United States District Court, D. Arizona
MARICOPA COUNTY, a political subdivision of the State of Arizona, Plaintiff,
OFFICE DEPOT, INC., a Delaware corporation, Defendant.
ORDER MOTION FOR ATTORNEYS' FEES AND NON-TAXABLE
Russel Holland United States District Judge.
moves for an award of attorneys' fees and non-taxable
This motion is opposed. Oral argument was requested but is not
case involves plaintiff Maricopa County's purchase of
office supplies from defendant Office Depot Inc. via the U.S.
Communities program. U.S. Communities is a cooperative
purchasing organization for government and non-profit
entities. Certain U.S. Communities' members serve as
“lead agencies” which bid out supplier contracts
that allow other U.S. Communities members to
“piggyback” on the contracts, meaning that they
can purchase goods from the supplier at the prices in the
lead agency's contract.
piggybacked on a Master Agreement that was between defendant
and Los Angeles County. As the supplier under the Master
Agreement, defendant also entered into an Administration
Agreement with U.S. Communities.
commenced this action on May 1, 2014 in state court, which
was subsequently removed to this court on the basis of
diversity jurisdiction. In its complaint, plaintiff asserted
five claims against defendant, three fraud claims (statutory
fraud, common law fraud and deceit, and negligent
misrepresentation) and two contract claims. Plaintiff sought
“no less than $6.75 million in
breach of contract claims were based on allegations that
defendant “promised [plaintiff] ... that it would
receive the lowest prices offered to any state or local
governmental entities in the United States for goods it
purchased from” defendant but that defendant “failed to
provide [plaintiff] with the lowest prices it offered to any
state or local governmental entities....” Plaintiff's fraud
claims were based on allegations that defendant had
“misrepresented to [plaintiff], among other things,
that the prices it charged ... for office supplies were the
lowest it charged to any other state and local governmental
entity in the United States.”
moved to dismiss all of plaintiff's claims. The court
granted defendant's motion in part and denied it in
court dismissed plaintiff's contracts claims that were
based on allegations that defendant breached the Master
Agreement, and the court dismissed plaintiff's fraud
Plaintiff's contract claims which were based on
allegations that defendant breached the Pricing Commitment in
the Administration Agreement survived the motion to
The court concluded that plaintiff was an intended
third-party beneficiary of the Administration Agreement with
a right to enforce the Pricing Commitment.
fact discovery was complete, the parties cross-moved for
summary judgment on whether defendant had breached the
Administration Agreement. In the cross-motions, the parties
advanced different interpretations of the Pricing Commitment.
The court found that plaintiff's proposed interpretation
was not supported by the extrinsic evidence. The court
concluded that defendant had not breached the Administration
Agreement and thus granted defendant's motion for summary
judgment and denied plaintiff's partial motion for
summary judgment. Judgment was entered on December 1,
2016, dismissing plaintiff's complaint with
now moves for an award of $1, 076, 678.35 in attorneys'
fees and $68, 277.29 in non-taxable expenses.
party requesting an award of attorneys' fees and
non-taxable expenses must show that it is (1) eligible for an
award; (2) entitled to an award; and (3) requesting a
reasonable amount of attorneys' fees.” Smith v.
Ariz., Case No. CV-13-00332-PHX-SRB, 2014 WL 11342455,
at *1 (D. Ariz. Feb. 11, 2014) (citing LRCiv. 54.2(c)).
is eligible for attorneys' fees pursuant to A.R.S. §
12-341.01(A), which 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.” Defendant is also eligible for attorneys'
fees and non-taxable expenses pursuant to Section 1717(a) of
California's Civil Code, which provides that
[i]n any action on a contract, where the contract
specifically provides that attorney's fees and costs,
which are incurred to enforce that contract, shall be awarded
either to one of the parties or to the prevailing party, then
the party who is deter- mined to be the party prevailing on
the contract, whether he or she is the party specified in the
contract or not, shall be entitled to reasonable
attorney's fees in addition to other costs.
Administration Agreement, which is to “be governed
exclusively by and construed in accordance with the
applicable laws of the State of California, ” provides
that “[i]f any action at law or in equity is brought to
enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to reasonable
attorney's fees and costs....”
order to be entitled to fees pursuant to A.R.S. §
12-341.01(A), defendant must first show that this was a
“contested action arising out of a contract.”
Although plaintiff asserted statutory and tort claims (the
fraud claims) as well as contract claims, “‘[i]t
is well-established that a successful party on a contract
claim may recover not only attorneys' fees expended on
the contract claim, but also fees expended in litigating an
interwoven tort claim.'” Modular Mining
Systems, Inc. v. Jigsaw Technologies, Inc., 212 P.3d
853, 860 (Ariz.Ct.App. 2009) (quoting Ramsey Air Meds.,
L.L.C. v. Cutter Aviation, Inc., 6 P.3d315, 318
(Ariz.Ct.App. 2000)). Plaintiff's fraud claims and
contract claims were interwoven as evidenced by the
court's order on defendant's motion to dismiss. The
court held that plaintiff's common law fraud claims were
barred by the economic loss rule because they were
“based on the same alleged conduct as [plaintiff's]
contract claims[.]” And, the court found that
“[p]laintiff's statutory fraud claim [was] based on
allegations that defendant represented that its contracts
guaranteed that plaintiff would be charged the lowest
governmental pricing for office supplies”, which were
“representations as to the meaning of the contract, not
representations of fact.” Defendant is entitled to recover
fees expended on both plaintiff's fraud claims and
plaintiff's contract claims, as long as defendant meets
the other requirements of A.R.S. § 12-341.01.
order to be entitled to fees under A.R.S. § 12-341.01,
defendant must also show that it was the successful party.
“To determine whether a party is successful under
Section 12-341.01, a court should consider ‘the
totality of the circumstances and the relative success of the
litigants.'” Medical Protective Co. v.
Pang, 740 F.3d 1279, 1283 (9th Cir. 2013) (quoting
McAlister v. Citibank, 829 P.2d 1253, 1262
(Ariz.Ct.App. 1992)). “Where, as here, a case involves
multiple claims..., ‘the successful party is the net
winner.'” Id. (quoting Berry v. 352 E.
Va., LLC, 261 P.3d 784, 788 (Ariz.Ct.App. 2011)).
“Courts may determine the relative success of the
parties by using a ‘percentage of success factor'
test, or by looking at the ‘totality of the
litigation.'” Id. (quoting Schwartz v.
Farmers Ins. Co. of Ariz., 800 P.2d 20, 25-26
contends that it is entitled to fees under Section 12-341.01
for the period of time up until its motion to dismiss was
granted. Although as plaintiff points out, defendant was only
partially successful on the motion to dismiss, all but one of
plaintiff's claims were dismissed as a result of
defendant's motion to dismiss. In addition to
plaintiff's fraud claims being dismissed, the court also
dismissed plaintiff's contract claims which were based on
the Master Agreement. Plainly, defendant was the successful
party as far as the motion to dismiss was concerned.
the court finds that a party is the ‘successful
party' as envisioned in A.R.S. §12-341.01, the court
may then exercise its discretion on whether to award
reasonable attorneys' fees.” Lexington Ins. Co.
v. Scott Homes Multifamily Inc., Case No.
CV-12-02119-PHX-JAT, 2016 WL 5118316, at *4 (D. Ariz. Sept.
21, 2016). “[T]here is no presumption that a successful
party should be awarded attorney fees under §
12-341.01.'” Motzer v. Escalante, 265 P.3d
1094, 1095 (Ariz.Ct.App. 2011).
In determining whether to exercise its discretion to award
attorneys' fees under § 12-341.01(A), the Arizona
Supreme Court concluded in Associated Indemnity that
a court may consider, among other factors, the following:
(1) the merits of the unsuccessful parties' claim or
defense; (2) whether litigation could have been avoided or
settled; (3) whether assessing fees against the unsuccessful
party would cause extreme hardship; (4) whether the
successful party prevailed with respect to all relief sought;
(5) the novelty of the issues; and (6) whether the award will
overly deter others from bringing meritorious suits.
Lexington Ins. Co., 2016 WL 5118316, at *4 (quoting
Velarde v. PACE Membership Warehouse, Inc.,
105 F.3d 1313, 1319 (9th Cir. 1997)).
urges the court to exercise its discretion and not award
defendant any attorneys' fees under Section 12-341.01(A).
Plaintiff argues that fees should not be awarded because
doing so would discourage litigants from advancing positions
which have merit. Plaintiff argues that its claims had merit
and that this was a close case, as evidenced by the fact that
one of plaintiff's claims survived the motion to dismiss
and that the court found both parties' interpretation of
the Pricing Commitment reasonable, if only the four corners
of the Administration Agreement were
considered. Plaintiff also argues that fees should
be not awarded because this case involved a public agency
attempting to protect the tax dollars of its constituents.
Finally, plaintiff argues that it did not bring its claims in
court is not persuaded by plaintiff's arguments. While
plaintiff's complaint was not frivolous nor brought in
bad faith, all of plaintiff's claims lacked merit.
Defendant also engaged plaintiff in a serious effort to avoid
litigation. Assessing attorneys' fees on a large
governmental agency such as plaintiff will not cause extreme
hardship. The business arrangement between defendant and
plaintiff was novel but the issues to be resolved were not.
And, there is no reason to believe that imposing
attorneys' fees will deter plaintiff or others from
bringing meritorious suits. Defendant is entitled to
attorneys' fees under A.R.S. § 12-341.01(A).
defendant's entitlement to attorneys' fees and
non-taxable expenses under Section 1717(a) of
California's Civil Code, “[w]here a nonsignatory
plaintiff sues a signatory defendant in an action on a
contract and the signatory defendant prevails, the signatory
defendant is entitled to attorney fees only if the
nonsignatory plaintiff would have been entitled to its fees
if the plaintiff had prevailed.” Cargill, Inc. v.
Souza, 201 Cal.App.4th 962, 967 (Cal.Ct.App. 2011)
(citation omitted). Plaintiff argues that it would not have
been entitled to fees under the Administration Agreement
because it was not a party to that agreement. Plaintiff cites
to Sessions Payroll Management, Inc. v. Noble Const.
Co., 101 Cal.Rptr.2d 127 (Cal.Ct.App. 2000), in support
of its argument. There, the attorney fee clause in the
In the event it becomes necessary for either party
to enforce the provisions of this Agreement or to obtain
redress for the violation of any provision hereof, whether by
arbitration, or otherwise, the prevailing party shall be
entitled to recover from the other party all costs and
expenses associated with such action, including statutory
interest and reasonable attorney fees.
Id. at 130. The court held that a third-party
beneficiary would not be entitled to attorneys' fees
under this clause because the recovery of attorneys' fees
was expressly limited to “either party.”
Id. at 133. The court explained that the word
“‘party' limits recovery of attorney fees to
a ‘party' to the contract, reflecting the intent of
Noble and Mackey to exclude non-signatories, such as
Sessions, from the scope of the attorney fee clause.”
defendant is quick to point out, the attorney fee clause in
the Administration Agreement is quite different from the one
in Sessions. While the Sessions clause
expressly referred to disputes between the parties to the
contract, the clause in the Administration Agreement refers
to any action involving enforcement of the terms of
the agreement. The attorney fee clause in the Administration
Agreement does not reflect an intent to exclude
non-signatories, such as plaintiff, from the scope of the
clause. Because this was an action involving enforcement of
the terms of the Administration Agreement, plaintiff would
have been entitled to attorneys' fees as a third-party
beneficiary had it prevailed on its claim that defendant
breached the agreement. In turn, that means that, under
California law, defendant is entitled to attorneys' fees
and non-taxable expenses.
then to the reasonableness of defendant's request for
attorneys' fees, “[r]easonability is generally
analyzed under the ‘lodestar method[.]”
Lexington Ins. Co., 2016 WL 5118316, at *4.
“The lodestar method of calculating reasonable
attorneys' fees is a two-step process whereby a court
multiplies the number of hours reasonably expended by a
reasonable hourly rate and then determines if any of the
identified lodestar factors favor enhancing or reducing the
arrived at product.” Id. (citation omitted).
The lodestar factors have been incorporated into Local Rule
(A) The time and labor required by counsel;
(B) The novelty and difficulty of the questions presented;
(C) The skill requisite to perform the legal service
(D) The preclusion of other employment by counsel because of
the acceptance of the action;
(E) The customary fee charged in matters of the type
(F) Whether the fee contracted between the attorney and the
client is fixed or contingent;
(G) Any time limitations imposed by the client or the
(H) The amount of money, or the value of the rights,
involved, and the results obtained;
(I) The experience, ability and reputation of counsel;
(J) The “undesirability” of the case;
(K) The nature and length of the professional relationship
between the attorney and the client;
(L) Awards in similar actions; and
(M) Any other matters deemed appropriate under the
argues that the $41, 371.00 billed by its local counsel,
Osborn Maledon, was reasonable. Plaintiff raises no
challenges to the rates billed by the Osborn Maledon
attorneys ($575, $290, $240) or the Osborn Maledon document
clerk ($70). Plaintiff also does not contend that the
number of hours billed by Osborn Maledon (100.4 hours) was
court finds that the rates billed by Osborn Maledon were
reasonable as were the number of hours billed. The lodestar
amount for Osborn Maledon is $41, 371.00. There are no
lodestar factors that would require an increase or reduction
to this amount. Defendant is entitled to $41, 371.00 in
attorneys' fees for the work done by Osborn Maledon.
also argues that the $1, 035, 307.35 in fees billed by
Williams & Connolly, the Washington D.C. firm that
represented defendant, was reasonable. First. defendant
argues that the rates billed by Williams & Connolly were
reasonable. The seven attorneys who worked on this
case billed at the following rates:
Juli Ann Lund
four paralegals who worked on this case billed at the