Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-96-07186/USCOURTS-caDC-96-07186-0/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 3, 1997 Decided November 7, 1997 

No. 96-7169

IDEAL ELECTRONIC SECURITY CO., INC., ET AL.,

APPELLANTS/CROSS-APPELLEES

v.

INTERNATIONAL FIDELITY INSURANCE COMPANY,

APPELLEE/CROSS-APPELLANT

Consolidated with

No. 96-7186

Appeals from the United States District Court 

for the District of Columbia 

(No. 94cv00385)

John W. Karr argued the cause and filed the briefs for 

appellants/cross-appellees.

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Neil L. Henrichsen argued the cause and filed the briefs 

for appellee/cross-appellant.

Before: EDWARDS, Chief Judge, SENTELLE and RANDOLPH, 

Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

EDWARDS, Chief Judge: This case involves a claim under an 

indemnity agreement by a surety company, appellee International Fidelity Insurance Co. ("IFIC" or "surety"), against 

the holders of a payment bond, appellants Ideal Electronic 

Security Co., Inc., et al. ("Ideal"). Upon securing the payment bond, Ideal agreed to indemnify IFIC against any 

losses or expenses, including attorney's fees incurred to defend against claims arising under the bond. In this case, 

IFIC seeks recovery of attorney's fees incurred by the surety 

in defending a claim brought by Modern Electric, Inc. ("Modern") against appellants for an alleged underpayment on 

subcontracted work. The appellants claim (1) that because 

the surety failed to justify the hiring of counsel, no attorney's 

fees should be awarded and (2) that even if a claim for 

attorney's fees is warranted, the surety failed to demonstrate 

that the amount sought in this case is reasonable.

The District Court found that IFIC is entitled to fees for 

its defense of appellants on the claim brought by Modern; 

however, because IFIC asserted that certain billing statements supporting the claim for fees were protected by the 

attorney-client privilege (and redacted portions of some billing statements), the District Court reduced the award of fees 

for the amounts covered by the purportedly privileged materials. Ideal contends that it was entitled to review all billing 

statements, so that it would be in a position to show that the 

surety's arrangements with counsel were both unnecessary 

and unreasonable. The surety cross-appeals, claiming that 

the District Court erred in reducing the award of attorney's 

fees by the amounts covered by privileged documents.

The contract claims arising under the disputed indemnity 

agreement are governed by the law of the District of Columbia. Under D.C. law, once a party's contractual entitlement 

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to attorney's fees has been ascertained, it is within the trial 

court's sound discretion to determine a reasonable fee award. 

In the instant case, we find that the District Court was 

correct in holding that the surety was entitled to claim 

attorney's fees, but abused its discretion in assessing the 

amount due to IFIC.

Appellants are entitled to full discovery of information 

underlying the claim for fees; only after obtaining such 

discovery will the appellants be in a position to assess the 

reasonableness of IFIC's position and then present to the 

court any legitimate challenges to the surety's claim. The 

reasonableness of any portion of the billing statements can 

only be determined by examining all billing statements pertaining to the legal services provided as a whole. Appellee 

effectively waived its attorney-client privilege with regard to 

all communications going to the reasonableness of the fees 

claimed when it placed the purportedly privileged matters in 

dispute by claiming indemnification for the attorney's fees. 

Accordingly, we remand the case to allow appellants an 

opportunity to challenge the reasonableness of IFIC's claim 

for fees following full disclosure of the redacted portions of 

the billing statements. If IFIC declines to disclose the 

redacted portions of the billing statements, then the entire 

claim for fees must be denied by the District Court.

I. BACKGROUND

The Miller Act requires payment bonding to assure payments to subcontractors on construction work undertaken for 

the United States. 40 U.S.C. §§ 270a-270f (1994). Ideal and 

its principals, Cora Williams and Kenneth Rogers, entered 

into a contract with the United States to replace or repair 

electrical transformers at the Walter Reed Army Medical 

Center in Washington, D.C. Since the contract was of a type 

governed by the Miller Act, Ideal was required to obtain a 

payment bond to secure the contract. IFIC provided bonding for the base year, July 29, 1991 to July 28, 1992. In order 

to induce IFIC to provide the payment bond, Ideal entered 

into an indemnity agreement in which it agreed, under certain 

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conditions, to indemnify IFIC against any losses or expenses 

arising from the payment bond, including attorney's fees 

incurred in defending against claims arising under the bond 

and costs incurred in enforcing the terms of the indemnity 

agreement itself. See Agreements of Indemnity at ¶ 2, reprinted in Appendix of Appellee/Cross-Appellant at 21, 25 

(hereinafter "Indemnity Agreement").

This litigation commenced when a subcontractor on the 

Walter Reed project, Modern, sued both Ideal and IFIC, 

claiming that Ideal had underpaid Modern for subcontracted 

work. Modern brought this suit in the United States District 

Court for the District of Maryland, invoking that court's 

jurisdiction under the Miller Act, 40 U.S.C. § 270b, which 

provides a federal cause of action for persons supplying labor 

and materials on federal construction projects to collect payment under the bonds required by 40 U.S.C. § 270a. The 

suit was subsequently transferred to the District Court for 

the District of Columbia.

IFIC formally tendered its defense to Ideal, upon the 

condition that Ideal first deposit with IFIC cash or collateral 

in the amount of $300,000 to cover its potential liability as 

surety, including its attorney's fees. See Memorandum Opinion at 4-5 (May 3, 1996) (hereinafter "Mem. Op."). Ideal 

declined to provide the requested reserve payment; as a 

consequence, IFIC mounted its own defense against Modern's 

claims. Id. at 5. After discovery proceedings and two hearings, the District Court granted IFIC's motion for summary 

judgment dismissing Modern's claims against IFIC. Id. at 5-

6.

IFIC asserted the indemnification claim at issue in this 

appeal in a cross-claim against Ideal and a third-party complaint against Ideal's principals. On October 13, 1995, the 

District Court denied a motion by IFIC for summary judgment on its indemnification claim. A jury trial was held on 

April 25 and 26, 1996. At the conclusion of the trial, the 

District Court granted IFIC's motion for judgment as a 

matter of law pursuant to FED. R. CIV. P. 50(a)(1). See Mem. 

Op.; Order Awarding Attorney's Fees (July 1, 1996). In 

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supporting its claim for attorney's fees, IFIC submitted billing statements from counsel. However, over the objection of 

Ideal, IFIC redacted portions of the billing statements, contending that the undisclosed materials were protected by the 

attorney-client privilege. The District Court resolved this 

dispute by awarding fees only for the unredacted portions of 

the billing statements. Mem. Op. at 11-12. Subsequently, 

IFIC filed a motion for additional fees incurred in prosecuting the indemnity action. The District Court summarily 

denied this motion, stating simply that "the judgment already 

awarded to IFIC is reasonable compensation for legal work 

that was necessary to protect IFIC's position." Order Denying Additional Attorney's Fees (July 18, 1996).

Ideal appeals the District Court's judgment as a matter of 

law on the question of liability and on the reasonableness of 

the amount of fees awarded. IFIC cross-appeals the District 

Court's denial of fees based on redacted billing statements 

and also the court's denial of fees incurred in prosecuting the 

indemnity action.

II. ANALYSIS

A. Choice of Law 

Before turning to the merits of the parties' appeals, we 

must first determine which law governs the case. This 

appeal involves a state contract claim which is in federal court 

under supplemental jurisdiction. The Miller Act provides a 

federal cause of action for subcontractors and suppliers on 

construction projects governed by the Act to collect on payment bonds required by the Act. 40 U.S.C. § 270b (1994); 

F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 

U.S. 116, 127 (1974). Accordingly, Modern's suit against 

Ideal and IFIC was properly brought in federal district court 

under the court's federal question jurisdiction. Although 

contract claims between the various parties to a case brought 

under the Miller Act may be heard by the federal court 

hearing the Miller Act claim, the appended contract claims 

are governed by state, not federal, law. See, e.g., United 

States ex rel. J.W. Briggs v. Grubb, 358 F.2d 508, 515 (9th 

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Cir. 1966) (local law rather than federal law is applicable to 

cross-complaint under a Miller Act bond); Western Casualty 

& Surety Co. v. Biggs, 217 F.2d 163, 165 (7th Cir. 1954) (suit 

by surety against general contractors as principals on payment bond was not an action under the Miller Act, since the 

Act provides only for an action on the payment bond by one 

who has furnished labor and material and has not been paid).

When deciding state-law claims under diversity or supplemental jurisdiction, federal courts apply the choice-of-law 

rules of the jurisdiction in which they sit. See Lee v. Flintkote Co., 593 F.2d 1275, 1278-79 n.14 (D.C. Cir. 1979). The 

District of Columbia has adopted the Restatement (Second) of 

Conflict of Laws § 188. Finance America Corp. v. Moyler,

494 A.2d 926, 929 & n.7 (D.C. 1985). Where, as here, the 

parties to a contract have not specified which law governs 

their agreement, the Restatement approach requires the 

court to weigh various jurisdictions' contacts with the transaction at issue and to determine which has the most substantial 

interest in the matter. According to the record, IFIC is 

domiciled in New Jersey, Appellants Williams and Rogers are 

domiciled in Virginia, Ideal is domiciled in the District of 

Columbia, the indemnity agreement was entered into in the 

District of Columbia, and the subject matter of the contract 

(the bond) secures construction taking place in the District of 

Columbia. On balance, and in the absence of any arguments 

by the parties to the contrary, we hold that interpretation of 

the indemnity agreement is controlled by D.C. law.

B. Judgment as a Matter of Law in Favor of IFIC

We review de novo the District Court's order granting 

IFIC's motion for judgment as a matter of law. Hendry v. 

Pelland, 73 F.3d 397, 400 (D.C. Cir. 1996). We can affirm the 

District Court's judgment only if we find "no legally sufficient 

evidentiary basis for a reasonable jury to find for" Ideal 

under applicable D.C. law, "considering the evidence in the 

light most favorable to [Ideal] and making all reasonable 

inferences in [its] favor." Id. at 400; FED. R. CIV. P. 50(a)(1).

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Under D.C. law, contractual provisions providing for the 

indemnification of attorney's fees are generally enforceable in 

accordance with the intentions of the contracting parties, 

unless enforcement would be contrary to public policy. Wisconsin Ave. Assocs. v. 2720 Wisconsin Ave. Coop. Ass'n, 441 

A.2d 956, 964-65 (D.C. 1982); FDIC v. Bender, 1997 WL 

582901, *3 (D.C. Cir. Sept. 23, 1997). "Whether an attorneys 

fees award is available is a matter of contract interpretation 

by the trial judge, unless there is an ambiguity that needs to 

be resolved to determine the intention of the parties. In that 

case, the entitlement question must be resolved by the factfinder." Urban Masonry Corp. v. N&N Contractors, Inc.,

676 A.2d 26, 33 (D.C. 1996) (citations omitted).

The parties' indemnity agreement provides a "good faith" 

standard for determining whether Ideal is obligated to indemnify IFIC for attorney's fees:

the Surety shall be entitled to charge for any and all 

disbursements made by it in good faith in or about the 

matters herein contemplated by this Agreement under 

the belief that it is or was liable for the sums and 

amounts so disbursed, or that it was necessary or expedient to make such disbursements, whether or not such 

liability, necessity or expediency existed; and [ ] vouchers or other evidence of any such payments made by the 

Surety shall be prima facie evidence of the fact and 

amount of the liability to the Surety.

Indemnity Agreement at ¶ 2. However, the parties dispute 

exactly what this good faith standard requires. IFIC contends that it is entitled to attorney's fees absent any showing 

of fraud or bad faith. Brief of Appellee/Cross-Appellant at 

12. Ideal argues that the agreement's good faith standard 

requires something more than the mere absence of fraud. 

Rather, Ideal asserts that, in order to be entitled to indemnity for any resulting attorney's fees under the parties' agreement, IFIC must show (1) that its decision to retain separate 

counsel to defend against Modern's claims was reasonable 

and (2) that the services rendered by counsel were reasonable. Brief of Appellants/Cross-Appellees at 7-8.

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There is no clear precedent under District of Columbia law 

defining the scope of a contractual "good faith" standard of 

the sort at issue here. However, courts in other jurisdictions 

have indicated that, as a general matter, a surety must show 

something akin to reasonable necessity when seeking attorney's fees under an indemnity agreement. For example, the 

Fifth Circuit, applying Mississippi law, has held that

[A]n indemnity agreement is not a blank check; it does 

not entitle the surety [ ] to reimbursement for legal fees 

which are unreasonable or unnecessary. To hold otherwise would allow [a surety] to retain counsel and to 

charge attorneys' fees against the indemnitor even when 

the surety [ ] does not require a separate legal defense to 

protect its interests. The indemnity contract cannot 

reasonably be construed as requiring the indemnitee to 

bear the cost of such redundant representation.

Jackson v. Hollowell, 685 F.2d 961, 966 (5th Cir. 1982). See 

also Sentry Ins. Co. v. Davison Fuel & Dock Co., 396 N.E.2d 

1071, 1074 (Ohio Ct. App. 1978) (rejecting all claims for 

recovery of fees under indemnity agreement's good faith 

standard for services which were simultaneously being rendered competently by the principal's counsel); Central Towers Apts. v. Martin, 453 S.W.2d 789, 799-800 (Tenn. Ct. App. 

1969) (probing the reasonableness and necessity of a surety's 

incurred attorney's fees, given the identity of interests between principal and surety in the indemnity context). But 

see Wilson & Co. v. Walsenburg Sand & Gravel Co., 779 P.2d 

1386, 1387 (Colo. Ct. App. 1989) (interpreting plain meaning 

of similar good faith standard in similar indemnity agreement 

as limiting defenses against liability to bad faith or fraud).

In any case, we need not resolve the contract interpretation 

issue because, even if the District of Columbia Court of 

Appeals were to interpret the agreement's good faith standard to require a showing of reasonableness, or if a jury were 

to find that the good faith standard was intended by the 

parties to include a showing of reasonableness, no reasonable 

fact-finder could find that IFIC's decision to hire counsel to 

defend against Modern's suit was unreasonable under the 

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uncontested facts of this case. Accordingly, we hold that 

judgment in favor of IFIC is appropriate pursuant to Rule 

50(a)(1) with regard to the liability question of whether Ideal 

is required, under the parties' indemnity agreement, to indemnify IFIC for attorneys' fees incurred by IFIC to defend 

itself against Modern's claims.

Ideal alleges that IFIC's decision to mount its own defense 

against Modern's claims was unreasonable because Modern's 

claims against IFIC were obviously without merit and, moreover, Ideal had offered to defend IFIC against these claims. 

In essence, Ideal contends that IFIC did not need to hire 

counsel to mount a defense against Modern's claims because 

it could have relied on Ideal to defend these claims, even 

though Ideal was unwilling or unable to meet IFIC's demand 

for a reserve payment to cover IFIC's alleged liability to 

Modern.

This court resolved a similar claim in Carroll v. National 

Surety Co., 24 F.2d 268 (D.C. Cir. 1928). In that case, as 

here, a construction contractor entered into an indemnity 

agreement in order to induce a surety to provide a payment 

bond for a construction project. Id. at 269. The relevant 

language in the indemnity agreement in Carroll was virtually 

identical to the relevant contract language at issue here. Id.

at 269-70. In Carroll, the surety was sued for payment 

under the bond. The surety, believing that it had no defense 

to the claims, settled the claims and then sought indemnification for the settlement costs from the contractor pursuant to 

their indemnity agreement. Id. The contractor disputed the 

surety's indemnification claim, alleging, among other things, 

that the surety was mistaken in its belief that it had no 

defense to the subcontractors' claims and that, in fact, it had 

a complete defense. Id. at 270. The contractor further 

argued that, since it had notified the surety that it was willing 

and able to mount a complete defense to the subcontractors' 

claims, the surety's settlement of the claims was voluntary 

and thus the contractor should not be required to indemnify 

the settlement costs. Id. This court rejected the contractor's arguments, holding that the contractor's notification to 

the surety that it was ready to furnish a complete defense to 

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the claims against the surety did not deprive the surety of the 

right to compromise the claims where the indemnity agreement authorized such a compromise. Under the parties' 

indemnity agreement, the surety waived this right only on the 

condition that the contractor deposit with the surety satisfactory collateral for the payment of any judgment which might 

be entered against it. Since the contractor had not tendered 

such a deposit, the surety had acted within its rights under 

the indemnity agreement to settle the claims brought against 

it under the bond and to seek indemnity from its principal for 

the same. Id. at 270-71. Similarly, Ideal's offer to mount a 

complete defense to Modern's claims against IFIC did not 

deprive IFIC of its right to mount its own defense against 

these claims and then look to Ideal to indemnify its litigation 

costs.

Ideal does not offer any persuasive arguments that IFIC's 

decision to retain counsel to defend against Modern's suit was 

unreasonable. Regardless of the purported strength or 

weakness of Modern's claims against IFIC, no reasonable 

fact-finder could find that IFIC's decision to hire separate 

counsel to defend against Modern's claims was unreasonable, 

in light of Ideal's inability or unwillingness to post satisfactory collateral to cover the amount for which Modern sought to 

hold IFIC liable.

C. Reasonableness of the Fee Award

Although it was not unreasonable for IFIC to retain counsel to defend against Modern's claims, that is not the end of 

our inquiry. The second question at issue concerns the 

reasonableness of the fee amount claimed by IFIC.

The District of Columbia Court of Appeals has long held, 

and this court has acknowledged, that once a contractual 

entitlement to attorney's fees has been ascertained, the determination of a reasonable fee award is for the trial court in 

light of the relevant circumstances. Bender, 1997 WL 582901 

at *3 (applying D.C. law). Where a claim for attorney's fees 

arises from a private contract provision, such a claim does not 

embody a right to trial by jury. McGuire v. Russell Miller, 

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Inc., 1 F.3d 1306, 1313-15 (2d Cir. 1993); Kudon v. f.m.e. 

Corp., 547 A.2d 976, 978-80 (D.C. 1988). Rather, the reasonableness of an attorney's fees award is within the sound 

discretion of the trial court and is reviewed only for abuse of 

discretion. Singer v. Shannon & Luchs Co., 779 F.2d 69, 70 

(D.C. Cir. 1985).

Even when attorney's fees are stipulated in an agreement, 

the trial court may still inquire into the reasonableness of the 

fees claimed under an indemnity agreement if those fees are 

challenged. Columbia Plaza Corp. v. Security Nat'l Bank,

676 F.2d 780, 791 (D.C. Cir. 1982) (applying D.C. law). A 

contractual provision stipulating how the amount of the attorney's fees award shall be calculated "creates a rebuttable 

presumption that the stipulated amount is reasonable." 

Bender, 1997 WL 582901 at *5. However, if a stipulated fee 

is properly challenged, "the district court [is] obliged under 

District law to award only reasonable fees, with reasonableness a determination to be made by the judge." Id. at *6.

IFIC points to two provisions of the parties' agreement 

which, in its view, limits the standard of reasonableness. 

First, IFIC notes that the agreement provides that the surety 

may sometimes recover disbursements even when there is no 

showing of "liability, necessity or expediency." See Indemnity Agreement at ¶ 2. The parties' agreement allows charges 

only for "disbursements made ... in good faith," however. 

Id. As for attorney's fees (as distinguished from disbursements to settle claims), the parties agreed at oral argument 

that disbursements for attorney's fees can only be found to be 

in good faith if the legal work for which the charges are made 

was reasonable and necessary to the surety's defense. Although IFIC obviously has some discretion under the parties' 

agreement to decide about the scope of the legal work for 

which it contracts, any decisions to pay counsel must pass a 

test of reasonableness in order to be in good faith. Indeed, if 

good faith in this context did not include reasonableness, the 

indemnitee would have no incentive to police its attorneys' 

activities and charges, since it could simply dump any and all 

charges billed onto the indemnitor. Such a result would 

make no sense.

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Second, IFIC argues that the indemnity agreement's provision that "vouchers or other evidence of any payments made 

by the Surety shall be prima facie evidence of the fact and 

amount of the liability to the Surety," Indemnity Agreement 

at ¶ 2, requires Ideal to indemnify it for the full amount of the 

attorney billing statements submitted. This argument fails 

upon assertion, for the contract provision relied on by IFIC 

says only that "vouchers" shall be "prima facie evidence of 

the fact and amount of liability to the Surety." This confirms 

that something more than evidence of mere payment will be 

required if a charge is challenged. Thus, this provision is 

hardly conclusive with regard to the amount of a reasonable 

fee award, but rather simply shifts to Ideal the burden of 

proving that the fees claimed are excessive.

IFIC's redaction of portions of the billing statements withholds from Ideal information essential to Ideal's efforts to 

meet this burden. The District Court attempted to resolve 

this issue by awarding attorney's fees only for the unredacted 

portions of the billing statements. This is not an adequate 

solution. As a practical matter, the reasonableness of any 

portion of the billing statement can only be determined by 

examining all billing statements pertaining to the legal services provided as a whole. The reasonableness of any one 

entry on an attorney's billing statement is likely to be informed by other charges incurred for the same general 

service. For example, the court needs to determine: Has the 

attorney over-charged for its services by expending a ridiculous amount of total time on a simple research task? Did the 

work undertaken encompass issues and tasks outside the 

scope of the question being litigated? Was each task undertaken a necessary and reasonable component of a reasonable 

litigation strategy? In this case, the general service at issue 

is IFIC's defense against Modern's claims and its related 

cross-claim against Ideal. Ideal has the right to challenge 

whether IFIC's disbursements for attorney's fees pertaining 

to this general service as a whole were reasonable.

Ideal is entitled to discover the information it requires to 

appraise the reasonableness of the amount of fees requested 

by IFIC, including the nature and extent of the work done by 

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IFIC's counsel on various phases of the case, so that it may 

present to the court any legitimate challenges to IFIC's 

claim. See National Ass'n of Concerned Veterans v. Secretary of Defense, 675 F.2d 1319, 1329 (D.C. Cir. 1982). IFIC 

may opt to withhold billing statements under a claim of 

attorney-client privilege; however, where IFIC's assertion of 

a privilege results in the withholding of information necessary 

to Ideal's defense to IFIC's claim against it, the privilege 

must give way to Ideal's right to mount a defense. Under 

the common-law doctrine of implied waiver, the attorneyclient privilege is waived when the client places otherwise 

privileged matters in controversy. See 6 JAMES W. MOORE, ET 

AL., MOORE'S FEDERAL PRACTICE § 26.49[5] (3d ed. 1997). This 

court explained the rationale underlying the implied waiver 

doctrine in In re Sealed Case, 676 F.2d 793 (D.C. Cir. 1982):

Implied waiver deals with an abuse of a privilege.... 

Where society has subordinated its interest in the search 

for truth in favor of allowing certain information to 

remain confidential, it need not allow that confidentiality 

to be used as a tool for manipulation of the truth-seeking 

process.... [A party asserting attorney-client privilege] 

cannot be allowed, after disclosing as much as he pleases, 

to withhold the remainder.

Id. at 807 (quotation omitted). This is particularly true 

where, as here, a party partially discloses the allegedly 

privileged information in support of its claim against another, 

but then asserts the privilege as a basis for withholding from 

its opponent the remainder of the information which is necessary to defend against the claim. Accord United States v. 

Western Elec. Co., 132 F.R.D. 1, 3 (D.D.C. 1990) (where client 

placed counsel's actions at issue, client was precluded from 

asserting work-product privilege as to any documents that 

undermined client's position while at the same time producing 

work-product that supported position); Byers v. Burleson,

100 F.R.D. 436, 440 (D.D.C. 1983) (attorney-client privilege 

impliedly waived where privileged information is necessary to 

resolve precise issue which party asserting privilege interjected into the case); Wender v. United Services Auto. Ass'n, 434 

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A.2d 1372, 1374 (D.C. 1981) (by asserting its reliance on 

advice of counsel as a material element of its defense, party 

waived the attorney-client privilege with respect to all communications to or from counsel concerning the transaction).

By claiming indemnification of attorney's fees from Ideal 

and offering the billing statements as evidence of the same, 

IFIC waived its attorney-client privilege with respect to the 

redacted portions of the billing statements and any other 

communications going to the reasonableness of the amount of 

the fee award. See In re Sealed Case, 877 F.2d 976, 980-81 

(D.C. Cir. 1989) ("[A] waiver of the privilege in an attorneyclient communication extends to all other communications 

relating to the same subject matter.") (quotations omitted). 

If IFIC opts to claim indemnity for attorney's fees from 

Ideal, it must disclose the billing statements itemizing those 

fees in its entirety, notwithstanding its claim that portions of 

the billing statements are privileged. If IFIC's claim of 

attorney-client privilege would otherwise have been valid, the 

information could perhaps be examined by Ideal under seal, 

but in camera review by the court alone is insufficient. Thus, 

although "the nature and amount of proof necessary to determine reasonableness" is included within the trial court's scope 

of discretion in determining a reasonable fee award, Bender,

1997 WL 582901 at *4, we hold that the District Court abused 

this discretion in failing to require IFIC to disclose the 

unredacted portions of the billing statements.

III. CONCLUSION

We affirm the District Court's judgment finding Ideal 

liable, under the parties' indemnity agreement, for attorney's 

fees incurred by IFIC in defending against Modern's claims, 

but reverse and remand for determination of a reasonable fee 

award. Although the reasonableness of the fee award is 

ultimately within the District Court's discretion, Ideal must 

first be allowed an opportunity to challenge the reasonableness of the fees following full disclosure of the billing statements. If IFIC continues to withhold the information, then 

its claim for attorney's fees should be dismissed in its entirety.

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On remand, the fees denied by the District Court's July 18, 

1996 order should be considered together with the fees at 

issue in the July 1, 1996 order, since all of these fees were 

allegedly incurred in pursuit of the same case. In addition, 

the court must provide reasons to justify its determination of 

a reasonable award so that a reviewing court can evaluate 

whether it acted within its discretion. Singer, 779 F.2d at 

70-71. Computation of a reasonable attorney's fee award 

requires more than simply a report of the number of hours 

spent and the hourly rate. It also requires the court's 

assessment of, among other things, the time and labor reasonably required by the case, the skill demanded by the 

novelty or complexity of the issues, and the incentive effects 

on future cases. Thus, for example, the court should exclude 

charges billed for services which were unnecessary to IFIC's 

defense against Modern's claims or its related indemnity 

claim. See id. at 71 (district court must justify awarding fees 

for work on issues that appellants argue are ineligible for 

compensation).

So ordered.

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