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Suretec Insurance Co. v. Eternity LLC

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

November 15, 2018

SURETEC INSURANCE COMPANY, Plaintiff,
v.
ETERNITY LLC, et al., Defendants.

          MEMORANDUM OPINION

          ANNEMARIE CARNEY AXON, UNITED STATES DISTRICT JUDGE

         The matter before the court is plaintiff SureTec Insurance Company's (SureTec) Application for Preliminary Injunction. (Doc. 1). The court has carefully considered the application, the supporting brief, and the arguments presented at the November 7, 2018 hearing. For the following reasons, the application for preliminary injunction (doc. 1) is GRANTED. The specific terms of the injunctive relief are set forth by separate order.

         I. Background

         The parties to this action are plaintiff SureTec and defendants Eternity LLC (“Eternity”), BMP, Inc. (“BMP”), and Bobby Shane McCarty, an individual. SureTec is a surety company and is in the business of issuing payment and performance bonds on behalf of contractors like Eternity. (See doc. 2 at 2). Eternity is plumbing contractor, and Mr. McCarty is the sole member of Eternity. (Doc. 1 at ¶¶ 2, 7; Doc.

         18 at 1). Eternity was awarded a contract to complete certain plumbing work on a construction project at Talladega College. (Doc. 1 at ¶ 7; Doc. 2 at 4; Doc. 18 at 1).

         The contract required Eternity to guarantee the company's work with a payment and performance bond. (See doc. 2 at 2; doc. 18 at 1). SureTec issued the payment and performance bond.

         Before SureTec issued the bond, SureTec required Eternity, BMP, and Mr. McCarty execute an Indemnity Agreement in favor of SureTec in the event that Eternity did not perform its obligations on the Talladega College construction project. (Doc. 2 at 2). The agreement intended to protect SureTec against assuming “the sole risk that any failure or default by Eternity might result in loss to it.” (Doc. 2 at 2). The agreement was executed, and the defendants became Indemnitors promising to “indemnify and save [SureTec] harmless” in the event of any failure or default by Eternity. (Doc. 2-1 at ¶ 2). Specifically, the Indemnity Agreement provided:

2. The Indemnitors shall indemnify and save the Company harmless from and against every claim, demand, liability, cost, loss, charge, suit, judgment, award, fine, penalty, and expense which the Company may pay, suffer, or incur in consequence of having executed, delivered, or procured the execution of such bonds . . . and the expense of determining liability, or procuring, or attempting to procure, release from liability, or in bringing suit or claim to interpret or enforce . . . any of the obligations under the Bonds or of the Indemnitors under this Agreement. (Doc. 2-1, ¶ 2).

         The Agreement goes onto provide:

3. Payment of loss or deposit of cash, cash collateral, or other collateral security acceptable to the Company shall be made to the Company by the Indemnitors as soon as liability exists or is asserted against the Company, whether or not the Company shall have made any payment or established any reserve therefor . . . The Indemnitors stipulate and agree that the Company will not have an adequate remedy at law should Indemnitors fail to perform the Collateral Requirement and further agree as a result that the Company is entitled to specific performance of the Collateral Requirement. (Doc. 2-1, ¶ 3).

         After beginning construction on the Talladega project, Eternity allegedly failed to complete its work under the contract. (See Doc. 18 at 1). Eternity was terminated, and the developer of the Talladega College project submitted a claim to SureTec against the bond for payment of costs associated with completion of the contract. (Doc. 2 at 5). Upon receiving the claim, SureTec sent a demand letter to the defendants. (Doc. 2 at 5). The letter informed the Indemnitors of their obligations and demanded collateral in the amount of $135, 000.00 as security for SureTec's projected loss under the claim. (Doc. 2 at 5). After investigating the claim, SureTec issued a $105, 000.00 payment to the project developer for a full and final settlement of the claim. (Doc. 2 at 5).

         It is undisputed that defendants have not deposited any collateral with SureTec. SureTec seeks a preliminary injunction ordering defendants to deposit collateral with SureTec in the amount of $135, 000.00.

         II. Standard of Review

          A preliminary injunction “is an extraordinary remedy.” Bloedorn v. Grube,631 F.3d 1218, 1229 (11th Cir. 2011). “The purpose of the preliminary injunction is to preserve the positions of the parties as best we can until a trial on the merits may be held.” Id. “A party seeking a preliminary injunction bears the burden of establishing its entitlement to relief.” Scott v. Roberts,612 F.3d 1279, 1290 (11th Cir. 2010). To prevail on an application for a preliminary injunction, SureTec must establish: (1) “a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to [SureTec] ...


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