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Cincinnati Insurance Company v. Ralston Brown

September 25, 2012


The opinion of the court was delivered by: Magistrate Judge Jeffrey T. Gilbert


Plaintiff Cincinnati Insurance Company ("CIC") sued Defendants Ralston Brown, Inc. ("Ralston Brown") and Gregory Brown ("Brown") (collectively, "Defendants") for money allegedly owed to CIC under various indemnity agreements between the parties. CIC is a corporation with its principal place of business in Ohio. Gregory Brown is a resident of Wisconsin. Ralston Brown was an Illinois corporation at the time this suit was filed. Relying on the Court's jurisdiction under the diversity statute, 42 U.S.C. § 1332, CIC brought claims of breach of contract, exoneration, and specific performance against the Defendants, and sought a preliminary injunction requiring them to post funds sufficient to cover their obligations to CIC. District Judge Charles Norgle granted the injunction on June 1, 2010, and ordered Defendants to post collateral in the amount of $314,820. (Doc. 24).

CIC later filed a motion for summary judgment, and the parties consented to have Magistrate Judge Martin Ashman conduct any and all proceedings in this case, including the entry of final judgment. (Docs. 46 & 51). Defendants' counsel withdrew from the case after the motion was filed, and CIC sought default judgment against the corporate defendant, Ralston Brown. (Doc. 67). Judge Ashman granted the default judgment motion on April 14, 2011 because the corporation did not obtain new counsel. (Doc. 84). He later denied CIC's summary judgment motion as it related to the individual defendant because CIC failed to recognize that a choice-of-law provision in the indemnity contracts directed application of Ohio law to the parties' agreements. (Doc. 89). Defendant Brown then filed his own motion for summary judgment on December 5, 2011. (Doc. 111). The motion is now before this Court following the reassignment of the case from Judge Ashman's docket on June 12, 2012. (Doc. 129). After a careful review of the parties' briefs and statements of facts, the Court finds that the motion should be denied.

I. Background

Local Rule 56.1 requires a party moving for summary judgment to submit a statement of material facts with "specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts . . . ." N.D. Ill. LR 56.1(a). The opposing party must then file a response to this statement, as well as its own statement of supplemental facts. N.D. Ill. LR 56.1(b)(3)(C). A party's obligation to support its facts with evidence is mandatory, and the Seventh Circuit has frequently upheld strict compliance with the requirements of Local Rule 56.1. See, e.g., Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003); Midwest Imports, Ltd. v. Coval, 71 F.3d 1311, 1316 (7th Cir. 1995) (noting that "consistent, bright-line enforcement is essential to obtaining compliance with the rule and to ensuring that long-run aggregate benefits in efficiency inure to the district courts").

Brown has only partially complied with this requirement. His fact statement cites a number of communications related to the bond applications described below that are not supported by the evidence Local Rule 56.1 requires. Courts do not consider unsupported fact allegations in deciding whether summary judgment is warranted. Malec v. Sanford, 191 F.R.D. 581, 583 (N.D. Ill. 2000) ("Factual allegations not properly supported by citation to the record are nullities."). As a result, the following account of events only includes facts that have been properly supported by the parties' Local Rule 56.1 submissions.*fn1

Before it was dissolved in December 2009, Ralston Brown was an Illinois corporation that performed sheet metal fabrication and heating, ventilation and air-conditioning ("HVAC") services under the name of Larson Sheet Metal. Gregory Brown was the company's president. (Def.'s SOF at Ex. A). In October 2008, Ralston Brown was the low bidder for replacing HVAC equipment on two projects undertaken by the State of Illinois Tollway -- the Downers Grove Maintenance facility ("the M-14 project") and the Dekalb Maintenance facility ("the M-11 project"). (Pl.'s SOF at ¶ 1). Ralston Brown contracted to replace roof-top HVAC units on the M-14 project for a price of $189,744 and to replace unit heaters with infra-red heaters at the M-11 site for $269,099. Ralston Brown then entered a third contract on March 26, 2009 to replace unit heaters for a public construction project with the Schaumburg, Illinois Park District in the amount of $68,044 ("the Schaumburg project"). (Id. at ¶ 1).

Illinois law requires state officials to obtain a payment bond from contractors like Ralston Brown that perform work for a political subdivision costing in excess of $5,000, or who undertake work for the State of Illinois costing more than $50,000. 30 ILCS 550/1. Each of the construction contracts Ralston Brown entered required the company to seek payment and performance surety bonds in order to guarantee payments to the company's subcontractors and materialmen. (Pl.'s SOF at ¶ 2). Working through an insurance broker, Brown completed two CinciExpress contract bond applications to CIC on October 9, 2008 for the M-11 and M-14 projects ("the bond applications").*fn2 (Id. at ¶ 3; Def.'s SOF at Ex. A).

The M-11 and the M-14 bond applications both included general indemnity agreements that are identical for both applications ("the indemnity agreements" or "the indemnity contracts"). The two agreements contain a choice-of-law clause applying Ohio law to the indemnity contracts. They state that the bond applicant agreed to:

Indemnify the Surety and hold it harmless from and against any and all liability, losses, costs, damages, attorney's fees, disbursements and expenses of whatever kind or nature which the Surety may sustain or incur by reason or in consequence of having executed or procured the execution of the Bond or Bonds aforementioned and/or which the Surety may sustain or incur . . . in settling any claims . . . which may be made or brought under or in connection therewith, and/or in enforcing any of the covenants of this Agreement. The Undersigned will pay over, reimburse and make good to the Surety . . . all money which the Surety or its representatives shall pay, or cause to be paid or become liable to pay, by reasons of the execution of any such Bond or Bonds, such payment to be made to the Surety when due, whether the Surety shall have paid out such sum or any part thereof, or not. (Pl.'s SOF at Ex. A).

The agreements also contain various signature requirements that are central to Brown's motion for summary judgment. The indemnity agreements state that "two corporate officers must sign below on behalf of the Company[, and] [s]hareholders of the Corporation and their spouses must sign personal indemnity below." (Id.). These instructions are announced in a box placed just above the signature lines. They are prefaced by a highlighted and capitalized notice that the requirements are "IMPORTANT." (Id.). Despite this warning, Brown's wife, who held the corporate office of secretary for Ralston Brown, did not sign. (Id. at Ex. A and G). The agreements also require a principal and at least one individual indemnitor to sign. On October 9, 2008, Brown printed the name of "Ralston Brown, Inc." as the principal, and signed his own name twice -- as the company's president and as an individual indemnitor -- on both the M-11 and M-14 indemnity agreements. (Id. at Ex. A).

CIC then issued performance and payment bond number B-9108027 for the M-14 project ("the M-14 bond") and bond number B-910828 for the M11 Project ("the M11 bond"). (Def's. SOF at ¶ 4). Unfortunately, Ralston Brown was not able to carry out all of its contractual obligations to the Tollway or the Park District. Brown claims that the Tollway violated its contractual obligations to Ralston Brown by failing to pay invoices within thirty days after the company submitted payment claims. (Pl's. SOF at ¶ 38). The record does not clarify what specific events occurred, but CIC eventually began receiving claims that required it to make direct payments to Ralston Brown's suppliers in some cases, and to arrange for the completion of the company's work in others. (Def.'s SOF at ¶¶ 7-8). These included $172,172.67 for payments related to the M-11 bond, $68,341.67 concerning the M-14 bond, and $43,210.67 in attorney's fees. (Fox Aff. at ¶¶ 11-19). As a result, CIC brought this suit to enforce its rights under the indemnity agreements against Gregory Brown.

II. Legal Standard

Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court views all facts in the light most favorable to CIC as the non-moving party and draws all justifiable inferences in its favor. Anderson, 477 U.S. at 255. Not all factual disputes will preclude summary judgment; a genuine issue of material exists only where there is sufficient evidence for a jury to "reasonably find for the [nonmoving party]." Id. The parties may not rely on mere allegations or speculation in arguing for or against summary judgment. Argyropoulos v. City of Alton, 539 F.3d 724, 737 (7th Cir. 2008). Instead, both sides must support their factual assertions with "competent evidence of a type otherwise admissible at trial." Lewis v. City of ...

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