USCA4 Appeal: 23-1181 Doc: 48 Filed: 07/16/2025 Pg: 1 of 20
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 23-1181
KERALINK INTERNATIONAL, INC.,
Plaintiff,
v.
STRADIS HEALTHCARE, LLC,
Defendant and Third-Party Plaintiff – Appellee,
GERI-CARE PHARMACEUTICALS CORPORATION,
Third-Party Defendant – Appellant,
and
INSOURCE, INC.; KAREWAY PRODUCT, INC.,
Third-Party Defendants.
No. 23-1246
STRADIS HEALTHCARE, LLC, USCA4 Appeal: 23-1181 Doc: 48 Filed: 07/16/2025 Pg: 2 of 20
Defendant and 3rd-Party Plaintiff – Appellant,
Third Party Defendant – Appellee, and
Defendants.
Appeal from the United States District Court for the District of Maryland, at Baltimore. Catherine C. Blake, Senior District Judge. (1:18-cv-02013-CCB)
Argued: May 6, 2025 Decided: July 16, 2025
Before HARRIS and QUATTLEBAUM, Circuit Judges, and KEENAN, Senior Circuit Judge.
Affirmed by published opinion. Senior Judge Keenan wrote the opinion, in which Judge Harris and Judge Quattlebaum agreed.
Danielle D. Giroux, HARMAN CLAYTOR CORRIGAN & WELLMAN, Glen Allen, Virginia, for Appellant/Cross-Appellee. Kelly Marie Lippincott, GORDON REES SCULLY MANSUKHANI, LLP, Alexandria, Virginia, for Appellee/Cross-Appellant.
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BARBARA MILANO KEENAN, Senior Circuit Judge:
In this appeal, we consider whether the district court erred (1) in awarding summary
judgment to Stradis Health Care, LLC (Stradis) on its claim of implied indemnification
against a joint tortfeasor, Geri-Care Pharmaceuticals Corporation (Geri-Care), and (2) in
denying Stradis’ request that Geri-Care be ordered to pay Stradis’ attorneys’ fees. In a
prior appeal involving these parties, we affirmed the district court’s judgment in favor of
plaintiff KeraLink International, Inc. (KeraLink), the operator of a national network of
“eyebanks,” on its strict products liability claim against Stradis and Geri-Care, two
suppliers of contaminated eyewash used to remove donated eye tissue for future transplant.
KeraLink Int’l v. Geri-Care Pharm., 60 F.4th 175 (4th Cir. 2023). Stradis and Geri-Care
were held jointly and severally liable for the judgment amount of $606,415.49 plus
prejudgment interest.
Upon our review, we hold that the district court did not err under Maryland law in
awarding Stradis implied indemnification against Geri-Care for the products liability
judgment, based on the court’s conclusion that Stradis’ culpability in distribution of the
contaminated eyewash product was secondary to Geri-Care’s primary culpability as the
apparent manufacturer of the product. We also conclude that the district court did not err
or abuse its discretion under Maryland law in denying Stradis’ claim for attorneys’ fees
based on the court’s application of the “American Rule,” which ordinarily precludes the
recovery of attorneys’ fees as compensatory damages unless authorized by statute, rule, or
contract. We therefore affirm the district court’s judgment.
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I.
We state the relevant facts as set forth in our prior decision. Id. KeraLink, which
maintains its business headquarters in Maryland, operates a network of eyebanks in many
states and collects corneas and donated eye tissue for future transplants. KeraLink
purchased from Stradis a number of “surgical packs” containing “eyewash,” among other
products. Stradis had purchased this eyewash from a third party, which had bought the
eyewash from Geri-Care. Geri-Care, in turn, had procured the eyewash from Kareway
Product, Inc. (Kareway), which had obtained the eyewash from a Korean manufacturing
company.
After receiving the eyewash from Kareway, Geri-Care did not test the eyewash for
pathogens but relied on Kareway’s certification that the contents of each box of bottled
eyewash were sterile. Geri-Care registered the eyewash with the Food & Drug
Administration (FDA) and inspected the bottles’ seals and expiration dates. The label on
each eyewash bottle displayed Geri-Care’s logo, stated that the bottle was “distributed by”
Geri-Care, and that the eyewash was a “Product of Korea.” Geri-Care listed no other
entities on the eyewash labeling.
Before Geri-Care marketed the product, Geri-Care requested that Kareway make
changes to the label, including changes to the directions for use, changes to the expiration
dates, and the addition of a statement asserting that the contents were comparable to another
named brand of eyewash. The Geri-Care eyewash label stated that the eyewash was a
“STERILE EYE IRRIGATING SOLUTION.”
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When the eyewash arrived at Stradis’ facility in Georgia, each bottle already had
been individually sealed. After ensuring that the plastic seal on the cap of each bottle was
secure, Stradis placed the eyewash bottles into surgical packs that also contained other
items. Stradis included in each surgical pack sent to KeraLink an insert listing the pack’s
contents, including “sterile eye wash.” The insert also contained a statement that Stradis
had manufactured and distributed the surgical packs.
The Eye Bank Association of America later notified KeraLink about potentially
contaminated eyewash. KeraLink confirmed the presence of contaminants in eight of ten
bottles tested and identified certain lot numbers of Stradis’ surgical packs containing the
potentially contaminated eyewash. Corneal tissue recovered with this contaminated
eyewash was rendered unusable. The record showed that testing conducted by Stradis and
Geri-Care after the reports of contamination confirmed that the eyewash was contaminated
when it left Geri-Care’s and Stradis’ possession.
KeraLink filed suit against Stradis and Geri-Care in the trial court asserting claims
for strict products liability and other claims. Stradis filed a third-party complaint against
Geri-Care and other entities not involved in this appeal. As relevant here, the district court
initially awarded summary judgment to KeraLink on its strict products liability claim
against both Geri-Care and Stradis.1
1 KeraLink alleged additional claims against Stradis and Geri-Care. Those claims are not relevant to this appeal. See KeraLink, 60 F.4th at 180 nn.2 & 3.
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Neither Stradis nor Geri-Care disputed that KeraLink could prove the elements for
a strict products liability claim, but both parties sought to avoid liability by asserting a
“sealed container defense.”2 See id. at 181 (setting forth elements of strict products liability
under Maryland law: (1) “the product was in [a] defective condition at the time that it left
the possession or control of the seller”; (2) the product was “unreasonably dangerous to the
user or consumer”; (3) “the defect was a cause of the injuries”; and (4) “the product was
expected to and did reach the consumer without substantial change in its condition”
(quoting Phipps v. Gen. Motors Corp., 363 A.2d 955, 958 (Md. 1976))). The district court
rejected Stradis’ and Geri-Care’s affirmative defenses and entered “final judgment” on
KeraLink’s claims against Stradis and Geri-Care under Federal Rule of Civil Procedure
54(b), thus permitting Stradis and Geri-Care to appeal to this Court. In its judgment, the
district court held that Stradis and Geri-Care were jointly and severally liable to pay
KeraLink $606,415.49, plus prejudgment interest. Notably, KeraLink did not seek and was
not awarded any attorneys’ fees from Stradis or Geri-Care.
On appeal, we affirmed this part of the district court’s judgment. Id. at 188. In our
analysis, we agreed with the district court that Geri-Care was barred under Maryland Code,
Cts. & Jud. Proc. § 5-405(b) from asserting a “sealed container defense” to the products
liability claim, because Geri-Care had held “itself out as a manufacturer.” Id. at 182-83.
We explained that there was no basis on which a purchaser, sophisticated or otherwise,
2 Geri-Care also asserted an affirmative defense based on the “economic loss rule.” We affirmed the district court’s analysis that Geri-Care was not entitled to rely on this rule. Id. at 184-86.
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could determine from the eyewash bottle and packaging that another entity was a
manufacturer of the eyewash. Id. at 183. Only Geri-Care’s name and logo appeared on
the eyewash bottle and packaging, and only Geri-Care registered the product with the FDA.
Id. Although Geri-Care identified itself as a “distributor” and not as a “manufacturer,” we
concluded that a reasonable jury would determine that Geri-Care was the apparent
manufacturer of the eyewash. Id.
With regard to Stradis, we agreed with the district court that Stradis was a “seller”
of the eyewash and not a “manufacturer.” Id. at 182. Nevertheless, we concluded that
Stradis was not entitled to invoke the sealed container defense based on a separate
exception in Maryland Code, Cts. & Jud. Proc. § 5-405(c)(6). Id. at 182-84. Under that
provision, when a seller makes an express warranty and breaches that warranty, causing
the injury, that seller is not permitted to invoke a sealed container defense. Md. Code § 5-
405(c)(6). We agreed with the district court that Stradis made an “express warranty” that
the eyewash was sterile, and that Stradis’ breach of its express warranty barred Stradis from
asserting a “sealed container defense” to the products liability claim. KeraLink, 60 F.4th
at 183-84. After addressing certain other issues presented on appeal, we affirmed the
court’s award of summary judgment to KeraLink on its products liability claim. Id. at 188.
The remaining part of the case proceeded in the district court, including the court’s
consideration of Stradis’ third-party complaint seeking indemnification from Geri-Care.3
3 Stradis asserted additional claims against Geri-Care, but those claims are not relevant to this appeal.
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In support of its request for implied indemnification in tort, Stradis alleged that its liability
to KeraLink was “secondary, passive, technical, or imputed,” while Geri-Care’s liability
was “primary, active, and direct.” So, Stradis alleged that Geri-Care should bear full
responsibility for the money judgment jointly and severally owed to KeraLink by the two
tortfeasors.
The district court agreed with Stradis, granting its motion for summary judgment,
and later denying Geri-Care’s motion to reconsider. But the court denied Stradis’ request
to recover from Geri-Care attorneys’ fees4 incurred in Stradis’ defense of KeraLink’s
products liability action, and the court later denied Stradis’ motion to reconsider that ruling.
Geri-Care now appeals the district court’s ruling that Geri-Care must indemnify
Stradis. And Stradis appeals the court’s ruling denying its claim for attorneys’ fees. We
address these challenges in turn.
II.
We review de novo the district court’s award of summary judgment in favor of
Stradis. RXD Media, LLC v. IP Application Dev. LLC, 986 F.3d 361, 372 (4th Cir. 2021).
Summary judgment is appropriate when “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). We review the court’s denial of Stradis’ request for attorneys’ fees under an
4 For ease of reference, we refer to this request as one for attorneys’ fees, even though Stradis also sought recovery of costs.
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abuse-of-discretion standard. Jones v. Southpeak Interactive Corp. of Del., 777 F.3d 658,
675 (4th Cir. 2015) (citation omitted) (Southpeak). Applying this standard, we will reverse
the district court only if the court was “clearly wrong” or “committed an error of law.” Id.
(quoting McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013)).
The district court asserted its diversity jurisdiction over this case under 28 U.S.C.
§ 1332 and applied Maryland law when considering Stradis’ claim for indemnification and
its request for attorneys’ fees. We agree with the court’s decision to apply Maryland law,
which decision the parties do not challenge, because the issues presented are related to
KeraLink’s money judgment awarded under Maryland law on its products liability claim.
A.
We first address Geri-Care’s argument that the district court erred in awarding
Stradis implied indemnification on the strict products liability judgment. Geri-Care
contends that Stradis’ culpability was not significantly different from Geri-Care’s
culpability in the case, thereby barring implied indemnification. Geri-Care asserts that like
Geri-Care, Stradis received the eyewash in sealed containers, failed to test the containers’
contents, and passed the containers on to others while representing that they contained
sterile eyewash. According to Geri-Care, its status as an “apparent manufacturer,” which
barred its prior assertion of a sealed container defense, is not relevant to the inquiry whether
Geri-Care should be required to indemnify Stradis, a “non-innocent bystander in the
distribution chain of the eyewash.” We disagree with Geri-Care’s position.
Under Maryland law, indemnification can arise by express contractual agreement,
by implication in fact based on the parties’ special relationship, or by implication in law.
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Pulte Home Corp. v. Parex, Inc., 942 A.2d 722, 731-32 (Md. 2008) (citing Franklin v.
Morrison, 711 A.2d 177, 182 (Md. 1998)). Stradis sought indemnity based on the third
category, which in the context of an underlying tort claim is referred to as “tort indemnity.”
Id. (citing Franklin, 711 A.2d at 182).
Critically, Maryland does not require that a party seeking tort indemnity be wholly
innocent or free from negligent conduct to state a claim. Instead, Maryland permits one
joint tortfeasor to seek implied indemnity against another joint tortfeasor that is primarily
culpable, provided that the party seeking indemnification is only secondarily culpable.
Max’s of Camden Yards v. A.C. Beverage, 913 A.2d 654, 660 (Md. Ct. Spec. App. 2006);
Bd. of Trs. of Balt. Cnty. Cmty. Colls. v. RTKL Assocs., 559 A.2d 805, 810-11 (Md. Ct.
Spec. App. 1989); see Jennings v. United States, 374 F.2d 983, 987 n.7 (4th Cir. 1967)
(applying Maryland law).
Maryland’s highest court has explained that “[i]t is extremely difficult to state any
general rule or principle as to when indemnity will be allowed and when it will not.”
Franklin, 711 A.2d at 183 (quoting W.P. Keeton et al., Prosser and Keeton on the Law of
Torts § 51, at 343-44 (5th ed. 1984)). Maryland law recognizes that tort indemnity is not
subject to any “one explanation” because equitable principles are at the heart of implied
indemnity claims. Id. at 183 (citation omitted). Therefore, Maryland courts have not
articulated generally applicable standards for determining what types of conduct
distinguish “primary and secondary” culpability, terms that Maryland has used
interchangeably with the terms “active and passive” negligence.
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But Maryland courts have emphasized that tort indemnity may be awarded to
prevent the tortfeasor who should carry the burden of liability for an injury from being
“unjustly enriched” if a less culpable tortfeasor is required to discharge that liability. Pulte
Home Corp., 942 A.2d at 731 (citation omitted); Franklin, 711 A.2d at 183 (citing
Restatement (Second) of Torts § 886B (Am. Law Inst. 1979)). And, despite the absence
of generally applicable standards for considering a request for tort indemnity, Maryland’s
highest court has emphasized that before a court may award indemnity to a less culpable
tortfeasor, there must be a disparity in the nature or the extent of fault between the joint
tortfeasors. See Franklin, 711 A.2d at 183 (explaining that tort indemnity can rest on a
difference in character of the duties owed by the two parties to the injured plaintiff); see
also id. at 180-83 (driver of car that stalled on road and contributed to death of plaintiff
who ran into stalled car could not seek indemnification from mechanic who contributed to
car’s stall because both driver and mechanic were actively negligent); Gardenvillage
Realty Corp. v. Russo, 366 A.2d 101 (Md. Ct. Spec. App. 1976) (tenant was injured after
a porch concrete slab collapsed on her; any negligence by the owner and general contractor
of the residence was passive, while the supplier who built the slab was actively negligent
and was required to indemnify).
One “frequently occurring” instance in which “a right to implied indemnification
has been recognized between tortfeasors” is when one tortfeasor fails to discover a defect
in an item that has been supplied by another tortfeasor. Max’s of Camden Yards, 913 A.2d
at 659. In the present case, Stradis was exposed to strict products liability by its use of
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Geri-Care’s product in Stradis’ surgical packs and by Stradis’ acceptance of Geri-Care’s
representation that its product was sterile.
Although Stradis also expressly stated that the eyewash was sterile, this
representation was not the reason for Stradis’ responsibility on the strict products liability
claim. As we already have observed, in strict products liability, parties in any portion of
the chain of distribution, including manufacturers, distributors, and sellers generally may
be held liable for injuries caused by a defective product, regardless of the degree or nature
of their fault. See Phipps, 363 A.2d at 957.
No decisions from courts in Maryland directly address tort indemnity in the context
of joint tortfeasors held liable for strict products liability. But Maryland’s intermediate
appellate court has suggested that implied indemnity is available in some cases as a remedy
between joint tortfeasors held strictly liable for distribution of the same defective product.
See Max’s of Camden Yards, 913 A.2d at 659-60 (discussing general applications of
implied indemnity); see also Restatement (Second) of Torts § 886B(2)(d).
We do not find any basis in Maryland law for excluding the availability of tort
indemnification in cases of strict products liability. Cases in Maryland involving common
law strict products liability, like cases alleging common law negligence, will have instances
in which more than one tortfeasor will be held liable for the plaintiff’s injury and the degree
of the different tortfeasors’ culpability may materially differ. In fact, as a practical matter,
there likely will be more instances in the liability chain in a products case than in a simple
negligence case in which the utility of, or need for, implied indemnity will be manifest.
And the principles of Maryland’s law of tort indemnity, which differentiate primary
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culpability from secondary or passive culpability, can be applied with equal facility to both
causes of action. So, while Maryland’s courts have not directly addressed whether tort
indemnity applies in a strict products liability action to indemnify a party who incorporates
a defective product obtained from an upstream actual or apparent manufacturer into their
own product, we conclude that Maryland law permits such indemnification as allowed by
the trial court in this case. See BP Prods. N.A. v. Stanley, 669 F.3d 184, 188 (4th Cir. 2012)
(explaining that when a federal court asserts diversity jurisdiction, it applies the governing
state law or, when necessary, predicts how the state’s highest court would rule on an
unanswered question).
As noted above, KeraLink invoked a claim of strict products liability against Stradis
based on its sale of Geri-Care’s contaminated eyewash. Courts have described this type of
conduct as being passively or secondarily negligent or culpable and have applied indemnity
principles against the product manufacturer. See Pyramid Condo Ass’n v. Morgan, 606 F.
Supp. 592, 596 (D. Md. 1985) (right to indemnity exists “where the indemnitee’s
negligence is based upon a failure to inspect and thereby discover a defect in an article
manufactured by the indemnitor” (quoting Jennings, 374 F.2d at 987 n.7)). Here, the trial
court’s award of tort indemnification in favor of downstream distributor Stradis and against
the apparent manufacturer of the defective product, Geri-Care, protected Stradis from
exposure to payment of the entire judgment based on its joint and several liability.
After considering the record before us, we hold that the trial court did not err in
concluding that Stradis should be awarded tort indemnification against Geri-Care. At the
outset, we recognize that neither party actually manufactured the eyewash nor tested the
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eyewash for sterility before its use. Likewise, both parties incorrectly represented that the
eyewash was sterile. If these were the only relevant facts, we would agree that, as a matter
of law, Stradis and Geri-Care were equally culpable and that Stradis was not entitled to
indemnification. But the full factual record demonstrates that Geri-Care’s culpable
conduct was more extensive and of a different nature than Stradis’ culpable conduct. And
on this record, a jury could not reasonably reach a different conclusion. See RXD Media,
986 F.3d at 375.
As the record shows, Geri-Care entered into an agreement with Kareway to become
the exclusive seller of that eyewash, which was a pre-existing product created by a
company in South Korea. Geri-Care provided Kareway with information to place on the
eyewash bottle, which included Geri-Care’s corporate address in New York, its logo, and
the statement that the eyewash was distributed by Geri-Care; no other entity’s name
appears on the eyewash packaging. Geri-Care also reviewed the label for “accuracy” and
made changes, including to the “Drug Facts” section of the label. Further, Geri-Care
registered the eyewash with the FDA, listing no other entities as being affiliated with the
eyewash.
After obtaining the Geri-Care-branded eyewash from Kareway, Geri-Care sold the
product to a third party and ultimately the eyewash was sold to Stradis. Stradis, a
downstream supplier, placed the contaminated eyewash into its surgical packs and sold
those packs to KeraLink. So, Geri-Care, which had taken numerous steps to be the
exclusive seller of its branded eyewash, set in motion the downstream distribution of its
eyewash. That eyewash ultimately reached Stradis, which placed the contaminated Geri-
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Care branded eyewash in surgical packs for distribution to KeraLink. Although Stradis
placed its own warranty of sterility on its product, that fact did not alter the relative
culpabilities of the two joint tortfeasors held liable for strict products liability.5 Stradis
remained the downstream distributor of the defective product apparently manufactured and
warranted by Geri-Care, and continued to be secondarily culpable in both degree and kind
to Geri-Care’s primary culpability in placing its branded eyewash in the stream of
commerce. See Franklin, 711 A.2d at 183.
Moreover, if we were to accept Geri-Care’s view that it and Stradis were equally
culpable, then only the actual manufacturer of the eyewash could be subject to tort
indemnification in favor of a downstream supplier. We have not found any Maryland law
to support such an assertion. Based on the facts presented, Stradis’ culpability was properly
viewed by the trial court as being secondary to that of Geri-Care as a matter of law. The
trial court’s conclusion also was consistent with the equitable nature of the remedy of
implied indemnity under Maryland law, ensuring that Geri-Care was not “unjustly
enriched” by Stradis’ exposure to payment of the entire judgment despite Geri-Care’s
primary culpability. See id.
For these reasons, we conclude that the district court did not err in awarding
summary judgment to Stradis on its implied indemnification claim.
5 The district court also awarded judgment to KeraLink on its claims against Stradis for breach of both express and implied warranty and on KeraLink’s claim against Geri- Care for breach of implied warranty. KeraLink, 60 F.4th at 186 n.8. But as we explained in reviewing the prior appeal, these claims were alternative theories of liability for the same damages to which KeraLink was entitled under its strict products liability claim. Id.
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B.
We next consider whether the district court abused its discretion in declining to
include in Stradis’ indemnity award the sum of $220,950 in attorneys’ fees associated with
Stradis’ defense in the KeraLink suit. Before we address Stradis’ arguments, we set forth
the district court’s analysis.
The district court began by explaining that Maryland follows the “American Rule,”
which bars a prevailing party from recovering attorneys’ fees as part of compensatory
damages unless authorized by statute, rule, or contract. See Bausch & Lomb Inc. v. Utica
Mut. Ins. Co., 735 A.2d 1081, 1094 (Md. 1999). In fact, the district court’s award of
summary judgment in favor of KeraLink against Stradis and Geri-Care did not include any
amount of attorneys’ fees.
The district court addressed application of the American Rule in the context of
Stradis defending against KeraLink’s claims. In its analysis, the district court relied on the
decision of Maryland’s intermediate appellate court in Max’s of Camden Yards v. A.C.
Beverage, 913 A.2d 654 (Md. Ct. Spec. App. 2006). In Max’s, Chad Burger and others
became ill after consuming tainted beer at “Max’s of Camden Yards” (the bar). 913 A.2d
at 658. Burger sued both the bar and the company responsible for inspecting and cleaning
the bar’s “beer lines” (the company), asserting various theories of negligence. Id. at 661-
62. After Burger entered into a settlement agreement with the company releasing both
defendants and Burger’s complaint was dismissed, the bar sued the company seeking
indemnification for the bar’s attorneys’ fees and costs expended in defending Burger’s suit.
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Id. at 658. The bar asserted that the company had been actively negligent, while the bar
had engaged only in passive negligence. Id. at 659.
The Maryland court explained that an exception to the American Rule arises “when
an innocent party is forced into litigation with a third party by the wrongful conduct of
another, the innocent party can recover fees” incurred in defending itself. Id. at 660
(emphasis added) (citing Chang v. Brethren Mut. Ins. Co., 897 A.2d 854, 864 (Md. Ct.
Spec. App. 2006)). But the court observed that this exception may be limited to
circumstances in which a party has both a duty to defend and to indemnify and that,
generally, a tortfeasor does not have a duty to defend another tortfeasor. Id. at 660-61. The
Maryland court also stated, in dictum, that “[i]t is very doubtful” that Maryland law permits
a tort indemnitee to recover attorneys’ fees in a case involving an “active-passive
[culpability] distinction.” Id. at 661. But the court did not need to reach that question in
Max’s because it concluded that, as alleged, the bar had been actively negligent and so was
precluded from recovering any tort indemnity award. Id. at 662.
In the present case, the district court found persuasive the dictum in Max’s, namely,
that recovery of attorneys’ fees was “very doubtful” in the context of tort indemnity suits
involving active-passive culpability. See id. at 661. The district court found that this
dictum did not conflict with any decisions of Maryland’s highest court and observed that
this position also was consistent with Maryland’s general presumption in favor of the
“American Rule.” So, the district court held that Stradis was not entitled to attorneys’ fees
in its indemnity claim against Geri-Care.
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On appeal, Stradis contends that the district court’s holding conflicts with the
decision of the state’s highest court in Nova Research, Inc. v. Penske Truck Leasing Co.,
L.P., 952 A.2d 275 (Md. 2008), which relied on that court’s prior holding in Jones v. Calvin
B. Taylor Banking Co., 253 A.2d 742 (Md. 1969). According to Stradis, these decisions
establish that Stradis, which was compelled to defend itself based on Geri-Care’s conduct,
is entitled to recover attorneys’ fees from Geri-Care. We disagree.
Nova Research involved a lessor’s contracts with Penske Truck Leasing Company
(Penske) to rent “a tractor and trailer.” 952 A.2d at 278. The rental agreements included
indemnification clauses but did not expressly provide for recovery of attorneys’ fees. Id.
at 278-79. After a fatal accident occurred involving Penske’s tractor and trailer, Penske
incurred expenses related to an investigation and “environmental cleanup.” Id. Penske
sought indemnification from the lessor, asserting that the lessor had breached the contract
by authorizing a non-permissive driver to drive the vehicle. Id. at 279. In its indemnity
claim, Penske also sought recovery of its attorneys’ fees expended in seeking indemnity.
In resolving this issue, Maryland’s highest court explained that its prior decision in
Jones established a limited “implied indemnity exception” to the American Rule regarding
recovery of attorneys’ fees. Id. at 282. But the court further explained that this exception
was restricted to recovery of attorneys’ fees arising from an indemnitee’s need to defend
against a third-party’s lawsuit, not fees related to pursuit of a “first-party” indemnification
claim. Id. Thus, the court held in Nova Research that Penske could not recover attorneys’
fees related to its “first-party” indemnification claim. Id. at 285.
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In Jones, a bank entered a contract with a company (the company) to act as its local
escrow agent and to facilitate payments to the company’s suppliers. 253 A.2d at 743. As
part of the contract, two of the company’s corporate officers personally guaranteed
responsibility for any loss the bank suffered resulting from the transactions. Id. After the
company declared bankruptcy, the bankruptcy trustee sued the bank to recover certain
payments. Id. at 745-46. The bank, in turn, filed suit against the two corporate officers of
the company seeking to recover the amounts the bank paid to the trustee, as well as the
bank’s attorneys’ fees arising from the bank’s defense against the bankruptcy trustee’s
lawsuit. Id. at 746. Even though the contract had not provided for recovery of attorneys’
fees, the court in Jones employed equitable principles and implied in the contract a
provision permitting recovery of those fees. Id. at 747-48.
We conclude that these two cases are inapplicable here. Both cases involved
indemnity contracts and the extent to which certain expenses were recoverable when the
contracts of indemnification did not include provisions relating (1) to an indemnitee’s
defense of an action brought by a third party, Jones, 253 A.2d at 746, or (2) to the recovery
of fees in a “first party” action seeking indemnification, Nova Research, 952 A.2d at 289.
Both these holdings related to whether expenses not addressed by the parties in their
contracts nonetheless were recoverable under a theory of implied contract. Neither of the
cases addressed the recovery of fees incurred by a tortfeasor in the defense of a tort action.
And, manifestly, neither case involved a situation in which the indemnitee had been
determined secondarily culpable in the tort action against which it was defending. These
distinctions render the holdings in Jones and Nova Research inapposite to the present case.
19 USCA4 Appeal: 23-1181 Doc: 48 Filed: 07/16/2025 Pg: 20 of 20
We therefore decline Stradis’ request that we recognize an exception to the American Rule
to permit indemnification of attorneys’ fees incurred in defending against a tort action in
which that defending party has been found secondarily culpable.
Given the facts presented in this case and the absence of Maryland law requiring
otherwise, we hold that the district court did not commit an error of law in relying on the
American Rule in concluding that Stradis was not entitled to indemnification for its
attorneys’ fees incurred in defending against KeraLink’s suit. See Southpeak, 777 F.3d at
675. Accordingly, the district court also did not abuse its discretion in denying Stradis’
request for these attorneys’ fees. Id.
III.
For these reasons, we affirm the district court’s award of summary judgment in
favor of Stradis on its tort indemnity claim against Geri-Care, and we affirm the court’s
decision declining to include in that award Stradis’ request for attorneys’ fees.
AFFIRMED