IN THE 

SUPREME COURT OF THE STATE OF ARIZONA

EMPIRE WEST TITLE AGENCY, L.L.C. F/K/A EMPIRE TITLE AGENCY OF 

ARIZONA, L.L.C., AN ARIZONA LIMITED LIABILITY COMPANY,

Petitioner, 

v. 

THE HONORABLE DAVID M. TALAMANTE, JUDGE OF THE SUPERIOR COURT OF 

THE STATE OF ARIZONA, IN AND FOR THE COUNTY OF MARICOPA, 

Respondent Judge, 

DOS LAND HOLDINGS, L.L.C., AN ARIZONA LIMITED LIABILITY COMPANY, 

Real Party in Interest. 

No. CV-13-0268-PR 

Filed May 7, 2014 

Appeal from the Superior Court in Maricopa County 

The Honorable David M. Talamante, Judge 

No. CV2011-094829 

REMANDED

Decision Order of the Court of Appeals, Division One 

Filed August 13, 2013 

VACATED

COUNSEL: 

James L. Blair, Bryan M. Folger, Kevin R. Myer (argued), Renaud Cook 

Drury Mesaros, PA, Phoenix, for Empire West Title Agency, LLC 

Chad A. Hester, Wallin Hester, PLC, Gilbert; and Blake T. Ostler (argued), 

Thompson Ostler & Olsen, Salt Lake City, UT, for DOS Land Holdings, 

L.L.C. 

JUSTICE PELANDER authored the opinion of the Court, in which CHIEF 

JUSTICE BERCH, VICE CHIEF JUSTICE BALES, JUSTICE BRUTINEL and 

JUSTICE TIMMER joined. 
2 

JUSTICE PELANDER, opinion of the Court: 

¶1 In this contract case, the issue is whether the plaintiff 

impliedly waived the attorney–client privilege by alleging that it 

“reasonably believed” the defendant had met its contractual obligations. 

We find no waiver and hold that merely alleging the reasonableness of 

one’s beliefs does not, in itself, waive the privilege; rather, the litigant 

must advance a subjective evaluation or understanding that incorporates 

the advice of counsel. 

I. 

¶2 In 2006, while pursuing the purchase of a vacant lot in Mesa, 

David Jemmett discovered a recorded quitclaim deed abandoning an 

access easement essential for developing the property. Empire West Title 

Agency, L.L.C., acting as title agent for Fidelity National Title Insurance 

Company, allegedly informed Jemmett that the quitclaim deed would not 

affect his claim to the easement. Jemmett later decided not to complete 

the transaction and informed Empire that DOS Land Holdings, L.L.C. 

would instead purchase the property. 

¶3 On August 3, 2007, DOS’s attorneys, Chester & Shein 

(“C&S”),1 sent Empire a Closing Instructions Letter (“CIL”), which 

attached a legal description of the property that included the access 

easement. In an email accompanying the CIL, C&S asked Empire to 

“make sure that the legal description attached . . . is the same legal 

description that will be attached to the conveyance deed.” Under the CIL, 

Empire acknowledged that, by signing, it agreed to comply with the 

letter’s terms. Empire signed and returned the CIL, and the transaction 

closed on August 10, 2007. Contrary to the CIL’s terms, however, the 

closing documents omitted the easement from the property’s legal 

description. 

¶4 In 2008, DOS sued the owners of the adjacent property to 

establish its right to the easement. After that case was dismissed as timebarred, DOS filed this action, naming Fidelity and Empire as defendants 

and alleging claims of bad faith against Fidelity and breach of contract 

and breach of the covenant of good faith and fair dealing against both 

defendants. (DOS has since settled all claims against Fidelity.) In its 

 

1 C&S also represented Jemmett, who allegedly planned to assist in 

developing the property after DOS’s purchase. Those facts do not affect 

our analysis here. 
3 

breach of contract claim against Empire, DOS alleged that, based on 

Empire’s agreement to use the legal description attached to the CIL, DOS 

“reasonably believed that [the easement] was represented in all 

documents used at the closing.” 

¶5 Empire moved to compel DOS to disclose any attorney–

client communications indicating whether DOS knew before close of 

escrow that the easement had been abandoned. The superior court denied 

the motion, finding that “this matter can be litigated and decided without 

breaching [the attorney–client] privilege.” 

¶6 Empire filed a petition for special action in the court of 

appeals, arguing that DOS had impliedly waived the attorney-client 

privilege. In an unpublished decision, the court agreed, holding that “[b]y 

pleading a contract claim based on its ‘reasonable belief,’ DOS put in issue 

all information in its possession at the time . . . bear[ing] on the 

reasonableness of its belief that Empire West agreed to provide coverage 

of the easement.” Distinguishing State Farm Mutual Automobile Insurance 

Co. v. Lee, 199 Ariz. 52, 13 P.3d 1169 (2000), the court of appeals stated that 

this case concerns “a party’s reasonable belief about a particular 

situation,” not whether an insurer reasonably responded to a demand for 

coverage. The court ordered DOS and C&S to provide all attorney–client 

communications for which the privilege was claimed for the superior 

court’s in-camera inspection and instructed that court to order the 

disclosure of communications found “relevant to the reasonableness of 

DOS’s expectation of coverage.” 

¶7 We granted review on two issues: (1) whether DOS 

impliedly waived the attorney–client privilege by injecting its “reasonable 

belief” into the litigation, and (2) whether the court of appeals’ decision is 

overbroad. We have jurisdiction under Article 6, Section 5(3) of the 

Arizona Constitution and A.R.S. § 12-120.24. 

II. 

¶8 Whether a party has impliedly waived the attorney–client 

privilege poses a mixed question of law and fact, which we review de 

novo. Twin City Fire Ins. Co. v. Burke, 204 Ariz. 251, 254 ¶ 10, 63 P.3d 282, 

285 (2003). 

¶9 In State Farm v. Lee, we adopted the following criteria, 

referred to as the Hearn test, for determining whether the attorney–client 

privilege has been waived when a litigant’s mental state is at issue: 
4 

“(1) [The] assertion of the privilege was a result of some 

affirmative act, such as filing suit [or raising an affirmative 

defense], by the asserting party; (2) through this affirmative 

act, the asserting party put the protected information at issue 

by making it relevant to the case; and (3) application of the 

privilege would have denied the opposing party access to 

information vital to his defense.” 

199 Ariz. at 56 ¶ 10, 13 P.3d at 1173 (emphasis omitted) (quoting Hearn v. 

Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975)).2 Under the Hearn test, when a 

litigant advances “a subjective and allegedly reasonable evaluation of the 

law . . . that necessarily incorporates [the advice of counsel],” confidential 

attorney–client communications relevant to that evaluation are 

discoverable. Id. at 58 ¶ 15, 13 P.3d at 1175; see also id. at 62 ¶ 28, 13 P.3d at 

1179 (explaining that no waiver results unless the party asserting the 

privilege “has asserted some claim or defense, such as the reasonableness 

of its evaluation of the law, which necessarily includes the information 

received from counsel”). 

¶10 We emphasized in Lee, however, that merely filing an action 

or denying an allegation does not waive the privilege. Id. at 58 ¶ 16, 62 

¶ 28, 13 P.3d at 1175, 1179. Rather, the party claiming the privilege must 

affirmatively “interject[] the issue of advice of counsel into the litigation.” 

Id. at 62 ¶ 28, 13 P.3d at 1179. In addition, neither the “relevance nor 

pragmatic importance alone [of the information sought] will support a 

finding that the attorney–client privilege has been waived.” Twin City, 

 

2 The Court in Lee also adopted the test set forth in Restatement 

(Third) of The Law Governing Lawyers § 80(1)(2000), which states in relevant 

part: 

The attorney–client privilege is waived for any relevant 

communication if the client asserts as to a material issue in a 

proceeding that: 

(a) the client acted upon the advice of a lawyer or that the 

advice was otherwise relevant to the legal significance of the 

client’s conduct. 

199 Ariz. at 62 ¶ 27, 13 P.3d at 1179. Although that test provided 

additional support for our decision in Lee, id. ¶ 28, it applies when a 

litigant’s legal knowledge is at issue, a situation not presented here. 

Regardless, because the Restatement test is consistent with and 

encompassed by the broader Hearn test, we need not apply both tests here. 
5 

204 Ariz. at 256 ¶ 22, 63 P.3d at 287; see also Lee, 199 Ariz. at 58 ¶ 15, 13 

P.3d at 1175. 

¶11 The underlying issue in Lee was whether defendant State 

Farm acted in bad faith when it denied its policyholders’ underinsured 

and uninsured motorist claims based on State Farm’s interpretation of a 

policy provision. 199 Ariz. at 54–55 ¶¶ 2–4, 13 P.3d at 1171–72. During 

discovery, State Farm refused to produce its communications with counsel 

relating to the denials, invoking the attorney–client privilege. Id. at 55 ¶ 5, 

13 P.3d at 1172. Although it admitted receiving advice from counsel 

before deciding whether to pay the claims, State Farm argued that its 

conduct was objectively and subjectively reasonable based on “what its 

personnel actually knew,” not based on its lawyers’ advice. Id. at 57 ¶ 13, 

13 P.3d at 1174 (emphasis, citation, and internal quotation marks omitted).

¶12 We held that by asserting “the subjective evaluation and 

understanding of its personnel about the state of the law” as a defense, 

State Farm “affirmatively injected” those issues into the litigation and 

thereby invited scrutiny of the bases of that legal knowledge, including 

any relevant communications with counsel. Id. at 65 ¶ 34, 13 P.3d at 1182. 

State Farm’s defense of its employees’ “subjective belief,” which in turn 

was directly based on “information and advice received from a number of 

lawyers,” was crucial to our finding an implied waiver in Lee. Id. at 66 

¶ 38, 13 P.3d at 1183. It would make “a mockery of the law,” we 

explained, to allow a litigant to assert that it acted reasonably based on its 

interpretation of law, “while at the same time allowing that litigant to 

withhold . . . information it received from counsel on that very subject.” Id.

at 65 ¶ 33, 13 P.3d at 1182.

¶13 This case differs from Lee, though not for the reason 

advanced by the court of appeals. Lee was an “unusual case” involving 

waiver of the attorney–client privilege when “the mental state of a litigant 

[was] at issue.” Id. at 54 ¶ 1, 57 ¶ 11, 13 P.3d at 1171, 1174. We considered 

the waiver issue “only in light of the bad faith and fraud counts” in the 

plaintiffs’ complaint. Id. at 55 ¶ 3, 13 P.3d at 1172.

¶14 In contrast to State Farm’s defense against the bad faith 

claims in Lee, the breach of contract claim in this case does not depend on 

DOS’s mental state or subjective knowledge. And, unlike State Farm, 

DOS has not affirmatively put those matters at issue. It simply alleged 

that Empire breached the parties’ contract by failing to comply with the 

CIL’s terms. Although DOS’s knowledge of the alleged title defect might 

be material to Empire’s defense, DOS has done nothing to inject that issue 
6 

into the litigation. Merely pleading a claim, as we noted in Lee, does not 

waive the attorney–client privilege. Id. at 58 ¶ 16, 62 ¶ 28, 13 P.3d at 1175, 

1179.

¶15 The statement in DOS’s complaint that it “reasonably 

believed” that the CIL’s property description, including the easement, was 

included in all closing documents does not alter our analysis. That 

allegation is not essential to stating the breach of contract claim and 

therefore did not place DOS’s mental state or subjective knowledge “at 

issue.” As DOS’s counsel acknowledged at oral argument, DOS could 

have sufficiently alleged its contract claims against Empire without the 

“reasonable belief” assertion. That allegation reflects DOS’s factual 

understanding of the CIL, rather than “a subjective and allegedly 

reasonable evaluation of the law . . . that necessarily incorporates” 

knowledge or advice obtained from counsel and that formed a basis for 

State Farm’s defense in Lee. Id. at 58 ¶ 15, 13 P.3d at 1175. We will not 

find a waiver based merely on imprecise or superfluous pleading. 

¶16 Even if DOS’s state of mind were at issue, Empire has not 

demonstrated that denying it access to the requested communications 

would undermine its defense. See Twin City, 204 Ariz. at 256–57 ¶ 22, 63 

P.3d at 287–88 (finding no implied waiver in part because the “[t]he 

evaluation of Twin City’s counsel is not vital to General Star’s defense”). 

Empire has other means of obtaining information about what DOS knew 

or should have known regarding the easement’s purported abandonment. 

For instance, because agency law principles apply to the attorney–client 

relationship, Panzino v. City of Phoenix, 196 Ariz. 442, 447 ¶ 16, 999 P.2d 

198, 203 (2000), C&S’s knowledge about the allegedly abandoned 

easement may be imputable to DOS. See Restatement (Third) of Agency

§ 5.03 (2006). We see no reason to disturb the superior court’s ruling that 

“this matter can be litigated and decided without breaching [the] 

privilege.” Cf. Lee, 199 Ariz. at 67 ¶ 40, 13 P.3d at 1184 (deferring to trial 

judge’s finding that State Farm “implicitly asserted the advice of counsel 

as a defense”). 

¶17 Finally, the policy concern that motivated our decision in Lee

is not implicated here. Unlike State Farm, DOS has not “‘thrust [its] lack 

of knowledge into the litigation’” as a basis for its claim, while at the same 

time asserting the privilege so as to frustrate discovery of what it actually 

knew. See Lee, 199 Ariz. at 58–59 ¶ 18, 13 P.3d at 1175–76 (quoting Ulibarri 

v. Superior Court in & for Cnty. of Coconino (Gerstenberger), 184 Ariz. 382, 

385, 909 P.2d 449, 452 (App. 1995)). Rather, DOS is attempting to use the 

privilege purely as a shield, consistent with its intended purpose. See 
7 

A.R.S. § 12-2234; Ulibarri, 184 Ariz. at 384, 909 P.2d at 451 (noting that the 

purpose of the attorney–client privilege is “to encourage a client to 

provide all information to the attorney so the attorney can provide 

effective legal representation to the client”). 

III. 

¶18 The court of appeals erred in ruling that DOS impliedly 

waived the privilege by pleading its “reasonable belief” in this breach of 

contract case. In light of this conclusion, we need not address the second 

issue raised. We vacate the court of appeals’ decision order and remand 

the case to the superior court for further proceedings consistent with this 

opinion. 

¶19 Both parties request an award of attorneys’ fees pursuant to 

A.R.S. § 12-341.01. Empire has not prevailed and is therefore ineligible for 

a fee award. Exercising our discretion, we deny DOS’s fee request 

without prejudice to DOS seeking an award by the superior court of fees 

expended on appeal if DOS ultimately prevails.