Safeway Ins. Co., Inc. v. Guerrero

• Decision Date: 27 January 2004
• Docket Number: No. 1 CA-CV 02-0661.,1 CA-CV 02-0661.
• Citation: 83 P.3d 560,207 Ariz. 82
• Parties: SAFEWAY INSURANCE COMPANY, INC., a foreign corporation, Plaintiff-Appellant, v. Peter A. GUERRERO, individually, Peter A. Guerrero, P.C., an Arizona professional corporation; Charles D. Roush, individually, Charles D. Roush, P.C., an Arizona professional corporation; and Roush, McCracken, Guerrero & Miller, Attorneys at Law, a partnership of professional corporations, Defendants-Appellees.
• Court: Arizona Court of Appeals

83 P.3d 560

207 Ariz. 82

SAFEWAY INSURANCE COMPANY, INC., a foreign corporation, Plaintiff-Appellant, v. Peter A. GUERRERO, individually, Peter A. Guerrero, P.C., an Arizona professional corporation; Charles D. Roush, individually, Charles D. Roush, P.C., an Arizona professional corporation; and Roush, McCracken, Guerrero & Miller, Attorneys at Law, a partnership of professional corporations, Defendants-Appellees.

No. -0661.

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

January 27, 2004.

Parrillo, Weiss & O'Halloran By Ronald E. Huser, Tempe, Attorneys for Plaintiff-Appellant.

Turley, Swan & Childers, P.C. By Kent E. Turley, Phoenix, Attorneys for Defendants-Appellees.

OPINION

BARKER, Judge.

¶ 1 If a lawyer allegedly negotiates a Damron/Morris¹ agreement in violation of the permissible boundaries for such agreements, is that lawyer immune as a matter of law from a tort claim for intentional interference with contractual relations? Our answer to that question is "No."

¶ 2 The thrust of this lawsuit is an insurer's claim that lawyers representing a third-party plaintiff stepped outside the legal boundaries for Damron/Morris agreements and purposefully implemented a scheme to "manufacture" a bad faith claim in order to generate a multi-million dollar recovery instead of collecting on a $15,000 motor vehicle policy. For the reasons that follow, we reverse the trial court's grant of summary judgment on this claim.

I. Pertinent Facts and Procedural History

¶ 3 Safeway Insurance Company, Inc. ("Safeway") appeals from the summary judgment granted by the superior court on its claim of intentional interference with contractual relations. We view the facts in a light most favorable to the party, Safeway, against whom the summary judgment was granted. Hartford Accident & Indem. Co. v. Federal Ins. Co., 172 Ariz. 104, 107, 834 P.2d 827, 830 (App.1992). We have dealt with related aspects of this case, as we discuss below, in Himes v. Safeway Insurance Company, 205 Ariz. 31, 66 P.3d 74 (App.2003). We take judicial notice of that opinion. The parties have also asked that we take judicial notice of the Order and Opinion of the federal district court in Safeway Insurance Company v. Botma, No. CIV-00-553-PHX RCB (D.Ariz. Mar. 7, 2003), appeal docketed, No. 03-16020 (9th Cir. May 22, 2003) ("Botma I"). We agree with this request and draw upon that decision in our recitation and understanding of the facts pertinent to this case.²

¶ 4 This action has its genesis in an automobile accident in which Holly Castano was severely injured. Steven Botma ("Botma") was the driver of the vehicle. Patrica Himes ("Himes") is the mother and guardian of Holly Castano. Himes sued Botma for his alleged negligence in causing Holly Castano's injuries.

¶ 5 Appellees Peter A. Guerrero and Charles D. Roush are attorneys whose professional corporations are members of the appellee law firm, Roush, McCracken, Guerrero & Miller (collectively "Roush"). Roush represented Himes in her suit against Botma. Botma is a Safeway insured. His policy with Safeway provided coverage limits of $15,000 per person with a total of $30,000 per accident.

¶ 6 By any account Holly Castano's injuries were extremely severe. As we stated in Himes:

Without attempting to fully describe her injuries, we note that Castano suffered a diffuse axonal injury to her brain which resulted in spastic quadreparesis. She has no use of her left arm or leg. She can slightly move her right leg and has limited use of her right arm. She has the ability to communicate but suffers distorted long term and short term memory problems. Some evidence put the cost of her past and projected medical care at $7 million.

205 Ariz. at 35, ¶ 2, 66 P.3d at 78.

¶ 7 Plainly, the difference between the extent of the injuries (past and projected medical costs in excess of $7 million) and the extent of the insurance coverage ($15,000 per person) is dramatic. To generalize,³ Himes (through Roush) made a settlement offer that included a demand of policy limits in the amount of $15,000. Safeway contended that it accepted the offer. Himes, however, withdrew the offer. Himes contended that the offer was not accepted by Safeway. The issue of whether the case was in fact settled was tried to a jury. The jury agreed with Himes and, in a memorandum decision, we upheld that decision. Himes v. Safeway Ins. Co., 205 Ariz. 31, 66 P.3d 74 (Ariz.App. 2003) ("Himes Memorandum").

¶ 8 After the jury determined that there had in fact been no policy limits settlement, Botma and Himes entered into a Damron/Morris agreement for $12 million on the theory that Safeway had breached its duty of giving equal consideration to Botma's interest with regard to the policy limits demand. At that point, the litigation took two different directions. The reasonableness of the amount was approved by the state trial judge and appealed to this court. We reversed that decision in Himes. The question of whether there was a bad faith failure to give equal consideration to Botma's interest was raised in the federal district court action. The federal district court found that it was Himes who had "backed out" of the policy limits settlement discussions. Botma I, slip op. at 45. It found no breach of any duty on the part of Safeway. Id. It noted that "[w]hether an actual `settlement' occurred is not material to the fact that there were clearly good faith negotiations proceeding throughout this period, and that the parties were moving in concert toward a resolution." Id. The federal district court's judgment, granting Safeway's motion for summary judgment on the bad faith claim, is presently on appeal.

¶ 9 As described below, it is Roush's alleged conduct, with regard to the Damron/Morris agreement and eventual bad faith claim, that is the subject of this action. While the state and federal court proceedings referenced above were pending, Safeway filed a separate claim against Roush for intentional interference with contractual relations. Safeway alleged that Roush realized that under the $15,000 per person policy in place for Botma, Roush would only be able "to collect a very modest fee." Accordingly, as the claim goes, Roush "devised a scheme that would allow them [the lawyers] to make a substantially larger fee."⁴ The alleged scheme was that Roush "manufactured through their misconduct in settlement negotiations" a bad faith claim that would induce Botma to enter into a Damron/Morris agreement and assign his claims against Safeway to Himes. A necessary consequence of the alleged scheme "was to intentionally interfere with the contract" between Safeway and Botma.

¶ 10 Roush's alleged misconduct is set forth in detail in Part VI(B) of this opinion. Infra at ¶¶ 46-51. In short, the claim is that the settlement offer was made by Roush and then withdrawn by Roush (after Safeway believed it had accepted the offer) for the purpose of manufacturing a bad faith claim by contending that Safeway did not give equal consideration to the settlement offer.

¶ 11 Roush filed a motion for summary judgment with regard to Safeway's claim.⁵ Roush asserted that Safeway's theory was "inventive but frivolous." Roush alleged that to allow Safeway's claim to proceed would be contrary to Arizona law allowing insureds to enter into Damron/Morris agreements. Roush further claimed that Safeway was attempting to "obstruct an insured's exercise of this right" by seeking liability against counsel for "pursuing and agreeing to a Damron/Morris agreement." Finally, Roush claimed immunity from suit asserting that claims against lawyers in such situations are limited to claims of malicious prosecution and wrongful institution of civil proceedings ("WICP").

¶ 12 The trial judge agreed with Roush. She granted the motion for summary judgment. Without elaborating, she indicated that "based on the undisputed facts, plaintiff's complaint fails as a matter of law." Safeway appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(B) (2003).

II. The Issues

¶ 13 We review de novo a trial court's ruling that a party is entitled to summary judgment as a matter of law. Collette v. Tolleson Unified Sch. Dist. No. 214, 203 Ariz. 359, 361, ¶ 2, 54 P.3d 828, 830 (App.2002). We view the issues in this fashion:

(1) As a matter of law, are lawyers immune from suit for intentional interference with contractual relations?

(2) As a matter of law, can there be a claim for intentional interference with contractual relations when the interference at issue was made to effectuate a Damron/Morris agreement but constitutes conduct allegedly outside the permissible boundaries for such agreements?

(3) Is there a question of fact in this case that precludes entry of summary judgment?

After addressing some foundational principles, we take each issue in turn.

III. The Tort of Intentional Interference with Contractual Relations

¶ 14 As described in Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 493, ¶ 74, 38 P.3d 12, 31 (2002), the tort of intentional interference with contractual relations has five elements:

A prima facie case of intentional interference requires: (1) existence of a valid contractual relationship, (2) knowledge of the relationship on the part of the interferor, (3) intentional interference inducing or causing a breach, (4) resultant damage to the party whose relationship has been disrupted, and (5) that the defendant acted improperly.

The tort has been described by our supreme court as "long recognized" in Arizona. Id.; see also Wagenseller v. Scottsdale Mem'l Hosp., 147 Ariz. 370, 386-88, 710 P.2d 1025, 1041-43 (1985), superceded by A.R.S. §§ 23-1501 to -1502 (Supp.2003). In briefly recounting the history and application of the tort, the Arizona Supreme Court noted:

In Meason v. Ralston Purina Co., 56 Ariz. 291, 107 P.2d 224 (1940), we recognized a cause of action for

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