Chasan v. Farmers

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

CYNTHIA CHASAN, Plaintiff/Appellant,

v.

FARMERS INSURANCE EXCHANGE; FARMERS INSURANCE
COMPANY OF ARIZONA, et al., Defendants/Appellees.

No. 1 CA-CV 14-0832
FILED 4-5-2016

Appeal from the Superior Court in Maricopa County
No. CV1999-004815
The Honorable Arthur T. Anderson, Judge

AFFIRMED

COUNSEL

Law Offices of Richard Langerman, Phoenix
By Richard W. Langerman
Counsel for Plaintiff/Appellant

Broening Oberg Woods & Wilson, PC, Phoenix
By James R. Broening, Jathan P. McLaughlin, Kevin R. Myer
Counsel for Defendants/Appellees
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MEMORANDUM DECISION

Judge John C. Gemmill delivered the decision of the Court, in which
Presiding Judge Andrew W. Gould and Judge Margaret H. Downie joined.

G E M M I L L, Judge:

¶1 Cynthia Chasan and the estate of her late husband, Dow
Chasan (collectively “Chasan”) challenge the Maricopa County Superior
Court’s ruling awarding attorney fees and sanctions to Farmers Insurance
Company of Arizona (“FICA”) and Farmers Insurance Exchange (“FIE”).
For the reasons set forth below, we affirm.

BACKGROUND

¶2 We address only the facts relevant to this appeal; other details
may be found in our three earlier decisions: Chasan v. Farmers Group, Inc.,
Case No. 1 CA-CV 03-0102 (Ariz. App. Jan. 20, 2005) (mem. decision)
(“Chasan I”); Chasan v. Farmers Group, Inc., Case No. 1 CA-CV 07-0323, 2009
WL 3335341 (Ariz. App. Sept. 24, 2009) (mem. decision) (“Chasan II”); and
Estate of Chasan v. Farmers Ins. Exchange, Case No. 1 CA-CV 12-0397, 2013
WL 2297026 (Ariz. App. May 23, 2013) (mem. decision) (“Chasan III”).

¶3 Chasan sued the Farmers Insurance group of companies in
1999, alleging breach of contract and bad faith stemming from a 1998
burglary. Chasan’s amended complaint, filed in 2000, named four Farmers
entities: FICA, FIE, Farmers Group Inc. (“FGI”), and Fire Insurance
Exchange (“FIRE”). In 2002, the trial court granted summary judgment in
favor of all four defendants. Chasan appealed; in Chasan I, we reversed the
summary judgment ruling and remanded for further proceedings.

¶4 Following Chasan I, Chasan’s claims against FGI and FIRE
were again resolved by motion. Chasan’s claims against FICA and FIE went
to trial, where the jury found for the Chasans and awarded them
compensatory and punitive damages. FICA and FIE appealed, and in
Chasan II, we reduced the punitive damages award to Mrs. Chasan, vacated
the punitive damages award to Mr. Chasan, reversed and vacated an
additur entered for Mr. Chasan, and vacated the attorney fees award to the
Chasans. 2009 WL 3335341 at *16, ¶¶ 71–73. We also found that FICA and

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FIE were successful parties entitled to recover reasonable attorney fees and
costs. Id. at *16, ¶ 70.

¶5 On remand following Chasan II, the trial court affirmed, in
large part, the jury’s compensatory damages awards and again awarded
punitive damages to Mr. Chasan. The trial court also ruled that the Chasans
were successful parties entitled to recover reasonable attorney fees and
costs. As a result, the trial court denied FICA’s and FIE’s motion for
sanctions under Arizona Rule of Civil Procedure (“Rule”) 68, explaining
that the motion hinged on an offer of judgment to Chasan for $133,333.33,
including attorney fees and costs.

¶6 Both sides appealed, which led to Chasan III. There, we
determined the judgments the Chasans obtained were not more favorable
than FICA’s and FIE’s December 14, 2000 offers of judgment. Chasan III,
2013 WL 2297026, at *6–*10, ¶¶ 25–36. We vacated the fee awards to the
Chasans, deemed FICA and FIE the successful parties from December 14,
2000 forward, and remanded for a determination of a reasonable attorney
fees award to FICA and FIE. Id. at *9, ¶ 36. We also determined that FICA
and FIE would be eligible to request Rule 68 sanctions and explained that
the trial court “may consider [Chasan’s] argument that, although FICA and
FIE were jointly represented, FICA cannot recover attorneys’ fees because
the bills were sent to and paid by FIE . . . . ” Id.

¶7 On remand, FICA and FIE moved for an award of attorney
fees and Rule 68 sanctions. Chasan opposed the motion, arguing that
neither FICA nor FIE paid the fees they sought to recover. Chasan also
applied for a supplemental attorney fees award, arguing that she was the
successful party from October 10, 2002 forward.

¶8 The trial court granted FICA’s and FIE’s requests for attorney
fees and Rule 68 sanctions and denied Chasan’s supplemental fee
application. The trial court entered judgment against Chasan for $223,416
in attorney fees and $100,915.81 in Rule 68 sanctions. Chasan timely
appeals. We have jurisdiction under Arizona Revised Statutes (“A.R.S.”)
section 12-2101(A)(2).

DISCUSSION

¶9 This appeal hinges on the parties’ competing interpretations
of A.R.S. § 12-341.01 and Rule 68. We review these interpretations de novo,
using principles of statutory construction. See Halt v. Gama ex rel. Cty. of
Maricopa, 238 Ariz. 352, 354, ¶ 9 (App. 2015); Arizona Tile, LLC v. Berger, 223
Ariz. 491, 498–99, ¶ 35 (App. 2010).

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I. Attorney Fees Award to FICA and FIE

¶10 Chasan argues neither FICA nor FIE can recover attorney fees
because the fees were paid by FIRE, not FICA or FIE. Chasan contends that
the “billing statements prepared . . . indicate that the firm’s client in the
Chasan litigation was FIRE” and therefore FICA and FIE are precluded
from recovering attorney fees under A.R.S. § 12-341.01(B), which limits the
recovery of fees to “the amount paid or agreed to be paid.”

¶11 This court has explained that § 12-341.01(B)1 imposes two
prerequisites on the recovery of attorney fees: (1) an attorney-client
relationship between the litigant and counsel; and (2) a “genuine financial
obligation on the part of the litigant” to pay the fees. Moedt v. Gen. Motors
Corp., 204 Ariz. 100, 103, ¶ 11 (App. 2002) (internal citation and quotation
omitted). Chasan points to a 2014 letter from counsel providing the address
to which billing statements “generally” were sent and three checks issued
by “Farmers Insurance Group of Companies/Fire Insurance Exchange” as
proof that neither FICA nor FIE actually paid — or incurred an obligation
to pay — attorney fees. See A.R.S. § 12-341.01(B).

¶12 Even assuming FIRE made payments to counsel, FICA and
FIE had an attorney-client relationship with counsel and accepted the
benefits of representation.2 FICA and FIE therefore incurred an obligation
to pay attorney fees. See Wilcox v. Waldman, 154 Ariz. 532, 538 (App. 1987)
(“[T]he fact that fees may ultimately be borne by third parties . . . does not
prevent the successful party from meeting the requirements of A.R.S. § 12-

1 In relevant part, A.R.S. § 12-341.01 provides:

A. In any contested action arising out of a contract, express or
implied, the court may award the successful party reasonable
attorney fees.

...

B. The award of reasonable attorney fees pursuant to this
section 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.
2 Neither FICA nor FIE appear to dispute that another Farmers entity paid
at least a portion of the fees.

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341.01(B)”); see also Journal-Minter Publ’g Co. v. Curley, 31 Ariz. 280, 282–83
(1927) (explaining that when services are rendered to a client, the obligation
to pay for those services arises regardless of whether a written agreement
exists).

¶13 Chasan cites Lisa v. Strom, 183 Ariz. 415 (App. 1995), to
support her contention that FICA’s and FIE’s obligation to pay fees was not
genuine. But Lisa is distinguishable on multiple grounds. There, we held
an attorney-litigant representing himself, his wife, and his marital
community could not recover attorney fees under A.R.S. § 12-349. Lisa, 183
Ariz. at 418–20. We explained that “[t]he judicial system would be unfair if
an attorney-litigant could qualify for a fee award without incurring the
potential out-of-pocket obligation that the opposing nonlawyer party must
bear in order to qualify for a similar award.” Id. at 419. We further noted
that an award of fees would not have made the parties whole because any
hypothetical payment would have been “made by the [marital] community
to itself.” Id. at 420.

¶14 Neither FICA nor FIE is an attorney-litigant and neither
represented itself in this litigation. The facts of this case thus are much
closer to Caruthers v. Underhill, 230 Ariz. 513 (App. 2012). There, the
plaintiffs argued that the successful defendant, Underhill Holding
Company (“UHC”), could not recover attorney fees because a related
company, Underhill Transfer Company (“UTC”), paid UHC’s fees. Id. at
527, ¶ 60. We found UHC could recover attorney fees because

[t]he declaration of UHC’s counsel submitted in support of
UHC’s application for attorneys’ fees stated that, pursuant to
its fee agreement with his firm, UHC was billed monthly for
all attorneys’ fees and other expenses incurred. It further
noted that UHC had already paid for the vast majority of
those fees and expenses.

…

Although the billing statements list Underhill [Transfer]
Company and not UHC next to “Client Number,” UHC’s
counsel explained at oral argument that the firm’s software
allowed only one name. In addition, many of the invoices
were addressed to Underhill Holding Corporation. The
record sufficiently establishes that UHC agreed to pay its
attorneys’ fees.

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Id. at 527, ¶¶ 60–61.

¶15 Here, the affidavits FICA and FIE submitted with their
attorney fees application state that “the terms of the fee arrangement
between the Law Firm and Farmers provide that the Law Firm be
reimbursed for attorney and paralegal services at a specified hourly rate”
and that “the records, and accompanying checks issued by Farmers indicate
that the [billing] statements were submitted to, and paid, by Farmers.”
FICA and FIE also submitted a record of payments to counsel totaling
$663,747.72. On this record, the trial court permissibly determined that
FICA and FIE owed a genuine obligation to pay their counsel’s fees. Section
12-341.01(B) does not bar FICA and FIE from recovering attorney fees.

II. Chasan’s Supplemental Application for Attorney Fees

¶16 Chasan also challenges the trial court’s denial of her
supplemental application for attorney fees. On October 10, 2002, the
Chasans sent a letter to counsel for FICA and FIE expressing the Chasans’
then-willingness to “forego any appeal in this matter in exchange for a
satisfaction of any judgment that your clients obtain.” After our decision in
Chasan III, Chasan filed a supplemental application for attorney fees,
contending — for the first time — that this letter constituted a settlement
offer more favorable than the final judgment FICA and FIE ultimately
obtained. Accordingly, Chasan argued she is the successful party under
A.R.S. § 12-341.01(A)3 and is entitled to attorney fees from October 10, 2002
forward.

¶17 In response, FICA and FIE argued that Chasan was precluded
from asserting her successful party argument because she failed to raise it

3 In relevant part, A.R.S. § 12-341.01(A) provides:

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.

We assume, without deciding, that the October 10, 2002 letter constituted a
“written settlement offer” for the purposes of this statute.

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in Chasan III. The trial court agreed, denied Chasan’s fee application, and
awarded attorney fees to FICA and FIE “from December 14, 2000 forward.”

¶18 A question that was “necessarily involved and decided” on
appeal generally becomes the “law of the case” and may not be
reconsidered by a trial court on remand. State v. Bocharski, 218 Ariz. 476,
489, ¶ 60 (2008) (quoting State v. King, 180 Ariz. 268, 278 (1994)); see also
Lennar Corp. v. Transamerica Ins. Co., 227 Ariz. 238, 242–43, ¶ 12 (App. 2011).
The doctrine is meant to uphold the principle that “orderly processes of
judicial procedure require an end to litigation.” State v. Maxwell, 19 Ariz.
App. 431, 435 (1973) (quoting Gore v. Bingaman, 124 P.2d 17, 20 (Cal. 1942)).
Nonetheless, we will not preclude a court from reconsidering a prior
decision if substantial injustice will result. Lennar Corp., 227 Ariz. at 243, ¶
12.

¶19 The law of the case doctrine applies here. As stated by this
court, the central issue in Chasan III was “whether a judgment finally
obtained by [Chasan] was more favorable than [FICA’s and FIE’s] written
settlement offer she rejected a dozen years ago,” implicating “the successful
party determination for a statutory attorneys’ fees award.” 2013 WL
2297026 at *1, ¶ 1. We held Chasan was the successful party until FICA and
FIE made a settlement offer on December 14, 2000; FICA and FIE were
deemed the successful parties “from December 14, 2000 forward.” Id. at *9,
¶ 36. The successful party determination was therefore “necessarily
involved and decided” in Chasan III.4 See Bocharski, 218 Ariz. at 489, ¶ 60.
The trial court appropriately refused to reconsider this court’s
determination that FICA and FIE were the prevailing parties from
December 14, 2000 forward.

¶20 We disagree with Chasan’s contention that she could not have
raised the October 2002 letter in Chasan III because she was not aggrieved
by the judgment then under review. As the appellants, FICA and FIE
argued they were entitled to attorney fees from December 14, 2000 forward.
As the appellee, Chasan did not need to be aggrieved in order to respond
to this affirmative argument. Chasan could have raised the issue of the
October 2002 settlement offer during Chasan III. Because Chasan had a fair
opportunity to present her argument, applying the law of the case doctrine
on remand does not result in a “manifestly unjust decision.” Lennar Corp.,

4 Because Chasan III held FICA and FIE to be the successful parties “from
December 14, 2000 forward” (emphasis added), we find unconvincing
Chasan’s argument that the court’s decision did not address whether
FICA’s and FIE’s success “would continue indefinitely.”

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227 Ariz. at 243, ¶ 12 (quoting Dancing Sunshines Lounge v. Indus. Comm’n,
149 Ariz. 480, 482 (1986)).

¶21 Furthermore, even if the law of the case doctrine does not
apply here, we agree that Chasan waived the argument that the 2002 letter
changed the successful party calculus. As this court has explained, “issues
not raised and argued in a first appeal may not be raised later in a second
appeal.” Jimenez v. Wal-Mart Stores, Inc., 206 Ariz. 424, 427, ¶ 11 (App. 2003)
(citing Carrillo v. State, 169 Ariz. 126, 132 (App. 1991)). In Chasan III, Chasan
had the opportunity to argue that she was the successful party as of October
10, 2002. Because Chasan did not clearly raise and argue the issue until
after Chasan III, she has waived the argument. See Carrillo, 169 Ariz. at 132.
The trial court correctly determined that she could not assert it on remand.
Accordingly, we affirm the trial court’s denial of Chasan’s supplemental
application for attorney fees.

III. Rule 68 Sanctions Award to FICA and FIE

¶22 Chasan also challenges the trial court’s award of Rule 68
sanctions. We review the imposition of sanctions for an abuse of discretion.
Berry v. 352 E. Virginia, LLC, 228 Ariz. 9, 15, ¶ 31 (App. 2011).

¶23 Chasan first contends Chasan III held that “the trial court
should limit the sanctions to the costs/expenses actually paid by each
party.” We did not so hold; instead, we found FICA and FIE were eligible
to request Rule 68 sanctions upon remand. Chasan III, 2013 WL 2297026, at
* 8, *10, ¶¶ 31, 36.

¶24 Chasan also argues FICA and FIE cannot recover Rule 68
sanctions because FIRE allegedly paid their costs and expenses. Rule 68, as
it existed in 2000 when FICA and FIE made their offers of judgment,5
authorized an award of “reasonable expert witness fees and double the
taxable costs of the offeror . . . incurred after making the offer.” Ariz. R. Civ.
P. 68(d) (emphasis added). Chasan does not dispute that the costs FICA
and FIE sought to recover were incurred on their behalf. Therefore, even
assuming FIRE actually paid the costs, FICA and FIE incurred them. FICA
and FIE may therefore recover Rule 68 sanctions.

5 The parties stipulated in Chasan III that the 2000 version of Rule 68 applies
to FICA’s and FIE’s offers of judgment. 2013 WL 2297026, at *7 n.7, ¶ 26. In
any event, the language of the current Rule 68(d) is substantially similar on
this point.

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CONCLUSION

¶25 We affirm the trial court’s awards of attorney fees and Rule
68 sanctions to FICA and FIE. Both sides request attorney fees on appeal
pursuant to A.R.S. §§ 12-341.01(A) and 12-349. In our discretion, we deny
these requests. Because FICA and FIE are the successful parties in this
appeal, they are entitled to taxable costs upon compliance with ARCAP 21.

:ama

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