Travelers Casualty and Surety Company of America v. Samson Investment Company

Filing 100

OPINION AND ORDER by Judge James H Payne ; granting 59 Motion for Summary Judgment (pll, Dpty Clk)

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA,
Plaintiff,
v.
SAMSON INVESTMENT COMPANY,
Defendant.

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Case No. 13-CV-156-JHP-FHM

OPINION AND ORDER
Before the Court are Travelers Casualty and Surety Company of American (“Travelers”)
Motion for Summary Judgment (Dkt. No. 59); Samson Investment Company’s Response in
Opposition thereto (Dkt. No. 61); and Travelers Reply to Samson’s Response (Dkt. No. 66).
After review of the briefs, and for the reasons stated below, Travelers Motion for Summary
Judgment (Dkt. No. 59) is GRANTED.
BACKGROUND
A. Procedural History
On March 15, 2013, Travelers, the surety, filed suit against Samson, the principal, seeking
a preliminary injunction, specific performance, and reimbursement for any losses suffered under
bonds issued on behalf of Samson. After this Court granted the preliminary injunction, Travelers
moved for summary judgment (Dkt. No. 59), Samson responded (Dkt. 61), and Travelers filed a
reply and supplemental motion (Dkt. 66; 99).
In its motion, Travelers requested two forms of relief.

First, Travelers seeks a specific

performance of the Indemnity Agreement so that the Letter of Credit remains in effect until the

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last release is received and approved by Travelers.1

Second, Travelers seeks to draw down on

the Letter of Credit in the amount of fees and expenses it incurred.2
B. Factual Background
At the request of Samson, Travelers, as surety, issued over 100 bonds for Samson in
favor of various obligees (the “Bonds”). In connection with issuance of the Bonds by
Travelers, Samson executed a General Contract of Indemnity dated February 19, 2009 (the
“Indemnity Agreement”).

The Indemnity Agreement provides Travelers with, among other

things, an unqualified right to request and thereafter have Samson discharge Travelers from the
Bonds and/or collateralize any and all remaining liability under the Bonds. In this regard, the
Indemnity Agreement provides:
Indemnitors shall, within thirty (30) days of receipt of Company’s written
demand (“Discharge Demand”), procure the full and complete discharge of
the Company from any and all Bond(s) by providing competent written
evidence of discharge satisfactory to Company, in its sole discretion. If
Indemnitors fail to provide the aforementioned discharge[,] Indemnitors
shall, within an additional seven (7) days, provide Company with an
irrevocable letter of credit in form, content and by a bank acceptable to the
Company.
(Dkt. 59-1, Exhibit A, Indemnity Agreement ¶ 5(a)).
Under the Indemnity Agreement, Samson also expressly acknowledged and agreed that if
Samson breached its obligation to provide Travelers with the requested collateral, Travelers
would have no adequate remedy at law, thus entitling Travelers to specific performance of that
obligation:

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The Court notes that the Letter of Credit was originally posted in the amount of $1,880,828.00. Due to the releases
subsequently procured by Samson and the cooperation among the parties, the Letter of Credit has been reduced to
$165,000.
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  To date, Travelers has incurred $75,621.46 in fees and expenses.

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Indemnitors waive, to the fullest extent permitted by law, each and every
right they may have to contest this requirement. Indemnitors stipulate and
agree that Company will not have an adequate remedy at law should
Indemnitors fail to post said letter of credit and further agree as a result that
Company is entitled to specific performance of this provision … .
(Indemnity Agreement ¶ 5(b)).
The Indemnity Agreement also provides:
If Company has or obtains collateral or letters of credit, Company shall not have
any obligation to release collateral or letters of credit or turn over the proceeds
thereof until it shall have received a written release in form and substance
satisfactory to Company with respect to each and every Bond. Any collateral or
letters of credit provided to Company by any Indemnitor or any third party, or the
proceeds thereof, may be applied to any Loss.
(Indemnity Agreement ¶ 9).“Loss,” as it is defined in the Indemnity Agreement, includes
“interest, court costs and counsel fees, and any expense incurred or sustained by reason of
making any investigation.” (Indemnity Agreement ¶ 5(b)).

The Indemnity Agreement also

included a prima facie evidence clause that provides that “originals or photocopies of claim
drafts, or of payment records, kept in the ordinary course of business, including computer
printouts, verified by affidavit, shall be prima facie evidence of the fact and amount of such
Loss.” (Indemnity Agreement ¶ 2(a)).
On November 21, 2012, December 3, 2012, January 22, 2013, and February 22, 2013,
Travelers made demand on Samson to procure the full and complete discharge of Travelers from
the Bonds as provided by the terms of the Indemnity Agreement.

Travelers contends that

Samson, however, failed to fulfill its contractual obligations by failing to procure the full
discharge of Travelers obligations under the Bonds and refusing to post an irrevocable letter of
credit upon Travelers’ request.
Travelers thereafter filed the current action, seeking specific performance of certain
conditions of the Indemnity Agreement and seeking its losses incurred under the Bonds.

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Travelers also moved for a preliminary injunction. (Dkt. No. 2; 3).

At a hearing on June 5,

2013, the parties presented evidence and oral arguments on the issue of compelling Samson to
provide the irrevocable letter of credit pursuant to the Indemnity Agreement.

Magistrate Judge

McCarthy filed a Report and Recommendation recommending that Travelers be granted a
preliminary injunction (Dkt. No. 34), which was subsequently adopted by this Court (Dkt. No.
39; 48). Pursuant to the Court’s Order, Samson provided the letter of credit on August 20, 2013
(the “Letter of Credit”).
In order to help facilitate obtaining additional releases, Samson brought third-party
claims against the remaining obligees.

The process worked and Samson dismissed all

third-party obligees. Samson now awaits one more release – Travelers Bond No. 104104182
for the State of Oklahoma in the penal sum of $10,000.
DISCUSSION
Summary judgment is appropriate when “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to a material fact and
that the movant is entitled to a judgment as a matter of law.” FED. R. CIV. P. 56(c)(2). The party
seeking summary judgment must first identify grounds to show the absence of any genuine
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
The burden then shifts to the respondent who must go beyond the pleadings and present
affirmative evidence to show that a genuine issue of fact does, indeed, exist. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
A.

Indemnity Agreements under Oklahoma Law
An indemnity contract is interpreted under Oklahoma law according to the general rules

of contract interpretation. Wallace v. Sherwood Constr. Co., Inc., 877 P.2d 632, 634 (OKLA. APP.
1994) (citing Luke v. Am. Sur. Co. of N.Y., 114 P.2D 950 (OKLA. 1941)); see also OKLA. STAT.

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ANN.

TIT.

15, § 427 (2005). The intention of the parties must be ascertained based upon the

whole contract, and the intent of the parties will be given effect if it can be done within the
bounds of the law. Id; see also OKLA. STAT. ANN. TIT. 15, § 152 (2005) (“A contract must be so
interpreted as to give effect to the mutual intention of the parties, as if existed at the time of
contracting, so far as the same is ascertainable and lawful.”); OKLA. STAT. ANN. TIT. 15, § 157
(2005) (“The whole of a contract is to be taken together, so as to give effect to every part … .”).
B.

Specific Performance
The granting of specific performance necessarily involves a finding that the elements of a

valid contract are present, and a weighing of the equities in favor of the respective parties. Tickel
v. Felton, 1959 OK 206, 345 P.2d 901, 902; 25 WILLISTON ON CONTRACTS § 67:89 (4th ed.);
RESTATEMENT (SECOND) OF CONTRACTS 371(1) (“[S]pecific performance of a contract duty will
be granted in the discretion of the court against a party who has committed . . . a breach of the
duty”).
The parties do not dispute the existence and validity of the Indemnity Agreement.

In the

agreement, Samson contractually (1) agreed to procure full and complete discharge of Travelers
from the Bonds; (2) waived the right to contest this requirement; (3) stipulated and agreed that
Travelers has no adequate remedy at law; and (4) stipulated and agreed that Travelers is entitled
to specific performance.

(Indemnity Agreement ¶5).

Specific performance is routinely granted to sureties.

A recent case, Travelers Cas. &

Sur. Co. of Am. v. Winmark Homes, Inc., involved not only the same issues—a motion for
summary judgment for specific performance and attorneys’ fees—but also an identical indemnity
agreement.

2013 WL 2150920 (11th Cir. May 20, 2013).

The Eleventh Circuit held that

given the “defendants’ promise to provide a letter of credit upon demand … Travelers is entitled

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to specific performance in the form of an irrevocable letter of credit and to its attorneys’ fees.”
Id. at *4.
Courts will generally grant specific performance if the surety can provide that: (1) it has
no adequate remedy at law; (2) the indemnity agreement is just and reasonable and supported by
adequate consideration; (3) the terms of the indemnity agreement are sufficiently definite to
allow enforcement by the court; and (4) the performance sought is substantially identical to that
promised in the indemnity agreement. See Meeker, Surety’s Right to Specific Performance of
Indemnity Agreements, CONSTR. LAW., (Spring 1982).

With regard to the first consideration,

Sampson specifically stipulated in the Indemnity Agreement that Travelers has no adequate
remedy at law. (Indemnity Agreement ¶ 5).

The remaining three considerations are not in

dispute. (See, Dkt. No. 25; 38).
Significantly, Samson waived “to the fullest extent permitted by law, each and every right
that they may have,” to contest the discharge demand requirement, stipulated that Travelers “will
not have an adequate remedy at law,” and agreed that Travelers is “entitled to specific
performance of this provision.” (Indemnity Agreement ¶ 5(b)).

Samson agreed to provide

bond discharges upon demand in exchange for these bonds, and agreed that Travelers would be
entitled to specific performance.
While Samson opposes Travelers’ motion, it provides no legal authority to overcome the
language of the Indemnity Agreement and authority cited by Travelers. Accordingly, the Court
finds that Travelers is entitled to continued specific performance of the Indemnity Agreement.
Further, the Letter of Credit shall remain in effect until the final bond—Travelers Bond No.
104104182—has been released.
C.

Attorneys’ Fees

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Next, Travelers seeks its fees, as losses, under the Indemnity Agreement.

Samson

contractually promised that it would:
Indemnify and exonerate Company from and against any and all loss, cost and
expense of whatever kind which it may incur or sustain as a result of or in
connection with the furnishing of Bond(s), the assumption of obligations by
Company of Bond(s), and/or enforcement of this Agreement, including unpaid
premiums, interest, court costs and counsel fees, and any expense incurred or
sustained by reason of making any investigation … .
(Indemnity Agreement ¶ 5(b)).
Attorneys’ fees are typically treated as losses under indemnity agreements.
Accordingly, courts nationwide have awarded attorneys’ fees pursuant to the unambiguous terms
of the Indemnity Agreement. Travelers Cas. & Sur. Co. of Am. v. Winmark Homes, Inc.,
11-15950, 2013 WL 2150920 (11th Cir. May 20, 2013)(“Travelers submitted payment records of
its attorneys’ fees in the form of a computer printout verified by affidavit, thereby meeting its
prima facie burden.”)
The Indemnity Agreement also included a prima facie evidence clause that provides that
“originals or photocopies of claim drafts, or of payment records, kept in the ordinary course of
business, including computer printouts, verified by affidavit, shall be prima facie evidence of the
fact and amount of such Loss.” (Indemnity Agreement ¶ 2(a)).
The prima facie evidence clause in an indemnity agreement is intended to aid a surety’s
ability to prevail against indemnitors on a summary judgment basis. Phillip L. Bruner & Patrick
J. O’Connor, Jr., BRUNER & O’CONNOR ON CONSTRUCTION LAW, Vol. 3, §10:105 (2002). This
clause shifts the evidentiary burden to Samson to prove whether Travelers made any payments in
bad faith. Samson provides no evidence or allegations to this effect.
Travelers submitted a payment summary of its fees and expenses verified by affidavit,
thereby meeting its prima facie burden.

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Samson provides no rebuttal evidence, which is fatal to its opposition of these fees.
Addressing the exact same indemnity agreement, the Court in Travelers Cas. & Sur. Co. of Am.
v. Winmark Homes, Inc., affirmed the trial court’s summary judgment after noting that the
defendants “did not submit any evidence disputing the fees requested.” The Court held:
Based on the record before us, we agree with the district court that Travelers is
entitled to an award of attorneys' fees and expenses under the indemnity agreement
because it presented prima facie evidence of its loss and because the Winmark
defendants did not provide any rebuttal evidence.
518 Fed. Appx. 899, 903-04 (11th Cir. 2013).
By application of the prima facie clause under the Indemnity Agreement, the only
evidence before this Court supports the award of $75,621.46 to Travelers for attorneys’ fees and
expenses incurred to date.
Pursuant to paragraph 9 of the Indemnity Agreement, Travelers may reduce the letter of
credit by the amount of fees incurred.

In the event an appeal is made, under the Indemnity

Agreement, Travelers may hold the Letter of Credit to ensure it is sufficiently protected from
additional losses, including appellate attorneys’ fees and expenses.
CONCLUSION
After review of the briefs, and for the reasons stated below, Travelers Motion for Summary
Judgment (Dkt. No. 59) is GRANTED. With all issues in this case now resolved, Travelers is
ordered to submit a proposed form of final judgment within fifteen (15) days from the date of this
Order.

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