Opinion ID: 184363
Heading Depth: 2
Heading Rank: 2

Heading: Judgment as a Matter of Law in Favor of IFIC

Text: 13 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). 14 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, 127 F.3d 58 (D.C.Cir.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). 15 The parties' indemnity agreement provides a good faith standard for determining whether Ideal is obligated to indemnify IFIC for attorney's fees: 16 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. 17 Indemnity Agreement at p 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. 18 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 [327 U.S.App.D.C. 66] to reasonable necessity when seeking attorney's fees under an indemnity agreement. For example, the Fifth Circuit, applying Mississippi law, has held that 19 [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. 20 Jackson v. Hollowell, 685 F.2d 961, 966 (5th Cir.1982). See also Sentry Ins. Co. v. Davison Fuel & Dock Co., 60 Ohio App.2d 248, 396 N.E.2d 1071, 1074 (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, 61 Tenn.App. 244, 453 S.W.2d 789, 799-800 (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). 21 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 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. 22 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. 23 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 the claims against the surety did not deprive the surety of the right to compromise the claims where the indemnity agreement authorized such a [327 U.S.App.D.C. 67] 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. 24 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.