Wichansky v. Zowine et al

Filing 316

ORDER denying 314 Motion for Reconsideration. Signed by Judge David G Campbell on 1/13/2016.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Marc A. Wichansky,
Plaintiff,

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ORDER

v.

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No. CV-13-01208-PHX-DGC

David T. Zowine, et al.,

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Defendants.

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Defendants move for reconsideration on two issues addressed by the Court’s

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December 11, 2015 order (Doc. 310). Doc. 314. Specifically, Defendants ask this Court

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to grant reconsideration on (1) whether the statute of limitations bars Wichansky’s claim

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that Zowine breached his fiduciary duties by failing to prevent billing fraud at MGA, and

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(2) whether the Superior Court’s valuation judgment precludes Wichansky from

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recovering Receiver’s fees. Because Defendants have failed to identify any error in the

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Court’s order, let alone the type of “manifest error” that would justify reconsideration

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(see LRCiv. 7.2(g)), the motion will be denied.

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1.

Statute of Limitations.

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In its previous order, the Court denied Defendant’s motion for summary judgment

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on Wichansky’s claim that Zowine breached his fiduciary duties by failing to prevent

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billing fraud at MGA. Doc. 310 at 5-9, see id. at 15-17. Defendants ask the Court to

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reconsider this ruling with respect to any breach of fiduciary duty claim based on

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Zowine’s alleged failure to implement proper billing and accounting procedures at MGA,

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arguing that Wichansky claims to have known before the onset of the limitations period

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that Zowine was in control of MGA and that MGA was experiencing billing issues.

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Doc. 314 at 2.

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As the Court explained in its order, the limitations period for a breach of fiduciary

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duty claim “begins to run when the plaintiff discovers the cause of action – that is, when

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the plaintiff knows, or reasonably should know, that he has been harmed, that the harm

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was caused by the defendant, and that the act or omission which caused the harm was

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wrongful.” Doc. 310 at 5 (citing Walk v. Ring, 44 P.3d 990, 996 (Ariz. 2002); Doe v.

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Roe, 955 P.2d 951, 961 (Ariz. 1998)). Defendants’ motion for summary judgment on the

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breach of fiduciary duty claim did not address when Wichansky knew or should have

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known of Zowine’s alleged failure to implement proper procedures. Defendants focused

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instead on when Zowine’s duty to implement such procedures arose:

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If Zowine had a duty to stop billing fraud, that duty would have arisen no
later than 2010. Similarly, if Zowine was in charge of medical billing
“long before” 2010 (Doc. 160 ¶ 59), his duty to investigate and institute
policies to prevent fraud would have been triggered then. A breach of
fiduciary duty claim premised on the Medical Billing Theories is therefore
time-barred.

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Doc. 275 at 3 (legal citations omitted).

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Defendants argue in their motion for reconsideration that “if Wichansky was

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aware of medical billing issues, regardless of whether he knew who was responsible for

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creating those issues, he was on notice that the absence of anti-fraud policies and

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procedures might be a problem at the company – which would have been Zowine’s

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responsibility as the person in ‘complete managerial control of [MGA’s] billing

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processes.’” Doc. 314 at 3. This argument focuses on Wichansky’s knowledge rather

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than Zowine’s duty and therefore differs from the argument made in the summary

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judgment motion. Motions for reconsideration are not the place to make arguments that

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could have been made in the original briefing. Nw. Acceptance Corp. v. Lynnwood

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Equip., Inc., 841 F.2d 918, 925-26 (9th Cir. 1988).

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In addition, Defendants’ original motion did not show that knowledge of medical

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billing issues is tantamount to knowledge that proper accounting procedures have not

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been implemented. Surely even businesses with proper procedures sometimes encounter

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billing problems. The fact that procedures are implemented does not mean that they will

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always be followed by every employee, nor does it mean that the manager will always be

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aware when procedures are not followed. Defendants failed to show in their motion that

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Wichansky’s pre-limitations-period knowledge included the fact that Zowine had failed

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to implement proper billing and accounting procedures.

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2.

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The previous order declined to accept Wichansky’s argument that this Court

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should impose a penalty for Defendants’ failure to comply with the state court order,

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noting that enforcement of the state court order is the province of the state court.

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Doc. 310 at 13. The Court also noted, without deciding, that it likely would be improper

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for the Court to address alleged defects in the state court judgment. Doc. 310 at 12 n. 11.

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Defendants ask the Court to extend these observations to preclude Wichansky from

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recovering from Defendants the portion of the Receiver’s fees assigned to Wichansky in

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the state court valuation proceeding, suggesting that doing so would re-litigate a matter

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“already addressed by the Superior Court.” Doc. 314 at 4.

Receiver’s Fees.

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The Court does not agree with Defendants’ characterization of the state court

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decision. The state court’s task was to determine the fair value of Wichansky’s share in

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the company as of the date he petitioned for dissolution. See A.R.S. § 10-1434(D).

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Following this statutory directive, Judge Oberbillig deducted a portion of the Receiver’s

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fee from each of the company’s owners in proportion to their ownership. Doc. 276-2 at

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41-43. Judge Oberbillig explicitly disclaimed any intention to rule on either party’s

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fiduciary duty claims, explaining that his valuation ruling would not have preclusive

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effect on these claims. Doc. 292-1 at 187-88 (“I’m not here on a fair value hearing to

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determine the other counts in the complaint. Breach of fiduciary duty, whatever those

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might be. . . . I don’t think there’s going to be preclusive effect.”). Thus, permitting

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Wichansky to recover his portion of the Receiver’s fee in this case as damages for breach

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of fiduciary duty will not re-litigate any matter decided by the state court.

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IT IS ORDERED that Defendants’ motion for reconsideration (Doc. 314) is
denied.
Dated this 13th day of January, 2016.

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