Lattin v. Shamrock

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

KRISTI LATTIN,
Plaintiff/Appellant,

v.

SHAMROCK MATERIALS LLC, et al.,
Defendants/Appellees.

No. 1 CA-CV 19-0761
FILED 10-20-2020

Appeal from the Superior Court in Maricopa County
No. CV2017-011398
The Honorable James D. Smith, Judge

AFFIRMED

COUNSEL

Brier, Irish, Hubbard & Erhart, PLC, Phoenix
By Teresa H. Foster
Counsel for Plaintiff/Appellant

Sacks Tierney, PA, Scottsdale
By Patrick J. VanZanen, Michael L. Kitchen
Counsel for Defendant/Appellee
 LATTIN v. SHAMROCK, et al.
Decision of the Court

MEMORANDUM DECISION

Judge David D. Weinzweig delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Judge D. Steven Williams joined.

W E I N Z W E I G, Judge:

¶1 Plaintiff Kristi Lattin appeals the superior court’s denial of her
motions to amend and entry of judgment on the pleadings for defendants
Diana Gignac (“Diana”), David Gignac (“David”) and Shamrock Materials,
LLC (“Shamrock”) (collectively, the “Defendants”). Because Lattin shows
no error, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Lattin, Diana and Carol Lee Ortega-McCann (“McCann”)
formed Shamrock in July 2005, filing articles of organization with the
Arizona Corporation Commission. Shortly thereafter, the articles were
amended to remove Lattin’s name as a member, which she had requested
because her husband worked in the same industry. Diana, McCann and
Lattin then entered a Profit Participation Agreement (“Agreement”), which
explained that (1) Diana and McCann each owned 50 percent of Shamrock,
and (2) Lattin was entitled to a one-third interest in the net profits of
Shamrock. The Agreement also provided Lattin an option to acquire a
“one-third (1/3) Membership Interest” in Shamrock if exercised within ten
years of the Agreement.

¶3 McCann resigned her membership in 2008 and withdrew
from the Agreement. The Agreement was amended (“Amendment”) to
reflect Diana as the sole member and increase Lattin’s share of net profits
to 50 percent while recognizing “the terms and provisions of the
[Agreement] shall continue in full force.”

¶4 Although not a member, Lattin answered thirteen “capital
calls” for Shamrock between 2005 and 2010, contributing $162,000, which
Shamrock classified as equity, then debt, and again as equity. The funds
are currently held in Lattin’s capital account with Shamrock.

¶5 Lattin timely exercised her option to acquire a membership
interest in Shamrock under the Agreement. Diana first declined the option
but then granted Lattin a one-third membership interest in Shamrock.

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Lattin claimed she was entitled, however, to a one-half membership interest
under the Agreement and Amendment, when read together.

¶6 Lattin sued the Defendants in August 2017 for breach of
contract, unjust enrichment and conversion.1 The Defendants answered
and moved for judgment on the pleadings, arguing that Lattin was only
entitled to a one-third membership interest in Shamrock. After briefing, the
court granted the Defendants’ motion, finding “that [Lattin] had an option
to convert her profit participation interest for the 33.33% membership
interest in [Shamrock], as opposed to a 50% membership interest.”

¶7 The Defendants twice moved for summary judgment on all
counts. The court denied the first motion in March 2018, except to reassert
Lattin’s ownership interest for tax purposes, finding disputed facts over
“whether Defendant Shamrock Materials, LLC generated net profits during
the time [Lattin] held a Participation Interest.” The court granted the
second motion in May 2019, dismissing all claims except whether Shamrock
circumvented a cap on interest repayments for member loans under the
Agreement.

¶8 On the eve of trial, Lattin filed two motions to amend her
complaint. Her first motion—filed only 20 days before trial—proposed to
add a new breach of fiduciary duty claim, relying on the Arizona Supreme
Court’s just-issued opinion in In re Sky Harbor Hotel Properties, LLC, 246 Ariz.
531 (2019), which Lattin described as holding that “members owe a
fiduciary duty to each other.” Lattin wanted to allege the Defendants
breached this duty when they failed to disclose she was only a minority
member. Her second motion—filed two days later—proposed to alter
Lattin’s unjust enrichment theory to focus on her capital contributions to
Shamrock because she held no equity interest in the business. To justify the
last-minute motion in late June 2019, Lattin relied on the superior court’s
minute entry from March 2018 as reflecting that Lattin had made
unnecessary capital contributions. The superior court denied both motions
to amend. Lattin timely appealed. We have jurisdiction. A.R.S. § 12-120.21.

DISCUSSION

A. Motions To Amend

¶9 We review the denial of a motion to amend for an abuse of
discretion. Timmons v. Ross Dress For Less, Inc., 234 Ariz. 569, 572, ¶ 17 (App.

1 Lattin asserted but voluntarily dismissed a declaratory judgment
claim and challenge to corporate record practices under A.R.S. § 29-607.

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2014). “A motion for leave to amend a pleading is addressed to the sound
discretion of the trial court, and we will not overturn the trial court's
decision on appeal absent a clear abuse of that discretion.” In re Torstenson’s
Estate, 125 Ariz. 373, 376 (App. 1980).

¶10 Motions to amend should be freely granted, Ariz. R. Civ. P.
15(a)(2), unless a court finds specific cause to deny the amendment,
including “undue delay in the request, bad faith, undue prejudice, or
futility in the amendment,” Tumacacori Mission Land Dev., Ltd. v. Union Pac.
R.R., 231 Ariz. 517, 519, ¶ 4 (App. 2013) (citation omitted). The superior
court has discretion to deny a motion to amend for these reasons and when
“[n]othing in the record indicates any compelling reason for the delay.”
Torstenson’s Estate, 125 Ariz. at 377.

¶11 Lattin argues the superior court abused its discretion by
denying her motions to amend the complaint on the eve of trial. Lattin has
shown no error. First, although courts should freely grant motions to
amend in the interests of justice, an eleventh-hour request tends to cause
substantial prejudice to other parties, which is a “critical factor” in
“determining whether an amendment should be granted.” Owen v. Superior
Court (Moroney), 133 Ariz. 75, 79 (1982).

¶12 Both of Lattin’s motions were filed less than three weeks
before trial, after disclosure and discovery had closed and final trial
preparation was underway. Lattin’s first motion to amend sought
permission to add a count for breach of fiduciary duty, a new basis of
liability. Her second motion to amend sought permission to alter her unjust
enrichment theory, claiming that Shamrock was unjustly enriched by
Lattin’s capital contributions rather than her inadequate “share in the
profits and losses.”

¶13 Lattin insists that the Defendants would not have been
prejudiced, but she overlooks the facts and procedural posture. Lattin
asked for permission to change the playing field just before trial, adding a
new breach of fiduciary duty claim and altering an existing unjust
enrichment claim. The dispositive motion deadline had passed and
discovery had closed. The superior court was well within its discretion to
deny leave to amend under these circumstances. See, e.g., Citizens Utils. Co.
v. New W. Homes, Inc., 174 Ariz. 223, 228 (App. 1992) (no abuse of discretion
in denial of post-summary judgment motion to amend); Carranza v.
Madrigal, 237 Ariz. 512, 515, ¶ 13 (2015) (court properly exercised its
discretion to decline late proposed amendment that “raises new issues

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requiring preparation for factual discovery which would not otherwise
have been necessitated nor expected”).

¶14 Nor are we persuaded by Lattin’s reasons for her belated
amendments. Lattin contends she moved to amend the unjust enrichment
claim in June 2019 based on the superior court’s March 2018 denial of the
Defendants’ first motion for summary judgment, but never explains why
she waited more than 15 months. The superior court may deny a motion to
amend when, as here, “[n]othing in the record indicates any compelling
reason for the delay.” Torstenson’s Estate, 125 Ariz. at 377.

¶15 For her breach of fiduciary duty claim, Lattin points to Sky
Harbor. She misunderstands that decision. There, the supreme court
determined whether LLC members owe a common law fiduciary duty to
the LLC, not whether the LLC members owe fiduciary duties to each other.
246 Ariz. at 532, ¶ 1. Moreover, Sky Harbor relies on case law that “LLC
members do not owe each other fiduciary duties unless they are expressly
included in the LLC operating agreement.” Id. at 533, ¶ 5 (quoting Butler
Law Firm, PLC v. Higgins, 243 Ariz. 456, 462, ¶ 23 (2018)). As such, Lattin
had no claim for breach of fiduciary duty against Diana. Yes on Prop 200 v.
Napolitano, 215 Ariz. 458, 471, ¶ 40 (App. 2007) (leave to amend may be
denied on futility ground).

B. Judgment on the Pleadings

¶16 Lattin also challenges the superior court’s entry of judgment
on the pleadings for the Defendants, which resolved a question of contract
interpretation. “A motion for judgment on the pleadings pursuant to
[Arizona Rule of Civil Procedure 12(c)] tests the sufficiency of the
complaint, and judgment should be entered for the defendant if the
complaint fails to state a claim for relief.” Giles v. Hill Lewis Marce, 195 Ariz.
358, 359, ¶ 2 (App. 1999). We review the granting of a motion for judgment
on the pleadings de novo. Id.

¶17 The superior court properly granted judgment to the
Defendants on the pleadings because the Agreement’s and Amendment’s
terms were plain and unambiguous, leaving no room for parol evidence to
change or modify the terms. Lattin argues the Agreement and Amendment
directed that she have a one-half membership interest in Shamrock upon
exercising her option, not one-third. But the Agreement states that Lattin
possesses “the option to acquire a one-third (1/3) Membership Interest in
and to the Company.” And, the Amendment confirms that the
Agreement’s terms remain “in full force and effect.” Arizona courts

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consider “the plain meaning of the words” of a contract in the context of the
whole contract to determine the meaning of the document. Dunn v. FastMed
Urgent Care PC, 245 Ariz. 35, 38, ¶ 10 (App. 2018).

¶18 Lattin still insists the Agreement is susceptible to differing
interpretations and the superior court should have considered parol
evidence to interpret the document. Not so. Arizona courts will not
consider parol evidence when interpreting a contract unless the contract’s
terms are “reasonably susceptible” to the movant’s alternative
interpretation. Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 154
(1993). As discussed above, the terms of the Agreement and Amendment
are plain and contrary to Lattin’s claims. They are not reasonably
susceptible to Lattin’s urged interpretation.

¶19 Beyond that, Lattin wants to introduce her own declaration as
parol evidence, in which she describes her subjective perception of the
contract’s terms, which differed from the contract’s actual terms. Cf. Isaak
v. Massachusetts Indem. Life Ins. Co., 127 Ariz. 581, 584 (1981) (“No matter
what form a written contract takes, it is not the undisclosed intent of parties
to a contract with which we are concerned, but the outward manifestations
of their assent. A clear and unambiguous contract must be interpreted
according to its terms.”). In the end, Lattin’s self-interested subjective
perception must yield to the Agreement’s plain and unambiguous terms.

CONCLUSION

¶20 For these reasons, we affirm. The Defendants request their
attorney fees and costs on appeal under the Agreement, A.R.S. §§ 12-341
and 12-341.01. We grant their request upon compliance with ARCAP 21.

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

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