186 Conn. App. 706
Conn. App. Ct.2018Background
- In March 2007 Michael Konover sold his KBE stock to buyers and the parties executed a stock purchase agreement containing indemnification provisions addressing two then-pending groups of lawsuits (the "Existing Litigation").
- Section 4.3(b)(i)-(ii) required Konover to indemnify KBE and the buyers for "Damages" from any judgment in the Existing Litigation; §4.4 gave Konover exclusive control to manage the Existing Litigation and required buyers to cooperate. §4.4 also stated Konover would pay costs of any "Successor Actions."
- "Damages" was defined to include attorneys' fees (§4.6), but §4.3(b)(i)-(ii) expressly excluded the "cost of [the defendants'] legal fees" and "costs or expenses incurred by the [defendants] as a result of any further claims."
- During litigation the buyers objected to Konover’s management and Konover demanded reimbursement from the buyers for legal fees he had advanced defending the Existing Litigation.
- Konover and related entities sued the buyers for breach of contract (seeking repayment of attorney’s fees); the buyers counterclaimed and moved for summary judgment arguing the agreement did not obligate them to reimburse Konover for fees incurred in the Existing Litigation.
- The trial court granted partial summary judgment for the buyers on all claims premised on a contractual obligation to pay attorneys’ fees for the Existing Litigation; Konover appealed and the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the SPA obligates defendants to reimburse Konover for attorneys' fees incurred defending the Existing Litigation | Konover: the indemnification provisions, read in context, unambiguously require buyers to pay their own fees and therefore reimburse Konover for fees he advanced | Buyers: the plain language limits Konover's indemnity to satisfaction of judgments and expressly excludes buyers' legal fees for further claims; buyers are not obligated to reimburse fees for Existing Litigation | Affirmed for buyers: contract is clear and unambiguous; buyers not required to reimburse Konover for fees in Existing Litigation |
| Whether court should consider parties' course of conduct or defendants' prior pleadings (judicial admissions) to interpret indemnity language | Konover: even if language appears clear, extrinsic evidence and defendants' prior admissions show parties intended buyers to bear their own fees | Buyers: where contract language is unambiguous, intent is a question of law and courts should interpret the contract on its four corners; judicial admissions are factual concessions that do not bind legal interpretation | Held: extrinsic evidence and judicial admissions not considered because contract language is unambiguous; court gives plain meaning precedence |
| Whether phrase "as well as" and use of "cost" vs "costs" create ambiguity preventing summary judgment | Konover: phrasing creates ambiguity (e.g., makes "cost" and "costs" redundant) and raises factual dispute | Buyers: ordinary meanings differ; "as well as" is inclusive and the terms have distinct common meanings, so no ambiguity exists | Held: no ambiguity; words read in context have ordinary meanings and do not preclude summary judgment |
| Whether court should adopt modern approach permitting extrinsic evidence even when contract appears clear | Konover: cites modern contract scholarship and dissenting authority to argue courts may consider extrinsic evidence to avoid enforcing a meaning neither party intended | Buyers: traditional four-corners rule controls where language is unambiguous; Sims limited to releases and is inapplicable | Held: appellate court declines to adopt broader approach here; adheres to four-corners rule for unambiguous contracts |
Key Cases Cited
- McFarline v. Mickens, 177 Conn. App. 83 (standard for summary judgment)
- Lopes v. Farmer, 286 Conn. 384 (appellate review of legal conclusions)
- Isham v. Isham, 292 Conn. 170 (when intent is clear, courts need not look outside the contract)
- Levine v. Massey, 232 Conn. 272 (four-corners rule; plain language controls)
- Sims v. Honda Motor Co., Ltd., 225 Conn. 401 (limited exception allowing extrinsic evidence for releases)
- Deming v. Nationwide Mut. Ins. Co., 279 Conn. 745 (court cannot import terms not in agreement)