Ward v. Life Care Centers of America Incorp.

          REPORT AND RECOMMENDATION

          HONORABLE JACQUELINE M. RATEAU, UNITED STATES MAGISTRATE JUDGE

         Pending before the Court is Defendant Life Care Centers of America, Inc.'s unopposed Motion for Award of Attorneys' Fees (Doc. 64). The Magistrate Judge recommends that Life Care's Motion be granted in part and award Defendant attorneys' fees in the amount of $3, 452.85.

         I. Factual and Procedural Background

         Plaintiff filed his original complaint on October 10, 2016, asserting two claims: (1) wrongful termination under the Arizona Employment Protection Act (AEPA), and (2) breach of the implied covenant of good faith and fair dealing. After Plaintiff filed his Complaint and before Defendant filed any responsive pleading, the parties exchanged settlement offers, but were unable to resolve the case. Fiore Decl. ¶ 13.

         Defendant moved to dismiss the case in its entirety on December 21, 2016. Doc. 10. In response, Plaintiff filed an Amended Complaint alleging the same two causes of action. Doc. 12. The parties then stipulated to the filing of the Amended Complaint and giving Defendant 30 days to answer or otherwise respond to the Amended Complaint. Docs. 15 (Stipulated Motion), 16 (Order granting motion). Defendant did not renew the Motion to Dismiss; rather, it filed an Answer to the Amended Complaint on February 27, 2017. Doc. 17.

         On June 2, 2017, the Court issued a scheduling order and the parties proceeded to conduct discovery. See Docs. 21, 30, 38, 49, 50 (Plaintiff's discovery notices); 20, 27, 28, 29, 31, 32, 33, 34, 35, 37, 43, 44, 45 (Defendant's discovery notices). During discovery, Defendant inquired about settlement. Plaintiff made a revised settlement demand, to which Defendant responded on December 14, 2017. Fiore Decl. ¶ 15. Plaintiff's counsel stated that he would relate the offer to his client and respond, but he never responded. Id. Defendant's counsel subsequently called Plaintiff's counsel to inquire about the offer and to move settlement discussions forward. Id. On March 6, 2018, Defendant's counsel sent a letter to Plaintiff's counsel that reiterated the December 14, 2017 settlement offer and noted that Plaintiff had yet to respond to it. Id. Defendant specifically noted that it hoped to resolve the case prior to the parties incurring significant fees associated with a motion for summary judgment. Id. Plaintiff neither responded to the letter nor made any new settlement overture. Id.

         On March 30, 2018, after the close of discovery, Defendant filed its Motion for Summary Judgment requesting dismissal of the two claims alleged in the Amended Complaint. Doc. 51. Plaintiff responded to the motion, arguing that summary judgment should not be granted on his claim under the AEPA, but offering no argument in support of his claim for breach of the implied covenant of good faith and fair dealing. Doc. 56. Defendant replied in support of the motion and noted that Plaintiff had made no attempt to save his claim for breach of the implied covenant of good faith and fair dealing. Doc. 11.

         On August 17, 2018, the Court issued its Report and Recommendation to the District Court recommending that Defendant's Motion for Summary Judgment be granted. Doc. 59. Approximately 7 pages of discussion in the Report and Recommendation addressed the parties' AEPA-related arguments. One page of the discussion addressed Plaintiff's claim for breach of the implied covenant of good faith and fair dealing. Id. No objections were filed and, on November 5, 2018, the District Court adopted the Report and Recommendation, granted Defendant's Motion for Summary Judgment, and ordered the case dismissed with prejudice. Doc. 60.

         II. Discussion

         In the motion before the Court, Defendant requests and award of attorneys' fees under A.R.S. § 12-341.01. Specifically, Defendant requests a fee award in the amount of $38, 132.50 (36.17% of its total fees), which represents all fees incurred in the preparation, drafting and finalizing of its Motion to Dismiss and its Motion for Summary Judgment. Alternatively, Defendant requests a fee award in the amount of $3, 452.00, which is an approximated percentage of the fees attributable to defending against Plaintiff's claim of breach of the implied covenant of good faith and fair dealing. The Court recommends that the District Court grant the fee request in the amount of $3, 452.85.

         A. Eligibility Under A.R.S. § 12-341.01

         Under A.R.S. § 12-341.01(A), “[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.” The Ninth Circuit has recognized that A.R.S. § 12-341.01 itself “makes clear that a fee award may not exceed the amount necessary to defend against those claims for which such fees are appropriate.” Harris v. Maricopa County Superior Court, 631 F.3d 963, 972 (9th Cir. 2011). Defendant argues that it is entitled to fees for both claims alleged in the Amended Complaint under § 12- 341.01(A) because both “aris[e] out of a contract.” To determine whether a claim “arise[s] out of a contract, ” the Court examines whether the “claim could not exist ‘but for' the breach or avoidance of contract.” Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 6 P.3d 315 (Ariz. App. 2000); see also A.H. By and Through White v. Arizona Property and Cas. Ins. Guar. Fund, 950 P.2d 1147 (Ariz. 1997) (en banc). A defendant is entitled to an award of attorney's fees under the statute if the court finds that no contract existed or if the plaintiff was unsuccessful in recovering on the contract. Chevron U.S.A., Inc. v. Schirmer, 11 F.3d 1473, 1480 (9th Cir. 1993) (citation omitted).

         Addressing first Plaintiff's claim alleging breach of the covenant of good faith and fair dealing, the Court finds an award of attorneys' fees appropriate. A breach of an implied covenant of good faith and fair dealing can lead to liability in either contract or tort depending on the circumstances. See Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr. Fund, 38 P.3d 12, 28-29 (Ariz. 2002). In the Amended Complaint, Plaintiff asserts that the breach in this case occurred “when the Defendant, through their agent and his supervisor, terminated [Plaintiff's] employment for bad cause.” Doc. 13, ¶ X. As is relevant to Plaintiff's claim of breach of the implied covenant of good faith and fair dealing, the AEPA provides that an employment relationship is at-will and severable by either party unless the parties “have signed a written contract to the contrary setting forth that the employment relationship shall remain in effect for a specified duration of time.” A.R.S. § 23-1501(A)(2). “An employee has a claim against an employer for termination of employment only if . . . (a) The employer has terminated the employment relationship of an employee in breach of an employment contract . . . . A.R.S. § 23-1501(A)(3). Under the requirements of the AEPA, Plaintiff's bad faith claim was potentially viable only if he could prove the existence of an employment contract. See White v. AKDHC, LLC, 664 F.Supp.2d 1054, 1065 (D. Ariz. 2009) (the implied duty of good faith and fair dealing “protects an employee only to the extent that the employer denied the terminated employee benefits agreed to in the employment contract.”). Here, Defendant defeated the claim by showing that, in fact, no such contract existed. See Doc. 59, pp. 12-13 (Report and Recommendation), Doc. 60 (order adopting R&R). Therefore, on the claim of breach of the implied covenant of good faith and fair dealing, Defendant meets the threshold requirements for an award of fees under A.R.S. § 341.01. See Chevron, 11 F.3d at 1480 (fees available under § 12-341.01 because plaintiff's complaint alleged the existence of contracts).

         Defendant argues that it is entitled to an award of attorneys' fees for work performed in relation to Plaintiff's retaliatory-discharge claim because the claim is “interwoven” with Plaintiff's claim of breach of the implied covenant of good faith and fair dealing. However, while the Court recognizes that the two claims implicated many of the same ...