Mortensen v. Gust Rosenfeld

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

CLIFFORD T. MORTENSEN, SR. and SYLVIA A. MORTENSEN, as
Co-Trustees of the Clifford T., Sr. and Sylvia A. Mortensen Living Trust
dated, December 15, 2004; VIRGINIA LOUISE MORTENSEN,
as Successor Trustee of the Azel Jack Mortensen and Virginia Louise
Mortensen Living Trust, dated October 20, 1992; FOREST B. ALLISON
and GLORIA ALLISON, as Co-Trustees of the Allison Family Trust;
BYRD ENTERPRISES OF ARIZONA, INC., an Arizona corporation;
AVONDALE BOULEVARD, LLC, an Arizona limited liability company;
TIFFANY CONSTRUCTION, INC., an Arizona corporation; CARLOS
O'BRIEN'S SCOTTSDALE L.L.C., an Arizona limited liability company,
and WINNERS DEVELOPMENT, LLC, an Arizona limited liability
corporation, Plaintiffs/Appellants,

v.

GUST ROSENFELD, PLC, an Arizona professional corporation;
ANDREW J. MCGUIRE and DENISE MCGUIRE, husband and wife,
Defendants/Appellees,

CITY OF AVONDALE, an Arizona municipal corporation,
Defendant/Appellee.

No. 1 CA-CV 14-0262
FILED 10-27-2015

Appeal from the Superior Court in Maricopa County
No. CV 2012-008177
The Honorable J. Richard Gama, Judge

AFFIRMED IN PART; REVERSED IN PART; REMANDED
 COUNSEL

Russell Piccoli, P.L.C., Phoenix
By Russell Piccoli
Counsel for Plaintiffs/Appellants

Lewis Roca Rothgerber, L.L.P., Phoenix
By Susan M. Freeman
Counsel for Defendants/Appellees

Quarles & Brady, L.L.P., Phoenix
By Nicole France Stanton, Lauren Elliott Stine, Brian A. Howie
Counsel for Defendant/Appellee City of Avondale

MEMORANDUM DECISION

Presiding Judge Margaret H. Downie delivered the decision of the Court,
in which Judge Patricia A. Orozco and Judge Maurice Portley joined.

D O W N I E, Judge:

¶1 Clifford and Sylvia Mortensen, as Co-Trustees of the Clifford
T., Sr. and Sylvia A. Mortensen Living Trust, Virginia Mortensen, as
Successor Trustee of the Azel Jack Mortensen and Virginia Louise
Mortensen Living Trust, Forest and Gloria Allison, as Co-Trustees of the
Allison Family Trust, Byrd Enterprises of Arizona, Inc., Avondale
Boulevard, LLC, Tiffany Construction, Inc., O’Brien’s Scottsdale, L.L.C.
(“O’Brien’s”), and Winners Development, LLC (collectively, “Appellants”)
appeal the dismissal of their civil claims against the City of Avondale
(“the City”), Gust Rosenfeld PLC, and Andrew and Denise McGuire
(collectively, “Appellees”). For the following reasons, we affirm in part,
reverse in part, and remand for further appropriate proceedings.

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FACTS AND PROCEDURAL HISTORY1

¶2 For several years, the City has considered pursuing a
commercial development project known as the Avondale City Center
(“City Center”). Among other things, the project would require the City
to obtain financing and acquire several parcels of real property.

¶3 The City began discussing City Center with developer
Winners Development (“Winners”). In July 2011, the City and Winners
signed a Memorandum of Understanding (“MOU”). The City and
Winners later signed a Letter of Intent and Understanding (“LOI”) in
October 2011.

¶4 Winners arranged for a form of financing through National
Standard Finance (“NSF”) and worked with Tiffany Construction
(“Tiffany”) to obtain construction cost estimates. Winners also obtained
contracts to purchase necessary parcels of real property from the
Mortensen Trusts, the Allison Trust, Byrd, and Avondale Boulevard
(collectively, “the Landowners”).

¶5 In December 2011, Winners and the City discussed assigning
the land purchase contracts to the City in exchange for an assignment fee.
Winners anticipated that the proposed assignment would be approved at
a December 19 City Council meeting because the purchase contracts were
set to expire at the end of December. However, on December 16, Andrew
McGuire — a partner with the law firm of Gust Rosenfeld who serves as
City Attorney for the City — requested additional information regarding
the properties, including surveys, topographical maps, and environmental
reports.2 As a result, Winners extended the purchase contracts at an
additional cost.

¶6 In January 2012, McGuire informed Winners’ counsel that
the City Council would not discuss the proposed assignment at its
January meeting and requested a new set of conditions. On January 9, the

1 Our recitation of the facts is based on the first and second amended
complaints. See Logan v. Forever Living Products Int’l, Inc., 203 Ariz. 191,
192, ¶ 2 (2002) (when reviewing dismissal under Rule 12(b)(6), we assume
truth of well-pleaded facts).
2 McGuire’s spouse is also named as a defendant. References to
“McGuire” in the singular are to Andrew McGuire. Gust Rosenfeld and
the McGuires are referred to collectively as “the Lawyer Defendants.”

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City’s Economic Development Director advised Winners that the City had
obtained appraisals of the properties and that the appraised values “were
below what the City was to pay for them.” According to Appellants,
McGuire provided these appraisals to the City Council, which thereafter
rejected the purchases of the Landowners’ properties. Appellants allege
that the City-obtained appraisals were “knowingly based on false
premises and did not remotely state the fair value of the assembled
parcels.”

¶7 On January 23, 2012, Winners filed a notice of claim against
the City pursuant to Arizona Revised Statutes (“A.R.S.”) section 12-821.01,
demanding $62,793,824. On February 1, 2012, the City Manager sent
correspondence to Winners stating that the City had determined the City
Center project was “not feasible as contemplated in either the MOU or the
LOI” and that the City wished “to terminate the MOU and the LOI.”

¶8 Winners filed the original complaint in this matter in May
2012. An amended complaint was subsequently filed that added the
remaining plaintiffs and several causes of action (“amended complaint”).
With leave of court, Appellants later filed a first amended complaint
(“FAC”).

¶9 Appellees moved to dismiss the amended complaint and
FAC pursuant to Arizona Rule of Civil Procedure 12(b)(6). The superior
court granted their motions. Appellants sought leave to file a second
amended complaint and also moved to reinstate their contract claims
(essentially seeking reconsideration of the dismissal of those claims). The
superior court denied the motion to reinstate but, over objection, allowed
Appellants to file a second amended complaint (“SAC”).

¶10 The Lawyer Defendants and the City separately moved to
dismiss the SAC. The superior court granted both motions. Appellants
timely appealed.3 We have jurisdiction pursuant to A.R.S. §§ 12-
120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶11 Appellants seek to reinstate counts one through four of the

3 The City filed a cross-appeal that has since been dismissed.

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FAC4 and counts four through ten of the SAC.5 We review the dismissal
of those counts pursuant to Rule 12(b)(6) de novo. See Coleman v. City of
Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). “We will uphold dismissal only if the
plaintiffs would not be entitled to relief under any facts susceptible of
proof in the statement of the claim.” Dressler v. Morrison, 212 Ariz. 279,
281, ¶ 11 (2006).

I. Contract Claims

¶12 As a threshold matter, we reject the City’s contention that
Winners’ failure to reassert its contract claims in the SAC precludes our
review of the dismissal of those claims. No Arizona court has adopted the
Ninth Circuit’s decidedly minority view that “a plaintiff waives all claims
alleged in a dismissed complaint which are not realleged in an amended
complaint.” Lacey v. Maricopa Cty., 693 F.3d 896, 925, 928 (9th Cir. 2012)
(deciding to limit this rule to claims which were “voluntarily dismissed”).
Even the Ninth Circuit has acknowledged it is “an outlier among the
circuits,” going so far as to characterize the position as “formalistic and
harsh.” Id. at 927; see also Young v. City of Mount Ranier, 238 F.3d 567, 572–
73 (4th Cir. 2001) (“[I]f a claim is dismissed without leave to amend, the
plaintiff does not forfeit the right to challenge the dismissal on appeal
simply by filing an amended complaint that does not re-allege the
dismissed claim.”); Davis v. TXO Prod. Corp., 929 F.2d 1515, 1518 (10th Cir.
1991) (“[A] rule requiring plaintiffs who file amended complaints to
replead claims previously dismissed on their merits in order to preserve
those claims merely sets a trap for unsuspecting plaintiffs with no

4 Count one is Winners’ breach of contract claim against the City.
Count two is Winners’ breach of the covenant of good faith and fair
dealing claim against the City. Count three is Winners’ breach of
fiduciary duty claim against the City. Count four is Winners’ “Joint
Liability for Breach of Fiduciary Duty” claim against the Lawyer
Defendants.
5 Count four is the Landowners’ intentional interference claim
against the City. Count five is Tiffany’s intentional interference claim
against the City. Count six is Winners’ intentional interference claim
against the Lawyer Defendants. Count seven is the Landowners’
intentional interference claim against the Lawyer Defendants. Count
eight is Tiffany’s intentional interference claim against the Lawyer
Defendants. Count nine is O’Brien’s intentional interference claim against
the Lawyer Defendants. Count ten is Winners’ “Aiding and Abetting
Fraud” claim against the Lawyer Defendants.

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concomitant benefit to the opposing party.”); 6 Charles Alan Wright et al.,
Federal Practice & Procedure § 1476 (3d ed.), Westlaw (database updated
April 2015) (“A rule that a party waives all objections to the court’s
dismissal if the party elects to amend is too mechanical and seems to be a
rigid application of the concept that a Rule 15(a) amendment completely
replaces the pleading it amends.”). We turn, then, to an analysis of
whether the superior court properly dismissed Winners’ contract claims
under Rule 12(b)(6).

¶13 In the FAC, Winners alleged that the City was liable for
breach of contract (count one) and breach of the covenant of good faith
and fair dealing (count two). The superior court identified the dispositive
question as whether the MOU and/or LOI “constitute a sufficiently
definite contract to negotiate in good faith, v. an unenforceable agreement
to agree.” The court then ruled that the MOU and LOI “unequivocally
state they are subject to future approval and are not final, binding
agreements.” Although the court recognized that “[t]he ultimate question
is the intent of the parties,” it concluded both documents reveal “a clear
expression of intent not to be bound.”

¶14 Interpretation of a contract is a mixed question of law and
fact that we review de novo. Johnson Int’l, Inc. v. City of Phx., 192 Ariz. 466,
470, ¶ 19 (App. 1998). Courts generally should not dismiss claims under
Rule 12(b)(6) “where there is conduct which could be construed as
binding that is sufficient to create a question of fact for the trier. However,
where there is explicit language that the parties do not intend to be bound
until a condition precedent, no fact question exists.” Id. at ¶ 20. “[W]here
there is an express nonbinding clause, we will honor it and not look to
surrounding circumstances to imply an obligation at variance with the
express clause.” Id. at 473, ¶ 43.

¶15 Appellants are not appealing the determination that the
MOU is not a binding agreement upon which contract-based claims can be
predicated. Nevertheless, we briefly discuss the MOU because it is
relevant to our assessment of claims based on the LOI.

¶16 As the superior court found, the MOU contains several
provisions that reflect its non-binding nature, including:

This agreement does not constitute a commitment by the
City to obtain lands for the development of the City Center
outside of those properties that the City currently owns or
controls. . . . It is understood that specific project

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development proposals will need to obtain Site Plan
approval by City Council and that any assistance by staff
does not constitute such approval.

It is also understood that this agreement does not in itself
constitute a commitment by the city to enter into an
Economic Development Agreement with Winners for the
development of specific projects. The City, subject to the
approval by the City Council acting in its sole discretion,
may enter into Economic Development Agreements that
benefit the City on a case-by-case basis.

¶17 Additionally, the MOU is quite general in describing the
parties’ respective undertakings. It states, for example, that the “City shall
remain supportive of Winners’ interests in acquiring and planning” and
“will assist Winners in its due diligence and provide support for a
comprehensive planning effort.” The City also agrees to “provide a
cooperative working relationship” and to “use its best efforts to respond
to requests made by Winners in a timely manner.” Winners, in turn,
agrees to “use its best efforts and influence to assist and support the City”
in attracting tenants, employers, and other third parties vital to the City
Center concept.

¶18 The LOI is substantively different. Its stated purpose is to
“further define and memorialize the intents of the Parties” as outlined in
the MOU, and it provides that the LOI “is a continuation of the process
begun with the MOU.” Yet the LOI does not incorporate the terms of the
MOU, and the LOI is much more specific than the MOU in many respects.
Among other things, the LOI obligates the City to “use its best efforts to
support the development of City Center in the following specific tasks:”

 Cooperate and assist Winners with acquiring the real
property needed for the initial phase of City Center.

 Cooperate and assist Winners with the planning and
scheduling of infrastructure design and budgeting.

 “Work closely with Winners to produce a
Development Agreement outlining in specificity how
each Party will behave in the development of City
Center.”

 Work closely with Winners to refine and agree on the
financing mechanisms to be used to acquire the real

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property, “the design and construction of the
infrastructure and the acquisition of certain City
assets. The financial model will include a strategy to
ensure that contributions from the City will not occur
until at least three years after closing on the
acquisition of all of the Real Property (the ‘Closing’).
Additionally, the financial model shall include
Winner’s acquisition of specific real property assets
currently owned by the City.”

 Work closely with Winners and NSF “to produce a
lease document that will serve as the basis for
financing the acquisition of the Real Property and the
design and construction of the public infrastructure.”

 “Facilitate a fast-track approach to approvals required
for the review and permitting of infrastructure
improvements within City Center.”

The LOI, in turn, states that Winners “shall use its best efforts and
resources to lead the development of City Center in the following specific
tasks:”

 Primary responsibility for acquiring the necessary
real property.

 Primary responsibility for planning and scheduling
infrastructure design and budgeting.

 Primary responsibility for producing “a Development
Agreement outlining, in specificity, how each Party
will behave in the development of City Center.”

 Primary responsibility for providing the financing
source and refining “the financial model relating to
the financing mechanisms that will ultimately be
utilized to finance the acquisition of the Real
Property, the design and construction of the
infrastructure and the acquisition of certain City
assets. The financial model will include a strategy to
ensure that contributions from the City will not occur
until at least three years after the Closing.
Additionally the financial model shall include

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Winners’ acquisition of specific real property assets
currently owned by the City.”

 Primary responsibility for working with NSF “to
produce a lease document which will serve as the
basis for financing the acquisition of the Real
Property, and the design and construction of the
public infrastructure.”

 Primary responsibility “to work with and attract
corporate employers, amateur and professional
sports, higher education, retail and entertainment,
medical and residential tenants to City Center.”

¶19 There are also substantive differences in the language that
immediately precedes the parties’ signatures on the two documents. The
MOU reads:

IN WITNESS WHEREOF, by executing this Letter of
Understanding and Intent, [sic] the Parties hereto
acknowledge that they understand and agree to the content of
this Agreement. (Emphasis added.)

The LOI states:

IN WITNESS WHEREOF, by executing this Letter of Intent
and Understanding, the Parties hereto acknowledge that
they understand and agree to the terms and conditions set forth
herein. (Emphasis added.)

¶20 We recognize that the above-quoted language from the LOI
is similar to language considered in Johnson. See 192 Ariz. at 468, ¶ 6 (“IN
WITNESS WHEREOF, the parties have executed this Agreement . . . and
bind their respective entities to the terms and obligations herein
contained.”). Standing alone, the differences in verbiage between the
MOU and LOI may not be particularly compelling. But where, as here,
the same parties elect to employ different language in documents signed
less than ten weeks apart, it raises the question whether they intended an
assent to “terms and conditions” (LOI) to mean something different from
an agreement “to the content” of the MOU.

¶21 Additionally, unlike the MOU, which expressly states that
the City Council has final decision-making authority regarding matters
discussed therein, the LOI is silent about City Council involvement. This

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is another distinguishing fact from Johnson, where the memorandum of
understanding expressly stated that the City would not be bound unless
Bureau of Reclamation approval was obtained. See id. at 472, ¶ 35.
Moreover, the MOU in Johnson included clear non-binding language,
stating:

This memorandum is not intended to be the final agreement
or to include all of the material terms, which shall be subject
to further negotiations, and it shall not be binding on either
party.

Id. at 468, ¶ 5. Despite the City’s repeated protestations to the contrary,
the LOI at issue here lacks similarly clear non-binding language.

¶22 Appellees articulate policy concerns about treating letters of
intent as binding agreements. But the relevant inquiry is the parties’
intent, not the title given a particular document. See, e.g., Rennick v.
O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 315 (9th Cir. 1996) (holding that a letter
of intent may be a contract, regardless of its title, and that a court must
“study the words and context to decide”); Channel Home Ctrs. v. Grossman,
795 F.2d 291, 300 (3d Cir. 1986) (sufficient evidence for trier of fact to
decide whether landlord breached agreement to negotiate in good faith by
terminating discussions and leasing to third party); Teachers Ins. & Annuity
Ass’n of Am. v. Tribune Co., 670 F. Supp. 491, 497, 499 (S.D.N.Y. 1987)
(noting that “[l]abels such as ‘letter of intent’ or ‘commitment letter’ are
not necessarily controlling although they may be helpful indicators of the
parties’ intentions,” and holding that commitment letter required both
sides to negotiate in good faith to reach final agreement).

¶23 We hold that the allegations of counts one and two of the
FAC, insofar as they are premised on the LOI, were sufficient to avoid
dismissal under Rule 12(b)(6). We express no opinion about the scope of
the obligations, if any, arising under the LOI, cf. Channel Home Ctrs., 795
F.2d at 298 (distinguishing between contention that letter of intent set
binding lease terms versus “a mutually binding obligation to negotiate in
good faith”), or Winners’ ability to withstand proceedings under Rule 56
based on a more fully developed record and arguments focused on, inter
alia, other essential elements of contract formation.

II. Breach of Fiduciary Duty

¶24 In count three of the FAC, Winners alleged a breach of
fiduciary duty by the City. In count four, Winners alleged “Joint Liability

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for Breach of Fiduciary Duty” against the Lawyer Defendants. The
superior court’s dismissal of these counts was predicated on its dismissal
of the breach of contract claims. Because we have reversed the dismissal
of the breach of contract claim, the underpinnings of the superior court’s
order no longer exist, and we therefore reverse the dismissal of the breach
of fiduciary duty count against the City and the joint liability for breach of
fiduciary duty claim against the Lawyer Defendants, again expressing no
opinion regarding the substantive merits of these claims.6

III. Intentional Interference Claims

A. Landowners and Tiffany v. City

¶25 The superior court dismissed the Landowners’ and Tiffany’s
intentional interference claims against the City on alternative grounds:
immunity under A.R.S. § 12-820.01, and failure to state a claim upon
which relief could be granted under Rule 12(b)(6). Because we agree that
the City is entitled to immunity, we need not reach the court’s alternative
holding. See Ariz. Bd. of Regents v. State ex rel. Ariz. Pub. Safety Ret. Fund
Manager, 160 Ariz. 150, 154 (App. 1989) (appellate court will affirm
superior court’s decision if it is correct for any reason).

¶26 Determining whether a municipality is entitled to immunity
is a question of law for the court. Galati v. Lake Havasu City, 186 Ariz. 131,
134 (App. 1996). The City has absolute immunity for certain actions,
including “determination[s] of whether to seek or whether to provide the
resources necessary for . . . [t]he construction or maintenance of facilities,”
and “determination[s] of fundamental governmental policy [including] . . .
whether and how to spend existing resources.” A.R.S. § 12-820.01(A)(2),
(B)(1)(b), (B)(2). “[A] public entity is entitled to immunity if it makes an
actual decision or affirmative act. An actual decision is made when
deciding to do something or deciding not to do something.” Tostado v.
City of Lake Havasu, 220 Ariz. 195, 199, ¶ 16 (App. 2008). Determinations of
fundamental governmental policy include matters such as

whether government or its agencies should pursue one
general course of action over another, whether an agency of

6 In their answering brief, the Lawyer Defendants raise numerous
substantive arguments regarding this claim — arguments more
appropriately addressed to the superior court on remand in a non-Rule
12(b)(6) context.

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government should construct a particular building or where
the building should be located, or a decision as to the
direction and focus of an entire regulatory scheme. . . . [as
well as] decisions on whether to provide resources for the
purchase of equipment [or] the construction or maintenance
of facilities.

Fid. Sec. Life Ins. Co. v. State Dep’t of Ins., 191 Ariz. 222, 225, ¶ 11 (1998).

¶27 The City’s challenged actions, including deciding not to
approve purchase contracts with the Landowners (or assignments
thereof), to request a non-recourse lease, and to obtain and rely on
appraisals, involve determinations of fundamental governmental policy
— including whether and how to expend funds and develop property —
as contemplated by A.R.S. § 12-820.01. Cf. Myers v. City of Tempe, 212 Ariz.
128, 131, ¶ 10 (2006) (city’s agreement relating to emergency services
“indisputably determined fundamental governmental policy”).

¶28 Nothing in the statute or appellate precedent supports
Appellants’ suggestion that the “determinations” protected by the
immunity statute must be formally enacted decisions of a municipal body.
Nor do the allegations regarding McGuire’s alleged misconduct vitiate
statutory immunity. Cf. Kohl v. City of Phx., 215 Ariz. 291, 296, ¶ 21 (2007)
(city’s decision to dispatch particular emergency unit “flowed inexorably”
from decision to enter intergovernmental agreement on emergency
responses so immunity applied to both). Once again, nothing in the
statute or relevant caselaw indicates that a plaintiff may circumvent
statutory immunity by parsing intermediate acts and decisions that
culminate in otherwise-protected municipal determinations — a
proposition that would largely gut governmental immunity.

¶29 The superior court properly dismissed the Landowners’ and
Tiffany’s intentional interference claims against the City.

B. Winners v. Lawyer Defendants

¶30 Winners seeks reinstatement of the SAC’s intentional
interference count against the Lawyer Defendants. Tortious interference
with economic relations requires a plaintiff to plead: (1) the existence of a
valid contract or business expectancy; (2) the defendant’s knowledge
thereof; (3) intentional interference inducing or causing a breach or
termination thereof; and (4) damages. See Dube v. Likins, 216 Ariz. 406,
411, ¶ 8 (App. 2007). Additionally, the alleged interference must be

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improper in some manner. See Safeway Ins. v. Guerrero, 210 Ariz. 5, 11–12,
¶ 21 (2005).

¶31 In the SAC, Winners alleged that McGuire knew of its
“prospective contractual relationship with the City” for the development
of City Center; knew of its outstanding purchase contracts with the
Landowners, and knew “Winners had a prospective business opportunity
with NSF to provide the financing to purchase the real properties and
install the infrastructure” for City Center. Winners alleged McGuire
“intentionally interfered with Winners’ prospective economic relationship
with NSF by falsely advising NSF that Arizona State law required any
lease with the City to be non-recourse.” According to Winners, McGuire
knew his representations were false, knew “no reasonable lender” would
finance the project “with no binding obligation for repayment,” and knew
“his representations to NSF would cause NSF to withdraw from the
transaction.” Winners also alleged McGuire obtained “false appraisals,”
which he furnished to the City Council “with the knowledge that those
appraisals would cause the City to not purchase the subject parcels,” to
terminate negotiations with Winners, and to “cause the termination of all
of Winners’ purchase contracts for the subject parcels.” Winners alleged
McGuire took these actions “outside the scope of his agency with the
City” and acted with improper purposes.

¶32 Although we have reservations about Winners’ ability to
withstand a motion for summary judgment on this count, we conclude
that the well-pled allegations of the SAC, taken as true, were sufficient to
withstand dismissal under Rule 12(b)(6).7 Winners alleged the essential

7 On a more fully developed record, the Lawyer Defendants may
well establish that McGuire was acting as the City’s agent and in
accordance with the City’s wishes and that Appellants’ allegations to the
contrary lack legal or evidentiary support. See, e.g., Am. Family Mut. Ins. v.
Zavala, 302 F. Supp. 2d 1108, 1121 (D. Ariz. 2003) (“[A] client and lawyer,
acting in an agency relationship, constitute a single entity.” Therefore, an
attorney, “if acting within the scope of his or her representation, is
immune from liability for tortious interference with a client’s contract.”);
Campbell v. Westdahl, 148 Ariz. 432, 438 (App. 1985) (“A party cannot be
held liable in tort for intentional interference with its own contract.”).
Appellees may also develop their ratification arguments and their
contention Appellants have conceded the agency issue. But see Black v.
Perkins, 163 Ariz. 292, 293 (App. 1989) (“When a party by pleading or
stipulation has agreed to a certain set of facts, he may not contradict them.

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elements of a tortious interference claim, and the Lawyer Defendants’
answering brief rejoinders (including their characterization of the issue on
appeal as “[w]hether City Attorney’s alleged conduct was within the
scope of his duties to his client”) are more appropriate for a motion for
summary judgment, rather than a Rule 12(b)(6) motion.

C. Landowners, O’Brien’s, and Tiffany v. Lawyer Defendants

¶33 Tiffany, O’Brien’s, and the Landowners also asserted
intentional interference counts against the Lawyer Defendants in the SAC.
They alleged: (1) McGuire knew the Landowners had contracts to sell
their properties to Winners; (2) McGuire knew Tiffany “had been engaged
by Winners to prepare cost estimates for the construction of all the
infrastructure in the City Center development;” (3) McGuire knew
O’Brien’s had leased land for a restaurant “whose success would
necessarily be dependent upon the build-out of the entire City Center
development;” and (4) McGuire took actions for his own economic self-
interest and for that of his law firm, and against the City’s interests,
causing termination of the Landowners’ purchase contracts and the failure
of Tiffany “to secure the construction contracts to build” City Center.

¶34 As discussed supra, Appellants must plead (and ultimately
prove) the existence of a valid contract or business expectancy. See Dube,
216 Ariz. at 411, ¶ 8. Such an expectancy must be “evidenced by an actual
and identifiable understanding or agreement which in all probability
would have been completed if the defendant had not interfered.” Id. at
414, ¶ 19. The expectancy must constitute more than a mere hope. Id. at
412, ¶ 14; Marmis v. Solot Co., 117 Ariz. 499, 502 (App. 1977) (investor’s
alleged expectancy insufficient because it “was clearly conditioned upon
the absence of other bidders and upon court approval, and if anything,
amounted only to a hope”).

¶35 The record supports the dismissal of Tiffany’s intentional
interference claims. The operative pleadings make clear that Tiffany’s
“expectancies” were nothing more than multiple layers of hope that, in
turn, were contingent on myriad factors. Tiffany’s own allegations
demonstrate this reality. Tiffany alleged, for example, that “if its bids

. . . When the parties have framed the issues for resolution, they may not
change them absent an amendment of the pleadings or trial of the issue by
consent.”) (emphasis added).

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were competitive,” it would be awarded the construction contract for City
Center. (Emphasis added.) Tiffany’s complaint suggested Winners would
essentially rig the bidding process to ensure it received the contract. But
even before reaching that point, numerous contingencies existed, any of
which could derail the City Center development and/or Tiffany’s
involvement therein.

¶36 O’Brien’s interference claim against the Lawyer Defendants
suffers from these same deficiencies but is even more tenuous. O’Brien’s
signed its lease “in or about January 2011” — months before the MOU and
LOI were signed.

¶37 The Landowners are in a materially different position
because they had existing contracts with Winners. As a result, unlike
Tiffany and O’Brien’s, the Landowners’ allegations were sufficient to
withstand dismissal under Rule 12(b)(6) regarding the first element of the
claim — the existence of a valid contract or business expectancy.

¶38 Turning to the other elements of the cause of action, the
Landowners alleged McGuire knew of their contracts and wrongfully
interfered with them by: (1) causing NSF to withdraw from the project by
“falsely advising NSF that Arizona State law required any lease with the
City to be non-recourse;”and (2) obtaining and furnishing the City Council
with “false appraisals,” knowing that such action would cause the City to
vote against the purchases and assignments and to terminate its
agreements with Winners. The Landowners further alleged that the
Lawyer Defendants acted with improper motives in that they sought to
further their own personal interests to the detriment of the City.

¶39 The Lawyer Defendants argue the purchase contracts gave
Winners “the right, but not the obligation, to purchase Landowners’
properties for negotiated prices by a deadline. When [Winners] did not
exercise the purchase rights by the agreed-upon deadline (as extended),
the contracts ‘expire[d] by their terms’ — they were not breached.” Once
again, this is an argument better suited for summary judgment. The
record does not include the contracts between Winners and the
Landowners (the FAC and SAC call them “purchase contracts,” while
Appellees characterize them as “option contracts”). We obviously cannot
affirm dismissal of this count on the basis that no breach occurred when
the record does not even include the contract documents. And while the
“improper” prong of the intentional interference claim is clearly subject to
further litigation, a dismissal on that basis is inappropriate under Rule
12(b)(6) standards. See, e.g., Safeway, 210 at 11–12, ¶¶ 20–22 (in assessing

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Decision of the Court

whether alleged conduct was “improper” in summary judgment context,
court primarily considers the nature of the defendant’s conduct or means
used and the defendant’s motive); Snow v. W. Sav. & Loan Ass’n, 152 Ariz.
27, 34 (1986) (Whether defendant acted improperly is determined by
“weighing the social importance of the interest the defendant seeks to
advance against the interest invaded.”).

¶40 We affirm the dismissal of Tiffany’s and O’Brien’s
intentional interference claims against the Lawyer Defendants. We
reverse the dismissal of the Landowners’ intentional interference claim
against the Lawyer Defendants based on Rule 12(b)(6).

IV. Aiding and Abetting/Fraud

¶41 In the SAC, Winners alleged common law fraud and fraud
by omission against the City, as well as aiding and abetting fraud against
the Lawyer Defendants. The superior court dismissed those counts,
concluding Winners had failed to comply with A.R.S. § 12-821.01(A)
(2014), which states:

Persons who have claims against a public entity or a public
employee shall file claims with the person or persons
authorized to accept service for the public entity or public
employee as set forth in the Arizona rules of civil procedure
within one hundred eighty days after the cause of action
accrues. The claim shall contain facts sufficient to permit the
public entity or public employee to understand the basis on
which liability is claimed. The claim shall also contain a
specific amount for which the claim can be settled and the
facts supporting that amount. Any claim that is not filed
within one hundred eighty days after the cause of action
accrues is barred and no action may be maintained thereon.

¶42 On appeal, Winners asks us to reinstate only count ten — the
aiding and abetting fraud claim against the Lawyer Defendants. Winners
does not seek reinstatement of its common law fraud and fraud by
omission claims against the City.

¶43 Without the underlying fraud counts against the City,
Winners’ aiding and abetting claim against the Lawyer Defendants fails as
a matter of law. The first element of an aiding and abetting claim is that
the allegedly aided and abetted defendant commit the wrongful act. See,
e.g., Wells Fargo Bank v. Laborers, Teamsters & Cement Masons Local No. 395
Pension Trust Fund, 201 Ariz. 474, 485, ¶ 36 (2002) (aiding and abetting “is

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Decision of the Court

a theory of secondary liability”); Caruthers v. Underhill, 230 Ariz. 513, 526,
¶ 54 (App. 2012) (aiding and abetting claim properly dismissed based on
dismissal of claim against alleged primary wrongdoer). We therefore
affirm the dismissal of count ten of the SAC.

CONCLUSION

¶44 We reverse the dismissal of counts one through four of the
FAC and counts six and seven of the SAC, and we remand those counts to
the superior court for further appropriate proceedings. We affirm the
superior court’s judgment in all other respects. All parties request an
award of attorneys’ fees and costs on appeal pursuant to A.R.S. § 12-
341.01. In the exercise of our discretion, we deny all fee requests. We
award Appellees their taxable costs on appeal against Tiffany and
O’Brien’s upon compliance with ARCAP 21. We make no further cost
awards, as the remaining parties have all partially prevailed.

:ama

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