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
• Citation: Fid. & Deposit Co. of Md. v. Riess Family, LLC, Case No. 16-CV-270-GKF-FHM (N.D. Okla. May 04, 2018)
• 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 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.

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 on the Third-Party Complaint [Doc. #75], filed by third-party defendants George Thompson, TSUR, L.L.C., and Alliant Insurance Services, Inc., and the Motion for Summary Judgment Against Third Party Defendants [Doc. #78], filed by third-party plaintiff Rebecca Riess. For the reasons discussed below, third-party defendants' motion for summary judgment is granted, and third-party plaintiff's motion for summary judgment is denied.

I. Background

This case arises from a dispute concerning a General Indemnity Agreement. The Indemnity Agreement was executed in favor of Fidelity and Deposit Company of Maryland and Zurich American Insurance Company (collectively, "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. 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].

Both Rebecca Riess and third-party defendants seek summary judgment on the claims asserted in the Third-Party Complaint.

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:

In 2015, Robert A. Riess, Sr. served as president and chief executive officer of Sheehan Pipe Line Construction Company. [Doc. #76, pp. 5-6 ¶ 1; Doc. #96, p. 6 ¶ 1; Doc. #78, p. 3 ¶ 1; Doc. #91, pp. 3-8]. Sheehan Pipe Line wished to bid on a number of potentially lucrative pipelineconstruction projects—including contracts with Texas Eastern Transmission, LP; Ohio River Systems, LLC; and Transcontinental Gas Pipe Line Company, LLC—which required it to secure payment and performance bonds. [Doc. #76, pp. 6-7 ¶ 8; Doc. #96, p. 7; Doc. #78, p. 3 ¶ 2; Doc. #91, pp. 3-8]. To that end, Alliant Insurance Services, Inc. acted as a surety broker. [Doc. #76, p. 6 ¶ 6; Doc. #96, p. 7]. George Thompson, through his business entity TSUR, L.L.C., acted as a consultant to Alliant in the brokering of bonds to Sheehan Pipe Line. [Doc. #76, p. 6 ¶¶ 4-5; Doc. #96, p. 7].

Surety agreed to issue certain performance and payment bonds naming Sheehan Pipe Line as principal. [Doc. #96-15]. However, in 2015, Sheehan Pipe Line experienced financial struggles. [Doc. #76, pp. 6-7 ¶ 8; Doc. #96, p. 7]. As a result, Surety required that Robert Riess's wife, Rebecca Riess, and their affiliated family entity, Riess Family, LLC, execute a General Indemnity Agreement in favor of Surety to further secure the bonds with their personal assets.³ [Doc. #76, p. 7 ¶ 9; Doc. #96, p. 7]. In a January 27, 2015 email from Thompson to David Sheehan, Thompson stated as follows:

The indemnity issue raises an interesting question. The agreement that Zurich has now has you and Rob signing individually. Normally the surety would ask for both wives indemnity and frankly Zurich wants it that way. They would back off on Becky [Rebecca Riess] if you ask but making him refuse could give you leverage down the road as you address his future. This decision is yours.

[Doc. #78-10]. On January 28, 2015, Surety revised the Indemnity Agreement to include Rebecca Riess as a signatory. [Doc. #78-2]. The General Indemnity Agreement includes the following provision:

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.

[Doc. #76-10, p. 6]. The Indemnity Agreement designates Riess Family, LLC, Robert A. Riess, Sr., and Rebecca Riess as "Indemnitors." [Id.].

On January 30, 2015, Rebecca Riess and Robert Riess, individually, and Robert Riess on behalf of Riess Family, LLC, signed the Indemnity Agreement in Belleville, Illinois. [Doc. #76, pp. 12-13 ¶ 20; Doc. #96, p. 13; Doc. #78-1, p. 56:6-13]. Belleville, Illinois is in the Central Time Zone. [Doc. #76, pp. 12-13 ¶ 20; Doc. #96, p. 13]. At 12:56 p.m. CST, Robert Riess scanned the executed signature pages at his brother's place of business and emailed them to Leonard Pataki, Sheehan Pipe Line's then-general counsel. [Doc. #76, p. 13 ¶ 21(a); Doc. #96, pp. 13-15, ¶ 13; Doc. #76-8; Doc. #76, pp. 15-21 ¶ 22; Doc. #96, pp. 13-16]. At 1:57 p.m. CST, Pataki assembled the Indemnity Agreement with all signatures and emailed the complete executed Indemnity Agreement to Thompson in an email with the subject matter line "Zurich-Sheehan GIA." [Doc. #76, p. 13 ¶ 21(b); Doc. #96, pp. 13-15 ¶ 13; Doc. #76-9; Doc. #76, pp. 15-21 ¶ 22; Doc. #96, pp. 13-16]. At 2:04 p.m. CST, Thompson forwarded the complete executed Indemnity Agreement to Surety. [Doc. #76, p. 14 ¶ 21(c); Doc. #96, pp. 13-15 ¶ 13; Doc. #76-10; Doc. #76-19, pp. 6-7; Doc. #76-25; Doc. #76-26; Doc. #76, pp. 15-21 ¶ 22; Doc. #96, pp. 13-16]. At 2:15 p.m. CST, Thompson replied to Pataki's earlier email in an email titled, "Re: Zurich-Sheehan GIA." [Doc. #76, pp. 14-15 ¶ 21(d); Doc. #96, pp. 13-15 ¶ 13; Doc. #76-11; Doc. #76-19, pp. 6-7; Doc. #76-27; Doc. #76-28; Doc. #76, pp. 15-21 ¶ 22; Doc. #96, pp. 13-16].⁴ The email stated as follows:

Thank you Leonard for all your help.

Please send the original to:

Tom Finn

Zurich Surety

863 Creston Drive

Maitland, Fl.32751

Zurich has agreed to issue a rider to the GIA excluding the personal assets of Tamara and Rebecca that are not construction assets. For example for Tamara it would be the house in Tulsa, the condo in Hawaii but not limited to that. David and Rob are aware of this and what I will need is a list from both for Zurich to review.

I don't know about you but I am planning to have a stiff drink this evening!

[Doc. #76-27; Doc. #96-5]. The email was intended to confirm an earlier telephone conversation between Thompson and Pataki. [Doc. #78-4, p. 78:8-19]. However, due to Thompson's typographical error, Thompson conveyed that Surety had agreed to issue a rider, when he intended to convey that Surety had agreed to consider issuing a rider. [Doc. #76, p. 15 ¶ 21(f); Doc. #96, pp. 13-15 ¶ 13; Doc. #76-15, pp. 88:24 to 89:10]. Surety never authorized a rider to the Indemnity Agreement excluding Rebecca Riess's personal assets. [Doc. #78, p. 4 ¶ 10; Doc. #91, pp. 5-8; Doc. #78-4, pp. 56:5 to 57:13 and 77:5 to 78:2].

Sheehan Pipe Line filed for bankruptcy in 2016 in the United States Bankruptcy Court for the Northern District of Oklahoma (case no. 16-10678-M). As previously stated, Sheehan Pipe Line's creditors have made claims on the surety bonds. [Doc. #76, p. 8 ¶ 15; Doc. #96, pp. 9-10 ¶ 9].

IV. Analysis

Both Rebecca Riess and third-party defendants assert entitlement to summary judgment on the claims asserted in the Third-Party Complaint. Third-party defendants argue that Rebecca Riess cannot establish the elements of her claims and, further, Alliant Insurance Services, Inc. separately argues that it cannot be vicariously liable for Thompson's conduct. Rebecca...