Free Reply to Response to Motion - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Timothy R. Hyland (SBA# 010298) Dominic L. Verstegen (SBA# 022308) KUNZ PLITT HYLAND DEMLONG & KLEIFIELD 3838 North Central Avenue, Suite 1500 Phoenix, Arizona 85012 (602) 331-4600 Attorneys for Defendants/Third-Party Defendants John and Claudette Brimhall IN THE UNITED STATES DISTRICT COURT OF ARIZONA FOR THE DISTRICT OF ARIZONA Erchonia Medical, Inc., et al., Plaintiff, v. Miki Smith, et al., Defendants. Erchonia Medical, Inc., Plaintiff, v. Miki Smith, et al., Defendants. Robert E. Moroney, LLC, Plaintiff, v. Erchonia Medical, Inc., et al., Defendants. BRIMHALLS' REPLY IN SUPPORT OF THEIR MOTION FOR PARTIAL SUMMARY JUDGMENT No. CIV 02-2036-PHX-MHM Consolidated with No. CIV 02-2048-PHX-MHM and No. CIV 02-2353-PHX-MHM

Case 2:02-cv-02036-MHM

Document 301

Filed 09/06/2005

Page 1 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I.

John and Claudette Brimhall (the "Brimhalls"), pursuant to Rule 56, Federal Rules of Civil Procedure, hereby submit their Reply in support of their Motion for Summary Judgment. The Brimhalls seek partial summary judgment1 as to REM's claims under the Arizona Consumer Fraud Act and for intentional interference with prospective economic advantage, relating to Jeanne and/or Dr. Jack Winner not paying REM for two lasers, as described in part in paragraphs 66 and 67 of REM's Second Amended Verified Complaint. The Brimhalls are entitled to partial summary judgment as to these claims because REM suffered no damages as a result of the alleged wrongful conduct of the Brimhalls, as set forth in REM's Second Amended Verified Complaint. This Reply is supported by the attached Memorandum of Points and Authorities, the Brimhalls' Statement of Facts filed with their Motion for Summary Judgment, and the Court's entire file. MEMORANDUM OF POINTS AND AUTHORITIES REM CANNOT MAINTAIN A CLAIM UNDER THE CONSUMER FRAUD ACT SINCE IT IS NOT A CONSUMER. ARIZONA

The Brimhalls are entitled to summary judgment as a matter of law on REM's Arizona Consumer Fraud Act ("ACFA") claim because REM is not an injured consumer, as required by the statute. In response to this assertion, REM argues that the Brimhalls failed to cite to any authority to support this proposition. This is incorrect.

Case 2:02-cv-02036-MHM

The Brimhalls and REM have reached an agreement to settle and resolve all the claims between them, except for those addressed in this Motion. The parties recently finalized the documentation relating to this settlement and will be submitted a Joint Stipulation of Dismissal and proposed Judgment to this Court. Since the Court has not yet ruled on these documents, the present Motion is seeking only partial summary judgment. If the Court enters the judgment as requested, the present Motion will address all remaining claims between REM and the Brimhalls. -2Document 301 Filed 09/06/2005 Page 2 of 11

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

The case of Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 407 (9th Cir. 1992), cited by the Brimhalls in their Motion, is instructive. In its decision, the Court stated: Arizona's Consumer Fraud Act makes it illegal to commit fraud or deception "in connection with the sale or advertisement of any merchandise." A.R.S. § 44-1522. The clear intent of this provision is to protect unwary buyers from unscrupulous sellers. The basis for Vintage's claim, however, is that Sutter Home deceived it by secretly selling to another distributor the exclusive rights to distribute its wine. Under this scenario, Vintage is not a buyer, nor is it the target of deceptive advertising. Consequently, it cannot maintain an action under Arizona's Consumer Fraud Act. Id. (emphasis added); see also, Holeman v. Neils, 803 F. Supp. 237, 242 (D. Ariz. 1992)(stating "[t]he Arizona Consumer Fraud Act is a broad act intended to eliminate unlawful practices in merchant-consumer transactions," citing State ex rel. Corbin v. Hovatter, 144 Ariz. 430, 431, 698 P.2d 225, 226 (App. 1985)); Waste Mfg. & Leasing Corp. v. Hambicki, 183 Ariz. 84, 900 P.2d 1220 (App. 1995). These cases are hardly "inapposite," as REM alleges. In fact, the court's holding in Sutter Home is directly on point. Since Vintage was neither a buyer nor the target of the deceptive advertising, it could not maintain an action under the ACFA. Sutter Home, at 407. To the extent that these cases cited in Brimhalls' Motion for Summary Judgment leave any doubt as to the ACFA's requirement that the party seeking relief must be a consumer, additional authority is presented as follows. In Sellinger v. Freeway Mobile Home Sales, Inc., 110 Ariz. 573, 576, 521 P.2d 1119, 1122 (1974), the court first held that the ACFA created a cause of action in favor of the consumer. Id. "The elements of a private cause of action for statutory fraud are a false promise or misrepresentation made in connection with the sale or advertisement of merchandise and the hearer's consequent and

Case 2:02-cv-02036-MHM

Document 301

-3-

Filed 09/06/2005

Page 3 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

proximate injury." Parks v. Macro-Dynamics, Inc., 121 Ariz. 517, 520, 591 P.2d 1005, 1008 (App. 1979) (citing Sellinger) (emphasis added). Consumer protection statutes have been enacted in many states. See Edward X. Clinton, Jr., Do Businesses Have Standing to Sue Under State Consumer Fraud Statutes?, 20 S. Ill. U.L.J. 385 (1996). The majority of state consumer protection laws trace their genesis to the Uniform Trade Practices and Consumer Protection Law, developed by the Council of State Governments and the Federal Trade Commission in the late 1960's. See MARY DEE PRIDGEN, CONSUMER PROTECTION AND THE LAW § 3:5 (2004). The term "Little FTC Acts" has been used to describe some of these statutes. Id. Some states have enacted consumer fraud acts that are similar to the "Little FTC Acts," except they do not prohibit unfair methods of competition, but focus exclusively on consumer issues. Id., at § 3:6. Arizona is one of these states. Id. According to at least one commentator, REM is not the first "business-plaintiff" to make a claim under a consumer protection statute. See Clinton, supra, at 388 ­ 89. According to Mr. Clinton, typical business disputes are not usually covered by state consumer fraud acts, as courts are reluctant to confer consumer standing in disputes between two businesses, except where on business purchased goods or services in a consumer-oriented manner. Id., at p. 394. Although there are exceptions to the general rule (like in the Colorado and New Mexico cases cited by REM)2, the majority of jurisdictions are in line with the general rule, including Arizona. Id.; see also, Sutter Home, supra.

Case 2:02-cv-02036-MHM

It is also significant to note that the Colorado and New Mexico statutes discussed by REM are different from the ACFA, as they were derived from the Uniform Deceptive Trade Practices Act that was originally "intended as a remedy for business competitors." See PRIDGEN, at § 3:4. -4Document 301 Filed 09/06/2005 Page 4 of 11

2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Therefore, in New Jersey (one of the six other states with similar "Consumer Fraud" statutes), the court held that the New Jersey Consumer Fraud Act did not exclude business entities from its protection so long as they were truly "consumers" in the facts of the case. City Check Cashing, Inc. v. National State Bank, 582 A.2d 809, 811 (N.J.Super.A.D. 1990); see also, Independent Communications Network, Inc. v. MCI Telecommunications Corp., Inc., 657 F. Supp. 785, 787 (D.D.C. 1987) (stating that the D.C. Consumer Protection Procedures Act "is not intended to supply merchants with a private cause of action against other merchants. In no imaginable way could plaintiff [corporation] be categorized as a consumer."). Thus, in the present case, since REM is not a consumer as required by the ACFA, this Court must grant summary judgment to the Brimhalls as to REM's claim under the ACFA. II. REM'S CLAIM FOR INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE FAILS BECAUSE REM DID NOT SUFFER, NOR DID IT ALLEGE ANY PROSPECTIVE DAMAGE. REM argues in its Response that since its intentional interference with prospective economic advantage claim is similar to an interference with contract claim, the Brimhalls' argument that REM failed to show any "prospective" economic advantage that was damaged is somehow moot. See Robert E. Moroney, LLC's Consolidated Response in Opposition to Erchonia Medical, Inc.'s Motion for Summary Judgment Concerning REM's Claims for Conversion and Violation of the Arizona Consumer Fraud Act, and Brimhalls' Motion for Partial Summary Judgment, p. 11, n. 7. This argument fails for obvious reasons, namely that proving the elements of a similar tort is not sufficient to prove the elements of a related cause of action. The elements for intentional interference with prospective economic advantage are similar to the elements for interference with contract, but are not the same. Belden Corp. v. Internorth, Inc., 413 N.E.2d 98, 101 (Ill. 1980). The difference is that under a claim for -5Document 301 Filed 09/06/2005 Page 5 of 11

Case 2:02-cv-02036-MHM

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

interference with prospective economic advantage, REM "must allege business expectancies, not grounded in present contractual relationships, but which are commercially reasonable to expect." Sheppard v. Dickstein, Shapiro, Morin, & Oshinsky, 59 F.Supp.2d 27, 34 (D.D.C.1999), citing Democratic State Comm. of the District of Columbia v. Bebchick, 706 A.2d 569, 572 (D.C.1998) (quoting Carr v. Brown, 395 A.2d 79, 84 (D.C.1978)). Alleging conduct that injured REM's current business dealings is insufficient to impose liability under a claim for interference with prospective economic advantage. Id.; see also Turner v. Halliburton Co., 722 P.2d 1106, 1115 (1986) (stating that [interference with contractual relations] is aimed at preserving existing contracts and [interference with prospective business advantage] at protecting future or potential contractual relations."). As such, REM's current claim fails as a matter of law since it did not claim any damage to a prospective economic advantage. In its Response, REM also appears to infer that they plead a claim for interference with contract in addition to, or rather than intentional interference with prospective economic advantage. It is unclear what the basis for this argument is. Clearly, in

captioning its claims in its Second Amended Verified Complaint, and pleading the elements of those claims, REM did not make a claim for interference with contract. To the extent that REM suggests that this Court should amend its Complaint to include such a claim, this cannot be allowed. REM must not be allowed to be a "moving target." This litigation began in 2002. REM has amended its Complaint twice, and it chose to keep only the interference with prospective economic advantage and ACFA claims while dismissing the remainder of its similar claims in a settlement agreement recently entered with the Brimhalls. To suddenly argue in its Response to a Motion for Summary Judgment, after the discovery and dispositive motion deadlines have passed, that its claims should be changed again is unreasonable and unwarranted. Granting such a request in the -6Document 301 Filed 09/06/2005 Page 6 of 11

Case 2:02-cv-02036-MHM

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

face of such undue delay would greatly prejudice the Brimhalls, who need to be able to identify the claims at issue in order to attempt to properly resolve those claims. See Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004) (noting that the factors to take into consideration when deciding whether to amend a Complaint include the existence of bad faith, undue delay, prejudice to the opposing party, futility of amendment, and whether the plaintiff has previously amended the complaint); see also Vollrath Co. v. Sammi Corp., 9 F.3d 1455, 1464 (9th Cir. 1993) (holding that the denial of a motion to amend a Complaint to include claim for tortious interference with contractual or business relationship was not an abuse of discretion where the plaintiff waited until almost one year after being reinstated as a party to case before attempting to amend complaint and by time plaintiff attempted to amend complaint, discovery cutoff date had already past); Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 2004) (noting that where a party has previously filed an amended complaint, the district court's discretion to deny leave to amend is "particularly broad."). In sum, as to REM's claim for intentional interference with prospective economic advantage, REM failed to prove any interference by Brimhall with any prospective economic advantage. Even if anything Brimhall did amounted to "interference," those act(s) did not have any effect on any prospective, or future economic advantage of REM. The contract for the sale of the laser to Jeanne Winner was already made, and Jeanne Winner admits that she owes money to REM under this contract for sale. (SOF 30.) The tort of intentional interference with prospective economic advantage, by its very nature, presupposes impedance of a future financial relationship. Sheppard v. Dickstein, Shapiro, Morin, & Oshinsky, 59 F.Supp.2d 27, 34 (D.D.C.1999). REM suffered no damage to a future financial relationship. Any suggestion or request that this deficiency should be -7-

Case 2:02-cv-02036-MHM

Document 301

Filed 09/06/2005

Page 7 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

overlooked must be denied, and summary judgment should be granted to the Brimhalls on this Count. III. REM'S CLAIMS FAIL BECAUSE REM SUFFERED NO DAMAGES AS A RESULT OF BRIMHALL'S ALLEGED WRONGFUL CONDUCT. Both of REM's claims, the first claim for damages pursuant the ACFA, and the second for intentional interference with prospective economic advantage, fail because REM suffered no damages as a result of the alleged wrongful conduct of Brimhall. It is undisputed that Jeanne Winner received two lasers that now make up the crux of the dispute between the Brimhalls and REM, an REM laser, and an Erchonia-brand loaner laser. The parties agree that Jeanne offered to pay for the REM laser, but REM argues that she did so only if that would release her from any obligation to pay for the loaner laser, and as such, REM could not accept payment. See Robert E. Moroney, LLC's Consolidated Response in Opposition to Erchonia Medical, Inc.'s Motion for Summary Judgment Concerning REM's Claims for Conversion and Violation of the Arizona Consumer Fraud Act, and Brimhalls' Motion for Partial Summary Judgment, pp. 11-12. REM does not dispute that it did not own the loaner laser, but bases its argument that it could not accept Winner's offer to pay for the REM laser on the Declaration of Robert E. Moroney attached to the Response, in which Moroney declares that REM was obligated to either pay for, or return, the laser to its owner, Miki Smith. This argument is flawed. A self-serving declaration such as Moroney's is only relevant to the extent that it presents admissible facts. U.S. v. Shumway, 199 F.3d 1093, 1104 (9th Cir. 1999) (citing FED.R.CIV.P. 56(e)). Moroney's statement that REM is obligated to Smith for the loaner laser is nothing more than an inadmissible conclusion. Id. There was no evidence of any obligation prior to Moroney's declaration (SOF 18); rather, the evidence shows that Miki Smith thought that he owned the laser, and that he had not made a claim for its return
Document 301

Case 2:02-cv-02036-MHM

-8-

Filed 09/06/2005

Page 8 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

despite the fact that he is a party in the current litigation. In fact, Smith still has made no claim for the laser. Therefore, Moroney's recently disclosed conclusion that REM is obligated to Smith for the loaner laser is inadmissible. Id. Further, to the extent that Moroney's statement is admissible evidence, it does not establish an essential fact that would prevent this Court from entering summary judgment on the Brimhalls' behalf. Even if REM borrowed the laser from Smith, that does not give it legal standing to make a claim for its loss. Smith is a party in the instant litigation, and if he is indeed the owner of the loaner laser, then he, not REM, could make a claim for its loss. See, e.g., Huber v. Oliver County, 529 N.W.2d 179, 182 (N.D. 1995) (noting a distinction between a legal obligation and a mere moral obligation which the law will not lend its aid to enforce). It is undisputed that REM was not the owner of the loaner laser, and that it has suffered no damages relating to the loaner laser, since Smith has not made a claim for it. Therefore, REM's claims must fail as a matter of law. IV. CONCLUSION. REM failed to prove all of the necessary elements for its claims under the ACFA and for intentional interference with prospective economic advantage, and did not suffer any damages. Therefore, the Brimhalls respectfully request this Court to grant summary judgment on their behalf against REM. ... ... ... ... ... ... ...
Document 301

Case 2:02-cv-02036-MHM

-9-

Filed 09/06/2005

Page 9 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

RESPECTFULLY SUBMITTED this 6th day of September, 2005. KUNZ PLITT HYLAND DEMLONG & KLEIFIELD A Professional Corporation

By

s/Dominic L. Verstegen Timothy R. Hyland Dominic L. Verstegen 3838 North Central Avenue, Suite 1500 Phoenix, Arizona 85012 Attorneys for John and Claudette Brimhall

CERTIFICATE OF SERVICE I hereby certify that on the 6th day of September, 2005, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to those attorneys registered with CM/ECF: Gregory L. Miles Lori A. Curtis DAVIS MILES, PLLC 1550 E. McKellips Rd., Ste. 101 Mesa, AZ 85203 Attorneys for Third-Party Plaintiffs John and Claudette Brimhall Ira M. Schwartz Michael A. Cordier DeCONCINI McDONALD YETWIN & LACY, P.C. 7310 N. 16th St., Ste. 330 Phoenix, AZ 85020 Attorneys for Plaintiff Erchonia Medical Inc., George Leger and Gina Leger, Steven Shanks and Debbie Sue Shanks, Kevin Tucek and Carolyn Tucek Michael S. Rubin David Bray MARISCAL WEEKS MCINTYRE & FRIEDLANDER, PA 2901 N. Central Ave., Ste. 200 Phoenix, AZ 85012-2705 Attorneys for Robert E. Moroney, LLC, Robert Moroney and A Major Difference, Inc.

Case 2:02-cv-02036-MHM

Document 301

- 10 -

Filed 09/06/2005

Page 10 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Benjamin B. Lieb Robert Brunelli SHERIDAN ROSS, P.C. 1560 Broadway, Ste. 1200 Denver, CO 80202-5141 Attorneys for Robert E. Moroney, LLC, Robert Moroney and A Major Difference, Inc. Gordon S. Bueler 1300 N. McClintock Dr., Ste. B-4 BUELER JONES, LLP Chandler, AZ 85226 Attorneys for Miki Smith and KMS Marketing, Inc. Scott A. Salmon THE CAVANAUGH LAW FIRM 1850 N. Central Ave., Ste. 2400 Phoenix, AZ 85004-4527 Attorneys for Dr. George Gonzalez and Lorena Guzman Bradley R. Jardine Michael Warzynski JARDINE BAKER HICKMAN & HOUSTON, PLLC 3300 N. Central Ave., Ste. 2600 Phoenix, AZ 85012-2504 Attorneys for Defendant Erchonia Medical Inc. Ray K. Harris FENNEMORE CRAIG 3003 N. Central Ave., Ste. 2600 Phoenix, AZ 85012-2913 Attorneys for Dr. Richard Amy s/Alice Murphy

Case 2:02-cv-02036-MHM

Document 301

- 11 -

Filed 09/06/2005

Page 11 of 11