TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE.
Currently before the Court are The Harris Company of Forth Smith's ("Harris") Motion for Summary Judgment (Doc. 61), Ark-Con Testing Service's ("Ark-Con") Motion for Summary Judgment (Doc. 64), Limestone Development's ("Limestone") Motion to Set Aside Default (Doc. 68), and the various briefs accompanying and responding to those motions. For the reasons discussed below, these motions will be adjudicated as follows:
This litigation involves a construction dispute arising from the expansion of the Fort Smith National Cemetery (the "Cemetery") in Fort Smith, Arkansas. To execute that expansion, the Federal Government contracted with Limestone to be the general contractor on the project. As an apparent requirement of the contract, Limestone obtained a performance bond from, and entered into an indemnity agreement with, Hartford Fire Insurance Company ("Hartford"). Pursuant to the bond and related indemnity agreement, Limestone assigned to Hartford all rights, title, and interest to all claims in connection with the subcontracts related to the Cemetery expansion.
On April 20, 2010, Limestone entered into a sub-contract with Defendant/Third-Party Plaintiff Harris to perform certain erosion control, demolition, earthwork, drainage work, paving, sewage, concrete work, and other work for the expansion. Around the same time, Limestone entered into a sub-contract with Third-Party Defendant Ark-Con to test the compaction rate of soil upon which various structures were to be built. Following several alleged problems in the early phases of construction, which now form the basis of this lawsuit, Limestone dismissed Harris from the worksite on February 15, 2011, and
After completing the Cemetery expansion in place of Limestone, Hartford brought the instant suit against Harris, alleging that Harris breached its subcontract agreement with Limestone, made misrepresentations to Limestone regarding the quality of workmanship, materials, and professional care it exercised, and was negligent in the execution of the contract. Harris filed its Answer to Amended Complaint on June 17, 2014, denying all of Hartford's claims. Harris also commenced actions against Limestone and Ark-Con, alleging contribution, indemnity, breach of contract, and promissory estoppel against Limestone, and contribution, indemnity, and promissory estoppel against Ark-Con. Ark-Con filed its Answer to Harris's Amended Third-Party Complaint denying all claims. It also filed a Counterclaim against Harris and a Crossclaim against Limestone asserting that any damages incurred by Hartford are primarily attributable to either Harris or Limestone, and seeking an apportionment of fault or contribution. Limestone failed to respond to Harris's original and amended Third-Party Complaints, and to Ark-Con's Crossclaim.
On June 25, 2015, the Clerk of the Court filed a Notice of Default Procedures alerting counsel for Harris that Limestone failed to plead or otherwise defend against Harris's claims.
Harris filed its Motion for Summary Judgment on August 31, 2015. The Motion first argues that summary judgment against Hartford is appropriate because, as Limestone's surety, Limestone's default is imputed onto Hartford. In the alternative, the Motion contends that partial summary judgment is appropriate as to Hartford's claims based on the settlement of the Building, and alleged defects with the administration-building sidewalk, irrigation lines, grading by the storage bins and storage building, grading over the crypts, grading for the fencing, grading on both sides of "B" street, inlet grates and yard inlets, broken curbs, and wiring to the bell tower. Also on August 31, 2015, Ark-Con filed its Motion for Summary Judgment against Harris, arguing that there is no genuine issue of material fact that it did not cause the settling of the Building.
Apparently realizing the potential consequences of Limestone's default for Hartford, Hartford's counsel, Paul Devlieger, filed a Notice of Appearance on behalf of Limestone on September 3, 2015, and moved the Court to set aside its Default Judgment on the same day. Briefing for all of the aforementioned motions has been completed, and all are now ripe for decision.
Limestone's Motion to Set Aside Default Judgment first contends that this Court
Addressing the first matter, the Court finds that Limestone's creative attempt to benefit from the common-defense doctrine is misguided, and that the Court did not err in granting default judgment. The common-defense doctrine is an English common law doctrine that gained acceptance in the United States in the mid-1800's. See Firestone and Rubber Co. v. Little: Overextension of the Common Defense Doctrine, 35 Ark. L. Rev. 328, 328-29 (1981). The doctrine operates to allow a co-defendant to avoid default judgment by relying on a responsive pleading filed by another co-defendant. E.g., Sutter v. Payne, 337 Ark. 330, 335, 989 S.W.2d 887 (1999) ("Arkansas has long recognized the common-defense doctrine, which provides that an answer that is timely filed by a co-defendant inures to the benefit of a defaulting co-defendant."). The straight-forward purpose of the doctrine is to avoid the inconsistent outcome of a court entering default judgment against one defendant, thus adjudicating him liable to the plaintiff, while a similarly situated co-defendant prevails on the merits. See Angelo Iafrate Const., LLC v. Potashnick Const., Inc., 370 F.3d 715, 722 (8th Cir.2004) ("To avoid such inconsistent results, a judgment on the merits for the answering party should accrue to the benefit of the defaulting party."); Frow v. De La Vega, 82 U.S. (15 Wall.) 552, 554, 21 L.Ed. 60 (1872) (opining that absent the common-defense doctrine, defaults could result in an "absurdity" where courts both sustain a charge and deem it to be entirely unfounded). Consistent with this underlying purpose, the doctrine does not apply where "liability of the defaulting party is based on independent wrongful acts or a legal theory distinct from the one under which the answering party prevailed." 370 F.3d at 722.
If Limestone and Hartford were co-defendants, it is quite likely that the common-defense doctrine would save Limestone from default. But, they are not. Hartford is the Plaintiff in this case and Limestone is a Third-Party Defendant. Limestone tries to circumvent this facially fatal incongruity by asserting that "although couched as affirmative claims as opposed to affirmative defenses, the pleas of Hartford, that Harris was the defaulting responsible party, if proven, would operate as a defense to the claims of Harris." (Doc. 68-1, p. 2). Limestone cites no law to support its conclusion that the common-defense doctrine applies in such situations, and the Court could find none either. While the Court would stop short of assuming that the common-defense doctrine could never apply in such a case, it is confident that the doctrine does not apply here because the underlying purpose of the doctrine is not implicated. This is so because the default of a principal is imputed upon a surety "when the surety had full knowledge of the action against the principal and an opportunity to defend." Drill South, Inc. v. Int'l Fidelity Ins. Co., 234 F.3d 1232, 1235 (11th Cir.2000). Accordingly, if this Court upholds Limestone's default, the default imputes upon Hartford, eliminating any potential for inconsistency.
The parties quibble over whether Limestone's default should be imputed upon Hartford, so the Court's above conclusion warrants some explanation. The
Even if a default judgment against a principal could not be imputed against a surety, the Court would decline to extend the common-defense doctrine to this case. Limestone contends that the instant case is analogous to the classic situation where the doctrine applies: when a plaintiff sues two defendants and one fails to respond. The Court disagrees. Given that Hartford and Limestone are — while formally distinct — effectively the same party for the purposes of this lawsuit, Harris's Third-Party Complaint against Limestone is in essence a counterclaim against Hartford's original suit. Viewed analogously, Limestone's argument collapses, as it would effectively declare that Hartford's Complaint doubles as an answer to Harris's Counterclaim. Moreover, in the classic situation where the doctrine applies, the plaintiff has benefitted from a responsive pleading filed by some defendant, just not all of the defendants. In this case, however, no party has formally responded to Harris's claims. Accordingly, even if Limestone's default were not imputable to Hartford, the Court did not err in entering default judgment against Limestone. Instead, it correctly declined to extend the common-defense doctrine beyond what its purpose, function, and underlying reasoning could withstand.
Having determined that default judgment was properly entered, the Court now turns to the second point of inquiry: whether the default should nonetheless be set aside. Rule 60(b) of the Federal Rules of Civil Procedure gives the district courts broad discretion to set aside a final order in the case of, as pertinent here, "mistake, inadvertence, surprise, or excusable neglect" or "any other reason that justifies relief." Fed. R. Civ. P. 60(b); see also Jefferson v. Hicks, 364 Fed.Appx. 281, 283 (8th Cir.2010) (noting that the district courts have "broad discretion" on Rule 60(b) motions). This rule "authorizes an extraordinary remedy that allows a court to preserve the delicate balance between the sanctity of final judgments and the incessant command of a court's conscience that justice be done in light of all the facts." Hoover v. Valley West D M, 823 F.2d 227, 230 (8th Cir.1987) (quotation omitted).
Id. (citing Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993)). In addition, "the existence of a meritorious defense [is a] relevant factor ...." Union Pac. R. Co. v. Progress Rail Servs. Corp., 256 F.3d 781, 783 (8th Cir.2001). To be sure, Rule 60(b) "does not permit litigants and their counsel to evade the consequences of their legal positions and litigation strategies, even though these might prove unsuccessful, ill-advised, or even flatly erroneous," 796 F.3d at 896 (quotation omitted), but if attorneys' actions are "not so gross as to be inexcusably negligent," district courts have discretion to grant relief. Hoover, 823 F.2d at 230.
Applying these factors, the Court finds that Limestone's neglect in failing to file a response to Harris's Third-Party Complaint was excusable. First, the danger of prejudice to Harris is minimal. "Setting aside a default must prejudice plaintiff in a... concrete way, such as loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and collusion." Stephenson v. El-Batrawi, 524 F.3d 907, 915 (8th Cir.2008) (quotation omitted). Setting aside the default against Limestone would cause no loss of evidence or opportunity for fraud and collusion. While discovery in this case has closed, any difficulty resulting from additionally granted discovery would be de minimis, as the parties and issues in the case will remain essentially the same. Second, though the length of Limestone's delay was significant, it will have no impact on judicial proceedings. Trial in this case has been pushed back until March of 2016, giving Limestone time to file a responsive pleading, and giving the parties sufficient time to prepare for trial.
Third, the Court that finds Limestone acted in good faith. Limestone/Hartford's counsel likely failed to file a response on behalf of Limestone because it erroneously believed that Limestone's default would not impact Hartford. While this belief was mistaken, it was not held in bad faith. Fourth, Limestone's Motion does not explain the reason for its delay, but, as stated above, the Court believes that the reason is clear enough. Limestone, as an apparently insolvent entity, has no real
While the correct course of conduct would have been to respond to Harris's Third-Party Complaint in the first instance, this is a fairly nuanced area of common law. The relationship between attorneys and the common law is not one of a sage oracle divining from his crystal ball. Instead, the Court expects that attorneys will exercise a reasonable level of competence and diligence to understand the law, and pursue the rights of their clients in accordance with it. When such efforts are exerted, this Court will be reluctant to sustain a default judgment when, all other factors being in favor of setting it aside, the reason for the delay was a reasonable misunderstanding of a nuanced area of substantive common law.
Fifth and finally, Limestone has meritorious defenses to Harris's claims. Harris's claims against Limestone, and its defenses against Hartford, are both centrally premised on the idea that Limestone was responsible for the construction issues that occurred during the Cemetery expansion. Hartford's claims, on the other hand, are centrally premised on the idea that Harris was responsible for the construction issues. Underlying many of these claims are disputed issues of the material fact that will go to trial. Since Limestone's defenses are likely to be similar to Hartford's claims, and many of Hartford's claims will proceed to trial, it follows that Limestone's defenses are potentially meritorious.
For the reasons discussed herein, Limestone's Motion to Set Aside Default Judgment (Doc. 68) is
Harris asks the Court to grant summary judgment on the claims brought against it by Hartford. Harris first bases its Motion for Summary Judgment on Limestone's default, which it argues should be imputed onto Hartford. However, since the Court has set aside Limestone's default, this aspect of Harris's Motion is moot. In the alternative, Harris argues that it is entitled to partial summary judgment on all claims related to the structural failure of the Building, on a group of claims that it has styled as the "Res Ipsa" claims, and on Hartford's cause of action for misrepresentation. The Court will address these issues in turn.
"The court shall grant summary judgment if 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). The Court must view the facts in the light most favorable to the non-moving party, and
If the moving party meets this burden, then the non-moving party must "come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. 1348 (quoting Fed. R. Civ. P. 56(c)). These facts must be "such that a reasonable jury could return a verdict for the nonmoving party." Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir.1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). "The nonmoving party must do more than rely on allegations or denials in the pleadings, and the court should grant summary judgment if any essential element of the prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial." Register v. Honeywell Fed. Mfg. & Techs., LLC, 397 F.3d 1130, 1136 (8th Cir.2005) (citing Celotex Corp v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
Hartford's claims against Harris sound in breach of contract, negligence, and misrepresentation. Harris argues that each of these claims include the essential element of proximate causation, and that Hartford cannot meet its burden of proof on that element when it comes to the structural failure of the Building. More specifically, Harris contends that there is no genuine issue of material fact that the difference between a 95% and a 98% compaction rate could not have proximately caused the Building's structural failure. Hartford counters primarily by asserting that the cause of the structural failure of the Building is not material to its claims, because even if the structure did not fail, it would have had to demolish it to ensure that the building pad complied with the 98% specification anyway.
"Proximate cause is `that which in a natural and continuous sequence, unbroken by any efficient intervening cause, produced the injury, and without the result would not have occurred.'" Hiser v. XTO Energy Inc., 2012 WL 3542009 (E.D.Ark. Aug. 14, 2012) (quoting Ashley County Ark. v. Pfizer, Inc., 552 F.3d 659, 666 (8th Cir.2009)). "In Arkansas, proximate cause is generally a fact issue to be decided by a jury .... It becomes a question of law for the court only if reasonable minds could not differ." Id. (citing Ashley Cnty., 552 F.3d at 667) (quotation omitted).
Accepting, for purposes of this Order, the view that Hartford must prove that Harris proximately caused the structural failure of the Building,
Although Ark-Con's testing found that the building pad was compacted to an above 95% rate, a thorough review of the record shows questions of fact regarding the adequacy of Ark-Con's testing.
Finally, if the building pad was initially under-compacted, there are genuine issues of material fact surrounding the question of who is responsible for that sub-par work: Harris, Ark-Con, Limestone, or other contractors. There is conflicting evidence on the record regarding (i) who was responsible for directing the frequency of Ark-Con's testing; (ii) who was responsible for ensuring that Ark-Con's testing metrics complied with the project specifications; and (iii) the scope of various parties' responsibilities for ensuring that the building pad complied with the project specifications. For example, Harris's expert D.H. Watson argues that: "Limestone, MWC [an engineering firm] and Ark-Con all approved Harris's earthwork. If there were deficiencies in the earth-fill compaction, it was the responsibility of these parties to notify Harris." (Doc. 61-2, p. 11). On the other hand, Hartford's expert James Reddick contends that Harris had an affirmative obligation to inquire into the specific results of the testing. (Doc. 61-6, p. 85).
In conclusion, genuine issues of material fact surround the structural failure of the Building. A review of the record reveals an issue of fact as to whether the building pad was initially compacted to a 95% rate. This, in turn, raises several issues of material fact as to whether a lower rate could have caused the structural failure of the Building, what may have caused a lower compaction rate, and who would bear responsibility for a lower rate. Given these
Harris next moves for summary judgment on a group of issues that it has styled the "Res Ipsa" claims. This group is comprised of Hartford's claims related to (i) the administration-building sidewalk; (ii) the existing irrigation lines; (iii) the grading by the storage bins and storage building; (iv) the grading over the crypts; (v) the grading for both sides of "B" street; (vi) the inlet grates and yard inlets; (vii) the broken curbs; and (viii) the wiring to the bell tower. Harris styles these issues this way because it argues that Hartford must rely on the theory of res ipsa loquitor to prove them. Because Hartford cannot demonstrate that Harris had exclusive control over the work underlying these issues, Harris's argument continues, the application of res ipsa loquitor would fail as a matter of law. Consequently, Hartford's claims on these issues would fail as well.
As a preliminary matter, the Court disagrees with Harris's framing of these issues. It does not follow that if the doctrine of res ipsa loquitor cannot apply to Hartford's claims, then they must be dismissed. Res ipsa loquitor is but one way to prove negligence. It applies in certain circumstances because "the mere fact that an accident occurred is not evidence of negligence." Schubert v. Target Stores, Inc., 2010 Ark. 466, 369 S.W.3d 717, 719 (2010). So, in order to "assist in the proof of negligence where the cause is connected with an instrumentality in the exclusive control of a defendant," the doctrine allows the finder of fact to presume negligence in certain situations. Id. at 720. Res ipsa loquitor is, in other words, an alternate way to prove negligence, available to plaintiffs in certain circumstances when they cannot make out a prima facie claim. As Hartford has not conceded that its claims depend on the doctrine, the question before the Court is whether Hartford can carry its burden on the underlying elements of its claims. If it cannot, only then would res ipsa loquitor potentially be relevant as to Hartford's negligence cause of action.
"To establish a prima facie case of negligence, [a plaintiff] must show that he sustained damages, that the defendants were negligent, and that such negligence was a proximate cause of his damages." Mangrum v. Pigue, 359 Ark. 373, 383, 198 S.W.3d 496 (2004). "Negligence is the failure to do something which a reasonably careful person would do, or the doing of something which a reasonably careful person would not do. Proximate cause means a cause, which, in a natural and continuous sequence, produces damage and without which the damage would not have occurred." Id. (internal citation omitted). In establishing negligence, a party cannot "rely upon inferences based on conjecture or speculation." Id.
Viewing the facts in the light most favorable to Hartford, the Court finds that genuine issues of material fact exist as to Hartford's claims based on the administration-building sidewalk, the existing irrigation lines, all of the grading issues, and the inlet grates. Regarding those issues, a reasonable jury could find in Hartford's favor. However, with respect to its claims based on the broken curbs and the wiring to the bell tower, Hartford has failed to raise specific facts that create genuine issues for trial. The Court will address each issue in order:
In sum, genuine issues of material fact exist, precluding an entry of summary judgment, on the administration building sidewalk issue, the existing irrigation lines issue, all of the grading issues, and the inlet issues. No genuine issues of material fact exist as to the curb issues and the wiring issue. Accordingly, summary judgment will be granted on those two issues. For clarity's sake, the entry of summary judgment applies to both Hartford's negligence and its breach of contract causes of action.
Harris moves for summary judgment on Hartford's misrepresentation cause of action, arguing that it cannot prove that Harris made misrepresentations about the compaction rate of the building pad. In its Response, Hartford counters that it can prove such misrepresentations, and additionally references misrepresentations related to concrete footings found underground on the construction site. In its Reply, Harris notes that Federal Rule of Civil Procedure 9(b) requires plaintiffs "alleging fraud or mistake [to] state with particularity the circumstances constituting fraud or mistake," and that Hartford failed to mention the concrete footings issue in its Complaint when it alleged misrepresentation. Fed. R. Civ. P. 9(b). The Court will, accordingly, begin by resolving the parties' dispute over the propriety of the concrete footings claim, and then turn to whether Harris is entitled to summary judgment on the building pad issue.
Harris is correct that Hartford failed to plead with particularity a misrepresentation claim based on Harris's handling of the concrete footings. One of the primary purposes of the particularity requirement "is to facilitate a defendant's ability to respond to and to prepare a defense to a plaintiff's charges." Greenwood v. Dittmer, 776 F.2d 785, 789 (8th Cir.1985). The only particular circumstances referenced in Count II of the Complaint, the misrepresentation count, relate to the construction of the building pad. Allowing Hartford to now proceed with a misrepresentation claim based on other grounds would undermine the purpose of Rule 9(b). Therefore, to the extent that Hartford intended to base its misrepresentation cause of action on the concrete footings issue, it is barred from doing so.
The Court now turns to the building pad issue. In Arkansas, the tort of misrepresentation must be proven by a preponderance of the evidence with respect to the following five elements:
Roach v. Concord Boat Corp., 317 Ark. 474, 476, 880 S.W.2d 305 (1994). Harris argues that Hartford cannot prove these elements for three reasons. First, it argues that it never made a misrepresentation to Limestone because it was Ark-Con, not Harris, that communicated the compaction rate of the building pad to Limestone. Second, Harris maintains that it had no knowledge that any representation was false, because it believed the compaction to be in compliance with the specifications. Third, Harris believes that Hartford cannot prove that any reliance on a representation made by Harris would be justifiable, because Limestone had the testing reports from Ark-Con showing that the compaction rate was 95%. Hartford counters that Harris was fully aware that its compaction did not meet the project's specifications and that Limestone relied on its contrary representation in moving forward with construction of the Building structure.
The Court finds that there is no genuine dispute as to any material fact and that Harris is entitled to judgment as a matter of law. Most damning to Hartford's case is its inability to prove that any reliance on Harris's alleged representations was justifiable. The MACTEC Daily Report from August 12, 2010, states that the "Arkcon testing results are now being sent directly to Nate of Limestone Development." (Doc. 61-8). Ark-Con testing reports dated August 16, 2010, September 7, 2010, and September 20, 2010 all list the tested compaction rates of the building pad. (Doc. 61-7). It follows that these results were given directly to Limestone. Accordingly, it would not have been reasonable for Limestone to have relied on any representation made by Harris that the building pad was compacted to the 98% compaction rate listed in the project specifications. See Doc. 72, p. 23 (Hartford basing its misrepresentation argument on the theory that Harris was aware that it did not meet the 98% compaction rate but misrepresented that it did).
The Court additionally notes the dearth of evidence in the record indicating that Harris made any communications to Limestone about the compaction rate of the building pad, let alone a knowingly false statement about it. Given these shortcomings, Hartford has failed to carry its burden of proof on the elements of misrepresentation.
For the reasons discussed herein, Harris's Motion for Summary Judgment (Doc. 61) is
The Court now turns its attention to the final matter before it, Ark-Con's Motion for Summary Judgment. After being sued by Hartford, Harris filed its Amended Third-Party Complaint against Ark-Con for contribution and promissory estoppel. Ark-Con has now filed its Motion for Summary Judgment on these claims, arguing that Harris's theory of Ark-Con's liability is premised on Hartford's allegation that the discrepancy between a 95% and 98% compaction rate caused the Building structure to fail. Because summary judgment against Hartford is proper given its inability to prove that the 3% discrepancy caused the failure, Ark-Con's reasoning follows, summary judgment should also be granted in its favor on that issue.
As the Court explained in Section B(2), supra, genuine issues of material fact remain about what caused the Building's structure to fail. Because these issues remain,
For the reasons stated herein, the motions before the Court are adjudicated as follows: