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Iberia Risk Services v. Scott & Sons Holdings, LLC

United States District Court, N.D. Georgia, Atlanta Division

August 6, 2014

IBERIA RISK SERVICES, Intervenor Plaintiff,
v.
SCOTT & SONS HOLDINGS, LLC, et al., Defendants.

OPINION AND ORDER

WILLIAM S. DUFFEY, Jr., District Judge.

This matter is before the Court on Intervenor Plaintiff Iberia Risk Services' ("Plaintiff") Motion for Summary Judgment against Defendants on its equitable subrogation claim [48].

I. BACKGROUND

In the beginning of 2008, Ullico Casualty Company ("Ullico") hired Plaintiff to serve as a managing general underwriter for Ullico's surety business. Defendants Kashka Scott, Shields Scott, and Jerome Scott own and operate Defendant Scott & Sons Holdings, LLC (collectively, "Defendants"), a construction company based in Atlanta, Georgia. In July 2008, Plaintiff underwrote and issued surety bonds, on behalf of Ullico, to Defendants in the amount of $3, 788, 360.18 to develop sidewalks and pedestrian safety upgrades in DeKalb County, Georgia, for the Georgia Department of Transportation ("GDOT"). On April 30, 2008, the Defendants entered into a General Indemnity Agreement ("GIA") with Ullico that provides:

The Undersigned agree to indemnify and hold [Ullico] harmless from and against any and all demands, liabilities, losses, costs, damages, attorneys' fees and expenses of whatever kind or nature together with interest thereon at the maximum rate allowed by law, which arise by reason of, or in consequence of, the execution by the Surety of any Bond on behalf of the Principal and whether or not the Surety shall have paid any sums in partial or complete payment thereof, including but not limited to... [s]ums paid including interest thereon at the maximum rate allowed by law, or liabilities incurred in the settlement or the adjustment of any and all claims, demands, damages, costs, losses, suits, proceedings, or judgments...

See Pl.'s Ex. B, Kashka S. Dep., Exhibit 1 at 1. The GIA also granted Ullico the "right in its sole and absolute discretion to determine whether any claims under any Bond or Bonds shall be paid, compromised, adjusted, defended, prosecuted or appealed, " and "the right to incur such expenses in handling a claim as it shall deem necessary, including but not limited to the expenses for investigative, accounting, engineering and legal services." Id.

Ullico received claims on the surety bonds after the Defendants failed to pay their subcontractors for work completed on the sidewalks and pedestrian safety upgrades in DeKalb County, Georgia. Ullico ultimately paid $1, 461, 296.13 to investigate and settle the subcontractors' claims. Ullico recovered $221, 801.57 in contract proceeds, and absorbed a loss of $1, 239, 494.56 on the surety bonds issued to Defendants. To date, Defendants have not paid the amount owed under the surety bonds, and Defendants failed to indemnify Ullico for its losses under the GIA.

On July 11, 2011, Ullico filed a two (2) count Complaint against the Defendants for breach of the GIA, seeking to recover from Defendants the amount owed under the surety bonds and attorneys' fees and costs. Ullico also hired a private arbitration panel to arbitrate its claims against Plaintiff. In the arbitration proceedings, Ullico alleged that Plaintiff failed to implement a condition that required a $1, 000, 000 line of credit to be procured for the Defendants before the surety bonds could be issued for the DeKalb County project. Ullico argued that if this condition had been implemented, Ullico would have been protected from the losses sustained on the surety bonds. After a four-day hearing, the arbitration panel awarded $1, 239, 494.56 to Ullico for the losses sustained on the surety bonds.

On March 18, 2013, Plaintiff moved to intervene in this action to seek indemnification or contribution from the Defendants. On September 30, 2013, the Court granted Plaintiff's Motion to Intervene in this action. On October 11, 2013, Plaintiff filed a Complaint against the Defendants seeking subrogation in the place of Ullico to recover $1, 239, 494.56 in losses sustained on the surety bonds. On October 16, 2014, Ullico moved to dismiss its claims against the Defendants pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure. On November 21, 2013, the Court granted Ullico's Motion for Voluntary Dismissal, and dismissed Ullico's claims against Defendants without prejudice.

On February 3, 2014, Plaintiff moved for summary judgment on its equitable subrogation claim. Plaintiff argues that it is entitled to indemnification from the Defendants because Plaintiff paid $1, 239, 494.56 to Ullico for losses incurred on the surety bonds. Plaintiff contends that it is subrogated to the rights of Ullico and thus entitled to enforce Defendants' liability for losses incurred on the surety bonds.

II. DISCUSSION

A. Legal Standard

A 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). Parties "asserting that a fact cannot be or is genuinely disputed must support that assertion by... citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." Fed.R.Civ.P. 56(c)(1).

The party seeking summary judgment bears the burden of demonstrating the absence of a genuine dispute as to any material fact. Herzog v. Castle Rock Entm't , 193 F.3d 1241, 1246 (11th Cir. 1999). Once the moving party has met this burden, the non-movant must demonstrate that summary judgment is inappropriate by designating specific facts showing a genuine issue for trial. Graham v. State Farm Mut. Ins. Co. , 193 F.3d 1274, 1282 (11th Cir. 1999). Non-moving parties "need not ...


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