author: PERKINS, Judge:

text:
    Greg SHEPHERD, Plaintiff/Appellant, v. COSTCO WHOLESALE CORPORATION, Defendant/Appellee.
    No. 1 CA-CV 18-0072
    Court of Appeals of Arizona, Division 1.
    FILED April 30, 2019
   PERKINS, Judge:

¶1 Greg Shepherd challenges the dismissal of his complaint against Costco Wholesale Corporation ("Costco") alleging numerous tort claims stemming from Costco's alleged failure to cancel an unwanted prescription and disclosure of the prescription information to his ex-wife. We reverse and remand for further proceedings on Shepherd's negligence and punitive damages claims but affirm the dismissal of his other claims. Further, we hold that HIPAA's requirements may inform the standard of care in a negligence action for wrongful disclosure of healthcare information.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Because Shepherd appeals from the grant of a motion to dismiss, we state the facts alleged in his operative complaint and must assume they are true for purposes of this appeal. Southwest Non-Profit Housing Corp. v. Nowak , 234 Ariz. 387, 389, ¶ 4, 322 P.3d 204, 206 (App. 2014).

¶3 Shepherd saw his physician in January 2016 for a check-up and a refill of his usual prescription. During that visit, his physician offered him an erectile dysfunction ("E.D.") medication sample, which he accepted. Shortly thereafter, Costco told Shepherd that his regular prescription and a full prescription of the E.D. medication were ready for pickup. Shepherd told Costco he did not want the E.D. prescription, and Costco acknowledged his cancellation request.

¶4 Approximately one month later, Shepherd called Costco to check on another refill of his regular prescription and was told it and a full prescription of the E.D. medication were ready for pickup. Shepherd again told Costco he did not want the E.D. medication.

¶5 Shepherd called Costco again the next day to authorize his ex-wife, with whom he was exploring possible reconciliation, to pick up his regular prescription. Costco gave her the regular prescription and the E.D. medication. She did not accept or pay for the E.D. medication but joked with a Costco employee about Shepherd "not picking it up yet" and told Shepherd's children and some friends about the medication. She also stopped reconciliation efforts with Shepherd.

¶6 Shepherd complained to Costco headquarters and received a written response that allegedly acknowledged the disclosure of medical information to his ex-wife violated both the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and Costco's privacy policy. Shepherd then sued Costco alleging negligence, breach of fiduciary duty, fraud, negligent misrepresentation, intentional infliction of emotional distress, intrusion upon seclusion, and public disclosure of private facts based on Costco's "public disclosure of an embarrassing medication that [he] twice rejected."

¶7 Costco moved to dismiss the complaint. The trial court granted the motion, finding (1) Costco was entitled to immunity from suit under Arizona Revised Statutes ("A.R.S.") section 12-2296, (2) HIPAA preempted the claims, and (3) Shepherd failed to allege sufficient facts to support his claims. Shepherd now appeals.

DISCUSSION

¶8 We review the dismissal of a complaint pursuant to Arizona Rule of Civil Procedure 12(b)(6)de novo . Coleman v. City of Mesa , 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). We are required to accept as true all well-pled facts and give Shepherd the benefit of all reasonable inferences arising therefrom. Botma v. Huser , 202 Ariz. 14, 15, ¶ 2, 39 P.3d 538, 539 (App. 2002). We will affirm the dismissal only if Shepherd would not have been entitled to relief under any facts susceptible of proof in his complaint. Coleman , 230 Ariz. at 356, ¶ 8, 284 P.3d at 867.

I. Negligence

¶9 A plaintiff must prove four elements to establish a negligence claim: (1) a duty requiring the defendant to conform to a certain standard of care, (2) the defendant's breach of that standard, (3) a causal connection between the defendant's conduct and the resulting injury, and (4) actual damages. Quiroz v. ALCOA Inc. , 243 Ariz. 560, 563-64, ¶ 7, 416 P.3d 824, 827-28 (2018).

¶10 In his complaint, Shepherd alleged Costco's duty of care arose from "the regulations governing pharmacy conduct, HIPAA laws, and Costco's own privacy policy." On appeal, he again contends Costco violated HIPAA and A.R.S. §§ 12-2291 to -2297.

A. Statutory Authorization

¶11 Under Arizona law, "all medical records and payment records, and the information contained in medical records and payment records, are privileged and confidential." A.R.S. § 12-2292(A). But this information may be disclosed "without the written authorization of the patient or the patient's health care decision maker as otherwise authorized by state or federal law, including [HIPAA] privacy standards." A.R.S. § 12-2294(C). HIPAA, in relevant part, allows covered entities such as Costco to "disclose to ... any ... person identified by the individual, the protected health information directly relevant to such person's involvement with the individual's health care." 45 C.F.R. § 164.510(b)(1)(i).

¶12 Here, Costco disclosed the E.D. prescription to Shepherd's ex-wife, whom he had expressly authorized to receive prescription information. Shepherd contends HIPAA only authorizes the disclosure of "filled prescriptions," but even assuming Shepherd's contention is correct, the E.D. prescription was filled, albeit erroneously.

¶13 Shepherd also contends he objected to such disclosure when he requested that the E.D. prescription be cancelled but he bases this contention on a HIPAA provision that applies only to disclosures that take place in the presence of the patient. 45 C.F.R. § 164.510(b)(2)(ii). The portion of the relevant regulation addressing disclosures made when the individual is not present grants covered entities such as Costco the ability to use professional judgment to reasonably infer the individual's best interest in allowing another to act on his behalf to pick up filled prescriptions. 45 C.F.R. § 164.510(b)(3). Costco did not need to exercise such judgment here because Shepherd authorized his ex-wife to receive prescription information. Shepherd thus did not allege a violation of either HIPAA or related Arizona statutes.

B. Duty

¶14 Although it did not arise under HIPAA, the parties nonetheless agree that Costco owed Shepherd a duty of care. That duty includes, at a minimum, the obligation to act as a reasonably prudent pharmacy would under the circumstances. See Lasley v. Shrake's Country Club Pharmacy, Inc ., 179 Ariz. 583, 586, 880 P.2d 1129, 1132 (App. 1994). Shepherd alleged that Costco "represented ... that his instructions to cancel his prescription had been acknowledged and would be acted upon," that it "fail[ed] to cancel the [E.D.] prescription" despite multiple requests and opportunities to do so, and that one of its employees "joked" with his ex-wife about the E.D. prescription. These allegations are sufficient to withstand dismissal on the pleadings under Rule 12(b)(6). See, e.g., Verduzco v. American Valet , 240 Ariz. 221, 225, ¶ 9, 377 P.3d 1016, 1020 (App. 2016) (quoting Ariz. R. Civ. P. 8(a)(2) ) (under Arizona's notice pleading rules, "[a] short and plain statement of the claim showing that the pleader is entitled to relief" is sufficient to overcome a Rule 12(b)(6) motion to dismiss). The trial court thus erred in dismissing Shepherd's negligence claim.

II. Breach of Fiduciary Duty

¶15 Shepherd alleged a fiduciary duty arose between himself and Costco because of "the confidential, professional, and private nature of the relationship between pharmacist/pharmacy and medical customer." Establishing a fiduciary duty requires either peculiar intimacy or an express agreement to serve as a fiduciary. Cook v. Orkin Exterminating Co., Inc. , 227 Ariz. 331, 334, ¶ 15, 258 P.3d 149, 152 (App. 2011). Neither circumstance is alleged in this case, and mere unilateral trust in another party's competence or integrity does not alone establish a fiduciary duty. Standard Chartered PLC v. Price Waterhouse , 190 Ariz. 6, 24, 945 P.2d 317, 335 (App. 1996). Nor does the fact that a profession is regulated, despite Shepherd's contention to the contrary. Thus, the superior court did not err in ruling Shepherd failed to state a claim for breach of fiduciary duty.

III. Fraud

¶16 Shepherd based his common law fraud claim on Costco's alleged representations that "his instructions to cancel his [E.D.] prescription had been acknowledged and would be acted upon." But unfulfilled promises cannot support an actual fraud claim absent the presence of an intent not to perform at the time of the promise. Hall v. Romero , 141 Ariz. 120, 123-24, 685 P.2d 757, 760-61 (App. 1984). Shepherd alleged no facts to suggest Costco intended to not cancel the E.D. prescription when it acknowledged his first cancellation request. He contends on appeal that there was a "triple confirmation that the offending prescription had been cancelled," but his complaint only alleged acknowledgment of his first cancellation request.

¶17 Shepherd further contends Costco acted fraudulently by failing to disclose to him the E.D. prescription was "a) still not cancelled and b) also waiting for pickup." He did not raise this argument in the trial court and cannot raise it for the first time on appeal. County of La Paz v. Yakima Compost Co., Inc. , 224 Ariz. 590, 606, ¶ 49, 233 P.3d 1169, 1185 (App. 2010). The trial court correctly dismissed Shepherd's fraud claim.

IV. Negligent Misrepresentation

¶18 Shepherd's negligent misrepresentation claim also relies on Costco's alleged acknowledgment of his request to cancel the E.D. prescription. Negligent misrepresentation, like fraud, cannot be premised on a promise of future conduct. McAlister v. Citibank (Arizona) , 171 Ariz. 207, 215, 829 P.2d 1253, 1261 (App. 1992). Thus, this claim was properly dismissed.

V. Intentional Infliction of Emotional Distress

¶19 A plaintiff alleging intentional infliction of emotional distress must show the defendant caused severe emotional distress by committing extreme and outrageous conduct with the intent to cause emotional distress or with reckless disregard of the near-certainty that such distress would result. Watkins v. Arpaio , 239 Ariz. 168, 170-71, ¶ 8, 367 P.3d 72, 74-75 (App. 2016). The conduct must be "so outrageous in character and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community." Mintz v. Bell Atl. Sys. Leasing Int'l, Inc. , 183 Ariz. 550, 554, 905 P.2d 559, 563 (App. 1995) (quoting Cluff v. Farmers Ins. Exchange , 10 Ariz. App. 560, 562, 460 P.2d 666, 668 (1969) ).

¶20 Shepherd contends a jury could conclude the "mocking disclosure" of the E.D. medication was outrageous. The trial court, not the jury, determines whether the acts are sufficiently extreme and outrageous to state a claim for relief. Id. ; see also Nelson v. Phoenix Resort Corp., 181 Ariz. 188, 199, 888 P.2d 1375, 1386 (App. 1994) (trial court must make "preliminary determination whether the conduct may be considered so outrageous and extreme as to permit recovery"). Shepherd only alleged that his ex-wife and a Costco employee "joked" at the counter about him "not picking it up yet." While these jokes may have been in poor taste, they do not approach the level of outrageousness needed to prove intentional infliction of emotional distress. See, e.g., Restatement (Second) of Torts § 46, cmt. d ("The liability clearly does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities.... There is no occasion for the law to intervene in every case where some one's feelings are hurt."); Ford v. Revlon, Inc. , 153 Ariz. 38, 43, 734 P.2d 580, 585 (1987) (stating that Arizona follows the standard for liability set forth in Restatement (Second) of Torts § 46 ). The trial court did not err in dismissing this claim.

VI. Intrusion Upon Seclusion

¶21 Shepherd contends the trial court erroneously found "actual trespass" was a necessary element of an intrusion upon seclusion claim. The court instead found he had not alleged any "intrusion." We agree.

¶22 This court has previously followed the four-part classification of invasion of privacy claims set forth in Restatement (Second) of Torts §§ 652A -E. Hart v. Seven Resorts Inc ., 190 Ariz. 272, 279, 947 P.2d 846, 853 (App. 1997). An intrusion upon seclusion occurs when one "intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns" and the intrusion is "highly offensive to a reasonable person." Restatement (Second) of Torts § 652B. It typically involves

(1) "physical intrusion into a place in which the plaintiff has secluded himself;"
(2) "the use of the defendant's senses, with or without mechanical aids, to oversee or overhear the plaintiff's private affairs, as by looking into his upstairs windows with binoculars or tapping his telephone wires;" or
(3) "some other form of investigation or examination into his private concerns, as by opening his private and personal mail, searching his safe or his wallet, examining his private bank account, or compelling him by a forged court order to permit an inspection of his personal documents."

Id ., cmt. b. Shepherd alleged none of these circumstances; he instead alleged in conclusory fashion that Costco "intentionally intruded upon the solitude and seclusion of [Shepherd's] private affairs and concerns" without alleging additional facts that would support this claim. On appeal, he contends Costco "published" the information to his ex-wife but does not contend that Costco knew Shepherd had purposefully secluded or shielded his ex-wife from receiving prescription information; in fact, Shepherd expressly authorized Costco to share prescription information with her. Accordingly, Shepherd's claim for intrusion upon seclusion fails as a matter of law. See Hart , 190 Ariz. at 279, 947 P.2d at 853 ("The defendant is subject to liability ... only when he has intruded into a private place, or has otherwise invaded a private seclusion that the plaintiff has thrown about his person or affairs") (quoting Restatement (Second) of Torts § 652B, cmt. c).

VII. Public Disclosure of Private Facts and False Light

¶23 Shepherd contends the disclosure to his ex-wife constituted a false light invasion of privacy. A false light tort occurs when:

One who gives publicity to a matter concerning another that places the other before the public in a false light is subject to liability to the other for invasion of his privacy, if
(a) the false light in which the other was placed would be highly offensive to a reasonable person, and
(b) the actor had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the other would be placed.

Hart , 190 Ariz. at 280, 947 P.2d at 854 (quoting Restatement (Second) of Torts § 652E ). Generally, however, "it is not an invasion of the right of privacy ... to communicate a fact concerning the plaintiff's private life to a single person or even to a small group of persons." Id . (quoting Restatement (Second) of Torts § 652D, cmt. a).

¶24 In Hart , the appellants asserted a false light claim based on "rumors in the community" that they had been terminated from employment because they were drug users. Id. The court rejected the claim, finding there was no evidence to suggest the employer had "publicly revealed the reasons for appellants' termination." Id . at 280-81, 947 P.2d at 854-55. Similarly, Shepherd did not allege that Costco publicly revealed the E.D. prescription. He only alleged that Costco disclosed it to one person-his ex-wife, who was authorized to receive such information. What she chose to do with that information is irrelevant to whether he stated a claim against Costco. See id . at 281, 947 P.2d at 855 ("The mere fact that some interested parties may have heard rumors from sources other than [the plaintiff] ... is, without more, insufficient to meet the level of publicity required for a false light claim.") (quoting Moore v. Big Picture Co ., 828 F.2d 270, 274 (5th Cir. 1987) ). Accordingly, the trial court properly dismissed Shepherd's false light claim.

VIII. Immunity from Suit for Good Faith Disclosures

¶25 Because Shepherd's negligence claim was improperly dismissed, we next consider the trial court's determination that Costco was immune from suit under A.R.S. § 12-2296. That statute provides as follows:

A health care provider, contractor or clinical laboratory that acts in good faith under this article is not liable for damages in any civil action for the disclosure of medical records, payment records or clinical laboratory results or information contained in medical records, payment records or clinical laboratory results that is made pursuant to this article or as otherwise provided by law. The health care provider, contractor or clinical laboratory is presumed to have acted in good faith. The presumption may be rebutted by clear and convincing evidence.

A.R.S. § 12-2296. When interpreting a statute, we look first to the statute's plain language. White Mountain Health Ctr., Inc. v. Maricopa Cty. , 241 Ariz. 230, 249, ¶ 68, 386 P.3d 416, 435 (App. 2016). If the language is clear and unambiguous, we must give effect to it without using other rules of statutory construction. Parsons v. Ariz. Dep't of Health Serv. , 242 Ariz. 320, 323, ¶ 11, 395 P.3d 709, 712 (App. 2017). We strictly construe statutes that limit common law liability. Ramirez v. Health Partners of S. Ariz. , 193 Ariz. 325, 329, ¶ 11, 972 P.2d 658, 662 (App. 1998).

A. Section 12-2296 Applies to the Alleged Disclosure.

¶26 The parties do not dispute that Costco is a "health care provider" for purposes of § 12-2296. A.R.S. § 12-2291(5)(a). Shepherd contends, however, that § 12-2296 does not apply because Costco did not disclose the E.D. prescription to his ex-wife "under this article."

¶27 Section 12-2294(C) authorizes the disclosure of medical records or the information contained in those records without written authorization "as otherwise authorized by state or federal law, including [HIPAA] privacy standards," and HIPAA allows disclosure to "any ... person identified by the individual" so long as the information is relevant to that person's involvement with the individual's health care. 45 C.F.R. § 164.510(b)(1)(i). HIPAA also authorizes covered entities to "use professional judgment and ... experience with common practice to make reasonable inferences of the individual's best interest in allowing a person to act on behalf of the individual to pick up filled prescriptions, medical supplies, X-rays, or other similar forms of protected health information" when the individual is not present. 45 C.F.R. § 164.510(b)(3).

¶28 Shepherd admits that he authorized his ex-wife to pick up his regular medication and that he was not present at the time of the disclosure. Accordingly, Costco's disclosure was within the scope of § 12-2296.

B. Shepherd Alleged Sufficient Facts to Avoid Dismissal Based on § 12-2296 Immunity.

¶29 Shepherd argues Costco is not entitled to immunity because it did not act in good faith. While the statute presumes good faith, it does not define it; we therefore give the term its ordinary meaning and may consult dictionary definitions in doing so. DBT Yuma, L.L.C. v. Yuma Cty. Airport Auth. , 238 Ariz. 394, 396, ¶ 9, 361 P.3d 379, 381 (2015).

¶30 Webster's Second Unabridged Dictionary defines good faith, in the general sense, as "accordance with standards of honesty, trust, sincerity, etc." Random House Webster's Second Unabridged Dictionary 822 (2001); see Sierra Tucson, Inc. v. Pima Cty. , 178 Ariz. 215, 220, 871 P.2d 762, 767 (App. 1994) (citing same dictionary). Similarly, in the context of commercial transactions, the Uniform Commercial Code defines "[g]ood faith" as "honesty in fact in the conduct or transaction concerned"; see also Stewart v. Thornton , 116 Ariz. 107, 110, 568 P.2d 414, 417 (1977) (relying on the UCC's definition of good faith). Our supreme court has further noted that good faith, in the context of commercial transactions, entails the absence of bad faith including actions that amount to "guilty knowledge or willful ignorance." Stewart , 116 Ariz. at 110, 568 P.2d at 417.

¶31 Shepherd has alleged that: (1) he told Costco to cancel the E.D. prescription twice; (2) Costco acknowledged one of his requests but did not cancel the prescription; and (3) a Costco employee crudely joked about the prescription with Shepherd's ex-wife. Given these allegations, Shepherd may be able to prove some set of facts showing Costco did not act in good faith. See Luchanski v. Congrove , 193 Ariz. 176, 180, ¶ 20, 971 P.2d 636, 640 (App. 1998) (stating that a motion to dismiss should be denied unless it is "beyond doubt" that the plaintiff could prove no set of facts which would entitle him to relief) (quoting Newman v. Maricopa Cty., 167 Ariz. 501, 505-06, 808 P.2d 1253, 1257-58 (App. 1991) ). Thus, Costco was not entitled to dismissal based on § 12-2296 immunity. Instead, Costco's potential § 12-2296 immunity remains an open question on remand, subject to further discovery, but without prejudice to summary judgment in the event the developed record does not support a genuine issue of fact on this issue.

IX. HIPAA Preemption

¶32 We next consider the trial court's conclusion that HIPAA preempted Shepherd's claims.

¶33 Relying on federal authorities, Costco contends Shepherd "cannot use a HIPAA violation as the basis of a lawsuit" because HIPAA does not create a private cause of action. See, e.g., Webb v. Smart Document Solutions, LLC , 499 F.3d 1078, 1082 (9th Cir. 2007) ; Lee-Thomas v. LabCorp , 316 F.Supp.3d 471, 474 (D.D.C. 2018). Other state courts have allowed state law claims based on alleged HIPAA violations to survive a motion to dismiss. See R.K. v. St. Mary's Med. Ctr., Inc. , 229 W.Va. 712, 735 S.E.2d 715, 724 (2012) ("[S]tate common-law claims for the wrongful disclosure of medical or personal health information are not inconsistent with HIPAA ... [and] compliment HIPAA by enhancing the penalties for its violation and thereby encouraging HIPAA compliance"); Acosta v. Byrum , 180 N.C.App. 562, 638 S.E.2d 246, 251 (2006) ("Here, defendant has been placed on notice that plaintiff will use ... HIPAA to establish the standard of care. Therefore, plaintiff has sufficiently pled the standard of care in her complaint"); but see Sheldon v. Kettering Health Network , 40 N.E.3d 661, 672, ¶ 24 (Ohio 2015) ("[I]n our view utilization of HIPAA as an ordinary negligence 'standard of care' is tantamount to authorizing a prohibited private right of action for violation of HIPAA itself").

¶34 HIPAA does not prohibit a private right of action for tortious disclosure of healthcare information, it merely declines to create an independent federal statutory private right of action. See Webb , 499 F.3d at 1082 ; see also 65 Fed.Reg. 82462-01, 82566, 82641 (Dec. 28, 2000) (noting that the penalty provisions of HIPAA do not include a private right of action). A state-law negligence claim for wrongful disclosure of protected information, even when based on failure to abide by standard practices mandated by HIPAA, does not interfere with government enforcement actions authorized by HIPAA. Instead, additional state remedies encourage compliance with HIPAA by providing further means for patients to recover for harm suffered due to non-compliance. Accord Sheldon , 40 N.E.3d at 672, ¶¶ 24-25 (holding that HIPAA does not preempt state-law claims for unauthorized disclosure of medical information so long as the disclosure is not specifically allowed by HIPAA, but deferring to an Ohio statute setting forth a standard of care). Moreover, A.R.S. § 12-2296 limits, but does not eliminate, private causes of action based on improper disclosure of medical information. If all private causes of action were foreclosed, § 12-2296 's grant of qualified immunity would be superfluous. Thus, HIPAA does not preempt state-law negligence claims for wrongful disclosure of medical information. Accordingly, we hold HIPAA's requirements may inform the standard of care in state-law negligence actions just as common industry practice may establish an alleged tortfeasor's duty of care and to the extent such claims are permitted under A.R.S. § 12-2296.

¶35 Finally, relying on Skinner v. Tel-Drug, Inc. , Costco argues that federal courts in Arizona have previously dismissed negligence per se claims made by a patient on HIPAA grounds. No. CV-16-00236-TUC-JGZ (BGM), 2017 WL 1076376 (D. Ariz. Jan. 27, 2017), adopted by the district court at 2017 WL 1075029 (D. Ariz. March 22, 2017). In Skinner , the plaintiff raised a negligence per se claim alleging the defendant breached HIPAA regulations by sending numerous faxes containing protected health information to an unintended recipient. Id . at *1, *3. The magistrate judge recommended dismissing the plaintiff's claim because it relied solely on HIPAA violations to establish per se negligence. Id. *3-*4, *5. Skinner is distinguishable because Shepherd's negligence claim does not rely solely on HIPAA and because Shepherd did not state a per se violation of HIPAA in his complaint, as discussed supra . Moreover, we are not bound by the federal district court's interpretation of Arizona law. Arpaio v. Figueroa , 229 Ariz. 444, 447, ¶ 11, 276 P.3d 513, 516 (App. 2012).

X. Punitive Damages

¶36 Finally, we address the trial court's dismissal of Shepherd's punitive damages claim. To recover punitive damages, a plaintiff must prove something more than the underlying tort. Saucedo ex rel. Sinaloa v. Salvation Army , 200 Ariz. 179, 182, ¶ 11, 24 P.3d 1274, 1277 (App. 2001). There are no special pleading requirements for punitive damages claims; a general prayer for punitive damages is sufficient to put a defendant on notice that punitive damages are requested in the prayer for relief. Ezell v. Quon , 224 Ariz. 532, 538, ¶ 23, 233 P.3d 645, 651 (App. 2010) (quoting Kline v. Kline, 221 Ariz. 564, 572, ¶ 29, 212 P.3d 902, 910 (App. 2009) ). Most of the tort claims alleged in Shepherd's complaint that might legitimately give rise to a punitive damage claim have been properly dismissed by the trial court. What is left is a general negligence claim. But punitive damages are not available for mere negligence. Smith v. Chapman , 115 Ariz. 211, 214, 564 P.2d 900, 903 (1977) ("Punitive damages are not permitted in Arizona for mere negligence: there also must be shown a reckless or wanton disregard of the rights of others.") (citation omitted).

¶37 In his complaint, Shepherd alleged Costco's actions were "malicious, oppressive or in reckless disregard of Plaintiff's rights" and sought punitive damages. This conclusory allegation, standing alone, is insufficient to support punitive damages. Shepherd has, however, specifically alleged that Costco "rewards its pharmacy employees through a system of incentives for pharmacy sales, which system contributed to the failure of [Costco] to cancel the prescription as requested twice by Plaintiff." This is a serious allegation leveled against Costco. We reiterate that, in a Rule 12(b)(6) setting, we are not examining whether the allegation is true, or whether there is sufficient admissible evidence in the record to satisfy the heightened burden of proof and allow the jury to consider the claim. Instead, we presume counsel can meet the obligations imposed by Rule of Civil Procedure 11 and thus are required to accept that these allegations are true. See Ariz. R. Civ. P. 11(b)(3) (by signing a pleading, an attorney certifies that factual contentions have evidentiary support or likely will after discovery). In that circumstance, and on that basis alone, we cannot say as a matter of law that Shepherd will be unable to adduce facts supporting his allegation of an overt financial incentive to disregard a customer's prescription cancellation request. See Verduzco , 240 Ariz. at 225, ¶ 9, 377 P.3d at 1020 ("Under Arizona's notice pleading rules, it is not necessary to allege the evidentiary details of plaintiff's claim for relief.") (internal quotation marks omitted). Again, this holding is based on the Rule 12(b)(6) standard and will not prejudice any motion practice following discovery.

CONCLUSION

¶38 We affirm the dismissal of Shepherd's complaint except for his negligence and punitive damages claims. We reverse and remand for further proceedings on those claims. Shepherd may recover his taxable costs incurred on appeal upon compliance with Arizona Rule of Civil Appellate Procedure 21. See , e.g. , Douglas v. Governing Bd. of Window Rock Consol. Sch. Dist. No. 8 , 206 Ariz. 344, 346, 349, ¶¶ 3, 18-19, 78 P.3d 1065, 1067, 1070 (App. 2003) (awarding costs to party who successfully appealed trial court's dismissal of their claims).

THOMPSON, J., concurring in part, dissenting in part:

¶39 I concur with the majority opinion, except as to punitive damages against Costco, and the award of costs.

¶40 "To obtain punitive damages, plaintiff must prove that defendant's evil hand was guided by an evil mind." Rawlings v. Apodaca, 151 Ariz. 149, 162, 726 P.2d 565, 578 (1986). It would serve no evil purpose on Costco's part to reward employees' inefficiencies in filling prescriptions which customers do not want. Thus, the complaint fails to sufficiently allege conduct by Costco, with evil intent, which could have caused harm to Shepherd.

¶41 Costs are generally awarded when a party has prevailed on the merits. Plaintiff has not yet prevailed on the merits. Costs may also be awarded under the so-called " Wagenseller " exception. Wagenseller v. Scottsdale Mem. Hosp ., 147 Ariz. 370, 393-94, 710 P.2d 1025, 1048-49 (1985) (stating fees may be awarded where appellant has obtained reversal of an order central to the case or final determination of a significant issue of law, which determination on appeal forms a separate unit within the overall litigation); Henry v. Cook, 189 Ariz. 42, 44, 938 P.2d 91, 93 (App. 1996) (stating interpretation of "successful party" should be uniform for fees and costs). The punitive damages issue is merely ancillary, and not central to Shepherd's claims. Indeed his counsel, at oral argument, characterized the punitives claim as "a stretch."

¶42 I would therefore affirm as to punitive damages, and would not award costs at this point in the ongoing litigation.


source: Caselaw Access Project

author: BREARCLIFFE, Judge:

license: Public Domain

text:
    The STATE of Arizona, Appellee, v. Aaron Michael ROSE, Appellant.
    No. 2 CA-CR 2018-0136
    Court of Appeals of Arizona, Division 2.
    Filed April 22, 2019
    Mark Brnovich, Arizona Attorney General, Joseph T. Maziarz, Chief Counsel, By Tanja K. Kelly, Assistant Attorney General, Tucson, Counsel for Appellee
    Harriette P. Levitt, Tucson, Counsel for Appellant
    Judge Brearcliffe authored the opinion of the Court, in which Presiding Judge Staring and Judge Vásquez concurred.
   BREARCLIFFE, Judge:

¶1 Aaron Michael Rose appeals his convictions after a jury trial on two counts of sexual conduct with a minor under the age of fifteen. We affirm.

Issues

¶2 Rose contends the trial court committed fundamental error by admitting, under Rule 404(c), Ariz. R. Evid., evidence of his juvenile delinquency adjudication for child molestation. The state contends that the evidence was properly admitted. The sole issue on appeal is whether the court erred because Rule 404(c) does not permit the admission of evidence of other crimes, wrongs or acts committed by a juvenile as evidence of a character trait giving rise to an aberrant sexual propensity to commit a criminal sexual offense.

Factual and Procedural Background

¶3 We view the facts in the light most favorable to upholding the trial court's rulings and jury's verdict. See State v. Gay , 214 Ariz. 214, ¶¶ 2, 4, 150 P.3d 787, 790 (App. 2007). Rose was indicted on two counts of sexual conduct with a minor under the age of fifteen, a class two felony and dangerous crime against children in the first degree. Between December 2015 and August 2017, when Rose was thirty-six to thirty-eight years old, he engaged in the charged acts with the son of his then-girlfriend. The boy was between the ages of three and five at the time of the crimes. At trial, the state sought to introduce evidence under Rule 404(c) of Rose's prior juvenile delinquency adjudication for child molestation as evidence of Rose's aberrant sexual propensity to commit the acts charged in this case. In that matter, Rose, then fourteen, was found to have molested a five- to six-year-old boy in a similar manner.

¶4 Rose opposed the admission of the evidence arguing that expert witness testimony was necessary to demonstrate that he had a "continuing emotional propensity" to commit the crime, that the acts were dissimilar to the current charged offenses and remote in time, and that their admission would be unduly prejudicial. The trial court found the 1994 adjudication admissible under Rule 404(c). At the conclusion of the three-day trial, Rose was convicted on both counts, and the jury found the aggravating factor that the victim was age twelve or under at the time of each crime. Rose was sentenced to two consecutive life sentences, and he timely appealed. We have jurisdiction pursuant to A.R.S. §§ 13-4031 and 13-4033(A)(1).

Analysis

¶5 Rose did not assert below the ground he now asserts on appeal-that his 1994 adjudication was inadmissible by virtue of its being a juvenile adjudication. Consequently, he did not preserve the issue for harmless error review. As he must, he argues that the trial court's error in admitting this other-acts evidence was fundamental and prejudicial error. State v. Henderson , 210 Ariz. 561, ¶¶ 18-19, 115 P.3d 601, 607 (App. 2005). We therefore review the court's ruling admitting this other-acts evidence for fundamental error.

¶6 To establish fundamental, prejudicial error, a defendant must show trial error exists and that the error either went to the foundation of the case, deprived him of a right essential to his defense, or was so egregious that he could not possibly have received a fair trial. State v. Escalante , 245 Ariz. 135, ¶ 21, 425 P.3d 1078, 1085 (2018). If a defendant can make that showing, he must also demonstrate resulting prejudice. Id. If a defendant shows the error was so egregious that he could not have received a fair trial, however, then he has necessarily shown prejudice and must be granted a new trial. Id ."[T]he first step in fundamental error review is determining whether trial error exists." Id. (citing Henderson , 210 Ariz. 561, ¶ 23, 115 P.3d 601, 608 ).

¶7 We review the trial court's interpretation and application of court rules de novo . State v. Winegardner , 243 Ariz. 482, ¶ 5, 413 P.3d 683, 685 (2018). "We interpret court rules according to the principles of statutory construction." State v. Aguilar , 209 Ariz. 40, ¶ 23, 97 P.3d 865, 872 (2004). "But when the rule's language is unambiguous, 'we need look no further than that language to determine the drafters' intent.' " Id .

¶8 Rules 404(a) and (b) read together serve as an exception to the general principle, provided by Rules 401 and 402, Ariz. R. Evid., that all relevant evidence is admissible in criminal cases. Rules 404(a) and (b) bar evidence of "other crimes, wrongs, or acts" to prove a defendant's character or trait for the purpose of proving "action in conformity therewith." Rule 404(c), however, serving itself as an exception to Rules 404(a) and (b), permits admission of other-acts evidence for this purpose when the defendant is charged with having committed a "sexual offense."

¶9 In such a case, other-acts evidence is admissible under Rule 404(c)"if relevant to show that the defendant had a character trait giving rise to an aberrant sexual propensity to commit the offense charged." The trial court may admit such evidence if it finds (1) "the evidence is sufficient to permit the [jury] to find that the defendant committed the other act," (2) the other act "provides a reasonable basis to infer that the defendant had a character trait giving rise to an aberrant sexual propensity to commit the crime charged," and (3) the evidentiary value of the other-act evidence is not substantially outweighed by the factors stated in Rule 403, Ariz. R. Evid. ("unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence"). Ariz. R. Evid. 404(c). On its face, Rule 404(c) makes no distinction between the admission of evidence of another crime, wrong, or act the defendant committed as a juvenile and one he committed as an adult. See id. Nonetheless, Rose would have this court add to the rule, by judicial fiat, an additional restriction on the admission of such other-acts evidence, namely, that no evidence of an act committed when the defendant was a juvenile may be admitted under Rule 404(c).

¶10 Rose argues that any admission of other-acts evidence otherwise allowable under the plain reading of Rule 404(c) is impermissible and reversible fundamental error because "juvenile offenders are far different from adult offenders," and, as shown by other rules of evidence, juvenile adjudications must be treated differently from adult convictions. Rose also argues that the admission of such evidence under Rule 404(c) violates a criminal defendant's Fifth, Sixth, and Fourteenth Amendment rights under the United States Constitution, and his rights under article 2, §§ 23 and 24 of the Arizona Constitution. The state argues principally that Rose has failed to show fundamental error-including prejudice-because under its plain language, Rule 404(c) does not prohibit the use of juvenile crimes as other-acts evidence.

¶11 Initially, Rose argues that Rules 608 and 609, Ariz. R. Evid., are "instructive" on this question. Those rules, read together, do not permit the admission of evidence of a defendant's juvenile delinquency adjudication as impeachment evidence bearing on his credibility-that is, to prove his character trait for "truthfulness or untruthfulness." Because these rules treat juvenile delinquency adjudications differently from adult convictions for credibility determinations, Rose argues that such adjudications and convictions ought to be treated differently under Rule 404(c) for propensity determinations. We do not agree.

¶12 Rose is, in effect, asking us to apply the reasoning of a rule on impeachment to a question of propensity and then, having done so, read into Rule 404(c) a limitation not expressly put there by the supreme court or, at any time since its adoption in 1997, imposed otherwise statutorily by the legislature. That the supreme court distinguished juvenile delinquency adjudications from adult convictions in Rules 608 and 609, but made no corresponding distinction between juvenile other-acts evidence and adult other-acts evidence in Rule 404(c), supports the conclusion that it intended that there be none. Moreover, the legislature in A.R.S. § 8-207(B) provided that "[t]he disposition of a juvenile in the juvenile court may not be used against the juvenile in any case or proceeding other than a criminal or juvenile case in any court." (Emphasis added.) By expressly allowing the use of juvenile adjudications in criminal cases, this statute does not betray any public policy against using them for the purposes of Rule 404(c).

¶13 Rose then asks us to apply here the principles of Miller v. Alabama , 567 U.S. 460, 132 S.Ct. 2455, 183 L.Ed.2d 407 (2012) and Graham v. Florida , 560 U.S. 48, 130 S.Ct. 2011, 176 L.Ed.2d 825 (2010), addressing the punishment that may be levied against juvenile defendants. Rose wants this court to extend the general reasoning of those cases-that "children are constitutionally different" for the purposes of punishment-to this evidentiary matter. In Graham , extending its then-recent Eighth Amendment cases, the United States Supreme Court pronounced that "The Constitution prohibits the imposition of a life without parole sentence on a juvenile offender who did not commit homicide." 560 U.S. at 82, 130 S.Ct. 2011. In Miller , the Court, still extending, held that "mandatory life-without-parole sentences for juveniles violate the Eighth Amendment." 567 U.S. at 470, 132 S.Ct. 2455.

¶14 We are constrained by the Supremacy Clause to follow the United States Supreme Court in matters on which it may and does authoritatively speak in a similar factual context. See, e.g. , McLaughlin v. Jones , 243 Ariz. 29, ¶ 25, 401 P.3d 492, 498 (2017), cert. denied , --- U.S. ----, 138 S.Ct. 1165, 200 L.Ed.2d 314 (2018) ; Wright v. Salt River Valley Water Users' Ass'n , 94 Ariz. 318, 323, 384 P.2d 104 (1963) (court bound by decision of United States Supreme Court dealing with a similar fact situation). However, we are not constrained to apply its reasoning to wholly different circumstances on which that court has not spoken, or on which it cannot speak such as on pure matters of state constitutional or statutory law. See Pool v. Superior Court , 139 Ariz. 98, 108, 677 P.2d 261, 271 (1984) ("The decisions of the United States Supreme Court are binding with regard to the interpretation of the federal constitution; interpretation of the state constitution is, of course" the province of Arizona's courts); see also Bunker's Glass Co. v. Pilkington PLC , 206 Ariz. 9, ¶¶ 8, 13, 75 P.3d 99, 102-104 (2003) (declining "to rigidly follow federal precedent on every issue of antitrust law regardless of whether differing concerns and interests exist in the state and federal systems," and because doing so would "thwart[ ] the [Arizona] legislative intent" and would not necessarily achieve uniformity); McLaughlin v. Bennett , 225 Ariz. 351, ¶ 14, 238 P.3d 619, 623 (2010) (refusing to extend reasoning of federal courts on general treatment of public elections and union representation in context of a "separate amendment" ballot dispute). Because neither Graham nor Miller bears on evidentiary matters, and because this matter does not involve the 8th Amendment, we also will not apply the principles of those cases here.

¶15 Rose similarly cites to a series of non-binding, federal cases interpreting federal rules of evidence, which are materially different from the Arizona rule of evidence at issue, and asks us to follow their lead. Because Rule 404(c) has no identical counterpart in the federal rules of evidence, there is no federal lead to follow. Cf. Hernandez v. State , 203 Ariz. 196, ¶ 10, 52 P.3d 765, 767 (2002) ("In interpreting Arizona's evidentiary rules, we look to federal law when our rule is identical to the corresponding federal rule"); but see State v. Green , 200 Ariz. 496, ¶ 10, 29 P.3d 271, 273-274 (2001) ("When interpreting an evidentiary rule that predominantly echoes its federal counterpart, we often look to the latter for guidance."). Consequently, we will not look to the cited federal authority for guidance.

¶16 Defendants who committed other crimes, wrongs or acts while under the age of eighteen are not without safeguards as to the admission of such propensity evidence in later prosecutions for sexual offenses. As stated above, Rule 404(c) provides a series of factors a trial court must consider before any such evidence is presented to a jury: there must be sufficient facts supporting that the earlier act in fact occurred; the commission of that earlier act must provide a "reasonable basis to infer" that the accused had the aberrant-sexual-propensity character trait; and the evidence of the other act must not be "substantially outweighed by the danger of unfair prejudice"-as to which the court considers all of the traditional Rule 403 factors. Ariz. R. Evid. 404(c). While these considerations are given to evidence of other acts committed by adults as well as by minors, it is not an undemanding examination. Indeed, the trial judge here, examining those factors, although admitting evidence of the crime Rose committed at age fourteen, refused to admit evidence of another act he had committed at age eighteen, although urged to do so by the state.

¶17 Rose has failed to demonstrate that the trial court did not properly apply the plain language and requirements of Rule 404(c) when it admitted evidence of Rose's juvenile delinquency adjudication for child molestation as other-acts evidence of his aberrant sexual propensity to commit the crimes charged here. It is neither a trial court's nor this court's role to apply the rules of evidence other than according to their plain language. State v. Salazar-Mercado , 234 Ariz. 590, ¶ 4, 325 P.3d 996, 997 (2014) ("If a rule's language is plain and unambiguous, we apply it as written without further analysis."). Consequently, we do not find that the trial court erred. And because the court did not err in the first place, there necessarily cannot be fundamental error. Escalante , 245 Ariz. 135, ¶ 21, 425 P.3d 1078, 1085.

Disposition

¶18 Because evidence of another crime, wrong, or act committed by a minor, including one that resulted in a juvenile delinquency adjudication, may be admitted under Rule 404(c), we affirm Rose's convictions and sentences.

      Rose does not articulate, beyond his citation to United States Supreme Court case law elsewhere in his briefs, how the language of these federal constitutional provisions, which are generally applicable to all persons, are to be applied differently to him in a case such as this one. And, he does not approach any argument at all as to the Arizona constitutional provisions. Because he did not, we will not address the claim of a violation of these provisions beyond addressing the applicability of the United States Supreme Court cases cited. See State v. Moody , 208 Ariz. 424, n.9, 94 P.3d 1119, 1147 (2004) (Appellant "must present significant arguments, supported by authority, setting forth [the] appellant's position on the issues raised. Failure to argue a claim usually constitutes abandonment and waiver of that claim." (quoting State v. Carver , 160 Ariz. 167, 175, 771 P.2d 1382, 1390 (1989) )).

      Atkins v. Virginia , 536 U.S. 304, 122 S.Ct. 2242, 153 L.Ed.2d 335 (2002) (execution of the mentally retarded unconstitutional), Roper v. Simmons , 543 U.S. 551, 125 S.Ct. 1183, 161 L.Ed.2d 1 (2005) (death penalty for juveniles unconstitutional), and Kennedy v. Louisiana , 554 U.S. 407, 128 S.Ct. 2641, 171 L.Ed.2d 525 (2008) (death penalty in non-homicide cases unconstitutional).


text:
    COLORADO CUSTOM MAID, LLC, Petitioner, v. INDUSTRIAL CLAIM APPEALS OFFICE and Division of Unemployment Insurance, Respondents.
    Supreme Court Case No. 17SC350
    Supreme Court of Colorado.
    May 28, 2019
    Attorneys for Petitioner: James Abrams, LLC James Abrams, Denver, Colorado
    Attorneys for Respondent Industrial Claim Appeals Office: Philip J. Weiser, Attorney General, Emmy Langley, Assistant Solicitor General, Denver, Colorado
    No appearance on behalf of Division of Unemployment Insurance.
    En Banc
   JUSTICE HART delivered the Opinion of the Court.

¶1 Colorado Custom Maid (CCM) places house cleaners with clients who need their homes cleaned. In doing so, it has tried to avoid becoming the house cleaners' employer, hoping instead to maintain the relationship as one between a referral service and a group of independent contractors so that it could avoid paying unemployment taxes on the money it paid to those cleaners.

¶2 In 2014, the Colorado Department of Labor and Employment Division of Employment and Training (Division) concluded that, despite CCM's efforts to characterize them as independent contractors, CCM's cleaners were in fact employees for whom the company should be paying unemployment taxes. After evaluating the dynamics of the relationship between CCM and its cleaners, we agree. We therefore affirm the court of appeals'

decision, which itself affirmed the conclusion of an Industrial Claim Appeals Office Panel (Panel) that the realities of CCM's relationship with its cleaners establish an employment relationship.

I. Facts and Procedural History

¶3 CCM describes itself as a referral service that matches house cleaners with homeowners. The company recruits potential cleaners and, after checking their work and criminal histories, enters into contracts that specify that the cleaners are independent subcontractors. When a homeowner contacts CCM, the company assesses how frequently the home will be cleaned, determines how long each cleaning will take, and sets a price for the cleaning. CCM then assigns one of its contracted cleaners to the home. Each time a home is cleaned, the homeowner writes a check to CCM and CCM in turn gives the cleaner forty-seven percent of what it was paid by the homeowner.

¶4 In May 2014, the Division conducted an audit of CCM for the three preceding years to determine whether CCM properly classified its cleaners as independent contractors. The Division concluded that the cleaners should have been classified as employees under the Colorado Employment Security Act (CESA) and required CCM to pay unemployment taxes on the amounts it had paid to the cleaners during those years.

¶5 CCM appealed. A hearing officer reversed the Division's decision, concluding that CCM had proven, as required by section 8-70-115(1)(b), C.R.S. (2018), that the cleaners were free from CCM's control and direction and that they customarily engaged in an independent business of providing cleaning services. The Division appealed.

¶6 The Panel reversed the hearing officer's decision because it determined that the hearing officer made two significant errors. First, the Panel concluded that the hearing officer failed to make sufficient factual findings to determine whether the cleaners were in fact customarily engaged in independent businesses. Second, the Panel held that the hearing officer failed to consider the totality of the circumstances, or the dynamics of the relationship between CCM and the cleaners, in concluding that the cleaners were customarily engaged in an independent business. See Indus. Claim Appeals Office v. Softrock Geological Servs., Inc. , 2014 CO 30, ¶ 2, 325 P.3d 560, 562 (requiring a totality of the circumstances test that evaluates the dynamics of the relationship between the putative employer and employee to determine whether an individual is engaged in an independent trade or business).

¶7 On remand, the hearing officer made additional factual findings and again concluded that the cleaners were independent contractors. The Division appealed, and the Panel once again reversed the hearing officer's decision. Although the Panel adopted some of the hearing officer's factual findings, it set several of them aside. The Panel determined that a number of the hearing officer's findings were not supported by the evidentiary record and others were contradicted by factual concessions made by CCM. After conducting its own review of the factual record, the Panel found that the cleaners were employees, not independent contractors, under the totality of the circumstances. CCM appealed the second Panel determination.

¶8 The court of appeals agreed with the Panel's conclusions. Colo. Custom Maid, LLC v. Indus. Claim Appeals Office , No. 16CA0075, ¶¶ 1, 8, 18, 38, 2017 WL 946398 (Colo. App. March 9, 2017). The court first examined whether the cleaners performed services for the benefit of CCM. Id. at ¶ 8. To this question, the court answered yes. Id. at ¶ 15. The court held that CCM derived a purposeful benefit from the cleaners' work because it maintained an ongoing relationship with the cleaners and the clients. Id. at ¶ 16. Having addressed what it characterized as a "threshold matter," id. at ¶ 10, the court then employed section 8-70-115(1)(b)'s two-prong test to determine whether there was substantial evidence to support the Panel's finding that the cleaners were (1) free from CCM's control and direction in the performance of their cleaning services and (2) engaged in an independent trade or business. Id. at ¶¶ 22-25. In making this determination, the court of appeals recognized that the Panel set aside a number of the hearing officer's factual findings but concluded that the Panel did not err in doing so because the majority of those set aside were contradicted by undisputed evidence in the record.

Id. at ¶¶ 31-38. Ultimately, the court of appeals concluded that there was sufficient evidence to support the Panel's conclusion that the cleaners were employees for purposes of CESA. Id . at ¶ 38.

¶9 CCM petitioned for certiorari and we granted the petition.

II. Analysis

¶10 We begin by setting out the standard of review, both for our consideration of the Panel's determination and for the Panel's review of the hearing officer's findings. We then offer a brief overview of the statutory framework for determining whether employers may classify individuals as independent contractors rather than employees for CESA unemployment tax purposes. In doing so, we disapprove the notion, first suggested by the court of appeals in Employer Services and accepted by the division here, that the statute requires a "threshold" showing that the services being provided by a putative employee are being provided for the benefit of the putative employer. Id. at ¶ 10 ; see Div. of Unemp't Ins., Emp'r Servs. v. Indus. Claim Appeals Office , 2015 COA 149, ¶ 10, 361 P.3d 1150, 1152 (hereinafter Employer Services ). Finally, we apply the two-prong test provided in section 8-70-115(1)(b), C.R.S. (2018), and conclude that there was substantial evidence to support the Panel's determination that the cleaners were employees.

A. Standard of Review

¶11 To rebut CESA's presumption of employment, the employer has the burden of demonstrating that a putative employee is in fact an independent contractor. See Softrock , ¶ 9, 325 P.3d at 563. Whether an employer has met this burden is a question of fact. Id. ; see W. Logistics, Inc. v. Indus. Claim Appeals Office , 2014 CO 31, ¶ 11, 325 P.3d 550, 552. We will not disturb the Panel's conclusion that the cleaners were employees if it properly applied the law and the findings of fact support its conclusion. § 8-74-107(6)(c), (d), C.R.S. (2018); see Softrock , ¶ 9, 325 P.3d at 563 ; W. Logistics , ¶ 11, 325 P.3d at 552 ; see also Allen Co., Inc. v. Indus. Comm'n , 762 P.2d 677, 680 (Colo. 1988) (holding that the ICAO's decision "should not be disturbed if it is supported by substantial evidence").

¶12 In the administrative hearing process, evidentiary facts found by the hearing officer must not be set aside by a panel of the ICAO unless they are "contrary to the weight of the evidence." § 24-4-105(15)(b), C.R.S. (2018); Samaritan Inst. v. Prince-Walker , 883 P.2d 3, 9 (Colo. 1994). Ultimate facts, which are "conclusions of law or mixed questions of law and fact that are based on evidentiary facts and determine the rights and liabilities of the parties," require less deference by the Panel to the hearing officer. Federico v. Brannan Sand & Gravel Co., 788 P.2d 1268, 1272 (Colo. 1990). The Panel is entitled to make its own determination as to ultimate facts, so long as that determination "has a reasonable basis in law and is supported by substantial evidence in the record." Samaritan Inst. , 883 P.2d at 9.

B. Applicable Law

¶13 CESA requires employers to pay unemployment taxes on wages paid to employees but not on compensation paid to independent contractors. §§ 8-76-101 to - 102.5 C.R.S. (2018); see Softrock , ¶ 11, 325 P.3d at 563. The law starts with a presumption that services performed by an individual for another "shall be deemed" covered employment for unemployment tax liability purposes. § 8-70-115(1)(b). This presumption can be overcome in one of two ways. First, a putative employer may rebut the employment presumption by producing a written document signed by both parties and containing nine expressly stated limitations on the relationship that distinguish it from that of employer and employee.

§ 8-70-115(1)(c)(I)-(IX). In the absence of such a signed document, the putative employer can offer facts to demonstrate by a preponderance of the evidence that (1) the worker "is free from control and direction in the performance of the service," and (2) the worker "is customarily engaged in an independent trade, occupation, profession, or business related to the service performed." § 8-70-115(1)(b). While both elements must be demonstrated to overcome the presumption of employment, the inquiries are necessarily interrelated-each requires an expansive inquiry into the dynamics of the relationship between the putative employee and employer to determine whether an employment relationship exists, and certain facts about the relationship may be relevant to both elements. W. Logistics , ¶ 3, 325 P.3d at 551. ¶14 In evaluating whether an individual providing services is free from direction and control, we consider the totality of the circumstances, focusing on whether the putative employer has a general right to control and direct the individual in the performance of the service. See Allen Co. , 762 P.2d at 680 ; see also Dep't of Labor & Emp't Reg. 17.1.2, 7 Colo. Code Regs. 1101-2 (2018) (requiring the hearing officer and Panel to consider "[t]he totality of the circumstances of the relationship between the company for whom services are performed and the worker" when assessing whether an individual is an employee or independent contractor). An "employer's firm hand in controlling the details of the manner and method of job performance" evinces an overall right to control the actions of an employee. Rent-A-Mom, Inc. v. Indus. Comm'n , 727 P.2d 403, 406 (Colo. App. 1986). But control over the details of performance is not required. Indeed, we have explained that simply the right to terminate a service contract without liability is an important factor in determining "whether the individual is free of control and direction 'because the right immediately to discharge involves the right of control.' " Allen Co. , 762 P.2d at 681 (quoting Indus. Comm'n v. Nw. Mut. Life Ins. Co. , 103 Colo. 550, 88 P.2d 560, 564 (1939) ).

¶15 The second element of the showing a putative employer must make to overcome the employment presumption is that the individual providing services is customarily engaged in an independent trade or a business related to the services performed. Stripped of legal jargon, this question asks whether the worker is an independent contractor with his or her own business that provides the particular services. In answering this question, we again look to the totality of the circumstances surrounding the relationship between the worker and the putative employer. See Softrock , ¶ 14, 325 P.3d at 564. As we noted in Softrock , consideration of the nine conditions in section 8-70-115(1)(c) is helpful here, since the legislature has directed that if the parties agree to those nine conditions, the presumption of an employer-employee relationship is overcome. Id. at ¶ 15, 325 P.3d at 564-65. But a review of these conditions alone does not end our inquiry. "[T]he nine factors in section 8-70-115(1)(c) as well as any other information relevant to the nature of the work and the relationship between the employer and the individual" should be considered to determine whether an individual is engaged in an independent trade or business. Id. at ¶ 17, 325 P.3d at 565. For example, courts have considered whether the putative employee (1)

had business cards, a business address, or a business telephone number; (2) made a financial investment in the services such that he or she could be vulnerable to financial loss in connection with performance of the service; (3) had his or her own equipment; (4) set the price of the service; (5) employed assistants; and (6) carried his or her own liability or workers' compensation insurance. See Visible Voices, Inc. v. Indus. Claim Appeals Office , 2014 COA 63, ¶ 26, 328 P.3d 307, 311-12 (Colo. App. 2014).

¶16 CCM contends that before addressing the two-prong test above, section 8-70-115(1)(b) requires a preliminary showing that the service provided by the putative employee was provided for the benefit of the putative employer. In support, CCM points to the court of appeals' decision in Employer Services , holding that CESA requires an initial finding that an employee performed "an act done for the benefit or at the command of another" for an employment relationship to exist. ¶ 10, 361 P.3d at 1152 (quoting Magin v. Div. of Emp't , 899 P.2d 369, 370 (Colo. App. 1995) ). This benefit, the court explained, must be "purposeful or intended," not inadvertent. Id. at ¶ 15, 361 P.3d at 1152. Because the putative employees in Employer Services , individuals seeking acting and modeling work, did not perform acting or modeling services for the purpose of benefiting the putative employer, a talent agency that referred the actors and models to job opportunities, the court determined that the talent agency did not employ the artists but merely arranged for them to provide services for third parties. Id. at ¶¶ 16-17, 361 P.3d at 1152. CCM contends that, like the talent agency in Employer Services , it too does not employ the cleaners. Instead, CCM merely refers the cleaners to third-party homeowners. Because the intended benefit is derived by the homeowner, not by CCM, CCM argues that the employment inquiry must end at this threshold question.

¶17 CCM's reading of section 8-70-115(1)(b) is inconsistent with both the purposes of the statute and our prior interpretations of the law. The presumption of employment within the unemployment insurance statute exists because the legislature intended to ensure complete coverage, protecting workers against the risks of involuntary unemployment. See Softrock , ¶ 14, 325 P.3d at 564 (explaining that the purpose of CESA is to "protect employees from the negative consequences of involuntary unemployment"); see also § 8-70-102, C.R.S. (2018) (setting out the legislative purposes of the unemployment insurance laws). Requiring the preliminary showing that CCM advances here would have the opposite effect; it would permit a wide range of employers to avoid paying unemployment taxes. Under CCM's reading of the law, employers across service industries could justify classifying employees as independent contractors by alleging that the individuals perform services "for" the customers or clients, not "for" the employer. There is no such loophole to be exploited in CESA. And creating one is inconsistent with our prior caselaw, which has never required this threshold showing. Instead, as we have explained here and in other decisions, section 8-70-115(1)(b) begins with a presumption of employment that a putative employer can only rebut by making the required statutory showings.

C. Application

¶18 Applying these standards, did the Panel appropriately conclude that CCM had failed to overcome the employment presumption by demonstrating that it did not exercise direction and control over the cleaners and further that the cleaners were customarily engaged in an independent business such that they are properly characterized as independent contractors? It did.

¶19 We look first to the Panel's conclusion that CCM exerted control over and directed the cleaners in the performance of their work. In reaching that conclusion, the Panel set aside the hearing officer's finding that CCM is no longer involved in the client-cleaner relationship after assigning a cleaner to a client. While recognizing that this is generally true about the details of the cleaning, the Panel found that the evidence adduced at the hearing shows that CCM exerts extensive control over the cleaners in the resolution of client complaints. During the hearing, one cleaner, Andrea Hernandez, testified that she was asked to assist a cleaner about whom CCM had received a complaint and "train her to do the work properly." Other cleaners who testified corroborated that CCM exercised this kind of quality control. This type of oversight, the Panel concluded, is "exactly the control and direction referred to by [ section] 8-70-115(1)(b)."

¶20 The Panel also concluded that CCM has the right to control whom the cleaners hire as assistants. One of CCM's owners testified during the hearing that cleaners are prohibited from acquiring helpers to assist with cleaning client homes without approval from CCM because CCM's "reputation is at stake." Despite testimony that this prohibition was violated at times, the Panel determined that CCM "retained the right to control who was used as a helper."

¶21 Finally, the Panel concluded, based on the hearing officer's findings, that CCM controls the collection and distribution of fees paid by the clients. CCM negotiates the price with the client, collects the payment from the client, and pays the cleaners forty-seven percent of the amount charged each time the cleaner provides services to a client. Far from arranging a one-time referral of a cleaner to a client, CCM maintained a continuous relationship with the client homeowners and with the cleaners. CCM received payment each time the worker provided cleaning services for the client and assignments were not for a limited time. Some cleaners "worked for CCM for years in an open-ended relationship." The Panel further noted that CCM set the price for cleaning based on the amount of time the cleaning would take and the frequency of the cleaning services, so that the payment to the cleaners was effectively an hourly rate. For all of these reasons, the Panel concluded that the cleaners are dependent on CCM for continued work at a salary set by CCM and the relationship bears the hallmarks of control and direction characteristic of an employment relationship. Because these conclusions are supported by the hearing officer's findings of fact and the applicable legal standards, we see no basis for setting them aside.

¶22 As to the Panel's determination that CCM had not sufficiently demonstrated that the cleaners were engaged in an independent business, we again see no basis for disturbing that determination. In reaching that conclusion, the Panel reviewed and relied on the following facts found by the hearing officer: the cleaners were paid in their personal names, not in any independent business name; none of the cleaners had any of the indicia of an independent business, such as cards, an address, financial investment, or liability insurance; and the cleaners did not control the amount they were paid for their work but instead received payments that were effectively hourly payments set by CCM. Based on these findings, the Panel reasonably concluded that the cleaners were not customarily engaged in an independent business.

¶23 CCM disagrees, primarily arguing that many of the cleaners had clients of their own in addition to those they cleaned for through CCM. This, CCM contends, indicates that the cleaners were engaged in an independent business. The Panel did acknowledge in its findings that "most cleaners also have other work outside of their relationship with CCM" and even considered that fact to "support a conclusion that the cleaners are independent contractors." Although it is true that maintaining outside clients supports a finding that individuals are engaged in an independent trade, this factor is not dispositive, but is just one of many to be considered. See Softrock , ¶ 18, 325 P.3d at 565 (rejecting the argument that "whether the individual actually provided services for someone other than the employer is dispositive proof of an employer-employee relationship"). And the Panel did consider it, but still concluded that, under the totality of the circumstances, the cleaners were employees. We must defer to this ultimate factual conclusion unless it lacks evidentiary support, which it does not.

¶24 CCM further contends that the Panel erred in substituting the hearing officer's findings with those of its own. Specifically, CCM argues that the Panel erred in finding that CCM established a quality standard, that CCM paid the cleaners a salary, and that CCM had control over the cleaners' schedules and ability to hire assistants. While the Panel and the hearing officer interpreted the facts differently, we cannot conclude that the Panel erred in its ultimate conclusion that the cleaners were employees. As to the particular facts that the Panel set aside, we are persuaded that they were either ultimate facts, which did not require deference from the Panel, or evidentiary facts that were not supported by the record. See Samaritan Inst. , 883 P.2d at 9 (explaining the difference between ultimate facts and evidentiary facts in the hearing process).

¶25 The Panel thoroughly considered the dynamics of the relationship between CCM and the cleaners and meticulously reviewed the nine conditions of section 8-70-115(1)(c) as well as other relevant facts developed in the hearing record to conclude that the cleaners were employees under the totality of the circumstances. We are satisfied that the hearing officer's findings, the Panel's findings, and the record evidence support the Panel's determination that CCM failed to meet its burden of establishing that the cleaners were customarily engaged in an independent trade or business of providing cleaning services. Softrock , ¶ 9, 325 P.3d at 563.

III. Conclusion

¶26 Because substantial evidence supports the Panel's ultimate determination that CCM failed to meet its burden of showing that CCM did not exercise direction and control and that the cleaners were customarily engaged in an independent trade or business related to their provision of cleaning services, we will not disturb that determination on review. Accordingly, we affirm the judgment of the court of appeals.

JUSTICE HOOD does not participate.

      We granted certiorari to review the following issue:
      Whether the Court of Appeals erred in finding that, for the purpose of assessing unemployment tax premiums under the Colorado Employment Security Act, individuals (cleaners) who performed cleaning services in private homes were employees of the referral service, Colorado Custom Maid, which linked them with clients who are homeowners seeking cleaning services.

      These limitations include:
      ... that the person for whom services are performed does not:
      (I) Require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document;
      (II) Establish a quality standard for the individual; except that such person can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
      (III) Pay a salary or hourly rate but rather a fixed or contract rate;
      (IV) Terminate the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
      (V) Provide more than minimal training for the individual;
      (VI) Provide tools or benefits to the individual; except that materials and equipment may be supplied;
      (VII) Dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
      (VIII) Pay the individual personally but rather makes checks payable to the trade or business name of the individual; and
      (IX) Combine his business operations in any way with the individual's business, but instead maintains such operations as separate and distinct.
      § 8-70-115(1)(c)(I)-(IX).

      CCM requests that we award attorney fees for this appeal. We deny CCM's request because it neither prevails on appeal nor cites any legal or factual basis for such an award. See C.A.R. 39.1.