Turner Construction Company v. American Safety Casualty Insurance Company
Filing
238
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS MOTION TO WITHDRAW JURY DEMANDAND TO STRIKE JURY DEMAND FROM INTERVENOR-COMPLAINT. Turner Construction Co.s motion to withdraw its jury demand and to strike DSMs jury demand ECF No. 109 is DENIED. Signed by Senior Judge Frederick P. Stamp, Jr on 11/4/2016. (Copy counsel of record)(jmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
TURNER CONSTRUCTION CO.,
Plaintiff,
v.
Civil Action No. 1:15CV83
(STAMP)
TIG INSURANCE COMPANY,
successor by merger to
AMERICAN SAFETY CASUALTY
INSURANCE COMPANY,
Defendant,
and
UNITED STATES f/u/b/o
DESIGNER’S SPECIALTY CABINET CO.,
d/b/a DESIGNER’S SPECIALTY MILLWORK,
Intervenor-Plaintiff,
v.
TURNER CONSTRUCTION CO.,
TRAVELERS SURETY & CASUALTY
CO. OF AMERICA,
FEDERAL INSURANCE CO.,
THE CONTINENTAL INSURANCE CO.,
FIDELITY & DEPOSIT CO. OF MD,
ZURICH NORTH AMERICAN INSURANCE CO.,
LIBERTY MUTUAL INSURANCE CO. and
ZURICH AMERICAN INSURANCE CO.,
Intervenor-Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFF’S MOTION TO WITHDRAW JURY DEMAND
AND TO STRIKE JURY DEMAND FROM INTERVENOR-COMPLAINT
The plaintiff has filed a motion to withdraw its jury demand
and to strike the jury demand contained in the amended intervenorcomplaint.
The defendant and the intervenor-plaintiff oppose the
plaintiff’s
request
to
withdraw
its
jury
demand,
and
the
intervenor-plaintiff opposes the plaintiff’s request to strike the
intervenor-plaintiff’s jury demand.
This memorandum opinion and
order sets forth in detail this Court’s prior oral ruling made at
the telephonic status and scheduling conference held on October 31,
2016. For the following reasons, the plaintiff’s motion is denied.
I.
Background
The plaintiff, Turner Construction Co. (“Turner”), entered
into a contract with the Federal Bureau of Investigation (“FBI”) to
build facilities in Clarksburg, West Virginia.
After initially
engaging Institutional Products, Inc. in a subcontract to provide
millwork,
Turner
entered
into
a
subcontract
with
Designer’s
Specialty Cabinet Company doing business as Designer’s Specialty
Millwork (“DSM”) to replace Institutional Products, Inc.
The
original defendant, American Safety Casualty Insurance Company
(“ASCIC”), issued a performance bond guaranteeing DSM’s performance
of the subcontract. The performance bond incorporated by reference
the subcontract’s terms, including a provision indemnifying Turner
against any increased costs due to a slow-down or breach of the
subcontract.
Turner alleges that DSM defaulted on the subcontract
by improperly staffing the project, by providing late supplies
deliveries, and by ignoring directions from Turner and the FBI.
Turner then exercised the subcontract’s alternative completion
clause and engaged another subcontractor to complete the project.
2
Turner filed this civil action against ASCIC to collect under
the indemnification clause of the subcontract as incorporated into
the performance bond.
ISSUES SO TRIABLE.”
Turner’s complaint “DEMANDS A JURY ON ALL
ECF No. 1 at 10.
TIG Insurance Company
(“TIG”) has since replaced ASCIC as the defendant as ASCIC’s
successor by merger.
DSM has been permitted to join the action as
an intervenor-plaintiff, with Turner and the Miller Act sureties
named as intervenor-defendants.1
In its amended intervenor-complaint, DSM alleges that it is
entitled to payment of the Miller Act bonds by the sureties and
asserts claims against Turner for breach of contract, fraudulent
inducement, common law fraud, and cardinal change.
Turner filed a
counterclaim against DSM for breach of contract.
DSM’s original
intervenor-complaint did not include a jury demand, but its amended
intervenor-complaint does include a jury demand.
II.
Applicable Law
Federal Rule of Civil Procedure 38(b) provides that a party
may demand a jury trial “[o]n any issue triable of right by a
jury.”
Fed. R. Civ. P. 38(b).
A party may withdraw its jury
demand “only if the parties consent.”
Fed. R. Civ. P. 38(d).
Under Rule 39(a), a court may strike a party’s jury demand if the
1
The Miller Act sureties include Travelers Surety & Casualty
Co. of America, Federal Insurance Co., The Continental Insurance
Co., Fidelity & Deposit Co. of Maryland, Zurich North American
Insurance Co., Liberty Mutual Insurance Co., and Zurich American
Insurance Co.
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court “finds that . . . there is no federal right to a jury trial”
on the issues for which a jury trial was demanded.
Fed. R. Civ. P.
39(a)(2).
III.
A.
Discussion
Turner’s Jury Demand
Turner’s complaint “DEMANDS A JURY ON ALL ISSUES SO TRIABLE.”
ECF No. 1 at 10.
ASCIC’s original answer and TIG’s amended answer
do not include a jury demand.
DSM’s original intervenor-complaint
did not include a jury demand, but its amended intervenor-complaint
does include a jury demand.
Neither TIG nor DSM consent to
Turner’s motion to withdraw its jury demand.
Turner argues that
TIG and DSM’s consent is not required to withdraw its jury demand
because neither party relied on Turner’s jury demand.
First, Turner argues that ASCIC and TIG waived their rights to
a jury trial by not relying on Turner’s jury demand because “there
is no evidence that ASCIC, the party against whom the jury demand
was made, had any intention of relying on Turner’s jury demand or
that it failed to make its own jury demand in reliance on Turner’s
jury demand.”
ECF No. 109 at 4.
However, the right to a jury
trial is a fundamental right; thus, waivers of that right are
heavily
scrutinized
and
“courts
presumption against” such waivers.
indulge
every
reasonable
Aetna Ins. Co. v. Kennedy ex
rel Bogash, 301 U.S. 389, 393 (1937).
The United States Court of
Appeals for the Ninth Circuit has held that this presumption may be
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overcome
if
the
party
asserting
waiver
shows
that
the
non-
consenting party affirmatively or through its conduct in the
litigation did not rely on the jury demand. Reid Bros. Logging Co.
v. Ketchikan Pulp Co., 699 F.2d 1292, 1304-05 (9th Cir. 1983).
However, the United States Court of Appeals for the Fourth Circuit
has not adopted the Ninth Circuit’s holding.
Even if the Ninth
Circuit’s holding applies, Turner simply asserts that ASCIC and TIG
have not relied on its jury demand, and Turner presents no evidence
or
argument
to
overcome
the
presumption
of
non-waiver.
Accordingly, this Court finds that Turner may not withdraw its jury
demand.
Second, Turner argues that DSM’s consent is irrelevant because
DSM contractually waived its right to a jury trial.
While it is
true that consent is not required from a party that does not have
a right to a jury trial, Kramer v. Banc of Am. Secs., LLC, 355 F.3d
961, 968 (7th Cir. 2004), as discussed below, this Court finds that
DSM did not waive its right to a jury trial in this civil action.
Nevertheless, regardless of whether DSM waived its right to a jury
trial, TIG has not waived its right to jury trial and its consent
is needed.
B.
Thus, Turner may not withdraw its jury demand.
DSM’s Jury Demand
Turner argues that DSM’s jury demand should be stricken
because DSM contractually waived its right to a jury trial and,
alternatively, because its jury demand is untimely.
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For the
following reasons, this Court finds that DSM’s claims are embraced
by Turner’s jury demand, that DSM did not contractually waive its
right to a jury trial, and that DSM’s jury demand should not be
stricken.
1.
Scope of Turner’s Jury Demand
As a preliminary matter, DSM’s claims against Turner are
embraced by Turner’s jury demand and DSM’s demand is superfluous,
regardless of whether DSM waived its right to a jury trial.
Rule 38(d)’s consent-to-withdrawal requirement means that
“once one party files . . . a [jury] demand other parties are
entitled to rely on that demand for the issues it covers, and need
not file their own demands.”
Fuller v. City of Oakland, 47 F.3d
1522, 1531 (9th Cir. 1995). A general jury demand “extends even to
issues raised by the opposing party.”
Millner v. Norfolk & W. R.
Co., 643 F.2d 1005, 1010 (4th Cir. 1981). Similarly, a “demand may
be relied on by parties other than those directly adverse to the
demanding party; if issues embraced by the pleadings containing the
demand occur between third parties on a cross-claim, the jury right
inheres in those issues as well.”
22 (1st Cir. 1982).
In re N-500L Cases, 691 F.2d 15,
In determining the scope of a demand, as used
in Rule 38, the term “issue” is concerned with issues of fact, not
the addition of new legal theories or new parties.
Id. at 22-23.
“One issue is the same as another when it is based on the same
conduct or concerns the same general area of dispute.”
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Id.; see
also Lanza v. Drexel, 479 F.2d 1277, 1310 (2d Cir. 1973).
Thus,
the inquiry is whether the “issues” raised in each pleading “turn
on the same matrix of facts.”
Las Vegas Sun, Inc. v. Summa Corp.,
610 F.2d 614, 620 (9th Cir. 1979).
Turner made a general jury demand in its complaint, embracing
all issues raised in the complaint.
This demand necessarily
“extends even to issues raised by the opposing party”; originally
ASCIC, now TIG.
Millner, 643 F.2d at 1010.
The complaint alleges
that DSM breached the subcontract by improperly staffing the
project, by providing late supplies deliveries, and by ignoring
directions from Turner and the FBI.
Thus, the general area of
dispute raised by Turner’s complaint is the parties’ performance of
the subcontract and any defenses to the subcontract.
Because ASCIC and now TIG are DSM’s sureties, they are
entitled to raise any defenses that DSM could raise.
To that end,
ASCIC’s original answer and TIG’s amended answer each incorporate
by
reference
all
DSM’s
counterclaim against DSM.
affirmative
defenses
affirmative
defenses
to
Turner’s
ECF Nos. 98 at 7, 234 at 8.
include:
(1)
that
DSM’s
Those
performance
was
excused due to Turner’s material breaches of the subcontract, ECF
No. 91 at 3-5, 8; (2) that Turner fraudulently misled DSM and its
surety in the course of performance, id. at 6-7; (3) that Turner
affected a cardinal change to the subcontract, id. at 7; and (4)
that Turner fraudulently induced DSM to enter into the subcontract.
7
Id.
at
8.
Thus,
ASCIC
and
TIG
respectively
raised
these
affirmative defenses in their original and amended answers to the
complaint, and Turner’s jury demand necessarily embraces those
affirmative defenses.
In its amended intervenor-complaint, DSM alleges that Turner
breached the subcontract, that DSM is entitled to payment of the
Miller Act bonds by the sureties because of Turner’s breach, that
Turner fraudulently induced DSM to enter into the subcontract, that
Turner committed common law fraud in the course of performance, and
that Turner affected a cardinal change to the subcontract. Each of
these claims is co-extensive with ASCIC and TIG’s affirmative
defenses.
Because DSM’s claims are identical to TIG’s affirmative
defenses, DSM’s claims do not raise new issues.
Thus, Turner’s
jury demand embraces DSM’s claims regardless of whether DSM has a
right to a jury trial on those claims.
2.
Contractual Waiver of Right to Jury Trial
Turner argues that Article XXXIII of the subcontract between
it and DSM constitutes a waiver of DSM’s right to a jury trial.
“The Seventh Amendment right is of course a fundamental one, but it
is one that can be knowingly and intentionally waived by contract.”
Leasing Serv. Corp. v. Crane, 804 F.2d 828, 832-33 (4th Cir. 1986).
“[T]he party seeking enforcement of the waiver must prove that
consent was both voluntary and informed.”
Id. at 833.
“There is
a presumption against denying a jury trial based on waiver, and
8
waivers must be strictly construed.”
Med. Air Tech. Corp. v.
Marwan Inv., Inc., 303 F.3d 11, 18 (3d Cir. 2002) (citing Aetna
Ins. Co., 301 U.S. at 393).
In determining whether to enforce a
contractual jury waiver, courts must first determine whether the
plain language of the waiver “unambiguously covers the claims
asserted.”
Id.; see also Topline Solutions, Inc. v. Sandler Sys.,
Inc., 131 F. Supp. 3d 435, 439 (D. Md. 2015).
Article XXXIII of the subcontract, with the header “Dispute
Resolution,” provides in full:
Article XXXIII. The Subcontractor acknowledges that
the General Contract commits certain decisions and
factual and legal determinations to the representative of
the Owner designated the Contracting Officer including,
but not limited to, decisions and/or determinations as to
the quality of the work, the existence of differing site
conditions, suspensions, or changes, and the appropriate
compensation for any of the foregoing, or for and [sic]
delay, impact or disruptions. The Subcontractor agrees
that any decisions and/or determinations of the
Contracting Officer shall be as binding upon the
Subcontractor as upon Contractor.
The Subcontractor
further agrees that any factual and legal determinations
by any Court, Board of Contract Appeals or other
administrative tribunal that are binding upon Contractor
shall also be binding upon the Subcontractor.
The Subcontractor shall not be entitled to assert
any claim that is inconsistent with any such binding
decision or factual or legal determination and expressly
consents to the dismissal of any lawsuit or proceeding
asserting such claim, provided however, if such a suit or
proceeding has been commenced and Contractor has
commenced an appeal or other proceeding to challenge any
such
binding
decision
or
determination,
the
Subcontractor’s lawsuit may be stayed during the
pendency, and until the completion of all appeals and
proceedings challenging such decisions or determinations,
as necessary to preserve the Subcontractor’s rights, if
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any, against the running of any applicable limitations
period.
It is expressly understood that any right of the
Subcontractor to receive any payment under the
Subcontract shall be co-extensive with Contractor’s right
to receive reimbursement for such payment under the
Primary Subcontract, as determined in accordance with
decision and determinations that are binding upon
Contractor and Subcontractor expressly waives any claim
to any payment in excess thereof or on a basis for
payment different from the foregoing, including but not
limited to any contrary rights arising under 40 USC 27a
and/or 270b.
The parties recognize that problems and disputes
between them may occur and that it is preferable for them
to reach an amiable resolution of same without the need
to resort to formal dispute resolution procedures. In
that regard, they each pledge to participate in good
faith in voluntary and non-binding Alternative Dispute
Resolution (ADR) procedures. However, in the event that
such disputes are not resolved by mediation or other ADR
procedure as Contractor and the Subcontractor may agree
then such disputes shall be resolved at the Contractor’s
sole option either in the manner and forum pursuant to
which disputes between the Owner and Contractor are to be
resolved under the terms of the General Contract, or
according to law. Furthermore, the Subcontractor agrees
that Contractor shall have the exclusive right to join
the Subcontractor as a party in any dispute resolution
procedure (including without limitation ADR procedures,
binding arbitration or other judicial or non-judicial
proceeding) between the Owner and the Contractor,
together with such other Subcontractors or parties as may
be appropriate, where in the judgment of Contractor the
issues in dispute are related to the work or performance
of the Subcontractor.
Furthermore, the Subcontractor
expressly agrees to waive its right to trial by jury in
case Contractor elects to resolve the dispute in
litigation.
ECF No. 109-2 at 11-12 (emphasis added).
This Court finds the jury waiver’s scope to be ambiguous.
It
is unclear whether the waiver applies to disputes between Turner
10
and the FBI implicating DSM’s work, to disputes between Turner and
DSM, or to both.
The final paragraph of Article XXXIII deals both
with disputes between DSM and Turner and with disputes between
Turner and the FBI relating to DSM’s work.
The jury waiver clause
uses “the dispute” as an unqualified term, making it unclear to
which type of dispute it refers. Further, the preceding paragraphs
of Article XXXIII all deal with how the results of disputes between
Turner and the FBI affect DSM.
The term “the dispute” may
reasonably be interpreted to apply to either disputes between DSM
and Turner, disputes between Turner and the FBI involving DSM’s
work, or both.
See Spartan Iron & Metal Corp. v. Liberty Ins.
Corp., 6 F. App’x 176, 178 (4th Cir. 2001) (“A term is ambiguous
only when it may fairly and reasonably be understood in more ways
than one.”). Thus, this Court finds that the plain language of the
waiver does not unambiguously apply to disputes between DSM and
Turner.
Strictly construing that provision, this Court finds that
DSM has not waived its right to a jury trial in this civil action.
3.
Timeliness
Turner also argues that DSM waived its right to a jury trial
by failing to make a timely jury demand.
A jury demand is timely
if it has been served on all other parties “no later than 14 days
after the last pleading directed to the issue is served.”
Civ. P. 38(b)(1).
Fed. R.
Where an amended pleading raises new issues not
contained in the original pleadings, the amended pleading is the
11
“last pleading” for the purpose of the new issues.
Jones v. Boyd,
161 F.R.D. 48, 49 (E.D. Va. 1995); Brown v. Cox, No. 2:11CV184,
2012 WL 243233, *5 (E.D. Va. Jan. 24, 2012) (citing 9 Charles Alan
Wright, Arthur R. Miller, Mary Kay Kane, Richard L. Marcus & Adam
N. Steinman, Federal Practice and Procedure § 2320 (3d ed. 1998)).
Although this Court finds that DSM’s claims are embraced by
Turner’s jury demand, if they are not, then they would constitute
new issues for which DSM was permitted to demand a jury trial.
Thus, DSM’s jury demand would be timely as to the new claims raised
in the amended intervenor-complaint because the amended-intervenor
complaint would be the “last pleading” as to those issues.
V.
Conclusion
For the foregoing reasons, Turner Construction Co.’s motion to
withdraw its jury demand and to strike DSM’s jury demand (ECF No.
109) is DENIED.
Turner’s jury demand, contained in the complaint,
embraces all issues raised in this civil action.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
November 4, 2016
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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