Graham v. Carpenter

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

JEFF GRAHAM, Plaintiff/Appellant,

v.

CARPENTER HAZLEWOOD DELGADO & BOLEN, LLP,
Defendant/Appellee.

No. 1 CA-CV 23-0495
FILED 06-04-2024

Appeal from the Superior Court in Maricopa County
No. CV2020-094884
The Honorable Patricia A. Trebesch, Judge (retired)

AFFIRMED

COUNSEL

Smith & Smith, PLLC, Tucson
By John C. Smith, Will Sherman
Counsel for Plaintiff/Appellant

Jeffrey J. Jarvi, Bozeman, Montana
Counsel for Plaintiff/Appellant

Wood, Smith, Henning & Berman LLP, Phoenix
By Joshua M. Bolen, Ember Van Vranken, Jodi L. Mullis
Counsel for Defendant/Appellee
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MEMORANDUM DECISION

Vice Chief Judge Randall M. Howe delivered the decision of the court, in
which Presiding Judge Anni Hill Foster and Judge Brian Y. Furuya joined.

H O W E, Judge:

¶1 Jeff Graham appeals the trial court’s order granting Carpenter
Hazlewood Delgado & Bolen, LLP’s (“Carpenter”) motions to dismiss, for
summary judgment, and for attorneys’ fees. We affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In 2020, Graham owned a condominium unit in Glendale with
his wife, mother, and father. The unit was part of a homeowners’
association, the Quarter Condominium Association, Inc. (the “HOA”). In
August of that year, Graham sued, among others, the HOA and its counsel,
Carpenter. He alleged that the HOA had wronged him by fining him $8,000
for three violations of its short-term rental policy—violations he denied
committing. He alleged that Carpenter had caused him to lose a potential
buyer to his unit because it had informed and requested his title company
to withhold the amount of the fines from the sale’s proceeds. He sought
damages for “breach of contract, negligence, fraud and/or intentional
interference with contractual relation, punitive damages, and attorney’s
fees and costs.”

¶3 Carpenter moved to dismiss the complaint for failure to state
a claim under Arizona Rule of Civil Procedure (“Rule”) 12(b)(6). The court
granted the motion as to all claims but the intentional interference with
contract claim. Graham then filed an amended complaint, alleging reckless
misrepresentation, intentional or knowing misrepresentation, negligent
misrepresentation, intentional interference with contract, false document,
defamation, negligent infliction of emotional distress (“NIED”), reckless
infliction of emotional distress (“RIED”), and intentional infliction of
emotional distress (“IIED”). His amended complaint alleged economic and
noneconomic damages stemming from his loss of the original and a second
buyer, forcing him to hold onto the unit for longer and subjecting him to
additional mortgage payments, HOA dues, utilities, and cost of a new front
door from an attempted break-in. Carpenter again moved to dismiss the
complaint for failure to state a claim. Graham simultaneously responded to

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Carpenter’s motion and cross-moved to amend his complaint a second
time.

¶4 Before ruling on the motion to dismiss, the court issued an
order rejecting Graham’s motion to amend because he had not cited any
authority that allowed him to jointly file two motions in one pleading. It
stated, however, that Graham would be provided with an opportunity to
amend his complaint a second time if it granted Carpenter’s motion to
dismiss. Graham moved for reconsideration, which the court denied. The
court later granted in part Carpenter’s motion to dismiss. Finding that
Graham had failed to state a claim for relief, the court dismissed the
knowing misrepresentation claim, the false document claim, and the NIED
claim. The court specifically found that Graham failed to plead fraud with
particularity, did not allege that any false document was recorded, and that
any emotional anguish Graham suffered was not accompanied by or
manifested as physical injury.

¶5 Discovery ensued. As part of discovery, parties deposed an
agent for Graham’s title company. The agent stated that she had received
communications from the property manager, but nothing from Carpenter.
In another deposition, a Carpenter attorney who regularly served as the
HOA’s counsel stated that she never had contact with title companies. And
a Carpenter managing partner testified in an affidavit that neither he nor
any Carpenter employee had any communication with a title company
regarding Graham or his property.

¶6 After discovery, Carpenter moved for summary judgment on
the remaining claims. The court granted the motion. It found that Arizona
law did not recognize a reckless misrepresentation claim. As to the
defamation claim, the intentional interference with contract claim, the
negligent misrepresentation claim, the RIED claim and the IIED claim, the
court found that Graham presented no evidence in support of those claims.
Specifically, the court found no evidence to refute Carpenter’s contention
that it had no contact with any title company. The court also awarded
Carpenter attorneys’ fees under A.R.S. § 12-349(A)(1) because Graham
brought his claim without a basis and in bad faith. Graham timely appealed,
and this court has jurisdiction. See A.R.S. § 12-2101(A)(1).

DISCUSSION

¶7 Graham challenges the trial court’s orders dismissing both his
complaint and amended complaint and granting Carpenter summary
judgment and attorneys’ fees. We address each challenge below.

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I. Motion to Dismiss

¶8 “We review de novo an order granting a motion to dismiss
for failure to state a claim.” Abbott v. Banner Health Network, 239 Ariz. 409,
412 ¶ 7 (2016). In reviewing a Rule 12(b)(6) motion to dismiss, we take as
true the well-pleaded facts alleged in the first amended complaint and
“indulge all reasonable inferences therefrom.” Cullen v. Auto-Owners Ins.
Co., 218 Ariz. 417, 419 ¶ 7 (2008).

¶9 To state a claim for relief, a pleading must include “a short
and plain statement of the claim,” Ariz. R. Civ. P. 8(a)(2), but must not
include mere conclusory statements, Cullen, 218 Ariz. at 419 ¶ 7. The
standard is intended “to avoid technicalities” while “giv[ing] the opposing
party notice of the basis for the claim and of its general nature.” Verduzco v.
Am. Valet, 240 Ariz. 221, 225 ¶ 11 (App. 2016) (quoting Daniel J. McAuliffe
& Shirley J. McAuliffe, Ariz. Civil Rules Handbook at 144 (2015 ed.)). The
complaint need not “allege the evidentiary details of plaintiff’s claim for
relief.” Id. at 225 ¶ 9. “The test is whether enough [information] is stated to
entitle the pleader to relief on some theory of law susceptible of proof under
the allegations made.” Id. (quoting McAuliffe & McAuliffe, supra, at 144).

¶10 Graham asserts that the trial court erred by “glean[ing]” or
“extract[ing]” causes of action from his original and amended complaint.
He contends that he was not required to plead causes of action under
Arizona’s liberal notice pleading standards. While he is correct as to the
notice pleading standards, the trial court did not err. The court granted (in
part) the motion to dismiss not because Graham did not plead causes of
action, but because the facts alleged in both his complaint and amended
complaint did not entitle him to relief on any theory of law. See id.; see also
Cullen, 218 Ariz. at 419–20 ¶¶ 7–8 (stating that a complaint’s “well-pled
factual allegations” but not “mere conclusory statements” are considered
when determining a plausible claim for relief). And although the court has
the ability to liberally construe pleadings, it cannot do so to create a claim
that isn’t pleaded.

¶11 The court dismissed Graham’s fraud (intentional or knowing
misrepresentation) claim because Graham failed to plead with particularity
the circumstances constituting fraud. See Ariz. R. Civ. P. 9(b). On appeal,
Graham fails to articulate how his amended complaint particularly alleged
fraud or how the amended complaint identifies which of Carpenter’s
actions constituted fraud. The court dismissed Graham’s false documents
claim because the statute authorizing that claim, A.R.S. § 33-420(A),
requires that the offending-document be recorded. While Graham’s

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amended complaint alleged that a false lien was “deemed as a matter of
Arizona law to be recorded in the property records,” he did not identify
which law or doctrine authorizes constructive recording for purposes of
A.R.S. § 33-420(A). And the court dismissed the NIED claim because the
amended complaint did not allege that Graham’s suffering was
accompanied by, or manifested as, physical injury, a required element for
that claim in Arizona. See Gau v. Smitty’s Super Valu, Inc., 183 Ariz. 107, 109
(App. 1995). The court thus did not err in dismissing these claims.

II. Summary Judgment

¶12 This court reviews de novo a trial court’s grant of summary
judgment. Glazer v. State, 237 Ariz. 160, 167 ¶ 29 (2015). Here, the trial court
granted Carpenter summary judgment on Graham’s reckless
misrepresentation, negligent misrepresentation, defamation, intentional
interference with contractual relations, IIED, and RIED claims.

¶13 The trial court dismissed Graham’s RIED claim because it
determined that Arizona law does not recognize the claim. While Arizona
law does not recognize an independent RIED claim, the IIED standard
encompasses both intentional and reckless conduct. See Ford v. Revlon, Inc.,
153 Ariz. 38, 43 (1987) (“The three required elements [for IIED] are: first, the
conduct by the defendant must be ‘extreme’ and ‘outrageous’; second, the
defendant must either intend to cause emotional distress or recklessly
disregard the near certainty that such distress will result from his conduct; and
third, severe emotional distress must indeed occur as a result of defendant’s
conduct.” (emphasis added and omitted)). Because IIED encompasses
REID, and Graham brought both claims, the court did not err in dismissing
the duplicate claim.

¶14 Graham correctly notes that a summary judgment motion
involves shifting burdens. “Initially, a party moving for summary
judgment has the burden of showing there are no genuine issues of material
fact and it is entitled to summary judgment as a matter of law.” Nat’l Bank
of Ariz. v. Thruston, 218 Ariz. 112, 114–15 ¶ 12 (App. 2008), as amended (Jan.
23, 2008). “Only if the moving party satisfies this burden will the party
opposing the motion be required to come forward with evidence
establishing the existence of a genuine issue of material fact that must be
resolved at trial.” Id.

¶15 Graham is incorrect, however, that Carpenter has failed to
carry its initial burden. Because Carpenter showed that the title company
had no communications with the firm, it became Graham’s burden to show

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that Carpenter had somehow interfered with the sale. Graham did not do
so.

¶16 Graham’s remaining claims—reckless misrepresentation,
negligent misrepresentation, defamation, intentional interference with
contract, and IIED—all hinge on Carpenter’s having made false
representations to the title company that Graham’s $8,000 fine was a lien
assessable against his Arizona property. Graham showed, at most, that
either his HOA or property manager—not Carpenter—interfered with the
sale. The trial court did not err in granting Carpenter summary judgment
on the remaining claims.

III. Attorneys’ Fees at Trial

¶17 Graham appeals the trial court’s order awarding Carpenter its
attorneys’ fees under A.R.S § 12-349(A)(1), which mandates such an award
as a sanction against a party that brings or defends a claim without
substantial justification. He argues that the court erred in sanctioning him
because his suit was not frivolous or brought without substantial
justification. Review of an attorney fees award under this section presents
a mixed question of fact and law. Ariz. Republican Party v. Richer, CV-23-
0208-PR, 2024 WL 1922203, at *3 ¶ 10 (Ariz. May 2, 2024). “We defer to a
trial court’s findings of fact unless clearly erroneous, but we review the
court’s interpretation and application of the fees statute de novo.” Id.
(citation omitted).

¶18 The court shall order attorneys’ fees under A.R.S. § 12-349
against an attorney or party “if the attorney or party does any of the
following”: (1) “[b]rings or defends a claim without substantial
justification”; (2) “[b]rings or defends a claim solely or primarily for delay
or harassment”; (3) “[u]nreasonably expands or delays the proceeding”; or
(4) “[e]ngages in abuse of discovery.” A.R.S. § 12–349(A). A party brings a
claim “without substantial justification” if the claim is both groundless and
not made in good faith. A.R.S. § 12–349(F); Ariz. Republican Party, 2024 WL
1922203, at *4 ¶ 14. In addition, the court must provide specific reasons for
the award. A.R.S. § 12–350. Here, the trial court awarded Carpenter fees
after it concluded “from the totality of the record that the action against
Carpenter was wholly prosecuted in bad faith.” The court also determined
that Graham “was alleging a variety of unsupported claims with the hope
that one might be viable[,]” which “is not an appropriate use of judicial
resources and constitutes an abuse of the judicial system.”

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¶19 For § 12-349 purposes, “groundless” is synonymous with
“frivolous.” Ariz. Republican Party, 2024 WL 1922203, at *4 ¶ 15. A claim is
groundless “if the proponent can present no rational argument based upon
the evidence or law in support of that claim.” Rogone v. Correia, 236 Ariz. 43,
50 ¶ 22 (App. 2014) (internal quotation omitted).

¶20 Here, Graham’s NIED and false documents claims were
groundless from the outset, as Graham neither suffered physical injury nor
did Carpenter record any documents, as discussed supra ¶ 11. His other
claims against Carpenter were rendered groundless upon discovery
showing that Carpenter had never communicated with the title company.
Therefore, we must determine whether Graham’s claims were also not
made in good faith.

¶21 A claim is “not made in good faith” if “(1) it is groundless and
(2) the party or attorney knows or should know that it is groundless, or is
indifferent to its groundlessness, but pursues it anyway.” Ariz. Republican
Party, 2024 WL 1922203, at *9 ¶ 38. This applies to both bringing groundless
initial claims and maintaining claims once they are found to be groundless.
Id. at *9 ¶ 41.

¶22 Here, Graham continued to pursue his claims against
Carpenter even when discovery showed that no factual basis for such
claims existed. His claims were thus not made in good faith, and because
they were also groundless, the trial court did not err in its decision to award
fees under § 12-349(A)(1).

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CONCLUSION

¶23 We affirm. Carpenter requests an award of its attorneys’ fees
and costs on appeal under A.R.S. §§ 12-349 and -350. We grant Carpenter’s
request because this appeal was brought without substantial justification.
By appealing this case, Graham continues to pursue his groundless claims
with complete indifference to their lack of merit. See Ariz. Republican Party,
2024 WL 1922203, at *9 ¶ 38. Graham’s appeal is therefore unjustified under
A.R.S. § 12–349(A)(1). As the prevailing party, Carpenter is also awarded
its costs on appeal upon compliance with Ariz. R. Civ. App. P. 21.

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

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