Goldman v. Sahl

• Decision Date: 05 March 2020
• Docket Number: No. 1 CA-CV 18-0687,1 CA-CV 18-0687
• Citation: 462 P.3d 1017,248 Ariz. 512
• Parties: Mark D. GOLDMAN, Plaintiff/Appellant, v. Mark K. SAHL, et al., Defendants/Appellees.
• Court: Arizona Court of Appeals

248 Ariz. 512

462 P.3d 1017

Mark D. GOLDMAN, Plaintiff/Appellant,

v.Mark K. SAHL, et al., Defendants/Appellees.

No. 1 CA-CV 18-0687

Court of Appeals of Arizona, Division 1.

FILED March 5, 2020

Review Denied August 25, 2020

McMURDIE, Judge:

¶1 Attorney Mark Goldman appeals the dismissal of his claims for defamation and abuse of process against another attorney, Mark Sahl, arising out of a letter Sahl sent to Goldman and others and a bar charge Sahl filed accusing Goldman of misconduct. We affirm the superior court's dismissal of the complaint but vacate the court's award of attorney's fees against Goldman imposed under Arizona Revised Statutes ("A.R.S.") section 12-349. We hold that: (1) communication that occurs preliminary to a judicial proceeding is privileged when the defendant was seriously considering commencing litigation or had a good-faith basis to believe someone else was; (2) Rule 48(l ) of the Rules of the Supreme Court of Arizona ("Rule") codifies common-law privileges and immunities; (3) under the common law, professional-discipline proceedings are subject to claims of improper litigation conduct, and the Arizona Constitution prevents the abrogation of such claims; and (4) we cannot affirm a sanction based on the superior court's finding that a claim was groundless because it was contrary to well-established law if we do not affirm the court's judgment based on the application of that law.¹

FACTS AND PROCEDURAL BACKGROUND

¶2 In April 2016, a dispute arose between CopperWynd Resort (the "Resort") and the Villas at CopperWynd's homeowners’ association (the "Association") over the Association's opposition to the Resort's frequent use of temporary noise permits. To allow the Resort to extend an outdoor event until midnight, a noise ordinance required the Resort to obtain a permit from the Town of Fountain Hills for each outdoor event that ran after 10:00 p.m. On average, the Resort applied for, and the town administratively granted, two permits per month. The town issued permits without a complaint until a villa owner objected in April 2016. The villa owner complained that after new ownership took over the Resort, there had been excessively loud music coming from the Resort in general, and specifically after 10 p.m. ¶3 The relationship between the Association and the Resort is governed by the declarations of covenants, conditions, and restrictions ("CC&Rs") created when the Resort and the neighboring villas were developed. The CC&Rs contemplate that villa owners may purchase club memberships with the Resort allowing the residents to use the Resort's amenities. The CC&Rs provide that "any rights to membership and to use any facilities which are part of the Club Property are solely within the discretion of the Club Owner." The year before this dispute arose, William Hinz purchased the Resort and three of the villas.² Hinz then invested more than five million dollars in renovating the Resort, focusing on making the Resort competitive as a venue for weddings and special events, claiming that with only 32 guest rooms, the Resort was not otherwise viable.

¶4 Around the same time that the disagreement arose over the noise permits, the town resumed a review of the noise ordinance affecting the Resort. Sahl represented the Association, which opposed both the administrative grant of permits and the proposed amendments to the noise ordinance. Both Hinz and Sahl actively participated in the noise review, advocating for their respective positions. Sahl advocated for volume and time restrictions on noise from the Resort. Hinz maintained that such restrictions would prevent the Resort from being financially viable and proposed increasing the hours that the Resort could host outdoor events to allow it to become more competitive with other venues in the surrounding cities. The Association's position was that Hinz's management of the Resort's activities was detrimental to the peace, comfort, and general welfare of the Association. The town council ultimately resolved the permit issue and the amendment to the noise ordinance favorably for the Resort.

¶5 On December 15, 2016, the same day the town approved the amendment to the noise ordinance, Goldman wrote Sahl on behalf of his client, Sarah Nolan, a villa resident. The letter stated in part that Nolan believed that Sahl and his law firm were "not acting in the best interest of the unit owners/Association members," and were "acting to the extreme detriment of the unit owners, either knowingly and intentionally or negligently." Goldman asserted that the letter served as "notice to [Sahl and his] law firm that Ms. Nolan intend[ed] to hold [Sahl and his] law firm accountable for [his] and its conduct." He requested Sahl and the firm "cease and desist from advocacy on behalf of the Association ... until such time as all of the unit owners/Association members have been given the opportunity to be fully informed as to the serious nature and consequences of [Sahl and his] law firm's conduct." The letter stated it served as "notice to the Association and its Board that Ms. Nolan intend[ed] to hold the Association and its individual Board members accountable and liable for their conduct."

¶6 The letter also asserted that Nolan believed that the Association's retention of the law firm and its advocacy has "caused and w[ould] continue to cause damage" to the villa owners, including "risking lawsuits that may arise in various manners," devaluing the property, and compelling the Resort "to take actions that w[ould] deprive the Villas of the use of and enjoyment of CopperWynd." The letter claimed that Sahl and his "law firm's conduct and advocacy against CopperWynd w[ould] be directly responsible for forcing CopperWynd into that position." Goldman's letter concluded: "please advise the members of the board of directors of the Association that Ms. Nolan intends to hold them personally liable for their conduct. Would you please let me know as to whether your law firm represents the members of the Board individually and/or will accept service of process on their behalf. Based upon the [CC&Rs] we believe that the director exceptions to immunity from personal liability are applicable." Sahl did not respond to Goldman's letter.

¶7 The following week, an attorney from Sahl's law firm contacted the State Bar's ethics hotline, asking about the ethical propriety of Goldman's request that Sahl "cease and desist" advocacy on behalf of the Association and also suggesting that the Association did not need representation. Notes from that conversation indicate the State Bar advised that Goldman's conduct appeared "to be a violation of the spirit if not the letter of the rules," and the attorney suggested he would consider filing a bar charge.

¶8 After the beginning of the new year, the tension between the Association and the Resort escalated. On January 5, 2017, the Association sent the villa owners a notice of an "Executive Board Workshop to Review Issues of Contemplated Litigation." The same day, Goldman, again representing that he was Nolan's attorney, sent a letter to Sahl expressing concerns about the notice, asserting Nolan's belief that litigation would be detrimental to the Association and the villa owners, and asking whether any Association fees were used in connection with the workshop or attorney's fees. Goldman, noting that Sahl did not respond to his first letter, stated: "it appears that the Association is desirous of litigation rather than an amicable resolution of issues."

¶9 Sahl responded in a letter the next day (the "January 6 Letter") accusing Goldman of being "patently misleading" by presenting himself as the attorney of a singular villa owner without disclosing that he represented the Resort and that Nolan was Hinz's long-time significant other. Sahl also noted that the Association was "already aware of several actions taken against unit owners within the Association to ‘curtail, limit or end the unit owners’ ability to utilize CopperWynd’ " and that "[Goldman's] attempt to dissuade [his] representation and leave the Association without legal counsel is entirely inconsistent with ethical requirements." Sahl informed Goldman that his firm had consulted with the ethics hotline for the State Bar and believed it had an obligation to report Goldman's demand that the firm abandon its advocacy on behalf of the Association. He further stated that despite what appeared to be Nolan's position that the Association should not have representation, "in the event of litigation, the Association will vigorously defend its actions and positions and will seek an award of attorney's fees," although he hoped it would not be necessary.

¶10 Goldman responded to Sahl that because of the Association's ongoing efforts in opposition to the Resort, the Resort was demanding that the Association's entire board resign, there be an election of a new board—in which no existing member could run—and that the Resort's attorney must be present at any meeting. Goldman wrote "that absent compliance with the Resort's demands, the Resort would issue a moratorium on membership in the Resort by future Villa owners, notify parties with current listings for the sale of Villa units about the moratorium," and "immediately take such other action as [the Resort] must do to protect itself from the conduct of the Association." The following day, Sahl filed a bar charge³ against Goldman, reporting Goldman's request that Sahl cease his representation and Goldman's alleged misrepresentations.

¶11 The Resort followed through with its threat by imposing a moratorium on membership on January 16, 2017. Goldman notified listing agents of the moratorium on membership for any new purchasers and sent letters to villa owners informing them of the moratorium and that "the Association, through its legal counsel, further exacerbated and escalated the situation and actually threatened to sue CopperWynd Resort on January 11, 2017."

¶12 Sahl responded...