JOHN J. TUCHI, District Judge.
At issue is Defendants' Motion to Dismiss Or, In The Alternative, For A More Definite Statement (Doc. 9, Mot.), to which Plaintiff filed a Response (Doc. 14, Resp.) and Defendants filed a Reply (Doc. 15, Reply). For the reasons that follow, the Court dismisses all claims against Defendants but grants Plaintiff leave to amend the Complaint.
This matter is the latest in a long and tumultuous line of cases stemming from a business dispute between Plaintiff Marc A. Wichansky and his former business partner, David Zowine. The Court summarizes in relevant part that dispute and ensuing legal battles, as alleged in the Complaint and asserted in the briefing.
Plaintiff and Zowine were equal owners of a company called MGA Employee Services, Inc. (Doc. 1, Compl. ¶ 12.) At some point, Plaintiff determined that Zoel Holding Company, Inc. ("Zoel"), an MGA subsidiary managed at the time by Zowine, was improperly billing the State of Arizona for home healthcare services provided to Arizona Medicaid recipients. Plaintiff began investigating, at which point the relationship between Plaintiff and Zowine soured to irreconcilability. Thereafter, Plaintiff attempted to "place Zowine on leave." (Compl. ¶ 22.) After Zowine refused, a lawsuit was initiated in state court in 2011, seeking dissolution of the partnership (the "Termination Action").
While the State Court Actions were proceeding, Plaintiff filed an action in federal court in 2013 alleging various claims against Zowine and other defendants (the "Federal Action"). Also around this time, Plaintiff filed a qui tam action against MGA, Zowine, Zoe Holding Company, Inc. (formerly Zoel or otherwise related to Zoel), and other defendants. In 2016, Plaintiff obtained a $27.5 million jury verdict—and later, judgment—in the Federal Action. The bulk of the liability and verdict was levied against Zowine, who then filed for bankruptcy. Zowine also appealed the result of the Federal Action to the Ninth Circuit Court of Appeals. While that appeal was pending, the Termination Action and Misappropriation Action were dismissed off the state court's Dismissal Calendar on March 12 and August 14, 2018, respectively. (See Doc. 9-1 Exs. 3 & 4.)
As Zowine's bankruptcy case wended through the system, Plaintiff, Zowine, Zoe Holding Company, and several other parties reached a "Global Settlement," which settled and resolved all aforementioned lawsuits: the two State Court actions, the Federal Action, the qui tam action, and the bankruptcy action. The agreement set forth two conditions precedent to its enforceability: (1) the bankruptcy court's approval of the settlement agreement and Zowine's bankruptcy plan, and (2) Plaintiff's dismissal of the qui tam action. According to the Complaint, those conditions were respectively satisfied on September 5 and September 19, 2018. On October 20, 2018, the Ninth Circuit dismissed the appeal from the Federal Action.
The present Defendants William Quinlan and the Quinlan Law Firm's roles in this extensive history were as legal counsel for Zowine and Zoel (and other same-side parties) in both State Court Actions and the Federal Action.
Federal Rule of Civil Procedure 12(b)(6) is designed to "test[] the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal under Rule 12(b)(6) for failure to state a claim can be based on either (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable legal claim. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When analyzing a complaint under Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). On a Rule 12(b)(6) motion, Rule 8(a) governs and requires that, to avoid dismissal of a claim, Plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
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To state a claim for malicious prosecution of a civil proceeding,
The Court notes at the outset that neither the Complaint nor the Response states which civil action(s) forms the basis of Plaintiff's malicious prosecution claim—a deficiency the Court will discuss more fully below. The Complaint cursorily mentions the State Court Actions brought by Zowine while represented by Defendants. (Compl. ¶¶ 38, 40.) Later, directly under a reference to the Federal Action, which Plaintiff brought, the Complaint alleges Defendants filed "multiple, frivolous claims." (Compl. ¶ 43.) The Court will analyze a claim for malicious prosecution first in the context of the State Court Actions and then briefly in the context of the "multiple, frivolous claims," to the extent they refer to claims filed by Defendants in the Federal Action.
A cause of action for malicious prosecution has a one-year limitations period and accrues when the underlying civil action terminates in Plaintiff's favor and all appeals have concluded. See Nataros v. Super. Ct. Maricopa Cty., 557 P.2d 1055, 1057 (1976); A.R.S. § 12-541. Focusing on the fourth element, Defendants argue that even if the dismissals of the State Court Actions from the Dismissal Calendar could be considered a "favorable" termination for Plaintiff, which Defendants deny, the terminations themselves occurred on March 12 and August 14, 2018. Therefore, a claim for malicious prosecution could have accrued no later than each dismissal, and was time-barred as of March 12 and August 14, 2019, respectively.
Plaintiff focuses on post-dismissal events, arguing all the underlying litigation, including the two State Court Actions, terminated in his favor with the Global Settlement. Specifically, either the bankruptcy court's approval of the Global Settlement on September 5, 2018, the dismissal of the qui tam action on September 19, 2018, or the Ninth Circuit's October 20, 2018, dismissal of the Federal Action appeal supplies the favorable termination date.
The Court finds that the State Court Actions terminated upon their dismissals from the Dismissal Calendar on March 12 and August 14, 2018. At the moment of each dismissal, the civil actions that form the first element of a claim for malicious prosecution were over. A later settlement purporting to settle and release at least five outstanding legal disputes between the underlying parties may or may not have resulted in a favorable outcome in general for Plaintiff. But the post-dismissal settlement was not a favorable termination of the State Court Actions themselves for the simple reason that they had already been terminated by final written order. (See Doc. 9-1 Exs. 3 & 4 (dismissing without prejudice all claims in the State Court Actions by "final written Order of the Court" and entering final judgment pursuant to Arizona Civil Rule of Procedure 54(d)).) The settlement's reference to the State Court Actions did not resurrect or extend their life.
Plaintiff argues that had he brought the present case before the Global Settlement was approved or the qui tam action dismissed, Defendants would have moved to dismiss "on the basis that his claim was not ripe because the litigation was not terminated." (Resp. at 13.) In addition to this being speculation, whether Defendants would have moved to dismiss on ripeness grounds does not mean the claim would in fact be unripe. Contrary to Plaintiff's statement, the litigation was terminated, and the settlement occurred after that termination. Aside from hypothetical motions to dismiss, nothing precluded Plaintiff from filing a claim for malicious prosecution after the State Court Actions were dismissed.
Plaintiff also posits that a termination date predicated on the dismissals would raise factual disputes that cannot be resolved on a motion to dismiss. (Resp. at 14.) This argument conflates whether a termination is favorable with when the termination occurred. Plaintiff is correct that determining whether a dismissal is a favorable termination, as opposed to a procedural or technical occurrence, may require a look into "the substance rather than the form of prior events and often involves questions of fact." See Frey v. Stoneman, 722 P.2d 274, 279 (Ariz. 1986). This is because factors that are distinct from merits—such as funding, emotional costs, or forgiveness—may be at play in abandoning or withdrawing the underlying proceeding. See id. But whether the dismissals from the Dismissal Calendar substantively reflected on the merits is irrelevant if they occurred more than one year before a malicious prosecution claim is brought.
To the extent Plaintiff's malicious prosecution claim is aimed at the State Court Actions Defendants brought on behalf of Zowine, it is time-barred. Accordingly, the Court dismisses with prejudice the claim with respect to the State Court Actions.
The Complaint refers to "multiple, frivolous claims" Defendants made in what appears to be the Federal Action that Plaintiff brought against Defendants. (Compl. ¶ 43.) Under the Restatement, followed by Arizona courts, "one who files a counterclaim to a cause of action initiates a civil proceeding." Restatement (Second) of Torts § 674 cmt. a. Thus, while Plaintiff has just barely alleged the first element of malicious prosecution, he fails to allege facts to support the remaining four. The Complaint neglects to identify the nature or the resolution of Defendants' claims, let alone allege that those specific claims— as opposed to the earlier lawsuits—were brought without probable cause and with malice. Many of the allegations relate specifically to lawsuits other than the Federal Action. (See Compl. ¶¶ 24, 25, 27, 34-36.) The rest of the Complaint consists of general allegations of Defendants' conduct without any attendant timeframe or context as to how the conduct relates to Defendants' claims in the Federal Action.
In short, to the extent Plaintiff's malicious prosecution claim arose from the claims Defendants helped bring in the Federal Action, the Complaint pleads no facts with respect to those claims specifically. Without factual allegations, Plaintiff's malicious prosecution claim cannot survive Defendants' Rule 12(b)(6) Motion and must be dismissed.
If a defective complaint can be cured, a plaintiff is entitled to amend the complaint before the action is dismissed. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). Here, because Plaintiff may be able to cure the defect only with respect to Defendants' claims in the Federal Action, the Court will give him an opportunity to amend. Plaintiff shall only file an amended Complaint if he is able to cure the defect. If he files an amendment that fails to comply with Rule 8, the Court will dismiss the malicious prosecution claim, in its entirety, with prejudice.
To state a claim for abuse of process, Plaintiff must allege sufficient facts to show that Defendants committed "(1) a willful act in the use of judicial process; (2) for an ulterior purpose not proper in the regular conduct of the proceedings." Crackel v. Allstate Ins. Co., 92 P.3d 882, 887 (Ariz. Ct. App. 2004). Using the judicial process for its authorized purposes—even if done with bad intentions or with incidental spiteful motives—does not constitute abuse of process. Morn v. City of Phoenix, 730 P.2d 873, 875-76 (Ariz. Ct. App. 1986) (finding no abuse of process when the plaintiff's suit was brought to seek redress for perceived wrongs but also had an incidental purpose of "getting even" with the defendants). Plaintiff must show that the process was used primarily to pursue an improper purpose. Nienstedt v. Wetzel, 651 P.2d 876, 881 (Ariz. Ct. App. 1982). In other words, the use of judicial process must be "so lacking in justification" that it "could not logically be explained without reference to the defendant's improper motives." Id.; Crackel, 92 P.3d at 889.
Like Plaintiff's claim for malicious prosecution, his claim for abuse of process lacks factual allegations sufficient to withstand a Rule 12(b)(6) motion. The Complaint begins by making general allegations of Defendants' misconduct, as described in footnote 7. The gist of the allegations are that Defendants acted dishonestly in protecting Zowine while attempting to shift the blame for the improper billing onto Plaintiff. However, these allegations contain no timeframe and are untethered from any specific judicial proceeding, and, more importantly, use of judicial process. Plaintiff alleges Defendants "advocated in written pleadings, motion practice, and oral argument" that a formula error, which Defendants allegedly knew to be false, was the cause of the billing issue. (Compl. ¶ 31.) But in addition to the dearth of facts as to (1) which motions, pleadings, or arguments in (2) which legal proceeding and when,
The Complaint then proceeds to simply recite the chronology of all the underlying litigation. It alleges Defendants knew the lawsuits they filed (i.e., the State Court Actions) were frivolous and without probable cause and that Defendants brought "multiple, frivolous claims and motions in an effort to drain [Plaintiff's] financial resources." (Compl. ¶ 43.) Again, the Complaint contains no detail as to the specific judicial process employed, or when it was used. This particularity is essential in light of the protracted legal history between Plaintiff and Zowine, much of which occurred over two years ago. The Court cannot extrapolate from Plaintiff's vague statements the basis for his claim.
Accordingly, Plaintiff fails to state a claim for abuse of process. Plaintiff is granted leave to amend, with the same admonition that any amendment must comply with Rule 8 or face dismissal with prejudice.
The elements of aiding and abetting tortious conduct are "(1) the primary tortfeasor must commit a tort that causes injury to the plaintiff; (2) the defendant must know that the primary tortfeasor's conduct constitutes a breach of duty; and (3) the defendant must substantially assist or encourage the primary tortfeasor in the achievement of the breach." Wells Faro Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr. Fund, 38 P.3d 12, 23 (Ariz. 2002).
Defendants contend the Complaint fails to properly allege the first element. By definition, a claim for aiding and abetting requires at least two tortfeasors. Ortiz v. Zurich Am. Ins. Co., No. CV-13-02097-PHX-JAT, 2014 WL 1410433, at *5 (D. Ariz. Apr. 11, 2014) (citing Restatement (Second) of Torts § 876 cmt. a). Thus, Plaintiff must adequately plead an independent primary tort—here, committed by Zowine—and that Defendants took separate action in concert with Zowine's alleged tort. Fromkin v. Indymac Bank FSB, No. 10-CV-8014-PCT-PGR, 2010 WL 2541167, at *5 (D. Ariz. June 18, 2010). The Complaint alleges that Zowine oversaw Zoel; orchestrated a fraudulent scheme to overcharge the State of Arizona; psychologically harassed and physically attacked Plaintiff; ignored a court order in the Termination Action enjoining his harassment; harassed the court-appointed receiver in the Termination Action; and engaged in "abusive conduct" in attempt to end Plaintiff's investigation into the billing practices and steal Plaintiff's ownership interest in MGA.
While some of these allegations could potentially subject Zowine to civil liability, the Complaint fails to allege which facts specifically amount to a breach of fiduciary duty or to whom that duty was owed.
In short, the Complaint's haphazard factual pleading (1) precludes the Court and Defendants from ascertaining the precise nature of Zowine's primary tort and (2) fails to demonstrate Defendants' knowledge of and substantial assistance in accomplishing the same (as opposed to merely representing Zowine in legal proceedings after the fact). See Sec. Title Agency, Inc. v. Pope, 200 P.3d 977, 988 (Ariz. Ct. App. 2008) (holding the encouragement or assistance must be a "a substantial factor in causing the resulting tort") (emphasis added).
