United States Fire Ins. Co. v. Provision Contracting Servs.

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UNITED STATES FIRE INSURANCE COMPANY, Plaintiff, v. PROVISION CONTRACTING SERVICES, LLC, et al., Defendants.

CIVIL No. 3:23-cv-133-ECM [WO]

United States District Court, M.D. Alabama, Eastern Division

June 26, 2024

MEMORANDUM OPINION AND ORDER

EMILY C. MARKS, CHIEF UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter concerns three parties: United States Fire Insurance Company (“USFIC”), a surety company incorporated in Delaware; Provision Contracting Services, LLC (“Provision”), a construction contractor located in Alabama; and Nicholas D. Dowdell (“Dowdell”) Provision's sole member. In November 2020, the parties entered into an indemnity agreement in which Provision and Dowdell (collectively, “the Defendants”) agreed to indemnify USFIC for any losses that may result from the issuance of bonds to Provision for three construction projects. Shortly after, Provision experienced financial difficulties, rendering it unable to perform its obligations on the construction projects. USFIC then stepped in to complete the projects and satisfy claims made on the bonds. In doing so, USFIC incurred large expenses.

Afterwards USFIC demanded that Provision and Dowdell perform their indemnity obligations under the agreement, but the Defendants refused. Subsequently, USFIC sued the Defendants in this Court. (Doc. 1). Nine months later, upon application by USFIC, the Clerk of the Court entered default against the Defendants. (Doc. 33). Now pending before the Court is USFIC's motion for default judgment. (Doc. 36). Upon an independent review of the record, and for the reasons that follow, the motion is due to be granted.

II. JURISDICTION AND VENUE

The Court has subject matter jurisdiction over the claims in this matter pursuant to 28 U.S.C. § 1332. Personal jurisdiction and venue are uncontested, and the Court concludes that venue properly lies in the Middle District of Alabama. See 28 U.S.C. § 1391.

III. LEGAL STANDARD

A default judgment may be entered where a defendant “has failed to plead or otherwise defend as provided by these rules.” FED. R. CIV. P. 55(a). While the Eleventh Circuit has a “strong policy of determining cases on their merits” and “therefore view[s] defaults with disfavor,” In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003), it is well-settled that a “district court has the authority to enter default judgment for failure . . . to comply with its orders or rules of procedure.” Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985).

“When a defendant defaults, he ‘admits the plaintiff's well-pleaded allegations of fact.'” Giovanno v. Fabec, 804 F.3d 1361, 1366 (11th Cir. 2015) (quoting Lary v. Trinity Physician Fin. & Ins. Servs., 780 F.3d 1101, 1106 (11th Cir. 2015)). Therefore, “the allegations must be well-pleaded in order to provide a sufficient basis for the judgment entered.” De Lotta v. Dezenzo's Italian Rest., Inc., 2009 WL 4349806, at *2 (M.D. Fla. 2009) (citing Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009)).^[1] A complaint is “well-pleaded” when it satisfies the requirements set out in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). Specifically, “the factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555. “[A] formulaic recitation of the elements of a cause of action will not do.” Id.

The court may, but is not required to, hold a hearing before entering a default judgment. Further, “[g]iven its permissive language, Rule 55(b)(2) does not require a damages hearing in every case.” Giovanno, 804 F.3d at 1366.

IV. FACTS^[2]

A. Factual Background

On November 30, 2020, USFIC entered into an indemnity agreement (“the Agreement”) with Provision and Dowdell, who each “jointly and severally, promised to exonerate, indemnify, and hold USFIC harmless from all ‘Loss', cost, or expense, which may result from the issuance of any bonds to Provision.” (Doc. 1 at 2) (footnote omitted). The Agreement, which is incorporated into USFIC's complaint by reference, defines “loss” as:

[A]ll demands, liabilities, losses, costs, damages and expenses of any kind, including legal fees and expenses, court costs, technical, engineering, accounting, consultant, expert witness and/or other professional fees and expenses, including the cost of in-house professionals, which [USFIC] incurs, or to which it may be exposed, in connection with any Bond or this Agreement, including but not limited to all loss and expense incurred by reason of: (i) [USFIC's] having executed any Bond or any other instrument or any Modification thereof; . . . (iii) [USFIC's] prosecuting or defending any action in connection with any Bond; . . . (v) [USFIC's] recovering or attempting to recover Property (as hereinafter defined) in connection with any Bond or this Agreement; (vi) [the Defendants'] failure to perform or comply with any promise, covenant, or condition of this Agreement; (vii) [USFIC's] enforcing by litigation or otherwise any of the provisions any of the provisions of this Agreement; and (viii) all interest accruing thereon at the maximum legal rate ....

(Doc. 1-4 at 2, para. 2). The Agreement also requires the Defendants to complete other obligations, such as providing “current financial information to [USFIC] until such time as all obligations of the [Defendants] hereunder have been discharged.” (Id. at 3, para. 12).^[3]The Agreement further specifies that it is governed by “the laws of the State of New York.” (Doc. 1-4 at 4, para. 16).

After executing the Agreement, USFIC issued performance and payment bonds on behalf of the Defendants. The bonds covered three specific construction projects: a road repair, a Tuskegee University meat processing plant project, and an elevator repair (collectively, “the Projects”). The bonds pertaining to the road repair and the elevator repair projects listed Provision as the principal and the United States of America as the owner. The bond pertaining to the Tuskegee University meat processing plant project listed Provision as the principal and Tuskegee University as the owner.

Sometime during the construction process of the Projects, Provision experienced financial difficulties, rendering it unable to perform. Upon learning of Provision's financial struggles, USFIC completed the Projects and satisfied the claims on the three bonds, “incur[ring] significant fees and expenses” while doing so. (Doc. 1 at 5). The Defendants did not indemnify USFIC for its losses. Subsequently, USFIC “made demands upon the [Defendants] for collateral and for information.” (Id.). These requests have not been honored by the Defendants, who “have refused to perform their obligations to USFIC as provided in the Indemnity Agreement.” (Id.).

B. Procedural Background

On March 9, 2023, USFIC filed a complaint against the Defendants in this Court, alleging five counts against the Defendants: Count One - Breach of Indemnity Agreement; Count Two - Common Law/Equitable Indemnity, Reimbursement, and Exoneration; Count Three - Specific Performance of Obligations of Indemnitors; Count Four -Collateralization/Quia Timet; and Count Five - Application for Preliminary Injunction. (See generally doc. 1). For three months, USFIC unsuccessfully attempted to serve Provision and Dowdell. (Docs. 7, 10, 11, 16, 17, 20, 21). Eventually, USFIC moved the Court to extend the time for service and to allow service by publication. (Doc. 24). The Court granted the extension of time but denied the motion in all other respects. (Doc. 25). Thereafter, USFIC again attempted to effectuate service on the Defendants to no avail (doc. 28), before moving to, once more, extend the time for service and allow service by publication (doc. 29). This time, the Court granted their motion for service by publication. (Doc. 30). USFIC filed proof of publication (doc. 31) before ultimately applying to the Clerk for an entry of default against the Defendants about a month later (doc. 32). The Clerk then entered default on December 20, 2023. (Doc. 33). Soon thereafter, USFIC filed the pending motion. (Doc. 36).^[4]

V. DISCUSSION

The Clerk's entry of default against the Defendants amounts to an admission of all USFIC's well-pleaded allegations. See Giovanno, 804 F.3d at 1366. Consequently, so long as USFIC's motion for default judgment presents “a sufficient basis in the pleadings for the judgment entered,” default judgment against the Defendants should follow. Nishimatsu Const. Co. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).^[5]

USFIC seeks default judgment on Count One, its breach of contract claim, in which USFIC alleges that the Defendants have failed to “perform their obligations to USFIC as specified by the Indemnity Agreement, thereby materially breaching the agreement.” (Doc. 1 at 6, para. 23). USFIC looks to recover damages (including attorneys' fees) and receive “an Order requiring Defendants to provide current financial information and access to books and records under paragraph 12 of the Indemnity Agreement.” (Doc. 45 at 2).

A. Default Judgment

First, the Court determines whether the allegations in USFIC's complaint, which have all been deemed admitted by the Defendants, provide a sufficient basis to enter default judgment against the Defendants. In Count One of the complaint, the count on which USFIC seeks a default judgment, USFIC alleges that the Defendants have failed to comply with their obligations under Agreement in three principal ways: (1) indemnifying USFIC for any and all loss, including attorneys' fees from this matter; (2) providing USFIC with continuing access to current financial information, books, and records; and (3) depositing collateral with USFIC as security.

Under New York law,^[6] “[t]he right of one ...