Fidelity and Deposit Company of Maryland v. Ohio Department of Transportation et al
Filing
64
ORDER ADOPTING 57 REPORT AND RECOMMENDATIONS in full but for the minor clarifications set forth in this Order at p. 3. Plaintiff's motion for summary judgment (Doc. 43) is GRANTED. Defendant's motion for summary judgment 45 is DENIED. The funds previously deposited with this Court pursuant to Local Rule 77.2 (see Doc. 42) shall be releasedin their entirety to Plaintiff, subject to the handling fees outlined in Local Rule 77.2(c). This case is CLOSED. Signed by Judge Timothy S. Black on 3/30/18. (sct)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
FIDELITY AND DEPOSIT,
COMPANY OF MARYLAND,
Plaintiff,
vs.
OHIO DEPARTMENT OF
TRANSPORTATION, et al.,
Defendants.
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Case No. 1:16-cv-284
Judge Timothy S. Black
Magistrate Judge Stephanie K. Bowman
DECISION AND ENTRY
ADOPTING THE REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE (Doc. 57) AND
TERMINATING THIS CASE IN THIS COURT
This case is before the Court pursuant to the Order of General Reference to
United States Magistrate Judge Stephanie K. Bowman. Pursuant to such reference, the
Magistrate Judge reviewed the pleadings filed with this Court and, on November 22,
2017, submitted a Report and Recommendation. (Doc. 57). Defendant, the United States
of America, and Plaintiff, Fidelity and Deposit Company of Maryland, each filed
objections on 12/13/17. (Doc. 59; Doc. 60).
Defendant’s objections are not well-taken. After reviewing both the Report and
Recommendation and Defendant’s objections, the Court finds that each of Defendant’s
five objections lack merit because: (1) The Report and Recommendation correctly
determined that evaluating the existence of property rights under state law is a
prerequisite for determining whether a federal tax lien can attach to alleged property;
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(2) non-party Cosmos in fact had no property interest in the disputed funds generated
after September 1, 2015—the property interest in those funds was held by Plaintiff as the
performing surety; (3) The Report and Recommendation correctly applied the doctrine of
subrogation to the facts of this case; (4) Plaintiff is entitled to the disputed funds
generated before September 1, 2015 by virtue of its satisfaction of the outstanding
mechanics’ liens and fringe benefit claims that led to the withholding of those funds;
(5) A declaration of default is not an absolute prerequisite to a performing surety’s right
to claim ownership of funds generated through performance.
The reasoning of the Report and Recommendation speaks for itself, and the Court
fully adopts that reasoning as its own (with the exceptions of the minor adjustments
articulated in this Order). Ultimately, Defendant advocates an untenable and inequitable
resolution to this case. A ruling in Defendant’s favor would hold that Plaintiff, despite
doing all the work and generating all the expense required to generate the disputed funds
in this case, had no property rights over any of the fruits of its labor. “Ultimately, the
doctrine [of subrogation] will be invoked when necessary to prevent injustice.” Am. Ins.
Co. v. Ohio Bur. of Workers Comp., 577 N.E.2d 756, 759 (Ohio Ct. App. 1991). That
doctrine is appropriately invoked in this case.
As required by 28 U.S.C. § 636(b) and Fed. R. Civ. P. 72(b), the Court has
reviewed the comprehensive findings of the Magistrate Judge and considered de novo all
of the filings in this matter. Upon consideration of the foregoing, the Court does
determine that such Report and Recommendation should be and is hereby adopted.
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Plaintiff’s objections, while agreeing with the reasoning and conclusion of the
Report and Recommendation, request certain clarifications which, after review, the Court
finds are appropriate. The first such clarification is a minor typographical error from the
Report and Recommendation. The Report and Recommendation states that “[b]etween
September 2, 2014 and November 19, 2015, F&D also paid all thirteen outstanding
mechanics’ liens that ODOT had received.” (Doc. 57, at 6). That first date should read
“September 1, 2015” and not “September 2, 2014.” The second request for clarification
involves the Report and Recommendation’s occasional reference to non-party Cosmos
Industrial Services, LLC (“Cosmos”) having “made a claim under the bonds.” (See, e.g.
id. at 15). Cosmos, as the principal, was the primary obligor under the bonds, and not a
beneficiary—Cosmos accordingly could not “make a claim” under the bonds. Plaintiff’s
obligation to perform by maintaining the work flow on the bonded projects at issue in this
case arose not due to any claim made by Cosmos but due to Plaintiff’s status as the surety
and secondary obligor with duties to the oblige under the bonds (in this case, the Ohio
Department of Transportation). This clarification of the roles of Plaintiff and Cosmos
does not affect this Court’s complete adoption of the Report and Recommendation’s
conclusion or of its reasoning regarding the application of the principles of subrogation to
this case. Other than the minor corrections identified above, the Report and
Recommendation is adopted in its entirety.
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Accordingly, IT IS ORDERED that:
1) The Report and Recommendation (Doc. 57) is ADOPTED in full
but for the minor clarifications set forth in this Order at p. 3;
2) Plaintiff’s motion for summary judgment (Doc. 43) is GRANTED;
3) Defendant’s motion for summary judgment (Doc. 45) is DENIED;
4) The funds previously deposited with this Court pursuant to Local Rule 77.2
(see Doc. 42) shall be released in their entirety to Plaintiff, subject to the
handling fees outlined in Local Rule 77.2(c);
5) The Clerk shall enter a judgment accordingly, whereupon this case shall be
CLOSED.
IT IS SO ORDERED.
Date: 3/30/18
s/Timothy S. Black
Timothy S. Black
United States District Judge
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