Free Response in Support of Motion - District Court of Arizona - Arizona

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FENNEMORE CRAIG, P.C. Kenneth J. Sherk (No. 001371) Timothy J. Burke (No. 002568) 3003 North Central Avenue Suite 2600 Phoenix, AZ 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Attorneys for Third-Party Defendant Snell & Wilmer, L.L.P.

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA MERITAGE HOMES CORPORATION, a Maryland corporation, formerly d/b/a Meritage Corporation, HANCOCK-MTH BUILDERS, INC., an Arizona corporation, HANCOCK-MTH COMMUNITIES, INC., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation, Plaintiff, v. RICKY LEE HANCOCK and BRENDA HANCOCK, husband and wife, GREGORY S. HANCOCK and LINDA HANCOCK, husband and wife, RICK HANCOCK HOMES, LLC, an Arizona limited liability company, RLH DEVELOPMENT, L.L.C., an Arizona limited liability company, and J2H2, L.L.C., an Arizona limited liability company, Defendants

NO. CV-04-0384-PHX-ROS REPLY IN SUPPORT OF MOTION TO DISMISS THIRD PARTY COMPLAINT BY THIRD-PARTY DEFENDANT SNELL & WILMER, L.L.P. (Oral Argument Requested)

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GREG HANCOCK, an individual, Defendant, Counter-Claimant and Third Party Plaintiff, v. STEVEN J. HILTON, an individual; JOHN R. LANDON, an individual; LARRY W. SEAY, an individual; and SNELL & WILMER, L.L.P., an Arizona professional corporation, Third-Party Defendants.

Third Party Defendant Snell & Wilmer L.L.P. files this reply in support of its motion to dismiss Defendant Greg Hancock' Third-Party Complaint under Rule 12(b)(6). s The Third Party Complaint contains but two claims against Snell & Wilmer, one for abuse of process and the other for malicious prosecution (also known as wrongful institution of civil proceedings). The allegations in support of both fail to state a claim upon which relief can be granted, and the Court should dismiss all claims against Snell & Wilmer. MEMORANDUM OF POINTS AND AUTHORITIES I. ISSUES PRESENTED 1. To plead malicious prosecution, a plaintiff must allege that a civil

proceeding terminated in the plaintiff' favor. Here, Hancock acknowledges both the s existence of this requirement and his inability to comply with it. In support of this doomed claim, Hancock argues-- without legal support-- that the claim should not be dismissed because he clairvoyantly predicts that he will ultimately prevail on a motion for summary judgment.1 Hancock has failed to state a claim for malicious prosecution. 2.
1

To state a claim for abuse of process requires that some overt and improper

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Currently, there is not even a motion for summary judgment pending. Hancock previously withdrew the motion and has recently filed a motion for leave to reinstate.
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act-- other than the institution of a legal process itself-- be made. Here, Hancock only alleges that Snell & Wilmer wrongfully instituted the present legal action ­ which merely duplicates his wrongful institution of civil pleadings claim ­ and therefore fails for failing to allege some additional overt and improper act. Meritage paid $88,000,000 for Hancock Homes, including a seven-year license to use the names Hancock Homes and Hancock Communities. When defendants began registering and using similar names, Meritage filed this Lanham Act claim for unfair competition to prevent confusion and protect its rights in the license. Snell & Wilmer took no overt and improper act, and it took no action inconsistent with legitimate litigation goals, and did nothing other than assert Mertiage' s Lanham Act Claim. Hancock has failed to state a claim for abuse of process. II. BACKGROUND Two simple facts-- which Hancock' response tacitly supports -- necessitates that s Snell & Wilmer' motion to dismiss be granted. First, Meritage paid $88,000,000 for s Hancock Communities, Hancock Homes and HC Builders (the "Hancock Business")-- along with the right to use the Hancock Community and Hancock Home names for a period of seven years. The parties allocated as much as $19,000,000 of the purchase price to the goodwill of the Hancock Business. Second, despite the License Agreement, Rick Hancock registered the name "Hancock Family Builders," and later went into business as "Rick Hancock Homes." This is not the only confusing use of the Hancock Homes name. Attached as Exhibit 1, is a Rick Hancock Homes business card-- which prominently features "Hancock Homes"-- without disclaimer, and attached as Exhibit 2, is an email showing the use of hancockhomesaz.com by defendants. Meritage has the right to protect the use of the Hancock Communities and Hancock Homes names for which it paid great consideration to prevent confusion among the public. To protect its investment, Meritage filed its Lanham Act Claim for unfair competition. For purposes of this motion, it does not matter whether Hancock has

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meritorious defenses and might therefore prevail on Meritage' claim. The determinative s point is that it was not an abuse of process for Meritage, through Snell & Wilmer, to assert the claim. III. ARGUMENT A. The Malicious Prosecution Claim Fails to State a Claim.

Defendant Greg Hancock fails to state a claim for wrongful institution of civil proceedings or malicious prosecution. See, Wolfinger v. Cheche, 206 Ariz. 504, 508, P.3d 783, 787 (App. 2003) (elements same for both causes of action). "It is universally held that an essential element of a malicious prosecution claim is that the proceedings must have terminated in favor of the person against whom they were brought." Nataros v. Superior Court, 113 Ariz. 498, 500, 557 P.2d 1055, 1057 (Ariz. 1976). And the Arizona Supreme Court' precedent stating that a malicious prosecution claim does not accrue s until the prior proceedings have terminated in claimant' favor has stood for nearly thirty s years. Id. Simply put, "if an action is filed prior to a favorable termination of the proceedings the action is premature and subject to dismissal." That is all Snell & Wilmer asks here. Hancock failed to plead a claim because he cannot allege that the proceedings have terminated in his favor. Left with universal and longstanding precedent against him, Hancock is left with a limp argument that the Court will eventually grant his motion for summary judgment.2 In addition to consisting of nothing but pure speculation-- that the Court grant his motion for leave to file his motion for summary judgment and eventually grant the motion-- this argument contradicts established law. Wolfinger, 206 Ariz. at 50809, P.3d at 787-88. The claim for malicious prosecution fails to state a claim under rule
2

Of course, even if the Court were to grant Hancock' motion on the underlying Lanham s Act claim, Hancock would still bear the burden of proving the remaining elements of his malicious prosecution claim.
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12(b) (6). B. Defendant Greg Hancock Fails to State a Claim for Abuse of Process.

Hancock' response largely fails to address the arguments made in Snell & s Wilmer' motion to dismiss. Hancock' sole argument is that Snell & Wilmer abused the s s legal process by filing this suit without justification ­ as noted, essentially his malicious prosecution claim. For example, Hancock' response alleges that Snell & Wilmer s

"abused the legal process because the case was spurious when commenced and when amended," that the "suit was instituted solely to harass Greg Hancock and his brother", and "Snell & Wilmer commenced this phony federal court litigation on behalf of its client to wrongfully attempt to prevent Rick Hancock from using his own surname, and in the process harass Greg ... the instigation of the case amounted to the use of a court process inconsistent with legitimate litigation goals." (See Response pages 6-7). To sustain the claim, the tort of abuse of process requires that some overt and improper act, other than the institution of a legal process itself, be made before a proper claim may lie. "Abuse of process . . . is not commencing an action or causing process to issue without justification." Morn v. Phoenix, 152 Ariz. 164, 167, 730 P.2d 873, 876 (App. 1986) (citing PROSSER AND KEATON ON THE LAW OF T ORTS, § 121 at 897 (5th ed. 1984)). Arizona courts have held that something beyond a merely improper purpose in instituting and continuing the litigation is required. See id. Even an ulterior or spiteful motive is not sufficient. For instance, in Morn, even if the plaintiff had originally filed her lawsuit with no justification and continued the lawsuit after ascertaining it was groundless, the court would not infer the necessary overt act "not proper in the regular conduct of the proceeding" merely because the plaintiff had an improper motive throughout the litigation. Id. at 168, 730 P.2d at 877. Some overt, extrajudicial act outside the regular conduct of the litigation-- such as the demand for the surrender of property or the payment of money outside ordinary settlement negotiations--

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is required to maintain an abuse of process claim. Id., 730 P.2d at 877. Wrongfully instituting a lawsuit may give rise to a claim for malicious prosecution, but as a matter of law it does not constitute an abuse of process. Hancock failed to address the well-recognized authority that commencing an action is simply not an abuse of process other than to rely on Crackel v. Allstate Ins. Co., 208 Ariz. 252, 92 P.3d 882 (App. 2004), and claim "that it stands to reason that if merely defending a case can give rise to a claim, then instituting a case should be able to due likewise." Response at 7. (emphasis added). But Crackel did not hold that "merely defending a case" can give rise to a claim, and Crackel is consistent with the authorities cited above. The Crackel court held that a generalized allegation of misuse of the litigation process as a whole could not support a claim for abuse of process, as "it must be based on something more than the opposing party' mere persistence in the litigation." Id. at 258, s 92 P.3d at 888. Further, the court explained, that a "claimant must present more than mere speculation to support the assertion that" court process has been used with improper intent. Id. at 259, 92 P.3d at 889 (emphasis added). Indeed, the claimant must show that the party' improper purpose was the primary motivation, that the court process was used s primarily to pursue an improper motive. Id. (emphasis added). To accomplish that, a claimant must establish that the court process was used "in a fashion inconsistent with legitimate litigation goals," or in other words, that "could not be logically explained without reference to ... improper motives." Id. In Crackel, Allstate' overt acts-- beyond "merely defending the case" -- included: s (1) asserting a contributory negligence defense although it had already concluded that its own insured was entirely at fault; (2) serving an offer of judgment for $101 to be split between the two plaintiffs when Allstate knew that plaintiffs' undisputed medical costs exceeded $1000; (3) exercising its procedural right to conduct independent medical exams

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even though neither plaintiff was seeking to recover medical expenses for treatment arising from ongoing injuries; (4) appealing the arbitration award even though it had concluded that the award was reasonable; (5) engaging in misconduct at the mandatory settlement conference-- including misrepresenting anticipated testimony to the Court; and (6) issuing a written company policy that its employees were to litigate minor-injury softtissue claims in a manner designed to make it financially infeasible for claimants to continue to pursue litigation. Crackel, 93 P.3d at 892. Each of these additional acts collectively were considered overt acts abusing process. It is clear from the facts in Crackel that Allstate had a pre-existing policy with respect to soft-tissue injuries whereby it would use legal process whenever it could to discourage claimants from rightfully pursuing claims using the legal system ­ regardless of the merit of the dispute over the parties' respective rights. Legal process is intended to allow parties to adjudicate rights between them, not to be used as a tool to thwart one party' ability to assert and protect its rights. Because that is what Allstate did, the court s in Crackel found Allstate to have abused process. In contrast, Meritage (and its lawyers Snell & Wilmer) have not used process to prevent or discourage Hancock from asserting or protecting his rights and interests, but to initiate an adjudication over the parties' separate rights and interests. But Hancock is asking the court to rule on the merits of Meritage' claim and hold s that the action was "spurious when commenced and when amended" and therefore constitutes an abuse of process. Again, this is simply a claim for malicious prosecution and must await termination of the action. "Abuse of process differs from malicious prosecution in that the gist of the tort is not commencing an action or causing process to issue without justification but misusing or misapplying process justified in itself for an end other that that which it was designed to accomplish." Joseph v. Markovitz, 27 Ariz. App. 122, 124, 551 P.2d 571, 574 (1976). As alleged, Hancock' abuse of process claim s

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is no different than its malicious prosecution claim. Hancock has not alleged any misuse of process other than Meritage' mere filing of a lawsuit. s Furthermore, the alleged acts of Snell & Wilmer in filing the action-- putting aside that the allegations are completely speculative-- are all easily explained without reference to some improper motive. Meritage seeks to protect its investment in the names Hancock Homes and Hancock Communities, just as it seeks damages from Hancock' other s wrongful conduct alleged in the Second Amended Complaint. Nowhere in Defendant Greg Hancock' Counterclaims and Third-Party Complaint is there an allegation that s Snell & Wilmer took some improper overt act outside the normal judicial process in Federal court. In the absence of an overt act outside the judicial process, the Court cannot even entertain Defendant Greg Hancock' abuse of process claim and must dismiss the s claim for failing to state a claim. IV. CONCLUSION Hancock failed to state a claim because an essential element of his malicious prosecution claim is lacking; namely, litigation has not terminated in Hancock' favor. s Furthermore, Hancock' claim for abuse of process must be dismissed as it rests solely on s his allegation that Snell & Wilmer wrongfully instituted the present action. It is hornbook law that a cause of action for abuse of process cannot lie for instituting a suit-- which at most may give rise to a claim for malicious prosecution-- but there must be some overt act inconsistent with legitimate litigation goals that could not be logically explained without reference to an improper motive outside the judicial process. For all of the reasons set forth above, the Court should dismiss Defendant Greg Hancock' Third-Party Complaint s as to Snell & Wilmer with prejudice.

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DATED this 17th day of August, 2005. FENNEMORE CRAIG, P.C.

By

/s/ Tim Burke Attorneys for Third-Party Defendant Snell & Wilmer, L.L.P., an Arizona professional corporation,

CERTIFICATE OF SERVICE I hereby certify that on August 17, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal of a s Notice of Electronic Filing to the following CM/ECF registrants: Ivan K. Mathew; Robert M. Frisbee; Dan W. Goldfine; Richard Gray Erickson, Emma Cathrene Harty; Adam Elliott Lang; Kenneth J. Sherk; John R. Tellier; Jason Scott Vanacour.

/s/Barbara Marinoff CERTIFICATE OF SERVICE I hereby certify that on August 17, 2005, I served the attached document by mail on the following, who is not a registered participant of the CM/ECF System: Joe M. Romley Joe M. Romley PC 3550 N. Central Avenue, Ste. 1800 Phoenix, AZ 85012 /s/ Barbara Marinoff
1699855

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