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IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA

 

 Before the Court is Defendant National Union Fire Insurance Company of 

Pittsburgh, PA’s Motion for Attorneys’ Fees (the “Motion”). (Doc. 113) For the 

following reasons, the Motion will be granted. 

I. Background 

 Apollo Education Group, Inc. (“Apollo”) purchased an insurance policy from 

National Union Fire Insurance Company of Pittsburgh, PA (“National Union”). (Doc. 1 

at 2) Apollo was the defendant in a class action lawsuit, which settled for $13.125 

million in April 2014. (Doc. 1 at 5) Apollo filed a claim with National Union to fund the 

settlement, but National Union refused to fund any of the settlement amount. (Doc. 1 at 

6) Apollo then initiated this suit against National Union for wrongful and bad faith 

refusal to pay the claim related to the settlement agreement and reimbursement for the 

$13.125 million Apollo paid out of pocket. (Doc. 1 at 2) National Union successfully 

Apollo Education Group, Inc., an Arizona 

corporation, 

 

Plaintiff, 

vs. 

National Union Fire Insurance Company 

of Pittsburgh, PA, a Pennsylvania 

corporation, 

Defendant. 

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No. CV-15-CV-01948-SPL

ORDER 
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moved for summary judgment on all of Apollo’s claims, and it now moves for an award 

of attorneys’ fees. (Doc. 119 at 2) 

II. Standard of Review 

 Federal Rule of Civil Procedure 54(d)(2) provides “[a] claim for attorney’s fees 

[...] must be made by motion unless the substantive law requires those fees to be proved 

at trial as an element of damages.” Fed. R. Civ. P. 54. National Union is moving for an 

award of attorneys’ fees pursuant to Fed. R. Civ. P. 54(d)(2)(B) and A.R.S. § 12-341.01. 

There are six factors to consider in a request for such fees under A.R.S. § 12-341.01(A). 

Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). These factors are: 

(1) whether the unsuccessful party’s claim was meritorious; (2) whether the litigation 

could have been avoided or settled and the successful party’s efforts were completely 

superfluous in achieving the result; (3) whether assessing fees against the unsuccessful 

party would cause extreme hardship; (4) whether the successful party prevailed with 

respect to all relief sought; (5) whether the legal question presented was novel and 

whether such a claim had previously been adjudicated in this jurisdiction; and (6) 

whether an award in the case would discourage other parties with tenable claims from 

litigating legitimate contract issues for fear of incurring liability for substantial amounts 

of attorneys’ fees. Id. The Court must consider each factor as no one factor is 

determinative. Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz. Ct. App. 1987). 

III. Entitlement to Attorney’s Fees 

 The Court finds that the Warner factors weigh in favor of awarding National 

Union attorneys’ fees. 

A. Merit 

 The Court finds that Apollo’s claims had merit because the claims centered on an 

ambiguous contractual agreement. It is first important to note that “[a]n unsuccessful 

claim is not necessarily one that lacks merit.” Biltmore Assocs., L.L.C. v. Twin City Fire 

Ins. Co., 2007 WL 496766 at *3 (D. Ariz. 2007). Apollo and National Union had a 

Consent-to-Settle provision as part of their contracts which stated that “Insurer’s consent 
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[to settlements] shall not be unreasonably withheld.” (Doc. 75-3 at 14) Arizona courts 

have yet to interpret what “unreasonably” means in the present context. However, 

according to the Restatement (Second) of Property, Apollo must prove that National 

Union withheld its consent “as a result of unreasonable caprice, whim, or personal 

prejudice.” Restatement (Second) of Property § 15.2 Comment g (1977); Tucson Med. 

Ctr. v. Zoslow, 712 P.2d 459, 462 (Ariz. Ct. App. 1985). Apollo argues that the 

applicable standard is that an insurer is obligated to provide consent as long as the 

settlement is reasonable. The Court finds that because of the ambiguity of the provision 

in terms of the word “unreasonably” and lack of Arizona precedent on the specific issue, 

the case had merit despite the summary judgement ruling. This factor weighs against 

awarding attorneys’ fees. 

 B. Settlement Efforts 

 The settlement efforts in this case present a neutral factor in determining awards of 

attorneys’ fees. Both parties argue that the other side was unreasonable in their 

mediation efforts. Apollo acknowledges its failure to make counteroffers, but claims, and 

appears to offer no proof, that National Union promised to increase its settlement offers 

at each mediation. On the other hand, National Union argues that it should not be 

required to “bid against itself” and increase settlement offers if Apollo does not give a 

counteroffer. The records of what actually occurred at the settlement negotiations are 

sealed. The Court finds that this factor does not weigh in favor of either party because 

neither side appeared willing to work together to reach an agreed settlement. 

 C. Extreme Hardship 

 The Court finds that due to the size and revenue of Apollo, the requested 

attorneys’ fees would not cause extreme hardship. “This factor asks whether assessing 

fees against an unsuccessful party would cause extreme hardship given the parties’ 

relative economic positions.” Biltmore, 2007 WL 496766 at *4. It is the burden of the 

party asserting financial hardship to show prima facie evidence of financial hardship. 

Woerth v. City of Flagstaff, 808 P.2d 297, 305 (Ariz. Ct. App. 1990). National Union 
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argues that paying the requested attorneys’ fees would not cause undue hardship because 

Apollo is “a global company that reported $2.1 billion in net revenue for its fiscal year 

ending August 31, 2016.” (Doc. 113 at 9) Additionally, in its Form 10-K, Apollo 

asserted that the $13.125 million settlement was an “immaterial” amount that was paid 

for without the liquidation of assets. (Doc. 113 at 9) Apollo had the burden of proving 

potential financial hardship if attorneys’ fees were awarded, but failed to do so. Not only 

did Apollo fail to present an argument regarding this factor, they also did not list this 

factor as one that favors a finding against an award of fees. Apollo did not meet its 

burden of showing extreme financial hardship. Accordingly, the Court finds that this 

factor weighs in favor of awarding attorneys’ fees to National Union. 

 D. Winning Party Prevailed 

 Both parties agree that National Union successfully moved for summary 

judgement with respect to all of the relief sought by Apollo. This factor weighs in favor 

of a finding that National Union is entitled to an award of attorneys’ fees. 

 E. Novelty of the Issue 

 The Court finds that because the issues presented were somewhat novel, this fifth 

factor weighs slightly against a finding that attorneys’ fees should be granted. The 

Arizona Appellate Court has found that even when the state has not determined the 

meaning of the word in question in a similar context, if other jurisdictions have done so, 

no novel question regarding the meaning of the word exists. Potter v. United States 

Specialty Ins. Co., 98 P.3d 557, 560 (Ariz. App. 2004). Arizona may not have addressed 

the word “unreasonable” in an insurance contract, but the issue has been addressed in 

other jurisdictions. See Schwartz v. Twin City Fire Ins. Co., 492 F. Supp. 2d 308, 319 

(S.D.N.Y. 2007) (finding that a court may consider the totality of the circumstances 

known to the party whose conduct they were considering in deciding whether they acted 

reasonably or in good faith). Due to the previous interpretation of the term, this Court 

finds that the meaning of the term “unreasonable” in a contract dispute is not a 

completely novel question. However, because the Arizona courts needed to establish 
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what they would find to be the proper definition in this jurisdiction, the issue presented 

was still somewhat novel and weighs slightly in favor of denying the motion for 

attorneys’ fees. 

 F. Discourage Future Claims

 The Court finds that awarding attorneys’ fees in this case would not discourage 

future claims. Precedent already alerts parties to the risks of bringing unmeritorious 

claims. A.R.S. § 12-341.01(A) discusses the possibility of a court awarding attorneys’ 

fees. That statute warns potential litigants to consider that possibility, regardless of what 

this case decides. In addition, Apollo is a large organization that has been involved in 

lawsuits in the past, and it is well aware of the risks of litigation. Accordingly, the Court 

finds that this factor is neutral in deciding whether to award attorneys’ fees. 

G. Consolidation of Court Resources 

 Apollo argues that the Court should deny the Motion without prejudice until the 

pending appellate case has been decided. While the District Court has discretion as to 

whether or not to award attorneys’ fees after the notice of appeal from the decision has 

been filed, ruling on motions for attorneys’ fees “will prevent hasty consideration of postjudgement fee motions.” Masalosalo ex rel. Masalosalo v. Stonewall Ins. Co., 718 F.2d 

955, 957 (9th Cir. 1983). The Ninth Circuit has also noted that if the District Court 

decides a fee issue “early in the course of a pending appeal on the merits, and the fee 

order is appealed, the appeals may be consolidated.” Id. Here, the Court agrees with the 

Ninth Circuit and finds that in order to promote efficiency with both time and court 

resources, the present Motion shall be granted. 

IV. Reasonableness of Attorney’s Fees

 The Court finds that the requested fee award of $1,215,832.80 is reasonable 

because National Union (1) addressed Apollo’s concerns in response to the Motion, and 

(2) reasonably deducted the costs that Apollo found to be incompliant with Local Rule 

54.2. 

 First, in order to calculate the fee award, the Court must multiply the number of 
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hours reasonably expended on the litigation times a reasonable hourly rate. Blum v. 

Stenson, 465 U.S. 886, 888 (1984). Here, National Union provided documentation as to 

the hours worked on the case and the fee acquired. 

 Next, National Union addressed several block billed entries by reducing its fee 

request. Block billing, entering multiple and unrelated tasks together in a single fee entry, 

is prohibited by LRCiv 54.2(e)(1)(B). This rule requires “unrelated” tasks to be on 

separate time entries, and the Court may reduce excessive fees in the event that that 

National Union has block billed. Apollo listed seven time entries in which Apollo claims 

National Union block billed. Apollo does not list a total of how many time entries they 

believe were in direct conflict of LRCiv 54.2(e) other than that the seven entries listed 

were just a “small sample” of the invalid entries. National Union gave evidence to show 

that several of the given entries were valid due to each activity being related. Without 

further evidence as to how many legitimately block billed time entries are present, the 

Court is unable to adequately determine the severity of the issue. Thus, with the evidence 

presented to the Court, it would be unjust to create a fee reduction because of the block 

billing entries. 

 Further, Apollo argues several categories in which National Unions fees were 

excessive: (1) preparing for fee petition, (2) Floren deposition, (3) written discovery 

requests, (4) mediation, and (5) Expert Peter (“Thomas”) Zaccaro. 

1) Apollo discusses how the fees charged for preparing the fee petition are 

excessive, in part, because National Union requested $36,000 for more than 

70 hours of preparation for attorneys’ fees. Due to the complexity of the 

issue, the Court uses its discretion and follows the guidelines of Angel Jet 

Servs., LLC v. Giant Eagle, Inc. in finding that 77.4 hours was a reasonable 

amount of hours expended in this litigation. 2013 WL 11311729, at *9. 

2) As for claims regarding the Floren deposition, National Union has already 

withdrawn fees for travel time and decreased its requested fees where it 

charged more than the discussed $460/hour billing rate because of a 
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spreadsheet error. National Union has, on its own, fixed the issues with this 

charge that Apollo addresses, so the Court finds the updated amount 

reasonable. 

3) Apollo also requests that National Union’s fees pertaining to written 

discovery requests be found unreasonable because they were “largely boiler 

plate responses.” (Doc. 119 at 16) However, Apollo does acknowledge that 

the issues addressed were complicated and time sensitive. Furthermore, 

Apollo does not state how much time courts generally find to be 

unreasonable in the past for similar jobs. Apollo therefore has not provided 

sufficient evidence towards a finding that this charge is objectively 

unreasonable. 

4) Apollo next explains that the 168 hours and $53,633.00 incurred in 

connection with the second meditation is unreasonable because it was 

largely redundant. However, both sides agree that this was the first 

mediation in which National Union’s counsel, Steptoe & Johnson LLP, was 

hired to represent National Union. It is only logical that the new firm would 

require a substantial amount of time to prepare for their first mediation with 

Apollo. Therefore, the Court finds that the costs were reasonable. 

5) Apollo finally argues that the Court should strike all of the fees related to 

National Union’s expert Zaccaro because (i) National Union did not rely on 

his testimony during litigation, and (ii) Zaccaro is unqualified as an expert. 

The Court finds that National Union did rely on Zaccaro heavily before trial 

by repeatedly citing his reports and submitting those reports as exhibits. 

There is also a high bar to establish that an expert witness is unqualified. 

“Because there are many different kinds of experts and expertise, [the 

standards for determining if an expert is qualified] is, by necessity, a 

flexible one.” People v. Kowalski, 492 Mich. 106, 119 (2012). Apollo does 

not allege what the legal standard is to be an expert in this field. The Court 
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does not find reason to rule that Zaccaro is unqualified as an expert witness. 

 For the foregoing reasons, the Court finds that the amount of attorneys’ fees 

requested, $1,215,832.80, is reasonable. 

IV. Conclusion 

 While no one factor is determinative, most of the factors favor granting National 

Union’s Motion. As the Court has found, three of the six Warner factors weigh in favor 

of granting the Motion: (i) the requested fees would not cause Apollo undue hardship, (ii) 

National Union prevailed on summary judgement with respect to all relief sought, and 

(iii) the issue presented was only somewhat novel. On the other hand, only one factor 

actually weighed against awarding attorneys’ fees: the claim that Apollo brought did have 

merit. The other two factors are neutral in this analysis. Further, it conserves court 

resources to grant the Motion now, rather than dismissing the Motion until after the case 

is decided on appeal. For the foregoing reasons, the Court grants the Motion. 

 Accordingly, 

IT IS ORDERED that Defendant’s Motion (Doc. 113) is granted, and that the 

Plaintiff shall pay, and the Defendant shall be awarded, attorneys’ fees in the amount of 

$1,215,832.80. 

Dated this 18th day of July, 2018. 

Honorable Steven P. Logan

United States District Judge