Hartford Fire Ins. Co. v. Harris Co. of Fort Smith, Inc.

• Decision Date: 12 November 2015
• Docket Number: CASE NO. 2:14-CV-2096
• Citation: 143 F.Supp.3d 800
• Parties: Hartford Fire Insurance Company, Plaintiff v. The Harris Company of Fort Smith, Inc., Defendant/Third Party Plaintiff v. Limestone Development, LLC and Ark–Con Testing Service, Inc., Third–Party Defendants
• Court: U.S. District Court — Western District of Arkansas

143 F.Supp.3d 800

Hartford Fire Insurance Company, Plaintiff

v.The Harris Company of Fort Smith, Inc., Defendant/Third Party Plaintiff

v.Limestone Development, LLC and Ark–Con Testing Service, Inc., Third–Party Defendants

CASE NO. 2:14-CV-2096

United States District Court, W.D. Arkansas, Fayetteville Division.

Signed November 12, 2015

Justin D. Wear, Manier Herod, Nashville, TN, Robert M. Dunn, Devlieger Hilser P.C., Philadelphia, PA, for Plaintiff.

Dale W. Brown, II, Kutak Rock LLP, Grace K. Johnson, Scott E. Wray, Bassett Law Firm LLP, Fayetteville, AR, for Defendant/Third Party Plaintiff.

Paul T. Devlieger, Devlieger Hilser P.C., Philadelphia, PA, for Plaintiff/Third–Party Defendant.

David M. Donovan, Watts, Donovan & Tilley, P.A., Little Rock, AR, for Third–Party Defendants.

OPINION AND ORDER

TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE

Currently before the Court are The Harris Company of Forth Smith's ("Harris") Motion for Summary Judgment (Doc. 61), Ark-Con Testing Service's ("Ark-Con") Motion for Summary Judgment (Doc. 64), Limestone Development's ("Limestone") Motion to Set Aside Default (Doc. 68), and the various briefs accompanying and responding to those motions. For the reasons discussed below, these motions will be adjudicated as follows:

• Limestone's Motion to Set Aside Default (Doc. 68) is GRANTED. Limestone is ORDERED to respond to Harris's Counterclaim within 14 DAYS of this Order's entry. Limestone is further ORDERED to respond to Ark-Con's Crossclaim within 14 DAYS of this Order's entry.

• Harris's Motion for Summary Judgment (Doc. 61) is GRANTED IN PART as to the curb issues, the wiring issue, and the misrepresentation claim, and DENIED IN PART as to all of the remaining issues.

• Ark-Con's Motion for Summary Judgment (Doc. 64) is DENIED.

I. BACKGROUND

This litigation involves a construction dispute arising from the expansion of the Fort Smith National Cemetery (the "Cemetery") in Fort Smith, Arkansas. To execute that expansion, the Federal Government contracted with Limestone to be the general contractor on the project. As an apparent requirement of the contract, Limestone obtained a performance bond from, and entered into an indemnity agreement with, Hartford Fire Insurance Company ("Hartford"). Pursuant to the bond and related indemnity agreement, Limestone assigned to Hartford all rights, title, and interest to all claims in connection with the subcontracts related to the Cemetery expansion.

On April 20, 2010, Limestone entered into a sub-contract with Defendant/Third-Party Plaintiff Harris to perform certain erosion control, demolition, earthwork, drainage work, paving, sewage, concrete work, and other work for the expansion. Around the same time, Limestone entered into a sub-contract with Third-Party Defendant Ark-Con to test the compaction rate of soil upon which various structures were to be built. Following several alleged problems in the early phases of construction, which now form the basis of this lawsuit, Limestone dismissed Harris from the worksite on February 15, 2011, and terminated the parties' sub-contract agreement in April of that year. Shortly thereafter, Limestone defaulted on its contract with the Government and Hartford stepped into Limestone's shoes pursuant to the March 1, 2010 performance bond.

After completing the Cemetery expansion in place of Limestone, Hartford brought the instant suit against Harris, alleging that Harris breached its subcontract agreement with Limestone, made misrepresentations to Limestone regarding the quality of workmanship, materials, and professional care it exercised, and was negligent in the execution of the contract. Harris filed its Answer to Amended Complaint on June 17, 2014, denying all of Hartford's claims. Harris also commenced actions against Limestone and Ark-Con, alleging contribution, indemnity, breach of contract, and promissory estoppel against Limestone, and contribution, indemnity, and promissory estoppel against Ark-Con. Ark-Con filed its Answer to Harris's Amended Third-Party Complaint denying all claims. It also filed a Counterclaim against Harris and a Crossclaim against Limestone asserting that any damages incurred by Hartford are primarily attributable to either Harris or Limestone, and seeking an apportionment of fault or contribution. Limestone failed to respond to Harris's original and amended Third-Party Complaints, and to Ark-Con's Crossclaim.

On June 25, 2015, the Clerk of the Court filed a Notice of Default Procedures alerting counsel for Harris that Limestone failed to plead or otherwise defend against Harris's claims.¹ Harris's counsel then filed an affidavit certifying that Limestone was properly served by a private process server, followed by a Motion for Default Judgment as to Limestone on June 29, 2015. The Clerk of the Court entered default against Limestone on July 1, 2015, and this Court granted Harris's Motion for Default Judgment on August 5, 2015, deeming the issues of legal liability and responsibility set forth in Harris's Third-Party Complaint admitted.

Harris filed its Motion for Summary Judgment on August 31, 2015. The Motion first argues that summary judgment against Hartford is appropriate because, as Limestone's surety, Limestone's default is imputed onto Hartford. In the alternative, the Motion contends that partial summary judgment is appropriate as to Hartford's claims based on the settlement of the Building, and alleged defects with the administration-building sidewalk, irrigation lines, grading by the storage bins and storage building, grading over the crypts, grading for the fencing, grading on both sides of "B" street, inlet grates and yard inlets, broken curbs, and wiring to the bell tower. Also on August 31, 2015, Ark-Con filed its Motion for Summary Judgment against Harris, arguing that there is no genuine issue of material fact that it did not cause the settling of the Building.

Apparently realizing the potential consequences of Limestone's default for Hartford, Hartford's counsel, Paul Devlieger, filed a Notice of Appearance on behalf of Limestone on September 3, 2015, and moved the Court to set aside its Default Judgment on the same day. Briefing for all of the aforementioned motions has been completed, and all are now ripe for decision.

II. DISCUSSION

A. LIMESTONE'S MOTION TO SET ASIDE DEFAULT JUDGMENT

Limestone's Motion to Set Aside Default Judgment first contends that this Court erred by entering default in the first place, because Limestone was entitled to rest on Hartford's Complaint under the common-defense doctrine. Additionally, Limestone argues that the default should be lifted because doing so would not prejudice Harris, and that maintaining the default would produce a harsh or unfair result. The Court will accordingly consider, first, whether it erred in granting the default judgment, and second, whether, if properly granted, the default judgment should nonetheless be set aside.

Addressing the first matter, the Court finds that Limestone's creative attempt to benefit from the common-defense doctrine is misguided, and that the Court did not err in granting default judgment. The common-defense doctrine is an English common law doctrine that gained acceptance in the United States in the mid-1800's. See Firestone and Rubber Co. v. Little: Overextension of the Common Defense Doctrine , 35 Ark. L. Rev. 328, 328-29 (1981). The doctrine operates to allow a co-defendant to avoid default judgment by relying on a responsive pleading filed by another co-defendant. E.g. , Sutter v. Payne , 337 Ark. 330, 335, 989 S.W.2d 887 (1999) ( "Arkansas has long recognized the common-defense doctrine, which provides that an answer that is timely filed by a co-defendant inures to the benefit of a defaulting co-defendant."). The straight-forward purpose of the doctrine is to avoid the inconsistent outcome of a court entering default judgment against one defendant, thus adjudicating him liable to the plaintiff, while a similarly situated co-defendant prevails on the merits. See Angelo Iafrate Const., LLC v. Potashnick Const., Inc. , 370 F.3d 715, 722 (8th Cir.2004) ("To avoid such inconsistent results, a judgment on the merits for the answering party should accrue to the benefit of the defaulting party."); Frow v. De La Vega , 82 U.S. (15 Wall.) 552, 554, 21 L.Ed. 60 (1872) (opining that absent the common-defense doctrine, defaults could result in an "absurdity" where courts both sustain a charge and deem it to be entirely unfounded). Consistent with this underlying purpose, the doctrine does not apply where "liability of the defaulting party is based on independent wrongful acts or a legal theory distinct from the one under which the answering party prevailed." 370 F.3d at 722.

If Limestone and Hartford were co-defendants, it is quite likely that the common-defense doctrine would save Limestone from default. But, they are not. Hartford is the Plaintiff in this case and Limestone is a Third-Party Defendant. Limestone tries to circumvent this facially fatal incongruity by asserting that "although couched as affirmative claims as opposed to affirmative defenses, the pleas of Hartford, that Harris was the defaulting responsible party, if proven, would operate as a defense to the claims of Harris." (Doc. 68-1, p. 2). Limestone cites no law to support its conclusion that the common-defense doctrine applies in such situations, and the Court could find none either. While the Court would stop short of assuming that the common-defense doctrine could never apply in such a case, it is confident that the doctrine does not apply here because the underlying purpose of the doctrine is not implicated. This is so because the default of a principal is imputed upon a surety "when the surety had full knowledge of the action against the principal and an opportunity to defend." Drill South, Inc. v. Int'l Fidelity Ins. Co., 234 F.3d 1232, 1235 (11th Cir.2000). Accordingly, if this Court upholds Limestone's default, the default...