Williams Service Group, LLC v. National Union Fire Insurance Company of Pittsburgh

Case: 11-14999 Date Filed: 10/23/2012 Page: 1 of 11
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-14999
________________________
D.C. Docket No. 1:09-cv-00832-TWT
WILLIAMS SERVICE GROUP, LLC,
as successor to Williams Service Group, Inc.,
lllllllllllllllllllllllllllllllllllllll l Plaintiff - Counter Defendant -
llllllllllllllllllllllllllllllllllllllll Appellee - Cross Appellant,
versus
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
ILLINOIS NATIONAL INSURANCE COMPANY,
BIRMINGHAM FIRE INSURANCE COMPANY,
INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
llllllllllllllllllllllllllllllllllllllll Defendants - Counter Claimants -
llllllllllllllllllllllllllllllllllllllll Appellants - Cross Appellees,
Chartis Property Casualty Company,
llllllllllllllllllllllllllllllllllllllll Counter Claimant.
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________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(October 23, 2012)
Before TJOFLAT, CARNES, and JORDAN, Circuit Judges.
PER CURIAM:
This insurance dispute arises out of the breakdown of a complicated
contractual relationship between Williams Service Group, LLC and four insurers:
National Union Fire Insurance Company of Pittsburgh, Illinois National Insurance
Company, Birmingham Fire Insurance Company, and Insurance Company of the
State of Pennsylvania. Williams sued the insurers in Georgia state court alleging
that they owe it more than $500,000. The insurers removed the case to federal
district court and counterclaimed, alleging that Williams owes them over $2
million.
After discovery, Williams and the insurers filed cross motions for summary
judgment. The district court entered a final order granting in part and denying in
part each party’s motion. The parties cross-appeal different parts of the district
court’s order.
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I.
Between 1990 and 1997, Williams and the insurers entered into at least
forty-five occurrence-based workers’ compensation and general liability insurance
policies, which we collectively refer to as the program agreements. The policies
provided that the insurers would initially pay the entire cost of resolving any
claims against Williams. Williams was then responsible for reimbursing the
insurers for a self-insured retention, which is similar to a deductible, and for the
administrative costs of investigating and defending claims. The program
agreements required the insurers to bill Williams monthly for any amounts that
Williams owed them. The agreements also required Williams to secure its
payment obligations by giving the insurers a letter of credit. The insurers
currently hold two clean, irrevocable letters of credit from Williams.1 One of
those letters is for $1 million, and the other is for $1.2 million. Neither letter has
expired.
In 1995, Williams and the insurers entered into a buyout agreement that
outlined what their obligations would be going forward for any claims made under
the 1990–1995 policies. Williams paid the insurers $3.8 million, and the insurers
1
To draw on a clean letter of credit, the beneficiary needs only to present the letter to the
issuing bank. No other documentation is required. McCormack v. Citibank, N.A., 100 F.3d 532,
537–38 (8th Cir. 1996).
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promised to pay up to $4.2 million for claims made against those policies. The
insurers’ payments reached that cap in February 1999, and they have now paid
$1,850,572 over the cap. Williams has not reimbursed them for those payments,
nor has it reimbursed them for $166,662 in administrative costs that the insurers
incurred under the 1996–1997 policies.
The insurers did not send Williams monthly bills as the program agreements
required. It was not until December 11, 2009, after Williams filed this lawsuit,
that Williams received a bill for payments made over the buyout agreement’s $4.2
million cap and the reimbursable administrative costs that had accrued under the
1996–1997 policies.
Williams sued the insurers in Georgia superior court in March 2009,
seeking: (1) a declaratory judgment that the insurers owe it $548,471 in
overpayments that Williams made under the 1996–1997 policies; (2) damages for
a claim for recoupment; (3) damages for the insurers’ negligent handling of a
claim; and (4) a temporary restraining order to prevent the insurers from drawing
on the letters of credit. The superior court granted the temporary restraining order.
The insurers then removed the case to federal district court, and that court lifted
the temporary restraining order. The insurers counterclaimed for breach of
contract, seeking a declaration that: (1) Williams owes the insurers $1,850,572 for
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claims paid over the $4.2 million cap in the 1995 buyout agreement and $166,662
for reimbursable administrative costs incurred under the 1996–1997 policies (a
total of $2,017,234), and (2) the insurers may draw on the letters of credit to
recover that entire amount. The district court granted in part and denied in part
both motions for summary judgment, awarding the insurers $530,088 for unpaid
reimbursements within six years of the date that the parties agreed to toll the
statute of limitations, but holding that the insurers’ claims for unpaid
reimbursements before that date are time-barred and that the insurers may not
draw on the letters of credit to recover those amounts.
II.
We review de novo a district court’s summary judgment order, viewing the
evidence and drawing all inferences in favor of the nonmoving party. Chapter 7
Tr. v. Gate Gourmet, Inc., 683 F.3d 1249, 1254 (11th Cir. 2012). Summary
judgment is appropriate only if there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
A.
We begin by addressing the two issues that Williams raises in its appeal.
First, Williams contends that the insurers waived their right to collect on the
amounts Williams owes because they failed to send it monthly bills as the program
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agreements required. This argument itself fails because the program agreements
contain a nonwaiver clause stating that a “failure . . . to enforce any and all of the
provisions of this Agreement or to insist upon strict compliance by the other party
shall not be construed as a waiver of any rights or privileges of the parties.”
Under that clause, the insurers did not waive their right to collect amounts owed
under the program agreements by failing to enforce their right to reimbursement
each month by sending a monthly bill.
Second, Williams contends that the insurers’ failure to send it monthly bills
was a material breach that excused Williams’ performance under the program
agreements. Williams relies on Burnham v. Cooney, 593 S.E.2d 701 (Ga. Ct. App.
2004). In that case, the contract between an attorney and his client required the
attorney to bill the client monthly, which the attorney failed to do. Id. at 704. The
court noted that there was evidence in the record that the client had told his
attorney that he wanted to limit the cost of the litigation, had repeatedly requested
bills in an attempt to do so, and might have ended the litigation had he known the
amount of the attorney’s fees that he was incurring. Id. For those reasons, the
court held that a jury reasonably could find that the attorney’s failure to send the
client monthly bills was a material breach that excused the client’s obligation to
pay the attorney. Id. Williams argues that, as in the Burnham case, there is a jury
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question here about whether the insurers’ failure to send monthly bills is a material
breach.
Williams’ reliance on Burnham is misplaced. There is no evidence that
Williams asked for bills from the insurers so that it could monitor and manage its
expenses. Nor is there evidence that Williams would have, or even could have,
ended its relationship with the insurers if they had sent monthly bills. See General
Steel, Inc. v. Delta Building Sys., Inc., 676 S.E.2d 451, 454, 455 n.16 (Ga. Ct.
App. 2009) (holding that one party’s failure to send monthly bills as required by a
contract was not a material breach and distinguishing Burnham because in it,
“there was evidence that [the] client repeatedly asked [the] lawyer for billing
statements during the pendency of the litigation, but was not provided with any;
that [the] client discovered during the litigation that the target defendant was
judgment proof; that [the] client therefore told [the] lawyer that he did not want to
spend a lot of money on the suit; and that [the] client would or might have
withdrawn from the litigation, had he been billed periodically”). Here, the
insurers’ obligation to send monthly bills to Williams was merely incidental to the
“main purpose” of the program agreements—namely, providing insurance
coverage to Williams. See id. at 455. Their failure to send those bills was not a
material breach that excuses Williams’ reimbursement obligation. See id.7
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Williams also argues that the insurers’ obligation to send monthly bills is a
condition precedent to its payment obligation under the program agreements.
Nothing in the program agreements supports that argument. The program
agreements do not use language such as “only if” or “if” or “on condition that” or
“provided that” or any other words indicating that the parties intended a condition
precedent. See id. at 454. Under Georgia law, conditions precedent are
disfavored and a contractual provision is interpreted as a condition precedent only
if it is clear that the parties intended it to operate that way. See id. at 454; Fulton
Cnty. v. Collum Props., Inc., 388 S.E.2d 916, 918 (Ga. Ct. App. 1989); see also
Ga. Code Ann. § 44-6-41. Because the program agreements do not indicate that
the parties intended the monthly billing requirement to be a condition precedent to
Williams’ reimbursement obligation, we will not treat it as one.
B.
We now turn to the issue that the insurers have raised in their cross-appeal.
The district court concluded that the insurers’ “right to draw on the letters of credit
arises from the [p]rogram [a]greements, not the letters of credit themselves,” and
because an action to enforce the program agreements is time-barred under the
statute of limitations, the statute of limitations prevents the insurers from drawing
on the letters of credit. The insurers contend that the statute of limitations does
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not bar them from drawing on the letters of credit. We agree.
The insurers’ right to draw on the letters of credit is not dependent on their
ability to successfully bring a breach of contract action under the program
agreements. By their terms, the letters of credit are clean and unconditional—the
insurers’ right to draw on them is independent of the program agreements. See
Dibrell Bros. Int’l S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578–79
(11th Cir. 1994) (applying Georgia law) (“[T]he [bank’s] obligation to the
[insurers under a letter of credit] is independent of performance under the related
contracts. The [bank] must honor the engagement to pay upon presentation of the
proper documents regardless of the [insurers’] performance on the underlying
contract. . . . [T]he [bank] is primarily liable and cannot assert defenses available
to [Williams] that arise from a breach of the underlying contract.”); see also
McCormack v. Citibank, N.A., 100 F.3d 532, 537 (8th Cir. 1996) (explaining that
to draw on a clean letter of credit, the holder “must merely demand payment; no
documentation . . . is required”).
The plain language of Georgia’s statute of limitations indicates that it does
not affect the ability of the insurers to draw on the letters of credit. It states, “All
actions upon simple contracts in writing shall be brought within six years after the
same become due and payable.” Ga. Code Ann. § 9-3-24 (emphasis added). As
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written, the statute operates to bar only judicial remedies—it does not affect the
parties’ substantive rights or bar non-judicial remedies. See Martin’s Landing
Found., Inc. v. Landing Lake Assocs., 707 F.2d 1329, 1331 (11th Cir. 1983) (“In
Georgia, statutes of limitations bar the remedy sought by the plaintiff, not the
substantive right.”); Dixie Constr. Co. of Ga. v. Williams, 98 S.E.2d 582, 583 (Ga.
Ct. App. 1957) (“Statutes of limitation look only to remedy and not to substantive
rights. . . .”). Drawing on a letter of credit is not an “action” within the meaning of
the Georgia statute of limitations. It is a non-judicial remedy. For that reason, the
statute of limitations does not bar the insurers from drawing on the letters of
credit. The district court erred in concluding that it does.
IV.
We affirm the district court’s summary judgment order insofar as it
concluded that the insurers did not waive their right to collect the amounts
Williams owes and insofar as it concluded that the insurers’ failure to bill
Williams monthly does not excuse Williams’ reimbursement obligations under the
program agreements. However, we vacate the district court’s order to the extent
that it concluded that Georgia’s statute of limitations for actions to recover on a
written contract bars the insurers from drawing on the letters of credit. The case is
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remanded for proceedings consistent with this opinion.2
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
2
Williams’ briefs to this Court argue that the parties entered into a “collateral agreement”
that allows the insurers to draw on the letters of credit for only those debts accruing under the
1996–1997 policies. If that is true, then the insurers would breach the collateral agreement by
drawing on the letters of credit to satisfy Williams’ $1,850,572 debt for payments of claims
under the 1990–1995 policies beyond the buyout agreement’s $4.2 million cap. Because the
district court did not address this issue in its summary judgment order, we do not decide it here
and instead leave it for the district court to decide in the first instance on remand.
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