Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00655/USCOURTS-azd-2_15-cv-00655-0/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Anna Leafty, 

Plaintiff, 

v. 

Aussie Sonoran Capital LLC, et al., 

Defendants. 

No. CV-15-00655-PHX-DLR

ORDER 

Before the Court is Defendant’s Motion for Attorneys’ Fees. (Doc. 41.) Pursuant 

to A.R.S. § 12-341.01(A), Defendant seeks $8,490.00 in attorneys’ fees incurred in 

obtaining a dismissal order. (Id. at 1-2.) The motion is fully briefed and neither party 

requested oral argument. The relevant factual background is detailed in the Court’s 

August 12, 2016 order granting Defendant’s motion to dismiss (Doc. 40) and will not be 

repeated here. For the following reasons, Defendant’s motion is denied. 

I. Waiver 

Preliminarily, Plaintiff argues that Defendant waived its entitlement to attorneys’ 

fees by not demanding them in its responsive pleading. (Doc. 42 at 4-6.) Plaintiff’s 

argument is misguided because a motion to dismiss is not a “pleading” within the 

meaning of the Federal Rules of Civil Procedure. Rule 7(a) defines “pleading” as: 

(1) a complaint; (2) an answer to a complaint; (3) an answer 

to a counterclaim designated as a counterclaim; (4) an answer 

to a crossclaim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the court orders on, a reply to 

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an answer. 

Rule 7 distinguishes between “Pleadings” and “Motions and Other Papers.” See Fed. R. 

Civ. P. 7(a)-(b). Rule 12 also distinguishes between pleadings and motions, providing 

that “[e]very defense to a claim for relief in any pleading must be asserted in the 

responsive pleading if one is required,” but a party “may assert . . . defenses by motion.” 

Fed. R. Civ. P. 12(b). 

 More importantly, however, Defendant was not required to demand attorneys’ fees 

at the pleading stage. Federal courts sitting in diversity apply state substantive law and 

federal procedural law. See Hanna v. Plumer, 380 U.S. 460, 465 (1965). Although here 

state law governs Defendant’s entitlement to fees, the Federal Rules of Civil Procedure 

“establish the method by which a federal litigant must obtain attorneys’ fees[.]” Port of 

Stockton v. W. Bulk Carriers KS, 371 F.3d 1119, 1120 (9th Cir. 2004). Pursuant to Rule 

54(d), requests for attorneys’ fees must be made by motion unless the substantive law 

requires those fees to be proven as an element of damages at trial. Id. at 1120-21. When 

attorneys’ fees are considered a form of special damages, Rules 54(d) and 9(g) require 

that they be specifically pled. 

 Plaintiff does not argue that attorneys’ fees under § 12-341.01 are an element of 

damages that need to be proven at trial, nor has the Court found authority directing that 

result. Section 12-341.01(A) allows the Court to “award the successful party reasonable 

attorney fees,” which indicates that the right to fees does not accrue until the case has 

been decided. Because attorneys’ fees in cases arising out of contract fall within Rule 

54(d)’s general purview, not its limited exception, Defendant has not waived its 

entitlement to attorneys’ fees. 

II. A.R.S. § 12-341.01(A) 

Section 12-341.01 provides that “[i]n any contested action arising out of a 

contract, express or implied, the court may award the successful party reasonable attorney 

fees.” A claim arises under contract when “the claim could not exist ‘but for’ the breach 

or avoidance of contract.” Harris v. Maricopa Cty. Super. Ct., 631 F.3d 963, 974 (9th 

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Cir. 2011) (internal quotation and citation omitted). When determining whether a claim 

arises out of contract, the Court is not limited to the form of the pleadings and, instead, 

looks to the nature of the action and the surrounding circumstances. Marcus v. Fox, 723 

P.2d 682, 684 (Ariz. 1986). The mere existence of a contract somewhere in the 

transaction, however, does not bring a claim within the purview of § 12-341.01. “The 

statute does not apply if the contract is only a factual predicate to the action but not the 

essential basis of it.” Kennedy v. Linda Brock Auto. Plaza, Inc., 856 P.2d 1201, 1203 

(Ariz. Ct. App. 1993). 

Plaintiff brought various statutory and tort claims, all of which were premised on 

the allegation that she had validly rescinded her home loan before a 2011 trustee’s sale of 

her property. (Doc. 21.) Defendant argues that “[t]his case would not exist but for the 

2007 loan and [Plaintiff’s] breach thereof.” (Doc. 43 at 6.) The Court agrees. Although 

Plaintiff’s claims took the form of statutory and tort actions, they each were based on 

Plaintiff’s contention that her home loan and accompanying deed of trust were void 

because she had exercised her rescission rights under the Truth In Lending Act (TILA). 

Thus, the success of Plaintiff’s claims depended on a judicial determination that 

Plaintiff’s mortgage contracts were unenforceable. See Mullins v. S. Pac. Transp. Co., 

851 P.2d 839, 842 (Ariz. Ct. App. 1992) (explaining that fees are not precluded when 

successful party proves the non-existence of a contract). 

Having determined that this action arises out of contract, the Court has broad 

discretion to apportion fees. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1184 

(Ariz. 1985). In exercising its discretion, the Court considers: (1) the merits of the 

unsuccessful party’s claim or defense; (2) the chances that litigation could have been 

avoided or settled and whether the successful party’s efforts were superfluous in 

achieving the result; (3) whether assessing fees against the unsuccessful party would 

cause an extreme hardship; (4) whether the successfully party prevailed with respect to 

all relief sought; (5) the novelty of the questions presented; and (6) whether a fee award 

would discourage other parties with tenable claims or defenses from litigating or 

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defending legitimate contract issues for fear of incurring liability for fees. Id. 

 Several of the Warner factors weigh in favor of a fee award. Defendant could not 

have avoided litigation, it prevailed with respect to all relief sought, and its efforts were 

not superfluous to achieving that result. Additionally, Plaintiff does not contend that a 

fee award would impose a hardship. 

 Nevertheless, the Court declines to award fees because the remaining Warner

factors counsel against an award. Recent developments in the law governing TILA 

rescissions prompted Plaintiff to pursue her claims. See Jesinoski v. Counrtywide Home 

Loans, -- U.S. --, 135 S.Ct. 790 (2016). In granting Defendant’s motion to dismiss, the 

Court concluded that Plaintiff was collaterally estopped from re-litigating the validity of 

the trustee’s sale or raising claims that necessarily assert and interest in the property 

because (1) she litigated the validity of the trustee’s sale, along with the rescission issue, 

in a previous state court action and (2) the Arizona Court of Appeals ruled that the 

completion of the trustee’s sale extinguished Plaintiff’s interest in and claims related to 

the property. (Doc. 40 at 3-4.) As a result, the Court did not pass on the merits of 

Plaintiff’s claims or her arguments concerning the effects of Jesinoski. 

Further, the Court notes that TILA does not contain a provision allowing 

successful defendants to recover attorneys’ fees. Although TILA does not explicitly bar 

defendants from seeking fee awards under other applicable state statutes, TILA’s fee 

shifting provision is designed to encourage plaintiffs to bring legitimate claims. See

Boksa v. Keystone Chevrolet Co., 553 F. Supp. 958, 962 (N.D. Ill. 1982) (footnote 

omitted) (“To a certain extent TILA itself may encourage an ‘industry’ of bringing suits 

for damages and attorneys’ fees, but that reflects a deliberate congressional choice with 

which this Court may not interfere.”). Because all TILA rescission claims necessarily 

arise out of contract, awarding fees in cases such as this could undermine that purpose by 

deterring future litigants from pursuing potentially meritorious claims based on changes 

in relevant law. For these reasons, 

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IT IS ORDERED that Defendant’s Motion for Attorneys’ Fees (Doc. 41) is 

DENIED. 

 Dated this 14th day of February, 2017. 

Douglas L. Rayes 

United States District Judge 

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