Opinion ID: 535587
Heading Depth: 3
Heading Rank: 1

Heading: Authority for the Award

Text: 47 In challenging the award of fees for defending against the complaint and against the interpleader action, Towers and Hoffenberg argue principally that such an award is impermissible under this Court's decision in Jackson v. Oppenheim, 533 F.2d 826 (2d Cir.1976). We disagree with the contention that that decision controls this case. 48 In Jackson v. Oppenheim, Jackson had purchased securities from Oppenheim and had signed two notes, each of which stated that [i]f this note is placed with an attorney for collection the maker shall pay all costs of collection, including, but not limited to, counsel fees. Id. at 830. Thereafter, Jackson unsuccessfully sued Oppenheim for fraud under the federal securities laws, and Oppenheim successfully counterclaimed to collect on the notes. In connection with the successful counterclaims, the district court awarded Oppenheim not only the cost of collecting on the promissory notes but also the cost of defending against Jackson's securities law claim. We reversed, ruling that language more express than 'costs of collection' should have been employed to have placed [Jackson] on notice that he was undertaking to protect [Oppenheim] from costs incurred in defending a separate claim regarding validity of the underlying sale transaction under the federal securities laws. Id. at 831. Cf. Redfern v. R.E. Dailey & Co., 146 Mich.App. 8, 379 N.W.2d 451, 456 (1985) (indemnity agreement covering all claims, liabilities, losses, damages and expenses of every character whatsoever broad enough to include attorneys' fees, while agreement covering any and all claims and demands of whatever nature not broad enough). 49 Jackson is doubly distinguishable from the present case. First, the securities law claim in Jackson was not a contract claim but rather was a collateral attack on the contract. Here, in contrast, Towers's action raised issues only as to the terms and performance of the loan commitment agreement; the interpleader action likewise depends only on the resolution of issues integral to the performance of the loan commitment agreement. Arguably even a contract provision as limited as costs of collection would cover the expense incurred by Cadillac to recover the escrowed funds and the sum loaned in exchange for the Note where the only challenges to its right to recover are integral to the agreement rather than collateral. Further, the fact that Towers commenced suit first would not remove Cadillac's cost of defending that action from the category of costs of collection; Towers cannot avoid its contractual responsibilities simply by making a meritless preemptive strike. 50 Second, in the present case, the contract language was substantially broader than the language at issue in Jackson. In each pertinent document, the language was ample to place Towers or Hoffenberg on notice that it or he was agreeing to reimburse Cadillac for costs and attorneys' fees incurred in defending an action for specific performance of the loan commitment agreement and in pursuing any litigation needed to recover funds placed in escrow in connection with that agreement. Each of the documents specifically included attorneys' fees in the costs and expenses to be reimbursed, and each was open-ended with respect to costs and fees relating to the underlying agreements. Thus, the Commitment Letter stated that whether or not the Loan was closed, Towers would pay all expenses of [Cadillac] in connection with the Loan. The Note stated that [u]pon default, Towers would pay not just the costs of collection, but also other costs incurred by [Cadillac] under such circumstances, in case the principal of the Note or any interest thereon is not paid at the Due Date hereunder, whether or not suit is commenced for such purpose. The Guaranty stated that Hoffenberg agreed to indemnify Cadillac against any and all reasonable ... expenses ... incurred by [Cadillac] in connection with the enforcement of its rights under this Guaranty, or as a result of the assertion of any and all claims for the return of moneys paid under the Note. In all three documents, the language was substantially broader than the costs of collection language at issue in Jackson. 51 The district court did not err in determining that these provisions authorized Cadillac's recovery of fees. It is plain that the expense of defending against an action for alleged breach of the loan agreement and the expense of showing that Cadillac was entitled to the escrowed funds in the interpleader action, were, within the meaning of the Commitment Letter, expenses incurred in connection with the Loan. Equally plainly, there was a default under the terms of the Note, and since Towers interposed virtually its entire complaint as an affirmative defense to Cadillac's counterclaim for repayment of the Note, Cadillac was required, in the circumstances adverted to by the Note and in connection with the enforcement of its rights under th[e] Guaranty, to litigate Towers's complaint in order to collect the Note. In sum, Cadillac was required to defend each action in order to establish its right to recover its $1.4 million. It was entitled, under the terms of the agreements, to an appropriate award for each category of expenses.