Zurich Am. Ins. Co. v. Concrete
| Decision Date | 06 November 2013 |
| Docket Number | No. SA–13–CV–00310–DAE.,SA–13–CV–00310–DAE. |
| Citation | 982 F.Supp.2d 714 |
| Parties | ZURICH AMERICAN INSURANCE COMPANY, Fidelity and Deposit Company of Maryland, and Colonial American Casualty and Surety Company, Plaintiffs, v. TEJAS CONCRETE & MATERIALS INC., Ballenger United Development Ltd., Val–Tex Asphalt & Environmental Recycling Inc., Joe C. Ballenger Sr., and Joe C. Ballenger Jr., Defendants. |
| Court | U.S. District Court — Western District of Texas |
OPINION TEXT STARTS HERE
Carlos H. Garcia, Christopher R. Ward, Strasburger & Price, LLP, Dallas, TX, for Plaintiffs.
Scott Link, Law Office of Scott Link, Houston, TX, for Defendants.
ORDER: (1) DENYING DEFENDANTS' RULE 12(b)(3) MOTIONS TO DISMISS; (2) DENYING DEFENDANTS' RULE 12(b)(6) PARTIAL MOTIONS TO DISMISS; (3) DENYING DEFENDANT JOE C. BALLENGER SR.'S MOTION TO TRANSFER VENUE
On October 30, 2013, the Court heard oral argument on the Rule 12(b)(3) Motion to Dismiss (Dkt. # 6) brought by Defendant Joe C. Ballenger, Sr. (“Ballenger, Sr.”) and the Rule 12(b)(3) Motion to Dismiss (Dkt. # 12) brought by Defendants Joe C. Ballenger, Jr., Tejas Concrete & Materials, Inc., Ballenger United Development LTD., and Val–Tex Asphalt & Environmental Recycling Inc. (collectively, “Ballenger, Jr. Defendants”). The Court also heard the Rule 12(b)(6) Partial Motions to Dismiss brought by the Ballenger, Jr. Defendants and Defendant Ballenger, Sr. (Dkt. 7, 11.) Also before the Court is Defendant Ballenger, Sr.'s Motion to Transfer Venue. (Dkt. # 32.) Marshall R. Ray, Esq., George Baldwin, Esq., and Robert Carson Fisk, Esq., appeared at the hearing on behalf of Defendants. Christopher R. Ward, Esq., appeared on behalf of Plaintiffs Zurich American Insurance Company, Fidelity and Deposit Company of Maryland, and Colonial American Casualty and Surety Company (collectively, “Plaintiffs”). After reviewing the motions and the supporting and opposing memoranda, the Court DENIES Defendants' Rule 12(b)(3) Motions to Dismiss (Dkt. 6, 12), DENIES Defendants' Rule 12(b)(6) Partial Motions to Dismiss (Dkt. 7, 11), and DENIES Ballenger, Sr.'s Motion to Transfer Venue (Dkt. # 32).
I. Factual and Procedural Background
On April 15, 2009, Defendants, together with Ballenger Construction, Inc. (“Ballenger Construction”), executed an Agreement of Indemnity in favor of Plaintiffs in consideration for certain surety bonds. (Dkt. # 1 ¶ 11.) Plaintiffs issued several performance and payment bonds (“the Bonds”), which named Ballenger Construction Co. as principal on nine construction projects to be completed in the State of Texas (“the Projects”). ( Id. ¶ 12.)
Unpaid subcontractors and suppliers on the Projects have made numerous claims on the Bonds, and Plaintiffs aver that this has caused Plaintiffs “to incur substantial losses and expenses.” ( Id. ¶ 13.) As a result, Plaintiffs have “demanded that Defendants exonerate and indemnify” Plaintiffs for their losses relating to the Bonds, “but Defendants have wholly failed and refused to do so.” ( Id. ¶ 15.)
On April 15, 2013, Plaintiffs filed suit against Defendants in this Court, bringing claims for (1) breach of the Agreement of Indemnity; (2) collateralization of Defendants' assets; (3) equitable exoneration; (4) violations of Chapter 162 of the Texas Property Code; and (5) an accounting. ( See id. ¶¶ 16–40.) Plaintiffs also seek to recover attorneys' fees, costs, and interest. ( Id. ¶¶ 41–45.)
On May 10, 2013, Defendant Ballenger, Sr. filed a Motion to Dismiss pursuant to Rule 12(b)(3), asserting that venue is improper in the United States District Court for the Western District of Texas. (Dkt. # 6.) Ballenger, Sr. also filed a Partial Motion to Dismiss pursuant to Rule 12(b)(6), asking the Court to dismiss Plaintiffs' claims brought under Chapter 162 of the Texas Property Code. (Dkt. # 7.) On May 21, 2013, the Ballenger, Jr. Defendants filed a Motion to Dismiss pursuant to Rule 12(b)(3) and a Partial Motion to Dismiss pursuant to Rule 12(b)(6). (Dkt. 11, 12.) On May 24, 2013, Plaintiffs filed responses in opposition to the Motions to Dismiss. (Dkt. 14, 15.) On May 31, 2013, Defendants filed replies in support of their motions. (Dkt. 23, 24, 25.)
On July 12, 2013, Ballenger, Sr. filed a Motion to Transfer Venue, asserting that venue is “clearly more convenient” in the United States District Court for the Southern District of Texas, Brownsville Division. (Dkt. # 32.) On July 19, 2013, Plaintiffs filed a response in opposition to the motion. (Dkt. # 34.) On August 30, 2013, Ballenger, Sr. filed a Supplement to Motion to Transfer Venue. (Dkt. # 36.)
II. Related LitigationA. Bankruptcy of Ballenger Construction
On December 7, 2012, Ballenger Construction 1 filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. (Dkt. # 31–1.) The petition is signed by Defendants Ballenger, Sr. and Ballenger, Jr. ( Id.) Ballenger, Sr. is the CEO of Ballenger Construction and Ballenger, Jr. is the President of Ballenger Construction. ( Id.)
Two of the plaintiffs in the instant case, Colonial American Casualty and Surety Company (“Colonial”) and Fidelity and Deposit Company of Maryland (“Fidelity”) have entered an appearance in the bankruptcy action. (Dkt. # 32–2.) Additionally, Plaintiff Zurich American Insurance Company (“Zurich”) has filed several notices of intent to conduct a Rule 2004 examination and issued several subpoenas duces tecum in the bankruptcy action. (Dkt. # 32–3.) One of the examinations was to be held in Austin, Texas at the law offices of Zurich's counsel in the bankruptcy action. ( Id.)
On December 31, 2012, Ballenger Construction removed to federal court a case filed against it by Cameron County Regional Mobility Authority in the 445th Judicial District Court of Cameron County, Texas. (Dkt. # 32–12.) The parties agreed to transfer the case to the United States Bankruptcy Court for the Southern District of Texas. (Dkt. # 32–13.)
On January 3, 2013, Ballenger Construction removed to federal court a case filed against it by FED Investments Inc. in the 166th Judicial District Court of Bexar County, Texas. (Dkt. # 32–14.) Following a status conference, the bankruptcy judge in United States Bankruptcy Court for the Western District of Texas ordered that the action be transferred to the Southern District of Texas. (Dkt. # 32–15.)
B. Actions Brought by Liberty Mutual Insurance Company
Liberty Mutual Insurance Company (“Liberty”) also served as a surety and issued payment bonds to Ballenger Construction and several defendants in the instant case 2 (collectively, the “Liberty Defendants”). (Dkt. # 32–16.) On March 1, 2013, Liberty filed suit against the Liberty Defendants in the United States District Court for the Northern District of Texas, bringing claims for breach of the indemnity agreement, equitable exoneration, and collateralization. ( Id.) Ballenger, Sr. filed a Motion to Transfer Venue based on 28 U.S.C. § 1404(a), which the court granted on July 3, 2013. (Dkt. # 32–17.) The case was transferred to the Southern District of Texas, Brownsville Division. ( Id.)
On April 5, 2013, Liberty filed a lawsuit against Ballenger Construction's accountant in the United States District Court for the Southern District of Texas, McAllen Division, asserting a claim for negligent misrepresentation. (Dkt. # 32–18.)
C. Action Involving Zurich Construction
On April 30, 2013, CEMEX Material South L.L.C. (“CEMEX”) filed a lawsuit against Ballenger Construction and Plaintiffs in the United States District Court for the Southern District of Texas, Brownsville Division. (Dkt. # 32–19.) CEMEX brings claims relating to one of the nine Projects for which Plaintiffs had issued a performance and payment bond. ( See id.)
D. Bankruptcy of Val–Tex
On August 23, 2013, Defendant Val–Tex Asphalt & Environmental Recycling, Inc. (“Val–Tex”) filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Brownsville Division. (Dkt. # 36–1.)
A party may move to dismiss an action based on improper venue pursuant to Rule 12(b)(3). SeeFed.R.Civ.P. 12(b)(3). Once a defendant challenges venue, the plaintiff has the burden of demonstrating that the chosen venue is proper. Am. Gen. Life Ins. Co. v. Rasche, 273 F.R.D. 391, 396 (S.D.Tex.2011) (citation omitted). “On a Rule 12(b)(3) motion to dismiss for improper venue, the court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff.” Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 Fed.Appx. 612, 615 (5th Cir.2007) (per curiam) (citations omitted). Thus, a plaintiff may show that venue is proper by “setting forth facts that taken as true would establish venue.” Bigham v. Envirocare of Utah, Inc., 123 F.Supp.2d 1046, 1048 (S.D.Tex.2000) (citingWilson v. Belin, 20 F.3d 644, 648 (5th Cir.1994)).
If venue is improper, 28 U.S.C. § 1406(a) instructs district courts to “dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” 28 U.S.C. § 1406(a). The decision to dismiss or transfer lies within the court's discretion. AllChem Performance Prods., Inc. v. Aqualine Warehouse, LLC, 878 F.Supp.2d 779, 788 (S.D.Tex.2012) (citing Dubin v. United States, 380 F.2d 813, 815 (5th Cir.1967)).
Rule 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim upon which relief can be granted.” Review is limited to the contents of the complaint and matters properly subject to judicial notice. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). In analyzing a motion to dismiss for failure to state a claim, “[t]he court accepts ‘all well-pleaded facts as true, viewing them in the light most favorable to ...
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