Clayton v. HSBC Bank USA NA

          ORDER

          HONORABLE STEVEN P. LOGAN UNITED STATES DISTRICT JUDGE.

         Defendants Wells Fargo Home Mortgage Corporation and HSBC Bank USA NA (together, the “Defendants”) move for an award of attorneys' fees pursuant to A.R.S. § 12-341.01(A) (the “Motion”). (Doc. 55) The Motion was fully briefed on July 13, 2018. (Docs. 61, 65) The Court's ruling is as follows.

         I. Background

         Mickey Nelson Clayton (the “Plaintiff”) initiated this lawsuit against HSBC Bank USA NA in Arizona state court alleging causes of action for breach of contract and declaratory relief, among other claims, related to the Defendants' failure to modify his home loan agreement. (Doc. 1) In April 2017, Wells Fargo Home Mortgage Corporation was added as a defendant to the case, and the Defendants removed the case to federal court in May 2017. Approximately two weeks after removal, the Defendants filed a motion to dismiss the Plaintiff's claims. (Doc. 18) The motion to dismiss was granted on March 31, 2018, and judgement was entered in favor of the Defendants. (Docs. 42, 43) The Defendants now move for an award of attorneys' fees for successfully defending against the Plaintiff's claims. (Doc. 55)

         II. Analysis A. Eligibility For Fees Under A.R.S. §12-341.01(A).

         The Defendants move for an award of reasonable attorneys' fees pursuant to A.R.S. § 12-341.01(A). (Doc. 55 at 2) A.R.S. § 12-341.01 provides district courts with discretion to award attorneys' fees to the “successful party” in actions arising out of contract. Ariz. Rev. Stat. Ann. § 12-341.01 (stating “in any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees”); Med. Protective Co. v. Pang, 740 F.3d 1279, 1280 (9th Cir. 2013). It is undisputed that the Defendants were the successful party in this matter. (Doc. 61 at 8) Furthermore, the Plaintiff does not contest that this lawsuit arose out of a contract between the parties, thus allowing A.R.S. § 12-341.01(A) to provide the statutory basis for the recovery of attorneys' fees. (Doc. 61 at 5)

         The Court must consider six factors when weighing a decision to award fees to a successful party, including: (1) whether the unsuccessful party's claim or defense 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 an extreme hardship; (4) whether the successful party prevailed with respect to all of the relief sought; (5) whether the legal question presented was novel and whether such claim or defense has previously been adjudicated in this jurisdiction; and (6) whether the award would discourage other parties with tenable claims or defenses from litigating or defending legitimate contract issues for fear of incurring liability for substantial amounts of attorneys' fees. Med. Protective Co. v. Pang, 25 F.Supp.3d 1232, 1242 (D. Ariz. 2014). No. one factor is determinative, and a court should consider all six factors in its analysis. Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz.Ct.App. 1987).

         1. Whether the Unsuccessful Party's Claim or Defense Was Meritorious.

         The Defendants argue that the Plaintiff's claims lacked merit because they were premised on faulty legal theories that were unable to survive the Defendants' motion to dismiss. (Doc. 55 at 7) The Plaintiff reiterates the facts supporting his claims in order to argue that his claims had merit, even though he was ultimately unsuccessful. (Doc. 61 at 7) As evident from the Court's Order (Doc. 42) granting the Defendants' motion to dismiss, the majority of the claims that the Plaintiff asserted against the Defendants were without merit. The Plaintiff failed to allege sufficient facts on his breach of contract claim against the Defendants because the Plaintiff failed to meet the conditions precedent to qualifying for a loan modification. (Doc. 42 at 3) Furthermore, the Court found that the Plaintiff's reliance on the “Trial Period Plan Notice” as a basis for his estoppel claim against the Defendants was unjustified. (Doc. 42 at 5) Accordingly, the Court finds that this factor weighs heavily in favor of awarding the requested attorneys' fees.

         2. Whether the Litigation Could Have Been Avoided or Settled.

         The Defendants argue that they could not have avoided this litigation because they needed to defend their interests in the Plaintiff's loan agreement. (Doc. 55 at 8) The Plaintiff argues that settlement of this case was possible, but the Defendants were inflexible and unwilling to provide the Plaintiff with the loan modification relief he sought prior to filing the lawsuit. (Doc. 61 at 7) The Court finds that it was reasonable for the Defendants to defend their interests under the loan agreement in this case, and the Defendants' efforts in quickly bringing the motion to dismiss helped efficiently expedite the resolution of the case. Accordingly, the Court finds that this factor weighs slightly in favor of awarding the Defendants their attorneys' fees for their efforts in defending this case.

         3. Whether Assessing Fees Against the Unsuccessful Party Would Cause an Extreme Hardship.

         The Defendants argue that the Plaintiff has not provided sufficient evidence to demonstrate that an award of the requested attorneys' fees would cause extreme hardship. (Doc. 55 at 8) The Plaintiff states that his ongoing bankruptcy matter, his pre-bankruptcy tax liability, and his ongoing spousal maintenance obligations are all factors that help to demonstrate that the additional obligation of paying an award of attorneys' fees would cause extreme hardship on him as an individual. (Doc. 61 at 8) The Defendants' requested fee award is in excess of $100, 000, which in most circumstances, but especially under the present circumstances, would cause an individual party an extreme hardship. This finding is not only based on the amount of the fees requested by the Defendants, but also the Plaintiff's ongoing bankruptcy proceedings. Therefore, the Court finds that this factor weighs against an award of attorneys' fees.

         4. Whether the Successful Party Prevailed with Respect to ...