The Cincinnati Insurance Co. v. Case Construction, LLC

          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 (11^th Cir. 2003); see also Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. and Canada, 674 F.2d 1365, 1369 (11^th 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 ...