Edmark Auto, Inc. et al v. Zurich, Inc. et al

Filing 381

MEMORANDUM DECISION AND ORDER. IT IS ORDERED that Plaintiffs Motion for Attorney Fees and Costs (Dkt. 325) is GRANTED in the amount of $1,999,771.50. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (kt)

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
EDMARK AUTO, INC., an Idaho
corporation; and CHALFANT CORP.,
an Idaho corporation,

Case No. 1:15-cv-00520-BLW
MEMORANDUM DECISION
AND ORDER

Plaintiff,
v.
ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation;
and UNIVERSAL UNDERWRITERS
SERVICE CORPORATION, a
Delaware Corporation,
Defendants.

INTRODUCTION
Before the Court is Plaintiffs’ Motion for Attorney Fees. Dkt. 325. The
Motion is fully briefed and at issue. Plaintiffs seek $1,999,771.50 in attorneys’
fees. Defendants claim that (1) Plaintiffs have not proved their entitlement to fees
by failing to provide a claim-by-claim analysis, (2) even if Plaintiffs are entitled to
fees, not all claims qualify for statutory attorneys’ fees, and (3) any award of fees
should be reduced by 20 percent due to excessive attorney time and unreasonable
duplication of effort, and because it was unreasonable for Plaintiffs to conduct a

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mock trial, voir dire, and opening statements. The Court has reviewed the
submitted records and affidavits and has determined that oral arguments will not
significantly assist the decisional process. Therefore, the Court will not conduct a
hearing. For the reasons explained below, the Court will award Plaintiffs
$1,999,771.50 in attorneys’ fees.
BACKGROUND
Plaintiffs Edmark Auto, Inc. and Chalfant Corp. initiated suit against
Defendants Zurich, Inc. and Universal Underwrites Service Corp. after a nearly
two-decade long business relationship. Plaintiffs alleged unfair business practices,
breach of contract, breach of fiduciary duty, and fraud concerning a “No
Chargeback Program” in which Defendants promised to cover Plaintiffs’
“Chargebacks,” or refunds to car-buying customers who canceled their vehicle
services.
Following intensive discovery and extensive motion practices, the case
proceeded to trial where the jury returned verdicts in Plaintiffs’ favor. Dkts. 321,
322, 323. On July 24, 2019, Plaintiffs filed the pending motion seeking attorneys’
fees.
LEGAL STANDARD
Jurisdiction in this suit is based on diversity of citizenship under 28 U.S.C.

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§ 1332, therefore the right to attorney fees and the method of calculating the fees is
governed by state law. See Mangold v. Cal. Pub. Utils. Comm’n, 67 F.3d 1470,
1478 (9th Cir. 1995). In Idaho, attorneys’ fees may be awarded if authorized by
either contract or statute. Idaho R. Civ. P. 54(e)(1) (authorizing the award of
reasonable attorney fees to the prevailing party in a civil action when provided for
by statute or contract); see Stibal v. Fano, 157 Idaho 428, 435 (Idaho 2014)
(“Attorney fees may be awarded if authorized by statute or contract.”). Here,
Plaintiffs seek attorneys’ fees under Idaho Code §12-120(3), Idaho Code § 48-608,
Fed. R. Civ. P. 54, and Dist. Local R. 54.2.
1) Idaho Code § 12-120(3)
Idaho Code § 12-120(3) provides, “In any civil action to recover . . . in any
commercial transaction . . . the prevailing party shall be allowed a reasonable
attorney’s fees.” See Clement v. Franklin Inv. Group, Ltd. 689 F. Supp. 1575, 1577
(D. Idaho 1988) (“Idaho Code § 12-120 is mandatory in its nature.”).
“Commercial transaction” is broadly defined to encompass “commercial in
the ordinary sense of the word.” Id. at 1576; see also Idaho Code § 12-120(3)
(“The term ‘commercial transaction’ is defined to mean all transactions except
transactions for personal or household purposes.”). For a prevailing party to avail
itself of § 12-120(3), the critical test is “whether the commercial transaction

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comprises the gravamen of the lawsuit.” Great Plains Equip. v. Northwest Pipeline
Corp., 136 Idaho 466, 471(Idaho 2001). Importantly, the commercial transaction
“must be integral to the claim and constitute a basis on which the party is
attempting to recover.” Id. Section 12-120(3) may be invoked even when eligible
claims are combined with other theories that would not have triggered its
application, as long as the commercial transaction remains integral to the claim and
constitutes the basis of recovery. See Brooks v. Gigray Ranches, 128 Idaho 72, 79
(Idaho 1996).
2) Idaho Code § 48-608
The Idaho Consumer Protection Act (ICPA) provides, “In any action
brought by a person under this section, the court shall award . . . reasonable
attorney’s fees to the plaintiff if he prevails.” Idaho Code § 48-608(5).
3) Idaho R. Civ. P. 54(e)(3)
If the Court grants attorneys’ fees, it must consider the factors enumerated in
Idaho R. Civ. P. 54(e)(3):
(A) the time and labor required;
(B) the novelty and difficulty of the questions;
(C) the skill requisite to perform the legal service properly and the
experience and ability of the attorney in the particular field of law;

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(D) the prevailing charges for like work;
(E) whether the fee is fixed or contingent;
(F) the time limitations imposed by the client or the circumstances of the
case;
(G) the amount involved and the results obtained;
(H) the undesirability of the case;
(I) the nature and length of the professional relationship with the client;
(J) awards in similar cases;
(K) the reasonable cost of automated legal research (Computer Assisted
Legal Research), if the court finds it was reasonably necessary in preparing a
party's case;
(L) any other factor which the court deems appropriate in the particular case.
The “trial court is not required to make ‘specific findings demonstrating how
it employed any of the factors in Rule 54(e)(3),’ [but] it is required to consider
those factors when determining the amount of the fees to award.” Sun Valley
Potato Growers, Inc. v. Texas Refinery Corp., 139 Idaho 761, 769 (Idaho 2004)
(citation omitted). The reasonableness of an attorneys’ fee award is based on the
consideration of the Rule 54(e)(3) factors. Id.
ANALYSIS

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A.

Idaho Code § 12-120(3)

Defendants do not dispute that Plaintiffs are prevailing parties under both
Idaho Code § 12-120(3) and Idaho Code § 48-608. See Dkt. 376 at 2. Rather, they
claim that Plaintiffs failed to show their entitlement to fees by neglecting to
provide a claim-by-claim analysis separating their consumer protection and
contract claims from their fiduciary duty, fraud, and punitive damage claims. The
Court disagrees. While it is true that the Court is required to “analyze the gravamen
claim by claim,” Plaintiffs are not required to separate claims when each cause of
action stems from the same commercial transaction. See Sims v. Jacobson, 157
Idaho 980, 985 (Idaho 2015); see also Winn v. Amerititle, 2010 WL 4904676, *2
(D. Idaho 2010). Here, each of Plaintiffs’ causes of actions arose from
Defendants’ failure to meet their obligations as to the No Chargeback Program,
which clearly meets the plain definition of a commercial transaction and
constitutes the gravamen of the lawsuit. Dkt. 147.
Thus, Defendants’ claim that the Court should not award fees for Plaintiffs’
breach of fiduciary duty, fraud, and punitive damage claims fails. The Idaho
Supreme Court has explicitly held that § 12-120(3) does not prohibit a fee award
for a commercial transaction that also involves tortious conduct. Blimka v. My Web
Wholesaler, LLC, 143 Idaho 723, 728 (Idaho 2007).

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Still, Defendants claim that Plaintiffs’ theory of recovery on their breach of
fiduciary duty, fraud, and punitive damage claims is immaterial to the commercial
transaction for two reasons: 1) Plaintiffs’ sought disgorgement and not
“recover[y]” under § 12-120(3), and 2) the special relationship between the parties
minimized the commercial nature between them, rendering their breach of
fiduciary duty incompatible with a commercial transaction. Neither reason has
merit.
1) Damages Sought
Defendants claim that, because Plaintiffs sought disgorgement and punitive
damages, their purpose was to punish Defendants instead of recover damages
sustained because of Defendants’ fraudulent conduct. See Dkt. 376 at 7 (“[I]t is
clear that the theory for awarding disgorgement turns not on the commercial
transaction but rather on proof of Defendants’ profits and principles of equity.”).
According to Defendants, these damages are incompatible with recovering from
the commercial transaction here. This is a tortured interpretation of commercial
transaction, and is unsupported by both law and fact. Plaintiffs’ successfully
established that defendants’ misrepresentations and mismanagement with respect
to the No Chargeback Program was the genesis of Plaintiffs’ claims of tortious
conduct. See Dkts. 321-323, 373. Put another way, without the Program, Plaintiffs

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would be unable to assert the tortious conduct claims on which they prevailed. Cf.
Dickinson Frozen Foods, Inc. v. J.R. Simplot Co., 164 Idaho 669, 687 (Idaho 2019)
(finding that plaintiff was not entitled to fees based on defamation allegations that
were unrelated to the business contract).
Furthermore, Plaintiffs’ established that they would have been better off
with one of Defendants’ competitors. See Dkt. 373 at 14. Given that their loss was
difficult to quantify, Plaintiffs’ measured their loss through Defendants’ profits.
See Jordan v. Hunter, 124 Idaho 899, 908 (Ct. App. 1993) (proof of unjust profits
satisfies damage elements for fraud). Indeed, by virtue of alleging tortious conduct,
punitive damages were authorized by statute. See Idaho Code § 6-1604.
Accordingly, the Court does not accept Defendants’ attempt to untether the breach
of fiduciary duty, fraud, and punitive damages claim from the commercial
transaction based on the type of damages Plaintiffs sought. See Blimka, 143 Idaho
at 728.
2) Fiduciary Relationship
Defendants further claim that the fiduciary relationship between the parties
minimized the commercial nature between them because it distinguished their
dealings from arms-length transactions. However, no basis exists to assert that a
fiduciary relationship undermines the commercial relationship or renders the

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commercial transactions distinct here. In fact, precedent indicates otherwise. See
Prehn v. Hodge, 161 Idaho 321, 331 (Idaho 2016) (district court did not err in
awarding attorney’s fees based on breach of fiduciary duty). As explained, the
genesis of the lawsuit was the No Chargeback Program, which fits squarely within
the definition of a commercial transaction.
Furthermore, in finding as a matter of law that the Defendants owed
Plaintiffs a fiduciary duty in administering the No Chargeback Program, the
Court’s ruling supports the determination that the duty arose, and is not separable
from, the commercial transactions. See Dkt. 373 at 8-10. The Court instructed the
jury that the scope of the fiduciary duty amounted to administering the No
Chargeback Program and subsequent agreements. Id. at 17. In fact, the Special
Verdict Form clearly asks the jury to find whether Defendants fraudulently induced
Plaintiffs to enter into contracts. See Dkt. 321 at 1-2. As such, Plaintiffs are entitled
to recover reasonable attorneys’ fees under § 12-120(3).
B.

Idaho Code § 48-608

As noted, Defendants do not dispute that Plaintiffs are prevailing parties.
“[A] party who invokes the protection of the ICPA and prevails is entitled to
reasonable attorney fees based on an application of the prevailing party analysis
from [Idaho R. Civ. P.] 54(d)(1)(B).” Duspiva v. Fillmore, 154 Idaho 27, 37 (Idaho

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2013). Accordingly, the Court finds that plaintiffs are entitled to fees on this
statutory basis as well.
C.

Reasonableness of Fees

Defendants claim that Plaintiffs incorrectly rely on the “lodestar” approach
in determining reasonableness of attorneys’ fees, but do not deny that Plaintiffs’
affidavit adequately addresses the factors outlined in Rule 54(e)(3). Dkt. 376 at 10
(“Defendants are not here to argue that Plaintiffs thorough affidavit fails to address
the criteria outlined in Idaho Rule of Civil Procedure 54(e)(3).”). See Hackett v.
Streeter, 109 Idaho 261, 264 (Ct. App. 1985) (“Rule 54(e)(3) requires the trial
court to consider the enumerated factors.”). The Court has considered the Rule
54(e)(3) factors along with the records submitted and finds that Plaintiffs’
requested fees are reasonable in light of the time and labor required in this
vigorously contested lawsuit.
1) Hourly Rates
Reasonable hourly rates “are to be calculated according to the prevailing
market rates in the relevant legal community.” Vargas v. Howell, 949 F.3d 1188,
1194 (9th Cir. 2020) (quoting Blum v. Stenson, 465 U.S. 886, 895 (1984)). The
Court has further considered the experience, skill, and reputation of Plaintiffs’
attorneys. See Trevino v. Gates, 99 F.3d 911, 924 (9th Cir. 1996). Defendants

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concede that Plaintiffs’ rates are reasonable, and the Court agrees in light of its
familiarity with the rates of Holland & Hart timekeepers. Dkt. 376 at 12. See
LaPeter v. Can. Life Ins. Of Am., 2007 U.S. Dist. LEXIS 89097, *4 (D. Idaho
2007) (“It has [] been this Court’s experience that attorneys at regional firms, such
as Holland & Hart, charge hourly rates at or near, but not above, the high end of
acceptable rates for the Boise area.”).
2) Defendants’ Requested Reduction
While Defendants do not dispute the hourly rate, they claim that the number
of hours expended were excessive. Specifically, they claim that overstaffing
resulted in excessive attorney time and duplicative effort and that Plaintiffs
expended unnecessary hours in preparing for and conducting a mock trial, voir
dire, and opening statements. As such, Defendants ask to reduce Plaintiffs’
requested fee award by 20 percent.
a. Number of Hours and Staffing
Defendants claim that Plaintiffs overstaffed the litigation, resulting in
unreasonable time and labor invested. In support, they point to a 23 percent
difference in hours billed. See Dkt. 376 at 13. However, a disparity in the number
of hours expended between Plaintiffs and Defendants does not necessarily mean
Plaintiffs’ excessively staffed their litigation or that hours expended were

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unreasonable. See Democratic Party of Wash. State v. Reed, 388 F.3d 1281, 1287
(9th Cir. 2004) (noting that many factors can cause a prevailing party to spend
more time on matters, but opposing counsel’s billing records are a “useful guide”
in evaluating the reasonableness of claimed time). The Court “should defer to the
winning lawyer’s professional judgment as to how much time he was required to
spend on the case; after all, he won, and might not have, had he been more of a
slacker.” Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008).
Here, Defendants were responsible for evasive discovery practices and the
production of unusual documents. See Ex. B, Dkt. 111; Stidham Decl., Dkt. 325-2
at 2-3. This case also involved complex and extensive motion practice. See
Stidham Decl. at 2, 4. Records submitted indicate that Plaintiffs staffed more
attorneys on depositions that were document-intensive; and even then, the hours
were not always charged. See Dkt. 325-3 at 74. See Reed, 388 F.3d at 1286-1287
(courts must exercise discretion considering the circumstances of the individual
case in determining whether unnecessary duplication occurred). Given that
plaintiffs prevailed on all fronts, the modest 23 percent difference in hours tends to
highlight their efficiency and undermines the Defendants’ claim that overstaffing
occurred. Id. at 1287. Accordingly, the Court will not reduce the award based on
this claim.

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b. Mock Trial
Defendants claim that Plaintiffs unreasonably spent 387 hours preparing for
and conducting a mock trial, voir dire, and opening statements. The Court has
discretion to decide whether this was a reasonable expense under the
circumstances. Reed, 388 F.3d at 1286-1287. Considering the complexity of the
case, counterclaims, and the relationship between the parties, the Court finds that
the mock trial was a reasonable expense. Indeed, given again that Plaintiffs
ultimately prevailed, the Court cannot say that the mock trial was not a
contributing factor in the outcome of the case. As such, the Court will defer to the
experience of counsel and will not reduce the award based on this claim as well. Id.
In so concluding, the Court does not mean to intimate that mock trials are
necessary or recoverable expenses in more routine litigation. But, with the
amounts at stake, the complexity of the issues, and the quality of counsel on both
sides, I must conclude that it was a reasonable expenditure here.
CONCLUSION
Accordingly, in considering all Rule 54(e)(3) factors, the Court concludes
that Plaintiffs’ requested fees of $1,999,771.50 is reasonable.
ORDER
IT IS ORDERED that Plaintiff’s Motion for Attorney Fees and Costs (Dkt.

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325) is GRANTED in the amount of $1,999,771.50.

DATED: March 1, 2021

_________________________
B. Lynn Winmill
U.S. District Court Judge

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