United States District Court, D. Connecticut
RULING ON MOTION FOR SUMMARY JUDGMENT
Michael P. Shea, U.S.D.J.
I.
Introduction
This
lawsuit arises out of surety bonds issued for a construction
project in Stamford, Connecticut. Associated Construction /
A.P. Construction, LLC (“Associated
Construction”), a construction contractor, alleges that
the issuer of the bonds, Hanover Insurance Company
(“Hanover” or the “Surety”), and its
alleged agents, Scott Adams, Avalon Risk, LLC
(“Avalon”), and Lighthouse Management, LLC
(“Lighthouse”), failed to perform under the bonds
and other related contracts and made misrepresentations in
connection with the project. Defendants Adams and Lighthouse
filed cross-complaints against Hanover for its alleged role
in the issuance of the bonds, seeking indemnification, or in
the alternative, contribution on a proportionate basis with
regard to all claims brought against them by Associated
Construction. Now before me is a motion for summary judgment
brought by Hanover against Adams and Lighthouse. (ECF No.
156). For the reasons that follow, the motion is GRANTED IN
PART AND DENIED IN PART. The motion is granted with respect
to Adams's and Lighthouse's indemnification and
“comparative indemnity” claims. Further, for the
reasons explained below, within 14 days of this ruling, Adams
and Lighthouse shall show cause why I should not grant
summary judgment as to the contribution claims on the ground
that the Court has yet to issue a judgment against them.
II.
Background
A.
The Performance Bonds
The
following facts, which are taken from the parties' Local
Rule 56(a) Statements and the exhibits, are undisputed unless
otherwise indicated. Associated Construction “served as
construction manager for a residential housing project
located in Stamford, Connecticut known as Park Square West
Phase II (“the Project”). (ECF No. 158,
Hanover's Local Rule 56(a)1 Statement (“Def.'s
L.R. 56(a)1 Stmt.”) ¶ 1); ECF No. 179-1,
Adams's[1] Local Rule 56(a)2 Statement
(“Pl.'s L.R. 56(a)2 Stmt.”) ¶ 1.)
“Intext Building System, LLC (“Intext”) was
a subcontractor engaged by [Associated Construction] to
perform work on the Project.” (Def.'s L.R. 56(a)1
Stmt. at ¶ 2; Pl.'s L.R. 56(a)2 Stmt. at ¶ 2.)
Associated Construction informed “Intext that it would
subcontract with Intext if Intext could secure payment and
performance bond for the proposed subcontract.”
(Def.'s L.R. 56(a)1 Stmt. at ¶ 4; Pl.'s L.R.
56(a)2 Stmt. at ¶ 4.)[2] Associated Construction “referred
Intext to an insurance agent who introduced Intext to
Defendant Adams, a principal and president of Avalon Risk,
LLC (‘Avalon').” (Def.'s L.R. 56(a)1
Stmt. at ¶ 7; Pl.'s L.R. 56(a)2 Stmt. at ¶ 7.)
Avalon
“was an agent of Hanover” and “had
discretionary authority to issue surety bonds for the Surety
within defined limits.” (Def.'s L.R. 56(a)1 Stmt.
at ¶ 8; Pl.'s L.R. 56(a)2 Stmt. at ¶ 8.) Adams
advised Intext that Avalon lacked authority to issue a bond
to Intext for a subcontract in excess of $2 million.
(Def.'s L.R. 56(a)1 Stmt. at ¶ 9; Pl.'s L.R.
56(a)2 Stmt. at ¶ 9.) Associated Construction
“drafted three Subcontracts, each in an amount less
than $2 million that were intended [to] encompass the
Original Scope: a ‘Framing Subcontract' in the
amount of $1, 987, 000 for interior and exterior metal stud
framing; a ‘Drywall Subcontract' in the amount of
$1, 881, 000 for multiple tasks, including but not limited to
drywall installation, fire-stopping, carpentry, and
coordination among the three subcontracts; and a
‘Materials Subcontract' in the amount of $642, 000
for the purchase of drywall materials.” (Def.'s
L.R. 56(a)1 Stmt. at ¶ 11; Pl.'s L.R. 56(a)2 Stmt.
at ¶ 11.) Associated Construction and Intext executed
the Drywall and Framing Subcontracts, while Associated
Construction and IBS Contracting, LLC (“IBS”)
executed the Materials Subcontract. (Def.'s L.R. 56(a)1
Stmt. at ¶¶ 12-13; Pl.'s L.R. 56(a)2 Stmt. at
¶¶ 12-13.)[3]
Avalon
“underwrote and issued payment and performance bonds
for each of the Subcontracts, each with a maximum amount of
less than $2 million.” (Def.'s L.R. 56(a)1 Stmt. at
¶ 15; Pl.'s L.R. 56(a)2 Stmt. at ¶ 15.) The
parties diverge regarding whether the Surety had prior notice
of the issuance of the bonds or was involved in their
underwriting or issuance. (Compare Def.'s L.R.
56(a)1 Stmt. at ¶ 19 (“The Surety did not have
actual prior notice of and was not involved in the
underwriting or issuance of the Bonds.”) with
Pl.'s L.R. 56(a)2 Stmt. at ¶ 19 (“The Surety
approved the Bonds once they were submitted to the
Surety's computer system . . . .”).) Intext and
Lighthouse also executed three Disbursement Control
Agreements (“DCAs”) for each of the Subcontracts.
(Def.'s L.R. 56(a)1 Stmt. at ¶ 20; Pl.'s L.R.
56(a)2 Stmt. at ¶ 20.) Under the DCAs, Lighthouse
“served as ‘Disbursement Agent' for Intext .
. ., which included paying bills for Intext to the extent
that funds were received by Lighthouse from [Associated
Construction] under the Framing Subcontract and Drywall
Subcontract.” (Def.'s L.R. 56(a)1 Stmt. at ¶
22; Pl.'s L.R. 56(a)2 Stmt. at ¶ 22.) Adams is the
president of Lighthouse. (ECF No. 179-9, Deposition of Scott
M. Adams, at 10:16-20.)
Adams
did not contact the Surety regarding performance issues on
the Project prior to June 2, 2014. (Def.'s L.R. 56(a)1
Stmt. at ¶ 24; Pl.'s L.R. 56(a)2 Stmt. at ¶
24.) On June 12, 2014, Thomas Walsh, a senior executive with
Associated Construction, called Joseph Brenstrom, the
Surety's Vice President for Surety Claims, concerning
“performance issues regarding the Bonds.”
(Def.'s L.R. 56(a)1 Stmt. at ¶ 25; Pl.'s L.R.
56(a)2 Stmt. at ¶ 25.) By June 12, 2014, Associated
Construction has issued default notices to Intext on all of
the Subcontracts. (Def.'s L.R. 56(a)1 Stmt. at
¶¶ 29-31; Pl.'s L.R. 56(a)2 Stmt. at
¶¶ 29-31.) “On July 15, 2014, [Associated
Construction] terminated Intext on the Framing an[d] Drywall
Subcontracts.” (Def.'s L.R. 56(a)1 Stmt. at ¶
33; Pl.'s L.R. 56(a)2 Stmt. at ¶ 33.) “In
response to [Associated Construction's] claims on the
Performance Bonds, the Surety [paid] $1, 881, 000 to
[Associated Construction] under the Drywall Performance Bond
and $475, 739.27 under the Framing Performance Bond.”
(Def.'s L.R. 56(a)1 Stmt. at ¶ 34; Pl.'s L.R.
56(a)2 Stmt. at ¶ 34.)
B.
Associated Construction's Claim Against Lighthouse and
Adams
Associated
Construction's CUTPA claim against Adams[4] centers on
several alleged misrepresentations made by him. The first of
these misrepresentations allegedly took place at a meeting
between Associated Construction management, Adams, and
various others on October 9, 2013. (See ECF No. 43
(“Complaint”) at ¶ 19.) Adams allegedly
misrepresented at that meeting that the three performance
bonds “would perform exactly as if a single performance
bond had been issued for all the work.” (Id.)
The second of these misrepresentations purportedly took place
at another meeting between Associated Construction and Adams
on May 8, 2014. (Id. at ¶ 32.) Adams allegedly
misrepresented at that meeting that Intext's “cash
flow was not a problem” and that Hanover would support
Intext so as to enable it to complete the Sheetrock Work on
time. (Id. at ¶¶ 32, 62(j)) The parties
agree that Hanover was not aware of either of these meetings
and that it did not authorize Adams to make any
representations. (Def.'s L.R. 56(a)2 Stmt. at
¶¶ 38-48; Pl.'s L.R. 56(a)2 Stmt. at
¶¶ 38-48).[5]
Associated
Construction's claims against Lighthouse center on the
company's “failure to determine whether there were
adequate funds in the funds control account when considered
with the balance of the Contract Account, ” Adam's
representations “that there were adequate funds to
complete the Project, ” and Lighthouse's disbursal
of “funds from the funds control account when it knew
or should have known there were not enough funds available
considering the balance to be paid under the Subcontract to
complete the Sheetrock Work.” (Id. at ¶
62(k-l).) Associated Construction also claims that Lighthouse
“took fees and other money over which [it] had control
under the DCA[s] that was not used or available to pay for
Work on the Project” and that it “failed to
reconcile its fee after Intext was defaulted and
terminated.” (Id. at ¶ 62(n-o).) In its
complaint, Associated Construction alleges that all of this
conduct was intentional. (See Complaint at ¶ 67
(“The conduct alleged [within its CUTPA count against
Adams and Lighthouse] was intentional.”).)
C.
Cross-Complaints
After
Associated Construction brought suit, Adams filed a
cross-complaint against Hanover. (See ECF No. 106.)
In his cross-complaint, Adams alleges that Hanover was
“negligent, misrepresented certain facts, breached
fiduciary duties, and breached contracts and/or agreement[s],
and that such aforementioned acts were the proximate cause of
[Associated Construction's] alleged damages and/or
losses.” (Id. at 11-12.) The complaint goes on
to note that any liability Adams might have to Associated
Construction would “be the direct and proximate result
of active and affirmative conduct on the part of
Hanover.” (Id. at ¶ 20) As such, Adams
brings claims against Hanover for “indemnity, ”
“comparative indemnity, ” and
“contribution.” (Id. at 11-13.) He also
seeks a declaratory judgment as to “the rights,
responsibilities and obligations of [Hanover] as to
[Adams].”[6] (Id. at 13.) Lighthouse brings
nearly a carbon copy of Adams's cross-complaint against
Hanover. It alleges that Hanover “was negligent,
misrepresented certain facts, breached fiduciary duties, and
breached contracts and/or agreements operative to this claim,
and that such aforementioned acts were the proximate cause of
[Associated Construction's] alleged damages and/or
losses.” (ECF No. 114 at 10-11.) It also alleges claims
for indemnity, comparative indemnity, contribution, and for
declaratory relief.[7](Id. at 10-13.)
III.
Standard of Review
Summary
judgment is appropriate only when the moving party
“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). “In making
that determination, a court must view the evidence in the
light most favorable to the opposing party.” Tolan
v. Cotton,134 S.Ct. 1861, 1866 (2014) (internal
quotation marks omitted). “A fact is material if the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” McCarthy v. Dun
& Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007)
(internal quotation marks omitted). The moving party bears
the burden “of showing that no genuine factual dispute
exists . . ., and in assessing the record to determine
whether there is a genuine issue ...