Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-02024/USCOURTS-azd-2_04-cv-02024-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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It is unclear why Mishkin filed a separate motion for attorneys' fees given that he

joined in the Joint Motion for Attorneys' Fees.

WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In the Matter of:

MCW Brickyard Commercial, LLC; 

7th and Mill Parking Assessment, LLC,

Debtors.

Bank One, N.A., et al., 

Appellants, 

vs.

MCW Brickyard Commercial, LLC, et al.,

Appellees. 

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CV 04-2024-PHX-SRB

Nos. 2-02-bk-12581-RTB and

 2-02-bk-12582-GBN

ORDER

At issue are motions for attorneys' fees and non-taxable expenses filed by Appellees

following the dismissal of an appeal from the United States Bankruptcy Court. In particular,

this Order addresses the following motions: Joint Motion for Award of Attorneys' Fees and

Related Non-Taxable Expenses filed by all Appellees (Doc. 31); and Motion for Award of

Attorneys' Fees and Related Non-Taxable Expenses by Alan Mishkin (Doc. 30)1

. The parties

seeking attorneys' fees also filed memoranda in support of their motions. (Doc. 32, 34, 35,

36, 39.) The motions request only those costs and fees incurred in connection with the

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 1 of 8
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The underlying facts of this appeal were fully discussed in the Court's Order dated

July 18, 2005 (Doc. 29).

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present appeal, including the costs and fees incurred in drafting the present motions. In all,

Appellees seek approximately $115,000 in attorneys' fees and related non-taxable expenses.

I. LEGAL STANDARDS AND ANALYSIS

A. A.R.S. § 12-341.01

Appellees bring their motions pursuant to Arizona Revised Statutes § 12-341.01

which provides, in relevant part,

A. In any contested action arising out of contract, express or implied,

the court may award the successful party reasonable attorney fees. . . .

B. 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. It need not equate or relate to

the attorney fees actually paid or contracted, but the award may not

exceed the amount paid or agreed to be paid.

The Arizona Supreme Court has acknowledged that this statute vests trial courts with

broad discretion in assessing attorneys' fees. Associated Indem. Corp. v. Warner, 694 P.2d

1181, 1184 (Ariz. 1985) (citations omitted). The parties do not dispute that this action arose

out of an express contract, and that therefore, the requests for attorneys' fees are governed

by A.R.S. § 12-341.01.2

 

B. Factors Guiding the Court's Discretion

The Arizona Supreme Court has adopted the following six factors to help guide a

court's discretion as to whether to award attorney's fees under A.R.S. § 12-341.01. 

1. The merits of the claim or defense presented by the unsuccessful

party.

2. The litigation could have been avoided or settled and the successful

party's efforts were completely superfluous in achieving the result.

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 2 of 8
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3. Assessing fees against the unsuccessful party would cause an extreme

hardship.

4. The successful party did not prevail with respect to all of the relief

sought.

[5.] [T]he novelty of the legal question presented, and whether such

claim or defense had been previously adjudicated in this jurisdiction.

[6.] [W]hether 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.

Associated Indem. Corp., 694 P.2d at 1184 (citations omitted). These factors weigh strongly

in favor of awarding attorneys' fees to Appellees. 

The first factor asks, in this context, whether the issues on appeal were meritorious.

They were not. The vast majority of the appeal took issue with the Bankruptcy Court's

factual findings, which were reversible on appeal only upon a showing of clear error.

Appellants did not even come close to showing any error in the Bankruptcy Court's factual

findings, much less clear error. The only true legal issue on appeal concerned the waivability

of A.R.S. § 33-814, but even that issue did not have to be reached because the terms of the

Settlement Agreement clearly provided that even assuming the debtors and guarantors could

have waived their rights under A.R.S. § 33-814, they did not. The issues presented by this

appeal were not meritorious, and this factor favors awarding attorneys' fees to Appellees..

Second, this appeal could have been avoided. Appellants chose to appeal essentially

every aspect of the Bankruptcy Court's ruling, even those aspects which were plainly correct.

This factor favors the awarding of fees.

The third and fourth factors also weigh in favor of awarding attorneys' fees.

Appellants have presented no evidence that they would suffer extreme hardship if they are

forced to pay attorneys' fees. Also, Appellees have prevailed with respect to all relief sought

- they asked for an affirmance of the Bankruptcy Court's Order and they got it.

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 3 of 8
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Another factor to consider is whether the appeal involved a novel question of law.

While one of the thirteen issues on appeal was novel - whether it is possible for a party to

waive the protections of A.R.S. § 33-814 - that issue was, as discussed above, secondary.

The terms of the Settlement Agreement were clear: the debtors and the guarantors retained

their rights under A.R.S. § 33-814. The issue of whether a party can waive its rights under

A.R.S. § 33-814 comes into play only if that party had actually attempted to waive its rights

under that statute. That was not the case here, and the Court's Order could have resolved the

waiver issues solely based on principles of contract interpretation. Accordingly, this factor

does not weigh in Appellants' favor.

Finally, the Court cannot see how an award of attorneys' fees would discourage other

parties with tenable claims from litigating legitimate contract issues for fear of incurring

liability for substantial amounts of attorneys' fees. Appellants argue that "[i]f banks are

sanctioned for using the courts to clarify the legality of their contracts with borrowers, the

relationship between borrowers and lenders will suffer." (Appellants' Opp'n to Mots. for

Att'ys Fees at 11.) First, a very small part of this appeal concerned "clarifying the legality"

of the Settlement Agreement - it was primarily about questioning factual determinations by

the Bankruptcy Court. Second, the "legality" of the A.R.S. § 33-814 waiver was an ancillary

issue - the language of the Settlement Agreement clearly secured Appellees' rights under

A.R.S. § 33-814. Third, contrary to discouraging the litigation of tenable claims, awarding

attorneys' fees in this case would encourage parties to make better choices about the issues

they choose to appeal.

Appellants argue that because the Bankruptcy Court chose not to award attorneys' fees

to Appellees, this Court should do the same because "the Bankruptcy Court was in a unique

position to decide whether attorneys' fees should be awarded to mitigate the burden of the

expense of litigation . . ." (Appellants' Opp'n to Mots. for Att'ys Fees at 7.) While it is true

that the Bankruptcy Court was in a unique position to assess the propriety of awarding

attorneys' fees incurred in connection with proceedings before the Bankruptcy Court, this

Court is in the unique position of judging whether attorneys' fees should be awarded to

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 4 of 8
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Appellees for the cost of this appeal. Based on its consideration of the factors set forth by

the Arizona Supreme Court, the Court feels that Appellees are entitled to attorneys' fees for

having to defend this appeal.

C. Miscellaneous

Appellants argue that even assuming the Court chooses to award attorneys' fees to

Appellees, that award should not include non-taxable costs, as such costs are not recoverable

under A.R.S. § 12-341.01. Ahwatukee Custom Estates Mgmt. Ass'n v. Bach, 973 P.2d 106,

108 (Ariz. 1999). Appellants are generally correct, as "the cost of direct expenses of

litigation" are not recoverable under A.R.S. § 12-341.01. Id. at 108 (noting that "[t]he

common understanding . . . is that an award for fees should reimburse the attorney . . . for his

or her legal training and knowledge as it relates to the legal services rendered to, or on behalf

of, a particular client."). Appellees, therefore, are not entitled to recover the cost of, among

other things, messenger services, telephone calls, travel expenses and document binding

costs. See CenTrust Mortgage Corp. v. PMI Mortgage Ins. Co., 800 P.2d 37, 45-46 (Ariz.

App. 1990). However, Appellees are entitled to recoup the costs of computerized legal

research and assistance by paralegals and legal assistants. Ahwatukee Custom Estates Mgmt.

Ass'n, 973 P.2d at 108-09. 

Appellants also argue that an award of attorneys' fees should not include the fees and

costs Appellees incurred in filing their motions to recover attorneys' fees. The Court

disagrees. As the Ninth Circuit has reasoned that, "[i]t would be inconsistent to dilute an

award of fees by refusing to compensate an attorney for time spent to establish a reasonable

fee." Kinney v. IBEW, 393 F.2d 690, 695 (9th Cir. 1991). Appellants point out that Kinney

did not involve an award under A.R.S. § 12-341.01. While that is true, the logic of that case

still applies. The Court believes that it has discretion to include such fees in the ultimate

award and, to the extent discussed below, chooses to do so.

D. Reasonableness

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Appellants argue that the attorneys' fees requested are excessive and unreasonable.

Appellants point to the fact that Appellees have filed separate briefs despite the fact that their

interests in this matter are essentially identical. On this point, the Court agrees with

Appellants. There was no reason for Appellees to file separate briefs in response to

Appellants' Opening Brief as well as separate briefs on the attorneys' fees issue, especially

when the substance of those briefs was virtually identical. If a particular Appellee wished

to make a different legal argument from that of the other Appellees, a separate brief would

have been warranted. That was, for the most part, not the case here. The Court was forced

to read essentially the same brief four times.

Appellants, however, did their share to create extra work. Their Opening Brief had

to be stricken, re-organized and re-filed, forcing Appellees to re-organize and re-file their

own briefs. Appellants also chose to appeal thirteen issues, most of which were heavily fact

intensive and sorely lacking in merit.

The Court has reviewed the hourly rates charged by the respective lawyers for

Appellees, and those rates appear reasonable, in light of the complexity of the case and the

experience of the particular lawyers. The Court has also reviewed the time each attorney

spent on this case, and except as discussed above, those times were reasonable.

E. Calculation

Appellees request $114,812.73 in attorneys' fees and non-taxable costs. Some of the

costs, as discussed above, cannot be included in an attorneys' fees award under A.R.S. § 12-

341.01. For example, the costs of faxes, photocopies, postage, scanning, teleconferencing,

filing fees, transcripts and delivery services are not recoverable under A.R.S. § 12-341.01.

See Ahwatukee, 973 P.2d at 108-09; CenTrust Mortgage Corp., 800 P.2d at 45-46.

The table below reflects the revised requested amounts following deduction of nonrecoverable costs.

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 6 of 8
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Exhibit Two to the Declaration of David P. Brooks filed in support of his motion for

attorneys' fees (Doc. 33) lists $252.62 as the sub-total for "legal courier charge and online

legal research." Legal courier charges are not recoverable under A.R.S. § 12-341.01, but

online legal research charges are. Because this aspect of the exhibit does not separate the

recoverable expenses from the non-recoverable, the Court will not allow counsel to recover

any portion of the $252.62.

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Total Amount

Requested

Non-Recoverable

Costs

Revised Amount

Requested

Mishkin $28,950 $328.09 $28,621.91

Lynch $29,175.88 $1,071.88 $28,104.00

Claassen, Bill & Joan

Was, Bill & Joan Was

Family Trust

$22,132.12 $252.623 $21,879.50

Debtors $34,554.73 $1,099.55 $33,455.18

Totals $114,812.73 $2,752.14 $112,060.59

The Court chooses to award Appellees seventy-five percent of the revised requested

amount. The reason for the partial award is the duplicative briefs filed by Appellees both in

response to Appellants' Opening Brief as well as the requests for attorneys' fees. As

discussed above, the Court feels that it was not necessary for parties with very similar

interests to file four briefs which were, in most respects, substantively identical.

Accordingly, Appellees are awarded their attorneys' fees in the following amounts: 

Mishkin $21,466.43

Lynch $21,078.00

Claassen, Bill & Joan

Was, Bill & Joan Was

Family Trust

$16,409.63

Debtors $25,091.39

Total $84,045.44

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IT IS ORDERED granting in part and denying in part the Joint Motion for Award

of Attorneys' Fees and Related Non-Taxable Expenses (Doc. 31).

IT IS FURTHER ORDERED granting in part and denying in part Alan Mishkin's

Motion for Award of Attorneys' Fees and Related Non-Taxable Expenses (Doc. 30).

IT IS FURTHER ORDERED granting in part and denying in part the Motion for

Attorneys' Fees and Amended Motion for Attorneys' Fees filed by Appellee Edwin Lynch

(Doc. 36, 39).

IT IS FURTHER ORDERED that the Clerk of the Court enter judgment in favor of

Appellee Ted Claassen, Bill and Joan Was and the Bill and Joan Was Family Trust and

against Appellants in the amount of $16,409.63. 

IT IS FURTHER ORDERED that the Clerk of the Court enter judgment in favor of

Appellee Alan Mishkin and against Appellants in the amount of $21,466.43.

IT IS FURTHER ORDERED that the Clerk of the Court enter judgment in favor of

Appellee Edwin Lynch and against Appellants in the amount of $21,078.00.

IT IS FURTHER ORDERED that the Clerk of the Court enter judgment in favor of

Appellees MCW Brickyard Commercial LLC and 7th and Mill Parking Assessment LLC and

against Appellants in the amount of $25,091.39.

DATED this 6th day of December, 2005.

Case 2:04-cv-02024-SRB Document 45 Filed 12/06/05 Page 8 of 8