Zurich Am. Ins. Co. v. Carter & Carter Constr.

• Decision Date: 29 November 2022
• Docket Number: Civil Action 4:22-cv-00196
• Court: U.S. District Court — Eastern District of Texas
• Parties: ZURICH AMERICAN INSURANCE COMPANY et al., Plaintiffs, v. CARTER & CARTER CONSTRUCTION, LC et al., Defendants.

ZURICH AMERICAN INSURANCE COMPANY et al., Plaintiffs,
v.
CARTER & CARTER CONSTRUCTION, LC et al., Defendants.

Civil Action No. 4:22-cv-00196

United States District Court, E.D. Texas, Sherman Division

November 29, 2022

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendants' Motion to Transfer Venue (Dkt. #20). Having considered the motion and the relevant pleadings, the Court finds that the motion should be GRANTED as to the alternative requested relief of a stay.

BACKGROUND

I. Factual Background

The parties' relationship generated two different lawsuits that are currently pending in federal district courts. On July 8, 2011, Zurich American Insurance Company, Colonial American Casualty and Surety Company, and Fidelity and Deposit Company of Maryland (collectively, “Plaintiffs”) entered into an indemnity agreement where they would provide surety bonds on behalf of Carter & Carter Construction, LLC (“Carter & Carter”), Precision Builders, LLC (“Precision”), Carter & Carter Real Estate, LLC (“CCRE”), Bradley Collin Carter, and Casey Carter. Subsequently, on June 8, 2018, Plaintiffs executed another indemnity agreement (“2018 Indemnity Agreement”) with Carter & Carter, Precision, CCRE, Casey Carter, Bradley Collin Carter, and Flight Club Aviation, LLC (“Flight Club”) that would apply to all previous surety

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bonds Plaintiffs issued and any new bonds issued thereafter. In 2019, N3CC, LLC (“N3CC”) executed a rider agreement-adding it to the 2018 Indemnity Agreement.

The 2018 Indemnity Agreement provides that Carter & Carter, Precision, CCRE, Casey Carter, Bradley Collin Carter, Flight Club, and N3CC (collectively, “Defendants”) will indemnify Plaintiffs for any and all liability and loss arising from or related to any payment and performance bonds issued on behalf of Defendants (Dkt. #1, Exhibit 3 at p. 1). Furthermore, the parties agreed that Defendants, on demand, would deposit an amount of money that Plaintiffs determined sufficient to fund any liability or loss (Dkt. #1, Exhibit 3 at p. 1). The 2018 Indemnity Agreement also granted Plaintiffs collateral security interests in certain property, including in project funds for bonded projects (Dkt. #1, Exhibit 3 at p. 2).

In connection with the indemnity agreements, Plaintiffs issued payment and performance bonds for Carter & Carter's construction projects in Frisco, Texas (“Alaqua Project”) and West Columbia, South Carolina (“Brookland Project”). Ultimately, claims were made on these bonds because Carter & Carter allegedly defaulted and failed to pay subcontractors and/or suppliers. Litigation ensued in Texas state court over the Alaqua Project and in South Carolina state court over the Brookland Project. As a result, Plaintiffs allege that they suffered substantial costs and expenses in investigating and defending these claims.

On January 5, 2022, Plaintiffs sent Defendants a demand letter seeking reimbursement and protection pursuant to their indemnity agreements. Specifically, Plaintiffs requested Defendants (1) pay $519,737.47 in costs for investigating and defending the claims related to the Brookland Project and the Alaqua Project and (2) deposit collateral in the amount of $300,000 to protect Plaintiffs from further losses. Defendants refused to do either-citing the fact that Plaintiffs did not produce information that supported their demand for payment. Following Defendants' refusal,

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Plaintiffs demanded tender of $525,000 in contract funds that were being held by the Registrar of Deeds in Lexington County, South Carolina, in connection to litigation over the Brookland Project. Carter & Carter took an adverse position to Plaintiffs and claimed it was entitled to the funds. On February 28, 2022, Plaintiffs once again demanded indemnification and requested additional security to protect themselves from further loss. Defendants refused both requests.

II. Procedural Background Between the Parties

On February 15, 2022, Carter & Carter filed a lawsuit in Alabama state court (“Alabama lawsuit”) that alleged Plaintiffs breached the 2018 Indemnity Agreement by acting in bad faith and interfering with its rights to the contract funds held by the Registrar of Deeds in Lexington County, South Carolina (Case No. 3:22-cv-00137, Dkt. #1, Exhibit 1).^[1]On March 18, 2022, Plaintiffs removed the Alabama lawsuit to the United States District Court for the Middle District of Alabama (Case No. 3:22-cv-00137, Dkt. #1).

On March 14, 2022...