United States District Court, S.D. Alabama, Southern Division
ORDER
WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE
This
matter comes before the Court on Plaintiff's Motion for
Default Judgment (doc. 15). The Motion is ripe for
disposition.
I.
Background.
Plaintiff,
The Cincinnati Insurance Company, brought this action against
defendants, Case Construction, LLC, Stephen G. Case and
Tracey Case, asserting claims against the individual
defendants for breach of indemnity agreement and against the
business entity defendant for equitable indemnity,
reimbursement and exoneration.[1] According to the well-pleaded
factual allegations of the Complaint, Cincinnati issued
certain surety bonds on behalf of defendant Case
Construction. Those bonds took the form of performance and
payment bonds issued in connection with (i) a construction
contract between Case Construction and the University of
South Alabama to perform work on a project known as Chemistry
Building Exterior Modifications, and (ii) a construction
contract between Case Construction and AltaPointe Health
Systems, Inc. to perform work on a project known as
Administration Buildings of AltaPointe Health Systems, Inc.
(Doc. 1, ¶¶ 12-14 & Exh. 2.)
In
issuing the surety bonds for both the South Alabama and
AltaPointe projects, Cincinnati alleges that it relied on the
covenants and conditions contained in a certain Agreement of
Indemnity executed by defendants Stephen G. Case and Tracey
Case in Cincinnati's favor. (Doc. 1, ¶¶ 8, 12.)
By its express terms, the Agreement reflected that Stephen G.
Case and Tracey Case were obligated to
“exonerate, indemnify and keep indemnified [Cincinnati]
from and against any and all liability for losses and
expenses of whatsoever kind or nature, including the fees and
disbursements of counsel, and against any and all said losses
and expense which [Cincinnati] may sustain or incur: (i) by
reason of having executed or procured the execution of any
Bond or Bonds; (ii) by reason of the failure of [Case
Construction, Stephen Case and Tracey Case] to perform or
comply with the covenants and conditions of this Agreement;
or (iii) in enforcing any of the covenants and conditions of
this Agreement.”
(Doc. 1, Exh. 1, at 1.) The Agreement authorized Cincinnati
to “pay or compromise any claim, demand, suit, judgment
or expense arising out of any Bond or Bonds and any such
payment or compromise shall be binding upon [Case
Construction, Stephen Case and Tracey Case] and included as a
liability, loss or expense covered by this Indemnity
Agreement, ” so long as Cincinnati made such payment
“in the reasonable belief that it was liable for the
amount disbursed, or that such payment or compromise was
reasonable under all circumstances.” (Id., at
1, 4.) On its face, the Agreement appears to have been signed
by Stephen Case and Tracey Case, as indemnitors, in the
presence of a witness and a notary public, on July 20, 2007.
(Id. at 7.)
The
well-pleaded factual allegations of the Complaint reflect
that after execution of the Agreement, Cincinnati incurred
considerable losses and expense, including fees and
disbursements of counsel, as a result of having issued bonds
on behalf of Case Construction for the South Alabama and
AltaPointe projects. (Doc. 1, ¶ 15.) In that regard, the
Complaint recites factual allegations itemizing these losses
and expenses as follows: (i) Cincinnati received and paid a
claim submitted by Metropolitan Glass Co., Inc. in the amount
of $40, 181 under the South Alabama Payment Bond, as a result
of Case Construction's failure to pay subcontractors and
suppliers on the South Alabama project; (ii) Cincinnati
sustained net losses of $353, 387.32 to arrange for
completion of work on the AltaPointe project and payment of
subcontractors and suppliers after Case Construction's
general contracting license expired on January 31, 2015,
causing AltaPointe to suspend Case Construction's
performance of work on that project; and (iii)
Cincinnati
incurred expenses, including counsel fees, in the amount of
$51, 669.56 at the time of filing the Complaint, as a result
of having issued the bonds and pursuing the indemnitors under
the Indemnity Agreement. (Doc. 1, ¶¶ 16-19.) The
Complaint alleged that Stephen Case and Tracey Case were
obligated to indemnify and reimburse Cincinnati in the amount
of $449, 546.52, pursuant to the Indemnity Agreement, with
that amount being subject to increase going forward.
(Id., ¶¶ 20-21.)[2] According to the Complaint,
Cincinnati demanded indemnification and reimbursement from
Stephen Case and Tracey Case in writing in July 2018 and
October 2018 pursuant to the Agreement; however, the Cases
failed and refused to provide such indemnity and
reimbursement to Cincinnati as required by the Agreement.
(Id., ¶¶ 22-24.)
On the
strength of these and other related factual allegations,
Cincinnati's Complaint asserted a claim against Stephen
Case and Tracey Case for breach of the indemnity agreement,
and a claim against Case Construction for equitable
indemnity, reimbursement and exoneration under the common
law. The Complaint confirmed that Cincinnati sought recovery
of all losses and expenses incurred under the Case
Construction surety bonds, as enumerated in the pleading.
The
court file reflects that all three defendants were properly
served with process several months ago. In particular,
returns of service demonstrate that a private process server
personally served the Summons and Complaint on Stephen Case
and Case Construction at an address in Mobile, Alabama on
March 29, 2019. (Docs. 7 & 8.) Another return of service
shows that a private process server personally served the
Summons and Complaint on Tracey Case at a different address
in Mobile, Alabama on April 7, 2019. (Doc. 12.) When
defendants failed to appear or file a responsive pleading
within the time prescribed by Rule 12(a), Fed.R.Civ.P.,
Cincinnati applied to the Clerk of Court for entry of
default. (Doc. 13.) On May 13, 2019, a Clerk's Entry of
Default was entered against all three defendants pursuant to
Rule 55(a), Fed.R.Civ.P., for failure to plead or otherwise
defend within the time provided by the rules. (Doc. 14.)
Copies of both plaintiff's application for default and
the Clerk's Entry of Default were served on defendants by
mail at the same addresses where they were served with
process. On June 24, 2019, Cincinnati filed its Motion for
Default Judgment, and served notice of that motion on each
defendant via U.S. mail addressed to his, her or its address
where service of process was perfected. (Doc. 15.) Despite
entry of default against them and repeated notification of
these ongoing default proceedings, defendants have neither
appeared nor defended in this action, much less undertaken to
set aside the entry of default or forestall entry of default
judgment against them.
II.
Analysis.
A.
Entry of Default Judgment is Appropriate.
In this
Circuit, “there is a strong policy of determining cases
on their merits and we therefore view defaults with
disfavor.” In re Worldwide Web Systems, Inc.,
328 F.3d 1291, 1295 (11th Cir. 2003); see also
Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S.
and Canada, 674 F.2d 1365, 1369 (11th Cir.
1982) (“Since this case involves a default judgment
there must be strict compliance with the legal prerequisites
establishing the court's power to render the
judgment.”). Nonetheless, it is well established that a
“district court has the ...