Ajman Stud v. David Cains
19-16779
| 9th Cir. | Sep 16, 2021Background
- In 2012 Ajman Stud bought a mare (La Bella Versace) from Stonewall Farms; Stonewall (via agent Cains) allegedly failed to disclose the mare had been bred and that reserved embryo rights existed.
- Stonewall received payment Feb 28, 2012, but retained the mare until May 2012; while in Stonewall’s care she was artificially inseminated and two embryos were extracted; Ajman learned of the breeding in June 2013.
- Ajman sued in Arizona state court (claims: breach of contract, breach of covenant of good faith and fair dealing, fraud, conversion, breach of fiduciary duty, breach of bailment, and declaratory relief); the case was removed to federal court.
- After a six-day bench trial the district court ruled for Ajman on all claims except breach of contract, awarding $975,000 compensatory, $100,000 punitive, and attorneys’ fees (~$743,357); defendants appealed; consolidated appeals followed.
- The Ninth Circuit affirmed most rulings, reversed the fiduciary-duty judgment, and remanded limited issues (attorneys’ fees relating to an unrelated suit) for further proceedings.
Issues
| Issue | Plaintiff's Argument (Ajman) | Defendant's Argument (Cains/Stonewall/Bailey) | Held |
|---|---|---|---|
| Motion for new trial based on alleged erroneous factual findings/miscitations | District court findings supported the judgment; errors (if any) were immaterial | District court made numerous clearly erroneous findings and miscitations undermining confidence in the judgment | Denied — appellants showed only speculation and no material effect on judgment |
| Motion to dismiss as sanction for alleged coaching during deposition of Sh. Ammar | No coaching occurred; Ajman not responsible for tech glitches | Grassi coached Sh. Ammar via texts and Ajman should be sanctioned/dismissed | Denied — no evidence of coaching; district court credibility finding not an abuse of discretion |
| Pretrial exclusion of evidence from the separate Cains/Grassi suit | Exclusion appropriate because evidence would confuse matters and concern an unrelated transaction | Evidence was relevant and admissible to impeach/defend | Affirmed — court did not clearly err; Rule 403 confusion/unfair prejudice problem |
| Admission of Cains’ alleged prior bad acts (404(b)) | Prior acts probative of lack of mistake and intent | Prior-acts evidence unduly prejudicial and should be excluded | Affirmed — probative of intent; appellants failed to show substantial prejudice |
| Alter ego liability for Bailey | Bailey and Cains commingled assets with Stonewall; observing corporate form would promote injustice | No evidence Stonewall was formed or used to perpetrate fraud | Affirmed — Arizona law requires unity of interest and that corporate form would sanction fraud or promote injustice; evidence showed commingling and enrichment of Bailey |
| Liability on principal tort claims (fraud; breach of covenant; bailment; fiduciary duty) | Evidence supports fraud, breach of covenant, and bailment; fiduciary exists from long relationship | Insufficient evidence for these claims, especially fiduciary duty | Fraud, covenant, and bailment affirmed; fiduciary duty reversed — record lacked factors (influence, sophistication, entrustment) to support fiduciary relationship |
| Damages for lost breeding/embryos and punitive damages | Expert testimony and testimony re: plan to breed to Ajman stallion support non-speculative lost-embryo damages; conduct warranted punitive damages | Damages speculative; stallion semen was unreliable/impotent | Affirmed — expert and record support four-embryo estimate and compensatory award; punitive damages supported by evidence of malice/intentional misconduct |
| Attorneys’ fees under Ariz. Rev. Stat. § 12-341.01 | Fees recoverable because torts arose from contractual relationship | Fees improper because breach-of-contract claim failed | Affirmed in principle — fees allowed where claims arise from contract; remanded to determine whether fees included work on the separate Cains/Grassi suit |
Key Cases Cited
- Dietel v. Day, 492 P.2d 455 (Ariz. Ct. App. 1972) (Arizona alter-ego test: unity of interest and that observance of corporate form would sanction fraud or promote injustice)
- Ridgeway v. Walmart Inc., 946 F.3d 1066 (9th Cir. 2020) (existence of conflicting evidence does not by itself invalidate a bench trial finding supported by clear and convincing evidence)
- Rawlings v. Apodaca, 726 P.2d 565 (Ariz. 1986) (en banc) (punitive-damages standard requires proof of an ‘‘evil mind’’ or similar culpability under Arizona law)
- Eagerton v. Fleming, 700 P.2d 1389 (Ariz. Ct. App. 1985) (factors for determining existence of a fiduciary relationship)
- Cook v. Orkin Exterminating Co., 258 P.3d 149 (Ariz. Ct. App. 2011) (hallmarks of fiduciary association include intimacy, secrets, or entrusting of power)
- Marcus v. Fox, 723 P.2d 682 (Ariz. 1986) (en banc) (test for awarding contract-based attorneys’ fees when tort claims arise from contractual relationship)
- Associated Indemnity Corp. v. Warner, 694 P.2d 1181 (Ariz. 1985) (en banc) (factors and discretion in awarding attorneys’ fees under Arizona law)
- Harper v. City of L.A., 533 F.3d 1010 (9th Cir. 2008) (appellate standard requiring showing of substantial prejudice to overturn an evidentiary ruling)