South Dallas Water Auth. v. the Guarantee Co. of North Am., Civil Action No. 10–0604–CG–C.

Citation767 F.Supp.2d 1284
Decision Date09 February 2011
Docket NumberCivil Action No. 10–0604–CG–C.
PartiesSOUTH DALLAS WATER AUTHORITY, Plaintiff,v.The GUARANTEE COMPANY OF NORTH AMERICA, USA, Defendant.
CourtUnited States District Courts. 11th Circuit. United States District Court of Southern District of Alabama

OPINION TEXT STARTS HERE

James F. Mozingo, Webb & Eley, P.C., Montgomery, AL, for Plaintiff.George Matthew Keenan, L. Graves Stiff, III, Starnes & Atchison, LLP, Birmingham, AL, for Defendant.

ORDER
CALLIE V.S. GRANADE, District Judge.

After due and proper consideration of all portions of this file deemed relevant to the issues raised, and there having been no objections filed, the recommendation of the Magistrate Judge made under 28 U.S.C. § 636(b)( l )(B) and dated January 25, 2011 is ADOPTED as the opinion of this Court. Therefore, plaintiff's motion to remand (Doc. 4) is hereby GRANTED and this action is REMANDED to the Circuit Court of Dallas County, Alabama. It is further ORDERED that plaintiff's motion to tax costs and expenses (Doc. 6) is DENIED.

REPORT AND RECOMMENDATION

WILLIAM E. CASSADY, United States Magistrate Judge.

This cause is before the Magistrate Judge for issuance of a report and recommendation, pursuant to 28 U.S.C. § 636(b), on the notice of removal (Doc. 1), plaintiff's motion to remand (Doc. 4; see also Doc. 5) and motion to tax costs and expenses (Doc. 6), the response in opposition filed by defendant The Guarantee Company of North America USA (Doc. 14),1 and plaintiff's reply (Doc. 21). Upon consideration of the foregoing pleadings, the Magistrate Judge recommends that the Court GRANT plaintiff's motion to remand and remand this action to the Circuit Court of Dallas County, Alabama.

FINDINGS OF FACT

1. Sometime in 2008, plaintiff awarded to W.D. Wainwright & Sons, Inc. (“Wainwright”) a construction contract under which Wainwright “was obligated to install a water main and connecting water lines along various county roads to connect to the waste-water treatment plant being constructed by ... Cardinal Contracting, Inc. (Doc. 1, Exhibit A, COMPLAINT, at ¶ 8) 2 As required by the construction contract and bid request, Wainwright obtained and submitted to plaintiff a performance bond which obligated it (Wainwright) and its third-party surety, The Guarantee Company, to fulfill the construction contract “and pay any damages, costs, expenses, including attorneys' fees, and other sums due the Authority under the construction contract or arising from a breach thereof should Wainwright fail to timely perform the contract.” ( Id. at ¶ 9)

2. Because Wainwright did not complete its work by the April 16, 2009 deadline, the South Dallas Water Authority's (South Dallas) board of directors held a meeting with the officers of Wainwright on April 24, 2009 to discuss the corporation's breach of the construction contract. ( Id. at ¶ 13) At the meeting, Wainwright requested an opportunity to complete the contract and by letter dated May 6, 2009, plaintiff notified Wainwright and The Guarantee Company that although it was granting Wainwright's request to complete the contract, it reserved its right to enforce the contract's liquidated damages provision, by which liquidated damages would accumulate from the date of the breach until the contract was completed. ( Id. (emphasis supplied))

The Board of the South Dallas Water Authority recently met to act upon the recommendations of the United States Department of Agriculture regarding Wainwright's failure to complete the Water Main Improvements Construction Contract by the contractual deadline of April 16, 2009. The Board has taken the following actions, of which you and Wainwright are hereby notified:

1. In reliance upon Wainwright's commitment and representations made to the Authority during the April 24, 2009 conference, Wainwright is to fully complete, carry-out and satisfy its duties and responsibilities under the Contract as soon as possible and without any further delay.

2. The Authority will enforce the Liquidates Damages provision contained in § 4.03 of the Contract, which imposes Liquidated Damages of $500 for each day after the time specified for the Contract's completion, i.e., April 16, 2009, until the Contract is completed.

3. The Authority will make no further Progress Payments to Wainwright.

4. Once Wainwright has completed, carried-out and fully satisfied its duties and responsibilities under the Contract, the Authority will make Final Payment to the order of Wainwright and Wainwright's guarantor, The Guarantee Company, to be mailed directly to The Guarantee Company. If Wainwright claims all or a portion of the funds comprising the Final Payment, Wainwright should seek satisfaction from The Guarantee Company.

(Doc. 1, Exhibit F (May 6, 2009 letter) 3)

3. Upon subsequently being informed by Wainwright that it could not complete the contract until September 2, 2009, the Water Authority notified Wainwright and The Guarantee Company by letter dated August 17, 2009 that no additional delays would be acceptable and demanded completion of the work not later than September 2, 2009. (Doc. 1, Exhibit A, COMPLAINT, at ¶ 15) Wainwright not only did not complete its work by September 2, 2009 but, in addition, informed the Water Authority, on September 17, 2009, that it needed another month to complete the work. ( Id. at ¶ 16) The next day, September 18, 2009, the Water Authority informed Wainwright by letter that it was terminated. ( Id. at ¶ 17)

As I previously advised, the South Dallas Water Authority is extremely dissatisfied with W.D. Wainwright & Sons' performance of the Water Main Improvements Construction Contract. South Dallas's dissatisfaction has been expressed in numerous letters either addressed directly to you or to The Guarantee Company of North America or its attorney, Graves Stiff, with which you were copied....

Wainwright previously represented that it would complete its work by September 2, 2009. As you recall, the contract required Wainwright to complete its work by April 16, 2009. By my letter to you dated August 7, 2009, Wainwright was placed on notice that no further delays were acceptable or would be tolerated. It has been brought to my attention that substantial work remains to be completed and that Wainwright now claims it will take an additional month to complete the work.... This is totally unacceptable. Accordingly, Wainwright is hereby notified that it is terminated, effective today, by the South Dallas Water Authority for breach of contract.

...

South Dallas Water Authority has reserved, continues to reserve, and will exercise its contractual and legal rights with respect to the Water Main Improvements Construct[ion] Contract including, but not limited to, obtaining indemnity from Wainwright and its surety, The Guarantee Company of North America, for all costs and expenses the Authority has previously incurred or will incur for Wainwright's breach of contract.

(Doc. 1, Exhibit G (September 18, 2009 Letter) 4) Three days later, on September 21, 2009, the Water Authority notified The Guarantee Company of Wainwright's termination, demanded that The Guarantee Company complete Wainwright's work, and informed The Guarantee Company that “it would obtain and forward three proposals from other contractors to complete the work.” (Doc. 1, Exhibit A, COMPLAINT, at ¶ 17)

Pursuant to the Performance Bond ... in favor of South Dallas Water Authority, you are hereby notified that the Authority has terminated W.D. Wainwright & Sons due to default/breach of contract for failure to complete the Water Main Improvements Construction Contract....

Accordingly, the Authority hereby demands that The Guarantee Company of North America USA, at The Guarantee Company's expense, perform its duties and responsibilities and ensure the completion of the Water Main Improvements Construction Contract. The Authority will not consent to Wainwright completing the contract. In an effort to obtain an expedited completion of the contract, which is currently more than five (5) months behind schedule, the Authority will obtain three proposals from qualified contractors and will submit the proposals to The Guarantee Company, along with the Authority's preference.

The Guarantee Company is also hereby placed on notice that the Authority reserves any and all rights for costs, damages and expenses to which the Authority is entitled by contract and/or law including, but not limited to, liquidated damages as provided in the contract of $500 for each day that expires from the scheduled date of completion until the actual date of completion. For your information, as of today's date, the amount of liquidated damages currently due is approximately $79,000.00.

(Doc. 1, Exhibit I, September 21, 2009 Letter 5 (emphasis supplied))

4. Plaintiff provided The Guarantee Company with three proposals from other contractors during the week of September 28, 2009, as promised. ( See Doc. 1, Exhibit A, COMPLAINT, at ¶ 18) The Water Authority recommended that Cardinal Contracting, Inc.'s proposal be accepted both because it was already constructing the water treatment plant and because it submitted the lowest of the three proposals. ( Id.) Not long thereafter, the Water Authority demanded a status update from The Guarantee Company. ( Id. at ¶ 19) By letter dated October 9, 2009, The Guarantee Company informed plaintiff that it was refusing “to perform its obligations as required by the Performance Bond.” ( Id.) Therefore, the Water Authority “engaged Cardinal to complete Wainwright's work at additional costs, expenses, and damages to the Authority.” ( Id. at ¶ 20) Moreover, [i]n completing the work, numerous deficiencies were discovered in Wainwright's work, and the Authority was consequently forced to remedy such deficiencies at additional costs, expenses, and damages to the Authority.” ( Id.; see also Doc. 1, Exhibit H, December 19, 2009 Letter 6 (“I am writing to inform you that Cardinal has completed the Water Main Improvements Construction Contract. However, it has...

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