Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-00050/USCOURTS-azd-2_10-cv-00050-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

GRK Holdings, LLC, 

Plaintiff, 

vs.

First American Title Insurance Co., et al.,

Defendants.

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No. CV10-0050 PHX DGC

ORDER

Defendant First American Title Insurance Co. has filed a motion to dismiss Plaintiff

GRK Holdings, LLC’s claims against it. Doc. 38. The motion is fully briefed. Docs. 45,

47. Defendants Mariscal, Weeks, McIntyre & Friedlander, P.A. and attorneys Timothy J.

Thomason and Charles H. Oldham (collectively “the Mariscal Defendants”) have filed a

motion to dismiss GRK’s claims against them. Doc. 39. The motion is fully briefed. Docs.

46, 48. Defendants Quarles & Brady LLP and attorneys John Maston O’Neal and Lauren

Elliott Stine (collectively “the Quarles Defendants”) have filed a motion to dismiss GRK’s

claims against them. Doc. 33. The motion is fully briefed. Docs. 41, 44. No party has

requested oral argument. For reasons that follow, the Court will grant in part and deny in

part First American’s motion to dismiss(Doc. 38), grant in part and deny in part the Mariscal

Defendants’ motion to dismiss (Doc. 39), and grant the Quarles Defendants’ motion to

dismiss (Doc. 33).

I. Background.

The facts as pled by the Plaintiff are as follows. On August 28, 2006, GRK lent

$270,000 to non-party Shamrock Glen, LLC. Doc. 21 at 3-4. The loan promised a minimum

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1

 It appears that owners Donna Murphy, Sharyn Miller, Mercedes Cruz, Joseph Miller, Gary

Morgan, and Cynthia Morgan purchased units in Shamrock Glen and received title insurance

from Security Title (collectively “the Security Title insured owners”). Doc. 33-1 at 2-3.

Other owners received title insurance from First American (collectively “the First American

insured owners”).

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return of $340,000 to be paid in full on October 31, 2006, and was secured by a deed of trust

which covered 58 properties. Id. at 4. The deed of trust was recorded by Defendant Capital

Title Agency, Inc. Id. First American issued a lender’s insurance policy that insured GRK’s

deed of trust in the amount of $270,000. Id.

Although the time frame is unclear from the complaint, at some point after the deed

of trust was executed Shamrock Glen sold several of the 58 properties to various buyers. Id.

at 4. Shamrock Glen made these sales without securing a release of the properties from

GRK. Id. All the owners and lenders received title insurance policies from First American

or Security Title.1

 Id. GRK contends that Capital Title acted as the agent for First American

and Security Title, and prepared the title reports on the properties that were sold. Id. 

Shamrock Glen defaulted on the loan. Id. In June of 2007, Shamrock Glen attempted

to secure additional funds by refinancing with non-party La Jolla Loans. Id. at 5. La Jolla

and Shamrock Glen developed a proposed settlement whereby GRK was to receive $300,000

in exchange for execution of a full release of the 58 properties secured by the deed of trust.

Id. GRK executed a full release of the properties that was subject to a letter which stipulated

that the release was to be recorded only upon written instructions from GRK. Id. at 5-6.

Defendant Security Title Agency was to act as the escrow agent on the proposed settlement,

and promised to record the release of the properties only if GRK instructed it to do so. Id.

at 6. The proposed settlement was never finalized. Id. As a result, GRK never gave Security

Title instructions to record the release. Id.

After the proposed settlement was abandoned, Shamrock Glen approached GRK with

a different proposed agreement that would require GRK to release its interest in 16 of the 58

properties that secured the loan. In exchange, Shamrock Glen would immediately provide

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$200,000 to GRK, would transfer title to one of the 58 properties – Unit 208 – to GRK, and

would eventually pay the remaining balance due under the loan to GRK. Id. at 6. This

proposed agreement was finalized, and Security Title recorded GRK’s release of the 16

properties on July 6, 2007. Id. at 7. About one month later, Security Title accidentally

recorded GRK’s full release of all 58 properties – which had been executed for purposes of

the proposed settlement that was never finalized – despite the fact that such recording was

not requested or authorized by GRK. Id.

Although Shamrock Glen paid GRK the $200,000 and transferred title to Unit 208,

it failed to pay the remaining balance due under the loan. Id. As a result, GRK ordered a

trustee’s sale guarantee of the 42 unreleased units from its insurer, First American. Id. Upon

ordering this trustee’s sale guarantee, GRK learned that Security Title had erroneously

recorded a copy of the full release of all 58 properties. Id. Security Title realized its mistake

in November of 2007, and recorded affidavits of erroneous recording. Doc. 21-4 at 1.

According to its motion to dismiss, First American retained the Mariscal Defendants

to represent the owners and clear the clouds on their units arising from liens on the

properties, including GRK’s. Doc. 38 at 2. The First American insured owners, through the

Mariscal Defendants, filed a complaint in Maricopa County Superior Court (“the Superior

Court litigation”) against GRK and others, seeking to quiet title and enjoin any trustee’s sale.

Id. In the complaint, the owners alleged that GRK’s lien was subordinate to the lien held by

La Jolla Loans. Id. at 2-3. 

According to the Quarles Defendants’ motion to dismiss, Security Title, acting on

behalf of its obligations under the title insurance policies issued to the Security Title insured

owners, retained the Quarles Defendants to represent the owners and clear the clouds on their

units arising from liens on the properties, including GRK’s. Doc. 33 at 5. The Security Title

insured owners, through the Quarles Defendants, filed a complaint in Maricopa County

Superior Court against GRK and others (“the Superior Court litigation”), seeking to quiet

title and enjoin any trustee’s sale. Id. The lawsuits filed by the First American insured

owners and the Security Title insured owners were consolidated by the Superior Court.

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GRK brings the present suit against First American, Security Title, Capital Title, the

Mariscal Defendants, and the Quarles Defendants. Doc. 21. GRK claims that all Defendants

have abused process by assisting in or causing the filing of the Superior Court litigation

(Count I). Doc. 21 at 10. GRK contends that Defendants had an improper purpose for filing

the cases in Superior Court, and sought to “harass GRK into abandoning, or releasing for

trivial compensation, GRK’s liens against the property rather than incurring huge legal fees

and expenses.” Id. GRK further contends that all Defendants have tortiously interfered with

GRK’s contractual relationship with Shamrock Glen by “failing to recognize GRK’s lien

when subsequently issuing clear title insurance” and/or by filing or assisting in filing the

litigation on behalf of the First American and Security Title insured owners (Count IV).

GRK also claims that First American, as the issuer and underwriter of GRK’s lender’s

insurance policy on the deed of trust to the 58 properties, owed it a duty of good faith that

was breached (Count II). Id. at 12. GRK contends that First American has required it to “go

through needless adversarial hoops to achieve its rights under” the lender’s insurance policy

and that it breached its duty by acting in concert with the First American insured owners in

filing the Superior Court litigation. Id. at 12-14. GRK further claims that First American

breached the lender’s insurance policy by failing to disclose to Capital Title (the company

that prepared the title reports on all the properties sold to the First American insured owners)

that GRK had a valid deed of trust on those properties (Count III). Doc. 21 at 15.

GRK has brought two claims against Security Title – a claim for promissory estoppel

(Count V) and breach of contract (Count VI).

II. Legal Standard.

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), the

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) (citation

omitted). To avoid dismissal, the complaint must plead “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)).

This plausibility standard requires sufficient factual allegations to allow “the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft

v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “[W]here the well-pleaded facts do not permit the

court to infer more than the mere possibility of misconduct, the complaint has alleged – but

it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’” Id. at 1950 (citing Fed. R. Civ.

P. 8(a)(2)). Legal conclusions couched as factual allegations are not given a presumption of

truthfulness. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998).

III. Analysis.

A. First American.

The following claims are pending against First American: abuse of process (Count I),

insurance bad faith (Count II), breach of contract (Count III), and tortious interference with

contract (Count IV). First American seeks dismissal of all four claims against it. Doc. 38.

The Court will consider each claim in turn.

1. Abuse of Process (Count I).

GRK alleges that First American abused process by “caus[ing] the filing of Sham

Litigation against GRK” in Superior Court. Doc. 21 at 10. First American argues that

GRK’s allegations are insufficient to state a claim for abuse of process. The Court agrees.

Unlike the tort of malicious prosecution, which covers the initiation of civil

proceedings “without probable cause” and “motivated by malice,” abuse of process addresses

misuse of process after proceedings have been initiated. Joseph v. Markowitz, 551 P.2d 571,

574-75 (Ariz. App. 1976). In Arizona, the elements of an abuse of process claim are “(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. App.

2004) (quoting Nienstedt v. Wetzel, 651 P.2d 876, 881 (Ariz. App. 1982)).

First American argues that GRK’s complaint fails to plead the necessary elements of

abuse of process because it alleges only that the lawsuit was filed for an improper purpose.

GRK replies that “alleg[ing] a specific act which showed abuse . . . is not required when the

plaintiff alleges process used for the ulterior motive and primary purpose of subjecting the

opposing party to excessive legal fees and expenses.” Doc. 45 at 5. GRK argues that the

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“Sham Litigation was brought by the Defendants for an improper purpose,” (id.), but does

not identify which of First American’s acts of using the process were tortious.

Arizona law requiresthat a “willful act in the use of judicial process” be alleged in an

abuse of process claim. Crackel, 92 P.3d at 887; Nienstedt, 651 P.2d at 881. A “generalized

allegation that a defendant has misused the litigation process as a whole” cannot support a

claim of abuse of process. Id. at 888. The claim must be based on something more than the

opposing party’s “mere persistence in the litigation.” Id. As the Arizona Court of Appeals

has explained, the tort of abuse of process, unlike the tort of malicious prosecution, requires

“some act beyond the initiation of a lawsuit.” Joseph, 551 P.2d at 574-75. 

GRK cites no Arizona case that purports to overrule Joseph, and this Court has found

none. As a result, Arizona law still holds that GRK may not base its abuse of process claim

on the mere initiation of the Superior Court litigation. Some specific abuse of the litigation

process must be alleged. GRK has not pled such specific abuse, and the Court accordingly

will grant First American’s motion to dismiss the claim. The Court need not decide whether

GRK alleged sufficient facts to plead improper purpose on the part of First American.

2. Insurance Bad Faith (Count II).

GRK alleges that First American owed it a duty of good faith and fair dealing based

on the lender’s insurance policy. Doc. 21 at 12. GRK contends that First American breached

this duty by causing the filing of the Superior Court litigation, which would deprive GRK of

its rights to the 58 properties. Id.

The tort of insurance bad faith arises when, inter alia, “the insurance company

intentionally denies, fails to process or pay a claim without a reasonable basis for such

action.” Noble v. National Am. Life Ins. Co., 624 P.2d 866, 868 (Ariz. 1981); see Golden

Rule Ins. Co. v. Montgomery, 435 F. Supp. 2d 980, 995 (D. Ariz. 2006). “The tort consists

of two elements. The insured must show that: (1) the insurer acted unreasonably in its

handling of the insured’s claim; and (2) that the insurer acted knowing that it was acting

unreasonably or with such reckless disregard that knowledge may be imputed to it.” Id.

(emphasis in original). First American argues that GRK’s claim is defective because it is

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based on First American’s filing of the litigation in Superior Court, not on its failure to

“process or pay a claim[.]” Noble, 624 P.2d at 868. First American asserts – and GRK does

not deny – that GRK has never made a claim under the First American lenders’ policy, and

that GRK therefore has not alleged that First American “acted unreasonably in its handling”

of any claim. Doc. 38 at 11. 

GRK argues that “[alt]hough many cases litigated do revolve around a submitted

claim, careful reading of the case law shows that it is the conduct of the insurer toward the

insured’s interests that [is] the catalyst for the claim.” Doc. 45 at 11. GRK cites three

Arizona cases: Rawlings v. Apodaca, 726 P.2d 565, 576 (Ariz. 1986); Noble, 624 P.2d at

868; and Trus Joist Corp. v. Safeco Ins. Co. of Am., 735 P.2d 125, 134 (Ariz. App. 1986).

The Court agrees that Rawlings supports GRK’s position.

The Rawlings were insured by Farmers Insurance Company of Arizona for losses

caused by fire. The policy limit was $10,000. When the Rawlings’ barn was burned due to

the negligence of their neighbors, the Apodacas, Farmers paid the Rawlings the $10,000

owed under the policy. This payment did not cover all of the Rawlings’ losses. 

Farmers had also insured the Apodacas. That policy included $100,000 of liability

coverage – money that could be called upon to pay the Rawlings’ uninsured losses if the

Apodacas in fact caused the fire. An investigator hired by Farmers concluded that the

Apodacas caused the fire. When the Rawlings sought to obtain a copy of the investigator’s

report, Farmers blocked their effort and thereby impeded their ability to bring a claim against

the Apodacas that Farmers ultimately would pay.

On appeal from a judgment in favor of the Rawlings, Farmers made the same

argument that First American makes here – “that actionable bad faith by an insurer facing a

first-party claim is limited to the unfounded refusal or delay in payment of a valid claim.”

726 P. 2d at 569 (footnote omitted). Because it had paid the Rawlings the $10,000 it owed

under their insurance policy, Farmers argued that it could not be liable. The Rawlings made

the argument asserted in this case by GRK – “that bad faith claims are not limited to

situations involving breach of the express promise to pay covered claims.” Id. 

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The Arizona Court of Appeals agreed with Farmers, holding “that because Farmers

had paid the Rawlings’ claim in full (the policy limits) and without delay, it could not be

liable for the tort of bad faith.” Id. The Arizona Supreme Court reversed. It held that

Farmers breached the covenant of good faith and fair dealing implied in its insurance contract

with the Rawlings when it blocked the Rawlings’ access to the investigative report and

thereby frustrated their efforts to bring a claim against the Apodacas. As the Supreme Court

explained, “Farmers intentionally pursued a course of conduct designed, for its own benefits,

to impede the [Rawlings] claim against the tortfeasor. Thus, although Farmers performed

its express covenants, the evidence supports the conclusion that for its own profit Farmers

breached its duty to play fairly with its insureds and to give their legitimate interests equal

consideration.” Id. at 573. 

Rawlings thus holds that insurance bad faith is not limited to wrongful actions in the

handling of a claim. Bad faith may occur under Arizona law when the insurance company

takes other actions to defeat the insured’s interest. Whether First American did so in this

case will require further factual development, but the Court cannot hold at this stage that

GRK has failed to state a claim for insurance bad faith.

3. Breach of Contract (Count III).

GRK alleges that First American’s insurance policy, “through the elements of good

faith and fair dealing,” contained an implicit promise that First American “would recognize

and disclose GRK’s Deed of Trust to subsequent interested parties[.]” Doc. 21 at 15. GRK

alleges that First American breached this implied covenant by failing to disclose the deed of

trust to Capital Title – the company that did the title searches on the properties. Id. 

To prevail on a breach of contract claim, a plaintiff must prove the existence of a

contract between the plaintiff and defendant, a breach of the contract by the defendant, and

resulting damage to the plaintiff. See Coleman v. Watts, 87 F. Supp. 2d 944, 955 (D. Ariz.

1998) (citing Clark v. Compania Ganadera de Cananea, S.A., 387 P.2d 235, 237 (Ariz.

1963)). First American argues that GRK has failed to allege a breach because “there is no

provision in the policy requiring First American to make disclosure to anyone of GRK’s deed

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of trust.” Doc. 38 at 10. GRK alleges that First American breached the covenant of good

faith and fair dealing implied in any contract, which mandates that “neither party will act to

impair the right of the other to receive the benefits which flow from their agreement or

contractual relationship.” Rawlings, 726 P.2d at 569. 

GRK’s claim is premised on First American’s failure to perform an affirmative act –

to disclose GRK’s deed of trust to Capital Title. This is not the same as the insurance bad

faith claim discussed above – a claim premised on First American’s filing of the Superior

Court litigation. Under Arizona law, however, the “implied covenant in an insurance

contract [does not] entitle[] the insured . . . to protection in excess of that which is provided

for in the contract, nor to anything inconsistent with the limitations contained in the

contract.” Id. at 571. Moreover, insurance companies have not been deemed by law as full

fiduciaries. Id. at 571 (“we do not go so far as to hold that the insurer is a fiduciary”). 

GRK does not claim that its contract with First American required First American to

notify others about GRK’s rights under the deed of trust. Nor has GRK cited any case

recognizing an implied contractual obligation for an insurer of a deed oftrust to notify buyers

of the property that the deed of trust exists. Because such an obligation clearly would exceed

the protection provided in the lenders’ insurance policy, it is not implied under Arizona law.

GRK therefore has failed to state a claim for breach of contract in Count III.

4. Tortious Interference With Contract (Count IV).

Under Arizona law, a plaintiff asserting a claim of tortious interference with

contractual relations must prove: “(1) existence of a valid contractual relationship,

(2) knowledge of the relationship on the part of the interferor, (3) intentional interference

inducing or causing a breach, (4) resultant damage to the party whose relationship has been

disrupted, and (5) that the defendant acted improperly.” Safeway Ins. Co. v. Guerrero, 106

P.3d 1020, 1025 (Ariz. 2005) (quoting Wells Fargo Bank v. Ariz. Laborers, Teamsters &

Cement Masons Local No. 395 Pension Trust, 38 P.3d 12, 31 (Ariz. 2002)).

GRK alleges that it “had a valid contractual relationship and/or business expectancy

with Shamrock [Glen]” pursuant to the loan GRK made to Shamrock Glen. Doc. 21 at 16.

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GRK further alleges that First American “had knowledge” of the loan and failed to recognize

GRK’s lien when it filed the litigation in Superior Court. Id. GRK argues that First

American intentionally interfered with GRK’s contract with Shamrock Glen by filing the

litigation under these facts.

First American claims that “GRK’s tortious interference claim fails as a matter of law

because other factual allegations in the Complaint clearly show that GRK has not pled the

first element of the tort – that it had a valid contractual relationship at the time of the

interference.” Doc. 38 at 9 (emphasis in original). First American contends that the

complaint clearly alleges that Shamrock Glen breached the contract on October 31, 2006,

more than one year before First American filed the Superior Court litigation. First American

argues that because Shamrock Glen had already breached the contract at the time the lawsuit

was filed, First American cannot have interfered with a valid contract. First American has

cited no case law for the proposition that once a contract has been breached with respect to

one provision it is deemed invalid or unenforceable with regard to all provisions. Moreover,

the Court must interpret the facts in a light most favorable to the nonmoving party for the

purposes of this motion. GRK has alleged that there was a valid contract, and nothing in

GRK’s complaint establishes that the aspect of the contract with which First American is

alleged to have interfered was invalid or unenforceable.

First American also argues that the filing of the lawsuit is privileged and cannot form

the basis for tortious interference. This proposition is not supported by Arizona law.

Arizona recognizes the tort of malicious prosecution, whereby a plaintiff can be held liable

for instituting civil proceedings against a defendant if it commenced a suit without probable

cause, motivated by malice, and ended up losing the suit. Joseph, 551 P.2d at 573. The

recognition of this tort is sufficient to show that filing a lawsuit is not per se privileged.

First American cites Western Technologies v. Sverdrup & Parcel, Inc., 739 P.2d 1318,

1323 (Ariz. App. 1986), and Green Acres Trust v. London, 688 P.2d 617 (Ariz. 1984), in

support of its privilege argument. Western Technologies recognized “an absolute privilege

or immunity to statements made in judicial and quasi-judicial proceedings.” 739 P.2d at

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2

 In its reply brief, First American cites Drummond v. Stahl, 618 P.2d 616, 619 (Ariz. App.

1980), and Yeung v. Zoran, 232 P.3d 1281 (Ariz. App. 2010). These cases similarly deal

only with statements made or actions taken during the course of litigation, not the filing of

the litigation. See Yeung, 232 P.3d at 1282 (court noting that the case dealt with statements

made “in connection with a private, contractual arbitration proceeding”); Drummond, 618

P.2d at 619 (court noting that an allegation that an attorney had a conflict of interest, made

during litigation proceedings, is privileged). 

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1324. The court did not consider the question of whether the filing of a lawsuit – rather than

a statement made in a judicial proceeding – is privileged. Likewise, Green Acres did not

concern privilege for the filing of a lawsuit, but privilege for statements made during the

course of judicial and quasi-judicial proceedings. The court noted that the “privilege protects

judges, parties, lawyers, witnesses and jurors” from statements made in the course of the

proceedings. 688 P.2d at 613.2

 Neither case holds that filing of a lawsuit is privileged.

An additional question is whether the interference was proper. Safeway, 106 P.3d at

1025; Wagenseller v. Scottsdale Memorial Hosp., 710 P.2d 1025, 1043 (Ariz. 1985). GRK

alleges that the lawsuit was improper, including its claim that the lawsuit breached the

covenant of good faith and fair dealing. Because First American does not focus on the issue

of whether its lawsuit was proper as a matter of law – beyond arguing that filing of a lawsuit

is absolutely privileged, which the Court rejects – nor state additional reasons why the Court

should dismiss this claim, the Court will deny First American’s motion to dismiss the tortious

interference claim.

B. The Mariscal Defendants.

GRK has asserted claims against the Mariscal Defendants for abuse of process

(Count I) and tortious interference with contract (Count IV).

1. Abuse of Process (Count I).

GRK alleges that the Mariscal Defendants committed the tort of abuse of process by

“caus[ing] the filing of Sham Litigation against GRK” in order “to leverage and harass GRK

into abandoning, or releasing for trivial compensation,” GRK’s liens against the properties.

Doc. 21 at 10. The Mariscal Defendants argue that GRK has failed to allege any willful act

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3

 In their reply brief, the Mariscal Defendants argue that GRK failed to plead the third

element of a tortious interference claim – that the intentional interference induced or caused

a breach. Doc. 48 at 8. They also argue that “GRK cannot collaterally attack” other rulings

“through the guise of a tortious interference claim.” Id. The Court will not consider

arguments made for the first time in a reply brief.

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beyond the filing of the Superior Court litigation – an insufficient allegation under Arizona

law. Crackel, 92 P.3d at 888 (court finding that “a generalized allegation that a defendant

has misused the litigation process as a whole” is insufficient). The Court agrees with the

Mariscal Defendants and will dismiss the abuse of process claim for the reasons discussed

above.

2. Tortious Interference With Contract (Count IV).

GRK alleges that the Mariscal Defendants tortiously interfered with its contract with

Shamrock Glen by filing the Superior Court litigation that prevented GRK from foreclosing

on the properties. Doc. 21 at 16. The Mariscal Defendants make arguments identical to First

American’s – GRK has failed to show a valid contractual relationship, and filing of the

Superior Court litigation was privileged. Doc. 39 at 8. The Court will deny the motion to

dismiss the tortious interference claim for the reasons discussed above.3

C. The Quarles Defendants.

GRK sues the Quarles Defendants for abuse of process (Count I) and tortious

interference with contract (Count IV).

1. Abuse of Process (Count I).

GRK alleges that the Quarles Defendants committed the tort of abuse of process by

“caus[ing] the filing of Sham Litigation against GRK” in order “to leverage and harass GRK

into abandoning, or releasing for trivial compensation,” GRK’s liens against the properties.

Doc. 21 at 10. The Quarles Defendants, like the other Defendants, argue that GRK has failed

to allege any willful act beyond the filing of the litigation – an insufficient allegation under

Arizona law. Crackel, 92 P.3d at 888 (court finding that “a generalized allegation that a

defendant has misused the litigation process as a whole” is insufficient). For reasons

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 In their reply brief, the Quarles Defendants make yet a fourth argument that GRK has failed

to plead the third element of a tortious interference claim – that the intentional interference

induced or caused a breach. Doc. 44 at 6. The Court will not consider this untimely

argument. 

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explained above, the Court agrees that GRK has failed to state a claim for abuse of process

and will dismiss this claim against the Quarles Defendants.

2. Tortious Interference With Contract (Count IV).

GRK alleges that the Quarles Defendants tortiously interfered with its contract with

Shamrock Glen by filing the Superior Court litigation that prevented GRK from foreclosing

on the properties. Doc. 21 at 16. The Quarles Defendants make the same two arguments as

the other Defendants – which the Court rejected above – and one additional argument.4

Defendants argue that “GRK’s allegations pled in the [complaint] in support of the tortious

interference claim do not meet the plausibility requirements of Rule 8.” Doc. 33 at 8. They

argue that “GRK has pled no facts showing that the [Superior Court litigation] is something

other than what it appears to be – a litigated dispute as to whether GRK has [the] right to

foreclose on its deed of trust.” Id. They contend that there are absolutely no facts in support

of GRK’s conclusory assertions that the Quarles Defendants acted with improper intent and

filed suit to interfere with GRK’s contract. The Court agrees.

GRK alleges that the Quarles Defendants filed suit with improper motives (Doc. 21

at 16), but alleges no facts that allow “the court to draw the reasonable inference that the

[Quarles Defendants] [are] liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949.

Indeed, the following are the only factual statements in the complaint that even mention the

Quarles Defendants: “Defendant Quarles & Brady . . . is a foreign limited liability

partnership” (Doc. 21 at 3), “Defendant John Maston O’Neal . . . is an Arizona resident” and

“an attorney” with Quarles & Brady (id.), “Defendant Lauren Elliott Stine . . . is an Arizona

resident” and “an attorney” with Quarles & Brady (id.), and the fact that Quarles Defendants

filed the Superior Court litigation (id. at 8). 

In its response to Quarles Defendants’ motion to dismiss, GRK states that “[w]hen

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GRK tried to foreclose, Defendants stepped in and filed a lawsuit to stop them.” Doc. 41 at

6. GRK also points to paragraph 90 of its complaint, where it alleges that “Defendants’

interference was improper as to motive and/or means.” Id. at 7; Doc. 21 ¶ 90. But the mere

allegation that interference was improper is a legal conclusion, not a statement of fact. Legal

conclusions couched as factual allegations are not given a presumption of truthfulness.

Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). Iqbal requires a plaintiff’s complaint

to state sufficient factual allegations to allow “the court to draw the reasonable inference that

the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949

(2009). GRK pleads no facts that allow the Court to draw the inference that the Quarles

Defendants filed the Superior Court litigation with any improper intent. Safeway, 106 P.3d

at 1025 (noting that, while attorneys do not have a qualified privilege with regard to civil

suits, they can be held liable only if they “acted improperly”). As a result, the Court must

dismiss the claim against the Quarles Defendants. 

IV. Leave of Amend.

GRK, in a single sentence, asks that the Court grant leave to amend in the event any

of GRK’s claims are dismissed. Doc. 45 at 13. GRK has already had three opportunities to

plead its claims. See Docs. 1, 11, 21. GRK has also been slow in getting this litigation

started: Defendants were not served until some six months after this case was commenced.

See Doc. 20. Because leave to amend should be freely granted under Rule 15, and the

Supreme Court has instructed that “this mandate is to be heeded,” Foman v. Davis, 371 U.S.

178, 182 (1962), the Court will grant GRK one more opportunity to amend. GRK has until

October 22, 2010, to file an amended complaint. Given the number of times GRK has

amended its complaint and the time that has elapsed since the commencement of this

litigation, GRK is cautioned that this deadline will not be extended absent truly extraordinary

circumstances. Defendants also are advised that the time for them to answer or otherwise

respond to the complaint will not be extended absent truly extraordinary circumstances. 

IT IS ORDERED:

1. First American’s motion to dismiss (Doc. 38) is granted in part and denied

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in part. The Court will grant First American’s motion to dismiss the abuse of process claim

(Count I) and deny the motion as to the other claims (Counts II, III, and IV).

2. The Mariscal Defendants’ motion to dismiss(Doc. 39) is granted in part and

denied in part. The Court will dismiss the abuse of process claim (Count I) and deny the

motion with respect to the tortious interference claim (Count IV).

3. The Quarles Defendants’ motion to dismiss (Doc. 33) is granted.

4. GRK will have until October 22, 2010 to file a third amended complaint.

DATED this 6th day of October, 2010.

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