Arizona Court of Appeals Division One holds that for purposes of Rule 77(h) sanctions in an arbitration appeal, courts must compare whether the total judgment on the trial de novo is 23 percent more favorable than the total arbitration award.

A driver rear-ended a car carrying four family members.  The family members sued the driver jointly and the case proceeded to mandatory arbitration.  The arbitrator awarded damages as to each family member and also awarded costs for a collective arbitration award of $97,119.18.  The driver appealed the arbitration award to a de novo trial under Rule 77(a).  After the trial, the jury awarded damages that were less for each family member, but the percentage of that decrease varied for each person.  The court also awarded costs, resulting in a total judgment of $73,017.73.

Under Rule 77(h) the court must award reasonable attorneys’ and expert fees as a sanction “[i]f the judgment on the trial de novo is not at least 23 percent more favorable than . . . the arbitration award.”  The family moved for sanctions, arguing that as to two of the four family members, the driver did not obtain a result that was 23 percent more favorable.  The driver argued that Rule 77(h) sanctions were not available because the total trial judgment was 23 percent more favorable than the total arbitration award.  The trial court followed the party-by-party analysis and awarded sanctions as to the two family members.  

The Court of Appeals struck the Rule 77(h) sanctions, holding that courts must compare the total judgment to the total arbitration award.  As used in the Rule, the “arbitration award” includes awarded costs as does the “judgment.”  When multiple parties bring a single lawsuit, the result is a single arbitration award and a single judgment for purposes of Rule 77(h).  Sanctions are unavailable if that total outcome is 23 percent more favorable on appeal, regardless of the percentage of change in the damages attributable to each individual party.

Judge Howe authored the opinion; Presiding Judge McMurdie and Judge Campbell concurred.