Hameed v. Isho Petroleum

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

SHAHID SHAWN HAMEED, et al., Plaintiffs/Appellees,

v.

ISHO PETROLEUM, LLC, Defendant/Appellant.

No. 1 CA-CV 22-0598
FILED 5-16-2023

Appeal from the Superior Court in Maricopa County
CV2022-003915
The Honorable Randall H. Warner, Judge

VACATED AND REMANDED

COUNSEL

Degnan Law Group, Phoenix
By David W. Degnan, Mark W. Horne, Casey C. Dempsey
Counsel for Defendant/Appellant

Iannitelli Marcolini, P.C., Phoenix
By Claudio E. Iannitelli
Counsel for Plaintiffs/Appellees
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Decision of the Court

MEMORANDUM DECISION

Judge Daniel J. Kiley delivered the decision of the Court, in which Presiding
Judge Maria Elena Cruz and Judge James B. Morse Jr. joined.

K I L E Y, Judge:

¶1 Isho Petroleum, LLC (“Isho”) appeals from the superior
court’s denial of its request for an award of attorney fees incurred in
securing the dismissal of a complaint filed by Shahid Shawn Hameed and
Salman Rasheed (“Plaintiffs”). For the following reasons, we vacate the
superior court’s ruling and remand for further proceedings.

FACTS AND PROCEDURAL BACKGROUND

¶2 After Plaintiffs agreed to buy, from Isho, a gas station and the
land it sits on, the parties set forth the purchase terms in two separate
contracts (the “Agreements”). The first is the Business Assets Purchase
Agreement (“BAPA”) governing the sale of the gas station, while the
second is the Commercial Real Estate Purchase Contract (“CRPC”)
governing the sale of the underlying land.

¶3 The BAPA and the CRPC are similar in many respects. Both
contracts, for example, contain mandatory fee-shifting provisions entitling
the party that prevails in contract enforcement proceedings to an award of
reasonable attorney fees and costs.1

1 The BAPA provides, in pertinent part:

Should Buyer, Seller, Broker, or Broker’s agents[] file an
action . . . to enforce any right or rights arising under this
[BAPA], the party prevailing in such action shall be entitled to
recover reasonable attorney’s fees and all costs and expenses
incurred incidental to the successful prosecution or defense of
any such action.

The CRPC similarly provides:

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¶4 The two contracts contain material differences as well. Of
relevance here, the CRPC contains an alternative dispute resolution
(“ADR”) clause that requires the parties to engage in mediation of any
dispute prior to seeking judicial relief, while the BAPA contains no
comparable provision.2 Additionally, the BAPA contains an
order-of-precedence clause providing that, “[i]n the event of a conflict
between the terms of the [BAPA] and the [CRPC], the terms of this [BAPA]
shall control.”

¶5 When a dispute arose during the escrow process, Plaintiffs
filed a complaint against Isho asserting alternative claims for damages and
specific performance. Isho filed a motion to dismiss, asserting that the court
lacked subject matter jurisdiction because the parties had not yet complied
with the CRPC’s ADR clause by engaging in mediation. In response,
Plaintiffs asserted that their claims were not subject to mediation under the
CRPC’s ADR clause because, by virtue of the BAPA’s order-of-precedence
clause, the BAPA, not the CRPC, governs their dispute, and the BAPA
contains no ADR clause. Plaintiffs also stated, however, that they would
agree to stay the case and mediate.

¶6 The superior court granted Isho’s motion and dismissed the
case without prejudice, holding that “Plaintiffs filed this lawsuit
prematurely” because the parties had not yet engaged in mediation. Noting
that the CRPC’s ADR clause mandates mediation as a condition precedent
to litigation, the superior court found that the absence of a comparable ADR

If Buyer or Seller files suit against the other to enforce any
provision of this Contract or for damages sustained by reason of
its breach, all parties prevailing in such action, on trial and
appeal, shall receive their reasonable attorney’s fees and costs as
awarded by the court.

2 The CRPC provides as follows:

Mediation: Buyer and Seller agree to mediate any dispute or
claim arising out of or relating to this Contract, any alleged
breach of this Contract, or services provided in relation to this
Contract, claims for Earnest Money or representations made by
the Buyer or Seller in connection with the sale, purchase,
financing, condition, or other aspect of the Property to which this
Contract pertains, including, without limitation, allegations of
concealment, misrepresentation, negligence and/or fraud
before resorting to court action.

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provision in the BAPA did not create a “conflict” between the two
Agreements that would trigger application of the BAPA’s
order-of-precedence clause.

¶7 The superior court denied Isho’s request for an award of
attorney fees, however, concluding that “there is no prevailing party here
because the merits of the dispute have not been adjudicated.”

¶8 After denying Isho’s subsequent motion for reconsideration,
the superior court entered judgment. Isho appealed the denial of its fee
request. Plaintiffs filed a notice of cross-appeal, which they later withdrew.
We have jurisdiction over Isho’s appeal under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶9 A contractual fee-shifting provision will be enforced
according to its terms. Geller v. Lesk, 230 Ariz. 624, 627, ¶ 10 (App. 2012).
Interpretation of a contractual provision, including a fee-shifting provision,
is a question of law that we review de novo. See Murphy Farrell Dev., LLLP v.
Sourant, 229 Ariz. 124, 133, ¶ 31 (App. 2012).

¶10 Isho argues that the superior court abused its discretion in
denying its fee request, citing Britt v. Steffen, 220 Ariz. 265 (App. 2008), for
the proposition that, when a contract action “has been dismissed without
prejudice, the defendant is still considered a ‘successful party’ for purposes
of A.R.S. § 12-341.01(A) even though such a dismissal does not operate as
an adjudication upon the merits.” Id. at 267, ¶ 9.

¶11 In response, Plaintiffs “concede” that the superior court
“incorrectly found that a dismissal without prejudice is not a decision on
the merits for purpose of a fee award.” They nonetheless assert that the
court reached the correct result in denying Isho’s fee request because the
Agreements provide for the award only of “reasonable” fees, and, Plaintiffs
contend, Isho “did not incur any ‘reasonable’ attorney’s fees.” Plaintiffs
explain that they had agreed to stay the litigation and engage in mediation
as soon as Isho’s counsel raised the issue, and that Isho acted unreasonably
in filing a motion to dismiss instead of accepting Plaintiffs’ offer to stay the
litigation. Because they had agreed to a stay pending mediation of the
parties’ dispute, Plaintiffs conclude, Isho’s efforts to secure the dismissal of
the case were “completely superfluous,” and the fees associated with
securing the dismissal “were unreasonably incurred and therefore not
recoverable in any amount.”

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¶12 Because the parties do not dispute that Isho’s success in
securing the dismissal of the complaint entitles it to “prevailing party”
status under the Agreements, we need not address that question further.
Instead, we turn to Plaintiffs’ argument that the superior court’s refusal to
award Isho fees should be affirmed on the alternative ground that the fees
Isho claimed were incurred needlessly, and so were not “reasonable” fees
within the meaning of the Agreements’ fee-shifting provisions.

¶13 A court “lacks discretion to deny a fee award” to the party
that prevails in a contract dispute if such an award is mandated by “the
terms of the parties’ contract.” Murphy Farrell, 229 Ariz. at 133, ¶ 32. Because
the prevailing party is only entitled to recover “reasonable” fees, however,
a court must disallow all requested fees in excess of a reasonable amount.
See Tucson Ests. Prop. Owners Ass’n v. Jenkins, 247 Ariz. 475, 478, ¶ 10 (App.
2019) (“[A] contractual provision providing for an award of unreasonable
attorneys’ fees will not be enforced.”) (citation omitted). If the prevailing
party incurs fees in an amount greater than necessary in light of the result
obtained, the court must reduce the fee award accordingly. Schweiger v.
China Doll Rest., Inc., 138 Ariz. 183, 189 (App. 1983) (“Where a party has
achieved only partial or limited success . . . it would be unreasonable to
award compensation for all hours expended[.]”). It follows that if none of
the fees incurred by the prevailing party were reasonably or necessarily
incurred, then the reasonable amount of a fee award is zero dollars. See
Farrar v. Hobby, 506 U.S. 103, 117 (1992) (O’Connor, J., concurring) (“[T]he
reasonable fee” for “a Pyrrhic victory” is “zero.”). The fact that Isho is the
“prevailing party” under the Agreements did not, therefore, require the
superior court to award fees to Isho if the court determined that Isho’s
requested fees were wholly unreasonable.

¶14 Although Plaintiffs “concede” that the superior court
“incorrectly found” that a fee award was unavailable as a matter of law,
Plaintiffs ask that we affirm the superior court’s denial of Isho’s fee request
on the alternative ground that “the record supports a finding that all of the
attorneys’ fees” Isho sought “were unreasonably incurred and therefore not
recoverable in any amount.” We decline Plaintiffs’ invitation to determine,
in the first instance, whether Isho acted unreasonably in pursuing dismissal
of the case in lieu of accepting their offer of a stay pending mediation. Such
a determination should be left to the superior court, which is better
positioned to do so. See Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 574 (App.
1994) (stating that an appellate court will defer to a superior court’s fee
award in part because of “the trial court’s superior understanding of the
litigation”) (cleaned up). We will, therefore, remand this matter with

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directions that the superior court determine the amount of fees, if any, that
Isho reasonably incurred in securing the dismissal of this case.

¶15 Isho requests an award of fees on appeal. Because the superior
court has not yet determined the extent to which Isho reasonably incurred
fees in litigating its motion to dismiss, we cannot determine the
reasonableness of the fees Isho has incurred in pursuing this appeal.
Accordingly, in our discretion, we will leave to the superior court the
determination of the reasonable amount of fees Isho has incurred on appeal.
See Murphy Farrell, 229 Ariz. at 134, ¶ 38 (remanding with instructions for
superior court to resolve remaining claims and holding that, because
prevailing party had not yet been determined, the superior court should
make that determination and then “award the prevailing party reasonable
attorney’s fees expended on appeal”).

CONCLUSION

¶16 We vacate that portion of the judgment denying Isho’s
attorney fees claim and remand to the superior court for further
proceedings consistent with this decision.

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

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