Kaydon Acquisition Corp. v. Custum Mfg., Inc.

• Decision Date: 11 May 2004
• Docket Number: No. C 03-3004-MWB.,C 03-3004-MWB.
• Citation: 317 F.Supp.2d 896
• Parties: KAYDON ACQUISITION CORP., Plaintiff, v. CUSTUM MANUFACTURING, INC., f/k/a Gold Star Manufacturing, Inc., America Central Industries, Inc., Lloyd Mefferd, and Floyd Mefferd, Defendants.
• Court: U.S. District Court — Northern District of Iowa

317 F.Supp.2d 896

KAYDON ACQUISITION CORP., Plaintiff, v. CUSTUM MANUFACTURING, INC., f/k/a Gold Star Manufacturing, Inc., America Central Industries, Inc., Lloyd Mefferd, and Floyd Mefferd, Defendants.

No. C 03-3004-MWB.

United States District Court, N.D. Iowa, Central Division.

May 11, 2004.

Edward M. Mansfield, Holly M. Logan, James R. Swanger, Michael R. Reck, Belin Lamson McCormick Zumbach Flynn, Des Moines, IA, for Plaintiff.

Paul D. Lundberg, Lundberg Law Firm, Sioux City, IA, Redge O. Berg, Berg & Howe Law Office, Spencer, IA, for Defendants/Counter Claimants.

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION FOR CLARIFICATION OF ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT AND PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON DEFENDANTS' COUNTERCLAIM

BENNETT, Chief Judge.

                TABLE OF CONTENTS
                  I. INTRODUCTION .......................................................... 898
                

                     A. Factual Background ................................................. 899
                        1. The Irgens litigation and the indemnity dispute ................. 899
                        2. The sales commission dispute .................................... 899
                     B. Procedural Background .............................................. 900
                 II. LEGAL ANALYSIS ........................................................ 902
                     A. The Motion For "Clarification" ..................................... 902
                        1. Arguments of the parties ........................................ 902
                        2. Analysis ........................................................ 903
                           a. Authority to "clarify" or "reconsider" a summary judgment
                              ruling ....................................................... 903
                           b. "Clarification" .............................................. 904
                           c. "Reconsideration" ............................................ 906
                                i. McNally & Nimergood ..................................... 906
                               ii. The rule for exonerated indemnitees ..................... 907
                              iii. Should the rule be different for settling indemnitees?... 907
                               iv. The McNally & Nimergood exception ....................... 908
                                v. Do any disputed elements remain? ........................ 910
                        3. Summary ......................................................... 911
                     B. The Motion For Summary Judgment On The Defendants'
                          Counterclaim ..................................................... 911
                        1. Arguments of the parties ........................................ 911
                        2. Applicable standards ............................................ 912
                        3. Analysis ........................................................ 912
                III. CONCLUSION ............................................................ 913
                

This action involves the plaintiff's claim for indemnity from the defendants, following settlement of a products liability action in California state court, and the defendants' counterclaim for breach of a contract to pay commissions. By order dated February 11, 2004, the court granted in part and denied in part the parties' cross-motions for summary judgment on the plaintiff's indemnity claim. See Kaydon Acquisition Corp. v. Custum Mfg., Inc., 301 F.Supp.2d 945 (N.D.Iowa 2004). Presently before the court is the plaintiff's motion for "clarification" of the February 11, 2004, ruling as to the plaintiff's claim for indemnity for attorneys' fees and costs. The defendants concur in the need for "clarification," but take a different position on the proper interpretation of the court's ruling. In a separate motion, the plaintiff also seeks summary judgment on the defendants' remaining counterclaim for unpaid commissions. The defendants resist summary judgment on their remaining counterclaim.

I. INTRODUCTION

The parties to this action are plaintiff Kaydon Acquisition Corporation (Kaydon) and the following defendants, described collectively as the Mefferd Defendants: Custum Manufacturing, Inc., formerly known as Gold Star Manufacturing, Inc.,¹ American Central Industries, Inc. (ACI), and Lloyd and Floyd Mefferd. This court provided some factual background to this litigation in its prior ruling on the parties' cross-motions for summary judgment. See Kaydon Acquisition Corp., 301 F.Supp.2d at 949-52. Nevertheless, some review of that factual background is necessary to put in context the court's discussion of Kaydon's motion for "clarification" of the ruling on the cross-motions for summary judgment, and some additional facts are necessary to put in context the parties' dispute concerning the propriety of summary judgment on the Mefferd Defendants' counterclaim. Therefore, the court turns to a recitation of the pertinent facts and factual disputes.

A. Factual Background

1. The Irgens litigation and the indemnity dispute

The parties agree that Kaydon acquired the assets of the Mefferd Defendants' hydraulic cylinder manufacturing business on March 11, 1997, under an Asset Purchase Agreement. The Asset Purchase Agreement included provisions concerning the Mefferd Defendants' duty to indemnify Kaydon, inter alia, for products liability claims "made in connection with the sale of products manufactured by Seller prior to the Closing Date[.]" Defendants' Appendix To Cross-Motions For Summary Judgment at 29 (Asset Purchase Agreement, ¶ 12.2).

By letter dated August 17, 2001, Kaydon "demand[ed] that [the Mefferd Defendants] indemnify and hold Kaydon harmless pursuant to Paragraph 12.2 of the Asset Purchase Agreement" in litigation brought by James and Robert Irgens against Kaydon in the Superior Court of California for the County of San Diego. The Irgens litigation arose from the alleged malfunction of a cherry picker, which utilized a hydraulic cylinder manufactured by the Mefferd Defendants prior to March 11, 1997. Although Kaydon's initial demand was for the Mefferd Defendants to "indemnify and hold [Kaydon] harmless," Kaydon subsequently demanded not only "indemnity," but also a "defense" by the Mefferd Defendants. Except for a brief period, from January to April 2002, during which the Mefferd Defendants assumed Kaydon's defense, the Mefferd Defendants declined to defend or indemnify Kaydon while the Irgens litigation was pending. The Mefferd Defendants were eventually added as defendants in the Irgens litigation, but the Mefferd Defendants and Kaydon were represented by separate counsel, except for the brief period in 2002.

Kaydon or its insurance carrier ultimately settled the Irgens plaintiffs' claims against Kaydon for $350,000, and the Mefferd Defendants ultimately settled the Irgens plaintiffs' claims against them for $15,000. At no time did Kaydon obtain the Mefferd Defendants' written consent to Kaydon's settlement of the Irgens litigation. After the parties reached these settlements with the Irgens plaintiffs, Kaydon filed a motion pursuant to California procedure for a determination by the court that Kaydon's settlement had been in good faith. Although the Mefferd Defendants filed an opposition to Kaydon's motion, the California court granted Kaydon's motion, holding that Kaydon's settlement was reasonable. Upon the conclusion of the Irgens litigation, Kaydon initiated this action for indemnity against the Mefferd Defendants seeking indemnity for the $350,000 that Kaydon paid to settle the Irgens plaintiffs' claims as well as over $200,000 in attorneys' fees and costs that Kaydon incurred in defending against those claims.

2. The sales commission dispute

The parties now assert that additional facts are pertinent to Kaydon's motion for summary judgment on the Mefferd Defendants' counterclaim for unpaid commissions. Kaydon asserts, and the Mefferd Defendants do not dispute, the following facts. On or about May 3, 1998 — that is, a little over a year after Kaydon bought the assets of the Mefferd Defendants' hydraulic manufacturing business — Kaydon entered into a Sales Representation Agreement with ACI and Lloyd and Floyd Mefferd. Pursuant to that agreement, the Mefferds and ACI performed duties as sales representatives for Kaydon from May 3, 1998, through July 9, 1999. Kaydon terminated the agreement, effective July 9, 1999, pursuant to the "without cause" provision of the agreement. Consequently, the Mefferds were to receive commissions of 2.5% of net invoice for orders received by Kaydon prior to July 8, 1999, for which Kaydon was paid before July 8, 2000.

Although the Mefferds contend that they were not paid all commissions due them, Lloyd Mefferd conceded in his deposition that he couldn't tell at that time if there were orders on which the Mefferds should have received commissions, but did not. Kaydon has declined to make extra copies, at Kaydon's expense, of documents potentially relevant to the Mefferds' claim for commissions, because it would cost Kaydon a great deal of money to do so. However, Kaydon has voluntarily provided the Mefferds with some documents and has made others available for on-site inspection, which the Mefferds have now reviewed. A certified public accounting firm hired by Kaydon has determined that, at most, only about $1,142 of commissions could potentially be due to the Mefferds, although that firm also indicated that there may be valid reasons to exclude some of those fees from the commission worksheets. Kaydon's expert's report also indicates that there is insufficient data to determine whether commissions are owed on additional sales, although he opined that the commission payments were "substantially correct."

The parties dispute the following facts. The Mefferd Defendants dispute Kaydon's contentions that Kaydon has provided them with all of the documents pertinent to the issue of whether the Mefferds have been paid all of the commissions that they are due. In addition, the Mefferds contend that they have never been paid a commission for between $1 million and $2 million worth of business that they "procured"...