Insurance Company of the West v. Eagle Mountain Investments et al

Filing 78

MEMORANDUM DECISION AND ORDER denying 54 Motion for Leave to File Third Party Complaint. Signed by Judge David Nuffer on 7/25/13 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
INSURANCE COMPANY OF THE WEST,
Plaintiff,
v.
EAGLE MOUNTAIN INVESTMENTS, LLC,
a Utah limited liability company; TOM
WOOD, individually; BRENDA WOOD,
individually; SPECTRUM DEVELOPMENT
CORP., a Utah corporation; KENT
BURNINGHAM, individually; PAUL F.
BURNINGHAM, individually; and DOES 1
through X, MERSCORP, INC., a Virginia
corporation;

MEMORANDUM DECISION AND
ORDER DENYING DEFENDANTS
EAGLE MOUNTAIN INVESTMENTS,
LLC, AND TOM & BRENDA WOOD’S
MOTION FOR LEAVE TO FILE THIRDPARTY COMPLAINT
Case No. 2:11-cv-00976-DN
District Judge David Nuffer

Defendants.

Defendants Eagle Mountain Investments, LLC, Tom Wood and Brenda Wood,
(collectively, the “Wood Defendants”) have filed a motion requesting leave to file a third party
complaint against Eagle Mountain City (the “City”). 1
The Wood Defendants motion for leave to file a third-party complaint is DENIED.
BACKGROUND FACTS
1.

On September 8th, 2004, Defendant Eagle Mountain Investments, LLC (“EMI”)

and the City entered into a Project Development Agreement permitting EMI to build a new
subdivision known as “The Woods Phase 1.” 2

1
2

Motion for Leave to File Third Party Complaint, docket no. 54, filed June 28, 2012.

Memorandum in Support of Wood Defendants’ Motion for Summary Judgment and Motion to Dismiss For Lack
of Subject Matter Jurisdiction (Support 19) ¶ 2, docket no. 19, filed December 19, 2011.

2.

On September 20, 2005, Plaintiff Insurance Company of the West (“ICW”), on

behalf of EMI, issued the Eagle Mountain City, Utah – Subdivision Bond 213 68 29 (the
“Bond”) 3 as security for completion of improvements in the subdivision.4
3.

The Wood Defendants executed an Indemnity Agreement in favor of ICW as

partial consideration of ICW’s issuance of surety bonds on behalf of EMI. 5
4.

On August 26, 2008, the City declared a default, pursuant to the terms of the

Bond, by issuing proper notice to ICW. 6
5.

ICW settled the City’s claim against the Bond by paying the City the total sum of

$127,247.58. 7
DISCUSSION
“A defending party may, as third-party plaintiff, serve a summons and complaint on a
nonparty who is or may be liable to it for all or part of the claim against it.” 8 If the party “files
the third-party complaint more than 14 days after serving its original answer” 9 the “third-party
plaintiff must, by motion, obtain the court’s leave.” 10 The Tenth Circuit has held that “Rule
14(a) should be liberally construed to accomplish its purpose but it is not a catchall for
independent litigation.” 11 Furthermore:

3

Id. ¶ 3.

4

Exhibit C to Support 19, docket no. 19-1, filed December 19, 2011.

5

Wood Defendants’ Response to Plaintiff’s Memorandum in Opposition to Wood Defendants’ Motion for Summary
Judgment and Motion to Dismiss For Lack of Subject Matter Jurisdiction (Reply 28) ¶ 4, docket no. 28, filed March
6, 2012.
6

Support 19, ¶ 6.

7

Reply 28, ¶ 14.

8

Fed. R. Civ. P. 14(a)(1).

9

Id.

10

Id.

11

U.S. Fidelity & Guaranty Co. v. Perkins, 388 F.2d 771, 773 (10th Cir. 1968).

2

Whether third-party defendants may be brought in and retained in the
action is ordinarily a matter addressed to the sound discretion of the trial judge. If
impleading a third party defendant would require the trial of issues not involved
in the controversy between the original parties without serving any convenience,
there is no good reason to permit the third-party complaint to be filed. 12
In the present case, the Wood Defendants request leave to file their third-party
complaint. The proposed third-party complaint lists claims against the City for breach of
implied covenant of good faith and fair dealing, as well as equitable indemnity or
declaratory judgment. 13 The basis of the third-party claims derives from a project
development agreement between the Wood Defendants and the City. 14 The present case
between ICW and the Wood Defendants involves liability pursuant to the Indemnity
Agreement signed between ICW and the Wood Defendants. Adjudication of the
proposed third-party claims between the Wood Defendants and the City would not
involve the Indemnity Agreement. Adjudicating the third-party claims “would require
the trial of issues not involved in the controversy between the original parties.”
Furthermore, ICW persuasively notes that if the Wood Defendants’ motion was
granted, the scope and complexity of the case would “unnecessarily expand.” 15 In order
for the Wood Defendants to prevail on their claim that the City breached its duty by not
giving the Wood Defendants “fair and equitable treatment,” 16 the Wood Defendants
would likely present evidence on how the City required “more of the Wood Defendants

12

Id. (quoting Barron and Holtzoff, Federal Practice and Procedure, Vol. 1A, p. 647).

13

Ex. A to Motion for Leave to File Third-Party Complaint at 5-7, docket no. 54, filed June 28, 2012.

14

Id.

15

Plaintiff’s Memorandum in Opposition to Wood Defendants’ Motion for Leave to File Third Party Complaint
(Opposition 56) at 8, docket no. 56, filed July 6, 2012.
16

Third-Party Complaint ¶ 32.

3

than other similarly situated developers.” 17 This would likely include evidence of:
“similar projects, similar developers, similar contracts, similar circumstances, similar
requirements, similar guidelines, similar subcontractors, similar means and methods of
construction, a similar time frame, [and] similar City needs and requirements during
those time frames.” 18 The presentation of such issues or similar issues is well beyond the
controversy of the original parties, because the original controversy dealt with the sole
issue of liability under the Indemnity Agreement between ICW and the Wood
Defendants.
ORDER
Accordingly, IT IS HEREBY ORDERED that the Wood Defendants’ motion for leave to
file third party complaint 19 is DENIED.

Signed July 25, 2013.
BY THE COURT

________________________________________
District Judge David Nuffer

17

Opposition 56 at 8.

18

Id.

19

Docket no. 54, filed June 28, 2012.

4