¶ 1. Rexnord, Inc., Rexnord Holdings, Inc., Fairchild Corporation, and Banner Industries, Inc. (collectively "RHI") appeal from the trial court's denial of their motion for partial summary judgment on their cross-claim for reimbursement of attorneys' fees and costs against Rexworks, Inc., a co-defendant in a products liability suit, and the trial court's grant of Rexworks' cross-motion for summary judgment. RHI contends that the trial court erred in determining "that RHI was not entitled to control its own defense and have Rexworks reimburse it for its attorneys' fees and costs." Because Rexworks accepted RHI's tender of defense and RHI failed to establish an actual conflict or provide any valid independent basis for its contention that it was entitled to separate counsel or the reimbursement of its fees, we affirm.
I. Background.
¶ 2. In January 2000, Ronald C. Williams filed a personal injury lawsuit against RHI and Rexworks, among others. Williams alleged that he was injured while operating a defective conveyor machine in 1997. The allegedly defective machine had been manufactured by the Construction Machinery Division of Rex-nord, Inc. 1 In 1982, however, Rexworks purchased the Division from Rexnord. In connection with the sale, Rexworks and Rexnord entered into an agreement, effective March 28, 1982, that included provisions allocating responsibility for products liability, personal injury, and other claims and related litigation that might arise in connection with the Division.
[Rexworks] expressly agrees to make available to Rex-nord and its counsel all those [Rexworks] employees ... who are knowledgeable about any facts relating to a claim or litigation for which Rexnord shall be responsible pursuant to this agreement. [Rexworks] shall make such employees available to Rexnord at such times and for such periods as Rexnord and its counsel shall determine are necessary.
Rexnord shall make available to [Rexworks] and its counsel all those Rexnord employees relating to a claim or litigation for which [Rexworks] shall be responsible pursuant to this Agreement. Rexnord shall make such employees available to [Rexworks] at such times and for such periods as [Rexworks] and its counsel shall determine are necessary.
¶ 4. As such, in August 2000, in response to the lawsuit filed by Williams, RHI notified Rexworks that "to the extent that it is shown the injury is connected to a construction machinery division product," RHI was putting Rexworks "on notice -that [it (Rexworks) was]
¶ 5. As of April 23, 2001, Rexworks had yet to accept RHI's tender. On that date, RHI filed a cross-claim against Rexworks for declaratory relief and breach of contract. The cross-claim alleged that, pursuant to the sale agreement, Rexworks was obligated to assume responsibility for all personal injury and product liability claims arising out of the Construction Machinery Division occurring after the conveyance of the assets, and sought a judgment declaring that Rex-works is liable "for the cost of defending [Williams'] claims to date, any and all future costs and damages to be incurred in connection with [Williams'] claims and damages connected with the breach of the Agreement for Sale."
¶ 6. On June 18, 2001, Rexworks filed its answer to RHI's cross-claims denying that it had breached the 1982 agreement and alleged that it had "not refused the tender of defense or refused to honor its obligations under the Agreement," but instead was conducting a "factual investigation into the intent of the contracting parties" relative to the agreement language referenced in the cross-claim. Shortly thereafter, on June 29, 2001, Rexworks accepted RHI's tender of defense.
¶ 7. After Rexworks accepted RHI's tender of defense, there were several instances of correspondence and communication between them concerning RHI's requests for reimbursement of its attorneys' fees and costs, a potential conflict of interest, whether Rexworks had agreed to indemnify RHI, and Rexworks' financial
¶ 8. In December, Shapiro tendered RHI's claims to Rexworks' insurer. Just under two weeks later, RHI filed for partial summary judgment on the cross-claim, 3 and Rexworks opposed the motion. In January 2002, before Rexworks' insurer had responded, RHI withdrew its tender to the insurer. In February 2002, the trial court denied RHI's motion for partial summary judgment.
¶ 9. Both Tidwall and Shapiro continued to defend the action. RHI filed a motion to dismiss Williams' first amended complaint, and in June 2002, the trial court granted the motion dismissing Williams' action in
¶ 10. On September 11, 2003, the trial court denied RHI's motion and entered judgment in Rexworks' favor, dismissing the cross-claim. It found no legal authority for RHI's claim that it had to consent to representation by Rexworks after tendering the defense, or for the claim that it had a right to control its own defense:
RHI... maintains that it never acceded to representation by Rexworks because there w[ere] potential conflicts of interest between the parties. Any potential conflicts of interest were not brought to the Court's attention at any time for determination.
This Court has considered RHI['s] arguments but could find no case law to support the position that [RHI] had to, or had a right to, accede to representation by Rexworks before Rexworks could represent [RHI], Both counsels have directed the Court to review insurance law - case law and the general business context. ... [TJhey were of no assistance to this Court in making the determination in this case regardingwhether or not Rexworks is liable for the attorney's fees and costs incurred by [RHI], ... This Court is unaware of any legal authority that would require Rexworks to pay the attorney's fees and costs incurred by [RHI] subsequent to the acceptance of the tender of defense. Once the tender of defense was accepted by Rexworks, [RHI] was represented by counsel selected and retained by Rexworks. [RHI] did not have the right to choose its own counsel and require Rexworks to pay for that representation. The Court is mindful of Attorney Shapiro's position that there were potential conflicts, but such conflicts were never brought to the Court's attention. The defense was tendered and then it was accepted. To this Court's knowledge, there is no third step that is required under the law.
Thereafter, the trial court ruled that Rexworks was liable for RHI's reasonable attorneys' fees and costs from the date RHI notified Rexworks that it intended to tender the defense through the date Rexworks accepted the tender. The parties stipulated that Rexworks would pay RHI $5,000 to cover the fees and costs for the relevant period, and RHI would dismiss all claims with regarding fees and costs for that time period. A final order was entered, and RHI now appeals. 4
II. Analysis.
¶ 11. "When called upon to review the denial of a summary judgment motion, we must apply the standards set forth in [Wis. Stat. §] 802.08 ... in the same manner as the trial court."
Germanotta v. National Indent. Co.,
¶ 12. Both parties agree that, pursuant to the 1982 agreement, Rexworks was obligated to defend RHI in the underlying suit commenced by Williams. Both parties also agree that Rexworks accepted tender of the defense on June 29, 2001. They disagree, however, as to whether it was necessary for RHI to consent to Rexworks' representation after Rexworks accepted the tender, and how Rexworks was to satisfy its obligations under the 1982 agreement.
¶ 13. RHI contends that the trial court erred in ruling that RHI was not entitled to control its own defense and have Rexworks reimburse it for its attorneys' fees and costs. RHI frames the issue as:
[wjhether an indemnitee may control its legal defense by selecting its own counsel and then having the indemnitor reimburse it for its attorneys' fees and costs in a case when there is a potential or actual conflict of interest between the indemnitee and indemnitor and the underlying indemnification agreement is silent as to the means by which the indemnitor fulfills its duties under the indemnification agreement[.]
RHI insists that the "sole means for Rexworks to discharge its obligations under the Agreement would be
¶ 14. Rexworks argues that it "is not obligated to reimburse RHI's separate counsel's attorneys' fees and costs unilaterally incurred after Rexworks accepted RHI's tender of this lawsuit." Rexworks asserts that Wisconsin follows the American Rule regarding the allocation of attorneys' fees, and insists that the 1982 agreement did not "clearly and unambiguously" require Rexworks to reimburse RHI for its separate fees and costs. Rexworks also contends that RHI has cited no legal authority mandating that RHI has a right to control its own defense and be reimbursed, that the Supreme Court Rules do not provide an independent basis for such a claim, and that RHI is estopped from claiming attorneys' fees based on an alleged conflict of interest that was never brought before the trial court for determination.
¶ 15. At the outset, we note that the parties and the trial court have referred to the relevant language in the contract as an "indemnity" clause. It has no such label, and, in fact, the word indemnification never appears in the clause (s). Indeed, there is very little language in the contract relevant to the issue of who is responsible for which products liability actions and on what terms. While the "who" and "which" are straightforward, the "on what terms" is troubling. The scope of the "responsibility" allocated is, to say the least, not painstakingly defined.
¶ 16. Notably, there is no mention of "reservations of rights" or an explicit explanation of the allocation of
¶ 17. As noted, the contract provided: "Responsibility for product liability claims and litigation will be on an occurrence basis. Those occurring prior to noon C.S.T. on the Closing Date will be for Rexnord's account; occurrences after noon C.S.T. on the Closing Date will be for [Rexworks'] account." Further, it stated that Rexworks assumed Rexnord's liability for "[p]ersonal injury and property damage claims arising out of the Construction Machinery ("CM") product lines . . . hut only such claims as shall arise out of occurrences after noon C.S.T. on April 23, 1982." There is also a clause indicating that "[e]ach party shall bear all attorney fees, accounting fees and any and all finder and brokerage fees, if any, incurred by it in relation to this Agreement or related transaction." As acknowledged by RHI, the agreement is silent as to how either party is to discharge its obligation to defend the other. However, pursuant to the agreement, RHI elected to tender its defense to Rexworks and Rexworks accepted tender of the litigation.
¶ 18. RHI contends that since the agreement is silent as to how one party is to properly discharge its
¶ 19. Quite simply, if RHI did indeed believe that it was entitled to separate counsel, and accordingly, to the reimbursement of its fees, on the basis of the existence of some conflict, it should have taken the necessary steps to actually establish that a conflict existed, and brought the matter before the trial court for determination. Instead, we have an agreement that is silent as to how either party is to properly discharge its defense duties, an accepted tender of defense, RHI's
¶ 20. Furthermore, the Supreme Court Rules do not provide an independent basis to support RHI's claim that it was entitled to separate counsel and the reimbursement of its attorneys' fees. Indeed, the preamble to Chapter 20, the Rules of Professional Conduct for Attorneys, provides in relevant part:
Violation of a rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability.
Thus, it is clear from the preamble, and from the lack of any authority to the contrary, that the Supreme Court Rules do not provide an independent basis for civil liability, and do not create any presumption that a legal duty has been breached. As such, any reliance RHI places on the Supreme Court Rules for attempting to establish the "sole means" by which Rexworks could discharge its obligation under the agreement — allowing RHI to secure separate counsel and reimbursing RHI for the attorneys' fees incurred therefrom — is misplaced.
By the Court. — Orders affirmed.
Notes
Rexnord, Inc. was a predecessor corporation to RHI.
Indeed, it is unclear what the source of the alleged conflict actually was. During oral argument, RHI was unable to identify a clear conflict in relation to the plaintiffs claims. It appears that RHI may have been relying on Rexworks' refusal to accept its demand for a judgment for its attorneys' fees as the source of the conflict, but again, the trial court did not have the opportunity to address this issue.
RHI sought summary judgment on its claim requesting a judgment declaring that "Rexworks is liable to [RHI] for costs, damages and fees, including reasonable attorneys' fees, that [RHI has] incurred or may incur on account of [Williams'] claims."
The fees and costs incurred during the time between the tender and acceptance of defense are not a part of this appeal.
Wisconsin Stat. § 802.08(2) provides, in relevant part: "The judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
We also observe that had a conflict been established, and separate counsel ordered by the trial court, it remains to be seen who would be responsible for the attorneys' fees given the paucity of relevant language in the agreement.