United States District Court, D. Arizona
A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE.
before the court is Defendant Warner Bros. Entertainment Inc.
and Defendant Warner Bros. Consumer Products Inc.'s
(collectively, “Defendants”) Motion for
Attorneys' Fees (Doc. 92) and Plaintiff David
Kaufman's (“Plaintiff”) Motion for Leave to
File Surreply to Defendants' Motion for Attorneys'
Fees (Doc. 116). These motions are fully
briefed. Finding these matters appropriate for
decision without oral argument,  the Court now rules on these
familiarity with the factual and procedural history of this
action, the Court will recount only those aspects of this
litigation that are relevant to the pending issue of
attorneys' fees and costs.
mid-1960s, Kustomotive-a partnership between Richard Korkes
(“Korkes”) and Daniel Dempski
(“Dempski”) that created automobiles for use in
movies, television, and other forms of entertainment-entered
into contracts with Twentieth Century-Fox Television, Inc.
(“Fox”) and Greenway Productions, Inc.
(“Greenway”) to build a “Batcycle”
and a “Batgirl-Cycle” to be used in the 1960s
Batman television show and movie and the
Batgirl movie. (Docs. 67-6; 67-16). One of these
contracts, the Batcycle Agreement, stated that Kustomotive:
quitclaims, assigns, transfers and sets over to [Fox and
Greenway] any and all right, title and interest in and to the
design of the Batcycle . . . and in and to the design or
designs of the completed Batcycle . . . and any and all
right, title and interest in and to said designs shall
forever be vested in and owned solely by [Fox and Greenway].
(Doc. 67-6 at 7). The Batgirl-Cycle agreement contained the
same language. (See Doc. 67-16 at 4).
agreements did provide, however, the opportunity for
Kustomotive to “acquire a percentage of net profits
received from merchandising rights in and to the
Batcycle” and Batgirl-Cycle “[s]ubject to
entering into an agreement with Licensing Corporation of
America” (“LCA”). (Docs. 67-6 at 5; 67-16
at 4-5). In this suit, Plaintiff claimed that Kustomotive
entered into such a merchandising contract with LCA regarding
the Batcycle (“Merchandising Contract”), (Doc. 72
at 2), and the Batgirl-Cycle, (Doc 28 at 4), while Defendants
contested that such merchandising agreements were ever made,
(Doc. 66 at 2).
and Dempski, the individuals who signed these alleged
Merchandising Contracts, are now deceased. (Id.).
Plaintiff claimed to be the assignee of Korkes' rights
under the Batcycle and Batgirl-Cycle contracts and the
related merchandising agreements. (Id.). Plaintiff
sued Defendants, who are allegedly successors in interest to
LCA, arguing that Defendants owed Plaintiff a percentage of
the merchandising profits from selling Batcycle and
Batgirl-Cycle products. (Id.). Plaintiff alleged
five causes of action in this lawsuit, including: (1) breach
of contract; (2) breach of the covenant of good faith and
fair dealing; (3) conversion; (4) unjust enrichment; and (5)
fraudulent concealment. (Doc. 28).
October 5, 2017, Defendants filed a Motion for Summary
Judgment, arguing that Plaintiff failed to prove the
existence of the alleged Merchandising Contract. (Doc. 66).
Based on the lack of evidence regarding the existence of the
alleged Merchandising Contract, the Court granted
Defendants' Motion for Summary Judgment on all of
Plaintiff's six claims. (Doc. 86). After entry of
judgment, Plaintiff filed a Motion for Reconsideration, (Doc.
88), which the Court denied. (Doc. 124).
PLAINTIFF'S MOTION FOR LEAVE TO FILE SURREPLY
Defendants' Motion for Attorneys' Fees was fully
briefed, Plaintiff filed a Motion for Leave to File Surreply
to Defendants' Motion for Attorneys' Fees to address
the “new evidentiary statements” allegedly made
in Defendants' Reply. (Doc. 116). With this Motion for
Leave to File Surreply (Doc. 116), Plaintiff also filed a
proposed Surreply (Doc. 116-1 at 1-7) and eleven new exhibits
(Docs. 116-2-116-13). In their Response In Opposition to
Plaintiff's Motion for Leave to File Surreply, (Doc.
118), Defendants request that the Court permit them to
supplement their request for attorneys' fees to include
the additional post-judgment fees incurred by Defendants
after they filed their Motion for Attorneys' Fees,
including fees accrued in responding to Plaintiff's
Motion for Leave to File Surreply and Plaintiff's Motion
for Reconsideration. (Doc. 118 at 12-13). Thereafter,
Plaintiff filed a Reply (Doc. 119) in support of its Motion
for Leave to File Surreply.
general, surreplies are “highly disfavored, as they
usually are a strategic effort by the nonmoving party to have
the last word on a matter.” Sims v. Paramount Gold
& Silver Corp., No. CV 10-356-PHX-MHM, 2010 WL
5364783, at *8 (D. Ariz. Dec. 21, 2010) (quoting In re
Enron Corp. Sec., 465 F.Supp.2d 687, 690 n.4 (S.D. Tex.
2006)). Accordingly, surreplies will not be permitted except
“in the most extraordinary circumstances.”
Id. (quoting Beckner v. Astrue, No.
06-1012-JTM, 2007 WL 2013608, at *1 (D. Kan. July 9, 2007)).
Further, a surreply may be appropriate if the opposing party
raises an entirely new issue in a reply brief, or if that
party files new evidence with their reply brief. ML
Liquidating Tr. v. Mayer Hoffman McCann P.C., No.
2:10-CV-02019-RRB, 2011 WL 10451619, at *1 (D. Ariz. Mar. 11,
Plaintiff claims that Defendants' Reply “sets forth
three factual arguments” that are “unsupported by
evidence appearing in the record, ” (Doc. 116 at 1),
this is not a valid basis for requesting a surreply. To the
contrary, Defendants' Reply did not raise any novel
issues or introduce any new evidence that would warrant
granting Plaintiff leave to file a surreply. Defendants'
Reply merely responded to, and rebutted, Plaintiff's
arguments concerning the Associated Indemnity factor
relating to the merits of Plaintiff's claim, (Doc. 111 at
4-7), which is not improper. See Haldiman v. Cont'l
Cas. Co., No. CV-13-00736-PHX-DLR, 2014 WL 12670637, at
*9 n.6 (D. Ariz. Aug. 26, 2014), aff'd, 666
Fed.Appx. 612 (9th Cir. 2016) (Plaintiff moved “for
leave to file a surreply addressing Defendant's
‘new argument.' Plaintiff's motion is denied
because Defendant does not raise a new argument but only
rebuts arguments first raised by Plaintiff in her
opposition.”). Moreover, Defendants' Reply merely
cites to previously filed evidence.
the Court finds no “extraordinary circumstances”
which would justify the granting of Plaintiff's request.
Indeed, any argument that Defendants' Reply presents new
factual arguments is without merit. First, to the extent
Plaintiff claims that Defendants raised a new factual
argument concerning whether Korkes and Dempski created
“new intellectual property, ” (Doc. 116 at 2),
Plaintiff misstates the record. After Defendants argued in
their Motion for Attorneys' Fees that Korkes had assigned
any rights he had to Fox and Greenway, and thus there was no
logical reason that LCA would have gratuitously given Korkes
merchandising royalties, (Doc. 92 at 12), Plaintiff asserted
in his Response that it was “undisputed that
Korkes and Dempski created the Batcycle-a new piece
of intellectual property.” (Doc. 106 at 10 (emphasis
added)). Then, in their Reply, Defendants' argued in
rebuttal that Korkes and Dempski did not create the
Batcycle, because the Batcycle had already been depicted in
comic books before Mr. Korkes built a version of the Batcycle
to be used in filming the television series. (Doc. 118 at 8
(citing Doc. 111 at 5)). This was a proper rebuttal argument
to Plaintiff's assertion that Korkes
“created” the Batcycle. Further, the Court agrees
with Defendants that “there is no just reason to
further extend the briefing on the motion for attorneys'
fees to allow Plaintiff to argue over the immaterial issue of
whether Korkes and Dempski created ‘new intellectual
property,' because any rights they may have had were
assigned to Fox and Greenway.” (Id. at 8-9).
Plaintiff asserts that he should be permitted to file a
surreply to point out that Twentieth Century Fox did not pay
Plaintiff any funds to Plaintiff for Plaintiff's
dismissal of the claims against it. (Doc. 116 at 2).
Plaintiff makes this argument in response to the statement in
Defendants' Reply that Plaintiff “makes no mention
of the value of his settlement with Defendant Twentieth
Century Fox.” (Doc. 111 at 7). Defendants make this
statement to point out that Plaintiff failed to present
evidence in his Response (Doc. 106 at 8) that an
attorneys' fees award would cause extreme hardship.
Pointing out all of the financial assets which Plaintiff
failed to discuss in establishing “extreme
hardship” is a proper rebuttal argument which
Defendants were permitted to make in their Reply. See
Haldiman, 2014 WL 12670637, at *9 n.6. Moreover,
Defendants even concede that Plaintiff entered a tolling
agreement and did not receive any funds from Twentieth
Century Fox, (Doc. 118 at 11), so a surreply discussing this
topic is unnecessary.
extent Plaintiff claims that Defendants raised a
“new” factual argument concerning the fact that
George Barris, the person who built the Batmobile, did not
receive royalties from Defendants, (Doc. 116 at 2), this
argument was not raised for the first time in Defendants'
Reply (Doc. 111). Rather, Defendants made this exact argument
in their initial Motion for Attorneys' Fees.
(See Doc. 92 at 12 (“George Barris, who built
the iconic Batmobile for the same television series in the
1960s, was not given any merchandising rights in the
Batmobile. He signed a similar agreement assigning all of his
rights in the design of the Batmobile, and to the same
entities that Korkes assigned his rights in the design of the
Batcycle.”)). Finally, to the extent Plaintiff contends
that Defendants raised a “new” factual argument
concerning the fact that there was no admissible evidence of
a merchandising agreement, (Doc. 116 at 2), this argument
also fails. Defendants' Motion for Attorneys' Fees
raised the argument that “Defendants established a just
defense to all of Plaintiff's claims. There never was any
alleged Merchandising Contract.” (Doc. 92 at 12;
see also Id. at 13 (“Plaintiff . . . rested
its claims upon an alleged Merchandising Contract that never
existed.”)). For these reasons, the Court denies
Plaintiff's Motion for Leave to File Surreply to
Defendants' Motion for Attorneys' Fees (Doc. 116).
The Court will not consider Plaintiff's proposed
Surreply, (Doc. 116-1 at 1-7), or the eleven new exhibits he
filed therewith, (Docs. 116-2-116-13), in ruling on
Defendants' Motion for Attorneys' Fees.
the Court denies without prejudice Defendants' request
for additional post-judgment fees incurred after filing the
Motion for Attorneys' Fees at issue, including fees
accrued in responding to Plaintiff's Motion for Leave to
File Surreply and Plaintiff's Motion for Reconsideration.
(Doc. 118 at 12-13). Defendants' request for further fees
incurred in responding to these post-judgment motions fails
to comply with Local Rule (“LRCiv”) 54.2(d), as
Defendants do not submit a task-based, itemized statement of
time expended in the preparation of their Response to
Plaintiff's Motion for Leave to File Surreply (Doc. 118)
and Response to Plaintiff's Motion for Reconsideration
DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND
October 3, 2018, Defendants filed their Motion for
Attorneys' Fees, seeking an award of attorneys' fees
and costs pursuant to A.R.S. § 12-341.01 and LRCiv 54.2.
(Doc. 92). In total, Defendants seek an award of $138,
792.50, including $118, 886.10 in attorneys' fees, $1,
208.00 in paraprofessional fees, $1, 200.00 in computerized
legal research charges, and $17, 498.40 in attorneys'
fees incurred in the preparation of the Motion for
Attorneys' Fees. (Doc. 92 at 17). Plaintiff filed his
Response (Doc. 106) in opposition on October 25, 2018,
arguing that Defendants' Motion for Attorneys' Fees
should be denied, or else significantly reduced, because
Defendants did not satisfy the requirements of A.R.S. §
12-341.01. (Doc. 106 at 1). On November 7, 2018, Defendants
filed their Reply in support of their Motion for
Attorneys' Fees. (Doc. 111).
federal court sitting in diversity applies the law of the
forum state regarding an award of attorneys' fees.”
Kona Enters., Inc. v. Estate of Bishop, 229 F.3d
877, 883 (9th Cir. 2000) (citations omitted). Under Arizona
law, “[i]n any contested action arising out of
contract, express or implied, the court may award the
successful party reasonable attorney fees.” A.R.S.
§ 12-341.01(A). Therefore, to award attorneys' fees
under this statute, the Court must find that this action
arises out of a contract, that Defendants are the
“successful” or prevailing party, that an award
of attorneys' fees is appropriate, and that the requested
fees are reasonable. See Lexington Ins. Co. v. Scott
Homes Multifamily Inc., No. CV-12-02119-PHX-JAT, 2016 WL
5118316, at *2 (D. Ariz. Sept. 21, 2016). Ultimately, any
award under A.R.S. § 12-341.01 “should be made to
mitigate the burden of the expense of litigation to establish
a just claim or a just defense.” A.R.S. §
12-341.01(B). The award “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.”
Eligibility for Fees Under A.R.S. §
are eligible for an award of reasonable attorneys' fees
pursuant to A.R.S. § 12-341.01(A) as Defendants were the
successful party in this litigation, and this suit involved a
contested action arising out of contract.
Defendants were the “Successful” Party
Arizona law, “the trial court has substantial
discretion to determine who is a ‘successful
party'” when determining an award of attorneys'
fees under A.R.S. § 12-341.01. Fulton Homes Corp. v.
BBP Concrete, 155 P.3d 1090, 1096 (Ariz.Ct.App. 2007)
(citing Pioneer Roofing Co. v. Mardian Constr. Co.,
733 P.2d 652, 664 (Ariz.Ct.App. 1986)). “The decision
as to who is the successful party for purposes of awarding
attorneys' fees is within the sole discretion of the
trial court, and will not be disturbed on appeal if any
reasonable basis exists for it.” Maleki v. Desert
Palms Prof'l Props., L.L.C., 214 P.3d 415, 422
(Ariz.Ct.App. 2009) (quoting Sanborn v. Brooker &
Wake Prop. Mgmt., Inc., 874 P.2d 982, 987 (Ariz.Ct.App.
case, the Court granted Defendants' Motion for Summary
Judgment, (Doc. 86 at 16), and the Clerk of the Court entered
judgment in favor of Defendants on all claims and dismissed
the case with prejudice, (Doc. 87). Plaintiff does not
dispute that Defendants were the successful party. (See
generally Doc. 106). As Defendants successfully defended
each of Plaintiff's claims, the Court finds that
Defendants were the “successful party” within the
meaning of A.R.S. § 12-341.01.
The Claims Arise out of Contract
determining whether a claim arises out of a contract, the
court considers the “nature of the action and the
surrounding circumstances.” Marcus v. Fox, 723
P.2d 682, 684 (Ariz. 1986) (citing Wenk v. Horizon Moving
& Storage Co., 639 P.2d 321, 322 (Ariz. 1982)).
“It is well-established that a successful party on a
contract claim may recover not only attorneys' fees
expended on the contract claim, but also fees expended in
litigating an ‘interwoven' tort claim.”
Modular Mining Sys., Inc. v. Jigsaw Techs., Inc.,
212 P.3d 853, 860 (Ariz.Ct.App. 2009) (quoting Ramsey Air
Meds, L.L.C. v. Cutter Aviation, Inc., 6 P.3d 315, 318
(Ariz.Ct.App. 2000)). “The test to determine if an
action arises out of contract is whether the plaintiff would
have a claim ‘even in the absence of a
contract.'” ML Servicing Co. v. Coles, 334
P.3d 745, 753 (Ariz.Ct.App. 2014) (quoting Ramsey Air
Meds, L.L.C., 6 P.3d at 320-21). Thus, a tort claim
arises out of a contract under A.R.S. § 12-341.01(A)
“only when the tort could not exist ‘but for'
the breach or avoidance of contract.” Ramsey Air
Meds, L.L.C., 6 P.3d at 320; see also Barmat v. John
& Jane Doe Partners A-D, 747 P.2d 1218, 1222 (Ariz.
1987) (“Where . . . the duty breached is not imposed by
law, but is a duty created by the contractual relationship,
and would not exist ‘but for' the contract, then
breach of either express covenants or those necessarily
implied from them sounds in contract.”). Consequently,
A.R.S. § 12-341.01 does not apply if the “contract
is only a factual predicate to the action but not the
essential basis of it.” Kennedy v. Linda Brock
Auto. Plaza, Inc., 856 P.2d 1201, 1203 (Ariz.Ct.App.
1993). Nor does “[t]he mere reference to a contract in
a complaint . . . make the action one ‘arising out of
contract.'” Dooley v. O'Brien, 244
P.3d 586, 591 (Ariz.Ct.App. 2010) (citation omitted).
Plaintiff's Claims for Breach of Contract and Breach of
the Covenant of Good Faith and Fair Dealing
first allege that they are eligible for an award of
attorneys' fees for their defense of Plaintiff's
claims for breach of contract and breach of the covenant of
good faith and fair dealing. (Doc. 92 at 2). Defendants argue
that Plaintiff's claim for breach of contract arose out
of an alleged express contract, while Plaintiff's claim
for breach of the covenant of good faith and fair dealing
arose out of an alleged implied contract. (Id.).
Plaintiff does not dispute that these two claims arise out of
contract. (See Doc. 106 at 2- 5). As each of these
claims were premised on the existence of an alleged
Merchandising Contract, Defendants are eligible for a fee
award under A.R.S. § 12-241.01(A) for the work performed
defending these claims. See Harris v. Maricopa Cty.
Superior Court, 631 F.3d 963, 974-75 (9th Cir. 2011)
(holding that the defendant was eligible for an award of
attorneys' fees for work performed on the plaintiff's
claims for breach of contract and the duty of good faith and
fair dealing, as these claims were “explicitly premised
on the existence of an implicit contract that the district
court found did not exist”).
Plaintiff's Unjust Enrichment, Conversion, and Fraudulent
also argue that they are entitled to fees for defending
against Plaintiff's unjust enrichment, conversion, and
fraudulent concealment claims, because “the[se] other
claims were ‘inextricably intertwined' with the
contract claims and predicated on a common set of
facts.” (Doc. 92 at 2). In specific, Defendants point
out that “[a]ll of the claims were defeated based upon
the non-existence of the alleged Merchandising
Contract.” (Id.). Plaintiff contends, however,
that Defendants are not entitled to attorneys' fees
incurred in defending these three claims because they did not
“arise out of a contract, ” as §
12.341.01(A) requires. (Doc. 106 at 2-5).
now argues that his unjust enrichment claim “was
alleged as an alternative claim if no contract existed”
and “does not rely on the existence of a contract or a
breach of a contract litigated in this action.”
(Id. at 5). Nevertheless, Plaintiff's Complaint
indicates that the unjust enrichment claim was premised on
the asserted failure of Defendants to pay Plaintiff for the
“proceeds derived from licensing and merchandising
contracts.” (Doc. 28 at 9-10). The Court granted
summary judgment to Defendants on this claim based upon the
absence of any genuine issue of fact concerning the existence
of the alleged Merchandising Contract. (Doc. 86 at 14).
Plaintiff's unjust enrichment claim could not exist
“but for” the breach or avoidance of the alleged
Merchandising Contract, and is therefore considered to be an
“interwoven” tort claim for purposes of A.R.S.
§ 12-341.01. See Barmat, 747 P.2d at 1222
(“Where . . . the duty breached is not imposed by law,
but is a duty created by the contractual relationship, and
would not exist ‘but for' the contract, then breach
of either express covenants or those necessarily implied from
them sounds in contract.”); see also ML Servicing
Co., 334 P.3d at 753 (holding, in part, that the trial
court did not err in finding that the unjust enrichment claim
arose out of contract because the unjust enrichment claim
would not exist in the absence of the insurance contract
which was paid out to the defendant).
Plaintiff's fraudulent concealment claim could not exist
“but for” the alleged Merchandising Contract.
Ramsey Air Meds, L.L.C., 6 P.3d at 320;
Barmat, 747 P.2d at 1222. This claim was based upon
allegations that Defendants “purposefully and knowingly
concealed and denied the existence of . . . the Merchandising
Contract . . . .” (Doc. 28 at 10). Therefore, the Court
concludes that Plaintiff's fraudulent concealment claim
arose out of contract within the meaning of § 12-341.01.
See SK Builders, Inc. v. Smith, 436 P.3d 519, 528
(Ariz.Ct.App. 2019) (finding that homeowners' breach of
contract and fraudulent misrepresentation claims against
subcontractor were intertwined where fraudulent
misrepresentation claim, which was based on the allegation
that subcontractor knew it performed defective work under the
contract and did not intend to cure the defects according to
the contractually required plans and specifications, could
not exist but for the alleged contract); Sunstate Equip.
Co. v. Davis, No. 1 CA-CV-18-0222, 2019 WL 1499854, at
*4 (Ariz.Ct.App. Apr. 4, 2019) (finding that a claim for
fraudulent concealment arose out of contract for purposes of
§ 12-341.01 because it arose out of the alleged business
transactions between the parties and could not exist
“but for” the alleged breach of contract).
Plaintiff argues that his conversion claim was
“premised on the theory that if an agreement between
Twentieth Century Fox Television, Greenway Productions, and
Korkes was invalid, then any use of the Batcycle design by
any person other than Korkes was an unlawful exercise of
dominion or control over his intellectual property.”
(Doc. 106 at 4). Although Plaintiff now claims that his
conversion claim does not arise out of contract,
(id.), the Court explicitly noted in its Order
granting summary judgment that Plaintiff had previously
argued that “if Korkes and Dempski did not receive
merchandising rights, the assignment of rights to Fox and
Greenway is subject to rescission.” (Doc. 86 at 15
(citing Doc. 72 at 10)). Thus, Plaintiff's claim for
conversion, by his own admission, was predicated upon proof
of rescission of contract, and was “substantially
dependent” upon the contract being found unenforceable.
Modular Mining Sys., Inc., 212 P.3d at 861.
Accordingly, Plaintiff's claim for conversion arose out
of contract. See Deutsche ...