CORE Construction Services, L.L.C. v. U.S. Specialty Insurance Company

Filing 13

ORDER & REASONS denying 6 Motion to Dismiss Case. Signed by Judge Sarah S. Vance on 3/17/2017. (mmm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CORE CONSTRUCTION SERVICES,
LLC
VERSUS

CIVIL ACTION
NO. 16-13447

U.S. SPECIALTY INSURANCE
COMPANY

SECTION “R” (1)

ORDER AND REASONS
Defendant U.S. Specialty Insurance Company moves under Federal
Rule of Civil Procedure 12(b)(7) to dismiss plaintiff Core Construction
Services, LLC’s claims for failure to join an indispensable party. Because the
Court finds that Strategic Planning Associates, LLC is not a necessary party
under Rule 19, U.S. Specialty’s motion is denied.

I.

BACKGROUND
Plaintiff Core Construction Services, LLC served as the general

contractor for a construction project dubbed the “Sophie B. Wright High
School Renovation.” 1 Core alleges that Strategic Planning Associates, LLC, a
non-party, defaulted on its obligation to supply steel and erect a steel

1

R. Doc. 1 at 2.

structure under a subcontract between Core and Strategic Planning. 2 Core
sues U.S. Specialty Insurance Company, and alleges that U.S. Specialty
served as commercial surety to Core’s contract with Strategic Planning. 3
Core further asserts that, as surety, U.S. Specialty is jointly and severally
liable with Strategic Planning for the alleged breach.4 Core is currently party
to a separate arbitration proceeding against Strategic Planning. 5
Core attaches a performance bond contract to its complaint. 6 The
performance bond names Strategic Planning as “Principal,” U.S. Specialty as
“Surety,” and Core as “Obligee.” 7 Under the terms of the bond, upon showing
of default by Strategic Planning and other terms, U.S. Specialty agrees to
perform one of several mitigating actions on behalf of Core. 8

These

mitigating actions include arranging for completion of the contract or paying
Core the sum needed to secure completion. 9
U.S. Specialty now moves under Federal Rule of Civil Procedure
12(b)(7) to dismiss Core’s claims for failure to join Strategic Planning. 10 In

2
3
4
5
6
7
8
9
10

Id.
Id.
Id.
R. Doc. 6-2.
R. Doc. 1-2.
Id. at 1.
Id. at 1-2.
Id. at 2.
R. Doc. 6.
2

support, U.S. Specialty argues that Strategic Planning is a necessary and
indispensable party under Rule 19. 11

II.

LEGAL STANDARD
Rule 12(b)(7) of the Federal Rules of Civil Procedure permits a party to

bring a motion to dismiss a complaint for failure to join a party under Rule
19. See Fed. R. Civ. P. 12(b)(7). Proper joinder under Rule 19 is a two step
process. First, the court must decide if the absent party is a necessary party
to the action. See Fed. R. Civ. P. 19(a). Second, if the absent party is a
necessary party, but its joinder is not feasible, the court must decide whether
the absent party is an “indispensable” party to the action under Rule 19(b).
See Fed. R. Civ. P. 19(b). Under Rule 19(a), a party is “necessary” if:
(1) in the person’s absence complete relief cannot be accorded
among those already parties, or (2) the person claims an interest
relating to the subject of the action and is so situated that the
disposition of the action in the person’s absence may (i) as a
practical matter impair or impede the person’s ability to protect
that interest or (ii) leave any of the persons already parties
subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations by reason of the claimed
interest.
Fed. R. Civ. P. 19(a).

11

Id.
3

If a party is “necessary,” but cannot be joined in the action because its
joinder would defeat the court’s diversity jurisdiction, the court must
determine “whether in equity and good conscience the action should proceed
among the parties before it . . . .” Fed. R. Civ. P. 19(b). The rule provides a
list of four factors for a court to consider when making its determination:
[F]irst, to what extent a judgment rendered in the person’s
absence might be prejudicial to the person or those already
parties; second, the extent to which, by protective provisions in
the judgment, by the shaping of relief, or other measures, the
prejudice can be lessened or avoided; third, whether a judgment
rendered in the person’s absence will be adequate; fourth,
whether the plaintiff will have an adequate remedy if the action
is dismissed for nonjoinder.
Fed. R. Civ. P. 19(b).
State law is relevant “in determining what interest the outsider actually
has, but the ultimate question whether, given those state-defined interests, a
federal court may proceed without the outsider is a federal matter.”
Morrison v. New Orleans Pub. Serv. Inc., 415 F.2d 419, 423 (5th Cir. 1969)
(citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102,
125 n.22 (1968)).

III. DISCUSSION
To determine the relationship between Core, U.S. Specialty, and
Strategic Planning, the Court must look to Louisiana law governing surety
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contracts. In a contract of suretyship, “a person binds himself to a creditor
to fulfill the obligation of another upon the failure of the latter to do so.” La.
Civ. Code art. 3035. A surety is liable “for the full performance of the
obligation of the principal obligor.” La. Civ. Code art. 3045. In other words,
the surety’s liability is solidary with the principal’s. See La. Civ. Code art.
1794 (“An obligation is solidary for the obligors when each obligor is liable
for the whole performance”).12
As solidary obligors, both principal and surety are liable to the obligee
for full performance of the contract. See La. Civ. Code art. 3035; see also
Bonny v. Brashear, 19 La. 383, 385 (1841) (stating that both principal and
surety are “bound towards the creditor for the whole.”); Dictoguard, Inc. v.
Lopeo, 983 So. 2d 156, 159 (La. App. 5 Cir. 2008) (“A legal surety creates a
separate and distinct obligation from the underlying judgment, that
obligation being a guaranty of the performance of the principal, in the event
the principal cannot perform.”). Accordingly, in Louisiana, even as early as
1841 “[i]t ha[d] long since been settled, that a surety can be sued without his

In Louisiana, “solidary” liability is equivalent to common law “joint
and several” liability. In re Hari Aum, LLC, 714 F.3d 274, 277 n.1 (5th Cir.
2013) (citing Black’s Law Dictionary 1521 (9th ed. 2009)); see also Bank One
v. SWC Corp., 823 So. 2d 1060, 1063 (La. App. 2 Cir. 2002) (“The term ‘joint
and several’ has a distinct meaning in the common law, akin to solidary
liability in Louisiana . . .”).
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principal.” Id.; see also Indus. Equip. Sales & Serv. Co. v. Sec. Plumbing
Inc., 666 So. 2d 1165, 1167 (La. App. 5 Cir. 1995) (“The accessorial nature of
the contract of surety does not obligate the creditor to first proceed against
the principal debtor rather than the surety to enforce a debt. The creditor
may sue the surety only, or he may join the surety and the principal in the
same suit and get a judgment against both.” (emphasis in original)).
Although Louisiana courts plainly permit obligees to sue sureties
alone, this does not end the inquiry. State law informs the Rule 19 inquiry,
but federal law governs whether a party is necessary. Morrison, 415 F.2d at
423. Under federal law, a party that is merely subject to joint and several
liability with an existing defendant is not a necessary party. Temple v.
Synthes Corp., 498 U.S. 5, 7; see also Fed. R. Civ. P. 19 advisory committee’s
note to 1966 amendment (stating that the rule “is not at variance with the
settled authorities holding that a tortfeasor with the usual ‘joint-and-several’
liability is merely a permissive party to an action against another with like
liability” and that the “[j]oinder of these tortfeasors continues to be regulated
by Rule 20”). U.S. Specialty offers nothing to distinguish this case from a
standard case of joint and several liability.
Under Rule 19(a)(1)(A), Strategic Associates is a necessary party if in
Strategic Associates’ “absence complete relief cannot be accorded among
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those already parties.” As made clear by the above discussion, Core may
obtain complete relief from U.S. Specialty, and Strategic Associates is
therefore not a necessary party under Rule 19(a)(1)(A).

Under Rule

19(a)(1)(B) Strategic Associates is a necessary party if it claims an interest
relating to this case, and disposing of this case without Strategic Associates
would: “(i) as a practical matter impair or impede [Strategic Associates’]
ability to protect that interest or (ii) leave any of the persons already parties
subject to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of the claimed interest.” U.S. Specialty
has made no showing that disposing of this case with the existing parties will
impede Strategic Associates’ interests. First, U.S. Specialty is entitled to
assert any defense available to Strategic Associates. La. Civ. Code art. 3046.
Second, Core provides evidence, and U.S. Specialty does not dispute, that
Strategic Associates is represented in the related arbitration by the same
attorneys that represent U.S. Specialty in this case. 13

Under these

circumstances, the Court sees no realistic possibility that Strategic
Associates’ absence from this case will impede its interests.
Similarly, U.S. Specialty is at no risk of incurring multiple obligations.
As noted, U.S. Specialty is entitled to reimbursement by Strategic Associates

13

R. Doc. 9-4.
7

for payments made to Core. La. Civ. Code art. 3049 (“A surety who pays the
creditor is entitled to reimbursement from the principal obligor.”). Although
this raises the specter of multiple suits, Rule 19 is concerned with the threat
of inconsistent obligations, not multiple litigation. See Shelton v. Exxon
Corp., 843 F.2d 212, 218 (5th Cir. 1988). Finally, the Court notes that this
analysis is supported by the many times this Court has rejected arguments
that principals are indispensable parties in suits against sureties. See, e.g.,
Alton Ochsner Med. Found. v. HLM Design of N. Am., Inc., No. 01-1662,
2001 WL 1204054, at *3 (E.D. La. Oct. 10, 2001); CFSC Capital Corp. XXVII
v. Riverwood LaPlace Assocs., No. 96-1089, 1996 WL 337220, at *1 (E.D.
La. June 18, 1996); L & L Oil Co. v. Hugh Mac Towing Corp., 859 F. Supp.
1002, 1005 (E.D. La. 1994).
To resist the Court’s conclusion, U.S. Specialty cites to Conerly Corp.
v. Regions Bank, 668 F. Supp. 2d 816 (E.D. La. 2009). That case, however,
is easily distinguishable. In Conerly, the existing plaintiff had assigned a
partial interest in the disputed contract to an absent party. Id. at 830. The
Court noted in that case that “[u]nder Louisiana law, when an incorporeal
right is partially assigned, it must be enforced by both the assignor and
assignee.” Id at 831 (citing La. Code Civ. P. 698(1)). By contrast, as noted,
Louisiana law permits a principal to sue a surety alone.
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IV.

CONCLUSION

For the foregoing reasons, defendant U.S. Specialty Insurance
Company’s motion to dismiss plaintiff Core Construction Services, LLC’s
claims pursuant to Federal Rule of Civil Procedure 12(b)(7) is DENIED.

17th
New Orleans, Louisiana, this _____ day of March, 2017.

_____________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

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