Opinion
No. CIV 06-1598-PHX-RCB.
May 8, 2008
ORDER
After prevailing on their motion for summary judgment, defendants Norquay Construction Company ("Norquay") and Safeco Surety ("Safeco") filed the present motion in accordance with LRCiv. 54.2 seeking $20,140.00 in attorneys' fees. Mot. (doc. 35) at 7. Defendants are relying upon a contractual attorneys' fees provision. Alternatively, they are relying upon A.R.S. § 12-341.01(A) which authorizes an award of attorneys' fee to "the successful party . . . [i]n any contested action arising out of a contract[.]" Id. (West 2003). Plaintiff, U.S. Prefab, opposes this motion asserting that it is "not properly supported[;]" and the amount sought is "unreasonable[.]" Resp. (doc. 37) at 1. Defendants counter, in sum, that plaintiff's "objections are undeserving of consideration by the Court[,]" and they request an additional $1,400.00 for attorneys' fees incurred in replying to plaintiff's objections. Reply (doc. 38) at 8.
For the reasons set forth below, the court does not find convincing either of plaintiff's opposition arguments. Therefore, the court awards defendants the full amount of the fees which they are seeking by this motion.
Background
Norquay and Prefab entered into a subcontract on July 12, 2005, wherein Prefab agreed to install carports at the United States Bureau of Reclamations' Phoenix area office headquarters. Defs'. Statement of Facts ("DSOF") (doc. 18), exh. 1 thereto at 1. When Prefab was nearing completion of that project, a dispute arose between it and Norquay over charges of $18,675.36 in excess of the base contract price due to alleged "hard dig" conditions encountered by Prefab while drilling in the parking areas. Id., exh. 5 thereto at 3. The parties attempted to resolve this dispute short of litigation, but were not successful.
On June 22, 2006, Prefab commenced the present action against Norquay alleging breach of contract. Pursuant to the Miller Act, 40 U.S.C. § 3131 et seq., Prefab further alleged that defendant Safeco was liable as Norquay's surety. Prefab sought to recover "the principal sum of $30,053.61" for "materials and services furnished[.]" Co. (doc. 1) at 2, ¶ 4. Prefab also sought interest on that amount "at the rate of two percent . . . per month from April 15, 2006, until paid[.]" Id. at 5, ¶ 1. In accordance with the terms of the bond, Safeco tendered the defense of the bond claim to Norquay, which Norquay accepted, as it had an obligation to under the bond. After engaging in some discovery, defendants moved for summary judgment. The court granted that motion and entered judgment dismissing plaintiff's complaint in its entirety. Defendants then filed the present motion seeking the attorneys' fees incurred in the defense of this action.
Discussion
I. Procedural Requirements
Before turning to the merits of defendants' fee motion, the court observes that they have complied with the mandatory procedural requirements of LRCiv. 54.2. See Societe Civile Succession Richard Guino v. Beseder Inc., 2007 WL 3238703, at *7 (D.Ariz. 2007) ("These requirements [of LRCiv. 54.2] are not advisory, but mandatory to support an award of attorneys' fees[.]"). As LRCiv. 54.2(c)(1)-(3) requires, defendants timely filed this motion which includes a memorandum of points and authorities discussing, in the required sequence and with the required corresponding headings, the following: (1) "eligibility," (2) "entitlement," and (3) "reasonableness of requested award." See Mot. (doc. 35) at 2-7. Defendants also submitted the following "supporting documentation" as LRCiv. 54.2(d) and (e) mandates: (1) a statement of consultation; (2) an attorney affidavit explaining the oral fee agreement between defense counsel and Norquay; (3) a task-based itemized statement of fees in chronological order; (4) and an affidavit of moving counsel. Mot. (doc. 35), exhs. B (doc. 35-3); C (doc. 35-4); and D (doc. 35-5) thereto. Further, defendants' "Task-Based Itemized Statement of Attorneys' Fees" comports with LRCiv. 54.2(e) as to format and in terms of the "description of services rendered." Likewise, the fee application, as it must, "adequately describe[s] the services rendered so that the reasonableness of the charge can be evaluated." LRCiv. 54.2(e)(2); see also Hummingbird Defense Systems, Inc., 2007 WL 4200751, at *4 (D.Ariz. 2007) (quotingSchweiger v. China Doll Restaurant, Inc., 673 P.2d at 932) ("`In order to make a determination that the hours claimed are justified, the fee application must be in sufficient detail to enable the court to assess the reasonableness of the time incurred.'").
Judgment was entered on June 26, 2007 (doc. 34), and defendants filed this motion on July 10, 2007 (doc. 35), within the 14 day time frame set forth in Fed.R.Civ.P. 54(d)(2)(B).
In his "Statement of Consultation" dated June 29, 2007, attorney Diekemper indicates that he "attempted to consult with opposing counsel . . . on July 27, 2007[.]" Mot. (doc. 35), exh. B thereto (doc. 35-3). Presumably the latter date is a typographical error given the date of the Statement, and the attempted consult was actually on June 27, 2007.
II. "Eligibility"
F.D. Rich Co. V. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974), "serves as the starting point for consideration of attorneys' fees in Miller Act cases." United States ex rel. Reed v. Callahan, 884 F.2d 1180, 1185 (9th Cir. 1989). Noting that the Miller Act does not provide for the recovery of attorneys' fees, the Supreme Court in F.D. Rich applied the "American Rule" which "generally precludes an award of attorneys' fees absent statutory authorization or an enforceable contractual fees provision[.]" Golden Pisces v. Fred Wahl Marine Const., 495 F.3d 1078, 1081 (9th Cir. 2007) (citations omitted). Based upon that rule, the F.D. Rich Court held that although successful, the plaintiff was not entitled to an attorneys' fee award because neither the Miller Act nor the contract provided for such an award. F.D. Rich, 417 U.S. at 127-131, 94 S.Ct. at 2162-2164.
Factually distinguishing F.D. Rich, the Ninth Circuit inCallahan held that because the subcontract at issue included a specific clause authorizing an award of attorneys' fees, the successful Miller Act litigant was entitled to recover those fees. Callahan, 884 F.2d at 1185. Similarly, the subcontract between Norquay and Prefab included a provision expressly allowing for the recovery of attorneys' fees. That provision states in relevant part as follows:
Should either party employ an attorney to institute suit . . . to enforce any of the provisions hereof, to protect its interest in any matter arising under this Agreement, or to collect damages for the breach of the Agreement or to recover on a surety bond given by a party under this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees, costs, charges and expenses expended over [sic] incurred therein.
DSOF, exh. 1 (doc. 18-2) thereto at 10, Article 14.4 (emphasis added). Thus, the present case falls into the contract exception to the American Rule pertaining to the recovery of attorneys' fees.
Because the court has determined that the subcontract governs the attorneys' fee issue herein, it is not essential to consider defendants' alternative argument that they are entitled to recover those fees under A.R.S. § 12-341.01(A). The court observes, however, that in F.D. Rich the Supreme Court "thought it best `to extricate the federal courts from the morass' of state law regarding attorneys' fees." U.S. ex rel. EPC Corp. v. Travelers Cas. Sur. Co. of America, 423 F.Supp.2d 1016, 1025 (D.Ariz. 2006) (quoting F.D. Rich, 417 U.S. at 128, 94 S.Ct. 2157). Employing that rationale, the court in EPC Corp. held that even if it was "ultimately successful at trial[,]" a subcontractor in a Miller Act case was not entitled to an attorneys' fee award under that Act. Id. That rationale applies with equal force here. Consequently, there is, in any event, no basis for defendants' alternative argument.
The Ninth Circuit has "long held that state law controls the interpretation of Miller Act subcontracts to which the United States is not a party[,]" such as the subcontract between Norquay and Prefab. See Callahan, 884 F.2d at 1185 (citation and footnote omitted). Thus, "[l]like a court sitting in diversity, . . . the law of the forum state" governs the construction of this subcontract. See Callahan, 884 F.2d at 1185. Therefore, the court must apply Arizona law here. See Palmer Constr., Inc. v. Cal State Elec., Inc., 940 F.2d 1260, 1264 (9th Cir. 1991) (citation omitted) (Miller Act case applying California law to subcontract authorizing attorney fee award to prevailing party).
III. "Entitlement"
Norquay asserts that it is entitled to recover attorneys' fees for the 107.20 hours expended by three attorneys and one paralegal because it "was 100% successful in defeating plaintiff's claims." Mot. (Doc. 35) at 3. Approximately 13 of those hours were devoted to preparation of this fee motion. See id., exh. A thereto (doc. 35-2) at 17-18. Defendants also are seeking $1,400.00 in fees for time expended in preparing a reply to plaintiffs' response. See Resp. (doc. 38) at 8; and exh. A thereto (doc. 38-2) (itemized billing statement). Putting aside for the moment the issue of the reasonableness of the requested fees, the court agrees that defendants' fee request properly includes fees for preparing this motion, as well as fees for preparing the reply. See Dahn World Co. Ltd. v. Chung, 2006 WL 3313951, at * 6 (D.Ariz. 2006) (awarding, inter alia, $4,000.00 "in attorney fees for the work performed on the motion for attorney fees and expenses"); andForaker v. Apollo Group, Inc., 2007 WL 2081465, at *2 (D.Ariz. 2007) (awarding $641 for fees "incurred [in] submitting the response to Defendants' objection to Plaintiff's supplemental fee application").
In an effort to show the unreasonableness of the hours expended, plaintiff mistakenly states that there were "five billing professionals" on this case, when, in fact, there were only four. See Resp. (doc. 37) at 3. This disparity probably comes from the fact that attorney Blunck is listed twice due to her differing hourly rates.
IV. "Reasonableness of Requested Award"
Having found that defendants are eligible for and entitled to an award of attorneys' fees, the court must next decide whether the requested amount is reasonable. Reasonableness has two parts. First, the court must determine the reasonableness of the hourly billing rate. Schweiger, 138 Ariz. at 187, 673 P.2d at 931 ("The beginning point in a development of a reasonable fee is the determination of the actual billing rate which the lawyer charged in the particular matter.") Second, it must determine the reasonableness of the hours expended on the case. Id. at 188, 673 P.2d at 932. Informing this inquiry is the general proposition that "[t]he prevailing party . . . is `entitled to recover a reasonable attorney's fee for every item of service which, at the time rendered, would have been undertaken by a reasonable and prudent lawyer to advance or protect his client's interest[.]'"Id. (quoting Twin City Sportservice v. Charles O. Finley Co., 676 F.2d 1291, 1313 (9th Cir. 1982)). It is against this legal backdrop which the court has carefully reviewed the parties' respective motion submissions, paying particular attention to defendants' "Task-Based Itemized Statement of Attorneys' Fees."
A. Hourly Billing Rate
As to the hourly billing rate, "[u]nder Arizona law, `in corporate and commercial litigation between fee-paying clients, there is no need to determine the reasonable hourly rate prevailing in the community for similar work because the rate charged by the lawyer to the client is the best indication of what is reasonable under the circumstances of the particular case.'" Hummingbird Defense Systems, Inc. v. Ye, 2007 WL 4200751, at *4 (D.Ariz. 2007) (quoting Schweiger, 138 Ariz. at 187-188, 673 P.2d at 931-932). Here, attorney Kent A. Lang avers that the firm of Lang Baker, PLC has an "oral fee agreement" with defendant Norquay, and has represented it "for more than five years." Aff. of Kent A. Lang (doc. 35-4) at 1, ¶¶ 1 and 2. Attorney Lang further explains that "[t]he firm's bills to Norquay are based upon the prevailing hourly rates of the individual attorneys who render services." Id. at 1-2, ¶ 2.
Three defense attorneys worked on this litigation, each with different billing rates. Mr. Lang's hourly rate is $275.00. Mot. (doc. 35) at 4. Mr. Diekemper's hourly rate is $200.00. Id. A portion of Ms. Blunck's time was billed at $170.00 per hour, and a portion at $150.00. Id. One paralegal also worked on this action and her hourly rate is $70.00. Id. A review of attorney Blunck's affidavit detailing her own legal education and experience, as well as that of attorneys Lang and Diekemper, combined with the court's independent knowledge of hourly rates in the Phoenix area for lawyers with comparable education and experience, performing comparable tasks, readily supports a finding that these hourly rates are reasonable. The fact that Norquay "has actually paid or agreed to pay all attorneys' fees . . . incurred in this litigation by . . . Norquay and Safeco, including all those itemized in the task-based itemization[,]" bolsters this finding of reasonableness. Mot. (doc. 35), exh. C thereto (Lang Aff.) at 2, ¶ 4. Evidently plaintiff agrees as it is not contesting the hourly billing rates. Therefore, any fees awarded herein will be based upon the rates which defendants are seeking.
B. Hours Reasonably Expended
The bulk of the time for which defendants are seeking to recover was expended by attorney Diekemper — 83.0 hours. Mot. (doc. 35) at 4. Additionally, attorney Blunck expended a total of 17.1 hours, attorney Lang expended 1.6 hours, and a paralegal expended 5.5 hours on this case. Id. Multiplying the total number of hours billed (107.20) by the hourly rates specified above, initially defendants sought $20,140.00 in attorneys' fees. Since then however, as mentioned earlier, now defendants are also seeking $1,400.00 for the 7 hours attorney Diekemper expended in preparing defendants' reply.
Of attorney Blunck's hours, 9.6 were billed at an hourly rate of $150.00, while the remaining 7.5 were billed at an hourly rate of $170.00. Mot. (doc. 35) at 4.
Plaintiff's primary objection to this fee request is that defense counsel spent "an inordinate amount of time . . . on several tasks[,]" and thus the hours expended were not reasonable. Resp. (doc. 37) at 4. Contending that defendants did not address some of the reasonableness factors mentioned inSchweiger, 138 Ariz. at 187, 673 P.2d at 931, (many of which are also listed in LRCiv. 54.2(c)(3)), plaintiff further asserts that the court should "discount the attorneys fees" sought on that basis alone.Id. Finally, by plaintiff's estimation "the fees sought exceed the amount in dispute." Id. at 5. Thus plaintiff asserts that there is a danger of "the attorney fees becoming the tail wagging the dog." Id. In light of the foregoing, plaintiff maintains that a reasonable fee here is "no greater than $5,000." Id.
Describing plaintiff's objections as "broad" and "insufficiently specific[,]" defendants retort that those "criticisms" do not support denying or reducing the requested fees. Reply (doc. 38) at 3. Defendants add that in part because plaintiff "bypassed several opportunities" to settle its claim, seemingly it "was proceeding not on the strength of its claim, but rather on the commonly-held but wrongheaded theory that a defendant, even with knowledge that it will likely win the lawsuit, will pay at least a portion of the plaintiff's claim if it appears the [defense] fees . . . will exceed the amount to settle." Id. at 2. This tactic should not be countenanced by denying or reducing a fee award, defendants argue.
Plaintiff's attacks on the reasonableness of defendants' requested fees fail on several counts. First, it is true that defendants did not address all of the factors which LRCiv. 54.2(c)(3) lists. Defendants' failure to address all of those factors is not dispositive of this motion, however. Nor, despite plaintiff's assertion, does that failure provide a sufficient basis for reducing the requested attorneys' fees.
LRCiv. 54.2(c)(3), like Schweiger, contemplates a flexible approach to the reasonableness inquiry. More specifically, that Rule expressly states that when discussing the "[r]easonableness of [a] [r]equested [a]ward[,]" counsel "should discuss, as appropriate, the various factors bearing on the reasonableness of the requested attorneys' fee award[.]" LRCiv. 54.2(c)(3) (emphasis added). Plainly not every fee application implicates every one of the 13 factors set forth in LRCiv. 54.2(c)(3). In their supporting memorandum and reply, defendants did discuss the various, relevant "factors bearing on the reasonableness of the requested attorneys' fee award. See Mot. (doc. 35) at 4-6; and Reply (doc. 38) at 7-8. Thus, there is no basis for plaintiff's assertion that the court should deny or at least reduce the fees requested herein because defendants did not address all of the LRCiv. 54.2(c)(3) factors.
Second, the court agrees with defendants that plaintiff's objections are not sufficiently specific so as to warrant denying or reducing the requested fees. "Once a party submits an itemized list of fees with sufficient detail and establishes entitlement to fees," as defendants have done here, "the burden shifts to the party challenging the fees to show that the fees are unreasonable." Best Western International, Inc. v. Patel, 2008 WL 544820, at *4 (D.Ariz. 2008) (citing Nolan v. Starlight Pines Homeowners Ass'n, 216 Ariz. 482, 167 P.3d 1277, 1286 (Ariz.Ct.App. 2007)). Significantly, "[a]n opposing party does not meet [that] burden merely by asserting broad challenges to the application." Nolan, 216 Ariz. at 491, 167 P.3d at 1286 (internal quotation marks and citations omitted). Therefore, "[i]t is not enough . . . simply to state, for example, that the hours claimed are excessive and the rates submitted too high."Id. (internal quotation marks and citations omitted). Rather, as the party opposing this fee request, it is incumbent upon plaintiff to "present specific objections to the reasonableness of the fees requested." See id. (emphasis added). Indeed, quite recently, the court in Best Western awarded "Defendants the full amount of attorney's fees sought" where "[p]laintiff . . . failed to meet th[is] burden[.]" Best Western, 2008 WL 544820, at *5; see also Nolan, 216 Ariz. at 491, 167 P.3d at 1286 (no abuse of discretion in awarding attorneys' fees where, inter alia, plaintiffs "argued generally that [defense] counsel spent excessive time defending the case and questioned the necessity of various aspects of counsel's work").
Plaintiff did not specifically object to any single billing entry in defendants' 18 page Task-Based Itemized Statement of Attorneys' Fees. Instead, plaintiff's main objections are framed in terms of blocks of billing time. To illustrate, rather than the 8.3 hours supposedly expended in preparing an answer, plaintiff asserts that "no greater than 3 hours" should have been expended on that task. Resp. (doc. 37) at 4. In a similar vein, interpreting defense counsel's billing records as expending "more than 40 hours . . . primarily" preparing a summary judgment motion, plaintiff asserts that "[a] more reasonable time . . . is not more than 10 hours." Id. Likewise, plaintiff claims that the expenditure of "12 plus hours" on this fee motion "is more than 3 times what was called for." Id. at 5.
These broad challenges to the reasonableness of the hours expended does not, in this court's view, satisfy plaintiff's burden in opposing this fee motion. In the first place, plaintiff offers no rationale for why its suggested times for the completion of a given task are reasonable, while the time actually expended is not. Therefore, it strikes the court that not only are plaintiff's objections not specific enough, the times which it is assigning to a given task are somewhat arbitrary.
Second, by focusing on blocks of time rather than upon single billing entries, plaintiff has mischaracterized defendants' billing records. Between September 21, 2006 and February 7, 2007, defendants did not, as plaintiff puts it, "log . . . more than 40 hours . . ., primarily in connection with . . . prepar[ing] . . . the Motion for Summary Judgment." Resp. (doc. 37) at 4. Close scrutiny of the billing records during that timeframe shows that defense counsel were not only preparing a summary judgment motion, but they also were performing a host of other legal "service[s] which, at the time rendered, would have been undertaken by a reasonable and prudent lawyer to advance or protect his client's interest[.]'" Schweiger, 138 Ariz. at 188, 673 P.2d at 932 (quoting Twin City Sportservice, 676 F.2d at 1313). Following is a representative sampling of some of the non-summary judgment related tasks which defense counsel performed during the relevant time frame: preparing the initial disclosure statement and attendant tasks, see, e.g., mot. (doc. 35), exh. A thereto (doc. 35-2) at 4 (entries for 9/27/06 and 9/28/06); reviewing the subject contract regarding limits on assignment and transferability of mediation rights, id., exh. A thereto (doc. 35-2) at 5 (entry 10/9/06); and engaging in various aspects of discovery such as document production and scheduling depositions, id., exh. A thereto (doc. 35-2) at 9 (entry 11/21/06); at 11 (entry 2/1/07); and at 12 (entries 2/5/07; and 2/6/07). In short, as just shown, not only are plaintiff's objections lacking in the requisite specificity, but they are somewhat misleading. Accordingly, plaintiff has not provided a sufficient basis for reducing, much less denying, defendants' motion for attorneys' fees.
Even if the court were to deem plaintiff's objections sufficiently specific, the result would be the same: defendants are entitled to recover the full amount of the attorneys' fees which they are seeking. Defendants are entitled to that full recovery because when the court reviews defense counsel's billing entries one-by-one, instead of grouping them as did plaintiff, it finds reasonable the fees which defendants incurred in successfully defending this action.
Finally, the court observes that while fee requests do have the potential for becoming the proverbial "tail wagging the dog," this is not such a case. Defendants successfully defended this action. Norquay and Prefab entered into a contract well before this litigation, expressly authorizing the "prevailing party" to recover its attorneys' fees. DSOF, exh. 1 (doc. 18-2) thereto at 10, Article 14.4. What is more, the fees incurred were reasonable. Therefore, for the reasons set forth above,
IT IS ORDERED that "Defendants' Motion for Attorneys' Fees" (doc. 35) is GRANTED in the amount of $21,540.00.