Am. Contractors Indem. Co. v. Reflectech, Inc.
| Decision Date | 12 March 2020 |
| Docket Number | Civil No. 1:18cv297-HSO-RHW |
| Court | U.S. District Court — Southern District of Mississippi |
| Parties | AMERICAN CONTRACTORS INDEMNITY COMPANY PLAINTIFF/COUNTER DEFENDANT v. REFLECTECH, INC., J&L PROPERTIES, LLC, LARRY R. WILLIAMSON, and JANIS C. WILLIAMSON DEFENDANTS/COUNTER CLAIMANTS/THIRD-PARTY PLAINTIFFS/COUNTER DEFENDANTS v. CENTURY CONSTRUCTION & REALTY, INC. THIRD-PARTY DEFENDANT/COUNTER CLAIMANT |
BEFORE THE COURT are Plaintiff/Counter Defendant American Contractors Indemnity Company's Motions [37] [38] for Summary Judgment. Plaintiff/Counter Defendant seeks dismissal of Defendants/Counter Claimants' Counterclaim and summary judgment on its own claim against Defendants/Counter Claimants. Having considered the parties' submissions, the record, and relevant legal authority, the Court is of the opinion that Plaintiff/Counter Defendant's Motions [37] [38] for Summary Judgment should be granted.
This suit arises out of a construction indemnity agreement between the parties. On August 1, 2014, Defendants/Counter Claimants Reflectech, Inc. ("Reflectech"), J&L Properties, LLC, Larry R. Williamson ("Mr. Williamson"), and Janis C. Williamson ("Ms. Williamson") (collectively "Defendants") entered into a General Indemnity Agreement ("GIA") with Plaintiff/Counter Defendant American Contractors Indemnity Company's ("ACIC") parent company, HCC Surety Group.1 Pl. Ex. A [38-1] at 1; Pl. Ex. A-i [38-2] at 1. Defendants sought to obtain the GIA in connection with a roofing subcontract that Reflectech had entered into in July 2017 with Third-Party Defendant/Counter Claimant Century Construction & Realty, Inc. ("Century") as part of renovations to a baseball stadium at the University of Mississippi ("the Project"). Pl. Ex. B [38-15] at 10; Pl. Ex. A-ii [38-3] at 1; Pl. Ex. A-iii [38-4] at 1. As a condition of awarding Reflectech the roofing subcontract, Century required Reflectech to obtain performance and payment bonds, which Reflectech in turn sought from ACIC. Pl. Ex. B [38-15] at 26; Pl. Ex. A-ii [38-3] at 1; Pl. Ex. A-iii [38-4] at 1. The face amount of each bond was $412,360.00. Pl. Ex. A-ii [38-3] at 1; Pl. Ex. A-iii [38-4] at 1.
As part of its subcontract with Century, Reflectech agreed that its roofing work would be subject to final approval by the Project architect. Def. Ex. 2 [43-2] at 158. Reflectech ultimately did not receive the architect's approval for some of its work because it was unable to secure a twenty-year warranty from themanufacturer on a portion of the roof it constructed. Id. at 159. According to the manufacturer, Reflectech did not properly install a section of the roof and that section would have to be replaced before it would issue a warranty. Id. at 100. Reflectech agreed that the roof needed to be replaced but maintained that it would not make the repairs without the payment of additional compensation by Century. Id. at 100-01. In response, Century terminated Reflectech's subcontract for default on May 10, 2018. Id. at 148; Pl. Ex. A-vi [38-7].
Century made demand upon ACIC to complete the roofing subcontract under the terms of the performance bond. Pl. Ex. A [37-1] at 2. ACIC retained an attorney and an engineering firm, Forcon International ("Forcon"), to investigate Century's claim. Id. at 3. Forcon and the attorney investigated the site, reviewed documentation from Century, and conducted interviews of Reflectech and Century personnel. Id. at 3. ACIC determined that Century's claim on the performance bond was $675,811.44. Id. at 4. ACIC ultimately settled Century's claim on September 28, 2018, for $412,360.00, the penal sum of the performance bond. Id. at 4.
ACIC also received claims on the payment bond from three of Reflectech's subcontractors and suppliers. Id. at 4-6. Reflectech informed ACIC that the three claimants had performed their jobs and should be paid. Def. Ex. 2. [43-2] at 42-43. ACIC paid the three claimants a total of $53,890.91 under the payment bond. Pl. Ex. A [37-1] at 5-6.
On September 10, 2018, ACIC filed this lawsuit against Reflectech and itsindemnitors, seeking to enforce the GIA and obtain reimbursement for the claims ACIC had settled, plus pre-judgment interest and associated attorneys' fees. See Compl. [1]. On February 13, 2019, Defendants filed a Counterclaim against ACIC for breach of contract, negligence, breach of fiduciary duty, breach of duty of good faith and fair dealing, and breach of constructive trust. See Am. Answer [19]. Defendants also raised third-party claims against Century for breach of subcontract, negligent supervision, negligent misrepresentation, fraudulent misrepresentation, breach of duty of good faith and fair dealing, and breach of constructive trust. See id. Century filed a Motion [29] to Compel Arbitration and Stay Proceedings as to the claims between it and Defendants. The Court granted that Motion on August 27, 2019, and referred the third-party claims to arbitration. Order [35] at 11.
ACIC has now filed the instant Motions [37] [38] for Summary Judgment seeking judgment as a matter of law on its Complaint [1] and on Defendants' counterclaims, respectively. On its claims against Defendants, ACIC argues that there is no genuine dispute of material fact that Defendants are bound by the terms of the GIA to reimburse it for the expenses it incurred settling the claims on the performance and payment bonds. Pl. Mot. [37] at 13. Defendants respond that summary judgment is not appropriate because there exist material fact questions as to whether the GIA is unconscionable and thus whether it is enforceable against Defendants. Resp. [43] at 2.
ACIC also contends that it is entitled to summary judgment on Defendants'counterclaims because Defendants have failed to show that ACIC breached the GIA or any of the duties it allegedly owed Defendants. Id. Pl. Mot. [38] at 2. Defendants assert that there are material fact questions as to whether ACIC properly investigated Century's performance bond claim under the GIA. Resp. [43] at 2.
Summary judgment is appropriate "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). If the movant carries this burden, "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
To rebut a properly supported motion for summary judgment, the opposing party must show, with "significant probative evidence," that there exists a genuine issue of material fact. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000). "A genuine dispute of material fact means that evidence is such that a reasonable jury could return a verdict for the nonmoving party." Royal v. CCC&R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013) (quotation omitted). If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Cutting Underwater Techs. USA, Inc. v. ENI U.S. Operating Co., 671 F.3d 512, 517 (5th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). In deciding whether summary judgment is appropriate, the Courtviews facts and inferences in the light most favorable to the nonmoving party. RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 857 (5th Cir. 2010).
ACIC argues that it is entitled to judgment as a matter of law on its single claim against Defendants for indemnification. Pl. Mot. [37] at 13. It asserts that there is no disputed issue of material fact that Defendants freely and voluntarily entered into the GIA, which entitles ACIC to reimbursement for the money it paid on Defendants' payment and performance bonds. Id. Defendants have raised in their Response [43] as their only defense to ACIC's claim that the GIA is unenforceable because it is unconscionable. Resp. [43] at 2.
It is undisputed that Mississippi law governs the issues in this case. Pl. Mem. [39] at 13; Resp. [43] at 4. In Mississippi, an unconscionable contract is "one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other." Smith v. Express Check Advance of Miss., LLC, 153 So. 3d 601, 608 (Miss. 2014) (internal quotation omitted). There are two types of unconscionability, procedural and substantive. East Ford, Inc. v. Taylor, 826 So. 2d 709, 714 (Miss. 2002). Substantive unconscionability looks to the substantive terms of the agreement, while procedural unconscionability focuses on the circumstances surrounding the agreement's formation. Cleveland v. Mann, 942 So. 2d 108, 114 (Miss. 2006). The party challenging the enforceability of the agreement bears the burden of showing that it is unconscionable. Smith, 153 So. 3d at 608.
In assessing an agreement for substantive unconscionability, courts "look within the four corners of [the] agreement in order to discover any abuses relating to the specific terms which violate the expectations of, or cause gross disparity between, the contracting parties." Covenant Health & Rehab. of Picayune, LP v. Estate of Moulds, 14 So. 3d 695, 699 (Miss. 2009). "Substantive unconscionability is proved by oppressive contract terms such that there is a one-sided agreement whereby one party is deprived of all the benefits of the agreement or left without a remedy for another party's nonperformance or breach." Oasis Health and Rehab of Yazoo City, LLC v. Smith, 42 F. Supp. 3d 821, 826 (S.D. Miss. 2014) (internal quotation omitted).
Defendants' argument that the GIA is substantively unconscionable is based entirely upon the testimony of their expert witness, Clyde X. Copeland, III ("Copeland")...
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