United States District Court, D. Arizona
JAMES A. TEILBORG, Senior District Judge.
Pending before the Court is Plaintiff DIRECTV, LLC's ("DIRECTV", formerly known as DIRECTV, Inc.) Motion for Award of Attorneys' Fees and Related Non-Taxable Expenses (Doc. 200). The Court now rules on the motion.
DIRECTV brought this civil action against Defendants, including Paul LaBarre and Terri LaBarre (collectively, the "LaBarres"), for "fraudulently obtaining DIRECTV's satellite television programming and distributing that programming over cable systems owned and operated by Defendants in Arizona and Nevada." (Doc. 1 at 2). In addition to this civil action, Defendants Paul LaBarre and Ernest McKay were the subject of a criminal investigation in which Paul LaBarre was ultimately sentenced and ordered to pay DIRECTV $157, 395 in restitution. (Doc. 200-5 ¶ 7).
DIRECTV and the LaBarres entered into a settlement agreement (the "Settlement Agreement") because DIRECTV believed, based on the Defendants' representations, that Defendants had limited assets available. ( Id. ¶ 9). Defendants specifically represented in the Settlement Agreement that they "fully and completely disclosed to DIRECTV all assets with a fair market value in excess of $20, 000, and have provided accurate appraisals and/or good faith estimates of the value of each asset disclosed by them." ( Id. at 71). Defendants agreed to pay $400, 000 in compensation to DIRECTV, and executed a consent judgment in this amount to be held by DIRECTV as security for Defendants' performance under the agreement. ( Id. ¶¶ 10, 14). Defendants also agreed that upon any breach by them of the Settlement Agreement:
DIRECTV shall be entitled to recover its actual expenses associated with the enforcement of this Settlement Agreement and/or the Permanent Injunction, including but not limited to reasonable attorneys' fees and recoverable costs incurred in connection with such enforcement, in addition to any other monetary or injunctive relief to which DIRECTV may be entitled.
( Id. at 78).
Defendants' first payment under the Settlement Agreement was due on September 24, 2009. ( Id. at 67). Defendants failed to make this payment, and the Court subsequently entered judgment jointly and severally against Defendants for $400, 000. ( Id. ¶ 13; Doc. 99). DIRECTV then undertook extensive, multi-year efforts to collect from Defendants. ( Id. ¶¶ 16-44). To date, Defendants have not yet satisfied the judgment in full. (Doc. 201-1 at 5).
In 2013, the LaBarres filed a voluntary bankruptcy petition. DIRECTV filed a Proof of Claim for the outstanding balance on the judgment plus attorneys' fees and costs incurred in enforcing the Settlement Agreement. Claim 11-1, In re Paul D.H. La Barre and Terri Sue La Barre, Ch. 13 Case No. 2:13-bk-17390-EPB (Bankr. D. Ariz. Feb. 14, 2014). The LaBarres objected to DIRECTV's claim, arguing that DIRECTV's attorneys' fees were unreasonable. Debtors Objection to the Proof of Claim Filed by DIRECTV, LLC, Claim 11-1, In re Paul D.H. La Barre and Terri Sue La Barre, Ch. 13 Case No. 2:13-bk-17390-EPB (Bankr. D. Ariz. Feb. 14, 2014). The Bankruptcy Court has stayed its proceedings pending a determination by this Court of the reasonableness of DIRECTV's claimed attorneys' fees.
II. Legal Standard
A. Reasonableness of Attorneys' Fees
"The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 430 (1983); see also Schweiger v. China Doll Restaurant, Inc., 673 P.2d 927, 931-32 (Ariz.Ct.App. 1983). Accordingly, "fees in excess of the amount in dispute are not per se unreasonable." Harris v. Reserve Life Ins. Co., 762 P.2d 1334, 1338 (Ariz.Ct.App. 1988); see also Wagner v. Casteel, 663 P.2d 1020, 1023 (Ariz.Ct.App. 1983). Rather, the question is whether "a reasonable and prudent lawyer" would have undertaken the claimed services "to advance or protect his client's interest in the pursuit" of a successful recovery of damages. See Schweiger, 673 P.2d at 932 (quoting Twin City Sportservice, Inc. v. Charles O. Finley & Co., 676 F.2d 1291, 1313 (9th Cir. 1982)).
B. Local Rule 54.2
Local Rule of Civil Procedure ("Local Rule") 54.2 governs claims for attorneys' fees and related non-taxable expenses. LRCiv 54.2(a). A party moving for an award of fees must demonstrate both eligibility for fees and entitlement to the particular amount of fees requested. LRCiv 54.2(c)(1)-(2). Moving counsel must attest to, among other things, their qualifications, the reasonableness of the rate, and the reasonableness of the time spent. LRCiv 54.2(d)(4). Counsel must also attach to its motion "[a]ny other affidavits or evidentiary matter deemed appropriate under the circumstances or required by law." LRCiv 54.2(d)(5).
The party against whom fees are sought has the burden of specifically identifying those portions of the fee request to which it objects:
The responsive memorandum of points and authorities in opposition to a motion for award of attorneys' fees and related non-taxable expenses shall identify with specificity all disputed issues of material fact and shall separately identify each and every disputed time entry or expense item. The respondent may attach controverting affidavits.
LRCiv 54.2(f); see also Aviva USA Corp. v. Vazirani, 2012 WL 2503962, at *3 (D. Ariz. June 28, 2012) (rejecting the defendants' broad challenge to claimed fees and noting the defendants' "burden to challenge fees with specificity").
A. Claimed Fees Exceeding the Underlying Debt
The LaBarres first assert that DIRECTV's fees claim is facially unreasonable because the amount claimed is "almost three times the amount of the actual underlying debt." (Doc. 201 at 3). The LaBarres accuse DIRECTV's counsel of "needlessly rack[ing] up unnecessary attorneys' fees, based on the assumption they would be able to recover those attorneys' fees from the LaBarres under the Settlement Agreement." ( Id. )
The LaBarres do not cite, and the Court has not found, any authority for the proposition that a fees-to-debt ratio of 3:1 is facially unreasonable. The Arizona Court of Appeals has indicated that "fees in excess of the amount in dispute are not per se unreasonable." Harris, 762 P.2d at 1338. Rather, the question is whether a reasonable lawyer would have undertaken DIRECTV's collection efforts to protect DIRECTV's interests. See Schweiger, 673 P.2d at 932. Although at first glance the claimed fees appear to be significant in light of the debt owed, DIRECTV offers uncontroverted evidence detailing its collection efforts; this evidence shows that DIRECTV's attorneys' fees were necessary for DIRECTV to attempt to collect on the LaBarres' debt.
DIRECTV offers the declaration of its counsel, Scott T. Wilsdon, who testifies to the following facts regarding DIRECTV's collection efforts. The Court reproduces the following paragraphs from Wilsdon's declaration because they adequately summarize DIRECTV's collection efforts and ...