United States District Court, N.D. Alabama, Southern Division
DAVID PROCTOR UNITED STATES DISTRICT JUDGE.
case is before the court on Defendants' motion to
dismiss. (Doc. # 9). For the reasons explained below, the
motion is due to be denied.
a contract action between (1) Travelers Casualty and Surety
Company of America (“Travelers”) and (2) several
defendants who contractually agreed to indemnify Travelers
against certain losses (the “Indemnitors”). The
complaint alleges the Indemnitors breached their contract
with Travelers by failing to reimburse Travelers for losses
it incurred in connection with certain surety bonds it issued
on the Indemnitors' behalf. (Doc. # 1 at ¶¶
14-26). Travelers also claims the Indemnitors breached their
contractual obligations by failing to provide Travelers with
collateral sufficient to discharge the losses Travelers may
incur in connection with one of the surety bonds.
(Id. at ¶¶ 25, 37-38). The Indemnitors
respond that this entire lawsuit should be dismissed or
stayed under either Alabama's abatement statute or the
Colorado River abstention doctrine. (Doc. # 9 at
is a surety company that issues payment and performance bonds
on behalf of construction contractors. (Doc. # 1 at ¶
8). One of the Indemnitor Defendants, Brown Mechanical
Contractors, Inc., (“Brown”) is a contractor that
performs construction projects. (Id. at ¶
9-10). To secure contracts on various projects in Alabama and
elsewhere, Brown obtained payment and performance bonds from
Travelers. (Id. at ¶ 10). Through those bonds,
Travelers agreed to stand as surety for Brown-i.e.,
to guarantee Brown's faithful performance of its
construction contracts. (Id. at ¶ 8). Under the
surety bonds, if Brown defaulted on one of its contracts,
Travelers was required to either (1) finish performing the
contract (or arrange for someone else to do so) or (2)
reimburse Brown's contractual partner its reasonable
costs to complete the contract work (up to a maximum amount
known as the “penal amount” of the bond). (Doc. #
1-7 at 39).
2011, years before Travelers issued the bonds relevant to
this litigation, Brown and several other Indemnitors executed
a General Agreement of Indemnity with Travelers. (Doc. # 1 at
¶ 11; Doc. # 1-1). Through the Indemnity Agreement, the
Indemnitors made several promises to Travelers. Two are
relevant here. First, the Indemnitors agreed to indemnify
Travelers “from and against all Loss.” (Doc. # 1
at ¶ 12; Doc. # 1-1 at 1). The Indemnity Agreement
defined the term “Loss” as “[a]ll loss and
expense of any kind or nature, including attorneys' and
other professional fees, which [Travelers] incurs in
connection with any Bond or this Agreement.” (Doc. #
1-1 at 1). The term “Bond” as used in the
Indemnity Agreement is further defined to mean “[a]ny
and all bonds . . . issued for or on behalf of [the
Indemnitors], whether executed or procured before, on, or
after the execution of this Agreement.” (Id.).
Second, the Indemnitors agreed “to deposit with
[Travelers], upon demand, an amount as determined by
[Travelers] sufficient to discharge any Loss or anticipated
Loss.” (Id. at 2). As explained in more detail
below, Travelers alleges the Indemnitors have breached both
of these agreements.
after executing the Indemnity Agreement, Travelers issued a
bond on behalf of Brown in favor of the Birmingham Plumbers
and Steamfitters Local 91 Health and Welfare Plan (the
“Union”). (Doc. # 1 at ¶ 14). The penal
amount of this bond (the “Union Bond”) was $50,
000. (Id.). In August 2017, the Union submitted a
claim on the bond, asserting that Brown owed $76, 674.86 in
unpaid contributions to the Union. (Id. at ¶
15). When Travelers contacted Brown about the claim, Brown
did not dispute the validity of the Union's claim.
(Id. at ¶¶ 16-18). Instead, Brown told
Travelers that it planned to pay the Union out of funds Brown
expected to receive from another project. (Id. at
¶ 18). Because Brown did not dispute the Union's
claim, Travelers paid the Union $50, 000 (the penal amount of
the Union bond). (Id. at ¶ 19). Travelers
thereby satisfied its obligations under the Union bond.
(Id.). In this lawsuit, pursuant to the terms of the
Indemnity Agreement, Travelers seeks indemnification from
Brown and the other Indemnitors for the $50, 000 claim it
paid on the Union bond.
issued another bond on Brown's behalf in February 2016.
(Id. at ¶ 20). The second bond was a
subcontract performance bond guaranteeing Brown's
performance of a subcontract for Hardy Corporation
(“Hardy”). (Id. at ¶ 20). Hardy is
a contractor that was performing certain work related to the
construction of a new body shop at the Mercedes-Benz
manufacturing facility in Vance, Alabama. (Doc. # 1-7 at
1-2). The penal sum of this bond (the “Hardy
bond”) was $973, 440. (Doc. # 1 at ¶ 20).
arose during the course of Brown's work for Hardy on the
Mercedes-Benz project. (Id. at ¶ 21). Hardy
alleges Brown failed to supply an adequate workforce to
comply with the time constraints in their contract, and that
as a result Hardy had to supplement Brown's work so the
project could be completed in a timely manner.
(Id.). Hardy claims that Brown's alleged default
cost it several hundred thousand dollars in additional funds
to complete the project on time. (Id. at
¶¶ 22-23). Hardy therefore sued Brown in the
Circuit Court of Jefferson County, Alabama, seeking $661,
100.28 in damages for breach of contract. (Id. at
¶ 23; Doc. # 1-7). Hardy also named Travelers as a
defendant in that lawsuit, seeking to recover the full amount
of Brown's liability from Travelers, based on the surety
bond Travelers had issued on Brown's behalf. (Doc. # 1-7
at 1, 17-19). As a result of the Hardy bond, Travelers is
currently exposed to a potential judgment of $661, 100.28 in
Hardy's state-court lawsuit.
months after Hardy filed suit against Brown and Travelers,
Travelers sent Brown and the other Indemnitors a demand
letter seeking to enforce the Indemnity Agreement. (Doc. # 1
at ¶ 25). The letter demanded the Indemnitors tender
payment to Travelers in the amount of $57, 574.50 to
indemnify Travelers for its loss and expenses in connection
with the two bonds issued on Brown's behalf-$50, 000 for
Travelers' payment to the Union and $7, 574.50 for
expenses Travelers had incurred defending the lawsuit against
Hardy. (Doc. # 1-8 at 1-2). The letter also demanded the
Indemnitors immediately deposit with Travelers a sum of $661,
100.28 (the amount sought by Hardy in the state-court
lawsuit), in accordance with their agreement to
“deposit with [Travelers], upon demand, an amount as
determined by [Travelers] sufficient to discharge any . . .
anticipated Loss.” (Id. at 2-3).
Indemnitors failed to comply with the demand letter, so
Travelers filed this lawsuit. Travelers seeks both
indemnification (i.e., money damages) and specific
performance of the collateral security portion of the
Indemnity Agreement. (Doc. # 1 at 9-12). In money damages,
Travelers seeks (1) $50, 000 as reimbursement for the amount
it paid under the Union bond and (2) an amount sufficient to
compensate it for all loss and expenses (including costs and
attorneys' fees) it has incurred as a result of executing
the Hardy bond. Travelers also seeks an order of specific
performance directing the Indemnitors to post collateral in
an amount not less than $661, 100.28-the amount for which
Travelers is potentially liable under the Hardy bond in
Hardy's ongoing state-court lawsuit.
their motion to dismiss, the Indemnitors do not dispute the
merits of Travelers' claims under the Indemnity
Agreement. Instead, they ask the court to dismiss or stay
this action under either Alabama's abatement statute or
the Colorado River abstention doctrine. (Doc. # 9 at
3-9). But neither the abatement statute nor Colorado
River provides a basis to dismiss or stay this lawsuit.
The Indemnitors' motion is therefore due to be denied.
Dismissal Is Not Warranted Under Alabama's ...