McKnight v. McKnight

1 WO 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Briana McKnight, No. CV-20-01956-PHX-DWL 10 Plaintiff, ORDER v. Brian McKnight, et al., 13 Defendants.

15 INTRODUCTION 16 In this action, Plaintiff Briana McKnight (“Plaintiff”) initially asserted tort claims against her estranged father, Defendant Brian McKnight (“Defendant”), premised on the allegation that Defendant posted a video on his social media accounts in August 2019 in which he falsely accused Plaintiff of having sex with one of her relatives. (Doc. 1.)

20 However, Plaintiff later sought and obtained (over Defendant’s objection) leave to assert an array of contract-based claims against Defendant premised on the allegation that he violated the terms of a 2003 stipulated judgment arising from an Arizona family law proceeding by failing to maintain a life insurance policy for Plaintiff’s benefit that would be worth $1 million by the time Plaintiff turned 18 and graduated from high school. (Docs.

25 15, 19, 24.) Afterward, Defendant raised various jurisdictional challenges to the contract- based claims, but those challenges were rejected. (Docs. 29, 57.)

27 Now pending before the Court is Plaintiff’s motion for partial summary judgment on one of her contract-based claims. (Doc. 73.) As explained below, the motion is granted.

1 RELEVANT BACKGROUND 2 The facts set forth below are derived from the parties’ summary judgment submissions. Although the facts are generally undisputed, the Court has construed them in the light most favorable to Defendant, as the non-movant, and resolved any factual disputes in his favor.

6 In November 2001, Plaintiff was born. (Doc. 73-2 at 3 ¶ 3.) Defendant is Plaintiff’s biological father. (Id. at 3 ¶ 2.)

8 On November 24, 2003, the Maricopa County Superior Court entered a stipulated judgment of paternity (“the Stipulated Judgment”) in an action filed by Plaintiff’s mother against Defendant. (Doc. 34 at 17-19.)1 Among other things, the Stipulated Judgment provided that: 12 On or before January 1, 2004, Defendant shall obtain and maintain a whole life, universal life, or similar insurance policy on his life in the face amount of $1 million with the minor child as the sole irrevocable beneficiary. . . .

14 [T]he terms of the policy shall provide that, by the time the minor child reaches the age of 18 and has graduated high school, she will have a million dollar life insurance policy on his life free of any further premium payment 16 obligations. Defendant shall provide [Plaintiff’s mother] with a copy of the life insurance policy . . . as soon as he obtains the policy. (Id. at 18-19.)

Pursuant to the Stipulated Judgment, Defendant obtained a $1 million life insurance policy from Transamerica Occidental Life (“Transamerica”). (Doc. 73-3 at 8.) Initially, Defendant identified Plaintiff’s mother as the beneficiary. (Doc. 73-4 at 2.) Later, Defendant filed paperwork to designate Plaintiff as the beneficiary. (Id. at 5-7.)

In November 2019, Plaintiff turned 18. (Doc. 73-2 at 3 ¶ 3.)

In June 2020, Plaintiff graduated from high school. (Id. at 3 ¶ 4.)

On November 4, 2020, Defendant submitted a document to Transamerica entitled The Stipulated Judgment is subject to judicial notice and Defendant has, at any rate, admitted the relevant details concerning its existence and contents. (Doc. 59 ¶ 40 [“Defendant admits the existence of the Contract and that the Contract contains the language quoted in Paragraph 40.”]; Doc. 73-2 at 11-12 [admitting Request for Admission Nos. 2-4].)

1 “Request for Full Surrender for Life Insurance Policies.” (Doc. 73-4 at 13-16.) In this document, Defendant “elect[ed] to surrender the Policy for its net cash value.” (Id. at 13.)

3 On November 17, 2020, Transamerica processed the surrender request and mailed a check to Defendant for $74,414.04. (Doc. 73-5 at 2-3.)

5 On February 9, 2021, Plaintiff amended her complaint to add contract-related claims related to the insurance policy. (Doc. 25.)

7 On August 5, 2021, Plaintiff filed the pending motion for partial summary judgment. (Doc. 73.)2 9 On September 17, 2021, Defendant submitted an application to Pacific Life Insurance Company (“Pacific Life”) for a new $1 million life insurance policy. (Doc. 80- 1 at 3.) Per the application, Plaintiff would be the primary beneficiary of this new policy.

12 (Id. at 2.) There is no evidence that Pacific Life has issued the requested policy.

13 On September 21, 2021—that is, four days after submitting the application to Pacific Life—Defendant filed a response to Plaintiff’s motion. (Doc. 80.)

15 On October 1, 2021, Plaintiff filed a reply. (Doc. 81.)

16 DISCUSSION I. Legal Standard 18 “The court shall grant summary judgment if [a] movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A fact is ‘material’ only if it might affect the outcome of the case, and a dispute is ‘genuine’ only if a reasonable trier of fact could resolve the issue in the non-movant’s favor.” Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 23 1119, 1125 (9th Cir. 2014). The court “must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inference in the nonmoving party’s favor.”

25 Rookaird v. BNSF Ry. Co., 908 F.3d 451, 459 (9th Cir. 2018). “Summary judgment is improper where divergent ultimate inferences may reasonably be drawn from the 2 Plaintiff requested oral argument, but this request is denied because the issues are fully briefed and argument would not aid the decisional process. See LRCiv 7.2(f).

1 undisputed facts.” Fresno Motors, 771 F.3d at 1125 (internal quotation marks omitted).

2 A party moving for summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”

6 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[T]o carry its burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party’s claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.”

10 Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). “If . . .

11 [the] moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense.” Id. at 1103. Summary judgment is appropriate against a party that “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

16 II. The Parties’ Arguments 17 In Count Three of her operative complaint, Plaintiff asserts a claim for breach of contract. (Doc. 25 ¶¶ 38-46.) Plaintiff now moves for partial summary judgment on that claim. (Doc. 73.)3 As an initial matter, Plaintiff argues that a claim premised on a violation of the Stipulated Judgment is properly considered a breach-of-contract claim because (1) under Arizona law, a contract for child support becomes an independently enforceable contract once the child turns 18; and/or (2) she is an intended beneficiary of the Stipulated Judgment and thus has standing to enforce it. (Id. at 6-8.) On the merits, Plaintiff argues that a claim for breach of contract under Arizona law has three elements—the existence of a contract, breach, and resulting damages—and the first two elements are established here because (1) it is undisputed that the Stipulated Judgment exists and (2) Defendant breached Although the motion erroneously refers to the breach-of-contract claim as Plaintiff’s “Fourth Cause of Action” (Doc. 73 at 1), a review of the second amended complaint reveals that the breach-of-contract claim appears in Count Three.

1 his obligations under the Stipulated Judgment by cashing out the insurance policy in lieu of maintaining it for her benefit and delivering it to her. (Id. at 8-9.) Finally, as for damages, Plaintiff contends that “[t]he fact of her damages is beyond dispute,” in light of Defendant’s failure to maintain and deliver the insurance policy, and “[t]he precise amount of damages can be established at trial.” (Id. at 9-11.)4 6 Although Defendant opposes Plaintiff’s motion (Doc. 80), he does not dispute many of the factual and legal predicates on which the motion is based. Specifically, Defendant does not dispute that Plaintiff’s claim arising from the Stipulated Judgment is properly characterized as a breach-of-contract claim, that Plaintiff has standing to pursue such a claim, that the Stipulated Judgment required him to maintain a $1 million insurance policy for Plaintiff’s benefit, and that he cashed out the insurance policy in November 2020.

12 Nevertheless, Defendant contends that summary judgment should be denied because “Plaintiff has no damages and, absent damages, no claim for breach of contract lies.” (Id. at 1.)5 In support of his claim that Plaintiff has suffered no damages, Defendant proffers evidence that he applied for a new $1 million insurance policy in September 2021. (Doc.

16 80-1.) According to Defendant, this application shows that Plaintiff “will imminently have a $1 million life insurance policy on his life” and that he has substantially complied with his obligations under the Stipulated Judgment. (Doc. 80 at 3-4.) Defendant concludes: “Because Defendant has obtained a $1 million life insurance policy to which Plaintiff is the beneficiary, she is in as good a position as she would have been in had the contract been performed. Any money awarded Plaintiff at this stage would constitute a windfall, and is therefore not allowed.” (Id. at 4, citations, quotation marks, and brackets omitted.)6 4 Plaintiff also argues “in the alternative that she would be entitled to summary judgment (or enforcement of the judgment) based on well-known principles of full faith and credit even if the Court were to view the underlying contract as having been subsumed into the Stipulated Judgment.” (Doc. 73 at 11-16.) It is unnecessary to address this alternative argument because, as discussed below, Plaintiff is entitled to relief based on her primary argument.

5 See also Doc. 80 at 3 (“The elements of a breach of contract claim are ‘(1) the existence of a contract; (2) breach; and (3) resulting damages.’ The Motion fails to establish that Plaintiff has suffered any damages. Without damages, no claim for breach of contract will lie.”) (citations omitted).

6 Defendant also responds to Plaintiff’s alternative summary judgment arguments.

1 In reply, Plaintiff argues that Defendant’s recent application for a new insurance policy has no bearing on the summary judgment analysis because, as of the date she amended her complaint to add the contract-related claims (and also as of the date she filed her summary judgment motion), there was no insurance policy in place. (Doc. 81 at 1-3.)

5 Plaintiff contends that, under Arizona law, she “became entitled to money damages” at the “moment [Defendant] failed to perform” and her damages must be measured from the date of breach. (Id. at 3.) In a related vein, Plaintiff argues that, under Arizona law, the aggrieved party in a breach-of-contract action is entitled to choose which remedy to pursue; here she has elected to pursue money damages; and Defendant cannot override her election by identifying his own preferred remedy (i.e., replacement of the policy) and forcing her to accept it. (Id. at 4.) Plaintiff also contends that Plaintiff’s application for a new policy cannot be considered “substantial compliance” because he still hasn’t obtained a new policy, the new policy is “materially different” from the sort of policy required under the Stipulated Judgment (because it is not yet fully paid), and requiring her to accept the new policy would thus expose her to “the risk of (1) [Defendant] defaulting in payments, as he did with the last policy, (2) [Defendant] absconding with the cash value of the policy, as he did with the last policy, and (3) [Defendant’s] death before the policy is fully paid up.”

18 (Id. at 4-5.) Finally, Plaintiff contends that she has established the certainty of damages because her money damages “can be calculated with reasonable certainty” by simply calculating “the present value, based on the Defendant’s life expectancy, of $1,000,000.”

21 (Id. at 6-8.)

22 III. Analysis 23 Plaintiff is entitled to partial summary judgment on the breach-of-contract claim in Count Three of her operative complaint. As noted, Defendant does not dispute Plaintiff’s ability to pursue a breach-of-contract claim based on the Stipulated Judgment, does not dispute that he was contractually required by the Stipulated Judgment to maintain a fully- paid $1 million life insurance policy for Plaintiff’s benefit, and does not dispute that he had (Doc. 80 at 4-5.)

1 breached this obligation (because he cashed out the policy in November 2020) by the time Plaintiff asserted her breach-of-contract claim in February 2021.

3 The sole ground on which Defendant challenges Plaintiff’s entitlement to summary judgment concerns the existence (and certainty) of damages, but as Plaintiff correctly points out in her reply, Defendant’s belated application for a new insurance policy in September 2021 does not create a disputed issue of fact on those issues. In Arizona, “the general rule appears to be that the rights of the parties with respect to a breach of contract are fixed at the time of breach and that damages are measured as of that time,” although “this is not a rigid rule which the trial court must apply in all situations.” Fairway Builders, Inc. v. Malouf Towers Rental Co., Inc., 603 P.2d 513, 525-26 (Ariz. Ct. App. 1979). See also State ex rel. Herman v. Schaffer, 467 P.2d 66, 75 (Ariz. 1970) (“[T]he State breached its agreement and the measure of damages, if any, should be computed, in accordance with the rule we have set forth herein, at the time that the breach occurred.”); 22 Am. Jur. 2d Damages § 95 (“Damages for a breach of contract are determined as of the time of the occurrence of the breach . . . .”). Here, Defendant breached his obligations under the Stipulated Judgment no later than the moment he cashed out the insurance policy in November 2020. The breach remained unremedied at the time Plaintiff amended her complaint in February 2021 to add the breach-of-contract claim.

19 Under Arizona law, Plaintiff was entitled to elect the remedy of monetary damages based on this breach. See, e.g., W. Pinal Fam. Health Ctr., Inc. v. McBryde, 785 P.2d 66, 68 (Ariz. Ct. App. 1989) (“Upon the breach of a contract, the party seeking relief has the choice of three remedies: rescind the contract, refuse to treat the breach as a termination of the contract and request that the court compel performance under the contract, or consider the breach to be a termination of the contract and request damages resulting from the breach.”). Defendant cannot avoid his obligation to pay such money damages by belatedly attempting to secure a new insurance policy and proffering those efforts as proof of his specific (albeit only substantial) performance of his contractual obligations. Id. at 70 (holding that “[t]he choice of remedies is [plaintiff’s], not [defendants’],” and that “[a]s the allegedly breaching parties, [defendants] may not require that [plaintiff] elect a preferred remedy.”). Finally, although Plaintiff’s reply identifies, for the first time, a methodology for calculating her monetary damages arising from the contractual breach, it is unnecessary at this time to determine whether this is the correct methodology as a matter of law. In her motion, Plaintiff only seeks partial summary judgment on the first two elements of her contract claim (existence of contract and breach) and states that “[t]he precise amount of damages can be established at trial.” (Doc. 73 at 10.) It is reasonably certain that Plaintiff has suffered some damages,7 so it is appropriate to grant her request for partial summary judgment on liability and defer any calculation of damages until trial. Cf. Simel v. City of New York, 274 A.D.2d 466, 466-67 (N.Y. App. Div. 2000) (“Since it is uncontroverted that the Knights failed to obtain the insurance required by the lease, the Supreme Court properly granted summary judgment . . . on [the] cross claim alleging breach of contract.

13 Accordingly, the Knights are liable . . . for any damages resulting from their failure to obtain the insurance.”) (citations omitted).

15 … 16 … 17 … 7 Courts have recognized that the failure to obtain a life insurance policy, in violation of a contractual obligation to do so, may result in compensable harm to the anticipated beneficiary of the policy. See, e.g., Continental Ins. Co. v. Bussell, 498 P.2d 706, 709 (Alaska 1972) (“In the event . . . that Bussell failed to discharge his duty to obtain a life insurance policy, the estate of Young would have the right to sue for damages for breach of the covenant to procure the life insurance policy. . . . Young, as a third party beneficiary of the union contract, was entitled to performance by Bussell of his contractual duty to secure the life insurance. Bussell’s contractual duty was established at the time the contract was made. A breach of that duty would change his relationship with Young and give rise to the obligation to respond in damages for the breach.”); In re Carter’s Estate, 116 N.W.2d 23 419, 420, 422 (Iowa 1962) (in an action involving a breach-of-contract counterclaim against a bank for failing “to procure credit life insurance upon the life of Carter,” rejecting the bank’s argument that the plaintiff “failed to prove any damage due to her failure to establish Carter could have obtained credit insurance from some other source,” holding that the tort cases cited by the bank were inapposite because they “are not authority on the question of damages for breach of such an agreement,” and recognizing that “the question of damages in this case will be treated and considered as if a policy in the usual form had been obtained by the bank. The measure of defendant’s recovery is the amount recoverable had a policy been actually obtained.”); Parsons v. Watley, 492 S.W.2d 61, 64 (Tex. Ct. App. 1973) (“[T]he trial court properly found Parsons agreed to procure credit life insurance on the life of Watley. Parsons failed to discharge this obligation. Therefore he is liable now to the plaintiff.”).

1 Accordingly, 2 IT IS ORDERED that Plaintiff's motion for partial summary judgment (Doc. 73) || is granted.

4 Dated this 5th day of November, 2021.

6 Lom 7 f C _o—— Dominic W, Lanza 8 United States District Judge -9-