Opinion
2 CA-CV 2023-0021
11-09-2023
Melanie Goldstein, Plaintiff/Appellee, v. MWM Vicsdale Magic, LLC, an Arizona limited liability company; and Victor Gojcaj, Defendants/Appellants.
McGill Law Firm, Scottsdale By Gregory G. McGill Counsel for Plaintiff/Appellee Stinson LLP, Phoenix By Jeffrey J. Goulder and Michael Vincent Counsel for Defendants/Appellants
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2020005417 The Honorable M. Scott McCoy, Judge The Honorable Bradley Astrowsky, Judge
McGill Law Firm, Scottsdale By Gregory G. McGill Counsel for Plaintiff/Appellee
Stinson LLP, Phoenix By Jeffrey J. Goulder and Michael Vincent Counsel for Defendants/Appellants
Judge Eckerstrom authored the decision of the Court, in which Presiding Judge Brearcliffe and Judge Kelly concurred.
MEMORANDUM DECISION
Eckerstrom, Judge
¶1 MWM Vicsdale Magic LLC, and its principal, Victor Gojcaj, (collectively "MWM") appeal the judgment entered by the trial court after a jury awarded compensatory and punitive damages in a lawsuit stemming from the sale of a water-damaged house to Melanie Goldstein. MWM challenges the constitutionality of the punitive damages award, as well as a negative inference instruction the court provided to the jury after Gojcaj failed to appear for the third day of trial as ordered. For the reasons that follow, we affirm.
Factual and Procedural Background
¶2 "We review the facts and inferences in the light most favorable to upholding the jury's verdict." Hudgins v. Sw. Airlines, Co., 221 Ariz. 472, ¶ 2 (App. 2009). MWM purchases "distressed" homes, renovates them, and resells them for a profit. According to the opening brief, MWM "has bought and sold hundreds, if not thousands, of homes in the Phoenix area." This includes the home in Scottsdale that forms the basis for this action. MWM conducted a major renovation on the home, including installing new flooring, new lighting, and a new kitchen.
On the first day of trial, MWM's counsel informed the jury that MWM "does a massive bulk volume of these houses" and that, just in the subdivision in which the subject property is located, MWM has flipped "over 500 houses." On the last day of trial, said counsel reiterated that MWM "is flipping houses in massive volume."
¶3 MWM listed the renovated property for sale in November 2019. In January 2020, Goldstein purchased the home for $515,000. The contract included a warranty that MWM had disclosed "all material latent defects and any information concerning the Premises known to [MWM]."
¶4 After a standard inspection, the sale closed on February 28, 2020, and everything appeared to be in order. At the time of closing, Goldstein and her son lived on the east coast and had not yet relocated to Arizona, so she rented out the property.
I. Discovery of Damage
¶5 A few days after closing, as the renters moved into the property, they discovered subtle evidence of water seepage on one wall. Goldstein's realtor and property manager coordinated an investigation, which began with the removal of a square section of drywall and stucco. Further opening of the wall revealed substantial evidence of past water leakage, including saturated insulation and wet drywall. The water damage was extensive, compromising the entire west side of the house from the front to the back. There was also clear evidence of recent patch work repair inside the wall. This included "a lot of brand new drywall" that had apparently been installed to conceal the preexisting water problem. The wetness had persisted long enough for extensive toxic black mold to develop, even in the dry Scottsdale climate. Mold was also found hidden behind the new kitchen appliances and cabinetry MWM had installed. None of these issues were identified during the pre-closing inspection because they had been concealed behind the wall and the new appliances.
The jury heard testimony that black mold is "very dangerous" and should not be touched or breathed in, as it can damage human lungs and cause other health problems.
¶6 It became apparent that, due to the extensive black mold, the house posed a health hazard. A professional remediation company spent six weeks conducting hazardous material cleanup and decontamination. The work required the use of personal protective equipment, the erection of a containment barrier, air or surface testing, lab analysis, and equipment decontamination. Encapsulation and air duct cleaning were required to ensure that dangerous mold spores would not remain in the air ducts and circulate through the house.
The jury saw images of remediation workers wearing hazmat suits.
¶7 All told, the remediation and repair of the property cost Goldstein approximately $29,000. She also incurred over $14,000 in expenses related to lost rental income and arranging alternative living arrangements for her tenants during the remediation and repairs.
II. Dispute Begins
¶8 On March 31, 2020, Goldstein sent a demand letter to MWM. Gojcaj responded aggressively, voicing no surprise that such substantial preexisting water damage had been revealed at the home his company had sold to Goldstein. In particular, he called Goldstein's realtor, threatened to "take [her] down," told her "I know exactly who you are.... I'm taking you out," and called her a "bitch" and a "cunt." The same day, Gojcaj also sent a series of expletive-laden emails to Goldstein's lawyer, calling him a "bitch" and insulting his law firm, reiterating his threats against the realtor, mocking the demand letter's mention of Goldstein's autistic son, and saying, "[L]et's do court. I haven't lost a case in my life."
¶9 In May 2020, Goldstein filed an action against MWM and Gojcaj for breach of contract, consumer fraud, common-law fraud, fraudulent concealment, and negligent misrepresentation, seeking compensatory and consequential damages of "not less than $50,000" and punitive damages of "not less than $100,000."
III. Pre-Trial Conduct
¶10 By July 2020, MWM had not filed an answer. Goldstein's lawyer offered defense counsel an extension of time in which to do so. The same day, Gojcaj sent Goldstein's lawyer a blank email with the subject line "Ha ha bitch." MWM answered the complaint on July 17.
¶11 In early October 2020, the trial court issued a scheduling order. Among other things, it ordered the parties to exchange initial disclosures and disclose fact witnesses by October 23, to complete the depositions of fact witnesses by January 31, 2021, and to fully complete discovery by March 10.
¶12 At the end of December 2020, Goldstein filed a motion for sanctions under Rule 37, Ariz. R. Civ. P. As grounds, she alleged that MWM had provided "nothing," essentially "disappeared" from the action, and "blatantly disregarded" the disclosure deadline "for more than 2 months despite repeated requests . . . to send the Initial Disclosure Statement and many assurances and promises by the defense to do so." She explained that the failure to provide initial disclosures had forced her to twice postpone the deposition of Gojcaj, which had yet to occur, and had impeded her ability to propound discovery requests. She urged the trial court not to allow Gojcaj-"a serial house-flipper" with a modus operandi of concealment to trick unsuspecting out-of-state buyers into purchasing homes with "half-baked renovations"-to "bring that concealment MO into the litigation." She requested that MWM be held in contempt of the scheduling order and that the court either enter a default judgment or (a) exclude defense witnesses and exhibits, (b) provide a negative inference instruction to the jury, and (c) sanction Gojcaj and his counsel jointly and severally $10,000.
¶13 In January 2021, Goldstein requested leave to supplement her motion for sanctions based on Gojcaj's refusal to appear for his deposition. She explained that she had notified the defense of a January 14 deposition two months in advance and that defense counsel had confirmed in writing that Gojcaj would appear. However, said counsel sent an email to the court reporter about an hour before the scheduled time of the deposition stating that Gojcaj had left a voice mail claiming that an "unexpected family emergency" would prevent him from appearing.
¶14 In March 2021, the trial court ruled on the motion for sanctions. It acknowledged that Gojcaj "personally has been discourteous and the defense in general has been dilatory," but it concluded that the challenged behaviors-while "undesirable"-"collectively do not amount to anything 'beyond the pale.'" It therefore found that only an award of the attorney fees and costs incurred in the filing of the motion were appropriate, refusing all the other sanctions Goldstein had requested. Goldstein applied for over $10,000 in fees, but the court awarded only $2,000, finding that the application had sought fees "far beyond those contemplated by the Court."
¶15 In June 2021, MWM refused to agree to extend the March 10 discovery deadline to allow for Gojcaj's deposition to be taken. In August, the trial court issued an amended scheduling order, requiring the parties to complete depositions by the end of September and discovery by the end of October.
¶16 In September 2021, Gojcaj appeared over Zoom for his deposition. Although he stated under oath that he was at his home, he was clearly driving a vehicle. Due to resulting disruptions and connectivity problems, the deposition could not proceed. Gojcaj did not offer to drive to his attorney's office or his own home or office to ensure a reliable Zoom connection. Instead, he implied that he knew where Goldstein's counsel lived and repeatedly stated that he could drive to his office, which Goldstein's counsel interpreted as threats. The trial court immediately held a hearing. After discussion regarding Gojcaj's "distractions and connection problems" during the video deposition, the court set a date for the deposition to be taken at the courthouse and ordered Gojcaj to make himself available. Gojcaj did so in November 2021. The court then awarded Goldstein her attorney fees for the deposition violation.
¶17 At the end of November 2021, Goldstein moved for partial summary judgment on the breach of contract and fraud claims based on admissions Gojcaj had made during his in-court deposition, "his repeated violations," and uncontroverted evidence. She argued that Gojcaj's testimony claiming he had no knowledge of the lawsuit proved "his propensity to lie and deceive." She noted that his deposition had been noticed "at least 5 times," with Goldstein attempting to take the deposition "since November of 2020 before it was finally taken in November of 2021." She emphasized that MWM had never provided an initial disclosure statement as required under Rule 26.1, Ariz. R. Civ. P., and had never responded to her non-uniform interrogatories or requests for production of documents-discovery requests seeking the bases for MWM's denial of the core allegations in the complaint. Goldstein argued, "The pattern of misconduct by Gojcaj poisoned the entirety of this case. At every turn the defendants[] delayed and disregarded discovery resulting in obstruction, inefficiencies and a needless expansion in the proceedings that impeded the prosecution." She urged that MWM's "complete disregard of the rules and the obvious absence of any documents, evidence, or witnesses to defend this action" warranted the entry of summary judgment in her favor on the contract and fraud counts.
¶18 In response, MWM asked the trial court to stay briefing and order the parties to conduct a settlement conference or, in the alternative, to deny the motion outright or-at minimum-allow MWM to amend its admittedly "cursory" response. Two days later, the court ordered the parties to participate in a settlement conference.
¶19 In her reply in support of her motion for partial summary judgment, Goldstein forcefully rejected MWM's "attempt to create an issue about settlement." She argued that "MWM's repeated rule violations and complete disregard for the litigation process" had "delayed and stymied the prosecution of this case for almost two years" and had "made it impossible for [Goldstein] to engage in any cooperative dispute resolution process with [MWM] which requires good faith participation in a formal process and adherence to rules." She decried MWM's "attempt to distract and pull the court's attention to inconsequential collateral matters that were avoidable if [MWM had] followed the rules in this case," instead of confronting the issues on the merits. Goldstein further argued that, due to MWM's failure to participate in discovery-"watching all of the deadlines lapse without any justification whatsoever"-and MWM's failure to introduce any evidence to support its opposition to summary judgment, "the court [was] left with nothing except h[o]llow attorney argument and a general denial of the allegations in the Complaint." The reply referenced MWM's "continuous disrespect toward the court system and [Goldstein] in this matter," which had so far "proceeded with impunity." It urged the trial court to "impose consequences for this inappropriate conduct and not allow any supplemental responses" that would permit MWM's approach to "continue unabated," and to grant summary judgment.
¶20 After a February 2022 hearing, the trial court denied Goldstein's motion. Although the court acknowledged Gojcaj's "poor and foul communication with [Goldstein's] counsel and his poor behavior during depositions," it reasoned that those issues were "not relevant at the summary judgment stage." It explained that, rather than presenting evidence sufficient to establish that there was no genuine dispute regarding any material fact, Goldstein's filings had focused on "ad hominem attacks" on Gojcaj, contained "broad conclusions without support in fact," and were "full of irrelevant information." It noted that a large number of Goldstein's purported "facts" reflected counsel's "personal opinions" about Gojcaj and had been included "to induce the Court to conclude [that he is] not a credible person"-an inappropriate consideration at the summary judgment stage.
¶21 In May 2022, Goldstein asked the trial court to reconsider its denial of the motion for summary judgment as to her claim for breach of contract. She reiterated that MWM had violated Rule 26.1 "for over two years with impunity," having failed to file an initial disclosure statement regarding "the facts, legal defenses, witnesses, and documents" in support of MWM's positions. In particular, she noted that MWM had "disclosed nothing in this 2-year case: no documents, affidavits, reports, or testimony" establishing a genuine dispute regarding any fact material to the contract claim. Given this failure, together with the court's two scheduling orders establishing that neither party would be permitted to present any witness or exhibit at trial not disclosed in a timely manner, Goldstein argued that MWM could not possibly raise a genuine issue of fact on the breach of contract claim. She further argued that nothing presented in MWM's response to the motion for summary judgment had meaningfully called into question the facts relevant to the contract claim. In arguing that she was therefore entitled to judgment as a matter of law on that claim, Goldstein also notified the court that, after the original motion for summary judgment was denied, Gojcaj sent an email to her counsel that contained only nine laughing-face emojis, which she characterized as evidence of his "continued mocking of counsel and the Court." The court denied this motion to reconsider.
IV. The Trial
¶22 The trial court scheduled trial for October 19-20 and November 1-2, 2022, expressly ordering Gojcaj to be "physically present everyday for trial." However, on October 19, Gojcaj failed to appear without providing an explanation to the court or his counsel. Goldstein made a record of her opinion that, "if the Defendant doesn't show up and violates [the court's] order with impunity, that shows a mockery of the court system."
¶23 After the jury was selected and excused for a break, defense counsel reported that he still had not heard from Gojcaj. The trial court indicated that it intended to give Gojcaj "the day to show up" and discuss any proposed instructions or sanctions at the end of the day. The court specified, "There might be instructions concerning presumptions or other sanctions that I may impose regarding the trial, but I will give him the day because we don't know anything yet at this time." Goldstein argued that Gojcaj's failure to appear or even call his counsel, given the history of the case and the court's explicit order that he be physically present, "shows that he had no respect for the court system, or frankly, the Court." After additional discussion, the court assured Goldstein: "It depends on what information is received. But if he's not present, and your ability to, therefore, call him, is taken away, then we can fashion an instruction regarding presumptions," a negative inference instruction. The court then directed MWM's counsel to "reach out" to Gojcaj and report back.
¶24 After the jury received preliminary instructions and was dismissed for lunch, defense counsel reported that he had learned from Gojcaj's cousin that Gojcaj had fallen ill with COVID-19 the night before. The trial court directed counsel to obtain substantial documentary proof of the diagnosis by the end of the day. The trial then proceeded with opening statements and Goldstein's testimony. Both she and her counsel asked the jury to award $100,000 in punitive damages to deter Gojcaj from engaging in similar behavior with other purchasers.
¶25 Near the end of the day, defense counsel addressed the trial court to read a communication received from Gojcaj. This led to further discussion "regarding expectations for defendant to appear and testify and possible sanction consequences for his failure to comply."
¶26 The following day, October 20, Gojcaj appeared electronically. When questioned by the trial court regarding his absence from trial, he testified under oath that he had been suffering from COVID-19 "for about 24 hours." The court then ordered his physical presence at trial on November 1-2, 2022. As the court was explaining that his failure to appear without good cause could lead to a contempt finding, Gojcaj repeatedly interrupted. During those interruptions, Gojcaj stated he would not appear, expressed his disinterest in the trial, and insulted Goldstein's attorney. After the court provided a "last warning concerning [his] interruption of the Court," Gojcaj interrupted again and continued to speak discourteously.
¶27 The trial court found Gojcaj in "direct contempt of court by interrupting the proceedings, being rude to the Court," and fined him $200. Gojcaj responded by "checking his phone and making faces." The court noted that the trial had already been postponed as a result of issues relating to Gojcaj and his attorney. The court explained that the second day of trial would continue in his absence, due to his illness. After emphasizing again that Gojcaj was expected to be physically present for both days in November and that he would face contempt sanctions if he failed to appear as ordered, the court asked Gojcaj if he understood. Rather than answering the question as directed, Gojcaj belligerently replied, "How much longer am I going to be on this?" The court again found him in "direct criminal contempt of court" and fined him an additional $200. The court explained, "Mr. Gojcaj is being disrespectful to the Court, not listening to the Court, not willing to respond to the Court. He is present, however, and he's on notice regarding expectations for this trial. If he fails to comply with them, he'll suffer the consequences."
¶28 After Gojcaj had left the proceedings, the trial court explained to his counsel that Gojcaj was "looking at being incarcerated if he fails to show up to court," that a warrant would be issued if he failed to appear "first thing in the morning" on November 1, and that he would "be held in custody and brought into court for his testimony." The court later noted that Gojcaj had "been rude and uncooperative throughout the process, not only to counsel, but to the Court, as well." However, over Goldstein's objection, the court informed the jurors that Gojcaj's absence was excused for the first two days of trial due to illness and that they should not hold that absence against him.
¶29 After the jury was excused for the day, the trial court again addressed counsel regarding Gojcaj's appearance. Goldstein noted that she might again request a default judgment if Gojcaj did not appear to defend himself. The court indicated that it would allow either party to provide briefing and case law regarding any other possible remedies. Further discussion was held regarding possible sanctions to be imposed on Gojcaj if he did not appear. The court noted that Gojcaj had made "clear that he has zero respect for this process and our court system."
¶30 The third day of trial occurred on November 1. Gojcaj did not appear. The trial court noted "the history in this case of Mr. Gojcaj not complying with the rules of the Court, not comporting himself well, using foul language towards counsel, et cetera." Discussion ensued regarding Gojcaj's failure to appear as ordered and what options were available for the trial to proceed. Goldstein requested an entry of default, which the trial court refused. Before trial, Goldstein had notified both MWM and the court that she intended to put Gojcaj on the stand and question him for more than two hours. She explained that her inability to call Gojcaj as a live witness would prejudice her case because it would deprive the jury of "a real time opportunity to see his demeanor on the stand and his approach, and a lot of that goes to the issue of credibility." The court agreed that, given how Gojcaj had presented himself at his deposition and in court, "if I were Plaintiff's counsel, I'd want the jury to see that" because it might "help them see the case and determine credibility." Goldstein then requested a directed verdict on the merits, arguing "[w]e win because he can't put on a defense, and I can't finish my case." The court deferred the issue to later, indicating that a motion for judgment as a matter of law ("JMOL") under Rule 50, Ariz. R. Civ. P., "might be more appropriate."
¶31 The trial court then ordered defense counsel to attempt to contact Gojcaj to allow him to either appear remotely or appear the following day. Counsel could not reach him, and Goldstein elected to proceed with trial, including by reading portions of Gojcaj's deposition to the jury in lieu of live testimony. Before that occurred, the court explained to the jury that Gojcaj's absence was not excused and told them, "You may take any negative inference you wish concerning his failure to appear."
¶32 In the portions of the deposition transcript read into the record, Gojcaj denied remembering the property in question and whether he had been involved in renovating it. He also denied having been aware of Goldstein's demand letter and complaint, which he characterized as a "scam," and denied having been involved in the profanity-laden email exchange with Goldstein's attorney. Goldstein's lawyer then presented certain exhibits, including the email exchange, information regarding supplies Gojcaj had purchased at Lowe's, sampling of mold spores, and the post-remediation verification inspection report.
¶33 Goldstein then rested. The trial court explained to the jury, "the Defendant's not here, so the Defendant's not going to present any evidence. So . . . the universe of the evidence has been presented to you at this time."
¶34 MWM then made a motion for JMOL under Rule 50(a), arguing that the evidence presented was insufficient to establish liability and thus any damages. The trial court denied the motion. During review of the verdict forms, MWM moved for JMOL as to all claims against Gojcaj as an individual based on the corporate veil. The court denied this second Rule 50(a) motion as well, noting that the issue had not been raised in the pretrial statement or otherwise pled.
The trial court also denied Goldstein's Rule 50(a) motion.
¶35 MWM then argued that the jury instructions and verdict form should reflect that any punitive damages must be limited to $100,000, on the ground that Goldstein had "consistently always argued for a number of $100,000." After Goldstein noted that the complaint repeatedly requested "not less than" $100,000 in punitive damages, the trial court rejected the request on the ground that MWM had been on notice that the award could potentially be higher. After MWM agreed that there was no dispute on the amount of compensatory damages-$45,068-the court granted JMOL on that amount, should the jury find in favor of Goldstein on any of her claims.
¶36 The trial court's final jury instructions reminded the jurors that they were obligated to "decide the facts only from the evidence produced in court" and "not speculate or guess about any fact" or "be influenced by sympathy or prejudice." The court cautioned the jury not to "take anything I said or did during the trial as indicating any opinion about the facts." It clarified that the jury alone was the judge of facts, the weigher of evidence, and the arbiter of witness credibility. It also reminded the jury that Goldstein bore the burden of proof on all her claims. With regard to punitive damages in particular, the court instructed the jury, "[Y]ou may consider assessing additional damages to punish Defendants or to deter Defendants and others from similar misconduct in the future." It then clarified that an award of such damages required Goldstein to have proven "by clear and convincing evidence, either direct or circumstantial, [that MWM] acted with an evil mind," which could be shown in a number of ways. The court also instructed, "The law provides no fixed standard for the amount of punitive damages you may assess, if any, but leaves the amount to your discretion," providing examples of some factors that the jury might consider. At no point during its instructions did the court mention Gojcaj's failure to appear or the negative inference instruction it had provided earlier that day before the reading of parts of the deposition.
¶37 Goldstein argued during summation that, although the complaint had sought an award of "not less than $100,000" in punitive damages, Gojcaj's failure to appear for trial merited an award of "$200,000 at a minimum" because there was "a strong chance that he will do this again and again." Goldstein specified that she was asking "for a minimum of 200 grand because he didn't even go to this trial, which is a signal that he's not going to stop." Noting defense counsel's statements during trial that MWM had flipped 500 or more houses, Goldstein argued, "He's very active in this.... This is what he does, and he's not here, and this is a jury trial over two years into a case. So punitive damages, it needs to smart. It needs to hurt a little bit, and then he'll stop doing it." She reiterated the request for "a minimum of 200 grand," but noted more than once that the jury was free to award more if, in its "collective wisdom," it decided that "the number should be higher."
¶38 In support of punitive damages, Goldstein also discussed Gojcaj's "attitude" and "disdain" for purchasers like Goldstein and the legal system in general, as evidenced by "the coverup, the patchwork, the email exchange with [her counsel] showing disrespect for an attorney in the court system, and not showing up at trial." When emphasizing that the house was "riddled with toxic black mold"-"a serious thing"-Goldstein again argued that, after just patching and covering up the problem and selling the house to Goldstein without telling her about it or providing the required disclosures, and after two-and-a-half years of pretrial litigation, Gojcaj "doesn't show up at trial . . . basically thumbing his nose to the system." Goldstein then observed that MWM had failed to meaningfully refute or rebut her claims, although the trial court had provided Gojcaj "more than one opportunity to be here." Finally, Goldstein urged the jury:
He covered it up, patched it, hid it. Mouthing off in emails with the attorney. Doesn't show up to court. Big mold problem. Isn't respecting the system . . . it's just reprehensible conduct. It goes on, and on, and on. Throw the book at him.... [W]e can't let him do this to somebody else.... [W]e're asking for a minimum of 200-grand in the punitive damages, a minimum. Just don't let him do this to other people. Get his attention.
¶39 After review of the verdict forms, the jury retired to deliberate. In less than one hour, they returned a unanimous verdict in favor of Goldstein on all claims, finding that punitive damages were merited in the amount of $1 million. The trial court then entered judgment as to all claims other than punitive damages, including for collective compensatory damages in the amount of $45,068, "pursuant to the Rule 50 motion and without objection by the defendant."
¶40 The trial court ordered Goldstein to submit a form of judgment and application for attorney fees. She did so, requesting approximately $76,000 in attorney fees and costs. MWM objected to the proposed form of judgment. In that filing, it raised a number of legal challenges to the jury's verdicts, including attacking the $1 million punitive damages award as "beyond excessive" and unconstitutional. In reply, Goldstein argued that MWM's objection was improper and should not be considered, as it was "really a disguised Rule 59 motion" seeking to "challenge the merits of the trial and propriety of the verdict rendered by the Jury."
MWM also argued that all of Goldstein's tort claims besides consumer fraud were "unequivocally barred as a matter of law by the economic loss doctrine," that no legal basis allowed for the recovery of accruing costs and attorney fees incurred in an attempt to collect the judgment, and that MWM and Gojcaj could not be held jointly and severally liable on Goldstein's tort claims.
¶41 On December 13, 2022, the trial court entered final judgment. It reaffirmed the judgment under Rule 50 as to $45,068 in full compensatory damages. It further ordered that the jury's "unanimous verdict as to punitive damages" is against MWM and Gojcaj "jointly and severally on the three fraud claims for a total of $1,000,000." And, finding that Goldstein was entitled to attorney fees on all claims-both because they arise out of contract and as "a sanction for defendants' misconduct at trial"-the court awarded an additional $76,164.50 in attorney fees and costs.
¶42 MWM filed no renewed motion for JMOL under Rule 50(b) or motion for new trial under Rule 59, Ariz. R. Civ. P. Instead, MWM filed a notice of appeal on January 6, 2023. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
Constitutionality of Punitive Damages Award
¶43 MWM contends the jury's $1 million punitive damages award in this case is "unconstitutionally excessive" because it "pierces far beyond the outer bounds of due process." It asks us to vacate that portion of the judgment and either "remand for a new trial on the existence and amount of punitive damages" or, in the alternative, to "drastically reduce the punitive damages awarded" to "not more than $45,068," a one-to-one ratio with the unchallenged compensatory damages.
¶44 "[A]lthough punitive damages awards under the common law are not subject to any statutory limits and are generally left to the jury's discretion, Arizona courts quite often overturn or reduce excessive punitive damages awards based on constitutional limitations." Orca Commc'ns Unlimited, LLC v. Noder, 236 Ariz. 180, ¶ 13 (2014). In particular, due process "prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor" because a "grossly excessive" award "furthers no legitimate purpose and constitutes an arbitrary deprivation of property." State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416-17 (2003). As such, the United States Supreme Court has instructed courts reviewing punitive damages to consider three guideposts: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." Id. at 418; see also Arellano v. Primerica Life Ins. Co., 235 Ariz. 371, ¶ 35 (App. 2014).
¶45 MWM contends that we are "obligated to review de novo the amount of punitive damages awarded." It misstates the law. The Supreme Court has "mandated appellate courts to conduct de novo review of a trial court's application of [the three foregoing guideposts] to the jury's award." State Farm, 538 U.S. at 418; see also, e.g., Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 436 (2001) (holding that "courts of appeals should apply a de novo standard of review when passing on [trial] courts' determinations of the constitutionality of punitive damages awards"); Hudgins, 221 Ariz. 472, ¶ 51 ("We review the trial court's application of these guideposts to the jury's punitive damages awards de novo." (emphasis added)); Sec. Title Agency, Inc. v. Pope, 219 Ariz. 480, ¶ 94 (App. 2008) ("Appellate courts are to conduct a de novo review of the trial court's application of the guideposts to the jury's award." (emphasis added)). Nowhere do these cases establish that an appellate court is obligated to conduct de novo review of the constitutionality of a punitive damages award when that issue was never properly raised before, or addressed by, the trial court. Indeed, each of the cases cited by MWM on the issue of the constitutionality of punitive damages awards involved review by this court in the context of a prior determination by a trial court.
See Nardelli v. Metro Grp. Prop. & Cas. Ins. Co., 230 Ariz. 592, ¶¶ 1-2, 16 (App. 2012) (challenging trial court denial of defendant's renewed motion for JMOL on plaintiff's entitlement to punitive damages, as well as its reduction of jury's award of punitive damages); State Farm, 538 U.S. at 415-16 (reviewing punitive damages award reinstated by state supreme court after trial court reduced award returned by jury); Pope, 219 Ariz. 480, ¶¶ 1, 40 (addressing whether trial court erred in setting aside punitive damages award following motions for JMOL and new trial); BMW of N.Am., Inc. v. Gore, 517 U.S. 559, 565-66 (1996) (reviewing trial court denial of defendant's post-trial motion to set aside punitive damages award); Hudgins, 221 Ariz. 472, ¶¶ 1, 37, 49, 51 (challenge to trial court denials of motions for JMOL and new trial, as well as its refusal to "either negate or reduce" jury's punitive damages award); Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 20, 23 (1991) (noting that state supreme court had established post-trial procedures for scrutinizing punitive damages awards that "ensures meaningful and adequate review by the trial court whenever a jury has fixed the punitive damages," and finding defendant had benefited from that procedural protection through trial court's compliant post-verdict hearing, as well as adequate jury instructions and state supreme court's review); Hardeman v. Monsanto Co., 997 F.3d 941, 950 (9th Cir. 2021) (where district court had reduced jury's punitive damages award); Arellano, 235 Ariz. 371, ¶¶ 17, 33 (challenge to trial court denial of defendant's motion to reduce punitive damages award).
¶46 Here, there is no trial court application of the Supreme Court's guideposts for us to review de novo. As detailed above, at the close of the evidence, MWM made a number of motions for JMOL under Rule 50(a), all of which the trial court denied. Presumably because the jury had yet to return its verdict, none of those motions asked the court to address the guideposts creating constitutional limits for a punitive damages award. After the jury returned its verdict awarding $1 million in punitive damages, MWM briefly challenged the award's constitutionality in its December 5th objection to Goldstein's proposed form of judgment. But, as we have explained, the plain language of the portions of Rule 58, Ariz. R. Civ. P., governing objections to a proposed form of judgment "contemplates its use as a means to object to the form of judgment only, not its substance." United Bank of Ariz. v. Allyn, 167 Ariz. 191, 197 (App. 1990).
¶47 MWM never filed anything more with the trial court after it entered judgment on December 13, 2022. MWM had fifteen days-until December 28-to file a renewed motion under Rule 50(b) for JMOL, a motion for new trial under Rule 59, or both. See Ariz. R. Civ. P. 50(b); Ariz. R. Civ. P. 59(b)(1). MWM could have used such motions to challenge the sufficiency of the evidence to support the jury's findings of liability, the sufficiency of the evidence to support the jury's punitive damages award (including that it was the result of passion or prejudice), or that the $1 million punitive damages award was unconstitutionally excessive. See Ariz. R. Civ. P. 50(b); Ariz. R. Civ. P. 59(a)(1)(E), (G), (H), (f); see also, e.g., Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 494, 500-02 (1987) (reaching and rejecting properly preserved claim that amount of punitive damages not justified by evidence). Either type of motion could have provided the trial court with the opportunity to address the sufficiency of the evidence to support the punitive damages awarded or the constitutionality of that award. Indeed, Rule 59 provides special procedures for a motion for new trial on the ground of excessive damages and allows a trial court to grant a new trial only on the issue of damages, if appropriate. Ariz. R. Civ. P. 59(e)-(f).
¶48 But, again, MWM filed no such motion. It so failed even though Goldstein had pointed out on December 9, before the judgment was entered, that the arguments raised in MWM's objection to the proposed form of judgment needed to be raised instead in a motion for new trial under Rule 59. MWM filed only a notice of appeal on January 6, 2023.
¶49 MWM's failure to file any post-judgment motions with the trial court has various consequences. First, it deprives us of jurisdiction to entertain any claim that the evidence was insufficient to support the verdict or judgment, whether in terms of liability, Goldstein's entitlement to punitive damages, or the amount of such damages. See A.R.S. § 12-2102(C) (on appeal from final judgment, appellate court "shall not consider the sufficiency of the evidence to sustain the verdict or judgment in an action tried before a jury unless a motion for a new trial was made"); Marquette Venture Partners II, L.P. v. Leonesio, 227 Ariz. 179, ¶¶ 9, 13 (App. 2011) (holding, as matter of first impression, that although Rule 50(b) motion satisfies "motion for new trial" requirement, Rule 50(a) motion is "insufficient to satisfy the jurisdictional requirement of § 12-2102(C)"). Second, that failure deprives us of any trial court ruling on the subject for us to review, as well as any trial judge findings or party briefing that would have been gathered to inform such a ruling. See, e.g., Nardelli v. Metro Grp. Prop. &Cas. Ins. Co., 230 Ariz. 592, ¶ 16 (App. 2012) (trial court reduced jury's award of punitive damages "after extensive briefing"). MWM's failure to meaningfully participate in discovery further compounds any ability this court might have to properly address the constitutionality of the punitive damages ultimately awarded.
¶50 Notably, MWM refrains from presenting on appeal any sufficiency of the evidence claim, which we would be statutorily barred from addressing. § 12-2102(C); Leonesio, 227 Ariz. 179, ¶¶ 7, 13, 24. Instead, MWM raises only the constitutional argument, which we are not jurisdictionally prohibited from considering. Id. ¶ 24. But such consideration "is discretionary with this court." Hawkins, 152 Ariz. at 503. Under circumstances involving less trial court misconduct than occurred in this case, our supreme court has refused to address the constitutionality of a substantial punitive damages award raised for the first time on appeal. Id. at 494, 502-03 (involving challenge to constitutionality of $3.5 million punitive damages award when jury had awarded only $15,000 in compensatory damages). There, it observed: "Whether this court should review a question raised here for the first time depends upon the facts and circumstances disclosed by the particular record. It undoubtedly has the power, but ordinarily will not exercise it." Id. at 503 (quoting Town of S. Tucson v. Bd. of Supervisors, 52 Ariz. 575, 582 (1938)); see also Nielson v. Patterson, 204 Ariz. 530, n.3 (2003) (noting that, in Hawkins, Arizona Supreme Court "admonished a party for raising a constitutional issue for the first time on appeal").
¶51 Given the unique procedural history of this case outlined in detail above, which would compromise our ability to review the determinations of either the jury or trial court under the appropriate constitutional guidelines, we decline to exercise our discretion to address MWM's constitutional claim, not properly raised until this appeal. See, e.g., id.; Leonesio, 227 Ariz. 179, ¶ 25.
¶52 Nor does the record provide us a compelling reason to do so. The trial court instructed the jury on punitive damages. Those instructions, approved by both parties, conformed to the pertinent Revised Arizona Jury Instruction. See Rev. Ariz. Jury Instr. (Civil) Personal Injury Damages 4 (7th ed. 2018). And, trial courts stand in "a better position to assess whether punitive damages were appropriate after hearing the evidence." Leonesio, 227 Ariz. 179, ¶ 25. Indeed, the court in this case heard more testimony from MWM than the jury did. Due to Gojcaj's resistance to appearing for his deposition, it was ultimately held in court, which-along with his under-oath electronic appearance during day two of trial-gave the court more of an opportunity to hear his testimony and observe his demeanor than the jury ever received. We also note that the court displayed significant restraint, repeatedly rejecting Goldstein's requests that MWM's dismissive behavior toward Goldstein, the legal process, and the court be treated as dispositive.
Our supreme court has directed that jurors "should be instructed to consider all aspects of fairness and justice in deciding whether, and in what amount, to award punitive damages," and "reminded of its right to decline a punitive verdict altogether." Haralson v. Fisher Surveying, Inc., 201 Ariz. 1, ¶ 20 (2001). Such instructions are a key part of the "safeguards [that] exist, and should be utilized, to protect against arbitrary, exorbitant, or otherwise improper verdicts." Id. Here, the trial court instructed the jury as required, highlighting some of the factors the jury might consider, and repeatedly emphasizing that the jury could properly decline to award punitive damages altogether.
¶53 In short, after repeatedly giving MWM the benefit of the doubt, and after hearing more testimony from Gojcaj than the jury heard, the trial court entered judgment awarding the full measure of punitive damages awarded by the jury. MWM never asked for reconsideration or examination of that award by the court. See Aloia v. Gore, 252 Ariz. 548, ¶ 12 (App. 2022) ("Rule 59 sets forth the procedure to contest the constitutionality of a jury's punitive damages award when a defendant does not timely move for a judgment as a matter of law under Rule 50."); see also Hawkins, 152 Ariz. at 503 (in light of case's procedural history, "we believe it does not promote sound appellate practice to consider issues so belatedly urged").
¶54 Finally, as our supreme court further explained in Hawkins when declining to reach an unpreserved constitutional challenge to an award of punitive damages, "This is not a case involving denial of a fundamental constitutional right in a criminal trial nor contentions which affect the jurisdiction of the court, and we do not feel compelled to exercise our discretion." 152 Ariz. at 503. The same is true here.
¶55 As noted above, in Hawkins our supreme court also rejected a properly preserved challenge to the sufficiency of the evidence to support a jury's award of punitive damages. 152 Ariz. at 494, 500-02. This, together with the refusal to exercise its discretion to reach the unpreserved due process challenge, resulted in the court affirming the jury's verdict awarding $3.5 million in punitive damages alongside $15,000 in compensatory damages, a ratio of more than 233 to one. Id. at 494, 500-02, 505. Thus, even taking as accurate for the sake of argument MWM's claim that "Arizona has repeatedly recognized" a four-to-one ratio "as the maximum outer limit" for punitive damages, such constraints do not apply when a court does not reach the constitutional question.
Negative Inference Instruction
¶56 MWM also contends the trial court committed fundamental error by providing to the jury an "open-ended, utterly-unbounded" negative inference instruction that "resulted in an excessive punitive damages award that deprived Gojcaj of his constitutional right to due process." He characterizes the court's instruction as having told the jury "that it had carte blanche to take action against Gojcaj, thus allowing the jury to ultimately award an excessive amount of punitive damages."
¶57 As an initial matter, MWM's claim assumes the conclusion that the punitive damages awarded by the jury were unconstitutionally excessive-an issue we do not reach for the reasons articulated above. The argument also takes the trial court's negative inference instruction out of context. "We review jury instructions 'as a whole with an eye toward determining whether the jury was given the proper rules of law to apply in arriving at its decision.'" Pope, 219 Ariz. 480, ¶ 43 (quoting Thompson v. Better-Bilt Aluminum Prods. Co., 187 Ariz. 121, 126 (App. 1996)). We will not overturn a verdict as a result of even improper jury instructions unless substantial doubt exists as to whether the trial court properly guided the jury in its deliberations. Id.
¶58 As noted above, on the first day of trial, before MWM's counsel had been provided with any explanation for Gojcaj's absence, the trial court said it would "give him the day to show up" and then discuss possible sanctions, including possibly "instructions concerning presumptions." The court then clarified that, if Gojcaj failed to appear and Goldstein's ability to call him as a witness was "taken away" as a result, the court could "fashion an instruction regarding presumptions"-a negative inference instruction. The court then stated that, although it "would not entertain a default" at that time, "other contempt sanctions" were also available, including converting the matter to a bench trial.
¶59 Early on the second day of trial, over Goldstein's objection, and giving Gojcaj a substantial benefit of the doubt, the trial court advised the jurors that Gojcaj's absence was excused for the first two days of trial due to illness and that they should not hold that absence against him. At the end of the day, the court advised MWM's counsel that Gojcaj was expected to appear for the third day of trial and that there should be "an expectation of sanctions" if he failed to do so. The court indicated that it would "entertain anything" in fashioning an appropriate sanction for a continued failure to appear-including any case law MWM's counsel thought should be considered-emphasizing that Goldstein "has the right to get her case heard to completion, and she's had to wait, again due to no fault of her own."
¶60 When Gojcaj did not appear as ordered for the third day of trial, the trial court ordered his counsel to attempt to contact him. Those efforts were unsuccessful, and the parties extensively discussed how the court should proceed given Gojcaj's failure to appear and Goldstein's resulting inability to call him as a witness. MWM's counsel argued against the entry of a default judgment, which Goldstein had requested, but otherwise deferred to the court. After the court made clear that it would not be entering default judgment or a directed verdict, Goldstein opted to proceed with the reading of excerpts of Gojcaj's deposition rather than move the trial into a fourth day. When the jury returned, the court instructed as follows, with no objection from MWM's counsel:
[T]he Court ordered and directed directly to Mr. Gojcaj that he be present today for trial so Plaintiff could . . . call him as a witness, as they're entitled to do.
Mr. Gojcaj is not present today. There is no good cause for his failure to appear today in court. You may take any negative inference you wish concerning his failure to appear. You can imply that in favor of Plaintiff against Defendant at your discretion. What we're about
to do in lieu of his live testimony is Plaintiff is going to read portions of his pre-trial deposition. You can take Defendant's failure to appear into account when assessing his credibility when you hear his testimony via the deposition.
The reading of the deposition excerpts followed immediately afterward.
¶61 In challenging the trial court's negative inference instruction, MWM ignores the context in which it was provided to the jury: as an introduction to the reading of Gojcaj's deposition testimony. MWM also ignores the court's language expressly tying the negative inference instruction to how jurors could be expected to assess Gojcaj's credibility when his testimony was only being provided through a reading of his words by others.
¶62 Notably, by providing the negative inference instruction in this way, the trial court imposed a sanction that was more limited than others it had considered. Earlier that day, when discussing with the parties what sanction should be imposed for Gojcaj's failure to appear, the court had also articulated the possibility of providing a negative inference instruction untethered from any discussion of Gojcaj's testimony, immediately before final jury instructions and closing arguments. Instead, as explained, the court opted for the more narrowly tailored sanction of tying the instruction to Gojcaj's failure to appear to provide live testimony and the resulting reading of the transcript from his deposition.
¶63 Thus, contrary to MWM's contention at oral argument, the trial court took precautions to deliver the negative inference instruction in the context of the deposition testimony, reducing any risk the jury might apply it too broadly. By the court's design, the court's final instructions to the jury on the legal criteria for imposing punitive damages were delivered at the conclusion of the presentation of the evidence. They were provided to the jury both orally and in writing. In them, the court made no mention of Gojcaj's failure to appear or the negative inference instruction that had been provided earlier in the context of the reading of the deposition transcript.
¶64 We must presume that the jury followed the punitive damages instructions given nearer in time to its deliberations. See Hudgins, 221 Ariz. 472, ¶ 16. Furthermore, we presume jurors understand individual instructions in the context of the other instructions they have been provided. See Pope, 219 Ariz. 480, ¶ 43. Therefore, MWM has failed to establish any doubt-much less substantial doubt-that the trial court properly guided the jury in its deliberations. See id. Furthermore, as the court's sanction for Gojcaj's failure to appear, the negative inference instruction arguably inured to MWM's benefit: it was provided in lieu of granting Goldstein's arguably meritorious request for a default judgment.
Attorney Fees and Costs
¶65 Goldstein requests an award of her attorney fees on appeal pursuant to Ariz. R. Civ. App. P. 21(a) and A.R.S. § 12-341.01(A) (permitting award of reasonable attorney fees to successful party in "any contested action arising out of a contract"). In our discretion, we grant that request. MWM's appeal leverages its own refusal to meaningfully participate in the litigation below and asserts arguments not properly presented to the trial court. MWM emphasizes perceived gaps in the evidence arising primarily from those failures. In the interests of justice, we decline to impose the expense of defending such an appeal on Goldstein. See § 12-341.01(B) (award of fees under this section "should be made to mitigate the burden of the expense of litigation"). As the prevailing party, Goldstein is also entitled to recover her costs on appeal, A.R.S. § 12-341, upon her compliance with Rule 21(b).
Disposition
¶66 For the foregoing reasons, we affirm the judgment of the trial court and award Goldstein her attorney fees and costs on appeal.