Employers Mutual Casualty Company v. Pete Vicari General Contractor, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

EMPLOYERS MUTUAL CASUALTY COMPANY CIVIL ACTION

VERSUS NO. 19-12652

PETE VICARI GENERAL CONTRACTOR, LLC, SECTION “L” (3)

PETER VICARI AND BARBARA VICARI

ORDER & REASONS

Before the Court is Plaintiff Employers Mutual Casualty Company’s Motion for Partial

Summary Judgment. R. Doc. 11. The motion is opposed. R. Doc. 34. Plaintiff filed a reply. R.

Doc. 46. Having considered the parties’ briefs and the applicable law, the Court now rules as

follows.

I. BACKGROUND

Plaintiff Employers Mutual Casualty Company (“EMCC”) filed suit against Pete Vicari

General Contractor, LLC (“PVGC”), Pete Vicari, and Barbara Vicari. R. Doc. 1 at 1. EMCC is a

surety company that issues payment, performance and lien bonds and stand as a surety for selected

contractors, while PVGC is a contractor in the business of performing construction work. R. Doc.

1 at 2. In order to obtain work on certain projects, PVGC needed performance and payment bonds

and sought these bonds from EMCC. R. Doc. 1 at 2. EMCC claims that in order to induce EMCC

to issue bonds for PVGC, in February 2011, PVGC, Pete Vicari, and Barbara Vicari (collectively,

“Indemnitors”) executed a General Indemnity Agreement in favor of EMCC. R. Doc. 1 at 3.

EMCC claims that as a result of numerous projects in which PVGC was involved, claims were

made against PVGC and EMCC for alleged defective and delayed performance, and non-payment

for work and/or materials by PVGC. R. Doc. 1 at 10–23. Specifically, EMCC alleges that PVGC

entered into a contract with the Plaquemines Parish School Board (“PPSB”) for a construction

project known as Belle Chasse Primary Pre K-1 (“BCEL”). R. Doc. 1 at 12. EMCC alleges that

because of project delays and construction issues, PPSB issued a Notice of Default and

Termination Letter to PVGC in November 2015 and initiated a claim against the BCEL

Performance Bond. R. Doc. 1 at 13–18. EMCC then conducted an investigation of PPSB’s

termination of PVGC and claim against the BCEL Performance Bond and ultimately denied

PPSB’s claim. R. Doc. 1 at 18–19. Thereafter, beginning in late February/early March 2016,

EMCC, PPSB, and PVGC engaged in settlement negotiations. R. Doc. 1 at 23. Following

settlement negotiations, EMCC contends that it agreed to a limited waiver of the indemnity

obligations owed to EMCC by Indemnitors, but alleges that this Limited Waiver of Indemnity was

wholly contingent on the execution of the Settlement Agreement and no additional claims being

made against the BCEL Performance Bond. R. Doc. 1 at 27–28. However, EMCC argues that

subsequent claims voided the Limited Waiver of Indemnity and made Indemnitors fully liable for

all of EMCC’s incurred costs and losses as a result of providing the BCEL Bond. R. Doc. 1 at 41.

To date, EMCC alleges that it has sustained a total loss of $1,195,921.46 representing

amounts paid for claims, consulting fees, and attorneys’ fees in connection with the BCEL Bond

and the Lafitte Bond (collectively, “Bonds”) that EMCC issued on behalf of PVGC. R. Doc. 1 at

52. EMCC thus seeks specific performance of the Indemnity Agreement and request a deposit of

collateral security of $1,100,000 under the Indemnity Agreement. R. Doc. 1 at 53. EMCC also

seeks a judgment declaring the Limited Waiver of Indemnity null and void and making

Indemnitors fully liable under the Indemnity Agreement, and requiring Indemnitors to pay EMCC

in the amount of $1,195,921.46 to reimburse EMCC for the losses, costs, and expenses incurred

to date. R. Doc. 1 at 66. Moreover, EMCC seeks judgment in EMCC’s favor for reimbursement

of all sums expended by EMCC, for an order requiring Indemnitors to indemnify and exonerate

EMCC for all liabilities, losses, and expenses, and attorneys’ fees, and for an order permanently

enjoining PVGC, Pete Vicari, and Barbara Vicari from selling, transferring, disposing, liening

their assets and property, etc. unless and EMCC is paid. R. Doc. 1 at 66.

PVGC, Peter Vicari, and Barbara Vicari filed an Answer, Affirmative Defenses, and

Counterclaim. R. Doc. 6. Defendants generally deny the allegations and also assert numerous

affirmative defenses, including that: (1) they are not liable to EMCC for indemnity or damages;

(2) they complied with all terms, conditions, and requirements of the General Agreement of

Indemnity; (3) they acted in good faith at all times; (4) EMCC breached the terms, conditions, and

requirements of the Indemnity Agreement and Performance Bonds and therefore released and

waived any claims against Defendants; (5) EMCC acted in bad faith; and (6) they are not

responsible for any alleged damages or losses sustained by EMCC. R. Doc. 6 at 34–37. Defendants

also assert a Counterclaim against EMCC, contending EMCC engaged in bad faith with respect to

the Indemnity Agreement and Performance Bonds. Moreover, Defendants argue that EMCC’s

demand for collateral is invalid because the construction job that the surety secured has been

completed and no claims have been made; thus, no collateral is required. R. Doc. 6 at 59.

Defendants thus seek declaratory relief, and damages for the following: breach of contract, breach

of the covenant of good faith, for violations under the Louisiana Unfair Trade Practices Act

(“LUTPA”), and for detrimental reliance.

II. PENDING MOTION

EMCC now files a motion for partial summary judgment against Indemnitors, seeking

collateral of $1,110,000 from them. R. Doc. 11 at 1. EMCC argues that it has incurred losses and

costs as a result of providing bonds to PVGC and on May 28, 2019, EMCC issued a collateral

demand pursuant to Section 11 of the Indemnity Agreement to Indemnitors. R. Doc. 11-1 at 4.

However, Indemnitors failed to provide the requested security, so EMCC now requests that

Indemnitors deposit $1,110,000 as collateral pursuant to EMCC’s rights under the Indemnity

Agreement. R. Doc. 11-1 at 4–5.

III. LAW AND ANALYSIS

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). When ruling on a motion

for summary judgment, a court may not resolve credibility issues or weigh evidence. See Delta &

Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008); Int’l

Shortstop, Inc. v. Rally’s Inc., 939 F.2d 1257, 1263 (5th Cir. 1991).

Under Federal Rule of Civil Procedure 56(c), the moving party bears the initial burden of

“informing the district court of the basis for its motion, and identifying those portions of [the

record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex,

477 U.S. at 322. “Rule 56(c) mandates the entry of summary judgment, after adequate time for

discovery and upon motion, against a party who fails to make a showing sufficient to establish the

existence of an element essential to that party’s case, and on which the party will bear the burden

of proof at trial.” Id. The court must find “[a] factual dispute [to be] ‘genuine’ if the evidence is

such that a reasonable jury could return a verdict for the nonmoving party [and a] fact [to be]

‘material’ if it might affect the outcome of the suit under the governing substantive law.” Beck v.

Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986)). Moreover, the court must assess the evidence and “review the facts

drawing all inferences most favorable to the party opposing the motion.” Reid v. State Farm Mut.

Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir. 1986). But “unsubstantiated assertions,” “conclusory

allegations,” and merely colorable factual bases are insufficient to defeat a motion for summary

judgment. See Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994); Anderson, 477 U.S. at 249–50.

However, summary judgment is generally “not appropriate unless the nonmoving party has

been provided adequate time for discovery.” Bankers Trust Co. of California v. Boydell, 46 F.

App’x 731 (5th Cir. 2002) (citing Celotex, 477 U.S. at 322). “When a party is not given a full and

fair opportunity to discover information essential to its opposition to summary judgment, the

limitation on discovery is reversible error.” Access Telecom, Inc. v. MCI Telecommunications

Corp., 197 F.3d 694, 720 (5th Cir. 1999) (citing Anderson, 477 U.S. at 250).

In this case, EMCC argues that the Indemnity Agreement serves as the binding law between

EMCC and Indemnitors, and the parties agreed that Iowa law would govern the contract. R. Doc.

11-1 at 6–7. Under Iowa law, a surety has the right to demand that the securities in the hands of a

creditor are preserved for his indemnity in the event that he is compelled to pay it. Bedwell v.

Gephart, 24 N.W. 585, 586 (1885). Moreover, Louisiana federal courts have applied Iowa federal

law and held that a surety is entitled to collateral security pursuant to an indemnity agreement. See

W. Sur. Co. v. PASI of LA, Inc., 334 F. Supp. 3d 764, 794 (M.D. La. 2018) (“[P]laintiff has

established that it is entitled under Iowa law to specific performance of its contractual right to

collateral security.”); Employers Mut. Cas. Co. v. Precision Const. & Maint., LLC, No. CIV.A.

14-1420, 2015 WL 5552414, at *2 (E.D. La. Sept. 17, 2015) (granting partial summary judgment

to surety for collateral demand in the amount of $300,000). EMCC alleges that it is undisputed it

requested Indemnitors to provide $1,110,000 in collateral, which Indemnitors refused, so there

was a breach of the Indemnity Agreement and EMCC is entitled to collateral security. R. Doc. 11-

1 at 10. EMCC thus contends there are no genuine issues of material fact on these issues and partial

summary judgment for collateral security is warranted. R. Doc. 11-1 at 11.

In opposition, Indemnitors argue that EMCC that EMCC is attempting to “short-circuit this

litigation by asking the Court to prematurely adjudicate the seminal issues in this case.” R. Doc.

34 at 1. Indemnitors contend that this case is not a typical dispute in which a surety is seeking

collateral from indemnitors to protect against future loss, but rather, it involves

egregious misconduct” by a surety that breached its obligations in bad faith. R. Doc. 34 at 1.

Indemnitors further allege that the Indemnity Agreement is not the exclusive law between the

parties because there were subsequent waiver and settlement agreements that “significantly

modified the rights of the parties” under the Indemnity Agreement. R. Doc. 34 at 2. In fact,

Indemnitors believe that EMCC’s breach of its contractual and good faith obligations have

nullified EMCC’s right to demand collateral and it would be inequitable and prejudicial to

Indemnitors to require them to pay collateral when their obligation to indemnify is null and void

as a matter of law. R. Doc. 34 at 2. Moreover, Indemnitors allege that their Counterclaim raises

numerous genuine issues of material fact that defeat summary judgment. R. Doc. 34 at 2.

Indemnitors also contend that EMCC is misrepresenting the remedy it is seeking and that it is

actually seeking recovery of alleged losses rather than collateral as it claims. R. Doc. 34 at 25.

Finally, Indemnitors argue that summary judgment is also not warranted because there has been a

lack of adequate discovery in this matter, particularly regarding the critical fact issues at play in

this motion. R. Doc. 34 at 28.

As a preliminary matter, it is not clear whether EMCC is actually seeking recovery of

alleged past losses—which is not subject to a collateral demand—or whether it is actually seeking

collateral as it claims. If the latter, it is unclear as to the purpose of the collateral since it appears

that the construction job has been completed and no claims have been filed. Nevertheless, the

Court concludes that the parties have not “been provided adequate time for discovery” in this

matter and therefore, summary judgment is not appropriate at this time. See Boydell, 46 F. App’x

731. To date, no depositions have been conducted and document discovery is minimal at best.

Further discovery will enable the parties to establish whether EMCC is seeking collateral pursuant

to the Indemnity Agreement as it claims, or whether EMCC is seeking payment for past losses as

Indemnitors claim. Accordingly, the Court will deny this motion for partial summary judgment as

premature and give the non-moving party a “full and fair opportunity to discover information

essential to its opposition to summary judgment.” Access Telecom, Inc., 197 F.3d at 720.

IV. CONCLUSION

For the reasons stated above,

IT IS ORDERED that Plaintiff Employers Mutual Casualty Company’s Motion for Partial

Summary Judgment, R. Doc. 11, is hereby DENIED as premature, reserving the right of the party

to re-file at a later date if necessary.

New Orleans, Louisiana, this 6th day of February, 2020.

Ay, CM

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UNITED STATES DISTRICT JUDGE