Berghoff v. Gerdts
1 CA-CV 20-0623
Ariz. Ct. App.Jul 13, 2021Background
- In May 2016 Gerdts and McKinney contracted with Berghoff to design/install extensive landscaping; Berghoff billed $531,207 and received $481,918 before dispute arose.
- Berghoff sued in September 2018 for breach of contract seeking $49,289; Gerdts and McKinney counterclaimed alleging defective work and overbilling, seeking $70,833 (total counterclaim value $120,122).
- Parties tried settlement exchanges, then submitted the matter to binding arbitration.
- The arbitrator awarded Berghoff $35,367 for unpaid services but allowed offsets of $34,588 for defective installations, producing a net award of $779 to Berghoff.
- Both sides sought attorney’s fees under A.R.S. § 12-341.01; the superior court applied the net-judgment rule, found Berghoff the prevailing party, and awarded $52,480 (about half requested), reducing fees for unsuccessful claims and inefficiencies.
- Gerdts and McKinney appealed the fee award; the court of appeals affirmed and awarded Berghoff appellate costs/fees.
Issues
| Issue | Plaintiff's Argument (Berghoff) | Defendant's Argument (Gerdts/McKinney) | Held |
|---|---|---|---|
| Whether Berghoff was the "successful party" under the net-judgment rule | Net award to Berghoff ($779) makes Berghoff prevailing over counterclaims | Their larger gross offset ($34,588 or $48,510 argued) shows they prevailed | Court: Net-judgment rule compares net awards; $779 net in Berghoff’s favor makes Berghoff prevailing; affirmed |
| Whether court abused discretion in awarding fees without proper Warner-factor consideration | Court properly considered Warner factors and may award fees where reasonable basis exists | Court failed to apply Warner factors or applied them incorrectly | Court: Written Warner-factor findings were made; even if reasons sparse, award upheld if reasonable; no abuse of discretion |
| Whether defendants’ $10,000 settlement offer made them the prevailing party under A.R.S. § 12-341.01 | Berghoff’s pre-offer fees/costs plus judgment exceed $10,000, so offeror did not obtain a better result | $10,000 offer was more favorable than Berghoff’s $779 judgment | Court: Compare offer to judgment + pre-offer fees/costs; here pre-offer fees make offer not more favorable; court did not err |
| Entitlement to appellate fees/costs | Berghoff seeks fees/costs on appeal as prevailing party | Defendants opposed | Court of appeals: Berghoff is prevailing on appeal; awards costs and discretionary attorney’s fees subject to rule compliance |
Key Cases Cited
- Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9 (App. 2011) (appellate review: affirm fee determination if reasonable basis exists)
- Ocean W. Contractors, Inc. v. Halec Const. Co., 123 Ariz. 470 (1979) (net-judgment rule when contract claims and counterclaims arise from same contract)
- Associated Indemnity Corp. v. Warner, 143 Ariz. 567 (1985) (enumerating permissive factors courts may consider under A.R.S. § 12-341.01)
- American Power Products v. CSK Auto, Inc., 242 Ariz. 364 (2017) (settlement-offer comparison: judgment plus pre-offer attorney’s fees and costs compared to offer)
- Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566 (App. 2007) (fee award may be affirmed even if trial court gives no detailed reasons when record supports the award)