The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PLENARY INFRASTRUCTURE CIVIL ACTION
BELLE CHASSE, LLC
VERSUS No. 22-2666
ASPEN AMERICAN INSURANCE SECTION: “J”(5)
COMPANY
ORDER AND REASONS
Before the Court is a Motion for Partial Summary Judgment (Rec. Doc. 23)
filed by Defendant, Aspen American Insurance Company (“Aspen”); an opposition
thereto (Rec. Doc. 31), filed by Plaintiff, Plenary Infrastructure Belle Chasse, LLC
(“Plenary”); and Aspen’s reply (Rec Doc 34). Having considered the motion and legal
memoranda, the record, and the applicable law, the Court finds that the motion
should be GRANTED.
FACTS AND PROCEDURAL BACKGROUND
Plenary is the general contractor on the Belle Chasse Bridge and Tunnel
Replacement Public-Private Partnership Project (“the Project”). Plenary, as the
private partner with the Louisiana Department of Transportation and Development
(“LA DOTD”) was responsible for financing, design-build construction, tolling, and
long-term operations and maintenance for the bridge replacement. Plenary and the
LA DOTD executed a Comprehensive Agreement setting out the terms and conditions
for the project, including that Plenary (or its chosen subcontractor) was obligated to
perform Operations and Maintenance (“O&M Work”) until the existing bridge and
tunnel is decommissioned in accordance with the Agreement with LA DOTD. The
Comprehensive Agreement also requires that Plenary or its subcontractor furnish a
performance bond and payment bond to secure Plenary’s obligations.
Plenary retained DBi Services, LLC (“DBi”) as a subcontractor to perform the
Construction Period O&M Work and entered into an O&M Contract with Plenary. As
security for DBi’s obligations, DBi acquired an O&M Payment and Performance Bond
(“the Bond”) from Aspen, naming DBi as the Principal, Aspen as the Surety, and
Plenary as the Obligee. The Bond states that the DBi, Aspen, and Plenary bind
themselves for all obligations incurred under the O&M Contract “in the amount of
Five Hundred Ninety-Nine Thousand Four Hundred and 00/100 Dollars
($599,400.00) for the Payment Bond and in the amount of Five Hundred Ninety-Nine
Thousand Four Hundred and 00/100 Dollars ($599,400.00) for the Performance
Bond.” (Rec. Doc. 1-10, at 1). The Bond states that it was effective from January 21,
2021 to January 20, 2022. Id. The Bond issued by Aspen replaced a bond issued by
Harco National Insurance Company, which expired on January 20, 2021.
On October 22, 2021, DBi ceased operations abruptly and without notice and
terminated its employees on the project, constituting a default under the O&M
Contract. On that same day, Plenary emailed an initial Notice of Default to DBi. On
October 22, 2021 Plenary informed Aspen that DBi would no longer be manning the
Project and requested that Aspen perform under the Bond. On October 24, 2021,
Plenary resubmitted the notice to DBi and delivered a Notice of Nonconforming Work
to DBI demanding DBi cure the defects caused by its default, including DBi’s failure
to provide bridge operators during construction, to ensure the bridge is continuously
manned, and to perform activities pursuant to the O&M Contract. That same date,
Plenary sent Aspen another letter making a demand under the Bond, and Aspen
initiated an investigation into what amount Plenary was entitled under the Bond.
On November 5, 2021, Plenary sent DBi a letter officially terminating the
O&M Contract and also informed Aspen of that termination. On November 24, 2021,
Plenary provided Aspen with an itemization of its alleged costs incurred as a result
of DBi’s default, totaling over $830,000 and offered to settle for $599,400 plus
$200,000 for Aspen’s alleged failure to perform. On December 7, 2021, Aspen notified
DBi and Plenary that it would not be renewing the Bond, so the Bond expired January
21, 2022.
On January 12, 2022, Plenary made a renewed demand against the Bond and
proof of loss for over $2.4 million, which it claimed it had or would incur to complete
the total scope of DBi’s work under the five-year O&M Contract. On February 11,
2022, Aspen responded with an offer to tender $118, 191.78 to Plenary but denied the
remainder of the claim, explaining that information to substantiate the claim was
missing and the documents Plenary provided showed that Plenary was seeking
amounts far beyond the Bond’s penal sum and for anticipated costs past the Bond’s
expiration date. Aspen continued to decline to pay additional amounts to Plenary,
and that denial resulted in Plenary filing the instant suit against Aspen on August
15, 2022. Plenary asserted two counts against Aspen: (1) breach of contract for failure
to pay the amount demanded by Plenary under the Bond and (2) bad faith penalties
under the Louisiana Insurance Code for the failure to pay.
In its breach of contract claim, Plenary argues that, because “Aspen’s
obligations were triggered during the Bond Term, Aspen is liable for all costs incurred
by Plenary, without regard to whether or not the costs were incurred or anticipated
to be incurred prior to January 20, 2022,” the last day before the Bond expired. (Rec.
Doc. 1, at 14). In the instant motion, Aspen seeks partial summary judgment on two
legal issues related to Plenary’s claims under Performance Bond No. SU39234
(“Bond”) issued by Aspen: (1) the term of the bond (and dismissal of any claims for
damages related to performance outside the Bond term) and (2) the penal sum of the
Bond (and dismissal of any claims for damages in excess of the penal sum). (Rec. Doc.
23-1, at 1). In response, Plenary argues that the motion is premature and there are
genuine issues of material fact regarding the extent of Aspen’s liability. (Rec. Doc. 31,
at 10). Specifically, Plenary disputes whether the parties contemplated that the Bond
would be subject to a one-year maximum term
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing FED. R. CIV. P. 56); see Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a
dispute as to any material fact exists, a court considers “all of the evidence in the
record but refrains from making credibility determinations or weighing the evidence.”
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th
Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but
a party cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be
satisfied that “a reasonable jury could not return a verdict for the nonmoving party.”
Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party will bear the burden
of proof at trial, the moving party “must come forward with evidence which would
‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving
party can then defeat the motion by either countering with sufficient evidence of its
own, or “showing that the moving party’s evidence is so sheer that it may not
persuade the reasonable fact-finder to return a verdict in favor of the moving party.”
Id. at 1265.
If the dispositive issue is one on which the nonmoving party will bear the
burden of proof at trial, the moving party may satisfy its burden by merely pointing
out that the evidence in the record is insufficient with respect to an essential element
of the nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden then shifts
to the nonmoving party, who must, by submitting or referring to evidence, set out
specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may
not rest upon the pleadings but must identify specific facts that establish a genuine
issue for trial. See id. at 325; Little, 37 F.3d at 1075.
DISCUSSION
Aspen argues that the Bond only covers costs incurred for O&M Work
performed or to be performed during the Bond’s term—not for the entire period of the
O&M Contract as Plenary requested—based on the Bond’s language itself together
with the Comprehensive Agreement with LA DOTD, the O&M Contract with DBi,
and the previous bond issued by Harco. (Rec. Doc. 23-1, at 8). Aspen asserts that
Plenary is not entitled to amounts for costs incurred after January 20, 2021 and any
amount above $599,400. Id. at 10.
I. Contractual Damages
Aspen argues that it is entitled to partial summary judgment narrowing
Plenary’s breach of contract claim because the plain language of the Bond states that
the Bond was only effective to guarantee DBi’s performance of services for the one-
year period of January 21, 2021 to January 20, 2022. (Rec. Doc. 23-1, at 10). Aspen
also argues that the total amount for which Aspen can be liable to Plenary under the
Bond is capped at the Bond’s penal sum. Id. at 12-13. In response, Plenary contends
that Aspen’s interpretation of the contract leads to absurd consequences, and instead,
the Bond Term establishes the time frame in which the subcontractor default will
trigger Aspen’s obligations. (Rec. Doc. 31, at 23).
“When the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the parties’ intent.”
La. Civ. Code art. 2046. A performance bond, which guarantees that a contractor will
perform the contract, is a conventional bond, so the language of the bond itself
controls its meaning. Roy Anderson Corp. v. 225 Baronne Complex, LLC, 280 So. 3d
730, 743 (La. App. 4 Cir. 2019); Stonecipher v. Mitchell, 655 So. 2d 1381, 1389 (La.
App. 2 Cir. 1995). The language used in the conventional bond must be deemed to
fully express the parties’ intent when the words are clear and explicit and lead to no
absurd consequences. Emile M. Babst Co. v. U.S. Fid. & Guar. Co., 497 So. 2d 1358,
1360 (La. 1986). A suretyship may be qualified, conditioned, or limited in any lawful
manner, and obligations set forth in a bond are strictly construed in favor of
protecting the oblige. La. Civ. Code art. 3040; Stonecipher, 655 So. 2d at 1389; Cont'l
Cas. Co. v. Associated Pipe & Supply Co., 447 F.2d 1041, 1051 n.10 (5th Cir. 1971).
The “penal sum” is “the limit of the surety's financial exposure under a
performance bond.” 4A Bruner & O'Connor Construction Law § 12:22 (2023). It “is
the sum stated on the face of the performance bond as the surety’s maximum liability
to the obligee for completion of the contract or payment of the obligee’ s actual costs
of completion.” Id.
Here, the Bond states, in pertinent part:
Be it known that DBI Services, LLC, as Principal, and Aspen American
Insurance Company as Surety, meeting the requirements of Louisiana
Revised Statutes 48:255(D), hereby bind themselves, in solido, to
Plenary Infrastructure Belle Chasse LLC, as Obligee, and other
potential claimants, for all obligations incurred by the Principal under
its O&M Contract for the maintenance of State Project No. H.004791 in
the amount of Five Hundred Ninety-Nine Thousand Four Hundred and
00/100 Dollars ($599,400.00) for the Payment Bond and in the amount
of Five Hundred Ninety-Nine Thousand Four Hundred and 00/100
Dollars ($599,400.00) for the Performance Bond furnished in accordance
with Section 16.08(a) of the O&M Contract. The obligations of the
Principal and Surety under these Payment and Performance Bonds
must continue in full force and effect, until all materials, equipment,
and labor have been provided for the maintenance of the Project’s
current annual term only, and all requirements contained in the O&M
Contract for the maintenance of the Project have been completed in a
timely, thorough, and workmanlike manner, for the current annual
term only and furthermore said bonds are subject to an annual renewal
or replacement of such Payment and Performance Bonds in accordance
with Section 16.08(a) of the O&M Contract. The parties acknowledge
that these Bonds are given under the provisions and limitations
contained in Louisiana Revised Statutes 28:250, et seq.
These Payment and Performance Bonds shall be effective from January
21, 2021 to January 20, 2022, unless said bond is released by the Obligee
prior thereto, and may be continued by Continuation Certificate by the
Principal and Surety.
(Rec. Doc. 1-10, at 1).
Considering the foregoing terms, the Court finds that the language of the Bond
is clear and explicit and leads to no absurd consequences, so no further interpretation
is needed to determine the parties’ intent as to the term of the Bond. The Bond clearly
sets out limits to the suretyship: that Aspen’s obligations continue for the annual
term (January 21, 2021 to January 20, 2022) only, unless the bond is released early
by Plenary or if DBi and Aspen extend the Bond. Neither party alleges that the Bond
was extended, and Aspen notified Plenary on December 7, 2021 that the Bond would
not be renewed. The Bond does not include language triggering obligations for Aspen
for the entirety of the O&M Contract with DBi or for any costs incurred or anticipated
to be incurred in connection with DBi’s obligations to perform after January 20, 2022.
As to the penal sum, the Court also finds that the language of the Bond is clear
and explicit: Aspen can be liable under the bond for costs up to $599,400. The Court
need not, as Plenary suggests, look at extrinsic evidence beyond the four corners of
the instrument to determine that the parties agreed that Aspen would not be liable
for contractual damages in excess of the penal bond amount. Although Plenary argues
that additional discovery is required regarding the parties’ intent to procure a bond
with different terms, any facts as to the parties’ intent are not required for the Court
to determine the Bond terms for the purposes of this motion.
II. Bad Faith Penalties
Plenary argues that the penal sum does not apply to its claims for statutory
bad faith penalties under Louisiana Revised Statutes 22:1982 and 22:1973. (Rec. Doc.
31, at 20). However, only the breach of contract claim is at issue in the instant motion,
not the statutory bad faith penalty claim. Thus, at this time, the Court need not
decide whether the statutory bad faith penalties are subject to the limitation of
Aspen’s liability to the penal sum. Accordingly,
CONCLUSION
IT IS HEREBY ORDERED that the Motion for Partial Summary Judgment
(Rec. Doc. 23) on the issue of the extent of Aspen’s liability is GRANTED.
New Orleans, Louisiana, this 23rd day of February, 2024.
Sauce
A Wi (_/
CARL J. BAR ry. Rv
UNITED STATES DISTRICT JUDGE