cannon/hunger v. Hon. julian/turpen

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

CANNON COCHRAN MANAGEMENT SERVICES, INC., a foreign
corporation; MALCOLM HUNGER, an individual, Petitioners,

v.

THE HONORABLE MELISSA IYER JULIAN, Judge of the SUPERIOR
COURT OF THE STATE OF ARIZONA, in and for the County of
MARICOPA, Respondent Judge,

v.

KEITH TURPEN; DEBRA TURPEN, Real Parties in Interest.

No. 1 CA-SA 24-0171

FILED 12-05-2024

Petition for Special Action from the Superior Court in Maricopa County
No. CV2023-051524
The Honorable Melissa Iyer Julian, Judge

JURISDICTION ACCEPTED; RELIEF GRANTED IN PART AND
DENIED IN PART

COUNSEL

Gordon Rees Scully Mansukhani, LLP, Phoenix
By David L. O’Daniel, Jonathan C. Brannon
Counsel for Petitioners

Robert J. Hommel, P.C., Phoenix
Counsel for Real Parties in Interest
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MEMORANDUM DECISION

Judge Samuel A. Thumma delivered the decision of the Court, in which
Presiding Judge Maria Elena Cruz and Judge Andrew M. Jacobs joined.

T H U M M A, Judge:

¶1 This special action turns on whether the superior court
properly found the attorney-client privilege protecting statements on
several pages of claim notes created by Petitioners Cannon Cochran
Management Services Inc. (CCMSI) and Malcom Hunger was waived,
requiring production of those notes to Real Parties in Interest Keith and
Debra Turpen. The Turpens (plaintiffs in this insurance bad faith case)
claim Petitioners (two of the defendants) waived their privilege by relying
on an advice of counsel defense. Accepting special action jurisdiction, this
court grants relief in part and denies relief in part as stated below.

FACTS AND PROCEDURAL HISTORY

¶2 In January 2021, while working for Vision Solar, Keith Turpen
slipped and fell. Turpen sought medical treatment and workers’
compensation benefits. Defendant New York Marine & General Insurance
Company apparently provides workers’ compensation coverage for Vision
Solar. New York Marine, in turn, apparently retained CCMSI and Hunger
to investigate Turpen’s worker’s compensation claim. Among other things,
Hunger consulted with attorney Lisa Lamont, including in April 2021,
sending an email to Lamont titled “Question on Denied/Investigation
Pending” Independent Medical Examination (IME).

¶3 In January 2022, an Industrial Commission of Arizona Award
apparently found Turpen’s workers’ compensation claim compensable.
Someone other than Turpen sought review of that Award. In September
2022, the Commission affirmed the Award. Even then, however, Turpen
apparently did not receive workers’ compensation benefits pending his
providing monthly status reports (MSRs), with the parties disputing
responsibility for MSRs.

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¶4 In April 2023, the Turpens filed this case, alleging bad faith
and wrongful denial and delay of payment of workers’ compensation
benefits by Petitioners and New York Marine. After Petitioners disclosed
CCMSI claim notes, asserting information redacted from those notes was
attorney-client privileged, motion practice followed. As relevant here, that
motion practice yielded two minute entries requiring, after an in camera
review, the production of about 10 pages of unredacted CCMSI claim notes.

¶5 In its June 17, 2024 minute entry, the superior court found
that, as applicable here, (1) Petitioners showed that the redacted
information (involving communications between Hunger and counsel) was
attorney-client privileged; (2) the Turpens showed Petitioners impliedly
waived that privilege by asserting a subjective good faith defense based on
advice of counsel; (3) granting in part and denying in part the Turpens’
motion to compel and (4) granting in part and denying in part Petitioners’
motion to submit documents for in camera inspection. As relevant here, in
that minute entry, the court ordered that Petitioners produce to the Turpens
unredacted copies of CCMSI claim note pages 21, 23 and 30. It also directed
Petitioners to deliver to the court for in camera inspection unredacted
copies of additional pages of specified CCMSI claim notes.

¶6 A July 8, 2024 minute entry reflects the results of the in camera
review of the unredacted copies of CCMSI claim notes. As relevant here,
the court concluded that the previously “redacted communication” on the
following pages “implicate[d] CCMSI’s subjective good faith defense as it
pertains to the decision to deny the claim as well as CCMSI’s investigation
into how the accident occurred,” resulting in an order that Petitioners
produce to the Turpens unredacted copies of CCMSI claim note pages 39,
40, 67, 69, 70, 72 & 74.

¶7 Petitioners filed this special action, challenging the order
requiring them to produce unredacted versions of these documents.

DISCUSSION

I. The Court Accepts Special Action Jurisdiction.

¶8 “Special action review of an order compelling discovery over
the objection of a party asserting a privilege is appropriate because there is
no equally plain, speedy, or adequate remedy by appeal.” Miller v. Kelly, 212 Ariz. 283, 284 ¶ 1 (App. 2006) (citations omitted); accord State Farm Mut.
Auto. Ins. Co. v. Lee, 199 Ariz. 52, 66 ¶ 38 (2000). Accordingly, this court

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accepts special action jurisdiction. See Ariz. R.P. Spec. Act. 1(a).1 The
question then becomes whether Petitioners are entitled to relief. See Ariz.
R.P. Spec. Act. 3.

¶9 The court accepted special action jurisdiction over only the
question the petition presented: whether ordering production of the
unredacted copies of the CCMSI claim notes specified above was error
when (1) Petitioners have not asserted a subjective good faith defense based
on advice of counsel and (2) Petitioners “never put those communications
at issue.” The court thus will not tread beyond those limited questions to
review other issues neither raised with or addressed by the superior court,
nor raised in the petition. In particular, the court will not address whether
the documents at issue were privileged to begin with or whether the crime-
fraud exception provides a basis to go behind the privilege, arguments the
Turpens seek to raise in response to the petition. Finally, the substantive
merits of the claims and defenses, which have yet to be resolved, are not
addressed here.

II. The Record Presented to This Court.

¶10 The record in a special action proceeding is limited to what
the parties provide. A petition seeking special action relief must “be
supported by an appendix of documents in the record before the trial court
that are necessary for a determination of the issues raised by the petition.”
Ariz. R.P. Spec. Act. 7(e). Unlike an appeal, the record in a special action
proceeding is what the parties provide this court.

¶11 The parties here have provided hundreds of pages of
documents in their appendices, many lacking obvious relevance to the
issues presented. Notwithstanding this bulk, there are significant (and
seemingly meaningful) gaps in the record presented. Although providing
their answer to the Turpens’ complaint, Petitioners have not provided a
copy of the complaint. As a result, other than indicating the Turpens’
complaint has 86 paragraphs, and alleges bad faith, joint and several
liability and punitive damages, the record does not include the allegations
made in the Turpens’ operative pleading.

¶12 Similarly, the two significant minute entries at issue here
resolved a motion to compel and a motion for in camera inspection.
Petitioners provided the Turpens’ motion to compel and Petitioners’

1 Absent material revisions after the relevant dates, statutes and rules cited

refer to the current version unless otherwise indicated.

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response, but not the Turpens’ reply. Petitioners also provided their motion
for in camera inspection and their reply, but not the Turpens’ response.
Although the Turpens provided their reply supporting their motion to
compel, the record does not include the response to Petitioners’ motion for
in camera inspection. As a result, the court lacks a complete set of the six
briefs that resulted in the two minute entries being challenged here.

¶13 These omissions seem particularly significant, given that
Petitioners’ argue they have not asserted a subjective good faith reliance on
counsel defense and have referenced subjective good faith “only as
discussed in the relevant case law, in response to the Turpen’s claims
[apparently in their complaint, which was not provided to this court] and
assertions contained in their Response” to the motion for in camera review,
which was not provided to this court.

¶14 It may be that the gaps in the record provided to this court are
inconsequential. But that possible conclusion is not obvious. What is clear
is that these gaps in the record likely influence the analysis here and that
these gaps in the record could have been avoided.2

III. Documents No Longer At Issue.

¶15 Petitioners correctly note the Turpens’ response does not
address CCMSI 23, meaning they have waived any claim to its production.
See, e.g., Lunney v. State, 244 Ariz. 170, 174 ¶ 3 n.3 (App. 2017); Rowland v.
Great States Ins. Co., 199 Ariz. 577, 581 ¶ 6 n.1 (App. 2001). Accordingly,
relief is granted such that any inadvertently disclosed copy of the April 13,
2021 note on CCMSI 23 is deemed clawed back and must be either returned
to Petitioners or destroyed.

2 Indeed, it appears that the gaps in this record might defeat special action

jurisdiction under rule changes effective January 1, 2025. Though this court
has accepted jurisdiction here, it would likely have been improper to do so
after January 1, 2025 because these gaps in the record violate new Rule 14(e)
(“Appendices”). See Ariz. R.P. Spec. Action 14(e)(1) (eff. Jan. 1, 2025) (“A
petitioner must file an appendix that includes a copy of the decision being
challenged and copies of all documents from the trial court’s record the
reviewing court will need to decide the issues the petition raises.”).

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¶16 Petitioners concede that the April 6, 2021 email included in
CCMSI 30, a portion of which is redated, was disclosed without redaction
by New York Marine. Petitioners admit this “waived the attorney-client
privilege[] that had been attached to” that communication and concede the
redacted information on CCMSI 30 is no longer privileged. Thus, the
superior court appropriately required disclosure of the unredacted
document, and the relief Petitioners request regarding CCMSI 30 is denied.

¶17 Petitioners claim privilege attaching to a three-letter acronym
on CCMSI 74 meant the superior court should not have ordered production
of the unredacted document revealing the acronym. Petitioners, however,
have not shown how those three letters were shielded from disclosure or
how the superior court erred in ordering their production. Accordingly,
Petitioners’ request for relief regarding CCMSI 74 is denied.

IV. Applicable Legal Standard.

¶18 Although discovery orders are reviewed for an abuse of
discretion, Twin City Fire Ins. Co. v. Burke, 204 Ariz. 251, 253 ¶ 10 (2003)
(citing cases), this court reviews de novo findings that the attorney-client
privilege has been waived, State ex rel. Adel v. Adleman, 252 Ariz. 356, 360 ¶
10 (2022) (citing cases). Petitioners argue the superior court erred in finding
waiver given they have not “asserted a subjective good faith defense based
on advice of Counsel.”3 Petitioners argue the superior court erred in
applying the analysis set forth in Mendoza v. McDonald’s Corp., 222 Ariz. 139
(App. 2009) and, instead, it should have applied the analysis in State Farm
Mutual Automobile Insurance Co. v. Lee, 199 Ariz. 52 (2000). Everest Indemnity
Insurance Co. v. Rea, 236 Ariz. 503 (App. 2015), a more recent case, discussed
and sought to synthesize Mendoza and Lee.

3 Petitioners also argue the superior court erred “without granting Oral

Argument,” noting they had requested oral argument in their response to
the Turpen’s motion to compel. From the record, it does not appear that
Petitioners brought this issue to the superior court’s attention after the June
17, 2024 minute entry, when complying with that minute entry by
submitting documents for in camera review or at any time, before or after,
the July 8, 2024 minute entry ruling on privilege after the in camera review.
By this action and inaction, any issue regarding oral argument appears to
have been waived. See Odom v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535 ¶
18 (App. 2007). Moreover, even absent waiver, as applicable here “the court
may decide motions without oral argument, even if oral argument is
requested.” Ariz. R. Civ. P. 7.1(d).

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¶19 Everest stated that “[u]nder Lee, the attorney-client privilege is
impliedly waived only when the litigant [holding the privilege] asserts a
claim or defense that is dependent upon the advice or consultation of
counsel.” 236 Ariz. at 505 ¶ 7. Everest continued that, “[u]nder Lee, to waive
the attorney-client privilege, a party [holding the privilege] must make an
affirmative claim that its conduct was based on its understanding of the
advice of counsel – it is not sufficient that the party consult with counsel
and receive advice.” 236 Ariz. at 505 ¶ 9 (citing cases). Turning to Mendoza,
Everest described that case as involving

an employer rel[ying] on the advice of counsel
in scheduling [IMEs] and determining whether
to issue surgical authorization for an
employee’s worker’s compensation claim. The
employer expressly admitted that it had relied
substantially on the advice of worker’s
compensation counsel in reaching its decisions.
In the face of decisions made based on the
advice of counsel, such a claim that those
decisions were made in subjective good faith
necessarily depends upon the information the
client had learned from its lawyers. In that
circumstance, Mendoza found the attorney-
client privilege was impliedly waived under
Lee.

236 Ariz. at 506 ¶ 10 (citations omitted); see also Mendoza, 222 Ariz. at 154 ¶
51 (“By electing to defend this case based on the subjective, not just
objective, reasonableness of its adjusters’ actions, McDonald’s placed in
issue their subjective beliefs and directly implicated the advice and
judgment they had received from McDonald’s ICA counsel incorporated in
those actions.”). The majority in Everest, on the facts presented, found
defendant “has not yet placed the advice it received from counsel at issue
in this litigation,” meaning it had not waived the privilege, 236 Ariz. at 506
¶ 11, while the dissent found defendant’s “actions are ‘inextricably
intertwined’ with the advice it received from counsel,” meaning it had
placed that advice at issue and had waived the privilege, id. at 507 ¶ 17
(Orozco, J., dissenting). Using that dichotomy, the issue here is on which
side of this dividing line Petitioners’ asserted defenses place this case.

¶20 The Turpens concede they are making “no claim that
Petitioners relied on counsel,” nor are they “assert[ing] that Petitioners
were relying on an evaluation of law.” Turning to the defenses asserted by

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Petitioners, the superior court found that, “[l]ike the facts at issue” in
Mendoza,

CCMSI claims subjective good faith in its
decision to maintain the status of the claim as
“denied/under investigation” until it received
the results of the IME. Although Hunger claims
in his declaration . . . that he made this
determination independently and before he
communicated with Attorney Lamont on April
6, 2021, the evidence suggests that his decision-
making on that issue as of and after April 6,
202[4] “implicated the advice and judgment”
received from counsel.

¶21 The tipping point for the Lee/Mendoza/Everest line of cases
appears to be whether a defense invoked by holders of the privilege, here
Petitioners, constitutes a waiver of the privilege they hold. See Lee, 199 Ariz.
at 58 ¶ 15 (where party “claiming the privilege relies on and advances as a .
. . defense a subjective and allegedly reasonable evaluation of the law—but
an evaluation that necessarily incorporates what the litigant learned from
its lawyer—the [privilege is waived and the] communication is
discoverable”) (citing “the Hearn test,” originating in Hearn v. Rhay, 68
F.R.D. 574 (E. D. Wash. 1975)); Mendoza, 222 Ariz. at 154 ¶ 51 (similar;
quoted above); Everest, 236 Ariz. at 506 ¶ 11 (“Everest has not asserted as a
defense, at least not yet, that it depended on advice of counsel in forming
its subjective beliefs regarding the appropriate course of conduct.”); see also
Everest, 236 Ariz. at 506 ¶ 10 (noting the employer in Mendoza “expressly
admitted that it had relied substantially on the advice of worker’s
compensation counsel in reaching its decisions.”).

¶22 Petitioners (who hold the privilege) argue, with record
support, that they have never asserted a subjective good faith defense based
on advice of counsel. To the contrary, they argue they have expressly
disavowed asserting such a defense. Petitioners point to their answer to the
Turpens’ complaint (which includes no such defense or affirmative
defense), their final Rule 26.1 disclosure statement (which includes no such
defense or affirmative defense), their response to the Turpens’ motion to
compel (which disavows any defense that would depend upon advice of
counsel) and Hunger’s sworn declaration (which states that he consulted
with counsel to seek but does not rely on that advice for a good faith
defense). Petitioners correctly note the Turpens have submitted no evidence

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to the contrary, which is neither surprising nor instructive given that
Petitioners control the defenses they assert.

¶23 The record presented here is quite similar to the record in
Everest, resulting in a conclusion that the holder of the privilege in that case
had not waived that privilege by asserting a subjective good faith defense
based on advice of counsel:

At present, Everest’s defense falls short
of the Lee and Mendoza requirements for an
implied waiver. Everest contends that it acted
with a subjective belief in the good-faith nature
of its actions. Everest also admits that it
consulted counsel before making the decision to
enter into the settlement agreement and that
counsel were involved in the settlement
negotiations. But these facts alone are not
enough to suggest that Everest’s subjective
belief in the legality of its actions necessarily
included or depended on the advice it received
from counsel. Everest has not asserted as a
defense, at least not yet, that it depended on
advice of counsel in forming its subjective
beliefs regarding the appropriate course of
conduct. Similarly, Everest has not yet seen the
need to share the advice of its counsel with its
own expert—the expert simply cites the fact of
consultation as a procedural indication of good
faith. As such, Everest has not yet placed the
advice it received from counsel at issue in this
litigation.

Everest, 236 Ariz. at 506 ¶ 11 (emphasis added; citations and footnote
omitted). This same analysis applies here. It may be that Petitioners made a
tactical mistake by failing to assert a subjective good faith defense based on
advice of counsel. Regardless, as in Everest, Petitioners have failed to do so.
Accordingly, applying Everest, relief is granted by vacating that portion of
the superior court’s orders finding an implied waiver of privilege as to the
remaining CCMSI documents subject to this special action proceeding.

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CONCLUSION

¶24 Accepting special action jurisdiction, this court grants relief in
part and denies relief in part. That portion of the superior court’s orders
finding Petitioners impliedly waived the attorney-client privilege as to the
following documents, by asserting a subjective good faith defense
implicating advice of counsel, is vacated: CCMSI 21, 23, 39, 40, 67, 69, 70,
72. The superior court’s orders regarding CCMSI 30 and 70 are affirmed.

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

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