Gray Insurance Company v. Aaron Terry

Case: 14-30917 Document: 00512973645 Page: 1 Date Filed: 03/18/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-30917 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
March 18, 2015
GRAY INSURANCE COMPANY, Lyle W. Cayce
Clerk
Plaintiff–Appellee,
v.
AARON D. TERRY; TAMMIE M. TERRY,
Defendants–Appellants.
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 2:07-CV-1523
Before PRADO, OWEN, and GRAVES, Circuit Judges.
PER CURIAM:*
Aaron and Tammie Terry appeal the district court’s grant of summary
judgment to the Gray Insurance Company (Gray) on Gray’s claims for
indemnity arising from a surety agreement. We affirm.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 14-30917
I
Government Technical Services, LLC (GTS), owned by Joseph Terry, was
a general contractor in the business of providing construction services to
governmental entities. Gray is an insurance company that issues payment and
performance bonds as surety for general contractors.
The present dispute arises from a surety agreement between Gray and
GTS. To ensure compliance with the Miller Act, 1 GTS requested Gray to issue
payment and performance bonds as surety for government construction
projects for which GTS would serve as the general contractor. Gray and GTS
executed a surety agreement under which Gray agreed “to furnish, procure or
continue contracts of suretyship” on behalf of GTS, and GTS agreed to
indemnify and hold [Gray] harmless from all loss, liability,
damages and expenses including, but not limited to, court costs,
interests and attorney’s fees, which [Gray] incurs or sustains (1)
because of having furnished any Bond, or (2) because of the failure
of an Indemnitor to discharge any obligations under this
Agreement, or (3) in enforcing any of the provisions of this
Agreement.
The surety agreement was signed by GTS as an indemnitor, and by Joseph
Terry, Aaron Terry, and Tammie Terry as individual indemnitors.
On a number of GTS’s government construction projects for which Gray
issued a payment and performance bond, GTS’s subcontractors asserted claims
against GTS and Gray for payment. Gray paid several of the claims and
incurred costs and attorney’s fees in connection with investigating and
resolving each claim. As of the district court’s grant of summary judgment,
Gray had incurred a loss of $1,683,509.82 in claims and costs associated with
the surety agreement, approximately $600,000 of which were legal fees, costs,
and expenses.
1 40 U.S.C. §§ 3131-33.
2
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Gray first brought suit against GTS and the individual indemnitors in
2007. At that time, there were unsettled issues regarding whether the
payments made by Gray had been properly paid, and the district court
dismissed the case without prejudice to allow for these issues to be resolved.
In 2013, Gray filed a Motion to Lift Stay and Reopen Litigation because the
claims underlying Gray’s indemnity action had been resolved. Shortly after
Gray filed a motion for summary judgment, GTS informed the district court
that it had filed for bankruptcy. The district court stayed the proceedings
against GTS due to the pending bankruptcy action pursuant to 11 U.S.C. § 362,
but granted summary judgment to Gray against Joseph, Aaron, and Tammie
Terry and ordered them to indemnify Gray in the amount of $1,683,509.82.
Aaron and Tammie Terry now appeal.
II
We review a district court’s grant of summary judgment de novo,
applying the same standard as the district court. 2 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.” 3
III
The surety agreement is governed by Louisiana law, which provides that
“[w]hen the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the parties’
intent.” 4 The terms of the surety agreement are clear. They require the Terrys
to indemnify Gray for all losses Gray incurs “(1) because of having furnished
any Bond, or (2) because of the failure of an Indemnitor to discharge any
2 Elizondo v. Green, 671 F.3d 506, 509 (5th Cir. 2012).
3 FED. R. CIV. P. 56(a).
4 LA. CIV. CODE ANN. art. 2046.
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obligations under this Agreement, or (3) in enforcing any of the provisions of
this Agreement.” The test set forth in the surety agreement is one of causation,
whether Gray incurred losses because it furnished a payment and performance
bond for GTS. The Terrys must indemnify Gray for all payments made to
claimants pursuant to the bonds. The Terrys must also indemnify Gray for the
costs it incurred in investigating and resolving those claims, even when Gray
did not ultimately make a payment to the claimant, because those costs and
fees were incurred because Gray furnished the bonds on behalf of GTS.
The Terrys assert that there is a genuine issue of material fact regarding
whether Gray acted in bad faith by making payments on certain claims despite
GTS having valid defenses against those claims. 5 However, by the very terms
of the surety agreement, whether GTS had a valid defense against a
subcontractor’s claim was not a condition precedent to GTS’s and the Terrys’
obligations to indemnify Gray. The surety agreement only requires that Gray
incur the expenses “because of having furnished any Bond,” and it is
undisputed that the losses Gray is claiming were incurred in connection to
having furnished bonds in favor of GTS. Furthermore, the Terrys failed to
adduce any evidence indicating that Gray acted with any dishonesty or
commercial unreasonableness when investigating and settling the underlying
claims. 6
The Terrys argue that summary judgment is improper because Gray has
not provided proper documentation of the Attorney’s fees and costs it incurred
in excess of $600,000. Under the terms of the surety agreement, the evidence
Gray adduced to prove its fees is adequate to establish the Terrys’ obligation
5 LA. CIV. CODE ANN. art. 1983 (“Contracts must be performed in good faith.”).
6 LA. REV. STAT. ANN. § 39:1553 (“‘Good faith’ means honesty in fact in the conduct or
transaction concerned and the observance of reasonable commercial standards of fair
dealing.”).
4
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to indemnify: “Vouchers or other evidence of such payments, including records
of any nature maintained by the Surety in the ordinary course of business,
shall be prima facie evidence of the existence and extent of the liability of the
Indemnitors to the Surety.” 7 Gray provided ledgers it kept in the ordinary
course of business indicating the payments it made for legal services in
connection with the claims submitted under the bonds. These records were
sufficient, under the agreement, to establish a prima facie case against the
Terrys for indemnification. The Terrys have failed to provide any evidence to
rebut the accuracy of these fees or that would indicate that Gray acted in bad
faith. Instead, the Terrys assert that the amount of Gray’s legal fees is
unreasonable. They rely on Central Progressive Bank v. Bradley for the
proposition that Louisiana law prohibits lawyers from charging a “clearly
excessive fee.” 8 The decision in Central Progressive dealt with a rule against
excessive fees as set forth in the disciplinary rules for the Louisiana bar. That
case did not concern an indemnity agreement. 9 In any event, the Terrys
provided no evidence that would indicate that the amount of legal fees Gray
incurred over several years, litigating claims asserted by a number of GTS’s
subcontractors, was excessive, let alone clearly so. Gray satisfied the prima
facie standard for indemnification of attorney’s fees as set forth by the contract,
and Terry failed to provide any evidence indicating the excessiveness of these
fees. Gray is entitled to summary judgment.
* * *
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
See LA. CIV. CODE ANN. art. 1983 (“Contracts have the effect of law for the parties
7
and may be dissolved only through the consent of the parties or on grounds provided by law.”).
8 502 So. 2d 1017, 1017 (La. 1987) (per curiam).
9 Id.
5