New Decisions from the Arizona CourtsIn BAC Home Loans Servicing v. Semper Investments, the Division Two Court reviewed a grant of summary judgment related to the application of equitable subrogation doctrine. Intervening lienholders contested its application where the refinance loan had a higher interest rate than the original loan, claiming that it increased the likelihood of default. The Court held that, since the refinance was fixed-rate and the original was variable with the potential to increase to twice the rate of the refinance, and since disparate interest rates alone do not equate to prejudice upon the intervening lienholders, the certainty of a fixed-rate loan, even if at a higher rate, could not materially prejudice the intervening lienholder.Division One, in a memo opinion on a special action in Sell v. Gama/Towler, addressed disqualification of counsel on grounds of conflict of interest. Beneficiaries of a trust were victims of a pyramid scheme. The trustee hired counsel for the complaint, and when the defendants sought to depose each of the beneficiaries/investors, counsel then sent solicitation letters to each proposing joint representation with the trustee. Counsel then prepared the individuals and defended their depositions. Defendants moved to disqualify counsel, the trial court granted, and the Court of Appeals remanded after holding that the representation was "limited" and did not create a conflict. On remand, defendants sought production of the solicitation letters and counsel claimed attorney-client privilege. Defendants argued there was no privilege and, even had there been a privilege, counsel waived it by voluntarily disclosing the content in defending against disqualification. Counsel argued that any communication between counsel and a prospective client should be privileged no matter who initiates the contact, as well as that the privilege could only be waived by the client and their defensive disclosure was not a waiver. The trial court found for defendants - there was no privilege and, had there been, it was waived. The Court of Appeals agreed. Absent an agreement, the Court said, a trust beneficiary is not a client of the trustee's attorney. At the time the letters were sent, the investors were not counsel's clients, nor were they seeking counsel/representation and had taken no steps to create such a relationship. The correspondence was no more than solicitation, akin to advertising, and the investor could have had no expectation of confidentiality. An attorney-client relationship was formed, however, prior to the depositions, so defense counsel was entitled to production of the solicitation letters, but not to correspondence beyond that.Division Two of the AZ Court of Appeals ruled in a special action, Salvation Army v. Bryson, that summaries of interviews of witnesses conducted by an investigator hired by counsel constituted work product. The witnesses included Salvation Army employees and volunteers, as well as non-affiliated witnesses. In the underlying personal injury action, plaintiffs sought production of "copies of all tapes and interview notes of all witnesses tape recorded and interviewed by [the investigator]." There is no further mention of the tapes of the interviews, but the Salvation Army objected to production of the summaries on grounds of work product and attorney-client privilege. The Court determined that it need not determine whether her summaries were subject to disclosure under [work product doctrine] because if the summaries reveal communications, they are protected by the attorney-client privilege and "[t]o the extent they do not reveal communications, they reveal the attorneys' [or investigator's] mental processes in evaluating the communications." As such, the Court held that the summaries created by the investigator were protected by attorney-client privilege under ARS § 12-2234. The Court directed the trial judge to determine whether the volunteers are agents of the Salvation Army such that the privilege would extend to their communications as well.Division Two of the AZ Court of Appeals recently rule on a civil procedure issue in In re the ESTATE OF FRANCES B. LEWIS. In this probate contest, Appellant, a Texas resident, appeared telephonically at a status hearing. Later, he was represented by local counsel, who appeared telephonically at the next two hearings. At the end of the latter hearing and in the following minute entry, the judge ordered the Appellant to appear in person for the pretrial conference. Appellant's counsel never filed a notice to appear telephonically at the conference. At the conference, the opposing party and counsel appeared in person but no one appeared on Appellant's side. The Court then contacted the attorney on the phone and told him that his client was not present and that there was debate as to whether the attorney was to be there. The attorney, upon questioning, had no answer for why the client was not in attendance, save for claiming that he was from out-of-state and it was difficult for him to travel in for hearings. He also stated that his response to opposing counsel's counterclaim was given to the client for review and would be couriered the next day, though the judge had ordered no filings after the date of the pretrial conference. The Court then granted the relief in the counterclaim and vacated the trial date. Before the signed order was entered, the Appellant filed a document stating that the attorney had misrepresented him in the case. He said he had not been informed of his required appearance and that he had not been given any response to review. The Court deemed the filing a motion for reconsideration and denied it. The Court of Appeals reversed and remanded. It stated that the pretrial conference "is a technique to promote the disposition of litigation by cooperation and agreement. The purpose of sanctions...is to coerce this cooperation rather than to dispose of litigation as a form of punishment." As the Court was reviewing for abuse of discretion, it stated that " when a court imposes severe sanction such as dismissal, striking a pleading, or entering a default judgment, 'its discretion is more limited than when it employs lesser sanctions'" and that "drastic sanctions...must be based on a determination of willfulness or bad faith by the party being sanctioned." When there are questions of bad faith or willful misconduct, the Court said that an evidentiary hearing is required by fundamental fairness and the pretrial conference could not count as that hearing for various reasons. The Court found a clear abuse of discretion and remanded.New Decisions from the Ninth CircuitIn Bagdasarian Productions v. Twentieth Century Fox, the Ninth Circuit held that, where a contract between parties included a clause stating that all disputes arising out of the agreement or which required interpretation of the agreement would be submitted to a referee, and the District Court stayed proceedings brought before it pending the reference, the stay did not constitute a final decision such that it was immediately appealable to the Circuit Court. The plaintiffs did not explain how the stay put them "out of court" since they relied on cases involving parallel proceedings while the matter before the Court involved a reference to a non-jury referee rather than a state court. The reference is not the end of proceedings since it may be reviewed "in like manner as if made by the court." For this reason, the plaintiffs' alternative argument - that the order should be appealable as a collateral order - also fails.The Ninth Circuit also showed how strictly it will interpret foreclosure proceedings in In re Kekauoha-Alisa. After a debtor's bankruptcy filing triggered an automatic stay of the foreclosure proceedings, the creditor postponed the sale in order to comply with a Hawaii law which required "public announcement made by the mortgagee or by a person acting on the mortgagee's behalf." The law firm conducting the sale sent a legal secretary to the location of the sale at the designated time to make the announcement. She spoke to several people and asked if they were there for the auction but did not shout any announcement nor post any info regarding the postponement. The Ninth Circuit, having no Hawaiian legal standard or definition of "public announcement" upon which to rely, determined that "any reasonable meaning of 'public announcement' does not encompass Lenders' actions in this instance." The Court held that there was no ambiguity to be found in the meaning of "public announcement" and held that the creditor was in violation of the Hawaiian statute on judicial foreclosures and that the actions constituted a deceptive practice.
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