by Timothy Sandefur
January 8, 2019
Scottsdale taxpayer Mark Stuart filed a lawsuit against the city a few years ago challenging the legality of an economic development project whereby the city devoted over $1.5 million to renovating a privately owned golf course. Stuart thought the project violated the state constitution’s gift clause, which forbids government from subsidizing private businesses with public dollars. He lost that case, thanks to a court decision that found that the city was getting benefits in exchange for the money—specifically, it would get to keep the title to the improvements to the golf course’s clubhouse and would get certain payments back from the course’s owner. For that and other reasons, the court ruled against Stuart.
Whether that decision was right or wrong, though, the really disturbing thing is what happened next: The court “sanctioned” him by ordering him to pay more than $26,000 to the city.
That happened thanks to Rule 68 of the Arizona Rules of Civil Procedure, a rule that was designed to encourage out-of-court settlements. Many states have such rules, but Arizona’s is uniquely harsh. It provides that in cases where a defendant offers to settle a lawsuit and the plaintiff fails to respond with written objections, and then later doesn’t win as much as he asked for, he must pay twice the “costs” of the plaintiff and also the expert witness fees.
That rule is harsh and unjust, and in a petition filed today, we’ve asked the Arizona Supreme Court to change it. The rule was intended for cases in which people seek money damages, not for cases brought by taxpayers against (allegedly) illegal acts by the government. Applying the rule in that kind of case deters public-interest litigation and hinders efforts by taxpayers and citizens to vindicate their rights in court.
Stuart’s case is a prime example. Scottsdale’s “settlement offer” to him was really simple: Drop the case and we’ll call it even. That’s not exactly a “settlement offer”—and no wonder: Stuart wasn’t seeking monetary damages. He was asking the court to issue an order blocking the city from doing something he thought was illegal. Yet the court punished him—a “sanction,” after all, is a punishment—for failing to file a formal objection to the city’s “offer.” And the court was required to; the rule forces judges to issue such sanctions awards.
We’ve asked the Arizona Supreme Court to modify this unnecessarily harsh rule. In our petition, we explain how other states and the federal courts deal with this problem and encourage the court to limit the sanctions rule to cases involving claims for money damages—or at least to give trial judges the option of not imposing sanctions in cases where that’s not appropriate. While Rule 68 had good intentions, it goes too far and threatens taxpayers with punishment for exercising their legal rights. That’s not good for them—or for Arizona.
Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.