United States Court of Appeals
For the First Circuit
No. 03-2356
BYRON A. CROWE,
Plaintiff, Appellee,
v.
J.P. BOLDUC,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. David M. Cohen, U.S. Magistrate Judge]
Before
Selya, Circuit Judge,
Stahl, Senior Circuit Judge,
and Lynch, Circuit Judge.
Michael J. Gartland, with whom Lee H. Bals and Marcus, Clegg
& Mistretta, P.A. were on brief, for appellant.
John M.R. Paterson, with whom Jennifer D. Sawyer and
Bernstein, Shur, Sawyer & Nelson were on brief, for appellee.
April 22, 2004
SELYA, Circuit Judge. This is, as Yogi Berra might say,
déjà vu all over again. Not long ago, we affirmed a verdict
awarding plaintiff-appellee Byron A. Crowe $86,381.98 in his
indemnity action against defendant-appellant J.P. Bolduc. Crowe v.
Bolduc, 334 F.3d 124 (1st Cir. 2003) (Crowe II). Flush from his
appellate triumph, Crowe repaired to the district court and
successfully petitioned for incremental awards of prejudgment
interest and attorneys' fees. Bolduc challenges both awards.
The prejudgment interest issue requires us to revisit
prior circuit precedent, specifically, Aubin v. Fudala, 782 F.2d
287 (1st Cir. 1986). Aubin held that the proper vehicle for the
initial assessment of mandatory prejudgment interest, wholly
omitted from an earlier judgment, is a motion to correct the
judgment pursuant to Fed. R. Civ. P. 60(a) rather than a motion to
alter or amend the judgment pursuant to Fed. R. Civ. P. 59(e). Id.
at 290. Recognizing that an intervening Supreme Court decision has
undermined Aubin's resolution of this point, we overrule that
determination and hold that, in such circumstances, resort should
be made to Rule 59(e).1 However, since Crowe justifiably relied
1
Following the procedure described in Gallagher v. Wilton
Enterprises, Inc., 962 F.2d 120, 124 n.4 (1st Cir. 1992) (per
curiam), the proposed panel opinion in this case has been
circulated to all active judges of the court prior to publication,
and none has interposed an objection to the panel's overruling of
Aubin. We caution that this procedure does not convert this
opinion to an en banc decision nor does it preclude a suggestion of
rehearing en banc on any issue in the case, whether or not related
to the panel's treatment of Aubin.
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upon, and faithfully followed, existing circuit precedent, we
direct that this holding operate in a purely prospective fashion.
Consequently, we affirm the award of prejudgment interest even
though Crowe failed to file his motion within the ten-day period
delineated in Rule 59(e).
The remaining question involves Crowe's entitlement vel
non to attorneys' fees. The answer to that question depends
principally on contractual arrangements entered into by and between
the parties. Fairly read, those agreements authorize fee-shifting
in the circumstances of this case. Thus, we affirm the award of
attorneys' fees as well.
I. BACKGROUND
We do not write on a pristine page. This appeal is an
offspring of a transaction that has been mired in litigation for
several years. That litigation has inspired two published circuit
court opinions, each of which recounts pertinent aspects of the
factual background. See Crowe II, 334 F.3d at 128-30; Achille
Bayart & Cie v. Crowe, 238 F.3d 44, 45-46 (1st Cir. 2001) (Crowe
I). We refer the reader who hungers for further details to those
opinions. For present purposes, we offer only an overview.
Crowe was the president and sole shareholder of Andrew
Crowe & Sons, Inc. d/b/a Crowe Rope Company (Crowe Rope). Once an
industry leader, Crowe Rope fell upon hard times. By December of
1995, the company owed over $8,600,000 to its prime commercial
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lender, Fleet Bank. To secure this debt, Fleet held mortgages on,
and security interests in, all the assets of Crowe Rope. When
Crowe Rope defaulted on its obligations to Fleet, Bolduc emerged as
a white knight.
Acting through a web of holding companies, Bolduc
purchased the Fleet debt and stepped into Fleet's shoes as Crowe
Rope's principal secured creditor. Crowe Rope then transferred all
of its assets to one of Bolduc's nominees (the Operating Company)
and Crowe and his wife transferred some business-related real
estate held in their names to another of Bolduc's nominees. In
exchange, Bolduc and/or the Operating Company agreed to (i) cancel
the existing debt and release the Crowes from any personal
liability, (ii) pay the Crowes (or the survivor of them) a $40,000
lifetime annuity, (iii) pay Crowe a $60,000 one-time fee for
consulting services and for agreeing not to compete, and (iv) hold
the Crowes harmless should creditors cry foul. We discuss below
the various documents that memorialize this transaction.
The deal left Crowe Rope's trade creditors barking up a
defoliated tree. On May 6, 1998, one such creditor, Achille Bayart
& Cie, brought suit against the Crowes seeking to set aside the
$40,000 annuity as a fraudulent transfer. See Crowe I, 238 F.3d at
46. After some preliminary skirmishing, not relevant here, the
district court granted the Crowes' motion for judgment as a matter
of law. We affirmed that decision. Id. at 49.
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In Crowe's view, certain provisions in the agreements
between the parties bound Bolduc to defray the legal fees that he
had expended in defending Crowe I. Accordingly, he brought suit
against Bolduc in a Maine state court to recoup those fees. Bolduc
removed the case to the district court based on diversity of
citizenship and the existence of a controversy in the requisite
amount. 28 U.S.C. §§ 1332(a)(1), 1441(a). The parties proceeded
by consent before a magistrate judge. See id. § 636(c). After a
two-day trial, a jury accepted Crowe's view of the arrangement and
awarded him $86,381.98. Crowe II, 334 F.3d at 130. We affirmed
that award on July 3, 2003. Id. at 139.
That did not end the case, but, rather, set the stage for
further proceedings. On July 25, 2003, Crowe invoked Fed. R. Civ.
P. 60(a) and moved to correct the judgment by adding prejudgment
interest. He also moved for an award of attorneys' fees pursuant
to Fed. R. Civ. P. 54(d)(2). The magistrate judge granted both
motions, tacking on $3,437.44 in prejudgment interest and
$67,872.50 in attorneys' fees.2 This appeal ensued.
II. PREJUDGMENT INTEREST
Bolduc's challenge to the prejudgment interest award
turns on abstract questions of law. We therefore review the lower
court's decision de novo. Disola Dev., LLC v. Mancuso, 291 F.3d
2
The fee award included some expenses incurred by Crowe's
lawyers in prosecuting Crowe II. We see no need to differentiate
between the components of that award for purposes of this opinion.
-5-
83, 86 (1st Cir. 2002); R.I. Charities Trust v. Engelhard Corp.,
267 F.3d 3, 5 (1st Cir. 2001).
When a plaintiff obtains a jury verdict in a diversity
case in which the substantive law of the forum state supplies the
rules of decision, that state's law governs the plaintiff's
entitlement to prejudgment interest. See R.I. Charities Trust, 267
F.3d at 8; Roy v. Star Chopper Co., 584 F.2d 1124, 1135 (1st Cir.
1978). Maine law broadly entitles prevailing civil plaintiffs to
prejudgment interest as a matter of right. Me. Rev. Stat. Ann.
tit. 14, § 1602 (repealed and replaced by Me. Rev. Stat. Ann. tit.
14, § 1602-B, effective for judgments entered on or after July 1,
2003); Sawyer v. Walker, 572 A.2d 498, 499 (Me. 1990). It is,
therefore, beyond serious question that Crowe's success in Crowe II
carried with it an entitlement to prejudgment interest so long as
that entitlement was properly preserved.
Despite Crowe's right to recover prejudgment interest,
the district court's judgment in Crowe II made no mention of
interest, but simply confirmed the damage award. That judgment
entered no later than November 12, 2002.3 On July 25, 2003 — more
3
The district court originally entered judgment on September
19, 2002 in the amount of the jury verdict ($86,381.98). On
November 12, 2002, the court entered an amended judgment in the
same amount following the denial of Bolduc's post-trial motion for
judgment as a matter of law under Fed. R. Civ. P. 50(b). For
consistency's sake, we refer throughout to the judgment entered on
November 12, 2002 (noting, however, that it makes no difference
here which of these two judgments started the clock for purposes of
filing other post-trial motions).
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than eight months thereafter — Crowe filed a motion to augment the
judgment by adding prejudgment interest. Crowe brought this motion
under Fed. R. Civ. P. 60(a), which provides in pertinent part that
"[c]lerical mistakes in judgments . . . and errors therein arising
from oversight or omission may be corrected by the court at any
time . . . on the motion of any party."
Bolduc opposed Crowe's motion, asseverating that Rule
60(a) was the wrong procedural vehicle and that recourse to the
proper vehicle — Fed. R. Civ. P. 59(e) — was time-barred. Rule
59(e) governs motions to alter or amend a judgment and explicitly
provides that all such motions "shall be filed no later than 10
days after entry of judgment." Because Crowe had filed his motion
to add prejudgment interest more than 250 days after the entry of
judgment, the ten-day deadline, if applicable, had long since
expired.
The district court rejected Bolduc's importunings. It
found this case "indistinguishable in all material respects" from
our earlier decision in Aubin, 782 F.2d at 290. Relying
principally on that precedent, the court anointed Rule 60(a) as an
acceptable vehicle for adding prejudgment interest and adjudged
Crowe's motion timely. Aubin, however, was a weaker reed than the
district court thought. We explain briefly.
In Aubin, the plaintiff won a jury verdict in New
Hampshire's federal district court and, thus, became entitled to
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prejudgment interest as a matter of New Hampshire law. Id. at 289
(citing N.H. Rev. Stat. Ann. § 524:1-b). The court entered a
judgment that referred only to the amount of damages and the
plaintiff subsequently moved to add prejudgment interest. The
district court allowed the motion even though it had been filed
more than ten days after entry of the judgment. We affirmed,
holding that a Rule 60(a) motion was an appropriate vehicle for
correcting a final judgment that omitted mandatory prejudgment
interest and that, therefore, the plaintiff's motion was not
subject to the temporal strictures of Rule 59(e). Id. at 290.
This court decided Aubin in 1986. Three years later, the
Supreme Court decided Osterneck v. Ernst & Whinney, 489 U.S. 169
(1989). In that case, the Court held that a motion to augment a
previously entered judgment by adding discretionary prejudgment
interest is properly classified as a motion to alter or amend the
judgment, and, thus, must be brought under Rule 59(e). Id. at 175.
The Court reasoned from the premise that the use of Rule 59(e) is
appropriate when a motion involves "reconsideration of matters
properly encompassed in a decision on the merits." Id. at 174
(quoting White v. N.H. Dep't of Emp. Sec., 455 U.S. 445, 451
(1982)). It then noted two considerations pertinent to
discretionary prejudgment interest: (i) prejudgment interest
traditionally has been regarded as a make-whole remedy and as a
part of the plaintiff's complete compensation, and (ii) motions to
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add prejudgment interest to a verdict neither raise issues "wholly
collateral to the judgment in the main cause of action" nor require
an inquiry "wholly separate from the decision on the merits." Id.
at 175-76 (citations and internal quotation marks omitted). Based
largely on these two considerations, the Court concluded that
motions for the addition of discretionary prejudgment interest
involve "the kind of reconsideration of matters within the merits
of a judgment to which Rule 59(e) was intended to apply." Id. at
176. And as a policy matter, requiring resort to Rule 59(e) for
this purpose "further[s] the important goal of avoiding piecemeal
appellate review of judgments." Id. at 177 (discussing Fed. R.
App. P. 4(a)(4)).4
Strictly speaking Osterneck is distinguishable. The
Court there was dealing with a belated attempt to secure a
discretionary award of prejudgment interest. See id. at 175.
Crowe seizes on this distinction, pointing out that this case —
like Aubin — involves a motion to add mandatory prejudgment
interest. That distinction carries little weight. For one thing,
the considerations relied upon by the Osterneck Court apply with
equal force to augmentations involving mandatory prejudgment
interest. For another thing, the Osterneck Court took pains to
note:
4
Fed. R. App. P. 4(a)(4) renders ineffective notices of appeal
filed during the pendency of a timely Rule 59(e) motion.
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We do not believe the result should be
different where prejudgment interest is
available as a matter of right. It could be
argued that where a party is entitled to
prejudgment interest as a matter of right, a
reexamination of issues relevant to the
underlying merits is not necessary, and
therefore the motion should be deemed
collateral in the sense we have used that
term. However, mandatory prejudgment
interest, no less than discretionary
prejudgment interest, serves to "remedy the
injury giving rise to the [underlying]
action," and in that sense is part of the
merits of the district court's decision.
Moreover, . . . "[w]hat is of importance here
is not preservation of conceptual consistency
in the status of a particular [type of motion]
as 'merits' or 'nonmerits,' but rather
preservation of operational consistency and
predictability . . . ." "Courts and litigants
are best served by the bright-line rule . . .
that a motion for prejudgment interest
implicates the merits of the district court's
judgment."
Id. at 176 n.3 (citations omitted).
To be sure, this footnote is dictum, but it is much more
than an offhand comment. We have recognized before, and today
reaffirm, that "[c]arefully considered statements of the Supreme
Court, even if technically dictum, must be accorded great weight
and should be treated as authoritative." United States v. Santana,
6 F.3d 1, 9 (1st Cir. 1993); accord McCoy v. MIT, 950 F.2d 13, 19
(1st Cir. 1991). The Osterneck footnote is purposeful,
straightforward, and soundly reasoned. All nine Justices
subscribed to it. And, finally, the footnote remains unblemished;
it has not been scarred by any subsequent Supreme Court
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pronouncement. In these circumstances, we are unwilling to turn a
blind eye to the clear import of footnote 3.
Following Osterneck's lead, we conclude that Rule 59(e)
is the proper procedural vehicle for motions seeking to revise a
judgment to include an initial award of prejudgment interest
(whether mandatory or discretionary). This holding aligns us with
the three other courts of appeals that have addressed the question
post-Osterneck. The Tenth Circuit has held squarely, as do we,
that Rule 59(e), rather than Rule 60(a), is the proper vehicle for
motions seeking an initial award of mandatory prejudgment interest,
Capstick v. Allstate Ins. Co., 998 F.2d 810, 813 (10th Cir. 1993),
and two other circuits have indicated their assent to that
proposition, see Pogor v. Makita U.S.A., Inc., 135 F.3d 384, 388
(6th Cir. 1998) (dictum); Kosnoski v. Howley, 33 F.3d 376, 378 (4th
Cir. 1994) (dictum).5 To the extent that our earlier decision in
Aubin is inconsistent with this holding, it is overruled. See
supra note 1.
5
We use the adjective "initial" inasmuch as we limit our
holding to those cases in which the judgment, prior to the
attempted revision, is altogether silent as to prejudgment
interest. We do not address the somewhat different scenario in
which the judgment awards interest but either fails to quantify the
amount or erroneously computes the amount. It may well be that, in
those circumstances, Rule 60(a) is an appropriate vehicle for a
subsequent motion to fix the size of the interest award. See,
e.g., Pogor, 135 F.3d at 388; Kosnoski, 33 F.3d at 379. This case
does not pose that question, and we leave it for another day.
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Despite this square holding, our journey must continue.
Crowe asserts that he nonetheless was entitled to rely upon Aubin
because that decision had not been expressly overruled (and,
indeed, had been followed by the federal district court in Maine
even after the Osterneck decision). Any abrogation of Aubin
should, he suggests, be purely prospective, and should not have
force in this case.
As a general rule, judicial decisions are retroactive in
the sense that they apply both to the parties in the case before
the court and to all other parties in pending cases. James B. Beam
Distilling Co. v. Georgia, 501 U.S. 529, 535 (1991); Amann v. Town
of Stow, 991 F.2d 929, 934 (1st Cir. 1993) (per curiam). This rule
is absolute in the criminal context. Griffith v. Kentucky, 479
U.S. 314, 328 (1987). In civil cases, however, the rule admits of
a narrow equitable exception. See Chevron Oil Co. v. Huson, 404
U.S. 97, 106-07 (1971); see also Am. Trucking Ass'ns, Inc. v.
Smith, 496 U.S. 167, 178 (1990) (plurality op.) (reaffirming
preeminence of Chevron Oil in the civil context post-Griffith).
The exception works along the following lines. A court
in a civil case may apply a decision purely prospectively, binding
neither the parties before it nor similarly situated parties in
other pending cases, depending on the answers to three questions.
First: does the court's decision announce a new and unexpected
rule of law, by, say, overruling settled precedent on which the
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parties may have relied? Second: does the history of the
jurisprudence in the affected area of the law, together with the
new rule's purpose and effect, counsel for or against retroactive
application? Third: would retroactive application give rise to a
substantial inequity? Chevron Oil, 404 U.S. at 106-07. Selective
prospectivity, however, is not permissible; if a new rule is
applied to the parties in the rule-creating case, then it must be
applied retroactively to similarly situated parties in all pending
cases. Harper v. Va. Dep't of Tax., 509 U.S. 86, 97 (1993). In a
civil case, then, a court has only two available options: pure
prospectivity or full retroactivity. Glazner v. Glazner, 347 F.3d
1212, 1218 (11th Cir. 2003) (en banc); George v. Camacho, 119 F.3d
1393, 1399 n.9 (9th Cir. 1997) (en banc).
We find this case a suitable candidate for purely
prospective application of a new rule. In jettisoning Aubin, we
set aside binding circuit precedent that authorized submission of
initial motions for mandatory prejudgment interest under Rule
60(a). Although the Osterneck dictum presaged the demise of the
Aubin rule, Osterneck did not expressly abrogate Aubin. Thus,
Aubin remained good law in this circuit. Bolduc has pointed to no
opinion at either the circuit or district level that raised the
possibility that Aubin was lingering on life support. Typical
cases, such as the decisions in Mirra Co. v. Maine School
Administrative District No. 35, No. 01-165, 2003 WL 21026786, at *2
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(D. Me. May 6, 2003) and Lewis v. City of Brockton, Civ. No. 85-
1158, 1990 WL 26840, at *1 (D. Mass. Feb. 23, 1990), cite
confidently to Aubin, and proceed to apply it with no mention of
the Osterneck dictum. Under these circumstances, Crowe's reliance
on Aubin was understandable and the first prong of the Chevron Oil
test is, therefore, satisfied. See Glazner, 347 F.3d at 1220;
George, 119 F.3d at 1401.
The second Chevron Oil factor also counsels against
retrospective application here. The newly minted requirement that
mandatory prejudgment interest motions must be brought pursuant to
Rule 59(e) is meant to provide parties with clear direction and
certainty in litigating their claims. Applying the rule
retroactively to parties who justifiably have relied on a previous
rule does not advance any discernible goal.
The final Chevron Oil signpost points in the same
direction. We think that it would be patently unfair to subject a
party to a forfeiture for assiduously following binding circuit
precedent. See George, 119 F.3d at 1399 ("[N]o court has ever
applied a change to a procedural rule in a manner that serves to
forfeit a litigant's substantive rights when that litigant had
fully complied with the provisions of the rule as it existed at the
time he acted.") (emphasis in original); see also Wagner v. Daewoo
Heavy Indus. Am. Corp., 314 F.3d 541, 544-45 (11th Cir. 2002) (en
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banc) (refusing to apply new rule restricting right to amend
pleadings retroactively).
Our conclusion in favor of purely prospective application
fits well with cases that change the allotted time in which to make
a filing, but refuse to apply the new rule retroactively. For
example, when a decision replaces a limitations period previously
established in circuit precedent with a new, less generous rule of
timeliness, courts regularly have refused to apply the new rule
retroactively if doing so would bar an action timely brought under
the prior law. See, e.g., St. Francis Coll. v. Al-Khazraji, 481
U.S. 604, 608-09 (1987); Chevron Oil, 404 U.S. at 107. Another
example is George, in which the Ninth Circuit overturned circuit
precedent that had allowed litigants in the Northern Mariana
Islands an additional seven days within which to file notices of
appeal. Despite the fact that the overruled precedent was based on
a flat misreading of the applicable local rule, the George court
made its decision purely prospective and refused to apply the new
interpretation to bar the appellant's appeal. 119 F.3d at 1395-96.
That ends this aspect of the matter. Although we hold
that motions to augment previously entered judgments by adding
mandatory prejudgment interest must be brought under Rule 59(e) and
therefore must meet that rule's ten-day filing requirement, we
direct that our holding be applied in a purely prospective manner.
Consequently, this holding does not affect Crowe. And because
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Crowe's motion was timely under then-binding circuit precedent, we
affirm the district court's award of prejudgment interest.
III. ATTORNEYS' FEES
We turn next to the decision awarding Crowe the
attorneys' fees incurred in prosecuting Crowe II. The American
rule, followed in Maine, generally requires that each party
compensate his or her own lawyers. Alyeska Pipeline Serv. Co. v.
Wilderness Soc'y, 421 U.S. 240, 247 (1975); Jackson v. Inhabitants
of Searsport, 456 A.2d 852, 855-56 (Me. 1983). This rule, like
almost every general rule, admits of various exceptions. One
exception is that prevailing parties are entitled to attorneys'
fees if the parties agreed by contract to a fee-shifting
arrangement. Jackson, 456 A.2d at 856.
In this case, the district court concluded that the
documents memorializing the transaction authorized the shifting of
fees. Bolduc challenges this conclusion.
There are three agreements which, taken together, govern
the arrangements between Crowe and Bolduc. The centerpiece is an
agreement dated December 8, 1995 among the Crowes, Bolduc, and the
Operating Company. In it, Crowe agreed to transfer all of Crowe
Rope's assets to the Operating Company and the real estate to
another of Bolduc's nominees in satisfaction of the Fleet debt.
The same agreement bound Bolduc and the Operating Company to pay
the Crowes the $40,000 lifetime annuity and the $60,000
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consulting/noncompetition fee. The second document, executed on
the same date, is a letter agreement between the Crowes and Bolduc.
The letter agreement is, broadly speaking, an indemnity agreement.
It imposed two obligations on Bolduc. First, it bound him to hold
the Crowes harmless against any loss in the event that a court
decree interrupted the payment of either the $40,000 annual stipend
or the $60,000 one-time fee. Second, it obligated Bolduc to defend
the Crowes against creditor suits or, alternatively, reimburse them
for the reasonable cost of defending such actions. See Crowe II,
334 F.3d at 135-38 (approving a jury finding that the letter
agreement imposed that obligation on Bolduc).
The third document is a guaranty (the Guaranty), executed
one week after the other two agreements. The Crowes, Bolduc, and
the Operating Company are parties to the Guaranty. In the portion
of the Guaranty that is of interest here, Bolduc guaranteed payment
to the Crowes of certain obligations due to them under the December
8 agreements.
This appeal centers on the district court's recension of
the Guaranty. In this inquiry, Maine law supplies the substantive
rules of decision (the agreements so stipulate, and the parties
concede the point). The district court held that the Guaranty was,
in pertinent part, unambiguous, and that the indemnity provisions
encompassed the costs incurred by Crowe. Whether a contract is
unambiguous presents a question of law subject to plenary review.
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Blackie v. Maine, 75 F.3d 716, 721 (1st Cir. 1996). So too the
interpretation of unambiguous contract terms. Id.
The interpretive principles that guide our decision are
familiar. A guarantee is simply a specialized form of contract
and, as such, is subject to the same canons of construction that
apply to other types of contracts. Handy Boat Serv., Inc. v.
Prof'l Servs., Inc., 711 A.2d 1306, 1308 (Me. 1998). Thus, the
language of the Guaranty should be interpreted "to effect the
parties' intentions as reflected in the written instrument,
construed with regard for the subject matter, motive, and purpose
of the agreement, as well as the object to be accomplished." Id.
Where, as here, the parties entered into several contracts in the
same time frame and for the purpose of completing a unitary
transaction, the contracts ought to be construed together. Bumila
v. Keiser Homes of Me., Inc., 696 A.2d 1091, 1094 (Me. 1997).
With these tenets in mind, we turn to the specific
provisions at issue here. Pertinently, the Guaranty provides in
paragraph 4:
Bolduc hereby unconditionally and irrevocably
guarantees the payment by the Operating
Company of all payments due to the Crowes or
either of them from the Operating Company
under and on account of the December 8, 1995
Agreement and pursuant to a certain letter
agreement also dated December 8, 1995 from
Bolduc to the Crowes, a true copy of which is
attached hereto and made a part hereof, as and
when said payments are due, including without
limitation, all compensation for
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noncompetition and consulting services and
[annuity] payments . . . .
The Guaranty also includes a fee-shifting provision stating that
"Bolduc agrees to pay all o [sic] the Crowe's [sic] reasonable
legal fees, costs, and expenses in collecting the Obligations or in
enforcing this Guaranty." The question before us reduces to
whether this fee-shifting provision, when read together with the
remainder of paragraph 4 and the December 8 agreements, obligates
Bolduc to pay Crowe the legal fees incurred in prosecuting Crowe
II.
The parties offer competing interpretations of the fee-
shifting provision. Crowe begins from the premise that he is
entitled to recoup legal fees expended in "enforcing this
Guaranty." In paragraph 4, Bolduc guarantees the making of
payments "pursuant to [the] letter agreement." One payment due
under the letter agreement was for the cost of defending Crowe I.
See Crowe II, 334 F.3d at 138. Since Bolduc initially refused to
make that payment and Crowe only recovered the sums due after
bringing suit, Crowe II should be characterized as an action to
enforce Bolduc's obligation under paragraph 4. Hence, Crowe is
entitled to recover legal fees expended in prosecuting that action.
Bolduc begins from the same premise — that Crowe is
entitled to legal fees expended in "enforcing this Guaranty" — but
reaches the opposite conclusion. Under paragraph 4, Bolduc
"guarantees the payment by the Operating Company of all payments
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due to the Crowes or either of them from the Operating Company
under and on account of the December 8, 1995 Agreement and pursuant
to [the] letter agreement." Bolduc reads this language as
restricting his liability to payments due from the Operating
Company to the Crowes. Since Crowe II was an action to collect a
payment Bolduc individually owed Crowe under the letter agreement
(not to collect a payment due from the Operating Company), it
should not be characterized as an action to enforce the Guaranty.
Hence, Crowe is not entitled to recover attorneys' fees for
prosecuting that action.
At first blush, it may seem that we are faced with an
ambiguous contract (although neither Crowe nor Bolduc subscribes to
that view).6 On further examination, however, that is not the
case. After all, a contract need not "negate every possible
construction of its terms in order to be unambiguous." Waxler v.
Waxler, 458 A.2d 1219, 1224 (Me. 1983). Nor is a contract
ambiguous "merely because a party to it . . . disputes an
interpretation that is logically compelled." Blackie, 75 F.3d at
721. In the last analysis, a contract is ambiguous only when its
terms, fairly construed, yield more than one reasonable
6
Leaving considerations of waiver to one side, such a
conclusion might have consequences. When a contract is ambiguous,
its interpretation becomes a question of fact, and the court
typically will look to extrinsic evidence to determine the parties'
intent. See Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076,
1083 (1st Cir. 1989); Acadia Ins. Co. v. Buck Constr. Co., 756 A.2d
515, 517 (Me. 2000).
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interpretation. Lexington Ins. Co. v. Gen. Accid. Ins. Co., 338
F.3d 42, 47 (1st Cir. 2003); Blackie, 75 F.3d at 721.
In this instance, Bolduc's interpretation of the fee-
shifting provision is unreasonable. A contract ordinarily should
be interpreted so as to give force to all of its provisions.
Blackie, 75 F.3d at 722; Acadia Ins. Co. v. Buck Constr. Co., 756
A.2d 515, 517 (Me. 2000). It follows that an inquiring court
should, whenever possible, avoid an interpretation that renders a
particular word, clause, or phrase meaningless or relegates it to
the category of mere surplusage. Acadia Ins., 756 A.2d at 517.
Here, the fatal flaw in Bolduc's argument is that it renders
nugatory paragraph 4's reference to the letter agreement.
According to Bolduc, his only obligation under paragraph
4 is to ensure payments due from the Operating Company. This
interpretation overlooks the fact that paragraph 4 applies not only
to payments "under and on account of the December 8, 1995
Agreement" but also to payments required "pursuant to [the] letter
agreement." The Operating Company is liable, under the main
December 8 agreement, to make the annuity and
consulting/noncompetition payments, and the Guaranty clearly
applies to those payments. But the Operating Company is not liable
for any payments under the letter agreement (it is not even a party
to that agreement). If we were to accept Bolduc's thesis,
paragraph 4's reference to payments "pursuant to [the] letter
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agreement" would be meaningless. That would contravene the rule
that, whenever possible, contracts should be construed to give
effect to every word, clause, and phrase. See Blackie, 75 F.3d at
722; Acadia Ins., 756 A.2d at 517.
Bolduc has offered nothing that would square his
construction of the Guaranty with the reference to the letter
agreement; he would simply have us read that reference out of the
contract. But we are not so struthious as to ignore plain
language, nor are we at liberty to disregard terms purposefully
inserted into an agreement by experienced businessmen. See
Mathewson Corp. v. Allied Marine Indus., Inc., 827 F.2d 850, 856
(1st Cir. 1987).
These principles apply with especial force when, as now,
an alternative reading exists that gives meaning to every word,
clause, and phrase. Blackie, 75 F.3d at 722. Crowe's
interpretation of paragraph 4 is an entirely plausible reading of
the language chosen by the parties. Because there is no room for
any reasonable difference of opinion as to the meaning of paragraph
4 in the context of this case, we hold that the Guaranty
unambiguously covers the indemnity payment due under the letter
agreement. That seals the deal: Crowe's successful prosecution of
Crowe II and his collection of a payment secured by the Guaranty
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triggered Bolduc's duty to defray Crowe's attorneys' fees. The
district court did not err in awarding those fees to Crowe.7
IV. CONCLUSION
We need go no further. For the reasons elucidated above,
we affirm both the award of prejudgment interest and the award of
attorneys' fees.
Affirmed.
7
Crowe's motion for fees was made pursuant to Fed. R. Civ. P.
54(d)(2), and the timing of the motion was dictated by the terms of
an agreement between the parties. In this proceeding, Bolduc has
not questioned either the amount of the fee award or the procedural
vehicle used to obtain it. We therefore eschew any discussion of
these matters.
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Crowe v. Bolduc
Court: Court of Appeals for the First Circuit
Date filed: 2004-04-22
Citations: 365 F.3d 86
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