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Devon Investment Inc. v. Andes Industries, Inc.

United States District Court, D. Arizona

January 3, 2018

Devon Investment Inc., Plaintiff,
v.
Andes Industries, Inc., Defendant.

          ORDER

          Neil V. Wake, Senior United States District Judge.

         Before the Court is Devon Investment Inc.'s Motion for an Award of Attorneys' Fees and Non-Taxable Costs (Doc. 59).

         I. BACKGROUND

         This case arises out of a promissory note dated March 11, 2009 (“March 2009 Note”) by which Andes Industries, Inc., promised to pay Chi-Jen (Dennis) Lan the principal sum of $4, 700, 507.00 with interest. The March 2009 Note provides that it shall be governed by the laws of the State of Arizona. Andes made partial interest only payments on the March 2009 Note. On March 19, 2015, Dennis Lan transferred to Devon Investment Inc. all of his rights, title, and interest in and to the March 2009 Note, including all rights to enforce the note and to recover and collect all amounts due thereunder.

         On April 3, 2015, Devon sued Andes for breach of contract to recover and collect all amounts due under or arising from enforcement of the March 2009 Note. On September 5, 2017, the Court granted summary judgment in Devon's favor. On October 4, 2017, judgment was entered in favor of Devon and against Andes in the amount of: (1) the principal amount of $4, 700, 507.00, plus (2) pre-judgment interest to October 4, 2017, in the amount of $2, 370, 729.89 at the rate of 6% per annum simple interest, plus (3) post-judgment interest on $7, 071, 236.89 (the sum of amounts (1) and (2)) at the rate of 6% per annum from the date of entry of judgment (October 4, 2017) until paid. The October 4, 2017 judgment awarded Devon all of the relief it sought.

         The March 2009 Note includes the following: “Borrower shall pay all costs and expenses, including reasonable attorneys' fees and court costs, incurred in the collection or enforcement of all or any part of this Note.” (Doc. 1-1 at 4.) Devon seeks award of attorney's fees and related non-taxable expenses as provided by the March 2009 Note and A.R.S. § 12-341.01(A).

         II. LEGAL STANDARD

         A.R.S. § 12-341.01(A) provides: “In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. . . . This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees.” The statute does not apply when the parties have provided in their contract the conditions under which attorney's fees may be recovered if the statute “effectively conflicts with an express contractual provision governing recovery of attorney's fees.” Am. Power Prods., Inc. v. CSK Auto, Inc., 242 Ariz. 364, 368, 396 P.3d 600, 604 (2017). But “rather than being completely supplanted by any attorney fee provision in the parties' contract, the statute- consistent with its plain language-applies to ‘any contested action arising out of contract' to the extent it does not conflict with the contract.” Id. To the extent that § 12-341.01(A) does not conflict with the parties' contract, it is incorporated into the contract. Id.

         Although an award of reasonable attorney fees is discretionary under § 12-341.01(A), it is mandatory under the March 2009 Note. To determine reasonable attorney's fees in commercial litigation, courts begin by determining the actual billing rate that the lawyer charged in the particular matter. Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 187, 673 P.2d 927, 931 (Ct. App. 1983). “In corporate and commercial litigation between fee-paying clients, . . . the rate charged by the lawyer to the client is the best indication of what is reasonable under the circumstances of the particular case.” Id. at 187-88, 673 P.2d at 931-32. However, in determining reasonable rates, courts are not bound by the parties' agreements. Id. at 188, 673 P.2d at 932.

         III. ANALYSIS

         A. Reasonable Attorney Fees

         Devon entered into engagement agreements with its counsel through which it agreed to pay 70% of counsel's standard hourly rates upon receipt of monthly invoices and to pay all out-of-pocket costs and expenses. Devon agreed to pay a contingent fee consisting of the remaining 30% of counsel's standard hourly rates if Devon's claim was resolved, plus 20% of the net amount recovered as a result of resolution of Devon's claim. Andes does not dispute that Devon is eligible for and entitled to award of reasonable attorney fees. Andes does not contend that the requested hourly rates or hours expended are unreasonable. Andes objects to the amount requested based on 20% of the net amount of recovery because it results in an hourly rate much greater than Devon's counsel's standard hourly rates.

         Under the Arizona Supreme Court's Rules of Professional Conduct, factors to be considered in determining the reasonableness of an attorney fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform ...

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