The Arizona Supreme Court released its long-awaiting ruling in a case involving employer liability when an employee’s work related conduct gives rise to a tort lawsuit, and they voided part of a court decision from 78 years ago to do so.
The issue before the justices is what happens to a claim raised in a lawsuit against an employer when the claim against an employee is dismissed without a ruling on the employee’s culpability.
The answer, according to the Court’s 4 to 3 decision, is that “it depends.”
Public records show Jacob Laurence and his minor son were injured in January 2017, when a truck owned by Salt River Project Agricultural Improvement & Power District (SRP) and driven by an SRP employees collided with Laurence’s vehicle.
Laurence alleged the SRP employee caused the accident. As a result, Laurence claimed SRP was vicariously liable under Arizona’s respondeat superior doctrine when the employee is acting negligently within the course and scope of their employment.
But a jury never got to hear Laurence’s case, in part based on a technicality that had nothing to do with whether the SRP employee was negligent.
SRP is a political subdivision of the State of Arizona. Anyone who intends to sue a public entity or a public employee must first file a notice of claim with that entity or person. The notice must be filed within 180 days after the cause of action accrues, according to Arizona Revised Statutes 12-821.01.
Laurence filed a timely notice of claim with SRP, but did not file his claim against the employee until nearly 15 months after the accident. Laurence then moved forward by filing a lawsuit against SRP and the employee in January 2018.
The employee filed a motion for summary judgment based on Laurence’s failure to timely comply with § 12-821.01. A Maricopa County Superior Court judge granted the motion, which had the same effect as dismissing the lawsuit against the employee.
SRP then sought to have Laurence’s respondent superior claim dismissed, arguing the public entity could not be held vicariously liable for the employee’s negligence because the court dismissed the claim against the employee.
The Maricopa County judge sided with SRP over Laurence’s arguments that the dismissal was unrelated to the merits of the negligence claim and therefore SRP should stand trial. The Arizona Court of Appeals affirmed the dismissal of the claim against SRP, but the Supreme Court justices decided in 2021 to hear the case.
[The minor child’s claims were not impacted by the notice of claim issue, as Arizona law does not require a minor to file a claim until 180 days after turning 18. A settlement was later reached on behalf of the injured child.]
A key question for the justices was whether a 1945 Arizona Supreme Court decision in Degraff v. Smith was applicable. That decision involved the Smiths, who were injured after driving into the rear of a commercial truck stopped at night on the side of a highway without lights or emergency flares.
The Smiths sued the truck driver for negligence and the truck’s owner for a claim of respondeat superior. But during the trial, the Smiths asked the judge to dismiss their claim against the driver. The dismissal was entered “with prejudice” meaning the claim could not be brought up again.
A jury went on to award the victims monetary damages against the truck’s owner. The jury’s verdict in DeGraff, however, was later overturned by the Arizona Supreme Court, which at the time had only three justices.
In the Court’s 2 to 1 decision, the justice noted a dismissal with prejudice against the truck driver was the same as the driver being found “not guilty of any negligence.” As a result, the 1945 justices ruled the truck’s owner could not be vicariously liable.
Fast forward 78 years, and it was a position SRP agreed with and which Laurence argued should be reconsidered for when a claim against an employee is dismissed for technical reasons without consideration of the underlying merits.
But overturning decades of precedent is not something the Arizona Supreme Court takes likely. In fact, Justice Timmer’s opinion explained the factors the seven justices took into consideration in deciding whether DeGraff should stand after nearly eight decades.
“The stare decisis doctrine cautions courts against overruling a prior opinion unless the reasons underlying it no longer exist or the opinion was ‘clearly erroneous or manifestly wrong.’” Timmer wrote. “The doctrine is rooted in the public policy that people should be able to rely on judicial precedent to know their rights and order their conduct accordingly.“
Timmer went on to add there were several “compelling reasons” for today’s Court to overturn DeGraff’s precedent.
“By requiring dismissal of a respondeat superior claim when the employee-claim is dismissed for reasons unrelated to the claim’s merits, DeGraff incorrectly hitches the respondeat superior doctrine to the employee’s liability rather than the employee’s tortious acts,” Timmer added. “Overruling DeGraff in substantial part eliminates this misstep.”
The opinion further notes the three justices who joined Timmer – Chief Justice Robert Brutinel, retired Justice John Pelander, and Justice William Montgomery – in setting aside a critical part of DeGraff did not do so lightly. Pelander was brought in to hear the matter after Justice Clint Bolick recused himself.
“DeGraff was incorrectly decided from the outset, forcing courts to wrestle with its illogic for decades and prompting this Court to chip away parts,” Timmer wrote. “After carefully applying stare decisis, we eliminate all confusion by shaking free of DeGraff’s incorrect reasoning.”
Justice John R. Lopez IV authored a dissenting opinion in which Justices James Beene and Kathryn King joined.
In the dissent, Lopez opposed the majority’s decision to “upend” nearly 80 years of respondeat superior jurisprudence and thus embark “upon this precarious road despite the debatable nature of the issue.” Lopez also pointed out the Court declined last year to overrule a questionable precedent in interpreting a critical constitutional provision.
The Laurence case now goes back to Maricopa County Superior Court with instructions to allow the father to move forward with his claim against SRP.