Hall Family Properties, Ltd. v. Gosnell Development Corp. (In re Gosnell Development Corp.)

MEMORANDUM **

Plaintiff-Appellant Hall Family Properties, Ltd. (“Hall Family”) appeals the district court’s affirmance of the bankruptcy court’s order granting Gosnell Development Corporation (“Gosnell”)’s motion for summary judgment on the ground that Hall’s proof of claim was barred by the economic loss rule. We reverse. Because the parties are familiar with the factual and procedural history of this case, we need not recount it here.

“In assessing how a state’s highest court would resolve a state law question — absent controlling state authority — federal courts look to existing state law without predicting potential changes in that law.” Ticknor v. Choice Hotels Intern., Inc., 265 F.3d 931, 939 (9th Cir.2001). To date, Arizona appellate courts have not addressed whether the economic loss rule could bar a breach of fiduciary duty claim. However, the Court of Appeals of Arizona has on several occasions permitted a partner to recover (or at least pursue) solely pecuniary damages from another partner that breached his or her fiduciary duty to the partnership, while acting under an oral or written partnership agreement, with no mention of the economic loss rule. See Jerman v.…