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Colonial Surety Company v. Dme Construction Associates

February 18, 2011


The opinion of the court was delivered by: Yvette Kane, Chief Judge United States District Court

Chief Judge Kane Magistrate Judge Smyser


Pending before the Court is Magistrate Judge Smyser's report and recommendation ("R&R") (Doc. No. 77) which concludes that Plaintiff Colonial Surety Company's motion for summary judgment (Doc. No. 59) should be denied to allow further discovery by Defendants. Plaintiff filed a timely objection to the R&R. (See Doc. No. 79.) The Court will not adopt Judge Smyser's recommendation for the following reasons.

First, Defendants have failed to put forward any evidence, or to point the Court to any discoverable information, which would rebut Plaintiff's claim that Defendants are liable for breaching the parties' General Indemnity Agreement. Therefore, the Court must grant summary judgment to Plaintiff on the issue of liability. Second, the Court finds that Defendants have pointed to discoverable information which could support their contention that genuine issues of material fact remain as to the damages amount claimed by Plaintiff. Therefore, the Court will defer ruling on the damages issue pending limited discovery by Defendants.


The Magistrate Act, 28 U.S.C. § 636, and Federal Rule of Civil Procedure 72(b), provide that any party may file written objections to a magistrate's proposed findings and recommendations. In deciding whether to accept, reject, or modify the R&R, the Court is to make a de novo determination of those portions of the R&R to which objection is made. 28 U.S.C. § 636(b)(1). Accordingly, in the present case, the Court reviews de novo the R&R's denial of Plaintiff's motion for summary judgment.

Federal Rule of Civil Procedure 56(a) provides 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." Fed. R. Civ. P. 56(a).*fn1 The substantive law identifies which facts are material, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is genuine only if there is a sufficient evidentiary basis that would allow a reasonable fact finder to return a verdict for the non-moving party. Id. at 248-49.

The moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir. 2004). Once the moving party has shown that there is an absence of evidence to support the nonmoving party's claims, "the non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument." Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment is appropriate. Celotex, 477 U.S. at 322-23.

Rule 56 also allows the Court to grant summary judgment as to some issues but not as to others. Specifically, the Court may "enter an order stating any material fact-including an item of damages or other relief-that is not genuinely in dispute," and thereby treat such a fact "as established in the case." Fed. R. Civ. P. 56(g).


A. Complaint and Case Management

Plaintiff Colonial Surety Company is a Pennsylvania surety company that entered into a General Indemnity Agreement to execute bonds on behalf of Defendants. (See Doc. No. 77 at 5.) Defendants Peter Chardon and Darlene Edwards, husband and wife, own Defendant DME, an incorporated business with its principal place of business in New York. (Id.) Plaintiff issued seven different bonds on behalf of Defendants. (Id.) In the complaint, Plaintiff alleges that numerous payment and performance claims have been made against the bonds, but Defendants refused to cooperate in the investigation of the claims and breached the indemnity agreement "by not providing access to financial information and by failing to deliver collateral security as demanded by [Plaintiff]." (Id. at 5-6.) According to the complaint, nearly all of Plaintiff's losses relate to a roof replacement project being performed by Defendants at the Navy Depot in Mechanicsburg, Pennsylvania. (Id. at 6.)

Plaintiff filed its complaint on May 21, 2009, and Defendants filed an answer on August 20, 2009. A joint case management plan was filed on September 24, 2009. (Doc. No. 15.) At that time, the parties consented to proceed before a magistrate judge. However, the case was eventually reassigned to the undersigned judge because the Department of the Navy was added as a defendant and did not consent to magistrate judge jurisdiction. (See Doc. No. 56.)

On July 16, 2010, the case management conference was held and a case management order was issued.*fn2 The case management order established deadlines of January 31, 2011, for discovery and April 30, 2011, for dispositive motions. (See Doc. No. 53 at 2-3.) In an order filed on September 13, 2010, the Court dismissed a number of claims against the Department of the Navy and transferred the remaining claims against the Department of the Navy to the Court of Federal Claims. The claims against Defendants Chardon, Edwards, and DME remained within this Court's jurisdiction.

B. Motion for Summary Judgment

Plaintiff filed its motion for summary judgment on September 24, 2010. (Doc. No. 59.) In the original complaint,*fn3 Plaintiff listed six different counts for relief which sought, inter alia, specific performance under the indemnity agreement, exoneration and quia timet, injunctive relief, and exoneration and indemnification. (See Doc. No. 1.) Plaintiff's motion for summary judgment "does not address all of the counts in the . . . complaint, and does not seek relief that is the relief requested in any of the particular counts of the complaint." (Doc. No. 77 at 8.) Rather, "[P]laintiff's motion argues that it is entitled to summary judgment in the amount of $512,288.11 on the basis of the terms of the General Indemnity Agreement." (Id.)

In accordance with Local Rule 56.1, Plaintiff filed a statement of undisputed facts with its summary judgment motion.*fn4 (Doc. No. 60.) According to the statement, "at least $512, 288.11 in liabilities, losses[,] and expenses ha[ve] been imposed upon, sustained, or incurred by [Plaintiff] by reason of having executed Bonds for the [D]efendants." (See Doc. No. 77 at 8; Doc. No. 60 ¶ 16.) As evidentiary support, Plaintiff submits the affidavits of Wayne Nunziata, Plaintiff's President, and Frederick Gallo, Plaintiff's Treasurer and Controller, and accompanying exhibits. Plaintiff asserts that it is entitled to summary judgment for its losses through August 25, 2010, of $512,288.11 in accordance with the terms of the Indemnity Agreement and Pennsylvania common law. (Doc. No. 60 ¶ 37.) Plaintiff points to the following language in the Agreement:


Indemnitor and your successors agree to perform all the conditions of each Bond and Contract and to indemnify and save harmless Surety from and against any and all (i) demands, liabilities, losses, costs, damages or expenses of whatever nature or kind, including all fees of attorneys and all other expenses, including but not limited to costs and fees of investigation, adjustment of claims, procuring or attempting to procure the discharge of Bonds, enforcement of any Contract with Indemnitor, and in attempting to recover losses or expenses from Indemnitor, or third parties, whether or not Surety shall have paid out any or all of such sums, (ii) amounts sufficient to discharge any claim made against Surety on any Bond, which amounts may be used by Surety to pay such ...

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