Yammine v. Toolbox for HR Spolka z Ograniczona Odpowiedzialnoscia Spolka Komandytowa

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Marco Yammine, Plaintiff, v. Toolbox for HR Spolka z Ograniczona Odpowiedzialnoscia Spolka Komandytowa, Defendant.

No. CV-21-00093-PHX-MTL

United States District Court, D. Arizona

August 2, 2024

ORDER

Michael T. Liburdi United Slates District Judge

Before the Court is Defendant/Counterclaimant Toolbox for HR Spolka Z Ograniczona Odpowiedzialnoscia Spolka Komandytowa's (“Toolbox”) Motion for Attorneys' Fees and Non-Taxable Expenses. (Doc. 183.) The Motion is fully briefed. (Docs. 183, 186, 190.) For the following reasons the Court will grant the Motion in part and deny it in part.

I. BACKGROUND

The Court previously set forth the factual background of this case in detail. (See Docs. 65, 126.) As relevant here, in January 2021, Plaintiff/Counter-Defendant Marco Yammine initiated this action against Toolbox, alleging violations under the Anticybersquatting Consumer Protection Act and seeking a declaratory judgment. (Doc. 1.) Toolbox responded in March 2021 with seven counterclaims against Yammine, including breach of fiduciary duty. (Doc. 11.) It did not, however, allege breach of contract. (See id.; see also Doc. 35.)

In June 2022, the parties stipulated to dismissal of Yammine's Complaint. (Doc. 89.)

On September 21, 2022, Yammine filed a Motion for Summary Judgment on the remaining counterclaims. (Doc. 101.) The Court granted summary judgment in part, leaving only Toolbox's breach of fiduciary duty counterclaim to proceed to trial. (Doc. 126.) There, the jury returned a verdict in favor of Toolbox, awarding $500,000 in damages. (Doc. 179.)

II. LEGAL STANDARD

A. Attorney's Fees

Under the “American Rule,” a litigant's attorney's fees are not ordinarily recoverable unless there is a statute or enforceable contract that provides for them. Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 (1967); see also Astrue v. Ratliff, 560 U.S. 586, 591 (2010); London v. Green Acres Tr., 159 Ariz. 136, 145 (Ct. App. 1988).

Arizona Revised Statutes § 12-341.01, under which Toolbox seeks attorneys' fees, permits a “successful party” to recover reasonable fees for any “contested action arising out of a contract, express or implied.” A.R.S. § 12-341.01(A). A “successful party” is defined as any party that receives a final judgment equal to or greater than any written settlement offers that party made. Id. The fee award need not equal, but cannot exceed, the actual attorneys' fees paid, and it is the role of the Court, not the jury, to award such fees. A.R.S. §§ 12-341.01(B)-(C). Additionally, parties requesting an award of fees must meet the content and formatting requirements outlined in the Local Rules of Civil Procedure. See LRCiv. 54.2.

Arizona courts have interpreted the “arising out of a contract” requirement of A.R.S. § 12-341.01 broadly. See, e.g., Marcus v. Fox, 150 Ariz. 333, 334 (1986) (en banc). The prevailing test for determining whether an action arises out of a contract is whether the cause of action could have existed “but for” the existence of a contract. Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529, 543 (1982) (en banc). This does not mean that a party must assert an explicit breach of contract claim, however. See ML Servicing Co. v. Coles, 235 Ariz. 562, 570 (Ct. App. 2014). A trial court may award attorneys' fees to the successful party even when tort claims are “interwoven” with contract claims. Rudinsky v. Harris, 231 Ariz. 95, 102 (Ct. App. 2012); see also Sparks, 132 Ariz. at 543 (“Attorney's fees may be recoverable in tort cases which find their basis in contract.”).

But the mere existence of a contract “somewhere in the transaction” is insufficient for the purposes of § 12-341.01. Marcus, 150 Ariz. at 335. If a particular contract “merely puts the parties within tortious striking range of each other, [it] does not convert ensuing torts into contract claims.” Dooley v. O'Brien, 226 Ariz. 149, 152 (Ct. App. 2010) (internal marks and citation removed). Moreover, the fee statute does not apply to purely statutory causes of action or where a contract is a factual predicate to the action but not its essential basis. Hanley v. Pearson, 204 Ariz. 147, 151 (Ct. App. 2003); see also Kennedy v. Linda Brock Auto. Plaza, Inc., 175 Ariz. 323, 325 (Ct. App. 1993).

Thus, when analyzing whether a particular tort claim is sufficiently connected to the existence of a contract, a trial court should ask “whether the defendant would have a duty of care under the circumstances even in the absence of a contract.” Ramsey Air Meds, LLC v. Cutter Aviation, Inc., 198 Ariz. 10, 16 (Ct. App. 2000). If the duty breached is one implied by law based on the relationship of the parties, that claim sounds fundamentally in tort, not contract. Id.

B. Other Costs

Under 54(d)(1), Fed. R. Civ. P., costs other than attorney's fees should be allowed to the prevailing party unless a federal statute, the rules, or a court order provides otherwise. Marx v. Gen. Revenue Corp., 568 U.S. 371, 375-76 (2013). This rule establishes a presumption in favor of awarding costs to the prevailing party, but it does not grant courts unrestricted discretion to award any costs they deem appropriate. Id. at 377.

The Supreme Court, in Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437 (1987), clarified that only those costs explicitly enumerated in 28 U.S.C. § 1920 may be taxed by the Court. Id. at 441-42. Section 1920 lists the following categories of recoverable costs:

(1) Fees of the clerk and marshal; (2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case; (5) Docket fees under [28 U.S.C. §] 1923; (6) Compensation of court-appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section [28 U.S.C. §] 1828.

28 U.S.C § 1920.

The Court may, in its discretion, decline to tax as costs items listed in § 1920. Little Oil Co. v. Atl. Richfield Co., 852 F.2d 441, 448 (9th Cir. 1988). But it does not have the discretion to tax costs beyond those enumerated in § 1920 without explicit statutory authorization or a Federal Rule of Civil Procedure allowing otherwise. Crawford Fitting Co., 482 U.S. at 441-42. The Local Rules of Civil Procedure provide for additional taxable costs allowable under Rule 54(d), Fed.R.Civ.P. See LRCiv 54.1(e).

III. DISCUSSION

A. Attorney's Fees

There is no dispute that Toolbox was the successful party on its breach of fiduciary duty claim. Finding for Toolbox, the jury awarded $500,000 in damages. (Doc. 179.) Whether that claim arose out of a contract within the meaning of A.R.S. § 12-341.01 is, however, a subject of contention.

Toolbox asserts that two contracts “shaped and defined the nature and terms of [the] fiduciary” duty that is “at issue in this case.” (Doc. 183 at 6.) These contracts have been identified as the “independent contractor agreement” and the “employment agreement.” In support of its Motion, Toolbox cites several provisions of these agreements, maintaining that they were necessary to prove that a fiduciary relationship existed and noting that the contracts came up in testimony at trial and during closing arguments. (Id. at 3-6; Doc. 190 at 3-4.) But Toolbox does not identify or discuss the applicable test that courts use to determine whether an action “aris[es] out of a contract.” See A.R.S. § 12-341.01(A).

Yammine, opposing the Motion, argues that Toolbox has recharacterized its breach of fiduciary duty claim as contractual after, throughout this litigation, it has based its claim in Arizona common law. (See Doc. 186 at 4-6, 11-12.)

The Court finds that Toolbox's characterization of its claim for breach of fiduciary duty as one arising out of a contract is inconsistent with the record in this case. Toolbox has indeed consistently asserted that Yammine owed Toolbox fiduciary duties as a matter of Arizona law. At most, it has relied on the independent contractor and employment agreements merely to establish the existence of an agent-principal and, later, employee-employer relationship.

For example, in its First Amended Answer and Counterclaims, Toolbox did not allege that Yammine owed it a fiduciary duty because of the agreements it now references. (See generally Doc. 35.) Instead, it generally stated that “[a]n agent owes fiduciary duties to its principal, including the duty of loyalty and the duty of care. As a fiduciary, Yammine had the duty to act with the utmost good faith in the interest of his employer [Toolbox] both when he was an employee and when he was a contractor.” (Id. at 29.) Similarly, in Toolbox's opposition to Yammine's motion to dismiss, Toolbox only discussed whether Yammine owed Toolbox a fiduciary duty under Arizona law. (See Doc. 55 at 24-25.) Later, in opposition to Yammine's motion for summary judgment, Toolbox took the same position. (See Doc. 112 at 10-11.) It did not rely on specific contractual obligations in either brief. (See Doc. 55 at 24-25; Doc. 112 at 10-11.) Even in the Final Pretrial Order, Toolbox failed to ground its position in contractual obligations, instead stating that, “[a]s an employee, Marco Yammine owed a duty of fidelity to be honest in his dealing with Toolbox and not use information or resources obtained through Toolbox for his own benefit.” (Doc. 157 at 3 (emphasis added).) Each of these arguments stem from the alleged breach of fiduciary duty under Arizona common law.

Contrary to Toolbox's arguments in its Motion, it maintained this position at trial. In its closing argument, Toolbox emphasized the Court's...