                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 15a0401n.06

                                      Case No. 14-2099                             FILED
                                                                              Jun 04, 2015
                           UNITED STATES COURT OF APPEALS                 DEBORAH S. HUNT, Clerk
                                FOR THE SIXTH CIRCUIT

ROYAL MANOR APARTMENTS, LLC,                          )
                                                      )
       Plaintiff-Appellee,                            )
                                                              ON APPEAL FROM THE
                                                      )
                                                              UNITED STATES DISTRICT
v.                                                    )
                                                              COURT FOR THE EASTERN
                                                      )
                                                              DISTRICT OF MICHIGAN
FEDERAL NATIONAL MORTGAGE                             )
ASSOCIATION,                                          )
                                                                     OPINION
                                                      )
       Defendant-Appellant.                           )

BEFORE: DAUGHTREY, GIBBONS, and GRIFFIN, Circuit Judges.

       JULIA SMITH GIBBONS, Circuit Judge. This is a contractual dispute over the amount

paid by Royal Manor Apartments, LLC (“Royal Manor”) when it redeemed a property on which

the Federal National Mortgage Association (“Fannie Mae”) had foreclosed. Arguing that it had

been forced to pay too much to redeem the property, Royal Manor sued Fannie Mae to recover

the alleged overpayment. The district court granted summary judgment to Royal Manor, finding

that (1) a contractual 5% late fee on the balloon payment was unenforceable, (2) Fannie Mae had

wrongly applied certain post-foreclosure payments to attorneys’ fees, and (3) Fannie Mae had

used a too-high interest rate during the time frame between foreclosure and redemption. As

explained below, we affirm in part and reverse in part the district court’s judgment and remand

for further proceedings.
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
                                                 I.

       In 2003, Royal Manor borrowed money to purchase an apartment complex in Oakland

County, Michigan. As part of that transaction, Royal Manor executed a note agreeing to pay

$2,000,000 to Arbor Commercial Mortgage, LLC, and granted Arbor a mortgage on the

property. Shortly thereafter, Arbor assigned the mortgage and note to Fannie Mae. The note

called for Royal Manor to make monthly payments of $11,658.75, consisting of interest and

principal, starting on April 1, 2003 and continuing until Royal Manor made a balloon payment of

all remaining interest and principal on March 1, 2013. Over the next ten years, Royal Manor

made all of its monthly payments on time, but when the balloon payment came due, it defaulted.

The outstanding principal balance on March 1, 2013 was $1,687,701.78.

       On March 11, 2013, Fannie Mae demanded full payment of the outstanding principal

balance and accrued interest, as well as its costs and attorneys’ fees. In a separate letter sent the

same day, Fannie Mae expressed its willingness to discuss potential restructuring plans for the

loan, provided that Royal Manor executed a pre-negotiation agreement consenting to certain

conditions. In the pre-negotiation agreement, which Royal Manor signed on March 21, 2013,

Royal Manor acknowledged that the loan had matured and was fully due, that Royal Manor had

defaulted, and that Fannie Mae retained its rights and remedies set forth in the loan documents.

Royal Manor further agreed to make monthly payments to Fannie Mae of either (a) the pre-

maturity monthly payment due under the loan documents, or (b) all of the net operating income

(“NOI”) from the property. And Royal Manor agreed that those payments could be used by

Fannie Mae “in any order and for any purpose which is related directly or indirectly to the Loan

Documents or to the Property, including, without limitation, the payment of attorneys’ fees . . . .”

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Royal Manor Apartments, LLC v. Federal National Mortgage Association
       The parties did not reach a permanent agreement on restructuring the loan. On June 6,

2013, Fannie Mae filed a complaint in the Eastern District of Michigan requesting the court to

issue a preliminary injunction against Royal Manor and to appoint a receiver.

       On July 9, 2013, Fannie Mae purchased the property by credit bid at a foreclosure sale for

$1,740,860.42. Fannie Mae calculated the amount it was owed as follows. The starting point

was the principal balance owed as of March 1, 2013 ($1,687,701.78). Fannie Mae then added

interest at the annual rate of 5.74%, the baseline rate established in the note ($42,516.96).

Fannie Mae then charged additional interest at the annual rate of 4% that was due upon default,

as provided in the note ($24,377.91). Also as provided in the note, Fannie Mae assessed a 5%

late fee on the principal balance ($84,761.82).1 Fannie Mae added another $10,075.00 of costs,

which included an appraisal, a broker’s price opinion, an environmental site assessment, and a

physical need assessment, but did not include attorneys’ fees other than the $75.00 statutory fee

under MCL 600.2431(2)(c). Finally, Fannie Mae subtracted $108,573.05 in escrow and reserve

funds that it was holding.

       After the foreclosure sale, Royal Manor made two additional NOI payments to Fannie

Mae totaling $29,219.84.

       On August 15, 2013, Royal Manor redeemed the property by paying $1,758,527.22.2

This amount represented the amount of Fannie Mae’s credit bid at the foreclosure sale

($1,740,860.42), plus interest at the annual rate of 9.74% from the date of the foreclosure sale to

the date of redemption.

       1
         It is unclear to us where this figure came from. 5% of $1,687,701.78 is $84,385.09.
Nevertheless, the parties seem to have accepted the figure of $84,761.82.
       2
         Fannie Mae says that according to its records, the redemption price was $1,758,513.22,
but acknowledges that the $14 discrepancy is not material.

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No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
       Shortly thereafter, Royal Manor filed a counterclaim against Fannie Mae alleging that the

amount Royal Manor had paid to redeem the property exceeded the amount it owed to Fannie

Mae. First, Royal Manor argued that the terms of the loan documents did not allow Fannie Mae

to assess a 5% late charge against the entire outstanding principal and interest balance at

maturity, and that even if the contract did include such a provision, it would be an unenforceable

penalty. Second, Royal Manor argued that Fannie Mae wrongly applied the post-default interest

rate of 9.74%, rather than the contractual baseline interest rate of 5.74%, for the period after the

foreclosure sale until redemption.     Finally, Royal Manor argued that Fannie Mae wrongly

applied its post-foreclosure NOI payments to Fannie Mae’s attorneys’ fees rather than crediting

those payments toward the amount Royal Manor would have to pay in redemption.

       Fannie Mae moved to dismiss; Royal Manor moved for summary judgment. The district

court denied Fannie Mae’s motion to dismiss and granted summary judgment to Royal Manor.

First, the district court found that the 5% late charge provision in the note did apply to the

balloon payment, but that it was unreasonable and therefore constituted a penalty and was

unenforceable. Second, the district court further held that Royal Manor’s post-foreclosure NOI

payments were improperly applied to Fannie Mae’s attorneys’ fees. Finally, the district court

held that Royal Manor was improperly charged a 9.74% interest rate, rather than 5.74%, during

the period between foreclosure and redemption, and that (consistent with the first two holdings)

the too-high interest rate was applied to an too-large amount of principal—i.e., it was applied to

an amount that added the 5% late charge and that did not subtract Royal Manor’s post-

foreclosure NOI payments.

       Fannie Mae timely filed this appeal, seeking reversal of all three of these rulings and

renewing its motion to dismiss. Citing the costs of litigation, Royal Manor declined to file a

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Royal Manor Apartments, LLC v. Federal National Mortgage Association
reply brief but instead submitted a letter stating that it would rely solely on the briefing filed in

the district court and the district court’s order granting summary judgment.3

                                                   II.

        We review de novo a district court’s grant of summary judgment. Rose v. State Farm

Fire & Cas. Co., 766 F.3d 532, 535 (6th Cir. 2014). Summary judgment is appropriate if the

record, viewed in the light most favorable to the nonmoving party, “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); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986).

        In making this assessment we apply Michigan substantive law. This is because in a

diversity case the court applies the choice-of-law rules of the forum state: here, Michigan. Mill’s

Pride, Inc. v. Continental Ins. Co., 300 F.3d 701, 704 (6th Cir. 2002) (citing Klaxon Co. v.

Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). And under Michigan choice-of-law rules we

will give effect to the parties’ choice-of-law clause, which states that the applicable law will be

the law of the jurisdiction where the land is located: again, Michigan. See Chrysler Corp. v.

Skyline Indus. Servs., Inc., 528 N.W.2d 698, 703–707 (Mich. 1995).

                                                  III.

        We first consider whether the contractual 5% late charge provision was enforceable on

the balloon payment. At the outset we note briefly that the district court was correct to find that

        3
         Although this is an unorthodox move, it is contemplated by the Federal Rules of
Appellate Procedure. If an appellant fails to file a brief, an appellee may move to dismiss the
appeal, but if, as here, an appellee fails to file a brief, the penalty is simply that the appellee “will
not be heard at oral argument unless the court grants permission.” Fed. R. App. P. 31(c).
Having different penalties makes sense: “A district court’s judgments are not chattels that the
victors may abandon at their pleasure but precedents with value ‘to the legal community as a
whole.’” Lampe v. Kash, 735 F.3d 942, 943 (6th Cir. 2013) (quoting U.S. Bancorp Mortg. Co. v.
Bonner Mall P’ship, 513 U.S. 18, 26 (1994)).

                                                  -5-
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
by the plain language of the note, the late charge provision did apply to the balloon payment.

The late charge provision reads as follows:

       If any monthly installment due hereunder is not received by Lender on or before
       the 10th day of each month or if any other amount payable under this Note or
       under the Security Instrument or any other Loan Document is not received by
       Lender within 10 days after the date such amount is due, counting from and
       including the date such amount is due, Borrower shall pay to Lender, immediately
       and without demand by Lender, a late charge equal to 5 percent of such monthly
       installment or other amount due.

As the district court correctly observed, the only amounts payable under the note are installment

payments and the balloon payment at maturity, so the words “other amount payable under this

Note” would be superfluous if they did not include the balloon payment. “[C]ourts must . . . give

effect to every word, phrase, and clause in a contract and avoid an interpretation that would

render any part of the contract surplusage or nugatory.” Klapp v. United Ins. Group Agency,

Inc., 663 N.W.2d 447, 468 (Mich. 2003).

       The pivotal question, then, is whether the late fee provision was enforceable, which, as

discussed above, turns on Michigan law. “In resolving issues of Michigan law, we look to the

final decisions of that state’s highest court, and if there is no decision directly on point, then we

must make an Erie guess to determine how that court, if presented with the issue, would resolve

it.” Conlin v. Mortgage Electronic Registration Systems, Inc., 714 F.3d 355, 358–59 (6th Cir.

2013) (citing Savedoff v. Access Grp., Inc., 524 F.3d 754, 762 (6th Cir. 2008)). “In making this

determination, ‘[i]ntermediate state appellate courts’ decisions are also viewed as persuasive

unless it is shown that the state’s highest court would decide the issue differently.’”           Id.

(alteration in original) (quoting Savedoff, 524 F.3d at 762)).

       The Michigan Supreme Court has not addressed whether a contractual late fee on a

balloon payment is enforceable. Other jurisdictions are split. Compare 1300 Ave. P Realty

Corp. v. Stratigakis, 720 N.Y.S.2d 725, 726–27 (N.Y. App. Term. 2000) (late fee provision

                                                -6-
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
clearly applied to the balloon payment and was enforceable), and MetLife Capital Fin. Corp. v.

Washington Ave. Assocs. L.P., 732 A.2d 493, 495 (N.J. 1999) (five percent late fee on balloon

payment was a valid measure of liquidated damages), with Poseidon Dev., Inc. v. Woodland

Lane Estates, LLC, 62 Cal. Rptr. 3d 59, 65–66 (Cal. Ct. App. 2007) (late fee on balloon payment

would be an unenforceable penalty), and In re Market Ctr. East Retail Prop., Inc., 433 B.R. 335,

363 (Bankr. D.N.M. 2010) (five percent late fee on principal balance was an unenforceable

penalty under the court’s best guess at New Mexico law).

       Fortunately, however, the Michigan Court of Appeals has spoken on the issue, albeit in

an unpublished opinion. P & R Developers, L.L.C. v. Scott T. Bosgraaf Trust U/A/D 2/25/88 ex

rel. Bosgraaf, No. 297439, 2011 WL 6119288 (Mich. Ct. App. Dec. 8, 2011). In Bosgraaf the

parties entered into a land contract under which the defendants would purchase property

containing eight condominium units for $1,350,000, payable in three yearly installments of at

least $150,000 and a final balloon payment of the balance. Id. at *1. The contract provided for a

five percent late fee on the balloon payment. Id. at *5. The defendants defaulted on the balloon

payment of $850,000. Id. The trial court awarded plaintiffs a five percent late fee of $42,500,

and the Michigan Court of Appeals, treating the late fee as a liquidated damages provision,

affirmed:

       It is a well-settled rule in this State that the parties to a contract can agree and
       stipulate in advance as to the amount to be paid in compensation for loss or injury
       which may result in the event of a breach of the agreement. Such a stipulation is
       enforceable, particularly where the damages which would result from a breach are
       uncertain and difficult to ascertain at [the] time [the] contract is executed. If the
       amount stipulated is reasonable with relation to the possible injury suffered, the
       courts will sustain such a stipulation.

Id. (alteration in original) (quoting Moore v. St. Clair Co., 328 N.W.2d 47 (Mich. Ct. App.

1982)). The Michigan Court of Appeals concluded that at the time of contracting, the potential

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Royal Manor Apartments, LLC v. Federal National Mortgage Association
damages if defendants failed to make the balloon payment were uncertain and difficult to

ascertain, and further concluded that the five percent late fee was reasonable. Id.

       Bosgraaf is closely analogous and we will follow it in making our Erie best guess as to

what Michigan law requires in this case. Although Bosgraaf, as an unpublished opinion of the

Michigan Court of Appeals, is not precedentially binding, see MCR 7.215(C)(1), it is persuasive

and there is no indication that the Michigan Supreme Court would decide the issue differently:

indeed, the Michigan Supreme Court denied Bosgraaf’s application for leave to appeal the

judgment of the Michigan Court of Appeals. P & R Developers, L.L.C. v. Scott T. Bosgraaf

Trust U/A/D 2/25/88 ex rel. Bosgraaf, 815 N.W.2d 457 (Mich. 2012) (mem.).

       As Fannie Mae points out, the cases cited by the district court are inapposite. Both Green

v. Trowbridge 1, Inc., No. 230349, 2003 WL 21508489, at *2–3 (Mich. Ct. App. July 1, 2003),

and In re Brunswick Apartments of Trumbull County, Ltd., 169 F.3d 333, 335 (6th Cir. 1999),

addressed the preliminary question of whether the language of the contract allowed the lender to

charge a late fee on the balloon payment in the first place, not whether that contractual language

was enforceable—the issue presented here. See In re Brunswick Apartments, 169 F.3d at 335

(“It is obvious that the note contemplates a service charge only on unpaid monthly installments.

There is no ambiguity in the language of the note.”); Green v. Trowbridge 1, Inc., 2003 WL

21508489, at *2 (“We reject defendant’s argument that the balloon payment is ‘merely one of

many’ installment payments, thereby warranting a five percent late fee.”).

       It is worth acknowledging that In re Brunswick Apartments does contain dicta suggesting

that a contractual late charge on a balloon payment may be unenforceable in certain

circumstances:

       The courts below observed that “standard commercial practice” imposes service
       charges for nonpayment of periodic installments, not on the principal balance

                                               -8-
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
       owed at maturity. That holding is consistent with the case law developed under
       § 506(b) of the Bankruptcy Code, which applies the principle that a service charge
       based on percentage of the remaining balance is unreasonable when combined
       with default interest greater than the market rate of interest.

Id. (citing In Re Consolidated Props., Ltd. P’ship, 152 B.R. 452 (Bankr. D. Md. 1993)). But that

commentary does not control this case. For one thing, the court’s observations about “standard

commercial practice” made by the “courts below” are perhaps outdated but at least are called

into question by the number of cases in various jurisdictions addressing (and upholding)

contractual late-fee-on-balloon-payment provisions, as discussed above.            For another, the

observations about “standard commercial practice” are presented in the context of discussing

whether the contract is ambiguous about whether the late charge was meant to apply the balloon

payment in the first place. Moreover, this case does not involve the Bankruptcy Code. And

there is a Michigan case addressing this question but going the other way.

       In light of that case—Bosgraaf—we reverse the district court’s decision to grant

summary judgment to Royal Manor on the basis that the late charge provision was

unenforceable. Under Michigan law, as best we can ascertain, Fannie Mae was contractually

entitled to apply the late charge provision to the balloon payment. We therefore remand to the

district court with instructions to grant Fannie Mae’s motion to dismiss on this claim: as a matter

of law, Royal Manor is not entitled to legal relief even if its factual allegations are true. See Fed.

R. Civ. P. 12(b)(6); Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993).

                                                 IV.

       We next consider whether Fannie Mae was entitled to apply Royal Manor’s post-

foreclosure NOI payments to attorneys’ fees. In the pre-negotiation agreement, Royal Manor

agreed to make monthly payments to Fannie Mae of either (a) the pre-maturity monthly payment

                                                -9-
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
due under the loan documents, or (b) all of the net operating income (“NOI”) from the property.

And Royal Manor agreed that those payments could be used by Fannie Mae

       in any order and for any purpose which is related directly or indirectly to the Loan
       Documents or to the Property, including, without limitation, the payment of
       attorneys’ fees or other charges incurred by Fannie Mae, application to principal
       or interest due under the note evidencing the Loan, payment for repairs or capital
       expenditures for the Property, or any other purpose determined by Fannie Mae in
       its sole and absolute discretion and in accordance with the Loan Documents.

After the foreclosure sale, Royal Manor made two additional NOI payments to Fannie Mae

totaling $29,219.84. Fannie Mae acknowledges that it applied these payments to its attorneys’

fees and says that it was entitled to do so under the terms of the pre-negotiation agreement.

       In its motion for summary judgment, Royal Manor argued that the NOI payments “should

have been credited by Fannie Mae to Royal Manor in the calculation of the redemption price.”

Royal Manor further argued that even if Fannie Mae was entitled to apply the payments to

attorneys’ fees, the amount of claimed attorneys’ fees was unreasonable. The district court sided

with Royal Manor on the first question, finding that Fannie Mae was not allowed to apply the

NOI payments to attorneys’ fees. The district court noted, in part, that the “NOI payments were

made after the sale, and by then, the Pre-Negotiation Agreement was not the controlling

document; Michigan’s foreclosure statute then controlled.”

       The district court was right insofar as the pre-negotiation agreement did not by its own

terms control after foreclosure. After foreclosure the debt is satisfied and the mortgage is

extinguished. Bank of Three Oaks v. Lakefront Properties, 444 N.W.2d 217, 219 (Mich. Ct.

App. 1989).    The purpose of the pre-negotiation agreement was “to discuss the problems

associated with this Loan and a potential workout/restructuring plan for the Loan.” But after

foreclosure there was nothing to negotiate.    Although the pre-negotiation agreement expressly

allowed Fannie Mae to pursue the remedies allowed under the loan documents, including

                                               - 10 -
No. 14-2099
Royal Manor Apartments, LLC v. Federal National Mortgage Association
foreclosure, even while discussing with Royal Manor the possible terms of restructuring, the pre-

negotiation agreement did not say—indeed, it would make little sense for it to have said—that if

Fannie Mae did pursue those remedies, it would still be entitled to the benefit of the pre-

negotiation agreement, including continuing to receive NOI payments. Either party was entitled

to terminate the pre-negotiation agreement at any time for any reason, and we conclude that the

fairest reading is that Fannie Mae did so by foreclosing.

       The difficulty for Royal Manor is the following admission contained in its motion for

summary judgment: “Following the foreclosure sale and a telephonic status conference relating

to Fannie Mae’s Motion for Appointment of a Receiver, Royal Manor agreed to continue making

NOI payments to Fannie Mae per the terms of the Pre-Negotiation Agreement.” (DE 20, Mot.

Summ. J., Page ID 524.) In other words, after foreclosure, Royal Manor entered into a fresh

agreement that incorporated the terms of the pre-negotiation agreement as they related to NOI

payments. Thus, even if the pre-negotiation agreement had been terminated, Royal Manor has

conceded that the payment terms continued to apply.

       Furthermore, Royal Manor has forfeited any argument to the contrary by its repeated

explicit acknowledgments that the NOI payments were made under the terms of the pre-

negotiation agreement. For example:

      “Fannie Mae also failed to credit Royal Manor for payments made under the Pre-

       Negotiation Agreement following the foreclosure sale. Specifically, Royal Manor made

       payments of $29,219.84, which should have been credited by Fannie Mae to Royal

       Manor in the calculation of the redemption price.” (DE 15, Def.’s First Am. Verified

       Answer, Page ID 412.)

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Royal Manor Apartments, LLC v. Federal National Mortgage Association
      “Fannie Mae failed to credit Royal Manor for payments made under the Pre-Negotiation

       Agreement following the foreclosure sale.” (DE 20, Mot. Summ. J., Page ID 548.)

      “It is undisputed that Royal Manor made payments of $29,219.84 after the foreclosure

       sale, pursuant to the terms of the Pre-Negotiation Agreement, which Fannie Mae failed to

       credit Royal Manor for in calculating the redemption amount.” (DE 22, Response to

       Mot. to Dismiss, Page ID 919.)

       And the terms of the pre-negotiation agreement, supra, are clear: Fannie Mae was

allowed at its sole discretion to use the NOI payments for any purpose related to the loan or the

property, including attorneys’ fees.

       We therefore reverse the district court’s judgment that Fannie Mae was not entitled to

apply the NOI payments to attorneys’ fees. Because this does not resolve Royal Manor’s other

argument to the district court—that the claimed attorneys’ fees were unreasonable—we remand

for consideration of that question.

                                                 V.

       Finally, we consider what the applicable interest rate was between foreclosure and

redemption. The district court held that it was 5.74%. Michigan law provides that a mortgagor

may redeem a foreclosed property by paying

       the amount that was bid for the entire premises sold, interest from the date of the
       sale at the interest rate provided for by the mortgage, the amount of the sheriff's
       fee paid by the purchaser under section 2558(2)(q), and an additional $5.00 as a
       fee for the care and custody of the redemption money if the payment is made to
       the register of deeds.

MCL § 600.3240(2) (emphasis added). Although Royal Manor’s mortgage does not specify an

interest rate, it incorporates the note by reference. The note, in turn, specifies that interest would

ordinarily accrue on the unpaid principal balance at the annual rate of 5.74%, but if Royal Manor

defaulted (i.e., “[s]o long as any monthly installment or any other payment due under this Note

                                                - 12 -
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Royal Manor Apartments, LLC v. Federal National Mortgage Association
remains past due for 30 days or more”), the interest rate would increase by four percentage

points to 9.74%.

       Royal Manor argued below that because the mortgage ceased to exist upon the

foreclosure sale, the default interest provision no longer applied, and therefore for purposes of

MCL 600.3240(2) the “interest rate provided for by the mortgage” was the baseline rate of

5.74%. Fannie Mae contends that the default interest rate of 9.74% is the “interest rate provided

for by the mortgage,” because at the moment when the foreclosure sale occurred, Royal Manor

was in default and the higher interest rate applied.

       Royal Manor has the better of this argument.         “When property is purchased at a

foreclosure sale for an amount equal to the amount due on the mortgage, the debt is satisfied”

and the mortgage is extinguished. Lakefront Properties, 444 N.W.2d at 219. Thus, upon

foreclosure, no payments from Royal Manor to Fannie Mae remained past due; indeed, no

payments were due at all. Under the terms of the note, the default interest rate of 9.74% applies

only so long as payments remain past due for 30 days or more; otherwise, the rate of 5.74%

applies. Therefore the “interest rate provided for by the mortgage” for purposes of MCL

§ 600.3240(2) should be the baseline rate of 5.74% as specified in the note.

       We therefore affirm the district court’s holding that the applicable post-foreclosure

interest rate was 5.74%. However, because in light of the first two holdings this interest rate

applies to a different balance than the district court thought, we remand for recalculation of the

amount by which Royal Manor overpaid in post-foreclosure interest.

                                                 VI.

       For the reasons set forth above we reverse the district court’s grant of summary judgment

to Royal Manor as to the first ruling and simultaneously remand with instructions to grant Fannie

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Royal Manor Apartments, LLC v. Federal National Mortgage Association
Mae’s motion to dismiss on that claim. Under Michigan law the late fee on the balloon payment

was enforceable.

       We further reverse the district court’s grant of summary judgment to Royal Manor as to

the second ruling. Fannie Mae was contractually entitled to apply the post-foreclosure payments

to attorneys’ fees. However, Royal Manor also argued in the district court that the amount of

attorneys’ fees was unreasonable, so we remand for further proceedings to resolve that issue.

       Finally, we affirm the district court’s grant of summary judgment to Royal Manor on the

third finding: Fannie Mae did charge Royal Manor an overly-high interest rate during the period

between foreclosure and redemption. However, in light of the above rulings, the amount on

which post-foreclosure interest should have been charged is different than the district court

thought. Therefore, even though the district court got the applicable interest rate right, we must

remand to the district court to recalculate the amount by which Royal Manor overpaid in post-

foreclosure interest.

                                              - 14 -


800 F.Supp.2d 173 (2011)
PEOPLE FOR THE ETHICAL TREATMENT OF ANIMALS, INC., Plaintiff,
v.
BUREAU OF INDIAN AFFAIRS, Defendants.
Civil Action No. 11-555 (ESH).
United States District Court, District of Columbia.
August 3, 2011.
*174 Jeffrey S. Kerr, Foundation to Support Animal Protection, Washington, DC, for Plaintiff.
Andrea McBarnette, U.S. Attorney's Office, Washington, DC, for Defendants.

MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, District Judge.
Plaintiff People for the Ethical Treatment of Animals, Inc. ("PETA"), a Virginia nonprofit corporation, has sued the Bureau of Indian Affairs ("BIA"). Plaintiff brings this suit under the Freedom of Information *175 Act ("FOIA"), 5 U.S.C. § 552 et seq., claiming that defendant failed to conduct a reasonable search in response to two FOIA requests made by plaintiff, and as a result, failed to produce the requested documents until after litigation commenced. Before the Court are defendant's motion for summary judgment and plaintiff's cross motion for summary judgment. For the reasons set forth below, the Court will grant defendant's motion and deny plaintiff's motion.

BACKGROUND

I. FACTUAL HISTORY
Plaintiff submitted two FOIA requests. The first request ("the August request") was submitted on August 2, 2010, and sought information regarding three leases entered into by the Eastern Band of Cherokee Indians ("EBCI"): Santa's Land; the Cherokee Bear Zoo and/or Barry Coggins; and Chief Saunooke Bear Park and/or Chief Saunooke Trading Post and/or Cole Klapsaddle (collectively, "the Bear leases"). (Complaint ["Compl."] at ¶ 10; Defendant's Memorandum of Law in Support of Motion for Summary Judgment ["Def.'s Mot."] at 2.) Plaintiff limited the scope of the August request to documents dated from January 1, 2003, to the date of the request, August 2, 2010. (Compl. at ¶ 10.) Defendant assigned the August request FOIA Control No. BIA-2010-01249. (Id. at ¶ 11.)
Defendant houses the Bear leases in hard-copy form only, located in a file cabinet at the BIA's Cherokee Agency office in Cherokee, North Carolina. (Def.'s Mot., Declaration of Franklin Keel ["Keel Decl."] at ¶ 5; Defendant's Memorandum of Points and Authorities in Support of Supplement to Motion for Summary Judgment, Reply and Opposition to Plaintiff's Cross Motion for Summary Judgment ["Def.'s Supp."] at 2; Def.'s Supp., Declaration of Ruth McCoy ["McCoy Decl."] at ¶¶ 1, 2.) In that office, Ruth McCoy serves as a Realty Officer and supervises Gail Kuester, a Realty Specialist who maintains BIA's lease files pertaining to EBCI lands. (Def.'s Supp., Declaration of Gail Kuester ["Kuester Decl."] at ¶¶ 1, 2, p. 4; McCoy Decl. at ¶ 1.) Kuester was assigned to the August request, and searched "a spreadsheet of [EBCI] leases on the Cherokee Agency share drive," which "does not contain copies of documents" but "contains information showing the lease number, lessor, and lessee." (Kuester Decl. at ¶¶ 3, 4.) Kuester used the information to collect data on the Bear leases and then manually searched the hard copy files in the file cabinet. (Id. at ¶ 4.) Pursuant to the August request, on September 23, 2010, defendant produced seven documents totaling 273 pages: three memoranda, one letter, one lease, and two lease supplements. (Compl. at ¶ 12, Ex. 2; Reply in Support of Defendant's Supplement to Motion for Summary Judgment ["Def.'s Rep."], Second Supplemental Declaration of John Harrington ["Second Harrington Decl."] at ¶ 3.)
Plaintiff submitted a second FOIA request ("the October request") on October 12, 2010, seeking the same documents as the August request, but plaintiff removed the date restriction for the search. (Id. at ¶ 14.) Defendant assigned the October request FOIA Control No. BIA-2011-00035. (Id. at ¶ 15, 16, Ex. 5.) In response to the October request, Kuester again conducted a manual search of the files, finding no additional responsive documents that had not already been provided to plaintiff as a result of the August request. (Id.; Kuester Decl. at ¶ 4.)
On December 2, 2010, plaintiff filed an administrative appeal, asserting that defendant's search was unreasonable and inadequate. (Compl. at ¶ 20, Ex. 5.) On *176 January 14, 2011, defendant informed plaintiff that it would have a decision on the appeal in one or two weeks. (Id. at ¶ 23.) The record does not reflect that defendant took any further steps to resolve the appeal.
Plaintiff filed the instant complaint on March 17, 2011. (Compl. at 1.) John Harrington, BIA counsel, spoke to plaintiff's counsel on April 13, 2011, seeking clarification of the types of documents plaintiff requested. (Def.'s Mot. at 2.) Plaintiff's counsel informed Harrington that a number of responsive documents could be eliminated from the search, but that plaintiff wanted any documents related to the exhibition of animals, the enforcement of laws and regulations, and contractual obligations showing that lessees were complying with laws and regulations. (Id. at 2-3.) During this phone call, Harrington admitted that defendant's search and production up to that point had been inadequate. (Pl.'s Rep. at 4; Def.'s Rep. at 8.)
In March 2011, Rebecca Smith, a Program Support Assistant at the BIA's Branch of Tribal Government, Eastern Region, in Nashville, Tennessee, requested that BIA employees at the Cherokee Agency send her copies of the entire files of each of the Bear leases. (Def.'s Supp., Declaration of Rebecca J. Smith ["Smith Decl."] at ¶¶ 1, 4.) She received those files on March 25, 2011, and then sent them electronically to Harrington. (Id. at ¶ 4.) Subsequent to several conversations between Harrington and Smith outlining responsive and exempt documents, on April 22, 2011, defendant produced an additional thirty-eight documents, totaling approximately 420 pages, that were responsive to the August and October requests. (Def.'s Mot. at 3; Plaintiff's Consolidated Memorandum of Points and Authorities in Support of Plaintiff's Cross-Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment ["Pl.'s Cross Mot."] at 9; Smith Decl. at ¶ 5; Second Harrington Decl. at ¶ 4.) Only one of those documents, totaling six pages, was responsive to the August request but not produced in the September 2010 disclosure (Second Harrington Decl. at ¶ 5); thus, the vast majority (thirty-seven out of thirty-eight documents) were responsive to the October request, which had no restrictions as to dates. Twelve of the documents contained minor redactions of private addresses or private financial information. (Keel Decl. at ¶ 11.)
The EBCI completed an electronic database of its reservation lands in May 2011; unlike the Cherokee Agency's spreadsheet that contains references to files that exist in hard-copy form only, the EBCI database houses all of EBCI's lease documents in a searchable, electronic format. (Def.'s Supp. at 2, 3.) The database is the sole property of the EBCI; however, the EBCI granted access to defendant upon the database's completion. Kuester searched the database in May 2011, after the Eastern Region in Nashville had reviewed the entire set of BIA files and produced every responsive document in those files. (Id.) Kuester used search terms that included the lease numbers, the lessors' and lessees' names, and the words "Santa's Land," "Cherokee Bear Zoo," and "Chief Saunooke's Trading Post." (Kuester Decl. at ¶¶ 5, 6, 7, p. 4.) She found 479 pages of responsive documents but discovered that those documents were the same ones that had already been produced by the Eastern Region office in the April 2011 disclosure. (Def.'s Supp. at 2, 3.)

ANALYSIS

I. STANDARD OF REVIEW
The Court may grant a motion for summary judgment if the pleadings, the discovery *177 and disclosure materials on file, and any affidavits show "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a), (c). The moving party bears the burden of demonstrating an absence of a genuine issue of material fact in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Factual assertions in the moving party's affidavits may be accepted as true unless the opposing party submits his own affidavits, declarations, or documentary evidence to the contrary. Neal v. Kelly, 963 F.2d 453, 456-57 (D.C.Cir.1992).
"FOIA cases typically and appropriately are decided on motions for summary judgment." Defenders of Wildlife v. U.S. Border Patrol, 623 F.Supp.2d 83, 87 (D.D.C.2009) (citations omitted). "In a FOIA case, summary judgment may be granted to the government if `the agency proves that it has fully discharged its obligations under the FOIA, after the underlying facts and the inferences to be drawn from them are construed in the light most favorable to the FOIA requester.'" Fischer v. U.S. Dep't of Justice, 596 F.Supp.2d 34, 42 (D.D.C.2009) (quoting Greenberg v. U.S. Dep't of Treasury, 10 F.Supp.2d 3, 11 (D.D.C.1998)).
"An agency fulfills its obligations under FOIA if it can demonstrate beyond material doubt that its search was `reasonably calculated to uncover all relevant documents.'" Valencia-Lucena v. U.S. Coast Guard, 180 F.3d 321, 325 (D.C.Cir.1999) (quoting Truitt v. Dep't of State, 897 F.2d 540, 542 (D.C.Cir.1990)); see also Steinberg v. U.S. Dep't of Justice, 23 F.3d 548, 551 (D.C.Cir.1994). "[T]he issue to be resolved is not whether there might exist any other documents possibly responsive to the request, but rather whether the search for those documents was adequate." Weisberg v. U.S. Dep't of Justice, 745 F.2d 1476, 1485 (D.C.Cir.1984). "The adequacy of the search, in turn, is judged by a standard of reasonableness and depends, not surprisingly, upon the facts of each case." Id. Detailed descriptions of "what records were searched, by whom, and through what process" satisfy this standard of reasonableness. See Steinberg, 23 F.3d at 551-52. To meet its burden, the agency may submit affidavits or declarations that explain in reasonable detail the scope and method of the agency's search. Perry v. Block, 684 F.2d 121, 126 (D.C.Cir. 1982). In the absence of contrary evidence, such affidavits or declarations are sufficient to demonstrate an agency's compliance with FOIA. Id. at 127. However, if the record "leaves substantial doubt as to the sufficiency of the search, summary judgment for the agency is not proper." Truitt, 897 F.2d at 542.

II. THE FOIA REQUESTS
The only issue on appeal is the adequacy of defendant's search, since plaintiff does not contest the exemptions invoked by defendant, and while the legal conclusions are disputed, the underlying facts are not. (See infra note 7.) Plaintiff argues that it is entitled to summary judgment because the pre-litigation searches were inadequate. (See Pl.'s Cross Mot. at 9-17; Pl.'s Rep. at 4-15.) Plaintiff bases its argument on the fact that it did not get the documents it requested until after litigation commenced; thus, plaintiff reasons, the post-litigation search and the results thereof proves the inadequacy and bad faith of defendant's pre-litigation search.[1]*178 Given the record before the Court,[2] it cannot agree with the premise of this argument or the legal conclusions.
First, plaintiff has failed to prove that defendant's first search, in response to the August request, was inadequate. As defendant's declarations show, and plaintiff does not appear to contest, the first search, limited in time by plaintiff, found all but one responsive document that was six pages long. (Second Harrington Decl. at ¶ 5.) The existence of this single document, however, is immaterial to the adequacy of defendant's search in response to the August request because "the issue to be resolved is not whether there might exist any other documents possibly responsive to the request, but rather whether the search for those documents was adequate." Weisberg, 745 F.2d at 1485. Regarding the August request, defendant has fulfilled its burden to provide detailed descriptions of "what records were searched, by whom, and through what process." See Steinberg, 23 F.3d at 551-52. As defendant's declarations show, the responsive files are housed in a single file cabinet in hard-copy form only at the Cherokee Agency in North Carolina. Gail Kuester used an Agency spreadsheet to search for responsive files, and then she went to the files and manually searched them. Those details are clearly sufficient to show "who" searched "what records" "through what process." Id.
Plaintiff's argument, then, is essentially that defendant's search in response to the October request, where there were no date restrictions, was inadequate and in bad faith because that search *179 inexplicably missed thirty-seven documents totaling over 400 pages that were later produced by defendant after litigation had commenced. Even if the October search had been inadequate, it is well settled in this Circuit that the subsequent production of responsive documents can remedy inadequate searches.[3] Further, that subsequent production cannot serve as proof that the agency conducted an unreasonable search initially or acted in bad faith, for such a rule would punish those agencies that attempted to correct past inadequate searches:
In Military Audit Project v. Casey, we "emphatically reject[ed]" the notion that an agency's disclosure of documents it had previously withheld renders its affidavits suspect, and our reasoning in that case is applicable here as well. We observed that such a line of argument, if accepted, "would work mischief in the future by creating a disincentive for an agency to reappraise its position, and when appropriate, release documents previously withheld." Were the court to thus "punish flexibility," it would "provide the motivation for intransigence"; the argument in favor of doing so is "based on the perverse theory that a forthcoming agency is less to be trusted in its allegations than an unyielding agency." It would be unreasonable to expect even the most exhaustive search to uncover every responsive file; what is expected of a law-abiding agency is that it admit and correct error when error is revealed.
Meeropol v. Meese, 790 F.2d 942, 953 (D.C.Cir.1986) (quoting Military Audit Project v. Casey, 656 F.2d 724, 754 (D.C.Cir.1981)) (citations omitted) (brackets in original); see also Ground Saucer Watch, Inc. v. CIA, 692 F.2d 770, 772 (D.C.Cir.1981) ("Indeed, if the release of previously withheld materials were held to constitute evidence of present `bad faith,' similar evidence would exist in every FOIA case involving additional releases of documents after the filing of suit.").
Meeropol dealt with a massive FOIA request[4] made by the sons of Julius and Ethel Rosenberg, the American couple who were executed in 1953 for espionage. 790 F.2d at 945. After making their FOIA request on February 20, 1975, the plaintiffs filed a complaint in federal district court on July 14, 1975, alleging that several government agencies were withholding responsive documents. Id. at 945-46. "In the ensuing ten years [following the initiation of litigation,] the defendant agencies, under court order, retrieved approximately 500,000 pages of records and released approximately 200,000 of those pages" to the plaintiffs. Id. at 946.
At issue in Meeropol was the FBI's handling of various FOIA requests. The sons challenged the adequacy of the FBI's *180 search that resulted in an allegedly incomplete production of documents. Id. at 952-53. Despite the admission of all involved that "the searches conducted by the FBI between the years 1975 and 1978 were ... `inadequate,'" the Court found that the FBI had subsequently remedied the problem by conducting an adequate search despite the requestors' argument that "references to [unproduced, responsive] files in [produced] documents" proved that the FBI was still withholding responsive files. Id. at 950, 963. The Court found that the FBI's subsequent production of relevant documents within the files referenced by already produced documents, inter alia, was sufficient to show that the FBI conducted a good faith, adequate search. Id. at 953-54.
Noticeably absent from the Court's analysis in Meeropol is any support for the proposition that pre-litigation and post-litigation searches should be weighed differently or that the post-litigation searches and production should be ignored in determining whether the government has conducted an adequate search. See id. at 950-54. In fact, the Court confirmed the adequacy of the FBI's search despite the fact that the adequate search came several years after the initiation of litigation. See id. at 945-46, 953-54, 963.
Similar to the FBI in Meeropol, the BIA remedied whatever inadequacies might have existed in response to the October request by subsequently searching every single document in every single file that could have contained responsive documents, ultimately producing thirty-seven more documents totaling over 400 pages in April 2011. Plaintiff concedes that this post-litigation search was adequate (see supra note 1), but still it contends that the post-litigation search proves the inadequacy of the pre-litigation search. As noted, plaintiff's attempt to render defendant's post-litigation efforts as immaterial (or as proof of bad faith) is contrary to the law in this Circuit, which recognizes that it is immaterial that the search occurred after litigation commenced. See Meeropol, 790 F.2d at 953.
Plaintiff's contention that defendant's post-litigation search and April 2011 production are proof of bad faith is also misguided.[5] (See Pl.'s Cross Mot. at 16.) *181 Absent evidence to the contrary, the Court must presume good faith on the part of the agency and its declarants. Ground Saucer Watch, 692 F.2d at 771. Because plaintiff relies solely on an argument that cannot be used to prove bad faith (i.e., that subsequent production proves earlier bad faith), see Meeropol, 790 F.2d at 953, plaintiff has not provided any evidence to overcome the presumption of good faith.[6] Defendant's May 2011 search of the EBCI's electronic database further undercuts plaintiff's contention that defendant acted in bad faith. Even though defendant conducted a detailed search of every responsive file, and albeit belatedly, produced every responsive document in those files, defendant went further and searched a database that was not government property to be sure that it had uncovered all relevant files. Indeed, the Court notes that this might go above and beyond what is required of an agency under FOIA, because the search "need not be perfect" and "[i]t would be unreasonable to expect even the most exhaustive search to uncover every responsive file." Meeropol, 790 F.2d at 953, 956. At any rate, it certainly undercuts any argument of bad faith.
In response, plaintiff points to Nkihtaqmikon v. Bureau of Indian Affairs, 672 F.Supp.2d 154 (D.Me.2009), to argue that the BIA has a track record of failing to properly respond to FOIA requests. (Pl.'s Rep. at 6.) Although the Court is troubled by BIA's lack of effort to adjudicate PETA's administrative appeal before the commencement of litigation, neither what happened in Nkihtaqmikon nor BIA's apparently dilatory response to the administrative appeal is relevant to the legal issues in this case. In addition to this Court's finding that BIA fulfilled its duty to conduct an adequate search, Nkihtaqmikon is easily distinguishable. First, the Maine court ultimately found that the BIA's search was inadequate because it was not reasonably calculated to uncover all relevant documents; in fact, the BIA had conducted a series of inadequate electronic searches over a four-year period that led to "dribbling disclosure," never attempting to comprehensively correct its past inadequate disclosure. 672 F.Supp.2d *182 at 168-70. Second, BIA did not file responsive pleadings in that case, offering no reason why it had taken so long to disclose responsive documents or why its search was reasonable. Id. at 169. In this case, BIA's disclosure was not "dribbling"; on the contrary, defendant's agents reviewed the entire files for the three Bear leases requested by plaintiff and produced everything in those files in April 2011. In addition, BIA has fulfilled its obligation to describe its searches, filing three pleadings and several declarations of agency employees that explain in detail how the searches were conducted, and arguing why those searches were reasonable. The fact that the agency has been unable to explain why its second search was not fruitful does not detract from the Court's conclusions nor does it permit the argument that defendant has engaged in a pattern or practice of not conducting adequate searches. See Payne Enters., Inc. v. U.S., 837 F.2d 486, 491 (D.C.Cir.1988) ("So long as an agency's refusal to supply information evidences a policy or practice of delayed disclosure or some other failure to abide by the terms of the FOIA, and not merely isolated mistakes by agency officials, a party's challenge to the policy or practice cannot be mooted by the release of the specific documents that prompted the suit." (footnote omitted) (emphasis added)).
Finally, plaintiff contends that defendant's reply to its cross motion did not controvert the Statement of Facts included with the cross motion, and thereby violated Local Civil Rule 7(h)(1), thus entitling it to summary judgment. (Pl.'s Rep. at 2.) Assuming that plaintiff's arguments regarding LCvR 7(h)(1) are correct, the Court would have to treat each of plaintiff's uncontroverted facts as true; however, each "fact" is either immaterial to the adjudication of this case or constitutes a conclusion of law.[7]

CONCLUSION
For the above reasons, defendant's motion for summary judgment is granted, and plaintiff's cross motion for summary judgment is denied. Further, plaintiff's motion to strike defendant's July 18, 2011 pleading is denied. A separate order accompanies this Memorandum Opinion.
NOTES
[1]  Plaintiff, in fact, concedes that the post-litigation search was adequate. As noted by plaintiff, "Defendant makes much of the fact that Plaintiff has not addressed ... the reasonableness of Defendant's post-litigation search ... [but] Plaintiff never challenged ... the alleged reasonableness of Defendant's post-litigation search." (Pl.'s Rep. at 1.)
[2]  The record includes the Second Supplement Declaration of John Harrington, which clarified the extent of the agency's production in April 2011. As is clear from this declaration, the first search only failed to locate six pages of documents, and the expanded scope of the production thereafter was primarily attributable to the fact that the timeframe of plaintiff's second request was greatly increased.

While the Court does not condone the late filing of this declaration, it will not, as requested by plaintiff, strike the pleading. To the extent that the legal arguments are redundant and unnecessary, they have been ignored, but the clarification of facts regarding the adequacy of the search cannot be disregarded given the nature of plaintiff's challenges. Moreover, in a FOIA case, even if defendant had failed in obtaining summary judgment because of an inadequate search, it does not necessarily follow that plaintiff prevails. Rather, the usual remedy is for the Court to remand to the agency to expand its search or to provide more detailed declarations regarding the scope of the search. See, e.g., Kean v. NASA, 480 F.Supp.2d 150, 159-60 (D.D.C.2007) (ordering NASA to coordinate with plaintiff on a plan to properly search and document its search procedures).
For instance, courts often deny an agency's motion for summary judgment based upon vague or conclusory declarations and ask the agency to submit more detailed declarations. E.g., Schoenman v. FBI, No. 04-2202, 2009 WL 763065, at *10 (D.D.C. Mar. 19, 2009); see also Morley v. CIA, 508 F.3d 1108, 1121 (D.C.Cir.2007) (commanding the district court that "[o]n remand the CIA must supplement its explanation"). In other cases, courts ask the agency to conduct a more adequate search. E.g., Campbell v. U.S. Dep't of Justice, 164 F.3d 20, 37 (D.C.Cir.1998) (remanding to the district court so it could order the agency to conduct a more adequate search).
As the Court has shown, those cases where an agency's motion for summary judgment was denied based on inadequate declarations are distinguishable from the case here because, in those cases, the agency provided vague and conclusory declarations. (See infra note 5.) That is not the case here, but nonetheless, the explanation of the quantification of page and document numbers in the second declaration has allowed the Court to avoid an unnecessary remand and better enabled the Court to address some of plaintiff's arguments.
[3]  Plaintiff's repeated emphasis that the pre-litigation searches are the only searches material to the adequacy determination is also legally unsupportable. (See Pl.'s Cross Mot. at 15 (arguing that defendant "failed to identify... responsive documents ... until after Plaintiff initiated litigation"); Pl.'s Rep. at 1, 5 ("Defendant in this case falls far short of meeting its burden of proving the reasonableness of the searches it allegedly conducted before litigation commenced.").) The cases cited by plaintiff in support of this proposition, McKinley v. FDIC, 756 F.Supp.2d 105 (D.D.C.2010), and Cuban v. SEC, 744 F.Supp.2d 60 (D.D.C.2010), do not make any substantive distinction between pre- and post-litigation searches.
[4]  Plaintiffs sought "`all of the records relating directly or indirectly to investigation and prosecution of our parents,'" which at the time "was perhaps the most extensive FOIA request ever made." Meeropol, 790 F.2d at 945 (quoting Letter from Michael and Robert Meeropol to the Office of the Deputy Attorney General (Feb. 20, 1975)).
[5]  Plaintiff's use of Campbell v. U.S. Dep't of Justice, 164 F.3d 20, 28-29 (D.C.Cir.1998), to support this proposition is misplaced. (See Pl.'s Cross Mot. at 16.) In Campbell, the Court found an FBI search inadequate because its scope was too narrow; the FBI had evidence that other databases contained responsive documents but refused to search them. Campbell, 164 F.3d at 28. Here, the BIA searched every single responsive file in the only location that contained responsive files (i.e., the entire lease files for all three Bear leases), producing all responsive documents. (Def.'s Mot. at 3; Smith Decl. at ¶¶ 1, 4, 5.) Thus, unlike Campbell, plaintiff has not pointed to any other filing systems with potentially responsive documents that should have been searched.

Likewise, plaintiff's other cases are easily distinguished. Valencia-Lucena v. U.S. Coast Guard is similar to Campbell; the agency's search was inadequate because it refused to search a known location with responsive documents. 180 F.3d at 326-27. Founding Church of Scientology of Wash., D.C., Inc. v. NSA, 610 F.2d 824 (D.C.Cir.1979), hinges on the inadequacy of the agency's single, undetailed declaration. Id. at 837. Defenders of Wildlife v. U.S. Dep't of Interior undermines plaintiff's assertion because the agency's search was found adequate even though a reference in another document suggested that additional responsive documents might exist. 314 F.Supp.2d 1, 10 (D.D.C.2004). Kean v. NASA relates to the inadequacy and lack of detail in the agency's declarations. 480 F.Supp.2d at 157. Finally, in Friends of Blackwater v. U.S. Dep't of the Interior, 391 F.Supp.2d 115 (D.D.C.2005), this Court held a Fish and Wildlife Service ("FWS") search inadequate when production from other agencies produced documents created by FWS that the FWS itself failed to produce in response to the FOIA request. Id. at 120-21. None of those circumstances is present here.
[6]  Likewise, despite its exhaustive efforts to undermine defendant's declarants, plaintiff has failed to provide any evidence to overcome the presumption of good faith. (Pl.'s Rep. at 9-10, 12-15.) As the Circuit reasoned in Perry v. Block,

[None of the existing precedent] demands in every FOIA case that the affidavits of the responding agency set forth with meticulous documentation the details of an epic search for the requested records. Rather, in the absence of countervailing evidence or apparent inconsistency of proof, affidavits that explain in reasonable detail the scope and method of the search conducted by the agency will suffice to demonstrate compliance with the obligations imposed by the FOIA.
684 F.2d at 127 (emphasis added). Indeed, the presumption of good faith is bolstered by the fact that each of the declarants whom plaintiff attacks possesses direct, personal knowledge of the searches. Franklin Keel is the Regional Director of the Eastern Region of the BIA in Nashville, Tennessee, and his official duties include management over the Cherokee Agency office where the files of the Bear leases are housed, as well as, the region's FOIA manager, Rebecca Smith. (Keel Decl. at ¶¶ 1, 2.) Gail Kuester, the individual who actually conducted the manual searches in response to the August and October requests, describes in detail how she conducted those searches, from using the spreadsheet to her manual search of the hard-copy files. (Kuester Decl. at ¶ 4.) Ruth McCoy is a BIA Realty Officer in the very office that houses the lease documents and is Gail Kuester's supervisor. (McCoy Decl. at ¶ 1; Kuester Decl. at 4.) Finally, having read these documents, the Court cannot agree with plaintiff's characterization of these declarations as "conclusory."
[7]  As shown by the analysis above, plaintiff's conceded "facts" that defendant failed to produce all responsive documents and that the search was untimely (i.e., it occurred after litigation commenced) are immaterial. (See Pl.'s Rep. at 2.) Further, concessions that include phrases like "was inadequate as a matter of law" (see id. at 3-4), are not "facts" that the Court need consider. Finally, plaintiff's contention that John Harrington, BIA counsel, conceded the inadequacy of the search in a telephone call is immaterial both because it is a conclusion of law and because the alleged concession occurred before the April 2011 production.


                                                                                Opinions of the United
2006 Decisions                                                                                States Court of Appeals
                                                                                for the Third Circuit

5-19-2006

Stark v. Ear Nose Throat
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-2345

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_2006/1080

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                                                              NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT

                                     No. 05-2345

                    BEATA A. STARK; NORMAN A. STARK;
                    BEATA CLINICAL RESEARCH SERVICES,

                                                           Appellants
                                          v.

           EAR NOSE & THROAT SPECIALISTS OF NORTHWESTERN
            PENNSYLVANIA, P.C.; JACK B. ANON, INDIVIDUALLY;
        ROBERT BUDACKI, INDIVIDUALLY; SETH ANON, INDIVIDUALLY;
                  ELLEN ANON; and OTHERS to be identified

                   On Appeal from the United States District Court
                       for the Western District of Pennsylvania
                            (D.C. Civil No. 04-cv-00032E)
                    District Judge: Honorable Sean J. McLaughlin

                   Submitted Pursuant to Third Circuit LAR 34.1(a)
                                   May 19, 2006

           Before: RENDELL and VAN ANTWERPEN, Circuit Judges, and
                      ACKERMAN, Senior District Judge.*

                               (Filed:   May 19, 2006 )

_____

* The Honorable Harold A. Ackerman, Senior District Judge for the District of New
Jersey, sitting by designation.

                                         _____
                               OPINION OF THE COURT

VAN ANTWERPEN, Circuit Judge.

       Appellants Beata Stark, Norman Stark, and Beata Clinical Research Services

(hereinafter “Stark” or “BCRS”) appeal from the District Court’s dismissal of antitrust

claims pursuant to Federal Rule of Civil Procedure 12(b)(6) in favor of appellees Dr. Jack

Anon, Ear Nose & Throat Specialists of Northwestern Pennsylvania, P.C. (Anon’s

medical practice), Anon’s wife and son, and an employee, Robert Budacki (hereinafter

“Anon” or “ENT,” collectively). We have jurisdiction pursuant to 28 U.S.C. § 1291 and

will affirm.

                                              I.

       Only Stark’s antitrust claims are before us.1 We exercise plenary review of the

grant of a motion to dismiss and accept as true all factual allegations in the complaint,

viewing them in the light most favorable to Stark and BCRS. See, e.g., Doug Grant, Inc.

   1
      Stark’s first amended complaint pursued some 17 federal and state causes of action,
including claims under both Section 1 (restraint of trade) and Section 2 (monopolization)
of the Sherman Act, 15 U.S.C. § 1 et seq.; claims under 42 U.S.C. §§ 1981, 1983, 1985,
and Title IX; and state law claims of defamation, civil assault, civil battery, interference
with contractual relations, and interference with prospective contractual relations. The
District Court dismissed the Section 1 claim, as well as the § 1981, § 1985, and Title IX
claims, in an oral Order on June 21, 2004. Stark then withdrew her § 1981 claim.
Stark’s second amended complaint pursues some 11 causes of action, only one of which
is federal, the Section 2 claim that the District Court dismissed in a written Order dated
March 31, 2005. Pursuant to 28 U.S.C. § 1367(c)(3), the District Court then dismissed
Stark’s pendant state law claims without prejudice. On appeal, Stark challenges only the
dismissal of her Section 1 and Section 2 claims.
                                              2
v. Greate Bay Casino Corp., 232 F.3d 173, 183 (3d Cir. 2000).

       Both the first amended and second amended complaints allege that Anon

economically retaliated against Stark and BCRS after Stark rebuffed Anon’s sexual

advances and sexual harassment. In the first amended complaint, Stark alleged the

retaliation constituted both a restraint of trade, in violation of Section 1 of the Sherman

Act, 15 U.S.C. § 1, as well as monopolization, in violation of Section 2 of the Sherman

Act, 15 U.S.C. § 2. In an attempt to make out these antitrust claims, the first amended

complaint averred in pertinent part:

       ¶ 2: Stark is a “Registered Nurse [who] performs regulatory, compliance, patient
       management . . . and other services in support of clinical studies . . . . In that
       capacity she began working in conjunction with [Anon] and [ENT], respectively a
       physician and organization engaged in research . . . .” (emphasis added).

       ¶ 15: “BCRS administers contracts with Erie area physician’s offices . . . .”
       (emphasis added).

       ¶ 74, 98: [In retaliation for Stark rebuffing Anon,] “Plaintiff [was told she] would
       no longer have access to the ENT facilities without a monitor,” and one of Anon’s
       colleagues said “he was changing all of the locks at ENT.”

       ¶ 84, 98: “Anon launched at least one research study in competition with
       [BCRS].”

       ¶ 104: “There exists in the Northwest region of Pennsylvania . . . a substantial
       market for drug research contracts.” (emphasis added).

       ¶ 106: “Anon and ENT control almost exclusively a substantial portion of that
       market, including drugs used to diagnose and treat ear, nose, and throat illnesses.”
       (emphasis added).

       ¶ 108: “Beginning in March 2003, Anon and/or ENT and/or Budacki and/or
       others undertook to injure [Stark] by combining and/or conspiring to restrain
       interstate commerce in the NW Region [of Pennsylvania] and/or by combining

                                              3
       and/or conspiring to monopolize and/or attempt to monopolize the drug research
       market in the NW region.” (emphasis added).

       In a June 21, 2004 oral Order after hearing argument on Appellees’ motions to

dismiss this and other claims, the District Court dismissed Stark’s Section 1 claim on the

grounds that the first amended complaint averred only unilateral action by ENT, its

owner, and its employee. The District Court also determined that Stark’s averments

failed to adequately identify unnamed others with whom Anon, ENT, or Budacki

allegedly conspired. The District Court went on to find deficiencies with the first

amended complaint’s averments as to a Section 2 claim, but granted Stark leave to re-

plead her Section 2 claim if she so desired.

       Stark’s subsequent second amended complaint averred, inter alia, the following in

support of a Section 2 claim:

       ¶ 6: “BCRS is a site management organization . . . .” (emphasis added)

       ¶ 7: “[ENT] is a medical practice . . . .” (emphasis added)

       ¶ 8: “[Dr. Anon] is a physician employed by ENT and/or an owner of
       ENT.” (emphasis added).

       ¶ 25: “[Stark and BCRS] perform[] regulatory, compliance, patient
       management, . . . and other services in support of clinical studies of
       medications . . . .”

       ¶ 26: “BCRS is a research study contractor to various drug manufacturers
       and drug research firms. BCRS administers contracts with Erie area
       physicians’ offices for various drug firms. BCRS pays physicians and
       physician’s offices for the research [they perform].” (emphasis added).

       ¶ 28: “The relationship between [BCRS and Stark] and [ENT and Anon]
       was essentially one of contractor and subcontractor . . . .”

                                               4
       ¶ 124: “ . . . ENT and [Anon] launched one or more competitive research
       projects designed to harm [Stark’s and BCRS’s] relationships with drug
       firms.” (emphasis added).

       ¶ 150: “At least one competing area ear, nose and throat physician has
       merged with ENT as a result of [ENT’s monopoly power and] undue
       pressure.”

       ¶ 152: “[One doctor] rejected an offer to merge with ENT. Thereafter,
       [ENT and Anon] intentionally interfered with [the doctor’s] staff privileges
       at the local hospital as well as interfered with [his] ability to lecture and
       interface with the pharmaceutical industry.”

       ¶ 153: “[ENT’s and Anon’s] actions were so obstructive that [the doctor]
       was unable to compete and he was forced to leave Erie and move to another
       state to practice.”

       ¶ 154: “As a result of [ENT’s and Anon’s] monopolistic actions, ENT and
       its physicians are the only ear, nose and throat physicians in the [Erie area]
       who have the necessary patient base and who perform the full range of
       services . . . which are often part of the relevant clinical trials.”

       ¶ 157: “[ENT and Anon] perform the research activities for these types of
       clinical trials, while [BCRS and Stark] perform . . . services in support of
       these types of clinical trials.”

       The District Court dismissed the Section 2 claim in the second amended complaint

pursuant to Fed.R.Civ.P. 12(b)(6) because it concluded that, at its core, the second

amended complaint averred that BCRS was a company that administered contracts in

support of medical drug studies, on behalf of drug companies, and therefore did not

participate or compete in the same market with ENT, a medical practice that, among other

things, actually performed medical studies.

                                              II.

       As we observed in City of Pittsburgh v. West Penn Power Co., 147 F.3d 256 (3d

                                              5
Cir. 1998), our task is to “determine whether the injury [plaintiff] alleges can legally form

the basis for relief under the antitrust laws.” Id. at 263. In so doing, we have “an

obligation . . . to view the complaint as a whole and to base rulings not upon the presence

of mere words but, rather, upon the presence of a factual situation which is or is not

justiciable.” Id. “We do draw on the allegations of the complaint, but in a realistic, rather

than a slavish, manner.” Id. Accordingly, we “need not accept as true ‘unsupported

conclusions and unwarranted inferences.’” Id. at n.13 (quoting Schuylkill Energy Res.,

Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1996), cert. denied, 522 U.S.

977 (1997)). Nor need we “assume that the [plaintiff] can prove facts that it has not

alleged . . . .” Id. (quoting Assoc. Gen. Contractors of Cal. v. Cal. State Council of

Carpenters, 459 U.S. 519, 526 (1983)).

                                              III.

       Stark raises two issues on appeal: whether her second amended complaint

adequately pleaded the required elements of a Section 1 claim, and whether it adequately

pleaded antitrust standing in support of a Section 2 claim. We address these in order.

                                              A.

       In Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 999 (3d Cir. 1994), we

explained that “[t]he very essence of a Section 1 claim . . . is the existence of an

agreement,” because “Section 1 liability is predicated upon some form of concerted

action.” Stark and BCRS asserted two such theories of concerted action in the first

amended complaint: an agreement among “Anon and/or ENT and/or Budacki and/or

others . . . to injure [Stark] by combining and/or conspiring to restrain interstate

                                               6
commerce in the NW Region [of Pennsylvania],” First Amended Complaint ¶ 108, and

agreement among “Anon and/or ENT and/or Budacki” contrary to ENT’s interests. Id.

        As we held in Rossi v. Standard Roofing, Inc. 156 F.3d 452 (3d Cir. 1998),

unilateral activity by a defendant, no matter the motivation, cannot give rise to a Section 1

violation. Rossi, 156 F.3d at 465. Here that is the only Section 1 averment that Stark and

BCRS make. They aver that Anon, through ENT, “launched at least one research study in

competition with BCRS” in retaliation for her rebuffing his sexual advances, as averred in

Paragraphs 84 and 98 of the first amended complaint. This is an allegation of increased

competition initiated by unilateral activity on the part of ENT, its owner, Dr. Anon, and

its employee, Mr. Budacki. As such, it violates neither the letter or policy of the antitrust

laws.

         Stark next argues that her averments qualify for “an exception to the ordinary rule

that ‘officers or employees of the same firm do not provide the plurality of actors

imperative for a Section 1 conspiracy.’” Weiss v. York Hosp., 745 F.2d 786, 813 (3d Cir.

1984) (quoting Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984)). To trigger

this limited exception, Stark must allege that Anon or an employee of ENT was acting

outside ENT’s interests. Copperweld, 467 U.S. at 770 n.15 (citing, inter alia, Johnston v.

Baker, 445 F.2d 424, 426-27 (3d Cir.1971)). Here, according to the first amended

complaint, only two actors could so act: Dr. Anon and Mr. Budacki. As to the former,

Stark has alleged a desire to harm BCRS in particular and a desire to increase ENT’s

market share in drug research contracts. As to the latter, Stark has alleged that Mr.

Budacki assisted Dr. Anon in achieving those goals. None of this constitutes a sufficient

                                              7
averment that Anon or Budacki were acting outside ENT’s interests, and we may not

draw that inference. “[A]ntitrust law limits the range of permissible inferences from

ambiguous evidence in a § 1 case.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 588 (1986). “[C]onduct as consistent with permissible competition as with

illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.”

Id. This is because there is “often a fine line separat[ing] unlawful concerted action from

legitimate business practice.” Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware

Co., 998 F.2d 1224, 1230 (3d Cir. 1993). For these reasons, the District Court did not err

in dismissing the Section 1 claim.

                                              B.

       We also agree with the District Court that the second amended complaint fails to

plead antitrust standing in support of a Section 2 claim. Antitrust standing is, of course,

more than the “injury in fact” and the “case or controversy” required by Article III of the

Constitution. Rather, the doctrine reflects additional prudential concerns. See, e.g.,

Assoc. Gen., 459 U.S. at 545; West Penn Power, 147 F.3d at 263. Accordingly, we have

held, in cases such as Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 118 F.3d 178

(3d Cir. 1997), that entities such as brokers of a good or service are not competitors of

companies that actually supply the good or service, and that they consequently lack

antitrust standing. See id. at 184. This logic is controlling here.

       Here, the second amended complaint avers that Dr. Anon and ENT perform

medical research while Stark and BCRS do not. Rather, as at least Paragraphs 6, 25, 26,

and 157 of the second amended complaint allege, Stark and BCRS merely provide

                                              8
administrative and contractual support, since “BCRS is a research study contractor to

various drug manufacturers and drug research firms.” Second Amended Complaint ¶ 26

(emphasis added). “BCRS administers contracts with Erie area physicians’ offices for

various drug firms.” Id. (emphasis added). This distinction is also the reason why, to the

extent Stark attempts to rely on it, our decision in Carpet Group Intern. v. Oriental Rug

Importers Assoc., 227 F.3d 62 (3d Cir. 2000), is distinguishable. There, everybody

involved was trying to do the same thing: sell carpet. That is not the case here.

       The factors relevant to an antitrust standing analysis are: (1) the causal connection

between the antitrust violation and the harm, and the defendant’s intent to cause that

harm, with neither factor alone conferring standing; (2) whether the plaintiff’s injury is

the type which the antitrust laws were intended to redress; (3) the directness of the injury;

(4) the existence of more direct victims; and (5) the potential for duplicative recovery or

complex apportionment of damages. See, e.g., Barton & Pittinos, 118 F.3d at 181 (citing

In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165-66 (3d Cir. 1993)).

       Applied here, these factors show the District Court did not err in dismissing

Stark’s Section 2 claim. First, Stark does not aver a direct nexus between Anon’s alleged

monopolization of the market for ear, nose and throat physicians and their medical

research, on the one hand, and the separate market for contract support, which is the only

market in which Stark and BCRS may participate. Stark cannot participate in the former

market, as she is not a medical doctor, and there is no allegation that Anon and ENT have

attempted to monopolize the latter market of contract support. To the contrary, as

discussed, Stark and BCRS aver that “ENT and [Anon] launched one or more

                                              9
competitive research projects.” (emphasis added). Second Amended Complaint ¶ 124.

       Second, we ask if the antitrust laws are intended to address the alleged injury. The

thrust of Stark’s second amended complaint is that Anon engaged in economic retaliation

after she rebuffed his sexual advances. It also alleges that BCRS, a contractor to multiple

drug firms, contracts with multiple physicians’ offices. See Second Amended Complaint,

¶ 26 (“BCRS is a research study contractor to various drug manufacturers and drug

research firms. BCRS administers contracts with Erie area physicians’ offices for various

drug firms.”) (emphasis added). Lacking are the classic indicia of injury for which the

antitrust laws were designed, such as increased prices for consumers or a reduction of

consumer options.

       Third, for these reasons, there is substantial risk that the antitrust injury averred in

the second amended complaint is speculative. Indeed, fourth, if Anon and ENT were

attempting to monopolize physician research, more direct victims would exist, such as the

doctors mentioned in Paragraphs 150, 152, and 153 of the second amended complaint.

Fifth, and finally, there exists the potential for duplicative recovery should Stark and

BCRS recover on both their Section 2 claim and their state law claims. This is because

the second amended complaint avers that all of Stark’s and BCRS’ causes of action arise

from the same nucleus of underlying facts—Anon’s retaliation after Stark discouraged his

sexual advances.

       The analysis of these five factors shows that both Stark and BCRS lack antitrust

standing for their Section 2 claim, as the District Court properly concluded. See, e.g,

Barton & Pittinos, 118 F.3d at 181. Stark argues that the harm BCRS suffered is

                                              10
“inextricably intertwined” with Anon/ENT’s alleged wrongdoing, but that narrow

exception is limited to instances where parties operate in the same market and are

engaged in the same activity. See, e.g., Carpet Group Int’l, 227 F.3d at 76-77 (discussing

“inextricably intertwined” exception where all parties sold carpet).

         For these reasons, the District Court did not err in dismissing Stark’s Section 2

claim.

                                              IV.

         We will affirm the June 21, 2004 and March 31, 2005 Orders of the District Court.

                                              11


488 So.2d 982 (1986)
SOVERIGN INSURANCE COMPANY
v.
The TEXAS PIPE LINE COMPANY
v.
ATLAS CONSTRUCTION COMPANY.
No. 85-C-1499.
Supreme Court of Louisiana.
May 20, 1986.
*983 Larry N. Port, Metairie, for defendant-applicant.
Gerard M. Dillon, Dillon & Cambre, New Orleans, James M. Funderburk, Duval, Funderburk, Sundbery & Lovell, Houma, for respondents.
DENNIS, Justice.
This court decided that a contract of indemnity whereby the indemnitee is indemnified against the consequences of his own negligence is strictly construed, and that such a contract will not be construed to indemnify an indemnitee against losses resulting to him through his own negligent acts, unless such an intention is expressed in unequivocal terms. Polozola v. Garlock, 343 So.2d 1000 (La.1977). The present case raises the question of whether a similar rule of contractual interpretation should be applied to determine if a contract provides indemnity against an indemnitee's strict liability under Civil Code article 2317 for damage to a third person caused by an unreasonably dangerous thing in the indemnitee's custody. The trial court decided that the instant contract did not afford indemnification against such a claim, and the Court of Appeal affirmed by an evenly divided en banc court. 470 So.2d 969 (La. App. 1st Cir.1985). We reverse. When a contract of indemnity makes no express provisions for indemnification against the consequences of the indemnitee's negligence, and an unequivocal intention to so indemnify cannot be found after interpreting each contractual provision in light of the whole contract and the general rules of contractual interpretation, the court will presume that the parties did not intend to hold the indemnitee harmless from such liability. On the other hand, this presumption does not apply to the question of whether the parties intended to indemnify against the indemnitee's strict liability under Civil Code article 2317. If the contract's provisions are doubtful or simply fail to address the question, the court may further interpret the contract on this point in light of everything that, by law, custom, usages or equity is considered as incidental or necessary to its effectuation.
Texas Pipeline Company leased a tract of land for purposes of operating a crude oil storage facility. On January 27, 1981, Texas entered into a contract with Atlas Construction Company, Inc. for the construction of three crude oil storage tank foundations. The contract provided that Atlas would indemnify Texas against any liability, cost, expense, damage or loss in connection with the contract, except that resulting solely from Texas' negligence.[1] On September 30, 1981, a roadbed on the leased premises collapsed, causing a cement truck owned by a subcontractor to overturn. The truck was a total loss except for its salvage value. The subcontractor's insurer, Soverign Insurance Company, paid most of the loss and received a conventional subrogation.
*984 Soverign and the subcontractor sued Texas as custodian of the roadway, claiming strict liability based on Civil Code article 2317. Texas filed a third-party demand against Atlas for indemnity under the construction contract. The plaintiffs amended their petition to name Atlas and the landowner as defendants also.
After trial, the district court found that the damage was caused by a defective condition in the roadway on Texas' leased premises, held Texas strictly liable under Civil Code article 2317, rejected Texas' claim for indemnity under the contract, and dismissed all the other claims. The court of appeal, sitting en banc, affirmed by an evenly divided vote. An opinion subscribed to by a plurality reasoned that the strict construction rule of Polozola v. Garlock should be applied to decide whether the parties intended to indemnify the indemnitee against strict liability under Civil Code article 2317. We granted certiorari because incorrect results were reached below due to a failure to properly interpret the contract and a misunderstanding of the Polozola v. Garlock rule.
The general rules which govern the interpretation of other contracts apply in construing a contract of indemnity. See Polozola v. Garlock, supra. Interpretation of a contract is the determination of the common intent of the parties. See Civil Code arts. 1945, 1949, 1950 and 1956 (1870); Civil Code art. 2045 (1984).[2] When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. See Civil Code arts. 13 and 1945(3) (1870); Maloney v. Oak Builders Inc., 256 La. 85, 235 So.2d 386 (1970); Civil Code art. 2046 (1984). Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole. Civil Code art. 1955 (1870); see Civil Code art. 2050 (1984). Although a contract is worded in general terms, it must be interpreted to cover only those things it appears the parties intended to include. Civil Code art. 1959 (1870); see Civil Code art. 2051 (1984). When the parties intend a contract to have a general scope, but particularly describe a specific situation to eliminate doubt, the interpretation of the contract must not restrict its scope to that specific situation. Civil Code art. 1962 (1870); Civil Code art. 2052 (1984). The obligation of contracts extends not only to what is expressly stipulated, but also to everything that, by law, equity or custom, is considered as incidental to the particular contract, or necessary to carry it into effect. Civil Code art. 1903 (1870).[3] Equity is based on the principles that no one is allowed to take unfair advantage of another and that no one is allowed to enrich himself unjustly at the expense of another. Civil Code art. 1965 (1870); see Civil Code art. 2055 (1984).
Applying these interpretive rules to the contract in the present case, we conclude that the parties intended to provide for indemnity against Texas' strict liability to a third person under Civil Code art. 2317. The words of the contract are not clear and explicit regarding strict liability, so further interpretation may be made in search of the common intent. Although *985 the contract provides that Atlas shall indemnify and hold Texas harmless against each and every claim, demand or cause of action and any liability, such general terms must be interpreted to cover only those things it appears the parties intended to include. When this provision is interpreted in light of the other provisions and the contract as a whole, however, it is evident that the parties intended to afford Texas indemnity against claims, causes of action and strict liability arising under Civil Code article 2317. In the other contractual provisions, Atlas represented that it had inspected the premises for hazardous conditions and had determined their nature and extent to its satisfaction; and Atlas promised to take any measures necessary to adequately protect all persons and property from injury or loss arising out of the work and to maintain all passageways for the protection of persons and property required by any local conditions. The contract excepts from the indemnity provision only claims, causes of action and liability resulting "solely from [Texas'] negligence."
The contract provides that Atlas is obliged to indemnify Texas "whether or not [Texas] may have jointly caused or contributed to, by its own negligence any such claim, demand, cause of action, liability...." The parties described this specific situation to eliminate doubt, however, and did not intend to restrict the scope of the contract to that situation alone.
Considering the contract as a whole, it is clear that the parties adverted to the possibility of claims, causes of actions and judgments based upon strict liability for damage caused by premises hazards or defects. Accordingly, strict liability was within their contemplation when they agreed that indemnity should cover each and every claim, demand or cause of action, and liability, except for those resulting solely from Texas' negligence. Hence, the contract as a whole indicates an intention to provide indemnity against Texas' strict liability under article 2317 for damage caused by premises defects which arise out of the performance of the contract, and further interpretation of the agreement is not warranted because the meaning of its provision for indemnity against strict liability is not in doubt.
Because the rule of Polozola v. Garlock applies only in a case in which a contractual provision to indemnify against the indemnitee's negligence liability is still in doubt after a careful reading of the contract as a whole, the issues suggested by the plurality appellate opinion are not squarely presented in this case. In the interest of clarifying an area in which there is confusion, however, we will discuss the different contractual interpretation rules which apply to, first, a doubtful provision to indemnify against an indemnitee's strict liability under Civil Code article 2317 and, second, a doubtful provision to hold an indemnitee harmless from the consequences of his own negligence.
If the common intention of the parties as to strict liability is in doubt after applying the general rules and interpreting each provision in light of the contract as a whole, the court is called upon to interpret the contract further in light of everything that, by law, custom, usages, or equity, is considered as incidental to the particular contract or necessary to carry it into effect. See Civil Code arts. 1903, 1953, and 1965 (1870); cf. Civil Code arts. 2053, 2054 (1984). In such a case, these elements enter into every contract and may be shown for the purpose not only of elucidating it, but also of completing it. Southern Bitulithic Co. v. Algiers Ry. & Lighting Co., 130 La. 830, 58 So. 588 (1912).
When there is doubt as to indemnification against an indemnitee's own negligence liability, however, usage, custom or equity may not be used to interpret a contract expansively in favor of the indemnitee. In such a case, if the provision is still in doubt after applying the general rules of construction and interpreting the provision in light of the contract as a whole, i.e., if the intention to indemnify against an indemnitee's liability for his negligence is equivocal, this court has established a presumption that the parties did not intend to indemnify an indemnitee against losses resulting *986 from his own negligent act. Polozola v. Garlock, Inc., supra; see Civil Code art. 2288 (1870); Civil Code art. 1852 (1984).
The rule or presumption of Polozola v. Garlock, Inc. is derived from the principles of equity. To impose on a person an obligation to indemnify another against the indemnitee's own negligence without the obligor's unambiguous consent is contrary to the principles of equity. Because of the obligor's lack of ability to evaluate, predict, or control the risk which may be created by the indemnitee's future conduct, enforcement of such a provision without clear evidence that the risk was bargained for and accepted may allow one to take unfair advantage of another and unjustly enrich himself at the other's expense. See Civil Code arts. 1964, 1965 and 1966 (1870); Civil Code art. 2055 (1984). Moreover, such an injustice may encourage antisocial acts and a relaxation of vigilance toward the rights of others by relieving the wrongdoer of liability for his conduct. See Hyde v. Chevron, 697 F.2d 614 (5th Cir.1983); Strickland v. Tesoro Drilling Co., 434 So.2d 424 (La.App. 1st Cir.1983); Rodriguez v. Olin Corp., 780 F.2d 491 (5th Cir.1986).
In the case of claims, causes of action and liability which may arise under Civil Code article 2317, the indemnitor usually is in as good a position as the indemnitee to evaluate and protect against the risk. Correlatively, indemnity against liability for the custodianship of dangerous things does not provide as great a disincentive to careful and prudent conduct as does indemnity against the consequences of the indemnitee's own negligence. Therefore, this court has not established a presumption of contractual intention in the instance of a doubtful provision regarding indemnity against strict liability under Civil Code article 2317.
For the reasons assigned, the judgment of the Court of Appeal is amended to render judgment in favor of third-party plaintiff, Texas Pipeline Company, and against third-party defendant, Atlas Construction Company, for full indemnity against the amounts Texas Pipeline was required to pay in judgment on the principal demands, with legal interest from the date of judicial demand until paid, all costs of these proceedings, and attorney's fees of $5000.00; otherwise the judgment of the Court of Appeal is affirmed.
AMENDED AND AFFIRMED.
LEMMON, J., dissents and assigns reasons.
LEMMON, Justice, dissenting.
The contract to build storage tanks on Texas' premises cannot reasonably be construed so as to conclude that Atlas intended to indemnify Texas for liability for latent premises defects in the roads on the premises when the defects were in existence prior to the commencement of Atlas' operations on the premises and were neither caused nor aggravated by those operations. Even more clearly, Atlas did not intend to indemnify Texas for liability for latent premises defects in areas other than the area in which Atlas was building the storage tanks. Moreover, Atlas was in no better position at the time of the execution of the contract to evaluate, predict or control the risks arising from latent defects on the premises for which Texas was responsible as custodian than it was to evaluate, predict or control the risks arising from Texas' negligence. Allowing indemnification to Texas under these circumstances discourages vigilance on the part of lessees to discover and remedy hazards on premises under their control.
NOTES
[1]  The indemnity clause provided:

Contractor [Atlas] shall fully defend, protect, indemnify and hold harmless the Company [Texas], its employes and agents from and against each and every claim, demand or cause of action and any liability, cost, expense (including but not limited to reasonable attorney's fees and expenses incurred in defense of the Company), damage or loss in connection therewith, which may be made or asserted by Contractor, Contractor's employes or agents, subcontractors, or any third parties, (including but not limited to Company's agents, servants or employes) on account of personal injury or death or property damage caused by, arising out of, or in any way incidental to, or in connection with the performance of the work hereunder, whether or not Company may have jointly caused or contributed to, by its own negligence, any such claim, demand, cause of action, liability, cost, expense, damage or loss, except such as may result solely from the Company's negligence.
[2]  In the interests of clarity and conciseness, the language of 1984 La. Acts, No. 331, which revised titles III and IV of Book III of the Civil Code, is used herein whenever the modern version makes no change in the law.
[3]  In the 1984 revision of the obligations articles, the substance of article 1903 was enlarged and reproduced in new article 2053 and converted from substantive law to an interpretative rule by Civil Code art. 2054 (1984).

Civil Code art. 2053 (1984) provides:
A doubtful provision must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties.
Civil Code art. 2054 (1984) provides:
When the parties made no provision for a particular situation, it must be assumed that they intended to bind themselves not only to the express provisions of the contract, but also to whatever the law, equity, or usage regards as implied in a contract of that kind or necessary for the contract to achieve its purpose.