Leafty v. Aussie Sonoran Capital LLC et al

Filing 44

ORDER denying 41 Motion for Attorneys' Fees. (See Order for details.) Signed by Judge Douglas L Rayes on 2/14/2017. (MMO)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

Anna Leafty,

No. CV-15-00655-PHX-DLR
Plaintiff,

10
11

v.

12

ORDER

Aussie Sonoran Capital LLC, et al.,

13

Defendants.

14
15
16

Before the Court is Defendant’s Motion for Attorneys’ Fees. (Doc. 41.) Pursuant

17

to A.R.S. § 12-341.01(A), Defendant seeks $8,490.00 in attorneys’ fees incurred in

18

obtaining a dismissal order. (Id. at 1-2.) The motion is fully briefed and neither party

19

requested oral argument. The relevant factual background is detailed in the Court’s

20

August 12, 2016 order granting Defendant’s motion to dismiss (Doc. 40) and will not be

21

repeated here. For the following reasons, Defendant’s motion is denied.

22

I. Waiver

23

Preliminarily, Plaintiff argues that Defendant waived its entitlement to attorneys’

24

fees by not demanding them in its responsive pleading. (Doc. 42 at 4-6.) Plaintiff’s

25

argument is misguided because a motion to dismiss is not a “pleading” within the

26

meaning of the Federal Rules of Civil Procedure. Rule 7(a) defines “pleading” as:

27
28

(1) a complaint; (2) an answer to a complaint; (3) an answer
to a counterclaim designated as a counterclaim; (4) an answer
to a crossclaim; (5) a third-party complaint; (6) an answer to a
third-party complaint; and (7) if the court orders on, a reply to

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

an answer.
Rule 7 distinguishes between “Pleadings” and “Motions and Other Papers.” See Fed. R.
Civ. P. 7(a)-(b). Rule 12 also distinguishes between pleadings and motions, providing
that “[e]very defense to a claim for relief in any pleading must be asserted in the
responsive pleading if one is required,” but a party “may assert . . . defenses by motion.”
Fed. R. Civ. P. 12(b).
More importantly, however, Defendant was not required to demand attorneys’ fees
at the pleading stage. Federal courts sitting in diversity apply state substantive law and
federal procedural law. See Hanna v. Plumer, 380 U.S. 460, 465 (1965). Although here
state law governs Defendant’s entitlement to fees, the Federal Rules of Civil Procedure
“establish the method by which a federal litigant must obtain attorneys’ fees[.]” Port of
Stockton v. W. Bulk Carriers KS, 371 F.3d 1119, 1120 (9th Cir. 2004). Pursuant to Rule
54(d), requests for attorneys’ fees must be made by motion unless the substantive law
requires those fees to be proven as an element of damages at trial. Id. at 1120-21. When
attorneys’ fees are considered a form of special damages, Rules 54(d) and 9(g) require
that they be specifically pled.
Plaintiff does not argue that attorneys’ fees under § 12-341.01 are an element of
damages that need to be proven at trial, nor has the Court found authority directing that
result. Section 12-341.01(A) allows the Court to “award the successful party reasonable
attorney fees,” which indicates that the right to fees does not accrue until the case has
been decided. Because attorneys’ fees in cases arising out of contract fall within Rule
54(d)’s general purview, not its limited exception, Defendant has not waived its
entitlement to attorneys’ fees.
II. A.R.S. § 12-341.01(A)
Section 12-341.01 provides that “[i]n any contested action arising out of a
contract, express or implied, the court may award the successful party reasonable attorney
fees.” A claim arises under contract when “the claim could not exist ‘but for’ the breach
or avoidance of contract.” Harris v. Maricopa Cty. Super. Ct., 631 F.3d 963, 974 (9th
-2-

1

Cir. 2011) (internal quotation and citation omitted). When determining whether a claim

2

arises out of contract, the Court is not limited to the form of the pleadings and, instead,

3

looks to the nature of the action and the surrounding circumstances. Marcus v. Fox, 723

4

P.2d 682, 684 (Ariz. 1986).

5

transaction, however, does not bring a claim within the purview of § 12-341.01. “The

6

statute does not apply if the contract is only a factual predicate to the action but not the

7

essential basis of it.” Kennedy v. Linda Brock Auto. Plaza, Inc., 856 P.2d 1201, 1203

8

(Ariz. Ct. App. 1993).

The mere existence of a contract somewhere in the

9

Plaintiff brought various statutory and tort claims, all of which were premised on

10

the allegation that she had validly rescinded her home loan before a 2011 trustee’s sale of

11

her property. (Doc. 21.) Defendant argues that “[t]his case would not exist but for the

12

2007 loan and [Plaintiff’s] breach thereof.” (Doc. 43 at 6.) The Court agrees. Although

13

Plaintiff’s claims took the form of statutory and tort actions, they each were based on

14

Plaintiff’s contention that her home loan and accompanying deed of trust were void

15

because she had exercised her rescission rights under the Truth In Lending Act (TILA).

16

Thus, the success of Plaintiff’s claims depended on a judicial determination that

17

Plaintiff’s mortgage contracts were unenforceable. See Mullins v. S. Pac. Transp. Co.,

18

851 P.2d 839, 842 (Ariz. Ct. App. 1992) (explaining that fees are not precluded when

19

successful party proves the non-existence of a contract).

20

Having determined that this action arises out of contract, the Court has broad

21

discretion to apportion fees. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1184

22

(Ariz. 1985). In exercising its discretion, the Court considers: (1) the merits of the

23

unsuccessful party’s claim or defense; (2) the chances that litigation could have been

24

avoided or settled and whether the successful party’s efforts were superfluous in

25

achieving the result; (3) whether assessing fees against the unsuccessful party would

26

cause an extreme hardship; (4) whether the successfully party prevailed with respect to

27

all relief sought; (5) the novelty of the questions presented; and (6) whether a fee award

28

would discourage other parties with tenable claims or defenses from litigating or

-3-

1

defending legitimate contract issues for fear of incurring liability for fees. Id.

2

Several of the Warner factors weigh in favor of a fee award. Defendant could not

3

have avoided litigation, it prevailed with respect to all relief sought, and its efforts were

4

not superfluous to achieving that result. Additionally, Plaintiff does not contend that a

5

fee award would impose a hardship.

6

Nevertheless, the Court declines to award fees because the remaining Warner

7

factors counsel against an award. Recent developments in the law governing TILA

8

rescissions prompted Plaintiff to pursue her claims. See Jesinoski v. Counrtywide Home

9

Loans, -- U.S. --, 135 S.Ct. 790 (2016). In granting Defendant’s motion to dismiss, the

10

Court concluded that Plaintiff was collaterally estopped from re-litigating the validity of

11

the trustee’s sale or raising claims that necessarily assert and interest in the property

12

because (1) she litigated the validity of the trustee’s sale, along with the rescission issue,

13

in a previous state court action and (2) the Arizona Court of Appeals ruled that the

14

completion of the trustee’s sale extinguished Plaintiff’s interest in and claims related to

15

the property. (Doc. 40 at 3-4.) As a result, the Court did not pass on the merits of

16

Plaintiff’s claims or her arguments concerning the effects of Jesinoski.

17

Further, the Court notes that TILA does not contain a provision allowing

18

successful defendants to recover attorneys’ fees. Although TILA does not explicitly bar

19

defendants from seeking fee awards under other applicable state statutes, TILA’s fee

20

shifting provision is designed to encourage plaintiffs to bring legitimate claims. See

21

Boksa v. Keystone Chevrolet Co., 553 F. Supp. 958, 962 (N.D. Ill. 1982) (footnote

22

omitted) (“To a certain extent TILA itself may encourage an ‘industry’ of bringing suits

23

for damages and attorneys’ fees, but that reflects a deliberate congressional choice with

24

which this Court may not interfere.”). Because all TILA rescission claims necessarily

25

arise out of contract, awarding fees in cases such as this could undermine that purpose by

26

deterring future litigants from pursuing potentially meritorious claims based on changes

27

in relevant law. For these reasons,

28

-4-

1
2
3

IT IS ORDERED that Defendant’s Motion for Attorneys’ Fees (Doc. 41) is
DENIED.
Dated this 14th day of February, 2017.

4
5
6
7
8

Douglas L. Rayes
United States District Judge

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

-5-