Dawn v. Yuma's Sunset Mountain

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

CRYSTAL DAWN, Plaintiff/Appellee

v.

YUMA’S SUNSET MOUNTAIN CONSTRUCTION, Defendant/Appellant.

No. 1 CA-CV 20-0645
FILED 11-18-2021

Appeal from the Superior Court in Yuma County
No. S1400CV201800769
The Honorable Lawrence C. Kenworthy, Judge

AFFIRMED

COUNSEL

William P. Katz, Yuma
Counsel for Defendant/Appellant

Murphy Schmitt Hathaway & Wilson PC, Prescott
By Robert E. Schmitt
Co-Counsel for Plaintiff/Appellee

Becke & Olson PLLC, Prescott
By Andrew J. Becke
Co-Counsel for Plaintiff/Appellee
 DAWN v. YUMA’S SUNSET MOUNTAIN
Decision of the Court

MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge Brian Y. Furuya joined.

B R O W N, Judge:

¶1 Defendant Yuma’s Sunset Mountain Construction, L.L.C.
(“YSMC”) appeals the superior court’s order denying its request for
sanctions against plaintiff Crystal Dawn and her attorneys under Arizona
Rule of Civil Procedure (“Rule”) 11 and A.R.S. § 12-349. YSMC also appeals
the court’s denial of a portion of its request for taxable costs. Finding no
abuse of discretion, we affirm.

BACKGROUND

¶2 In March 2017, Dawn was involved in a car accident with
Carolyn Mathis. At the scene of the accident and in later interviews, Mathis
stated she did not see Dawn’s motorcycle approaching until Mathis entered
the intersection while taking a left-hand turn. Mathis did not mention any
obstructions to her line of sight that may have contributed to the accident.

¶3 Upon further investigation, however, Mathis retained an
accident reconstructionist to create a report of the scene in relation to a
potential line-of-sight obstruction from a portable advertising sign in the
right-of-way on the northeast corner of the intersection. Two days before
the expiration of the statute of limitations, Mathis gave Dawn the names of
entities that could be responsible for landscaping located near the same
corner, based on the accident reconstructionist’s preliminary opinion that
the landscaping affected sight distance. As relevant here, Dawn filed a
second amended complaint on March 20, 2019, adding claims of negligence
and negligence per se against YSMC and two other entities allegedly
responsible for installing or maintaining the landscaping.

¶4 A few weeks later, Mathis filed a notice of non-party at fault,
alleging that various individuals or entities associated with the installation
or maintenance of the landscaping were negligent because the shrubbery
and trees “like[ly] caused or contributed to the subject motor vehicle
accident by improperly creating a site distance obstruction to the left
turning Mathis vehicle.” The accident reconstructionist later concluded in

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his report that the presence of the advertising sign and the landscaping
would limit a motorist’s ability to “fully observe approaching traffic.”

¶5 Beginning in September 2019, two of the defendants were
dismissed from the lawsuit after they provided affidavits to Dawn
indicating they had no material involvement with the landscaping. At least
one of those defendants agreed to bear its own costs and expenses. Dawn
and YSMC discussed dismissing YSMC but disagreed regarding the terms.
Dawn offered to dismiss YSMC without prejudice, with each side bearing
their own attorneys’ fees and costs, if YSMC would provide an affidavit
stating that it did not have any responsibility for the installation or
maintenance of the landscaping near the intersection where the accident
occurred. YSMC declined that offer, as well as other similar offers,
asserting it would seek recovery of all its fees and costs incurred in
defending the second amended complaint. YSMC then demanded that the
claims against it be dismissed with prejudice, and that Dawn pay YSMC
$12,032.21, which included $7,605 in attorneys’ fees and $4,100 in expert
witness fees.

¶6 After additional discussions, in a letter to Dawn dated May
15, 2020, YSMC outlined various points explaining why it believed the
claims against it were brought without substantial justification and without
any independent investigation. According to YSMC, Dawn refused to
consider a proposed stipulation that YSMC did not design, install, or
maintain the landscaping. YSMC advised it would now pursue court
intervention and relief “with the necessary motions.” On May 28, Dawn
noted her “longstanding offer” to pay taxable costs and dismiss the claims
against YSMC with prejudice. She indicated she would be filing a motion
to dismiss within the next seven days, and the superior court could decide
whether Dawn or her counsel were “guilty of some inappropriate and/or
unprofessional conduct.” On June 7, YSMC moved for summary judgment
and requested an award of all of its costs, expenses, and attorneys’ fees, plus
damages, under “various sources of legal authority,” including A.R.S. § 12-
341, common law bad faith, and A.R.S. § 12-349.

¶7 The next day Dawn filed her motion to dismiss YSMC. Before
the superior court ruled on the two pending motions, and three months
after filing of the motion for summary judgment, YSMC filed a motion for
sanctions against Dawn and her counsel under Rule 11, seeking $23,220 in
attorneys’ fees and $10,114.54 in other expenses and costs. YSMC argued
that Dawn failed to conduct an independent investigation into whether
YSMC was responsible for the landscaping and failed to dismiss YSMC for
many months despite evidence that YSMC was not responsible.

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¶8 In its ruling, the superior court noted that Mathis informally
disclosed that her accident reconstruction expert believed the vegetation
was a cause of the automobile accident and that YSMC may have been
responsible, which she followed by filing a notice of non-party at fault
naming YSMC as a defendant a short time later. The court further noted
that Dawn offered to dismiss YSMC in October 2019, if YSMC would
provide “an affidavit as to non involvement,” but YSMC declined to do so.
The court concluded that Dawn did not violate Rule 11, finding that she
and her counsel acted reasonably in suing YSMC and not moving to dismiss
until June 2020. YSMC’s motion for summary judgment was denied as
moot.

¶9 The court later awarded YSMC costs in the amount of
$1,656.73, but declined to award costs for deposition transcripts in the
amount of $1,464.50 that were incurred after Dawn filed her motion to
dismiss YSMC. After all other parties were dismissed from the case, the
court entered final judgment and YSMC timely appealed. We have
jurisdiction under A.R.S. §§ 12–120.21(A)(1) and 12–2101(A)(1).

DISCUSSION

A. Rule 11 Sanctions

¶10 YSMC argues the superior court abused its discretion in
denying the motion for Rule 11 sanctions against Dawn and her counsel.
We review the court’s denial of Rule 11 sanctions for an abuse of
discretion. In re $15,379 in U.S. Currency, 241 Ariz. 462, 469, ¶ 15 (App.
2016).

¶11 All pleadings, written motions, and other documents filed
with a court must be signed by an attorney of record or the party. Rule
11(a)(1). As relevant here, Rule 11(b)(3) states as follows:

By signing a pleading, motion, or other document, the
attorney or party certifies that to the best of the person’s
knowledge, information, and belief formed after reasonable
inquiry[,] . . . the factual contentions have evidentiary support
or, if specifically so identified, will likely have evidentiary
support after a reasonable opportunity for further
investigation or discovery . . . .

¶12 An attorney is not required to prepare a prima facie case for
trial before filing a complaint. Boone v. Superior Ct., 145 Ariz. 235, 241 (1985).
Instead, the attorney must make reasonable efforts to determine that the

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claim is not insubstantial or frivolous. Id. Reasonable efforts are
determined by the circumstances that exist at the time of the filing,
including the facts known to the plaintiff and the amount of time available
for investigation. Id. We evaluate the attorney’s conduct under an objective
standard of reasonableness. James, Cooke & Hobson, Inc. v. Lake Havasu
Plumbing & Fire Prot., 177 Ariz. 316, 319 (App. 1993).

¶13 YSMC argues that Dawn’s counsel failed to conduct an
independent investigation into whether YSMC was the entity responsible
for the landscaping at issue, basing the decision to file the second amended
complaint on information provided by the original defendant’s counsel
through an email. The superior court, however, found that it was
reasonable for Dawn to sue YSMC. Given the preliminary opinion that the
landscaping may have contributed to obstructing the original defendant’s
line of sight and that the statute of limitations was set to expire in two days,
the court did not abuse its discretion in concluding that Dawn’s claim was
based on a good faith belief and a reasonable inquiry.

¶14 YSMC further contends that Dawn’s decision to maintain the
action against it for eight months after she became aware that it was not
responsible for the landscaping violated Rule 11. Dawn, however,
voluntarily dismissed one defendant six months after filing its second
amended complaint when the defendant provided a relatively simple
affidavit of non-involvement with the landscaping at issue. Dawn also
offered to dismiss YSMC if it provided a similar affidavit, which YSMC
refused to provide. Approximately two months later, Dawn stipulated to a
second defendant’s dismissal after it provided an affidavit of non-
involvement.

¶15 In November 2019, Dawn offered to dismiss YSMC without
prejudice if each party agreed to pay its own attorneys’ fees and taxable
costs. YSMC refused this offer. The following month, Dawn tried to reach
an agreement by offering to dismiss YSMC with prejudice and pay its
taxable costs. But YSMC refused the offer again and insisted that (1) Dawn
pay its costs, expenses, and attorneys’ fees of more than $12,000, and (2)
dismiss the case with prejudice to restore YSMC to its status before Dawn
wrongfully filed the suit. YSMC also noted that it would have to ask its
expert to continue his work due to an upcoming disclosure deadline, and
that other defense costs “will continue to accrue.”

¶16 In its Rule 11 motion, YSMC argues that “the only way out”
offered by Dawn and its counsel required it to stipulate to bear its own
attorneys’ fees and all other non-taxable costs. But YSMC could have

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signed an affidavit confirming its lack of involvement with the landscaping,
and Dawn eventually offered to pay YSMC’s taxable costs. In any event,
YSMC offers no explanation why it failed to ask for attorneys’ fees as a
sanction in its answer, failed to seek dismissal of the complaint much earlier
in the litigation, or continued to actively litigate the case for such an
extended period if it knew it had no involvement with the landscaping at
issue. YSMC waited a significant amount of time before it began to provide
specific information why its client could not be found negligent. And the
first formal request for sanctions was summarily mentioned at the end of
the summary judgment motion, filed a little over 14 months after the second
amended complaint was filed. Then three months later YSMC filed its
request for Rule 11 sanctions. Given all the circumstances involved in this
litigation, we cannot say the court abused its discretion when it denied
YSMC’s request for Rule 11 sanctions.

B. Sanctions Under A.R.S. § 12-349

¶17 YSMC argues the superior court was required to impose
sanctions against Dawn under A.R.S. § 12-349 as condition of obtaining a
dismissal of her complaint because it took Dawn an unreasonable length of
time to file the motion. We review a court’s application of § 12-349 de novo,
but we view the evidence in a manner most favorable to sustaining the
decision and we will affirm unless the court’s finding is clearly erroneous.
Phoenix Newspapers, Inc. v. Dep’t of Corr., 188 Ariz. 237, 243–44 (App. 1997).

¶18 Under A.R.S. § 12-349(A), a court “shall” assess reasonable
attorneys’ fees against an attorney or party who, among other things, brings
a claim without substantial justification. As defined within the statute, a
claim lacks substantial justification when it is both “groundless” and “not
made in good faith.” A.R.S. § 12-349(F). While groundlessness is
determined objectively, bad faith is a subjective determination. Rogone v.
Correia, 236 Ariz. 43, 50, ¶ 22 (App. 2014). A claim is groundless if the
proponent is unable to present any rational argument, based on the law or
the evidence , supporting the claim. Id.

¶19 YSMC argues that Dawn filed the action against it without
substantial justification and that Dawn unreasonably delayed the
proceedings. But as discussed above, the court did not abuse its discretion
when it concluded Dawn acted in good faith in filing the complaint.
Accordingly, the court did not err by denying sanctions under A.R.S. § 12-
349.

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C. Taxable Costs

¶20 YSMC contends the superior court erred in denying the cost
of deposition transcripts as taxable costs under A.R.S. § 12-332. Costs for
preparing transcripts are incidental to taking a deposition and therefore
recoverable as costs. Visco v. Nat’l Bank of Ariz., 3 Ariz. App. 504, 508 (1966).
Trial courts, however, “must determine whether challenged expenditures,
notwithstanding their status as taxable costs, were necessarily incurred and
whether they are reasonable in amount.” Reyes v. Frank’s Serv. & Trucking,
LLC, 235 Ariz. 605, 611, ¶ 20 (App. 2014). We will affirm the court’s cost
award if there is any reasonable basis to support it. Owner-Operator Indep.
Drivers Ass’n v. Pac. Fin. Ass’n, Inc., 241 Ariz. 406, 416, ¶ 38 (App. 2017).

¶21 YSMC argues the court applied an incorrect standard to
determine taxable costs. After the court granted Dawn’s motion to dismiss
and awarded YSMC its costs, YSMC filed a statement of taxable costs.
Dawn objected to the transcript costs for depositions taken after she filed
her motion to dismiss and YSMC sought summary judgment because those
costs were unnecessarily incurred. The court declined to award the
deposition costs, reasoning that they were incurred in relation to the issue
of sanctions and not to secure a dismissal. On this record, YSMC has failed
to establish that the court lacked any reasonable basis for denying the
requested deposition costs.

CONCLUSION

¶22 We affirm the superior court’s judgment. As the successful
party on appeal, Dawn is entitled to an award of taxable costs upon
compliance with ARCAP 21.

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

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