United States District Court, D. Arizona
Apollo Education Group, Inc., an Arizona corporation, Plaintiff,
National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania corporation, Defendant.
HONORABLE STEVEN P. LOGAN UNITED STATES DISTRICT JUDGE.
the Court is Defendant National Union Fire Insurance Company
of Pittsburgh, PA's Motion for Attorneys' Fees (the
“Motion”). (Doc. 113) For the following reasons,
the Motion will be granted.
Education Group, Inc. (“Apollo”) purchased an
insurance policy from National Union Fire Insurance Company
of Pittsburgh, PA (“National Union”). (Doc. 1 at
2) Apollo was the defendant in a class action lawsuit, which
settled for $13.125 million in April 2014. (Doc. 1 at 5)
Apollo filed a claim with National Union to fund the
settlement, but National Union refused to fund any of the
settlement amount. (Doc. 1 at 6) Apollo then initiated this
suit against National Union for wrongful and bad faith
refusal to pay the claim related to the settlement agreement
and reimbursement for the $13.125 million Apollo paid out of
pocket. (Doc. 1 at 2) National Union successfully moved for
summary judgment on all of Apollo's claims, and it now
moves for an award of attorneys' fees. (Doc. 119 at 2)
Standard of Review
Rule of Civil Procedure 54(d)(2) provides “[a] claim
for attorney's fees […] must be made by motion
unless the substantive law requires those fees to be proved
at trial as an element of damages.” Fed.R.Civ.P. 54.
National Union is moving for an award of attorneys' fees
pursuant to Fed.R.Civ.P. 54(d)(2)(B) and A.R.S. §
12-341.01. There are six factors to consider in a request for
such fees under A.R.S. § 12-341.01(A). Associated
Indem. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz.
1985). These factors are: (1) whether the unsuccessful
party's claim was meritorious; (2) whether the litigation
could have been avoided or settled and the successful
party's efforts were completely superfluous in achieving
the result; (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) whether the legal question presented was novel
and whether such a claim had previously been adjudicated in
this jurisdiction; and (6) whether an award in the case would
discourage other parties with tenable claims from litigating
legitimate contract issues for fear of incurring liability
for substantial amounts of attorneys' fees. Id.
The Court must consider each factor as no one factor is
determinative. Wilcox v. Waldman, 744 P.2d 444, 450
Entitlement to Attorney's Fees
Court finds that the Warner factors weigh in favor
of awarding National Union attorneys' fees.
Court finds that Apollo's claims had merit because the
claims centered on an ambiguous contractual agreement. It is
first important to note that “[a]n unsuccessful claim
is not necessarily one that lacks merit.” Biltmore
Assocs., L.L.C. v. Twin City Fire Ins. Co., 2007 WL
496766 at *3 (D. Ariz. 2007). Apollo and National Union had a
Consent-to-Settle provision as part of their contracts which
stated that “Insurer's consent [to settlements]
shall not be unreasonably withheld.” (Doc. 75-3 at 14)
Arizona courts have yet to interpret what
“unreasonably” means in the present context.
However, according to the Restatement (Second) of Property,
Apollo must prove that National Union withheld its consent
“as a result of unreasonable caprice, whim, or personal
prejudice.” Restatement (Second) of Property §
15.2 Comment g (1977); Tucson Med. Ctr. v. Zoslow,
712 P.2d 459, 462 (Ariz.Ct.App. 1985). Apollo argues that the
applicable standard is that an insurer is obligated to
provide consent as long as the settlement is reasonable. The
Court finds that because of the ambiguity of the provision in
terms of the word “unreasonably” and lack of
Arizona precedent on the specific issue, the case had merit
despite the summary judgement ruling. This factor weighs
against awarding attorneys' fees.
settlement efforts in this case present a neutral factor in
determining awards of attorneys' fees. Both parties argue
that the other side was unreasonable in their mediation
efforts. Apollo acknowledges its failure to make
counteroffers, but claims, and appears to offer no proof,
that National Union promised to increase its settlement
offers at each mediation. On the other hand, National Union
argues that it should not be required to “bid against
itself” and increase settlement offers if Apollo does
not give a counteroffer. The records of what actually
occurred at the settlement negotiations are sealed. The Court
finds that this factor does not weigh in favor of either
party because neither side appeared willing to work together
to reach an agreed settlement.
Court finds that due to the size and revenue of Apollo, the
requested attorneys' fees would not cause extreme
hardship. “This factor asks whether assessing fees
against an unsuccessful party would cause extreme hardship
given the parties' relative economic positions.”
Biltmore, 2007 WL 496766 at *4. It is the burden of
the party asserting financial hardship to show prima
facie evidence of financial hardship. Woerth v. City
of Flagstaff, 808 P.2d 297, 305 (Ariz.Ct.App. 1990).
National Union argues that paying the requested
attorneys' fees would not cause undue hardship because
Apollo is “a global company that reported $2.1 billion
in net revenue for its fiscal year ending August 31,
2016.” (Doc. 113 at 9) Additionally, in its Form 10-K,
Apollo asserted that the $13.125 million settlement was an
“immaterial” amount that was paid for without the
liquidation of assets. (Doc. 113 at 9) Apollo had the burden
of proving potential financial hardship if attorneys'
fees were awarded, but failed to do so. Not only did Apollo
fail to present an argument ...