Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_16-cv-04069/USCOURTS-azd-2_16-cv-04069-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:2201 Declaratory Judgment

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Terry Dishon, et al.,

Plaintiffs,

v. 

Connie R Gorham, et al.,

Defendants.

No. CV-16-04069-PHX-ROS

ORDER 

Plaintiffs Terry Dishon and Luci Dishon, husband and wife, filed suit against 

Defendants Connie Gorham and Gary Haak, alleging breach of contract and requesting 

declaratory judgment. (Doc. 6.) On June 4, 2019, the Court conducted a bench trial. On 

September 20, 2019, the Court made findings of fact and conclusions of law and ordered 

Plaintiffs to file a brief explaining their damages theory and Defendants to respond. (Doc. 

160.) Plaintiffs complied, requesting an award of fees and expenses totaling $339,166.57. 

(Doc. 161.) Defendants did not comply and have therefore waived any objections. See

Local R. Civ. P. 7.2(i); c.f. Trantor v. Fredrikson, 878 P.2d 657, 659 (Ariz. 1994) (a party’s 

failure to object to “the lack of findings of fact and conclusions of law in making awards 

of attorneys’ fees under § 12–341.01(C) or § 12–349 precludes that party from raising the 

absence of findings as error on appeal”). Plaintiffs will be awarded $191,862.80 in 

attorneys’ fees and $4,846.50 in taxable costs.

BACKGROUND

The Court set forth the facts in detail in the Findings of Fact and Conclusions of 

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Law, Doc. 160, and repeats only those facts necessary to understand Plaintiffs’ position 

regarding the recovery of attorneys’ fees and costs.

Plaintiff Terry Dishon owned Dishon Disposal, Inc., an oil field services company 

in North Dakota, which was later acquired by Digerati Technologies, Inc. through a series 

of transactions and a reverse merger that the parties call the “November Transactions.” In 

May 2013, Digerati Technologies filed for Chapter 11 Bankruptcy in the United States 

Bankruptcy Court for the Southern District of Texas. Pursuant to the bankruptcy, two 

settlement agreements were executed: the Rule 11 Mediated Settlement Agreement and the 

Bankruptcy Settlement Agreement (collectively, the “Settlement Agreements”). Plaintiffs 

Terry Dishon and Luci Dishon, David Gorham (the late husband of Defendant Connie 

Gorham), Defendant Connie Gorham, MCI Partners (which employed Defendant Gary 

Haak), and multiple other parties were signatories to the Settlement Agreements, which 

provided that all parties agreed not to assert certain claims in the future. Specifically, all 

parties agreed to

mutually release, acquit and forever discharge . . . any and all claims, causes 

of action, demands, of any character or kind, known or unknown, whether in 

contract or in tort, relating to the Lawsuits . . . or any theory of law concerning 

the facts giving rise to the allegations brought forth in any of the Lawsuits or 

that could have been brought forth related to any of the Lawsuits through the 

date of this Settlement Agreement. 

(Doc. 156 Ex. 1.)

After David Gorham passed away in 2015, Defendant Connie Gorham, through her 

attorney, demanded that the Dishons pay $1.5 million, and Defendant Haak also asserted 

claims and made demands to the Dishons for payments relating to his employment at MCI 

Partners and the November Transactions. The Court found these demands breached the 

Settlement Agreements, and held Defendants liable for breach of contract.

Plaintiffs request $339,166.57 in damages, which they assert represents “the 

reasonable and necessary attorney’s fees and costs incurred by Plaintiffs in connection 

[with] Defendants’ breach of the Settlement Agreements.” (Doc. 161 at 6.)

ANALYSIS

In Arizona, “courts generally do not construe ‘damages’ to include attorneys’ fees.” 

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City Ctr. Exec. Plaza, LLC v. Jantzen, 344 P.3d 339, 343 (Ariz. Ct. App. 2015) (collecting 

cases).1 This comports with the “American Rule,” under which courts generally prohibit 

the recovery of attorney’s fees as damages, except where authorized by statute. Seattle 

Times Co. v. Seattle Mailer’s Union No. 32, 664 F.2d 1366, 1370 (9th Cir. 1982). For this 

reason, the Court ordered Plaintiffs to cite relevant law supporting their theory that 

attorneys’ fees are damages. (Doc. 160 at 4.) Plaintiffs appear to have misunderstood the 

Court’s Order, and argued their entitlement to attorneys’ fees in the general sense without 

addressing the specific question of whether those attorneys’ fees were damages; and, if the 

attorneys’ fees were not damages, what the damages might have been. (Doc. 161.)

But Plaintiffs’ failure to identify the applicable law does not mean such law does 

not exist. In Arizona, “a victim of a breach of contract may recover damages from the 

breaching party to compensate for the attorneys’ fees and costs it incurred in defending a 

separate action initiated against it as a foreseeable result of the breach.” State Bar of 

Arizona, Arizona Attorneys’ Fees Manual, § 7.3.1 (6th ed. 2017); see Desert Mountain 

Properties Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 236 P.3d 421, 436 (Ariz. Ct. App. 

2010), aff’d, 250 P.3d 196 (Ariz. 2011) (“[W]hen one party's breach of contract places the 

other in a situation that ‘makes it necessary to incur expense to protect his interest, such 

costs and expenses, including attorneys’ fees, should be treated as the legal consequences 

of the original wrongful act and may be recovered as damages.’”) (quoting Fairway 

Builders, Inc. v. Malouf Towers Rental Co., 603 P.2d 513, 529 (Ariz. Ct. App. 1979)). 

Plaintiffs have incurred attorneys’ fees and costs defending against Defendant Haak in 

related cases 2:17-cv-03576-PHX-ROS and 2:19-cv-00405-PHX-SMB, and those fees and 

costs are recoverable as damages in this case.

In addition, Plaintiffs, as the successful party in a “contested action arising out of a 

1 But see Sundance Residential Homeowners Ass’n Inc. v. Glawe, No. 1 CA-CV 17-0042, 

2018 WL 326528, at *3 (Ariz. Ct. App. Jan. 9, 2018) (“[R]ecovery of the attorneys’ fees 

still constituted damages because the [defendant’s breach of contract] required the 

[plaintiff] to hire counsel . . . and then prosecute the claim. Thus, when the breach of

contract required the [plaintiff] to protect its interests, costs and expenses, including 

attorneys’ fees, should be treated as the legal consequences of the breach because they are 

a foreseeable result of the breach.”).

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contract, express or implied,” are entitled to recover the attorneys’ fees and taxable costs 

incurred in litigating this matter. A.R.S. §§ 12-341, 12-341.01. Ordinarily, Plaintiffs would 

be required to file a motion for award of attorneys’ fees and related non-taxable expenses, 

along with a supporting memorandum of points and authorities, before this matter’s fees 

and costs could be awarded. But the Court in its discretion waives this requirement, 

considers Plaintiffs’ Brief Regarding the Recovery of Attorneys’ Fees and Costs to be the 

supporting memorandum, and reviews the evidence of fees and costs incurred in all three 

cases, which was submitted together, under the process for awarding fees pursuant to 

A.R.S. §§ 12-341 and 12-341.01. 

A fee award pursuant to A.R.S. § 12-341.01 is discretionary, and “a court deciding 

whether to award fees under the statute must consider the multifactor standard outlined in 

Associated Indemnity Corporation v. Warner.” Harris v. Maricopa Cty. Superior Court, 

631 F.3d 963, 974 (9th Cir. 2011). There are six Associated Indemnity Factors: 

(1) whether the unsuccessful party’s claim or defense was meritorious; (2) 

whether the litigation could have been avoided or settled and 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) whether the legal question presented was novel 

and whether such claim or defense have previously been adjudicated in this 

jurisdiction; and (6) 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 substantial amounts of attorney’s fees.

Id. at 974 n.3 (quoting Wagenseller v. Scottsdale Mem’l Hosp., 147 Ariz. 370, 394 

(1985)).

The Associated Indemnity factors weigh in favor of a fee award. Defendants’ claims 

were not meritorious, Defendant Haak filed two of the three lawsuits whose fees and costs 

are at issue, and Plaintiffs prevailed with respect to all of the relief sought. The award 

would not discourage other parties with tenable claims from litigating legitimate contract 

issues. Assessing fees against Defendants might cause an extreme hardship, given the 

representations regarding ability to pay which have previously been made, Docs. 120, 129, 

but that factor is outweighed by the other factors. 

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Next, Local Rule 54.2 requires the Court consider a variety of other factors, in 

addition to the Associated Indemnity factors, in determining the reasonableness of the 

requested fee award. LRCiv.P. 54.2(c)(3). The high number of hours (over 1200) worked 

over the course of years, and the hundreds of thousands of dollars requested, demonstrate 

the time and labor required of counsel and the preclusion of other employment by counsel 

because of the acceptance of the action. Plaintiffs’ counsel’s James Key’s certification by 

the Texas Board of Legal Specialization in Oil, Gas, and Mineral Law bears on the skill 

requisite to perform the legal service properly and the novelty and difficulty of the 

questions presented. The hourly billing rates, never higher than $375 per hour, are 

reasonable. The amount of money involved was in the millions of dollars. (See Doc. 1 in 

No. 2:17-cv-03576-PHX-ROS, requesting $4.3 million in damages.)

Accordingly, the Court considers the fees and costs requested in light of A.R.S. 

§ 12-341.01, which permits the recovery of taxable costs only2; Local Rule of Civil 

Procedure 54.1(e), which explains which costs are taxable; and Local Rule of Civil 

Procedure 54.2(e), which explains the information in the task-based itemized statement of 

attorneys’ fees that must be provided to permit recovery. The issue of fees related to the 

August 2018 depositions of Defendants was already addressed by the Court and such fees 

may not be included in the current request for fees. (Doc. 102.) Fees incurred by Jones, 

Skelton & Hochuli will be addressed on invoices from Jones, Skelton & Hochuli, and not 

on invoices from Harris, Finley & Bogle, P.C. 

Pursuant to Local Rule of Civil Procedure 54.2(e)(2), the description of services 

rendered in the task-based itemized statement of attorneys’ fees and related non-taxable 

expenses must “furnish an adequate nonprivileged description of the services in question. 

If the time descriptions are incomplete, or if such descriptions fail to adequately describe 

the service rendered, the court may reduce the award accordingly.” Entries describing 

telephone calls “must identify all participants” and entries related to legal research “must 

2 Non-taxable costs “may not be included in an award of attorneys’ fees made pursuant to 

A.R.S. § 12–341.01.” Ahwatukee Custom Estates Mgmt. Ass’n, Inc. v. Bach, 193 Ariz. 401, 

404 (1999)

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identify the specific legal issue researched.” LRCiv.P. 54.2(e)(2)(A), (B). Furthermore, 

“Time entries simply stating ‘research’ or ‘legal research’ are inadequate and the court may 

reduce the award accordingly.” LRCiv.P. 54.2(e)(2)(B).

The Court follows this guidance. Therefore, no fees are awarded for a charge 

description that has been redacted to the point where the description is no longer compliant 

with LRCiv.P. 54.2(e)(2). And, where a charge description contains multiple services 

rendered, some of which are completely described and some of which are overly redacted, 

fees are awarded proportionately. For example, the first three time entries will be awarded 

as follows:

• 09/07/17, TDO performed 1.3 hours of work at a rate of $335, for a total charge of 

$435.50, for “Review and analysis of pleadings and potential responsive motions.” 

This charge description is adequate and full fees are awarded.

• 09/08/17, TDO performed 2.1 hours of work at a rate of $335, for a total charge of 

$703.5, for “Analysis of [redacted]; analysis of previously filed pleadings; 

telephone call to Arizona counsel.” The charge description “Analysis of [redacted]” 

is inadequate. Therefore, 2/3 of the requested fees, or $469, are awarded.

• 09/10/17, TDO performed 1.3 hours of work at a rate of $335, for a total charge of 

$435.50, for “Analysis of timeline and [redacted]; research regarding [redacted].” 

Neither charge description is adequate, and no fees are awarded.

Neither fees for admission pro hac vice nor counsel’s fees and expenses incurred in 

attending a deposition are taxable. LRCiv.P. 54.1(e)(1), (3). “Costs associated with a video 

recording [of a deposition] are not taxable.” LRCiv.P. 54.1(e)(3). Federal Express charges 

are not taxable. Safety Dynamics, Inc. v. Gen. Star Indem. Co., No. 11-15798, 2013 WL 

11299004, at *7 (9th Cir. Sept. 9, 2013). And neither “expenses incurred for photocopying

. . . [nor] messenger and delivery charges,” are taxable. Ahwatukee Custom Estates Mgmt. 

Ass’n, Inc. v. Bach, 193 Ariz. 401, 402, 973 P.2d 106, 107 (1999).

The chart attached as Exhibit A describes the fees and expenses awarded in detail. 

In sum, Plaintiffs are entitled to $191,862.80 in fees and $4,846.5 in taxable expenses.

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Accordingly,

IT IS ORDERED the Clerk of Court shall enter judgment in favor of Plaintiffs in 

the amount of $191,862.80 in attorneys’ fees, plus $4,846.50 in taxable expenses, and close 

the case.

Dated this 13th day of March, 2020.

Honorable Roslyn O. Silver

Senior United States District Judge

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