United States District Court, D. Arizona
Douglas L. Rayes, United States District Judge
the Court is Defendant's Motion for Attorneys' Fees.
(Doc. 41.) Pursuant to A.R.S. § 12-341.01(A), Defendant
seeks $8, 490.00 in attorneys' fees incurred in obtaining
a dismissal order. (Id. at 1-2.) The motion is fully
briefed and neither party requested oral argument. The
relevant factual background is detailed in the Court's
August 12, 2016 order granting Defendant's motion to
dismiss (Doc. 40) and will not be repeated here. For the
following reasons, Defendant's motion is denied.
Plaintiff argues that Defendant waived its entitlement to
attorneys' fees by not demanding them in its responsive
pleading. (Doc. 42 at 4-6.) Plaintiff's argument is
misguided because a motion to dismiss is not a
“pleading” within the meaning of the Federal
Rules of Civil Procedure. Rule 7(a) defines
(1) a complaint; (2) an answer to a complaint; (3) an answer
to a counterclaim designated as a counterclaim; (4) an answer
to a crossclaim; (5) a third-party complaint; (6) an answer
to a third-party complaint; and (7) if the court orders on, a
reply to an answer.
distinguishes between “Pleadings” and
“Motions and Other Papers.” See Fed. R.
Civ. P. 7(a)-(b). Rule 12 also distinguishes between
pleadings and motions, providing that “[e]very defense
to a claim for relief in any pleading must be asserted in the
responsive pleading if one is required, ” but a party
“may assert . . . defenses by motion.”
importantly, however, Defendant was not required to demand
attorneys' fees at the pleading stage. Federal courts
sitting in diversity apply state substantive law and federal
procedural law. See Hanna v. Plumer, 380 U.S. 460,
465 (1965). Although here state law governs Defendant's
entitlement to fees, the Federal Rules of Civil Procedure
“establish the method by which a federal litigant must
obtain attorneys' fees[.]” Port of Stockton v.
W. Bulk Carriers KS, 371 F.3d 1119, 1120 (9th Cir.
2004). Pursuant to Rule 54(d), requests for attorneys'
fees must be made by motion unless the substantive law
requires those fees to be proven as an element of damages at
trial. Id. at 1120-21. When attorneys' fees are
considered a form of special damages, Rules 54(d) and 9(g)
require that they be specifically pled.
does not argue that attorneys' fees under §
12-341.01 are an element of damages that need to be proven at
trial, nor has the Court found authority directing that
result. Section 12-341.01(A) allows the Court to “award
the successful party reasonable attorney fees, ” which
indicates that the right to fees does not accrue until the
case has been decided. Because attorneys' fees in cases
arising out of contract fall within Rule 54(d)'s general
purview, not its limited exception, Defendant has not waived
its entitlement to attorneys' fees.
A.R.S. § 12-341.01(A)
12-341.01 provides that “[i]n any contested action
arising out of a contract, express or implied, the court may
award the successful party reasonable attorney fees.” A
claim arises under contract when “the claim could not
exist ‘but for' the breach or avoidance of
contract.” Harris v. Maricopa Cty. Super. Ct.,
631 F.3d 963, 974 (9th Cir. 2011) (internal quotation and
citation omitted). When determining whether a claim arises
out of contract, the Court is not limited to the form of the
pleadings and, instead, looks to the nature of the action and
the surrounding circumstances. Marcus v. Fox, 723
P.2d 682, 684 (Ariz. 1986). The mere existence of a contract
somewhere in the transaction, however, does not bring a claim
within the purview of § 12-341.01. “The statute
does not apply if the contract is only a factual predicate to
the action but not the essential basis of it.”
Kennedy v. Linda Brock Auto. Plaza, Inc., 856 P.2d
1201, 1203 (Ariz.Ct.App. 1993).
brought various statutory and tort claims, all of which were
premised on the allegation that she had validly rescinded her
home loan before a 2011 trustee's sale of her property.
(Doc. 21.) Defendant argues that “[t]his case would not
exist but for the 2007 loan and [Plaintiff's] breach
thereof.” (Doc. 43 at 6.) The Court agrees. Although
Plaintiff's claims took the form of statutory and tort
actions, they each were based on Plaintiff's contention
that her home loan and accompanying deed of trust were void
because she had exercised her rescission rights under the
Truth In Lending Act (TILA). Thus, the success of
Plaintiff's claims depended on a judicial determination
that Plaintiff's mortgage contracts were unenforceable.
See Mullins v. S. Pac. Transp. Co., 851 P.2d 839,
842 (Ariz.Ct.App. 1992) (explaining that fees are not
precluded when successful party proves the non-existence of a
determined that this action arises out of contract, the Court
has broad discretion to apportion fees. Associated Indem.
Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). In
exercising its discretion, the Court considers: (1) the
merits of the unsuccessful party's claim or defense; (2)
the chances that litigation could have been avoided or
settled and whether the successful party's efforts were
superfluous in achieving the result; (3) whether assessing
fees against the unsuccessful party would cause an extreme
hardship; (4) whether the successfully party prevailed with
respect to all relief sought; (5) the novelty of the
questions presented; and (6) whether a fee award would
discourage other parties with tenable claims or defenses from
litigating or defending legitimate contract issues for fear
of incurring liability for fees. Id.
of the Warner factors weigh in favor of a fee award.
Defendant could not have avoided litigation, it prevailed
with respect to all relief sought, and its efforts were not
superfluous to achieving that result. Additionally, Plaintiff
does not contend that a fee award would impose a hardship.
the Court declines to award fees because the remaining
Warner factors counsel against an award. Recent
developments in the law governing TILA rescissions prompted
Plaintiff to pursue her claims. See Jesinoski v.
Counrtywide Home Loans, ___ U.S. ___, 135 S.Ct. 790
(2016). In granting Defendant's motion to dismiss, the
Court concluded that Plaintiff was collaterally estopped from
re-litigating the validity of the trustee's sale or
raising claims that necessarily assert and interest in the
property because (1) she litigated the validity of the
trustee's sale, along with the rescission issue, in a
previous state court action and (2) the Arizona Court of
Appeals ruled that the completion of the trustee's sale