Red Mountain Med Spa, L.L.C. v. Az NP Health Servs., LLC, 1 CA-CV 16-0251

• Decision Date: 23 October 2018
• Docket Number: No. 1 CA-CV 16-0251,1 CA-CV 16-0251
• Parties: RED MOUNTAIN MED SPA, L.L.C., Plaintiff/Appellee, v. AZ NP HEALTH SERVICES, LLC, et al., Defendants. CHRISTOPHER B. INGLE, Appellant.
• Court: Arizona Court of Appeals

RED MOUNTAIN MED SPA, L.L.C., Plaintiff/Appellee, v. AZ NP HEALTH SERVICES, LLC, et al., Defendants.CHRISTOPHER B. INGLE, Appellant.

No. 1 CA-CV 16-0251

ARIZONA COURT OF APPEALS DIVISION ONE

October 23, 2018

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2013-055010

The Honorable Susan M. Brnovich, Judge

AFFIRMED

COUNSEL

Sherman & Howard LLC, Phoenix

By Michael W. Wright, Gabriel A. Peraza

Counsel for Plaintiff/Appellee

May Potenza Baran & Gillespie PC, Phoenix

By Christopher B. Ingle, Michelle Mozdzen

Counsel for Appellant Ingle

MEMORANDUM DECISION

Presiding Judge James P. Beene delivered the decision of the Court, in which Judge Michael J. Brown and Judge James B. Morse Jr. joined.

BEENE, Judge:

¶1 Appellant Christopher B. Ingle challenges a sanctions award stemming from the denial of a motion to disqualify opposing counsel from representing Appellee Red Mountain Med Spa, L.L.C. ("Red Mountain") at trial. We affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Red Mountain sued AZ NP Health Services and Steve and Loretta Hayko (collectively "Defendants") in 2013 and alleged, among other things, that Defendants had misappropriated Red Mountain confidential and proprietary information (the "Red Mountain Lawsuit"). AZ NP counterclaimed alleging tortious interference with its business relations and unfair business practices. The superior court granted summary judgment for Red Mountain on AZ NP's counterclaims and set trial on Red Mountain's claims for January 4-7, 2016.

¶3 On December 14, 2015, less than a month before trial, Defendants, through Ingle, moved to disqualify Red Mountain's counsel, Sherman & Howard LLC ("S&H"), from continuing to represent Red Mountain. Defendants alleged that Pamela Andow ("Andow"), a witness who they contended had "worked at AZ NP," had taken "a lot of AZ NP's proprietary information," and that S&H was "using the information . . . obtained from Andow against AZ NP in this case" in violation of Arizona Supreme Court Rule 42, Rules of Professional Conduct, Ethical Rules ("ER") 1.2 and 4.2. Defendants also contended Andow had an "ongoing relationship" with AZ NP because it had disclosed her as a witness and intended to call her to testify at trial. Defendants further noted that Andow had retained S&H to file suit to dissolve another company known as Improve Aesthetics after she "terminated her relationship with AZ NP" in August 2015 (the "Improve Aesthetics Lawsuit").

¶4 Red Mountain contended in response that Andow only worked with AZ NP as an independent contractor from September 2014 through May 2015, at which time she and Mr. Hayko formed Improve Aesthetics. S&H acknowledged representing Andow in the Improve Aesthetics Lawsuit but denied that it had any communications with Andow relating to the Red Mountain Lawsuit. S&H also contended that it obtained the allegedly confidential information through legitimate means. On these bases, Red Mountain argued Defendants filed the motion to disqualify "without substantial justification, with the intent to harass Red Mountain, and to needlessly increase the cost of litigation on the eve of trial" and requested sanctions under Arizona Rules of Civil Procedure ("Rule") 11 or Arizona Revised Statutes ("A.R.S.") section 12-349.

¶5 The superior court denied the motion to disqualify in an unsigned minute entry on December 23, 2015. The court found that Andow "was not a former employee" of AZ NP and that she did not start working with AZ NP until after the events that led to the Red Mountain Lawsuit. The court also granted Red Mountain's sanctions request, ordered Red Mountain to submit a fee affidavit and proposed form of order by January 9, 2016, and ordered that "any objection to the affidavit shall be filed no later than January 19, 2016."

¶6 Red Mountain submitted a fee application and proposed form of judgment on January 8, 2016. Five days later, Red Mountain filed an amended fee application and proposed form of judgment in which it specifically requested that the court enter sanctions against both Defendants and Ingle. Defendants responded on January 20, 2016, challenging the basis of the sanctions award and objecting to the amount of fees requested. On January 22, 2016, the superior court entered a final Rule 54(b) judgment denying the motion to disqualify and imposing $5,000 in sanctions against Defendants and Ingle jointly and severally (the "Sanctions Judgment.").

¶7 Defendants and Ingle filed a timely motion for new trial on February 8, 2016. Citing then-Rule 59(l), now codified as Rule 59(d), Defendants and Ingle asked the court "for an order vacating the judgment . . . ." They contended they were not given "an opportunity to respond to [the] Amended Application for Costs and Fees, or its Amended Proposed form of Judgment, before the Court entered said judgment" because Red Mountain had mailed the documents as opposed to using the electronic service tool available in the Maricopa County Superior Court TurboCourt system. They also contended the amended application and proposed form of judgment were untimely.

¶8 The superior court denied the motion for new trial in a March 31, 2016 unsigned minute entry, finding that Defendants were given an opportunity to, and did, address Red Mountain's sanctions arguments. Defendants, but not Ingle, filed a notice of appeal on April 4, 2018, challenging this ruling. Defendants and Ingle then moved the superior court to set an amount for a supersedeas bond on April 19, 2016.

¶9 On May 19, 2016, Defendants and Ingle filed an amended notice of appeal challenging the Sanctions Judgment. The next day—the day Ingle was scheduled to sit for a judgment debtor examination—Red Mountain notified the court that the Sanctions Judgment had been satisfied in full. The court then denied Defendants' motion to set an amount for a supersedeas bond as moot.

¶10 On November 15, 2017, following a lengthy stay due to ongoing bankruptcy proceedings, this Court determined that the April 4, 2016 notice of appeal and the May 19, 2016 amended notice of appeal were premature. This Court ordered Defendants and Ingle to apply for a signed order denying the motion for new trial and, once that order was obtained, file a new notice of appeal designating "the judgment and/or order being appealed as well as who is appealing." The superior court entered a signed order denying the motion for new trial on January 5, 2018. Ingle, but not Defendants, filed a timely notice of appeal challenging both the order and the Sanctions Judgment.

DISCUSSION

I. This Court Has Jurisdiction over Claims For Which Appellate Notice Was Filed and Ingle Was Aggrieved.

¶11 Before addressing the merits, we must determine whether we have jurisdiction to resolve the issues Ingle raises on appeal. Ghadimi v. Soraya, 230 Ariz. 621, 622, ¶ 7 (App. 2012). A party may not appeal from a judgment or order unless he is "aggrieved" by the judgment or order. ARCAP 1(d); Chambers v. United Farm Workers Org. Comm., AFL-CIO, 25 Ariz. App. 104, 107 (App. 1975). One is "aggrieved" by a judgment or order if it denies him some personal or property right. Gries v. Plaza del Rio Mgmt. Corp., 236 Ariz. 8, 12, ¶ 14 (App. 2014).

¶12 We have previously held that an attorney may appeal from a judgment imposing sanctions against him. Wieman v. Roysden, 166 Ariz. 281, 284 (App. 1990). The parties agree on appeal, however, that Ingle paid the remaining balance of the judgment in May 2016. Payment of a judgment can preclude an appeal if the payment is voluntary. Flood Control Dist. of Maricopa Cty. v. Paloma Inv. Ltd. P'ship, 237 Ariz. 322, 326, ¶ 13 (App. 2015). Payments made to avoid collection efforts outside of a settlement or compromise agreement, however, are generally considered to be compulsory, not voluntary. Webb v. Crane Co., 52 Ariz. 299, 320 (1938); Freeman v. Wintroath Pumps-Div. of Worthington Corp., 13 Ariz. App. 182, 183 (App. 1970).

¶13 The timing of Ingle's payment—made on the day he was to sit for a debtor's examination—suggests he chose to satisfy the judgment to avoid further collection efforts. Satisfaction of the Sanctions Judgment thus did not preclude his right to appeal it. See Del Rio Land, Inc. v. Haumont, 110 Ariz. 7, 10 (App. 1973) ("One against whom a judgment is entered, if he fails to satisfy it, must expect to see his property seized and sold at a sacrifice, and it is difficult to conceive how his payment of the judgment can give rise to any estoppel against his seeking to avoid it for error.") (quoting Freeman on Judgments, vol. 2, 5^th ed., p. 2410, § 1165).

¶14 Ingle also challenges unspecified rulings that he contends allowed Red Mountain to introduce "information and documents" at trial that he says were not properly disclosed. Ingle's notice of appeal did not challenge any part of the judgment resulting from the trial on Red Mountain's claims; moreover, he was not a party to the trial, nor was he aggrieved by the result. He therefore cannot raise those issues. See, e.g., Matter of Gubser, 126 Ariz. 303, 306 (1980) ("Appellant can appeal from only that part of the judgment by which she is aggrieved."); MCA Fin. Group, Ltd. v. Enter. Bank & Tr., 236 Ariz. 490, 494, ¶ 8 (App. 2014) ("Generally, a person who is not a party to an action is not aggrieved and cannot appeal from findings adverse to him."). We thus proceed to consider the Sanctions Judgment and the order denying his motion to disqualify that precipitated it.

II. The Superior Court Did Not Abuse Its Discretion in Denying the Motion to Disqualify S&H.

¶15 Ingle contends the trial court erred in denying the motion to disqualify, reiterating his contentions that S&H violated ERs 1.2(d) and 4.2. We review the denial of a motion to disqualify counsel for an abuse of discretion. Simms v. Rayes, 234 Ariz. 47, 49, ¶ 8 (App. 2014).

¶16 ER 1.2(d) provides:

A lawyer

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