CORE Construction Services, L.L.C. v. U.S. Specialty Insurance Company, No. 2:2016cv13447 - Document 13 (E.D. La. 2017)
Court Description: ORDER & REASONS denying 6 Motion to Dismiss Case. Signed by Judge Sarah S. Vance on 3/17/2017. (mmm)
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CORE Construction Services, L.L.C. v. U.S. Specialty Insurance Company Doc. 13 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA CORE CONSTRUCTION SERVICES, LLC VERSUS CIVIL ACTION NO. 16-13447 U.S. SPECIALTY INSURANCE COMPANY SECTION “R” (1) ORD ER AN D REASON S Defendant U.S. Specialty Insurance Com pany m oves under Federal Rule of Civil Procedure 12(b)(7) to dism iss plaintiff Core Construction Services, LLC’s claim s for failure to join an indispensable party. Because the Court finds that Strategic Planning Associates, LLC is not a necessary party under Rule 19, U.S. Specialty’s m otion is denied. I. BACKGROU N D Plaintiff Core Construction Services, LLC served as the general contractor for a construction project dubbed the “Sophie B. Wright High School Renovation.”1 Core alleges that Strategic Planning Associates, LLC, a non-party, defaulted on its obligation to supply steel and erect a steel 1 R. Doc. 1 at 2. Dockets.Justia.com structure under a subcontract between Core and Strategic Planning. 2 Core sues U.S. Specialty Insurance Com pany, and alleges that U.S. Specialty served as com mercial surety to Core’s contract with Strategic Planning. 3 Core further asserts that, as surety, U.S. Specialty is jointly and severally liable with Strategic Planning for the alleged breach. 4 Core is currently party to a separate arbitration proceeding against Strategic Planning. 5 Core attaches a perform ance bond contract to its com plaint. 6 The perform ance bond nam es Strategic Planning as “Principal,” U.S. Specialty as “Surety,” and Core as “Obligee.”7 Under the terms of the bond, upon showing of default by Strategic Planning and other term s, U.S. Specialty agrees to perform one of several m itigating actions on behalf of Core. 8 These m itigating actions include arranging for com pletion of the contract or paying Core the sum needed to secure com pletion. 9 U.S. Specialty now m oves under Federal Rule of Civil Procedure 12(b)(7) to dism iss Core’s claims for failure to join Strategic Planning. 10 In 2 3 4 5 6 7 8 9 10 Id. Id. Id. R. Doc. 6-2. R. Doc. 1-2. Id. at 1. Id. at 1-2. Id. at 2. R. Doc. 6. 2 support, U.S. Specialty argues that Strategic Planning is a necessary and indispensable party under Rule 19. 11 II. LEGAL STAN D ARD Rule 12(b)(7) of the Federal Rules of Civil Procedure perm its a party to bring a m otion to dism iss a com plaint for failure to join a party under Rule 19. See Fed. R. Civ. P. 12(b)(7). Proper joinder under Rule 19 is a two step process. First, the court m ust decide if the absent party is a necessary party to the action. See Fed. R. Civ. P. 19(a). Second, if the absent party is a necessary party, but its joinder is not feasible, the court m ust decide whether the absent party is an “indispensable” party to the action under Rule 19(b). See Fed. R. Civ. P. 19(b). Under Rule 19(a), a party is “necessary” if: (1) in the person’s absence com plete relief cannot be accorded am ong those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence m ay (i) as a practical m atter im pair or im pede the person’s ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, m ultiple, or otherwise inconsistent obligations by reason of the claim ed interest. Fed. R. Civ. P. 19(a). 11 Id. 3 If a party is “necessary,” but cannot be joined in the action because its joinder would defeat the court’s diversity jurisdiction, the court m ust determ ine “whether in equity and good conscience the action should proceed am ong the parties before it . . . .” Fed. R. Civ. P. 19(b). The rule provides a list of four factors for a court to consider when making its determ ination: [F]irst, to what extent a judgm ent rendered in the person’s absence m ight be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgm ent, by the shaping of relief, or other m easures, the prejudice can be lessened or avoided; third, whether a judgm ent rendered in the person’s absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dism issed for nonjoinder. Fed. R. Civ. P. 19(b). State law is relevant “in determ ining what interest the outsider actually has, but the ultim ate question whether, given those state-defined interests, a federal court m ay proceed without the outsider is a federal m atter.” Morrison v. N ew Orleans Pub. Serv. Inc., 415 F.2d 419, 423 (5th Cir. 1969) (citing Provident Tradesm ens Bank & Trust Co. v. Patterson, 390 U.S. 10 2, 125 n.22 (1968)). III. D ISCU SSION To determ ine the relationship between Core, U.S. Specialty, and Strategic Planning, the Court m ust look to Louisiana law governing surety 4 contracts. In a contract of suretyship, “a person binds him self to a creditor to fulfill the obligation of another upon the failure of the latter to do so.” La. Civ. Code art. 30 35. A surety is liable “for the full performance of the obligation of the principal obligor.” La. Civ. Code art. 30 45. In other words, the surety’s liability is solidary with the principal’s. See La. Civ. Code art. 1794 (“An obligation is solidary for the obligors when each obligor is liable for the whole perform ance”). 12 As solidary obligors, both principal and surety are liable to the obligee for full perform ance of the contract. See La. Civ. Code art. 30 35; see also Bonny v. Brashear, 19 La. 383, 385 (1841) (stating that both principal and surety are “bound towards the creditor for the whole.”); Dictoguard, Inc. v. Lopeo, 983 So. 2d 156, 159 (La. App. 5 Cir. 20 0 8) (“A legal surety creates a separate and distinct obligation from the underlying judgm ent, that obligation being a guaranty of the perform ance of the principal, in the event the principal cannot perform.”). Accordingly, in Louisiana, even as early as 1841 “[i]t ha[d] long since been settled, that a surety can be sued without his 12 In Louisiana, “solidary” liability is equivalent to com m on law “joint and several” liability. In re Hari Aum , LLC, 714 F.3d 274, 277 n.1 (5th Cir. 20 13) (citing Black’s Law Dictionary 1521 (9th ed. 20 0 9)); see also Bank One v. SW C Corp., 823 So. 2d 10 60 , 10 63 (La. App. 2 Cir. 20 0 2) (“The term ‘joint and several’ has a distinct m eaning in the com m on law, akin to solidary liability in Louisiana . . .”). 5 principal.” Id.; see also Indus. Equip. Sales & Serv. Co. v. Sec. Plum bing Inc., 666 So. 2d 1165, 1167 (La. App. 5 Cir. 1995) (“The accessorial nature of the contract of surety does not obligate the creditor to first proceed against the principal debtor rather than the surety to enforce a debt. The creditor m ay sue the surety only, or he m ay join the surety and the principal in the same suit and get a judgm ent against both.” (em phasis in original)). Although Louisiana courts plainly perm it obligees to sue sureties alone, this does not end the inquiry. State law inform s the Rule 19 inquiry, but federal law governs whether a party is necessary. Morrison, 415 F.2d at 423. Under federal law, a party that is m erely subject to joint and several liability with an existing defendant is not a necessary party. Tem ple v. Sy nthes Corp., 498 U.S. 5, 7; see also Fed. R. Civ. P. 19 advisory com m ittee’s note to 1966 am endm ent (stating that the rule “is not at variance with the settled authorities holding that a tortfeasor with the usual ‘joint-and-several’ liability is m erely a perm issive party to an action against another with like liability” and that the “[j]oinder of these tortfeasors continues to be regulated by Rule 20 ”). U.S. Specialty offers nothing to distinguish this case from a standard case of joint and several liability. Under Rule 19(a)(1)(A), Strategic Associates is a necessary party if in Strategic Associates’ “absence com plete relief cannot be accorded am ong 6 those already parties.” As m ade clear by the above discussion, Core may obtain com plete relief from U.S. Specialty, and Strategic Associates is therefore not a necessary party under Rule 19(a)(1)(A). Under Rule 19(a)(1)(B) Strategic Associates is a necessary party if it claim s an interest relating to this case, and disposing of this case without Strategic Associates would: “(i) as a practical m atter im pair or im pede [Strategic Associates’] ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, m ultiple, or otherwise inconsistent obligations by reason of the claim ed interest.” U.S. Specialty has m ade no showing that disposing of this case with the existing parties will im pede Strategic Associates’ interests. First, U.S. Specialty is entitled to assert any defense available to Strategic Associates. La. Civ. Code art. 30 46. Second, Core provides evidence, and U.S. Specialty does not dispute, that Strategic Associates is represented in the related arbitration by the same attorneys that represent U.S. Specialty in this case. 13 Under these circum stances, the Court sees no realistic possibility that Strategic Associates’ absence from this case will im pede its interests. Sim ilarly, U.S. Specialty is at no risk of incurring m ultiple obligations. As noted, U.S. Specialty is entitled to reim bursement by Strategic Associates 13 R. Doc. 9-4. 7 for paym ents m ade to Core. La. Civ. Code art. 30 49 (“A surety who pays the creditor is entitled to reim bursem ent from the principal obligor.”). Although this raises the specter of m ultiple suits, Rule 19 is concerned with the threat of inconsistent obligations, not m ultiple litigation. See Shelton v. Exxon Corp., 843 F.2d 212, 218 (5th Cir. 1988). Finally, the Court notes that this analysis is supported by the many tim es this Court has rejected arguments that principals are indispensable parties in suits against sureties. See, e.g., Alton Ochsner Med. Found. v. HLM Design of N . Am ., Inc., No. 0 1-1662, 20 0 1 WL 120 40 54, at *3 (E.D. La. Oct. 10 , 20 0 1); CFSC Capital Corp. XXVII v. Riverw ood LaPlace Assocs., No. 96-10 89, 1996 WL 337220 , at *1 (E.D. La. J une 18, 1996); L & L Oil Co. v. Hugh Mac Tow ing Corp., 859 F. Supp. 10 0 2, 10 0 5 (E.D. La. 1994). To resist the Court’s conclusion, U.S. Specialty cites to Conerly Corp. v. Regions Bank, 668 F. Supp. 2d 816 (E.D. La. 20 0 9). That case, however, is easily distinguishable. In Conerly , the existing plaintiff had assigned a partial interest in the disputed contract to an absent party. Id. at 830 . The Court noted in that case that “[u]nder Louisiana law, when an incorporeal right is partially assigned, it m ust be enforced by both the assignor and assignee.” Id at 831 (citing La. Code Civ. P. 698(1)). By contrast, as noted, Louisiana law permits a principal to sue a surety alone. 8 IV. CON CLU SION For the foregoing reasons, defendant U.S. Specialty Insurance Com pany’s m otion to dism iss plaintiff Core Construction Services, LLC’s claim s pursuant to Federal Rule of Civil Procedure 12(b)(7) is DENIED. New Orleans, Louisiana, this _ 17th _ day of March, 20 17. ___ _____________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 9
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