Fid. & Deposit Co. of Md. & Zurich Am. Ins. Co. v. Riess Family, LLC

• Decision Date: 04 May 2018
• Docket Number: Case No. 16-CV-270-GKF-FHM
• Parties: FIDELITY AND DEPOSIT COMPANY OF MARYLAND and ZURICH AMERICAN INSURANCE COMPANY, Plaintiffs, v. RIESS FAMILY, LLC, ROBERT A. RIESS, SR., and REBECCA RIESS, Defendants, v. GEORGE THOMPSON, TSOR, L.L.C, and ALLIANT INSURANCE SERVICES, INC., Third-Party Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

FIDELITY AND DEPOSIT COMPANY OF MARYLANDand ZURICH AMERICAN INSURANCE COMPANY, Plaintiffs, v. RIESS FAMILY, LLC, ROBERT A. RIESS, SR., and REBECCA RIESS, Defendants, v. GEORGE THOMPSON, TSOR, L.L.C,and ALLIANT INSURANCE SERVICES, INC., Third-Party Defendants.

Case No. 16-CV-270-GKF-FHM

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

May 4, 2018

OPINION AND ORDER

This matter comes before the court on the Motion for Summary Judgment [Doc. #70], filed by plaintiffs Fidelity and Deposit Company of Maryland and Zurich American Insurance Company (collectively referred to as "Surety"), and the Motion for Summary Judgment Against Plaintiffs [Doc. #73], filed by defendant Rebecca Riess. For the reasons discussed below, Surety's Motion for Summary Judgment is granted, and Rebecca Riess's Motion for Summary Judgment against Surety is denied.

I. Background

This case arises from a dispute concerning a General Indemnity Agreement. The Indemnity Agreement was executed in favor of Surety as consideration for the issuance of surety bonds naming Sheehan Pipe Line Construction Company as principal on certain construction projects. Unpaid subcontractors and suppliers have made claims on the surety bonds and Surety has incurred, and will incur, substantial losses. Surety alleges it made demand on the defendants to honor their obligations as indemnitors under the Indemnity Agreement, but defendants have failed to pay. The Complaint contains five causes of action: (1) a claim for breach of the Indemnity Agreement; (2) collateralization; (3) a claim for exoneration from all loss, liability, damage, and expense threatened or incurred as a result of issuance of the bonds; (4) a claim for breach of fiduciary duty; and (5) a claim for an accounting of the defendants' financial statements, books, and records. See [Doc. #2].

The same day Surety initiated this case, defendants filed a Petition for Declaratory Relief and Alternative Relief against Zurich American Insurance Company in state district court. In that Petition, the defendants seek a declaratory judgment that the Indemnity Agreement excludes the personal assets of defendant Rebecca Riess that are not construction assets of Sheehan Pipe Line. In the alternative, the defendants seek a declaratory judgment that the Indemnity Agreement is unenforceable based on fraud in the inducement. See [Doc. #2-1 in case no. 16-CV-350-GKF-PJC]. Zurich removed the declaratory judgment action. This court consolidated the action with this case, and converted defendants' requests for declaratory relief to counterclaims. See [Doc. #23]. Additionally, defendants filed a Third-Party Complaint against George Thompson, TSUR, L.L.C., and Alliant Insurance Services, Inc.¹ The Third-Party Complaint asserts misrepresentation and negligence claims.² See [Doc. #38].

Surety seeks summary judgment as to its claims under the Indemnity Agreement—and defendants' counterclaims—against defendants the Riess Family, LLC, Robert A. Riess, Sr., and Rebecca Riess. See [Doc. #70]. Rebecca Riess, individually, has filed a motion for summary judgment against Surety. See [Doc. #73].

II. Summary Judgment Standard

A motion for summary judgment shall be granted "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). Federal Rule of Civil Procedure 56(a) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A court must examine the factual record in the light most favorable to the party opposing summary judgment. Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir. 1995).

When the moving party has carried its burden, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted). In essence, the inquiry for the court is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

III. Material Facts

The following material facts are uncontested:

Sheehan Pipe Line Construction Company engaged Alliant Insurance Services, Inc. to represent it in procuring certain performance and payment bonds. [Doc. #70, p. 11 ¶ 25; Doc. #95, pp. 6-15; Doc. #89, p. 14 ¶ 12; Doc. #110, pp. 2-5; Doc. #73-8, p. 18:3-5]. George Thompson, an employee of TSUR, L.L.C., served as a consultant for Alliant. [Doc. #70, p. 11 ¶ 24; Doc. #70-7, pp. 6:10-15 and 8:2-4; Doc. #89, p. 14 ¶ 11; Doc. #110, pp. 2-5]. Thompson was not an employee of Surety. [Doc. #70-7, pp. 6:10-15 and 8:2-4].

Surety agreed to issue certain performance and payment bonds naming Sheehan Pipe Line Construction Company as principal on the following construction projects:

(a) Bond No.: 09120120

Obligee: Ohio River Systems, LLC

Project: Installation of 36" pipeline in Monroe, Belmont and Jefferson Counties, contract no. MCA-696-2014-1120

(b) Bond No.: 09120121

Obligee: Texas Eastern Transmission, LP

Project: Installation of 30" pipeline in Monroe, Belmont and Jefferson Counties, contract no. 14-2015

(c) Bond No.: 09120122

Obligee: Transcontinental Gas Pipe Line Company, LLC

Project: Construction of approximately 531 miles of new 42" Leidy Loop, D Dorrance Loop, Luzerne, PA, contract no. 2015-0006

(d) Bond No.: 09120123

Obligee: Transcontinental Gas Pipe Line Company, LLC

Project: Construction of approximately 11.47 miles of the company's new 42" Leidy Loop "D" Franklin Loop, Luzerne and Monroe Counties, PA, contract no. 2015-0001

[Doc. #70, pp. 6-7 ¶ 3; Doc. #73, p. 6 ¶ 2; Doc. #70-1, pp. 2-3 ¶ 5; Doc. #95-15]. In conjunction with the issuance of the requested bonds, Surety required Robert A. Riess, Sr., the then-president and chief executive officer of Sheehan Pipe Line; Rebecca Riess, Robert Riess's wife; and RiessFamily, LLC to execute a General Indemnity Agreement in favor of Surety. [Doc. #73, p. 6 ¶ 4; Doc. #89, p. 6 ¶ 4; Doc. #88-1]. The General Indemnity Agreement includes the following provisions:

2. INDEMNITY: Indemnitors shall exonerate, indemnify, and hold Surety harmless from any and all liability and Loss sustained or incurred, arising from or related to: (a) any Bond, (b) any Claim, (c) any Indemnitor failing to timely and completely perform or comply with this Agreement, (d) Surety enforcing this Agreement or (e) any act of Surety to protect or procure any of Surety's rights, protect or preserve any of Surety's interests, or to avoid or lessen Surety's liability or alleged liability. The liability of Indemnitors to Surety under this Agreement includes all Claims made on Surety, all payments made, Loss incurred, and all actions taken by Surety under the Good Faith belief that Surety is, would be or was liable for the amounts paid or the actions taken, or that it was necessary or expedient to make such payments or take such actions, whether or not such liability, necessity or expediency existed. Indemnitors shall promptly, upon demand, make payment to Surety as soon as liability or Loss exists, whether or not Surety has made any payment. An itemized statement of Loss, sworn to by any officer of Surety or the voucher or other evidence of any payment shall be prima facie evidence of the fact amount and extent of the liability of Indemnitors for such Loss. Indemnitors shall promptly upon demand procure the full and complete discharge of Surety from all Bonds and all liability in connection with such Bonds. If Indemnitors are unable to obtain discharge of any or all such Bonds within the time demanded, Indemnitors shall promptly deposit with Surety an amount of money that Surety determines is sufficient to collateralize or pay any outstanding bonded obligations.

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4. PLACE IN FUNDS: Indemnitors agree to promptly deposit with Surety, on demand, an amount of money that Surety determines is sufficient to fund any liability or Loss. Such funds may be used by Surety to pay Loss or may be held by Surety as collateral against potential future Loss. Any remaining funds held by Surety after payment of all sums due to Surety under this Agreement shall be returned upon the complete release and/or discharge of Surety's liability under all Bonds.

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28. WAIVER OF EXEMPTIONS: Indemnitors waive all rights to claim any of their property, including their respective homesteads. as exempt from any levy, execution, sale or other legal process by Surety unless such waiver is prohibited by law.

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30. DEFINITIONS:

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Claim or Claims means any notice, claim, demand, defense, counterclaim, setoff, lawsuit or proceeding or circumstance which may constitute, lead to or result in Loss, liability, or asserted liability in connection with any Bond, any Bonded Contract, or this Agreement.

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Loss means all premiums due to Surety and any and all liability, loss, Claims, damages, court costs and expenses, attorneys' fees (including those of Surety), consultant fees, and all other costs and expenses, including but not limited to any additional or extra-contractual damages arising from Surety's Settlement of any Claim. Pre-judgment and post-judgment interest shall accrue from the date of any payment made by Surety with respect to any of the foregoing at the maximum default rate permitted by law.

[Doc. #88-1, pp. 1-2 and 4-5]. The Indemnity Agreement designates Riess Family, LLC, Robert A. Riess, Sr.,...