yauck/alt v. West Town

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

JEFF YAUCK, an individual; and CODY ALT, an individual, Petitioners,

v.

WEST TOWN BANK & TRUST, an Illinois chartered bank, Respondent.

No. 1 CA-SA 24-0268
FILED 03-20-2025

Petition for Special Action from the Superior Court in Maricopa County
No. CV2024-013134
The Honorable Dewain D. Fox, Judge

JURISDICTION ACCEPTED; RELIEF GRANTED

COUNSEL

Gallagher & Kennedy, P.A. Phoenix
By Dale C. Schian, Christopher W. Thompson
Counsel for Petitioners

Provident Law, Scottsdale
By Timothy J. Watson, Aaron Lumpkin
Counsel for Respondent

OPINION

Judge Daniel J. Kiley delivered the opinion of the Court, in which Presiding
Judge Michael J. Brown and Judge D. Steven Williams joined.
 YAUCK/ALT v. WEST TOWN
Opinion of the Court

K I L E Y, Judge:

¶1 Petitioners Jeff Yauck and Cody Alt seek special action relief
from orders granting an application for provisional remedies filed by
Respondent West Town Bank & Trust (“West Town”) and allowing West
Town to conduct prejudgment discovery into Petitioners’ financial
condition. For the reasons that follow, we accept jurisdiction and grant
relief.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Petitioners are the founders of, and former majority
shareholders in, PureKana, LLC, (“PureKana”), which was in the business
of selling “hemp-based cannabidiol-related products.”

¶3 In 2020, West Town lent PureKana $10,000,000 pursuant to an
agreement (the “Loan Agreement”) that required full repayment after five
years, with periodic payments in the interim. Under the Loan Agreement,
the outstanding balance would be due upon an uncured “event of default,”
including, as relevant here, PureKana’s filing of a bankruptcy petition. West
Town and PureKana also entered into several ancillary agreements,
including a security agreement (the “Security Agreement”) that gave West
Town a security interest in PureKana’s inventory, equipment, and other
tangible and intangible property.

¶4 When PureKana entered the Loan Agreement, Petitioners
simultaneously executed separate guaranty agreements (the “Guaranty
Agreements”) in which they guaranteed full payment to West Town of
amounts due under the Loan Agreement.

¶5 In May 2024, West Town sued Petitioners, alleging that
PureKana defaulted under the Loan Agreement by filing a bankruptcy
petition. West Town sought to recover from all sums due under the Loan
Agreement, which amounts to principal and accrued interest of
$10,250,391.10 along with attorney fees, costs, and other accruing charges.

¶6 West Town also filed an Application for Prejudgment
Remedies of Attachment and Garnishment With Notice and Motion for
Order Permitting Prejudgment Discovery of Assets in Aid of Enforcement
of Provisional Remedies (the “Application”) seeking the provisional
remedies of attachment under A.R.S. § 12-1521(1) and prejudgment
garnishment under A.R.S. § 12-1570(5).

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Opinion of the Court

¶7 In support of the requested attachment, the Application
stated that Petitioners are liable for PureKana’s obligations under the
Guaranty Agreements. Without referencing West Town’s security interest
in PureKana’s tangible and intangible property, the Application alleged
that Petitioners’ obligation under the Guaranty Agreements and Loan
Agreement is “unsecured,” thereby justifying attachment under A.R.S. § 12-
1521(1).

¶8 In support of the requested prejudgment garnishment, the
Application cited A.R.S. § 12-1570(4), which defines “judgment creditor” to
include a defendant against whom an order granting a provisional remedy
has been entered. The Application did not, however, include the
information required to be included in an application for prejudgment
garnishment. See A.R.S. § 12-1572(2). The Application did not, for example,
identify a garnishee, nor did it set forth “good reason to believe” that a
garnishee “has in [its] possession nonexempt personal property belonging
to the judgment debtor.” A.R.S. § 12-1572(2)(c).

¶9 In its Application, West Town requested leave to conduct
discovery into Petitioners’ assets. Acknowledging “the normal rule
prohibiting the taking of discovery of a party’s assets before judgment is
entered,” West Town argued that an exception was warranted in this case.
According to West Town, obtaining discovery of Petitioners’ financial
condition before judgment would help it determine whether litigating its
claims on the merits would be cost-effective. “[I]t is possible that the
plaintiff may never prevail in its case,” West Town explained, and so “it
makes no sense to waste the time and resources of the parties and their
counsel dealing with issues about assets to enforce the plaintiff’s judgment
until after there has been an entry of judgment against the defendant [sic].”

¶10 Neither the Complaint nor the Application were supported
by an affidavit. Nonetheless, the superior court set a “probable validity”
hearing on the Application. See A.R.S. § 12-2410. The day before the hearing,
West Town filed a verification (the “Verification”) stating:

1. I, Mick Crawford, am the representative of [West Town].

2. I have read the Application for Provisional Remedies (with
notice) filed May 24th, 2024, and I verify that the matters and
things stated therein are true to the best of my knowledge.

3. I declare under penalty of perjury that the information
contained in the Application for Provisional Remed[ies] is
true and correct.

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Opinion of the Court

¶11 After the hearing, the superior court issued its ruling, finding
that West Town had “satisfied the statutory requirements for issuance” of
writs of attachment and garnishment and that West Town had established
the probable validity of its claim as required by A.R.S. § 12-2410(C). The
court therefore held that “West Town is entitled to the provisional remedies
of attachment and non-earnings garnishment” upon posting a bond equal
to “the payoff amount on the PureKana loan,” or $10,649,395.61. The court
granted West Town leave to “submit applications for pre-judgment writs
of attachment and garnishment” to the clerk of the court, and authorized
the clerk to issue the writs “if satisfied that West Town’s applications
comply with applicable law.” The court further granted West Town leave
to conduct discovery of Petitioners’ assets “to aid in the execution of a
potential judgment.” Petitioners seek relief from the ruling by special
action.

DISCUSSION

¶12 The decision to accept special action jurisdiction is “highly
discretionary,” Prosise v. Kottke, 249 Ariz. 75, 77, ¶ 10 (App. 2020) (citation
omitted), but may be appropriate where no “equally plain, speedy, and
adequate . . . remedy by appeal” exists, Ariz. R.P. Spec. Act. 2(b)(2).1
Further, because the interpretation of statutes and court rules is a matter of
law reviewed de novo, cases presenting such issues are “particularly
appropriate for review by special action.” Sierra Tucson, Inc. v. Lee ex rel.
County of Pima, 230 Ariz. 255, 257, ¶ 7 (App. 2012).

¶13 West Town argues that the prejudgment attachment and
garnishment writs here pose no risk of “permanent or irreparable harm” to
Petitioners because the writs merely allow their assets “to be held” but “not
disposed of, until [entry of] final judgment.”

¶14 But the “freezing” of Petitioners’ assets, even though
temporary, is no trifling interference with their property rights. See
Connecticut v. Doehr, 501 U.S. 1, 12 (1991) (noting that, although
prejudgment attachment does not result in “a complete, physical, or
permanent deprivation” of property, “even the temporary or partial

1 The Arizona Supreme Court revised the Arizona Rules of Procedure for

Special Actions, effective January 1, 2025. These new rules apply in all
special actions pending on that date, including this one, unless doing so
would be infeasible or cause injustice. See Ariz. R.P. Spec. Act. 1 Application
Note. As applying the new rules in this case would not be infeasible or
cause injustice, we apply them here.

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Opinion of the Court

impairments to property rights that attachments, liens, and similar
encumbrances entail are sufficient to merit due process protection”); see also
Fuentes v. Shevin, 407 U.S. 67, 84-85 (1972) (stating that although “[a]
deprivation of a person’s possessions under a prejudgment writ of replevin
. . . may be only temporary[,] . . . a temporary, nonfinal deprivation of
property is nonetheless a ‘deprivation’ in the terms of the Fourteenth
Amendment” (citation omitted)). On the contrary, the wrongful
deprivation of a person’s property, even if only for a short while, violates
due process. Cf. Fuentes, 407 U.S. at 86 (“The Fourteenth Amendment draws
no bright lines around three-day, 10-day or 50-day deprivations of
property.”); Grimm v. City of Portland, 125 F.4th 920, 926 (9th Cir. 2025)
(holding that due process notice requirements apply to municipal vehicle
towing procedures because a motor vehicle owner or operator
“undoubtedly . . . has an interest against being even temporarily deprived
of [the] vehicle”).

¶15 West Town further asserts that a post-judgment appeal is an
adequate remedy here because the bond it posted “provides Petitioners
with security” to redress any harm they may suffer if the prejudgment writs
are later determined to have been granted in error.

¶16 The statutory requirement that the plaintiff post a bond,
though an important procedural safeguard, does not assure the property
owner of full recompense for losses caused by a wrongful grant of a
provisional remedy. Cf. Fuentes, 407 U.S. at 81-82 (noting that, although
“[d]amages may . . . be awarded to” the owner “for the wrongful
deprivation” of property, “no damage award can undo the fact” that the
wrongful deprivation “has already occurred”; “This Court has not
embraced the general proposition that a wrong may be done if it can be
undone.” (cleaned up)). The wrongful attachment of a defendant’s assets
could, among other things, “cloud[] title” to the property and “taint[]” the
defendant’s “credit rating,” see Doehr, 501 U.S. at 11, while a wrongful
garnishment could prevent the defendant from timely paying other debts
as they come due, see Am. Sur. Co. of N.Y. v. Nash, 95 Ariz. 271, 275 (1964)
(noting that “[p]roof that the [defendant debtor] . . . could no longer pay
[its] debt” due to a “wrongful garnishment” would entitle debtor to
“recover[] on the bond” posted by plaintiff (citation omitted)). Establishing
and quantifying such losses may be difficult, thus rendering a bond an
imperfect safeguard against loss. For these reasons, and because this case
raises questions of the proper interpretation of statutes and court rules,
which are legal questions “appropriate for review by special action,” see
Sierra Tucson, Inc., 230 Ariz. at 257, ¶ 7, we accept special action jurisdiction,
see Bancamerica Commercial Corp. v. Brown, 167 Ariz. 308, 309 (App. 1990)

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Opinion of the Court

(accepting special action jurisdiction to review order quashing writ of
attachment because plaintiff was “without an adequate remedy by means
of an appeal”); see also In re Argyll Equities, LLC, 227 S.W.3d 268, 273 (Tex.
App. 2007) (holding that defendant had no adequate remedy by appeal to
challenge erroneous writ of attachment that would “freeze assets needed to
meet [defendant’s] present operating costs and . . . hinder its ability to
conduct business”).

I. West Town’s Claim Against PureKana’s Assets in its Bankruptcy
Proceeding Does Not Preclude West Town from Simultaneously
Seeking Relief, Including Provisional Remedies, from Petitioners.

¶17 Petitioners complain that West Town is not entitled to seek
provisional remedies here because it “filed a proof of claim” in PureKana’s
bankruptcy proceeding “asserting a claim . . . for $10,205,256.56, secured by
PureKana’s business assets.” According to Petitioners, West Town “should
not be permitted to tie up [their] assets while it simultaneously takes active
steps to collect the same amount in a separate proceeding.”

¶18 We are aware of no authority for the proposition that a
creditor’s claim in a debtor’s bankruptcy proceeding precludes it from
simultaneously seeking repayment from the guarantors of the debt. Cf. In
re Chugach Forest Prods., Inc., 23 F. 3d 241, 246 (9th Cir. 1994) (noting that 11
U.S.C. § 362(a)’s provision for an automatic stay of proceedings against
debtor in bankruptcy “does not stay actions against guarantors . . . or other
non-debtor parties liable on the debts of the debtor” (cleaned up)).
Certainly, nothing in Arizona statute makes provisional remedies
unavailable to creditors who simultaneously pursue recovery from debtors
in bankruptcy proceedings and from guarantors in separate litigation.
Because the Arizona Legislature did not restrict the availability of
provisional remedies in this manner, it is not up to this Court to read such
a limitation into the provisional remedies statutes. See Dep’t of Child Safety
v. Lang in and for County of Maricopa, 254 Ariz. 539, 542-43, ¶ 11 (App. 2023)
(noting that courts “lack the authority to add statutory requirements not
included by the Legislature”).

¶19 Of course, a creditor cannot recover twice on the same debt,
and West Town does not suggest otherwise. On the contrary, West Town
acknowledges that “[a]ny amount secured through the bankruptcy
proceedings will . . . offset amounts recoverable . . . in this matter.” As far
as the record before us shows, however, West Town has not, at least to date,
recovered anything in the bankruptcy case. In any event, the proof of claim
West Town filed in PureKana’s bankruptcy case does not, by itself, prohibit

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West Town from seeking relief, including provisional remedies, against
Petitioners.

A. Although an Application for Provisional Remedies Must Be
Supported by Affidavit, the Two Need Not Be Filed
Simultaneously, and so West Town’s Failure to File an
Affidavit Along With Its Application Did Not, By Itself,
Require that the Application Be Denied.

¶20 Petitioners complain that “the Application was not verified or
made under oath” at the time it was filed. They acknowledge that West
Town served a verification later, but assert that the verification was
untimely because it was not filed “until several months” after the
Application was filed, only “days before the [probable validity] hearing.”
Because West Town “did not even bother to attempt to verify the
Application until four (4) months after it was filed,” Petitioners contend,
“the trial court should have denied the Application.”

¶21 As West Town correctly argues in response, however, its
failure to submit an affidavit or verification with its Application, though a
“procedural misstep,” was not, by itself, fatal. Although an application for
provisional remedies must be made “under oath,” A.R.S. § 12-2404(A),
nothing in statute requires that the application and affidavit be filed
contemporaneously. A trial court cannot, of course, properly grant an
application for a provisional remedy that is not supported by affidavit, and
may properly refuse to schedule a probable validity hearing on an
unverified application until the applicant cures the defect by supplying the
required affidavit. But the fact that an application for a provisional remedy
is not accompanied by an affidavit at the time it is filed does not, by itself,
require that the application be denied.2

2 The Arizona Rules of Civil Procedure (the “Rules”) provide that when

“these rules require” that a matter be supported by affidavit, an unsworn
declaration may be used instead of an affidavit as long as the declaration
meets certain requirements. Ariz. R. Civ. P. 80(c) (emphasis added). The
requirement that an application for attachment be supported by affidavit is,
however, one of statute, not a requirement of the Rules. See A.R.S. § 12-1522.
Because Petitioners have not argued that West Town’s reliance on a
declaration instead of an affidavit does not satisfy A.R.S. § 12-1522, we need
not consider that issue. Instead, we assume, without deciding, that the
Verification is not invalid on the grounds that it is an unsworn declaration
rather than an affidavit.

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B. West Town Failed to Satisfy Statutory Requirements to
Obtain a Writ of Attachment.

¶22 Petitioners assert that the Application “failed to strictly
adhere to the requirements for obtaining” a writ of attachment and
therefore should have been denied. West Town argues that the court
properly granted its request for a writ of attachment because the remedy is
available “for the payment of money which is not fully secured” and the
testimony presented at the probable validity hearing established that the
debt claimed in this case is “unsecured.”

¶23 A.R.S. § 12-2403 provides that a request for a provisional
remedy with notice may not be granted unless:

1. All statutory requirements for the issuance of such
provisional remedy have been complied with by the party
seeking such remedy.

2. An application and notice for issuance of any provisional
remedy has been filed with the clerk of the court and a copy
of such notice and application have been served on the party
against whom any remedy will operate.

3. The party against whom any provisional remedy is sought
has been afforded an opportunity for a hearing or a hearing
has been held as provided in this article.

A.R.S. § 12-2403.

¶24 The requirements to obtain the provisional remedy of
attachment are set forth in A.R.S. §§ 12-1521 to -1539 and -2401 to -2412.
Because these statutory requirements are intended to safeguard
defendants’ due process rights, courts require strict adherence with the
statutes’ terms. Valley Nat’l Bank of Ariz. v. Educ. Credit Bureau, Inc., 23 Ariz.
App. 148, 149-50 (1975) (citing case law for the proposition that “pre-
judgment summary remedies provided by statute [must] be strictly
followed” to “protect the owner . . . of property from undue hardship and
deprivation of its full use and enjoyment prior to a final adjudication of the
creditor’s right, if any, to the property”).

¶25 Section 12-1521 permits prejudgment attachment of property

[i]n an action upon a contract, express or implied, for payment
of money which is not fully secured by real or personal

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property, or, if originally so secured, the value of such
security has, without any act of the plaintiff or the person to
whom the security was given, substantially diminished below
the balance owed.

A.R.S. § 12-1521(1). Section 12-1522 requires that a writ of attachment be
supported by an affidavit that “show[s] any one or more of the
requirements for a writ of attachment as set forth in section 12-1521.”

¶26 Petitioners argue that the Verification that West Town
submitted “failed to provide sufficient foundation” to establish the legal
and factual basis for the Application. Among other things, Petitioners
contend, the Verification “did not lay sufficient foundation from an
individual with personal knowledge that the debt [claimed by West Town]
is unsecured.”

¶27 We agree. Section 12-1522 requires that an affidavit in support
of an application for a writ of attachment make a “showing” of statutory
grounds for issuance of the writ. Because conclusory affidavits are without
evidentiary value, the factual showing required by § 12-1522 cannot be
made by an affidavit consisting of conclusory assertions by an affiant who
fails to establish personal knowledge of the matters set forth therein. See
Ariz. R. Evid. 602 (“A witness may testify to a matter only if evidence is
introduced sufficient to support a finding that the witness has personal
knowledge of the matter.”); cf. Florez v. Sargeant, 185 Ariz. 521, 526 (1996)
(“[A]ffidavits that only set forth ultimate facts or conclusions of law can
neither support nor defeat a motion for summary judgment.” (citation
omitted)); State v. Krum, 183 Ariz. 288, 290, 294 (1995) (affirming trial court’s
denial of relief to criminal defendant who sought post-conviction relief
based on affidavits of third parties asserting that “the victim recanted her
allegations”; “[T]he trial court could properly discount the affidavits”
because they “do not say when or where or to whom the victim supposedly
recanted,” and thus “lack any reliable factual foundation.”).

¶28 Here, the Verification contains nothing more than conclusory
statements to the effect that the declarant believes that the allegations in the
Application are true “to the best of [his] knowledge.” The Verification
includes no information that would support a finding that the declarant has
personal knowledge of the matters set forth in the Application. Nothing in
the Verification provides any indication of the declarant’s position with
West Town or his role in this case, nor does anything in the Verification
give cause to believe that the declarant has any knowledge of Petitioners’
financial condition or of the debt they purportedly owe. The vague and

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conclusory statements in the Verification wholly lack evidentiary value,
and so fail to “show” any of the requirements for attachment.

¶29 Because, as Petitioners correctly argue, West Town’s
Application “fail[ed] to meet basic statutory requirements necessary to
secure the [requested] prejudgment remedies,” the Application was
defective on its face and could not properly have been granted.

¶30 West Town insists that the superior court did not abuse its
discretion in granting its request for a writ of attachment because the court
held a probable validity hearing at which Petitioners had the opportunity
to cross-examine West Town’s witnesses and present evidence of their own,
had they chosen to do so. Any information lacking from the Application
and the supporting Verification, West Town suggests, was cured by the
evidence presented at the probable validity hearing.

¶31 Under § 12-2403, a provisional remedy with notice cannot be
granted unless the requirements of all three statutory subsections are met.
Subsection 1 requires that the applicant comply with “[a]ll statutory
requirements for the issuance of such provisional remedy,” while
Subsection 3 requires that “a hearing,” or at least “an opportunity for a
hearing,” be afforded to “[t]he party against whom [the] provisional
remedy is sought.” Although the requirements of Subsection 3 were
satisfied when the court held the probable validity hearing, the
requirements of Subsection 1 have never been met because, for the reasons
set forth above, see supra ¶¶ 27-29, West Town’s Application did not satisfy
the statutory requirements for issuance of a writ of attachment. Because the
requirements of Subsection 1 of § 12-2403 were not met, the trial court erred
in granting the Application. See Benson v. Casa De Capri Enterprises, LLC, 252
Ariz. 303, 306, ¶ 13 (2022) (“Since garnishment is a creature of statute,
garnishment proceedings are necessarily governed by the terms of those
statutes and courts may not allow garnishment proceedings to follow any
course other than that charted by the legislature.” (cleaned up)); see also
Parsons v. Ariz. Dep’t of Health Services, 242 Ariz. 320, 323, ¶ 11 (App. 2017)
(“When [a] statute’s language is clear and unambiguous, we must give
effect to that language without employing other rules of statutory
construction.” (citation omitted)).

C. West Town Failed to Satisfy Statutory Requirements to
Obtain a Writ of Garnishment.

¶32 The requirements for the provisional remedy of garnishment
are set forth in A.R.S. §§ 12-1570 to -1597 and -2401 to -2412. Again, strict

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compliance is required. See Benson, 252 Ariz. at 307, ¶ 17 (“Courts narrowly
construe the garnishment statutes and apply them as prescribed by the
legislature.”).

¶33 A.R.S. § 12-1572 authorizes issuance of a writ of garnishment
upon an application that “contain[s],” as is relevant here, “[a] statement that
the applicant has good reason to believe . . . [t]hat the garnishee has in the
garnishee’s possession nonexempt personal property belonging to the
judgment debtor.” Here, neither the Complaint, the Application, nor the
Verification satisfy this provision. None of these documents contains a
statement that West Town has good reason to believe that any garnishee
holds non-exempt property belonging to Petitioners. Indeed, none of these
documents even identifies a garnishee.

¶34 West Town argues that the court did not “issue a writ of
garnishment,” but merely “grant[ed] [its] Application for the provisional
remedies, including garnishment, subject to” its later submission of
“proposed forms of writs of garnishment naming specific garnishees as
required” by statute. West Town asserts, in other words, that after the
probable validity hearing, the court entered what amounts to the
provisional grant of the provisional remedy of garnishment, subject to West
Town’s subsequent submission of proposed writs of garnishment that meet
statutory requirements.

¶35 The purpose of a probable validity hearing is, in part, to afford
the defendant an opportunity to assert “claims of personal property
exemptions” relating to the property against which the provisional remedy
will operate. A.R.S. § 12-2410(C)(1). Unless the property against which the
remedy will operate has been identified, however, a defendant cannot
determine what exemptions from garnishment, if any, may apply. Because,
when the probable validity hearing was held, West Town had never
identified any account that it claimed was subject to garnishment,
Petitioners were denied an opportunity to present evidence in support of
potentially applicable exemptions.

¶36 Because West Town failed to comply with statutory
requirements for either attachment or garnishment, the court erred in
granting the Application.

II. Prejudgment Discovery

¶37 Finally, Petitioners assert that the trial court erred in
authorizing West Town to conduct prejudgment discovery of their assets.
Because this issue is likely to recur in further superior court proceedings in

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this case, we address it. See Gila River Indian Community v. Dep’t of Child
Safety, 238 Ariz. 531, 536, ¶ 19 (App. 2015).

¶38 In authorizing West Town to conduct prejudgment discovery
of Petitioners’ assets, the court concluded that, “read together,” Rules 64
and 69 “allow pre-judgment discovery of assets to aid in the execution of a
potential judgment when the provisional remedies of attachment and
garnishment are granted.” Petitioners argue that neither Rule 64 nor Rule
69 authorize “pre-judgment discovery concerning a defendant’s assets to
aid in the request for a provisional remedy.” In response, West Town
asserts that the court acted within its discretion in so ordering, contending
that the identification of assets through its requested discovery “advances
the purpose of the provisional remedy.”

¶39 Rule 64 provides as follows:

(a) Remedies--Generally. At the commencement of and
throughout an action, every remedy authorized by law is
available for the seizure of a person or property to secure
satisfaction of a potential judgment.

(b) Specific Kinds of Remedies. The remedies available under
this rule include the following--however designated and
regardless of whether the remedy is ancillary to the action or
requires an independent action:

(1) arrest;

(2) attachment;

(3) garnishment;

(4) replevin;

(5) sequestration; and

(6) other corresponding or equivalent remedies.

Ariz. R. Civ. P. 64. A “remedy” is a judgment, order, or other form of relief
that a court or other tribunal is authorized to grant to protect or vindicate a
right or redress a wrongful act. See Black’s Law Dictionary (12th ed. 2024)
(defining “remedy” as “[t]he means of enforcing a right or preventing or
redressing a wrong; legal or equitable relief”). Although Rule 64 authorizes
a claimant to seek “remedies” throughout the pendency of an action, Rule
64 does not authorize discovery because discovery is not a “remedy.”

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¶40 Rule 69, in turn, provides in part that “[a] party may execute
on a judgment -- and seek relief in proceedings supplementary to and in aid of
judgment or execution -- as provided in these rules, statutory remedies, and
other applicable law.” Ariz. R. Civ. P. 69(a) (emphasis added). Rule 69 thus
contemplates the use of discovery as provided in the Arizona Rules of Civil
Procedure in aid of execution on a judgment. Nothing in the rule’s
provisions, however, authorizes the use of discovery before a judgment is
obtained.

¶41 Prejudgment discovery is generally limited to matters
“relevant to any party’s claim or defense.” Ariz. R. Civ. P. 26(b)(1). As
courts have long recognized, restricting discovery of a defendant’s assets
until judgment is obtained serves to protect the defendant from being
subjected to harassment, invasion of privacy, and unnecessary litigation
costs. See Arpaio v. Figueroa, 229 Ariz. 444, 447, ¶ 9 (App. 2012) (explaining
basis for limits on financial discovery when claim for punitive damages
asserted); see also Richards v. Superior Court, 86 Cal. App. 3d 265, 271, 150
Cal. Rptr. 77, 80 (1978) (“Respon[ding] to discovery seeking financial
information places a severe burden on the responder. [At] a minimum,
there is the time and expense necessary to the compilation of a complex
mass of information unrelated to the substantive claim involved in the
lawsuit and relevant only to” a claim for damages “which may never be
awarded.”).

¶42 Because a defendant’s financial condition is generally not
relevant to any party’s claim or defense, a majority of courts that have
considered the issue have declined to allow discovery into a defendant’s
assets before the plaintiff has obtained a judgment. See, e.g., SierraPine v.
Refiner Prods. Mfg., Inc., 275 F.R.D. 604, 609 (E.D. Cal. 2011) (“[D]istrict
courts across the country generally do not allow pre-judgment discovery
regarding a defendant’s financial condition or ability to satisfy a judgment”
because “such discovery is not relevant to the parties’ claims or defenses
and is not reasonably calculated to lead to the discovery of admissible
evidence.” (citations omitted)); 2245 Venetian Ct. Bldg. 4, Inc. v. Harrison, 149
So.3d 1176, 1179 (Fla. Dist. Ct. App. 2014) (“In the prejudgment context, a
party is entitled only to the opponent’s financial records that pertain to the
pending action. But in postjudgment discovery, the dispute in the original
civil action has been resolved and therefore the matters relevant for
discovery are those that will enable the judgment creditor to collect the
debt.” (cleaned up)); Travelers Ins. Co. v. Hindle, 748 A.2d 256, 259 (R.I. 2000)
(“Ordinarily, the federal discovery rules and similar state rules do not
permit the discovery of facts concerning a defendant’s financial status or
ability to satisfy a judgment, since such matters are not relevant to the trial

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issues and cannot lead to the discovery of admissible evidence.” (cleaned
up)).

¶43 To be sure, discovery concerning an adverse party’s assets is
generally permissible if relevant to the merits of a claim or defense asserted
in the litigation. See Ariz. R. Civ. P. 26(b)(1). Prejudgment financial
discovery is permissible, for example, if the plaintiff asserts a claim for
punitive damages, as long as the plaintiff makes the requisite prima facie
showing of the defendant’s liability for punitive damages. See Larriva v.
Montiel, 143 Ariz. 23, 26 (App. 1984). Likewise, prejudgment discovery of a
defendant’s finances may be warranted if the plaintiff’s claim is predicated
on an “alter ego” theory of liability. See Deutsche Credit Corp. v. Case Power
& Equip. Co., 179 Ariz. 155, 160 (App. 1994) (citations omitted) (noting that
“commingling of . . . funds” and parent company’s “payment of salaries
and other expenses of [the] subsidiary” are relevant to establish alter ego
relationship); see also In re Marriage of Gromicko, 387 P.3d 58, 63, ¶ 35 (Colo.
2017) (holding that wife in marital dissolution action was entitled to “such
discovery as would reasonably have been necessary to allow her to attempt
to establish” an alter ego relationship between husband and his business).
Further, discovery of the defendant’s financial affairs may be appropriate
when the wrongful exercise of dominion and control over assets is an
element of a claim being asserted. See, e.g., Hett v. Barron-Lunde, 290 So. 3d
565, 568, 571 (Fla. Dist. Ct. App. 2020) (rejecting challenge to order requiring
defendant to produce personal financial information and holding that such
evidence was relevant to plaintiff’s claims for “civil theft, conversion,
breach of fiduciary duty, [and] unjust enrichment” based on defendant’s
removal of funds from cognitively impaired man’s bank accounts). And a
defendant may be entitled to discovery of the plaintiff’s financial
information when relevant to the plaintiff’s claim for compensatory
damages, such as when the plaintiff seeks damages for lost profits. See Uni-
Splendor Corp. v. Remington Designs, LLC, 2017 WL 10581102 at *2 (C.D. Cal.
Sept. 5, 2017) (“In cases alleging damages based on lost sales or offset, courts
have required production of corporate financial information such as tax
returns; general ledgers, sales registers, and income statements; annual
financial statements; and financial analyses, projections and budgets.”
(citations omitted)).

¶44 Additionally, a court may properly authorize prejudgment
discovery of a party’s finances if evidence suggests that the party is
concealing or disposing of assets to render uncollectible any judgment that
may be entered. See, e.g., EEOC v. Ian Schrager Hotels, Inc., No. CV99-
0987GAFRCX, 2000 WL 307470, at *4 (C.D. Cal. Mar. 8, 2000) (unpublished)
(rejecting defendants’ objection to plaintiff’s discovery requests for

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Opinion of the Court

financial documents; “Clearly, plaintiff may obtain defendants’ financial
information . . . to determine whether defendants have attempted to
transfer, or have transferred, income or assets to others to avoid potential
liability if defendants lose the pending litigation.”). Prejudgment remedies
are statutorily authorized to prevent the dissipation of assets during the
pendency of litigation to frustrate post-judgment recovery, see A.R.S. §§ 12-
1521(2), -2402(1), and nothing in this opinion precludes trial courts from
authorizing creditors to conduct financial discovery when necessary to give
effect to those statutory remedies.

¶45 But the mere fact that a party has been granted a provisional
remedy does not, without more, entitle the party to conduct discovery into
its adversary’s assets or financial condition. Unless the defendant’s finances
are relevant to a claim or defense, the general rule barring prejudgment
discovery of a defendant’s finances governs when prejudgment remedies
are sought to secure an unsecured or under-secured debt. Accordingly, we
hold that, because West Town’s claim for provisional remedies was based
solely on its contention that Petitioners are liable for an unsecured debt, the
court erred in granting West Town’s request to conduct prejudgment
discovery of Petitioners’ financial condition.

III. Attorney Fees and Costs on Appeal.

¶46 Both parties claim an award of attorney fees and costs
pursuant to A.R.S. §§ 12-341.01(A) and -2411. In our discretion, we deny
without prejudice each party’s request for an award of fees, deferring to the
superior court to determine whether to award fees incurred in this special
action to the successful party at the conclusion of the proceedings on the
merits. See L.H. v. VandenBerg, 256 Ariz. 44, 50, ¶ 22 (App. 2023) (denying
petitioners’ request for award of attorney fees without prejudice and
authorizing the superior court to award “fees incurred in this special
action” after resolving pending motion “on the merits”); Tierra Ranchos
Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, 204, ¶ 37 (App. 2007) (denying
appellant’s request for award of attorney fees on appeal, “deferring this
request to the trial court’s discretion pending resolution of the matter on
the merits”). We award Petitioners their costs under Ariz. R. Spec. Act. P.
17(c), subject to their compliance with the requirements of that rule.

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Opinion of the Court

CONCLUSION

¶47 For the foregoing reasons, we accept special action
jurisdiction and grant relief by vacating the orders granting provisional
remedies and prejudgment discovery.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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