SOUTHERN CALIFORNIA GAS COMPANY, a California corporation, Plaintiff-counter-defendant-Appellee, v. SYNTELLECT, INC., a Delaware corporation, Defendant-counter-claimant-Appellant, 534 F. App'x 637

MEMORANDUM Syntellect, Inc. (Syntellect), appeals the district court’s grant of partial

summary judgment requiring it to indemnify Southern California Gas Company (SoCal) for damages arising from third-party allegations of patent infringement. Syntellect also challenges the district court’s grant of a motion in limine excluding evidence related to the allocation of damages between responsible parties. We vacate the judgment and remand for further proceedings. 1. “The question whether an indemnity agreement covers a given case turns primarily on contractual

interpretation, and it is the intent of the parties as expressed in the agreement that should control....” St. Paul Fire & Marine Ins. Co. v. Am. Dynasty Surplus Lines Ins. Co., 101 Cal. App.4th 1038, 1049, 124 Cal.Rptr.2d 818 (2002) (citation and alteration omitted). The intent of the parties is “ascertained from the clear and explicit language of the contract.” Cont’l Heller Corp. v. Amtech Mech. Servs., Inc., 53 Cal.App.4th 500, 504, 61 Cal.Rptr.2d 668 (1997) (citation and internal quotation marks omitted).

In this case, the indemnity provision covers “any and all claims ... of any kind whatsoever arising from actual or alleged infringement or misappropriation by [Syn-tellect] ... of any patent ... in connection with the System ...” California courts have rendered “consistently broad”

interpretations of “phrases such as ‘arising out of or ‘arising from’ and ‘resulting from.’ ” St. Paul Fire, 101 Cal.App.4th at 1050, 124 Cal.Rptr.2d 818. Liability will attach if the indemnitor’s performance under the contract is “causally related in some manner to the injury for which indemnity is claimed.” Id. at 1053, 124 Cal.Rptr.2d 818.

The contract broadly defined the “System” to include the Vista Interactive Voice Response System (IVR), “Services,” and all specifications and requirements included in the Request for Proposal (RFP). “Services” include “Custom Application Programs,” which are “software application programs that [Syntellect] develops specifically to [SoCal’s] written application specifications and provides to [SoCal] pursuant to this Agreement.” Under these contract provisions, the “System” cannot logically be considered separate and apart from the customized services described in the contract and RFP.

Each of the “accused services” from the Katz copyright infringement complaint were enabled by Syntellect’s performance of its contractual duties. In its Motion for

Summary Judgment, Syntellect admitted as much, comparing each of the accused services to the requirements and specifications of the RFP. For these reasons, it is apparent that the allegations of patent infringement were causally related to Syntellect’s provision of the “System.” Syntellect is therefore liable for damages stemming from utilization of the “System.” We affirm the district court’s grant of

summary judgment in favor of SoCal on the liability issue. 2. Syntellect forfeited its argument that the magistrate judge erred by barring discovery of information related to the technical operation of the call center, the nature of the Katz claims, and the nature of the settlement because it failed to timely request review of the order by the district court judge. See Glenbrook Homeowners Ass’n. v. Tahoe Reg’l Planning Agency, 425 F.3d 611, 619 (9th Cir.2005). 3.

When an indemnitee settles without trial, “the indemnitee must show the liability is covered by the contract, that liability existed, and the extent thereof. The settlement is presumptive evidence of liability of the indemnitee and the amount of liability, but it may be overcome by proof from the indemnitor that the settlement was unreasonable ...” Peter Culley & Assocs. v. Superior Court, 10 Cal.App.4th 1484, 1497, 13 Cal.Rptr.2d 624 (1992), as modified. The “presumptively reasonable” liability of the indemnitee (SoCal) does not necessarily mirror the liability of the indemnitor (Syntellect).

See Mel Clayton Ford v. Ford Motor Co., 104 Cal.App.4th 46, 56, 127 Cal.Rptr.2d 759 (2002) (noting in the context of insurance contracts that “[t]he settlement ... becomes presumptive evidence only of the liability of the insured and the amount thereof’) (citation omitted) (emphasis in original). Where a party’s indemnity obligation is limited under the contract, an allocation of liability between culpable parties is appropriate.

See Culley, 10 Cal.App.4th at 1497, 13 Cal.Rptr.2d 624 (noting that where multiple parties are liable, the “allocation of the settlement is at least as important as the total amount of the settlement”). Here, SoCal adequately demonstrated that:

(1) Syntellect was liable under the contract to indemnify it against the Katz claims, and (2) its omi liability was reflected in the “presumptively reasonable” amount of the settlement. However, SoCal must still demonstrate that the entire liability should be allocated to Syntellect. See id. at 1497-98, 13 Cal.Rptr.2d 624. Where there is a dispute, “Plaintiff should be required to prove the reasonableness of its proposed allocation by ordinary means.” Id. at 1498, 13 Cal.Rptr.2d 624.

Because the indemnitor disputed the allocation of liability, the district court abused its discretion in excluding all evidence relevant to the allocation of damages. See id.; see also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) (“A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law ...”). This is not to say that Syntellect is not or cannot be, liable for the entirety of the settlement under the contract.

However, the district court must consider the nature of the Katz claims as they apply to the indemnity provision and to other potentially liable parties. Apportionment is appropriate if some portion of the liability for the alleged infringement is not embraced by Syntellect’s indemnity obligation. We express no opinion on whether apportionment is required or on the amount of the appropriate allocation if apportionment is required. Rather, we remand for the district court to undertake this inquiry in the first instance. VACATED and REMANDED for further proceedings consistent with this disposition.

Each party shall bear its costs on appeal. This disposition is not appropriate for publication and is not precedent except as provided by 9 th Cir. R. 36-3.