Crackel v. Allstate ( 2004 )

IN THE COURT OF APPEALS
STATE OF ARIZONA
DIVISION TWO
ERIKA CRACKEL, now known as ERIKA )
GUENTHER, and TAMMIE GUENTHER, )
now known as TAMMIE DRANNAN, )
)
Plaintiffs/Appellants/ ) 2 CA-CV 2002-0123
Cross-Appellees, ) DEPARTMENT B
)
v. ) OPINION
)
ALLSTATE INSURANCE COMPANY, a )
foreign corporation, )
)
Defendant/Appellee/ )
Cross-Appellant, )
)
and )
)
BLAINE S. GAUB, )
)
Defendant/Appellee. )
)
APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY
Cause No. C329946
Honorable John M. Quigley, Judge
Honorable Gilbert Veliz, Judge
AFFIRMED
Thur & O’Sullivan, P.C.
By Calvin C. Thur and Roger O’Sullivan Scottsdale
Attorneys for Plaintiffs/
Appellants/Cross-Appellees
Steptoe & Johnson LLP
By Floyd P. Bienstock, Karl M. Tilleman,
Bennett Evan Cooper, and Jason Sanders Phoenix
Attorneys for Defendant/
Appellee/Cross-Appellant
Chandler, Tullar, Udall & Redhair
By D. B. Udall Tucson
Attorneys for Defendant/Appellee
E C K E R S T R O M, Judge.
¶1 We previously issued an opinion in this matter. On the parties’ motions for
reconsideration, however, we vacated our prior opinion and now, in light of certain points raised
in those motions, issue this new opinion in its stead.
¶2 Appellants Erika Guenther and Tammie Drannan sued Allstate Insurance Company
and attorney Blaine Gaub for abuse of process. A jury found Allstate liable and awarded Guenther
and Drannan compensatory but not punitive damages. The jury found in favor of Gaub. On
appeal, Guenther and Drannan argue that the trial court abused its discretion in excluding evidence
of Allstate’s behavior in several other claims, in excluding portions of a judicial order sanctioning
Allstate in the underlying personal injury action Guenther and Drannan had filed against an Allstate
insured, and in denying their request to produce several Allstate claims files. They also argue that
the trial court improperly instructed the jury on the elements of an abuse-of-process claim. Allstate
cross-appeals, asserting that the trial court erred in denying its motion for judgment as a matter of
law (JMOL) and that the jury’s verdict in favor of Gaub necessarily exonerated Allstate as well.
We affirm.
2
Background
¶3 We view the facts and the reasonable inferences therefrom in the light most favorable
to upholding the jury’s verdicts. S Dev. Co. v. Pima Capital Mgmt. Co., 201 Ariz. 10, ¶16, 31
P.3d 123, ¶16 (App. 2001). On November 28, 1995, Drannan and her infant son were passengers
in Guenther’s car. Harvey Hamilton drove a car into the back of Guenther’s car while Guenther
was stopped at a traffic light in Casa Grande. Although Guenther’s car suffered little or no damage
from the collision, she experienced some pain in her neck and shoulder area from the impact.
Drannan, who was six months pregnant, felt a cramping-type pain in her abdominal area and was
urged to go to the emergency room to be evaluated. Both women were examined in a hospital
emergency room and released. Guenther was diagnosed with a whiplash injury to her neck and
spine. The emergency room physician instructed Drannan to see her obstetrician as soon as
possible. Neither Guenther nor Drannan sought, or incurred any costs for, treatment beyond the
initial evaluations the emergency room physician had recommended. Guenther and Drannan filed
a lawsuit against Hamilton in Pinal County Superior Court in February 1997, seeking special
damages of approximately $720 in medical expenses Guenther had incurred and the $890 in medical
expenses Drannan had incurred in addition to unspecified general damages.
¶4 Allstate, Hamilton’s automobile liability insurer, adopted a company policy in
August 1995 concerning minor-impact, soft-tissue (MIST) claims. Under the policy, automobile
accident claims involving property damage of less than $1,000 in which the claimant was
represented by an attorney were to be handled by one claims adjuster. Allstate characterized
Guenther’s and Drannan’s claims as MIST claims and assigned them to adjuster Shirlee Kopin for
processing. Kopin had copies of the medical bills Guenther and Drannan had incurred and knew
3
that Allstate had already “admitted 100 percent negligence” by Hamilton. Kopin nonetheless
instructed Gaub, the attorney Allstate retained to represent Hamilton in the personal injury
litigation, to serve on the plaintiffs a joint offer to confess judgment for a total of $101.1 Kopin
believed the offer was fair because, “based on [her] experience and knowledge of the file, [she]
thought a defense verdict was a real possibility in this case.” Her belief was based in large part
on Allstate’s position that any injury reportedly caused by “a minor impact” was “suspect.”
¶5 Altogether, Allstate expended over $4,500 defending Guenther’s and Drannan’s
claims up to and including preparation for arbitration. Allstate took Guenther’s and Drannan’s
depositions in July 1997 and learned that Guenther, Drannan, and Drannan’s son had been in
another automobile accident about one month before the accident with Hamilton. During their
depositions, both Guenther and Drannan said they were still experiencing occasional discomfort
from the Hamilton accident. Allstate hired a biomechanical expert to determine whether Guenther’s
and Drannan’s reported discomfort could have been caused by the accident with Hamilton.
Although Kopin did not suspect that Guenther and Drannan had been “overtreat[ed]” for their
injuries, and neither Guenther nor Drannan had been treated for their injuries in more than nineteen
months, Allstate nevertheless required Guenther and Drannan to submit to independent medical
examinations (IME) with Dr. John LaWall.
¶6 By October, Kopin believed she had collected enough information to “actually
evaluate[]” Guenther’s and Drannan’s claims. She assessed Allstate’s liability and recommended
1
We question whether this unapportioned joint offer would have been effective to impose
sanctions under Rule 68(d), Ariz. R. Civ. P., 16 A.R.S., Pt. 2. See Duke v. Cochise County, 189
Ariz. 35, 40-41, 938 P.2d 84, 89-90 (App. 1996).
4
that Gaub offer Guenther $801 and Drannan $1,001 to settle the claims. Guenther and Drannan
rejected the offer. Guenther did so because, by this stage in the case, the amount offered would not
have “fairly compensated” her lawyer for his work.
¶7 The case proceeded to mandatory arbitration in October. When the arbitrator asked
Gaub what the case was worth, he responded that it was worth “zero” and that Guenther and
Drannan deserved “nothing.” The arbitrator awarded Guenther $2,300 and Drannan $3,400. At
trial in this case, Kopin admitted she had believed the awards were “not . . . bad,” but she had
directed Gaub to appeal them because, in part, she believed arbitration awards generally are higher
than the actual value of claims. Gaub testified at trial that the decision to appeal the arbitration
award could only have been made by Allstate but stated, “Seldom has a plaintiff recovered [from
a jury an award] anywhere near the arbitration award.” Guenther was “frustrated” and Drannan
was apparently “distraught” when Allstate appealed the award.
¶8 After Allstate appealed the award, the parties were ordered to attend a settlement
conference before Judge O’Neil. Based on their conduct, Judge O’Neil found that Hamilton and
Gaub had not participated in the settlement conference in good faith. The court struck Hamilton’s
answer and ordered the case to be tried solely on the issue of damages. The parties then settled
Guenther’s and Drannan’s claims for the amounts originally awarded them in arbitration.
¶9 Guenther and Drannan later filed this action, claiming Allstate had abused legal
process in defending the underlying personal injury action. The jury awarded Guenther and
Drannan $7,500 each in compensatory damages. The trial court denied their subsequent motion
for new trial, and this appeal and cross-appeal followed.
5
Cross-Appeal
¶10 Allstate cross-appeals from the trial court’s denial of its motion for JMOL on
Guenther’s and Drannan’s abuse-of-process claim. Because this issue could be dispositive, we
address it first, starting with the law of abuse of process and then applying that law to Allstate’s
JMOL motion.
¶11 The elements of an abuse-of-process claim are “(1) a willful act in the use of judicial
process; (2) for an ulterior purpose not proper in the regular conduct of the proceedings.”
Nienstedt v. Wetzel, 133 Ariz. 348, 353, 651 P.2d 876, 881 (App. 1982). A party can
demonstrate the latter element by “showing that the process has been used primarily to accomplish
a purpose for which the process was not designed.” Id. In the context of this tort, Arizona
interprets “process” as encompassing “the entire range of procedures incident to the litigation
process.” Id. at 352, 651 P.2d at 880.
¶12 Citing this language in Nienstedt, Guenther and Drannan argue that an abuse-of-
process claim may be based on the worthiness of the litigation “process as a whole.” They
maintain that Allstate pursued a stated policy of refusing to compromise claims and engaging in
unnecessarily vigorous and expensive litigation in MIST cases, making it financially unfeasible to
pursue a claim for modest damages against an Allstate insured. They assert that the court
procedures for civil litigation were designed to facilitate a fair resolution of individual disputes and
were not intended to provide well-funded litigants like Allstate the means to deter claimants from
litigating their claims by making litigation too costly. Drannan and Guenther maintain that
Allstate’s stated policies, coupled with evidence of Allstate’s behavior in the underlying personal
injury action, constituted adequate evidence to support an abuse-of-process claim.
6
¶13 Although Allstate concedes that abuse-of-process claims need not be anchored in the
strictest definition of court “process,” it insists that a plaintiff must nevertheless establish that a
litigant initiated a specific compulsory act or proceeding under court authority with improper
motives. It argues that a civil defendant’s mere decision not to settle, and to thereby require the
plaintiff to prove his or her case, even if carried out with improper motives, does not constitute
abuse of process. Allstate maintains that such decisions do not involve the initiation of a specific
compulsory procedure. Allstate asserts that anchoring the tort on the defendant’s motives as to the
“litigation process as a whole” would spawn a flood of collateral litigation to second-guess the
motives of litigants who decline to settle or who vigorously defend or pursue their claims.
¶14 We agree with Allstate that a plaintiff must prove that one or more specific judicially
sanctioned processes have been abused to establish an abuse-of-process claim. Although Nienstedt
allows such claims to be predicated on the abuse of “the entire range of procedures incident to the
litigation process,” id., Guenther and Drannan have taken that language out of context to suggest
that Nienstedt invites abuse-of-process claims that fail to describe the abuse of any particular court
process. In Nienstedt, the defendants had argued that such claims should be narrowly limited to
improper use of court-sanctioned service of process. Responding to that argument, the court stated:
We reject appellants’ suggestion that we adopt the position
taken by some courts which require as an additional element of an
abuse of process claim . . . a showing that the wrongful use of the
court’s process has resulted in the seizure of plaintiffs’ person or
property. Such a requirement has not been set forth in prior Arizona
decisions . . . and . . . would limit the scope of the tort to those
instances involving the use of “process” in the strictest sense of that
term. As previously indicated, the later authorities interpret
“process” as encompassing the entire range of court procedures
incident to the litigation process, and do not restrict the tort to the
7
utilization of process in the nature of attachment, garnishment or
warrants of arrest.
Id. at 353, 651 P.2d at 881 (citations omitted; emphasis added). The court did not address whether
a claim could be predicated on the litigation process as a whole or on a defendant’s mere refusal
to settle. Rather, the court specified which court processes arguably had been misused by the
defendant in the underlying action. That analysis would have been unnecessary if a claimant were
only required to establish that the defendant had possessed an improper purpose in sustaining the
overall litigation. Id. at 351-54.
¶15 Subsequently, this court confirmed that a claimant must present evidence that the
defendant committed a specific “wilful act . . . not proper in the regular conduct of the
proceedings” to support a claim for abuse of process and that evidence of the defendant’s mere
persistence in litigation, even if based on an improper motive, does not sustain the tort. Morn v.
City of Phoenix, 152 Ariz. 164, 166, 168, 730 P.2d 873, 875, 877 (App. 1986); see also Simon
v. Navon, 71 F.3d 9, 17 (1st Cir. 1995) (“[P]roof of a specific act in an abuse of process setting
provides concrete assurance that a process actually has been abused.”). Accordingly, we reject
Guenther and Drannan’s contention that a generalized allegation that a defendant has misused the
litigation process as a whole can support a claim of abuse of process. Rather, it must be based on
something more than the opposing party’s mere persistence in the litigation.
¶16 On the other hand, we reject Allstate’s suggestion that an abuse-of-process claim
may be based only on a limited range of court procedures, those by which a litigant uses court
procedural authority to compel opposing litigants “to act or forbear to act” in some way. Although
Nienstedt does not invite abuse-of-process claims based on an amorphous allegation that a party
8
misused the litigation process as a whole, it allows such claims when a litigant has abused any of
the “entire range of court procedures incident to the litigation.” 133 Ariz. at 353, 651 P.2d at 881
(emphasis added). In using such inclusive language, the court appeared to reject any limitation on
the types of court processes that, if abused, can support a claim.2 Id. As noted, the court
specifically identified several court processes that, if abused, could support an abuse-of-process
claim on the specific facts before it. Among them were several court processes that a litigant can
abuse without forcing an opposing litigant to act or forbear to act. Id. at 351-53, 651 P.2d at 779-
81 (identifying motions for change of judge and for continuances as procedures, the abuse of which
can support a claim); see also General Refractories v. Fireman’s Fund Ins., 337 F.3d 297, 302,
304, 310-11 (3d Cir. 2003) (applying Pennsylvania law and suggesting that abuse-of-process claim
could be based on defendants’ behavior in responding to discovery requests or misrepresentations
made to opposing counsel and the court). Thus, no Arizona court has expressly refused to limit
the grounds upon which the tort may be based in the manner Allstate suggests.
¶17 We also conclude that a litigant may commit abuse of process while merely
defending an underlying action. As noted, an abuse-of-process claim may be based on the full
range of court procedures provided by the civil litigation process. Nienstedt. Those procedures
are designed for the benefit of defendants as well as plaintiffs and can therefore be equally abused
by defendants. In Nienstedt, for example, the court upheld the verdict against the Wetzel
defendants even though they had acted as both plaintiffs and counterdefendants in the underlying
action. 133 Ariz. at 351, 651 P.2d at 879 (observing that the Nienstedts had filed a counterclaim
2
In Nienstedt, Arizona adopted a liberal view on the types of court processes that can
support a claim. See 2 Dan B. Dobbs, The Law of Torts § 438 at 1235-36 (2001).
9
in prior litigation). In General Refractories, the court acknowledged that a defendant’s abuse of
the discovery process could constitute abuse of process and granted the plaintiff leave to amend the
complaint to articulate its allegations more specifically. 337 F.3d at 308-11; see also Torok v.
Yost, 335 S.E.2d 419, 421 (Ga. Ct. App. 1985) (plaintiff could base abuse-of-process claim on
defendant’s filing frivolous counterclaim for improper purpose).
¶18 Allstate argues that, if we do not limit the abuse-of-process tort as it suggests, the
tort will become “an amorphous cloud that hangs over everything a litigant does.” However, our
courts have imposed two additional requirements that deter frivolous, unfounded, or ill-defined
claims. First, a claimant must present more than mere speculation to support the assertion that the
defendant has used court processes with an improper intent. Instead, a plaintiff must show that the
defendant’s improper purpose was the primary motivation for its actions, not merely an incidental
motivation. Nienstedt, 133 Ariz. at 354, 651 P.2d at 882; see also Morn, 152 Ariz. at 166-67, 730
P.2d at 875-76. The Restatement of Torts addresses the significance of the “primary purpose”
requirement:
The significance of th[e] word [“primarily”] is that there is no action
for abuse of process when the process is used for the purpose for
which it is intended, but there is an incidental motive of spite or an
ulterior purpose of benefit to the defendant. Thus, the entirely
justified prosecution of another on a criminal charge . . . does not
become abuse of process merely because the instigator dislikes the
accused and enjoys doing him harm; nor does the instigation of
justified bankruptcy proceedings become abuse of process merely
because the instigator hopes to derive benefit from the closing down
of the business of a competitor.
Restatement (Second) of Torts § 682 cmt. b (1977). Thus, a claim of abuse of process may not be
based solely on the fact that an opposing litigant received some secondary gain or emotional
10
satisfaction from the use of a court process. Rather, to survive a motion for JMOL, a claimant
must have presented evidence that the court process was used primarily to pursue that improper
motive.
¶19 Second, to demonstrate a defendant’s primary motive was improper, a claimant must
establish that the defendant used a court process in a fashion inconsistent with legitimate litigation
goals. In Nienstedt, the court explained this requirement as follows:
We recognize that the utilization of virtually any available
litigation procedure by an attorney will generally be accompanied by
an awareness . . . that his action will necessarily subject the opposing
party to additional legal expenses. The range of feeling in the
initiating attorney evoked by that awareness might well vary from
instances of actual indifference to instances of intense satisfaction.
. . . Liability should result only when the sense of awareness
progresses to a sense of purpose, and, in addition the utilization of
the procedure for the purposes for which it was designed becomes so
lacking in justification as to lose its legitimate function as a
reasonably justifiable litigation procedure.
133 Ariz. at 354, 651 P.2d at 882 (emphasis added); see also General Refractories, 337 F.3d at
308. Thus, plaintiffs must not only present evidence that the defendant used a court process for
a primarily improper purpose, they must also show that, in using the court process, the defendant
took an action that could not logically be explained without reference to the defendant’s improper
motives.
¶20 We now turn to the question whether, in light of these principles, the trial court
erred by denying Allstate’s JMOL motion. A motion for JMOL should be granted if “there is no
legally sufficient evidentiary basis for a reasonable jury to find for [the nonmoving] party on that
issue.” Ariz. R. Civ. P. 50(a)(1), 16 A.R.S., Pt. 1. In reviewing a ruling on a motion for JMOL,
we view the facts in the light most favorable to the party opposing it. Saucedo ex rel. Sinaloa v.
11
Salvation Army, 200 Ariz. 179, ¶9, 24 P.3d 1274, ¶9 (App. 2001). In considering a JMOL
motion, a trial court should apply the same test for deciding whether to grant a motion for summary
judgment, that is, the “motion should be granted if the facts produced in support of the claim or
defense have so little probative value, given the quantum of evidence required, that reasonable
people could not agree with the conclusion advanced by the proponent of the claim or defense.”
Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990). We review de novo a trial
court’s denial of a motion for JMOL. Monaco v. HealthPartners of S. Ariz., 196 Ariz. 299, ¶6,
995 P.2d 735, ¶6 (App. 1999).
I. Evidence that Allstate acted with an improper purpose
¶21 Allstate argues that Guenther and Drannan presented so little evidence that Allstate
had acted with an improper purpose in defending the personal injury claims that no rational jury
could have agreed with Guenther and Drannan’s position. In the context of an abuse-of-process
claim,
“[t]he improper purpose usually takes the form of coercion to obtain
a collateral advantage, not properly involved in the proceeding itself,
such as the surrender of property or the payment of money, by the
use of process as a threat or a club. There is, in other words, a form
of extortion, and it is what is done in the course of negotiation,
rather than the issuance of any formal use of the process itself, which
constitutes the tort.”
Morn, 152 Ariz. at 168, 730 P.2d at 877, quoting W. Page Keeton et al., Prosser and Keeton on
the Law of Torts § 121, at 898 (5th ed. 1984). Guenther and Drannan maintain that Allstate used
the prospect of sustained and expensive litigation as a “club” in an attempt to coerce them, and
other similarly situated claimants, to surrender those causes of action that sought only modest
damages.
12
¶22 We have little trouble concluding that such a use of court processes would be
improper. See Nienstedt, 133 Ariz. at 354, 651 P.2d at 882 (use of process to expose injured party
to excessive attorney fees and legal expenses constitutes improper purpose). But Guenther and
Drannan were required to establish that Allstate’s alleged improper purpose was its primary
motivation for using the process as it did and that the improper purpose was not merely an
incidental and collateral motivation. See Morn, 152 Ariz. at 166-67, 730 P.2d at 875-76;
Nienstedt, 133 Ariz. at 354, 651 P.2d at 882.
¶23 Guenther and Drannan presented evidence that Allstate had adopted written policies
governing MIST claims directing its adjusters and attorneys to handle certain kinds of claims in
such a way that it would not be financially feasible for claimants to pursue litigation. Allstate
instructed its representatives to “do-whatever-it-takes [sic] to remove any need” for claimants to
retain an attorney to assist in settling claims, including making “settlement offers in a range that
will make [a] claim economically unacceptable to an attorney.” In another manual, Allstate
management told personnel to take a “proactive stance on MIST cases” and “force[] the attorney
and the claimant to think about the obstacles they must overcome to reach a realistic settlement or
a walk-away settlement.” According to the policy, an increase in Allstate’s trial activity would
constitute one such “obstacle.” The MIST policy further stated that one of its goals was “to send
a message to attorneys of our proactive stance on MIST cases.”
¶24 In denying Allstate’s motion for summary judgment on the improper purpose
element, the trial court placed some weight on the obvious implication of that policy, stating:
[Guenther and Drannan] allege that [Allstate’s] actions are part of a
policy regime designed to harass, intimidate and inflict excessive
expense on plaintiffs. [Allstate’s] own manual regarding Claim Core
13
Processing Redesign (CCPR) and Minor Injury Soft Tissue (MIST)
claims seems to support this argument.
Although Allstate was entitled to present information to the jury explaining why those policies
might have been misunderstood or taken out of context, these policies at a minimum created a
factual question whether Allstate had intended to use court processes to achieve corporate goals
inconsistent with the proper purpose of those court processes.
¶25 In assessing whether a reasonable jury could determine that Allstate’s allegedly
improper corporate goals constituted a primary motivation for the use of court processes in this
case, the trial court was also entitled to consider evidence of Allstate’s conduct in the underlying
litigation. See Morn, 152 Ariz. at 168, 730 P.2d at 877 (ulterior motive may be inferred from
defendants’ acts in underlying case). Allstate initially served on Guenther and Drannan an offer
of judgment for $101. It did so even though it conceded its insured had been one hundred percent
negligent in the accident; it knew Guenther and Drannan initially were not seeking special damages
beyond the costs of their precautionary emergency room visits and the isolated follow-up visits
recommended by the emergency room physician; and it possessed the medical records
corroborating the costs of the precautionary medical examinations.
¶26 At the time Guenther and Drannan filed their damages action against Hamilton, they
had incurred medical expenses of merely $1,600. Nonetheless, Allstate pursued a litigation
strategy that cost it in excess of $4,500 to defend facially valid claims and prepare for arbitration.
Although neither Guenther nor Drannan had obtained any continuing treatment in the nineteen
months after the accident and were therefore not seeking special damages beyond their initial
medical expenses, Allstate demanded that Guenther and Drannan submit to IMEs pursuant to
14
Rule 35, Ariz. R. Civ. P., 16 A.R.S., Pt. 1. It also retained a biomechanical expert to evaluate
Guenther’s and Drannan’s injuries and act as a potential expert witness.
¶27 After the IMEs, Allstate’s medical examiner stated that he could not fault Guenther
or Drannan for seeking precautionary care after the collision. Nonetheless, Gaub took the position
during arbitration that the case was worth “zero” and that Guenther and Drannan deserved
“nothing.” Allstate then appealed an arbitration award that their own adjuster conceded was “not
. . . bad.”
¶28 Thereafter, a Pinal County trial judge found that Allstate’s counsel had failed to
participate in good faith in a mandatory settlement conference. That court sanctioned Allstate for
its behavior during that settlement conference on the grounds that Allstate had: (1) intentionally
refused to abide by the local rule requiring distribution of pretrial memoranda to opposing counsel
in preparation for the conference, (2) told the trial court that nothing the court could say would
affect Allstate’s negotiating position, and (3) misrepresented the conclusions of Allstate’s expert
on whether it had been reasonable for Drannan to seek medical attention after the accident. Based
on Gaub’s comments during the settlement conference and his previous efforts to cancel that
proceeding altogether, the jury could have reasonably concluded Gaub had engaged in the
sanctioned behavior precisely to convey his resolve to litigate the case in conformity with Allstate’s
MIST policy.3
3
Gaub stated during the conference that Allstate “draw[s] a line in the sand in these cases,”
directly referring to Allstate’s MIST policy. Gaub had previously contacted Guenther and
Drannan’s counsel and unsuccessfully attempted to secure an agreement to cancel the settlement
conference on the ground that little could be accomplished by that exercise. Kopin had noted in
her negotiations plan that she had told Guenther and Drannan’s counsel prior to the settlement
conference that she was not going to increase Allstate’s settlement offers at the conference. She
15
¶29 Allstate has presented alternate explanations for its conduct, suggesting its actions
were not improperly motivated.4 It is not our province to make any findings of fact on this
question. Because we must view the direct and circumstantial evidence of improper motive in the
light most favorable to Guenther and Drannan, see Saucedo, and because the evidence must be
considered in the context of Allstate’s other behavior in the underlying case, 5 we cannot say that
the trial court erred in concluding that Gunether and Drannan had presented sufficient evidence to
survive a motion for JMOL on this element of the tort. See 2 Dan B. Dobbs, The Law of Torts
§ 438, at 1236-37 (2001) (improper purpose “may be inferred from what is said or done”); Keeton,
supra, § 121, at 899 (“The ulterior motive may be shown by showing a direct demand for collateral
advantage; or it may be inferred from what is said or done about the process.”). In short, a jury
reasonably could have concluded that Allstate’s actions had been consistent with a primary motive
to use the processes of our civil litigation system to pursue a corporate policy of deterring future
claims rather than with any genuine intention to use those processes to resolve the underlying
dispute.
II. The reasonableness of Allstate’s actions in using specific court processes
¶30 We now turn to the question whether a reasonable jury could have found that
Allstate’s “utilization of the procedure for the purposes for which it was designed becomes so
had also told him that she did not think there was any point in going to the settlement conference
absent additional information.
4
For example, Allstate explained its decision to conduct IMEs by noting that both Guenther
and Drannan had claimed in their depositions that they still suffered occasional pain from their
minor injuries arising from the collision.
5
We do not decide whether any of the above behaviors during litigation, standing alone,
would constitute adequate evidence of any improper primary purpose.
16
lacking in justification as to lose its legitimate function as a reasonably justifiable litigation
procedure.” Nienstedt, 133 Ariz. at 354, 651 P.2d at 882. And, we must also consider whether
Guenther and Drannan established that Allstate used a specific court process in a manner that was
inconsistent with legitimate litigation goals. Id. at 353, 651 P.2d at 881.
¶31 During oral argument before this court, Guenther and Drannan asserted that Allstate
had abused several specific court processes by: (1) asserting a contributory negligence defense
although it had concluded that its own insured was entirely at fault; (2) serving an offer of judgment
for $101 to be split between the two plaintiffs when it knew that the undisputed medical costs
Guenther and Drannan had incurred exceeded $1,000; (3) exercising its procedural right to conduct
IMEs even though neither plaintiff was seeking to recover medical expenses for treatment arising
from ongoing injuries; (4) appealing the arbitration award even though its adjuster had
characterized that award as reasonable; and (5) engaging in misconduct at the mandatory settlement
conference.
¶32 Allstate insists either that it pursued each of those actions with justifiable litigation
goals or that we simply cannot consider them because they occurred during settlement proceedings
or negotiations, and “settlement conduct does not involve use of the judicial process.” We need
not decide whether each of the above processes as used here could be justified as reasonable actions
in the course of litigation because a jury could reasonably have found that Gaub’s conduct on
Allstate’s behalf during the mandatory settlement conference, standing alone, constituted an abuse
of a specific court process and that his behavior could not be justified as a reasonable litigation
strategy.
17
¶33 The Pinal County Superior Court ordered the parties to attend the “mandatory pre-
trial settlement conference,” as authorized by Rule 16, Ariz. R. Civ. P, 16 A.R.S., Pt. 1. Portions
of that rule, which authorizes courts to “expedite the disposition” of civil cases and conduct pretrial
settlement conferences, were specifically drafted “to reduce discovery abuse and to make the
judicial system in Arizona more efficient, expeditious, and accessible to the people.” Ariz. R. Civ.
P. 16(b), cmt. to 1991 amendment. Thus, the mandatory settlement conference the court ordered
arose from a procedural rule designed specifically to focus litigants on the legitimate public policy
goals of the civil justice system.
¶34 Allstate conducted itself at that settlement conference in a manner contrary to serving
the public policy purposes of the court procedure and did so to the detriment of Guenther and
Drannan. The court directed the parties to exchange memoranda on their respective settlement
positions. The court also ordered that those individuals with settlement authority attend the
conference along with the parties’ attorneys. Guenther and Drannan abided by the court’s order
by giving Allstate their settlement memorandum, by attending the conference, and by participating
in good faith—actions that correspondingly required Guenther and Drannan to seek further services
from their retained counsel.
¶35 In contrast, Gaub filed on Allstate’s behalf an incomplete memorandum entitled
“Confidential Position Statement” and failed to provide the memorandum to Guenther and
Drannan.6 Although Gaub attended the settlement conference, he did not bring the missing portions
of Allstate’s memorandum. In essence, he refused to participate in the court’s efforts to encourage
6
Although the memorandum discussed the reports of its expert witnesses and referred to
them as “attachments,” Allstate failed to attach any such reports to the memorandum.
18
a nontrial resolution by stating that Allstate had “decided to draw a line in the sand on all cases like
this” and by informing the court that no observation by the court could have any possible effect on
Allstate’s settlement position. As discussed in ¶ 28, supra, Gaub then misrepresented the
conclusions of Allstate’s expert on whether it had been reasonable for Drannan to seek medical
attention after the accident.
¶36 Gaub maintained at trial that his failure to abide by the procedural requirements of
the settlement conference and his misrepresentation regarding Dr. LaWall’s opinion were honest,
unintentional, oversights. He further testified that his remarks expressing a lack of willingness to
consider the trial court’s input had been taken out of context. But the jury was not required to
accept Gaub’s version of the events. It could also have reasonably concluded that the series of
“mistakes” and defiant remarks were part of a comprehensive effort to discourage current and
future claimants in conformity with Allstate’s MIST policy. And, whether Gaub’s pivotal
misrepresentation about Drannan’s core claim for damages reflected an intentional effort to mislead
the court or merely a lack of preparation for, and interest in, the settlement conference, the jury
could have concluded that it demonstrated Allstate’s overt defiance of the purposes of the
procedure.
¶37 Allstate observes, correctly, that a mere failure to settle or refusal to make a
settlement offer cannot constitute abuse of process and emphasizes its absolute right to refuse to
settle a claim. See Halaby, McCrea & Cross v. Hoffman, 831 P.2d 902, 908 (Colo. 1992)
(attendance at settlement conference with settlement authority capped at $300 not ground for
sanctions); Kamaunu v. Kaaea, 56 P.3d 734, 743-45 (Haw. Ct. App.), aff’d, 57 P.3d 428 (Haw.
2002) (mere refusal to settle during settlement conference not proper ground for court-imposed
19
sanctions). Allstate warns of the mischief to the orderly resolution of disputes that could occur if
settlement positions could be the basis for collateral litigation. But we do not suggest that Allstate
abused process by declining to settle on Guenther’s and Drannan’s terms during the mandatory
settlement conference. Rather, the jury could have found that Allstate had abused that process by
violating the court’s orders, by misrepresenting a fact, by failing to participate in good faith during
that procedure, and by doing so to the detriment of Guenther and Drannan, whom Allstate knew
were equally duty-bound to comply with the court’s instructions. The settlement judge emphasized
this very distinction when it sanctioned Allstate for that behavior:
The decision by [Allstate] to offer a sum to settle this case was not
a factor for the Court in making its decision to issue a sanction any
more than if [Allstate], in good faith, had decided not to make any
offer to settle the case. The issue for this Court is the decision by
[Allstate] not to participate to any extent in good faith negotiations.
¶38 Allstate also argues that “a court-ordered settlement conference” cannot give rise
to the tort of abuse of process when, as here, the defendant did not cause the settlement conference
to be held. But we have already rejected Allstate’s premise that the tort is limited to abuse of only
those court processes by which a litigant can compel opposing parties “to act or forbear to act” in
some way. Allstate cites Ruberton v. Gabage, 654 A.2d 1002, 1005 (N.J. Super. Ct. App. Div.
1995), for the proposition that misbehavior at a mandatory settlement conference can never provide
the basis for an abuse-of-process claim. But, there, a New Jersey court rejected the plaintiff’s
claim specifically because New Jersey law, unlike Arizona legal precedent, authorizes the tort only
when a defendant has abused a process “used by a court to ‘acquire or exercise its jurisdiction over
a person or over specific property.’” Id., quoting Black’s Law Dictionary 1084 (5th ed. 1979);
compare Ruberton with Nienstedt, 133 Ariz. at 353, 651 P.2d at 881 (explicitly rejecting limitation
20
of tort to circumstances involving “seizure of plaintiff’s person or property” and interpreting
process “as encompassing the entire range of court procedures”).
¶39 Generally, so long as the party challenging the reasonableness of an action raises a
question of fact, reasonableness remains a question for the trier of fact. See Siddons v. Bus. Prop.
Dev. Co., 191 Ariz. 158, ¶7, 953 P.2d 902, ¶7 (1998); Clearwater v. State Farm Mut. Auto. Ins.
Co., 164 Ariz. 256, 260, 792 P.2d 719, 723 (1990); Trustmark Ins. Co. v. Bank One, Ariz., NA,
202 Ariz. 535, ¶25, 48 P.3d 485, ¶25 (App. 2002). The trial court properly denied Allstate’s
motion for JMOL on this issue because Guenther and Drannan raised a question of fact whether
Allstate had abused a specific court process in a fashion not consistent with reasonably justifiable
litigation goals.
III. Other abuse-of-process issues
¶40 Allstate further contends Guenther and Drannan failed to show they had actually
been injured as a result of Allstate’s abuse of process in their personal injury action.7 Allstate
specifically argues that Guenther and Drannan suffered no monetary damage from its behavior at
the settlement conference because the costs of preparing for that conference, and the inconvenience
of attending that conference, arose from the court order setting the conference and would therefore
have been incurred by Guenther and Drannan “even if Gaub had fulfilled his obligations
flawlessly.” Allstate is correct that Guenther and Drannan must demonstrate that they suffered
7
Guenther and Drannan originally maintained that Allstate had waived this argument by not
raising it below. But Allstate specifically argued in its motion for JMOL that Guenther and
Drannan had suffered no actual injury arising from its behavior at the settlement conference.
21
harm arising from Allstate’s abuse of the process to establish a claim, Nienstedt, 133 Ariz. at 353,
651 P.2d at 881, but they are incorrect that Guenther and Drannan made no such showing here.
¶41 First, the jury could infer that Guenther and Drannan rejected offers by Allstate to
cancel the settlement conference because Guenther and Drannan placed some value in that process.8
In deciding to incur the costs and inconvenience of the settlement conference, Guenther and
Drannan were entitled to assume that Allstate would participate in that process in good faith. See
Ariz. R. Civ. P. 16(f) and 16.1, 16 A.R.S., Pt. 1 (failure to participate in good faith at pretrial
settlement conference renders party or attorney subject to sanctions). Thus, the jury could conclude
that Allstate harmed Guenther and Drannan by depriving them of the benefit to be derived from the
cost and inconvenience of preparing for and attending the conference: Allstate’s good faith
participation in a process wherein both parties would receive and consider judicial input on the
wisdom of their settlement positions.9
¶42 Moreover, the trial court instructed the jury that it could assess damages to Guenther
and Drannan based on “[e]motional distress, humiliation, inconvenience or anxiety” caused by
Allstate’s abuse of process. Drannan testified that she felt “very frustrat[ed]” after the events of
the settlement conference. Guenther testified that she felt upset at the settlement conference when
Gaub made the statement “that he draws a line in the sand on cases like this.” Shortly after the
settlement conference, Guenther and Drannan eventually agreed to waive the fees that the trial
8
Allstate elicited testimony that the parties could enter a stipulation to request that the trial
court vacate the settlement conference.
9
The trial court implicitly acknowledged that Allstate’s actions had harmed Guenther and
Drannan when its sanctions of Allstate included an order that Allstate pay Guenther’s and
Drannan’s attorney fees “incurred in presenting and appearing at the settlement conference.”
22
judge had ordered as a sanction for Allstate’s conduct because “they were worn out” and simply
wanted to “get the case over” by means of a settlement. From this, the jury could have concluded
that Guenther and Drannan eventually settled the case for less than it was worth in part because
Allstate’s conduct at the settlement conference had so demoralized them. The jury could also have
concluded that the settlement conference behavior harmed Guenther and Drannan to the extent it
caused them inconvenience and frustration. Because we must view the direct and circumstantial
evidence in the light most favorable to Guenther and Drannan, see Saucedo, we cannot say the trial
court erred when it implicitly rejected Allstate’s claim that Guenther and Drannan had presented
insufficient evidence on the damage element of the tort.
¶43 In a related argument, Allstate asserts Guenther and Drannan were required to
present expert testimony on the reasonableness of Allstate’s actions. Although Guenther and
Drannan assert that Allstate also waived this argument, Allstate clearly raised it in its motion for
JMOL, and we therefore address it.
¶44 Allstate acknowledges that Arizona does not require expert testimony in abuse-of-
process claims, but, citing cases such as Yater v. Coy, 681 N.E.2d 232 (Ind. Ct. App. 1997), urges
us to adopt such a requirement on the ground that “the reasonableness of litigation practices . . .
[is] beyond the common knowledge of most people.” Because abuse-of-process claims involve no
standard-of-care requirement, because expert witnesses are expensive for plaintiffs to secure, and
because a jury is capable of deciding whether a legal process has been primarily used to pursue an
improper purpose, we decline Allstate’s invitation to require expert testimony to support an abuse-
of-process claim. Moreover, we have already concluded that Guenther and Drannan raised a
23
genuine issue of fact on Allstate’s reasonableness in defending the underlying litigation. Based on
that, we cannot say the trial court erred in denying Allstate’s motion for JMOL.
IV. Exoneration of Gaub
¶45 Finally, Allstate argues the jury’s verdict in favor of Gaub required the court to enter
a JMOL in its favor. It suggests that Guenther’s and Drannan’s claims against it were based solely
on Gaub’s conduct as an agent of Allstate and that, because the jury did not hold the agent liable,
it could not hold Allstate liable as the principal. See Ford v. Revlon, Inc., 153 Ariz. 38, 42, 734
P.2d 580, 584 (1987) (“[W]hen the master’s liability is based solely on the negligence of his
servant, a judgment in favor of the servant is a judgment in favor of the master.”). The verdict,
however, does no more than indicate the jury believed that Gaub had acted solely on Allstate’s
direction and that he had not acted with an improper purpose. Allstate attempts to characterize its
independent conduct as minimal and asserts that Guenther and Drannan presented no evidence of
its independent conduct. But the verdict could have been based on no more than the jury’s finding
that only Allstate had acted with an ulterior purpose by adopting the MIST policy and by allowing
that policy to direct Kopin’s and Gaub’s actions throughout the litigation. We therefore cannot say
the trial court erred in denying Allstate’s motion for JMOL on this ground. See id. (“‘We
recognize that where there is independent negligence on the part of the master, the master may be
liable, apart from his derivative liability for his servant’s wrongful acts.’”), quoting Torres v.
Kennecott Copper Corp., 15 Ariz. App. 272, 274, 488 P.2d 477, 479 (1971).
24
Appeal
I. Preclusion of “other act” evidence
¶46 Guenther and Drannan contend the trial court abused its discretion in excluding other
acts evidence they had offered to show that Allstate’s actions had been guided by an ulterior
purpose. Relevant other act evidence is generally admissible to show a party’s “motive,
opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.”
Ariz. R. Evid. 404(b), 17A A.R.S.
¶47 Prior to trial, Guenther and Drannan identified 25 witnesses and 204 exhibits they
intended to introduce on Allstate’s handling of other claims. After Allstate moved to exclude this
evidence, Guenther and Drannan apparently “streamlined the witnesses and exhibits” they intended
to use during trial. Those witnesses would have testified about other cases Allstate had handled
in a fashion that, in Guenther and Drannan’s view, displayed Allstate’s use of its MIST policies to
chill or discourage valid claims. Most of the evidence they proffered related to other MIST cases
Allstate had handled in Arizona; one case involved Gaub’s behavior in another MIST case. Judge
Quigley nonetheless excluded the evidence.
¶48 In arguing that Judge Quigley erred in doing so, Guenther and Drannan place great
weight on Arizona case law that confirms the relevancy and potential admissibility of the other acts
evidence they proffered here. See Lee v. Hodge, 180 Ariz. 97, 882 P.2d 408 (1994); Hawkins v.
Allstate Ins. Co., 152 Ariz. 490, 733 P.2d 1073 (1987). Although we agree that the proffered
evidence was both relevant and probative of various issues litigated at trial, the judge did not
preclude that evidence on relevancy grounds. Instead, he precluded the evidence on the ground that
its probative value was outweighed by its potential for prejudice. See Ariz. R. Evid. 403 (court
25
may exclude relevant evidence if evidence’s “probative value is substantially outweighed by the
danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of
undue delay, waste of time, or needless presentation of cumulative evidence”).
¶49 In support of the ruling, Allstate argues that the other acts evidence had the potential
to mislead and confuse the jury and would have required the court to “conduct a series of mini-
trials” on the details of the other cases. Allstate contends these minitrials could have distracted the
jury from appropriately focusing on the underlying case and would have resulted in an
unnecessarily lengthy trial. Allstate also asserts that one of the other acts by Allstate involved a
case in which a woman had lost an unborn child in an accident, evidence which, in its view, could
have inflamed the passions of the jury.
¶50 Allstate maintains that the risks of unfair prejudice, delay, and jury confusion
outweighed the probative value of the evidence in question, and asserts the evidence merely proved
a point about which there was no meaningful dispute. Allstate did not dispute that it had litigated
the underlying case against Guenther and Drannan in an aggressive manner pursuant to its MIST
policy. Nor did it dispute that it continued to apply its MIST policy in other cases.
¶51 Guenther and Drannan counter that the probative value of the evidence was
substantial and its prejudicial impact minimal. They argue that the evidence would have established
that Allstate had an institution-wide, improper motive in litigating MIST cases; demonstrated that
Gaub’s behavior in their underlying case was not an isolated mistake; demonstrated a pattern of
conduct by Allstate relevant to their request for punitive damages, see Hawkins, 152 Ariz. at 497,
733 P.2d at 1080; and rebutted Allstate’s own “other case” evidence, which Allstate had presented
to show that its MIST program was designed to pursue the legitimate purpose of settling claims in
26
conformity with their actual fair value. As a whole, Guenther and Drannan maintain that Judge
Quigley’s ruling prevented them from proving essential elements of their case.
¶52 Guenther and Drannan also assert that Allstate’s claimed fear about the necessity of
minitrials is exaggerated. They note that they had intended to present most of the “other case”
evidence through the testimony of one witness, an attorney who had litigated a large number of
Allstate MIST claims through arbitration and trial. They argue that Allstate could have
appropriately rebutted their evidence by having its defending attorney explain its actions in the
other cases.
¶53 The balancing of factors under Rule 403 “is peculiarly a function of trial courts, not
appellate courts.” Yauch v. S. Pac. Transp. Co., 198 Ariz. 394, ¶26, 10 P.3d 1181, ¶26 (App.
2000); see also Readenour v. Marion Power Shovel, 149 Ariz. 442, 449-50, 719 P.2d 1058, 1065-
66 (1986). We thus evaluate Judge Quigley’s decision to preclude the evidence for an abuse of
discretion. See Readenour, 149 Ariz. at 450, 719 P.2d at 1066. Although the judge did not
elaborate on his reasoning process in precluding the evidence, he specifically found that it had
limited probative value that was “far outweighed” by its unfair prejudicial effect. While reasonable
minds might disagree with Judge Quigley’s assessment that the probative weight of the precluded
evidence was limited, we cannot conclude that he abused his discretion in precluding the evidence,
given the arguments presented on both sides of the question.
¶54 Guenther and Drannan also contend Judge Veliz, who was next assigned the case,
erroneously considered Judge Quigley’s ruling as the law of the case. Judge Veliz did exhibit some
reluctance to reverse Judge Quigley’s order on the ground it was “the law of the case.” But he also
showed a willingness to analyze the evidentiary arguments independently. Notably, Judge Veliz
27
admitted additional portions of Judge O’Neil’s order, thus modifying Judge Quigley’s prior ruling.
Overall, we conclude that Judge Veliz struck an appropriate balance of trial flexibility and respect
for the rulings of the prior judge in the case. Compare Hibbs v. Calcot, 166 Ariz. 210, 214, 801
P.2d 445, 449 (App. 1990) (“[O]ne trial judge should not reconsider the decision of another in the
absence of new circumstances.”), with United States v. Bensimon, 172 F.3d 1121, 1127 (9th Cir.
1999) (trial judge may change ruling on motions in limine at trial because testimony may bring facts
to judge’s attention not anticipated at time of original ruling).
II. Motion to produce
¶55 Allstate presented the testimony of economist Price Fishback to rebut Guenther and
Drannan’s allegations that, in handling MIST claims, Allstate had made “low-ball offers” and taken
unjustified appeals from arbitration awards. Fishback testified that he had designed a statistical
study of the relationship between Allstate’s offers in MIST cases arising in Southern Arizona and
the ultimate jury awards in those cases. In doing so, Fishback relied on figures in the Trial
Reporter Compendium, a publication listing completed jury trial information that includes the
amounts of jury awards, arbitration awards, plaintiffs’ demands, and defendants’ offers. To help
convey his results to the jury, Fishback used a series of charts. Guenther and Drannan argue that,
pursuant to Rule 1006, Ariz. R. Evid., the trial court erred in denying their motion to produce the
Allstate claims files that formed the basis of the Trial Reporter’s information. They essentially
argue that Rule 1006 required Allstate to produce entire claims files because information from them
had been used to generate the Trial Reporter listings. We review de novo the meaning and effect
of a court rule. Perguson v. Tamis, 188 Ariz. 425, 427, 937 P.2d 347, 349 (App. 1996).
28
¶56 Rule 1006 provides:
The contents of voluminous writings, recordings, or
photographs which cannot conveniently be examined in court may be
presented in the form of a chart, summary, or calculation. The
originals, or duplicates, shall be made available for examination or
copying, or both, by other parties at a reasonable time and place.
The court may order that they be produced in court.
In other words,
[a] witness may summarize the information contained in voluminous
reports or records as long as the information contained in the
documents would be admissible and the documents are made
available to the opposing party for their inspection. Rule 1006 . . .
authorizes the use of summaries when the contents of “voluminous
writings” cannot be conveniently examined in court.
Rayner v. Stauffer Chem. Co., 120 Ariz. 328, 333-34, 585 P.2d 1240, 1245-46 (App. 1978)
(citations omitted). The parties agree that the purpose of Rule 1006 is to give parties an
opportunity to detect and prepare for inaccurate summaries. See Paddack v. Dave Christensen,
Inc., 745 F.2d 1254, 1259 (9th Cir. 1983).
¶57 But the record reflects that Allstate produced all the information on which Fishback
relied, and Guenther and Drannan do not suggest otherwise. Fishback admitted he had asked
Allstate for its claim files to verify the information contained in the Trial Reporter. An Allstate
employee apparently generated the relevant excerpts from those claims files, and Allstate produced
those excerpts for Guenther’s and Drannan’s review. Allstate’s efforts fell within the express scope
of Rule 1006. Guenther and Drannan were consequently afforded the opportunity to challenge the
data contained in Fishback’s charts. The cases upon which they rely do not suggest otherwise and,
in fact, are limited to discussions about the information used to prepare summaries. See, e.g.,
United States v. Miller, 771 F.2d 1219, 1238 (9th Cir. 1985) (government’s failure to produce
29
records before offering summary into evidence rendered summary inadmissible); Hackett v.
Housing Auth., 750 F.2d 1308, 1312 (5th Cir. 1985) (summary inadmissible for failure to produce
underlying records when underlying records no longer existed); United States v. Seelig, 622 F.2d
207, 214-15 (6th Cir. 1980) (admission of charts erroneous because government failed to produce
underlying records).
¶58 Guenther and Drannan suggest we should read Rule 1006 as requiring Allstate to
produce collateral information with which they could have attacked Fishback’s opinions. But, our
review of the trial court’s ruling is limited to determining the scope of production required by
Rule 1006. Although Guenther and Drannan might have been entitled to additional production
under Rule 26(b)(1), Ariz. R. Civ. P., 16 A.R.S., Pt.1, they do not present that issue on appeal.
Their arguments rely exclusively on case law interpreting Rule 1006 and the contents of that rule.
Under this limited inquiry, we find no error.
III. Redaction of Judge O’Neil’s sanction order
¶59 Guenther and Drannan next challenge the trial court’s redaction of Judge O’Neil’s
sanction order. A trial court has broad discretion in the admission of evidence, and we will not
disturb its decision absent an abuse of that discretion and resulting prejudice. Gemstar Ltd. v.
Ernst & Young, 185 Ariz. 493, 506, 917 P.2d 222, 235 (1996). Following the mandatory
settlement conference in the underlying personal injury action, Judge O’Neil issued a minute entry
order sanctioning Allstate. That order included the following passage:
Initially the Court notes the order of January 14 ordered that “the
parties shall exchange the [pretrial conference] memorand[a] with
each other or with the consent of all parties, furnish the memoranda
sealed to the Court.” . . . It appears [defendant Allstate failed to send
its memorandum] to Plaintiff as required under the scheduling order.
30
Further, the Defendant’s statement states photos and IME reports and
a bio-mechanical report are attached. No such statements are
supplied to the Court and upon inquiry during the settlement
conference, Defendant did not have present with him such
attachments.
....
. . . The Court finds Defendants and counsel failed to
participate in good faith in settlement negotiations and the Court,
pursuant to Rule 16(f), [Ariz. R. Civ. P., 16 A.R.S., Pt. 1,] does
issue sanctions against Defendants as follows.
....
This Court is well aware that sanctions issued under Rule 16
are to be “appropriate” and “just.” . . . Several factors loom large
in this Court’s decision to issue the sanctions it has. First, in
discussing the potentiality of settlement, counsel stated, “the
insurance company has decided to draw a line in the sand on all cases
like this.” . . . [T]he Court then posed the question, “Am I to
understand that nothing I might say or point out to you would have
any impact on your decision to consider settlement or not?” The
answer to the Court’s question was “yes.” . . .
Counsel acknowledged during the joint settlement conference
that there is no allegation of [contributory] negligence by Plaintiff or
anyone else. Both were affirmatively alleged by Defendants in their
answer. Procedurally the outline of the case, as has been pointed out
in this minute entry, has appeared to be a war of attrition rather than
any reasonable attempt to discuss the merits of the case. . . .
[Furthermore, by trying to have Guenther and Drannan’s attorney
stipulate to cancel the settlement conference,] Defendants made clear
that it was their intent to derail the Court’s directive to appear and
participate in good faith negotiations and settlement nearly
immediately after the Judge’s order calling for such conference.
The other primary factor preceding the final “straw” is that
counsel’s and perhaps Defendants’ decision to not participate [to] a
meaningful extent was made clear that there was no discussion of any
kind between counsel, the insurance adjuster or the Defendant at the
conclusion of the Court’s remarks. Those remarks included an
inquiry as to whether the expert, Dr. LaWall, would in fact present
31
testimony “to attack the necessity of treatment . . . .” The response
was that the doctor would testify with specificity that [Drannan], who
the Defendants concede was six months pregnant at the time of the
accident, should never have sought a medical exam of any kind. It
was at this point the Court inquired why the pretrial settlement
memorandum did not contain the doctor’s report as was referred to
within their memorandum and a concession was made that the doctor
had not opined that no medical exam would be needed.
Judge Quigley excluded this portion of the order on Allstate’s motion, ruling it was inadmissible
hearsay and allowing Guenther and Drannan to introduce a redacted version showing that Judge
O’Neil had sanctioned Allstate.
¶60 Any out-of-court statement offered to prove the truth of the matter asserted is
hearsay. Ariz. R. Evid. 801(c). The excluded portions of the order that Guenther and Drannan
had hoped to introduce consist of Judge O’Neil’s observations about the settlement conference.
Guenther and Drannan contend the excluded portions were admissible because they were offered
to show the effect they had had on Allstate’s witnesses, to prove Judge O’Neil’s state of mind, and
to show Allstate’s knowledge of Gaub’s “improper conduct at the settlement conference” and its
subsequent refusal to either change the MIST policy or reprimand Gaub. Guenther and Drannan
also argue that Judge Veliz erred in denying their motion to admit the entire order, in which they
argued Allstate had opened the door to its admission by misrepresenting the reasons for Judge
O’Neil’s order.
¶61 Preliminarily, we agree that the contents of Judge O’Neil’s order should not have
been barred on the ground that the order is hearsay, given the nature of the issues litigated at trial.
The contents of that order were not offered for the truth of the matter asserted but, rather, for their
effect on Allstate and its employees in causing Allstate to settle Guenther’s and Drannan’s claims
32
and Allstate’s reaction to Gaub’s behavior in light of that order. See Pub. Serv. Co. of Okla. v.
Bleak, 134 Ariz. 311, 320, 656 P.2d 600, 609 (1982) (words offered for effect on listener “are not
within the proscription of Ariz. R. Evid. 802, since they are not offered for a hearsay purpose”).
¶62 We also agree that the effect of Judge O’Neil’s order on Allstate was relevant to the
issue of punitive damages. “Evidence is properly considered by the trier-of-fact in assessing
punitive damages if it bears on the purpose and function of punitive damages.” Hawkins, 152 Ariz.
at 497, 713 P.2d at 1080. Our supreme court has observed:
Another category of relevant evidence [as to punitive
damages] is the nature of the defendant’s conduct, including the
reprehensibility of the conduct and the severity of the harm likely to
result, as well as the harm that has occurred, from the defendant’s
conduct. . . . The duration of the misconduct [and] the degree of
defendant’s awareness of the harm or risk of harm . . . are elements
to consider in judging the reprehensibility of the defendant’s
conduct.
Id. (citations omitted; emphasis added). Thus, the details of Judge O’Neil’s order were relevant
to the issue of Allstate’s awareness of the risks of harm to claimants posed by its aggressive
litigation strategy in MIST cases.
¶63 Allstate counters that Judge Quigley addressed this ground of admissibility by
allowing Guenther and Drannan to introduce a redacted form of the order that showed the sanctions
imposed but not the basis for those sanctions. But the jury could not possibly evaluate how Allstate
should have reacted to the sanctions in the context of its MIST policy without knowing the details
of the judge’s complaints about Allstate’s conduct.
¶64 Indeed, the record suggests that Allstate did consider the details of that order in its
internal discussions about Guenther’s and Drannan’s claims. Allstate held a round-table discussion
33
on the order, and adjuster Kopin made an entry in her claim log that the order “has to be read to
be appreciated.” Notwithstanding the contents of Judge O’Neil’s order, Allstate continued to use
a modified version of the MIST policy, and Gaub never suggested he had changed his conduct as
a result of being sanctioned. To the contrary, Allstate rewarded Gaub for his trial work on its
behalf shortly after the sanction order was entered. In essence, Guenther and Drannan argue that
Allstate’s unwillingness to adjust its policy or to discipline Gaub in light of Judge O’Neil’s order
demonstrates Allstate’s overall willingness to use the judicial process as a weapon. In light of our
supreme court’s discussion of relevancy in the context of punitive damages, see Hawkins, we
conclude Guenther and Drannan were entitled to make this argument to the jury.
¶65 Although we conclude the contents of Judge O’Neil’s order should not have been
precluded as hearsay, this does not end our discussion. Judge Veliz independently and repeatedly
assessed the admissibility of that evidence during the ebb and flow of trial under Rule 403, Ariz.
R. Evid. We review for abuse of discretion his rulings refusing to admit an unredacted order. See
Yauch; Readenour.
¶66 The record shows that the trial court carefully considered the probative value and
prejudicial effect of the order in the context of the trial testimony presented and the issues litigated.
In so doing, the court was entitled to consider the unique prejudicial effect of admitting the
statements and findings of a trial judge that were directly critical of Allstate on the underlying facts
in dispute. See Nipper v. Snipes, 7 F.3d 415, 418 (4th Cir. 1993) (jury would likely give undue
weight to judicial findings because, “by virtue of having been made by a judge,” they would create
a “serious danger of unfair prejudice”). The court was also entitled to consider whether a curative
instruction (which would have told the jury not to consider Judge O’Neil’s order “for the truth of
34
the matter asserted”) would adequately protect Allstate. Further, the exclusion of the text of Judge
O’Neil’s order did not prevent Guenther and Drannan from eliciting testimony from Allstate’s
employees and its own witnesses about the actual behavior of Gaub and Allstate during the
settlement conference and thereafter. Indeed, Guenther and Drannan vigorously cross-examined
Gaub about his actions at the settlement conference and thereby referred to each of Judge O’Neil’s
specific complaints about Gaub’s behavior.
¶67 At the conclusion of nearly all the testimony, Judge Veliz admitted an additional
portion of Judge O’Neil’s order to permit Guenther and Drannan to rebut Allstate’s suggestion that
it had been sanctioned merely because it had asserted its right to refuse to settle the case. That
portion of the order clarified that the judge had sanctioned Allstate because of its failure to
participate in good faith in the settlement conference. However, Judge Veliz also continued to
preclude the details of Judge O’Neil’s order on the ground that its prejudicial effect outweighed its
probative value. In light of a trial court’s unique ability to conduct the Rule 403 weighing process
in the context of a trial, and given the arguments presented to Judge Veliz, we cannot say that he
abused his discretion in so ruling. See Gemstar, 185 Ariz. at 506, 917 P.2d at 235 (trial court
accorded substantial discretion in determining admissibility of evidence under Rule 403).
IV. Jury instructions
¶68 Guenther and Drannan next challenge two of the trial court’s jury instructions. “A
jury instruction need not be a model instruction, as long as it does not mislead the jury when the
instructions are read together and in light of each other.” Life Investors Ins. Co. of Am. v.
Horizon Res. Bethany, Ltd., 182 Ariz. 529, 532, 898 P.2d 478, 481 (App. 1995). We review
challenged jury instructions to determine whether the trial court gave the jury “the proper rules of
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law to apply in arriving at its decision.” Durnin v. Karber Air Conditioning Co., 161 Ariz. 416,
419, 778 P.2d 1312, 1315 (App. 1989). “Absent substantial doubt whether the jury was properly
guided in its deliberations, we will not overturn a jury verdict because of jury instructions.” Terry
v. Gaslight Square Assocs., 182 Ariz. 365, 368, 897 P.2d 667, 670 (App. 1994).
¶69 The trial court instructed the jury that “‘process,’ as used in the tort of ‘abuse of
process,’ encompasses the entire range of procedures authorized by the court which are incident
to the litigation process.” Guenther and Drannan contend that, by including the term “authorized
by the court,” the trial court “unduly restrict[ed]” the jury from considering all the evidence.
Although, “process” for purposes of an abuse-of-process claim is not confined to the strict legal
definition of the word, it is still “‘an act done under the authority of the court for the purpose of
perpetrating an injustice, i.e., a perversion of the judicial process to the accomplishment of an
improper purpose.’” Morn, 152 Ariz. at 167, 730 P.2d at 876, quoting Rondelli v. County of
Pima, 120 Ariz. 483, 489, 586 P.2d 1295, 1301 (App. 1978). The authority of the court must have
been invoked for a defendant to be liable for an abuse of process. Thus, we do not agree with
Guenther and Drannan that the trial court gave an erroneous instruction in defining “process.”
¶70 Over Guenther and Drannan’s objection, the trial court also instructed the jury that
“[f]acts occurring both prior to and after the filing of a formal action and the issuance of process
may serve as evidence of motive.” Guenther and Drannan had requested an instruction that would
have explicitly allowed the jury to consider Allstate’s prelitigation conduct in assessing its liability
as well as its motive. As we stated in Morn, “‘it is what is done in a course of negotiation, rather
than the issuance of any formal use of the process itself, which constitutes the tort.’” Id. at 168,
730 P.2d at 877, quoting Keeton, supra, § 121, at 898. But that statement was made in the context
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of the counterdefendants’ argument that the counterclaimants had presented no evidence of
improper purpose. Therefore, any implication about whether a party may be liable for abuse of
process based on acts occurring before the issuance of process is dictum. Moreover, Guenther and
Drannan’s assertion is undermined by our additional comment that “‘[t]he purpose for which the
process is used, once it is used, is the only thing of importance.’” Id. at 167, 730 P.2d at 876,
quoting Keeton, supra, § 121, at 897 (emphasis added). Because Morn is, at best, ambiguous on
the question of whether a defendant can be liable for prelitigation conduct in an abuse-of-process
claim, we cannot say the trial court erred by not amplifying its jury instructions to accommodate
Guenther and Drannan’s request. Finally, we note that the instruction given did not in any fashion
limit the jury from considering Allstate’s motives before litigation began, and the jury ultimately
found Allstate liable for abuse of process.
¶71 Affirmed.
__________________________________________
PETER J. ECKERSTROM, Judge
CONCURRING:
_______________________________________
PHILIP G. ESPINOSA, Chief Judge
_______________________________________
JOHN PELANDER, Presiding Judge
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