Plaza Athenee, S.E. v. U.S. Fidelity, No. 3:2001cv02597 - Document 303 (D.P.R. 2009)

Court Description: OPINION AND ORDER DENYING 300 Third Party MOTION for Reconsideration; GRANTING IN PART 299 Supplemental Motion Regarding Reasonableness of USF&G'S Claimed Fees and Costs. Our prior Opinion and Order, dated June 22, 2009 (Docket No. 297 ), is hereby amended to reflect a downward adjustment in fees awarded as damages to USF&G in the amount of $11,294.32. Signed by Chief Judge Jose A Fuste on 7/24/09.(mrj)

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1 2 UNITED STATES DISTRICT COURT DISTRICT OF PUERTO RICO 3 PLAZA ATHà Nà E, S.E., 4 Plaintiff, 5 v. 6 7 8 9 10 11 12 13 14 Civil No. 01-2597 (PG/JAF) UNITED STATES FIDELITY AND GUARANTY COMPANY (USF&G), Defendant and Third-Party Plaintiff, v. INGENIEROS Y PROYECTISTAS, et al., Third-Party Defendants. OPINION AND ORDER 15 This is an eight-year-old civil litigation case that is being 16 addressed as part of our obligation to dispose of three-year-old-and- 17 older cases under the Directives of the Judicial Conference of the 18 United States. (See Misc. 09-59 (JAF) (Docket No. 291).) 19 I. 20 Introduction 21 This case is a diversity action arising out of a controversy 22 between a surety, Defendant and Third-Party Plaintiff United States 23 Fidelity and Guaranty Company ( USF&G ), its principal, Third-Party 24 Defendant Ingenieros y Proyectistas, Inc. (I&P), and a real estate 25 development company, Plaintiff Plaza Athénée, S.E. ( PA ). Plaintiff Civil No. 01-2597 (PG/JAF) -2- 1 PA filed the first of two complaints in this case against Defendant 2 USF&G to collect monies allegedly due under a Performance and Payment 3 Bond (the Bond ) issued by USF&G on behalf of its principal I&P. In 4 September 2006, Plaintiff PA and Defendant USF&G reached a settlement 5 of PA s claims. On October 30, 2006, we adjudicated the claims 6 remaining in this case brought by USF&G as a Third-Party Plaintiff 7 for indemnification and reimbursement against contractor I&P and its 8 four 9 Miguel principals, A. Fernando Maldonado, and Vigil Fernández, Rosario I. Clarisse Guzmán Nieto, Piovanetti, hereinafter 10 collectively referred to as I&P (Docket No. 227), after which USF&G 11 moved for damages. On June 22, 2009, we granted, in part (Docket 12 No. 297),1 USF&G s Motion for Summary Judgment of Third Party 13 Plaintiff United States Fidelity And Guaranty Company as to Damages 14 on Count I of USF&G s Third Party Complaint ( USF&G s Motion ) after 15 finding insufficient evidence to support I&P s claim that USF&G made 16 payments2 in bad faith in violation of Paragraph IV(A)3 of the Master 17 Surety Agreement ( MSA ). Third-Party Defendant I&P now moves for 1 We declined to award USF&G interest on damages. 2 The payments at issue include payments made to Plaintiff PA in settlement of PA s claims, as well as fees and costs paid to counsel for USF&G. (See Docket No. 268-2, at 39, III(A) and IV(A).) 3 Paragraph IV(A) of the MSA reads as follows: The liability of UNDERSIGNED [I&P] shall extend to and include all amounts paid by SURETY [USF&G] in good faith under the belief that: (1) SURETY [USF&G] was or might be liable therefor; (2) such payments were necessary or advisable to protect any of SURETY S rights or to avoid or lessen SURETY s liability or alleged liability. (Docket 268-2 at 39.) Civil No. 01-2597 (PG/JAF) -3- 1 reconsideration pursuant to Federal Rule of Civil Procedure 59(e) 2 (Docket No. 300), which Third-Party Plaintiff USF&G opposes (Docket 3 No. 302). 4 No. 5 consideration regarding the reasonableness of fees claimed in USF&G s 6 Motion (Docket No. 299), which USF&G opposes (Docket No. 301). 297 By separate motion and pursuant to our invitation (Docket at 30),4 I&P submits a supplemental 7 for our II. 8 motion Standard of Review 9 We entertain motions for reconsideration to (1) correct manifest 10 errors of law or fact, (2) consider newly-discovered evidence, 11 (3) incorporate an intervening change in the law, or (4) otherwise 12 prevent manifest injustice. See Marie v. Allied Home Mortgage Corp., 13 402 F.3d 1, 7 n.2 (1st Cir. 2005) (citing 11 Charles Allen Wright, 14 Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure 15 § 2810.1 (2d ed.1995)); see also Aybar v. Crispin-Reyes, 118 F.3d 10, 16 16 (1st Cir. 1997); FDIC v. World Univ., Inc., 978 F.2d 10, 16 (1st 17 Cir. 1992). 18 III. 19 I&P s Motion for Reconsideration (Docket No. 300) 20 21 I&P moves for reconsideration on two grounds. First, I&P contends that we applied the wrong law. Specifically, I&P asserts 4 By Order and Opinion dated June 22, 2009 (Docket No. 297), we unsealed billing statements submitted by USF&G to support the fees claimed in USF&G s Motion and invited I&P to submit argument regarding the reasonableness of such fees. Civil No. 01-2597 (PG/JAF) -4- 1 that we erred in not considering USF&G s duty of good faith beyond 2 Paragraph IV(A)5 of the Master Surety Agreement ( MSA ). (Docket 3 No. 300.) I&P claims that USF&G s alleged bad faith conduct6 should 4 have been evaluated for compliance with USF&G s general duty of good- 5 faith performance under Puerto Rico common law and Article 1210 of 6 the Puerto Rico Civil Code, 31 L.P.R.A. § 3375.7 Id. Although we 7 typically do not entertain motions for reconsideration to the extent 8 it would require us to rehash old arguments, Standard Quimica De 9 Venezuela v. Central Hispano International, Inc., 189 F.R.D. 202, n.4 10 (D.P.R. 1999), we take this opportunity to more fully explain our 11 rejection of I&P s good-faith argument. 12 As noted in our Opinion and Order of June 22, 2009, we recognize 13 that Puerto Rico law imposes a general duty of 14 contracting parties, see An-Port, Inc. v. MBR Industries, Inc., 772 15 F.Supp. 1301, 1314 (D.P.R. 1991); AMECO v. Jaress Corp., 98 P.R.R. 16 820 (1970); 31 L.P.R. § 3375. In opposition to USF&G s Motion and 17 again on motion for reconsideration, I&P offers Puerto Rico authority 5 good faith on Supra, note 3. 6 I&P s opposition is replete with allegations that USF&G conducted itself in bad faith, the majority of which are allegations that USF&G did not adequately consider potential defenses to liability and did not consult I&P during the litigation and settlement of PA s claims. 7 Article 1210 reads as follows: Contracts are perfected by mere consent, and from that time they are binding, not only with regard to the fulfilment of what has been expressly stipulated, but also with regard to all the consequences which, according to their character, are in accordance with good faith, use, and law. 31 L.P.R.A. § 3375 (emphasis supplied). Civil No. 01-2597 (PG/JAF) -5- 1 governing the implied duty of good faith in support of its position 2 that USF&G s conduct need only rise to the level of negligent 3 conduct to constitute bad faith conduct. We would be more inclined 4 to rely on I&P s authority if it were more on point. I&P s 5 authority 6 indemnification under a surety agreement and the notion of good 7 faith as it is incorporated into the express language of such 8 agreements; rather, I&P s authority concerns an implied duty of good 9 faith does not performance concern under the other liability types of of a principal contracts. See, for e.g., 10 Oriental Financial Services v. Nieves, 2007 T.S.P.R. 193; Colón v. 11 Glamour Nails & Boutique, 2006 T.S.P.R. 16 (2006); Rodriguez Reyes v. 12 Caribbean Hospital Corp., 141 D.P.R. 182 (1996); González v. The 13 Commonwealth Insurance Company, 140 D.P.R. 673, 683 (1996). This is 14 understandable as Puerto Rico law is silent on the meaning of good 15 faith when it is used in an express stipulation of what tend to be 16 form 17 guidance. 18 the issue, which we review in our Opinion and Order. (See Docket 19 No. 297 at 17-21.) Such authority concerns surety agreements with the 20 same or similar language as that found in paragraph IV(A) of the MSA. 21 We find this authority to be on point and controlling. surety agreements. We, therefore, look to other law for There is ample federal case law that directly addresses 22 Our decision to rely on federal authority does not offend 23 Article 1210 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3375. 24 Article 1210 recognizes the binding nature of a contract s express Civil No. 01-2597 (PG/JAF) -6- 1 stipulations. 31 L.P.R.A. § 3375 ( they are binding, not only with 2 regard to the fulfilment of what has been expressly stipulated, ).8 3 Having 4 paragraph IV(A), we appropriately analyze the meaning of good faith 5 under case law that addresses the meaning of good faith when used 6 in the same or similar surety agreement provisions. 7 to consider USF&G s duty of good faith beyond paragraph IV(A) of the 8 MSA. found the alleged conduct to fall within the scope of There is no need 9 I&P s second contention is that we improperly assessed the 10 credibility of deposition testimony provided by USF&G s Rule 30(b)(6) 11 witness, Ms. Cristine Alexander.9 Both I&P and USF&G rely considerably 12 on Ms. Alexander s deposition testimony in their pleadings. (See 13 Docket Nos. 268 at 19-23 (I&P s opposing and counter statement of 14 material facts) and 282 at 01-03, 15-17 (USF&G s opposing and counter 15 statement of material facts.)10 Now, for the first time, I&P brings 16 into issue the credibility of Ms. Alexander s deposition testimony, 17 alleging that her demeanor and body language at the deposition casts 18 a doubt on the veracity of her testimony and would disclose that her 19 actions 8 or inaction were intentional, irresponsible, grossly Supra, note 7. 9 Ms. Alexander is the USF&G claims handler who managed and authorized the settlement of claims brought by Plaintiff PA. 10 On May 29, 2009, we ordered USF&G to Ms. Alexander s deposition testimony in order to USF&G that were not available in the record (See copy of deposition testimony of Ms. Alexander); file a complete copy of review pages relied on by Docket No. 268-7)(partial (Docket No. 294.) Civil No. 01-2597 (PG/JAF) -7- 1 negligent or negligent. I&P s credibility argument is flawed for two 2 reasons. First, I&P failed to develop its credibility theory in 3 either its opposition or sur-reply. As such, we decline to reconsider 4 our 5 credibility. Iverson v. City of Boston, 452 F.3d 94, 104 (1st Cir. 6 2006). Second, a determination of whether or not Ms. Alexander s 7 actions were irresponsible or negligent is not dispositive of whether 8 USF&G conducted itself in good faith pursuant to paragraph IV(A). As 9 stated in our Opinion and Order, to demonstrate that USF&G violated 10 the good-faith provision in paragraph IV(A) of the MSA, I&P would 11 have 12 diligence, simple negligence, or even gross negligence. (Docket 13 No. 297 at 20.) It was I&P s burden to demonstrate that USF&G 14 conducted 15 recklessness, or breach of a known duty through motive or self- 16 interest or ill will in order to overcome summary disposition. Under 17 this standard, we found the evidence before us to be deficient, and 18 we fail to see how Ms. Alexander s demeanor and body language would 19 make up the deficiency. 20 decision to on produce itself grounds more that than with Ms. evidence dishonest Alexander s of bad purpose, testimony judgment, improper lacks lack of motive, Having considered the arguments of both parties, we find our 21 reliance on federal authority and Ms. Alexander s deposition 22 testimony to be proper. Accordingly, Third-Party Defendant I&P s 23 motion for reconsideration is DENIED. Civil No. 01-2597 (PG/JAF) -8- 1 II. 2 3 Supplemental Motion on Reasonableness of Attorney s Fees 4 Having reviewed for the first time the billing statements of 5 USF&G s counsel, I&P contends that we erred in our determination that 6 the fees claimed in USF&G s Motion are reasonable. I&P argues under 7 Rule 1.5 of the Model Rules of Professional Conduct that the fees 8 requested by USF&G are unreasonable (1) where USF&G utilized state- 9 side attorneys for the research of local Puerto Rico civil law 10 matters, (2) in consideration of USF&G s actual potential exposure 11 (Docket No. 299 at 5), and (3) where fees are imposed for duplicate 12 and excessive work, or clerical work. In opposition, USF&G argues 13 that I&P s claims are self-serving, inaccurate, and unsupported by 14 law or any industry standard. 15 Having reviewed I&P s motion and USF&G s opposition thereto in 16 conjunction with the billing statements of counsel for USF&G, we are 17 persuaded by I&P s argument with respect to invoice numbers 18244 18 (6/16/02), 24794 (7/20/04, 7/29/04, 7/29/04), 25426, 26187 (12/31/04, 19 12/16-31/2004), 26413, 26706, 27029, 27659, 28590, 29860, and 31391. 20 Accordingly, I&P s motion is GRANTED, in part. Our prior Opinion and 21 Order, dated June 22, 2009 (Docket No. 297), is hereby amended to Civil No. 01-2597 (PG/JAF) -9- 1 reflect a downward adjustment in fees awarded as damages to USF&G in 2 the amount of $11,294.32.11 3 IT IS SO ORDERED. 4 San Juan, Puerto Rico, this 24th day of July, 2009. 5 6 7 S/José Antonio Fusté JOSE ANTONIO FUSTE Chief U. S. District Judge 11 Invoices subject to a downward adjustment and the corresponding amount of adjustment are as follows: 18244 ($80), 24794 ($407.50 for filings), 25426 ($237.50 for filings and $608.57 for sur-reply), 26187 ($150 for filing and $7,500 for motion), 26413 ($912 for filing), 26706 ($56.25), 27029 ($225), 27659 ($230), 28590 ($600), 29860 (187.50), and 31391 ($100).

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