Standard Bank PLC v. Runge, Inc.
ORDER Denying Defendant's 167 Motion for Attorney's Fees costs and excess costs as supplemented 189 , by Judge Richard P. Matsch on 8/9/2012.(rpmcd)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior District Judge Richard P. Matsch
Civil Action No. 07-cv-01989-RPM
STANDARD BANK, PLC,
RUNGE, INC., f/k/a RUNGE MINING, INC., and d/b/a PINCOCK, ALLEN & HOLT,
After this Court dismissed this civil action on the defendant’s motion for summary
judgment, Runge, Inc., f/k/a Runge Mining, Inc., and d/b/a Pincock, Allen & Holt (PAH)
moved for an award of attorney’s fees, costs and excess costs against the plaintiff
Standard Bank, PLC (“Standard”), claiming entitlement under a contract between PAH
and Bronco Energy Fund, Inc. (Bronco). More particularly, the claim is made pursuant
to paragraph 14 of the standard Terms & Conditions containing a fee shifting provision
favoring the prevailing party in a dispute related to the services provided under the
agreement said to be part of that contract. Proceedings on the motion were stayed
pending determination of Standard’s appeal. The Tenth Circuit Court of Appeals
affirmed this Court’s ruling that Standard’s tort claims are barred by Colorado’s
economic loss rule in an Order and Judgment entered on October 6, 2011.
PAH filed a supplement to its motion for attorneys’ fees and costs on January 10,
2012. The issue of entitlement was separated from the amounts that may be awarded
by an order entered February 7, 2012. The entitlement issue has been fully briefed.1
The facts of this case are contained in this Court’s Memorandum Decision of
January 28, 2010, and the recitations in the Order and Judgment. The services
provided by PAH were required by The Royal Bank of Scotland (RLB) as a condition of
its proposed financing of Bronco’s purchase of a coal mine in Hazelton, Indiana. PAH
submitted its proposal to do an evaluation and performed its services after receipt of a
$35,000 prepayment. There was no written contract signed by Bronco. After RLB
declined the loan, Standard saw an opportunity to profit from financing the Bronco
purchase and accepted the work of PAH. The loan closed, the purchase was made and
Bronco filed for bankruptcy, resulting in a very substantial loss to Standard.
Standard filed this action to recover its loss by claiming that PAH was negligent
in performing its work and negligently misrepresented the merits of the mine. This
Court held that because the duty that PAH owed to Standard arose from the contractual
duty to Bronco, the case was controlled by the decision of the Colorado Supreme Court
in BRW, Inc. V. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004).
The Tenth Circuit Court analyzed that Colorado court decision in its Order and
Judgment and held that because the duty to provide professionally competent services
in evaluating the mine set forth in the contract was the same as that alleged by
Standard to have been breached by PAH, the economic loss rule barred tort claims
even if Standard did not have a contract remedy.
Costs that may be allowed pursuant to 28 U.S.C. § 1920 have been waived because
PAH failed to file a Bill of Costs within 14 days from the judgment as required by
In the present motion PAH argues that Standard is bound by the fee shifting
provision in the Terms and Conditions in the Bronco proposal on one or all of the
following grounds: (1) Standard and PAH entered into an implied contract which
incorporated the fee-shifting provision in the PAH/Bronco contract; (2) Standard is
bound by the terms of the PAH/Bronco contract as a third party beneficiary; (3) Royal
Bank of Scotland was a third-party beneficiary of the PAH/Bronco contract and
Standard succeeded to Royal Bank of Scotland’s third party beneficiary
status;(4) Standard directly benefitted from the PAH/Bronco contract and is bound by
the fee-shifting provision under the principle of direct benefit estoppel.
There is an assumption in all of these arguments that these Terms and
Conditions were a part of the Bronco contract. While this Court decided that the
proposal became a contract when Bronco paid the $35,000 advance fee, it did not
decide that the fee shifting provision in the Terms and Conditions was a part of the
agreement. There was no need to make that decision. Indeed, early in this litigation
PAH contended that a limitation of liability provision in the PAH standard Terms and
Conditions was applicable and enforceable against Standard. That question was fully
briefed by both parties in their respective motions for summary judgment.2 It was never
decided because the ruling on the scope of the economic loss rule barred this action
Colorado courts have strictly construed fee shifting agreements because they are
in derogation of the American rule and their scope depends, in part, on the
Standard moved for partial summary judgment on PAH’s defenses (#135).
circumstances surrounding the formation of the contract. There has been no evidence
of any negotiations between PAH and Bronco and no occasion for this Court to
determine whether it and the other PAH standard Terms and Conditions were accepted
by Bronco. In the absence of a finding that attorney’s fees and costs would be
recoverable from Bronco, the defendant’s arguments for recovery from Standard are
PAH has moved for recovery of some of its attorney’s fees and costs from
plaintiff’s counsel, Jones Day pursuant to 28 U.S.C. § 1927. That section provides:
Any attorney or other person admitted to conduct cases in any court of the
United States or any Territory thereof who so multiplies the proceedings in
any case unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorneys' fees
reasonably incurred because of such conduct.
PAH argues that Jones Day unreasonably and vexatiously multiplied the
proceedings when Standard challenged the existence of a contract between PAH and
Bronco in response to PAH’s Rule 12 motion to dismiss. In particular, PAH focuses on
the following statement in Standard’s response to that motion:
PAH’s Motion To Dismiss is the first time that either party [Bronco or PAH]
had put Standard on notice of the Proposal and T&C…. The lack of notice
is significant. Research has not revealed a single case… where the
non-signatory did not have notice of the written agreement between the
(Pl.’s resp., # 14 at 20-21.) PAH accuses Jones Day of misrepresenting Standard’s
knowledge of the PAH/Bronco contract, pointing to handwritten notes prepared by
Standard loan officer Michael Hutchings. (Ex. 13 to Pl.’s resp., #136-32.) Hutchings’
notes reflect a series of conversations he had in September and October 2005, when
Standard was evaluating whether to become involved in Bronco’s acquisition of the
Hazleton Mine. Hutchings’ notes indicate that he inquired about the nature of PAH’s
engagement and was told that PAH had a contract with Bronco and the work was being
done on behalf of Royal Bank of Scotland. (Id. at p. 4 of 5.)
PAH argues that if Jones Day had been forthright about the existence of the
PAH/Bronco contract when it crafted Standard’s response to PAH’s Rule 12 motion, this
court would have dismissed Standard’s complaint at that early stage, and further
proceedings would not have been required.
The PAH motion to dismiss was made under Fed.R.Civ.P. 12(b)(1) and 12(b)(3)
based on the contention that the mandatory forum-selection and alternative dispute
resolution provisions in PAH’s standard Terms and Conditions required dismissal.
Alternatively, PAH invoked Rule 12(b)(6) on the grounds that as a third party beneficiary
of a contract between PAH and Bronco the tort claims were barred by the economic
loss rule or, if not, there was no privity of contract between Standard and PAH.
It was indeed something of a stretch for plaintiff’s counsel to deny the existence
of a Bronco contract but that was not the basis for this Court’s denial of the motion.
The course of this litigation concerned disputes over the nature and scope of the
relationships between PAH and Bronco and PAH and Standard. That was due, in large
part, from the fact that PAH failed to obtain a signed written contract with Bronco or
Standard contrary to its usual procedures. In the absence of a signed contract, it was
not improper for Standard/Jones Day to challenge PAH’s contention that the July 12,
2005 proposal defined the PAH/Bronco relationship. It certainly was not improper for
Standard/Jones Day to challenge PAH’s contention that the PAH standard Terms and
Conditions were binding on Standard.
Much of the discovery and motions practice in this case resulted from the fact
that both parties failed to take any precautions in defining their relationship, apparently
in Standard’s haste to seize what it thought was a golden investment opportunity and
PAH’s assumptions based on past dealings with Standard. The ultimate decision
ending this lawsuit came after this Court’s suggestion at an oral argument on discovery
disputes on July 29, 2009, that the economic loss rule be briefed.
Jones Day did not multiply these proceedings unreasonably or vexatiously.
Accordingly, it is
ORDERED that the defendant’s motion for an award of attorney’s fees, costs and
excess costs [#167] as supplemented [#189] is denied.
DATED: August 9th, 2012
BY THE COURT:
s/Richard P. Matsch
Richard P. Matsch, Senior Judge
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