Arizona Court of Appeals Division One holds that a party who agrees to pay its attorney only those fees awarded by a court does not become ineligible for a fee award under A.R.S. § 12-341.01.

The legislature modified the Elected Officials Retirement Plan (EORP) to cap employer contributions.  Two retirees, who were members of EORP, retained a law firm to pursue claims for declaratory and injunctive relief invalidating that statutory change.  The fee agreement limited attorney’s fees to “those fees and costs awarded by the [superior court] under any applicable fee shifting statute” and obligated plaintiffs, if ultimately successful, to request an award of attorney fees under A.R.S. § 12-341.01 and to surrender any award to counsel.  The retirees prevailed in the litigation and were awarded fees.  The State appealed the fee award.

Section 12–341.01 provides that a court may award reasonable attorney fees to the successful party in any contested action arising out of a contract, but that the award “may not exceed the amount paid or agreed to be paid.”  A.R.S. § 12-341.01(B).  On appeal, the State argued that the retirees could not recover fees because they never paid or agreed to pay their lawyers.  The Court of Appeals disagreed.  It reasoned that the fee agreement obligated Plaintiffs to perform two affirmative acts: petition for a fee award and surrender those fees to counsel.  That constituted an agreement to pay counsel, just like a contingent fee agreement.  The Court also concluded that the State’s contrary argument would create an “unintended and undesirable emphasis on damages” and “curtail public interest litigation” involving contract-related claims for which no money damages are available.

The Court of Appeals, therefore, affirmed the fee award.  It also awarded the retiree’s fees on appeal.

Judge Weinzweig delivered the opinion of the court; Judges Cattani and Swann joined.