Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02913/USCOURTS-caed-2_06-cv-02913-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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28 This matter was determined to be suitable for decision without *

oral argument. L.R. 78-230(h).

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CLAUDE G. COSSU, )

) 2:06-cv-02913-GEB

)

Appellant, )

)

v. ) ORDER*

)

JEFFERSON PILOT SECURITIES )

CORPORATION, )

)

Appellee. )

)

Appellant Claude G. Cossu (“Cossu”) appeals from a

bankruptcy court judgment entered December 5, 2006 against him and in

favor of Appellee Jefferson Pilot Securities Corporation (“Jefferson

Pilot”) in the amount of $1,488,399.85; the judgment is. For the

reasons stated below, the judgment is affirmed.

BACKGROUND

In 1995, Cossu became a stock broker and registered

representative of Jefferson Pilot. In re Cossu, 410 F.3d 591, 593

(9th Cir. 2005). Under his agreement with Jefferson Pilot, Cossu was

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prohibited from engaging in outside business activity without company

approval. Id. In 1998-99, Cossu began selling certain promissory

notes to his clients without the approval of Jefferson Pilot. Id. at

593-94. When the SEC shut down a company related to the promissory

notes, some of his clients lost a substantial amount of money. Id. at

594. Several of Cossu’s clients sued Jefferson Pilot, which settled

many of the claims. Id.

Subsequently, Cossu filed for Chapter 7 bankruptcy. Id. 

Jefferson Pilot brought an adversary proceeding against him to recover

the amounts it had paid to defend against and settle the claims of

Cossu’s clients. Id. The bankruptcy court found Cossu liable to

Jefferson Pilot under a fiduciary theory, but the district court

reversed and remanded. Id. On remand, the bankruptcy court found

Cossu liable to Jefferson Pilot because of an indemnity agreement

between Cossu and Jefferson Pilot, which provided that Cossu would

“indemnify and hold [Jefferson Pilot] harmless against any . . .

expenses (including reasonable attorney fees and expenses)” arising

out of any unauthorized, illegal or improper acts by Cossu. In re

Cossu, 410 F.3d at 594. Under the indemnity agreement, Jefferson

Pilot was entitled to recover attorney fees, costs and the amounts it

had paid to settle the claims by Cossu’s clients. Id. 

On appeal, the Ninth Circuit affirmed in part, reversed in

part, and remanded to the bankruptcy court. Id. at 597. The Circuit

held that

[a]lthough Jefferson Pilot introduced information

regarding the amounts it paid to settle the

claims, it provided no evidence about the specific

causes of action the claimants brought against

Jefferson Pilot or what state or federal law

applied to those actions [and that therefore, it

could not] say that Jefferson Pilot demonstrated

its actual or potential liability so as to sustain

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28 Cossu also argues that Jefferson Pilot did not meet its 1

(continued...)

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the indemnity claim with respect to the settlement

amounts. 

Id. at 596. The Ninth Circuit held that “[b]ecause the bankruptcy

court erred in calculating the amount of the indemnity award on the

record before it, [the action was] remand[ed] . . . for further

proceedings . . . .” Id. at 597. 

The Ninth Circuit also stated that Jefferson Pilot had

introduced evidence of its attorney’s fees and expenses. Id. The

court noted that “[u]nder the indemnity provision, it appears these

fees and costs could be recovered irrespective of liability in the

underlying lawsuit.” Id.

On remand, the bankruptcy judge conducted an evidentiary

hearing on November 16, 2006, over Cossu’s objection. (Appellant’s

Br. at 4:23 - 5:2; In re Cossu, Transcript of Proceedings, Case No.

01-25730, U.S. Bankr. Ct., E.D. Cal., Nov. 16, 2006 (“Hr’g Tr.”).) 

During this hearing, Jefferson Pilot introduced evidence that it would

be liable on the claims by Cossu’s clients, as well as further

evidence relating to its attorney fees. Upon conclusion of the

hearing, the bankruptcy court entered judgment against Cossu for

$1,488,399.85 based on the indemnity agreement. (In re Cossu,

Judgment, Case No. 01-25730, U.S. Bankr. Ct., E.D. Cal., Dec. 5,

2006.) 

Cossu appeals from this judgment. Cossu argues that (1) the

bankruptcy court erred when it conducted the further evidentiary

hearing, and (2) Jefferson Pilot did not meet its burden of showing

that its attorney fees and costs were reasonable.1

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(...continued) 1

evidentiary burden on the issue of whether Cossu was liable to Jefferson

Pilot based on the theory that some of Cossu’s clients had assigned

their claims against Cossu to Jefferson Pilot. (Appellant’s Br. at

15:16-17.) But this issue need not be reached in light of the ruling

herein, as the assignment theory was only an alternative basis of

recovery not necessary to the bankruptcy court’s judgment. (Hr’g Tr. at

78.)

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DISCUSSION

I. Standard of Review

A district court must review the bankruptcy court’s

conclusions of law de novo and its factual findings for clear error.

In re Jastrem, 253 F.3d 438, 441 (9th Cir. 2001); Fed. R. Bankr. P.

8013.

II. Scope of Review

Cossu argues that the Ninth Circuit remand intended the

bankruptcy court to rule based on the existing record, without further

evidentiary hearings. (Appellant’s Br. at 13:20-21.) Cossu supports

this argument by pointing to the language at the end of the Ninth

Circuit opinion, which Cossu argues does not indicate that the

bankruptcy court could allow further evidentiary hearings. (Id. at

12:12-17.) 

It is pellucid that trial courts must comply with the

appellate court’s mandate, but trial courts may decide “anything not

foreclosed by the mandate.” Herrington v. County of Sonoma, 12 F.3d

901, 904 (9th Cir. 1993). “[T]he ultimate task is to distinguish

matters that have been decided on appeal, and are therefore beyond the

jurisdiction of the lower court, from matters that have not.” United

States v. Kellington, 217 F.3d 1084, 1093 (9th Cir. 2000).

In this case, the Ninth Circuit found that Jefferson Pilot

had failed to present sufficient evidence to support its indemnity

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claim, and therefore, the bankruptcy court had incorrectly calculated

the damages. In re Cossu, 410 F.3d at 595-96. The remand “for

further proceedings” permitted the bankruptcy court to re-calculate

the amount of the indemnity award. Nothing in the remand decision

precluded the bankruptcy court from conducting further evidentiary

hearings. See Stevens v. F/V Bonnie Doon, 731 F.2d 1433, 1436 (9th

Cir. 1984) (finding that “[t]he mandate . . . did not forbid taking

new evidence on the question of damages”). Therefore, the bankruptcy

court did not err in conducting the further evidentiary hearing.

II. Attorney Fees and Costs

The bankruptcy court judgment from which Cossu appeals

awarded Jefferson Pilot attorney fees and costs based on the indemnity

agreement, which provided for “reasonable” attorney fees and costs. 

In re Cossu, 410 F.3d at 595. While the Ninth Circuit found that “it

appears” that Jefferson Pilot could recover its attorney fees and

costs, the Circuit decision did not address whether Jefferson Pilot’s

fees and costs were reasonable. Id. at 596. Cossu argues that

Jefferson Pilot failed to prove the reasonableness of the attorney

fees and costs awarded to it. (Appellant’s Br. at 15:24-25.) 

Jefferson Pilot disagrees. (Appellee’s Br. at 9:14-16.) 

Jefferson Pilot offered substantial evidence at the November

16, 2006, evidentiary hearing on both the amount it paid in attorney

fees and the reasonableness of those fees. This evidence included the

testimony of Craig Moreshead (“Moreshead”), who served as in-house

counsel for Jefferson Pilot during the litigation of Cossu’s clients’

claims. (Appellee’s Br., Exh. D.) Moreshead testified that the cases

were “very heavily litigated” and that Jefferson Pilot “vigorously

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defended these cases and . . . that the amounts paid in defense costs

were reasonable.” (Hr’g Tr. at 60:21, 61:2-4.)

After evaluating the factual evidence before it, the

bankruptcy court found that the amount Jefferson Pilot paid in

attorney fees and costs was reasonable. (Id. at 74:8-10; 75:21; 78:3-

4.) This factual determination is reviewed for clear error. Fed. R.

Bankr. P. 8013. Since ample evidence supports the bankruptcy court’s

finding that the amount of fees and costs was reasonable, its decision

is affirmed.

CONCLUSION

For the reasons stated, Cossu has not shown that the

bankruptcy court committed any error. Therefore, the bankruptcy

court’s judgment entered December 5, 2006, is AFFIRMED. 

Dated: September 18, 2007

 

GARLAND E. BURRELL, JR.

United States District Judge

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