# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 5- 17 39

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Feed Man ag em en t Syste m s, In c.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Co m co Sy st em s, In c.; C om co Man uf act ur in g, Lt d.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

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No. 1 5- 18 40

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Feed Man ag em en t Syste m s, In c.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Co m co Sy st em s, In c.; C om co Man uf act ur in g, Lt d.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el la nt

s

__ __ __ __ __ __
App eal s fr om

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __Su bm it te d: Nov em be r 17 , 20 15
Fil ed : M ay

23 , 20 16

__ __ __ __ __ __

Befo re SM ITH, BYE, and BENTON, Circu it Ju dg es

. 1

__ __ __ __ __ __

SMI TH, Circ ui t J ud ge

.

In Ju ly 20 08

, Feed Man ag em en t Sy st em s, In c. (FM S) an d Co m co Sy st em s, In c. ("C om co ") en te red in to an ag reem en t ("M an ag em en t Agr eem en t" ). Am on g ot he r

th in gs , th e Man ag em en t Agr eem en t ob li ga te d Co m co to br oa dl y in de m ni fy FMS as
well as rei m

bu rs e FMS fo r reas on ab le co st s an d ex pe ns es , in cl ud in g at to rn ey s' fees

. Afte r Co m co refu se d to in de m ni fy FMS in a la wsu it in vo lv in g no n- pa rti es Bri ll ia nt

Alt ern at iv es , In c. an d R ob ert Bri ll (co ll ect iv el y , "Br il l" ), FMS su ed Co m co fo r
rei m bu rs em en t of at t o r n ey s' fees an d ot he r ex pe ns es th at res ul te d fro m th e la wsu it

. FMS an d Co m co fil e d c r o s s- m ot io ns fo r su m m ary jud gm en t. The di st ric t co ur t 2

gr an te d b ot h m ot io ns in pa rt. FM S an d C om co each ap pe al . W e aff irm.

I. Bac kg ro un d

Befo re ent eri ng in to th e Ma na ge m en t Ag reem en t, FMS an d Com co each ha d

de al in gs wit h Bri ll

. In Ja nu ary 20 08

, Co m co en te red in to a n ag reem en t wit h Bri ll
("C om co –B ril l Agr eem en t" ) to acq ui re Bri ll 's rig ht s to cert ai n so ftw a r e pr od uc ts

rel at ed to an im al feed m an ag em en t an d an in te rn at io na l di st rib ut io n ne two rk of sa le s

ag en ts. D ur ing the Co m co –B ril l Agr eem en t ne go ti at io ns , an d aft er its ex ec uti on, FM S

de fen de d it se lf in li ti ga ti on fil ed ag ai ns t it by Bri ll

. Co m co en te red th e Co m co –B ril l

Thi s op in io n is be in g fil ed by Ju dg e Sm it h an d Ju dg e Ben to n pu rs ua nt to 8t h 1

Ci r. Ru le 47 E.

The Hon or ab le Dav id S. Dot y , Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct of 2

Mi nn es ot a.

-2

-Agr eem en t, in pa rt, to as su m e co nt ro l of th e li ti ga ti on

. In ret ur n fo r co nt ro l ov er th e

li ti ga ti on an d t he acq ui si ti on of B ril l's ab ov e-l is te d rig ht s, Co m co ag reed to m ark et

an d d is tri bu te th e so ftwa re an d p ay Bri ll royalt ie s an d a co nt ract or fee.

In ex erci si ng it s c on tro l ov er th e on go in g li ti ga ti on be twee n FMS an d Bri ll

, Co m co to ok ov er se tt le m en t ne go ti at i o n s wit h FMS fro m Bri ll

. Dur in g th e

ne go ti at io ns , FM S a n d C o m co di sc us se d th e po te nt ia l fo r a bu si ne ss rel at io ns hi p.
Ult im at el y , th e se tt le m en t di sc us si on s res ul te d in th e Man a g e m en t Agr eem en t. As

pa rt of th e Ma n a g em en t Agr eem en t, Co m co "ap po in t[e d] FMS

. . . to ren de r

m an ag em en t se rv ic es to [Co m co ] pu rs ua nt t o t h e t erm s of [th e Man ag em en t]
Agr eem en t." The se m an ag em en t se rv ic es in cl ud ed (i) "b il li ng , co ll ect in g, an d pa y in g

th e ag en ts whi ch co m

pr is e th e [d ]is tri bu ti on [n ]etwor k," an d (ii ) "p ro vi di ng wor k

di rect io n to Bri ll

. . . in or de r to en ab le Bri ll to fu lfi ll [it s] ob li ga ti on s un de r th e [Co m co –B ril l] A g r e em en t." Uns ur pr is in gl y , be cau se of it s hi st or y wit h Bri ll

, FMS

in si st ed on br oa d pr ot ect io ns ag ai ns t an y li ti ga ti on th at Bri ll m ig ht br in g. To ad dr es s

th is co nc ern , th e Ma na ge m en t Ag reem en t re qu ire d C om co to in de m ni fy FMS

fro m an d ag ai ns t an y an d al l lo ss es , co st s, ex pe ns es , cl ai m s, da m ag es

an d li ab il it ie s wha ts oe ve r

. . . to whi ch [FM S] m ay be co m e su bjec t

un de r an y ap pl ic ab le la w, or an y cl ai m mad e by an y th ird pa rty, or
ot he rwis e, to th e ex te nt th ey re l a t e to or ari se ou t of or in co nn ect io n wit h th e pe rfo rm an ce of th e Serv ic es co n t e mp l a t ed by t hi s Agr eem en t

or th e en ga ge m en t of FMS pu rs ua nt to

, an d th e pe rfo rm an ce by FMS of
th e Ser vi ces co nt em

pl at ed by, th is Agre em en t.

Co m co al so ag reed to rei m bu rs e FMS fo r "al l reas on ab l e co st s an d ex pe ns es (in cl ud in g reas on ab le at to rn ey s' fees an d ex pe ns es

. . . ) a s t h e y are in cu rred in

co nn ect io n wit h th e in ve st ig at io n of

, pr ep arat io n fo r or de fen se o f a n y p e n di ng or

th reat en ed cl ai m fo r whi ch [FM S] wou ld be en ti tl ed to in de m ni fic at io n

. . . o r an y

act io n or pr oc ee din g ar isi ng th eref ro m ." FMS an d Co m co ag reed th at th es e pr ov is io ns

-3

-wou ld su rv iv e th e te rm in at io n of the Man ag em en t Agree m en t. On Marc h 1 6, 2 00 9,

FMS ter m in at ed th e Ma na ge m en t Ag reem en t.

B y t h is po in t, Co m co ha d al read y se ve red it s rel at io ns hi p wit h Bri ll an d wa s

en ga ge d in li ti ga ti on in it ia te d by Bri ll

. Afte r Co m co reac he d a se tt le m en t with Bri ll

at th e en d of Ju ly 2 0 0 9

, B r i ll br ou gh t su it ag ai ns t FMS on Aug us t 27

, 20 09
("B ril l– FMS Lit ig at io n" ). Bri ll al le ge d th at th e Man ag em en t Agr eem en t was an

im pe rm is si bl e as si gn m en t of Co m co 's rig ht s an d ob li ga ti on s un de r th e Co m co –B ril l
Agr eem en t an d th at FMS en ga ge d in in te nt io na l m is co nd uc t un de r th e Man ag em en t Agr eem en t.

S h o r t l y a fte r Bri ll fil ed it s co m pl ai nt ag ai ns t FMS , F MS te nd ered de fen se t o

Co m co pu rs ua nt to t h e i nd em ni fic at io n pr ov is io n of th e Man ag em en t Agr eem en t.

Co m co reject ed FMS 's te nd er, arg ui ng th at th e cl ai m s th at Bri ll as se rte d were ou ts id e

th e sc op e of th e in de m

ni ty pr ov is io n. Sp eci fic al ly, Co m co arg ue d th at th e cl ai m s di d

no t rel at e to th e pe rfo rm an ce of se r v i c e s li st ed in th e Man ag em en t Agr eem en t an d

en fo rci ng in de m

ni fic at io n wou ld vi ol at e pu bl ic po li cy be cau se FMS was accu se d of

in te nt io na l m is co nd uc t. FMS res po nd ed to Co m co 's refu sa l, no ti ng it s di sa gr eem en t

wit h Co mco ' s p o si ti on an d res erv in g it s rig ht to se ek in de m ni fic at io n an d

rei m bu rs em en t fo r de fen se co st s an d fees

. Co ns eq ue nt ly, FMS so ug ht co ve rag e fro m

it s in su rer, Sco tt sd al e In de m ni t y Co m pa ny ("S co tt sd al e")

. Sco tt sd al e acce pt ed th e

te nd er on Nov em

be r 19

, 20 09

. Sco tt sd al e ag reed to FMS 's req ue st th at Bo wm an an d

Bro ok e, LLP se rv e as le ad co un se l bu t req ui red FMS to pa y an y am ou nt s ex ceed in g

th e ap pr ov ed pa rtn er ra te

.

W hi le th e Bri ll –F MS Lit ig at io n was on go in g, Carg il l, In c. ("C arg i l l" )

pu rch as ed FMS an d as su m ed co nt ro l of th e li ti ga ti on aft er th e m erg er. Carg il l,

ho wev er, di d no t co nt rib ut e to de fraying th e co st of th e li ti ga ti on

. In st ead

, C a r g i ll

, FMS , a nd FMS 's Se rie s A St oc kh ol de rs "ag reed to est ab li sh a joi nt de fen se fun d t o

pr ov id e fo r th e de fen se an d se tt le m en t of th e [ B ril l– FMS ] Lit ig at io n." To es ta bl is h

-4

-th e joi nt de fen se fu nd

, th es e co m pa ni es se t as id e $5 00 ,00 0 th at wou ld ot he rwis e ha ve
be en pa id to th e Ser ie s A St oc kh ol de rs

.

N e a rly th ree y ears aft er th e Bri ll –F MS Lit ig at io n be ga n, FMS pr ev ai le d i n

ha vi ng al l of Bri ll ' s c l ai m s di sm is se d on su m m ary jud gm en t, bu t th e co st of th e
de fen se was su bs ta nt ia l. Bo wm an an d Br ooke al one bil le d $1, 077, 88 0.3 0. Thre e ot he r

la w fir m s al so pr ov id ed se rv ic es

. Nall & Mi ll er, LLP se rv ed as lo cal co un se l, bi ll in g

a to ta l of $ 10 ,66 7.5 6. So ffer Ch arb on ne t Law Gro up , P LLC ( "So ffer Ch arb on ne t" )

as si st ed FMS in se e k i n g in de m ni fic at io n fro m Sco tt sd al e an d Co m co an d bi ll ed

$ 19 ,35 0.0 0. Lom m en Abd o, P.A. bi ll ed $2 5,9 17 .50 fo r rep res en ti ng th e Seri es A

St oc kh ol de rs du rin g th e Car gi ll m erg er. The to ta l co st of th e de fen se was $1 ,13 3,8 15 .36 in att or ne y s' fe es , cos ts , and ot he r ex pe ns es

. 3

At t he en d o f Ja nu ary 20 13 , FMS s ou gh t re im bu rs em en t fr om

Co m co for th e

fu ll co st of t he Bri ll –F MS Li ti ga ti on . Com co m ai nt ai ne d i ts po si ti on th at it was no t

req ui red to in de m

ni fy or rei m

bu rs e FMS un de r th e Man ag em en t Agr eem en t be cau se

of th e na tu re of th e cl ai m s th at Bri ll as se rte d. App ro xi m at el y two m on th s la te r, FMS

br ou g h t t hi s br each -o f-co nt ract su it ag ai ns t Co m co

. FMS an d Co m co fil ed cro ss

m ot io ns fo r su m

m ary jud gm en t. The di st ric t co ur t gr an te d pa rti al su m m ary jud gm en t

in fav or of bo th FMS an d Co m co , ho ld in g th at Co m co was ob li ga te d to (1 ) in de m ni fy

FMS ag ai ns t cl ai m s br ou gh t by Bri ll

, an d (2 ) rei m bu rs e FMS fo r $8 7,3 50 in at to rn ey s'

fees an d ot he r ex pe ns es bu t no t th e en ti re $1 ,13 3,8 15 .36 th at FMS cl ai m ed

. FMS an d

Co m co each ap pe al th e jud gm en t o f th e d is tri ct co ur t.

Tog et he r, FMS

, th e Seri es A St oc kh ol de rs , an d Sco tt sd al e pa id fo r th e to ta l 3

co st of th e Bri ll –F MS Lit ig at io n. Of th e $1 ,08 8,5 47 .86 bi ll ed by Bo wm an an d Br ooke

an d Nal l & Mi ll er, FMS pa id $6 8,0 00 ; Sc ot ts da le pa id $8 59 ,14 4.6 9; an d t he Seri es A St o ck ho ld ers pa id $1 61 ,40 3.1 7. In ad di ti on , FMS pa id th e fu ll am ou nt bi ll ed by
So ffer Ch arb on ne t, an d th e Seri es A St oc kh ol de rs pa id th e f ul l am ou nt bi ll ed by

Lom m en Abd o. In to ta l, Sco tt sd al e pa id $8 59 ,14 4.6 9, th e Seri es A St oc kh ol de rs pa id $1 87 ,32 0.6 7, an d F MS p ai d $ 87 ,35 0.

-5

-II. Dis cu ss io n

W e rev ie w de no vo th e di st ric t co ur t's de ci si on on cro ss -m ot io ns fo r su m m ary jud gm en t. Dun n v. Aamo dt , 69 5 F .3d 79 7, 7 99 (8 th Ci r. 20 12 ). Su m m ary jud gm en t

is ap pr op ria te whe n "t he re is no ge nu in e di sp ut e as to an y m at e r i a l fact an d th e

m ov an t is en ti tl ed to jud gm en t as a m at te r of la w." Fed

. R. Ci v. P. 56 (a). The cas e is

be fo re us on di ve rs it y juri sd ic ti on , an d by th e te rm s of th e Man ag em en t Agr eem en t,

Mi nn es ot a la w go ve rn s. Und er Mi nn es ot a la w , " [ t ]h e m ean in g of an in de m ni ty

cl au se , li ke th e co ns tru ct io n of any ot he r writ te n c on tra ct , is a qu es ti on of l aw." Art

Goe be l, In c. v. N. Su bu rb an Age nc ie s, In c. , 56 7 N.W .2d 51 1, 51 5 (Mi nn

. 19 97 )
(ci ta ti on om it te d)

.

A. In de mni fi ca ti on

Co m co ta ke s is su e w i th th e di st ric t co ur t's de te rm in at io n th at th e Bri ll –F MS

Lit ig at io n is wit hi n th e sc op e of th e Man ag em en t Agr eem en t's in de m ni ty pr ov is io n.

Co m co arg ue s th at it is on ly ob li ga te d "t o in de m ni fy FMS fo r cl ai m s th at ari se ou t of
(1 ) FMS 's pe rfo rm an ce of 'se rv ic es ' un de r th e Agr eem en t, i.e., bi ll i n g an d pa y in g

a g e n t s , an d pr ov id in g wor k di rect io n fo r Bri ll

, [o r] (2 ) th e en ga ge m en t of FM S t o

pe rfo rm su ch se rv ic es ." Acco rd in g to C o mco , ne it he r cat eg or y en co m pa ss es th e

Bri ll –F MS Lit ig at io n. Bu il di ng on th is po i n t

, C o mco fu rth er arg ue s th at it was no t

ob li ga te d to in d e mn i fy FMS be cau se Bri ll 's cl ai m s in th e Bri ll –F MS Lit ig at io n

al le ge d i nt en ti on al m is co nd uc t.

W he n in te rp ret in g a co nt ract

, M i n n e s o ta co ur ts "l oo k to it s la ng ua ge to

de te rm in e th e pa rti es ' in te nt ." Sa vel a v. Ci ty of Dul ut h

, 80 6 N.W .2d 79 3, 79 6 (Mi nn

. 20 11 ) (ci ta ti on om it te d)

. "Where th ere is a writ te n in st ru m en t, th e in te nt of th e pa rti es
is de te rm in ed fro m

th e p la in la ng ua ge of th e in st ru m en t it se lf." Tr av er ti ne Co rp . v

. Lexi ng to n- Si lv er wo od

, 68 3 N.W .2d 26 7, 27 1 (Mi nn

. 20 04 ) (ci t a t i on om it te d)

. Mi nn es ot a co ur ts as si gn un am bi gu ous co ntr ac t la

ngua ge its pl ai n m ean in g an d refr ai n

fro m rewri ti ng , m od ifyin g, o r li m it in g i ts effe ct by a str ai ne d c on st ru ct io n. Id

.

-6

-Th e i n de m ni fic at io n pr ov is io n in th e Man ag em en t Agr eem en t st at es th a t

Co m co wil l i nd em

ni fy FMS

fro m an d ag ai ns t an y an d al l lo ss es , co st s, ex pe ns es , cl ai m s, da m ag es

an d li ab il it ie s wha ts oe ve r

. . . to whi ch [FM S] m ay be co m e su bjec t

un de r an y ap pl ic ab le l a w, or an y cl ai m m ad e by an y th ird pa rty, or
ot he rwis e, to t h e ex te nt th ey rel at e to or ari se ou t of or in co nn ect io n wit h th e pe rfo rm an ce of th e Serv ic es co nt em pl at ed by t hi s A g r e e men t

or th e en ga ge m en t of FMS pu rs ua nt to

, an d th e pe rfo rm an ce by FMS of
th e Ser vi ces co nt em

pl at ed by, th is Agre em en t.

A s a pr el im in ary m at te r, we do no t fin d th e la ng ua ge am bi gu ou s. Th e

4

in de m ni fic at io n pr ov is io n co ve rs an y th ird -p art y cla im th at rel at es to , ari se s o ut of,

or is co nn ect ed wit h th e en ga ge m en t or du ti e s o f FMS un de r th e Man ag em en t Agr eem en t. Alt ho ug h th e la ng ua ge is br oa d, am bi gu it y do es no t in he re in br ead th

. Se e La tt er el l v. Pro gr es si ve N. In s. Co

. , 80 1 N.W .2d 91 7, 92 1 (Mi nn

. 20 11 )
(e x p l a i n i n g th at "jus t be cau se co nt ract ua l la ng ua ge is br oa d do es no t m ean it is

am bi gu ou s" ).

W he n th e in de m

ni ty pr ov is io n is ap p l i e d t o th e Bri ll –F MS Lit ig at io n, th e
cl ai m s as se rte d th erei n pl ai nl y fal l wit hi n t he am bi t o f th e p ro vi si on . Com co po in ts

to fiv e o f Bri ll 's c la im s i n s up po rt o f it s ar gu m en t:

1. FMS in te nt io na ll y in te rfer ed wit h th e co nt ract an d bu si ne ss rel at io ns hi p be twee n Bri ll an d Co m co by in du ci ng Co m co to te rm in at e Bri ll 's c on tra ct wit h C om co ;

2. FMS co m

m it te d frau d at a mee t i ng in Aug us t 20 08 by i nt en ti on al ly
fai li ng to di sc lo se m at eri al fact s;

It is un cl ear whe th er th is is in di sp ut e. In it s br ie f, C o mco refe rs to th e 4

la ng ua ge of th e in de m ni ty pr ov is io n as b o t h " a m bi gu ou s" an d "cl ear an d

un am bi gu ou s."

-7

-3. FMS m is ap pr op ria te d bu si ne ss op po rtu ni ti es th ro ug h is su an ce of it s

own pre ss rel eas es ;

4. FMS was un

jus tl y en ric he d th ro ug h rece iv in g in fo rm at io n fro m Bri ll
th at was "n ot u s e d by Co m co " bu t in st ead us ed by FMS fo r pe rs on al

ga in ; an d

5. Bri ll is an in te nd ed th ird

- p a r t y be ne fic ia ry of th e Co m co -FM S

co nt ract

.

(Ci ta ti on s om it te d an d bo ld om it te d.) Yet, on cl os er ex am in at io n, al l of th es e cl ai m s
rel at ed to

, aro se ou t of

, or were co nn ect ed "wi th

. . . th e en ga ge m en t of FMS pu rs ua nt

to

, an d th e pe rfo rm an ce by FMS of th e Serv ic es co nt em pl at ed by" th e Man ag em en t Agr eem en t. Sect io ns 2( a) an d 2( c) of th e Man ag em en t Agr eem en t ch arg ed FMS wit h
"p ro vi di ng wor k di rect io n to Bri ll as an in de pe nd en t co nt ract or to [Co m co ]" an d ga ve

FMS "ex cl us iv e di sc ret io n an d au th or it y to de te rm in e th e m an ne r in whi ch it pr ov id es

Serv ic es pu rs ua nt to [th e Ma na ge m en t] Agree m en t."

In Bri ll 's co m

pl ai nt

, th e in te nt io na l in te rfer e n c e cl ai m is ba se d up on FMS
"g ai ni ng un fet te red acce ss to th e [d ]ist rib ut io n [n ]etwor k" pu rs ua nt to th e

Man ag em en t Agr eem en t. Lik ewis e, th e cl ai m s fo r frau d an d un jus t en ric hm en t are
ba se d up on oc cu rren ces th at to ok pl ace at a m eet in g he ld pu rs ua nt to th e Man ag em en t Agr eem en t. Th e m is ap pr op ria te d- bu si ne ss -o pp or tu ni ty clai m is ba se d u po n a ct io ns

th at FMS to ok th at al le ge dl y tra ns ferr ed be ne fit s fro m Co mco t o FMS wro ng fu ll y "p ur su an t to th e

. . . Man ag em en t Agr eem en t." Fi na ll y , th e t h i r d

- pa rty be ne fic ia ry
cl ai m as se rts th at Bri ll is an in te nd ed th ird -p art y be ne fic ia ry "o f th e

. . . Man ag em en t Agr eem en t." Bri ll 's co m

p l a i n t al le ga ti on s rev eal th at Bri ll 's di sp ut e aro se fro m th e

Man ag em en t Ag reem en t.

W e reject Co m co 's as se rti on th at th e pl ai n la ng ua ge of th e in de m ni ty pr ov is io n

ex cl ud es th e Bri ll –F MS Lit ig at io n. C o mco as ks us to st ric tl y co ns tru e th e

-8

-in de m

ni fic at io n la ng ua ge be cau se it sh ift s li ab il ity fo r FMS 's own m is co nd uc t. Und er

a st ric t co ns tru ct io n, Co m co arg ue s th at th e pr ov is io n d o e s n o t cl earl y an d

un eq ui vo cal ly sh ift li ab il it y fro m FMS to Co m co

. Sp eci fic al ly, Co m co co nt en ds th at

th e pr ov is io n do es no t co ve r th e Bri ll –F MS Lit ig at io n be cau se it do es no t ex pr es sl y

co ve r act io ns ari si ng ou t o f FMS 's o wn m is co nd uc t.

"When ap pl y in g Mi nn es ot a l a w, we st ric tl y co ns tru e in de m ni fic at io n

ag reem en ts th at sh ift li ab il it y fo r th e in de m ni te e's own ne gl ig en ce." Har le ys vi ll e In s.

Co

. v. Phy si ca l Dis tr ib ut io n Se rv s., In c. , 71 6 F.3 d 45 1, 45 7 (8 th Ci r. 20 13 ) (ci ta ti on

om it te d)

. In de m

ni fic at io n pr ov is io ns th at sh i f t l i a bi li ty "ar e no t fav or ed by th e la w

an d are no t co ns tru ed in fav or of in de m ni fic at io n un le ss su ch in te nt io n is ex pr es se d

i n c l e ar an d un eq ui vo cal te rm s, or un le ss no ot he r m ean in g can be as cri be d t o i t

. "

Na t'l Hyd

ro Sy s. v. M.A. Mor te ns on Co

. , 52 9 N.W .2d 6 9 0

, 6 9 4 (Mi nn

. 19 95 )
(q uo ta ti on an d ci ta ti on om it te d)

. "No ti ce is th e m ai ns pr in g of an en f o r c e ab le

ind em nif ic at io n pr ov is io n— to sh ift li ab il it y , an ind em nif ic at ion pr ovi sio n m

ust ' fa ir ly

a p p r i s e [] [th e in de m

ni to r] of an ob li ga ti on to in de m ni fy [th e in de m

ni te e].'"

Har le ys vi ll e , 71 6 F.3 d at 45 7 ( a l t erat io ns in or ig in al ) (q uo ti ng Y an g v. Voy ag ai re

Hou se bo at

s, In c. , 70 1 N.W.2d 7 83 , 79 1– 92 n.5 (Mi nn . 20 05 )).

Co m co 's ur gi ng no twi th st an di ng , we de cl in e to st ric tl y co ns tru e th e in de m ni ty

pr ov is io n. As th e di st ric t co ur t no te d, "t he pr ov is io n di d no t act ua ll y sh ift li ab il it y fo r

m is co nd uc t by FMS

. . . be cau se FMS was no t fo un d li ab le fo r th e co nd uc t th at Bri ll

al le ge d." Mi nn es ot a la w di rect s co ur ts to st ric tl y co ns tru e in de m ni ty pr ov is io ns
"wh en th e in de m

ni te e

. . . se ek s to be in de m ni fie d fo r it s o w n n e g l ig en ce," Na t'l
Hyd ro Sy s ., 52 9 N.W .2d at 69 4 (a l t erat io n in or ig in al ) (q uo ta ti on an d ci ta ti on

om it te d)

, no t whe n a co m pl ai nt m erel y al le ge s su ch m is co nd uc t. Se e Se if er t v. Reg en ts of Uni v. of Min n. , 50 5 N.W .2d 83

, 85 –8 6 (Mi nn

. Ct

. App

. 1 9 9 3 ) (h ol di ng

th at al le ga ti on of ne gl ig en ce di d no t in va li da te in de m ni ty pr ov is io n whe re th e reco rd

di d no t su pp or t a fin di ng of ne gl ig en ce). An in de m ni ty pr ov is io n ho ld s harm le ss an

in de m ni te e fro m cert ai n act io ns an d co ns eq ue nc es

. Unl es s cl earl y an d un eq ui vo cal ly

-9

-pr ov id ed , M in ne so ta la w e xc lu de s an in de m ni te e's own m is co nd uc t fro m th e ran ge

of act io ns an d co ns eq ue nc es co ve red

. Im po rta nt ly, it is th e in de m

ni te e's co nd uc t th at

tri gg ers st ric t co ns tru ct io n. Th e pu rp os e be hi nd st ric tl y co ns tru in g an in de m ni ty

pr ov ision—pr ev en ti ng an in de m ni to r fro m be co m in g an un wit ti ng in su rer— is ab se nt

he re. The reco rd do es n o t s u p p o r t a fin di ng th at FMS co m m it te d an y of th e

m is co nd uc t al le ge d b y

Bri ll

.

Eve n if we were to st ric tl y co ns tru e th e pr ov is io n, ou r de ci si on in Har le ys vi ll e
fo recl os es Co m co 's arg um en t. In Har le ys vi ll e , we st ric tl y co ns tru ed a pr ov is io n th at

in de m ni fie d an in de m

ni te e " fro m an y an d al l cl ai m s, act io ns , o r cau se s of act io n in

an y way rel at in g to pe rs on ne l as si gn ed to [th e in de m ni te e], in cl ud in g, bu t no t li m it ed

to

, pe rs on al in

jury." 71 6 F.3 d at 45 8 n.9 (q uo ta ti on an d em ph as es om it te d)

. W e he ld

th at th is br oa d "p ro vi si on ga ve [th e in de mn i t o r ] cl ear no ti ce of an ob li ga ti on to

in de m ni fy [th e in de m

ni t e e ] f o r fu tu re pe rs on al in

jury cl ai m s ari si ng fro m [th e

in de m ni te e's ] ne gl ig en ce." Id

. at 45 8. W he n co nf ro nt ed a t or al arg um en t wit h

Har ley sv ill e , co un se l fo r Co m co di d no t at te m pt to di st in gu is h Har le

ys vi ll e or ex pl ai n why it di d no t ap pl y

. In st ead

, co un se l as ke d th at we reject th e ho ld in g in Har le ys vi ll e

as in co rrec tl y de ci de d. W e do no t fin d an y m ean in gf ul di st in ct io n be twee n th e br oa d

in de m ni ty pr ov i s i o n a t is su e in Har le ys vi ll e an d th e br oa d in de m ni ty pr ov is io n at

is su e h ere, an d t hu s, we ar e b ou nd by the ho ld in g i n Har le ys vi ll e

.

The di st ric t co ur t co rrec tl y in te rp ret ed th e in de m ni ty pr ov is io n as co ve rin g th e

Bri ll –F MS Li ti ga ti on

.

B. Reimb ur se men t

FMS arg ue s th at th e di st ric t co ur t erre d in li m it in g it s reco ve ry to th e $8 7,3 50

th at it pa id ou t of po ck et

. FMS co nt en ds th at th e pl ai n la ng ua ge of th e Man ag em en t Agr eem en t req ui res Co m co to rei m bu rs e it fo r th e en ti re $1 ,13 3,8 15 .36 in fees

, co st s,

an d ex pe ns es th at res ul t e d fro m th e Bri ll –F MS Lit ig at io n. FMS fu rth er arg ue s th at

th e di st ric t co ur t erre d in ho ld in g th at it co ul d no t pu rs ue reco ve ry as "t he real pa rty

-1 0-in in te res t be cau se it s lo ss es in cl ud e an d ex ceed th e am ou nt s Sco tt sd al e an d th e Seri es

A [ St oc kh ol de rs ] co nt rib ut ed ." Fi na ll y , F MS po in ts to th e su br og at io n p ro vi si on in

it s in su ran ce po li cy wit h Sco tt sd al e an d it s or al ag reem en t to rei m bu rs e th e Seri es A

St oc kh ol de rs as ev id en ce th at it wou ld no t rece iv e a win df al l w e r e i t al lo wed to

reco ve r th e en ti re $ 1,1 33 ,81 5.3 6.

The Man ag em en t Agr eem en t o b l i g at ed Co m co to "p ay an d rei m bu rs e, on
de m an d, [FM S] fo r al l reas on ab le co st s an d ex pe ns es (in cl ud in g reas on able at tor ne y s'

fees an d ex pe ns es , whi ch m ay be req ui red to be pa id in ad va nc e) as th ey are in cu rred

in co nn ect io n wit h [an y in de m ni fie d li ab il it y ]. " Co m co br each ed th is pr ov is io n whe n

it reject ed FMS 's te nd er be cau se th e Man ag em en t Agr eem en t req ui red Co m co to pa y
fo r FMS 's de fen se co st s " as th ey a re in cu rr ed " or , if req ui red

, "i n ad va nc e."
(Em ph as is ad de d.)

"Th e ru le of th e co m

m on la w is th at whe re a pa rty su st ai ns a lo ss by reas on of

a br each of co nt ract

, he is

, so far a s mo n ey can do it

, to be pl aced in th e sa m e
si tu at io n, wi th res pe ct to da m ag es , a s if th e co nt ract ha d be en pe rfo rm ed ." Pai ne v.
Sh er wo od

, 21 Mi nn

. 22 5, 23 2 (1 87 5) (q uo ta ti on an d ci ta ti on o mi t t e d ) ; se e al so
Kel lo gg v. W

oo ds

, 72 0 N.W .2d 84 5, 85 3 (Mi nn

. Ct

. App

. 20 0 6 ) ( ex pl ai ni ng th at
"[t ]he ap pr op ria te m eas u r e f o r br each -o f-co nt ract da m ag es is th e am ou nt th at wil l
pl ace th e no nb reac hi ng pa rty in t h e s a me po si ti on he wou ld be in ha d th e co nt ract

be en pe rfo rm ed " (ci ta ti on om itt ed ))

. N ev er the le ss, "i t is w el l es ta bl is he d in Mi nn es ot a

th at in th e cas e of a br each of co nt ract th e in jure d pa rty m

us t us e reas on ab le di li ge nc e

to m in im iz e hi s da m ag es ." La ne sb or o Pro du ce & Hat ch er y Co

. v

. Fo r t h u n , 16

N.W .2d 32 6, 32 8 (Mi nn

. 19 44 ) (ci ti ng Bar ro n G. Co ll ie r, In c. v. W ome n's Gar men t

St or e, In c. , 18 9 N.W. 40 3, 4 04 (Mi nn . 19 22 ); Bar ro n G. Co ll ie r, In c. v. Ki nd y , 1 78

N.W . 58 4, 5 85 (Mi nn . 19 20 ); W av ra v. Ka rr , 17 2 N.W. 11 8, 1 20 (Mi nn . 19 19 )).

The am ou nt s pa id by Sco tt sd al e an d th e Seri es A St oc kh ol de rs are no t da m ag es

th at FMS su ffer ed as a res ul t of Co m co 's br each

. FMS m ak es m uc h of th e te rm

-1 1-"i nc ur ," arg ui ng th at it m erel y refe rs to a li ab il i t y a nd no t an act ua l pa y m en t. FMS

po in ts ou t th at al th ou gh it di d no t pa y fo r al l of th e ex pe ns es as so ci a t e d wit h th e

Bri ll –F MS Li t i g a t i o n, it be cam e li ab le fo r al l of th e ex pe ns es . As su ch , F MS se ek s
da m ag es fo r al l ex pe ns es "i nc ur red ." Thi s arg um en t, ho wev er, ig no res th e m eas ur e

of da m ag es res ul ti ng fro m a br each of co nt ract

. If Co m co ha d no t br ea c h e d t he

co nt ract

, FMS m ay be co rrec t th at th e la ng ua ge of th e Man ag em en t Agr eem en t wou ld

en ti tl e it to al l reas on ab le fees

, co st s, an d ex pe ns es res ul ti ng fro m th e Bri ll –F MS

Lit ig at io n. Bu t Co m co di d br each

, an d FMS

, in acco rd wit h it s le ga l du ty, m it ig at ed

it s d a m ag es by te nd eri ng th e de fen se to Sco tt sd al e an d arra ng in g fu nd in g wit h th e
Seri es A Sto ck ho ld ers

. 5

FMS at te m

pt s to es cap e th is co nc lu si on by arg ui ng th at it wou ld no t rece iv e a
win df al l were it to reco ve r th e en ti re $1 ,13 3,8 15 .36

. Acco rd in g t o F M S

, th e

su br og at io n pr ov is io n in it s in su ran ce po li cy wit h Sco tt sd al e de m on st rat es th at FMS 6

ha s a g r e e d to rei m

bu rs e Sco tt sd al e. Howev er, FMS ha s pr ov id ed no au th or it y

su gg es ti ng th at th e ge ne ral ru le s on da m ag es are su pp l a n t e d by th e su br og at io n

F M S may ha ve ad di ti on al da m ag es as a res ul t of te nd eri ng it s de fen se t o 5

Sco tt sd al e (s uc h as su bs eq ue nt ly hi gh er pr em iu m s)

, bu t i t h a s no t so ug ht rel ie f fo r

an y th in g ot he r th an th e fu l l a mo u n t of fees

, co st s, an d ex pe ns es res ul ti ng fro m th e Bri ll –F MS Li ti ga ti on

.

FMS 's i n s ur an ce po li cy wit h Sco tt sd al e co nt ai ns th e fo ll owi ng su br og at io n 6

pr ov is io n:

I n t h e ev en t of an y pa y m en ts un de r th is Po li cy , In su rer sh al l be

su br og at ed to th e ex te nt of su ch pa y m en t to al l of th e In su red s' rig ht s of

reco ve ry ag ai ns t an y pe rs on or en ti ty. The In su red s sh al l ex ecu te al l

pa pe rs req ui red an d sh al l do ev erythi ng th at m ay be ne ces sa ry to se cu re

an d pr es erv e su ch rig ht s, in cl ud in g th e ex ecu ti on of su ch do cu m en ts as

are ne ces sa ry to en ab le In su rer effe ct iv el y to br in g su it or o t he rwis e
pu rs ue su br og a t i on in th e na m e of th e In su red s, an d sh al l pr ov id e al l

ot he r as si st an ce an d co op erat io n whi ch In su rer m ay reas on ab ly req ui re.

-1 2-a gr eem en t. Afte r m it ig at in g it s da m ag es , FMS pa id $8 7,3 50 ou t-o f-p oc ke t. Thu s

FMS 's award of $8 7,3 50 pl aces it "i n th e sa m e si tu at io n, wit h res pe ct to da m ag es , as

if th e co nt r a c t h a d be en pe rfo rm ed ." Pai ne , 2 1 Mi nn . a t 23 2; se e al so Am. S ur . C o.

v. St at e Far m Mut

. Aut o. Ins

. Co

. , 14 2 N.W.2d 3 04 , 30 6 (M in n. 1 96 6) (fi nd in g t ha t

in su red "was no t dam ag ed by [ins ur er-]de fen da nt 's re fu sa l t o d efen d i n v io la ti on of

it s o bl ig at io ns un de r th e p ol ic y " b ecau se in su red 's s eco nd in su rer "was req ui red [to

de fen d] un de r it s own po li cy "); Co nc or d Hos p. v. N.H. Me d

. Mal

pr ac ti ce Jo in t

Und er wr it in g Ass 'n

, 69 4 A.2d 99 6 (N.H. 19 97 ) (ref us in g to award m or e th an ou t-o fpo ck e t e x pe ns es to a ho sp it al aft er on e of it s in su rers refu se d to pa y li ti ga ti on

ex pe ns es ). 7

FMS al so arg ue s th at it wil l no t be ne fit fro m a win df al l be cau se it ha s o r a l l y

ag reed to rei m

bu rs e th e Seri es A St oc kh ol d e r s f o r t he ir co nt rib ut io n to th e joi nt

de fen se fu nd

. FMS ov erl oo ks th e fact th at it can no t reco ve r fro m Co m co wha t rig ht fu ll y be lo ng s to th e Seri es A St oc kh ol de rs

. "Be cau se a co rp or at io n a n d it s

st oc kh ol de rs are se pa rat e en ti ti es ," FMS 's ab il it y to su cces sf ul ly su e on be ha lf of th e
Seri es A St oc kh ol de rs is du bi ou s at be st

. Se e S i n g er v. All ie d Fac to rs
, In c. , 13

N.W .2d 37 8, 3 80 (Mi nn . 19 44 ) (ci ta ti on s o m it te d)

.

The di st ric t co ur t co rrec tl y li m it ed FMS 's reco ve ry fro m Co m co to th e $8 7,3 50

FMS pa id ou t o f po ck et

.

FMS rel ie s on a li ne of Mi nn es ot a cas es ho ld in g th at if an "i ns ur ed ret ai ns 7

so m e in te res t in th e cau se of act io n, th e su it m ay be br ou gh t in hi s na m e. If he m ak es

reco ve ry , he ha s th e r i g h t t o r e im bu rs e hi m se lf fo r hi s lo ss an d ex pe ns es an d th en ho ld th e ba la nc e of hi s reco ve ry in tru st fo r th e in su rer." Bl a i r v. Esp el an d

, 43

N.W .2d 27 4, 2 7 6 ( M i n n

. 19 50 ) (ci ta ti on s om it te d) ; se e al so Li ne s v. Rya n , 27 2

N .W .2d 89 6, 90 4 (Mi nn . 1 97 8) (s am e); Flo r v. Buc k , 2 48 N.W .2d 74 3, 74 4 (M i n n

. 19 33 ) (s am e). Tho se cas es in vo lv ed in jure d pa rti es th at ha d rece iv ed jud gm en ts

. Thi s is a co nt ract cas e, no t a to rt cas e. FMS ha s n ot de m on st rat ed th at Mi nn es ot a wou ld
si m il arl y all ow d ou bl e-re co ve rie s fo r co nt ract di sp ut es

.

-1 3-III. Co nc lu si on

Acco rd in gl y , we affi rm

th e jud gm en t o f th e d is tri ct co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

-1 4-