Lebaron Properties, L.L.C. v. Jeffry S. Kaufman, Ltd. (CA1 12/15/09)

(link to opinion)

This is the latest in a line of cases demonstrating that a lis pendens is a dangerous thing you shouldn’t file unless you know what you’re doing. But it ends less than disastrously for the lawyer involved.

Lebaron sued five defendants for breach of contract to purchase real property. Kaufman, the defendants’ lawyer, filed a notice of lis pendens before filing his Answer and Counterclaim. (If you don’t understand why that could be wrong then stop, do not pass Go, and read the statute – 12-1191 – and cases carefully before venturing into lis pendens land.) Lebaron moved to quash and asked for damages of $25,000 plus fees and costs. Kaufman’s response acknowledged his mistake. The court granted the motion and ordered Kaufman (not his clients) to pay $25,000. Kaufman released the lis pendens but didn’t pay the money. The trial court entered judgment against him for $25,000 plus $750 in attorneys fees. Kaufman appealed.

Under A.R.S. 33-420(A) one who files an invalid lis pendens must pay not less than $5,000 or triple the actual damage, whichever is greater, plus fees and costs. Kaufman argued that this means $5,000; Lebaron argued that since there were five defendants it means $5,000 times five. Kaufman won the argument. The Court of Appeals decided that the legislature’s intent was that actual damages be tripled and then the greater of that or $5000 awarded. The person who causes the filing is liable so where, as here, only one person caused it the maximum award is $5000 (plus fees and costs).

The opinion also examines the question of whether the trial court was right in finding that only Kaufman, not his clients, were responsible for causing the filing. The statute has been held to have a scienter requirement. Here it wasn’t met since there was no evidence that Kaufman’s clients either told him to file the lis pendens or knew that filing it when he did was wrong.

The affirmed the judgment as modified — $5000 plus the $750.