Marquette Venture Partners Ii v. Leonesio

• Decision Date: 03 May 2011
• Docket Number: No. 1 CA–CV 09–0166.,1 CA–CV 09–0166.
• Citation: 227 Ariz. 179,254 P.3d 418,607 Ariz. Adv. Rep. 17
• Parties: MARQUETTE VENTURE PARTNERS II, L.P., a Delaware limited partnership; and MVP II Affiliates Fund, L.P., a Delaware limited partnership, Plaintiffs/Appellants/Cross–Appellees,v.Frank M. LEONESIO and Melissa Leonesio, husband and wife; John J. Leonesio and Robin Leonesio, husband and wife; Stephen J. Currier and Susanne Currier, husband and wife; Richard A. Intorcio and Marilyn Intorcio, husband and wife, Defendants/Appellees/Cross–Appellants.
• Court: Arizona Court of Appeals

227 Ariz. 179

254 P.3d 418

607 Ariz. Adv. Rep. 17

MARQUETTE VENTURE PARTNERS II, L.P., a Delaware limited partnership; and MVP II Affiliates Fund, L.P., a Delaware limited partnership, Plaintiffs/Appellants/Cross–Appellees,

v.Frank M. LEONESIO and Melissa Leonesio, husband and wife; John J. Leonesio and Robin Leonesio, husband and wife; Stephen J. Currier and Susanne Currier, husband and wife; Richard A. Intorcio and Marilyn Intorcio, husband and wife, Defendants/Appellees/Cross–Appellants.

No. 1 CA–CV 09–0166.

Court of Appeals of Arizona, Division 1, Department T.

May 3, 2011.

Osborn Maledon, P.A. by Colin F. Campbell, Thomas L. Hudson, Jean–Jacques Cabou, Sharad H. Desai, Phoenix, Attorneys for Plaintiffs/Appellants/Cross–Appellees.Quarles & Brady, LLP by Lonnie J. Williams, Jr., Carrie M. Francis, Phoenix, Attorneys for Defendants/Appellees/Cross–Appellants.

OPINION

PORTLEY, Judge.

¶ 1 The plaintiffs, Marquette Venture Partners II, L.P., and MVP II Affiliates Fund, L.P. (collectively “Marquette”), challenge Frank Leonesio's (“Leonesio”) ¹ cross-appeal claims. Specifically, Marquette argues that Arizona Revised Statutes (“A.R.S.”) section 12–2102(C) (2003) precludes our review of the sufficiency of the evidence to support a jury verdict when an Arizona Rule of Civil Procedure (“Rule”) 50(a) ² motion was not followed by a post-verdict Rule 50(b) motion. Because we agree, we grant Marquette's motion to partially dismiss the cross-appeal.³

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Defendants and Marquette were owners of Q Fitness Clubs, Inc. (“Q Clubs”). In 1999, Q Clubs agreed to merge with Fitness Holdings, Inc. (“FHI”), which operated 24 Hour Fitness. Following the merger, FHI asserted $45.6 million in damages against Q Clubs' owners and sought to recover an additional $5 million that had been placed in an escrow account for indemnification. Marquette and Defendants entered into a contract to fund litigation arising out of FHI's claims. After nearly three years of litigation, the case settled on the eve of trial. Marquette disputed the distribution of the settlement proceeds and sued Defendants alleging: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) fraud in the inducement; (4) conversion; (5) fraudulent transfer; (6) constructive trust; (7) unjust enrichment; and (8) an equitable lien. Marquette specifically alleged the following claims against Frank Leonesio and Kevin DeAngelis: (1) declaratory judgment; (2) breach of agency agreement; and (3) breach of fiduciary duty. Marquette also sought punitive damages against Frank Leonesio.

¶ 3 Defendants filed unsuccessful motions for summary judgment, and the case proceeded to trial. During trial, Defendants filed unsuccessful Rule 50(a) motions for judgment as a matter of law. After the jury found in favor of Marquette on its breach of fiduciary duty claim against Leonesio, it awarded Marquette compensatory and punitive damages. The jury found in favor of Defendants on the remaining claims. Leonesio did not file a post-verdict Rule 50(b) motion for judgment as a matter of law.

¶ 4 Marquette appealed, and Leonesio filed a cross-appeal. He argued that: (1) Marquette's breach of fiduciary duty claim was barred by the statute of limitations; (2) he was entitled to attorneys' fees; and (3) the jury's punitive damage award was excessive.

DISCUSSION

¶ 5 Marquette filed a motion to partially dismiss Leonesio's cross-appeal pursuant to ARCAP 6 and argues that certain cross-appeal issues are outside the scope of our jurisdiction. Specifically, Marquette argues that § 12–2102(C) precludes us from exercising appellate jurisdiction to consider the cross-appeal claims that challenge the sufficiency of the evidence.

¶ 6 We independently review whether we have jurisdiction to address an appellate issue. Engel v. Landman, 221 Ariz. 504, 508, ¶ 10, 212 P.3d 842, 846 (App.2009). Appellate jurisdiction is limited by statute. Eaton v. Unified Sch. Dist. No. 1, 122 Ariz. 391, 392, 595 P.2d 183, 184 (App.1979). Section 12–2101 (2003) specifies when the court may take jurisdiction, and § 12–2102(A) includes the requirement that we “review any intermediate orders involving the merits of the action and necessarily affecting the judgment, and all orders and rulings assigned as error, whether a motion for a new trial was made or not.”

I.

¶ 7 Section 12–2102(C), however, provides “an exception” to the broad scope of review granted under § 12–2102(A). Lewis v. S. Pac. Co., 105 Ariz. 582, 583, 469 P.2d 67, 68 (1970); see Acuna v. Kroack, 212 Ariz. 104, 111 n. 9, ¶ 27, 128 P.3d 221, 228 n. 9 (App.2006); Gabriel v. Murphy, 4 Ariz.App. 440, 442, 421 P.2d 336, 338 (1966) (“[A] motion for new trial must be made before the scope of the appeal may be enlarged to include the sufficiency of the evidence to sustain the verdict or judgment.”). Specifically, subsection C provides that we cannot consider the sufficiency of the evidence on appeal from a jury trial “unless a motion for a new trial was made.” We can, however, consider questions of law and evidentiary rulings “regardless of whether they were presented to the lower court in a motion for a new trial.” Hays v. Richardson, 95 Ariz. 263, 267, 389 P.2d 260, 263 (1964).

¶ 8 Although Leonesio filed motions for summary judgment and Rule 50(a) motions before the verdict,⁴ he did not file a motion for new trial or any other post-verdict motions for judgment as a matter of law. He argues that his Rule 50(a) motions sufficiently preserved the issues under § 12–2102(C).

¶ 9 Our supreme court has stated that a Rule 50(b) motion satisfies § 12–2102(C)'s “motion for a new trial” requirement. S.H. Kress & Co. v. Evans, 70 Ariz. 175, 177, 218 P.2d 486, 487 (1950). We have not, however, considered whether a Rule 50(a) motion is also sufficient.

¶ 10 Rule 50(a)(2) allows a party to file for judgment as a matter of law prior to submitting the case to the jury. We have explained that Rule 50(a) “is based upon the premise that the claimed omission in proof might be cured by a reopening of plaintiff's case if the trial court finds merit to the motion.” Chavez v. Tolleson Elementary Sch. Dist., 122 Ariz. 472, 476, 595 P.2d 1017, 1021 (App.1979). In addition, Rule 50(a) “is conceived as a device to save the time and trouble involved in a lengthy jury determination when there is a clear insufficiency of evidence on one side of the case or the other.” 9B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2521 (3d ed. 2010).

¶ 11 Because a Rule 50(a) motion is a prerequisite for a Rule 50(b) motion,⁵ a party must first make a Rule 50(a) motion before seeking judgment as a matter of law under Rule 50(b). La Bonne v. First Nat. Bank of Ariz., 75 Ariz. 184, 189, 254 P.2d 435, 438–39 (1953); Standard Chartered PLC v. Price Waterhouse, 190 Ariz. 6, 27, 945 P.2d 317, 338 (App.1996); Tortu v. Las Vegas Metro. Police Dept., 556 F.3d 1075, 1083 (9th Cir.2009) (interpreting Federal Rules of Civil Procedure 50(a) and 50(b)).⁶

¶ 12 A similar question was considered in Unitherm Food Systems, Inc. v. Swift–Eckrich, Inc., where the U.S. Supreme Court held that a pre-verdict Federal Rule of Civil Procedure (“Federal Rule”) 50(a) motion that was not followed by a post-verdict Federal Rule 50(b) motion was inadequate to preserve a sufficiency of the evidence challenge on appeal. 546 U.S. 394, 407, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006). The Court stated that the “ ‘requirement of a timely application for judgment after verdict is not an idle motion’ because it ‘is ... an essential part of the rule, firmly grounded in principles of fairness.’ ” Id. at 401, 126 S.Ct. 980 (quoting Johnson v. New York, N.H. & H.R. Co., 344 U.S. 48, 53, 73 S.Ct. 125, 97 L.Ed. 77 (1952)) (alteration in original). As the Court explained, Federal Rules 50(a) and 50(b) are substantively different; Federal Rule 50(b) allows the court to enter judgment as a matter of law or order a new trial, but Federal Rule 50(a) only allows the court to enter judgment as a matter of law. Id. at 405, 126 S.Ct. 980. Moreover, Federal Rule 50(a) is permissive—the trial court is not required to grant the motion. Id. (“[T]he district courts are, if anything, encouraged to submit the case to the jury, rather than granting such motions.”). Similarly, we have stated that “[i]t is undisputed that when considering a Rule 50 motion a ‘trial judge is not required to grant judgment as a matter of law even in a case in which it has the power to do so.’ ” Chalpin v. Snyder, 220 Ariz. 413, 419, ¶ 23, 207 P.3d 666, 672 (App.2008) (quoting 9A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2533, at 318 (2d ed.1994)).

¶ 13 In the absence of a prior decision from our courts, we find the U.S. Supreme Court's holding in Unitherm persuasive because “uniformity in interpretation of our rules and the federal rules is highly desirable.” Orme Sch. v. Reeves, 166 Ariz. 301, 304, 802 P.2d 1000, 1003 (1990). Rule 50(a) and Rule 50(b) are substantively different. Unlike Rule 50(b) motions which are made after the verdict and, therefore, analogous to a motion for a new trial, see Rule 59; Rule 50(a) motions are made before the verdict is granted. Moreover, it is difficult to consider Rule 50(a) “a motion for a new trial” under § 12–2102(C) when, by definition, the motion must be made prior to a jury verdict and does not allow the trial court to grant a new trial, while Rule 50(b) specifically allows the court to grant a new trial. Consequently, we hold that a Rule 50(a) motion is insufficient to satisfy the jurisdictional requirement of § 12–2102(C).

¶ 14 Leonesio, however, asserts that the Arizona Rules of Civil Procedure “shall be construed to secure the just, speedy, and inexpensive determination of every action,” Rule 1, and our holding may create a trap for the unwary. Even if true, Justice Stevens has stated that “it may be unfair or even an abuse...