United States District Court, D. Arizona
St. Paul Guardian Insurance Company, et al. Plaintiffs,
Town of Colorado City, et al., Defendants.
A. TEILBORG Senior United States District Judge.
17, 2016, the Court closed this case in light of a
stipulation between the parties acknowledging that all
outstanding issues had been resolved by settlement in a
separate action, United States v. Town of Colorado City
et al, No. CV12-08123-PCT-HRH. (Doc. 81). On May 27,
2016, Defendant Town of Colorado City (“Colorado
City”) filed the pending motion seeking “an award
of . . . reasonable attorney’s fees incurred in
defending this declaratory judgment action” pursuant to
Local Rule of Civil Procedure 54.2. (Doc. 82). Having
considered the parties’ filings, the Court now rules on
Arizona law, “[i]n any contested action arising out of
a contract, express or implied, the court may award the
successful party reasonable attorney fees.” A.R.S.
§ 12-341.01(a). There is no dispute that this action
arises out of a contract. The Court must first determine
whether Colorado City is the “successful party”
within the meaning of A.R.S. § 12-341.01(a). If an
affirmative finding is made, the Court must then decide
whether awarding fees is appropriate. Finally, the Court must
determine if the amount of fees Colorado City seeks is
Successful Party Status
Court has “substantial discretion” in determining
who is a successful party. Fulton Homes Corp. v. BBP
Concrete, 155 P.3d 1090, 1096 (Ariz.Ct.App. 2007)
(quoting Pioneer Roofing Co. v. Mardian Constr. Co.,
733 P.2d 652, 664 (Ariz.Ct.App. 1986)); Sanborn v.
Brooker & Wake Prop. Mgmt., Inc., 874 P.2d
982, 987 (Ariz.Ct.App. 1994). Indeed, the decision “is
within the sole discretion of the trial court, and will not
be disturbed on appeal if any reasonable basis exists for
it.” Maleki v. Desert Palms Prof’l
Properties, L.L.C., 214 P.3d 415, 422
(Ariz.Ct.App. 2009) (quoting Sanborn v. Brooker &
Wake Prop. Mgmt., Inc., 874 P.2d 982, 987
parties” are “not limited to those who have a
favorable final judgment at the conclusion of the”
action. Wagenseller v. Scottsdale Mem’l
Hosp., 710 P.2d 1025, 1048 (Ariz. 1985) (en banc),
superseded by statute on other grounds, Ariz. Rev. Stat.
§ 12-341.01. As such, “[a]n adjudication on the
merits is not a prerequisite to recovering attorney’s
fees under [§ 12-341.01].” Fulton Homes,
155 P.3d at 1096.
as here, the matter involves multiple claims and a degree of
success, the Court “may apply a ‘percentage of
success’ or a ‘totality of the litigation’
test.” Berry v. 352 E. Virginia,
L.L.C., 261 P.3d 784, 788-89 (Ariz.Ct.App. 2011)
(quoting Schwartz v. Farmers Ins. Co. of Ariz., 800
P.2d 20, 25 (Ariz.Ct.App. 1990)); Nataros v. Fine Arts
Gallery of Scottsdale, 612 P.2d 500, 505 (Ariz. App.
1980). Under this analysis, there are no “strict
factors” to consider. Medical Protective Co. v.
Pang, 25 F.Supp.3d 1232, 1240 (D. Ariz. 2014) (citing
Berry, 261 P.3d at 788-89). Rather, the Court has
discretion to review the entirety of the litigation. The
Court will thus consider “‘the totality of the
circumstances and the relative success of the
litigants’ to determine whether there is a successful
party.” Id. at 1239 (quoting McAlister v.
Citibank, 829 P.2d 1253, 1263 (Ariz.Ct.App. 1992)).
declaratory judgment action was initiated by Plaintiffs St.
Paul Guardian Insurance Company (“St. Paul”) and
The Travelers Indemnity Company (“Travelers”) on
December 10, 2013. (Doc. 1). Plaintiffs sought a
determination as to whether they had a duty to defend and
indemnify their insured, Colorado City, in separate
litigation, a suit brought by the United States Department of
Justice (“DOJ”) against Colorado City for
violations of various federal statutes. (Doc. 59 at 1-2).
Generally, the DOJ alleged that Colorado City-among others
not a party to this action-had “engaged in a pattern or
practice of illegal discrimination against individuals who
are not members of the Fundamentalist Church of Jesus Christ
of Latter-day Saints (“FLDS”).”
the DOJ brought three causes of action against Colorado City.
The first cause of action was for engaging in a pattern or
practice of conduct that deprived persons of rights,
privileges, or immunities secured or protected by the United
States Constitution in violation of Title 42 U.S.C. §
14141 (2012) (the “First Cause of Action”). (Doc.
59 at 2). The second cause of action was for discriminating
on the basis of religion in the availability and rental of
housing and for interfering with the exercise of statutorily
granted rights in violation of the Fair Housing Act (the
“Second Cause of Action”). (Id.). The
third cause of action was for violating the Civil Rights Act
by depriving individuals “of equal utilization of a
public facility” (the “Third Cause of
Action”). (Id.). By the time dispositive
motions were filed in the instant matter, the third cause of
action had been dismissed, leaving only the first and second
causes of action in the underlying litigation.
January 23, 2015, Plaintiffs filed a Motion for Summary
Judgment or, in the Alternative, for Partial Summary
Judgment. (Doc. 44). The Court was tasked with interpreting
three insurance policies covering the years 2009-2011 and
2013-2014 to determine whether the agreements established as
a matter of law that Plaintiffs had no duty to defend and
indemnify Colorado City. (Doc. 59 at 2-3). On July 13, 2015,
the Court issued an Order granting in part, and denying in
part Plaintiff’s motion. (Id. at 19).
these insurance policies, the Court found that with respect
to the First Cause of Action, Plaintiffs had established as a
matter of law that under the 2009-2011 insurance policies,
there was no coverage through the (1) Public Entity General
Liability, (2) the Law Enforcement Liability Protection, and
(3) the Public Entity Management Liability Protection
provisions. (Doc. 59 at 18). Considering the Second Cause of
Action, there was no coverage through the (1) Public Entity
General Liability Protection and (2) Public Entity Management
Liability Protection provisions. (Id.). But
Plaintiffs failed to show as a matter of law that no coverage
existed for the First Cause of Action and the Second Cause of
Action through “the Umbrella Excess Liability
Protection and Excess Errors and Omissions Liability
Protection coverage parts” of the 2009-2011 insurance
policies. Additionally, there was potential coverage for the
Second Cause of Action through the Law Enforcement Liability
Protection coverage portion of the 2009-2011 insurance
policies. (Id.). Thus, Plaintiffs had not
established as a matter of law that they had no duty to
defend Colorado City in the underlying litigation. Whether
there was a duty to indemnify Colorado City depended
“on the facts to be proved” in the underlying
litigation. (Id. at 19).
October 5, 2015, the Court reiterated that its prior Order
“did not grant summary judgment in favor of”
Colorado City on the issue of Plaintiffs’ duty to
defend in the underlying litigation, but found that
Plaintiffs had “failed to establish-as a matter of
law-that all applicable insurance policies did not provide
coverage for [Colorado City] against both causes of action in
the underlying litigation.” (Doc. 68 at 2-3). Trial was
necessary to resolve the issue. Upon Plaintiffs’
motion, (Doc. 61), the Court subsequently stayed these
proceedings pending the return of a verdict in the underlying
litigation. (Doc. 71 at 2). On April 13, 2016, the Court
lifted the stay, (Doc. 77), and on April 28, 2016, the
parties notified the Court that the substantive issues before
it-Plaintiffs’ duty to defend and indemnify Colorado
City-had been resolved via settlement in the underlying
litigation. (Doc. 78 at 1-2). On May 17, 2016, “[b]ased
on stipulation of the parties, ” the Court dismissed
with prejudice the issue of Plaintiffs’ duty to
indemnify, and found that the issue of the duty to defend
Colorado City had been resolved by Plaintiffs’
agreement to “defend . . . Colorado City in the
underlying litigation . . . through any necessary post-trial
proceedings (including the enforcement of any
injunction).” (Doc. 81 at 1, amended by Doc.
Court acknowledges the difficulty in determining whether a
successful party emerged in the instant action. The case was
stayed following adjudication of Plaintiffs’
dispositive motion, and a party’s measure of success in
this case is largely defined by the impact on the underlying
litigation. The Court is also cognizant of other courts
declining to award attorney’s fees where each party
experiences success to a varying degree. See First Ascent
Ventures Inc. v. DLC Dermacare LLC, No.
CV06-1794-PHX-JAT, 2007 U.S. Dist. LEXIS 47956, at *5 (D.
Ariz. June 27, 2007) (citations omitted) (citing to Arizona
case law declining to award attorney’s fees where there
is no clear victor). Nonetheless, having examined the
totality of the litigation, the Court finds that Colorado
City is the successful party, and eligible for reasonable
attorney’s fees under A.R.S. § 12-341.01(a).
the goal behind Plaintiffs’ action was to absolve
themselves of the duty to provide coverage for Colorado City.
As the Complaint makes clear, this action was directly
related to the June 21, 2012, action brought against Colorado
City, i.e., the underlying litigation. (See Doc. 1
at 3-4, 20-22). A valid insurance policy imposes two distinct
duties on the insurer: (1) the duty to defend the insured,
and (2) the duty to indemnify the insured for any claims that
fall within the scope of the policy’s coverage.
Colo. Cas. Ins. Co. v. Safety Control Co., 288 P.3d
764, 796 (Ariz.Ct.App. 2012). Here, the Court never arrived
at the issue of the duty of indemnification, as the
settlement resolving the underlying litigation rendered it
moot. (See Doc. 78 at 1-2). The issue was thus
dismissed by party stipulation, (see Doc. 81 at 1,
amended by Doc. 85), and its adjudication does
nothing to illuminate who the successful party is. Success in
this matter turns on the duty to defend.
duty to defend “arises at the earliest stage of
litigation and generally exists regardless of whether the
insured is ultimately found liable.” Regal
Homes, Inc. v. CNA Ins., 171 P.3d 610, 615
(Ariz.Ct.App. 2007). A favorable resolution on the issue in
this matter was critical to Plaintiffs’
involvement in the underlying litigation. As noted
supra, Plaintiffs filed a Motion for Summary
Judgment or, in the Alternative, for Partial Summary
Judgment, on January 23, 2015. (Doc. 44). The Court granted
in part and denied in part Plaintiffs’ motion, and a
successful summary judgment motion is a piece in the totality
of the litigation that may be considered by the Court.
Wagenseller, 710 P.2d at 1047-48. Since Plaintiffs
were successful in ...