Lee v. ING Investment Management, LLC

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

CURTIS F. LEE, Plaintiff/Appellee/Cross-Appellant,

v.

ING INVESTMENT MANAGEMENT, LLC, a Delaware limited liability
company, Defendant/Appellant/Cross-Appellee.

No. 1 CA-CV 15-0025
FILED 6-16-2016

Appeal from the Superior Court in Maricopa County
No. CV2010-092027
The Honorable David O. Cunanan, Judge

AFFIRMED

COUNSEL

Beus Gilbert PLLC, Phoenix
By Leo R. Beus, Thomas A. Connelly
Counsel for Plaintiff/Appellee/Cross-Appellant

Ogletree, Deakins, Nash, Smoak, & Stewart, PC, Phoenix
By Tracy A. Miller, Caroline K. Larsen
Counsel for Defendant/Appellant/Cross-Appellee

OPINION

Judge John C. Gemmill delivered the opinion of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Maurice Portley joined.

G E M M I L L, Judge:
 LEE v. ING
Opinion of the Court

¶1 This appeal and cross-appeal arise from an action filed by
Curtis F. Lee against ING Investment Management, LLC (“IIM”) following
the termination of Lee’s employment. For the following reasons, we affirm
the superior court’s entry of judgment and its award of attorney fees and
costs.

BACKGROUND

¶2 Beginning in 2001, Lee was employed by IIM as a chief credit
officer. Lee was an at-will employee and never signed an employment
contract. He did, however, sign a one-page letter (the “Severance
Agreement”) outlining his rights in the event IIM terminated his
employment without cause:

[I]n the event you are terminated without cause from your
employment at [IIM] . . . you will receive a lump sum payment
equivalent to one year of your base salary and your average
annual bonus, provided that you sign the attached Release of
All Claims at the time of your termination.[1]

The Severance Agreement was also signed by James Hennessy, then-
President and CEO of IIM.

¶3 In 2010, IIM terminated Lee’s employment without cause.
According to Lee, IIM refused to pay him the amount owed under the
Severance Agreement. Lee then filed this suit alleging breach of contract,
breach of the implied covenant of good faith and fair dealing, and
entitlement to treble damages under Arizona Revised Statutes (“A.R.S.”)
section 23-355.

¶4 After extensive discovery, the parties filed cross-motions for
summary judgment. The court granted partial summary judgment in favor
of IIM, dismissing Lee’s claim under A.R.S. § 23-355 and rejecting Lee’s

1 IIM argues for the first time on appeal that it has a “complete defense” to
Lee’s claims because Lee never signed the release. We decline to address
the argument raised for the first time on appeal. See In re MH 2008-002659,
224 Ariz. 25, 27, ¶ 10 (App. 2010). Moreover, IIM made an offer of judgment
resolving Lee’s claims under the severance agreement. Lee accepted that
offer of judgment and judgment was entered. IIM cannot now claim it has
an absolute defense to the judgment. See Duwyenie v. Moran, 220 Ariz. 501,
506, ¶ 16 (2009) (explaining that a party cannot challenge a judgment to
which it consented).

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Opinion of the Court

calculation of the Severance Agreement’s bonus provision. The court
denied both parties’ motions for summary judgment on all other claims.

¶5 IIM subsequently presented Lee with an offer of judgment
under Arizona Rule of Civil Procedure (“Rule”) 68. IIM’s offer provided
that the court would enter a judgment against IIM and in favor of Lee in the
amount of $900,000, exclusive of any attorney fees that Lee would be
entitled to recover. Lee accepted the offer, and the court entered judgment
against IIM. Lee then filed a motion requesting attorney fees and costs,
which the court granted in part.

¶6 Both parties timely appeal. IIM argues the superior court
improperly determined Lee was the successful party for the purposes of
attorney fees under A.R.S. § 12-341.01(A). Lee argues the superior court
erred by rejecting his claim for treble damages under A.R.S. § 23-355 and
by not awarding him the entirety of his attorney fees and costs. This court
has appellate jurisdiction under A.R.S. § 12-2101(A)(1).

ANALYSIS

I. The Superior Court’s Attorney Fees and Costs Award

¶7 After Lee accepted IIM’s offer of judgment, he filed a timely
motion for attorney fees under A.R.S. § 12-341.01(A).2 Lee requested more
than $900,000 in attorney fees and $105,610.62 in taxable and non-taxable
costs. IIM objected and filed its own motion for attorney fees and costs,
claiming that it was the successful party. After reviewing “the totality of
the litigation and considering all relevant factors,” the superior court found
Lee was the successful party and awarded him $562,000 in attorney fees and
$18,021.21 in costs, awards both parties challenge on appeal.

A. IIM’s Appeal — Successful Party Determination

¶8 IIM argues the superior court improperly determined that
Lee, rather than IIM, was the successful party in the action. The
determination of the successful party under A.R.S. § 12-341.01(A) is within
the “discretion of the trial court,” and we will not disturb the court’s award
“if any reasonable basis exists” to support it. Berry v. 352 E. Virginia, LLC,
228 Ariz. 9, 13, ¶ 21 (App. 2011) (quoting Sanborn v. Brooker & Wake Prop.

2 In relevant part, A.R.S. § 12-341.01(A) provides: “In any contested action
arising out of a contract, express or implied, the court may award the
successful party reasonable attorney fees.” (Emphasis added.)

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Opinion of the Court

Mgmt., Inc., 178 Ariz. 425, 430 (App. 1994)); Hawk v. PC Village Ass’n Inc.,
233 Ariz. 94, 100, ¶ 19 (App. 2013).

¶9 IIM contends the amount of Lee’s recovery, compared with
the damages he originally sought, shows that Lee was not the successful
party. In his complaint, Lee sought compensatory damages under the
Severance Agreement and trebling of those damages under A.R.S. § 23-355.
But the superior court granted summary judgment against Lee on his claim
for treble damages, reducing by two-thirds the amount of Lee’s potential
recovery. The superior court also rejected Lee’s argument that the bonus
provision of the severance agreement should be calculated using the
average value of the last three bonuses Lee actually received, rather than
the average of his bonuses during the last three years of his employment.3
Accordingly, as a result of successfully defending the majority of Lee’s
claims in terms of dollar value, IIM argues it was the successful party.

¶10 IIM has shown no abuse of discretion. “Partial success does
not preclude a party from ‘prevailing’ and receiving a discretionary award
of attorneys’ fees”; the superior court may find that a party is the successful
party even when the recovery it obtains is “significantly reduced.” Berry,
228 Ariz. at 14, ¶¶ 23–24. Although the court’s entry of summary judgment
against Lee on his treble damages claim precluded him from recovering a
significant portion of the damages he sought, Lee still obtained a $900,000
judgment on the key claim of his suit. Furthermore, although a monetary
award is not alone dispositive, it is still “an important item [for the court]
to consider when deciding who, in fact, did prevail” in the litigation. See
Ocean W. Contractors, Inc. v. Halec Constr. Co., 123 Ariz. 470, 473 (1979). In
light of the totality of the litigation, there is a reasonable basis for the
superior court’s conclusion that Lee was the successful party under A.R.S.
§ 12-341.01(A). See Schwartz v. Farmers Ins. Co. of Ariz., 166 Ariz. 33, 38 (App.
1990) (affirming superior court’s use of a “totality of the litigation” test for
determining the successful party).

B. Lee’s Appeal — Amount of Fees and Costs Awarded

¶11 In his cross appeal, Lee argues the court erred by awarding
him less than the total amount of fees and costs he requested under A.R.S.

3 The Severance Agreement states: “The average annual bonus will be
calculated by averaging the annual bonuses you have received during the
three full calendar years preceding the date of your termination . . . .” Lee
received a bonus in only two of the last three years of his employment.

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Opinion of the Court

§§ 12-341.01 and 12-341.4 We review the amount of the superior court’s
attorney fees and costs awards for an abuse of discretion. Modular Mining
Systems, Inc. v. Jigsaw Technologies, Inc., 221 Ariz. 515, 521, ¶ 21 (App. 2009)
(fees); Graville v. Dodge, 195 Ariz. 119, 130 (App. 1999) (costs).

¶12 Lee has not shown there is no reasonable basis for the superior
court’s reduced fee award. See Hawk, 223 Ariz. at 100, ¶ 21 (“Though
reasonable minds may have balanced the factors differently, we cannot say
that the superior court’s decision was an abuse of discretion.”); see also
Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 569, ¶ 9 (explaining that
the court “will affirm an award with a reasonable basis even if the trial court
gives no reasons for its decision”). In their motions for fees and costs, each
party pointed to the possibility of early resolution and the complicated and
lengthy discovery process as evidence that the other party acted
unreasonably during the suit, thereby driving up the cost of litigation. Both
parties agree that IIM was willing to pay up to $670,000 to resolve Lee’s
claims before the lawsuit was filed. Lee contends the costs of litigation were
thus inflated by IIM’s “bad faith litigation tactics.” IIM counters by arguing
Lee’s “unreasonableness” made it necessary for IIM to “defend itself
[through] this long, protracted litigation.”

¶13 As it was required to do, the court reviewed “the moving
papers and any attachments, the relevant statutory and legal authority, and
the facts” of the case and determined a reasonable amount of fees and costs
to award Lee. See Hawk, 223 Ariz. at 100, ¶ 21. In so doing, the court
determined that Lee was entitled to some, but not all, of his requested costs
and attorney fees.5 On this record, Lee has not shown the superior court’s
reduced fees and costs award was an abuse of discretion.

II. Partial Summary Judgment and Rule 68

¶14 Lee also argues the superior court’s grant of partial summary
judgment on his treble damage claim was contrary to law. We do not reach

4 In relevant part, A.R.S. § 12-341 provides: “The successful party to a civil
action shall recover from his adversary all costs expended or incurred
therein unless otherwise provided by law.” “Costs” in the superior court
are defined as taxable costs, such as witness fees, costs of depositions,
compensation of referees, and certified copies. A.R.S. § 12-332; In re Nelson,
207 Ariz. 318, 323, ¶ 20 (2004).

5 The record reveals the superior court limited Lee’s recovery of costs to
taxable costs in accordance with A.R.S. § 12-341 and A.R.S. § 12-332.

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Opinion of the Court

Lee’s arguments, however, because his right to appeal the interlocutory
summary judgment rulings was extinguished when he accepted IIM’s offer
of judgment under Rule 68.

¶15 Rule 68 allows any party to serve on the other party an offer
allowing judgment to be entered in accordance with the offer’s terms. If the
offer of judgment is accepted, then “either party may file the offer together
with proof of acceptance, and a judgment . . . shall be entered.” Ariz. R.
Civ. P. 68(c). Once entered by the court, an accepted offer of judgment
represents a substantive adjudication of the case on its merits. See 4501
Northpoint LP v. Maricopa Cnty., 212 Ariz. 98, 102, ¶ 19 (2006) (explaining
that a Rule 68 judgment, “under ordinary principles of claim preclusion,”
prevents the parties thereto from re-litigating the claims resolved by the
judgment). Accordingly, a party’s acceptance of a Rule 68 offer of judgment
ends litigation and represents a final resolution of all claims at issue therein.
See id.; see also Cuellar v. Vettorel, 235 Ariz. 399, 403, ¶ 14 (App. 2014) (holding
that Rule 68 prevents “collateral litigation” to determine liability after entry
of judgment).

¶16 IIM’s offer of judgment encompassed all of Lee’s claims,
including the claims addressed by the partial summary judgment ruling.
“Because an offer of judgment need not be apportioned by claim, it follows
that a party’s offer encompasses all the opposing party’s claims, unless
otherwise specified in the language of the offer.” Douglas v. Governing Bd.
of Window Rock, 221 Ariz. 104, 109–10 (App. 2009) (explaining that offer of
judgment in a class-action suit encompassed both (1) the class certification
and (2) the individual claim on the merits) (internal quotations
omitted). We disagree with Lee’s contention that the claims resolved by
the partial summary judgment rulings were no longer “in this action” at the
time of IIM’s offer of judgment. Those rulings did not dispose of all claims
nor were they certified as final and appealable under Rule 54(b).

¶17 Lee cites Wersch v. Radnor/Landgrant, 192 Ariz. 99, 102 (App.
1997), in which this court explained that a Rule 68 offer of judgment could
not nullify a court’s ruling on summary judgment because that ruling
“resolved all of the issues between the plaintiffs and this defendant.”
(Emphasis added.) In contrast to Wersch, the partial summary judgment
rulings in this case did not resolve all issues between Lee and IIM. The Rule
68 judgment therefore encompassed the entirety of Lee’s claims, including
the unappealed, interlocutory summary judgment rulings.

¶18 This interpretation of Rule 68 is consistent with the purpose
of the rule. Rule 68 helps parties settle meritorious claims outside of court,

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 LEE v. ING
Opinion of the Court

thus avoiding needless litigation. Warner v. Southwest Desert Images, LLC,
218 Ariz. 121, 138, ¶ 57 (App. 2008) (explaining that the purpose of Rule 68
is not met by allowing collateral litigation to determine whether the parties
to a lien acted in good faith when refusing to reach a settlement). Allowing
parties to continue litigating issues no longer central to the resolution of the
case would run contrary to Rule 68’s purpose of avoiding prolonged,
unnecessary legal disputes. Cuellar, 235 Ariz. at 403, ¶ 14; see also Levy v.
Alfaro, 215 Ariz. 443, 445, ¶ 12 (App. 2007) (“Rule 68 is intended to
encourage settlement and avoid protracted litigation.”); Wersch, 192 Ariz.
at 102 (when “summary judgment had already resolved the matter,” there
was no need for the parties to reach agreement under Rule 68).

¶19 By accepting IIM’s offer of judgment, Lee agreed to end the
litigation on all claims encompassed by his complaint once judgment was
entered against IIM. Accordingly, Lee cannot now appeal the superior
court’s interlocutory summary judgment rulings because he agreed to entry
of judgment resolving those claims. See Duwyenie v. Moran, 220 Ariz. 501,
506, ¶ 16 (App. 2009) (“A party cannot generally appeal from an order that
it consented to have entered against it.”); Douglas, 221 Ariz. at 108–09, ¶ 9
(“It is a well-established rule that a party cannot appeal from a judgment to
which it consents.”).

¶20 Lee argues that his consent to the judgment was conditional
upon the superior court’s earlier promise to “preserve all parties’ rights of
appeal.” IIM’s response is that, in the event Lee’s acceptance was in fact
conditional, the judgment is invalid because Lee never properly accepted
it. Neither argument is supportable.

¶21 This court’s appellate jurisdiction is limited by statute, and
the superior court cannot enlarge a party’s right to appeal nor this court’s
jurisdiction to hear an appeal. See Garza v. Swift Transp. Co. Inc., 222 Ariz.
281, 283–84, ¶ 12 (explaining that this court’s appellate jurisdiction is
derived “wholly from statutory provisions” (quoting Eaton v. Unified Sch.
Dist. No. 1, 122 Ariz. 391, 392 (App. 1979))); see also State ex rel. Neely v.
Rodriguez, 165 Ariz. 74, 77 (1990) (explaining that this court cannot expand
its statutory appellate jurisdiction by using its special action jurisdiction
when a party has failed to timely file a notice of appeal).6 The acceptance

6 The parties may have misinterpreted the superior court’s good-faith
attempt to preserve an appellate remedy beyond the acceptance of a Rule
68 offer of judgment. But the superior court subsequently explained,
during argument on IIM’s motion for clarification, that it did not purport

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Opinion of the Court

of the Rule 68 offer and the entry of judgment resolved all the claims
between the parties (including the interlocutory rulings), meaning there
was nothing to appeal.

CONLCUSION

¶22 We affirm the judgment and award of fees and costs as set
forth in the superior court’s November 26, 2014 order. Both parties request
attorney fees and costs on appeal. We conclude that neither Lee nor IIM
prevailed in this appeal. Because neither side was “successful” under
A.R.S. § 12-341.01 or § 12-341, we decline to award attorney fees or costs on
appeal to either party. See Smith v. Pinnamaneni, 227 Ariz. 170, 179, ¶ 29
(App. 2011).

:AA

to expand the parties’ rights to appeal: “I can’t confer something I don’t
have, and that’s a question for the Court of Appeals . . . .”

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