July 25, 2012 Practice Points

Attorney Fees Award Based on Size of Requesting Firm

By Cameron LaDuke

A March 22, 2011, decision from Hon. Mary H. Murguia, U.S. District Court, District of Arizona, could supply a basis for reducing solo and small-firm attorney fees requests simply because of the size of the requesting attorneys' firm.

In Skydive Arizona, Inc. v. Quattrocchi, the plaintiff sought $3,030,330.00 in attorney fees under 15 U.S.C. § 1117(a) for the defendant's violations of the Lanham Act. No. CV 05-2656-PHX-MHM, 2011 WL 1004945, at *1 (D. Ariz. Mar. 22, 2011). Applying the lodestar method for calculating attorney fees and citing the State Bar of Arizona's 2007 edition of the Economics of Law Practice in Arizona, Judge Murguia awarded the plaintiff $1,063,555 in attorney fees because the requested attorney billing rates exceeded the prevailing market rate as reflected in the State Bar of Arizona publication. Id. at *2–3, 5. Judge Murguia found that the requested billing rates were unreasonable, in part, because they exceeded the median rates charged by attorneys from Arizona firms with a comparable number of practicing attorneys, partners, and associates. Id. at *3. Given Judge Murguia's holding, litigants could attempt to use the Skydive Arizona decision to reduce solo or small-firm attorney fees requests on the basis of their size if the requested billing rate exceeds the prevailing market rate for firms of comparable size.

There are, however, at least three reasons that Skydive Arizona is or should be limited in its effect on solo or small firm attorney fees requests. First, it appears that Judge Murguia relied on the 2007 edition of the Economics of Law Practice in Arizona to support her holding because it was the only evidence (other than affidavits from the plaintiff's attorneys) offered in support of the attorney fees request. Skydive Arizona, 2011 WL 1004945, at *2–3. Citing Ninth Circuit case law, Judge Murguia indicated that she would have considered "evidence of rate determinations in . . . similar cases or . . . affidavits from non-interested attorneys concerning the reasonableness of the rates charged by [the plaintiff's] attorneys or of their reputation within the community" if offered. Id. at 3 (citing Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1215 (9th Cir. 2003) and United Steelworkers of America v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990)).

Other recent decisions from of the District of Arizona have upheld attorney fees requests supported, in part, by affidavits from non-interested attorneys in the relevant community. See, e.g., St. Bernard v. State Collection Serv., Inc., 782 F. Supp. 2d 823, 827 (D. Ariz. 2010) (the plaintiff submitted affidavits from five noninterested Arizona attorneys, evidence that the counsel's rate had been constant for several years, and data from the Laffey Matrix); Shelago v. Marshall & Ziolkowski Enter., LLC, No. CV 07-0279-PHX-JAT, 2009 WL 1097534, at *2 (D. Ariz. Apr. 22, 2009) (the plaintiff submitted evidence of affidavits from noninterested attorneys, the Laffey Matrix, and a consumer-law attorney-fee survey). Consequently, the holding of Skydive Arizona appears to have been the result of the evidence and arguments presented by counsel and not the result of a general rule to be applied in all cases.

Second, the Skydive Arizona decision may be based on an incorrect application of the relevant case law. Under the lodestar method for calculating attorney fees as articulated in the Ninth Circuit, a reasonable billing rate should "reflect[] the prevailing market rate in the community for similar services of lawyers 'of reasonably comparable skill, experience, and reputation.'" Skydive Arizona, 2011 WL 1004945, at *2 (quoting Dang v. Cross, 422 F.3d 800, 814 (9th Cir. 2005)). By its own terms, this standard should not take into consideration the size of the firm requesting attorney fees. Because the plaintiff's attorneys in Skydive Arizona came from one of the larger firms in Arizona, it is likely that this issue was never raised with the court. As briefly mentioned above, the decision states that the court relied only on those "portions of the Arizona Bar's 2007 edition of the Economics of Law Practice in Arizona" that the plaintiff's attorneys cited and attached to their briefs, which presumably included the data Judge Murgia cited relating to the size of the requesting attorneys' firm. See id. at *2.

Third, although Judge Murguia stated that the court "must use the lodestar method [as articulated by the Ninth Circuit] for calculating attorney's fees" under the Lanham Act (see id. at *2), other forums may have different or varying standards for determining an award of attorney fees. Arizona courts, for example, appear to apply Arizona law "to determine the necessity for and sufficiency of evidence to establish the reasonable value of attorneys' fees sought," even where the claim providing for the award of attorney fees is based on the substantive law of another forum. See Taylor v. Sec. Nat'l Bank, 20 Ariz. App. 504, 508, 514 P.2d 257, 261 (1973) (applying California substantive law to a contract claim but using Arizona law to determine the value of the attorney fees sought); see also Aries v. Palmer Johnson, Inc., 153 Ariz. 250, 257, 735 P.2d 1373, 1380 (App. 1987) (reasoning that the recovery of attorney fees is a substantive matter, whereas the calculation of the reasonable value of attorney fees sought is procedural and governed by the law of the forum). In view of this case law, it is arguable that awards for attorney fees based on federal law should be calculated using Arizona law (which, under certain circumstances, does not require use of the lodestar method), when the federal claim is brought in Arizona court. Thus, depending on the law of the relevant forum, Skydive Arizona may have little to no effect on solo and small-firm attorney fees requests.

Accordingly, although Skydive Arizona may provide a basis for reducing solo or small-firm attorney fees requests, there are also grounds for distinguishing and limiting its scope and effect.

Keywords: litigation, solo firms, small firms, attorney fees, Arizona

Cameron LaDuke is with Cohen Kennedy Dowd & Quigley, PC, in Phoenix, Arizona.

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