Evaluating risk before mediation or trial often requires an assessment of whether the prevailing party will be awarded its attorneys’ fees. Pursuant to A.R.S. § 12-341.01, attorney fees are only awarded when the action “arises out of a contract.” However, it can be very difficult to determine whether the action arises out of contract, as opposed to a tort claim, for example.

VONDRAN LEGAL® - ARIZONA BREACH OF CONTRACT ARBITRATION AND LITIGATION LAW FIRM - ARIZONA ATTORNEY FEES LAW EXPLAINED [A.R.S. 12-341.01]INTRODUCTIONThis blog is written by Steve Vondran, Esq., an Arizona Business & Contract Dispute Lawyer. The following is general legal information only and not legal advice.A.R.S. 12-341.01 TEXT OF THE LAWHere is the text of the statute.Recovery of attorney feesA. In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees. This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees.B. The award of reasonable attorney fees pursuant to this section should be made to mitig

01“is inapplicable by its terms if it effectively conflicts with an express contractual provision governing recovery of attorney’s fees.” 241 Ariz.at568,¶13,390 P.3dat808,citingJordan v. Burgbacher,180 Ariz. 221, 229, 883 P.2d 458, 466 (App. 1994) (disagreeing withConnor’sbroad statement and observing thatSweis“did not hold that any express contractual provision for attorney’s fees, however worded, ‘preempts’A.R.S. section 12–341.01”). “Thus,” it held, “rather than being completely supplanted by any attorney fee provision in the parties’ contract, the statute, consistent with its plain language, applies to ‘any contested action arising out of contract” to the extent it does not conflict with the contract.”

The Court agreed with Pulte, finding that since Pulte made no representations to the Sullivans and, since they had no interaction until well after the Sullivans purchased their home, that the Sullivans were not placed in an unfair bargaining position vis-à-vis Pulte; and that Pulte had not made any misrepresentations or statements to the Sullivans “‘in connection with the sale or advertisement’ of the home.” Thus, the Sullivans had no ACFA claim against Pulte.No Attorneys’ Fees to Pulte Under A.R.S. § 12-341.01(A), as the Claims Arise Out of an “Implied-in-Law” Contract. After prevailing on its Motion to Dismiss, Pulte sought attorneys’ fees pursuant to A.R.S. § 12-341.

The Court agreed with Pulte, finding that since Pulte made no representations to the Sullivans and, since they had no interaction until well after the Sullivans purchased their home, that the Sullivans were not placed in an unfair bargaining position vis-à-vis Pulte; and that Pulte had not made any misrepresentations or statements to the Sullivans “‘in connection with the sale or advertisement’ of the home.” Thus, the Sullivans had no ACFA claim against Pulte.No Attorneys’ Fees to Pulte Under A.R.S. § 12-341.01(A), as the Claims Arise Out of an “Implied-in-Law” Contract. After prevailing on its Motion to Dismiss, Pulte sought attorneys’ fees pursuant to A.R.S. § 12-341.

The jury found in favor of Sirrah on its payment claim and on the Wunderlichs’ claims for breach of contract and breach of the covenant of good faith and fair dealing, and in favor of the Wunderlichs on their breach of implied warranty claim. The trial court determined the Wunderlichs were the prevailing parties and awarded them attorneys’ fees pursuant to a contractual fee provision and A.R.S. § 12-341.01(A), the statute that provides for attorneys’ fees for the prevailing party in contested contract disputes. The Arizona Supreme Court determined that the implied warranty is a contract term, and that even though the implied warranty is imposed by law, breach of the warranty can give rise to a contract-based fee award.

This was a case where the attorneys’ fees drove the case and far exceeded the value of the underlying dispute. Its effect should ripple through many attorneys’ fees disputes in construction cases, since “successful party” is a term used in A.R.S. § 12-341.01, which governs disputes arising out of contract. The facts in the case are summarized below. In 1999, Jane Hall purchased a previously owned house.

This was a case where the attorneys’ fees drove the case and far exceeded the value of the underlying dispute. Its effect should ripple through many attorneys’ fees disputes in construction cases, since “successful party” is a term used in A.R.S. § 12-341.01, which governs disputes arising out of contract. The facts in the case are summarized below. In 1999, Jane Hall purchased a previously owned house.

."Id. at 134, ¶ 36, 272 P.3d at 365 (first alteration in original) (quoting Berry v. 352 E. Va., L.L.C., 228 Ariz. 9, 13-14, ¶ 22, 261 P.3d 784, 788-89 (App. 2011) (citations omitted)). For example, in Schwartz v. Farmers Insurance Co. of Arizona, 166 Ariz. 33, 800 P.2d 20 (App. 1990), the plaintiffs' vehicle was destroyed in an accident. Id. at 34, 800 P.2d at 21. The plaintiffs' insurer offered to reimburse the plaintiffs $11,000 for the vehicle, but the plaintiffs insisted on $14,000. Id. at 34-35, 800 P.2d at 21-22. Unable to reach an agreement, the plaintiffs sued the insurer for breach of contract and bad faith, id. at 35, 800 P.2d at 22, and requested punitive damages for the insurer's alleged bad faith. Id. at 38, 800 P.2d at 25. The jury found in favor of the plaintiffs on the breach of contract claim and awarded them $12,000 for the vehicle, but found in favor of the insurer on the bad faith claim. Id. at 35, 800 P.2d at 22. Both parties requested attorneys' fees pursuant to A.R.S. § 12-341.01(A).5 Id. The superior court, applying a "totality of the litigation" standard, found the insurer was the successful party and thus entitled to a fee award. See Covid, Inc. v. Misencik, 2014 Ariz. App. Unpub. LEXIS 337, *21-2244-406. Statute of limitationsAn action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of this section, a continuing misappropriation constitutes a single claim.The main defenses to trade secret misappropriation in Arizona:1. There was no trade secret2. There was no misappropriation by improper means3. Independent creation4. Reverse engineering5. Statute of limitations6. The trade secret has no value7. No reasonable steps were taken to keep the trade secret confidentialThis is not an exclusive list.

In this second phase, the homebuilder has the burden of establishing that another construction professional (i.e., a trade or subcontractor) was responsible or partially responsible for the defect and therefore should be responsible for the liability and damages associated therewith.Lastly, SB 1271 includes provisions with respect to how a court may award attorneys’ fees to prevailing parties in construction defect litigation. Under an Arizona statute governing contract disputes, A.R.S. § 12-341.01, the court may award the prevailing party “reasonable” attorney fees in any contested action arising out of a contract. SB 1271 clarifies that with respect to dwelling actions involving construction defects, the court may award reasonable attorneys’ fees to the prevailing party with respect to each contested issue raised.