Feed Management Systems, Inc. v. Comco Systems, Inc., Comco Manufacturing, Inc. 

This is an Eighth Circuit Court of Appeals' opinion considering an appeal out of the District of Minnesota. Feed Management Systems, Inc. (FMS) and Comco Systems (Comco) entered into a management agreement under which FMS agreed to provide management services and work direction to Brilliant Alternatives, Inc. and Robert Brill (Brill) on behalf of Comco. The agreement also obligated Comco to indemnify FMS for all costs and expenses, including attorneys' fees, for any claims against FMS related to or arising out of the services contemplated in the management agreement. FMS was later sued by Brill and tendered defense to Comco, which rejected the tender. The total cost of FMS's defense, which resulted in summary judgment dismissal of Brill's claims, was $1,133,815.36 in attorneys' fees, costs, and other expenses.

FMS sought reimbursement from Comco for the full cost of its litigation with Brill. The district court granted partial summary judgment in favor of both parties, holding that Comco was obligated to (1) indemnify FMS against claims brought by Brill, and (2) reimburse FMS for $87,350 in attorneys' fees and other expenses but not the entire amount FMS claimed. The Eighth Circuit affirmed, concluding that the Brill's complaint arose from the management agreement because they arose out of FMS's performance under the management agreement and the indemnity provision did not shift liability for FMS's own negligence because it was not found liable for the conduct that Brill alleged. The court further concluded that FMS was only entitled to reimbursement for $87,350 - the costs it incurred - because, after Comco breached the contract, FMS mitigated its damages (as it was required to do under the law) by tendering defense to its insurer and arranging funding through its stockholders, thereby limiting FMS's damages to only those costs it actually incurred, not the entire cost of defense.