United States District Court, D. Arizona
KnightBrook Insurance Company; and Knight Management Insurance Services, LLC, Plaintiffs,
Payless Car Rental System, Inc.; and PCR Venture of Phoenix, LLC, Defendants.
G. CAMPBELL SENIOR UNITED STATES DISTRICT JUDGE.
Payless Car Rental System, Inc. and PCR Venture of Phoenix,
LLC (together, “Payless”) seek to recover
attorneys' fees under A.R.S. § 12-341.01 from
Plaintiffs KnightBrook Insurance Company and Knight
Management Insurance Services, LLC (collectively,
“KnightBrook”). Doc. 457. Payless seeks to
recover fees for its ultimately successful defense against
KnightBrook's claim for equitable indemnity. See
Doc. 444. The motion is fully briefed, and no party requests
oral argument. The Court will grant the motion in
12-341.01 provides that “[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). The parties disagree on whether
KnightBrook's equitable indemnity claim arises out of
contract. To resolve this issue, the Court must consider
whether the claim would exist but for a breach of a contract.
See Schwab Sales, Inc. v. GN Constr. Co., 992 P.2d
1128, 1132 (Ariz. 1998); In re Gorilla Companies
LLC, No. CV10-1029-PHX-DGC, 2011 WL 5519910, at *3-4 (D.
Ariz. Nov. 14, 2011). If KnightBrook's claim would not
exist but for a contract, then the claim arises out of the
contract and § 12-341.01 applies. Id.
equitable indemnity claim arose out of contract. The Ninth
Circuit and Arizona Supreme Court ruled in this case that
KnightBrook could obtain equitable indemnity from Payless
only if it discharged an “actual obligation” of
Payless. See KnightBrook Ins. Co. v. Payless Car Rental
Sys., Inc., 356 F.Supp.3d 856, 858 (D. Ariz. 2018).
KnightBrook argued that the actual obligation of Payless
arose from the SLI policy - a contract of insurance created
at the time of the car rental. See, e.g., Docs. 433
at 2 (for KnightBrook to prevail, the Court “must find
that . . . [Payless] and KnightBrook were actually liable to
Michael Bovre on the breach of contract claim for
failing to provide SLI coverage”); 441 at 8
(“KnightBrook paid to fix that mistake, thereby
extinguishing the parties' coextensive contractual
liability.”) (emphasis added). The equitable
indemnification claim would not have existed without the
alleged SLI policy.
citations to equitable indemnity law, including the
Court's order of April 1, 2015, are not relevant.
See Docs. 376 at 23, 460 at 2. Defendants seek to
recover attorneys' fees under § 12-341.01, not under
traditional indemnity law.
the parties' and the Court's previous assertions with
respect to § 78 of the Restatement First of Restitution
relevant. That section required only that an indemnification
plaintiff discharge a “supposed obligation” of
the indemnification defendant. See Restatement
(First) of Restitution § 78 (1937); KnightBrook Ins.
Co. v. Payless Car Rental Sys., Inc., 100 F.Supp.3d 817,
829 (D. Ariz. 2015), aff'd in part, vacated in
part, 731 Fed.Appx. 632 (9th Cir. 2018). The Arizona
Supreme Court, on referral from the Ninth Circuit, declined
to adopt that approach and instead required that the
indemnification plaintiff discharge an “actual
obligation” of the indemnification defendant.
KnightBrook Ins. Co. v. Payless Car Rental Sys.
Inc., 409 P.3d 293, 295 (Ariz. 2018). The “actual
obligation” asserted by Plaintiffs, as discussed above,
is a contract - the SLI policy - bringing the equitable
indemnification claim within the scope of § 12-341.01.
seeks an award of fees for the work of the Taylor Anderson
firm in the amount of $21, 066.20, for the Covington firm in
the amount of $134, 408.00, and for the Gust Rosenfeld firm
in the amount of $5, 820.00, for a total of $161, 294.20.
Doc. 457. As explained in the motion, this fee request has
been substantially discounted from actual fees incurred in
this case. See Doc. 457. In Associated Indem.
Corp. v. Warner, 694. P.2d 1181 (Ariz. 1985), the
Arizona Supreme Court identified several factors the Court
should consider in deciding whether to award fees under
§ 12-341.01. These include: (1) the merits of the claim
or defense presented by the unsuccessful party; (2) whether
the litigation could have been avoided or settled and whether
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) the novelty of the
legal question presented; (6) whether the claim or defense
had previously been adjudicated in this jurisdiction; and (7)
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 the
opposing party's fees. Id. at 1183-84.
makes various arguments with respect to the Warner
factors, but the Court does not find them persuasive. Doc.
400 at 4-6. On the first factor, Payless prevailed on the
merits of all of KnightBrook's claims. Although
KnightBrook prevailed on an interim basis with respect to its
indemnification claim, it ultimately was unsuccessful. This
factor is neutral. Second, both parties identify settlement
opportunities the other side rejected. Payless notes,
however, that it felt compelled to litigate this case to a
conclusion in order to avoid an adverse precedent with
respect to its many existing SLI policies. This is not a
situation where the successful party's efforts were
completely superfluous in achieving the result. This factor
favors an award of fees. The third and fourth factors also
favor a fee award. KnightBrook does not assert that a fee
recovery in this case would cause it extreme hardship and
Payless prevailed entirely on the equitable indemnity claim
for which it seeks fees, and on all other claims asserted by
KnightBrook. Fifth, novel legal questions were litigated by
both sides. This factor is neutral. Sixth, the claims and
defenses had not been previously litigated in this
jurisdiction, and, as noted, Payless felt compelled to
litigate them fully in order to protect its business interest
in many other SLI policies. This factor favors a fee award.
And finally, this was a lawsuit between two large and
sophisticated corporations, so an award of fees would not
discourage tenable claims or defenses. This factor also
favors a fee award.
the seven factors identified by the Arizona Supreme Court in
Warner favor awarding attorneys' fees in this
case. 694 P.2d at 1184. The Court will award fees.
Discretionary Adjustments to the Fee Award.
has not shown that attorney Nesbitt's later disciplinary
problems affected his billings in this case. The Court will,
however, reduce the Taylor Anderson fees by $1, 000 in light
of the block billing by Mr. Williams.
hourly rates charged by the Covington firm are excessive for
the Phoenix legal market and for this case. The Court will
reduce the Covington fees by 25% to bring ...