Finchem v. Fernandez ( 2023 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
MARK FINCHEM; ANTHONY KERN; and PAUL GOSAR (each in his
personal capacity), Plaintiffs/Appellants,
v.
CHARLENE FERNANDEZ (in her personal capacity), Defendant/Appellee.
No. 1 CA-CV 22-0647
FILED 8-10-2023
Appeal from the Superior Court in Yuma County
No. S1400CV202100146
The Honorable Levi Gunderson, Judge
AFFIRMED
COUNSEL
Broening Oberg Woods & Wilson PC, Phoenix
By Donald Wilson, Jr., Kelley M. Jancaitis
Co-counsel for Plaintiffs/Appellants
Blehm Law PLLC, Scottsdale
By Bryan James Blehm
Co-counsel for Plaintiffs/Appellants
Kolodin Law Group PLLC, Phoenix
By Christopher A. Vizkovic
Co-counsel for Plaintiffs/Appellants
Ballard Spahr LLP, Phoenix
By David Jeremy Bodney, Matthew E. Kelley, Kennison Lay
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Vice Chief Judge Randall M. Howe delivered the decision of the court, in
which Judge Jennifer M. Perkins and Judge Daniel J. Kiley joined.
H O W E, Judge:
¶1 Mark Finchem, Anthony Kern, and Paul Gosar (collectively
“Plaintiffs”) appeal the trial court’s order awarding Charlene Fernandez
her attorneys’ fees under A.R.S § 12–349, which mandates such an award as
a sanction against a party that brings or defends a claim without substantial
justification. They contend, among other arguments, that the trial court
erred in finding that they brought their defamation claims against
Fernandez without substantial justification because she co-signed and
published a letter to federal law enforcement requesting an investigation
about their involvement in the events on January 6, 2021, at the United
States Capitol.
¶2 The trial court did not err in awarding Fernandez attorneys’
fees. Substantial justification is lacking when a claim is groundless and not
made in good faith. A.R.S. § 13–349(F). The trial court correctly ruled that
Plaintiffs’ defamation claims were groundless because the statements they
contend were defamatory were absolutely privileged as communications to
law enforcement about potential criminal activity. The court also correctly
found that Plaintiffs did not bring their claims in good faith because their
complaint presented allegations relating to Fernandez’s political positions
that were irrelevant to the defamation claims.
FACTS AND PROCEDURAL HISTORY
¶3 The parties are current or former Arizona legislators and a
United States congressman representing Arizona. On or about January 12,
2021, all 42 Democratic members of the Arizona legislature, including
Fernandez, co-signed a letter to the Department of Justice (“DOJ”) and the
Federal Bureau of Investigations (“FBI”) asking them to “fully investigate
the extent” to which Finchem, Kern, Gosar, and Representative Andy Biggs
“incited, encouraged, or participated in the lawless behavior that took
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place” at the United States Capitol on January 6, 2021. Alleging that the
“social media posts” of Finchem and Kern “strongly suggest[ed]” that they
“were present at the riot” and “actively encouraged the mob,” the co-
signers of the January letter asserted that “[i]t is vital . . . that we learn what
these elected officials knew about this planned insurrection and when they
knew it.”
¶4 Finchem and Kern thereafter sued Fernandez for defamation.
They alleged that she “simultaneously published, conspired to publish, or
aided in publishing the Criminal Referral to the media.” They defended
themselves by alleging that they were not involved in the “attack on the
Capitol.” They alleged that on January 7, 2021, Kern published a tweet
condemning the violence. They also alleged that a few days after January 6,
Finchem published a press release “categorically denying the press
allegations, providing details regarding his movements and his reasons for
being present in Washington, D.C. on January 6.” They also alleged that the
allegations in the January letter were published with actual malice. They
alleged that Fernandez had “opposed and sought to defeat measures
supported by Plaintiff to enhance election integrity in our State.” They
added that Fernandez’s accusations were “motivated by animus and by a
desire to shut down debate regarding the controversy over election fraud
in the 2020 Presidential election.” They alleged that she had historically
disparaged Kern and accused him of being “vindictive for holding
Democratic bills as rules chairman” in the Arizona House of
Representatives. They alleged that she “call[ed] for his removal” as rules
chairman. They sought damages and an order requiring Fernandez to
retract her allegations.
¶5 In March, upon receiving the complaint, Fernandez wrote
Plaintiffs requesting they dismiss the lawsuit because the claims were
meritless under the First Amendment and the communications to law
enforcement were absolutely privileged. She also warned Plaintiffs that she
would seek attorneys’ fees under A.R.S. § 12–349 and Arizona Rule of Civil
Procedure (“Rule”) 11.
¶6 In May 2021, Plaintiffs filed a first amended complaint
(“FAC”) adding Gosar as a plaintiff, expanding on their defamation claim
to allege both defamation per se and defamation per quod—defamation that
“is not apparent but is proved by extrinsic evidence.” Black’s Law
Dictionary (11th ed. 2019). They also added claims of conspiracy to commit
defamation and aiding and abetting defamation. And they alleged that
“Plaintiffs have suffered past, present, and/or future pecuniary losses as a
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result” pointing, as an example, to Kern’s business, which allegedly lost
clientele.
¶7 Further, they included allegations in the FAC that were not
relevant to Fernandez’s purportedly defamatory statements, such as that
Fernandez “is essentially in favor of open borders” and allegations that
“social media companies” acted in a biased manner to prevent the
dissemination of certain “news stories that they deemed harmful” to one of
the candidates in the 2020 election. As an example, they alleged that certain
social media companies prevented circulation of stories about “highly
damaging contents of” the President’s son’s laptop.
¶8 In August 2021, Fernandez wrote Plaintiffs’ counsel again
requesting dismissal of Plaintiffs’ claims. Alleging that Plaintiffs’ lawsuit
was “aimed at gaining publicity,” she asserted that a courtroom was not the
“proper forum for such political activity.”
¶9 Plaintiffs did not dismiss their FAC, and so Fernandez moved
to dismiss the FAC for failure to state a claim. She argued that Plaintiffs
could not pursue their defamation claims because the letter was protected
as an absolutely privileged communication to law enforcement about
possible criminal activity. She added that even if it were not privileged,
Plaintiffs failed to sufficiently plead facts to establish that she had actual
malice or knew the “statements were false or consciously disregarded
subjective doubts about their truth.”
¶10 Plaintiffs opposed Fernandez’s motion to dismiss, arguing
that she could not claim absolute privilege because she was not a witness
present on January 6. They also argued that even if sending the January
letter to the FBI were privileged, publishing it to the media was not
privileged. Plaintiffs also moved for leave to file a second amended
complaint (“SAC”). The SAC removed some allegations and reworded
others. Plaintiffs also added that a “left-leaning” online journal published
an article explaining that convicting the rioters for treason or insurrection
for the January 6 events would be “nearly impossible.” The SAC continued
to maintain allegations from the FAC about Fernandez’s support for open
borders, social media companies in the election, and the President’s son’s
laptop.
¶11 The court heard argument on the motions and granted
Plaintiffs’ motion to file the SAC at the end of the hearing. The court took
Fernandez’s motion to dismiss under advisement and later granted it. The
court found that the January letter asked federal officials to investigate
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Plaintiffs’ involvement in the events of January 6, which went “to the heart
of free speech and the right to petition the government in connection with
matters of great public concern. [Fernandez] had the right to express her
concerns, both as an individual and as a state legislator.”
¶12 Fernandez then asked for her attorneys’ fees under A.R.S.
§ 12–349, which mandates such an award as a sanction against a party that
brings or defends a claim without substantial justification or primarily for
delay or harassment. She also asked for fees under Rule 11(c), which
authorizes sanctions against a party who brings a case for an improper
purpose.
¶13 The court granted Fernandez’s application for attorneys’ fees
and entered a final judgment against Plaintiffs for $75,616.20, for which all
three Plaintiffs were jointly and severally liable, under A.R.S.
§ 12–349(A)(1)–(3) and Rule 11. The court found that the “Plaintiffs brought
their claim without substantial justification, meaning that it was groundless
and not made in good faith.” The court found that Fernandez “had the
right, together with 41 other Arizona lawmakers, to express her concerns to
federal law enforcement officials” to request they investigate the
involvement or participation of four named Arizona legislators in
connection with the “insurrection.” The court found that Fernandez’s
conduct “was clearly protected both by the right to free speech and the right
to petition the government, as guaranteed by the First Amendment to the
United States Constitution and by the corresponding provisions of
Arizona’s Constitution.”
¶14 The court also found that “a significant portion of the original
Complaint and the First Amended Complaint were written for an audience
other than the assigned trial court judge.” The court noted that the SAC
“removed and reworded a number of such section, but still included the
‘open borders’ allegations against [Fernandez] which were wholly irrelevant
to the instant proceedings.” The court also found that Plaintiffs expanded
the litigation in filing their FAC, adding a third plaintiff, and increasing the
number of counts alleged against Fernandez. The court noted that fees were
justified without regard to Rule 11. Plaintiffs timely appealed the award of
Fernandez’s attorneys’ fees.
DISCUSSION
¶15 Plaintiffs argue that the court erred in sanctioning them
because their SAC was not frivolous or brought without substantial
justification. We review the application of A.R.S. § 12–349 de novo. Solimeno
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v. Yonan, 224 Ariz. 74, 81 ¶ 30 (App. 2010). We view “the evidence in a
manner most favorable to sustaining the award and will affirm the trial
court’s findings unless clearly erroneous.” Takieh v. O’Meara, 252 Ariz. 51,
61–62 ¶ 39 (App. 2021) (internal quotation marks omitted). We affirm the
trial court’s ruling if “correct for any reason apparent in the record.” Forszt
v. Rodriguez, 212 Ariz. 263, 265 ¶ 9 (App. 2006).
¶16 The court did not err in entering sanctions. The court shall
order attorneys’ fees under A.R.S. § 12–349 against an attorney or party “if
the attorney or party does any of the following”: (1) “[b]rings or defends a
claim without substantial justification”; (2) “[b]rings or defends a claim
solely or primarily for delay or harassment”; (3) “[u]nreasonably expands
or delays the proceeding”; or (4) “[e]ngages in abuse of discovery.” A.R.S.
§ 12–349(A). A party brings a claim “without substantial justification” if the
claim “is groundless and is not made in good faith.” A.R.S. § 12–349(F); see
Rogone v. Correia, 236 Ariz. 43, 50 ¶ 22 (App. 2014) (using “not made in good
faith” interchangeably with “bad faith”). The court must provide specific
reasons for the award. A.R.S. § 12–350. “[T]he findings need only be specific
enough to allow an appellate court to test the validity of the judgment.”
Takieh, 252 Ariz. at 61 ¶ 38 (quoting Bennett v. Baxter Grp., Inc., 223 Ariz. 414,
421 ¶ 28 (App. 2010)).
I. Award of Attorneys’ Fees
A. Groundlessness
¶17 Plaintiffs’ defamation claims were groundless. A claim is
groundless “if the proponent can present no rational argument based on
the evidence of law in support of that claim.” Rogone, 236 Ariz. at 50 ¶ 22
(quoting Evergreen W., Inc. v. Boyd, 167 Ariz. 614, 621 (App. 1991)).
Groundlessness is an objective determination. Id.¶18 A defamation claim has merit when the plaintiff proves that
a defendant (1) published a false statement concerning the person, (2) knew
the statement was false and defamed the other, and (3) acted in reckless
disregard of these matters or negligently failed to ascertain them. Dube v.
Likins, 216 Ariz. 406, 417 ¶ 35 (App. 2007). But “[f]ormal or informal
complaints to a prosecuting attorney or other law enforcement officer
concerning violations of the criminal law are absolutely privileged.” Ledvina
v. Cerasani, 213 Ariz. 569, 573 ¶ 10 (App. 2006) (quoting Restatement
(Second) of Torts § 598 cmt. e) (finding reports to police are related to
judicial proceedings); see also Restatement (Second) of Torts § 587 (“A party
to a private litigation . . . is absolutely privileged to publish defamatory
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matter concerning another in communications preliminary to a proposed
judicial proceeding.”).
¶19 Here, the court found Plaintiffs’ claims groundless because
the January letter was a privileged communication to law enforcement
about potential criminal activity. The January letter was addressed to the
DOJ and FBI asking them to investigate Plaintiffs’ involvement in the
“attack on the Capitol.” Because this communication was absolutely
privileged based on evidence of law, Plaintiffs could present no rational
argument for bringing the defamation claims against Fernandez. Their
defamation claims were therefore groundless.
¶20 Plaintiffs argue, however, that Ledvina’s holding that
complaints to law enforcement are privileged does not apply because
Fernandez was not a crime victim or witness to the crime. Ledvina’s holding
is not so narrow, however. While the defendant in Ledvina was a crime
victim who made a report about the plaintiff to law enforcement, the court
did not limit the absolute privilege to crime victims and witnesses. See
Simonds v. Ariz. Aerospace Found., Inc., No. 2 CA-CV 2018–0007, 2018 WL
4055654, *1 ¶¶ 3–4, *3 ¶ 12 (unpublished) (holding that “the absolute
privilege applied to putative crime victims fully encompasses the HR
director’s police report regarding Simonds,” although the director was
neither the victim nor a witness to the statement). That is consistent with
the purpose of the privilege, which “assure[s] utmost freedom of
communication between citizens and public authorities whose
responsibility it is to investigate and remedy wrongdoing.” Ledvina, 213
Ariz. at 574 ¶ 12 (quoting Hagberg v. Calif. Fed. Bank, 81 P.3d 244, 251 (Calif.
2004)). “The mere possibility of retaliatory defamation claims would also
tend to discourage free and unfettered reporting to law enforcement
authorities to assist the detection and prosecution of criminal activity.” Id.at 573 ¶ 12.
¶21 Plaintiffs argue that exceptions to absolute privilege apply
because Fernandez acted in bad faith in making the statements in the
January letter, and the statements were “themselves criminal” because they
were false. However, “[w]hen statements are absolutely privileged, the
speaker is immune from civil liability and courts do not inquire into the
declarant’s motives or whether the statements were made in good faith.”
See id. at 571 ¶ 4. Even if the statements in the January letter were false,
“[t]he defense is absolute in that the speaker’s motive, purpose or
reasonableness in uttering a false statement do not affect the defense.” Green
Acres Trust v. London, 141 Ariz. 609, 613 (1984).
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¶22 Citing Mesnard v. Campagnolo, 251 Ariz. 244 (2021), Plaintiffs
argue that the privilege does not protect Fernandez’s publication of the
January letter to the media. In that case, the Arizona Supreme Court held
that a legislator who modified an investigative report about another
legislator before releasing it to House members and the public was
absolutely immune from defamation. Id. at 249 ¶ 17, 250 ¶ 22. The Court
ruled that the legislator was performing a legislative function regardless
whether he acted with ill motives or actually defamed the legislator. Id. 249–
250 ¶ 18. The Court also held, however, that the legislator was not
absolutely immune from liability for publishing a news release wherein he
communicated “only his personal views and plans rather than those of the
House.” Id. at 253 ¶ 33. Issuing the news release, the Court held, was a
political act, not a legislative function. Id. at 252 ¶ 28.
¶23 Here, in contrast, while Plaintiffs allege that Fernandez
personally published the January letter to the media, the January letter
remains a statement to law enforcement about potential violations of
criminal law that is absolutely privileged. See Ledvina, 213 Ariz. at 571 ¶ 4
(“[A]bsolute immunity immunizes absolutely . . . where the public interest
is so vital and apparent that it mandates complete freedom of expression
without inquiry into a defendant’s motives.”). Unlike the legislator in
Mesnard, Plaintiffs here do not allege that Fernandez issued a news release
that communicated her personal views or additional information beyond
that in the January letter. Mesnard is thus distinguishable.
B. Bad Faith
¶24 In addition to bringing groundless defamation claims,
Plaintiffs pursued their claims in bad faith. Whether a party acted in bad
faith is a subjective determination. Rogone, 236 Ariz. at 50 ¶ 22. Plaintiffs
were not shy in their pleadings to express their position on election
integrity, a subject matter irrelevant to their defamation claim. They alleged
that social media companies influenced the election. As an example, they
alleged that these companies prevented circulation of stories about the
President’s son’s laptop. They additionally alleged that Fernandez had
“opposed and sought to defeat” election integrity measures which Plaintiffs
supported. They even quoted a letter from a United States Senator—whom
they expressly note is a Democrat—addressing problems with the
electronic voting system. Plaintiffs also alleged that a “left-leaning” online
journal published an article explaining that convicting the rioters for
treason or insurrection for the January 6 events would be “nearly
impossible.” Allegations about such irrelevant and politically charged
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subject matters demonstrated that they pursued their defamation claims in
bad faith to advance a political agenda.
¶25 Plaintiffs also showed bad faith by highlighting the political
animus between the parties. They alleged that Fernandez had historically
disparaged Kern and accused him of being “vindictive for holding
Democratic bills as rules chairman” in the Arizona House of
Representatives. They alleged that she had wanted him removed as rules
chairman of the Legislature’s Rules Committee. They even alleged that
Fernandez supported open borders. These allegations have nothing to do
with Plaintiffs’ claims for defamation. “The court system exists to hear
legitimate legal disputes, not for airing political disputes or grievances.”
Ariz. Republican Party v. Richer, No. 1 CA-CV 21-0201, 2023 WL 4445282,
*12 ¶ 58 (Ariz. App. July 11, 2023).
¶26 Moreover, after Plaintiffs filed their complaint, Fernandez
warned them that the January letter was privileged. Plaintiffs then filed the
FAC, adding a third plaintiff and additional claims. Fernandez sent another
letter reiterating the warning. Yet Plaintiffs continued litigating. See Takieh,
252 Ariz. at 62 ¶ 40 (holding that plaintiff brought defamation action in bad
faith because trial court had ruled earlier in the litigation that
communications in peer-review process could not be used to prosecute
defamation claim, but plaintiff amended his complaint alleging defamation
based primarily on these communications). They did not make any effort
to determine the validity of their claim in filing their pleadings, even going
so far as to add more defamation claims in their amended pleadings.
Including allegations in their pleadings that had no possible relevance to
the defamation claim supports the trial judge’s determination that “a
significant portion” of Plaintiffs’ pleadings “were written for an audience
other than the assigned trial court judge.”
¶27 Plaintiffs argue that the trial court was inconsistent in
sanctioning them because it had praised the parties for their arguments
during the oral argument. At the conclusion of the hearing on the motion
to dismiss, the superior court judge thanked counsel “for their
presentations,” adding, “My compliments to the attorneys. The argument
and the written pleadings were all very well done.” Citing the judge’s
“praise of the parties’ preparedness, arguments, and briefing,” Plaintiffs
argue that the trial court’s subsequent imposition of sanctions is
“inexplicable.” The court’s complimentary words at the conclusion of the
hearing, they insist, “are further evidence of a lack of reasonable basis” for
the sanctions the court imposed.
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¶28 The superior court’s courteous words at the conclusion of the
hearing cannot reasonably be construed as a finding that the parties’
arguments were well-grounded in fact and law. On the contrary, by taking
the matter under advisement, the court made clear it was not yet prepared
to determine the merits of Fernandez’s motion to dismiss and request for
sanctions. After time for reflection and review of the relevant authorities,
the court concluded that sanctions were warranted. As Plaintiffs
themselves concede, a court can “change its mind—as it apparently did”
here.
¶29 Based on the evidence in the record, the trial judge did not
abuse its discretion in finding that Plaintiffs’ claims were groundless and
pursued in bad faith, warranting sanctions under A.R.S. § 12–349(A)(1).
Therefore, we need not reach Plaintiffs’ arguments that they did not have
to plead actual malice, or that if they did, they sufficiently pleaded it in the
SAC. We also need not consider whether sanctions were proper under the
other grounds of the statute or under Rule 11.
II. Attorneys’ Fees on Appeal
¶30 Fernandez requests her attorneys’ fees and costs on appeal
under A.R.S. § 12–349 because the appeal is on its face groundless and
pursued in bad faith. Fernandez argues that Plaintiffs made “multiple false
factual statements and dramatically mischaracterized settled law” in their
pleadings and opening brief. We grant Fernandez her attorneys’ fees and
costs on appeal because she showed by a preponderance of the evidence
that Plaintiffs brought their claims without substantial justification. A.R.S.
§ 12–349(A); see In re Estate of Stephenson, 217 Ariz. 284, 289 ¶ 28 (App. 2007).
Plaintiffs request their costs under A.R.S. §§ 12–341 and –342(A), which we
duly deny because they are not the prevailing party on appeal. A.R.S.
§ 12–341 (“The successful party to a civil action shall recover from his
adversary all costs expended or incurred therein unless otherwise provided
by law.”). They alleged claims on appeal that rendered their appeal
groundless and pursued their claims in bad faith. See A.R.S. § 12–349(F).
¶31 Plaintiffs could not bring a defamation claim against
Fernandez for the statements in the January letter because the statements
are absolutely privileged. See supra ¶¶ 18–20. Their pleadings were riddled
with irrelevant allegations, see supra ¶¶ 24–27, and they continued to make
irrelevant arguments on appeal, including arguing about what to call the
January 6 events and defending their “open borders” allegation. Further,
on appeal, they continue to focus on the parties’ political differences, rather
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than law and fact, to support their claims. Their appeal, therefore, is both
groundless and brought in bad faith.
CONCLUSION
¶32 For the foregoing reasons, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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