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Lincoln General Insurance Co. v. Smith

July 5, 2006


The opinion of the court was delivered by: Scullin, Senior Judge



Plaintiff brings this claim as a surety for indemnity and reimbursement under a General Indemnity Agreement for performance and payment bonds issued on behalf of Defendant Lor-Mar Enterprises, Inc. ("Defendant Lor-Mar"), in connection with various contracts entered into by and between Defendant Lor-Mar and the bond obligees and in consideration of and in reliance on the General Indemnity Agreement. The Court has subject matter jurisdiction over this action because there is complete diversity between the parties and the amount in controversy exceeds $75,000.

Plaintiff commenced this action on May 7, 2004, in the United States District Court for the District of New Jersey. See Dkt. No. 15 at 1-2. On or about October 25, 2004, that court transferred Plaintiff's action to this District. See id. On November 8, 2005, Magistrate Judge Peebles granted Bond Schoeneck & King, PLLC's motion to withdraw as counsel for Defendants and ordered Defendants to file notice with the Court and serve Plaintiff with notice advising of an address and telephone number where they could be reached for purposes of communication with the Court pending their retention of new counsel and to notify the Court of the identity of the new counsel representing them or their desire to proceed pro se on or before January 31, 2006. See Affidavit of Harry R. Blackburn, Esq., dated April 12, 2006 ("Blackburn Aff."), at Exhibit "A;" see also Dkt. No. 15 at 2. Defendants failed to comply with the Court's Order in any respect, and on February 8, 2006, Magistrate Judge Peebles' court room deputy sent a letter to Defendant Smith reiterating the above requirements and directing that he provide the required information by February 24, 2006.*fn1

See Dkt. No. 15 at 3; Blackburn Aff. at Exhibit "C" at 1-2. Magistrate Judge Peebles' court room deputy also advised Defendant Smith that his continued non-compliance could result in the Court striking Defendants' answer from the record and entering a default judgment. See id. Despite this communication and opportunity to comply with the November 8, 2005 Order, Defendants failed to provide this Court with the requested information. On March 27, 2006, this Court ordered that Defendants' answer be stricken from the record, that the Clerk of the Court enter default against Defendants, and that Plaintiff file a motion for entry of a default judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure on or before April 28, 2006. See Blackburn Aff. at Exhibit "C." Currently before the Court is Plaintiff's motion, pursuant to Rule 55(b) of the Federal Rules of Civil Procedure, for entry of a default judgment in the amount of $767,462.11 plus costs to be determined at a later date.


A. Standard of Review

When a court enters a default judgment, it must "accept[] as true all of the factual allegations of the complaint, except those relating to damages." Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (citations omitted). With respect to damages, the court must "conduct an inquiry in order to ascertain the amount of damages with reasonable certainty." Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)). Determining the amount of damages is a two-fold task. See id. First, the court must determine "the proper rule for calculating damages on [the] claim;" then, the court must assess the "plaintiff's evidence supporting the damages to be determined under this rule." Id. In calculating damages, the court "need not agree that the alleged facts constitute a valid cause of action . . . ." Au Bon Pain, 653 F.2d at 65 (citation omitted).

B. Breach of General Indemnity Agreement

"'[L]ike other contracts, indemnity agreements are usually to be interpreted according to the plain meaning of the language employed, where such meaning is unambiguously expressed.'" Dubai Bank, Ltd., N. Y. Branch v. Joshi, No. 85 CIV. 5005, 1989 WL 168088, *2 (S.D.N.Y. Aug. 29, 1989) (quotation and citation omitted). In this case, the General Indemnity Agreement, by its plain language, provides that the "indemnitor[s] shall . . . indemnify . . . the Surety from and against any and all claims, demands and liability for losses, costs and expenses of whatever kind or nature, including court costs, attorney fees, interest, investigative costs . . . which Surety may sustain or incur . . . .[,]" see Complaint at Exhibit "A," "by reason or in consequence of having issued any bonds or suretyship instruments on behalf of [Defendant] Lor-Mar." See id. at ¶ 6.

1. Actual Damages

Plaintiff's complaint establishes that a valid general indemnity agreement existed, that Plaintiff performed under the contract, that Defendants failed to perform their obligations and that Plaintiff suffered damages. See Complaint at ¶¶ 6-11, 15. Defendant Smith signed this agreement individually and in his capacity as president of Defendant Lor-Mar, and Plaintiff is named as the Surety in the agreement. See id. at Exhibit "A."

Plaintiff provides a Statement of Amount Due ("Statement") to support its claim for $767,462.11 in damages. The Statement shows that Plaintiff paid $317,250.79 on the Mains Payment Bond and $281,367.08 on the Mains Performance Bond. See Statement at Exhibit "A." It also shows that Plaintiff paid $14,522.00 on the Martin Payment Bond and $57,190.10 on the Martin Performance Bond. See id. Accordingly, the Court awards Plaintiff $670,329.97 in actual damages for ...

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