Scie LLC v. Xl Reinsurance America, Inc.

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NOT FOR PUBLICATION SEP 27 2010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.