RABA v. CONNECT

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

RABA KISTNER, INC.,
Plaintiff/Appellee/Cross-Appellant,

v.

CONNECT 202 PARTNERS, LLC, et al.,
Defendants/Appellants/Cross-Appellees.

No. 1 CA-CV 24-0072
FILED 02-12-2026

Appeal from the Superior Court in Maricopa County
No. CV2019-013828, CV2020-000440
The Honorable Danielle J. Viola, Judge

AFFIRMED IN PART; REVERSED IN PART; VACATED IN PART;
AND REMANDED

COUNSEL

Lewis Roca Rothgerber Christie LLP, Phoenix
By Susan M. Freeman, Robert F. Roos, Adam T. Reich, Brooks Brennan
Counsel for Defendants/Appellants/Cross-Appellees

Holden Willits PLC, Phoenix
By Robert G. Schaffer, Michael J. Holden, Kevin M. Estevez
Co-Counsel for Plaintiff/Appellee/Cross-Appellant

Duane Morris LLP, Austin, Texas
By Benton T. Wheatley (Pro Hac Vice), James V. Earl (Pro Hac Vice)
Co-Counsel for Plaintiff/Appellee/Cross-Appellant
 RABA v. CONNECT, et al.
Opinion of the Court

OPINION

Judge David B. Gass delivered the opinion of the court, in which Presiding
Judge Brian Y. Furuya and Chief Judge Randall M. Howe joined.

G A S S, Judge:

¶1 A deal is a deal, especially in Arizona—a right to contract
state. With no significant overriding public policy considerations, Arizona
holds parties to their deals. No such considerations apply to the terms of
the deal here—a five-year, multi-million-dollar, commercial contract
between two sophisticated commercial entities. The court thus holds the
parties to the deal’s express terms.

¶2 Raba Kistner, Inc. wants to avoid being held to the terms of
the deal—a professional services agreement (the Agreement) it made with
Connect 202 Partners, LLC. For almost two years, Raba overbilled Connect.
When Connect identified the overbilling during a contractually authorized
audit, Connect clawed back the overpayments by reducing its later
payments to Raba. Raba sued, arguing in key part: (1) it did not overbill
Connect under the Agreement, and (2) even if it did overbill Connect, the
superior court should allow Raba to keep Connect’s overpayments under
the voluntary payment doctrine. The superior court correctly ruled Raba
overbilled Connect, a ruling Raba does not challenge on appeal. The
superior court then ruled Connect did not have the right to audit Raba’s
billing statements after it paid them, so Raba was entitled to recover the
clawed-back overpayments under the voluntary payment doctrine.
Connect appealed that ruling and others. Raba cross-appealed on other
grounds, including equitable estoppel.

¶3 Because the superior court correctly found that the
undisputed evidence did not support Raba’s equitable estoppel claim, the
court affirms that ruling. The court reverses the superior court’s ruling in
Raba’s favor on the voluntary payment doctrine. The thus court vacates the
superior court’s ruling on the payment bond, the award of attorney fees and
costs, and the judgment. With that, the balance of Raba’s cross-appeal issues
are moot. The court thus remands to the superior court to consider
Connect’s claims for attorney fees and costs and its claims under the
payment bond.

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FACTUAL AND PROCEDURAL HISTORY

¶4 The Agreement arises out of an Arizona Department of
Transportation project to extend State Route 202 to link Interstate 10 south
of Phoenix to I-10 west of Phoenix. The Loop 202 South Mountain Freeway
Project extended State Route 202 by adding a 22-mile divided highway
south and west of South Mountain Park, allowing traffic to bypass
downtown Phoenix.

¶5 The Department retained Connect to design and build the
Project and then maintain it for 30 years. A detailed contract governed the
relationship between the Department and Connect. That contract required
Connect to subcontract with others to provide quality assurance services
for the Project. Connect entered the Agreement so Raba would provide
those quality assurance services, including Raba’s certification to the
Department that it had inspected Connect’s work for compliance.

¶6 The parties entered the almost 100-page Agreement after
extensive negotiations. Connect agreed to pay Raba a contract price “not-
to-exceed” $26,208,854 for providing services, most of which were labor
costs. This appeal focuses on the details underlying the labor multiplier and
Connect’s audit rights.

I. Raba agreed it would bill the labor multiplier for regular hours but
not overtime hours.

¶7 Connect agreed to pay Raba for its direct labor costs hourly,
using a labor multiplier to compensate Raba for other indirect costs such as
taxes, insurance, overhead, benefits, and profit. The Agreement’s labor
multiplier was 2.21 for the first 40 hours an employee worked each week.
The Agreement included an example applying the labor multiplier: “Labor
charges reimbursable by [Connect] for a [Raba] employee with actual W-2
earnings of $10 per hour would be $22.10 per hour.”

¶8 In negotiations leading up to the Agreement, Raba also wanted
the labor multiplier to apply to overtime hours, but Connect wanted the
labor multiplier to apply only to the first 40 hours an employee worked each
week. Connect’s view ultimately prevailed, and the Agreement expressly
did not apply the labor multiplier to overtime hours. Instead, the
Agreement said “overtime labor [will] be treated as follows. The [2.21]
specified Labor Multiplier shall be applied to the straight-time labor rate
only, eliminating the premium portion from the calculation. The premium

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portion of overtime labor shall be paid with no mark-up.” Schedule B to the
Agreement included an example showing how the labor multiplier applied
to a non-exempt Raba employee who works 50 hours in a single week.
Schedule B showed the labor multiplier would apply to the first 40 hours,
but would not apply to the 10 hours of overtime.

II. Under the Agreement, Raba must maintain certain records so the
parties can exercise their audit rights.

¶9 At the superior court, Raba argued the Agreement did not
give Connect the right to audit Raba’s billing statements. Connect
disagreed. The superior court concluded the Department had the right to
audit Raba, but it ruled Connect did not have that right.

¶10 The Agreement says the labor multiplier “shall be determined
and documented in accordance with the provisions” in Part III, Section 24.0.
Part III, Section 24.1 says:

Contractor shall maintain all records and accounts pertaining
to Work performed on other than a solely lump sum basis for
a period of at least five (5) years after final payment.
Company, Owner and/or FHWA shall have the right to
audit, copy and inspect said records and accounts at all
reasonable times during the course of such Work and for the
above five (5) year period for the purpose of verifying costs
incurred.

¶11 The Agreement defines Contractor as Raba, Company as
Connect, and Owner as the Department. The Agreement thus says
“[Connect], [the Department,] and/or FHWA shall have the right to audit,
copy and inspect said records and accounts at all reasonable times during
the course of such Work and for the above five (5) year period for the
purpose of verifying costs incurred.” Section 24.3 adds Connect’s audit
rights “include the right to observe the business operations of [Raba] and
its Subcontractors to confirm the accuracy of Books and Records.”

III. After six months, Raba begins overbilling Connect by applying
the labor multiplier to overtime.

¶12 Under the Agreement, Raba submitted monthly invoices to
Connect and Connect would make monthly progress payments to Raba.
The Agreement required Raba to certify its invoices to show the work was
complete, correct, and authentic. Connect had the right to make “partial or

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provisional payment on an invoice in dispute, pending audit and
reconciliation of the total charge.”

¶13 As the superior court found, Raba’s first six invoices did not
include any overtime labor. Starting with Raba’s seventh invoice, Raba
applied the labor multiplier to overtime. Connect representatives
(including Connect’s quality manager, contracts manager, and project
director) approved the invoices, and Connect paid them.

IV. Through an audit, Connect discovered Raba’s overbilling and took
corrective action.

¶14 About two years into the Agreement, Connect realized Raba
likely would exceed the not-to-exceed price. As a result, Connect audited
Raba’s past invoices and learned Raba had been billing (and Connect had
been paying) the labor multiplier on overtime. Connect sent Raba a letter
identifying the incorrect invoicing for the labor multiplier on overtime and
requested a meeting. For several months, Raba continued to submit
invoices to Connect applying the labor multiplier to overtime. Connect
ultimately sent Raba a letter saying, through the rest of the project, Connect
would withhold payments from Raba for the amount Raba overbilled for
overtime.

¶15 Connect also began a claw-back process for the amounts it
already paid Raba for the labor multiplier on overtime. In that process, it
clawed back an additional $1,950,000 ($350,000 for five months and
$200,000 for one month).

V. Raba sued Connect and Connect counterclaimed.

¶16 In its amended complaint, Raba asserted these claims against
Connect: breach of contract, breach of the implied covenant of good faith
and fair dealing, violation of Arizona’s prompt pay act for Department
construction contracts under A.R.S. §§ 28-411.C and -6924.A.2, a claim
against Connect’s payment bond, declaratory judgment, and an alternative
claim for unjust enrichment. Connect counterclaimed, alleging breach of
contract and the implied covenant of good faith and fair dealing. Connect
also sought declaratory relief. In answering Connect’s counterclaim, Raba
asserted the voluntary payment doctrine as an affirmative defense.

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VI. On summary judgment, the superior court concluded Connect did
not have audit rights under the Agreement and awarded Raba
$1,950,000 in clawed-back monies under the voluntary payment
doctrine.

¶17 Connect and Raba filed competing motions for summary
judgment. Raba sought summary judgment on (1) its breach of contract,
payment bond, and declaratory relief claims against Connect; and (2)
Connect’s counterclaims alleging breach of contract, declaratory relief, and
good faith and fair dealing. Connect sought summary judgment on (1)
Raba’s claims against Connect’s claims (declaratory relief, breach of
contract, good faith and fair dealing, prompt payment act, payment bond,
and unjust enrichment); and (2) Connect’s counterclaims.

¶18 As a matter of contract interpretation, the superior court
analyzed the Agreement’s terms and ruled the labor multiplier did not
apply to overtime hours, saying it “only applies to the first 40 hours of
straight time labor and not to any overtime.” The superior court then found
the voluntary payment doctrine applied to the $1,950,000 claw-back
amount. The superior court reasoned Connect had no contractual
obligation to make the payments to Raba under the Agreement and
Connect “had every opportunity to know that Raba was applying the labor
multiplier to overtime hours,” given the detail in Raba’s invoices. In that
process, the superior court ruled Raba waived the voluntary payment
doctrine under the Agreement (including the audit, review, and back
charge provisions). It also rejected Connect’s argument about paying the
invoices under duress because of time pressures created under Arizona’s
prompt payment act for Department construction contracts. 1 For the
amounts Connect withheld after identifying the overbilling ($630,089.98),
the superior court found the voluntary payment doctrine did not apply
because Connect had not actually paid that money to Raba.

¶19 The superior court rejected Raba’s equitable estoppel claim
for the withheld amount because Raba did not change its position once
Connect began withholding the monies in January 2019. For that reason,
Raba could not show Connect caused Raba any harm. Connect acted
consistent with the Agreement when it stopped paying the labor multiplier
overtime hours. The superior court also found Raba could not show the

1 As discussed below, Arizona has two prompt pay acts, one applies just to

the Department’s construction contracts under A.R.S. § 28-411, and one
generally applies to all other construction contracts under A.R.S. §§ 32-1181
to -1188.

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reliance required for an equitable estoppel claim. Based on those rulings,
the superior court concluded Connect was entitled to summary judgment
on Raba’s good faith and fair dealing, prompt pay act, and unjust
enrichment claims.

¶20 After subsequent motion practice, the superior court sua
sponte—and over Connect’s objection—granted Raba summary judgment
on Connect’s good faith and fair dealing claim, based on the voluntary
payment doctrine. In doing so, the superior court concluded the voluntary
payment doctrine was a complete bar to Connect’s recovery of the monies
it clawed back, even if the overpayments resulted from Raba’s breach of the
implied covenant or other inequitable conduct and because Connect’s
implied covenant claim sought the same damages as its express breach of
contract claim.

¶21 In addressing the parties’ competing claims for an award of
attorney fees and costs under A.R.S. § 12-341.01 and the payment bond, the
superior court granted Connect’s application related to claims not at issue
in this appeal and denied the rest of both parties’ applications. After the
superior court entered final judgment, Raba moved to alter or amend it,
challenging the superior court’s determination Raba was not entitled to
attorney fees or prejudgment interest. The superior court denied Raba’s
requested relief.

¶22 The court has jurisdiction over Connect’s timely appeal and
Raba’s timely cross-appeal under Article VI, Section 9, of the Arizona
Constitution and A.R.S. §§ 12-120.21.A.1 and -2101.A.1.

DISCUSSION

¶23 Summary judgment is appropriate when “the facts produced
in support of the claim or defense have so little probative value, given the
quantum of the evidence, 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 (1990); Ariz. R. Civ. P. 56(a) (“The court shall
grant summary judgment if the moving party shows that there is no
genuine dispute as to any material fact and the moving party is entitled to
judgment as a matter of law.”). Interpretation of a contract is a question of
law, which the court reviews de novo. Powell v. Washburn, 211 Ariz. 553, 555–
56 ¶ 8 (2006).

I. Two undisputed facts control the outcome of this appeal: (1) The
Agreement did not allow Raba to charge the labor multiplier on

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overtime hours; and (2) the Agreement gave Connect the right to
audit Raba’s bills and Connect’s progress payments.

¶24 As to the first undisputed fact, the superior court issued a
detailed minute entry ruling on the competing motions granting them in
part and denying them in part. As a matter of contract interpretation, the
superior court analyzed the Agreement’s terms and ruled the labor
multiplier does not apply to overtime hours, saying it “only applies to the
first 40 hours of straight time labor and not to any overtime.” Raba does not
challenge that ruling on appeal.

¶25 As to the second undisputed fact, Connect has the right to
audit Raba’s bills under the Agreement. True, the superior court concluded
the Department, but not Connect, had the right to audit Raba. Connect
challenges that conclusion based on the Agreement’s express terms. The
Agreement’s terms support Connect’s challenge. The Agreement says
Connect, the Department, and FHWA each “have the right to audit, copy
and inspect said records and accounts at all reasonable times during the
course of such Work and for the above five (5) year period for the purpose
of verifying costs incurred.” Raba’s answering brief is silent on the issue.
Instead, Raba argues the Agreement’s audit provisions do not affect Raba’s
claim under the voluntary payment doctrine. The court rejects that
argument in section II.D below. Because the Agreement’s terms support
Connect’s argument and Raba does not challenge that argument, that
undisputed fact stands.

¶26 Based on those two undisputed facts, Raba had no right to be
paid the labor multiplier on overtime hours. And to the extent Connect paid
the labor multiplier on overtime hours, it could rely on its audit rights to
recover the overpayments.

¶27 Those points establish that Connect had a valid restitution
claim to recover the overpayments. Arizona law and the Restatement align
on the validity of Connect’s restitution claim. As the Restatement says,
“Mistaken payment of money not due presents one of the core cases of
restitution, whether liability is explained by reference to the transferee’s
unjustified enrichment or to the transferor’s unintended dispossession.
Such a payment gives rise to a prima facie claim in restitution . . . .”
Restatement (Third) Restitution and Unjust Enrichment § 6 cmt. a (A.L.I.
2011).

¶28 Because Connect has a valid restitution claim for the
overpayments, Raba must overcome it by showing “the setting [is] one in

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which opposing principles—representing fundamental limits to recovery
in restitution—are simultaneously applicable.” Id.

II. The terms of the Agreement must control unless Raba can identify
a significant overriding public-policy consideration requiring the
court to override the parties’ bargain.

¶29 Raba argues the voluntary payment doctrine is a significant
overriding public policy. It is not.

A. The voluntary payment doctrine does not apply broadly to
every voluntary overpayment.

¶30 The voluntary payment doctrine has a long history in
Arizona. In 1914, the Arizona Supreme Court applied the equitable
voluntary payment doctrine to a party who sought restitution for voluntary
payments the party made knowing it was not obligated to make those
payments. Merrill v. Gordon, 15 Ariz. 521, 532 (1914). Merrill explained,
“Except where otherwise provided by statute, a party cannot by direct
action or by way of set-off or counterclaim recover money voluntarily paid
with a full knowledge of all the facts, and without any fraud, duress, or
extortion, although no obligation to make such payment existed.” Id.
(quoting 30 Cyc. 1298); accord Moody v. Lloyd’s of London, 61 Ariz. 534, 540
(1944) (same); Wood v. Nw. Hosp., LLC, 249 Ariz. 600, 604 ¶ 14 (App. 2020)
(same).

¶31 That said, application of the voluntary payment doctrine
depends on the facts of the case, not a blind application of the doctrine,
especially when the payment is made in the context of a contract. See, e.g.,
Douglas Inv. Co. v. Van Ness, 105 Ariz. 541, 545 (1970) (recognizing party
could recover overpayment if the parties understood a payment could “be
later adjusted as to amount in the event [the person] overpaid”); Ali v. Sitts, 1 Ariz. App. 439, 444 (1965) (recognizing the voluntary payment doctrine
did not apply to a commercial tenant’s lease overpayments).

¶32 The Restatement recognizes the limitations of the voluntary
payment doctrine, as has Arizona. The Restatement says:

The rule appears in frequent judicial statements to the effect
that “money voluntarily paid with knowledge of the facts
cannot be recovered back.” Statements of this kind must be
treated with caution. In a business setting, it is at least
paradoxical to suppose that the overpayment of an asserted
(or any payment of a nonexistent) liability could ever be

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“voluntary,” and the proper operation of the voluntary
payment rule must be realistic rather than artificial.

Restatement (Third) Restitution and Unjust Enrichment § 6 cmt. e
(A.L.I. 2011).

¶33 Consistent with the Restatement, Arizona courts have
expressed doubt about applying the voluntary payment doctrine in a
business setting involving progress payments. See Ali, 1 Ariz. App. at 444.
As the court said 60 years ago in Ali:

If it be that the . . . payments can be classified in their entirety
as voluntary payments without any right of off-set, then no
one would be safe if that person paid any sum before the exact
amount due became fixed or if payment was made before the
due date or perhaps until sued, the matter reduced to
judgment and the judgment had become final.

Id. Just as Ali was skeptical that any business could safely make progress
payments “before the exact amount due became fixed,” so is the court here.
And the court’s skepticism rises when those payments are subject to
contractual audit rights and based on billing statements from the other
party.

B. The Parties’ freedom to contract significantly limits when the
voluntary payment doctrine will apply.

¶34 Arizona considers private parties’ freedom to contract a
foundational common-law principle and a paramount public policy.
Zambrano v. M & RC II LLC, 254 Ariz. 53, 58 ¶ 10 (2022). For that reason, the
court must honor it unless the contract term is unconscionable, illegal, or
contrary to public policy. Id. ¶ 12.

¶35 Arizona’s commitment to parties’ freedom to contract is
rooted in its Bill of Rights. See Ariz. Const. art. II, § 25. Article 2, Section 25
says, “No bill of attainder, ex-post facto law, or law impairing the obligation
of a contract, shall ever be enacted.” Id. A parties’ freedom to contract is a
“paramount public policy.” Zambrano, 254 Ariz. at 58 ¶ 10. The court
upholds the freedom to contract unless specific circumstances, such as
legislative prohibitions or overriding public policy considerations, demand
limitations on contractual terms. See id. ¶ 11 (considering whether implied
warranty of workmanship and habitability is waivable).

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¶36 The court hesitates to declare contract terms unenforceable on
public policy grounds, but it will do so in rare cases when enforcement
would injure the public welfare. Id. at 58 ¶ 11. The court will not infringe
on parties’ freedom to contract for terms they choose unless those terms
violate legislation or “when an identifiable public policy clearly outweighs
enforcement.” Id. The court “will not refuse to enforce a contract merely
because one party made a bad deal, even when the terms are harsh.” Id.
¶ 10 (citations omitted). The court presumes “parties are best situated to
decide whether contractual terms are beneficial, especially in commercial
settings.” Id. ¶ 11.

¶37 In identifying those rare cases, the court balances the interests
in enforcing contractual terms against public policy concerns. Id. To protect
the parties’ bargained-for expectations while ensuring contracts do not
harm public welfare or violate established legal principles, the court will
enforce contract terms unless they are unconscionable, illegal, or contrary
to public policy. Id. at 59 ¶ 12.

¶38 To identify the relevant public policy, the court examines
Arizona’s constitution, legislation, and judicial decisions. Id. ¶ 11. In
Zambrano, the Arizona Supreme Court held a new home builder to the
implied warranty of workmanship and habitability despite the builder’s
efforts to use express contract terms to avoid it. Id. at 64 ¶ 36. Zambrano
considered several overriding bases, including the unequal bargaining
power between new homebuyers and new homebuilders and sellers. Id. at
61 ¶ 21. It also emphasized public policy considerations, including
protecting homebuyers from latent construction defects, could override the
ability of parties to contract on terms that would vitiate those public
policies. Id. at 61–64 ¶¶ 24–36.

¶39 Arizona has recognized other limited times when the court
will override the parties’ express contract terms. See, e.g., Dobson Bay Club II
DD, LLC v. La Sonrisa de Siena, LLC, 242 Ariz. 108 (2017) (voiding contractual
late fee term as an unenforceable penalty because contract remedies should
be compensatory, not punitive); CSA 13-101 Loop, LLC v. Loop 101, LLC, 236
Ariz. 410 (2014) (holding parties could not prospectively waive statutory
rights protecting public interests, including the right to have the fair market
value of property credited against debt obligations); Am. Fed’n of Lab. v. Am.
Sash & Door Co., 67 Ariz. 20 (1948) (acknowledging the State may limit
freedom to contract based on its interest of public health, safety, and
welfare); Green Cross Med., Inc. v. Gally, 242 Ariz. 293 (App. 2017) (ruling
contracts are enforceable unless the acts to be performed are illegal or
contrary to public policy, or if the legislature demonstrated its intent to

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prohibit enforcement); Nickerson v. Green Valley Recreation, Inc., 228 Ariz.
309 (App. 2011) (recognizing the court may invalidate contracts if they are
oppressive or unconscionable).

C. The voluntary payment doctrine does not override Connect’s
right to audit the progress payments to address Raba’s bills in
which Raba applied the labor multiplier to overtime hours.

¶40 The Agreement’s express terms gave Connect the right to
audit Raba’s invoices. Both Raba and Connect negotiated the Agreement’s
terms, terms beneficial to both. The resulting Agreement is more than 100
pages long. The Agreement’s terms expressly did not allow Raba to bill for
a labor multiplier on overtime. Raba did so anyway. Connect paid those
bills until it audited them using its contractual audit rights and identified
the discrepancy.

¶41 With that understanding, neither Merrill nor any other
Arizona case expressly addresses how to apply the voluntary payment
doctrine when the parties contractually allocate the risk of an overpayment
through an audit procedure. But Arizona has addressed the allocation of
risk when a party makes progress payments. See Douglas Inv. Co. v. Van
Ness, 105 Ariz. 541, 545 (1970). As Van Ness said, “A person who has paid
to another an amount of money pursuant to an understanding that the
payment was not final and would be later adjusted as to amount in the
event [the person] overpaid or in the event [the person] underpaid, is
entitled to a refund in the amount of the overpayment.” Id. Consistent with
Van Ness, when a contract explicitly allocates the risk of overpayment of
progress payments, the party overpaying may recover the overpayment
even without audit rights.

¶42 And five years before Van Ness, the court reached the same
conclusion when it considered progress payments in Ali:

Under the . . . arrangement in effect . . . , there was no legal
obligation . . . to make any payments until the final returns on
each crop had been calculated. Under these circumstances it
can be said that in a sense . . . payments [made] before a due
date . . . were voluntarily made. To hold that one who makes
advanced payments in relation to an obligation which is
unascertained only in the amount and as to the date that the
payment became due, thereby makes such payments
‘voluntary’ which cannot be off-set against the debt when it
becomes due would be harsh indeed. The character of the

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obligation under the written lease was the same as the
character of the obligation under the verbal arrangement,
namely an obligation to pay rent for the use of the land.

1 Ariz. App. at 444. Here, though Connect had to make monthly payments,
the parties agreed Connect had the contractual right to audit those
payments and make appropriate adjustments.

¶43 A comparison to a recent case in which the court applied the
voluntary payment doctrine further makes this point. In Wood, a hospital
and a doctor entered a multi-year contract in which the hospital agreed to
pay the doctor annually based on the number of procedures the doctor
performed at the hospital that year. 249 Ariz. at 602–03 ¶¶ 5–6. The Wood
court concluded the voluntary payment doctrine prevented the hospital
from recovering its overpayment under the contract with the doctor. Id.

¶44 This case leads the court to a different result because of crucial
differences from Wood.

• The Wood contract was subject to an annual compensation cap. Id. at
603 ¶ 8. Here, the Agreement had an overall, but not annual,
compensation cap.

• The hospital maintained the records of how many procedures the
doctor performed, evaluated whether the doctor exceeded the
compensation cap for that contract year, and calculated the amount
it owed the doctor. Id. at 602–03 ¶¶ 6–7, 9. Here, Raba kept track of
its work and billed Connect, not the other way around.

• The hospital paid the doctor more than the annual compensation cap
for two years. Id. at 603 ¶ 9. Here, Connect never paid Raba in excess
of the compensation cap.

• The Wood contract included an audit provision requiring quarterly
audits and reviews. Id. at 603 ¶ 7. Here, the audit provision applied
“at all reasonable times during the course of such Work and for the
above five 5 year period for the purpose of verifying costs incurred.”

• The hospital sought to adjust for its overpayments after its
contractual quarterly audit rights had lapsed. Id. at 604 ¶¶ 11–13.
Here, Connect’s audit rights had not lapsed when Connect acted.

• In the third contract year, the hospital withheld earned wages for
overpayments it made to the doctor “in excess of a[n annual]

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contractual compensation cap” during the previous two contract
years. Id. at 602–04 ¶¶ 2, 11–12. Here, Connect withheld the
payments during the same, five-year contract term.

¶45 Wood affirmed summary judgment for the doctor was
“consistent with [the] principles of equity.” Id. at 607 ¶ 30. Wood reasoned
the voluntary payment doctrine barred the hospital from recovering its
overpayments because the doctor relied on the hospital’s payments after
the hospital allowed its audit rights to lapse and paid the doctor in excess
of the annual compensation cap—not just once, but twice. Id. ¶ 28; see also
Moody, 61 Ariz. at 540 (adopting the general rules on voluntary payments).
The court said if the hospital had acted within the contract years, the doctor
could have reduced his workload, negotiated a different deal, or quit. Wood,
249 Ariz. at 607 ¶ 30. Under those facts, Wood emphasized that the hospital
“‘had every opportunity to know’ that payment was being made in excess
of the cap and could have asserted the payment cap to avoid making such
payments, had it exercised ordinary diligence.” Id. at 604 ¶ 15.

¶46 Because of the key differences between Wood and this case as
outlined above, and consistent with the principles of equity, the court does
not apply the voluntary payment doctrine here.

¶47 As a final point on this issue, the Agreement’s audit terms are
not void under Arizona’s prompt pay act for Department construction
projects. See A.R.S. § 28-6924.A. The parties agree the Department’s prompt
pay act applies to the Agreement. And under that act, the parties may
include audit terms so long as they do not “materially alter the rights of any
contractor, subcontractor or material supplier to receive prompt and timely
payment as provided under this section.” A.R.S. § 28-6924.B. Raba has not
argued the audit rights violated the Department’s prompt pay act. And no
case in Arizona has addressed either subsection B or Section 28-6924. The
prompt pay act addresses void provisions, and limits them to the following:

A provision, covenant, clause or understanding in, collateral
to or affecting a construction contract that makes the contract
subject to the laws of another state or that requires any
litigation, arbitration or other dispute resolution proceeding
arising from the contract to be conducted in another state is
against this state’s public policy and is void and
unenforceable.

A.R.S. § 28-6926. The Agreement’s audit terms do not violate that section.

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Opinion of the Court

D. How readily Connect could have identified Raba’s overbilling
does not change the outcome.

¶48 Raba argues Connect cannot rely on its audit rights because it
easily could have identified Raba’s overbilling practices before it overpaid
Raba. Connect reviewed and paid Raba’s invoices monthly. Raba argues
those invoices plainly showed it applied the labor multiplier to overtime.
The superior court agreed, finding:

The information contained in the invoice provided notice to
[Connect] that Raba was billing the multiplier to all hours
worked, including overtime hours. Nothing was hidden. The
fact that Raba was applying the multiplier to all hours worked
(49) could have easily been identified (and was) by [Connect]
during its review of the invoice each month.

¶49 Even if factually true, by treating those facts as a legal defense,
the superior court mooted Connect’s audit rights. At its core, the argument
asks the court to rule as a matter of law that if Raba’s overbilling “could
have easily been identified” on an invoice’s face (itself a fact question as to
what “could have easily been identified”), Connect has no recourse if it
pays the erroneous amount, even if Connect must discover all such errors
within the abbreviated timeframe imposed by the Department’s prompt
pay act. And even if Connect has reserved a contractual right to audit
Raba’s invoices later, Raba cites no case for that proposition. To the
contrary, Arizona’s interpretive canons directs the court to “attempt to
reconcile and give effect to all terms of the contract to avoid any term being
rendered superfluous.” Terrell v. Torres, 248 Ariz. 47, 50 ¶ 14 (2020).

¶50 Whether an error requires a cursory or complicated audit,
Raba agreed Connect would have the contractual right to audit for those
errors. Nothing in the Agreement says Connect will be responsible for open
and obvious billing errors. The court thus holds the Agreement’s audit
rights, when timely exercised, implicitly and necessarily empower Connect
to correct payment errors during the Agreement’s term.

III. Raba cannot establish equitable estoppel.

¶51 In its cross-appeal, Raba asks the court to reverse the superior
court’s grant of summary judgment in Connect’s favor.

¶52 To establish equitable estoppel, Raba must prove: (1) Connect
committed acts inconsistent with a position it later adopts; (2) Raba relied
on it; and (3) Connect’s repudiation of its earlier conduct injured Raba. See

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 RABA v. CONNECT, et al.
Opinion of the Court

Valencia Energy Co. v. Ariz. Dep’t of Revenue, 191 Ariz. 565, 576–77 ¶ 35 (1998);
see also Lowe v. Pima Cnty., 217 Ariz. 642, 650 ¶ 34 (App. 2008) (recognizing
“equitable estoppel is an affirmative defense”).

¶53 Raba argues Connect’s earlier payment of the multiplier
“expressed its unequivocal intent to waive” the Agreement’s requirement
for any amendments to be in writing and was contrary to the Agreement’s
express terms. And it argues it reasonably relied on those payments to its
detriment. But Raba’s performance was based on its contractual obligations
under the Agreement, not Connect’s erroneous overpayments.

¶54 On the record provided, the superior court did not err in
concluding Raba had no viable equitable estoppel claim. See Best v. Edwards, 217 Ariz. 497, 504 ¶ 27; Valencia Energy Co., 191 Ariz. at 576–77 ¶ 35.

¶55 As an aside, Raba says, “As a result of [Connect’s] conduct,
Raba had no need to bring a claim for rescission or reformation, which it
certainly had the facts to support.” But Raba never pressed a rescission or
reformation claim and lost on its declaratory judgment claim.

ATTORNEY FEES AND COSTS

¶56 Connect and Raba request an award of attorney fees and costs
on appeal under A.R.S. § 12-341.01 and the payment bond. Connect is the
successful party on appeal. Accordingly, the court awards its reasonable
attorney fees and taxable costs incurred on appeal under A.R.S. § 12-341.01
upon Connect’s compliance with Rule 21, Arizona Rules of Civil Appellate
Procedure. Because Raba is not the successful party on appeal, the court
denies its request. The court does not address both parties’ request for an
award of fees and costs on appeal under the payment bond but remands
the issue to the superior court.

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Opinion of the Court

CONCLUSION

¶57 The court affirms the superior court’s ruling in Connect’s
favor on Raba’s equitable estoppel claim. The court reverses the superior
court’s ruling on the voluntary payment doctrine. The court vacates the
superior court’s ruling on the payment bond, the award of attorney fees and
costs, and the judgment. The court thus remands to the superior court to
consider Connect’s claims for attorney fees and costs and its claims under
the payment bond.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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