[00:00:00] Speaker 02:
Good morning and may it please the court.

[00:00:04] Speaker 02:
My name is David Bray with the law firm that Dickinson right and I represent the appellates in this matter.

[00:00:10] Speaker 02:
This argument relates to the very last portion of a much larger case that was filed way back in 2014, which I think is now a decade ago.

[00:00:22] Speaker 02:
All of the other issues have been resolved through settlement with the other parties that was finalized in December of 2022.

[00:00:30] Speaker 02:
The remaining two non-settling individual defendants are Fernando Godinese and Carly Uritz.

[00:00:41] Speaker 02:
The other individual defendants have

[00:00:44] Speaker 02:
settled with plaintiffs, and that's resolved more than half of the individual defendant's fee award.

[00:00:53] Speaker 02:
The question of Ms.

[00:00:55] Speaker 02:
Oretz and Mr. Godinez's entitlement to a fee award has been fully briefed to the court.

[00:01:01] Speaker 02:
But as I only have 10 minutes for argument this morning, I'm going to focus my argument on the fee award to Ms.

[00:01:08] Speaker 02:
Oretz.

[00:01:10] Speaker 02:
It is appellant's position that the district court erred when it awarded Ms.

[00:01:16] Speaker 02:
Uritz attorney's fees under ARS-12341.01A, which is of course the Arizona statute that says a prevailing party in a matter arising out of contract may be awarded his or her attorney's fees.

[00:01:30] Speaker 02:
The key argument or the key words for

[00:01:33] Speaker 02:
My portion this morning is but for.

[00:01:38] Speaker 02:
The relevant test in Arizona as to whether something arises out of contract is whether the claim would exist, but for the existence of a contract.

[00:01:49] Speaker 02:
And the claims, or at least the arguments that Ms.

[00:01:54] Speaker 02:
Uritz has made regarding a fee award to her under that statute fails that test.

[00:01:59] Speaker 02:
What is not disputed is there was no contract claim brought by plaintiffs against Ms.

[00:02:06] Speaker 02:
Eritz.

[00:02:07] Speaker 02:
We did not allege that she signed or breached any employment agreement.

[00:02:12] Speaker 02:
We did not allege that she signed or breached any confidentiality agreement.

[00:02:18] Speaker 02:
or any employee handbook.

[00:02:22] Speaker 02:
The district court below recognized, quote, Eritz did not sign an agreement with JDM, JDM being shorthand for JD Melburg Financial, the corporate plaintiff in this case.

[00:02:34] Speaker 03:
So what were the claims against Ms.

[00:02:37] Speaker 03:
Eritz?

[00:02:38] Speaker 02:
I believe the claims were a breach of fiduciary duty or breach of duty and loyalty, as well as misappropriation of trade secrets.

[00:02:46] Speaker 03:
But didn't you say she worked in concert with the other individual defendants?

[00:02:53] Speaker 02:
I'd have to go back to the original complaint.

[00:02:57] Speaker 02:
I don't remember if there was a, quote unquote, conspiracy claim or not.

[00:03:01] Speaker 03:
Well, not conspiracy necessarily, but if you said she worked in concert with the individual defendants, wouldn't that meet the test?

[00:03:10] Speaker 03:
Because but for their breach of the claims, she wouldn't have been able to work in concert with them to get the proprietary and confidential information.

[00:03:21] Speaker 03:
Is that fair?

[00:03:23] Speaker 02:
I would disagree with that, Your Honor.

[00:03:25] Speaker 02:
I think the claims, the core claims against Mr. Eritz were for misappropriation of trade secrets and breach of fiduciary duties or breach of dodeh loyally, I think it's called under Arizona law.

[00:03:37] Speaker 02:
So it's not like we were asserting

[00:03:40] Speaker 02:
only a misappropriation of trade secret claim or a contract claim against the other individual defendants, Mr. Will, for example, and saying that she behaved poorly because she was part of a conspiracy or acted in concert with them.

[00:03:58] Speaker 02:
We were saying that she independently misappropriated our trade secrets through her actions, which were described in the second amended complaint.

[00:04:07] Speaker 03:
What were her actions that were taken that were independent of the other defendants?

[00:04:12] Speaker 02:
Before she left Melburg's employee, she emailed a number of, what we argued were trade secret confidential information to her personal email address.

[00:04:25] Speaker 02:
That was the core allegations regarding Ms.

[00:04:28] Speaker 02:
Oritz.

[00:04:30] Speaker 02:
She was, I think, a copywriter for the marketing department, and there was a number of

[00:04:37] Speaker 02:
what we would argue with the confidential information that JDM used in this marketing department that she emailed to herself, you know, immediately following the termination or immediately prior to her submitting a resignation.

[00:04:55] Speaker 03:
You don't dispute that there was an employee-employee relationship there, do you?

[00:04:59] Speaker 02:
Oh, absolutely not.

[00:05:01] Speaker 02:
Yeah, absolutely not.

[00:05:03] Speaker 02:
And, you know, there was a, put it in council, you know, filed a notice of supplemental authority that quoted a portion of the Employment Protection Act that stated that the employment relationship, you know, is contractual in nature.

[00:05:20] Speaker 02:
The purpose of that Employment Protection Act in Arizona was to avoid or to clarify the relationship such that

[00:05:32] Speaker 02:
an employee could not make an argument that they had a right to employment for a particular term based on some sort of argument regarding an implied covenant of good faith and fair dealing.

[00:05:42] Speaker 02:
And that goes back to the Laggan-Seller case with a nude volleyball game at the Grand Canyon, which is a kind of a fun case if you're in Arizona.

[00:05:49] Speaker 02:
But the point is, one of their arguments was that the tort claims or the

[00:05:59] Speaker 02:
misappropriation, a trade secret claim against Ms.

[00:06:02] Speaker 02:
Dorowitz was intertwined with contract claims.

[00:06:05] Speaker 02:
There's never been an Arizona case that said that intertwining applies to different claims against different defendants.

[00:06:11] Speaker 02:
As always, all of the cases deal with port and contract claims against the same defendant.

[00:06:17] Speaker 02:
So that's what's distinguishable from the cases that they cite.

[00:06:21] Speaker 02:
And then the other thing, and I think this is relevant to

[00:06:24] Speaker 02:
The statute they cited, the Employment Protection Act, is Arizona's version of the Uniform Trade Secret Act 44-401 through 404.

[00:06:33] Speaker 02:
Under 44-404, there are three specified grounds.

[00:06:38] Speaker 02:
that a prevailing party in a trade secret case may recover its attorney's fees.

[00:06:43] Speaker 02:
That statute was passed after 12341.01A.

[00:06:48] Speaker 02:
And if it's because the employment relationship is contractual in nature, if in fact

[00:06:55] Speaker 02:
In every trade secret case in Arizona, the prevailing party can recover its attorney's fees.

[00:07:02] Speaker 02:
That 44-404 is completely superfluous and no Arizona courts held that.

[00:07:10] Speaker 01:
And again, I'm sorry.

[00:07:11] Speaker 01:
I've got a couple of questions I'd like to get in.

[00:07:14] Speaker 01:
So let's assume that I was sympathetic to your claims about Ms.

[00:07:20] Speaker 01:
Uritz.

[00:07:21] Speaker 01:
Was she jointly represented with Mr. Godinez?

[00:07:23] Speaker 01:
Was it common counsel for the two of them?

[00:07:27] Speaker 02:
There was common counsel.

[00:07:30] Speaker 02:
The individual defendants all had the same counsel.

[00:07:32] Speaker 02:
Impact had separate counsel.

[00:07:34] Speaker 01:
Can you point to any bills that were approved by the district court for attorney's fees that would have related to the claims against her alone and not against her and Mr. Godinez?

[00:07:47] Speaker 02:
Yeah, if you look at the application for attorney's fees that the Individual Defendants Council filed, I think it was Mr. Woodlock, I believe it's Exhibit 1.

[00:08:02] Speaker 02:
or exhibit five to his affidavit, has broken down fees for Ms.

[00:08:08] Speaker 02:
Eritz.

[00:08:09] Speaker 02:
And the whole basis of the settlement and the fee argument was, I've broken down fees separately billed for each of the four individual defendants.

[00:08:19] Speaker 02:
And this was significant in terms of how we settled the case.

[00:08:23] Speaker 02:
As to the fees they identified as common fees, as to all, they were broken up.

[00:08:27] Speaker 02:
He argued that each individual defendant was responsible for his or her share of that.

[00:08:33] Speaker 02:
So they were broken down in Mr. Bergdahl's application.

[00:08:36] Speaker 01:
Are there fees that the district court awarded in the proceeding that's still before us that have not been settled out?

[00:08:42] Speaker 01:
that remain common to Godinas and Yurats.

[00:08:47] Speaker 01:
It looks to me like Judge Jorgensen awarded fees that probably were for actions that were common to both Godinas and Yurats.

[00:09:03] Speaker 01:
Are you disputing those fees?

[00:09:06] Speaker 02:
We're disputing her portion of it.

[00:09:08] Speaker 02:
The way that

[00:09:10] Speaker 02:
defendants counsel divided it up was that Ms.

[00:09:12] Speaker 02:
Yuritz was responsible for one fourth of the common fees.

[00:09:17] Speaker 02:
And then counsel also included a separate exhibit, which again, I think was exhibit five to his affidavit that broke down fees specifically for her.

[00:09:26] Speaker 01:
Okay, if we thought that this was meritorious and did not think that any of your other arguments were meritorious, what kind of a reduction are we talking about?

[00:09:36] Speaker 01:
Do you have a number?

[00:09:38] Speaker 02:
I believe this year to separate fees, what we'd be arguing for a 20 seconds would be a miss your it's a separate fees, which is an exhibit five, which I think was around $12,000.

[00:09:47] Speaker 02:
And one.

[00:09:49] Speaker 02:
I have the number right one fourth of the common fees.

[00:09:56] Speaker 02:
And again, it's complicated in terms of, we'll just have to deal with whatever the water is, but it's complicated in terms of the settlement because that provides parameters as to the caps that we're responsible for.

[00:10:09] Speaker 03:
Council, am I correct in my understanding that if we conclude that the fees were not awardable under section 12-341.01, that you would be agreeable to remanding for consideration under section 44-404.1?

[00:10:27] Speaker 03:
Yes, Your Honor.

[00:10:30] Speaker 03:
Okay.

[00:10:33] Speaker 03:
All right, let's hear from opposing council, Mr. Workin.

[00:10:38] Speaker 03:
We can't see you.

[00:10:39] Speaker 03:
Okay.

[00:10:42] Speaker 00:
Good morning, Your Honors.

[00:10:43] Speaker 03:
Good morning.

[00:10:44] Speaker 00:
My name is Charles Workin.

[00:10:46] Speaker 00:
May it please the Court, I represent the Appellees, Goenius, and Yuritz, and I was sitting to the side of my podium at a table while you all were having that conversation.

[00:10:59] Speaker 00:
In answer to your question, Judge Rawlinson, the claims against Ms.

[00:11:06] Speaker 00:
Yuritz were counts two, three, eight, and nine, misappropriation of trade secrets, unfair competition, civil conspiracy, and aiding and abetting.

[00:11:19] Speaker 00:
And it's important to note that the civil conspiracy and aiding and abetting counts incorporated all the preceding allegations

[00:11:28] Speaker 00:
including the allegation of the breach of contract by Mr. Godinus and breaches by other defendants as well.

[00:11:36] Speaker 00:
So she was being captured in that broader net by the civil conspiracy and aiding and abetting claims.

[00:11:47] Speaker 00:
And the district court observed

[00:11:51] Speaker 00:
And I'm reading from the extract of record at page 18 that the claims against yurts were premised on conspiring and aiding and abetting other defendants for their alleged breach of agreements.

[00:12:09] Speaker 00:
And that's consistent with the second amended complaint, which I just summarized for you.

[00:12:16] Speaker 01:
Mr. Workin, I've read the Arizona authorities.

[00:12:22] Speaker 01:
I couldn't find myself anywhere where someone was awarded attorney's fees because a tort claim against them was related to a contract with someone else.

[00:12:36] Speaker 01:
Now, I understand, I'm going to probe a little more about the conspiracy and aiding and abetting, but I want to first ask, do you have any Arizona authority that would suggest that someone like Uritz can collect, that her claim can be intertwined with the breach by someone else?

[00:12:53] Speaker 00:
I understand your question and know, Your Honor, I'm not aware of a case with those precise facts or that analysis, but I think it really misstates the issue here.

[00:13:03] Speaker 00:
We're not talking about an award of fees here to Ms.

[00:13:07] Speaker 00:
Yuritz because some other defendant had a contract.

[00:13:12] Speaker 00:
We're talking here not about the intertwining of defendants, but the intertwining of claims.

[00:13:20] Speaker 00:
And as I said, you know, she, the intertwined- But there's no contract claims against her.

[00:13:26] Speaker 01:
That's what distinguishes this from all of the other Arizona cases.

[00:13:32] Speaker 00:
But yet she's alleged to have conspired with and aided and abetted the other defendants who did have contracts that were alleged to have been breached.

[00:13:44] Speaker 01:
But I think by your own admission, and I appreciated the candor of your answer, it was very refreshing.

[00:13:48] Speaker 01:
And I think you're right, but this would be an extension of Arizona law, wouldn't it?

[00:13:53] Speaker 00:
Well, but I don't think we need to go there.

[00:13:56] Speaker 01:
Okay, then go ahead.

[00:13:57] Speaker 01:
Please tell me why we don't need to go there.

[00:14:00] Speaker 00:
And certainly there are multiple Arizona cases that deal with the award of fees in a case where there are intertwined tort and contract claims.

[00:14:12] Speaker 00:
And the modular mining case

[00:14:14] Speaker 00:
is the one that is most like this because it involved misappropriation of trade secrets.

[00:14:20] Speaker 00:
It cites to Ramsey Eyre and it also cites to my own case of Campbell versus Westall from some 25 years ago.

[00:14:29] Speaker 00:
So we're not breaking any new ground in that respect.

[00:14:33] Speaker 03:
If I understand your argument, you're saying that because

[00:14:38] Speaker 03:
there were claims of civil conspiracy and aiding and abetting in the breach of the agreements that meets the arising out of contract language in the statute.

[00:14:50] Speaker 00:
Yes, Your Honor.

[00:14:51] Speaker 00:
That is what I'm trying to say to you.

[00:14:54] Speaker 00:
And I think we have another complication here to which this court should defer.

[00:15:01] Speaker 00:
And that is, as the district court recognized, it's impractical, impracticable to try to apportion the fees between the various claims.

[00:15:15] Speaker 00:
And in that situation, according to Arizona case law, it's a matter of abuse of discretion.

[00:15:25] Speaker 00:
The threshold question of the applicability of the statute to these claims one by one, we don't need to reach.

[00:15:35] Speaker 00:
And that was found to be true in the modular mining case.

[00:15:40] Speaker 00:
Instead, you look at this collection of claims that are inextricably intertwined and overlapping, and they all have this common nexus to some degree or another with underlying contracts and the breach of them.

[00:15:56] Speaker 00:
And then the complication of the

[00:15:59] Speaker 00:
impracticability of trying to apportion fees among them.

[00:16:03] Speaker 00:
And the district court observed in fact that the apportionment was not possible.

[00:16:10] Speaker 00:
So I submit to you that you should find no abuse of discretion here in deciding this fees issue as Judge Jorgensen did.

[00:16:21] Speaker 01:
But your opposing counsel suggested that there was at least one.

[00:16:24] Speaker 01:
You decided to exhibit five to one of the experts and cited $12,000 that that was attributable to URITS alone.

[00:16:36] Speaker 00:
And I don't have that number at hand.

[00:16:39] Speaker 00:
I believe that in the fee application, starting at excerpt page 138, there are tables of fees, itemizations of fees, and I believe that they are broken down by the individual defendants.

[00:16:58] Speaker 00:
My firm previously represented more than these two remaining defendants.

[00:17:04] Speaker 00:
But Judge Jorgensen's award was in the aggregate.

[00:17:10] Speaker 00:
not individual defendant by defendant.

[00:17:14] Speaker 00:
It's certainly not between Godinez and Uritz.

[00:17:17] Speaker 00:
But again, even if she had made an award or if you want to parse it out and segregate the amounts between these two people, still she is entitled to be awarded those fees because she was successful in defending this group of claims that were interwoven

[00:17:40] Speaker 00:
and involved in part an underlying breach of contract.

[00:17:45] Speaker 00:
Although not her employment agreement, which there was, she did have an employment agreement.

[00:17:54] Speaker 00:
And she's also, of course, in an employment relationship, which is contractual in nature.

[00:18:01] Speaker 00:
But more to the point,

[00:18:05] Speaker 00:
she was caught up in this allegation of aiding and abetting and conspiring with others to breach the contracts to keep confidential these alleged trade secrets.

[00:18:19] Speaker 00:
I hope I'm being responsive, Your Honors.

[00:18:25] Speaker 00:
It seems that there's

[00:18:28] Speaker 00:
no dispute here this morning that Mr. Godinus is entitled to his fees since we're only talking about Ms.

[00:18:36] Speaker 00:
Uretz.

[00:18:38] Speaker 00:
And we've had no discussion about

[00:18:44] Speaker 00:
the application of the Warner Factors, which Judge Jorgensen did carefully consider.

[00:18:51] Speaker 00:
There are seven factors, as you may well know, and five of them were relevant, and she discusses each of them in the record at pages 17 and 18.

[00:19:04] Speaker 00:
And we also haven't had any discussion about certifying any issue to the Supreme Court, and I imagine that that has been abandoned.

[00:19:14] Speaker 00:
there's no need to do that.

[00:19:16] Speaker 00:
And besides the premise of the question that appellants would want you to certify is, is incorrect and ignores the interwoven nature of these claims.

[00:19:27] Speaker 00:
If there are other questions, I'm happy to answer them.

[00:19:30] Speaker 03:
Yes, counsel.

[00:19:30] Speaker 03:
I'll ask you what I asked the polls and counsel is my understanding correct that if the panel finds that there was error under an awarding fees under ARS section 12,

[00:19:43] Speaker 03:
Would you object to a remand for consideration of fees under ARS section 44-4041?

[00:19:52] Speaker 00:
Of course not.

[00:19:57] Speaker 03:
I just want to get on the record.

[00:20:00] Speaker 00:
Okay.

[00:20:03] Speaker 00:
Certainly, if you were to reverse as to Ms.

[00:20:07] Speaker 00:
Uretz, you would remand the case to the district court for further proceedings consistent with your order.

[00:20:13] Speaker 00:
And we would then go back to the court and ask the court to consider and decide the application of the trade secrets fee statute, which Judge Jorgensen avoided doing because she made her award under the contract fee statute.

[00:20:29] Speaker 03:
Correct.

[00:20:30] Speaker 00:
Yes.

[00:20:31] Speaker 00:
So.

[00:20:33] Speaker 03:
All right, if there's nothing, I will give you a minute for rebuttal, Mr. Bray.

[00:20:38] Speaker 02:
Thank you, Your Honor.

[00:20:40] Speaker 02:
I would just say two things.

[00:20:41] Speaker 02:
I just took a look at the Second Amendment complaint.

[00:20:44] Speaker 02:
The aiding and abetting claim and the conspiracy claim refers only specifically to the misappropriation of trade secrets.

[00:20:51] Speaker 02:
There is broader language regarding, you know, unfair acts or illegal acts, but the only specific claims called out is the misappropriation of trade secrets.

[00:21:01] Speaker 02:
And with regard to whether those sort of claims would arise out of contract, I'd direct Your Honors to

[00:21:07] Speaker 02:
the bar J bar cattle versus pace case in Arizona, which is seven 63 P second five 45.

[00:21:17] Speaker 02:
And in that case, the court found that a claim for tortious interference with contract does not arrive under contract for purposes of 12, three 41.01 a. All right.

[00:21:30] Speaker 03:
Thank you, counsel.

[00:21:32] Speaker 03:
Thank you, your honor.

[00:21:34] Speaker 03:
It appears not.

[00:21:36] Speaker 03:
Thank you to both counsel for your helpful arguments.

[00:21:38] Speaker 03:
The case just argued is submitted for decision by the court and we are adjourned.

[00:21:44] Speaker 00:
Thank you.

[00:21:46] Speaker 00:
Thank you for hearing us.

[00:21:46] Speaker 00:
This session stands adjourned.