Bd. of Trs., Roofers Local No. 30 Combined Welfare Fund v. Int'l Fid. Ins. Co.

• Citation: 63 F.Supp.3d 459
• Decision Date: 21 October 2014
• Docket Number: Civil Action No. 10–4721.
• Parties: BOARD OF TRUSTEES, ROOFERS LOCAL NO. 30 COMBINED WELFARE FUND, et al., Plaintiffs, v. INTERNATIONAL FIDELITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

63 F.Supp.3d 459

BOARD OF TRUSTEES, ROOFERS LOCAL NO. 30 COMBINED WELFARE FUND, et al., Plaintiffs

v.INTERNATIONAL FIDELITY INSURANCE COMPANY, Defendant.

Civil Action No. 10–4721.

United States District Court, E.D. Pennsylvania.

Signed Oct. 21, 2014.

Dawn M. Costa, James E. Goodley, Moira Kulik, Richard B. Sigmond, Shanna Marie Cramer, Jennings Sigmond, P.C., Philadelphia, PA, for Plaintiffs.

Louis A. Modugno, McElroy Deutsch Mulvaney & Carpenter, Morristown, NJ, Monica T. Holland, Stephen Paul Chawaga, McElroy, Deutsch, Mulvaney & Carpenter, LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

TUCKER, Chief Judge.

Presently before the Court are cross-motions for summary judgment in a diversity action for a breach of contract. Upon careful consideration of the parties' submissions and exhibits thereto and for the reasons set forth below, the Court will grant in part and deny in part Plaintiffs' motion and deny Defendant's motion in its entirety.

I. FACTUAL AND PROCEDURAL BACKGROUND

Because the Court writes primarily for the parties, it sets forth only those facts that are relevant to its conclusion. Though the parties contest the significance of the facts underlying this action, they largely do not dispute the facts themselves. Plaintiffs are trust funds established in Pennsylvania under collective bargaining agreements (“CBAs”) between Local Union No. 30 of the United Union of Roofers, Waterproofers and Allied Workers (“Union”) and two companies, Brown's Roofing, Inc. (“Brown”) and Brown & Guarino, Inc. (“B & G”, or collectively “Companies”). Defendant International Fidelity Insurance Company (“IFIC”) is a surety company based in Newark, New Jersey with whom Companies entered into surety bond agreements to guarantee contributions to Plaintiffs.

At all times relevant to this action, Brown and B & G were bound by CBAs with Union, which required the payment of fringe benefit contributions to Plaintiffs and the maintenance of surety bonds on those contributions. On or about June 19, 2006, IFIC issued one surety bond each to B & G (“B & G Bond”) and Brown (“Brown Bond”). Both bonds were in the amount of $400,000. On May 13, 2008, IFIC issued bond riders, effective June 19, 2008, that increased the B & G Bond to $800,000 (“B & G Bond Rider”) and decreased the Brown Bond to $250,000 (“Brown Bond Rider”). The bond agreements contained identical terms and provisions. They provided that, within one year of default by the applicable Company, Plaintiffs are to notify IFIC of a claim against the bond. IFIC would then pay all sums due in accordance with the terms of the bond agreements.

As of December 2007, B & G was the biggest offender against the Union for failure to pay required contributions to Plaintiffs. On May 27, 2008, Plaintiffs made a “final” demand for payment to B & G in the amount of $365,545.02 for contributions, interest, and liquidated damages. This demand was made two weeks after IFIC had issued the B & G Bond Rider that increased the B & G Bond's penal amount from $400,000 to $800,000.

At that time, Brown had also become delinquent on its contributions. On May 27, 2008, Plaintiffs made a similar “final” demand to Brown for payment of $394,407.67.

When neither Brown nor B & G satisfied their delinquencies, Plaintiffs initiated separate suits against them on August 5, 2008 for failure to make required contributions pursuant to the CBAs and the Employee Retirement Income Security Act (“ERISA”). Those actions were resolved when Plaintiffs entered into settlement agreements on January 7, 2009 with both Companies. The agreements required Brown and B & G to pay “settlement sums” in monthly installments in addition to regular contributions already required under their respective CBAs. The “settlement sums” were equal to the then-existing delinquency amounts owed by the Companies. On February 16, 2009 and June 8, 2009, Plaintiffs secured consent judgments against B & G and Brown, respectively, for payments pursuant to the settlement agreements. See Bd. of Trustees, Roofers Local No. 30 Combined Welfare Fund, et al. v. Brown & Guarino, Inc., Civ. A. No. 08–3689, Doc. 12; Bd. of Trustees, Roofers Local No. 30 Combined Welfare Fund, et al. v. Brown's Roofing, Inc., Civ. A. No. 08–3690, Doc. 6. IFIC never received notice from Plaintiffs of these prior actions, the settlement agreements, or the consent judgments.

By January 2010, both Brown and B & G had stopped making contributions under both the settlement agreements and the CBAs. On June 11, 2010, Plaintiffs sent IFIC a claim on the B & G Bond in the amount of $771,833.75, which was the total sum due for B & G's delinquencies between April to October 2008 and January to April 2010. On June 18, 2010, IFIC responded by letter, requesting further documentation and denying Plaintiffs' claim with respect to the April to October 2008 delinquency because over a year had elapsed. IFIC further wrote that Plaintiffs never advised it of B & G's delinquency from April to October 2008. IFIC characterized this as a material omission because it would not have issued the B & G Bond Rider in June 2008 had it known of B & G's delinquency.

On June 18, 2010, Plaintiffs sent to IFIC a claim on the Brown Bond in the amount of $166,211.01. Ten days later, IFIC responded by requesting further documentation.

When IFIC failed to pay on either claim, Plaintiffs initiated two suits against IFIC on September 15, 2010—one to enforce the Brown Bond and the other to enforce the B & G Bond. This Court consolidated the cases by an order dated November 23, 2010. After the close of discovery, each party filed a motion for summary judgment, responses, and replies thereto. Plaintiffs seek judgment on the merits, an award of $1,029,729.98 in damages, and an additional award of attorneys' fees and costs. IFIC denies liability. The Court heard oral arguments from the parties on September 15, 2014 and this matter is now ripe for review.

II. STANDARD OF REVIEW

The court will grant a motion for summary judgment “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) ; Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288, 292 (3d Cir.2012). “A motion for summary judgment will not be defeated by ‘the mere existence’ of some disputed facts, but will be denied when there is a genuine issue of material fact.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir.2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A genuine issue of material fact exists if, after making all reasonable inferences in the nonmoving party's favor, a reasonable jury could find for the nonmoving party. Pignataro v. Port Auth. of N.Y. and N.J., 593 F.3d 265, 268 (3d Cir.2010). An issue of fact is “material” if it “might affect the outcome of the case under governing law.” Byrne v. Chester Cnty. Hosp., Civ. A. No. 09–889, 2012 WL 4108886, at *2 (E.D.Pa. Sept. 19, 2012) (citing Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir.2006) ). The court is “not to weigh the evidence or determine the truth of the matter, but only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the nonmoving party.” Am. Eagle Outfitters, 584 F.3d at 581.

The movant bears the initial burden of informing the court of the basis for summary judgment and identifying the portions of the record that demonstrate the absence of a genuine issue of material fact. Byrne, 2012 WL 4108886, at *2. Once this burden is met, the non-moving party must then “set forth specific facts showing that there is a genuinely disputed factual issue for trial.” Id. It may cite to particular parts of the materials in the record or show that the materials cited do not establish the absence or presence of a genuine dispute. Fed. R. Civ. P. 56(c)(1). However, “[u]nsupported assertions, conclusory allegations, or mere suspicions are insufficient to overcome a motion for summary judgment.”Betts v. New Castle Youth Dev. Ctr., 621 F.3d 249, 252 (3d Cir.2010).

III. DISCUSSION

The parties' cross-motions for summary judgment and the responses and replies thereto present the following dispositive issues: whether and to what extent the bond agreements provide for Plaintiffs' discretion in determining “default” by the Companies; whether a material modification of the bonded obligation took place such that IFIC's liability is discharged; whether Plaintiffs are entitled to damages; whether the B & G Bond Rider is valid; and whether Plaintiffs are entitled to additional attorneys' fees and costs by exercise of this Court's equitable powers. The Court will address each issue in turn.

A. Plaintiffs' Determination of Default was a Valid Exercise of Discretion Under the Bond Agreements

As a federal court sitting in diversity, this Court applies Pennsylvania law to the interpretation of surety contracts. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) (“Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state.”).¹ Under Pennsylvania law, a surety agreement is a contract and its language determines the surety's rights and liabilities. Beckwith Machinery Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 890 A.2d 403, 406 (Pa.Super.Ct.2005) ; see Berks Prod. Corp. v. Arch Ins. Co., 72 A.3d 315, 319 (Pa.Commw.Ct.2013) ( “[W] hen interpreting a bond, the language of the bond is determinative.”), appeal denied, 89 A.3d 662 (Pa.2014). The primary determinants of a surety's liability are the intent and meaning of the bond instrument. Berks Prod. Corp., 72 A.3d at 319. A written contract that is clear and unambiguous may be interpreted by the court as a matter of law. Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 588 Pa. 470, 905 A.2d 462, 469 (2006). The court constructs “the intent from all words...