Taylor et al v. Hawley Troxell Ennis & Hawley LLP et al

Filing 420

MEMORANDUM DECISION AND ORDER - The Court HEREBY ORDERS: 1. Crumb & Mundings Motion for Attorney Fees (Dkt. 399 ) will be considered atthe conclusion of the case. 2. The Courts dismissal of GemCaps Third-Party Complaint remains WITHOUT PREJUDICE. GemCap retains the right to reassert its claims in a separate lawsuit at a later date. Signed by Judge David C. Nye. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITIED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
DALE L. MIESEN, an individual who is a
shareholder and who is also bringing this
action on behalf of and/or in the right of
AIA Services Corporation and its wholly
owned subsidiary AIA Insurance, Inc.;
Plaintiff,
v.
CONNIE TAYLOR HENDERSON, an
individual; JOLEE K. DUCLOS, an
individual; HAWLEY TROXELL ENNIS &
HAWLEY LLP, an Idaho limited liability
partnership; GARY D. BABBITT, an
individual; D. JOHN ASHBY, an
individual; RICHARD A. RILEY, an
individual; MICHAEL W. CASHMAN SR.,
an individual; JAMES BECK, an individual;
R. JOHN TAYLOR, an individual; CROP
USA INSURANCE AGENCY, INC., an
Idaho corporation; AIA SERVICES
CORPORATION, an Idaho corporation;
AIA INSURANCE, INC.; an Idaho
corporation; CROP USA INSURANCE
SERVICES, LLC; an Idaho limited liability
company; and GEMCAP LENDING I,
LLC, a Delaware limited liability company,
Defendants.
___________________________________
CROP USA INSURANCE AGENCY,
INC., an Idaho corporation; CONNIE
TAYLOR HENDERSON, an individual;
JOLEE DUCLOS, an individual; R. JOHN
MEMORANDUM DECISION AND ORDER - 1

Case No. 1:10-cv-00404-DCN-CWD
MEMORANDUM DECISION
AND ORDER

TAYLOR, an individual; MICHAEL W.
CASHMAN SR., an individual; JAMES
BECK, an individual,
Defendants/Third-Party Plaintiffs,
v.
REED TAYLOR, an individual,
Third-Party Defendant.
REED TAYLOR, an individual,
Third-Party Defendant/
Counterclaimant,
v.
CONNIE TAYLOR HENDERSON, an
individual; R. JOHN TAYLOR, an
individual; JAMES BECK, an individual,
and UNKNOWN BONDING COMPANY,
an unknown entity that issued the unknown
fidelity ERISA Bond,
Counterdefendants.
GEMCAP LENDING I, LLC, a Delaware
limited liability company,
Defendant/Third-Party Plaintiff,
v.
QUARLES & BRADY, LLP, a
Wisconsin limited legal partnership;
and CRUMB & MUNDING, P.S., a
Washington professional service
corporation,
Third-Party Defendants.

MEMORANDUM DECISION AND ORDER - 2

I. INTRODUCTION
Third-Party Defendant Crumb & Munding P.S. filed a Motion for Attorney Fees
(Dkt. 399) and Third-Party Plaintiff GemCap Lending I, LLC (“GemCap”) filed a Status
Report regarding its Amended Third-Party Complaint (Dkt. 402). Having reviewed the
record and briefs, the Court finds that the facts and legal arguments are adequately
presented. Accordingly, in the interest of avoiding further delay, and because the Court
finds that the decisional process would not be significantly aided by oral argument, the
Court will address the Motion for Attorney Fees without oral argument. Dist. Idaho Loc.
Civ. R. 7.1(d)(2)(ii). For the reasons outlined below, the Court finds good cause to refrain
from ruling on the motion for attorney fees at this time and permit GemCap to reserve a
contribution and/or indemnity claim until after a judgment, if any, is entered against
GemCap.
II. BACKGROUND
Third-Party Plaintiff GemCap filed a Third-Party Complaint against the law firm
of Crumb & Munding and the law firm of Quarles & Brady on November 21, 2017. The
factual background of the Third-Party Complaint is set forth in the Court’s previous
Decision. Dkt. 391. The Court incorporates that background in full by reference.
On December 21, 2017, Crumb & Munding filed a Motion to Dismiss. Dkt. 303.
Shortly thereafter, Crumb & Munding filed a Motion for Rule 11 Sanctions. Dkt. 362.
After the Motions were fully briefed, the Court held oral argument on the Motions. The
Court ultimately granted the Motion to Dismiss, finding GemCap had failed to state a
claim for indemnity/contribution under either Idaho statutory law or Idaho common law.
MEMORANDUM DECISION AND ORDER - 3

Dkt. 391. However, the Court also found it conceivable that GemCap could allege
additional facts to cure the deficiencies the Court identified. Therefore, the Court
dismissed the Third-Party Complaint without prejudice, but required GemCap⸺if it
wanted to file an amended complaint⸺to seek leave to amend and submit a copy of its
proposed amended complaint within 30 days. Id. The Court also denied the Motion for
Rule 11 Sanctions. Id.
On June 29, 2018, GemCap notified the Court that it was not “seek[ing] leave to
amend its Third-Party Complaint at th[at] time.” Dkt. 402, at 3. Rather, GemCap stated
that “in the unlikely event a judgment is entered against [it] in this action, [it] reserve[d]
the right, at that [future] time, to pursue contribution and/or indemnity claims against
Crumb & Munding, Quarles & Brady, and/or any other proper party.” Id. Crumbing &
Munding objects to this reservation of rights and asks the Court to dismiss the ThirdParty Complaint with prejudice and enter judgment against GemCap. Dkt. 409.
III. ANALYSIS
A. Amended Complaint
Crumb & Munding argues the Court should dismiss the Third-Party Complaint
with prejudice and not allow GemCap to assert claims against it later for two main
reasons. First, it argues GemCap seeks to “hold[] Crumb & Munding hostage in this
litigation.” The Court disagrees with this argument. Crumb & Munding is no longer
involved in this litigation and GemCap cannot amend its Third-Party Complaint to bring
them back in to this case since it did not do so within the required thirty days. Any claim
by GemCap against Crumb & Munding for contribution or indemnification will now need
MEMORANDUM DECISION AND ORDER - 4

to be asserted, if at all, in a separate action filed after judgment is entered in this case.
The validity of the contribution or indemnification claim will be decided in that separate
action. Accordingly, Crumb & Munding will not need to monitor this case or incur legal
fees in the meantime.
Second, Crumb & Munding argues dismissal is required because GemCap failed
to comply with the Court’s orders to file an amended complaint within 30 days. Crumb &
Munding notes that dismissals are presumptively with prejudice and courts regularly
convert dismissals without prejudice to dismissals with prejudice after a plaintiff fails to
comply with a court’s amendment deadline. It is true that GemCap failed to strictly
comply with the Court’s instructions and deadline. However, in effect, GemCap’s Status
Report is simply a notice to Crumb & Munding that GemCap may file an indemnification
action after judgment in this case. That indemnification or contribution action will not
exist unless and until after GemCap pays on a judgment.
As explained in the previous Memorandum Decision and Order (Dkt. 391),
GemCap’s only claim against Crumb & Munding is for contribution/implied indemnity,
which can be actionable under either common law or Idaho Code section 6-803. This
Code section provides in relevant part:
(5) A party shall be jointly and severally liable for the fault of another person
or entity or for payment of the proportionate share of another party where
they were acting in concert or when a person was acting as an agent or servant
of another party. As used in this section, “acting in concert” means pursuing
a common plan or design which results in the commission of an intentional
or reckless tortious act.
Idaho Code § 6-803.

MEMORANDUM DECISION AND ORDER - 5

In its decision dismissing the Third-Party Complaint, this Court found GemCap
had not alleged that it “act[ed] in concert” with Crumb & Munding (in aiding and
abetting the AIA Controlling Defendants breaches of their fiduciary duties or in
committing fraud). However, the Court also acknowledged that it would be difficult for
GemCap to do so without admitting any fault. This remains true. Accordingly, GemCap
only wishes to file a complaint⸺presumably setting forth facts showing it acted in
concert with Crumb & Munding⸺“in the unlikely event a judgment is entered against
GemCap in this action.” Dkt. 402. At that point (if that occurs), the barriers preventing
GemCap from asserting an indemnity/contribution claim will have been removed.
GemCap points out that Idaho law allows a party (such as GemCap) to pursue a
claim for contribution or indemnity, where appropriate, after the party has paid an
underlying claim, judgment, or settlement—including, for example, after a judgment or
settlement is entered. See, e.g., Idaho Code § 6-803(1) (“The right of contribution exists
among joint tortfeasors, but a joint tortfeasor is not entitled to a money judgment for
contribution until he has by payment discharged the common liability or has paid more
than his pro rata share thereof.”); Mountain View Hosp., L.L.C. v. Sahara, Inc., No. 4:07CV-464-BLW, 2011 WL 4962183, at *23 (D. Idaho Oct. 17, 2011) (claims for indemnity
accrue for statute of limitations purposes “when the underlying claim, judgment, or
settlement is paid or discharged” (quoting Schiess v. Bates, 693 P.2d 440, 442 (Idaho
1984)).
For all of these reasons, the Court finds it appropriate to allow GemCap to reassert
its contribution/indemnity claims at some point in the future in a new lawsuit if the Court
MEMORANDUM DECISION AND ORDER - 6

enters judgment against GemCap in this case. Accordingly, the dismissal will remain
without prejudice.
B. Motion for Attorney Fees
As this Court’s subject matter jurisdiction is based on diversity, Idaho state law
applies to Crumb & Munding’s request for attorney fees. Clark v. Podesta, No. 1:15-CV00008-CWD, 2017 WL 4855845, at *2 (D. Idaho Oct. 26, 2017) (citing Chambers v.
NASCO, Inc., 501 U.S. 32, 34, (1991); Alyeska Pipeline Serv. Co. v. Wilderness Soc’y,
421 U.S. 240, 260 n. 31 (1975)). Crumb & Munding specifically requests attorney fees
under section 12-120(3) of the Idaho Code, which provides as follows:
In any civil action to recover on an open account, account stated, note, bill,
negotiable instrument, guaranty, or contract relating to the purchase or sale
of goods, wares, merchandise, or services and in any commercial transaction
unless otherwise provided by law, the prevailing party shall be allowed a
reasonable attorney’s fee to be set by the court, to be taxed and collected as
costs.
Under this section, an award of fees is mandatory if the Court determines Crumb &
Munding is the prevailing party. Scott USA Inc. v. Patregnani, No. 1:14-CV-00482BLW, 2015 WL 7013204, at *1 (D. Idaho Nov. 12, 2015) (citing Merrill v. Gibson, 87
P.3d 949, 954 (Idaho 2004)). The determination of whether a party is the prevailing party
is committed to the discretion of the trial court. Sanders v. Lankford, 1 P.3d 823, 826
(Idaho 2000); see also I.R.C.P. 54(d)(1)(B).
GemCap does not dispute that section 12-120(3) of the Idaho Code applies in this
case. However, GemCap does argue that Crumb & Munding is not a prevailing party

MEMORANDUM DECISION AND ORDER - 7

because the Court dismissed its Third-Party Complaint without prejudice.1 In a
concurrence in Straub v. Smith, then Chief Justice Eismann definitively declared that
“there can be no prevailing party until the merits of the lawsuit have been decided and
there is a final judgment.” 175 P.3d 754, 761–62 (Idaho 2007) (citing Howard v. Perry,
106 P.3d 465 (2005); I.R.C.P. 54(d)(1)(B)). He went on to explain that “[i]n the instant
case, there was no final judgment until the action was dismissed with prejudice. The
dismissal of Straub’s action with prejudice was a precondition to the Smiths’ right to
recover court costs and attorney fees, not a denial of that right.” Id.
The Court notes this language came from a concurrence and is, therefore, not
precedential. However, this language is consistent with the Idaho Supreme Court’s
position in Asbury Park, LLC v. Greenbriar Estate Homeowners' Ass'n, Inc., 271 P.3d
1194, 1201-02 (2012), where it encountered a judgement that did not dispose of each
claim involved in the case. There, the Court explained that “the procedural posture of this
case prevents us from awarding attorney fees and costs at this time. . . . The certified
judgment does not dispose of all of the parties' claims. Therefore, we cannot determine
the prevailing party, nor can we award attorney fees. The trial court is to take the issue of
attorney fees and costs for this appeal into consideration when it addresses all fees and
costs at the conclusion of the case.”  Id. (emphasis added) (citations and punctuation
omitted). Here, because the dismissal is without prejudice, there has been no final
judgment, and Crumb & Munding is not a “prevailing party” under Idaho Code section

1

GemCap also argues that Crumb & Munding’s requested attorney fees and costs are not
reasonable. The Court need not address this argument at this time.

MEMORANDUM DECISION AND ORDER - 8

12-120(3). Accordingly, the Court will not address Crumb & Munding’s request for
attorney fees at this time. Instead, the Court will consider this request when it addresses
all fees at the conclusion of the case.
IV. ORDER
The Court HEREBY ORDERS:
1. Crumb & Munding’s Motion for Attorney Fees (Dkt. 399) will be considered at
the conclusion of the case.
2. The Court’s dismissal of GemCap’s Third-Party Complaint remains WITHOUT
PREJUDICE. GemCap retains the right to reassert its claims in a separate lawsuit
at a later date.

DATED: August 8, 2018

_________________________
David C. Nye
U.S. District Court Judge

MEMORANDUM DECISION AND ORDER - 9