Business owners should be aware of new laws impacting litigation in Arizona. Areas affected include civil judgments, arbitration, credit card debt and indemnity agreements. Unless otherwise stated, all of the laws described in this article will go into effect on July 20, 2011. If you are presently involved in or anticipate being involved in an Arizona litigation matter in the future, one or more of these laws may impact your case. These recently enacted laws came out of the Fiftieth Arizona Legislature, which adjourned on April 20, 2011.

Interest Rates on Civil Judgments, Awardable Interest, and Supersedeas Bonds

SB 1212 amends various Arizona statutes with respect to interest rates that may be applied to civil judgments, the type of interest that may be awarded by a court, and the amount of supersedeas bond that must be filed by a party to stay enforcement of a civil judgment pending appeal.

With respect to civil judgments, SB 1212 modifies A.R.S. § 44-1201 to provide that interest on judgments which are based on a written agreement evidencing a loan, indebtedness or other obligation bearing an interest rate less than 10% shall be at the interest rate in the agreement and shall be specified in the judgment. The statute is further amended to state that unless specifically provided for in a statute or the parties agree in writing, interest on any judgment shall be the lesser of 10% annually or 1% plus the prime rate established at the time of entering the judgment by the Board of Governors of the Federal Reserve. A civil judgment must now state the applicable interest rate and the rate shall not change after entry of the judgment.

A.R.S. § 44-1201(D) also now prohibits a court from awarding prejudgment interest for any unliquidated, future, punitive or exemplary damages or interest for any future, punitive or exemplary damages that are awarded by a jury.

Additionally, SB 1212 limits the amount of an appeal bond required under Arizona Appellate Rule 7 to stay execution of a judgment pending the outcome of an appeal to the lesser of the total amount of damages awarded, excluding punitive damages, 55% of the appellant's net worth, or $25 million. Tort reform advocates have expressed support for this change asserting that it helps to ensure defendants in civil litigation can afford to persist in the appeals process and appropriately resist pressure from plaintiffs to settle simply because the defendant cannot afford to appeal. SB 1212 also, however protects judgment creditors by increasing the required supersedeas bond amount up to the full amount of the judgment if the appellee/creditor can prove by clear and convincing evidence that the appellant/debtor is intentionally dissipating assets outside the ordinary course of business to avoid payment of the judgment.

This law goes into effect July 20, 2011.

Arizona Revised Uniform Arbitration Act

Arbitration is an alternative dispute-resolution process conducted in lieu of a judicial proceeding. On April 29, 2011, Arizona Governor Jan Brewer signed into law SB 1504, amending Arizona’s recent adaptation of the Revised Uniform Arbitration Act (the RUAA). Although the recent technical changes are minor, the RUAA has been widely heralded as the most sweeping reform of Arizona arbitration law in decades and deserves a brief mention here.

The RUAA applies to all existing arbitration agreements when the Federal Arbitration Act (FAA) does not or where Arizona’s old Uniform Arbitration Act applies. For example, Arizona’s old UAA, which is still law, applies in disputes between an employer and employee, arising from an insurance contract, or involving a national bank or self-regulating securities organizations. The RUAA applies to all other disputes.

The RUAA mandates that certain provisions in agreements to arbitrate may not be waived before an actual dispute arising. The RUAA also provides for interim remedies before a final judgment (e.g., an injunction or provisional remedy), whether issued by an arbitrator or a court before an arbitrator is appointed and able to act. The RUAA also provides for the consolidation of separate arbitration proceedings expect that an agreement to arbitrate may prohibit consolidation. In addition to interim remedies, the RUAA gives arbitrators expanded power to conduct an arbitration proceeding, which will hopefully lead to the more effective and efficient resolution of claims.

The RUAA became effective on January 1, 2011. The technical amendments passed during the most recent legislative session will become effective on July 20, 2011.

Statute of Limitations for Credit Card Debt

House Bill 2412 adds a credit card to the type of debt that must be prosecuted within six years after the cause of action accrues. A six-year statute of limitations already applied to an action for debt on a contract, which many agreed included credit cards. To the extent there was any confusion, the new law makes it clear. The new law also removes any conflict between Arizona law and other jurisdictions by mandating that the six-year statute of limitations applies. Don’t forget, however, that The Fair Debt Collection Practice Act, the federal law that governs how and when debt collectors can contact consumers and collect on unpaid bills, dictates where legal action on a debt can be filed. This law goes into effect July 20, 2011.

Indemnity Agreements

House Bill 2359 makes it illegal for most shippers to put a clause in a contract requiring truckers to indemnify shippers. Indemnification language is commonly included in contracts. Current law does not prohibit a shipper from including indemnification language in its contracts and, thereby, absolves the shipper of all liability for damage to goods regardless of fault. For example, if a shipment of produce is damaged in the warehouse because it was kept there too long, these indemnity agreements have been interpreted to hold the trucking company responsible because of the indemnification provision in the contract. The shippers excluded from this law include governments, railroads, and electric and gas utilities. Applauded by the trucking industry, the new law could be a forecast of future laws declaring indemnity provisions in other contracts void as against public policy. This law goes into effect July 20, 2011.

Our litigation lawyers handling judicial and arbitration proceedings in commercial, construction, employment, real estate and other business disputes throughout Arizona and the Western United States are available to assist you. Please contact us if you need assistance in dealing with these newly-enacted laws or other litigation matters.