Opinion ID: 1037568
Heading Depth: 2
Heading Rank: 4

Heading: Indemnification for Costs

Text: IAP sought the costs it incurred in the Fluor dispute in its Amended Complaint. It prayed “[t]hat this Court award Plaintiff[] recovery for any additional liability, costs, fees, or other obligations resulting from the dispute between RMS and Fluor.”39 IAP’s request for costs also was memorialized in the parties’ joint report on their discovery planning meeting.40 However, during discovery and in support of its motion for summary judgment, IAP produced no evidence of its costs. Nor did it request costs in its motion for summary judgment. Consequently, the district court did not discuss or purport to award costs in its grant of summary judgment. The district court next appointed a special master to “decide the amount of reasonable fees and costs in accordance with” Local Rule 54 and to “decide whether the Order granting summary judgment (Doc. 292) awarded IAP costs incurred in this dispute with Fluor in addition to the attorneys’ fees incurred in this 39 R.224 at 14. 40 See, e.g., R.216 at 4 (requesting “indemnification from [Johnson Controls] for the settlement payment, and fees and costs incurred in connection with the recently settled Fluor claims, as well as the costs and fees associated with settling the related dispute with the Air Force”); id. at 5 (“IAP seeks approximately $7.2 million as reimbursement for its settlement payment to Fluor, and costs and fees related to reaching that settlement, including costs and fees incurred in the related claim against the Air Force”). 26 Case: 12-10793 Date Filed: 08/14/2013 Page: 27 of 38 dispute.”41 In this phase of the proceedings, IAP produced evidence of its costs. Johnson Controls reviewed this evidence and produced an expert report opining on the costs’ lack of reasonableness. Before the special master, Johnson Controls objected to any award of costs. The special master rejected its arguments and found that the district court awarded costs when the district court awarded IAP indemnification for damages arising out of the Fluor dispute. Johnson Controls objected to the special master’s report to the district court. The district court rejected these arguments and awarded IAP $308,804.90 in costs. On appeal, Johnson Controls challenges only the award of costs, not the amount awarded. It contends that because IAP did not seek costs at summary judgment, the district court violated its due process rights by later awarding costs. We must disagree. Whether the SPA provides indemnification for IAP’s costs incurred in settling the Fluor dispute is a matter of law, which we review de novo. See Natco Ltd. P’ship v. Moran Towing of Fla., Inc., 267 F.3d 1190, 1193-94 (11th Cir. 2001). Under New York law, which applies here, broadly worded indemnification agreements are construed as covering the indemnified party’s costs. See, e.g., 41 R.329 at 2. 27 Case: 12-10793 Date Filed: 08/14/2013 Page: 28 of 38 Gary v. Flair Beverage Corp., 60 A.D.3d 413, 875 N.Y.S.2d 4, 7 (N.Y. App. Div. 2009) (holding that the indemnified party “is also entitled to . . . costs pursuant to the broad language of the indemnification clause” which did not explicitly mention costs); Boyd v. Bethlehem Steel Corp., 247 A.D.2d 864, 668 N.Y.S.2d 817, 818 (N.Y. App. Div. 1998) (finding costs covered “[i]n view of the broad language of the indemnification provision,” which provided indemnification for “‘any loss or liability’”). Under the SPA’s broadly worded indemnification provision, we conclude that IAP was entitled to indemnification of its costs arising from the Fluor dispute as a matter of law. Johnson Controls is correct that IAP did not seek its costs at summary judgment. However, this failure does not necessarily preclude the district court’s later sua sponte grant of summary judgment on that issue. “A district court possesses the power to enter summary judgment sua sponte provided the losing party was on notice that she had to come forward with all of her evidence.” Burton v. City of Belle Glade, 178 F.3d 1175, 1203 (11th Cir. 1999) (internal quotation marks omitted). “[S]o long as the party against whom judgment will be entered is given sufficient advance notice and has been afforded an adequate opportunity to demonstrate why summary judgment should not be granted, then 28 Case: 12-10793 Date Filed: 08/14/2013 Page: 29 of 38 granting summary judgment sua sponte is entirely appropriate.” Id. at 1204. Here, the district court’s instruction to the special master was to determine whether IAP’s entitlement to indemnification also included indemnification for costs. Johnson Controls understood this, as evidenced by its memoranda and briefs to the special master and district court concerning IAP’s entitlement to indemnification for costs. Thus, Johnson Controls received notice that the issue of costs was going to be decided.42 It also was afforded adequate opportunity to produce arguments and evidence in support of its position, which it took. It fully briefed the issue of IAP’s entitlement to costs under the SPA’s indemnification provision and the reasonableness of costs claimed before both the special master and the district court. Therefore, Johnson Controls received sufficient due process to sustain the district court’s sua sponte grant of summary judgment. IAP was entitled to indemnification for costs as a matter of law; Johnson Controls could only preclude summary judgment by showing a genuine issue of 42 Johnson Controls addressed the issue of costs in its August 8, 2011, Response to Plaintiffs’ Opening Brief on Damages. R.316. It is unclear precisely when Johnson Controls was notified that the district court was considering awarding IAP costs. However, Johnson Controls clearly was aware of the court’s intention on August 8, 2011; the district court ordered the special master to consider the issue on October 13, 2011, R.329, and the special master decided it on November 28, 2011, R.331. Therefore Johnson Controls had several months of notice prior to the determination of this issue, which is more than “a reasonable time to respond,” as required by Federal Rule of Civil Procedure 56(f). 29 Case: 12-10793 Date Filed: 08/14/2013 Page: 30 of 38 material fact with respect to the reasonableness of IAP’s costs. However, Johnson Controls has not appealed the district court’s determination that IAP’s asserted costs, which were supported by evidence, were reasonable. Instead it rests its entire argument on the alleged procedural impropriety of the district court’s grant of summary judgment. As we have noted earlier, because Johnson Controls received adequate opportunity to litigate the matter, we affirm the district court’s sua sponte grant of summary judgment on the issue of indemnification for costs.