make it 

any less of an adjudication on the merits. 

¶24 A Rule 68 judgment is entered by the court; it ends 

the case on its merits and represents a legally enforceable 

change in the parties’ relationship. See Hanley, 609 N.W.2d at 

208 (“[A]n offer of judgment more nearly emulates a judgment 

after trial rather than a form of settlement.”); see also 

Wimbledon Townhouse Condo. I Ass’n v. Kessler, 425 So. 2d 29, 30 

(Fla. Dist. Ct. App. 1983) (a Rule 68 judgment “end[s] the 

dispute on the merits”); Fleet v. Sanguine, Ltd., 854 P.2d 892, 

898 & n.32 (Okla. 1993) (“[T]he offer of judgment removes from 

judicial consideration all fact issues whose resolution is 

necessary to the judgment’s pronouncement. . . . The judgment 

that results is considered to be equivalent to a jury 

verdict.”). 

¶25 In this regard, the court of appeals erred in relying 

on Chaney Building Co. v. City of Tucson, 148 Ariz. 571, 716 

P.2d 28 (1986). That case held that the stipulated dismissal of 
13

one defendant from a lawsuit did not preclude the plaintiff from 

asserting, in the continuing litigation against another 

defendant, that the dismissed defendant had acted negligently. 

Id. at 573-74, 716 P.2d at 30-31. In noting that “nothing is 

adjudicated between parties to a stipulated dismissal,” Chaney 

merely recognized that issue preclusion applies only to issues 

that are actually litigated. Id. at 573, 716 P.2d at 30. 

¶26 Chaney illustrates an important difference between 

claim preclusion and issue preclusion. Under claim preclusion, 

a prior judgment “on the merits” bars a second suit on the same 

claim. Id. As noted above, a judgment can be “on the merits” 

for purposes of claim preclusion even if it results from the 

parties’ stipulation or certain pre-trial rulings by the court. 

See Suttle, 94 Ariz. at 163-64, 382 P.2d at 572 (holding that 

stipulated dismissal was claim preclusive). Issue preclusion, 

in contrast, applies only as to issues that have in fact been 

litigated and were essential to a prior judgment. Chaney, 148

Ariz. at 573, 716 P.2d at 30; see also Restatement § 27. Chaney 

is thus consistent with our conclusion that a judgment entered 

pursuant to Rule 68 has claim preclusive effect and reflects an 

“adjudication on the merits” for purposes of § 12-348(B). 

¶27 The County also argues that construing § 12-348(B) to 

allow fee awards based on a Rule 68 judgment would be contrary 

to public policy. This interpretation, the County argues, would 
14

both discourage taxing entities from making offers of judgment 

under Rule 68 and would encourage private parties to reject 

early settlement offers in the hope of recovering subsequently 

incurred fees. We do not find these arguments persuasive. 

¶28 When the County made its Rule 68 offer, it obviously 

sought to obtain the advantage of possibly recovering sanctions 

if Northpoint rejected the offer and did not do better at trial. 

By making the Rule 68 offer, the County also had to accept the 

downside of its possible acceptance: the entry of judgment in 

favor of the taxpayer. That a judgment entered under Rule 68 

has negative consequences for the offeror, including the 

assessment of costs under A.R.S. § 12-341 or potential exposure 

to a fee award under § 12-348, is not, in itself, inconsistent 

with the policies underlying Rule 68. If the County desired to 

avoid the potential downsides of a Rule 68 judgment, it could 

have made a settlement offer that excluded any fees rather than 

an offer of judgment. 

¶29 Accepting the County’s interpretation could, in fact, 

undercut the policies underlying both Rule 68 and § 12-348. If, 

as the County urges, a public entity is insulated from a fee 

award when it makes a Rule 68 offer, the taxpayer faces two 

options: 1) accept the offer and thereby forgo any potential fee 

recovery, a result that would be contrary to the “compelling 

policy” of generally awarding fees under § 12-348 to taxpayers 
15

who successfully challenge the wrongful imposition of taxes, or 

2) reject the offer in order to preserve the opportunity to 

recover fees and expenses after trial, a result that would be 

contrary to Rule 68’s goal of encouraging pre-trial settlement. 

¶30 Finally, we note that § 12-348 itself contains 

provisions that mitigate concerns that potential fee awards will 

either unduly discourage public entities from making Rule 68 

offers of judgment or encourage private parties to reject early 

settlements. A court may deny or reduce a fee award if, among 

other things, it finds that the prevailing party has unduly and 

unreasonably protracted the final resolution of the matter or 

has refused a settlement offer that is at least as favorable to 

the party as the relief ultimately granted. A.R.S. § 12-

348(C)(1), (3). Fee awards under § 12-348 are also subject to 

monetary limits, including the restriction that an award under 

§ 12-348(B) not exceed $30,000 for fees incurred at each level 

of judicial appeal. A.R.S. § 12-348(E)(5). 

III. 

¶31 Because we hold that a taxpayer who accepts a Rule 68 

offer of judgment in the taxpayer’s favor is eligible for a fee 

award under A.R.S. § 12-348(B), we vacate the opinion of the 

court of appeals and remand this case to the tax court for 

further proceedings consistent with this opinion. The tax court 

shall determine the extent, if any, to which Northpoint should 
16

be awarded fees and other expenses under A.R.S. § 12-348(B), 

(C), and (E) for proceedings before that court. Pursuant to 

ARCAP 21, we also grant Northpoint’s request for an award of 

attorneys’ fees incurred in this Court and the court of appeals. 

 ________________________________ 

 W. Scott Bales, Justice 

CONCURRING: 

_______________________________________ 

Ruth V. McGregor, Chief Justice 

_______________________________________ 

Rebecca White Berch, Vice Chief Justice 

_______________________________________ 

Michael D. Ryan, Justice 

_______________________________________ 

Andrew D. Hurwitz, Justice