Stebbins v. Sullivan ( 2016 )


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  •                     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    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
    PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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
    JEFFREY STEBBINS, Plaintiff/Appellant,
    v.
    JOSEPH M. SULLIVAN, Defendant/Appellee.
    No. 1 CA-CV 14-0774
    FILED 2-9-2016
    Appeal from the Superior Court in Maricopa County
    Nos. CV2012-014152, CV2012-014153
    (Consolidated)
    The Honorable Lori Horn Bustamante, Judge
    The Honorable Colleen L. French, Judge Pro Tempore
    AFFIRMED
    COUNSEL
    Coppersmith Brockelman, PLC, Phoenix
    By L. Keith Beauchamp, Katherine DeStefano
    Counsel for Plaintiff/Appellant
    Law Office of Nathaniel P. Nickele, PLLC, Phoenix
    By Nathaniel P. Nickele
    Counsel for Defendant/Appellee
    STEBBINS v. SULLIVAN
    Decision of the Court
    MEMORANDUM DECISION
    Judge Margaret H. Downie delivered the decision of the Court, in which
    Presiding Judge Andrew W. Gould and Judge John C. Gemmill joined.
    D O W N I E, Judge:
    ¶1           Jeffrey Stebbins appeals from the entry of summary judgment
    in favor of Joseph Sullivan on statute of limitations grounds. For the
    following reasons, we affirm.
    FACTUAL AND PROCEDURAL BACKGROUND
    ¶2            Sullivan signed an employment agreement with Noble
    Systems Incorporated (“Noble Systems”) in 2006 when he became Director
    of Engineering. Under the terms of that agreement, Sullivan agreed to
    complete work on a tankless water heater. The employment agreement
    stated that “[a]ll information, ideas, concepts, improvements, discoveries
    and inventions” Sullivan developed during his employment were Noble
    Systems’ “exclusive property.” The agreement further provided:
    Employee assigns, transfers and conveys to the Company all
    of his worldwide rights, in and to all such information, ideas,
    concepts, projects, improvements, discoveries and inventions,
    and any United States or foreign patent applications
    applicable thereto, that relate to the business, products,
    projects, or services of the Company. Employee shall assist
    the Company and its nominee at all times and in all manners,
    during his employment and after it ends, in protecting the
    Company’s rights in such information, ideas, concepts,
    improvements, discoveries and/or inventions.
    ¶3            In early May 2008, counsel for Noble Systems submitted a
    patent application for a tankless water heater to the United States Patent
    and Trademark Office (“USPTO”). The application identified Sullivan as
    the inventor. On May 26, 2008, Noble Systems’ president asked Sullivan to
    sign a document assigning the patent rights to Noble Innovations
    Incorporated (“Noble Innovations”) — a related company. Sullivan
    refused because Noble Systems owed him money.
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    STEBBINS v. SULLIVAN
    Decision of the Court
    ¶4            In June 2008, Noble Systems reportedly merged into or was
    acquired by Noble Innovations. Sullivan continued to work with Noble
    Innovations but did not sign a new employment agreement. In 2009,
    Sullivan quit because he had not been paid for several months.
    ¶5            In 2011, Sullivan revoked the power of attorney previously
    given to Noble Systems’ counsel and began communicating directly with
    the USPTO regarding the patent application. In April 2012, the USPTO
    issued the patent in Sullivan’s name. Sullivan later tried unsuccessfully to
    sell the patent rights.
    ¶6            In September 2012, Stebbins sued Noble Innovations, its
    president, and other entities and individuals. In 2013, as part of the
    settlement of a separate lawsuit, Noble Innovations reportedly assigned to
    Stebbins “any and all rights it may have in patents.” Stebbins thereafter
    amended his complaint to add Sullivan as a defendant — asserting unjust
    enrichment, conversion, and declaratory relief claims against him.
    ¶7            Sullivan moved for summary judgment, arguing, inter alia,
    that Stebbins’ claims were time-barred. The court granted the motion,
    entered judgment in favor of Sullivan, and awarded him $70,000 in
    attorneys’ fees. Stebbins timely appealed. We have jurisdiction pursuant
    to Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).
    DISCUSSION
    ¶8            On appeal from summary judgment, we review de novo
    whether there are any genuine issues of material fact and whether the trial
    court properly applied the law. See Parkway Bank & Trust Co. v. Zivkovic,
    
    232 Ariz. 286
    , 289, ¶ 10 (App. 2013). We view the record “in the light most
    favorable to the party against whom summary judgment was entered.” 
    Id. I. Statute
    of Limitations
    ¶9           “As a matter of public policy, our legislature has determined
    that claims must be brought within an identifiable period of time, and
    claims brought thereafter are, absent certain circumstances, too stale to be
    enforceable.” Porter v. Spader, 
    225 Ariz. 424
    , 427, ¶ 7 (App. 2010). Courts
    examine four factors in determining whether a claim is time-barred: (1)
    when the cause of action accrued; (2) the applicable limitations period; (3)
    when the claim was filed; and (4) whether the limitations period was tolled
    or suspended. 
    Id. at ¶
    8. Only the first two factors are at issue in this appeal.
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    STEBBINS v. SULLIVAN
    Decision of the Court
    ¶10            “As a general matter, a cause of action accrues, and the
    statute of limitations commences, when one party is able to sue another.”
    Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 
    182 Ariz. 586
    , 588
    (1995). Under the traditional construction of that rule, the statute of
    limitations begins to run “when the act upon which legal action is based
    took place, even though the plaintiff may be unaware of the facts
    underlying his or her claim.” 
    Id. We review
    de novo the question of when
    a cause of action accrues if that determination rests on a question of law
    rather than disputed facts. Montano v. Browning, 
    202 Ariz. 544
    , 546, ¶ 4
    (App. 2002).
    A.     Unjust Enrichment
    ¶11          Stebbins does not challenge the superior court’s
    determination that a four-year statute of limitations applies to his unjust
    enrichment claim. See A.R.S. § 12-550. He argues instead that his claim did
    not accrue until the USPTO issued the patent. We conclude otherwise.
    ¶12             In his unjust enrichment count, Stebbins alleges “Sullivan’s
    work on the patent constitutes a ‘work for hire,’ and Sullivan has no legal
    claim on the patent.” Yet Sullivan clearly asserted a claim to the patent
    when he refused to assign the patent rights or assist Noble in protecting its
    rights in May 2008.1 As Stebbins’ opening brief notes, Noble’s president
    “expected Sullivan to convey his interest in the Patent to Noble after
    submission of the patent application.” (Emphasis added.) And both the factual
    record and legal principles support the superior court’s determination that
    by refusing to assign the patent in May 2008, “Sullivan was enriched by the
    salary, etc., that his employer had paid him to develop the patent, and the
    employer was impoverished by those amounts.”
    ¶13          Stebbins’ reliance on St. John’s University v. Bolton, 757 F.
    Supp. 2d 144 (E.D.N.Y. 2010), is unavailing. In Bolton, the employment
    agreement at issue “imposed a duty of future performance,” and the
    defendants/inventors were not required to assign their rights until “a
    reasonable time following the issuance” of the patents. See 
    id. at 163–65.
    ¶14          The superior court correctly ruled that Stebbins’ claim for
    unjust enrichment is time-barred.
    1     Stebbins himself asserted in the superior court that Sullivan held
    “the patent hostage based on his claim that he is owed some unpaid
    compensation from Noble.”
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    STEBBINS v. SULLIVAN
    Decision of the Court
    B.     Conversion
    ¶15            Stebbins acknowledges that an action for conversion must be
    filed within two years of its accrual. See A.R.S. § 12-542(5). Conversion is
    defined as “any act of dominion wrongfully exerted over another’s personal
    property in denial of or inconsistent with his rights therein.” Shartzer v.
    Ulmer, 
    85 Ariz. 179
    , 184 (1959); see also Case Corp. v. Gehrke, 
    208 Ariz. 140
    ,
    143, ¶ 11 (App. 2004) (“Conversion is defined as an act of wrongful
    dominion or control over personal property in denial of or inconsistent with
    the rights of another.”).
    ¶16            The conversion count of the second amended complaint
    alleges that “Sullivan has exercised dominion and control over the patent
    by claiming the patent as compensation, refusing to convey the patent, and
    attempting to sell the patent for profit.” On appeal, Stebbins attempts to
    recast this count as one based solely on Sullivan’s attempt to sell the patent
    rights in 2012. Stebbins, however, is bound by the allegations of his
    complaint, which clearly allege acts occurring in 2008.
    ¶17            The record supports the superior court’s determination that
    Sullivan’s 2008 refusal to assign the patent “was an intentional exercise of
    control over the patent to the detriment of his employer, and demonstrated
    his unwillingness to comply with the provisions of the Employment
    Agreement.” Cf. Ariz. Real Estate Dep’t v. Ariz. Land Title & Trust Co., 9 Ariz.
    App. 54, 61 (1968) (for limitations purposes, date of “demand and refusal
    may be treated as the date of conversion where demand and refusal are
    relied on to show a conversion”) superseded on other grounds by statute, A.R.S.
    § 32-2188(E), as stated in Chaffin v. Comm’r of Ariz. Dep’t of Real Estate, 
    164 Ariz. 474
    , 478 (App. 1990).
    ¶18           Stebbins’ conversion claim accrued in May 2008 when
    Sullivan asserted rights to the patent by claiming it as compensation for
    unpaid wages and reimbursements and by refusing to sign the proffered
    assignment. The limitations period expired two years later — well before
    Stebbins filed his complaint.
    C.     Declaratory Judgment
    ¶19           The declaratory relief count sought “a declaration stating that
    Sullivan’s rights to the patent have been assigned to Plaintiff by the
    employment agreement between Sullivan and Noble and the patent
    assignment from Noble to Plaintiff.” Because Arizona lacks a statute of
    limitations expressly applicable to declaratory relief actions, we determine
    the appropriate limitations period by “examining the substance of that
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    STEBBINS v. SULLIVAN
    Decision of the Court
    action to identify the relationship out of which the claim arises and the relief
    sought.” Canyon del Rio Inv’rs v. City of Flagstaff, 
    227 Ariz. 336
    , 341, ¶ 21
    (App. 2011).
    ¶20           Stebbins urges application of the six-year statute of
    limitations applicable to patent infringement. See 35 U.S.C. § 286. Stebbins
    concedes he is not suing for patent infringement, but argues “the substance
    of his claim is more analogous to patent infringement than breach of an
    employment contract.” Sullivan, on the other hand, contends the one-year
    statute of limitations applicable to breaches of employment contracts
    applies, see A.R.S. § 12-541(3), because the declaratory relief claim
    “ultimately rests on the theory that Sullivan breached the Agreement by
    refusing to convey the Invention/Patent to Noble Innovations.”
    ¶21           We agree with Sullivan. The declaratory relief claim that was
    pled arises from Sullivan’s alleged failure to comply with the employment
    agreement. The complaint seeks a declaration that “Sullivan’s rights to the
    patent have been assigned to [Stebbins] by the employment agreement
    between Sullivan and Noble.” Accordingly, the one-year statute of
    limitations for breach of an employment contract applies.
    ¶22            In determining when a claim for declaratory relief arises, we
    look for “affirmative conduct by a party that removes the claim from the
    realm of mere possibility and creates an actual controversy.” Rogers v. Bd.
    of Regents of Univ. of Ariz., 
    233 Ariz. 262
    , 268, ¶ 17 (App. 2013). Sullivan’s
    refusal to assign the patent rights in May 2008 or to assist Noble Systems in
    protecting its rights constituted such “affirmative conduct.” Accordingly,
    the one-year statute of limitations on this claim expired in 2009.
    II.    Attorneys’ Fees
    ¶23           Finally, Stebbins contends the superior court abused its
    discretion by awarding Sullivan $70,000 in attorneys’ fees pursuant to
    A.R.S. § 12-341.01 and asserts the court failed to “articulate any rationale”
    for the $70,000 figure.
    ¶24            Trial courts have broad discretion in determining the amount
    of a fee award under § 12-341.01(A). See Associated Indem. Corp. v. Warner,
    
    143 Ariz. 567
    , 570 (1985). In Warner, the court identified factors that are
    “useful to assist the trial judge in determining whether attorney’s fees
    should be granted.” 
    Id. There is,
    however, no requirement that a court
    make findings regarding these factors on the record. Hawk v. PC Village
    Ass’n, Inc., 
    233 Ariz. 94
    , 100, ¶ 21 (App. 2013). “We will affirm an award
    with a reasonable basis even if the trial court gives no reasons for its
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    STEBBINS v. SULLIVAN
    Decision of the Court
    decision regarding whether to award fees.” Fulton Homes Corp. v. BBP
    Concrete, 
    214 Ariz. 566
    , 569, ¶ 9 (App. 2007). In reviewing a fee award, we
    view the record in the light most favorable to sustaining the trial court’s
    decision. Rowland v. Great States Ins. Co., 
    199 Ariz. 577
    , 587, ¶ 31 (App. 2001).
    ¶25            Stebbins filed suit well after expiration of the limitations
    periods, and Sullivan prevailed on all claims. Sullivan requested
    $117,737.50 in fees, but was awarded only $70,000. On appeal, Stebbins
    asserts that “[e]ven the reduced attorney’s fee award of $70,000 is an abuse
    of discretion given the inadequate description of time entries supplied by
    counsel.” We disagree. Sullivan’s counsel submitted an affidavit and
    detailed time records enumerating the legal services performed, as well as
    relatively modest hourly billing rates for counsel and a paralegal ($250 and
    $125 respectively). Under these circumstances, we find no abuse of
    discretion.
    ¶26           Sullivan requests an award of attorneys’ fees on appeal
    pursuant to A.R.S. § 12-341.01(A). In the exercise of our discretion, we grant
    his request and will award a reasonable sum of fees, as well as taxable costs,
    upon Sullivan’s compliance with Arizona Rule of Civil Appellate
    Procedure 21.
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    STEBBINS v. SULLIVAN
    Decision of the Court
    CONCLUSION2
    ¶27          For the foregoing reasons, we affirm the judgment of the
    superior court.
    :ama
    2      Because we affirm dismissal of the complaint on statute of
    limitations grounds, we need not decide whether the superior court’s
    alternative basis for dismissal — that the claims lacked substantive merit —
    was correct.
    8