Court Opinion

ID: 9838230
Source: CourtListenerOpinion
Date Created: 2023-09-05 19:05:21.376099+00
Date Added: 2024-06-11T15:47:16.067093
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                 AHERN RENTALS, INC., Plaintiff/Appellant,

                                         v.

       EQUIPMENTSHARE.COM INC., et al., Defendants/Appellees.

                              No. 1 CA-CV 22-0661
                                FILED 9-5-2023

            Appeal from the Superior Court in Maricopa County
                           No. CV2020-004183
               The Honorable Timothy J. Thomason, Judge

                                   AFFIRMED

                                    COUNSEL

Littler Mendelson, PC, Phoenix
By Kristy L. Peters, Peter C. Prynkiewicz, Kimberly G. Dennis
Counsel for Ahern Rentals, Inc.

Yen Pilch Robaina & Kresin, PLC
By Thomas T. Griffin, Edmundo P. Robaina
Counsel for Ruben and Christina Gutierrez
Jennings Strouss Salmon, PLC, Phoenix
By Daniel J.F. Peabody
Co-Counsel for EquipmentShare.com Inc.

Baker McKenzie, LLP, Dallas, TX
By Mark D. Taylor, Kimberly Fahrenbrook Rich
Co-Counsel for EquipmentShare.com Inc.

Quarles & Brady, LLP Phoenix
By Jimmie W. Pursell, Jr., Jeffrey D. Gardner
Co-Counsel for EquipmentShare.com Inc.

                      MEMORANDUM DECISION

Judge David D. Weinzweig delivered the decision of the Court, in which
Presiding Judge Cynthia J. Bailey and Judge Jennifer B. Campbell joined.

W E I N Z W E I G, Judge:

¶1          Ahern Rentals, Inc. (“Ahern”) appeals the superior court’s
grant of summary judgment in favor of EquipmentShare.com
(“EquipmentShare”) and Christina Gutierrez, award of attorney fees to
EquipmentShare, and denial of Ahern’s motion for default judgment.
Because Ahern shows no error, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2           Ahern and EquipmentShare rent heavy construction
equipment to customers in Phoenix, including forklifts and hydraulic
scissors. Ahern opened its Phoenix office in 1999. EquipmentShare joined
the Phoenix market in November 2019.

¶3             From March 2018 until November 2019, Christina Gutierrez
was a sales representative at Ahern, where she worked to garner and
maintain customers. Ahern trained Gutierrez and supplied her with
information for her job. Ahern required Gutierrez to sign a confidentiality
agreement (“Agreement”) before she started. Under the Agreement,
Gutierrez promised to keep certain information confidential, including
trade secrets, customer lists, purchasing histories and pricing. Ahern used
passwords to electronically protect this information. Gutierrez never
signed a non-compete agreement with Ahern, and she knew who rented
heavy equipment from Ahern by working as its sales representative.

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               AHERN v. EQUIPMENTSHARE.COM, et al.
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¶4           Gutierrez resigned from Ahern and joined EquipmentShare
in November 2019. Before leaving Ahern, she printed her commission
revenue report and client list, which identified her Ahern customers and
customer contacts, along with rate and revenue information. After joining
EquipmentShare, Gutierrez contacted her former Ahern customers and
offered them lower prices.

¶5           Ahern sued EquipmentShare and Gutierrez in April 2020,
alleging unfair competition, misappropriation of trade secrets, tortious
interference with business expectancy against both Gutierrez and
EquipmentShare, breach of contract and breach of loyalty against
Gutierrez, and intentional interference with contract against
EquipmentShare.1

¶6             EquipmentShare and Gutierrez moved for summary
judgment. The superior court dismissed all but Ahern’s breach of loyalty
claim against Gutierrez. After an evidentiary hearing, the court excluded
Ahern’s damages expert witness and invited Gutierrez to move for
summary judgment on the breach of loyalty claim for lack of damages
evidence. Gutierrez so moved, and the court granted summary judgment
on the last claim. Ahern appealed. We have jurisdiction. See A.R.S. § 12-
2101(A)(1).

                              DISCUSSION

I.    Misappropriation of Trade Secrets

¶7            Ahern argues the superior court erroneously dismissed its
misappropriation of trade secrets claim because Ahern presented ample
evidence that its customer list and commission revenue sheets were entitled
to trade secret protection.

¶8             Summary judgment is appropriate when “the moving party
shows that there is no genuine dispute as to any material fact and [it] is
entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a). We review
de novo the superior court’s grant of summary judgment, Jackson v. Eagle
KMC LLC, 245 Ariz. 544, 545, ¶ 7 (2019), construing the facts in the light
most favorable to the non-moving party, Wells Fargo Bank, N.A. v. Allen, 231
Ariz. 209, 213, ¶ 14 (App. 2012). We will affirm the entry of summary
judgment when “the facts produced in support of the claim or defense have

1    Ahern has brought nearly 20 similar actions against its former
employees who left Ahern to work for competitors, including
EquipmentShare.

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               AHERN v. EQUIPMENTSHARE.COM, et al.
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so little probative value, given the quantum of evidence required, that
reasonable people could not [find for the proponent].” Orme Sch. v. Reeves,
166 Ariz. 301, 309 (1990).

¶9             To prove a claim for misappropriation of trade secrets, a
plaintiff must first show that “a legally protectable trade secret exists.”
Calisi v. Unified Fin. Servs., LLC, 232 Ariz. 103, 106, ¶ 14 (App. 2013).
Whether a trade secret exists is a mixed question of law and fact that we
review de novo. See id. at 106, ¶ 13. We accept the superior court’s findings
of fact unless they are clearly erroneous, but we “are not constrained by the
legal conclusions from facts found or inferred in the judgment.” Id. (citing
Enterprise Leasing Co. of Phoenix v. Ehmke, 197 Ariz. 144, 148, ¶ 11 (App.
1999)).

¶10           Arizona law defines a “trade secret” as “information,
including a formula, pattern, compilation, program, device, method,
technique or process, that both: (a) [d]erives independent economic value,
actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use[; and] (b) [i]s the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.” A.R.S.
§ 44-401(4).

¶11            Ahern insists the record at summary judgment has enough
evidence to raise a question of disputed fact as to whether Ahern’s client
list and commission reports qualified as legally protected trade secrets. We
are not persuaded. Ahern presented no evidence at summary judgment to
prove its competitors could not have “readily ascertain[ed]” this
information “by proper means.” A.R.S. § 44-401(4)(a). Basic customer
information is not protected as a trade secret when the customer does
business with multiple sources and the customer information is known to
competitors. Amex Distrib. Co. v. Mascari, 150 Ariz. 510, 517 (App. 1986); see
also Wright v. Palmer, 11 Ariz. App. 292, 295–96 (1970) (customer list was not
protected in part because customers were “well-known” to other printing
concerns operating in Phoenix).

¶12         According to the summary judgment record, the Phoenix
market had a limited pool of customers that regularly rented heavy
equipment, these customers often rented from more than one rental
company, and the rental companies knew the identity of these customers.
Ahern did not prevent its customers from sharing Ahern’s prices. Ahern
presented no evidence that its customers would not share Ahern’s prices
with a competitor if it meant lower rental prices. See Calisi, 232 Ariz. at 106,

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¶ 15 (requiring subject matter to have been kept secret and steps taken to
maintain that secrecy).

¶13           What is more, Ahern has not explained how its customer list
or commission reports contained “any specialized, valuable information
about its customers, such as information concerning their financial
requirements, tax strategies, investment objectives, and risk and investment
preferences that could constitute a protectable trade secret.” Id. at 108, ¶ 21.
Nor has Ahern offered evidence that its rental prices represented a
competitive cocktail of business or financial strategies. See Freedom Med.
Inc. v. Whitman, 343 F. Supp. 3d 509, 519–20 (E.D. Pa. 2018) (holding “pure
pricing information is not protectable because that information is known to
the customer,” but pricing formulae derived from a “range of data [such as]
materials, labor, overhead, and profit margin” are protectable as
combination or compilation secrets because that “full compilation of
pricing information is not readily obtainable from publicly available
sources”) (citations omitted). And last, Gutierrez was allowed to compete
with Ahern, having never entered a non-compete agreement.

¶14           Even so, Ahern emphasizes its safeguards to keep the
customer information confidential. But protective measures alone do not
create a trade secret. See A.R.S. § 44-401(4); Calisi, 232 Ariz. at 106, ¶ 15
(information must also be secret). We affirm the grant of summary
judgment.2

II.    Damages Expert

¶15         Ahern next challenges the superior court’s exclusion of its
damages expert witness, Nathanial Curtis, which led the court to invite and
grant summary judgment on Ahern’s breach of loyalty claim.

¶16           We review a superior court’s exclusion of evidence for an
abuse of discretion, State v. Bernstein, 237 Ariz. 226, 228, ¶ 9 (2015), even
when raised at summary judgment, Baker v. Univ. Physicians Healthcare, 231
Ariz. 379, 387, ¶ 30 (2013). An “abuse of discretion” exists when the court
commits an error of law in reaching a discretionary decision that is
“manifestly unreasonable, or exercised on untenable grounds, or for

2      We do not reach the misappropriation issue because Ahern did not
create a triable issue on whether the client list and commission reports were
legally protected trade secrets. See Calisi, 232 Ariz. at 106, ¶ 14 (claimant
must first prove a trade secret exists before addressing whether there was
misappropriation).

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untenable reasons.” Torres v. N. Am. Van Lines, Inc., 135 Ariz. 35, 40 (App.
1982).

¶17            Ahern bore the burden to prove by a preponderance of the
evidence that Curtis’ testimony was admissible under Arizona Rule of
Evidence 702. See Bernstein, 237 Ariz. at 228, ¶ 9. Expert testimony is
admissible under Rule 702 when “(a) the expert’s scientific, technical, or
other specialized knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue; (b) the testimony is based on
sufficient facts or data; (c) the testimony is the product of reliable principles
and methods; and (d) the expert has reliably applied the principles and
methods to the facts of the case.” Ariz. R. Evid. 702.

¶18           We discern no abuse of discretion. The superior court
exercised its gatekeeper function here, ensuring that expert testimony is
reliable and helpful to the jury. See Ariz. R. Evid. 702 cmt. (2012). The
record shows that Curtis relied exclusively on Ahern’s projected revenues
and growth rate to determine its damages, and that Curtis identified no
actual damages resulting from Gutierrez’s actions. The superior court also
heard from Curtis directly at the evidentiary hearing and found his
“conclusions [were] totally unreliable and speculative.” The superior court
found that Curtis used a “results oriented approach,” too, which yielded
“no reliable conclusions.” Arizona courts may consider whether “an expert
developed his opinion based on independent research, or whether the
expert developed his opinion ‘expressly for purposes of testifying.’” State
ex rel. Montgomery v. Miller, 234 Ariz. 289, 303, ¶ 47 (App. 2014) (citation
omitted).

III.   Discovery Sanctions

¶19           Ahern contends the superior court erroneously denied its
motion for default judgment against Gutierrez because she deleted her text
messages and violated the discovery rules. We review the court’s ruling on
a motion for sanctions for an abuse of discretion. James, Cooke & Hobson, Inc.
v. Lake Havasu Plumbing & Fire Prot., 177 Ariz. 316, 319 (App. 1993).

¶20           We discern no abuse of discretion. The superior court held an
evidentiary hearing where Gutierrez testified. Based on the evidence, the
court sanctioned Gutierrez in the amount of $20,000 for “extremely
careless” conduct, but the court determined that she lacked malicious
intent. The court found that she regularly deleted text messages out of
habit, including those communications in 2019, and that it was “highly
unlikely” the missing evidence would have helped Ahern’s case. We do

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               AHERN v. EQUIPMENTSHARE.COM, et al.
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not reweigh or reassess credibility issues on appeal. See Williams v. King,
248 Ariz. 311, 317, ¶ 26 (App. 2020).

IV.   Attorney Fees

¶21          Ahern argues the superior court erroneously granted attorney
fees to EquipmentShare under A.R.S. § 12-349 because Ahern’s claims were
not groundless or brought in bad faith.

¶22            Section 12-349(A)(1) directs the superior court to award
attorney fees against a party who “[b]rings or defends a claim without
substantial justification.” A claim is “without substantial justification”
when “groundless and [] not made in good faith.” A.R.S. § 12-349(F). We
interpret and apply the statute de novo, but we accept the superior court’s
findings of fact unless clearly erroneous. City of Casa Grande v. Ariz. Water
Co., 199 Ariz. 547, 555, ¶ 27 (App. 2001).

¶23          We find no error. The superior court found Ahern’s claims
“were groundless and not brought in good faith.” See A.R.S. § 12-349(A)(1).
The record has reasonable evidence to support that finding. Ahern
continued to push the litigation forward based on an unreliable damages
report. Ahern had also filed several cases against its former employees and
EquipmentShare with “little or no effort to determine the validity of its
claims.”

                              CONCLUSION

¶24          We affirm. We grant Gutierrez her attorney fees and costs on
appeal under A.R.S. §§ 12-341 and -341.01 once she meets the requirements
of ARCAP 21.

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

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