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City of Murray v. Robertson, Inc. Bridge and Grading Division

United States District Court, W.D. Kentucky, Paducah

July 25, 2018

CITY OF MURRAY, KENTUCKY, PLAINTIFF
v.
ROBERTSON INC. BRIDGE AND GRADING DIVISION, et al., DEFENDANTS/THIRD-PARTY PLAINTIFFS
v.
DALE BEARDEN CONSTRUCTION CO., INC., THIRD-PARTY DEFENDANT

          MEMORANDUM OPINION & ORDER

          THOMAS B. RUSSELL, SENIOR JUDGE UNITED STATES DISTRICT COURT

         This matter comes before the Court upon two motions. First, Defendant Federal Insurance Company, (“FIC”), has moved for summary judgment against Plaintiff City of Murray, Kentucky, (“Murray”). [DN 78.] Second, Murray has moved for partial summary judgment against FIC. [DN 84.] The merits of these matters are discussed below.

         A. Factual Background

         This case arises out of events which transpired during a construction project called the “East Fork Clarks River Pump Station Improvements and Force Main, ” (“the Project”). [DN 1-1, at 1.] On January 12, 2015, Murray and Defendant Robertson Inc. Bridge and Grading Division, (“Robertson”), entered into a contract, (the “Contract”), whereby Robertson was to complete the Project on behalf of Murray, which owns the property. [DN 1, at 3.] In relation to the Contract, a construction performance bond, (“Performance Bond”), and a payment bond, (“Payment Bond”), were executed. [Id.] Pursuant to the terms of the Performance Bond, FIC and Robertson bound themselves, jointly and severally, “for the performance of the Construction Contract” and, under the Payment Bond, FIC and Robertson bound themselves “to pay for labor, materials, and equipment…use[d] in the performance of the Contract….” [DN 1-2.]

         On January 7, 2016, the Project Engineer, GRW Engineers, Inc., (“GRW”), notified Robertson “in writing of certain defects in [Robertson's] work in the construction of a concrete wet well that is part of the Project.” [DN 84-2, at 4 (Parson's Affidavit); see also DN 84-5 (GRW Letter).] According to GRW, Robertson's work on the concrete wet well “was defective because it did not comply with the Project plans and specifications, ” and GRW “requested [that Robertson] remove and replace the defective work, unless an acceptable, engineered alternative was proposed.” [Id. See also DN 84-5.]

         Thereafter, Murray, through counsel, wrote to Robertson and FIC on December 1, 2016 and instructed them that, although GRW had made Robertson aware of the alleged defects eleven months previous, no corrective action had been commenced by Robertson or anyone else. [DN 84-6.] In that same letter, Murray informed Robertson that, “[a]s a result of Robertson's work on the Project, the heat in an adjacent existing building has ceased working. That building houses computers that could be damaged by exposure to cold temperatures.” [Id. at 2.] Murray indicated that Robertson's counsel had been notified of this additional issue on November 21, 2016, but that Murray had “received no indication that Robertson ha[d] investigated this problem.” [Id.] Murray went on to declare that it was “considering declaring a contractor default and…request[ed] a conference with Robertson and [FIC] within 15 days to discuss the remedial plan of action.” [Id.] Murray concluded by clarifying that its letter constituted a formal “demand[] that Robertson fulfill its obligations under its contract and that [FIC] fulfill its obligations under the performance bond that it issued in connection with th[e] project.” [Id.]

         Next, on January 6, 2017, Murray, through counsel, wrote again to Robertson and FIC and informed them it had received no response to its December 1, 2016 letter. [DN 84-8, at 1.] Murray then purported to “exercis[e] its right to terminate the services of [Robertson] for the Project, ” and indicated that it would “exercise all of its rights under its contract with [Robertson] to correct the defective work and finish the Project.” [Id.] Next, Murray cited to portions of the Contract, informing Robertson and FIC that it considered Robertson “responsible for all claims, costs, losses and damages (including but not limited to, all fees and charges of engineers, architects, attorneys, and other professionals and all court, arbitration or other dispute resolution costs) sustained by owner arising out of, or relating to, [Murray's] exercise of its rights and remedies, including the performance of the corrective work and completion of the Project.” [Id.] Murray filed suit in this Court five days later, on January 11, 2017. [DN 1.]

         B. Summary Judgment Standard

         Federal Rule of Civil Procedure 56 instructs that “[t][he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion.” Fed.R.Civ.P. 56(a). “In deciding a motion for summary judgment, the court must view the evidence and draw all reasonable inferences in favor of the nonmoving party.” Nat'l Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir. 2001) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Further, “[t]he judge is not to ‘weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.'” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).

         “The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists.” Am. Guarantee and Liability Ins. Co. v. Norfolk S. Rwy. Co., 278 F.Supp.3d 1025, 1037 (E.D. Tenn. 2017) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). The movant “may discharge this burden either by producing evidence that demonstrates the absence of a genuine issue of material fact or simply ‘by showing-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case.'” Id. (quoting Celotex, 477 U.S. at 325). If the movant carries his or her burden here, “[t]he non-moving party…may not rest upon its mere allegations or denials of the adverse party's pleadings, but rather must set forth specific facts showing that there is a genuine issue for trial.” Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir. 2009) (citing Matsushita, 47 U.S. at 586). Finally, “[t]he mere existence of a scintilla of evidence in support of the non-moving party's position will be insufficient to defeat a motion for summary judgment; there must be evidence on which the jury could reasonably find for the non-moving party.” Id. (internal citations and brackets omitted). This means that “[i]f the [non-moving] party fails to make a sufficient showing on an[y] essential element of its case with respect to which it has the burden of proof, the moving party is entitled to summary judgment.” Am. Guarantee and Liability Ins. Co., 278 F.Supp.3d at 1037 (citing Celotex, 477 U.S. 323).

         C. FIC's Motion for Summary Judgment

         The first motion is FIC's motion for summary judgment. [DN 78.] FIC argues that Murray filed to provide it with adequate notice, as required under the terms of the Performance Bond, and that this failure precludes any recovery by Murray as against FIC. [DN 78-1, at 7.]

         1. Terms of the Performance Bond

         In support of its motion for summary judgment, FIC points to §§ 3-5 of the Performance Bond, which FIC and Robertson both executed in connection with Robertson's work on the Project for Murray. [DN 1-2.] Section 3 explains the steps Murray must take before FIC's obligation to perform is invoked due to a contractor default. It provides as follows:

3. If there is no Owner[1] Default, the Surety's[2] obligation under this Bond shall arise after:
3.1 The Owner has notified the Contractor[3] and the Surety at its address described in Paragraph 10 below, that the Owner is considering declaring a Contractor Default and has requested and attempted to arrange a conference with the Contractor and the Surety to be held not later than fifteen days after receipt of such notice to discuss methods of performing the Construction Contract. If the Owner, the Contractor and the Surety agree, the Contractor shall be allowed a reasonable time to perform the Construction Contract, but such an agreement shall not waive the owner's right, if any, subsequently to declare a (Contractor Default); and
3.2 The Owner has declared a Contractor Default and formally terminated the Contractor's right to complete the contract. Such Contractor Default shall not be declared earlier than twenty days after the Contractor and the Surety have received notice as provided in Subparagraph 3.1; and
3.3 The Owner has agreed to pay the balance of the Contract Price to the Surety in accordance with the terms of the Construction Contract or to a contractor selected to perform the Construction Contract in ...

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