Free Memorandum - District Court of Arizona - Arizona

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JOSEPH C. DOLAN, ESQ. (007376) 1650 North 1st Avenue Phoenix, Arizona 85003 (602) 266-7667 Fax (602) 277-9839 Attorney for Plaintiff IN THE UNITED STATES DISTRICT COURT IN AND FOR DISTRICT OF ARIZONA JERRY SIMMS, a single man, Plaintiff, vs STATE FARM FIRE AND CASUALTY COMPANY, an Illinois corporation; ABC CORPORATIONS I-X; JOHN DOES I-X, Defendants. MEMORANDUM IN SUPPORT OF AWARD OF ATTORNEYS FEES AND RELATED NON-TAXABLE EXPENSES CV-03-1415-PHX-ROS

Pursuant to L.R. Civ. 54.2, plaintiff Jerry Simms hereby supplies to the Court his memorandum of points and authorities in support of his motion for award of attorneys fees and nontaxable expenses. 1. Eligibility

Judgment was entered in this matter on July 24, 2006 after a jury verdict was entered in favor of plaintiff in the amount of $141,000. This was a breach of contract/bad faith action which arises from the contract (policy of insurance) between plaintiff and his insurer, defendant State Farm Fire and Casualty Company (hereafter "defendant"). Attorneys fees are awardable to the prevailing party pursuant to A.R.S. §12-341.01. Plaintiff was the prevailing party in this action. Plaintiff received a verdict in his favor in the amount of $41,000 on the breach of contract claims. The breach of contract claims included claims for items of structural damage for which defendant had not provided compensation. The claim also included expenses for plaintiff's week-long stay at the Biltmore Hotel during a period of time when the home was arguably uninhabitable.

Case 2:03-cv-01415-ROS

Document 217

Filed 09/22/2006

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Plaintiff also prevailed on his claim of bad faith against defendant. The jury awarded $100,000 in damages as to the bad faith claim. Plaintiff's bad faith claim was based principally upon defendant's failure to acknowledge the obligation to compensate plaintiff for items of structure damage including color matching problems and heat damage which had never been addressed through defendant's prior adjustment practices. The amount of damages awarded by the jury certainly supports the claim that plaintiff sustained his burden of proving the elements of these claims. Throughout the trial and in closing argument, defendant's counsel argued that defendant had already "overcompensated" the plaintiff for the damages sustained as the result of the fire. Obviously, the jury did not agree with defendant. As the prevailing party, plaintiff is eligible for an award of his attorneys fees in this insurance breach of contract/bad faith action. See Sparks v Republic Nat'l Life Ins. Co., 132 Ariz. 529, 544, 647 P.2d 1127, 1142 (1982). Plaintiff also requests fees incurred by legal assistants specially retained for the trial for the purposes of organizing, handling, and publishing exhibits to the jury during the trial. The bill for these services from "Sanction," the organization in question, were in the amount of $9,308.00. Said bills of legal assistants are recoverable. See Continental Townhouses E. Unit 1 Association v Brockbank, 152 Ariz. 537, 152 Ariz. 544, 733 P.2d 1127 (Ariz. App. 1986); In the Matter of the Liquidation of: AzStar Casualty Co., 189 Ariz. 27, 28, 938 P.2d 76, 77 (Ariz. App. 1996). Plaintiff did not prevail on the punitive damages claim. However, the discovery that was relevant to and a necessary part of the punitive damage claim also apply equally to the bad faith claim. Plaintiff prevailed on the bad faith claim and should be entitled to fees even if plaintiff was not successful on the punitive damage issue. See Orfaly v Tucson Symphony Soc'y, 209 Ariz. 260, 266-267, 99 P.3d 1030, 1036-1037 (Div. 2 2004). 2. Entitlement

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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The Court should consider the following factors in determining the entitlement to attorneys fees. These factors are set forth in Associated Indem. Corp. v Warner, 153 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985).

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a. The merits of the claim or defense. Plaintiff established that numerous items of structure damage had not been adjusted and paid for by defendant. These included a guesthouse that had only been partially "re-coated" with stucco which left a very unsatisfactory cosmetic appearance; staining of the stone flooring in the guesthouse; heat damage to the roof of the main house; heat damage to the exterior "EIFS" coating of the main house which will require retexturing and re-coating; damage to metal "shade boxes" used throughout the main residence and the guesthouse resulting from smoke damage and/or activities of the fire department during the fire suppression effort; and other various items including damage to the butcher block in the kitchen. Defendant contended throughout the case that it had already "overpaid" the plaintiff and that plaintiff was not entitled to even a single penny in compensation. On the merits of the contract action, plaintiff obviously prevailed and defendant was obviously unsuccessful. On the bad faith action, defendant contended that it had already "bent over backwards" to pay every penny to which plaintiff was entitled for damages resulting from the covered fire loss. Again, defendant obviously was unsuccessful in its arguments and plaintiff was the prevailing party. Perhaps the most significant item of evidence included the glaring cosmetic problems still displayed on the exterior of both structures for which defendant had not offered to pay and argued throughout the trial that it was not obligated to pay. Photographs demonstrated a gross discrepancy in the color coatings of the guesthouse. Testimony from Ron Macdonald, the stucco contractor from Horizon Stucco, attested to the fact that Ken Ridolfi was told that his efforts to re-coat only a part of the guesthouse was likely to result in a color matching problem. Ron Cope, the representative of the "Dry-vit" system coating used on this home testified that the "industry standard" was to re-coat the entire structure when it was impossible to find a definite 90-degree corner to end the re-coating process. Throughout the trial, despite this evidence, defendant continued to insist that it did not owe even a penny in compensation to plaintiff to address this problem. This item of evidence alone was enough to persuade the jury that defendant had acted in bad faith. But this was not the only item of evidence, as the Court well knows. Defendant refused to pay for a "laundry list" of anywhere from 12 to 15 items of damage. Defendant refused to pay for any power washing of the roof of the residence even

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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though it was easy to see from the video taken from the night of the fire that plaintiff's residence was subjected to tremendous heat and smoke. Defendant refused to investigate heat damage to the house even though palm trees surrounding the house were charred and burned, demonstrating that they were subjected to temperatures exceeding 450 degrees Fahrenheit. Defendant refused to pay for obvious damage for the floor of the guesthouse even though it had been presented with a letter from Nancy Brunkhorst attesting to the fact that this damage was not present when the "walk through" process of the construction of the home had been completed just six months prior to the fire. Photographs taken within days after the fire showed the guesthouse floor covered with black ash and soot. Obviously, the plaintiff's breach of contract and bad faith claims were meritorious. b. Whether the parties could have avoided or settled the litigation. This matter could not have been settled. Defendant's position from the beginning of this litigation was that plaintiff's claims were meritless. See Exhibit 1, attached correspondence from defense counsel proclaiming that defendant had already "generously" paid the plaintiff for these damages. c. Whether assessing fees against the unsuccessful party will cause an extreme hardship. Defendant can easily bear the burden of the present attorney fee award. There is no reason to believe that assessing attorneys fees will "cause an extreme hardship." d. Whether the successful party prevailed on all relief sought. Plaintiff prevailed on all relief sought with the exception of the claim for punitive damages. The discovery relevant to the punitive damage claim, however, was inextricably entwined with the discovery and trial effort related to the bad faith claim. Plaintiff prevailed on the bad faith claim. As such, this is not a factor that should militate in favor of reducing plaintiff's award of attorneys fees. See Orfaly, supra, pp. 209 Ariz. at 266-277.

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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e. The novelty of the legal questions presented. The legal questions in the present matter were not novel. The issues in this case were governed entirely by time-honored insurance bad faith law in the state of Arizona, including Sparks v Republic Nat'l Life Ins. Co., 132 Ariz. 529, 544, 647 P.2d 1127, 1142 (1982). Defendant cannot argue that the present case involved "novel" issues. f. Whether the claims or defenses had been previously adjudicated in Arizona. The entitlement to the types of damages set forth in plaintiff's claims had been previously adjudicated in Arizona. There was nothing novel about the issues presented herein. See Borland v Safeco Ins. Co. of America, 147 Ariz. 195, 709 P.2d 552(App. 1985). g. Whether an award of fees would discourage other parties with tenable defenses from defending legitimate contract issues for fear of incurring liability for substantial amounts of attorneys fees. Plaintiff must submit that defendant and other insurance carriers will not be discouraged from defending legitimate contract issues. Defendant made the mistake in the present case of vigorously defending contract claims that should have been paid. This factor does not militate in favor of allowing any discretionary relief to defendant for the present claim of attorneys fees. 3. Reasonableness of Requested Award

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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Plaintiff claims entitlement to fees as follows: (1) 30% of the amount of the verdict plus post verdict interest at the rate of 10% per annum; (2) $10,375 for all post verdict practice computed and billed on an hourly basis; and (3) $9,308 which was billed by legal assistants (Sanction). a. The time and labor required of counsel. This case was a very labor intensive case. Present counsel was required to conduct a great many on-scene examinations with consultants and experts. He was required to put together a case that involved an examination of defendant's acts and omissions relating to its investigation of numerous items of structure and contents damage including: the roof; exterior surfaces; roof drains; EIFS/stucco; interior finishes including flooring and paint; furniture including kitchen butcher block; carpeting. Plaintiff was required to commandeer the efforts of experts Sidney Abed, Richard

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Andrews, Robert Hutzel and Marc Beckerman. The document production was extensive. Disclosure notebooks occupy seven full size three-ring binders. Defendant filed 27 disclosure statements and plaintiff filed a similar number. The documents files from defendant's files on these matters numbered 2,049 pages. Twelve witnesses were deposed, several of which lasted multiple days. The deposition of plaintiff lasted multiple days. The deposition of Rob Burttram lasted multiple days as did Ken Ridolfi's. The trial in this matter lasted nine court days. When accounting for the trial preparation work practically the entire month of June of 2006 was occupied with the trial of this case. This is a substantial factor which weighs in favor of allowing plaintiff to receive the entire amount claimed in this attorney fee request. b. The novelty and difficulty of the questions presented. The questions presented in this case were not novel but they were somewhat difficult to establish. These were very detailed oriented issues which could not be painted with a broad brush. Proving the case required a great deal of effort to coordinate documentary evidence and photographs to establish the areas where defendant breach its contract with the plaintiff and the requisite "state of mind" to establish bad faith. c. The skill required to perform the legal service properly. Plaintiff's counsel does not profess to be a consummately skilled trial lawyer. Plaintiff's counsel did the best he could to put on the evidence in an efficient manner. Plaintiff presented live testimony through ten witnesses and deposition testimony through two witnesses. In addition, plaintiff organized and presented numerous exhibits from the several hundred exhibits that were admitted into evidence. Plaintiff's counsel can only submit that the trial was handled efficiently by both sides given the vast number of witnesses and exhibits to be considered during the time set aside for trial. d. The preclusion of other employment by counsel because of the acceptance of the action. Plaintiff counsel was not precluded from accepting other cases because of his representation of plaintiff in this matter. The only "preclusion" which took effect was as a result of the time spent in

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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the present case. Essentially, this is not a factor to be considered either for or against the application for attorneys fees. e. A customary fee charged in matters of the type involved. Plaintiff counsel submits that it has become standard in this community to either require a 40% contingent fee in matters of this type or a "blended" fee agreement which allows plaintiff's attorney to claim fees on an hourly basis at the conclusion of the trial. This would allow plaintiff to recover an award of fees equal to the reasonably hourly rate times the number of hours expended if that exceeds the 40% contingent fee agreement. The plaintiff's fee agreement herein is much more conservative. f. Whether the fee agreement is fixed or contingent. The fee agreement between counsel and plaintiff was contingent. If plaintiff counsel did not prevail in this matter, he would have received zero in attorneys fees. g. Time limitations imposed by the client or the circumstances. This factor does not seem to apply. h. The amount of money involved and the results obtained. Plaintiff claimed breach of contract damages in the amount of slightly over $100,000. Plaintiff received a verdict of $141,000. Certainly the attorneys fees claimed are modest in comparison to the amount in controversy. i. The experience, reputation and ability of counsel. Plaintiff counsel would prefer to leave the consideration of this factor to the discretion of the Court. j. The undesirability of the case. This case was "undesirable" from the standpoint of too many issues being involved. While it should be the trial attorney's objective to simplify the issues and not clutter the presentation with too many details, this case really could not be presented by focusing only on one or two structure or content issues. The essence of the case could only be appreciated by viewing the entirety of the

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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issues which were mishandled by defendant's adjusters. Unfortunately, this presented a logistical nightmare for the attorneys. k. The nature and length of the professional relationship between the attorney and the client. This does not seem to be a factor. l. Awards in similar actions. This does not appear to be a factor. m. Any other matters deemed appropriate under the circumstances. Plaintiff requests an award of the fees charged by the legal assistant who assisted in the organization and publication of exhibits during trial. This bill was in the amount of $9,308.00. See invoice attached as Exhibit 2. Additionally, pursuant to the "addendum" entered between counsel and client, counsel is entitled to claim hourly fees at the rate of $250.00 per hour for all post verdict activity. As such, counsel has included a claim in this memorandum for attorneys fees in the amount of $10,375 in addition to the 30% contingent fee recovery based upon the amount of the judgment. 4. Supporting Documentation a. A statement of consultation. See attached, Exhibit 3, certifying that plaintiff's counsel has personally consulted with counsel for defendant and has been unable to satisfactorily resolve the issues. b. Fee agreement. See attached Exhibit 4 (original and addendum). c. Task based itemized statement of fees and expenses. See attached Exhibit 5. d. Affidavit of moving counsel. See attached Exhibit 6.

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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RESPECTFULLY SUBMITTED this 22nd day of September, 2006.

By

s/Joseph C. Dolan 007376 JOSEPH C. DOLAN, ESQ. 1650 North 1st Avenue Phoenix, Arizona 85003 Attorney for Plaintiff

CERTIFICATE OF SERVICE I HEREBY CERTIFY that on September 22, 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: William Phillips, Esq. BROENING OBERG WOODS & WILSON 1122 East Jefferson Phoenix, Arizona 85036 Attorneys for State Farm

JOSEPH C. DOLAN

1650 North First Avenue Phoenix, Arizona 85003

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I HEREBY CERTIFY that on September 22, 2006 I served the attached document by mailing a copy of the following: Hon. Roslyn Silver United States District Court, Suite 624 401 W. Washington Street Phoenix, Arizona 85003-2158

s/Joseph C. Dolan, Esq. 007376 Attorney

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