Travelers Casualty & Surety Company of America v. Hub Mechanical Contractors, Inc. et al
Filing
321
MRMORANDUM OPINION AND ORDER granting 305 Motion in Limine; denying 307 Motion in Limine; granting 308 Motion in Limine. Signed by District Judge Keith Starrett on 10/20/2015 (scp)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
TRAVELERS CASUALTY & SURETY
COMPANY OF AMERICA
V.
PLAINTIFF
CIVIL ACTION NO. 2:13-CV-101-KS-MTP
HUB MECHANICAL CONTRACTORS, INC.,
GEORGE C. CURRY, CINDY B. CURRY,
ARTHUR C. HENDERSON, and
HUB REFRIGERATION & FIXTURES, INC.
DEFENDANTS
and
GEORGE C. CURRY, JR., CINDY CURRY, and
HUB REFRIGERATION & FIXTURES, INC.
THIRD-PARTY PLAINTIFFS
V.
RICHARD TEB JONES and
BANCORPSOUTH INSURANCE SERVICES, INC.
THIRD-PARTY DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Travelers’ Motion In Limine to Preclude Failure to
Mitigate as a Defense (“Motion to Preclude Defense”) [305], Motion In Limine Regarding
March 27, 2008 Letter (“Motion to Exclude Letter”) [307], and Motion In Limine Regarding Not
Characterizing Plaintiff as an Insurance Company (“Motion to Preclude Characterization”)
[308]. Having considered the submissions of the parties, the record, and the applicable law, the
Court finds the Motion to Preclude Defense [305] and the Motion to Preclude Characterization
[308] to be well taken and should be granted. The Court also finds that the Motion to Exclude
Letter [307] should be denied.
I. BACKGROUND
Travelers filed its original complaint against George C. Curry, Jr., (“Mr. Curry”) and
Mrs. Curry (collectively “the Currys”) on May 15, 2015. Travelers added Hub Refrigeration &
Fixtures, Inc., (“Hub Refrigeration”) as a defendant in its Amended Complaint [184] on April 9,
2015. Travelers contends that all three are liable to indemnify its losses under the construction
bonds issued to Hub Mechanical Contractors, Inc., (“Hub Mechanical”) in July 2009, under an
Indemnity Agreement [184-1] executed in February 2005. The Currys’ liability stems from their
alleged personal execution of the agreement, while Hub Refrigeration’s liability flows from Mr.
Curry’s ownership, as the agreement provides that indemnitors under the agreement include any
“legal entity in which one or more [of the Currys] are involved.” (See Indemnity Agreement
[184-1] at p. 1.)
On February 11, 2005, Mr. Curry executed the Indemnity Agreement through Richard
Teb Jones (“Jones”), an agent of Travelers. Mr. Curry admits to having forged his wife
signature on the advice of Jones, as he knew she would not consent to signing and Travelers
would not issue bonds for Hub Mechanical without her signature. (See Mr. Curry Depo. [270-3]
at 25:19-23.) Mr. Curry, though, contends that he sent a letter to Jones terminating the
Indemnity Agreement in March 2008. Travelers and Jones both deny having received this letter.
(See Jones Depo. [290-14] at 77:9-17.)
In July 2009, Travelers issued two bonds, a Payment Bond and a Performance Bond, to
Hub Mechanical after it entered into a subcontract agreement with Rod Cooke Construction
(“Rod Cooke”). Travelers brought suit for the indemnification of its losses under these bonds
after Hub Mechanical defaulted, bringing claims for reimbursement of all amounts paid to Hub
Mechanical’s subcontractors, suppliers, and materialmen on the Rod Cooke Project, for
attorneys’ fees and costs, and for fraud. An indemnity claim was also filed against Hub
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Refrigeration in Travelers’ Amended Complaint [184] in April 2015. In their Amended Answer
[257] to the Amended Complaint, the Currys and Hub Refrigeration (collectively “Defendants”)
filed counterclaims against Travelers for abuse of process, intentional tort, intentional
interference with business relations, and conspiracy.
The Court has since granted Hub Refrigeration and Mrs. Curry’s motions for summary
judgment and have dismissed them as parties from the case. The Court has also granted
summary judgment in favor of Travelers on all counterclaims. Travelers now brings these
motions in limine in anticipation of trial.
II. DISCUSSION
A.
Motion to Preclude Defense [305]
Travelers argues that Defendants are precluded from raising the defense of failure to
mitigate damages because they did not raise it as an affirmative defense in their pleadings.
Defendants contend that the defense should be allowed because failure to mitigate is not always
an affirmative defense and because equity demands the defense to be heard at trial.
Federal Rule of Civil Procedure 8(c)(1) states that “[i]n responding to a pleading, a party
must affirmatively state any avoidance or affirmative defense.” The Fifth Circuit has held that
failing to plead an affirmative defense in a timely manner “may result in waiver and the
exclusion of the defense from the case.” LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394, 398
(5th Cir. 2014) (citing Morris v. Homco Int’l, Inc., 853 F.2d 337, 342-43 (5th Cir. 1988)). When
a federal court’s jurisdiction rests in diversity, “substantive state law determines what constitutes
an affirmative defense.” See id. (citations omitted).
Under Mississippi law, failure to mitigate damages is an affirmative defense. Mason v. S.
Mortg. Co., 828 So.2d 735, 739 (Miss. 2002) (citing Wall v. Swilley, 562 So.2d 1252, 1258
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(Miss. 1990)). Defendants cite Carrizales v. State Farm Lloyds for their contention that failure
to mitigate is not always an affirmative defense. 518 F.3d 343 (5th Cir. 2008). The Fifth Circuit
in Carrizales, however, was applying Texas law. See id. at 350. The Mississippi Supreme Court
has clearly stated that failure to mitigate damages is an affirmative defense. Mason, 828 So.2d at
739 (citing Wall, 562 So. 2d at 1258). It does not matter that mitigation of damages is not listed
as an affirmative defense in Rule 8(c)(1), as the list is not meant to be exhaustive and the rule
states that “a party must affirmatively state any . . . affirmative defense.” Fed. R. Civ. P. 8(c)(1)
(emphasis added). Therefore, failure to mitigate damages is an affirmative defense that
Defendants failed to raise in their pleadings, prompting the Court to find that they have waived it
as a defense.
The principles of equity also do not require the Court to allow the affirmative defense of
failure to mitigate in this case. Defendants argue that both sides have already conducted
discovery on mitigation and that, despite Travelers’ formal objection to discovery on this issue, it
has consented through its actions for the defense to be brought. Regardless of whatever
discovery that has been conducted, Defendants have pointed to no particular actions by Travelers
that would override their objection to the defense. Furthermore, there is no sense of unfairness
in the exclusion of this defense which might prompt the Court to invoke equity to allow the
defense. Defendants knew at least as of May 20, 2015, that Travelers objected to the use of a
failure to mitigate defense because it was not pleaded in Defendants’ answer, which put
Defendants on notice to this deficiency in their pleadings. (See Travelers Depo. [306-6] at pp.
123-24.) Defendants filed their Amended Answer and Counterclaim to Amended Complaint
[257] on June 11, 2015, and failed once again to include the mitigation defense. Because of this
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failure, the Court concludes that they have waived a failure to mitigate defense and will not be
allowed to argue the defense at trial.
Therefore, the Court grants Travelers’ Motion to Preclude Defense [305].
B.
Motion to Exclude Letter [307]
Travelers makes three arguments for the exclusion of the March 27, 2007, letter. First, it
claims that it is irrelevant evidence as the letter was insufficient to terminate the Indemnity
Agreement. Second, it argues that the letter pertains only to the Currys’ liability under the
Performance Bond, and not the Payment Bond or the associated attorneys’ fees and litigation
expenses. Third, Travelers contends it cannot be used to relieve Hub Refrigeration from
liability. The Court has already awarded summary judgment to Hub Refrigeration and Mrs.
Curry, and dismissed them both from the case. Therefore, the only arguments left are the ones
pertaining to Mr. Curry’s liability under the Indemnity Agreement.
Under the terms of the Indemnity Agreement, termination takes effect thirty days after
Travelers is “giv[en] written notice . . . of Indemnitors’ intent to terminate.” (See Indemnity
Agreement [310-1] at p. 2.) The question of how this contractual term should be construed is a
question of law which the Court must decide. See Facilities, Inc. v. Rogers-Usry Chevrolet, Inc.,
908 So.2d 107, 109 (Miss. 2005) (“Questions concerning the construction of contracts are
questions of law that are committed to the court rather than questions of fact committed to the
fact finder.”) (citations and internal quotations omitted). Because Travelers prepared the
agreement, the Court, applying Mississippi law, construes any contractual ambiguity against it as
the preparing party. See Banks v. Banks, 648 So.2d 1116, 1121 (Miss. 1994) (“There is also the
universal rule of construction that when the terms of a contract are vague or ambiguous, they are
always construed more strongly against the party preparing it.”) (citations omitted). The Court
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finds nothing in the language of the agreement which specifies any particular language needed to
express the intent to terminate. As such, the Court finds that, under the terms of the Indemnity
Agreement, any written statement which gives notice of an intent to terminate would be
sufficient to terminate Mr. Curry’s liability under the Indemnity Agreement.
Mr. Curry claims that the following language from his letter dated March 27, 2008, gave
written notice of his intent to terminate the Indemnity Agreement:
Teb,
I have sold all interest that I may have owned in Hub Mechanical Contractors. As
per Stacy’s request I summit [sic] this letter as official Notice that George Curry
Jr. and Cindy Curry will no longer be responsible for any performance bonds
issued on Hub Mechanical Contractors behalf after March 27, 2008.
(See Termination Letter [310-2].) Under Federal Rule of Evidence 401, this letter, as the
purported written notice, is relevant to whether Mr. Curry conveyed his written intent to
terminate. Therefore, it will not be excluded from trial.
Furthermore, as the Court stated in its previous order denying Travelers’ Motion for
Partial Summary Judgment [263], Mr. Curry has presented sufficient evidence showing that, at
the time of the relevant events, § 85-7-185 of the Mississippi Code, though it has since been
repealed, could have been taken to mean that a performance bond is at times both a performance
bond and a payment bond. The letter is relevant under Rule 401 to determine whether an intent
to terminate the Indemnity Agreement with regards to both types of bond was conveyed to
Travelers. As such, Mr. Curry will not be precluded from arguing that the letter disclaimed his
indemnity liability as to the Payment Bond.
The Court also finds that the letter is relevant to whether Mr. Curry is liable to Travelers
for attorneys’ fees and expenses, as Mr. Curry’s liability for these costs are based in his liability
under the bonds. Mr. Curry is liable for attorneys’ fees and expenses under the Indemnity
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Agreement’s definition of loss, which holds Mr. Curry liable for “[a]ll loss and expense of any
kind or nature, including attorneys’ and other professional fees, which [Travelers] incurs in
connection with any Bond or this Agreement, including . . . enforcing by litigation or otherwise
any provisions of this Agreement . . . .” (See Indemnity Agreement [310-1] at p. 1.) While an
award of attorneys’ fees and expenses would be appropriate if Mr. Curry was found liable under
the agreement for losses under the bonds, the Court would not award such costs under this
language merely because Travelers brought suit attempting to enforce the agreement against him.
Liability for attorneys’ fee and expenses, therefore, is tied to liability for losses on the subject
bonds, to which the letter is relevant. Mr. Curry, then, will be allowed to argue at trial the
letter’s relevancy with regards to attorneys’ fees and expenses.
Therefore, the Court denies Travelers’ Motion to Exclude Letter [307].
C.
Motion to Preclude Characterization [308]
In its Motion to Preclude Characterization [308], Travelers requests the Court preclude
Defendants from characterizing it as an insurance company. All parties agree that Travelers is a
surety company and not an insurance company. Defendants oppose the motion on the grounds
that they have no intention of characterizing Travelers as an insurance company and an order
precluding it would be superfluous. As Defendants otherwise have no argument against the
motion, the Court grants Travelers’ Motion to Preclude Characterization [308].
III. CONCLUSION
IT IS THEREFORE ORDERED AND ADJUDGED that Travelers’ Motion to Preclude
Defense [305] is granted.
IT IS FURTHER ORDERED AND ADJUDGED that Travelers’ Motion to Exclude
Letter [307] is denied.
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IT IS FURTHER ORDERED AND ADJUDGED that Travelers’ Motion to Preclude
Characterization [308] is granted.
SO ORDERED AND ADJUDGED this the 20th day of October, 2015.
s/ Keith Starrett
UNITED STATES DISTRICT JUDGE
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