Design Trend International Interiors, Ltd. v. Cathay Enterprises, Inc.

Filing 134

ORDER that Design Trend's Amended Motion for Entry of Final Judgment (Doc. 114 ) is granted in the amounts stated below. IT IS FURTHER ORDERED that the Clerk vacate the Judgment (Doc. 93 ) entered March 6, 2012, and enter judgment pursuant to mandate and to this order in favor of Design Trend International Interiors, Ltd., against Cathay Enterprises, Inc., for: (1) $169,025.22 in damages, (2) $199,218.22 in prejudgment interest thereon at the rate of 10% per annum from June 5, 2003, until March 16, 2015, (3) $381,936.14 in attorneys' fees, (4) $10,203.93 in taxable costs, and (5) postjudgment interest on those amounts, which total $760,383.51, at the federal rate of 0.25% per annum from March 16, 2015, until paid. The Clerk shall terminate this case.. Signed by Judge Neil V Wake on 3/16/2015.(KMG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 Design Trend International Interiors, Ltd., an Arizona corporation, 12 13 ORDER Appellant, 11 No. CV-10-01079-PHX-NVW vs. Cathay Enterprises, corporation, 14 Inc., an Arizona Appellee. 15 16 Before the court are questions of prejudgment interest and attorneys’ fees. 17 Plaintiff/Appellant Design Trend International Interiors, Ltd. (“Design Trend”) was 18 previously awarded damages of $169,025.22, with prejudgment interest at the Arizona 19 statutory rate of 10% and postjudgment interest at the federal statutory rate of 0.26%. 20 (Doc. 93.) Attorneys’ fees were awarded in the amount requested of $382,966.44, plus 21 taxable costs of $10,203.93. Design Trend Int’l Interiors, Ltd. v. Cathay Enters., No. CV 22 10-01079-PHX-NVW, 2012 WL 727257, at *7, 2012 U.S. Dist. LEXIS 29045, at *17 (D. 23 Ariz. Mar. 6, 2012). 24 Judgment was originally entered on March 29, 2011, but the court concluded on 25 reconsideration that it had erred in overlooking prejudgment interest and that 26 Defendant/Appellee Cathay Enterprises, Inc. (“Cathay”) was entitled to additional 27 findings on some claimed offsets that the Bankruptcy Court had not addressed. In light 28   1 of the nearly ten years this dispute had already been in litigation, this court withdrew the 2 reference of the adversary proceeding to make those additional findings here. (Doc. 69 at 3 8.) The March 29, 2011 judgment was vacated in light of the need to change the award, 4 and a corrected judgment was entered on March 6, 2012. (Doc. 93.) The corrected 5 judgment was backdated to the date of the original judgment, March 29, 2011, so no 6 party would suffer from the fortuity that the original judgment was vacated and replaced. 7 (Doc. 92, 93.) But this court did not explain its reason for making the second judgment 8 nunc pro tunc. 9 The Court of Appeals affirmed the principal damage award but reversed and 10 remanded the calculations of prejudgment interest and attorneys’ fees. This court “erred 11 in using the equitable remedy of nunc pro tunc to backdate its order for the purpose of 12 calculating prejudgment interest.” (Doc. 113-1 at 4.) In accordance with the mandate of 13 the Court of Appeals, this court now addresses the rate of prejudgment interest to apply 14 up to the date of a final judgment, not the nunc pro tunc date of the original judgment. 15 Under Arizona statute, Design Trend is entitled to interest at 10% per annum on that 16 liquidated obligation until judgment. 17 Because the Court of Appeals reversed and remanded the judgment of March 6, 18 2012, the question arises whether the prejudgment interest rate stops on the date of that 19 former final judgment or continues until entry of a new final judgment on remand. The 20 Bankruptcy Court recently shed light on this question when it ruled, at Cathay’s urging, 21 that the March 6, 2012 judgment is not final in any part and nothing may yet be paid 22 under it. 23 independent of that ruling, in the specific circumstances of this case it is more equitable 24 for the prejudgment interest rate to continue until entry of a final judgment on remand. Consistent with that decision and with principles of judgment interest 25 The Court of Appeals also remanded for “further explanation and, if necessary, 26 recalculation” of the award of attorneys’ fees because this court “did not give enough 27 information to determine whether the attorneys’ fees award was reasonable” and failed to 28 -2  1 indicate that it “excluded fees that could be attributed to work performed during the 2 bankruptcy proceedings unrelated to the contract dispute.” (Doc. 113-1 at 4-5.) This 3 court now addresses in more detail why it awards attorneys’ fees in its discretion under 4 state law and why all the attorneys’ fees directly incurred in the bankruptcy case are 5 intertwined with the contract claim and therefore awardable. 6 Judgment will be entered in favor of Design Trend against Cathay in the amounts 7 of: $169,025.22 for damages; $199,218.22 for prejudgment interest at the rate of 10% 8 per annum from June 5, 2003, until March 16, 2015; $381,936.14 for attorneys’ fees; 9 $10,203.93 for taxable costs; and postjudgment interest on all those amounts at the 10 federal rate of 0.25% from March 16, 2015, until paid. 11 The award for attorneys’ fees and taxable costs exceeds the damages and interest, 12 but that is to be expected when a dogged defense through fourteen years of litigation ends 13 in adjudication on the merits, not capitulation. The prejudgment simple interest at 10% 14 per annum equates to only 6.83% compound interest. The effective interest rate on the 15 cost to Design Trend is much lower, probably under 4%, because there is no prejudgment 16 interest on the attorneys’ fees and taxable costs incurred over many years. In this 17 commercial dispute between sophisticated parties, these are modest and foreseeable 18 consequences of playing hard and losing. 19 I. PREJUDGMENT INTEREST 20 A. 21 The question presented is whether, under a 2011 amendment to Arizona Revised 22 Statutes § 44-1201, a party owing a liquidated sum, on which 10% interest accrues until 23 entry of judgment, partially extinguishes that accrued interest obligation by not paying it. 24 By forcing the creditor to sue and reduce his claim to judgment, does the debtor make the 25 lower postjudgment interest rate apply backwards to oust part of the prejudgment interest 26 previously accrued at 10%? Summary 27 28 -3  1 The answer is no. First, the language of the 2011 amendment leaves in place the 2 10% prejudgment interest rate on liquidated obligations without an agreed rate. The 3 language falls far short of compelling a partial forfeiture of past interest. Second, if the 4 “plain language” of the amendment did favor forfeiture—which it does not—that 5 conclusion would be perverse. Even “plain language” in a statute does not compel an 6 absurd result. Third, under the Applicability section of the Session Laws, the amendment 7 “applies to all loans that are entered into, all debts and obligations that are incurred and 8 all judgments that are entered on or after the effective date of this act.” 2011 Ariz. Sess. 9 Laws 99, § 17. The liquidated obligation in this case was incurred long before the 10 effective date of the 2011 amendment. So even if that amendment in general purports to 11 defeat accrued interest upon later entry of a judgment, Cathay’s breach-of-contract debt is 12 excluded. 13 B. 14 The 2011 Amendment of A.R.S. § 44-1201 Leaves in Place Prejudgment Interest at 10% on Liquidated Obligations with No Agreed Rate of Interest 15 16 Federal judgment creditors are entitled to interest “calculated from the date of the 17 entry of the judgment, at a rate equal to the weekly average 1-year constant maturity 18 Treasury yield.” 19 prejudgment interest, if any, should be provided in the judgment. “Substantive state law 20 determines the rate of prejudgment interest in diversity actions.” Home Indem. Co. v. 21 Lane Powell Moss & Miller, 43 F.3d 1322, 1332 (9th Cir. 1995) (citation omitted). This 22 case is equivalent to a diversity case removed to federal court. (Doc. 92 at 6; In re Banks, 23 225 B.R. 738, 750 (Bankr. C.D. Cal. 1998) (“The removed [adversary proceeding] is 24 equivalent to a diversity action, as it is not brought under any aspect of federal law and is 25 in this court only due to its relationship to the [core] bankruptcy.”).) Design Trend is 26 therefore entitled to prejudgment interest in the amount Arizona law provides for a 27 liquidated obligation with no agreed rate of interest. 28 U.S.C. § 1961(a). The federal statute is silent on how much 28 -4  1. Statutory Text and History 1 2 Before July 20, 2011, Arizona had a simple regime for interest on judgments and 3 interest owing without entry of a judgment. Under former A.R.S. § 44-1201, an agreed 4 legal rate of interest governed both prejudgment and postjudgment. Otherwise, 10% was 5 the rate on judgments and for interest owing even without entry of a judgment. The 6 statute said: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Interest on any loan, indebtedness, judgment or other obligation shall be at the rate of ten per cent per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to. ... C. A judgment given on an agreement bearing a higher rate not in excess of the maximum permitted by law shall bear the rate of interest provided in the agreement, and it shall be specified in the judgment. A.R.S. § 44-1201 (2003 & Supp. 2010); see also Metzler v. BCI Coca-Cola Bottling Co. of L.A., 235 Ariz. 141, 145, 329 P.3d 1043, 1047 (2014) (“[F]rom 1992 to 2011, § 44-1201 did not differentiate between judgments and other obligations, or between prejudgment and post-judgment interest on judgments.”). Judicial decisions added to the law of prejudgment interest in this sparse statute. In 2011, the Legislature amended § 44-1201 to codify elements of case law and to make two changes (one of which, prohibition of interest on punitive damages, has no bearing on this case). For interest on any “loan, indebtedness or other obligation” except a judgment, the prior statutory language was left in place. If the parties have agreed to a rate, that rate governs; otherwise the rate is 10%. The other change was to reduce judgment interest in cases without an agreed rate, from the previous 10% to the lesser of 10% or 1% above the prime rate. This change sets a variable market rate for judgment interest, but capped at 10%, unless the parties have agreed to a different rate. 26 27 28 -5  1 The 2011 amendment achieves this by adding some new language while leaving 2 other language in place. The amended text of § 44-1201 is as follows (strikeout shows 3 deletions, underline shows additions): 4 5 6 7 8 9 A. Interest on any loan, indebtedness judgment or other obligation shall be at the rate of ten per cent per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to. Interest on any judgment that is based on a written agreement evidencing a loan, indebtedness or obligation that bears a rate of interest not in excess of the maximum permitted by law shall be at the rate of interest provided in the agreement and shall be specified in the judgment. 13 B. Unless specifically provided for in statute or a different rate is contracted for in writing, interest on any judgment shall be at the lesser of ten per cent per annum or at a rate per annum that is equal to one per cent plus the prime rate as published by the board of governors of the federal reserve system in statistical release H.15 or any publication that may supersede it on the date that the judgment is entered. The judgment shall state the applicable interest rate and it shall not change after it is entered. 14 ... 15 D. A court shall not award either of the following: 10 11 12 16 17 18 19 20 21 22 23 1. Prejudgment interest for any unliquidated, future, punitive or exemplary damages that are found by the trier of fact. 2. Interest for any future, punitive or exemplary damages that are found by the trier of fact. E. For the purposes of subsection D of this section, “future damages” means damages that will be incurred after the date of the judgment and includes the costs of any injunctive or equitable relief that will be provided after the date of the judgment. F. If awarded, prejudgment interest shall be at the rate described in subsection A or B of this section. 24 25 2011 Ariz. Sess. Laws 99, § 15. The new, underlined text in subsections (A) and (B) 26 states the rate for postjudgment interest under Arizona law: either an agreed rate or, 27 28 -6  1 failing that, the lower of 10% or the prime rate plus 1%. Subsection (A) sets the interest 2 rate at 10% on obligations other than judgments, unless a different rate is agreed. 3 4 2. Subsection (F) Affirms Subsection (A)’s Rate for Prejudgment Interest on Obligations Without an Agreed Rate 5 Under the new A.R.S. § 44-1201(F), any prejudgment interest awarded “shall be at 6 the rate described in subsection A or B of this section.” The first sentence of subsection 7 (A) already states that the prejudgment interest rate is 10% per annum, unless a different 8 rate is agreed in writing. Subsection (F) restates that a later judgment on an interest 9 obligation that the first sentence of subsection (A) imposes before entry of any judgment 10 shall be at the same rate already accrued before entry of a judgment. This is the meaning 11 of the plain language and of common sense. 12 The taxonomy of interest-bearing obligations stated in A.R.S. § 44-1201(A) and 13 (B) supports this reading. As amended, the text divides those obligations into four 14 categories: 15 1. Any “loan, indebtedness or other obligation” (except a judgment) without an 16 agreed interest rate—10% applies. 17 sentence). 18 § 44-1201(A) (first clause of first 2. Any “loan, indebtedness or other obligation” with an interest rate agreed in 19 writing—the agreed rate applies. 20 sentence). 21 22 23 24 § 44-1201(A) (second clause of first 3. Any “judgment that is based on a written agreement” with an agreed interest rate—the agreed rate applies. § 44-1201(A) (second sentence). 4. “[A]ny judgment” without a rate agreed in writing—the lesser of 10% or 1% above prime applies. § 44-1201(B). 25 Of these four categories, the first fits interest accruing on Cathay’s indebtedness to 26 Design Trend before entry of judgment. The fourth category fits a judgment entered on 27 Design Trend’s claim unless the federal statute governs the rate accruing after judgment. 28 When subsection (F) says “prejudgment interest shall be at the rate described in -7  1 subsection A or B of this section,” it can only mean the interest rate that fits by the terms 2 of subsection (A) or (B). 3 According to Cathay, if a liquidated obligation with no agreed rate is unpaid and 4 eventually reduced to judgment, subsection (F) retroactively reduces the 10% rate after 5 the prejudgment interest has already accrued. 6 interest must be calculated based upon one of the alternative rates described in the added 7 portion of subsection A”—that is, subsection (A)’s second sentence—“or B as amended.” 8 (Doc. 115 at 4.) “Pre-judgment interest,” Cathay argues, “must be either based upon a 9 written agreement (subsection A), or the prime rate plus one percent (1%) (subsection 10 B).” (Id.) Cathay contends that by prescribing “the rate described in subsection A or B,” 11 subsection (F) actually instructs courts to ignore the express direction in subsection (A) 12 that “[i]nterest on any loan, indebtedness or other obligation shall be at the rate of ten per 13 cent per annum . . . .” § 44-1201(A) (emphasis added). Cathay would rewrite subsection 14 (F) to adopt for prejudgment interest the “rate described in subsection B and not the rate 15 described in subsection A.” (Emphasis added.) This is bare assertion in defiance of 16 statutory text. The plain language of the amended statute leaves in place for prejudgment 17 interest exactly what Cathay says the Legislature repealed. Cathay’s view is that “pre-judgment 18 Arizona case authority consones to the reading that “interest on any judgment” in 19 subsections (A) and (B) means only interest owing because of a judgment. The term does 20 not apply to interest owing even in the absence of a judgment. By contrast, the words 21 “indebtedness” and “other obligation” in subsection (A) encompass a wide range of legal 22 duties beyond those dependent upon existence of a judgment. 23 In Metzler, the Arizona Supreme Court decided whether “the rate for prejudgment 24 interest awarded pursuant to Rule 68(g) is governed by § 44-1201(A) [at 10%] or § 44- 25 1201(B) [at 1% above prime rate].” 235 Ariz. at 144, 329 P.3d at 1046. Rule 68(g) of 26 the Arizona Rules of Civil Procedure provides that if a party “rejects an offer [of 27 judgment] and does not later obtain a more favorable judgment . . . the offeree must pay, 28 -8  1 as a sanction . . . prejudgment interest on unliquidated claims to accrue from the date of 2 the offer.” Ariz. R. Civ. P. 68(g). (Sanctions under the Arizona offer-of-judgment rule 3 are more robust than those under Federal Rule of Civil Procedure 68.) 4 The Metzler court found the term “obligation” ambiguous, as it could refer to a 5 broad “legal or moral duty” or to a narrower “formal, binding agreement . . . to pay a 6 certain amount or to do a certain thing for a particular person or set of persons.” 235 7 Ariz. at 145, 329 P.3d at 1047 (citations and internal quotation marks omitted). The court 8 applied ejusdem generis, the canon of statutory interpretation that “general words [that] 9 follow the enumeration of particular classes of persons or things should be interpreted as 10 applicable only to the persons or things of the same general nature or class.” Id. 11 (alteration in original) (citation and internal quotation marks omitted). 12 concluded that an “obligation” covered by § 44-1201(A) must be similar in nature to a 13 “loan” or “indebtedness.” Id. at 145-46, 329 P.3d at 1047-48. Specifically, a § 44- 14 1201(A) “obligation,” unlike Rule 68 prejudgment interest as a sanction, does not 15 “depend[] on a judgment for its existence.” See id. at 146, 329 P.3d at 1048. “What 16 would otherwise be an unliquidated claim on which no prejudgment interest is owed,” if 17 imposed as a Rule 68 sanction “becomes liquidated, memorialized, and enforceable only 18 when judgment is entered.” Id. As a result, Rule 68 prejudgment interest is “interest on a 19 judgment,” rather than interest on a “loan, indebtedness or other obligation.” Id. Hence, 20 the lower rate of § 44-1201(B) for interest “on any judgment” applies to prejudgment 21 interest imposed after judgment as a sanction under Rule 68(g). Id. Under the logic of 22 Metzler, prejudgment interest on a liquidated claim—unlike interest that is neither owing 23 nor quantifiable until entry of a judgment under Rule 68—is interest on an “obligation” 24 pursuant to § 44-1201(A) and thus accrues at the 10% rate of subsection (A). The court 25 In summary, the plain language of A.R.S. § 44-1201(A) is that interest on a 26 liquidated obligation without an agreed rate accrues before judgment at 10% per annum. 27 Subsection (F) confirms that past accrual upon reduction to judgment when it says that 28 -9  1 “prejudgment interest shall be at the rate described in subsection A or B of this section.” 2 A.R.S. § 44-1201(F). 3. Cathay’s Interpretation of the Statute Yields an Absurd Result 3 4 In determining meaning, one looks to the language of the statute. “When 5 construing statutes, we begin with the language of the statute itself because we expect it 6 to be the best and most reliable index of a statute’s meaning.” Canyon Ambulatory 7 Surgery Ctr. v. SCF Ariz., 225 Ariz. 414, 420, 239 P.3d 733, 739 (Ct. App. 2010) 8 (citation and internal quotation marks omitted). “If the statute’s language is clear, it 9 controls unless an absurdity or constitutional violation results. But if the text is 10 ambiguous, we also consider the statute’s context; its . . . subject matter, and historical 11 background; its effects and consequences; and its spirit and purpose, as well as other 12 applicable canons of statutory construction. We seek to harmonize, whenever possible, 13 related statutory and rule provisions.” Metzler, 235 Ariz. at 144-45, 329 P.3d at 1046-47 14 (alteration in original) (citations and internal quotation marks omitted). 15 The plain language of the statute is the opposite of Cathay’s proffered meaning. 16 But if the plain language somehow said what Cathay wants, the “effects and 17 consequences” of that interpretation would be too perverse to be imputed to the 18 Legislature. 19 postjudgment rate on accrued interest for which subsection (A) expressly sets a higher 20 rate—would reward a recalcitrant debtor with a windfall for refusing to pay, forcing 21 litigation, and causing entry of judgment. The Legislature could set a prejudgment 22 interest rate of 1% above prime. 23 Legislature to create an interest obligation and then destroy it by entry of a judgment 24 enforcing it. That is exactly the kind of absurd result that even plain language need not 25 yield. See id. Cathay’s position—that subsection (F) imposes subsection (B)’s lower But it would be unjust and nonsensical for the 26 27 28 - 10   C. 1 2 3 The Applicability Section of the Session Laws Excludes Obligations Already Incurred from the 2011 Amendment Whatever the effect of the 2011 amendment of A.R.S. § 44-1201 in general, it does not apply in this case. The Applicability section of the 2011 amendment states: 4 6 Section 44-1201, Arizona Revised Statutes, as amended by this act, applies to all loans that are entered into, all debts and obligations that are incurred and all judgments that are entered on or after the effective date of this act. 7 2011 Ariz. Sess. Laws 99, § 17(B). The amended interest provisions do not apply to any 8 obligation incurred before the amendment. Cathay’s obligation to Design Trend was 9 incurred by 2003, eight years before the revision of § 44-1201. That obligation is 10 therefore governed by the old § 44-1201, which indisputably mandated prejudgment 11 interest at 10%. 5 12 The provision in § 17(B) that the new § 44-1201 applies to judgments entered on 13 or after the date of amendment cannot repeal the preceding words protecting interest on 14 “all loans that are entered into, all debts and obligations that are incurred” before the 15 effective date. The manifest purpose of § 17(B) is to vindicate obligations and interest 16 incurred before the 2011 amendment. That purpose would fail if interest on a loan, debt, 17 or obligation already in breach were impaired by the enactment in 2011. Design Trend is therefore entitled to principal damages of $169,025.22, with 18 19 20 prejudgment interest at 10% per annum from June 5, 2003. II. POSTJUDGMENT INTEREST IS AT THE FEDERAL RATE 21 Federal postjudgment interest is governed by 28 U.S.C. § 1961(a) “at a rate equal 22 to the weekly average 1-year constant maturity Treasury yield.” But an “exception to 23 § 1961 exists when the parties contractually agree to waive its application.” Fid. Fed. 24 Bank, FSB v. Durga Ma Corp., 387 F.3d 1021, 1023 (9th Cir. 2004) (citing Citicorp Real 25 Estate, Inc. v. Smith, 155 F.3d 1097, 1107-08 (9th Cir. 1998)). If a contract “indicates a 26 mutual intent by the parties to have pre- and post-judgment interest calculated at the 27 contract interest rate,” then the contract rate applies. Citicorp, 155 F.3d at 1108. Other 28 - 11   1 circuits concur. Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 101 (2d Cir. 2004); 2 Kanawha-Gauley Coal & Coke Co. v. Pittston Minerals Grp., Inc., 501 F. App’x 247, 3 254 (4th Cir. 2012); Hymel v. UNC, Inc., 994 F.2d 260, 266 (5th Cir. 1993); Cent. States, 4 Se. & Sw. Areas Pension Fund v. Bomar Nat’l, Inc., 253 F.3d 1011, 1020 (7th Cir. 2001); 5 In re Riebesell, 586 F.3d 782, 794 (10th Cir. 2009). 6 However, courts are divided on how much specificity is needed to waive § 1961. 7 Compare Westinghouse Credit Corp., 371 F.3d at 101-02 (finding agreed interest rates 8 insufficient to waive § 1961 rate), and In re Riebesell, 586 F.3d at 794-95 (same), with 9 Andrews v. Triple R Distrib., LLC, No. CV 4:12-00346-TUC-RCC (HCE), 2013 WL 10 1177834, at *6, 2013 U.S. Dist. LEXIS 39480, at *15 (D. Ariz. Feb. 28, 2013) (holding 11 agreed rate sufficient). 12 The parties’ contract states, “Payments due and unpaid under the Contract shall 13 bear interest from the date payment is due at the rate stated below, or in the absence 14 thereof, at the legal rate prevailing from time to time at the place where the Project is 15 located.” (Doc. 131-1 at 5.) The parties inserted no specific rate in the space provided. 16 This contractual language adopts the Arizona legal rate of 10% for prejudgment interest 17 on liquidated obligations with no agreed rate. 18 In a supplemental reply brief on remand, Design Trend asserts for the first time 19 that the Arizona postjudgment interest rate at 4.25% may also apply “beyond” the time of 20 a final judgment. (Doc. 131 at 2 n.2.) But “arguments made in passing and inadequately 21 briefed are waived.” Halicki Films, LLC v. Sanderson Sales & Mktg., 547 F.3d 1213, 22 1230 (9th Cir. 2008). This court need not decide this issue, to which Design Trend has 23 given scant attention and on which courts are divided. See Latour v. Citigroup Global 24 Mkts., Inc., NO. 11cv1167-LAB (RBB), 2012 WL 909319, at *1, 2012 U.S. Dist. LEXIS 25 35976, at *4 (S.D. Cal. Mar. 16, 2012) (“deem[ing] any arguments arising from the 26 application of state law standards waived” under the Halicki Films standard). 27 28 - 12   1 Accordingly, postjudgment interest will be awarded at the federal rate, now 0.25% 2 per annum, until paid. “[T]he accrued prejudgment interest is included in the total award 3 that is subject to postjudgment interest” at that rate. 20A James Wm. Moore et al., 4 Moore’s Federal Practice § 337.15 (3d ed. 2014); see also Air Separation, Inc. v. 5 Underwriters at Lloyd’s of London, 45 F.3d 288, 291 (9th Cir. 1994). 6 III. 7 THE PREJUDGMENT INTEREST RATE CONTINUES UNTIL ENTRY OF FINAL JUDGMENT ON REMAND 8 The parties dispute whether the court should enter “a new, final judgment” (Doc. 9 131 at 6) or merely “modify or amend” (Doc. 130 at 5) the judgment previously entered 10 on March 6, 2012. A new judgment must be entered for Design Trend to collect the 11 principal, interest, and attorneys’ fees to which it is entitled following remand, as 75% of 12 the previous judgment—attorneys’ fees and interest—was reversed and remanded. 13 Whether the new judgment is cast as a replacement judgment or as a revision of the prior 14 judgment, the real disagreement is over the date on which accumulation of interest at the 15 prejudgment rate ceases and the postjudgment rate begins, as the rate is higher for the 16 first. Cathay believes March 6, 2012, is the proper date; Design Trend says it is the date 17 of judgment on remand pursuant to this order. The form of the judgment has some 18 bearing on the dispute but is not conclusive. 19 Cathay cites to Planned Parenthood of the Columbia/Willamette Inc. v. American 20 Coalition of Life Activists, 518 F.3d 1013 (9th Cir. 2008), for the point that, following 21 remand, when the “legal and evidentiary basis of an award is . . . preserved, post- 22 judgment interest is ordinarily computed from the date of [the judgment’s] initial entry.” 23 518 F.3d at 1018 (alteration in original) (citations and internal quotation marks omitted). 24 It is not apparent how this general principle would apply to the March 6, 2012 judgment. 25 The “legal and evidentiary basis” of Design Trend’s award could not be ascertained with 26 certainty until remand, as three-quarters of the original judgment was reversed and 27 remanded. 28 - 13   1 In any event, it is also true that “determining from which judgment interest should 2 run requires an inquiry into the nature of the initial judgment, the action of the appellate 3 court, the subsequent events upon remand, and the relationship between the first 4 judgment and the modified judgment.” Guam Soc’y of Obstetricians & Gynecologists v. 5 Ada, 100 F.3d 691, 702 (9th Cir. 1996) (citations and internal quotation marks omitted). 6 The standard is a flexible one that takes account of a variety of circumstances. Foremost 7 among these is the “equitable purpose behind § 1961 . . . to ensure[] that the plaintiff is 8 further compensated for being deprived of the monetary value of the loss from the date of 9 ascertainment of damages until payment by defendant.” AT&T v. United Computer Sys., 10 98 F.3d 1206, 1209 (9th Cir. 1996) (brackets in original) (citation and internal quotation 11 marks omitted). 12 calculating postjudgment interest from the date of the prior judgment,” that prior 13 judgment should mark the dividing line between pre- and postjudgment interest. See id. 14 But where “the postjudgment interest rate is less than the prejudgment interest rate, and it 15 is the losing party who asks that postjudgment interest begin at the time of the initial 16 judgment, while the prevailing party seeks to have postjudgment interest run from the 17 date of the later judgment,” equitable principles favor the date of the later judgment. See 18 id. at 1210-11 (emphasis in original). Where “the prevailing party would be ‘further compensated’ by 19 In this case, “the award of prejudgment interest under state law” until entry of 20 judgment on remand “more fully compensates [Design Trend] for the loss of use of its 21 money due to the delay occasioned by [Cathay’s] actions.” Id. at 1211. Cathay delayed 22 payment through fourteen years of litigation. “Any other result would penalize the 23 prevailing party, and in certain circumstances might also encourage losing parties to 24 instigate postjudgment litigation so they can reap the benefits of a low interest rate.” Id. 25 Even if the court lacked power to find the equitable date for interest on remand, 26 Cathay would be judicially estopped from saying postjudgment interest should run from 27 March 6, 2012. On December 31, 2014, Design Trend moved in the Bankruptcy Court to 28 - 14   1 release from Cathay’s reserve fund the $179,229.15 in damages and costs affirmed in the 2 mandate. Cathay objected, arguing that “Design Trend does not have a complete and 3 enforceable final judgment” on which to collect. (Doc. 128-2 at 3.) That amount was 4 “only part of a potential judgment on remand, the contents and basis of which are 5 presently unknown,” Cathay wrote in its opposition brief. (Id. at 4.) At oral argument, 6 Cathay reiterated that Design Trend “didn’t have a final judgment” in this court. (Doc. 7 130-1 at 11.) The Bankruptcy Court agreed and denied release of the funds. (See id. at 8 11-13.) Having kept the use of $179,229.15 by claiming there is no final judgment, 9 Cathay may not now say the opposite to avoid paying interest while it had those funds. 10 Judicial estoppel forbids saying something in court to get a benefit after having gotten a 11 different benefit in court by having said the opposite. Ah Quin v. Cnty. of Kauai DOT, 12 733 F.3d 267, 270 (9th Cir. 2013) (“[J]udicial estoppel is an equitable doctrine invoked 13 by a court at its discretion. [I]ts purpose is to protect the integrity of the judicial process 14 by prohibiting parties from deliberately changing positions according to the exigencies of 15 the moment.” (alterations in original) (citation and internal quotation marks omitted)). 16 Prejudgment interest at 10% per annum will continue to the March 16, 2015 date 17 of judgment on remand, with postjudgment interest thereafter on the entire award at the 18 federal rate of 0.25% per annum. 19 IV. ATTORNEYS’ FEES 20 Under Arizona law, in “any contested action arising out of a contract, express or 21 implied, the court may award the successful party reasonable attorney’s fees.” A.R.S. 22 § 12-341.01(A). “The trial judge . . . has broad discretion in fixing the amount of the fee 23 provided that ‘such award may not exceed the amount paid or agreed to be paid.’” 24 Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985) 25 (quoting A.R.S. § 12-341.01(B)). Among the factors to consider are (1) the “merits of 26 the claim or defense presented by the unsuccessful party,” (2) whether the “litigation 27 could have been avoided or settled and the successful party’s efforts were completely 28 - 15   1 superfluous in achieving the result,” (3) whether “[a]ssessing fees against the 2 unsuccessful party would cause an extreme hardship,” (4) whether the “successful party 3 did not prevail with respect to all of the relief sought,” (5) “the novelty of the legal 4 question presented,” (6) “whether such claim or defense had previously been adjudicated 5 in this jurisdiction,” and (7) “whether the award in any particular case would discourage 6 other parties with tenable claims or defenses from litigating or defending legitimate 7 contract issues for fear of incurring liability for substantial amounts of attorney’s fees.” 8 Id. 9 In “determining reasonable attorneys’ fees in commercial litigation,” the 10 “beginning point . . . of a reasonable fee is the . . . the actual billing rate which the lawyer 11 charged in the particular matter . . . . Unlike public-rights litigation . . . in corporate and 12 commercial litigation between fee-paying clients, there is no need to determine the 13 reasonable hourly rate prevailing in the community for similar work because the rate 14 charged by the lawyer to the client is the best indication of what is reasonable under the 15 circumstances of the particular case.” Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 16 186-88, 673 P.2d 927, 930-32 (Ct. App. 1983). While the agreed billing rate is not 17 conclusive, there is no showing here that the agreed rates were too high, and the court 18 finds the agreed rates and paid fees to be reasonable. 19 considerations as to the amount of the award are four challenged categories of fees. Accordingly, the remaining 20 A. Fees Related to Bankruptcy 21 Cathay contests fees for work done by Jaburg & Wilk, which Design Trend 22 retained in Cathay’s bankruptcy case. It makes two objections: first, that those fees are 23 “unsupported by any fee invoices or alternative task-based itemization”; and second, that 24 fees incurred for the bankruptcy proceeding are unrelated to the contract claim. (Doc. 25 115 at 6-7.) 26 27 28 - 16   1 1. Admissibility of the records 2 Cathay moved to strike Design Trend’s Reply (Doc. 116) on the ground that it 3 impermissibly attached Jaburg & Wilk’s fee invoices. The parties were ordered to brief 4 “whether the additional billing records may be added and considered on remand.” (Doc. 5 121 at 1.) The invoices were emailed to Cathay’s counsel prior to Design Trend’s filing 6 the original motion for attorneys’ fees in 2011, but they were inadvertently left out of the 7 attachments to the fee motion itself. That oversight does not prejudice Cathay when the 8 invoices were received in fact. Nor is there any prejudice to Cathay in considering those 9 invoices now, even if they had not been received before. 10 Cathay argues that the Jaburg & Wilk invoices may not be considered because the 11 Court of Appeals’ mandate did not direct this court to do so. (Doc. 125 at 6.) To the 12 contrary, the mandate expressly authorized “recalculation” of the fee award. (Doc.113-1 13 at 5.) “On remand for further proceedings after decision by an appellate court, the trial 14 court must proceed in accordance with the mandate and the law of the case as established 15 on appeal. The mandate is controlling as to all matters within its compass, but leaves to 16 the district court any issue not expressly or impliedly disposed of on appeal.” Stevens v. 17 F/V Bonnie Doon, 731 F.2d 1433, 1435 (9th Cir. 1984) (per curiam) (citations omitted). 18 Cathay relies on Stevens, which concerned a collision at sea. The Ninth Circuit 19 had previously “remanded for further proceedings to determine what the costs of repairs 20 were and directed exclusion of repair costs resulting from deterioration.” “On remand the 21 district court held a further hearing on damages and heard expert testimony presented by 22 [the vessel’s owner] to establish the cost of repair.” The district court increased the 23 amount of damages proximately caused by the collision. The defendants contended that 24 holding another hearing exceeded the scope of the remand. The Ninth Circuit affirmed 25 the new award, holding that because the “mandate . . . did not forbid taking new evidence 26 on the question of damages . . . it was no abuse of discretion for the court . . . to take new 27 evidence on the costs of repairs” instead of basing the newfound cost of repairs “on an 28 - 17   1 analysis of its prior award.” Id. at 1436. Stevens rejects the proposition for which Cathay 2 cites it. The Jaburg & Wilk invoices are properly considered. 3 2. Value of fees 4 Cathay argues the Jaburg & Wilk invoices do not establish the reasonableness of 5 the bankruptcy attorneys’ fees because “Arizona law prohibits non-task based billing.” 6 (Doc. 115 at 6.) This overstates the law. Arizona courts are skeptical about “block- 7 billing,” that is, a lawyer’s “recording of only half-hour or one-hour increments and his 8 practice of grouping tasks together in a block so that time spent on each task cannot be 9 reviewed for its reasonableness.” See Sleeth v. Sleeth, 226 Ariz. 171, 178, 244 P.3d 10 1169, 1177 (Ct. App. 2010). But Sleeth ultimately held only that a court should 11 “consider whether each entry of block-billing provides sufficient detail to support an 12 award for that entry.” Id. 13 Here, Jaburg & Wilk’s invoices provide enough detail to conclude that the 14 services were reasonable and compensable. (See generally Doc. 116-2.) Even in its 15 Supplemental Brief (Doc. 125), filed after Design Trend supplied the Jaburg & Wilk 16 invoices again, Cathay has not challenged any particular entries as lacking sufficient 17 detail. Instead, Cathay offers only a conclusory allegation that “J&W did not attempt to 18 distinguish or itemize tasks.” (Doc. 125 at 9.) The Jaburg & Wilk fees are reasonable 19 and will be awarded in the amounts billed. 20 Cathay also challenges Jaburg & Wilk’s fees and $15,553.00 in Wilenchik & 21 Bartness fees on the ground they were incurred in bankruptcy proceedings unrelated to 22 the contract action. Assuming without deciding that a bankruptcy proceeding is not itself 23 a “contested action” for purposes of A.R.S. § 12-341.01(A), this adversary proceeding is, 24 as it was when in state court before it was removed to bankruptcy court. Nevertheless, 25 “when two claims are so intertwined as to be indistinguishable, a court has discretion to 26 award attorney fees under § 12-341.01 even though the fees attributable to one of the 27 causes of action would not be recoverable under this statute.” Zeagler v. Buckley, 223 28 - 18   1 Ariz. 37, 39, 219 P.3d 247, 249 (Ct. App. 2009) (citations omitted). Under this flexible 2 and fact-dependent doctrine, fees may be awarded for work done in bankruptcy where 3 “the bankruptcy proceeding was substantially intertwined with [a] contract dispute.” Id. 4 (citation omitted). 5 substantially overlapping discovery would occur, there is no sound reason to deny 6 recovery of such legal fees.” Id. 7 For example, when “claims are so interrelated that identical or This contract action was “substantially intertwined” with Cathay’s bankruptcy 8 proceeding. Indeed, it was the only reason for the bankruptcy. Cathay filed the 9 bankruptcy the day before a jury trial on the breach-of-contract claim was set to begin. 10 Design Trend had a majority of the claims, excluding disputed insider claims. If, as 11 Cathay contended, its principal shareholder had a senior $4 million lien on the hotel, 12 Design Trend would have been left with an empty judgment. 13 bankruptcy strategy was essential to vindicating Design Trend’s contract claim. Defeating Cathay’s 14 Design Trend did avoid Cathay’s strategy to divert all the value in its estate to its 15 shareholder. That resulted in a surplus estate. All creditors were paid and $750,000.00 16 was reserved for Design Trend’s claim. Having examined the factual record in detail, the 17 court finds as a fact that the fees Design Trend’s attorneys incurred in the Bankruptcy 18 Court were intertwined with and necessary to prosecution of the contract claim against 19 Cathay. Cf. Zeagler, 223 Ariz. at 39, 219 P.3d at 249 (“The trial court [is] in the best 20 position to understand the relationship between the bankruptcy litigation and the contract 21 dispute.” (citations omitted)). Accordingly, the fee award against Cathay will include the 22 $102,785.00 in bankruptcy attorneys’ fees. 23 B. Fees Related to Registrar Proceedings 24 Cathay challenges $1,030.30 in time entries for services in Arizona Registrar of 25 Contractors administrative proceedings. Design Trend said at oral argument that it did 26 not mean to claim fees for Registrar proceedings, and rather than litigate over the 27 classification of that minor amount, it withdraws that $1,030.30. 28 - 19   1 C. 2 Design Trend had pay-when-paid clauses with its subcontractors. It was sued by 3 subcontractors who were unpaid because Design Trend was unpaid. In one of those 4 actions, subcontractor Hawkeye sued Cathay, Huang, and Design Trend in Superior 5 Court, prompting Design Trend to file counterclaims and cross-claims. That case was 6 later consolidated with another action brought against Cathay by a third party and 7 removed to the Bankruptcy Court in September 2004. Cathay now challenges $7,448.25 8 in “fees incurred in third-party proceedings,” including “fees associated with settlement 9 discussions between [Design Trend] and subcontractor Hawkeye, pleadings by Hawkeye, 10 Fees Related to Third-Party Claims and/or pleadings between Hawkeye and Cathay.” (Doc. 115 at 11.) 11 Contrary to Cathay’s contention, the holding of Fulton Homes Corp. v. BBP 12 Concrete, 214 Ariz. 566, 569, 155 P.3d 1090, 1093 (Ct. App. 2007)—that “the parties 13 must actually be ‘adverse’” for fees under § 12-341.01—does not preclude fees directly 14 occasioned by another party in the same action between the directly adverse parties. The 15 test is whether those fees are “intertwined” with the contest between the contracting 16 parties. Cathay’s wrongful non-payment of Design Trend drew Hawkeye and others into 17 this litigation. Defending against those additional parties was inextricably intertwined 18 with prosecuting Design Trend’s contract claim against Cathay in the same consolidated 19 action. 20 D. Fees Related to Unfiled Papers 21 Cathay challenges $2,904.50 in fees for drafting papers that Design Trend decided 22 not to file. There is no automatic exclusion of services for drafting documents not 23 ultimately filed. 24 reasonably explore ideas and strategies that they decide not to pursue. Sometimes only 25 writing will show whether a paper merits filing. Sometimes events make the filing 26 unnecessary. There is no showing that the $2,904.50 for work on papers not filed was 27 unreasonable. Rather, the test is whether the work was reasonable. 28 - 20   Lawyers 1 The strategy being investigated was liability of Cathay’s principal, Mr. Huang. In 2 October 2001, Cathay recorded a deed of trust giving Huang a $4 million lien on that 3 hotel. Cathay and Design Trend were by this time already in a dispute about Cathay’s 4 failure to pay Design Trend for work on the hotel. (See Doc. 29 at 2-3.) Design Trend 5 argued that Cathay’s sale of the hotel in bankruptcy was an attempt to “materially 6 advance its sole shareholder’s personal interests to the derogation of . . . the interests of 7 creditors.” In re Cathay Enters., Inc., No. 2:04-bk-15766-PHX-RTB, Doc. 124 at 4 8 (Bankr. D. Ariz. Nov. 9, 2006). Design Trend withdrew its objection to Cathay’s sale of 9 the hotel in November 2006 after Cathay agreed to set aside $750,000 for Design Trend’s 10 claims. Id. at 5. It was reasonable to investigate Huang’s liability, which ceased to 11 matter once Cathay agreed to that reserve. 12 E. Review of Discretionary Factors for Awarding Fees 13 The factors identified in Associated Indem. Corp. v. Warner, 143 Ariz. 567, 694 14 P.2d 1181 (1985), confirm this court’s discretion in awarding Design Trend its reasonable 15 attorneys’ fees. 16 insubstantial, though costly and time-consuming. 17 Notwithstanding Design Trend’s delay, Cathay repeatedly demanded that Design Trend 18 complete performance, which it did. By electing completion rather than termination and 19 damages, Cathay waived Design Trend’s breach as a basis to refuse payment. These 20 facts did not present a “novel[] … legal question.” 21 “previously been adjudicated in this jurisdiction” under well-settled principles of Arizona 22 construction law. Awarding Design Trend its fees will not “discourage other parties with 23 tenable . . . defenses from . . . defending legitimate contract issues for fear of incurring 24 liability for substantial amounts of attorney’s fees.” Design Trend prevailed on most of 25 its claims except some offsets. “Assessing fees against the unsuccessful party” will not 26 “cause an extreme hardship.” The funds to pay the award are in Cathay’s estate. The “merits of the . . . defense presented by” Cathay proved 27 28 - 21   Id. at 570, 694 P.2d at 1184. The claims and defenses had 1 The strongest consideration in this case is whether the “litigation could have been 2 avoided or settled and the successful party’s efforts were completely superfluous in 3 achieving the result.” Id. Cathay has fought with determination for fourteen years to 4 avoid paying for work done. 5 quantified in the Superior Court trial in 2004, had Cathay filed its bankruptcy after the 6 verdict rather than the day before the trial. It then could have had all the protections of 7 bankruptcy concerning management and liquidation of its asset, the hotel. Cathay’s 8 unrelenting defense made this litigation unavoidable and increased the expense greatly. Indeed, this claim could have been adjudicated and 9 The circumstances of this case powerfully satisfy the court’s discretion to award 10 fees “to mitigate the burden of the expense of litigation to establish a just claim or a just 11 defense.” A.R.S. § 12-341.01(B). Failure to award fees would leave Design Trend better 12 off had it never come to court. It would reward the strategy of multiplying proceedings 13 to make meritorious litigation futile. 14 Design Trend will be awarded $381,936.14 in attorneys’ fees, including attorneys’ 15 non-taxable expenses, which are customarily and reasonably listed separately from the 16 hourly rate value of professional services. Attorneys’ fees incurred on remand may be 17 claimed pursuant to Rule 54(d)(2), Federal Rules of Civil Procedure, and Local Rule 18 54.2. IT IS THEREFORE ORDERED that Design Trend’s Amended Motion for Entry 19 20 of Final Judgment (Doc. 114) is granted in the amounts stated below. 21 IT IS FURTHER ORDERED that the Clerk vacate the Judgment (Doc. 93) 22 entered March 6, 2012, and enter judgment pursuant to mandate and to this order in favor 23 of Design Trend International Interiors, Ltd., against Cathay Enterprises, Inc., for: 24 25 26 /// 27 /// 28 - 22   1 (1) $169,025.22 in damages, 2 (2) $199,218.22 in prejudgment interest thereon at the rate of 10% per annum 3 from June 5, 2003, until March 16, 2015, 4 (3) $381,936.14 in attorneys’ fees, 5 (4) $10,203.93 in taxable costs, and 6 (5) postjudgment interest on those amounts, which total $760,383.51, at the 7 federal rate of 0.25% per annum from March 16, 2015, until paid. 8 The Clerk shall terminate this case. 9 Dated: March 16, 2015. 10 11 Neil V. Wake United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 23  

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