Kadish v. Arizona State Land Dept.

Decision Date13 July 1993
Docket NumberCA-CV,No. 1,1
Citation177 Ariz. 322,868 P.2d 335
PartiesFrank and Lorain KADISH, Marion L. Pickens; and the Arizona Education Association, a non-profit corporation, Plaintiffs-Appellants, v. ARIZONA STATE LAND DEPARTMENT, an agency of the State of Arizona; Joe T. Fallini, in his capacity as the State Land Commissioner, Defendants-Appellees. 91-0110.
CourtArizona Court of Appeals
OPINION

GRANT, Presiding Judge.

This is an appeal from the trial court's denial of an award of attorney's fees to the plaintiffs-appellants. In 1981, Frank and Lorain Kadish, Marion L. Pickens and the Arizona Education Association ("appellants"), represented by the Arizona Center for Law in the Public Interest ("the Center"), filed a taxpayer action challenging the validity of the fixed royalty provisions of Ariz.Rev.Stat.Ann. ("A.R.S.") section 27-234(B). The trial court dismissed the complaint, ruling that the statute did not violate the Arizona Enabling Act or the Arizona Constitution. Appellants subsequently prevailed in the Arizona Supreme Court and the United States Supreme Court.

Upon remand to the trial court, appellants requested an award of their attorney's fees incurred in all stages of the litigation. They sought fees pursuant to the private attorney general doctrine. This appeal is from the trial court's denial of appellants' fee application. We hold that the trial court abused its discretion in declining to award fees under the private attorney general doctrine.

I. FACTS AND PROCEDURAL BACKGROUND

Appellants brought their action against the Arizona State Land Department and the State Land Commissioner ("appellees") and Cyprus Pima Mining Company. The court allowed Magma Copper Company, ASARCO Incorporated, James P.L. Sullivan, Eisenhower Mining Company and Can-Am Corporation (collectively "the mining defendants"), all holders of mineral leases, to intervene as defendants.

In their complaint, appellants maintained that the Arizona Enabling Act and Arizona Constitution required that all leased state lands be offered at their true value. Appellants alleged that A.R.S. section 27-234(B) violated the Enabling Act and Constitution by unlawfully providing for a flat rate royalty for minerals extracted from the leased land, thereby depriving the state school trust of millions of dollars annually.

Upon hearing cross motions for summary judgment, the trial court entered judgment in favor of the defendants. Following an appeal to this court, the matter was transferred to the Arizona Supreme Court. The Arizona Supreme Court held that A.R.S. section 27-234 violated Article 10 of the Arizona Constitution and Section 28 of the Enabling Act. Kadish v. Arizona State Land Dept., 155 Ariz. 484, 747 P.2d 1183 (1987), aff'd, ASARCO v. Kadish, 490 U.S. 605, 109 S.Ct. 2037, 104 L.Ed.2d 696 (1989).

In that appeal, appellants sought an award of fees against appellees pursuant to the "substantial benefit doctrine," the "private attorney general doctrine" and A.R.S. section 12-348(A). Id. 155 Ariz. at 497-498, 747 P.2d at 1196-1197. The court concluded that A.R.S. section 12-348(A) did not apply to the case. Id. at 497, 747 P.2d at 1196. Two of the justices believed that an award of fees was proper under the substantial benefit doctrine or private attorney general doctrine. However, because the third justice who concurred on the merits withheld his concurrence on the attorney's fees question, another justice dissented on the underlying constitutional issue and one justice did not participate in the decision, the court lacked a majority or plurality in favor of a fee award and thus did not award fees. Id. at 498, 747 P.2d at 1197. Appellants' motion for reconsideration of the attorney's fees request was denied without comment.

In its mandate issued in February, 1988, the Arizona Supreme Court directed the trial court to conduct such proceedings as required to comply with the court's opinion. The opinion indicated that the case was remanded with instructions to enter judgment in favor of appellants declaring A.R.S. section 27-234 unconstitutional and invalid as it pertained to nonhydrocarbon mineral leases. Id. The supreme court also instructed the trial court to consider appellants' petition for special action relief and to grant such relief as might be appropriate and consistent with the supreme court's decision. Id.

Upon remand, the trial court entered judgment in which it included an order that "[a]ny and all claims the plaintiffs may have for attorney's fees may be presented to the Court at a later time realizing that the Defendants reserve the right to challenge the merits of such claims." Shortly before entry of that judgment, the mining defendants filed a petition for writ of certiorari in the United States Supreme Court. The Supreme Court granted certiorari and affirmed the decision of the Arizona Supreme Court. ASARCO, Inc. v. Kadish, 490 U.S. 605, 109 S.Ct. 2037, 104 L.Ed.2d 696 (1989). Appellees were not parties in the United States Supreme Court proceedings.

Despite the trial court's request that appellants and appellees settle the attorney's fees issue without court intervention, the parties were unable to do so. Appellants, therefore, filed an application for attorney's fees in the trial court, seeking an award of fees to be paid by the state pursuant to the private attorney general doctrine. Appellants did not request an award against the mining defendants because shortly before the appeal of the dismissal of their complaint, appellants and the mining defendants stipulated to waive any claims for costs and attorney's fees that each might have against the other in either the trial court or appeals proceedings. The stipulation provided that the agreement did not preclude appellants from seeking an award of attorney's fees and costs from the state.

In response to the motion for fees, appellees argued that the court should not award fees for the following reasons: (1) the state was merely a passive or nominal party, (2) the Arizona Supreme Court's "denial" of a fee award was res judicata as to the question, (3) the private attorney general doctrine did not apply because, as against the state, the doctrine was preempted by A.R.S. section 12-348, (4) appellants failed to apportion the fees, (5) the requested hourly rate of $200 was not reasonable under the circumstances, and (6) applying the requested multiplier to an enhanced hourly rate was not justified.

The trial court denied the fee application without stating its reason for doing so. This appeal from the order denying a fee award was timely filed.

II. DISCUSSION
A. Standard of Review

The record before this court does not contain any indication of the trial court's reasoning in denying an award of fees to appellants. Arizona courts have noted that A.R.S. section 12-341.01 does not require that the trial court state its reasons for denying a fee award, Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 571, 694 P.2d 1181, 1185 (1985); Great Western Bank and Trust Co. v. Pima Sav. and Loan Ass'n, 149 Ariz. 364, 368, 718 P.2d 1017, 1021 (App.1986). Similarly, we know of no requirement in the court-applied private attorney general doctrine that the trial court must set forth its reasons for denying a fee award under that doctrine. We reiterate, however, that the better practice is for trial court judges to indicate on the record the factors taken into account and reasons for denying a discretionary fee award. See Associated Indemnity, 143 Ariz. at 571, 694 P.2d at 1185; Grand Real Estate, Inc. v. Sirignano, 139 Ariz. 8, 14, 676 P.2d 642, 648 (App.1983). Because the reason for the denial of the fee application does not appear in the record, we must examine each argument against the fee award made by appellees to determine whether any of them would support the denial as a matter of law or as a reasonable exercise of the trial court's discretion.

Appellees argued below that the doctrine of res judicata and state law preemption of the private attorney general doctrine precluded an award of fees. These arguments involve questions of law and thus are reviewed de novo by this court to determine whether either argument provides a legal basis for the trial court's denial of fees. See City of Scottsdale v. Thomas, 156 Ariz. 551, 552, 753 P.2d 1207, 1208 (App.1988).

If neither of those issues supplies a legal basis for denying the fee application, we must examine whether the trial court abused its discretion. An award of fees under the private attorney general doctrine is at the discretion of the trial court. Arnold v. Dept. of Health Services, 160 Ariz. 593, 609, 775 P.2d 521, 537 (1989). We must uphold the trial court's exercise of its discretion if the record contains a reasonable basis for the court's denial of fees. Pettay v. Ins. Mktg. Services, Inc. (West), 156 Ariz. 365, 368, 752 P.2d 18, 21 (App.1987); Great Western Bank, 149 Ariz. at 368, 718 P.2d at 1021. To sustain the denial of fees where the court's reasoning is not contained in the record, an examination of the record must reveal some reasonable justification for the denial. See Sirignano, 139 Ariz. at 14, 676 P.2d at 648.

B. Res Judicata Argument

As noted above, appellants requested an award of fees in their appeal from the trial court's dismissal of their complaint. Two Arizona Supreme Court justices would have awarded fees against appellees under the substantial benefit doctrine or the private attorney general doctrine. Kadish, 155 Ariz. at 498, 747 P.2d at 1197. The third justice who concurred in the majority decision, however, did not concur in the portion of the opinion permitting the allowance of fees, and the two...

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