IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

GREG SHEPHERD, Plaintiff/Appellant, 

v.

COSTCO WHOLESALE CORPORATION, Defendant/Appellee. 

No. 1 CA-CV 18-0072 

Appeal from the Superior Court in Maricopa County

No. CV2017-052615 

The Honorable Aimee L. Anderson, Judge Retired

AFFIRMED IN PART, REVERSED AND REMANDED IN PART

COUNSEL

Joshua Carden Law Firm PC, Scottsdale

By Joshua W. Carden 

Counsel for Plaintiff/Appellant

Cavanagh Law Firm, Phoenix

By Karen C. Stafford, Cassandra V. Meyer 

Counsel for Defendant/Appellee

FILED 4-30-2019
SHEPHERD v. COSTCO

Opinion of the Court

2 

OPINION

Presiding Judge Jennifer M. Perkins delivered the opinion of the Court, in 

which Judge Lawrence F. Winthrop joined. Judge Jon W. Thompson

dissented in part and concurred in part. 

P E R K I N S, Judge:

¶1 Greg Shepherd challenges the dismissal of his complaint 

against Costco Wholesale Corporation (“Costco”) alleging numerous tort 

claims stemming from Costco’s alleged failure to cancel an unwanted 

prescription and disclosure of the prescription information to his ex-wife. 

We reverse and remand for further proceedings on Shepherd’s negligence 

and punitive damages claims but affirm the dismissal of his other claims.

Further, we hold that HIPAA’s requirements may inform the standard of 

care in a negligence action for wrongful disclosure of healthcare 

information.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Because Shepherd appeals from the grant of a motion to 

dismiss, we state the facts alleged in his operative complaint and must 

assume they are true for purposes of this appeal. Southwest Non-Profit 

Housing Corp. v. Nowak, 234 Ariz. 387, 389, ¶ 4 (App. 2014). 

¶3 Shepherd saw his physician in January 2016 for a check-up 

and a refill of his usual prescription. During that visit, his physician offered 

him an erectile dysfunction (“E.D.”) medication sample, which he accepted.

Shortly thereafter, Costco told Shepherd that his regular prescription and a 

full prescription of the E.D. medication were ready for pickup. Shepherd 

told Costco he did not want the E.D. prescription, and Costco 

acknowledged his cancellation request. 

¶4 Approximately one month later, Shepherd called Costco to 

check on another refill of his regular prescription and was told it and a full 

prescription of the E.D. medication were ready for pickup. Shepherd again 

told Costco he did not want the E.D. medication. 

¶5 Shepherd called Costco again the next day to authorize his exwife, with whom he was exploring possible reconciliation, to pick up his 

regular prescription. Costco gave her the regular prescription and the E.D. 
SHEPHERD v. COSTCO

Opinion of the Court

3 

medication. She did not accept or pay for the E.D. medication but joked 

with a Costco employee about Shepherd “not picking it up yet” and told

Shepherd’s children and some friends about the medication. She also 

stopped reconciliation efforts with Shepherd.

¶6 Shepherd complained to Costco headquarters and received a 

written response that allegedly acknowledged the disclosure of medical 

information to his ex-wife violated both the Health Insurance Portability 

and Accountability Act of 1996 (“HIPAA”) and Costco’s privacy policy.

Shepherd then sued Costco alleging negligence, breach of fiduciary duty, 

fraud, negligent misrepresentation, intentional infliction of emotional 

distress, intrusion upon seclusion, and public disclosure of private facts 

based on Costco’s “public disclosure of an embarrassing medication that 

[he] twice rejected.”

¶7 Costco moved to dismiss the complaint. The trial court 

granted the motion, finding (1) Costco was entitled to immunity from suit 

under Arizona Revised Statutes (“A.R.S.”) section 12-2296, (2) HIPAA 

preempted the claims, and (3) Shepherd failed to allege sufficient facts to 

support his claims. Shepherd now appeals.

DISCUSSION

¶8 We review the dismissal of a complaint pursuant to Arizona 

Rule of Civil Procedure 12(b)(6) de novo. Coleman v. City of Mesa, 230 Ariz. 

352, 355, ¶ 7 (2012). We are required to accept as true all well-pled facts and 

give Shepherd the benefit of all reasonable inferences arising therefrom.

Botma v. Huser, 202 Ariz. 14, 15, ¶ 2 (App. 2002). We will affirm the dismissal 

only if Shepherd would not have been entitled to relief under any facts 

susceptible of proof in his complaint. Coleman, 230 Ariz. at 356, ¶ 8. 

I. Negligence

¶9 A plaintiff must prove four elements to establish a negligence 

claim: (1) a duty requiring the defendant to conform to a certain standard 

of care, (2) the defendant’s breach of that standard, (3) a causal connection 

between the defendant’s conduct and the resulting injury, and (4) actual 

damages. Quiroz v. ALCOA Inc., 243 Ariz. 560, 563–64, ¶ 7 (2018). 

¶10 In his complaint, Shepherd alleged Costco’s duty of care arose

from “the regulations governing pharmacy conduct, HIPAA laws, and 

Costco’s own privacy policy.” On appeal, he again contends Costco 

violated HIPAA and A.R.S. §§ 12-2291 to -2297. 
SHEPHERD v. COSTCO

Opinion of the Court

4 

A. Statutory Authorization

¶11 Under Arizona law, “all medical records and payment 

records, and the information contained in medical records and payment 

records, are privileged and confidential.” A.R.S. § 12-2292(A). But this 

information may be disclosed “without the written authorization of the 

patient or the patient’s health care decision maker as otherwise authorized 

by state or federal law, including [HIPAA] privacy standards.” A.R.S. § 12-

2294(C). HIPAA, in relevant part, allows covered entities such as Costco to 

“disclose to . . . any . . . person identified by the individual, the protected 

health information directly relevant to such person’s involvement with the 

individual’s health care.” 45 C.F.R. § 164.510(b)(1)(i). 

¶12 Here, Costco disclosed the E.D. prescription to Shepherd’s exwife, whom he had expressly authorized to receive prescription 

information. Shepherd contends HIPAA only authorizes the disclosure of 

“filled prescriptions,” but even assuming Shepherd’s contention is correct, 

the E.D. prescription was filled, albeit erroneously.

¶13 Shepherd also contends he objected to such disclosure when 

he requested that the E.D. prescription be cancelled but he bases this 

contention on a HIPAA provision that applies only to disclosures that take 

place in the presence of the patient. 45 C.F.R. § 164.510(b)(2)(ii). The portion 

of the relevantregulation addressing disclosures made when the individual 

is not present grants covered entities such as Costco the ability to use 

professional judgment to reasonably infer the individual’s best interest in 

allowing another to act on his behalf to pick up filled prescriptions. 45 

C.F.R. § 164.510(b)(3). Costco did not need to exercise such judgment here 

because Shepherd authorized his ex-wife to receive prescription 

information. Shepherd thus did not allege a violation of either HIPAA or 

related Arizona statutes. 

B. Duty

¶14 Although it did not arise under HIPAA, the parties 

nonetheless agree that Costco owed Shepherd a duty of care. That duty 

includes, at a minimum, the obligation to act as a reasonably prudent 

pharmacy would under the circumstances. See Lasley v. Shrake’s Country 

Club Pharmacy, Inc., 179 Ariz. 583, 586 (App. 1994). Shepherd alleged that 

Costco “represented . . . that his instructions to cancel his prescription had 

been acknowledged and would be acted upon,” that it “fail[ed] to cancel 

the [E.D.] prescription” despite multiple requests and opportunities to do 

so, and that one of its employees “joked” with his ex-wife about the E.D. 

prescription. These allegations are sufficient to withstand dismissal on the 
SHEPHERD v. COSTCO

Opinion of the Court

5 

pleadings under Rule 12(b)(6). See, e.g., Verduzco v. American Valet, 240 Ariz. 

221, 225, ¶ 9 (App. 2016) (quoting Ariz. R. Civ. P. 8(a)(2)) (under Arizona’s 

notice pleading rules, “[a] short and plain statement of the claim showing 

that the pleader is entitled to relief” is sufficient to overcome a Rule 12(b)(6)

motion to dismiss). The trial court thus erred in dismissing Shepherd’s 

negligence claim.

II. Breach of Fiduciary Duty

¶15 Shepherd alleged a fiduciary duty arose between himself and 

Costco because of “the confidential, professional, and private nature of the 

relationship between pharmacist/pharmacy and medical customer.”

Establishing a fiduciary duty requires either peculiar intimacy or an express 

agreement to serve as a fiduciary. Cook v. Orkin Exterminating Co., Inc., 227 

Ariz. 331, 334, ¶ 15 (App. 2011). Neither circumstance is alleged in this case, 

and mere unilateral trust in another party’s competence or integrity does 

not alone establish a fiduciary duty. Standard Chartered PLC v. Price 

Waterhouse, 190 Ariz. 6, 24 (App. 1996). Nor does the fact that a profession 

is regulated, despite Shepherd’s contention to the contrary. Thus, the 

superior court did not err in ruling Shepherd failed to state a claim for 

breach of fiduciary duty. 

III. Fraud

¶16 Shepherd based his common law fraud claim on Costco’s 

alleged representations that “his instructions to cancel his [E.D.] 

prescription had been acknowledged and would be acted upon.” But 

unfulfilled promises cannot support an actual fraud claim absent the 

presence of an intent not to perform at the time of the promise. Hall v. 

Romero, 141 Ariz. 120, 123–24 (App. 1984). Shepherd alleged no facts to 

suggest Costco intended to not cancel the E.D. prescription when it 

acknowledged his first cancellation request. He contends on appeal that 

there was a “triple confirmation that the offending prescription had been 

cancelled,” but his complaint only alleged acknowledgment of his first

cancellation request.

¶17 Shepherd further contends Costco acted fraudulently by 

failing to disclose to him the E.D. prescription was “a) still not cancelled 

and b) also waiting for pickup.” He did not raise this argument in the trial 

court and cannot raise it for the first time on appeal. County of La Paz v. 

Yakima Compost Co., Inc., 224 Ariz. 590, 606, ¶ 49 (App. 2010). The trial court 

correctly dismissed Shepherd’s fraud claim.
SHEPHERD v. COSTCO

Opinion of the Court

6 

IV. Negligent Misrepresentation

¶18 Shepherd’s negligent misrepresentation claim also relies on 

Costco’s alleged acknowledgment of his request to cancel the E.D. 

prescription. Negligent misrepresentation, like fraud, cannot be premised 

on a promise of future conduct. McAlister v. Citibank (Arizona), 171 Ariz. 207, 

215 (App. 1992). Thus, this claim was properly dismissed.

V. Intentional Infliction of Emotional Distress

¶19 A plaintiff alleging intentional infliction of emotional distress 

must show the defendant caused severe emotional distress by committing 

extreme and outrageous conduct with the intent to cause emotional distress 

or with reckless disregard of the near-certainty that such distress would 

result. Watkins v. Arpaio, 239 Ariz. 168, 170–71, ¶ 8 (App. 2016). The conduct 

must be “so outrageous in character and so extreme in degree, as to go 

beyond all possible bounds of decency, and to be regarded as atrocious and 

utterly intolerable in a civilized community.” Mintz v. Bell Atl. Sys. Leasing 

Int'l, Inc., 183 Ariz. 550, 554 (App. 1995) (quoting Cluff v. Farmers Ins. 

Exchange, 10 Ariz. App. 560, 562 (1969)). 

¶20 Shepherd contends a jury could conclude the “mocking 

disclosure” of the E.D. medication was outrageous. The trial court, not the 

jury, determines whether the acts are sufficiently extreme and outrageous 

to state a claim for relief. Id.; see also Nelson v. Phoenix Resort Corp., 181 Ariz. 

188, 199 (App. 1994) (trial court must make “preliminary determination 

whether the conduct may be considered so outrageous and extreme as to 

permit recovery”). Shepherd only alleged that his ex-wife and a Costco 

employee “joked” at the counter about him “not picking it up yet.” While 

these jokes may have been in poor taste, they do not approach the level of 

outrageousness needed to prove intentional infliction of emotional distress. 

See, e.g., Restatement (Second) of Torts § 46, cmt. d (“The liability clearly 

does not extend to mere insults, indignities, threats, annoyances, petty 

oppressions, or other trivialities. . . . There is no occasion for the law to 

intervene in every case where some one’s feelings are hurt.”); Ford v. Revlon, 

Inc., 153 Ariz. 38, 43 (1987) (stating that Arizona follows the standard for 

liability set forth in Restatement (Second) of Torts § 46). The trial court did 

not err in dismissing this claim. 

VI. Intrusion Upon Seclusion

¶21 Shepherd contends the trial court erroneously found “actual 

trespass” was a necessary element of an intrusion upon seclusion claim. The 

court instead found he had not alleged any “intrusion.” We agree. 
SHEPHERD v. COSTCO

Opinion of the Court

7 

¶22 This court has previously followed the four-part classification 

of invasion of privacy claims set forth in Restatement (Second) of Torts §§ 

652A-E. Hart v. Seven Resorts Inc., 190 Ariz. 272, 279 (App. 1997). An 

intrusion upon seclusion occurs when one “intentionally intrudes, 

physically or otherwise, upon the solitude or seclusion of another or his 

private affairs or concerns” and the intrusion is “highly offensive to a 

reasonable person.” Restatement (Second) of Torts § 652B. It typically 

involves 

(1) “physical intrusion into a place in which the plaintiff has 

secluded himself;” 

(2) “the use of the defendant’s senses, with or without 

mechanical aids, to oversee or overhear the plaintiff’s private 

affairs, as by looking into his upstairs windows with 

binoculars or tapping his telephone wires;” or 

(3) “some other form of investigation or examination into his 

private concerns, as by opening his private and personal mail, 

searching his safe or his wallet, examining his private bank 

account, or compelling him by a forged court order to permit 

an inspection of his personal documents.” 

Id., cmt. b. Shepherd alleged none of these circumstances; he instead alleged 

in conclusory fashion that Costco “intentionally intruded upon the solitude 

and seclusion of [Shepherd’s] private affairs and concerns”without alleging 

additional facts that would support this claim. On appeal, he contends 

Costco “published” the information to his ex-wife but does not contend that 

Costco knew Shepherd had purposefully secluded or shielded his ex-wife 

from receiving prescription information; in fact, Shepherd expressly 

authorized Costco to share prescription information with her. Accordingly, 

Shepherd’s claim for intrusion upon seclusion fails as a matter of law. See 

Hart, 190 Ariz. at 279 (“The defendant is subject to liability . . . only when 

he has intruded into a private place, or has otherwise invaded a private 

seclusion that the plaintiff has thrown about his person or affairs”) (quoting 

Restatement (Second) of Torts § 652B, cmt. c).

VII. Public Disclosure of Private Facts and False Light

¶23 Shepherd contends the disclosure to his ex-wife constituted a 

false light invasion of privacy. A false light tort occurs when: 
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Opinion of the Court

8 

One who gives publicity to a matter concerning another that 

places the other before the public in a false light is subject to 

liability to the other for invasion of his privacy, if

(a) the false light in which the other was placed would 

be highly offensive to a reasonable person, and

(b) the actor had knowledge of or acted in reckless 

disregard as to the falsity of the publicized matter and 

the false light in which the other would be placed.

Hart, 190 Ariz. at 280 (quoting Restatement (Second) of Torts § 652E).

Generally, however, “it is not an invasion of the right of privacy . . . to 

communicate a fact concerning the plaintiff’s private life to a single person 

or even to a small group of persons.” Id. (quoting Restatement (Second) of 

Torts § 652D, cmt. a). 

¶24 In Hart, the appellants asserted a false light claim based on 

“rumors in the community” that they had been terminated from 

employment because they were drug users. Id. The court rejected the claim, 

finding there was no evidence to suggest the employer had “publicly 

revealed the reasons for appellants’ termination.” Id. at 208–81. Similarly, 

Shepherd did not allege that Costco publicly revealed the E.D. prescription.

He only alleged that Costco disclosed it to one person—his ex-wife, who 

was authorized to receive such information. What she chose to do with that 

information is irrelevant to whether he stated a claim against Costco. See id. 

at 281 (“The mere fact that some interested parties may have heard rumors 

from sources other than [the plaintiff] . . . is, without more, insufficient to 

meet the level of publicity required for a false light claim.”) (quoting Moore 

v. Big Picture Co., 828 F.2d 270, 274 (5th Cir. 1987)). Accordingly, the trial 

court properly dismissed Shepherd’s false light claim.

VIII. Immunity from Suit for Good Faith Disclosures

¶25 Because Shepherd’s negligence claim was improperly 

dismissed, we next consider the trial court’s determination that Costco was 

immune from suit under A.R.S. § 12-2296. That statute provides as follows: 

A health care provider, contractor or clinical laboratory that 

acts in good faith under this article is not liable for damages 

in any civil action for the disclosure of medical records, 

payment records or clinical laboratory results or information 

contained in medical records, payment records or clinical 

laboratory results that is made pursuant to this article or as 
SHEPHERD v. COSTCO

Opinion of the Court

9 

otherwise provided by law. The health care provider, 

contractor or clinical laboratory is presumed to have acted in 

good faith. The presumption may be rebutted by clear and 

convincing evidence.

A.R.S. § 12-2296. When interpreting a statute, we look first to the statute’s 

plain language. White Mountain Health Ctr., Inc. v. Maricopa Cty., 241 Ariz. 

230, 249, ¶ 68 (App. 2016). If the language is clear and unambiguous, we 

must give effect to it without using other rules of statutory construction.

Parsons v. Ariz. Dep’t of Health Serv., 242 Ariz. 320, 323, ¶ 11 (App. 2017). We 

strictly construe statutes that limit common law liability. Ramirez v. Health 

Partners of S. Ariz., 193 Ariz. 325, 329, ¶ 11 (App. 1998). 

A. Section 12-2296 Applies to the Alleged Disclosure.

¶26 The parties do not dispute that Costco is a “health care 

provider” for purposes of § 12-2296. A.R.S. § 12-2291(5)(a). Shepherd 

contends, however, that § 12-2296 does not apply because Costco did not 

disclose the E.D. prescription to his ex-wife “under this article.”

¶27 Section 12-2294(C) authorizes the disclosure of medical 

records or the information contained in those records without written 

authorization “as otherwise authorized by state or federal law, including 

[HIPAA] privacy standards,” and HIPAA allows disclosure to “any . . . 

person identified by the individual” so long as the information is relevant 

to that person’s involvement with the individual’s health care. 45 C.F.R. 

§ 164.510(b)(1)(i). HIPAA also authorizes covered entities to “use 

professional judgment and . . . experience with common practice to make 

reasonable inferences of the individual’s best interest in allowing a person 

to act on behalf of the individual to pick up filled prescriptions, medical 

supplies, X-rays, or other similar forms of protected health information” 

when the individual is not present. 45 C.F.R. § 164.510(b)(3). 

¶28 Shepherd admits that he authorized his ex-wife to pick up his 

regular medication and that he was not present at the time of the disclosure. 

Accordingly, Costco’s disclosure was within the scope of § 12-2296.

B. Shepherd Alleged Sufficient Facts to Avoid Dismissal 

Based on § 12-2296 Immunity.

¶29 Shepherd argues Costco is not entitled to immunity because 

it did not act in good faith. While the statute presumes good faith, it does 

not define it; we therefore give the term its ordinary meaning and may 
SHEPHERD v. COSTCO

Opinion of the Court

10 

consult dictionary definitions in doing so. DBT Yuma, L.L.C. v. Yuma Cty. 

Airport Auth., 238 Ariz. 394, 396, ¶ 9 (2015). 

¶30 Webster’s Second Unabridged Dictionary defines good faith, 

in the general sense, as “accordance with standards of honesty, trust, 

sincerity, etc..” Random House Webster’s Second Unabridged Dictionary

822 (2001); see Sierra Tucson, Inc. v. Pima Cty., 178 Ariz. 215, 220 (App. 1994) 

(citing same dictionary). Similarly, in the context of commercial 

transactions, the Uniform Commercial Code defines “[g]ood faith” as 

“honesty in fact in the conduct or transaction concerned”; see also Stewart v. 

Thornton, 116 Ariz. 107, 110 (1977) (relying on the UCC’s definition of good 

faith). Our supreme court has further noted that good faith, in the context 

of commercial transactions, entails the absence of bad faith including 

actions that amount to “guilty knowledge or willful ignorance.” Stewart, 

116 Ariz. at 110. 

¶31 Shepherd has alleged that: (1) he told Costco to cancel the E.D. 

prescription twice; (2) Costco acknowledged one of his requests but did not 

cancel the prescription; and (3) a Costco employee crudely joked about the 

prescription with Shepherd’s ex-wife. Given these allegations, Shepherd 

may be able to prove some set of facts showing Costco did not act in good 

faith. See Luchanski v. Congrove, 193 Ariz. 176, 180, ¶ 20 (App. 1998) (stating 

that a motion to dismiss should be denied unless it is “beyond doubt” that 

the plaintiff could prove no set of facts which would entitle him to relief) 

(quoting Newman v. Maricopa Cty., 167 Ariz. 501, 505–06 (App. 1991)). Thus, 

Costco was not entitled to dismissal based on § 12-2296 immunity. Instead, 

Costco’s potential § 12-2296 immunity remains an open question on 

remand, subject to further discovery, but without prejudice to summary 

judgment in the event the developed record does not support a genuine 

issue of fact on this issue.

IX. HIPAA Preemption

¶32 We next consider the trial court’s conclusion that HIPAA 

preempted Shepherd’s claims.

¶33 Relying on federal authorities, Costco contends Shepherd 

“cannot use a HIPAA violation as the basis of a lawsuit” because HIPAA 

does not create a private cause of action. See, e.g., Webb v. Smart Document 

Solutions, LLC, 499 F.3d 1078, 1082 (9th Cir. 2007); Lee-Thomas v. LabCorp, 316 

F. Supp. 3d 471, 474 (D.D.C. 2018). Other state courts have allowed state law 

claims based on alleged HIPAA violations to survive a motion to dismiss. 

See R.K. v. St. Mary’s Med. Ctr., Inc., 735 S.E.2d 715, 724 (W. Va. 2012)

(“[S]tate common-law claims for the wrongful disclosure of medical or 
SHEPHERD v. COSTCO

Opinion of the Court

11 

personal health information are not inconsistent with HIPAA . . . [and] 

compliment HIPAA by enhancing the penalties for its violation and thereby 

encouraging HIPAA compliance”); Acosta v. Byrum, 638 S.E.2d 246, 251 

(N.C. Ct. App. 2006) (“Here, defendant has been placed on notice that 

plaintiff will use . . . HIPAA to establish the standard of care. Therefore, 

plaintiff has sufficiently pled the standard of care in her complaint”); but see

Sheldon v. Kettering Health Network, 40 N.E.3d 661, 672, ¶ 24 (Ohio 2015)

(“[I]n our view utilization of HIPAA as an ordinary negligence ‘standard of 

care’ is tantamount to authorizing a prohibited private right of action for 

violation of HIPAA itself”). 

¶34 HIPAA does not prohibit a private right of action for tortious 

disclosure of healthcare information, it merely declines to create an 

independent federal statutory private right of action. See Webb, 499 F.3d at 

1082; see also 65 Fed.Reg. 82462-01, 82566, 82641 (Dec. 28, 2000) (noting that 

the penalty provisions of HIPAA do not include a private right of action). 

A state-law negligence claim for wrongful disclosure of protected 

information, even when based on failure to abide by standard practices 

mandated by HIPAA, does not interfere with government enforcement 

actions authorized by HIPAA. Instead, additional state remedies encourage 

compliance with HIPAA by providing further means for patients to recover 

for harm suffered due to non-compliance. Accord Sheldon, 40 N.E.3d at 672, 

¶¶ 24–25 (holding that HIPAA does not preempt state-law claims for 

unauthorized disclosure of medical information so long as the disclosure is 

not specifically allowed by HIPAA, but deferring to an Ohio statute setting 

forth a standard of care). Moreover, A.R.S. § 12-2296 limits, but does not 

eliminate, private causes of action based on improper disclosure of medical 

information. If all private causes of action were foreclosed, § 12-2296’s grant 

of qualified immunity would be superfluous. Thus, HIPAA does not 

preempt state-law negligence claims for wrongful disclosure of medical 

information. Accordingly, we hold HIPAA’s requirements may inform the 

standard of care in state-law negligence actions just as common industry 

practice may establish an alleged tortfeasor’s duty of care and to the extent 

such claims are permitted under A.R.S. § 12-2296. 

¶35 Finally, relying on Skinner v. Tel-Drug, Inc., Costco argues that 

federal courts in Arizona have previously dismissed negligence per se 

claims made by a patient on HIPAA grounds. No. CV-16-00236-TUC-JGZ 

(BGM), 2017 WL 1076376 (D. Ariz. Jan. 27, 2017), adopted by the district court 

at 2017 WL 1075029 (D. Ariz. March 22, 2017). In Skinner, the plaintiff raised

a negligence per se claim alleging the defendant breached HIPAA 

regulations by sending numerous faxes containing protected health 

information to an unintended recipient. Id. at *1, *3. The magistrate judge 
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Opinion of the Court

12 

recommended dismissing the plaintiff’s claim because it relied solely on 

HIPAA violations to establish per se negligence. Id. *3–*4, *5. Skinner is 

distinguishable because Shepherd’s negligence claim does not rely solely 

on HIPAA and because Shepherd did not state a per se violation of HIPAA 

in his complaint, as discussed supra. Moreover, we are not bound by the

federal district court’s interpretation of Arizona law. Arpaio v. Figueroa, 229 

Ariz. 444, 447, ¶ 11 (App. 2012). 

X. Punitive Damages

¶36 Finally, we address the trial court’s dismissal of Shepherd’s

punitive damages claim. To recover punitive damages, a plaintiff must 

prove something more than the underlying tort. Saucedo ex rel. Sinaloa v. 

Salvation Army, 200 Ariz. 179, 182, ¶ 11 (App. 2001). There are no special 

pleading requirements for punitive damages claims; a general prayer for 

punitive damages is sufficient to put a defendant on notice that punitive 

damages are requested in the prayer for relief. Ezell v. Quon, 224 Ariz. 532, 

538, ¶ 23 (App. 2010) (quoting Kline v. Kline, 221 Ariz. 564, 572, ¶ 29 (App. 

2009)). Most of the tort claims alleged in Shepherd’s complaint that might 

legitimately give rise to a punitive damage claim have been properly 

dismissed by the trial court. What is left is a general negligence claim. But 

punitive damages are not available for mere negligence. Smith v. Chapman, 

115 Ariz. 211, 214 (1977) (“Punitive damages are not permitted in Arizona 

for mere negligence: there also must be shown a reckless or wanton 

disregard of the rights of others.”) (citation omitted). 

¶37 In his complaint, Shepherd alleged Costco’s actions were 

“malicious, oppressive or in reckless disregard of Plaintiff’s rights” and 

sought punitive damages. This conclusory allegation, standing alone, is 

insufficient to support punitive damages. Shepherd has, however, 

specifically alleged that Costco “rewards its pharmacy employees through 

a system of incentives for pharmacy sales, which system contributed to the 

failure of [Costco] to cancel the prescription as requested twice by Plaintiff.”

This is a serious allegation leveled against Costco. We reiterate that, in a 

Rule 12(b)(6) setting, we are not examining whether the allegation is true, 

or whether there is sufficient admissible evidence in the record to satisfy 

the heightened burden of proof and allow the jury to consider the claim. 

Instead, we presume counsel can meet the obligations imposed by Rule of 

Civil Procedure 11 and thus are required to accept that these allegations are 

true. See Ariz. R. Civ. P. 11(b)(3) (by signing a pleading, an attorney certifies 

that factual contentions have evidentiary support or likely will after 

discovery). In that circumstance, and on that basis alone, we cannot say as 

a matter of law that Shepherd will be unable to adduce facts supporting his 

allegation of an overt financial incentive to disregard a customer’s 
SHEPHERD v. COSTCO

Opinion of the Court

13 

prescription cancellation request. See Verduzco, 240 Ariz. at 225, ¶ 9 (“Under 

Arizona’s notice pleading rules, it is not necessary to allege the evidentiary 

details of plaintiff’s claim for relief.”) (internal quotation marks omitted).

Again, this holding is based on the Rule 12(b)(6) standard and will not 

prejudice any motion practice following discovery. 

CONCLUSION

¶38 We affirm the dismissal of Shepherd’s complaint except for 

his negligence and punitive damages claims. We reverse and remand for 

further proceedings on those claims. Shepherd may recover his taxable 

costs incurred on appeal upon compliance with Arizona Rule of Civil 

Appellate Procedure 21. See, e.g., Douglas v. Governing Bd. of Window Rock 

Consol. Sch. Dist. No. 8, 206 Ariz. 344, 346, 349, ¶¶ 3, 18–19 (App. 2003) 

(awarding costs to party who successfully appealed trial court’s dismissal 

of their claims).

T H O M P S O N, J., concurring in part, dissenting in part: 

¶39 I concur with the majority opinion, except as to punitive 

damages against Costco, and the award of costs.

¶40 “To obtain punitive damages, plaintiff must prove that 

defendant’s evil hand was guided by an evil mind.” Rawlings v. Apodaca, 

151 Ariz. 149, 162 (1986). It would serve no evil purpose on Costco’s part to 

reward employees’ inefficiencies in filling prescriptions which customers 

do not want. Thus, the complaint fails to sufficiently allege conduct by 

Costco, with evil intent, which could have caused harm to Shepherd.

¶41 Costs are generally awarded when a party has prevailed on 

the merits. Plaintiff has not yet prevailed on the merits. Costs may also be 

awarded under the so-called “Wagenseller” exception. Wagenseller v. 

Scottsdale Mem. Hosp., 147 Ariz. 370, 393–94 (1985) (stating fees may be 

awarded where appellant has obtained reversal of an order central to the 

case or final determination of a significant issue of law, which 

determination on appeal forms a separate unit within the overall litigation); 

Henry v. Cook, 189 Ariz. 42, 44 (App. 1996) (stating interpretation of 

“successful party” should be uniform for fees and costs). The punitive 

damages issue is merely ancillary, and not central to Shepherd’s claims.
SHEPHERD v. COSTCO

T H O M P S O N, J., concurring in part, dissenting in part

14 

Indeed his counsel, at oral argument, characterized the punitives claim as 

“a stretch.” 

¶42 I would therefore affirm as to punitive damages, and would

not award costs at this point in the ongoing litigation.