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Cayne v. Washington Trust Bank

United States District Court, D. Idaho

August 30, 2017

ROBERT CAYNE; RONNIE RIVERA; SEAN RIVERA; KEN McELROY; individually and on behalf of all others similarly situated, Plaintiffs,
WASHINGTON TRUST BANK, a Washington corporation; and WEST SPRAGUE AVENUE HOLDINGS, LLC, a Washington limited liability company, Defendants.


          Honorable Ronald E. Bush Chief U.S. Magistrate Judge.

         Currently pending before the Court is Defendants' Motion for Attorney Fees and Petition for Costs (Dkt. 392). This Decision addresses and decides the issue of whether there is an entitlement to recover any of such fees and nontaxable costs.


         The facts of this case are detailed in multiple decisions issued during the course of the litigation. See, e.g., (Dkts. 44, 174, 177, 263, 457.) Recounted briefly here are pertinent procedural history and substantive facts that bear upon Defendants' Motion.

         Plaintiffs were members of the “Club at Black Rock” (the “Club”), a golf course and residential resort community located on the shores of Lake Coeur d'Alene, Idaho. Marketed and designed for people of affluence, Plaintiffs each paid a large sum of money as a membership deposit in order to become members of the Club. In doing so, club members entered into Membership Agreements with the Club. Those agreements required payment of such membership deposits but also called for a return of the deposits under certain conditions, which included termination of membership, termination of the Membership Plan, and discontinuance of Club operations.

         The Club was owned by a legal entity known as the Club at Black Rock, LLC (the “LLC”). Over time, the LLC borrowed more than $12 million from Defendant Washington Trust Bank (“Washington Trust”). The loans making up that debt were secured by various means, including security interests in the real and personal property connected with the Club. When the LLC fell into significant financial difficulty, the LLC and Washington Trust negotiated a work-out agreement - an “Agreement for Deed in Lieu of Foreclosure” (the “DIL”). As part of that agreement, Washington Trust released the LLC from all its debts and liabilities in exchange for conveyance of the real and personal property associated with the Club, and released the individual primarily responsible for the development of the Club from any personal liability for the indebtedness.[1]

         In this certified class action lawsuit, Plaintiffs brought claims for breach of contract, misrepresentation/fraud, a consumer protection act violation, and sought to recover from Washington Trust the membership deposits they had paid to the Club. (Dkt. 1-1). This Court granted in part and denied in part Defendants' Motion for Judgment on the Pleadings. (Dkt. 44). Relevant here, the Court ruled that Plaintiffs had stated a plausible claim for relief for breach of contract; however, the Court dismissed, without prejudice, Plaintiffs' claims for misrepresentation/fraud and violation of the Idaho Consumer Protection Act. See id. After further motion practice, the Court granted in part and denied in part both Plaintiffs' and Defendants' Motions for Summary Judgment. (Dkts. 174, 177). A two-week jury trial followed, resulting in a verdict in Defendants' favor. Following its rulings on Plaintiffs' Motion for Judgment as a Matter of Law and Motion for New Trial (as well as other post-trial motions), the Court now issues this Decision on whether Defendants are entitled to recover attorney fees and costs.


         1. Pursuant to Rule 23(h), Defendants are Entitled to Recover Attorney Fees under Idaho Code § 12-120(3)

         “In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement.” Fed.R.Civ.P. 23(h). In diversity actions, federal courts must follow state law as to attorney fees. See Interform Co. v. Mitchell, 575 F.2d 1270, 1272 (9th Cir. 1978). Generally, the law of the forum state is applied to determine whether a party is entitled to attorney fees. See MRO Commc'ns, Inc. v. American Tel. & Tel. Co., 197 F.3d 1276, 1282 (9th Cir. 1999). If the attorney fee rules of the forum state conflict with the attorney fee rules of the state which provides the substantive law for the case, a choice of law analysis is undertaken. Only when there is a conflict between the law of the forum and the law of the state that provides the substantive law for the claim on whether to award attorney fees, is there a need for a choice of law analysis (which can include consideration of the non-forum state's public policy). Those circumstances are not present here. In this case, Idaho is both the forum state and the state of the substantive law for the Membership Agreement; hence, a choice of law analysis is not required.[2]

         In making this ruling, the Court considered the parties' arguments as to which state law controls for purpose of entitlement (or the lack of entitlement) to attorney fees. Plaintiffs contend that Washington law applies because Washington law governed the interpretation of the DIL. Washington law does apply to the DIL, as the Court previously held. (Dkt. 37). The DIL was a vital document in determining whether Plaintiffs could proceed with a claim that Defendants assumed a contractual liability for the refund of the membership deposits. But, it is the Membership Agreement that Plaintiffs sued upon and which formed the basis of their breach of contract claim.

         The breach of contract claim was the only remaining claim in the case after the Court's ruling on the Motion for Judgment on the Pleadings. See (Dkt. 44); (Dkt. 52) ¶¶ 71-81. This claim was tried to the jury. Accordingly, Washington law does not apply to whether Defendants are entitled to attorney fees; instead, Idaho law applies. Idaho is both the forum state and the state supplying the substantive law and, thereby, the law on attorney fees. With this in mind, Defendants seek fees under Idaho Code § 12-120(3), which provides:

In any civil action to recover on an open account, account stated, note, bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of good, wares, merchandise, or services and in any commercial transaction unless otherwise provided by law, the prevailing party shall be allowed a reasonable attorney's fee to be set by the court, to be taxed and collected as costs. The term “commercial transaction” is defined to mean all transactions except transactions for personal or household purposes.

I.C. § 12-120(3).

         This frequently-invoked provision of Idaho law covers an array of business transactions. Among other things, an award of attorney fees is proper if “the commercial transaction is integral to the claim, and constitutes the basis upon which the party is attempting to recover.” Blimka v. My Web Wholesaler, LLC, 152 P.3d 594, 599 (Idaho 2007) (citing Brower v. E.I. DuPont De Nemours and Co., 792 P.2d 345, 349 (Idaho 1990)). Further, Idaho Code § 12-120(3) is triggered if a party alleges the existence of a contractual relationship of the type embraced by the statute, even though no liability under a contract is ultimately established. See Miller v. St. Alphonsus Reg'l Med. Ctr., 87 P.3d 934, 948 (Idaho 2004). Likewise, if a party asserts a claim based upon the existence of an alleged commercial transaction, attorney fees are awardable to the prevailing party who defends against such claim even if the alleged commercial transaction is found not to have existed. See id.

         Plaintiffs alleged the existence of a contractual relationship between themselves and Defendants that Defendants later breached. Plaintiffs' pleadings and the arguments establish this beyond dispute. According to Plaintiffs, Washington Trust “contractually bound itself to honor the Membership Contracts with the Club's members, including assuming the obligation to refund the membership deposits if any of the conditions precedent to triggering a refund of the membership deposits occurred.” (Dkt. 52) ¶ 9. Further, Plaintiffs alleged that Defendants “breached the Membership Contracts by failing and refusing to refund Plaintiffs ...

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