Guarantee Company of North America v. Pine Plantation LLC. ( 2018 )


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  •            Case: 16-15751   Date Filed: 08/16/2018   Page: 1 of 18
    [DO NOT PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    ________________________
    No. 16-15751
    Non-Argument Calendar
    ________________________
    D.C. Docket No. 3:15-cv-00083-CDL
    GUARANTEE COMPANY OF NORTH AMERICA,
    Plaintiff - Appellee,
    versus
    GARY'S GRADING & PIPELINE CO., INC., et al.,
    Defendants -
    Cross Defendants,
    PINE PLANTATION LLC,
    Defendant -
    Cross Claimant -
    Appellant,
    CGP EQUIPMENT COMPANY, INC., et al.,
    Defendants,
    GARY G. OPOLKA,
    Defendant -
    Case: 16-15751      Date Filed: 08/16/2018   Page: 2 of 18
    Cross Defendant -
    Cross Claimant.
    ________________________
    Appeal from the United States District Court
    for the Middle District of Georgia
    ________________________
    (August 16, 2018)
    Before JORDAN, ROSENBAUM, and JULIE CARNES, Circuit Judges.
    PER CURIAM:
    Plaintiff Guarantee Company of North America (“GCNA”) brought this
    action to collect payments GCNA made to third parties pursuant to a bond
    indemnification agreement. Defendant Pine Plantation LLC (Pine Plantation) is
    one of several indemnitors named in the agreement. The district court entered
    summary judgment in favor of GCNA as to Pine Plantation’s liability under the
    agreement, and a jury determined that GCNA is entitled to $2,546,354.69 in
    damages. Pine Plantation appeals the district court’s summary judgment order, as
    well as its entry of judgment on the jury’s verdict as to damages. After careful
    review, we affirm.
    BACKGROUND
    GCNA is a surety company that issues payment and performance bonds to
    assist in financing construction projects. Pine Plantation is a Georgia LLC that is
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    owned in equal shares and co-managed by brothers Christopher, Gary, and Peter
    Opolka. At all times relevant to this action, Gary’s Grading was a Georgia
    construction company primarily operated by Christopher Opolka.
    In October 2012, Christopher Opolka, as a manager and on behalf of Gary’s
    Grading and Pine Plantation, entered into a bond indemnification agreement with
    GCNA. Pursuant to the agreement, GCNA agreed to issue payment and
    performance bonds to suppliers and subcontractors of Gary’s Grading on various
    construction projects. In exchange, Gary’s Grading, Pine Plantation, and other
    related entities—including Christopher Opolka individually—agreed to post
    collateral at GCNA’s request and to indemnify GCNA for any losses incurred in
    connection with the bonds.
    While negotiating the bond agreement, GCNA employees met only with
    Christopher Opolka. The agreement contains both Christopher and Gary’s
    notarized signatures, but Pine Plantation argues that Christopher forged Gary’s
    signature and that Gary had no knowledge of the agreement until 2015, nearly
    three years after it was executed. A jury agreed with Pine Plantation on that point,
    finding that Gary did not sign the agreement. Thus, we must assume that
    Christopher Opolka was the only Pine Plantation manager who authorized Pine
    Plantation to enter into the agreement.
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    As required by the agreement, GCNA issued multiple bonds to suppliers and
    subcontractors of Gary’s Grading. Those suppliers and subcontractors sought
    payment from GCNA when Gary’s Grading failed to pay them for services and
    materials provided in relation to the bonded construction projects. GCNA paid the
    suppliers and subconctractors, and then demanded that the indemnitors named in
    the bond agreement—including Christopher Opolka, Gary Opolka, Pine Plantation,
    and Gary’s Grading—post collateral and reimburse GCNA for the payments it
    made. After none of the indemnitors complied with its request, GCNA filed this
    action.
    GCNA’s claims against Christopher Opolka were stayed when he initiated
    bankruptcy proceedings. All of the other indemnitors except Gary Opolka and
    Pine Plantation failed to answer GCNA’s complaint and thus defaulted on the
    claims asserted therein. GCNA’s claims against Pine Plantation and Gary Opolka
    proceeded to discovery.
    At the close of discovery, GCNA moved for summary judgment on its
    claims against Pine Plantation. In opposition to the motion, Pine Plantation argued
    that Christopher Opolka did not have the authority to bind Pine Plantation to the
    bond agreement. The district court granted summary judgment to GCNA on the
    issue of Pine Plantation’s liability, holding that the bond agreement was binding on
    Pine Plantation and that Pine Plantation had breached the agreement by not posting
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    collateral or reimbursing GCNA for the payments it had made to bond claimants.
    But the court found insufficient evidence to calculate GCNA’s damages as a matter
    of law, and ultimately held a jury trial as to GCNA’s damages, as well as the issue
    of Gary Opolka’s liability.
    The jury concluded that Gary Opolka did not sign the bond agreement and
    was therefore not liable under it. As to GCNA’s damages, the jury found Pine
    Plantation liable to GCNA in the amount of $2,546,354.69. This finding was
    based on the testimony of Christina Zabek, the GCNA employee who handled the
    Gary’s Grading bond claims, and on documentary evidence, specifically, the
    checks written by GCNA to bond claimants. Pine Plantation objected to Zabek’s
    testimony on hearsay and other grounds. In addition, Pine Plantation filed a
    motion for judgment as a matter of law, claiming that GCNA did not adequately
    prove its damages. The district court overruled the objection to Zabek’s testimony
    and denied Pine Plantation’s motion for judgment as a matter of law.
    Pine Plantation now appeals three issues: (1) whether Christopher Opolka
    had the authority to bind Pine Plantation to the bond agreement, as the district
    court held in its summary judgment order, (2) whether the district court abused its
    discretion by relying on inadmissible hearsay in its summary judgment ruling, and
    (3) whether the district court erred when it denied Pine Plantation’s motion for
    judgment as a matter of law.
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    STANDARDS OF REVIEW
    We review the district court’s summary judgment ruling de novo, using the
    same legal standard as the district court. Feliciano v. City of Miami Beach, 
    707 F.3d 1244
    , 1247 (11th Cir. 2013). Pursuant to that standard, summary judgment is
    appropriate if 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). In conducting our
    review, we view all facts and resolve all doubts in favor of the nonmoving party.
    
    Feliciano, 707 F.3d at 1247
    . Similarly, we review the district court’s denial of
    Pine Plantation’s motion for judgment as a matter of law de novo, drawing all
    reasonable inferences in favor of the nonmoving party. Home Design Servs., Inc.
    v. Turner Heritage Homes Inc., 
    825 F.3d 1314
    , 1320 (11th Cir. 2016). We review
    the district court’s evidentiary rulings for an abuse of discretion. Corwin v. Walt
    Disney Co., 
    475 F.3d 1239
    , 1249 (11th Cir. 2007). Applying that standard, we will
    only reverse if the district court “made a clear error of judgment” or “applied the
    wrong legal standard.” 
    Id. DISCUSSION I.
       The district court correctly held, on summary judgment, that Pine
    Plantation is liable to GCNA under the bond agreement.
    Pine Plantation argues that it is not bound by the bond agreement because
    Christopher Opolka did not have the authority to execute the agreement on Pine
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    Plantation’s behalf. For the reasons set out below, we agree with the district court
    that Christopher Opolka acted within the scope of his authority as a manager of
    Pine Plantation when he signed the agreement, and that Pine Plantation is thus
    liable to GCNA under the agreement.
    A.     Pine Plantation’s operating agreement determines the scope of
    Christopher Opolka’s agency authority.
    The parties agree that Georgia law applies to this action, which is on appeal
    from a Middle District of Georgia court sitting in diversity jurisdiction and which
    involves a bond agreement that was executed and delivered in Georgia. See Rosa
    and Raymond Parks Inst. for Self Dev. v. Target Corp., 
    812 F.3d 824
    , 829 (11th
    Cir. 2016) (explaining that “a federal court sitting in diversity applies the
    substantive law of the state in which it sits”); Travelers Property Cas. Co. of Am. v.
    Moore, 
    763 F.3d 1265
    , 1270–71 (11th Cir. 2014) (noting that Georgia applies the
    lex loci contractus rule, and that in Georgia a contract is “made” where it is
    delivered). Under Georgia law, an agent acting within the scope of his agency
    authority can bind his principal to a contract with a third party. See Harvey v.
    Bank One, N.A., 
    290 Ga. App. 55
    , 57 (Ga. Ct. App. 2008). To determine whether
    Christopher Opolka had the agency authority to bind Pine Plantation to the bond
    agreement at issue in this case, we look to Pine Plantation’s operating agreement,
    which expressly addresses his authority as an agent of the LLC. See BBL-
    McCarthy, LLC v. Baldwin Paving Co., 
    285 Ga. App. 494
    , 497 (Ga. Ct. App.
    7
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    2007) (explaining that the clear and unambiguous terms of a written contract
    govern its construction); Findlay Brick Co. v. Am. Sewer Pipe Co., 
    18 Ga. App. 446
    (Ga. Ct. App. 1916) (“Where an agent’s authority is conferred and defined in
    writing, the scope or extent of such authority must be determined from the terms of
    the writing, and is to be determined and construed by the court.”).
    It is undisputed that the operating agreement made Christopher Opolka an
    agent of Pine Plantation. The determinative issue is whether Christopher Opolka
    exceeded the scope of his agency authority by executing the bond agreement
    without the knowledge or consent of Pine Plantation’s co-managers Gary and Peter
    Opolka. Pine Plantation argues that under its operating agreement, a single
    manager cannot bind the corporation. In support of its argument, Pine Plantation
    cites a provision in its operating agreement that states:
    At any time when there is more than one Manager, no one Manager
    may take any action permitted to be taken by the Managers without
    agreement of the other Manager or Managers, or unless other approval
    requirements of the Managers are expressly set forth elsewhere in this
    Operating Agreement or the Georgia Act.
    According to Pine Plantation, this language requires all managers to authorize a
    contract in order for Pine Plantation to be bound under it.
    We are unpersuaded by this argument. As quoted above, the operating
    agreement states that “no one Manager may take any action permitted to be taken
    by the Managers without agreement of the other Manager or Managers, or unless
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    other approval requirements of the Managers are expressly set forth elsewhere in
    this Operating Agreement or the Georgia Act.” As used in this provision, the
    “Georgia Act” refers to the Georgia Limited Liability Company Act (the LLC
    Act), O.C.G.A. § 14-11-100, et seq. The plain language of the agreement thus lays
    out three ways in which a manager can bind Pine Plantation: (1) by getting the
    approval of the other managers, (2) by complying with “other approval”
    requirements set out elsewhere in the operating agreement, or (3) by complying
    with “other approval” requirements set out in the LLC Act. See Albritton v. Kopp,
    
    300 Ga. 529
    , 531 (Ga. 2017) (emphasizing that the plain language of a contract
    governs its interpretation).
    We assume based on the jury’s finding that Christopher did not get Gary or
    Peter Opolka’s approval to enter into the bond agreement. And the parties agree
    that there are no relevant “other approval” provisions set out elsewhere in the
    operating agreement. Nevertheless, we agree with the district court that
    Christopher Opolka complied with “other approval” requirements set forth in § 14-
    11-301(b)(2) of the LLC Act in executing the bond agreement, thus binding Pine
    Plantation to the agreement.
    B.     Christopher Opolka satisfied the requirements of § 14-11-301(b)(2) of
    the LLC Act, thereby binding Pine Plantation to the bond agreement.
    Section 14-11-301(b)(2) of the LLC Act states that:
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    Every manager is an agent of the limited liability company . . . for
    apparently carrying on in the usual way the business and affairs of the
    limited liability company . . . unless the manager so acting has, in fact,
    no authority to act for the limited liability company in the particular
    matter, and the person with whom he or she is dealing has knowledge
    of the fact that the manager has no such authority.
    O.C.G.A. § 14-11-301(b)(2). Pursuant to this provision, a manager acts as an
    agent for an LLC to the extent that he is (1) “apparently carrying on in the usual
    way the business” of the LLC and (2) unless he has no authority to take the
    particular action at issue “and the person with whom he . . . is dealing has
    knowledge of the fact that the manager has no such authority.” 
    Id. Christopher Opolka
    satisfied both of these requirements when he executed the bond agreement
    with GCNA.
    As to the first requirement, Pine Plantation’s argument focuses on whether
    Christopher Opolka actually had the authority to sign the bond agreement without
    the approval of his co-managers. But § 14-11-301(b)(2) asks whether a manager
    acted with apparent, rather than actual, agency authority. There is no question that
    Christopher Opolka acted with apparent agency authority when he executed the
    bond agreement with GCNA. He approached GCNA about the bond agreement in
    an effort to obtain financing that was necessary to the business of Pine Plantation’s
    sister corporation, Gary’s Grading. During the negotiations concerning the
    agreement, Christopher provided GCNA with consolidated financial statements of
    Gary’s Grading and Pine Plantation, and he represented (1) that the corporations
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    functioned as a conglomerate, (2) that he was authorized as a manager to enter into
    an agreement that would be binding on both corporations, and (3) that Gary
    Opolka also had authorized the agreement. Further, it is undisputed that GCNA
    believed Christopher had on a prior occasion executed a bond agreement on behalf
    of Pine Plantation and Gary’s Grading in the exact same manner as he did here,
    and without signatures from Gary or Peter Opolka. See Fielbon Dev. Co., LLC v.
    Colony Bank of Houston Cty., 
    290 Ga. App. 847
    , 851 (Ga. Ct. App. 2008)
    (interpreting an identical “carrying on the usual way” phrase in O.C.G.A. § 14-11-
    301(c) to encompass an act the manager had done in the past).
    Pine Plantation is therefore bound to the bond agreement unless Christopher
    Opolka did not have the authority to act and GCNA had knowledge of that fact.
    See § 14-11-301(b)(2). There is no evidence that GCNA knew Christopher Opolka
    lacked authority to execute the bond agreement without the signatures of Gary and
    Peter Opolka. In support of its argument to the contrary, Pine Plantation points to
    the fact that GCNA might have possessed a copy of Pine Plantation’s operating
    agreement. Even if GCNA saw Pine Plantation’s operating agreement, that would
    not inform the company that Christopher Opolka lacked authority to execute the
    bond agreement. In fact, it affirms the opposite. The operating agreement
    explicitly states that:
    Any person dealing with the company, other than a Member, may
    rely on the authority of any manager or officer in taking any
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    action in the Company’s name. They will not need to inquire into
    the provision of this Operating Agreement or with compliance,
    regardless of whether the action actually is taken in accordance with
    this Operating Agreement.
    Contrary to the plain language of O.C.G.A. § 14-11-301(b)(2), Pine
    Plantation argues that it should not be held liable under the bond agreement
    because GCNA failed to adequately investigate whether Christopher Opolka had
    the authority to execute the agreement on behalf of Pine Plantation. But Pine
    Plantation’s reliance on Ly v. Jimmy Carter Commons, LLC, 
    286 Ga. 831
    (Ga.
    2010) in support of this argument is misguided. In Ly, the Georgia Supreme Court
    denied summary judgment because there was substantial evidence that the
    contracting third party knew the agent did not have the authority to execute the
    loan documents at issue in that case. 
    Id. at 831–32.
    Here, as discussed, there is no
    evidence that GCNA knew Christopher Opolka lacked authority to execute the
    bond agreement. In the absence of any governing authority that is more closely
    aligned to the facts of this case, we decline to read a due diligence requirement into
    § 14-11-301(b)(2) that does not appear in the text of the statute. See Six Flags
    Over Ga. v. Kull, 
    276 Ga. 210
    , 211 (Ga. 2003) (“Where the language of a statute is
    plain and unambiguous, judicial construction is not only unnecessary but
    forbidden.”).
    In short, Christopher Opolka, a manager of Pine Plantation, appeared to have
    the authority to execute the bond agreement on behalf of Pine Plantation, and there
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    is no evidence GCNA knew he lacked the authority. Having thus satisfied the
    “other approval” requirements of § 14-11-301(b)(2), Christopher Opolka acted
    within his agency authority as a manager of Pine Plantation when he executed the
    bond agreement, thereby binding Pine Plantation to the agreement.
    II.   The district court did not abuse its discretion by relying on inadmissible
    hearsay in ruling on GCNA’s summary judgment motion.
    In support of its motion for summary judgment, GCNA submitted deposition
    and affidavit testimony from John Redding and Michael Dawson. Redding is the
    GCNA underwriter who negotiated and drafted the bond agreement. Dawson, an
    agent from Yates Insurance Company, assisted in the drafting and in the
    negotiations. Pine Plantation argues that the district court should not have relied
    on Redding and Dawson’s testimony because it contained inadmissible hearsay.
    Hearsay is an out-of-court statement that is offered in evidence “to prove the
    truth of the matter asserted in the statement.” Fed. R. Evid. 801(c)(2). An out-of-
    court statement not admitted for its truth, but instead used for another purpose, is
    not hearsay. United States v. Mateos, 
    623 F.3d 1350
    , 1355 (11th Cir. 2010). In
    their testimony, Redding and Dawson both recounted certain out-of-court
    statements regarding the scope of Christopher Opolka’s agency authority. But
    GCNA did not rely on those statements to prove the truth of the matter asserted,
    that is, to prove that Christopher Opolka was in fact authorized to execute the bond
    agreement. Instead, GCNA relied upon Redding’s testimony to prove that it had
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    no knowledge of the limited scope of Christopher Opolka’s agency authority under
    Pine Plantation’s operating agreement and it relied upon Dawson’s testimony to
    prove that it believed Christopher Opolka had executed a similar agreement on
    Pine Plantation’s behalf in the past. Accordingly, the testimony is not hearsay, and
    the district court did not abuse its discretion in relying upon it.
    III.   GCNA produced sufficient evidence to prove damages.
    Finally, Pine Plantation argues that GCNA did not present sufficient
    evidence at trial to prove damages, an essential element of its breach of contract
    claim. Specifically, Pine Plantation asserts that Christina Zabek’s testimony as to
    damages was not based on her personal knowledge and contained inadmissible
    hearsay, and that GCNA was required to produce physical copies of the bond claim
    documents rather than relying on the checks it produced showing paid claims. Due
    to these deficiencies, Pine Plantation argues, the district court should have granted
    judgment as a matter of law. We do not agree.
    A.    Christina Zabek’s testimony was admissible.
    As discussed, Zabek is the GCNA employee who was responsible for
    handling the bond claims GCNA received from suppliers and subcontractors of
    Gary’s Grading. In her trial testimony, Zabek explained her process for
    investigating and settling bond payment demands related to the Gary’s Grading
    account. In addition, Zabek described how much GCNA paid to the bond
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    claimants, the costs of processing and settling the bond demands, the amount of
    GCNA’s attorney’s fees incurred in this lawsuit, the amount GCNA expects to pay
    to bond claimants in the future, and the amount of any funds GCNA has recovered
    on the Gary’s Grading bonds.
    Zabek’s testimony was based on her personal knowledge obtained from
    working with Gary’s Grading bond claimants. Fed. R. Evid. 602 (“A witness may
    testify to a matter only if evidence is introduced sufficient to support a finding that
    the witness has personal knowledge of the matter.”). And contrary to Pine
    Plantation’s argument, the testimony was not hearsay. Although Zabek repeated
    out-of-court statements during her testimony, including the amount of money
    demanded of GCNA by Gary’s Grading bond claimants, GCNA did not rely upon
    those statements to prove the truth of the matter asserted in the statements, but
    rather to show that GCNA received bond claims and its response to those claims.
    See United States v. Rivera, 
    780 F.3d 1084
    , 1092 (11th Cir. 2015) (“Generally, an
    out-of-court statement admitted to show its effect on the hearer is not hearsay.”).
    B.     GCNA was not required to produce bond claim documents to
    substantiate the amount of its damages.
    As discussed, GCNA relied upon Zabek’s testimony and copies of the
    checks it wrote to bond claimants in order to prove its damages. Pine Plantation
    argues that GCNA was required to also produce copies of the bond claim
    documents submitted to GCNA, and that it violated the best evidence rule by
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    failing to do so. We disagree. The best evidence rule requires a litigant to produce
    an original document “to prove [the] content” of the document. Fed. R. Evid.
    1002. But GCNA was not required to produce the original bond claim documents,
    because it was not trying to prove the content of those documents. See Telecom
    Tech. Servs., Inc. v. Rolm Co., 
    388 F.3d 820
    , 830 (11th Cir. 2004) (“The best
    evidence rule applies where the party presenting evidence seeks to prove the
    specific contents of a writing.”). Rather, GCNA was trying to prove the amount of
    money it spent paying and settling claims pursuant to the bond agreement.
    Zabek’s testimony and the checks verifying payments GCNA made to Gary’s
    Grading bond claimants were sufficient evidence of that amount.
    Further, the bond agreement expressly states that if GCNA seeks
    indemnification, “[v]ouchers or other evidence of payments made by [GCNA]
    shall be prima facie evidence of the fact and amount of the liability” of Pine
    Plantation to GCNA. This type of provision is enforceable under Georgia law, and
    it clearly was satisfied by the “other evidence” produced by GCNA. See Cagle
    Constr., LLC v. Travelers Indem. Co., 
    305 Ga. App. 666
    , 668–69 (Ga. Ct. App.
    2010).
    C.     The district court correctly denied Pine Plantation’s motion for
    judgment as a matter of law.
    As indicated by the above discussion, the district court correctly denied Pine
    Plantation’s motion for judgment as a matter of law. Judgment as a matter of law
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    is only appropriate if “a reasonable jury would not have a legally sufficient
    evidentiary basis” to find for the nonmovant on a particular issue. Fed. R. Civ. P.
    50(a)(1). To substantiate its claimed damages, GCNA submitted 105 pages of
    checks written to bond claimants. Zabek explained these checks to the jury, and
    she summarized GCNA’s total costs: GCNA paid $3,006,338.55 to the bond
    claimants, spent $50,756.83 investigating and settling the claims, expended
    $60,053.15 in attorney’s fees, and expects to pay an additional $954,069.27 to
    bond claimants who have demanded payment, but whom GCNA has not yet paid.
    This totals $4,071,217.80. GCNA has already received $1,524,863.11 in
    recoveries from other sources. The jury subtracted GCNA’s recoveries
    ($1,524,863.11) from its total losses ($4,071,217.80) to get the damages figure of
    $2,546,354.69.
    Zabek’s testimony and the checks provide sufficient evidence for a
    reasonable jury to find for GCNA. Fed. R. Civ. P. 50(a). It appears that the jury
    found Zabek credible, relying on her totals and the admitted checks to calculate
    damages. It was reasonable for the jury to do so. Though GCNA did not provide
    physical copies of the bond demand documents, the jury had testimony and copies
    of checks. There was a sufficient evidentiary basis for a reasonable jury to find the
    defendant-indemnitors liable for $2,546,354.69.
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    CONCLUSION
    For the foregoing reasons, we AFFIRM the district court’s summary
    judgment order and its entry of judgment on the jury’s verdict as to damages.
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