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Travelers Casualty and Surety Co. of America v. BCP Construction of Hawaii, Inc.

United States District Court, D. Hawaii

December 10, 2019

TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Plaintiff,
v.
BCP CONSTRUCTION OF HAWAII, INC., et al., Defendants.

          ORDER GRANTING IN PART MOTION FOR PARTIAL SUMMARY JUDGMENT

          DERRICK K. WATSON JUDGE.

         INTRODUCTION

         Plaintiff Travelers Casualty and Surety Company of America (“Travelers”) moves for summary judgment on two of its claims on the basis that Defendants have breached a contract between the parties and damages have ensued. Travelers seeks both damages it has already suffered and damages it anticipates suffering due to Defendants' conduct. In no small part due to Defendants not responding to Travelers' motion, the facts are undisputed, and those facts show that the parties' contract has been breached, and Travelers has suffered damages. However, because the Court has questions regarding the damages Travelers anticipates suffering, the motion for partial summary judgment is GRANTED IN PART without prejudice pending clarification of Travelers' anticipated damages.

         PROCEDURAL BACKGROUND

         Travelers initiated this action with the filing of a Complaint on March 18, 2019 against BCP Construction of Hawaii, Inc. (“BCP”), Legacy One Development, LLC, Close Family Trust, Robert N. Close, and Betty Close (collectively, “Defendants”). Dkt. No. 1. In the Complaint, Travelers asserts five claims for relief, two of which are the subject of the pending motion for partial summary judgment: Claim One - Breach of Contract - and Claim Five - Specific Performance. Essentially, Travelers alleges a breach of contract by Defendants and seeks, inter alia, damages and specific performance of the contract.

         On April 12, 2019, Defendants appeared in this action by answering the Complaint. Dkt. No. 15. On July 8, 2019, the parties appeared before the assigned Magistrate Judge for a settlement conference that did not result in a resolution. Dkt. No. 44.

         On October 16, 2019, Travelers filed the instant motion for partial summary judgment (“the motion”), along with a concise statement of facts and accompanying exhibits. Dkt. Nos. 48-49. The motion was scheduled for a hearing on December 2, 2019, meaning that, pursuant to Local Rule 7.2, an opposition was due three weeks before that date. No opposition to the motion was (or has been) filed. On November 18, 2019, Travelers filed a brief reply, and the Court subsequently vacated the December 2, 2019 hearing. Dkt. Nos. 55-56.

         FACTUAL BACKGROUND

         BCP is a contractor licensed to conduct business in the State of Hawai‘i. Concise Statement of Facts (“CSF”) at ¶ 1, Dkt. No. 49. Robert Close and Betty Close, both individually and as trustees of the Close Family Trust, and BCP entered into a General Agreement of Indemnity (“GAI”) with Travelers dated May 20, 2013. Id. at ¶ 2. On December 12, 2014, Legacy One Development, LLC was added as an indemnitor under the GAI. Id. at ¶ 3. Pursuant to the GAI, Defendants agreed to (1) indemnify Travelers against all “Loss” and (2) deposit, upon demand, an amount determined by Travelers to be sufficient to discharge any “Loss” or anticipated “Loss.” GAI at ¶¶ 3, 5, Dkt. No. 48-4. The GAI defines “Loss” as “[a]ll loss and expense of any kind or nature, including attorneys' and other professional fees, which [Travelers] incurs in connection with any Bond or [the GAI]….” Id. at ¶ 1.

         After execution of the GAI, BCP entered into a contract with the State of Hawai‘i Department of Accounting and General Services (“DAGS”) for BCP to upgrade the security electronics at the Halawa Correctional Facility (“the Halawa Project”). CSF at ¶¶ 6, 9. In connection therewith, Travelers issued bonds for BCP's work on the Halawa Project (“the Halawa Bonds”). Decl. of Paul Harmon at ¶ 10, Dkt. No. 48-3; 12/15/15 Performance Bond, Dkt. No. 48-5 at 7; 12/15/15 Labor and Material Payment Bond, Dkt. No. 48-5 at 9. Travelers also issued numerous other bonds on behalf of BCP. Harmon Decl. at ¶ 10.

         A notice to proceed on the Halawa Project was issued on February 16, 2016. CSF at ¶ 8. Most of the work for the Halawa Project was to be completed by two BCP subcontractors: Sierra Detention Systems (“SDS”) with respect to hardware supply and programming; and Hawaiya Technologies, Inc. (“HTI”) as the electrician. Id. at ¶ 9. The Halawa Project was scheduled for completion on September 7, 2017, but this date was subsequently extended to August 31, 2018. Id. at ¶ 8. Construction was complicated due to the Halawa Correctional Facility (“HCF”) being fully occupied with inmates in four cell modules at the time of the work. Id. at ¶ 11. To accommodate construction activities, 248 inmates were temporarily sent from HCF to a private prison in Arizona. Id. at ¶ 12. Due to the high cost of re-housing inmates, a penalty clause was included in the contract between DAGS and BCP, charging BCP $16, 829.00 per day for every day the Halawa Project was late. Id. at ¶ 13.

         At various points during the Halawa Project, SDS went out of business, and HTI was terminated after installing defective electrical work. Id. at ¶ 14. As a result of these and other issues, the Halawa Project was delayed by over two years, with DAGS alleging that it had incurred over $7.2 million in delay damages. Id. at ¶ 16.

         On approximately February 15, 2019, Travelers received a payment bond claim from one of BCP's subcontractors, CML RW Security, LLC (“CML”), which had been hired to complete SDS' remaining work. Id. at ¶ 17. Travelers paid CML's claim in the amount of $315, 353.89, after being informed by BCP that, although the claim was valid, BCP did not have the money to pay it. Id. at ¶ 19. BCP subsequently failed to pay other subcontractors and suppliers, resulting in additional claims being made against the bonds Travelers had issued. Id. at ¶ 20. After conducting its own investigations, Travelers paid the claims it determined were valid, but has not been reimbursed by Defendants under the GAI. Id. at ¶ 21.

         On February 14, 2019, Travelers made a formal written demand to Defendants to deposit cash or other property in the amount of $7.6 million to indemnify Travelers from the losses potentially resulting from the claims made against the Halawa Bonds. Id. ...


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