Black Creek v. Alanco
1 CA-CV 16-0735
| Ariz. Ct. App. | Dec 14, 2017Background
- In 2010 Black Creek purchased assets from Alanco under an APA that required inventory-value disputes to be resolved by independent public accountants under §3.2 (binding ADR).
- After closing, Black Creek contested inventory schedules, asserting warranty breaches for AeroScout and MicroTech inventory and other issues; Alanco counterclaimed for increased inventory value.
- Parties initially agreed to compulsory arbitration; Black Creek sued after ADR was not followed, and an arbitrator awarded Black Creek $23,609.74; Alanco appealed to superior court.
- The superior court (after trial) awarded Black Creek $16,847.30 on certain claims and granted attorneys’ fees and costs; this fee award was vacated on the first appeal and the matter was remanded for accountant ADR to determine inventory damages.
- An independent accountant later awarded Black Creek $13,031.69; the superior court designated Black Creek the prevailing party and awarded attorneys’ fees and costs totaling $139,609.82. Alanco appealed that fee and cost award.
Issues
| Issue | Black Creek's Argument | Alanco's Argument | Held |
|---|---|---|---|
| Whether the superior court abused discretion awarding attorneys’ fees under the APA | Fees are recoverable for litigation implementing the APA; related claims arose from same transaction so fees for unsuccessful theories are recoverable | Fees for unsuccessful, separate claims and fees tied to Alanco’s successful prior appeal should be disallowed or reduced | Court largely upheld reasonableness of fees but reduced award by $5,355 for 15.3 hours of appellate-related time that Alanco prevailed on |
| Whether the fee award must be pared due to partial success (Schweiger rule) | Interrelated warranty claims arose from same transaction; time on unsuccessful theories was reasonably related to successful claim | Some claims were distinct and unsuccessful, so fees for those should be excluded under Schweiger | Court concluded claims were related; no across-the-board reduction under Schweiger was required |
| Whether certain costs (CPA fees and appellate filing fee) are recoverable under the APA | Contractually authorized costs may include non-taxable items like CPA consulting for ADR preparation | CPA fees were not necessarily or reasonably incurred for ADR and appellate filing fee should not be awarded because Black Creek did not prevail on that appeal | Court abused discretion awarding $8,800 CPA fees and $140 appellate filing fee; those amounts must be struck from the cost award |
| Whether the court should have considered mitigation of damages after the accountant’s award | (Implicit) Court can review mitigation post-ADR | Alanco argued Black Creek failed to mitigate and court should reduce damages | Court did not err: APA made the accountants’ determination final and binding, leaving no discretion to alter award for mitigation |
Key Cases Cited
- Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183 (App. 1983) (partial-success rule; fees for unrelated, unsuccessful claims should be excluded)
- McDowell Mountain Ranch Cmty. Ass'n v. Simons, 216 Ariz. 266 (App. 2007) (contractual fee provisions requiring award of all fees may still be subject to judicial reasonableness review)
- RS Indus., Inc. v. Candrian, 240 Ariz. 132 (App. 2016) (block billing alone is not grounds for reversal of a fee award)
- Reyes v. Frank's Serv. & Trucking, LLC, 235 Ariz. 605 (App. 2014) (taxable costs still require court review for necessity and reasonableness)
- Ahwatukee Custom Estates Mgmt. Ass'n v. Bach, 193 Ariz. 401 (1999) (broad contractual cost provisions can allow recovery of non-taxable costs)
- Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204 (App. 2014) (standard of review for fee awards: abuse of discretion)
- Chase Bank of Ariz. v. Acosta, 179 Ariz. 563 (App. 1994) (appellate hesitancy to overturn trial court fee determinations)