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American Southern Insurance Co. v. KHDM Construction, LLC

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

October 17, 2019





         On March 14, 2019, American Southern Insurance Company (“Plaintiff”) filed suit against KHDM Construction, LLC (“Defendant”) and Matthew L. McCarty[1]for breach of an Indemnity Agreement between the parties. (Doc. 1). The Plaintiff alleges that on August 5, 2011, it entered into the Indemnity Agreement with the Defendant “[a]s a condition of [the Plaintiff's] issuance of surety bonds on behalf of the [the Defendant.]” (Id. at 2). Moreover, the Plaintiff contends that it has made payments under the Defendant's bonds and incurred attorneys' fees in connection with the same. (Id. at 6-7).

         The Defendant failed to file an Answer or otherwise appear in this lawsuit within the time limits set forth in the Federal Rules of Civil Procedure. Accordingly, on July 18, 2019, the Clerk entered a default against the Defendant. (Doc. 12). On August 26, 2019, the Plaintiff filed a Motion for Default Judgment (doc. 16), requesting that judgment be entered in its favor against the Defendant in the amount of $863, 649.83, which figure represents the losses, costs, and expenses sustained by the Plaintiff as a result of issuing surety bonds on behalf of the Defendant and enforcing the indemnity agreement. (Doc. 17 at 10) (Doc. 18 at 3). The Defendant did not file a response to the Plaintiff's Default Judgment Motion, although it had an opportunity to do so. (Doc. 23). For the reasons that follow, the Plaintiff's Motion for Default Judgment is due to be granted on the issues of liability and damages.


         This Court possesses subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a) because the amount in controversy exceeds $75, 000, exclusive of interests and costs, and complete diversity exists between the parties. Personal jurisdiction and venue are uncontested.


         Under Federal Rule of Civil Procedure 55(a), the Clerk of Court must enter default when “a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise . . ..” Further, “[i]f the plaintiff's claim is for a sum certain . . . the clerk - on the plaintiff's request, with an affidavit showing the amount due - must enter judgment for that amount and costs against a defendant who has been defaulted for not appearing . . ..” FED.R.CIV.P. 55(b)(1).

         Once a default has been entered, “[t]he defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.” Nishimatsu v. Const. Co., Ltd. V. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). A district court need not hold a hearing to determine damages when “all essential evidence is already of record.” S.E.C. v. Smyth, 420 F.3d 1225, 1231-32 & n.13 (11th Cir. 2005).


         A. Liability for Breach of the Indemnity Agreement

         In support of its Motion for Default Judgment, the Plaintiff submits an affidavit of John Northrop, its Assistant Vice President of Surety Claims for National Claims Services. (Doc. 18). In his affidavit, Mr. Northrop attests to the execution of the subject Indemnity Agreement, the issuance of surety bonds, payments made under the Bonds, and attorneys' fees incurred. The Plaintiff also submits an affidavit from its attorney, Adrienne Fazio, attesting to the attorneys' fees and costs incurred “arising out of and connected to surety bonds executed on behalf of KHDM Construction, LLC . . ..” (Doc. 19 at 1).

         The Plaintiff's allegations concerning the breach of the Indemnity Agreement and supporting evidence provide a sufficient basis for the Court to enter default judgment against the Defendant as to liability.

         To establish breach of contract under Georgia law, a Plaintiff must prove three elements: (1) subject matter of the contract; (2) consideration; and (3) mutual assent by all parties to all contract terms. Broughton v. Johnson, 247 Ga.App. 819, 819, 545 S.E.2d 370, 371 (2001).[2] Moreover, Georgia courts routinely uphold “the validity and enforceability of indemnification agreements executed in connection with the issuance of surety bonds.” Anderson v. U.S. Fid. & Guar. Co., 267 Ga.App. 624, 627, 600 S.E.2d 712, 715 (2004). “When interpreting [indemnity] agreements, [Georgia courts] apply the ordinary rules of contract construction.” Id. Importantly, “[n]o ...

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