Surowiec v. Capital Title Agency, Inc.
790 F. Supp. 2d 997
D. Ariz.2011Background
- In November 2006, Surowiec purchased a Scottsdale condo from Shamrock Glen, with Romley of Capital Title Agency as escrow agent.
- Surowiec contends Romley failed to disclose pre-closing that the property would be encumbered by investor deeds of trust and related liens.
- Liens and investor foreclosures allegedly prevented Surowiec from selling, causing financial loss.
- Surowiec sued Romley and Capital in November 2009 asserting breach of contract, fiduciary duty, fraud, negligent misrepresentation, negligence, and breach of the implied covenant, seeking compensatory and punitive damages.
- The court granted in part Defendants’ summary judgment, denied Plaintiff’s summary judgment motion, and granted in part sanctions motions.
- Damages issues centered on whether compensatory damages could exceed $100,000 given purchase price, later sale prices, current value, and impact of liens; punitive damages were challenged as to evidence of evil mind; spoliation and discovery sanctions were also addressed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Damages certainty for compensatory relief | Plaintiff: damages exceed $100k based on price history and encumbrances. | Defendants: damages require more precise proof; claims speculative due to market factors. | Damages sufficient to survive summary judgment; jury to decide amount |
| viability of punitive damages | Plaintiff argues evidence shows evil mind via Romley’s fraud participation. | No clear and convincing evidence of outrageous conduct; punitive not warranted. | Punitive damages rejected; summary judgment granted for Defendants on this claim |
| breach of fiduciary duty – escrow duties and causation | Defendants breached fiduciary duties by failing to disclose and by mismanaging escrow releases. | Evidence shows disclosures occurred; causation and damages not proven yet; material facts for trial remain. | Denial of Plaintiff’s summary judgment; issues of duty, breach, causation, and damages for trial |
| spoliation sanctions and duty to preserve | Capital failed to preserve emails; urged sanctions for spoliation. | No substantial spoliation; preservation adequate. | Spoliation found; adverse inference sanction warranted; default or preclusion denied |
| sanctions under Rule 37 and inherent powers | Requests severe sanctions due to discovery abuses by Capital. | Less severe sanctions appropriate; monetary sanctions suffice. | Monetary sanctions awarded; no harsher remedies imposed |
Key Cases Cited
- Gilmore v. Cohen, 95 Ariz. 34 (Ariz. 1963) (certainty of damages not required if damage is proven)
- Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326 (Ariz. 1986) (punitive damages require showing outrageous conduct; proper mindset)
- Rawlings v. Apodaca, 151 Ariz. 149 (Ariz. 1986) (fraud not always punishable by punitive damages; need more than mere tort)
- Mur-Ray Mgmt. Corp. v. Founders Title Co., 169 Ariz. 417 (Ariz. Ct. App. 1991) (escrow fiduciary duties; question of duty, breach, causation for jury)
- Maganas v. Northroup, 135 Ariz. 573 (Ariz. 1983) (duty to disclose in escrow and fiduciary duties in title transactions)
- Zubulake v. UBS Warburg LLC (Zubulake IV), 220 F.R.D. 212 (S.D.N.Y. 2003) (duty to preserve evidence; scope and triggers)
- Rimkus Consulting Group, Inc. v. Cammarata, 688 F.Supp.2d 598 (S.D. Tex. 2010) (spoliation sanctions standard; relevance and prejudice when missing evidence)
- Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060 (N.D. Cal. 2006) (no duty to preserve absent reasonable anticipation of litigation)
- Goodman v. Praxair Servs., Inc., 632 F.Supp.2d 494 (D. Md. 2009) (preservation duty; focus on counsel's role and litigation hold)
- Victor Stanley II, 269 F.R.D. 497 (D. Md. 2010) (sanctions for spoliation; relevance and prejudice standard)
- Leon v. IDX Systems Corp., 464 F.3d 951 (9th Cir. 2006) (five-factor test for terminating sanctions; adverse inference as alternative)
- Dawson v. Withycombe, 216 Ariz. 84 (Ariz. Ct. App. 2010) (punitive damages not automatic in fraud cases)
- Smethers v. Campion, 108 P.3d 946 (Ariz. Ct. App. 2005) (elements of breach, causation, and damages in fiduciary duty claims)