Amec Civil LLC v. Mitsubishi Intern. Corp.

• Decision Date: 28 December 2007
• Docket Number: No. 06-CV-1420.,06-CV-1420.
• Citation: 940 A.2d 131
• Parties: AMEC CIVIL LLC, Appellant, v. MITSUBISHI INTERNATIONAL CORPORATION., Appellee.
• Court: D.C. Court of Appeals

940 A.2d 131

AMEC CIVIL LLC, Appellant, v. MITSUBISHI INTERNATIONAL CORPORATION., Appellee.

No. 06-CV-1420.

District of Columbia Court of Appeals.

Argued December 4, 2007.

Decided December 28, 2007.

Paul W. Killian, with whom Thomas P. McLish and Ephraim Wernick were on the brief, Washington, for appellant.

E. Duncan Getchell, with whom Marshall Beil and Lauren Rosenblatt were on the brief, for appellee.

Before FARRELL, KRAMER, and FISHER, Associate Judges.

FARRELL, Associate Judge:

The issue before us, governed by Virginia law, is whether res judicata barred appellant's action for attorney's fees filed in the Superior Court of the District of Columbia after appellant had withdrawn the claim from underlying breach-of-contract litigation in Virginia, without obtaining either agreement by appellee or authorization by the court to defer the claim to later proceedings. We hold, with the trial judge, that appellant was precluded in these circumstances from pursuing its claim for attorney's fees in a separate action.

I.

AMEC Civil LLC (hereafter AMEC) sued Mitsubishi International Corp. (MIC) in Virginia state court alleging breach of contract after MIC failed to supply steel for highway bridges under the parties' contract related to a construction project in Virginia. The jury returned a verdict for AMEC and awarded damages for breach, an award MIC paid without taking an appeal.

The parties' contract also contained an indemnification provision, which provided in relevant part:

Without limitation of any other right or remedy available to Purchaser hereunder or at law, Seller shall protect, defend, indemnify and hold Purchaser and Owner harmless from and against any and all claims, losses, damages, liabilities, fines, penalties, costs and expenses (including attorneys' fees) directly or indirectly arising out of (i) Seller's refusal or failure to perform or observe any of Seller's agreements, undertakings, warranties or obligations referred to hereunder, including, without limitation, the delivery, furnishing or utilization in the Project of any non-conforming materials and/or labor . . . This indemnity shall not apply to the extent that the matter is caused by the negligent act or omission of any or all of the persons or entities indemnified hereunder.

Accordingly, in AMEC's suit for breach of contract, the complaint had included a request for attorney's fees as part of its ad damnum, clause.¹ During trial, however, AMEC withdrew the claim for attorney's fees after a brief colloquy on the subject, and the jury heard no evidence about fees and was not instructed on the issue.

Instead, after receiving judgment on the breach of contract claim, AMEC brought suit in the Superior Court of the District of Columbia seeking to enforce the attorney's fee provision. MIC moved for summary judgment, arguing that AMEC was splitting its claims in a manner that Virginia law prohibits, and that its failure to pursue the claim for legal fees to judgment in the Virginia suit barred recovery under principles of res judicata. After a hearing, the trial judge agreed, stating that AMEC had "had a full opportunity to submit any evidence they wanted [on the fee issue] at trial and could have pursued its claim to verdict."

This appeal by AMEC followed. We review both the grant of summary judgment and the trial court's application of res judicata principles de novo. See Carrollsburg v. Anderson, 791 A.2d 54, 58 (D.C.2002); Osei-Kuffnor v. Argana, 618 A.2d 712, 713 (D.C.1993). The parties are in accord that, by operation of the contract, Virginia law governs the substantive issues presented.

II.

Virginia law requires a litigant raising the defense of res judicata to establish four elements: (i) "identity of the remedies sought"; (ii) "identity of the cause of action"; (iii) "identity of the parties"; and (iv) "identity of the quality of the persons for or against whom the claim is made." Davis v. Marshall Homes, Inc., 265 Va. 159, 576 S.E.2d 504, 506 (2003). Res judicata bars the assertion in a subsequent proceeding not only of all claims actually brought in an earlier proceeding, but of claims constituting the same cause of action that could have been brought in the earlier proceeding. See Lofton Ridge, LLC v. Norfolk Southern Railway Co., 268 Va. 377, 601 S.E.2d 648, 650 (2004) ("When the second suit is between the same parties as the first, and on the same cause of action, the judgment in the former is conclusive of the latter, not only as to every question which was decided, but also as to every other matter which the parties might have litigated and had determined . . .").

In dispute here is primarily the question of whether AMEC's claim for attorney's fees is part of "the same cause of action" as its underlying claims for breach of contract. In our view, Virginia law beginning with Sands v. Roller, 118 Va. 191, 86 S.E. 857 (1915), provides a clear answer. Sands, like this case, involved successive actions for breach of agreement (there failure to make payments due on promissory notes) and for related legal fees and expenses. As the Virginia Supreme Court described the sequence: "The present controversy arises from a suit brought ... after the judgment was rendered [for the plaintiff on the contract], and since it was satisfied, to recover the fees and expenses incurred by the plaintiff in obtaining the judgment and certain alleged expenses incurred in enforcing its payment." Id. at 858. The court disposed of the suit in one paragraph:

We are of opinion that, when the [original] judgment was obtained ..., it merged the entire contract upon which the suit was brought, and the plaintiff could not afterwards maintain a suit for another recovery under that contract. The alleged fees and expenses were provided for in the contract which was reduced to judgment. That cause of action can never again become the basis of a suit between the same parties. It has lost its vitality; it has expended its force and effect. All its power to sustain rights and enforce liabilities has terminated in the judgment. It is drowned in the judgment, and must henceforth be regarded as functus officio. . . . [S]uch contract and all rights under it ceased to exist and the judgment became the only and superior evidence of the defendant's liability.

Id. (citations and internal quotation marks omitted).

Sands thus teaches that a claim for legal fees based on a contract is part of the "cause of action" for breach of the underlying contract provisions, and ordinarily must be pursued there or will be extinguished "in the judgment." See Republic Ins. Co. v. Culbertson, 717 F.Supp. 415, 419 (E.D.Va.1989) (rejecting, as contrary to Sands, claim that suit for attorney's fees incurred after judgment "involve[d] a new cause of action, separate from the [underlying] cause"). AMEC argues, nonetheless, that Sands did not decide our case because the obligation to pay fees there did not depend on the outcome of the underlying claim of breach; it was conditioned (in the words of the promissory notes) only on "any litigation ensu[ing] to holder." Critical for AMEC is the fact that its indemnity agreement with MIC hinged an award of fees on a determination that MIC had "refus[ed] or fail[ed] to perform or observe any of Seller's agreements"—it was, AMEC argues, the equivalent of a "prevailing party" clause, see, e.g., FED.R.Civ.P. 54(d), under which the issue of fees arises only post-judgment. See discussion, infra, part III. However, although Sands recited the counsel fees provision of the contracts in dispute there, it attached no significance to their language other than to say that "fees were provided for in the contract which was reduced to judgment," and were merged ("drowned") therein. Nothing in Sands implies that a different rule would have pertained if the language had required the holder to prove breach (as he in fact did) before being entitled to attorney's fees.

Sands was subsequently cited by the Court of Appeals of Virginia in Bazzle v. Bazzle, 37 Va.App. 737, 561 S.E.2d 50, 55 (2002), for the "well settled" principle that "[w]hen a cause of action has been reduced to a judgment, the cause of action is merged into the judgment and cannot form the basis for future suits between the parties." Then, in Lee v. Mulford, 269 Va. 562, 611 S.E.2d 349 (2005), the Virginia Supreme Court again considered the relation between an underlying cause of action (again a suit on a promissory note) and a request for attorney's fees based on the contract, and recognized an important but limited qualification on the merger principle. Lee had sued for breach of the note and sought attorney's fees "as part of his claim for damages," but effectively withdrew the claim because "[We offered no evidence to the jury in support of an award of attorney's fees," id. at 351, and instead sought post-judgment to claim his fees by a separate motion. He argued that it was "customary to argue the issue of fees post-trial." Id. The Virginia Supreme Court rejected this appeal to "local custom and practice." It explained that "[w]e are aware of many cases in which the parties, with the concurrence of the trial court, have bigureated the fact-finding process," id. (citing Virginia appellate decisions), but that "[i]n this case there is no such prior agreement between the parties that was approved by the trial court" reserving the attorney's fee issue to later determination. Id. Again noting Lee's "conce[ssion] that there was no express agreement with approval of the trial court to bifurcate the factfinding process," id., the court concluded:

Absent agreement of the parties with the concurrence of the court, or pursuant to contract or statute with specific provisions, a litigant is not entitled to bifurcate the issues and have the matter of attorney's fees decided by the trial court in post-verdict proceedings.

Id. at 352.

Sands and Lee together announce what appears to be an...