Free Order on Motion for Attorney Fees - District Court of Arizona - Arizona

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Trading) ) ) Plaintiffs, ) ) vs. ) ) Rockford Corporation, ) ) Defendant. ) ) ) ) Rockford Corporation, ) ) Counterclaimant, ) ) vs. ) ) Ezra Cohen, Ezcony Trading Corporation) and Ezcony Interamerica, Inc., ) ) Counterdefendants. ) _________________________________)

Ezra Cohen Corporation,

and

Ezcony

No. CIV 03-261 PHX-LOA ORDER

This matter arises on the Application of Rockford Corporation ("Rockford") for an
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Award of Reasonable Attorneys' Fees and Related Non-Taxable Expenses. (document #195)
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Rockford seeks an award of $425,208.70 for legal fees, and $28,389.03 for costs and expenses.
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(document # 196, Exhs. 3-5) Plaintiffs, Ezra Cohen and Ezcony Trading Corporation, and
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Counterdefendants, Ezra Cohen, Ezcony Trading Corporation and Ezcony Interamerica, Inc.
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have not responded to the Application. The Court has previously determined that Rockford is
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Case 2:03-cv-00261-LOA

Document 197

Filed 09/13/2005

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the prevailing party in this action and is entitled to an award of reasonable attorneys' fees, costs, and expenses. (May 16, 2005 Order) BACKGROUND I. Procedural History This matter arose out of a distribution agreement between Rockford and Ezcony Trading Corporation ("ETC"). Rockford and its affiliates manufacture, market, and sell car stereo products worldwide under various brand names. On January 26, 2000, Rockford and ETC entered into a Distribution Agreement pursuant to which ETC agreed to distribute Rockford Fosgate products in a specified region in Latin America. During the course of the Agreement, ETC became delinquent in its payment obligations to Rockford prompting Rockford to terminate the Distribution Agreement. Counterclaim). Thereafter, Cohen and ETC commenced this action seeking a declaration that Cohen was not personally liable to Rockford for ETC's obligations (Count I) and alleging that Rockford conspired with ETC employees to breach the employee's fiduciary duty owed ETC (Count II). Rockford counterclaimed asserting eleven counts regarding the recovery of outstanding receivables and ETC's interference with Rockford's contractual relationships with other parties. On April 6, 2005, the Court entered final judgment in favor of Rockford on Count III of Rockford's Amended Counterclaim (or Count IX of its Second Amended Counterclaim), and Counts I-IV, VI-VIII, and XI of its Second Amended Counterclaim, finding that Plaintiff/Counterdefendants ETC and Ezra Cohen were jointly liable for the full amounts sought by Rockford. The Court had previously dismissed all counts of the Complaint filed by ETC and Cohen as a discovery sanction under Fed.R.Civ.P. 37 and 41. (January 3, 2005 Order)("The Court enters judgment on the merits against ETC on ETC's Complaint in Rockford's favor.") Rockford now seeks an award of attorneys' fees and costs. II. Entitlement to Attorneys' Fees This contract action is before the court on diversity jurisdiction, therefore, the availability of attorneys' fees is governed by state law. Mangold v. California Public Utilities, 67 F.3d 1470,
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(Complaint, Rockford's Second Amended

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1478-79 (9th Cir. 1995)(holding that in a diversity action, state law determines the right to attorneys' fees and the method of calculating those fees); Diamond v. John Martin Co., 753 F.2d 1465, 1467 (9th Cir.1985). Rockford requests attorneys' fees pursuant to Ariz.Rev.Stat. § 12-341.01(A), which provides that: "[i]n any contested action arising out of a contract, express or implied, the Court may award the successful party reasonable attorneys' fees." Arizona law does not require the trial court to award fees in all contract disputes. See, Ariz.Rev.Stat. § 12-341-01.A (2004). Rather, an award of attorneys' fees is discretionary. See, A.R.S. § 12-341.01; Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181 (1985); Solar-West, Inc. v. Falk, 141 Ariz. 414, 687 P.2d 939 (App.1984). In determining whether to award attorneys' fees under § 12-341.01(A), courts should consider the following factors: (1) the merits of the unsuccessful party's claim or defense, (2) whether the litigation could have been avoided or settled and whether the successful party's efforts were completely superfluous in achieving the result, (3) whether assessing fees against the unsuccessful party would cause extreme hardship, (4) whether the successful party prevailed with respect to all of the relief it sought, (5) the novelty of the legal question presented, and (6) whether the award in any particular case would discourage other parties from litigating tenable claims or defenses for fear of incurring liability for substantial amounts of attorneys' fees. Associated Indemnity Corporation v. Warner, 143 Ariz. 567, 694 P.2d 1181, 1184 (1985). See also, Ofaly v. Tucson Symphony Society, 209 Ariz. 260, 99 P.3d 1030, 1035-36 (Ariz. Ct. App. 2004); Marvin Johnson, P.C. v. Shoen, 888 F.Supp. 1009, 1018 (D.Ariz. 1995). After considering the foregoing factors, the court finds that Rockford is entitled to an award of attorneys' fees as the successful party in this action. Rockford was successful on all of its claims and in defending against all of ETC's and Cohen's counterclaims. Additionally, ETC and Cohen made virtually no effort to resolve this case, rather they hindered its resolution by their lack of cooperation during discovery. There is no evidence that the imposition of fees would cause extreme hardship. See, Woerth v. City of Flagstaff, 167 Ariz. 412, 420, 808 P.2d 297, 305 (App.1990) ("To raise the issue of undue hardship ... [the party opposing the fee request] was required to present specific facts by affidavit or testimony.") Finally, there is no evidence that
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an award of fees would deter others from defending legitimate contract claims. The Court must next determine the reasonableness of the amount of fees which Rockford requests. III. Reasonableness of Fees Requested As previously stated, A.R.S. § 12-341.01(A) authorizes an award of reasonable attorneys' fees to a prevailing party "[i]n any contested action arising out of contract, express or implied . . . ." Once the decision to award attorney's fees has been made, subsection B of the statute grants the trial court broad discretion in determining the amount of the award. Assoc. Indem. Corp. v. Warner, 143 Ariz. 567, 569-70, 694 P.2d 1181, 1183-84 (1985). The basis for the fee request in this case is the fee agreement between counsel and Rockford. In such a case, the starting point for determining a reasonable fee is the actual billing rate which counsel charged in a particular matter. In "commercial litigation between fee-paying 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." Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183187-188, 673 P.2d 927 (Ariz. Ct. App. 1983). Thus, the affidavit in support of the fee application must include the agreed upon hourly rate. Id. In addition, under Arizona law, courts also consider the following factors in assessing the reasonableness of a fee award: (1) qualities of the advocate: his ability, his training, education, experience, professional standing and skill; (2) the character of work to be done: its difficulty, its intricacy, its importance, time and skill required, the responsibility imposed and the prominence and character of the parties where they affect the importance of the litigation; (3) the work actually performed by the lawyer: the skill, time, and attention given to the work; (4) the result: whether the attorney was successful and what benefits were obtained. Schweiger, 138 Ariz. 183, 187, 673 P.2d 927 (citing Schwartz v. Schwerin, 85 Ariz. 242, 24546, 336 P.2d 144 (1959). The affidavit and documentation submitted by Rockford's counsel to the court support the reasonableness of the award. The time spent by counsel on this case is carefully itemized

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and billed at a reasonable hourly rate. Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183, 673 P.2d 927 (App.1983). The Court will also consider the factors set forth in Schwartz which are subsumed in those contained in Local Rule of Civil Procedure 54.2(c)(2). Local Rule of Civil Procedure 54.2(c)(2) sets forth the following factors to be considered in determining the reasonableness of a requested attorneys' fee award. The factors are: (1) the time and labor required of counsel, (2) the novelty and difficulty of the questions presented, (3) the skill necessary to perform the legal service, (4) the preclusion of other employment because of acceptance of the action, (5) the customary fee charged in similar matters, (6) whether the fee agreement is fixed or contingent, (7) any time limitations imposed by the client or the circumstances, (8) the amount of money involved and the results obtained, (9) the experience, reputation and ability of counsel, (10) the "undesirability" of the case, (11) the nature and length of the professional relationship between the attorney and the client, and (12) awards in similar actions. LRCiv 54.2. Rockford's counsel avers that he consulted with Cohen's and ETC's counsel in an effort to resolve the Rockford's request for attorneys' fees, in accordance with LRCiv 54.2(d)(1). (document # 195, Exh. 1) The Court will consider the foregoing factors in conjunction with those set forth in Schwartz in assessing the reasonableness of the fee request. 1. Time and Labor Required/Work to be Performed: Rockford contends that this matter was "intense and time-consuming." (document # 196 at 7) The Court agrees. This matter involved considerable discovery and required Rockford to incur additional costs due to ETC's and Cohen's failure to cooperate in the discovery process. Ultimately, the Court conducted a three-day evidentiary hearing regarding discovery infractions and imposed sanctions against ETC and Cohen. 2. Novelty and Difficulty of Issues/Work Actually Performed: This matter was primarily a breach of contract case and did not present novel legal issues. However, the legal issues arose out of complex facts which were contested. Rockford's alter ego claim, on which it prevailed, involved complex business relationships and transactions. Additionally, ETC,

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Cohen and many witnesses were located in Panama which complicated discovery by requiring document translation among other complications. 3. Skill of Counsel/Qualities of the Advocate: There is no dispute regarding the high level of skill of Rockford's counsel, Steptoe & Johnson. 4. Preclusion of other Employment: Rockford's counsel advises the Court that preclusion of other employment was not an issue in this matter. 5. Customary Fee Charged: There is no dispute regarding the fee charged in this matter. Counsel advises the Court that it charged Rockford fees at its standard rate, minus a ten percent discount. The record reflects that the hourly fees for counsel ranged from $100/hour for associates to $395 for one senior partner. Most of the work in this matter was performed by associates who billed at $160-$185/hour. Additionally, counsel gave Rockford a volume discount of 10% based on Rockford's annual billings. (document # 195, Exh. 2) 6. Type of Fee: Rockford's counsel charged a fixed fee based on counsel's actual billed time. The fixed fee agreed upon by Rockford and its counsel is the best evidence of what constitutes a reasonable fee award. See, Schweiger, stating that: [I]n corporate and commercial litigation between fee-paying 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. 673 P.2d at 931-32; Sanborn v. Brooker & Wake Property Managment, Inc., 178 Ariz. 425, 874 P.2d 982, 988 n. 3 (Ariz. Ct. App. 1994)(stating that although the court has broad discretion in fixing amount of attorneys' fees, such an award may not exceed the amount paid or agreed to be paid.) 7. Time Limitations Imposed by Circumstances: Rockford advises the Court that this factor does not apply. 8. Amount of Money Involved and Results Obtained: As previously stated, Rockford succeeded on all of its claims against ETC and Cohen and successfully defeated ETC's claims against Rockford. Rockford obtained a final judgment in the amount of $1,435,612.05.

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9. Experience and Reputation of Counsel/Qualities of the Advocate: As previously stated, the skill and experience of counsel is not at issue. Steptoe & Johnson is a leading Phoenix firm and its attorneys are reputable. 10. Undesirability of Case: This factor was not an issue in this case. 11. Length of Professional Relationship: Rockford advises the Court that it has a long standing relationship with counsel. In view of the skill of counsel, the long-term professional relationship between Rockford and its counsel, the existence of a fee agreement, the 10% discount counsel awarded Rockford based on the volume of work it performed for Rockford, and the factual complexity of this matter, the Court finds Rockford's attorneys' fee request reasonable. NON-TAXABLE EXPENSES, TAXABLE COSTS In addition to attorneys' fees, Rockford seeks an award of taxable costs and related litigation expenses in the amount of $28,389.03. In its May 16, 2005 Order the Court determined that Rockford was entitled to seek its costs and expenses as the prevailing party in this matter. Under Arizona law, "awarding costs to the successful party under A.R.S. § 12-341 is mandatory." Watson Constr. Co. v. Amfac Mortg. Corp., 124 Ariz. 570, 606 P.2d 421 (Ariz. Ct. App. 1979). Arizona Revised Statute § 12-341 provides that "[t]he successful party to a civil action shall recover from his adversary all costs expended or incurred unless otherwise provided by law." Rockford's request for an award of costs and expenses is unopposed.

Review of the documents in support of Rockford's request reveals that the request is reasonable and supported by the documents which Rockford has submitted to the Court. Because Rockford, the prevailing party, is entitled to recover its cost and expenses in this case and because there is no objection to the amount requested, the Court will award Rockford its costs and expenses in the amount of $28,389.03. SUMMARY The Court finds that Rockford has established that it is entitled to recover attorney's fees in the amount of $425,208.70 and costs and expenses in the amount of $28,389.03. In accordance with the foregoing,
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IT IS HEREBY ORDERED that Rockford's Application for Attorneys' Fees and Related Non-Taxable Expenses (document # 195) is GRANTED. IT IS FURTHER ORDERED that Rockford is awarded: (1) attorneys' fees in the amount of $425,208.70 and costs and expenses in the amount of $28,389.03. DATED this 13th day of September, 2005.

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