NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL

AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

BLACK CREEK INTEGRATED SYSTEMS CORP.,

an Alabama corporation,

Plaintiff/Appellee1,

v.

ALANCO/TSI PRISM, INC., an Arizona corporation, 

ALANCO TECHNOLOGIES INC., an Arizona corporation,

Defendants/Appellants.

________________________________________________________________

TSI DISSOLUTION CORP. (formerly known as ALANCO/

TSI PRISM, INC.) an Arizona corporation, 

Counterclaimants/Appellants,

v. 

BLACK CREEK INTEGRATED SYSTEMS CORP., an Alabama 

corporation, 

Counter-Defendant/Appellee.

No. 1 CA-CV 16-0735

1 On the court’s own motion, the caption is hereby amended as 

reflected in this decision and shall be used on all further documents filed in 

this appeal.

FILED 12-14-2017
2

Appeal from the Superior Court in Maricopa County

No. CV2011-014175

The Honorable Daniel G. Martin, Judge

The Honorable Patricia Starr, Judge

The Honorable Lisa D. Flores, Judge

AFFIRMED IN PART; REVERSED AND REMANDED IN PART

COUNSEL

Koeller, Nebeker, Carlson & Haluck, LLP, Phoenix

By David W. Kash

Counsel for Plaintiff/Counter-Defendant/Appellee

Mueller & Drury, PC, Mesa

By Douglas V. Drury

Counsel for Defendants/Counter-Claimants/Appellants

MEMORANDUM DECISION

Presiding Judge Michael J. Brown delivered the decision of the Court, in 

which Judge Jennifer B. Campbell and Judge Patricia A. Orozco2 joined.

B R O W N, Judge:

¶1 Alanco Prism, Inc. (now known as TSI Dissolution Corp.) and 

Alanco Technologies, Inc. (collectively, "Alanco") appeals from the superior 

court's judgment in favor of Black Creek Integrated Systems Corp. ("Black 

Creek"). Alanco argues the court erred in (1) awarding Black Creek 

unreasonable amounts of attorneys' fees and costs, and (2) declining to find

 

2 The Honorable Patricia A. Orozco, Retired Judge of the Court of 

Appeals, Division One, has been authorized to sit in this matter pursuant 

to Article VI, Section 3 of the Arizona Constitution.
BLACK CREEK v. ALANCO, et al.

Decision of the Court

3

that Black Creek failed to mitigate its damages. For the following reasons, 

we affirm in part and reverse and remand in part.

FACTUAL AND PROCEDURAL BACKGROUND3

¶2 In 2010, Black Creek and Alanco Prism, Inc. entered into an 

Asset Purchase Agreement ("APA"), which provided that the purchase 

price would be adjusted based on the inventory value as of the closing date. 

If the parties could not resolve any outstanding inventory issues, the 

disputed issues would be submitted to "independent public accountants"

for a final and binding resolution of the dispute. 

¶3 After the transaction closed, Black Creek objected to the 

inventory schedule, asserting that some of the inventory violated the APA 

warranty requirements. The parties were unable to resolve the dispute and 

Black Creek filed this lawsuit, which addressed four issues—two related to 

inventory value ("AeroScout Inventory" and "MicroTech Inventory"), one 

dealt with shared office expenses, and the fourth was based on an alleged 

failure to deliver prepaid design work ("Alderfer Strap" issue). Alanco's 

answer and counterclaim alleged in part that Black Creek was required to 

submit its claims to independent accountants pursuant to § 3.2 of the APA 

and that Black Creek owed Alanco for an increase in the inventory value at

closing. 

¶4 After settling the shared expense issue, and notwithstanding 

§ 3.2 of the APA, the parties stipulated that the amount in controversy 

remaining was below the compulsory arbitration limit. Before the case 

went to compulsory arbitration, however, Alanco moved for partial 

summary judgment, asserting that "the dispute was governed by § 3.2 of 

the APA and should be decided by independent accountants." Black Creek 

contended that it was seeking damages resulting from Alanco's breach of 

warranty related to the inventory and that the "accountants were not 

qualified to resolve its breach of warranty claim." The superior court 

denied Alanco's motion for partial summary judgment and the matter went

to arbitration. The arbitrator issued a decision in favor of Black Creek in 

the amount of $23,609.74, and Alanco appealed to the superior court. 

 

3 This court previously considered an appeal filed by Alanco in this 

matter, and our decision in that appeal includes a more detailed description 

of the facts and procedural history. Black Creek Integrated Sys. Corp. v. 

Alanco/TSI Prism, Inc. ("Black Creek I"), 1 CA-CV 14-0449, 2015 WL 3400945 

(Ariz. App. May 26, 2015) (mem. decision). 
BLACK CREEK v. ALANCO, et al.

Decision of the Court

4

¶5 After completion of discovery and a two-day bench trial, the 

superior court ruled in favor of Black Creek on its breach of warranty claim 

concerning the AeroScout inventory, but against Black Creek on the 

Alderfer Strap and Microtech Inventory claims. The court also denied 

Alanco's $39,340.97 counterclaim. The court awarded Black Creek $7,277.42 

in damages on the AeroScout Inventory claim and added it to $9,569.88 the 

parties stipulated was owed to Black Creek for business expenses, resulting 

in a total award of $16,847.30. The court then awarded Black Creek 

$100,267.50 in attorneys' fees and costs in the amount of $2,916.33 pursuant 

to the APA; Black Creek had submitted a combined request of $112,096.34, 

plus a supplemental request of $5,169. Alanco then appealed to this court. 

¶6 We affirmed the superior court's decision that Alanco 

breached the APA's warranty regarding the AeroScout Inventory and 

remanded the case to the superior court to direct the parties to engage in 

the alternative dispute resolution ("ADR") process outlined in § 3.2 of the 

APA by having an independent accountant determine the amount of 

damages. We vacated the court's award of attorneys' fees and costs to Black 

Creek, finding that a determination of the prevailing party was premature. 

Once the parties' claims were resolved by the APA, however, the parties 

could seek a prevailing party determination for the purpose of awarding 

fees. We also awarded Alanco its attorneys' fees incurred on appeal. The 

parties then stipulated to an award of attorneys' fees and costs in the 

amount of $21,862.60. 

¶7 On remand, the parties presented their remaining dispute to 

an independent accountant, who awarded Black Creek $13,031.69. Alanco 

moved for further relief, arguing the accountant's computation was 

inaccurate and that the superior court had to resolve whether Black Creek 

failed to mitigate its damages. The court denied Alanco's request, adopted 

the accountant's conclusions as final, and determined that Black Creek was 

the prevailing party. 

¶8 Black Creek filed its application for attorneys' fees and costs, 

claiming the same amounts that were vacated in Black Creek I ($100,267.50 

in attorneys' fees and $2,916.33 in costs), plus additional amounts of 

attorneys' fees and costs incurred from after the appeal was filed until final 

judgment was entered. The total amount requested was $161,472.42, which 

was then offset by Alanco's award of appellate fees and costs, resulting in a 

request of $139,609.82. The court awarded Black Creek $139,609.82 for its 

reasonable attorneys' fees pursuant to the APA and Arizona Revised 
BLACK CREEK v. ALANCO, et al.

Decision of the Court

5

Statutes ("A.R.S.") section 12-341.01, and costs pursuant to the APA and 

A.R.S. § 12-341.4 This timely appeal followed.

DISCUSSION

A. Attorneys' Fees and Costs

¶9 Section 19 of the APA provides that "[i]n any action brought 

to enforce the provisions of this Agreement, the prevailing party shall be 

entitled to recover its attorneys' fees and costs as determined by the court 

and not the jury." We review the superior court's award of attorneys' fees 

for an abuse of discretion. Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, 

205, ¶ 5 (App. 2014). "[I]f there is any reasonable basis for the exercise of 

such discretion, its judgment will not be disturbed." Schwartz v. Farmers Ins. 

Co. of Ariz., 166 Ariz. 33, 38 (App. 1990). "Appellate courts are hesitant to 

second-guess the trial court on awards of attorneys' fees in view of the trial 

court's superior understanding of the litigation and the desirability of 

avoiding frequent appellate review of what essentially are factual matters."

Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 574 (App. 1994) (internal citation 

and quotation omitted). However, and "[n]otwithstanding the general rule 

that attorneys' fees are enforced in accordance with the terms of a contract, 

a contractual provision providing for an award of unreasonable attorneys' 

fees will not be enforced." McDowell Mountain Ranch Cmty. Ass'n v. Simons, 

216 Ariz. 266, 270, ¶ 16 (App. 2007). 

1. Reasonableness of Attorneys' Fees

¶10 Alanco argues the superior court did not follow Schweiger v. 

China Doll Restaurant, Inc., 138 Ariz. 183 (App. 1983), and thus erred when 

it awarded Black Creek its attorneys' fees on unsuccessful claims. In 

Schweiger, the court explained that "[w]here claims could have been 

litigated separately, fees should not be awarded for those unsuccessful 

separate and distinct claims which are unrelated to the claim upon which 

the plaintiff prevailed." 138 Ariz. at 189. When "a party has achieved only 

partial or limited success, . . . it would be unreasonable to award 

compensation for all hours expended, including time spent on the

unsuccessful issues or claims." Id. However, because a claim may involve 

 

4 Neither the proposed form of judgment nor the signed judgment 

include separate amounts for attorneys' fees and costs, as contemplated by 

Arizona Rule of Civil Procedure 54(h). Nor did Black Creek file a separate 

verified statement of taxable costs, as contemplated by Rule 54(f).
BLACK CREEK v. ALANCO, et al.

Decision of the Court

6

related legal theories, making it difficult to divide counsel’s time on a claimby-claim basis, a party that has “accomplished the result sought in the 

litigation” should be awarded fees for “time spent even on unsuccessful 

legal theories." Id.5 

¶11 Here, Black Creek was successful on its AeroScout Inventory 

claim and on Alanco's counterclaim. Although Black Creek was not 

successful on its MicroTech Inventory and Alderfer Strap claims, they arose 

from the same legal theory—that Alanco breached its warranty. Because 

Black Creek's claims arose from the same transaction and involved the same 

legal theory, the court did not abuse its discretion in declining to reduce the 

fees requested based solely on Black Creek's partial success. See Berry v. 352 

E. Virginia, L.L.C., 228 Ariz. 9, 14, ¶ 24 (App. 2011) ("Partial success does not 

preclude a party from 'prevailing' and receiving a discretionary award of 

attorneys' fees.").

¶12 Alanco also challenges the overall reasonableness of the 

superior court's fee award. The APA does not state that the prevailing party 

is entitled to receive all of its attorneys' fees in litigation; therefore, the fees 

requested are subject to a reasonableness determination. Cf. McDowell 

Mountain Ranch, 216 Ariz. at 271, ¶¶ 4, 21-22 (concluding that contract 

provision mandating award of "all attorneys' fees" incurred required court 

to award fees unless "clearly excessive"). Before the award of attorneys' fees 

was vacated on appeal, the superior court reviewed whether the fees were 

reasonable; the court did not award all of the fees that were requested. 

After the appeal, in its final judgment the court awarded Black Creek the

 

5 In the superior court's initial ruling that awarded attorneys' fees to 

Black Creek, the court stated that it did not have authority to reduce the 

fees requested by parsing through Black Creek's wins and losses based on 

the attorneys' fees provision in the APA. The court erred to the extent it 

believed it could not reduce fees based on wins and losses of the various 

disputes at issue in this case. However, the error is harmless because the 

court expressly stated that it had the discretion to review the fee application 

for reasonableness, and it did so. Moreover, the fee award was vacated by 

this court in Black Creek I. On remand, the case was assigned to a different 

judge, who ultimately determined that Black Creek was the prevailing 

party. When that judge rotated off the case, a third judge considered the 

final attorneys' fee application, which included all of the fees previously 

requested.
BLACK CREEK v. ALANCO, et al.

Decision of the Court

7

same amount of fees awarded prior to Black Creek I, as well as the additional 

fees requested, finding that they were reasonable. 

¶13 Alanco argues Black Creek should not be rewarded any 

attorneys' fees that accrued prior to Black Creek I because the case should 

have been sent to ADR as mandated by the APA. However, Black Creek 

was not solely responsible for the case not being referred directly to ADR. 

Alanco initially stipulated to compulsory arbitration rather than pursuing

the contractually-mandated ADR. Additionally, the attorneys' fees 

incurred prior to Black Creek I were not necessarily unreasonable because 

Black Creek had to defend against Alanco's unsuccessful counterclaim and 

the bench trial was necessary to establish Alanco's indemnity of TSI. 

¶14 Although we question whether the superior court should 

have awarded Black Creek the precise amount of attorneys' fees that were 

vacated by this court in Black Creek I, we cannot say the court abused its 

discretion by doing so, given all of the circumstances and unique factors at 

play in this protracted litigation. While the attorneys' fees awarded to Black 

Creek are substantial, Alanco was on notice that the prevailing party would 

be awarded fees "as determined by the court." 

¶15 Alanco next argues the court's fee award was unreasonable 

because Black Creek engaged in block billing, which occurs when tasks are 

grouped together in a block so that time spent on each task cannot be 

reviewed for its reasonableness. See In re Guardianship of Sleeth, 226 Ariz. 

171, 178, ¶ 34 (App. 2010). "In order for the court to make a determination 

that the hours claimed are justified, the fee application must be in sufficient 

detail to enable the court to assess the reasonableness of the time incurred." 

Schweiger, 138 Ariz. at 188. Although Black Creek's entries list multiple 

tasks per entry, the time allocated on the individual tasks is sufficiently 

detailed, and the time spent on the multiple tasks does not appear 

unreasonable. While block billing may not be the best practice, "no Arizona 

authority holds that a court abuses its discretion by awarding fees that have 

been block-billed." RS Indus., Inc. v. Candrian, 240 Ariz. 132, 138, ¶ 21 (App. 

2016). As such, the court did not abuse its discretion. 

¶16 Alanco also argues that certain fee entries demonstrated a 

duplication of effort. Although multiple attorneys worked on different 

aspects of the case at times, we are unable to say the court abused its 

discretion by not reducing the fees on that basis.

¶17 Alanco next contends the superior court erred by awarding 

Black Creek attorneys' fees from the first appeal in which Alanco prevailed 
BLACK CREEK v. ALANCO, et al.

Decision of the Court

8

and was awarded fees. Reviewing the fee application, it is evident that a 

number of time entries (total of 15.3 hours) between May 30, 2014, and July 

15, 2014, were directly related to the appeal in Black Creek I and Alanco's 

resulting award of attorneys' fees. The court did not have discretion to 

award such fees to Black Creek. Accordingly, the court's award of 

attorneys' fees must be reduced by $5,355. 

2. Reasonableness of Cost Award

¶18 Alanco disputes the superior court's cost award of $8,800.00 

for certified public accountant ("CPA") fees, arguing it is not a taxable cost 

under A.R.S. § 12-332(A). According to Black Creek, these costs were 

incurred for consultation with a CPA in preparation for submitting 

materials to ADR. A contract may entitle a party to costs that would 

otherwise be unrecoverable. See A.R.S. § 12-332(A)(6) (stating that superior 

court costs include "[o]ther disbursements that are made or incurred 

pursuant to an order or agreement of the parties") (emphasis added); Ahwatukee 

Custom Estates Mgmt. Ass'n v. Bach, 193 Ariz. 401, 404, ¶ 15 (1999) 

(upholding award of non-taxable costs because of the parties' "broadly 

written contract provision"). The APA permits the prevailing party to be 

awarded costs but does not define costs or specify that "all" costs will be 

recoverable. The superior court interpreted the APA to include non-taxable 

costs. 

¶19 Assuming without deciding that the cost language in the APA 

was broad enough to fall under A.R.S. § 12-332(A)(6), a court must consider 

whether the costs claimed by the prevailing party were necessarily incurred 

and reasonable. See Reyes v. Frank's Serv. & Trucking, LLC, 235 Ariz. 605, 

611, ¶ 20 (App. 2014) ("[T]rial courts must determine whether challenged 

expenditures, notwithstanding their status as taxable costs, were 

necessarily incurred and whether they are reasonable in amount."). The 

court's discretion will not be disturbed on appeal in the absence of an abuse 

of that discretion. Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 361 (App. 1987). 

¶20 Black Creek's only explanation for this cost was that the 

services were necessary for preparation of materials submitted in 

connection with the ADR proceeding. Because the parties had already tried 

the case twice, once to an arbitrator, and the second time to the superior 

court at trial, we are not persuaded that the CPA fees were reasonably 

necessary for the narrowly-defined matters that were decided through 

ADR. Moreover, we are unable to determine whether the fees charged were 

reasonable because the CPA's invoices lack any specific details of what 
BLACK CREEK v. ALANCO, et al.

Decision of the Court

9

work was performed or the hours expended on each project. Accordingly, 

the court abused its discretion in awarding $8,800 in costs to Black Creek.

¶21 Alanco also argues the superior court erred by awarding 

Black Creek $140.00 for its appellate filing fee costs from the first appeal. 

Because Black Creek was not the prevailing party on appeal, it was not 

entitled to costs. Thus, the cost award must be reduced by $140.00. 

B. Mitigation of Damages

¶22 Alanco contends the superior court erred by not addressing 

whether Black Creek mitigated its damages following the ADR's calculation 

of damages. In the first appeal, we held that the superior "court lacked 

jurisdiction to determine the amount of Black Creek's damages" because § 

3.2 of the APA required the parties to submit their inventory valuation 

dispute to independent public accountants. See Black Creek I, 1 CA-CV 14-

0449, at *4, ¶ 18. We therefore remanded the case to the superior court for 

that purpose. The APA states that "the determination by the Independent 

Accountants . . . shall be final, binding, and conclusive on the parties." The 

APA's plain language does not grant the court discretion to alter the award. 

As such, the court did not err in not considering whether Black Creek failed 

to mitigate its damages.

C. Attorneys’ Fees and Costs on Appeal

¶23 Both parties request an award of attorneys’ fees and costs 

incurred on appeal under § 19 of the APA. In our discretion, we conclude 

that Alanco is the prevailing party on appeal. As such, we award 

reasonable attorneys’ fees and taxable costs to Alanco upon its compliance 

with Arizona Rule of Civil Appellate Procedure 21. 
BLACK CREEK v. ALANCO, et al.

Decision of the Court

10

CONCLUSION

¶24 For the foregoing reasons, we affirm the superior court's 

ruling that Black Creek was the prevailing party as well as the court's 

refusal to address mitigation of damages. We reverse the court's ruling in 

part on the reasonableness of attorneys' fees, reducing the award by $5,355. 

We also reverse the court's ruling on costs that awarded $8,800 in CPA fees 

and the $140 appellate filing fee. On remand, the court shall reduce the 

judgment by $14,295.