Fleck v. American Home Mortgage Servicing Incorporated et al

Filing 65

ORDER - 1. Defendants' motion for attorneys' fees related to Plaintiff's motion to strike (Doc. 55) is granted in part as set forth above. Defendants are awarded attorneys' fees of $4,513.05 against Plaintiff's counsel Douglas C. Rhoads. 2. Defendants' second motion for attorneys fees (Doc. 59) is denied. Signed by Judge David G Campbell on 7/9/12.(LAD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Robin Fleck, an individual,

No. CV-10-8256 PCT-DGC

Plaintiff,

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ORDER

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v.

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Quality Loan Service Corporation, trustee,
and American Home Mortgage Servicing,
Inc., Servicer, and Citibank N.A. as Trustee
for Merrill Lynch Mortgage Investors Trust,
Mortgage Loan Asset-Backed Certificate,
Series 2007-HE2 by American Home
Mortgaging Servicing, Inc. Successor in
Interest to Option One Mortgage
Corporation as attorney-in-fact; Quality
Loan Service Corporation; American Home
Mortgage Servicing Inc., its assigns and or
successors in interest, and Does 1-20,

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Defendants.

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Defendants have filed two separate motions for attorneys’ fees, costs, and

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expenses, the first to recover fees of $7,626.50 incurred in responding to Plaintiff’s

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motion to strike, and the second to recover attorneys’ fees of $70,893.55, taxable costs of

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$350, and non-taxable expenses of $2,137.06 incurred in successfully defending against

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this lawsuit. Docs. 55, 59. The motions are fully briefed. Docs. 55, 59, 61, 62, 63. No

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party has requested oral argument. Defendants’ motion for fees incurred in defeating the

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motion to strike will be granted against Plaintiff’s counsel. Defendants’ motion for fees,

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costs, and expenses incurred in defending against this lawsuit will be denied.

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I.

Background.

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Plaintiff Robin Fleck filed suit on November 10, 2010, seeking compensatory and

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punitive damages for intentional misrepresentation and consumer fraud, an accounting of

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the proceeds from a foreclosure sale, and a declaration of quiet title. Doc. 1, ¶¶ 21-61.

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Defendants filed a motion for summary judgment which was granted on May 5, 2012.

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Docs. 33, 57. After the summary judgment motion was filed, Plaintiff filed a motion to

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strike and for sanctions. Doc. 37. That motion was denied on April 27, 2012. Doc. 54.

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II.

Legal Standards.

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A.R.S. § 12-349(A) provides that a court “shall” award attorneys’ fees and

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expenses, and, in its discretion, double damages not to exceed $5,000, against a party or

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attorney who (1) brings a claim without substantial justification, (2) brings an action

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solely for the purpose of harassment, (3) unreasonably expands or delays the proceedings,

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or (4) engages in discovery abuse.

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A.R.S. § 12-341.01(A) provides that, “[i]n 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.” The trial court has broad discretion regarding the amount of fees awarded, and

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may use its discretion to deny fees or to award any amount up to the amount paid or

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agreed to be paid. A.R.S. § 12-341.01(B); see also Wilcox v. Waldman, 744 P.2d 444,

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450 (Ariz. Ct. App. 1987).

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III.

Plaintiff’s Motion to Strike and for Sanctions.

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Plaintiff’s motion to strike made various arguments against Defendants: their

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written discovery responses were untimely, the responses violated Rule 11, the responses

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were not verified by proper corporate representatives, and Defendants failed timely to

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disclose a corporate representative. Doc. 37. Plaintiff sought serious sanctions, including

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that the responses be stricken, the requests for admission be deemed admitted, and

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financial sanctions be awarded against Defendants. Id. Defendants responded with a

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point-by-point rebuttal showing, for several reasons on each point, that Plaintiff’s motion

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was simply wrong. Doc. 41. Plaintiff filed nothing in reply. The Court’s order denying
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Plaintiff’s motion found that it was legally and factually incorrect and that Plaintiff had

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failed to comply with the case management order in this case and Federal Rule of Civil

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Procedure 11. Doc. 54. The Court stated that it was inclined to enter an award of

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attorneys’ fee against Plaintiff or her counsel for filing the motion, but concluded that

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they should be given an opportunity to respond before such an award was granted. The

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Court accordingly required that the parties brief the issue. Id.

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Defendants’ subsequent motion for attorneys’ fees argued that the deficiencies in

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Plaintiff’s motion evidenced bad faith motives to harass and cause Defendants to incur

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unnecessary legal fees. Doc. 55. Plaintiff filed a 12-page response that discussed the

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mortgage crisis in America, the enormous number of foreclosures instituted by lenders,

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the failure of the courts to provide justice to borrowers, and the fact that summary

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judgment in this case was wrongfully obtained. Doc. 61. The response attached more

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than 250 pages of exhibits. Id. The response did not, however, address the arguments

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made in Defendants’ motion for attorneys’ fees (Doc. 55) or the deficiencies identified in

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the Court’s order denying the motion to strike (Doc. 54). Id.

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Under Arizona law – which applies in this diversity action – a court “shall” award

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attorneys’ fees when an attorney unreasonably expands or delays the proceeding. A.R.S.

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§ 12-349(A)(3). Plaintiff’s motion to strike unreasonably expanded and delayed the

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resolution of this case by asserting numerous incorrect claims for sanctions.

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deficiencies were errors of fact and law that could have been avoided through reasonable

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diligence by Plaintiff’s attorney. See Docs. 41, 54. Because the motion to strike was

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clearly baseless, and the errors were those that should have been avoided by counsel, the

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Court concludes that Plaintiff’s counsel unreasonably expanded and delayed this

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proceeding and that Defendants are entitled to recover the reasonable attorneys’ fees they

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incurred as a result.

The

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Defendants’ motion for attorneys’ fees includes an affidavit from lead counsel

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concerning fees expended in opposing the motion to strike, an explanation of the hourly

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rates charged for the response, and a spreadsheet describing by attorney, date, and subject
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matter the work performed in responding to the motion. Doc. 56. Plaintiff’s response

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argues that the motion for attorneys’ fees fails to comply with Local Rule 54.2, but that

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rule by its terms applies to requests for attorneys’ fees at the end of a case and not to fee

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requests for violation of the Federal Rules of Civil Procedure. See LRCiv 54.2(a). The

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Court’s order denying Plaintiff’s motion for sanctions found, among other errors, that it

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violated Rule 11 of the Federal Rules of Civil Procedure. Doc. 54 at 2.

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Upon review of Defendants’ supporting materials, the Court concludes that the

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$385 hourly rate for associate David LaSpaluto and the $175 hourly rate for paralegal

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Heidi Kmoch are unreasonably high for the Phoenix market. The Court will reduce the

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amounts awarded for the work of these individuals to $250 and $125 respectively. So

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reduced, the total amount of fees reasonably incurred in responding to the motion to

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strike is $4,513.05. The Court will award this amount in favor of Defendants and against

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Plaintiff’s counsel Douglas C. Rhoads personally.

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IV.

Attorneys’ Fees Regarding Plaintiff’s Unsuccessful Suit.

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Defendants argue that they are entitled to attorneys’ fees incurred in defending

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against this action pursuant to the plain terms of the Note, A.R.S. § 12-341.01, and

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A.R.S. § 12-349. The Court does not agree.

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Defendants are not entitled to a mandatory award of attorneys’ fees under A.R.S.

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§ 12-349 because they have failed to prove the necessary elements. In order to obtain an

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award of fees against a party who brings a claim without substantial justification, the

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party requesting fees must prove by a preponderance of the evidence that the claim

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constitutes harassment, and is groundless, and is not made in good faith. A.R.S. § 12-

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349(F). The absence of even one element will preclude an award of fees. Valles v. Pima

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County, 642 F. Supp. 2d 936, 957 (D.Ariz. 2009); City of Casa Grande v. Arizona Water

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Co., 20 P.3d 590, 598 (Ariz. Ct. App. 2001). Defendants’ motion for attorneys’ fees

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argues that Plaintiff’s suit was groundless and not made in good faith, but fails to show

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that it was brought for purposes of harassment. Absent a showing of harassment, A.R.S.

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§ 12-349(A)(1) does not authorize an award of fees.
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Defendants also fail to provide evidence that they are entitled to recover attorneys’

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fees under the Note. In order for the Note’s attorneys’ fees clause to have effect, the

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Note holder must first comply with the Notice of Default clause in the same paragraph.

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Doc. 59-1, ¶ 7(C), (E). Defendants have failed to provide any evidence showing that they

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complied with the Notice of Default clause and thus triggered the attorneys’ fees clause.

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Doc. 8, ¶ 17.

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Under A.R.S. § 12-341.01(A), a trial court has discretion in awarding fees and

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should consider several factors when making its decision. Velarde v. PACE Membership

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Warehouse, Inc., 105 F.3d 1313, 1319-20 (9th Cir. 1997); Associated Indemn. Corp. v.

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Warner, 694 P.2d 1181, 1184 (Ariz. 1985) (en banc). Among these factors is whether a

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fee award “would cause undue hardship.” Wagenseller v. Scottsdale Mem’l. Hosp., 710

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P.2d 1025, 1049 (Ariz. 1985) (en banc); Woerth v. City of Flagstaff, 808 P.2d 297, 305

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(Ariz. Ct. App. 1990).

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The Court concludes that an award of more than $73,000 in fees and costs against

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Plaintiff would impose undue hardship. Plaintiff informed Defendants that without a

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settlement in this case she would file for bankruptcy. Doc. 62-1 at 2. Defendants have

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not provided evidence to show that Plaintiff has the ability to pay of fee award of more

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than $73,000 without undue hardship.

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IT IS ORDERED:

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1.

Defendants’ motion for attorneys’ fees related to Plaintiff’s motion to strike

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(Doc. 55) is granted in part as set forth above. Defendants are awarded attorneys’ fees

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of $4,513.05 against Plaintiff’s counsel Douglas C. Rhoads.

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2.

Defendants’ second motion for attorneys’ fees (Doc. 59) is denied.

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Dated this 9th day of July, 2012.

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