Vazirani et al v. Heitz
Filing
168
MEMORANDUM AND ORDER denying 145 Motion for Attorney Fees. Signed by District Judge Monti L. Belot on 10/10/2012. (alm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
ANIL VAZIRANI and
SECURED FINANCIAL SOLUTIONS, LLC,
Plaintiffs,
v.
MARK V. HEITZ and
JORDAN CANFIELD,
Defendants.
VAZIRANI & ASSOCIATES
FINANCIAL, LLC,
Plaintiff,
v.
MARK V. HEITZ and
JORDAN CANFIELD,
Defendants.
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CIVIL ACTION
No.
09-1311-MLB
CIVIL ACTION
No.
11-1032-MLB
MEMORANDUM AND ORDER
This case comes before the court on defendants’ motion for
attorney fees.1
(Doc. 145).
The motion has been fully briefed and
is ripe for decision. (Docs. 149, 152, 166, 167). Defendants’ motion
is denied for the reasons herein.
I.
Facts and Procedural History2
1
Defendants also moved for an order authorizing payment of their
costs.
The parties, however, have entered into a stipulation
regarding the costs in this action.
(Doc. 161).
Therefore, the
motion for costs is granted.
2
The facts surrounding this action are accurately set forth in
this court’s memorandum and order entered on June 27, 2012. (Doc.
143).
Plaintiffs filed these actions alleging claims of tortious
interference
with
contract
and
business
expectations,
civil
conspiracy, aiding and abetting, defamation and trade libel. On March
15,
2011,
the
court
granted
defendants’
defamation and trade libel claims.3
motion
to
dismiss
the
On June 27, 2012, the court
granted summary judgment in favor of defendants on the remaining
claims.
Plaintiffs have appealed that order to the Tenth Circuit.
(Doc. 146).
Defendants move for attorney’s fees on the basis that they are
allowable under Arizona law for the prevailing party in an action
arising out of a contract.
II.
Plaintiffs object.
Analysis
Pursuant to A.R.S. § 12-341.01, a prevailing party can recover
attorney’s fees “[i]n any contested action arising out of a contract.”
The most recent decision concerning this statute is Bennett v. Baxter
Group, Inc., 223 Ariz. 414, 224 P.3d 230 (Ariz. Ct. App. 2010), in
which the court noted that “the meaning of ‘arising out of a contract’
as used in § 12-341.01(A) has been the subject of many appeals in
which courts have had to evaluate its applicability to non-contract
claims.”
224 P.3d at 235.
Bennett cites to Ramsey Air Meds, L.L.C. v. Cutter Aviation,
Inc., 198 Ariz. 10, 6 P.3d 315 (Ariz. Ct. App. 2000), as the
applicable standard in determining whether an action is one which
arises out of a contract:
the court should look to the fundamental nature of the
3
Defendants do not seek attorney’s fees for the expenses
incurred on these two claims. (Doc. 152 at 1).
-2-
action rather than the mere form of the pleadings. The
existence of a contract that merely puts the parties within
tortious striking range of each other does not convert
ensuing torts into contract claims. Rather, a tort claim
will “arise out of a contract” only when the tort could not
exist “but for” the breach or avoidance of contract. When
the duty breached is one implied by law based on the
relationship
of
the
parties,
that
claim
sounds
fundamentally in tort, not contract. In such cases, it
cannot be said that the plaintiffs claim would not exist
“but for” the contract. The test is whether the defendant
would have a duty of care under the circumstances even in
the absence of a contract.
6 P.3d at 320-21.
Applying that rationale, the Court of Appeals in Bennett held
that a claim of tortious interference does not arise out of a
contract, citing Bar J Bar Cattle Co. v. Pace, 158 Ariz. 481, 486, 763
P.2d 545, 550 (Ariz. Ct. App. 1988) (“The duty not to interfere with
the contract of another arises out of law, not contract.”) and W.
Techs., Inc. v. Sverdrup & Parcel Inc., 154 Ariz. 1, 3, 7-8, 739 P.2d
1318, 1320, 1324-25 (Ariz. Ct. App. 1986).
Although the plaintiff in
Bennett brought a claim of breach of contract in addition to his
numerous
tort
claims,
the
court
found
that
attorney’s
fees
in
conjunction with a claim for tortious interference is not allowed
under Arizona law.4
Turning to the first case cited in Bennett, Bar J, the plaintiff,
a cattle ranch, sued the defendant alleging that the defendant
4
The Arizona Court of Appeals, however, remanded the issue of
attorney’s fees in light of Modular Mining Sys., Inc. v. Jigsaw Tech.,
Inc., 221 Ariz. 515, 212 P.3d 853 (Ariz. Ct. App. 2009), which allows
attorney’s fees on tort claims when the tort claims are so factually
connected to a contract claim that they require the same work that is
already necessary for the defense or prosecution of the contract claim
alone. This analysis is not applicable in this case because plaintiffs
have not brought a breach of contract claim against defendants in this
case.
-3-
interfered
with
his
contract
with
the
state
of
New
Mexico
by
fraudulently inducing the sale of the land the plaintiff leased from
the state.
1988).
158 Ariz. 481, 486, 763 P.2d 545, 550 (Ariz. Ct. App.
The trial court entered summary judgment in favor of the
defendant after determinating that the defendant did not improperly
interfere with New Mexico’s decision to terminate the lease with the
plaintiff.5
The defendant sought attorney’s fees on the basis that
the action arose out of a contract.
The Arizona Court of Appeals
determined that here was no contractual relationship between the
parties and the “duty not to interfere with the contract of another
arises out of law, not contract.”
763 P.2d at 550.
Therefore, an
award of attorney’s fees was not allowed under the statute.
In W. Techs., the Arizona Court of Appeals briefly discussed the
attorney’s fees issues and held that fees were not allowable on the
tort claims, which included a claim for tortious interference.
739
P.2d at 1324-25.
Defendants, however, urge the court to follow the analysis in
Killingsworth v. State Farm Mut. Auto. Ins. Co., No. 03-1950, 2006 WL
381682 (D. Ariz. Feb. 16, 2006), a federal district court decision,
and hold that the claim of tortious interference arises out of
In Killingsworth, the plaintiff, a
plaintiffs’ contract with Aviva.
former employee of one of the defendants, brought claims of breach of
contract, promissory estoppel, and breach of the implied covenant of
good faith and fair dealing against his former employer. In addition,
the
plaintiff
brought
a
claim
5
of
tortious
interference
with
As in this case, there was no breach of the contract but rather
a termination of the contract.
-4-
contractual relations against another employee.
Upon prevailing on
their summary judgment motion, defendants sought attorney’s fees under
§ 12-341.01(A). After discussing the claims against the employer, the
court turned to the availability of fees for the claim of tortious
interference.
First, the court noted that “[c]laims for tortious
interference with contract generally do not come within the reach of
A.R.S. § 12-341.01(A) because the duty not to interfere is imposed by
law, rather than by contract.”
Killingsworth, 2006 WL 381682, *2
(citing Bar J, 763 P.2d at 550).
The court, however, in allowing the award of fees reasoned as
follows:
But that generalization may not be the end of the
inquiry for a case like this in which the tortious
interference claim was asserted against an employee
(Gonzales) of the contracting party (State Farm) for
allegedly causing his employer to breach its contract with
the plaintiff. Gonzales was granted summary judgment
precisely because he cannot be personally liable for
breaching or inducing breach of his employer's contract,
acting in the course and scope of his employment. In this
case the manager is the employer, so there is no third
party, which is the gist of the action for tortious
interference.
(Doc.
#
193,
pp.
8-10.)
In
these
circumstances the supposed tort of interference with the
contract collapses into the claim of breach of contract
itself.
2006 WL 381682 at *2.
In Killingsworth, the court emphasized that the employee was
acting in the course of his employment at all times which resulted in
the conclusion that the tort was in actuality a breach of contract
claim against his employer.
Contrary to the facts in Killingsworth,
plaintiffs in this case have consistently argued that defendants were
acting outside the scope of their job duties for their own benefit and
the benefit of another company which contracted with Aviva.
-5-
The
court, however, determined that plaintiffs did not establish this
fact.
The rationale for the Killingsworth decision was based on an
earlier Arizona Court of Appeals case, Rutledge v. Arizona Bd. of
Regents, 147 Airz. 534, 557, 711 P.2d 1207, 1230 (Ariz. Ct. App.
1985), a decision which the court in Killingsworth realized was “now
muted” in light of other Arizona cases but has not been “overruled
explicitly.”
The court in Rutledge determined that attorney’s fees
were available to defendants on the basis that the plaintiff’s claim
of intentional interference with a contract made against the employer
under the doctrine of respondeat superior did not exist “but for the
alleged breach of contract.”
Rutledge, 711 P.2d at 1230.
The
Rutledge court, however, did not specifically discuss the claim of
intentional interference with a contract that was made against another
employee but did not include allegations of respondeat superior. This
is significant because plaintiffs’ allegations in this case do not
include a theory of respondeat superior but claim that defendants were
acting for their own benefit and the benefit of another company which
contracted with Aviva.
This distinguishes the case before the court
from Rutledge.
Moreover, as mentioned in Killingsworth, Rutledge was “muted” by
the Arizona Supreme Court’s decision in Barmat v. John and Jane Doe
Partners A-D, 155 Ariz. 519, 747 P.2d 1218 (1987).
Barmat discussed
the meaning of the phrase “arising out of a contract” as follows:
“Where, however, the duty breached is not imposed by law, but is a
duty created by the contractual relationship, and would not exist ‘but
for’ the contract, then breach of either express covenants or those
-6-
necessarily implied from them sounds in contract. Sparks6, supra;
Lewin, supra. The essence of such actions arises ‘out of a contract,’
eligible for an award of fees under the statute.”
747 P.2d at 1223.
In this case, the allegations do not stem from a duty owed by the
contract.
The duty not to interfere with one’s contract or business
expectations is a duty created out of law.
Importantly, one can
interfere with a contract without causing a breach, as discussed in
Bar J.
Moreover, the court is bound by Arizona law set forth in
Bennett, 224 P.3d at 235-37, which has held that a claim for tortious
interference does not arise out of a contract.
Because the duties of
defendants in this case arise out of law and not out of the contract
plaintiffs had with Aviva, attorney’s fees are not allowed under
A.R.S. § 12-341.01.7
Defendants’ motion is accordingly, but reluctantly, denied.
III. Conclusion
Defendants’ motion for attorney’s fees is denied.
(Doc. 145).
6
Sparks v. Republic Nat. Life Ins. Co., 132 Ariz 529, 647 P.2d
1127 (1982). In Sparks, the court held that attorney’s fees “may be
awarded pursuant to 12-341.01(A) based upon facts which show a breach
of contract, the breach of which may also constitute a tort. The fact
that the two legal theories are intertwined does not preclude recovery
of attorney's fees under s 12-341.01(A) as long as the cause of action
in tort could not exist but for the breach of the contract.” 647 P.2d
at 1142.
7
Although the parties spend a significant amount of time on the
claim of interference with a contract, defendants also seek fees on
the claims of interference with business expectancies, civil
conspiracy and aiding and abetting. The claim of interference with
business expectancies clearly sounds in tort and does not arise out
of a contract as plaintiffs asserted that they had an interest in
future income from the relationship with Aviva. With respect to the
civil conspiracy claim and the aiding and abetting claims, those
claims were based on the predicate torts of interference with a
contract and interference with business expectancies.
Therefore,
attorney’s fees are not allowed for the reasons stated in this order.
-7-
A motion for reconsideration of this order pursuant to this
court's Rule 7.3 is not encouraged.
Any such motion shall not exceed
three pages and shall strictly comply with the standards enunciated
by this court in Comeau v. Rupp.
The response to any motion for
reconsideration shall not exceed three pages.
No reply shall be
filed.
IT IS SO ORDERED.
Dated this 10th
day of October 2012, at Wichita, Kansas.
s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE
-8-
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