United States District Court, E.D. Louisiana
FACTORY SALES AND ENGINEERING, INC.
CHUBB EUROPEAN GROUP, LTD, ET AL.
the Court is Appellant Factory Sales and Engineering,
Inc.'s appeal from a decision of the United States
Bankruptcy Court for the Eastern District of Louisiana (Rec.
Doc. 1, 4). Appellees ACE European Group, Ltd., Westchester
Fire Insurance Co., and Chubb European Group, Ltd. filed a
response brief (Rec. Doc. 6). Appellant filed a reply brief
(Rec. Doc. 10).
Factory Sales and Engineering (“FSE”), has
submitted the following Statement of Issues on Appeal from
the Judgment of the Bankruptcy Court entered on June 14, 2018
(Rec. Doc. 4):
1. Whether, under the principles of New York contract
interpretation law, the Agreement of Indemnity
(“Executed Indemnity”) governing the relationship
between the Appellees (the "Sureties") and Factory
Sales and Engineering, Inc. ("FSE") is ambiguous
regarding whether collateral provided to the Sureties for a
specific bond must be released to FSE when that bond is
2. If the Executed Indemnity is ambiguous, whether, under New
York law, it should be construed against the Sureties as its
3. If the Executed Indemnity is ambiguous, whether, in light
of other related instruments and the New York law doctrine of
expressio unius est exclusio alterius ("the
expression of one thing means the exclusion of other
things"), the omission of explicit language providing
for cross-collateralization in the Executed Indemnity should
be deemed intentional.
4. If the Executed Indemnity is ambiguous, whether the weight
of the other extrinsic evidence supports interpreting it to
require the Sureties to release collateral provided by FSE
for a specific bond to FSE when that bond is released.
5. Whether the Sureties are obligated under New York law to
return the disputed deposits to FSE.
reasons discussed below, IT IS ORDERED that
the opinion of the Bankruptcy Court is
AFFIRMED, dismissing the instant appeal at
Sales and Engineering, Inc. (FSE) was in the business of
designing, manufacturing and installing large pieces of
industrial equipment for various clients around the world.
See Rec. Doc. 2-5. Sometime in 2012, FSE was in
contact with an insurance broker, Marsh, Inc. (Marsh).
See Rec. Doc. 2-5 at 70. Because some of FSE's
customers required FSE to provide surety bonds, FSE was put
in contact with ACE European Group, Ltd., Westchester Fire
Insurance Co., and Chubb European Group, Ltd. (“the
Sureties”. See id. In September 2012, the
Sureties began issuing bonds for FSE. See id. To
protect themselves against the risk of loss on the bonds, the
Sureties required that FSE sign the Indemnity Agreement.
Id. Under the Indemnity Agreement, FSE was required
to deposit cash collateral with the Sureties. Id. at
9, 2017, FSE filed a petition in state court seeking the
return of $2.35 million in collateral held by the Sureties.
See Rec. Doc. 2-5. On June 6, 2017, an involuntary
Chapter 7 petition was filed against FSE by several of its
creditors. Id. The Sureties removed the case to
federal court. Id. at 62. On July 17, 2017, the case
was converted to a Chapter 11 reorganization. See
Rec. Doc. 2-5. After hearing testimony and reviewing the
evidence, the Bankruptcy Court found that the Sureties were
entitled to keep the $2.35 million in collateral and apply it
to any outstanding claims on projects that were not completed
by FSE. Id. at 184-85. Specifically, the Bankruptcy
Court held that the language was not ambiguous and that it
called for a cross-collateralization of bonds. Id.
The Bankruptcy Court further found that even if the language
of the contract was ambiguous, the extrinsic evidence
supported the result that the Sureties were entitled to hold
onto the collateral at issue. Id. at 184-99.
26, 2018, FSE filed a notice of appeal. See Rec.
argues that this Court should reverse the ruling of the
Bankruptcy Court because the executed indemnity agreement at
issue does not provide for cross-collateralization among
separate bonds. See Rec. Doc. 4 at 6. Specifically,
Appellant argues that the collateral is bond-specific.
Id. According to Appellant, the language in the
executed indemnity agreement is ambiguous as a matter of New
York law. Id. at 7. Therefore, Appellant urges this
court to construe the agreement against the Appellees and
render judgment in favor of Appellant. Id.
argue that the ruling of the Bankruptcy Court should be
upheld because the collateral is cross-collateralized across
multiple bonds issues in other projects that Appellant has
worked on. See Rec. Doc. 6 at 9-10. Specifically,
Appellees argue that they are entitled to keep the funds and
use those funds to pay ...