Preston Collection Incorporated v. Youtsey

Filing 83

ORDER granting 66 Motion for Attorney Fees and Non-Taxable Costs. The Clerk shall enter judgment in favor of Plaintiff Preston Collection Inc. and against Defendant Steven Youtsey in the amount of $167,239.00 for attorney fees, plus post-judgment interest at the federal rate of 1.78% from the date of this judgment until paid. Signed by Senior Judge Neil V Wake on 1/3/18. (DXD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Preston Collection Inc.,
Plaintiff,

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No. CV-15-00607-PHX-NVW
ORDER

v.
Steven Youtsey,
Defendant.

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Before the Court is Preston Collection Inc.’s Motion for an Award of Attorneys’

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Fees and Non-Taxable Costs (Doc. 66).

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I.

BACKGROUND

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This case arises out of an agreement dated December 29, 2009 by which Steven

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Youtsey acknowledged his personal debt to Kun-Te Yang in the amount of

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$1,142,500.00 (“Youtsey Personal Loan”). On March 19, 2015, Yang transferred to

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Preston Collection Inc. all of his rights, title, and interest in and to the Youtsey Personal

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Loan, including all rights to enforce the loan and to recover and collect all amounts due

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thereunder.

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On April 3, 2015, Preston sued Youtsey for breach of contract to recover and

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collect all amounts due under or arising from enforcement of the Youtsey Personal Loan.

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On September 5, 2017, the Court granted summary judgment in Preston’s favor. On

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October 4, 2017, judgment was entered in favor of Preston and against Youtsey in the

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amount of: (1) the principal amount of $1,142,500.00, plus (2) pre-judgment interest to

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October 4, 2017, in the amount of $866,108.77 at the rate of 10% per annum simple

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interest, plus (3) post-judgment interest on $2,008,608.77 (the sum of amounts (1) and

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(2)) at the federal rate of 1.31% per annum from the date of entry of judgment (October

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4, 2017) until paid. The October 4, 2017 judgment awarded Preston all of the relief it

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sought.
Preston seeks award of attorney fees under A.R.S. § 12-341.01(A).

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II.

ANALYSIS

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A.

Whether to Award Attorney Fees

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A.R.S. § 12-341.01(A) provides:

“In any contested action arising out of a

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contract, express or implied, the court may award the successful party reasonable attorney

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fees.” An award of fees under § 12-341.01 is discretionary. Fulton Homes Corp. v. BBP

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Concrete, 214 Ariz. 566, 569, 155 P.3d 1090, 1093 (Ct. App. 2007). The statute does not

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establish a presumption that attorney fees be awarded in contract actions. Associated

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Indem. Corp. v. Warner, 143 Ariz. 567, 569, 694 P.2d 1181, 1183 (1985). In determining

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whether attorney fees should be granted under § 12-341.01, trial courts may consider the

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following factors: the merits of the unsuccessful party’s case, whether the litigation

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could have been avoided or settled, whether assessing fees against the unsuccessful

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would cause an extreme hardship, the degree of success by the successful party, any

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chilling effect the award might have on other parties with tenable claims or defenses, the

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novelty of the legal questions presented, and whether such claim had previously been

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adjudicated in this jurisdiction. Id. at 570, 694 P.2d at 1184.

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Youtsey does not contend that Preston should be awarded no attorney fees.

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Preston was entirely successful. The legal questions were not novel, and many breach of

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contract claims had previously been adjudicated in this jurisdiction. Youtsey admitted

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that he signed a document acknowledging that he owed Kun-Te Yang a balance of

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$1,142,500.00 on a personal loan. He did not assert that he had made any subsequent

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payments on his debt to Yang. Youtsey could have avoided the litigation by paying his

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debt. Yang does not explicitly assert that a fee award would cause him an extreme

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hardship, and he provides no evidence regarding his financial condition. These factors

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weigh in favor of awarding Preston attorney fees under A.R.S. § 12-341.01(A).

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B.

What Constitutes Reasonable Attorney Fees

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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). “The award of reasonable

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attorney fees pursuant to [§ 12-341.01] should be made to mitigate the burden of the

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expense of litigation to establish a just claim or a just defense. It need not equal or relate

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to the attorney fees actually paid or contracted, but the award may not exceed the amount

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paid or agreed to be paid.” A.R.S. § 12-341.01(B).

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To determine reasonable attorney’s fees in commercial litigation, courts begin by

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determining the actual billing rate that the lawyer charged in the particular matter.

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Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 187, 673 P.2d 927, 931 (Ct. App.

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1983). If persuaded that the contracted hourly rates are unreasonable, courts may use a

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lesser rate. Id. at 188, 673 P.2d at 931.

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Under the Arizona Supreme Court’s Rules of Professional Conduct, factors to be
considered in determining the reasonableness of an attorney fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly;

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(2) the likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer;

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(3) the fee customarily charged in the locality for similar legal services;

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(4) the amount involved and the results obtained;

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(5) the time limitations imposed by the client or by the circumstances;

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(6) the nature and length of the professional relationship with the client;

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(7) the experience, reputation, and ability of the lawyer or lawyers
performing the services; and

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(8) the degree of risk assumed by the lawyer.

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A.R.S. Sup. Ct. Rules, Rule 42, Rules of Prof. Conduct, ER 1.5. In addition, Local Rules

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require consideration of whether the fee contracted between the attorney and the client is

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fixed or contingent, the “undesirability” of the case, and awards in similar actions.

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LRCiv 54.2(c).

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Preston entered into engagement agreements with its counsel through which it

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agreed to pay 70% of counsel’s standard hourly rates upon receipt of monthly invoices

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and to pay all out-of-pocket costs and expenses. Preston agreed to pay a contingent fee

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consisting of the remaining 30% of counsel’s standard hourly rates if Preston’s claim was

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resolved, plus 20% of the net amount recovered as a result of resolution of Preston’s

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claim.

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Preston’s counsel billed Preston at 70% of usual rates for a total of 296.3 hours

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from March 19, 2015, through October 17, 2017, which totaled $111,128.50. Under its

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engagement agreements, Preston must also pay contingent hourly fees at 30% of the

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usual rates for those hours, which is $47,626.50. Thus, the total amount of attorney fees

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incurred through October 17, 2017, at the usual hourly rates is $158,755.00. Youtsey

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contends that the discounted rates are more than reasonable in the Phoenix market, but

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does not contend that either the usual hourly rates or the number of hours expended is

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unreasonable. In its reply brief, Preston seeks an additional $8,484.00 for post-judgment

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discovery and preparing the reply brief for 20.2 hours at 70% of the usual rates.

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Therefore, the total fees requested based on hourly rates is $167,239.00.

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Youtsey objects to the amount Preston seeks based on 20% of the net amount of

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recovery because it results in an hourly rate much greater than Preston’s counsel’s

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standard hourly rates. Preston seeks reimbursement for the contingency fee of 20% of

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the net amount recovered that it agreed to pay its counsel, which Preston calculates to be

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$368,981.06.

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recovery” minus fees actually paid based on hourly rates and costs and expenses actually

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paid. They define “gross recovery” as “anything of value obtained or received directly or

Preston’s engagement agreements define “net recovery” as “gross

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indirectly by [Preston] from any of the Claims,” including money, reduction of debt, etc.

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Although Preston obtained a judgment of more than $2 million against Youtsey, Preston

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does not assert that it has received anything of value yet from Preston to satisfy the

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judgment. Therefore, an award of attorney fees based on any amount Preston hopes to

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recover from Youtsey would be speculative.

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Moreover, an additional contingency fee of nearly $370,000 may be reasonable for

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Preston to pay its counsel because EZconn and eGtran spent hundreds of thousands of

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dollars to defeat Andes’ claims in other cases, which negated purported offsets to

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Preston’s claim, and because Preston’s counsel risked receiving fees based on rates

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discounted by 30%. But neither reason justifies shifting the additional contingency fee to

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Youtsey. Therefore, Preston will be awarded attorney fees based on its counsel’s usual

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hourly rates.

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IT IS THEREFORE ORDERED that Preston Collection Inc.’s Motion for an
Award of Attorneys’ Fees and Non-Taxable Costs (Doc. 66) is granted.

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IT IS FURTHER ORDERED directing the Clerk to enter judgment in favor of

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Plaintiff Preston Collection Inc. and against Defendant Steven Youtsey in the amount of

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$167,239.00 for attorney fees, plus post-judgment interest at the federal rate of 1.78%

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from the date of this judgment until paid.

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Dated this 3rd day of January, 2018.

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