CHARLES CASE II, Bankruptcy Judge
I. Introduction
Debtors Davis have filed an application for award of attorneys' fees against Bill J. Davis ("BJD") arising out of the contested motion to enforce settlement agreement. BJD objects. The Court has considered the arguments of the parties and hereby grants the application for the reasons set out below.
This is an application for fees under A.R.S. § 12-341.01 which provides that the "successful party" in a contract action may be awarded fees subject to the discretion of the court. Sections A and B neither mandate an award of fees nor specify how the fees are to be calculated; rather, the award of fees under subsection A is permissive and subsection B simply caps the award at the amount agreed to be paid by the client. Subsection C mandates an award of fees if there is clear and convincing evidence that the losing party's claim or defense "constitutes harassment, is groundless and is not made in good faith." The requirements of subsection C are conjunctive; all three must be shown to mandate an award.
A.R.S. § 12-341.01 reads:
A. In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. 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. This section shall in no manner be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees.
B. The award of reasonable attorney fees pursuant to subsection A should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense. It need not equal or relate to the attorney fees actually paid or contracted, but the award may not exceed the amount paid or agreed to be paid.
C. The court shall award reasonable attorney fees in any contested action upon clear and convincing evidence that the claim or defense constitutes harassment, is groundless and is not made in good faith. In making the award, the court may consider any evidence it deems appropriate and shall receive this evidence during a trial on the merits of the cause, or separately, regarding the amount of fees it deems in the best interest of the litigating parties.
D. The court and not a jury shall award reasonable attorney fees under this section.
II. Discussion
A. Subsection C
Although BJD did not prevail, the debtor has not shown by clear and convincing evidence that the three conjunctive requirements of subsection C have been met. Therefore, the Court will analyze the request under subsections A and B.
B. Subsection A
BJD makes three arguments: 1) Debtor was not the successful party on all relief sought because he dropped his supplemental claim with respect to the 22nd Street Property and he did not prevail on two motions in limine; 2) the legal question was novel; 3) an award of fees would discourage others from bringing or defending bona fide positions on contracts. See Associated Indemnity v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985). In addition, BJD questions certain costs. The Court will address these in order.
1. Successful Party
BJD's arguments are not persuasive. The motions in limine are markers on the highway of a piece of litigation, not the destination. Who prevailed on such matters is open to question in this case, but it is not important to the final result. It is not correct to add up every battle won or lost and allocate fees on that basis; rather, the issue is who won and what is a fair amount. Here, Debtors clearly won and BJD clearly lost.
The same is true of the supplement to the motion on 22nd Street. BJD admitted in his response to the motion that "perhaps it could have been communicated more clearly to the Debtors" that the Debtors' economic interest in that property remained equivalent after transfer; indeed, once that issue was clarified, no further activity occurred with regard to the supplement. Further, the supplement was minor part of the controversy that quickly disappeared so that the great bulk of the fees incurred related to the primary dispute.
2. Novelty
The apparent purpose of this test is to encourage an award of fees in cases where the legal doctrine in question is not in doubt such that it is fairer for the non-successful party to bear the cost of the litigation. Here, the issue of whether rescission was immediately effective was controlled by California law and there was no clear answer. However, a counterweight to this apparent support for not awarding or reducing fees is the fact that BJD's actions throughout the underlying case, and in other venues, was inconsistent with the "immediately effective" argument. This invokes the first Associated factor not relied upon by BJD; i.e., whether or not the litigation could have been avoided. Id., 143 Ariz. at 570, 694 P.2d at 1184. In short, yes, perhaps there was some novelty involved, but it was late in arriving. These two factors, in effect, cancel each other out.
3. Chilling Effect
This factor cuts against BJD. A failure to award fees would chill parties like Debtor from bringing what was eventually a successful motion to enforce an agreement entered into after long and expensive litigation. A party like BJD, whom the Court has found refused to honor an agreement, fairly should bear the expense of the litigation, not vice versa.
C. Subsection B
The Court agrees that it has broad discretion to award fees so long as the amount awarded does not exceed the amount agreed to be paid by the successful party. Counsel's affidavit establishes that the amounts sought have either been paid or agreed to be paid by Debtors and BJD does not challenge this fact. In the exercise of its discretion, the Court concludes that the entire amount sought is reasonable and the appropriate to award.
D. Costs
Under the circumstances, there is nothing unreasonable about the costs sought. The Court will overrule the objection.
III. Conclusion
Having reviewed the applicable law, the briefs and evidence presented by the parties, and the record in the case, the Court awards to the debtor and against BJD attorneys' fees in the amount of $45,497.50 and costs in the amount of $2,076.42, with interest from the date of this order at the federal judgment rate.
Counsel for debtors is to submit a form of order.