UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LABORATORY CORPORATION OF

AMERICA HOLDINGS, INCORPORATED,

formerly known as Roche

Biomedical Laboratories,

Incorporated,

Plaintiff-Appellee,

v.

No. 97-1175

CLINICAL LABORATORY CONSULTANTS,

INCORPORATED,

Defendant-Appellant,

and

FABIO E. GUTIERREZ, M.D.,

Defendant.

LABORATORY CORPORATION OF

AMERICA HOLDINGS, INCORPORATED,

formerly known as Roche

Biomedical Laboratories,

Incorporated,

Plaintiff-Appellant,

v.

No. 97-1219

CLINICAL LABORATORY CONSULTANTS,

INCORPORATED,

Defendant-Appellee,

and

FABIO E. GUTIERREZ, M.D.,

Defendant.
Appeals from the United States District Court

for the Eastern District of Virginia, at Richmond.

Robert R. Merhige, Jr., Senior District Judge.

(CA-95-658-3)

Argued: July 7, 1997

Decided: September 5, 1997

Before WILKINSON, Chief Judge, and WILKINS and

HAMILTON, Circuit Judges.

_________________________________________________________________

Affirmed in part, reversed in part, and remanded by unpublished per

curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Brewster Stone Rawls, BREWSTER S. RAWLS &

ASSOCIATES, P.C., Richmond, Virginia, for Appellant. John Henry

OBrion, Jr., COWAN & OWEN, Richmond, Virginia, for Appellee.

ON BRIEF: John B. Nicholson, BREWSTER S. RAWLS & ASSOCIATES, P.C., Richmond, Virginia, for Appellant.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Laboratory Corporation of America Holdings, Incorporated, formerly Roche Biomedical Laboratories, Incorporated (Roche), brought

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this indemnification action against Clinical Laboratory Consultants,

Incorporated (CLC) to recover payments made by Roche in settlement of a medical malpractice action. Following a bench trial, the district court granted judgment to Roche and awarded attorneys' fees

incurred in the indemnification action against CLC. However, the

court refused to allow Roche to recover legal fees expended in

defending the underlying malpractice action. CLC appeals the judgment of the district court in favor of Roche on the indemnification

claim and the award of attorneys' fees. Roche cross appeals the

refusal of the district court to award attorneys' fees it incurred in

defending the malpractice action. We affirm in part, reverse in part,

and remand.

I.

Roche's claim for indemnification arose out of a medical malpractice action initiated in Virginia state court by Nancy Benson against

numerous defendants, including Roche; two of Roche's laboratory

technicians; and Dr. Fabio Gutierrez, a pathologist employed by CLC.

Roche provided pathology services for various health care practitioners in Richmond, Virginia. Ordinarily, physicians sent pap smear tests

to Roche for analysis by a technician. Abnormal specimens, however,

required further review by a board-certified pathologist. Roche

entered into a written agreement with CLC whereby CLC agreed to

supply such pathology services. Additionally, CLC agreed

to defend and indemnify and hold Roche Biomedical harmless from any and all liability to all persons, due to bodily

injuries, including death, and/or damage to all property, arising directly or indirectly from [CLC's] own negligence or

wrongful act [sic] or the negligence or wrongful acts of its

agents and employees.

J.A. 24.

Shortly before Benson's malpractice action went to trial, she

accepted a comprehensive settlement offer of $1.75 million that was

extended on behalf of all defendants. Roche contributed $750,000 to

the settlement amount, as did Benson's treating physicians. Dr.

Gutierrez contributed $250,000. CLC, although not a defendant in the

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malpractice action, signed the settlement agreement. The agreement

provided that "the fact of settlement and the amounts Roche and

Gutierrez have agreed to contribute to settlement of the lawsuit shall

not waive or affect in any manner the rights, if any exist, of Roche

or CLC ... to seek full indemnification and/or contribution from the

other pursuant to" their written agreement. J.A. 373.

Roche then filed this action seeking indemnification from CLC and

Dr. Gutierrez in the amount of $750,000, plus attorneys' fees incurred

in the defense of Benson's lawsuit and in the prosecution of this

action for indemnification. The district court determined that because

CLC had received appropriate notice of the underlying claim and had

been given a meaningful opportunity to defend against it, Roche was

required only to prove potential liability, i.e. , "that its settlement was

reasonable and in good faith." J.A. 276 (internal quotation marks

omitted). Concluding that the settlement in fact was reasonable and

in good faith, the district court awarded Roche the full amount it contributed to the Benson lawsuit plus the attorneys' fees that it incurred

in recovering this amount from CLC. However, the court refused to

award any attorneys' fees incurred by Roche in defending against

Benson's malpractice claims, reasoning that Roche had to incur legal

fees in any event to defend its two employees.

II.

With respect to the grant of judgment in favor of Roche on its

indemnification claim, CLC raises two issues on appeal. First, CLC

asserts that the district court erred in determining that CLC had notice

of and an opportunity to defend Benson's malpractice claim and, as

a result, that Roche was required to prove only that its settlement of

the claim was reasonable and was made in good faith rather than that

Roche was actually liable to Benson. See Jennings v. United States,

374 F.2d 983, 985-87 (4th Cir. 1967); see also Atlantic Richfield Co.

v. Interstate Oil Transp. Co., 784 F.2d 106, 111 (2d Cir. 1986). Specifically, CLC contends that Roche should be required to make a

showing of actual liability because it did not afford CLC sufficient

notice or an opportunity to defend against Benson's malpractice

action. We disagree. CLC clearly had notice of Benson's claim

against Roche since Dr. Gutierrez was also a defendant in the malpractice action. Furthermore, CLC directly participated in the settle-

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ment negotiations, was represented by counsel for Dr. Gutierrez

during the negotiations, and actually signed the settlement agreement.

CLC next asserts that Roche's settlement of Benson's claims was

not reasonable, contending that Roche had a strong defense on the

basis that it was not vicariously liable to Benson for the acts or omissions of Dr. Gutierrez because he was an independent contractor of

Roche. After closely reviewing the record, we conclude that the district court did not err in concluding that the settlement was reasonable. A jury reasonably could have concluded that Roche exercised

sufficient control over the work of Dr. Gutierrez to be vicariously liable for his acts, given that he performed work at Roche's laboratory,

used Roche's equipment, reported his findings on Roche's forms, and

was empowered to revise various procedures performed at Roche's

laboratory. See Hadeed v. Medic-24, Ltd., 377 S.E.2d 589, 594-95

(Va. 1989). Furthermore, Roche's $750,000 contribution to the comprehensive settlement was reasonable in light of the fact that the presiding judge and a mediator determined independently that the total

settlement value of the case was $1.75 million. 1 And, CLC approved

the settlement agreement, evidencing its belief that the amount was

reasonable.2

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1 CLC also argues that the amount of the settlement was unreasonable

because Virginia limits damages in medical malpractice actions against

health care providers to $1,000,000. See Va. Code Ann. § 8.01-581.15

(Michie 1992). However, at the time of the settlement in 1995 it was not

clear that a clinical laboratory such as Roche would be protected by the

statutory cap. See Richman v. National Health Labs., Inc., 367 S.E.2d

508, 510-11 (Va. 1988) (holding that a clinical laboratory was not a

health care provider under the statutory definition of that term). Indeed,

the Supreme Court of Virginia has since clarified that the statutory cap

does not protect any individual or entity that is not a health care provider

as that term is defined by Virginia law. See Schwartz v. Brownlee, 482

S.E.2d 827, 831 (Va. 1997). Given the possibility that Roche would be

responsible for the full amount of any judgment in Benson's favor, its

decision to settle was not unreasonable.

2 We have carefully considered CLC's remaining argument challenging

the indemnification award and conclude that it is without merit.

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III.

Both parties challenge the ruling of the district court with respect

to attorneys' fees. CLC contends that the district court erred in awarding Roche attorneys' fees incurred in connection with this indemnification action, asserting that absent an express agreement to the

contrary, attorneys' fees are recoverable only to the extent they are

incurred in the defense of a claim by a third party and not in the prosecution of an action for indemnity. We disagree. An indemnitee who

is forced to bring an action against an indemnitor to enforce an

indemnification agreement may recover legal fees and costs incurred

in establishing its right to indemnification, provided the language in

the agreement is sufficiently broad to encompass the recovery of such

expenses. See Rappold v. Indiana Lumbermens Mut. Ins. Co., 431

S.E.2d 302, 304-05 (Va. 1993). Here, CLC agreed to indemnify

Roche "from any and all liability ... arising directly or indirectly from

... the negligence or wrongful acts of its agents and employees." J.A.

24. Because this language is broad enough to include the recovery of

legal fees incurred in enforcing the indemnification agreement, we

conclude that the district court properly awarded Roche its attorneys'

fees in this action. See id.

In turn, Roche contends that the district court erred in concluding

that Roche was not entitled to recover the attorneys' fees it incurred

in defending against Benson's malpractice action because such fees

were unreasonable and excessive. We agree. In determining whether

a fee is reasonable, the court "should consider such circumstances as

the time consumed, the effort expended, the nature of the services

rendered, and other attending circumstances." Mullins v. Richlands

Nat'l Bank, 403 S.E.2d 334, 335 (Va. 1991). Here, the district court

refused to award even a portion of the attorneys' fees incurred by

Roche in connection with its defense of Benson's lawsuit for the sole

reason that Roche was obligated to pay legal fees in any event to

defend its employees. This fact alone, although it may justify a reduction of attorneys' fees, is not sufficient to defeat Roche's entire claim

for attorneys' fees resulting from the defense of Benson's claims as

a matter of law. Accordingly, we reverse this portion of the order of

the district court and remand for a determination, in light of all the

attendant circumstances, of whether Roche is entitled to recover attorneys' fees expended in connection with the underlying lawsuit. In

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making this determination, the district court should apportion the fees

between those incurred as a result of the allegations against Dr.

Gutierrez and those incurred in defense of Roche's employees, setting

off any amount that can be attributed to the defense of the two Roche

employees.

IV.

For the foregoing reasons, we affirm the judgment of the district

court on Roche's indemnification claim and the award of attorneys'

fees incurred by Roche in connection with this action. We reverse that

portion of the judgment relating to Roche's claim for attorneys' fees

connected with its defense of the underlying action and remand for a

proper determination of whether any such fees are recoverable.

AFFIRMED IN PART, REVERSED

IN PART, AND REMANDED

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