Chain Bridge Bank, N.A.’S Motion To Establish The
Summary
JPMorgan Chase Bank, N.A.'s opposition to Chain Bridge Bank, N.A.'s motion to establish the amount of indemnified fees and expenses, in Blue Flame Medical LLC v. Chain Bridge Bank, N.A., Civil Action No. 1:20-cv-00658 (LMB/IDD), in the U.S. District Court for the Eastern District of Virginia, Document 213, filed December 7, 2021 and dated November 18, 2021. JPMorgan, the third-party defendant, states that Chain Bridge seeks nearly $6 million in attorneys' fees and expenses. It argues that under U.C.C. § 4A-211(f) and the court's September 23, 2021 summary-judgment ruling, Chain Bridge may recover only reasonable fees incurred defending Blue Flame's U.C.C. claims. It asks the court to deny fees tied to state-law claims, fees on fees for indemnification and insurance, and fees incurred regardless, while not opposing a revised request. The 31-page brief is signed by WilmerHale counsel.
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
(Alexandria Division)
BLUE FLAME MEDICAL LLC,
Plaintiff,
v.
CHAIN BRIDGE BANK, N.A.,
JOHN J. BROUGH, and Civil Action No. 1:20-cv-00658 (LMB/IDD)
DAVID M. EVINGER,
Defendants.
CHAIN BRIDGE BANK, N.A.,
Third-Party Plaintiff,
v.
JPMORGAN CHASE BANK, N.A.,
Third-Party Defendant.
JPMORGAN CHASE BANK, N.A.’S OPPOSITION TO
CHAIN BRIDGE BANK, N.A.’S MOTION TO ESTABLISH THE
AMOUNT OF INDEMNIFIED FEES AND EXPENSES
TO BE AWARDED FROM JPMORGAN CHASE BANK, N.A
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TABLE OF CONTENTS
TABLE OF AUTHORITIES.................................................................................................... ii
INTRODUCTION................................................................................................................... 1
BACKGROUND..................................................................................................................... 2
LEGAL STANDARD ............................................................................................................. 4
ARGUMENT .......................................................................................................................... 5
I. CHAIN BRIDGE IS ENTITLED ONLY TO REASONABLE FEES AND EXPENSES INCURRED AS A
RESULT OF BLUE FLAME’S U.C.C. CLAIMS—NOT BLUE FLAME’S STATE-LAW CLAIMS ... 5
A. Article 4A, As The Exclusive Means For Determining Legal Obligations,
Does Not Permit Chain Bridge To Recover Attorneys’ Fees For Its Separate
State-Law Claims.............................................................................................. 5
1. Article 4A is an exclusive remedy .......................................................... 5
2. Courts narrowly counstrue indemnification provisions ............................ 7
B. Fees Incurred As A Result Of State-Law Claims Were Not Incurred
“As A Result Of The Cancellation” ................................................................... 9
C. Fees Incurred As A Result Of State-Law Claims Must Be Excised
From Chain Bridge’s Fee Demand ................................................................... 13
II. CHAIN BRIDGE IS NOT ENTITLED TO “FEES ON FEES” INCURRED IN PURSUIT OF
INDEMNIFICATION AND INSURANCE ............................................................................. 14
A. “Fees On Fees” Are Available Only Where Specifically Authorized,
And There Is No Such Authorization In Section 4A-211(f)............................... 14
B. Indemnification And Insurance Fees Must Be Excised From Chain Bridge’s
Fee Demand.................................................................................................... 18
III. CHAIN BRIDGE IS NOT ENTITLED TO FEES IT WOULD HAVE INCURRED REGARDLESS
OF THE U.C.C. CLAIMS............................................................................................... 19
A. Chain Bridge Has Failed To Disaggregate Fees It Would Have Incurred
Absent The Indemnification-Triggering Conduct ............................................. 19
B. Fees That Would Have Been Incurred Absent Blue Flame’s
U.C.C. Claims Must Be Excised From Chain Bridge’s Fee Demand ................. 23
CONCLUSION ..................................................................................................................... 23
i
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TABLE OF AUTHORITIES
CASES
Automotive Finance Corp. v. EEE Auto Sales, Inc.,
2011 WL 3422648 (E.D. Va. Aug. 3, 2011) .............................................................4, 14
Beastie Boys v. Monster Energy Co.,
112 F. Supp. 3d 31 (S.D.N.Y. 2015) ........................................................................... 19
Blue Flame Medical LLC v. Chain Bridge Bank, N.A.,
2021 WL 4341111 (E.D. Va. Sept. 23, 2021) ........................................................passim
Bradford v. HSBC Mortgage Corp.,
280 F.R.D. 257 (E.D. Va. 2012).................................................................................. 16
C.F. Trust, Inc. v. First Flight Ltd. Partnership,
359 F. Supp. 2d 497 (E.D. Va. 2005) ............................................................................ 4
Caraway v. City of Elizabeth City,
854 F. App’x 472 (4th Cir. 2021)................................................................................ 20
Choice Escrow & Land Title, LLC v. BancorpSouth Bank,
754 F.3d 611 (8th Cir. 2014)......................................................................................5, 6
Colli v. S. Methodist University,
2012 WL 13027419 (N.D. Tex. Oct. 22, 2012).............................................................. 4
E.I. DuPont de Nemours & Co. v. Custom Blending Int’l, Inc.,
1998 WL 842289 (Del. Ch. Nov. 24, 1998)................................................................... 8
Eisenberg v. Wachovia Bank, N.A.,
301 F.3d 220 (4th Cir. 2002)......................................................................................5, 6
Estate of Kalahasthi v. United States,
630 F. Supp. 2d 1120 (C.D. Cal. 2008).......................................................................... 9
Fair Housing Council of Greater Washington v. Landow,
999 F.2d 92 (4th Cir. 1993)......................................................................................4, 21
Fox v. Vice,
563 U.S. 826 (2011) ..............................................................................................19, 20
Galante v. Queens Borough Public Library,
2016 WL 4573978 (E.D.N.Y. Sept. 1, 2016) ............................................................4, 15
Gill v. Warden,
2011 WL 2358531 (E.D. Va. June 9, 2011)................................................................. 11
ii
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Goodyear Tire & Rubber Co. v. Haeger,
137 S. Ct. 1178 (2017) ................................................................................ 5, 19, 20, 21
Guidry v. Clare,
442 F. Supp. 2d 282 (E.D. Va. 2006) .......................................................................... 22
Hair Club for Men, LLC v. Ehson,
2017 WL 1250998 (E.D. Va. Apr. 3, 2017) ................................................................... 4
Hensley v. Eckerhart,
461 U.S. 424 (1983) .......................................................................................... 4, 18, 22
Hooper Associates, Ltd. v. AGS Computers, Inc.,
548 N.E.2d 903 (N.Y. 1989)..................................................................................15, 16
In re Crescent County Estates, LLC,
588 F.3d 822 (4th Cir. 2009)....................................................................................... 15
In re Fitzgerald Marine & Repair, Inc.,
619 F.3d 851 (8th Cir. 2010)....................................................................................... 15
In re Health Management Systems, Inc. Securities Litigation,
82 F. Supp. 2d 227 (S.D.N.Y. 2000), aff’d sub nom. Baker v. Health
Management Systems, Inc., 298 F.3d 146 (2d Cir. 2002).........................................14, 15
In re Navidea Biophamaceuticals Litigation,
2021 WL 2323380 (S.D.N.Y. Apr. 21, 2021), report & recommendation
adopted sub nom. In re Navidea Biopharmaceuticals Litigation,
2021 WL 2156276 (S.D.N.Y. May 27, 2021) .............................................................. 22
Independent Federation of Flight Attendants v. Zipes,
491 U.S. 754 (1989) ................................................................................................... 20
Industrial Enterprises, Inc. v. Penn America Insurance Co,
637 F.3d 481 (4th Cir. 2011)......................................................................................... 7
James Constructors, Inc. v. Salt Lake City Corp.,
888 P.2d 665 (Utah Ct. App. 1994) ............................................................................. 14
Jones v. Southpeak Interactive Corp. of Delaware,
2014 WL 2993443 (E.D. Va. July 2, 2014), aff’d,
777 F.3d 658 (4th Cir. 2015)....................................................................................... 22
Leaf River Cellulose, LLC v. Mid-Continent Casualty Co.,
2012 WL 1033477 (S.D. Miss. Mar. 27, 2012) .............................................................. 8
Lyle v. Food Lion, Inc.,
954 F.2d 984 (4th Cir. 1992)....................................................................................... 18
iii
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Mack v. Wilcox County Commission,
2009 WL 4884310 (S.D. Ala. Dec. 9, 2009) ................................................................ 11
Madeira v. Affordable Housing Foundation, Inc.,
323 F. App’x 89 (2d Cir. 2009)................................................................................... 21
Martin v. Franklin Capital Corp.,
546 U.S. 132 (2005) ................................................................................................... 18
Mulugeta v. Ademachew,
2019 WL 7945712 (E.D. Va. Nov. 6, 2019) ................................................................ 20
National Organization for Marriage, Inc. v. United States,
24 F. Supp. 3d 518 (E.D. Va. 2014) .............................................................................. 9
Nova Research, Inc. v. Penske Truck Leasing Co.,
952 A.2d 275 (Md. 2008) ........................................................................................... 17
Paroline v. United States,
572 U.S. 434 (2014) ................................................................................................9, 10
Perconti v. Thornton Oil Corp.,
2002 WL 982419 (Del. Ch. May 3, 2002) ..................................................................... 8
Perdue Farms, Inc. v. Travelers Casualty & Surety Co. of America,
448 F.3d 252 (4th Cir. 2006)......................................................................................7, 8
Pike Creek Chiropractic Ctr., P.A. v. Robinson,
637 A.2d 418 (Del. 1994) .................................................................................... 8, 9, 16
Rekor Systems, Inc. v. Loughlin,
2020 WL 6898271 (S.D.N.Y. Nov. 23, 2020).............................................................. 17
Salgam v. Advanced Software Systems, Inc.,
2020 WL 6322857 (E.D. Va. July 2, 2020).................................................................. 20
Salim v. Dahlberg,
2016 WL 2930943 (E.D. Va. May 18, 2016) ................................................................. 5
SPM Corp. v. M/V Ming Moon,
22 F.3d 523 (3d Cir. 1994).......................................................................................... 15
Stifel Financial Corp. v. Cochran,
809 A.2d 555 (Del. 2002) ........................................................................................... 17
Thor 725 8th Avenue LLC v. Goonetilleke,
675 F. App’x 31 (2d Cir. 2017)................................................................................... 17
iv
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Warren Drilling Co. v. Equitable Production Co.,
621 F. App’x 800 (6th Cir. 2015).............................................................................9, 17
Weaver v. ZeniMax Media, Inc.,
2004 243163 (Del. Ch. Jan. 30, 2004) ......................................................................... 17
Wells Fargo Bank, N.A. v. National Bank of Commerce,
240 So. 3d 541 (Ala. 2017)......................................................................................... 14
STATUTES & REGULATIONS
28 U.S.C. § 1447(c)............................................................................................................... 18
28 U.S.C. § 1927 ................................................................................................................... 19
42 U.S.C. § 1988 ..............................................................................................................18, 19
U.C.C. § 4A-211 cmt. 5 ......................................................................................................... 20
U.C.C. § 4A-211(f)..........................................................................................................passim
RULES
Fed. R. Civ. P. 11(c)(4).......................................................................................................... 19
Fed. R. Civ. P. 37(b)(2)(C)..................................................................................................... 19
v
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INTRODUCTION
Seeking nearly $6 million in attorneys’ fees and expenses, Chain Bridge insists that it is
entitled to all fees and expenses it incurred in litigating all the claims in this multi-party case—
regardless of whether they are first-party, third-party, state-law, or U.C.C. claims, and regardless
of whether they are against Chain Bridge itself or the individual defendant executive officers. In
so doing, putting aside the question of the reasonableness of the amount sought, it improperly
seeks hundreds of thousands of dollars in fees spent pursuing its claim to indemnification, and
over one hundred thousand dollars more in fees to interpret its own insurance policies. All of
this, Chain Bridge claims, is reimbursable because it somehow results from the cancellation of
the wire. That argument fails because it ignores the limits of the U.C.C. and rests on a theory of
causation with no apparent bounds, let alone one confined by applicable standards of but-for and
proximate cause.
Under the Court’s summary-judgment ruling, some fees and expenses are reimbursable to
Chain Bridge—that is, those reasonably spent by Chain Bridge defending against Blue Flame’s
U.C.C. claims, which were premised on the cancellation of the wire. But other categories of
Chain Bridge’s demand are not, including fees and expenses spent defending Blue Flame’s state-
law claims, which are grounded in Chain Bridge’s independent conduct; “fees on fees” in pursuit
of indemnification and insurance; and fees and expenses that Chain Bridge would have spent
even if the only claims asserted by Chain Bridge were non-indemnifiable. Moreover, many of
the fee entries provided by Chain Bridge—for example, those for time billed to “[r]eview and
respond to correspondence” (without elaboration)—are impossible to categorize because of
Chain Bridge’s insufficiently detailed records. The Court’s ruling requires JPMC to pay
reasonable fees and expenses arising from U.C.C. claims that were incurred “as a result of” the
1
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wire cancellation only. All other categories lack the statutory and causal nexus required by
Article 4A’s indemnification provision.
As Chain Bridge well knew since the beginning of this case, as the fee applicant it bears
the burden to establish the reasonableness and recoverability of the fees and expenses it claims.
It has failed to meet that burden, both because it demands categories of fees that are non-
reimbursable and because it has provided inadequate documentation for the fees it demands.
JPMC should not pay more than the Court’s ruling requires—especially given JPMC’s
“commendable” conduct, Blue Flame Med. LLC v. Chain Bridge Bank, N.A., 2021 WL 4341111,
at *14 (E.D. Va. Sept. 23, 2021). The Court should therefore deny Chain Bridge’s motion.
JPMC does not oppose Chain Bridge being granted the opportunity to submit a revised fee
request, accompanied by sufficiently detailed documentation, reflecting only fees for expenses
incurred defending the U.C.C.-based claims asserted by Blue Flame. 1
BACKGROUND
On June 12, 2020, Blue Flame filed a 10-count complaint against Chain Bridge and two
of its executive officers (collectively, Defendants). Compl., Dkt. 1.
Counts I and II were grounded on the claim that Defendants violated “Federal Reserve
Board regulations that strictly control whether, when, and under what circumstances a bank may
agree to return or cancel a wire transfer it receives for a beneficiary account holder.” Compl. ¶ 4;
see id. ¶¶ 86-112. Specifically, those first two counts alleged violations of Article 4A of the
U.C.C. as incorporated into the Federal Reserve Board’s Regulation J, § 4A-404(a) (Count I) and
1 JPMC respectfully disagrees with, and has appealed, the Court’s ruling that JPMC is
liable to Chain Bridge for indemnification at all. See Dkt. 181. For purposes of Chain Bridge’s
motion, JPMC does not contest the ruling here, but JPMC’s arguments should not be construed
in any way to waive or concede any aspect of its arguments on appeal.
2
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§ 4A-204 (Count II). See id. ¶¶ 86-112. In substance, the counts asserted that Chain Bridge was
not allowed to “cancel or amend the payment order after it had been accepted.” Id. ¶ 93; see id.
¶ 110 (Chain Bridge “issued a new payment order on behalf of Blue Flame”). 2
Counts IV and V made an additional set of allegations. They alleged tortious interference
with contract and business expectancy (respectively) by asserting that “Defendants knew of
[Blue Flame’s] contractual relationship” and “Blue Flame’s business expectancy” “at the time
Defendants unilaterally contacted California officials and accused Blue Flame of fraud, without
basis.” Compl. ¶¶ 128, 137. Count IX was also based on allegations that Defendants “contacted
[California], and claimed that the transaction was fraudulent and made other false statements
casting aspersions on the business and character of Blue Flame.” Id. ¶ 166.
On October 13, 2020, Chain Bridge filed a third-party complaint against JPMC. Third-
Party Compl., Dkt. 43. It asserted that, “under UCC § 4A-211(f) JPMorgan is liable to Chain
Bridge Bank, N.A. for ‘any loss and expenses, including reasonable attorney’s fees, incurred …
as a result of the cancellation’ of JPMorgan’s payment order.” Id. ¶ 20.
Discovery ensued, which culminated in all parties moving for summary judgment. On
September 23, 2021, the Court granted summary judgment for Chain Bridge on Blue Flame’s
U.C.C. claims. Blue Flame Med. LLC v. Chain Bridge Bank, N.A., 2021 WL 4341111, at *1
(E.D. Va. Sept. 23, 2021). The Court also granted summary judgment for Chain Bridge on Blue
Flame’s state-law claims. Id. at *12-13. Finally, the Court granted summary judgment on Chain
Bridge’s indemnification claim against JPMC. Id. at *13-14. The Court made clear that its
conclusion on indemnification was “not meant to punish or criticize JPMorgan” and noted that
2 Five counts in the complaint (III, VI, VII, and VIII, and X) were dismissed as preempted
by the U.C.C. Dkts. 31, 32.
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“JPMorgan’s quick and thorough investigation of potential fraud is commendable.” Id. at *14.
Recognizing that JPMC “went above and beyond for its customer, California,” the Court
suggested that JPMC could “work out with California, in the separate proceeding in California,
how to allocate its losses.” Id.
In March 2021, JPMC had submitted a notice of claim with California’s Government
Claims Program; on September 14, 2021, California rejected it.
LEGAL STANDARD
“[S]tatutory indemnification provisions should be strictly construed.” Galante v. Queens
Borough Pub. Libr., 2016 WL 4573978, at *6 (E.D.N.Y. Sept. 1, 2016) (describing New York
law). Similarly, authority for awarding attorneys’ fees should be “interpreted narrowly.” C.F.
Tr., Inc. v. First Flight Ltd. P’ship, 359 F. Supp. 2d 497, 503 (E.D. Va. 2005). A party cannot
recover attorneys’ fees for a claim unless that claim is “vested with” an “independent statutory or
contractual right to recovery”—even if the claim is “closely intertwined with the claims for
which fees were awarded.” Hair Club for Men, LLC v. Ehson, 2017 WL 1250998, at *4-5 (E.D.
Va. Apr. 3, 2017). In other words, where “claims are not dependent on provisions of contract or
statute that permits recovery of fees, the Court may not award fees for those claims.” Id. at *5.
“[T]he fee applicant bears the burden of establishing entitlement to an award,” Hensley v.
Eckerhart, 461 U.S. 424, 437 (1983), and “proper documentation is key,” Auto. Fin. Corp. v.
EEE Auto Sales, Inc., 2011 WL 3422648, at *2 (E.D. Va. Aug. 3, 2011) (Brinkema, J.).
Specifically, the fee applicant “should maintain billing time records in a manner that will enable
a reviewing court to identify distinct claims.” Hensley, 461 U.S. at 437; Fair Hous. Council of
Greater Washington v. Landow, 999 F.2d 92, 97 (4th Cir. 1993) (“applicant must make every
effort to submit time records which specifically allocate the time spent on each claim”); Colli v.
S. Methodist Univ., 2012 WL 13027419, at *3 (N.D. Tex. Oct. 22, 2012) (“[W]hen a lawsuit
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involves multiple claims, the party seeking attorney fees must segregate recoverable fees from
those incurred on claims for which fees are not recoverable.”). A fee applicant “may recover
‘only the portion of his fees that he would not have paid but for’ the [fee-entitling claims].”
Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1187 (2017). “Accordingly, if a
billing entry includes a description of both recoverable and nonrecoverable work but does not
identify the amount of time spent on each type of work, the entire entry will be deducted from
plaintiff’s recoverable hours.” Salim v. Dahlberg, 2016 WL 2930943, at *10 (E.D. Va. May 18,
2016) (Brinkema, J.).
ARGUMENT
I. CHAIN BRIDGE IS ENTITLED ONLY TO REASONABLE FEES AND EXPENSES INCURRED
AS A RESULT OF BLUE FLAME’S U.C.C. CLAIMS—NOT BLUE FLAME’S STATE-LAW
CLAIMS
Chain Bridge demands indemnification for fees and expenses spent defending the three
state-law claims that survived dismissal: tortious interference with contract; tortious interference
with business expectancy; and defamation. Chain Bridge is not entitled to that.
A. Article 4A, As The Exclusive Means For Determining Legal Obligations,
Does Not Permit Chain Bridge To Recover Attorneys’ Fees For Its Separate
State-Law Claims
1. Article 4A is an exclusive remedy
“The rules adopted from Article 4A serve as the exclusive means for determining the
rights, duties and liabilities of all parties involved in a Fedwire funds transfer.” Eisenberg v.
Wachovia Bank, N.A., 301 F.3d 220, 223 (4th Cir. 2002). Thus, state-law causes of action
“premised on conduct falling within the scope of [Article 4A], whether the state law conflicts
with or is duplicative of [Article 4A],” are preempted. Id.; see also Choice Escrow & Land Title,
LLC v. BancorpSouth Bank, 754 F.3d 611, 625 (8th Cir. 2014) (“Article 4A preempts common
law causes of action ‘in two specific areas: (1) where the common law claims would create
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rights, duties, or liability inconsistent with Article 4A; and (2) where the circumstances giving
rise to the common law claims are specifically covered by Article 4A.’”). In this case, the Court
held that the three state-law claims at issue here were not preempted by Article 4A. See Dkts.
31, 32. Necessarily, then, these state-law causes of action were not “premised on conduct falling
within the scope of [Article 4A],” Eisenberg, 301 F.3d at 223, or given rise by “circumstances …
specifically covered by Article 4A,” Choice Escrow, 754 F.3d at 625.
Extending Section 4A-211(f)’s indemnification provision to cover fees and expenses
incurred in defending against these state-law claims would violate those settled principles of law.
It would create “rights” held by a U.C.C. indemnitee, “duties” incumbent upon a U.C.C.
indemnitor, and “liabilities” running between them for common-law conduct falling outside the
scope of the U.C.C.—defying the Fourth Circuit’s command that “Article 4A serve[s] as the
exclusive means for determining the rights, duties and liabilities of all parties” involved in a wire
transfer. Eisenberg, 301 F.3d at 223 (emphasis added).
The reasoning of Choice Escrow is instructive. There, the Eighth Circuit held that a bank
could sue its customer to enforce a contractual indemnification provision for attorneys’ fees
because Article 4A “contains no provision allocating attorney’s fees between the bank and its
customer in the event of litigation.” Choice Escrow, 754 F.3d at 626. Where conduct falls
outside the scope of Article 4A, parties are free to negotiate their own indemnification clauses
that allocate the risk of loss for it. The Eighth Circuit explained that, “[a]lthough awarding
attorney’s fees to a bank under an indemnification agreement might reduce a [beneficiary]’s
overall recovery against that bank, it would do so for reasons extrinsic to Article 4A’s attempts
to balance the risk of loss due to a fraudulent payment order.” Id. Choice Escrow thus enforces
the general proposition that indemnification for conduct outside of Article 4A’s ambit must—if it
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is to be obtained—be arranged by some mechanism outside of the U.C.C. (e.g., private
agreement). The Court found no such private agreement here.
2. Courts narrowly construe indemnification provisions
Even aside from Article 4A’s exclusivity, indemnification provisions are narrowly
construed. For example, in Industrial Enterprises, Inc. v. Penn America Insurance Co., the
Fourth Circuit rejected the claim that a standard comprehensive general liability insurance (CGL)
policy indemnified the insured for liability under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA). 637 F.3d 481, 489 (4th Cir. 2011). As the Fourth
Circuit explained, “The standard CGL policy language … was formulated to address an insured’s
tort liability for property damage caused to third parties. The scope of that risk was well
understood, and there is no evidence to indicate that the broad, indeterminate risks of CERCLA
liability somehow became automatically includable in the term ‘property damage[.]’” Id. Here,
Section 4A-211(f) imposes liability on sending banks for the “reasonable attorney’s fees”
“incurred by” a receiving bank “as a result of [a] cancellation.” The “scope of that risk” does not
include “the broad, indeterminate risks,” Industrial Enters., 637 F.3d at 489, that arise from a
receiving bank (Chain Bridge) unilaterally questioning a transaction with the sending bank’s
client (California). The latter “broad, indeterminate risks” resulted in Blue Flame’s state-law
claims for tortious interference and defamation. Id. Accordingly, those state-law claims are not
covered by the U.C.C.’s indemnification provision.
In Perdue Farms, Inc. v. Travelers Casualty & Surety Co. of America, an insurance
agreement covered expenses for ERISA claims but not wage-and-hour claims. 448 F.3d 252,
261-262 (4th Cir. 2006). Former employees sued the insured, asserting both types of claims.
The district court concluded that “Travelers had a duty to indemnify all claims ‘reasonably
related’ to those covered by its policy,” but the Fourth Circuit held that to be erroneous. Id. at
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260. As the Fourth Circuit explained, “even a suit with multiple claims will typically involve
both a similar set of operative facts and overlapping legal theories,” so “applying the reasonably
related rule to indemnification would often leave insurers footing the bill for an entire judgment
or settlement, even for those claims the policy did not reach.” Id. at 261. Emphasizing that
“Travelers is not liable for non-covered claims,” the Fourth Circuit directed the district court, on
remand, to determine an “apportionment of … amounts among covered and non-covered
claims.” Id. at 263. The same type of apportionment is imperative here.
The principal case Chain Bridge cites in support of its demand for reimbursement of
state-law claim expenses is distinguishable. See Chain Bridge Fees Mem. (“Mem.”) 10 (citing
Pike Creek Chiropractic Ctr., P.A. v. Robinson, 637 A.2d 418 (Del. 1994)), Dkt. 195. Pike
Creek concerned a demand for indemnification under a contract provision. At the threshold, the
policies animating private indemnification agreements are not freely transferable to statutory
indemnification regimes. See Perconti v. Thornton Oil Corp., 2002 WL 982419, at *9 (Del. Ch.
May 3, 2002) (“The policies behind the general contract law of Delaware, as enunciated in Pike
Creek, are different from the particular considerations motivating the indemnification of officers
and directors, whether directly pursuant to statute or through bylaws as authorized by statute.”).
Indeed, as several courts have held, “the [Pike Creek] decision was premised upon what the
parties explicitly agreed in the contract[.]” Leaf River Cellulose, LLC v. Mid-Continent Cas. Co.,
2012 WL 1033477, at *8 (S.D. Miss. Mar. 27, 2012); E.I. DuPont de Nemours & Co. v. Custom
Blending Int’l, Inc., 1998 WL 842289, at *6 (Del. Ch. Nov. 24, 1998) (“The specific [provision]
and its relevance here … distinguishes this situation from Pike Creek.”).
Moreover, the Pike Creek contract provision was substantially broader than U.C.C. § 4A-
211(f). It required the employee to indemnify the employer “against any liabilities and expenses,
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including attorney’s fees which result from any acts and admissions [sic] of the [e]mployee.”
637 A.2d at 419-20 (emphasis added). Here, indemnification is limited to any loss and expenses
“incurred by the bank as a result of the cancellation.” U.C.C. § 4A-211(f) (emphasis added).
Those distinct clauses are by no means “practically indistinguishable,” as Chain Bridge claims
(Mem. 12). And distinct language demands tailored analysis as to each one’s scope. Finally, as
explained below (pp.16-17), Pike Creek occupies a minority position in its broad reading of what
the indemnification provision permitted. See Warren Drilling Co. v. Equitable Prod. Co., 621 F.
App’x 800, 806-807 (6th Cir. 2015) (listing Pike Creek to state the law of only “two
jurisdictions” that “go the other way” from “most jurisdictions” in awarding “fees on fees”). Put
simply, Pike Creek is inapplicable.
B. Fees Incurred As A Result Of State-Law Claims Were Not Incurred
“As A Result Of The Cancellation”
There is a second, independent bar for reimbursement of Chain Bridge’s state-law claims:
Section 4A-211(f) imposes a causation standard that Chain Bridge cannot satisfy because the
fees and expenses associated with Blue Flame’s state-law claims were not incurred “as a result of
the cancellation.” The phrase “as a result” imposes both factual and proximate-cause standards.
See, e.g., National Org. for Marriage, Inc. v. United States, 24 F. Supp. 3d 518, 529 (E.D. Va.
2014) (citing Paroline v. United States, 572 U.S. 434, 445 (2014) for the “common maxim that a
plaintiff must prove both proximate cause and actual cause to recover damages that are ‘a result
of’ a particular defendant’s conduct”); Estate of Kalahasthi v. United States, 630 F. Supp. 2d
1120, 1128 (C.D. Cal. 2008) (“use of ‘arising out of’ and ‘relating to’ was broader and more
expansive than … ‘as a result of’”). “The traditional way to prove that one event was a factual
cause of another is to show that the latter would not have occurred ‘but for’ the former.”
Paroline, 572 U.S. at 449-50. Proximate cause “defies easy summary,” but it “is often
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explicated in terms of foreseeability or the scope of the risk created by the predicate conduct.”
Id. at 444-445.
Chain Bridge cannot show that the wire’s cancellation was the factual, let alone
proximate, cause of the fees it incurred defending the state-law claims. Blue Flame’s state-law
claims are grounded in alleged comments that Chain Bridge made to California officials that
purportedly tarnished Blue Flame’s reputation and scuttled its business relationship with the
State. Chain Bridge made the allegedly offending statements before the cancellation, and thus
necessarily did not do so “as a result of” it. See, e.g., Ex. 21 to Loretta Decl. in Supp. of JPMC’s
Mot. for Summ. Judgment (“JPMC MSJ”), Dkt. 113-22, Gonzales Dep. 49:21-50:15 (California
official testifying that Mr. Evinger conveyed, before the wire’s return, that Blue Flame account
was opened by a “political lobbyist” one day before transaction); see also Ex. 29 to Loretta Decl.
in Supp. of JPMC MSJ, Dkt. 113-30, CBB00004453 at 4466 (internal Chain Bridge notes from
same call, recording that “David [Evinger] and John [Brough] explained to [California officials]
that the recipient’s account was just opened yesterday by a client of the bank who is a political
lobbyist,” which “seemed to surprise them”). These alleged communications were animated by
Chain Bridge’s concerns about the wire, which preceded, and so would have existed even absent,
cancellation. Moreover, such communication between receiving banks (Chain Bridge) and a
non-customer accountholder (California) is not to be expected. See Ex. 21 to Loretta Decl. in
Supp. of JPMC MSJ, Dkt. 113-22, Gonzales Dep. 97:22-98:22 (California employee testifying
that “it’s not typical for us to speak to the counterparty’s bank”); see also Ex. 22 to Loretta Decl.
in Supp. of JPMC MSJ, Dkt. 113-23, Baxter Rep. ¶¶ 42 (“remarkable step of contacting the State
of California”), 74 (“unusual even in exceptional circumstances”).
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Blue Flame’s defamation claim most easily illustrates why Chain Bridge cannot satisfy
its causal burden. That claim was based on allegations that Defendants “contacted [California]
and claimed that the transaction was fraudulent and made other false statements casting
aspersions on the business and character of Blue Flame.” Compl. ¶ 166. Cancellation is neither
necessary nor sufficient to support defamation. Indeed, the defamation claim is predicated on
alleged conduct divorced from JPMC’s involvement in the transaction. Furthermore, Chain
Bridge made its allegedly defamatory statements to California before the cancellation happened;
therefore, the statements could not possibly have occurred “as a result of” the cancellation. Cf.
Gill v. Warden, 2011 WL 2358531, at *3 (E.D. Va. June 9, 2011) (“Gill did not commit the
offense for which the present 151-month sentence was imposed until [2001]. Therefore, he
could not have been [in detention from 1985-1987] ‘as a result of the offense for which the
[present 151-month] sentence was imposed[.]’”) (emphasis added); Mack v. Wilcox Cnty.
Comm’n, 2009 WL 4884310, at *5 (S.D. Ala. Dec. 9, 2009) (“Plaintiff’s claim that he was
terminated because he filed an EEOC [charge] fails … because … Plaintiff’s termination
preceded his EEOC charge; thus, the charge could not have triggered Plaintiff’s termination and
as a result, was not causally related to the discharge.”). As a matter of plain language and
common sense, Chain Bridge’s expenses in defending against the defamation claim were not
incurred “as a result of the cancellation.”
Nor were fees for the tortious-interference claims incurred “as a result of the
cancellation.” Those claims asserted that “Defendants knew of [Blue Flame’s] contractual
relationship” and “Blue Flame’s business expectancy” “at the time Defendants unilaterally
contacted California officials and accused Blue Flame of fraud, without basis.” Compl. ¶¶ 128,
137. Indeed, in Chain Bridge’s motion for summary judgment against Blue Flame, Chain Bridge
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urged that there was no basis for the claims “that Defendants defamed Blue Flame or tortiously
interfered with its contracts and business by informing California officials that Blue Flame’s
account had been opened the day before by a political lobbyist.” Chain Bridge Mem. in Supp. of
Mot. for Summ. Judgment Against Blue Flame 3, Dkt. 119. Chain Bridge continued, “Sharing
that indisputably true information with the responsible California officials was rightful, not
tortious.” Id.; see id. at 29 (“Blue Flame’s claims for tortious interference with contract (Count
IV) and business expectancy (Count V) are [like the defamation claim] premised on allegations
that Defendants ‘unilaterally contacted California officials and accused Blue Flame of fraud,
without basis.’”) (quoting Compl. ¶¶ 128, 137). One can only assume, then, that the attorneys’
fees Chain Bridge incurred defending these claims were spent on work that concerned Chain
Bridge’s independent conduct.
Driving home the point that the state-law claims arise from conduct distinct from the
U.C.C. claims is the fact that the two categories of claims were brought against different
defendants. Blue Flame brought the U.C.C. claims against Chain Bridge only (see Compl. 20,
23), and the state-law claims against Chain Bridge and its two executive officers, David Evinger
(President) and John Brough (CEO) (see id. at 27, 28, 32). The state-law claims were based on
conduct by two individual officers while the U.C.C. claims arose from the institutional act of a
wire cancellation. The U.C.C. provides indemnification only for the latter.
Finally, there is no merit to Chain Bridge’s refrain (Mem. 1-2, 3, 8, 9) that the Court
already decided the causation question at issue here. Chain Bridge overreads the Court’s opinion
and fails to acknowledge the distinction between the causation issue at summary judgment and
the analysis required now. At summary judgment, JPMC argued that Blue Flame’s damages
would have accrued whether or not JPMC cancelled the wire because Chain Bridge would not
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have given “Blue Flame unfettered access to the $456 million within enough time for Blue
Flame to complete the deal with California.” JPMC MSJ Reply 6, Dkt. 158. The Court rejected
that argument as “‘speculation.’” Blue Flame Med. LLC v. Chain Bridge Bank, N.A., 2021 WL
4341111, at *14 (E.D. Va. Sept. 23, 2021). While JPMC respectfully disagrees with that
conclusion, the causation point here is different. Here, JPMC asserts that Chain Bridge’s
attorneys’ fees did not accrue “as a result of the cancellation” because the state-law claims are
predicated on theories of liability distinct from the cancellation itself.
C. Fees Incurred As A Result Of State-Law Claims Must Be Excised From
Chain Bridge’s Fee Demand
Chain Bridge has made no effort to segregate the fees incurred on the three state-law
claims (non-eligible for reimbursement) from the fees incurred on the two U.C.C. claims
(eligible for reimbursement), with one ineffective exception. For defamation, in conclusory
fashion, Chain Bridge has asserted that “Robbins Russell separately billed its fees and expenses
related solely to defending against Blue Flame’s defamation claim,” which allegedly totaled
$23,396.50. CB Mem. 9-10 n.3.3 But that sum appears to exclude certain entries for work spent
on defamation claims. 4 Chain Bridge has failed to explain the methodology or tracking system it
3 Chain Bridge asserts that it did so “for purposes relating to Chain Bridge’s discussions
with its insurers” (Mem. 9 n.3), but the fact that it did so at all reveals that it understood the
necessity of segregating fees spent working on specific claims. It failed to do so.
4 The $23,396.50 total apparently represents the sum of entries from invoices titled “Blue
Flame – Defamation”: from June 2020 ($1,391.50), July 2020 ($7,865.00), August 2020
($12,580.00), and July 2021 ($1,560.00). Ex. 1 to Burke Decl. at 13, 30, 40, 234. But those
invoices (and that total) exclude: an entry from February 2021 titled “Email P. Fitzgerald
regarding defamation claim,” an entry from March 2021 that specifically references the
“defamation” section of the summary judgment brief, and several other entries that plainly
included work on the defamation claim (e.g., “Draft state law claim section of reply brief for D.
Burke”). Id. at 150, 169, 217. Chain Bridge understood that time entries pertained to
defamation work even when they did not bear the label “defamation,” see id. 30 (including three
entries titled “Edit Motion to Dismiss” under a Blue Flame-Defamation invoice), yet it failed to
tally up all such entries. The $23,396.50 total also excludes three entries from Chain Bridge’s
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used in tallying the $23,396.50 figure, and so has failed to justify it. Chain Bridge bears the
burden of doing so and should be required to do so by identifying which time entries fall under
which category. See Auto. Fin. Corp. v. EEE Auto Sales, Inc., 2011 WL 3422648, at *2 (E.D.
Va. Aug. 3, 2011) (Brinkema, J.) (“proper documentation is key”).
II. CHAIN BRIDGE IS NOT ENTITLED TO “FEES ON FEES” INCURRED IN PURSUIT
OF INDEMNIFICATION AND INSURANCE
Chain Bridge not only seeks to recover fees it spent defending against Blue Flame’s state-
law claims, but also it expects JPMC to pay for fees that Chain Bridge spent trying to recoup fees
and expenses from JPMC and Chain Bridge’s insurers. Recovering fees incurred in pursuit of
indemnification—so-called “fees on fees”—is not permitted absent an unmistakably clear
directive, which Section 4A-211(f) lacks. Under the same principle, Chain Bridge is not entitled
to recover for fees in pursuit of insurance.
A. “Fees On Fees” Are Available Only Where Specifically Authorized, And
There Is No Such Authorization In Section 4A-211(f)
“Under the general and ‘virtually unanimous rule,’ an indemnitee may recover only those
attorney fees reasonably incurred in defending the claim indemnified against; the indemnitee
may not recover attorney fees incurred in establishing the right to indemnity.” James
Constructors, Inc. v. Salt Lake City Corp., 888 P.2d 665, 673 (Utah Ct. App. 1994); Wells Fargo
Bank, N.A. v. Nat’l Bank of Com., 240 So. 3d 541, 547 (Ala. 2017) (“[T]he allowance of attorney
fees is limited to the defense of the claim indemnified against and does not extend to services
rendered in establishing the right of indemnity.”); In re Health Mgmt. Sys., Inc. Sec. Litig., 82
insurance-coverage counsel (billed from January 9-January 10, 2021) relating specifically to the
defamation claim. Ex. 2 to Burke Decl. at 32. To be clear, JPMC is not simply asking for those
identified examples to be added to the defamation category; rather, these examples illustrate the
unreliability of Chain Bridge’s characterizations and the need for clearer records.
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F. Supp. 2d 227, 236 (S.D.N.Y. 2000) (“[W]here a party is provided with indemnification by
statute or agreement, it is nevertheless not entitled to its fees for enforcing its rights against the
indemnitor absent specific language to that effect.”), aff’d sub nom. Baker v. Health Mgmt. Sys.,
Inc., 298 F.3d 146 (2d Cir. 2002). The same is true under federal law. See, e.g., In re Fitzgerald
Marine & Repair, Inc., 619 F.3d 851, 864 (8th Cir. 2010) (“Under maritime law, ‘[a] contract of
indemnity includes the obligation to pay the costs and attorneys fees of the indemnitee against
the third party, but not the right to costs and fees in connection with establishing the right to
indemnification unless expressly stated.’”); SPM Corp. v. M/V Ming Moon, 22 F.3d 523, 526 (3d
Cir. 1994) (“[T]he costs of prosecuting the indemnity claim itself may not be recovered.”).
This presumption against “fees on fees” derives from the American Rule, which requires
that each side, winner and loser, bears its own attorneys’ fees. See Galante v. Queens Borough
Pub. Libr., 2016 WL 4573978, at *6 (E.D.N.Y. Sept. 1, 2016) (explaining, “[s]tarting from the
general American Rule,” why there was insufficient statutory authority for “fees on fees”). The
American Rule is “a longstanding legal principle, and one ‘deeply rooted’ in our nation’s
common law tradition, with origins dating back perhaps as early as 1796.” In re Crescent Cty.
Ests., LLC, 588 F.3d 822, 825-26 (4th Cir. 2009); id. at 826 (noting judicial “duty to keep the
American Rule intact”). Section 4A-211(f) preserves the American Rule in the “fees on fees”
context because it lacks any indication that sending banks should have to pay fees spent by
receiving banks in pursuing their claims for indemnification. The text of the provision covers
“any loss and expenses, including reasonable attorney’s fees, incurred by the bank as a result of
the cancellation.” If that language were deemed enough to encompass “fees on fees,” nearly
every indemnification provision would do so, and that is clearly not the law. Cf. Hooper Assocs.,
Ltd. v. AGS Computers, Inc., 548 N.E.2d 903, 905 (N.Y. 1989) (clause obligating defendant “to
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‘indemnify and hold harmless [plaintiff] … from any and all claims, damages, liabilities, costs
and expenses, including reasonable counsel fees’” was “typical of those which contemplate
reimbursement when the indemnitee is required to pay damages on a third-party claim” and
lacked “language clearly permitting plaintiff to recover from defendant the attorney’s fees
incurred in a suit against defendant”).
For the same reason Chain Bridge cannot recover fees in pursuit of indemnification, it
cannot saddle JPMC with the fees it spent exploring the scope of its private insurance coverage.
The principle underlying the American Rule is that the “cost of recovering damages” is properly
borne by the party that recovers damages, Bradford v. HSBC Mortg. Corp., 280 F.R.D. 257, 262
(E.D. Va. 2012)—even if that “cost” of recovery depresses the total amount of recovery. Chain
Bridge is free to engage legal help to maximize its amount of insurance recovery, but the cost of
doing so cannot be shunted to JPMC.
There is another problem here too: these insurance fees lack the requisite causal
connection to the cancellation. It bears emphasis that Chain Bridge has failed to adequately
specify what kind of insurance work its fees were spent on, including whether insurance was
sought only for the state-law claims described above. Many of Chain Bridge’s entries are simply
impossible to categorize. See Ex. 2 to Burke Decl. at 37 (“Checking in”); id. at 38 (“Memo”).
But in any event, allowing insurance-fee recovery would put sending banks on the hook for any
kind of expenses a receiving bank—even one like Chain Bridge who insists it was certain from
the start of its “‘built in’” right to indemnification, see, e.g., Blue Flame Med., 2021 WL
4341111, at *14—might opt to spend.
To support “fees on fees,” Chain Bridge again cites Pike Creek (see Mem. 11-12). But
Pike Creek has been roundly criticized for that holding, which occupies a “distinct minority”
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position. Warren Drilling Co. v. Equitable Prod. Co., 621 F. App’x 800, 806 (6th Cir. 2015)
(“[M]ost jurisdictions hold that, absent a clear statement to the contrary, the indemnified party
may not recover attorney’s fees incurred in the course of determining the meaning or scope of an
indemnity clause.”) (collecting cases); id. at 807 (“Just two jurisdictions appear to go the other
way.”) (citing Pike Creek); Nova Rsch., Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 288 n.6
(Md. 2008) (Pike Creek embraces a “distinct minority view”).
And Chain Bridge’s citation to Delaware state law (Mem. 12 (citing Stifel Fin. Corp. v.
Cochran, 809 A.2d 555 (Del. 2002))), also provides it no help. In fact, it provides a helpful
illustration of the rule that does not apply here. Under Delaware law, “fees on fees” are
recoverable unless specifically disclaimed. See Rekor Sys., Inc. v. Loughlin, 2020 WL 6898271,
at *16 (S.D.N.Y. Nov. 23, 2020) (“The Delaware Chancery Court has held that under Stifel, fees
on fees are ‘an inherent right of [a] party materially successful in asserting a claim for
indemnification or advancement,’ unless the applicable bylaws ‘specifically exclude’ them.”);
see Weaver v. ZeniMax Media, Inc., 2004 WL 243163, at *7 (Del. Ch. Jan. 30, 2004) (“Under
Stifel Financial, if a corporation does not want to incur the obligation to pay ‘fees on fees,’ it
must expressly preclude any such right.”). In Stifel, the applicable bylaw permitted
indemnification “to the ‘fullest extent permitted by law’” and there was “no express prohibition
in the law against indemnification of expenses incurred in prosecuting the indemnification suit.”
Stifel Fin., 809 A.2d at 560. Naturally, then, under the Delaware rule, “fees on fees” were
recoverable. This case is not in Delaware state court, nor is it governed by Delaware law. And
Delaware law runs contrary to the default rule. See Thor 725 8th Ave. LLC v. Goonetilleke, 675
F. App’x 31, 34 (2d Cir. 2017) (“An award of ‘fees on fees’ requires ‘specific language to
indicate that time spent in justifying a fee application was to be included.’”).
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Chain Bridge also cites (Mem. 13-14) a number of fee cases that have no bearing here.
For example, awarding fees under the removal statute (28 U.S.C. § 1447(c)) intends to “deter
removals sought for the purpose of prolonging litigation and imposing costs on the opposing
party.” Martin v. Franklin Cap. Corp., 546 U.S. 132, 140 (2005). There is no such deterrence
objective here. Similarly inapplicable are fee-shifting statutes like the Clean Air Act and 42
U.S.C. § 1988, which aim to “promote citizen enforcement of important federal policies.” Lyle
v. Food Lion, Inc., 954 F.2d 984, 988 n.1 (4th Cir. 1992). No such incentive exists here.
Instead, the default rule of no “fees on fees” applies.
B. Indemnification And Insurance Fees Must Be Excised From
Chain Bridge’s Fee Demand
Chain Bridge asserts (Mem. 11 n.4) that its “fees on fees” amount to “$343,929.50 to
Robbins Russell and $31,280 to CRI Compliance.” A fee applicant must present its case using
“billing time records in a manner that will enable a reviewing court to identify distinct claims,”
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983), not by mere say-so. Chain Bridge has failed to
do so; for example, it billed over 8 hours to drafting and revising an outline for the deposition of
Natalie Gonzales, an employee of the California State Treasurer’s Office. Ex. 1 to Burke Decl.
at 21-22. During the Gonzales deposition, Chain Bridge pursued lines of questioning relating to
its indemnification claim and relating to other claims. It is Chain Bridge’s burden to identify
which time entries account for “fees on fees” and to subtract those from its fee demand.
Furthermore, Chain Bridge has identified $158,650.50 in fees paid to “insurance-
coverage counsel,” Weisbrod Matteis & Copley, “relating to legal advice about the assertion of
coverage for Blue Flame’s claims.” CB Mem. 2. Chain Bridge has failed to identify the amount
of time its litigation counsel, Robbins Russell, spent on insurance issues—much less explain
whether any insurance analysis went to reimbursable U.C.C. issues or non-reimbursable state-
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law issues. The time records from Robbins Russell make clear that it spent at least some time
working on insurance. See Ex. 1 to Burke Decl. at 47 (“Emails re insurance issues”). Chain
Bridge bears the burden of identifying which time entries count towards insurance fees; those
fees must be subtracted from Chain Bridge’s award.
III. CHAIN BRIDGE IS NOT ENTITLED TO FEES IT WOULD HAVE INCURRED REGARDLESS
OF THE U.C.C. CLAIMS
Finally, certain issues are common to Blue Flame’s U.C.C. and state-law claims—most
notably, discovery and briefing related to Blue Flame’s damages. JPMC should not be
responsible for fees that Chain Bridge would have incurred regardless of the U.C.C. claims for
which JPMC has been held to have an indemnification obligation, and it is Chain Bridge’s
burden to identify which fees those are. Chain Bridge’s time records fail to do so. Moreover,
those records often contain vague, abstract descriptions that preclude the necessary
categorization and review.
A. Chain Bridge Has Failed To Disaggregate Fees It Would Have Incurred
Absent The Indemnification-Triggering Conduct
Federal courts apply a “but-for causation standard” to fee shifting where, as here, some
categories of fees are reimbursable and others are not. Goodyear Tire & Rubber Co. v. Haeger,
137 S. Ct. 1178, 1187 (2017) (fees shifted pursuant to court’s inherent sanctions authority); Fox
v. Vice, 563 U.S. 826, 836 (2011) (fees shifted pursuant to 42 U.S.C. § 1988); Beastie Boys v.
Monster Energy Co., 112 F. Supp. 3d 31, 58 (S.D.N.Y. 2015) (“strip[ping] out the legal work
that, but for the Lanham Act claim, would not have been done”). 5 Specifically, the “complaining
5 Where a fee-shifting provision uses language like “caused by” (Federal Rule of Civil
Procedure 37(b)(2)(C)), “directly resulting from” (Rule 11(c)(4)), or “because of” (28 U.S.C.
§ 1927), it is particularly clear that “causal connection” is required. Goodyear Tire, 137 S. Ct. at
1186 n.5. Here, of course, the fee-shifting provision permits recovery of attorneys’ fees incurred
“as a result.” U.C.C. §4A-211(f). “[F]ee-shifting statutes’ similar language is ‘a strong
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party … may recover ‘only the portion of his fees that he would not have paid but for’ the [fee-
entitling claims].” Goodyear Tire, 137 S. Ct. at 1187 (quoting Fox); Caraway v. City of
Elizabeth City, 854 F. App’x 472, 474 (4th Cir. 2021) (Where the fee applicant incurred
expenses relating to both reimbursement-eligible and non-eligible claims, the court may award
attorney’s fees … ‘only for costs that the [applicant] would not have incurred but for the
[eligible] claims.”); Mulugeta v. Ademachew, 2019 WL 7945712, at *2 (E.D. Va. Nov. 6, 2019)
(“Fees are awardable if they would not have been incurred but for the [reimbursement-eligible
work].”). “When a ‘defendant would have incurred [an] expense in any event[,] he has suffered
no incremental harm from the [fee-entitling] claim,’ and so the court lacks a basis for shifting the
expense.” Goodyear Tire, 137 S. Ct. at 1187 (quoting Fox). 6
The “but-for causation standard generally demands that a district court assess and allocate
specific litigation expenses.” Goodyear Tire, 137 S. Ct. at 1187. “The court’s fundamental job
is to determine whether a given legal fee—say, for taking a deposition or drafting a motion—
would or would not have been incurred in the absence of the [fee-entitling claims].” Id. “The
award is then the sum total of the fees that, except for the [fee-entitling claims], would not have
accrued.” Id.
indication’ that they are to be interpreted alike.” Independent Fed’n of Flight Attendants v.
Zipes, 491 U.S. 754, 758 n.2 (1989).
6 Fee-shifting in the sanctions context is shaped by the principle that sanctions “must be
compensatory, not punitive.” Salgam v. Advanced Software Sys., Inc., 2020 WL 6322857, at *5
(E.D. Va. July 2, 2020) (explaining rationale behind Goodyear’s causation standard). The same
principle animates fee-shifting here. See U.C.C. § 4A-211 cmt. 5 (when a receiving bank
“agrees to cancellation” it “should not incur a risk of loss in doing so”). Section 4A-211(f) is
designed to make receiving banks whole for losses incurred as a result of a cancellation—not to
punish sending banks by forcing them to cover expenses that receiving banks incurred as a result
of distinct and independent conduct that happened to occur around the same time as the
cancellation. That point is particularly salient here where Chain Bridge acted unilaterally vis-à-
vis California and where the Court’s conclusion regarding indemnification was explicitly “not
meant to punish or criticize JPMorgan.” Blue Flame, 2021 WL 4341111, at *14.
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Here, Chain Bridge “would have incurred,” Goodyear Tire, 137 S. Ct. at 1187, many of
its fees if the only claims asserted against it were ones not held to be eligible for fee-shifting—
i.e., the state-law claims Blue Flame brought because of Chain Bridge’s unilateral, independent,
and antecedent-to-cancellation communication with California. Those include, at least, fees
expended on contesting the existence of Blue Flame’s damages, see Blue Flame, 2021 WL
4341111, at *12 (granting summary judgment on tortious interference claims “for the same
reason that Count I failed: there is insufficient evidence in this record from which a reasonable
factfinder could conclude that Blue Flame could have fulfilled California’s order and that
California would not have cancelled the contract and insisted on a return of the funds in that
event”), and general litigation management (or at least some allocable portion of it), see, e.g., Ex.
1 to Burke Decl. at 175 (“Weekly team strategy meeting”).
“To whatever extent any portion of the fee claim cannot be segregated into the allowable
component and the component that is not allowed, that risk should be borne by the fee
claimants.” Madeira v. Affordable Hous. Found., Inc., 323 F. App’x 89, 92 (2d Cir. 2009). The
Fourth Circuit recognizes that “some claims may have such a common core of facts and legal
theories so as to prevent any allocation of the fees to the applicant’s separate claims,” but it
“admonish[es] all parties that a blind adherence to this argument runs the risk of incurring a
complete denial of fees.” Fair Hous. Council of Greater Washington v. Landow, 999 F.2d 92, 97
(4th Cir. 1993). Chain Bridge’s fee demand reflects such a “blind adherence,” id., as it has
declined thus far to separate any single time entry from any other. Moreover, it ignores the basic
deficiencies in certain descriptions. For example, Chain Bridge’s counsel billed 7.70 hours to
“Draft deposition outline.” Ex. 1 to Burke Decl. at 72; see also id. at 71 (billing 2.50 hours to
same); id. at 73 (billing 6.80 hours to same). It is unclear whether that deposition outline was for
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the non-reimbursable, indemnification-related deposition of Charles Grice (Chain Bridge’s
expert on indemnification) or for a different witness.
Chain Bridge’s failure to isolate its indemnifiable fees from its non-indemnifiable fees is
particularly unjustified because Chain Bridge has known, from the earliest days of this litigation,
that it would have that obligation. See In re Navidea Biophamaceuticals Litig., 2021 WL
2323380, at *1 (S.D.N.Y. Apr. 21, 2021), report & recommendation adopted sub nom. In re
Navidea Biopharmaceuticals Litig., 2021 WL 2156276 (S.D.N.Y. May 27, 2021) (“[I]t should
have been abundantly clear to … counsel, from the get-go, that, should their client wish to seek
… indemnification … of his attorneys’ fees in this case, he would have to be able to segregate
the time spent by counsel in defending each of the different claims[.]”). As in Navidea, Chain
Bridge’s lawyers “failed to make efforts to identify the particular claims on which they were
working.” Id. 7
Finally, Chain Bridge failed to describe its fees with appropriate particularity. Thus,
JPMC has also been unable to determine whether they are “excessive, redundant, or otherwise
unnecessary,” Hensley, 461 U.S. at 434, in violation of Section 4A-211(f)’s provision for
“reasonable” attorneys’ fees. As just one example, a time entry called “Update cast of
characters” charges JPMC $1,331. Ex. 1 to Burke Decl. at 83. It is unclear what that means and
7 “Inadequate documentation includes the practice of grouping, or ‘lumping,’ several tasks
together under a single entry, without specifying the amount of time spent on each particular
task.” Guidry v. Clare, 442 F. Supp. 2d 282, 294 (E.D. Va. 2006). This practice is known as
“block billing,” and it is inadequate for fee applications because it renders courts unable “to
ascertain how much time was spent on each task for which a fee is requested.” Jones v.
Southpeak Interactive Corp. of Del., 2014 WL 2993443, at *9 (E.D. Va. July 2, 2014), aff’d,
777 F.3d 658 (4th Cir. 2015). The problem is particularly pronounced here where fees for some
block-billed tasks are reimbursable while others are not. See Ex. 1 to Burke Decl. at 35 (“Work
on draft MTD reply, including revisions to brief, reviewing comments from clients and emails re
same, discussion with insurance counsel, and finalizing for filing”) (emphasis added).
22
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5648
therefore whether 2.20 hours is an excessive amount of time to spend on it. See also id. at 143
(“Deposition matters.”); id. at 146 (“Review correspondence.”). JPMC reserves all rights to
challenge not only the recoverability but the reasonableness of Chain Bridge’s fees, upon
production of appropriately particularized supporting documentation.
B. Fees That Would Have Been Incurred Absent Blue Flame’s U.C.C. Claims
Must Be Excised From Chain Bridge’s Fee Demand
As with the other categories of excludable fees, it is Chain Bridge’s burden to identify,
with particularity, fees that would have been incurred absent Blue Flame’s U.C.C. claims and to
subtract those from its fee demand.
CONCLUSION
Respectfully, the Court should deny Chain Bridge’s motion with prejudice as to fees and
expenses related to (1) non-U.C.C. claims, (2) fees in pursuit of its indemnification and
insurance, and (3) fees that would have been incurred in the absence of the U.C.C. claims.
JPMC does not oppose Chain Bridge being granted an opportunity to submit a revised fee
request as to those fees and expenses unrelated to the above categories, accompanied by
sufficiently detailed documentation to enable adequate review.
23
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5649
Dated: November 18, 2021 Respectfully submitted,
WILMER CUTLER PICKERING HALE
AND DORR LLP
/s/ Meredith K. Loretta
Meredith K. Loretta (92369)
Albinas J. Prizgintas (pro hac vice)
Whitney Russell (pro hac vice)
1875 Pennsylvania Avenue N.W.
Washington, DC 20006
Tel.: (202) 663-6981
Fax: (202) 663-6363
meredith.loretta@wilmerhale.com
Alan E. Schoenfeld (pro hac vice)
Marissa W. Medine (pro hac vice)
7 World Trade Center
250 Greenwich Street
New York, NY 10007
Tel.: (212) 230-8800
Fax: (212) 230-8888
alan.schoenfeld@wilmerhale.com
Felicia Ellsworth (pro hac vice)
60 State Street
Boston, MA 02109
Tel.: (617) 526-6000
Fax: (617) 526-5000
felicia.ellsworth@wilmerhale.com
Margarita M. Botero (pro hac vice)
1225 17th Street, Suite 2600
Denver, CO 80202
Tel.: (720) 274-3135
Fax: (720) 274-3133
margarita.botero@wilmerhale.com
Attorneys for Third-Party Defendant
JPMorgan Chase Bank, N.A.
24
Case 1:20-cv-00658-LMB-IDD Document 213 Filed 12/07/21 Page 31 of 31 PageID#
5650
CERTIFICATE OF SERVICE
I certify that on this 18th day of November, 2021, I electronically filed the foregoing
using the Court’s CM/ECF system, which will then send a notification of such filing to all
counsel of record.
/s/ Meredith K. Loretta
Meredith K. Loretta
1875 Pennsylvania Avenue N.W.
Washington, DC 20006
Tel.: (202) 663-6981
Fax: (202) 663-6363
meredith.loretta@wilmerhale.com
25
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