Risas Holdings v. Tackett

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

RISAS HOLDINGS LLC, et al., Plaintiffs/Appellees,

v.

BRANDON TACKETT, et al., Defendants/Appellants.

No. 1 CA-CV 20-0150
FILED 12-1-2020

Appeal from the Superior Court in Maricopa County
No. CV2016-001841
The Honorable Christopher T. Whitten, Judge

AFFIRMED

COUNSEL

Osborn Maledon, P.A., Phoenix
By Scott W. Rodgers, Kristin L. Windtberg, Eric M. Fraser
Counsel for Plaintiffs/Appellees

Galbut Beabeau, P.C., Scottsdale
By Olivier A. Beabeau, Keith R. Galbut, Grant H. Frazier
Counsel for Defendants/Appellants
 RISAS HOLDINGS, et al. v. TACKETT, et al.
Decision of the Court

MEMORANDUM DECISION

Acting Presiding Judge Lawrence F. Winthrop delivered the decision of the
Court, in which Chief Judge Peter B. Swann and Judge Maurice Portley1
joined.

W I N T H R O P, Judge:

¶1 Brandon and Catherine Tackett (“the Tacketts”) appeal the
superior court’s denial of attorneys’ fees and costs following resolution of
multi-count litigation with Risas Dental Management, LLC, and Risas
Holdings, LLC (collectively, “Risas”). The Tacketts argue the trial court
erred in denying their request for attorneys’ fees and costs based on a
contractual agreement between the parties and based on Arizona Revised
Statutes (“A.R.S.”) sections 12-341, -341.01. The Tacketts also contend the
court erred in failing to grant attorneys’ fees for defending a trade secret
claim pursuant to A.R.S. § 44-404(3). For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 Risas Holdings, LLC, owns and manages Risas Dental
Management, LLC, which operates dental offices in Arizona and Colorado.
Risas hired Brandon Tackett (”Tackett”) as a support center director in 2013,
and he transitioned into the role of marketing director in early 2015.

¶3 In connection with his employment, Tackett signed an
Employee Confidentiality and Non-Solicitation Agreement (the
“Confidentiality Agreement”). The Confidentiality Agreement prohibited
Tackett from disclosing or using certain confidential company information
or trade secrets during and after his employment with Risas. It also
restricted Tackett’s ability to solicit Risas’ employees for two years after
Tackett ended his employment with Risas. In addition, Tackett signed a
Stock Participation Agreement, which included additional confidentiality
provisions (the “Participant Agreement”).

1 The Honorable Maurice Portley, Retired Judge of the Court of
Appeals, Division One, has been authorized to sit in this matter pursuant
to Article 6, Section 3, of the Arizona Constitution.

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¶4 Tackett gave Risas notice of his resignation in early 2016. A
few weeks later, Tackett formed Somos Dental, LLC, and Somos Dental
Services, LLC, (collectively, “Somos”) to provide dental management and
consulting services.

¶5 Risas subsequently filed suit against Tackett, seeking
monetary damages and a temporary restraining order, as well as
preliminary and permanent injunctions, to prevent Tackett from competing
with Risas or using Risas’ confidential information and intellectual
property. An amended complaint later joined Tackett’s wife, Catherine,
and Somos as defendants (collectively, the “Defendants”). The amended
complaint alleged seven counts against the Tacketts and/or Somos:
(1) Breach of the Confidentiality Agreement; (2) Violation of Arizona’s
Uniform Trade Secrets Act; (3) Breach of Fiduciary Duty; (4) Preliminary
and Permanent Injunction; (5) Unfair Competition; (6) Aiding and Abetting;
and (7) Breach of the Participant Agreement.

¶6 In May 2016, the parties entered a Consent Decree enjoining
Tackett from using Risas’ confidential information for five years from the
date of his termination and from soliciting any of Risas’ employees for two
years from his termination. Although limited in scope, entry of this decree
provided Risas the core relief it sought in Count 4 of its complaint. The
court subsequently granted Defendants’ motion for summary judgment on
all remaining counts of Risas’ complaint, except for Count 3, the claim for
Breach of Fiduciary Duty. The parties later stipulated to a monetary
judgment of $80,601.43 in favor of Risas to resolve the fiduciary duty claim.

¶7 Defendants filed an application for attorneys’ fees and costs
and Risas filed an application for costs. After reviewing the parties’
memoranda, the court denied Defendants’ request for fees and costs, and
awarded Risas its costs in the amount of $12,170.85. The court reasoned
that, based on the totality of the litigation, Risas was the prevailing party
because it obtained the injunctive relief it sought and obtained “the only
money that changed hands.”

¶8 Defendants filed a motion for reconsideration on the issue of
costs and fees, which the court denied. The court entered final judgment
on the matter, affirming the injunctive relief covered by the Consent Decree,
entering judgment for $80,601.43 in favor of Risas on the fiduciary duty
claim, entering judgment for Defendants on the remaining counts, and
awarding Risas its taxable costs.

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¶9 The Tacketts timely appealed the final judgment to this Court.
We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).

ANALYSIS

I. Attorneys’ Fees and Costs Pursuant to the Confidentiality
Agreement and A.R.S. §§ 12-341, -341.01

¶10 The Confidentiality Agreement mandates that if “any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party will be entitled to reasonable attorneys’
fees, costs, and necessary disbursements.” Similarly, A.R.S. § 12-341.01
provides that “[i]n any contested action arising out of a contract, express or
implied, the court may award the successful party reasonable attorney
fees.” Also, “[t]he successful party to a civil action shall recover from his
adversary all costs expended or incurred therein.” A.R.S. § 12-341.

¶11 The Tacketts contend that because they obtained summary
judgment on every claim seeking enforcement of the Confidentiality
Agreement, they are entitled to attorneys’ fees and costs for litigation of
those contract-related claims through the summary judgment phase
pursuant to the attorneys’ fees clause in the Confidentiality Agreement and
A.R.S. §§ 12-341, -341.01. They argue the trial court had no reasonable basis
to conclude Risas was the “prevailing party” under the contract because
Risas only secured a favorable judgment on the fiduciary duty claim, which
is a tort claim that did not depend on or arise out of the Confidentiality
Agreement.

¶12 We review de novo the application and interpretation of a
contractual provision for attorneys’ fees and costs. Murphy Farrell Dev.,
LLLP v. Sourant, 229 Ariz. 124, 133, ¶ 31 (App. 2012). We also review de novo
the application and interpretation of A.R.S. § 12-341.01. Modular Mining
Sys., Inc. v. Jigsaw Tech., Inc., 221 Ariz. 515, 521, ¶ 21 (App. 2009).

¶13 The trial court has discretion whether to award attorneys’ fees
under A.R.S. § 12-341.01; but, “[u]nlike fees awarded under A.R.S. § 12-
341.01(A), the court lacks discretion to refuse to award fees under [a]
contractual provision.” McDowell Mountain Ranch Cmty. Ass’n, Inc. v.
Simons, 216 Ariz. 266, 269, ¶ 14 (App. 2007) (internal quotations omitted);
accord Bennett v. Appaloosa Horse Club, 201 Ariz. 372, 378, ¶ 26 (App. 2001)
(“The awarding of attorneys’ fees to a prevailing party pursuant to a
contract between the parties is mandatory.”).

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¶14 But whether pursuant to A.R.S. § 12-341.01 or an attorneys’
fees clause in a contract, the determination of which party is the
“successful” or “prevailing” party for the purposes of awarding attorneys’
fees remains within the discretion of the trial court and will not be disturbed
on appeal if any reasonable basis for it exists. See Sanborn v. Brooker & Wake
Prop. Mgmt., Inc., 178 Ariz. 425, 430 (App. 1994); Bobrow v. Bobrow, 241 Ariz.
592, 598, ¶ 25 (App. 2017); see also Assyia v. State Farm Mut. Auto. Ins. Co.,
229 Ariz. 216, 223, ¶ 32 (App. 2012) (noting the superior court has
“substantial discretion” in determining who is the successful party for the
purposes of costs). Accordingly, we need only consider whether any
reasonable basis exists for the court’s determination that Risas was the
prevailing party.

¶15 Looking at the totality of the litigation, including the
outcomes of the claims arising out of the Confidentiality Agreement, we
cannot say the superior court abused its discretion. Although the court’s
April 17, 2018 minute entry granted Defendants’ motion for summary
judgment on all counts except Count 3 (Breach of Fiduciary Duty), the
court’s final judgment correctly notes Count 4 was resolved by the Consent
Decree entered prior to the summary judgment ruling. The basis for the
Consent Decree was the Confidentiality Agreement and the decree granted
Risas injunctive relief according to the scope of the Confidentiality
Agreement with regard to the use of confidential information and
solicitation of employees. Prior case law makes clear that in determining
who is the “prevailing party” for the purposes of fees, “court-ordered
consent decrees create the material alteration of the legal relationship of the
parties necessary to permit an award of attorney’s fees.” Buckhannon Bd. &
Care Home, Inc. v. W. Va. Dep’t of Health & Hum. Res., 532 U.S. 598, 604 (2001)
(internal quotations omitted). This is true even if the consent decree does
not include an admission of liability. Id. Moreover, a claim need not be
adjudicated on the merits to warrant an award of fees. Fulton Homes Corp.
v. BBP Concrete, 214 Ariz. 566, 572, ¶ 24 (App. 2007).

¶16 The superior court’s later grant of summary judgment does
not negate the enforceable injunctive relief Risas sought in its amended
complaint and obtained through the Consent Decree.2 Similarly, the

2 The Tacketts assert that the Consent Decree was no more than an
“ephemeral” “initial victory” that was insufficient to make Risas the
“prevailing party,” citing Sole v. Wyner, 551 U.S. 74, 86 (2007) (“[A] plaintiff
who gains a preliminary injunction does not qualify for an award of counsel
fees under § 1988(b) if the merits of the case are ultimately decided against

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injunctive relief obtained by Risas is not made meaningless by the fact that
Risas continued to seek more expansive injunctive relief after entering the
Consent Decree. See Lee v. ING Inv. Mgmt., LLC, 240 Ariz. 158, 161, ¶ 10
(App. 2016) (“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.” (internal quotations omitted)). As such,
there was a reasonable basis for the court to determine Risas was the
prevailing party for the purposes of defeating Defendants’ claim for
attorneys’ fees and costs and awarding Risas its taxable costs. Accordingly,
the court did not abuse its discretion.

II. Attorneys’ Fees Pursuant to A.R.S. § 44-404(3)

¶17 With respect to Count 2, the trade secrets claim, A.R.S. § 44-
404 provides an attorneys’ fee award is permissible under the following
circumstances:

The court may award reasonable attorney fees to the
prevailing party for any of the following:

1. A claim of misappropriation made in bad faith.

2. A motion to terminate an injunction made or resisted in
bad faith.

3. Willful and malicious appropriation.

¶18 The Tacketts argue they should have been granted attorneys’
fees pursuant to A.R.S. § 44-404(3) because they successfully defended
against Risas’ trade secrets claim, which alleged Tackett had committed
“willful and malicious appropriation.” In opposing that argument, Risas
contends § 44-404(3) does not apply to a defendant seeking fees, arguing
instead that only a plaintiff who prevails on a claim of willful and malicious
misappropriation may recover fees under the subsection.

¶19 We review de novo the application and interpretation of A.R.S.
§ 44-404. See Sedona Grand, LLC v. City of Sedona, 229 Ariz. 37, 40, ¶ 8 (App.
2012). To date, no Arizona state court case has explicitly addressed whether

her.”). Yet Risas obtained more than an “initial victory” of a preliminary
injunction; rather, it obtained an enforceable permanent injunction for the
full period of time applicable under the Confidentiality Agreement.

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a defendant who successfully defends a claim of willful and malicious
appropriation of a trade secret can recover fees under § 44-404(3). But the
language of the statute allowing an award of fees “to the prevailing party for
any of the following . . .” leads us to agree with the Tacketts’ interpretation
that a party who successfully defends against a claim of willful and
malicious appropriation is the prevailing party for the purposes of the court
considering an award of attorneys’ fees pursuant to § 44-404(3). (Emphasis
added); see Sempre Ltd. P’ship v. Maricopa Cnty., 225 Ariz. 106, 108, ¶ 5 (App.
2010) (“We first look to the plain language of the statutes as the most
reliable indicator of their meaning.”).

¶20 This interpretation is consistent with our application and
interpretation of other permissive statutory fee provisions. For example,
A.R.S. § 12-341.01 allows an award of attorneys’ fees to the successful party
in an action “arising out of a contract.” But under that statute, attorneys’
fees may be awarded to the “successful party” who proves the absence of
the contract sued upon by the opposing party. See Rudinsky v. Harris, 231
Ariz. 95, 101, ¶ 27 (App. 2012) (“Even when a contract is alleged by a
plaintiff and the defendant successfully proves that there was no contract,
the action is considered to have arisen out of contract for purposes of A.R.S.
§ 12-341.01.”); Nolan v. Starlight Pines Homeowners Ass’n, 216 Ariz. 482, 490,
¶ 36 (App. 2007) (“[A] court may award fees to a defendant [pursuant to
A.R.S. § 12-341.01] if the defendant prevails on the basis that there is no
contract or there has been no breach of the contract.”); Rogus v. Lords, 166
Ariz. 600, 604 (App. 1991) (“[A] prevailing party is entitled to its fees under
§ 12-341.01 when sued on a contract even if the judgment is based on the
absence of any contract.”).

¶21 Although a party who successfully defends a trade secret
claim for willful and malicious appropriation may qualify for an award of
fees pursuant to A.R.S. § 44-404(3), we reiterate that the decision to award
fees under a permissive fees statute, as well as the amount of any fees
awarded, is discretionary with the court. See Hall v. Read Dev., Inc., 229 Ariz.
277, 279, ¶¶ 7-8 (App. 2012). Here, the trial court considered the Tacketts’
arguments regarding fees pursuant to A.R.S. § 44-404(3) in both
Defendants’ original application for attorneys’ fees and Defendants’ motion
for reconsideration. As is proper in cases involving multiple claims and
varied success, the superior court employed a “totality of the litigation”
analysis and considered the outcome of all claims in making its

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determination of fees and costs.3 See Berry v. 352 E. Va., L.L.C., 228 Ariz. 9,
13-14, ¶¶ 22-23 (App. 2011). We find no abuse of discretion in the trial
court’s conclusion that the balance of success rested with Risas, nor with
the court’s resulting denial of Defendants’ request for an award of
attorneys’ fees and costs.

CONCLUSION

¶22 For the foregoing reasons, we affirm both the superior court’s
grant of costs to Risas in the amount of $12,170.85 and the court’s denial of
attorneys’ fees and costs to the Defendants. We deny the Tacketts’ request
for attorneys’ fees on appeal.

AMY M. WOOD • Clerk of the Court
FILED: AA

3 The Tacketts argue that the monetary award to Risas should not have
been considered under the “totality of the litigation” analysis because, as a
tort claim not arising out of the contract, the breach of fiduciary duty claim
was not eligible for an award of fees. Although determining which claims
are fee-eligible is necessary to assess the amount of fees available to a
prevailing party, the court need not consider only fee-eligible claims when
evaluating which party prevailed in the “totality of the litigation” for the
purposes of an award of attorneys’ fees. See Ariz. Biltmore Hotel Villas
Condos. Ass’n v. Conlon Grp. Ariz., LLC, 249 Ariz. 326, 334, ¶ 40 (App. 2020)
(accepting a “totality of the litigation” analysis in a case involving varied
success on both fee-eligible and non-fee-eligible claims).

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