§ 11.2.1.3 Attorneys' Fees Under A.R.S. § 12-349.

• Jurisdiction: Arizona

§ 11.2.1.3 Attorneys’ Fees Under A.R.S. § 12-349. Previously, frivolous litigation could be punished by an award of attorneys’ fees under two partially overlapping statutes, A.R.S. § 12-341.01(C) and A.R.S. § 12-349. Effective January 1, 2013, the legislature repealed § 12-341.01(C), see Laws 2012, ch. 305, §§ 1 & 4, leaving § 12-349 as the primary statutory basis for an award of fees against a party that litigates frivolously.

A.R.S. § 12-349 and its companion enactment, A.R.S. § 12-350, are legislative expressions of support for the judicial practice of controlling needless or frivolous litigation through fee awards. Section 12-349(A)(1) requires the court to impose sanctions against a party who “[b]rings or defends a claim without substantial justification.” The phrase “without substantial justification” as used in § 12-349(A)(1) means that “the claim or defense is groundless and is not made in good faith.” A.R.S. 12-349(F). This definition previously included a “constitutes harassment” element as well, but the legislature struck that language effective January 1, 2013, see Laws 2012, ch. 305, §§ 2 & 4, presumably because it overlapped with § 12-349(A)(2), which establishes a separate basis for fees against one who “[b]rings or defends a claim solely or primarily for delay or harassment.”

Attorneys’ fees under A.R.S. § 12-349 may be awarded during the course of proceedings to a party who ultimately does not prevail on the merits. See Hamm v. Y & M Enters., 157 Ariz. 336, 338, 757 P.2d 612, 614 (App. 1988). However, the court’s authority to award fees under A.R.S. § 12-349 depends upon the existence of an action either commenced or pending in that court. See Bryant v. Bloch Cos., 166 Ariz. 46, 48-49, 800 P.2d 33, 35-36 (App. 1990). Sanctions under R. Civ. P. 11 are not so limited. Id. at 49, 800 P.2d at 36.

The factors to be considered in awarding attorneys’ fees under A.R.S. § 12-349 are enumerated in A.R.S. § 12-350 and discussed in Harris v. Reserve Life Ins. Co., 158 Ariz. 380, 382, 762 P.2d 1334, 1336 (App. 1988) and Donlann v. Macgurn, 203 Ariz. 380, 387, ¶ 36, 55 P.3d 74, 81 (App. 2002) (“Section 12-349 requires that Wife show by a preponderance of the evidence that Husband’s motions were brought without substantial justification, or solely or primarily for delay or harassment, or that they unreasonably expanded or delayed the proceedings.”). In Harris, the plaintiff’s action for a death benefit under her husband’s life insurance policy was held to be substantially unjustified because both the plaintiff and her attorney had evidence, before instituting the lawsuit, that the deceased husband had materially misrepresented his medical...