Employers Mutual Casualty Company v. Precision Construction & Maintenance, LLC et al, No. 2:2014cv01420 - Document 41 (E.D. La. 2015)
Court Description: ORDER AND REASONS - the Court DISMISSES WITHOUT PREJUDICE plaintiff's remaining claims for indemnification. The Court DENIES AS MOOT plaintiff's motion 20 to separate issues and stay proceedings.. Signed by Chief Judge Sarah S. Vance on 9/17/15. (jjs)
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Employers Mutual Casualty Company v. Precision Construction & Maintenance, LLC et al Doc. 41 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA EMPLOYERS MUTUAL CASUALTY COMPANY CIVIL ACTION VERSUS NO: 14-1420 PRECISION CONSTRUCTION & MAINTENANCE, LLC, ET AL. SECTION: R ORD ER AN D REASON S Plaintiff Employers Mutual Casualty Company ("EMC") moves the Court to separate the issues in this case an d to adm inistratively stay its claim s for indem nification for ongoing and future losses pending resolution of an underlying litigation. In a prior ruling, the Court noted that the claim s EMC seeks to have stayed appear prem ature under applicable law. Thus, the Court ordered EMC to show cause why those claim s should not be dism issed instead of stayed. After reviewing EMC's supplem ental briefing on the issue, the Court finds that the rem aining claim s for indem nification are prem ature and m ust be dism issed. EMC's m otion to separate and stay proceedings is denied as m oot. 1 Dockets.Justia.com I. BACKGROU N D This case involves a contractual dispute between a surety com pany and a construction contractor. A full explanation of the factual and procedural background can be found elsewhere.1 Here, the Court presents only those facts relevant to the instant order. EMC issued paym ent and perform ance bonds that enabled Precision Construction & Maintenance, LLC, Craig Trahan, and Marilyn Trahan (collectively, the "defendants") to obtain several construction and renovation contracts. To protect EMC against any loss on its bonds, defendants executed a General Agreem ent of Indem nity (the "Indem nity Agreem ent") in EMC's favor.2 Section 2 of the Indem nity Agreem ent states that defendants: [S]hall exonerate, indem nify, and keep indem nified [EMC] from and against any and all liability for losses and/ or expenses of w hatsoever kind or nature (including, but not lim ited to interest, court costs and counsel fees) and from and against any and all such losses and/ or expenditures which [EMC] m ay sustain and incur: (1) By reason of having executed or procured the execution of the Bonds, (2) By reason of the failure of [defendants] to perform or com ply with the covenants and conditions of this Agreem ent or (3) In enforcing any of the covenants and conditions of this agreem ent.3 1 R. Doc. 39. 2 R. Doc. 1-1. 3 Id. at 1, § 2. 2 After executing the Indem nity Agreem ent, defendants contracted with the City of New Orleans to serve as a general contractor for repairs on the Municipal Yacht Harbor Adm inistration Building (the "Yacht Harbor Project"). 4 EMC then provided a paym ent and perform ance bond, which secured defendants' obligation to perform the contracting work for the City of New Orleans.5 Unfortunately, the Yacht Harbor Project did not go as planned. After years of delays and disagreem ents between various parties, defendants term inated the Yacht Harbor Project contract 6 and sued the City for dam ages in Orleans Parish Civil District Court.7 The City responded by filing a reconventional dem and, alleging that defendants breached the contract by failing to perform agreed-upon work.8 The City later am ended its reconventional dem and to assert a claim against EMC as surety for defendants' perform ance.9 This lawsuit, (the "State Litigation") is still pending in Civil 4 See R. Doc. 13-4. 5 R. Doc. 13-12 at 4. 6 See R. Doc. 13-9 (Defendants' Sworn Notice of Term ination of Public Works Contract, filed in the Mortgage Records for Orleans Parish, dated February 27, 20 14). 7 See R. Doc. 22-1 at 7 (Defendants' Petition for Dam ages, For Am ounts Due Under Contract, and for Declaratory J udgm ent). 8 Id. at 36 (City's Answer, Affirm ative Defenses, and Reconventional Dem and). 9 R. Doc. 13-7 (City's Am ended Reconventional Dem and for Dam ages Due Under Contract). 3 District Court. On J une 18, 20 14, EMC filed this lawsuit, seeking to enforce its rights against defendants under the Indem nity Agreem ent.10 Count I of EMC's com plaint alleges that defendants are jointly and severally liable for "all past and future attorneys' fees, expenses, and costs incurred" by EMC as a result of having executed bonds for defendants' projects. Count II alleges that defendants failed to post collateral security with EMC, as required by the term s of the Indem nity Agreem ent, and seeks an order com pelling defendants to post cash or collateral in the am ount of EMC's reserve. On J une 10 , 20 15, EMC m oved the Court for partial sum m ary judgm ent.11 EMC then m oved the Court to separate the issues in this case and stay its claim s for ongoing and future losses and attorney's fees.12 On Septem ber 2, 20 15, the Court granted EMC's m otion for partial sum m ary judgm ent and ordered that defendants pay $ 10 ,0 0 0 in indem nity and post cash or collateral in the am ount of EMC's $ 30 0 ,0 0 0 reserve. The Court noted, however, that EMC's claim s for indem nification for ongoing and 10 R. Doc. 1. 11 R. Doc. 13-1. 12 R. Doc. 20 . 4 future losses appeared to be prem ature under Iowa law.13 Accordingly, the Court ordered that EMC show cause why its rem aining claim s for indem nification should not be dism issed instead of stayed. EMC tim ely filed a supplem ental briefing in support of its request for an adm inistrative stay. Defendants have not responded. II. D ISCU SSION Under Iowa law, an action for indem nity "accrues or becom es enforceable only when the indem nitee's legal liability becom es fixed or certain as in the entry of judgm ent or a settlem ent." Evjen v. Brooks, 372 N.W.2d 494, 496 (Iowa 1985); see also McNally & Nim ergood v. Neum ann-Kiew it Constructors, Inc., 648 N.W.2d 564, 574 (Iowa 20 0 2) ("Norm ally, a judgm ent in the underlying action will establish the essential liability to pursue indem nification."); 42 C.J .S. Indem nity § 25 ("In the usual indem nity situation, the indem nitor is liable to the indem nitee only after a judgm ent has been entered against it, and until that has occurred, no responsibility exists."). Thus, claims for indemnification do not arise until the party seeking indemnity 13 The Indem nity Agreem ent contains a choice-of-law provision, which states that the contract is governed by Iowa law. The Court's prior order concluded that the provision was valid and enforceable and construed the Indem nity Agreem ent under the principles of Iowa law. 5 has suffered "som e actual loss or dam age." Becker v. Cent. States Health & Life Co. of Om aha, 431 N.W.2d 354, 357 (Iowa 1988) overruled on other grounds by Johnston Equip. Corp. of Iow a v. Indus. Indem ., 489 N.W.2d 13 (Iowa 1992). Indem nification claim s are therefore prem ature until the aggrieved party m akes actual paym ent on the underlying claim pursuant to a settlem ent or judgm ent. See Kay don Acquisition Corp. v. Custum Mfg., Inc., 30 1 F. Supp. 2d 945, 960 (N.D. Iowa) order clarified on reconsideration, 317 F. Supp. 2d 896 (N.D. Iowa 20 0 4) (concluding that the "actual loss or dam age" requirem ent m eans "not sim ply incurring costs to defend against a claim to which indem nity m ay apply, but the 'actual loss or dam age' of paying a claim for which the payor is entitled to indem nity from another"). Here, EMC adm its that the State Litigation is ongoing and that there has been no judgm ent on or settlem ent of the claim s against it. Nonetheless, EMC argues that its claim s for indem nification are ripe because it has incurred, and continues to incur, attorneys' fees and other costs in connection with the State Litigation. While EMC m ay eventually be entitled to recover its ongoing expenditures under the Indem nity Agreem ent, the m ere paym ent of counsel fees does not give rise to a cause of action for indem nification. See Kay don, 30 1 F. Supp. 2d at 960 . A claim for indem nification "becom es enforceable only w hen the indem nitees' legal liability becom es fixed or certain as in the 6 entry of a judgm ent or a settlem ent." Becker, 431 N.W.2d at 357 (em phasis added). So until the Civil District Court renders a judgm ent in the State Litigation or EMC settles the claim s against it, EMC has no cause of action for indem nity.14 Because there is no claim for EMC to pursue at this tim e, EMC's suit is prem ature and m ust be dism issed without prejudice. III. CON CLU SION For the foregoing reasons, the Court DISMISSES WITHOUT PREJ UDICE plaintiff's rem aining claim s for indem nification. The Court DENIES AS MOOT plaintiff's m otion to separate issues and stay proceedings. 17th New Orleans, Louisiana, this _ _ _ _ day of Septem ber, 20 15. ______________________________ Sarah S. Vance United States District J udge 14 EMC argues that judicial econom y warrants a stay in this case rather than dism issal because "[t]he Court is already fam iliar with the parties and issues involved, and has m ade dispositive findings of fact and conclusions of law with respect to the GAI." The Court finds this argum ent unpersuasive. In light of the Court's duty to "not let cases languish before it," Alcala v. Texas W ebb Cnty ., 625 F. Supp. 2d 391, 40 7 (S.D. Tex. 20 0 9), the Court finds dism issal without prejudice to be m ore appropriate. 7
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