Court Opinion

ID: 4179045
Source: CourtListenerOpinion
Date Created: 2017-06-20 15:05:18.218324+00
Date Added: 2024-06-11T14:38:46.698707
License: Public Domain

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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                              WILLIAM RUSSELL,
                               Plaintiff/Appellant,

                                         v.

                          RICHARD P. VAIRO, et al.,
                             Defendants/Appellees.

                              No. 1 CA-CV 16-0414
                                FILED 6-20-2017

            Appeal from the Superior Court in Maricopa County
                           No. CV2014-051269
                The Honorable John R. Hannah Jr., Judge

                                   AFFIRMED

                                    COUNSEL

William Russell, Scottsdale
Plaintiff/Appellant

Bonnett, Fairbourn, Friedman & Balint, PC, Phoenix
By Robert J. Spurlock, Kevin R. Hanger
Counsel for Defendants/Appellees Vairo

McCarthy, Holthus & Levine, PC, Scottsdale
By Paul M. Levine
Counsel for Defendant/Appellee Taylor
Ivy L. Kushner, Attorney at Law, Scottsdale
By Ivy L. Kushner
Counsel for Defendant/Appellee Myers

Thomas, Markson, Rubin & Kelley, PC, Phoenix
By Neal B. Thomas, Michael G. Kelley
Counsel for Defendant/Appellee West USA

                      MEMORANDUM DECISION

Presiding Judge Diane M. Johnsen delivered the decision of the Court, in
which Judge Patricia K. Norris and Judge Jennifer B. Campbell joined.

J O H N S E N, Judge:

¶1            William Russell appeals from the dismissal of his complaint,
which the superior court ordered as a sanction for Russell's repeated
failures to comply with his discovery obligations. We affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2             In July 2014, Russell filed a complaint against several
defendants, alleging theft, extortion, "breach of duty and conflict of
interest," "unfair debt collection practices," "loansharking," "racketeering,"
"breach of trustee's duties," "unlicensed mortgage banking and brokering,"
"collusion, predatory lending and unjust enrichment," and "intimidation
and intentional infliction of emotional distress."

¶3            Russell's claims all pertained to a series of interconnected real
estate transactions involving properties in West Phoenix. Russell alleged
he borrowed money from some of the defendants to buy the properties.
According to his complaint, after he suffered an unrelated business setback,
some of the properties fell into foreclosure. Russell alleged that some of the
defendants agreed to buy the properties and hold them in trust for him until
he could bring the loans current. Eventually one of the defendants, a real
estate agent, agreed to list some of Russell's properties for sale to generate
funds to repay the loans. Russell alleged some of the properties were sold
and the proceeds used to pay down the loans. He further alleged that some
of the defendants, however, wrongly refused to credit him with payments
he made on the loans and continued to collect rent on properties after they
should have been relinquished to him. Further, he alleged that some of the

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defendants refused his repeated requests for an accounting and refused to
accept payments he offered to pay off a loan.

¶4            Russell sought temporary injunctive relief, and after a five-
day hearing, the superior court entered a preliminary injunction restraining
defendants' sale or foreclosure of three of the properties. In entering the
injunction, the court found Russell had raised serious questions concerning
the merits of his claims and that he was likely to succeed on certain of the
claims. The court made detailed findings and conclusions in a 13-page
order issued in late 2014.

¶5            As the litigation continued, defendants moved in July 2015 to
sanction Russell for failure to provide discovery. According to a
declaration filed in support of the motion, Russell's initial disclosures
identified broad categories of alleged damages totaling $2,406,421. His
disclosures did not, however, identify documents supporting his damage
claims. Defendants stated that, during Russell's deposition on May 13,
2015, he was questioned at length about the existence of documents
supporting his claimed damages, and he agreed that before July 15, he
would produce many of the damage documents defendants sought.
Defendants asserted that a day later, however, Russell told the defendants
he had changed his mind and would not produce the documents.
Accordingly, defendants served formal requests for production of Russell’s
damage documents, along with interrogatories.             Meanwhile, the
resumption of Russell's deposition was set for July 16. Russell did not
respond to the formal document requests, but on July 13, Russell emailed
defense counsel saying he had "boxes" of documents pertaining to the
transactions he had sued about, and defendants demanded he produce
them by noon on July 15, the day before the continuation of his deposition.
When Russell did not produce the documents by the designated time on
July 15, the defendants notified him that his deposition was going to be
continued. Nevertheless, because Russell had indicated to defense counsel
that he would bring "twelve boxes" of documents for them to review on July
16, counsel emailed Russell to say that they would accept the boxes and
review the documents. Despite at least two emails from defendants
confirming they would accept the documents on July 16, Russell failed to
appear at the scheduled time to present his documents. According to
defendants, Russell did not say whether he was withdrawing his agreement
to produce the documents, but said simply he was on his way to Montana.

¶6            In a motion to compel filed on July 28, defendants asked the
court to order Russell to respond to the outstanding document requests and
interrogatories (both of which were served on May 14) and to appear for

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the resumption of his deposition. Russell did not respond to the motion to
compel; nor did he respond to a defense motion for summary adjudication
and sanctions filed on August 26.

¶7            At oral argument in September 2015, Russell appeared
through newly retained counsel, who told the court that Russell would
supplement his disclosure statement and would produce documents within
30 days. After argument, the court ordered Russell "through counsel" to
make a comprehensive disclosure pursuant to Arizona Rule of Civil
Procedure 26.1 and to respond to defendants' document requests, all within
30 days. The court further imposed attorney-fee sanctions on Russell
totaling $3,000.

¶8           In explaining its decision to award sanctions, the court stated:

      I went pretty far [in prior hearings] to try to be fair with Mr.
      Russell. And I took into account that there appears to be
      something in his personality that just shuts down and refuses
      at some point.

      But if that's who he is, he's just going to have to work with
      that because at some point the other side, no matter how
      righteous – he might think his claim is – the other side has a
      right to expect compliance from him. So he can consider this
      a shot over the bow . . . that . . . he needs to – for what he needs
      to do in the future because I agree with them that there needs
      to be a message to him.

The court also ordered the parties to submit a scheduling order within 60
days.

¶9            Notwithstanding the order requiring Russell to provide the
required discovery, however, Russell failed to comply. As defendants
argued later, in the weeks following entry of the September order, Russell
entirely failed to respond to requests for production of documents,
produced just 15 new documents relevant to the case, and responded to an
interrogatory about his damages by providing a spreadsheet without
explanation. Accordingly, in November 2015, defendants filed a "Motion
to Dismiss Litigation as Ultimate Discovery Sanction," arguing Russell had
failed to comply with the September order directing him to serve a proper
disclosure statement, to respond to the discovery requests, and to pay the
sanctions award.

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¶10           Two weeks following the motion to dismiss, the lawyer
Russell had retained just before the prior oral argument applied for leave
to withdraw, citing, inter alia, Russell's "repeated failure to provide [his
lawyer] with disclosure and discovery materials and other materials as or
when promised." According to Russell's counsel, his client had "fail[ed] to
provide information and documents pertaining to the case as agreed when
[the lawyer] accepted the case" and had a "habit of blaming others for his
failure to comply with court orders and his failure to fulfill commitments
made" to the lawyer.

¶11           With his application to withdraw pending, Russell's lawyer
filed a response to the motion to dismiss that, for the most part, recited an
account "dictated" by Russell. Russell asserted he had responded to the
defendants' written discovery requests and had provided the defendants
"with electronic access to thousands of pages of documents." He also
explained his wife had been the "detail person" who assembled materials
that he used in the preliminary injunction hearing. According to Russell,
his wife had prepared drafts of his disclosure statement and his responses
to the written discovery, but she had grown frustrated with the litigation
and "antagonistic to him," and had refused to give him documents or
provide further assistance; indeed, he said, she had obtained an order of
protection barring him from contacting her. Apparently attempting to
explain his delay in prosecuting the litigation without his wife's assistance,
Russell stated, "Plaintiff is not good at reading long documents when he is
under pressure." Through counsel, Russell argued that his failures to
comply with his discovery obligations were not willful nor prejudicial to
the defense.

¶12           In their reply in support of their motion to dismiss,
defendants attached a chart that Russell had provided in response to an
interrogatory asking for damage information, and asserted that when
Russell was examined in his deposition about a similar chart, he admitted
the listed damages were wrong, inappropriate or not appropriately
calculated. They further asserted that Russell had yet to provide a detailed
disclosure statement and, although, he did upload some documents to a
cloud drive, they were not organized or presented in "coherent fashion in
response to interrogatory or discovery responses."

¶13          The court granted Russell’s counsel's application to
withdraw, and set a one-hour argument on the defendants' motion to
dismiss for March 4, 2016, more than three months after defendants filed
the motion. At the argument, the court questioned defense counsel about
Russell's contention that he had uploaded relevant documents "to the

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cloud," and counsel responded that the uploaded documents were those
exchanged during the preliminary injunction proceeding, rather than
documents called for by the requests for production that defendants served
later. More specifically, defense counsel cited a spreadsheet filed with the
court that identified the documents Russell had produced, asserting many
of them were public records or exhibits filed in other proceedings.

¶14           The court asked the defendants why it would not be
appropriate to impose a lesser sanction than dismissal, suggesting an order
barring Russell from offering in evidence any documents he had withheld
and an instruction allowing the jury to draw an adverse inference. But
defendants responded that the lesser remedy the court proposed would not
ameliorate the prejudice Russell's disclosure failures created for them.
Without his production of relevant documents, the defendants asserted,
they would be unable to cross-examine him at trial about his damage
claims. And they pointed out that the court had already imposed a "lesser
sanction" six months before, when it had ordered Russell to pay sanctions
and serve proper discovery responses within 30 days.

¶15           As the argument came to a close, the superior court at length
explained its decision to Russell, who was present by phone:

      The -- we have been down this road once already in this case,
      as the Defendants rightly point out, and there was a sanction
      -- an order -- a sanction order requiring compliance and
      payment of money. That order has not been complied with.

      And specifically it's difficult with respect to the interrogatory
      responses, and to some extent the document production, it's
      difficult for me to assess that because those responses are not
      before the Court, though I do have some sense of the
      document production anyway from what was filed on behalf
      of [one of the defendants].

      But what is -- it is not in dispute that there has not been
      compliance with the order requiring a new Rule 26.1
      disclosure and some organization of the information into a
      coherent statement of claims and damages arising from those
      claims, and that was really -- that's really the heart of what --
      for all this time, really, for the better part of a year and a half.

      The Defendants have been asking for the -- Defendants at the
      preliminary injunction hearing were asking for it back then,

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                    RUSSELL v. VAIRO, et al.
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and I think it's fair to say that they're still unhappy with me
because I didn't sufficiently require it at that time.

Here's the thing, Mr. Russell. This is private dispute between
private parties over private business transactions. You came to
me and invoked the power of the Court on your side because
you said that what was happening was unfair to you, and I took
you seriously, and I exercised the power of the Court.

So that -- when that happens, it's not just a private matter
between private individuals anymore. Once you do that, you
have obligations that have to be met, and those are a function of
your having come to the court and asked to invoke the power of
the Court on your behalf, and you haven't done it.

                          *       *       *

And I know that you have reasons. What I -- whether I think
those reasons are good or bad at some point doesn't matter
anymore. At some point deserving's got nothing to do with it,
as they said in the movie.

And, I mean, that in the larger sense, not in the sense of Rule 37
failure to comply because there's clearly been a failure to
comply. At some point it's just not fair to the Defendants
anymore, and the Defendants are subject to an injunction that
prevents them from acting because you invoked the power of
the Court.

And at some point it's not fair to them to prevent -- continue to
prevent them from acting when the process that was started by
you is not moving forward and has -- there's no sign on the
horizon that it's ever going to move forward.

The Court -- for the record, the Court fully understands that
dismissal of the case for failure to comply with disclosure[,]
[d]iscovery obligations is an extreme, rare, drastic step. On this
record, I'd like to think it can't be said that the Court didn't allow
every opportunity that it could for compliance because I think
Mr. Russell was given ample opportunity to comply. And as I
said, at some point the reasons -- they're not irrelevant, but
they're secondary.

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                          RUSSELL v. VAIRO, et al.
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¶16            The court then entered judgment dismissing Russell's claims,
lifting the injunction and granting costs and an additional attorney's fees
award of $5,985 to one defendant and $3,046.50 to other defendants.

¶17          Russell filed a timely notice of appeal. We have jurisdiction
pursuant to Article 6, Section 9, of the Arizona Constitution and Arizona
Revised Statutes ("A.R.S.") section 12-2101(A) (2017).1

                                DISCUSSION

¶18           At the time of the judgment in this case, Arizona Rule of Civil
Procedure 37(b)(2) provided that if a party "fails to obey an order to provide
or permit discovery," the court "may make such orders in regard to the
failure as are just."2 Among the remedies the rule expressly allowed the
superior court to impose was "[a]n order . . . dismissing the action or
proceeding or any part thereof" and an award of the moving party's
reasonable expenses. Ariz. R. Civ. P. 37(b)(2)(C). Moreover, the rule
granted the court the same power to remedy a party's failure to serve a
timely Rule 26.1 disclosure. Ariz. R. Civ. P. 37(c)(1).

¶19            Although the superior court's discretion to dismiss a case for
a discovery violation "is more limited than when it employs lesser
sanctions," Wayne Cook Enters., Inc. v. Fain Props. Ltd. P'ship, 196 Ariz. 146,
147, ¶ 5 (App. 1999), a "willful disregard of discovery obligations" may be
a "valid basis" for entry of judgment in favor of the moving party, Roberts v.
City of Phoenix, 225 Ariz. 112, 119, ¶ 27 (App. 2010). "We will affirm a trial
court's imposition of sanctions for discovery violations, including entry of
. . . judgment, unless the record reflects a clear abuse of discretion." Roberts,
225 Ariz. at 119, ¶ 24.

¶20           Without citation to the record, Russell argues on appeal that
his disclosure was merely "tardy" and that he provided "discovery
substantially in compliance with the trial court's orders." We have closely
reviewed the record and conclude it does not support his contention. As
the superior court stated in imposing the sanctions, Russell was on notice
from the prior ruling on the defendants' motion to compel that he would be

1     Absent material revision after the relevant date, we cite a statute's
current version.

2      Rule 37 was revised and "restyled" effective January 1, 2017, after
entry of the judgment in this case. We deal here with the prior version of
the Rule.

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                         RUSSELL v. VAIRO, et al.
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held to his disclosure obligations under the rules. Through counsel, Russell
agreed in September 2015 to file a disclosure statement and discovery
responses within 30 days. He did not do so, nor does the record disclose
any efforts by Russell to comply with the September order or his other
disclosure obligations during the three months between the filing of the
motion to dismiss and the date of oral argument on the motion.

¶21           Russell argues on appeal that the superior court should have
sanctioned him by imposing an attorney's fees award rather than dismiss
his case. But the court already had imposed fees when it ruled against
Russell in September 2015 on the defendants' motion to compel. Having
once imposed a fee sanction, the court was entirely within its discretion to
decline to impose another on Russell when he failed to comply with the
prior order. Contrary to Russell's contention that the court abused its
discretion, the court displayed great patience in dealing with Russell
throughout the course of the litigation, from the five-day injunction hearing
in which Russell appeared pro se, through the court's careful consideration
of the record presented on Russell's subsequent disclosure violations and
its explanation of its ruling to Russell at the close of the hearing on the
motion to dismiss.

¶22           Finally, Russell argues that the superior court violated his
due-process rights when it "unreasonably restricted" Russell's remarks
during the argument on the motion to dismiss. Having closely reviewed
the transcript, we conclude the record does not support his contention. To
the contrary, the superior court treated Russell with respect and allowed
him a full and complete opportunity to litigate his case within the
applicable rules and the law.3

3       Russell argues the court abused its discretion by dismissing his
complaint with prejudice, suggesting the court should have imposed the
lesser sanction of a dismissal without prejudice. The judgment does not
specify whether the dismissal is with or without prejudice. Nevertheless,
such a judgment constitutes a judgment on the merits with res judicata
effects. Phillips v. Ariz. Bd. of Regents, 123 Ariz. 596, 598 (1979). For the
reasons stated, ¶¶ 20-22, his argument for a lesser sanction is unavailing.

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                        RUSSELL v. VAIRO, et al.
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                              CONCLUSION

¶23            For the reasons stated, we affirm the judgment. Contingent
on defendants' compliance with Arizona Rule of Civil Appellate Procedure
21, we grant them their costs on appeal and a reasonable amount of
attorney's fees pursuant to A.R.S. § 12-349(A)(1) (2017) (allowing sanctions
against party who "brings or defends a claim without substantial
justification").

                         AMY M. WOOD • Clerk of the Court
                         FILED: AA

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