Hartford Casualty Insurance Company v. Farley Associates, Inc. et al
ORDER AND OPINION granting in part and denying in part 45 MOTION for Summary Judgment. (Status Report due by 5/28/2014) Signed by Honorable Cameron McGowan Currie on 5/12/2014. (cbru, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
ROCK HILL DIVISION
Hartford Casualty Insurance Company,
Farley Associates, Inc., JJF Company, LLC, )
James C. Farley, Jr., James C. Farley, III,
Janis I. Farley, and Catherine G. Farley,
C/A No. 0:13-547-CMC
ORDER AND OPINION
ON MOTION FOR PARTIAL
This matter is before the court on motion for partial summary judgment filed by Plaintiff
Hartford Casualty Insurance Company (“Hartford”). ECF No. 45. Specifically, Hartford seeks
summary judgment as to liability and damages on its causes of action for breach of contract (first
cause of action) and common law indemnity (second cause of action). These claims are asserted
against two entities and four individuals (collectively “Indemnitors”) and arise out of a General
Indemnity Agreement (“GIA”) through which Indemnitors agreed to indemnify Hartford for losses
and related expenses Hartford might incur for bonds issued on behalf of one or more of them.
For the reasons set forth below, the court grants Hartford’s motion as to liability on its breach
of contract cause of action based on undisputed evidence that Hartford has incurred losses and
expenses covered by the GIA as a result of bonds issued on behalf of Indemnitor Farley Associates,
Inc. (“Farley Associates”). The court awards Hartford damages in the amount of $10,058,731.97
on this cause of action. The court leaves open whether Hartford may be entitled to an additional
$2,746,750 in damages on the contract cause of action. The court denies the motion to the extent
it seeks summary judgment on Hartford’s claim for common law indemnification.
Summary judgment should be granted if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). It is well established that summary judgment should be granted “only when it is clear that
there is no dispute concerning either the facts of the controversy or the inferences to be drawn from
those facts.” Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir. 1987).
The party moving for summary judgment has the burden of showing the absence of a genuine
issue of material fact, and the court must view the evidence before it and the inferences to be drawn
therefrom in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369
U.S. 654, 655 (1962).
Rule 56(c)(1) provides as follows:
A party asserting that a fact cannot be or is genuinely disputed must support
the assertion by:
citing to particular parts of materials in the record, including
depositions, documents, electronically stored information, affidavits
or declarations, stipulations . . . , admissions, interrogatory answers
or other materials; or
showing that the materials cited do not establish the absence or
presence of a genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact.
Fed. R. Civ. P. 56(c)(1).
A party “cannot create a genuine issue of material fact through mere speculation or the
building of one inference upon another.” Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985).
Therefore, “[m]ere unsupported speculation . . . is not enough to defeat a summary judgment
motion.” Ennis v. National Ass’n of Bus. & Educ. Radio, Inc., 53 F.3d 55, 62 (4th Cir. 1995).
Neither may a party create a genuine issue of material fact by presenting his or her own conflicting
versions of events. Barwick v. Celotex Corp., 736 F.2d 946, 960 (4th Cir. 1984) (“A genuine issue
of material fact is not created where the only issue of fact is to determine which of the two
conflicting versions of the plaintiff’s testimony is correct.”).
It is undisputed that Indemnitors are bound by the GIA through which they agreed to
indemnify Hartford for any damages it sustained as a result of providing surety bonds on behalf of
any of them. E.g., ECF No. 44-1 (GIA reflecting signatures of or on behalf of each Indemnitor);
ECF No. 52 at 1 (conceding in opposition memorandum that the GIA was “entered into by all
Defendants”). It is also undisputed that Hartford provided bonds on behalf of Indemnitor Farley
Associates. ECF No. 52 at 2 (stating in opposition memorandum that “Hartford was the surety and
[Farley Associates] was the principal on payment and performance bonds . . . on thirteen (13)
separate construction projects”).
The provision of the GIA addressing the scope of indemnification reads, in relevant part, as
Indemnity and Exoneration. The Indemnitors are jointly and severally liable
to Hartford, and will indemnify, exonerate and hold Hartford harmless from all loss,
liability, damages and expenses including, but not limited to, court costs, interest,
attorney’s fees, professional fees and consulting fees, which Hartford incurs or
sustains (1) because of having furnished any Bond, (2) because of the failure of an
Indemnitor to discharge any obligations under this Agreement, (3) in enforcing any
of the provisions of this Agreement, (4) in pursuing the collection of any loss
incurred hereunder, or (5) in the investigation of any claim submitted under any
ECF No. 45-2 at 2.
Settlement of claims on any underlying bond and the Indemnitors’ resulting liability is
addressed as follows:
Claim Settlement. Hartford has the right to adjust, settle or compromise any
claim, demand, suit or judgment upon any Bonds without affecting the Indemnitors’
liability under this Agreement. The Indemnitors shall immediately be liable to
Hartford for all payments, plus interest thereon at the maximum rate permitted by
law, from the date such payments are made by Hartford in the belief that either (1)
Hartford was or might be liable therefore, or (2) they were necessary or advisable to
protect Hartford’s rights or to avoid or lessen Hartford’s liability. Copies of checks
or other evidence of such payments, including records of any nature maintained by
Hartford in the ordinary course of business, shall be prima facie evidence of the
existence and extent of the liability of the Indemnitors to Hartford.
Hartford has presented evidence that it made payments totaling $19,768,723.91 to adjust
claims made on bonds covered by the GIA. ECF No. 45-3 (Affidavit of Jennifer Leuschner); ECF
No. 45-4 (Payment List). This evidence includes a detailed list of disbursements made on the
bonded projects. Id. After accounting for contract funds received from project owners, Hartford
maintains its net loss is $12,805,481.97. ECF No. 45-3 ¶¶ 4, 9.
Hartford also relies on deposition testimony of each of the Indemnitors, which Hartford
summarizes as follows:
Farley Associates’ Chief Executive Officer, James C. Farley, Jr. admitted that the
Indemnitors breached the terms of the GIA prior to any involvement with the subject
construction projects by Hartford. (Exhibit 3, James C. Farley, Jr. dep. at 55:19-22,
57:16-21 and 58:20-59:1). Farley Associates’ President and FRCP 30(b)(6)
corporate designee, James C. Farley, III, and Farley Associates’ CEO, James C.
Farley, Jr., both testified that they have no evidence to support any of the
Indemnitors’ affirmative defenses, set forth in their jointly filed Answer to the
Amended Verified Complaint. (Exhibit 4, 30(b)(6) dep. of Farley Associates at
192:14 – 194:22 and 198:8-16; Exhibit 3 James C. Farley, Jr. dep. at 51:14 – 52:12,
54:20-23, 61:18-21 and 65:21-66:23). JJF Co. LLC’s FRCP 30(b)(6) designee and
Janis I. Farley also testified that they have no evidence to support the affirmative
defenses asserted in the Answer. (Exhibit 5, 30(b)(6) dep. of JJF, Co., LLC at 33:6
– 42:3; Exhibit 6, Janis I. Farley dep. at 40:1 – 41:21). Catherine G. Farley also
testified that she has no knowledge or evidence to support any defense asserted by
any Indemnitor in this lawsuit. (Exhibit 7, Catherine G. Farley dep. at 53:23-54:22).
Farley Associates’ FRCP 30(b)(6) corporate designee also testified that Farley
Associates has no evidence to dispute any of Hartford’s losses. (Ex. 4, 30(b)(6) dep.
of Farley Associates at 192:5–13).
ECF No. 45 at 3-4. The cited depositions were taken on February 25 and 26, 2014, less than two
weeks before discovery closed on April 10, 2014. See ECF. No. 39 (Second Consent Amended
Scheduling Order); depositions cited above.
Indemnitors do not point to any misstatement of the record in Hartford’s summary of the
cited deposition testimony. They do, however, challenge Hartford’s characterization of the evidence
as a concession that Indemnitors have no evidence to support their affirmative defenses, including
failure to mitigate damages. Indemnitors note, first, that all of the inquiries regarding whether the
deponent had evidence to support an affirmative defense were prefaced by “as you sit here today.”
Indemnitors also note that Farley Associates’ corporate designee (James Farley, III (“Trey Farley”))
responded affirmatively when asked whether he had any evidence that Hartford incurred any losses
due to its own conduct. ECF No. 52 at 7 n.2 (citing Rule 30(b)(6) deposition ECF No. 45-6 at 195).
Asked to elaborate, Trey Farley stated that he was referring to “[t]he method with which the projects
were completed” and gave two examples. Id. The first example related to a ten-fold overpayment
to a fencing subcontractor. ECF No. 45-6 at 195-96 (stating fencing subcontractor was paid $98,000
when it was only due $9,800). The second related to comments Trey Farley received from
subcontractors that the contractor hired to oversee completion of the work (“Completion
Contractor”) “had three or four management people walking around on the projects,” even when all
that remained was “a 20 item punch list.” Id.
Indemnitors also rely on deposition testimony Trey Farley gave in his individual capacity.
Through this deposition, Trey Farley adopted his earlier testimony as corporate designee except as
to mitigation. ECF No. 52-1 at 2 (Trey Farley dep. at 5). As to mitigation, Trey Farley expanded
on his earlier testimony, explaining that he believed Hartford had overpaid the Completion
Contractor for two reasons. First, the Completion Contractor was paid over $3.6 million when
Farley Associates had offered to do the same work for $500,000. Second, third parties had informed
him that the Completion Contractor had overstaffed jobs. Trey Farley dep. at 52, 61. He corrected
a misstatement during his earlier testimony as corporate designee, by conceding the ten-fold fencing
overpayment had been corrected. Trey Farley dep. at 58, 60. He also conceded that he lacked
evidence regarding Hartford’s costs of completion or what demands were made by project owners.
Id. at 51, 56-58. He, nonetheless, maintained that Hartford failed to mitigate damages. Id. at 62-63.
Finally, Indemnitors rely on a detailed Declaration by Trey Farley (“Farley Declaration”)
submitted in opposition to Hartford’s motion for summary judgment. ECF. No. 52-1.1 This
Declaration first summarizes the events surrounding Hartford’s decision to take over completion of
the projects. While this summary indicates that some of Hartford’s actions may have had a negative
impact on Farley Associates, including impairing its ability to complete the underlying projects, there
is no evidence or argument that Hartford’s actions were improper under either the GIA or the
Hartford argues that the court should exclude this Declaration, at least as it relates to
mitigation of damages. Because the court finds Hartford entitled to summary judgment even with
consideration of the Declaration, it need not decide whether it should be excluded.
underlying bonds. Similarly, while there are references to efforts by Farley Associates to cooperate
in minimizing costs, there is no indication that Hartford was obligated to accept such offers. The
most specific information relating to these efforts and related costs refers to Farley Associates’ offer
to carry out the remaining duties of general contractor for $500,000, far less than the $3,683,432
Hartford ultimately paid the Completion Contractor.
The Farley Declaration also points to a $2,746,750 discrepancy between the credit for
collections from project owners Hartford uses in calculating damages and amounts Indemnitors
believe were due from project owners when Hartford took over the project. This suggests Hartford
may still receive an additional $2,746,750 from project owners, which would reduce the net damages
by the same amount.
Finally, the Farley Declaration points to a difference between “committed payables” owed
to suppliers and subcontractors when Hartford took over the project ($15,862,017) and the amount
Hartford claims was expended for the same work ($16,085,293), suggesting the possibility that
Hartford may have paid subcontractors roughly $223,000 more than Farley Associates was obligated
to pay them to complete the subcontract work. The Farley Declaration points to seven examples of
possible overpayments to subcontractors, all based on a comparison of contract prices and committed
costs at the time Hartford took over the project to the amounts ultimately paid by Hartford. The
Declaration does not offer support for the implicit premise that Hartford acted unreasonably (or,
more critically, beyond the parameters of what is recoverable under the GIA) in making any
increased payments.2 Moreover, one of the cited examples relates to overpayment to the fencing
No evidence is provided that would explain why the amount ultimately paid was more than
the amount Trey Farley claims was owed when Hartford took over the project. Neither is there any
indication Indemnitors sought to determine the reasons for the differences through discovery. See
subcontractor that Trey Farley conceded in his individual deposition had been corrected.3
Liability. Indemnitors do not contest liability as to either of the causes of action addressed
in Hartford’s motion for summary judgment. The court has, nonetheless, independently reviewed
the proffered evidence and legal arguments as to Hartford’s claims for breach of contract and
common law indemnity. Having done so, the court concludes that the evidence and law establish
that Indemnitors are liable to Hartford under the GIA as a matter of law. The court, therefore, grants
summary judgment on the issue of liability as to Hartford’s first cause of action for breach of
The court, however, does not find the facts and law so clear as to Hartford’s second cause
of action for common law indemnity. This is, most critically, because Hartford has failed to address
any basis for imposing liability on Indemnitors other than as a consequence of their express
agreement to be bound by the GIA. The court, therefore, denies the motion for summary judgment
as it relates to Hartford’s second cause of action.
Damages. Because the court has granted summary judgment as to liability only as to the
contract claim, it limits discussion of damages to that claim. Under the Claim Settlement provision
of the GIA, Indemnitors shall “immediately be liable to Hartford for all payments. . . made by
ECF No. 56 at 4 (Hartford’s reply stating Indemnitors conducted no written discovery or
The corrected overpayment was to Brabham Fence Company, which was paid $92,730.30
when it was only owed $9,273.03. Farley Declaration ¶ 30. This appears to be the same error
referenced in Trey Farley’s deposition as corporate designee, which he conceded had been corrected
in his subsequent deposition in his individual capacity. On reply, Hartford submits a copy of the
check refunding the overpayment and confirms that the original overpayment has not resulted in an
overstatement of damages.
Hartford in the belief that either (1) Hartford was or might be liable therefore, or (2) they were
necessary or advisable to protect Hartford’s rights or to avoid or lessen Hartford’s liability.” GIA
Evidence that Hartford has made such payments serves as “prima facie evidence of the
existence and extent of the liability of the Indemnitors to Hartford.” Id.
Hartford has presented evidence that it made payments to complete the work secured by
bonds subject to the GIA. Under the plain language of the GIA, the fact that such payments were
made constitutes “prima facie evidence of the existence and extent of the liability of Indemnitors to
Indemnitors assert that there are “material facts in dispute” regarding “the actual amount of
total damages incurred and recoverable by Hartford; whether Hartford acted in good faith in
connection [with] its completion of the Bonded Projects and settlement of claims; whether
Hartford’s payments were reasonable; and whether Hartford failed to mitigate its damages.” ECF
No. 52 at 6. Indemnitors have not, however, proffered any evidence that Hartford, in fact, paid less
than $19,768,723.91 to complete work secured by bonds issued on behalf of one of them. Thus, they
have failed to proffer evidence to overcome Hartford’s prima facie showing (as defined in the GIA)
of the existence and extent of their liability.
At most, Indemnitors proffer evidence consistent with the possibility Hartford paid more than
was necessary to the Completion Contractor and some subcontractors to complete the bonded
projects. Indemnitors have not, however, proffered evidence that would move this possibility into
the realm of probability. Most critically, Indemnitors have failed to proffer evidence that Hartford
made any payment (whether more than was strictly necessary or not) without the requisite belief that
Hartford was or might be liable for the payment or the payment was necessary or advisable to protect
Hartford’s rights or lessen its liability. See GIA ¶ 7. It follows that Indemnitors have failed to raise
a genuine issue of material fact which would preclude entry of summary judgment on this aspect of
the damages determination.
One argument by Indemnitors justifies reduction of the damages to be awarded on summary
judgment. This argument relates to payments Hartford may still collect for completion of the project
and is supported by the Farley Declaration, which suggests that amounts still due total $2,746,750.
Because Hartford has not pointed to any contrary deposition testimony by Trey Farley (including
testimony suggesting an absence of evidence on the relevant point), the court accepts the Declaration
for purposes of this issue.4
In light of this evidence, the court finds there is a genuine issue of material fact as to the
amount of damages, but only with respect to whether Hartford is still due amounts from any project
owners (in the maximum amount of $2,746,750). The court, therefore, finds for purposes of
summary judgment that Hartford is entitled to an award of no less than $10,058,731.97. Whether
the additional amount is also due will be determined at trial or by other alternative proceedings as
may be appropriate.
Further Proceedings. This order determines liability and partially determines damages as
to Hartford’s first cause of action. It leaves open a relatively discrete damages issue as to Hartford’s
first cause of action as well all issues on Hartford’s remaining claims.
In the body of its reply, Hartford appears to concede that this reduction should be made for
purposes of summary judgment: “For purpose of this Motion only, Hartford submits that summary
judgment in its favor against all Indemnitors in the amount of $10,058,731.97 (i.e., $2,746,750.00
less than Hartford’s actual damages) would be appropriate.” ECF No. 56 at 3. The conclusion,
however, continues to seek $12,805.481.97 in damages. The lesser amount is referenced as an
Recognizing that Hartford’s other causes of action may seek the same damages (ultimately
requiring an election of remedies)5 and the possibility that the open damages issue on the first cause
of action may be subject to resolution by means other than trial, the court directs the parties to confer
and file a status report no later than May 28, 2014, regarding what further proceedings are necessary
and appropriate. To the extent trial is necessary, the pretrial deadlines remain as set in the Second
Consent Amended Scheduling Order.
For the reasons set forth above, the court grants partial summary judgment to Hartford on its
first cause of action for breach of contract, and finds Indemnitors jointly and severally liable to
Hartford in the amount of $10,058,731.97. This determination does not preclude Hartford from
establishing that additional amounts are due under its first cause of action as set forth above. The
parties shall confer and file a status report relating to further proceedings as indicated above
IT IS SO ORDERED.
s/ Cameron McGowan Currie
CAMERON MCGOWAN CURRIE
Senior United States District Judge
Columbia, South Carolina
May 12, 2014
Hartford suggests this possibility in its opening memorandum. ECF No. 45 at 1 n.2.
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