Arizona Court of Appeals, Division One holds that presentation of attorneys’ fees as damages precludes later attempts to recover fees through fee shifting.

A long-running property dispute involving the rights to an easement across one parcel of land in order to access another was settled by both landowners after years of litigation. Shortly after that settlement was reached, however, new disputes erupted between the parties. The easement owners sued for breach of the settlement agreement, and the parcel owners countersued for, among other things, breach of the covenant of good faith and fair dealing.

The case ultimately went to a jury trial. As part of their trial presentation, the parcel owners introduced evidence regarding their claim for attorneys’ fees. Ultimately, the jury returned a mixed verdict—the jury found in favor of the easement owners on some claims but awarded no damages, and found for the parcel owners on some of their claims and awarded roughly $25,000 in damages, with $12,800 of those damages specific to their breach of the implied covenant claim.

Both sides claimed victory and attempted to recover their attorneys’ fees. The trial court denied both parties’ requests. It reasoned that the easement owners had not prevailed because the jury awarded them no damages. As to the parcel owners, the superior court concluded that because they had presented their claim for attorneys’ fees to the jury and had recovered some amount of damages, they could not now separately seek fees because the jury had effectively already decided that award. The parcel owners appealed.

On appeal, the Arizona Court of Appeals largely affirmed. The parcel owners had argued that the trial court erred in denying their post-trial request to shift fees on the grounds that such a request was wholly separate from their trial presentation. The Court of Appeals disagreed. The Court explained that fees-as-damages, to be awarded by the jury, and fee-shifting are two alternative theories to support a single potential recovery—a party cannot pursue both. True, it was error for the parcel owners to present their fees to the jury as damages (such recovery is only allowed in limited circumstances). But because they did so, they were judicially estopped from attempting to recover fees through a fee-shifting provision and could not seek to supplement what the jury awarded.

On the other hand, the Court vacated the portion of the trial court’s order that denied the parcel owners’ request for costs. The parcel owners had not presented their costs as part of their damages to the jury, and so the same estoppel principle did not apply. But the trial court had not considered whether the parcel owners were the prevailing party, so the Court remanded to the trial court for further proceedings on the costs issue.

Interestingly, after considering both sides’ comparative success on appeal, the Court awarded fees on appeal to the easement owners.

Judge Cattani authored the opinion, joined by Judges Thumma and Paton.

Posted by: Joshua J. Messer