Nationwide Retirement Solutions, Inc. v. PEBCO,Inc.

Supreme Court of Alabama

Nationwide Retirement Solutions, Inc. v. PEBCO,Inc.

DecidedAugust 29, 2014

Docket1120806

StatusPublished

This text of Nationwide Retirement Solutions, Inc. v. PEBCO,Inc. (Nationwide Retirement Solutions, Inc. v. PEBCO,Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Nationwide Retirement Solutions, Inc. v. PEBCO,Inc., (Ala. 2014).

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Opinion

REL:08/29/2014

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229- 0649), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA SPECIAL TERM, 2014 ____________________

1120806 ____________________

Nationwide Retirement Solutions, Inc.

v.

PEBCO, Inc.

Appeal from Jefferson Circuit Court (CV-07-4052)

On Application for Rehearing

MOORE, Chief Justice.

PEBCO, Inc., has filed an application for rehearing,

asking us to review this Court's opinion of March 28, 2014, in 1120806

which we reversed an award of approximately $1.1 million to

PEBCO as indemnification for attorney fees and expenses PEBCO

incurred in defending a class action. The class action

resulted from PEBCO's receipt of "sponsorship payments," not

disclosed to regulators, for appointing Nationwide Retirement

Solutions, Inc. ("NRS"), to manage the Alabama Public

Employees Deferred Compensation Plan ("the Plan"). The class-

action plaintiffs claimed that these payments reduced the rate

of return on the Plan, thus injuring them financially. NRS,

Nationwide Life Insurance Company, and PEBCO settled with the

plaintiffs for $16 million, which amount was largely funded by

NRS. In the settlement PEBCO was allowed to retain $12 million

in sponsorship payments. The trial court severed a cross-claim

by PEBCO requesting indemnification for its expenses incurred

in defending the class action. The trial court awarded PEBCO

indemnification from NRS, and we reversed its judgment.

Analysis

An application for rehearing "must state with

particularity the points of law or the facts the applicant

believes the court overlooked or misapprehended." Rule 40(b),

Ala. R. App. P. A party cannot raise an issue on rehearing

2 1120806

that was not raised in the brief the appellant originally

submitted to the Court. See SouthTrust Bank v. Copeland One,

L.L.C., 886 So. 2d 38, 43 (Ala. 2003) (opinion on application

for rehearing) ("Matters not argued in an appellant's brief on

original submission cannot be raised for the first time on

application for rehearing."). Therefore, only arguments that

both were raised in the original brief submitted to the Court

and were "overlooked or misapprehended" by the Court may be

presented in an application for rehearing.

In our opinion on original submission we stated:

"Alabama does not permit a party to be indemnified for defending against claims premised on its own allegedly wrongful actions. In Jack Smith Enterprises v. Northside Packing Co., 569 So. 2d 745 (Ala. Civ. App. 1990), the Court of Civil Appeals noted that 'there is considerable authority holding that an indemnitee is precluded from recovering attorney fees where the indemnitee has been required to defend accusations which encompass his own separate wrongful acts.' 569 So. 2d at 746. The Court of Civil Appeals then concluded that 'indemnification, including attorney fees, is allowed where one is defending claims predicated solely upon another defendant's negligence; however, where one is defending for his own benefit, an award of attorney fees will not be allowed.' 569 So. 2d at 746. This Court subsequently adopted that reasoning. Stone Bldg. Co. v. Star Elec. Contractors, Inc., 796 So. 2d 1076, 1092 (Ala. 2000).

"The class-action claims unquestionably encompassed PEBCO's own allegedly wrongful acts.

3 1120806

PEBCO defended those acts for its own benefit. Therefore, it may not now seek indemnification for its costs of defense in the class action."

Nationwide Retirement Solutions, Inc. v. PEBCO, Inc., [Ms.

1120806, March 28, 2014] ___ So. 3d ___, ___ (Ala. 2014)

(footnote omitted).

PEBCO argues on rehearing, as it did in its original

brief, that we should adopt the reasoning of Delaware and

Nevada1 that a showing of actual, as opposed to alleged,

wrongdoing by the indemnitee should be required to deny

indemnification. That position, however, is not the law of

this State. Our opinion on original submission discussed this

question and resolved it on the basis of Alabama precedent.

Thus, the issue was not overlooked or misapprehended.

Rehearing is not an opportunity to revisit matters already

fully addressed and decided on original submission. SouthTrust

Bank, supra. Otherwise, a rehearing would be equivalent to

hearing the appeal again.

In any event, if we were inclined to revisit that

precedent, this case would not be an appropriate vehicle to do

1 Pike Creek Chiropractic v. Robinson, 637 A.2d 418 (Del. 1994); Piedmont Equip. Co. v. Eberhard Mfg. Co., 99 Nev. 523, 665 P.2d 256 (1983). 4 1120806

so. The claims against PEBCO in the class action were not

trivial or pro forma but arose directly out of PEBCO's

solicitation of special payments from NRS and its deliberate

concealment of those payments from the State Personnel Board

by setting them out in a separate agreement known only to NRS

and PEBCO. Were PEBCO an obviously innocent party swept into

a lawsuit arising solely from NRS's wrongdoing, it might have

an arguable case for indemnification of its expenses in

litigating that lawsuit. But that is not the case.

PEBCO's central argument on rehearing is that it was

innocent of wrongdoing because it had no inkling that the

sponsorship payments would reduce the participants' rate of

return on their contributions to the Plan. Although PEBCO made

this point in the fact section of its original brief to refute

factual statements in NRS's brief, PEBCO did not mention or

rely on this assertion in the argument section of its brief to

demonstrate that NRS had not used its "best efforts" to ensure

that the Plan met the legal requirements for such plans.2

2 See Birmingham News Co. v. Horn, 901 So. 2d 27, 79 (Ala. 2004) (opinion on application for rehearing) (noting that a statement in the fact section of the brief "would have operative effect as an argument advanced in the brief only to the extent that it was properly brought forward to the argument section"). 5 1120806

PEBCO's only assertion in its original brief about the

inadequacy of NRS's advice was that NRS "has never advised

ASEA [the Alabama State Employees Association] or PEBCO of any

potential exposure related to maintaining the terms of the

Administrative Services Agreement in a confidential fashion."

Because PEBCO itself wanted that agreement to be confidential,

we did not, on original submission, consider this argument

persuasive as a ground for holding that NRS had not used its

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REL:08/29/2014

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229- 0649), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA SPECIAL TERM, 2014 ____________________

1120806 ____________________

Nationwide Retirement Solutions, Inc.

v.

PEBCO, Inc.

Appeal from Jefferson Circuit Court (CV-07-4052)

On Application for Rehearing

MOORE, Chief Justice.

PEBCO, Inc., has filed an application for rehearing,

asking us to review this Court's opinion of March 28, 2014, in 1120806

which we reversed an award of approximately $1.1 million to

PEBCO as indemnification for attorney fees and expenses PEBCO

incurred in defending a class action. The class action

resulted from PEBCO's receipt of "sponsorship payments," not

disclosed to regulators, for appointing Nationwide Retirement

Solutions, Inc. ("NRS"), to manage the Alabama Public

Employees Deferred Compensation Plan ("the Plan"). The class-

action plaintiffs claimed that these payments reduced the rate

of return on the Plan, thus injuring them financially. NRS,

Nationwide Life Insurance Company, and PEBCO settled with the

plaintiffs for $16 million, which amount was largely funded by

NRS. In the settlement PEBCO was allowed to retain $12 million

in sponsorship payments. The trial court severed a cross-claim

by PEBCO requesting indemnification for its expenses incurred

in defending the class action. The trial court awarded PEBCO

indemnification from NRS, and we reversed its judgment.

Analysis

An application for rehearing "must state with

particularity the points of law or the facts the applicant

believes the court overlooked or misapprehended." Rule 40(b),

Ala. R. App. P. A party cannot raise an issue on rehearing

2 1120806

that was not raised in the brief the appellant originally

submitted to the Court. See SouthTrust Bank v. Copeland One,

L.L.C., 886 So. 2d 38, 43 (Ala. 2003) (opinion on application

for rehearing) ("Matters not argued in an appellant's brief on

original submission cannot be raised for the first time on

application for rehearing."). Therefore, only arguments that

both were raised in the original brief submitted to the Court

and were "overlooked or misapprehended" by the Court may be

presented in an application for rehearing.

In our opinion on original submission we stated:

"Alabama does not permit a party to be indemnified for defending against claims premised on its own allegedly wrongful actions. In Jack Smith Enterprises v. Northside Packing Co., 569 So. 2d 745 (Ala. Civ. App. 1990), the Court of Civil Appeals noted that 'there is considerable authority holding that an indemnitee is precluded from recovering attorney fees where the indemnitee has been required to defend accusations which encompass his own separate wrongful acts.' 569 So. 2d at 746. The Court of Civil Appeals then concluded that 'indemnification, including attorney fees, is allowed where one is defending claims predicated solely upon another defendant's negligence; however, where one is defending for his own benefit, an award of attorney fees will not be allowed.' 569 So. 2d at 746. This Court subsequently adopted that reasoning. Stone Bldg. Co. v. Star Elec. Contractors, Inc., 796 So. 2d 1076, 1092 (Ala. 2000).

"The class-action claims unquestionably encompassed PEBCO's own allegedly wrongful acts.

3 1120806

PEBCO defended those acts for its own benefit. Therefore, it may not now seek indemnification for its costs of defense in the class action."

Nationwide Retirement Solutions, Inc. v. PEBCO, Inc., [Ms.

1120806, March 28, 2014] ___ So. 3d ___, ___ (Ala. 2014)

(footnote omitted).

PEBCO argues on rehearing, as it did in its original

brief, that we should adopt the reasoning of Delaware and

Nevada1 that a showing of actual, as opposed to alleged,

wrongdoing by the indemnitee should be required to deny

indemnification. That position, however, is not the law of

this State. Our opinion on original submission discussed this

question and resolved it on the basis of Alabama precedent.

Thus, the issue was not overlooked or misapprehended.

Rehearing is not an opportunity to revisit matters already

fully addressed and decided on original submission. SouthTrust

Bank, supra. Otherwise, a rehearing would be equivalent to

hearing the appeal again.

In any event, if we were inclined to revisit that

precedent, this case would not be an appropriate vehicle to do

1 Pike Creek Chiropractic v. Robinson, 637 A.2d 418 (Del. 1994); Piedmont Equip. Co. v. Eberhard Mfg. Co., 99 Nev. 523, 665 P.2d 256 (1983). 4 1120806

so. The claims against PEBCO in the class action were not

trivial or pro forma but arose directly out of PEBCO's

solicitation of special payments from NRS and its deliberate

concealment of those payments from the State Personnel Board

by setting them out in a separate agreement known only to NRS

and PEBCO. Were PEBCO an obviously innocent party swept into

a lawsuit arising solely from NRS's wrongdoing, it might have

an arguable case for indemnification of its expenses in

litigating that lawsuit. But that is not the case.

PEBCO's central argument on rehearing is that it was

innocent of wrongdoing because it had no inkling that the

sponsorship payments would reduce the participants' rate of

return on their contributions to the Plan. Although PEBCO made

this point in the fact section of its original brief to refute

factual statements in NRS's brief, PEBCO did not mention or

rely on this assertion in the argument section of its brief to

demonstrate that NRS had not used its "best efforts" to ensure

that the Plan met the legal requirements for such plans.2

2 See Birmingham News Co. v. Horn, 901 So. 2d 27, 79 (Ala. 2004) (opinion on application for rehearing) (noting that a statement in the fact section of the brief "would have operative effect as an argument advanced in the brief only to the extent that it was properly brought forward to the argument section"). 5 1120806

PEBCO's only assertion in its original brief about the

inadequacy of NRS's advice was that NRS "has never advised

ASEA [the Alabama State Employees Association] or PEBCO of any

potential exposure related to maintaining the terms of the

Administrative Services Agreement in a confidential fashion."

Because PEBCO itself wanted that agreement to be confidential,

we did not, on original submission, consider this argument

persuasive as a ground for holding that NRS had not used its

"best efforts."

PEBCO now argues for the first time on rehearing that NRS

alternatively failed to use its "best efforts" because it

concealed from PEBCO the fact that the sponsorship payments

would reduce Plan assets. Just as an appellant may not raise

an argument for the first time in a reply brief, Giambrone v.

Douglas, 874 So. 2d 1046, 1057 (Ala. 2003), neither may it

make a new argument on rehearing. We cannot be held in error

for overlooking or misapprehending points of law or facts that

were not argued on original submission. See Birmingham News

Co. v. Horn, 901 So. 2d 27, 79 (Ala. 2004) (noting that if an

"argument was never presented on original submission, we will

not consider it on rehearing"). Additionally, any attempt by

6 1120806

PEBCO to fasten blame for the class action on NRS is belied by

the settlement agreement itself, in which both NRS and PEBCO

stipulated that neither was admitting to any wrongdoing.

Conclusion

Because PEBCO's application for rehearing (1) repeats

arguments offered on original submission and addressed in our

opinion on original submission or (2) makes arguments for the

first time on rehearing, it presents no ground for

reconsidering our original judgment.

APPLICATION OVERRULED.

Stuart, Bolin, Parker, Murdock, and Wise, JJ., concur.

Shaw, J., concurs in the result.

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