Caruthers v. Underhill
230 Ariz. 513
| Ariz. Ct. App. | 2012Background
- UHC is a family-controlled holding company; Clinton, son of James, purchased stock from Kyle (12 shares) and Helena (initially 7 shares, later remaining 5) at $6,000 per share; Kyle and Helena allege Clinton had special knowledge about stock value and misrepresented it.
- John Sr. (grandfather) previously controlled UTC/UHC; in 2004 a valuation for Diane’s estate valued a share at $6,000 (estate tax purpose); a 2006 appraisal valued UTC assets at about $35,000,000 but did not value UHC shares.
- During 2005–2006 Clinton sought to acquire a controlling stake; James provided loans to Clinton and co-signed loans to purchase shares; family tensions over control of UTC/UHC existed.
- Plaintiffs alleged breach of fiduciary duty, common law fraud, and securities fraud by Clinton; James and UHC were claimed to have aided/abetted and conspired; plaintiffs sought remedies and attorneys’ fees.
- The trial court granted summary judgment for Clinton and James; awarded UHC attorneys’ fees; the appellate court affirmed on all claims and the fee award, concluding no material fact supported misrepresentation or the special-facts duty; issues on appeal centered on misrepresentation, special facts, aiding/abetting, and contract-based fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Misrepresentation or omission by Clinton | Clinton misled by citing 2004 value as current | Offer of $6,000 was opinion, not misrepresentation; no duty to disclose | No material misrepresentation; claims fail |
| Special facts doctrine applicability | Clinton had special facts not disclosed; duty to share | Availability of information precludes special-facts duty | Special facts not applicable to Kyle/Helena; no material disclosure duty established |
| Aiding/abetting and conspiracy by James | James knew of higher values and aided Clinton | No tort by Clinton proven; James did not materially aid | Affirmed summary judgment for James; no basis for aiding/conspiracyJoel |
| Attorneys’ fees under ARS 12-341.01 | Fees should be awarded against UTC/UHC | Fees arise out of contract; UHC paid or agreed to pay | Fees awarded to UHC; timely and proper under contract-based theory |
Key Cases Cited
- Steinfeld v. Nielsen, 15 Ariz. 424 (Arizona 1913) (director/officer disclosure duties limited by special facts)
- Strong v. Repide, 213 U.S. 419 (Supreme Court 1909) (Special facts where director’s actions affect stock value)
- TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (U.S. Supreme Court 1976) (materiality of omitted facts standard)
- Van Schaack Holdings, Ltd. v. Van Schaack, 867 P.2d 892 (Colo. 1994) (special facts doctrine and duties of disclosure in close contexts)
- Marcus v. Fox, 150 Ariz. 333 (Ariz. 1986) (fraud arising from fraudulent inducement; contract-focused analysis)
- Garcia v. Cordova, 930 F.2d 826 (10th Cir. 1991) (soft information and materiality in fraud cases)
- Frazier v. S.W. Sav. & Loan Ass’n, 134 Ariz. 12 (App. 1982) (opinions on value generally not material fraud)
- Echols v. Beauty Built Homes, Inc., 132 Ariz. 498 (Ariz. 1982) (fraud elements; materiality)
- Thorne v. Bauder, 981 P.2d 662 (Colo. Ct. App. 1998) (reliability and materiality of professional appraisal)