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Hartford Fire Insurance Co. v. NBC General Contractors Corporation

United States District Court, N.D. California

September 2, 2014

HARTFORD FIRE INSURANCE COMPANY, Plaintiff,
v.
NBC GENERAL CONTRACTORS CORPORATION, Defendant.

REPORT AND RECOMMENDATION RE: PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

JACQUELINE SCOTT CORLEY, Magistrate Judge.

Plaintiff Harford Fire Insurance Company brought claims against Defendants Monica Ung ("Ung"), Dennis Chow ("Chow"), and NBC General Contractors ("NBC") for breach of an indemnity agreement. The district court granted judgment in Plaintiff's favor as to the claims against the individual defendants and Plaintiff now seeks default judgment as to the claims brought against Defendant NBC. The Motion for Default Judgment (Dkt. No. 154) was referred to the undersigned for a report and recommendation. The Court finds that the motion is suitable for determination without oral argument and VACATES hearing scheduled for September 4, 2014. See Civil Local Rule 7-1(b). For the reasons given below, the Court recommends that Plaintiff's Motion be GRANTED.

BACKGROUND

The following factual summary is taken from the District Court's order granting Summary Judgment as to Defendant Ung.

On February 27, 2006, Hartford and the Defendants entered into a General Indemnity Agreement ("Indemnity Agreement" or "agreement") as partial consideration for Hartford's issuance of surety bonds on behalf of NBC, Ung, and Casey Enterprises in connection with Defendants' performance of construction services on various projects in the San Francisco Bay Area. See Levesque Decl. ¶¶ 7, 9-10, Exh. 1, Dkt. 127-2. Ung signed the agreement as the President of NBC and as an individual, while Chow signed the agreement as an individual. Id. , Exh. 1. Pursuant to the Indemnity Agreement and at the request of the Defendants, Hartford issued performance and payment bonds for five projects (collectively, "the Projects") and three "Contractors License Bonds" (collectively, "the Bonds"). Id. ¶¶ 10-11. The Projects are referred to as the El Cerrito Project, Fox Courts Project, Laney College Project, College of Alameda Project, and 81st Avenue Project. Id. ¶ 10.
Under the terms of the Indemnity Agreement, the Defendants agreed to "indemnify, exonerate and hold Hartford harmless from all loss, liability, damages and expenses...which Hartford incurs or sustains (1) because of having furnished any Bond, (2) because of the failure of an Indemnitor to discharge any obligation[] under this Agreement, (3) in enforcing any of the provisions of this Agreement, (4) in pursuing the collection of any loss incurred hereunder, or (5) in the investigation of any claim submitted under any Bond...." Levesque Decl. ¶ 9, Exh. 1 ¶ 5. Sometime after the Bonds were issued, "[o]wners, obligees, subcontractors, suppliers and materialmen providing labor and materials on the Projects alleged NBC defaulted on certain performance and payment obligations...." Levesque Decl. ¶ 12. According to Hartford, "said obligations fall within Hartford's obligations under the Bonds." Id.
In October 2008, Hartford became aware that NBC was having problems meeting its contractual obligations to its subcontractors and suppliers. Levesque Decl. ¶ 35. Thereafter, Hartford requested in writing that the Indemnitors indemnify, exonerate and hold Hartford harmless from all loss, liability, damages and expenses that Hartford incurs because of having issued the Bonds. Id.
From the end of 2008 to the filing of the instant motion, Hartford repeatedly communicated with the Defendants, both in writing and via telephone and e-mail, regarding claims against the Bonds and the Defendants' obligations under the Indemnity Agreement. Levesque Decl. ¶ 36.

(Dkt. No. 137 at 2-3.) Plaintiff has re-submitted the aforementioned Declaration from Richard L. Levesque in support of this motion.[1] (Dkt. No. 154-1.)

Plaintiff contends that it has incurred $6, 096, 345.62 in losses related to claims paid under the Bonds, $1, 373, 605.28 in attorney's and consultant's fees and costs, and that it has recovered $3, 478, 296.73 in funds from third-parties. Plaintiff thus contends that it suffered a net loss of $3, 991, 654.17 under the Bonds. (Dkt. No. 127-2 at ¶ 13 & Ex. 2 (Claims Payment History Report).)

Plaintiff filed the underlying action on November 16, 2009. All three Defendants, Ung, Chow, and NBC, answered and were represented by the same counsel from McInerney & Dillon. Before any substantive pleadings were filed, NBC filed a voluntary petition under Chapter 7 of the United States Bankruptcy Court for the Northern District of California. (Dkt. No. 34.) Nearly a year later, Defendant Ung likewise filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California. (Dkt. No. 69.) On February 25, 2013, summary judgment was entered in favor of Plaintiff as to all claims against Defendant Chow. (Dkt. No. 104.) On March 5, 2013, the district court entered an order administratively closing the case as to Defendants NBC and Ung in light of the pending bankruptcy actions. (Dkt. No. 107.) Thereafter, Plaintiff obtained an order from the bankruptcy court lifting the automatic stay as to Ung. (Dkt. No. 110.) The district court reopened the case as to Ung on May 15, 2013 and subsequently granted summary judgment as to all claims against her. (Dkt. Nos. 111 & 137.)

On October 4, 2013, Defendants' counsel McInerney & Dillon moved to withdraw. (Dkt. No. 117.) While this motion was pending, the bankruptcy court issued a final decree closing NBC's Chapter 7 case. (Dkt. No. 149, Ex. 1.) On March 6, 2013, the district court granted counsel's motion to withdraw and ordered NBC to find substitute counsel within 30 days as a corporation cannot represent itself in federal court. (Dkt. No. 131.) The order further stated that "If NBC has not filed a substitution of counsel within thirty (30) days from the date this Order is filed, Hartford shall move for entry of default." ( Id. at 4.) No appearance was made by substitute counsel and Plaintiff moved for entry of default, which was granted. (Dkt. No. 135.) Because it was unclear whether the case had been reopened as to Defendant NBC following the bankruptcy court's final decree, the undersigned issued an order to show cause and Plaintiff subsequently moved to reopen the case. (Dkt. Nos. 147 & 148.) The district court reopened the case on July 16, 2014 and default was again entered against Defendant NBC on July 29, 2014. (Dkt. Nos. 150 & 153.) The underlying motion for default judgment followed.

DISCUSSION

I. Jurisdiction and Service ...


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