Guarantee Company of North America v. Pine Plantation LLC.

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[DO NOT PUBLISH]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 -
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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.
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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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