11333 Incorporated v. Certain Underwriters at Lloyd's, London et al

Filing 218

ORDER: Defendant Certain Underwriters at Lloyd's, London Subscribing to Policy Number MBB0756586A08's Motion for Award of Attorneys' Fees 214 is granted in the amount of $104,648.50 in addition to the previously awarded amount of $1,099,011.50. IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Certain Underwriters at Lloyd's, London Subscribing to Policy Number MBB0756586A08 against Plaintiff 11333, Inc., in the amount of $1,203,660.00 for attorney fees, plus interest thereon at the federal rate of 2.31% from the date of this judgment until paid. Signed by Senior Judge Neil V Wake on 5/22/2018. (REK)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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11333, Inc., f/k/a Investors Mortgage
Holdings, Inc.,

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Plaintiff,

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No. CV-14-02001-PHX-NVW
ORDER

v.
Certain Underwriters at Lloyd’s, London,
Subscribing to Policy Numbers
MBB0756586A08, MBB0856586A09, and
B066456586B09; HUB International
Insurance Services, Inc.,
Defendants.

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Before the Court is Defendant Certain Underwriters at Lloyd’s, London

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Subscribing to Policy Number MBB0756586A08’s Supplemental Motion for Award of

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Attorneys’ Fees (Doc. 214), 11333 Incorporated’s response, and Underwriters’ reply.

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I.

BACKGROUND

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On March 30, 2018, the Court granted Underwriters’ motion for award of attorney

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fees under A.R.S. § 12-341.01(A) in the amount of $1,099,011.50 so far. (Doc. 211.) In

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their motion Underwriters had excluded most of the amounts charged to and paid by

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Underwriters for attorney time incurred during air travel. The Court overruled 11333’s

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objections to the amounts charged for attorney air travel time that Underwriters had

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claimed, invalidating the Local Rule that purported to exclude such attorney fees from

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awards under that state statute. The Court permitted Underwriters to file a supplemental

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request for attorney fees to include previously omitted attorney air travel time and any

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additional services incurred on their fee motion.

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Underwriters’ supplemental motion requests an additional $56,820.00 for attorney

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air travel time that was withheld from their initial fee motion and $47,828.50 for attorney

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fees incurred on the initial fee motion. 11333 objects that attorney air travel time

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ordinarily should not be charged unless other work was done at the same time. Local

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Rule LRCiv 54.2(e)(2)(D). 11333 also contends some of the attorney air travel time was

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unreasonable and unnecessary. Finally, 11333 requests reduction of the award because

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same of the services are inadequately described. Local Rule LRCiv 54.2(e)(2).

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II.

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FEE AWARDS UNDER ARIZONA LAW FOR ATTORNEY TRAVEL
TIME

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Federal courts sitting in diversity apply state substantive law and federal

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procedural law. CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099,

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1111 (9th Cir. 2007). State statutes are substantive when they authorize fee awards to

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litigants in a particular class of cases, as A.R.S. § 12-341.01 does for actions arising out

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of contract. See id.

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Federal district courts may “prescribe rules for the conduct of their business,” that

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is, local rules of procedure. 28 U.S.C. § 2071(a). No rule may be prescribed by a district

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court other than under 28 U.S.C. § 2071. 28 U.S.C. § 2071(b). A district court must

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enforce local rules prescribed under § 2017 if substantial rights are at stake. Prof’l

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Programs Grp. v. Dep’t of Commerce, 29 F.3d 1349, 1353 (9th Cir. 1994); All. of

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Nonprofits for Ins., Risk Retention Grp. v. Kipper, 712 F.3d 1316, 1327 (9th Cir. 2013).

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But 28 U.S.C. § 2071 only authorizes district courts to prescribe rules for “the conduct of

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their business.” It gives no authority to district courts to prescribe rules that modify the

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substantive law to be applied.

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Arizona substantive law provides district courts with discretion to award

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reasonable attorney fees in contract litigation. A.R.S. § 12-341.01(A) states: “In any

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contested action arising out of a contract, express or implied, the court may award the

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successful party reasonable attorney fees.” The statute provides broad judicial discretion:

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“The award of reasonable attorney fees pursuant to [§ 12-341.01] should be made to

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mitigate the burden of the expense of litigation to establish a just claim or a just defense.

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It need not equal or relate to the attorney fees actually paid or contracted, but the award

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may not exceed the amount paid or agreed to be paid.” A.R.S. § 12-341.01(B).

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“Once a litigant establishes entitlement to a fee award, the touchstone under

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§ 12-341.01 is the reasonableness of the fees.” Assyia v. State Farm Mut. Auto. Ins. Co.,

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229 Ariz. 216, 222, 273 P.3d 668, 674 (Ct. App. 2012). Reasonableness of fees is a fact

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question based on the market and practices of attorneys and clients. It is customary and

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routine for commercial attorneys working on an hourly rate basis, including insurance

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attorneys, to charge their clients for their time necessarily traveling on the matter,

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whether or not other legal work is done on the airplane. Clients universally pay for that

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time, as did Underwriters here. That is part of the “reasonable” fee that the Court may

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award in its discretion, provided it does “not exceed the amount paid or agreed to be

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paid.” A.R.S. § 12-341.01(A) and (B).

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Local Rule LRCiv 54.2 establishes the procedure for requesting award of attorney

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fees and related non-taxable expenses in the U.S. District Court for the District of

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Arizona. LRCiv 54.2(d) requires movants to submit supporting documentation, including

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a task-based itemized statement of attorney fees and expenses. LRCiv 54.2(e)(2) states:

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“The party seeking an award of fees must adequately describe the services rendered so

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that the reasonableness of the charge can be evaluated.” It further states: “If the time

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descriptions are incomplete, or if such descriptions fail to adequately describe the service

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rendered, the court may reduce the award accordingly.”

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For this case the Arizona statute gives the court substantive discretion to award

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fees up to the lower of what is “reasonable” or what does “not exceed the amount paid or

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agreed to be paid.” A.R.S. § 12-341.01(A) and (B). Local Rule LRCiv 54.2(e) provides

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the procedure to supply the district court with the information it needs to decide whether

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the requested fees are reasonable.

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However, LRCiv 54.2(e)(2)(D) goes beyond enabling the court to determine

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reasonableness. It also excludes fees for attorney air travel time as beyond what the

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Arizona statute authorizes for compensation, though the market shows them to be

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reasonable and charged and paid in fact. The rule states:
(D) Travel Time. Ordinarily air travel time should not be charged. If
services were performed during such time, then describe such services
rather than charging for the travel time.

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In this case under A.R.S. § 12-341.01(A), this application of LRCiv 54.2(e)(2)(D) to

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exclude fees that are compensable under A.R.S. § 12-341.01(A) exceeds the district

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court’s authority under 28 U.S.C. § 2071(a) to prescribe procedural rules. As applied

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here, the local rule is invalid.

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III.

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OBJECTIONS TO SPECIFIC FEES
11333’s objections to specific services are all unmeritorious.

Some of the

objections have already been rejected in the first order awarding fees. (Doc. 211.)

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Occasional travel by counsel for in-person strategy sessions and conferences with

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opposing counsel was reasonable. 11333 says all such meetings should have been by

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video conference. In-person meeting is much more productive, depending on the nature

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and length of the meetings. Those meetings were justified.

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The Court has already found the division of labor between the out-of-state and the

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local law firms reasonable and justified. Major litigants like Underwriters may use their

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regular litigation counsel and local counsel as well.

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The multiple lawyers attending the depositions of Jerome Joseph, William J. Lutz,

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Plaintiff’s corporate representatives, and Underwriters’ representatives were all

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warranted in light of the division of responsibilities among their lawyers. (Doc. 217 at 4-

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5.) It was especially justified for Mr. West to travel to London, though he did not attend

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the Rule 30(b)(6) depositions, in light of his participation in the preparation of the

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deponents and his extensive history with the major representatives of Underwriters.

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11333’s principal’s belated announcement that he would attend the deposition and

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wished to discuss settlement made Mr. West’s presence all the more beneficial.
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11333 objects again to ten time entries, as it did before, for preparation of

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identified court papers. Use of the word “prepare” can sometimes be unclear about what

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is being done. But it is utterly clear here what preparation of the attorney fees motion and

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the reply refers to. Those objections are overruled also.

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The Court finds that the $56,820.00 for attorney fees for air travel time, originally

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omitted from Underwriters’ fee motion and now sought, is reasonable.

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objections to the reasonableness of attorney air travel time are overruled. All the travel

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was reasonable. Further, 11333’s objections to Underwriters’ request for $47,828.50 for

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attorney fees incurred on the initial fee motion are overruled for reasons stated herein and

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11333’s

previously in the March 30, 2018 order (Doc. 211).

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IT IS THEREFORE ORDERED that Defendant Certain Underwriters at Lloyd’s,

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London Subscribing to Policy Number MBB0756586A08’s Motion for Award of

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Attorneys’ Fees (Doc. 214) is granted in the amount of $104,648.50 in addition to the

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previously awarded amount of $1,099,011.50.

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IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Certain

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Underwriters at Lloyd’s, London Subscribing to Policy Number MBB0756586A08

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against Plaintiff 11333, Inc., in the amount of $1,203,660.00 for attorney fees, plus

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interest thereon at the federal rate of 2.31% from the date of this judgment until paid.

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Dated this 22nd day of May, 2018.

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