D'Amico v. Structural I

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IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE IRENE E. D AMICO, Plaintiff/Counterdefendant/ Appellee/Cross-Appellant, v. STRUCTURAL I COMPANY, Defendant/Counterclaimant/ Appellant/Cross-Appellee. _________________________________ IRENE E. D AMICO, Plaintiff/Appellant, v. STRUCTURAL I COMPANY, Defendant/Appellee. _________________________________ IRENE E. D AMICO, Plaintiff/Counterdefendant/ Appellee, v. STRUCTURAL I COMPANY, Defendant/Counterclaimant/ Appellant. DIVISION ONE FILED: 04/03/2012 RUTH A. WILLINGHAM, CLERK BY: sls ) No. 1 CA-CV 09-0493 ) 1 CA-CV 10-0569 1 CA-CV 10-0762 ) ) (Consolidated) ) ) ) ) ) DEPARTMENT B ) ) ) ) )O P I N I O N ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Superior Court in Maricopa County Cause No. CV2006-009862 The Honorable Jeanne M. Garcia, Judge AFFIRMED IN PART, REVERSED IN PART, REMANDED Cavanagh Law Firm By David A. Selden Julie A. Pace Jodi R. Bohr Attorneys for Structural I Phoenix Cohen Law Firm By Larry J. Cohen Attorneys for Irene D Amico Phoenix J O H N S E N, Judge ¶1 A framing company fired its chief executive officer, who then sued the company for breach of contract. We address two issues raised by the resulting jury verdicts and judgments in favor of the former officer. For the reasons set forth below, we hold that on appeal, a litigant may not contest a decision by the superior court to admit arguably privileged testimony when the litigant does not hold the privilege that protects the testimony. We also hold the superior court has discretion to decline to award treble damages in a wage claim even when the employer did not withhold the wages in good faith. 2 FACTS AND PROCEDURAL HISTORY ¶2 Structural I Company was a family-owned framing company founded and operated by Mary Jo and Doug McLeod. 1 their retirement approached, the McLeods were As seeing a counselor, Sharon Cottor, about personal and business matters. When the McLeods told Cottor they wanted to transition out of day-to-day involvement in Structural I, she suggested they hire a bridge CEO developed their Structural I to run the management hired company while skills. Irene D Amico younger At Cottor s as a insiders suggestion, consultant, negotiated an agreement to bring her on as CEO. then Under the agreement, Structural I would pay D Amico $200,000 a year in salary, plus a bonus based on the company s net income. The agreement, dated July 2003, was for a term of five years and provided that D Amico could be Things did not go well, however. calculation of disagreements her also bonuses arose. in terminated only for cause. The McLeods disputed D Amico s 2004 Structural and 2005, I finally and other discharged D Amico in April 2006. ¶3 D Amico sued Structural I, alleging it breached the agreement by terminating her without cause and withholding wages in bad faith. Structural I counterclaimed, alleging breach of 1 We view the evidence in the light most favorable to sustaining the jury s verdicts. See S Dev. Co. v. Pima Capital Mgmt. Co., 201 Ariz. 10, 18, ¶ 16, 31 P.3d 123, 131 (App. 2001). 3 fiduciary duty, fraud, unjust enrichment, fraudulent concealment and replevin. ¶4 After a 13-day trial, the jury returned six special verdicts. It found Structural I breached by terminating D Amico without cause and by shorting her a total of $29,792 in bonuses for 2004 and 2005. for the duration It awarded D Amico $547,000 in unpaid salary of the agreement, plus $177,054, which parties stipulated would have been D Amico s 2006 bonus. the Of the total wages assessed of $753,846, the jury found there was a good-faith dispute over just $229,792. D Amico fraud on and Structural unjust I s claims enrichment. The jury also found for for It fraudulent concluded, inducement, however, that D Amico breached her fiduciary duty to Structural I and awarded Structural I $150,000 in damages. interest, entering awards of After calculating prejudgment attorney s fees and costs and setting off the verdicts against each other, the court entered judgment in favor of D Amico for $910,616. ¶5 Both parties appealed. In this opinion, we address two issues raised by D Amico s claim for breach of contract. Pursuant to Arizona Rule of Civil Appellate Procedure 28(g), we resolve the other issues raised by the appeals in a separate memorandum decision. 4 DISCUSSION I. ¶6 Psychologist-Patient Privilege. Structural I argues the superior court erred by denying its Motion for Judgment as a Matter of Law and Motion for a New Trial pursuant to Arizona Rules of Civil Procedure 50(b) and 59(a). superior Cottor court Among other things, Structural I argues the should concerning her have excluded personal privileged counseling testimony sessions with by the McLeods. 2 ¶7 Although Cottor is a clinical social worker and not a psychologist, D Amico does not dispute that a privilege may protect Cottor s confidential communications with her clients in counseling sessions about personal matters. A psychologist s confidential communications with her patient are privileged and are placed on the same basis as [those] provided by law between attorney and client. Bain v. Superior Court, 148 Ariz. 331, 333, 714 P.2d 824, 826 (1986) (citing Arizona Revised Statutes ( A.R.S. ) section 32-2085). prohibits pretrial discovery Once it attaches, this privilege of privileged information and testimony about information within the scope of the privilege. Id. We review de novo whether a privilege exists. State v. Miles, 211 Ariz. 475, 477, ¶ 7, 123 P.3d 669, 671 (App. 2005). 2 We understand the testimony at issue concerned emotional issues involving a McLeod family member, whom D Amico argued was to blame for some of Structural I s poor financial performance. 5 We also review de novo whether a party has standing to assert the privilege. ¶8 Id. A psychologist s client holds the privilege. A.R.S. § 32-2085 (West 2012); see also State v. Sucharew, 205 Ariz. 16, 21, ¶ 10, 66 P.3d 59, 64 (App. 2003) (attorney-client privilege belongs to the client ). 3 personal to the client. Put differently, the privilege is State v. Griswold, 105 Ariz. 1, 5, 457 P.2d 331, 335 (1969). For that reason, on appeal, the erroneous denial of the privilege can only be complained of by the client whose privilege has been infringed. Evidence § 92 (6th ed. 2006). decision to admit arguably 1 McCormick on Thus, appellate review of a privileged testimony is only available if the client is a party to the appeal; if the client is not a party, the appellant is without recourse. appeal, a litigant cannot created for his benefit. ¶9 other assert a privilege that Id. was On not Id. While Arizona courts have not addressed this issue, jurisdictions treatise. follow the rule stated in McCormick s See, e.g., United States v. Harrelson, 754 F.2d 1153, 1169 (5th Cir. 1985) (client s wife may not assert attorneyclient privilege held by her husband); United States v. Dien, 609 F.2d 1038, 1043-44 (2d Cir. 1979) (defendant may not assert 3 Absent material revision after the relevant date, we cite a statute s current version. 6 marital privilege held by another defendant); United States v. Crockett, 534 F.2d 589, 604 (5th Cir. 1976) (refusing to address marital privilege question because alleged holder of privilege was not a party to appeal); People v. Corona, 259 Cal. Rptr. 524, 532 (App. 1989) (citing Cal. Evid. Code § 918) (appellant may challenge privilege ruling only if he holds the privilege); Schaibly v. Vinton, 61 N.W.2d 122, 124 (Mich. 1953) (trial ruling on privilege cannot be appealed when owner of privilege is not party to lawsuit). We conclude the rule these cases apply is sensible and adopt it. ¶10 At issue in this case is testimony by Cottor concerning her personal counseling sessions with the McLeods. 4 Any privilege that may have protected those sessions was held not by Structural I but by the McLeods. parties to the lawsuit Because Structural I standing to argue the and does are not superior not hold court The McLeods were not parties the to this privilege, erred when it appeal. it lacks admitted Cottor s testimony concerning her counseling sessions with the McLeods. 5 4 Structural I does not contend that the testimony at issue concerned Cottor s business counseling sessions with the McLeods. 5 In our separate memorandum decision, we reject Structural I s other arguments in support of its appeal from the judgment in favor of D Amico. 7 II. ¶11 D Amico Treble Damages. argues the superior court abused its discretion by refusing to treble her damages pursuant to A.R.S. § 23-355(A) (2012). Under that statute, if an employer, in violation of this chapter, fails to pay wages due any employee, the employee may recover in a civil action against an employer or former employer an amount that is treble the amount of the unpaid wages. ¶12 Section damages whenever because another 23-355(A) an plainly employer statute, does withholds A.R.S. § not wages. 23-352 impose We (2012), treble know this states in relevant part that [n]o employer may withhold or divert any portion of an reasonable employee s good due . . . . faith wages dispute unless as . to . the . [t]here amount of is a wages Put differently, § 23-352 allows an employer to withhold wages when the employer disputes in good faith that it owes the wages. may not be Certainly it must follow that treble damages awarded pursuant to A.R.S. § 23-355(A) when employer withholds wages subject to a good-faith dispute. an See Apache East, Inc. v. Wiegand, 119 Ariz. 308, 312, 580 P.2d 769, 773 (App. awarded 1978) when ( The there is treble a damages reasonable good between the employer and the employee. ). 8 penalty faith should wage not be dispute ¶13 The jury in this case concluded that Structural I owed D Amico $753,846 in wages, and that the company had disputed in good faith only $229,792 of that amount. 6 D Amico argues that because the jury necessarily found that the remaining $524,054 was not disputed in good faith, the court was required to treble those damages pursuant to A.R.S. § 23-355(A). ¶14 In explaining its denial of D Amico s request for treble damages, the superior court stated that there was a good faith dispute concerning employment contract. the amount due [D Amico] under the This conclusion, however, flies in the face of the jury s verdict that only $229,792 of the total owed of $753,846 was disputed in good faith. ¶15 under The court also observed that the amount due D Amico her employment agreement was not a set amount, required a calculation based on the company s success. but While a disagreement over the application of a complex compensation formula contract may form the basis of a good-faith dispute, Cummings v. Aviation Specialties Trade Corp., 120 Ariz. 536, 537, 587 P.2d 255, 256 (App. 1978), we presume the jury applied that standard when it determined that Structural I disputed in good faith only $229,792 of D Amico s damages. 6 This is the sum of the amounts the jury found D Amico was owed for her 2004 and 2005 bonuses and one year of her $200,000 annual salary. 9 ¶16 Nevertheless, superior court cited although do not we conclude support its the factors decision to the decline D Amico s request for treble damages, we reject her contention that the court erred as a matter of law by refusing to treble the damages the jury found were not disputed in good faith. Contrary to D Amico s argument, even when an employer has no good-faith basis to dispute wages owed to an employee, the superior court has discretion to deny the employee s request for treble damages under A.R.S. § 23-355(A). ¶17 which This conclusion is consistent with the general rule, is that treble damages are not mandatory under § 23- 355(A), but are left to the discretion of the superior court. Crum v. Maricopa County, 190 Ariz. 512, 514-15, 950 P.2d 171, 173-74 (App. 1997). Although the circumstances in Crum were different, in that case we rejected the argument D Amico makes here, which is that § 23-352(3) defines the only circumstance in which a court may refuse treble damages in a case for unpaid wages. Crum, 190 Ariz. at 515, 950 P.2d at 174. if the legislature had intended to As we stated in constrain in that fashion the discretion § 23-355(A) grants to the superior court, it would have done so expressly. In the absence of a statutory directive, we abide by our conclusion in Crum that the language in § 23-355(A) that an employee may recover treble damages means not that the superior court must make such an award, but 10 that it may exercise its discretion to do so. See Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 178 Ariz. 425, 429, 874 P.2d 982, 986 (App. 1994) (employer who withholds wages in bad faith faces possibility of treble damages ). Among the factors the court may find relevant to its determination are the origin and nature of the dispute, efforts one party or the other made to resolve the relationship dispute short between the of litigation, employer and the nature employee, of and the other contemporaneous acts by either party not bearing directly on the alleged breach of contract. ¶18 Because the reasons the superior court cited do not support its refusal to treble the damages the jury found were not disputed in good faith, we vacate the order declining D Amico s request for treble damages and remand to allow the court to request. exercise its discretion in considering D Amico s While treble damages may be awarded under § 23-355(A) when an employer has withheld wages without reason, see, e.g., Schade v. Diethrich, 158 Ariz. 1, 12, 760 P.2d 1050, 1061 (1988); Patton v. Mohave County, 154 Ariz. 168, 172, 741 P.2d 301, 305 (App. 1987), we do not mean in this opinion to express any view of the proper outcome of that decision by the superior court. 11 CONCUSION ¶19 For memorandum the reasons decision, we stated above reverse the and in our companion judgment in favor of Structural I on its claim for breach of fiduciary duty against D Amico. We consistent with vacate this and remand opinion the for further superior declining D Amico s request for treble damages. proceedings court s order Otherwise, we affirm the judgments. /s/ DIANE M. JOHNSEN, Presiding Judge CONCURRING: /s/ MARGARET H. DOWNIE, Judge /s/ LAWRENCE F. WINTHROP, Chief Judge 12

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