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Law Offices of Ethan Frey v. Peck

Court of Appeals of Arizona, First Division, Department B

June 27, 2013

LAW OFFICES OF ETHAN FREY, a professional limited liability company, Plaintiff/Counterdefendant/ Appellee,
v.
BRUCE PECK and JAN PECK, husband and wife; and DELNO HALL, a single man, Defendants/Counterclaimants/ Third Party Plaintiffs/ Appellants. BRUCE PECK and JAN PECK, husband And wife; and DELNO HALL, a Single man, Defendants/Counterclaimants/ Third Party Plaintiffs/ Appellants,
v.
DAVID RODGERS and JANE DOE RODGERS, husband and wife; LAW OFFICES OF DAVID RODGERS, a professional limited liability company and LAW OFFICES OF FREY AND MCCUE, a professional Limited liability company, Third Party Defendants/ Appellees.

Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure

Appeal from the Superior Court in Maricopa County Cause No. CV2005-015306 The Honorable Larry Grant, Judge

Hagens Berman Sobol Shapiro LLP Phoenix by Robert B. Carey Don Andrew St. John Attorneys for Third-Party Plaintiffs/Appellants Bruce Peck, Jan Peck and Delno Hall

Dickinson Wright/Mariscal Weeks PLLC Phoenix by Timothy J. Thomason Anne L. Tiffen Attorneys for Plaintiff/Counterdefendants/Appellees Law Offices of Ethan Frey, PLLC Ethan and Jane Doe Frey and Law Offices of Frey & McCue, PLLC

Beus Gilbert PLLC Phoenix by Robert B. Hoffman Lee M. Andelin Attorneys for Counterdefendants/Third-Party Defendants/Appellees David Rogers and Law Offices of David Rodgers, PLLC

MEMORANDUM DECISION

SAMUEL A. THUMMA, Judge

¶1 This matter involves the second and third appeals by Delno Hall and Bruce and Jan Peck (collectively, Appellants) from a February 14, 2011 summary judgment ruling. Appellants argue the superior court erred by granting summary judgment against them on causes of action against their former attorneys Ethan and Jane Doe Frey (Frey), the Law Offices of Ethan Frey, PLLC and the Law Offices of Frey & McCue, PLLC (collectively, Frey Entities), David Rodgers (Rodgers) and the Law Offices of David Rodgers, PLLC (collectively, Appellees).

¶2 The prior appeal affirmed summary judgment on Appellants' claims against one of Rogers' former law firms because Appellants cannot establish the "fact" of damages, a defect that infects this appeal with equal force. See Peck v. Gammage & Burnham, 1 CA-CV 11-0576, 2012 WL 3239131 (Ariz. App. Aug. 9, 2012) (mem. decision). Because Appellants are precluded from relitigating their inability to prove damages, and because the superior court did not err in awarding the Frey Entities their attorneys' fees, the judgment in favor of the Frey Entities is affirmed. Because Rodgers and his law offices have not shown any authority supporting the award of attorneys' fees in their favor, that portion of the judgment in favor of Rodgers and his law offices is vacated.

FACTS AND PROCEDURAL HISTORY[1]

¶3 The disputes in this case arise out of a lawsuit filed by Jan Peck against Medical Service Card Company (MSC) more than a decade ago. After Jan provided services to MSC pursuant to a contract, MSC did not pay the agreed-upon sums. Peck, 2012 WL 3239131 at *1, ¶ 2. In 2001, the Pecks assigned to Hall their claims against MSC; Hall signed a contingency fee agreement with attorney Frey stating Frey would "seek legal services from" Rodgers. In July 2001, Frey filed a complaint against MSC, naming Hall as the sole plaintiff. Id. at *1, 6; see also id. at *1, 7 (noting that, in January 2002, Pecks and Hall signed another "contingency fee agreement with Frey for representation" regarding Pecks' claims against MSC).

¶4 In February 2002, Appellants accepted MSC s offer to settle the dispute for payment of $4.5 million to Appellants. Id. at *1, 8. Almost immediately, that agreement fell apart and, by March 2002, "all parties knew the settlement was dead." Id. As a result, Frey and Rodgers filed a second suit against MSC on behalf of Appellants in June 2002. Id. at *2, ¶ 9. In November 2002, Appellants terminated Frey (and apparently Rodgers) and hired new counsel, who represented Appellants for the remainder of the second case against MSC. Id. at *2, ¶ 10.

¶5 Appellants' new counsel prosecuted the second case for more than two years and obtained a favorable jury verdict on liability for Appellants. Id. In April 2005, prior to a damages trial, MSC threatened bankruptcy and the parties reached another settlement agreement; "[t]he settlement amount is protected by a confidentiality agreement and order, but it significantly exceeds the previously-offered sum of $4.5 million." Id.

¶6 A fee dispute arose between Appellants and Frey and "Appellants refused to pay Frey or to arbitrate their fee dispute." Id. at *2, ¶ 11. Appellee Law Offices of Ethan Frey then sued Appellants to compel arbitration of the fee dispute and sought an award of attorneys' fees pursuant to Arizona Revised Statutes (A.R.S.) section 12-341.01(A).[2] Id. at *2, ¶ 11. In response, Appellants filed (1) a respondeat superior counterclaim against the Law Offices of Ethan Frey, and a third party claim against the Law Offices of Frey and McCue, PLLC, alleging vicarious liability for Frey's actions; (2) a respondeat superior third party claim against the Law Offices of David Rodgers, PLLC, alleging vicarious liability for Rodgers' actions; and (3) legal malpractice, breach of contract, breach of the covenant of good faith and fair dealing and misrepresentation third party claims against Frey and Rodgers.[3] In their pleadings, Appellants sought attorneys' fees pursuant to A.R.S. § 12-341.01. In their answer, Rodgers and his law offices also sought fees pursuant to A.R.S. § 12-341.01.

¶7 The superior court granted the Law Offices of Ethan Frey's motion to compel arbitration on the fee dispute. The arbitrator awarded the Law Offices of Ethan Frey $185, 783 in attorneys' fees for services performed on behalf of Appellants against MSC and the superior court affirmed that award. In opposing entry of an Arizona Rule of Civil Procedure (Rule) 54(b) judgment on that contract claim award, Appellants argued that each of the "unadjudicated claims arises out of or is related to the same fee agreement and conduct the arbitration award is based upon." The superior court denied the request for a Rule 54(b) judgment.

¶8 Appellants advanced two damage theories for their claims, arguing that "but for" the improper acts by Frey and Rodgers: (1) the case against MSC would have gone to trial in 2003 instead of 2005, therefore causing Appellants to incur "lost opportunity costs" by delaying the date of settlement by two years and (2) MSC was in a better financial position in 2003 than in 2005 and therefore would have paid a larger amount to settle the matter in 2003. Appellees and one of Rodgers' former law firms moved for summary judgment, arguing that Appellants could not establish causation or damages.

¶9 Appellants countered with expert evidence from financial expert Dwight Duncan regarding the "'lost opportunity cost[s]'" resulting from the allegation of a delayed settlement and MSC s relative financial strength in 2002 and 2004 and Duncan's "opinion that MSC was financially able to pay more in 2003 than in 2005." Id. at *4, ΒΆΒΆ 19-22. The superior court granted summary judgment against Appellants, finding that their theory of liability "has not been recognized in" Arizona and the court was ...


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