United States District Court, D. Arizona
11333, Inc., f/k/a Investors Mortgage Holdings, Inc., Plaintiff,
Certain Underwriters at Lloyd's, London, Subscribing to Policy No. MBB0756586A08, MBB0856586A09, and B066456586B09; HUB International Insurance Services, Inc., Defendants.
V. Wake Senior United States District Judge.
the Court is Defendant Certain Underwriters at Lloyd's,
London Subscribing to Policy Number MBB0756586A08's
Motion for Award of Attorneys' Fees (Doc. 185), 11333
Incorporated's response, Underwriter's reply, 11333
Incorporated's sur-reply, and Underwriters' objection
to 11333 Incorporated's sur-reply.
Incorporated (“11333”) is a licensed mortgage
broker that arranges and services mortgage loans. In 2003,
11333 was designated as the exclusive manager of IMH Secured
Loan Fund, LLC (“the Fund”), a limited liability
company that makes commercial and subdivision real estate
loans. Until 2010, 11333 was a separate entity from the Fund.
2006, the Fund made an $18 million mortgage loan to Avocet
Oceanfront Villas (“Avocet”), a subdivision land
developer. Avocet used the loan to obtain and develop 146
acres for an oceanfront subdivision in Galveston, Texas. In
2007, Avocet defaulted on its mortgage loan, and its property
insurance was canceled for non-payment of premium. In April
2008, the Fund foreclosed and took ownership of the Avocet
International Insurance Services, Inc. (“HUB”) is
an insurance broker. In 2007, HUB procured for 11333 a
“Mortgage Bankers/Brokers Errors and Omissions”
policy (“the Policy”) from Certain Underwriters
at Lloyd's, London (“Underwriters”). The
Policy named 11333 as the insured; it did not name the Fund
as an insured. It had coverage limits of $5 million minus a
$25, 000 deductible. The Policy remained in effect until June
September 2008, Hurricane Ike struck the Texas Gulf Coast and
caused damage to the Avocet property, which 11333 discovered
by March 2009. By at least March 2009, 11333 also knew that
it did not have flood insurance for the physical damage.
2010, the Fund acquired 11333 as a wholly owned subsidiary.
In March 2011, the Fund submitted a claim under a Mortgage
Bankers/Brokers Errors and Omissions Policy that was
effective from 2010 to 2011. The claim was denied, litigated,
rejected on summary judgment, and settled on appeal.
January 2014, 11333 submitted a claim to Underwriters under
the 2008-09 Policy. In March 2014, Underwriters denied
coverage. On September 10, 2014, 11333 filed this action. It
alleged against Underwriters breach of contract by failing to
indemnify 11333's losses caused by 11333's negligent
failure to procure flood insurance and breach of the duty of
good faith and fair dealing by depriving 11333 of the benefit
of its bargain with respect to the Policy. It alleged against
HUB negligence, professional negligence, breach of contract,
and breach of the duty of good faith and fair dealing,
arising out of HUB's contract with 11333 to procure
mortgage bankers/brokers insurance for 11333.
13, 2017, Underwriters' and HUB's motions for summary
judgment were granted, and judgment was granted in their
favor on all of 11333's claims. Underwriters seek an
award of attorney fees under A.R.S. § 12-341.01(A) in
the amount of $1, 112, 137.50, which is comprised of $124,
359.50 The Cavanagh Law Firm billed to Underwriters, which
was paid in full by Underwriters, and $987, 778.00 Clyde
& Co U.S. LLP billed to Underwriters, which also was paid
in full by Underwriters.
LEGAL STANDARD UNDER A.R.S. § 12-341.01(A)
§ 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.”
Under § 12-341.01(A), attorney fees may be awarded based
upon facts that show a breach of contract, the breach of
which may also constitute a tort. Sparks v. Republic Nat.
Life Ins. Co., 132 Ariz. 529, 543, 647 P.2d 1127, 1141
(1982). Intertwining of contract and tort legal theories does
not preclude a fee award if the cause of action in tort could
not exist but for the breach of contract. Id.;
Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc.,
198 Ariz. 10, 13, 6 P.3d 315, 318 (Ct. App. 2000).
“[W]hen two claims are so intertwined as to be
indistinguishable, a court has discretion to award attorney
fees under § 12-341.01 even though the fees attributable
to one of the causes of action would not be recoverable under
this statute.” Zeagler v. Buckley, 223 Ariz.
37, 39, 219 P.3d 247, 249 (Ct. App. 2009). “Moreover,
when . . . claims are so interrelated that identical or
substantially overlapping discovery would occur, there is no
sound reason to deny recovery of such legal fees.”
state and federal statutes direct courts to award a
successful party certain taxable costs, A.R.S. §
12-341.01 does not permit courts to award non-taxable costs.
Ahwatukee Custom Estates Mgmt. Ass'n, Inc. v.
Bach, 193 Ariz. 401, 404, 973 P.2d 106, 109 (1999). An
award of attorney fees under § 12-341.01 may include
legal assistant services and the cost of computerized legal
research. Id. at 403-04, 973 P.2d at 108-09.
award of fees under § 12-341.01 is discretionary.
Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566,
569, 155 P.3d 1090, 1093 (Ct. App. 2007). The statute does
not establish a presumption that attorney fees be awarded in
contract actions. Associated Indem. Corp. v. Warner,
143 Ariz. 567, 569, 694 P.2d 1181, 1183 (1985). In
determining whether to award attorney fees under §
12-341.01, trial courts may consider the following
non-exclusive factors pertinent to discretion: the merits of
the unsuccessful party's case, whether the litigation
could have been avoided or settled, whether assessing fees
against the unsuccessful party would cause an extreme
hardship, the degree of success by the successful party, any
chilling effect the award might have on other parties with
tenable claims or defenses, the novelty of the legal
questions presented, and whether such claim had previously
been adjudicated in this jurisdiction. Id. at 570,
694 P.2d at 1184.
award of reasonable attorney fees pursuant to [§
12-341.01] should be made to mitigate the burden of the
expense of litigation to establish a just claim or a just
defense. It need not equal or relate to the attorney fees
actually paid or contracted, but the award may not exceed the
amount paid or agreed to be paid.” A.R.S. §
12-341.01(B). “Once a litigant establishes entitlement
to a fee award, the touchstone under § 12-341.01 is the
reasonableness of the fees.” Assyia v. State Farm
Mut. Auto. Ins. Co., 229 Ariz. 216, 222, 273 P.3d 668,
674 (Ct. App. 2012). To determine reasonable attorney 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). If
persuaded that the contracted hourly rates are unreasonable,
courts may use a lesser rate. Id. at 188, 673 P.2d
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
the legal service properly;
(2) the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude other
employment by the lawyer;
(3) the fee customarily charged in the locality for similar
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
(6) the nature and length of the professional relationship
with the client;
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the services; and
(8) the degree of risk assumed by the lawyer.
A.R.S. Sup. Ct. Rules, Rule 42, Rules of Prof. Conduct, ER
1.5. In addition, Local Rules require consideration of
whether the fee contracted between the attorney and the
client is fixed or contingent, the
“undesirability” of the case, and awards in
similar actions. LRCiv 54.2(c).
motion for award of attorney fees must include a task-based
itemized statement of fees, which identifies the date on
which the service was performed, the time devoted to each
individual unrelated task performed on the date, a
description of the service provided, and the identity of the
person performing the service. LRCiv 54.2(e)(1).
The party seeking an award of fees must adequately describe
the services rendered so that the reasonableness of the
charge can be evaluated. In describing such services,
however, counsel should be sensitive to matters giving rise
to issues associated with attorney-client privilege and
attorney work-product doctrine, but must nevertheless furnish
an adequate nonprivileged description of the services in
question. If the time descriptions are incomplete, or if ...