Smith v. Rai & Barone, P.C.

• Decision Date: 18 April 2022
• Docket Number: 2 CA-CV 2021-0110
• Citation: Smith v. Rai & Barone, P.C., 2 CA-CV 2021-0110 (Ariz. App. Apr 18, 2022)
• Court: Arizona Court of Appeals
• Parties: Michael W. Smith and Sandi K. Smith, husband and wife, Plaintiffs/Appellants, v. Rai & Barone, P.C., an Arizona professional corporation, Thomas M. Duer, and Jack G. Barone, Defendants/Appellees.

Michael W. Smith and Sandi K. Smith, husband and wife, Plaintiffs/Appellants, v. Rai & Barone, P.C., an Arizona professional corporation, Thomas M. Duer, and Jack G. Barone, Defendants/Appellees.

No. 2 CA-CV 2021-0110

Court of Appeals of Arizona, Second Division

April 18, 2022

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Pima County No. C20205572 The Honorable D. Douglas Metcalf, Judge

Michael W. Smith and Sandi K. Smith, Houston, Texas In Propria Personae

Rai & Barone P.C., Phoenix By Rina Rai and Brock Kaminski Counsel for Defendants/Appellees

Presiding Judge Eckerstrom authored the decision of the Court, in which Chief Judge Vásquez and Judge Espinosa concurred.

MEMORANDUM DECISION

ECKERSTROM, PRESIDING JUDGE

¶1 Michael and Sandi Smith appeal from the trial court's dismissal of their case against Rai & Barone P.C., a law firm, and individually named attorneys from the firm (collectively "RBPC") for conduct in a prior litigation. For the reasons that follow, we affirm.

Factual and Procedural Background

¶2 On appeal from the grant of a motion to dismiss, "we consider the facts alleged in the complaint to be true, and we view them in a light most favorable to the plaintiff to determine whether the complaint states a valid claim for relief." Mintz v. Bell Atl. Sys. Leasing Int'l Inc., 183 Ariz. 550, 552 (App. 1995). However, we do not accept as true "conclusions of law or unwarranted deductions of fact." Folk v. City of Phoenix, 27 Ariz.App. 146, 150 (1976). We may take judicial notice of anything of which the trial court could have taken judicial notice, even if it did not do so. See Gordon v. Est. of Brooks, 242 Ariz. 440, n.2 (App. 2017); see also Ariz. R. Evid. 201(c)(1), (d) (court may take judicial notice on its own, at any stage of proceeding). And, it has long been established that, "[i]n Arizona it is proper for a court to take judicial notice of the record in another action tried in that same court." Visco v. Universal Refuse Removal Co., 11 Ariz.App. 73, 74 (1969).

The 2013 Case

¶3 In 2013, having been sued by their residential general contractor, the Smiths brought a third-party complaint against D.C. Concrete ("DC"), a subcontractor, which has at all relevant times been represented by RBPC. In 2017, the trial court granted summary judgment in favor of DC on the Smiths' breach of contract and fraudulent misrepresentation claims, awarding DC attorney fees, costs, and sanctions.

¶4 The trial court directed DC to file an application for the attorney fees and costs in question. RBPC (as DCs counsel) did so. The Smiths then objected to the application as "deceptive," claiming that DC had: (a) failed to disclose an amended reservation of rights letter showing that its insurer, NGM Insurance Company ("NGM"), would provide a defense for the Smiths' claims against DC; (b) failed to disclose any fee agreement between itself and RBPC, or between NGM and RBPC; (c) never actually paid RBPC, who had been paid by NGM; (d) redacted the attorney billing entries submitted to the trial court; and (e) requested recovery of fees and costs incurred in RBPC's defense of a different (ultimately settled) claim against a different defendant. The trial court awarded the requested fees, apparently rejecting each of the Smiths' arguments in opposition.

¶5 On appeal, we affirmed the trial court's judgment for DC, including the award of attorney fees, and awarded DC additional attorney fees and costs. SK Builders, Inc. v. Smith, 246 Ariz. 196, ¶¶ 31-32 (App. 2019), superseded by statute, 2019 Ariz. Sess. Laws, ch. 145, § 43, review denied, CV-19-0070-PR (Sept. 24, 2019). In September 2019, the trial court entered a supplemental judgment against the Smiths in favor of DC, incorporating both its own prior award and our award on appeal.

¶6 Since then, DC has engaged in post-judgment execution efforts, including issuing written discovery requests and notices of deposition seeking the Smiths' financial information. In June 2021, the trial court granted DCs motions for sanctions pursuant to Rules 11 and 37, Ariz. R. Civ. P., due to the Smiths' refusal to comply with a prior discovery ruling. The Smiths separately appealed that decision. In rejecting that appeal, we recently found that the Smiths have engaged in "gamesmanship" involving "repeated and redundant efforts to block [DC] from identifying the Smiths' assets and collecting its judgment against them." Smith v. D.C. Concrete Co., No. 2 CA-CV 2021-0093, ¶ 28 (Ariz. App. Jan. 28, 2022) (mem. decision). Because we concluded that the Smiths' appeal was a "continuation of their taxing of judicial resources merely for the purpose of delay and harassment," id., we awarded DC its attorney fees on appeal pursuant to Rule 25, Ariz. R. Civ. App. P.

The 2019 Case

¶7 In October 2019 - less than a month after the trial court issued its supplemental judgment in the 2013 case-the Smiths brought an independent action in superior court against DC and NGM, claiming fraud, fraud on the court, and tort of another. They asked that the judgment in the 2013 case be set aside, and for an award of tort and punitive damages. As grounds, they raised the same allegations already unsuccessfully raised in the initial case, namely: (a) no supplemental disclosure to show that NGM would pay DCs defense costs; (b) no fee arrangements disclosed; (c) NGM, not DC, had paid RBPC's bills; (d) redacted billing statements; and (e) that RBPC had "falsely represented" to both the trial court and this court that the fees and costs it sought in the 2013 case had all been incurred defending DC against the Smiths' causes of action for breach of contract and fraudulent misrepresentation. In December 2019, DC (again represented by RBPC) answered the complaint and requested that it be dismissed with prejudice.^[1]

¶8 In March 2021, DC filed a motion for summary judgment. In July, after a hearing, the trial court granted the motion. The opening brief in the present appeal states that the Smiths' 2019 action to set aside the 2013 judgment "was dismissed by the trial court . . . based upon the court's finding and conclusion that the issue was precluded by the doctrine of [i]ssue [p]reclusion." This is a strikingly incomplete description of the trial court's extensive ruling, which appears in the transcript of the hearing on DCs motion for summary judgment (which the Smiths have tellingly not provided in this case, but which is before us in a separate appeal).

¶9 Regarding the Smiths' allegation that RBPC had wrongfully included unrelated fees and costs when seeking the judgment in the 2013 case, the trial court stated: "[The Smiths] could have, and in fact did, raise this argument, albeit unsuccessfully, in [their] objection to [DC]'s application for attorney's fees in [the 2013 case], as well as in [their] subsequent appeal of that matter. In other words, the Smiths already unsuccessfully litigated this issue," which "cannot properly be re-litigated here in this new lawsuit." The court then addressed the other "alleged procedural flaws" in the fee application-including the incompletely disclosed fee agreements and the redacted billing statements - and rejected them as already unsuccessfully raised in the 2013 case and meritless. The court went on to state:

The record regarding the briefings on the pending motions and plaintiffs' own admissions in their response illustrate that plaintiffs do not have any evidence to support their claims against [DC] here. In other words, there is insufficient evidence to support the elements of the claims here. Moreover, one of the claims here, tort of another, has no application in this case whatsoever. Moreover, the claims here are legally barred by the preclusion doctrines, both issue and claim, and the law precluding horizontal appeals. Notably, plaintiffs' response nowhere disputes [DC]'s statement and charts demonstrating how, when, and where plaintiffs' assertions here were previously made and rejected in the [2013 case].

After offering what it called a "simple examination of the undisputed facts in this case from the hundred thousand foot level" to illustrate "its lack of merit and extreme danger to [the trial] court's ability to resolve disputes with finality," the court explained: "Ultimately, this case is simply about the Smiths trying to get a second bite at the attorney's fees apple they lost in the trial court and the court of appeals in [the 2013 case]. The law simply does not allow for this under the undisputed facts here." The court then granted DCs request for an award of attorney fees, both because the action arose out of contract and because the Smiths' claims had been "brought without substantial justification and solely or primarily for delay and harassment." The court concluded with "a warning" to the Smiths that "[i]f they bring another lawsuit arising from the outcome in [the 2013 case], and that case is determined, as this one has, to be devoid of legal merit, the [Smiths] and/or their counsel will be subject to serious sanction above and beyond the award of attorney's fees and costs." In September 2021, the court entered judgment and awarded DC attorney fees, costs, and sanctions. The Smiths have separately appealed that judgment.

This Case

¶10 In December 2020-before DC had filed its motion for summary judgment in the 2019 case-the Smiths filed a civil complaint against RBPC, which forms the basis for this appeal. They alleged claims for fraudulent schemes/misrepresentation negligent representation, negligence, tort of another, and negligence per se. All of these claims relate to the same conduct from the 2013 case the Smiths have already unsuccessfully raised in both that case and...