Opinion
1 CA-CV 11-0157
02-21-2012
DANIEL FIORE and MICHELLE FIORE, husband and wife, Plaintiffs/Appellees, v. GEICO GENERAL INSURANCE COMPANY, a Maryland corporation, Defendant/Appellant.
Jeffrey I. Ostreicher PC By Jeffrey I. Ostreicher and Knapp & Roberts, P.C. By David L. Abney Attorneys for Plaintiffs/Appellees Jones, Skelton & Hochuli, P.L.C. By Eileen D. GilBride and Jennifer R. Erickson and Sanford K. Gerber Attorneys for Defendant/Appellant
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. CV 2009-007301
The Honorable Edward O. Burke, Judge
AFFIRMED
Jeffrey I. Ostreicher PC By Jeffrey I. Ostreicher
and
Phoenix
Knapp & Roberts, P.C. By David L. Abney Attorneys for Plaintiffs/Appellees
Scottsdale
Jones, Skelton & Hochuli, P.L.C. By Eileen D. GilBride and Jennifer R. Erickson and Sanford K. Gerber Attorneys for Defendant/Appellant
Phoenix NORRIS, Judge
¶1 Defendant/Appellant Geico General Insurance Company
timely appeals the superior court's grant of Plaintiff/Appellees Daniel and Michelle Fiore's motion to set aside a judgment entered pursuant to an offer of judgment. Geico argues the superior court abused its discretion in setting aside the judgment. We disagree, and affirm the court's decision to set aside the judgment.
FACTS AND PROCEDURAL BACKGROUND
¶2 In March 2009, the Fiores sued Geico for breach of contract and other related claims after Geico refused to pay an underinsured motorist claim. On August 17, 2010, the Fiores' attorney faxed to Geico's counsel a document captioned as an offer of judgment pursuant to Arizona Rule of Civil Procedure ("Rule") 68 (the "first offer"). The first offer proposed a settlement of $450,000. Their attorney then faxed to Geico a "Notice of Withdrawal of Offer of Judgment" (the "withdrawal notice") and a second "Offer of Judgment" (the "second offer") roughly one hour and fifteen minutes after faxing the first offer. The withdrawal notice stated "NOTICE is hereby given that Plaintiffs, by and through counsel undersigned, are withdrawing their Offer of Judgment mistakenly served earlier today upon Defendant in the above-referenced matter." The second offer proposed a settlement of $750,000. An employee of the Fiores' attorney then placed the first offer in one envelope, the withdrawal notice and the second offer in a second envelope, and mailed both envelopes to Geico.
¶3 Geico took the position the first offer was valid. Although the Fiores disagreed, Geico, without saying anything to the superior court about their dispute, filed a notice on September 17, 2010 accepting the first offer. Geico also lodged a form of judgment to this effect with the superior court, which the court entered. The Fiores moved to set aside this judgment, arguing, among other things, Geico knew they had withdrawn the first offer before mailing it and had made a "mistake" falling under Rule 60(c)(1). The superior court granted the Fiores' motion under Rule 60(c) on "either of two bases": first, "the offer of judgment was withdrawn before it was 'served' under the Rules of Civil Procedure," and second, the Fiores had "established by their affidavits that their attorney did not have authority to submit an offer of judgment for $450,000."
DISCUSSION
We review "whether there is sufficient basis to set aside a judgment under Rule 60(c) for an abuse of discretion." Morris v. Giovan, 225 Ariz. 582, 583, ¶ 7, 242 P.3d 181, 182 (App. 2010).
¶4 As the parties recognize, "[i]t has been held in Arizona that an offer of judgment pursuant to Rule 68 is not subject to revocation, since an irrevocable offer for a period of time fixed by rule of law constitutes an option for consideration." Preuss v. Stevens, 150 Ariz. 6, 7, 721 P.2d 664, 665 (App. 1986). Under Rule 68(a) and (h), "any party may serve upon any other party an offer to allow judgment to be entered in the action," and "[a]n offer of judgment made pursuant to [Rule 68] shall remain effective for 30 days after it is served." (emphasis added). It is therefore clear from the Rule and Arizona case law that an offer of judgment validly served is irrevocable. Relying on these principles, Geico argues the first offer, served by fax on August 17, 2010, was irrevocable. We disagree.
¶5 The parties acknowledge they did not "consent[] in writing," as required by Rule 5(c) for service "by any other means, including electronic means." See also Ariz. R. Civ. P. 5(c) State Bar Committee Note, 1996 Amend. ("The consent to electronic service must be express, and may not be implied from conduct. . . . Again, consent must be express, and may not be implied from conduct.") . The first offer -- and, for that matter, the withdrawal notice and the second offer -- was therefore not "served" on Geico when the Fiores' attorney transmitted it by fax, and we reject Geico's argument to the contrary.
¶6 The remaining question is then whether, as the superior court ruled, the Fiores withdrew the first offer "before it was 'served.'" Geico says "no," arguing the Fiores "served" that offer for purposes of Rule 68 when the Fiores' attorney's employee put it, along with the withdrawal notice and the second offer, in the mail. Again, we disagree. As we explain, this argument focuses only on the first offer and accords no significance or meaning to the notice given by the faxed withdrawal notice or to the subsequent mailing of the withdrawal notice with the other two documents.
¶7 Courts often apply contract principles to resolve disputes involving offers of judgment. See Mubi v. Broomfield, 108 Ariz. 39, 41, 492 P.2d 700, 702 (1972) (applying contract principles to determine whether offers of judgment are revocable); Spooner v. EEN, Inc., 644 F.3d 62, 70 (1st Cir. 2011); Radecki v. Amoco Oil Co., 858 F.2d 397, 400 (8th Cir. 1988) ("To decide whether there has been a valid offer and acceptance for purposes of Rule 68, courts apply the principles of contract law," including the principle that "for an offer and acceptance to create a binding agreement there must be an objective manifestation of mutual assent."). One contract principle -- specifically the principle of intent to make an offer -- is applicable here. In Arizona, "whether an offer has been made does not depend on the offeree's understanding of the terms of the offer, but instead on whether a reasonable person would understand that an offer has been made and that, upon acceptance, the offeror would be bound." Ballesteros v. Am. Standard Ins. Co. of Wis., 226 Ariz. 345, 348, ¶ 13, 248 P.3d 193, 196 (2011).
¶8 As discussed at supra ¶ 2, before Geico's counsel opened their mail on August 18th, 2010, they had received faxes from the Fiores' attorney that clearly communicated their intent to withdraw the first offer, which, because it had not been served, was, at best, a "garden-variety settlement offer," Spooner, 644 F.3d at 70, not a binding, irrevocable offer of judgment under Rule 68. The fax transmission forms submitted by the Fiores and the other correspondence between the parties reflect the notice of withdrawal was successfully transmitted to Geico's counsel on August 17, 2010, and at no time has Geico ever argued to the contrary, either in the superior court or in its briefing and oral argument on appeal. Indeed, in its opening brief on appeal, Geico acknowledges "that same day, Plaintiff's counsel faxed a document to GEICO's counsel entitled 'Notice of Withdrawal of Offer of Judgment.'" A party making an offer can revoke it before it is accepted, provided they give actual notice to the offeree: "[t]he revocation of an offer . . . must ordinarily be communicated to prevent an acceptance from changing it into a binding contract, and it is not communicated to the offeree unless it is actually brought to his knowledge." Butler v. Wehrley, 5 Ariz. App. 228, 232, 425 P.2d 130, 134 (App. 1967) (quotation omitted). This fax, once received by Geico's counsel's office, provided actual notice and thus revoked the $450,000 offer, which, as discussed, could only have been considered as a "garden-variety settlement offer." Spooner, 644 F.3d at 70; see also Manone v. Coffee, __ S.E.2d _, 2011 WL 6425019 at *3 (N.C. App. Dec. 20, 2011) (faxed copy of order was effective notice "when the attorney's office, not the individual attorney" received it).
¶9 Thus, when Geico's counsel opened their mail on August 18, 2010, not only did they do so after receiving notice of the Fiores' intent not to make or "serve" the first offer, but the contents of the envelopes themselves -- which the record suggests were sent and received simultaneously -- would not have led "a reasonable person [to] understand that an offer ha[d] been made and that, upon acceptance, the offeror would be bound." Ballesteros, 226 Ariz. at 348, ¶ 13, 248 P.3d at 196. "Instructive here is the principle that substantially contemporaneous documents are to be read together to determine the nature of the transaction." Childress Buick Co. v. O'Connell, 198 Ariz. 454, 456, ¶ 9, 11 P.3d 413, 415 (App. 2000) (citation omitted). As discussed at supra ¶ 2, the envelopes contained the first offer, the withdrawal notice, and the second offer. Geico's counsel could not have reasonably considered these documents, received together, as manifesting the Fiores' intent to be bound by the withdrawn first offer.
¶10 In Speckel by Speckel v. Perkins, the court was presented with a situation similar to the one presented here: an attorney, with "obvious carelessness," mailed a letter containing a settlement offer -- albeit not a Rule 68 offer of judgment -- that both refused and offered to settle the case for $50,000, which the offeree "accepted." 364 N.W.2d 890, 892 (Minn. App. 1985). There, the court, like Arizona courts, applied the "objective theory of contract formation," and held no valid offer had been made because the language of the letter was "internally inconsistent" and "raised a presumption of error" that precluded a binding acceptance of the first offer. Id. at 892, 894. The same is true here. Whether in the context of Rule 68 or a "garden-variety settlement offer," the offer must demonstrate an objective manifestation by the offeror to be bound. This did not happen here, and Geico could not reasonably have considered the Fiores' internally inconsistent communications as manifesting any intent to "serve" the first offer as an irrevocable offer of judgment.
¶11 Despite the evident internal inconsistency of these documents, Geico argues the Fiores failed to establish a "mistake" under Rule 60(c)(1) and the superior court was thus not entitled to set the judgment aside under that Rule. We disagree. The mistake here, as we view it, was the Fiores' attorney's mailing of the first offer. Although, as discussed, a reasonable person would not have understood that mailing of the first offer, in these circumstances, constituted "service" of an offer of judgment inviting acceptance, it nevertheless caused -- as amply evidenced by the record and this appeal --confusion and misunderstanding about its legal effect. See Transit Cas. Co. v. Sec. Trust Co., 441 F.2d 788, 792 (5th Cir. 1971) ("'Mistake,' which as a common word should be given its common meaning, means to misunderstand the meaning or intention of something, or to misinterpret it.").
¶12 This view accords with the superior court's ruling. As noted at supra ¶ 3, the superior court found the first offer had been "withdrawn before it was 'served.'" We construe this to mean the court found that the Rule 60(c)(1) mistake arose from the parties' disagreement about whether the first offer had been "served," and that the sequence of events demonstrated the Fiores had never objectively manifested intent to "serve" the first offer simply because their counsel's employee mailed the envelopes containing the internally inconsistent documents. The superior court has considerable discretion to construe and apply both Rule 60(c) and Rule 68 in a manner that effectuates their intended purposes. Hirsch v. Nat'l Van Lines, Inc., 136 Ariz. 304, 308, 666 P.2d 49, 53 (1983); McEvoy v. Aerotek, Inc., 201 Ariz. 300, 305, ¶ 25, 34 P.3d 979, 984 (App. 2001). Under these circumstances, and for the reasons discussed above, we hold the superior court did not abuse its discretion in setting aside the judgment under Rule 60(c) on this basis, and therefore do not address the second basis relied on by the court.
CONCLUSION
¶13 For the foregoing reasons, we affirm the superior court's ruling setting aside the judgment in favor of Geico. As the prevailing party on appeal, the Fiores are entitled to recover their costs on appeal subject to their compliance with Arizona Rule of Civil Appellate Procedure 21.
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PATRICIA K. NORRIS, Presiding Judge
CONCURRING:
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MARGARET H. DOWNIE, Judge
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PHILIP HALL, Judge