NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL

AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

E&M SERVICES, LLC, Plaintiff/Appellee, 

v.

A&N SERVICES, LLC, et al., Defendants/Appellants.

No. 1 CA-CV 18-0616

Appeal from the Superior Court in Maricopa County

No. CV 2016-013511

The Honorable Roger E. Brodman, Judge

AFFIRMED

COUNSEL

Whitley Legal Group, PC, Scottsdale

By Jeffrey C. Whitley

Co-Counsel for Defendants/Appellants

Dorsey & Whitney, LLP, Minneapolis, MN

By F. Matthew Ralph 

Co-Counsel for Defendants/Appellants

FILED 3-3-2020
2

Donald J. Newman, PC, Phoenix

By Donald J. Newman

Co-Counsel for Plaintiff/Appellee

Lane & Nach, PC, Phoenix

By S. Gregory Jones

Co-Counsel for Plaintiff/Appellee

MEMORANDUM DECISION

Judge Jennifer B. Campbell delivered the decision of the Court, in which 

Presiding Judge Maria Elena Cruz and Judge Kent E. Cattani joined.

C A M P B E L L, Judge:

¶1 This matter involves competing claims of breach of contract, 

breach of the duty of good faith and fair dealing, and fraud. Following a 

four-day bench trial, the superior court found in favor of Eslam Hawari and 

his related business entities, E&M Services, LLC; Sahnad Services, LLC

(“Sahnad”); and M&T, LLC (collectively, “E&M”), on all of its claims

against A&N Services, LLC, Abedelhalim Lawabni (“Abed”), and Nohad 

Loabneh (“Ned”) (collectively, “A&N”).

1

¶2 The superior court’s judgment hinged on its determination of 

the witnesses’ credibility. The court, in a detailed 13-page minute entry,

stated that the parties’ versions of events were mutually exclusive and

explicitly found Eslam to be the more credible party.

¶3 A&N appeals the various findings of fact and conclusions of 

law in favor of E&M and the award of attorney fees below.2 Finding no 

error, we affirm.

1 The superior court found in favor of A&N on its counterclaim which 

alleged that E&M provided false trip reports with forged signatures. 

2 Although A&N generally challenges Eslam’s credibility, it does not 

specifically dispute the following five damage claims: 

(1) The payout withheld for rides from July 11, 2016, to October 2, 2016: 

$86,412.79. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

3

BACKGROUND

¶4 Over the past 30 years, brothers Abed and Ned have operated 

several businesses in Minnesota and Arizona, including A&N, which 

operates primarily as a government contractor. At A&N, Ned was 

primarily responsible for A&N’s contracts, claims, and subcontractors, and 

Abed was primarily responsible for accounting functions. 

¶5 Eslam had previously worked for Ned and Abed in 

Minnesota as an employee and subcontractor with their first nonemergency medical transportation business. Eslam moved to Arizona, 

formed E&M, and became a subcontractor of A&N. 

¶6 The parties have had long-standing personal relationships. 

Both Eslam and Ned testified the other was like family. They vacationed 

together, and their wives were friends. Abed did not like Eslam, but Ned 

persuaded Abed to let Eslam do business with A&N. Ned and his various 

companies loaned Eslam and E&M money based on several verbal 

agreements; the repayment of these loans underlies some of the issues in 

this case. 

¶7 A&N contracted to provide non-emergency medical 

transportation services to government agencies, particularly the Arizona 

Health Care Cost Containment System (“AHCCCS”), and several prime 

contractor transportation companies. A&N furnished administrative 

services to subcontractors who provided the actual transportation for the 

patients. 

¶8 A&N paid its subcontractors between 70–80 percent of gross 

billings. A&N issued payment on a biweekly basis for rides performed 

during the prior two weeks. Prior to payment, A&N sent “payout” reports

to subcontractors listing revenues paid out for rides and any deductions.

(2) The erroneous recoupment for a ride provided by another 

subcontractor: $717.84. 

(3) The overassessment for chargebacks stemming from the Office of 

Inspector General’s audit: $1,866.27. 

(4) The missing rides from 2015-2016: $74,987.25. 

(5) The underpayment for 2014: $64,776.51. 

Ned calculated the maximum amount E&M was entitled to per its 

allegations was $24,891.66 (before offsets due to E&M’s alleged material 

breach). A&N argued it did not deliberately or knowingly underpay E&M 

and any underpayment was excused by E&M’s breach. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

4

Deductions included administrative expenses, such as rent, marketing 

materials, copying costs, electronic deposit fees, and “recoupment” for 

claims denied by reimbursing entities.

3 A&N also sent its subcontractors

“aging reports” to account for “out of order” rides, or rides performed in 

prior periods that had been entered into A&N’s billing system after the 

cutoff time for their corresponding billing cycle.

4 

¶9 While A&N’s main customer, AHCCCS, quickly reimbursed 

claims for most rides, it occasionally denied a claim because of incomplete 

paperwork or a failure to get a prior authorization for rides in excess of 100 

miles. A&N was able to review AHCCCS’ online portal to check the status 

of each claim. A&N had up to six months from the date of service to submit 

or supplement claims for reimbursement. 

¶10 E&M was A&N’s largest subcontractor between 2013 and 

2016, performing more than 47,000 rides.5 E&M had a fleet of approximately

40 vehicles and hired its own drivers. The drivers provided trip logs to 

document the trips, and each individual trip was listed in A&N’s online 

portal. A&N paid E&M in excess of $2.2 million dollars over the course of 

their business relationship. 

¶11 It is undisputed that in December 2013, MEISA

Transportation Services, LLC―another non-emergency medical 

transportation business owned and operated by Ned and Abed―loaned 

Eslam $40,000 to establish the Arizona business. This was a verbal contract 

3 During his testimony, Abed used Exhibit 187, the December 2013 file 

for A&N’s subcontractor, M&T, as a payout exemplar. That document 

shows the total amount invoiced to the contracting entity, minus drivers’ 

wages (which A&N paid at that time along with workers’ compensation), 

minus “other applicable deductions” for direct deposit fees, the monthly 

fee for use of A&N’s online portal, copier fees, two vehicle decals, and 

denied claims for that time frame. The remainder, in item four, was the net 

amount of payout due to M&T. Notably, this exhibit was drawn up for trial. 

4 Prior to 2015, A&N used an end-of-year reconciliation rather than 

biweekly aging reports to account for out-of-order rides. 

5 E&M also served as the sole member of Sahnad, which was managed 

by Eslam and also provided transport services to A&N under the same 

contractual terms as E&M. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

5

without contemporaneous paperwork, nor subsequent payment receipts or 

accountings.

6

¶12 Eslam noticed inconsistent billing entries and discussed the 

issue with Ned both in person and over email. Initially, Ned said he would 

look into it but later attempted to resolve the issue by falsifying payout 

records.

7

¶13 Eslam and Ned argued, and Ned eventually told Eslam he 

wasn’t going to change his position. Upset that such a large error was going 

uncorrected, Eslam began reviewing old payouts looking for other errors. 

Around this time, Eslam received a tip from Husam Alsadi, a disgruntled 

former subcontractor, that he should look for errors in A&N’s 2014 payouts. 

After investigating the payouts, Eslam determined that A&N had shorted 

him for 1,388 rides. 

¶14 Also in June 2016, A&N received a notice from the Office of 

Inspector General (“OIG”) that a preliminary investigation determined

AHCCCS had overpaid A&N by $7,265.37. The issue related to 

transportation claims where there was not a concurrent AHCCCS-covered 

medical service claim, which raised red flags. In July, Abed sent Eslam a 

copy of the letter and advised him he was going to withhold Eslam’s current 

payout until A&N could determine how much recoupment E&M owed for 

the rides it had performed. A few days later, Ned sent an email to Eslam

informing him that A&N would be recouping $3,951.46 from E&M’s next 

payout, claiming that E&M had provided 33 of the rides at issue. After 

checking his own pay out records and A&N’s online portal, Eslam

determined E&M had provided approximately half of the challenged rides, 

but A&N refused to adjust the recoupment.

8 

¶15 The parties’relationship quickly deteriorated. In August, Ned 

advised Eslam he was conducting an audit of E&M for fraud, waste, and 

abuse. Ned demanded that E&M produce all missing original trip logs for 

thousands of trips dating back to 2014 within five days. Because Ned did 

6 At issue, in part, is whether A&N made additional loans to Eslam, 

and whether all the loans were paid back.

7 It was later determined that E&M was penalized for another 

subcontractor’s mistake. 

8 Eslam suspected that A&N had copied and altered records from the 

subcontractor who actually performed the rides, I&M, to make it appear as 

if E&M had provided the rides. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

6

not specify which of the 47,000 trips were missing trip logs, however, Eslam

was unable to produce them. Citing this failure, A&N suspended E&M on 

August 22, 2016. A&N, rather than processing the then-due payout of

$86,412.79 due to E&M, withheld it. Eslam immediately went to work for a 

competitor of A&N. 

¶16 After being unable to informally resolve the conflicts with 

A&N, E&M filed a complaint in superior court alleging several counts of 

breach of contract, breach of the duty of good faith and fair dealing, and 

fraud. E&M alleged damages stemming from A&N’s failure to pay for 

certain “missing rides,” failure to pay for services E&M provided in July 

and August of 2016, overassessment of chargebacks from the OIG audit, 

and erroneous recoupment assessed for rides provided by other 

subcontractors.9 Eslam further asserted that he had been systematically 

underpaid in 2014 and that A&N had doctored payout reports. 

¶17 A&N filed an answer and counterclaimed for breach of 

contract and unjust enrichment. A&N later amended its answer and 

counterclaims. In the joint pretrial statement, A&N asserted E&M had

breached its subcontract by providing meals and other prohibited 

kickbacks to riders, by submitting fraudulent trip logs, by going to work for 

a competitor in violation of the covenant not to compete, and by copying 

the A&N contract to create a contract with the competitor. A&N also 

asserted that E&M had failed to pay back various loans. The joint pretrial 

statement also contained some stipulated facts, which the superior court 

adopted. 

¶18 Eslam, Ned, and Abed each testified during the four-day 

bench trial. Four additional subcontractors or former subcontractor drivers

also testified: Bruce Yazzie, Adel Alfaraneh, Sadi Alsadi, and Husam 

Alsadi. The superior court reviewed deposition testimony from three 

additional witnesses, including Eslam’s wife Renieh Alratrout. No financial 

experts testified. Over 100 items were admitted into evidence. 

¶19 In reaching its judgment, the superior court stated:

This case is about credibility. The parties tell such 

dramatically different versions that their stories cannot be 

reconciled. In other words, unlike some cases, disputes 

9 “Missing rides” is the term the parties use for AHCCCS rides provided 

by E&M and paid for by AHCCCS to A&N, but where E&M never received 

its due share. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

7

cannot be attributed to good faith misunderstandings of 

events. Someone is lying. 

The [c]ourt finds that the version of the facts given by Eslam

is more credible than the version given by Ned and Abed. 

¶20 The superior court awarded E&M a total of $225,081.26 in 

damages for breach of contract and $64,776.51 for fraud. The court awarded 

Sahnad $3,336 for breach of contract and $3,336 for fraud. The court made 

Abed and Ned jointly and severally liable for the fraud damages, while also 

indicating that because the fraud damages for both companies were 

duplicative to the contract damages, they were not separately recoverable. 

The court awarded E&M $213,163.75 in attorney fees and $9,730.45 in 

taxable costs. 

¶21 A&N filed a motion for reconsideration which the superior 

court denied. A&N filed a timely notice of appeal. The court also denied 

A&N’s untimely motion to amend the findings of fact and conclusion of 

law. The matter was temporarily stayed in this court pending the superior 

court’s signing of two unsigned orders and resolution of a claim for postjudgment attorney fees against A&N. A&N timely filed an amended notice 

of appeal. 

¶22 On appeal A&N asserts:

1.The court’s credibility findings in favor of Eslam and against 

A&N were clearly erroneous in material respects;

2.The court erred by denying A&N’s counterclaims related to 

loans made to E&M;

3.The court erred by determining A&N’s three-year covenant 

not to compete was unenforceable and by declining to adopt 

factual findings in support of that claim;

4.The court erred when it denied A&N a remedy for E&M’s 

alleged Medicaid fraud;

5.The court’s bad faith and fraud findings as to A&N are 

erroneous; and

6.The attorney fee awards below should be reversed.
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

8

DISCUSSION

I. Standard of Review

¶23 On appeal from a bench trial, we review questions of law de 

novo but review the superior court’s findings of fact for clear error. Castro 

v. Ballesteros-Suarez, 222 Ariz. 48, 51–52, ¶¶ 11–12 (App. 2009). Even if 

substantial conflicting evidence exists, “[a] finding of fact is not clearly 

erroneous if substantial evidence supports it.” Kocher v. Dep’t of Rev. of Ariz., 

206 Ariz. 480, 482, ¶ 9 (App. 2003). Evidence is substantial if “a reasonable 

person [could] reach the trial court’s result.” Davis v. Zlatos, 211 Ariz. 519, 

523–24, ¶ 18 (App. 2005) (quoting In re U.S. Currency in the Amount of 

$26,980.00, 199 Ariz. 291, 295, ¶ 9 (App. 2000)). “We view the evidence and 

reasonable inferences from that evidence in the light most favorable to the 

prevailing party.” FL Receivables Trust 2002-A v. Ariz. Mills, L.L.C., 230 Ariz. 

160, 166, ¶ 24 (App. 2012). 

II. Credibility

¶24 Since neither party kept written documentation regarding

the existence or repayment of loans or potential offsets, witness credibility 

drove the result in this matter. In deciding which party to believe about the

loans made, loans paid, and which parties were complicit in potentially 

fraudulent behavior, the superior court found Eslam the more credible

witness. 

¶25 A&N argues the superior court’s credibility findings are 

“clearly erroneous” and not supported by the record. A&N asserts, among 

other things, that: (l) the court’s interpretation of the events surrounding a

pre-deposition visit between Abed, Ned, and former A&N subcontractor 

Husam Alsadi was “coincidental” and given undue weight; (2) Eslam’s 

misdeeds occurred over a longer period of time than any misdeeds Ned 

may have engaged in; (3) the court made unwarranted findings of A&N’s

wrongdoing outside the scope of the case; and (4) the court “gave no 

weight to [A&N’s] credible and . . . disinterested witnesses,” and “undue 

weight” to Husam Alsadi’s testimony. We disagree. 

¶26 After hearing several days of testimony, the superior court 

stated:

Although there are multiple reasons to find plaintiff’s version 

of the story more credible . . . the [c]ourt puts emphasis on the 

events surrounding Husam Alsadi’s deposition. Everyone 

agrees that Husam Alsadi was scheduled to have his 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

9

deposition taken on the afternoon of October 3, 2017. On the 

morning of the deposition, Ned and Abed visited Mr. Alsadi 

at his place of work. There was no credible evidence that Ned 

and Abed regularly stopped by Mr. Alsadi’s gas station just 

to chat. Mr. Alsadi credibly testified that Ned and Abed asked 

him not to testify about loans being repaid in cash.

Ned and Abed denied that they were trying to influence 

Mr. Alsadi’s testimony. Ned flatly denied having a 

conversation with Mr. Alsadi about the deposition. The 

[c]ourt finds Ned and Abed not credible on this point for 

several reasons. First, Mr. Alsadi’s testimony is credible.

Overall, he was a credible witness. A review of his deposition 

testimony presented during trial reveals that Mr. Alsadi was 

earnestly trying to avoid testifying about loan repayments in 

cash while responding to Mr. Newman’s questions during the 

deposition. Defendants’ counsel pressed him on the point and 

Mr. Alsadi reluctantly acknowledged that he regularly repaid 

loans to Ned and Abed by cash. Second, Ned’s explanation 

for showing up at Mr. Alsadi’s business on the morning of the 

deposition was not credible. It was not a coincidence that Ned 

and Abed just happened to stop by on the morning in 

question. The [c]ourt finds that Ned and Abed went to Husam 

Alsadi to pressure Husam Alsadi into giving inaccurate 

testimony. Such conduct will not be rewarded. 

¶27 On the issue of the relative misdeeds of both parties, the 

superior court stated: 

While A&N committed misconduct, E&M is not without 

fault. Although not as extensive as A&N’s misconduct, E&M 

breached the [subcontractor] contract and engaged in a 

number of improper activities, including providing A&N 

with fraudulent trip logs and improperly buying meals for 

riders. E&M’s improper conduct goes back to Minnesota, 

where Eslam’s wife submitted false trip logs for drives she did 

not make.

Moreover, E&M took out undocumented loans and repaid 

them in cash. Although E&M didn’t benefit from this practice 

as much as A&N did, E&M knew exactly what was going on 

and was complicit in the scheme. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

10

The superior court was obviously aware of Eslam’s misdeeds and, 

nevertheless, concluded that he was the more credible of the parties. 

¶28 We acknowledge that conflicting testimony was presented. 

As our Supreme Court has noted, “where there is a dispute in the evidence 

from which reasonable [persons] could arrive at different conclusions as to 

the ultimate facts, we will not disturb the findings of a trial court.” In re 

$26,980.00, 199 Ariz. at 296, ¶ 16 (citations omitted). 

¶29 A&N asserts that the superior court gave no weight to two of 

their credible and disinterested witnesses. But those witnesses were not 

necessarily disinterested, given their financial relationships with A&N. 

Moreover, even assuming the court gave no weight to the witnesses’

testimony, there would be no error. A finder of fact “may accept everything 

a witness says or part of it or none of it.” Callender v. Transpacific Hotel Corp., 

179 Ariz. 557, 562 (App. 1993). Our Supreme Court has long held that a 

finder of fact is not bound to accept even the uncontroverted testimony of 

any witness, and especially that of interested witnesses. See, e.g., Estate of 

Reinen v. N. Ariz. Orthopedics, Ltd., 198 Ariz. 283, 287, ¶ 12 (2000). 

Accordingly, we decline to reverse the court’s credibility determinations. 

III. Loans

¶30 A&N asserts that the superior court failed to require any 

“affirmative” or documentary evidence from Eslam that he ever repaid the 

loans. We disagree. 

¶31 In an action for breach of contract, the plaintiff bears the 

burden to prove the contract was breached and damages resulted. Thomas 

v. Montelucia Villas, LLC, 232 Ariz. 92, 96, ¶ 16 (2013). Whether a contract 

has been breached is generally a question for the finder of fact. Great Western 

Bank v. LJC Development, LLC, 238 Ariz. 470, 478, ¶ 23 (App. 2015) 

(construction loans). The superior court’s factual findings will be “accepted 

on appeal unless they are clearly erroneous.” Davis, 211 Ariz. at 523, ¶ 18. 

¶32 The parties stipulated that E&M received three loans. Finding 

Eslam’s version of events more credible, the superior court found that 

Eslam had repaid all of the loans, albeit in cash.

¶33 The superior court detailed the mutually exclusive nature of 

the conflict:

Of course, none of these loans are reflected by a promissory 

note or other written agreement.
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

11

Eslam claims he has repaid all loans in full. A&N claims that 

Eslam has not paid a dime on any of the loans.

¶34 Eslam’s testimony was supported directly and indirectly by 

other witnesses and exhibits. Eslam testified, as did Husam Alsadi, that 

loans from A&N were buried in payouts, disbursed in odd numbers in 

order to avoid scrutiny by government officials, and made to look like 

expenses. Eslam testified:

Q So do you know why Ned and Abed disguised their loan 

as a payment for an invoice to you? 

A [Eslam] Well, first of all, they put it in a 1099, so if they get 

audited, you know, it says invoice for UCare, but it’s not 

UCare. I mean it’s, by their own admission, it’s a loan. 

Q Right. 

A And it says here [in Exhibit] UCare payment, and even 

though I received, you know, prior to that, the direct pay for 

[a] similar period, I mean we both know that was not a loan. 

And . . . they decide to put a note there that’s for maybe the 

IRS or for any audit that . . . comes up that will show that this 

was a work-related [expense], not loan. 

Q So it looks like an expense [for A&N] when it’s on their 

bank account going out, and then when it’s paid back there’s 

no sign of it if it’s cash. 

A Yeah. And . . . there [are] no traces of it, it’s cash. 

¶35 On cross-examination, A&N questioned Eslam about why his 

bank accounts did not then reflect regular cash withdrawals for loan 

payments. Eslam testified that he usually used cash that he had on hand, 

but when he did not have cash available, he would disguise the “memo” on 

a check or bank withdrawal slip as being for the purchase of a car. 

¶36 Husam Alsadi stated that he, like Eslam, had taken loans from 

A&N. He testified that Abed had told him to avoid round numbers that 

might draw attention. Both of his loan disbursements were buried in 

payout documents. Alsadi testified he personally delivered loan 

repayments of $5,000 in cash during the first three days of each month. He 

testified that those payments are not reflected in his bank statements 

because he paid in cash. Eslam likewise testified that he once ran into 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

12

Husam at the A&N offices at the beginning of the month; each of them had 

envelopes full of cash to make their loan payments and made a joke about 

it being “payday” for A&N. 

¶37 Eslam’s and Alsadi’s trial statements were likewise 

supported, indirectly, by Abed. Abed admitted that Eslam’s payment in 

December 2013 for $40,000 was written so as to appear to be a payout to 

Eslam’s former company M&T, although he admits it was not. Abed stated 

that Eslam asked him to do that. 

¶38 Ned denied the existence of one of the loans and maintained 

the large payment was a reconciliation payment. Regarding the other two 

loans, Ned stated he didn’t insist on repayment from Eslam because A&N 

needed E&M to help take on new contracts and because the outstanding 

loans paled in comparison to anticipated revenues. He denied requesting 

or receiving loan repayments in cash. 

¶39 The superior court summarized its conclusions:

In areas such as loans and loan repayments, the lack of 

supporting documentation is surprising. There are no written 

promissory notes, repayment schedules, or receipts for 

payments. (Eslam testified he needed to make all repayments 

in cash.) Although some of the lack of documentation may be 

explained because of the long-standing relationship between 

the parties. (Eslam and Ned both testified that they 

considered the other like family), the [c]ourt was persuaded 

that a significant portion of the lack of documentation was an 

effort to avoid appropriate accounting.

. . .

The [c]ourt finds that the version of the facts given by Eslam

is more credible than the version given by Ned and Abed. 

. . .

Defendants had the burden of proving that there was a loan 

contract, that Eslam breached the contract, and that the breach 

resulted in damages. Defendants failed to prove that they 

have been damaged by Eslam’s breach of the loan 

agreements.
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

13

In conclusion, the [c]ourt finds that A&N made loans to Eslam

and his companies in the following amounts: 1) $40,000 in 

December 2013; 2) $40,000 in August 2014; 3) $70,000 in 

December 2014; and 4) $20,000 in December 2014 to Sahnad. 

The [c]ourt finds that all of these loans were repaid by Eslam

in cash. 

¶40 Because the record supports the superior court’s findings, we 

affirm the court’s judgment as to the loans. 

IV. Covenant Not to Compete

¶41 A&N challenges the superior court’s denial of its 

counterclaim that E&M breached its subcontracting agreement by, among 

other things, going to work for a competitor of A&N one day after A&N 

“suspended” E&M in August of 2016. E&M entered into a series of four 

successive independent contractor agreements with A&N. Each contract

contained a covenant not to compete with no geographical limitation.

¶42 The superior court expressed “concerns about the 

enforceability of the noncompete provision,” noting that a “three year 

noncompete is too long” under Arizona precedent. Regardless of the 

enforceability, however, the court held that any breach of the noncompete 

by E&M was excused by material breaches of the implied covenant of good 

faith and fair dealing by A&N. Alternatively, assuming the noncompete 

was enforceable and breached, the court found A&N had failed to prove 

damages. 

¶43 A&N contends that the superior court erred by questioning 

the covenant’s enforceability, arguing that non-compete provisions that are 

effective during the term of the contract are “inherently reasonable” 

because businesses are entitled to protect their interests from competition 

by independent contractors they work with. A&N asserts the contract was 

still in effect when Eslam pursed a new business relationship, which would 

have allegedly breached the non-compete provision. However, the court 

found A&N’s “suspension” of Eslam was pretextual and Eslam’s contract 

had, in fact, been terminated, which rendered the non-compete covenant 

invalid. A&N therefore failed to advance a legitimate protectable business 

interest and we affirm the court’s finding to that effect. See Hilb, Rogal & 

Hamilton Co. v. McKinney, 190 Ariz. 213, 216 (App. 1997). A material breach 

by one party excuses performance by the other party to the contract. 

Zancanaro v. Cross, 85 Ariz. 394, 399 (1959).
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

14

¶44 A&N also contends it presented sufficient evidence of lost 

profits to substantiate its damage claim. E&M counters that A&N was the 

first to materially breach the contract, relieving it from its non-compete 

obligation. A&N also makes various claims regarding factual findings 

related to this claim, including its asserted lost profits of nearly $400,000. 

Having affirmed the superior court’s finding that Eslam’s conduct in 

seeking new employment following A&N’s breach was justified, we need 

not address those claims. 

V. E&M’s Alleged Medicaid Fraud

¶45 A&N asserts that E&M breached its subcontractor agreement 

by submitting fraudulent trip logs and providing meals as incentives to 

patients in violation of the contract, the A&N Policies and Procedures 

Manual, and AHCCCS regulations.

A. Forged Trip Logs

¶46 After Eslam left A&N, Ned began a quality-control

investigation of E&M and questioned several of Eslam’s trip logs. The 

superior court heard from Bruce Yazzie, a former driver for E&M, that 

someone had submitted his forged signature for eight different rides 

occurring after he had left the company’s employment in June 2016. 

¶47 Eslam testified he had given some trip logs to other Navajo 

drivers to get Yazzie’s signature, but he didn’t verify the signatures himself. 

He stated that the handwriting appeared to be Abed’s. Eslam admitted that 

there were four rides for which Bruce Yazzie’s name was improperly used. 

¶48 Eslam testified that he did not find out about the forgeries 

until they were in litigation, but the superior court may not have found him 

completely credible. As A&N has continually reminded the court, Eslam

and his wife submitted “hundreds” of claims for rides she did not provide 

when they were working in Minnesota. Eslam admitted he forged her 

signature on some of the claimed rides.

10

¶49 The Yazzie rides at issue totaled 1,921 miles and would have 

resulted in $3,679.40 for E&M. Although the OIG never challenged the

accuracy of the trip logs, the superior court found E&M’s submission of 

10 Eslam indicated that Ned showed him how doing so would result in 

more money. Eslam’s wife testified that due to their close relationship, Ned 

certainly knew that she couldn’t drive. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

15

those claims to be a breach of contract and held any recovery by E&M 

would be offset by $3,679.40. 

¶50 A&N next asserted Eslam breached the contract by failing to 

submit original trip logs during the quality control audit. The superior 

court found AHCCCS did not require the submission of original trip logs 

and A&N had never previously required the originals. Because the request 

for original logs wasn’t pursuant to an audit by AHCCCS, A&N did not 

suffer any financial loss. Finding evidence in the record to support these 

findings, we affirm. 

B. Providing Meal Incentives

¶51 A&N also asserted E&M violated the subcontractor 

agreement and committed fraud by allowing drivers to provide meals to 

passengers contrary to AHCCCS guidelines on fraud, waste, and abuse. 

AHCCCS rules prohibit a driver from buying meals for its passengers.

Section 4(b) of the contract between A&N and E&M required E&M to 

conform to those governmental rules. 

¶52 In response to this allegation, Eslam testified that he generally 

allowed his drivers to use a company debit card to buy themselves food. 

He stated that occasionally drivers would ask him if they could buy food 

for passengers on long rides where the passenger was unable to afford food 

for themselves. Eslam testified he allowed it “for certain people . . . on a 

humane basis but not to induce rides.” 

¶53 Bruce Yazzie testified that he understood from Eslam it was 

okay to buy meals to induce passengers to call you back, especially for those 

who took long rides. Yazzie testified he did not know at the time that it was 

illegal. 

¶54 Husam Alsadi testified that Abed verbally authorized 

kickbacks and incentives to certain riders, but they had to publicly maintain 

the no kickback policy. Abed testified that providing meals or kickbacks to 

passengers was totally inappropriate and it would have resulted in 

termination had they known about it. 

¶55 The superior court found:

Persuasive evidence demonstrated that E&M drivers 

regularly purchased meals for riders after long trips. The 

[c]ourt did not find credible Eslam’s testimony that these 

meals were provided only for “humane” purposes. E&M 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

16

provided its drivers with debit cards to purchase gas and 

food. The [c]ourt finds that this was a common practice of 

which E&M and Eslam were aware. The [c]ourt finds Mr. 

Yazzie credible when he testified that Eslam told him it was 

okay to buy meals for rides greater than 100 miles.

On the other hand, the [c]ourt finds that the provision of 

meals for riders was a common practice, not just with E&M 

but also with other subcontractors. The [c]ourt[] suspects that 

A&N was well aware of the practice but attempted to 

maintain plausible deniability in the event of a government 

audit. Although E&M’s conduct violates the contract, there 

was no persuasive evidence that A&N was sanctioned by 

AHCCCS or will otherwise suffer damages arising from this 

breach of contract. In short, although A&N proved a breach 

of contract, A&N failed to meet its burden of proving 

damages. 

¶56 The record supports the superior court’s conclusions. 

Therefore, we affirm the denial of A&N’s claims relating to improper meal

incentives. 

VI. Bad Faith and Fraud By A&N and Application of the Economic 

Loss Rule

¶57 Finally, A&N asserts that the superior court’s findings of bad 

faith and fraud are erroneous and, regardless, any damages are barred by 

the economic loss doctrine. Finding clear and convincing evidence of bad 

faith and fraud, we affirm. 

¶58 The duty of good faith and fair dealing is implied in every 

contract. See Rawlings v. Apodaca, 151 Ariz. 149, 153 (1986). To prove fraud, 

Eslam was required to establish: 

(1) a representation by A&N; (2) its falsity; (3) its materiality; 

(4) defendants’ knowledge of its falsity or ignorance of its 

truth; (5) defendants’ intent that it should be acted upon by 

Eslam and in the manner reasonably contemplated; (6) 

Eslam’s ignorance of its falsity; (7) his reliance on its truth; (8) 

his right to rely thereon; and (9) his consequent and proximate 

injury.

See KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326, 333, ¶ 31 

(App. 2014) (quoting Nielson v. Flashberg, 101 Ariz. 335, 338–39 (1966)). 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

17

Fraud must be established by clear and convincing evidence. Enyart v. 

Transamerica Ins. Co., 195 Ariz. 71, 77, ¶ 18 (App. 1998).

¶59 The bad conduct at issue is multifaceted. The majority of such 

conduct has been described herein, including the withholding of E&M’s 

final payout, the recoupment of rides provided and paid to other 

subcontractors, and the allocation of the OIG fees. Two other areas remain

to be discussed: A&N’s systematic misrepresentations of ride totals that led 

to the regular underpayment of payouts in 2014 and the failure by A&N to 

pay for certain “missing rides.”

¶60 Based on a tip from Husam Alsadi, Eslam began 

investigating his 2014 payouts. Eslam learned that spreadsheets created by

Ned each pay period were doctored. It was only by adding the rides

manually that Eslam discovered that he had been underpaid by $64,776.51 

in 2014. When asked about this at trial, Ned admitted that the numbers at 

the bottom of the column were less than the sum derived from straight 

addition. Ned explained this by stating that he had gone in and made a 

manual offset to account for recoupments, which he claimed to be entitled 

to due to late denials by AHCCCS. However, the existence of manual offsets

were not communicated to the subcontractors, and A&N did not provide 

subcontractors with any specifics about which rides Ned manually offset.

The reason Ned gave for his failure to provide that information was that it 

was “too much work.” Given that Abed routinely kept track of and charged 

subcontractors for administrative expenses―down to the cost of

photocopies―that testimony was not credible.

¶61 A&N did not reimburse subcontractors for the 2014 

underpayments. A&N asserted at trial that one of the loans was in fact a 

reconciliation payment. But the superior court explicitly found that transfer 

was the disbursement of the third loan, not a reimbursement or a 

reconciliation payout. But Ned admitted there were no remaining 

documents to support the amounts he took as deductions because the 

documents were destroyed after each individual pay period. 

¶62 The manner in which A&N kept their books was misleading 

and purposefully opaque. Subcontractors were not always paid for rides 

and did not have a method of knowing, at least before 2015 or 2016, which 

rides had been approved and paid. Subcontractors had to rely on A&N’s 

accounting, regarding both earnings and deductions, which was later 

determined to be false. To further complicate matters, A&N’s data 

disappeared after each billing period. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

18

¶63 The superior court concluded that the 2014 underpayments,

the missing rides, and the withholding of the final 2016 payout were all

material breaches of the contract and excused E&M’s performance under 

the contract. The court further found that A&N breached either its contract 

with E&M or the implied covenant of good faith and fair dealing. We agree 

and affirm the court’s fraud and bad faith determinations. 

¶64 Finally, A&N claims that E&M’s fraud damages are barred by 

the economic loss rule. To this end, A&N cites Cook v. Orkin Exterm. Co., 227 

Ariz. 331, 332, 335 n.6 (App. 2011), for the proposition that the economic 

loss rule limits recovery to a party’s contract damages even in the face of 

fraud. The superior court awarded E&M contract damages in the following 

amounts: $64,776.51 (underpayments in 2014) + $74,987.25 (missing rides)

+ $86,412.79 (payouts withheld in July and August 2016) + $1,866.27 (OIG 

chargeback) + $717.84 (charged for another subcontractors mistake) for a 

total of $228,760.66. The court further found Sahnad established contract 

damages for underpayment of the 2014 rides in the amount of $3,336. The 

court also clarified that the 2014 damages were the same amounts as the 

pertinent fraud damages, and that Eslam was not entitled to a double 

recovery.

¶65 Generally, the law merely requires “a reasonable basis in the 

evidence for the trier of fact to fix compensation when a dollar loss is 

claimed.” Nelson v. Cail, 120 Ariz. 64, 67 (App. 1978). We review damage 

awards for an abuse of discretion and the award “will not be disturbed on 

appeal except for the most cogent of reasons.” Fernandez v. United Acceptance 

Corp., 125 Ariz. 459, 464 (App. 1980). The computation of damages is a 

factual issue that we will uphold unless clearly erroneous. See Elar Invs., Inc. 

v. Sw. Culvert Co., Inc., 139 Ariz. 25, 30 (App. 1983). The economic loss 

doctrine applies to tort claims when the parties already have a contract 

defining their relationship and may act to limit the recovery to contract 

damages. See Sullivan v. Pulte Home Corp., 232 Ariz. 344, 346, ¶ 9 (2013); 

Flagstaff Affordable Housing Ltd. P’ship v. Design Alliance, Inc., 223 Ariz. 320, 

323, ¶ 11 (2010). But here the superior court specifically ruled that A&N was 

not entitled to double recover; thus, the only import of the fraud holding is 

that it imposes personal liability on Ned and Abed, and the economic loss 

doctrine is inapplicable. 
E&M SERVICES v. A&N SERVICES, et al.

Decision of the Court

19

VII. The Attorney Fee Awards Below

¶66 The superior court initially awarded $213,163.75 in attorney

fees against A&N pursuant to A.R.S. § 12-341.01(A).

11 The court awarded 

another $12,100 in attorney fees against A&N after judgment. We will not 

disturb an award of fees if it is supported by “any reasonable basis.” Desert 

Mountain Props. Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, 213 

(App. 2010). 

¶67 A&N argues on appeal it should have been the successful 

party below and therefore any fee award to E&M must be reversed. As we 

have affirmed the judgment in favor of E&M on all counts, A&N’s 

argument is unpersuasive. The award of attorney fees below is affirmed. 

VIII. Attorney Fees on Appeal

¶68 Both E&M and A&N request an award of attorney fees on 

appeal pursuant to A.R.S. § 12-341.01(A). In the exercise of our discretion,

we award E&M its attorney fees. As the successful party, E&M may also 

recover its costs upon compliance with ARCAP 21.

CONCLUSION

¶69 For the above stated reasons, we affirm the superior court’s 

ruling. 

11 We cite to the current version of any statute unless the statute has 

changed since the events in question and that change would materially 

affect the result.