Ashkenazi v. Baldino

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ROGER ASHKENAZI, et al., Plaintiffs/Appellees,

v.

JOSEPH L. BALDINO, et al., Defendants/Appellants/Appellees.

ML MANAGER, et al., Intervenors/Appellees,

No. 1 CA-CV 19-0049
1 CA-CV 19-0050
(Consolidated)
FILED 3-31-2020

Appeal from the Superior Court in Maricopa County
No. CV2014-000071
CV2014-006829
(Consolidated)
The Honorable Roger E. Brodman, Judge

REVERSED AND REMANDED

COUNSEL

Broening, Oberg, Woods & Wilson PC, Phoenix
By Robert T. Sullivan, Sarah L. Barnes, Jathan P. McLaughlin
Counsel for Defendants/Appellants

The Sifferman Law Firm PLLC, Phoenix
By Mark S. Sifferman
Counsel for Defendants/Appellees
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Decision of the Court

Sherman & Howard LLC, Phoenix
By David A. Weatherwax, Craig A. Morgan, Matthew A. Hesketh
Counsel for Plaintiffs/Appellees

Moyes, Sellers & Hendricks, Phoenix
By Keith L. Hendricks, Joshua T. Greer
Counsel for Intervenor/Appellee ML Manager

Ryan, Rapp, Underwood, & Pacheco PLC, Phoenix
By J. Henk Taylor
Counsel for Intervenors/Appellees Brown

MEMORANDUM DECISION

Presiding Judge Randall M. Howe delivered the decision of the Court, in
which Judge David D. Weinzweig and Judge David B. Gass joined.

H O W E, Judge:

¶1 Joseph Baldino, Eva Sperber-Porter, and others appeal the
trial court’s granting Roger Ashkenazi and others summary judgment on
their breach of contract claim. For the following reasons, we reverse and
remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 Baldino, Sperber-Porter, Ashkenazi, and others invested in
Mortgages Ltd., a mortgage lender (“Lender”). In 2010, after Lender went
bankrupt, Baldino and Sperber-Porter organized a group of plaintiffs,
including Ashkenazi and other individuals, entities, and trusts (collectively
the “Baldino and Ashkenazi Group”), to file a class action against
Greenberg Traurig (“GT”) and others alleging securities fraud for
concealing Lender’s financial condition. Baldino and Sperber-Porter were
members of a three-person steering committee that was responsible for the
day-to-day decisions and assisting the attorneys in the litigation. The
Baldino and Ashkenazi Group opted out of other class action lawsuits filed
by other Lender investors, including Facciola, et al. v. Greenberg Traurig, LLP,
et al., U.S. District Court, District of Ariz., Case No. 2:10-cv-01025-FJM, in
federal court, and a lawsuit filed by the Marsh Group in state court.

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¶3 The Baldino and Ashkenazi Group signed an Engagement
Agreement with attorneys Rickman Brown and Jeff Ross, and a separate
agreement among themselves (the “Intra-Client Agreement”). Each
agreement contained a “majority rule” provision that stated each claimant
would be bound by any settlement collectively accepted by plaintiffs who
held a majority of recoverable “Net Losses” asserted in the claim.

¶4 GT requested a joint mediation with the different class action
lawsuits filed against it so it could attempt to reach a global settlement.
Before mediation, the Baldino and Ashkenazi Group attorneys held a
meeting to obtain settlement authority. A majority of the Baldino and
Ashkenazi Group voted to give its attorneys settlement authority for a
specified amount, while Baldino and Sperber-Porter objected. Baldino told
the Baldino and Ashkenazi Group that he would not attend the mediation.
Sperber-Porter flew to New York to attend the mediation, but the attorneys
told her she needed to leave. Following mediation, the attorneys settled
with GT for an amount greater than the minimum settlement authority the
Baldino and Ashkenazi Group authorized. In June 2012, the attorneys filed
a “Notice of Settlement.” The settlement terms provided that

[t]he Settlement Payment Date shall be the date ten (10)
business days following the latest of (i) the last date on which
each of the Ashkenazi Plaintiffs has executed an
Acknowledgement of Claim and Settlement Agreement and
Release in the form attached hereto as Exhibit A and delivered
same to GT’s Counsel, (ii) the date on which the Bar Orders
entered by the Court, as referred to in Section 4 below,
becomes Final, (iii) the date on which the Judgment in the
Facciola Action becomes Final, and (iv) the dismissal with
prejudice of the Ashkenazi Action.

¶5 The members of the Baldino and Ashkenazi Group, except for
Baldino and Sperber-Porter, signed and returned the Acknowledgement of
Claim and Settlement Agreement and Release Forms. GT and the Baldino
and Ashkenazi Group moved for entry of final judgment and bar orders.
Baldino and Sperber-Porter opposed the settlement agreement, arguing
that the Baldino and Ashkenazi Group’s attorneys did not have authority
to bind them to the settlement. The trial court found that the attorneys had
actual authority to bind Baldino and Sperber-Porter and entered final
judgment and bar orders. This Court affirmed in Baldino v. Ashkenazi, 1
CA-CV 16-0404, 2017 WL 4413765 (Ariz. App. Oct. 5, 2017).

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¶6 The remaining members of the Baldino and Ashkenazi
Group, known as the Ashkenazi Plaintiffs, sued Baldino and Sperber-Porter
for, among other things, breaching the Intra-Client Agreement and
Engagement Agreement, resulting in a delayed payment of the GT
settlement from January 2013 to August 2019. The lawsuit alleged that GT
was prepared to pay the settlement by January 14, 2013, but Baldino and
Sperber-Porter’s conduct caused a multi-year delay until GT finally paid in
August 2018.

¶7 Both parties moved for summary judgment on the breach of
contract claim. The trial court found for the Ashkenazi Plaintiffs. As a result,
the trial court awarded the Ashkenazi Plaintiffs delay damages under
A.R.S. § 44–1201(A) and 10% prejudgment interest on the delay damages
under the same statute. Baldino and Sperber-Porter moved for a new trial,
arguing that A.R.S. § 44–1201(A) was inapplicable because they had never
owed the Ashkenazi Plaintiffs money. The trial court found that Baldino
and Sperber-Porter’s conduct caused them to become indebted to the
Ashkenazi Plaintiffs, so A.R.S. § 44–1201(A) applied. Baldino and Sperber-
Porter timely appealed.

DISCUSSION

¶8 Baldino and Sperber-Porter argue that the trial court erred by
granting the Ashkenazi Plaintiffs summary judgment because they
breached the Engagement and Intra-Client Agreements first, the Ashkenazi
Plaintiffs are not entitled to delay damages at a rate of 10%, and because the
Ashkenazi Plaintiffs failed to mitigate their damages. “We review a grant
of summary judgment de novo, considering the evidence and all reasonable
inferences in the light most favorable to the non-moving party.” Lennar
Corp. v. Transamerica Ins. Co., 227 Ariz. 238, 242 ¶ 7 (App. 2011).

¶9 Baldino and Sperber-Porter also argue that the trial court
erred by granting the Ashkenazi Plaintiffs summary judgment because they
prevented Baldino and Sperber-Porter from participating in the mediation.
But Baldino voluntarily chose not to attend the mediation, and the Baldino
and Ashkenazi Group’s attorneys, not the Ashkenazi Plaintiffs, told
Sperber-Porter to leave the mediation. Additionally, because this Court
found that the attorneys had actual authority to bind the Baldino and
Ashkenazi Group to the settlement, Baldino and Sperber-Porter suffered no
damages as a result of any alleged breach by the Ashkenazi Plaintiffs. See
Baldino, 2017 WL 4413765 at *6 ¶ 23. Therefore, the Ashkenazi Plaintiffs did
not breach the parties’ agreements first and the trial court properly granted

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the Ashkenazi Plaintiffs summary judgment as to liability for breach of
contract.

¶10 Baldino and Sperber-Porter also argue that the Ashkenazi
Plaintiffs are not entitled to prejudgment interest under A.R.S. § 44–1201(A)
because Baldino and Sperber-Porter did not owe any money to the
Ashkenazi Plaintiffs. “Interest on any loan, indebtedness or other obligation
shall be at the rate of ten per cent per annum[.]” A.R.S. § 44–1201(A). A loan
is “money lent at interest,” and an indebtedness is “something (as an
amount of money) that is owed.” Metzler v. BCI Coca-Cola Bottling Co. of Los
Angeles, Inc., 235 Ariz. 141, 146 ¶ 19 (2014) (quoting Webster’s Ninth New
Collegiate Dictionary 612, 700 (1983)). The phrase “other obligation” applies
only to things of the same nature or class as “loan” or “indebtedness.” Id. at
145–46 ¶ 18.

¶11 Baldino and Sperber-Porter were not lent money by the
Ashkenazi Plaintiffs, were not indebted to the Ashkenazi Plaintiffs, and had
no other financial obligation to the Ashkenazi Plaintiffs. Because Baldino
and Sperber-Porter were not otherwise indebted to the Ashkenazi Plaintiffs
for a liquidated sum, A.R.S. § 44–1201(A) was inapplicable. To obtain delay
damages, the Ashkenazi Plaintiffs had to prove actual loss caused by the
delayed receipt of the settlement funds before prejudgment interest could
be awarded under A.R.S. § 44–1201. Because the Ashkenazi Plaintiffs did
not present evidence of actual loss in its motion for summary judgment,
and make no such showing on appeal, the trial court erred by granting the
Ashkenazi Plaintiffs’ motion for summary judgment for damages.1

¶12 The Ashkenazi Plaintiffs argue that Baldino and
Sperber-Porter did not timely raise their argument below. When this Court
interprets and applies statutes, however, we are not limited to the parties’
arguments if that would lead to an incorrect result. Azore, LLC v. Bassett, 236
Ariz. 424, 427 ¶ 7 (App. 2014). Baldino and Sperber-Porter did challenge
A.R.S. § 44–1201(A)’s applicability in their response to the Ashkenazi
Plaintiffs’ motion for summary judgment, in a supplement to their response
to the Ashkenazi Plaintiffs’ motion for summary judgment, and in their
motion for a new trial, which the trial court addressed on the merits. We
address A.R.S. § 44–1201(A)’s applicability because failing to do so would
lead to an incorrect result.

1 Because we reverse the trial court’s grant of summary judgment on
this ground, we need not consider Baldino and Sperber-Porter’s mitigation
of damages argument.

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¶13 The Ashkenazi Plaintiffs further argue that even though
Baldino and Sperber-Porter did not originally owe the Ashkenazi Plaintiffs
the GT settlement payment, they became liable for all damages their breach
caused. While Baldino and Sperber-Porter may have breached the
Intra-Client Agreement and Engagement Agreement, they did not owe any
liquidated amount of money to the Ashkenazi Plaintiffs. And because
Baldino and Sperber-Porter were not indebted to the Ashkenazi Plaintiffs
for a liquidated sum, A.R.S. § 44–1201(A) could not be used to calculate the
Ashkenazi Plaintiffs’ delay damages.

¶14 At oral argument, the Ashkenazi Plaintiffs argued that no
judgment on Baldino and Sperber-Porter’s alleged indebtedness was
needed before a court could award delay damages under A.R.S.
§ 44–1201(A) because prejudgment interest on a liquidated claim is a matter
of right in a breach of contract action. The Ashkenazi Plaintiffs also alleged
that the claim had a liquidated amount of roughly $7 million based on the
Ashkenazi Plaintiffs’ share of the GT settlement payment. They are wrong
for two reasons. First, the Ashkenazi Plaintiffs’ claim was not liquidated
because they never alleged the $7 million settlement amount as part of their
breach of contract damages. Second, prejudgment interest implies a period
ending in judgment, Metzler v. BCI Coca-Cola Bottling Co. of Los Angeles, Inc.,
230 Ariz. 26, 28 ¶ 7 (App. 2012), and the Ashkenazi Plaintiffs never obtained
a judgment against Baldino or Sperber-Porter for the settlement amount. As
a result, prejudgment interest could not be awarded as delay damages
under A.R.S. § 44–1201(A).

¶15 The Ashkenazi Plaintiffs argue last that Baldino and
Sperber-Porter are collaterally estopped from contesting the interest rate
used to calculate the delay damages because they litigated the issue in
arbitration with the attorneys. The Ashkenazi Plaintiffs, however, waived
this argument by failing to raise it below. See Henderson v. Henderson, 241
Ariz. 580, 586 ¶ 13 (App. 2017).

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CONCLUSION

¶16 For the foregoing reasons, we reverse the trial court’s grant of
summary judgment on damages in favor of the Ashkenazi Plaintiffs and
remand for further proceedings. In our discretion, we award Baldino and
Sperber-Porter their attorneys’ fees and costs incurred on appeal upon
compliance with Arizona Rule of Civil Appellate Procedure 21.

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

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