Garcia v. JP Morgan Chase Bank NA et al

Filing 160

ORDER: Defendants' Motion for Attorneys' Fees (Doc. 119 ) is GRANTED in part. Defendants are awarded attorneys' fees in the amount of $96,708 and non-taxable costs in the amount of $456.72 against Garcia. Signed by Judge Douglas L Rayes on 3/30/2018. (REK)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Patricia Garcia,
Plaintiff,

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ORDER

v.

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No. CV-16-01023-PHX-DLR

JPMorgan Chase Bank NA, et al.,

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Defendants.

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Defendants JP Morgan Chase, N.A. (“Chase”) and Bank of America, N.A.

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(“BANA”) move for an award of attorneys’ fees against Plaintiff Patricia Garcia pursuant

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to fee shifting provisions within Garcia’s promissory note (“Note”) and corresponding

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Deed of Trust (“DOT”). (Doc. 119.) Defendants also seek an award of fees jointly and

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severally against Garcia, her current attorneys Daniel Cracchiolo and Barbara Forde, her

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former attorney Monique Wilhite, and their respective law firms and marital communities

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pursuant to A.R.S. § 12-349 and 28 U.S.C. § 1927. The relevant background may be

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found in the Court’s June 22, 2017 order dismissing this action (“Garcia II”) (Doc. 117),

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and April 5, 2017 order granting summary judgment for Defendants in the related case of

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Garcia v. JP Morgan Chase Bank NA, et al., No. CV-15-01493-PHX-DLR (“Garcia I”)

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(Doc. 278 in Garcia I).1 The Court grants Defendants’ motion in part, as explained

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below.2

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Unless otherwise specified, record citations refer to documents filed in Garcia II.

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Garcia’s request for oral argument is denied. See Fed. R. Civ. P. 78(b); LRCiv.

7.2(f).

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I. Preliminary Issues

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Before turning to the merits, the Court addresses three preliminary issues: (1) the

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duplicative responsive briefing on whether Defendants are entitled to fees against Garcia

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pursuant to the Note and DOT, (2) Garcia’s improper request for reconsideration or

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vacatur, and (3) the adequacy of the parties’ efforts to meet and confer on Defendants’

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fee request.

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A. Duplicative Briefing

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Defendants seek an award of fees against Garcia and her current and former

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attorneys, Wilhite, Cracchiolo, and Forde. Wilhite withdrew as counsel for Garcia on

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June 7, 2016, and therefore does not represent Garcia in opposing Defendants’ fee

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request.

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addressing only Defendants’ request for fees against her personally. (Doc. 142.)

(Doc. 20.)

Wilhite appropriately filed a separate response memorandum

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Cracchiolo and Forde, however, both remain counsel of record for Garcia.

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Though the Court can understand why Forde and Cracchiolo decided to separately

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address Defendants’ request for fees against them personally, the Court did not expect to

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receive separate briefs addressing the fee request against Garcia. A litigant is not entitled

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to as many responses as she has attorneys. Yet that is what happened with respect to

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Defendants’ request for fees against Garcia pursuant to the fee-shifting provisions of the

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Note and DOT. (See Docs. 139 at 13-14; 148 at 3-4.) This duplicative briefing is another

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manifestation of a persistent problem throughout this litigation: the lack of adequate

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coordination and communication between Cracchiolo and Forde. (See, e.g., Docs. 117 at

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9-10; Doc. 148-2 at 24 ¶ 2.) The Court nonetheless will consider the duplicative briefing

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as to the fee request against Garcia, as Defendants have not objected to it. Where

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relevant, the Court will specify whether an argument is found in the response filed by

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Cracchiolo (“Cracchiolo response”) or the response filed by Forde (“Forde response”).

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B. Reconsideration or Vacatur of the Court’s Dispositive Order

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In responding to Defendants’ contention that this case was groundless and not

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brought in good faith, Garcia comments almost in passing that the evidence justifies

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either reconsideration or vacatur of the Court’s dismissal order under Federal Rule of

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Civil Procedure 60. (Docs. 139 at 2; Doc. 148 at 10.) Garcia has not properly moved for

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such relief.

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Indeed, this case’s appellate history highlights why it is imperative for parties to

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actually move for relief and not just casually allude to it in unrelated filings. Garcia

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noticed an appeal on July 17, 2017, which she amended on July 26, 2017 after the Court

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formally entered judgment.

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reconsideration of the Court’s dismissal order, or for Rule 60 relief within 28 days after

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the Court entered judgment on July 20, 2017, the Ninth Circuit would have held her

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notice of appeal in abeyance until the Court ruled on her motion. See Fed. R. App. P.

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4(a)(4); Leader Nat’l Ins. Co. v. Indus. Indem. Ins. Co., 19 F.3d 444, 445 (9th Cir. 1994).

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That did not happen. Rather, Garcia’s appeal proceeded for several months until the

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parties stipulated to dismissal, resulting in the Ninth Circuit issuing its mandate on

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December 5, 2017. (Doc. 154.) Thus, not even the Ninth Circuit understood Garcia to

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have properly moved for reconsideration or other post-judgment relief.

(Docs. 124, 132.)

Had Garica properly moved for

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In addition to not actually moving for relief, Garcia’s passing requests for

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reconsideration or vacatur are substantively and procedurally improper. First, in the

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Cracchiolo response, Garcia suggests that the Court should reconsider the merits of this

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case. (Doc. 139 at 2.) Pursuant to LRCiv 7.2(g)(2), however, “[a]bsent good cause

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shown, any motion for reconsideration shall be filed no later than fourteen (14) days after

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the date of the filing of the Order that is the subject of the motion.” The Court issued its

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dismissal order on June 22, 2017 and entered judgment based on that order on July 20,

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2017. Even taking the latest of these two dates, any motion for reconsideration was due

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by no later than August 3, 2017. Garcia’s passing references to reconsideration are made

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in a response memorandum filed on September 6, 2017, over a month late, and she has

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not shown good cause for the delay.3

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Nor does her one-sentence allusion to

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The Court granted the parties’ stipulation to extend the time for Garcia to
respond to Defendants’ attorneys’ fees motion to September 6, 2017, but neither the
parties’ stipulation nor the Court’s order approving it mentioned a request for
reconsideration. (Docs. 133, 134.)
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reconsideration comply with the requirements of LRCiv 7.2(g)(1).

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Next, in a footnote to the Forde response, Garcia argues that that the judgments in

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Garcia I and Garcia II should be vacated under Rule 60. (Doc. 148 at 10 n.11.) The

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Court will not consider any such argument concerning the summary judgment order in

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Garcia I; it should go without saying that if Garica wants relief in Garcia I, she must file

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a motion in that case and not in this one. As for Garcia’s suggestion that the Court

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should vacate the judgment in this case, Garcia did not follow the appropriate procedure

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for requesting such relief after she filed her appeal. Specifically,

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[o]nce an appeal is filed, the district court no longer has
jurisdiction
to
consider
motions
to
vacate
judgment. However, a district court may entertain and decide
a Rule 60(b) motion after notice of appeal is filed if the
movant follows a certain procedure, which is to ask the
district court whether it wishes to entertain the motion, or to
grant it, and then move [the appeals court], if appropriate, for
remand of the case.

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Davis v. Yageo Corp., 481 F.3d 661, 685 (9th Cir. 2007) (internal quotations and citations
omitted). This did not happen.
Garcia’s failure to follow this procedure raises concerns about whether the Court
may properly entertain her request for post-judgment relief now.

Indeed, all the

arguments raised in her response briefs could and likely would have been made in her
appellate briefs had she not dismissed her appeal. For the Court to consider them now,
after Garcia has dismissed her appeal and the Ninth Circuit has issued its mandate, would
afford her an impermissible second bite at the apple. Moreover, Garcia has since filed for
bankruptcy, meaning further prosecution of these matters would be complicated by the
bankruptcy stay. It therefore is not clear that Garica still desires post-judgment relief.
These subsequent developments, coupled with the absence of a formal motion requesting
such relief, counsel against the Court further entertaining these arguments in this order.
C. Adequacy of the Meet and Confer
Local Rule of Civil Procedure 54.2(d)(1) states:
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No motion for award of attorneys’ fees will be considered
unless a separate statement of the moving counsel is attached
to the supporting memorandum certifying that, after personal
consultation and good faith efforts to do so, the parties have
been unable to satisfactorily resolve all disputed issues
relating to attorneys’ fees or that the moving counsel has
made a good faith effort, but has been unable, to arrange such
conference. The statement of consultation shall set forth the
date of the consultation, the names of the participating
attorneys and the specific results or shall describe the efforts
made to arrange such conference and explain the reasons why
such conference did not occur.

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In accordance with this rule, Defendants submitted a separate statement of
consultation that explained the following:

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Defendants . . . provide this statement of consultation with . . .
Garcia’s counsel pursuant to LRCiv 54.2(d)(1). On July 6,
2017, Defendants’ counsel sent counsel for [Garcia],
including former counsel Monique Wilhite and current
counsel Daniel Cracchiolo and Barbara Forde, email
correspondence requesting to schedule a time to meet and
confer regarding Defendants intention to file a motion for
attorneys’ fees. Ms. Forde and Ms. Wilhite responded. Ms.
Wilhite declined to participate in the meet in confer because
she is no longer counsel of record.

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Subsequently, on July 6, 2017, Ms. Forde stated that Garcia
objects to a request for attorneys’ fees and further that Ms.
Forde believes this Court might deny a motion for attorneys’
fees in light of Garcia’s intention to appeal this Court’s
decision.

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(Doc. 120.)

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In the Forde response, Garcia contends that Defendants’ efforts to meet and confer

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were inadequate because Defendants did not specify that they intended to seek sanctions

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against Garcia’s current and former attorneys, nor did they make a good-faith effort to

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resolve the dispute. (Doc. 148 at 2.) For support, Garcia attaches the emails exchanged

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on June 6, 2017. (Doc. 148-2 at 49-51.) In relevant part, Daniel Crane, counsel for

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Defendants, emailed Cracchiolo, Forde, and Wilhite the following: “Please let me know

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if you are available today to meet and confer regarding Defendants . . . intention to file a

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motion for attorneys’ fees based upon the Court’s dismissal of Ms. Garcia’s claims in

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Garcia II.” (Id. at 50.) Forde replied:

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I am traveling and just arrived in Nashville.

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I would recommend you contact the court, as my
understanding is that Judge Rayes will simply deny any
attorney fee motion pending appeal. And as Bob Shely
knows, if we don’t settle through the Ninth Circuit mediation
program, Garcia II will be appealed. If you have a deadline
looming for filing the application, I will agree to an
extension.
(Id.) Bob Shely, now former counsel for Defendants, responded:
The judge might deny the motion or decline to hear briefing,
but he might decide it too. Either way, we plan to file it, and
we presume that you would oppose it [in] any event, so I’d
like at least to have your agreement that we have met and
conferred and that Garcia opposes the motion in substance
and timing.
(Id. at 49.) Forde replied: “Yes we would oppose the motion.” (Id.)
Though the parties’ correspondence pays lip service to LRCiv 54.2(d)(1), it does
not comport with the purpose of the rule. The emails do not reflect a substantive
conferral over the issues raised in the motion; they reflect a failed attempt to schedule a
time to confer, which evidently no one was interested in doing.
Though only Forde raises the issue, the Court finds that Defendants’ failure to
adequately meet and confer with Wilhite precludes them from seeking fees against her.
At no point in the emails discussed above did Defendants disclose the basis for their
planned motion, specifically that they intended to seek a fee award against Garcia’s
current and former attorneys. Perhaps had they done so, Wilhite would have conferred
on the motion to the extent it sought fees from her personally. Indeed, Defendants’
statement of conferral indicates that Wilhite declined to participate in the consultation
because she is no longer counsel of record, which suggests Wilhite believed Defendants’
anticipated fee motion would be directed against Garcia only, and not also against her.
Because Wilhite was no longer counsel of record, it was reasonable for her to decline the
invitation to meet and confer, as she now lacks authority to litigate or negotiate on
Garcia’s behalf. But had she known that fees would be sought from her personally, a
productive consultation on that issue might have been possible.
Cracchiolo and Forde, however, remain counsel of record for Garcia and,
therefore, had an obligation to engage with Defendants in good faith regardless of the
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basis for the motion.

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statement of consultation, but this is not entirely accurate.

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Cracchiolo, and Forde all share some responsibility for the failure to meet and confer.

Garcia accuses Defendants of certifying a falsehood in their
Defendants’ counsel,

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For her part and to her credit, Forde initially did not seem reluctant to meet and

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confer. Rather, she informed Crane that she was travelling out-of-state, noted some

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concerns about the timing of the anticipated attorneys’ fees motion, and offered to

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stipulate to an extension of time to file the fee application. Instead, of offering to confer

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via telephone or to schedule a time to confer after Forde returned to Arizona, Shely

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simply reiterated his intent to file the motion (again, without any discussion of its

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substance), and asked Forde if she would agree that the parties had met and conferred,

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and to confirm that Garcia opposes the motion. Of course, the parties had not met and

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conferred in any meaningful sense. Forde nevertheless responded affirmatively and

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stated that Garcia would oppose the motion. This, of course, raises a serious question:

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how would Garcia or her attorneys know that they would oppose the motion if the basis

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for the motion had not been disclosed?

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Cracchiolo evidently did not respond to the email at all.

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No party genuinely sought to confer in good faith. It is not good faith to blindly

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oppose a motion without substantive information about its legal and factual bases. Nor is

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it good faith to agree to tell the Court that you have conferred when, in reality, you have

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not, or to give up after one failed scheduling attempt.

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Nonetheless, the Court will not deny Defendants’ application as it pertains to

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Garcia, Cracchiolo, and Forde on this basis. Courts in this district occasionally overlook

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this procedural shortcoming, especially when doing so causes no prejudice, or when

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ordering the movant to file a new motion after consultation would be futile. See Skydive

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Ariz., Inc. v. Quattrocchi, No. CV 05-2656-PHX-MHM, 2011 WL 1004945, at *1 (D.

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Ariz. Mar. 22, 2011). The Court finds such to be the case. Garcia’s willingness to

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declare her unqualified opposition to the attorneys’ fees motion without having seen or

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discussed its contents strongly suggests that a more substantive consultation would not

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have changed her mind. Moreover, “[b]ased on the rancor between the [p]arties in this

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case and their repeated failure to work out issues without resorting to motion practice, the

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Court highly doubts any such consultation would have been productive.” Id. The Court

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therefore will excuse the parties’ failure to meet and confer in good faith because the

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parties regrettably do not seem receptive to such a consultation and, based on their

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diametrically opposed memoranda, it likely would be futile.

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And with that, the Court proceeds to the merits.
II. Fees Pursuant to the Note and DOT
A. Entitlement

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Defendants argue that four provisions in the Note and DOT require the Court to

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award reasonable attorneys’ fees in this case. First, paragraph 14 of Garcia’s DOT states:

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“Lender may charge Borrower fees for services performed in connection with Borrower’s

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default, for the purpose of protecting Lender’s interest in the Property and rights under

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this Security Instrument, including, but not limited to, attorneys’ fees, property inspection

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and valuation fees.” (Doc. 119-1 at 86-87.) Second, paragraph 9 of the DOT provides

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that the Lender may seek reasonable attorneys’ fees expended for participating in a “legal

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proceeding that might significantly affect Lender’s interest in the Property and/or rights

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under this Security Instrument.” (Id. at 84.) Third, paragraph 22 of the DOT provides

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that the Lender may collect reasonable attorneys’ fees incurred in connection with

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pursuing an acceleration of the loan. (Id. at 89.) Finally, paragraph 7 of the Note states

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that Garcia will be in default if she does not pay on the Note as agreed, and that “the Note

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Holder will have the right to be paid back by [Garcia] for all of the costs and expenses in

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enforcing this Note to the extent not prohibited by applicable law. Those expenses

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include, for example, reasonable attorneys’ fees.” (Id. at 73.)

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Garcia is identified as Borrower and Washington Mutual Bank, FA (“WaMu”) is

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identified as “Lender” under both instruments. (Id. at 75, 77.) In its order granting

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summary judgment for Defendants in Garcia I, the Court found based on the

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uncontroverted evidence that “BANA purchased the Note from WaMu in 2007, and at all

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relevant times BANA possessed the Note through Chase, which services the loan on

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BANA’s behalf.” (Doc. 278 at 3 in Garcia I.) In dismissing this case, the Court

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reiterated that finding and concluded that it precluded a contrary determination in the

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second lawsuit. (Doc. 117 at 1, 19-20.) Though Garcia continues to argue over these

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rulings in her responses to Defendants’ attorneys’ fees application, she did not timely or

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properly move for reconsideration in either case, nor has she pursued an appeal. Instead,

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she voluntarily dismissed her appeals in both cases and the Ninth Circuit has issued

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mandates. Accordingly, Defendants are entitled to invoke the fee-shifting provisions of

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the Note and DOT.

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As the Court explained in its dismissal order:

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The operative complaint . . . contains (1) an action to quiet
title and (2) a claim that Defendants violated A.R.S. § 33-420
by recording certain documents asserting an interest in the . . .
property, such as an assignment of the [DOT], a substitution
of trustee, and a notice of trustee’s sale. . . . Both claims are
based on allegations that neither Chase nor BANA “own” or
otherwise have a beneficial interest in the loan.

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The same is true for Garcia’s proposed amended complaint . .
. . In addition to the quiet title and false recordings claims
discussed above, the proposed amended complaint seeks a
declaratory judgment that Defendants do not have an interest
in the loan and alleges claims for intentional interference with
contractual relations, intentional/negligent infliction of
emotional distress, fraud, and violations of the Arizona
Consumer Fraud Act . . . . All of these claims fundamentally
are based on allegations that Defendants do not have an
interest in Garcia’s loan and, therefore, acted improperly by
negotiating a modification they allegedly were not authorized
to provide and by initiating non-judicial foreclosure.

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(Id. at 19-20.) Accordingly, Defendants’ defense of this action falls within the scope of

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the fee-shifting provisions of the Note and DOT. See Rich v. BAC Home Loans Servicing

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L.P., No. CV-11-00511-PHX-DLR, 2015 WL 12090226 (D. Ariz. Mar. 20, 2015)

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(reaching similar conclusion based on similar contractual provisions), aff’d by Rich v.

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Bank of Am., N.A., 666 Fed. App’x 635 (9th Cir. 2016).

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Garcia does not argue otherwise. Instead, she contends that Defendants cannot

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recover attorneys’ fees under the Note and DOT because A.R.S. §§ 12-1103(B) and 33-

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420(B) provide the exclusive mechanisms for recovering fees in actions asserting the two

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claims in the operative complaint, and those statutes preclude fees under these

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circumstances. (Docs. 139 at 13-14; 148 a 3-4.) Garcia is mistaken.

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Although Arizona courts have held that A.R.S. § 12-1103(B) is the exclusive basis

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for attorneys’ fees in quiet title actions, they have done so in the context of fee

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applications brought under A.R.S. § 12-341.01(A), which allows courts, in their

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discretion, to award attorneys’ fees to prevailing parties in actions arising out of contract.

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See Lange v. Lotzer, 727 P.2d 38, 39-40 (Ariz. Ct. App. 1986). This conclusion is based

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both on the well-settled principle that “a specific statute governs over a general statute on

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the same subject and will control,” and on A.R.S. § 12-341.01(A)’s plain language,

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which subordinates its application to other statutes that provide for attorneys’ fees. Id.

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Indeed, all of the cases relied upon by Garcia involve applications for fees under A.R.S. §

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12-341.01 rather than under express contractual fee-shifting provisions. See Ariz. Bd. of

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Regents v. Main Street Mesa Assocs., 891 P.2d 889 (Ariz. Ct. App. 1994); Lewis v.

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Pleasant Country Ltd., 840 P.2d 1051, 1060 (Ariz. Ct. App. 1992). The Court has not

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found a case in which an Arizona court has applied this rule to refuse an award of fees

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otherwise provided for by an express contractual fee-shifting provision. The same holds

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true for Arizona’s false recordings statute.

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To the contrary, under Arizona law “‘when a contract has an attorney[s’] fees

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provision it controls to the exclusion of the statute.’” Rich, 666 Fed. App’x at 642

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(quoting Lisa v. Strom, 904 P.2d 1239, 1242 n.2 (Ariz. Ct. App. 1995)). Further, the

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Court lacks discretion to refuse to award fees under a contractual fee-shifting provision,

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which must be enforced according to its terms. See Chase Bank of Ariz. v. Acosta, 880

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P.2d 1109, 1121 (Ariz. Ct. App. 1994).

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contractually agreed to shift attorneys’ fees, their agreement controls. But where no such

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fee-shifting provision exists, a specific fee-shifting statute will govern to the exclusion of

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a generic one.

Stated differently, where parties have

Defendants therefore are entitled to their reasonable attorneys’ fees

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because the parties have contractually agreed to shift fees under these circumstances, and

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the Court is without discretion to refuse the award.

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B. Reasonableness of Fee Request

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Where reasonable attorneys’ fees are sought pursuant to a contractual provision, a

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fee award must be supported by proof of what is reasonable. Schweiger v. China Doll

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Rest., Inc., 673 P.2d 927, 931 (Ariz. Ct. App. 1983). “A fee award calculated by a

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lodestar method—multiplying a reasonable hourly rate by the number of hours

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expended—is presumptively reasonable.”

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Paloma Inv. Ltd. P’ship, 279 P.3d 1191, 1212 (Ariz. Ct. App. 2012).

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Once the prevailing party makes a prima facie case that the
fees requested are reasonable, the burden shifts to the party
opposing the fee request to establish that the amount
requested is clearly excessive. If that party fails to make such
a showing of unreasonableness, the prevailing party is entitled
to full payment of the fees. If, however, the party opposing
the award shows that the otherwise prima facie reasonable fee
request is excessive, the court has discretion to reduce the
fees to a reasonable level.

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Flood Control Dist. of Maricopa Cty. v.

Geller v. Lesk, 285 P.3d 972, 976 (Ariz. Ct. App. 2012).
When analyzing the reasonableness of a requested fee award, the Court begins by
determining the billing rate charged by the attorneys who worked on the case.
Schweiger, 673 P.2d at 931. “[I]n corporate and commercial litigation between feepaying 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.” Id.
at 931-32. However, “upon the presentation of an opposing affidavit setting forth the
reasons why the hourly billing rate is unreasonable, the court may utilize a lesser rate.”
Id. at 932.
Defendants seek fees charged by two attorneys, Shely and Crane, and one
paralegal, Justin Monnet. (Doc. 119-1 at 9.) Shely billed at an hourly rate of $430,
Crane at $279, and Monnet at $219. (Id.) In the Forde response, Garcia unpersuasively
argues that these rates are unreasonably high because the results of a 2013 survey
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conducted by the Arizona State Bar indicated that the mean billing rates for attorneys and

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paralegals are lower. (Docs. 148 at 17; 148-12.) As Defendants note in their reply, these

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survey results are several years old. Moreover, although the survey discusses factors

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such as firm size, experience, location, and field of practice in isolation, it does not

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analyze how these factors might affect fee rates in combination. The Court therefore

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finds that the hourly rates charged by Defendants’ counsel are reasonable.

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Next, the Court must assess whether Defendants’ attorneys billed a reasonable

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number of hours for appropriate tasks. A reasonable attorneys’ fee award compensates

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only for those “item[s] of service which, at the time rendered, would have been

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undertaken by a reasonable and prudent lawyer to advance or protect his client’s

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interest.” Schweiger, 673 P.2d at 932 (internal quotation and citation omitted). To that

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end, the party seeking a fee award must submit an affidavit indicating “the types of legal

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services provided, the date the service was provided, the attorney providing the service . .

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., and the time spent providing the service.” Id.; see also LRCiv 54.2(d)(3), (e). Once

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that party establishes its entitlement to fees and submits a sufficiently-detailed affidavit,

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“the burden shifts to the party opposing the fee award to demonstrate the impropriety or

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unreasonableness of the requested fees.” Nolan v. Starlight Pines Homeowners Ass’n,

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167 P.3d 1277, 1286 (Ariz. Ct. App. 2007). The opposing party must “present specific

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objections to the reasonableness of the fees requested.” Id. Generic assertions that the

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fees “are inflated and that much of counsel’s work was unnecessary . . . are insufficient as

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a matter of law.” Id. at 1285-86.

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Defendants have met their prima facie burden by submitting a detailed, task-based

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itemization of the fees incurred in defending against this action, which total $98,307.20.

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(Doc. 119-1 at 93-99.) This itemization includes the date each task was performed, the

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attorney or paralegal performing the task, a description of the task, the amount of time

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spent performing it, and the total amount billed for each task. Defendants also seek

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$456.72 in non-taxable costs, which have been similarly itemized. (Id. at 101.) The

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burden therefore shifts to Garcia to present specific objections to the reasonableness of

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the fees requested.

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The Forde response is the only submission that attempts to do so. In most cases,

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however, Garcia objects not to the reasonableness of specific fee entries, but to whether

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certain fees may be attributed to sanctionable conduct. But this is not the relevant inquiry

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when awarding fees under the contractual fee-shifting provisions. In many other cases,

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Garcia’s objections are too generic and simply criticize Defendants’ counsel for

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overworking the case.

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With that said, the Court sustains Garcia’s objections to the following billing

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entries: 49, 110, 116, 131, and 133. (See Doc. 148-2 ¶¶ 25, 30, 36, 39.) These entries

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total $1,599.20. The Court therefore reduces Defendants’ fee award against Garcia

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pursuant to the fee-shifting provisions in the Note and DOT to $96,708. No objections

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have been made to Defendants’ non-taxable costs.

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Defendants $456.72 in non-taxable costs pursuant to those same contractual provisions.

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III. Fees as a Sanction Under A.R.S. § 12-349

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The Court therefore awards

Defendants also seek to hold Garcia, Forde, and Cracchiolo jointly and severally
liable for attorneys’ fees and $5,000 in damages under A.R.S. § 12-349, which states:
Except as otherwise provided by and not inconsistent with
another statute, in any civil action commenced or appealed in
a court of record in this state, the court shall assess reasonable
attorney fees, expenses and, at the court’s discretion, double
damages of not to exceed five thousand dollars against an
attorney or party, including this state and political
subdivisions of this state, if the attorney or party does any of
the following:
1. Brings or defends a claim without substantial justification.

23

2. Brings or defends a claim solely or primarily for delay or
harassment.

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3. Unreasonably expands or delays the proceeding.

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4. Engages in abuse of discovery.

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27
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“‘[W]ithout substantial justification’ means that the claim or defense is groundless and
not made in good faith.” A.R.S. § 12-349(F).
The Ninth Circuit has held, however, that A.R.S. § 12-349 cannot be used to
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1

sanction attorney or party misconduct in actions brought or removed to federal court.4 In

2

re Larry’s Apartment, L.L.C., 249 F.3d 832, 837-39 (9th Cir. 2001). Instead, federal law

3

governs where sanctions are sought “based upon misconduct by an attorney or party in

4

the litigation itself, rather than upon a matter of substantive law.” Id. at 838; see also

5

GoDaddy.com LLC v. RPost Commc’n Ltd., No. CV-14-00126-PHX-JAT, 2016 WL

6

4569122, at *10-11 (D. Ariz. Sept. 1, 2016); R. Prasad Indus. v. Flat Irons Envtl.

7

Solutions Corp., No. CV-12-08261-PCT-JAT, 2014 WL 4722487, at *12 (D. Ariz. Sept.

8

23, 2014); Woehler v. Bank of Am., N.A., No. CV-11-1088-PHX-SRB, 2011 WL

9

13118553, at *4 (D. Ariz. Oct. 13, 2011).5 The Court therefore denies Defendants’

10

request for sanctions under A.R.S. § 12-349 because “state law rules for attorney fees and

11

sanctions do not apply to cases in federal district court where requests for fees are based

12

on an attorney’s conduct.” Woehler, 2011 WL 13118553, at *4.

13

IV. Fees as a Sanction Under 28 U.S.C. § 1927

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Under 28 U.S.C. § 1927, lawyers who unreasonably and vexatiously multiply

15

court proceedings may be assessed the excess costs, expenses, and attorneys’ fees

16

incurred as a result.

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expenses, and fees incurred because of an attorney’s unreasonable conduct; it does not

18

authorize an award of the total costs of litigation. See United States v. Associated

19

Convalescent Enters., Inc., 766 F.2d 1342, 1347-48 (9th Cir. 1985). To award fees under

20

this section, the Court must find that the attorney acted in bad faith. MGIC Indem. Corp.

21

v. Moore, 952 F.2d 1120, 1122 (9th Cir. 1991). An attorney’s bad faith is assessed under

22

a subjective standard, and “is present when an attorney knowingly or recklessly raises a

23

frivolous argument, or argues a meritorious claim for the purpose of harassing an

24

opponent.” In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996)

Section 1927 authorizes only the assessment of excess costs,

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4

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27
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Technically, Larry’s Apartment holds that A.R.S. § 12-349 does not apply to
actions removed to federal courts sitting in diversity. Here, this matter was removed
under both 28 U.S.C. §§ 1331 and 1332. (Doc. 1 ¶¶ 5-6.) This distinction makes no
difference, however, because a federal court overseeing a claim presenting a federal
question likewise would apply federal law to sanction attorney misconduct.
5

Neither party brought these authorities to the Court’s attention.
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1

(quotation and citation omitted); see also In re Giardi, 611 F.3d 1027, 1061 (9th Cir.

2

2010) (“[A] finding that the attorney recklessly or intentionally misled the court,” or “a

3

finding that the attorney[] recklessly raised a frivolous argument which resulted in the

4

multiplication of the proceedings is . . . sufficient to impose sanctions under § 1927.”

5

(internal citations omitted)). Sanctions under 28 U.S.C. § 1927 may be awarded only

6

against an attorney, not an employee of an attorney or a law firm. See Kaass Law v.

7

Wells Fargo Bank, N.A., 799 F.3d 1290, 1293 (9th Cir. 2015).

8

Having carefully considered the parties’ arguments and reflected on the history of

9

this case, the Court declines to sanction Cracchiolo and Forde under 28 U.S.C. § 1927

10

because Defendants have not proven that they acted in subjective bad faith. It does not

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follow, however, that Cracchiolo and Forde’s conduct was objectively reasonable, or that

12

the claims they pursued on behalf of Garcia were meritorious. To the contrary, Garcia’s

13

legal theories are dubious at best, and the Court finds for a number of reasons that

14

Cracchiolo and Forde prosecuted this case in an objectively unreasonable manner.

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Because the Court declines to sanction Cracchiolo and Forde, it will not exhaustively

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recount these reasons, but a few examples will suffice to convey the point.

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First, Garcia and her attorneys’ contention that Defendants lacked authority to

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enforce the Note and DOT is based largely on their belief that securitization somehow

19

divested Defendants of their interests in these instruments.

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securitization renders the [DOT] unenforceable has been repeatedly rejected.” Kuc v.

21

Bank of Am., NA, No. CV 12-08024-PCT-JFM, 2012 WL 1268126, at *3 (D. Ariz. Apr.

22

16, 2012); see also In re Nordeen, 495 B.R. 468, 478-81 (9th Cir. B.A.P. 2013). Garcia’s

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theories also seem to ignore basic agency principles. See, e.g., Steinberger v. IndyMac

24

Mortgage Servs., No. CV-15-00450-PHX-ROS, 2017 WL 6040003, at *20 (D. Ariz. Jan.

25

12, 2017). Moreover, Garcia’s efforts to quiet title were meritless because “under long-

26

established Arizona law . . . a plaintiff cannot bring a quiet title action unless she has paid

27

off her mortgage in full.” Bergdale v. Countrywide Bank FSB, No. CV-12-8057-PCT-

28

GMS, 2012 WL 4120482, at *6 (D. Ariz. Sept. 18, 2012) (citing Farrell v. West, 114

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But “the theory that

1

P.2d 910, 911 (1941)); see also Jones v. Recontrust Co., 599 Fed. App’x 328, 328-29 (9th

2

Cir. 2015); Hermosillo v. Caliber Home Loans Inc., No. CV-15-02052-PHX-ESW, 2017

3

WL 2653039, at *7 (D. Ariz. June 20, 2017).

4

Second, the Court repeatedly voiced concerns that these claims should have been

5

brought through an amendment to the complaint in Garcia I, rather than a separate

6

lawsuit. Indeed, the verified complaint in Garcia I affirmatively alleged that BANA is

7

the beneficiary of the DOT and that Chase services the loan on its behalf. (Doc. 1-1 at

8

20, 31 ¶¶ 11, 13, 110-11 in Garcia I.) Yet that allegation never was removed, and Garcia

9

pursued this separate lawsuit based on a wholly contradictory premise. Further, the

10

justifications for bringing this separate action are flimsy. For instance, although A.R.S. §

11

12-401(12) requires quiet title actions to be brought in the county in which the subject

12

real property is located, nothing in that statute requires such actions to be brought in state

13

rather than federal court.6 Relatedly, even though Garcia’s attorneys might have wanted

14

to pursue this action in state court, it was not objectively reasonable to believe it would

15

stay there considering that complete diversity exists and the parties already were

16

litigating a substantially related case in federal court. Indeed, because Garcia I came to

17

this Court on removal, Garcia’s attorneys should have anticipated removal in this case.

18

(Doc. 1 in Garcia I.)

19

To compound this issue, and as painstakingly explained in the Court’s dismissal

20

order, Garcia’s attorneys refused “two opportunities to consolidate these matters early in

21

the litigation, at a time when Defendants would not have been prejudiced by

22

consolidation, and in a manner that would have avoided needless duplication of

23

resources.

24

simultaneously.” (Doc. 117 at 23.) The Court expressly found that, had Garcia not

25

inexplicably withdrew her first consolidation motion, Garcia I and Garcia II likely would

26

have been consolidated and many of the problems that have resulted from the

27

simultaneous litigation would have been avoided.

28

Instead, Garcia chose to duplicate discovery and litigate both cases

6

(Id. at 7.)

Moreover, Garcia’s

This Court is located in the same county as Garcia’s home, and quiet title actions
of a similar variety routinely are litigated here.
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1

attorneys repeatedly misrepresented the relationship between Garcia I and Garcia II

2

whenever consolidation or the possibility of joint discovery was discussed, which

3

suggests that their positions were motivated more by short-term strategy than ensuring

4

the “just, speedy, and inexpensive determination of every action and proceeding.” Fed.

5

R. Civ. P. 1.

6

Third, as the Court previously noted, a lack of adequate communication between

7

Cracchiolo, Forde, and Wilhite (during the time that she represented Garcia), resulted in

8

some duplicative discovery and much confusion about the nature of Garcia I and its

9

relationship to and potential impact on the claims asserted in Garcia II. For instance,

10

Forde was not up to speed on the substantial, relevant discovery that had occurred in

11

Garcia I, even though Cracchiolo has been co-counsel in both cases since their inception.

12

Likewise, Forde evidently represented during the June 23, 2016 scheduling conference

13

that the ownership of Garcia’s loan was not at issue in Garcia I based on her

14

conversations with Cracchiolo and Wilhite. Of course, substantial discovery on this issue

15

had occurred in Garcia I, and Wilhite had represented to the Court on multiple occasions

16

in that ownership issues were directly relevant to that case. Simple communication could

17

have ensured that all attorneys were on the same page. Moreover Garcia’s attorneys

18

should have understood, with a little reflection and forethought, that Garcia I and Garcia

19

II shared common issues of fact and law, that consolidation was appropriate, and that if

20

Garcia intended to pursue the types of theories asserted in this case, she needed to amend

21

her verified complaint in Garcia I to remove wholly inconsistent allegations.

22

If 28 U.S.C. § 1927 authorized sanctions for objectively bad faith conduct, the

23

Court might be inclined to shift liability for some of Defendants’ attorneys’ fees to

24

Garcia’s counsel. But the statute requires proof of subjective bad faith, and the Court

25

does not find that Cracchiolo and Forde knowingly or recklessly prosecuted this case for

26

the purpose of harassing Defendants. Rather, Cracchiolo and Forde both seem genuinely

27

to have been motivated by a desire to assist Garcia, but in their zealousness they lost sight

28

of fundamental legal principles and their obligations under the Federal Rules of Civil

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1

Procedure. Their conduct was objectively unreasonable, but not subjectively egregious

2

enough to justify sanctions, especially of the magnitude sought by Defendants.

3

V. Conclusion

4

For the foregoing reasons, the Court grants Defendants’ motion for attorneys’ fees

5

against Garcia based on the fee-shifting provisions in the Note and DOT. The Court

6

denies their request for sanctions under A.R.S. § 12-359 because state law does not

7

govern the imposition of sanctions for attorney or party misconduct in federal court. The

8

Court also denies Defendants’ request for sanctions under 28 U.S.C. § 1927 because (1)

9

they did not adequately confer with Wilhite about these sanctions and (2) Cracchiolo and

10

Forde’s conduct, though objectively unreasonable, does not rise to the level of subjective

11

bad faith. Accordingly,

12

IT IS ORDERED that Defendants’ Motion for Attorneys’ Fees (Doc. 119) is

13

GRANTED in part. Defendants are awarded attorneys’ fees in the amount of $96,708

14

and non-taxable costs in the amount of $456.72 against Garcia.

15

Dated this 30th day of March, 2018.

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Douglas L. Rayes
United States District Judge

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