AES-Apex Employer Services, Inc. et al v. Rotondo et al
Filing
196
OPINION and ORDER Granting Plaintiff's Request for Indemnification and Directing the Parties to Submit a Proposed Order of Judgment, Stipulated as to Form by 5/1/2020 Signed by District Judge Robert H. Cleland. (LWag)
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UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
______________________________________________________________________
AES-APEX EMPLOYER SERVICES, INC.,
and AES-APEX EMPLOYER SOLUTIONS, INC.,
Plaintiffs,
v.
Case No. 13-14519
DINO ROTONDO, RICHARD MARK, and
UNITED STATES DEPARTMENT OF TREASURY
INTERNAL REVENUE SERVICE,
Defendants,
and
AKOURI INVESTMENTS, L.L.C.,
Intervenor.
__________________________________/
OPINION AND ORDER GRANTING PLAINTIFFS’ REQUEST FOR
INDEMNIFICATION AND DIRECTING THE PARTIES TO SUBMIT A PROPOSED
ORDER OF JUDGMENT
Plaintiffs AES-APEX Employer Services, Inc., and AES-APEX Employer
Solutions, Inc., (“AES”) filed this interpleader action in 2013. (ECF No. 1.) It was
removed to federal court and has been heavily litigated since. (Id.) After five opinions,
two appeals, and affirmation by the Sixth Circuit, a final issue remains to be decided:
the amount of indemnification Plaintiffs are owed in attorney fees. (ECF Nos. 135, 149,
153, 160, 170, 182, 185, 191.) Defendant Internal Revenue Service (“IRS”) and
Plaintiffs have submitted supplemental briefing on the matter. (ECF Nos. 193, 194.) The
court finds a hearing unnecessary. E.D. Mich. L.R. 7.1(f)(2). For the reasons provided
below, the court will grant Plaintiffs’ request for $389,998.73 in attorney fees.
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I. BACKGROUND
The court and the parties have extensively set forth the tangled facts of this case,
familiarity with which facts is presumed. (E.g., ECF No. 83, PageID.2666-74; ECF No.
191, PageID.6069-72.) The court will not elaborate on such, but limit reference to the
facts pertinent to the remaining issue now before the court.
Plaintiffs purchased the assets of five companies owned and controlled by
Defendant Dino Rotondo (“Purchase Agreement”). (ECF No. 83, PageID.2671-72; ECF
No. 182, PageID.5990; ECF No. 178, PageID.5822, ¶ 1.) As part of the agreement,
Plaintiffs agreed to pay Rotondo consulting fees. (ECF No. 182, PageID.5990; ECF No.
178, PageID.5823, ¶¶ 4-5.) The fees were calculated as a percentage of the sales
generated as a result of Plaintiffs’ asset purchases. (ECF No. 178, PageID.5823, ¶ 5.)
After Plaintiffs’ purchase of Rotondo’s corporate assets, the IRS gave notice of
federal tax liens on Rotondo’s property and rights to property. (Id., ¶ 6.) The IRS sought
collection of Rotondo’s consulting fees as recovery for Rotondo’s unpaid taxes. (Id.,
PageID.5825, ¶¶ 11-12.)
Intervenor Akouri Investments, L.L.C., then filed in state court a claim against
Rotondo, Rotondo’s businesses, Plaintiffs, and Plaintiffs’ owner. (Id., PageID.5823-24, ¶
7.) Intervenor attempted to void the sale of Rotondo’s business assets to Plaintiffs and
claimed that the transfer was a fraudulent conveyance and constituted tortious
interference, conversion, and unjust enrichment. (Id., PageID.5824, ¶ 8.) Plaintiffs
moved for summary disposition in state court, and Intervenor’s claims against Plaintiffs
and Plaintiffs’ owner were dismissed. (Id., ¶ 9-10.)
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Plaintiffs filed the instant interpleader suit against Defendants Rotondo, IRS, and
Richard Mark to determine to whom Rotondo’s consulting fees are owed. (ECF No. 1.)
Intervenor joined the action, attempting to claim rights to the fees. (ECF No. 33.)
Eventually, the court granted summary judgment in favor of the IRS. (ECF No. 135.)
The IRS obtained priority over the other claimants and is now entitled to Rotondo’s fee
income. (Id.) Plaintiffs deposited $308,957.96 of Rotondo’s consulting earnings with the
court and in August 2019, the court ordered distribution of those funds to the IRS. (ECF
No. 173; ECF No. 191, PageID.6085.) However, the court also found that consulting
fees Plaintiffs owe above and beyond the $308,957.96 already deposited can be offset
by Plaintiffs’ attorney fees. (ECF No. 191, PageID.6085.)
In the Purchase Agreement, Plaintiffs obtained indemnification for legal costs.
The provision states:
Each Seller and Guarantor covenant and agree that, regardless of any
investigation at any time made by or on behalf of Purchaser or of any
information Purchaser may have in respect thereof, the Sellers and
Guarantors will jointly and severally indemnify and hold harmless
Purchaser from, for and against any loss, damage, liability or deficiency
(including without limitation, reasonable attorneys’ fees and other costs
and expenses incident to any suit, action, investigation or other
proceeding) arising out of or resulting from, and will pay Purchaser on
demand the full amount of any sum which Purchaser may pay or become
obligated to pay on account of . . . (iv) any claim, litigation or other action
of any nature arising out of any act performed, transaction entered into or
state of facts suffered to exist by any Seller and/or Sellers’ Affiliate(s) prior
to the date of Closing.
(ECF No. 178-1, PageID.5832 (emphasis added).) The final issue before the court is the
extent to which Plaintiffs can offset amounts owed to Rotondo, and thus the IRS, in
consulting fees as indemnification for Plaintiffs’ legal costs.
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II. DISCUSSION
Plaintiffs must first demonstrate that legal fees are subject to the indemnification
clause. The indemnification clause covers fees from “any claim, litigation, or other action
of any nature arising out of any act performed, transaction entered into or state of facts
suffered to exist by any Seller and/or Sellers’ Affiliate(s) prior to the date of closing.”
(ECF No. 178-1, PageID.5832.) The court and the Sixth Circuit have interpreted this
provision as requiring compensation where Plaintiffs were required to expend attorneys’
fees due to a “state of facts suffered to exist” by Rotondo. (Id.; ECF No. 191,
PageID.6083-84 (citation removed) (“The court has already found that [Plaintiffs] [are]
entitled to attorneys’ fees in this action because it arises out of the Purchase
Agreements and is related to the state of facts suffered to exist by Rotondo.”); ECF No.
182, PageID.5993 (The Sixth Circuit: “The Indemnification Provision may indeed
encompass expenses incurred in this litigation since Rotondo owed taxes and did not
pay his loan before the deal was closed.”); ECF No. 135, PageID.4839 (citation
removed) (“[T]his action is related to a state of facts suffered to exist by Rotondo.”).)
Further, the action must have taken place prior to the Purchase Agreement’s closing,
March 28, 2013. (ECF No. 178-1, PageID.5832 (indemnification clause); id.,
PageID.5838-39 (Purchase Agreement signatures).)
Plaintiffs seek compensation for three categories of legal expenses: 1) costs
incurred defending Intervenor’s state court suit against Plaintiffs, with its attempt to
invalidate the Purchase Agreement; 2) other costs due to involvement in Intervenor’s
state court litigation, including Intervenor’s attempt to collect on amounts owed by
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Rotondo to Intervenor; and 3) costs litigating this interpleader suit. The court will
address each category in turn.
A. State Court Claims Against Plaintiffs
Plaintiffs seek $123,414.49 spent defending its asset purchases and defending
Intervenor’s claims directed at Plaintiffs. (ECF No. 193-1, PageID.6100 (Plaintiffs’
breakdown of costs).) The IRS does not contest this amount. The state of facts
underlying Intervenor’s claim against Plaintiffs, i.e., a loan by Intervenor to Rotondo and
his companies, came about due to Rotondo’s actions in securing the loan, and occurred
before March 28, 2013. (ECF No. 45, PageID.710-42 (Intervenor’s state court
complaint); id., PageID.598-600 (Intervenor’s loan agreements).) The loan was
executed on May 1, 2011. (ECF No. 45, PageID.710-42.) The court will grant Plaintiffs’
request for indemnification related to defending Intervenor’s state court claims.
B. State Court Litigation Generally
Plaintiffs seeks an additional $32,505.00 in legal fees resulting from Intervenor’s
state court litigation, but not tied directly to defending against Intervenor’s claims against
Plaintiffs. (ECF No. 193-1, PageID.6100.) Despite being dismissed from the lawsuit on
February 12, 2015, Plaintiffs assert that they were forced to stay involved in the case
through motion practice, appeals, and attempts at post-judgment relief. Some of these
expenses are included in the first category, money spent defending Intervenor’s claims
against Plaintiffs. (Id. (Category #3 expenses after February 12, 2015.).) However, other
expenses were related to Intervenor’s underlying claims against Rotondo. The IRS now
attempts to exclude all legal costs related to Intervenor’s efforts to collect on its loan to
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Plaintiff. For instance, the IRS argues that Plaintiffs should not be reimbursed for the
deposition of Plaintiffs’ owner, or costs incurred in complying with discovery requests.
The IRS’s sole argument is that the indemnification clause in fact covers
expenses caused by only Rotondo’s companies and not by Rotondo himself. The IRS
points to contract language that the “state of facts suffered to exist” must be by “by any
Seller and/or Sellers’ Affiliate(s),” and that Rotondo was listed as a guarantor and not a
seller. (ECF No. 178-1, PageID.5832.) This is a distinction without substance, given that
Rotondo owned and controlled the companies that sold the assets. (ECF No. 83,
PageID.2671-72; ECF No. 182, PageID.5990; ECF No. 178, PageID.5822, ¶ 1.) Also,
the IRS presents this argument only at the conclusion of a protected, heavily contested
litigation. This court has already interpreted the indemnification clause to cover the
“state of facts suffered to exist” by Rotondo and has not been called upon to drill into the
mundane (and mostly insignificant) differences between the acts of Rotondo and the
acts of his companies. (ECF No. 191, PageID.6083-84 (citation removed) (“The court
has already found that [Plaintiffs] [are] entitled to attorneys’ fees in this action because it
arises out of the Purchase Agreements and is related to the state of facts suffered to
exist by Rotondo.”); ECF No. 135, PageID.4839 (citation removed) (“[T]his action is
related to a state of facts suffered to exist by Rotondo.”).)
The Sixth Circuit implicitly accepted this reading, finding that Rontondo’s failure
to pay taxes and Rotondo’s failure to pay loans would trigger indemnification if litigation
resulted, also adding that Plaintiffs must make a proper demand. (ECF No. 182,
PageID.5993.) The court stated: “The Indemnification Provision may indeed encompass
expenses incurred in this litigation since Rotondo owed taxes and did not pay his loan
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before the deal was closed.” (Id.) Nowhere did the court assert or imply that Plaintiffs
could receive indemnification only if Plaintiffs were able to intricately trace the litigation
solely to the acts of Rotondo’s corporations.
The IRS’s argument also conflicts with its own position, admitting indemnification
for state court claims against Plaintiffs. It is hard to understand the distinction between
litigation costs incurred in defending claims aimed directly at Plaintiffs and those
incurred due to the relevance of the Purchase Agreement to claims against Rotondo
and Rotondo’s companies. The IRS admits that the indemnification clause is triggered
when a third party sues Plaintiffs, claiming that the Purchase Agreement harms its
interests in a loan made to Rotondo. With that, it is difficult to see how other litigation
expenses—incurred concerning claims made directly against Rotondo and using the
same loan document—are not included. (ECF No. 45, PageID.710-42 (Intervenor’s
complaint, basing claims against Plaintiffs, Rotondo, and Rotondo’s companies on
Intervenor’s loan).) The court discerns no reason to limit Plaintiffs’ indemnification solely
to those costs incurred to defend Intervenor’s claims against Plaintiffs. All costs incurred
in the state court litigation were caused by the “state of facts suffered to exist” by
Rotondo and as such are subject to the indemnification clause. (ECF No. 178-1,
PageID.5832.)
Even if the court were to entertain the IRS argument and analyze the source of
Intervenor’s lawsuit, it is not at all clear that the IRS would prevail. The loan on which
Intervenor attempted to collect in the state court litigation obligated Rotondo, in the
general sense. However, the record demonstrates that the loan was alleged to have
been made to one of Rotondo’s companies, secured by Rotondo’s companies, and
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guaranteed by Rontondo. (ECF No. 45, PageID.714-15, ¶¶ 24-34 (Intervenor’s
complaint alleging that the relevant loan was made to a corporation 100% owned by
Rotondo, secured by corporations 100% owned by Rotondo, and signed in an individual
and corporate capacity by Rotondo); id., PageID. 598-600 (Intervenor’s loan agreement
entered into by one of Rotondo’s companies, signed by Rotondo); id., PageID.614-17
(guaranty agreement entered into by a Rotondo company and signed by Rotondo); see
also ECF No. 110, PageID.3636 (adopted Report and Recommendation granting the
IRS’s motion for summary judgment: “Rotondo signed all of the loan agreements,
promissory notes, security agreements, and guaranties in his individual capacity and/or
corporate capacity.”).) It is clear to this court that the entire litigation was caused by a
“state of facts suffered to exist” by Rotondo’s companies, with Rotondo individually
playing only a part, which would largely conform to the IRS’s own stance on the matter
regarding Intervenor’s claims against Plaintiffs. (ECF No. 178-1, PageID.5832.)
Further, even if the court were to apply the IRS standard and even if the IRS
demonstrated that the state court litigation came about solely as a result of Rotondo’s
acts outside his position of corporate maestro, the IRS argument would still fail. The
“state of facts suffered to exist” by Rotondo’s companies encompasses the owner and
controller of the companies taking on substantial debt and subjecting Plaintiffs to
litigation costs. (ECF No. 178-1, PageID.5832.) The litigation was directly tied to the
Purchase Agreement and involved an investigation into the propriety of the asset sale
and Rotondo’s intent during the contract’s negotiation and execution. (E.g., ECF No. 45,
PageID.730 (Intervenor’s state court complaint: “Rotonodo . . . knew or should have
known that the lien held by [Intervenor] was properly perfected and secured . . . . The
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assets sold [to Plaintiffs] were not sold in good faith, and were sold with full knowledge
that [Intervenor] did not execute any subordination agreement and/or permission to sell
assets.”).)
The word “suffered” in the phrase “state of facts suffered to exist” is not a
restrictive term. It applies to all those events Plaintiffs was “submit[ed] to or . . . forced to
endure.” Suffer, Merriam-Webster Dictionary (last visited April 24, 2020),
https://www.merriam-webster.com/dictionary/suffer; Weiss v. St. Paul Fire and Marine
Ins. Co., 283 F.3d 790, 796 (6th Cir. 2002) (Under “normal contract rules,” “[t]he court is
to give the terms of [a] contract their plain and natural meaning.”); Burdett Oxygen Co.
of Cleveland v. Employers Surplus Lines Ins. Co., 419 F.2d 247, 248 (6th Cir. 1969)
(describing foundational theories of contract interpretation). If the indemnification clause
applies only to Rotondo’s companies, Plaintiffs were “submit[ed]” and “forced to endure”
the financial problems of the companies’ highly indebted owner and controller. The
companies obtained Rotondo as an agent and lead negotiator for the Purchase
Agreement and it was Rotondo’s involvement in the deal that subjected Plaintiffs to
litigation costs. (ECF No. 45, PageID.598-600 (loan agreement signed by Rotondo);
ECF No. 110, PageID.3638 (Report and Recommendation: “Rotondo began negotiating
an asset sale with [Palintiffs’ owner].”).) The IRS, standing in for Rotondo, cannot play
hide and seek with corporate entities, dodging indemnification simply because litigation
costs are caused directly by Rotondo, but “forced” upon Plaintiffs due to Rotondo’s
participation in an agreement between Plaintiffs and Rotondo’s companies.
The court will accept Plaintiffs’ indemnification request for the full amount of legal
resources expended in its involvement in Intervenor’s lawsuit, whether each hour billed
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was related to claims against Plaintiffs or Rotondo. Plaintiffs will be able to offset an
additional $32,505.00.
C. Plaintiffs’ Interpleader Litigation
Plaintiffs seek $214,284.87 for legal expenses incurred in this litigation. (ECF No.
193-1, PageID.6100-01.) Plaintiffs also seek indemnification for $19,794.37 in fees
“related to the interpleader case” but not expressly categorized under the “Federal
Interpleader” matter. (Id.) As the court explained in its August 2019 opinion, this action
“arises out of the Purchase Agreements and is related to a state of facts suffered to
exist by Rotondo—namely, his unpaid tax liabilities.” (ECF No. 191, PageID.6083-84.)
The Sixth Circuit agreed, reasoning that “Rotondo owed taxes and did not pay his loan
before the [Purchase Agreement] closed,” the factual predicates to the current lawsuit.
(ECF No. 182, PageID.5993.) The IRS also agrees and accepts that Plaintiffs are owed
compensation for their costs, but only to a limited extent. The IRS contends that the
indemnification clause covers only $6,225.00 of Plaintiffs’ legal fees, those associated
with writing the interpleader complaint and writing a check to deposit funds.
Noticeably, the IRS does not argue that Plaintiffs’ fee calculations are inaccurate
or inflated. Instead, it claims no expenses outside of rudimentary interpleader
obligations should be covered. However, this theory is not tied to or supported by the
text of the indemnification clause. The clause does not state that Plaintiffs “shall be
indemnified only for those minimal costs necessary to accomplish the rudimentary
aspects of subsequent litigation,” e.g., drafting and filing a complaint. The clause states
Plaintiffs shall be indemnified “for and against any loss, damage, liability or deficiency,”
for “reasonable attorneys’ fees and other costs and expenses incident to any suit,
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action, investigation or other proceeding,” and for “the full amount of any sum which
Purchaser may pay or become obligated to pay” in litigation “arising out of or resulting
from” Rotondo’s actions. (ECF No. 178-1, PageID.5832 (emphasis added).) “Any” cost
and costs “incident” to “any” lawsuit are commonly understood to be expansive terms.
(ECF No. 178-1, PageID.5832.) Merriam-Webster defines “any” in this context as
“unmeasured or unlimited in amount, number, or extent” and “incident” as “dependent
on or relating to another thing.” Any, Merriam-Webster Dictionary (last visited April 24,
2020), https://www.merriam-webster.com/dictionary/any; Incident, Merriam-Webster
Dictionary (last visited April 24, 2020), https://www.merriamwebster.com/dictionary/incident. Costs “relating to” a lawsuit and encompassing an
“unmeasured . . . amount” certainly extends beyond the bare minimum required to
litigate an interpleader action. Plaintiffs are entitled to attorney fees beyond the IRS’s
suggested strict limits.
Nonetheless, the IRS claims at least some of the fees were a result of Plaintiffs’
involvement with the claims of Rotondo’s competing creditors, including Rotondo’s tax
lein, and thus were a result of facts brought into existence by Rotondo and not
Rotondo’s companies. The IRS relies on the same interpretation of the indemnification
provision the court rejected with regards to the Plaintiffs’ state court litigation. The court
and the Sixth Circuit have already found that this litigation is covered by the
indemnification clause, based as it was on facts “suffered to exist by Rotondo” and
involving tax liens and various loans made to Rotondo and his companies. (ECF No.
191, PageID.6083-84; ECF No. 182, PageID.5993; ECF No. 135, PageID.4839.) In fact,
the Sixth Circuit referred explicitly to the fact that “Rotondo owed taxes and did not pay
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his loans” when it stated Plaintiffs may be indemnified. (ECF No. 182, PageID.5993.)
The IRS’s argument is, yet again, inconsistent with its other stances. Filing an
interpleader complaint to resolve disputes between Rotondo’s creditors is covered, it
seems, but any greater involvement by Plaintiffs based on the same liabilities, e.g.,
providing reasonable accounting, is not. The court does not find the argument
convincing.
The IRS also includes an argument that, as a matter of law, attorney fees cannot
be used to offset a federal tax lien. The IRS cites two cases from two circuits, the
Seventh and the Eighth, that concern priority of rights for awards of attorney fees after a
lien by the IRS is perfected under federal law. With precedent that is actually binding
and a more substantive argument, it is possible this claim would have merit.
Nonetheless, this court and the Sixth Circuit have already decided that attorney fees
incurred by Plaintiffs can be offset, despite the fact that Rotondo’s consulting fees will
go to the IRS due to a perfected tax lien. The breath of the IRS’s claim would be
significant. If the IRS were correct, Plaintiffs could not recover any attorney fees from
amounts owed to the IRS vis-à-vis Rotondo’s consulting fees because any claim for
attorney fees would thus be de facto superior to the IRS lien. Yet the IRS already admits
that Plaintiffs may recover $123,414.49 in state court litigation fees and $6,225.00 in
this litigation. The courts have ruled Plaintiffs have a right to offset attorney fees and the
IRS has agreed. The court will not unsettle an established finding.
More substantively, the IRS claims that Plaintiffs incurred unnecessary legal
expenses in litigating issues in which Plaintiffs did not need to get involved. The IRS
asserts Plaintiffs should not be reimbursed for litigating Plaintiffs’ automatic deduction of
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attorney fees, the priority of Rotondo’s creditors, deduction of Plaintiffs’ attorney fees
before a demand for indemnification was made, and Plaintiffs’ deposit of consulting fees
with the court.
The indemnification clause does specify that Plaintiffs’ are entitled to
“reasonable” attorney fees. (ECF No. 178-1, PageID.5832.) Furthermore, general
contract principles imply a covenant of good faith and fair dealing. Restatement
(Second) of Contracts § 205 (Am. Law Inst. 1981); see, e.g., Kinzel v. Bank of Am., 850
F.3d 275, 283 (6th Cir. 2017); State Auto Props. and Cas. Ins. v. Hargis, 785 F.3d 189,
196 (6th Cir. 2015). Plaintiffs cannot obtain compensation for any and all litigation fees
that result from Rotondo’s actions prior to closing the Purchase Agreements. They
cannot take advantage of a situation, Plaintiffs knowing that they will be indemnified
while piling on unreasonable attorney fees in bad faith. Without the “reasonable”
limitation on fees, the indemnification provision would create perverse incentives, a
massive moral hazard, and threaten the consulting fee consideration for which Rotondo
rightfully contracted. See, e.g., K & T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171, 178
(6th Cir. 1996) (“[B]y making it more difficult for insurance companies to deny liability in
cases of arson, it is clear that the ultimate effect of this rule would be to encourage
arson for profit.”).
Nonetheless, the sweep of the indemnification clause is broad. It covers any
litigation expenses incurred as a result of Rotondo and expenses incidental or related to
such litigation, so long as those costs are themselves “reasonable.” (ECF No. 178-1,
PageID.5832.) There is no indication that the indemnification clause somehow limited or
prevented Plaintiffs from litigating their ability to automatically offset attorney fees, the
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priority of creditors with whom Plaintiffs would have to engage in payment of Rotondo’s
consulting fee income, the timing of when an attorney fees offset can be made, and the
timing of a deposit with the court. 1 These are issues related to litigation caused by
Rotondo: his failure to pay debts and taxes. (Id.) Plaintiffs are entitled to reasonable
attorney fees that result. (Id.) The IRS does not contest the reasonableness of the fees
themselves; the IRS does not claim that Plaintiffs overstate services provided, or that
the fees were calculated in a bad faith manner. Restatement (Second) of Contracts §
205 (Am. Law Inst. 1981). (ECF No. 178-1, PageID.5832.) What the IRS challenges is
the category of litigation issues in which Plaintiffs can be involved and for which they
can be indemnified. The court sees no such categorical limitations in Rotondo’s
indemnification guarantee. It was Rotondo’s responsibility to negotiate legally
enforceable contract terms and Rotondo agreed to an extensive indemnification right.
The IRS cannot now limit the indemnification for which Plaintiffs contracted.
Plaintiffs are entitled to the entirety of the reasonable legal fees incurred in this
lawsuit, $214,284.87. The IRS does not differentiate in its arguments between those
1
The IRS attempts to make a distinction between litigation issues in which
Plaintiffs were successful and those that were unsuccessful. Although the IRS cites to
no caselaw or statute for this contention and merely references “concept[s] . . . in the
law,” there are indeed times when only prevailing parties can obtain attorney fees. E.g.
Fed. R. Civ. P. 37(a)(5) (allowing payment of fees to the prevailing party in a motion to
compel discovery); Buckhannon Bd. and Care Home, Inc. v. W. Va. Dept. of Health and
Human Resources, 532 U.S. 598, 602-03 (2001) (“Congress . . . has authorized the
award of attorney’s fees to the ‘prevailing party’ in numerous statutes,” including the Fair
Housing Amendments Act and the Americans with Disabilities Act). Nonetheless, the
IRS makes no claim that such a limitation is included in the contract at issue. It is the
Purchase Agreement that defines Plaintiffs’ rights to indemnification, and it contains no
language preventing recovery for attorney fees if Plaintiffs are not the prevailing party in
a given motion. (ECF No. 178-1, PageID.5832.) Instead, the clause contains broad
language covering “any” legal expenses “incident” to litigation caused by Rotondo. (Id.)
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costs and the $19,794.37 “associated with the interpleader case” but not expressly
classified under the “Federal Interpleader” subject matter. Considering the matter
resolved in favor of Plaintiffs, Plaintiffs are entitled to the total amount of fees Plaintiffs
account to this interpleader action, $234,079.24.
III. CONCLUSION
Plaintiffs have a right to indemnification for litigation caused by Rotondo’s
actions. The court, the parties, and the Sixth Circuit all agree. Plaintiffs may offset
attorney fees incurred as a result of Intervenor’s state court litigation and this lawsuit.
Although the IRS disputes the extent of compensation due, the court will grant Plaintiffs
request for $123,414.49 defending Intervenor’s state court claims against Plaintiffs,
$32,505.00 additional expenditures in state court, and $234,079.24 as a result of this
lawsuit. Plaintiffs may offset a total of $389,998.73. Accordingly,
IT IS ORDERED that Plaintiffs’ request for indemnification is GRANTED.
Plaintiffs may offset $389,998.73 in attorney fees.
It appears to the court that all outstating issues have now been resolved and the
case is ready to be closed. Thus, IT IS ORDERED that the parties are DIRECTED to
submit a proposed order of judgment, stipulated as to form, by May 1, 2020.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
/
Dated: April 24, 2020
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, April 24, 2020, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
(810) 292-6522
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