THE OHIO CASUALTY INSURANCE COMPANY v. AMERICAN TEC ELECTRIC COMPANY

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

THE OHIO CASUALTY INSURANCE )

COMPANY, )

)

Plaintiff, )

)

v. ) 1:23-cv-253

)

AMERICAN TEC ELECTRIC )

COMPANY, d/b/a AMERICAN )

ELECTRIC COMPANY, and )

DAVID A. GOODSON, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

OSTEEN, JR., District Judge

Plaintiff, The Ohio Casualty Insurance Company, has filed a

Motion for Entry of Default Judgment Against Defendants.

(Doc. 9.) In support of the motion, Plaintiff filed declarations

of Thomas H. Duke, (Doc. 11), a Senior Surety Claims Counsel,

and James A. Roberts, (Doc. 12), counsel for Plaintiff. After

consideration of the pleadings, evidence, and relevant

authorities, this court concludes Plaintiff is entitled to

default judgment and the motion will be granted.

In summary, the evidence and pleadings establish that

Plaintiff issued performance and payment bonds on behalf of

Defendants and, as part of that process, entered into a General

Agreement of Indemnity (“Indemnity Agreement”) with Defendants.

(Doc. 11 at 2.)1 Following Defendant’s failure to complete its

subcontract obligations, Plaintiff was compelled to perform its

obligations under the payment and performance bonds. (Id. at

2–3.) As a result, Defendants became liable to Plaintiff under

the terms of the Indemnity Agreement for the loss incurred by

Plaintiff. (See Doc. 1 at 6; Doc. 1-1 at 3.) “Loss” is defined

as

any loss, fees, costs and expenses, including pre- and

post-judgment interest at the maximum rate permitted

by law, court costs, counsel fees, accounting,

engineering and outside consulting fees, which Surety

may sustain or incur . . . by reason of . . .

execution or procurement of a Bond, including any cost

incurred by Surety in fulfilling its obligations under

any Bond . . . or in enforcing any of the covenants

and conditions of this Agreement . . . .

(Doc. 1-1 at 2-3.) In this action, Plaintiff seeks recovery of

$708,643.83 paid on the Performance Bond, expert consulting fees

of $8,215.12 for investigation and resolution, pre-judgment and

post-judgment interest, attorneys’ fees in the amount of

$1,952.50, filing fees of $402.00, and service of process fees

in the amount of $770.00. (Doc. 10 at 4–5.)

1 All citations in this Memorandum Opinion and Order to documents

filed with the court refer to the page numbers located at the

bottom right-hand corner of the documents as they appear on

CM/ECF.

I. ANALYSIS

A. Jurisdiction

“Before a . . . court may exercise personal jurisdiction

over a defendant, the procedural requirement of service of

summons must be satisfied.” Omni Capital Int’l, Ltd. V. Rudolf

Wolff & Co., 484 U.S. 97, 104 (1987). The party moving for

default judgment must still show that the defaulted party was

properly served. Maryland State Firemen’s Ass’n v. Chaves, 166

F.R.D. 353, 354 (D. Md. 1996).

Plaintiff is a corporation organized and existing under the

laws of New Hampshire with its principal place of business in

Boston, Massachusetts. (Doc. 1 at 1.) Defendant American Tec

Electric Company is a corporation organized and existing under

the laws of North Carolina with its principal place of business

in Kannapolis, North Carolina. (Id. at 2.) Defendant David

Goodson is a citizen and resident of Kannapolis, North Carolina.

(Id.)

The summons and complaint were served on Defendants on

April 11, 2023. (Docs. 5, 6.) Defendants failed to answer or

otherwise defend as provided by the Federal Rules of Civil

Procedure following proper service. The Clerk entered default

against Defendants on July 7, 2023. (Doc. 8.) This court has

subject matter jurisdiction under 28 U.S.C. § 1332 because there

is diversity of citizenship and the amount in controversy

exceeds $75,000.

B. Default Judgment

Generally, if a defendant fails to plead or otherwise

defend an action, this court has the discretion to enter default

judgment as to that defendant. Fed. R. Civ. P. 55; see Music

City Music v. Alfa Foods, Ltd., 616 F. Supp. 1001, 1002 (E.D.

Va. 1985). “A court confronted with a motion for default

judgment is required to exercise sound judicial discretion in

determining whether the judgment should be entered, and the

moving party is not entitled to default judgment as a matter of

right.” EMI April Music, Inc. v. White, 618 F. Supp. 2d 497, 505

(E.D. Va. 2009). “Therefore, in determining whether to enter

default judgment, the Court may exercise its discretion by

considering many factors from the record.” Id. “Although the

clear policy of the Rules is to encourage dispositions of claims

on their merits, see Reizakis v. Loy, 490 F.2d 1132, 1135 (4th

Cir. 1974), trial judges are vested with discretion, which must

be liberally exercised, in entering such judgments and in

providing relief therefrom.” United States v. Moradi, 673 F.2d

725, 727 (4th Cir. 1982) (citing Fed. R. Civ. P. 55(c), 60(b)).

“Upon the entry of default, the defaulted party is deemed to

have admitted all well-pleaded allegations of fact contained in

the complaint.” J & J Sports Prods., Inc. v. Romenski, 845 F.

Supp. 2d 703, 705 (W.D.N.C. 2012). “However, the defendant is

not deemed to have admitted conclusions of law . . . .” Id. The

party moving for default judgment must still show that the

“unchallenged factual allegations constitute a legitimate cause

of action.” Agora Fin., LLC v. Samler, 725 F. Supp. 2d 491, 494

(D. Md. 2010); see Romenski, 845 F. Supp. 2d at 705 (default

judgment is proper when “the well-pleaded allegations in the

complaint support the relief sought”).

In this case, Plaintiff asserts one claim for relief,

reimbursement from Defendants under the Indemnity Agreement.

(Doc. 1 at 6.) Plaintiff alleges, and this court finds, that

Plaintiff is entitled to recover all costs and expenses under

the terms of the indemnity agreement, including $708,643.83 paid

on the Performance Bond, $8,215.12 in expert consulting fees,

pre-judgment interest in the amount of $31,109.76, post-judgment

interest, and filing and service fees in the amount of

$1,172.00.

North Carolina law is controlling. The Indemnity Agreement

contains a provision requiring the payment of attorneys’ fees.

(Doc. 1-1 at 2-3.) N.C. Gen. Stat. § 6-21.2 makes attorneys’ fee

provisions enforceable “upon any note, conditional sale contract

or other evidence of indebtedness.” While this court has not

been able to find a North Carolina Supreme Court case addressing

the issue of whether an indemnification agreement is evidence of

indebtedness, after review of Stillwell Enters., Inc. v.

Interstate Equipment Co., 200 N.C. 286, 266 S.E.2d 812 (1980),

GR & S Atl. Beach, LLC v. Hull, No. 11 CVS 5883, 2011 WL 4501912

(N.C. Super. Ct. Sept. 29, 2011), and United States v. Browne &

Assocs., Inc., 751 F. Supp. 2d 813 (M.D.N.C. 2010), this court

concludes the indemnification agreement is evidence of

indebtedness within the meaning of N.C. Gen. Stat. § 6-21.2.

Stillwell held that “evidence of indebtedness” refers to

“any printed or written instrument, signed or otherwise executed

by the obligor(s), which evidences on its face a legally

enforceable obligation to pay money.” Stillwell, 300 N.C. at

294, 266 S.E.2d at 817. This court agrees with the Browne court

that Stillwell suggests a “broad” construction of “evidence of

indebtedness.” Browne, 751 F. Supp. 2d at 817.

Plaintiff’s counsel has submitted an affidavit in support

of the attorneys’ fees that is not contested, (Doc. 12), and

this court finds the fees reasonable. This court finds Plaintiff

is entitled to the recovery of $1,952.50 in attorneys’ fees.

For the reasons set forth herein,

IT IS ORDERED that Plaintiff’s Motion for Entry of Default

Judgment Against Defendants, (Doc. 9), is GRANTED and judgment

by default shall be entered in favor of Plaintiff and against

Defendants American Tec Electric Company, d/b/a/ American

Electric Company and David A. Goodson in the amount

of $749,140.71, a sum that includes principal paid, expert

consulting fees, prejudgment interest, and court and service

costs.

IT IS FURTHER ORDERED that Plaintiff have and recover

attorneys’ fees from Defendant in the amount of $1,952.50.

IT IS FURTHER ORDERED that Plaintiff have and recover from

Defendants interest at the statutory rate from the date of the

Judgment until paid.

A default judgment will be entered contemporaneously

herewith.

This the 25th day of September, 2023.

Le Minin _L. Webi Vi

United States District Type

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