Zurich Am. Ins. Co. v. Carter & Carter Constr., Civil Action 4:22-cv-00196

CourtUnited States District Courts. 5th Circuit. United States District Court of Eastern District Texas
Decision Date29 November 2022
Docket NumberCivil Action 4:22-cv-00196



Civil Action No. 4:22-cv-00196

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

November 29, 2022



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.


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


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,


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, Plaintiffs filed the current case against Defendants alleging causes of action for (1) breach of contract, (2) breach of fiduciary duty, (3) conversion, (4) attorneys' fees, and (5) costs and interest. All causes of action center around the fact that Defendants did not honor their obligations under the relevant indemnity agreements because they refused to indemnify Plaintiffs, provide appropriate security, or turn over the contract funds held by the Registrar of Deeds in Lexington County.

On April 6, 2022, Defendants filed the pending motion in this Court, arguing that the Court should (1) transfer the case under the first-to-file rule or (2) stay the current action (Dkt. #20). On


April 20, 2022, Plaintiffs filed their response (Dkt. #23). On May 11, 2022, Defendants filed their reply (Dkt. #25). On June 15, 2022, Plaintiffs filed their sur-reply (Dkt. #29).

Since the parties' briefing for Defendants' Motion to Transfer Venue, the Middle District of Alabama has granted Carter & Carter leave to amend its complaint on two separate occasions (Case No. 3:22-cv-00137, Dkt. #20; Dkt. #47). Carter & Carter subsequently joined all Defendants in this case as co-plaintiffs in the Alabama lawsuit (Case No. 3:22-cv-00137, Dkt. #21; Dkt. #48). Defendants also added other causes of action, including for declaratory judgment relating to Plaintiffs' demands for indemnification and collateral, as well as actions for declaratory judgement and breach of contract tied to a construction project unrelated to this Court's case (Case No. 3:22-cv-00137, Dkt. #48). The Alabama lawsuit is currently pending and subject to a motion to dismiss by Plaintiffs. See (Case No. 3:22-cv-00137, Dkt. #52).


I. Staying Proceedings

The district court has inherent power to control its own docket, including the power to stay proceedings. Clinton v. Jones, 520 U.S. 681, 706 (1997). How to best manage the court's docket “calls for the exercise of judgment, which must weigh competing interests and maintain an even balance.” Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). “In deciding whether to exercise the discretion to stay litigation, the Court should consider the interests of each party, as well as the conservation ofjudicial resources.” Miller Weisbrod, LLP v. Klein Frank, PC, No. 3:13-CV-2695-B, 2014 WL 2738231, at *2 (N.D. Tex. June 17, 2014) (citations omitted). Additionally, when a stay is premised on the resolution of another case, “the court must carefully consider the time reasonably expected for resolution of the ‘other case,' in light of the principle that ‘stay orders will be reversed when they are found to be immoderate or of an indefinite duration.'” Wedgeworth v. Fireboard Corp.,


706 F.2d 541, 545 (5th Cir. 1983) (quoting McKnight v. Blanchard, 667 F.2d 477, 479 (5th Cir. 1982)).

II. First-to-File Rule

“Under the first-to-file rule, when related cases are pending before two federal courts, the court in which the case was last filed may refuse to hear it if the issues raised by the cases substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999). This rule exists to support “comity and sound judicial administration” among the federal courts. Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d...

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