         Case: 12-10793   Date Filed: 08/14/2013   Page: 1 of 38


                                                        [DO NOT PUBLISH]


           IN THE UNITED STATES COURT OF APPEALS

                  FOR THE ELEVENTH CIRCUIT
                   _________________________

                           No. 12-10793
                    _________________________

               D.C. Docket No. 5:09-cv-00331-RS-EMT

FLUOR INTERCONTINENTAL, INC.,

                                                                     Plaintiff,

IAP WORLDWIDE SERVICES, INC.,
READINESS MANAGEMENT SUPPORT, L.C.,

                                                                   Defendants,

IAP WORLDWIDE SERVICES, INC.,
READINESS MANAGEMENT SUPPORT, L.C.,

                          Third Party Plaintiffs-Appellees Cross Appellants,

                                versus

JOHNSON CONTROLS, INC.,

                          Third Party Defendant-Appellant Cross Appellee.

                    ________________________

             Appeals from the United States District Court
                 for the Northern District of Florida
                   _________________________
                          (August 14, 2013)
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Before BARKETT, JORDAN, and RIPPLE,* Circuit Judges.

RIPPLE, Circuit Judge:

       Johnson Controls, Inc. (“Johnson Controls”) appeals from the district

court’s grant of summary judgment in favor of IAP Worldwide Services, Inc.

(“IAP”).1 The district court held that IAP was entitled to indemnification for

losses it had incurred in connection with litigating, and eventually settling, a

dispute on behalf its wholly-owned subsidiary, Readiness Management Support,

L.C. (“RMS”), which IAP purchased from Johnson Controls. The district court

also held that the parties’ indemnification agreement covered IAP’s attorneys’ fees

and costs associated with settling the dispute for RMS. Johnson Controls timely

appealed,2 and IAP filed a timely cross-appeal concerning the amount of attorneys’

fees determined to be due under the parties’ indemnification agreement. For the

reasons set forth in this opinion, we affirm in part and reverse in part the judgment

of the district court.


       *
          Honorable Kenneth F. Ripple, United States Circuit Judge for the Seventh Circuit,
sitting by designation.
       1
         The district court’s jurisdiction was predicated on 28 U.S.C. § 1332. IAP is a Delaware
corporation with its principal place of business in Florida. Johnson Controls is a Wisconsin
corporation with its principal place of business in Wisconsin.
       2
           This court’s jurisdiction is predicated on 28 U.S.C. § 1291.



                                                  2
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                                         I

                                 BACKGROUND

      Prior to March 30, 2005, RMS was a wholly-owned subsidiary of Johnson

Controls Worldwide Services (“JCWS”). JCWS was a wholly-owned subsidiary

of Johnson Controls. In 2002, RMS contracted with the Air Force to build an

expeditionary village in Qatar, called “Task 5076.” To complete Task 5076, RMS

contracted with Fluor Intercontinental, Inc. (“Fluor”) for some of the construction.

Fluor in turn subcontracted some of the work to a subcontractor that failed to

perform adequately under the contract by delivering non-conforming materials.

Correcting the subcontractor’s mistakes generated large cost overruns for Fluor.

Consequently, Fluor terminated its contract with the subcontractor. RMS and

Fluor then jointly petitioned the Air Force to obtain reimbursement of Fluor’s cost

overruns, and Fluor demanded reimbursement from RMS for amounts not

reimbursed by the Air Force.

      While negotiations with the Air Force were underway, Johnson Controls

sold JCWS, RMS’s parent, to IAP through a stock purchase agreement (the

“SPA”). JCWS and IAP ultimately merged. The SPA provided for IAP’s

acquisition of all of JCWS’s subsidiaries, including RMS. It is clear from the




                                         3
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record that at the time of the SPA, Johnson Controls knew of Fluor’s demands for

reimbursement from RMS.

      The SPA contained a choice-of-law provision, providing that the contract

would be interpreted under New York law. It also contained an indemnification

provision, Section 8.3(e). Section 8.3(e) states that,

      [a]fter the Closing, Seller [Johnson Controls] agrees to indemnify and
      hold harmless Buyer [IAP] and the Company [JCWS], to the extent
      permitted by applicable law, from and against all demands, claims,
      actions or causes of action, assessments, losses, damages and
      liabilities (collectively “Damages”), asserted against or actually
      incurred by Buyer or the Company as a result of

several actions or claims, listed in Section 8.3(e)(x).3 The SPA, however, also

expressly limits Johnson Control’s duty of indemnification as follows: Section

8.3(e) provides, in pertinent part,

      Seller’s obligation to indemnify Buyer for any Damages pursuant to
      this Section 8.3(e) shall be effective and Seller shall be liable only to
      the extent that . . . written notice of a Buyer Claim in respect of such
      Damages, specifying in detail the basis therefor and referring to this
      Section 8.3(e), has been received by Seller on or prior to [March 30,
      2007] . . . .[4]

The parties executed the SPA on March 30, 2005.


      3
          R.251-2 at 55 (SPA).
      4
          Id. at 55-56.



                                          4
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      Prior to closing on the sale, however, IAP and Johnson Controls executed

Amendment No. 1 to the SPA. Amendment No. 1 amended Section 8.3(e)(x) “to

include indemnity for Damages arising out of or relating to item[] 1[] . . . set forth

on Exhibit A to this Amendment, subject to the limitations in Section 8.3(e).”5

Item 1 in Exhibit A is entitled “RMS AFCAP.”6 It recounts the ongoing dispute

between RMS, Fluor and the Air Force (“the Fluor dispute”) and states that “[t]he

maximum exposure in settling this issue for RMS is approximately $26 million.”7

The parties executed the amendment on February 11, 2005, and closed on the sale

on March 30, 2005.

      After closing, IAP, as the new owner of RMS, became involved in RMS and

Fluor’s negotiations with the Air Force. On April 14, 2009, after reaching a

partial settlement with the Air Force, IAP requested that Johnson Controls, RMS’s

former owner, indemnify it. Johnson Controls refused.

      IAP and RMS then brought a declaratory judgment action against Fluor,

seeking a determination that RMS was not liable for the remainder of Fluor’s cost



      5
          R.1-3 at 4 (Amendment No. 1).
      6
          Id. at 7 (Amendment No. 1 Ex. A).
      7
          Id. (emphasis added).



                                              5
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overruns. IAP and RMS also brought a claim against Johnson Controls for

indemnification under the SPA. The district court realigned the parties, making

Fluor the plaintiff, RMS and IAP the defendants and Johnson Controls a

third-party defendant. The indemnification action between IAP and Johnson

Controls was stayed, pending the resolution of the litigation between RMS and

Fluor. RMS and Fluor settled before trial.

      IAP and Johnson Controls subsequently filed cross-motions for summary

judgment on the indemnification action. Johnson Controls argued that IAP was

not entitled to indemnification for two reasons. First, it asserted that the SPA’s

plain language establishes that Johnson Controls only undertook to indemnify

IAP, and the claim for which IAP sought indemnification was made against RMS,

not IAP. Second, Johnson Controls submitted that IAP had failed to satisfy

Section 8.3(e)’s notice requirements because it did not request indemnification

until April 2009. The district court rejected both of these arguments and

determined that the plain language of the SPA, in conjunction with Amendment

No. 1, established that Johnson Controls had received the required notice and had

a duty to indemnify IAP for losses sustained as a result of the Fluor dispute.

      At summary judgment, IAP sought only its fees from settling RMS’s dispute




                                          6
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with Fluor, including those it incurred before requesting indemnification from

Johnson Controls. IAP did not seek fees incurred in the present action against

Johnson Controls for indemnification. The district court awarded IAP attorneys’

fees, determining that, under New York law, broadly worded indemnification

agreements, like Section 8.3(e), cover attorneys’ fees. The district court then

appointed a special master to calculate a reasonable fee amount and to determine

whether IAP was entitled to costs.

       To establish its attorneys’ fees, IAP submitted billing invoices, which were

billed in quarter-hour, rather than tenth-of-an-hour, increments as required by the

district court’s initial scheduling order and Local Rule 54.1. IAP also admits that

it failed to file some invoices by the deadline set out in the district court’s

scheduling order and Local Rule 54.1.8

       The special master recommended that IAP’s attorneys’ fees be reduced in

three ways: (1) by disallowing the fees contained in the invoices which were not

timely filed in accordance with Local Rule 54; (2) by reducing fees for IAP’s

failure to submit bills in tenth-of-an-hour increments; and (3) by reducing the fees


       8
          Local Rule 54.1 governs motions for attorneys’ fees. It provides, among other things:
(1) the time for filing a motion for fees, (2) requirements for attorneys’ fee records and (3) how to
determine fee amounts. N.D. Fla. Loc. R. 54.1.



                                                 7
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requested by ten percent to compensate for duplicative or vague time entries. The

special master also determined that IAP was entitled to costs pursuant to the

district court’s grant of summary judgment. After de novo review, the district

court adopted the special master’s recommendation and awarded IAP

$1,882,405.68 in attorneys’ fees and $308,804.90 in costs.

      Johnson Controls timely appealed, and IAP cross-appealed, challenging

only the district court’s disallowance of fees which were not timely filed in

accordance with Local Rule 54.1 and which were not billed in tenth-of-an-hour

increments.



                                             II

                                      DISCUSSION

      We review the district court’s grant of summary judgment de novo.

Moorman v. UnumProvident Corp., 464 F.3d 1260, 1264 (11th Cir. 2006). By the

parties’ agreement, New York law governs the SPA’s interpretation.9




      9
          R.251-2 at 62 (SPA); R.1-3 at 6 (Amendment No. 1).



                                              8
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A. Indemnification of IAP

       It is undisputed that Section 8.3(e) of the SPA is not facially ambiguous;

therefore it must be construed according to its plain meaning. See Bailey v. Fish

& Neave, 868 N.E.2d 956, 959 (N.Y. 2007).

       Section 8.3(e) governs Johnson Controls’ duty to indemnify IAP for

specified “Damages.” “Damages” are defined in the agreement as “all demands,

claims, actions or causes of action, assessments, losses, damages and liabilities”

arising from certain events.10 Thus, Section 8.3(e), as amended by Amendment

No. 1, provides that “[Johnson Controls] agrees to indemnify and hold harmless

[IAP] . . . from and against all . . . losses[] . . . actually incurred by”11 IAP “arising

out of or relating to”12 the Fluor dispute, for which “[t]he maximum exposure in

settling this issue for RMS is approximately $26 million.”13 It bears emphasis that

the parties in amending the SPA’s indemnification provision through Amendment




       10
            R.251-2 at 55 (SPA).
       11
            Id.
       12
            R.1-3 at 4 (Amendment No. 1).
       13
            Id. at 7.



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No. 1 explicitly contemplated “settling [the Fluor dispute] for RMS.”14 Under the

amended Section’s plain language, IAP is entitled to indemnification from

Johnson Controls for the actual losses it sustained because of the Fluor dispute,

including those incurred by settling the Fluor dispute “for RMS.”15

       Johnson Controls submits that it does not owe IAP indemnification because

RMS, not IAP, had liability as a result of the Fluor dispute. Although Johnson

Controls is correct that only RMS, and not IAP, was liable to Fluor because of the

cost overruns associated with the Air Force project, it is incorrect in concluding

that this absence of liability relieves it of its duty of indemnification. Johnson

Controls did not undertake to indemnify IAP only for liability incurred as a result

of the Fluor dispute. Rather it agreed to indemnify IAP for a host of damages,

including losses actually incurred.

       The district court found that IAP suffered actual losses as a result of RMS’s

litigation and ultimate settlement with Fluor.16 At summary judgment, Johnson



       14
            Id. (emphasis added).
       15
            Id.
       16
           R.292 at 8. For example, IAP produced evidence that, in accordance with GAAP, IAP
and RMS file consolidated financial statements, in which reductions in RMS’s value appear as
losses to IAP. R.251-48 at 2-3.



                                             10
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Controls produced no evidence disputing this fact.17 Its only argument on appeal

is that because IAP and RMS are separate legal entities, IAP cannot be liable for

RMS’s debts. However, the absence of legal liability does not preclude finding

that IAP suffered actual losses, which the SPA specifically provides for, as a result

of the Fluor dispute. Indeed, in order to give effect to the parties’ agreement,

including Amendment No. 1, we cannot accept Johnson Controls’ argument that

IAP is precluded from suffering actual losses as a result of the Fluor dispute

because IAP and RMS are distinct legal entities. Were this sufficient to preclude

IAP from incurring an actual loss, Amendment No. 1 would be meaningless.

       Under New York law, actual loss must be given its “plain and ordinary

meaning.” White v. Cont’l Cas. Co., 9 N.Y.3d 264, 267, 878 N.E.2d 1019, 848

N.Y.S.2d 603 (N.Y. 2007). IAP presented evidence that it suffered real, tangible

losses as a result of the Fluor dispute. As the district court noted, Johnson

Controls chose not to challenge or rebut this evidence, see R.292 at 8, and so has

forfeited its opportunity to do so.




       17
          See R.292 at 8 (noting that Johnson Controls produced no evidence in response to
IAP’s evidence that it sustained actual losses).



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       However, we note that IAP has incurred actual losses. The shared balance

sheet reflects more than mere accounting practices between IAP and RMS; it

reflects the reality of the ownership structure whereby IAP funded RMS’s

settlement with Fluor and the associated attorneys’ fees. First, IAP incurred

monetary losses by funding RMS’s litigation. Second, RMS is IAP’s

wholly-owned subsidiary; in short, RMS itself is one of IAP’s assets. When

RMS’s net worth was reduced because of expenses incurred in negotiating,

litigating and ultimately settling with the Air Force and with Fluor, IAP suffered a

cognizable monetary loss--its asset (RMS) was diminished in value.

       The SPA as amended by Amendment No. 1 clearly contemplates

indemnifying IAP’s “settling this issue for RMS.”18 The district court found that,

based on uncontroverted evidence, IAP incurred actual losses in doing just that.

Thus, the SPA, as amended, covers the losses IAP actually incurred because of the

Fluor dispute.




       18
           R.1-3 at 7 (emphasis added) (Amendment No. 1). We do not require Johnson Controls
to indemnify RMS, but rather, in accordance with the terms of Amendment No.1, to indemnify
IAP for losses incurred by IAP because of RMS’s dispute with Fluor. There is a difference
between requiring Johnson Controls to indemnify RMS and requiring it to indemnify IAP for
losses that RMS’s actions caused IAP to suffer, which was the purpose of Amendment No. 1.



                                            12
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B. Notice Requirement

       One of the prerequisites for obtaining indemnification for damages, as

defined in the SPA, is that sufficient notice of the damages be given. Giving

notice of damages does not trigger Johnson Controls’ duty to indemnify; rather it

preserves IAP’s ability to request indemnification later. Notice of any damages

incurred by IAP must be given in accordance with Section 8.3(e), which is the

subject of the present dispute.19

       Section 8.3(e) provides:

       [Johnson Controls’] obligation to indemnify [IAP] for any Damages
       pursuant to this Section 8.3(e) shall be effective and [Johnson
       Controls] shall be liable only to the extent that . . . written notice of a
       Buyer Claim in respect of such Damages, specifying in detail the
       basis therefor and referring to this Section 8.3(e), has been received
       by [Johnson Controls] on or prior to the date specified by Section
       8.3(b) . . . .[20]

Section 8.3(b)(iii) specifies that such notice be given before the closing’s second




       19
          A separate notice provision, Section 8.3(h)(i), governs requests for indemnification.
As Johnson Controls notes, IAP requested indemnification on April 14, 2009. Appellant’s Br.
49. Section 8.3(h)(i) only requires that notice be “prompt,” and provides that “failure of an
indemnified party to give timely notice hereunder shall not affect rights to indemnification
hereunder, except and only to the extent that the indemnifying party demonstrates actual material
damage caused by such failure.” R.251-2 at 57 (SPA).
       20
            Id. at 55-56.



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anniversary, March 30, 2007.21 Notice will be deemed given if it is in writing and

delivered by certain methods.22 However, these methods are not exclusive.

       The district court found that Section 8.3(e)’s notice requirements were

satisfied by Amendment No 1. We agree. Amendment No. 1 satisfies the four

requirements of Section 8.3(e): (1) It was written; (2) it specified in detail the

basis for the damages claimed; (3) it referred to Section 8.3(e); and (4) it was

received by Johnson Controls prior to March 30, 2007. Moreover, the purpose of

the Amendment was to memorialize the Fluor dispute and Johnson Controls’

obligation to indemnify IAP for any losses arising from it. We agree with the

district court that, given the language and evident purpose of Amendment No. 1, it

“would be an absurd result”23 to hold that IAP was obligated to give Johnson

Controls additional notice of the Fluor dispute and that the dispute was covered by

Section 8.3(e)’s indemnification provision.

       We cannot accept Johnson Controls’ arguments to the contrary. First,


       21
            Id. at 55.
       22
           Id. at 61. The specified methods are “personally, by telex, telegram, or facsimile
transmission, or by registered or certified mail (return receipt requested) or nationally recognized
private courier to the other party at the following address for such party (or at such other address
as shall be specified by like notice).” Id.
       23
            R.292 at 7.



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Section 8.3(e) provides detailed requirements for giving notice of damages.

Contrary to Johnson Controls’ assertions, that section does not contemplate

additional requirements other than those required by the SPA itself. There is no

basis for our adding additional requirements to the facially unambiguous notice

provision. Second, we cannot agree with Johnson Controls’ contention that this

interpretation renders portions of the SPA meaningless. As Johnson Controls

correctly notes, Amendment No. 1 recites that it is “subject to the limitations in

Section 8.3(e).”24 Finding that Amendment No. 1 satisfied Section 8.3(e)’s notice

requirement does not render this language a nullity. Indeed, IAP was still subject

to, and met, other requirements under Section 8.3(e), including the prohibition on

consequential damages, the threshold amount for Johnson Controls’ liability,

which the parties do not dispute was met, and a cap on damages.25

      Amendment No. 1 expressly provided for indemnification arising out of the

Fluor dispute, an ongoing event. Indeed, providing notice of this indemnifiable

claim is the only conceivable purpose of the amendment. It satisfied the

formalities set forth in Section 8.3(e); there was no need for additional notice to be


      24
           R.1-3 at 4 (Amendment No. 1).
      25
           R.251-2 at 55-56 (SPA).



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given. Therefore, we conclude that IAP gave Johnson Controls sufficient notice

and so is entitled to indemnification.



C. Indemnification for Attorneys’ Fees

      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...)



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claim. Then we address the issue IAP raises on cross-appeal.



       1. Johnson Controls’ Contentions

       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.



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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.



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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.



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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.



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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




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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
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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



       2. IAP’s Contentions on Cross-Appeal

       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.



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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.



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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.




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D. Indemnification for Costs

       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”).



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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.



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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




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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).



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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.



                                    Conclusion

       For the foregoing reasons, we affirm in part and reverse in part the judgment

of the district court.

       AFFIRMED IN PART AND REVERSED IN PART




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JORDAN, Circuit Judge, dissenting:

       My view of this case differs from that of my colleagues. I therefore

respectfully dissent.

       1. The majority holds that Johnson Controls must indemnify the losses

incurred by RMS, a non-indemnitee/second-tier subsidiary of IAP.1 In my

opinion, this holding runs counter to the language of § 8.3(e) of the Stock

Purchase Agreement, which limits indemnification to the “Buyer and the

Company,” i.e., IAP and IAPWS respectively.2

       First, § 8.3(e) does not grant indemnification to any subsidiary of IAPWS.

Because New York law requires that an indemnity provision be “strictly construed

to avoid reading into it a duty which the parties did not intend to be assumed,”

Hooper Assoc., Ltd. v. AGS Computers, Inc., 548 N.E.2d 903, 905 (N.Y. 1989), I

        1
          As defined in the Stock Purchase Agreement, “Buyer” refers to IAP and “Company” refers
to Johnson Controls World Services (“JCWS”). See Stock Purchase Agreement [D.E. 251-2] at 1.
After the sale of its stock to IAP, JCWS was renamed as IAP World Services (“IAPWS”). See
Plaintiffs’ Redacted Statement of Material Undisputed Facts [D.E. 251] at ¶¶ 1, 2; Johnson Controls
Answer [D.E. 241] at ¶ 2, 23. Thereafter, RMS remained a wholly-owned subsidiary of IAPWS,
which was a wholly-owned subsidiary of IAP. See D.E. 241 at ¶ 1, 23; D.E. 251 at ¶ 1.
       2
         The majority says that Johnson Controls, by failing to challenge the figures put forth by
IAP, has forfeited its challenge. See Maj. Op. at 15. I disagree. Johnson Controls may not have
contested the sums incurred by RMS, but it steadfastly denied that § 8.3(e) required
indemnification. See Johnson Control’s Response to Motion for Summary Judgement [D.E.
270] at 20 (“[A]pplying the limitations in Section 8.3(e) . . . means that any duty to indemnify
remains limited to Damages asserted or actually incurred by IAP or IAPWS. Here, the
undisputed evidence is that the only entity whom Fluor asserted any Damages . . . was RMS.”).



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do not think § 8.3(e) extends to subsidiaries. See, e.g., Dana Corp. v. Celotex

Asbestos Settlement Trust, 251 F.3d 1107, 1115 (6th Cir. 2001) (affirming

summary judgment under Ohio law in favor of seller, which refused to indemnify

losses incurred by former subsidiary, because indemnity provision of stock

purchase agreement only indemnified buyer's own losses incurred as a result of

subsidiary’s torts). Reading § 8.3(e) in this limited manner is consistent with other

provisions in the stock purchase agreement, which expressly extend

indemnification rights to subsidiaries in other scenarios. See Stock Purchase

Agreement [D.E. 251-2] at § 4.2(a) (“Seller shall be responsible for and pay,

reimburse, indemnify and hold harmless each of Buyer, the Company and each

Subsidiary [for certain taxes].”); § 4.3 (“Seller shall reimburse, indemnify and hold

harmless each of the Buyer, the Company and each Subsidiary for [taxes arising

from refunds or credits].”); § 5.15(f) (“Seller shall indemnify and hold Buyer, the

Company and any of their respective Subsidiaries harmless against any cost,

liability or expense to the extent related to a complete or partial withdrawal . . .

from any Multiemployer Plan.”); and § 9.2 (“Seller shall fully indemnify Buyer,

the Company and its Subsidiaries with respect [to costs related to an employee

benefits plan].”).




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      Second, the parties’ negotiations to the amendment to § 8.3(e) support a

strict reading of § 8.3(e). IAP’s initial draft of the amendment requested the

inclusion of subsidiaries as indemnitees. See Meyers Letter dated February 8,

2005 [D.E. 281-5] at 1 (“Seller agree[s] to indemnify and hold harmless Buyer, the

Company and their respective Subsidiaries from and against all Damages arising

out of or relating to any of the matters set forth on Exhibit A [which included the

Fluor dispute].”) (emphasis added). Johnson Controls, however, rejected this

increased responsibility, see McCarty Letter dated February 9, 2005 [D.E. 282-6]

at 3, and the parties ended up agreeing to terms “subject to the limitations in [§]

8.3(e),” notably sans “subsidiary.” Like the Sixth Circuit in a similar case, I think

that the drafting history makes a difference. See Dana Corp., 251 F.3d at 1114

(“Dana did not, however, agree to indemnify S&K [the subsidiary] for its

liabilities as evidenced by a prior draft which provided as much, but was

rejected.”).


      Third, in ruling that the losses incurred by a second-tier subsidiary are

actual losses of the parent solely because the affiliated entities filed consolidated

financial statements, the majority conflates an accounting loss with an actual loss.

See McAnaney v. Astoria Fin. Corp., 665 F. Supp. 2d 132, 145 (E.D.N.Y. 2009)



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(under New York law, the “reporting of consolidated results of such subsidiaries

in public filings . . . are insufficient without more, as a matter of law, to eviscerate

the presumption of corporate separateness”). The majority says that a loss

incurred by a second-tier subsidiary constitutes an identical loss to the parent

because a subsidiary is an asset of the parent. See Maj. Op. at 12 (“[I]n short,

RMS itself is one of IAP’s assets.”). New York corporate law, however, rejects

such an assertion. See Connecticut Gen. Life Ins. Co. v. Superintendent of Ins.,

176 N.E.2d 63, 66-67 (N.Y. 1961) (“[T]he general rule in this State [is] that in no

legal sense can . . . the business of a subsidiary corporation be said to be that of a

parent.”) (internal citations omitted). Legally, only the shares of a subsidiary may

be considered an asset of the parent. See Dole Food Co. v. Patrickson, 538 U.S.

468, 475 (2003) (“An individual shareholder, by virtue of his ownership of shares,

does not own the corporation’s assets and, as a result, does not own subsidiary

corporations in which the corporation holds an interest. A corporate parent which

owns the shares of a subsidiary does not, for that reason alone, own or have legal

title to the assets of the subsidiary; and, it follows with even greater force, the

parent does not own or have legal title to the subsidiaries of the subsidiary”)

(internal citations omitted). See also JPMorgan Chase Bank, N.A. v. Malarkey, 65




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A.D.3d 718, 721 (N.Y. App. Div. 2009) (“[a] corporate parent which owns the

shares of a subsidiary does not . . . own or have legal title to the assets of the

subsidiary”) (quoting Dole Food Co., 538 U.S. at 475). IAP has never claimed a

diminution in value of the shares of RMS due to the Fluor dispute, so it has

suffered no actual loss. In any event, § 8.3(e) “expressly exclude[s] consequential

damages,” such as the diminution of a second-tier subsidiary’s share price.


      2. Unlike the majority, I don't think that an amendment to the stock

purchase agreement can, by itself, satisfy the notice required by that agreement.

The text of the amendment makes its terms subject to the limitations originally

specified in § 8.3(e), including the requirement to provide timely notice of an

indemnification obligation. Saying that § 8.3(e), as amended, satisfies its own

notice provision does not make much sense to me, and would impermissibly

render the distinct notice requirement of § 8.3(e) “mere surplusage,” a result

frowned upon by New York law. See FCI Group, Inc. v. City of New York, 862

N.Y.S.2d 352, 356 (N.Y. App. Div. 2008) (rejecting contract interpretation that

would render a provision “mere surplusage”).




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       Assuming that the amended § 8.3(e) could be a legally effective and sufficient

vehicle for providing notice, and assuming that a second-tier subsidiary's loss could

be deemed a direct loss to the parent, the effective date of the amendment pre-dated

any putative loss suffered by IAP, and therefore constituted ineffective notice. Under

New York law, a right to indemnification “does not accrue until the indemnified party

has made a payment, or actually suffered a loss.” Pfizer, Inc. v. Stryker Corp., 348

F. Supp. 2d 131, 150 (S.D.N.Y. 2004) (applying New York law). As of the effective

date of the amendment – February 11, 2005 – RMS had not “actually incurred” a loss.

See Plaintiffs’ Redacted Statement of Material Undisputed Facts [D.E. 251] at ¶ 60.

At the earliest, Fluor asserted its claim against RMS (for roughly $10 million) on

February 2, 2009. Shortly thereafter, RMS settled with Fluor for $4.4 million.

Therefore, even under the majority's view of subsidiary liability, IAP did not incur a

loss (via RMS’ payment of the settlement) until sometime in 2009 – nearly four years

after the amendment was signed. 3

       3
          The majority also concludes that IAP’s direct expenditures in litigating the Fluor
dispute were an indemnifiable loss. See Maj. Op. at 11. I’m not so sure. First, before an
indemnification right accrues, § 8.3(e) requires that the “Damages” incurred must exceed the
“Threshold Amount,” i.e., $2 million. Second, as noted above, under New York law the right of
IAP to indemnification would only accrue once it had actually “made a payment, or actually
suffered a loss.” See Pfizer, 348 F. Supp. 2d at 150. As of February 11, 2005, IAP did not even
own the stock of RMS and therefore could not have reported any Fluor-related expenses incurred
by RMS on its consolidated financial statement. See Plaintiff’s Redacted Statement of Material
                                                                              (continued...)



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       In order for the majority's reasoning to hold, we must assume that the 2005

amendment sufficiently specified a loss amount that, itself, only became fixed in

2009. Although the principles of special relativity may provide that “past” and

“future” events are equally discernible as mere points set in a spacetime

continuum,4 the laws of New York are not so availing – no indemnification

obligation exists “unless and until an actual loss has been sustained.” McCabe v.

Queensboro Farm Products, Inc., 239 N.E.2d 340, 342 (N.Y. 1968). See also

Pfizer, 348 F. Supp. 2d at 150 (“To assert a claim under a loss or liability

(...continued)
Undisputed Facts [D.E. 251] at ¶ 3 (“On March 30, 2005, IAP purchased all of the stock of
JCWS, including all of the stock for RMS.”). It is highly unlikely that IAP would have expended
any money (and certainly not $2 million) on litigation for an entity that it did not yet even own.
There is, at the very least, this disputed issue of material fact: whether, as of February, 11, 2005,
IAP had spent any money on RMS’ Fluor-related legal fees and whether those expenses, if any,
exceeded the $2 million threshold amount to permit IAP to assert an indemnification right at that
time. Third, the indemnification provision “expressly exclude[d] consequential damages.” “In
general, the precise demarcation between direct and consequential damages is a question of fact,
and the commercial context in which a contract is made is of substantial importance in
determining whether particular items of damages will fall into one category or the other.” Am.
Elec. Power Co., Inc. v. Westinghouse Elec. Corp., 418 F. Supp. 435, 459 (S.D.N.Y. 1976)
(applying New York law). See also Roneker v. Kenworth Truck Co., 944 F. Supp. 179, 186
(W.D.N.Y. 1996). Moreover, New York courts have ruled that indemnification provisions,
absent express language, do not include legal fees expended by an indemnitee in asserting an
otherwise indemnifiable claim. See Gorman v. Kings Mercantile Co., 231 N.Y.S.2d 642, 644
(N.Y. Sup. Ct. 1962); Robbins v. Melbrook Realty Co., 213 N.Y.S.2d 403, 407 (N.Y. Sup. Ct.
1961). Here, § 8.3(e) does not expressly indemnify any “costs,” “expenses,” or “fees.” Because
there are genuine issues of material fact regarding the parties’ intended disposition of such
expenses and whether such expenses fall under the exclusion for consequential damages,
summary judgment was improper.
      4
        Albert Einstein, Relativity: The Special and General Theory 65-68 (trans. Robert Lawson,
Henry Holt and Co.) (1920) (discussing Minkowski spacetime).



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indemnification agreement, a party must establish that the amount claimed is

fixed.”); Goodridge v. Harvey Group, Inc., 778 F. Supp. 115, 133 (S.D.N.Y. 1991)

(“It is established under New York law that agreements to indemnify against

liability become enforceable when the liability is fixed”); Martinez v. Fiore, 454

N.Y.S.2d 475, 475 (N.Y. App. Div. 1982) (“a party seeking indemnity must be

held liable to the plaintiff before he can recover over from a third party”).

      At best, the amendment only vaguely suggests a potential claim of an

unknown amount to be made at some unknown future point in time: “The

maximum exposure in settling this issue for RMS is approximately $26 million.

RMS has not paid Fluor for the cost overruns and has not recognized cost/revenue

on these costs.” See Exhibit A to Amendment No. 1 to Stock Purchase Agreement

[D.E. 251-3] at ¶ 1. As of February 11, 2005, there was no loss that had been

“actually incurred” by IAP or RMS.




                                          38
