Gametech Intern. v. Trend Gaming Systems, L.L.C.

• Decision Date: 04 August 2005
• Docket Number: No. CV-01-0540-PHX-LOA.,CV-01-0540-PHX-LOA.
• Citation: 380 F.Supp.2d 1084
• Parties: GAMETECH INTERNATIONAL, INC., a Delaware Corporation, Plaintiff, v. TREND GAMING SYSTEMS., L.L.C, a Texas limited liability company, Defendant. Trend Gaming Systems, L.L.C, a Texas limited liability company, Counterclaimant, v. Gametech International, Inc., a Delaware Corporation, Counterdefendant.
• Court: U.S. District Court — District of Arizona

380 F.Supp.2d 1084

GAMETECH INTERNATIONAL, INC., a Delaware Corporation, Plaintiff, v. TREND GAMING SYSTEMS., L.L.C, a Texas limited liability company, Defendant.

Trend Gaming Systems, L.L.C, a Texas limited liability company, Counterclaimant, v. Gametech International, Inc., a Delaware Corporation, Counterdefendant.

No. CV-01-0540-PHX-LOA.

United States District Court, D. Arizona.

August 4, 2005.

COPYRIGHT MATERIAL OMITTED

Edward Jeffrey Walsh, Jennifer Meredith Dubay, Greenberg Traurig LLP, Phoenix, AZ, for Plaintiff and Counter-Defendant.

Richard E. Chambliss, Wesley S. Loy, Broening Oberg Woods & Wilson PC, Phoenix, AZ, for Defendant and Counter-Claimant.

ORDER

ANDERSON, United States Magistrate Judge.

This matter arises on the original and Supplemental Applications of Trend Gaming Systems, L.L.C. ("Trend") for an Award of Attorneys' Fees, Related Non-Taxable Expenses and Taxable Costs. (documents 428 and 503, respectively) Gametech has responded to both applications and has requested oral argument. (document # 514) Trend filed a Reply in Support of its Supplemental Application for an Award of Attorneys' Fees, Related Non-Taxable Expenses, and Taxable Costs (document # 524). Thereafter, Gametech sought leave to file a Sur-Reply which the Court granted. (documents # 529, # 530, # 534). Trend filed a Response to Gametech's Sur-Reply. (document # 535) In addition, Gametech has filed a Motion to Strike Paragraph Four of the Supplemental Affidavit of Richard Chambliss (document # 513) and a Motion to Strike Affidavit of Michael Stark (document # 528). Trend filed responses to both motions (documents # 523, # 531) to which Gametech has replied. (documents # 527, # 538)

As stated above, Gametech requests oral argument. Trend, on the other hand, contends that oral argument is unnecessary. The Court has reviewed the relevant pleadings¹ in this matter and concludes that oral argument is not necessary. Domegan v. Fair, 859 F.2d 1059, 1065 (1st Cir.1988); Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 411 (1st Cir.1985)(discussing trial court's "wide latitude" on setting oral argument.). The Court, therefore, will resolve Trend's Applications for Attorneys' Fees and the related motions solely on the pleadings and the file as a whole without oral argument.

BACKGROUND

I. Procedural History

This matter arises from breaches of a written Distribution Agreement between Gametech and Trend which provides that the prevailing party is entitled to recover attorneys' fees, costs, and expenses. Specifically, the Distribution Agreement² provides:

8.9 Attorneys' Fees. The prevailing party in any legal action brought by one party against the other and arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys' fees.

This litigation commenced on March 22, 2001 when Gametech filed a Complaint seeking a declaration that Gametech had not breached certain provisions of the Distribution Agreement and that Trend had breached the Distribution Agreement.

On July 30, 2001, Trend filed an Answer and Counterclaim seeking declaratory relief that Trend had not breached the Distribution Agreement (Count I) and seeking damages on the ground that: (1) Gametech had breached the Distribution Agreement by entering into distribution agreements with other distributors which were more favorable (provided higher commissions) than Trend's Distribution Agreement (Count V), (2) Gametech had breached the Distribution Agreement by not providing adequate service to Trend's customers (Count V), (3) Gametech had breached the Distribution Agreement by failing to provide Trend the first right of refusal for new products (Count V), and (4) Gametech had breached the Distribution Agreement by interfering with Trend's contractual relationships with its customers (Count VI).

On July 22, 2002, Gametech advised Trend in writing that it had breached the Distribution Agreement by entering into contracts which did not provide Gametech with "its required minimum rate of return" and by entering into "generic" contracts with certain charities. Gametech warned Trend that if it did not cure those breaches on or before August 21, 2002, Gametech would terminate the Distribution Agreement.

Shortly thereafter on August 9, 2002, Trend applied for a temporary restraining order ("TRO") requesting that the Court restrain Gametech from (i) removing the equipment at certain charities, or (ii) terminating the parties' distribution agreement. On August 22, 2002 Trend filed a Motion for Preliminary Injunction seeking similar relief.

On August 26 and 27, 2002, the Court conducted an evidentiary hearing on the motions for TRO and preliminary injunction. (document # 61) The Court denied both motions. Following the Court's ruling, Gametech terminated the Distribution Agreement. On August 30, 2002 and September 12, 2002, the parties amended their claims and counterclaims to reflect additional claims and damages allegedly resulting from the termination of the Distribution Agreement.

Before trial, the Court granted summary judgment for Trend on the generic contract claim, and for Gametech on Trend's consumer fraud claim. Also before trial, Gametech withdrew its claims for unauthorized discounts, failure to promote the installation of products, and defamation.

When this matter proceeded to trial, Gametech's claims fell into the following general categories: (i) Trend's failure to pay monies owed to Gametech; (ii) Trend's use of unauthorized pricing formulas; (iii) Trend's conversion of Gametech property; (iv) Trend's unjust enrichment; and (v) Trend's violation of the covenant of good faith and fair dealing. Trend counterclaimed that Gametech (i) improperly terminated the Distribution Agreement; (ii) failed to service the equipment; (iii) interfered with Trend's contractual relationships with its customers; (iv) failed to grant Trend product exclusivity; and (v) failed to grant Trend a higher commission rate. The Court granted a directed verdict to Gametech on Trend's promissory estoppel claim and claim regarding higher commissions paid to other Texas distributors asserted in Trend's First Amended Counterclaim, but the jury found in favor of Trend on all other claims.

Specifically, on November 1, 2004, the jury found that: (1) Gametech breached the November 1, 1999 Distribution Agreement when it terminated the agreement over a pricing dispute and that Trend is entitled to compensatory damages in the amount of $3,526,765.46. (2) Following Gametech's termination of the Agreement on August 27, 2002, Trend did not pay $735,648.09 to Gametech from funds Trend collected after August 27, 2002.³ From the compensatory damages Gametech owes Trend, Gametech is entitled to an offset in the amount of $735,648.09. (3) Gametech breached the Distribution Agreement by failing to provide Trend the first right to negotiate for the exclusive distribution of Diamond TED, Diamond Too, and TED2C on terms and conditions no less favorable than those accepted by other distributors. Trend is entitled to nominal damages for this breach in the amount of $1.00. (4) Gametech breached the Distribution Agreement by failing to provide commercially reasonable support and service to Trend's customers. Trend is entitled to nominal damages in the amount of $1.00 for this breach. (5) Gametech intentionally interfered with Trend's business relationship with East Plano Bingo. Trend is entitled to nominal damages in the amount of $1.00 for this breach. (6) Trend did not convert money that was property of Gametech. (7) Trend was not unjustly enriched by not paying Gametech from funds Trend collected from bingo collectors (charities) after August 27, 2002. (document # 506)

In its application for attorneys' fees, Trend claims that it "prevailed on every claim and defense, including the claims asserted in the original Complaint filed March 22, 2001 and the Counterclaim filed on July 30, 2001." (document # 428 at 4-5) While Gametech concedes that Trend was the prevailing party, it argues that Trend had only limited success on its claims because it was only awarded nominal damages on "three of the four purported breaches and consequently recovered $2,791,117.37 after offset of Gametech's $735,648.09." (document # 514 at 13)

This matter is before the Court on diversity and magistrate judge jurisdiction pursuant to express consent of all parties. Both parties agree that Arizona law governs the resolution of the attorneys' fees issue. Mangold v. California Public Utilities Comm'n., 67 F.3d 1470, 1478-79 (9th Cir.1995)(stating that state law controls the method of calculating attorneys' fees awarded under state law in diversity jurisdiction.).

II. Terms of Distribution Agreement

Because the parties' Distribution Agreement governs their relationship, the Court will first look to that Agreement as a basis for awarding Trend its attorneys' fees and costs. As previously stated, Article 8.9 of the Distribution Agreement entitles the prevailing party in any dispute "arising out of th[e] Agreement, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys' fees." As the prevailing party, Trend is entitled to recover its reasonable attorneys' fees from Gametech. Dorn v. Robinson, 158 Ariz. 279, 762 P.2d 566, 574 (1998)(stating that successful litigant was entitled to an award of attorneys' fees where they were provided for by contract.). An attorneys' fees provision contained in a contract controls to the exclusion of the Arizona Revised Statutes ("A.R.S.") governing attorneys' fees. Sweis v. Chatwin, 120 Ariz. 249, 252, 585 P.2d 269, 272 (1978); A.R.S. § 12-341.01. Although the Distribution Agreement awards attorneys' fees to the prevailing party, it does not define that term. Under Arizona law, the...