United States District Court, D. Arizona
Marc A. Wichansky, Plaintiff,
David T. Zowine, et al., Defendants
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Marc A Wichansky, Plaintiff: Alethia Michelle Scipione, LEAD
ATTORNEY, Callagy Law, Phoenix, AZ; Matthew R Major, Michael
J Smikun, Sean R Callagy, LEAD ATTORNEYS, Law Offices of Sean
R Callagy Esquire LLC, Paramus, NJ; Christopher R Miller,
Callagy Law LLC - Paramus, NJ, Paramuys, NJ.
David T Zowine, husband, Karina Zowine, wife, Defendants:
Gayathiri Shanmuganatha, LEAD ATTORNEY, Kate Elizabeth
Frenzinger, Quinlan Law Firm LLC - Phoenix, AZ, Phoenix, AZ;
Jared Lynn Sutton, Michael Joseph Hammer, Robert F Roos, LEAD
ATTORNEYS, Lewis Roca Rothgerber LLP - Phoenix Office,
Phoenix, AZ; William John Quinlan, LEAD ATTORNEY, Quinlan Law
Firm LLC, Chicago, IL.
Martha Leon, wife, Charles Johnson, husband, Patricia
Gonzalez, wife, Pat Shanahan, husband, Sarah Shanahan, wife,
Mike Ilardo, husband, Rio Mayo, husband, Michael Narducci,
husband, Brett Costello, husband, Zoel Holding Company
Incorporated, an Arizona corporation, Defendants: Jared Lynn
Sutton, Michael Joseph Hammer, Robert F Roos, LEAD ATTORNEYS,
Lewis Roca Rothgerber LLP - Phoenix Office, Phoenix, AZ;
William John Quinlan, LEAD ATTORNEY, Quinlan Law Firm LLC,
Chicago, IL; Gayathiri Shanmuganatha, Kate Elizabeth
Frenzinger, Quinlan Law Firm LLC - Phoenix, AZ, Phoenix, AZ.
Home Healthcare LLC, an Arizona limited liability company,
Alisa Ilardo, Wife, Andrea Costello, Wife, Justin Grant,
Husband, Kai Knowlton, Husband, Don Maniccia, Husband,
Defendants: Jared Lynn Sutton, Michael Joseph Hammer, Robert
F Roos, LEAD ATTORNEYS, Lewis Roca Rothgerber LLP - Phoenix
Office, Phoenix, AZ; Gayathiri Shanmuganatha, Kate Elizabeth
Frenzinger, Quinlan Law Firm LLC - Phoenix, AZ, Phoenix, AZ.
Manning & Kass Ellrod, Ramirez, Trester LLP, Movant: Robert
Bryan Zelms, LEAD ATTORNEY, Manning & Kass Ellrod Ramirez
Trester LLP, Scottsdale, AZ.
G. Campbell, United States District Judge.
parties have filed cross-motions for summary judgment. Docs.
273, 275. The motions have been fully briefed (Docs. 284,
303, 291, 307), and the parties have produced a voluminous
factual record (Docs. 274, 276, 285, 286, 301). The Court
held oral argument on December 3, 2015. For the reasons that
follow, Plaintiff's motion will be denied and
Defendants' motion will be granted in part and denied in
2006, Marc Wichansky and David Zowine began business
together, founding Zoel Holding Co., Inc. (" Zoel"
), an Arizona corporation specializing in employee placement
services, and MGA Home Healthcare, LLC (" MGA" ), a
wholly-owned subsidiary of Zoel specializing in health care
services. Doc. 286, ¶ 1, Doc. 285, ¶
3. Wichansky was President of Zoel,
Zowine was Vice President, and both men owned a 50% share in
the company. Doc. 286, ¶ 3. The parties dispute the
allocation of authority within MGA. See Doc. 285,
personal relationship between Wichansky and Zowine began to
deteriorate around December 2010. After a particularly
contentious conversation, Zowine told
Wichansky that the two " would never be friends
again." Doc. 286, ¶ ¶ 10-11. On January 19,
2011, the two men were involved in a physical altercation.
Wichansky contends that Zowine assaulted him. Id.,
personal dispute spilled over into their business
relationship. On January 26, 2011, Wichansky purported to
terminate Zowine. Id., ¶ 24. Around this time,
Zowine, who was no longer welcome at the main office on 44th
Street in Phoenix, established a new office for the business
on 24th Street. Doc. 285, ¶ 38. On January 31, 2011,
several employees affiliated with Zowine (named as Defendants
in this action) moved Zoel computers from the 44th Street
office to the 24th street office. Id., ¶ 41. On
February 2, after an unsuccessful attempt to image Zoel's
servers, the same employees moved the servers from the 44th
Street office to the 24th Street office. Id., ¶
February 4, 2011, Wichansky filed a complaint in Maricopa
County Superior Court seeking an order confirming the
validity of Zowine's termination and requiring Zowine to
return all Zoel property to the 44th Street location. Doc.
286, ¶ 31. The parties ultimately entered into a
stipulation which provided that they each would have access
to the computers and servers to continue the operation of
their business. Id., ¶ 32. This arrangement
apparently worked for a period of time, but on March 31,
2011, Wichansky sought judicial dissolution of Zoel and
appointment of a receiver to manage the company's assets.
Id., ¶ 48. On April 12, 2011, the Superior
Court appointed Ted Burr as a receiver and management
consultant. Id., ¶ 62. Burr will be referred to
in this order as " the receiver."
10, 2011, Zowine filed an election to purchase
Wichansky's shares in Zoel in lieu of dissolution of the
company. Id., ¶ 69. On August 4, 2011,
Wichansky moved to withdraw his dissolution petition,
asserting that his prior counsel had failed to advise him of
the consequences of filing the petition and that he had
discovered evidence that Zowine was involved or acquiesced in
medical billing fraud at the company. Id., ¶
70. The Court denied Wichansky's motion to withdraw.
Id., ¶ 73.
March 2012, the Superior Court held a five-day valuation
hearing to establish the terms of Zowine's purchase of
Wichansky's interest in Zoel. Id., ¶ 78. On
March 6, 2012, the Court issued a ruling which found that
Wichansky's interest was worth $5,000,000 less various
deductions, resulting in a net valuation of $4,058,000 as of
March 31, 2011, the date Wichansky moved for dissolution.
Id., ¶ 80. In arriving at this determination,
the Court assigned half of the receiver's expenses to
Wichansky and half to Zowine. Id. Shortly
thereafter, Zowine made the initial payment and the Superior
Court granted him full control of Zoel's property and
assets. Id., ¶ 85.
the course of these events, efforts were made to investigate
billing improprieties at MGA. In 2010, Zoel's Vice
President of Finance, Richard Eden, discovered a pattern of
irregular and improper billing practices at MGA. Doc. 285,
¶ 14. Eden communicated this finding to Wichansky, who
alerted Zowine. Id., ¶ 16. At Wichansky's
direction, Eden began to investigate the discrepancies.
Id., ¶ 18. On March 21, 2011, Wichansky
reported these improprieties to the Arizona Health Care Cost
Containment System (" AHCCCS" ), but did not label
them as fraud. Doc. 301, ¶ ¶ MM-NN. In March 2013,
MGA and AHCCCS entered into a settlement agreement to refund
$1,250,000 to AHCCCS for overpayments received between
January 1, 2006 and December 31, 2011. Doc. 286, ¶ 95.
The agreement stated that " AHCCCS found no evidence
that Provider committed fraud, acted with intent to defraud
AHCCCS or AHCCCS Contractors,
or engaged in criminal wrongdoing." Doc. 276, Ex. 72,
14, 2013, Wichansky filed this suit against Zoel, MGA,
Zowine, and several individuals affiliated with Zowine. This
is one of several pending lawsuits between the parties. The
Court has issued several rulings in this case, and has
disposed of several of Wichansky's claims, including
claims for securities fraud, obstruction of justice, and
violation of the False Claims Act, and some claims under the
Computer Fraud and Abuse Act (" CFAA" ).
See Docs. 49, 82, 149. The Court considers the
remaining claims today.
seeking summary judgment " bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact." Celotex Corp. v.
Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d
265 (1986). Summary judgment is appropriate if the evidence,
viewed in the light most favorable to the nonmoving party,
shows " that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law." Fed.R.Civ.P. 56(a). Summary judgment is
also appropriate against a party who " fails to make a
showing sufficient to establish the existence of an element
essential to that party's case, and on which that party
will bear the burden of proof at trial."
Celotex, 477 U.S. at 322. Only disputes over facts
that might affect the outcome of the suit will preclude the
entry of summary judgment, and the disputed evidence must be
" such that a reasonable jury could return a verdict for
the nonmoving party." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202
moves for summary judgment on his claims for breach of
fiduciary duty, violation of the CFAA, conspiracy to violate
the CFAA, and constructive fraud. Doc. 273. Defendants move
for summary judgment on all of Wichansky's claims. Doc.
275. Wichansky has failed to defend his claims for unjust
enrichment, intrusion upon seclusion, and prima facie tort,
and the Court will grant summary judgment on these claims
without further discussion. See Estate of
Shapiro v. United States, 634 F.3d 1055, 1060 (9th Cir.
2011). The Court will address Wichansky's remaining
Breach of Fiduciary Duty.
Nine of Wichansky's second amended complaint asserts a
claim for breach of fiduciary duty. Doc. 160, ¶ ¶
469-473. Wichansky argues that he is entitled to summary
judgment on this claim because any reasonable jury would find
that Zowine breached his fiduciary duties by contributing to
or failing to prevent a pattern of overbilling at MGA, by
interfering with investigations into the billing problems by
Wichansky and the receiver, and by antagonizing Wichansky in
an attempt to force him out of the company. Doc. 273 at 5-8,
Doc. 274, ¶ ¶ 68-71, Doc. 291 at 11-17. Defendants
contend that they are entitled to summary judgment because
any reasonable jury would find Wichansky's claims
time-barred, and because Wichansky cannot establish damages,
an essential element of his claim. Doc. 275 at 7-8.
Statute of Limitations.
Arizona, a claim for breach of fiduciary duty is subject to a
two-year statute of limitations. See Mohave
Elec. Co-op., Inc. v. Byers, 189 Ariz. 292, 942 P.2d
451, 469 (Ariz. Ct.App. 1997) (citing
A.R.S. § 12-542(3)). The limitations period begins to
run when the plaintiff discovers the cause of action -- that
is, when the plaintiff knows, or reasonably should know, that
he has been harmed, that the harm was caused by the
defendant, and that the act or omission which caused the harm
was wrongful. See Walk v. Ring, 202 Ariz.
310, 44 P.3d 990, 996 (Ariz. 2002) (discovery occurs when
plaintiff possesses " a minimum requisite of knowledge
sufficient to identify that a wrong occurred and caused
injury" ); Doe v. Roe, 191 Ariz. 313, 955 P.2d
951, 961 (Ariz. 1998) (" cause of action accrues when
plaintiff discovers injury is attributable to particular
person's conduct; plaintiff must know both the what and
who elements" ) (citation omitted). The date when a
cause of action was discovered is a question of fact that, if
subject to genuine dispute, must be decided at trial.
Walk, 44 P.3d at 996.
argue that Wichansky's fiduciary duty claim based on
billing fraud is time-barred because Wichansky was aware of
the alleged billing fraud before June 14, 2011, the earliest
date within the statute of limitations. Doc. 275 at 7.
Wichansky acknowledges that he was aware of " a pattern
of irregular and improper billing practices" in 2010
(Doc. 292, ¶ ¶ 6, 11), and that he voluntarily
disclosed these improprieties to AHCCCS on March 21, 2011 (
id., ¶ 56). He argues, however, that he did not
discover that Zowine was responsible for the overbilling
until August 2011, when Ron Wise, a forensic auditor hired by
Wichansky, completed a preliminary review of the
company's records. Doc. 291 at 13-14 (citing Doc. 289,
Ex. BB, ¶ ¶ 14-19).
most relevant Arizona case is Walk v. Ring, in which
the Arizona Supreme Court addressed when a cause of action
accrues for negligence or other wrongdoing in a fiduciary
relationship. Describing earlier Arizona cases, Walk
stated that " it is not enough" for the plaintiff
to comprehend that something has gone wrong -- referred to in
Walk as the " what" of the plaintiff's
potential claim. 44 P.3d at 996. Rather, " there must
also be reason to connect the 'what' to a particular
'who' in such a way that a reasonable person would be
on notice to investigate whether the injury might result from
Walk further provides that, in determining whether
the plaintiff was on notice to investigate, the question is
whether plaintiff's " failure to go forward and
investigate [his possible cause of action] is not reasonably
justified." Id. For example, a plaintiff would
be reasonably justified in declining to investigate a claim
against a possible defendant if the plaintiff "
subjectively believed" that the defendant had done
nothing wrong. Id. (citation omitted). The question
is whether a reasonable person in the plaintiff's
position would investigate the claim. Id.
this Arizona law, even if Wichansky knew, prior to the
limitations period, that billing irregularities were
occurring at MGA and that Zowine was in control of MGA, the
claim for breach of fiduciary duty would not accrue until
Wichansky knew or had reason to know that Zowine was involved
or knowingly acquiesced in the irregularities. Defendants
have not established beyond genuine dispute that Wichansky
knew or should have known this before June 14, 2011.
Wichansky notes that he and Zowine had been friends and
business partners for many years, and that Zowine had been
the best man at his wedding. Wichansky argues that he never
suspected Zowine would be involved in fraudulent operation of
the business they jointly owned. Whether this is true in
light of all the facts -- including the serious falling-out
that occurred between Wichansky and Zowine in late 2010 and
Wichansky's report to AHCCCS in
March 2011 -- can be debated, but it is a factual
determination that must be made by the jury, not the Court.
Id. (" This is the very sort of factual
determination that must be left to the jury." ).
contend that Wichansky discovered his claim in July 2010 when
Richard Eden completed a report on the pattern of overbilling
at MGA. Doc. 307 at 5 (citing Doc. 285, Ex. 3). But nothing
in the Eden report suggested that Zowine was responsible for
these improprieties. Indeed, it appears that Wichansky
contacted Zowine after receiving the report " to let him
know about the problem." Doc. 285, Ex. 3, ¶ 20. A
reasonable jury could infer from this fact that Wichansky had
not yet discovered that Zowine was involved in the
Walk also notes that the accrual of a claim must
take into account any fiduciary duty that existed between the
plaintiff and the defendant. Defendants do not argue that
Zowine had no fiduciary duties to Wichansky. Walk
states that " 'if the fiduciary nature of the
relationship charges the fiduciary with a duty to disclose
his wrong to the plaintiff and he fails to disclose, the
statute of limitations will be tolled.'" 44 P.3d at
1000 (quoting Bourassa v. La Fortune, 711 F.Supp.
43, 46 (D. Mass. 1989)). Whether Zowine breached his
fiduciary duty to Wichansky in this manner is for the jury to
also argues that Zowine continued to breach his fiduciary
duties after June 14, 2011, by interfering with
investigations by Wichansky and the receiver into the billing
improprieties at MGA. Doc. 291 at 14, Doc. 292, ¶ ¶
65-67. Defendants do not explain how this claim could be
time-barred. The Court will deny Defendants' request for
summary judgment on this claim.
finally asserts that Zowine breached his fiduciary duties
before Wichansky moved for dissolution -- and therefore
before the opening of the limitations period -- by "
creating an atmosphere of chaos and terror in order to
harass, antagonize and intimidate Wichansky to cause him to
abandon the company he built." Doc. 291 at 15. To the
extent that the gravamen of this claim is the immediate
injury Wichansky suffered from the harassment -- the physical
injury from the alleged assault or the emotional injury from
the alleged harassment -- the claim is time-barred. Wichansky
clearly knew both
the " whet" and the " who" of such wrongs
when they occurred.
extent that the gravamen of this claim is the injury
Wichansky suffered in seeking dissolution of Zoel, however,
the Court cannot conclude as a matter of undisputed fact that
the claim is time-barred. The principal of a company may be
liable for breach of fiduciary duty where he wrongfully
causes the dissolution of the company. See Rhue
v. Dawson, 173 Ariz. 220, 841 P.2d 215, 226 (Ariz.
Ct.App. 1992) (a reasonable jury could find that the partner
breached his fiduciary duty by executing a wrongful plan to
oust his co-partner from the business). Wichansky asserts
that he did not know before June 14, 2011, that Zowine's
campaign of harassment was directed toward this end. He
asserts that Zowine's plan only became apparent when
Wichansky discovered Zowine's involvement in the billing
fraud. For reasons discussed above, the timeliness of this
claim presents a factual issue that must be resolved at
the Court holds that Wichansky's breach of fiduciary duty
claim for immediate injuries from Zowine's alleged
campaign of " chaos and terror," such as physical
or emotional injuries from the assaults or harassment, is
time-barred as to Zowine's actions before June 24, 2011,
but that Wichansky's claim for breach of fiduciary
related to the forced dissolution of the company through a
campaign of terror cannot be found time-barred on the basis
of undisputed fact. This breach claim, as well as the
breach claims based on Zowine's alleged involvement in
the fraud and interference with the fraud investigation, must
be resolved at trial.
for breach of fiduciary duty must establish that the
plaintiff was damaged by the defendant's breach. John
E. Shaffer Enters. v. City of Yuma, 183 Ariz. 428, 904
P.2d 1252, 1256 (Ariz. Ct.App. 1995). A plaintiff may satisfy
this element by establishing either compensatory or
restitutionary damages. AMERCO v. Shoen, 184 Ariz.
150, 907 P.2d 536, 540-42 (Ariz. Ct.App. 1995) (citing Am.