In Smith v. D.C. Concrete Co., an Arizona appellate court took on a matter involving issue preclusion.[i] Plaintiffs appealed from a trial court’s entry of summary of judgment on their claims of fraud, fraud on the court, and tort of another in favor of defendants. The appellate court agreed with the trial court, affirming the importance of collateral estoppel and making sure appeals are not precluded. Attorneys need to bring novel arguments to avoid collateral estoppel.
Underlying 2013 Lawsuit
The case arose from underlying litigation where a residential contractor sued the plaintiffs in 2013. Plaintiffs then brought a separate third-party complaint against the subcontractor, defendant, for breach of contract and fraudulent misrepresentation. In 2017, the trial court granted summary judgment in favor of defendant on Smiths’ claims and awarded defendant its attorney fees, costs, and sanctions.
The plaintiffs objected to defendant’s application for fees and costs. The Smiths claimed the application was “deceptive” as defendant:
(a) failed to disclose an amended reservation of rights letter showing that its insurer would provide a defense for the plaintiffs’ claims against it;
(b) failed to disclose any fee agreement between itself and a law firm or between its insurer and the firm;
(c) never actually paid the firm, who had been paid by its insurer;
(d) redacted the attorney billing entries submitted to the trial court; and
(e) requested recovery of fees and costs incurred in the firm’s defense of a different (ultimately settled) claim against a different defendant.[ii]
Ultimately, the trial court awarded defendant attorney fees of $259,092.70, costs of $5,299.34, and sanctions of $30,564.94[iii]
The plaintiffs appealed the award.[iv] The plaintiffs argued the trial court incorrectly determined the breach of contract and fraudulent misrepresentation claims were intertwined such that fees were proper for both. The appellate court concluded the trial court did not err in its ruling.
In the 2022 ruling, the court discussed a previous case.[v] In October 2019, plaintiffs brought another action against defendant. This 2019 suit was based on fraud, fraud on the court, and tort of another. The plaintiffs sought punitive damages, attorney fees and costs, and for the 2017 Judgment to be set aside. However, the plaintiffs’ allegations in the 2019 suit were the same they had raised, ineffectively, in their 2013 objection defendant’s application for fees and costs.
As such, defendant moved for summary judgment on the grounds the same argument had been presented and adjudicated. The trial court granted defendant’s motion. The trial determined the plaintiffs had already brought the same claims which were litigated unsuccessfully and therefore they could not be brought again in a new lawsuit.
The 2019 trial court also found there was insufficient evidence to support the plaintiffs’ claims. The trial court found plaintiffs’ 2019 suit was “simply about the plaintiffs trying get a second bite at the attorney’s fees apple they lost in the trial and the court of appeals in the 2013 case. The trial court awarded defendant attorney fees. The plaintiffs appealed the 2019 trial court ruling.
Appeal of 2019 Lawsuit
The appellate court reviewed the plaintiffs’ appeal. However, the appellate court ultimately determined the trial court’s judgment was proper. The appellate court found the issues the plaintiffs raised in their 2019 complaint were precluded as a matter of law. Specifically, the appellate court held issue preclusion, or collateral estoppel, applied. Issue preclusion occurs when an issue or fact material to a prior judgment “was actually litigated in a previous suit, a final judgment was entered, and the party against whom the doctrine is to be invoked had a full opportunity to litigate the matter and actually did litigate it.”[vi]
While the plaintiffs did bring new claims in their 2019 lawsuit, the 2019 lawsuit was still based upon the same details as they raised during their opposition defendant’s attorney fee application in 2013. As such, the plaintiffs had their day in court and the opportunity to fully litigate the issues, which they actually did. Thus, the appellate court affirmed the 2019 trial court’s ruling determining the plaintiffs cannot relitigate the issues again. The appellate court also awarded attorney’s fees and costs to defendants as a sanction against plaintiffs to discourage similar conduct in the future, and due to defendants having to defend a frivolous appeal.
This case affirms you cannot litigate the same issues which have been previously adjudicated. While the plaintiffs in the above matter were clearly upset about the adverse ruling from the 2017 trial court case involving the attorney fees, they properly appealed that ruling, which was ultimately adjudicated against them. The plaintiffs attempted to reframe the arguments in their 2019 lawsuit, but as these issues involved the same common set of facts and issues previously adjudicated, the appellate court affirmed the trial court’s ruling on defendant’s motion for summary judgment on issue preclusion.
It takes a skilled attorney to evaluate the best possible defense arguments in a matter. While issue preclusion may not always be applicable, the sooner the details can be identified in a given lawsuit, or in a previously adjudicated underlying case, the better because it allows for potential early resolution with a motion to dismiss or motion for summary judgment.
[i] Smith v. D.C. Concrete Co., 2 CA-CV 2021-0135, (Ariz. Ct. App. May. 17, 2022).
[ii] Smith v. D.C. Concrete Co., 2 CA-CV 2021-0135, 1-2 (Ariz. Ct. App. May. 17, 2022).
[iv] SK Builders, Inc. v. Smith, 246 Ariz. 196 (App. 2019), review denied (Ariz. Sept. 24, 2019).
[v] Smith v. D.C. Concrete Co., 2 CA-CV 2021-0135 (Ariz. Ct. App. May. 17, 2022).
[vi] Bridgestone/Firestone N. Am. Tire, L.L.C. v. Naranjo, 206 Ariz. 447 (App. 2003).