Court Opinion

ID: 4638263
Source: CourtListenerOpinion
Date Created: 2020-11-30 21:02:19.226736+00
Date Added: 2024-06-11T07:58:47.012126
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

             LISA M. AUBUCHON, et al., Plaintiffs/Appellants,

                                        v.

                MARICOPA COUNTY, Defendant/Appellee.

                             No. 1 CA-CV 19-0799
                               FILED 11-24-2020

           Appeal from the Superior Court in Maricopa County
                          No. CV2011-014754
                The Honorable Daniel G. Martin, Judge

                                  AFFIRMED

                                   COUNSEL

Lisa M. Aubuchon, Peter R. Pestalozzi, Tempe
Edward Moriarity, Missoula, MT
Plaintiffs/Appellants

Sacks Tierney P.A., Scottsdale
By James W. Armstrong, Jeffrey S. Leonard, Evan F. Hiller
Counsel for Defendant/Appellee
                    AUBUCHON, et al. v. MARICOPA
                        Decision of the Court

                      MEMORANDUM DECISION

Judge David B. Gass delivered the decision of the Court, in which Presiding
Judge Jennifer M. Perkins and Judge Michael J. Brown joined.

G A S S, Judge:

¶1           This appeal represents the final phase of litigation arising out
of Lisa Aubuchon’s former employment as a deputy county attorney. She
was terminated and ultimately disbarred. See In re Aubuchon, 233 Ariz. 62
(2013). Aubuchon and her husband, Peter Pestalozzi, sued multiple parties
for damages, including the County. See Aubuchon v. Brock, 1 CA–CV 13–
0451, 2015 WL 2383820 (Ariz. App. May 14, 2015) (mem. decision)
(Aubuchon I); Aubuchon v. Maricopa County, 1 CA-CV 17-0301, 2018 WL
2315778 (Ariz. App. May 22, 2018) (mem. decision) (Aubuchon II).

¶2            In the previous appeal, this court remanded for the superior
court to address Aubuchon’s and Pestalozzi’s contract claims, and the
award of sanctions and attorney fees. See Aubuchon II, 1 CA-CV 17-0301, at
*4, ¶¶ 20–23. The superior court did so, entering judgment in favor of the
County, including an award of attorney fees, costs, and sanctions. This
appeal followed. Because appellants have shown no genuine issues of
material fact or abuse of discretion by the superior court, we affirm.

               FACTUAL AND PROCEDURAL HISTORY

¶3           Aubuchon and Pestalozzi seek to revive their claims for
breach of contract and breach of the covenant of good faith and fair dealing
against the County. They argue Aubuchon was contractually entitled to
unconditional, County-funded representation in her State Bar disciplinary
proceedings. In September 2016, the parties filed cross-motions for
summary judgment. After full briefing and oral argument, the superior
court granted summary judgment for the County. The superior court then
awarded attorney fees against Aubuchon and Pestalozzi in the amount of
$57,010.00 and costs in the amount of $1,826.80. The superior court also
reimposed sanctions against Aubuchon, Pestalozzi, and Moriarity in the
amount of $35,486.50, with interest.

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

¶4            Aubuchon, Pestalozzi, and Moriarity timely appealed. This
court has jurisdiction pursuant to Article 6, Section 9, of the Arizona
Constitution, and A.R.S. § 12-2101.A.1.

                                 ANALYSIS

I.     The superior court correctly granted summary judgment for the
       County on Aubuchon’s and Pestalozzi’s breach of contract claim.

¶5             Summary judgment is appropriate when “no genuine dispute
as to any material fact” exists and “the moving party is entitled to judgment
as a matter of law.” Ariz. R. Civ. P. 56(a); see also Orme Sch. v. Reeves, 166
Ariz. 301, 305 (1990). This court reviews a superior court’s grant of
summary judgment de novo, viewing the facts in the light most favorable to
the non-movant, and will affirm “for any reason supported by the record,
even if not explicitly considered by the superior court.” See KB Home Tucson,
Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326, 329, ¶ 14 (App. 2014).

¶6              A breach of contract claim requires the plaintiff to show “the
existence of the contract, its breach, and the resulting damages.” See Thomas
v. Montelucia Villas, LLC, 232 Ariz. 92, 96, ¶ 16 (2013) (quotation omitted). In
Arizona, an “employment relationship is contractual in nature,” even for
at-will employees like Aubuchon. See A.R.S. § 23-1501.A.1. Accordingly,
Aubuchon and Pestalozzi have met the first element. They have not
presented “evidence that would create a genuine issue of fact” on the
remaining two elements of their breach of contract claim. See Aranki v. RKP
Invs., Inc., 194 Ariz. 206, 209, ¶ 12 (App. 1999).

       A.     The County did not breach Aubuchon’s employment
              contract.

¶7             Aubuchon’s and Pestalozzi’s argument is based on language
contained in the County’s policies and procedures manual. But “for an
enforceable contract to exist there must be an offer, an acceptance,
consideration, and sufficient specification of terms so that the obligations
involved can be ascertained.” Savoca Masonry Co., Inc. v. Homes & Son Const.
Co., Inc., 112 Ariz. 392, 394 (1975). Aubuchon did not receive the manual
until after she accepted her position with the County. Accordingly—as a
matter of law—nothing in the County manual could be a term of
Aubuchon’s initial employment contract. See id.

¶8           Aubuchon and Pestalozzi correctly note employment
contracts can be modified. Relying heavily on Leikvold v. Valley View
Community Hospital, they argue the manual and various statements by the

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

County about providing Aubuchon with representation constitute a
modification of her employment contract. See 141 Ariz. 544, 547–48 (1984).

¶9            To begin, modification of a contract requires “(1) an offer to
modify the contract, (2) assent to or acceptance of that offer, and (3)
consideration.” Demasse v. ITT Corp., 194 Ariz. 500, 506, ¶ 18 (1999) (citation
omitted). True, the Leikvold court held policy manuals can modify
employment contracts, and whether a specific policy manual “becomes part
of the particular employment contract is a question of fact.” See 141 Ariz. at
548. But the supreme court did not stop there, going on to hold:

       Where the terms of an agreement are clear and unambiguous, the
       construction of the contract is a question of law for the court.
       However, if the court determines that the terms of the contract
       can be reasonably construed in more than one manner, the
       language is ambiguous and extrinsic evidence may be used to
       ascertain the real meaning of the terms. Only after the contract
       is so construed can the jury then determine whether it was breached.

Id. (emphasis added) (citations omitted); see also Demasse, 194 Ariz. at 505,
¶ 15 (a term within an employee manual “is contractual only if it discloses a
promissory intent or is one that the employee could reasonably conclude
constituted a commitment by the employer”) (emphasis added) (quotation
and alteration omitted).

¶10            The policy manual receipt Aubuchon signed says “nothing in
this manual in any way creates an express or implied contract of
employment” and “this manual only summarizes major personnel and
office policies which are subject to change without notice.” (Emphasis added).
This language is unambiguous, “clearly and conspicuously tell[ing]
[Aubuchon] that the manual is not part of [her] employment contract.” See
Leikvold, 141 Ariz. at 548; see also Demasse, 194 Ariz. at 505, ¶ 15 (mere
descriptions “of the employer’s present policies [are] neither a promise nor
a statement that could reasonably be relied upon as a commitment”).

¶11          Further, “legal consideration, like every other part of a
contract, must be the result of agreement. The parties must understand and
be influenced to the particular action by something of value that is
recognized by all parties as the moving cause.” See id. at 507, ¶ 20 (quotation
and alternations omitted). Even if we assume the County’s manual and
subsequent representations were valid offers to modify Aubuchon’s
contract, Aubuchon and Pestalozzi have shown no evidence of the
necessary consideration.

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

¶12          In her briefing before this court, Aubuchon claims she
“changed jobs numerous times” with the County. But Aubuchon’s job
title—deputy county attorney—remained constant throughout her
employment. Though her specific responsibilities may have changed
during her employment, Aubuchon had a preexisting duty, as a County
employee, to perform those tasks assigned by her supervisors. Under
Arizona law, a contract lacks “consideration if the promisee is under a
preexisting duty to counter-perform.” Travelers Ins. Co. v. Breese, 138 Ariz.
508, 511 (App. 1983).

¶13           In short: “Separate consideration, beyond continued
employment, is necessary to effect a modification.” Demasse, 194 Ariz. at 507,
¶ 21 (emphasis added). Accordingly—as a matter of law—the County had
no contractual obligation to provide Aubuchon representation for her
disciplinary proceedings. As a result, no reasonable jury could have found
the County breached Aubuchon’s employment contract.

       B.     Aubuchon and Pestalozzi presented no evidence of
              compensable damages.

¶14          Aubuchon and Pestalozzi assert the County’s failure to
provide representation caused the following damages: lost earning
capacity; reputational damage; and attorney fees for Moriarity’s
representation.

¶15            To survive summary judgment, the non-movant “bears the
burden of producing sufficient evidence that an issue of fact does exist.”
Doe v. Roe, 191 Ariz. 313, 323, ¶ 33 (1998). This burden requires Aubuchon
and Pestalozzi to go beyond mere reliance on their pleadings. See Nat’l Bank
of Ariz. v. Thruston, 218 Ariz. 112, 119, ¶ 26 (App. 2008). They “must call the
court’s attention to evidence overlooked or ignored by the moving party or
must explain why the motion should otherwise be denied.” Id. Aubuchon
and Pestalozzi have not met this burden.

¶16            Contrary to Aubuchon’s and Pestalozzi’s arguments, Arizona
does not permit recovery for lost earning capacity in an action for breach of
an employment contract. See Lindsey v. Univ. of Ariz., 157 Ariz. 48, 54 (App.
1987). But see Felder v. Physiotherapy Assocs., 215 Ariz. 154, 163–64, ¶ 44 (App.
2007) (allowing recovery of lost wages in personal injury cases). Aubuchon
and Pestalozzi attempt to clear this hurdle by asserting they are “not
requesting wages from her lost position at the County,” but rather “the
damages that flowed from the bar matter and loss of her license.” But they
present no evidence showing the disciplinary proceedings would have

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

turned out differently if the County continuously funded her defense. And
in any event, it constitutes a claim for loss of earning capacity relating to an
alleged breach of contract, nothing more.

¶17             Arizona also prohibits recovery for reputational damage in
employment contract cases “because the computation of damages is too
speculative.” Lindsey, 157 Ariz. at 54; see also Rancho Pescado, Inc. v. Nw. Mut.
Life Ins. Co., 140 Ariz. 174, 186 (App. 1984) (“It is well settled that conjecture
or speculation cannot provide the basis for an award of damages.”). “In
effect, our courts have decided that in breach of employment contract cases
it is reasonable to require almost complete certainty as reflected in the
actual terms of the contract and the expectations of the parties to the
contract.” Felder, 215 Ariz. at 164, ¶ 45. Accordingly, Aubuchon’s and
Pestalozzi’s first two damage claims fail as a matter of law.

¶18            Their final damage claim is negated by the record. During her
deposition, Aubuchon said Moriarity undertook her representation pro
bono. Similarly, Moriarity’s deposition makes clear he neither collected fees
from, nor submitted a bill to, Aubuchon. True, an attorney who represents
the successful party in a contract action may be awarded fees. See A.R.S.
§ 12-341.01. But the ultimate award is paid by the opposing party—not the
attorney’s client. Accordingly, a potential post-litigation award of fees to a
pro bono attorney is not a “damage” suffered by the client. See, e.g., City Ctr.
Exec. Plaza, LLC v. Jantzen, 237 Ariz. 37, 41, ¶ 13 (App. 2015) (“courts
generally do not construe ‘damages’ to include attorneys’ fees”).

¶19            In summary, Aubuchon and Pestalozzi presented no
“evidence that would create a genuine issue of fact” on two essential
elements—breach and damages—of their contract claim. See Aranki, 194
Ariz. at 209, ¶ 12. The superior court, therefore, correctly granted summary
judgment for the County on this claim. See id.

II.    The superior court correctly granted summary judgment for the
       County on Aubuchon’s and Pestalozzi’s good faith and fair
       dealing claim.

¶20           “Arizona law implies a covenant of good faith and fair
dealing in every contract.” Keg Rests. Ariz., Inc. v. Jones, 240 Ariz. 64, 77, ¶ 45
(App. 2016). A party breaches this covenant by acting in a way inconsistent
with, or adverse to, the other “party’s reasonably expected benefits of the
bargain.” See Bike Fashion Corp. v. Kramer, 202 Ariz. 420, 424, ¶ 14 (App.
2002) (emphasis added). In the context of an employment contract, the
remedy for a breach of the implied covenant of good faith and fair dealing

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

is limited to contractual damages. See Nelson v. Phx. Resort Corp., 181 Ariz.
188, 198 (App. 1994).

¶21           As discussed above, Aubuchon’s and Pestalozzi’s contention
the County’s policy manual and subsequent representations modified
Aubuchon’s employment contract fails as a matter of law. Further,
Aubuchon herself described her employment contract as “kind of a fluid
thing,” and was unable to identify specific terms that apply in her contract.
But “an enforceable contract [requires] sufficient specification of terms so
that the obligations involved can be ascertained.” See Savoca Masonry, 112
Ariz. at 394. In short, Aubuchon and Pestalozzi failed to show County-
funded representation in her disciplinary proceedings was a “reasonably
expected benefit[]” of her employment. See Bike Fashion Corp., 202 Ariz. at
424, ¶ 14 (emphasis added).

¶22         In addition, as described above, Aubuchon and Pestalozzi
provided no evidence of contractual damages. Without evidence of
compensable contract damages, Aubuchon’s and Pestalozzi’s claim for
breach of the covenant of good faith and fair dealing related to her
employment contract fails as a matter of law. See Nelson, 181 Ariz. at 198.

¶23          Accordingly, the superior court correctly granted summary
judgment for the County on this claim. See Aranki, 194 Ariz. at 209, ¶ 12.

III.   The superior court did not abuse its discretion by awarding the
       County attorney fees and sanctions.

¶24           This court reviews a superior court’s award of attorney fees
and sanctions for an abuse of discretion. See ABCDW LLC v. Banning, 241
Ariz. 427, 440, ¶ 60 (App. 2016); Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229
Ariz. 377, 410, ¶ 113 (App. 2012). A superior court abuses its discretion
when its reasoning is legally incorrect, clearly untenable, or otherwise
constitutes a denial of justice. See State v. Penney, 229 Ariz. 32, 34, ¶ 8 (App.
2012).

¶25           Aubuchon and Pestalozzi argue the award of attorney fees
constitutes an abuse of discretion because Aubuchon’s contract did not
include a specific term obligating her to pay the County’s litigation costs.
Arizona law, however, gives courts the authority to award fees to the
successful party “[i]n any contested action arising out of contract.” A.R.S.
§ 12-341.01.A (emphasis added). Because Aubuchon’s and Pestalozzi’s
claims are based on Aubuchon’s employment contract, subsection 12-
341.01.A applies.

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                     AUBUCHON, et al. v. MARICOPA
                         Decision of the Court

¶26            Aubuchon and Pestalozzi next argue the superior court failed
to consider the factors outlined in Associated Indemnity Corporation v. Warner.
See 143 Ariz. 567, 570 (1985). The record contradicts this argument. The
superior court’s first post-appeal award of attorney fees explicitly analyzed
each of the Warner factors, ultimately awarding the County less than half
the fees it requested. Similarly, the superior court’s final fee award is nearly
$30,000.00 less than the County requested. Because the County is the
successful party, the record establishes the superior court did not abuse its
discretion in awarding attorney fees against Aubuchon and Pestalozzi. See
Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 569, ¶ 9 (App. 2007) (“We
will affirm an award with a reasonable basis even if the trial court gives no
reasons for its decision regarding whether to award fees.”).

¶27           Turning to the sanctions, the issue has been before this court
before. Previously,

       this court found “the superior court acted well within its
       discretion when it determined that [Aubuchon, Pestalozzi,
       and Moriarity] had engaged in sanctionable conduct,” but
       consideration of the amount of sanctions was deferred “until
       the case is resolved on remand.” The reasoning supporting
       the sanctions has not changed from that outlined in Aubuchon
       [I].

Aubuchon II, 1 CA-CV 17-0301, at *4, ¶ 21 (quoting Aubuchon I, 1 CA–CV 13–
0451, at *13, ¶ 48).

¶28            Contrary to appellants’ arguments here, this court never
found “the breach of contract and good faith and fair dealing covenants
were valid claims.” See Aubuchon II, 1 CA-CV 17-0301, at *4, ¶ 20 (“We
express no opinion as to the underlying merits of Aubuchon’s contract
case.”). And neither the amount of sanctions nor the underlying
justification has changed from Aubuchon I. The superior court now has
resolved the case on remand, placing it in the posture referenced in
Aubuchon II. The time was right for the superior court to consider the
amount of sanctions. Because the sanctions “are supported by reasonable
evidence,” we affirm the award. See Roberts v. City of Phoenix, 225 Ariz. 112,
119, ¶ 24 (App. 2010).

                      ATTORNEY FEES ON APPEAL

¶29            The County requests attorney fees on appeal. As the County
is the prevailing party in a “contested action arising out of a contract,” we

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                   AUBUCHON, et al. v. MARICOPA
                       Decision of the Court

exercise our discretion and award it reasonable attorney fees and taxable
costs on appeal upon compliance with ARCAP 21. See A.R.S. 12-341.01.A.

                             CONCLUSION

¶30          For the above reasons, we affirm the superior court’s
judgment in all respects.

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

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