Monday, April 29, 2013

Arizona Supreme Court Rules that Lawyer Seeking Reinstatement Need Not Identify “Root Cause” of Weakness that Led to Suspension

On April 17, 2013, J. Scott Rhodes, a partner at Jennings, Strouss & Salmon, secured a favorable opinion from the Arizona Supreme Court on behalf of his client in In re Johnson, Ariz., No. SB-12-0040-R. The client, a suspended lawyer seeking reinstatement, had received an adverse recommendation from the State Bar of Arizona’s disciplinary hearing panel, which claimed that there was insufficient proof that he had rectified the ethical problems that led to his suspension.

Although the hearing panel acknowledged that the lawyer had identified the weaknesses that produced the misconduct, and that he took the necessary steps to overcome those weaknesses, it required him to identify the deeper “root cause” of those weaknesses or the “character flaw that caused the decision to engage in unethical misconduct.”

The Supreme Court rejected the hearing panel’s recommendation and ordered that Mr. Rhodes’ client be reinstated to the active practice of law. In so doing, the Court adopted Mr. Rhodes’ argument that the lawyer seeking reinstatement must only prove rehabilitation by identifying the weakness that led to his misconduct and how he has overcome it, but he "need not establish what was or might have been the underlying cause of the identified weakness."

In the opinion, Justice John Pelander states, "A reinstatement hearing...does not necessarily require the peeling back of multiple layers of causation or psychoanalysis. Instead, the applicant must clearly and convincingly prove rehabilitation by specifically identifying the causal weakness leading to each count and explaining how the weakness has been overcome." Justice Pelander affirmed that Mr. Rhodes’ client had met that burden.

The opinion was reported in the ABA/BNA Lawyers' Manual on Professional Conduct™, a publication highly regarded as an authoritative source for news and guidance on attorney conduct and legal ethics. The manual is published by the American Bar Association and the Bloomberg BNA.

Thursday, April 25, 2013

Jennings Strouss Attorney VK Karpuk Comments on Recent Changes in Patent Laws


Jennings Strouss attorney VK Karpuk was featured in an article by the Phoenix Business Journal discussing recent changes in patent laws and the implications these changes could have on businesses. The full article can be accessed here.

Tuesday, April 23, 2013

Jennings Strouss Energy Attorney Deborah A. Swanstrom Featured in District Energy Magazine

Deborah A. Swanstrom

Jennings Strouss energy attorney Deborah A. Swanstrom is featured in the Second Quarter 2013 edition of District Energy magazine in an article entitled, “Dodd-Frank Act Extends Beyond Wall Street to Main Street: Why you may need to report your fuel supply and electricity transactions.” Click here to read the full article.

Monday, April 15, 2013

Does A Real Estate Appraiser Have A Duty To Your Client?

By David Brnilovich

It depends upon the circumstances and relationships between the parties.  Recently, a limited liability company (LLC) needed financing for the purchase and development of unimproved residential lots. One of the individuals involved with the LLC was going to personally guarantee the debt of the LLC. The LLC hired an appraiser to provide appraisals for the use of the guarantor. Belen Loan Investors (BLI) agreed to finance the project. When the loan went into default, BLI sued the LLC, guarantor and appraiser. Belen Loan Investors, LLC v. Bradley, 650 Ariz. Adv. Rep. 8.

The claims against the appraiser were for negligent misrepresentation, and aiding and abetting. The appraiser moved to dismiss the complaint on the grounds that he had no duty to BLI. The Court of Appeals reversed the dismissal, reaffirming the general rule that appraisers have no duty to third parties who might reasonably be expected, sooner or later, to have access to the information contained in the appraisal; however, the court then discussed the factors to be considered in order to determine whether the appraiser might have a duty to a third person.

Among the factors considered is the type of transaction or whether the appraiser’s client intended to use the appraisal for the benefit and guidance of others. Another factor is the appraiser’s knowledge. If he was aware that his client intended to supply the information contained in the appraisal to a specific group of persons, then the appraiser does owe a duty to the individuals of that group.

The limitations in the appraiser’s engagement letter are an important factor to be considered when evaluating the potential liability of an appraiser; however, the limitations of the engagement letter can be overcome by the knowledge of the appraiser, the intent of the appraiser’s client, and by other facts and circumstances.  The facts and circumstances underlying the loan process should be investigated if your client faces a potential loss from a defaulted real estate loan. 

David Brnilovich is a member of the law firm of Jennings, Strouss & Salmon P.L.C. and can be reached at or at 623.878.2222.

Thursday, April 11, 2013

Arizona Business Owners: Is That "Hold Harmless" Language in the Contract You Present to Customers Actually Providing You Protection?

By Garrett Olexa*

It is not uncommon for businesses today to include language in contracts, order forms, and invoices that seek to excuse or limit a business’s potential exposure if the company gets sued for things such as personal injuries or other types of civil wrongs other than breach of contract. Despite the common use of such contract language, many business owners do not know whether such language actually provides them any protection in the event they are sued. So -- do these “hold harmless” contract clauses actually work? As is often the case with the law, the answer is -- “it depends.”

While it would be impossible to address every situation in this short piece, and many situations will turn on case specific facts, the question of whether liability limiting contractual language will likely be found to be enforceable will be driven by some of the following basic principles and factors:

(1) Freedom to Contract v. Public Policy

In Arizona, parties are generally free to contract as they see fit, and agreed upon contract provisions are generally enforceable. One primary exception to the foregoing rule is if the contract provisions run contrary to State or local enacted laws or some identified public policy. Thus, you first have to know if there are any specific laws governing your industry that prevent you from attempting to excuse yourself from things such as your employee’s negligent conduct. Additionally, for a waiver of rights to be enforceable it must be made knowingly and willingly. Thus, the following are some of the factors to consider when assessing whether the waiver of liability language you are relying upon is enforceable:

a. Was the provision “bargained for”?

This is critical. The person seeking to rely upon the provision will need to be able to demonstrate the provision was bargained for or negotiated. Pre-printed form language on the back of an order form or invoice is unlikely to be considered “bargained for.” Requiring initials be placed next to the provision in the contract helps show it was highlighted, but in and of itself may not be enough to prove it was bargained for. The more you can show you walked through a contract and specific provisions or the other party tried to negotiate provisions of the contract, the stronger your case for enforcement of the liability limiting provision.

b. Were you on equal footing?

The Courts are most likely to enforce a provision when the parties are on equal footing when it comes to bargaining strength, relative knowledge and sophistication, and availability of other options. Where both parties are businesses, the courts are more likely to hold their feet to the fire. On the other hand, Courts are not likely going to dismiss a lawsuit for a personal injury when you the business owner are attempting to rely upon some language found in forms that were exchanged between company order clerks. Waivers need to be done knowingly.

c. Is there still an incentive for each party to act properly?

While contract language may be enforceable even if the business is seeking a complete waiver of potential tort liability, contract language that seeks less than a complete waiver of liability (for example, language that simply caps your company liability to a refund of what the customer was charged) may have a greater chance of being enforced. Why? Because public policy favors holding people accountable for conduct which harms others. Thus, if your contract language does not completely eliminate any incentive for you to act in a safe and prudent manner, but rather simply limits the potential recovery, a court is more likely to find such language enforceable (if the other critical factors are present).

* Garrett Olexa is a member of the law firm of Jennings, Strouss & Salmon, PLC and can be reached at or 623.878.2222.

Thursday, April 4, 2013

Jennings Strouss Supports "The Big Event"

Phoenix (April 4, 2013) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, is proud to support “The Big Event,” a fundraising event hosted by the Boys & Girls Club of Metro Phoenix’s MetrOrg. The Big Event, sponsored by Inventure Foods and presented by Jennings Strouss, will be held on Saturday, April 20 at 5:30 p.m. at the Museum at Papago Park, located at 1300 N. College Avenue in Tempe. The evening will include tasting stations from local restaurants, specialty beverages, entertainment and live and silent auctions.

“The Boys & Girls Clubs of Metro Phoenix helps thousands of Arizona’s kids by providing a safe space for them to learn, develop, and play,” says Kami Hoskins, an attorney at Jennings Strouss and a Board member of MetrOrg. “It has been my privilege to be a part of MetrOrg, and I hope others will support the great work of the Boys & Girls Clubs of Metro Phoenix.”

To receive more information about The Big Event, purchase individual tickets or to become a sponsor, please visit or contact Kate Delisa at the Boys & Girls Clubs of Metro Phoenix by phone at 602.343.1222 or email at

About the Boys & Girls Clubs of Metro Phoenix
The Boys & Girls Clubs of Metro Phoenix provides after-school and summer programs in some of the Valley’s most deserving neighborhoods. Our programs focus on four key areas: Academic Success, Healthy Choices, Be Great-Do Good and Fun with a Purpose, providing youth with the tools they need to enjoy childhood and become successful adults. Every year, thousands of children and teens benefit from programs through our 12 clubhouses, outreach services in the community and children’s dental clinic. For more information about the Boys & Girls Clubs of Metro Phoenix follow us on Facebook or visit

About the Boys & Girls Club of Metro Phoenix’s MetrOrg
MetrOrg is a volunteer group for the Boys & Girls Clubs of Metro Phoenix. Its members contribute their commitment, energy, connections and passion by raising funds, providing club resources and promoting community awareness. For more information about the Boys & Girls Club of Metro Phoenix, visit

About Jennings, Strouss & SalmonJennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix and Peoria, Arizona; and Washington, D.C. The firm's primary areas of practice include bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate; sports and entertainment; surety and fidelity; tax; and trust and estates. For additional information please visit and follow us on LinkedIn, Facebook and Twitter.

Contact: Dawn O. Anderson || 602.495.2806