Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_08-cv-00009/USCOURTS-azd-4_08-cv-00009-2/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Armando Valles, et al.,

Plaintiffs, 

vs.

Pima County, et al.,

Defendants. 

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CV-08-09-TUC-FRZ (JCG)

REPORT & RECOMMENDATION

Pending before the Court is a Motion to Dismiss filed by Defendants West Speedway

Partners, LLC (“West”) and The Villas at Hacienda del Sol, Inc. (“the Villas”) on April 21,

2008. (Doc. No. 66.) Plaintiffs filed a response on April 30, 2008. (Doc. No. 73.)

Defendants West and the Villas filed a reply on May 12, 2008. (Doc. No. 81.)

Also pending before the Court is a Motion for Sanctions filed by West and the Villas

on April 23, 2008. (Doc. No. 69.) Plaintiffs filed a response on April 30, 2008 and West and

the Villas timely replied. (Doc. Nos. 75 & 82.) 

 Pursuant to the Rules of Practice in this Court, the matter was assigned to Magistrate

Judge Guerin for a report and recommendation. On June 5, 2008, a hearing on the Motions

was held before Judge Guerin. After review, the Magistrate recommends the District Court,

after its independent review of the record, enter an order granting Defendants’ Motions.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are subdivision homeowners who seek to force completion of their

subdivision and to recover monetary damages after the developer of the subdivision filed for

bankruptcy. According to Plaintiffs’ Amended Complaint, West is a Limited Liability

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1

 Plaintiffs’ Amended Complaint is difficult to cite to because it is divided into sections

organized by roman numeral; within each of those sections the paragraphs are numbered and

some of the sections contain sub-sections organized by letter. In addition, Plaintiffs’ Amended

Complaint is 51 pages long and includes 43 pages of exhibits. Accordingly, the Report and

Recommendation cites to the Amended Complaint by page number rather than paragraph.

2

 West and the Villas requested that the Court take judicial notice of their bankruptcy

proceedings and attached the relevant pleadings and orders from those proceedings to their

Motion to Dismiss. (Doc. No. 66, fn. 2.) Fed. R. Evid. 201(d) provides that the Court “shall

take judicial notice if requested by a party and supplied with the necessary information.” The

Court “may take notice of proceedings in other courts, both within and without the federal

judicial system, if those proceedings have a direct relation to matters at issue.” U.S. ex rel.

Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (citations

omitted). A court may take judicial notice of matters of public record without converting a

motion to dismiss into a motion for summary judgment, as long as the facts noticed are not

subject to reasonable dispute. See Intri-Plex Technologies, Inc. v. Crest Group, Inc., 499 F.3d

1048, 1052 (9th Cir. 2007). Thus, there is no merit to Plaintiffs’ contention that because West

and the Villas attached copies of the bankruptcy court pleadings to their Motion to Dismiss, the

Court must convert the Motion to Dismiss to a Motion for Summary Judgment and defer ruling

on the Motion until after discovery has been conducted. The only matters outside the pleadings

which the Court has reviewed in considering the pending Motion to Dismiss are pleadings and

orders from the Villas' and West's bankruptcy proceedings. 

2

Company that develops and sells real estate. (Doc. No. 33, pg. 10.)1 The Villas is an

Arizona Corporation doing business in Pima County. (Id. at pg. 11.) Plaintiffs allege that

some of the liquid assets of West were fraudulently conveyed to the Villas. (Id.) 

Sometime prior to January, 2004, West purchased 36.16 acres of real property in Pima

County for the purpose of developing the Enclave at Gates Pass subdivision. (Id. at pgs. 9,

13.) On January 7, 2004, a final plat was recorded for the Enclave. (Id. at pg. 13.)

Sometime thereafter, Plaintiffs purchased lots within the Enclave. (Id. at pg. 16.) The sales

contracts entered into between West and Plaintiffs provided that subdivision improvements

would be completed before February 28, 2005. (Id. at pg. 42.) West failed to complete the

subdivision improvements by that date, thereby depriving Plaintiffs of their ability to use,

enjoy or re-sell their homes. (Id. at pg. 16.) 

On March 28, 2005, the Villas filed a voluntary petition for bankruptcy under Chapter

11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of

Arizona.2

 (Doc. No. 66, Ex. A.) The Bankruptcy Court confirmed a plan of reorganization

on January 12, 2006; the plan was modified on February 6, 2006. (Doc. No. 66, Ex. A.)

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 The Court takes judicial notice of the transcript from March 7, 2007 bankruptcy hearing

cited in Plaintiffs’ Response to the Motion to Dismiss. (Doc. No. 73, Ex. 1.) 

3

On or about December 15, 2006, West filed a voluntary petition for bankruptcy under

Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District

of Arizona. (Doc. No. 33, pg. 22.) During the course of West’s bankruptcy proceedings, at

a bankruptcy hearing on March 7, 2007, Plaintiffs allege that they first discovered that West

had transferred liquid assets to other entities/alter egos of West, including the Villas, leaving

West insolvent and unable to complete construction.3

 (Doc. No. 33, pg. 26; Doc. No. 73, Ex.

1.) West allegedly made these transfers despite its knowledge that improvements to the

Enclave were not complete and that a substantial amount of work needed to be re-done. (Id.)

On August 8, 2007, West proposed a plan of reorganization whereby a third party,

West Speedway Phase II (“WSPII”) would obtain a loan to be used to complete the

improvements to the Enclaves as well as purchase and develop an adjoining subdivision.

(Doc. No. 66, Ex. B.) 

At this point, Plaintiffs began filing documents in different forums and taking

inconsistent actions in an attempt to redress their injuries. On January 3, 2008, Plaintiffs

filed the pending action against West, the Villas and other Defendants in this Court. (Doc.

No. 1.) 

One day later, Plaintiffs objected in the bankruptcy court to West’s plan of

reorganization on the ground that the plan did not provide adequate assurances that the

improvements to the Enclave would be completed by WSPII. (Doc. No. 66, Ex. B.) 

On January 8, 2008 (after filing their Complaint in this Court), Plaintiffs filed in

bankruptcy court a motion for relief from stay in order to pursue the pending litigation.

(Doc. No. 66, Ex. B.) 

Plaintiffs withdrew their objection to West’s plan of reorganization on January 22,

2008 and the plan was confirmed on January 28, 2008. (Id.) 

On February 4, 2008, Plaintiffs withdrew their motion for relief from stay. (Doc. No.

66, Ex. B.) 

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4

On February 13, 2008, in the federal action, Plaintiffs filed a Request for Voluntary

Dismissal of West and the Villas. (Doc. No. 20.) Plaintiffs sought the dismissal on the

ground that Plaintiffs intended to seek relief for their claims against WSP and the Villas in

those Defendants’ respective bankruptcy cases. While the Request for Voluntary Dismissal

was pending, however, Plaintiffs moved to amend their Complaint on the ground that a plan

had been approved within West’s bankruptcy case and Plaintiffs wanted to amend the

complaint to address said plan and conform the Complaint to the evidence. (Doc. No. 26.)

In the Amended Complaint, Plaintiffs alleged claims against West for breach of contract and

misrepresentation, (Doc. No. 33, pgs. 41-43), and alleged a claim against the Villas for

fraudulent conveyance. (Doc. No. 33, pgs. 46-47.) In addition, the proposed amended

complaint included several amendments unrelated to West, including a change in Plaintiffs’

counsel and new allegations against Defendant Pima County.

The Magistrate issued a Report and Recommendation on February 25, 2008,

recommending that Defendants West and the Villas be dismissed from the litigation without

prejudice. (Doc. No. 29.) The Report and Recommendation was adopted on March 13,

2008. (Doc. No. 34.) West and the Villas were dismissed from the Complaint without

prejudice on that date. 

Two days before West and the Villas were dismissed, the Court granted Plaintiffs’

Motion to Amend Complaint. (Doc. No. 33.) The Amended Complaint, which named West

and the Villas as Defendants, appeared to conflict with Plaintiffs’ stated desire to dismiss

West and the Villas from the litigation. On March 26, 2008, Plaintiffs filed a Request for

Clarification, asking the Court to clarify whether West and the Villas remained parties to this

action. (Doc. No. 46.) The Court set the matter for a scheduling conference, which the

parties stipulated to continue. (Doc. Nos. 50, 54 & 63.) The scheduling conference is

currently set for June 24, 2008. (Doc. No. 77.) Meanwhile, West and the Villas filed the

pending Motion to Dismiss, arguing that to the extent that Plaintiffs had re-asserted claims

against them in the Amended Complaint, those claims should be dismissed pursuant to Rule

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12(b)(6), Fed. R. Civ. P., because they violated 11 U.S.C. § 524(a) and 11 U.S.C. §

1141(d)(1)(A).

MOTION TO DISMISS

A. STANDARD OF REVIEW

The dispositive issue raised by a Rule 12(b)(6) motion is whether the facts as pleaded,

if established, support a valid claim for relief. See Neitzke v. Williams, 490 U.S. 319, 328-

329 (1989). In reviewing a motion to dismiss for failure to state a claim, this Court’s review

is limited to the contents of the complaint. See Clegg v. Cult Awareness Network, 18 F.3d

752, 754 (9th Cir. 1994). All allegations of material fact in the complaint are taken as true

and construed in the light most favorable to the nonmoving party. Id. A complaint should

not be dismissed unless it appears beyond doubt that a plaintiff can prove no set of facts in

support of his claim that would entitle him to relief. Id. 

Rule 12(b) provides that if, on a motion to dismiss for failure to state a claim, matters

outside the pleading are presented to and not excluded by the court, the motion shall be

treated as one for summary judgment and disposed of as provided in Rule 56, provided that

all parties receive reasonable opportunity to present all material made pertinent to such a

motion. 

In deciding a motion for summary judgment, the Court views the evidence and all

reasonable inferences therefrom in the light most favorable to the party opposing the motion.

See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d

202 (1986); Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1289 (9th Cir.

1987). Summary judgment is appropriate if the pleadings and supporting documents “show

that there is no genuine issue as to any material fact and that the moving party is entitled to

a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,

322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). Material facts are those “that might

affect the outcome of the suit under the governing law.” Anderson, 477 U.S. at 248, 106 S.

Ct. at 2510. A genuine issue exists if “the evidence is such that a reasonable jury could

return a verdict for the nonmoving party.” Id. 

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4

 Plaintiffs’ argument regarding West and the Villas status is inconsistent – although

arguing that West and the Villas have been dismissed from the action, Plaintiffs also repeatedly

insisted during oral argument and in their Response that they have adequately plead claims

against West and the Villas in their Amended Complaint. In addition, Plaintiffs previously filed

a Request for Clarification with the Court, stating that they were uncertain whether West and the

Villas remained parties to this action.

5

 At oral argument, Plaintiffs’ counsel apologized for leaving West and the Villas in the

caption of her Amended Complaint. As stated above, however, the Amended Complaint did not

just name West and the Villas in the caption, it asserted numerous claims against them in the

body of the pleading.

6

B. DISCUSSION

 As a threshold matter, in responding to the Motion to Dismiss, Plaintiffs incorrectly

argued that West and the Villas have already been dismissed without prejudice from this

action.4

 Apparently, Plaintiffs believe that because the Order dismissing West and the Villas

without prejudice was filed after Plaintiffs filed their Amended Complaint, West and the

Villas should be considered dismissed from the Amended Complaint. However, the Order

of Dismissal only considered whether West and the Villas should have been dismissed

without prejudice from the original Complaint, as Plaintiffs requested. Upon the filing of

Plaintiffs’ Amended Complaint, West and the Villas were once again named as parties in this

action.5

 See King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987) (holding that amended

complaint supersedes original complaint).

West and the Villas contend that 11 U.S.C. § 524(a) and 11 U.S.C. § 1141(d)(1)(A)

prohibit Plaintiffs from pursuing claims against West and the Villas in this Court. Those

statutes operate to protect bankruptcy debtors from a multitude of legal actions by creditors

outside of bankruptcy proceedings. Once a bankruptcy petition is filed, all actions against

the debtor are stayed and no action may be commenced against the debtor unless the stay is

lifted by the bankruptcy court. See 11 U.S.C. § 362(a). After a bankruptcy plan has been

confirmed, creditors are bound by the plan and cannot pursue any claim that arose before the

bankruptcy plan was confirmed. See 11 U.S.C. § 524(a) and 11 U.S.C. § 1141(d)(1)(A).

In the present case, Plaintiffs’ claims against West arose before West’s bankruptcy

plan was confirmed on January 28, 2008. This is evidenced by the fact that, on January 3,

2008, Plaintiffs filed the pending action against West; the original complaint contains claims

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against West for breach of contract and misrepresentation which are essentially identical to

the claims alleged in the Amended Complaint. Thus, Plaintiffs claims against West in this

Court are clearly barred by 11 U.S.C. § 524(a) and 11 U.S.C. § 1141(d)(1)(A).

Plaintiffs’ claim against the Villas arguably did not arise until March 7, 2007, when

Plaintiffs allegedly discovered that West had fraudulently transferred funds to the Villas.

The Villas plan of reorganization was confirmed by the bankruptcy court on January 12,

2006. Assuming that Plaintiffs’ claim against the Villas did not arise until after confirmation

of the plan, 11 U.S.C. § 524(a) and 11 U.S.C. § 1141(d)(1)(A) do not apply to bar Plaintiffs’

claims. However, a lawsuit in this Court is not the proper vehicle for pursuing a claim

against the Villas, because the bankruptcy court has retained jurisdiction over “litigation of

Claims against the estate not otherwise discharged, and any other causes of action, contested

matters, or adversary proceedings over which this Court has jurisdiction.” (Doc. No. 66, Ex.

A, Order Confirming Reorganization Plan, ¶ 7.3.5.) The bankruptcy court retains such

jurisdiction until the Villas plan is fully administered. See In re Johns-Manville Corp., 97

B.R. 174, 180 (Bkrtcy. S.D.N.Y.,1989) (collecting cases). Any action in this Court

necessarily constitutes an impermissible attempt to obtain assets from a debtor whose assets

are the province of the bankruptcy court. See In re Crown Vantage, Inc., 421 F.3d 963,

970-972 (9th Cir. 2005) (“The filing of a bankruptcy petition creates a bankruptcy estate,

consisting of all of the debtor's legal or equitable interests in property ‘wherever located and

by whomever held.’ 11 U.S.C. § 541(a).”). Thus, if Plaintiffs wish to proceed on a claim

against the Villas that arose following confirmation of the plan, they have the option of

seeking relief from the finality of the plan in bankruptcy court via Federal Rule of

Bankruptcy Procedure 9024, which permits a party to use Rule 60, Fed. R. Civ. P. to apply

for relief from a judgment or order. See also 11 U.S.C.A. § 350(b) (“A case may be

reopened in the court in which such case was closed to administer assets, to accord relief to

the debtor, or for other cause.”) Rule 60, Fed. R. Civ. P. provides that newly discovered

evidence and fraud are both grounds for relief from a judgment.

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6

 Plaintiffs’ deadline to pursue claims against West and the Villas as exceptions to

discharge in the bankruptcy court may have expired. See Rule 4007, Federal Rules of

Bankruptcy Procedure.

7

 In fact, Plaintiffs state in their Response to the Motion for Sanctions that they were met

with opposition when they attempted to subpoena records in the bankruptcy matter and so

elected to dismiss their claims against West and the Villas, intending to pursue the claims later

“when the evidence is in hand.”

8

Plaintiffs assert that they have no objection to West and the Villas being dismissed

from this action without prejudice. However, Plaintiffs contend that they anticipate being

able to pursue their claims against West and the Villas as an exception to discharge and/or

injunction in the future, once they have conducted discovery or in the event that the plans are

not fully administered. Accordingly, Plaintiffs argue that it would be premature to dismiss

West and the Villas from this action with prejudice. The Bankruptcy Code does recognize

some exceptions to discharge if the debtor engaged in fraud or misrepresentation. See 11

U.S.C. §1141; 11 U.S.C. §727; 11 U.S.C. §523. However, as explained above, to the extent

that Plaintiffs believe that they may be able to pursue claims against West and the Villas as

exceptions to discharge, those claims would be properly brought in the bankruptcy court, not

this Court.6

 See Rule 4007, Federal Rules of Bankruptcy Procedure (“A debtor or any

creditor may file a complaint to obtain a determination of the dischargeability of any debt.”).

See In re Fisher, 186 B.R. 70, 71 (Bkrtcy. E.D. Tex. 1995) (“[P]ursuant to 11 U.S.C. §

523(c), the bankruptcy court has exclusive equitable jurisdiction to determine the

dischargeability of debts under 11 U.S.C. § 523(a)(2), (4) and (6).”); Harris v. U.S. Fire Ins.

Co., 162 B.R. 466, 468 (E.D. Va. 1994) (same). Plaintiffs may not file an action in this Court

in order to search, via discovery, for evidence supporting claims that they failed to pursue

in bankruptcy court.7

Furthermore, Plaintiffs have cited no authority to support their assertion that they may

“preserve their right” to pursue claims against West and the Villas at a later date by

voluntarily dismissing them from their original complaint but nonetheless naming them in

their Amended Complaint. Plaintiffs do not have a legal basis for pursuing claims against

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8

 Although Plaintiffs stated at oral argument that they did not intend to request discovery

from West and the Villas, Plaintiffs’ Response to the Motion to Dismiss states “Plaintiffs pray

the honorable Court will continue Defendants’ motion until Plaintiffs are provided reasonable

opportunity to conduct discovery specifically as to the Plaintiffs’ basis for exception to discharge

and/or injunctions as to Plaintiffs’ claims against Defendants [West and the Villas].” (Doc. No.

74, pg. 3.) 

9

 Rule 11, Fed. R. Civ. P. provides a mandatory 21-day safe harbor provision, during

which the movant must serve its Rule 11 motion on the opposing party and allow the opposing

party 21 days to retract the offending paper, claim, defense, contention, allegation or denial

before filing a motion for sanctions with the Court. Defendants West and the Villas complied

with this requirement by serving a copy of their Motion to Dismiss on Plaintiffs’ counsel on

9

West and the Villas in this Court. They are not entitled to keep one foot in the courthouse

door while they try to find a legal basis for being here. 

Although Plaintiffs are not entitled to legal relief in this Court, the Magistrate

nevertheless recommends that the action against West and the Villas be dismissed without

prejudice in order to preserve Plaintiffs’ ability to seek any relief remaining in bankruptcy

court. See Fed.R.Civ.P. 41(b) (non jurisdictional or venue dismissals). As previously stated,

Plaintiffs can prove no set of facts which would entitle them to relief against West and Villas

in this Court. The claims brought by Plaintiffs against West and the Villas, to the extent that

they are not completely barred by 11 U.S.C. § 524(a) and 11 U.S.C. § 1141(d)(1)(A), are

appropriately addressed in West’s and the Villas’ bankruptcy proceedings. 

Finally, if Defendants the Villas and West are dismissed from the Amended

Complaint, Plaintiffs are not permitted to use this litigation as a vehicle for requesting

discovery from the Villas and West in the hope of re-asserting claims against them later.8

Rule 26(b), Fed. R. Civ. P., specifically limits discovery to matters that are “relevant to the

claim or defense of any party.” As dismissed Defendants, neither West nor the Villas would

be considered parties to this action.

Accordingly, the Magistrate recommends that the District Court grant the Motion to

Dismiss and dismiss Defendants West and the Villas without prejudice.

MOTION FOR SANCTIONS AND AWARD OF ATTORNEYS’ FEES

West and the Villas seek sanctions against Plaintiffs pursuant to Rule 11, Fed. R. Civ.

P and an award of attorneys’ fees pursuant to A.R.S. § 12-341.01.9

 

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March 24, 2008. (Doc. No. 69, fn. 1.) 

10 In fact, Plaintiffs admitted during oral argument that they have been acting under

advice of bankruptcy counsel.

10

Rule 11 requires that sanctions be assessed when a complaint is frivolous, legally

unreasonable, or without factual foundation. See Zuniga v. United Can Co., 812 F.2d 443,

452 (9th Cir.1987). The rule thus creates and imposes upon counsel an affirmative duty of

investigation both as to law and fact before filing. See Golden Eagle Distrib. Corp. v.

Burroughs Corp., 801 F.2d 1531, 1536 (9th Cir.1986). A filing violates Rule 11 if it is

unreasonable when viewed from the perspective of a reasonably competent attorney admitted

to practice before the district court. See G.C. and K.B. Investments, Inc. v. Wilson, 326 F.3d

1096, 1109 (9th Cir. 2003). 

In the present case, Plaintiffs filed two claims against West in this action despite the

fact that they knew of those claims prior to confirmation of West’s bankruptcy plan and knew

that West had sought the protection of the bankruptcy court. In fact, it appears that Plaintiffs

were fully aware that they should be seeking relief against West in bankruptcy court, given

that they appeared in the bankruptcy proceedings, objected to the plan of reorganization, and

filed a motion to lift the bankruptcy stay.10 It was legally unreasonable of Plaintiffs to think

that their claims against West in this Court would not be barred by 11 U.S.C. § 524(a) and

11 U.S.C. § 1141(d)(1)(A). 

Similarly, even if Plaintiffs had no knowledge of their claim against the Villas until

after the Villas bankruptcy plan was confirmed, Plaintiffs were nonetheless without legal

justification for naming the Villas in their Amended Complaint. The law is clear that if

Plaintiffs wish to proceed on a claim against the Villas that arose following confirmation of

the plan, they could seek relief from the finality of the plan in bankruptcy court via Federal

Rule of Bankruptcy Procedure 9024. 

In addition, Plaintiffs’ decision to voluntarily dismiss West and the Villas from this

action on the ground that they intended to seek relief in bankruptcy court is at complete odds

with its decision to name West and the Villas in their Amended Complaint in order to use this

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litigation to hunt for evidentiary support for a future claim against the Defendants in this

Court. Plaintiffs have further obfuscated their intent in pursuing this litigation by at times

insisting that West and the Villas had been dismissed from their Amended Complaint when

in fact the Amended Complaint brought new claims against West and the Villas following

dismissal of the original Complaint. The inclusion of West and the Villas in Plaintiffs’

Amended Complaint under these circumstances is a legally unreasonable position that has

wasted the Court’s resources and caused West and the Villas to incur unnecessary expense.

In addition, as defense counsel stated at oral argument, Plaintiffs continued on with

this mysterious and unreasonable litigation strategy despite repeated attempts by defense

counsel to explain to Plaintiffs’ counsel that an action could not be brought in this Court

against West or the Villas due to the ongoing bankruptcy proceedings. Plaintiffs’ conduct in

this litigation has required bankrupt parties to devote assets – which would have otherwise

been part of the bankruptcy estate and presumably channeled to creditors – to defending

meritless claims. Although Plaintiffs now claim that their intent in naming West and the

Villas in the Amended Complaint was merely to preserve their right to proceed against West

and the Villas in the event that their bankruptcy proceedings were dismissed, that intent is

not proper, was not evident from the Amended Complaint, and Defendants had no choice but

to respond to the Amended Complaint: failure to do so would have put Defendants at risk of

default.

Defendants also seek an award of attorney's fees, after compliance with LRCiv. 54.2,

pursuant to A.R.S. § 12-341.01, on the grounds that this matter arose out of contract.

Arizona law, which is applicable to diversity actions such as this, permits the court to award

the successful party reasonable attorney's fees in any contested action arising out of a

contract. A.R.S. § 12-341.01(A). The statute provides that "The award of reasonable

attorney fees pursuant to subsection A should be made to mitigate the burden of the expense

of litigation to establish a just claim or a just defense." Plaintiffs' counsel acknowledges that

this matter arises out of contract and that an award of fees is permissible, as she herself

requested that the Court award Plaintiffs their attorneys' fees incurred in defending the

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11 Counsel admitted during oral argument that she would accept responsibility for West’s

legal fees incurred in bringing the Motion to Dismiss, but asked that the sanctions not be

awarded against her clients.

12

Motions to Dismiss. (Response at 14.) As discussed throughout this opinion, Plaintiffs'

counsel's actions were unjustified and necessitated Defendants' efforts in seeking dismissal.

Accordingly, the Magistrate concludes that an award of attorneys’ fees pursuant to A.R.S.

§ 12-341.01 is appropriate.

For the foregoing reasons, the Magistrate recommends that the district court award

sanctions against Plaintiffs and in favor of West and the Villas in the form of attorneys’ fees

incurred by West and the Villas in defending Plaintiffs’ action. The Magistrate further

recommends that those sanctions be ordered against Plaintiffs’ counsel, rather than Plaintiffs

themselves. The basis for sanctions is the legal unreasonableness of Plaintiffs’ claims against

West and the Villas in this Court; it was Plaintiffs’ counsel, not her clients, who designed the

litigation strategy for the case.11 

RECOMMENDATION

The Magistrate Judge recommends the District Court, after is independent review of

the record, enter an order GRANTING the Motion to Dismiss filed by West and the Villas

(Doc. No. 66) and GRANTING the Motion for Sanctions filed by West and the Villas (Doc.

No. 69.) Pursuant to 28 U.S.C. § 636(b), any party may serve and file written objections

within 10 days of being served with a copy of this Report and Recommendation. If

objections are not timely filed, they may be deemed waived. If objections are filed, the

parties should use the following case number: CV-08-09-TUC-FRZ.

DATED this 6th day of June, 2008.

Case 4:08-cv-00009-FRZ-JCG Document 90 Filed 06/09/08 Page 12 of 12