Opinion ID: 1427555
Heading Depth: 3
Heading Rank: 2

Heading: Savings Statute

Text: Our discussion of the trial court's denial of relief under § 12-504 requires an overview of the history of the provision and its underlying purposes. A.R.S. § 12-504(A) provides as follows: A. If an action is commenced within the time limited for the action, and the action is terminated in any manner other than by abatement, voluntary dismissal, dismissal for lack of prosecution or a final judgment on the merits, the plaintiff, or a successor or personal representative, may commence a new action for the same cause after the expiration of the time so limited and within six months after such termination. If an action timely commenced is terminated by abatement, voluntary dismissal by order of the court or dismissal for lack of prosecution, the court in its discretion may provide a period for commencement of a new action for the same cause, although the time otherwise limited for commencement has expired. Such period shall not exceed six months from the date of termination. This provision was enacted in response to our call to the legislature in Hosogai v. Kadota, 145 Ariz. 227, 700 P.2d 1327 (1985), to enact a general savings statute. In Hosogai, the plaintiff filed a timely wrongful death action and obtained a jury verdict in her favor. That judgment was overturned on grounds of defective service of process and failure to obtain personal jurisdiction over the defendant, a resident of Japan. The plaintiff filed a second lawsuit which was dismissed because the statute of limitations had run. We reversed the dismissal and, in the absence of a savings statute, found that the statute of limitations equitably tolled. Hosogai is instructive because it discusses the equitable tolling doctrine from which the savings statute evolved. However, the statute goes further than Hosogai, providing automatic relief in cases like Hosogai, as well as discretionary relief where an action is terminated by abatement, voluntary dismissal by order of the court or dismissal for lack of prosecution. Neither the statute nor the legislative record relating to the provision, however, indicate what factors should be considered by trial courts in exercising that discretion. [1] The conflicting tests adopted by different departments of the court of appeals reflect the need for articulating such a standard. We note initially that the very nature of the discretionary portion of the provision requires a case-by-case application and evaluation. Any standard, therefore, must be flexible. Moreover, the standard must ensure that the statute is not misused as a safe haven for the dilatory and a loophole through which parties may avoid the applicable rules of practice and procedure. Additionally, the standard must serve the policies underlying the equitable tolling doctrine. Courts should consider whether the purposes of the statute of limitations are being served, even where a savings statute has been enacted. Professor William D. Ferguson, The Statutes of Limitation: Saving Statutes 58 (1978). In Hosogai, we noted that the primary policy underlying the statute of limitations is the protection of defendants and courts from litigation of stale claims where plaintiffs have slept on their rights and evidence may have been lost or witnesses' memories faded. 145 Ariz. at 232, 700 P.2d at 1332 ( quoting Brooks v. Southern Pacific Company, 105 Ariz. 442, 444, 466 P.2d 736, 738 (1970)). We found that the purposes of the statute of limitations are furthered where the statute is equitably tolled after consideration of the following criteria: (1) timely notice to the defendant in filing the first claim; (2) lack of prejudice to the defendant in gathering evidence to defend against the second claim; (3) reasonable and good faith conduct by the plaintiff in prosecuting the first action and diligence in filing the second action. 145 Ariz. at 233, 700 P.2d at 1333. [2] We consider the plaintiff's diligence important. The test applied by the court of appeals in Flynn accomplishes the purposes and promotes the policies of statutes of limitations by including diligence among the factors considered in determining whether to grant relief. Moreover, the Flynn test serves what we believe is the legislative purpose of the savings statute: to provide a limited extension to prevent injustice. Flynn, supra, 160 Ariz. at 192, 772 P.2d at 15 (emphasis in original). We quote with approval the standard adopted by the court in Flynn: A mere balancing of prejudice to each party should not constitute the sole factor considered by the trial court. Several factors must be considered in determining whether to permit a plaintiff to refile. The court should ascertain whether the plaintiff acted reasonably and in good faith, whether he prosecuted his case diligently and vigorously, whether a procedural impediment exists which affects his ability to file a second action, and whether either party will be substantially prejudiced.    The burden is on the plaintiff to present the particular circumstances that justify relief under § 12-504. 160 Ariz. at 192, 772 P.2d at 15 (emphasis added; citations omitted). In adopting the Flynn standard, we necessarily reject the standard utilized in Jepson. The Jepson court, in rejecting Flynn, noted that diligence is no longer the hallmark when relief is sought under the savings statute as opposed to Rule 60(c)(6). 160 Ariz. at 201, 772 P.2d at 24. Rather, the focus shifts from diligence to good faith and comparison of prejudice when a party already denied 60(c)(6) reinstatement seeks permission for refiling under § 12-504. Id. (emphasis in original). In granting relief on the facts in Jepson, the court of appeals focused primarily on the balancing of prejudice to the parties, and concluded that the defendants had shown no prejudice while the Jepsons showed the prejudice to them, the loss of their personal injury action, was great. In criticizing the standard articulated in Flynn, the Jepson court stated that [b]y conditioning savings statute relief upon a showing of diligent prosecution, they have blurred the issue of refiling under § 12-504 with the issue of reinstatement under Rule 60(c)(6). Id. Specifically, the court pointed out that if the plaintiff showed such diligence under the standard set forth in Gorman, Rule 60(c)(6) relief would be available; thus, where the plaintiff could not show sufficient diligence for Rule 60(c)(6) relief, the court stated, relief under A.R.S. § 12-504 would also be unavailable. We disagree. First, where the statute of limitations has run and the test focuses primarily upon a balancing of prejudices, there would be an automatic exercise of discretion in favor of the plaintiff. There can hardly be any prejudice greater than the complete loss of a cause of action. Even where the defendant would be greatly prejudiced, such as where evidence has been lost or witnesses are no longer available, the defendant may not have the opportunity to demonstrate the prejudice because the relief is often sought ex parte. Regardless of the reason for the termination of the action, therefore, relief would almost always be granted, rendering meaningless the legislature's distinction between the first sentence of paragraph A of § 12-504, and the second sentence of the paragraph. Second, the Flynn test does not blur the distinction between relief under Rule 60(c)(6) and relief under the savings statute, nor does our interpretation of the statute render it superfluous, redundant or trivial. The distinction between Rule 60(c)(6) and A.R.S. § 12-504 is readily discernible. The relief sought under the two provisions is entirely different. Under Rule 60(c), the litigant is seeking reinstatement of the prior lawsuit; the savings statute, however, allows commencement of an entirely new action. Also, 60(c) relief requires satisfaction of certain criteria that the statute does not. The provisions of Rule 60(c)(1) through (5) specify that the request for relief may be based on mistake, inadvertence, surprise or excusable neglect; newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial; fraud, misrepresentation or other misconduct of an adverse party; a void judgment; and, the fact that the judgment has been satisfied, released or discharged, or a prior judgment on which it is based has been reversed or otherwise vacated, or when it is no longer equitable to apply the judgment prospectively. Rule 60(c)(6) is a catchall, providing relief for any other reason justifying relief from the operation of the judgment. As we have stated, in order to obtain relief under Rule 60(c)(6), a party must show extraordinary circumstances of hardship or injustice. Davis v. Davis, supra . Where Rule 60(c)(6) relief is sought from a Rule V dismissal for lack of prosecution, the litigant must show that the cause was prosecuted vigorously and diligently, that reasonable steps were taken to inform the court of the status of the case, and that substantial prejudice will result unless relief is granted. Gorman, supra, 152 Ariz. at 183, 731 P.2d at 78. Where relief is sought under any of the provisions of Rule 60(c), the litigant must also establish that relief was sought promptly and that a meritorious claim or defense existed. Id. It is evident that the diligence necessary to obtain relief under Rule 60(c) should also be part of the standard for relief under the savings statute. First, as discussed above, it furthers the purposes of the statute of limitations and ensures that the savings statute is not abused by dilatory litigants. Second, we believe that a finding of diligence is implicit in the statute itself. The fact that discretionary as opposed to automatic relief is available where an action is terminated by abatement, voluntary dismissal or lack of prosecution is significant. To avoid each type of termination requires some measure of diligence. The legislature did not intend the savings statute to be used as a respite for the litigant whose neglect resulted in one of these specific kinds of terminations in the first place. Their distinctive feature is even more clearly illustrated by comparing them to other kinds of dismissals, such as those listed under Ariz.R.Civ.P. 12(b), 16 A.R.S., for which automatic relief is available. Dismissals as discovery sanctions under Ariz. R.Civ.P. 37, 16 A.R.S., are another example. Diligence is simply not a necessary component in a case where automatic relief is granted under A.R.S. § 12-504. For example, no amount of diligence would have prevented the plaintiff from losing her claim in Hosogai where an appellate court determined that the trial court lacked personal jurisdiction over the defendant because of insufficient service of process. The savings statute recognizes that a litigant may sometimes be entitled to relief, despite facts that suggest a lack of diligence. For example, an action abates unless service is effected within one year of the filing of a complaint or that abatement period is enlarged. Ariz.R.Civ.P. 6(f), 16 A.R.S. To obtain relief under the savings statute where the action has abated and been terminated, the plaintiff must show that despite diligent efforts, he was unable to effect service. Perhaps plaintiff's request for an enlargement of the abatement period under Rule 6(f) was denied. Perhaps, too, the plaintiff diligently tried to serve the defendant but neglected to seek an enlargement of the abatement period, after which the case was terminated. Although the litigant's error may not be legally excusable under Rule 60(c), the circumstances may nevertheless justify relief under the savings statute. With regard to a voluntary dismissal by order of the court, Ariz.R.Civ.P. 41(a)(2), 16 A.R.S., requires that the trial court consider the circumstances before dismissing a case. Whether to allow the dismissal is within the trial court's discretion. State ex rel. Corbin v. Portland Cement Ass'n, 142 Ariz. 421, 690 P.2d 140 (App. 1984). In exercising that discretion, the trial court must determine whether the dismissal would result in a violation of the defendant's substantial legal rights. Schoolhouse Educational Aids, Inc. v. Haag, 145 Ariz. 87, 699 P.2d 1318 (App. 1985). Where, for example, a plaintiff reasonably believes after diligent investigation that the complaint named the wrong individuals as defendants and obtains a dismissal by order of the court, only to discover after the statute of limitations had run that the correct parties had been named, relief under § 12-504 may be appropriate. The trial court's discretion was required in determining whether dismissal was appropriate in the first place; it is only logical that its discretion also be required in determining whether a new action should be allowed. However, the savings statute was not intended to provide relief for those who dismiss an action because of their own folly in failing to ascertain the facts necessary for deciding whether to do so, or for those who have failed to diligently pursue their cases and want to file a new action so that they may start the Rule V clock running again. Where an action is terminated for lack of prosecution, relief under the savings statute should only be granted where the plaintiff demonstrates that despite diligent pursuit of the case, it was dismissed. To hold otherwise would undermine the policies the savings statute was intended to serve and emasculate Rule V by providing an out for litigants who, for no good reason, fail to comply with the rule. Where the dismissal date passes unnoticed as a result of an error which may or may not amount to a legal excuse under Rule 60(c), and the case is dismissed for lack of prosecution, there still may be sufficient grounds for relief under the savings statute particularly where the parties are engaged in active litigation. Perhaps a defendant was served but disappeared after answering the complaint, making discovery impossible. Or perhaps the plaintiff's medical status was unstable throughout the majority of the time the action was pending, seriously impeding vigorous prosecution of the case. Assuming the plaintiff demonstrates diligent efforts under the circumstances, relief under the savings statute may be warranted. To a large extent the test articulated in Flynn is derived from the test in Gorman. Recognizing the similarities and the differences between Rule 60(c) and the savings statute, however, both in terms of the relief available and the factors justifying relief under each, we conclude that while a litigant may be entitled to relief under both provisions under certain circumstances, the two are significantly distinct. The savings statute coexists with and is not superfluous to the rule. We now turn to the question of whether the trial court correctly denied Flynn leave to file a new complaint under A.R.S. § 12-504. The trial court must be granted broad discretion in determining whether to grant relief under the savings statute and, absent an abuse of that discretion, we will not disturb its decision on appeal. The court of appeals, in applying the correct test, found that because the record demonstrated Flynn's substantial lack of diligence in pursuing the claim, the trial court did not abuse its discretion in denying his claim. We agree. Flynn's conduct was not reasonable. Defendants' carriers with whom his trial counsel had been in contact were not notified that litigation had been commenced until six months after the complaint was filed. The complaint was not served until nine months after it was filed. Flynn granted some of the defendants an open extension of the time for filing their answers even though he knew the case had been placed on the inactive calendar and that the dismissal date of November 24, 1986, was fast approaching. He did not initiate any discovery, failed to respond to the discovery propounded by defendants, and waited until just four days before the dismissal date before seeking a continuance on the inactive calendar. Even then, he did not seek accelerated oral argument on his motion and simply allowed the dismissal date to come and go. We have already found that Flynn failed to diligently and vigorously prosecute the case, the second prong of the test. The lawsuit was filed and permitted to languish. Even assuming he was engaging in vigorous settlement negotiations, as Flynn contends, it does not change the fact that Flynn was dilatory in the prosecution of his claim. Finally, although the case is now barred by the statute of limitations and in balancing the prejudice in that regard it appears that the hardship is greatest upon Flynn, all factors must be considered together. Under the circumstances, we conclude that Flynn failed to sustain his burden of establishing circumstances justifying relief under A.R.S. § 12-504.