There is nothing wrong or unusual about the judge meeting in chambers with the attorneys and without the parties.

I understand what he is suing me for is illegal, can anyone tell me the Arizona Revised Statute I can use in my defense

Start with Az Rules of Civil Procedure Rule 8 which lists possible defenses. You would be smart to use a lawyer.

What happens in the Discovery phase of a lawsuit? Will I be notified by the court?

The time for answering the discovery requests can be found in the Justice Court procedural rules. If you don't respond, the Court may default you.

How is she responsible if she didn't sign and shouldn't the amount revert to the original since they didn't take her off?

If she did not sign, her only conceivable liability would be to you.

Do I have legal means to pursue a refund here, before I go to small claims court?

If you can establish that the property was not available for occupation on the first day of the term, they have breached the lease and...

If they refuse to pay the expenses (as they have) do I have any grounds to pursue the collection of expenses?

A lawyer would need to get more information from you. But the contract is likely to be determinative.

Yes, you can get a default on a counterclaim. But there is a default procedure you must follow.

Is that enough to end the lease and give move out date due to breach of contract and law?

There are some questions to be answered here, but barring some strange provision in your lease, on one can do anything to until the sale, and it...

Do we have any course of action we can take against the wholesale co

Contact a lawyer who specializes in the Uniform Commercial Code. As is does not always mean as is.

What should I do next

Mr Allen's answer to your last post was the correct one.