Rodriguez v. Accc Insurance Co.

          ORDER

          Honorable Roslyn O. Silver, Senior United States District Judge

         On March 5, 2019, the Court denied without prejudice Plaintiff's motion for an award of attorneys' fees and instructed Plaintiff to renew his motion after resolution of the pending appeal. Plaintiff then filed a motion for reconsideration, arguing the failure to provide an immediate ruling on his request for attorneys' fees will “add significant and unnecessary delay to the final resolution of this case.” (Doc. 108 at 2). Defendant opposed the motion for reconsideration by arguing, among other things, the outcome of the pending appeal might impact Plaintiff's request for fees. Therefore, Defendant believes it would be better to address the matter of fees after the appeal is resolved. Having considered the parties' positions, the Court will resolve the matter of fees now so that any appeal from this Order might be consolidated with the already-pending appeal.

         Plaintiff seeks an award of $373, 343.23 for attorneys' fees and non-taxable costs. Defendant concedes Plaintiff is entitled to most of what he requests but Defendant argues a complete award would be an inappropriate “windfall” and “punitive.” (Doc. 99 at 4, 6). Plaintiff's properly supported request for fees shifted the burden to Defendant to demonstrate, through specific objections, why the amount requested was unreasonable. Defendant made very limited objections and those objections are not convincing. Accordingly, Plaintiff is entitled to almost all the fees and costs he seeks.

         Plaintiff seeks an award of attorneys' fees pursuant to A.R.S. § 12-341.01. That statute allows for a “successful party” in an “action arising out of contract” to recover his “reasonable attorney fees.” A.R.S. § 12-341.01(A). Arizona courts have set out a clear sequence how requests for fees under § 12-341.01 should be resolved. First, the party seeking fees bears the burden of establishing it was the “successful party.” Assuming a party does so, that same party also bears the burden of establishing an award of fees is appropriate under a multi-factor test. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1183 (Ariz.1985) (listing factors). The successful party must also submit an application identifying “the type of legal services provided, the date the service was provided, the attorney providing the service . . ., and the time spent in providing the service.” Schweiger v. China Doll Rest., Inc., 673 P.2d 927, 932 (Ariz.Ct.App. 1983). If those first three requirements are met, “the burden shifts to the party opposing the fee award to demonstrate the impropriety or unreasonableness of the requested fees.” Nolan v. Starlight Pines Homeowners Ass'n, 167 P.3d 1277, 1286 (Ariz.Ct.App. 2007).

         The party opposing the fee award must do more than make “broad challenges to the application.” Id. For example, it is not enough to make vague claims that “the hours claimed are excessive and the rates submitted too high.” Id. Rather, the party opposing the fee award “must provide specific references to the record and specify which amount or items are excessive.” In re Indenture of Tr. Dated Jan. 13, 1964, 326 P.3d 307, 319-20 (Ariz.Ct.App. 2014). In the absence of specific objections, a court “is not obligated to search the record to determine” the propriety of the amount requested. State ex rel. Corbin v. Tocco, 845 P.2d 513, 521 (Ariz.Ct.App. 1992).

         In the present case, Defendant concedes Plaintiff was the “successful party” entitled to an award of attorneys' fees under § 12-341.01. Defendant also concedes an award of fees would be appropriate. That is, Defendant concedes the multi-factor test required by Arizona law supports an award of fees. Given those concessions, normally the only remaining issues would be whether Plaintiff submitted adequate documentation and whether Defendant has provided specific objections to that documentation. Here, however, there is an additional complication regarding the amount Plaintiff seeks.

         In his supporting documentation, Plaintiff establishes his attorneys billed “538.4 hours at a standard billed value . . . of $244, 791.50.”^[1] (Doc. 94 at 13). Plaintiff requests more than that amount. Plaintiff explains he has a contingency fee agreement requiring he pay counsel one-third of any judgment recovered. Thus, Plaintiff believes he is entitled to an award of $351, 306.82 in attorneys' fees, representing one-third of the judgment entered against Defendant.

         The Arizona Supreme long-ago recognized § 12-341.01 allows for an award of attorneys' fees when there is a contingency-fee agreement. Sparks v. Republic Nat. Life Ins. Co., 647 P.2d 1127, 1143 (Ariz. 1982). But “[w]hen a contingency agreement is involved, the contingency agreement should not be used as the basis for an award.” Estate of Snell v. Martin, No. 1 CA-CV 17-0629, 2018 WL 6495397, at *3 (Ariz.Ct.App. Dec. 11, 2018). “Instead, the agreed-upon contingency is a maximum amount” the Court can award. Id. When there is a contingency agreement, a court must first determine the “lodestar.” If the lodestar is less than the amount required by the contingency agreement, the court must determine if an award higher than the lodestar is appropriate.

         The “lodestar” is the “number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Bogard v. Cannon & Wendt Elec. Co., 212 P.3d 17, 28 (Ct. App. 2009). Plaintiff's hourly rates are within the reasonable rates charged in the Phoenix community for work of this type and, in any event, Defendant does not challenge the hourly rates. Next, Plaintiff's application contains detailed time entries regarding the services performed. Those detailed billing records were sufficient to shift the burden to Defendant to establish “the impropriety or unreasonableness of the requested fees.” Nolan, 167 P.3d at 1286. Defendant's opposition to the motion for fees presents no substantive objections to the number of hours. In fact, Defendant argues the Court should award fees “on an Hourly Basis.” (Doc. 99 at 10). Accordingly, Defendant has effectively conceded the correct lodestar is $244, 791.50.

         The final question, therefore, is whether the Court should depart from the lodestar and award Plaintiff the full amount he requests. Arizona courts have stressed that awards beyond the lodestar must be supported by “[e]vidence of reasonableness.” Crews v. Collins, 680 P.2d 216, 218 (Ariz.Ct.App. 1984). See also Cont'l Townhouses E. Unit One Ass'n v. Brockbank, 733 P.2d 1120, 1129 (Ariz.Ct.App. 1986) (noting contingency fee of 40% must be assessed for reasonableness). Those courts have not, however, outlined specific factors for a court to consider. It appears the decision whether to award more than the lodestar is simply left to the Court's discretion, to be guided by “the facts and consequences of each case.” London v. Green Acres Tr., 765 P.2d 538, 549 (Ariz.Ct.App. 1988).

         In seeking an enhancement to the lodestar, Plaintiff points to Defendant's actions throughout this case. In particular, Plaintiff points out Defendant denied Vicente's signature was a forgery for most of this case. It was not until summary judgment that Defendant admitted the signature was a forgery. Had Defendant made that admission earlier, Plaintiff could have avoided “much of the discovery, attorney work and expenses that occurred.” (Doc. 102 at 7). Plaintiff also explains Defendant made this litigation difficult in ways beyond refusing to admit facts, such as by delaying its discovery responses and producing new evidence after the entry of judgment. Plaintiff also argues an enhancement to the lodestar is appropriate because counsel accepted the case with “no guarantee of payment.” (Doc. 102 at 4). According to Plaintiff, his “counsel took a substantial (and ongoing) risk to pursue a valid claim.” (Doc. 102 at 4).

         Defendant does not respond with any explanation of its behavior during this litigation or any convincing reason to believe enhancement for the risk of non-payment would be inappropriate. Generally, Arizona courts are hesitant to increase the lodestar. See, e.g., Timmons v. City of Tucson, 830 P.2d 871, 878 (Ariz.Ct.App. 1991). But the circumstances of this case-including Defendant's behavior and the risk of non-payment- support the relatively minor enhancement Plaintiff seeks. Plaintiff will be awarded $351, 306.82 in attorneys' fees.

         Beyond attorneys' fees, Plaintiff also seeks $8, 144.00 in legal research expenses and $13, 892.41 in “non-taxable costs.” The Arizona Supreme Court “permit[s] recovery of computerized research expenses as an element of an award of attorneys' fees.” Ahwatukee Custom Estates Mgmt. Ass'n, Inc. v. Bach, 973 P.2d 106, 109 (Ariz. 1999). Thus, Plaintiff will be awarded his legal research expenses. But the “non-taxable” costs cannot be awarded under A.R.S. § 12-341 nor § 12-341.01. See Keg Restaurants Arizona, Inc. v. Jones, 375 P.3d 1173, 1188 (Ariz.Ct.App. 2016) (noting expert witness fees were “nontaxable costs” that could not be awarded under § 12-341 or 12-341.01); Ahwatukee Custom Estates Mgmt. Ass'n, Inc. v. Bach, 973 P.2d 106, 107-08 (Ariz. ...