Rhythm v. Beckwith ( 2015 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
RHYTHM MOTOR SPORTS, L.L.C., an Arizona limited liability
company, Plaintiff/Appellant,
v.
KEVIN L. BECKWITH and KEVIN L. BECKWITH P.C., an Arizona
professional corporation, Defendants/Appellees.
No. 1 CA-CV 14-0010
FILED 3-12-2015
Appeal from the Superior Court in Maricopa County
No. CV2012-013940
The Honorable Michael J. Herrod, Judge
AFFIRMED IN PART; VACATED IN PART; REMANDED
COUNSEL
The Calhoun Law Firm, PLC, Tempe
By S. Jay Calhoun
Counsel for Plaintiff/Appellant
Broening Oberg Woods & Wilson, P.C., Phoenix
By Donald Wilson, Jr., Brian W. Purcell
Counsel for Defendants/Appellees
RHYTHM v. BECKWITH
Decision of the Court
MEMORANDUM DECISION
Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge Kent E. Cattani and Judge Peter B. Swann joined.
W I N T H R O P, Judge:
¶1 Rhythm Motor Sports, L.L.C. (“RMS”) appeals from the
superior court’s entry of summary judgment in favor of Kevin L. Beckwith
(“Beckwith”) and his law firm, Kevin L. Beckwith, P.C. (“Firm”), on claims
of wrongful institution of civil proceedings (“WICP”) and abuse of process.
For the following reasons, we affirm in part and vacate in part the entry of
summary judgment on the WICP claim and affirm in part and vacate in part
the entry of summary judgment on the abuse of process claim.
FACTS AND PROCEDURAL HISTORY1
I. The Underlying Litigation
¶2 RMS is an Arizona limited liability company that sells “after
market” – or post-manufacture - parts for autos. George Sayegh, G & S
Auto Sales and Leasing, Inc.’s (“G & S”) sole shareholder, bought a
turbocharger tool kit from RMS in 2008. Sayegh paid cash to Nick
Cornelius, an employee of RMS, to begin work on installing the turbo kit in
a G & S Honda Civic. Cornelius installed the turbo kit in November 2008.
Dissatisfied with the installation, Sayegh had the Honda towed to Import
Power House (“Import”) for additional work and retained Beckwith and
Firm to recover damages. Invoices showed that Sayegh had the vehicle
towed five times between G & S and Import.
¶3 Through Beckwith, G & S claimed that RMS’s improper work
had “completely ruined the motor on the Honda.” In addition, G & S
demanded “all of RMS’ repair receipts on this vehicle,” a refund for
$2,818.91 in installation charges and repairs Import made to the Honda, and
unspecified expenses to repair the motor. RMS refused to pay, arguing that
it had no installation contract with G & S and had not installed the turbo
1 We view the evidence and the inferences drawn from it in the light
most favorable to RMS. Comerica Bank v. Mahmoodi, 224 Ariz. 289, 291, 293,
¶¶ 13, 21, 229 P.3d 1031, 1033, 1035 (App. 2010).
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kit. G & S accordingly filed suit against RMS in 2010 for breach of contract
and negligence and claimed $5,773.91 in damages (Maricopa County
Superior Court No. CV2010-022443). The superior court referred the case
to arbitration.
¶4 RMS moved for summary judgment based upon the lack of a
written contract between RMS and G & S. In declining to grant the motion,
the superior court noted that the record was a “mess” and ordered
Beckwith to amend G & S’s complaint and its disclosure statement to
specify the alleged contract’s terms and to clarify G & S’s damages. Firm
and Beckwith accordingly amended the complaint to include a $10,464.73
damages claim for installation, repairs, a new motor, and towing charges.
RMS responded with a motion to dismiss, and the superior court
subsequently denied the motion.
¶5 In deposition testimony, Sayegh explained that he had visited
RMS to order high performance auto parts. While at RMS, Sayegh asked
an employee of RMS, Nick Cornelius, if Cornelius was aware of anyone
who could install the turbo kit. Cornelius told Sayegh he would install the
turbo kit. In deposition testimony, both Sayegh and Cornelius denied that
the installation work was done at RMS.
¶6 According to Sayegh’s testimony, Import mechanic Ramsey
Leong had told him that “the vehicle is not running right, the turbo is not
installed right.” In a disclosure statement filed on November 12, 2010,
Beckwith similarly asserted that Leong would testify that RMS improperly
installed the turbo kit, causing the Honda to lose its engine and G & S to
sustain damages. But Leong later signed an affidavit stating that the turbo
kit was properly installed and he made no repairs to it when Sayegh first
brought it in. When Sayegh brought the Honda back to Import four months
later seeking repairs to the turbo kit, Leong stated that he still found no
issue with the turbo kit or its installation, and made unrelated repairs.
Thereafter the car “operated great” and future visits turned up no problems
with the turbo kit or its installation. Import eventually replaced the
Honda’s engine at Sayegh’s request, after noting that it “had high mileage
. . . and/or . . . the engine was pushed passed [sic] its limits.” Contrary to
representations in the disclosure statement, Leong testified at a March 26,
2012 evidentiary hearing that he had never told Beckwith that he would be
an expert witness, and Leong stated it was “not [his] opinion” that the turbo
kit was improperly installed.
¶7 Ultimately, the arbitrator found that the RMS invoices “in no
way demonstrate that Defendant contracted to install the turbo kit in
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question.” The arbitrator granted RMS its costs expended in proving that
there was no written installation contract and the final arbitration award
included a finding that the G & S witnesses’ testimony was “contradictory
and, as a result, was not credible.” The superior court had previously
concluded in a discovery hearing that Leong never held the opinions
attributed to him in G & S’s Rule 26.1 Disclosure Statement. The court
incorporated the arbitrator’s award in a judgment, which G & S did not
appeal.
II. This Litigation
¶8 RMS then sued G & S, Beckwith, and Firm for WICP and
abuse of process. All defendants moved for summary judgment on liability
and damages. In support of these motions, Beckwith submitted an affidavit
stating that he had brought suit based upon the RMS invoices and
information received from Sayegh. The superior court granted summary
judgment in favor of Firm and Beckwith, holding that RMS failed to
establish that Beckwith and Firm had reason to know that the complaint
was “objectively baseless.” The superior court, however, denied summary
judgment as to the claims against G & S.
¶9 The superior court incorporated the summary judgment
rulings concerning Beckwith and Firm in a Rule 54(b) judgment. This
appeal followed. We have jurisdiction pursuant to Arizona Revised
Statutes (“A.R.S.”) section 12-2101(A)(1).2
ANALYSIS
I. Wrongful Institution of Civil Proceedings
¶10 Summary judgment is not warranted if there are material
factual disputes or if the court must choose among competing inferences,
determine witness credibility, or weigh the quality of evidence. Taser Int’l,
Inc. v. Ward, 224 Ariz. 389, 393, ¶ 12, 231 P.3d 921, 925 (App. 2010). We
review the grant of summary judgment de novo. Great Am. Mortg., Inc. v.
Standard Ins. Co., 189 Ariz. 123, 125, 938 P.2d 1124, 1126 (App. 1997). This
court may affirm the summary judgment if the superior court “reached the
right result for the wrong reason.” Aida Renta Trust v. Maricopa Cnty., 221
Ariz. 603, 608, ¶ 5, 212 P.3d 941, 946 (App. 2009) (citation and internal
quotation marks omitted).
2 We cite the current version of the statutes if no revisions material to
our decision have occurred since the relevant dates.
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¶11 A WICP claim requires proof that the defendant “(1)
instituted a civil action which was (2) motivated by malice, (3) begun [or
maintained] without probable cause, (4) terminated in plaintiff’s favor and
(5) damaged plaintiff.” Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz.
411, 416-17, 758 P.2d 1313, 1318-19 (1988). In this case, the pivotal issue is
whether Beckwith and Firm had probable cause to begin or maintain the
action. The plaintiff’s “failure to establish a lack of probable cause is a
complete defense to an action for [wrongful use of civil proceedings].”
Carroll v. Kalar, 112 Ariz. 595, 596, 545 P.2d 411, 412 (1976). Whether a
particular set of facts establishes probable cause is a question for the court
only if the operative facts are undisputed. Smith v. Lucia, 173 Ariz. 290, 295,
842 P.2d 1303, 1308 (App. 1992); see generally Bird v. Rothman, 128 Ariz. 599,
603, 627 P.2d 1097, 1101 (App. 1981) (describing the jury’s function as
“determin[ing] the actual facts of what the prosecuting party or attorneys
performed in the way of investigation and research”).
A. The Probable Cause Standard
¶12 In support of the summary judgment motion on WICP,
Beckwith filed an affidavit and a statement of facts relating that G & S’s
complaint was based on information received from Sayegh, along with
invoices and billing statements. Beckwith’s affidavit further provides that
he honestly and in good faith believed that he had a good chance of
establishing to a fact finder that G & S hired RMS to install the turbo kit and
that RMS negligently installed it. To meet the probable cause standard, this
affidavit and other evidence must satisfy both objective and subjective
components. See Chalpin v. Snyder, 220 Ariz. 413, 419, ¶ 21, 207 P.3d 666,
672 (App. 2008). In assessing the objective element, the initiator must
“reasonably believe[] that he has a good chance of establishing [his case] to
the satisfaction of the court or the jury.” Bradshaw, 157 Ariz. at 417, 758 P.2d
at 1319 (quoting PROSSER & KEETON ON THE LAW OF TORTS
(“PROSSER & KEETON”) § 120, at 893 (5th ed. 1984)).
¶13 In support of its ruling granting summary judgment on the
WICP claim, the superior court relied in part on the underlying case judge’s
decision to deny RMS’s summary judgment and Rule 12(b)(6) motions.
Contrary to Beckwith and Firm’s argument, these rulings are not a critical
factor in the probable cause analysis. “The law has never recognized
[surviving a summary judgment motion] as the test for malicious
prosecution.” Bradshaw, 157 Ariz. at 417, 758 P.2d at 1319; Chalpin, 220 Ariz.
at 422-23, ¶ 38, 207 P.3d at 675-76 (“The test for objective probable cause is
not whether a person can force an issue to trial.”). In this case, RMS’s two
dispositive motions quickly followed the filing of the complaint and the
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amended complaint, and the superior court had directed G & S to further
delineate its contract theory. The superior court’s rulings consequently
were not indicative of the ultimate merits of G & S’s claims.
B. Filing the Amended Complaint
¶14 RMS argues that, in addition to applying the wrong legal
standard, the superior court overlooked material issues of fact preventing
resolution of the WICP claim as a matter of law. Although the evidence
ultimately failed to support Sayegh’s version of events, there is no genuine
dispute as to what facts Beckwith had at the time he filed the amended
complaint. Applying the Bradshaw standard to these facts, we affirm the
summary judgment on the WICP claim only with respect to Beckwith’s
filing of the amended complaint.
¶15 The arbitrator ultimately rejected Sayegh’s version of events.
There is no genuine dispute, however, concerning what Sayegh told
Beckwith about the case before the latter filed the amended complaint.
Sayegh told Beckwith that Cornelius, an employee of RMS, performed the
installation upon payment of $1,500, and Sayegh had subsequently taken
the vehicle to Import for repairs. He provided Beckwith with invoices for
repair work and towing expenses, as well as his American Express bill
reflecting charges at RMS for unspecified items. RMS disputed Sayegh’s
version of events and denied performing the work. Beckwith did not have
to believe RMS’s assertions; under Bradshaw, Beckwith also “did not have
to be certain [G & S] would prevail; rather, [he] only had to reasonably
believe in the possibility that the court would find [G & S’s] claim valid.”
Bradshaw, 157 Ariz. at 418, 758 P.2d at 1320. Based upon the documents,
Cornelius’s status as RMS’s employee, and Sayegh’s representations about
Leong’s testimony, Beckwith could reasonably have believed at the
inception of the litigation that he had a good chance under Bradshaw of
establishing the existence of a contract and negligent installation. See Bird,
128 Ariz. at 603-04, 627 P.2d at 1101-02 (granting summary judgment
because the parties did not dispute the facts surrounding the plaintiff’s pre-
filing investigation and research). Regardless of the relative strength of the
case, the record established probable cause to file the amended complaint.
See id.C. Maintaining and Continuing the Proceedings
¶16 The superior court based its summary judgment on RMS’s
failure to establish that Beckwith and Firm had reason to know that G & S’s
complaint was objectively baseless at the time of filing. RMS contends that
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the superior court erroneously failed to consider whether Beckwith also
had probable cause to continue the prosecution of the action. We agree.
¶17 A WICP claim arises not only when a party brings suit, but
also when it continues or maintains the litigation. See McClinton v. Rice, 76
Ariz. 358, 367, 265 P.2d 425, 431 (1953) (explaining that the test is: “would a
reasonably prudent man have instituted or continued the proceeding?”); see
generally Restatement (Second) of Torts § 674 (1977) (a party may bring a
WICP claim against one who “takes an active part in the initiation,
continuation or procurement of civil proceedings against another”); id. cmt.
c (explaining that a WICP claim may be asserted against one who “takes an
active part in [a civil proceeding’s] continuation for an improper purpose
after he has learned that there is no probable cause for the proceeding
. . . .”).
¶18 The complaint’s WICP allegations are not limited to probable
cause at the time of filing, and also extend to the post-filing activity of
exchanging Rule 26.1 disclosure statements misrepresenting Leong’s
opinion. Further, the claim incorporates the allegation that Beckwith and
Firm made “false material statements” during the litigation and “they failed
to correct those statements.” Beckwith’s affidavit did not allege, and the
superior court did not consider, whether Beckwith and Firm had probable
cause to maintain and continue to prosecute the action after filing the
amended complaint.
¶19 The record contains material evidence of Beckwith’s lack of
diligent investigation after filing the amended complaint. Beckwith did not
depose Cornelius during the pendency of the underlying lawsuit, and he
failed to contact Leong, G & S’s designated expert and the mechanic
performing the repairs, to verify Leong’s purported opinions.
Consequently, G & S’s disclosure statements represented for months that
Leong would testify that RMS negligently installed the turbo kit. During
his deposition, however, Leong denied that the turbo kit was negligently
installed. Beckwith later admitted that Leong’s testimony was fatal to G &
S’s claim for damages to the Honda’s motor, yet he failed to dismiss that
claim prior to the arbitration hearing. Although probable cause existed at
the time of filing, the record fails to support summary judgment on
probable cause to continue and maintain the claim thereafter. See Carroll,
112 Ariz. at 598-99, 545 P.2d at 414-15 (“If from one set of facts the
conclusion can be inferred that probable cause exists, and from another that
it does not, it is for the jury to determine the true state of facts.”). We
therefore vacate the entry of summary judgment as it relates to the WICP
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claim concerning maintaining the underlying action after the filing of the
amended complaint.
II. Abuse of Process
¶20 RMS also argues that Beckwith and Firm were not entitled to
summary judgment on the abuse of process claim. This tort requires proof
that a defendant committed a willful act in using judicial process for an
ulterior purpose not proper in the regular conduct of the proceeding.
Nienstedt v. Wetzel, 133 Ariz. 348, 353, 651 P.2d 876, 881 (App. 1982). “Abuse
of process differs from malicious prosecution in that the gist of the tort is
not commencing an action or causing process to issue without justification,
but misusing, or misapplying process justified in itself for an end other than
that which it was designed to accomplish.” PROSSER & KEETON § 121, at
897.
¶21 The abuse of process tort extends to the “entire range of
procedures incident to the litigation process” and includes noticing a
deposition and general motion practice. Nienstedt, 133 Ariz. at 352, 651 P.2d
at 880. On appeal, RMS narrows its abuse of process allegations to misuse
of the subpoena, discovery, and the hearing processes. Specifically, RMS’s
Opening Brief alleges that Beckwith and Firm (1) made false statements in
an effort to disqualify RMS’s counsel, (2) issued two subpoenas to Leong,
and (3) added new damages to the original complaint and filed it as an
amended complaint. Because RMS has developed legal and factual
authority only with respect to G & S’s motion to disqualify RMS’s counsel,
we limit our abuse of process review to that issue. See Polanco v. Indus.
Comm’n, 214 Ariz. 489, 491 n.2, ¶ 6, 154 P.3d 391, 393 n.2 (App. 2007); see
generally Ariz. R. Civ. App. P. 13(a)(6).
¶22 Liability for abuse of process results “only when the sense of
awareness progresses to a sense of purpose, and, in addition the utilization
of the procedure for the purposes for which it was designed becomes so
lacking in justification as to lose its legitimate function as a reasonably
justifiable litigation procedure.” Nienstedt, 133 Ariz. at 354, 651 P.2d at 882.
Beckwith based the disqualification motion on alleged improper contacts
between RMS’s counsel and Leong, G & S’s designated expert. After a
hearing, the superior court found that RMS’s counsel had obtained an
affidavit from Leong. Nevertheless, the court denied G & S’s
disqualification motion in view of the lack of prejudice, explaining that
Leong was never going to support G & S’s negligence theory.
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¶23 Although Leong was disclosed by Beckwith as having expert
opinions, Leong was not a retained or specially employed expert; instead
he was, first and foremost, a fact witness. As such, counsel for RMS was
entitled to contact Leong to determine his knowledge of the underlying
events and the work performed on the Honda. In that regard, counsel for
RMS exercised appropriate diligence. In contrast, Beckwith was not
diligent relative to interviewing Leong. At a minimum, there is a question
of fact as to Beckwith’s motivation for filing the motion to disqualify.
Accordingly, we vacate the entry of summary judgment on this aspect of
the abuse of process claim.
III. Remaining Issues
¶24 In its Opening Brief, RMS complains that the superior court
(1) expanded the comparative fault statute by allowing Beckwith and Firm
to identify RMS’s counsel as a non-party at fault; (2) erred by altering
another superior court’s judgment; and (3) erroneously ignored collateral
estoppel principles in ordering that Cornelius be deposed. Beckwith and
Firm’s answering brief does not address RMS’s arguments as to these
remaining issues. In addition, Beckwith and Firm concede that the superior
court applied an illegal rate of interest.
¶25 Although the superior court allowed Beckwith and Firm to
designate RMS’s counsel as a non-party at fault, the superior court
ultimately found Beckwith and Firm were not at fault. As a result, the court
did not apply the comparative fault statute and RMS counsel’s alleged fault
was not a factor in the summary judgment. RMS’s argument concerning
the court’s award of $771.53 in costs and application of an erroneous
interest rate is more persuasive. Beckwith and Firm do not dispute RMS’s
argument that these amounts were unauthorized and erroneous. See Hecla
Min. Co. v. Indus. Comm’n, 119 Ariz. 313, 314, 580 P.2d 774, 775 (App. 1978)
(holding that failure to respond to a debatable argument constitutes
confession of error on appeal).
¶26 RMS urges that we order any discovery concerning
Cornelius’ status and scope of work as an employee of RMS precluded on
res judicata grounds, even though RMS did not raise this issue in summary
judgment briefing prior to this appeal. We decline to address it. See
Lansford v. Harris, 174 Ariz. 413, 419, 850 P.2d 126, 132 (App. 1992) (holding
that on appeal from a grant of summary judgment an appellant may not
advance new theories or raise new issues). Likewise, we will not assess
whether litigation of this issue constitutes a horizontal appeal.
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CONCLUSION
¶27 Based on the foregoing analysis, we vacate the grant of
summary judgment on RMS’s WICP claim with respect to Beckwith and
Firm’s continuation of the proceedings after filing the amended complaint,
and the abuse of process claim relating to the filing of the motion to
disqualify counsel, but otherwise affirm summary judgment on the WICP
and abuse of process claims. We remand those portions of the WICP claim
and the abuse of process claim for resolution consistent with this decision,
and vacate the award of $771.53 in costs and application of the erroneous
interest rate. In the exercise of our discretion, we decline to award either
party attorneys’ fees on appeal pursuant to A.R.S. § 12-341.01(A), Arizona
Rule of Civil Procedure 11, A.R.S. § 12-349, and Arizona Rule of Civil
Appellate Procedure 21(c).
:ama
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