Berkman v. Walt Danley ( 2023 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
SHANNON BERKMAN, Plaintiff/Appellant,
v.
WALT DANLEY REALTY, LLC, et al., Defendants/Appellees.
No. 1 CA-CV 22-0584
FILED 8-08-2023
Appeal from the Superior Court in Maricopa County
No. CV2018-010817
The Honorable John R. Hannah, Judge
AFFIRMED
COUNSEL
Shannon Berkman, Phoenix
Plaintiff/Appellant/Counter-Defendant
Don Bivens, PLLC, Scottsdale
By Don Bivens
Co-Counsel for Defendants/Appellees/Counter-Claimant
Snell & Wilmer, LLP, Phoenix
By Joshua R. Woodard, Patrick A. Tighe
Co-Counsel for Defendants/Appellees/Counter-Claimant
BERKMAN v. WALT DANLEY, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Cynthia J. Bailey delivered the decision of the Court, in which
Presiding Judge James B. Morse Jr. and Judge Brian Y. Furuya joined.
B A I L E Y, Judge:
¶1 Shannon Berkman appeals the superior court’s judgment for
her former employer Walt Danley Realty, LLC (“WDR”) and its executives
Douglas Dellis and Walt Danley (collectively, “Defendants”) on her
wrongful termination claim and the court’s judgment for Danley on his
invasion of privacy counter-claim against Berkman. Because Berkman has
shown no error, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 We view the facts in the light most favorable to sustaining the
court’s verdicts. Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 417, ¶ 2 (App.
2010).
¶3 WDR is an Arizona real estate company specializing in luxury
homes. In September 2016, WDR hired Berkman as a real estate agent.
Several months later, Berkman began working as an assistant to Danley, the
president and co-owner of WDR. In early 2018, issues with Berkman’s
performance arose. In February 2018, Danley told Berkman that they had
a “communication problem,” she was not fulfilling her role as his assistant,
and she focused only on real estate transactions on which she could earn
commissions. The next month, Danley again told Berkman that her
performance was “unprofessional” and that she was not directing enough
attention to her role as his assistant, and he requested that she take three
days off to think about her role at WDR. Then, in April, a WDR client
emailed Danley, complaining that Berkman had acted unprofessionally
during the sale of her home, causing her to lose valuable furniture.
¶4 On May 9, 2018, Danley instructed WDR chief operating
officer Dellis to fire Berkman. Dellis was about to leave on a scheduled
vacation and requested that he be allowed to do so once he returned.
Danley agreed. When Dellis returned on May 21, Danley told Dellis not to
fire Berkman immediately because he “had a few loose ends to tie up before
we let her go.” About a week later, Danley gave Dellis the green light to
fire Berkman, but she was on a scheduled vacation. Dellis decided to wait
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until Berkman returned from vacation so that he could fire her in a face-to-
face meeting. Dellis tried to set up a meeting with Berkman once she
returned on June 7, but she maintained she was unavailable because she
was caring for her son, who had been in an accident, attending a friend’s
funeral, and helping that friend’s family.
¶5 Then, on June 13, Danley instructed Dellis to fire Berkman
that day, even if he could not meet with her personally. Three events led
Danley to conclude Berkman had to be fired immediately. First, a WDR
client called to complain about confusion surrounding the sale of her house
and that she had not been informed of significant dates. Berkman, though
not the listing agent, had been heavily involved in the transaction and was
responsible for communicating with the client. Second, Danley reviewed a
negative survey response from a client about a transaction Berkman
worked on. Third, Danley grew suspicious that, during a negotiation
where WDR represented the seller of a home, Berkman revealed the
“bottom line” price of WDR’s client—a breach of WDR’s fiduciary duties.
¶6 Based on Danley’s instruction, Dellis fired Berkman via email
on June 13. Several months later, Berkman filed suit against WDR, Danley,
and Dellis for wrongful termination. She alleged that she was fired in
retaliation for reporting conduct by Dellis and Danley that she believed was
unlawful. Specifically, she alleged that on May 23, 2018, she disclosed to
Danley that she believed Dellis was selling “leads” (information about
potential buyers WDR could represent or sell one of its listings to) that
WDR paid to get from Zillow.com to a WDR agent in exchange for “illegal
kickbacks.” She also alleged that on June 6, 2018, she reported to WDR’s
designated broker that Danley had required her to give him an “illegal
kickback” of $4,000 out of one of her commission checks almost a year
earlier.
¶7 Before suing, Berkman sent a demand letter to Defendants
laying out her potential claims and requesting a settlement. Attached to the
demand letter was one of Danley’s private journal entries. Realizing
Berkman had stolen his private materials and shared them with others,
Danley counter-claimed against Berkman for invasion of privacy, alleging
that her actions caused him significant emotional distress.
¶8 In 2021, after a seven-day bench trial, the superior court found
for Defendants on Berkman’s wrongful termination claim and for Danley
on his invasion of privacy counter-claim, and entered a final judgment
accordingly. Berkman timely appealed, and we have jurisdiction under
Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).
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Decision of the Court
DISCUSSION
I. Standard of Review
¶9 Following a bench trial, we review the superior court’s legal
conclusions de novo but defer to its findings of fact unless clearly erroneous.
Town of Marana v. Pima Cnty., 230 Ariz. 142, 152, ¶ 46 (App. 2012). A factual
finding is not clearly erroneous so long as it is supported by substantial
evidence. Castro v. Ballesteros-Suarez, 222 Ariz. 48, 51–52, ¶ 11 (App. 2009)
(citation omitted). “Evidence is substantial if it allows ‘a reasonable person
to reach the trial court’s result.’” Id. at 52, ¶ 11 (quoting Davis v. Zlatos, 211
Ariz. 519, 524, ¶ 18 (App. 2005)). “We will not reweigh the evidence or
substitute our evaluation of the facts.” Id. (citing Cauble v. Osselaer, 150 Ariz.
256, 258 (App. 1986)).
¶10 When reviewing evidentiary and discovery-related
challenges, we will not disturb the court’s ruling absent an abuse of
discretion. See Marquez v. Ortega, 231 Ariz. 437, 441, ¶ 14 (App. 2013). A
court abuses its discretion if the record lacks competent evidence to support
its decision or the court commits an error of law in reaching its decision.
Hurd v. Hurd, 223 Ariz. 48, 52, ¶ 19 (App. 2009) (citations omitted). We
review de novo whether attorney-client privilege protects a communication
and whether a party has waived the privilege. State ex rel. Adel v. Adleman,
252 Ariz. 356, 360, ¶ 10 (2022).
II. Wrongful Termination Claim
¶11 Berkman alleged that she was wrongfully terminated in
retaliation for reporting what she believed to be unlawful conduct by
Danley and Dellis. To prevail on her claim, Berkman had to prove (1) that
she was an employee, (2) that she had “a reasonable belief that [her]
employer, or an employee of the employer, has violated, is violating or will
violate” Arizona law, (3) she disclosed her belief “in a reasonable manner”
to a person she “reasonably believe[d] [wa]s in a managerial or supervisory
position,” and (4) she was fired “in retaliation for” her disclosure. A.R.S.
§ 23-1501(A)(3)(c)(ii).
¶12 Berkman argues that substantial evidence does not support
the verdict for Defendants under the McDonnell Douglas burden-shifting
framework.1 See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802–04
1 To the extent that Berkman relies on deposition testimony not
admitted at trial to support her claim, we do not consider this evidence. See
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Decision of the Court
(1973). As Defendants point out, no published opinion in Arizona has
adopted the McDonnell Douglas burden-shifting framework for wrongful
termination claims under A.R.S. § 23-1501. But unpublished memorandum
decisions from this court have concluded the McDonnell Douglas standard
applies to claims under A.R.S. § 23-1501(A)(3)(c)(ii). See Baron v.
HonorHealth, 1 CA-CV 19-0391, 2020 WL 5638539, at *2, ¶ 13 (Ariz. App.
Sept. 22, 2020) (mem. decision); Czarny v. Hyatt Residential Mktg. Corp., 1
CA-CV 16-0577, 2018 WL 1190051, at *2, ¶¶ 12–13 (Ariz. App. Mar. 8, 2018)
(mem. decision). Much like those decisions, we apply McDonnell Douglas
here.
¶13 In McDonnell Douglas, the United States Supreme Court held
that under federal civil rights law, an employee bears the burden of making
a prima facie case of discrimination on the basis of race. 411 U.S. at 802.
Then, the burden shifts to the employer to “articulate some legitimate,
nondiscriminatory reason” for terminating the employee’s job. Id. Once
the employer does so, the burden shifts back to the employee to prove the
offered reason is pretextual. Id. at 804.
¶14 Berkman testified that she reported misconduct by Dellis on
May 23, 2018, and misconduct by Danley on May 31, 2018. Both Dellis and
Danley testified that Danley instructed Dellis to fire Berkman for her poor
work performance on May 9, 2018, well before she reported any allegedly
unlawful conduct. And a WDR real estate agent testified that by May 21,
2018, she knew that Danley had ordered Berkman to be fired. Additionally,
on May 17, 2018, Dellis texted WDR’s chief financial officer, confirming that
he was to fire Berkman when he returned from vacation. Danley and Dellis
both testified that on May 21, Danley requested Dellis delay firing Berkman
until Danley had tied up some “loose ends.” But Danley was clear that from
May 9 on, he never changed his mind about firing Berkman. Substantial
evidence shows that Danley decided to fire Berkman before she reported
any misconduct, and that this decision was not a pretext for firing her in
retaliation for her disclosure.
¶15 Berkman points to conflicts in the evidence that she claims
show Defendants’ stated reason for her firing and their account of the
timing of the decision were pretextual. But we must defer to the superior
court’s resolution of evidentiary conflicts. See In re Estate of Newman, 219
Ariz. 260, 271, ¶ 40 (App. 2008). Berkman also argues that Defendants
Gersten v. Gersten, 223 Ariz. 99, 103, ¶ 10 (App. 2009) (“[P]ortions of the
record not admitted in evidence at trial ha[ve] no evidentiary value unless
they [a]re the proper subject of judicial notice.” (citations omitted)).
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Decision of the Court
changed their story at trial to support a theory that the decision to fire her
was made before her disclosures. But throughout the litigation, Defendants
maintained that Danley instructed Dellis to fire Berkman on May 9 for her
poor performance, and that the decision was never reversed, just delayed.
Because the court’s verdict is supported by substantial evidence, we will
not disturb it. See Creamer v. Troiano, 108 Ariz. 573, 577 (1972).
III. Invasion of Privacy Counter-claim
¶16 Berkman also argues that substantial evidence does not
support the court’s verdict for Danley on his invasion of privacy counter-
claim. To prevail, Danley had to prove (1) that Berkman “intentionally
intrude[d], physically or otherwise, upon the solitude or seclusion of
[Danley] or his private affairs or concerns,” and (2) the intrusion was
“highly offensive to a reasonable person.” Hart v. Seven Resorts Inc., 190
Ariz. 272, 279 (App. 1997) (quoting Restatement (Second) of Torts § 652B
(1977)). Danley did not have to prove financial or reputational damages; he
could recover for “the mental anguish and distress caused by” the invasion
of his privacy. Reed v. Real Detective Pub. Co., 63 Ariz. 294, 305–06 (1945).
¶17 At trial, Danley introduced his journal entry that Berkman
attached to the demand letter she sent Defendants. He also introduced 143
journal pages and other personal documents that Berkman produced
during discovery. Danley testified that he kept these documents in a desk
drawer at his home office. He testified that he did not share his private
journaling with anyone, and he did not allow Berkman to access the office
drawer where they were kept. He also testified that he could not have
mistakenly turned over his journals to Berkman when moving from his
home office to his work office. Berkman maintains that Danley had no
reasonable expectation of privacy in his home office drawer, because he
required Berkman to work with him in his home office. But Danley never
allowed Berkman to access his journals, and he intentionally kept them
private from everyone, including Berkman. Danley therefore maintained a
privacy interest in his journals. And taking and distributing another’s
private thoughts and reflections is the kind of privacy intrusion that is
“highly offensive to a reasonable person.” Hurt, 190 Ariz. at 279. Danley
also testified about the significant emotional distress he experienced
because of Berkman’s invasion of his privacy. Substantial evidence thus
supports the court’s verdict.
¶18 Berkman next contends that the court improperly considered
the journal entries and documents that were not attached to the demand
letter but later produced in discovery. She contends that because Danley
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Decision of the Court
did not amend his counter-claim to reference these documents, they could
not be used to support his counter-claim. But Danley never limited his
counter-claim to Berkman’s taking of the journal entry attached to the
demand letter. He alleged that Berkman invaded his privacy by
“intentionally interfer[ing] with [his] privacy when she read, stole and/or
copied, then revealed his private notes to other people.” This allegation
was broad enough to encompass the later-discovered documents. That
more evidence emerged to support his allegation through discovery did not
require him to amend his counterclaim. See Pruitt v. Pavelin, 141 Ariz. 195,
205–06 (App. 1984).
¶19 Finally, Berkman argues that the court improperly considered
the journal entry attached to Berkman’s demand letter because the letter
was protected by attorney-client privilege and Arizona Rule of Evidence
(“Rule”) 408.2
¶20 To establish a communication is privileged, the party
claiming the privilege must show (1) “an attorney-client relationship,” (2)
that “the communication was made to secure or provide legal advice,” (3)
that “the communication was made in confidence,” and (4) that “the
communication was treated as confidential.” Clements v. Bernini, 249 Ariz.
434, 440, ¶ 8 (2020) (citation omitted). Berkman cannot meet this standard,
as she did not treat the demand letter and attached journal entry as
confidential because she sent it to Defendants to try to resolve her claim.
¶21 Rule 408 prohibits the admission of any offer, acceptance, or
negotiation of settlement, including any “conduct or a statement made
during compromise negotiations” for impeachment or “to prove or
disprove the validity or amount of a disputed claim.” Ariz. R. Evid. 408(a).
But Rule 408 provides that “[t]he court may admit this evidence for another
purpose.” Ariz. R. Evid. 408(b). Danley did not admit the demand letter
and attachment to impeach Berkman or to prove the validity or amount of
any claim. The letter and attachment were admitted as substantive proof
of Danley’s claim against Berkman for invasion of privacy. Rule 408 thus
did not bar their admission.
2 In her reply brief, Berkman also argues Danley had no privacy
interest in this journal entry because it contained information about
Berkman’s work performance, and therefore Danley would have needed to
disclose it in discovery on her wrongful termination claim. Berkman
waived this argument by failing to raise it in her opening brief. See State v.
Lindner, 227 Ariz. 69, 70, ¶ 3 n.1 (App. 2010).
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IV. Admission of Late-Disclosed Witness Testimony
¶22 In her complaint, Berkman alleged that when she was fired,
Defendants knew she was out of the office for “a scheduled vacation, a
funeral, and the medical needs of her son,” but did not relate this fact to her
request for “emotional distress” damages. When asked about her theory of
damages during her deposition, Berkman never mentioned the funeral or
grief-related damages. For the first time in her final disclosure statement,
filed after the witness disclosure deadline, Berkman alleged that she was
entitled to damages for “Defendants’ malicious and deliberate misconduct
at a time when [she] was grieving the loss of her friend.”
¶23 To rebut this allegation of damages, Defendants requested to
call a witness who would testify that Berkman had made false statements
about the extent of her relationship with the individual whose funeral she
attended. The superior court found Defendants had shown good cause for
their untimely disclosure of this witness and permitted them to call her at
trial.
¶24 Berkman argues the superior court erred by allowing
Defendants to call this witness because they did not timely disclose their
intention to call her. Berkman waived this issue by failing to cite any
authority or facts supporting her position and failing to develop her
argument. See MacMillan v. Schwartz, 226 Ariz. 584, 591, ¶ 33 (App. 2011)
(“Merely mentioning an argument in an appellate opening brief is
insufficient. Opening briefs must present significant arguments, supported
by authority, setting forth the appellant’s position on the issues raised.”
(internal citation omitted)).
¶25 Waiver aside, Berkman has shown no abuse of discretion.
Generally, a party who fails to timely disclose a witness may not call that
witness at trial. See Ariz. R. Civ. P. 37(c)(1). But the court may allow a party
to call a late-disclosed witness if it finds that the delay did not prejudice the
opposing party or otherwise finds good cause. Id. Before the disclosure
deadline, Defendants were aware of Berkman’s factual allegation that she
attended a funeral around the time she was fired, but she did not disclose
her grief damages theory until after the witness disclosure deadline. The
superior court did not abuse its discretion in finding that because
Defendants were not on notice of this theory of damages until after the
witness disclosure deadline, they had established good cause for their late
disclosure of a witness who could rebut this theory.
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V. Admission of Exhibit 23
¶26 Berkman contends the superior court erred in admitting
Exhibit 23, a copy of an obituary and news article containing Berkman’s
handwritten notes. She argues the exhibit should not have been admitted
because it was never produced during discovery and protected by attorney-
client privilege.
¶27 Berkman has shown no error. First, contrary to Berkman’s
assertion, Exhibit 23 was produced in discovery. Second, Exhibit 23 was
not protected by attorney-client privilege. As noted above, to establish that
a communication is privileged, the party claiming the privilege must show,
among other requirements, that “the communication was treated as
confidential.” Clements, 249 Ariz. at 440, ¶ 8 (citation omitted). Berkman
did not treat Exhibit 23 as confidential. It was produced as part of
discovery, and nothing in the record shows that Berkman asserted it was
privileged and inadvertently produced. See Ariz. R. Civ. P. 26(b)(6)(B)
(outlining procedures for clawing back inadvertently produced privileged
material). And even assuming Exhibit 23 was privileged, Berkman waived
any privilege by not taking reasonable steps to remedy its disclosure. See
Ariz. R. Evid. 502(b).
VI. Attorneys’ Fees and Costs
¶28 Defendants request their attorneys’ fees incurred on appeal
because Berkman’s opening brief did not contain appropriate citations to
the record and legal authorities, see ARCAP 13(a)(4)–(5), (7), and she
unreasonably expanded and delayed the litigation with her appeal, see
A.R.S. § 12-349(A)(3). Though Berkman’s brief did not include appropriate
citations for every assertion, she generally complied with the applicable
rules. And her appeal did not unreasonably expand or delay this litigation.
We thus deny Defendants’ request for attorneys’ fees. As the prevailing
parties, Defendants may recover their taxable costs upon compliance with
Rule 21, ARCAP.
CONCLUSION
¶29 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: JT
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