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Maule v. Philadelphia Media Holdings

October 1, 2010

R. BRADLEY MAULE, PLAINTIFF,
v.
PHILADELPHIA MEDIA HOLDINGS, LLC, GYRO ADVERTISING, INC., AND STEVEN GRASSE, DEFENDANTS.
GYRO ADVERTISING, INC. AND STEVEN GRASSE, THIRD-PARTY PLAINTIFFS,
v.
SHANNON ASSOCIATES, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Robert F. Kelly, Sr. J.

MEMORANDUM

Presently before the Court is the Petition for Attorneys' Fees and Costs of Third-Party Plaintiffs Gyro Advertising, Inc. ("Gyro") and Steven Grasse ("Grasse") (collectively the "Gyro Parties"). For the following reasons, the Gyro Parties' Petition is granted in part and denied in part.

I. BACKGROUND

A. Introduction

The claims in this case related to a November 2007 Professional Services and License Agreement (the "Agreement") through which Shannon Associates provided an illustration ("Pigs Fly Illustration") to Philadelphia Media Holdings, LLC ("PMH"), a Gyro client, for an advertising campaign. On July 17, 2008, R. Bradley Maule ("Maule") filed a Complaint in this Court against PMH, Gyro, and Grasse on the basis that the Pigs Fly Illustration infringed upon Maule's federally copyrighted photograph of the Philadelphia skyline (the "First-Party Litigation").

In September 2008, the Gyro Parties first contacted Shannon Associates and demanded that it fulfill its indemnification responsibilities pursuant to the Agreement. Subsequently, on February 23, 2009, after substantial correspondence between the parties, the Gyro Parties filed a Third-Party Complaint against Shannon Associates for failing to fulfill its indemnification obligations (the "Third-Party Litigation"). On June 9, 2009, the First-Party Litigation settled. In accordance with the settlement agreement, the Gyro Parties paid $15,000 to Maule and Shannon Associates paid $10,000 to Maule.

In a March 15, 2010 Memorandum and Order, we disposed of the Cross-Motions for Summary Judgment filed by the Gyro Parties and Shannon Associates.*fn1 We found that Shannon Associates was a contracting party to the Agreement and that it did have indemnification obligations under the specific indemnification provision in the Agreement. Accordingly, we granted the Gyro Parties' Motion and denied Shannon Associates' Motion.

In this Petition, pursuant to the fee-shifting indemnification provision in the Agreement, the Gyro Parties seek reimbursement from Shannon Associates for $250,754.92 of attorneys' fees and costs. This amount relates to: 1) services rendered and costs incurred in the First-Party Litigation; 2) the payment of $15,000 to effectuate the settlement of the First-Party Litigation; 3) services rendered and costs incurred in pursuing the third-party indemnification claim; and 4) services rendered and costs incurred in preparing the instant Petition.

B. The Indemnification Provision in the Agreement

Paragraph Nine of the Agreement contains the following indemnification clause ("Indemnification Provision"):

Contractor [Shannon Associates] shall defend, indemnify, and hold harmless Gyro and its officers, directors, shareholders, employees, representatives, agents, successors, and assigns from and against any and all losses, obligations, risks, damages, injuries, costs, settlements, liabilities, and expenses (including reasonable attorneys' fees), and against any and all claims, actions, suits, and proceedings, arising out of or relating to (a) any breach of Contractor's representations or warranties in this Agreement; (b) any breach of this Agreement by Contractor; (c) any fraud, negligence, willful misconduct, or violation of law by Contractor; and (d) any damage to property or injuries to persons, or other acts or omissions caused or contributed to by the Contractor or any of its Representatives, or anyone acting under the Contractor's direction or control or on the Contractor's behalf, in the course of performance under this Agreement. (Third-Party Pls.' Mem. Supp. Pet., Ex. B at 4.)

C. Relevant Correspondence

As previously noted, the First-Party Litigation commenced in July 2008. In September 2008, the Gyro Parties contacted Shannon Associates and demanded that it fulfill its indemnification responsibilities pursuant to the Agreement. (Third-Party Pls.' Summ. J. Mot., Ex. I.) Subsequently, on November 6, 2008, the Gyro Parties sent a letter to Shannon Associates "requesting that Shannon Associates abide by its contractual indemnification obligations enumerated in paragraph 9 of the Agreement." (Id.) In this letter, the Gyro Parties requested that Shannon Associates advise by November 14, 2008 as to its position regarding its indemnification obligations to the Gyro Parties. (Id.)

Shannon Associates did not respond to the November 6, 2008 letter until January 21, 2009. In a January 21, 2009 letter to Gyro, Shannon Associates stated: "[B]ecause there has been no 'breach,' Shannon Associates has no obligations to [the Gyro Parties] at this time based on paragraphs 8 and 9 of the Agreement. Nonetheless, from this point going forward, Shannon Associates will agree to defend and indemnify [the Gyro Parties] relevant to the above-referenced matter." (Id., Ex. J.)

In a January 30, 2009 letter, in response, the Gyro Parties provided a detailed explanation of their position that pursuant to the language in the Agreement "Shannon Associates is contractually required to defend, indemnify, and hold the Gyro Defendants harmless from the allegations of infringement asserted against them in the [First-Party Litigation]" of which Shannon Associates was made aware in September 2008. (Id., Ex. K.) In this letter, the Gyro Parties demanded that Shannon Associates pay all of the Gyro Parties' attorneys' fees and costs from the commencement of the First-Party Litigation. Also, on January 30, 2009, the Court partially granted the Gyro Parties' Motion to Dismiss. Thus, Counts IV, IX, and X of the Amended Complaint were dismissed.

Subsequently, through a February 3, 2009 letter, Shannon Associates reasserted its position: "Shannon Associates does not have an obligation to defend, indemnify or hold harmless the 'Gyro defendants' until there is a finding Shannon breached its representation and warranty [that] its Deliverables would not infringe any intellectual property rights." (Id., Ex. L.) The company restated its position that it would agree to defend and indemnify the Gyro Parties from that point forward.

The Gyro Parties rejected Shannon Associates' offer to merely defend the First-Party Litigation in the future because they believed the case was close to a settlement. On February 13, 2009, the Gyro Parties informed Shannon Associates that they would file a third-party complaint if Shannon Associates did not abide by its contractual obligations to pay all fees and costs associated with the First-Party Litigation by February 20, 2009. Shannon Associates did not respond by February ...


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