Great American Insurance Company v. Brewer et al
Filing
84
ORDER granting in part and denying in part 62 Motion for summary judgment; denying as moot 76 Motion in Limine. Signed by Judge Roy B. Dalton, Jr. on 8/17/2017. (VMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
GREAT AMERICAN INSURANCE
COMPANY,
Plaintiff,
v.
Case No. 6:16-cv-63-Orl-37KRS
BILLY J. BREWER; DEBORAH
BREWER; and BREWER PAVING &
DEVELOPMENT, INC.,
Defendants.
ORDER
This matter is before the Court on the following: (1) Plaintiff’s Motion for
Summary Judgment (Dispositive Motion) and Memorandum of Law in Support
(Doc. 62); (2) Defendants’ Response to Plaintiff’s Motion for Summary Judgment
(Dispositive Motion) and Memorandum of Law in Support (Doc. 69); and (3) Plaintiff’s
Reply in Support of Motion for Summary Judgment Against the Defendants (Doc. 70).
INTRODUCTION
Plaintiff Great American Insurance Company initiated this action against
Defendants Brewer Paving and Development, Inc. (“BPDI”), Billy J. Brewer and Deborah
Brewer to enforce its rights under an agreement of indemnity. (See Doc. 14; Doc. 15-1, pp.
1–9 (“Indemnity Agreement”).) Although Defendants admit that they entered into the
Indemnity Agreement (Doc. 19, ¶ 8), and they “have failed and refused to indemnify
[Plaintiff] or to deposit collateral security as required under the Indemnity Agreement”
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(id. ¶ 21), they also allege that Plaintiff’s claims are “barred by the Doctrine of Bad Faith”
(“Bad Faith Defense”) (id. ¶¶ 30–33, 44–47, 53–56). Plaintiff now moves for summary
judgment in its favor on its claims for breach of contact (Count II) and specific
performance (Count I). (Doc. 62 (“Motion”).) Defendants responded to the Motion
(Doc. 69 (“Response”)), and Plaintiff replied (Doc. 70 (“Reply”)).
LEGAL STANDARDS
Under the Federal Rules of Civil Procedure, “[a] party may move for summary
judgment, identifying each claim or defense—or the part of each claim or defense—on
which summary judgment is sought.” Fed. R. Civ. P. 56(a). The movant has the initial
burden of establishing that “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Id.; Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986); Penley v. Eslinger, 605 F.3d 843, 848–49 (11th Cir. 2010). To meet
this burden, the movant must: (1) cite “to particular parts of materials in the record,
including depositions, documents, electronically stored information, affidavits or
declarations, stipulations . . ., admissions, interrogatory answers, or other materials; or”
(2) show “that the materials cited do not establish the absence or presence of a genuine
dispute, or that an adverse party cannot produce admissible evidence” of a genuine
dispute. Fed. R. Civ P. 56(c)(1).
If the movant meets its initial burden, then the Court must enter summary
judgment unless the non-movant shows that a genuine issue of material fact remains for
trial. See Divine Motel Grp., LLC v. Rockhill Ins. Co., 655 F. App’x 779, 781
(11th Cir. 2016)(quoting Scott v. Harris, 550 U.S. 372, 380 (2007)). What facts are “material”
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depends on the substantive law applicable to the case. 1 See id.; Hickson Corp. v. N. Crossarm
Co., 357 F.3d 1256, 1259 (11th Cir. 2004). An issue of fact is “genuine” if the record taken
as a whole could lead a rational trier of fact to find for the nonmoving party. Hickson,
357 F.3d at 1260. “An issue is not ‘genuine’ if it is unsupported by the evidence or is
created by evidence that is ‘merely colorable’ or ‘not significantly probative.’” Baloco v.
Drummond Co., Inc., 767 F.3d 1229, 1246 (11th Cir. 2014).
In resolving motions for summary judgment, courts must not make credibility
assessments or weigh conflicting evidence. See Hairston v. Gainesville Sun Pub. Co.,
9 F.3d 913, 919 (11th Cir. 1993). Rather, courts must: (1) view the record evidence in the
light most favorable to the non-moving party; and (2) draw all reasonable inferences in
favor of the non-moving party. See White v. Pauly, 137 S. Ct. 548, 550 (2017); see infra n.2.
If a reasonable fact finder could draw more than one inference from the facts and that
inference creates an issue of material fact, a court must not grant summary judgment. See
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Here, the parties do not dispute that Florida law governs in this diversity action.
See Tatum v. SFN Grp., Inc., No. 16-11966, 2017 WL 2705302, *3 (11th Cir. June 23, 2017)
(noting that in diversity actions, federal courts “must apply the choice of law rules of the
forum state”). In applying Florida law, the Court must endeavor to decide this action as
would the Florida Supreme Court. See U.S. Fid. & Guar. v. Liberty Surplus Ins. Corp.,
550 F.3d 1031, 1033 (11th Cir. 2008); BRE Mariner Marco Town Ctr., LLC v. Zoom Tan, Inc.,
682 F. App’x 744, 745–46 (11th Cir. 2017) (noting that federal courts must predict how the
highest court would decide the case before it).
1
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THE FACTS 2
I.
The Indemnity Agreement
Under the terms of the Indemnity Agreement, Defendants agreed to be liable for
losses and expenses incurred by Plaintiff because of its issuance of construction bonds to
Defendants or the Defendants’ breach of the Indemnity Agreement:3
The [Defendants] jointly, severally and/or collectively shall
exonerate, indemnify, hold harmless, and keep [Plaintiff]
indemnified from and against any and all liability for losses,
costs, and/or expenses of whatsoever kind or nature
(including, but not limited to, interest, court costs, consultant
or expert fees, and counsel fees) and from any against any and
all such losses and/or expenses which the [Plaintiff] may
sustain and incur:
(1)
By reason of having executed or procured the
execution of Bonds on behalf of any of the
[Defendants;]
(2)
By reason of the failure of the [Defendants] to
perform or comply with any of the covenants
and conditions of this [Indemnity] Agreement[;]
or
(3)
In enforcing any of the terms, covenants,
obligations, or conditions of this [Indemnity]
The facts recited here and in more detail below are not the actual facts of the case.
See Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006). Rather, they reflect the Defendants’
“best case”—which is what the Court must consider at this stage of the proceedings. See
Robinson v. Arrugueta, 415 F.3d 1252, 1257 (11th Cir. 2005); see also Walker v. City of Riviera
Beach, 212 F. App’x 835, 837 (11th Cir. 2006).
3 Generally, a contract for indemnity concerns a promisor’s agreement to protect
the indemnified party “against loss or damages by reason of liability to a third party.” See
BVS Acquisition Co., LLC v. Brown, 649 F. App’x 651, 654 (11th Cir. 2016) (citing Royal
Indem. Co. v. Knott, 101 Fla. 1495 474, 479 (1931)). Absent “clear and unequivocal terms,”
a contract for indemnity does not cover expenses incurred as a result of the indemnified
parties’ own actions. Id. Here, the Indemnification Agreement includes such clear and
unequivocal terms.
2
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Agreement.
(Doc. 62-1, p. 1; see id. at 6 (“By executing this [Indemnity] Agreement [Defendants] are
bound jointly, severally, and/or collectively to the [Plaintiff] with respect to all Bonds . .
. to be executed, provided or procured by [Plaintiff] at any time in behalf of any of the
[Defendants], and with respect to all undertakings of this [Indemnity] Agreement.”).)
The Indemnity Agreement also required that Defendants pay for losses, costs, and
expense incurred by Plaintiff after taking over Defendants’ obligations under any
agreement covered by a bond issued by Plaintiff:
In the event of any breach, delay or default asserted [against
Defendants] in connection with any Bond or any contract
covered by the Bond . . . the [Plaintiff] shall have the right, but
not the obligation, at its option and in its sole discretion, and
is hereby authorized with or without exercising any other
right or option conferred upon it by law or in the terms of this
[Indemnity] Agreement, to take possession of any part or all
of the work under any contract or contracts covered by any
Bonds, and at the expense of the [Defendants] to complete or
arrange for the completion of the same, and the [Defendants] shall
promptly upon demand pay to the [Plaintiff] all losses, costs, and
expenses so incurred.
(Id. at 3 (emphasis added).) Defendants’ payments to Plaintiff under the Indemnity
Agreement were to be made upon demand:
Payment . . . shall be made to the [Plaintiff] by the
[Defendants] upon the demand by [Plaintiff] as soon as liability
exists or is asserted against [Plaintiff], whether or not the
[Plaintiff] shall have made any payment therefor. . . .
The [Plaintiff’s] demand shall be sufficient if sent by
registered or certified mail, by facsimile transmission, or by
personal service to the [Defendants] . . . .
(Id. (emphasis added).)
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Finally, the Indemnity Agreement afforded Plaintiff the right to settle claims on
any bonds issued by Plaintiff for Defendants:
The [Plaintiff] shall have the right to adjust, settle or
compromise any claim, demand, suit, arbitration proceeding
or judgment upon the Bonds. The liability of the [Defendants]
to the [Plaintiff] under this Agreement shall extend to and
include all amounts paid by the [Plaintiff] under the belief
that:
(1)
the [Plaintiff] was or might be liable therefore;
or
(2)
such payments were necessary or advisable to
protect any of the [Plaintiff’s] rights or to avoid
or lessen [Plaintiff’s] liability or alleged liability.
(Id. at 4.)
II.
The Performance Bond
As contemplated by the Indemnity Agreement, Plaintiff—as “Surety”—issued
“Subcontract Performance Bond, number 211-69-64,” which named BPDI as “Principal”
and GLF Construction Corporation (“GLF”) as “Obligee.” 4 (See Doc. 69-1, p. 7
(“Performance Bond”); see also Doc. 19, ¶ 13; Doc. 62-2, pp. 1–12 (“Tabor Aff.”).)
Incorporating by reference the terms of a “written agreement” titled “Contract Number
CN1-8-10-12-014A; Package 1, Upland and Minor Marine Works in connection with
Canaveral Harbor 44 Foot Channel Project,” (“Subcontract”), 5 the Performance Bond
guaranteed BPDI’s performance under the Subcontract:
In Florida, the obligee on a bond has “the duty of fair dealing and good faith”
toward the surety. See Standard Accident Ins. Co. v. Bear, 184 So. 97, 98 (Fla. 1938).
5 Despite repeated references to the Subcontract in the parties’ briefing and in the
record evidence, neither party has provided the Court with a copy of the Subcontract.
4
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Whenever Principal shall be, and be declared by Obligee to be
in default under the [Subcontract,] the Obligee having
performed Obligee’s obligations thereunder:
(1)
Surety may promptly remedy the default
subject to the provisions of paragraph 3 herein;
or
(2)
Obligee after reasonable notice to Surety may,
or Surety upon demand of Obligee, may
arrange for the performance of Principal’s
obligation under the [S]ubcontract subject to the
provisions of paragraph 3 herein;
(3)
The balance of the [S]ubcontract price . . ., shall
be credited against the reasonable cost of
completing performance of the [S]ubcontract. . .
[But] in no event shall the aggregate liability of
the Surety exceed the amount of this
[Performance Bond—$3,563,741.76]. . . .
(Doc. 69-1, p. 7; see Doc. 19, ¶ 12 (admitting that BPDI “entered into a subcontract
agreement with [GLF], whereby [BPDI] agreed to perform certain work and/or supply
materials” for a maritime construction project in the Canaveral Harbor (“Project”).)
Defendants admit that GLF terminated the Subcontract shortly after it “declared
BPDI to be in default under the Project.” (See Doc. 19, ¶ 14; see also Doc. 69-1, pp. 12–13
(“Subcontract Default Letter”); Doc. 62-2, p. 52 (“Subcontract Termination Letter”).)
According to the Subcontract Default Letter, BPDI defaulted on the Subcontract by failing
to: (1) remove material from the channel to a depth of 13 feet; (2) “correct, replace and/or
re-excavate [BPDI’s] faulty or defective [work]; and (3) “complete or diligently proceed
with [BPDI’s] work within the time required by [GLF].” (See Doc. 69-1, p. 12.)
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In its response to GLF’s Subcontract Default Letter, BPDI asserted that it did
excavate the channel to 13 feet per the Subcontract, and it accused GLF of breaching the
Subcontract by: (1) short paying BPDI for its diligent work; and (2) failing to dewater,
supply rock, and give BPDI a “project schedule.” (Doc. 69-1, pp. 14–16 (“Default
Responses”); see also id. at 1–5 (“Brewer Aff.”).) GLF denied BPDI’s dewatering request
and reiterated that BPDI had an obligation under the Subcontract “to present the project
excavation to -13 to [GLF] and the Canaveral Port Authority.” (See id. at 17–18 (“Default
Reply”).) Nonetheless, BPDI demanded that it be permitted to complete its work on the
Project, which demand was refused “because GLF would not allow it or allow BPDI back
on the work site.” (See Brewer Aff., ¶ 15.)
GLF sent Plaintiff copies of the Subcontract Default and Termination Letters and
it demanded that Plaintiff “undertake performance of the remaining Subcontract work
and correct and complete same.” (See Doc. 62-2, pp. 53–54 (“Demand Letter”); see also
Tabor Aff., ¶¶ 4, 6, 7.) The Demand Letter further advised that “time was of the essence,”
and “due to [GLF’s] obligations to mitigate its damages, GLF [would] continue to look to
[Plaintiff] for all costs, expenses, and fees incurred should it become necessary to
commence completion of the remaining work as a result of [Plaintiff’s] inability to notify
GLF of its decision.” (See Doc. 62-2, pp. 53–54.)
III.
The Investigation
Plaintiff’s employee Brandon Tabor “was primarily responsible for investigating,
evaluating and attempting to resolve” GLF’s claim on the Performance Bond. (See Tabor
Aff., ¶¶ 2–4, 7; see also Brewer Aff., ¶ 6.) In communications between Messrs. Brewer and
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Tabor, Mr. Brewer “rebutted the claim by GLF that [BPDI] had not reached a full thirteen
(13) feet of material removal from the channel, which was a part of the [S]ubcontract . . .,
by means of a contemporaneous survey of dredge depth that [BPDI] had prepared by a
licensed surveyor” named Chris S. Bowers (“Surveyor”). 6 (See Brewer Aff., ¶ 9.)
Mr. Brewer also informed Mr. Tabor that:
(1)
“GLF’s claim was invalid and . . . it had terminated the
[S]ubcontract without just cause . . . [because] GLF was
behind on its prime contract and was merely
attempting to shift the blame for delay to [BPDI]” (id.
¶ 8);
(2)
“any claim of failing to maintain the dredge depth of
thirteen (13) feet during the performance of the
[S]ubcontract was not a contractual obligation” (id.
¶ 10); and
(3)
“any delay in performance of the [S]ubcontract was
caused by GLF’s failure to honor its obligations to
provide rip rap rock and site dewatering, which were
its obligation and which was the cause of [BPDI’s]
inability to work on the east side of the project as well
as those areas requiring rock” (id. ¶ 12).
Although Mr. Tabor does not specifically address the foregoing in his affidavit, he
does aver that he undertook his responsibilities concerning this matter “in good faith.”
Defendants filed a copy of the Survey with their Response along with averments
from the Surveyor (Doc. 69-3, ¶ 5 (“Surveyor Aff.”)) that: (1) the Surveyor prepared the
Survey (see id. ¶ 5); (2) the data collected for the Survey “indicates that a -13 foot contour
had been reached by the excavation effort performed by [BPDI]” (id. ¶ 6); (3) “[t]he
vertical leveling procedures utilized in preparing said [S]urvey are consistent with the
standards of my profession and meet typical accuracy requirements” (id. ¶ 7); and
(4) “[t]he field work for said [S]urvey was performed over various intervals during the
projects construction from December 16, 2014 thru May 6, 2015. During those dates it is
my belief that the temporary benchmarks utilized for the machine calibrations were in
place on the project site as shown and noted in my report” (id. ¶ 8.)
6
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(See Tabor Aff. ¶ 8.) Specifically, Mr. Tabor: (1) “requested, obtained and considered
documentation from GLF and [BPDI] pertinent to [BPDI’s] work” under the Subcontract;
(2) “retained a consultant, Philip Crannell [(“Consultant”)], to assist with the
determination of whether [BPDI] had properly performed the work required under the
[S]ubcontract;” and (3) “participated in various meetings with representatives of [BPDI]
and of GLF.” (See id.; see also Doc. 62-3 (“Consultant Aff.”); Brewer Aff. ¶ 13.)
Based on his investigation and input from the Consultant, 7 Mr. Tabor concluded
that “GLF would have a likelihood of prevailing in an action against” Plaintiff on the
Performance Bond, “and that it was reasonable and, indeed, urgent for [Plaintiff] to reach
at least partial settlement of [GLF’s claim] in order to minimize the exposure of [Plaintiff]
and, derivatively, of [Plaintiff’s] indemnitors to losses and expenses that would likely be
associated with continued refusal to pay [GLF’s] claim.” (See Tabor Aff. ¶ 10.)
Accordingly, Plaintiff “decided to make partial payment to GLF and to enter an
[a]greement with GLF.” (See Doc. 62-4, ¶ 6 (“Thompson Aff.”)).
IV.
Settlement Agreement
Without “the knowledge or permission of [BPDI],” Plaintiff negotiated and
entered into an agreement with GLF concerning Plaintiff’s obligations under the
After an investigation, the Consultant formed various opinions, including that:
(1) the Subcontract required BPDI “to widen and deepen, by dredging or excavation, a
certain portion of the entrance channel in Port Canaveral until that portion reached a
uniform -13 feet consistently within” BPDI’s area of the Project; (2) BPDI “did not achieve
a uniform of -13 feet as required” by the Subcontract; (3) BPDI “failed to complete
excavation work across the entire east to west ends of the Project;” and (4) BPDI did not
take “steps to protect its work on the Project, which may have resulted in back wash into
some of the excavated area.” (See Consultant Aff., ¶¶ 5, 6.)
7
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Performance Bond. (See Doc. 62-2, pp. 55–63 (“Settlement Agreement”); see also Tabor
Aff., ¶ 11; Brewer Aff., ¶ 19.) Specifically, to “mitigate any costs and damages flowing”
from BPDI’s performance on the construction project (“Project”), Plaintiff agreed to pay
GLF: (1) $476,000.00 to cover costs that GLF represented it had “incurred and the estimate
of the costs it will incur to complete [BPDI’s] scope of work on the Project], less the
Subcontract balance;” and (2) $1,374,000.00 to cover the costs that GLF represented it
would incur to pay a third party (“Durta”) for 25 days of dredging work; and
(3) additional funds for “work performed by Durta, and [GLF’s hauling costs] beyond a
total of 25 days if such additional work is not due to delays caused by [GLF] or Durta.”
(See id. at 56–58.)
Under the Settlement Agreement, Plaintiff and GLF acknowledged and explicitly
declined to resolve BPDI and GLF’s conflicting positions concerning the parties’
respective obligations under the Subcontract (“Disputes”). (See Doc. 62-2, pp. 55–56.) In
addition, GLF recognized and confirmed Plaintiff’s “subrogation rights against [BPDI] to
the extent of [Plaintiff’s] payments” under the Settlement Agreement, and it agreed to
“remit to [Plaintiff] any payments subsequently to be made by [GLF] to [BPDI] in
connection with or arising out of the Project, including for payment of any judgment
rendered in any action or adjudicative proceeding in favor of [BPDI] in connection with
or arising out of the Project.” (See id. at 57–58; see also id. at 60–61 (addressing Plaintiff’s
subrogation rights in relation to an action pending against GLF in state court—Brewer
Paving & Dev., Inc. v. GLF Const. Corp., No. 05-2015-CA-031758 (“BPDI Action”)).)
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V.
Indemnification Demands
After receiving the Demand Letter, but before entering the Settlement Agreement,
Plaintiff made a written demand that “the Defendants deposit $1,500,000 in collateral
pursuant to the terms and conditions of the Indemnity Agreement.” (See Doc. 19, ¶ 15; see
also Doc. 62-2, pp. 40–41 (“June Demand Letter”).) Defendants admit that they “refused
to post the collateral demanded by [Plaintiff].” (Doc. 19, ¶ 16; Doc. 14, ¶ 16.) Nonetheless,
on September 17, 2015, Plaintiff issued a check to GLF for $1,850,000.00 (“First Payment”)
(See Doc. 62-2, p. 64; Tabor Aff., ¶ 12.) Three months later, Plaintiff issued another check
to GLF for $825,000.00 (“Second Payment”). (See Doc. 62-2, p. 65; Tabor Aff., ¶ 13.)
After entering the Settlement Agreement and making the First and Second
Payments to GLF, Plaintiff again demanded that Defendants indemnify it and
immediately deposit with Plaintiff collateral “in the full amount of $2,842,463.00, which
[Plaintiff] has determined as its full potential exposure under the . . . Bonds.” (See Doc. 19,
¶ 20; see also Doc. 62-2, pp. 46–47 (“December Demand Letter”).) Defendants admit that
they again refused to comply with the December Demand Letter. (See Doc. 19, ¶ 21.)
The Defendants’ refusals to indemnify Plaintiff are grounded in their denial that
BPDI breached the Subcontract and in Mr. Brewer’s averments that: (1) all “payments
made to GLF by [Plaintiff] in this matter were made without permission of [BPDI], and
over the objection of [BPDI]” (Brewer Aff., ¶ 18); (2) the information that Plaintiff
provided to BPDI concerning such payments was “incomplete, not itemized, and shows
that work was being performed that was unnecessary and outside the terms and
conditions” of the Subcontract (see id. ¶ 17); and (3) the amounts claimed by Plaintiff “far
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exceed any of the work which was called for in” the Subcontract, and it is “approximately
six (6) times greater tha[n] the balance due” to BPDI under the Subcontract. (See id. ¶ 18;
see also Doc. 69-1, pp. 21–23.)
DISCUSSION
I.
Liability
Plaintiff moves for summary judgment on the grounds that the evidence presents
no genuine issues concerning the following material facts:
(1)
the parties executed the Indemnity Agreement;
(2)
in reliance on the Indemnity Agreement, Plaintiff
issued the Performance Bond;
(3)
in its claim on the Performance Bond, GLF asserted “a
substantial default” by BPDI and exposed Plaintiff “to
exposure, not only for the claimed damages for the cost
of completing or correcting the bonded work, but also
for attorney’s fees and consequential and
extracontractual damages[;]”
(4)
in good faith performance of its obligations under the
Performance Bond, Plaintiff incurred “[a]ctual losses
and expenses and continuing liability for additional
claims, all within the scope of the Defendants’
indemnity obligations under the” Performance Bond;
and
(5)
Defendants have refused to honor their obligations
under the Indemnity Agreement to make payments to
and deposit collateral with Plaintiff.
(See Doc. 62, p. 5.) 8
Plaintiff supported its Motion with the Tabor Aff., the Consultant Aff., and the
Thompson Aff.
8
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Although Defendants did not specifically address any of Plaintiff’s “material
facts,” they nonetheless contend that the record evidence it filed with its Response shows
“that genuine issues of material fact remain to be determined at trial.” (Doc. 69, p. 2.) 9
Specifically, Defendants contend that the Brewer Aff. shows that: (1) Mr. Tabor “declined
to take into account the [S]urvey . . . establishing the completion of the -13 foot dredge
obligation . . . which was alleged to be part of the rationale of Plaintiff in determining that
[BPDI] was in breach of [the Subcontract]” (see id. at 3); and (2) Plaintiff’s investigation
was inadequate (see id. at 5).
In its Reply, Plaintiff argues that Defendants’ evidence is immaterial to Plaintiff’s
claims and is insufficient to raise a question of fact as to the Bad Faith Defense. (Doc. 70.)
Upon consideration of the record and the applicable law, the Court agrees with Plaintiff
and finds that the Motion is due to be granted as to Defendants’ liability for breach of the
Indemnity Agreement.
In Florida, a construction performance bond surety like Plaintiff is “entitled to
reimbursement pursuant to an indemnity contract for any payments made by it in a good
faith belief that it was required to pay, regardless of whether any liability actually
existed.” 10 Employers Ins. of Wausau v. Able Green, Inc., 749 F. Supp. 1100, 1103
In support of its Response, Defendants filed the Brewer Aff., the Surveyor Aff.,
and the affidavit of Defendant Deborah Brewer (Doc. 69-2).
10 The common law right of indemnity “is based on principles of equity.” Castle
Const. Co. v. Huttig Sash & Door Co., 425 So. 2d 573, 574 (Fla. 2d DCA 1982). Common law
indemnity “is allowed only where the indemnitor is solely at fault”—it shifts loss “from
one who, although without active negligence or fault, has been obligated to pay, because
of some vicarious or constructive liability, to another who should bear the costs because
it was the latter’s wrongdoing.” See id. at 574–75. Plaintiff has not moved for summary
9
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(S.D. Fla. 1990). 11 Further, where—as here—an indemnity agreement gives the surety
discretion to settle a claim brought under a bond, “the only defense to indemnity for [such
a] settlement is bad faith on the part of the surety.” See Travelers Cas. & Sur. Co. of Am. v.
Grace & Naeem Uddin, Inc., No. 08-61868-CIV, 2009 WL 4110110, at *2 (S.D. Fla.
Nov. 24, 2009). 12
A bad faith defense is not available to indemnitees like Defendants who do not
post collateral in accordance with a demand under an indemnification agreement. See Fid.
& Deposit Co. of Md. v. C.E. Hall Const., Inc., 627 F. App’x 793, 795–96 (11th Cir. 2015)
(affirming order granting surety’s motion for summary judgment against defendant on
indemnification claims where surety settled bond claim in good faith after defendant
failed to post collateral). When a bad faith defense is available, it requires proof of “an
improper motive or dishonest purpose on the part of the surety.” See Auto-Owners Ins.
Co. v. SE Floating Docks, Inc., 571 F.3d 1143, 1146, 1154 (11th Cir. 2009). Standing alone,
evidence of a surety’s “lack of diligence,” negligence, and even “gross negligence,” is not
judgment on its common law indemnity claim—Count III.
11 See also U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 888 (Fla. 2007) (noting
that a surety on a construction bond is “entitled to indemnification” from the contractor);
Waterhouse v. McDevitt & Street Co., 387 So. 2d 470, 472 (Fla. 5th DCA 1980) (noting that
surety had a contractual right to indemnification for “payments made in a good faith
belief that they were necessary or expedient”); Liberty Mut. Ins. Co. v. Aventura Eng’g &
Const. Corp., 534 F. Supp. 2d 1290, 1307 (S.D. Fla. 2008) (noting that indemnification
agreement gave a surety the “right to be exonerated and indemnified” when it “faces
potential liability under” an issued bond).
12 See also Thurston v. Int’l Fid. Ins. Co., 528 So. 2d 128, 129 (Fla. 3d DCA 1988)
(rejecting argument that the possibility of duplicate payments provides a defense to a
surety’s “right of indemnification”); Aventura Eng’g, 534 F. Supp. 2d at 1306 (noting that
“right to settle” clauses provide sureties “with wide discretion in settling claims, even
where the principal is not liable for the underlying claim”).
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evidence of bad faith. W. Sur. Co. v. Merkury Corp., No. 12-22938-CIV, 2013 WL 12092472,
at *7 (S.D. Fla. June 17, 2013) (noting that a surety’s overstatement of required collateral
was “not necessarily unreasonable” or evidence of bad faith), adopted
by
2013 WL 12092089, at *1 (S.D. Fla. Aug. 21, 2013).
Here, Defendants argue that a jury could infer Plaintiff’s bad faith from “the
inadequacy of the Plaintiff’s investigation combined with” the “self-interested”
Settlement Agreement. (See Doc. 69, p. 5.) But, aside from rejecting the Survey and
Defendants’ representations in favor of the Consultant’s views, Defendants do not
identify any inadequacies in Plaintiff’s investigation. Such disagreement with a surety’s
investigation “is not evidence of bad faith.” C.E. Hall Const., Inc., 627 F. App’x at 795–96
(affirming order granting surety’s motion for summary judgment against defendant on
indemnification claims).
The Court also rejects Defendants’ argument that the Settlement Agreement
reflects Plaintiff’s improper motive and dishonest purpose because: (1) it obligates
Plaintiff to pay GLF six times “the balance remaining on [the Subcontract]” (Doc. 69, p. 5);
and (2) it put Plaintiff “in a position to recover its alleged damages from both the
Defendants and [GLF] (id. at 6). First, there is simply no evidence of a financial incentive
for Plaintiff to agree to pay “inflated payments” to GLF. Indeed, such payments reflect a
loss to Plaintiff until and unless it can recover such sums from Defendants. See TransAm.
Ins. Co. v. H.V.A.C. Contractors, Inc., 857 F. Supp. 969, 974 n.8 (N.D. Ga. 1994) (rejecting
argument that surety’s payment of inflated bond claims evidenced bad faith, and
granting surety’s motion for summary judgment on its indemnification claim). Likewise,
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the Settlement Agreement merely acknowledges Plaintiff’s other avenues of recovery—
it did not create a right to double recovery. See J.S.U.B., 979 So. 2d at 890–91 (rejecting as
speculative argument that indemnity would create a windfall for surety). Because
Defendants have not shown that any genuine issue of material fact exists concerning their
breach of the Indemnity Agreement or their Bad Faith Defense, the Motion is due to be
granted as to Defendants’ liability.
II.
Relief
In their Motion, Plaintiff contends that the Court should enter: (1) judgment
against Defendants “in the amount of $3,045,914.24 due to Defendants’ breach” of the
Indemnity Agreement; (2) “a final decree of specific performance, compelling Defendants
to provide collateral to [Plaintiff] in the amount of $3,946,815.50;” and (3) a “final
judgment . . . against all Defendants, jointly and severally.” (See Doc. 62.)
Defendants do not dispute that if they are found liable under the Indemnity
Agreement, then: (1) such liability would apply to all Defendants jointly and severally;
and (2) specific performance is an appropriate remedy. 13 (See Doc. 69.) Defendants do
13
With respect to specific performance, the Indemnity Agreement provides:
[Defendants] acknowledge that the failure of [Defendants] to
deposit with the [Plaintiff], immediately upon demand, the
sum demanded by the [Plaintiff] as payment shall cause
irreparable harm to the [Plaintiff] for which the [Plaintiff] has
no adequate remedy at law. The [Defendants] agree that the
[Plaintiff] shall be entitled to injunctive relief for specific
performance of any or all of the obligations of the [Defendants]
under this [Indemnity] Agreement including the obligation to pay
the [Plaintiff] the sum demanded and hereby waive any claims or
defenses to the contrary.
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take issue with the adequacy of Plaintiff’s damages evidence. Specifically, Mr. Brewer
avers that:
Despite [his] requests, [Mr.] Tabor has only provided [him]
with sketchy information which he alleges is the basis of
[Plaintiff’s] payments to GLF. That information is incomplete,
not itemized, and shows that work was being performed that
was unnecessary and outside the terms and conditions of [the
Subcontract]. [Plaintiff] has not provided any information
from which to ascertain what work has been performed to
complete the [Subcontract] and which work has been
performed to complete GLF’s prime contract with Canaveral
Port Authority.”
(Brewer Aff., ¶ 17.) Thus, the only remaining issue is whether Plaintiff has sufficiently
established its damages.
Generally, a surety’s “right to reimbursement for settlement payments is governed
by a standard of good faith; whereas indemnification for fees and expenses is governed
by a reasonableness standard.” Grace & Naeem Uddin, 2009 WL 4110110, at *3; see Am. S.
Ins. Co. v. Nestor, No. 16-23550-CIV, 2017 WL 2972841, at *5 (S.D. Fla. Jul. 12, 2017) (noting
that claims for contractual indemnification of settlement payments require only a
“showing of potential liability”). This general rule is consistent with the terms of the
Indemnity Agreement, 14 which provides:
(Doc. 62-1, p. 2 (emphasis added).)
14 The Indemnity Agreement also provides that when payment is demanded from
Defendants: “The amount of such payment to the [Plaintiff] by the [Defendants] shall be
determined by the [Plaintiff] . . . . (Doc. 62-1, pp. 1–2 (emphasis added).) This provision of
the Indemnity Agreement suggests that Plaintiff may set the amount to be paid through
specific performance, but it does not obviate the necessity for Plaintiff to prove its
damages in a breach of contract action. See Gray Ins. Co. v. Const. Mgmt. Assocs., LLC,
No. 6:13-cv-401-40KRS, 2014 WL 12628616, at *4 (M.D. Fla. Jul. 7, 2014) (noting that, under
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the [Plaintiff] shall be entitled to charge for any and all
disbursements made by the [Plaintiff] in good faith in and
about the matters herein contemplated by this [Indemnity]
Agreement under the belief that the [Plaintiff] is or was liable
for the sums and amounts so disbursed, or that it was
necessary or expedient for the [Plaintiff] to make such
disbursements, whether or not such liability, necessity or
expediency existed . . . .
(Doc. 62-1, p. 2.) The Indemnity Agreement further indicates that an accounting is
necessary “[i]n the event of any payment of any kind” by the Plaintiff, and in the event
of an accounting “vouchers, invoices, and affidavit, or other evidence of any such
payments made by the [Plaintiff] shall be prima facie evidence of the fact and amount of
the [Defendants’] liability to the [Plaintiff]. (See id. (emphasis added).)
The record evidence does not suggest that an accounting has been conducted, and
Plaintiff does not request that an accounting be ordered. Instead, in its Motion, Plaintiff
requests that the Court simply enter judgment against Defendants in the amount of
$3,045,914.24 for Defendants’ breach of the Indemnity Agreement (“Present
Damages”). 15 (Doc. 62, pp. 21–22, 24.) According to Plaintiff, the Present Damages consist
Florida law, an indemnitee must establish “damages” to recover for breach of an
indemnity agreement); see also Camp Dress & McKee, Inc. v. Paul N. Howard Co.,
853 So. 2d 1072, 1077 (Fla. 5th DCA 2003) (“In cases involving contractual indemnity, the
terms of the agreement will determine whether the indemnitor is obligated to reimburse
the indemnitee for a particular claim.”).
15 Plaintiff also contends that it expects to incur additional damages (“Future
Damages”) based on GLF’s recent claims for: (1) “the remaining balance of [Dutra’s] bills
for performance of work on the [P]roject, which balance is represented by GLF to total at
least $834,265.30,” and (2) “GLF’s hauling costs attributable to Dutra [for] work beyond
25 days on the Project, which costs are represented by GLF to total at least $524,501.89.”
(Tabor Aff., ¶ 14.) Plaintiff does not request that the Court enter judgment in these
amounts, but it does include these Future Damages in calculating its collateral request.
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of: (1) $2,675,000.00 that Plaintiff paid to GLF for is claims under the Performance Bond
(“Paid Losses”); (2) $266,878.33 in costs and expenses (“Claim Expenses”); and
(3) $104,039.91 for the attorney fees incurred in this action (“Litigation Expenses”). (Id.)
The Claim Expenses consist of:
(1)
$107,232.60 paid to the
(“Consultant I Payment”);
Consultant’s
firm
(2)
$53,195.07 paid to consulting firm Chicago Bridge “for
assistance with technical review of the [P]roject work
and documents” (“Consultant II Payment”);
(3)
$56,118.17 paid to the “law firm Thompson & Slagle,
LLC” for its assistance with the Settlement Agreement
and defense of GLF’s claims (“Attorney I Payment”);
(4)
$30,770.34 paid to the “law firm Becker and Poliakoff,
PA for assistance with the defense of the [P]erformance
[B]ond claim (“Attorney II Payment”);
(5)
$6,337.50 for the costs of three mediations (“Mediation
Payment”); and
(6)
$13,224.65 for Plaintiff’s “[i]nternal costs” (“Internal
Costs”).
(Tabor Aff., ¶ 15.)
To support its claim for Paid Losses, Plaintiff submitted copies of checks issued to
GLF in the total amount of $2,675,000.00 (see Doc. 62-2, pp. 64–65), and the Tabor Aff.,
which states that the amounts paid to GLF reflected amounts that Plaintiff “was or might
be liable for under the [P]erformance [B]ond . . . [or the amount] necessary or advisable
in order to protect [Plaintiff’s] rights or to avoid or lessen [Plaintiff’s] liability or alleged
liability.” (Tabor Aff., ¶ 9.) Under the Indemnity Agreement, this evidence is prima facie
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proof of Plaintiff’s damages that Defendants have not successfully challenged. See Nestor,
2017 WL 2972841, at *5 (granting partial summary judgment on indemnitee’s claim for
settlement payments made when faced with potential liability under bond).
Plaintiff provides less evidence in support of its Claim Expenses. Indeed, with the
exception of Mr. Tabor’s conclusory averments, Plaintiff submitted no evidence—
invoices, vouchers, or other evidence—concerning the Consultant II Payment, the
Attorney I and II Payments, and the Mediation Payment. 16 (See Doc. 62.) Accordingly, the
Court finds that the Plaintiff has not met its initial burden to establish that there is no
genuine dispute as to the reasonableness and payment of the Claim Expenses. See Gray
Ins. Co., 2014 WL 12628616, at *6 (denying summary judgment where indemnitee failed
to proffer prima facie evidence to support its “fees and costs” claim); Grace & Naeem
Uddin, 2009 WL 4110110, at *2 (finding that surety failed to establish the “reasonableness”
of its “claim for indemnification of attorney fees”).
When a movant “fails to properly support an assertion of fact” in its summary
judgment motion, the Court may “give an opportunity to properly support or address
the fact” or “issue any other appropriate order.” See Fed. R. Civ. P. 56(c). Here, the Court
will enter summary judgment as to Plaintiff’s liability, grant Plaintiff’s request for specific
16In
contrast, Mr. Tabor’s averments concerning the Attorney III Payment are
supported by the Thompson Aff. and redacted billing records of Plaintiff’s attorneys in
this action (see Doc. 62-4). According to the Thompson Aff., the total amount of expenses,
fees, and costs incurred in the representation of [Plaintiff in this action” is no less than
$116,195.41, based upon the amount billed to [Plaintiff] at this point ($104,035.91) plus
time . . . not yet billed”—$12,159.50 (id. ¶ 14). Mr. Tabor’s averments concerning the
Consultant I Payment are likewise supported by the Consultant’s averment that he has
“sent invoices to [Plaintiff] totaling $107,232.60” (see Consultant Aff., ¶ 7).
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performance, but it will deny Plaintiff’s request that the Court enter judgment against
Defendants “in the amount of $3,045,914.24.” Rather than proceed to trial on the issue of
damages, the Court will: (1) require that the parties advise the Court whether it should
order an accounting or additional summary judgment briefing on the damages issue; and
(2) cancel the trial currently set to commence in the September Trial term.
CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED as follows:
1.
Plaintiff’s Motion for Summary Judgment (Dispositive Motion) and
Memorandum of Law in Support (Doc. 62) is GRANTED IN PART AND
DENIED IN PART in accordance with this Order.
2.
With respect to Defendants’ liability for breach of the Indemnity Agreement
(Count II), summary judgment is ENTERED in favor of Plaintiff and
against Defendants.
3.
With respect to Plaintiff’s claim for specific performance (Count I),
summary judgment is ENTERED in favor of Plaintiff and against
Defendants.
4.
On or before September 1, 2017, Plaintiff is DIRECTED to perform its
obligations under the Indemnity Agreement by providing collateral to
Plaintiff in the amount of $3,045,914.24.
5.
At the Pretrial Conference set for August 23, 2017, the parties are
DIRECTED to advise the Court whether it should order an accounting or
direct additional summary judgment briefing on the damages issue.
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6.
The trial currently set to commence in the September Trial term is
CANCELLED.
7.
General American Insurance Company’s Motion in Limine (Doc. 76) is
DENIED AS MOOT.
DONE AND ORDERED in Orlando, Florida, this 17th day of August, 2017.
Copies to:
Counsel of Record
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