In 2002, Comerica agreed to extend Xeba a line of credit. The Agreement required Xeba to submit monthly reports to Comerica describing the status of Xeba’s accounts receivable. A short time later, Comerica initiated a lawsuit against Xeba for allegedly breaching the contract. Xeba immediately sought Chapter 7 bankruptcy protection. Notably, the amount of accounts receivable that Xeba reported to the bankruptcy court was only one-fourth of what it had reported to Comerica the month before. Xeba’s president, Mr. Mahmoodi, was unfortunately unable to account for the discrepancy because he had recently been involved in a traffic accident that rendered him mentally incapacitated. A short time later, Comerica amended its complaint to add a fraud claim against Mr. Mahmoodi, alleging that he had knowingly and intentionally submitted reports to Comerica that falsely represented the value of Xeba’s accounts receivable. Comerica then moved for summary judgment on its fraud claim, arguing that the evidence supported a strong inference that Mr. Mahmoodi had intentionally submitted false reports. The Court granted summary judgment and Mr. Mahmoodi timely appealed.
The Arizona Court of Appeals reversed, holding that Comerica had not satisfied its burden of persuasion. In Arizona, the burden of persuasion on a summary judgment motion is heavy. The party moving for summary judgment must present evidence that would compel any reasonable juror to find in its favor on every element of its claim. If the evidence is susceptible to different assessments by a reasonable finder of fact, the motion must be denied – even if the non-moving party does not offer any opposing evidence. In this case, the Court of Appeals concluded that Comercia did not submit evidence sufficient to satisfy its burden of persuasion with respect to all the elements of fraud. Although the evidence could support an inference that Mr. Mahmoodi knowingly inflated the reports, the Court of Appeals found that a reasonable jury could also draw a number of other inferences. Because reasonable jurors could reach different conclusions, the Court of Appeals held that the lower court had improperly granted summary judgment.
Judge Swann authored the opinion; Judges Norris and Barker concurred.
Posted By: Brandon A. Hale