HomeStar Property Solutions, LLC v. Safeguard Properties, LLC et al
Filing
254
ORDER granting in part 166 Motion for Summary Judgment; granting 171 Motion for Summary Judgment(Written Opinion) Signed by Judge Susan Richard Nelson on 2/6/2019. (ACT)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
HomeStar Property Solutions, LLC,
Case No. 14-cv-4531 (SRN/DTS)
Plaintiff,
v.
Safeguard Properties, LLC, and Bank of
America, N.A.,
Defendants,
MEMORANDUM OPINION
AND ORDER
and
Safeguard Properties, LLC,
Counterclaim Plaintiff,
v.
HomeStar Property Solutions, LLC,
Counterclaim Defendant.
Andrew D. Parker, Anthony G. Edwards, Christopher M. Daniels, and Russell M. Spence,
Jr., Parker Daniels Kibort LLC, 123 North Third Street, Suite 888, Minneapolis, MN
55401, and Todd C. Pearson, Pearson Law Office, 601 Carlson Parkway, Suite 1050,
Minnetonka, MN 55305 for Plaintiff and Counterclaim Defendant.
Joseph J. Santoro and Markus E. Apelis, Gallagher Sharp, Sixth Floor Buckley Building,
1501 Euclid Avenue, Cleveland, OH 4115, and Brian A. Wood, Lind Jensen Sullivan &
Peterson, PA, 901 Marquette Ave South, Suite 1300, Minneapolis, MN 55402 for
Defendants and Counterclaim Plaintiff.
SUSAN RICHARD NELSON, United States District Judge
This is a complicated commercial litigation matter between two businesses that
“preserve properties” on behalf of banks while those properties are in foreclosure:
Plaintiff Homestar Property Solutions LLC (hereinafter “Homestar”) and Defendant
Safeguard Properties LLC (hereinafter “Safeguard”). Homestar, which served as an
independent contractor for Safeguard for approximately two years, accuses Safeguard of
failing to pay it (and/or underpaying it) for services it provided, thereby causing it to fall
behind on its bills and, eventually, go out of business. Safeguard adamantly rejects this
narrative, and, in turn, accuses Homestar of failing to abide by the companies’ contract
regarding mechanics’ liens, which it alleges caused it to incur damages.
After years of on-and-off again discovery, punctuated by a final settlement and
judgment that was later vacated (see generally Doc Nos. 127-54), Safeguard moved for
summary judgment on the following claims: (1) Homestar’s breach of contract claim; (2)
Homestar’s unjust enrichment claim; (3) Homestar’s promissory estoppel claim; (4)
Homestar’s account stated claim; and (5) Safeguard’s breach of contract counterclaim
against Homestar. (See Safeguard’s Br. in Support of Summ. J. [Doc. No. 163]
(“Safeguard Primary Br.”); Safeguard’s Br. in Support of Summ. J. on its Counterclaim
[Doc. No. 168] (“Safeguard Counterclaim Br.”).) In addition, Bank of America, also
represented by Safeguard’s counsel, per an indemnification agreement between the two
companies, moved for summary judgment on (6) Homestar’s solo unjust enrichment
claim against it. (See Bank of America’s Summ. J. Br. [Doc. No. 173] (“BANA Br.”); see
id. at n.7 (noting this indemnification agreement).) Homestar opposed all of these
motions. (See Homestar’s Br. in Opp. to Summ. J. [Doc. No. 189] (“Homestar Primary
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Opp. Br.”); Homestar’s Br. in Opp. to Counterclaim Summ. J. [Doc. No. 207]
(“Homestar Counterclaim Opp. Br.”); Homestar’s Br. in Opp. to Bank of America
Summ. J. [Doc. No. 209] (“Homestar BANA Opp. Br.”).)1
On September 20, 2018, following an extensive oral argument on Safeguard’s
primary summary judgment motion (i.e., counts 1-4 listed above), the Court denied
summary judgment from the bench. (See Sept. 20, 2018 Minute Entry [Doc. No. 223].)
The Court then took Safeguard’s counterclaim summary judgment motion and Bank of
America’s unjust enrichment summary judgment motion under advisement (i.e., counts
5-6 listed above), to be decided on the papers. (Id.)2
In an effort to streamline this case as the parties prepare for trial, the Court will
now render its decision on the latter two motions; a written decision further explaining
the Court’s denial of Safeguard’s primary summary judgment motion will be issued in
due course. As detailed below, the Court grants in part Safeguard’s motion seeking
summary judgment on its counterclaim, and grants in whole Bank of America’s motion
seeking summary judgment on Homestar’s unjust enrichment claim. The Court will
discuss each motion in turn.
I.
Safeguard’s Breach of Contract Counterclaim Against Homestar
1
Safeguard and Bank of America also filed reply briefs. (See Safeguard Primary
Reply Br. [Doc. No. 215]; Safeguard Counterclaim Reply Br. [Doc. No. 217]; BANA
Reply Br. [Doc. No. 219].)
At this hearing, the Court also set this case for trial on the Court’s January 14,
2019 trial calendar. However, due to settlement negotiations and scheduling difficulties,
the Court subsequently postponed trial until May 6, 2019. (See Doc. No. 252.)
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A. Background
As the primary summary judgment briefing demonstrates, the parties dispute
arguably hundreds of discrete billing records and fees. The Court need not recount that
history in deciding this motion, though, because Safeguard’s breach of contract
counterclaim centers around a much narrower issue: Homestar’s contractual
responsibilities with respect to mechanics’ liens.
In short, Safeguard began contracting with Homestar in 2012; Homestar provided,
“on an as-needed basis, repair and construction services for residential properties in
repair as part of the property preservation process associated with foreclosed properties.”
(Safeguard Counterclaim Br. at 3.) Homestar, in turn, often contracted out its work to
subcontractors. (See Safeguard Ex. B [Doc. No. 169-3] at 21 (“Breese Dep.”).) As
Safeguard’s independent contractor, Homestar agreed to abide by various contractual
provisions, with respect to both its own conduct and its sub-contractors’ conduct. (See
Safeguard Ex. C [Doc. No. 169-4] (“Vendor Acknowledgement Forms”); Breese Dep. at
147-49 (agreeing that he signed these contracts on behalf of Homestar after reading them
beforehand).)
Two contractual provisions are of note here. First, Homestar agreed to waive its
right “to claim any liens, including mechanic’s liens, against any property (or
improvements thereon),” upon which it worked, and also agreed to “obtain a Lien Waiver
from all of [its] subcontractors who [it] hire[d] to perform work for Safeguard on [its]
behalf.” (Id. (the “Lien Waiver Provision”).) Second, Homestar agreed to indemnify
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Safeguard against “all claims, liabilities, costs and expenses, including, without
limitation, litigation costs, attorney’s fees, settlement costs, judgments, taxes, interest,
penalties or fines, resulting from and including,” it or its subcontractors’ “placing a lien
on any property for which they performed work on behalf [of] Safeguard.” (Id. (the “Lien
Indemnification Provision”).)
Despite these provisions, in mid-2014, Homestar filed mechanics’ liens on 493
different properties, spread across 15 states: Alabama, Connecticut, Florida, Georgia,
Idaho, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Minnesota, New York, Ohio,
Pennsylvania, and Texas. (See Safeguard Ex. D [Doc. No. 169-5] (“Homestar Liens”)
(attaching copies of all 49 liens); Breese Dep. at 150-51 (admitting that Homestar filed
these liens, in knowing violation of the contract).) Homestar did this because it believed
that Safeguard had “failed to timely pay” it with respect to work Homestar performed on
those properties. (See Michael Breese Aff. in Opp. to Safeguard Counterclaim [Doc. No.
206] ¶ 4 (“Breese Aff.”).) Homestar later withdrew these liens after Safeguard filed the
at-issue counterclaim, in an effort “to be cooperative.” (Breese Dep. at 150.)
Importantly, however, Homestar was not the only entity to file, or threaten to file,
mechanics’ liens on properties connected to Safeguard’s work. 16 of Homestar’s
subcontractors also filed, or threatened to file, mechanics’ liens on properties in eight
different states: Alabama, Florida, Georgia, Maryland, Minnesota, New Hampshire,
Ohio, and Wisconsin. (See Meyer Aff. in Support of Safeguard Counterclaim [Doc. No.
3
Although Safeguard initially stated that Homestar filed 45 liens, it later clarified
that it meant 49 liens. (See Safeguard Counterclaim Reply Br. at 3 n.1.)
5
169-1] ¶¶ 8-11 (“Meyer Aff.”).) The subcontractors did this because Homestar was not
paying them. (Id. ¶ 8.) Although Safeguard’s records showed that it had fully paid
Homestar for the work associated with the subcontractors’ complaints, Safeguard
nonetheless paid the 16 subcontractors $203,401.73, over 22 payments, “to avoid
significant disputes with Safeguard’s own clients as a result of improperly placed
mechanics’ liens.” (Id. ¶ 9; see also Safeguard Ex. 1 [Doc. No. 169-2] (“Subcontractor
Payments”) (showing copies of each check that Safeguard paid).) Homestar disputes that
Safeguard “paid Homestar in full for the work which [was] the subject of the mechanics’
liens filed by Homestar’s subcontractors.” (Breese Aff. ¶ 8; but see Meyer Supp. Aff. in
Support of Safeguard Counterclaim [Doc. No. 218-1] (providing a detailed chart showing
that Safeguard paid Homestar in full for the work performed on the at-issue properties,
with the exception of one $913.75 payment).)
B. Discussion
A court may grant a party summary judgment if there are no disputed issues of
material fact and the moving party is entitled to judgment as a matter of law. See Fed. R.
Civ. P. 56(a). In considering a summary judgment motion, the Court must “view[] the
evidence in the light most favorable to the nonmoving party.” Grinell Mut. Reinsurance
Co. v. Schwieger, 685 F.3d 697 (8th Cir. 2012). However, a party opposing summary
judgment “‘must set forth specific facts showing that there is a genuine issue for trial,’
and ‘must present affirmative evidence in order to defeat a properly supported motion for
summary judgment.’” Ingrassia v. Schafer, 825 F.3d 891, 896 (8th Cir. 2016) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57 (1986)).
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To prevail on a breach of contract claim under Minnesota law, a party must show:
“(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to
his right to demand performance by the defendant, and (3) breach of the contract by
defendant.” Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co., 848 N.W.2d 539, 543
(Minn. 2014). However, if a contract violates the law of a state, it is void against public
policy. See United Steelworkers of Am., Local 6115 v. Quadna Mountain Corp., 435
N.W.2d 120, 122 (Minn. Ct. App. 1989) (noting that, “[i]f a contract transgresses law or
public policy, it is void,” and that “the legislature may set the public policy of the state
through statute”). Moreover, Minnesota courts will not “enforce an indemnification
agreement if it is contrary to public policy.” Yang v. Voyagaire Houseboats, Inc., 701
N.W.2d 783, 791 (Minn. 2005); see also Zerby v. Warren, 210 N.W.2d 58, 64
(1973) (concluding that an indemnity agreement that seeks to relieve a party of the
consequences of a violation of a public duty imposed by statute is void).
As an initial matter, the contract’s Lien Waiver Provision is unenforceable in
Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts,
Minnesota, and New York. (See Homestar Counterclaim Opp. Br. at 6-8 (gathering
citations showing that mechanic lien waivers are prohibited by statute in those states);
Safeguard Counterclaim Reply Br. at 2-3 (conceding this point).)4 Therefore, Homestar
In Minnesota, for example, Minn. Stat. § 337.10, subd. 2, states that “[p]rovisions
contained in, or executed in connection with, a building and construction contract
requiring a contractor, subcontractor, or material supplier to waive the right to a
mechanics lien or to a claim against a payment bond before the person has been paid for
the labor or materials or both that the person furnished are void and unenforceable.”
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did not breach the contract merely by filing mechanics’ liens for purportedly missing
payments on the properties situated in those ten states. Similarly, the Court cannot require
Homestar to indemnify Safeguard for any attorneys’ fees or costs it incurred with respect
to liens filed by Homestar or Homestar’s subcontractors in those ten states; to do so
would be to relieve Safeguard of the consequences of its illegal contract. See Zerby, 210
N.W.2d at 64. This principle holds true even though Safeguard arguably only paid
Homestar’s subcontractors to maintain good business relations, rather than to fulfill debts
that Safeguard actually owed. (See Meyer Aff. ¶ 9.)5
That said, Homestar undoubtedly breached the contract’s Lien Waiver Provision
when it and/or its subcontractors filed mechanics’ liens on properties located in Alabama,
Idaho, Iowa, New Hampshire, Ohio, Pennsylvania, Texas, and Wisconsin, as those states
do allow parties to contract away their right to file a mechanic’s lien. (See Homestar
Counterclaim Opp. Br. at 7-8 (conceding this point).) This distinction matters because,
although the contract was signed in Minnesota, mechanics’ liens are governed by the law
of the state where the property is located (and hence where the contract is being
performed). See Nat. Glass, Inc. v. J.C. Penny Props., Inc., 336 Md. 606, 612 (Md. Ct.
App. 1994) (“Generally, the law of the state where the real property is located governs
the creation of a mechanic’s lien.”) (citing 2 Joseph H. Beale, A Treatise on the Conflict
Yang and Zerby preclude the Court from adopting Safeguard’s argument that the
Lien Waiver Provision and Lien Indemnification Provision are two entirely separate
issues, and that Homestar can be held liable for breaching the Lien Indemnification
Provision even if Homestar did not breach the (void against public policy) Lien Waiver
Provision. (See Safeguard Counterclaim Reply Br. at 4.) As the Court sees it, the two
provisions are inextricably intertwined.
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of Laws, § 230.1, at 949). Accordingly, with respect to properties in those states,
Homestar is contractually obligated to indemnify Safeguard for both the attorneys’ fees
Safeguard incurred in forcing Homestar to remove its own liens, as well as the costs
Safeguard incurred when it paid Homestar’s subcontractors to remove their liens. Based
on the parties’ submissions, it appears that 26 of Homestar’s liens were filed in lienwaivable states, and that Safeguard paid $60,187.39 to subcontractors to remove liens in
lien-waivable states.6
In response, Homestar argues that Safeguard breached its initial obligation of
payment first, and thereby relieved Homestar (and its subcontractors) of their contractual
duty to refrain from filing mechanics’ liens. See MTS Co. v. Taiga Corp., 365 N.W.2d
321, 327 (Minn. Ct. App. 1985) (“A rule in the law of contracts is that a party cannot
raise to its advantage a breach of contract against another party when it has first breached
the contract itself.”). The problem with this defense is that Homestar has not provided
any particularized evidence from which a reasonable juror could conclude that Safeguard
did, in fact, breach its contractual duties with respect to work Homestar and/or its
subcontractors performed on the at-issue properties. As the supplemental affidavit of
Steve Meyer’s demonstrates, Safeguard has accounted for every work order related to an
6
The Court found this number by adding together the checks listed in Safeguard’s
Exhibit 1 (Doc. No. 169-2) that were issued to a subcontractor based in a lien-waivable
state. Specifically, the Court added together checks payable to “Pyramid Services LLC”
in Wisconsin ($10,940), “Ward & Wilson LLC” in Alabama ($3,160), “Joseph Anthony”
in Texas ($16,859.39), “David Huffman” in Ohio ($16,000), FBG Construction in Texas
($11,278), and “Peniel Environmental” in New Hampshire ($1,950). However, as the
Court notes below, it will give Safeguard an opportunity to correct the Court’s
accounting, if necessary.
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at-issue lien, and has shown that it either paid Homestar’s invoice in full, or paid
Homestar the appropriate amount due under the parties’ contract. (See Doc. No. 218-1.)
Homestar does not point to evidence to the contrary, much less “specific facts” to the
contrary. Ingrassia, 825 F.3d at 896. Indeed, in contrast to Mr. Meyer’s detailed affidavit
for Safeguard, Mr. Breese’s affidavit merely offers generalized defenses that Safeguard
“did not timely pay Homestar,” and therefore materially breached the parties’ contract.
(See Breese Aff. ¶¶ 4, 8.) Suffice it to say, that is not enough to send Safeguard’s
counterclaim to the jury.7
For these reasons, the Court grants Safeguard’s motion for summary judgment in
part. Safeguard must file an affidavit listing the specific costs it believes it is entitled to
under this Order. Moreover, at a future date the Court will entertain a motion for
reasonable attorneys’ fees in accordance with this Order and the Court’s bifurcation
schedule, if necessary. (See Feb. 3, 2016 Bifurcation Order [Doc. No. 85].)
This is different than Homestar’s primary summary judgment opposition and
accompanying oral argument, where it at least pointed to several examples of specific
work orders that it disputed. (See, e.g., Homestar Primary Opp. Br. at 10-19.) Here, Mr.
Meyer’s chart lists the following work orders related to at-issue liens: A-006, A-087, A098, D-079, E-011, F-010. (See Doc. No. 218-1; see also Safeguard Ex. A-2 [Doc. Nos.
164-4 to 164-9] (detailing Safeguard’s accounting for the 578 work orders at issue in this
litigation).) However, nowhere in Homestar’s briefing – whether in opposition to this
motion or in opposition to Safeguard’s primary summary judgment motion – does
Homestar raise a factual dispute as to Safeguard’s analysis of these specific work orders.
Similarly, Homestar only offers generalized disputes to the work orders listed by
Mr. Meyers as “not included on Homestar’s AR [Accounts Receivable] Spreadsheet,”
which is the spreadsheet underlying this entire litigation. (See, e.g., Homestar Primary
Opp. Br. at 9-10 (summarily asserting that Homestar may also be entitled to damages for
improperly-paid work orders not included on the AR spreadsheet); see also Safeguard
Ex. A-1 [Doc. No. 164-2] (“AR Spreadsheet”).)
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II.
Homestar’s Unjust Enrichment Claim Against Bank of America
A. Background
Although this dispute primarily centers around Safeguard and Homestar, Bank of
America plays a part in this matter as well. Bank of America (“BANA”) hired Safeguard
to conduct “property preservation” for properties that BANA serviced (or owned through
foreclosure), and Safeguard, in turn, hired Homestar. (See Jacqueline Bailey Aff. [Doc.
No. 174-1] (“Bailey Aff.”); see also Homestar BANA Opp. Br. at 5 (noting that, “of the
578 projects in dispute in this case, no fewer than 339” were BANA-serviced
properties).) Payment between the three entities worked as follows: (1) Homestar would
send Safeguard an invoice; (2) Safeguard would review the invoice and adjust it pursuant
to the parties’ contract (if necessary, and sometimes in a manner disputed by Homestar),
and pay Homestar accordingly; (3) Safeguard would then invoice BANA the amount of
the adjusted invoice; and (4) BANA would pay Safeguard in accordance with that
invoice. (See Meyer Supp. Aff. in Support of BANA Summ. J. Motion [Doc. No. 220] ¶¶
5-8 (“Meyer Supp. Aff.”); Meyer Dep. [Doc. No. 210-1] at 25-26.)
Although Homestar contends that Safeguard has not paid it in full, it is essentially
undisputed that BANA has “paid Safeguard for the work invoiced, [and] no payments
remain due to Safeguard [from BANA] with respect to work performed by Homestar.”
(Bailey Aff. ¶ 4; accord Meyer Dep. at 25; Breese Dep. [Doc. No. 174-3] at 62-63
(admitting that he has no personal knowledge that BANA has not paid Safeguard in
full).) It is also not disputed that Safeguard is contractually required to indemnify BANA
for any costs related to this litigation. (See Bailey Aff. ¶ 3.)
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On these facts, Homestar brought a one-count claim of unjust enrichment against
BANA.
B. Discussion
As the Court noted above, a court may grant a party summary judgment if there
are no disputed issues of material fact and the moving party is entitled to judgment as a
matter of law. See Fed. R. Civ. P. 56(a). In considering a summary judgment motion, the
Court must “view[] the evidence in the light most favorable to the nonmoving party.”
Grinell Mut. Reinsurance Co., 685 F.3d 697. However, a party opposing summary
judgment “‘must set forth specific facts showing that there is a genuine issue for trial,’
and ‘must present affirmative evidence in order to defeat a properly supported motion for
summary judgment.’” Ingrassia, 825 F.3d at 896.
“In Minnesota, to state a claim for unjust enrichment, ‘the claimant must show that
the defendant has knowingly received or obtained something of value for which the
defendant in equity and good conscience should pay.’” Luckey v. Alside, Inc., 245 F. Supp.
3d 1080, 1099 (D. Minn. 2017) (quoting ServiceMaster of St. Cloud v. GAB Bus. Servs.,
Inc., 544 N.W.2d 302, 306 (Minn. 1996)). This law operates in conjunction with Minnesota
law barring plaintiffs from obtaining a “double recovery.” Howard v. Frondell, 387 N.W.2d
205, 208 (Minn. Ct. App. 1986) (holding that an “unjust enrichment” claim failed because
“[t]here can be no double recovery”).
Homestar’s unjust enrichment claim fails at summary judgment. First, Homestar
has not pointed to any facts showing that BANA “knowingly received” services from
Homestar for which BANA “in equity and good conscience should pay.” Luckey, 245 F.
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Supp. 3d at 1099. The record shows that BANA paid Safeguard the amounts that
Safeguard invoiced it in full, and did not play any role in the disputed “adjusted invoices”
that comprise the heart of this litigation.8
Moreover, given the relationship between the three parties, allowing Homestar’s
claim against BANA to advance would add nothing to this litigation, and could only
result in Homestar receiving an inappropriate double recovery. As BANA helpfully
explained in its reply brief:
Whether Safeguard properly adjusted Homestar’s invoices pursuant to their
separate contract is irrelevant to Homestar’s claim against [BANA]. If Safeguard
improperly adjusted Homestar’s invoices, liability lies with Safeguard, not
[BANA]. If, on the other hand, Safeguard properly reduced Homestar’s invoices
for Homestar’s failure to adhere to the parties’ contractual and industry guidelines
[as discussed in Safeguard’s primary summary judgment motion], Homestar has
no claim against [BANA] as a matter of law because no additional payments are
owed. In either instance, [BANA] is not liable to Homestar.
(BANA Reply Br. at 2-3.)
The Court finds this argument compelling. Further, because Safeguard is contractually
obligated to indemnify BANA for any costs related to this litigation, granting summary
judgment to BANA on this unjust enrichment claim does not prejudice Homestar’s
claims against Safeguard. (See BANA Br. at 10 n.7.)
For these reasons, the Court grants BANA’s motion for summary judgment.
8
Although Homestar argues in its brief that BANA has not sufficiently shown what
it meant by “paid Safeguard in full,” (see Homestar BANA Opp. Br. at 5-7), this
argument is not supported by any evidence that would cast BANA and Safeguard’s
unequivocal affidavits into doubt. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986) (“When the moving party has carried its burden
under Rule 56(c), its opponent must do more than simply show that there is some
metaphysical doubt as to the material facts.”).
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III.
CONCLUSION
Based on the submissions and the entire file and proceedings herein, IT IS
HEREBY ORDERED that Defendant Safeguard Properties’ Motion for Summary
Judgment on its Breach of Contract Counterclaim Against Plaintiff Homestar Property
Solutions is GRANTED IN PART, and that Defendant Bank of America’s Motion for
Summary Judgment is GRANTED.
Within 14 days of this Order, Safeguard must file an affidavit detailing the costs it
believes it is entitled to under this Order.
The Court will consider a motion for an award of Safeguard’s reasonable
attorneys’ fees at a later date, in accordance with this Order and the Court’s bifurcation
schedule.
Dated: February 6, 2019
__/s/ Susan Richard Nelson___
SUSAN RICHARD NELSON
United States District Judge
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