Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_09-cv-08095/USCOURTS-azd-3_09-cv-08095-1/pdf.json

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

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

OWNERS INSURANCE COMPANY, a

foreign insurer licensed to do business in

the State of Arizona, 

Plaintiff, 

v.

MONTE VISTA HOTEL, an Arizona

company; JIM NETTELAND, an

individual; and DANNY LEE RICH, an

individual,

Defendants.

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No. CV 09-8095-PCT-MHM

ORDER

Currently pending before the Court is Defendant Monte Vista Hotel's (“the Hotel”)

Motion for Attorney's Fees and Costs pursuant to A.R.S. § 12-341.01(A) and Federal Rule of

Civil Procedure Rule 54. (Dkt. #23). After reviewing the motion and memorandum in

support, as well as responses and replies thereto, the Court issues the following Order. 

I. BACKGROUND

This case initially came before this Court on June 4, 2009 when Plaintiff Owners

Insurance Company (“Owners”) filed a declaratory judgment action seeking a declaration that

it had no duty to defend its insured, the Hotel. (Dkt. #1). The Hotel claimed coverage after

one of its employees, Jim Netteland, allegedly assaulted Danny Lee Rich while acting within

the course and scope of his employment with the Hotel. Rich sued Netteland and the Hotel

Case 3:09-cv-08095-MHM Document 26 Filed 06/30/10 Page 1 of 6
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(under theories of both vicarious liability and independent negligence) in a lawsuit that is

currently pending in the Coconino County Superior Court as Rich v. Netteland, No. CV2007-

0276. In its declaratory action, Owners sought a declaration that there was no coverage under

its policy for claims asserted by Rich in the underlying Coconino suit. 

On August 7, 2009, Defendant Rich filed a Motion to Dismiss (Dkt. #10) on the basis

of Brillhart abstention, which the Hotel joined on August 13, 2009. On February 4, 2010, the

court entered an order granting the Motion to Dismiss. (Dkt. #21). In determining whether

to exercise jurisdiction over Owner’s declaratory action, the court evaluated the three Brillhart

factors and the six factors of the Dizol decision. Brillhart v. Excess Ins. Co., 316 U.S. 491

(1942) (discussed at length in Continental Casualty Co. v. Robsac Indus., 947 F.2d 1367 (9th

Cir. 1991), overruled on other grounds by Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220,

1227 (9th Cir. 1998)). The Court found the combination of the Brillhart and Dizol factors

cumulatively weighed against the Court's exercise of jurisdiction and thereby declined to

exercise jurisdiction over the declaratory judgment action. (Dkt. #21).

On February 19, 2010, the Hotel filed the instant Motion for Attorney's Fees and Costs

pursuant to A.R.S. § 12-341.01(A) and Federal Rule of Civil Procedure 54.2. (Dkt. #23).

Owners responded on March 15, 2010 (Dkt. #24) opposing the Hotel's request, arguing that

the Hotel was not a “prevailing party”; A.R.S. § 12-341.01(A) does not support an award of

attorney’s fees; and the amount requested is unreasonable. (Dkt. #24). 

II. DISCUSSION

A. Motion for Attorney’s Fees and Cost Pursuant to Rule 54 of the Federal Rules of

Civil Procedure

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The Hotel moves for attorney’s fees and costs pursuant to Federal Rule of Civil

Procedure 54.2. (Dkt. #23). It is unclear whether the Hotel is in fact referencing Federal

Rule 54(d)(2) or Local Rule 54.2. The court will assume that the Hotel is moving for

Attorney’s Fees and Costs under Federal Rule 54(d)(2) as the Hotel indicates in its motion

that it moves for Attorney’s Fees and Costs pursuant to Rule 54.2 of the “Federal” Rules of

Civil Procedure. (Dkt. #23).

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The Court will first address the Hotel’s Motion for Attorney’s Fees and Costs pursuant

to Rule 54 of the Federal Rules of Civil Procedure.1

 Under Federal Rule 54(d), the prevailing

party in an action may be entitled to attorney’s fees and should be allowed costs. FED R.CIV.

P. 54(d). The Supreme Court has held that there is a “prevailing party” when there has been

a “material alteration of the legal relationship of the parties.” Buckhannon Bd. & Care Home,

Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001). There are two specifically

identified judicial outcomes under which a plaintiff may be considered a “prevailing party” for

the purpose of awarding attorney’s fees: (1) an enforceable judgment on the merits and (2) a

court-ordered consent decree. Perez-Arellano v. Smith, 279 F.3d 791, 793 (9th Cir. 2002)

(citing Buckhannon Bd. & Care Home Inc. v. W. Va. Dept. of Health & Human Res., 532

U.S. at 603). In construing this standard, the Ninth Circuit has held that “costs under Rule

54(d) may not be awarded where an underlying claim is dismissed for lack of subject matter

jurisdiction, for in that case the dismissed party is not a ‘prevailing party’ within the meaning

of Rule 54(d).” Miles v. California, 320 F.3d 986, 988 (9th Cir. 2003). See also Dattner v.

Conagra Foods Inc., 458 F.3d 98 (2d Cir. 2006) (defendant who successfully obtains a forum

non conveniens dismissal is not a “prevailing party” within the meaning of Rule 54 as forum

non conveniens is a non-merits ground for dismissal). However, the Ninth Circuit has affirmed

the award of attorney’s fees when plaintiff’s claims were barred from the district court on the

basis of Eleventh Amendment immunity. Miles, 320 F.3d 986. In Miles, defendant was found

to be a “prevailing party” as Eleventh Amendment immunity is an affirmative defense, not a

dismissal for lack of subject matter jurisdiction, and thereby resulted in a material alteration

in the legal relationship of the parties. 320 F.3d at 988-89. 

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The instant case is akin to a dismissal for a lack of subject matter jurisdiction. The

Court had original jurisdiction to hear Owner’s declaratory judgment action under diversity

jurisdiction pursuant to 28 U.S.C. § 1332. (Dkt. #21). Upon evaluating the action in light of

Brillhart abstention, the Court declined to exercise its jurisdiction over the action and instead

favored Owners filing the declaratory action in state court in accordance with the Arizona

Declaratory Judgment Act. (Dkt. #21). As the Court merely declined to exercise its

jurisdiction over the action rather than bar the action from federal court, the instant case is

analogous to a dismissal for lack of subject matter jurisdiction. Consequently, the Court’s

dismissal of the declaratory judgment action did not materially alter the legal relationship of

the parties. In light of these considerations, the Hotel is not a “prevailing party” for the

purpose of awarding attorney’s fees and costs under Rule 54(d) of the Federal Rules of Civil

Procedure. Moreover, even if the Court had found that the Hotel was a prevailing party, the

Court would decline to exercise its discretion due to the lack of substantive relief granted to

the Hotel in the instant case. 

B. Motion for Attorney’s Fees and Cost Pursuant to A.R.S. § 12-341.01(A)

The Court will next address the Hotel’s Motion for Attorney’s Fees and Costs pursuant

to A.R.S. § 12-341.01(A). A successful party in an action arising out of a contract is eligible

for an award of reasonable attorney’s fees pursuant to A.R.S. § 12-341.01(A). See Sparks v.

Republic Nat’l Life Ins. Co., 132 Ariz. 529, 544 (1982). “An award of attorney's fees pursuant

to this statute is discretionary in nature, and no presumptions arise in favor of the prevailing

party.” Biltmore Associates, LLC v. Twin City Fire Ins. Co., 2007 WL 496766, at *1 (D. Ariz.

2007) (citing Associated Indem. Corp. v. Warner, 143 Ariz. 567, 569 (1985)). In exercising

its discretion, the Court considers the following six 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 completelysuperfluous in achieving the result;

(3) whether assessing fees against the unsuccessful party would cause an extreme hardship; (4)

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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. See Associated Indem. Corp.,143

Ariz. at 570.

With respect to the first factor, whether the unsuccessful party’s claim or defense was

meritorious, because the Court declined to exercise jurisdiction and granted the Hotel’s Motion

to Dismiss, the Court has never addressed the merits of Owner’s claim. As a result, the Court

cannot conclude at this time whether Owner’s claim was meritorious. Therefore, the first

factor weighs in favor of neither party. 

Second, although Owners initiated the litigation when it filed its declaratory judgment

action, Owners contends that litigation on the matter could have been avoided but for Hotel’s

failure to contact Owner’s counsel and ask if the matter could be resolved in state court instead.

(Dkt. #24 at 6). The Hotel does not dispute this claim. In addition, the Hotel joined Defendant

Rich’s Motion to Dismiss on the basis of Brillhart abstention. The Court ultimately granted

the Motion to Dismiss, noting that the cumulative weight of the Brillhart and Dizol factors

weighed strongly in favor of the Court’s decision to decline to exercise jurisdiction over the

declaratory action. (Dkt. #21). As a consequence, the action taken by the Hotel to join

Defendant Rich’s Motion to Dismiss was superfluous as the result would likely have been the

same regardless of whether or not it joined Rich’s motion. On balance, the second factor

weighs against awarding attorney's fees to the Hotel. 

Third, there is no evidence that awarding the Hotel attorney’s fees would be an extreme

hardship for Owners. Owners is a large, solvent national corporation and admits that it will

not sustain extreme hardship if required to pay attorney’s fees. (Dkt. #24). Thus, the third

factor weighs in favor of awarding attorney's fees to the Hotel. 

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Fourth, the Hotel prevailed with respect to all of the relief it sought in its Motion to

Dismiss. The Court granted the result the Hotel sought when the Court dismissed the action

on the basis of Brillhart abstention. Thus, the fourth factor weighs in favor of awarding

attorney's fees to the Hotel. 

The fifth factor does not weigh in favor of awarding attorney’s fees. Owner’s claim for

declaratory judgment asking the Court to interpret the rights of the parties under an insurance

contract is not a unique or novel legal issue. The legal issue has previously been adjudicated

in this jurisdiction. 

Finally, the Court finds that awarding the Hotel attorney's fee in the relatively minimal

amount of $6,578.66 will likely not deter other plaintiffs from litigating tenable claims or

defenses for fear of incurring liability for substantial amounts of attorney fees. As a result, the

sixth factor weighs in favor of awarding attorney’s fees. 

After considering each of the relevant factors, the Court finds that the factors are

relatively balanced in favor and against awarding attorney’s fees to the Hotel. In light of the

fact that the Hotel neither addressed nor explained in its motion why any of the factors guiding

the Court discretion should weigh in favor of the Court awarding attorney’s fees to the Hotel,

the Court will decline to exercise its discretion in awarding the Hotel attorney’s fees. 

Accordingly,

IT IS HEREBY ORDERED denying Defendant’s Motion for Attorney’s Fees. (Dkt.

#23).

DATED this 25th day of June, 2010.

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