Hall v. Smith

Decision Date08 February 2007
Docket NumberNo. 2 CA-CV 2006-0137.,2 CA-CV 2006-0137.
Citation152 P.3d 1192,214 Ariz. 309
PartiesMitchell HALL, Counterclaimant/Appellant, v. Sandra SMITH, Counterdefendant/Appellee.
CourtArizona Court of Appeals

Law Office of Alan N. Ariav, PC, by Alan N. Ariav, Phoenix, Attorneys for Counterclaimant/Appellant.

Goering, Roberts, Rubin, Brogna, Enos & Treadwell-Rubin, P.C., by Christopher L. Enos and Kristin A. Green, Tucson, Attorneys for Counterdefendant/Appellee.


PELANDER, Chief Judge.

¶ 1 Appellant Mitchell Hall appeals from a summary judgment entered in favor of appellee Sandra Smith on Hall's defamation counterclaim against her after Smith brought an action against Hall and others for wrongful termination. The defamation counterclaim arose from a letter Smith had written during the course of this litigation to the chief executive officer (CEO) of the parent company of the Arizona subsidiary for which both Hall and Smith worked. Finding that the absolute judicial privilege applied to the letter, the trial court granted summary judgment in favor of Smith. Hall argues on appeal the trial court improperly overlooked principles of corporate law and wrongly applied the privilege. We disagree and, therefore, affirm.


¶ 2 On appeal from a summary judgment, we view all facts of record and reasonable inferences therefrom in the light most favorable to the party against whom judgment was entered. Bothell v. Two Point Acres, Inc., 192 Ariz. 313, ¶ 2, 965 P.2d 47, 49 (App. 1998). In 1995, CIGNA Health Plan of Arizona, Inc. (CIGNA AZ) eliminated Smith's position within that company. She subsequently filed this wrongful termination action against her employer (CIGNA AZ), Dr. Gilbert Burkel, its Tucson Medical Director, and Hall, its Executive Director. Smith alleged their elimination of her position was a pretext to terminate her employment. Smith further alleged she actually had been terminated for "refus[ing] to administer narcotic drugs and other controlled substances to patients who . . . she concluded were seeking to obtain such by fraud" and for "report[ing] concerns about funds for patient care which were being diverted by . . . Hall for his own personal purposes."

¶ 3 After nearly eight years of litigation, in July 2004, Smith wrote a letter to Edward Hanway, the CEO of CIGNA Corporation (CIGNA), the parent company of CIGNA AZ. In her letter, Smith stated, inter alia, she had filed a wrongful termination action against CIGNA AZ and outlined the allegations of her complaint. She also said that, after "significant disclosure" in the case, "it [was] exceedingly clear that Hall and colleagues were indeed `diverting' millions of dollars annually" and that "large portions of these funds were diverted directly into the refurbishing of a former Tucson restaurant into what was intended to be a rather elaborate gay bar." She described this "gay bar" as not "just any old gay bar, but perhaps one with a heavy flavor of high-tech kinkiness guaranteed to be abhorrent to CIGNA clients and shareholders alike." She also suggested that Hall had "socialized . . . over the years" with "the good old judge" who was originally assigned to the case. Finally, she suggested "direct negotiations" between herself and Hanway "in order to resolve this matter as promptly as possible."

¶ 4 Although Smith sent the letter directly to Hanway by certified mail, Hanway never actually saw it. Rather, an executive secretary at CIGNA forwarded it through the executive office of the president to CIGNA's legal department. After several people in that department read the letter, it was sent to counsel for CIGNA AZ, who in turn forwarded it to Hall's attorney. Based on that letter, Hall filed a counterclaim for defamation, alleging that "Smith [had made] numerous false and defamatory statements about [him]" in the letter and that, "[b]ecause the letter was written to a third party, . . . Smith [wa]s not entitled to any qualified or absolute privilege of judicial immunity."

¶ 5 Smith moved to dismiss Hall's counterclaim, arguing that her letter was covered by the absolute judicial privilege. Hall responded to the motion, but Smith eventually withdrew it after her attorneys apparently concluded that it "[wa]s not likely to succeed" at that point. In response to two motions for summary judgment Hall filed, Smith also moved for partial summary judgment, again arguing, inter alia, that the letter was privileged. The trial court denied both parties' motions, finding "genuine issues of material fact remain[ed]."

¶ 6 Shortly before trial was to begin on both Smith's wrongful termination claim and Hall's defamation counterclaim, Smith settled her case with CIGNA AZ, leaving only the defamation claim for trial.1 During trial, Hall's counsel informed the court that he had newly discovered evidence showing Hall had never embezzled money from CIGNA AZ. Smith objected to the voluminous, new records based on untimely disclosure, and the trial court declared a mistrial on that basis. Thereafter, both parties again moved for summary judgment, relying on not only the evidence before the court in the previous motions but also evidence presented at trial. In a thorough and detailed ruling, the trial court granted Smith's motion, finding her letter to Hanway covered by the absolute judicial privilege. This appeal followed.

I. Absolute judicial privilege

¶ 7 In several related arguments, Hall contends the trial court erred in granting summary judgment in Smith's favor because it improperly applied the absolute judicial privilege. He maintains the privilege does not apply here because Smith sent her allegedly defamatory letter "to a non-party in the underlying litigation," the CEO of CIGNA AZ's parent corporation, which undisputedly is a separate corporate entity. "We review a trial court's grant of summary judgment de novo and independently determine whether a court's legal conclusions were correct." Ledvina v. Cerasani, 213 Ariz. 569, ¶ 3, 146 P.3d 70, 71 (App.2006). In addition, "[w]hether a communication is privileged is a question of law for the court; we are not bound by the trial court's conclusions of law, which we review de novo." Johnson v. McDonald, 197 Ariz. 155, ¶ 2, 3 P.3d 1075, 1077 (App.1999); see also Green Acres Trust v. London, 141 Ariz. 609, 613, 688 P.2d 617, 621 (1984); Sobol v. Alarcon, 212 Ariz. 315, n. 2, 131 P.3d 487, 489 n. 2 (App.2006).

¶ 8 With respect to parties to court proceedings such as Smith, the Restatement (Second) of Torts (1977) describes the absolute judicial privilege as follows:

A party to a private litigation . . . is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding, or in the institution of or during the course and as a part of, a judicial proceeding in which he participates, if the matter has some relation to the proceeding.

Restatement (Second) Torts § 587;2 see also Johnson, 197 Ariz. 155, ¶ 12, 3 P.3d at 1078. The privilege applies to both attorneys and parties to litigation. See Green Acres, 141 Ariz. at 613, 688 P.2d at 621; Restatement §§ 586, 587. And, "[t]he defense is absolute in that the speaker's motive, purpose or reasonableness in uttering a false statement do not affect the defense." Green Acres, 141 Ariz. at 613, 688 P.2d at 621; see also Sobol, 212 Ariz. 315, ¶ 11, 131 P.3d at 490. The purpose of the privilege is to ensure "the fearless prosecution and defense of claims which leads to complete exposure of pertinent information for a tribunal's disposition." Green Acres, 141 Ariz. at 613, 688 P.2d at 621; see also Krouse v. Bower, 20 P.3d 895, 900 (Utah 2001).

¶ 9 Hall argues the privilege does not apply here. Relying on several California decisions (one of which was unpublished3), he argues "[i]t is black-letter law that defamatory statements made to a non-party in litigation are not protected by the absolute judicial privilege." But those cases rely on California's statutory definition of judicial privilege, codified at Cal. Civ.Code § 47(b) (2005). Absent any similar statute in Arizona, we find those cases inapplicable to whether communications to non-parties are protected by the privilege in this state.

¶ 10 In both Green Acres and Johnson, the absolute judicial privilege was found inapplicable to allegedly defamatory communications made to various non-parties (a newspaper reporter and some Arizona legislators). But because Arizona case law has not foreclosed the judicial privilege from possibly applying to a litigant's communications with non-parties, we must first determine what standard should be applied in resolving that issue. Restatement § 587 does not address the requisite relationship the recipient must have to the proceeding in order for the privilege to attach. The pertinent Arizona cases, however, provide some guidance on that issue.

¶ 11 In Green Acres, our supreme court stated, "both content and manner of extra-judicial communications must bear `some relation to the proceeding.'" 141 Ariz. at 614, 688 P.2d at 622, quoting Asay v. Hallmark Cards, Inc., 594 F.2d 692, 697 (8th Cir.1979).4 And, the court further stated, "the recipient of the extra-judicial communication [must] have some relationship to the proposed or pending judicial proceeding for the occasion to be privileged." Id. The court also cited with approval Troutman v. Erlandson, 286 Or. 3, 593 P.2d 793, 795 (1979), which "require[d a] recipient to have [a] `close or direct' relationship to the proceedings" for the privilege to apply. Green Acres, 141 Ariz. at 614, 688 P.2d at 622.

¶ 12 More recently, in Johnson, Division One of this court recognized as controlling law the Green Acres standard requiring that the recipient have some relationship to the proceeding. 197 Ariz. 155, ¶ 13, 3 P.3d at 1078-79. After examining several out-of-state cases involving communications to non-parties, the Johnson court concl...

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