Lyon v. Helton

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

MICHAEL LYON, Plaintiff/Appellant,

v.

JODY HELTON, et al., Defendants/Appellees.

No. 1 CA-CV 21-0130
FILED 6-2-2022

Appeal from the Superior Court in Maricopa County
No. CV2020-008665
The Honorable Andrew J. Russell, Judge

REVERSED AND REMANDED

COUNSEL

Engelman Berger, P.C., Phoenix
By Steven N. Berger, Damien R. Meyer, Bradley D. Pack
Counsel for Plaintiff/Appellant

Shaw & Lines, LLC, Phoenix
By Augustus H. Shaw IV, Patrick J. Whelan
Counsel for Defendants/Appellees
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MEMORANDUM DECISION

Presiding Judge Maria Elena Cruz delivered the decision of the Court, in
which Judge Samuel A. Thumma and Judge Michael J. Brown joined.

C R U Z, Judge:

¶1 Plaintiff Dr. Michael Lyon appeals the superior court’s
dismissal of his gross negligence claim for failure to state a claim against
Regency House Association (“the Association”), its officers and directors
(“the Officers”), and the Association’s management company, AAM, LLC
(“AAM”) (collectively “appellees”). We reverse and remand to the superior
court because the allegations of the complaint are sufficient to allow Dr.
Lyon the opportunity to develop supporting evidence.

FACTUAL AND PROCEDURAL HISTORY

¶2 Dr. Lyon purchased an apartment unit in Regency House
Condominiums (“the Condo”) in Phoenix in 2009. The Condo had an
underground parking garage and Dr. Lyon was assigned a parking spot in
the garage on level two. The Condo’s parking areas were common elements
under the Condo’s Declaration of Horizontal Property Regime and of
Covenants, Conditions, and Restrictions for Regency House (“CC&Rs”).
Pursuant to the provisions of the CC&Rs, the Association had authority
over all common elements.

¶3 In 2019, the Association had AAM make several changes to
the configuration of levels one and two of the garage. Three parallel
parking spots were added on level two north of Dr. Lyon’s assigned
parking spot in a space that had been part of an access aisle. This resulted
in a narrowing of the two-way traffic access aisle from 26 feet to 18 feet. On
level one, two parking spots were converted to three smaller spots and a
new loading zone was created.

¶4 Dr. Lyon filed a six-count complaint against appellees in the
superior court including claims based in contract and tort law and for
injunctive relief. Appellees moved to dismiss four of the counts—count 3
(negligence/the Association and AAM), count 4 (gross negligence/all

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defendants)1, count 5 (nuisance/the Association and AAM), and count 6
(injunctive relief)—pursuant to Arizona Rule of Civil Procedure (“Rule”)
12(b)(6). After oral argument, the superior court dismissed the gross
negligence claim and denied the motion to dismiss as to the other counts.
After entry of a partial final judgment, see Rule 54(b), Dr. Lyon timely
appealed from the dismissal of the gross negligence claim, and we have
jurisdiction pursuant to Arizona Revised Statutes (“A.R.S.”) section 12-
2101(A)(1).

DISCUSSION

I. Motion to Dismiss

¶5 “Arizona follows a notice pleading standard, the purpose of
which is to give the opponent fair notice of the nature and basis of the claim
and indicate generally the type of litigation involved.” Cullen v. Auto-
Owners Ins. Co., 218 Ariz. 417, 419, ¶ 6 (2008) (citation and quotation marks
omitted). Rule 8(a)(2) requires complaints to contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.”

¶6 We review the dismissal of a claim under Rule 12(b)(6) de
novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). “Dismissal is
appropriate under Rule 12(b)(6) only if as a matter of law [] plaintiffs would
not be entitled to relief under any interpretation of the facts susceptible of
proof.” Id. at 356, ¶ 8 (citation and quotation marks omitted). Courts “look
only to the pleading itself” when ruling on a Rule 12(b)(6) motion, and
“must assume the truth of all well-pleaded factual allegations and indulge
all reasonable inferences from those facts.” Id. at ¶ 9 (citation omitted).

¶7 Appellees assert that Dr. Lyon’s gross negligence claim failed
to state a claim upon which relief can be granted because it contained

1 The Condo’s CC&Rs shielded the Officers from liability for their
conduct while acting on behalf of the Association except for actions that
constitute gross negligence or fraud. Section 4.6 of the CC&Rs state:

Non-Liability of the Members of the Board, Officers and
Declarant. Neither the members of the Board, officers of the
Association nor Declarant shall be personally liable to the
Owners for any mistake of judgment or for any acts or
omissions of any nature whatsoever of such members, officers
or Declarant, except for any acts or omissions found by a court
to constitute gross negligence or fraud. . . .

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conclusory allegations. See id. (“[M]ere conclusory statements are
insufficient” to defeat a Rule 12(b)(6) motion). “[A] complaint that states
only legal conclusions, without any supporting factual allegations, does not
satisfy [the Rule 8] notice pleading standard,” but the inclusion of a legal
conclusion will not invalidate a complaint. Cullen, 218 Ariz. at 419, ¶ 7.

¶8 A complaint states a claim for gross negligence if it alleges the
elements of negligence and additionally that the defendant’s breach of duty
involved “gross, willful, or wanton conduct” that is “more than ordinary
inadvertence or inattention . . . which falls closer to the recklessness
standard that usually involves a conscious disregard of a risk.” Noriega v.
Town of Miami, 243 Ariz. 320, 326, 328, ¶¶ 23, 36 (App. 2017) (citations and
quotation marks omitted). Gross negligence “is action or inaction with
reckless indifference to the . . . safety of others.” Williams v. Thude, 180 Ariz.
531, 539 (App. 1994). The issue of gross negligence is ordinarily a question
of fact. Luchanski v. Congrove, 193 Ariz. 176, 179, ¶ 18 (App. 1998).

¶9 The complaint alleged that appellees owed a duty of care to
Dr. Lyon and had created an unsafe environment for Dr. Lyon and other
Condo residents through their actions. See Martinez v. Woodmar IV Condos.
Homeowners Ass’n, 189 Ariz. 206, 209 (1997) (condominium association with
control over common areas owed a duty “with respect to the common
areas” to condo owners, tenants, and their guests). The complaint alleged
that appellees breached their duty by (1) “delegating to AAM the task of
coming up with a design for the changes to the Platted Parking Areas,” (2)
“consciously disregarding their duty to examine that design from a health
and safety perspective by consulting with a qualified parking expert,” (3)
“failing to consider and/or consciously disregarding the [City of Phoenix]
Zoning Ordinance and City Parking Guidelines,” and (4) “by implementing
the dangerous changes to the Platted Parking Areas.”

¶10 The complaint further alleged that Dr. Lyon’s experts
concluded that the changes to the parking garage resulted “in reduction of
user safety by increasing the risk of vehicle collision” and “danger to
pedestrians navigating between the parked car and building lobby
entrances,” and that the reduction in the access aisle next to Dr. Lyon’s
assigned spot to a width of 18 feet violated the Zoning Ordinance’s
requirement that the access aisle be a minimum of 24 feet wide and the City
Parking Guidelines’ minimum requirement that the aisle be 26 feet wide.
Further, the “reduction in the access aisle forces the drivers traveling
westbound to encroach the lane of the drivers traveling eastbound,”
“increas[ing] the risk of head-on collision between vehicles,” and “[t]he
danger caused by the reduction in the access aisle is compounded by other

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pre-existing conditions . . . such as existing columns . . . which create blind
spots.” In addition, the complaint alleged that appellees “acted with
recklessness and consciously disregarded the risks to the Regency House
residents, including Dr. Lyon,” that appellees’ conduct as set forth in the
complaint “was gross, willful, or wanton,” and that Dr. Lyon had been
injured by appellees’ conduct.

¶11 Appellees cite Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007) and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly) for
the proposition that to survive a Rule 12(b)(6) motion, a complaint must
contain factual allegations sufficient to “state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at 570.

¶12 Twombly does not provide the standard in Arizona state court
for determining whether a complaint states a claim upon which relief can
be granted under Rule 12(b)(6). Cullen, 218 Ariz. at 420-21, ¶¶ 9, 16. In
Twombly, the United States Supreme Court held that under the Federal
Rules of Civil Procedure, to survive a motion to dismiss, the complaint’s
“[f]actual allegations must be enough to raise a right to relief above the
speculative level,” and the plaintiffs’ allegations must be compelling
enough to “nudge[] their claims across the line from conceivable to
plausible.” 550 U.S. at 545, 570. However, in Cullen, the Arizona Supreme
Court made clear that there is no “plausibility” requirement or assessment
for complaints in Arizona state court under the Arizona Rules of Civil
Procedure. 218 Ariz. at 420-21, ¶¶ 9, 16 (rejecting Twombly’s “plausibility”
requirement and vacating the portion of the Court of Appeal’s opinion
citing to Twombly).

¶13 Taken as a whole, Dr. Lyon’s complaint alleged sufficient
facts to state a claim upon which relief can be granted and effectively put
appellees on notice of the nature and basis of Dr. Lyon’s gross negligence
claim against them. See Cullen, 218 Ariz. at 419, ¶ 6 (“Under Rule 8, Arizona
follows a notice pleading standard . . . .”).

¶14 Appellees argue that to “properly plead that [appellees] were
grossly negligent, [Dr. Lyon] must allege that [appellees] either knew that
they acted without a reasonable basis or failed to perform an investigation
or evaluation adequate to determine whether a reasonable basis supported
[their] action.” But, as noted supra ¶ 9, one of the allegations of the
complaint was that appellees “consciously disregard[ed] their duty to
examine [the] design from a health and safety perspective by consulting
with a qualified parking expert.”

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¶15 Appellees argue the Officers are protected by the Federal
Volunteer Protection Act, 42 U.S.C. § 14503(a), because they are volunteers,
and that if we do not affirm the superior court’s dismissal we will be
opening “floodgates of litigation to those having volunteered.” Even if
section 14503(a) applies, it limits the liability of volunteers for harm they
cause only in certain circumstances, and specifically states that volunteers
are not protected for harm caused by the volunteer’s gross negligence. 42
U.S.C. § 14503(a)(3). Appellees’ argument that they did not owe a duty to
Dr. Lyon because they were acting on behalf of the Association is equally
uncompelling. “Corporate officers are liable to those harmed by such
officers’ tortious conduct on behalf of the company they ostensibly serve.”
Higgins v. Assmann Elecs., Inc., 217 Ariz. 289, 294, ¶ 13 (App. 2007). And, as
noted above, the CC&Rs do not shield the Officers from acts or omissions
that constitute gross negligence.

¶16 Appellees further argue that Dr. Lyon “cannot merely rest on
his pleadings,” and must support his factual allegations with “proper
evidentiary material, which when coupled with undisputed background
and contextual facts, show that the fact-finder could reasonably find in [Dr.
Lyon’s] favor,” and “’in order to present [a gross negligence issue] to the
jury, gross negligence need not be established conclusively, but the
evidence on the issue must be more than slight and may not border on
conjecture.’” (quoting Walls v. Ariz. Dep’t of Pub. Safety, 170 Ariz. 591, 595
(App. 1991)). Walls involved an appeal from the superior court’s grant of
summary judgment in favor of defendants on the plaintiff’s gross negligence
claim. 170 Ariz. at 592, 596. Here, the superior court dismissed Dr. Lyon’s
gross negligence claim under Rule 12(b)(6) at the pleading stage. Taking
the well-pled factual allegations of the complaint as true, the dismissal for
failure to state a claim upon which relief can be granted was error.

II. Attorneys’ Fees

¶17 Dr. Lyon requests attorneys’ fees and costs pursuant to
section 23 of the CC&Rs and A.R.S. §§ 12-341, -341.01. Section 23 of the
CC&Rs is a one-way fee provision that would only apply if the Association
or Board sued Dr. Lyon. Section 12-341.01 permits discretionary fees to the
prevailing party in any contested action arising out of contract, express or
implied. Even if § 12-341.01 applies to Dr. Lyon’s gross negligence claim,
we deny his fee request because he has not prevailed in the litigation. As
the successful party on appeal, Dr. Lyon is entitled to costs upon
compliance with ARCAP 21.

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CONCLUSION

¶18 For the foregoing reasons, we reverse and remand for further
proceedings consistent with this decision.

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

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