1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Wine Education Council, No. CV-19-02235-PHX-SMB
10 Plaintiff, ORDER
11 v.
12 Arizona Rangers,
13 Defendant. 14 15 Pending before the Court are Defendant/Third-Party Plaintiff Arizona Rangers’ 16 (“AZR”) and Counterclaimant Grant G. Winthrop’s competing Motions for Attorneys’ 17 Fees. (Docs. 291; 293.) Consistent with his pursuit for attorneys’ fees, Winthrop filed a 18 Motion to Amend Judgment. (Doc. 292.) All three Motions are fully briefed. (See Docs. 19 297; 300; 303; 305–06; 310.) The Court exercises its discretion to resolve these motions 20 without oral argument. See LRCiv 7.2(f) (“The Court may decide motions without oral 21 argument.”). The Court will deny Winthrop’s Motions and grant AZR’s Motion in part for 22 the following reasons. 23 I. BACKGROUND 24 This case resulted from Plaintiff Wine Education Council’s (“WEC”) allegation that 25 AZR misused and misappropriated grant money. (Doc. 232 at 2.) AZR denied any 26 wrongdoing and asserted third-party claims against Winthrop for breach of fiduciary duty, 27 negligence, and common law indemnity. (Doc. 16 at 9–10.) AZR alleged that to the extent 28 it was deemed liable to WEC, Winthrop would be liable to AZR. (Doc. 232 at 2.) Winthrop 1 countersued, alleging claims for abuse of process, breach of contract, unjust enrichment, 2 breach of the covenant of good faith and fair dealing, and common law indemnity. (Docs. 3 68 at 4; 132 at 9–10, 14.) 4 Extensive motions practice ensued on the parties’ respective claims. The Court 5 dismissed Winthrop’s abuse of process claim (Doc. 123 at 4), and the Court later granted 6 summary judgment on all of Winthrop’s claims except his claim for reimbursement for 7 $499.97 spent on prototype badges (Doc. 232 at 22.) The Court also denied Winthrop’s 8 request for summary judgment as moot when it granted summary judgment against WEC’s 9 claim for misuse or misappropriation of funds. (Id. at 12.) The Court found AZR’s claims 10 against Winthrop became moot once WEC stopped pursuing its claim that AZR misused 11 and misappropriated grant funds. (Id.) 12 AZR and WEC settled their claims in October 2022. (Doc. 280.) The Court later 13 granted Winthrop’s request to voluntarily dismiss his remaining $499.97 contract claim 14 and directed the Clerk of Court to enter final judgment between AZR and Winthrop. (Doc. 15 284.) The Court now considers whether to award either Winthrop or AZR their requested 16 attorneys’ fees. 17 II. DICUSSION 18 A. Prevailing Party 19 Both parties seek attorneys’ fees under LRCiv 54.2 and A.R.S. § 12-341.01. (Docs. 20 291 at 2; 293 at 2.) “In any contested action arising out of a contract, express or implied, 21 the court may award the successful party reasonable attorney fees.” A.R.S. § 12- 22 341.01(A). The parties dispute which party was “successful.” The Clerk of Court entered 23 final judgment under Federal Rule of Civil Procedure 54(b) in October 2022, “in favor of 24 Defendant/Third-Party Plaintiff [AZR].” (Doc. 286.) Winthrop requests relief under Rules 25 59(e) and 60(b)(1) to amend the final judgment as entered in his favor. (Doc. 292 at 5.) 26 “If the action contains both a claim and a counterclaim arising out of a contract, it 27 is necessary to look at the whole litigation to determine whether there is a successful party.” 28 Liss v. Exel Trans. Servs. Inc., No. CV-04-2001-PHX-SMM, 2009 WL 1070876, at *4 (D. 1 Ariz. July 2, 2009). Courts use one of two methods to determine which party prevailed, 2 the “percentage of success factor” or the “totality of the litigation” test. Id. The Court will 3 employ the totality of the litigation test because the dispute between AZR and Winthrop 4 was effectively resolved by AZR’s settlement with WEC. See id. When evaluating the 5 totality of the litigation, courts consider the following factors: “(1) Whether the party 6 obtained a monetary judgment; (2) Whether the party against which judgment is entered 7 successfully defended against other claims; (3) Whether the party obtained its primary 8 objective in the litigation; and (4) Whether the parties attempted to settle the dispute, thus 9 avoiding the expense of extended litigation.” Id. (citing Schwartz v. Farmers Ins. Co. of 10 Ariz., 800 P.2d 20, 25 (Ariz. Ct. App. 1990). 11 The first factor is neutral because neither party obtained a monetary judgment. As 12 noted in the Court’s September 2021 summary judgment Order, AZR’s claims against 13 Winthrop were contingent on WEC’s allegations about misused or misappropriated grant 14 funds. (Doc. 232 at 12.) Thus, AZR’s claims against Winthrop became moot when the 15 Court granted summary judgment against WEC’s misuse or misappropriation claim. (See 16 id.) Winthrop’s “success” in defending AZR’s claims was tied to AZR’s success in 17 defending itself. The Court finds therefore finds the second factor is also neutral. 18 Third, the Court considers the parties’ primary objectives in this litigation. AZR 19 sought for Winthrop to indemnify it for any liability resulting from WEC’s claim of misuse 20 or misappropriation of funds. The primary objective of Winthrop’s counterclaims was to 21 recoup personal expenditures that AZR failed to reimburse him for. (See Doc. 64 at 6–8.) 22 As discussed above, the need for AZR’s indemnification became unnecessary because 23 WEC gave up their claim of improper use of grant funds. AZR thus accomplished its goal 24 of avoiding liability for misuse or misappropriation of grant funds.1 After multiple rounds 25 of motions, the Court either dismissed or entered judgment against all Winthrop’s claims 26 1 It is worth noting that John Winthrop, on behalf of WEC, and Grant Winthrop (John 27 Winthrop’s son) represented from the beginning of the case that funds were misappropriated by AZR. It wasn’t until oral argument on July 1, 2021, that WEC and 28 Grant Winthrop conceded that they were withdrawing any claims based on misappropriation—almost 2 years after the first complaint was filed.921750 1 except the $499.97 reimbursement claim he later voluntarily dismissed. Winthrop 2 therefore recovered no funds from AZR’s alleged failure to reimburse him. The Court 3 finds that factor three weighs strongly in AZR’s favor. 4 Fourth, the Court must analyze the parties’ efforts to settle their claims. Winthrop 5 contends he is the prevailing party because his 2020 settlement offer was equal to or more 6 favorable than the result of this litigation. (Doc. 293 at 8–9.) The Court disagrees. Section 7 12-341.01(A) considers an offeror of a settlement agreement to be the successful party 8 when “the judgment finally obtained is equal to or more favorable to . . . an offer made in 9 writing.” Winthrop’s characterization of the settlement agreement ignores the practical 10 realities of this litigation. The conflict between AZR and Winthrop was inextricably 11 intertwined with WEC’s claims against AZR. AZR did not simply dismiss its claims 12 against Winthrop, as was contemplated by the settlement offer. (See Doc. 293-7 at 2.) 13 AZR’s claims were mooted by WEC’s transformed theory of the case. (Doc. 232 at 7.) 14 The Court granted summary judgment on the issue of misuse or misappropriation of grant 15 funds in part because WEC’s general counsel—Winthrop’s father—signed an affidavit in 16 February 2021 stating that WEC’s claims were not based on the allegation that items were 17 improperly purchased with grant funds. (See Docs.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Wine Education Council, No. CV-19-02235-PHX-SMB
10 Plaintiff, ORDER
11 v.
12 Arizona Rangers,
13 Defendant. 14 15 Pending before the Court are Defendant/Third-Party Plaintiff Arizona Rangers’ 16 (“AZR”) and Counterclaimant Grant G. Winthrop’s competing Motions for Attorneys’ 17 Fees. (Docs. 291; 293.) Consistent with his pursuit for attorneys’ fees, Winthrop filed a 18 Motion to Amend Judgment. (Doc. 292.) All three Motions are fully briefed. (See Docs. 19 297; 300; 303; 305–06; 310.) The Court exercises its discretion to resolve these motions 20 without oral argument. See LRCiv 7.2(f) (“The Court may decide motions without oral 21 argument.”). The Court will deny Winthrop’s Motions and grant AZR’s Motion in part for 22 the following reasons. 23 I. BACKGROUND 24 This case resulted from Plaintiff Wine Education Council’s (“WEC”) allegation that 25 AZR misused and misappropriated grant money. (Doc. 232 at 2.) AZR denied any 26 wrongdoing and asserted third-party claims against Winthrop for breach of fiduciary duty, 27 negligence, and common law indemnity. (Doc. 16 at 9–10.) AZR alleged that to the extent 28 it was deemed liable to WEC, Winthrop would be liable to AZR. (Doc. 232 at 2.) Winthrop 1 countersued, alleging claims for abuse of process, breach of contract, unjust enrichment, 2 breach of the covenant of good faith and fair dealing, and common law indemnity. (Docs. 3 68 at 4; 132 at 9–10, 14.) 4 Extensive motions practice ensued on the parties’ respective claims. The Court 5 dismissed Winthrop’s abuse of process claim (Doc. 123 at 4), and the Court later granted 6 summary judgment on all of Winthrop’s claims except his claim for reimbursement for 7 $499.97 spent on prototype badges (Doc. 232 at 22.) The Court also denied Winthrop’s 8 request for summary judgment as moot when it granted summary judgment against WEC’s 9 claim for misuse or misappropriation of funds. (Id. at 12.) The Court found AZR’s claims 10 against Winthrop became moot once WEC stopped pursuing its claim that AZR misused 11 and misappropriated grant funds. (Id.) 12 AZR and WEC settled their claims in October 2022. (Doc. 280.) The Court later 13 granted Winthrop’s request to voluntarily dismiss his remaining $499.97 contract claim 14 and directed the Clerk of Court to enter final judgment between AZR and Winthrop. (Doc. 15 284.) The Court now considers whether to award either Winthrop or AZR their requested 16 attorneys’ fees. 17 II. DICUSSION 18 A. Prevailing Party 19 Both parties seek attorneys’ fees under LRCiv 54.2 and A.R.S. § 12-341.01. (Docs. 20 291 at 2; 293 at 2.) “In any contested action arising out of a contract, express or implied, 21 the court may award the successful party reasonable attorney fees.” A.R.S. § 12- 22 341.01(A). The parties dispute which party was “successful.” The Clerk of Court entered 23 final judgment under Federal Rule of Civil Procedure 54(b) in October 2022, “in favor of 24 Defendant/Third-Party Plaintiff [AZR].” (Doc. 286.) Winthrop requests relief under Rules 25 59(e) and 60(b)(1) to amend the final judgment as entered in his favor. (Doc. 292 at 5.) 26 “If the action contains both a claim and a counterclaim arising out of a contract, it 27 is necessary to look at the whole litigation to determine whether there is a successful party.” 28 Liss v. Exel Trans. Servs. Inc., No. CV-04-2001-PHX-SMM, 2009 WL 1070876, at *4 (D. 1 Ariz. July 2, 2009). Courts use one of two methods to determine which party prevailed, 2 the “percentage of success factor” or the “totality of the litigation” test. Id. The Court will 3 employ the totality of the litigation test because the dispute between AZR and Winthrop 4 was effectively resolved by AZR’s settlement with WEC. See id. When evaluating the 5 totality of the litigation, courts consider the following factors: “(1) Whether the party 6 obtained a monetary judgment; (2) Whether the party against which judgment is entered 7 successfully defended against other claims; (3) Whether the party obtained its primary 8 objective in the litigation; and (4) Whether the parties attempted to settle the dispute, thus 9 avoiding the expense of extended litigation.” Id. (citing Schwartz v. Farmers Ins. Co. of 10 Ariz., 800 P.2d 20, 25 (Ariz. Ct. App. 1990). 11 The first factor is neutral because neither party obtained a monetary judgment. As 12 noted in the Court’s September 2021 summary judgment Order, AZR’s claims against 13 Winthrop were contingent on WEC’s allegations about misused or misappropriated grant 14 funds. (Doc. 232 at 12.) Thus, AZR’s claims against Winthrop became moot when the 15 Court granted summary judgment against WEC’s misuse or misappropriation claim. (See 16 id.) Winthrop’s “success” in defending AZR’s claims was tied to AZR’s success in 17 defending itself. The Court finds therefore finds the second factor is also neutral. 18 Third, the Court considers the parties’ primary objectives in this litigation. AZR 19 sought for Winthrop to indemnify it for any liability resulting from WEC’s claim of misuse 20 or misappropriation of funds. The primary objective of Winthrop’s counterclaims was to 21 recoup personal expenditures that AZR failed to reimburse him for. (See Doc. 64 at 6–8.) 22 As discussed above, the need for AZR’s indemnification became unnecessary because 23 WEC gave up their claim of improper use of grant funds. AZR thus accomplished its goal 24 of avoiding liability for misuse or misappropriation of grant funds.1 After multiple rounds 25 of motions, the Court either dismissed or entered judgment against all Winthrop’s claims 26 1 It is worth noting that John Winthrop, on behalf of WEC, and Grant Winthrop (John 27 Winthrop’s son) represented from the beginning of the case that funds were misappropriated by AZR. It wasn’t until oral argument on July 1, 2021, that WEC and 28 Grant Winthrop conceded that they were withdrawing any claims based on misappropriation—almost 2 years after the first complaint was filed.921750 1 except the $499.97 reimbursement claim he later voluntarily dismissed. Winthrop 2 therefore recovered no funds from AZR’s alleged failure to reimburse him. The Court 3 finds that factor three weighs strongly in AZR’s favor. 4 Fourth, the Court must analyze the parties’ efforts to settle their claims. Winthrop 5 contends he is the prevailing party because his 2020 settlement offer was equal to or more 6 favorable than the result of this litigation. (Doc. 293 at 8–9.) The Court disagrees. Section 7 12-341.01(A) considers an offeror of a settlement agreement to be the successful party 8 when “the judgment finally obtained is equal to or more favorable to . . . an offer made in 9 writing.” Winthrop’s characterization of the settlement agreement ignores the practical 10 realities of this litigation. The conflict between AZR and Winthrop was inextricably 11 intertwined with WEC’s claims against AZR. AZR did not simply dismiss its claims 12 against Winthrop, as was contemplated by the settlement offer. (See Doc. 293-7 at 2.) 13 AZR’s claims were mooted by WEC’s transformed theory of the case. (Doc. 232 at 7.) 14 The Court granted summary judgment on the issue of misuse or misappropriation of grant 15 funds in part because WEC’s general counsel—Winthrop’s father—signed an affidavit in 16 February 2021 stating that WEC’s claims were not based on the allegation that items were 17 improperly purchased with grant funds. (See Docs. 193-14 at 3–4; 232 at 7 n.1.) 18 Winthrop’s 2020 settlement offer would have eliminated the indemnification AZR sought 19 in the third-party complaint before the Court disposed of those claims in September 2021. 20 The Court is unconvinced that the judgment obtained was equal to or more favorable to 21 Winthrop as the offeror and instead finds this factor to be neutral. 22 With only the third factor weighing in any party’s favor, the Court finds that AZR 23 is the prevailing party. The Court therefore also finds that the Clerk of Court correctly 24 entered judgment in AZR’s favor, and the Court will deny Winthrop’s Motion to Amend 25 Judgment (Doc. 292). 26 B. Eligibility & Entitlement 27 “The legislature used the phrase ‘may award’ in authorizing the trial judge to award 28 a successful contract litigant reasonable attorney’s fees.” Associated Indem. Corp. v. 1 Warner, 694 P.2d 1181, 1184 (Ariz. 1985). Arizona Courts have long held that: A court has broad discretion whether to award attorney fees and may consider 2 factors including (1) “[t]he merits of the claim or defense presented by the unsuccessful party”; (2) whether “[t]he litigation could have been avoided or 3 settled and the successful party's efforts were completely superfluous in achieving the result”; (3) whether the unsuccessful party would suffer 4 “extreme hardship”; (4) whether the successful party prevailed as to all relief sought; (5) whether novel legal questions were presented; and (6) whether 5 the award would discourage parties from litigating or defending legitimate contract issues. 6 Goodman v. 12 Univ. LLC, No. 2 CA-CV 2020-0034, 2020 WL 6878883, at *8 (Ariz. Ct. 7 App. Nov. 23, 2020) (quoting Warner, 694 P.2d at 1184). The Court makes the following 8 findings as to each factor: 9 1. Winthrop had at least one, limited claim with merit that he voluntarily 10 dismissed. The Court either dismissed or entered judgment on Winthrop’s other 11 counterclaims. As noted above, the Court did not determine the merit of Winthrop’s 12 defenses to AZR’s third-party complaint because those issues became moot when WEC 13 changed its theory of the case. This factor is neutral. 14 2. Winthrop detailed his efforts to settle all claims between him and AZR. As 15 noted above, the viability of those settlement efforts was impacted by WEC’s claims 16 against AZR. AZR’s efforts to assert third-party claims were not superfluous—AZR’s 17 pursuit of indemnification from Winthrop stopped when WEC quit trying to recover 18 misused or misappropriated grant funds. However, Winthrop did not renew his desire to 19 settle the counterclaims after AZR’s third-party complaint became moot. Instead, more 20 motions practice ensued on what was reduced to Winthrop’s $499.97 reimbursement claim 21 which was not resolved until AZR and WEC agreed to settle. The Court finds this factor 22 weighs in AZR’s favor. 23 3. Winthrop does not explain whether assessing fees against him would cause 24 extreme hardship, as he analyzes this factor from the position that AZR is in the 25 unsuccessful party. Because “the party asserting financial hardship has the burden of 26 coming forward with prima facie evidence of the financial hardship,” Woerth v. City of 27 Flagstaff, 808 P.2d 297, 305 (Ariz. Ct. App. 1990), and Winthrop has not done so, the 28 Court finds that this factor weighs in AZR’s favor. 1 4. AZR did prevail on the relief sought (indemnification) in the third-party 2 complaint, by forcing John Winthrop to admit there was no misappropriation of funds so 3 that WEC abandoned the claim. This factor weighs in AZR’s favor. 4 5. There is nothing novel about any of the parties’ arguments, rendering this 5 factor neutral. 6 6. The Court finds that an attorneys’ fees award, like the $244,260.50 sought 7 by AZR, would not deter others from litigating or defending against legitimate contract 8 issues. Most of Grant Winthrops counterclaims had little merit. This factor weighs in 9 AZR’s favor. 10 Most of the factors weigh in AZR’s favor, and the Court will award attorneys’ fees 11 accordingly. However, the Court will exercise its discretion to reduce the fees sought as 12 described below. 13 C. Reasonableness 14 A district court must calculate awards for attorneys’ fees using the “lodestar” 15 method. Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1149 n.4 (9th Cir. 2001). “The 16 ‘lodestar’ is calculated by multiplying the number of hours the prevailing party reasonably 17 expended on the litigation by a reasonable hourly rate.” Morales v. City of San Rafael, 96 18 F.3d 359, 363 (9th Cir. 1996). “[T]he lodestar figure is presumptively a reasonable fee 19 award,” Ferland, 244 F.3d at 1149 n.4, but “[a] district court should exclude from the 20 lodestar amount hours that are not reasonably expended because they are ‘excessive, 21 redundant, or otherwise unnecessary.’” Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 22 1041, 1045 (9th Cir. 2000) (quoting Hensley v. Eckerhart, 461 U.S. 424, 434 (1983)). 23 AZR seeks $244,260.50 in attorneys’ fees and $3,865.46 in costs. (Doc. 291 at 23 24 ¶¶ 15, 18.) Winthrop does not challenge the hourly rates charged by AZR’s counsel, 25 instead attacking the reasonableness of time expended. Winthrop argues AZR’s fee award 26 should be reduced by $48,801.50 to account for time entries unrelated to litigation with 27 Winthrop and time entries with redactions that prevent the Court from ascertaining the 28 entries’ reasonableness. (Doc. 303 at 9–10.) 1 The Court will reduce AZR’s requested amount as follows. First, the Court notes 2 that both parties over-litigated this case. The Court will therefore apply a broad 10% 3 reduction to the overall amount. See Moreno v. City of Sacramento, 534 F.3d 1106, 1112 4 (9th Cir. 2008) (“[T]he district court can impose a small reduction, no greater than 10 5 percent—a ‘haircut’—based on its exercise of discretion and without a more specific 6 explanation.”); see also Angel Jet Servs., LLC v. Giant Eagle, Inc., No. CV-09-10489- 7 PHX-SRB, 2013 WL 11311729, at *1, 9 (D. Ariz. Apr. 17, 2013) (applying Moreno to a 8 attorneys’ fees application under A.R.S. § 12-341.01). Second, the Court disagrees that 9 the tasks Winthrop’s highlights are “unrelated” to AZR’s effort to obtain relief from him— 10 but the Court does agree that AZR’s application contains numerous over-redactions. With 11 the exception of two partial entries totaling 3 hours billed by Mr. Messing, the entries 12 flagged as over-redactions contain insufficient information for this Court to determine their 13 reasonableness. (See Doc. 291 at 27, 32 (.6 and 2.4 hour entries do contain sufficient 14 information).) In its Reply, AZR seeks leave to file unredacted versions of those entries 15 under seal. The Court will not grant that request. As the requesting party, AZR is 16 responsible for establishing the reasonableness of its fee request. See Prison Legal News 17 v. Schwarzenegger, 608 F.3d 446, 453 (9th Cir. 2010). AZR had sufficient time to 18 contemplate filing its application or exhibits under seal. After accounting for the 10% 19 “haircut,” the Court will also reduce the requested amount by $15,764.50, which equals 20 the $17,564.50 highlighted in Winthrop’s Response (see Doc. 303 at 11.) minus $1,800 for 21 the six hours described above, where were billed at $300/hour. 22 AZR also requests attorneys’ fees related to the preparation of its application. (Doc. 23 291 at 15.) While these fees are recoverable under A.R.S. § 12-341.01, see Schweiger v. 24 China Doll Rest., Inc., 673 P.2d 927, 932 (Ariz. Ct. App. 1983) (holding the preparation 25 of post-decision motions are includable in a fee application), AZR did not include the rates 26 or hours in its application because it considered the amount “an ongoing cost.” (Doc. 291 27 at 15.) AZR did eventually include this necessary information in its Reply. (See Doc. 306 28 at 12.) However, Winthrop was not afforded an opportunity to rebut the reasonableness of 1 || AZR’s request specifically related to the preparation of its application. The Court will thus 2|| deny AZR’s requested fees associated with preparing its application. 3 Tt. CONCLUSION 4 Accordingly, 5 IT IS ORDERED denying Winthrop’s Motion to Amend Judgment. (Doc. 292.) 6 IT IS FURTHER ORDERED denying Winthrop’s Motion for Attorneys’ Fees. (Doc. 293.) 8 IT IS FURTHER ORDERED granting in part AZR’s Motion for Attorneys’ Fees (Doc. 291.) The Court will award AZR its reasonable attorneys’ fees in the amount of $204,069.95 and its costs in the amount of $3,865.46. 11 Dated this 29th day of June, 2023. 12 —_— 13 oS fe Aonorable Susan M; Brnovich 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28
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