WILLIAM E. CASSADY, Magistrate Judge.
This matter came before the Court upon Plaintiff Berkley Regional Insurance Company's ("Berkley") Motion for Default Judgment against Defendants Trademark Construction, Inc., Mill Creek Equipment Company, Inc., and Tomac Company, LLC (collectively, the "Defendants"), (doc. 14), and Berkley's Memorandum in Support, (doc. 20). The Defendants, who have not appeared in this matter, failed to file a response to Berkley's Motion for Default Judgment. For the reasons explained below, and after careful consideration of the filings and relevant law, it is recommended that Berkley's Motion for Default Judgment be
Berkley filed its Complaint for Indemnity and Equitable Relief (the "Complaint") against the Defendants seeking contractual and equitable indemnification for certain losses, costs and expenses sustained as a result of having issued certain surety bonds on behalf of Defendant Trademark Construction, Inc. (the "Principal") and enforcing a General Agreement of Indemnity executed by, among others, the Defendants (the "Indemnity Agreement"). Berkley filed the Complaint against the Defendants on October 23, 2014. (Doc. 1.) The Defendants failed to file an Answer or otherwise appear in this lawsuit within the time limits set forth in the Federal Rules of Civil Procedures. The Clerk entered a Default against the Defendants on December 16, 2014. (Doc. 10.) Berkley has requested that judgment be entered in its favor against the Defendants, jointly and severally, in the amount of $478,021.03, which figure represents the losses, costs and expenses sustained by Berkley as a result of having issued certain surety bonds on behalf of the Principal and enforcing the Indemnity Agreement. In addition to its Motion for Default Judgment, Berkley has submitted supplemental briefing as further evidence of the fact and amount of the damages it seeks against the Defendants. (Doc. 20).
Berkley alleges jurisdiction based on diversity of citizenship pursuant to 28
The Court has also considered the issue of whether personal jurisdiction over the defendants exists in this action. See, e.g.,
Berkley alleges that the Principal is a citizen of Alabama and may be served through its Registered Agent, Tomas K. Stanley, in Mobile, Alabama; defendant Mill Creek Equipment Company, Inc. is a citizen Alabama and may be served via its Registered Agent, Larry T. McPherson, in Mobile, Alabama
Defendants were served with the summons and complaint in November 2014 (docs. 5-7) in Mobile, Alabama. Additionally, Berkley has mailed a copy of the application for entry of default, and motion for default judgment to the defendants at their last known address (docs. 9 & 14, certificates of service). Therefore, defendants have been served with notice of this proceeding and notice of the motion for default judgment.
The Defendants executed the Indemnity Agreement, dated September 19, 2006, in favor of Berkley as inducement for Berkley to issue surety bonds on behalf of the Principal. (Doc. 20, Exh. 1) Those surety bonds, which are described in greater detail below, shall be referred to collectively as the "Bonds." Article 1.01 of the Indemnity Agreement obligates the Defendants, jointly and severally, to:
(Emphasis added). Article 1.01 of the Indemnity Agreement therefore requires the Defendants to, inter alia, indemnify Berkley with respect to all costs, damages, debts, demands, expenditures, liabilities, losses, payments, obligations or penalties of any kind whatsoever, including interest fees, court costs, costs of compromising or settling any claim, expert fees, investigative costs and the fees and expenses of attorneys, accountants and other professionals, sustained in relation to enforcing the Indemnity Agreement or as a result of having issued the Bonds.
Article 1.02 of the Indemnity Agreement further provides, in pertinent part:
Article 1.02 of the Indemnity Agreement obligates the Defendants to protect, exonerate and save harmless Berkley before Berkley even sustained any losses, costs and/or expenses in enforcing the Indemnity Agreement or as a result of having issued surety bonds on behalf of the Principal.
Article 2.01 of the Indemnity Agreement further allows Berkley to determine whether any claim "shall or shall not be paid, compromised, settled, resisted, defended, prosecuted, tried or appealed." Under Article 2.01 of the Indemnity Agreement, any such determination by Berkley, absent fraud, is binding on the Defendants. Finally, Article 2.01 of the Indemnity Agreement provides, in pertinent part, that:
(Emphasis added). The Indemnity Agreement establishes that an itemized statement of payments made by Berkley, for which it seeks indemnification from the Defendants, sworn to by an officer of Berkley, is prima facie evidence of the fact and amount of the Defendants' liability to Berkley. Berkley submitted both forms of proof in support of its Motion for Default Judgment against the Defendants.
Berkley issued the Bonds on behalf of the Principal in reliance on the Indemnity Agreement. More specifically, the evidence submitted to the Court indicates that Berkley issued Performance Bond No. 0132441 (the "Dining Facility Performance Bond") and Payment Bond No. 0132441 (the "Dining Facility Payment Bond") (collectively, the "Dining Facility Bonds") on behalf of the Principal in connection with its contract with the University of South Alabama (the "University") to construct the USA New Dining Facility Project (the "Dining Facility Project"). The evidence further indicates that Berkley issued Performance Bond No. 0132444 (the "Library Performance Bond") and Payment Bond No. 0132444 (the "Library Payment Bond") on behalf of the Principal in connection with its contract with the Harrison County Board of Supervisors (the "County") pertaining to the Governmental Complex & Library Project (the "Library Project").
The Dining Facility Bonds and the Library Bonds, which have already been collectively defined as the "Bonds," are the primary subject of Berkley's Complaint and are the main source of losses, costs and expenses for which Berkley seeks reimbursement from the Defendants. The Principal defaulted with respect to its obligations under the Bonds, resulting in Berkley's receipt of numerous claims from the Principal's subcontractors and suppliers who furnished labor and materials to either or both of the Dining Facility Project and the Library Project (the "Bond Claims"). Berkley has submitted sufficient and valid evidence to the Court that it paid the sum of $710,198.09 under the Bonds in satisfaction of valid Bond Claims.
Berkley submitted an Affidavit of Ellen M. Cavallaro (doc. 14-1) in support of its Motion for Default Judgment setting forth the damages sought by Berkley ("Affidavit One"). Berkley also submitted a second Affidavit of Ellen M. Cavallaro (doc. 20-39) in support of its Supplemental Brief to the Motion for Default Judgment ("Affidavit Two"). The Affidavits establish that Ms. Cavallaro is an Assistant Vice President of Surety Claims at Berkley Surety Group, a W.R. Berkley Company and, in that capacity, possesses personal knowledge of the losses, costs and expenses sustained by Berkley for which it seeks reimbursement from the Defendants. Based on the contents of the Affidavits, Berkley's damages can be broken down into three (3) categories: (1) sums paid under the Bonds to satisfy valid Bond Claims; (2) attorneys' fees and related costs; and (3) consulting fees and related costs.
Affidavit One contains an itemized chart of the payments Berkley made under the Bonds in satisfaction of valid Bond Claims. More specifically, Affidavit One identifies every subcontractor and supplier paid by Berkley, the amount paid and the project in relation to which the payment was made. In Affidavit One, Ms. Cavallaro affirms that Berkley satisfied the valid Bond Claims in good faith and with the reasonable belief that said Bond Claims were due. Affidavit One therefore constitutes an "itemized statement of payments made by [Berkley]" under the Bonds in accordance with Article 2.01 of the Indemnity Agreement. In further compliance with Article 2.01 of the Indemnity Agreement, Berkley also submitted to the Court copies of the checks transmitted to the claimants, which checks evidence actual payment and satisfaction of their Bond Claims. The Affidavits show that Berkley paid $710,198.09 to satisfy the following nine claims submitted under the Dining Facility Payment Bond and nine claims submitted under the Library Payment Bond:
The Court therefore finds that the total amount Berkley paid in satisfaction of the valid Bond Claims was $710,198.09, as stated in the Affidavits submitted by Berkley.
Berkley, supported by the Affidavits, has further shown that the damages incurred paying the valid Bond Claims must be offset back contract funds recovered from the University and the County on the Dining Facility Project and the Library Project, respectively. Affidavit Two shows that Berkley received $221,698.13 from the University in contract funds remaining on the Dining Facility Project and $119,787.36 from the County in contract funds remaining on the Library Project. The recovery of these contract funds would offset the total loss incurred under the Bonds by the sum of $341,485.49. In light of the contract funds recovered by Berkley, the Court finds that Berkley sustained a net loss (exclusive fees, expenses and costs) under the Bonds in the sum of
The Affidavits contain additional evidence showing that Berkley has paid the sum of $84,225.74 in legal fees in connection with its receipt, review, investigation and resolution of the Bond Claims and enforcing the Indemnity Agreement. Affidavit Two further breaks down Berkley's payment of legal fees by invoice, including payee, amount of payment and date of payment. Finally, Berkley submitted copies of the invoices for the legal services to the Court, under seal, to allow for judicial review. Affidavit Two clarifies that Berkley retained four law firms to provide legal services in connection with this matter. One law firm, Manier & Herod, P.C., served as the lead counsel for Berkley with respect to all matters involving the Principal, the Bonds and the Bond Claims. Berkley retained additional law firms to protect its interests after a number of subcontractors and suppliers filed lawsuits against Berkley in both Alabama and Mississippi in relation to their Bond Claims. Berkley also retained counsel to assist with the filing of this present lawsuit and the Complaint.
Upon review of the Affidavits and the invoices submitted under seal, it is clear that legal counsel assisted Berkley with reviewing, investigating, denying and/or resolving numerous Bond Claims, defending Berkley in relation to four lawsuits, filed in various jurisdictions, filed by the Bond claimants, procuring bonded contract funds held by the University and the County (which funds offset Berkley's total losses, costs and expenses), making demands on the Defendants to comply with the terms of the Indemnity Agreement, and pursuing Berkley's claims against the Defendants under the Indemnity Agreement in this present lawsuit. In light of the required volume of legal work, the complexity of the issues and the number of players involved in this matter, the Court finds that the legal services provided to and paid by Berkley in the amount of
The Affidavits show that Berkley paid $25,082.69 in consulting fees to Nicholson Professional Consulting, Inc. ("Nicholson") in connection with general and specific consulting services Nicholson provided to Berkley on matters involving the Principal, the Bonds and the Bond Claims. Affidavit Two contains specific information on the date and amount of each payment Berkley made to Nicholson. As with the legal services invoices, Berkley also submitted Nicholson's invoices to the Court, under seal, for judicial review. Upon review of the Affidavits and the invoices submitted under seal, the Court finds that the consulting services provided to and paid by Berkley in the amount of
Under the Indemnity Agreement, the Defendants are jointly and severally obligated to indemnify Berkley for, inter alia, all damages, costs, losses, expenditures, and payments made by Berkley under the Bonds and in enforcing the Indemnity Agreement. The damages to which Berkley is explicitly entitled include court costs, costs to settle or compromise any claim, expert fees, investigative costs, and the fees of attorneys, accountants and other professionals. The damages sought by Berkley in its Motion for Default Judgment represent those damages, costs, losses, expenditures, and payments made by Berkley under the Bonds and in enforcing the Indemnity Agreement for which it is entitled to indemnification under Article 1.01 of the Indemnity Agreement.
A surety is entitled to reimbursement pursuant to an indemnity contract for payments made by the surety with a good faith belief that it was required to pay, regardless of whether any liability actually existed. Travelers Cas. & Sur. Co. of Am. v. Thorington Elec. & Const. Co., No. 2:09-CV-37-WKW, 2009 WL 4758729, at *2 (M.D. Ala. Dec. 8, 2009); Frontier Ins. Co. v. Int'l, Inc., 124 F.Supp.2d 1211, 1213 (N.D. Ala. 2000). The Affidavits establish that Berkley satisfied valid Bond Claims in good faith and with the reasonable belief that said Bond Claims were due. Moreover, the Court has found that Berkley sustained a net loss (exclusive fees, expenses and costs) under the Bonds in the sum of $368,712.60 in good faith and that the legal and consulting services provided to and paid by Berkley in the collective amount of $109,308.40 were reasonable under the circumstances.
Berkley has further complied with the proof requirements set forth in Article 2.01 of the Indemnity Agreement by (1) submitting an itemized, sworn statement of its damages, costs, losses, expenditures, and payments and (2) submitting copies of checks and drafts for such damages, costs, losses, expenditures, and payments, although complying with only one of these requirements would have constituting prima facie evidence of the liability of the Defendants to Berkley. Provisions similar to Article 2.01 are common in construction surety indemnity agreements. Other courts have found that a surety's compliance with such similar provisions constitutes prima facie evidence of the fact and amount of the indemnitors' liability to the surety. See, e.g. Liberty Mutual Insurance Co. v. CTS Earthmoving, Inc., No. CV12-00089 JMS-KSC, 2012 WL 6704055 (D. Ha. Dec. 4, 2012); First National Insurance Company of America v. Maxim Construction, Inc., No. 3:11-CV-00715-LRH-VPC, 2012 WL 6204293 (D. Nev. Dec. 12, 2012) Bond Safeguard Insurance Co. v. Ridgeview Development, LLC, No. 11-cv-03275-WJM-KMT, 2012 WL 4511285 (D. Colo. Oct. 1, 2012); Great Am. Ins. Co. v. Wayne Evans Auction Co. Inc., 4:12-CV-45 CDL, 2012 WL 2154245 (M.D. Ga. June 13, 2012); Gray Cas. & Sur. Co. v. McConnell Contracting, LLC, No. 11-0184-KD-N, 2012 WL 1145186 (S.D. Ala. Apr. 5, 2012); Ins. Co. of the W. v. H & G Contractors, Inc., No. C-10-390, 2011 WL 4738197 (S.D. Tex. Oct. 5, 2011); SureTec Insurance Co. v. Cairns Corp., No. 8:10-cv-2794, 2011 WL 1061230 (M.D. Fla. March 22, 2011).
Berkley has, therefore, submitted ample evidence to establish the fact and amount of the Defendants' liability to Berkley. Accordingly, the Court has determined that Berkley's Motion for Default Judgment (doc. 14) should be
A copy of this report and recommendation shall be served on all parties in the manner provided by law. Any party who objects to this recommendation or anything in it must, within fourteen (14) days of the date of service of this document, file specific written objections with the Clerk of this Court. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); S.D. Ala. GenLR 72(c). The parties should note that under Eleventh Circuit Rule 3-1, "[a] party failing to object to a magistrate judge's findings or recommendations contained in a report and recommendation in accordance with the provisions of 28 U.S.C. § 636(b)(1) waives the right to challenge on appeal the district court's order based on unobjected-to factual and legal conclusions if the party was informed of the time period for objecting and the consequences on appeal for failing to object. In the absence of a proper objection, however, the court may review on appeal for plain error if necessary in the interests of justice." 11th Cir. R. 3-1. In order to be specific, an objection must identify the specific finding or recommendation to which objection is made, state the basis for the objection, and specify the place in the Magistrate Judge's report and recommendation where the disputed determination is found. An objection that merely incorporates by reference or refers to the briefing before the Magistrate Judge is not specific.
