Opinion ID: 1037568
Heading Depth: 2
Heading Rank: 3

Heading: Indemnification for Attorneys’ Fees

Text: Both parties raise claims concerning Local Rule 54.1 and its impact on the district court’s determination of the amount of attorneys’ fees for which Johnson Controls owed IAP indemnification.26 We begin by addressing Johnson Controls’ 26 Local Rule 54.1 reads, in relevant part: RULE 54.1 Motions for Attorneys’ Fees (A) Time for Filing. A motion for an award of attorneys’ fees and related nontaxable expenses (not otherwise taxable as costs) shall be filed and served within the time specified in the scheduling order entered in the case and as otherwise provided in Fed. R. Civ. P. 54(d). The pendency of an appeal from the judgment shall not toll the time for filing the motion. (B) Attorneys’ Fees Records. In any proceeding in which any party is seeking an award of attorneys’ fees from the opposing party pursuant to any statute, contract, or law, the party seeking such an award of attorneys’ fees shall: (1) Maintain a complete, separate, and accurate record of time (to the nearest 1/10 of an hour) devoted to the particular action, recorded contemporaneously with the time expended, for each attorney and each specific activity involved in the action (i.e., not just “research” or “conference”); and (2) File electronically a summary of such time record with the clerk by the fifteenth (15th) day of each month during the pendency of the action, for work done during the preceding month. (continued...) 16 Case: 12-10793 Date Filed: 08/14/2013 Page: 17 of 38 claim. Then we address the issue IAP raises on cross-appeal.
At summary judgment, IAP sought indemnification for the attorneys’ fees it had incurred throughout the Fluor dispute, including those incurred litigating against the Air Force.27 However, IAP did not seek recovery for the fees it incurred litigating against Johnson Controls. The district court entered summary judgment in favor of IAP, holding that Johnson Controls had undertaken to indemnify IAP for attorneys’ fees under the SPA. Johnson Controls now contends 26 (...continued) (3) If claim will be made for services performed by any person not a member of the bar, a separate time record shall be maintained for each such individual and filed as specified below, together with the hourly rate at which such person is actually reimbursed. (4) These records may be filed electronically under seal. If the attorney does not file these time records under seal, such records will remain unsealed. Attorney time records will be maintained electronically and will not be included in the electronic case file. Upon termination of the case or the determination of attorneys’ fees, whichever occurs later, all time records in the case will be destroyed. (5) Failure to comply with these requirements will result in attorneys’ fees being disallowed for the omitted period. N.D. Fla. Loc. R. 54.1 (citation omitted). 27 R.250 at 25. 17 Case: 12-10793 Date Filed: 08/14/2013 Page: 18 of 38 that IAP is not entitled to any attorneys’ fees. We cannot accept this argument. One preliminary matter deserves our attention.28 Prior to summary judgment, the parties filed a Joint Motion to Bifurcate and Stay Discovery into Plaintiffs’ Attorneys’ Fees.29 This joint motion asked the district court to bifurcate and stay all discovery into attorneys’ fees until the questions of Defendant’s duty to indemnify, Plaintiffs’[30] entitlement to fees, and Defendant’s ability to challenge the reasonableness of those fees have been decided, either on summary judgment or at trial. Should discovery into the fees remain necessary after the foregoing issues have been decided, the parties agree that the question of the reasonableness of Plaintiffs’ attorneys’ fees may be resolved through briefing to the Court or, if necessary, in a hearing before the Court.[31] The parties therefore agreed that IAP’s entitlement to fees would be addressed on summary judgment. In its motion for summary judgment, IAP specifically asserted its claim to indemnification for fees incurred in actions taken before IAP 28 Johnson Controls submits only that IAP is not entitled to any fees; it does not renew its previous challenges to the reasonableness of IAP’s claimed fees. Therefore, the only issue that Johnson Controls has raised on appeal is IAP’s entitlement to fees. Second, on appeal, Johnson Controls contends for the first time that IAP cannot recover for attorneys’ fees because they are consequential damages, which are disclaimed in Section 8.3(e). Johnson Controls has forfeited this argument by not raising it in the district court, and we shall not consider it. Douglas Asphalt Co. v. QORE, Inc., 657 F.3d 1146, 1152 (11th Cir. 2011) (“It is well settled that issues not raised in the district court in the first instance are forfeited.”). 29 R.244. 30 At the time the joint motion was made, IAP and RMS both were proceeding against Johnson Controls. Ultimately only IAP was awarded summary judgment. 31 R.244 at 2. 18 Case: 12-10793 Date Filed: 08/14/2013 Page: 19 of 38 requested indemnification, including those incurred in litigating against the Air Force. Johnson Controls ignored this specific claim at summary judgment. Indeed, it ignored all of IAP’s arguments concerning attorneys’ fees, relying instead on its more general argument that IAP was not entitled to any indemnification. However, during the damages portion of the proceeding below, Johnson Controls challenged IAP’s entitlement to indemnification for fees incurred prior to its April 14, 2009 request for indemnification. The special master determined that the issue of whether IAP was entitled to fees incurred prior to its April 14, 2009 indemnification request was not properly before him because it was part of the earlier proceedings: the inquiry concerning IAP’s entitlement to indemnification.32 Johnson Controls has not appealed this determination of the special master, which was adopted by the district court. Therefore, it likely has forfeited any argument that the district court’s refusal to consider its argument was in error. See Douglas Asphalt Co. v. QORE, Inc., 657 F.3d 1146, 1152 (11th Cir. 2011). However, even if we were to ignore Johnson Controls’ forfeiture, we agree that this issue was improperly raised in the second stage of the proceeding that 32 R.331 at 5 n.4. 19 Case: 12-10793 Date Filed: 08/14/2013 Page: 20 of 38 was limited to the reasonableness of IAP’s claims. Whether IAP was entitled to attorneys’ fees arising out of certain events is properly understood as being part of the earlier entitlement-to-fees inquiry rather than the reasonableness-of-fees inquiry; it is not a mere line item to be considered in calculating fees. Given IAP’s clear request for summary judgment on its entitlement to indemnification for fees, Johnson Controls was on notice that it needed to bring forth its evidence on this issue. However, Johnson Controls decided neither to acknowledge nor to respond to IAP’s claim. Given these circumstances, we agree with the district court that this issue was not timely raised in the district court, and we shall not consider it on appeal. We now turn to Johnson Controls’ remaining argument concerning IAP’s attorneys’ fees.33 Johnson Controls contends that, because of IAP’s admitted failure to comply strictly with the requirements of Local Rule 54.1, IAP should have been denied all recovery for attorneys’ fees. However, because Local Rule 54.1 does not apply to IAP’s claim for attorneys’ fees as contractual damages 33 This argument also was not made at summary judgment but this is not a barrier to review. Because IAP’s compliance with Local Rule 54.1 could not be determined until discovery, which was stayed pending the resolution of IAP’s motion for summary judgment, Johnson Controls properly addressed this issue in the later reasonableness portion of the proceedings below. 20 Case: 12-10793 Date Filed: 08/14/2013 Page: 21 of 38 under the SPA, we cannot agree. The applicability of Local Rule 54.1 is a question of law, which we review de novo. See Bailey v. ERG Enters., LP, 705 F.3d 1311, 1316 (11th Cir. 2013). Local Rule 54.1 applies to “Motions for Attorneys’ Fees.” N.D. Fla. Loc. R. 54.1. It governs postjudgment motions for prevailing-party fees, and its language tracks Federal Rule of Civil Procedure 54. By its own terms, it does not apply to IAP’s stand-alone claim for attorneys’ fees. It is inapplicable because IAP did not request prevailing-party fees. Indeed, it did not seek any attorneys’ fees incurred litigating its entitlement to indemnification against Johnson Controls. Rather, IAP’s requested fees are contractual damages; its entitlement to fees flows from the SPA rather than its status as a prevailing party in the present litigation. IAP brought a stand-alone claim for attorneys’ fees. “A ‘stand-alone’ claim for attorneys fees is one that can be brought as an independent claim, such as, for example, a claim brought by an attorney to recover fees from a former client pursuant to a retainer agreement.” Carolina Power & Light Co. v. Dynegy Mktg. & Trade, 415 F.3d 354, 360 (4th Cir. 2005). Essentially, a stand-alone claim is found “when a contract provides for an award of attorneys fees or legal costs, not 21 Case: 12-10793 Date Filed: 08/14/2013 Page: 22 of 38 as costs to the prevailing party, but as an element of damages.” Id. at 362. Here, IAP’s attorneys’ fees are due under the agreement as losses actually incurred, which arose from the Fluor dispute. They are not the fees incurred litigating against Johnson Controls. Johnson Controls nevertheless maintains that, because section (B) of Local Rule 54.1 purports to apply “[i]n any proceeding in which any party is seeking an award of attorneys’ fees from the opposing party pursuant to any statute, contract, or law,” it governs IAP’s demand for indemnification of attorneys’ fees incurred. We cannot accept this construction of Local Rule 54.1, which is entirely dependent on one phrase in section (B). First, Local Rule 54.1 must be considered as a whole: It is expressly limited to motions for attorneys’ fees, and its similarity, and direct reference, to Federal Rule of Civil Procedure 54 indicates that it governs only fee petitions submitted by prevailing parties.34 Second, the subsection relied on by Johnson Controls applies only to awards 34 Federal Rule of Civil Procedure 54(d)(2) governs “Attorney’s Fees” and is a prevailing-party fee rule. As the 1993 advisory committee’s note explains, section (d)(2) “establishes a procedure for presenting claims for attorneys’ fees, whether or not denominated as ‘costs.’ It applies also to requests for reimbursement of expenses, not taxable as costs, when recoverable under governing law incident to the award of fees. . . . [I]t does not, however, apply to fees recoverable as an element of damages, as when sought under the terms of a contract; such damages typically are to be claimed in a pleading and may involve issues to be resolved by a jury.” Fed. R. Civ. P. 54(d)(2) advisory committee’s note (1993). 22 Case: 12-10793 Date Filed: 08/14/2013 Page: 23 of 38 of attorneys’ fees from the opposing party in the present action. N.D. Fla. Loc. R. 54.1(B). IAP did not seek an award from Johnson Controls as its opposing party in this action. Rather, it sought to enforce the SPA and Johnson Controls’ obligation under it to reimburse IAP for attorneys’ fees it had expended in other actions attempting to settle the Fluor dispute for RMS. In short, IAP requested contract damages, which are wholly independent of IAP’s status as a prevailing party in the present action. The district court therefore erred in finding Local Rule 54.1 applicable to IAP’s stand-alone claim for attorneys’ fees. Thus, Johnson Controls’ argument that Local Rule 54.1 bars IAP’s recovery necessarily fails.35
Now we turn to IAP’s cross-appeal. IAP seeks reversal of the district court’s disallowance of $637,030.41 in fees. The special master recommended 35 We note that even if Local Rule 54.1 did apply, IAP’s noncompliance with the rule would not bar its recovery of attorneys’ fees. Contrary to Johnson Controls’ assertions, a district court has discretion to waive or excuse noncompliance with its local rules. See Quick v. Peoples Bank of Cullman Cnty., 993 F.2d 793, 798-99 (11th Cir. 1993). Thus, the district court did not abuse its discretion in failing to deny all of IAP’s requested fees. Indeed, Johnson Controls’ interpretation of Local Rule 54 to require the total denial of fees is contrary to the district court’s discretion. “[A] compulsory exercise of discretion is not discretion at all.” Id. at 799. 23 Case: 12-10793 Date Filed: 08/14/2013 Page: 24 of 38 that the district court disallow fees in the amount of $578,500 for “its failure to file the invoices with the Court pursuant to the local rules of court”36 and $58,530.41 for IAP’s attorneys’ failure to bill in tenth-of-an-hour increments.37 IAP objected to these reductions before the district court, reiterating its objection to the application of Local Rule 54.1. IAP also asked, in the alternative, that the district court exercise its discretion and excuse its noncompliance with the local rule, should it apply. The district court, after reviewing IAP’s objections, accepted the special master’s recommendations and, declining to exercise its discretion, disallowed $637,030.41 of IAP’s claimed fees. Under New York law, “[t]he determination of reasonable counsel fees is a matter within the sound discretion of the trial court.” Shrauger v. Shrauger, 146 A.D.2d 955, 537 N.Y.S.2d 84, 85 (N.Y. App. Div. 1989). The only stated basis in the record for the disallowance of these fees is the special master’s determination that IAP failed to comply with Local Rule 54.1. The district court “approved and . . . incorporated by reference” the special master’s report and recommendation.38 36 R.331 at 10. 37 Id. at 11. 38 R.334 at 1. 24 Case: 12-10793 Date Filed: 08/14/2013 Page: 25 of 38 As we already noted, Local Rule 54.1 does not apply to IAP’s stand-alone claim of indemnification for attorneys’ fees. Therefore, disallowing indemnification for fees that did not comply with Local Rule 54.1 was a mistake of law. “[A] mistake of law is, by definition, an abuse of discretion.” United States v. Hoffer, 129 F.3d 1196, 1200 (11th Cir. 1997). Johnson Controls urges this court to affirm the district court’s disallowance of IAP’s fees on the ground that IAP failed to comply with the district court’s initial scheduling order. We decline to do so. The initial scheduling order imposes requirements identical to those contained in Local Rule 54.1. Given the similarities in content and language, it is evident that the order incorporated Local Rule 54.1, to which IAP’s stand-alone claim is not subject. We therefore cannot penalize IAP for failing to comply with prevailing-party fee requirements, whether contained in Local Rule 54.1 or in the district court’s scheduling order. Accordingly, we must reverse the district court’s disallowance of IAP’s attorneys’ fees for noncompliance with Local Rule 54.1. On this issue, we remand to the district court with directions to amend its judgment to include the previously disallowed $637,030.41. 25 Case: 12-10793 Date Filed: 08/14/2013 Page: 26 of 38