Steadfast Ins. Co. v. ARC Steel, LLC

• Decision Date: 13 May 2019
• Docket Number: Case No. 16-3214-CV-S-SRB
• Parties: STEADFAST INSURANCE COMPANY, Plaintiff, v. ARC STEEL, LLC, et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

STEADFAST INSURANCE COMPANY, Plaintiff, v. ARC STEEL, LLC, et al., Defendants.

Case No. 16-3214-CV-S-SRB

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI SOUTHERN DIVISION

May 13, 2019

ORDER

Before the Court is Defendant ARC Steel, LLC's Motion for Summary Judgment. (Doc. #305). For the following reasons, the motion is granted in part and denied in part.

I. Background

The following facts are uncontroverted. Plaintiff Steadfast Insurance Company insured Killian Construction Co. ("Killian") while Killian was the general contractor for a hotel building project in Colorado. (Doc. #315, p. 6). Under Killian's insurance policy, Plaintiff insured Killian "against loss resulting from defaults of performance by subcontractors or suppliers." (Doc. #315, pp. 7-8). On June 20, 2012, Killian entered into a subcontract with Defendant ARC Steel, LLC ("ARC") under which Defendant agreed "to furnish and install structural steel, miscellaneous steel, and associated labor" for the building project. (Doc. #315, p. 6; Doc. #52-1). On May 30, 2013, Killian sent Defendant a "Notice to Supplement Forces," directing Defendant to "immediately appear and continue the remainder of [its] scope of work to complete its contract in entirety . . . . no later than 12:00PM, Monday June 3, 2013 with sufficient manpower . . . ." (Doc. #315, p. 14; Doc. #306-7, p. 3). At this time, "Killian was contemplating filing claims" on its insurance policy "against ARC." (Doc. #315, p. 14). On February 28, 2014, Killian submitted a claim on its "insurance policy issued by [Plaintiff], asserting that ARC had defaulted under its Subcontract and that Killian was entitled to compensation." (Doc. #315, p. 20). Plaintiff alleges that it paid "at least $989,055 to Killian" for the costs of completing or remediating Defendant's work. (Doc. #52, ¶ 24).

Plaintiff brings this case as Killian's assignee and subrogee. In its Second Amended Complaint, Plaintiff brings claims against Defendant for Breach of Contract (Count I), Negligence (Count II), Negligent Misrepresentation (Count III), Equitable Subrogation (Count IV), Equitable Contribution (Count V), and Unjust Enrichment (Count VI). Defendant now moves for summary judgment pursuant to Federal Rule of Civil Procedure 56(a). (Doc. #305). Defendant argues: 1) it is entitled to summary judgment on Counts I, IV, and V because it is not liable to Killian under the subcontract; 2) Counts II, III, and VI fail as a matter of law; and 3) even if Defendant is not entitled to full summary judgment, it is entitled to partial summary judgment on several aspects of Plaintiff's claims. (Doc. #306). In its opposing suggestions, Plaintiff "abandons its claims for equitable subrogation [(Count IV)], equitable contribution [(Count V)], and unjust enrichment [(Count VI)]." (Doc. #315, p. 57). The Court therefore grants summary judgment to Defendant on Counts IV-VI. From here, this Order will address only Counts I-III.

II. Legal Standard

Rule 56(a) requires a court to grant a motion for summary judgment if 1) the moving party "shows that there is no genuine dispute of material fact" and 2) the moving party is "entitled to judgment as a matter of law." A nonmoving party survives a summary judgment motion if the evidence, viewed in the light most favorable to the nonmoving party, is "such that a reasonable jury could return a verdict for the nonmoving party." Stuart C. Irby Co. v. Tipton,796 F.3d 918, 922 (8th Cir. 2015) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). While a plaintiff opposing summary judgment "may not simply point to allegations in the complaint," Robbins v. Becker, 794 F.3d 988, 993 (8th Cir. 2015) (internal quotation marks and citation omitted), the "standard for avoiding summary judgment" is "relatively lenient." Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455, 479-80 (2013) (citing Anderson, 477 U.S. at 248). The purpose of summary judgment "is not to cut litigants off from their right of trial by jury if they really have issues to try." Hughes v. Am. Jawa, Ltd., 529 F.2d 21, 23 (8th Cir. 1976) (internal quotation marks omitted) (quoting Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464, 467 (1962))

III. Discussion

A. Count I (Breach of Contract)

Under Missouri law,¹ "[a] breach of contract action includes the following essential elements: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant to the contract; (3) breach of the contract by the defendant; and (4) damages suffered by the plaintiff." Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 850 (8th Cir. 2014) (internal quotation marks omitted) (quoting Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. banc 2010)). Defendant argues it is entitled to summary judgment on Count I because "the undisputed facts demonstrate that ARC is not liable to Killian under theSubcontract." (Doc. #306, p. 32). Plaintiff argues that summary judgment is improper because the parties genuinely dispute whether Defendant breached the subcontract. While the parties' arguments address several provisions in the subcontract, they focus much of their attention on paragraph 6, which states the following:

Correction of Defective Work/Right to Stop Work. [Defendant] shall promptly correct its work rejected by [Killian] . . . for failure to conform to the Prime Contract. If [Defendant] fails to cure the rejected work, or satisfy any defects or deficiencies in its performance of this Subcontract Agreement . . . within two (2) working days after receipt of [Killian's] written notice of such rejection or deficiency, then [Killian] . . . shall have the right to reserve or withhold payment, terminate this Subcontract Agreement and/or take whatever steps it deems necessary to correct said deficiencies and charge the cost thereof to [Defendant] . . .

(Doc. #52-1, ¶ 6) (emphasis in original).

Viewed in the light most favorable to Plaintiff, the evidence is such that a reasonable jury could find for Plaintiff on Count I. If Defendant received written notice of rejected or deficient work and failed to cure the rejected work or deficiency within two business days, then Defendant breached the subcontract. Defendant argues that it did not breach paragraph 6 because Defendant "remedied every deficiency on the Westminster Project about which Killian or inspectors notified ARC and asked it to remedy" and "after June 2013, Killian never sent ARC written notices of rejection or deficiency providing ARC with an opportunity to cure the allegedly defective work." (Doc. #306, pp. 22, 34). Plaintiff disagrees, stating that in August and December of 2013 Killian "provided" Defendant with emails and "deviation log[s]" containing "deficiencies, including deficiencies with ARC's work," and that Defendant "only had employees working on the project until June 23, 2013." (Doc. #315, p. 29). Plaintiff argues that Defendant "has presented no evidence demonstrating that these deficiencies were cured within two (2) working days" as paragraph 6 requires. (Doc. #315, p. 50). Plaintiff has providedevidence of written notice and failure to cure sufficient to create a genuine issue for trial on Count I.² A genuine dispute of material fact exists as to whether conduct constituting breach of the subcontract occurred,³ and therefore Defendant is not entitled to summary judgment on Count I.

B. Count II (Negligence)

Under Missouri law, "negligence actions have three elements in common: 1) that a duty existed on the part of the defendant to protect the plaintiff from injury; 2) that the defendant failed to perform the duty; and 3) that the defendant's failure proximately caused the plaintiff's injury." Berliner v. Milwaukee Elec. Tool Corp., 501 S.W.3d 59, 64 (Mo. Ct. App. 2016) (citing Carman v. Wieland, 406 S.W.3d 70, 76 (Mo. Ct. App. 2013)). "The existence of duty is a threshold matter . . . and is purely a question of law." Berliner v. Milwaukee Elec. Tool Corp., 501 S.W.3d 59, 64 (Mo. Ct. App. 2016) (citing Carman, 406 S.W.3d at 76; Hoffman v. Union Elec. Co., 176 S.W.3d 706, 708 (Mo. banc 2005)). "Generally, the standard of negligence is the requirement that the actor use ordinary care and skill," and a "duty to use ordinary care and skill" can arise when "an interest entitled to protection will be damaged if such care is not exercised."Crowder v. Vandendeale, 564 S.W.2d 879, 882 (Mo. banc 1978). Property interests have "generally been found to merit protection from physical harm." Id.

"The economic loss doctrine prohibits a commercial buyer of goods from seeking to recover in tort for economic losses that are contractual in nature." Dannix Painting, LLC v. Sherwin-Williams Co., 732 F.3d 902, 905-06 (8th Cir. 2013) (internal citations omitted). "Recovery in tort is limited to cases in which there has been personal injury, or property damage either to property other than the property sold, or to the property sold when it is rendered useless by some violent occurrence." Rockport Pharmacy, Inc. v. Digital Simplistics, Inc., 53 F.3d 195, 198-99 (8th Cir. 1995) (internal citations omitted). "In essence, the economic loss, or commercial loss, doctrine denies a remedy in tort to a party whose complaint is rooted in disappointed contractual or commercial expectations." Dannix Painting, LLC, 732 F.3d at 906. However, "[w]here the parties have entered into a contract, our common law has imposed the duty to perform with skill, care, and reasonable expedience and faithfulness in regard to the thing to be done or accomplished within the contract. The negligent failure to observe and perform any portion of that duty gives rise to an action in tort as well as an action for breach of contract." Autry Morlan Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332 S.W.3d 184, 193 (Mo. Ct. App. 2010) (quoting Am. Mortg. Inv. Co. v. Hardin-Stockton Corp., 671 S.W.2d 283, 293 (Mo. Ct. App. 1984)).

Defendant argues that the economic loss doctrine...