United States District Court, D. Maryland
KEY GOVERNMENT FINANCE, INC.
E3 ENTERPRISES INC., ET AL
[Copyrighted Material Omitted]
For Key Government Finance, Inc., Plaintiff: Daniel C Fleming, LEAD ATTORNEY, Jeffrey S Downs, Jonathan R Miller, PRO HAC VICE, James K Haney, Wong Fleming PC, Princeton, NJ.
For E3 Enterprises Inc., Defendant: John P Van Beek, LEAD ATTORNEY, Goldman and Van Beek PC, Alexandria, VA.
For Meridian Imaging Solutions, Inc., Defendant: Holly Ann Currier, John P Van Beek, Goldman and Van Beek PC, Alexandria, VA.
DEBORAH K. CHASANOW, United States District Judge.
Presently pending and ready for review in this breach of contract case is the motion for attorneys' fees, costs, and pre-judgment interest filed by Plaintiff Key Government Finance, Inc. (" KGF" or " Key" ) against Meridian Imaging Solutions, Inc. (" Meridian" ). (ECF Nos. 32, 36, 37). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion will be granted, but attorneys' fees will be reduced and prejudgment interest will be calculated at an annual rate of six (6) percent from November 19, 2010.
This dispute arises out of a financing arrangement among KGF, E3 Enterprises, Inc. (" E3" ), and Meridian in connection with a Prime Contract to provide copier equipment and services to the United States Army (" the Army" ). A prior opinion explains the relevant facts. ( See Key Government Finance, Inc. v. E3 Enterprises Inc., 923 F.Supp.2d 733 (D.Md. 2013)).
On February 8, 2013, the undersigned issued a Memorandum Opinion and Order granting in part and denying in part KGF's motion for summary judgment. (ECF Nos. 25 & 26). Judgment was entered in favor of KGF and against Meridian on Count I of the complaint in the amount of $244,494.38. (ECF No. 26). Judgment was entered in favor of Meridian and E3 and against KGF as to Count III of the complaint. (Id. ¶ ¶ 22-28). KGF's motion was denied with respect to Count II against E3, which KGF later voluntarily dismissed. (ECF Nos. 29 & 30).
On April 5, 2013, KGF filed a motion seeking an award of attorneys' fees, costs, and pre-judgment interest against Meridian. (ECF No. 32). On April 17, 2013, Meridian filed an opposition contesting
both KGF's entitlement to attorneys' fees, costs, and pre-judgment interest, as well as the amount KGF requested. (ECF No. 33). KGF replied on May 1, 2013. (ECF No. 34). Much like the summary judgment briefing, the parties again disputed which state's law applies to determining an award of attorneys' fees, costs, and pre-judgment interest. At the summary judgment stage, KGF took the position that New York law governed by virtue of a choice of law provision in the MPA signed by E3 and KGF. E3 and Meridian, in turn, argued that Virginia law should apply because that is where the Servicing Rider - entered into by E3, Meridian, and KGF - was signed. In the February 8, 2013 memorandum opinion, the undersigned found it unnecessary to resolve the issue because fundamental principles of contract interpretation are the same under both Virginia and New York law. (ECF No. 25, at 16). In the motion for attorneys' fees, costs, and pre-judgment interest, however, KGF incorrectly characterized the opinion as holding " that Maryland law governs the interpretation of counsel fee provisions within the Servicing Rider." (ECF No. 32-2, at 3). Based on this erroneous interpretation, KGF relied exclusively on Maryland case law to argue its entitlement to attorneys' fees, costs, and pre-judgment interest. Thus, the court issued an order on August 15, 2013, directing the parties to submit supplemental briefs addressing the following three issues: (1) which state's law should apply as between New York and Virginia based on the choice of law principles recognized in Maryland; (2) the relevant principles in both New York and Virginia, including as to whether and when indemnification provisions are construed as allowing for the recovery of attorneys' fees in actions between the contracting parties; and (3) the relevant rules in each state regarding pre-judgment interest. (ECF No. 35, at 3-4). KGF was separately directed to file supplemental materials in support of its request for attorneys' fees.
A. Choice of Law
Plaintiff now argues that under Maryland's choice of law principles, New York law applies given the choice-of-law provision in Section 10.07 of the MPA. Meridian, on the other hand, contends that the MPA, and the first amendment to the MPA, were executed between KGF and E3 only, and that the Servicing Rider executed among all three parties contains no choice-of-law provision.
In an action based upon diversity of citizenship - such as here - the district court must apply the law of the forum state, including its choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In contract actions, Maryland courts generally apply the law of the jurisdiction where the contract was made, pursuant to the principle of lex loci contractus. See, e.g., Allstate Ins. Co v. Hart, 327 Md. 526, 611 A.2d 100 (1992). Well-established Maryland law provides, however, that " parties to a contract may agree to the law which will govern their transaction, even as to an issue going to the validity of the contract." Kunda v. C.R. Bard, Inc., 671 F.3d 464, 469 (4th Cir. 2011) ( citing Kronovet v. Lipchin, 288 Md. 30, 43, 415 A.2d 1096 (1980) (emphasis added)).
Here, the choice-of-law provision is contained in the MPA, which only KGF and E3 executed. The MPA defined KGF as the Buyer and E3 as the Seller. Meridian was not a party to the MPA, although it signed the Servicing Rider, which states the following:
Capitalized terms used and not defined herein shall have the meanings ascribed thereto in the above-listed Master Purchase Agreement. Buyer [E3] and SELLER [KGF] hereby agree that the Master Purchase Agreement between BUYER and SELLER, with respect to the Assignment Schedule only, shall be amended by this Rider, agreed to by and among BUYER, SELLER and MERIDIAN. All other terms and conditions of the Master Purchase Agreement, not amended herein, are ratified and affirmed and remain in full force and effect.
(ECF No. 38-1, at 51) (emphasis added). Defendant contends, " the Servicing Rider . . . set forth the obligations of Meridian to [KGF] . . . the Servicing Rider did not somehow impose upon Meridian the same duties to [KGF] that E3 had assumed in its contract with [KGF] (the MPA), and make Meridian the obligor to [KGF] under the MPA." (ECF No. 38, at 3); cf. Brock v. Entre Computer Centers, Inc., 933 F.2d 1253, 1259 (4th Cir. 1991) (holding that a choice-of-law provision in an original agreement applied to a subsequent agreement between the same parties that agreed to apply Virginia law). Courts in this district have applied the lex loci contractus principle where parties' agreements did not contain a choice-of-law provision. In Progressive Septic, Inc. v. SeptiTech, LLC, Civil Action No. ELH-09-03446, 2011 WL 939022, at *7 (D.Md. 2011), plaintiff alleged that SeptiTech breached the Distributor Agreement, which contained a choice-of-law provision and to which SeptiTech was not a party. The opinion reasoned that " [a]s SeptiTech was not a party to the Distributor Agreement in issue, and did not expressly assume it, the choice-of-law provision in that agreement (selecting Maine law) does not govern the question of whether SeptiTech's course of conduct constituted an implied assumption of the Distributor Agreement." [WL] at *9. Judge Hollander thus concluded that Maryland law applied pursuant to lex loci contractus.
Here too, Meridian did not expressly assume E3's obligations under the MPA so as to be bound by the choice-of-law provision found in an agreement between KGF and E3, defined in the MPA as " Buyer" and " Seller," respectively. The parties to the Servicing Rider ratified and affirmed the terms and conditions of the MPA not amended by the Servicing Rider, which suggests that they agreed to maintain the status quo as to the provisions and obligations between KGF and E3 not affected by the Servicing Rider. Notably, the choice-of-law provision in Section 10.07 of the MPA provides that " [t]his Agreement shall be construed in accordance with and governed by the laws of the State of New York." (ECF No. 38-1, at 14); see, e.g., Fidelity & Guar. Life Ins. Co. v. United Advisory Grp., Inc., Civil No. WDQ-13-0040, 2013 WL 322634, at *4 (D.Md. Jan. 25, 2013) (" The Producer Agreement governs the relationship between Fidelity and Quintera, ; the Loan Agreement governs the terms of the particular loan at issue . . . [t]he Producer agreement provides that, ' This Agreement is governed by the laws of the State of Maryland.' . . . [b]y contrast, the Loan Agreement contains no choice-of-law provision . . . Thus, the question becomes where the Loan Agreement was 'made.'" (emphasis in original) (internal quotations omitted)); Chubb & Son v. C & C Complete Servs., LLC, 919 F.Supp.2d 666, 676
(D.Md. 2013) (applying the law of the jurisdiction where the work order was made where the Master Agreement contained a choice of law clause stating that New Jersey law shall govern it, but " the work order between the Parties, Disaster, and Hargis does not appear to contain a choice of law clause." ) (emphasis added)). The parties could have included a choice-of-law provision in the Servicing Rider, but chose not to do so. See, e.g., Baker's Exp., LLC v. Arrowpoint Capital Corp., Civil Action No. ELH-10-2508, 2012 WL 4370265, at *10 (D.Md. Sept. 20, 2012) (" Presumably, A & F could have opted to include an express choice of law or choice of forum provision in the A & F Policy, or it could have included provisions explicitly addressing the substantive legal issue in dispute . . . A & F did not do so, however. In the absence of a choice of law provision, this Court is bound to apply the law of the forum state - Maryland - as to choice of law." ). Under Maryland law, where the contract contains no choice of law clause, courts " should apply the law of the jurisdiction where the contract was made." Chesapeake Bay Found., Inc. v. Weyerhaeuser Co., 848 F.Supp.2d 570, 578 (D.Md. 2012) (citation omitted). Here, the parties do not dispute that the Servicing Rider was executed in Virginia. Accordingly, Virginia law applies.
B. Attorneys' Fees
1. Application of the Indemnification Provision to First-Party Claims
" Generally, absent a specific contractual or statutory provision to the contrary, attorney's fees are not recoverable by a prevailing litigant from the losing litigant." Mullins v. Richlands Nat. Bank, 241 Va. 447, 449, 403 S.E.2d 334, 7 Va. Law Rep. 2282 (1991). In the initial motion for attorneys' fees, costs, and pre-judgment interest, Plaintiff argued that Section 9.02(v) ...