Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-04220/USCOURTS-azd-2_05-cv-04220-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Biltmore Associates, L.L.C., as Trustee 

of the Visitalk Creditors' Trust,

Plaintiff, 

vs.

Twin City Fire Insurance Company, 

et al., 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

No. 2:05-CV-04220-PHX-FJM

ORDER

On February 13, 2007, we granted defendants' motions for attorneys' fees. See

February 13, 2007 Order (doc. 89). The thirteen documents since filed concern the parties'

dispute over the caption of the judgment on the attorneys' fees order. 

The court has before it defendant Old Republic's "Notice of Lodging Proposed Form

of Judgment Relating to Attorneys' Fees" (doc. 90) and proposed judgment (attached as an

exhibit to doc. 90); plaintiff's "Notice of Lodging Proposed Judgment Relating to Attorneys'

Fees and Motion in Support Thereof" ("Plaintiff's Motion") (doc. 92) and proposed judgment

(attached as an exhibit to doc. 92); defendant Twin City's "Memorandum of Points and

Authorities in Opposition to Plaintiff Biltmore Associates, L.L.C.'s Notice of Lodging

Proposed Judgment Relating to Attorneys' Fees; Request for Further Award of Attorneys'

Fees Under A.R.S. § 12-341.01" ("Twin City Opposition") (doc. 94); defendant Old

Republic's response to plaintiff's motion (doc. 97); plaintiff's reply to Twin City's opposition

Case 2:05-cv-04220-FJM Document 104 Filed 05/11/07 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Carolina Casualty joins Old Republic's notice (doc. 91), Twin City's opposition

(doc. 95), and Old Republic's response (doc. 99); Great American joins Twin City's

opposition (doc. 96), and North American joins Twin City's opposition and Old Republic's

response (doc. 98).

2

 This order's caption identifies plaintiff as Biltmore Associates, L.L.C., as Trustee

of the Visitalk Creditors' Trust, and is consistent with the caption on most of the documents

filed in this case. Therefore, we grant plaintiff's motion to the extent that it requests that it

be identified in this manner. However, accepting plaintiff's proposed caption does not alter

our conclusion that plaintiff is liable for defendants' attorneys' fees.

- 2 -

(doc. 100); plaintiff's reply to Old Republic's response (doc. 101); defendant Old Republic's

motion for leave to file sur-reply to plaintiff's reply to Old Republic's response (doc. 102) and

proposed sur-reply (doc. 103).1

 For the reasons stated below, we conclude that plaintiff is

liable for defendants' attorneys' fees, regardless of the judgment's caption.2

 We also conclude

that Twin City is not entitled to additional attorneys' fees.

I.

Old Republic's proposed judgment identifies plaintiff as "Biltmore Associates,

L.L.C.," whereas plaintiff's proposed judgment identifies plaintiff as "Biltmore Associates,

L.L.C., as Trustee of the Visitalk Creditors' Trust." Plaintiff argues that we should adopt its

version of the caption because "the Creditors' Trust, not Biltmore Associates, LLC, is liable

for any judgment assessed against Plaintiff in this matter." Plaintiff's Motion at 2. Twin City

contends that plaintiff's motion is a veiled request for reconsideration of our February 13,

2007 attorneys' fees order, and should be denied pursuant to LRCiv 7.2(g). See Twin City

Opposition at 2-3. Alternatively, Twin City alleges that plaintiff is liable even though it

brought this action in its capacity as trustee of the Creditors' Trust. Id. at 4-5. Plaintiff

replies that its motion merely proposes a more accurate caption. Reply to Twin City

Opposition at 2. However, plaintiff also contends that its liability was never adjudicated in

our prior orders, and should not be addressed. Alternatively, plaintiff contends that "in

Arizona a trustee is not personally liable for judgments and obligations incurred toward third

parties on behalf of the trust." Id. 

Case 2:05-cv-04220-FJM Document 104 Filed 05/11/07 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

Old Republic also argues that plaintiff is liable, and requests that we include a

statement in the text of our judgment that "Biltmore is personally liable for payment of the

attorneys' fees awarded in connection with this judgment." Old Republic Response at 5.

Plaintiff replies that pursuant to a non-recourse clause in a Liquidating Trust Agreement

approved by a bankruptcy court, defendants have no recourse against plaintiff, and

alternatively, because plaintiff serves as the Creditors' Trust's liquidation trustee, it may not

be held liable. Reply to Old Republic Response at 2. 

The authority plaintiff cites in support of its argument that it is not liable for attorneys'

fees is either distinguishable from the facts of this case, or non-binding. However, the

Liquidating Trust Agreement ("Creditors' Trust Agreement") plaintiff entered into with

Visitalk does bolster plaintiff's contention that "there can be no personal recourse against

Plaintiff for any indebtedness arising from any activity conducted on behalf of the Creditors'

trust." Reply to Old Republic Response at 3 (emphasis in original). For example, the

Creditors' Trust Agreement provides that liability incurred by the trustee for any purpose

authorized by the agreement will be enforceable only against the trust. See Creditors' Trust

Agreement at 22-23, Affidavit of Michael F. Perlis in Support of the Motion of Twin City

Fire Insurance Company for Award of Attorneys' Fees ("Perlis Affidavit") (doc. 77), Exhibit

C. Also, it states that the Creditors' Trust will indemnify plaintiff against any judgment

incurred by plaintiff on the trust's behalf. See id. at 22. An order entered in the Visitalk

Chapter 11 proceedings authorizes, approves and confirms the terms of that agreement. See

Bankruptcy Court Order, Perlis Affidavit, Exhibit D. 

Although the Creditors' Trust Agreement suggests that plaintiff is not ultimately liable

for any judgment incurred on the trust's behalf, it does not authorize us to overlook plaintiff's

participation in this case. Entering judgment against the Creditors' Trust would eviscerate

one of the goals of A.R.S. § 12-341.01(A): notifying parties with untenable claims that if

they pursue those claims, attorneys' fees awards are a risk they must consider before filing.

See All-Way Leasing v. Kelly, 182 Ariz. 213, 218-19, 895 P.2d 125, 130-31 (App. 1994).

By suing defendants, plaintiff assumed the duty of assessing the viability of the Creditors'

Case 2:05-cv-04220-FJM Document 104 Filed 05/11/07 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 Although our attorneys' fees order did not expressly state that plaintiff was liable,

by concluding that plaintiff was the unsuccessful party in this case, we implied as much.

Therefore, to the extent that plaintiff moves for reconsideration of our February 13, 2007

order, we deny it pursuant to LRCiv 7.2(g). 

- 4 -

Trust's claims. Plaintiff should have recognized that the likelihood of success was low, and

therefore, the likelihood of paying defendants' fees was high. The Creditors' Trust

Agreement's promise of indemnification does not shield plaintiff from the liability that

accompanies the bringing of meritless claims.

Moreover, plaintiff cannot avoid liability by insisting upon a particular caption.

Rather, as the terms of the Creditors' Trust Agreement suggest, after judgment enters in this

case, plaintiff may thereafter seek indemnification. See Creditors' Trust Agreement at 22

(providing that the trust "will promptly advance any legal fees and expenses incurred" on

behalf of the Creditors' Trust, and "reimburse" any claim for which the trustee is entitled to

seek indemnification). The fact that plaintiff seeks to avoid judgment suggests that it is

concerned that it will be unable to enforce the indemnification clause. However, the

likelihood of securing indemnification is another risk plaintiff should have considered before

bringing this suit. It is not a risk that plaintiff may shift to defendants. 

Finally, fees awarded pursuant to A.R.S. § 12-341.01(A) are assessed against the

unsuccessful party to the litigation . See Associated Indem. Corp. v. Warner, 143 Ariz. 567,

570, 694 P.2d 1181, 1184 (1985). Fees are not assessed against entities that are not parties

to the case in which fees are awarded. We granted defendants' motions to dismiss plaintiff's

Amended Complaint. In this case, plaintiff is the unsuccessful party, and is therefore the

entity liable for defendants' fees.3

II.

Defendant Twin City moves for an additional $2,592.50 in attorneys' fees incurred in

preparing its opposition to plaintiff's motion. See Twin City Opposition at 5. Defendant

Twin City's counsel spent "in excess of 8.5 hours" on the issues raised by plaintiff's motion,

at a rate of $305.00 per hour. Declaration of Avi Wagner, Twin City Opposition. Given the

Case 2:05-cv-04220-FJM Document 104 Filed 05/11/07 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

 We grant plaintiff's motion only to the extent described supra in n.2. 

- 5 -

nature of the parties' dispute, this is an unreasonable request. Plaintiff's motion did not

require a lengthy response, and the question it presented was neither novel nor difficult.

Furthermore, we already concluded that the comparable prevailing community rate "is in the

range of $200.00 to $225.00 per hour," and that Twin City that may not shift the expense of

retaining counsel that billed above that rate to the non-prevailing party. See February 13,

2007 Order at 12. In our February 13, 2007 order, we awarded defendant Twin City $25,000

in fees. No additional fees are warranted. In our discretion, we deny Twin City's motion for

an award of fees in the amount of $2,592.50. 

THEREFORE, IT IS ORDERED GRANTING IN PART AND DENYING IN

PART plaintiff's "Notice of Lodging Proposed Judgment Relating to Attorneys' Fees and

Motion in Support Thereof" (doc. 92)4

 and it IS FURTHER ORDERED DENYING "Twin

City Fire Insurance Company's Memorandum of Points and Authorities in Opposition to

Plaintiff Biltmore Associates, L.L.C.'s Notice of Lodging Proposed Judgment Relating to

Attorneys' Fees; Request for Further Award of Attorneys' Fees Under A.R.S. § 12-341.01"

(doc. 94). IT IS ALSO ORDERED DENYING on grounds of mootness defendant Old

Republic's request that we include a statement in the text of our judgment that "Biltmore is

personally liable for payment of the attorneys' fees awarded in connection with this

judgment" (doc. 97) and defendant Old Republic's motion for leave to file sur-reply to

plaintiff's reply to Old Republic's response (doc. 102). Finally, IT IS ORDERED that the

clerk enter judgment in favor of defendants, and against plaintiff Biltmore Associates,

L.L.C., as Trustee of the Visitalk Creditors' Trust, in the amounts specified in our February

13, 2007 Order (doc. 89). 

DATED this 10th day of May, 2007.

Case 2:05-cv-04220-FJM Document 104 Filed 05/11/07 Page 5 of 5