United States District Court, D. Arizona
PAUL G. ROSENBLATT, District Judge.
Pending before the Court is Plaintiff's Motion for Summary Judgment on Count Two (Doc. 36), which is the plaintiff's Breach of Contract claim in her First Amended Complaint. Having considered the parties' memoranda and the evidence of record submitted by the parties, the Court finds that there are no genuine issues of material fact and that plaintiff Deborah Caldwell's summary judgment motion should be granted as a matter of law pursuant to Fed.R.Civ.P. 56.
Defendant J & J Rocket Company dba JP Consultants ("JP Consultants") is a consulting company that provides training, teaching and coaching on various leadership topics; its principal is Jo Ann Panke. JP Consultants had a contract with the Center for Drug Evaluation and Research ("CDER"), a subunit of the United States Food and Drug Administration ("FDA"), to provide a leadership course curriculum called Preceptor for a Change ("PAC"). The PAC curriculum was taught to separate consecutive small groups of students referred to as Cohorts. In October 2010, JP Consultants, through Panke, entered into a Professional Services Agreement ("PSA") with plaintiff Deborah Caldwell, an experienced professional instructor and coach, whereby she was to work as an independent contractor for a one-year period providing instruction services to JP Consultants' clients; the PSA provided that it was to be construed and interpreted under Arizona law. The primary work done by Caldwell was teaching and coaching the PAC course at CDER. The PSA recognized that Caldwell's work with the PAC program would bring her into contact with JP Consultants' clients, clients' employees and management.
After the PSA ended by its own terms in October 2011, Caldwell continued teaching the PAC cohorts at CDER for JP Consultants despite the lack of any written contract. On August 27, 2012, Panke emailed Caldwell a new draft agreement for her signature because Panke desired Caldwell to continue her relationship with JP Consultants. On September 5, 2012, Caldwell sent Panke an email rejecting the draft agreement and proposing a revised agreement. On September 7, 2012, Panke notified Caldwell through an email that she was rejecting Caldwell's counteroffer and that JP Consultants was terminating its relationship with her in October 2012. That same day, Panke sent an email to Janice Newcomb, the director of CDER's Office of Executive Programs Division of Training and Development, informing her that Caldwell was leaving JP Consultants in order to pursue her own independent contacts; at that time, Panke intended that Caldwell's last day at CDER would be October 26, 2012, and she then believed that it was permissible for Caldwell to seek independent consulting contracts outside of CDER and JP Consultants' current client pool.
On September 9, 2012, Panke sent Caldwell a formal notice of termination. The termination letter gave Caldwell eight weeks notice of termination because Panke did not believe she then had cause to terminate Caldwell notwithstanding her suspicions that Caldwell, without Panke's knowledge or permission, had been improperly communicating for several weeks directly with both Janice Newcomb and Virginia Giroux, CDER's deputy director for training, that Caldwell was improperly withholding information from Panke, and that she had been communicating about competing with JP Consultants. Panke's suspicions regarding Caldwell's communications were based solely on her perception of the breakdown in communications between her and Newcomb and how Newcomb and Giroux were treating her at that point and not on anything anybody had told her about any improper communications on Caldwell's part with Newcomb and Giroux.
Although she no longer had a written contract with JP Consultants, Caldwell began teaching and coaching PAC Cohort 9 at CDER for JP Consultants in September 2012. Despite her continuing suspicions about disloyalty on Caldwell's part, Panke approached Caldwell on October 10, 2012 about the possibility of Caldwell continuing to work for JP Consultants through the completion of PAC Cohort 9, and on October 18, 2012, Panke sent Caldwell a draft contract. Caldwell made a final counteroffer to JP Consultants on October 22, 2012. On October 23, 2012, Panke sent Caldwell an email stating that she would agree to have Caldwell finishing teaching and coaching PAC Cohort 9 with the specific compensation terms that Caldwell had proposed the day before; Panke added a term to the effect that Caldwell was to act with a high degree of professionalism. Later that same day, Caldwell emailed Panke that "[w]e are in agreement that I will finish PAC C9 which ends in June 2013." Both parties believe that the October 23rd emails constituted a binding agreement.
On January 8, 2013, Caldwell and Panke had a meeting regarding the status of the PAC Cohort 9 that Caldwell was still teaching for JP Consultants; during that meeting, Caldwell informed Panke that she was looking into working with several FDA sub-organizations other than CDER. On January 13, 2013, Panke sent Caldwell a letter claiming that she was prohibited from competing with JP Consultants until at least November 2014. Panke included the November 2014 date because it was three years after the expiration of the October 2010 PSA which contained a three-year non-compete provision. Panke informed Newcomb and Giroux at CDER that Caldwell could not perform any program instruction for FDA-related agencies on her own until October 2014.
Caldwell filed this action on March 4, 2013. The single claim in the original complaint sought to have the three-year non-compete provision in the expired PSA declared unenforceable. When Panke learned the next day that Caldwell had sued JP Consultants, she decided to terminate Caldwell. Early on March 9, 2013, Panke telephoned Giroux to inform her that Caldwell's relationship with JP Consultants was being terminated as a result of her lawsuit. Later that same day, Panke emailed a termination notice to Caldwell; the notice informed Caldwell that her services were no longer needed by JP Consultants "effective immediately" and that the non-compete provision of the October 2010 PSA survived her termination and would be enforced. On April 4, 2013, Caldwell filed an amended complaint in this action adding a breach of contract claim based on JP Consultants' early termination of the parties' October 23, 2012 email agreement. JP Consultants, while raising affirmative defenses, has not filed a counterclaim against Caldwell for breach of contract or for breach of the implied covenant of good faith and fair dealing.
Caldwell has moved for summary judgment on her breach of contract claim. In order to prove her claim, she has the burden of establishing the existence of a contract, its breach, and resulting damage. Graham v. Asbury , 540 P.2d 656, 657 (Ariz.1975). The Court concludes that Caldwell has met her initial burden of proof in that JP Consultants does not dispute that the parties entered into a binding email contract in October 2012, that its termination of Caldwell in March 2013 was prior to the June 2013 expiration of the parties' email agreement, and while JP Consultants disputes that it owes Caldwell any damages, it does not controvert Caldwell's contention that she lost the amount of $31, 100 as a result of JP Consultants' early termination of the parties' contract.
Since Caldwell has furnished undisputed proof of the parties' contract and the fact of her dismissal, the burden is on JP Consultants to prove its affirmative defense that it terminated Caldwell's services for cause because she breached the parties' October 2012 email agreement. See Palicka v. Ruth Fisher School District No. 90 of Maricopa County , 473 P.2d 807, 811 (Ariz.App.1970) (In an action by a teacher suing the school board for breach of contract, the court, relying on "the general rule that the party asserting the affirmative of an issue has the burden of proving it[, ]" stated that "after the teacher had established her teaching contract and the fact of dismissal, both of which the Board admitted, the burden of establishing good cause as a defense rested with the Board.") JP Consultants' specific allegation as to this affirmative defense, as set forth in its First Amended Answer to First Amended Complaint (Doc. 29), and reiterated in its CSOF 83 and in its response to Caldwell's summary judgment motion, is that Caldwell "violated her express and implied obligations under the Agreement, including her duty of good faith and fair dealing, by acting disloyally and insubordinate as a result of her efforts to repudiate her contractual obligations to Defendant, and her efforts to compete against and take clients - namely CDER and IHS - of JP Consulting [sic]."
The issue before the Court is whether JP Consultants has submitted evidence of sufficient quantum and quality to create a genuine issue of material fact as to whether Caldwell's conduct after the formation of the October 2012 email agreement justified her termination because it amounted to a material breach of certain expressed and implied duties owed to JP Consultants pursuant to the parties' email agreement and the covenant of good faith and fair dealing implied in that agreement. Zancanaro v. Cross , 339 P.2d 746, 750 (Ariz.1959) ("Ordinarily the victim of a minor or partial breach must continue his own performance, while collecting damages for whatever loss the minor breach has caused him; the victim of a material or total breach is excused form further performance."); Murphy Farrell Development, LLLP v. Sourant , 272 P.3d 355, 364 (Ariz.App.2012) ("[A]n uncured material breach of contract relieves the non-breaching party from the duty to perform and can discharge that party from the contract.") Under Arizona law, a material breach of a contract occurs when (1) a party fails to perform a substantial part of the contract or one or more of its essential terms or conditions, or (2) when it fails to do something required by the contract which is so important to the contract that the breach defeats the very purpose of the contract. Dialog4 System Engineering GmbH v. Circuit Research Labs, Inc. , 622 F.Supp.2d 814, 822 (D.Ariz.2009). Similarly, under Arizona law, a party breaches the covenant of good faith and fair dealing by denying the other party the reasonably expected benefits of the contract. FL Receivables Trust 2002- A v. Arizona Mills L.L.C. , 281 P.3d 1028, 1037 (Ariz.App.2012). Caldwell argues, and the Court agrees, that JP Consultants has not met its burden of showing that Caldwell breached her express or implied duties arising from the October 2012 contract in any material manner.
The parties agree that Caldwell's relationship to JP Consultants was one of agency as an independent contractor, and as such she owed JP Consultants a fiduciary duty, which included a duty of loyalty. See McCallister Co. v. Kastella , 825 P.2d 980, 982 (Ariz.1992) ("[I]n ...