Munger Chadwick, P.L.C. v. Farwest Development & Construction of the Southwest, LLC

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
MUNGER CHADWICK, P.L.C., AN ARIZONA PROFESSIONAL
LIMITED LIABILITY COMPANY,
Plaintiff/Appellee,
v.
FARWEST DEVELOPMENT AND CONSTRUCTION OF THE SOUTHWEST,
LLC, AN ARIZONA LIMITED LIABILITY COMPANY;
FARWEST PUMP COMPANY, AN ARIZONA CORPORATION;
AND CLARK P. VAUGHT AND CHANNA R. CREWS-VAUGHT,
HUSBAND AND WIFE,
Defendants/Appellants.
No. 2 CA-CV 2013-0113
Filed May 7, 2014
Appeal from the Superior Court in Pima County
No. C20120575
The Honorable Ted B. Borek, Judge
AFFIRMED IN PART; VACATED IN PART
COUNSEL
Munger Chadwick, P.L.C., Tucson
By John F. Munger and Thomas A. Denker
Counsel for Plaintiff/Appellee
Monroe McDonough Goldschmidt & Molla, P.L.L.C., Tucson
By Karl MacOmber
Counsel for Defendants/Appellants
MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
OPINION
Judge Eckerstrom authored the opinion of the Court, in which Judge
Espinosa and Judge Olson1 concurred.
E C K E R S T R O M, Judge:
¶1 Appellants Farwest Development and Construction of
the Southwest, LLC, Farwest Pump Company, and Clark P. Vaught
and Channa R. Crews-Vaught (collectively “Farwest”) appeal from
the trial court’s grant of attorney fees in favor of appellee Munger
Chadwick, P.L.C. For the following reasons, we vacate that portion
of the judgment.
Factual and Procedural Background
¶2 Munger Chadwick filed an action against Farwest
claiming breach of contract and unjust enrichment. After a jury trial,
a verdict was returned in Munger Chadwick’s favor on both counts.
Munger Chadwick then sought an award of attorney fees pursuant
to A.R.S. § 12-341.01(A). Farwest objected, claiming Munger
Chadwick had represented itself and was therefore ineligible for an
award of fees. The trial court awarded attorney fees over Farwest’s
objection. Farwest filed a motion for new trial, again claiming the
award was improper, which the court denied. This appeal followed.
Jurisdiction
¶3 At the outset, Munger Chadwick challenges this court’s
jurisdiction, claiming Farwest’s motion for new trial was merely an
improperly labeled motion for reconsideration that did not extend
the time for appeal, therefore rendering Farwest’s notice of appeal
untimely. The initial judgment in this case was entered on May 1,
2013. Farwest’s motion was filed on May 3, 2013. The final
1The Hon. Robert Carter Olson, a retired judge of the Arizona
Superior Court, is called back to active duty to serve on this case
pursuant to orders of this court and the supreme court.
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MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
judgment was filed on July 23, 2013, and Farwest’s notice of appeal
was filed on July 30, 2013. Therefore, if Farwest’s motion was a
proper motion for new trial that extended the time for appeal
pursuant to Rule 9(b)(4), Ariz. R. Civ. App. P.,2 the time for appeal
began to run on July 23 and Farwest’s notice of appeal was timely.
See Ariz. R. Civ. App. P. 9(a).
¶4 Munger Chadwick is correct that “[w]e will look to the
substance and not the form” in determining what type of motion has
been made, Ray Korte Chevrolet v. Simmons, 117 Ariz. 202, 204, 571
P.2d 699, 701 (App. 1977), and that a motion for reconsideration does
not extend the time for an appeal to be taken. Ariz. R. Civ. P. 7.1(e);
see Ariz. R. Civ. App. P. 9(b) (listing motions that extend time for
appeal and omitting motion for reconsideration); James v. State, 215
Ariz. 182, ¶ 12 & n.6, 158 P.3d 905, 908 & n.6 (App. 2007) (motions
not enumerated under former Rule 73(b), now Rule 9, Ariz. R. Civ.
App. P., do not extend time for appeal). However, a motion may be
treated as a time-extending motion for new trial, whatever it is
labeled, if it “refer[s] to rule 59 as authority for the motion and set[s]
forth as grounds for the motion those grounds found in rule 59.”
Farmers Ins. Co. of Ariz. v. Vagnozzi, 132 Ariz. 219, 221, 644 P.2d 1305,
1307 (1982). Farwest’s motion refers to the rule and argues that the
decision to award attorney fees is “contrary to law.” Ariz. R.
Civ. P. 59(a)(8). Furthermore, this court has approved of motions for
new trial as a means to challenge an award of attorney fees. PNL
Credit L.P. v. Sw. Pac. Invs., Inc., 179 Ariz. 259, 263, 877 P.2d 832, 836
(App. 1994). Accordingly, Farwest’s motion for new trial extended
the time for appeal under Rule 9(b) and its notice of appeal was
timely filed. This court therefore has jurisdiction to hear the case
pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
2We cite the version of the rule in effect at the time. See 214
Ariz. XLIV (2006).
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MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
Attorney Fees
¶5 In Arizona, it is the rule that parties who represent
themselves in a legal action are not entitled to recover attorney fees.3
Lisa v. Strom, 183 Ariz. 415, 419-20, 904 P.2d 1239, 1243-44 (App.
1995); Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 362, 742 P.2d 858, 863
(App. 1987); Connor v. Cal-AZ Props., Inc., 137 Ariz. 53, 56, 668 P.2d
896, 899 (App. 1983). Farwest contends that, under this rule,
Munger Chadwick was not eligible for an award of fees because it
represented itself. We review this question of law de novo. See
Saenz v. State Fund Workers’ Comp. Ins., 189 Ariz. 471, 475, 943 P.2d
831, 835 (App. 1997).
¶6 The trial court relied on Hunt in determining that
attorney fees were awardable in this case. It specifically noted that
“Munger Chadwick as a PLC could not represent itself,” drawing on
the reasoning of the Hunt case, in which this court found that an
attorney who was a partner in an investment partnership was
eligible for an award of fees arising from his representation of the
partnership, in part because the partnership could not represent
itself in court. 154 Ariz. at 362-63, 742 P.2d at 863-64.
3We note that a number of jurisdictions do not apply this rule
where an attorney, as opposed to a lay person, represents him- or
herself. See, e.g., Pratt & Whitney Canada, Inc. v. Sheehan, 852 P.2d
1173, 1181 (Alaska 1993); Winer v. Jonal Corp., 545 P.2d 1094, 1096-97
(Mont. 1976); Weaver v. Laub, 574 P.2d 609, 613 (Okla. 1977); Colby v.
Gunson, 238 P.3d 374, 376 (Or. 2010). But Munger Chadwick has not
challenged the wisdom of this rule generally, only its application to
the facts of this case. Furthermore, although our supreme court has
not squarely addressed recovery of attorney fees for pro se attorney
litigants, it has stated that “one who acts only for himself in legal
matters is not . . . practicing law.” State ex rel. Frohmiller v. Hendrix,
59 Ariz. 184, 190, 124 P.2d 768, 772 (1942). To the extent this
statement supports upholding the rule forbidding awards of
attorney fees to all pro se litigants, this court “is bound by decisions
of the Arizona Supreme Court and ha[s] no authority to overrule,
modify, or disregard them.” City of Phoenix v. Leroy’s Liquors, Inc.,
177 Ariz. 375, 378, 868 P.2d 958, 961 (App. 1993).
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Opinion of the Court
¶7 However, the more properly stated rule is that a
partnership, or a corporation, may not be represented by someone
who is not authorized to practice law. See Ramada Inns, Inc. v. Lane &
Bird Adver., Inc., 102 Ariz. 127, 128, 426 P.2d 395, 396 (1967); Anamax
Mining Co. v. Ariz. Dep’t of Econ. Sec., 147 Ariz. 482, 485, 711 P.2d 621,
624 (App. 1985). When stated this way, it becomes obvious that a
law firm is not barred from representing itself.
¶8 If, as Munger Chadwick asserts, it is not authorized to
represent itself because a corporation or other legal entity must be
represented by a natural person, the logical conclusion is that
Munger Chadwick is not authorized to represent any corporation.
But that conclusion would be contrary to the common practice of
clients hiring law firms for legal representation. Indeed, our
supreme court states that “[a]ny person or entity engaged in the
practice of law . . . in this state” is subject to its jurisdiction. Ariz. R.
Sup. Ct. 31(a)(1) (emphasis added). It likewise defines the
unauthorized practice of law as “engaging in the practice of law by
persons or entities not authorized to practice.” Ariz. R. Sup. Ct.
31(a)(2)(B)(1) (emphasis added). If the Arizona Supreme Court
intended to allow only natural persons to practice law, the inclusion
of the phrase “or entities” would be rendered meaningless. See
Devenir Assocs. v. City of Phoenix, 169 Ariz. 500, 503, 821 P.2d 161, 164
(1991) (court rules must be interpreted “to avoid rendering anything
superfluous, void, contradictory, or insignificant”).
¶9 The rules governing attorney conduct also contemplate
law firms representing clients. See, e.g., ER 1.10, Ariz. R. Prof’l
Conduct, Ariz. R. Sup. Ct. 42 (governing when law firm is barred
from representing client based on conflict of single lawyer). When a
client retains a lawyer affiliated with a law firm, the firm normally
“assumes the authority and responsibility of representing that
client.” Restatement (Third) of the Law Governing Lawyers § 14
cmt. h (2000); see also In re Kiley, 947 N.E.2d 1, 5-6 (Mass. 2011) (law
firm had continued responsibility to represent client even though
attorney primarily responsible for case had ceased practice of law);
Adler, Barish, Daniels, Levin & Creskoff v. Epstein, 393 A.2d 1175, 1184-
85 (Pa. 1978) (law firm was entitled to injunction preventing former
associates from interfering with contractual relationships between
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MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
firm and its clients). Because Munger Chadwick is a law firm
authorized to practice law, it is capable of self-representation.
¶10 Farwest points to several cases from other jurisdictions
in which a law firm representing itself was barred from receiving
attorney fees under the rule that pro se litigants may not receive
such fees. See, e.g., Trope v. Katz, 902 P.2d 259, 262, 272 (Cal. 1995);
Swanson & Setzke, Chtd. v. Henning, 774 P.2d 909, 909, 913 (Idaho Ct.
App. 1989); Jones, Waldo, Holbrook & McDonough v. Dawson, 923 P.2d
1366, 1374-75 (Utah 1996). Munger Chadwick has not cited, and this
court has not found, any cases from those jurisdictions that forbid
pro se attorney litigants from recovering fees that exempt law firms
from the scope of this rule. Cf. Hall v. Laroya, 238 P.3d 714, 718
(Haw. Ct. App. 2010) (finding “no relevant distinction” between
plaintiff representing self and law firm doing same). We likewise
can find no logical reason to draw any distinction between a law
firm that represents itself and a sole practitioner that does so.
¶11 Munger Chadwick asserts that the members of the firm
who presented this case, Munger and Denker, “worked on this case
. . . in their own free time, in addition to and on top of their
obligation to Munger Chadwick, P.L.C., to work on assigned cases.”
However, a pro se attorney who works in her spare time on a case
representing herself, separate and apart from her obligations to
other clients, is nonetheless not entitled to an award of attorney fees.
Connor, 137 Ariz. at 56, 668 P.2d at 899.
¶12 In applying the rule, our courts have expressed a core
concern that all parties to litigation be treated equally in their ability
to secure compensation for attorney fees. See id. at 55-56, 668 P.2d at
898-99. This court has specifically reasoned that an attorney ought
not be entitled to compensation for her time in representing herself
when a lay person would not be able to do so. Id. at 56, 668 P.2d at
899. We likewise conclude it would be inequitable for a law firm to
be able to obtain its fees through an arrangement that amounts to
self-representation when a sole practitioner would be unable to do
so. And, as we have previously observed,
To grant fees to parties appearing pro se
will . . . create incentives to protract and
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MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
delay litigation. It may well foster
litigation over specious claims and in many
cases the prospect of a fee award could well
be the principal motivating factor behind a
lawsuit. In particular, the leverage which
would be granted to attorneys appearing
on their own behalf could easily become
oppressive where the opposition is forced
to incur legal expenses.
Id. None of these concerns are mitigated by allowing a law firm to
“hire” its own attorneys as if they were outside counsel.4
¶13 Although we do not here address the wisdom of the
rule denying attorney fees to those attorneys who devote their time
and expertise to representing themselves, Munger Chadwick has
provided no reason that rule should be applied only to sole
practitioners and not to law firms. Accordingly, we conclude that
the rule forbidding an award of attorney fees when a party
represents itself does apply to law firms, and that Munger Chadwick
was therefore ineligible for an award of its fees. Accordingly, we
vacate the trial court’s award of attorney fees to Munger Chadwick.5
Attorney Fees on Appeal
¶14 Both Farwest and Munger Chadwick have requested
their attorney fees on appeal. Contrary to Farwest’s assertion, an
award of fees under A.R.S. § 12-341.01 is discretionary; it is not an
entitlement, see Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570,
694 P.2d 1181, 1184 (1985). Farwest has not explained why fees
4 We do not suggest any such improper motivations on the
part of Munger Chadwick in the case before us. To the contrary,
Munger Chadwick prevailed on the merits of its claim before the
trial court.
5 Becausewe conclude Munger Chadwick was ineligible for
any award of attorney fees, we need not reach Farwest’s claim that
Munger Chadwick was ineligible for attorney fees under the unjust
enrichment claim.
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MUNGER CHADWICK v. FARWEST DEV.
Opinion of the Court
should be awarded, particularly given the background of this case in
the trial court. And Munger Chadwick is not the “successful party.”
§ 12-341.01(A); see T.H. Props. v. Sunshine Auto Rental, Inc., 151 Ariz.
444, 446, 728 P.2d 663, 665 (App. 1986). Accordingly, in our
discretion, we deny both requests.
Disposition
¶15 For the foregoing reasons, we vacate the trial court’s
award of attorney fees to Munger Chadwick but otherwise affirm
the judgment. Both parties’ requests for attorney fees on appeal are
denied.
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