FI L ED U.S. COURT OF A P P E A LS E LE V E N T H C IR C U IT AUGUST 8, 2005 THOMAS K. KAH

N CL ERK [PUBLISH] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ _ N o. 03- 1248 4

____ ____ ____ ____ ____ ____ _ D. C. Docket N o. 96-01798 -CV -S- N W ILLIAM CASTLEBERRY, GLADDEA

N CASTLEBERRY, P la int if fs , ve rs us GOLDOME CREDIT CORPORATION, D ef en dant- Cr oss - D ef en dant- Appe llant, DAIWA FINANCE CORPORATION, D ef en dant- Cr oss - C laim ant-Appellee, DA IWA MO RT GA GE AC CE PT AN CE CORPO RAT IO N, DA IWA A MER ICA CORPORATION, DAIWA SECURITIES AMERIC A, INC., et al ., D ef en dants , FEDERAL DEPOSIT INSURANCE CORPO RAT IO N, in its ind ividu al co rp or at e ca

pa ci ty and i n it s c ap ac ity*Honora ble J ohn R. Gibson, United States Circuit J udg e for the Eighth Circuit, sit ting by desig nation. We considere d the Castleber ry s' appea l arisingout of the same litig ation in Castleberry 1 v. Goldome Credit Corp., 408 F.3d 773 ( 11th Cir. 2005). 2 as rec eiver of G oldo m e FS B, C ro ss- D ef en dant- Appe llant.

____ ____ ____ ____ ____ ____ _ Appe al f ro m the U nit ed

S ta te s D istri ct

Co urt f o r th e M i d d l e D i s t r i c to f

A l ab a ma

____ ____ ____ ____ ____ ____ _ (A ug us t 8, 200 5) Be fo re BI RC H , KRA V IT CH and G IB SO N , Ci rc uit Jud ge s. * GI BSO N, Circuit Judge. Goldom e Cr edit Corporation and th e FD IC a ppeal from

the district court's
or de r hol din g th em

li ab le to ind em

nif y D ai w a Fi nanc e Co rp or at ionf or it s attor ne y s' f ee s in curr ed

in de fe ndi ng i tse lf

a ga ins t the c la im s inCa stl eb er ry v. G old om e Cr ed it Co rp . , N o. 96- 0179 8- CV -S -N( M. D
. A la
. ). D ai w a' s in de m nity 1 cl ai m a ga ins t G old om e w as ba se d onaloan po rt fo lio sa le a gr ee m en t i n w hic h ( 1) D ai w a boug ht a

portf oli o of loans f ro m G old om e an d ( 2) G old om e ag re ed to ind em nif y and d ef en d D ai w a ag ai nst

a ny c la im a ri sin g ou t of

the or igi na tio n of loans within th e loan portfolio and filed within th ree y ears of the sale. The FD ICThe Castlebe rry s also named a s defe ndants Daiwa Mortg ag e Ac cepta

nce Corpor ation, 2 Daiwa Securities Amer ica Inc., and D aiwa America Corporation. 3 guaranteed G oldo m e's indem nity oblig ation. T he district court int er pr et ed the ind em

nity and g uarante e as ins ur an ce c ontra ct s and h el d th at , be ca use ac onf

lic t of int er es t aro se be tw ee n G old om e an d D ai w a, the c ontra ct s co nta ine d an im

pli ed obl igatio n onthe part

of G old om e to p ay

f or c ouns el of Da i wa 's ch o o s i n g . Th e d i s t ri ct co u rt en t er ed s u m m ary ju d g m en tfo r D ai wa . We hol d th at the loan po rt fo lio sa le a gr ee m en t i s no t a c ontra ct of ins ur an ce a nd, Goldom e having offered to provide a defense, the agree m ent does no t further
o b l i g a t e Go l d o me o r

th e F D I C t o p a y fo r

c o u n s e l h i r e db y Da i w a . Ac c o r d i n g l y, w e re ve rs e the j udgm en t of the dis tr ic t c ourt. The underly ing claim

in this lawsuit alleged fraud and lending law vio la tio ns b y

G old om e in c onne ct ionw ithahom e m ortga ge loan to W ill iam a nd Gladdean Ca stleberry
. The suit sough t class relief for other sim ilarly

situated
co nsum er s. T he Ca stl eb er ry s nam ed

D ai w a Fi nanc e Co rp . a s ade fe ndant, 2 al le gin g th at

D ai w a w as asuc ce sso r in i nte re st t o G old om e an d th at it r at if ie d and j oin ed in G old om e' s f

ra ud b y takin g a ssi gnm en t of

the loans i t bo ught

f ro m Gol do m e wit ho ut di sc lo si ng th e al le ge d fr au d a nd len di ng law v io la ti on s. Dai wa cr oss -c la im ed

a ga ins t G old om e, se ek ing c ontra ct ua l i nde m nity f or a ny li ab ili ty Da iwa m ight in cur to the Castleberr y s or any other m em

ber of the cla ss, as w ell as4

fo r attor ne y s' f ee s, e xpe nse s, and c ost s D ai w a w oul d in cur in d ef en din g a ga ins t the Ca stl eb er ry sui t. D ai w a al so j oin ed

the F D IC in its c ap ac ity

a s r ec ei ve r fo r Goldom e's par ent corporation and in it s corporate ca pacity , in w hich the FDI C
ex ec ute d an a gr ee m en t gu ar an te ei ng G old om e' s c ontra ct ua l ob lig at ionto in de m ni fy Daiwa f orcla im s ar is in g o ut of t he ori gi na ti on of t he lo an s. O n January

29, 199 3, D ai w a boug ht f ro m G old om e a loan po rt fo lio
am ount ing to m or e than $4 77 m ill ionin fa ce va lue , w hic h in cl ude d th e Ca stl eb er ry loan. A t the ti m e D ai w a pur ch as ed the portf oli o, the re w as a lr ea dy lit igatio n pe ndi ng a lle gin g th at G old om e ha d pe rp etrate d f ra ud i n c onne ct ionw ith the originatio n of hom e m ortgage loans; Goldom e inform ed Da iwa of such lit igatio n, and, in part ic ular of the A nde rs on c la ss a ct ion
. T he a gr ee m en t gove rn ing the loan po rt fo lio sa le inc lud ed a n un de rt ak ing by

G old om e to ind em nif y D ai w a fo r an y

sui ts ari sin g ou t of

the or igi na tio n of

the loans tha t m igh t be fil edag ai ns t Dai wa wit hi n t hr ee years o f th e lo an po rtf ol io sal e. T he Ca stl eb er

ry s f ile d su it ag ai nst

G old om e on J anuary

17, 199 5 instate
co urt i n A la

ba m a. T he y

a m en de d th ei r co m

pla int in Apr il 1995 to ad d D ai w a as a de fe ndant. O n Apr il 27, 199 5, D ai w a m ad e de m an d onG old om e fo r ind em nif ic at ionand d ef

en se of the Ca stl eb er

ry s' c la im , a nd G old om e ag re ed to defend Da iwa. G oldo m e re tained the law f irm of Johnso n, Barton, Pr octor, Sw ed lawand N af

f to r ep re se nt D ai w a in the Ca stl eb er ry c as e. Joh nson , Bart on5

re pr es en te d G old om e in tha t l iti ga tio n a s w el l. T he Joh nson , Bart on f irm w ro te D ai w a a le tte r unde rt ak ing to de fe nd i t, sub j ec t t o ar es er

va tio n of r igh ts i n th e ev en t G old om e la te r de te rm ine d th at the c la im did not f al l w ith in the sc ope of

the in de m ni fic at io n p ro vi si on s o f th e lo an po rtf ol io sal e ag reem en t. The C astleberry s m oved for certif ication of a class, and Goldom e opposed t h e mo t i o n . T h e s t a t e tr i a l c o u rtc o n d i t i o n a l l y c e rt i f i e dth e c l a s s , a n dG o l d o me m ove d f or r ec onsi de ratio n. D ai w a w ro te to the Joh nson , Bart on f irm , se ek ing assurance that, in the event the class wer e decer tified and form er c lass m em bers filed new suits after

the three-y ear anniversary of the loan portfolio sale (which
w as the li m itatio ns p er iod se t ou t i n th e sa le a gr ee m en t) , G old om e w oul d st ill ind em nif y D ai w a. D ai w a poi nte d ou t tha t, unl es s G old om e w er e w ill ing to w ai ve the thr ee -y ear tim e lim it fo r suc h su its , it w oul d be in D ai w a' s be st i nte re sts to supp ort c la ss c er

tif ic at ion ; a cc or din gly , the re w oul d be ac onf lic t of int er es t be tw ee n G old om e an d D ai w a that w oul d pr ec lud e the sam e law y er s f ro m re pr es en tin g th em

both inthe Ca stl eb er

ry li tig at ion
. G old om e re spon de d th at it had no ob ligation to indemnify Da iwa for any

suits filed after the three -y ear anniversary

of the loan portfolio sale. But, in response to th e acknowledged
co nf lic t of int er es t, G old om e pr opos ed to subs tit ute ne wc ouns el to re pr es en t Da iwa "under the control" of Goldom e. D aiwa ref used to accede to such an
ar range m en t; ins te ad , D ai w a hir ed it s own in de pe nde nt c ouns el
. D ai w a fi le d a6

cr oss -c la im

a ga ins t G old om e an d athi rd -p ar ty c om pla int a ga ins t the F D IC in the Castleberry

case f or indem nification and attorney s' fe es and costs. T he FD IC
rem oved the case to the Middle District of A labam a. T he feder al district court th en de cert ifi edth e cl as s. T he dis tr ic t c ourt e nte re d su m m ar y j udgm en t f

or the de fe ndants a ga ins t the Cas tl eb errys on May 31, 2 00 1. On Mar ch 29, 2002, the district court tookup Daiw a's m otion for sum m ary j udgm en t onit s c ro ss- cl ai m a ga ins t G old om e an d it s th ir d- party c om pla int a ga ins t the F D IC
. T he c ourt he ld tha t D ai w a' s c la im f or ind em nif ic at ionw as m oot

in lig ht of the j udgm ent against the Castleberry s, and the court declined to resolve Da iwa' s cl ai m f or ade cl ar at ionabout

any duty of G old om e to d ef

en d D ai w a in p oss ibl e su it s b ro ug ht in th e fu tu re b y for m er m em

be rs of t he de cert ifi edcla ss . T he dis tr ic t c ourt gr an te d su m m ar y j udgm en t t o D ai w a on i ts c la im a ga ins t G old om e se ek ing ade cl ar at ionthat G old om e ow ed D ai w a a duty

to de fe nd i t ag ai nst the Ca stl eb er

ry s' c la im ; the c ourt r ea sone d th at the Ca stl eb er

ry s' c la im s f

el l
w ith in the ind em

nity c lause of the loan po rt fo lio sa le a gr ee m en t. T he c ourt a lso gr an te d s umm ary jud gm en t t o Dai wa on it s cl ai m forth e fee s an d e xp en se s Dai wa incurred in hiring its own counsel to defend it against th e Castleber ry s. T he court
re as one d th at

be ca use "the ind em

nif ic at ionpr ovi sio ns o f the [ loan po rt fo lio sa le agreem ent] serve the sam e function as an insurance policy in which [G oldo m e]7

wa s the insu rer and [Da iwa is] the [insured] ," the c ourt sho uld appl y the principles of ins ur an ce lawgov er

nin g " the duty

of a n in sur an ce c om

pany to de fe nd i ts ins ur ed
. " S lip op. a t 13
. T he c ourt he ld tha t N ewY ork lawgov er ne d bo th the loan portfolio sale agre em ent and the guarantee. Under Ne w Y ork law, when an ins ur er is obl ige d to de fe nd i ts i nsur ed and a c onf lic t of int er es t ari se s be tw ee n th e tw o, the ins ur ed

ha s ar igh t t o ob ta in c ouns el of it s own c hoi ce to be pa id b y the in su rer. Sl ip op . at 2 1 (q uo ti ng Pen n Al um in um , Inc . v. Aet na Cas . & Su r. Co ., 402 N.Y .S .2d 877, 879 (App. D iv. 1978)). Ac cordingly , the c ourt held that G old om e w as obl ige d to pay f or ind ep en de nt c ouns el to re pr es en t D ai w a. S lip op. at23
. T he c ourt f

urthe r en te re d j udgm en t i n f av or of a ll re m ai nin g de fe ndants , inc lud ing D ai w a, a ga ins t the Ca stl eb er ry s. T he c ourt r et ai ne d j ur isd ic tio n to de ci de the a m ount

of the f ee aw ar d, but

c er tif ie d th e en tr

y of sum m ar y j udgm en t fo r imm ed ia te ap pe al un de r Fed eral Ru le of C iv il Pro cedur e 5 4( b) . Sli p o p. at 28
. O n a ppe al , G old om e ar gue s th at the dis tr ic t c ourt e rr ed

in ap ply ing ins ur an ce lawto the ind em nity pr ovi sio ns o f the loan po rt fo lio sa le a gr ee m en t and the guarantee. G oldo m e ar gues that if ordinary , non-insurance contract law w ere ap pli ed , G old om e w oul d no t have be enhe ld l ia ble to pay f or c ouns el hir ed

by Da iwa.8

W e re vie wthe dis tr ic t c ourt' s gr an t of sum m ar y j udgm en t de nov o. P en al ty KickMg m

t. v . Coc a Co la Co ., 31 8 F .3d12 84 , 12 90 n.5 (11 th Cir . 20 03 ). Sum m ary j udgm ent is appropriate onlyif there is no genu ine issue of m aterial f act and the m ovin g party

is entitled to judgm ent as a m atter of law. Fed. R. Civ. P
. 56(c). N ewY ork lawha s aspe ci fi c ru le , de ve lop ed in ins ur an ce c as es , gov er nin g the way in which an insurer m

ust dis charge its duty

to defend its insu red. N ew Y ork c as es state aw el l- es ta bli she d r ule that w he re a n in sur er

is obl ige d to sup ply th e in su redwit h a de fen se , [i ] f [a ] c onf

lic t of int er es t ari se s . . . the se le ct ionof the a tto rn ey s to re pr es en t the a ssure ds s houl d be m ad e by the m r athe r than by

the ins ur an ce c om

pany , w hic h sh oul d r em ai n li ab le f or the paym en t of the r ea sona

ble va lue of

the se rv ic es of

w ha te ve r attor

ne y s th e as sur ed s se le ct . Pr as hke r v. U nit ed

S ta te s G uar. Co
. , 1 N
. Y
. 2d 5 84, 593 ( 1956 ); a cc or d P ub. S er v. Mut
. I ns. Co
. v. G old farb , 53 N
. Y
. 2d 3 92, 401 ( 1981 ); 69th S t. & 2d A ve . G ar ag e A sso cs . v. T ic or

T itl e G uar. Co
. , 622 N
. Y
. S. 2d 1 3, 14 ( App. D iv. 199 5)
. T his r ule is evidentlyinvok ed without stud y of the language of the particular insurance contract at issue. See , e .g. , P rashker, 1 N. Y. 2d at 593 ; Goldfarb, 53 N. Y. 2d at 401. T he r

ule in que sti on e xis ts w ith in the c ont ex t of ins ur an ce lawa nd r ef

le ct s the e xig en ci es of

ins ur an ce sit

ua tio ns. "[ I] nsur an ce pol ic ie s, w hil e co ntr ac tua l i n9

na tur e, a re c er

ta inl y not or din ar y c ontra ct s, a nd s houl d no t be int er pr et ed or co nstru ed a s in div idu al ly

barg ai ne d f

or , f ull y ne got ia te d a gr ee m en ts, but sho uld be tr eate d a s c ontra ct s of

a dhe sio n be tw ee n un equa l part ie s. " 1 6 R ic hard A
. L or d, W ill ist on o n C ontra ct s § 4 9. 15 at 90 ( 4 e d. 200 0)
. A cc or d E ag le S tar In s. Co
. v. th In te rn ' l P ro te ins Co rp . , 360 N
. Y
. S. 2d 6 48, 650 ( App. D iv. 197 4) ( co ntr ac ts o f ins ur an ce are "a dhe sio n c ontra ct s" ), a ff ' d, 346 N
. E
. 2d 2 49 (N
. Y
. 197 6)
. C ourts h a v e i n t e r p r e t e di n s u r a n c e c o n t r a c t s a c c o r d i n g t o th e r u l e o f c o n t r ap r o f

e r e n t e m, re sol vin g am

big uit ie s a ga ins t the ins ur er . E
. g. , S inc of f v. L ibe rty

Mu t. F ir e In s. Co ., 18 3 N.E.2d 89 9, 9 01 -0 2 (N.Y. 1 96 2) ; Hab er v . St. Pa ul Guar di an Ins . Co., 137 F. 3d 6 91, 697 -9 8 ( 2d C ir
. 199 8) ( N ewY ork law ); P anA m . W or ld A ir w ay s, Inc. v. A etna Cas. & Sur. Co., 505 F.2d 989, 999-10 00 (2d Cir. 1974) (N ewYork law)
. "Most Am erican courts apply a rule of construction that coverages term s are construed broadlyand exclusion s and lim itations of coverage are construed
narr ow ly
. " 2 E ri c Mi lls H olm es a nd M ar k S
. Rh ode s, H olm es ' s Appl em anon In sur an ce § 6. 1 a t p. 173 ( 2d e d. 199 6)
. I n part ic ular, a n in sur er ' s c ontra ct ua l du ty t o d e f e n di t s i n s u r e di s r e a db r o a d l y. T he r at ion al e fo r the appl ic at ionof the tr ad iti ona l r

ule s [ of int er pr et ing any

a m big uity in the pol ic y

in favor of f ind ing of co ve ra ge ] is that the ins ur an ce pol ic y is ge ne ra lly

a n a dhe sio n co ntr ac t and the re fo re the ins ur ed ha s no abil ity

to ne got ia te f

or or control the wording of the provis ions con tained therein. T his lib eral ru le of c onstru ct ionis part ic ularl y appr opr ia te in de te rm ini ng the10

ins ur er ' s du ty

to de fe nd the ins ur ed

f ro m c la im s po te nti al ly

w ith in the scope of the policy

coverage. See i d. at § 6 .5, p p. 2 13 -1 4. Th us , [a ] n in sur er ' s duty

to de fe nd i s tr igg er ed

whe ne ve r the a lle ga tio ns i n a co m pla int , li be ra lly

c onstru ed , sug ge st a

r ea sona ble pos sib ili ty

of co ve ra ge , or

w he n th e ins ur er

ha s a ct ua l kn ow le dge of

f ac ts es ta bli shi ng s uc h ar ea sona

ble pos sib ili ty . A n in sur er m ay be re lie ve d of

it s du ty to de fe nd o nly

if it c ane sta bli sh, a s am atte r of law , that the re is no p oss ibl e fa ct ua l or le ga l ba sis on whic h it

m igh t eventually

be obligated to indem

nify its insu red, or by

proving that th e al le ga ti on s fa ll wit hi n a po li cy ex cl us io n. D ee tj env. N at ion w ide Mu t. F ir e In s. Co
. , 754 N
. Y
. S. 2d 3 66, 368 ( App. D iv. 20 03 ) (ci ta ti on om it te d)
. Inc ontra st, in a non- ins ur an ce ind em nity c as e, the r

ule of c onstru ct ionis j ust the opp osi te : a

non -i nsur an ce ind em

nity a gr ee m en t i s stri ct ly

c onstru ed , a nd a duty to ind em nif y sho uld not be f ound "a bse nt m an if

es ta tio n of

a' cl ear an d
unm ist ak ab le int en t' to ind em nif y . " C om m an de r O il Co rp . v. A dvanc e Fo od S er v. Equ ip ., 99 1 F .2d49 , 51 (2d Cir . 19 93 ); a cco rdTon ki ng v. Po rt Au th . of N.Y. & N
. J. , 821 N
. E
. 2d 1 33, 135 ( N
. Y
. 200 4) ; H oope r A sso cs . L td. v. A G S Co m put er s, In c., 54 8 N.E.2d 90 3, 9 05 (N.Y. 19 89 ). T he dis tr ic t c ourt a

ppl ie d in sur an ce lawto the loan po rt fo lio sa le a gr ee m en t because it contained an indem nity agree m ent and insu rance agreem ents are ind em nity a gr ee m en ts. I t do es not

f oll ow , how ev er , that a ll ind em nity a gr ee m en ts11

ar e ins ur an ce a gr ee m en ts. "W hil e a pol ic y

of ins ur an ce , oth er

than li fe or

a cc ide nt insurance, is basically

a contrac t of indem

nity , not all contracts of indem nity are ins ur an ce c ontra ct s; r athe r, an in sur an ce c ontra ct is one ty pe of ind em nity contract. " 1 L ee R. Russ, Couch on Insurance § 1.7 (3d ed. 2005 update); see Br oth er tonCo nstr. Co
. v. P atte rs on- E m er son- Co m sto ck , I nc . , 178 A
. 2d 6 96, 697 (Pa. 1962 ). T he c onc ep t of

an in sur an ce c ontra ct

is to d istri but e ri sk o f los s a cr oss a larg e gr oup, in oth er

w or ds, to "s oc ia liz e" the r isk
. 1 H olm es ' s Appl em anon In sur an ce , §§ 1
. 3- 1. 4; 1 6 W ill ist on o n C ontra ct s § 4 9:2
. T he loan po rt fo lio sa le ag re em en t m er el y

shi ft ed the r isk f ro m one c or por at ionto an oth er , w ithno "di str ibu tio n" sc he m e; it

the re fo re is not

aty pic al ins ur an ce c ontra ct . Mor eo ve r, a lth oughthe loan po rt fo lio sa le a gr ee m en t c ont ai ns an in de m nity provisi on, it is not prim arily an indem nity contract. Rather , it is a sale contract with an indem

nity clause covering the event that the instrum ents sold enm eshed the buy er in lit igatio n. T he ind em nity c lause f unc tio ne d a s an in duc em en t t o th e buy er to enter into th e sale transaction. When assum ption of risk is onlycollateral to a c ontra ct that ha s apr inc ipa l purp ose oth er than r isk shi ft ing , the c ontra ct

is not ac ontra ct

of ins ur an ce . S t. Joh n' s R eg ' l H ea lthCtr. v. A m . Ca s. Co
. , 980 F
. 2d 1222 , 122 4 ( 8 Ci r. 199 2) ; 1 Co uc h onI nsur an ce § 1: 9.

th12

Bu t m ost to the poi nt, the c ontra ct in thi s c as e w as not

ac ontra ct

of
a d h e s i o n i n w h i c h an i n s u r e r o f f e r e daf o rm c o n tr a c tt o ac o n s u me r . G o l d o me subm itt ed the a ff idavit of Br uc e Br ow n, the F D IC of

fi ci al c harg ed

w ith
ne got ia tin g th e sa le of

G old om e' s a sse ts. B ro w n te sti fi ed that D ai w a w as one of two fir m s that sub m itted final bids for G oldo m e's a ssets, the other being Goldm an Sa ch s. B ro w n st at ed

that he ne got ia te d di re ct ly w ithpr inc ipa ls f

ro m D ai w a an d G oldm anS ac hs r eg ar din g th e ind em nity pr ovi sio ns. D ai w a w as r ep re se nte d by le ga l co un se l i n t he m eet in gs th atled to th e sa le of t he lo an po rtf ol io . Bro wn inf orm ed the pot en tia l buy er s th at

f or the F D IC , one c ri te ri on i n aw ar din g th e bid
was th atFDIC s ou gh t t he m os t fa vo rab le in de m ni ty pro vi si on s i t co ul d o bt ai n. Goldm an Sachs off

ered $5.9 m illion m ore than Da iwa offer ed for the loan portf oli o, but D ai w a of fe re d an in de m

nity c lause m or e favor ab le to G old om e, w ith the indem nity period shortened from

six y ears to three y ears. D aiwa 's shortened ind em nity pe ri od w as the de te rm ini ng f ac tor in the F D IC sta ff

' s r ec om m en da tio n to the FDI C board of directors to ac cept the Da iwa bid rather than the Goldm an Sa ch s bi d. T he ind em

nity pr ovi sio n w as the re fo re ne got ia te d, not dic ta te d by G old om e or

F D IC
. T his w as no a dhe sio n c ontra ct . T he re is no r ea son to i nte rp re t the loan po rt fo lio sa le a gr ee m en t i n f av or of D ai w a ac co rd ing to the r

ule in ins ur an ce c as es . W e shou ld, ins te ad , appl y the r ule13

of construction specific to non-insu rance indem nity cases, and lookfor a "clear
a n dun mi s t a k ab l e " i n t e n tt o i n d e mn i f y. T he ope rativ e langua ge in the L oan S al e A gr ee m en t i s f ound in para gr ap hs 20. 2, S co pe of

I nde m nity , and 2 0. 3, P ro ce dur es f or O bta ini ng I nde m

nif ic at ion ; N oti ce . T he r el ev an t part of para gr ap h 20
. 2 pr ovi de s: Sel le r ag rees to an d s ha ll in de m ni fy an d h ol d h arm le ss Bu y er . . . ag ai nst any and a ll cl ai m s, los se s, li ab ili tie s, c ost s, e xpe nse s and da m ag es a ga ins t B uy er

. . . w hic h r es ult

f ro m a ny c au se of a ct ion ar isi ng o ut o f an y

a ct or om iss ionby

a ny or igi na tor

of a ny L oan . . . in co nn ect io n wi th th e o rig in at io n o f an y Loan
. . . . Para graph 20.3(ii) dealt m ore specifica lly with G oldo m e's duty

to provid e D aiwa

a defense: Upon re ce ipt

of [ buy er ' s no tic e of

ac la im a ga ins t i t] , S el le r sha ll a s s u me , a ti t s s o l e e x p e n s e , c o n t r o l o f th e d e f e n s e o f s u c h c l a i m, inc lud ing , w ith out

li m itatio n, the r igh t t o de sig na te c ouns el a nd t o co ntr ol a ll ne got ia tio ns, li tig at ion , a rb itr at ion , se ttl em en t, co m pr om is es an d app eal s o f su ch cla im
. . . . Fi na ll y , Parag rap h 2 0.3 (ii i) d is cu ss edth e p os si bi li ty of Dai wa hi rin g i ts own co unse l: N otw ith standi ng the f

or eg oin g, in the e ve nt tha t B uy er r et ai ns se parate c ouns el or

take s any

oth er a ct ionin co nne ct ionw iththe defense of a claim

that m ay give rise to an Indem

nified Loss, S eller shall not be required to reim burse Buy er f

or any costs or expenses inc ur re d, inc lud ing any

f ee s and d isb ur se m en ts o f co unse l, in co nn ect io n wi th th e d efen se of s uc h c la im
.14

T he te rm s of

the c ontra ct

e xpl ic itl y

pr ovi de that G old om e w oul d have the right to choo se the counsel it would prov ide to Daiw a and that if D aiwa retained
se parate c ouns el , G old om e w oul d no t have to pay f or it
. T he se te rm s ne ith er

state nor im ply an exception in case the rea son Daiwa chose to retain separate counsel
wa s a conflict of interest. T he term s of the contract do not require Goldom e to pay for separate counsel hired by Da iwa and provid e no reason to thinkany such obl igatio n m igh t be im

pli ci t. D ai w a ar gue s th at

G old om e br ea ch ed

the te rm s of

the loan po rt fo lio sa le ag reem en t b y

off eri ng Daiwa a de fen se subjec t t o a res erv at io n o f ri gh ts . Daiwa
r e l i e s o n l a n g u a g e i n p a r a g r ap h 2 0
. 3 ( i i ) , th a tup o n r e c e i p to f n o t i c e o f th e c l a i m, Goldom e shall assum e control of the defense of the c laim , "provided, howe ver, that Seller shall have advised Buy er that such claim would, if determ ined adve rs el y , c onst itu te an I nde m nif ie d L oss . " D ai w a co nte nds that G old om e' s r igh t to c ontro l the li tig at ionis co ndi tio ne d onG old om e fi rs t a gr ee ing that the c la im
w oul d be c ove re d un de r the ind em nity a gr ee m en t. A cc or din g to D ai w a, thi s language m eans that if G oldo m e does not agree in advance that all claim s are co ve re d, G old om e is n ot e nti tle d to dis ch ar ge it s du ty to de fe nd b y

hir ing law y er s, but in stead m

ust pay for lawy ers hired by

Da iwa. T his reading do es not com port wit h t he ag reem en t, wh ic h c on te m pl at es th atcla im s co ul d b e fi le d a ga in st Daiwa that are only

partly indem nifiable. P aragra

ph 20 .4 states that, in the event of an15

ac tio n w hic h m igh t r es ult in both c ove re d and n onc ove re d lo sse s, G old om e shou ld de fe nd a s de sc ri be d inpara gr ap h 20
. 3, but that i t sh oul d m ak e re as ona ble e ff orts to c onsu lt w ithD ai w a in the de fe nse . T hus, the a gr ee m en t c ont em plate s th e poss ibi lity

that G old om e co uld

de fe nd an a ct ionw hil e dis put ing li ab ili ty a s to
som e cl ai m s. Mo re ove r, para gr ap h 20
. 3( iii ) state s f la tly that i f D ai w a hir es it s ow n law y er s, G old om e w ill not be obl igate d to pay

the m ; this para gr ap h do es not de pe nd o n G old om e ha vin g pr ev iou sly a gr ee d to li ab ili ty

f or ind em nif ic at ionof a ll cl ai m s. Ac cordingly , w e re ve rs e the j udgm ent of the district court. W e rem and the
ca se f or f urthe r pr oc ee din gs i n a cc or danc e w iththi s op ini on.