Arnold et al v. Standard Pacific of Arizona Incorporated et al, No. 2:2016cv00452 - Document 38 (D. Ariz. 2016)
Court Description: ORDER granting in part and denying in part Plaintiff's 31 Motion for Attorney Fees. Plaintiff is awarded attorneys' fees and costs in the amount of $24,193.65. Plaintiff's 34 motion to seal is granted. The Clerk is directed to accept for filing under seal the document lodged as Doc. 35 on the Court's docket. Defendant's 36 motion for leave to file a sur-reply is granted. Signed by Judge David G Campbell on 12/02/2016. (ATD)
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Arnold et al v. Standard Pacific of Arizona Incorporated et al 1 Doc. 38 WO 2 3 4 5 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA 6 7 8 Christine Arnold, et al., 9 10 11 12 Plaintiffs, No. CV-16-00452-PHX-DGC ORDER v. Standard Pacific of Arizona Incorporated, et al., 13 Defendants. 14 15 Plaintiff Christine Arnold asks the Court to award attorneys’ fees and costs against 16 Defendants Standard Pacific of Arizona, Inc. and HSP Arizona, Inc. pursuant to Federal 17 Rule of Civil Procedure 54(d) and Local Rule 54.2(b). Doc. 31. The motion has been 18 fully briefed (Docs. 31, 32, 33, 36), and neither party has requested oral argument. For 19 the reasons that follow, the Court will grant Plaintiff’s motion in part. 20 I. Background. 21 Plaintiff purchased a single-family home in Avondale, Arizona, entering into a 22 purchase contract with Defendant Standard Pacific of Arizona, Inc. Doc. 25 at 18. The 23 purchase contract and addenda provided that any disputes, claims, or controversies 24 relating to the contract would be settled by arbitration, which in turn would be governed 25 by the procedures set forth in the contract’s limited warranty. Doc. 20-2 at 9. According 26 to this warranty, Defendants contracted with an entity known as Professional Warranty 27 Service Corporation (“PWC”), and PWC alone would select the service that would 28 arbitrate any potential claims. Doc. 25. The contract also contained a fallback provision Dockets.Justia.com 1 that would take effect if the arbitration provision was determined unenforceable. Id. at 2 26. 3 submitted to the American Arbitration Association (“AAA”). Id. The fallback provision stated that any disputes between the parties would be 4 In August 2015, Plaintiff filed a demand for arbitration with the AAA, alleging 5 construction defects in her home. Doc. 16, ¶ 20. Defendants filed a motion to dismiss, 6 alleging that Plaintiff was not entitled to proceed under the fallback provision because the 7 warranty arbitration provision had not been found invalid. Id., ¶ 21. Jeffrey S. Cates, the 8 arbitrator appointed by the AAA, granted the motion and stayed the arbitration. Doc. 20- 9 6 at 3. Plaintiff then filed a complaint with this Court seeking declaratory relief 10 concerning the validity and enforceability of the warranty arbitration provision. Doc. 1. 11 The Court granted summary judgment in favor of Plaintiff and found that the provision 12 was unenforceable as a matter of law. Doc. 29. 13 II. Analysis. 14 Plaintiff seeks an award of attorneys’ fees in the amount of $28,265.35, as well as 15 $466.65 in taxable costs. Doc. 33 at 9. Defendants argue that Plaintiff is not entitled to 16 fees and costs and, even if she were, the requested award is not reasonable. Doc. 32. 17 A. 18 Although the parties agree that the Federal Arbitration Act (“FAA”) governs 19 arbitration proceedings between them, they disagree about whether the FAA prohibits an 20 award of attorneys’ fees in this case. Doc. 32 at 3; Doc. 33 at 4. Plaintiff contends that 21 “the contractual rights of the parties for the underlying contracts are subject to Arizona 22 law” and she “seeks attorneys’ fees directly related to her action in district court to 23 enforce her contractual right to fair arbitration.” Id. at 3. Because she is “not seeking 24 costs associated with the actual arbitration,” she contends, the FAA does not apply. Id. at 25 4. Defendants disagree, and argue that “Arizona’s fee shifting statute is not applicable 26 here” because “the FAA preempts inconsistent or contrary state law. . . [and i]nterpretive 27 case law makes clear that the FAA does not provide for an award of attorneys’ fees.” 28 Doc. 32 at 3. Eligibility. -2- 1 The underlying dispute between the parties was governed by state law. According 2 to the FAA, an arbitration provision “shall be valid, irrevocable, and enforceable, save 3 upon such grounds as exist at law or in equity for the revocation of any contract.” 9 4 U.S.C. § 2. The Supreme Court has held that “generally applicable contract defenses, 5 such as fraud, duress, or unconscionability, may be applied to invalidate arbitration 6 agreements without contravening § 2.” Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 7 681, 687 (1996). As a result, “state law, whether of legislative or judicial origin, is 8 applicable [to an agreement to arbitrate] if that law arose to govern issues concerning the 9 validity, revocability, and enforceability of contracts generally.” Perry v. Thomas, 482 10 U.S. 483, 492 n.9 (1987) (emphasis in original). Arizona unconscionability law applies 11 to contracts broadly and is not targeted at arbitration agreements. AT&T Mobility LLC v. 12 Concepcion, 563 U.S. 333, 339 (2011) (citing Doctor’s Associates, 517 U.S. at 687). The 13 Ninth Circuit agrees that “state law is not entirely displaced from federal arbitration 14 analysis.” Ticknor v. Choice Hotels Int'l, Inc., 265 F.3d 931, 936-37 (9th Cir. 2001). 15 Defendants cite Clausen v. Watlow Elec. Mfg. Co., 242 F. Supp. 2d 877 (D. Or. 16 2002), for the proposition that although state law principles apply to the validity and 17 enforceability of a contract, “whether and how to apply those defenses is a matter of 18 federal law.” Doc. 32 at 3 (also referring to Clausen for the conclusion that the “scope 19 and enforcement of arbitration agreement is a matter of federal substantive law”). The 20 Clausen court determined whether the arbitration provision at issue bound the plaintiff 21 signatory in his individual capacity or solely as a representative of his corporation. 242 22 F. Supp. 2d at 883. The issue before the court was not the enforceability or validity of 23 the arbitration provision, but its meaning and scope. The court made clear that the “FAA 24 . . . does not preempt state law regarding the validity, revocability and enforceability of 25 contracts generally. Thus, to resolve the issue whether the parties entered into a valid and 26 enforceable written agreement to arbitrate, the court must apply general, state-law 27 principles of contract interpretation.” Id. at 882 (internal quotation marks and citation 28 omitted). Defendants make no effort to explain how Plaintiff’s claim, like the claim in -3- 1 Clausen, involved the scope of the parties’ agreement. It involved the enforceability of 2 the warranty arbitration provision. Consequently, the Court will apply state law. 3 Defendants also argue that Arizona law providing for the award of attorneys’ fees 4 is inconsistent with the FAA, which does not provide such awards. Doc. 32 at 3. 5 Defendants cite to a decision by the District Court for the District of Hawaii, which found 6 that “[a]ttorneys’ fees are not available under the Federal Arbitration Act.” Metzler 7 Contracting Co. LLC v. Stephens, 774 F. Supp. 2d 1073, 1089 (D. Haw. 2011). But the 8 petition in Metzler was seeking confirmation of an arbitration award and requested 9 attorneys’ fees related to such efforts. In concluding that the petitioner could not recover 10 attorneys’ fees under Hawaii law, the court noted that “the Federal Arbitration Act 11 governs the Court’s evaluation of both [petitioner’s] motion to confirm and the 12 [respondent’s] petition to vacate.” 13 confirmation of an arbitration award. 14 arbitration provision, and her claim was governed by Arizona law, not the FAA. Id. at 1089. Plaintiff in this case did not seek She asserted the invalidity of the warranty 15 Finally, Defendants argue that the parties’ “clearly stated intent was for there to be 16 no fee shifting with respect to the resolution of any disputed issues.” Doc. 32 at 9. But 17 the contract provisions cited by Defendants specifically provide that each party will bear 18 its own costs and fees for arbitration under the terms of the contract. Doc. 31 at 4 n.3. 19 This case was not an arbitration, but a dispute concerning the enforceability of a contract 20 provision that was governed by Arizona law. 21 Arizona law provides that, “[i]n any contested action arising out of a contract, 22 express or implied, the court may award the successful party reasonable attorneys’ fees.” 23 A.R.S. § 12-341.01(A). An award of attorney’s fees under this statute is discretionary 24 with the trial court. Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz. Ct. App. 1987). 25 Arizona law similarly allows a successful party in a civil action to recover costs. 26 A.R.S. §§ 12-341, 12-332. Because Plaintiff was a successful party in a contract dispute 27 governed by Arizona law, the Court may exercise its discretion to award reasonable 28 attorneys’ fees and costs. -4- 1 B. 2 In determining whether to exercise its discretion to award attorneys’ fees under 3 4 5 6 7 Entitlement. A.R.S. § 12-341.01(A), the Court must consider the following factors: 1) the merits of the unsuccessful party’s claim; 2) whether the successful party’s efforts were completely superfluous in achieving the ultimate result; 8 3) whether assessing fees against the unsuccessful party would cause extreme hardship; 9 4) whether the successful party prevailed with respect to all relief sought; 10 11 12 13 5) whether the legal question presented was novel or had been previously adjudicated; and 6) whether a fee award would discourage other parties with tenable claims from litigating. 14 Assoc. Indemn. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985); Am. Const. Corp. v. 15 Philadelphia Indemn. Ins. Co., 667 F. Supp. 2d 1100, 1106-07 (D. Ariz. 2009); City of 16 Phoenix v. Glenayre Elecs., Inc., 375 P.3d 1189, 1198-99 (Ariz. Ct. App. 2016). 17 The first factor weighs strongly in favor of Plaintiff. The warranty arbitration 18 provision had already been determined unenforceable as fundamentally unfair by the 19 Hawaii Supreme Court in Nishimura v. Gentry Homes, Ltd., 338 P.3d 524 (Haw. 2014). 20 This Court also found that the provision was clearly unconscionable and thus 21 unenforceable. 22 The second factor weighs in favor of Plaintiff. The challenge to the warranty 23 arbitration provision was necessary to provide Plaintiff with a fair forum to seek relief 24 under her contract. As the Court found, the warranty arbitration provision did not 25 provide Plaintiff with an “effective substitute for the judicial forum.” Doc. 29 at 9 (citing 26 McMullen v. Meijer, Inc., 355 F.3d 485 (6th Cir. 2004)). 27 28 The third factor favors Plaintiff. Defendants are substantial business entities and make no contention that fees would impose an undue hardship on them. -5- 1 The fourth and fifth factors weigh in favor of Plaintiff because she prevailed on 2 her only claim for relief before this Court. Additionally, as noted above, the issue had 3 already been litigated in the Hawaii Supreme Court, putting Defendants on notice that 4 their position lacked merit. 5 6 With respect to the sixth factor, Defendants do not contend that an award of fees would discourage future parties with tenable claims from litigating. 7 In sum, the six factors identified by Arizona cases, taken together, strongly favor 8 granting Plaintiff attorneys’ fees. The Court concludes that Plaintiff is entitled to recover 9 fees under A.R.S. § 12-341.01. 10 C. 11 Plaintiff relied on the lodestar analysis in calculating her request for attorneys’ 12 fees. Defendants argue that “[l]odestar may be an appropriate method of determining a 13 fee award in a damages case. Not so here in which the plaintiff did not request, and did 14 not receive, a damage award. . . . A lodestar analysis has no application to a declaratory 15 relief action as there is no damage award to which it would apply.” Doc. 32 at 4. 16 Defendants do not cite any law to support this proposition, and the Court does not find 17 any. Rather, Arizona courts have recognized that the lodestar figure is presumed to be 18 the proper reasonable fee. Timmons v. City of Tucson, 830 P.2d 871, 878 (Ariz. Ct. App. 19 1991). Are Fees Recoverable in This Matter? 20 Defendants also argue that because Plaintiff and her attorney entered into a 21 contingent fee agreement, “Plaintiff has no obligation to pay her counsel for any of the 22 fees incurred in this matter and, as a result, there is no entitlement to fees under A.R.S. 23 § 12-341.01.” Doc. 32 at 5. While Defendants correctly state that a litigant’s genuine 24 financial obligation to pay her attorney is necessary before any award of attorneys’ fees 25 may be granted, the cases cited by Defendant recognize that a contingent fee agreement is 26 such a genuine obligation. Moedt v. Gen. Motors Corp., 60 P.3d 240, 243 (Ariz. Ct. App. 27 2002); Lisa v. Strom, 904 P.2d 1239, 1243 n.3 (Ariz. Ct. App. 1995).1 According to 28 1 The court in Lisa was concerned with a pro se attorney litigant seeking attorneys’ -6- 1 Defendants, because Plaintiff has not yet received any damages award, she is under no 2 financial obligation to pay her attorney. The Court is not persuaded. Defendants cite no 3 law holding that a litigant does not have a financial obligation simply because she has not 4 yet received a damages award. Rather, precedent suggests that the financial obligation is 5 created when the contingency fee agreement is entered, not when damages are awarded. 6 Lisa, 904 P.2d at 1243 n.3 (“an agreement to pay attorney’s fees out of the recovery itself 7 is a genuine financial obligation.”) (emphasis in original). 8 D. 9 Plaintiff originally sought $34,378 in fees and costs, but revised her request in Is the Amount of the Requested Fee Award Reasonable? 10 response to Defendants’ contention that this amount was unreasonable. Doc. 33. 11 Court has reviewed the revised itemized statement of requested attorneys’ fees (Doc. 33- 12 1) and finds the total amount to be reasonable. The 13 Using the lodestar analysis, “‘[t]he most useful starting point for determining the 14 amount of a reasonable fee is the number of hours reasonably expended on the litigation 15 multiplied by a reasonable hourly rate.’” Bogard v. Cannon & Wendt Elec. Co., 212 P.3d 16 17, 28 (Ariz. Ct. App. 2009) (quoting Timmons, 830 P.2d at 878). 17 reimbursement at a rate of $300 per hour for partners, $200 per hour for associates, and 18 $80-85 per hour for paralegals. 19 reasonableness of these rates, and, taking into account market rates in the region for the 20 type of work undertaken, the Court also finds them reasonable. Doc. 31 at 8. Plaintiff seeks Defendants do not challenge the 21 Defendants do challenge whether these fees relate to work directly relevant to 22 issues before this Court. Doc. 32 at 5. Defendants argue that Plaintiff is not entitled to 23 fees incurred before the filing of the first amended complaint on March 28, 2016. 24 According to Defendants, fees incurred before this date fall into two categories which 25 26 27 28 fees when he had not actually incurred any out-of-pocket expenses, as well as any interpretation of the law which would allow a pro se attorney to recover fees where a pro se laymen could not. 904 P.2d at 1244. These concerns are not at issue here. Plaintiff’s attorney challenged the enforceability of the warranty arbitration provision as part of his effort to obtain damages for his client. There is no dispute that he incurred costs in doing so. -7- 1 should be excluded from any potential award. 2 First, Defendants argue that Plaintiff is not entitled to any fees incurred in relation 3 to the underlying arbitration initiated by Plaintiff in August 2014. Id. at 7. Defendants 4 argue that this leaves only “fees incurred for the preparation of the [first amended 5 complaint], preparation and filing of the initial case management report, and the briefing 6 and argument in support of plaintiff’s Motion for Judicial Relief. All other claimed fees 7 were incurred in relation to the failed arbitration and are not recoverable.” Id. at 6. The 8 Court does not agree. All itemized fees incurred in relation to the enforceability of the 9 warranty arbitration provision were necessitated by Defendants’ position, resulted in this 10 lawsuit, and are reasonable and recoverable. 11 Second, Defendants argue that the fees incurred in relation to Plaintiff’s original 12 complaint are not recoverable. Id. at 7. The original complaint included claims on behalf 13 of six plaintiffs. Doc. 1. As Defendants point out, this complaint “necessitated an 14 amendment as the plaintiffs could not establish that they each met the jurisdictional 15 requirement for the Court to assert diversity jurisdiction over their claims.” Doc. 32 at 7. 16 The Court agrees that Plaintiff may not recover fees incurred in relation to this 17 jurisdictional defect. Plaintiff’s counsel should have known that the original plaintiffs’ 18 claims could not be aggregated to satisfy the amount in controversy requirements. See 19 Urbino v. Orkin Servs. of California, Inc., 726 F.3d 1118, 1122 (9th Cir. 2013) (“The 20 traditional rule is that multiple plaintiffs who assert separate and distinct claims are 21 precluded from aggregating them to satisfy the amount in controversy requirement.”). 22 Any work aimed at establishing federal diversity jurisdiction over the claims of the other 23 five plaintiffs was not reasonable. Plaintiff emphasizes that she amended her complaint 24 in response to Defendants’ motion to dismiss based on lack of jurisdiction, rather than 25 litigate the issue, so as to reduce costs. Doc. 33 at 8. This is not sufficient to render 26 related attorneys’ fees reasonable. The Court finds that any fees incurred in response to 27 the issue of jurisdiction are unreasonable and should be removed from the final award. 28 The Court will remove items 13-15, 17-18, 32-40 from the award of attorneys’ fees. -8- 1 Doc. 33-1. 2 3 After reviewing Plaintiff’s evidence with these conclusions in mind, the Court will award Plaintiff $23,727 in attorneys’ fees and $466.65 in costs. 4 E. 5 Defendants argue that Plaintiff’s fee request should be denied for failure to comply 6 Compliance with Local Rules. with local rule 54.2(d)(1): 7 No motion for award of attorneys’ fees will be considered unless a separate statement of the moving counsel is attached to the supporting memorandum certifying that, after personal consultation and good faith efforts to do so, the parties have been unable to satisfactorily resolve all disputed issues relating to attorneys’ fees or that the moving counsel has made a good faith effort, but has been unable, to arrange such conference. 8 9 10 11 12 LRCiv 54.2(d)(1). 13 statement (Doc. 31), her reply brief does (Doc. 33-2). 14 correction is not sufficient to satisfy the rule because the consultation did not occur 15 before the motion for costs and fees was made and because Plaintiff did not discuss the 16 three substantive objections raised by Defendants in their response. Doc. 36-1 at 2. The 17 Court will not deny Plaintiff’s motion on this basis. Although consultation before filing a 18 motion for fees and costs is clearly the required practice, the Court concludes that 19 Plaintiff’s subsequent consultation substantially complied with this rule and that denial of 20 fees on this basis would be unjust. Defendants have made clear that they oppose any fee 21 award on multiple grounds. 22 IV. 23 While Plaintiff’s original motion did not contain the required Defendants argue that this Motion to Seal. Plaintiff seeks to file under seal her fee agreement with counsel. Doc. 34. 24 Defendants oppose the motion. Doc. 36-1 at 2-3. Two standards generally govern 25 requests to seal documents. “First, a ‘compelling reasons’ standard applies to most 26 judicial records.” Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 677-78 (9th Cir. 2010 27 (citing Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006); 28 Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135-36 (9th Cir. 2003)). “[A] -9- 1 party seeking to seal judicial records must show that ‘compelling reasons supported by 2 specific factual findings outweigh the general history of access and the public policies 3 favoring disclosure.’” Pintos, 605 F.3d at 678 (quoting Kamakana, 447 F.3d at 1178). 4 The second standard applies to “‘private materials unearthed during discovery,’ as such 5 documents are not part of the judicial record.” Id. (quoting Kamakana, 447 F.3d at 6 1180). The “good cause” standard set forth in Rule 26(c) of the Federal Rules of Civil 7 Procedure applies to this category of documents. See id.; San Jose Mercury News, Inc. v. 8 U.S. Dist. Court–N. Dist. (San Jose), 187 F.3d 1096, 1103 (9th Cir.1999). For good 9 cause to exist, “the party seeking protection bears the burden of showing specific 10 prejudice or harm will result if no protective order is granted.” Phillips v. G.M. Corp., 11 307 F.3d 1206, 1210-11 (9th Cir. 2002); see Foltz, 331 F.3d at 1130. The good cause 12 standard applies to documents attached to non-dispositive motions because those 13 documents are often “‘unrelated, or only tangentially related, to the underlying cause of 14 action.’” Phillips, 307 F.3d at 1213 (citation omitted). 15 Because the contingency fee agreement is attached to a non-dispositive motion, 16 the good cause standard will apply. Plaintiff argues that the agreement should be filed 17 under seal because “it contains protected personal information, professional business 18 strategies and potential trade secrets. Specifically, the fee agreement describes in part 19 Plaintiff’s counsels’ methods of litigating a case and strategy regarding retention of 20 clientele. Such proprietary information is protectable under seal.” Doc. 34 at 3. Plaintiff 21 further alleges that, if this agreement is not filed under seal, Plaintiff’s counsel would 22 likely “suffer professionally as other firms could adopt Plaintiff’s strategy in client 23 retention, or utilize their knowledge of the fee agreement to engage in gamesmanship 24 during the course of a case to ensure Plaintiff’s counsel is not paid.” Id. at 4. 25 Defendants do not allege, and the Court does not find, any significant public 26 interest in access to the content of the agreement. Plaintiff has met her burden of 27 showing good cause and overcoming the presumption of public access. 28 /// - 10 - 1 IT IS ORDERED: 2 1. Plaintiff’s motion for attorneys’ fees and costs (Doc. 31) is granted in part 3 and denied in part. Plaintiff is awarded attorneys’ fees and costs in the 4 amount of $24,193.65. 5 2. Plaintiff’s motion to seal (Doc. 34) is granted. The Clerk is directed to 6 accept for filing under seal the document lodged as Doc. 35 on the Court’s 7 docket. 8 3. 9 Dated this 2nd day of December, 2016. Defendant’s motion for leave to file a sur-reply (Doc. 36) is granted. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 11 -
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