February 16, 2022

The Supreme Court of the State of Arizona {“Arizona Supreme Court”) stated in its opinion dated January 20, 2022 in a medical malpractice case involving the vicarious liability of a hospital for the alleged negligent actions of its employees: “This case presents the issue of whether a vicarious liability claim against a hospital-employer is precluded because the trial court granted summary judgment dismissing medical malpractice claims against doctor-employees with prejudice. We hold that because the order of dismissal here was not a final judgment on the merits, it does not have preclusive effect.”

The Underlying Procedural Facts

Doctors jointly employed by the University of Arizona’s Medical School and Banner University Medical Center Tucson Campus, LLC, an Arizona Corporation DBA Banner University Medical Center Tucson, and other Banner entities (“Banner”) provided treatment to the Harrises’ fourteen-month-old son. After their son’s tragic death, the Harrises brought medical malpractice claims against the doctors, a vicarious liability claim against Banner based on the doctors’ conduct, and direct claims of breach of contract and fraud against Banner. Because the doctors were public employees, the Harrises were required to serve each of them with a notice of claim, which they failed to do. A.R.S. § 12-821.01(A). The doctors moved for summary judgment on the notice of claim issue, which the trial court granted in an unsigned minute entry dismissing them from the suit with prejudice. The court did not enter a judgment with language required by Arizona Rule of Civil Procedure 54(b) to make the ruling final and appealable.

In a subsequent motion for summary judgment, Banner argued that the trial court’s dismissal of the doctors “with prejudice” served as “an adjudication on the merits” that precluded any claim of vicarious liability against Banner for the doctors’ conduct. (Ariz. R. Civ. P. 41(b): “Unless the dismissal order states otherwise, a dismissal under this Rule 41(b) [‘Involuntary Dismissal; Effect’] and any dismissal not under this rule”—with exceptions not applicable here—“operates as an adjudication on the merits.”). The court denied the motion, acknowledging the “general rule” that “a judgment in favor of the servant relieves the master of any liability and that a dismissal with prejudice is the equivalent of a judgment on the merits” but found the general rule inapplicable to the facts and circumstances of this case.

As part of its reasoning, the trial court analogized a notice of claim statute to a statute of limitations and explicitly characterized the dismissal of the doctors as a “procedural dismissal” that “would not normally be considered an adjudication on the merits.” Banner sought special action relief from the trial court’s denial of its motion for summary judgment. The court of appeals accepted jurisdiction but in a divided decision denied relief, concluding that claim preclusion did not bar the vicarious liability claims against Banner under the circumstances of this case.

Arizona Supreme Court Opinion

Ariz. R. Civ. P. 54(b) provides that a decision resolving “fewer than all” claims against all the parties in an action is a “final judgment” only if the court expressly determines there is no just reason for delay and recites that the judgment is entered under Rule 54(b). If there is no such express determination and recital, any decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.

The Arizona Supreme Court stated that the order thus cannot be a final judgment absent the necessary Rule 54(b) language; nor, in the absence of resolving all claims as to all parties, could it be a Rule 54(c) final judgment. Furthermore, absent a judge’s signature, the order is not a judgment, final or otherwise … “Equally problematic for the application of preclusion is the trial court’s statement that it did not consider the procedural dismissal of the claims against the doctors an adjudication on the merits. See Ariz. R. Civ. P. 41(b) (providing that an involuntary dismissal is an adjudication on the merits, with exceptions not applicable here, “[u]nless the dismissal order states otherwise”). Given that the trial court stated otherwise, the entry of summary judgment on behalf of the doctors is not an adjudication on the merits. For this reason, the order dismissing the doctors is not a judgment on the merits that can be used to invoke issue or claim preclusion. Because there is no final judgment on the merits, the Harrises’ vicarious liability claim against Banner is not precluded.”

Source Banner Medical v. Hon. Gordon/Harris, No. CV-20-0179-PR.

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