On the interplay between 12-341.01 and contractual fee provisions.

The case  arose out of a contract that gave a right to attorney fees to the prevailing party; the phrase was not defined but the contract applied Arizona law. During trial of cross-claims CSK’s was dismissed and the parties apparently agreed that American would get judgment of at least $10,000 (we will use round numbers). That’s what the jury awarded, though American had sought $5 million. CSK had made a $1 million OJ. But the trial court found that American was the successful party and awarded it $775,000 in fees. The Court of Appeals affirmed that. The court reasoned that the contract did not define or limit “prevailing party” and that applying OJ law, which is for contracts now part of the statute, would change the contract, which the statute itself prohibits.

The Supreme Court reverses. “To the extent prior case law broadly precludes application of § 12-341.01 whenever the parties’ contract contains an attorney fee provision, regardless of its content, scope, and other provisions in the contract, we disagree. Rather, § 12-341.01 ‘is inapplicable by its terms if it effectively conflicts with an express contractual provision governing recovery of attorney’s fees.’” “Thus, rather than being completely supplanted by any attorney fee provision in the parties’ contract, the statute — consistent with its plain language — applies to ’any contested action arising out of contract’ to the extent it does not conflict with the contract.”

Justice Timmer dissents, basically agreeing with the Court of Appeals.

Remanded for the trial court to determine fees incurred before the offer (which American gets) and after the offer (which CSK gets).

(Opinion: American Power Products v. CSK)