Court Opinion

ID: 4552169
Source: CourtListenerOpinion
Date Created: 2020-07-30 18:02:20.546769+00
Date Added: 2024-06-11T13:07:30.861459
License: Public Domain

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                BMO HARRIS BANK NA, Plaintiff/Appellee,

                                        v.

                  JAMES GALUSHA, Defendant/Appellant.

                             No. 1 CA-CV 19-0549
                              FILED 7-30-2020

           Appeal from the Superior Court in Maricopa County
                          No. CV 2018-013234
             The Honorable Christopher T. Whitten, Judge

                                  AFFIRMED

                                   COUNSEL

Moyes Sellers & Hendricks LTD, Phoenix
By Cody J. Jess
Counsel for Defendant/Appellant

Quarles & Brady LLP, Phoenix
By Isaac M. Gabriel
Counsel for Plaintiff/Appellee
                       BMO HARRIS v. GALUSHA
                         Decision of the Court

                      MEMORANDUM DECISION

Presiding Judge Michael J. Brown delivered the decision of the Court, in
which Judge D. Steven Williams and Judge David D. Weinzweig1 joined.

B R O W N, Judge:

¶1           James Galusha appeals the superior court’s judgment
awarding contractual damages, interest, late charges, attorneys’ fees, and
costs to BMO Harris Bank (“BMO”). Galusha challenges only the fee
award. For the following reasons, we affirm.

                             BACKGROUND

¶2              In June 2017, Silverado Stages, Inc. (“Silverado”), a
transportation company in which Galusha and his wife were the majority
shareholders, obtained a loan from BMO in the amount of $1,290,000 (“the
Loan”). The Loan was secured in part by three 2017 Volvo buses. Galusha
also executed a continuing personal guaranty (“the Guaranty”), agreeing
that if Silverado failed to pay the Loan as it became due he would “pay on
demand the entire indebtedness and all losses, costs, attorneys’ fees and
expenses . . . suffered by [BMO] by reason of [Silverado]’s default.”

¶3           Silverado defaulted on the Loan. In October 2018, BMO filed
a complaint against Galusha in superior court for breach of the Guaranty,
and Silverado filed a Chapter 11 bankruptcy petition in federal district
court, which Galusha signed as Silverado’s chairman.2 BMO filed a motion
for summary judgment in the superior court action, followed by an
amended motion. After oral argument, the superior court granted the
motion, with the exception of a prepayment penalty fee.

1      Judge David D. Weinzweig replaces the Honorable Kenton D. Jones,
who was originally assigned to this panel. Judge Weinzweig has read the
briefs and reviewed the record.

2      Before filing its bankruptcy petition, Silverado refused to surrender
the buses and BMO’s counsel worked on preparing a state court lawsuit
and replevin action to recover them. Silverado later stipulated to relief from
the bankruptcy stay so BMO could repossess the buses, and it did so.

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                         BMO HARRIS v. GALUSHA
                           Decision of the Court

¶4            BMO filed an application for an award of attorneys’ fees,
seeking $88,069.85 in fees and $7,637.54 in costs, citing Arizona law.
Galusha objected, arguing the reasonableness of BMO’s fees should be
determined by Texas law and capped at $40,471.30. The superior court
awarded BMO all of its requested attorneys’ fees, explaining that “[w]hile
[Galusha] is correct that these fees are high for the nature of this dispute,
the Court does not believe the reason [BMO] incurred these abnormally
high fees can be laid at [BMO]’s doorstep.” Galusha timely appealed.

                                 DISCUSSION

¶5           Galusha first argues the superior court committed reversible
error by applying Arizona law rather than Texas law when considering
BMO’s fee application.

¶6              We review an award for attorneys’ fees for an abuse of
discretion but review de novo “issues of law, such as . . . a superior court’s
legal authority to use a specific method for determining attorneys’ fees.”
Charles I. Friedman, P.C. v. Microsoft Corp., 213 Ariz. 344, 350, ¶ 17 (App.
2006). Texas law also applies an abuse of discretion standard for review of
an award of attorneys’ fees. Chappell Hill Bank v. Smith, 257 S.W.3d 320, 325
(Tex. App. 2008). “To find an abuse of discretion, there must either be no
evidence to support the superior court’s conclusion or the reasons given by
the court must be clearly untenable, legally incorrect, or amount to a denial
of justice.” Charles I. Friedman, P.C., 213 Ariz. at 350, ¶ 17 (citations omitted).
We review the record in the light most favorable to upholding the court’s
decision and will not disturb the award if there is any reasonable basis for
it. In re Indenture of Trust Dated January 13, 1964, 235 Ariz. 40, 51, ¶ 41 (App.
2014).

¶7            Galusha argues that because both parties relied upon Texas
law in their summary judgment briefing and the superior court noted in its
summary judgment ruling that the parties had previously agreed the
substantive law of Texas would apply, the court was required to apply
Texas law in considering the fee application, and nothing in the court’s
ruling suggests it did so. He acknowledges that both Arizona and Texas
generally limit the recovery of attorneys’ fees to those reasonably incurred,
but argues that “Texas applies a more exacting standard in making the
reasonableness determination.” BMO does not dispute that Texas law was
applicable but argues nothing indicates the court failed to apply Texas law.
Although the court did not specify which law it applied when awarding
attorneys’ fees, we presume the court was aware Texas substantive law
governed the parties’ dispute and correctly applied that law in evaluating

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                       BMO HARRIS v. GALUSHA
                         Decision of the Court

BMO’s fee request. See State v. Moody, 208 Ariz. 424, 444, ¶ 53 (2004) (“We
presume that a court is aware of the relevant law and applies it correctly in
arriving at its rulings.”); State Nat. Bank v. Academia, Inc., 802 S.W.2d 282,
290 (Tex. App. 1990) (applying the presumption that “the trial court . . .
applied the correct law according to the established choice of law
principles”).3

¶8            Galusha also argues the superior court abused its discretion
because BMO’s fees were excessive, duplicative, and included time spent
pursuing unsuccessful claims. In Texas, “each party generally must pay its
own way in attorney’s fees.” Rohrmoos, 578 S.W.3d at 483. “When fee-
shifting is authorized, whether by statute or contract, the party seeking a
fee award must prove the reasonableness and necessity of the requested
attorney’s fees.” Id. at 484. Texas applies the lodestar method for making
those determinations. Id. at 500–01.

       [T]he determination of what constitutes a reasonable
       attorneys’ fee involves two steps. First, the [fact finder] must
       determine the reasonable hours spent by counsel in the case
       and a reasonable hourly rate for such work. The [fact finder]

3       Galusha concedes that “courts applying either Arizona or Texas law
consider similar factors when deciding an appropriate fee award.” Cf.
Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 502 (Tex.
2019); Schweiger v. China Doll Rest. Inc., 138 Ariz. 183, 187–88 (App. 1983).
Nevertheless, he argues that Texas, unlike Arizona, requires expert
testimony to prove the reasonableness and necessity of requested fees.
Galusha did not challenge the purported absence of expert testimony in his
objection to BMO’s attorneys’ fees application and therefore waived that
argument on appeal. See Trantor v. Fredrikson, 179 Ariz. 299, 300 (1994).
Moreover, an attorney’s affidavit may satisfy this requirement. See Day v.
Fed’n of State Med. Bds. of the U.S., Inc., 579 S.W.3d 810, 826–27 (Tex. App.
2019); RSL Funding, LLC v. Aegon Structured Settlements, Inc., 384 S.W.3d 405,
410 (Tex. App. 2012). Here, the sworn affidavit of BMO’s attorney, James
L. Ugalde, supported by detailed billing records, offered sufficient expert
testimony to sustain the award. Galusha also argues that unlike Arizona,
in Texas “reasonableness and necessity are not dependent solely on the
contractual fee arrangement between the prevailing party and its attorney.”
Rohrmoos, 578 S.W.3d at 498. However, Arizona law also requires a party
seeking fees to provide evidence of reasonableness. See Crews v. Collins, 140
Ariz. 80, 82 (App. 1984) (citing China Doll, 138 Ariz. at 188). Regardless, we
presume the superior court followed Texas law. Moody, 208 Ariz. at 444, ¶
53; State Nat. Bank, 802 S.W.2d at 290.

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                       BMO HARRIS v. GALUSHA
                         Decision of the Court

       then multiplies the number of such hours by the applicable
       rate, the product of which is the base . . . lodestar. The [fact
       finder] may then adjust the base lodestar up or down (apply
       a multiplier), if relevant factors indicate an adjustment is
       necessary to reach a reasonable fee in the case.
Id. at 501 (citation omitted). The base lodestar figure is presumptively
reasonable. See id. at 501; see also Perdue v. Kenny A. ex rel. Winn, 559 U.S.
542, 554 (2010) (recognizing “there is a ‘strong presumption’ that the base
lodestar figure is reasonable, but that presumption may be overcome in
those rare circumstances in which the lodestar does not adequately take
into account a factor that may properly be considered in determining a
reasonable fee.”).

¶9            “General, conclusory testimony devoid of any real substance
will not support a fee award.” Rohrmoos, 578 S.W.3d at 501. A claimant
seeking an attorneys’ fees award must present sufficient evidence to
support the fee award. Id. at 502. “Sufficient evidence includes, at a
minimum, evidence of (1) particular services performed, (2) who performed
those services, (3) approximately when the services were performed, (4) the
reasonable amount of time required to perform the services, and (5) the
reasonable hourly rate for each person performing such services.” Id. at
502. Contemporaneous billing records, although not required, are strongly
encouraged to prove the reasonableness and necessity of the requested fees.
Id. “When the record includes evidence that is adequate to address the five
factors outlined above, trial courts may presume the multiplication step of
the analysis has produced a figure that reflects a presumptively reasonable
fee.” Toledo v. KBMT Operating Co., LLC, 581 S.W.3d 324, 329 (Tex. App.
2019).

¶10           Here, BMO supported its application for attorneys’ fees with
Ugalde’s affidavit, which was supported by detailed billing records. The
superior court awarded BMO the amount requested in its application and
accompanying affidavit, $88,069.85, which was based upon 202.4 hours of
legal work performed by Quarles and Brady’s attorneys and paralegals.
Galusha therefore had the burden of proving a reduction in the base
lodestar figure of $88,069.85 was appropriate by providing specific
evidence to overcome its presumptive reasonableness. See Rohrmoos, 578
S.W.3d at 501. The legal work provided by BMO’s attorneys included the
preparation and litigation of the lawsuit, including attempts to resolve
various issues that Galusha opposed. It also included time spent in
connection with BMO’s efforts to recover its collateral and its participation

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                       BMO HARRIS v. GALUSHA
                         Decision of the Court

in Silverado’s bankruptcy.4 The billing records and affidavit provide
evidence of the particular services performed and who performed those
services, when the services were performed and the amount of time
required to perform them, as well as the hourly rates for each person
performing services. See id. at 502. This evidence supports the court’s
decision to award BMO its requested fees, and Galusha has not
demonstrated that any duplicated effort was per se unreasonable or the
overall award was excessive. See Sullivan v. Abraham, 488 S.W.3d 294, 299
(Tex. 2016) (citation omitted) (“A reasonable attorney[s’] fee is one that is
not excessive or extreme, but rather moderate or fair.”).

¶11           Galusha also argues the superior court abused its discretion
because BMO provided insufficient evidence to support the reasonableness
of the attorneys’ hourly rates. Given the experience and qualification of the
attorneys, as outlined in Ugalde’s affidavit together with his avowal that
the rates charged by Quarles and Brady “are consistent with, if not lower
than, the rates charged by comparable law firms,” we have no basis to
conclude the court should have reduced the base lodestar figure due to
unreasonably high hourly rates.5

¶12            In sum, the superior court held hearings and was familiar
with the legal positions taken by each party throughout the litigation,
including whether such proffered positions appropriately and reasonably
created the need for attorneys’ fees that may not have otherwise been
required. Thus, the court was in the best position to evaluate the affidavit,
billing records, hourly rates charged, and services provided in evaluating
the reasonableness and necessity of BMO’s attorneys’ fees. See El Apple I,
Ltd. v. Olivas, 370 S.W.3d 757, 761 (Tex. 2012) (award of attorneys’ fees
generally left to the trial court’s sound discretion); McMahon v. Zimmerman,
433 S.W.3d 680, 693 (Tex. App. 2014) (citation omitted) (“Trial judges can

4      Galusha argues that BMO “abandoned” its replevin claim and
therefore could not recover fees on that claim. But BMO could not pursue
its replevin efforts because Silverado filed for bankruptcy before BMO
could move for replevin. Fees incurred in connection with the replevin
were reasonable.

5      We are not persuaded by Galusha’s assertion that Ugalde’s
statement about the hourly rates being consistent with those of other law
firms is insufficient as a matter of law. Nor do we find persuasive Galusha’s
contention that a 2016 attorney survey listing median hourly rates in
Arizona necessarily demonstrates the unreasonableness of the hourly rates
charged by BMO’s attorneys in this case.

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                      BMO HARRIS v. GALUSHA
                        Decision of the Court

draw on their common knowledge and experience as lawyers and as judges
in considering the testimony, the record, and the amount in controversy in
determining attorney’s fees.”). We conclude the court did not abuse its
discretion in awarding BMO its requested attorneys’ fees; the record
supports the court’s implicit finding that the fees were reasonable and
necessary.

                             CONCLUSION

¶13            We affirm the superior court’s judgment. Both sides request
attorneys’ fees and costs on appeal pursuant to the Guaranty and Texas
Civil Practice and Remedies Code § 38.001. We award BMO reasonable
attorneys’ fees incurred in defending this appeal, together with taxable
costs, subject to compliance with ARCAP 21. However, we deny BMO’s
request for fees relating to post-judgment discovery and related matters
incurred in the superior court proceedings.

                        AMY M. WOOD • Clerk of the Court
                        FILED: AA

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