Civil Procedure: Reasonable Fees Determination For Party Beating 23% Rule

Granville v. Howard, __Ariz. Adv. Rep__ (App. Div. I, October 2014) (J. Downie)


Plaintiff received soft tissue injuries in low impact auto collision. The amount in controversy being less than $50,000 (Maricopa County Mandatory Arbitration limit) subjected the case to mandatory arbitration where plaintiff was awarded $6,719.45 including $1,163.90 in costs and $810.50 Rule 68 sanctions. Defendant appealed to superior court and won a trial de novo jury trial. Defendant was then awarded $17,885.50 including Rule 68 sanctions, expert witness fees and taxable costs. Plaintiff appealed to the court of appeals where by memo opinion the court of appeals overturned the defense verdict and sent the case back for a retrial where a jury awarded plaintiff $918.50. On top of this the trial court entered judgment for $86,646.40 to include the jury award, 5,950.65 in taxable costs, $5,027.25 in Rule 68 sanctions, $2,750 in expert fees and $72,000 in attorneys' fees. Defendant appealed and plaintiff cross-appealed  and the Arizona Court of Appeals vacated the award and remanded the case for further proceedings.    ARS § 12-133(H) and Rule 77 of the Arizona Rules of Civil Procedure permit a party that participates in compulsory arbitration proceedings to appeal the arbitration award and obtain a trial de novo in superior court. If, however, the judgment issued after the trial de novo is not more favorable to the appealing party by at least 23%, the superior court “shall” impose certain costs and fees , including “reasonable attorneys' fees as determined by the trial judge for services necessitated by the appeal .

Fees awarded under rule 77(f) must be reasonable. Undue hardship to the party sanctioned may dictate no award at all. If there is to be an award the court should consider a number of factors, some but not all of which include:

Whether the arbitration appeal was filed in good faith or was pursued to delay the proceedings, unduly burden the opposing party, or coerce capitulation based on superior financial resources.

How close the appealing party came to meeting the 23% standard (which may inform the assessment of whether the appeal was pursued in good faith).

The amount in controversy. Although a Rule 77(f) fee award may exceed the amount of the damages award, the reasonableness inquiry necessarily entails consideration of the amount in dispute.

Whether post-arbitration litigation could have been avoided or settled.

Whether failure to improve on the arbitration award by the required percentage may be attributable to evidence introduced at the trial de novo of post arbitration damages.

The amount of fees the requesting party is obligated to pay his or her lawyer

Whether the request ed fees were necessarily incurred or whether it appears that some fees were generated because of the prospect of a fee shifting award under Rule 77(f). Here the trial court was directed to reconsider its fee award in light of these factors.

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