Developers Sur. & Indem. Co. v. Carothers Constr., Inc.

320 F. Supp. 3d 386
CourtDistrict Court, D. Connecticut
DecidedMarch 19, 2018
DocketCivil No. 3:17–cv–875 (JBA)
StatusPublished
Cited by2 cases

This text of 320 F. Supp. 3d 386 (Developers Sur. & Indem. Co. v. Carothers Constr., Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Developers Sur. & Indem. Co. v. Carothers Constr., Inc., 320 F. Supp. 3d 386 (D. Conn. 2018).

Opinion

Janet Bond Arterton, U.S.D.J.

In this insurance coverage dispute, Plaintiff Developers Surety and Indemnity Company ("DSI"), a surety, seeks a declaratory judgment and injunctive relief providing that DSI is not bound by the arbitration provision in the subcontract between DSI's principal, subcontractor Seven Hills Construction, LLC ("Seven Hills"), and Defendant general contractor Carothers Construction, Inc. ("Carothers"), to arbitrate disputes with Carothers that have arisen under the Project Performance and Payment Bonds issued by DSI. Plaintiff moves [Doc. # 27] for summary judgment, and also seeks, in the alternative, a judgment that if DSI is bound by the arbitration provision, that such arbitration should take place in Connecticut, under Connecticut law. Defendant cross-moves [Doc. # 32] for summary judgment and seeks a stay of this action and transfer to the United States District Court for the Southern District of Mississippi, so that an order compelling arbitration can be entered by that court. If Plaintiff prevails and the Court issues a declaratory judgment that DSI is not bound by the arbitration provision, Defendant *389has moved in the alternative to transfer venue to the United States District Court for the Middle District of Georgia. For the reasons set forth below, the Court GRANTS Plaintiff's Motion for Summary Judgment, DENIES Defendant's Motion for Summary Judgment, and DENIES Defendant's requested transfer to the Middle District of Georgia.

I. Background

Plaintiff DSI originally filed this action, arising out of a construction project in Branford, Connecticut, known as the Roofing System for the Bridgeport Army Reserve Center, in the Connecticut Superior Court, Judicial District of New Haven on May 5, 2017.1 (Ex. A (Compl.) to Not. Removal [Doc. # 1-1] ¶ 3.) On May 25, 2017, Defendant Carothers removed the action to federal court on the grounds of diversity jurisdiction. (Not. Removal [Doc. # 1] at 1.)

Plaintiff DSI is a California corporation with offices in Irvine, CA, while Defendant Carothers is a Mississippi corporation with offices in Taylor, Mississippi. (Joint Stmt. Undisputed Facts and Documents (hereinafter "Joint Stmt.") [Doc. # 28] at 1.) Carothers' subcontractor, Seven Hills Construction, LLC, is a limited liability company with offices in Virginia and North Carolina. (Id. ) This case involves "commerce" within the meaning of the Federal Arbitration Act. (Id. ) On or about February 3, 2015, DSI, as surety, issued a Subcontract Performance Bond and a Subcontract Payment Bond, Bonds No. 505470P for the Project on behalf of its principal, Seven Hills, which was a subcontractor to Carothers, the Obligee under the Project Bonds and the general contractor on the Project. (Id. at 2.)

The Project Bonds are comprised of the Subcontract Performance Bond, the Subcontract Payment Bond, and the Surety Bond Rider, and were issued in conjunction with the Subcontract for the roofing system for the Project between Seven Hills and Carothers. (Id. ) The Subcontract was executed in September 2014. (Id. )

During the course of performance on the Project, disputes arose between Seven Hills and Carothers that resulted in Carothers declaring Seven Hills in default and in Carothers making claims against DSI. (Id. ) DSI has denied Carothers' claims. (Id. ) In April 2017, Carothers filed a Demand for Arbitration with the American Arbitration Association naming DSI as the sole Respondent. (Id. ) In the Demand, Carothers sought to arbitrate its disputes with DSI as to the Project and three other projects. (Id. at 3.)

This case involves the interpretation of a contractual provision that three different federal district courts outside of the Second Circuit have separately construed in the last year, reaching divided conclusions. Compare DSI v. Carothers , No. CV 9:17-1419-RMG, 2017 WL 3054646, at *4 (D.S.C. July 18, 2017) (finding DSI bound by the arbitration provision) with DSI v. Carothers , No. 17-2292-JWL, 2017 WL 3674975, at *4 (D. Kan. Aug. 24, 2017) (finding DSI was not bound by the same arbitration provision) and DSI v. Carothers , No. 1:17-CV-1979-SCJ, at *4-5 (N.D. Ga. Feb. 27, 2018) (finding DSI was not bound by same arbitration provision but was estopped from avoiding arbitration).

The two sets of documents at issue here are the Project Bonds-which are comprised of the Subcontract Performance Bond, the Subcontract Payment Bond, and *390the Surety Bond Rider-and the Subcontract. The Subcontract Performance Bond, which was executed by both principal Seven Hills and surety DSI (Plaintiff), incorporates the Subcontract executed by Seven Hills and contractor Carothers (Defendant). The Subcontract Performance Bond provides that the "Subcontract is incorporated by reference herein in its entirety and made an integral part of this Subcontract Performance Bond[.]" (Ex. A (Subcontract Performance Bond) to Joint Stmt. [Doc. # 28-1] at 1.)

The Subcontract Performance Bond contains two other relevant provisions. Paragraph 5, "Enforcement by Obligee[,]" provides that:

This Subcontract Performance Bond shall be governed by the laws of the place of the Project which shall be interpreted insofar as possible to require Surety to perform fully the Subcontract Work and to satisfy completely all of Principal's responsibilities under its Subcontract with Obligee for so long as the Obligee may be held liable with respect to the Subcontract Work, such that, to the fullest extent allowed by law, if any claim arising from or related to the Principal's alleged failure to comply strictly with the Subcontract or if any claim with respect to Obligee's liability pertaining to the Subcontract Work is asserted against the Obligee, against any bond or other security furnished by the Obligee, or against persons or entities to whom Obligee may be liable, such claim is also covered by the Subcontract Performance Bond, subject only to the penal sum hereof.

(Id. at 2.) Paragraph 6, "Right of Action[,]" provides that:

No right of action shall accrue on this Subcontract Performance Bond to or for the use of any person or entity other than the Obligee and Obligee's heirs, executors, administrators, assigns, and legal successors. Obligee is entitled to bring an action against Surety on this Subcontract Performance Bond, including specific performance of Surety's obligations hereunder, without being required to name the Principal.

(Id. ) The Subcontractor Payment Bond, which was executed by both principal Seven Hills and Plaintiff DSI, similarly incorporates the Subcontract executed by Seven Hills and Defendant Carothers. (Ex. A (Subcontractor Payment Bond) to Joint Stmt. at 1.) The Subcontractor Payment Bond also includes an analogous choice-of-law provision, under which the Bond shall be "governed by the law of the place of the Project[.]" (Id. at 2.)

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
320 F. Supp. 3d 386, Counsel Stack Legal Research, https://law.counselstack.com/opinion/developers-sur-indem-co-v-carothers-constr-inc-ctd-2018.