American Contractors Indemnity v. Carolina Realty and Development, No. 12-1952 (4th Cir. 2013)
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The court issued a subsequent related opinion or order on July 2, 2013.
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UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1952 AMERICAN CONTRACTORS INDEMNITY COMPANY, Plaintiff - Appellant, v. CAROLINA REALTY AND DEVELOPMENT COMPANY INCORPORATED; JOHN PAUL BAEHR; KIMBERLY BAEHR; WILLIAM LAMAR BAEHR; DUFFY BAEHR; JOHN BAEHR; JANIS BAEHR, Defendants Appellees, and MILLICENT BOZEMAN; MARY CLARK, WILLIAM S. BOZEMAN; CHAD CLARK; Defendants. Appeal from the United States District Court for the District of South Carolina, at Spartanburg. Timothy M. Cain, District Judge. (7:09-cv-02145-TMC) Argued: May 15, 2013 Decided: June 19, 2013 Before TRAXLER, Chief Judge, and GREGORY and DUNCAN, Circuit Judges. Affirmed by unpublished per curiam opinion. Jeff B. Slagle, THOMPSON & SLAGLE, PC, Johns Creek, Georgia, for Appellant. John S. Simmons, SIMMONS LAW FIRM, LLC, Columbia, South Carolina, for Appellees. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: Appellant American Contractors Indemnity Corporation ( American Contractors ) filed the instant action in the United States District Court for the District of South Carolina seeking to enforce an indemnity agreement entered into with Appellee Carolina Realty Realty ). 1 The and district Development court Incorporated entered judgment ( Carolina in favor of Carolina Realty, finding that the claim for indemnification was barred by a settlement agreement entered into by the parties. American Contractors appealed the district court s decision. For the reasons that follow, we affirm. I. American Contractors is a commercial construction payment and performance bonds. surety that issues In accordance with standard industry practice, American Contractors issues bonds to general contractors or subcontractors, financially guaranteeing the (sub)contractor with an obligee. will Should perform the its bonded 1 contractual obligations (sub)contractor fail to The other named Appellees, John Paul Baehr, Kimberly Baehr, William Lamar Baehr, Meredith Baehr, John Baehr, and Janis Baehr signed the indemnity agreement in their individual capacities as agents for Carolina Realty. Only John Paul Baehr, Kimberly Baehr, and Duffy Baehr were represented on appeal. For the purposes of this opinion, the parties will be referred to collectively as Carolina Realty. 3 perform its contractual obligations, such as paying laborers or suppliers, the obligee can seek redress from American Contractors as the surety. Dick Corporation was named general contractor for the NAS Pensacola, Aviation Rescue Swimmers School and Physical Fitness Center project (the Florida Project ). Dick Corporation in turn hired Carolina Realty as a subcontractor for the Florida Project to perform roofing work. The subcontract required Carolina Realty to obtain payment and performance bonds and as such, Carolina Realty applied to American Contractors for the necessary bonds. the bonds, In line with standard practice, before issuing American Contractors required Carolina Realty to execute a General Agreement of Indemnity ( Indemnity Agreement ) to insure against potential losses. Carolina Realty agreed Contractors] harmless liabilities, losses, expenses executed that the to from indemnify and costs, arise from Indemnity In the Indemnity Agreement, any against damages, bond Agreement on and any hold and [American all attorneys claims. July 6, demands, fees Carolina 2006, and Realty and the payment and performance bonds were issued on or about August 22, 2006. Beginning in 2008, American Contractors began receiving claims on the payment bond it had issued to Carolina Realty from labor and material suppliers. In 4 July of that year, one supplier and one subcontractor of Carolina Realty filed suit against Dick Corporation in the United States District Court for the Northern District of Florida, asserting a payment bond claim against the bond that Dick Corporation had itself taken out for the Florida Project. Dick Corporation filed third party complaints naming American Contractors and Carolina Realty as third-party performance Carolina defendants. bond claim Realty s subcontract. Corporation. counterclaims. Dick Corporation against alleged American deficient also asserted Contractors performance a based of on the Carolina Realty filed a counterclaim against Dick American Contractors Ultimately, several did not lawsuits assert were filed any by a number of parties alleging breaches of various contracts entered into for the Florida Project. These lawsuits were consolidated for purposes of discovery and trial (the Florida Litigation ). 2 In 2009, American Contractors Carolina Realty, insisting security -- amount an it post thought sent a demand $650,000.00 sufficient at in the letter to collateral time to indemnify American Contractors for the expenses it had incurred 2 The other consolidated cases were captioned as United States of America for the use and benefit of Bradco Supply Corp. v. Dick Corp., et. al. and United States for the use and benefit of Infinity Builders of the Emerald Coast, LLC v. Continental Ins. Co. et al., Consolidated Civil Action No. 3:08-cv-56-MCR-MD (N.D. Fla.). 5 to date on the payment and performance bonds issued to Carolina Realty. Carolina Realty did not respond to the request. On August 13, 2009, while the Florida Litigation was still pending, American Contractors filed the instant action against Carolina Realty, seeking indemnification for expenses it had incurred as a result of the issued bonds, including repayment of the money spent paying bond claims and attorneys fees for the litigation. Meanwhile, settlement talks between the various parties to the Florida talks, Litigation Carolina American were did Realty Contractors transpiring. not attorney, In represent Frank the settlement itself. Lanak, Instead, negotiated the agreement on behalf of Carolina Realty pursuant to the power-ofattorney Realty provision objected in to the Indemnity settlement. On Agreement, February as 10, Carolina 2011, the parties to the Florida Litigation, including Dick Corporation, Carolina Realty, and American Contractors, entered into an agreement settling the suits embroiled in the Florida Litigation and releasing all claims between the parties arising out of the Florida Project ( Settlement Agreement ). In total, American Contractors paid Dick Corporation $262,250.00 in claims against the bonds taken out by Carolina Realty. Once the Florida Litigation settled, discovery ensued in the instant action, indemnification in the as American amount of 6 Contractors $677,473.59, still sought reflecting the money it had paid in settlements, additional bond claims, costs, and attorneys Carolina fees Realty. summary in Following judgment. indemnification entered into connection by discovery, Carolina claim the was with both Realty barred parties the by to the end bonds issued to moved for parties argued that Settlement the Florida the Agreement Litigation. American Contractors contended that the Settlement Agreement had no effect on its claim for indemnification. The cross motions were referred to a magistrate judge, who concluded that the release American Carolina Realty. report that and Settlement Contractors As such, recommendation American Agreement Contractors not indemnification the to was magistrate the district motion for intended claim to against judge submitted court recommending summary granted and Carolina Realty s motion be denied. judgment a be The district court held oral argument on the magistrate judge s report on May 21, 2012. On July 9, 2012, the court issued an order declining to adopt the magistrate judge s conclusions, and instead granted Carolina Realty s motion to alternative, summary judgment. Co. v. Carolina Realty 2711802 (D.S.C. 2012). and enforce settlement, or in the See American Contractors Indem. Development Co., Inc., 2012 American Contractors timely appealed. 7 WL II. The district court diversity jurisdiction. heard this case pursuant See 28 U.S.C. § 1332. to its Therefore, we have jurisdiction under 28 U.S.C. § 1291. There is no choice of law provision in the Indemnity Agreement. As such, because the action was filed in the United States District Court for the District of South Carolina, South Carolina law, including its choice-of-law rules, applies to this action. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004). Under South Carolina law, a contract is controlled by the laws of the State in which it is made and to be performed. Hosp. of Augusta, LLC v. CompTrust AGC Fund, 636 S.E.2d 862, 864 (S.C. 2006). regarding the settlement transpired in Workers Doctors Comp. Trust As all relevant acts Florida, we employ Florida law to resolve the dispute, 3 and review the grant of summary judgment de novo. Blair v. Defender Servs., Inc., 386 F.3d 623, 625 (4th Cir. 2004). A. The pertinent part of the Settlement Agreement reads: [the parties] fully and forever settle, release and discharge, each other, each of their predecessors, successors, assigns, agents, insurers, sureties, 3 All parties agree that Florida law governs this matter. 8 attorneys, officers, directors and employees from any and all past and present claims, demands, damages, debts, or causes of action, in law or in equity, damages and losses of any and all kind or nature, whether contingent or fixed, known and unknown claims for known and unknown damages and which arise or may arise out of acts, omissions or events which occurred prior to the date hereof, arising out of or related to [the Florida Litigation], all other matters between the Parties relating to the [Florida] Project. The Settlement Agreement goes on: Not withstanding anything in this Settlement Agreement to the contrary, this Settlement Agreement and the releases contained here are strictly limited to the Federal Action, Bradco Action, Infinity Action, Dick Claims, Carolina Work, Carolina Claims, and all other matters between the parties relating to or arising out of the [Florida] Project. Under Florida law, [w]here the terms of a contract are clear and unambiguous, the parties intent must be gleaned from the four corners of the document. 1246, 1255 (Fla. 2011). Crawford v. Baker, 64 So.3d Further, when the language of a contract is clear and unambiguous[,] a court cannot entertain evidence contrary to its plain meaning. Sheen v. Lyon, 485 So.2d 422, 424 (Fla. 1986). We find the Settlement Agreement to be clear. Using broad and unequivocal language, American Contractors decided to fully and forever settle . . . any and all past and present claims . . . between the Parties relating to or arising out of the [Florida] Project. American Contractors and Carolina Realty are named parties to the Settlement Agreement; they clearly fall 9 within its broad scope. time the parties certainly a The instant action was pending at the entered into present the claim. Agreement; American it was most Contractors indemnification claim arose out of the Florida Project. When the term arising out of is used as an exclusionary term, as it was here, Florida courts have looked to the plain dictionary definition of the term arise originate or result from. to conclude it means to Westmoreland v. Lumbermens Mut. Cas. Co., 704 So.2d 176, 181-83 (Fla. Dist. Ct. App. 1997). American Contractors seeks repayment for the money it paid out on the bonds it issued Carolina Realty; these costs resulted from Carolina Realty s allegedly deficient performance on the Florida Project and were therefore fully and forever settled by the Agreement. American Contractors also requests reimbursement for attorneys fees incurred during the course of litigation; these fees originated in the Florida Litigation and are short, thereby the Agreement plain foreclosed and forecloses by the unambiguous American Settlement language of Contractors Agreement. the In Settlement request for indemnification. 4 4 Even if we were to find the Settlement Agreement to be ambiguous, under Florida law any ambiguity is construed against American Contractors as drafter of Agreement. See Hurt v. Leatherby Ins. Co., 380 So.2d 432, 434 (Fla. 1980). 10 B. Despite the clear language of the Settlement Agreement, American Contractors argues the above Agreement does not cover indemnification claims because: (1) the context of the Settlement Agreement evinces indemnity claims were not intended to be released; (2) Carolina Realty was not a true party to the Settlement Agreement as the Agreement was signed by American Contractors on Carolina Realty s behalf; (3) the instant action is not mentioned in the Settlement Agreement, showing that it was not included under the purview of the Settlement; and (4) the asserted indemnification claim does not arise out of the Florida Project. We find these arguments unpersuasive. i. American Contractors argues that indemnification provisions are essential to the successful operation of the construction bond industry. Therefore, it asserts that putting the Settlement Agreement in context, it is unreasonable to conclude that a commercial surety in the construction industry would waive its ability to bring an indemnification claim after having to pay out on an issued bond. We have noted indemnification is critical to the successful operation of the construction bond industry. See Fidelity & Deposit Co. of Md. v. Bristol Steel & Iron Works, Inc., 722 F.2d 1160, 1163 (4th Cir. 1983). This 11 general premise does not render any provision of the Settlement Agreement ambiguous, such that we may consider evidence outside of the four corners of the contract. Florida See law, Sheen, we 485 cannot So.2d at consider 424. this In accordance context evidence. with The general nature of the construction bond industry has no bearing on our resolution of this appeal. Similarly, American Contractors argues that we should put ourselves in the shoes of the parties and consider the contract in light of their individual perspectives. Contracts contract doubtful. § 149. is We can only ambiguous or the not this, meaning however, of the when contract the is See Ungaro v. West Palm Beach Biltmore Apartments, 61 So.2d 642 (Fla. 1952). has do See 11 Fla. Jur. 2d identified Agreement. As we just stated, American Contractors a single Therefore, indemnification is to ambiguity regardless sureties in the in the Settlement of how important bond business, surety relationships were considered under the Settlement Agreement and all claims covered therein were still released. ii. American Contractors next argues that because Carolina Realty was represented by an American Contractors attorney in the settlement talks, Carolina Realty is not a true party to the Settlement Agreement. 12 To accept this argument would mean the Settlement Agreement in toto has Carolina no effect Realty. as This to claims cannot be. asserted The by or Settlement against Agreement specifically lists Carolina Realty as a party to the Agreement. The Indemnity Agreement gave American Contractors the option of exercising power-of-attorney settlement talks. American to represent Contractors Carolina chose to Realty exercise in its power-of-attorney to settle the Florida Litigation on Carolina Realty s behalf over Carolina Realty s objection. American Contractors knowingly bound both itself and Carolina Realty by the deal reached. iii. American Contractors also argues that this action does not fall under the purview of the Settlement Agreement as it is not specifically mentioned in the Agreement. reasons that Settlement this litigation Agreement was was entered American Contractors pending into, and at the time the had it wished to include it in the Agreement, it would have done so expressly. Again, this argument has no grounding in the words of the Agreement. involved The Settlement parties from any Agreement and all expressly past and released present all claims relating to/arising from the Florida Litigation and the Florida Project action (emphasis was a added). present claim To repeat, at 13 the this time of indemnification the Settlement Agreement. That it was not Agreement is of no moment. individually mentioned in the Moreover, while there is a carve-out provision in the Settlement Agreement exempting personal injury and property damage claims, there is no similar provision for indemnification claims. And the exclusion of indemnification claims from the Settlement Agreement s carve-out provision is evidence that the parties respect to that matter. did not intend to contract with See Gulf Cities Gas Corp. v. Tangelo Park Svc. Co., 253 So.2d 744, 748 (Fla. Dist. Ct. App. 1971). It is important to remember that helped draft the Settlement Agreement. American Contractors This is not a case of parties having lopsided legal acumen -- the Settlement Agreement was drafted and agreed to by American Contractors attorneys, who are (presumably) well-apprised of business and basic contract principles. wanted to Agreement exempt it indemnification had the ability the bond If American Contractors claims and construction from knowledge the to Settlement do so, as evidenced by the fact that it expressly exempted other claims from the Agreement. American Contractors attempt to carve out this action indemnification contrary to the clear terms from the Settlement of the contract, contrary to Florida law. 14 Agreement and is therefore iv. American Contractors final argument is that the indemnification claim did not arise out of or relate to the Florida Litigation or the Florida Project. American Contractors asserts Indemnity that the claim arose from the Agreement itself, and therefore, does not fall under the plain language of the Settlement Agreement. The Settlement subcontract Agreement entered into required by the specifically Dick includes Corporation payment and and the Carolina Realty, which performance bonds at issue. These bonds are specifically mentioned in the recitals to the Settlement Agreement, and there is no dispute that bond claims were settled by the Agreement. reasoned, American Contractors As the district court would have no claim for indemnification had it not been for Carolina Realty s alleged lack of performance in relation to the Florida Project. Additionally, the attorneys fees sought by American Contractors are for reimbursement Litigation forecloses. Florida -- this is for having exactly to what partake the in the Settlement Florida Agreement The Indemnity Agreement was only activated when the Project was alleged adequately by Carolina Realty. not to have been performed American Contractors claim for indemnification arose from the Florida Project and the Florida Litigation; it is therefore barred by the Settlement Agreement. 15 III. American Contractors drafted and executed Agreement with extremely broad language. the terms of the contract. a Settlement It must now live by For the reasons detailed herein, clear principles of Florida contract law require us to affirm the district court s judgment granting summary judgment in Carolina Realty s favor. 5 AFFIRMED 5 Agents of the named corporate entities were also parties to the Settlement Agreement. The Settlement Agreement therefore covers the individual indemnitors who are parties to this appeal. Our holding today applies to all named Appellees with equal force. 16
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