Opinion
2 CA-CV 2023-0130
03-06-2024
Venture Out at Mesa, Inc., Plaintiff/Appellee, v. Gary Pfab and Roxanne Pfab, Defendants/Appellants.
Rose Law Group PC, Scottsdale By Shelton L. Freeman and Austin Moylan Counsel for Plaintiff/Appellee Harper Law PLC, Gilbert By Kevin Harper Counsel for Defendants/Appellants
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2022050878 The Honorable Melissa Iyer Julian, Judge
COUNSEL
Rose Law Group PC, Scottsdale By Shelton L. Freeman and Austin Moylan Counsel for Plaintiff/Appellee
Harper Law PLC, Gilbert By Kevin Harper Counsel for Defendants/Appellants
Judge Gard authored the decision of the Court, in which Presiding Judge Eppich and Chief Judge Vasquez concurred.
MEMORANDUM DECISION
GARD, Judge:
¶1 The superior court granted a preliminary injunction requested by Venture Out at Mesa Inc., a homeowners' association, requiring appellants Gary and Roxanne Pfab to bring their property into compliance with its governing documents and its easement agreement with a utility corporation. The court thereafter ordered the Pfabs to pay attorney fees and costs in the combined amount of $92,684.82. On appeal, the Pfabs challenge this award as unreasonable. For the following reasons, we affirm.
Factual and Procedural Background
¶2 "In reviewing a [superior] court's fee award, we view the record in the light most favorable to sustaining the [superior] court's decision." Solimeno v. Yonan, 224 Ariz. 74, ¶ 36 (App. 2010). In March 2022, Venture Out filed a complaint and an application for an order to show cause, alleging that the Pfabs had violated its "Declaration of Covenants, Conditions, Restrictions and Easements" (CC&Rs) and its community rules and regulations by installing an unauthorized and unpermitted bathroom on their property. Venture Out further alleged that the Pfabs' actions violated an agreement between it and the Salt River Project Agricultural Improvement and Power District (SRP), which gave SRP an easement to service utilities. The agreement required homeowners encroaching on the easement to bring their residences into compliance with the agreement's terms on the occurrence of certain triggering events, which included making upgrades requiring city building permits. Among other relief, Venture Out sought a preliminary injunction requiring the Pfabs to comply with the CC&Rs and the SRP agreement.
¶3 The superior court held a day-long evidentiary hearing on Venture Out's request for a preliminary injunction, at which multiple witnesses testified. Following closing briefing, the court granted the injunction. The Pfabs thereafter brought their property into compliance, and the parties lodged a stipulated proposed final judgment, subject to the court's determination of attorney fees.
¶4 Venture Out supported its subsequent fee application with a China Doll declaration executed by its lead counsel, which incorporated a detailed billing spreadsheet itemizing the attorney and staff time spent on case-related tasks. See Schweiger v. China Doll Rest., Inc., 138 Ariz. 183 (App. 1983). Venture Out further argued that the CC&Rs required the Pfabs to pay the costs of its retained experts. Venture Out thus requested attorney fees and costs in the combined amount of $92,684.82.
¶5 The superior court granted Venture Out's application in full, stating that it did "not find that the fees requested [were] unreasonable under the circumstances and given the issues presented and which resulted in a full day evidentiary hearing." The court further determined that the CC&Rs entitled Venture Out to recover all costs it had incurred, including expert-witness fees. The court entered final judgment against the Pfabs, who filed a timely notice of appeal. We have jurisdiction under A.R.S. § 12-2101(A)(1).
Discussion
¶6 The Pfabs challenge the superior court's award of attorney fees and costs as unreasonable and excessive. We review the awards for an abuse of discretion. See Tucson Ests. Prop. Owners Ass'n v. Jenkins, 247 Ariz. 475, ¶ 8 (App. 2019) (attorney fees); Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 361 (App. 1987) (costs). "To find an abuse of discretion, there must either be no evidence to support the superior court's conclusion or the reasons given by the court must be 'clearly untenable, legally incorrect, or amount to a denial of justice.'" Charles I. Friedman, P.C. v. Microsoft Corp., 213 Ariz. 344, ¶ 17 (App. 2006) (quoting State v. Chapple, 135 Ariz. 281, 297 n.18 (1983)). The court did not abuse its discretion here.
I. Attorney fees
¶7 The Pfabs contend the superior court abused its discretion by awarding $74,835.69 in attorney fees, an amount the Pfabs consider unreasonable. The Pfabs maintain that Venture Out's counsel performed unnecessary work, devoted a disproportionate amount of time and resources to certain tasks, and billed twice for some activities.
¶8 As a preliminary matter, the Pfabs cite Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 570 (1985), for the factors we should consider in determining whether the award of attorney fees is reasonable. As Venture Out correctly observes, however, the Warner factors apply to a superior court's decision whether to make a statutory award of attorney fees, which is discretionary. See A.R.S. § 12-341.01(A) ("In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees ...."); Warner, 143 Ariz. At 568 ("We granted review in this case to clarify the proper construction of the statute governing the discretionary award of attorney's fees to successful litigants in contract actions, A.R.S. § 12-341.01.").
The Pfabs purport to cite this court's decision in Associated Indemnity Corp. v. Warner, 143 Ariz. 585 (App. 1983), modified, 143 Ariz. 567 (1985), but the parties' contract so requires, "the court retains its discretion to limit any such award to a reasonable level." Geller v. Lesk, 230 Ariz. 624, ¶ 10 (App. 2012), disapproved on other grounds by Am. Power Prods., Inc. v. CSK Auto, Inc., 242 Ariz. 364, ¶¶ 13-14 (2017). A party establishes "its prima facie they discuss factors that appear only in our supreme court's subsequent opinion approving the factors this court identified and adding others. See Warner, 143 Ariz. at 570 (directing courts to consider novelty of legal question and whether award would dissuade others from litigation for fear of liability for attorney fees). We rely on our supreme court's opinion herein.
¶9 Here, § 8.5 of the CC&Rs provide that Venture Out "shall be entitled to recover from the other party its costs and reasonable attorneys' fees" if forced to employ an attorney to enforce its governing documents. "CC&Rs constitute a contract between the subdivision's property owners as a whole and individual lot owners." McDowell Mountain Ranch Cmty. Ass'n v. Simons, 216 Ariz. 266, ¶ 14 (App. 2007) (quoting Ahwatukee Custom Ests. Mgmt. Ass'n v. Turner, 196 Ariz. 631, ¶ 5 (App. 2000)). And a court "lacks discretion to refuse to award attorney fees under a contractual provision." Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, ¶ 8 (App. 2014); see also Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, ¶ 32 (App. 2012) ("Unlike discretionary fee awards made pursuant to A.R.S. § 12-341.01(A), the trial court lacks discretion to deny a fee award required by the terms of the parties' contract."). Because the CC&Rs required the superior court to award attorney fees here, the Warner factors do not govern our analysis.
We therefore do not address the Pfabs' argument that the fee award here would dissuade others from pursuing potentially meritorious claims or defenses, which is the only Warner factor the Pfabs specifically discuss in their opening brief. See Warner, 143 Ariz. at 570.
¶10 Although the superior court must award attorney fees when entitlement to fees in the amount requested" by filing a fee application and China Doll affidavit. McDowell Mountain Ranch, 216 Ariz. 266, ¶ 20; see also Nolan v. Starlight Pines Homeowners Ass'n, 216 Ariz. 482, ¶ 37 (App. 2007) ("[A]n attorney's affidavit supporting a fee application should include 'the type of legal services provided, the date the service was provided, the attorney providing the service . . . and the time spent in providing the service.'" (quoting China Doll, 138 Ariz. at 188)).
¶11 "Once a party establishes its entitlement to fees and meets the minimum requirements in its application and affidavit for fees, the burden shifts to the party opposing the fee award to demonstrate the impropriety or unreasonableness of the requested fees." Nolan, 216 Ariz. 482, ¶ 38. The opposing party must point to specific, record-based reasons that amounts or items are excessive; it may not rely on general allegations of excessive billing or inflated rates. In re Indenture of Trust Dated Jan. 13, 1964, 235 Ariz. 40, ¶ 47 (App. 2014). If the opposing party does not carry its burden, the moving party "is entitled to receive its full attorneys' fees." McDowell Mountain Ranch, 216 Ariz. 266, ¶ 20.
¶12 The superior court did not abuse its discretion by awarding Venture Out $74,835.69 in attorney fees. Venture Out submitted a detailed application supported by lead counsel's China Doll declaration and a spreadsheet reflecting counsel's billing. See Ariz. R. Civ. P. 80(c) (permitting declaration to substitute for affidavit if in specified form). The spreadsheet itemized the legal services counsel's firm had provided, identifying for each entry the date the work had been performed, the time the firm had spent on the work, the individual who had performed the work, and that individual's billing rate. Counsel also highlighted in his declaration his firm's cost-control efforts, including its application of "courtesy discounts" to reduce its total fees by $13,250.33. And in the application, Venture Out highlighted its multiple unsuccessful efforts to resolve the conflict short of litigation and to settle litigation once it had begun. When the Pfabs objected to certain billing entries on the ground that they reflected unnecessary or repetitive work, Venture Out explained why each challenged activity was reasonable in light of the nature of the case. Venture Out also withdrew billing entries for two dates the Pfabs had identified as duplicative and reduced its total requested fees by a corresponding amount.
¶13 In finding Venture Out's requested fees reasonable, the superior court noted the case's circumstances and the issues presented, which had required a full-day evidentiary hearing to resolve. Although the hearing's transcript is not included in our record on appeal, the available record reflects that multiple witnesses testified at that proceeding, including a forensic architect; the court received numerous exhibits; and the parties submitted closing briefs in lieu of argument. The court's subsequent findings of fact speak to the complicated factual matters at issue, including whether the Pfabs had installed new fixtures or merely repaired or replaced existing ones, the specific hazards created by the Pfabs' renovations, the work needed to remediate those hazards, and whether the Pfabs' property encroached upon the SRP easement. The record supports a finding that the litigation below involved complicated issues, and that counsel's requested fee award was reasonable in light of the case's circumstances.
We presume the omitted transcript supported the superior court's ruling and its assessment of the issues presented. See A Tumbling-T Ranches v. Flood Control Dist. of Maricopa Cnty., 222 Ariz. 515, ¶ 99 (App. 2009) (appellate court presumes that material omitted from record on appeal supports superior court's ruling).
¶14 Arguing otherwise, the Pfabs opine that Venture Out's counsel spent more time than necessary, or involved more staff members than he should have, in completing certain tasks. To the extent the Pfabs objected to the same billing entries in superior court as they challenge on appeal, Venture Out explained why each disputed activity was proportional to the case's needs, and the superior court could reasonably have credited these explanations. See Nolan, 216 Ariz. 482, ¶ 39 (no abuse of discretion in fee award where moving party responded to opposing party's objection with "an adequate explanation of why the fees were in proportion to the [opposing party's] discovery requests and theories of liability"). And in any event, the Pfabs cannot show the attorney-fees award was unreasonable merely by opining that counsel could have worked faster or more efficiently. See First Interstate Bank of Ariz., N.A. v. Simon, 159 Ariz. 91, 92 (App. 1988) ("We will not respond to plaintiff's efforts to identify particular services listed in the fee request and then to argue that those tasks should have taken less time.").
Venture Out argues that the Pfabs have waived any challenge to the portions of the fee award relating to counsel's post-hearing work and preparation of the fee application. See Roebuck v. Mayo Clinic, 256 Ariz. 161, ¶ 16 (App. 2023) (failure to present legal theory to superior court results in waiver on appeal). We agree with Venture Out that the Pfabs did not directly challenge these categories of billing in their response to Venture Out's application. But even were we to overlook any potential waiver, the Pfabs' challenges to these categories would fail for the reasons set forth above. See Spector v. Fitness & Sports Clubs, LLC, 255 Ariz. 215, ¶ 12 (App. 2023) ("[T]he doctrine of waiver is discretionary.").
¶15 In addition to challenging counsel's allocation of time and resources, the Pfabs identify two instances of duplicative billing. The Pfabs acknowledge that Venture Out corrected these erroneous entries in its reply in support of its fee application, but they appear to suggest that the superior court awarded duplicative fees despite the correction.
¶16 The record does not support the Pfabs' argument. In response to Venture Out's fee application, the Pfabs identified and objected to two instances of double billing by a staff member, occurring on February 27 and March 1, 2023. In its reply, Venture Out withdrew the duplicative entries and reduced its requested fee amount by $1,134. The superior court thereafter expressly awarded attorney fees in the "reduced amount (as noted in the reply brief)"-not in the amount Venture Out had initially requested. The Pfabs thus have not established that the court ordered them to pay twice for the same services.
¶17 Because the Pfabs have not provided the transcript of the evidentiary hearing, we must presume that the evidence presented supported the superior court's assessment of whether the litigation's circumstances justified counsel's efforts. See A Tumbling-T Ranches v. Flood Control Dist. of Maricopa Cnty., 222 Ariz. 515, ¶ 99 (App. 2009). The court did not abuse its discretion by awarding $74,835.69 in attorney fees.
II. Costs
¶18 The Pfabs also challenge the superior court's award of non-taxable costs in the amount of $17,257.73, consisting of expert fees and a small amount of computerized-research costs. The Pfabs argue Venture Out did not provide sufficient support for either component of their request, and that it incurred the expert fees unnecessarily.
The Pfabs do not challenge the superior court's award of $591.40 in taxable costs.
¶19 Generally, "a party cannot recover its litigation expenses as costs unless a statutory basis exists for recovery." Ahwatukee Custom Ests. Mgmt. Ass'n v. Bach, 193 Ariz. 401, ¶ 6 (1999). But parties may contract to recover costs that would not ordinarily be recoverable. See A.R.S. § 12-332(A)(6) (costs may include "[o]ther disbursements that are made or incurred pursuant to an order or agreement of the parties"); Schritter v. State Farm Mut. Auto. Ins. Co., 201 Ariz. 391, n.5 (2001) ("Under section 12-332.A.6, the parties may agree to share . . . costs or impose them on the losing party."). Here, the superior court determined that § 8.5 of the CC&Rs entitled Venture Out to recover all costs it had expended in the present litigation, including expert fees. See Keg Rests. Ariz., Inc. v. Jones, 240 Ariz. 64, ¶ 55 (App. 2016) ("[B]ecause expert fees are nontaxable costs, the trial court has discretion to award such costs if they are allowed by the parties' contract."); see also Ahwatukee Custom Ests., 193 Ariz. 401, ¶¶ 13-16 (no abuse of discretion in awarding nontaxable costs under broad provision of CC&Rs allowing court to enter any appropriate relief or judgment). The Pfabs do not appear to challenge the court's interpretation of the CC&Rs, instead arguing only that the award was unsupported and unreasonable.
¶20 "[W]here costs are awardable, the trial court is given wide latitude in determining the amount." Hunt Inv. Co., 154 Ariz. at 361; see also Reyes v. Frank's Serv. &Trucking, LLC, 235 Ariz. 605, ¶ 20 (App. 2014) ("[T]rial courts must determine whether challenged expenditures, notwithstanding their status as taxable costs, were necessarily incurred and whether they are reasonable in amount."). The superior court did not exceed this latitude here. Beginning with the court's award of computerized-research fees-which, at $62.18, amounted to a fraction of the total award-Venture Out itemized in its fee application two charges from a research service and the date counsel incurred each charge, and counsel avowed in his declaration to having incurred those fees. The Pfabs contend that Venture Out supplied no receipts to support counsel's claimed research expenses, and they speculate that counsel "likely" subscribed to a research service with a monthly fee and thus, presumably, incurred no case-specific expense. The Pfabs cite no evidence in the record to support this contention, and their conjecture is insufficient to rebut counsel's declaration attesting to the specific costs he had incurred. And we presume any evidence presented at the evidentiary hearing supported the court's findings. See A Tumbling-T Ranches, 222 Ariz. 515, ¶ 99.
Although the superior court included the computerized-research costs in the costs award, it correctly determined that Venture Out's computerized-research fees were also recoverable as attorney fees. See Ahwatukee Custom Ests., 193 Ariz. 401, ¶ 10 ("[A]ttorneys' fees awards can include the cost of computerized legal research.").
¶21 The Pfabs likewise have not shown that the superior court's award of expert-witness fees was unreasonable. The Pfabs first contend that Venture Out presented insufficient evidence of the experts' specific activities, but we must presume the evidence at the evidentiary hearing supported the court's award. See A Tumbling-T Ranches, 222 Ariz. 515, ¶ 99. The Pfabs also overlook that counsel's declaration itemized both retained experts' charges by time period, and that the forensic architect's report provides additional information regarding his case involvement.
¶22 Further, as they did in challenging the attorney-fees award, the Pfabs opine that Venture Out did not require expert assistance to litigate what the Pfabs consider simple claims. But counsel avowed otherwise in his declaration, and the Pfabs cannot establish unreasonableness merely by suggesting that Venture Out could have litigated its case less expensively or more efficiently. Cf. First Interstate Bank of Ariz., 159 Ariz. at 92. Moreover, in the absence of the hearing's transcript, we must again presume the evidence supported the court's conclusion. See A Tumbling-T Ranches, 222 Ariz. 515, ¶ 99. And as also discussed above, the available record suggests the litigation was technically complex. The court did not abuse its discretion by awarding $17,257.73 in nontaxable costs.
III. Attorney fees and costs on appeal
¶23 Both parties request attorney fees on appeal, and Venture Out requests its costs. Venture Out relies on § 8.5 of its CC&Rs which, as discussed above, entitles it to costs and reasonable attorney fees incurred in litigation to enforce the community's governing documents. As the prevailing party, and in accordance with the CC&Rs, we grant Venture Out's request for attorney fees and costs, subject to its compliance with Rule 21, Ariz. R. Civ. App. P. See McDowell Mountain Ranch, 216 Ariz. 266, ¶ 23.
Disposition
¶24 For the reasons set forth above, we affirm the judgment and the superior court's award of attorney fees and costs.