USCA1 Opinion

United States Court of Appeals

United States Court of Appeals
For the First Circuit
For the First Circuit
____________________

No. 95-1827

FRANCIS P. MITRANO,

Plaintiff, Appellant,

v.

TOTAL PHARMACEUTICAL CARE, INC.

AND ABBEY HEALTHCARE GROUP, INC.,

Defendants, Appellees.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

___________________

____________________

Before

Cyr, Circuit Judge,

_____________
Bownes, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________

____________________

John Traficonte for appellant.

_______________
Joseph L. Stanganelli, with whom David H. Erichsen
______________________
__________________
Dorr, were on brief for appellees.
____

and Hale
_____

____________________

February 9, 1996
____________________

Per Curiam.

Appellant Francis P. Mitrano

brought

Per Curiam.
__________

this

diversity action against

Total

Pharmaceutical

indemnification

corporate

bylaws.

Inc.

("TPC"),

seeking

Mitrano

also

sued

appellee

Inc. ("Abbey"), which had

Abbey

acquired TPC in

and affirmed at that time its obligation to honor TPC's

indemnification

Abbey

filed a

against

bylaw.

In

October

securities fraud

Abbey and

Mitrano, a former

the

Care,

for litigation expenses as provided in TPC's

Healthcare Group,

1993

his former employer, appellee

1994,

class action

various individuals,

to recover

in California

including appellant

officer of appellee TPC.

instant lawsuit

shareholders of

Mitrano brought

attorney fees

and expenses

incurred in defending the securities class action, as well as

the

fees and expenses incurred in this suit to establish his

right to indemnification.

The

corporate

corporation, provide

and

Directors to

bylaws

of

that TPC "shall

the fullest

TPC,

California

indemnify its Officers

extent permitted by

law" and

that TPC "is required to advance expenses to its Officers and

Directors

as

obtaining a

are

including

determination that

entitled to

Mitrano

incurred,

such Officers

indemnification."

is entitled to

expenses

It

-22

to

and Directors

is undisputed

indemnification only

expenses that are "reasonably incurred."

relating

that

for litigation

To defend the securities class

four

other

California

individual

law

firm.

defendants

Mitrano,

who

action, Mitrano and

jointly

worked

retained

for

TPC

in

Massachusetts and still resides there, also retained a Boston

lawyer,

Curtis C.

Pfunder, as

personal counsel.

October 1994, Mitrano made a written demand to

advancement and indemnification

In

late

Abbey/TPC for

of his litigation

expenses.

On

November

21,

advancement

to,

inter
_____

1994,

Abbey/TPC

and indemnification, but

alia, (1)
____

Abbey/TPC, (2)

forego

refrain from

any

fee advances.

Mitrano

November 30,

only if Mitrano agreed

assisting others in

found these

1994, had

offering

unrelated claims

against Abbey/TPC, and (3) mortgage

and, on

responded,

against

any action

his home as security for

conditions unacceptable

attorney Pfunder

file this

suit,

took

lawsuit.

After

Mitrano

filed

position that his retention

was

unreasonable and

not indemnify him

same

time,

also

the

of Pfunder as individual counsel

informed Mitrano that

for the

Abbey/TPC

Abbey/TPC

Abbey/TPC would

Pfunder representation.

softened

its

At

the

conditions

for

indemnification

of the

fees

for the

California firm,

and

eventually it paid those fees, which are not in dispute here.

Several months later,

dispute

the

Abbey/TPC made an offer

to settle the

over Pfunder's fees, but the offer fell far short of

fees Mitrano had already incurred.

-33

In February 1995, by

agreement

Mitrano

was

dismissed

from

the

underlying

securities class action.

In March

to encourage

motions

1995, after the

settlement

for summary

failed,

judgment.

district judge's efforts

the

parties

The only

issue on

judgment was the reasonableness of the fees that

incurred with Pfunder,

$54,000.

Mitrano

filed

cross

summary

Mitrano had

which at that point amounted to about

The district judge found that it was reasonable for

to

retain

Pfunder

securities class action, and

and the hours

as individual

the

district

judgment for

Mitrano in

the

in

the

that Pfunder's $195 hourly rate

expended in that action were

Accordingly,

counsel

judge

granted

amount of

also reasonable.

partial

summary

$22,170, which

the

parties

agreed was

class action.

the amount

allocable to

the securities

Neither party challenges those rulings.

The district judge, however, found that Mitrano was

unreasonable in

failing to

prematurely filing the

negotiate with

Abbey/TPC over the

sought to impose, and in not

The judge,

instant lawsuit,

in

conditions it

accepting the settlement offer.

therefore, granted

Abbey/TPC, ruling that all the

partial summary

judgment for

fees and expenses incurred in

this lawsuit were not recoverable because it was unreasonable

to have filed suit in the first place.

Abbey/TPC

not

liable

on

Accordingly, it found

the portion

arising from this indemnification action.

-44

of

Mitrano's

claim

entitled

The district judge also

ruled that Mitrano was not

to prejudgment interest

under Massachusetts law on

the $22,170 award because he had not actually paid those fees

to Pfunder.

Mitrano appealed, asserting that the district court

erred in (1) denying his claim for fees and expenses incurred

in

this action to enforce

his right to indemnification, (2)

denying

sub silentio his claim for fees and expenses in this

___ ________

appeal, and (3) denying prejudgment interest.

We review a grant

are

guided by

the same

of summary judgment de
__

criteria as

the district

novo and
____

court; a

grant of summary judgment cannot

stand on appeal "unless the

record discloses

issue of material

no trialworthy

fact and

the moving party is entitled to judgment as a matter of law."

Alexis v. McDonald's Restaurants of Mass., Inc., 67 F.3d 341,

______
_____________________________________

346 (1st Cir. 1995).

We are

granting

for

fees

convinced that the district

summary judgment

and

for Abbey/TPC on

expenses incurred

in

this

judge erred in

Mitrano's claim

action.

First,

Abbey/TPC does not challenge the district judge's ruling that

it was obligated

the

securities

position in

requires

relating to

to indemnify Mitrano for

class

action,

contrary to

refusing Mitrano's demand.

advancement

obtaining a

and

Pfunder's fees in

its

Second, TPC's bylaw

indemnification

determination that [an

-55

unyielding

of

"expenses

officer is]

entitled

applies

to indemnification,"

to this action.

was not unreasonable in

and that

requirement clearly

Third, for several reasons, Mitrano

bringing this suit against Abbey/TPC

to enforce his indemnification rights.

accepting

Abbey/TPC

attempted

to

onerous

conditions,

strong-arm

not requiring

Mitrano

the

into

relevant

bylaw, in order to obtain his clear right to indemnification.

Mitrano

was aware

that Abbey/TPC

had refused

to indemnify

another former officer, who eventually won a judgment against

Abbey/TPC

for

indemnification.

intransigence was

confirmed when,

suit

Abbey/TPC

was

filed,

indemnify Mitrano

for his

And,

Abbey/TPC's

only two weeks

announced

expenses for

that

it

after the

would

not

individual counsel,

expenses

which the

reasonable.

district

Based on the

not only that

further

his right

hold that

reasonable fees

to

a conclusion,

Abbey/TPC is

liable

that Mitrano acted

including the fees

Price,
_____

168

Rptr.

525,

533

Consequently, we

for the

bringing this suit

and expenses

and for proceedings on remand.

lawsuit

to Mitrano

and expenses incurred in

appeal

Cal.

partial

of law, in prosecuting this

to indemnification.

be

we hold

erred in granting

for Abbey/TPC, but also

reasonably, as a matter

found to

summary judgment record,

the district judge

summary judgment

to enforce

judge ultimately

for this

See Fed-Mart Corp. v.

___ ______________

(Cal.

Ct.

App.

1980)

(indemnification authorized by California corporation statute

-66

covers fees for appeal as well as trial).1

district

court

reasonable,

will

be

found

Pfunder's

$195

Because

hourly

rate

the

to

be

on remand the only issue as to fees and expenses

the time

expenses reasonably

reasonably

expended by

Pfunder

incurred in pursuing this

and the

action to its

conclusion

remand).

(including this

appeal

and

the proceedings

on

See Flanders & Medeiros, Inc. v. Bogosian, 65 F.3d

___ _________________________
________

198, 204

(1st

Cir. 1995)

(leaving intact

part of

summary

judgment ruling while reversing and remanding other part).

The district judge also erred in denying

claim

for

sought

in

judgment.

prejudgment

his

complaint

The

judge stated

plaintiff has

entitled

interest,

not paid
____

and in

in a

the legal

to prejudgment

interest."

which

his

Mitrano

motion

Mitrano's

expressly

for

summary

notation order:

"Since

fees in

The

issue he

is not

legal premise

is

correct under Massachusetts law, but the factual predicate --

Mitrano's non-payment

judgment record.

-- cannot be resolved

We explain.

on this summary

As an initial matter,

law

analysis

highest

interest.

in Mitrano's

relative

interest

we agree with the choice-of-

brief:

Massachusetts has

in

issue

the

of

the

prejudgment

See Quaker State Oil Refining Corp. v. Garrity Oil

___ _______________________________
___________

____________________

1.

The parties

agree that California law

governs the scope

of TPC's indemnification obligation under its bylaws

TPC is a California corporation.

-77

because

Co.,
___

884 F.2d 1510, 1514-15 (1st Cir. 1989).

Abbey/TPC does

not argue to the contrary.

The

substantive question

controlled by

N.E.2d

1008

Judicial

Sterilite Corp.
_______________

(Mass.

Court

of

1986).2

of Massachusetts

law is

v. Continental Cas. Co., 494

_____________________

In

Massachusetts

Sterilite,
_________

held

that

the

Supreme

prejudgment

interest on an award of attorney fees ran from the date

the

plaintiff paid the fees, not from

insurer

1011.

breached its

duty to

The Court explained:

that

the date on which the

defend the

insured.

Id. at
___

The dates of
bills,

the payment of

which

are

readily

determine the points

was

obliged

to

discernible,

at which

commit

rightfully should not

to commit.

in

Sterilite

sums

which

have been

it

obliged

Before those bills were paid,

Sterilite was not deprived

those

the various

sums.

a windfall

of the use of

Any other rule would result

for Sterilite,

which the

Legislature did not intend.

Id.
___

That explanation applies squarely to this case.

The

district

judge

was

incorrect,

finding on

the summary judgment

not paid.

It is true that the record

dates

on which Mitrano paid

affidavit states that he

____________________

however,

record that the

in

bills were

does not indicate the

Pfunder's bills.

But Mitrano's

was "forced to litigate and

pay my
___

2.

We note with displeasure that

his brief
contrary

without indicating

Mitrano cited this case in

that its holding

to his assertion that interest

was directly

should run from the

date on which Abbey/TPC breached its obligation to indemnify,

as opposed to the dates on which he paid Pfunder's bills.

-88

counsel" (emphasis added);

ambiguous,

it

indicates that

while that statement is

is uncontroverted.

Mitrano did not

Nothing

pay Pfunder.

in the

somewhat

record

Abbey/TPC has

not argued that Mitrano

Mitrano failed to

that

is

did not pay; instead it

___

establish that

a burden

that Mitrano

he did pay
___

does

argues that

Pfunder.

not bear

But

in opposing

summary judgment.

Therefore, on remand,

the district court

should determine

whether and when Mitrano

actually paid the

reasonably

incurred

litigation

expenses,

underlying securities class action as well

enforce

should be

his

indemnification

awarded to Mitrano,

payment in accordance with

right.

both

for

the

as this action to

Prejudgment interest

accruing from those

dates of

Massachusetts General Laws c. 231

6C.

Accordingly,

we

reverse
_______

the

partial

grant

of

summary

judgment for appellees Abbey and TPC on the issue of

fees and expenses in this action, and we reverse the notation

_______

order denying

remand for
______

Because

Mitrano's claim for prejudgment

interest.

We

further proceedings consistent with this opinion.

the costs of this

indemnification

award, no

appeal will be

costs are

App. P. 39.

-99

part of Mitrano's

awarded under

Fed. R.