Free Response to Motion - District Court of Arizona - Arizona

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BROENING OBERG WOODS & WILSON
PROFESSIONAL CORPORATION

LAW OFFICES

1122 EAST JEFFERSON STREET PHOENIX, ARIZONA 85034 POST OFFICE BOX 20527 PHOENIX, ARIZONA 85036 TELEPHONE: (602) 271-7700 FACSIMILE: (602) 258-7785

James R. Broening/Bar No. 004036 E-mail: [email protected] Wm. Rinaudo Phillips/Bar No. 019949 E-mail: [email protected]
Attorneys for Defendant State Farm Fire and Casualty Company

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA CIV-03-1415 PHX ROS DEFENDANT'S RESPONSE TO PLAINTIFF'S MEMORANDUM IN SUPPORT OF AWARD OF ATTORNEY FEES

12 JERRY SIMMS, a single man, 13 14 v. 15 STATE FARM FIRE AND CASUALTY COMPANY, an Illinois corporation; ABC 16 CORPORATIONS I-X; JOHN DOES I-X, 17 18 19 20 21 22 23 24 25 26 Defendant. Plaintiff,

Defendant offers the following Response to Plaintiff's Motion for Award of Attorney Fees (August 7, 2006) and Plaintiff's Memorandum in Support of Award of Attorney Fees and Related Non-Taxable Expenses (September 22, 2006). I. A.R.S. 12-341.01 DOES NOT PROVIDE FOR THE RECOVERY OF NONTAXABLE COSTS AS A COMPONENT OF ATTORNEYS' FEES. In his Memorandum, Plaintiff argues that, under A.R.S. §12-341.01, he is entitled to be reimbursed his litigation costs incurred in his electronic presentation at trial. Under Arizona law, such expenditures are not a proper consideration as a component of attorneys' fees.

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Plaintiff is correct in his argument that billings of legal assistants may be a recoverable component of attorney fees under A.R.S. §12-341.01. What plaintiff fails to confront, however, is the fact that the record contains no evidence whatsoever that his trial exhibit presenter, Mr. Matt Horn, is a legal assistant. A party seeking fees under this statute has the burden of proving her entitlement thereunder. Woerth v. City of Flagstaff, 167 Ariz. 412, 808 P.2d 297 (App. 1990). In Continental Townhouses East Unit v. Brockbank, 152 Ariz. 537, 733 P.2d 1120 (App. 1986), the court held that fees for legal work performed by legal assistants and law clerks may be recoverable under the statute. In so holding, the court adopted the following definition of "legal assistant": A legal assistant is a person, qualified through education, training, or work experience, who is employed . . . in a capacity or function which involves the performance, under the ultimate direction and supervision of an attorney, of specifically-delegated substantive legal work, . . . . 733 P.2d at 1128. In finding that the legal assistant "must perform legal work and be supervised by an attorney," Id., the court indicated that the fee application must include specificity demonstrating the existence of such work. Here, nothing in the record suggests that Mr. Horn is a legal assistant, or that Mr. Horn performed substantive legal work. Rather, the record indicates that Mr. Horn was hired a week before trial to organize plaintiff's exhibits and assist with their presentation at trial. In Ahwatukee Custom Estates Mgmt. Assoc., Inc. v. Bach, 193 Ariz. 401, 973 P.2d 106 (1999), the Arizona Supreme Court addressed this very topic. The court held that direct, out-of-pocket expenditures incurred in pursuing civil litigation are not recoverable under A.R.S. §12-341. According to the Ahwatukee Court: Designating non-taxable costs as attorneys' fees would require that we expand the definition of fees beyond any boundary that we are prepared to accept. 973 P.2d at 108. In so holding, the court agreed with earlier Court of Appeals' decisions
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holding that costs associated with legal assistants and computerized legal research could be properly considered as a component of attorneys' fees. In doing so, the court stated: The common understanding permeating these decisions is that an award for fees should reimburse the attorney or surrogate for his or her legal training and knowledge as it relates to the legal services rendered . . . . Id. at 109. The costs incurred in the electronic presentation of trial exhibits simply does not constitute the kind of substantive legal work described in Ahwatukee or Continental. Rather, such expenses are indistinguishable from the non-taxable costs at issue in Ahwatukee, 973 P.2d at 107 (delivery and messenger service charges, copying expenses, fax charges, postage and long distance charges). Accordingly, the costs incurred by plaintiff in electronically presenting his trial exhibits may not be considered. II. PLAINTIFF'S ELEVENTH HOUR POST VERDICT FEE ADDENDUM IS IMPROPER AND SHOULD BE DISREGARDED. At the inception of this litigation, plaintiff negotiated a contingency fee agreement with his lawyer. That fee agreement was unquestionably in force and effect until eleven days ago.1 On the day plaintiff filed his Memorandum in support of the instant motion, he signed an addendum to the fee agreement purporting to abandon the contingency fee in favor of an hourly rate.2 Plaintiff should not be allowed to enjoy the benefits of a contingent fee agreement through verdict only to retroactively modify the agreement in an attempt to inflate his post trial recovery. Plaintiff's original fee agreement of October 1, 2002, indicated that proceedings subsequent to verdict, "such as a new trial or an appeal" would be subject to an additional agreement. Here, plaintiff seeks to rely upon such language in an attempt to burden

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See Exhibit 4 to Plaintiff's Memorandum in Support of Award of Attorney Fees. Id.

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defendant with over $10,000 of hourly based legal fees, including 23 hours his attorney billed for preparation of the Memorandum in Support of Award of Attorney Fees. This Court has previously rejected similar attempts to amend fee agreements for the sole purpose of increasing recovery of attorney fees. Gametech International, Inc. v. Trend Gaming Systems, LLC, 380 F.Supp 2d 1084, 1094-95 (D.Ariz. 2005). In Gametech, the court addressed "the propriety of a post-verdict modification to increase the contingency component of such an agreement." Id. at 1093. In refusing to apply the post-verdict modification, the court stated as follows: Trend's effort to increase its attorneys' fees by increasing the contingency fee from 8% to 22% after the verdict was entered and attempting to now have Gametech pay the hirer fees is improper. * * * In view of the late date on which Trend and its counsel modified their fee agreement and the drastic increase, from 8% to 22%, in the contingency fee, the Court declines to base an award of attorneys' fee award [sic] on the May 2005 Agreement. . . . While a prevailing party and its counsel are free to voluntarily renegotiate a binding fee agreement between themselves at any time, this Court will not foist the burden of increased fees upon the losing party post-verdict with the benefit of the prevailing party's 20/20 hindsight. In the Court's view, if such an award were imposed upon the unsuccessful party, it would be an unreasonable one. 380 F.Supp 2d at 1094. The result herein should be no different. Any award of attorneys' fees to plaintiff should be based upon the original October 1, 2002 fee agreement. A.R.S. § 12-341.01(B) reads, in part, as follows: The award . . . need not equal or relate to the attorney's fees actually paid or contracted, but such award may not exceed the amount paid or agreed to be paid. (Emphasis added). Plaintiff's original fee agreement obligated plaintiff to pay his
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attorney 30% of any sums recovered. This 30% contingent fee operates as "a ceiling on the amount of attorneys' fees that may be recovered" under A.R.S. 12-341.01. Continental, 733 P.2d at 1129; see also, Markus v. Fox, 155 Ariz. 524, 525-26, 747 P.2d 1223, 1224-25 (App. 1988); Pasco Industries, Inc. v. Talco Recycling, Inc.,195 Ariz. 50, 65, 985 P.2d 535, 550 (App. 1998). As a result, any award of attorney's fees to plaintiff must be limited to 30% of the ultimate judgment herein. III. APPLICATION OF ASSOCIATED INDEMNITY FACTORS. As set forth by plaintiff, in exercising discretion under A.R.S. §12-341.01, courts are to be guided by the factors set for in Associated Indemnity Corp. v. Warner, 153 Ariz. 567, 694 P.2d 1181 (1985). In applying the Associated Indemnity factors, plaintiff has asserted that "[t]his matter could not have been settled." In attempting to support this statement, plaintiff relies upon a letter from defense counsel transmitting defendants' original Answer filed in this matter. This single letter, written at the inception of the lawsuit, hardly establishes that the present case defied settlement efforts. In fact, as plaintiff knows, his own unwillingness to participate in settlement negotiations drastically eliminated any chance of avoiding the eight day trial herein. In September of 2005, plaintiff, during a break in his deposition, told defense counsel, in no uncertain terms, that his claims against State Farm would never be settled.3 At the final pretrial conference, defense counsel was surprised to hear that his opponent thought that settlement efforts might be productive. Accordingly, defense counsel wrote to his opponent suggesting that the parties pursue mediation.4 Given plaintiff's prior emphatic statements regarding settlement, defense counsel was not at all surprised when his opponent, shortly thereafter, advised that mediation efforts were unlikely to be productive and would not be pursued. Simply put, the record herein does not support a
See Affidavit of William Phillips submitted in opposition to the present motion and filed herewith. 4 Id., Exhibit 2.
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conclusion that this matter "could not have been settled." More accurately, the record indicates that the case's susceptibility to resolution at mediation will never be known due to plaintiff's refusal to participate in any alternate dispute resolution mechanism. In his Memorandum, plaintiff also claims that he "prevailed on all relief sought with the exception of . . . punitive damages." Once again, the record supports a contrary conclusion. As the Court may recall, plaintiff's initial claims herein included a $1,000,000 claim for additional living expenses. Following substantial briefing and oral argument, all but $3,177.00 of that claim was eliminated on summary judgment by Order of December 15, 2004. The Court may also recall that plaintiff requested over $100,000 of contract damages in final argument to the jury.5 According to the jury's verdict, the majority of these contract damages were rejected. Although plaintiff did prevail, to some degree, on his claims of breach of contract and bad faith, he did not prevail on "all relief sought beyond punitive damages." IV. CONCLUSION. Plaintiff is not entitled to an award of non-taxable costs under A.R.S. §12-341. Any award of attorney fees under that statute is discretionary, and the Court is entitled to consider and apply all of the Associated Indemnity factors. In accordance with the express statutory language, any award must not exceed the amount agreed to be paid, i.e., 30% of all amounts recovered. RESPECTFULLY SUBMITTED this 3rd day of October, 2006.

BROENING OBERG WOODS & WILSON, P.C.

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See, Plaintiff's Memorandum in Support of Award of Attorney Fees at page 7, line 16.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -7By /s/Wm.Rinaudo Phillips #019949 James R. Broening Wm. Rinaudo Phillips 1122 E. Jefferson Street Phoenix, Arizona 85034 P. O. Box 20527 Phoenix, Arizona 85036 Attorneys for Defendant State Farm Fire and Casualty Company

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S:\BADFAITH\State Farm\Simms\Pleadings\Resp Memo re Atty Fees.doc

CERTIFICATE OF SERVICE I hereby certify that on October 3, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Joseph C. Dolan 1650 North First Avenue Phoenix, Arizona 85003 Attorney for Plaintiff HONORABLE ROSLYN O. SILVER United States District Court Sandra Day O'Connor U.S. Courthouse, Suite 401 West Washington Street, SPC Phoenix, AZ 85003

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