Caldwell Tanks, Inc. v. Haley & Ward, Inc.

United States Court of Appeals
For the First Circuit

No. 06-1697

CALDWELL TANKS, INC.,

Plaintiff, Appellee,

v.

HALEY & WARD, INC.,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Selya, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lynch, Circuit Judge.

Warren D. Hutchison, with whom David J. Hatem, Jeffrey W.
Hallahan, and Donovan Hatem, LLP were on brief, for Appellant.
Charles E. Schaub, Jr., with whom Hinckley, Allen & Snyder
LLP, Robert M. Connolly, Anne E. Gorham, Mark W. Leach, and Stites
& Harbison, PLLC were on brief, for Appellee.

December 8, 2006
 LYNCH, Circuit Judge. A federal jury ruled against

Caldwell Tanks, Inc., the builder of a water tank, in an action it

had instituted against Haley & Ward, Inc. (Haley), the engineer on

the water tank project. Haley had counterclaimed for

indemnification of its expenses in defending the action against

Caldwell, relying on a broadly worded indemnity agreement that ran

from Caldwell as builder, to both the water tank owner, the

Buzzards Bay Water District, and Haley as project engineer. The

jury, which had been properly instructed, found for Haley on the

counterclaim and awarded $175,000 to Haley, thus reimbursing Haley

for defense costs that indemnitor Caldwell had forced it to incur.

The district court vacated the jury verdict for Haley on

the counterclaim. See Caldwell Tanks, Inc. v. Tnemec Co., 417 F.

Supp. 2d 179, 182-83 (D. Mass. 2006). The court held as a matter

of law that under Massachusetts law there could be no indemnity

from Caldwell to Haley unless the agreement specified an express

intent to permit such indemnification in indemnitor-indemnitee

litigation. Id. at 182. The court also recognized that its

decision might well have been otherwise if Haley's defense costs

had been incurred in response to a third-party claim against Haley

for its work on the project. Id. at 182-83.

Haley appeals from the district court's judgment. To

date, there are no Massachusetts appellate court decisions

precisely on point. The question before us does not concern all

-2-
disputes between indemnitors and indemnitees. It is limited to

whether Massachusetts courts have adopted a rule that an indemnity

agreement must contain an express statement -- that the contract

governs costs and attorney's fees incurred by an indemnitee in

defense of unsuccessful claims brought by its indemnitor -- in

order to depart from the normal American rule that each party bears

its own attorney's fees in litigation, win or lose. See Alyeska

Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 257

(1975); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S.

714, 717 (1967).

We hold that Massachusetts has not adopted any such rule,

and so reverse. We have no need to address what special rules

Massachusetts might apply to the construction of indemnity

agreements in other fact settings.

I.

Pursuant to a contract dated August 29, 2000 (the

Contract), Caldwell served as the general contractor on a project

to construct a one-million-gallon elevated steel water tank for the

Buzzards Bay Water District in Buzzards Bay, Massachusetts.

Pursuant to a separate contract with the Water District, Haley

served as project engineer.

-3-
 On August 24, 2001, after the water tank had been

erected, Haley and the Water District, among others,1 attended a

"test patch meeting" to determine whether the tank was ready to be

painted. Tests performed at the meeting revealed the presence in

certain areas of a black substance between the raw steel of the

tank and the primer with which it had been coated. A number of

attendees stated that they believed the substance to be mill scale,

a substance that forms on steel during production, which Caldwell

should have removed and which would interfere with the adhesion of

the paint and primer to the tank. Thereafter, Haley stated to

Caldwell that the tank surface did not meet the Contract

specifications to which Caldwell had agreed. Haley requested that

Caldwell remove the black substance and reprime the tank before it

was painted. Eventually, Caldwell agreed to do so, without

admitting liability.

On September 10, 2003, Caldwell sued Haley for negligent

misrepresentation, claiming that Haley had failed to exercise

reasonable care in determining and communicating to the involved

parties that the black substance was mill scale.2 In essence,

1
Caldwell was represented at the meeting by a
subcontractor.
2
Caldwell also sued Tnemec Company, Inc., which supplied
the primer and other coatings specified in the Contract, Robert L.
Merithew, Inc., which served as paint inspector on the project, and
Righter Group, Inc., which during the project provided advice about
the Tnemec primer. Caldwell sued Tnemec for breach of contract,
breach of express and implied warranties, concealment and

-4-
Caldwell's suit alleged that the problem was not mill scale at all,

and was not Caldwell's fault. Caldwell's argument was that the

black substance had been caused by the primer that Haley had

required Caldwell to use, and that in any event the substance did

not compromise the integrity of the tank's surface coatings and

therefore did not need to be removed.

Haley asserted a counterclaim for indemnification of its

defense costs and any judgment rendered against it based on section

19.1 of the Contract, an indemnity clause that provides:

The CONTRACTOR [Caldwell] will indemnify and
hold harmless the OWNER [the Water District]
and the ENGINEER [Haley] and their agents and
employees from and against all claims,
damages, losses and expenses including
attorney's fees arising out of or resulting
from the performance of the Work, provided
that any such claims, damage, loss or expense
is attributable to bodily injury, sickness,
disease or death, or to injury to or
destruction of tangible property including the
loss of use resulting therefrom; and is caused
in whole or in part by any negligent or
willful act or omission of the CONTRACTOR, and
SUB-CONTRACTOR, anyone directly or indirectly
employed by any of them or anyone for whose
acts any of them may be liable.

The case was tried before a federal jury in the District

of Massachusetts. Both Caldwell and Haley moved for directed

verdicts. The motions were denied and the case was submitted to

nondisclosure, negligence, negligent misrepresentation, fraudulent
misrepresentation, fraudulent concealment, and selling a defective
product. It sued Merithew and Righter for negligent
misrepresentation.

-5-
the jury. The district court instructed the jury on the

indemnification counterclaim as follows:

[I]f you find that Haley & Ward is entitled to
indemnification from Caldwell, you must
determine how much that indemnification will
be. Pursuant to the contract, indemnification
is to include an amount for all claims,
damages, losses and expenses arising out of or
resulting from the Buzzards Bay project,
including attorney's fees.

Caldwell did not object to these instructions. The jury returned

a verdict for Haley as defendant on the negligent misrepresentation

claim and for Haley as claimant on the indemnification

counterclaim, and awarded Haley $175,000, the sum of its defense

costs, in expenses.3 The jury did not, of course, address the

question of whether if Caldwell had been successful in its suit

against Haley the Contract entitled Haley to indemnification.

Caldwell then moved under Rule 50(b) for a judgment

notwithstanding the verdict on Haley's indemnification

counterclaim, arguing that under Massachusetts law indemnity

clauses do not apply to inter se litigation unless they expressly

state otherwise.4 The district court allowed the motion. Caldwell

Tanks, 417 F. Supp. 2d at 183. The court concluded that "there is

3
The jury also found for defendants Tnemec, Merithew, and
Righter on all claims.
4
Caldwell also argued that Haley could not as a matter of
law recover the costs of defending itself against accusations of
its own wrongful acts or of establishing a right to indemnity, and
that Haley had failed to prove that Caldwell's claim was
indemnifiable.

-6-
no right to indemnification of claims between an indemnitor and

indemnitee unless the contract expressly contemplates such

entitlement." Id. at 182. It based this conclusion on its reading

of cases applying Massachusetts law and its own reasoning that

[w]here indemnification is sought in the
context of indemnitor-indemnitee litigation,
courts generally require that the provision
demonstrate a specific intent by the parties
that the indemnity operate in that context.
In this case, although the subject
indemnity is broad enough to encompass
indemnification of a claim brought by Caldwell
against Haley, the contract bears no explicit
indicia that the parties intended that
interpretation. Indeed, if the provision is
deemed to entitle Haley to indemnification of
claims brought by Caldwell, it would just as
likely also apply to opposing claims brought
by Haley against Caldwell, which would surely
violate the principle that a party seeking to
enforce its rights against a wrongdoer is
nevertheless responsible for its own
attorney's fees.

Id. The court in essence held that Massachusetts law has adopted

a rule that for an indemnification clause to apply in disputes

between indemnitors and indemnitees, the contract must bear

"explicit indicia" that the parties intended such an

interpretation. See id.

Haley appeals, arguing that Massachusetts law does not

require explicit language to enforce indemnity agreements in inter

se litigation, and that the indemnity clause of the Contract

permits the recovery of its costs in this case.

-7-
 II.

A district court may grant a Rule 50 motion only when

"after examining the evidence and all reasonable inferences

therefrom 'in the light most favorable to the nonmovant,' it

determines that 'the evidence could lead a reasonable person to

only one conclusion,' favorable to the movant." Aetna Cas. Sur.

Co. v. P & B Autobody, 43 F.3d 1546, 1556 (1st Cir. 1994) (quoting

Gallagher v. Wilton Enters., Inc., 962 F.2d 120, 124 (1st Cir.

1992)); see also Fed. R. Civ. P. 50(a)(1) ("If . . . a party has

been fully heard on an issue and there is no legally sufficient

evidentiary basis for a reasonable jury to find for that party on

that issue, the court may determine the issue against that party

and may grant a motion for judgment as a matter of law . . . .").

Since the court's ruling turned entirely on an issue of law, our

review is de novo. Alvarez-Fonseca v. Pepsi Cola of P.R. Bottling

Co., 152 F.3d 17, 23 (1st Cir. 1998) ("We review de novo a district

court's decision to grant a motion under Rule 50 for judgment as a

matter of law.").

Under Massachusetts law, where material facts are not in

dispute, interpretation of an indemnity clause is an issue of law.

Post v. Belmont Country Club, Inc., 805 N.E.2d 63, 67 (Mass. App.

Ct. 2004). True ambiguities, which may lead to questions of the

intent of the parties, may be resolved by a jury. Seaco Ins. Co.

v. Barbosa, 761 N.E.2d 946, 951 (Mass. 2002) ("Where . . . the

-8-
contract . . . has terms that are ambiguous, uncertain, or

equivocal in meaning, the intent of the parties is a question of

fact to be determined at trial."); Trafton v. Custeau, 155 N.E.2d

159, 161 (Mass. 1959) ("Where the terms of a written contract are

ambiguous, both parties may testify as to what they understood by

the terms of the contract when they executed it. The jury will

then determine what were its terms and apply the law to such facts

as they find comprised its terms."). "Contract language is

ambiguous where 'an agreement's terms are inconsistent on their

face or where the phraseology can support reasonable difference of

opinion as to the meaning of the words employed and obligations

undertaken.'" Post, 805 N.E.2d at 70 (quoting Fashion House, Inc.

v. K mart Corp., 892 F.2d 1076, 1083 (1st Cir.1989)). Although

neither party offered any direct evidence as to the parties'

intentions in executing the indemnification agreement, because the

issue was submitted to the jury, which ruled for Haley, we take it

that if there were any true ambiguity in the Contract, it has been

resolved in Haley's favor.

The indemnity clause on which Haley relies expressly

contemplates indemnification of litigation costs, including

attorney's fees. Nonetheless, Caldwell argues that indemnification

is inappropriate in this case because the clause does not expressly

provide for indemnification of costs incurred in the course of

-9-
inter se litigation. Caldwell argues that Massachusetts law

requires such specificity. We disagree.

In Shea v. Bay State Gas Co., 418 N.E.2d 597 (Mass.

1981), the Supreme Judicial Court rejected arguments that under

Massachusetts law contracts of indemnity should be (1) strictly

construed or (2) construed against the drafter. Id. at 600. Shea

held that even when the indemnity claim involves losses flowing

from the indemnitee's negligence, "something less than an express

reference in the contract to losses from the indemnitee's

negligence as indemnifiable will suffice to make them so if the

intent otherwise sufficiently appears from language and

circumstances." Id. (quoting Stern v. Larocca, 140 A.2d 403, 407

(N.J. Super. Ct. 1958)) (internal quotation marks omitted). Shea

also cited United States v. Seckinger, 397 U.S. 203 (1970), for the

proposition that "a clause that is intended to encompass

indemnification for the indemnitee's negligence . . . [need not]

explicitly state that indemnification extends to injuries

occasioned by the indemnitee's negligence." Shea, 418 N.E.2d at

600 (alteration in original) (quoting Seckinger, 397 U.S. at 213

n.17) (internal quotation marks omitted). The applicable rule of

construction is that "[c]ontract interpretation is largely an

individualized process, with the conclusion in a particular case

turning on the particular language used against the background of

other indicia of the parties' intention." Id. (alteration in

-10-
original) (quoting Seckinger, 397 U.S. at 213 n.17) (internal

quotation marks omitted).

Shea has been relied on more recently in Post, 805 N.E.2d

at 69, and Speers v. H.P. Hood, Inc., 495 N.E.2d 880 (Mass. App.

Ct. 1986). Speers held that "an indemnity provision is no longer

to be read with any bias in favor of the indemnitor and against the

indemnitee; it is to be interpreted like any ordinary contract,

with attention to language, background, and purpose." Id. at 881

(footnote omitted).

Massachusetts law also has not adopted a special rule

that requires that indemnity contracts be read as only applying to

third parties unless there is explicit language to the contrary.

See Hill v. Cabot, No. 91-0514-E, 1994 Mass. Super. LEXIS 419, at

*28 (Mass. Super. Ct. Oct. 27, 1994) ("A plain reading of the

Indemnification Agreement indicates that the indemnitor is

responsible for attorneys fees 'incurred in . . . defending against

any litigation . . . arising from . . . the failure of the Premises

to conform . . . with standards of environmental quality . . . .'

The agreement does not by its language, nor by implication, apply

only to suits brought by [a particular third party]." (omissions

in original) (footnote omitted)); cf. Whittle v. Pagani Bros.

Const. Co., 422 N.E.2d 779, 781 (Mass. 1981) ("[Indemnity]

contracts are to be fairly and reasonably construed to ascertain

the intention of the parties and to effectuate their purpose.");

-11-
N.Y., New Haven & Hartford R.R. Co. v. Walworth Co., 162 N.E.2d

789, 791 (Mass. 1959) ("Contracts of indemnity are to be fairly and

reasonably construed in order to ascertain the intention of the

parties and to effectuate the purpose sought to be accomplished."

(quoting Century Indem. Co. v. Bloom, 88 N.E.2d 906, 908 (Mass.

1949)) (internal quotation marks omitted)). As one court pointed

out nearly twenty years ago, there is nothing in the word

"indemnity" that limits it to third parties. Edward E. Gillen Co.

v. United States, 825 F.2d 1155, 1157 (7th Cir. 1987). That is

also true today. See Black's Law Dictionary 784 (8th ed. 2004)

(defining indemnity as "[a] duty to make good any loss, damage, or

liability incurred by another" (emphasis added)).

The district court here implicitly and correctly ruled

that the language of the Contract did not preclude indemnity

arising from non-third-party suits, see Caldwell Tanks, 417 F.

Supp. 2d at 182, and we agree. The language of section 19.1 of the

Contract is broad enough to encompass indemnity arising from suits

between the indemnitor and indemnitee.

The district court nonetheless reasoned that because of

the particular nature of inter se claims under indemnity clauses,

the "other indicia" referred to in Shea must always mean "explicit

indicia." Id. In some inter se indemnity situations there may be

public policy reasons why Massachusetts law might adopt such a

rule. For example, Massachusetts could decide that for public

-12-
policy reasons it wished to avoid results that led to indemnifying

a wrongdoer for his own negligence. There is some language in

Massachusetts law, perhaps in tension with Shea, that supports the

proposition that there must be express language to create such an

obligation. See Rathbun v. W. Mass. Elec. Co., 479 N.E.2d 1383,

1384 (Mass. 1985) ("The general rule is that there must be express

language creating an obligation to indemnify one against his own

negligence."). Even so, the Post court held that

"[i]ndemnification of a tortfeaser for damages caused by its own

negligence is not illegal, and is a question of the intent of the

parties." 805 N.E.2d at 70; see also Shea, 418 N.E.2d at 600-01.

Here, however, Haley's counterclaim did not ask that it

be reimbursed for sums expended to defend against a suit in which

its own negligence was established. Rather, its counterclaim was

that it be allowed to recover expenses incurred as a result of

Caldwell's suit against it, in which the jury found Haley not to

have been negligent.5 The district court relied heavily not on

Massachusetts appellate authority, but rather on Petit v. BASF

Corp., No. Civ.A. 96-1814A, 2001 Mass. Super. LEXIS 124 (Mass.

Super. Ct. Apr. 20, 2001), and one federal decision construing

state law, Astrolabe, Inc. v. Esoteric Techs. PTY, Ltd., No. Civ.A.

01-11352, 2002 U.S. Dist. LEXIS 5764 (D. Mass. Mar. 29, 2002). See

5
Consequently, Caldwell's argument that strict
construction of the indemnification clause is warranted because
Caldwell had no control over Haley's actions is without merit.

-13-
Caldwell Tanks, 417 F. Supp. 2d at 182. But those cases were the

reverse of this one; there, the indemnitees sought to recover their

own self-inflicted costs incurred in prosecuting affirmative claims

against an indemnitor.6 See Astrolabe, 2002 U.S. Dist. LEXIS 5764,

at *14-15; Petit, 2001 Mass. Super. LEXIS 124, at *2. Moreover, in

Astrolabe, the contract itself indicated that the indemnity clause

was to apply only to suits by third parties. See 2002 U.S. Dist.

LEXIS 5764, at *15-16. In the situation exemplified by those

cases, the indemnitor has strong arguments that it should not be

required to reimburse attorney's fees, over which it had no

control, for suits against it by an indemnitee.

The question here comes down to whether Massachusetts has

adopted a rule that as a matter of law an indemnity contract cannot

reshape the American rule in a dispute between indemnitor and

indemnitee absent an express statement to that effect. But it is

well accepted under Massachusetts law that parties may alter the

American rule by contract. See, e.g., Whittle, 422 N.E.2d at 781;

Shea, 418 N.E.2d at 600. The Contract here explicitly allowed for

6
In its brief, Caldwell also relies on Grant v. Hexalon
Real Estate, Inc., No. 91-5338-D, 1997 Mass. Super. LEXIS 366
(Mass. Super. Ct. Sept. 15, 1997), rev'd, 748 N.E.2d 1056 (Mass.
App. Ct. 2001), and Shan Indus., LLC v. Tyco Int'l (US), Inc., Civ.
No. 04-1018, 2005 U.S. Dist. LEXIS 30170 (D.N.J. Nov. 30, 2005),
two unpublished decisions applying Massachusetts law to determine
whether indemnity clauses applied to inter se lawsuits. Like Petit
and Astrolabe, both Grant and Shan involved indemnification for the
cost of claims brought by the indemnitee against the indemnitor,
see id. at *24; Grant, 1997 Mass. Super. LEXIS 366, at *7, and are
therefore not analogous to the case before us.

-14-
recovery of defense costs, including attorney's fees.7 It is

equally well accepted under Massachusetts law that indemnification

provisions are construed in accordance with their ordinary and

plain meaning and without any bias in favor of the indemnitor or

against the indemnitee. See, e.g., Herson v. New Boston Garden

Corp., 667 N.E.2d 907, 911 (Mass. App. Ct. 1996); Kelly v. Dimeo,

Inc., 581 N.E.2d 1316, 1318 (Mass. App. Ct. 1991).

To bolster its argument, Caldwell cites to FDIC v.

Fedders Air Conditioning, USA, Inc., 821 F. Supp. 50 (D. Mass.

1993), rev'd in part on other grounds, 35 F.3d 18 (1st Cir. 1999),

a case applying Illinois law, and Hooper Assocs. Ltd. v. AGS

Computers, Inc., 548 N.E.2d 903 (N.Y. 1989), and Bertaux v. Dreyfus

Trust Co., Civ. A. No. 99-10815, 2002 U.S. Dist. LEXIS 4077 (D.

Mass. Mar. 12, 2002), cases applying New York law, for the

proposition that indemnity for inter se litigation should not be

inferred unless explicitly provided for in the contract. We apply

Massachusetts law.8

7
Caldwell makes much of the rule that "[a] contract should
be construed to give it effect as a rational business instrument."
Lewis v. Chase, 505 N.E.2d 211, 214 (Mass. App. Ct. 1987).
Construing the indemnity clause to allow for indemnification in
this case, as the jury did here, is not irrational.
8
To the extent Caldwell cites to FDIC, Hooper, and Bertaux
because they were relied upon by courts applying Massachusetts law
in Grant, Petit, and Shan, we have already explained that those
cases are inapposite.

-15-
 Federal courts sitting in diversity jurisdiction are

constrained in their interpretation of state law. See Douglas v.

York County, 433 F.3d 143, 149 (1st Cir. 2005) ("As a federal court

sitting in diversity, we try to apply our best understanding of the

principles Maine has adopted. It is not our role to expand Maine

law; that is left to the courts of Maine."); Ryan v. Royal Ins. Co.

of Am., 916 F.2d 731, 744 (1st Cir. 1990) ("We have warned, time

and again, that litigants who reject a state forum in order to

bring suit in federal court under diversity jurisdiction cannot

expect that new trails will be blazed."). We lack the authority to

establish for Massachusetts new special rules for shifting defense

costs under inter se indemnity contracts like this. Massachusetts

law imposes no explicit statement rule for indemnity contracts

generally, or for varying the American rule, and contains no

assumption that indemnity provisions are restricted to third-party

claims. Against that background, we will not fashion a new rule.

We hold that the district court erred.

III.

Caldwell makes four other arguments, any one of which, if

valid, could support the district court's judgment on other

grounds. We discuss each briefly.

Caldwell relies on section 6.33 of the Contract and

Article 16 of the General Condition and Supplementary Conditions to

argue that the Contract as a whole precludes reading section 19.1

-16-
to apply to disputes between Caldwell and Haley. Section 6.33

provides:

The indemnification obligations of CONTRACTOR
[Caldwell] . . . shall not extend to the
liability of ENGINEER [Haley] and ENGINEER's
Consultants, officers, directors, employees or
agents caused by the professional negligence,
errors or omissions of any of them.

This, Caldwell argues, expresses an intent to specifically exclude

claims against the Engineer for professional negligence from

indemnification. Article 16 requires that all claims between

Caldwell and the Water District (also an indemnified party) be

resolved by arbitration. If the indemnification clause were read

to apply inter se, Caldwell argues, Article 16 would be rendered

meaningless. The issue was not argued to the trial court, and it

is waived. See States Res. Corp. v. The Architectural Team, Inc.,

433 F.3d 73, 85 (1st Cir. 2005) ("[I]ssues not presented to the

district court cannot be raised on appeal." (quoting Ouimette v.

Moran, 942 F.2d 1, 12 (1st Cir. 1991)) (internal quotation marks

omitted)); Violette v. Smith & Nephew Dyonics, Inc., 62 F.3d 8, 11

(1st Cir. 1995) ("An issue not presented to the trial court may not

be raised for the first time on appeal.").

Caldwell also argues that judgment notwithstanding the

verdict should enter on the basis that its claim against Haley --

one of negligent misrepresentation -- was not an indemnifiable

claim. Caldwell made its argument to the district court in its

-17-
Rule 50 motion for judgment as a matter of law. The district court

did not address the argument directly, but did state that "the same

claim brought under a different procedural posture might be

indemnifiable." Caldwell Tanks, 417 F. Supp. 2d at 182.

We reject Caldwell's argument. In finding for Haley on

its counterclaim, the jury must necessarily have concluded that

Caldwell's claim was indemnifiable. A reasonable jury could have

found that Caldwell's claim met all three of the contractual

requirements for indemnification: that the claim and the resulting

attorney's fees arose out of Caldwell's work on the Buzzards Bay

Water Tank; that the claim was attributable to injury of tangible

property, notably the water tank itself;9 and that the damage to

the water tank resulted from Caldwell's negligence. There was

ample evidence to that effect at trial, including testimony and

questionnaires indicating that the black substance was mill scale

that Caldwell should have removed, and various reports from

independent laboratories confirming as much. A reasonable person

could have concluded, as the jury did, that Caldwell's negligent

misrepresentation claim was indemnifiable under the Contract. See

Aetna Cas. Sur. Co., 43 F.3d at 1556.

9
Although the claim was for negligent misrepresentation,
rather than for negligent conduct that actually caused the damage,
the dispute essentially was about whether there was damage and, if
so, who should bear responsibility for the damage, and in that
sense, it would have been reasonable to conclude that the claim was
attributable to the damage.

-18-
 Caldwell argues that even if its negligent

misrepresentation claim was subject to the indemnification clause,

Haley failed to prove its counterclaim because the jury made no

finding that Caldwell was negligent, and the evidence was

insufficient. The argument, which arguably was preserved, fails.

To award defense costs to Haley, the jury must necessarily have

found that Caldwell was liable under the indemnity agreement. As

we have just noted, drawing all reasonable inferences from the

evidence in the light most favorable to Haley, such a finding was

reasonable.

Finally, Caldwell argues that Haley failed to apportion

its attorney's fees to exclude those incurred in establishing its

right to indemnity. This argument was properly preserved, but it

is without merit. Caldwell cites the general rule that "[a] claim

for attorney's fees and costs under an indemnification agreement

does not extend to costs incurred in establishing the right of

indemnity." 41 Am. Jur. 2d Indemnity § 30 (2006). But here, Haley

seeks to recover its costs for defending against Caldwell's

negligent misrepresentation claim. Haley's defense to Caldwell's

claim and its proof of its counterclaim were co-extensive. That

defending itself against Caldwell's claim necessarily served to

prove its counterclaim, and therefore its right to indemnity, does

not transform Haley's attorney's fees -- or any portion thereof --

from indemnifiable into non-indemnifiable expenses.

-19-
 The judgment of the district court is reversed, and the

case is remanded with instructions to reinstate the verdict of the

jury.10 Costs are awarded to Haley.

10
Haley has indicated that it will seek indemnification of
its attorney's fees for this appeal. That issue should be directed
to the district court for consideration.

-20-