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Paskenta Band of Nomlaki Indians v. Crosby

United States District Court, E.D. California

July 26, 2017

INES CROSBY; et al., Defendants.



         On February 21, 2017, the Court entered final judgment in favor of eight Defendants in this suit after all claims against them had been dismissed pursuant to various prior motions. See Mem. & Order, ECF No. 378; Final J., ECF No. 379. Umpqua Bank; Umpqua Holdings Corp. (collectively, “Umpqua”); Cornerstone Community Bank; and Associated Pension Consultants, Inc. (“APC”) subsequently filed motions for attorney's fees. ECF Nos. 382, 384, 388. These Defendants, as well as Garth Moore and Garth Moore Insurance and Financial Services, Inc. (collectively, “Moore”), also filed bills of costs, ECF No. 383, 385-87, to which Plaintiffs Paskenta Band of Nomlaki Indians (“the Tribe”) and Paskenta Enterprises Corp. (“PEC”) filed objections, ECF No. 403. For the reasons that follow, the Umpqua Defendants' and APC's motions for attorney's fees are DENIED, and Cornerstone's motion is GRANTED. Furthermore, the Court OVERRULES Plaintiffs' objections to the bills of costs.[1]


         As this Court has recounted in prior orders, Plaintiffs allege that Ines Crosby, John Crosby, Leslie Lohse, and Larry Lohse (collectively, the “Employee Defendants”)- all employed by the Tribe in executive positions for more than a decade-used their positions to embezzle millions of dollars from the Tribe and its principal business entity, PEC. According to Plaintiffs, the Employee Defendants stole these funds from Plaintiffs' bank accounts-including accounts at Umpqua Bank and Cornerstone Community Bank-by withdrawing large sums for their personal use. Plaintiffs further allege that the Employee Defendants caused the Tribe to invest in two unauthorized retirement plans for the Employee Defendants' personal benefit: a defined benefit plan and a 401(k) (collectively, “Tribal Retirement Plans”). The Employee Defendants allegedly kept their activities hidden from Plaintiffs by various means including harassment, intimidation, and cyber-attacks on the Tribe's computers.

         Plaintiffs go on to assert that Cornerstone, Umpqua, APC, and Moore knowingly assisted the Employee Defendants in aspects of their scheme. They contend that Umpqua and Cornerstone controlled banks where Plaintiffs maintained accounts and, despite knowing the Employee Defendants were withdrawing money from these accounts for their personal benefit, permitted the Employee Defendants to continue making withdrawals, and failed to notify Plaintiffs of the Employee Defendants' actions. According to Plaintiffs, APC and Moore-as the third-party administrator for the Tribal Retirement Plans and financial advisor, respectively-assisted the Employee Defendants in setting up and administering the unauthorized Tribal Retirement Plans.

         On October 19, 2016, the Court dismissed all the claims against Umpqua and APC with prejudice for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 299. In that same Memorandum and Order, the Court also granted Moore's Motion for Judgment on the Pleadings pursuant to Rule 12(c), resolving all claims against it. Id. On January 24, 2017, the Court granted the Cornerstone Defendants' Motions for Summary Judgment, similarly resolving all claims against them. ECF No. 358.


         A. Motions for Attorney's Fees

         1. APC

         APC claims that it is entitled to attorney's fees based on the contract APC and the Tribe entered into when APC was hired to design, structure, and administer the Tribal Retirement Plans. Mem. of P. & A. in Supp. of APC's Mot. for Attorney's Fees (“APC's Mot.”), ECF No. 389, at 2. The relevant language in that contract states:

Employer and Trustee agree to indemnify and hold APC harmless from and against all claims, losses, damages, liabilities, costs, and other expenses (including all attorneys' fees, collection fees or court costs) arising from or in connection with the operation of the Plan or the rendering of plan-related services by Employer, Plan Administrator, or any third party. This indemnification does not include claims, losses, damages, liabilities, costs, and expenses attributable solely to any gross negligence or willful misconduct by APC in the performance of services under this Agreement.

Decl. of Marc Roberts, ECF No. 391, Ex. 1, at 7.

         In its moving papers, APC appears to give two different, conflicting interpretations of this language. In its Memorandum of Points and Authorities in support of its motion, APC claims that the agreement provides attorney's fees for all claims made “by the Employer (i.e., the Tribe), Plan Administrator (i.e., the Tribe), or third parties” against APC. APC's Mot., at 5. However, in its Reply, APC claims instead that the indemnification clause identifies two separate instances in which it is triggered: (1) when claims “aris[e] from . . . the operation of the Plan, ” or (2) when claims “aris[e] from ‘the rendering of plan-related services by Employer, Plan Administrator or any third party.'” See APC's Reply, ECF No. 420, at 3.

         Plaintiffs advance yet a third reading of the contract. They read the provision to indemnify APC from liability only when claims arise from actions taken “by Employer, Plan Administrator or any third party.” See Pls.' Opp'n to APC's Mot., ECF No. 416, at 4. That is, they read the provision to indemnify APC for actions taken by anyone beside APC. They bolster this interpretation by pointing to the specific carve out for “willful conduct by APC.” See id. at 5. Accordingly, they argue that the attorney's fees clause does not apply to this action because APC's actions were the basis of its alleged liability. See id.

         The Court agrees that Plaintiffs' reading of the contract is the most natural one. It makes little sense to artificially sever the phrase “by the Employer, Plan Administrator or any third party” from the rest of the relevant sentence as APC urges. Plaintiffs' reading also more closely tracks standard indemnification provisions. At the very least, the contract is ambiguous, and under California law, ambiguities are “resolved against the drafter” of the contract. Winters v. Costco Wholesale Corp., 49 F.3d 550, 554 (9th Cir. 1995) (quoting Kunin v. Benefit Tr. Life Ins. Co., 910 F.2d 534, 539 (9th Cir. 1990)). As APC drafted the contract at issue, this rule also counsels adopting the narrower reading advocated by Plaintiffs. Accordingly, APC's motion is DENIED.[2]

         2. ...

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