THIS OPINION HAS BEEN MODIFIED

This at first seems to be an anti-abrogation case but the principal analysis is of negligent misrepresentation (and is arguably dicta).

“After [Plaintiffs] unwittingly bought a home next door to a registered sex offender, they sued the couple who sold them the home and the real estate broker that represented both couples in the transaction. The defendants moved to dismiss, arguing the . . .  claims of fraud, misrepresentation and breach of fiduciary duty were barred by the sales documents and by . . . A.R.S. §32-2156(A)(3) . . . which prohibits a civil action against a seller or real estate broker for failing to disclose that a home is located ‘in the vicinity of a sex offender.’”

That’s how the court begins – pleasantly concise. Unfortunately, it turns out that that’s just an introduction; the opinion soon reverts to standard Division One style.

The fraud claim was that defendants were moving because of the sex offender but told plaintiffs that they wanted to be nearer their family. On appeal the defendants apparently agreed that the statute wouldn’t cover fraud. They argued instead that what they said couldn’t be material or relied on because the documents specifically said that the sellers weren’t required to disclose sex offenders and that the buyers had to investigate that for themselves. The court says that contract language can’t excuse fraud and that materiality, etc., was for the jury; it reverses the trial court’s dismissal on fraud. The dissent (which agrees with the majority except for this issue) argues that a party’s reason for entering into a contract is generally not material. The opinion adds a footnote to counter this, suggesting that it isn’t always true as a matter of law. But the dissent points out that motivation’s only alleged relevance here is that it omitted something that needn’t be disclosed anyway.

The court next rules that the allegation of negligent misrepresentation stated a claim – subject to being barred by the statute – because “we draw from the Restatement [§551] . . . the principle that a seller may be required to disclose information when the buyer reasonably cannot discover the information for himself.” This lesson is drawn from a Restatement comment discussing the “continuing development of modern business ethics,” which the ALI professors are all too happy to conflate with law. The facts indicated that the location of a level one sex offender is not public record.

As for A.R.S. §32-2156(A)(3), plaintiffs argued that it was unconstitutional as an abrogation of common-law rights. The court holds it valid. A right to sue because of an undisclosed sex offender did not “evolve out of common-law antecedents” since at common law the seller had no duty to disclose “latent defects” absent a special relationship. Since the court’s negligent-misrepresentation conclusion is based on “modern business ethics” its not based on common law. So dismissal of the claims other than fraud – including the misrepresentation claim that the court had just spent several pages upholding – was okay after all.

(link to opinion)

This contract case says a little about the Statute of Frauds and a bit about attorney’s fees. But its main feature, to us, is an unfortunate footnote.

The parties were real estate agents. Rudinsky contracted, in return for a split of commission, to refer buyers to Harris’ outfit (called “Green Light”), which represented developers. This was in writing. But she alleged an oral agreement that Green Light could never, without compensating her, deal directly with any buyers she referred to it nor with any buyers those buyers referred it (“second-generation” buyers), even 10-20 years in the future. Harris moved for summary judgment on the Statute of Frauds, which the court granted. It then awarded fees and entered a Rule 54(b) judgment (Rudinsky’s Complaint also sued for defamation because of some things Harris said about her in connection with her deals with Green Light). The Court of Appeals affirms.

Rudinsky argued on appeal that the contract was capable of performance within one year because she might die that soon. She had an Arizona for this but it discussed the promisor’s death, not the promisee’s; the court says that it doesn’t apply because “there is no provision in the contract allowing Green Light to terminate the agreement within the year.” Rudinsky also argued that there might never be any second-generation buyers; Green Light’s alleged obligations as to them, though, would continue even if they took forever to exist.

As to fees, Rudinsky argued that they shouldn’t be awarded until her defamation claim, with which her contract claim was “interwoven,” was decided. But cases about the interweaving of tort and contract claims mean that you can get attorneys fees for the former, not that you can’t get them for the latter. And the point of the Rule 54(b) certification is that Green Light is entitled to relief now.

But the court includes a footnote implying that Rule 54(b) language shouldn’t have been granted. Perhaps that wasn’t its intent; if the court thinks 54(b) certification incorrect then the proper course is to remand for lack of jurisdiction. The footnote’s effect, though, is to suggest that “interweaving” is, after all, a reason not to certify. Yet in this case certification was, from what this opinion tells us, correct. The causes of action were separate. The opinion doesn’t explain why the outcome of one depended in any significant way on the outcome of the other. That some facts involved in one may also have been involved in the other is not a reason to deny 54(b) language.

(link to opinion)

This is an opinion about a complex insurance coverage dispute. The court ducks the main issue and deals with the rest predictably.

The ADEQ investigated TCE pollution and blamed Nucor. That triggered a class action. Nucor settled it and then fought with its insurers about which of them should contribute how much to its defenses and to the class-action settlement. After a protracted trial on many issues, basically (and inevitably in these cases) everybody appealed everything.

The first issue this opinion addresses is whether a Wausau policy covered claims for diminution of property value “because of the stigma of being above groundwater containing TCE.” Apparently the claim was that houses were worth less. Wausau’s policy covered “physical injury to or destruction of tangible property” or loss of use. But actual property-damage claims had been thrown out of the class action, leaving only these “stigma claims.” So Nucor argued, according to the court, that “the policies do not require the property to be damaged; but only that if there was a claim for property damage, any resulting damages are covered by the policies.” (That’s what it says; we trust that Nucor’s argument – and its punctuation – were somewhat more coherent.)

The court spends a couple of pages discussing cases Nucor cited that there doesn’t have to be property damage and cases Wausau cited that there does. Then, in a classic Division One swerve, it announces that “we do not need to resolve” that issue. Why not? Because the stigma claims were “too unrelated to property damage to require indemnity under Wausau’s policy.” The theory seems to be – though the court doesn’t says so – that, even if Nucor were right that “damages resulting from property damage” don’t actually have to result from actual property damage, there must nevertheless be some degree of relationship between the claim and effect on the property caused by the negligence.

What relationship? What degree? What rules or principles does this establish by which people in the future can figure out what their coverage is – as opposed to making that difficult or impossible to know? Don’t look for them here. And since when does an “even if” argument become the primary one? How do you even get that far if “physical injury to or destruction of tangible property” actually means “physical injury to or destruction of tangible property”?

In any event, the court uses this “reasoning” to affirm the trial court’s ruling that Wausau didn’t cover the stigma claims.

The next issue was whether Wausau should have defended Nucor in the ADEQ proceeding. Wausau had refused since its policy said it would defend “any suit against the insured seeking damages.” Nucor argued that getting a PRP letter is enough. Since other jurisdictions differ on whether that’s a “suit” the court found the policy ambiguous. From there you can guess the rest but it takes the court six pages to get there: a PRP letter qualifies as a “suit” to trigger the defense obligation.

Next, Wausau, having contributed to the defense of the class action, sought contribution from Nucor’s other insurers. Nucor opposed that (because it had settled with some of those insurers, in the process agreeing to defend them), arguing that Wausau had to pay indemnity first. The court says no, that is not a prerequisite to the normal rules of contribution among insurers.

The remainder of the opinion covers issues, largely fact-specific, regarding the allocation of costs among the insurers and how to handle the fact that one had become insolvent. Its not clear why these weren’t covered in the memorandum opinion that addresses the rest of the issues raised by these appeals.

(link to opinion)