Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-02001/USCOURTS-azd-2_04-cv-02001-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Robert LISS, et al., 

Plaintiffs, 

v.

EXEL TRANSPORTATION SERVICES,

INC., et al.,

Defendants. 

EXEL TRANSPORTATION SERVICES,

INC., 

Counterclaimant,

v.

Robert E. LISS, et al.,

Counterdefendants. _________________________________

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No. CV-04-2001-PHX-SMM

MEMORANDUM OF DECISION AND

ORDER

Pending before the Court is a Motion for Partial Judgment on the Pleadings [Doc. No.

62], filed by Defendant Exel Transportation Services, Inc. After considering the arguments

raised by the parties in their briefs [and during oral argument], the Court issues this

Memorandum of Decision and Order.

BACKGROUND

Plaintiff/Counterdefendant Robert Liss ("Liss") worked for

Defendant/Counterclaimant Exel Transportation Services, Inc. ("Exel" or "Defendant"), and

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As in a prior Order, and because Zoe Liss is named solely due to Arizona community

property law and did not participate in actions upon which the lawsuit is based, the Court will

refer to Plaintiffs collectively as "Liss" or "Plaintiff."

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its predecessor companies from December 28, 1992 to May 6, 2004. (Countercl. ¶ 22.) On

July 1, 1994, Liss entered into an Employment and Non-Compete Agreement with Jupiter

Transportation, a wholly-owned subsidiary of Mark VII Transportation Company, which is

now known as Exel. (Ex. A to Compl., Ex. B to Countercl.) In a December 23, 1998

addendum to the 1994 agreement, Jupiter Transportation assigned the agreement to Taurus

Trucking, another wholly-owned subsidiary of Mark VII Transportation Company, now Exel.

(Id.) In the addendum, the parties confirmed the provisions of the 1994 agreement would

continue with the assignment from Jupiter to Taurus. (Id.) In the 1994 agreement and

addenda that followed, Liss was referred to as "Executive." (Id.) At the time of his departure

from Exel, Liss was a President of Exel. (Countercl. ¶ 22.) 

On August 2, 2004, Plaintiffs Robert E. Liss and Zoe Liss1

 filed a Complaint in

Maricopa County Superior Court against Defendants. The Complaint alleged two counts

under Arizona state law: breach of contract and unpaid wages and treble damages under

Arizona Revised Statutes § 23-355. (Compl.) Specifically, Liss claims that Exel breached

the 1994 agreement, as amended by addenda, by failing to pay Liss bonus compensation, and

Liss is therefore entitled to treble damages due to Exel's bad faith breach. (Compl. ¶¶ 15, 27-

29.) Exel removed the action to this Court on September 23, 2004. (Doc. No. 1.) 

Exel answered the Complaint and filed a Counterclaim against Liss on October 6,

2004, alleging breach of contract, breach of the covenant of good faith and fair dealing,

unjust enrichment, misappropriation of Exel's trade secrets in violation of Arizona state law,

breach of fiduciary duty, tortious interference with prospective business relationships, and

accounting. (Doc. No. 6.) Liss filed a Motion to Dismiss the Counterclaim on October 29,

2004, which the Court denied in an Order dated September 30, 2005. (Doc. Nos. 7, 58.) Liss

answered the Counterclaim on October 21, 2005. (Doc. No. 61.)

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On October 24, 2005, Exel filed a Motion for Partial Judgment on the Pleadings as

to Count II of Plaintiff's Complaint. (Doc. No. 62.) Liss responded on November 10, 2005,

and Exel replied on November 21, 2005. (Doc. Nos. 63, 64.)

The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(1), as Liss

is a citizen of Arizona, Exel is a foreign corporation, and the amount in controversy exceeds

$75,000.

STANDARD OF REVIEW

Rule 12(c) of the Federal Rules of Civil Procedure provides that "[a]fter the pleadings

are closed but within such time as not to delay the trial, any party may move for judgment

on the pleadings." FED.R.CIV. P. 12(c). "Judgment on the pleadings is proper when, taking

all the allegations in the pleadings as true, the moving party is entitled to judgment as a

matter of law." Honey v. Distelrath, 195 F.3d 531, 532-33 (9th Cir. 1999).

When considering a Rule 12(c) motion, the Court cannot consider evidence beyond

the submitted pleadings. Instead, the Court must take "all the allegations in the pleadings as

true," and grant a motion for judgment on the pleadings only as a matter of law. Id. If the

Court does consider matters outside the pleadings, the Rule 12(c) motion shall be treated as

a motion for summary judgment and disposed of in accordance with Rule 56. FED. R. CIV.

P. 12(c).

For purposes of disposing of the pending Motion for Partial Judgment on the

Pleadings, the Court will not consider extraneous evidence and will not construe the motion

as one for summary judgment under Rule 56. The Court will assume that all allegations

made in the pleadings are true and only grant Defendant's Motion if it is entitled to judgment

as a matter of law.

DISCUSSION

Defendant moves this Court for judgment on the pleadings pursuant to Rule 12(c) of

the Federal Rules of Civil Procedure as to Count II of Plaintiff's Complaint only. As a matter

of law, Defendant argues that Plaintiff's claim for treble damages under A.R.S. § 23-355

fails, even if Plaintiff's assertion that Defendant breached the 1994 employment agreement

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("the Agreement") is assumed to be true. Defendant contends that Plaintiff waived his right

to recover treble damages in Section 6.03 of the Agreement. 

Plaintiff counters that Defendant's Motion for Partial Judgment on the Pleadings

should be denied. He argues that (a) he did not waive his right to recover treble damages

because he was not represented by counsel when he negotiated or signed the Agreement; (b)

Section 6.03 of the Agreement constitutes an unenforceable liquidated damages clause

because it is a penalty; (c) if Plaintiff is not entitled to treble damages for his pre-termination

compensation, Plaintiff is entitled to treble damages for his "post-employment"

compensation; and (d) because Defendant has not paid Plaintiff post-employment

compensation, Defendant is not entitled to enforce its claim that Plaintiff waived treble

damages.

Section 6.03 of the Agreement states:

Upon termination of this Agreement pursuant to Section 5.01(g)

(Employer's breach), Employer [Exel] shall pay to Executive [Liss] all

of the compensation set forth in Section 3, including bonus pursuant to

Section 3.02, for twelve months subsequent to the breach. All postemployment compensation paid by Employer under the terms of this

Section 6 shall be calculated in the manner set forth in Section 3 hereof

and shall constitute liquidated damages which Executive hereby agrees

to accept as his exclusive remedy for any breach of the obligations of

the Employer hereunder hereby waiving any right to punitive or

exemplary damages.

(Ex. A to Compl., Ex. B. to Countercl.) 

Defendant argues that the above section constitutes a waiver of Plaintiff's ability to

recover treble damages and therefore partial judgment on the pleadings should be granted as

a matter of law. In support of this argument, Defendant points to Swanson v. The Image

Bank, Inc., 77 P.3d 439 (Ariz. 2003). In Swanson, an executive who was represented by

counsel negotiated a contract which contained a forum selection clause. Id. at 440. Because

the law of Texas, rather than that of Arizona, applied, the executive was unable to recover

treble damages pursuant to A.R.S. § 23-355. Id. at 444. The Arizona Supreme Court held

that "parties experienced in business, represented by counsel, and having relatively equal

bargaining strength, may, by express provision in a negotiated contract, surrender the

statutory remedy under A.R.S. § 23-355." Id. The court noted in a footnote that the parties

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were not "unsophisticated or inexperienced in business and commerce, and neither was in

need of protection from the other's superior bargaining power" and commented that the

contract was detailed and had been "negotiated and drafted by competent counsel." Id. at n.5.

Defendant Exel argues Plaintiff Liss is a sophisticated and experienced businessman

who negotiated the contract for over a year and was capable of waiving his statutory

remedies. (Def.'s Reply at 6.) Defendant contends that the Swanson court's holding concerns

sophisticated parties with equal bargaining power, and that the focus should not be on

whether Plaintiff was represented by counsel. (Id. at 6-7.) In addition, Defendant argues that

statutory damages under A.R.S. § 23-355 are punitive in nature and therefore Plaintiff

waived his right to them in Section 6.03, which states that he "waiv[es] any right to punitive

or exemplary damages." (Def.'s Mot. at 5-6.) Plaintiff, on the other hand, reads Swanson as

requiring legal representation in order for a party to waive treble damages under A.R.S. § 23-

355. (Pl.'s Resp. at 9.)

The Court agrees with Plaintiff's interpretation. In Swanson, the Arizona Supreme

Court explicitly held that parties to a contract must possess three attributes to waive the

statutory remedy of A.R.S. § 23-355: "[w]e hold that parties experienced in business,

represented by counsel, and having relatively equal bargaining strength, may, by express

provision in a negotiated contract, surrender the statutory remedy under A.R.S. § 23-355."

Swanson, 77 P.3d at 444 (emphasis added). Here, Plaintiff was clearly experienced in

business; he was a high-level executive at Exel. It is undisputed, however, that Plaintiff was

not represented by counsel when he negotiated or signed the agreement. Additionally,

whether the parties Plaintiff had relatively equal bargaining power is not apparent from the

pleadings. Finally, the Court cannot determine from the pleadings whether Plaintiff was

aware of the possible scope of the phrase "punitive or exemplary damages" in Section 6.03

when he signed or negotiated the Agreement.

The Court recognizes that the Arizona Supreme Court is "the ultimate expositor" of

Arizona law and its constructions of Arizona law bind this Court. See Mullaney v. Wilbur,

421 U.S. 684, 691 (1975). The plain language of the Arizona Supreme Court's decision in

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 Because the Court has denied the Motion on the above grounds, it need not address

Plaintiff's remaining arguments.

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Swanson clearly requires three elements be present in order for parties to a contract to waive

the statutory remedy under A.R.S. § 23-355. Swanson, 77 P.3d at 444. Because at least one

of those elements is absent in the pleadings before the Court, and because it is not clear from

the pleadings whether Plaintiff was aware of all remedies possibly encompassed in Section

6.03 of the Agreement, the Motion for Partial Judgment on the Pleadings must be denied as

a matter of law.2

CONCLUSION

Accordingly, for the reasons set forth above,

IT IS ORDERED that Defendants' Motion for Partial Judgment on the Pleadings

[Doc. No. 62] is DENIED.

DATED this 12th day of December, 2005.

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