Opinion
No. 1 CA-CV 20-0029
12-01-2020
SIMMONS & GOTTFRIED PLLC, et al., Plaintiffs/Appellees, v. SCOTT KLARKOWSKI, et al., Defendants/Appellants.
COUNSEL Scott Klarkowski, Sun City Defendant/Appellant/Counter-Claimant Julie Klarkowski, Sun City Defendant/Appellant/Counter-Claimant The Marhoffer Law Firm PLLC, Scottsdale By David Marhoffer Counsel for Plaintiffs/Appellees/Counter-Defendants
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
Appeal from the Superior Court in Maricopa County
No. CV2018-002700
The Honorable Michael W. Kemp, Judge
AFFIRMED IN PART AND REVERSED IN PART
COUNSEL
Scott Klarkowski, Sun City
Defendant/Appellant/Counter-Claimant
Julie Klarkowski, Sun City
Defendant/Appellant/Counter-Claimant
The Marhoffer Law Firm PLLC, Scottsdale
By David Marhoffer
Counsel for Plaintiffs/Appellees/Counter-Defendants
MEMORANDUM DECISION
Presiding Judge Randall M. Howe delivered the decision of the Court, in which Judge Kent E. Cattani and Judge Cynthia J. Bailey joined.
HOWE, Judge:
¶1 Scott and Julie Klarkowski appeal the trial court's granting Simmons & Gottfried PLLC ("Simmons") summary judgment. For the following reasons, we affirm the court's grant of summary judgment on liability for breach of contract and the reasonableness of Simmons' attorneys' fees. However, we reverse the court's grant of summary judgment on the reasonableness of Simmons' interest charges and its award of attorneys' fees in this action, and remand for further proceedings.
FACTS AND PROCEDURAL HISTORY
¶2 Simmons represented the Klarkowskis in an underlying lawsuit. The engagement letter provided that any bill not paid within 30 days would accrue interest at a rate of 1.5% per month. The parties agreed that if Simmons had to commence a legal proceeding to collect its fees and costs, "the prevailing party in such litigation shall be entitled to full recovery of all costs and attorneys' fees."
¶3 The relationship between the parties deteriorated and, in April 2016, Simmons withdrew from representing the Klarkowskis after they failed to timely pay their attorneys' fees and costs. The Klarkowskis then retained a new lawyer. Meanwhile, Simmons sent the Klarkowskis invoices for the unpaid balance owed in the underlying action, but the invoices went unpaid. As a result, the outstanding balance began accruing interest at 1.5% per month.
¶4 In April 2017, Simmons sent the Klarkowskis an invoice for the current balance of $17,160.81, which represented the total unpaid balance plus the accrued interest. Two weeks later, the Klarkowskis' new counsel submitted a request for attorneys' fees in the underlying action, including the $17,160.81 that the Klarkowskis still owed Simmons and avowed that those fees were reasonable under Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183 (App. 1983). In August 2017, the court in the underlying action found that the Klarkowskis were the prevailing party
and that Simmons' attorneys' fees were reasonable. The court deducted $7,352.38 in "finance charges" and deducted $1,170.17 for photocopying, postage, and travel from Simmons' fees. The court then awarded the Klarkowskis $89,135.00 in attorneys' fees and $28,197.60 in taxable costs. This Court affirmed the fee award. Klarkowski v. Define, 1 CA-CV 17-0583, 2018 WL 4907577, at *5 ¶ 21-23 (App. Oct. 9, 2018).
¶5 In June 2018, Simmons sued the Klarkowskis for, among other things, breach of contract. The Klarkowskis asserted several counterclaims that were subsequently dismissed as time barred. In May 2019, Simmons moved for summary judgment on its breach of contract claim, asserting that the Klarkowskis had breached the contract between them by refusing to pay the fees incurred. It further argued that the Klarkowskis were precluded from challenging the fees' reasonableness because they had litigated that issue in the underlying action. The Klarkowskis did not contest that they had breached their contract with Simmons but argued that they had not litigated the attorneys' fees issue and had been unaware of miscalculations in the invoices until they hired a certified public accountant.
¶6 The trial court granted Simmons summary judgment on the breach of contract claim, finding that the Klarkowskis were precluded from challenging the fees' reasonableness because they had argued that the fees were reasonable in the underlying action. The court awarded Simmons $17,160.81 in attorneys' fees from its April 2017 invoice plus 1.5% interest per month from that date. The court further awarded Simmons $36,000 in attorneys' fees incurred in this action. The Klarkowskis timely appealed.
DISCUSSION
¶7 The Klarkowskis did not contest in the trial court that they breached their contract with Simmons, and they do not do so now on appeal. Instead, the Klarkowskis argue that the trial court abused its discretion in finding that they were precluded from challenging the reasonableness of the interest rates, fees, and charges incurred on the attorneys' fees in the underlying action. We review the grant of summary judgment de novo. Jackson v. Eagle KMC L.L.C., 245 Ariz. 544, 545 ¶ 7 (2019).
¶8 Issue preclusion precludes relitigating an issue or fact when the issue or fact was actually litigated in a previous lawsuit, a final judgment was entered, the party had a full opportunity to litigate the matter and did litigate the matter, and the issue was essential to the judgment. Kopp v. Physician Grp. of Ariz., Inc., 244 Ariz. 439, 442 ¶ 14 (2018) (citing Chaney Bldg. Co. v. City of Tucson, 148 Ariz. 571, 573 (1986)).
¶9 Whether the Klarkowskis are challenging the fees' reasonableness or just the interest that had accrued on the fees is unclear from their opening brief. The Klarkowskis' opening brief refers to the attorneys' fees but otherwise focuses on the interest charges accrued on those fees. The Klarkowskis have therefore waived any arguments related to the fees' reasonableness because they failed to develop them. See Stafford v. Burns, 241 Ariz. 474, 483 ¶ 34 (App. 2017).
¶10 The Klarkowskis are not precluded from challenging the reasonableness of the interest charges that accrued from failing to pay Simmons' attorneys' fees, however. Because the interest charges on Simmons' attorneys' fees accrued from the Klarkowskis' failure to pay the fees, those charges could not have been awarded in the underlying action and the trial court in that case properly deducted them from the fee award. As a result, the interest charges on the fees were not actually litigated and were not essential to the judgment. See Kopp, 244 Ariz. at 442 ¶ 14. The trial court therefore erred by granting Simmons summary judgment on the reasonableness of the interest charges. The court's awarding Simmons' its attorneys' fees in this action was therefore premature.
CONCLUSION
¶11 For the foregoing reasons, we affirm the trial court's grant of summary judgment on liability for breach of contract and the reasonableness of Simmons' attorneys' fees. But we reverse the court's grant of summary judgment on the reasonableness of Simmons' interest charges, its award of Simmons' attorneys' fees in this action, and remand for the court to determine the reasonableness of the interest charges. Because both parties prevailed in part, neither is entitled to attorneys' fees.