Free Order on Motion for Attorney Fees - District Court of Arizona - Arizona

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Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 1 of 9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

C I T I C A P I T A L T E C H N O L O G Y) FINANCE, INC., formerly known as EAB) Leasing Corp., a Pennsylvania) c o r p o r a t i o n , ; C I T I C A P I T A L) COMMERCIAL L E A S I N G) CORPORATION, formerly known as) Associates Leasing, Inc., an Indiana) corporation, predecessor in interest to real) party in interest, GENERAL ELECTRIC) ) CORPORATION, ) ) Plaintiffs, ) ) vs. ) ) GRANT H. GOODMAN AND TERI B.) ) GOODMAN, ) ) Defendants. ) )

No. CV 03-01587-PHX-JAT ORDER

Pending before the Court is Plaintiffs' Application for Attorney's Fees and Related Non-Taxable Expenses (Doc. # 98). The Court has considered Plaintiffs' Application for Attorney's Fees and Related Non-Taxable Expenses (Doc. # 98), Defendants' Objection to Application for Attorney's Fees and Related Non-Taxable Expenses (Doc. # 103), and Plaintiffs' Reply in Support of Application for Attorney's Fees and Related Non-Taxable Expenses (Doc. # 104).

1 I. BACKGROUND 2 GTI Capital Holdings, L.L.C., ("GTI") executed four lease agreements with Plaintiff 3 CitiCapital Technology Finance, Inc. ("CitiCaptial Technology") to finance GTI's 4 acquisition of certain equipment. GTI similarly executed four additional lease agreements 5 with Plaintiff CitiCapital Commercial Leasing Corporation ("CitiCapital Commercial"), 6 which subsequently assigned the leases to Plaintiff General Electric Capital Corporation 7 ("GE"). As a principal and member of GTI, Defendant Grant Goodman guarantied all 8 9 In April 2003, all eight leases went into default after GTI failed to pay the monthly 10 rents due on the leases. Under the express terms of the lease agreements, CitiCapital 11 Technology and GE (hereinafter sometimes referred to as "Plaintiffs") were entitled upon 12 default to immediatetly recover and dispose of the equipment included in their respective 13 leases. In GTI's bankruptcy case, the United States Bankruptcy Court for the District of 14 Arizona issued an order authorizing Plaintiffs to repossess the equipment contained in their 15 16 equipment listed in their respective leases, which, after extensive marketing, was sold by way 17 of both public auction and private sale. 18 Plaintiffs brought a diversity suit in this Court against Defendants, Grant and Teri 19 Goodman, as guarantors of the eight leases, seeking liquidated damages. Pursuant to the 20 terms of the lease agreements, Plaintiffs calculated their respective damages under each 21 lease, crediting GTI for all previous payments made on the lease and for all net proceeds 22 derived from the sale of the equipment contained in the lease. Under all of the leases that it 23 24 25 26 27 28 The four leases owed to CitiCapital Commercial, and latter assigned to GE, were guarantied by Grant Goodman and his wife Teri, which is why Teri Goodman is a named defendant in the complaint. In re: GTI Capital Holdings, L.L.C./G.H. Goodman Investment Companies, L.L.C., Case Nos. 2-03-07923, 2-03-7924. -2Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 2 of 9
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payments, charges, and obligations due under the eight lease agreements.1

leases.2 Plaintiffs subsequently notified all parties involved of the impending sale of the

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executed, GTI agreed to pay all reasonable attorney's fees and costs associated with enforcing any of the remedies contained in the leases. Following a three-day bench trial, this Court enforced the liquidated damages provisions contained in each lease agreement. The Court concluded that the sales of the equipment in Plaintiffs' leases were executed in a commercially reasonable manner under A.R.S. § 47-9627 because the equipment was sold in the usual manner in a recognized market. The Court concluded further that Plaintiffs properly calculated the deficiencies that Defendants owed upon default under the respective lease agreements. As such, the Court entered judgment in favor of Plaintiff CitiCapital Technology as to its four leases in the amount of $141,909.93 plus interest. Additionally, the Court entered judgment in favor of Plaintiff GE as to its four leases in the amount of $214,920.27 plus interest. Pursuant to A.R.S. § 12-341.01, Plaintiffs now seek attorney's fees in connection with this matter and related non-taxable expenses. Plaintiff CitiCapital Technology specifically requests attorney's fees in the amount of $33,109.50 and related costs in the amount of $2,351.53. Plaintiff GE seeks attorney's fees in the amount of $33,313.20 and costs in the amount of $1,968.62. Defendants do not challenge an award of attorney's fees, but only dispute the amount that Plaintiffs seek to recover. Thus, the primary issue before the Court concerns the reasonableness of the amount Plaintiffs seek in attorney's fees.3 II. LEGAL STANDARDS AND ANALYSIS Under Arizona law, in order to award attorney's fees to Plaintiffs, the Court must find that the award of attorney's fees is appropriate and that the fees being sought are reasonable. Plaintiffs argue that they are entitled to attorney's fees and costs under A.R.S. § 12-341.01. They contend further that the amount they are requesting in attorney's fees is reasonable under the circumstances.

Defendants do not challenge the non-taxable costs sought by Plaintiffs, which costs were provided for in the lease agreements. -3Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 3 of 9

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A. Entitlement to Attorney's Fees Plaintiffs argue that they are entitled to attorney's fees pursuant to A.R.S. § 12-341.01, which provides, in relevant part, that "[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees." A.R.S § 12-341.01(A). There is no presumption in favor of awarding attorney's fees as it is a matter left to the court's discretion subject to a number of factors that the court must consider. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1183-84 (Ariz. 1985). In addition to determining that the party requesting attorney's fees was the "successful party" and that the action arose out of a contract, the Court considers a number of factors in assessing the propriety of awarding attorney's fees including: (1) the merits of the defense or claim presented by the unsuccessful party; (2) whether the litigation could have been settled; (3) whether the successful party received all relief sought; (4) the novelty of the legal questions involved; and (5) whether the award of attorney's fees would discourage other parties with tenable claims from litigating contract issues for fear of incurring liability for substantial amounts of attorney's fees. Id. at 1184. However, in the instant case, the Court need not determine whether Plaintiffs are entitled to attorney's fees under A.R.S. § 12-341.01(A) because the parties expressly stipulated in the lease agreements that, in the event of default, Plaintiffs are entitled to reasonable attorney's fees and costs in connection with enforcing the liquidated damages provisions. As A.R.S. § 12-341.01(A) further provides, "[t]his section shall in no manner be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees." Arizona courts have interpreted this proviso to mean that A.R.S. § 12-341.01 is inapplicable when the "parties have provided in their contract the conditions under which attorney's fees may be recovered." Sweis v. Chatwin, 585 P.2d 269, 272 (Ariz. Ct. App. 1978). The court does not enjoy the same discretion it is given under A.R.S. § 12341.01 when a contractual provision for attorney's fees exists and must enforce the provision according to its terms. Chase Bank of Arizona v. Acosta, 880 P.2d 1109, 1121 (Ariz. Ct. App. 1994). If A.R.S. § 12-341.01 were held to be applicable in situations in which the parties had -4Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 4 of 9

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contracted for attorney's fees, "it would in effect cancel the unqualified contractual right to recover attorney's fees given to the successful party by their agreement, and substitute in its place the purely discretionary or permissive right given by the statute." Sweis, 585 P.2d at 272; see also Pioneer Roofing Co. v. Mardian Constr. Co., 733 P.2d 652, 668 (Ariz. Ct. App. 1986) ("Where a contract has a unilateral provision permitting one party to recover attorneys' fees under certain circumstances, § 12-341.01(A) requires that the contract provision be applied when the party seeking recovery of fees is the one allowed recovery under the unilateral contract provision."). Here, each lease agreement executed by and between the parties contains a provision which unilaterally permits the respective Plaintiff, in the event of a default, to recover reasonable attorney's fees and costs associated with enforcing its remedies under the lease agreement. Because the lease agreements expressly provide for attorney's fees, the Court finds that Plaintiffs are entitled to recover reasonable attorney's fees and costs in connection with having to litigate this matter. B. Reasonableness of Fees Having found that Plaintiffs are entitled to attorney's fees and costs as provided in the lease agreements, the Court must now determine whether the requested fees are reasonable. When analyzing attorney's fees for reasonableness, the Court must determine whether the hourly billing rate is reasonable and the hours expended on the case are reasonable. Schweiger v. China Doll Rest., Inc., 673 P.2d 927, 931-33 (Ariz. Ct. App. 1983). In determining a reasonable hourly rate, "there is no need to determine the reasonable hourly rate prevailing in the community for similar work because the rate charged by the lawyer to the client is the best indication of what is reasonable under the circumstances of the particular case." Id. at 931-32. Nevertheless, the Court is not bound by the rate agreed upon by the attorney and client and may accordingly, as it sees fit, adjust the rate upward or downward. Id. at 932. To pursue collection on the deficiencies owed by Defendants under the respective lease agreements, Plaintiffs each retained the services of solo practitioner David N. Ingrassia, -5Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 5 of 9

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who has practiced collection and bankruptcy law for over nineteen years. Although Mr. Ingrassia's normal hourly rate is $225.00, he charged each Plaintiff a discounted hourly rate of $150.00. Additionally, paralegal time was billed to each Plaintiff at the normal hourly rate of $90.00. Thus, given the years of experience Mr. Ingrassia holds in this area of litigation and the fact that Plaintiffs were billed at a discounted rate, the Court finds that the hourly rate charged to each Plaintiff is reasonable. The Court further finds that the hourly rate charged for paralegal services is similarly reasonable. In analyzing the reasonableness of hours expended, the Court looks to those hours which would be expended by a "reasonable and prudent lawyer." Schweiger, 673 P.2d at 932. Crucial to this inquiry are the actual time records kept by the attorney on behalf of his or her client. Id. at 932-33. Among other things, the time records should indicate the type of legal services provided, the dates on which those services were provided, the attorney(s) providing the services, and the amount of time spent in rendering the services. Id. at 932. Thus, "[i]n 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." Id. In his affidavit in support of Plaintiffs' fee application, Mr. Ingrassia asserts that, in pursuing the collection matters against Defendants, he spent 206.9 hours on behalf of Plaintiff CitiCapital Technology and 207.4 hours on behalf of Plaintiff GE.4 In addition, Plaintiffs provided the Court with the time records of attorney services rendered. Based on the affidavit and time records, Defendants raise a number of arguments questioning the reasonableness of the time expended by Plaintiffs' attorney.

Additionally, Mr. Ingrassia asserts that paralegals collectively spent 23.05 hours on behalf of Plaintiff CitiCapital Technology in its collection matter and 24.48 hours on behalf of Plaintiff GE in its collection matter. -6Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 6 of 9

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Defendants first allege that no discovery was taken in the matter. But, as Plaintiffs point out, Defendants served Plaintiffs with a number of extensive discovery requests to which Plaintiffs responded.5 The Court finds this argument is without merit. Defendants next argue that no more than five hours should have been spent by Plaintiffs' attorney in preparation of their motion for summary judgment. However, Plaintiffs' motion for summary judgment was supported by affidavits containing voluminous exhibits pertaining to their claim, which clearly was a time-consuming task. Limiting preparation time to five hours is not reasonable. Again, the Court finds that Defendants' argument is without merit. Additionally, Defendants argue that no more than $4,000.00 in Plaintiffs' attorney fees should be attributed to trial preparation, including the time spent on copying and filing records and delivering closing arguments. Given Plaintiffs' attorney's hourly rate, the amount Defendants deem reasonable would roughly calculate to twenty seven hours of time spent in preparing for the three-day bench trial for both Plaintiffs. Plaintiffs contend that the time spent in trial preparation, which clearly exceeded twenty seven hours, was reasonable because Plaintiffs were required to prove each element of their claims against Defendants in great detail at trial. The Court agrees with Plaintiffs. Accordingly, Defendants' argument is without merit. Finally, the Court finds that Mr. Ingrassia's affidavit contains sufficient detail to allow the Court to assess the reasonableness of the fees sought by Plaintiff. As such, after reviewing the time records contained in the affidavit, the Court concludes that the amount requested by Plaintiffs in attorney's fees and non-taxable costs is reasonable. Certainly, given the amount of experience Plaintiffs' attorney has in commercial debt collection and the fact that Plaintiffs were billed at a discounted hourly rate, the hourly billing rate of $150.00 is reasonable. Also, the amount of time expended by Plaintiffs' attorney is reasonable,

These discovery requests were in the form of interrogatories, requests for production, and requests for admission. -7Case 2:03-cv-01587-JAT Document 119 Filed 11/22/2006 Page 7 of 9

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especially in light of the relative complexity of the case and the fact that the matter has been ongoing for nearly three years. Moreover, although the amount sought in attorney's fees need not be proportional to the amount of damages recovered at trial, especially if a contingent fee was not agreed upon by the attorney and client, the Court finds persuasive the fact that the amount of attorney's fees requested on behalf of both Plaintiffs is less than twenty percent of the amount of damages awarded at trial, excluding interest. III. CONCLUSION As expressly provided for in the lease agreements executed by and between Plaintiffs and Defendants, Plaintiffs are entitled to reasonable attorney's fees and costs associated with collecting any outstanding deficiencies owed by Defendants under the lease agreements. Furthermore, the hourly billing rate and number of hours expended by Plaintiffs' attorney in this matter is reasonable. Therefore, the Court finds that an award of attorney's fees in the amount of $33,109.50 for Plaintiff CitiCapital Technology and $33,313.20 for Plaintiff GE is reasonable and appropriate. The Court similarly finds the amounts requested in non-taxable costs of $2,351.53 for Plaintiff CitiCapital Technology and $1,968.62 for Plaintiff GE to be reasonable and appropriate. Accordingly, IT IS ORDERED that Plaintiffs' Application For Attorney's Fees and Related NonTaxable Expenses (Doc. # 98) is granted as follows: The Court awards Plaintiff CitiCapital Technology $33,109.50 in attorney's fees and $2,351.53 in non-taxable costs. The Court awards Plaintiff GE $33,313.20 in attorney's fees and $1,968.62 in nontaxable costs. IT IS FURTHER ORDERED that the Clerk of the Court shall enter judgment in the amount of $35,461.03, plus interest from the date of judgment until paid, in favor of Plaintiff CitiCapital and against Defendant Grant Goodman.

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IT IS FURTHER ORDERED that the Clerk of the Court shall enter judgment in the amount of $35,281.82, plus interest from the date of judgment until paid, in favor of Plaintiff GE and against Defendants Grant and Teri Goodman. DATED this 22nd day of November, 2006.

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