Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-01785/USCOURTS-azd-2_03-cv-01785-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Southwest Storage & Distribution

Company, 

Plaintiff, 

vs.

Smith's Food & Drug Centers Inc, d/b/a

Fry's Food Stores; et al.,

Defendants. 

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No. CV-03-1785-PHX-NVW

ORDER

[Not for Publication]

In proceedings in open court on October 3, 2005, the parties stipulated to the

quantification of plaintiff's damages under Count 1 of the complaint as $409,178.42.

Defendants' right to challenge the court's prior rulings concerning liability is preserved. By

stipulation entered the same date (doc. #70), the parties agreed that the two issues remaining

to be decided are the amount of prejudgment interest to which plaintiff is entitled and the

amount of attorney fees, costs, and other expenses which plaintiff is entitled to recover.

Plaintiff claims 1.5 percent per month as stated in its invoices issued to defendants, and

defendants contend the applicable interest rate is the 10 percent simple interest provided by

Arizona statute. The parties agreed that the matter of attorneys fees, non-taxable costs, and

expenses is governed by paragraph 28 of the Pick/Managed Operations Agreement, which

provides:

Case 2:03-cv-01785-NVW Document 76 Filed 12/07/05 Page 1 of 6
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If any litigation arises out of the subject matter of this agreement, the prevailing party

shall be entitled to recover from the other party its reasonable attorneys' fees (as

determined by a Court not a jury) and all related costs and expenses incurred as a

result of litigation in addition to such other relief as may be granted.

The parties further agreed to submit the issue of attorney fees, costs, and expenses to

the court if they are not able to agree upon a quantification. Id. At the October 3, 2005

status conference, the court set a briefing schedule for the submission of briefs and

supporting evidence on these questions (doc. #71).

Now before the court are Plaintiff's Motion for Summary Judgment (doc. #72), the

Defendants' Brief Regarding Interest Rate and Attorney Fees (doc. #73) and Controverting

Statement of Facts (doc. #74), and Plaintiff's Reply (doc. #75). Although plaintiff styled its

motion as one for summary judgment, it is clear from the parties' contract and from the

October 3, 2005 status hearing that issues of attorney fees, costs, and expenses are to be

submitted and have been submitted to the decision of the court as trier of fact. The court

finds that the issue of entitlement to and rate of interest can be determined without recourse

to any disputed facts.

I. Rate of Interest

Arizona statute provides that the rate of interest on any indebtedness, judgment, or

other obligation shall be 10 percent per annum, “unless a different rate is contracted for in

writing, in which event any rate of interest may be agreed to.” A.R.S. § 44-1201. Thus,

absent some other agreement in writing, the rate of interest on the judgment must be 10

percent per annum, simple interest.

The Pick/Managed Operations Agreement dated October 3, 1999, between the parties

provides in paragraph 11.D. that Southwest shall invoice weekly. It further provides, “All

invoices are payable upon receipt. If invoices are not promptly paid, Fred Meyer

[predecessor to defendant] and Southwest will mutually agree upon late payment fees.”

Plaintiff claims a rate of 1.5 percent per month, rather than the statutory 10 percent per

annum, because its invoices stated, “An interest charge of 1.5 % per month will be charged

on all past due sums.” This assertion of a higher-than-statutory interest rate was made

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unilaterally by plaintiff and never agreed to in writing by defendants. Plaintiff contends,

nevertheless, that defendants are chargeable with the higher interest rate stated on the

invoices because defendants did not object to it. The court is unpersuaded for several

reasons. First and most importantly, the parties' Pick/Managed Operations Agreement

explicitly provided, as quoted above, that the parties would “mutually agree upon late fees.”

There is nothing mutual about a unilateral assertion of a higher-than-statutory interest rate.

The parties' contract explicitly contemplated communication and actual agreement upon an

interest rate. Of course, in the absence of such communication and agreement in fact, the

parties would be left with the statutory interest rate.

Second, one party's unilateral claim of a higher interest rate in an invoice does not

meet the statutory requirement of “a different rate . . . contracted for in writing.” A.R.S. §

44-1201(A). This is the holding of Hobart Bros. Co. v. Welding Supply Service, Inc., 21

Ohio App. 3d 142, 144-45, 486 N.E.2d 1229, 1232 (1985), which stated in interpreting a

materially identical statute:

An oral statement or a statement on an invoice or bill to which the other party has not

assented does not meet the requirement of R.C.1343.03(A) as to the existence of a

written contract between the parties. Here, there is a written contract between the

parties but it does not specify a rate of interest. Instead, the contract specifies only the

time at which interest will commence to be charged, namely, when the account

becomes past due. The term "rate of interest" as used in R.C.1343.03(A) refers to the

percentage or amount of interest. Where, as here, the contract merely states that

interest will be charged without specifying the percentage or amount of interest to be

charged, the contract does not meet the requirement of R.C.1343.03(A) that only a

written contract providing a rate of interest to be charged differing from the statutory

rate permits the charging of interest at a rate greater than that provided by the statute.

Since the contract between the parties did not specify a rate of interest with

respect to past due accounts, Hobart was limited to the statutory rate of interest upon

the accounts. 

Accord Scotts Co. Central Garden & Pet. 403 F.3d 781, 791 (6th Cir. 2005).

Although it was not included in the parties' Stipulation and Joint Status Report

description of further issues in dispute, plaintiff now argues that it is entitled to both the 10

percent per annum statutory interest rate and the 1.5 percent per month “late fee” stated in

the invoice. Plaintiff's contention that the invoice claims a “late charge” rather than interest,

and as such it can be cumulated with the statutory interest rate, is refuted by the language of

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the invoice itself, which refers to the 1.5% per month charge as “interest.” Because the

higher interest rate unilaterally claimed in the invoices has not been agreed to in writing by

the defendants, it is not due as interest and it cannot be due as a “late fee.”

Accordingly, plaintiff is entitled to simple interest at the statutory rate of 10 percent

per annum on balances 60 days overdue.

II. Attorney Fees, Costs, and Expenses

The court has considered the briefs and evidence for and against plaintiff's claim of

attorney fees in the amount of $116,824.40 through August 31, 2005. This is the sum of

$3,528.40 for the services of Jeffrey R. Simmons through his respective law firms,

$11,044.83 for services of Fennemore Craig, and $102,255.17 for services of Horvath &

Lieber, PC. 

Although the quantification of reasonable fees is a matter for the court as trier of fact,

defendants have submitted no evidence, by affidavit or otherwise, concerning the reasonable

value of fees claimed by plaintiff. Rather, defendants content themselves with the following

unsworn objections: 

1. Plaintiff's counsel have “block billed” their descriptions of services rendered,

quantifying only the sum for each day for each billing attorney.

2. Because plaintiff retained Chicago counsel, fees and costs associated with his

travel to Arizona, pro hac vice admission, and conferences with local counsel are

unreasonable.

3. An excessive amount of time was spent on motion practice. Defendants

suggested a 50 hour reduction and a maximum fee award of $75,000.00.

4. The fees for Mr. Simmons ($3,524.40) are unreasonable because plaintiff could

have employed Arizona counsel for the entire representation.

5. The fees of Fennemore Craig, $11,044.83 from February 2000 through April

2001, are not related to this litigation because they pre-dated this litigation.

Defendants' response does not meet the requirement of LRCiv 55.2(f) that it “identify

with specificity all disputed issues of material fact and shall separately identify each and

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every disputed time entry or expense item.” This deficiency alone is sufficient to spare the

court from laboring through time entry by time entry to surmise how defendants' general

objections might or might not apply. There are additional reasons as well for rejecting

defendants' objections.

Several of defendants' objections are ramifications of their general objection to

plaintiff's selection to employ out-of-state counsel rather than Arizona counsel. Litigants are

not required to retain local counsel, and plaintiff has sufficiently justified its selection of

counsel with experience and expertise helpful for the prosecution of this action. Moreover,

plaintiff's counsel's hourly rates are quite reasonable by the standards of the Phoenix market.

The additional involvement of plaintiff's local counsel is reasonable and appropriate as well.

This case entailed considerable complexity of factual and legal issues. Defendants'

summary request for fee reduction is unpersuasive.

Plaintiff demonstrated that the research and legal opinion rendered by the Fennemore

Craig firm was the predicate for this action and therefore directly related to it.

For the foregoing reasons, the court finds defendants' reasonable attorney fees, costs,

and expenses to be in the amount requested, $116,824.40.

IT IS THEREFORE ORDERED that Plaintiff's Motion for Summary Judgment (doc.

#72) is granted in part and denied in part. It is granted to the extent that Plaintiff is awarded

attorney fees, costs, and expenses in the amount requested, $116,824.40. It is granted and

denied to the extent that Plaintiff is awarded pre-judgment and post-judgment interest at the

rate of ten percent (10%) simple interest.

/ / /

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/ / / 

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/ / /

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IT IS FURTHER ORDERED that Plaintiff shall submit by December 21, 2005, a

proposed form of final judgment encompassing all claims and awarding interest as provided

in this order in stated amounts or showing principal amounts and accrual dates from which

the amounts of the past and future interest are ascertainable with clarity. Counsel are

directed to confer and to submit a form of judgment approved as to form if they can agree.

DATED this 7th day of December, 2005.

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