Pearson v. Cannon

Susan Pearson, Plaintiff, v. Sean Cannon, et al., Defendants.

No. CV-16-02721-PHX-DJH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

March 27, 2020

NOT FOR PUBLICATION

ORDER

Pending before the Court is Plaintiff's Motion for Award of Attorneys' Fees and Costs, filed in association with a garnishment that was initiated to collect on the 2017 judgment in this matter (Doc. 59). Defendants Sean Cannon and Cannon Law Firm, PLLC (collectively "Cannon") filed a Response (Doc. 61), as did non-party Cambridge Estates Homeowners Association ("Cambridge Estates") (Doc. 60). Plaintiff, Susan Pearson, filed a Consolidated Reply to the Responses of Cannon and Cambridge Estates (Doc. 62).

I. Background

Plaintiff brought this action against Cannon in August 2016, alleging violations of the Fair Debt Collections Practices Act. (Doc. 1). On March 2, 2017, the Parties filed a Stipulation for Entry of Judgment in Plaintiff's favor in the amount of $1,025.00. (Doc. 26). This Court approved the Stipulation and entered judgment in favor of Plaintiff and against Defendants for $1,025.00, plus interest at the rate of .66% per annum from the date of the Judgment until paid in full. (Doc. 27). Plaintiff subsequently filed a Motion for Award of Attorneys Fees (Doc. 28), which this Court granted in the amount of $13,335.00 (Doc. 33). The Clerk of Court then entered judgment in favor of Plaintiff and against Defendants for the $13,335.00 in attorneys' fees. (Doc. 34). The Clerk also entered a Judgment on Taxation of Costs for $1,516.12. (Doc. 32). On June 28, 2017, Plaintiff filed a Notice of Satisfaction of Stipulated Judgment, stating that the $1025.00 stipulated judgment had been satisfied, but that the Judgments for Attorneys' Fees and Costs had not yet been satisfied. (Doc. 35).

On May 2, 2019, Plaintiff applied for a writ of garnishment for monies in the possession of garnishee, Maricopa County Sheriff's Office (the "County"), that were being "held on behalf of" Cannon. (Doc. 36). The Application for Writ of Garnishment stated that the judgment for taxation of costs, plus the attorneys' fees judgment, totaled $14,851.12 and that the total amount of the outstanding judgments, including interest, was $15,145.04 (Doc. 36). The Application for Writ of Garnishment also stated that Plaintiff had "good reason to believe, and therefore alleges," that the County had in its possession non-exempt monies and/or personal property belonging to Cannon. (Doc. 36 at 2). A Writ of Garnishment was issued to the County, again identifying a total amount owed of $15,145.04. (Doc. 38).

In the County's Answer to the Writ of Garnishment, the County stated that it "received $16,287.89 on May 16, 2019 for judgments arising out of Maricopa County Superior Court cause number CV2018-007526." (Doc. 39 at 2). The Answer further stated that "$12,707.33 of this amount is owing to the Judgment Debtor, Sean Cannon" and that "$2,920.00 is withheld from [Cannon] for attorney's fees that [Cannon] alleged occurred but have not been awarded by the Superior Court." (Doc. 39 at 2). The County stated that it would hold the funds pending an order from the Federal Court. (Doc. 39 at 2).

On May 16, 2019, Cannon filed an Objection to Garnishment, Request to Quash Garnishment, and Request for Hearing. (Doc. 40). In this Objection, Cannon stated that the funds being held by the County did not belong to Cannon, but instead belonged to Cannon's legal client, Cambridge Estates. (Doc. 40 at 1-2). Cannon further stated that the funds were in the possession of the County as a result of a foreclosure judgment inMaricopa County Superior Court case number CV2018-007526, Cambridge Estates Homeowners Association v. Dung Ta. (Doc. 40 at 2). Cannon attached a copy of the judgment in that case, which shows that the named plaintiff was Cambridge Estates and that Cannon was the attorney for Cambridge Estates. (Doc. 40-1). Non-party Cambridge Estates, still represented by Cannon, similarly filed a Motion to Quash Garnishment and Request for Hearing. (Doc. 42). That Motion to Quash Garnishment also objected to the garnishment on the basis that the "money being held belongs to Cambridge, not its attorney." (Doc. 42 at 2).

In Plaintiff's May 23, 2019, Response to the Motions to Quash, Plaintiff stated that she "filed a Writ of Garnishment seeking $2,920 that is not part of any state court judgment and that belongs to [Cannon]." (Doc. 45 at 1). Plaintiff also stated that there was an existing state court judgment that awarded $12,707.33 to Cambridge Estates and that the "Writ of Garnishment does not seek those funds." (Doc. 45 at 2). Plaintiff's Response then details alleged flaws in the $2,920.00 of additional costs in the Maricopa County Superior Court case between Cambridge Estates and Dung Ta. Specifically, Plaintiff alleged that the $2,920.00 in costs was obtained in violation of state and federal law and in violation of court order. (Doc. 45 at 3-5). Plaintiff further alleged that the $2,920.00 was "part of a pattern of Cannon procuring or seeking personal funds disguised as amounts due to clients." (Doc. 45 at 5). Plaintiff next asserted that "[Cannon] is using the Writ in the Ta case to collect what he believes he is entitled to above and beyond the fees awarded in the Judgment in the Ta case. As the $2,920 is earmarked to go to Cannon, it is clearly subject to garnishment." (Doc. 45 at 8). Plaintiff then acknowledged that an evidentiary hearing "may be appropriate" and stated that discovery regarding the accounting of both Cannon and Cambridge Estates is necessary. (Doc. 45 at 8).¹

The Objection to Garnishment was referred to Magistrate Judge John Boyle (Doc. 44), who scheduled a garnishment hearing for June 11, 2019 (Doc. 46). At the June 11, 2019, hearing, an evidentiary hearing was scheduled for August 19, 2019. (Doc. 50). The Court also stated that Plaintiff "may serve limited discovery on [Cannon]" prior to the evidentiary hearing. (Doc. 50 at 2).

On June 29, 2019, Cannon and Cambridge Estates withdrew their Objections and Motions to Quash Garnishment "as to the $2,920.00 at issue in the garnishment action." (Doc. 57 at 1). Cannon and Cambridge Estates also requested that the evidentiary hearing be cancelled and that all post-judgment discovery actions relating to Cambridge Estates be quashed because Cambridge Estates "has no connection to the above matter in any way whatsoever." (Doc. 57 at 2). This Court granted the Motion to Withdraw, vacated the August hearing, and ordered that all post-judgment discovery shall cease. (Doc. 58). On or around July 3, 2019, the County released the $2,920 to Plaintiff and released the remainder of the garnished $16,287.89 to Cannon in trust for Cambridge Estates. (Doc. 59-4 at 57-58).

On July 16, 2019, Plaintiff filed the Motion for Award of Attorneys' Fees and Costs, seeking $13,860.00 in fees and $549.80 in costs. (Doc. 59; Doc. 59-1 at 4).

II. Analysis

Plaintiff asserts that she is entitled to fees for this garnishment based upon this Court's inherent authority to sanction actions taken in bad faith; based upon 28 U.S.C. § 1927, which provides that an attorney can be required to personally satisfy excess costs caused by the attorney "unreasonably and vexatiously" multiplying the proceedings; and based upon A.R.S. § 12-1580(E), which provides for an award of fees when an objection to garnishment is made "solely for the purpose of delay or to harass the judgment creditor." (Doc. 59 at 1, 4). In support of this position, Plaintiff asserts that "[b]ecause of the actions of Cambridge Estates and Cannon, Plaintiff was required to compile and file lengthyresponses with detailed exhibits demonstrating their fraudulent accounting, prepare for a potential evidentiary hearing, and draft and submit discovery demands and subpoenas all to get information that Defendants have been hiding in two other proceedings in efforts to mask that the sought funds by [Plaintiff] masked as debts to Cambridge Estates." (Doc. 59 at 2). Plaintiff also alleges that, because it only sought $2,920 in the garnishment and because Cannon and Cambridge Estates eventually withdrew their objections to the garnishment of that amount, the initial objections were made in bad faith or solely for the purpose of delay or harassment. (Doc. 59, Doc. 62).

In response, Cannon and Cambridge Estates both assert that the original amount stated in the Writ of Garnishment was $15,145.04, which is far greater than the $2,920.00 to which Cannon and Cambridge Estates ultimately withdrew their objection. (Doc. 60 at 2, Doc. 61 at 2-3). Cannon and Cambridge Estates also argue that they did not act in bad faith or solely to delay or harass because the garnishment was issued against money that belonged to Cambridge Estates, a non-party client of Cannon's; they explain that, because the money did not belong to Cannon (the Defendant and Judgment Debtor), but instead belonged to Cambridge Estates (whose only connection to this matter is that it is represented by Cannon), it would not be proper to garnish the money. (Doc. 60, 61). Cannon and Cambridge Estates also state that they withdrew their objections to the garnishment of the $2,920.00 once it became clear at the hearing before Judge Boyle that Plaintiff was only seeking to garnish $2,920.00, not the original $15,145.04 stated in the Writ of Garnishment. (Id.).

Under Rule 69 of the Federal Rules of Civil Procedure, when there is a money judgment, "[t]he procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located." Fed. R. Civ. P. 69(a)(1). Arizona Revised Statute § 12-1570 et seq. addresses garnishment procedure in Arizona. Section 12-1580, regarding objections to garnishment, identifies the limited circumstances under which a party may recover costs and attorneys' fees in a garnishment proceeding:

The prevailing party may be awarded costs and

...