415 F.Supp.3d 595 (E.D.Pa. 2019), C. A. 19-4854, Aaron Enterprises, Inc. v. Federal Insurance Co.

Docket Nº:Civil Action No. 19-4854
Citation:415 F.Supp.3d 595
Opinion Judge:CHAD F. KENNEY, JUDGE
Party Name:AARON ENTERPRISES, INC., Plaintiff, v. FEDERAL INSURANCE COMPANY, Defendant.
Attorney:James W. Kutz, Nicholas V. Fox, McNees Wallace & Nurick LLC, Harrisburg, PA, for Plaintiff. Patrick R. Kingsley, Shareda P. Coleman, Stradley Ronon Stevens & Young, Philadelphia, PA, for Defendant.
Case Date:December 13, 2019
Court:United States District Courts, 3th Circuit, Western District of Pennsylvania

Page 595

415 F.Supp.3d 595 (E.D.Pa. 2019)

AARON ENTERPRISES, INC., Plaintiff,

v.

FEDERAL INSURANCE COMPANY, Defendant.

Civil Action No. 19-4854

United States District Court, E.D. Pennsylvania

December 13, 2019

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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James W. Kutz, Nicholas V. Fox, McNees Wallace & Nurick LLC, Harrisburg, PA, for Plaintiff.

Patrick R. Kingsley, Shareda P. Coleman, Stradley Ronon Stevens & Young, Philadelphia, PA, for Defendant.

OPINION

CHAD F. KENNEY, JUDGE

Does a contingent claim made under a surety bond present an actual case or controversy that would be subject to a declaratory judgment when the bonding company has paid all its obligations under the bond but the insured faces the potential risk that a trustee in bankruptcy might seek a refund of contractual disbursements made to the insured for work done even though the trustee has made no such request or indicated she would make such a request now or in the future?

I. INTRODUCTION

Currently before the Court is Defendant, Federal Insurance Company’s Motion to Dismiss Plaintiff’s Complaint Pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) (ECF No. 5), Plaintiff, Aaron Enterprises, Incorporated’s Response in Opposition to the Motion (ECF No. 9), Defendant’s Reply (ECF No. 11), and Plaintiff’s Surreply (ECF No. 12). The matter is fully briefed for consideration.

II. BACKGROUND

Plaintiff initiated this action by filing a Writ of Summons in the Court of Common Pleas of Lancaster County. ECF No. 1 at 1, 7-9. Defendant filed a Praecipe for Rule to File Complaint, Plaintiff complied, and Defendant removed the case to this Court based on diversity of citizenship. Id., at 1-2, 12-14. Plaintiff filed its Complaint as an Action for Declaratory Judgment pursuant to 42 Pa.C.S. § 7531 et seq. and Pa.R.C.P. 1601 seeking "a declaration that Defendant is obligated to pay Plaintiff, pursuant to a payment bond issued by Defendant, any amounts that Plaintiff might be required to return, refund, or otherwise disgorge as preferential payments under the United States Bankruptcy Code." Id. at 19.

Defendant’s insured, Welded Construction, L.P. ("Welded"), entered into a written contract with Transcontinental Gas Pipe Line Company, LLC ("Transcontinental") to furnish "labor, supervision, materials, tools and equipment and to perform all work necessary in connection with the construction of" a new pipeline. Id. at 20-21. Plaintiff performed as a subcontractor for Welded and furnished "labor, material, and equipment for auger boring and related work that was necessary in the construction" of the new pipeline. Id. at 21. Defendant issued bond with Welded as principal and Transcontinental as obligee. Id.

Welded filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on October 22, 2018. Id. Welded paid Plaintiff approximately $1,428,897.00 over nine (9) individual disbursements. Id. Plaintiff received all payments within ninety (90) days preceding Welded’s bankruptcy filing. Id. Therefore,

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on January 16, 2019, Plaintiff made a contingent bond claim on the amounts paid within those ninety days if it was required "to return, refund, or disgorge all or any portion" of those payments. Id. at 22.

III. DISCUSSION

Defendant moves to dismiss the Complaint because (1) "Plaintiff has no bond claim and any bond claim has now expired ... Plaintiff’s attempt to judicially alter the statute of limitations by seeking declaratory relief must be rejected as a matter of law" and (2) "Plaintiff has failed to state a cognizable claim for declaratory relief because there is no current case or controversy as required by the Declaratory Judgment Act." ECF No. 5 at 4.

Plaintiff contends that its Complaint presents a case of actual controversy and is therefore properly before this Court. ECF No. 9 at 6. According to Plaintiff, "[t]he actual controversy in this case is that [Defendant] disputes [Plaintiffs] contention that [Defendant] is obligated to reimburse Plaintiff under the Bond, if [Plaintiff] is subsequently ordered to pay the $1,428,8[9]7 in Pre-Petition Funds back to the Bankruptcy Court." ECF No. 9 at 22...

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