Arizona SC overturns ‘prevailing party’ definition in contract case

By Laura Halleman | Apr 5, 2017

PHOENIX (Legal Newsline) - The Arizona Supreme Court has redefined the term “the prevailing party," altering a lower court’s decision and allowing for attorney fees to be awarded in a recent case.

Arizona law holds that a court “may award reasonable attorney fees to the successful party in a contested contract action.”

However, if a defendant offers a written settlement and the plaintiff rejects it and the final judgment of the court is greater than what the defendant offered the plaintiff, that party is, “deemed to be the successful party from the date of offer," according to the Supreme Court's opinion.

In American Power Products Inc. v. CSK Auto Inc., American Power was offered a settlement by CSK in the amount of $1,000,001, which included attorney fees. American refused the offer and won a trial verdict in the amount of $10,733.

American Power sued CSK in 2005 for breach of contract and negligent misrepresentation and had sought $5 million in damages. According to the court's opinion, American Power agreed to sell electric scooters to CSK on an open account in 2003, and the master vendor agreement did not define the term prevailing party.

Because it refused the settlement offer from CSK, American Power became the unsuccessful party in the lawsuit.

The trial court had determined American Power was the prevailing party. The Supreme Court overturned that decision.

The high court, in turn, remanded the case back to the lower court to determine fees and costs between the plaintiff and defendant.

According to the Supreme Court, “Rather than respect the parties’ intent to mandate a fee award for the single, prevailing party in the lawsuit, the majority uses the second sentence from 12- 341.01(A) to redefine 'the prevailing party' and require awards for each party. There are now two prevailing parties -- American before the settlement offer and CSK thereafter -- and each must be awarded attorney fees. This interpretation alters the MVA’s fee provision in violation of the third sentence in 12-341.01(A).”

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