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The Frederick Quinn Corporation v. West Bend Mutual Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

May 8, 2015

THE FREDERICK QUINN CORPORATION, Plaintiff,
v.
WEST BEND MUTUAL INSURANCE COMPANY, Defendant.

MEMORANDUM OPINION AND ORDER

JOAN B. GOTTSCHALL, District Judge.

In this action to recover on a performance bond, defendant West Bend Mutual Insurance Company contends that plaintiff Frederick Quinn Corporation's allegations about the amount in controversy, 28 U.S.C. § 1332(a), are insufficient. West Bend thus seeks to dismiss Frederick Quinn's complaint pursuant to Fed.R.Civ.P. 12(b)(1). For the reasons detailed below, Frederick Quinn will be required to file an amended complaint consistent with this opinion. In light of the anticipated amended complaint, West Bend's motion to dismiss is denied as moot.

I. BACKGROUND

Plaintiff Frederick Quinn Corporation is a general contractor that also performs construction management. Defendant West Bend Mutual Insurance Company is in the business of providing payment and performance bonds for construction contractors. Frederick Quinn and Optimal Fire Protection, LLC entered into a subcontract that required Optimal to install a fire protection system as part of a larger project. West Bend issued a performance bond to Frederick Quinn for the Frederick Quinn-Optimal subcontract.

In its single-count federal complaint seeking to recover on West Bend's performance bond, Frederick Quinn alleges that Optimal failed to perform, forcing Frederick Quinn to engage two other subcontractors (Automatic Fire Systems and C.L. Doucette) to complete Optimal's work. In addition, Frederick Quinn filed a state court action in the Circuit Court of DuPage County against Optimal based on Optimal's failure to perform. See West Bend Mut. Ins. v. Optimal Fire Prot. LLC, 14-AR-270 (Cir. Ct. DuPage Cnty.).

A. Damages Claimed in Frederick Quinn's Complaint

In its complaint, Frederick Quinn claims damages in the amount of $77, 872.37. (Compl. ¶ 29, Dkt. 1.) Frederick Quinn calculates that amount as follows. The price of the subcontract between Frederick Quinn and Optimal was $136, 000. Frederick Quinn paid Optimal $80, 820.00, leaving $55, 180.00 of the subcontract cost unpaid. (Id. at ¶¶ 25-26.) Frederick Quinn asserts that it spent a total of $133, 052.37 (including its legal fees) to complete the work that Optimal failed to do. (Id. at ¶ 28.) Frederick Quinn arrives at its claimed amount of $77, 872.37 in damages by applying a credit of $55, 180.00 to $133, 052.37. (Id. at ¶ 29.) It then concludes that West Bend, as the surety for the subcontract with Optimal, is liable for $77, 872.37.

B. West Bend's Initial Challenge to the Damages Claimed in Frederick Quinn's Complaint

According to West Bend, during the course of discovery in the state court proceedings between Frederick Quinn and Optimal, Optimal asked Frederick Quinn to produce "[a]ll Documents showing what amounts are due and owing to Optimal for the services it provided in connection with the project." (Dkt. 21, Ex. A at request 9.) In response, Frederick Quinn produced an affidavit from Scott Metzel (Frederick Quinn's Chief Financial Officer) supporting Frederick Quinn's claim that it previously paid $80, 820.00 to Optimal, as well as eight change orders showing that the total cost to complete the Optimal contract was $113, 747.00. West Bend correctly observes that $113, 747.00 minus the $55, 180.00 credit is $58, 667.00, which is less than the minimum amount in controversy of $75, 000. See 28 U.S.C. § 1332(a). West Bend's motion to dismiss for lack of subject matter jurisdiction is based on this calculation of damages.

C. Damages Claimed in Frederick Quinn's Response to the Motion to Dismiss

In response to West Bend's motion to dismiss, Frederick Quinn asserts that there were, in fact, ten change orders (not eight). It attaches the two additional change orders (in the amount of $7, 200 and $11, 155.00, respectively) to its response to the motion to dismiss, denies that it ever represented that the eight change orders reflected all of its damages, and represents that the last two change orders "inadvertently were not included in [its] initial production." (Pl. Resp. at 3, Dkt. 24.)

Change Order Nine is dated July 26, 2013 and Change Order Ten is dated May 12, 2014. (Dkt. 24-1, PageID #757-58.) Change Orders Nine and Ten both include "backcharge[s] for [Frederick Quinn] Project Management expense." Specifically, Change Order Nine reflects charges in the amount of $7, 200.00 for weekend and overtime painting work. Change Order Ten reflects charges in the amount of $3, 555.00 for legal and administrative expenses and $4, 100.00 for Frederick Quinn "management expenses." Change Order Ten also includes a $3, 5000 charge for "Interest Income lost due to fire protection work completion costs/expense... (Approx. $70, 000.00 at 5%/16 months)." (Id. )

In its response to West Bend's motion to dismiss, Frederick Quinn abandons its allegation in its complaint that West Bend, as a surety for the subcontract with Optimal, is liable for $77, 872.37. Instead, it claims that its damages in fact totaled "approximately $82, 853." (Id. ) The difference in the two figures is due to an additional $5, 931 in legal fees claimed in the Metzler affidavit (which is attached to Frederick Quinn's response to the motion to dismiss).[1] These legal fees cover the time period ...


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