Owners Ins. Co. v. Fid. & Deposit Co. of Md.

• Decision Date: 10 August 2021
• Docket Number: 4:21-CV-00184 JAR
• Parties: OWNERS INSURANCE COMPANY, as assignee of Lindberg Waterproofing, Inc., and STARK TRUSS COMPANY, INC., Plaintiffs, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

OWNERS INSURANCE COMPANY, as assignee of Lindberg Waterproofing, Inc., and STARK TRUSS COMPANY, INC., Plaintiffs, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant.

No. 4:21-CV-00184 JAR

United States District Court, E.D. Missouri, Eastern Division

August 10, 2021

MEMORANDUM AND ORDER

JOHN A. ROSS, UNITED STATES DISTRICT JUDGE.

Plaintiff Owners Insurance Company (“Owners”), as assignee of Lindberg Waterproofing, Inc. (“Lindberg”), and Intervening Plaintiff Stark Truss Company, Inc. (“Stark Truss”)^[1](collectively “Plaintiffs”) bring this action against Defendant Fidelity and Deposit Company of Maryland (“F&D”) alleging claims for breach of a labor and materials payment bond issued on a construction project. Owners alleges an additional claim for vexatious refusal to pay. This matter is before the Court on the parties' cross-motions for summary judgment. F&D also moves in the alternative to deny summary judgment to Plaintiffs pursuant to Rule 56(d). The motions are fully briefed and ready for disposition.

Factual background

The facts of this case are largely uncontroverted. In June 2015 BCC Partners, LLC (“BCC”) and Ben F. Blanton Construction, Inc. (“Blanton”) entered into a contract (the “Prime Contract”) for the construction of a luxury apartment building in St. Louis County, Missouri known as The Vue (the “Project”). Section 3.4.1 of the General Conditions of the Prime Contract provides:

Unless otherwise provided in the Contract Documents [Blanton] shall provide and pay for labor, materials equipment, tools, construction equipment, and machinery water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work[.]

Section 8.6.8 of the Prime Contract concerning insurance and bonds provides:

[Blanton] agrees to procure and maintain insurance of the types and with the limits specified in the Contract Documents and as required by [BCC]. [BCC] shall have the right to approve all insurance carriers. [Blanton] shall, upon request from [BCC], furnish Performance and Payment Bonds with sureties acceptable to [BCC]. As of the time of execution of this Agreement, the Contract Sum does not include the cost of Performance and Payment Bonds. If [BCC] requests [Blanton] to provide same, such will be provided with the cost for same added by Change Order. [Blanton] shall also furnish [BCC] with reasonable proof of financial responsibility to perform the Work and update this information upon request.

On June 25, 2015, F&D furnished a Labor and Materials Payment Bond (“Payment Bond”) for the Project in the amount of $24, 461, 157.50 with Blanton as the principal and BCC as the obligee. The Payment Bond provides in part:

[I]f the Principal [Blanton] shall promptly make payment to all claimants as hereafter defined, for all (1) labor and material used or reasonably required for use in the performance of the [BCC-Blanton] Contract then this obligation shall be void, otherwise, it shall remain in full force and effect, subject, however, to the following conditions:

...

2. The above-named Principal [Blanton] and Surety [F&D] hereby jointly and severally agree with the Obligee [BCC] that every claimant as herein defined, who has not been paid in full, may sue on this bond for the use of such claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon.

...

For projects located in the State of Connecticut, Surety [F&D] is liable for and is obligated to pay any interest, costs, penalties or attorneys' fees imposed upon the Principal [Blanton] under any provisions of Connecticut Public Act 99-153[.]

The Bond defines a Claimant as “one having a direct contract with the Principal [Blanton] or a subcontractor of the Principal [Blanton], for labor, material, or both, used or reasonably required for use in the performance of the [Prime Contract[.]”

In May 2015, prior to supplying materials for the Project, Stark Truss approved a Credit Application submitted by Blanton pursuant to which Blanton agreed that:

Past due balances are subject to a monthly finance charge computed at a periodic rate (to the extent permitted by law) of one and one-half percent (1.5%) per month (18% per year) of the balance past due ... If it is necessary for [Stark Truss] to pursue a claim against [Blanton] to enforce the terms of this agreement, or to recover any indebtedness or damages, [Stark Truss] shall be entitled to recover from [Blanton] its reasonable attorney's fees, costs, and other expenses.”

Thereafter, Blanton and Stark Truss entered into two purchase orders whereby Stark Truss agreed to supply various roof trusses, wall trusses, and other materials to Blanton for the Project, and Blanton agreed to pay for the materials at the rates set forth in the purchase orders. Disputes subsequently arose between Stark Truss and Blanton regarding Blanton's failure to pay Stark Truss for the materials it supplied, and Blanton's claims of alleged deficiencies in the materials supplied by Stark Truss.

On July 28, 2016, Blanton entered into a Subcontract Agreement with Lindberg for waterproofing work on the Project in the amount of $173, 353.00. Article I of the Blanton-Lindberg Subcontract provides that the Prime Contract, defined therein as “Contract Documents, ” “are incorporated in this Subcontract Agreement by reference, and [Lindberg] is bound by the Contract Documents insofar as they relate in any way, directly or indirectly to the work covered by this Subcontract Agreement.” Article XXVI.I of the Blanton-Lindberg Subcontract provides that “[i]n any dispute between [Blanton] and [Lindberg] related to this Subcontract Agreement, the prevailing party shall be entitled to recover its attorneys fees, expert fees, and costs from the nonprevailing party[.]” Disputes subsequently arose between Lindberg and Blanton with Lindberg seeking to recover an outstanding balance of $27, 000, plus interest and attorneys' fees, from Blanton on their subcontract and Blanton's claims of defective and incomplete work from Lindberg.

As a result of the disputes, the parties engaged in a multi-party arbitration proceeding with the American Arbitration Association (“AAA”) between 2018 and 2020. See AAA Case No. 0118-0004-2315, Ben F. Blanton Construction, Inc. v. BCC Partners, LLC et al. (the “Arbitration”). Owners represented Lindberg in the arbitration proceedings^[2] under the terms of an insurance policy issued by Owners to Lindberg. F&D was not a party to the arbitration.

On June 12, 2020, the Arbitration Panel entered its Interim Award on Phase 1 Claims. The Panel found in favor of Stark Truss and against Blanton in the amount of $124, 945.09 and declared that Stark Truss was a “prevailing part[y] in this proceeding and [is] entitled to recover reasonable attorneys' fees and other costs/expenses” from Blanton pursuant to the terms of the contract between Blanton and Stark Truss.

Likewise, the Arbitration Panel found in favor of Lindberg and against Blanton in the amount of $27, 000 and declared that Lindberg was a “prevailing part[y] in this proceeding and [is] entitled to recover reasonable attorneys' fees and other costs/expenses under the prevailing party and other contract provisions, the AAA rules and/or applicable law.” Both Stark Truss and Lindberg filed post-hearing submissions with respect to interest and attorney fees.

Blanton filed for bankruptcy on July 16, 2020. On October 15, 2020, the bankruptcy court modified the automatic stay in Blanton's bankruptcy case to allow the Arbitration Panel to finalize, complete and enter the Final Phase 1 Award.

Prior to the issuance of the Final Award, on September 21, 2020, F&D tendered payment of $27, 000 to Lindberg - the principal amount of the Interim Award - plus interest of $106.56. On October 5, 2020, F&D tendered payment of $124, 945.09 to Stark Truss - the principal amount of the Interim Award - plus interest of $19, 102.20.

On October 27, 2020, the Panel issued its Final Award, awarding Stark Truss $58, 671.44 in attorneys' fees and costs; $3, 000 for the AAA's filing fee; and $32, 015.39 for Stark Truss' share of the Panel's compensation. The Panel also awarded Stark Truss $56, 444.58 in prejudgment interest through July 1, 2020, plus an additional $61.61 per diem from July 1, 2020 through the date of confirmation of the Award.

The Panel awarded Lindberg $177, 183.38 in attorneys' fees and costs; $7, 500 for the AAA's filing fee; and $41, 238.01 for its share of the Panel's compensation. Lindberg assigned its interest in the Final Award, with the right to sue and collect, to Owners.^[3]

F&D has denied liability for the additional sums awarded to Plaintiffs in the Arbitration for attorneys' fees, costs, and expenses on the grounds that those amounts were not recoverable under the express terms of the Payment Bond.

Legal standard

The standards applicable to summary judgment motions are well settled. Pursuant to Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment if all of the information before the court shows “there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” See Celotex Corp. v Catrett, 477 U.S. 317, 322 (1986). Material facts are those “that might affect the outcome of the suit under the governing law, ” and a genuine dispute is one “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Cockram v. Genesco, Inc., 680 F.3d 1046, 1051 (8th Cir. 2012). There is no genuine issue as to any material fact if the nonmoving party has failed to “make a showing sufficient to establish the existence of...