Speaks v. Lyft ( 2019 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
DERRICK T. SPEAKS, et al., Plaintiffs/Judgment Creditors/Appellants-Cross
Appellees,
v.
LYFT, INC., Garnishee/Appellee-Cross Appellant.
No. 1 CA-CV 18-0779
FILED 12-12-2019
Appeal from the Superior Court in Maricopa County
No. CV2017-002877
The Honorable Lindsay P. Abramson, Judge Pro Tempore
AFFIRMED IN PART/VACATED AND REMANDED IN PART
COUNSEL
Lowis & Gellen LLP, Phoenix
By K. Scott Reynolds
Counsel for Plaintiffs/Judgment Creditors/Appellants-Cross Appellees
Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Phoenix
By L. Eric Dowell, Douglas Trey Lynn (argued)
Counsel for Garnishee/Appellee-Cross Appellant
SPEAKS, et al. v. LYFT
Decision of the Court
MEMORANDUM DECISION
Judge Paul J. McMurdie delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Jennifer M. Perkins joined.
M c M U R D I E, Judge:
¶1 Appellants/Judgment Creditors Derrick T. Speaks and
Vanatage FBO Derrick T. Speaks IRA #53138 (collectively “Speaks”)
challenge the superior court’s order setting aside a default judgment
entered against Appellee/Garnishee Lyft, Inc. We affirm the order setting
aside the judgment but vacate and remand the award of attorney’s fees for
reconsideration.
FACTS AND PROCEDURAL BACKGROUND
¶2 Speaks sued and obtained a default judgment against Keith
Marlow Bresee, Bresee Group, L.L.C., and Liberty Precious Metals, L.L.C.
(collectively “Bresee”) in 2017. Upon learning Keith Bresee worked for Lyft,
Speaks applied for and obtained a writ of garnishment.
¶3 Speaks served the writ on Lyft, but Lyft did not answer it.
Speaks then obtained and served an order to show cause requiring Lyft to
appear at a hearing to explain why a judgment should not be entered
against it. Lyft did not appear, and the superior court entered a judgment
against it for the full amount of Speaks’ judgment against Bresee.
¶4 About 40 days later, Lyft moved to set aside the default
judgment under Arizona Rule of Civil Procedure (“Rule”) 60(b). Lyft
offered an affidavit from its paralegal responsible for managing wage
garnishments in which she testified the writ was sent to the wrong
employee for processing due to “confusion over [a] change in process.” The
paralegal also testified that while Lyft received the order to show cause on
January 24, 2018, she did not review it until the day after the show-cause
hearing. She attributed this delay to “the high number of garnishment
requests Lyft receives and a temporary change in . . . Lyft’s personnel and
procedure for implementing garnishments,” noting that Lyft received 4,275
garnishment requests in 2017.
¶5 The superior court granted relief under both Rule 60(b)(1) and
(b)(6), concluding that “more liberality should be shown in setting aside a
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Decision of the Court
judgment against a defaulting garnishee than in setting aside a judgment
against a defaulting defendant” and that “it would be inequitable, unfair,
and unjust to allow the default judgment . . . to stand.” The court also stated
Lyft’s failure to timely respond “should not be without consequences” and
ordered Speaks to file a proposed form of judgment, statement of costs, and
attorney fee application under Arizona Revised Statutes (“A.R.S.”) section
12-1598.13(H). Speaks did so, seeking $5909 in attorney’s fees and $65.40 in
costs. The court entered a final order on November 13, 2018, awarding
Speaks the fees and costs requested.
¶6 Lyft moved for reconsideration, contending its response time
had not yet run, and that Speaks improperly claimed fees incurred in
responding to its motion to set aside, on which Lyft prevailed. The court
requested a response from Speaks, but Speaks filed a notice of appeal,
which stayed consideration of Lyft’s motion. Lyft filed a notice of
cross-appeal. We have jurisdiction under A.R.S. § 12-2101(A)(2).
DISCUSSION
A. The Superior Court Did Not Abuse Its Discretion by Setting Aside
the Default Judgment.
¶7 Speaks contends the superior court should not have set aside
the default judgment. We review an order setting aside a judgment under
Rule 60(b) for an abuse of discretion. Rogone v. Correia, 236 Ariz. 43, 48, ¶ 12
(App. 2014). Generally, we resolve doubts in favor of the party seeking to
set aside a default judgment because the law favors resolution on the
merits. Richas v. Superior Court, 133 Ariz. 512, 514 (1982).
1. The Superior Court Correctly Applied a More Liberal
Standard to Lyft’s Motion to Set Aside.
¶8 Speaks first contends the court erred by applying a more
liberal standard to Lyft’s motion to set aside. In Webb v. Erickson, 134 Ariz.
182 (1982), our supreme court held defaulted garnishees were entitled to a
more liberal standard in setting aside a default judgment because they are
“disinterested part[ies] in the [underlying] proceedings, so far as any
prospect of being benefited is concerned, yet . . . interested third person[s]
so far as the danger of being injured is concerned.” Id. at 187 (quoting
Gutierrez v. Romero, 24 Ariz. 382, 387 (1922)).
¶9 Neither this court nor the superior court can modify or
disregard Webb. Johnson v. O’Connor ex rel. County of Maricopa, 235 Ariz. 85,
92, ¶ 28 (App. 2014) (decisions by the supreme court are binding on lower
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Decision of the Court
courts, and we are unable to overrule, modify, or disregard them). Speaks
contends, however, that the Legislature abrogated Webb by amending the
garnishment statutes in 1981 to grant garnishees a hearing before a default
judgment can be entered and including the same rights in the
garnishment-of-earnings statutes, which were first enacted in 1986. A.R.S.
§§ 12-1583, 12-1598.13(H). He cites no legislative history or post-Webb
authority indicating any such abrogation; indeed, post-1986 caselaw
suggests the more liberal standard still applies. See Miller v. Nat’l Franchise
Servs., Inc., 167 Ariz. 403, 407–08 (1991) (stating in dicta that “Webb allows
greater liberality in setting aside a judgment when the defendant is a
garnishee”).
¶10 Speaks also overlooks another reason for applying a more
liberal standard—that Arizona law allows the court to enter judgment
against a defaulting garnishee for the full amount of the underlying
judgment, as it did in this case. A.R.S. §§ 12-1583, -1598.13(H); Webb, 134
Ariz. at 187. This often renders the garnishee liable for significantly more
than whatever debt it may owe to the judgment creditor. Webb, 134 Ariz. at
187. Notably, it was for this reason that the Webb court found it “not difficult
to see why the principles relating to the setting aside of default judgments
are applied more liberally in the case of a garnishee.” Id. The superior court
did not err by applying a more liberal standard to Lyft’s motion to set aside.
2. The Superior Court Did Not Abuse Its Discretion by
Granting Rule 60(b)(6) Relief.
¶11 Speaks also contends Lyft was not entitled to relief under Rule
60(b)(1) or (6). We assume without deciding that the court erred by granting
relief under Rule 60(b)(1), but find more than enough evidence supports the
court’s ruling regarding (b)(6). See Gonzalez v. Nguyen, 243 Ariz. 531, 535,
¶ 15 (2018) (error to grant relief on (b)(1) and (b)(6) for the same underlying
reasons because the clauses are mutually exclusive and the grounds for
relief are “separate and distinct”).
¶12 Rule 60(b)(6) allows a court to relieve a party from a final
judgment for “any other reason justifying relief.” Courts have broad
discretion to consider the totality of the circumstances and equities
involved when vacating a judgment under the Rule’s catch-all clause.
Rogone, 236 Ariz. at 48, ¶ 12; see also Webb, 134 Ariz. at 187 (recognizing the
“broad equitable power” of Rule 60(b)(6) in the context of setting aside
garnishment judgment). Here, vacating the judgment against Lyft is
equitable under Rule 60(b)(6). Keith Bresee was a part-time worker who
only earned a total of $1553 with Lyft. If the garnishment had been
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Decision of the Court
immediately entered by Lyft when originally served, it is highly unlikely
that it would have procured any money for Speaks. Yet, the default
judgment awarded over $20,000 and accruing costs of collection to Speaks.
Because Speaks would have recovered significantly less money had Lyft
responded to the writ in a timely fashion, it was equitable for the court to
vacate the judgment.
B. The Superior Court Erred by Ruling on the Request for Fees Before
Lyft’s Time to Respond Expired.
¶13 Lyft contends the court awarded attorney fees and costs
before Lyft’s time to object to Speaks’ proposed form of judgment expired.
We agree.
¶14 An opposing party has five days not counting weekends and
legal holidays to object to a proposed form of judgment. Ariz. R. Civ. P.
6(a)(2), 58(a)(2)(A). Speaks filed his proposed form of judgment, statement
of costs, and fee application documents on October 31, 2018, and Lyft
received an additional five calendar days because Speaks served it by mail.
Ariz. R. Civ. P. 5(c)(2)(C), 6(c). As such, the deadline for Lyft to file its
objections, given the November 12, 2018 court holiday, was November 13,
2018. Ariz. R. Civ. P. 6(a)(3). The court entered its final order granting
attorney’s fees and costs on November 13, 2018. Lyft, therefore, did not
receive the full allotment of time to object to Speaks’ claims for attorney’s
fees and costs.
¶15 Speaks contends Lyft waived its objections by not raising
them (1) after Speaks claimed entitlement to fees and costs in his response
to the motion to set aside or (2) after the court issued its October 15, 2018
minute entry. As to the first argument, Speaks only stated that he “should
be awarded his attorneys’ fees and costs.” The mere fact that Lyft did not
express a contrary position in its reply did not preclude it from challenging
the specifics of Speaks’ fee claim, which Speaks had not yet presented.
Regarding the second argument, the October 15, 2018 minute entry directed
Speaks to “lodge a proposed form of order, consistent with this minute
entry, along with any necessary documents to support any requested award
of attorney’s fees and costs, by October 31, 2018,” which it did. Lyft was not
obligated to respond to the minute entry to preserve its challenges to
whatever documents Speaks later filed.
¶16 Speaks also contends Lyft “should have filed a
time-extending motion for new trial on the attorneys’ fees issue.” But it was
Speaks’ notice of appeal that deprived the superior court of jurisdiction to
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resolve Lyft’s motion for reconsideration. See Bank of New York Mellon v.
Dodev, 246 Ariz. 1, 7, ¶ 18 (quoting Castillo v. Indus. Comm’n, 21 Ariz. App.
465, 467 (1974)) (“The principle is well established that an appeal generally
divests the trial court of jurisdiction to proceed except in furtherance of the
appeal.”) (App. 2018)). Speaks cites no authority suggesting Lyft instead
should have filed a motion that would have extended its time to appeal.
¶17 Lyft argues the court erred by awarding fees for Speaks’ time
responding to its motion to vacate because Lyft succeeded on the motion.
Lyft contends that no statute authorizes attorney’s fees to be granted
against it as the successful party on the motion. See Schwab Sales, Inc. v. GN
Const. Co., 196 Ariz. 33, 35, ¶ 4 (App. 1998) (Attorney’s fees cannot be
granted “without authorization by statute, rule, or otherwise”). However,
being a successful party is only one factor for the court to consider in ruling
on the reasonableness of the fees requested. See A.R.S. § 12-1598.13(H)
(“The court may award a reasonable attorney’s fee to the party for whom
the writ was issued and against the garnishee if the writ was not answered
within the time specified . . . .”) Because the court issued an award of fees
against Lyft for its failure to answer the writ, A.R.S. § 12-1598.13(H)
authorizes an award of “reasonable attorney’s fees.” Further, Rule 60(b)
allows the court to determine the “just terms” necessary to vacate a
judgment. Therefore, the court did not err by awarding fees to Speaks, but
Lyft should be allowed to respond to the specific amounts claimed.
¶18 We vacate the attorney’s fees and costs awards and remand
so that Lyft may respond to Speaks’ proposed form of judgment, statement
of costs, and fee application.
ATTORNEY’S FEES ON APPEAL/CROSS-APPEAL
¶19 Both parties request their attorney fees incurred in this appeal
and cross-appeal. Speaks requests fees under A.R.S. § 12-1598.13(H), which
provides in relevant part:
If the garnishee fails to appear or file and serve the answer
after the service of the order requiring the appearance in
person or answer on the garnishee, the court may render
judgment by default against the garnishee for the full amount
of the judgment against the judgment debtor. The court may
award a reasonable attorney’s fee to the party for whom the
writ was issued and against the garnishee if the writ was not
answered within the time specified in the writ and a petition
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Decision of the Court
requiring the garnishee to appear or answer was filed as
provided in this section.
The statute’s reference to a single court entering default judgment and
awarding fees suggests its scope is limited to reasonable fees incurred in
superior court. See Powers v. Carpenter, 203 Ariz. 116, 118, ¶ 9 (2002) (“In
interpreting statutes, we look to the plain language as the most reliable
indicator of meaning.”). Nonetheless, we would decline to award attorney’s
fees in this case under the discretion the statute affords, even if we were to
assume the statute authorizes them on appeal.
¶20 Speaks also cites Robert E. Mann Const. Co. v. Liebert Corp., 204
Ariz. 129 (App. 2003), as a basis for awarding fees. The Robert E. Mann court
did not interpret A.R.S. § 12-1598.13(H); it instead held that “[a] party
cannot fail to request fees for an appeal or special action from the appellate
court and then ask the trial court to award fees incurred in the appellate
court.” 204 Ariz. at 132, ¶ 5. That has not occurred here.
¶21 Lyft requests attorney’s fees under A.R.S. § 12-349(A)(1),
contending Speaks’ appeal lacked substantial justification. An appeal lacks
“substantial justification” if it “is groundless and is not made in good faith.”
A.R.S. § 12-349(F). Although we reject Speaks’ arguments, there is no basis
in the record to conclude he did not raise them in good faith. For these
reasons, we decline to award fees to either side.
CONCLUSION
¶22 We affirm the court’s ruling setting aside the default
judgment against Lyft, vacate the associated attorney’s fees and costs
awards, and remand so that Lyft may respond to Speaks’ attorney’s fees
and costs claims. Lyft may recover its taxable costs incurred in this appeal
and cross-appeal upon compliance with Arizona Rule of Civil Appellate
Procedure 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
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