Federer v. Zurich American Insurance Company

Filing 36

ORDER granting Defendants' 19 Motion for Summary Judgment, denying Plaintiff's 35 Motion for Oral Argument and denying Plaintiff's 23 Motion for Partial Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 8/26/16. (jkl)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
DAVID LAWRENCE FEDERER
as Executor of The Estate of Christina
Audrey Federer,
Plaintiff,
v.

CIVIL ACTION FILE
NO. 1:15-CV-4204-TWT

ZURICH AMERICAN INSURANCE
COMPANY, et al.,
Defendants.

OPINION AND ORDER

This is an action to recover on a bond. It is before the Court on the Defendants’
Motion for Summary Judgment [Doc. 19], the Plaintiff’s Motion for Partial Summary
Judgment [Doc. 23], and the Plaintiff’s Motion for Oral Argument [Doc. 35]. For the
reasons stated below, the Defendants’ Motion for Summary Judgment is GRANTED,
the Plaintiff’s Motion for Partial Summary Judgment is DENIED, and the Plaintiff’s
Motion for Oral Argument is DENIED.
I. Background
In 2012, Christina Federer filed a lawsuit in this Court against HSBC Bank
USA, N.A., The Bank of New York Mellon Corporation, Wells Fargo Bank, N.A.,
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Brightstone Mortgage, Inc., and Orchid Island TRS, LLC.1 That lawsuit alleged
improprieties in the issuance of Ms. Federer’s home loan, specifically gender
discrimination.2 Many of the defendants in that lawsuit filed motions to dismiss, and
this Court granted those motions, finding that the claims were barred by the statute of
limitations.3 This Court then issued show cause orders directing Ms. Federer to show
why her case should not be dismissed in its entirety.4 Ms. Federer did not respond, so
this Court dismissed the case in its entirety and entered judgment against her.5
Less than six weeks after this Court dismissed Ms. Federer’s lawsuit, she filed
a second lawsuit in the Superior Court of Gwinnett County, Georgia, against the same
parties as the first lawsuit, plus two additional defendants, Citigroup Global Markets,
Inc. and American Mortgage Express Corp. (“AMEC”).6 This second lawsuit again
alleged improprieties in the issuance of Ms. Federer’s home loan, specifically fraud.7

1

Defs.’ Statement of Facts ¶ 1.

2

Id. ¶ 2; Order, Federer v. Midland Mortg. Co., No. 1:12-cv-2492-TWT
(N.D. Ga. Nov. 21, 2012), ECF No. 33.
3

Defs.’ Statement of Facts ¶¶ 5-6.

4

Id. ¶ 7.

5

Id. ¶¶ 8-9.

6

Id. ¶ 10.

7

Id., Ex. F.

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All of the defendants in the second lawsuit, with the exception of AMEC, filed
motions to dismiss, arguing in part that the claims were barred by res judicata.8 The
Superior Court of Gwinnett County granted all of the motions to dismiss, finding that
the claims were barred.9 That court also granted a motion for default judgment as to
AMEC because AMEC did not respond to the complaint.10 After an evidentiary
hearing, that court also awarded Ms. Federer $332,000 against AMEC based on the
default judgment.11
In 2005, as a requirement of becoming a licensed mortgage lender in Georgia,
AMEC obtained a surety bond in the amount of $150,000 from Fidelity & Deposit
Company of Maryland (“F&D”), one of the Defendants in this action.12 Zurich
American Mortgage Company, the other Defendant here, is the parent company to
F&D; Zurich did not issue the bond, but sometimes handles claims asserted against
bonds issued by F&D.13 The bond remained active until it was cancelled on March 18,

8

Id. ¶ 13.

9

Id.

10

Pl.’s Statement of Facts ¶¶ 6-7.

11

Id. ¶ 8.

12

Id. ¶ 1.

13

Defs.’ Statement of Facts ¶¶ 18-19.

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2008, after AMEC ceased operating.14 On February 16, 2015, Ms. Federer’s counsel
sent a letter to the Defendants seeking payment under the Bond based on the default
judgment against AMEC.15 Zurich and F&D refused payment under the bond.16 Ms.
Federer passed away, and on November 6, 2015, the executor of her estate, David
Federer, filed a lawsuit against Zurich and F&D in the Superior Court of Gwinnett
County.17 The Defendants removed the case to this Court.18 The Plaintiff and the
Defendants now move for summary judgment.
II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show no genuine issue of material fact exists and
that the movant is entitled to judgment as a matter of law.19 The court should view the
evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.20 The party seeking summary judgment must first identify grounds to
14

Id. ¶ 16.

15

Pl.’s Statement of Facts ¶ 9.

16

Id. ¶ 13.

17

Id. ¶¶ 11-13.

18

Id. ¶ 14.

19

FED. R. CIV. P. 56(a).

20

Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).

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show the absence of a genuine issue of material fact.21 The burden then shifts to the
nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist.22 “A mere ‘scintilla’ of evidence
supporting the opposing party’s position will not suffice; there must be a sufficient
showing that the jury could reasonably find for that party.”23
III. Discussion
The parties both move for summary judgment on the Plaintiff’s claim that it is
entitled to recover the amount of the bond. Resolving the claim on the bond depends
on whether the default judgment against AMEC is conclusively binding on the
Defendants here. In Georgia, a judgment in favor of a creditor against a debtor is
prima facie evidence of guarantor liability.24 Then, however, the burden shifts to the
guarantor to rebut the correctness of the judgment.25 The Plaintiff argues that
Escambia does not apply here because this case deals with a surety bond, not a
contract of guaranty. Not so. The court in Escambia specifically noted that whether

21

Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

22

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

23

Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).

24

Escambia Chem. Corp. v. Rocker, 124 Ga. App. 434, 440 (1971).

25

Id.

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the contract is one of guaranty or suretyship does not matter with respect to the effect
of a judgment.26
The Plaintiff further argues that because it was not required to give the
Defendants notice of the lawsuit against AMEC, the default judgment is binding on
the Defendants here. Again, this argument is contradicted by the case law. The
Georgia Court of Appeals has held that the rule from Escambia applies regardless of
whether the guarantor had notice of the original lawsuit.27 Because the rule does not
change if the guarantor had notice of the lawsuit, it is immaterial whether the Plaintiff
was required to give notice here. This Court therefore finds that the default judgment
against AMEC is prima facie evidence of liability here, but the Defendants are
allowed to present evidence rebutting liability.
The Defendants present several arguments as to why they should not be bound
by the default judgment against AMEC. First they argue that the lawsuit against
AMEC was barred by res judicata. “The doctrine of res judicata . . . prevents relitigation of matters that were or could have been litigated in a previously-adjudicated

26

Id. at 436.

27

Noorani v. Sugarloaf Mills Ltd. P’ship of Ga., 308 Ga. App. 800, 807

(2011).
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action.”28 For an action to be barred based on res judicata, the first action must have
involved an adjudication by a court of competent jurisdiction, the two actions must
have identity of the parties and subject matter, and the party against whom the
doctrine of res judicata is asserted must have had a full and fair opportunity to litigate
the issues in the first action.29 The doctrine applies even if a new defendant is added
or some new facts have been alleged.30
Here, Federer’s first lawsuit was filed in this Court, and there is no dispute that
this Court had jurisdiction. The first requirement is therefore met. As to identity of the
parties, the parties are all identical, with the exception of two new defendants,
Citigroup and AMEC. As discussed, however, the addition of new defendants does
not defeat the identity requirement. The subject matter is also the same – the causes
of action in the first lawsuit and the second lawsuit both arise out of the same scenario,
namely alleged improprieties associated with the origination of Ms. Federer’s
mortgage loan. Finally, there is no question that Ms. Federer had a full and fair
opportunity to litigate the issues in the first action. A review of the docket in her first
lawsuit, which was before this Court, indicates that she filed a complaint, amended
28

Yates Paving & Grading Co., Inc. v. Bryan Co., 287 Ga. App. 802, 805

(2007).
29

Fowler v. Vineyard, 261 Ga. 454, 455-56 (1991).

30

Neely v. City of Riverdale, 298 Ga. App. 884, 887 (2009).

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that complaint, and engaged in motion practice before this Court dismissed the case.31
The requirements of res judicata have been met as to AMEC. In fact, the Superior
Court of Gwinnett County, Georgia, when assessing the claims against Brightstone
and Citigroup, found that all of those claims were barred by res judicata.32 The claims
asserted against AMEC were also asserted against either Brightstone or Citigroup.33
By extension, therefore, the claims against AMEC were barred by res judicata as well.
The Court does not need to address the Defendants’ additional arguments as to why
the default judgment is not binding given that it finds that the second lawsuit was
barred by res judicata. Because the Defendants here have presented evidence rebutting
liability under the default judgment, the default judgment is not binding upon them.
The Defendants’ motion for summary judgment should therefore be granted and the
Plaintiff’s motion for partial summary judgment should be denied. This Court was
able to decide the issues on the papers alone, and therefore the Plaintiff’s motion for
oral argument should also be denied.

31

Federer v. Midland Mortg. Co., No. 1:12-cv-2492-TWT (N.D. Ga. July

29, 2013).
32

Defs.’ Statement of Facts, Ex. F, pp. 8-10; Ex. G, pp. 2-5.

33

Id. at Ex. E.

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IV. Conclusion
For the reasons stated above, the Defendants’ Motion for Summary Judgment
[Doc. 19] is GRANTED, the Plaintiff’s Motion for Partial Summary Judgment [Doc.
23] is DENIED, and the Plaintiff’s Motion for Oral Argument [Doc. 35] is DENIED.
SO ORDERED, this 26 day of August, 2016.

/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge

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