Arizona Court of Appeals Division One Holds That Parties May Prove Facts by Statistical Sampling and Extrapolation in an Appropriate Case with Adequate Safeguards of Reliability.

This consolidated appeal arose from the adjudication of tens of thousands of separate claims by hospitals for reimbursement from Maricopa County for costs of providing health services to indigent patients.  The Superior Court appointed a Special Master to recommend and implement procedures for the efficient management and resolution of the cases.

The parties disputed whether to rely on statistical sampling and extrapolation to resolve the claims.  The County agreed that such sampling might be useful for mediation, but objected to the use of sampling to prove facts at trial.  Following a series of hearings and trials of claims by groups, the Superior Court overruled the County’s objections to the use of sampling, adopted the Special Master’s findings and conclusions, and entered judgment for the Hospitals. 

The Arizona Court of Appeals reversed and remanded for further proceedings.  Although statistical sampling may be used as a means of fact-finding in some cases, the record below did not contain sufficient evidence to support the use of the sampling methodology employed.

The Court applied the balancing test set forth by the United States Supreme Court in Connecticut v. Doehr, 501 U.S. 1 (1991) to determine whether the sampling methodology was permissible.  The test involves: “[F]irst, consideration of the private interest that will be affected by the [measure at issue]; second, an examination of the risk of erroneous deprivation through the procedures under attack and the probable value of additional or alternative safeguards; and third, . . . principal attention to the interest of the party seeking [to implement the measure], with, nonetheless, due regard for any ancillary interest the government may have in providing greater protections.” Doehr, 501 U.S. at 11.

Applying the Doehr balancing test, the Court reasoned that the hospitals’ interests weigh in favor of resolving the thousands of claims in an expedient manner, and the County has no economic interest in whether any particular claim is resolved properly.  Rather, the County’s only interest is that it not be held liable in the aggregate for more than the sum of all valid claims.  At the same time, the public has an interest in resolving the claims fairly but efficiently without consuming undue amounts of judicial resources.

The Court held that the Superior Court may adopt statistical sampling and extrapolation as a case management tool only when the specific methodology to be used is tailored to produce a result at least as fair and accurate as would be produced by traditional particularistic fact-finding methods.  In making this determination, the court must at a minimum consider the number of claims in the relevant universe, the number and nature of the variables present in those claims, the sample size and whether the sample is truly representative of the universe of claims.  The court also must make detailed findings that permit the reviewing court a clear understanding of the entire methodology and its application.

Here, however, neither the Superior Court nor the Special Master made the findings of fact necessary to determine the reliability of the statistical sampling method used.  There was no evidence on the record as the viability of the methodology, the appropriateness of the stratification of claims, or whether the methodology was properly implemented. 

When, as here, the master’s findings are subject to review pursuant to a “clearly erroneous” standard, the special master must make detailed findings of fact so the appointing court is allowed a meaningful opportunity to review the master’s work, including a review of whether the sampling methodology satisfied the parties’ rights to a fair and just process.

Judge Johnsen authored the opinion, which was joined by Judge Orozco.  Judge Swann specially concurred, writing separately that the Superior Court’s procedure was flawed because the Special Master’s role had exceeded the permissible scope of a reference under Rule 53, Ariz. R. Civ. P., in the absence of consent by all parties.