Enterprising v. Ellis

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ENTERPRISING SOLUTIONS INC, Plaintiff/Appellant,

v.

STACY ELLIS, et al., Defendants/Appellees.

No. 1 CA-CV 17-0282
FILED 4-10-2018

Appeal from the Superior Court in Maricopa County
No. CV2013-050340
The Honorable Susan M. Brnovich, Judge

AFFIRMED

COUNSEL

Gallagher & Kennedy, PA, Phoenix
By John P. Flynn
Counsel for Plaintiff/Appellant

Raymond Greer & McCarthy, PC, Scottsdale
By Daniel W. McCarthy, Michael J. Raymond
Counsel for Defendants/Appellees
 ENTERPRISING v. ELLIS, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Jon W. Thompson delivered the decision of the Court, in
which Judge Peter B. Swann and Judge James P. Beene joined.

T H O M P S O N, Judge:

¶1 Enterprising Solutions, Inc. (ESI) appeals the superior court’s
grant of summary judgment in favor of Stacy and Hal Ellis and Sunwest
Insurance Ltd. (collectively, Defendants). Because ESI failed to present any
evidence of damages, an essential element of its claims for negligence and
negligent misrepresentation, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 ESI is a professional employer organization that provides
employee-related administrative services to employers. In that role, ESI
administered an employee health benefits program called Sunwest
Employer Services Group Medical and Dental Plan (the Plan), which was
funded by ESI’s clients and their employees. During 2008 and 2009, the
contribution levels that ESI established were insufficient to cover the Plan’s
medical claims and expenses. After receiving numerous complaints from
Plan participants and providers, ESI terminated the Plan.

¶3 ESI had purchased a Staff Services Liability Policy and a
Commercial Umbrella Policy (collectively, the Policies) from National
Union Fire Insurance Company of Pittsburgh, Pennsylvania (National
Union) through its insurance agent, Stacy Ellis, and her agency, Sunwest
Insurance Ltd. Unable to pay its claims, ESI tendered them to National
Union, seeking defense and indemnity under the Policies. After National
Union informed ESI that provisions in the Policies precluded coverage, ESI
filed a lawsuit against National Union in superior court seeking a
declaratory judgment to establish coverage. National Union removed the
case to federal court. The district court issued an opinion determining that
the Policies did not provide coverage:

[P]laintiff’s failure to properly calculate the contributions
necessary to fully fund the [Plan] was, indeed, the exercise of
discretion relating to plan management and administration

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Decision of the Court

and was, consequently, subject to [Employee Retirement
Income Security Act] fiduciary standards. Consequently,
plaintiff’s conduct was excluded from coverage under the
[Policies] . . . .

Enterprising Sols., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 2:10-CV-01430-
PHX, 2012 WL 3962702 at *7 (D. Ariz. Sept. 11, 2012) (mem. decision)
(citation omitted).

¶4 While the federal litigation was pending, National Union paid
the aggregate amount of $439,415.65 to settle claims submitted by ESI under
a reservation of rights. After the district court issued its opinion, National
Union’s counsel sent a letter to ESI’s counsel indicating that National Union
“will no longer be paying any claims . . . relating to the failure of the [Plan].”
The letter further stated that “National Union reserves the right to seek
reimbursement from ESI for all sums it has paid to defend and settle the
claims previously asserted against ESI and [the Plan].” The record lacks
any evidence, however, to suggest that National Union ever sought
reimbursement.

¶5 Following the district court’s ruling in favor of National
Union, ESI brought this action in superior court asserting claims for
negligence and negligent misrepresentation, alleging that Defendants
failed to act with reasonable care in procuring the Policies and made false
representations regarding coverage. After conducting discovery,
Defendants moved for summary judgment arguing that “ESI cannot meet
its burden of proof because it cannot establish that Stacy Ellis failed to
exercise reasonable care or that it (ESI) sustained actual damages.”1

¶6 The superior court granted Defendants’ motion, and ESI
timely appealed. We have jurisdiction pursuant to Arizona Revised
Statutes (A.R.S.) section 12-2101(A)(1) (2018).

1Defendants first moved for summary judgment arguing that ESI’s claims
were time-barred. Although the superior court granted their motion, this
court vacated the judgment concluding that “neither party has shown as a
matter of law that ESI’s claims are, or are not, timely.” Enterprising Sols.,
Inc. v. Ellis, 1 CA-CV 14-0355, 2015 WL 4748020 at *7, ¶ 23 (Ariz. App. Aug.
11, 2015) (mem. decision). In their second motion for summary judgment,
Defendants again argued that ESI’s claims were time-barred. The superior
court rejected their argument.

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DISCUSSION

¶7 On appeal, ESI challenges the superior court’s determination
that “there was no triable issue of material fact as to whether ESI’s claims
for professional negligence and negligent misrepresentation resulted in
identified/disclosed damages.” We review de novo the court’s grant of
summary judgment. See Sanders v. Alger, 242 Ariz. 246, 248, ¶ 2 (2017). In
doing so, we view the evidence in the light most favorable to ESI, the non-
moving party. See id.

¶8 Summary judgment is appropriate when “there is no genuine
dispute as to any material fact and the moving party is entitled to judgment
as a matter of law.” Ariz. R. Civ. P. 56(a). The party moving for summary
judgment must demonstrate the absence of a genuine issue of material fact
and “explain why summary judgment should be entered in its favor.” Orme
School v. Reeves, 166 Ariz. 301, 310 (1990), as amended (Jan. 23, 2008)
(citations omitted). If the moving party meets its initial burden by
establishing that the non-moving party does not have enough evidence to
carry its burden of proof at trial:

[T]he burden then shifts to the non-moving party to present
sufficient evidence demonstrating the existence of a genuine
factual dispute as to a material fact. . . . To defeat the motion,
the non-moving party must call the court’s attention to
evidence overlooked or ignored by the moving party or must
explain why the motion should otherwise be denied.

Id. at 119, ¶ 26 (citations omitted). Pursuant to Arizona Rule of Civil
Procedure 56(e), a party opposing a motion for summary judgment “may
not rely merely on allegations or denials of its own pleading,” but by
affidavits or otherwise must “set forth specific facts showing a genuine
issue for trial.” If the opposing party does not properly respond to the
motion, then summary judgment “shall be entered against that party.” Id.

¶9 Here, Defendants moved for summary judgment arguing that
“ESI’s failure to disclose evidence of the fact, cause, amount, and timing of
its damages is fatal” to its claims for negligence and negligent
misrepresentation. Specifically, Defendants argued that damages are an
essential element of ESI’s claims, and that “ESI has disclosed no evidence
with which it can establish its damages.” See Amfac Distrib. Corp. v. Miller, 138 Ariz. 152, 153 (1983) (holding that a cause of action for negligence
requires that “actual injury or damages must be sustained”); KB Home
Tucson, Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326, 333 n.7, ¶ 30 (App.

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2014) (explaining that a cause of action for negligent misrepresentation
requires “resulting damage”).

¶10 In opposing Defendants’ motion, ESI addressed damages in
one paragraph only, stating:

ESI has disclosed sufficient information to support its
damages claim. Plaintiff’s Disclosure Statement, Response to
Requests for Admission, Response to Separate Non-Uniform
Interrogatories and Response to Request for Production of
Documents fully support the claims and damages sought.
Therein, Plaintiff disclosed 89 documents, while providing
responses confirming a minimum of $439,000 in claims
damages as National Union has retained a contractual/policy
entitled to seek recovery of those funds paid out under a
reservation of rights, subsequently withdrawn once [the
district court] finally ruled that no coverage existed.

(Citation omitted.) In ESI’s controverting statement of facts, it stated
simply: “Plaintiff’s disclosure and discovery responses identify the
damages.”

¶11 Therefore, we turn our review to Section VII of ESI’s
disclosure statement, which addressed damages by stating:

Given that this matter is in its infancy, Plaintiff has not fully
calculated its damages. However, at a minimum, Plaintiff is
entitled to recover its compensatory damages in excess of the
minimum jurisdictional limits of this Court and according to
proof. Plaintiff reserves the right to supplement this
disclosure as discovery in this matter progresses.

Although the disclosure statement lists eighty-nine relevant documents,
our review of the list provides no explanation of ESI’s claimed damages,
and the documents themselves are not a part of the record. Moreover, in
responding to Defendants’ motion for summary judgment, ESI failed to (1)
identify which of the documents are relevant to damages and (2) place the
relevant documents into the record.

¶12 We next turn to ESI’s discovery responses. Defendants served
ESI with an interrogatory expressly asking: “What are your damages?” ESI
responded: “ESI incorporates Section VII of its Disclosure Statement and
any supplements thereto.” On appeal, ESI again asserts that its discovery
responses confirm a “minimum of $439,000 in claims damages” that

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National Union “paid out under a reservation of rights.” The record,
however, contains nothing to reflect that National Union has sought
reimbursement.2

¶13 This fact was confirmed at oral argument on Defendants’
motion, when the superior court and ESI’s counsel had the following
exchange:

THE COURT: . . . I agree with the defense that you never
really responded to their claim that you haven’t produced any
evidence of damages.

MR. FLYNN: $439,000 in documented damages with a claw
back, a hang out from the insurer and the Department of
Labor claim as it relates to the unpaid claims. That’s been
identified in the course of litigation.

...

If there’s some additional supplementation that counsel
believes we need to provide, we certainly would be glad to.
But there’s documentation evidencing the damages that were
inflicted.

THE COURT: What is it? I still don’t understand. . . . I looked
at your statement of facts and I didn’t see anything. So are you
saying that National Union has come after your client for that
$439,000?

MR. FLYNN: They have not yet. The Department of Labor is
continuing to push and process. National Union has not filed
any action. They have indicated that they are reserving their
rights to do so. But they have not taken any action. There’s
been no lawsuit filed.

2 On appeal, ESI also argues that the “Department of Labor continues to
knock on ESI’s door,” but does not provide any citation to evidence in
support of its argument. See ARCAP 13(a)(7)(A) (explaining that a brief
must set forth arguments with “appropriate references to the portions of
the record on which the appellant relies”).

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Decision of the Court

¶14 In order to defeat Defendants’ motion for summary
judgment, ESI had to call the superior court’s attention to “evidence
overlooked or ignored” by Defendants regarding damages, which was an
essential element of their claims. Doe v. Roe, 191 Ariz. 313, 323, ¶ 33 (1998).
ESI could not “rely merely on allegations or denials of its own pleading,”
but had to “set forth specific facts showing a genuine issue for trial.” Ariz.
R. Civ. P. 56(e). “The opposing party must show that evidence is available
which justifies going to trial.” Portonova v. Wilkinson, 128 Ariz. 501, 502
(1981).

¶15 In opposing Defendants’ motion, ESI failed to present any
evidence demonstrating damages. Accordingly, the court properly granted
summary judgment in favor of Defendants under Rule 56(e). See id.

CONCLUSION

¶16 For the foregoing reasons, we affirm the entry of summary
judgment. We award costs to Defendants upon compliance with Arizona
Rule of Civil Appellate Procedure 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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