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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

William R Donges, et al.,

Plaintiffs,

v. 

USAA Federal Savings Bank,

Defendant.

No. CV-18-00093-TUC-RM

ORDER 

Pending before the Court is Defendant USAA Federal Savings Bank’s Motion for 

Attorneys’ Fees. (Doc. 86.) Plaintiff homeowners brought this action against Defendant 

seeking to enjoin the foreclosure and trustee’s sale of their house. (Doc. 35.) Plaintiffs 

asserted, among other things, that Defendant had exceeded the statute of limitations to 

bring a foreclosure action stemming from Plaintiffs’ default on a Home Equity Line of 

Credit (“HELOC”). (Id.) The Court granted summary judgment on all claims in favor of 

Defendant. (Doc. 83.) The Court, however, enjoined the trustee’s sale of the home 

pending Plaintiffs’ appeal to the Ninth Circuit. (Doc. 98.) Defendant requests an order 

awarding $114,928.91 in attorneys’ fees and nontaxable expenses. (Doc. 86.) Plaintiffs 

have filed a Response in Opposition (Doc. 94) and Defendant has filed a Reply (Doc. 95). 

A. Contractual Entitlement to Fees and Costs 

Defendant first alleges that the deed of trust securing Plaintiffs’ loan requires the 

recovery of attorneys’ fees and costs. (Doc. 86 at 2.) That deed of trust secured the first of 

multiple HELOC loans and provided that “[i]f Grantor breaches any covenant in this 
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Security Instrument, Grantor agrees to pay all expenses Lendor incurs in performing such 

covenants or protecting its security interest in the Property.” (Doc. 65-3 at 4.) It specified

that such “amount may include, but is not limited to, attorneys’ fees, court costs, and 

other legal expenses.” (Id.) 

Arizona’s statute governing the award of attorneys’ fees arising from a contract 

does not “alter[], prohibit[], or restrict[]” a contract that otherwise “provide[s] for 

attorney fees.” A.R.S. § 12-341.01. Consequently, “when a contract has an attorney’s fee 

provision it controls to the exclusion of the statute.” Am. Power Prods., Inc. v. CSK Auto, 

Inc., 396 P.3d 600, 604 (Ariz. 2017) (quoting Lisa v. Strom, 904 P.2d 1239, 1242 n.2 

(Ariz. App. 1995)). Therefore, if a contractual provision settles the question of fees and 

costs, the Court need not conduct a statutory analysis. 

However, it is far from clear that the contractual provision cited by Defendant 

applies here. This action was brought by Plaintiffs in a collateral challenge to a trustee’s 

sale of property. Plaintiffs based their arguments on A.R.S. § 12-548 and A.R.S. § 33-

816, which together provide that a trustee’s sale or foreclosure action must take place 

within a six-year statutory period. (Doc. 1-3.) 

As noted, the contractual provision cited by Defendant provides an entitlement to 

attorneys’ fees arising from efforts to protect its security interest following a breach of 

any covenant in the agreement. (Doc. 65-3 at 4.) There is little doubt that Plaintiffs’ 

failure to pay on their mortgage constituted a breach of a covenant. Defendant, however,

has failed to establish that any fees it incurred defending this action were caused by that 

breach. Rather, it appears that any fees incurred in this action were proximately caused by 

Defendant’s decision to postpone acting to preserve its security interest in the property 

until such time had passed that Plaintiffs had gained a colorable argument that the statute 

of limitations had run.

Moreover, although this Court did ultimately decline to accept Plaintiffs’

argument that the statute of limitations barred Defendant’s foreclosure action, Defendant 

does not establish that Plaintiffs’ conduct in bringing this collateral action constituted a 
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breach of any covenant. Accordingly, the Court finds that the contractual provision cited 

does not govern, and so the Court proceeds to an analysis of the claimed statutory bases 

for an award of costs and fees. 

B. Costs

Defendant claims that it incurred nontaxable expenses in the amount of $2,672.41. 

(Doc. 86.) Defendant has provided an itemized statement of its costs. (Doc. 86-4.) 

In a diversity action, federal law governs an award of taxable costs. Felix v. Pic–

N–Run, Inc., No. CV 09-8015-PCT-JAT, 2012 WL 551645, at *4 (D. Ariz. Feb. 21, 

2012) (citing Aceves v. Allstate Ins. Co., 68 F.3d 1160, 1167 (9th Cir.1995) (applying 

federal procedure instead of state procedure to determine the amount of costs); see also 

28 U.S.C. § 1920; Fed. R. Civ. P. 54(d)(1); LRCiv. 54.1(a).

Although Defendant describes its request as one for “nontaxable costs,” many of 

the listed costs are in fact taxable under LRCiv 54.1(e). Defendant requests costs for 

obtaining a copy of the complaint, which are taxable under LRCiv 54.1(e)(5), various 

filing fees, all of which are taxable under LRCiv 54.1(e)(1), costs of producing court 

copies of filings, which are taxable under LRCiv. 54.1(e)(5), and deposition costs, which 

are taxable under LRCiv. 54.1(e)(3). (Doc. 86-4.) 

Under LRCiv. 54.1(a), a party seeking taxable costs must, within fourteen days,

file a bill of costs on a form provided by the Clerk of Court and attach documentation 

supporting the requested costs. The docket reflects that no such bill of costs was filed. 

The time for so filing has passed. Defendant will therefore not recover these costs. 

In addition to the above taxable costs, Defendant also requests costs that are 

properly considered nontaxable, including for postage, parking, and delivery fees. (Doc. 

86-4.) Defendant relies on A.R.S. § 12-341.01 as a basis for recovery of these nontaxable 

expenses. But the Arizona Supreme Court has explained that, with limited exceptions, 

non-taxable costs cannot be recovered under § 12-341.01. Ahwatukee Custom Estates 

Mgmt. Ass’n, Inc. v. Bach, 973 P.2d 106, 107 (Ariz. 1999). The exceptions, including the 

cost of computerized legal research and the cost of legal assistant or law clerk services, 
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are not applicable here. Id. at 108-09. Defendant is therefore not entitled to recovery of 

these nontaxable costs. 

The Court accordingly declines to award Defendant costs. 

C. Attorneys’ Fees Under Arizona Law

Arizona law permits a court to award attorneys’ fees to the “successful party” in 

“any contested action arising out of a contract.” A.R.S. § 12-341.01. An award of such 

fees is at the discretion of the court. AmerisourceBergen Corp. v. Dialysist West, Inc., 

465 F.3d 946, 955 (9th Cir. 2006). A court should analyze six factors in determining 

whether to award such fees to an eligible party. Associated Indem. Corp. v. Warner, 694 

P.2d 1181, 1183 (Ariz. 1985). Those factors are: (1) whether the unsuccessful party’s 

claim or defense was meritorious; (2) whether the litigation could have been avoided or 

settled and so the successful party’s efforts were superfluous; (3) hardship to 

unsuccessful party; (4) whether the successful party prevailed with respect to all of the 

relief sought; (5) whether the legal question presented was novel; and (6) whether the 

award would discourage other parties from litigating legitimate contract issues for fear of 

incurring liability for substantial amounts of attorney’s fees. Id. at 1183-84. 

As a threshold matter, the court finds that USAA Federal Savings Bank is eligible 

for the recovery of attorneys’ fees under the statute. The Court granted summary 

judgment in favor of USAA Federal Savings Bank, making it a “successful party,” and

this action is fairly characterized as “arising out of a contract.” A.R.S. § 12-341.01. 

However, “[m]ere eligibility” for a fee award does not establish “entitlement” to the

award, and so the Court turns to the six Warner factors enumerated above. Wagenseller v. 

Scottsdale Mem’l Hosp., 710 P.2d 1025, 1048 (Ariz. 1985). 

The first factor, the merit of Plaintiffs’ claims, weighs against awarding fees here. 

Although Plaintiffs did not prevail, their claims presented substantive legal and factual 

issues that presented a close case at summary judgment and caused the Court to enjoin 

the trustee’s sale pending judgment in the Court of Appeals. (Doc. 98.) 

The second factor, whether the litigation could have been settled without the 
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expense of litigation, is not instructive here. Plaintiffs assert that Defendant cut off 

communication with Plaintiffs and provided no opportunity for Plaintiffs to cure their 

failure to pay. (Doc. 94.) Plaintiffs also argue that Defendant rejected multiple settlement 

offers. (Id.) Finally, Plaintiffs also allege that Defendant failed to meaningfully consult 

with Plaintiffs regarding the attorneys’ fee issue before bringing the instant motion. (Id.) 

Defendant in turn argues that Plaintiffs’ settlement offers were unreasonable and that 

Plaintiffs themselves refused to discuss settlement at their depositions. (Doc. 95.) The 

Court concludes that the evidence as to whether this action could have been settled 

without the expense of litigation is in equipoise and that this factor provides little 

guidance.

The third factor, hardship to the unsuccessful party, weighs heavily against the 

award of attorneys’ fees in this case. Plaintiffs, who have proceeded pro se in this action,

face foreclosure and a trustee’s sale of their home, pending the outcome of their appeal in 

the Ninth Circuit Court of Appeals. Although Defendant argues that Plaintiffs have

equity in the property at issue and thus could pay a large attorney’s fee award, Defendant 

has offered no evidence that extinguishing Plaintiffs’ equity in the property would not 

cause Plaintiffs hardship. 

The fourth factor, whether the successful party prevailed with respect to all relief 

sought, weighs in favor of awarding fees in this matter, as Defendant was awarded 

summary judgment on all of Plaintiff’s claims. 

The fifth factor, whether a novel question was presented, weighs against awarding 

fees. As Defendant acknowledges, Plaintiffs’ argument that the reasoning of the Arizona 

Supreme Court in Mertola, LLC v. Santos, 422 P.3d 1028 (Ariz. 2018) should be applied 

to calculating the statute of limitations for bringing a foreclosure action under a HELOC 

presented a novel issue of law. (Doc. 86 at 6.) 

Finally, the sixth factor, whether a fee award would tend to discourage others from 

engaging in legitimate contract litigation, weighs heavily against the award of fees. An 

award of fees in this matter would harm the public interest by chilling other homeowners 
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from asserting good-faith but novel challenges to foreclosure actions. 

The Court finds that, overall, the above factors counsel against an award of 

attorneys’ fees in this matter. An award of fees arising from Plaintiffs’ good-faith 

presentation of a novel legal issue would cause Plaintiffs significant hardship and would 

chill other individuals in asserting good-faith challenges to foreclosure actions. 

D. LRCiv 54.2 Reasonableness Factors 

Defendant argues that its requested fee award is reasonable under Local Rule of 

Civil Procedure 54.2. As the Court in its discretion has determined not to award 

attorneys’ fees in this matter, the Court does not address the reasonableness factors 

provided by LRCiv 54.2. 

Accordingly, 

IT IS ORDERED that Defendant’s Motion for Attorneys’ Fees (Doc. 86) is

denied. Defendant will not recover its costs or attorneys’ fees.

Dated this 31st day of October, 2019.