                              IN THE COURT OF APPEALS
                                  STATE OF ARIZONA
                                    DIVISION TWO


MARK J. MULLENAUX and REGINA                    )          2 CA-CV 2003-0130
MULLENAUX, husband and wife,                    )          DEPARTMENT A
                                                )
                       Plaintiffs/Appellants,   )          OPINION
                                                )
                     v.                         )
                                                )
GRAHAM COUNTY,                                  )
                                                )
                       Defendant/Appellee.      )
                                                )


           APPEAL FROM THE SUPERIOR COURT OF GREENLEE COUNTY

                                   Cause No. CV2003002

                          Honorable William J. Schafer, III, Judge

                                         AFFIRMED


Watters & Watters, P.C.
 By Andrea E. Watters                                                                 Tucson
                                                           Attorneys for Plaintiffs/Appellants

Jones, Skelton & Hochuli, P.L.C.
 By Georgia A. Staton and Abby L. Ewing                                             Phoenix
                                                            Attorneys for Defendant/Appellee


B R A M M E R, Presiding Judge.


¶1            Mark Mullenaux and his wife appeal from the trial court’s order granting summary

judgment in favor of Graham County on Mark’s wrongful discharge, breach of contract, and

defamation claims. On appeal, Mullenaux argues that his failure to raise his claims before the
Graham County Merit Commission does not, as the trial court apparently concluded, preclude

them. He also contends that a qualified privilege does not, as the court implicitly found, immunize

the County from liability on his defamation claim. 1 We affirm.

                                       Standard of Review

¶2             We determine de novo whether any genuine issues of material fact exist and whether

the trial court erred in its application of the law. Bothell v. Two Point Acres, Inc., 192 Ariz. 313,

965 P.2d 47 (App. 1998). In doing so, we view the facts and the reasonable inferences from them

in the light most favorable to the party against whom the judgment was entered. Id. Summary

judgment is proper if there are no genuine issues of material fact and the moving party is entitled

to judgment as a matter of law. Ariz. R. Civ. P. 56(c), 16 A.R.S., Pt. 2. Summary judgment

should be granted “if the facts produced in support of the claim or defense have so little probative

value, given the quantum of evidence required, that reasonable people could not agree with the

conclusion advanced by the proponent of the claim or defense.” Orme Sch. v. Reeves, 166 Ariz.

301, 309, 802 P.2d 1000, 1008 (1990). To withstand a motion for summary judgment, the

opposing party must set forth facts showing that a genuine issue of material fact exists that would

preclude judgment in favor of the moving party. Ariz. R. Civ. P. 56(c).

                                  Facts and Procedural History

¶3             In January 1993, Mullenaux began working full time for Graham County as an

equipment operator. From 1993 to January 2001, Mullenaux appears to have received one written




       1
       The trial court did not state its reasons for granting the County’s motion for summary
judgment. In its one-sentence minute entry, the court stated: “The Court grants Defendants’
Motion for Summary Judgment ‘on the entirety of Plaintiff’s Complaint.’”

                                                 2
reprimand for his work performance, issued December 21, 2000, for negligently damaging a

County vehicle.

¶4             On February 16, 2001, Mullenaux informed County authorities that he suspected

his supervisors, including his foreman Charles Weaver, were stealing and misusing County

property. One week later, Mullenaux was demoted and assigned to yard duty. The County

investigated Mullenaux’s allegations and found most of them to be unsubstantiated. During the

investigation, however, the County became aware of threats Mullenaux allegedly had made to

Weaver. Accordingly, Mullenaux received a written reprimand for violating Graham County

Merit Rule 601(3), which prohibits “physical or verbal conduct or behavior that is offensive,

coercive, abusive, or threatening.”

¶5             Approximately two months later, Weaver and Tommy Henrix, Loss Control

Manager for the Arizona Counties Insurance Pool, summoned Mullenaux to a meeting to discuss

Mullenaux’s numerous claims for workers’ compensation benefits, which were based on

Mullenaux’s assertion that he had suffered an industrial accident and had injured his back. Weaver

and Henrix told Mullenaux that any future workers’ compensation claims would be investigated

for their legitimacy and that, if he was found to have made a fraudulent claim, he would receive

“disciplinary action commensurate with the offense.”

¶6             In January 2002, the County terminated Mullenaux for “a cumulative sense of

dissatisfaction with [his] performance.” The letter of termination cited one verbal and three written

reprimands and referred to a January 2002 incident in which Mullenaux allegedly had “antagonized

a department employee” by making sexual statements about the employee’s wife. The letter also

informed Mullenaux that he could only appeal his termination in accordance with the Graham

                                                 3
County Merit System Manual’s grievance procedures. The portion of those grievance procedures

that appear in the record provide the following three-step process for presenting grievances to the

County:

               1. Step One: The employee shall first present the grievance in
               writing to the Department Head . . . [who] shall review . . . the
               complaint and shall give a written response . . . within ten days.

               2. Step Two: If the employee is dissatisfied with the response
               received from the Department Head, [he or she] may file a written
               request for review of the grievance by the County Manager . . .
               [who] shall convene a meeting . . . [and] shall render a written
               response to the employee. . . .

               3. Step Three: If the employee is dissatisfied with the response
               received from the County Manager, [he or she] may file a written
               request for review of the grievance by the Merit Commission. . . .
               The decision of the Merit Commission shall be the final
               administrative authority over the grievance . . . [and] shall be final
               and binding on all parties to the grievance.

The County’s Merit System Manual also provides:

               Most grievances shall begin at Step One of the grievance procedure
               with the exception of grievances regarding a demotion, suspension
               without pay, dismissal, unlawful discrimination, sexual harassment,
               or in any case where the grievance is being filed against a
               Department Head. Under the exceptions noted, the grievance
               procedure shall begin at Step Two.2

Mullenaux does not dispute that the County had properly adopted these procedures.

¶7             The County denied Mullenaux’s written protest of his discharge, made pursuant to

Step One of the grievance procedures. Because he perceived that bias against him by both the




       2
       This portion of the Merit System grievance procedure was set forth in an unmarked
document contained in the record. At oral argument, the parties agreed it is part of the Merit
System Manual procedures.

                                                 4
County Manager and the Merit Commission would render futile taking any further grievance steps,

Mullenaux did not pursue his grievance any further through administrative channels. Instead, in

August 2002, he sued the County for wrongful discharge and breach of contract.

¶8             Shortly after Mullenaux filed his lawsuit, Graham County Manager Terry Cooper

received a request for public records from Tom King, the managing editor of the Eastern Arizona

Courier. King requested a copy of the insurance investigation report prepared by Douglas Muell

on Mullenaux’s allegations that his foreman had been stealing and misusing County property.

Muell’s report also contained the results of Muell’s investigation into Mullenaux’s reported

threatening behavior. It is undisputed that, before complying with King’s request, Cooper notified

Mullenaux’s attorney and afforded her an opportunity to object to the release. Counsel stated that

Mullenaux had no objection to dissemination of the investigative report. Cooper released Muell’s

report in its entirety to King. On August 29, 2002, King published a story entitled “County sued,”

which not only described Mullenaux’s action against the County but also discussed Mullenaux’s

allegedly threatening behavior toward Weaver.

¶9             In September 2002, following publication of King’s story, Mullenaux amended his

complaint to add a defamation claim against the County. Mullenaux alleged in his amended

complaint that he had been wrongfully discharged based on whistleblower retaliation, retaliation

for seeking workers’ compensation benefits, breach of contract, and defamation. The County

moved for summary judgment on all counts, arguing that Mullenaux’s failure to exhaust his

administrative remedies through the County’s grievance procedures precluded his wrongful

discharge and breach of contract claims. The County argued it was entitled to summary judgment

on the defamation claim because its obligations under the Public Records Law, A.R.S. § 39-121,

                                                5
afforded it a qualified privilege “as a matter of law.” The trial court granted summary judgment

in favor of the County on all of Mullenaux’s claims.

                                           Discussion

Wrongful Discharge and Breach of Contract Claims

¶10           Mullenaux contends the trial court erred in concluding that his failure to contest his

termination through the County’s grievance procedure precluded his wrongful discharge and

breach of contract claims. We disagree.

              a) Administrative Procedure

¶11           That portion of the Arizona law dealing with “county employee merit systems” is

found in chapter 2, article 10 of title 11, A.R.S. §§ 11-351 through 11-356. Section 11-356

provides:

               A. Any officer or employee in the classified civil service may be
               dismissed, suspended or reduced in rank or compensation by the
               appointing authority after appointment or promotion is complete
               only by written order, stating specifically the reasons for the
               action. The order shall be filed with the clerk of the board of
               supervisors and a copy thereof shall be furnished to the person to
               be dismissed, suspended or reduced.

               B. The officer or employee may within ten days after
               presentation to him of the order, appeal from the order through the
               clerk of the commission. Upon the filing of the appeal, the clerk
               shall forthwith transmit the order and appeal to the commission for
               hearing.

               C. Within twenty days from the filing of the appeal, the
               commission shall commence the hearing and either affirm, modify
               or revoke the order. The appellant may appear personally,
               produce evidence, have counsel and, if requested by the appellant,
               a public hearing.




                                                6
                D. The findings and decision of the commission shall be final,
                and shall be subject to administrative review as provided in title
                12, chapter 7, article 6.

The parties do not dispute that the County’s grievance process was adopted pursuant to article 10.

Employee dismissals are clearly matters that must be pursued within the grievance process, and

Mullenaux’s claims fairly fall within the purview of the County’s Merit System’s grievance

procedures.

¶12            In support of the trial court’s grant of summary judgment in favor of the County on

Mullenaux’s wrongful discharge claim, the County relies, as it did in the trial court, on Guertin

v. Pinal County, 178 Ariz. 610, 875 P.2d 843 (App. 1994). In Guertin, the plaintiff sued Pinal

County after the county dismissed him. The plaintiff had unsuccessfully appealed his discharge to

the county merit commission, but did not seek judicial review of the adverse decision. Instead, the

plaintiff sued Pinal County alleging, inter alia, that he had been wrongfully discharged. This court

found that the plaintiff’s wrongful discharge claim was “squarely within the jurisdiction of the

county merit system” and that his exclusive remedy was to appeal the decision in accordance with

the Administrative Review Act, A.R.S. §§ 12-901 through 12-914. 178 Ariz. at 612, 875 P.2d

at 845. Mullenaux’s wrongful discharge claim, based specifically on whistleblower retaliation and

his having made a claim for workers’ compensation benefits, also falls within the Graham County

Merit Commission’s jurisdiction.

¶13            Mullenaux contends, however, that the use of the word “may” in Steps Two and

Three of the grievance procedures renders them permissive. See Campbell v. Chatwin, 102 Ariz.

251, 428 P.2d 108 (1967) (when administrative remedies are permissive, a party need not exhaust

them). He contends, therefore, that he was not required to pursue them as a prerequisite to filing

                                                 7
his action. The County insists that its grievance procedures are mandatory and that the word

“may” simply affords an employee the option of not pursuing further review. As a result, the

County contends, Mullenaux’s claims are barred under § 12-902(B), which states: “Unless review

is sought of an administrative decision within the time and in the manner provided in this article,

the parties to the proceeding before the administrative agency shall be barred from obtaining

judicial review of the action.”

¶14            Arizona case law solidly supports the County’s argument that the presence of the

word “may” in an administrative procedure does not necessarily render the procedure permissive.

See Estate of Bohn v. Waddle, 174 Ariz. 239, 848 P.2d 324 (App. 1992) (statutory administrative

process for tax refund claims and appeals mandatory despite use of word “may”); Gilbert v. Bd.

of Med. Exam’rs, 155 Ariz. 169, 745 P.2d 617 (App. 1987) (statute’s use of “may” rather than

“shall” does not render it permissive); Farmers Inv. Co. v. Ariz. State Land Dep’t, 136 Ariz. 369,

666 P.2d 469 (App. 1982) (finding on rehearing that word “may” does not make statute optional

and merely affords opportunity not to appeal); Ariz. Law Enforcement Merit Sys. v. Dann, 133

Ariz. 429, 652 P.2d 168 (App. 1982) (word “may” signifies only the option to decline further

review).3 Mullenaux cites only Southwestern Paint & Varnish Co. v. Arizona Department of

Environmental Quality, 194 Ariz. 22, 976 P.2d 872 (1999), as support for his argument that the

word “may” denotes permissiveness. Although Mullenaux is correct that, in Southwestern Paint,

our supreme court found that “a rule providing for rehearing of an administrative decision that


       3
        We recognize that, although our supreme court disapproved many of these cases in
Southwestern Paint & Varnish Co. v. Arizona Department of Environmental Quality, 194 Ariz.
22, 976 P.2d 872 (1999), its disapproval was based on issues independent of the interpretation of
the word “may.”

                                                8
contain[ed] the word ‘may’ [was] permissive,” he does not accurately characterize the holding in

that case. There, our supreme court held that a party who had pursued an administrative

procedure to a final decision did not need to request an agency rehearing of that decision before

seeking judicial review of the agency’s final action.4 The court did not hold, as Mullenaux

suggests, that a rule containing the word “may” is always permissive. The exhaustion analysis of

Mullenaux’s wrongful discharge claim applies equally to his breach of contract claim, requiring

that it also must have been pursued through the county’s administrative procedures.

¶15             We find the County’s argument correct and conclude that Mullenaux was required

to pursue Steps Two and Three of the grievance procedures to obtain further review of his

wrongful discharge and breach of contract allegations before he could sue the County on those

claims. We decline to adopt Mullenaux’s interpretation of that process, which would render it

permissive.

      b) Statutory Bases for the Claims

¶16             Mullenaux also claims that independent statutory bases permit him to bring his

wrongful discharge claim in superior court, notwithstanding his failure to pursue the County’s

administrative process to a final conclusion. Mullenaux asserts that his claim arises under the

Arizona Employment Protection Act (AEPA), A.R.S. § 23-1501(3), which provides, in pertinent

part, as follows:




        4
        The conceptual distinction between exhaustion of administrative remedies and the finality
of an administrative agency’s decision has also been noted in Darby v. Cisneros, 509 U.S. 137,
113 S. Ct. 2539, 125 L. Ed. 2d 113 (1993).

                                               9
                     3. An employee has a claim against an employer for
              termination of employment only if one or more of the following
              circumstances have occurred:

                      ....

                     (c) The employer has terminated the employment relationship
              of an employee in retaliation for any of the following:

                      ....

                      (ii) The disclosure by the employee in a reasonable manner
              that the employee has information or a reasonable belief that the
              employer, or an employee of the employer, has violated, is violating
              or will violate the Constitution of Arizona or the statutes of this state
              to either the employer or a representative of the employer who the
              employee reasonably believes is in a managerial or supervisory
              position and has the authority to investigate the information provided
              by the employee and to take action to prevent further violations of
              the Constitution of Arizona or statutes of this state or an employee
              of a public body or political subdivision of this state or any agency
              of a public body or political subdivision.

                      (iii) The exercise of rights under the workers’ compensation
              statutes prescribed in chapter 6 of this title.

¶17           As further support for his contention that the superior court had jurisdiction to

decide this claim, Mullenaux cites A.R.S. § 38-532, which identifies whistleblower retaliation as

a “prohibited personnel practice” and creates a cause of action against an employer for engaging

in such practices. Division One of this court has held that a nonclassified employee need not

exhaust his or her administrative remedies under § 38-532 before maintaining an action for

wrongful discharge under that statute. Walters v. Maricopa County, 195 Ariz. 476, 990 P.2d 667

(App. 1999) (in context of § 38-532, administrative remedies are permissive, and nonclassified

employee may file action in superior court without exhausting such remedies).




                                                 10
¶18            The County responds that, because Mullenaux did not specifically cite either

§ 23-1501 or § 38-532 in his complaint to support his claim, he has only raised a common law

claim, and there is no longer a common law cause of action for wrongful termination. As

Mullenaux correctly observes, however, Arizona is a notice pleading state. See Rosenberg v.

Rosenberg, 123 Ariz. 589, 601 P.2d 589 (1979). A pleading need only contain “[a] short and

plain statement of the claim showing that the pleader is entitled to relief,” Rule 8(a)(2), Ariz. R.

Civ. P., 16 A.R.S., Pt. 1, and our courts have long held that “failure to make reference to a

statute [in a complaint] is not fatal to a claim.” Toney v. Bouthillier, 129 Ariz. 402, 408, 631 P.2d

557, 563 (1981); see also Logan v. Forever Living Products Int’l, 203 Ariz. 191, 52 P.3d 760

(2002) (if employee’s claim cognizable under AEPA, it should not be dismissed); Mercer v.

Vinson, 85 Ariz. 280, 288, 336 P.2d 854, 860 (1959) (“[P]ublic statutes need not be pleaded or

offered into evidence since courts will take judicial notice thereof.”). Accordingly, we reject the

County’s argument that Mullenaux’s complaint was deficient and failed to properly state the claim.

¶19            We note that § 23-1501(3) applies to all employees, whether public or private. See

Taylor v. Graham County Chamber of Commerce, 201 Ariz. 184, ¶8, 33 P.3d 518, ¶8 (App.

2001) (APEA “applies to all employers”). By contrast, § 38-532 applies only to public employees.

See A.R.S. § 38-531(1) (defining “employee” as used in § 38-532 as including county employees).

By providing direct causes of action, both sections appear to be inconsistent with the administrative

requirements of § 11-356, which also applies only to public employees. When statutes appear to

be inconsistent, we “attempt to harmonize their language to give effect to each.” UNUM Life Ins.

Co. of Am. v. Craig, 200 Ariz. 327, ¶11, 26 P.3d 510, ¶11 (2001). The provisions of § 11-356,




                                                 11
which include requiring an employee to exhaust his or her administrative remedies, can be

harmonized with those of § 38-532 and § 23-1501.

¶20            A classified public employee who has a claim that is subject to a merit system

administrative procedure must pursue the claim through that procedure. If the employee is

successful in the administrative proceeding, further legal action may be obviated. Additionally,

claims that the employee raised or could have raised in the administrative proceeding will likely

be barred from subsequent litigation in superior court by res judicata. See Pinkerton v. Pritchard,

71 Ariz. 117, 223 P.2d 933 (1950) (res judicata applies both to claims actually raised and claims

capable of having been raised); Hawkins v. State, 183 Ariz. 100, 900 P.2d 1236 (App. 1995) (res

judicata applies to certain administrative agency decisions). However, the employee could still file

an action in superior court asserting any claims under § 23-1501 and § 38-532 that were neither

completely resolved in nor precluded by the administrative process. And the employee retains the

option of appealing the final agency action to superior court pursuant to § 12-902(B). Therefore,

application of § 11-356 to Mullenaux’s claims does not conflict with or diminish the effectiveness

of either § 38-532 or § 23-1501.

¶21            Mullenaux also relies on Walters to support the proposition that he can maintain his

statutory causes of action without exhausting his administrative remedies. In Walters, Maricopa

County dismissed a nonclassified employee after he had threatened to report the county’s illegal

activity to the attorney general. In its termination letter, which did not include a specific reason

for the termination, the county told the employee he did not have a right to appeal the termination.

Division One of this court concluded that § 38-532 permits a nonclassified employee to file an

action in superior court without exhausting the statute’s permissive administrative remedies. The

                                                12
court also stated in dicta that, if the administrative procedure provided by § 38-532 were regarded

as mandatory, it would effectively repeal § 23-1501(3)(c)(ii) by “taking away” the right to file a

wrongful termination action. Walters, 195 Ariz. 476, ¶25, 990 P.2d 677, ¶25. The court did not

discuss, however, the nature of administrative remedies created by § 11-356; rather, it addressed

remedies specifically provided in § 38-532. Further, Mullenaux was not a nonclassified employee.

Consequently, Walters is not applicable here.

¶22            We conclude, then, that a classified public employee must exhaust his or her

administrative remedies available under the system provided by §§ 11-351 through 11-356 before

filing an action in superior court under § 23-1501 or § 38-532. Although Mullenaux’s failure to

cite either § 23-1501 or § 38-532 in his complaint to support his allegations neither invalidates nor

precludes his statutory cause of action for wrongful discharge, because he failed to exhaust the

available administrative remedies provided by the County’s grievance procedures, his action for

wrongful discharge and breach of contract was premature. See § 12-902(B). Accordingly, we

need not reach the question whether material questions of fact existed as to either claim that might

have precluded summary judgment. See Ariz. R. Civ. P. 56(c).

Defamation Claim

¶23            Mullenaux advances a multitude of theories in support of his argument that the trial

court erred by granting the County summary judgment on his defamation claim. We do not reach

Mullenaux’s contentions, however, because he consented to the County’s release of Muell’s report.

¶24            Consent is a complete defense to defamation. See Restatement (Second) of Torts

§ 583 (1977); Glaze v. Marcus, 151 Ariz. 538, 729 P.2d 342 (App. 1986). Mullenaux does not

deny that, before it disclosed Muell’s report to King, the County notified Mullenaux of King’s

                                                 13
public records request and offered Mullenaux an opportunity to object to the release of the report.

The only evidence in the record on this issue establishes that Mullenaux consented to the release.

Mullenaux points to nothing suggesting that he objected to the release. Accordingly, we find no

disputed issue of fact on whether the County is protected by the consent defense. In light of this

conclusion, we need not decide whether any asserted privilege would also provide the County a

defense. See Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191, 836 P.2d 404 (App. 1992)

(appellate court affirms trial court judgment if it can be sustained on any theory). The trial court

did not err by granting summary judgment in favor of the County on Mullenaux’s defamation

claim.

                                            Conclusion

¶25            We affirm the trial court’s order granting summary judgment in favor of the County

on all of Mullenaux’s claims.



                                                ________________________________________
                                                J. WILLIAM BRAMMER, JR., Presiding Judge

CONCURRING:



______________________________________
M. JAN FLÓREZ, Judge



______________________________________
JOSEPH W. HOWARD, Judge




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