Singh v. Malhotra

• Decision Date: 22 February 2018
• Docket Number: No. 1 CA-CV 17-0033,1 CA-CV 17-0033
• Parties: RAJEEV SINGH, Plaintiff/Appellant, v. RAKESH MALHOTRA, Defendant/Appellee.
• Court: Arizona Court of Appeals

RAJEEV SINGH, Plaintiff/Appellant, v. RAKESH MALHOTRA, Defendant/Appellee.

No. 1 CA-CV 17-0033

ARIZONA COURT OF APPEALS DIVISION ONE

February 22, 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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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. CV2014-010941

The Honorable Karen A. Mullins, Judge

REVERSED AND REMANDED

COUNSEL

Al Arpad, Esq., Phoenix

By Alexander R. Arpad

Counsel for Plaintiff/Appellant

Stinson Leonard Street, LLP, Phoenix

By Carrie M. Francis, Lonnie J. Williams, Jr

Counsel for Defendant/Appellee

MEMORANDUM DECISION

Judge Jon W. Thompson delivered the decision of the Court, in which Presiding Judge Kenton D. Jones and Judge Patricia A. Orozco¹ joined.

THOMPSON, Judge:

¶1 In this action, plaintiff/appellant Rajeev Singh (Singh) appeals from the trial court's partial grant of summary judgment, and its second judgment after a bench trial on the remaining claims, in favor of defendant/appellee Rakesh Malholtra (Malhotra). For the reasons set forth below, we reverse and remand for a new trial on all substantive claims, consistent with this decision.

FACTUAL AND PROCEDURAL HISTORY

¶2 This case concerns two separate matters and incorporates claims for conversion, intentional interference with contract (or contractual relationship), breach of fiduciary duty, and unjust enrichment pertaining to certain alleged assets of Saguaro Medical Associates, P.C. (Saguaro).

¶3 At all relevant times, Saguaro was an Arizona professional corporation with its primary place of business in Maricopa County, Arizona. Malhotra was a shareholder, President and director of Saguaro. Malhotra and another shareholder and director, Satya Atluri, were the only shareholders involved in the administration of the practice. Saguaro initiated Chapter 7 Bankruptcy proceedings on October 11, 2012.² Theunderlying lawsuit was filed by Singh, as successor in interest to Saguaro,³ against Malhotra, in his capacity as President and a director of Saguaro.

¶4 The first matter pertains to the settlement of a federal lawsuit, brought by Saguaro against Banner Health in February 2008 alleging, among other claims, breaches of contract (the Hospital Action).⁴ Malhotra filed an amended complaint on Saguaro's behalf in the action in late July 2008, at the same time asserting individual claims on his own behalf as an additional plaintiff. The Hospital Action was settled in February 2010. Malhotra's only remaining claim at the time of the settlement was for interference with contractual relations. In the immediate lawsuit, Singh alleged Malhotra took 100% of the net settlement proceeds from the Hospital Action for himself, and diverted Saguaro funds to pay his personal legal fees. Singh asserted claims against Malhotra for conversion, breach of fiduciary duty, and unjust enrichment.

¶5 The second matter relates to a contract between Havasu Regional Medical Center (HRMC) and Saguaro (the Lake Havasu Contract). HRMC initiated discussions with Saguaro to become the exclusive contract provider of hospitalist services at HRMC, in Lake Havasu, Arizona. On March 26, 2008, Malhotra obtained a letter of intent from HRMC, awarding the contract to Saguaro. Saguaro, through Malhotra as its President, signed the Lake Havasu Contract with HRMC on April 28, 2008. On or about April 30, 2008, Malhotra assigned the Lake Havasu Contract to Polaris Medical Group, LLC (Polaris), for zero consideration. At the time, Malhotra retained sole discretion to make decisions on Saguaro's behalf.⁵ The contract was signed by a representative of HRMC on May 10, 2008.

¶6 At the time of the assignment, Polaris had only one member, Innovative Solutions Consulting, LLC, which only had one member, Abhay Padgaonkar (Padgaonkar). Padgaonkar was never a member of Saguaro.⁶ Saguaro could not fully pay its debts as of late May 2008. Malhotra became a 51% member of Polaris on May 30, 2008. He later assigned his 51% membership in Polaris to Axis Inpatient Management, LLC (Axis), of which he was the sole member.

¶7 Neither Saguaro nor Polaris could service the Lake Havasu Contract at the time Malhotra assigned it to Polaris. Polaris had no employees, and Malhotra contended no physicians were willing to work with Saguaro to fulfill the contract. Following the assignment, Polaris contracted with or hired various physicians, including Malhotra, to provide medical services to satisfy the contract. Saguaro stopped providing medical services around the end of June 2008, even though as of the date of assignment, it still had approximately 20 employees, comprised of 10 doctors and at least 10 staff.

¶8 In this lawsuit, Singh asserted claims against Malhotra for intentional interference with an existing contractual relationship between Saguaro and HRMC, breach of fiduciary duty, and unjust enrichment. Malhotra filed a motion to dismiss all claims relating to both matters,⁷ but the trial court ultimately denied that motion. Malhotra subsequently filed a motion for summary judgment on all claims.

¶9 The trial court granted the requested relief as to all claims related to the Hospital Action, and on the intentional interference withcontract (or contractual relationship) claim pertaining to the Lake Havasu Contract. Two claims—breach of fiduciary duty and unjust enrichment regarding the Lake Havasu Contract—survived summary judgment and were tried to the bench with an advisory jury. The advisory jury found Malhotra liable for $225,000 as to the claim of his breach of a fiduciary duty. It also found Malhotra had been unjustly enriched, but awarded no additional damages. The trial court entered judgment in favor of Singh.

¶10 Malhotra filed a post-trial motion challenging the judgment in Singh's favor, and the trial court subsequently vacated its original judgment and reversed itself, ordering judgment for Malhotra on both claims. The trial court also awarded Malhotra his related taxable costs and jury fees. Singh timely appealed both the court's summary judgment rulings and its second judgment after bench trial. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution and Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1) (2018) and -2101(A) (2018).

DISCUSSION

I. The Trial Court Erred in Granting Partial Summary Judgment to Malhotra on the Hospital Action Claims, and the Intentional Interference With Contract (or Contractual Relationship) Claim.

¶11 We review the trial court's summary judgment rulings de novo to determine whether any genuine issues of material fact exist and, if not, whether the trial court erred in applying the law. Bothell v. Two Point Acres, Inc., 192 Ariz. 313, 316, ¶ 8 (App. 1998). In reviewing the evidence, we draw reasonable inferences therefrom in the light most favorable to the party against whom judgment was entered. See Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, 308, ¶ 2 (2003); Angus Med. Co. v Digital Equip. Corp., 173 Ariz. 159, 162 (App. 1992). We will affirm a grant of summary judgment when an appellant has not shown per the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, that "there exists evidence of genuine issues for trial," Molever v. Roush, 152 Ariz. 367, 370 (App. 1986), and when the trial court was correct for any reason—either argued below or supported by the evidence, see City of Tempe v. Outdoor Sys, Inc., 201 Ariz. 106, 111, ¶ 14 (App. 2001).

A. Claims Pertaining Only to the Hospital Action

1. Conversion

¶12 Arizona courts apply the Restatement (Second) of Torts' definition of conversion. See Miller v. Hehlen, 209 Ariz. 462, 472, ¶ 34 (App. 2005). In Arizona, "[c]onversion is an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel." Restatement (Second) of Torts § 222A(1) (1965). Establishing these elements precedes any consideration of the seriousness of the interference and whether the interfering party must pay full value. Id. at § 222A(2).

¶13 In his complaint, Singh claimed Malhotra allocated the net settlement proceeds to himself, including for his attorneys' fees and costs in connection with the Hospital Action and his separate Divorce Action.⁸ The court ultimately found that Singh's conversion claim lacked factual support, and that Malhotra was entitled to summary judgment.

¶14 The court premised its summary judgment conclusion upon a review of the record which, the court concluded, did not establish Malhotra had allocated all the proceeds to himself, nor addressed how or why the relevant allocations were improper. We clarify that Singh's argument was as to the net proceeds of the settlement, not all proceeds.

¶15 The only evidence in the record as to the allocation of the settlement proceeds was Malhotra's deposition testimony and answers to interrogatories. The court highlighted that Malhotra testified that of the proceeds,

$292,000 would be paid to New York Life Insurance Company to repay the loan 'on the life insurance policy that was held by the pension plan for benefit of [Defendant] of the marital community,' that the loan had been used in part to pay legal fees and expert witness fees for the Hospital Action, and that $658,000 was paid to Defendant and his attorney, consisting of $125,000 for economic damages and $533,000 for emotional damages.

¶16 Malhotra argued this was a proper allocation of the proceeds, and that Singh had no evidence to the contrary. Singh offered the affidavit of his attorney expert, Douglas Tobler, in his response to Malhotra's motion for summary judgment. Tobler opined that "at most ten percent (10%) of the net Hospital Action settlement proceeds could reasonably have been allocated to Dr. Malhotra's sole surviving personal claim against the Hospital."

¶17 On appeal,...