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DiPietro v. First Allied Securities Inc.

United States District Court, D. Arizona

April 4, 2017

Michael DiPietro, Petitioner,
First Allied Securities Incorporated, Respondent.


          David G. Campbell, United States District Judge

         Respondent First Allied Securities, Inc. asks the Court to award attorneys' fees and costs against Petitioner Michael DiPietro pursuant to Federal Rule of Civil Procedure 54(d) and Local Rule 54.2(b). Doc. 89. The motion has been fully briefed (Docs. 89, 90, 92, 94), and neither party has requested oral argument. For the reasons that follow, the Court will grant First Allied's motion in part.

         I. Background.

         On October 8, 2004, the parties entered into an Independent Contractor Agreement (“ICA”) which provided that DiPietro would sell securities and other services on behalf of First Allied. Doc. 24-2 at 2. The ICA also included a broad provision under which DiPietro agreed to indemnify First Allied for losses, costs, and expenses related to disputes arising out of the agreement. Doc. 92-1 at 6; Doc. 94 at 5. On September 19, 2012, Martina Hutchinson filed a claim against First Allied in a FINRA arbitration related to investments purchased through DiPietro and First Allied. Doc. 24-3; Doc. 90 at 5. Pursuant to FINRA rules, the arbitration was assigned to Phoenix, Arizona. Doc. 92 at 2. First Allied filed an answer and a third-party claim against DiPietro seeking indemnification under the ICA. Doc. 24-4. DiPietro filed a response and counterclaims against First Allied for abuse of process and malicious prosecution. Doc. 24-11. Hutchinson's claims against First Allied were settled. Doc. 90 at 5; Doc. 92 at 2. The arbitration between First Allied and DiPietro continued, resulting in a unanimous three-member panel decision in favor of First Allied. Doc. 24-19. The panel found that DiPietro was liable to First Allied for $100, 000 in compensatory damages, post-judgment interest at the rate of 8%, $56, 047.55 in attorneys' fees, and $1, 456.24 in witness fees. Id. at 3. DiPietro's counterclaims were denied. Id.

         On March 12, 2014, DiPietro filed a motion with this Court to vacate or modify the arbitration award. Doc. 1. The Court denied the motion and confirmed the arbitration award. Doc. 68. First Allied filed a subsequent motion for attorneys' fees (Docs. 76, 77), which was denied without prejudice while the Ninth Circuit considered the Court's order on an appeal from DiPietro. Doc. 81. The Court instructed First Allied that a renewed motion for attorneys' fees could be filed within 30 days of the issuance of the mandate on appeal. Id. The Ninth Circuit affirmed the Court's decision (Doc. 88-2) and denied DiPietro's subsequent petition for panel rehearing and en banc review (Doc. 88-1). The Ninth Circuit also granted First Allied's motion to transfer consideration of the attorneys' fees on appeal to this Court. Id. The mandate affirming the Court's decision was issued, and First Allied filed this renewed motion for attorneys' fees.

         II. Analysis.

         First Allied seeks an award of attorneys' fees in the amount of $157, 630.33. Doc. 94 at 10. First Allied argues that it is entitled to these fees under three different sources: (1) A.R.S. § 12-1514; (2) A.R.S. § 12-341.01; and (3) the IRC. Doc. 89, ¶ 6. DiPietro argues that the Court may not award attorneys' fees because (1) California law governs the dispute under the terms of the ICA, and California law does not allow for attorneys' fees related to an appeal of an arbitration award; and (2) the Court does not have power to determine attorneys' fees under the IRC, which must instead be submitted to the arbitrator. Doc. 92. DiPietro also contends that the amount of attorneys' fees sought by First Allied is unreasonable. Id.

         A. California Law and the ICA.

         DiPietro argues that, under the express terms of the ICA, California law governs this dispute. Doc. 92 at 9. First Allied contends that “the parties have relied on Arizona law throughout this litigation” and “DiPietro has waived his right to enforce the ICA's choice of law provision.” Doc. 94 at 3. Even if the Court applies California law, however, First Allied is entitled to an award of fees related to DiPietro's challenge of the arbitration decision in this Court and the Ninth Circuit.

         1. Eligibility

         As DiPietro concedes, California law allows for an award of attorneys' fees when such fees are authorized by contract, statute, or law. Cal. Civ. Proc. Code § 1033.5; see also Cal. Civ. Proc. Code § 1021 (in judicial proceedings relating to arbitration, “the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties”); Carole Ring & Assocs. v. Nicastro, 104 Cal.Rptr.2d 519, 523 (Cal.Ct.App. 2001). California courts have awarded attorneys' fees to prevailing parties in state court suits for confirmation or modification of arbitration awards if a valid contract between the parties provides for such fees. See, e.g., Corona v. Amherst Partners, 132 Cal.Rptr.2d 250, 254 (Cal.Ct.App. 2003) (“A court must award costs in a judicial proceeding to confirm, correct or vacate an arbitration award. Attorney fees are recoverable as costs if authorized by contract.”) (citations omitted); Carole Ring, 104 Cal.Rptr.2d at 523 (finding that the court was required to award the prevailing party attorneys' fees related to post-arbitration judicial proceedings confirming an arbitration award when the contract provided for such fees).

         The parties agree that their dispute in this Court and the Ninth Circuit is “a continuation of the underlying arbitration case” and, as a result, the terms of the ICA apply to the motion for attorneys' fees related to this dispute. Doc. 90 at 9; Doc. 92 at 9 (citing First Allied's brief, Doc. 90 at 9). As a result, the Court will look to the language of the ICA to determine whether First Allied is eligible for attorneys' fees. Doc. 92-1.

         The ICA provides that “[a]ny dispute between [DiPietro] and First Allied which cannot be settled by the parties will be arbitrated[.]” Id. at 7. DiPietro argues that, pursuant to this clause, the Court cannot decide the motion for attorneys' fees; instead the motion must be submitted to the arbitrators for determination. Doc. 92 at 9. The Court does not agree. The language of the ICA does not prohibit a party from challenging an arbitration award in federal court, as DiPietro has done here. Nor does it preclude a federal court from awarding attorneys' fees related to such a challenge. Moreover, if motions for attorneys' fees related to district court proceedings modifying or confirming an arbitration award had to be submitted to the arbitrators, an absurd result could occur. Assuming the parties would always challenge the arbitrators' decision in the federal courts, the parties would find themselves in an unending back-and-forth between the arbitrators and the federal courts, unable to obtain complete relief.

         DiPietro's position that only the arbitrators can determine a motion for attorneys' fees is further contradicted by precedent from the California state courts. In Carole Ring, the parties' contract “contained an arbitration clause, requiring binding arbitration of any dispute or claim arising out of th[e] contract.” 104 Cal.Rptr.2d at 521 (quotation marks omitted and alterations incorporated). One of the parties sought review of an arbitration decision in the California superior court, and that arbitration decision was ultimately confirmed by the California court of appeal. Id. The prevailing party filed a subsequent motion for attorneys' fees with the superior court, which was denied. Id. The appellate court reversed, concluding that the superior court was ...

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