Two Brothers Distributing Inc. v. Valero Marketing and Supply Co.

          ORDER

          David G. Campbell Senior United States District Judge.

         Plaintiffs Two Brothers Distributing, Inc. (“Two Brothers”) and ten associated gasoline retailers (the “Station Plaintiffs”) sued Valero Marketing and Supply Company (“Valero”) asserting various claims. Doc. 29. The Court granted summary judgment for Valero on all claims, and the judgment was affirmed on appeal. Docs. 155, 161, 172.

         Valero has filed a motion for attorneys' fees and litigation costs. Doc. 174. The motion is fully briefed, and no party has requested oral argument. Docs. 175, 177. The Court will grant the motion in part and award Valero $1, 579, 124.37 in attorneys' fees, $310, 862.77 in expert fees, and $48, 809.44 in other litigation costs.

         I. Background.

         Two Brothers and Valero executed multiple distributor marketing agreements (“DMAs”) between 2007 and 2016 for the sale of gasoline. Doc. 155 at 2-4.^[1] These DMAs included an open price term which stated that Two Brothers “shall pay to [Valero] that price specified by [Valero] from time to time.” Id. at 2-3. After purchasing gasoline from Valero, Two Brothers would sell it to the Station Plaintiffs. Doc. 29 ¶ 4.

         Plaintiffs filed this case in May 2015 alleging that Valero manipulated the open price term to overprice the gasoline it sold to Two Brothers. Doc. 1-1. Plaintiffs asserted that Valero sought to decrease Plaintiffs' profits and drive them from the Maricopa County market. Doc. 155 at 5.

         The DMAs provide for the award of litigation costs in the event of a suit between Two Brothers and Valero:

Attorneys' Fees. In the event of any lawsuit between [Valero] and [Two Brothers] arising out of or relating to the transactions or relationship contemplated by this Agreement (regardless whether such action alleges breach of contract, tort, violation of a statute or any other cause of action), the substantially prevailing party shall be entitled to recover its reasonable costs of suit including its reasonable attorneys' fees. If a party substantially prevails on some aspects of such action but not others, the court may apportion any award of costs or attorneys' fees in such manner as it deems equitable.

Doc. 115-2 at 126 (2007 DMA), 214 (2010 DMA); see also Doc. 16-2 at 86-87 (2013 DMA containing substantially similar provision); Doc. 115-2 at 264-65 (2016 DMA containing substantially similar provision).

         Valero's renewed motion requests $1, 781, 078.75 in attorneys' fees, $445, 354.09 in expert fees, and $49, 209.44 in other litigation costs. Doc. 174 at 2. Valero supports its motion with a certificate of consultation, the terms of counsel's representation, itemized billing records and invoices, and an affidavit from lead counsel Jeffrey Wolf. Docs. 174-1 to -4.

         II. Legal Standards.

         Under Arizona law, “[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.” A.R.S. § 12-341.01(A). Fees may be awarded at the trial court's discretion. See Andra R Miller Designs LLC v. U.S. Bank NA, 418 P.3d 1038, 1045 (Ariz.Ct.App. 2018).

         Section 12-341.01(A) does not apply when parties “have provided in their contract the conditions under which attorneys' fees may be recovered.” Am. Power Prods., Inc. v. CSK Auto, Inc., 396 P.3d 600, 604 (Ariz. 2017). An award of attorneys' fees governed by a contract is mandatory, Castle v. Barrett-Jackson Auction Co., LLC, 276 P.3d 540, 544 (Ariz.Ct.App. 2012), and enforced according to the terms of the contract, F.D.I.C. v. Adams, 931 P.2d 1095, 1105 (Ariz.Ct.App. 1996). But “a contractual provision providing for an award of unreasonable attorneys' fees will not be enforced.” See McDowell Mountain Ranch Cmty. Ass'n, Inc. v. Simons, 165 P.3d 667, 671 (Ariz.Ct.App. 2007). The Court may consider several factors in assessing reasonableness. See LRCiv 54.2(c)(3)(A)-(M).

         III. Fees Related to Two Brothers' Claims.

         Plaintiffs concede that the DMAs require an award of reasonable attorneys' fees and litigation expenses. Doc. 175 at 10. Plaintiffs challenge the reasonableness of the requested legal fees. Doc. 175 at 10.

         Courts consider the following factors when addressing the reasonableness of a proposed attorneys' fee award: (1) time and labor required of counsel; (2) novelty and difficulty of the questions presented; (3) skill requisite to perform the legal service properly; (4) preclusion of other employment by counsel because of the acceptance of the action; (5) customary fee charged in matters of the type involved; (6) whether the fee contracted between the attorney and the client is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) amount of money, or the value of the rights, involved and the results obtained; (9) experience, reputation and ability of counsel; (10) “undesirability” of the case; (11) nature and length of the professional relationship between the attorney and the client; (12) awards in similar actions; and (13) any other matters deemed appropriate under the circumstances. LRCiv 54.2(c)(3).

         Valero argues that these factors show the requested fees to be reasonable. Doc. 174 at 12-17. Specifically, it asserts that over four years the attorneys on the case familiarized themselves with ten years of events, multiple contracts, and numerous theories of liability, and analyzed tens of thousands of documents, including years of bankruptcy filings by eight of the Station Plaintiffs. Doc. 174 at 13. Further, counsel deposed ten witnesses and obtained discovery from eleven parties. Id. Valero argues that although Plaintiffs' claims were not novel, they were factually complex, covering a decade of transactions and communications and eleven Plaintiffs. Id. The legal team possessed years of experience dealing with disputes between fuel suppliers and distributors and retailers. Id. at 14. Valero's legal counsel's rates are reasonable and in accord with lawyers and legal professionals in this community with similar experience. Id. at 16. The hours expended were reasonable because Plaintiffs sought nearly $30 million in damages. Id. And the requested fee is consistent with cases dealing with similar issues and complexity. Id. at 17.

         Plaintiffs do not challenge these arguments. See Doc. 175 at 10-15. Nor do they challenge counsel's billing rates. See Id. Plaintiffs instead assert that the overall time charged is excessive and duplicative, but that it is not practical to identify each and every disputed time entry or expense item. Id. at 11. They instead proceed to summarize the number of hours Valero's counsel spent on various tasks without explanation as to why those hours were excessive and unreasonable and without offering any alternatives. Id. at 11-13. The Court will address only the tasks challenged by Plaintiffs, and will accept Valero's time records on all other tasks as reasonable. See LRCiv 54.2(3)(f) (attorney opposing a motion for an award of attorneys' fees shall separately identify each and every disputed time entry or expense item).

         A. Motion to Dismiss.

         Plaintiffs note that Valero's counsel spent 86 hours preparing its motion to dismiss before conferring with Plaintiffs to identify curable deficiencies. Id. at 11. After Plaintiffs filed an amended complaint, Valero's counsel spent another 37.4 hours on the motion before filing it. Id. Plaintiffs appear to argue that spending substantial time both before and after the conference was unreasonable. See id.

         Valero counters that the 86 hours of work before the conference were necessary to facilitate a meaningful discussion. Doc. 177 at 9. After that discussion, Plaintiffs only withdrew one claim and actually added two new claims. Id. The 37.4 hours after the conference were not spent finalizing the motion, but researching and addressing the new claims. Id. Valero emphasizes that the hours were necessary to address the “nine legally complex claims” in the complaint and to draft a 23-page motion with approximately 200 pages of exhibits. Id.

         Valero also argues that Plaintiffs have failed to comply with Local Rule 54.2, which requires the opposing party to “separately identify each and every disputed time entry or expense item.” Doc. 177 at 7-8. Nor does Plaintiffs posit what amount of time would have been reasonable in light of the nature of the case. Id. at 8.

         The Court will not reduce the hours spent on the motion to dismiss. Plaintiffs have not explained which hours or tasks were unreasonable, and the Court cannot conclude that the total hours were excessive when the case included multiple, complex claims. Nor can the Court conclude that hours devoted before the conference were excessive. To explain why they thought Plaintiffs' claims were subject to dismissal, Defendants were required to analyze those claims. The conference did not eliminate most of the claims on which work had been performed, and added two more claims that required additional work. Plaintiffs have not shown that the time spent on the motion to dismiss was excessive.

         B. Reply in Support of Motion to Dismiss.

         Plaintiffs note that Valero's counsel spent 35 hours preparing its reply in support of its motion to dismiss. Doc. 175 at 11. Then, two senior partners each billed 1.1 hours analyzing the Court's motion to dismiss order. Id. at 12. Valero counters that Plaintiffs have failed to identify any specific time entry that was inadequate. Doc. 177 at 9. Further, they fail to explain why it was unreasonable for the “two lead partners on a multi-million dollar case to familiarize themselves with the Court's 11-page order, which resolved what claims would remain in the case, provided ...