1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Kasper Smoke Kastle LLC, No. CV-18-00950-PHX-JAT
10 Plaintiff, ORDER
11 v.
12 Atlantic Casualty Insurance Company,
13 Defendant. 14 15 Pending before the Court are dueling motions for attorneys’ fees and costs under 16 Arizona Revised Statutes (“A.R.S.”) §§ 12-341 and 12-341.01. (Docs. 146, 152). Plaintiff 17 Kasper Smoke Kastle LLC (“Plaintiff”) has responded to Defendant Atlantic Casualty 18 Insurance Company’s (“Defendant”) motion, (Doc. 151), but has not replied in support of 19 its own motion. Defendant has both responded, (Doc. 160), and replied, (Doc. 161). The 20 Court now rules on the motions. 21 I. BACKGROUND 22 In 2016, a fire broke out in Plaintiff’s smoke shop and convenience store, damaging 23 the structure and personal property used in connection with the business (“BPP”) housed 24 within. (Doc. 1-1 at 6). Plaintiff held a policy with Defendant and submitted a claim for 25 the fire damage. (Id.). Defendant paid some amounts under the policy, but Plaintiff believed 26 that Defendant had undervalued the BPP and that it was entitled to additional replacement 27 costs for the structure. (Doc. 92 at 2). Thus, Plaintiff filed a lawsuit in Maricopa County 28 Superior Court raising two counts: (1) “Breach of Contract; Breach of Implied Covenant 1 of Good Faith and Fair Dealing” and (2) “Tortious Bad Faith Claims Handling.” (Doc. 1- 2 1 at 7–8). Soon after, Defendant removed the case to federal court. (Doc. 1). 3 The lawsuit was relatively uneventful from that point on until Defendant filed a 4 motion for partial summary judgment. (Doc. 76). That motion sought summary judgment 5 on: (1) Plaintiff’s “action for tortious bad faith and its claim for punitive damages” and (2) 6 the breach of contract claim, but only as it related to the “payment of repairs to the structure 7 at issue.” (Id. at 1). As explained in the summary judgment order, the amount in dispute on 8 the structure portion of Plaintiff’s insurance claim was $10,418.67, which represented the 9 difference between the replacement cost value and actual cash value of the structure. (Doc. 10 92 at 2). As for the BPP, the parties’ dispute centered on how to properly value the contents. 11 (Id.). Plaintiff’s initial adjuster valued the salvageable items at $26,854.54 and Defendant’s 12 adjuster valued the non-salvageable items at $15,004.81. (Id.). Defendant paid Plaintiff 13 both of these amounts. (Id.). Plaintiff rejected its first adjustor’s findings on salvageability 14 and hired a new adjustor who developed its own valuation of the contents, arriving at a 15 retail value of $73,528.08 and BPP value of $137,380.35. (Id. at 2–3). 16 The Court granted Defendant’s partial motion for summary judgment in full. (Doc. 17 92 at 8). The order explained that Plaintiff had put forward no evidence that it had 18 completed the repairs to the structure and the policy required such repairs before covering 19 the structure’s replacement cost value. (Id. at 3–4). Because Defendant had paid all 20 amounts otherwise due for the structure damage, the Court granted summary judgment on 21 the structural loss portion of Plaintiff’s breach of contract claim. (Id. at 4). Turning to the 22 bad faith claim, the Court concluded that no reasonable jury could find that Defendant 23 acted in bad faith because it had: (1) paid all that was due under the policy for the structural 24 loss and (2) paid the amount calculated by Plaintiff’s first adjustor and did not need to 25 accept Plaintiff’s second adjustor’s alternate figure, which was based on values Plaintiff 26 provided. (Id. at 6–7). Thus, the Court entered summary judgment on the entirety of 27 Plaintiff’s bad faith claim and its request for punitive damages. (Id. at 8).1
28 1 There is some dispute in the briefs about how to view the summary judgment order. Defendant argues that the Court entered judgment on at least three out of four, or arguably 1 The case proceeded to trial, before which the Court denied without prejudice three 2 of Defendant’s motions in limine that, collectively, sought to exclude a vast amount of the 3 evidence that Plaintiff planned on introducing. (Doc. 114 at 1). After a four-day trial, the 4 jury found in Plaintiff’s favor and awarded $94,013.59 in damages, (Doc. 127 at 2), and 5 judgment was entered accordingly, (Doc. 133). The pending motions followed. 6 II. DISCUSSION 7 The Court has discretion to award reasonable attorneys’ fees to the successful party 8 in a contested action arising out of a contract. A.R.S. §12-341.01(A). Awarding fees in 9 such cases involves a three-step process. See Lexington Ins. Co. v. Scott Homes Multifamily 10 Inc., No. CV-12-02119-PHX-JAT, 2016 WL 5118316, at *3–5 (D. Ariz. Sept. 21, 2016). 11 The Court first exercises substantial discretion to determine who is the “successful party” 12 in the action. Hall v. Read Dev., Inc., 274 P.3d 1211, 1213 ¶ 7 (Ariz. Ct. App. 2012).2 In a 13 case like this one with multiple claims, courts generally look to the “totality of the 14 litigation” to make that determination. Berry v. 352 E. Va., L.L.C., 261 P.3d 784, 788–89 15 ¶ 22 (Ariz. Ct. App. 2011). Next, the Court exercises its discretion again to determine 16 whether an award of fees to the successful party is appropriate under the factors identified 17 in Associated Indemnity Corporation v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). See 18 Med. Protective Co. v. Pang, 740 F.3d 1279, 1284 (9th Cir. 2013). If it concludes an award 19 to the successful party is appropriate, the Court must finally decide whether that party’s 20 request is reasonable. Maguire v. Coltrell, No. CV-14-1255-PHX-DGC, 2015 WL 21 four out of five, claims in the summary judgment order. (See Doc. 161 at 1 n.1). Plaintiff 22 analyzes the order more along the lines of the complaint, which had only two counts. (See Doc. 151 at 7–8). The Court believes these arguments elevate form over function. Instead 23 of engaging in a claim-counting exercise, the Court chooses to instead premise its analysis on the impact of the order on the litigation. 24 2 As Hall explains, when a written settlement offer is rejected, the second sentence of 25 A.R.S. § 12-341.01(A) narrows that discretion somewhat by requiring courts to engage in the “settlement comparison test” by comparing the rejected offer to the “judgment finally 26 obtained,” including reasonable attorneys’ fees incurred up to the date of the offer. 274 P.3d at 1213–14, 1217 ¶¶ 9, 20. If settling would have been more favorable to the offeree, 27 the statute deems the offeror the successful party from the date of the offer. Id. at 1213 ¶ 9. The briefs mention written settlement offers, but neither party seeks application of the 28 settlement comparison test and, moreover, it is clear that the rejected settlements were less favorable than any “judgment finally obtained.” 1 3999188, at *3 (D. Ariz. July 1, 2015) (citing Schweiger v. China Doll Rest., Inc., 673 P.2d 2 927, 931–32 (Ariz. Ct. App. 1983)). 3 Thus, the essential predicate for an award of attorneys’ fees under A.R.S. § 12- 4 341.01(A) is the existence of a successful party within the meaning of that statute.
Free access — add to your briefcase to read the full text and ask questions with AI
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Kasper Smoke Kastle LLC, No. CV-18-00950-PHX-JAT
10 Plaintiff, ORDER
11 v.
12 Atlantic Casualty Insurance Company,
13 Defendant. 14 15 Pending before the Court are dueling motions for attorneys’ fees and costs under 16 Arizona Revised Statutes (“A.R.S.”) §§ 12-341 and 12-341.01. (Docs. 146, 152). Plaintiff 17 Kasper Smoke Kastle LLC (“Plaintiff”) has responded to Defendant Atlantic Casualty 18 Insurance Company’s (“Defendant”) motion, (Doc. 151), but has not replied in support of 19 its own motion. Defendant has both responded, (Doc. 160), and replied, (Doc. 161). The 20 Court now rules on the motions. 21 I. BACKGROUND 22 In 2016, a fire broke out in Plaintiff’s smoke shop and convenience store, damaging 23 the structure and personal property used in connection with the business (“BPP”) housed 24 within. (Doc. 1-1 at 6). Plaintiff held a policy with Defendant and submitted a claim for 25 the fire damage. (Id.). Defendant paid some amounts under the policy, but Plaintiff believed 26 that Defendant had undervalued the BPP and that it was entitled to additional replacement 27 costs for the structure. (Doc. 92 at 2). Thus, Plaintiff filed a lawsuit in Maricopa County 28 Superior Court raising two counts: (1) “Breach of Contract; Breach of Implied Covenant 1 of Good Faith and Fair Dealing” and (2) “Tortious Bad Faith Claims Handling.” (Doc. 1- 2 1 at 7–8). Soon after, Defendant removed the case to federal court. (Doc. 1). 3 The lawsuit was relatively uneventful from that point on until Defendant filed a 4 motion for partial summary judgment. (Doc. 76). That motion sought summary judgment 5 on: (1) Plaintiff’s “action for tortious bad faith and its claim for punitive damages” and (2) 6 the breach of contract claim, but only as it related to the “payment of repairs to the structure 7 at issue.” (Id. at 1). As explained in the summary judgment order, the amount in dispute on 8 the structure portion of Plaintiff’s insurance claim was $10,418.67, which represented the 9 difference between the replacement cost value and actual cash value of the structure. (Doc. 10 92 at 2). As for the BPP, the parties’ dispute centered on how to properly value the contents. 11 (Id.). Plaintiff’s initial adjuster valued the salvageable items at $26,854.54 and Defendant’s 12 adjuster valued the non-salvageable items at $15,004.81. (Id.). Defendant paid Plaintiff 13 both of these amounts. (Id.). Plaintiff rejected its first adjustor’s findings on salvageability 14 and hired a new adjustor who developed its own valuation of the contents, arriving at a 15 retail value of $73,528.08 and BPP value of $137,380.35. (Id. at 2–3). 16 The Court granted Defendant’s partial motion for summary judgment in full. (Doc. 17 92 at 8). The order explained that Plaintiff had put forward no evidence that it had 18 completed the repairs to the structure and the policy required such repairs before covering 19 the structure’s replacement cost value. (Id. at 3–4). Because Defendant had paid all 20 amounts otherwise due for the structure damage, the Court granted summary judgment on 21 the structural loss portion of Plaintiff’s breach of contract claim. (Id. at 4). Turning to the 22 bad faith claim, the Court concluded that no reasonable jury could find that Defendant 23 acted in bad faith because it had: (1) paid all that was due under the policy for the structural 24 loss and (2) paid the amount calculated by Plaintiff’s first adjustor and did not need to 25 accept Plaintiff’s second adjustor’s alternate figure, which was based on values Plaintiff 26 provided. (Id. at 6–7). Thus, the Court entered summary judgment on the entirety of 27 Plaintiff’s bad faith claim and its request for punitive damages. (Id. at 8).1
28 1 There is some dispute in the briefs about how to view the summary judgment order. Defendant argues that the Court entered judgment on at least three out of four, or arguably 1 The case proceeded to trial, before which the Court denied without prejudice three 2 of Defendant’s motions in limine that, collectively, sought to exclude a vast amount of the 3 evidence that Plaintiff planned on introducing. (Doc. 114 at 1). After a four-day trial, the 4 jury found in Plaintiff’s favor and awarded $94,013.59 in damages, (Doc. 127 at 2), and 5 judgment was entered accordingly, (Doc. 133). The pending motions followed. 6 II. DISCUSSION 7 The Court has discretion to award reasonable attorneys’ fees to the successful party 8 in a contested action arising out of a contract. A.R.S. §12-341.01(A). Awarding fees in 9 such cases involves a three-step process. See Lexington Ins. Co. v. Scott Homes Multifamily 10 Inc., No. CV-12-02119-PHX-JAT, 2016 WL 5118316, at *3–5 (D. Ariz. Sept. 21, 2016). 11 The Court first exercises substantial discretion to determine who is the “successful party” 12 in the action. Hall v. Read Dev., Inc., 274 P.3d 1211, 1213 ¶ 7 (Ariz. Ct. App. 2012).2 In a 13 case like this one with multiple claims, courts generally look to the “totality of the 14 litigation” to make that determination. Berry v. 352 E. Va., L.L.C., 261 P.3d 784, 788–89 15 ¶ 22 (Ariz. Ct. App. 2011). Next, the Court exercises its discretion again to determine 16 whether an award of fees to the successful party is appropriate under the factors identified 17 in Associated Indemnity Corporation v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). See 18 Med. Protective Co. v. Pang, 740 F.3d 1279, 1284 (9th Cir. 2013). If it concludes an award 19 to the successful party is appropriate, the Court must finally decide whether that party’s 20 request is reasonable. Maguire v. Coltrell, No. CV-14-1255-PHX-DGC, 2015 WL 21 four out of five, claims in the summary judgment order. (See Doc. 161 at 1 n.1). Plaintiff 22 analyzes the order more along the lines of the complaint, which had only two counts. (See Doc. 151 at 7–8). The Court believes these arguments elevate form over function. Instead 23 of engaging in a claim-counting exercise, the Court chooses to instead premise its analysis on the impact of the order on the litigation. 24 2 As Hall explains, when a written settlement offer is rejected, the second sentence of 25 A.R.S. § 12-341.01(A) narrows that discretion somewhat by requiring courts to engage in the “settlement comparison test” by comparing the rejected offer to the “judgment finally 26 obtained,” including reasonable attorneys’ fees incurred up to the date of the offer. 274 P.3d at 1213–14, 1217 ¶¶ 9, 20. If settling would have been more favorable to the offeree, 27 the statute deems the offeror the successful party from the date of the offer. Id. at 1213 ¶ 9. The briefs mention written settlement offers, but neither party seeks application of the 28 settlement comparison test and, moreover, it is clear that the rejected settlements were less favorable than any “judgment finally obtained.” 1 3999188, at *3 (D. Ariz. July 1, 2015) (citing Schweiger v. China Doll Rest., Inc., 673 P.2d 2 927, 931–32 (Ariz. Ct. App. 1983)). 3 Thus, the essential predicate for an award of attorneys’ fees under A.R.S. § 12- 4 341.01(A) is the existence of a successful party within the meaning of that statute. 5 Defendant, however, makes (at best) only a cursory argument that it has prevailed, focusing 6 nearly all of its efforts on whether an award is appropriate under the Warner factors. (Doc. 7 146 at 3–7). Those factors do not address which party has succeeded and are applied only 8 after that determination has been made. Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 9 874 P.2d 982, 987 (Ariz. Ct. App. 1994). Defendant’s argument addressing whether it has 10 succeeded extends no further than its unadorned assertion that, because the Court granted 11 summary judgment on bad faith, it is eligible for fees because it is in the same position as 12 the insurer that received fees in Schwartz v. Farmers Insurance Company of Arizona, 800 13 P.2d 20 (Ariz. Ct. App. 1990). (Docs. 146 at 3; 160 at 6). Any surface-level similarity 14 between the two cases evaporates on closer examination. In Schwartz, the contract claim 15 was for a mere $2,000 whereas the bad faith claim requested punitive damages in an 16 amount that would “punish” a company worth $266,437,727 and was described as the 17 “major issue to be decided in the litigation.” Id. at 25. The case at bar is readily 18 distinguishable given that Plaintiff’s breach of contract claim was for a far greater amount. 19 Moreover, the bad faith claim was seemingly a relatively minor issue at the summary- 20 judgment stage. Plaintiff’s only evidence of bad faith was Defendant’s purported failure to 21 inform Plaintiff why it had not paid additional replacement costs for the structural damage 22 and its refusal to jointly inspect the BPP. (Doc. 92 at 6–7). In the end, Defendant provides 23 nothing else that would allow the Court to conclude that it was successful, and the Court 24 simply will not act as Defendant’s lawyer and invent arguments on its behalf. 25 Plaintiff, for its part, argues that it is the successful party under the totality-of-the- 26 litigation test because it obtained a jury verdict and, even though summary judgment was 27 entered on its bad faith claim, its claims were “factually interrelated” and “aimed at 28 achieving the same relief: recovery of the ‘contract’ damages.” (Doc. 152 at 3). It points 1 out that a party can still be successful under A.R.S. § 12-341.01(A) despite failing to obtain 2 all the relief sought. (Id. at 4). None of these points, however, are dispositive. 3 While a monetary award is “an important item to consider” in the successful-party 4 analysis, Ocean W. Contractors, Inc. v. Halec Constr. Co., 600 P.2d 1102, 1105 (Ariz. 5 1979), the Court cannot look past the fact that, in addition to losing its bad faith claim at 6 summary judgment, Plaintiff obtained much less than half the relief that it sought at trial, 7 (see Doc. 146 at 2). Nor can the Court accept Plaintiff’s assertion that its bad faith claim 8 simply sought what it was owed under the policy. Although some aspects of the damages 9 available to Plaintiff for both of its claims might have overlapped, it is clear that Plaintiff 10 would have been entitled to prove damages beyond what was owed under the policy had 11 its bad faith claim survived summary judgment. Rawlings v. Apodaca, 726 P.2d 565, 577 12 (Ariz. 1986) (explaining that, when tort damages are available in an insurance bad faith 13 claim, the insured can recover for “all the losses caused by defendant’s conduct, including 14 damages for pain, humiliation and inconvenience, . . . pecuniary losses,” and punitive 15 damages in an appropriate case). How Plaintiff would have presented its theory of tort 16 damages, or any entitlement to punitive damages, is a guessing game that the Court will 17 not indulge in.3 The Court agrees with Plaintiff that a complete victory has never been the 18 sine qua non of the successful-party analysis, Lee v. ING Inv. Mgmt., LLC, 377 P.3d 355, 19 358 ¶ 10 (Ariz. Ct. App. 2016), but is nevertheless unable to conclude Plaintiff is the 20 successful party given the very limited amount of success that it experienced. 21 Based on the verdict awarding Plaintiff a portion of the money it sought, and the 22 summary judgment order, Arizona law supports a finding that neither party is successful 23 within the meaning of A.R.S. § 12-341.01(A). See, e.g., Med. Protective Co., 740 F.3d at 24 1283 n.3 (“If there is ‘no clear successful party,’ such as when the jury returns a partial 25 verdict, it may be proper for the court to find that there was no successful party.” (first 26 quoting Bank One, Ariz. v. Rouse, 887 P.2d 566, 571 (Ariz. Ct. App. 1994); and then citing
27 3 Defendant asserts that Plaintiff had taken the position that a $400,000 settlement was warranted in light of the bad faith claim but the record is devoid of any evidence indicating 28 what the source of Plaintiff’s bad faith damages would have been other than the contract. (Doc. 146 at 10). 1|| Kaman Aerospace v. Ariz. Bd. of Regents, 171 P.3d 599, 609 (Ariz. Ct. App. 2007))); □□ Conlon Grp. of Ariz. v. CNL Biltmore Real Estate, No. CV-08-965-PHX-FJM, 2010 WL 742620, at *1 (D. Ariz. Feb. 24, 2010); Liss v. Exel Transp. Servs. Inc., No. CV-04-2001- PHX-SMM, 2009 WL 10708576, at *5 (D. Ariz. July 2, 2009); First Ascent Ventures Inc. □□ v. DLC Dermacare LLC, No. CV06-1794-PHX-JAT, 2007 WL 1876376, at *2 (D. Ariz. 6|| June 27, 2007). Accordingly, the Court will deny both parties’ motions for attorneys’ fees.* 7\| I. CONCLUSION 8 Based on the foregoing, 9 IT IS ORDERED that Plaintiff's Motion for Attorneys’ Fees and Costs (Doc. 152) 10 || and Defendant’s Motion for Attorneys’ Fees and Costs (Doc. 146) are DENIED. 11 Dated this 3rd day of April, 2020. 12 13 A 14 James A. Teilborg 15 Senior United States District Judge 16 17 18 19 20 21 22 23 24 25 26 97 * The foregoing analysis applies equally to both eas request for costs, which also turns on the existence of a successful party. A.R.S. § 12-341 (“The successful party to a civil □□ Stherwise provided by law."); Watson Constr. Co, v. Amfac Mortg, Corp., 606 □□□□ 431. 435—36 (Ariz. Ct. App. 1979). -6-