Kretsch v. Barton

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Karla Kretsch, et al., No. CV-23-00411-PHX-ROS 10 Plaintiffs, ORDER 11 v. 12 John Barton, et al., 13 Defendants. [14] 15 Pending before the Court is Plaintiff’s Motion for Attorneys’ Fees and Costs 16 (“Motion”) (Doc. 25, “Mot.”) seeking $204,940.80 in fees and costs. For the reasons that 17 follow, the Court will grant Plaintiff’s Motion and award fees and costs in the full amount. 18 BACKGROUND 19 Plaintiff initially filed suit against Defendants in the Maricopa County Superior 20 Court, but it was later removed to federal court. (Doc. 1). The parties stipulated to the 21 filing of Plaintiff’s Second Amended Complaint (“SAC”). (Doc. 9). The SAC was 22 successfully challenged by Defendants and dismissed with leave to amend. (Doc. 15). 23 Thereafter, Plaintiff filed her Third Amended Complaint (“TAC”) asserting claims for 24 Arizona securities fraud, negligent misrepresentation, control person liability, constructive 25 fraud, civil conspiracy, fraud, and aiding and abetting tortious conduct. (Doc. 16). 26 After the TAC was served, counsel of record for Defendants withdrew from their 27 representation. (Doc. 17). Defendants did not respond by the Court’s extended deadline, 28 and the clerk entered default against them on May 14, 2024. (Doc. 21). Plaintiff then 1 moved for default judgment against Defendants, which the Court granted on October 8, 2 2024. (Doc. 23). Plaintiff now brings this Motion for attorneys’ fees and costs. 3 ATTORNEYS’ FEES 4 I. ENTITLEMENT AND ELIGIBILITY TO FEES 5 Plaintiff requests $60,177.58 in attorneys’ fees and costs incurred from this matter 6 under A.R.S. § 44-1991. Plaintiff also requests $144,732.22 in attorneys’ fees and costs 7 incurred from the arbitration against Guy Newman, Defendant John Barton’s employee 8 and/or agent (“Newman Arbitration”), under the “tort of another” doctrine. 9 A. Arizona Securities Fraud 10 A.R.S. § 44-2001 provides, “a sale of any securities to any purchaser” in violation 11 of Arizona securities fraud law allows the purchaser to recover “the consideration paid for 12 the securities, with interest, taxable court costs and reasonable attorney fees.” Because she 13 prevailed on her securities fraud claim, the Court finds Plaintiff is eligible for, and entitled 14 to, attorneys’ fees under the Arizona Securities Act. 15 B. “Tort of Another” 16 Arizona “follow[s] the general American rule that attorney fees are not recoverable 17 unless they are expressly provided for either by statute or contract.” Kaufmann v. 18 Cruikshank, 217 P.3d 438, 440 (Ariz. Ct. App. 2009). However, one exception to this rule 19 is the “tort of another” exception. See United States Fidelity & Guaranty Co. v. Frohmiller, [20] 227 P.2d 1007, 1008 (Ariz. 1951). The Fromhiller Court noted that where a defendant’s 21 malfeasance has “involved the plaintiff in litigation with others … as makes it necessary 22 to incur expense to protect [her] interest, such costs and expenses, including attorneys’ 23 fees, should be treated as the legal consequences of the original wrongful act and may be 24 recovered as damages.” Id. at 1009 ; see also 22 AM. JUR. 2D DAMAGES § 436 (2003); 25 RESTATEMENT (SECOND) OF TORTS § 914(2) (1979); 45 A.L.R.2d 1183 (1956). 26 Under Arizona law, a Plaintiff must establish the following five elements to recover 27 fees under the “tort of another” doctrine: (1) Plaintiff became involved in a legal dispute 28 because of Defendant’s tortious conduct; (2) the dispute was with a third party; (3) Plaintiff 1 incurred attorneys’ fees in connection with that suit; (4) the expenditure of attorneys’ fees 2 was a foreseeable or necessary result of the tortious conduct; and (5) the claimed fees are 3 reasonable. Collins v. First Fin. Servs., Inc., 815 P.2d 411 , 413–14 (Ariz. App. Ct. 1991). 4 Here, Plaintiff has satisfied the elements to recover fees under the “tort of another” 5 doctrine. First, Plaintiff alleges all of Newman’s actions were done under the direction of 6 Defendant Barton, and without Defendant Barton’s tortious conduct, Plaintiff would not 7 have needed to proceed in the Newman Arbitration. Second and third, the dispute with 8 Newman was clearly “with a third party” that was not Defendant Barton, and Plaintiff 9 incurred fees in connection with that dispute. Fourth, it is foreseeable that a plan in which 10 Defendant Barton utilized a FINRA-regulated individual to perpetuate his fraud would lead 11 to a FINRA arbitration against that individual. The Court finds Plaintiff may recover fees 12 incurred in the Newman Arbitration under the “tort of another doctrine,” with the 13 reasonableness of those fees to be analyzed infra. 14 II. REASONABLENESS OF REQUESTED AWARD 15 While the Arizona Securities Act provides for an award of attorneys’ fees to a 16 successful plaintiff, A.R.S. § 44-2001, “the amount of the award is within the discretion of 17 the court,” Houser v. Matson, 447 F.2d 860, 863 (9th Cir. 1971). Courts “employ the 18 ‘lodestar’ method to determine a reasonable attorney’s fees award.” Kelly v. Wengler, 822 19 F.3d 1085 , 1099 (9th Cir. 2016) (citing Fischer v. SJB–P.D. Inc., 214 F.3d 1115, 1119 (9th 20 Cir. 2000)). Courts calculate the lodestar figure by “multiplying the number of hours 21 reasonably expended on a case by a reasonable hourly rate.” Id. 22 After calculating the lodestar figure, a Court may reduce or increase the award based 23 on a variety of factors. Those factors include: (1) the time and labor required, (2) the 24 novelty and difficulty of the legal questions involved, (3) the skill required to perform the 25 legal service properly, (4) other employment precluded due to acceptance of the case, (5) 26 the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed 27 by the client or the circumstances, (8) the amount involved and the results obtained, (9) the 28 experience, reputation, and ability of the attorneys, (10) the ‘undesirability’ of the case, 1 (11) the nature and length of the professional relationship with the client, and (12) awards 2 in similar cases. Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975) (“Kerr 3 factors”).1 The lodestar calculation normally subsumes some of these factors such that the 4 Court need not consider them again after determining the lodestar. See Gonzalez v. City of 5 Maywood, 729 F.3d 1196, 1209 (9th Cir. 2013) (identifying factors often considered when 6 calculating lodestar). 7 A. Hourly Rates 8 The first question is whether Plaintiff’s asserted rate is reasonable. “A reasonable 9 hourly rate is ordinarily the prevailing market rate in the relevant community.” Sw. Fair 10 Hous. Council v. WG Scottsdale LLC, No. 19-00180, 2022 WL 16715613 at *3 (D. Ariz. 11 Nov. 4, 2022) (citing Kelly, 822 F.3d at 1099). And “the burden is on the fee applicant to 12 produce satisfactory evidence—in addition to the attorney’s own affidavits—that the 13 requested rates are in line with those prevailing in the community for similar services by 14 lawyers of reasonably comparable skill, experience, and reputation.” Blum v. Stenson, 465 15 U.S. 886 , 895 n.11 (1984). 16 The asserted hourly rates for Plaintiff’s counsel are as follows: [17] Attorneys: Initials Name Rate [18] JAT Jon A. Titus $495 19 BSS Bradley S. Shelts $375 to $500 DAF David A. Fitzgerald $325 to $375 [20] JPW Joshua P. Weiss $235 to $335 21 NBA Nathan B. Anderson $250 JLC Jennifer L. Carstens $230 [22] Paralegals: SH Sarah Haddix $175 to $195 23 SGS Shiela Sawyer $175 to $265 CDH Casey Delisa-Hughes $275 [24] KCR Karla C. Roberts $87.50 [25] 26 According to the declaration of Joshua P. Weiss, Plaintiff’s counsel—attorneys and [27] 1 LRCiv. 54.2 also lists factors the Court must address when determining the 28 reasonableness of the requested award. These factors are largely duplicative of the Kerr factors. 1 paralegals at Titus Brueckner & Levine PLC—have civil litigation experience ranging 2 from five years for associates to over 35 years for partners. (Doc. 25, Ex. B). Jon Titus, 3 the lead counsel on this case, is an experienced securities attorney in Arizona. (Id. at ¶ 5). 4 The hourly rates of attorneys range from $230 to $500 depending on the attorney’s level 5 of experience. (Id. at ¶ 13). The hourly rates of paralegals range from $87.50 to $265 also 6 dependent on experience. (Id.). These hourly rates, according to Mr. Weiss, “represent 7 productive lawyer and paralegal hours … [and] are reasonable.” (Id. at ¶ 14). Plaintiff 8 cites to World Nutrition Inc. v. Advanced Supplementary Techs. Corp., 2022 WL 9 21112266, at *4-5 (D. Ariz. June 10, 2022) to support the reasonableness of counsel’s fees. 10 (Mot. at 6). In Word Nutrition, the Court held a $875 hourly rate for a partner with over 11 20 years of experience and a $635 hourly rate for an associate with nine years of experience 12 were reasonable for the Phoenix area. 2022 WL 21112266 , at *4-5. Here, the requested 13 rates by Plaintiff’s counsel are significantly lower and are thus reasonable. 14 B. Hours Expended 15 Under the lodestar method, the prevailing party is generally entitled to recover fees 16 for “every item of service which, at the time rendered, would have been undertaken by a 17 reasonable and prudent lawyer to advance or protect his client’s interest.” Gary v. Carbon 18 Cycle Ariz. LLC, 398 F. Supp. 3d 468 , 486 (D. Ariz. 2019) (quoting Twin City Sportservice 19 v. Charles O. Finley & Co., 676 F.2d 1291 , 1313 (9th Cir. 1982)). Courts may “exclude 20 from this initial fee calculation hours that were not reasonably expended.” Hensley v. 21 Eckerhart, 461 U.S. 424, 433-34 (1983) (internal quotations omitted); see also McKown v. 22 City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009) (“In determining the appropriate 23 number of hours to be included in a lodestar calculation, the district court should exclude 24 hours that are excessive, redundant, or otherwise unnecessary.”). 25 Plaintiff contends this case is not a run-of-the-mill matter resulting in a default 26 judgment. The Court agrees. The cases against both Newman and Defendant Barton 27 required in-depth briefing on issues related to the statute of limitations and defending 28 multiple motions to dismiss against well-seasoned opposing counsel. Plaintiff contends 1 this case resulted in default only after significant briefing by both parties, and different 2 tribunals have decided the issues in this case in multiple different ways. The Court agrees. 3 What is more, the Newman Arbitration case was itself complex, began five years ago, and 4 involved a two-day arbitration proceeding that ended favorably for Plaintiff. 5 Because of the unique nature of this case, Plaintiff distinguishes it from other cases 6 resulting in defaults or trials. (Mot. at 7-9). For example, in Outland v. Arizona Movers 7 and Shakers, 2019 WL 2269423 , at *1 (D. Ariz. May 28, 2019), the court awarded almost 8 $13,000 in attorneys’ fees in a matter involving default because the complexity of the 9 matter was minimal due to the defendant’s refusal to defend it. Here, Defendants 10 participated in the case and the parties engaged in substantive briefing before Defendants 11 eventually abandoned the case. Plaintiff also cites to Pozez v. Ethanol Capital Mgmt., LLC, [12] 2013 WL 12095669 , at *8 (D. Ariz. July 15, 2013) wherein the court awarded over 13 $300,000 in attorneys’ fees following a two-day trial and the litigation of numerous 14 motions, including two motions for summary judgment. While this matter does not rise to 15 the level of Pozez, the time spent on this case together with the Newman Arbitration is 16 reasonable. The remaining Kerr factors do not warrant adjustment of the lodestar figure. 17 Thus, the Court will award attorneys’ fees in the amount of $199,646.81. 18 COSTS 19 In addition to attorneys’ fees, Plaintiff requests $5,293.99 in out-of-pocket costs 20 from this matter ($2,732.08) and the Newman Arbitration ($2,561.91) (Doc. 25, Ex. A 21 at 3). Reasonable out-of-pocket expenses are awardable as “costs of the action” under the 22 FLSA. See Van Dyke v. BTS Container Serv., Inc., 2009 WL 2997105 , at *2 (D. Or. Sept. 23 15, 2009). The Court finds Plaintiff’s requested out-of-pocket costs—consisting of filing 24 fees, service of process costs, postage costs, and legal research expenses—reasonable and 25 will award Plaintiff $5,293.99 in costs. 26 /// 27 /// 28 /// 1 Accordingly, 2 IT IS ORDERED Plaintiff's Motion for an Award of Attorneys’ Fees and Costs (Doc. 25) is GRANTED. The Court awards Plaintiff $204,940.80 in attorneys’ fees and 4|| costs. 5 Dated this 27th day of December, 2024. 6 fo . 7 ‘ —— . 9 Senior United States District Judge [28] -7-