704 F. App'x 410
6th Cir.2017Background
- Venture Holdings (owned by Larry J. Winget and the Larry J. Winget Living Trust) defaulted on a Credit Agreement; JPMorgan Chase (as administrative agent) pursued recovery under an Eighth Amendment guaranty and related pledges.
- Winget paid $50 million to release pledged stock; litigation continued over remaining deficiency (over $300M) and entitlement to attorneys’ fees and enforcement costs under the Guaranty.
- Key Guaranty provisions: Section 3 (limits Chase’s recourse against Winget to pledged stock), Section 10 (specifies order of application of payments), Section 17 (Guarantor agrees to pay all costs and attorneys’ fees incurred in enforcement), and Section 18 (except as limited by Section 3, obligations are joint and several).
- Procedural history: Chase sued in 2005 (books-and-records enforcement and costs claim), related claims were severed; Winget/Trust brought counterclaims in 2006 (dismissed as res judicata); lengthy 2008 action resulted in a judgment for Chase; Sixth Circuit reversed district court reformation as to the Trust and remanded.
- On remand Chase sought $12.7M (reduced to $11.15M) in fees/expenses under Section 17 for enforcement efforts across 2005/2006/2008; district court awarded $11,154,874.65 against both Winget and the Trust.
- Winget moved under Rule 60(b)(5) claiming his $50M payment satisfied the costs under Section 10; defendants argued res judicata and argued costs should be apportioned between Winget and the Trust. The district court denied relief; the Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Chase) | Defendant's Argument (Winget/Trust) | Held |
|---|---|---|---|
| Whether guarantors’ liability for enforcement costs must be apportioned between Winget and the Trust | Section 17 calls the parties collectively the “Guarantor,” making costs joint and several; Section 18 confirms joint-and-several liability except as to Section 3 | Winget/Trust: Sixth Circuit previously treated them as separate entities; costs tied to enforcement of a particular guarantor’s obligation should be allocated to that guarantor alone | Court held liability for costs under Section 17 is joint and several; no apportionment required |
| Whether Winget’s $50M payment discharged his obligation to pay enforcement costs under Section 10 (Rule 60(b)(5) relief) | Winget: Section 10 requires application of payments first to costs/expenses, so his prior $50M payment should have satisfied Chase’s costs claim | Chase: Section 10 governs ordering of application among lenders; it does not convert a pledge-payment into satisfaction of Guaranty enforcement costs; prior appellate ruling already rejected Winget’s claim | Court denied Rule 60(b)(5) relief; $50M did not satisfy costs; motion was barred by law of the case and was incorrect on the merits |
| Whether res judicata bars Chase from recovering costs incurred in the 2005 and 2006 actions | Chase: costs claim was properly brought after final adjudication in 2008 action; earlier proceedings did not afford opportunity to fully pursue the costs claim | Winget/Trust: Chase could have sought these costs earlier; claim preclusion should bar late recovery | Court held res judicata did not bar recovery: procedural posture and prior dismissals prevented prior adjudication; additionally, contractual waivers and unconditional-obligation language precluded defendants’ res judicata defense |
| Whether contractual waivers preclude defendants from asserting certain defenses (e.g., res judicata, delay/partial exercise) | Chase: Guaranty contains provisions (e.g., Sections 4 and 13) that preserve agent’s rights despite delay and bar defenses that would impair enforcement | Winget/Trust: Such waivers are boilerplate and should not be enforced to defeat res judicata or public-policy concerns | Court enforced the contractual waivers between sophisticated parties and rejected the public-policy argument; waivers barred defendants’ asserted defenses |
Key Cases Cited
- Haywood v. Fowler, 475 N.W.2d 458 (Mich. Ct. App. 1991) (plain contract language governs parties’ intent)
- Wilkie v. Auto–Owners Ins. Co., 664 N.W.2d 776 (Mich. 2003) (clear contract language controls; ambiguities construed against drafter)
- Meridian Leasing, Inc. v. Associated Aviation Underwriters, Inc., 409 F.3d 342 (6th Cir. 2005) (contract-interpretation standard reviewed de novo)
- Winget v. JPMorgan Chase Bank, N.A., [citation="602 F. App'x 246"] (6th Cir. 2015) (prior appellate decision rejecting reformation and addressing recourse limitation under Section 3)
- Montana v. United States, 440 U.S. 147 (1979) (res judicata bars subsequent claims on same cause of action)
- Bowling v. Pfizer, Inc., 132 F.3d 1147 (6th Cir. 1998) (law-of-the-case doctrine prevents reexamination of issues previously decided)