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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
AMENDED
FACT SHEET FOR s.b. 1556
cost recovery; contingency fee case
Purpose
Allows a prevailing defendant in an action involving a tort claim or contract to recover a percentage of the defendant's court costs from the plaintiff's attorney based on the contingency percentage that a plaintiff's attorney would have received.
Background
Current statute allows the court to award a successful party reasonable attorney fees in any contested action arising out of a contract, express or implied. Statute specifies that the award of reasonable attorney fees made in this manner should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense, and that it need not equal or relate to attorney fees actually paid or contracted, but that it may not exceed the amount paid or agreed to be paid (A.R.S. § 12-341.01).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Entitles a prevailing defendant, in an action that involves a tort claim or contract, to recovery of a percentage of the defendant's costs from the plaintiff's attorney that is commensurate with the contingency percentage, if any, that the plaintiff's attorney would have received had the plaintiff prevailed.
2. Requires a defendant, in order to be eligible to receive reimbursement from the plaintiff's attorney, to notify the plaintiff's attorney of the defendant's intention to request prevailment percentage costs in the defendant's initial response to the plaintiff's complaint.
3. Calculates the reimbursement that a prevailing defendant is entitled to as the defendant's costs, multiplied by the defendant's prevailment percentage, multiplied by the attorney's contingency percentage.
4. Prohibits the court from awarding an amount that exceeds the plaintiff's claim limit, except that this limitation does not apply if the plaintiff's claim limit does not exist.
5. Requires a plaintiff's attorney to provide the court with documentation of the attorney's fee arrangement within 60 days after the lawsuit is disposed of.
6. Requires the court, if the plaintiff's attorney fails to provide the documentation within 60 days, to deem the contingency percentage to be at least 40 percent.
7. States that the plaintiff and the plaintiff's attorney are not eligible to receive attorney fees for any fees that are determined to be contingent on the outcome of the case.
8. Subjects the defendant's attorney to the same requirements as the plaintiff's attorney if the defendant makes a counterclaim in the lawsuit.
9. States that the provisions of this act do not apply:
a) to an attorney who is solely charging an hourly rate, a nonwaivable flat fee or pass-through noncontingent expenses; and
b) if the requirements of this act conflict with a clause in an enforceable contract between the plaintiff and the defendant.
10. Defines contingency percentage as the amount that, had the plaintiff prevailed, would be due to the plaintiff's attorney and that would be based on any of the following:
a) the stated percentage that is due to the attorney for a judgment, verdict or settlement;
b) the effective percentage that is calculated based on a contingent fee that is due to the attorney and that is divided by the judgment, verdict or settlement amount that is required to trigger the fee; or
c) an effective percentage that is calculated based on any fees that are expected to be waivable based on the outcome of the lawsuit.
11. Defines decision amount as the total award that is made to the plaintiff by a court or arbiter.
12. Defines defendant's costs as including reasonable attorney fees, court costs and third-party defense expenses.
13. Defines defendant's offer as either:
a) the amount that is offered by the defendant to end the lawsuit before the court makes a determination that ends the lawsuit; or
b) zero, if the defendant does not make an offer.
14. Defines midpoint amount as:
a) if a plaintiff's claim limit exists, the average of the plaintiff's claim limit and the defendant's offer;
b) if a plaintiff's claim limit does not exist and the defendant's offer is greater than $5,000, an amount that is three times the defendant's offer; or
c) if neither of the above apply, $15,000.
15. Defines plaintiff's claim limit as the total monetary demand amount that is stated in the plaintiff's complaint, except that:
a) if the plaintiff amends the monetary demand in the complaint, the plaintiff's claim limit is the highest total monetary claim that was listed in any complaint;
b) if the maximum claim amount is limited by statute, the plaintiff's claim limit is the statutory limit; and
c) if there is no statutory limit and the plaintiff does not provide the court with a monetary claim amount within 60 days after filing the initial complaint, the plaintiff's claim limit does not exist.
16. Defines prevailment percentage as an amount that is not less than zero percent or more than one hundred percent and to which one of the following applies:
a) if the decision amount is more than the midpoint amount, zero percent;
b) if the decision amount is less than the midpoint amount, the percentage amount that is calculated by dividing the numerator by the divisor.
17. Defines divisor, for the purposes of this act, as the defendant's offer subtracted from the midpoint amount.
18. Defines numerator for the purposes of this act, as the decision amount subtracted from the midpoint amount.
19. Becomes effective on the general effective date.
Amendments Adopted by Committee
· Makes a technical correction.
Senate Action
JUD 2/10/22 DPA 5-3-0
Prepared by Senate Research
February 11, 2022
ZD/sr