Wichansky v. Zowine

• Decision Date: 11 December 2015
• Docket Number: No. CV-13-01208-PHX-DGC,CV-13-01208-PHX-DGC
• Citation: 150 F.Supp.3d 1055
• Parties: Marc A. Wichansky, Plaintiff, v. David T. Zowine, et al., Defendants.
• Court: U.S. District Court — District of Arizona

150 F.Supp.3d 1055

Marc A. Wichansky, Plaintiff,

v.David T. Zowine, et al., Defendants.

No. CV-13-01208-PHX-DGC

United States District Court, D. Arizona.

Signed December 11, 2015

Alethia Michelle Scipione, Christian C.M. Beams, Daniel Edward Fredenberg, Callagy Law, Robert A. Mandel, Taylor C. Young, Mandel Young PLC, Phoenix, AZ, Matthew R. Major, Michael J. Smikun, Sean R. Callagy, Law Offices of Sean R. Callagy Esquire LLC, Christopher R. Miller, Callagy Law LLC, Paramus, NJ, for Plaintiff.

Gayathiri Shanmuganatha, Kate Elizabeth Frenzinger, Quinlan Law Firm LLC, Jared Lynn Sutton, Michael Joseph Hammer, Robert F. Roos, Lewis Roca Rothgerber LLP, Phoenix, AZ, Justin L. Heather, Sarah McTurnan Steele, William John Quinlan, Quinlan Law Firm LLC, Chicago, IL, for Defendants.

ORDER

David G. Campbell, United States District Judge

The parties have filed cross-motions for summary judgment. Docs. 273, 275. The motions have been fully briefed (Docs. 284, 303, 291, 307), and the parties have produced a voluminous factual record (Docs. 274, 276, 285, 286, 301). The Court held oral argument on December 3, 2015. For the reasons that follow, Plaintiff's motion will be denied and Defendants' motion will be granted in part and denied in part.

I. Background.¹

In 2006, Marc Wichansky and David Zowine began business together, founding Zoel Holding Co., Inc. (“Zoel”), an Arizona corporation specializing in employee placement services, and MGA Home Healthcare, LLC (“MGA”), a wholly-owned subsidiary of Zoel specializing in health care services. Doc. 286, ¶ 1, Doc. 285, ¶ 3.² Wichansky was President of Zoel, Zowine was Vice President, and both men owned a 50% share in the company. Doc. 286, ¶ 3. The parties dispute the allocation of authority within MGA. See Doc. 285, ¶ 7.

The personal relationship between Wichansky and Zowine began to deteriorate around December 2010. After a particularly contentious conversation, Zowine told Wichansky that the two “would never be friends again.” Doc. 286, ¶¶ 10-11. On January 19, 2011, the two men were involved in a physical altercation. Wichansky contends that Zowine assaulted him. Id. , ¶ 14.

This personal dispute spilled over into their business relationship. On January 26, 2011, Wichansky purported to terminate Zowine. Id. , ¶ 24. Around this time, Zowine, who was no longer welcome at the main office on 44th Street in Phoenix, established a new office for the business on 24th Street. Doc. 285, ¶ 38. On January 31, 2011, several employees affiliated with Zowine (named as Defendants in this action) moved Zoel computers from the 44th Street office to the 24th street office. Id. , ¶ 41. On February 2, after an unsuccessful attempt to image Zoel's servers, the same employees moved the servers from the 44th Street office to the 24th Street office. Id. , ¶¶ 42-44.

On February 4, 2011, Wichansky filed a complaint in Maricopa County Superior Court seeking an order confirming the validity of Zowine's termination and requiring Zowine to return all Zoel property to the 44th Street location. Doc. 286, ¶ 31. The parties ultimately entered into a stipulation which provided that they each would have access to the computers and servers to continue the operation of their business. Id. , ¶ 32. This arrangement apparently worked for a period of time, but on March 31, 2011, Wichansky sought judicial dissolution of Zoel and appointment of a receiver to manage the company's assets. Id. , ¶ 48. On April 12, 2011, the Superior Court appointed Ted Burr as a receiver and management consultant. Id. , ¶ 62. Burr will be referred to in this order as “the receiver.”

On June 10, 2011, Zowine filed an election to purchase Wichansky's shares in Zoel in lieu of dissolution of the company. Id. , ¶ 69. On August 4, 2011, Wichansky moved to withdraw his dissolution petition, asserting that his prior counsel had failed to advise him of the consequences of filing the petition and that he had discovered evidence that Zowine was involved or acquiesced in medical billing fraud at the company. Id. , ¶ 70. The Court denied Wichansky's motion to withdraw. Id. , ¶ 73.

In March 2012, the Superior Court held a five-day valuation hearing to establish the terms of Zowine's purchase of Wichansky's interest in Zoel. Id. , ¶ 78. On March 6, 2012, the Court issued a ruling which found that Wichansky's interest was worth $5,000,000 less various deductions, resulting in a net valuation of $4,058,000 as of March 31, 2011, the date Wichansky moved for dissolution. Id. , ¶ 80. In arriving at this determination, the Court assigned half of the receiver's expenses to Wichansky and half to Zowine. Id. Shortly thereafter, Zowine made the initial payment and the Superior Court granted him full control of Zoel's property and assets. Id. , ¶ 85.

During the course of these events, efforts were made to investigate billing improprieties at MGA. In 2010, Zoel's Vice President of Finance, Richard Eden, discovered a pattern of irregular and improper billing practices at MGA. Doc. 285, ¶ 14. Eden communicated this finding to Wichansky, who alerted Zowine. Id. , ¶ 16. At Wichansky's direction, Eden began to investigate the discrepancies. Id. , ¶ 18. On March 21, 2011, Wichansky reported these improprieties to the Arizona Health Care Cost Containment System (“AHCCCS”), but did not label them as fraud. Doc. 301, ¶¶ MM-NN. In March 2013, MGA and AHCCCS entered into a settlement agreement to refund $1,250,000 to AHCCCS for overpayments received between January 1, 2006 and December 31, 2011. Doc. 286, ¶ 95. The agreement stated that “AHCCCS found no evidence that Provider committed fraud, acted with intent to defraud AHCCCS or AHCCCS Contractors, or engaged in criminal wrongdoing.” Doc. 276, Ex. 72, ¶ IV.

On June 14, 2013, Wichansky filed this suit against Zoel, MGA, Zowine, and several individuals affiliated with Zowine. This is one of several pending lawsuits between the parties. The Court has issued several rulings in this case, and has disposed of several of Wichansky's claims, including claims for securities fraud, obstruction of justice, and violation of the False Claims Act, and some claims under the Computer Fraud and Abuse Act (“CFAA”). See Docs. 49, 82, 149. The Court considers the remaining claims today.

II. Legal Standard.

A party seeking summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)

. Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is also appropriate against a party who “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex , 477 U.S. at 322, 106 S.Ct. 2548. Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. Analysis.

Wichansky moves for summary judgment on his claims for breach of fiduciary duty, violation of the CFAA, conspiracy to violate the CFAA, and constructive fraud. Doc. 273. Defendants move for summary judgment on all of Wichansky's claims. Doc. 275. Wichansky has failed to defend his claims for unjust enrichment, intrusion upon seclusion, and prima facie tort, and the Court will grant summary judgment on these claims without further discussion. See Estate of Shapiro v. United States , 634 F.3d 1055, 1060 (9th Cir.2011)

. The Court will address Wichansky's remaining claims.

A. Breach of Fiduciary Duty.

Count Nine of Wichansky's second amended complaint asserts a claim for breach of fiduciary duty. Doc. 160, ¶¶ 469-473. Wichansky argues that he is entitled to summary judgment on this claim because any reasonable jury would find that Zowine breached his fiduciary duties by contributing to or failing to prevent a pattern of overbilling at MGA, by interfering with investigations into the billing problems by Wichansky and the receiver, and by antagonizing Wichansky in an attempt to force him out of the company. Doc. 273 at 5-8, Doc. 274, ¶¶ 68-71, Doc. 291 at 11-17. Defendants contend that they are entitled to summary judgment because any reasonable jury would find Wichansky's claims time-barred, and because Wichansky cannot establish damages, an essential element of his claim. Doc. 275 at 7-8.

1. Defendants' Motion.

a. Statute of Limitations.

In Arizona, a claim for breach of fiduciary duty is subject to a two-year statute of limitations. See Mohave Elec. Co – op., Inc. v. Byers , 189 Ariz. 292, 942 P.2d 451, 469 (Ariz.Ct.App.1997)

(citing

A.R.S. § 12–542(3)

). The limitations period begins to run when the plaintiff discovers the cause of action—that is, when the plaintiff knows, or reasonably should know, that he has been harmed, that the harm was caused by the defendant, and that the act or omission which caused the harm was wrongful. See

Walk v. Ring , 202 Ariz. 310, 44 P.3d 990, 996 (2002) (discovery occurs when plaintiff possesses “a minimum requisite of knowledge sufficient to identify that a wrong occurred and caused injury”); Doe v. Roe , 191 Ariz. 313, 955 P.2d 951, 961 (1998) (“cause of action accrues when plaintiff discovers injury is attributable to particular person's conduct; plaintiff must know both the what and who elements”) (citation omitted). The date when a cause of action was discovered is a question of fact that, if subject to genuine dispute, must be decided at...