Marsh v. Mayer ( 2015 )

THE
ARIZONA COURT OF APPEALS
DIVISION ONE
MARY MARSH, individually; ACHEN CONTRACTORS, LLC, an
Arizona Limited Liability Company; ACHEN-GARDNER
ENGINEERING, LLC, an Arizona Limited Liability Company; ARENA I
LIMITED PARTNERSHIP, an Arizona limited partnership; JOHN
ARENA, as Trustee of the Farm Managers, Inc., PSP&T; SYLVIA ARENA,
individually; MERLE R. ARLEN, as Trustee of the Merle and Norma
Arlen Family Trust Dated January 6, 1997; MERLE R. ARLEN,
individually and as the owner and beneficiary of the Merle R.
Arlen IRA Rollover; THOMAS BERLINGER and CATHERINE
BERLINGER, husband and wife; BRUCE DENNIS BUCKLEY and ALIVIA
VIRGINIA BUCKLEY, as Trustees of The Bruce Dennis Buckley and
Alivia Virginia Buckley Revocable Living Trust Dated
June 4, 1985; BRUCE D. BUCKLEY, individually and as the owner and
beneficiary of the Bruce Dennis Buckley IRA; THOMAS A. BUSH and
JOANNE M. BUSH, husband and wife; C&D TRADING, INC., a
Nevada corporation; KAREN RUDEL CLEEVES-ESTABROOK, as Trustee
of the Karen Rudel Cleeves-Estabrook Revocable Trust dated
May 23, 2002; MELVIN L. DUNSWORTH JR., as Trustee of The
Revocable Living Trust of Melvin Dunsworth, Jr. Dated December 23,
2003; ENERGETICS, INC., an Arizona Corporation; JOHN
GREENBANK, as trustee for Energetics, Inc. Restated Profit
Sharing Plan; VALENTINE EYTAN, individually; DOUGLAS and
SHARLENE GARDNER, individually and as husband and wife;
DOUGLAS GARDNER, individually and as the owner and beneficiary of
the Douglas D. Gardner IRA; SHARLENE GARDNER, individually and
as the owner and beneficiary of the Sharlene K. Gardner IRA; WENDELL
J. GARDNER, individually and as the owner and beneficiary of the
Wendell J. Gardner IRA; WENDELL J. GARDNER and PAULINE M.
GARDNER, as Trustees of the WPG Revocable Trust dated May 23,
2002; GARDNER CAPITAL PARTNERS, LP, an Arizona limited
partnership; ADAM GILBURNE and RONDA GILBURNE, husband and
wife; ADAM GILBURNE, as Trustee for The Adam and Rhonda Gilburne
Family Trust U/T/A Dated June 20, 2006; RONDA GILBURNE, as
Trustee for The Adam Gilburne Irrevocable Trust For The Benefit Of
Jillian Gilburne; GOLDEN LENDING GROUP, LLC, an Arizona limited
liability company, f/k/a PENNY HARDAWAY INVESTMENTS, LLC;
BONNIE GREENBANK, individually and as the owner and beneficiary of
the Bonnie Greenbank IRA; BONNIE GREENBANK, as Trustee for Bonnie
L. Greenbank Family Trust; THELMA A. GROSS, SUSAN L. ARENSON
and MARC AMDUR GROSS as co-trustees of the Thelma Gross Trust
dated March 11, 2014; THELMA A. GROSS, SUSAN L. ARENSON, and
MARC AMDUR GROSS as co-trustees of the T & J Gross Trust; THELMA
GROSS, individually; DELERY GUILLORY and KATHY GUILLORY,
husband and wife; DELERY GUILLORY, individually; KATHY
GUILLORY, individually and as the owner and beneficiary of the Kathy
Guillory IRA account for which the Colonial Trust Company is
Custodian and the Kathy Guillory IRA for which the First Trust of
Onaga is Custodian; INVESTOR CLOUT, an Arizona Partnership;
JSM FAMILY VENTURES, LLLP, an Arizona Limited Liability Limited
Partnership; ALI G. KHAN, as Custodian for J.S. Khan; LISA KHAN, as
Custodian for A.E. Khan, under the Uniform Gift to Minors Act; LISA
KHAN, as Custodian for A.N. Khan, under the Uniform Gift to Minors
Act; LISA KHAN, as Custodian for T.M. Khan, under the Uniform Gift to
Minors Act; ALI KHAN and LISA KHAN, husband and wife; EVALINA
LAYNE, as Trustee of the Wesley R. and Evalina O. Layne Family Trust;
EVALINA LAYNE, individually and as the owner and beneficiary of the
Evalina Layne IRA; LEAH L. LEWIS, as Trustee of the Leah L. Lewis
Trust Dated February 23, 2000; LEAH L. LEWIS, individually and
as the owner and Beneficiary of the Leah L. Lewis IRA; WILLIAM
C. LEWIS, as Trustee of the William C. Lewis Trust Dated August 1, 1989,
as amended; BARBARA LUKAVSKY, individually; LYNTON R. LESLIE;
as Trustee of the Lynton R. Leslie and Rae D. Leslie Revocable Trust;
STEPHEN MAYNE and LINDA MAYNE, husband and wife; MAYNE
AND COMPANY DEFINED BENEFIT PENSION PLAN; DONNA J.
MCGREGOR, individually; CHUCK NIDAY, as Trustee of the Ross Verne
Family Trust, a Revocable Living Trust, dated January 18, 2007, and any
supplements thereto; JEROME NOSANCHUK, individually; JOSHUA
NOSANCHUK and PATRICIA L. MURPHY, husband and wife; SARA
NOSANCHUK, individually; RICHARD J. PRINZ and CATHERINE T.
PRINZ, husband and wife; YVONNE QUINTAL, individually; LINDA
REEVES, as Trustee for The Linda Reeves Trust; RMA RENTAL AND
LEASING LLP, an Arizona limited liability partnership; ROBERT
RODEN, as Trustee of the Robert G. Roden Living Trust; MARCELO
ROMANO, individually and as the owner and beneficiary of the
Marcelo A. Romano IRA; THE MARCELO ROMANO AND JEANETTE
ROMANO FAMILY LIMITED LIABILITY PARTNERSHIP, NUMBER
ONE, an Arizona limited liability partnership; DAVID ROSENTHAL,
individually; MORTON M. SCULT, as Trustee of the Morton M.
2
Scult, PC Money Purchase Pension Plan; SUMAR INVESTMENT
COMPANY, an Arizona general partnership; ROBERT L. TAYLOR and
BONNIE TAYLOR, as Trustees of The Taylor Loving Trust; ROBERT L.
TAYLOR, as Trustee of the Robert L. Taylor, DDS, PC Profit Sharing Plan
& Trust; RICHARD K. UNDERWOOD, as Trustee of the
Richard K. Underwood Revocable Trust Dated October 31, 1995, as
Amended; JOHN VINSON and TAEKO VINSON, as Trustees for the John
Charles Vinson Family Trust, dated December 3, 1984, as amended;
DAVID WACKNOV, individually and as the owner and beneficiary of the
David Wacknov IRA and the David Wacknov Roth IRA; CHRISTINE
WACKNOV, individually and as the owner and beneficiary of the
Christine Wacknov IRA and the Christine Wacknov Roth IRA; DON
WATKINS and CHRISTINE WACKNOV, individually and as joint
tenants with right of survivorship; LEANORE WIRTZ, as Trustee for The
Leanore Wirtz Living Trust Dated February 3, 1993; WMS FIXED
INCOME FUND I, LLC, an Arizona limited liability company; WPG
FAMILY LIMITED PARTNERSHIP, a Colorado Limited Partnership;
DIANA WYKES, individually; DAVID C. ZANECKI and JODY J.
ZANECKI, husband and wife and as joint tenants with right of
survivorship; DAVID C. ZANECKI, individually and as owner and
beneficiary of the David C. Zanecki IRA; CLARA B. ZANIECKI, an
individual, by and through her attorney-in-fact, David C. Zanecki,
Plaintiffs/Appellants,
v.
ASHLEY COLES, individually and as Trustee of the Ashley Coles
Family Trust; FRANCINE L. COLES, individually and as conservator of
Z.A. Coles and S.B. Coles, minors; and HALEY BROOKE COLES;
FRANCINE L. COLES, as Trustee of the Coles Children’s Irrevocable
Trust, U/T/A dated March 3, 2010, an Arizona Trust, for the benefit of
Z.A. Coles; FRANCINE L. COLES, as Trustee of the Coles Children’s
Irrevocable Trust, U/T/A dated March 3, 2010, an Arizona Trust, for the
benefit of Haley B. Coles; FRANCINE L. COLES, as Trustee of the Coles
Children’s Irrevocable Trust, U/T/A dated March 3, 2010, an Arizona
Trust, for the benefit of Samuel B. Coles; FRANCINE L. COLES, as Trustee
of the FLC Revocable Trust dated July 11, 2003, an Arizona Trust, as
amended; FHZS FAMILY LLC, an Arizona limited liability company; DG
RESORTS, LLC, an Arizona limited liability company; and NLV
HOLDINGS, LLC, an Arizona limited liability company,
Defendants/Appellees.
3
No. 1 CA-CV 14-0407
FILED 11-10-2015
Appeal from the Superior Court in Maricopa County
No. CV2010-097769
The Honorable Arthur T. Anderson, Judge
AFFIRMED
COUNSEL
Smith LC, Phoenix
By Steven C. Smith, Richard R. Thomas, Stephen C. Biggs
Co-Counsel for Plaintiffs/Appellants
The Spence Law Firm, LLC, Jackson, Wyoming
By G. Bryan Ulmer, III, Mel C. Orchard, III
Co-Counsel (Pro Hac Vice) for Plaintiffs/Appellants
Warner Angle Hallam Jackson & Formanek, PLC, Phoenix
By Jerome K. Elwell, J. Brent Welker, Phillip B. Visnansky
Counsel for Defendants/Appellees Francine L. Coles; Haley Brooke Coles; FHZS
Family LLC; DG Resorts, LCC; and NLV Holdings, LLC
Kercsmar & Feltus PLLC, Scottsdale
By Todd Feltus, Julia A. Guinane
Counsel for Defendant/Appellee Ashley Coles
OPINION
Judge Patricia K. Norris delivered the opinion of the Court, in which
Presiding Judge Donn Kessler and Judge Andrew W. Gould joined.
N O R R I S, Judge:
¶1 The issue in this appeal is whether investors may obtain a
constructive trust on life insurance proceeds received by the policy
beneficiaries after the death of the insured when the insured allegedly
acquired the insurance policies with funds wrongfully obtained through an
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Opinion of the Court
illegal enterprise and a pattern of unlawful activity under state racketeering
statutes. We hold a provision in Arizona’s racketeering statute protecting
innocent third parties bars the constructive trust requested by the investors.
We therefore affirm the superior court’s judgment in favor of the
beneficiaries.
FACTS AND PROCEDURAL BACKGROUND1
¶2 From at least 2003 until his death in 2008, Scott Coles
participated in an illegal enterprise that, through the unlawful sale of real-
estate backed securities and money laundering, wrongfully deprived the
plaintiff/appellant investors (“Investors”) of more than $127 million. The
Investors alleged Scott Coles’ “confederates” in this illegal enterprise
included Greenberg Traurig, LLP, a law firm, and an attorney employed by
the firm (“Lawyer Defendants”); Mayer Hoffman McCann, P.C., an
accounting and financial auditing firm, and associated entities (“Auditor
Defendants”); and Hirsch & Shah, LLC, an accounting firm. According to
the Investors, Scott Coles and these “confederates” (collectively, unless
specified by name, the “Other Defendants”) comprised “an association-in-
fact, although not a legal entity.”
¶3 Scott Coles used proceeds from the illegal enterprise to
acquire and maintain life insurance policies that, upon his death, paid out
“more than $40 [million]” to his widow, Ashley Coles; his ex-wife, Francine
Coles; one of his daughters; and a trust for the benefit of his children, the
Coles Children’s Irrevocable Trust. Francine Coles formed three limited
liability companies to acquire assets with the life insurance proceeds she
received, and also transferred $2,520,000 of the proceeds received by the
Children’s Irrevocable Trust to her personal trust, the FLC Revocable Trust.
We refer to the beneficiaries of Scott Coles’ life insurance policies and
Francine Coles’ limited liability companies and personal trust as the “Coles
Defendants,” and we refer to the life insurance proceeds received by the
Coles Defendants and the assets the Coles Defendants acquired with them,
collectively, as the “life insurance proceeds.”
1Because the Investors appeal from a dismissal for failure to
state a claim, see generally Ariz. R. Civ. P. 12(b)(6), we “describe the facts as
alleged in the complaint and assume them to be true for purposes of our
review.” Sullivan v. Pulte Home Corp., 232 Ariz. 344, 345, ¶ 2, 306 P.3d 1, 2
(2013).
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MARSH, et al. v. MAYER, et al.
Opinion of the Court
¶4 The Investors sued the Other Defendants, alleging, inter alia,
a civil racketeering (“RICO”) claim under Arizona Revised Statutes
(“A.R.S.”) sections 13-2312 (illegal control of an enterprise), -2314.04
(providing private cause of action to recover damages arising from
racketeering activity), and -2317 (money laundering) (2010 & Supp. 2014).2
The Investors did not allege any of the Coles Defendants knew of, or
participated in the alleged wrongful acts. Indeed, the Investors specifically
alleged they did not “believe” any of the Coles Defendants “participated in
the illegal enterprise.” But, because the life insurance proceeds were
allegedly proceeds of the illegal enterprise, the Investors asked the superior
court to impose a constructive trust on the life insurance proceeds pursuant
to A.R.S. § 13-2314.04(D)(6) (2010). Under that subsection, “[a]fter a
determination of liability” on the underlying RICO claim, “[a] person or
enterprise that acquires any property through an offense included in the
definition of racketeering” shall act as “an involuntary trustee” and “hold
the property, its proceeds and its fruits in constructive trust for the benefit
of persons entitled to remedies under” the other substantive provisions of
A.R.S. § 13-2314.04.
¶5 The Coles Defendants and the Other Defendants moved to
dismiss the Investors’ complaint for failure to state a claim under Arizona
Rule of Civil Procedure 12(b)(6). As relevant here, the Coles Defendants
argued A.R.S. § 13-2314.04(L), a provision in the RICO statute that protects
certain parties from being held “liable in damages or for other relief,”
barred the court from imposing a constructive trust on the life insurance
proceeds.3
¶6 Before the superior court ruled on the motions, the Lawyer
Defendants settled with the Investors. Accordingly, the superior court
entered a stipulated order dismissing all claims against the Lawyer
2Although the Arizona Legislature has amended certain
statutes cited in this decision after the events giving rise to this appeal, these
revisions are immaterial to our resolution of this matter. Thus, we cite to
the current version of these statutes.
3The Coles Defendants also argued A.R.S. § 20-1131(A) (2010),
a statute that protects “lawful beneficiar[ies]” of life insurance proceeds
from claims asserted by a decedent’s creditors, barred a constructive trust.
Because we resolve the case based on A.R.S. § 13-2314.04(L), we need not
address A.R.S. § 20-1131(A).
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Opinion of the Court
Defendants with prejudice and “irrevocably and unconditionally”
releasing the Lawyer Defendants from “any and all [c]laims.”
¶7 The superior court subsequently dismissed the Investors’
RICO claims against Hirsch & Shah and the Auditor Defendants, but it
denied their motions as to other claims raised by the Investors against them.
The Investors then settled their remaining claims against Hirsch & Shah and
the Auditor Defendants.
¶8 “In light of the dismissal of” the RICO claims against Hirsch
& Shah and the Auditor Defendants, the superior court granted the Coles
Defendants’ motions to dismiss the Investors’ request for a constructive
trust, apparently reasoning that without a viable RICO claim, the Investors
had no basis for asking the superior court to impose a constructive trust on
the life insurance proceeds pursuant to A.R.S. § 13-2314.04(D)(6). Thus, the
superior court did not address the Coles Defendants’ argument A.R.S. § 13-
2314.04(L) barred the Investors’ request for a constructive trust on the life
insurance proceeds. The superior court also awarded the Coles Defendants
attorneys’ fees and costs under A.R.S. § 13-2314.04(A).
DISCUSSION
¶9 The Investors argue that, notwithstanding the dismissal of
their RICO claims against the Other Defendants, they could still pursue
their request for a constructive trust on the life insurance proceeds received
by the Coles Defendants. In response, the Coles Defendants argue that even
if the Investors are correct, we should nevertheless affirm the judgment in
their favor because, as they argued in the superior court, A.R.S. § 13-
2314.04(L) barred the Investors’ request for a constructive trust. Because
the Coles Defendants’ argument presents issues of statutory interpretation,
we exercise de novo review, and, as explained, we agree the statute barred
the Investors’ request for a constructive trust.4 See Ariz. Citizens Clean
Elections Comm’n v. Brain, 234 Ariz. 322, 325, ¶ 11, 322 P.3d 139, 142 (2014);
Republic Nat. Bank of N.Y. v. Pima Cty., 200 Ariz. 199, 204, ¶ 19, 25 P.3d 1, 6
(App. 2001) (appellate court may affirm ruling on any issue raised below
even if unaddressed by superior court).
4We express no opinion whether, under A.R.S. § 13-
2314.04(D)(6), the superior court may impose a constructive trust on
property in the hands of an innocent third party in a private RICO action in
the absence of any party who was involved in the alleged wrongdoing.
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Opinion of the Court
I. A.R.S. § 13-2314.04(L) Barred a Constructive Trust on the Life
Insurance Proceeds
¶10 A.R.S. § 13-2314.04(L), in pertinent part, provides:
A natural person shall not be held liable in
damages or for other relief pursuant to [A.R.S. §
13-2314.04] based on the conduct of another
unless the fact finder finds by a preponderance
of the evidence that the natural person
authorized, requested, commanded, ratified or
recklessly tolerated the unlawful conduct of the
other. An enterprise shall not be held liable in
damages or for other relief pursuant to [A.R.S. §
13-2314.04] based on the conduct of an agent,
unless the fact finder finds by a preponderance
of the evidence that a director or high
managerial agent performed, authorized,
requested, commanded, ratified or recklessly
tolerated the unlawful conduct of the agent.
The plain language of this subsection barred the Investors’ constructive
trust claim. See Indus. Comm’n of Ariz. v. Old Republic Ins. Co., 223 Ariz. 75,
77, ¶ 7, 219 P.3d 285, 287 (App. 2009) (“Where [statutory] language is plain
and unambiguous, courts generally must follow the text as written.”). As
discussed at supra ¶ 3, the Coles Defendants include natural persons and
enterprises. See A.R.S. § 13-2301(D)(2) (Supp. 2014) (“’Enterprise’ means
any corporation, partnership, association, labor union or other legal entity
. . . .”). As such, they may be held “liable . . . for other relief,” only if “the
fact finder finds by a preponderance of the evidence” they or their agent
“authorized, requested, commanded, ratified or recklessly tolerated the
unlawful conduct” of the illegal enterprise that deprived the Investors of
their monies. See A.R.S. § 13-2314.04(L). As the Investors alleged no such
conduct, a finder of fact could never make this finding.
¶11 The Investors argue, nevertheless, that A.R.S. § 13-2314.04(L)
is inapplicable because imposing a constructive trust on the life insurance
proceeds does not amount to holding the Coles Defendants personally
“liable for . . . other relief.” The Investors reason that because the right to
a constructive trust “does not depend on the commission of any wrongful
act by the transferee” of property, and “is instead a recognition of the
plaintiff’s superior beneficial interest in the property,” a constructive trust
“may be enforced against the third-party transferee without holding the
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MARSH, et al. v. MAYER, et al.
Opinion of the Court
transferee liable for the conduct of the person or enterprise who wrongfully
acquired the property.” See Tucson Estates Residents Ass’n v. Mobilife Corp.,
26 Ariz. App. 83, 84–85, 546 P.2d 352, 353–54 (App. 1976) (“A constructive
trust will arise whenever circumstance[s] make it inequitable that the
property should be retained by the one who holds legal title.”); see also
Simonds v. Simonds, 58 A.D. 2d 305, 310–11 (N.Y. App. Div. 1977) (right to
constructive trust does not depend upon allegation of wrongdoing against
putative constructive trustee).
¶12 While this legal point may be correct in general, it ignores the
statutory language at issue here—“liable for . . . other relief.” A.R.S. § 13-
2314.04(L). The word “liable” is defined to include “[r]esponsible or
answerable in law; legally obligated.” Black’s Law Dictionary (10th ed.
2014); accord The American Heritage Dictionary 1008 (4th ed. 2006).5 By
requesting a constructive trust, the Investors sought to hold the Coles
Defendants personally “[r]esponsible or answerable in law” for the life
insurance proceeds. Black’s Law Dictionary (10th ed. 2014). And as we
have recognized, a constructive trust is a form of “other relief.” See Murphy
Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, 130, ¶ 23, 272 P.3d 355, 361 (App.
2012) (citing cases; “constructive trust is an equitable remedy”); see infra ¶
30. To agree with the Investors that A.R.S. § 13-2314.04(L) does not apply
to their request for a constructive trust would require us to ignore the
statute’s plain language, which provides, subject to exceptions inapplicable
here, that an innocent natural person or enterprise “shall not be held liable
in damages or for other relief” for the acts of another. (Emphasis added).
¶13 The Investors also argue we cannot construe A.R.S. § 13-
2314.04(L) to bar their request for a constructive trust on the life insurance
proceeds because such a construction renders A.R.S. § 13-2314.04(D)(6)’s
exception for a bona fide purchaser for value superfluous. In other words,
according to the Investors, this construction of A.R.S. § 13-2314.04(L) would
“swallow up” the narrower protections afforded by A.R.S. § 13-
2314.04(D)(6).6 See TDB Tucson Grp., L.L.C. v. City of Tucson, 228 Ariz. 120,
5SeeStout v. Taylor, 233 Ariz. 275, 278, ¶ 12, 311 P.3d 1088, 1091
(App. 2013) (“To determine the ordinary meaning of a word, we may refer
to established and widely used dictionaries.”).
6In connection with this argument, the Investors contend that
A.R.S. § 13-2314.04(D)(6) and (L) were enacted at the same time. Although
the Investors are technically correct, their reading of the legislative history
is too limited. As discussed below, see infra ¶¶ 17–18, the language of (D)(6)
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MARSH, et al. v. MAYER, et al.
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123, ¶ 9, 263 P.3d 669, 672 (App. 2011) (appellate court will not interpret a
statute in a manner that renders any part “superfluous, void, insignificant,
redundant or contradictory” (internal quotation marks omitted) (citation
omitted)). Under A.R.S. § 13-2314.04(D)(6), a bona fide purchaser for value
who is “reasonably without notice of the unlawful conduct and who is not
knowingly taking part in an illegal transaction” cannot be required to serve
as an involuntary trustee even if it possesses proceeds acquired through
racketeering activity. Because a bona fide purchaser, by definition, does not
have knowledge of the unlawful origins of the property it purchases, see
generally First Am. Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394, 398,
¶ 12, 187 P.3d 1107, 1111 (2008) (“The term ‘bona fide purchaser’ is often
used to refer to one who purchases property for value and without
notice.”), a bona fide purchaser could never have “authorized, requested,
commanded, ratified or recklessly tolerated the unlawful conduct” of the
wrongdoer; and, thus, a bona fide purchaser would always fall within the
protection granted in A.R.S. § 13-2314.04(L) as well.
¶14 We agree with the Investors that both A.R.S. § 13-2314.04(L)
and (D)(6) protect a bona fide purchaser. An interpretation of a statute is
not improper, though, merely because it acknowledges two subsections
may sometimes overlap in their effect. See Conn. Nat. Bank v. Germain, 503
U.S. 249, 253, 112 S. Ct. 1146, 1149, 117 L. Ed. 2d 391 (1992) (“Redundancies
across statutes are not unusual events in drafting, and so long as there is no
‘positive repugnancy’ between two laws, . . . a court must give effect to
both.”); In re Estate of Nash, 220 S.W.3d 914, 917–18 (Tex. 2007) (“[T]here are
times when redundancies are precisely what the Legislature intended[.]”).
While both subsections protect a bona fide purchaser, their core functions
and purposes are distinct. See Wyatt v. Wehmueller, 167 Ariz. 281, 284, 806
P.2d 870, 873 (1991) (“historical background” and “spirit and purpose” of
legislation may be considered in determining legislative intent).
¶15 The Legislature enacted Arizona’s RICO statutes in 1978.
1978 Ariz. Sess. Laws, ch. 204, § 2 (2d Reg. Sess.). As originally enacted,
A.R.S. § 13-2314 governed both state and private civil RICO actions. Id. In
1985, the Legislature enacted the language found in A.R.S. § 13-
2314.04(D)(6), then codified in A.R.S. § 13-2314(E), as part of its efforts to
expand RICO remedies to allow recovery of the proceeds of unlawful
first appeared in 1985 while subsection (L) did not appear until 1993, when
the Legislature created a separate statute governing private RICO actions.
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activity. 1985 Ariz. Sess. Laws, ch. 329, § 3 (1st Reg. Sess.); Senate Fact Sheet,
S.B. 1255, 37th Leg., 1st Reg. Sess. (Feb. 18, 1985).7
¶16 In reaction to abuses by private plaintiffs seeking significant
RICO remedies against defendants who had only oblique relationships to
the underlying wrongdoing, in 1993 the Legislature enacted a separate
statute to govern private RICO claims, A.R.S. § 13-2314.04. 1993 Ariz. Sess.
Laws, ch. 257, §§ 2–3 (1st Reg. Sess.); see Minutes, Senate Committee on
Commerce and Economic Development, S.B. 1197, February 3, 1993
(statements of Senators Greene and Wright);8 Senate Fact Sheet, S.B. 1197,
41st Leg., 1st Reg. Sess. (Feb. 1, 1993);9 Jennifer B. Wuamett, RICO Litigation;
Damages, 26 Ariz. St. L.J. 293, 294–95 (1994). As enacted, A.R.S. § 13-2314.04
restricted both the scope of defendants potentially liable in a private RICO
action, and the remedies available to the private RICO plaintiff. Senate Fact
Sheet, S.B. 1197, 41st Leg., 1st Reg. Sess. (Feb. 1, 1993); Wuamett, supra, 26
Ariz. St. L.J. at 296–97. While the Legislature retained the constructive trust
remedy in both the new private RICO statute and the amended statute
governing RICO actions by the State, compare A.R.S. § 13-2314(F) (2010) with
A.R.S. § 13-2314.04(D)(6), it only included the language of A.R.S. § 13-
2314.04(L) in the private RICO statute—a step in accord with its intent to
narrow the remedies available to private RICO plaintiffs. 1993 Ariz. Sess.
Laws, ch. 257, §§ 2–3 (1st Reg. Sess.); Senate Fact Sheet, S.B. 1197, 41st Leg.,
1st Reg. Sess. (Feb. 1, 1993); Wuamett, supra, 26 Ariz. St. L.J. at 306.
¶17 Consistent with this legislative history, A.R.S. § 13-
2314.04(D)(6) and (L) serve distinct purposes and protect distinct classes of
persons. Section 13-2314.04(D)(6) allows RICO plaintiffs to recover the
proceeds of unlawful activity unless the proceeds are in the hands of a bona
7See State v. Payne, 223 Ariz. 555, 563 n.5, ¶ 25, 225 P.3d 1131,
1139 n.5 (App. 2009) (“Senate fact sheets” are “relevant legislative history .
. . reflective, though not dispositive, of legislative intent.” (citing State ex rel.
Ariz. Dep't of Revenue v. Capitol Castings, Inc., 207 Ariz. 445, 449, ¶ 19, 88 P.3d
159, 163 (2004))).
8Hernandez-Gomez v. Leonardo, 185 Ariz. 509, 513, 917 P.2d 238,
242 (1996) (“[W]hen the sponsors of a bill and the very committees
considering that bill tell Congress and the public what they intended to
accomplish with a specific provision of that bill, such expressed intentions
can be useful to clarify any ambiguity in the meaning of the enacted
legislation.”).
9See Payne, 223 Ariz. at 563 n.5, ¶ 25, 225 P.3d at 1139 n.5.
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fide purchaser for value without notice of the unlawful activity, whereas
A.R.S. § 13-2314.04(L) protects individuals who did not “authorize[],
request[], command[], ratif[y] or recklessly tolerate[] the unlawful conduct”
of another from the reach of private RICO plaintiffs. Cf. Sonitrol of Maricopa
Cty. v. City of Phoenix, 181 Ariz. 413, 420, 891 P.2d 880, 887 (App. 1994) (two
subsections of city code that both had the effect of exempting charges for
out-of-state transmissions from taxable income were not “merely
duplicative” because they served distinct functions). Section 13-2314.04(L)
is substantially broader than the bona fide purchaser exception in A.R.S. §
13-2314.04(D)(6); A.R.S § 2314.04(L) protects even those with some
knowledge of the unlawful activity of another, whereas A.R.S. § 13-
2314.04(D)(6) protects only bona fide purchasers who are completely
ignorant of the unlawful activity. Sections 13-2314.04(D)(6) and (L) are
neither repugnant nor merely redundant; both can be applied to accomplish
their distinct purposes without creating contradiction or disharmony. See
Midtown Med. Grp., Inc. v. State Farm Mut. Auto. Ins. Co., 220 Ariz. 341, 347,
¶ 22, 206 P.3d 790, 796 (App. 2008) (“When construing statutes, we seek to
harmonize them.”).
¶18 Moreover, as discussed, A.R.S. § 13-2314.04(L) is clear on its
face, and we cannot abandon its plain meaning to comply with an
interpretative canon of statutory construction. See Sonitrol, 181 Ariz. at 420,
891 P.2d at 887 (“general principle that statutes should be construed to
avoid rendering any portion meaningless or superfluous” not applicable
when language of statute is clear on its face); Bank Midwest, Minn., Iowa,
N.A. v. Lipetzky, 674 N.W.2d 176, 181 (Minn. 2004) (applying plain meaning
of statute although acknowledging to do so resulted in redundancy).
¶19 For all of these reasons, we agree with the Coles Defendants—
A.R.S. § 13-2314.04(L) barred the Investors’ request for a constructive trust
on the life insurance proceeds.
II. Attorneys’ Fees
¶20 The Investors argue the superior court should not have
awarded the Coles Defendants attorneys’ fees and costs pursuant to A.R.S.
§ 13-2314.04(A) because they did not bring a “racketeering claim” against
them. According to the Investors, a “racketeering claim” only encompasses
those claims against defendants alleged to have actually participated in an
act of racketeering. Reviewing this question of law de novo, see supra ¶ 9,
we disagree.
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MARSH, et al. v. MAYER, et al.
Opinion of the Court
¶21 Section 13-2314.04(A) authorizes the superior court to award
costs and reasonable attorneys’ fees to “the person against whom a
racketeering claim has been asserted,” provided the person prevails.
Section 13-2301(D)(4) (Supp. 2014) defines “[r]acketeering” as “any act . . .
that is chargeable or indictable under the laws of the state or country in
which the act occurred . . . that would be punishable by imprisonment for
more than one year under the law of this state . . . and the act involves” any
of the various enumerated offenses. A “claim” is defined as including
“[t]he assertion of an existing right; any right to payment or to an equitable
remedy, even if contingent or provisional.” Black’s Law Dictionary (10th
ed. 2014). Thus, to be entitled to attorneys’ fees and costs under A.R.S. § 13-
2314.04(A), a party must be “the person against whom” the plaintiff has
asserted a right to payment or to an equitable remedy related to an act that
meets the statutory definition of “racketeering.”
¶22 The Investors’ request for a constructive trust on the life
insurance proceeds was a racketeering claim. A constructive trust “is a
remedial device, used ‘to compel one who unfairly holds a property interest
to convey that interest to another to whom it justly belongs.’” Cal X-Tra v.
W.V.S.V. Holdings, L.L.C., 229 Ariz. 377, 409, ¶ 107, 276 P.3d 11, 43 (App.
2012) (quoting Harmon v. Harmon, 126 Ariz. 242, 244, 613 P.2d 1298, 1300
(App. 1980)). Thus, by asserting a right to a constructive trust on the life
insurance proceeds, the Investors sought an equitable remedy against the
Coles Defendants. Because their putative right to this remedy arose from
racketeering activity, the Investors asserted a “racketeering claim” against
the Coles Defendants.
¶23 Moreover, adopting the Investors’ proposed construction
would lead to the anomalous result of allowing prevailing defendants
alleged to have actually participated in racketeering to recover their fees
and costs while forcing prevailing defendants who were not involved in the
alleged wrongdoing to bear their own fees and costs. See Summers Grp., Inc.
v. Tempe Mech., LLC, 231 Ariz. 571, 574, ¶ 14, 299 P.3d 743, 746 (App. 2013)
(“Statutes must be given a sensible construction that accomplishes the
legislative intent and which avoids absurd results.”).
13
MARSH, et al. v. MAYER, et al.
Opinion of the Court
CONCLUSION
¶24 For the foregoing reasons, we affirm the superior court’s
judgment in favor of the Coles Defendants. Pursuant to A.R.S. § 13-
2314.04(A), we also award the Coles Defendants their taxable costs and
reasonable attorneys’ fees on appeal, contingent upon their compliance
with Arizona Rule of Civil Appellate Procedure 21.
:ama
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