Court Opinion

ID: 176003
Source: CourtListenerOpinion
Date Created: 2010-09-28 00:03:51+00
Date Added: 2024-06-11T09:48:10.317918
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              SEP 27 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S . CO U RT OF AP PE A LS

                            FOR THE NINTH CIRCUIT

SCIE LLC, a Nevada Limited Liability             No. 08-56502
Company, DBA Entertainment Partners
Services Group; PAYPIÈ LLC, a Nevada             D.C. No. 2:03-cv-02782-CAS-
Limited Liability Company, DBA EPSG              FMO
Pixpay Services,

             Plaintiffs - Appellants,            MEMORANDUM *

  v.

ÈL REINSURANCE AMERICA, INC.,
FKA NAC Reinsurance Corporation;
STAR INSURANCE COMPANY,

             Defendants - Appellees.

SCIE LLC, a Nevada Limited Liability             No. 08-56537
Company, DBA Entertainment Partners
Services Group; PAYPIÈ LLC, a Nevada             D.C. No. 2:03-cv-02782-CAS-
Limited Liability Company, DBA EPSG              FMO
Pixpay Services,

             Plaintiffs - Appellees,

  v.

ÈL REINSURANCE AMERICA, INC.,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
FKA NAC Reinsurance Corporation;
STAR INSURANCE COMPANY,

               Defendants - Appellants.

                    Appeal from the United States District Court
                        for the Central District of California
                    Christina A. Snyder, District Judge, Presiding

                        Argued and Submitted March 2, 2010
                               Pasadena, California

Before:        KOZINSKI, Chief Judge, W. FLETCHER, Circuit Judge, and
               GETTLEMAN,** Senior District Judge.

      This action involves a long-running dispute over unpaid payroll services for

the motion picture 'The Devil and Daniel Webster' ('the film'). Plaintiffs SCIE

LLC and Paypix LLC, µnown as Entertainment Partners, provided payroll services

to the film's producers ('producers'). Entertainment Partners won an arbitration

award against producers on December 7, 2001, but was unable to collect. After the

film encountered financial difficulties, defendants Star Insurance Co. and ÈL

Reinsurance America, Inc. (collectively 'Star/ÈL'), the reinsurers of the film's

completion bond, acquired the film. Entertainment Partners then sought to collect

from Star/ÈL. In a prior decision, we upheld the jury's finding that Star/ÈL,

          **
            The Honorable Robert W. Gettleman, United States District Judge for
the Northern District of Illinois, sitting by designation.

                                          2
which accepted the benefit of Entertainment Partners's provision of payroll

services to the film, was liable for the producers' unpaid obligations to

Entertainment Partners. We remanded for a new trial on damages.

      On remand, the district court awarded plaintiffs the principal amount of the

arbitration award. In addition, it awarded attorney's fees and expenses incurred by

plaintiffs in the arbitration against producers, in confirming the arbitration award,

in efforts to collect from producers, and in the effort to collect against Star/ÈL

(that is, the instant action). It also awarded plaintiffs prejudgment interest on the

principal amount from the date of the Ninth Circuit's memorandum disposition,

and prejudgment interest on costs following trial from the date of the first

judgment. It denied prejudgment interest on the fees and expenses incurred in

arbitration. Both sides appeal. We AFFIRM the award of attorney's fees incurred

in the arbitration and in the related efforts to confirm the award and collect from

producers, and REVERSE the award of attorney's fees and expenses for the instant

litigation. We REVERSE the district court's award of prejudgment interest and

REMAND with instructions as to the award of interest.

                                           I

      Defendants challenge plaintiffs' legal entitlement to attorney's fees and

expenses pursuant to the terms of the contracts, a question of law we review de

                                           3
novo. See V.S. ex rel. A.O. v. Los Gatos-Saratoga Joint Union High Sch. Dist., 484

F.3d 1230, 1232 (9th Cir. 2007).

      The district court did not err in awarding plaintiffs the attorney's fees and

expenses incurred in arbitrating against producers, confirming the arbitration

award, and in attempting to collect from producers. The contracts contemplated

the arbitration of disputes. Clause 15, which addressed arbitration, provided, 'The

prevailing party shall be entitled to reimbursement of all costs and expenses

including reasonable attorney's fees.' Under California law, 'a contract provision

that permits the recovery of fees in arbitration is broad enough to include fees in

related judicial proceedings.' Ajida Techs., Inc. v. Roos Instruments, Inc., 87 Cal.

App. 4th 534, 552 (2001). As the contract contemplated, Entertainment Partners

arbitrated its dispute with producers. When producers did not pay the arbitration

award, Entertainment Partners initiated judicial proceedings against producers to

confirm and collect on the award. Under Clause 15 and Ajida, Entertainment

Partners is entitled to its attorney's fees and expenses incurred in these related

proceedings.

      We have already held that having assumed the benefit of the contract and

undertaµen to perform it, Star/ÈL is liable for the producers' contractual

obligations to Entertainment Partners. See Cal. Civ. Code y 1589. These

                                           4
obligations include not only producers' obligation to pay for the provision of

services, but also their obligation to pay attorney's fees and expenses incurred in

arbitration, in confirming the award, and in the effort to collect on the arbitration

award from producers. See E. Ïuincy Servs. Dist. v. Gen. Accident Ins. Co. of Am.,

88 Cal. App. 4th 239, 245 (2001) (holding surety liable for defaulting contractor's

obligations, including penalties incurred prior to default as a result of contractor's

violation of prevailing wage and maximum worµ hour requirements).

      However, we hold that the district court erred in awarding plaintiffs the

attorney's fees and expenses incurred in their efforts to collect against Star/ÈL.

Entertainment Partners contends that Clauses 12 and 15 of the contracts support

the district court's award. We conclude that neither clause permits recovery.

      Clause 12, which contains the terms 'indemnify,' 'hold harmless,' and

'defend,' is an indemnity clause. As a California Court of Appeal recently

reaffirmed, '[a] clause which contains the words 'indemnify' and 'hold harmless'

is an indemnity clause . . . . Indemnification agreements ordinarily relate to third

party claims.' Carr Business Enterprises, Inc. v. City of Chowchilla, 166 Cal.

App. 4th 14, 20 (2008) (quoting Myers Building Indus. v. Interface Tech., Inc., 13

Cal. App. 4th 949, 969 (1993)). An indemnity provision that includes an

obligation to indemnify 'from all loss, damage, etc., 'including attorney's fees'

                                           5
which 'arises out of or is in any way connected with the performance of worµ

under this Subcontract'' does not entitle a party to the contract to attorney's fees

incurred in prosecuting an action for breach of the contract. See Continental Heller

Corp. v. Amtech Mech. Servs., Inc., 53 Cal. App. 4th 500, 508 (1997). However,

California courts have allowed recovery of fees in an action for breach based on a

fees clause located within an indemnity provision when that provision

'unambiguously contemplated an action between the parties to enforce their

agreement . . . and expressly authorized recovery of fees in such an action.' Carr,

166 Cal. App. 4th at 22-23; see Continental Heller, 53 Cal. App. 4th at 508-09.

      Under Clause 15, the parties were to arbitrate disputes, and attorney's fees

and expenses would be awarded to the prevailing party. Entertainment Partners

did not arbitrate its dispute with Star/ÈL under Clause 15. Under Clause 12, the

duty to indemnify arose only when parties became liable to third parties as a result

of their action, inaction, or breach of the contract. Neither clause expressly

authorized the recovery of fees and expenses in litigation between the parties. See

Carr, 166 Cal. App. 4th at 22-23.

                                           II

      The parties dispute whether the district court should have awarded

prejudgment interest. They also dispute the date from which prejudgment interest

                                           6
should run. We affirm the district court's decision to award prejudgment interest

on the principal amount of the unpaid invoices but reverse as to the date from

which the interest runs. We direct the district court to award prejudgment interest

on the awards of attorney's fees and expenses that we uphold.

      California Civil Code y 3287(a) provides that prejudgment interest must be

awarded when the requirements of 'certainty' and 'vesting' are satisfied. In

Evanston Insurance Company v. OEA, Inc., 566 F.3d 915, 921 (9th Cir. 2009), we

explained that 'California cases uniformly have interpreted the 'vesting'

requirement as being satisfied at the time that the amount of damages become

certain or capable of being made certain, not the time liability to pay those amounts

is determined.'

      Entertainment Partners submitted invoices that were due and payable upon

receipt. Star/ÈL was ultimately found liable to pay the unpaid amount of the

invoices. Because the amount of Entertainment Partners's unpaid invoices was

'certain' as of the date the invoices were submitted and not paid, Entertainment

Partners's right to recover vested on that date. Accordingly, Entertainment

                                          7
Partners is entitled to prejudgment interest on each invoice due and unpaid from

the date of the invoice.1

      Entertainment Partners is also entitled to prejudgment interest on the fees

and expenses awards from the date that their amounts were made certain. The

award of fees and expenses incurred in arbitration was fixed and made certain at

the time of the arbitration award on December 7, 2001. It is irrelevant that

Star/ÈL's liability to pay that amount was not determined until later. See Evanston

Ins., 566 F.3d at 921. The fees and expenses incurred in confirming the award and

collecting against producers were made certain in the district court's decision on

August 11, 2008 quantifying the award.

      Accordingly, we hold that the district court erred in failing to award

prejudgment interest on the principal amount from the dates of the invoices, on the

award for attorney's fees and expenses incurred in arbitration from the date of the

arbitrator's award, and on the award for attorney's fees and expenses incurred in

confirming the award and attempting to collect from producers from August 11,

2008. We remand for a calculation of interest.

                                         III

      1
         To the extent any invoice was ultimately paid late in part or in full, the
district court shall award interest on the unpaid amount for the time in which that
amount was due and unpaid.

                                          8
      The parties also dispute the date upon which prejudgment interest stops

running and postjudgment interest commences. Prejudgment interest ordinarily

runs (if at all) up to the date of final judgment, at which point postjudgment

interest begins to run. See, e.g., AT&T v. United Computer Sys., Inc., 98 F.3d

1206, 1208 (9th Cir. 1996). Where there are multiple judgments, 'post-judgment

interest may run only from the date of a judgment later determined to be supported

by the evidence. It may not run from a legally insufficient judgment, or one where

the 'damages have not been 'ascertained' in any meaningful way.'' Planned

Parenthood v. ACLA, 518 F.3d 1013, 1021 (9th Cir. 2008) (quoting Kaiser

Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 836 (1990)). 'As between

two judgments, both of which sufficiently ascertain the damages, equitable

principles favor selecting the judgment which more fully compensates the

prevailing party.' Id. (citing AT&T, 98 F.3d at 1211).

      The first judgment, issued on April 6, 2005, did not ascertain damages for

Entertainment Partners. The second judgment, issued on September 2, 2008, did

ascertain damages. The circumstances of the September 2, 2008 judgment are

materially indistinguishable from the second judgment issued in AT&T, from

which the court ran the award of post-judgment interest in that case. Therefore, all

awards of prejudgment interest (including on the award of costs following trial)

                                          9
run up to the entry of the second judgment on September 2, 2008. Postjudgment

interest runs at the appropriate federal rate from that date forward.

      Each party shall bear its own costs on appeal.

AFFIRMED IN PART; REVERSED IN PART; REMANDED.

                                          10
                                                                              FILED
SCIE LLC v. ÈL Reinsurance Am., Inc., Nos. 08-56502õ                           SEP 27 2010

                                                                           MOLLY C. DWYER, CLERK
                                                                            U.S . CO U RT OF AP PE A LS

KOZINSKI, Chief Judge, dissenting:

      I would affirm under Clause 12 of the contract the district court's award of

the attorney's fees Entertainment Partners incurred suing Star/ÈL. Clause 12 has

four provisions. Provision 1 commits Star/ÈL to indemnify Entertainment Partners

against losses 'arising out of the services performed' by the personnel

Entertainment Partners hired for Star/ÈL. Contract j 12 (emphasis added).

Provision 2 obligates Entertainment Partners to indemnify Star/ÈL against losses

'arising out of [its] negligence or wrongful acts, errors or omissions . . . in the

performance of its services hereunder.' Id. (emphasis added). I agree with the

majority that these are third-party indemnification provisions. See Carr Bus.

Enters., Inc. v. City of Chowchilla, 82 Cal. Rptr. 3d 128, 134-35 (Cal. Ct. App.

2008); Myers Bldg. Indus., Ltd. v. Interface Tech., Inc., 17 Cal. Rptr. 2d 242,

256-58 (Cal. Ct. App. 1993).

      But Provisions 3 and 4, which refer to costs arising out of a breach of the

contract, aren't obviously third-party provisions. See Meininger v. Larwin-N. Cal.,

Inc., 135 Cal. Rptr. 1, 2 (Cal. Ct. App. 1976) (distinguishing 'actions on the

contract' from 'tort claims of third parties' that arise out of performance of the

contract). Provision 3 requires Star/ÈL to 'indemnify, defend and hold harmless'
                                                                                       page 2

Entertainment Partners against 'any and all costs and expenses (including, but not

limited to, reasonable attorney's fees) . . . arising out of . . . breach or alleged

breach' of the contract. Contract j 12. Provision 4 is a reciprocal promise by

Entertainment Partners to do the same for Star/ÈL. Id.

       Provisions 3 and 4 are liµe the fee-shifting provision in Continental Heller

Corporation v. Amtech Mechanical Services, Inc., which the court construed to

cover attorney's fees the parties incurred suing each other. 61 Cal. Rptr. 2d 668,

673 (Cal. Ct. App. 1997). The contract in that case had a third-party provision

indemnifying a general contractor for losses 'aris[ing] out of or . . . in any way

connected with the performance of worµ under this [contract].' Id. A second

provision obliged the subcontractor to 'indemnify the [general c]ontractor, and

save it harmless from any and all . . . costs, expenses and attorney's fees suffered

or incurred on account of any breach of the aforesaid obligations and covenants,

and any other provision or covenant of this [contract].' Id. (emphasis omitted).

The court held that this second provision shifted the attorney's fees the parties

incurred enforcing the contract because third-party claims were already covered by

the first provision. Id.; see also Baldwin Builders v. Coast Plastering Corp., 24

Cal. Rptr. 3d 9, 14 (Cal. Ct. App. 2005).

       Continental Heller controls our reading of the contract here: 'It is clear [that
                                                                                 page 3

Provisions 3 and 4 are] not referring to indemnity for attorney fees incurred in

defending actions brought against [either side by a third party because t]hat

indemnity is covered in [Provisions 1 and 2].' Cont'l Heller, 61 Cal. Rptr. 2d at

673. The fact that the provision in Continental Heller doesn't use the term

'defend' doesn't distinguish it from Provisions 3 and 4 because every promise to

'indemnify' and 'save . . . harmless' includes an implied duty to 'defend.' Cal.

Civ. Code y 2778, subd. (4). To give effect to every part of the contract, Cal. Civ.

Code y 1641, we should construe Provisions 3 and 4 to cover breach of contract

suits between the parties.

      Myers and Carr aren't to the contrary. Those cases addressed indemnity

provisions that referred to performance of the contract. See Myers, 17 Cal. Rptr.

2d at 252 (indemnifying against losses 'arising . . . out of . . . the performance of

this Agreement'); Carr Bus. Enters., 82 Cal. Rptr. 3d at 131 (indemnifying against

losses 'arising out of the performance of the worµ described herein' (emphasis

omitted)). More importantly, Myers and Carr refused to construe an indemnity

clause in favor of one party (the indemnitee) to cover suits to enforce the contract

because doing so would trigger California Civil Code y 1717, California's

reciprocal attorney's fees statute. Section 1717 converts every unilateral right to

attorney's fees incurred enforcing a contract into a reciprocal obligation granting
                                                                                   page 4

attorney's fees to the prevailing party, even if that party is not the one entitled to

fees under the text of the contract. Santisas v. Goodin, 951 P.2d 399, 406 (Cal.

1998). Myers and Carr reasoned that parties to a contract don't intend to obligate

indemnitees to pay their indemnitors' attorney's fees. See Myers, 17 Cal. Rptr. 2d

at 256 ('The provisions of Civil code section 1717 were never intended to inflict

upon the indemnitee the obligation to indemnify his indemnitor in similar

circumstances.'); Carr Bus. Enters., 82 Cal. Rptr. 3d at 135 ('[B]ecause 'an

indemnity agreement is intended by the parties to unilaterally benefit the

indemnitee, . . . application of reciprocity principles would defeat the very purpose

of the agreement.''). That's not a problem here. Provisions 3 and 4 are already

reciprocal, so section 1717's reciprocity principle wouldn't impose an obligation

the parties didn't already intend. Thus, Myers and Carr don't justify the majority's

departure from Clause 12's clear and explicit language. See Cal. Civ. Code

y 1638.