Opinion ID: 793358
Heading Depth: 3
Heading Rank: 2

Heading: Did the Indemnification Agreement Exclude Placement Fees?

Text: 91 Under Delaware law, 92 if a writing is plain and clear on its face, i.e., its language conveys an unmistakable meaning, the writing itself is the sole source for gaining an understanding of intent. However, if the words of the agreement can only be known through an appreciation of the context and circumstances in which they were used a court is not free to disregard extrinsic evidence of what the parties intended. In that situation the language used by the parties is subject to different meanings and is, thus, ambiguous, or more precisely, not reflective of the parties shared intent. But the language of an agreement, like that of a statute, is not rendered ambiguous simply because the parties in litigation differ concerning its meaning. 93 City Investing Co. Liquidating Trust v. Cont'l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993) (internal citations and quotations omitted). 94 In this case the agreement is plain on its face. There is no ambiguity regarding the words  any action take or omitted to be taken on behalf of the [Fund]. This is broad, unambiguous language that evinces no intention to carve out a particular transaction. Therefore, we do not consider the affidavit of an SIP member, submitted by SIP in opposition to the garnishment, which purports that the indemnity provision was not intended to apply to placement fee obligations. As the indemnification agreement is clear on its face, we hold that it does cover the placement fee arrangement, if it was undertaken on behalf of the Fund. 95 3. Was SIP Acting on Behalf of the Fund When It Refused to Pay IFC? 96 The Fund argues that although the placement fee arrangement was made on its behalf, the failure to pay IFC for its services was not done on its behalf. We believe that this draws too fine of a line and that, as a matter of law, SIP was acting on the Fund's behalf in contracting with IFC and in its actions that constituted a breach of that contract. It is unquestioned that SIP had the authority to enter into the placement fee arrangement and to monitor the contract. SIP's refusal to pay IFC was because SIP claimed that IFC was defrauding it. SIP has vigorously maintained this position throughout this litigation. When SIP refused to pay, it was acting in accordance with its management duties to protect the Fund from fraud and believed in good faith, as far as we can tell, that withholding payment was excused by IFC's prior breach. Only now, when it appears that the Fund might be on the hook, does the Fund disown SIP's actions. We are unimpressed. The failure to pay IFC its placement fees was done on behalf of the Fund and is covered by the indemnification agreement. 97 4. May the Fund Raise SIP's Set-Off Claim as a Defense to the Garnishment? 98 Finally, the Fund argues that IFC breached its agency agreement with SIP by diverting the Fund's assets and that the Fund's ability to raise SIP's claim of a set-off precludes summary judgment on the garnishment action. We disagree. First, this was SIP's defense in arbitration, which was rejected by the arbitrators. This is not a direct appeal of the arbitrators' ruling, so if the Fund were in privity with SIP, the arbitrators' ruling, confirmed by the District Court in its Order of September 7, 2004, would preclude litigation of this issue under res judicata. Transamerica Occidental Life Ins. Co. v. Aviation Office of America, Inc., 292 F.3d 384, 393 (3d Cir.2002). Second, the Fund, as garnishee, may not raise the judgment debtor's defenses as against the judgment creditor. Fed.R.Civ.P. 69 states that [t]he procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held. . . . Although the interpretation of the indemnification Agreement is governed by Delaware law, the case was before the United States District Court for the Eastern District of Pennsylvania. We look therefore to Pennsylvania law regarding enforcement of the judgment. Under Pennsylvania law, a garnishee may not assert any defense on behalf of the defendant against the plaintiff or otherwise attack the validity of the attachment. PA. R. CIV. P. 3145(b)(2). Therefore, the Fund may not raise SIP's set-off claim as a defense. 99 Because no genuine issues of material fact remain and all issues of law have been decided in favor of IFC, we hereby order summary judgment in favor of IFC in its garnishment action.