Levelset has wonderful resources on our website discussing Arizona mechanics lien law.  Our researchers even addressed the specific topic of whether lien claimants can include attorney fees in the lien total.  Although claimants cannot do so, it is noted that Arizona courts often award attorney fees to the prevailing party in a mechanics lien lawsuit.  A recent case, however, addressed a unique topic in Arizona mechanics lien law regarding attorney fees.  Specifically, will courts award attorney fees when the prevailing party’s attorney refuses to disclose exactly how he or she calculated the fees?

Arizona Mechanics Lien Law and Attorney Fees

Although Arizona lien claimants cannot include attorney fees in the mechanics lien itself, Arizona state courts often award attorney fees to prevailing parties in suits to foreclose on a mechanics liens.

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There are two statutes in Arizona mechanics lien law that discuss attorney fees in lien lawsuits.  The first, § 33-998, holds that in mechanics lien foreclosure lawsuits, the court will award reasonable attorney fees to the successful party.  The second, § 44-1201, holds that the successful party may even ask for interest on the amount awarded as attorney fees.

The key word in the former statute is, as it is in so many other legal areas, “reasonable.”  What exactly constitutes a “reasonable” amount of attorney fees?  Perhaps more importantly, what should a successful attorney have to show or disclose in order to prove that his or her fees are “reasonable”?

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what should a successful attorney have to show or disclose in order to prove that his or her fees are “reasonable”?

Under Arizona mechanics lien law, in order to prove that the amount in attorney fees a party is asking for is reasonable, the attorney must disclose how much time was spent on the case in addition to how that time was spent.  Full disclosure is, in fact, so important to Arizona courts they they chalk up such disclosure as a matter of due process.  Specifically, even if a losing party can be forced to pay the winning party’s attorney fees, that party still has a right to ensure that the attorney is only charging a fair rate for time actually spent working on the project.

Seemingly potentially at odds with this need for full disclosure is another fundamental arena of the justice system: attorney-client privilege.  Under that doctrine, all privileged information relating to a case must be kept confidential.  This privilege extends to what the law calls “work products” created by attorneys.  For example, if in the course of working on a case, an attorney drafts a research document addressing issues that will come up in court, that document should be kept confidential.

However, should attorney-client privilege and the protection of work products extend even further to the non-disclosure of documents describing how an attorney reached the amount in fees he or she is charging?  Or should a successful attorney have to disclose to both the court and the losing party how it calculated fees so that the court can determine if those fees are reasonable and the losing party’s due process rights are protected?

A Recent Case Applying Arizona Mechanics Lien Law and Attorney Fees

In late March of 2013, the Court of Appeals of Arizona, Division One, issued its opinion in Archicon, L.C. v. TPI Properties, L.L.C.  TPI is a property owner and developer who hired a general contractor which then hired Archicon to perform architectural work on the project.  After having many of its invoices go unpaid, Archicon filed a mechanics lien and later sued to foreclose on that lean.

After Archicon won its lawsuit, Archicon’s attorney asked the court to force TPI to pay $120,000 in legal fees.  The twist in this case is that when Archicon’s attorney submitted documents discussing how it reached those fees, parts of the fee schedule were redacted. The twist in this case is that when Archicon’s attorney submitted documents discussing how it reached those fees, parts of the fee schedule were redacted[/quote]Specifically, even though the fee schedule included the date, the timekeeper, and the time spent on the project, the issues researched in each work session were redacted from the copy given to the court and the opposition party.  Despite these redactions, the lower court granted Archicon $120,000 in attorney fees.

TPI appealed this decision and the appeal court agreed: Archicon could not ask for attorney fees and then refuse to disclose how those attorney fees were calculated.  Although the court noted that in some instances judges will permit redacted copies to be given to opposing parties in order to protect attorney-client privilege, in no case has a court ever allowed a redacted copy to be given to the judge.

In the appeals court opinion, the court noted that:

As the prevailing party, Archicon was entitled to seek attorneys’ fees; however, it could not simultaneously claim that the descriptions of the fees were privileged to TPI’s detriment. Without a full description of the fees incurred, TPI was left without any meaningful way of arguing that the time spent on various matters was unreasonable. It was unfair to seek payment for all the fees but to allow only the court to see the descriptions of all of the work.

Simply put, the prevailing party is still permitted to and will often receive attorney fees if they are successful in a lawsuit under Arizona mechanics lien law.  Nevertheless, in order to have the fees granted, attorneys must apparently be willing to accept that they will have to disclose all the pertinent details, including what issues were addressed in research (not just that research was occurring), in how the fees were calculated.  Finally, when asking for attorney fees, an attorney cannot then invoke attorney-client privilege as a reason for redacting which issues were addressed in the attorney’s work on the case.