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84 Lumber Coo v. F.H. Paschen

United States District Court, E.D. Louisiana

February 3, 2017

84 LUMBER COMPANY
v.
F.H. PASCHEN, S.N. NIELSEN & ASSOCIATES, LLC, ET AL.

         SECTION “R” (5)

          ORDER AND REASONS

          SARAH S. VANCE UNITED STATES DISTRICT JUDGE.

         Before the Court is Third-Party Defendant Fidelity and Deposit Company of Maryland's (Fidelity) motion for partial summary judgment.[1]Also before the Court is Fidelity's motion for partial judgment on the pleadings.[2] For the following reasons, the Court GRANTS both motions.

         I. BACKGROUND

         This case arises out of two school construction projects in New Orleans, Louisiana, the Mildred Osborne Project and the South Plaquemines Project.[3]Third-party plaintiff F.H. Paschen, S.N. Nielsen & Associates, LLC (Paschen) was the general contractor on both projects. Paschen subcontracted part of the projects to defendant J & A Construction Management Resources Company, Inc. (J & A), and J & A subcontracted its obligations to plaintiff 84 Lumber Company (the sub-subcontracts). Fidelity issued two performance bonds for each of the sub-subcontracts between J & A and 84 Lumber.[4] The bonds, dated October 4, 2010, and October 22, 2010, guaranteed 84 Lumber's performance under the sub-subcontracts with J & A.[5] Both performance bonds clearly on their face identify 84 Lumber as the Principal, J & A as the Obligee, and Fidelity as the Surety.[6] On October 7, 2010, and October 22, 2010, respectively, Fidelity added riders to both performance bonds, which amended the bonds by naming Paschen as a dual obligee.[7]Both riders stated that “[e]xcept as herein modified, said Performance Bonds shall be and remain in full force and effect.”[8]

         On July 5, 2012, 84 Lumber sued Paschen, Fidelity, and the other surety companies, alleging that it was not paid in full for work performed under its Master Service Agreement with J & A.[9] It also alleged that it was entitled to payment for materials and for additional work performed outside of the Master Service Agreement. Paschen answered 84 Lumber's complaint and added J & A as a third-party defendant.[10] Paschen's answer also asserted counterclaims against Fidelity, alleging that the breach of contract by 84 Lumber and J & A made Fidelity liable to Paschen for those damages.[11]

         The case was stayed for nearly three years while the parties attempted to resolve their claims through arbitration.[12] On January 13, 2016, this case was reassigned from Judge Berrigan's chambers to this Court for all further proceedings.[13] On May 5, 2016, the Court granted 84 Lumber's motion to lift the stay in this case and to dismiss J & A's claims against 84 Lumber for failure to prosecute.[14]

         With the case reopened, Fidelity now moves for summary judgment and judgment on the pleadings on Paschen's claims. Paschen filed an opposition to both motions, [15] and Fidelity filed replies for both.[16]

         II. LEGAL STANDARD

         A. Summary Judgment

         Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, the Court considers “all of the evidence in the record but refrains from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of law' are insufficient to either support or defeat a motion for summary judgment.” Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985) (quoting Wright & Miller, Fed. Prac. and Proc. Civ.2d § 2738 (1983)).

         If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party “must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial.” Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991) (internal quotation omitted). The nonmoving party can then defeat the motion by either countering with sufficient evidence of its own, or “showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at 1265.

         If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial. Id. at 325; see also Little, 37 F.3d at 1075 (“Rule 56 ‘mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'”) (quoting Celotex, 477 U.S. at 332).

         B. Judgment on the Pleadings

         A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is appropriate if the matter can be adjudicated by deciding questions of law rather than factual disputes. Brittan Commc'ns Int'l Corp. v. Sw. Bell Tel. Co., 313 F.3d 899, 904 (5th Cir. 2002). It is subject to the same standard as a motion to dismiss under Rule 12(b)(6). Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008). To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 239 (5th Cir. 2009). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678.

         A legally sufficient complaint must establish more than a “sheer possibility” that plaintiff's claim is true. Id. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Id. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiff's claim. Lormand, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, the claim must be dismissed. Twombly, 550 U.S. at 555.

         III. DISCUSSION

         Paschen asserts two claims against Fidelity, both arising out of Fidelity's performance bonds guaranteeing 84 Lumber's performance in the sub-subcontracts between J & A and 84 Lumber. The first claim seeks damages for the failure of both J & A and 84 Lumber to perform under the “J & A Subcontracts.” The second claim specifically seeks to recover damages that Paschen is allegedly entitled to recover because of its status as a dual obligee on the performance bonds issued by Fidelity.[17] Fidelity moves for summary judgment on Paschen's first claim and judgment on the pleadings on Paschen's second claim. Each will be addressed in turn.

         A. Summary Judgment

         Paschen's first claim against Fidelity asserts damages arising out of the breach by 84 Lumber and J &A of the “J & A Subcontracts, ” which Paschen itself defines as the contract between Paschen and J & A.[18] Fidelity argues it is entitled to summary judgment as a matter of law on this claim because it cannot be held liable for 84 Lumber's breach of the “J & A Subcontracts” as 84 Lumber is not a party to that subcontract, nor did Fidelity bond that subcontract.[19] Further, Fidelity argues that it cannot be held liable for J & A's breach of any contract because Fidelity guaranteed only 84 Lumber's, not J & A's, performance.[20] In response, Paschen contends that one of the performance bonds is ambiguous as to which contract the bond covers, and therefore the intention of the parties must determine the scope of the performance bonds.[21]

         1. Scope of the Performance Bonds

         Fidelity asserts, and Paschen does not dispute, that the performance bonds at issue are conventional bonds, governed by Louisiana's general suretyship law. See T & R Dragline Serv., Inc. v. CNA Ins. Co., 796 F.2d 133, 134-35 (5th Cir. 1986) (citing Elliot Construction Co., Inc. v. United States Fidelity & Guaranty Co., 424 So.2d 1202, 1204 (La.App. 1 Cir. 1982)). Under Louisiana law, “suretyship is an accessory contract by which a person binds himself to a creditor to fulfill the obligation of another upon the failure of the latter to do so.” La. Civ. Code art. 3035. Suretyship contracts must be express and in writing, id. art. 3038, and the suretyship “may be qualified, conditioned, or limited in any lawful manner, ” id. art. 3040. Suretyship will not be presumed, and the scope of the suretyship will be limited to the express terms of the contract. See First Nat. Bank of Crowley v. Green Garden Processing Co., Inc., 387 So.2d 1070, 1072-73 (La. 1980) (recognizing that suretyship contracts can be limited to their express terms); Shelter Prod., Inc. v. Am. Constr. Hotel Corp., 655 F. App'x 1012, 1015 n.4 (5th Cir. 2016) (per curiam).

         Here, the suretyship was created by the performance bonds issued by Fidelity. Both bonds state:

         KNOW ALL MEN BY THESE PRESENTS:

That 84 Lumber, . . . as Principal, . . ., and Fidelity and Deposit Company of Maryland . . . as Surety, . . . are held and firmly bound unto J & A Construction Management Resources Co. Inc. . . . as Obligee, . . ., in the amount of ($1, 400, 000.00/$5, 879, 950.00), for the payment of which Principal and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.
WHEREAS, Principal has by written agreement dated (10/01/2010 / 10/20/2010) entered into a subcontract with Obligee for (Mildred Osborn School/South Plaquemines High School) in accordance with drawings and specifications prepared by (Fauntelory & Latham Architects/Verges Rome Architects) which subcontract is by reference made a part hereof, and is hereinafter referred to as the subcontract.
NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, That, if Principal shall promptly and faithfully perform said subcontract, then this obligation shall be null and void; otherwise it shall remain in full force and effect.[22]

         A plain reading of both performance bonds reveals that Fidelity guaranteed 84 Lumber's performance under both sub-subcontracts between J & A and 84 Lumber, and only 84 Lumber's performance. Neither performance bond makes a reference to any contract to which 84 Lumber is not a party, or to any other subcontract for that matter.

         Despite the clear and unambiguous language of the performance bonds, Paschen argues that the scope of the bonded obligations under the bonds is ambiguous because both bonds “provide only a general description of the source of the bonded obligations, ” and because one of the bonds lists an incorrect date for the incorporated subcontract.[23] Paschen argues that the Court must look to extrinsic evidence to resolve the ambiguities. Neither of Paschen's arguments on ambiguity is persuasive.

         Surety contracts are governed by the same rules of interpretation as contracts in general. Ferrell v. S. Cent. Bell Tel. Co., 403 So.2d 698, 700 (La. 1981). In Louisiana, the issue of the ambiguity, vel non, of a contract is a legal question. Doré Energy Corp. v. Prospective Inv. & Trading Co., Ltd., 570 F.3d 219, 225 (5th Cir. 2009). If the contract is not ambiguous, then interpreting it is also a legal issue for the court. Id. A contract is considered ambiguous on the issue of intent when it lacks a provision bearing on that issue, the terms of a written contract are susceptible to more than one interpretation, there is uncertainty or ambiguity as to its provisions, or the intent of the parties cannot be ascertained from the language employed. Campbell v. Melton, 817 So.2d 69, 75 (La. 2002).

         First, that the bonds generally describe the source of the bonded obligation does not suggest ambiguity, and Paschen cites no caselaw implying that it does or that there is a specificity requirement for conventional bonds. But even if there were, the bonds clearly identify 84 Lumber as the Principal and J & A as the Obligee, clearly identify the contract between the Principal (84 Lumber) and the Obligee (J & A) as the bonded contract, and clearly guarantee the performance of the Principal (84 Lumber). None of that ...


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