On December 15, 2009, the Arizona Court of Appeals published its opinion in Lebaron Properties, LLC v. Kaufman, which sheds new light on statutory sanctions and that may presage the final outcome in the pending appellate matter of Galeb-Miller Development v. Markham Contracting, mentioned in two previous blog posts. The briefest summary of the facts pertinent to the disposition of this most recent appeal is this: Kaufman, a Scottsdale attorney, represented five defendants in a lawsuit over a busted realty contract. Before filing an answer and counterclaim on behalf of his defending clients (a violation of the Court of Appeals “choate claim” rule established in Santa Fe v. Bartschi discussed elsewhere on this blog), and, apparently without consulting the defendants, Kaufman filed a lis pendens describing the busted-contract land in the Maricopa County Records, and then refused to quash it upon demand from Lebaron.

Lebaron sued under A.R.S. §33-420, seeking $25 thousand in damages since Kaufman represented five defendants in the dispute – the statutory threshold $5 thousand per violation, multiplied by five. The trial judge found that only Kaufman was “to blame,” as there was no evidence that the defendants were in league with the attorney in his decision to file the lis pendens. Nonetheless, the trial judge interpreted the statute to mean that 5 defendants X $5,000 per “violation” entitled Lebaron to $25,000 in statutory damages. Kaufman appealed.

The Court of Appeals disposed of the argument that everyone named in the caption of the lawsuit leading to the lis pendens is per se a “violator”; it cited to the statutory language that a violator must be, at some level, a person “who causes” the filing, meaning an active participant in the lis pendens filing, at least to the extent of knowing (or having reason to know) of one’s attorney’s intended recording of the lien against the other camp’s property. In short, merely being a party to a lawsuit that precipitated the lis pendens lien is not, alone, a sufficient showing of a principal’s scienter (intent or knowledge of wrongdoing). So the Court reasoned that 1 X 1 X 1=1 (single violator, single instrument recorded, single landowner means only one statutory damages award is appropriate).

Hmm. If that’s going to be the Court of Appeal’s perspective, then how will that view affect the Motion for Reconsideration now before another panel of that court in the long-running saga of Galeb-Miller Development v. Markham Contracting? I notice that one of the parties filed a “Supplemental Citation of Authority” with the Court of Appeals on December 18, three days after Kaufman’s slip opinion was issued. I’m guessing that the party doing that filing is reminding the court that the conservative approach – dictated by “episodes” of groundless filing, instead of numbers of lien instruments recorded by the wrongdoer – should determine the size of the statutory damages. (See the August 17th post here for further details.) In other words, your honors if a number of groundless liens contemporaneously are recorded, kindly ignore that, so long as it’s all part of the same episode of groundless liens being impressed against the land of a single owner.

–MNW