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Arnold v. Standard Pacific of Arizona Inc.

United States District Court, D. Arizona

December 2, 2016

Christine Arnold, et al., Plaintiffs,
Standard Pacific of Arizona Incorporated, et al., Defendants.



         Plaintiff Christine Arnold asks the Court to award attorneys' fees and costs against Defendants Standard Pacific of Arizona, Inc. and HSP Arizona, Inc. pursuant to Federal Rule of Civil Procedure 54(d) and Local Rule 54.2(b). Doc. 31. The motion has been fully briefed (Docs. 31, 32, 33, 36), and neither party has requested oral argument. For the reasons that follow, the Court will grant Plaintiff's motion in part.

         I. Background.

         Plaintiff purchased a single-family home in Avondale, Arizona, entering into a purchase contract with Defendant Standard Pacific of Arizona, Inc. Doc. 25 at 18. The purchase contract and addenda provided that any disputes, claims, or controversies relating to the contract would be settled by arbitration, which in turn would be governed by the procedures set forth in the contract's limited warranty. Doc. 20-2 at 9. According to this warranty, Defendants contracted with an entity known as Professional Warranty Service Corporation (“PWC”), and PWC alone would select the service that would arbitrate any potential claims. Doc. 25. The contract also contained a fallback provision that would take effect if the arbitration provision was determined unenforceable. Id. at 26. The fallback provision stated that any disputes between the parties would be submitted to the American Arbitration Association (“AAA”). Id.

         In August 2015, Plaintiff filed a demand for arbitration with the AAA, alleging construction defects in her home. Doc. 16, ¶ 20. Defendants filed a motion to dismiss, alleging that Plaintiff was not entitled to proceed under the fallback provision because the warranty arbitration provision had not been found invalid. Id., ¶ 21. Jeffrey S. Cates, the arbitrator appointed by the AAA, granted the motion and stayed the arbitration. Doc. 20-6 at 3. Plaintiff then filed a complaint with this Court seeking declaratory relief concerning the validity and enforceability of the warranty arbitration provision. Doc. 1. The Court granted summary judgment in favor of Plaintiff and found that the provision was unenforceable as a matter of law. Doc. 29.

         II. Analysis.

         Plaintiff seeks an award of attorneys' fees in the amount of $28, 265.35, as well as $466.65 in taxable costs. Doc. 33 at 9. Defendants argue that Plaintiff is not entitled to fees and costs and, even if she were, the requested award is not reasonable. Doc. 32.

         A. Eligibility.

         Although the parties agree that the Federal Arbitration Act (“FAA”) governs arbitration proceedings between them, they disagree about whether the FAA prohibits an award of attorneys' fees in this case. Doc. 32 at 3; Doc. 33 at 4. Plaintiff contends that “the contractual rights of the parties for the underlying contracts are subject to Arizona law” and she “seeks attorneys' fees directly related to her action in district court to enforce her contractual right to fair arbitration.” Id. at 3. Because she is “not seeking costs associated with the actual arbitration, ” she contends, the FAA does not apply. Id. at 4. Defendants disagree, and argue that “Arizona's fee shifting statute is not applicable here” because “the FAA preempts inconsistent or contrary state law. . . [and i]nterpretive case law makes clear that the FAA does not provide for an award of attorneys' fees.” Doc. 32 at 3.

         The underlying dispute between the parties was governed by state law. According to the FAA, an arbitration provision “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Supreme Court has held that “generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2.” Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996). As a result, “state law, whether of legislative or judicial origin, is applicable [to an agreement to arbitrate] if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987) (emphasis in original). Arizona unconscionability law applies to contracts broadly and is not targeted at arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citing Doctor's Associates, 517 U.S. at 687). The Ninth Circuit agrees that “state law is not entirely displaced from federal arbitration analysis.” Ticknor v. Choice Hotels Int'l, Inc., 265 F.3d 931, 936-37 (9th Cir. 2001).

         Defendants cite Clausen v. Watlow Elec. Mfg. Co., 242 F.Supp.2d 877 (D. Or. 2002), for the proposition that although state law principles apply to the validity and enforceability of a contract, “whether and how to apply those defenses is a matter of federal law.” Doc. 32 at 3 (also referring to Clausen for the conclusion that the “scope and enforcement of arbitration agreement is a matter of federal substantive law”). The Clausen court determined whether the arbitration provision at issue bound the plaintiff signatory in his individual capacity or solely as a representative of his corporation. 242 F.Supp.2d at 883. The issue before the court was not the enforceability or validity of the arbitration provision, but its meaning and scope. The court made clear that the “FAA . . . does not preempt state law regarding the validity, revocability and enforceability of contracts generally. Thus, to resolve the issue whether the parties entered into a valid and enforceable written agreement to arbitrate, the court must apply general, state-law principles of contract interpretation.” Id. at 882 (internal quotation marks and citation omitted). Defendants make no effort to explain how Plaintiff's claim, like the claim in Clausen, involved the scope of the parties' agreement. It involved the enforceability of the warranty arbitration provision. Consequently, the Court will apply state law.

         Defendants also argue that Arizona law providing for the award of attorneys' fees is inconsistent with the FAA, which does not provide such awards. Doc. 32 at 3. Defendants cite to a decision by the District Court for the District of Hawaii, which found that “[a]ttorneys' fees are not available under the Federal Arbitration Act.” Metzler Contracting Co. LLC v. Stephens, 774 F.Supp.2d 1073, 1089 (D. Haw. 2011). But the petition in Metzler was seeking confirmation of an arbitration award and requested attorneys' fees related to such efforts. In concluding that the petitioner could not recover attorneys' fees under Hawaii law, the court noted that “the Federal Arbitration Act governs the Court's evaluation of both [petitioner's] motion to confirm and the [respondent's] petition to vacate.” Id. at 1089. Plaintiff in this case did not seek confirmation of an arbitration award. She asserted the invalidity of the warranty arbitration provision, and her claim was governed by Arizona law, not the FAA.

         Finally, Defendants argue that the parties' “clearly stated intent was for there to be no fee shifting with respect to the resolution of any disputed issues.” Doc. 32 at 9. But the contract provisions cited by Defendants specifically provide that each party will bear its own costs and fees for arbitration under the terms of the contract. Doc. 31 at 4 n.3. This case was not an arbitration, but a dispute concerning the enforceability of a contract provision that was governed by Arizona law.

         Arizona law provides that, “[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorneys' fees.” A.R.S. § 12-341.01(A). An award of attorney's fees under this statute is discretionary with the trial court. Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz.Ct.App. 1987). Arizona law similarly allows a successful party in a civil action to recover costs. A.R.S. §§ 12-341, 12-332. Because Plaintiff was a successful party in a contract dispute governed by Arizona law, the Court may exercise its discretion to award reasonable attorneys' fees and costs.

         B. Entitlement.

         In determining whether to exercise its discretion to award attorneys' fees under A.R.S. § 12-341.01(A), the ...

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