Gonzalez v. U.S. Human Rights Network

Full title: Rosalee Gonzalez Plaintiff, v. US Human Rights Network, et al., Defendants.

Court: United States District Court, District of Arizona

Date published: Jan 12, 2024

No. CV-20-00757-PHX-DWL (D. Ariz. Jan. 12, 2024)

Opinion

CV-20-00757-PHX-DWL

01-12-2024

Rosalee Gonzalez Plaintiff, v. US Human Rights Network, et al., Defendants.

Dominic W. Lanza United States District Judge

ORDER

Dominic W. Lanza United States District Judge

Dr. Rosalee Gonzalez (“Dr. Gonzalez”) served as the executive director of the U.S. Human Rights Network (“USHRN”) from February 2018 until November 2019, when she was terminated. Throughout this period, USHRN classified (and paid) Dr. Gonzalez as an independent contractor.

In this action, Dr. Gonzalez asserted contract and tort claims against USHRN and four USHRN board members in connection with her purported misclassification and termination. USHRN, in turn, asserted various counterclaims against Dr. Gonzalez. Before trial, the Court dismissed Dr. Gonzalez's claims against the board members and granted summary judgment in USHRN's favor as to Dr. Gonzalez's tort claims and as to the largest category of damages she sought in relation to her contract claims. Additionally, on the eve of trial, USHRN announced it would not be pursuing most of its counterclaims. Finally, a jury trial in August 2023 resulted in a $33,622.17 verdict in Dr. Gonzalez's favor on her contract claims and the rejection of USHRN's remaining counterclaim.

Now pending before the Court are a slew of post-trial motions: (1) Dr. Gonzalez's motion to vacate, alter, or amend the judgment, which effectively seeks reconsideration of the order granting summary judgment to USHRN on one of her tort claims (Doc. 204); (2) USHRN's motion for judgment as a matter of law and/or to alter or amend the judgment, which seeks a determination that Dr. Gonzalez's contract claims are time-barred in whole or in part (Doc. 213); (3) Dr. Gonzalez's motion for $545,008.50 in attorneys' fees (Doc. 206); (4) Dr. Gonzalez's motion for prejudgment interest (Doc. 211); (5) a motion for $12,460 in attorneys' fees filed by three of the individual USHRN board members (Doc. 205); and (6) Dr. Gonzalez's motion for $317,910 in monetary sanctions against USHRN's counsel (Doc. 207). For the reasons set forth below, both of the fee-related motions are granted or granted in part, as is the undisputed motion for prejudgment interest, and the remaining motions are denied.

BACKGROUND

I. Relevant Facts

Between February 2018 and December 2018, Dr. Gonzalez served as USHRN's acting executive director. This relationship was memorialized in a series of independent contractor agreements. (Doc. 106-1 at 28-38.)

The theory underlying Dr. Gonzalez's contract claims is that “[i]n December 2018, USHRN [orally] agreed to . . . employ [her] as its Executive Director [o]n a permanent basis . . . with a salary of $125,000 per year, as well as benefits consistent with the benefits package USHRN provided to its other employees,” that USHRN subsequently failed to “honor[] [this] agreement and [instead] tried to renegotiate the parties' agreement,” and that USHRN later “reaffirmed its just obligation to employ Dr. Gonzalez pursuant to the parties' December 2018 oral agreement.” (Doc. 163 at 3-4.) Meanwhile, USHRN's overarching defense to the contract claims is that it “did not enter any oral contract of employment with Plaintiff. The parties never reached a meeting of the minds regarding the terms of Plaintiff's employment (e.g., salary, benefits, at-will status, severance) as the permanent Executive Director of USHRN. USHRN paid Plaintiff, and Plaintiff knowingly accepted, bimonthly payments as an independent contractor during all relevant periods until USHRN terminated her on November 22, 2019.” (Id. at 4.)

II. This Litigation

On November 26, 2019, four days after her termination (and before litigation formally commenced), Dr. Gonzalez made a settlement offer of $155,000, but USHRN never responded to that offer. (Doc. 206 at 26 ¶¶ 26-27.)

On March 18, 2020, Dr. Gonzalez filed a complaint in Maricopa County Superior Court against USHRN and four USHRN board members (“the Individual Defendants”). (Doc. 1-3.)

On April 20, 2020, USHRN removed the action to federal court. (Doc. 1.)

On May 8, 2020, Dr. Gonzalez filed her operative pleading, the First Amended Complaint. (Doc. 11.)

On May 22, 2020, USHRN filed an answer and four counterclaims against Dr. Gonzalez. (Doc. 12.) One of those counterclaims, for contractual indemnity, was premised on the theory that certain USHRN employees had asserted claims against USHRN as a result of Dr. Gonzalez's conduct as executive director and that Dr. Gonzalez's independent contractor agreement required her to indemnify USHRN for the damages it incurred when defending against and settling those claims. (Id. at 20-21 ¶¶ 53-62.) The other counterclaims related to allegedly improper expenses Dr. Gonzalez incurred as executive director. (Id. at 21-23 ¶¶ 63-81.)

Between May 2020 and October 2020, three of the Individual Defendants filed motions to dismiss Dr. Gonzalez's claims against them for lack of personal jurisdiction, Dr. Gonzalez filed a Rule 12(b)(6) motion to dismiss USHRN's counterclaim for contractual indemnity, and Dr. Gonzalez filed a motion for leave to serve the fourth Individual Defendant via alternative means. (Docs. 15, 21, 40, 46.)

On January 11, 2021, the Court issued an order granting the motions to dismiss the three then-served Individual Defendants for lack of personal jurisdiction, granting Dr. Gonzalez's motion to dismiss the counterclaim for contractual indemnity (but also granting USHRN leave to file an amended pleading), and denying Dr. Gonzalez's motion for leave to serve the fourth Individual Defendant via alternative means. (Doc. 55.)¹

1 The Court later dismissed the fourth Individual Defendant due to Dr. Gonzalez's failure to effectuate service. (Doc. 199.)

On January 25, 2021, USHRN filed an amended answer and amended counterclaims. (Doc. 58.) In this pleading, USHRN reasserted the previously dismissed counterclaim for contractual indemnity and added new factual allegations in support of that counterclaim. (Id.)

On March 15, 2021, Dr. Gonzalez offered to settle the case for $800,000. (Doc. 215-6 at 2.)

On April 2, 2021, the parties attended a settlement conference with Magistrate Judge Bibles but were unable to reach a settlement. (Doc. 74.) During the conference, USHRN made settlement offers of $7,500 and $15,000 while Dr. Gonzalez offered $750,000. (Doc. 215-1 ¶ 35.)

On September 24, 2021, USHRN and Dr. Gonzalez filed cross-motions for summary judgment or partial summary judgment. (Docs. 106, 108.)

On December 17, 2021, USHRN offered to settle the case for $50,000. (Doc. 215-8 [“USHRN offers $50,000 in exchange for a complete release of all claims, dismissal with prejudice of both lawsuits, both sides to bear their own fees and costs. . . .”].)

On July 29, 2022, the Court issued an order resolving the cross-motions for summary judgment. (Doc. 128.) More specifically, the Court granted USHRN's motion for summary judgment on Dr. Gonzalez's tort claims for wrongful termination and negligent misrepresentation, denied both sides' motions for summary judgment as to Dr. Gonzalez's contract claims, denied both sides' motions for summary judgment as to USHRN's counterclaim for contractual indemnity, and granted USHRN's motion for summary judgment as to the largest category of damages Dr. Gonzalez sought in relation to her contract claims (i.e., interfering with her eligibility for student loan forgiveness). (Doc. 128.)

On August 12, 2022, Dr. Gonzalez sought reconsideration of the grant of summary judgment in USHRN's favor as to her wrongful termination claim. (Doc. 129.)

On October 3, 2022, the Court denied the motion for reconsideration. (Doc. 134.)

On October 17, 2022, USHRN renewed its $50,000 settlement offer. (Doc. 215-9.)

On October 24, 2022, Dr. Gonzalez renewed her settlement offer of $750,000. (Doc. 215-11.)

On August 15, 2023, the Court approved the parties' Joint Pretrial Order. (Doc. 162.) In the Joint Pretrial Order, USHRN indicated that it had abandoned all of its counterclaims except for the contractual indemnification counterclaim. (Doc. 163 at 34.)

On August 16, 2023, USHRN offered to settle for $100,000. (Doc. 215-12.)

On August 18, 2023, Dr. Gonzalez rejected USHRN's settlement offer and countered at $500,000. (Doc. 215-13.)

It appears that no further settlement offers were made by either party.

III. The Trial

With the parties unable to reach a settlement, a trial was held in August 2023 on Dr. Gonzalez's contract claims and USHRN's indemnification counterclaim. During trial, USHRN's corporate representative and Dr. Gonzalez both appeared to agree that they had intended beginning in 2019 to convert Dr. Gonzalez to an employee and not continue treating her as an independent contractor. (Doc. 201 at 19 [Johnson-Blanco: “After we had a discussion with Dr. Gonzalez . . ., we sent the contract to [our] pro bono attorney. And, based on those conversations, we realized that we needed to focus on the offer letter and not continue with the independent contractor agreement.”]; Doc. 196 at 4-5 [Dr. Gonzalez: “I continued to believe that [Johnson-Blanco] was going to now honor her promise. . . . I believed that we had an oral agreement, an employment agreement.”].)

The parties stipulated that the Court, rather than the jury, would rule on the ratification element of USHRN's indemnification counterclaim. (Doc. 163 at 9, 44; Doc. 199 at 3-4; Doc. 208 at 36.) On August 23, 2023, the Court ruled against USHRN as to that element, in part because the trial testimony showed that neither party intended to ratify the prior independent contractor agreement, and thus granted a directed verdict in Dr. Gonzalez's favor as to the indemnification counterclaim. (Doc. 208 at 36-45.) The Court also granted, without objection from USHRN, a directed verdict in Dr. Gonzalez's favor as to the remaining counterclaims that USHRN had declined to pursue at trial. (Id. at 4-5)

During the August 23, 2023 hearing, USHRN also moved for a directed verdict on Dr. Gonzalez's contract claims on statute-of-limitations grounds. (Id. at 10-15.) More specifically, USHRN argued that because Dr. Gonzalez was aware of the alleged breach by January 2019 but did not sue until March 18, 2020, and because her contract claims were subject to a one-year statute of limitations under A.R.S. § 12-541(3), those claims were time-barred. (Id.) The Court denied the motion, concluding that at least the underpayments received after March 18, 2019 were not time-barred because (1) a new cause of action accrued each time USHRN issued a paycheck without the agreed-to benefits, and (2) each of those underpayments occurred within a year of Dr. Gonzalez's filing of the lawsuit. (Id. at 26-29.) The Court also concluded that none of the challenged underpayments would be time-barred if the jury concluded that A.R.S. § 12-508's “acknowledgement of a just debt” exception applied. (Doc. 208 at 29-30.)

On August 24, 2023, the jury returned a verdict in Dr. Gonzalez's favor. It concluded that Dr. Gonzalez had entered into an oral employment contract with USHRN on December 20, 2018, that USHRN materially breached that contract (as well as the contract's implied covenant of good faith and fair dealing), and that the “acknowledgement of a just debt” exception applied. (Doc. 197.)

On September 1, 2023, the Court issued an order elaborating on its rationale for denying USHRN's motion for a directed verdict as to the “acknowledgement of a just debt” issue. (Doc. 199.) The Clerk then entered a judgment of $33,622.17 in Dr. Gonzalez's favor against USHRN. (Doc. 200.)

IV. Post-Trial Motions

On September 14, 2023, Dr. Gonzalez filed a bill of costs in the amount of $4,929.47. (Doc. 203.)

That same day, Dr. Gonzalez filed a motion to vacate, alter, or amend the judgment to allow for a new trial on her wrongful termination claim. (Doc. 204.) That motion is now fully briefed. (Docs. 227, 230.)

On September 15, 2023, the three Individual Defendants who had been dismissed for lack of personal jurisdiction (the “Other Defendants”) moved for attorneys' fees. (Doc. 205.) That motion is now fully briefed. (Docs. 212, 218.)

That same day, Dr. Gonzalez moved for attorneys' fees against USHRN (Doc. 206) and sanctions against USHRN's counsel (Doc. 207). Both motions are now fully briefed. (Docs. 214, 215, 220, 221.)

On September 27, 2023, Dr. Gonzalez moved to amend or correct the judgment and award prejudgment interest. (Doc. 211.) That motion is now fully briefed. (Docs. 225, 228.)

On September 28, 2023, USHRN filed a motion for judgment as a matter of law and/or to alter or amend the judgment. (Doc. 213.) This motion is now fully briefed. (Docs. 224, 229.)²

2 The requests for oral argument (Docs. 205, 215) are denied because the issues are fully briefed and argument would not aid the decisional process. See LRCiv 7.2(f).

On October 11, 2023, the deputy clerk issued a taxation judgment in the amount of $3,829.72. (Doc. 219.)

DISCUSSION

I. Dr. Gonzalez's Motion To Vacate

A. Legal Standard

Rule 59(a)(1)(A) provides in relevant part that “[t]he court may, on motion, grant a new trial on all or some of the issues . . . after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court.”

Rule 59(e) provides that “[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment.” Although the text of Rule 59(e) does not identify the standard for evaluating such a motion, “the view prevailing in the circuits is that motions to alter or amend the judgment are generally appropriate only in four situations: (1) to correct a manifest error of fact or law; (2) to incorporate newly discovered and previously unavailable evidence; (3) to prevent manifest injustice; and (4) to address an intervening change in controlling law.” 2 Steven S. Gensler & Lumen N. Mulligan, Federal Rules of Civil Procedure, Rules and Commentary, Rule 59 (2023). See generally Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir. 2011) (agreeing that these are the “four basic grounds upon which a Rule 59(e) motion may be granted”). The Ninth Circuit has elaborated that “amending a judgment after its entry remains an extraordinary remedy which should be used sparingly” and that it is an abuse of Rule 59(e) to “raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation.” 634 F.3d at 1111-12 (cleaned up).

Rule 60(b) “permits a party to seek relief from a final judgment, and request reopening of his case, under a limited set of circumstances.” Kemp v. United States, 596 U.S. 528, 533 (2022) (cleaned up). Under Rule 60(b)(2), a party may seek relief based on “newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b).” “Rule 60(b)(6) provides a catchall for ‘any other reason that justifies relief.' This last option is available only when Rules 60(b)(1) through (b)(5) are inapplicable.” Kemp, 596 U.S. at 533.

B. The Parties' Arguments

Dr. Gonzalez seeks “relief, in part, from the judgment under either Rule 59 or Rule 60, and/or . . . reconsider[ation]” of the Court's “summary judgment against her” and a “new trial on” her wrongful termination claim. (Doc. 204 at 14.) More specifically, Dr. Gonzalez asserts that at trial Johnson-Blanco “testified for the first time that USHRN sent the contract to the pro bono attorney. And based on those conversations . . . realized that it needed to focus on the offer letter and not continue with the independent contractor agreement.” (Id. at 2, cleaned up.) Dr. Gonzalez asserts that, due to an earlier privilege objection by USHRN, Johnson-Blanco had not previously disclosed this advice from the pro bono counsel. (Id.) Dr. Gonzalez asserts that this “testimony is new circumstantial evidence that USHRN was aware that its continued treatment of Dr. Gonzalez as an independent contractor was illegal.” (Id.) Dr. Gonzalez further argues that “this new evidence suggests USHRN improperly terminated [her] because she was complaining about her illegal classification.” (Id. at 2-3.) Dr. Gonzalez argues that the jury must have “rejected Ms. Johnson's testimony that she and Dr. Gonzalez had not agreed to such terms but had agreed to an extension of the independent contractor agreement” and speculates that, if given the chance, a jury might also reject USHRN's “asserted bases for terminating” her. (Id. at 10.)

USHRN offers several arguments in response. As a threshold matter, USHRN argues that Dr. Gonzalez's motion is effectively a motion for reconsideration and is thus “untimely under LRCiv 7.2(g).” (Doc. 227 at 2, 10.) Next, USHRN argues that Dr. Gonzalez's “alleged ‘new evidence' . . . has no factual or legal bearing on the basis for this Court's summary judgment ruling,” “is not new,” and could have been discovered through “reasonable diligence.” (Id. at 2-3, cleaned up.) Next, USHRN argues the reference to the jury verdict is improper because it is not evidence. (Id.) Finally, USHRN argues that Dr. Gonzalez's “arguments under Rules 59(a) and 60(b)(2) fail for the same reasons as her request for reconsideration under LRCiv 7.2(g)” and her “Rule 60(b)(6) argument is precluded by Plaintiff's Rule 60(b)(2) argument and by a failure to establish extraordinary circumstances.” (Id. at 3.)

Dr. Gonzalez argues in reply that her motion is timely under Rule 59, because it was filed within 28 days of entry of judgment, and that the time limit in LRCiv 7.2(g) is inapplicable. (Doc. 230 at 1-2.) Alternatively, Dr. Gonzalez argues that LRCiv 7.2(g) “permits filings outside of the general 14-day time limit for good cause, which exists here” because “the bases of [her] motion did not arise until the waiver of privilege by USHRN at trial during Ms. Johnson's testimony and the jury's verdict, and [she] could not have filed her motion before those events occurred.” (Id. at 2.) Dr. Gonzalez also reiterates that “Johnson's trial testimony is new and relevant evidence that demonstrates a triable issue on pretext exists.” (Id. at 3.) Further, Dr. Gonzalez argues that “Ms. Johnson's trial testimony, and the new inferences it allows, is circumstantial, affirmative evidence of USHRN connecting its illegal conduct with Dr. Gonzalez's termination, and that USHRN considered Dr. Gonzalez's complaints when terminating her.” (Id. at 4.) Dr. Gonzalez also asserts she could not have discovered this evidence earlier through reasonable diligence. (Id. at 8-9.) Finally, Dr. Gonzalez reiterates that “the jury's verdict necessarily rejected . . . [Johnson-Blanco's] trial testimony and demonstrates a trial issue of . . . [her] credibility . . . on the issue of pretext.” (Id. at 9-10.)

C. Analysis

As an initial matter, Dr. Gonzalez's motion does not qualify as a motion for reconsideration under LRCiv 7.2. Dr. Gonzalez already unsuccessfully sought reconsideration of the grant of summary judgment on her wrongful termination claim (Docs. 128, 134), and LRCiv 7.2(g) concerns reconsideration of interlocutory orders, not final judgments entered after trial. Teamsters Loc. 617 Pension & Welfare Funds v. Apollo Grp., Inc., 282 F.R.D. 216, 220 (D. Ariz. 2012) (“That Local Rule does not apply in this situation because that Rule expressly pertains only to motions to reconsider orders, as opposed to judgments. Federal Rule 59(e), on the other hand, and the explicit basis for plaintiff's motion herein clearly contemplates entry of judgment as a predicate to any motion thereunder.”) (cleaned up); FTC v. Noland, 2022 WL 901386, *3 (D. Ariz. 2022) (“[T]he District of Arizona adopted Local Rule 7.2(g) to implement and supplement Rule 54(b) . . . [and adopts] essentially the same standard a district court outside the District of Arizona . . . would apply when resolving a reconsideration motion under Rule 54(b).”) (cleaned up). Here, Dr. Gonzalez is challenging the Court's final judgment. (Doc. 204.) Thus, Dr. Gonzalez's motion is best construed as a motion under Rule 59 or Rule 60. Cf. McCauley v. Najafi, 2020 WL 2097781, *1 (D. Ariz. 2020) (“Plaintiffs have filed a Motion for Reconsideration pursuant to Local Rule 7.2(g), which the Court construes as a Motion to Alter or Amend the Judgment pursuant to Federal Rule of Civil Procedure 59(e).”) (cleaned up).

As for those rules, Dr. Gonzalez asserts in somewhat shotgun fashion that she is seeking relief under Rules 59(a), 59(e), 60(b)(2), and/or 60(b)(6). (Doc. 204.) However,

Rule 59(a) is inapplicable because it is a vehicle for seeking a new trial and Dr. Gonzalez never received a trial on her wrongful termination claim-it was dismissed at summary judgment. Merrill v. Cnty. of Madera, 389 Fed.Appx. 613, 615 (9th Cir. 2010) (“[A] Rule 59(a) motion for new trial is not available on claims or causes of actions for which Plaintiffs never received a trial.”).

Dr. Gonzalez's reliance on Rule 60(b)(6) is also misplaced. Her motion is predicated on what she characterizes as new evidence: Johnson-Blanco's trial testimony and the jury's subsequent verdict. (Doc. 204 at 6, 10.) New evidence may be used to support a motion under Rule 60(b)(2), not Rule 60(b)(6). Kemp, 596 U.S. at 533 (“Rule 60(b)(6) provides a catchall . . . [that] is available only when Rules 60(b)(1) through (b)(5) are inapplicable.”); Corex Corp. v. United States, 638 F.2d 119, 121 (9th Cir. 1981) (“It is established that clause (6) and the preceding clauses are mutually exclusive; a motion brought under clause (6) must be for some reason other than the five reasons preceding it under the rule. . . . [I]n this case taxpayer invokes clause (6), but it has suggested no reason for relief from judgment other than newly discovered evidence.”).

This leaves Rules 59(e) and 60(b)(2). Because Dr. Gonzalez filed her motion on September 14, 2023-13 days after judgment was entered-the Court will construe it as a motion under Rule 59(e) rather than Rule 60(b). See Fed. R. Civ. 59(e) (“A motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment.”).³

3 In Am. Ironworks & Erectors, Inc. v. N. Am. Const. Corp., 248 F.3d 892 (9th Cir. 2001), the Ninth Circuit held that “a ‘motion for reconsideration' is treated as a motion to alter or amend judgment under Federal Rule of Civil Procedure Rule 59(e) if it is filed within ten days of entry of judgment. Otherwise, it is treated as a Rule 60(b) motion for relief from a judgment or order.” Id. at 899 (citation omitted). Although this holding might seem, at first blush, to support treating Dr. Gonzalez's motion as a Rule 60(b) motion (because it was filed more than 10 days after entry of judgment), Rule 59(e) was subsequently amended to expand the filing deadline from 10 days to 28 days after entry of judgment. See Fed. R. Civ. P. 59, adv. comm. note to 2009 amendment. Thus, the logic of American Ironworks supports treating Dr. Gonzalez's motion as arising under Rule 59(e). This clarification, to be clear, has no effect on the outcome-Dr. Gonzalez would not be entitled to relief even if her motion were construed as arising under Rule 60(b)(2).

On the merits, Dr. Gonzalez's request for relief under Rule 59(e) is unavailing. As background, the theory underlying Dr. Gonzalez's wrongful termination claim was that USHRN terminated her “in retaliation for her whistleblowing and reporting that USHRN violated various Arizona laws when USHRN illegally misclassified her as an independent contractor and den[ied] her benefits, including, but not limited to, earning and using earned sick leave, payment of employee taxes, provision of worker's compensation coverage, and payment of unemployment benefit contributions.” (Doc. 128 at 4, cleaned up.) But as discussed in the summary judgment order and in the order denying Dr. Gonzalez's previous motion for reconsideration on this issue, even if Dr. Gonzalez established a prima facie case of wrongful termination, USHRN could avoid liability by identifying a legitimate, non-retaliatory reason for the termination decision. (Doc. 128 at 7-8; Doc. 134 at 2.) Under Ninth Circuit law, once USHRN articulated such a reason, Dr. Gonzalez had the burden of showing it was pretextual. (Id.)

USHRN succeeded in shifting the burden to Dr. Gonzalez by articulating six legitimate, non-retaliatory reasons for the termination decision: (1) rejection of employment offers; (2) mismanagement of subordinates; (3) insubordination toward the USHRN board; (4) failure to follow USHRN policies and the independent contractor agreements; (5) alienation of key partner organizations; and (6) failure to secure funding “for 2020 and beyond” and poor financial stewardship. (Doc. 128 at 13-14; Doc. 134 at 14-16.) Thus, Dr. Gonzalez had to demonstrate that these proffered reasons were pretextual. “A plaintiff may meet the burden to show pretext using either direct or circumstantial evidence. Direct evidence is evidence which, if believed, proves the fact of discriminatory animus without inference or presumption. . . . Circumstantial evidence, in contrast, is evidence that requires an additional inferential step.” Coghlan v. Am. Seafoods Co. LLC., 413 F.3d 1090, 1094-95 (9th Cir. 2005) (cleaned up). “The distinction between direct and circumstantial evidence is crucial, because it controls the amount of evidence that the plaintiff must present in order to defeat the employer's motion for summary judgment. Because direct evidence is so probative, the plaintiff need offer ‘very little' direct evidence to raise a genuine issue of material fact.” Id. (footnote omitted). In contrast, “when the plaintiff relies on circumstantial evidence”-as Dr. Gonzalez did at summary judgment-“that evidence must be ‘specific and substantial' to defeat the employer's motion for summary judgment.” Id. (citations omitted). Additionally, because USHRN “proffered more than one reason for the challenged action,” Dr. Gonzalez had to “address all of the employer's suggested reasons.” Hudson v. Chicago Transit Auth., 375 F.3d 552, 561 (7th Cir. 2004). See also Curley v. City of N. Las Vegas, 772 F.3d 629, 633 (9th Cir. 2014) (“Disputing only one of several well-supported, independently sufficient reasons for termination is generally not enough to defeat summary judgment.”). And for each proffered reason, Dr. Gonzalez had to show not that the reason may have been wrong or unwise, but rather that USHRN did not honestly believe its proffered reason for terminating her. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1063 (9th Cir. 2002) (“[C]ourts only require that an employer honestly believed its reason for its actions, even if its reason is foolish or trivial or even baseless.”) (cleaned up).

As noted in prior orders, Dr. Gonzalez failed to meet that burden. For example, in an effort to show that USHRN's “future funding” rationale for her termination was pretextual, Dr. Gonzalez presented evidence that she persuaded one donor to double its 2020 contribution. But that evidence was insufficient because it did not speak to whether she had succeeded in securing adequate funding overall. (Doc. 128 at 17.) In the order denying her earlier reconsideration request, the Court elaborated:

Although USHRN did not come forward with evidence proving that its future-funding rationale was true, the rationale was still clear and reasonably specific and thus sufficient to meet USHRN's burden of production. As a result, Dr. Gonzalez bore the burden of establishing that USHRN's proffered explanation for the adverse action is unworthy of credence. One way Dr. Gonzalez could have attempted to meet this burden would have been to present evidence that she had, in fact, succeeded in securing future funding for USHRN. Although such a showing may, alone, have been insufficient to meet her burden, it at least would have been a start. But Dr. Gonzalez failed to present any evidence concerning USHRN's overall funding picture for 2020 and beyond. Nor did Dr. Gonzalez present evidence from which a reasonable juror could conclude that USHRN's board members weren't actually concerned about her efforts to secure future funding-Dr. Gonzalez did not, for example, present substantial evidence concerning the overall success of her past fundraising efforts, from which an inference might be

drawn that there was no reason to doubt her prospective fundraising abilities. It follows that Dr. Gonzalez failed to meet her burden of establishing a triable issue of fact as to whether the future-funding rationale was pretextual.

(Doc. 134 at 6-7, cleaned up.)

Dr. Gonzalez now presents what she characterizes as two additional items of evidence. She concedes they are “circumstantial” (Doc. 230 at 9-10), so the same standard applies. First, Dr. Gonzalez argues that, in light of the new evidence that USHRN consulted with a pro bono attorney in mid-2019 regarding her employment status, it can be inferred that USHRN believed its independent contractor agreement with her was unlawful. (Doc. 230 at 8.) But even if this inference is logical, it at most underscores why Dr. Gonzalez's complaints of misclassification-which, she contends, were the impetus for the termination decision-were valid. However, the grant of summary judgment did not turn on whether Dr. Gonzalez's alleged whistleblowing and other protected activity was in fact premised on valid concerns. Indeed, the summary judgment order specifically noted that “[i]t is irrelevant, for purposes of whistleblower liability under § 23-1501(A)(3)(c)(ii), that [a whistleblowing] complaint . . . may have been groundless from a legal perspective. . . . [A]ll that matters is that [the plaintiff] made the complaint, she reasonably believed it to be true, and she was terminated in short succession afterward.” (Doc. 128 at 10, citing Drottz v. Park Electrochemical Corp., 2013 WL 6157858, *17 (D. Ariz. 2013).) In a related vein, the Court accepted at summary judgment that Dr. Gonzalez had come forward with sufficient evidence to establish a prima facie case of wrongful termination. (Id. at 8-11.) The analysis thus turned on the sufficiency of Dr. Gonzalez's evidence during later steps in the analysis-specifically, whether she could show that USHRN's proffered reasons for her termination were pretextual. (Id. at 14-18.) Johnson-Blanco's trial testimony does not speak to that question because it has nothing to do with whether USHRN believed Dr. Gonzalez's fundraising performance was subpar and merited termination. Thus, even assuming the trial testimony regarding USHRN's consultation with pro bono counsel qualifies as “new” evidence, it is not the sort of significant new evidence that might warrant the extraordinary remedy of relief under Rule 59(e). See generally Coastal Transfer Co. v. Toyota Motor Sales, U.S.A., 833 F.2d 208, 211 (9th Cir. 1987) (“[T]he newly discovered evidence must be of such magnitude that production of it earlier would have been likely to change the disposition of the case.”).

The other purportedly new evidence on which Dr. Gonzalez relies is the jury's verdict, which she views as proof that the jury rejected Johnson-Blanco's “testimony that she and Dr. Gonzalez had not agreed to [employment] terms but had agreed to an extension of the independent contractor agreement.” (Doc. 204 at 10.) As an initial matter, the Court is skeptical that the jury's verdict could qualify as “new evidence” for purposes of Rule 59(e). Taken to its logical conclusion, Dr. Gonzalez's argument would mean that if a defendant prevailed at summary judgment on certain claims by putting forth undisputed deposition testimony from a particular defense witness, the same witness later testified at trial in relation to the plaintiff's remaining claims, and the jury returned a verdict in the plaintiff's favor as to those claims (thereby implicitly rejecting the defense witness's testimony), the plaintiff would be entitled to seek vacatur of the summary judgment ruling under the theory that (1) the jury's verdict qualifies as “new evidence” regarding the defense witness's lack of credibility and (2) the newfound lack of credibility means that the defense witness's deposition testimony, although undisputed, should not have been credited for summary judgment purposes. But that is not how summary judgment works- once the movant comes forward with admissible evidence, the nonmovant must do more than simply question the credibility of the witness who provided the undisputed evidence. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (“If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact, . . . the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for trial.' Hence the nonmoving party may not merely state that it will discredit the moving party's evidence at trial. . . .”) (citations and emphasis omitted); Miller-Cunningham v. MacAllister, 2019 WL 1130091, *6 (D. Ariz. 2019) (“Contrary to Plaintiff's counsel's assertion that the Court is necessarily determining Defendant's credibility by considering Defendant's undisputed testimony, the Court is not making a credibility determination, but is basing its decision on the only admissible evidence before the Court at summary judgment.”). This is particularly true when it comes to an employer's proffered evidence at summary judgment of its non-discriminatory reasons for a challenged employment action. See, e.g., Traylor v. Brown, 295 F.3d 783, 791 (7th Cir. 2002) (explaining that “an employer will almost always have to rely on the testimony of one of its agents to explain why the agent took the disputed [employment] action” and “consistent with the plaintiff's ultimate burden of proof under McDonnell Douglas, a plaintiff cannot avoid summary judgment by merely claiming a jury could disbelieve the employer's reason”). Indeed, “[t]his burden is one of production, not persuasion; it can involve no credibility assessment.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 142 (2000) (cleaned up).

At any rate, even assuming a jury verdict could theoretically serve as new evidence under Rule 59(e) in the manner that Dr. Gonzalez suggests, none of the testimony at trial had anything to do with USHRN's future-funding rationale for terminating Dr. Gonzalez. Thus, even assuming the jury may not have accepted the testimony of USHRN's witnesses concerning other issues, this is not specific and substantial evidence that USHRN disbelieved its proffered fundraising rationale (or all of the other rationales it articulated, and Dr. Gonzalez failed to demonstrate were pretextual, at summary judgment).

II. USHRN's Motion For JMOL Or To Alter/Amend Judgment

A. Relevant Background

One of USHRN's defenses to Dr. Gonzalez's contract claims was a statute-of-limitations defense. More specifically, USHRN argued that because Dr. Gonzalez was aware of the alleged contractual breach by January 2019 but did not sue until March 18, 2020, and because contract claims are subject to a one-year statute of limitations under A.R.S. § 12-541(3), Dr. Gonzalez's contract claims were time-barred. (Doc. 163 at 28-29.) Dr. Gonzalez offered two theories in response: (1) USHRN took steps in mid-2019 to acknowledge its obligation to pay the debt, which had the effect under A.R.S. § 12-508 of restarting the one-year limitations period and rendering her contract claims wholly timely; and (2) at a minimum, her claims for underpayments received after March 18, 2019 were not time-barred because a new cause of action accrued each time USHRN issued a paycheck without the agreed-to benefits. (Id. at 27-28.) At the close of evidence, USHRN moved for judgment as a matter of law as to Dr. Gonzalez's first theory, on the ground that the evidence was insufficient to satisfy § 12-508, but the Court allowed the issue to go to the jury (albeit while expressing some concerns about the sufficiency of the evidence). (Doc. 208 at 29-30.) The Court also ruled in Dr. Gonzalez's favor as to her second theory (id. at 26-29), but that issue was mooted when the jury returned a verdict in Dr. Gonzalez's favor as to the applicability of § 12-508. Finally, in a post-trial order, the Court elaborated on its rationale for concluding that the evidence was sufficient to allow the § 12-508 issue to go to the jury. (Doc. 199 at 5-7.)

B. Legal Standard

If a party previously sought judgment as a matter of law (“JMOL”) under Rule 50(a), it may renew this motion (“RJMOL”) under Rule 50(b). Williams v. Gaye, 895 F.3d 1106, 1135 (9th Cir. 2018) (“[A] Rule 50(a) motion is . . . a prerequisite for a Rule 50(b) motion. . . .”). The movant must show that “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on” a particular “issue.” Fed.R.Civ.P. 50(a)-(b). In assessing such a motion, courts “view all evidence in the light most favorable to the nonmoving party, draw all reasonable inferences in favor of the non-mover, and disregard all evidence favorable to the moving party that the jury is not required to believe.” Shafer v. Santa Barbara Cnty., 868 F.3d 1110, 1115 (9th Cir. 2017). This standard is essentially the same as the standard by which courts evaluate summary judgment motions under Rule 56; the main difference is that courts rule on JMOLs and RJMOLs based on the evidence presented at trial rather than the summary judgment record. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986); Williams, 895 F.3d at 1135.

C. A.R.S. § 12-508

1. The Parties' Arguments

USHRN seeks “judgment as a matter of law and to alter or amend this Court's judgment” on Dr. Gonzalez's “claims for breach of contract and breach of the implied covenant of good faith and fair dealing” because those claims “are time barred by A.R.S. § 12-541(3).” (Doc. 213 at 1-2.) As for A.R.S. § 12-508, USHRN argues that Dr. Gonzalez's evidence was legally insufficient because the writing on which she relied, Trial Exhibit 22, (1) “does not ‘sufficiently identify' the debt,” (2) “did not contain a promise to pay sufficient to create a contract or obligation,” and (3) “does not contain any language regarding the ‘justness' of the debt.” (Id. at 7-11.)

Dr. Gonzalez responds that “Trial Exhibit 22 meets the requirements of A.R.S. § 12-508” because it “sufficiently identifies USHRN's obligation to provide Dr. Gonzalez employee benefits,” “is the best possible form of a promise by USHRN to perform its obligation to provide benefits,” and “backdating the offer letter in Trial Exhibit 22 sufficiently expresses USHRN's belief in the justness of performing its obligation.” (Doc. 224 at 7, 9, 13.) Dr. Gonzalez further asserts that a reasonable jury “could look to other evidence in the case to understand whether Trial Exhibit 22 meets the elements required for acknowledgement of a just claim under § 12-508, including . . . what reason USHRN had to backdate the offer letter in Trial Exhibit 22.” (Id. at 15.)

In reply, USHRN reiterates its contention that based on “the factual record and well-settled law,” Trial Exhibit 22 does not qualify as a “‘writing' under A.R.S. § 12-508.” (Doc. 229 at 2.) Specifically, USHRN argues that the “writing must reflect a promise sufficient to support a contract-independent of the original promise.” (Id. at 4.) Trial Exhibit 22 was, according to USHRN, “a conditional promise,” and such a “promise is only sufficient if the condition is performed.” (Id.) USHRN also characterizes Dr Gonzalez's position in her response brief as that she “accepted the conditional promise . . . by her . . . continued work for USHRN after the backdated offer letter was provided to her.” (Id. at 4.) USHRN asserts this “is a wholly new claim and argument that was never disclosed in this case” and “is contrary to all the evidence at trial,” including Dr. Gonzalez's own testimony that she did not sign the offer letter. (Id. at 4-5.) Finally, USRHN argues that the writing did not sufficiently identify the debt at issue because it did not “definitely and certainly designate the particular subject or demand to which it refers” and also did not contain language that “acknowledge[s] the ‘justness' of the debt.” (Id. at 8, cleaned up.)

2. Analysis

In Arizona, “[w]hen an action is barred by limitation no acknowledgment of the justness of the claim made subsequent to the time it became due shall be admitted in evidence to take the action out of the operation of the law, unless the acknowledgment is in writing and signed by the party to be charged thereby.” A.R.S. § 12-508. This “provision recognizes that the bar of the statute may be waived or suspended by the debtor and prescribes just how this may be done. Before this enactment, it could be done by an oral acknowledgment of the debt, or it might be done by partial payments on the debt. Now, the exclusive method is by a signed written acknowledgment of the justness of the claim, made subsequent to the accrual of the right of action, and either before or after the bar.” Steinfeld v. Marteny, 10 P.2d 367, 370 (Ariz. 1932). Thus, “[f]or an acknowledgment of an indebtedness to effectively remove the bar of the limitation[s] period [1] the acknowledgment must be in writing; [2] it must be signed by the party to be charged; [3] it must sufficiently identify the obligation referred to, though it need not specify the exact amount or nature of the debt; [4] it must contain a promise, express or implied, to pay the indebtedness; and [5] it must contain, directly or impliedly, an expression by the debtor of the ‘justness' of the debt.” Freeman v. Wilson, 485 P.2d 1161, 1165-66 (Ariz. 1971) (brackets added). As summarized above, USHRN asserts that no reasonable jury could have found that Trial Exhibit 22 satisfied the third, fourth and fifth elements.

This assertion lacks merit. As for the third element, although the email and attached offer letter did not expressly identify the “debt” as the unpaid employee benefits, a rational juror could infer from the circumstances that this was the debt being referenced-indeed, that is the most obvious inference arising from USHRN's decision to backdate the offer letter to January 2019 and from the evidence that Dr. Gonzalez had voiced repeated complaints during earlier portions of 2019 about USHRN's failure to provide benefits. De Anza Land & Leisure Corp. v. Raineri, 669 P.2d 1339, 1344 (Ariz.Ct.App. 1983) (“We also note that the promise to pay may be implied.”). For similar reasons, a rational juror could find that the fourth and fifth elements were satisfied-the backdated nature of the offer letter could be rationally construed as an implied promise to make good on the overdue benefits and an implied acknowledgement of the “justness” of the debt. Freeman, 485 P.2d at 1166 (“‘Justness', as used here, refers to the moral obligation which the debtor feels rests upon himself to repay the original obligation. The ‘justness' of a debt may be express or it may be implied from the words used in acknowledging the debt. . . . [N]o precise form of words need be used to constitute a legally sufficient acknowledgment.”).

USHRN's arguments to the contrary are unavailing. As for the third element, USHRN argues that it is irrelevant that a rational juror might infer that Trial Exhibit 22 was referring to the unpaid employee-benefit debt because, under Steinfeld, the writing must “identify the debt explicitly and certainly.” (Doc. 213 at 7, cleaned up.) The problem with this argument is that the Arizona Supreme Court subsequently clarified that its holding in Steinfeld addressed a circumstance “where there are several debts and it cannot be determined from the acknowledgment relied upon as to which particular debt it refers to.” John W. Masury & Son v. Bisbee Lumber Co., 68 P.2d 679, 692 (Ariz. 1937). In contrast, “if reference is made in the acknowledgment to some indebtedness not specified, and it appears from other evidence that there is but one distinct legal indebtedness existing between the parties, that is sufficient to identify it.” Id. at 692-93. Here, USHRN does not suggest that there were somehow an array of different debts owed to Dr. Gonzalez and that Exhibit 22 was therefore too imprecise in identifying which of those debts was being affirmed. See also Freeman, 485 P.2d at 1166 (“It is generally said that where there are several debts and it cannot be determined from the acknowledgment relied upon, which debt is referred to, the acknowledgment would be insufficient. [But here, that] the letters referred to the money owed on the promissory notes is beyond dispute; defendant himself has not argued differently.”); Dalos v. Novaheadinc, 2008 WL 4182996, *3 (Ariz.Ct.App. 2008) (“Although Masury involved a single debt, the court noted that in Steinfeld the court had held that if several debts exist and the acknowledgment fails to identify a particular one, the acknowledgement is insufficient. . . . In our case, there is a single debt. And as Masury made clear, an acknowledgment need not ‘specifically set up the exact distinctly and unerringly to a specific obligation.'”) (citation and emphasis omitted).

As for the fourth element, USHRN relies on De Anza Land and Masury for the proposition that “any promise must be sufficient on its own to constitute a new enforceable contract.” (Doc. 213 at 8.) But the point of A.R.S. § 12-508 is to revive an existing claim that would otherwise be too old to pursue. If the writing required under § 12-508 had to qualify as an independently enforceable contract, the Freeman test would make no sense: (1) it only requires one of the two parties to sign, whereas contracts require offer and acceptance; (2) it does not require the writing to “specify the exact amount or nature of the debt,” which are essential terms for an independent contract to be enforceable; and (3) the point of § 12-508 is to acknowledge an existing debt, not create a new one. Cf. Bainum v. Roundy, 521 P.2d 633, 634 (Ariz.Ct.App. 1974) (“[Appellants] contend . . . the statement in the letter ‘I am sure we can reach an understanding in a satisfactory arrangement for the repayment of my note with you' constitutes no more than a conditional promise to pay. We do not agree. . . . The use of the words ‘reach an understanding in a satisfactory arrangement' do not detract from his willingness to pay the debt-they merely reflect the fact that Mr. Bainum would have to work out the Terms of repayment. The trial court did not err in finding that the March 25th letter constituted a sufficient acknowledgment to remove the bar of the statute of limitations.”).

This conclusion is not inconsistent with De Anza. There, the Arizona Court of Appeals observed that the “new promise must be sufficient in itself to support an action for the debt, independent of the original promise.” 669 P.2d at 1344. The Court does not construe this passage as holding that the “new promise” must be a “contract”; instead, it simply recognizes that there must be enough information in the original promise to confirm the debt. At any rate, this passage is not particularly clear and the Court is required to follow the holdings of the Arizona Supreme Court on this issue to the extent they might be viewed as in tension with ambiguous dicta from a decision by the Arizona Court of Appeals. McKown v. Simon Prop. Grp. Inc., 689 F.3d 1086, 1091 (9th Cir. 2012) (“Since we are sitting in diversity, we must begin with the pronouncements of the state's highest court, which bind us. . . . [O]nly the [Arizona] Supreme Court's decisions are binding, and in the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, among other sources of authority, as guidance.”) (cleaned up). Tellingly, in other Arizona decisions (including decisions by the Arizona Supreme Court) where courts found the fourth element was satisfied, the writing acknowledging the debt likely would not have stood alone as an enforceable contract. Bainum, 521 P.2d at 634 (concluding that “I am sure we can reach an understanding in a satisfactory arrangement for the repayment of my note” was sufficient even though this message still required the defendant to “work out the Terms”); Freeman, 485 P.2d at 1166 (“We have here, in the form of letters written by Mr. Wilson, writings signed by the party to be charged. In the letter dated September 27, 1965, defendant refers to the subsisting indebtedness as the ‘Freeman money.'”).

Nor do Masury and De Anza Land stand for the proposition that “the promise is only sufficient if the condition is performed or accepted.” (Doc. 213 at 8.) Instead, these cases hold that the only remedy a party may pursue is dictated by the terms of the conditional offer. This means Dr. Gonzalez could only pursue whatever she would have received under the offer letter had she accepted it (which is all the jury awarded her); it does not mean she has no remedy unless she did accept it. De Anza Land, 669 P.2d at 1344-45 (“The agreement together with the subsequent affidavit is at best a conditional promise to see that the obligation under the note will be satisfied. Such a promise restrains the rights of the creditor to the terms proposed, and if he cannot recover by those terms, he cannot recover at all.”); Masury, 68 P.2d at 690 (“[I]f the new promise is qualified or conditional, it restrains the rights of the party to its own terms; and if he cannot recover by those terms, he cannot recover at all.”).

As for the fifth element, the January 2019 date of the offer letter is language that appears on the face of the writing. (Doc. 213-3.) Given Dr. Gonzalez's repeated complaints throughout 2019 about USHRN's failure to provide benefits, a reasonable juror could construe USHRN's decision to backdate the offer letter to January 2019 as an acknowledgement that it had agreed to provide those benefits to her as of the start of 2019.

D. Continuing Violation Theory

1. The Parties' Arguments

USHRN argues that “[t]he ‘continuous violation' doctrine is not applicable . . . because the breach at issue is not divisible but relates to a single breach,” namely “that USHRN failed to enroll [Dr. Gonzalez] in and provide certain employment benefits starting on January 1, 2019.” (Doc. 213 at 2.) According to USHRN, Builders Supply Corp. v. Marshall, 352 P.2d 982 (Ariz. 1960), Ancala Holdings, L.L.C. v. Price, 220 Fed.Appx. 569 (9th Cir. 2007), and Demasse v. ITT Corp., 984 P.2d 1138 (Ariz. 1999), do not support the Court's previous determination that the continuous violation theory applies. (Id. at 11-12.) Instead, USHRN argues that Day v. LSI Corp., 174 F.Supp.3d 1130 (D. Ariz. 2016), supports its position. (Id. at 11.)

Dr. Gonzalez responds that “it is clear to see why this Court ruled correctly when it determined Dr. Gonzalez's ‘claims were not wholly time-barred because a new claim accrued each time [USHRN] issued a paycheck without the agreed-to benefits.'” (Doc. 224 at 4, citing Doc. 199 at 2-3.) She continues: “As an at-will employee, Dr. Gonzalez had no contractual entitlement to employee benefits until she performed work on a given day because her performance was necessary for contract formation. More simply: there was no contract until she did the work. And if there was no contract, her claim could not have accrued.” (Id.)

In reply, USHRN reiterates its position that Dr. Gonzalez's “Contract Claims arise from a single act . . . that undisputedly accrued over one year prior to her filing suit” and that the cases previously cited by the Court “are materially distinguishable.” (Doc. 229 at 2.) USHRN also argues that the idea that a new contract arose each day is inconsistent with Dr. Gonzalez's argument to the jury and the jury's verdict. (Id. at 11-12.)

2. Analysis

Although the conclusions in Part II.C.2 above make it unnecessary to reach this issue, the Court will do so in an abundance of caution and in an effort to create a complete record in the event of appeal. The Arizona Supreme Court recognized in Builders Supply that ongoing underpayments resulting from ongoing contractual breaches each constitute “a separate breach” and that a “‘cause of action accrues'-in the terms of the statute of limitations-each time [the] defendant fails to perform as required.” 352 P.2d at 986. This was so even though the parties entered into a single written contract. Id. Thus, even if A.R.S. § 12-508 weren't applicable here, Dr. Gonzalez's claims for underpayments after March 18, 2019 would not be time-barred-each such underpayment constituted a separate breach occurring within one year of the filing of this lawsuit. (See also Doc. 208 at 28-29 [discussion of this issue during trial].)

The Arizona Supreme Court's reasoning in Demasse underscores this conclusion, because Demasse recognizes that each day of an at-will contract is a new unilateral contract. (See also Doc. 208 at 27 [discussion of this issue during trial].) Although USHRN asserts that the cited passage from Demasse is dicta, the Arizona Supreme Court has referred to the principle discussed in that passage as “fundamental Arizona contract law.” Cornell v. Desert Fin. Credit Union, 524 P.3d 1133, 1136-37 (Ariz. 2023) (“We begin with fundamental Arizona contract law, which distinguishes between bilateral contracts and unilateral contracts. . . . At-will employment contracts are unilateral and typically start with an employer's offer of a wage in exchange for work performed; subsequent performance by the employee provides consideration to create the contract. Thus, before performance is rendered, the offer can be modified by the employer's unilateral withdrawal of the old offer and substitution of a new one: the employer makes a new offer with different terms and the employee again accepts the new offer by performance (such as continued employment). Thus, a new unilateral contract is formed- a day's work for a day's wages.”) (quoting Demasse, 984 P.2d at 1142-43); Walter v. Prestige Staffing, LLC, 2008 WL 2406138 (Ariz.Ct.App. 2008) (“At-will employment contracts are unilateral and typically start with an employer's offer of a wage in exchange for work performed; subsequent performance by the employee provides consideration to create the contract.”) (quoting Demasse, 984 P.2d at 1142-43). Nor is Arizona an outlier in this regard. Other courts have applied the continuing-violation principle to at-will employment contracts in other contexts, Cuadra v. Millan, 952 P.2d 704 (Cal. 1988) (“[W]hen the work is continuing and the employee is therefore paid periodically (e.g., weekly or monthly) a separate and distinct cause of action accrues on each payday, triggering on each occasion the running of a new period of limitations.”), and to oral contracts, Hidden Empire Holdings, LLC v. Angelone, 2023 WL 4208067 (C.D. Cal. 2023) (“Angelone has nonetheless consistently alleged facts that make it plausible that an oral and/or implied partnership agreement may have been reached between the parties despite the absence of a formal written agreement. . . . [S]ince partnership agreements create continuing obligations, under the continuous accrual rule each breach of those obligations triggers a new statute of limitations.”).

Day does not compel a different conclusion. There, the court did not reject the application of the continuing-violation principle to employment contracts-it simply noted that A.R.S. § 12-541(3) applied, that the lawsuit was filed more than a year after the complained-of conduct began, and that the plaintiff has not explained why the lawsuit was timely. 174 F.Supp.3d at 1155-56. Far from a rejection of the continuing-violation principle, it appears the principle was never raised. Id. at 1155 (“Day has not responded to LSI's argument that this claim was not filed timely.”).

Finally, there is no merit to USHRN's argument that the conclusion being reached here “is inconsistent to [Dr. Gonzalez's] argument at trial and contrary to the jury's verdict.” (Doc. 229 at 11.) Dr. Gonzalez's theory of accrual set forth in the Final Pretrial Order-“Dr. Gonzalez acknowledges that USHRN continuously failed to compensate her as an employee throughout 2019. However, a cause of action accrues-in the terms of the statute of limitations-each time defendant fails to perform as required under the contract. Thus, a new cause of action accrued for each pay period that USHRN failed to treat and compensate Dr. Gonzalez as an employee.” (Doc. 163 at 27, cleaned up)-is essentially the same theory being adopted here. That theory is not inconsistent with the jury's verdict, as the jury was simply asked to decide (1) whether a contract was formed; (2) if so, whether it was breached; and (3) if so, whether USHRN acknowledged the resulting debt under § 12-508. (Doc. 197.) Per the joint agreement of the parties, the jury was not asked to make findings regarding damages or the accrual of the statute of limitations. (Doc. 226 at 56-58, 93-95, 103.) Instead, the parties agreed that if the jury found for Dr. Gonzalez on the issues of contract formation and breach, the resulting damages would either be $33,622.17 (if the jury found for Dr. Gonzalez on the § 12-508 issue) or $25,643.59 (if the jury did not), with the latter figure reflecting the subset of underpayments that occurred within one year of when Dr. Gonzalez filed suit. (Id. at 103.) Thus, nothing about the outcome here is inconsistent with the jury's verdict.

III. Dr. Gonzalez's Motion For Attorneys' Fees

A. The Parties' Arguments

Dr. Gonzalez argues she is eligible for attorneys' fees under A.R.S. § 12-341.01(A) because this lawsuit arose out of contract. (Doc. 206 at 4-5.) She also argues that she qualifies as the “successful party” under § 12-341.01(A), regardless of whether the “net judgment rule” or the “percentage of success” or “totality of the litigation” tests are applied, because she was successful on “six . . . of the eight . . . claims and counterclaims” and her defeat on the interwoven tort claims “does not . . . even affect the analysis.” (Id. at 5-6.) Next, Dr. Gonzalez argues that the discretionary factors under Associated Indem. Corp. v. Warner, 694 P.2d 1181 (Ariz. 1985), favor a fee award because (1) USHRN's counterclaims lacked merit whereas Johnson-Blanco's trial testimony showed “USHRN knew Dr. Gonzalez's claims had merit for more than a year before she filed them”; (2) she offered to settle the case in December 2019 for “approximately $155,000,” which was “well below the cost of USHRN's own attorney fees,” and thus “USHRN . . . needlessly caused this litigation”; (3) a fee award would not result in hardship to USHRN because the “claims, and any award of reasonable attorney fees, are covered by USHRN's insurance policy”; (4) “[t]he questions posed by the parties' positions generally were not novel” because “[t]his case largely boiled down to two issues of contract formation, via the oral negotiations between Dr. Gonzalez and Ms. Johnson, and USHRN's ‘ratification' argument, which was not supported by Arizona law or even the out-of-state cases upon which USHRN relied”; and (5) “an award would not discourage future litigation by parties with tenable claims or defenses because USHRN did not have any such claims or defenses.” (Id. at 7-9). Finally, Dr. Gonzalez argues that her requested fees of $545,008.50 are reasonable. (Id. at 9-12.)

In response, USHRN first argues that Dr. Gonzalez is statutorily ineligible to recover fees under § 12-341.01(A) “because the contractual claims . . . were incidental to Plaintiff's central claim for wrongful termination.” (Doc. 215 at 2.) Alternatively, USRHN argues that it “is the successful party under the totality of circumstances test because USHRN prevailed in dismissing over $1 million in Plaintiff's claims as compared to Plaintiff prevailing on $50,000+/- in claims,” because the “net winner test is not applicable here,” and “because it made a written offer of $50,000 pursuant to A.R.S. § 12-341.01(A) both before and shortly after the Court's summary judgment ruling.” (Id., cleaned up.) Further alternatively, USHRN argues that the Warner factors do not favor awarding attorneys' fees because its “claims and defenses were meritorious”; Dr. Gonzalez “never allowed this case to settle and expanded litigation”; Dr. Gonzalez “recovered only a small fraction of what she sought”; “this case involved novel legal issues”; “an award of fees would discourage litigants from defending legitimate claims”; and Dr. Gonzalez “is, at most, entitled to only fees related to the contract claims.” (Id. at 13-15.) Finally, USHRN argues that Dr. Gonzalez's fee request is inflated and unreasonable because “(i) it fails to identify entries related solely to the contract claims; (ii) it seeks excessive and intertwined attorneys' fees and costs for claims that [Dr. Gonzalez] lost; (iii) it bills for clerical work, duplicative work, excessive billing, block-billing, billing for inter-attorney meetings and communications; and (iv) uses unreasonable rates.” (Id. at 2-3.) In a related vein, USHRN argues that Dr. Gonzalez's attorneys (“Stinson”) “repeatedly raised their hourly rates” to a degree that far outpaced inflation despite acknowledging that “Dr. Gonzalez, as a single mother of three working for non-profits, is judgment proof.” (Id. at 3, emphasis omitted.)

In reply, Dr. Gonzalez asserts that “[w]hether a contract claim was central versus incidental is not the applicable legal test for whether [a] claim is ‘arising out of contract.' Rather, the test is whether liability is premised on breach or avoidance of a contract.” (Doc. 221 at 2.) On the successful-party issue, Dr. Gonzalez argues that the Court “cannot rely on USHRN avoiding liability on [her] tort claims to determine USHRN was the successful party.” (Id. at 3-4.) Dr. Gonzalez further argues that “USHRN's written settlement offers do not render it the successful party” because those offers never exceeded her “reasonable attorney fees . . . incurred . . . prior to th[ose] offer[s].” (Id. at 5.) On the topic of her unsuccessful tort claims, Dr. Gonzalez points out that “[i]n submitting her fee application, [she] has already reduced the amount requested in her fee application related to her tort claims in the amount of $165,813.50.” (Id. at 7-8.) Accordingly, Dr. Gonzalez contends that USHRN's assertion that “its positions had merit” is “irrelevant” because “she has already excluded fees incurred solely in pursuit of [tort] claims.” (Id. at 8.) As for USHRN's counterclaims, Dr. Gonzalez contends they only had enough merit to survive summary judgment “because USHRN withheld evidence until trial that it had been advised by its pro bono counsel that it was illegal to continue the independent contractor agreement.” (Id.) Dr. Gonzalez also contends that USHRN's statute of limitations defense to her contract claims lacked merit. (Id.) Finally, Dr. Gonzalez defends the reasonableness of Stinson's staffing decisions, rates, and hours expended. (Id. at 10-11.)

B. Analysis

Dr. Gonzalez's fee request is governed by A.R.S. § 12-341.01(A), which provides in relevant part that “[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.”

1. Contested Action Arising Out Of A Contract

As an initial matter, it is clear that this action arose out of a contract. Both of Dr. Gonzalez's successful claims against USHRN were express breach-of-contract claims, as were most of USHRN's counterclaims against her. Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 6 P.3d 315, 318 (Ariz.Ct.App. 2000) (acknowledging that the “case law interpreting the statutory phrase ‘arising out of a contract'” is “voluminous and sometimes confusing” but emphasizing that “[t]he statute obviously applies to express claims for breach of contract”). USHRN places heavy emphasis on the fact that Dr. Gonzalez also unsuccessfully asserted a pair of tort claims, but the presence of those unsuccessful tort claims does not alter the fact that this action arose from a contract. See, e.g., ML Servicing Co. v. Coles, 334 P.3d 745, 753 (Ariz.Ct.App. 2014) (“The meaning of ‘arises out of contract' is broad for the purposes of this statute. . . . [A] trial court may award attorney fees under § 12-341.01 to the successful party even on contract claims that are interwoven with tort claims.”); Rudinsky v. Harris, 290 P.3d 1218, 1225 (Ariz.Ct.App. 2012) (“Rudinsky also contends attorneys' fees should not have been awarded because the contract claim is ‘interwoven' with the tort claim. But even if the alleged contract claim is interwoven with the defamation claim, this does not prevent an award of fees on the contract claim.”). See also In re Larry's Apartment, L.L.C., 249 F.3d 832, 836-37 (9th Cir. 2001) (“When the contract in question is central to the issues of the case, it will suffice as a basis for a fee award.”). Although the unsuccessful tort claims may bear on whether Dr. Gonzalez should be considered “successful” and whether any of the time entries giving rise to her fee request should be reduced or eliminated, those issues are distinct from whether this action arose out of a contract (which it did).

2. Successful Party

The other threshold question under § 12-341.01(A) is whether Dr. Gonzalez was the successful party. Under Arizona law, “the trial court has substantial discretion to determine who is a ‘successful party.'” Fulton Homes Corp. v. BBP Concrete, 155 P.3d 1090, 1096 (Ariz.Ct.App. 2007). “The decision as to who is the successful party for purposes of awarding attorneys' fees is within the sole discretion of the trial court, and will not be disturbed on appeal if any reasonable basis exists for it.” Sanborn v. Brooker & Wake Property Mgmt., Inc., 874 P.2d 982, 987 (Ariz.Ct.App. 1994).

The “successful party” analysis here is complicated by the fact that Dr. Gonzalez sued an array of defendants under various tort and contract theories. (Doc. 11 ¶¶ 31-54.) Additionally, USHRN asserted counterclaims against Dr. Gonzalez but the Individual Defendants did not. (Doc. 58 at 21-25 ¶¶ 70-98; Docs. 21, 40.) The Court possesses particularly broad discretion when deciding how to determine the “successful party” in cases involving multiple parties and multiple claims. See, e.g., Schwartz v. Farmers Ins. Co. of Ariz., 800 P.2d 20, 25 (Ariz.Ct.App. 1990) (“The trial court possesses discretion to determine who is the successful party in multiple-party litigation and in cases where there are multiple-parties as well as multiple-claims.”); Pioneer Roofing Co. v. Mardian Constr. Co., 733 P.2d 652, 664 (Ariz.Ct.App. 1986) (“Given the third-party posture of this litigation and its multiple claims and parties, we hold that the trial court's method of determining who was the ‘successful party' as to each claim was not an abuse of discretion.”). Under the circumstances, the Court concludes that the most logical approach is to individually evaluate whether Dr. Gonzalez was successful in relation to each defendant.

The “successful party” assessment as to the Individual Defendants is straightforward. None of those defendants asserted their own affirmative claims against Dr. Gonzalez, and all of Dr. Gonzalez's claims against them failed. That Dr. Gonzalez's claims against the Other Defendants failed for lack of personal jurisdiction, rather than on the merits, is irrelevant. Balestrieri v. Balestrieri, 300 P.3d 560, 563 (Ariz.Ct.App. 2013); Boschee v. T.W. Lewis Co., 2017 WL 1882332, *2 (Ariz.Ct.App. 2017) (“[T]he superior court may award fees under A.R.S. § 12-341.01(A) to a defendant who prevails on a motion to dismiss for lack of personal jurisdiction.”).

As for Dr. Gonzalez and USHRN, both parties pursued affirmative claims against the other, so one approach for deciding which side was successful would be to apply the “net winner” test. Ayala v. Olaiz, 776 P.2d 807, 809 (Ariz.Ct.App. 1989) (“In cases involving various competing claims, counterclaims and setoffs all tried together, the successful party is the net winner.”). The Court disagrees with USHRN that it may not apply the net winner test “because [this test] only looks at the results at trial” and “entirely ignores any claims that do not make it to trial.” (Doc. 215 at 12). However, the Court agrees that “in a case involving multiple claims and varied success,” it also has the discretion to instead “apply a ‘percentage of the success' or a ‘totality of the litigation' test.” Berry v. 352 E. Virginia, L.L.C., 261 P.3d 784, 788 (Ariz.Ct.App. 2011) (citation omitted). See also Aspen Biotech Corp. v. Wakefield, 2021 WL 3503399, *18 (Ariz.Ct.App. 2021) (“This court has long held that the superior court is not bound to the net judgment rule in a multi-party, multi-claim case in the exercise of its discretion. Instead, it may use other tests to determine the parties' relative success concerning the various claims.”). Nevertheless, Dr. Gonzalez qualifies as the successful party no matter which test is used.

Beginning with the net winner test, Dr. Gonzalez prevailed on her contract claims, which resulted in a final judgment of $33,622.17, while USHRN lost on all of its counterclaims. This would make Dr. Gonzalez the successful party unless her rejection of settlement offers outweighs her success on the merits. A.R.S. § 12-341.01(A) (“If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees.”). For purposes of § 12-341.01(A), the “judgment finally obtained” includes not only the $33,622.17 judgment, but also any prejudgment interest, taxable court costs, and any attorneys' fees incurred up to the point of the offer. Berry, 261 P.3d at 790; Am. Power Prods., Inc. v. CSK Auto, Inc., 396 P.3d 600, 605 (Ariz. 2017); Hall v. Read Dev., Inc., 274 P.3d 1211, 1215 (Ariz.Ct.App. 2012).

Here, the Court has already awarded Dr. Gonzalez $3,829.72 in taxable costs. (Doc. 219.) Additionally, after trial, Dr. Gonzalez moved for prejudgment interest in the amount of $12,693.53. (Doc. 211.) USHRN responded that it did not contest the calculation of $12,693.53 in prejudgment interest based on the $33,622.17 judgment, although it continued to contest the $33.622.17 judgment (Doc. 225) for reasons now rejected elsewhere in this order. Therefore, Dr. Gonzalez is entitled to an additional award of $12,693.53. This brings the “judgment finally obtained” to $50,145.42. Because that figure exceeds the settlement offers of $7,500 and $15,000 that USHRN made in March 2021 (Docs. 215-1 ¶ 35), those offers were too low to alter the successful-party calculus.

On December 17, 2021, USHRN increased its offer to $50,000. (Doc. 215-8.) An argument can be made that this offer was actually worth $62,460 from Dr. Gonzalez's perspective, because it included a waiver of the Other Defendants' claim against Dr. Gonzalez for attorneys' fees (which, as discussed in Part IV below, the Court has now determined should be granted to the tune of $12,460). But even using a valuation of $62,460, this offer remained too low to suffice. Even after her attorneys' fees are reduced (for reasons explained in later portions of this order), Dr. Gonzalez had incurred $97,135.80 in fees on her contract-based claims by December 17, 2021. Thus, for a settlement offer on that date to be sufficient, it would have needed to equal or exceed $147,281.22 (i.e., Dr. Gonzalez's then-current fees of $97,135.80 plus the $50,145.42 sum calculated above).⁴

4 Even if the amount of pre-judgment interest accrued at the time of this offer was not quite as high as the ultimate sum of $12,693.53, because it was made about two years before the entry of judgment, the $50,000 offer remained far too low.

For similar reasons, although USHRN reiterated its $50,000 settlement offer in October 2022 (Doc. 215-9) and then increased its settlement offer to $100,000 on August 16, 2023 (Doc. 215-12), those offers remained too low. Even assuming the latter offer was worth $112,460 from Dr. Gonzalez's perspective (to account for the waiver of the Other Defendants' claim for fees) and even after Dr. Gonzalez's attorneys' fees are reduced for reasons explained in later portions of this order, Dr. Gonzalez had incurred more than $185,956.20 in fees on her contract-based claims by August 16, 2023. Thus, for a settlement offer on that date to be sufficient, it would have needed to equal or exceed $236,101.62 (i.e., Dr. Gonzalez's then-current fees of $185,956.20 plus the $50,145.42 sum calculated above).

Dr. Gonzalez also emerges as the successful party under the percentage of the success and totality of the litigation tests. USHRN asserts that Dr. Gonzalez's $33,622.17 recovery was about 3% of the approximately $1.1 million she initially sought. (Doc. 215 at 4-5.) Even accepting that denominator, which Dr. Gonzalez contends is inflated, she remains the successful party. Dr. Gonzalez's recovery may be a small percentage of what she initially sought, but USHRN lost on all of its counterclaims. A 3% recovery is more successful than a 0% recovery. Cramton v. Grabbagreen Franchising LLC, 2022 WL 1719687, *26 (D. Ariz. 2022) (“Although Defendants assert that this matter was not ‘resolved in [Plaintiff's] favor' because she received far less than she originally sought, Defendants fail to cite any authority in support of their position and the Court is unpersuaded-Phyrric though the victory may have been, this action was resolved in [Plaintiff's] favor when the Court entered judgment in her favor on several of her claims and on all of the counterclaims.”).

Similarly, when looking at the totality of the circumstances, the Court views Dr. Gonzalez as more successful than USHRN because she prevailed on at least some of her affirmative claims while defeating all of USHRN's counterclaims. Med. Protective Co. v. Pang, 25 F.Supp.3d 1232, 1240 (D. Ariz. 2014) (“Under the totality of the litigation rule . . ., [t]here are no strict factors, rather the trial court is afforded discretion in reviewing the totality of the litigation.”).

3. Warner Factors

Because Dr. Gonzalez was the successful party in relation to USHRN (no matter which test is used), she may be entitled to the attorneys' fees she incurred when pursuing her successful contract claims and successfully opposing USHRN's contract-based counterclaims. “However, there is no presumption that a successful party should be awarded attorney fees under § 12-341.01.” Motzer v. Escalante, 265 P.3d 1094, 1095 (Ariz.Ct.App. 2011). “The legislature used the phrase ‘may award' in authorizing the trial judge to award a successful contract litigant reasonable attorney's fees. The natural import of this phrase is to vest discretion in the trial court to determine the circumstances appropriate for the award of fees.” Warner, 694 P.2d at 1184. The factors Arizona courts have identified as “useful” in determining whether to award fees pursuant to § 12-341.01 include (1) the merits of the claim or defense of the unsuccessful party; (2) whether the litigation could have been avoided or settled; (3) whether assessing fees would cause extreme hardship; (4) whether the successful party prevailed with respect to all relief sought; (5) whether the legal question was novel or had been previously adjudicated; and (6) whether an award would discourage other parties with tenable claims or defenses from litigating them. Id. The party seeking fees has the burden of establishing entitlement. Woerth v. City of Flagstaff, 808 P.2d 297, 304-05 (Ariz.Ct.App. 1990).

As for the first factor, the Court agrees with Dr. Gonzalez that USHRN's counterclaims were relatively weak. USHRN wisely abandoned all but one of its counterclaims on the eve of trial (Doc. 163 at 33-34)-although not before Dr. Gonzalez incurred fees defending against them-and the Court easily rejected the one remaining counterclaim on the merits at trial (Doc. 208 at 36-37). As for Dr. Gonzalez's contract claims, USHRN's merits defense was, in the Court's estimation, relatively weak and unpersuasive. With that said, the Court acknowledges the debatable nature of the law concerning USHRN's statute of limitations defense and agrees that USHRN's assertion of that defense was reasonable. Nevertheless, overall, the first factor cuts in favor of awarding attorneys' fees.

So does the second factor. Despite the relative strength of Dr. Gonzalez's contract claims (and putting aside the potential additional exposure to USHRN created by her tort claims), USHRN did not even respond to her $155,000 pre-litigation settlement offer, then nickled and dimed her during the settlement conference in 2021 by making settlement offers of only $7,500 and $15,000. Although USHRN later increased its settlement offers, those offers remained too low because they failed to account for the attorneys' fees Dr. Gonzalez had accumulated in the meantime (which, again, USHRN could have avoided by making more reasonable offers at earlier stages of the case). True, Dr. Gonzalez was quite unreasonable in her settlement demands, but the Court's overall impression is that USHRN bears significant responsibility for this case's failure to settle. USHRN's assertion of weak counterclaims (most of which it abandoned on the eve of trial) also contributed to the settlement failure. SWC Baseline & Crismon Investors, L.L.C. v. Augusta Ranch Ltd. P'ship, 265 P.3d 1070, 1084-85 (Ariz.Ct.App. 2011) (where a party's tactics, including its assertion of a provocative counterclaim, “ignited litigation flames that scorched the earth,” that party “ha[d] only itself to blame” for substantial fees).

USHRN does not dispute that the third factor favors an award of fees. (Doc. 215 at 13-15.)

The Court agrees with USHRN that the fourth factor weighs against awarding fees because Dr. Gonzalez recovered a very small percentage of what she sought.

As for the fifth factor, as discussed previously, although the law governing USHRN's statute-of-limitations defense is debatable, Dr. Gonzalez's successful contract claims were otherwise relatively straightforward winners while USHRN's counterclaims were straightforward losers. Thus, the fifth factor weighs in favor of an award.

As for the sixth factor, the Court disagrees with USHRN that awarding fees that are outsized to the verdict would discourage parties from “defending meritorious claims.” (Doc. 215 at 15.) If anything, such an award would encourage defending parties to make a reasonable early settlement offer where, as here, the plaintiff has a strong contract claim that is likely to prevail. Although USHRN is correct that Dr. Gonzalez's ultimate recovery was relatively modest, this does not mean she lacked a legitimate claim. More important, all USHRN needed to do to avoid a fee award was make a reasonable settlement offer as to her contract claims before she began incurring substantial fees in pursuit of those claims. Cf. Cramton, 2022 WL 1719687 at *26-27 (awarding $192,792.50 in attorneys' fees, even though underlying fee-triggering claim “generated a recovery of just over $50,000,” where the plaintiff “was forced to litigate the claim” and although the plaintiff “did not make a targeted effort to settle the [successful] claim without regard to her other, [unsuccessful] bigger-ticket claims, . . . nothing about how Defendants litigated this case suggests that such a targeted settlement effort would have been successful”).

In sum, the Warner factors weigh in favor of awarding attorneys' fees to Dr. Gonzalez.

4. Reasonableness Review

To determine whether Dr. Gonzalez's requested fees are reasonable, the Court first looks to whether the hourly rates are reasonable, then evaluates whether the time spent on the matter is reasonable. Kaufman v. Warner Bros. Entm't Inc., 2019 WL 2084460, *13 (D. Ariz. 2019). The party requesting fees bears the burden of proving reasonableness. In re Guardianship of Sleeth, 244 P.3d 1169, 1176 (Ariz.Ct.App. 2010).

“The prevailing market rate in the community is indicative of a reasonable hourly rate.” Jordan v. Multnomah Cnty., 815 F.2d 1258, 1262-63 (9th Cir. 1987). Thus, Dr. Gonzalez must establish that the “requested rates are in line with those prevailing in the [Phoenix area] for similar services of lawyers of reasonably comparable skill and reputation” through “satisfactory evidence, in addition to the affidavits of its counsel.” Id. Unfortunately, Dr. Gonzalez did not submit an affidavit from a third-party attorney attesting to the reasonableness of Stinson's rates. Instead, Ms. Francis's affidavit contains a paragraph averring that her and other Stinson personnel's rates are reasonable based on her experience. (Doc. 206 at 23 ¶ 13.) This sort of certification is of questionable utility. The usual practice is to submit an affidavit from an attorney whose fees are not the subject of the fee request. See, e.g., Excel Fortress Ltd. v. Wilhelm, 2019 WL 5294837, *4 (D. Ariz. 2019) (“[T]he uncontradicted declaration from [a third-party attorney] establishes that the rates charged by Mr. McHugh and Ms. McHugh are reasonable rates in the Phoenix market for attorneys of comparable skill and experience.”); Pierce v. Cnty. of Orange, 905 F.Supp.2d 1017, 1036 (C.D. Cal. 2012) (“Plaintiffs submit declarations from Peter J. Eliasberg, the Legal Director at the American Civil Liberties Union Foundation of Southern California . . ., and Paula D. Pearlman, the Executive Director of the Disability Rights Legal Center . . ., both of whom corroborated that the hourly rates sought are in line with the rates charged in Southern California by similar attorneys for similar work.”). Thus, the Court will attempt to assess the reasonableness of the rates at issue by reference to recent decisions by courts within this District.

Two considerations complicate this inquiry. First, courts in this District are not in complete agreement about what a reasonable Phoenix rate looks like. This Court concluded, several years ago, “that a reasonable rate for highly skilled, experienced, and regarded lawyers involved in complex, high-dollar commercial litigation can range as high as $552 per hour” and that “reasonable associate rates approved in this district have reached $280 per hour.” Orman v. Central Loan Admin. & Reporting, 2020 WL 919302, *2 (D. Ariz. 2020) (cleaned up). In a more recent decision, another Arizona court approved hourly rates of $567 for partners, $375.50 for associates, and $265 for paralegals. Randolph v. Pravati SPV II LLC, 2022 WL 1480029, *2 (D. Ariz. 2022). However, other Arizona courts have observed that “[w]hile at times this Court has found higher fees to be reasonable, between $300 and $350 is the norm” for partners. Barrio v. Gisa Invs. LLC, 2021 WL 1947507, *2-3 (D. Ariz. 2021).

Second, although courts have recognized that what the client agreed to pay is a strong proxy for reasonableness, this principle applies with the most force when a client actually paid for the legal services at issue. Schweiger v. China Doll Restaurant, Inc., 673 P.2d 927, 931-32 (Ariz.Ct.App. 1983) (“[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.”) (emphasis added); Jackson v. Wells Fargo, N.A., 2015 WL 13567069, *2 (D. Ariz. 2015). Here, although Stinson and Dr. Gonzalez entered into an agreement that, on its face, involved hourly rates and periodic bills rather than a contingency agreement (Doc. 206 at 28-35), Dr. Gonzalez has not actually paid the fees she incurred. (Doc. 207 at 145 ¶ 4 [Francis declaration: “Because of Dr. Gonzalez's difficulties finding employment after [USHRN] terminated her, including as a result of the COVID-19 pandemic, Dr. Gonzalez has been unable to pay Stinson's attorney fees.”].) Indeed, as discussed in Part IV infra, Dr. Gonzalez has now taken the position that she is judgment proof and unable to pay the Other Defendants' attorneys' fees. (Doc. 212 at 4 [“Put simply, Dr. Gonzalez cannot pay any amount of attorney fees awarded against her.”].) In a related vein, it appears that Dr. Gonzalez's strategy from the early stages of this case was to require USHRN to pay her lawyers for her. (Doc. 215-7 [October 2021 letter from Dr. Gonzalez to USHRN: “USHRN faces a no-win situation. Dr. Gonzalez, as a single mother of three working for non-profits, is judgment proof. Even if USHRN is successful, it will not recover any amount, including its attorney's fees or costs. The cost of litigating will only increase. On the other hand, Dr. Gonzalez likely only needs to succeed on one of her claims to recover her attorney's fees, which will only increase as this case progresses. . . . [E]ven if USHRN's motion is granted in full, it will still face significant liability and costs.”].) Given this backdrop, more than a touch of skepticism is necessary when reviewing Stinson's rates. Dr. Gonzalez has not established that she ever intended for anyone other than USHRN to pay Stinson or that all of Stinson's work would have been performed (and at the same rates) had she been personally required to pay.

Here, Stinson charged hourly rates of $245 for paralegals, from $245 to $275 for e-discovery staff, and $290 for summer associates. (Doc. 206 at 23-24 ¶ 15.) Additionally, Stinson charged hourly rates of $450 to $545 for partner Carrie Francis's work, $290 to $385 for associate Tim Lauxman's work, and $340 for associate Ashley Cheff's work. (Id.) USHRN objects to these rates as unreasonable. (Doc. 215-1 ¶¶ 31-34.) USHRN also objects on the ground that Stinson overstaffed this case by charging for too many timekeepers. (Doc. 215 at 16.)

On the one hand, the Court rejects the overstaffing argument. The number of people staffed on the case is not a very useful metric for whether the time entries are reasonable. If Ms. Francis had done all of the work herself rather than delegating tasks to others, there would be fewer timekeepers but a higher bill. Cf. Continental Townhouses E. Unit One Ass'n v. Brockbank, 733 P.2d 1120, 1128 (Ariz.Ct.App. 1986) (“[Legal assistant fees are] properly considered as a component of attorneys' fees, since an attorney would have performed these services if a legal assistant was not employed instead.”); Andreason v. Comm'r of Soc. Sec. Admin., 2020 WL 5544367, *2 (D. Ariz. 2020) (“[T]he Court finds no fault with the fact that two attorneys collaborated on this case and recognizes that legal collaboration often requires multiple attorneys to review the same documents in order to contribute meaningfully to the drafting and editing process.”).

On the other hand, although hourly rates of up to $545 for an experienced, skilled partner such as Ms. Francis, up to $340 for associates, and up to $275 for paralegals and e-discovery staff might be appropriate under other circumstances, those rates are unreasonable here in light of the evidence that Stinson did not expect Dr. Gonzalez to actually foot the bill for work performed at those rates. It would create obvious perverse incentives to uncritically approve the requested rates under these circumstances. The Court therefore concludes that reasonable hourly rates under the facts of this case are $300 for partners, $212 for associates, and $100 for paralegals and e-discovery staff. Those figures fall at the low end of the ranges that USHRN concedes would be considered reasonable in Phoenix. (Doc. 215-1 ¶¶ 31-34.)

The Court is particularly unimpressed by the attempt to recover $290/hour for work performed by summer associates. This request is emblematic of the problem posed by some of the other requested rates here-nobody expected Dr. Gonzalez to actually pay this rate, and one can only imagine the reaction an actual paying client would have upon being presented with a bill for $290/hour summer associate work. Such work is often written off entirely. See, e.g., In re Borden, 104 B.R. 167, 170 (Bankr. D. Minn. 1989) (“Included in the request is the time of a summer associate. Summer clerkships, however, are typically used by law firms as a marketing tool to attract top talent to the firms that hope to hire them. Usually firms do not expect to make money on them. Rather, clerks are typically placed on projects to allow the firm to introduce them to the work done by the firm and to further the education of the clerk. It is simply unreasonable to charge $65.00 per hour for what likely constitutes two days of research time by a first or second year law student. Much of that effort was almost certainly devoted to educating the clerk on bankruptcy and the ways of the firm. Presumably, much of it was spent polishing a memorandum to be submitted to the lead attorney who would then be making recommendations on hiring. I take notice of the fact that summer clerk's time is often written off in its entirety; I believe this makes sense.”); Ryals v. City of Englewood, 2014 WL 2566288, *3 n.2 (D. Colo. 2014) (“I identified two associates, one summer associate, two ‘researchers,' two paralegals, one ‘paraprofessional,' and one staff employee as having recorded time to the account that was entirely written off.”). Here, however, USHRN does not argue that the summer associate time should be categorically excluded, so the Court will simply reduce the summer associate rate to the amount, $125/hour, that USHRN seems to concede (Doc. 215-1 ¶ 32) would be reasonable. See generally United States v. Sineneng-Smith, 140 S.Ct. 1575, 1579 (2020) (discussing “the principle of party presentation,” which holds that courts “should not[] sally forth each day looking for wrongs to right” and instead should “wait for cases to come to [them] . . . [and] normally decide only questions presented by the parties”) (citations and internal quotation marks omitted).

USHRN next argues that the time entries “include clerical work, block billing, and duplication.” (Doc. 215 at 16.) Clerical tasks include tasks like scheduling and filing, stamping, and serving documents. Although some courts have come out the other way, see, e.g., ME SPE Franchising LLC v. NCW Holdings LLC, 2023 WL 2691562, *11 (D. Ariz. 2023); Worden v. Klee Bethel, M.D., P.C., 2009 WL 2003321, *5 (Ariz.Ct.App. 2009), the Court finds it appropriate for paralegals to perform such work and bill for it at a paralegal rate. Similarly, the Court finds it appropriate for e-discovery staff to perform e-discovery work such as uploading documents into review platforms and to bill for it at a similar rate. Therefore, the Court has generally declined USHRN's request to disallow “clerical” work by paralegals and e-discovery staff. Further, to the extent USHRN suggests otherwise (Doc. 215-16), the Court concludes that activities like preparing exhibits, cite checking and proof-reading briefs, and drafting legal documents (even simple ones like summonses and cover sheets) are tasks that attorneys generally may perform and bill for at their rates. Also, Ms. Francis generally acted appropriately in delegating much of this work to associate attorneys rather than doing it herself. Thus, the Court has overruled many of USHRN's objections to clerical work but has sustained those objections where attorneys actually appear to have performed clerical work. See, e.g., Annotated Excel Time Sheet, Entry Nos. 289, 419.⁵

5 A copy of the Excel spreadsheet setting forth the time entries at issue here, as well as the Court's rulings on individual objections and other adjustments, is enclosed as an appendix to this order.

Next, Dr. Gonzalez is not entitled to recover for time entries that are unreasonably duplicative, excessive, or unnecessary. Cf. Moshir v. Automobili Lamborghini Am. LLC, 927 F.Supp.2d 789, 799-800 (D. Ariz. 2013). Attorneys' fees incurred solely to allow a new attorney to come up to speed are not compensable. Advanced Reimbursement Sols. LLC v. Spring Excellence Surgical Hosp. LLC, 2020 WL 2768699, *4 (D. Ariz. 2020). The Court has sustained a few of USHRN's “new attorney getting up to speed” objections on this basis. See Entry Nos. 520-21. A few other entries (such as taking an hour to write what appears to be a simple email, Entry No. 154), seem on their face unreasonable, and the Court has reduced those entries as well. In the main, however, Stinson's time entries are reasonable. There were a few attorneys from the same law firm working on the case, and in some instances, multiple attorneys reviewed or communicated about the same documents, research, or concepts. Other times, as USHRN points out, the same attorney reviewed the same document or performed similar research multiple times. All of this seems within the bounds of reasonable conduct for a relatively complicated case that dragged on for years. It is not surprising that important documents or legal concepts might be reviewed by multiple attorneys from the same team over the course of multi-year litigation. Cf. Farwest Pump Co. v. Secura Ins., 2023 WL 3650498, *3 (D. Ariz. 2023) (“Farwest's conclusory arguments that certain hours were unnecessary . . . or excessive also fail to explain why a prudent lawyer would not undertake the challenged tasks.”).

USHRN also raises several “block billing” objections. “‘Block billing' is ‘the timekeeping method by which each lawyer and legal assistant enters the total daily time spent working on a case, rather than itemizing the time expended on specific tasks.'” Welch v. Metro. Life Ins. Co., 480 F.3d 942, 945 n.2 (9th Cir. 2007) (quoting Harolds Stores, Inc. v. Dillard Dep't Stores, Inc., 82 F.3d 1533, 1554 n.15 (10th Cir.1996)). “While not forbidden by case law, block-billing makes it nearly impossible for the Court to determine the reasonableness of the hours spent on each task. Where the Court cannot distinguish between the time claimed for the various tasks, the Court will reduce the award accordingly.” Moshir, 927 F.Supp.2d at 799. Nevertheless, the fundamental question is “whether time entries meet the basic requirements of listing attorneys' hours and identifying the general subject matter of their time expenditures.” Maki v. N. Sky Partners II LP, 2018 WL 4042455, *2 (D. Ariz. 2018) (cleaned up). See also Oskowis v. Sedona Oak-Creek Unified Sch. Dist. #9, 2019 WL 5066821, *9 (D. Ariz. 2019) (“[B]ecause the entries provided sufficient detail regarding the various tasks that were performed, the fact that the tasks are included in a single entry does not render the entries deficient”), aff'd sub nom. 855 Fed.Appx. 421 (9th Cir. 2021). Courts tend to award fees despite the presence of block-billing where the billing is for “closely related tasks, each covering no more than a few hours.” Maki, 2018 WL 4042455 at *3. See also Sunstone Behav. Health, Inc. v. Alameda Cnty. Med. Ctr., 646 F.Supp.2d 1206, 1217 (E.D. Cal. 2009) (“[E]ven where hours are block-billed, a district court should refrain from reducing fees until it first determines whether sufficient detail has been provided so that the Court can evaluate what the lawyers were doing and the reasonableness of the number of hours spent on those tasks.”) (cleaned up).

Here, some of the objected-to entries are not actually block-billed. See Entry No. 620. Most of the remaining block-billed entries provide sufficient detail to assess the reasonableness of a time expenditure, involve closely related tasks, and do not last more than a few hours. See, e.g., Entry No. 62. These entries are not deficient. However, the Court has sustained USHRN's objections where a compensable task is lumped in with a non-compensable one-even if closely related. For example, in Entry No. 680, Stinson block-billed 5.7 hours of work on Dr. Gonzalez's fees motion (compensable) and sanctions motion (non-compensable). Because it is impossible to discern how the time was divided between these two tasks, none of the 5.7 hours is compensable.

USHRN also asserts that some time entries are too vague or ambiguous. For the most part, the objected-to entries are not deficient because they list “‘the type of legal services provided, the date the service was provided . . ., and the time spent in providing the service' as required to give the court sufficient detail to assess the reasonableness of time expended.” Mesa Airlines, Inc. v. Davis, 2021 WL 710191, *3 (Ariz.Ct.App. 2021) (quoting Schweiger , 673 P.2d at 932). However, the Court has sustained objections as to a few entries that did not meet this standard. See, e.g., Entry No. 358.

Finally, “[a]ttorney's fees may be awarded under [A.R.S. § 12-341.01] for tort claims that are intertwined with contract claims.” Campbell v. Westdahl, 715 P.2d 288, 297 (Ariz.Ct.App. 1985) (emphasis added); Pettay v. Ins. Mktg. Servs., Inc., 752 P.2d 18, 21 (Ariz. 1987). However, courts may in their discretion deny fees for work on unsuccessful claims even if those claims were intertwined with a successful one. Schweiger, 673 P.2d at 932-33 (“Where a party has achieved only partial or limited success, however, it would be unreasonable to award compensation for all hours expended, including time spent on the unsuccessful issues or claims.”); Se. Invs., LLC v. CB Richard Ellis, Inc., 2011 WL 1226466, *4 (Ariz.Ct.App. 2011) (“Given the very limited success Southeast enjoyed at trial (it recovered only 3.7% of its alleged damages), we cannot say the superior court abused its discretion in concluding that Southeast's reasonable attorney's fees amounted to only a fraction of the fees it requested.”). Here, the Court has generally denied fees for any time that appears to be spent only on Dr. Gonzalez's unsuccessful tort claims or other unsuccessful claims such as the sanctions motion. See, e.g., Entry No. 677. Further, for the vast majority of time entries related to work done before the July 29, 2022 order dismissing Dr. Gonzalez's tort claims, the same time entry was relevant to both the unsuccessful tort claims and the other (ultimately successful) contract claims. To account for the fact that these entries are in one sense compensable but in another sense non-compensable, the Court finds it appropriate, in its discretion, to reduce by 50% all time entries before the entry of summary judgment that appear to relate to both the tort claims and the contract claims.

Once all of these adjustments are made, the resulting size of the fee award is $234,881. This is a sizeable but fair award-albeit less than half of the $545,008.50 sum that Dr. Gonzalez requested-in a case that culminated in a jury trial in which Dr. Gonzalez recovered about $33,000 before costs, fees, and interest on her contract claims and defeated all of USHRN's contract-based counterclaims.

IV. Other Defendants' Motion For Attorneys' Fees

A. The Parties' Arguments

The Other Defendants assert that they “are eligible for an award of attorneys' fees under A.R.S. § 12-341.01 because [they] prevailed on all of Plaintiff's claims, including claims arising out of contract.” (Doc. 205 at 2.) They argue the Warner factors weigh in their favor, including because they told Dr. Gonzalez they were not subject to personal jurisdiction in Arizona but she persisted in forcing them to incur the cost of filing the motions to dismiss. (Id. at 5-7.) The Other Defendants also argue that their requested award of $12,460 is reasonable. (Id. at 1-2.)

In response, Dr. Gonzalez concedes that her claims against the Other Defendants arose from a contract and that they were the successful parties in relation to those claims but argues that the Court should still exercise its discretion to decline to award fees because she “would suffer extreme financial hardship if Defendants' application is granted.” (Doc. 212 at 2-3.) Dr. Gonzalez further argues that even though the Other Defendants avoided personal liability, it was still “their conduct . . . that resulted in USHRN's liability.” (Id. at 5.) Additionally, Dr. Gonzalez argues that because USHRN's insurer, not the Other Defendants, paid their attorneys' fees, a fee award would result in a “windfall” to them. (Id. at 5-6.) Finally, and at a minimum, Dr. Gonzalez argues that any award “should be via a reduction in Dr. Gonzalez's requested award of reasonable attorney fees.” (Id. at 2.)

In reply, the Other Defendants argue that (1) “the Warner factors support this Court using its discretion to award such fees”; (2) “Plaintiff has the financial means to pay such an award because Plaintiff was awarded a judgment of $33,622.17 and Plaintiff seeks an additional $12,693.53 in prejudgment interest in this same litigation”; (3) “Plaintiff's actions,” such as that “she hired and agreed to pay Plaintiff's counsel on an hourly basis to prosecute this case with hourly rates of $450 and $290,” are inconsistent with “the extreme financial hardship” she asserts; and (4) “there is no legal support for Plaintiff's arguments of a windfall nor payment via a speculative reduction.” (Doc. 218 at 1-2, citations and emphasis omitted.)

B. Analysis

As an initial matter, and as Dr. Gonzalez concedes, the Other Defendants are eligible to recover their fees under § 12-341.01(A) because they were the successful parties in a contested action arising out of contract. The Court also agrees with the Other Defendants that the Warner factors tip in favor of awarding fees. Dr. Gonzalez appears to dispute only the second factor (whether the litigation could have been avoided) and the third factor (whether the unsuccessful party would face extreme hardship from a fee award), but neither factor supports Dr. Gonzalez's position. Dr. Gonzalez could have avoided her litigation against the Other Defendants simply by not suing them and only suing USHRN. Meanwhile, although Dr. Gonzalez's financial circumstances are sympathetic, she makes no effort to reconcile her claims of poverty with the fact that she is receiving a large financial award in this case from USHRN that far exceeds the Other Defendants' fee request.

Nor is there any merit to Dr. Gonzalez's argument that awarding fees to the Other Defendants would result in a windfall because the insurance company paid their fees. The Other Defendants make clear that any fee award will ultimately be provided to the insurance company, not retained by them. (Doc. 218 at 5-6.) In any event, an insurance company's payment of the requested fees does not affect the applicability of A.R.S. § 12-341.01. See, e.g., Orfaly v. Tucson Symphony Soc., 99 P.3d 1030, 1037 (Ariz.Ct.App. 2004) (“[T]hat some portions of appellees' attorney fee expense was covered by insurance does not preclude the fee awards to appellees or otherwise establish any abuse of discretion in those awards.”); Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz.Ct.App. 1987) (“[T]he fact that fees may ultimately be borne by third parties pursuant to an insurance or indemnity agreement does not prevent the successful party from meeting the requirements of A.R.S. § 12-341.01(B), entitling him to an award of attorney's fees against the unsuccessful party to the litigation.”).⁶

6 Dr. Gonzalez also makes no effort to reconcile her position on this issue with the fact that she is seeking to recover over $500,000 in attorneys' fees from USHRN despite never actually paying those fees.

Finally, there is no merit to Dr. Gonzalez's argument that, in lieu of entering a fee award in the Other Defendants' favor, the Court should instead reduce the fee award being entered in her favor (and against USHRN) by a corresponding amount. The Other Defendants are distinct from USHRN and are entitled to separate treatment.

V. Sanctions Motion

A. Legal Standard

Under 28 U.S.C. § 1927, “[a]ny attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.” The “use of the word ‘may' [in § 1927]-rather than ‘shall' or ‘must'-confers substantial leeway on the district court when imposing sanctions.” Haynes v. City & Cnty. of San Francisco, 688 F.3d 984, 987 (9th Cir. 2012).

The Ninth Circuit's cases are “less than a model of clarity” as to the applicable liability standard under § 1927. B.K.B. v. Maui Police Dep't, 276 F.3d 1091, 1107 (9th Cir. 2002), as amended (Feb. 20, 2002). One held that “section 1927 sanctions must be supported by a finding of subjective bad faith,” which “is present when an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent.” In re Keegan Mgmt. Co., Sec. Lit., 78 F.3d 431, 436 (9th Cir. 1996) (citations and internal quotation marks omitted). Another concluded that “recklessness suffices for § 1927,” whereas “bad faith is required for sanctions under the court's inherent power.” Fink v. Gomez, 239 F.3d 989, 993 (9th Cir. 2001). And another held that knowing about a rule and the applicable law and “recklessness in the face of such undeniable knowledge” would be “sufficient to justify the imposition of § 1927 sanctions.” Maui Police, 276 F.3d at 1106-07. In Maui Police, the Ninth Circuit added that because counsel's argument was “frivolous inasmuch as it lacked credibility on its face,” § 1927 sanctions were justified “even under the Keegan standard.” Id. at 1107 n.8.

B. The Parties' Arguments

Dr. Gonzalez argues: “USHRN's Counsel acted recklessly and in bad faith in pursuing USHRN's counterclaims.” (Doc. 207 at 9.) More specifically, Dr. Gonzalez contends that “USHRN's Counsel explicitly pled that the parties had ‘ratified' the continuation of the expired contractor agreement in May 2020,” despite never citing legal authority to support that proposition. (Id. at 9-10.) Dr. Gonzalez also contends that USHRN's counsel might have found a stronger legal basis to support this position if counsel had done more research. (Id. at 10.) Dr. Gonzalez concludes that this failure to research the issue more thoroughly can only mean that USHRN's counsel pursued this claim “to smear Dr. Gonzalez, harass her, and potentially impede her ability to find a job and force her to settle at a discount.” (Id. at 10-11.) Dr. Gonzalez argues that “[b]ecause USHRN's Counsel asserted the counterclaims recklessly, without concern as to their merits and solely to harass Dr. Gonzalez, USHRN's Counsel are subject to sanctions.” (Id.) Dr. Gonzalez then argues that she “should be awarded . . . $317,910.00 in reasonable attorneys' fees . . . that resulted from USHRN's counsel's pursuit of baseless claims/defenses.” (Id. at 13.)

USHRN responds that Dr. Gonzalez's sanctions motion should be denied because “USHRN's counterclaims were filed only after Plaintiff filed suit against USHRN seeking approximately $1 million in damages”; “USHRN's counterclaims survived Plaintiff's Rule 12(b)(6) and Rule 56 motions”; “[t]here is no controlling Arizona case precluding USHRN's counterclaims and there is Arizona authority recognizing ratification by continued performance”; “[t]here was no finding by any court or government agency that USHRN acted ‘illegally' when it continued paying Plaintiff as a 1099 contractor following Plaintiff's continued rejection of USHRN's employment offers”; “USHRN and its counsel had a good faith basis to pursue its counterclaims, including relying on the testimony of USHRN witnesses, the testimony and conduct of Plaintiff, and various documentation disclosed in the case”; “Plaintiff fails to cite any case where any Court (including this Court) has awarded sanctions under 28 U.S.C. § 1927 under facts remotely comparable to USHRN's counterclaims”; and “Plaintiff never put USHRN on notice of her intent to seek 28 U.S.C. § 1927 sanctions at any time prior to the jury's verdict at trial, including failing to assert this 28 U.S.C. § 1927 claim in her Answer, MIDP responses, or in the Joint Pretrial Order.” (Doc. 214 at 2-3.)

In reply, Dr. Gonzalez reiterates that there are two independent bases for awarding sanctions: (1) “USHRN's Counsel pursued the counterclaims to publicly smear and harass Dr. Gonzalez”; and (2) “USHRN's Counsel were aware, since no later than September 2020, of USHRN's pro bono counsel's advice and opinion that the independent contractor agreement was illegal, but still pursued enforcement of that agreement via the counterclaims despite that illegality rendering any argument for its enforcement frivolous.” (Doc. 220 at 1-2.) Dr. Gonzalez further clarifies that “the first basis encompasses the second, which is merely additional evidence demonstrating that USHRN's Counsel did not care about the outcome, they just wanted to harass Dr. Gonzalez.” (Id. at 2.) Dr. Gonzalez contends that USHRN's counsel failed to respond to either of these arguments and instead attempted to distract the Court with other arguments. (Id. at 2-3.) Dr. Gonzalez also argues that the Court should not treat USHRN's counterclaims as meritorious just because they survived summary judgment, as the dispositive motion briefing “did not address USHRN's Counsel's motives for pursuing the counterclaims” and “at that time, Dr. Gonzalez was unaware of Ms. Johnson-Blanco's future trial testimony, which could have changed the outcome at summary judgment.” (Id. at 6.) Dr. Gonzalez further argues that other courts have awarded sanctions for a party continuing to pursue a frivolous claim. (Id. at 6-7.) Finally, Dr. Gonzalez argues that her fee request is reasonable and that sanctions are warranted even though she did not until recently disclose an intention to pursue them because “this briefing” has “provided USHRN's counsel due process.” (Id. at 11.)

C. Analysis

Dr. Gonzalez's sanctions request is denied. As an initial matter, it is unclear whether § 1927 sanctions are even available here. Section 1927 applies to an attorney or party who “multiplies the proceedings . . . unreasonably and vexatiously.” Section 1927 does not apply to initial pleadings, including counterclaims asserted in an initial answer. Glasser v. Blixseth, 649 F. App'x. 506, 506-07 (9th Cir. 2016) (“The district court abused its discretion by ordering sanctions against Conant under 28 U.S.C. § 1927 because that section does not allow for the imposition of sanctions based on initial pleadings, such as a counterclaim.”). All of the counterclaims Dr. Gonzalez views as vexatious and unreasonable were included as counterclaims in USHRN's initial pleading (Doc. 12), although USHRN provided additional factual allegations to support some of them in its first amended answer (Doc. 58).

But even if § 1927 sanctions might be theoretically available based on USHRN's counsel's subsequent failure to withdraw the counterclaims, the sanctions request fails on the merits. Sanctions under § 1927 are an “extraordinary remedy . . . to be exercised with extreme caution.” Keegan, 78 F.3d at 437. See also Lahiri v. Universal Music & Video Distribution Corp., 606 F.3d 1216, 1223 (9th Cir. 2010) (“The district court's authority to sanction attorneys under § 1927 . . . must be exercised with restraint and discretion.”). At trial, Johnson-Blanco testified that “based on those conversations, we realized that we needed to focus on the offer letter and not continue with the independent contractor agreement.” (Doc. 201 at 19.) Dr. Gonzalez argues that the only possible inference to draw from this testimony is that USHRN's counsel knew that treating her as an independent contractor was legally indefensible, but nonetheless pursued counterclaims based on alleged ratification of the independent contractor agreement. (Doc. 207 at 11-12.) But this is hardly the only possible inference. For example, perhaps the pro bono counsel simply advised USHRN that continuing with the independent contractor agreement was legally risky, even though a court might ultimately rule it was legal. In the Court's estimation, USHRN's counsel pursued USHRN's counterclaims because they believed in good faith that USHRN had a colorable argument that the parties had ratified the independent contractor agreements. Indeed, the summary judgment order concluded this was a colorable argument that a reasonable factfinder could accept. (Doc. 128 at 43-45.)

Ultimately, the parties stipulated that the Court would be the factfinder on the ratification issue and the Court rejected USHRN's argument, in part based on Johnson-Blanco's testimony. (Doc. 208 at 36-44.) But this outcome does not demonstrate that USHRN's counsel acted vexatiously by pursuing the counterclaim. Cf. Pacesetter Consulting LLC v. Kapreilian, 2021 WL 4820485, *8 (D. Ariz. 2021) (“[D]oubts remain about what Pacesetter's counsel ‘knew or should have known' when they agreed to appear in this action. And given the presence of such doubts, the Court chooses, in its discretion, to deny Bassetti's fee request under § 1927. Admittedly, this is not a fully satisfying outcome. Bassetti was forced to expend more than a half-million dollars in defense of claims and motions that were often perplexing and undeveloped. . . . Here, considerations of restraint compel the resolution of close calls and doubts in favor of Pacesetter's counsel and against the imposition of sanctions.”).

Accordingly, IT IS ORDERED that:

1. Dr. Gonzalez's motion to vacate, alter, or amend the judgment (Doc. 204) is denied.

2. USHRN's motion for judgment as a matter of law and/or Rule 59(e) motion to alter or amend the judgment (Doc. 213) is denied.

3. Dr. Gonzalez's motion for attorneys' fees (Doc. 206) is granted in part and denied in part. USHRN is ordered to pay Dr. Gonzalez $234,881.00 in attorneys' fees.

4. Dr. Gonzalez's motion for prejudgment interest (Doc. 211) is granted. Dr. Gonzalez is awarded prejudgment interest in the amount of $12,693.53. The Clerk shall enter an amended judgment reflecting this addition.

5. The Other Defendants' motion for attorneys' fees (Doc. 205) is granted. Dr. Gonzalez is ordered to pay the Other Defendants $12,460 in attorneys' fees.

6. Dr. Gonzalez's motion for sanctions (Doc. 207) is denied.

(Appendix Omitted)