AZTEC ENGINEERING GROUP, INC. et al v. LIBERTY MUTUAL INSURANCE COMPANY et al

Filing 57

ORDER DENYING MOTION TO INTERVENE - Isolux-Corsn's 35 Motion to Intervene is DENIED. (See Order.) Signed by Judge Jane Magnus-Stinson on 1/4/2017. (GSO)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
AZTEC ENGINEERING GROUP, INC.,
TECNICA Y PROYECTOS S.A.,
Plaintiffs,
vs.
LIBERTY MUTUAL INSURANCE
COMPANY,
FIDELITY AND DEPOSIT COMPANY OF
MARYLAND,
XL SPECIALTY INSURANCE COMPANY,
AMERICAN HOME ASSURANCE
COMPANY,
Defendants.

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No. 1:16-cv-01657-JMS-TAB

ORDER DENYING MOTION TO INTERVENE
In this action, Plaintiffs Aztec Engineering Group, Inc., and Tecnica y Proyectos S.A.
(collectively, “Aztec-TYPSA”) seek payment from Defendants Liberty Mutual Insurance
Company, Fidelity and Deposit Company of Maryland, XL Specialty Insurance Company, and
American Home Assurance Company (collectively, the “Co-Sureties”) pursuant to a payment
bond issued on a 21-mile portion of the I-69 development project. Isolux-Corsán, LLC (“IsoluxCorsán”) wants to intervene to assert a counterclaim against Aztec-TYPSA and then seek to stay
this litigation to pursue arbitration. [Filing No. 35.] For the reasons that follow, the Court denies
Isolux-Corsán’s request to intervene.
I.
STANDARD OF REVIEW
On timely motion, the Court must permit anyone to intervene as a matter of right who
“claims an interest relating to the property or transaction that is the subject of the action, and is so

situated that disposing of the action may as a practical matter impair or impede the movant’s ability
to protect its interest, unless existing parties adequately represent that interest.” Fed. R. Civ. Pro.
24(a)(2). If the movant does not have a right to intervene, the Court may exercise its discretion to
permit intervention if the movant “has a claim or defense that shares with the main action a
common question of law or fact.” Fed. R. Civ. Pro. 24(b)(1)(B). In doing so, however, the Court
“must consider whether the intervention will unduly delay or prejudice the adjudication of the
original parties’ rights.” Fed. R. Civ. Pro. 24(b)(3). Permissive intervention and intervention as a
matter of right both must be pursued through a timely motion. Grochocinski v. Mayer Brown
Rowe & Maw, LLP, 719 F.3d 785, 797-98 (7th Cir. 2013).
II.
BACKGROUND
On April 8, 2014, the Indiana Finance Authority (“IFA”) awarded I-69 Development
Partners LLC (the “Developer”) a Public-Private Agreement (the “PPA”) pursuant to Indiana
Code § 8-15.5-1-1, et seq., for the Developer to design, build, finance, operate, and upgrade
approximately 21 miles of existing State Road 37 into an interstate highway (the “Project”).
[Filing No. 1 at 3.] Corsan Corviam Construcción, SA (“Corsan”), entered into a Design-Build
Contract with the Developer for the design and construction work of the Project. [Filing No. 1 at
4.] Corsan later assigned the Design-Build Contract to its affiliate, Isolux-Corsán. [Filing No. 1
at 4.]
Pursuant to the terms of the PPA and the Design-Build Contract, Isolux-Corsán later
executed a payment bond (the “Payment Bond”) with the Co-Sureties in the penal sum of
$15,350,000 to ensure that payment would be made to Isolux-Corsán’s subcontractors on the
Project. [Filing No. 1 at 4; Filing No. 1-3.]

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B. The Engineering Services Agreement
On August 15, 2014, Corsan entered into an Engineering Services Agreement (the “ESA”)
with Aztec-TYPSA for Aztec-TYPSA to be a design-consultant subcontractor on the Project.
[Filing No. 1 at 4; Filing No. 1-4.] The ESA was assigned by Corsan to Isolux-Corsán. [Filing
No. 1 at 4; Filing No. 1-5 at 1.] Aztec-TYPSA assumed various obligations under the ESA to
perform design-related services on the Project. [Filing No. 1-4 at 8.] Pursuant to the ESA, IsoluxCorsán was permitted to withhold payment if it disputed “any items . . . for any reason, including
the lack of supporting documentation or suspected defective or negligently performed
Services . . . .” [Filing No. 1-4 at 17.] If it disputed items, Isolux-Corsán was to withhold payment
for the disputed items, promptly notify Aztec-TYPSA of the dispute, and request clarification or
remedial action. [Filing No. 1-4 at 17.] Payment for undisputed items was to be made within sixty
days, although full or partial payment was not evidence of Aztec-TYPSA’s satisfactory
performance of the services covered by the ESA. [Filing No. 1-4 at 17.]
Aztec-TYPSA submitted invoices to Isolux-Corsán and alleges that until April 2015, the
majority of them were not disputed or only partially disputed. [Filing No. 1 at 5.] Aztec-TYPSA
contends, however, that since April 2015, Isolux-Corsán failed to make the required payments
within the sixty-day period. [Filing No. 1 at 5.] Aztec-TYPSA alleges that it served Isolux-Corsán
with a notice of default in April 2015, but Isolux-Corsán made payment and cured that default.
[Filing No. 1 at 6.] Aztec-TYPSA served Isolux-Corsán with a second notice of default on March
21, 2016, listing twenty unpaid invoices totaling $4,811,869.62. [Filing No. 1 at 6-7; Filing No.
1-6 at 1-2.] Isolux-Corsán made partial payments, [Filing No. 1 at 7], but Aztec-TYPSA served it
with a third notice of default on June 9, 2016 after additional amounts became overdue, [Filing
No. 1 at 7; Filing No. 1-9].
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On June 1, 2016, Aztec-TYPSA suspended services under the ESA. [Filing No. 1 at 5.] It
alleges that to date, Isolux-Corsán owes it an outstanding balance of $4,110,973.17. [Filing No. 1
at 8; Filing No. 1-11.]
C. Payment Bond Claim and Federal Lawsuit
On March 29, 2016, Aztec-TYPSA served a Statement of Amount Due on the Co-Sureties,
representing that it was owed $4,679,369.62 for work performed and services rendered pursuant
to the ESA. [Filing No. 1 at 8; Filing No. 1-12 at 4.] It provided updates to the Co-Sureties as
additional amounts became due and some partial payments were made. [Filing No. 1-15.]
On June 24, 2016, Aztec-TYPSA filed a Complaint against the Co-Sureties in this Court,
alleging that the Co-Sureties breached the Payment Bond by not paying the Statement of Amount
Due after more than sixty days elapsed. [Filing No. 1 at 9-10.] Aztec-TYPSA alleges that the CoSureties must pay all amounts due to Aztec-TYPSA pursuant to the Payment Bond, which it
contends is $4,110,973.17 with prejudgment interest. [Filing No. 1 at 10.]
On July 18, 2016, the Co-Sureties filed a Motion to Dismiss or, In the Alternative, Stay
Litigation and Compel Arbitration, [Filing No. 9], asking the Court to compel arbitration of AztecTYPSA’s claim, [Filing No. 9-1]. Aztec-TYPSA opposed that motion, [Filing No. 18], and on
October 17, 2016, the Court denied the Co-Sureties’ requested to dismiss or stay this litigation,
[Filing No. 30]. On October 28, 2016, Isolux-Corsán filed a Motion to Intervene in this litigation.
[Filing No. 35.] Aztec-TYPSA opposes that motion, [Filing No. 43], and the Co-Sureties have not
filed a response. The Court will now consider Isolux-Corsán’s request to intervene.
III.
DISCUSSION
Isolux-Corsán argues that the Court must allow it to intervene as a matter of right pursuant
to Federal Rule of Civil Procedure 24(a)(2). Alternatively, it asks the Court to exercise its
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discretion to allow it to permissively intervene pursuant to Federal Rule of Civil Procedure
24(b)(1)(B). Isolux-Corsán’s purpose for intervening is “to counterclaim against Aztec-TYPSA
under . . . the ESA [and] then move to stay the Complaint and the ESA counts of its counterclaim
and to compel arbitration of the entirety of the ESA disputes.”1 [Filing No. 36 at 5.] Before turning
to the merits of Isolux-Corsán’s intervention request, the Court must address an argument that
Aztec-TYPSA raises in its response brief that Isolux-Corsán’s motion should be denied due to a
procedural violation.
A. Federal Rule of Civil Procedure 24(c)
Aztec-TYPSA contends that Isolux-Corsán’s motion should be denied because IsoluxCorsán violated Federal Rule of Civil Procedure 24(c) by not attaching a proposed pleading to its
motion to intervene. [Filing No. 43 at 22-23.] Aztec-TYPSA also argues that Isolux-Corsán’s
strategy to seek to stay this litigation and send it to arbitration runs contrary to the spirit of Rule
24(c), since Isolux-Corsán does not actually intend to pursue any claims in this litigation. [Filing
No. 43 at 22-23.]
In reply, Isolux-Corsán argues that it has not run afoul of Rule 24(c) because arbitration is
waivable and it “feared that an answer prior to its motion to compel arbitration could engender a
waiver argument.” [Filing No. 45 at 17-18.] Isolux-Corsán attached a proposed answer to its reply
brief to attempt to cure any defect with regard to Rule 24(c). [Filing No. 44-1.] Isolux-Corsán
contends that its strategy does not run afoul of the federal rules, which actually favor arbitration,

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In its opening brief, Isolux-Corsán also referenced claims it may have against Aztec-TYPSA
pursuant to a Team Member Agreement (“TMA”). [Filing No. 36 at 5.] Because it conceded in
its reply brief that it could not pursue those claims in this litigation, the Court will not discuss the
TMA in its analysis. [Filing No. 45 at 16 (“[Isolux-Corsán] will not seek to assert the TMA in this
action.”).]
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and that courts prefer not to decide motions on the basis of non-prejudicial, technical defects.
[Filing No. 45 at 18-19.]
Federal Rule of Civil Procedure 24(c) provides that a motion to intervene “must state the
grounds for intervention and be accompanied by a pleading that sets out the claim or defense for
which intervention is sought.” The Seventh Circuit Court of Appeals does “not advocate a strict
interpretation of the rule in all circumstances . . . but that does not mean that intervenors may
totally ignore the rule.” Shevlin v. Schewe, 809 F.2d 447, 450 (7th Cir. 1987).
Isolux-Corsán is correct that “[a] contractual right to arbitrate may be waived expressly or
implicitly, and a party that chooses a judicial forum for the resolution of a dispute is presumed to
have waived its right to arbitrate.” Ernst & Young LLP v. Baker O’Neal Holdings, Inc., 304 F.3d
753, 756 (7th Cir. 2002). That said, “[c]ourts must examine the totality of the circumstances and
determine whether based on all the circumstances, the party against whom the waiver is to be
enforced has acted inconsistently with the right to arbitrate.” Id. The parties do not adequately
analyze whether Isolux-Corsán actually would have waived its contractual right to arbitrate its
counterclaim by filing a proposed pleading pursuant to Rule 24(c) with its motion to intervene,
and the Court will not do so for them.2 Additionally, there is a well-established “federal rule policy
of deciding cases on the basis of the substantive rights involved rather than on technicalities.”
Barry Aviation Inc. v. Land O’Lakes Mun. Airport Comm’n, 377 F.3d 682, 687 (7th Cir. 2004).
Thus, under these circumstances, the Court will turn to the merits of Isolux-Corsán’s intervention
request, rather than denying it outright because of a Rule 24(c) violation.

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The Court does note that the proposed pleading Isolux-Corsán filed with its reply brief likely still
does not comply with Rule 24(c) because it does not include the counterclaim Isolux-Corsán
references in its briefing as the motivation for its intervention request. [Filing No. 44-1.]
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B. Intervention as a Matter of Right
Isolux-Corsán argues that it has a right to intervene in Aztec-TYPSA’s action against the
Co-Sureties because its motion is timely and the original parties will not be prejudiced by its
intervention. [Filing No. 36 at 7-9.] Isolux-Corsán contends that it would be prejudiced if it cannot
intervene because “disallowing intervention would prevent it from presenting the totality of its
ESA losses—which could result in an affirmative recovery from Aztec-TYPSA—in a single
dispute resolution.” [Filing No. 36 at 9.] Isolux-Corsán emphasizes that it has an interest in the
subject matter of this litigation and that the Co-Sureties cannot adequately protect that interest
because they have no ground to seek recovery from Aztec-TYPSA. [Filing No. 36 at 10.] It argues
that its interests could be impaired if it cannot intervene because it could be forced to indemnify
the Co-Sureties even though it is not a party to this lawsuit. [Filing No. 36 at 11.]
In response, Aztec-TYPSA contends that Isolux-Corsán’s intervention request is untimely
because it did not file its motion until after the Co-Sureties’ arbitration request was denied. [Filing
No. 43 at 4-8.] It also argues that the original parties will suffer prejudice if Isolux-Corsán is
allowed to intervene because cross-summary judgment motions are briefed and Isolux-Corsán
admits it will move to stay the litigation. [Filing No. 43 at 4-8.] Aztec-TYPSA argues that IsoluxCorsán will not be prejudiced if it is not a party to this action because only undisputed amounts
owed under the ESA are at issue herein, and the Co-Sureties can adequately represent any interest
that Isolux-Corsán has. [Filing No. 43 at 8-11; Filing No. 43 at 17-19.] Aztec-TYPSA admits that
any disputes regarding alleged damages for defective work must be arbitrated, and it emphasizes
that Isolux-Corsán has not initiated arbitration. [Filing No. 43 at 8.]
In reply, Isolux-Corsán again contends its motion is timely and emphasizes that it “just
seeks the opportunity to address the scope of the [ESA’s arbitration] clause.” [Filing No. 45 at 27

9.] It points to a savings clause in the ESA that provides that “[a]ny payment made by [IsoluxCorsán] hereunder does not relieve [Aztec-TYPSA] of any responsibility or liability of properly
performing all Services in accordance with this [ESA] . . . .” [Filing No. 45 at 10.] Isolux-Corsán
emphasizes that even if amounts paid were initially undisputed, the ESA’s savings clause allows
Isolux-Corsán to pull back those payments. [Filing No. 45 at 10.] For these reasons, Isolux-Corsán
argues that it has a right to intervene in this action.
There are four requirements to intervene as a matter of right: (1) timeliness, (2) an interest
relating to the subject matter of the main action, (3) at least potential impairment of that interest if
the action is resolved without the intervenor, and (4) lack of adequate representation by existing
parties. Reid L. v. Illinois State Bd. of Educ., 289 F.3d 1009, 1017 (7th Cir. 2002) (citing Fed. R.
Civ. Pro. 24(a)). The burden is on the party seeking to intervene as a matter of right to show that
all four criteria are met. Reid, 289 F.3d at 1017 (citation omitted); see also United States v. BDO
Seidman, 337 F.3d 802, 808 (7th Cir. 2003) (“Failure to satisfy any one of the four intervention
factors is sufficient grounds to deny the intervention.”). If the party seeking to intervene does not
meet its burden to show that all four criteria are met, “then the district court must deny intervention
of right.” Reid, 289 F.3d at 1017.
Although the parties dispute the timeliness of Isolux-Corsán’s Motion to Intervene, the
Court will assume that its request is timely, given that this case is only about six months old and
Isolux-Corsán moved to intervene within ten days of the Court denying the Co-Sureties’ arbitration
request. But timeliness alone is not enough. To support its alleged interest in this litigation, IsoluxCorsán relies on the ESA and the fact that Aztec-TYPSA performed services for Isolux-Corsán
under the ESA for which it seeks compensation. But Isolux-Corsán ignores that Aztec-TYPSA
initiated this action against the Co-Sureties, alleging that the Co-Sureties breached the Payment
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Bond, not the ESA. [Filing No. 1 at 9-10.] Importantly, Isolux-Corsán is not a party to the
Payment Bond, and the Payment Bond does not incorporate the ESA. As the Court noted in its
Order denying the Co-Sureties’ arbitration request, “[w]hile Aztec-TYPSA does seek payment for
services it performed under the ESA—a contract it entered into with Isolux-Corsán—AztecTYPSA is not seeking payment from Isolux-Corsán in this action.” [Filing No. 30 at 8.] Instead,
Aztec-TYPSA seeks payment from the Co-Sureties under the Payment Bond for unpaid amounts
that Isolux-Corsán has not disputed pursuant to provisions of the ESA.3 [See Filing No. 1-10.]
Given this narrow scope, the Court disagrees with Isolux-Corsán that it has an interest in the
subject matter of the pending litigation. Because it does not have an interest, Isolux-Corsán cannot
suffer a potential impairment of an interest if it is not allowed to intervene.
Even if the Court assumes that Isolux-Corsán has an interest in this litigation that could be
affected, that interest is adequately represented by the Co-Sureties. Indiana law provides that a
surety “is not liable unless the principal is, and, therefore, [the surety] may plead any defense
available to the principal.” BMD Contractors, Inc. v. Fid. & Deposit Co. of Maryland, 679 F.3d
643, 653 (7th Cir. 2012). In other words, to the extent that Isolux-Corsán has an interest in this
litigation, that interest is adequately protected by the Co-Sureties, who may plead any defense
available to Isolux-Corsán and have an incentive to do so to reduce their own potential liability to
Aztec-TYPSA.
For these reasons, the Court concludes that Isolux-Corsán has not met its burden to
intervene as a matter of right, and the Court must deny its request to do so.

Because these undisputed amounts have not been paid, Isolux-Corsán’s reliance on the ESA’s
savings clause is misplaced. [Filing No. 9-3 at 17 (ESA provision providing that “[a]ny payment
made by [Isolux-Corsán] hereunder does not relieve [Aztec-TYPSA] of any responsibility or
liability of properly performing all Services in accordance with this [ESA] . . . .”) (emphasis
added).]
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C. Permissive Intervention
Isolux-Corsán argues that if it does not have a right to intervene in this action, it should
still be permitted to intervene because it has a claim or defense that shares a common question of
law or fact with the main action. [Filing No. 36 at 13-14 (citing Fed. R. Civ. Pro. 24(b)).] It
emphasizes that permissive intervention is within the Court’s discretion, and it alleges that the
claims it seeks to pursue against Aztec-TYPSA for breach of the ESA raise the same fundamental
issues as the claims pending in this litigation. [Filing No. 36 at 14-15.] Isolux-Corsán contends
that allowing it to intervene will serve judicial economy and not unduly delay or prejudice AztecTYPSA because “intervention will allow it the ability to enforce the arbitration clause of the ESA”
and intervention “will prevent the delay and potential prejudice of multiple dispute resolution
proceedings.” [Filing No. 36 at 15-16.]
In response, Aztec-TYPSA asks the Court to deny Isolux-Corsán’s request for permissive
intervention. [Filing No. 43 at 19-23.] It argues that Isolux-Corsán’s proposed claims have limited
common questions of fact and law with the pending litigation and that it will be prejudiced if
Isolux-Corsán is permitted to pursue them in this litigation. [Filing No. 43 at 21-22.] AztecTYPSA also points out that this Court would lack subject matter jurisdiction over Isolux-Corsán’s
proposed counterclaim, which Aztec-TYPSA contends is required for permissive intervention.
[Filing No. 43 at 19-20.]
In reply, Isolux-Corsán does not address Aztec-TYPSA’s subject matter jurisdiction
argument or specifically reassert its permissive intervention arguments. [Filing No. 45.]
The Court may exercise its discretion to permit intervention if the movant “has a claim or
defense that shares with the main action a common question of law or fact.” Fed. R. Civ. Pro.

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24(b)(1)(B). In doing so, however, the Court “must consider whether the intervention will unduly
delay or prejudice the adjudication of the original parties’ rights.” Fed. R. Civ. Pro. 24(b)(3).
Isolux-Corsán apparently concedes that the Court must have independent subject matter
jurisdiction over its counterclaim for Isolux-Corsán to permissively intervene, given that it does
not dispute Aztec-TYPSA’s argument. While Aztec-TYPSA does not cite binding precedent for
this principle, district courts in this Circuit have denied permissive intervention on this basis. See,
e.g., Davila v. Arlasky, 141 F.R.D. 68, 73 (N.D. Ill. 1991) (“Federal courts do not have ancillary
jurisdiction over the permissive intervenor’s claims as they do with intervention as of right. In
order to be allowed permissive intervention the Insurers must establish an independent basis for
subject matter jurisdiction.”). Isolux-Corsán concedes the lack of diversity of citizenship between
it and Aztec-TYPSA in another portion of its brief. [Filing No. 45 at 16.] Thus, the Court denies
Isolux-Corsán’s permissive intervention request because the Court would not have an independent
basis for subject matter jurisdiction over Isolux-Corsán’s counterclaim against Aztec-TYPSA.
Out of an abundance of caution, the Court will briefly address the merits of Isolux-Corsán’s
request for permissive intervention. The Court disagrees with Isolux-Corsán that its proposed
crossclaim shares common questions of law or fact with the underlying action. Again, IsoluxCorsán’s proposed counterclaim arises out of the ESA and involves disputed claims that IsoluxCorsán would then seek to arbitrate under the ESA. But Aztec-TYPSA initiated this action against
the Co-Sureties, alleging that they breached the Payment Bond, not the ESA. [Filing No. 1 at 910.] Isolux-Corsán is not a party to the Payment Bond, and the Payment Bond does not incorporate
the ESA. Additionally, the Court agrees with Aztec-TYPSA that it would suffer prejudice if
Isolux-Corsán is allowed to intervene because Isolux-Corsán has confessed that its strategy is “to
counterclaim against Aztec-TYPSA under . . . the ESA [and] then move to stay the Complaint and
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the ESA counts of its counterclaim and to compel arbitration of the entirety of the ESA disputes.”
[Filing No. 36 at 5.] The Court has already found that the subject matter of the pending action
between Aztec-TYPSA and the Co-Sureties is not arbitrable. [Filing No. 30.] Allowing IsoluxCorsán to inject potentially arbitrable claims into this litigation just to seek to stay it and delay
resolution of the pending non-arbitrable claims is inefficient and prejudicial, especially given that
Aztec-TYPSA is experiencing financial distress due to the non-payment at issue in this case and
that Aztec-TYPSA and the Co-Sureties already have fully briefed cross-motions for summary
judgment on file. For these reasons, the Court denies Isolux-Corsán’s request for permissive
intervention.
As a final point, the Court notes that if Isolux-Corsán believed it was entitled to initiate
arbitration on claims it thinks are arbitrable, there is nothing about this litigation that prevented it
from doing so. The fact that it has not initiated arbitration suggests that its proposed intervention
here was geared more toward delay than the merits of any dispute.
IV.
CONCLUSION
For the reasons stated herein, Isolux-Corsán’s Motion to Intervene is DENIED. [Filing
No. 35.]

Date: 1/4/2017

Distribution via CM/ECF to Counsel of Record:
J. Michael Cavosie
EASTER & CAVOSIE
[e-mail]
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Jarrod W. Stone
MANIER & HEROD PC
[e-mail]
John M. Gillum
MANIER & HEROD PC
[e-mail]
Charles E. Harper
QUARLES & BRADY LLP
[e-mail]
Hunter Gerard DeKoninck
QUARLES & BRADY LLP (Indianapolis)
[e-mail]
Michael A. Rogers
QUARLES & BRADY LLP (Indianapolis)
[e-mail]

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