United States District Court, D. Arizona
ORDER
DOMINIC W. LANZA UNITED STATES DISTRICT JUDGE
Pending
before the Court is Defendant H&M Construction Company
Incorporated's (“H&M”) motion for $46,
688 in attorneys' fees (Doc. 139), which Plaintiff
Macy's Incorporated (“Macy's”) opposes
(Doc. 142).[1] For the following reasons, the motion will
be denied.
BACKGROUND
Macy's
filed this lawsuit in April 2017. (Doc. 1.) The operative
complaint asserted a single cause of action against H&M:
“Negligence of [H&M] in constructing the sprinkler
system.” (Doc. 67 at 7-9.)
On
April 1, 2019, H&M filed a motion for summary judgment.
(Doc. 106.) In this motion, H&M emphasized that
“[t]he negligence claim against H&M is currently
the only pending claim in this lawsuit” and
“[s]ignificantly, Plaintiff has not asserted a claim
for breach of contract or breach of any implied warranty
under the contract.” (Id. at 5.) H&M later
reiterated: “It is important to note, again, that the
claim being asserted by Plaintiff is one for negligence, and
not a breach of contract claim.” (Id. at 8.)
H&M proceeded to seek summary judgment on the negligence
claim because, inter alia, Macy's hadn't
produced an expert to establish the standard of care, as
required under Arizona law in negligence lawsuits against
professionals. (Id. at 8-9.)
On
April 30, 2019, Macy's filed its response to
H&M's summary judgment motion. (Doc. 109.) Among
other things, Macy's argued it wasn't required to
produce expert testimony concerning the standard of care
because its contract with H&M established the standard of
care.[2] (Id. at 9-11.)
On May
16, 2019, H&M filed its reply. (Doc. 114.) In the very
first sentence of this brief, H&M wrote: “[I]t is
important to note at the outset that the only claim currently
pending in this lawsuit is a negligence claim against
H&M. Plaintiff has no breach of contract claim.
Accordingly, this Court must evaluate Plaintiff's claim
solely as a negligence claim.” (Id. at 2.)
H&M went on to argue that it was entitled to summary
judgment because “[t]he standard of care in tort is
based on standards established by existing law, not by
contract.” (Id.)
On
August 16, 2019, the Court issued a 21-page order that
granted summary judgment in H&M's favor. (Doc. 135.)
Among other things, the Court stated that it “agrees
with H&M and disagrees with Macy's concerning how to
formulate the standard of care in this case. Although Arizona
law is not a model of clarity, it supports the conclusion
that a plaintiff cannot sue a professional under a negligence
theory by simply pointing to the parties' contract and
arguing that the contractual provisions establish the
standard of care for purposes of tort liability. This
approach would upset the carefully calibrated distinction
between contract and tort law that Arizona courts have long
followed.” (Id. at 7.) Thus, the Court
concluded that “Macy's cannot simply point to the
language in its contract with H&M as establishing the
standard of care for its tort claim” (id. at
15) and that the failure of Macy's to produce any expert
testimony establishing the standard of care meant that
Macy's could not prevail on its negligence claim
(id. at 15-21).
DISCUSSION
H&M
now seeks to recover the $46, 688 in attorneys' fees it
incurred when defending this action. (Doc. 139.) The sole
statute on which H&M relies is A.R.S. §
12-341.01(A), which provides in relevant part that
“[i]n any contested action arising out of a
contract, express or implied, the court may award the
successful party reasonable attorney fees.”
Id. (emphasis added). H&M argues that, although
“Plaintiff's only claim against H&M
Construction [was] a negligence claim, ” that claim
“arose” from the parties' underlying
contract, which Macy's unsuccessfully proffered when
attempting to establish the standard of care. (Doc. 139 at
1-4.)
These
arguments are unavailing. This was a negligence case, not a
breach-of-contract case. Indeed, H&M went out of its way
to emphasize the absence of a contract claim in its summary
judgment papers and the Court granted summary judgment to
H&M in part because Macy's couldn't rely on its
underlying contract with H&M to establish the standard of
care for the negligence claim.
A.R.S.
§ 12-341.01(A) does not permit recovery under these
circumstances. As the Ninth Circuit has emphasized,
“where a contract is merely somewhere within the
factual background, an award of fees under §
12-341.01(A) is not proper. . . . [T]he fee statute
‘does not apply if the contract is only a factual
predicate to the action but not the essential basis of
it.'” In re Larry's Apartment, L.L.C.,
249 F.3d 832, 836 (9th Cir. 2001) (citations omitted). Put
another way, “the mere existence of a contract as a
factor in an action does not allow a fee award where the
contract is simply ‘peripherally involved in a cause of
action.'” Id. at 837 (citation omitted).
The
most analogous Arizona case cited in the parties' briefs
is Lewin v. Miller Wagner & Co., Ltd., 725 P.2d
736 (Ariz.Ct.App. 1986). There, the plaintiff successfully
sued his accountant for malpractice, obtaining an award of
$200, 000 in damages, and the trial court then awarded the
plaintiff over $61, 000 in attorneys' fees under A.R.S.
§ 12- 341.01(A) under the theory that the malpractice
had “emerge[d] from a contract for professional
services” between the parties. Id. at 739,
742. The Arizona Court of Appeals reversed the fee award,
holding that “while a contractual relationship may give
rise to a duty to perform in accordance with a certain
standard of care, this legally imposed duty exists separate
and apart from the contract giving rise to the duty. The
failure to comply with this standard of care results in a
breach of the legal duty imposed and is not an action
‘arising out of contract' under A.R.S. §
12-341.01(A).” Id. at 743. The parallels
between this case and Lewin are obvious. Indeed, in
the summary judgment order, the Court cited Lewin as
one of the Arizona cases establishing that Macy's
couldn't proffer its contract with H&M as
establishing the standard of care for its tort claim against
H&M. (Doc. 135 at 11-12.)
Accordingly,
IT IS ORDERED that H&M's motion for
attorneys' ...