Court Opinion

ID: 4505317
Source: CourtListenerOpinion
Date Created: 2020-02-06 18:02:32.299722+00
Date Added: 2024-06-11T15:04:20.331193
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                              DIVISION ONE

                        KENNETH FIELDS, et al.,
                          Plaintiffs/Appellees,

                                     v.

              ELECTED OFFICIALS RETIREMENT PLAN,
                         Defendant/Appellee,
                 _________________________________

                          STATE OF ARIZONA,
                           Defendant/Appellant.

                          No. 1 CA-CV 18-0126
                            FILED 2-6-2020

           Appeal from the Superior Court in Maricopa County
                          No. CV2017-001200
              The Honorable Timothy J. Thomason, Judge

                               AFFIRMED

                                   COUNSEL

Osborn Maledon, P.A., Phoenix
By Colin F. Campbell
Counsel for Plaintiffs/Appellees

Arizona Attorney General’s Office, Phoenix
By Paula S. Bickett, Andrew G. Pappas, Nancy M. Bonnell,
Charles A. Grube, Eryn M. McCarthy
Counsel for Defendant/Appellant State of Arizona
                        FIELDS, et al. v. EORP, et al.
                           Opinion of the Court

                                 OPINION

Judge David D. Weinzweig delivered the opinion of the Court, in which
Presiding Judge Kent E. Cattani and Chief Judge Peter B. Swann joined.

W E I N Z W E I G, Judge:

¶1            A.R.S. § 12-341.01 allows the superior court to award
reasonable attorney fees to the successful party in a contested action arising
out of contract. Courts have held that fees may only be awarded under the
statute if the successful party has a “genuine financial obligation” to
compensate an attorney. At issue here is what that means.

¶2            Plaintiffs and their attorneys entered a contingent fee
agreement here that limited attorney compensation to any potential court-
ordered fee award under the statute. The superior court found that
Plaintiffs assumed a genuine financial obligation to compensate their
attorneys under this agreement and granted their request for reasonable
attorney fees under § 12-341.01. We affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶3           Plaintiffs Ken Fields and Gerald Porter are retired state court
judges and members of the Elected Officials Retirement Plan (EORP), a
defined benefit retirement plan for judges and other elected officials, which
is funded by various sources, including employer and employee
contributions. The legislature modified EORP in 2013 to cap employer
contributions at 23.5 percent of aggregate payroll. See A.R.S. § 38-810
(2014). Before then, employer contributions were set and made based on
actuarial methods and assumptions consistent with generally accepted
accounting standards.

       A.     The Fee Agreement

¶4            Plaintiffs retained the Osborn Maledon law firm in January
2017 to pursue claims for declaratory and injunctive relief but not damages
“arising from [the] 2013 statutory change capping employer contributions
to the EORP.” Plaintiffs and Osborn Maledon entered a written contingent
fee agreement. The law firm agreed to “limit recovery of [its attorney] fees
to those fees and costs awarded by the [superior court] under any
applicable fee shifting statute.”

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                        FIELDS, et al. v. EORP, et al.
                           Opinion of the Court

¶5           To that end, the fee agreement obligated Plaintiffs, if
ultimately successful, to request a court-ordered award of attorney fees
under A.R.S. § 12-341.01 and to surrender any award to counsel:

           If the case is successfully prosecuted or settled, Clients
           shall petition the Court for fees and costs under any
           applicable fee shifting statute.

                                 **    **   **

           Client[s] agree to pay those fees and costs over to
           Attorneys. Attorneys’ fees will be payable only out of
           recovery, and if no recovery is obtained, no fees shall
           be payable to Attorneys.

(Emphasis added).

      B.     The Lawsuit

¶6           Plaintiffs sued EORP and the State of Arizona for a
declaratory judgment that the statutory cap on employer contributions
breached their contract and violated the Arizona Constitution, and sought
a mandatory injunction against EORP to set employer contribution rates as
required by the law. Plaintiffs sought no money damages but did request
an award of attorney fees and costs under A.R.S. § 12-341.01 and the private
attorney general doctrine.

¶7            After a bench trial, the superior court held the State’s
statutory cap on EORP contributions violated Plaintiffs’ contract and the
Arizona Constitution. See Ariz. Const. art. 29, § 1 (A). The court ordered
the State to “set the employer contribution rates and other funding for
EORP, as a whole, based on actuarial methods and assumptions that are
consistent with generally accepted accounting standards.”

¶8            The superior court also ruled that Plaintiffs were “entitled to
at least some of their reasonable costs and attorneys’ fees under the private
attorney general doctrine and A.R.S. § 12-341.01,” and directed Plaintiffs to
file a fee affidavit. Plaintiffs requested $62,943 in attorney fees and
$2,355.30 in costs. The State countered that fees should be denied or
“greatly reduce[d]” for various reasons, including that Plaintiffs “had no
obligation to pay any fees to Osborn Maledon, [and] instead agree[d] that
the firm could have any fees that a court might assess against the
defendants.” After more briefing, the court held “[t]he private attorney
general doctrine [did] not apply,” but still awarded fees under A.R.S. § 12-

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                        FIELDS, et al. v. EORP, et al.
                           Opinion of the Court

341.01, reasoning that Plaintiffs had assumed a “sufficient financial
obligation” under the contingent fee agreement because they “agree[d] to
pay any attorney fees awarded to the lawyers.” Even so, the court reduced
the award by twenty percent because Plaintiffs had not secured all relief
requested.

¶9            The court eventually entered a revised final judgment for
Plaintiffs, awarding $46,088.80 in attorney fees, $1,899 in costs and post-
judgment interest at 5.25 percent. The State timely appealed. We have
jurisdiction pursuant to A.R.S. § 12-2101(A)(1).

                               DISCUSSION

¶10           The State contends that Plaintiffs did not qualify for an award
of attorney fees under A.R.S. § 12-341.01. We interpret and apply the statute
de novo. Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 198 Ariz. 10, 13, ¶
12 (App. 2000).

¶11           Section 12–341.01(A) provides that a court may award
reasonable attorney fees to the successful party in any contested action
arising out of a contract. The statute further directs that a fee award “need
not equal or relate to the attorney fees actually paid or contracted, but the
award may not exceed the amount paid or agreed to be paid.” A.R.S. § 12-
341.01(B). To recover fees under the statute, the successful party must
therefore show it entered an attorney-client relationship and assumed a
genuine financial obligation to compensate the attorney. Moedt v. General
Motors Corp., 204 Ariz. 100, 103, ¶ 11 (App. 2002).

¶12            The State does not contest that Plaintiffs entered an attorney-
client relationship with the Osborn Maledon law firm or that Plaintiffs
succeeded in a contested action arising out of a contract. Rather, the State
argues that Plaintiffs cannot recover any attorney fees because they “never
paid or agreed to pay their lawyers” under § 12-341.01(B). We disagree.

¶13            Plaintiffs “agreed to [pay]” counsel here and thus qualified
for an award of fees not to exceed that amount. A.R.S. § 12-341.01(B). We
interpret a statute to achieve the legislature’s intent, which is best expressed
by its plain language. SolarCity Corp. v. Ariz. Dep’t of Revenue, 243 Ariz. 477,
480, ¶ 8 (2018). Plaintiffs entered a written fee agreement with the law firm
that required Plaintiffs to perform two affirmative acts if successful in the
lawsuit. Plaintiffs promised first to “petition” the superior court for an
award of attorney fees and costs under the fee-shifting statute, and
promised then to surrender “those fees and costs over to” counsel. Those
twin promises are contractually enforceable under Arizona law and

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                         FIELDS, et al. v. EORP, et al.
                            Opinion of the Court

represent a genuine financial obligation to compensate counsel. Sparks v.
Republic Nat’l Life Ins. Co., 132 Ariz. 529, 545 (1982).

¶14           The conditional nature of payment does not diminish the
genuine financial obligation. Arizona courts have long recognized that
attorney fees are recoverable under § 12-341.01 “when the contract between
the party and the attorney is a contingency-fee agreement,” reasoning that
“[a]fter obtaining a judgment, a client who has retained counsel on a
contingency basis must surrender the agreed upon percentage of the
judgment as remuneration.” Id.

¶15           Even so, the State contends this case is different than Sparks
because the clients there sought damages and entered a contingent fee
agreement that required them to compensate counsel “out of whatever
[damages] they recover,” rather than merely “turn over whatever attorney
fees a court awards.” But § 12-341.01 only requires an agreement to pay
counsel—it never mentions or limits the source of payment. And clients
remain on the hook under either arrangement because payment must be
surrendered—whether from an independent fee award (here) or as a
percentage of the damages award (there).

¶16           If contingent fee clients must seek and recover money
damages to qualify for an award of attorney fees under § 12-341.01, and
recovery of declaratory and injunctive relief is not enough, the result will
be an unintended and undesirable emphasis on damages. Section 12-341.01
was enacted to mitigate the “expense of litigation to establish a just claim
or a just defense,” not to encourage more lawsuits for money damages in
lieu of meaningful injunctive or declaratory relief. Cf. Blanchard v. Bergeron,
489 U.S. 87, 95 (1989) (rejecting strict limitation on fee awards in civil rights
litigation).

¶17            Another consequence of the State’s argument, if accepted,
would be to curtail public interest litigation where individuals band
together and retain contingent fee counsel to pursue contract-related
injunctive and declaratory relief, but have no money damages. For clients
who lack the means to retain competent representation, a contingent fee
agreement to surrender any fee-shift award represents the only economic
option—shifting the risk and expense of litigation to counsel. Cf. Arnold v.
Ariz. Dep’t of Health Servs., 160 Ariz. 593, 608 (1989) (“Attorney’s fees should
not be limited by the fact that the plaintiffs are indigent and that their
attorneys accepted the case on a pro bono basis.”). Nothing in § 12-341.01
shows this fee arrangement is outside its reach.

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                        FIELDS, et al. v. EORP, et al.
                           Opinion of the Court

¶18             The State also insists that Plaintiffs’ award of attorney fees
represents a “windfall” that contravenes the purpose of fee awards under
§ 12-341.01. But Plaintiffs’ fee award tracks the express and recognized
purposes of § 12-341.01, which are to “mitigate the burden of the expense
of litigation to establish a just claim or a just defense,” and to encourage an
early and ongoing assessment of the merits and facilitate settlement.
Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, 29, ¶ 43 (App. 2006). A fee
award here mitigates the burden of litigation expenses incurred by counsel
to establish Plaintiffs’ claims. Neither the statute nor common law requires
clients to personally assume “the burden of the expense,” Catalina Foothills
Ass’n, Inc. v. White, 132 Ariz. 427, 428 (App. 1982), which if required would
defeat the rationale of contingent fee agreements. And given the contingent
fee agreement, it was imperative for all counsel to perform an early,
comprehensive appraisal of claims and defenses.

¶19           Meanwhile, the State asserts that § 12-341.01 is intended to
make litigants whole for having to pay attorney fees from their own pocket.
But the State arrogates that purpose from a different statute, A.R.S. § 12-
349, as applied in Lisa v. Strom, 183 Ariz. 415, 417 (App. 1995), where
attorney fees were awarded as a sanction against defendants for pressing a
groundless defense and abusing discovery. And even there, the court only
mentions the rationale to justify its denial of attorney fees to self-
represented “attorney-litigants.” Id. at 420 (“[A] financial obligation from
the community to itself is no obligation at all. An award of fees is therefore
inappropriate.”).

¶20            Nor can the fee award be characterized as an unreasonable or
unearned “windfall.” The statute independently requires any fee award to
be reasonable, both as to the number of hours devoted and billing rates. See
A.R.S. § 12-341.01(A), (B). The State again misrelies on Lisa, which warned
about the perception of “windfalls” where self-represented “attorney-
litigants” seek to recover attorney fees for representing themselves. 183
Ariz. at 419 (“The general rule against awarding fees to attorney-litigants is
based upon a perception that such awards are windfalls to persons who
have spent no money and incurred no debt for legal representation.”). This
case raises no such concern because Plaintiffs were represented by Osborn
Maledon and contractually bound to surrender any fee award to them.

¶21           The superior court did not abuse its discretion in awarding
attorney fees to Plaintiffs.

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                      FIELDS, et al. v. EORP, et al.
                         Opinion of the Court

                             CONCLUSION

¶22           We affirm the superior court’s fee award to Plaintiffs. We
grant Plaintiffs their costs and reasonable attorney fees on appeal under
A.R.S. §§ 12-341 and -341.01 upon compliance with Arizona Rule of Civil
Appellate Procedure 21.

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

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