Opinion
No. 1 CA-CV 11-0242
02-28-2012
K-J PLUMBING, L.L.C., an Arizona limited liability company; BRIAN and CINDY NEDBERG, husband and wife, Plaintiffs/Appellants, v. QUARLES & BRADY, LLP, a foreign limited liability partnership; ROBERT K. JONES and ANDREA C. JONES, husband and wife; DAVID T. BART and TAUNA BARTON, husband and wife; BENJAMIN J. NAYLOR; ISAAC M. GABRIEL, Defendants/Appellees.
Ryan, Rapp & Underwood, P.L.C. By Richard A. Kasper Jeffrey B. Landa, Pro Hac Vice Robert A. Waller, Jr., Pro Hac Vice Attorneys for Plaintiffs/Appellants Polsinelli Shughart PC By Marty Harper and Kelly J. Flood Attorneys for Defendants/Appellees
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. CV2008-030807
The Honorable Larry Grant, Judge
APPEAL DISMISSED IN PART; JUDGMENT AFFIRMED IN PART, VACATED IN
PART, AND REMANDED
Ryan, Rapp & Underwood, P.L.C.
By Richard A. Kasper
Jeffrey B. Landa, Pro Hac Vice
Phoenix
And
Robert A. Waller, Jr., Pro Hac Vice
Attorneys for Plaintiffs/Appellants
Encintas, CA
Polsinelli Shughart PC
By Marty Harper
and Kelly J. Flood
Attorneys for Defendants/Appellees
Phoenix HALL, Judge
¶1 K-J Plumbing, L.L.P., and Brian and Cindy Nedberg (collectively, Appellants) appeal the trial court's dismissal of their complaint. For the following reasons, we dismiss the appeal in part, and affirm in part and vacate in part the remaining portions of the judgment, and remand.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Brian Nedberg, Robert Gibb, Gregory Gibb, and James Gibb, the four original members of Gibb Plumbing, LLC, based in Fargo, North Dakota, purchased K-J Plumbing, Inc. in January 2004 from Kenneth Johnson. The purchase and sale agreement contained a covenant not to compete, which stated in relevant part:
They later changed the name to K-J Plumbing, L.L.C.
[K-J Plumbing, Inc.] and Johnson agree that for a period of three (3) years after the Time of Closing, they will not engage as an individual or as a stockholder, partner, director, officer, principal, agent, employee, trustee, creditor, financier or representative of any person, firm, corporation or association, or have any interest, direct or indirect, in any business in competition with the business of the Seller as that business is constitute at the Time of Closing within the State of Arizona. Seller and Johnson further agree that they will not directly or indirectly assist or encourage any other person tocarry on a business or activity that would be prohibited by this paragraph.
¶3 K-J Plumbing retained Ernesto De La Huerta, who had served as the foreman for K-J Plumbing, Inc., and K-J Plumbing operated in Arizona under De La Huerta's license. In 2005, K-J Plumbing believed that De La Huerta, with the help of Kenneth Johnson, solicited several of K-J Plumbing's clients in an effort to obtain their business for himself. As a result, Nedberg contacted Quarles & Brady LLP (Quarles & Brady) to explore K-J Plumbing's legal options. Nedberg spoke with Quarles & Brady partner Robert Jones, who referred the case to another Quarles & Brady partner, David Barton. Nedberg explained his concerns about De La Huerta to Barton and they discussed the option of filing a lawsuit against De La Huerta after Barton conducted research. On June 2, 2005, Robert Jones sent an engagement letter to Nedberg by both fax and mail, which Nedberg signed. The letter stated in relevant part, "we will strive to provide the most economical service to you that we can" and "[f]ees and costs relating to legal services are not predictable. Accordingly, we have made no commitment to you concerning that maximum fees and costs that will be necessary to resolve this matter." The letter also stated, "Since the outcome of negotiations (and litigation) is subject to factors that cannot always be foreseen, such as the uncertainties and risk inherent in the litigation process, it is understood that we have made no promises or guarantees to you concerning the outcome of this or any other matter and cannot do so."
¶4 On June 7, 2005, Barton, Nedberg, Robert Gibb, and Gregory Gibb participated in a telephonic conference to explore their legal options against De La Huerta. Barton presented three options during the conference call and the approximate cost of each option: send a letter to De La Huerta for approximately $500.00, file a lawsuit for approximately $2000.00 (and prosecute for approximately $40,000.00-$50,000.00), or file an injunction. The conference call resulted in a mutual understanding that Quarles & Brady would represent K-J Plumbing. On June 14, 2005, Quarles & Brady filed a complaint against De Le Huerta, asserting he breached the duty of loyalty owed to K-J Plumbing.
¶5 Several months after hiring Quarles & Brady, K-J Plumbing decided to file suit against Kenneth Johnson as well. Prior to filing an amended complaint adding Johnson as a defendant, Barton sent Nedberg an email stating, "Please understand that these amended claims will increase significantly the stakes in this litigation. We anticipate that Ken Johnson will fight hard to defeat this claim and the result will be significantly increased legal fees. . . . Although we can never guarantee a result, I believe you have a very good chance of prevailing based on Neil Feinstein's affidavit and the other evidence we have amassed in this case. If you have questions or concerns about this, please call me."
K-J Plumbing ultimately settled the lawsuit against Johnson by paying the balance owed on its purchase of the business.
¶6 Quarles & Brady sent Nedberg and Robert Gibb detailed monthly invoices for their review and payment. A year into the litigation, Appellants' attorneys' fees were approximately $100,000.00. Nedberg spoke with Quarles & Brady about the fees, but ultimately decided to continue the lawsuit, based, in part, on information from Feinstein that Nedberg provided to Quarles & Brady about De La Huerta's conduct and Johnson's "intentions."In 2007, Barton stated that he advised Nedberg and the Gibbs that in addition to costs already incurred, K-J Plumbing would incur approximately another $173,000.00 to continue litigation against De La Huerta. K-J Plumbing nonetheless decided not to settle and to continue its lawsuit against De La Huerta. In mid-2007, after K-J Plumbing permanently fell behind in its payments, Quarles & Brady created an alternative payment plan under which K-J Plumbing could pay a lesser amount of $7500.00 each month.
Feinstein allegedly provided Nedberg with information that Johnson helped De La Huerta "solicit" K-J Plumbing's clients.
By the time that Quarles and Brady withdrew in July 2008, K-J Plumbing had paid only $216,493.86 of the total bill of $407,990.35.
¶7 K-J Plumbing and De La Huerta entered into settlement negotiations and Quarles & Brady provided K-J Plumbing with a final settlement agreement on June 16, 2008. Pursuant to the settlement agreement, the De La Huertas were to pay K-J Plumbing $120,000.00, beginning with an initial payment of $48,000.00, followed by sixty equal monthly payments of $1200.00. In the event that the De La Huertas defaulted, the agreement provided that the De La Huertas would pay K-J Plumbing $593,000.00.
¶8 Meanwhile, K-J Plumbing, who had become dissatisfied with Quarles & Brady's legal representation, retained Jeffrey B. Landa, an attorney licensed to practice law in California. On June 23, 2008, Landa sent an email to Quarles & Brady, stating:
We represent K-J Plumbing, LLC in matters regarding services rendered by you and others in K-J Plumbing et al. v. De La Huerta et al. Our evaluations reveal a variety of errors and omissions, ongoing breaches of ethical/fiduciary obligations and a continuous pattern and practice of disturbing billing practices. Please advise your carrier of potential malpractice litigation so that we may communicate with your legal representatives at their earliest convenience to mutually determine the most efficient way to resolve this matter. . . .
As to the De La Huerta matter, we understand that you have dismissed defendant Johnson and have advised our clients to accept a settlement that is scheduled to be consummated within the next week or so. You are not
authorized to distribute any settlement proceeds to any person or entity other than K-J Plumbing, LLC. More specifically, those proceeds are not to be applied to any alleged indebtedness or charging lien claimed by you.
Please discontinue all communications with our client. We will be pleased to serve as an intermediary re the pending settlement in order to facilitate otherwise uncomfortable communications. (Emphasis in original).
¶9 On June 27, Quarles & Brady wrote Landa that it had "referred this matter to internal review here at Quarles. Given the threats made in your letter, we cannot do anything further toward consummating the settlement or litigating the case until that review is complete." Landa responded on June 30 that "I'm not sure delay or withdrawal is in K-J's best interests because, among other things, [De La Huerta's] access to money is apparently limited. Also, it would take another lawyer considerable time to fully understand the case. If you are unwilling to continue, please forward me the contact information so that I may contact opposing counsel on behalf of K-J."
¶10 On July 1, Quarles & Brady replied:
Based [on the internal review] of the matter, your claim that there have been errors and omissions, breaches of ethical/fiduciary obligations and disturbing billing practices is completely unfounded. . . . Your letter and subsequent email send conflicting messages. On the one hand, you imply that the De La Huerta matter was not handled properly and the settlement terms are not favorable to K-J Plumbing. At the same time, you appear to want us to consummate the settlement before the status conference on July 7, 2008. Under these circumstances, we can proceed one of two ways: (1) We can go ahead and finalize the settlement, but only if the client expressly directs us to do so and confirms that the
settlement terms are satisfactory; (2) We can postpone the status conference and suspend the settlement negotiations until you or some other attorney is substituted as counsel of record for K-J Plumbing. Please advise how you and the client want to proceed.
¶11 Landa responded that day, "Under the circumstances you describe, the best course would be for you to postpone the status conference and provide me with the names and contact information of opposing counsel."
¶12 The following day, on July 2, Quarles & Brady replied to Landa:
Per your request, we are contacting the court and opposing counsel and requesting a short postponement of the status conference on Monday. Please note that there are no guarantees that the court will grant such request, or that the opposing counsel will consent to such. We are also going to advise [De La Huerta's counsel] that all future communications are to be through your office.Further, Quarles & Brady provided Landa with the De La Huertas' counsel's information and stated "we do hereby confirm our withdrawal as counsel of record [and we] will prepare a Stipulation and Order for Substitution of Counsel, to be signed by the client and yourself, for filing with the court."
¶13 Also on July 2, the De La Huertas' attorney contacted Landa regarding the settlement agreement: "Here are the documents with the final changes that my clients have agreed to. Mr. De La Huerta is bringing in the $48,000 on Monday. I look forward to hearing from you."
¶14 On July 8, Landa responded: "I should have the settlement docs signed and returned to me within the next couple days. I'll forward them to you upon receipt. If you have no objection, I'll be changing the stipulation to have Robert Gibb sign them as pro se and remove Q&B from the documents as they are no longer cooperating with settlement issues." The De La Huertas' attorney replied that evening: "Since no settlement documents have been received and no response has been received as to whether the changes demanded by Mrs. De La Huerta are acceptable, the De La Huertas hereby withdraw their current offer to settle and are prepared to go to trial." The De La Huertas' attorney further stated that the De La Huertas' were extending a "one time settlement offer [of $60,000.00] in complete settlement of all claims between the parties." K-J Plumbing did not accept that settlement offer.
Mrs. De La Huerta objected to paying funds directly to Nedberg, instead offering to pay those same funds to K-J Plumbing.
¶15 After the parties were unsuccessful in completing the stipulated substitution of counsel, Quarles & Brady filed a motion to withdraw as counsel for K-J Plumbing and a separate certificate of counsel on July 15, 2008, which was one week after the De La Huertas withdrew their offer. The court signed the order for withdrawal.
¶16 After the trial court denied Appellants' motion to enforce the initial settlement agreement, K-J Plumbing and the De La Huertas entered into a "walk-away" settlement agreement on February 23, 2009, in which neither party paid any money to the other.
¶17 In January 2009, Appellants filed a first amended complaint against Quarles & Brady alleging the following seven counts: (1) breach of fiduciary duty—constructive fraud as to billing practices, (2) breach of fiduciary duty-constructive fraud as to failure to disclose, (3) professional negligence— legal malpractice, (4) breach of express written contract, (5) breach of implied covenant of good faith and fair dealing, (6) commercial fraud and/or common law fraud, and (7) negligent misrepresentation. Quarles & Brady moved to dismiss all counts in the first amended complaint, arguing, in part, that Appellants' claims of breach of fiduciary duty did not state a cognizable claim and the contract-based claims failed to state a cause of action because duties owed by attorneys to clients arise in tort not contract. The court eventually dismissed all claims except for legal malpractice.
Quarles & Brady argued that the legal malpractice claim should be dismissed as premature because it could not accrue until there was a final judgment in the underlying lawsuit and any appeal is concluded. The underlying lawsuit was resolved in February 2009 when the De La Huertas and K-J Plumbing entered into their "walk-away" agreement and the action was dismissed with prejudice.
¶18 In December 2009, Appellants filed a third amended complaint, which alleged professional negligence—legal malpractice, fraudulent inducement, fraudulent concealment, and fraud, and included a claim for punitive damages. Quarles & Brady moved for summary judgment on the legal malpractice claim, arguing that Appellants could not prove a causal link because its experts offered no opinions on causation. Quarles & Brady also moved for summary judgment on the remaining three claims for relief, fraudulent inducement, fraudulent concealment, and fraud, arguing that Appellants could not produce sufficient evidence to support their claims. The court granted Quarles & Brady's motions for summary judgment.
Based on our resolution of the issues on appeal, we need not address other grounds asserted by Quarles & Brady in their motion for summary judgment. Quarles & Brady also filed a counterclaim against Appellants for breach of contract and unjust enrichment based on unpaid attorneys' fees, which the court stayed based on the parties' stipulation pending the outcome of this appeal.
¶19 Appellants timely appealed the court's ruling. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-2101(B) (2003).
DISCUSSION
¶20 Appellants argue that the court erred by dismissing its contract and fiduciary claims from the first amended complaint and granting summary judgment on its legal malpractice, fraudulent inducement to enter into a contract, fraudulent inducement to continue litigation, fraudulent concealment, fraud, and punitive damages claims on its third amended complaint. I. Standard of Review
¶21 We review de novo the trial court's dismissal of claims for failure to state a claim pursuant to Arizona Rules of Civil Procedure (Rule) 12(b)(6). Canyon Ambulatory Surgery Ctr. v. SCF Arizona, 225 Ariz. 414, 417, ¶ 7, 239 P.3d 733, 736 (App. 2010). We also review de novo the grant of a motion for summary judgment. Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 199, ¶ 15, 165 P.3d 173, 177 (App. 2007). The moving party has the burden of proving no genuine issue of material fact as to each element of its claim, and all defenses, and that it is entitled to judgment as a matter of law. Orme Sch. v. Reeves, 166 Ariz. 301, 310, 802 P.2d 1000, 1009 (1990). If the moving party meets its burden, the burden shifts to the opposing party to produce sufficient evidence indicating that an issue of material fact exists as to one or more elements of the claim or defense. Doe v. Roe, 191 Ariz. 313, 323, ¶ 33, 955 P.2d 951, 961 (1998); Ariz. R. Civ. P. 56(c). Summary judgment is warranted when the facts produced to support a claim or defense "have so little probative value, given the quantum of evidence required, that reasonable people could not agree with the conclusion advanced by the proponent of the claim or defense." Orme Sch. , 166 Ariz. at 309, 802 P.2d at 1008. We must determine whether any genuine issues of material disputed fact exist and, if not, whether the trial court correctly applied the substantive law. In re Estate of Johnson, 168 Ariz. 108, 109, 811 P.2d 360, 361 (App. 1991). We also affirm the trial court if it reaches the correct result for the wrong reason. See Reeves v. Barlow, 227 Ariz. 38, 41, ¶ 12, 251 P.3d 417, 420 (App. 2011).
II. Fraudulent Inducement
¶22 Our rules of civil appellate procedure require that an appellant's brief "concisely and clearly set forth . . . [a] statement of facts relevant to the issues presented for review, with appropriate references to the record" and "[a]n argument which shall contain the contentions of the appellant with respect to the issues presented, and the reasons therefore, with citations to the authorities . . . and parts of the record relied upon." ARCAP 13(a)(4), (6). As explained below, Appellants' brief with respect to its assertions that the trial court erred in granting Quarles & Brady summary judgment regarding the two counts of fraudulent inducement in its third amended complaint do not minimally comply with ARCAP 13(a)(4), (6). We therefore dismiss those claims without considering their merits.
Fraudulent Inducement of Contract
¶23 Here, we highlight only one aspect of Appellants' argument—that relating to the claimed falsity of the representations. As support for its claim that Quarles & Brady made false or fraudulent representations, Appellants merely state on page 42 of their opening brief:
The contract is replete with Jones' statements regarding the intentions of third person timekeepers, who (other than Barton) were unknown at the time the contract was written. . . . Evidence that the above representations were knowingly false was submitted in opposition to summary judgment. [IR-94:6(¶72); fns6, 7, 12, 14, 16, 61)] Evidence that representations were fraudulent in nature was also submitted in opposition. [fns4-6, 9-13, 15, 17)].Although these statements might be part of an appropriate section heading, they are conclusory and only invite us to look elsewhere for supporting evidence, and are otherwise not helpful to us in our review. For example, even though Appellants claim the contract is "replete" with evidence of third person timekeepers' intentions, they fail to provide any record citations directing this court to such evidence of those fraudulent intentions. Moreover, the series of footnotes purporting to direct the court to specific evidence are confusing and generally do not support the claims being made.
¶24 For example, as excerpted above, page 42 of Appellants' opening brief directs the reader to footnote 6 of the opening brief, which, after it is located at page 4 of the opening brief, refers the reader to a series of record references and exhibits, including 46, 55, 57, 58, 59, and 67 in their entirety. Those exhibits, however, contain such information as the following: a 2007 Quarles & Brady partner evaluation of an attorney, which states, in part, that the partner "[c]omplie[d] with highest ethical standards and instill[ed] this commitment in others. Perceived as an exceptional Attorney who produce[d] high quality work in a timely manner . . . Provide[d] excellent service to all Firm clients . . . Delegate[d] staff[] and supervise[d] legal work appropriately;" an evaluation of a paralegal; an innocuous explanation of a firm's policy on paralegal salaries and associate compensation salaries, paralegal bonus and overtime salaries; and a copy of Metro Data Systems v. Durango Systems, Inc. , 597 F. Supp. 244 (D. Ariz. 1984), a memorandum opinion granting attorneys' fees in a lesser amount than requested, due, in part, to criticism of the firm's billing. Footnote 6 also includes a reference to a deposition of a partner at Quarles & Brady explaining the firm's fixed salary and overtime polices for paralegals; a positive self-evaluation and partner evaluation of a Quarles & Brady associate; a positive self- evaluation and partner evaluation of a paralegal; a deposition of an associate explaining that Quarles & Brady had billable hour requirements; portions of Nedberg's deposition but not containing the page number Appellants cited. The deposition of Quarles & Brady partner Robert Jones includes pages cited by Appellants containing the following information: an explanation of when the partner first spoke with Nedberg; an explanation that in order to become a partner at Quarles & Brady, one has to demonstrate diligent and economical service to clients; that the partner, associate, and paralegal working on the K-J Plumbing case did not report to him; Landa's questions about other Quarles & Brady partners not working on the K-J Plumbing case and whether they were partners at the time K-J Plumbing employed Quarles & Brady; a citation to Metro Data Systems, 597 F. Supp. 244, that the partner was unfamiliar with; and an explanation that Quarles & Brady had a very lenient policy for associates that did not meet the minimum billing requirements.
¶25 Finally, footnote 6 cites to Appellants' statement of controverting facts, which quoted information about Quarles & Brady's billable requirements, provided excerpts of evaluations of an associate and paralegal, and cited to additional exhibits that Appellants apparently expected us to search through on our own in order to find evidence of these alleged misrepresentations. We emphasize that one of our law clerks spent two hours parsing through footnote 6, which is only one of six footnotes provided in support of the one-sentence argument preceding the bracketed record references, and that the materials cited absolutely do not support, even inferentially, Appellants' assertion that employees of Quarles & Brady knowingly made any false representations.
Appellants' opening brief contains 111 footnotes, many of which similarly lack specificity and are misleading.
¶26 "Judges are not like pigs, hunting for truffles buried in [the record]," Best Choice Fund, LLC v. Low & Childers, PC, 1 CA-CV 10-0860 at 4 n.3 (Ariz. App. Jan. 6, 2012) (quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)), and "we cannot be expected to glean the party's arguments from a review of the evidence." Best Choice Fund, 1 CA-CV 10-0860 at 4 n.3; see also ARCAP 13(a)(4), (6). Because Appellants have failed to comply with our rules and have not properly and clearly cited to the record, and because it is not incumbent upon us to discover or make Appellants' case for them, we therefore do not consider Appellants' argument pertaining to fraudulent inducement to enter into the contract.
Fraudulent Inducement to Continue Litigation
¶27 Similarly, Appellants' argument regarding fraudulent inducement to continue litigation was insufficient and provided inadequate support and citations to the record. First, to support their assertion that Quarles & Brady persuaded Appellants to continue with what Quarles & Brady knew were baseless claims against De La Huerta, Appellants referred this court to the following statement that was part of their argument on fraudulent inducement of contract: "By virtue of the attorney-client relationship, [Quarles & Brady] intended and/or had reason to expect that their clients would act or refrain from acting in reliance on their statements." This sentence references "SOF § VI" as support, but otherwise fails to point out where in the record these alleged infractions occur. Section VI of the statement of facts then directs us to "[IR-194:8(¶93)]," which is just a citation to exhibit 80. We then have to locate exhibit 80 in the record, which is Quarles & Brady's answer to the third amended complaint and counterclaim. There are also footnotes directing us to exhibit 15, which was the retainer agreement, and exhibit 34, which includes Barton's statements in his deposition that he provided a detailed explanation of a particular bill and explained how he thought the case was going to proceed in the future in that explanation. Not only do these record references fail to lead us to any evidence that Quarles & Brady fraudulently induced K-J Plumbing to continue with litigation, Appellants also fail to adequately argue this claim. See Best Choice Fund, 1 CA-CV 10-0860 at 4 n.3; see also ARCAP 13(a)(4), (6). For these reasons, we decline to consider the fraudulent inducement to continue litigation claim.
The specific page numbers cited to in exhibit 34 were not in chronological order, making it all the more tedious and difficult to find.
We also note that Quarles & Brady argued that a cause of action for fraudulent inducement to continue litigation is not a cognizable claim, citing General Electric Capital Corp. v. DirecTV, Inc., 94 F.Supp. 2d 190, 202 (D. Conn. 1999) as support. Appellants' reply brief fails to direct this court to any legal authority supporting the existence of an action for fraudulent inducement to continue litigation and we have found none. Further, Appellants only response to this argument in its reply brief was to call it a "mischaracterization" and direct us to other parts of the record to find out why.
III. Fraudulent Concealment & Breach of Fiduciary Duty to Disclose
Fraudulent Concealment
¶28 Appellants urge this court to conclude that the trial court erred by granting summary judgment on the issue of fraudulent concealment. Arizona recognizes the tort of fraudulent concealment as set forth in the Restatement (Second) of Torts § 550 (1976):
One party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering.See Wells Fargo Bank, N.A. v. Ariz. Laborers, Teamsters & Cement Masons, 201 Ariz. 474, 496, ¶ 87, 38 P.3d 12, 34 (2002). The standard of proof for fraudulent concealment is clear and convincing evidence. Id. at 498 n.24, ¶ 98, 38 P.3d at 36, n.24.
¶29 Appellants cite to eight "bullet points" supporting this claim. We address each citation. First, Appellants maintain that Quarles & Brady "actively concealed" the $173,000.00 budget and belatedly lied about it. Appellants cite to Barton's deposition for support, in which Barton is asked if he ever told the Gibbs that if Quarles & Brady continued to work on the case from January 2007 through trial, it would cost K-J Plumbing another $173,000.00. Barton answered that he did indeed explain that to the Gibbs, as well as Nedberg, and they decided not to settle. Further, Barton swore in an affidavit that Quarles & Brady communicated with Appellants about the status of the case "on at least 243 occasions throughout the representation" and Appellants "don't deny there were scores of communications" between Appellants and Quarles & Brady. Appellants also cite to timesheets of billing, but fail to demonstrate how these timesheets concealed the $173,000.00 budget. Appellants additionally cite to Nedberg's affidavit, which states that Barton failed to advise K-J Plumbing of a litigation budget "at any time subsequent to their original estimate of $40,000 to $50,000" and they were not advised of the $173,000.00 litigation budget. However, it is undisputed that Quarles & Brady sent numerous invoices demonstrating the cost of litigation as well as warned Appellants about the "significant[] increase[] [in] legal fees" from the original $40,000.00-$50,000.00 estimate if they decided to proceed against Johnson, which they did. Accordingly, we conclude there is no merit to this particular assertion.
Appellants cite generally to exhibits 37, 38, 39, and 40 as support for their argument and fail to specifically indicate where the evidence is they are claiming supports any "active concealment" by Quarles & Brady. Because Appellants' citations to the record in their appellate briefing did not lead us to evidence reasonably supporting this assertion, we also examined Appellants' trial court record cites contained in their motion papers, which we found equally unavailing. For example, as support for this claim in their opposition to Quarles & Brady's motion for summary judgment, Appellants cite to exhibit E of exhibit 7, which they identify as Barton's declaration on page 69 of their statement of controverting facts. Exhibit 7 is not Barton's declaration and we cannot find the supposed reference in the record that Appellants argue supports their claim. Further, as we have previously stated, we will not do Appellants' work for them. Additionally, footnote 82 (copy of ethical rules) and 84 (Barton's deposition) also provide no support for this claim.
¶30 Next, Appellants argue in their second, sixth, and seventh bullet points that Barton actively concealed the lack of substantive support for claims against Johnson. For example, Appellants claim that Quarles & Brady was aware by August 11, 2006, that there was no evidentiary support for their claims against Johnson. However, two key people in that case, Johnson and Feinstein, were not deposed until May 2007. K-J Plumbing's settlement with Johnson followed shortly thereafter. Appellants similarly contend that Quarles & Brady was aware there was no evidence to support a claim that Johnson was involved in any unethical or illegal accounting transactions and did not disclose this information to them. We have reviewed the exhibits cited by Appellants; they provide little, if any, support for the claim that Quarles & Brady knew before Johnson's deposition that there was no evidence that he violated the non-compete agreement. For example, Appellants cite as support a summary of Barton's interview with an accountant for K-J Plumbing. Although the accountant stated she was unaware of unethical or illegal accounting transactions by Johnson, there was nothing in the summary regarding whether she knew anything about Johnson's compliance with the non-compete agreement. Appellants also argue that Quarles & Brady failed to inform them of any weakness in the case until after Johnson's deposition. Even assuming the truth of this allegation, it does not support a claim of "fraudulent concealment." As we previously noted, there were hundreds of communications, verbally and written, between the parties. Further, Nedberg attended many of the depositions and received reports of witness interviews. The citations to the record wholly fail to support this contention.
Footnote 86 cites generally to exhibits 92 through 100, which was comprised of 52 pages. Again, it is not our obligation to parse through these exhibits to try to figure out whether, and in what manner, they may support Appellants' argument.
¶31 Third, Appellants claim that Barton actively concealed that their damages could not justify their fees. Again, we find absolutely no support in the record for this contention. Appellants state in their statement of controverting facts that Quarles & Brady never told Appellants "what reasonable fees would be for a case with damages as represented by their damage expert; and, [Quarles & Brady] never told [Appellants] that they did not know what reasonable fees would be for such case." Appellants cite to a conclusory statement by Nedberg as the sole basis for support. Conclusory statements are insufficient to raise any genuine issue of material fact in response to a motion for summary judgment. See State ex rel. Corbin v. Challenge, Inc., 151 Ariz. 20, 26, 725 P.2d 727, 733 (App. 1986).
We also note that Appellants cite generally to Quarles & Brady's eleventh and twentieth disclosure statements without directing this court to where this claim is supported within those documents and Appellants' citation to exhibit 42 is not in the record.
¶32 Fourth, Appellants contend that Barton actively concealed that De La Huerta could not satisfy a judgment. Again, Appellants fail to cite to anything in the record that in any way supports this allegation. Appellants cite to a deposition statement by Thomas Zlaket, their expert witness pertaining to the standard of care and conduct in a legal malpractice action, that Quarles & Brady should have known that De La Huerta was impoverished based on "[w]hat he did. Who he was. Who he worked for. After all, he was an employee of K-J Plumbing up until the time that he was confronted and admitted that he was planning to go out on his own so he could make some money. He was no mystery." To the extent that this arguably common-sense observation was correct, it would have been just as evident to Appellants. Additionally, Quarles & Brady hired an investigator to determine De La Huerta's assets, the results of which it shared with Nedberg. As further support of active concealment, Appellants cite to Nedberg's conclusory statement, "Defendants never told Plaintiffs that they were aware that [the De La Huertas] were impoverished and could not pay potential damages . . . or, alternatively they did not know whether [the] De La Huertas could pay potential damages to" Appellants. See State ex rel. Corbin, 151 Ariz. at 26, 725 P.2d at 733. Moreover, Appellants cite to Barton's deposition in which he states, "I'm not sure we ever reached a conclusion that Mr. De La Huerta didn't have money." Barton further stated that De La Huerta's bankruptcy filing raised some concern that K-J Plumbing may have trouble collecting any money owed to them. Appellants' argument fails to demonstrate any evidence of Quarles & Brady's active concealment of De La Huerta's financial status.
¶33 Fifth, Appellants maintain that Barton approved Quarles & Brady's invoices, yet actively concealed that the invoices were inaccurate, included work not performed, and did not reflect necessary, diligent work. Appellants generally cite to Friedman's entire expert declaration. Although Friedman finds substantial fault with Quarles & Brady's billing practices, his deposition does not point to any evidence from which it could be reasonably inferred that Barton "actively concealed" inaccurate invoices, etc. Although Appellants additionally cite to specific portions of Friedman's deposition, this discussion relates to an entirely different topic than Barton's supposed active concealment of invoices. Appellants also cite allegations that the paralegal was charging paralegal rates for secretarial tasks and an associate was charging attorney rates for tasks that a paralegal could perform. Although the practice of having a person perform work that could have been appropriately assigned to a person who billed at a lesser hourly rate, if true, might constitute evidence of a breach of fiduciary duty or legal malpractice, see infra ¶¶ 46-50, the practice was not "concealed" because the person who performed the tasks for which Appellants were billed was identified by name.
¶34 Finally, Appellants claim that Barton actively concealed the "dearth" of Arizona authority that supported K-J Plumbing's claims against De La Huerta. As support, Appellants cite to Barton's deposition. In the deposition, he discussed an email he received from one of the associates regarding "the dearth of information and rather unfavorable case law in Arizona" pertaining to the breach of duty of loyalty claim and specifically about "what is and what is not solicitation" in a factually similar case. However, the "dearth" argument is misleading because Barton testified within the same portion of his deposition that Quarles & Brady ultimately found the case law that supported the claim against De La Huerta. Thus, this final assertion in support of Appellants' claim of fraudulent concealment is likewise lacking evidentiary support.
¶35 Accordingly, we reject Appellants' argument that the trial court erred when it granted summary judgment on the issue of fraudulent concealment. In the future, we admonish Appellants' counsel to take heed of the advice dispensed in Mangan v. Mangan, 227 Ariz. 346, 353, ¶ 29, 258 P.3d 164, 171 (App. 2011):
Whether counsel's misrepresentation of the record is the result of inadvertent sloppiness or is an intentional attempt to mislead the court, we cannot say. Nevertheless, we remind counsel that he has a duty of candor to this court and a duty to certify that representations made to this court are accurate.See Ariz. R. Sup.Ct. 42, E.R. 3.3; Ariz. R. Civ. P. 11(a).
Breach of Fiduciary Duty to Disclose
¶36 Quarles & Brady argued that the court should dismiss Appellants' claim for breach of fiduciary duty to disclose alleged in the first amended complaint because it was not a cognizable claim. Although the explanation provided by the court in its minute entry ruling dismissing this claim is unclear, we assume that it agreed with Quarles & Brady's argument. Contrary to the court's ruling, we conclude that a claim for breach of a fiduciary duty to disclose may indeed constitute a cognizable claim pursuant to the Restatement of Torts (Second) § 551 (Liability for Nondisclosure), which provides in relevant part:
In the first paragraph of its minute entry filed June 6, 2009, the court noted, apparently referring to the contract-based claims, "this action is a legal malpractice case that sounds in tort rather than contract." The court then dismissed the claims for breach of fiduciary duty (as well as other counts) after stating that it had considered "the arguments of counsel, the pleadings filed by counsel, and the case law cited therein[.]" Id.
(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.See also cmt. f (identifying "attorney and client" as one of the relationships of trust and confidence included within § 551(2)(a)).
(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated,
(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them[.]
¶37 Although we conclude that the court erred when it dismissed this claim pursuant to Rule 12(b)(6), we will affirm on any basis supported by the record. See Logerquist v. Danforth, 188 Ariz. 16, 18, 932 P.2d 281, 283 (App. 1996).
¶38 Quarles & Brady also argues that Appellants waived any error the court may have made in dismissing claims from the first amended complaint, including the breach of fiduciary duty for failure to disclose, that were not asserted in the third amended complaint. Although there is authority that supports waiver, we believe the better rule is that claims that are effectively dismissed with prejudice need not be reasserted in an amended complaint or immediately appealed lest they be forever waived. See 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1476 (3rd ed. 2011) (reasonable standard is that a party who amends its pleading to conform it to court ruling only waives objections to that order insofar as it applies to technical defects in the pleading; the party does not waive exceptions to rulings that strike a "vital blow" to a substantial portion of claim); compare Davis v. TXO Prod. Corp., 929 F.2d 1515, 1517 (10th Cir. 1991) ("We believe that a rule requiring plaintiffs who file amended complaints to replead claims previously dismissed on their merits in order to preserve those claims merely sets a trap for unsuspecting plaintiffs with no concomitant benefit to the opposing party.") with Forsyth v. Humana, Inc., 114 F.3d 1467, 1474 (9th Cir. 1997) (plaintiff waives claims alleged in dismissed complaint which are not realleged in amended complaint).
¶39 Having determined that the court erred by dismissing this particular claim, we would typically remand for further proceedings. But we decide not to do so here because remand would be futile. See, e.g., Wall v. Ariz. Dep't of Pub. Safety, 170 Ariz. 591, 597, 826 P.2d 1217, 1223 (App. 1991) (upholding denial of request for leave to amend because new claim would not survive summary judgment). Notwithstanding the erroneous dismissal of its claim, Appellants were able to make lemonade out of a lemon by reframing their failure to disclose claim to allege fraudulent concealment in their third amended complaint. Indeed, the "bullet point" factual allegations underlying the failure to disclose claim in the first amended complaint parallel those alleged in the fraudulent concealment count in the third amended complaint for which, as we have already determined, Quarles & Brady was entitled to summary judgment. Further, as we have also already mentioned, the evidentiary support for the underlying factual allegations, which Appellants had every motivation to fully develop during litigation of the third amended complaint, is entirely lacking. There being no evidence to support Appellants' claim that Quarles & Brady failed to disclose any facts that would support a finding of liability for breach of a fiduciary duty to disclose, we conclude no further purpose would by served by remanding this claim to the trial court.
IV. Breach of Contract Claims
¶40 Appellants' contract claims of breach of express written contract and breach of implied covenant of good faith and fair dealing were properly dismissed by the trial court. Attorneys owe special duties to their clients, and breaches of those duties are usually recognized as torts. See Barmat v. John & Jane Doe Partners, 155 Ariz. 519, 523, 747 P.2d 1218, 1222 (App. 1987). "The essential nature of actions to recover for the breach of such duties is not one 'arising out of contract,' but rather one arising out of tort." See id.; see also Keonjian v. Olcott, 216 Ariz. 563, 567, 169 P.3d 927, 931 (App. 2007) (claims for malpractice are generally tort claims and "[t]he fact that an attorney may have carried out a task 'in a negligent manner, in violation of the duty imposed on him by law to represent his client in accordance with the applicable standard of care, does not change the gravamen of the action from tort to contract.'") (citation omitted). Unlike Towns v. Frey, 149 Ariz. 599, 601, 721 P.2d 147, 149 (App. 1986), in which the court held that the attorney's failure to file a lawsuit and achieve satisfactory results as he represented he would do gave rise to a breach of contract action, the engagement letter provided Nedberg by Quarles & Brady promised only to represent KJ Plumbing in the "dispute or potential dispute with Ernie LaHuerta [sic]" and did not guarantee a favorable outcome. Therefore, the court properly disposed of the contract claims for failure to state a cause of action pursuant to Rule 12(b)(6).
V. Withdrawal and Billing Practices
¶41 Because the underlying allegations in support of Appellants' causes of action for legal malpractice, breach of fiduciary duty as to billing practices, and fraud substantially overlap, we analyze whether these claims present a triable issue of material fact by reviewing them under the categories of "withdrawal" and "billing practices."
Withdrawal
¶42 Appellants argue that Quarles & Brady's manner of withdrawal from representing them was improper and that the actual withdrawal resulted in the collapse of the then-proposed settlement between De La Huerta and K-J Plumbing, thereby giving rise to a legal malpractice claim. Appellants cite to the following excerpt from De La Huerta's February 23, 2009 affidavit, executed at the same time as the "walk-away" settlement agreement between De La Huerta and K-J Plumbing, as support: "I decided to withdraw the payment terms . . . when I was informed by [my attorney] . . . that [Quarles & Brady] . . . were withdrawing from the case; and, this was my sole reason for withdrawing the offer." However, in the course of objecting to K-J Plumbing's attempt to enforce the settlement agreement, De La Huerta submitted an earlier affidavit in December 2008, in which he stated:
There are items in [the proposed settlement agreement] that I never agreed to and that I would never have agreed to. For example, there are terms in the agreement under which my limited liability company was providing a security agreement on certain assets and that I warranted that this would be a first lien. In fact, there is no way that I could have agreed to this because, at the time of the settlement negotiations, those assets were already encumbered. . . . The point is that I had not reviewed such provisions, had not gone over them with my attorney, and could not have agreed to the same.
In short, it was always my understanding that before there would be a final settlement agreement, that I would go over the settlement agreement with [my attorney] in a very careful way and then I would sign it if it was agreeable to me. There were certain portions of this agreement that were not agreeable to me and I could not have signed the same.
I never authorized [my attorney] to enter into a final, binding settlement agreement with K-J Plumbing.
¶43 Thus, in his earlier affidavit, De La Huerta not only failed to mention Quarles & Brady's withdrawal as the basis for why De La Huerta did not enter into the settlement agreement, but clearly states he was unwilling to enter into the settlement agreement under the existing terms. In fact, the prior affidavit cites to such reasons as encumbered assets and adverse terms. Quarles & Brady argues that the sequence, context, and content of these two inconsistent affidavits renders the February 2009 affidavit a sham, and, therefore should not be considered as evidence in the summary judgment ruling to create a triable issue of fact. We agree.
¶44 The sham affidavit rule generally states that "when a party's affidavit is submitted to defeat summary judgment and contradicts the party's own deposition testimony, it should be disregarded in deciding the motion." Allstate Indem. Co. v. Ridgely, 214 Ariz. 440, 442, ¶ 9, 153 P.3d 1069, 1071 (App. 2007); see also Wright v. Hills, 161 Ariz. 583, 587, 780 P.2d 416, 420 (App. 1989), abrogated on other grounds by James, Cooke, & Hobson, Inc. v. Lake Havasu Plumbing & Fire Prot., 177 Ariz. 316, 868 P.2d 329 (App. 1993). Although the affidavits at issue in this case are not from either party, Allstate Indemnity recognized that federal case law "indicate[s] that the sham affidavit rule is properly applied when a nonparty affiant has some motive, emotional or financial, to fabricate sham issues of fact." 214 Ariz. at 443, ¶ 14, 153 P.3d at 1072. K-J Plumbing and the De La Huertas entered into their "walk-away" agreement, the same day that De La Huerta signed the February 2009 affidavit. Because De La Huerta had a financial motive to fabricate the second inconsistent affidavit, it is treated under the law as a sham affidavit. See Yahnke v. Carson, 613 N.W.2d 102, 107-08 (Wis. 2000) (sham affidavit "rule recognizes that contradictory affidavits tend to create sham, rather than genuine, issues"). Accordingly, we decline to consider De La Huerta's second affidavit. We therefore conclude that Appellants failed to demonstrate that the settlement agreement would have been entered into by both De La Huerta and K-J Plumbing, but for Quarles & Brady's withdrawal from representing K-J Plumbing.
¶45 Appellants also assert that their expert, Paul Friedman, concluded that Quarles & Brady's manner of withdrawal was improper. However, Friedman relied on De La Huerta's February 2009 affidavit to reach this conclusion, and we have already determined that the affidavit may not be considered.Friedman stated that Landa's initial email did not necessarily terminate the attorney-client relationship between Quarles & Brady and K-J Plumbing. Friedman also concluded that Quarles & Brady's statements to the court that "they have been informed that [Appellants] now wish to be represented by attorney [Landa]" and "we were advised by attorney [Landa] that he now represents [Appellants] and that we were to discontinue all communications with his clients" could be construed as a mischaracterization and therefore a breach of their duties to K-J Plumbing. We disagree. Having been advised by K-J Plumbing's new attorney that it was to cease all direct communication with K-J Plumbing and to communicate with K-J Plumbing only through Landa, Quarles & Brady reasonably interpreted K-J Plumbing's action as effectively terminating the attorney-client relationship. Even assuming that the circumstances preceding Quarles & Brady's formal withdrawal might otherwise have lessened the likelihood of a successful conclusion to the settlement negotiations, there is no evidence that the De La Huertas would have entered the agreement under consideration had Quarles & Brady not withdrawn. Accordingly, we hold that Quarles & Brady's method of withdrawal as well as the withdrawal itself did not provide a valid basis for a legal malpractice claim.
Apparently, neither of Appellants' experts, Friedman or Thomas Zlaket, were apprised of the first affidavit De La Huerta signed in December 2008.
Billing Practices
Breach of Fiduciary Duty
¶46 Next, Appellants maintain their claims regarding breach of fiduciary duty, legal malpractice, and fraud pertaining to Quarles & Brady's billing practices should not have been dismissed. Quarles & Brady urged the trial court to dismiss the first amended complaint on the breach of fiduciary claim, arguing it was not a cognizable cause of action. The court apparently agreed and dismissed that claim. We disagree.
¶47 A cause of action for a breach of fiduciary duty between an attorney and client requires a showing of the existence of a fiduciary relationship, a breach of that duty, and damages. See Charnay v. Cobert, 145 Cal. App. 4th 170, 182 (2006). Further, overbilling provides an appropriate foundation for a cause of action for breach of fiduciary duty. Cf. Bird, Marella, Boxer & Wolpert v. Superior Court, 106 Cal. App. 4th 419, 429-30 (2003) (implicitly recognizing a cause of action for overbilling). Therefore, contrary to the court's ruling, we conclude that an action for the breach of fiduciary duty claim pertaining to billing practices is a cognizable cause of action. We further conclude that the evidence regarding questionable or improper billing practices as summarized by Friedman is sufficient to defeat Quarles & Brady's motion for summary judgment on this claim at this juncture.
Legal Malpractice
¶48 We similarly conclude that evidence regarding alleged overbilling supports Appellants' claim for legal malpractice. A party asserting a legal malpractice cause of action "must prove the existence of a duty, breach of duty, that the defendant's negligence was the actual and proximate cause of injury, and the 'nature and extent' of damages." Glaze v. Larsen, 207 Ariz. 26, 29, ¶ 12, 83 P.3d 26, 29 (2004). Quarles & Brady does not dispute that the types of billing practices testified to by Friedman, if proven, would support a legal malpractice claim. Instead, Quarles & Brady asserts there was no expert opinion on causation and no damages. We disagree.
¶49 The gravamen of the overbilling claim is not so much that the quality of services provided was deficient as it is a claim that Quarles & Brady padded their bills by providing unnecessary "quantity." See Bird, Marella, Boxer & Wolpert, 106 Cal. App. 4th at 429-30 (convicted defendant may sue attorney for breach of contract in fee dispute involving overbilling without showing he was innocent because dispute involved "quantity" not "quality" of legal services). In an overbilling case, unlike a typical legal malpractice action, it is not necessary to show that the client suffered any additional harm other than excessive billing.
¶50 Friedman opined that based on his detailed review of the timesheets, Arizona Rules of Professional Conduct, and other authorities, Quarles & Brady acted below the standard of care and breached their fiduciary duties and potentially committed "overbilling," including failing to keep accurate time, block billing, time keepers billing for joint tasks but billing different amounts of time, and billing a paralegal rate for the paralegal when she performed secretarial tasks. Friedman also stated that Quarles & Brady improperly permitted two attorneys to bill for attending the same settlement conference, and improperly triple billed for staff attending another conference. Based on the foregoing, we conclude that the evidence pertaining to Appellants' claims of breach of fiduciary duty for billing practices and legal malpractice for billing practices was sufficient to defeat summary judgment.
In the course of rendering his opinion, Friedman relies extensively on Rule 42 of the Rules of the Supreme Court, Arizona Rules of Professional Conduct. We note that according to the preamble, violation of an ethical rule "should not itself give rise to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached. . . . [The Rules] are not designed to be a basis for civil liability. . . . Nevertheless, since the Rules do establish standards of conduct by lawyers, a lawyer's violation of a Rule may be evidence of breach of the applicable standard of conduct." Our determination that the evidence presented to the court was sufficient to survive a motion for summary judgment is not intended as an expression of our opinion regarding whether Quarles & Brady's billing practices violated any ethical rules. See, e.g., Orfaly v. Tucson Symphony Soc'y, 209 Ariz. 260, 266, 99 P.3d 1030, 1036 (App. 2004) (upholding an award of fees based in part on block billing).
Fraud
¶51 We reach a different conclusion, however, as to whether K-J demonstrated a prima facie case of fraud as to Quarles & Brady's alleged overbilling practices. Friedman's declaration and the evidence presented was not sufficient to survive a summary judgment claim of fraud. A fraud claim requires proof of the following nine elements: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of the falsity or ignorance of the truth; (5) the speaker's intent that the recipient act upon it in a manner reasonably contemplated; (6) the hearer's ignorance of the falsity; (7) the hearer's reliance on the truth; (8) the hearer's right to rely on it; and (9) injury to the hearer. Comerica Bank v. Mahmoodi, 224 Ariz. 289, 291-92, ¶ 14, 229 P.3d 1031, 1033-34 (App. 2010).
¶52 Appellants' evidence of intent was lacking and it failed to overcome its burden. For example, Appellants stated as evidence of intent that Quarles & Brady had "no corporate oversight to ensure timekeepers did not overbill" them. However, the evidence to support this claim was from Robert Jones's deposition, a Quarles & Brady attorney, who stated that "[e]very bill was audited by the responsible attorney before it was sent out. The responsible attorney would receive a copy of the time that was recorded for the previous month, audit that, have the ability to adjust it, and then make the decision to send it out." Further, Jones stated, "The responsible attorney would [also] have the discretion to get input from anybody else and frequently would go to other people to determine . . . what the time accounted for." These statements fail to demonstrate as evidence of fraud that Quarles & Brady had no corporate oversight to prevent overbilling. As another example, Appellants argue, that "despite business downturns, timekeepers had minimum billing requirements and their bonuses and annual raises depended on meeting and exceeding those minimums." Appellants fail to show how that statement demonstrates that Quarles & Brady engaged in suspected fraudulent billing practices and there is absolutely no evidence presented in the record that a downturn in the economy resulted in Quarles & Brady committing fraudulent billing practices. Thus, although there is sufficient evidence to survive a summary judgment motion for breach of fiduciary duty and legal malpractice on the limited issue of billing practices, we conclude that the evidence of billing discrepancies is insufficient to establish a prima facie case of fraud.
VI. Punitive Damages
¶53 Punitive damages are only appropriate "'in the most egregious of cases, where [a plaintiff proves by clear and convincing evidence that the defendant engaged in] reprehensible conduct' and acted 'with an evil mind.'" Warner v. Southwest Desert Images, LLC, 218 Ariz. 121, 130, ¶ 24, 180 P.3d 986, 995 (App. 2008) (citation omitted). The only counts that survive at this point are those relating to Quarles & Brady's billing practices. Even assuming that Appellants prevail on these claims on remand, we do not perceive any provable facts that would support a finding by clear and convincing evidence that Quarles & Brady's billing practices demonstrate that it engaged in "reprehensible conduct" and acted with an "evil mind," notwithstanding the Appellants' assertions to the contrary. Without intending to unduly belabor the point, we find two arguments by Appellants to be completely devoid of merit. First, K-J Plumbing cites a 1984 case in which a predecessor firm to Quarles & Brady was involved, Metro Data Systems, 597 F. Supp. 244, not in any other way connected to the instant case, as demonstrating the necessary motive and intent required for punitive damages here. Regarding Metro Data Systems, K-J Plumbing argued, "[c]learly, Q&B was aware that its billing practices were oppressive and improper, yet they continued to follow those same practices and procedures from 2005 through 2008, the pendency of the underlying case. This justifies punitive damages." An unrelated case twenty-eight years ago involving Quarles & Brady has no bearing on this case and provides no support here. Second, K-J Plumbing argues "[c]ircumstantial evidence of corporate motive" due to "business downturn" as a substantive basis for awarding K-J Plumbing punitive damages. Appellants offer no circumstantial evidence, only circumstantial speculation. The trial court correctly granted summary judgment on the claim for punitive damages.
VII. Sanctions
¶54 Citing ARCAP 25 and A.R.S. § 12-349 (2003), Quarles & Brady request their attorneys' fees and costs on appeal. Because K-J Plumbing's appeal was neither frivolous nor without substantial justification, we do not award fees on those grounds. ARCAP 25, however, also applies when "any party has been guilty of an unreasonable infraction" of the Arizona Rules of Civil Appellate Practice. K-J's failure to submit briefs in compliance with ARCAP 13(a) has caused this court and, undoubtedly, counsel for Quarles & Brady to spend considerably more time than would have been needed to address and resolve the issues on appeal. Accordingly, we impose an attorneys' fees award of $5000.00 payable by Appellants' attorneys on appeal (not Appellants) to Quarles & Brady. We further deny Appellants any award of taxable costs to which they might otherwise be entitled.
The attorneys' fee sanction applies jointly and severally to local counsel. See Ariz. R. Sup. Ct. 38(a)(2) ("Local counsel associating with a nonresident attorney in a particular cause shall accept joint responsibility with the nonresident attorney to the client, to opposing parties and counsel, and to court, board, or administrative agency in that particular cause.")
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CONCLUSION
¶55 For the foregoing reasons, we dismiss in part, affirm in part, vacate in part, and remand for further proceedings. We dismiss the appeal regarding the two counts of fraudulent inducement due to lack of compliance with ARCAP 13(a)(4), (6). We affirm the grant of the motion to dismiss (except as it relates to the breach of fiduciary duty claim for billing practices) and the grant of summary judgment to Quarles & Brady as to the claims for legal malpractice based on withdrawal and fraud. We vacate that portion of the court's orders dismissing the breach of fiduciary duty for billing practices claim and the legal malpractice claim pertaining to billing practices.
________________________
PHILIP HALL, Judge
CONCURRING: ________________________
PATRICIA A. OROZCO, Presiding Judge
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JOHN C. GEMMILL, Judge