Case 1:07-cv B Document 7 Filed 05/30/2007 Page 1 of 16 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA

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1 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 1 of 16 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA TRAVELERS CASUALTY AND SURETY ) COMPANY OF AMERICA, INC. ) ) Plaintiff, ) No v. ) ) EAST BEACH DEVELOPMENT, LLC; ) REGIONS BANK; A-1 GLASS SERVICES, INC.; ) ALL SOUTH SUBCONTRACTORS, INC.; ) ALPHA INSULATION & WATERPROOFING CO.; ) BAGBY & RUSSELL ELECTRIC COMPANY, INC.; ) JENNINGS SERVICE COMPANY, INC.; ) KONE, INC.; MANSFIELD INDUSTRIAL, INC.; ) SIMPSON COMMERCIAL CONTRACTING, INC. ) THRASHER WATERPROOFING CORP.; ) TRIPLE A FIRE PROTECTION, INC.; and ) ) Defendants. ) FIRST AMENDED COMPLAINT Comes now the Plaintiff, Travelers Casualty and Surety Company of America, Inc. ( Travelers ), by and through undersigned counsel, and pursuant to Federal Rule of Civil Procedure 15(a), and brings this First Amended Complaint seeking declaratory relief pursuant to 28 U.S.C I. THE PARTIES 1. Travelers is a corporation incorporated under the laws of the State of Connecticut and with a principal place of business located in Hartford, Connecticut. Travelers is duly qualified and authorized to transact its business, including the issuance of surety bonds, within the State of Alabama.

2 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 2 of Upon information and belief, East Beach Development, LLC ( East Beach ) is a limited liability company created and existing under the laws of the State of Alabama and with a principal place of business located in Gulf Shores, Alabama. East Beach may be served with process through its registered agent, Rick A. Phillips, located at 3145 Gulf Shores Parkway, Gulf Shores, Alabama Upon information and belief, Regions Bank is a bank duly incorporated under the laws of the State of Alabama and with a principal place of business located in Birmingham, Alabama. Regions Bank is duly authorized to transact its business in the State of Alabama, and may be served with process through its registered agent, CSC Lawyers Incorporating Service, Inc. located at 150 S. Perry Street, Montgomery, Alabama, Upon information and belief, A-1 Glass Services, Inc. ( A-1 Glass ) is a Louisiana corporation with a principal place of business located in Covington, Louisiana. A-1 Glass may be served with process through its registered agent, National Registered Agents, Inc., located at 150 S. Perry Street, Montgomery, Alabama, Upon information and belief, All South Subcontractors, Inc. ( All South ) is an Alabama corporation with a principal place of business located in Birmingham, Alabama. All South may be served with process through its registered agent, CSC Lawyers Incorporating Service, Inc., located at 150 S. Perry Street, Montgomery, Alabama, Upon information and belief, Alpha Insulation and Waterproofing Company ( Alpha ) is a Georgia corporation with a principal place of business located in Marietta, Georgia. Alpha may be served with process through its registered agent, The Corporation Company, located at 2000 Interstate Park Drive, Suite 204, Montgomery, Alabama,

3 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 3 of Upon information and belief, Bagby & Russell Electric Company, Inc. ( Bagby ) is an Alabama corporation with a principal place of business located in Mobile, Alabama. Bagby may be served with process through its registered agent, Franklin D. Russell, located at 513 Beltline Highway North, Mobile, Alabama, Upon information and belief, Jennings Service Company, Inc. ( Jennings ) is an Alabama corporation with a principal place of business located in Demopolis, Alabama. Jennings may be served with process through its registered agent, Ronald Wayne Jennings, located at 1105 Cypress Point, Demopolis, Alabama, Upon information and belief, Kone, Inc. ( Kone ) is a Delaware corporation with a principal place of business located in Moline, Illinois. Kone may be served with process through its registered agent, CSC Lawyers Incorporating Service, Inc., located at 150 S. Perry Street, Montgomery, Alabama, Upon information and belief, Mansfield Industrial, Inc. ( Mansfield ) is a Delaware corporation with a principal place of business located in Pensacola, Florida. Mansfield may be served with process through its registered agent, LexisNexis Document Solutions, Inc., located at 150 S. Perry Street, Montgomery, Alabama, Upon information and belief, Simpson Commercial Contracting, Inc. ( Simpson ) is an Alabama corporation with a principal place of business located in Birmingham, Alabama. Simpson may be served with process through its registered agent, George E. Simpson, located at 4905 Powell Avenue, Birmingham, Alabama Upon information and belief, Thrasher Waterproofing Corporation ( Thrasher ) is a Louisiana corporation with a principal place of business located in Madisonville, Louisiana. 3

4 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 4 of 16 Thrasher may be served with process through its registered agent, Manley Cummins, located at 2900 Highway 98, Suite 101-C, Daphne, Alabama, Upon information and belief, Triple A Fire Protection, Inc. ( Triple A Fire ) is an Alabama corporation with a principal place of business located in Semmes, Alabama. Triple A Fire may be served with process through its registered agent, Alton Turner, located at 8000 Wards Lane, Semmes, Alabama, II. JURISDICTION AND VENUE 14. This Court has the power to determine the parties respective rights and other legal obligations as requested herein pursuant to the Federal Declaratory Judgment Act, 28 U.S.C The demands of East Beach and the other Defendants discussed below create an actual controversy for this Court to adjudicate. 15. This Court has jurisdiction over this matter pursuant to 28 U.S.C because the matter in controversy exceeds the sum or value $75,000, exclusive of interest and costs, and is between citizens of different states. 16. Venue is proper before this Court pursuant to 28 U.S.C. 1391(a) because all relevant actions and transactions occurred within this judicial district. III. FACTUAL ALLEGATIONS The Lighthouse Project 17. On or about April 7, 2004, Coastal Builders, Inc. ( Coastal Builders ) (as Contractor) and East Beach (as Owner) executed a Standard Form of Agreement Between Owner and Contractor construction contract (the Lighthouse Construction Contract ) in relation to a construction project known as Lighthouse Condominiums (the Lighthouse Project ). A copy of the Lighthouse Construction Contract is attached hereto as Exhibit A. 4

5 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 5 of Pursuant to the terms of the Lighthouse Construction Contract, Coastal Builders was to be paid $9,120, Pursuant to Section of the Lighthouse Construction Contract, the parties agreed that the Lighthouse Project is a Multiple Prime Contract Project. 20. On or about April 7, 2004, Coastal Builders (as Construction Manager) and East Beach (as Owner) executed a Standard Form of Agreement Between Owner and Construction Manager contract in relation to the Lighthouse Project (the Lighthouse Construction Manager Contract ). A copy of the Lighthouse Construction Manager Contract is attached hereto as Exhibit B. 21. Travelers, as surety, issued Performance and Payment Bond number (the Lighthouse Bonds ), in the penal sum of $9,120,048, in conjunction with the Lighthouse Project and the Lighthouse Construction Contract. The Lighthouse Bonds named Coastal Builders as principal, East Beach as Obligee, and Regions Bank as Dual-Obligee. A copy of the Lighthouse Bonds is attached hereto as Exhibit C. 22. The Lighthouse Bonds were issued solely in relation to the Lighthouse Construction Contract, and assured performance solely of the Lighthouse Construction Contract. 23. Travelers did not issue any bonds in conjunction with the Lighthouse Construction Manager Contract. 24. Travelers has no obligation, under the Lighthouse Bonds or otherwise, with respect to the Lighthouse Construction Manager Contract. 25. The Lighthouse Construction Contract calls for a specific scope of construction work to be performed that is narrower than the scope of work for the entire Lighthouse Project. 5

6 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 6 of The amount of the Lighthouse Construction Contract was less than the total cost of the Lighthouse Project. 27. In correspondence dated August 13, 2003, counsel for Coastal Builders provided Travelers with a detailed explanation of the East Beach s proposed relationship with Travelers in relation to the Lighthouse Project. This correspondence was written prior to Travelers issuance of the Lighthouse Bonds and demonstrated that Travelers would be liable under the Lighthouse Bonds solely for the limited scope of work addressed in the Lighthouse Construction Contract. A copy of this correspondence is attached hereto as Exhibit D. 28. Travelers obligations under the Lighthouse Payment Bond are limited to claims asserted by valid Claimants, as that term is defined in the Lighthouse Payment Bond. 29. Section 15.1 of the Lighthouse Payment Bond defines a Claimant as An individual or entity having a direct contract with the Contractor or with a subcontractor of the Contractor to furnish labor, materials or equipment for use in the performance of the Contract. 30. In correspondence dated March 12, 2007, Julian Brackin (counsel for East Beach) informed Travelers, inter alia, as follows: East Beach Development, LLC has paid Coastal Builders, Inc. the full contract price. Notwithstanding our payment to Coastal Builders, Inc., a number of mechanics and materialmen s liens have been filed on this project. We hereby make demand that your company satisfy these liens under the terms of its payment bond. A copy of this correspondence is attached hereto as Exhibit E. 31. In correspondence dated April 11, 2007, Travelers informed Mr. Brackin that Travelers was aware of at least twelve (12) entities that had contracted directly with East Beach to furnish labor, materials or equipment in relation with the Lighthouse Project (the Owner Direct Contractors ). Travelers also informed Mr. Brackin that any entity that contracted 6

7 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 7 of 16 directly with East Beach was not a valid Claimant under the terms of the Lighthouse Payment Bond. A copy this correspondence is attached hereto as Exhibit F. 32. The Owner Direct Contractors in relation to the Lighthouse Project are A-1 Glass, All South, Bagby, Jennings, Mansfield, Simpson, Thrasher, and Triple-A Fire (collectively, the Lighthouse Owner Direct Contractors ). 33. Certain of the Lighthouse Owner Direct Contractors have asserted a claim against the Lighthouse Payment Bond. 34. In Exhibit F, Travelers informed Mr. Brackin that it has denied the Lighthouse Payment Bond claims asserted by any person or entity that was not a valid Claimant as that term is defined in the Lighthouse Payment Bond. 35. In Exhibit F, Travelers also informed Mr. Brackin as follows: Per the contract agreements between East Beach and the various Owner Direct Contractors, East Beach bore the responsibility to pay each of the Owner Direct Contractors. The fact that East Beach arguably paid [Coastal Builders] in full under [Coastal Builder s] general contract has no bearing on East Beach s separate obligation to discharge its own contractual obligations to the Owner Direct Contractors. 36. Upon information and belief, each of the Lighthouse Owner Direct Contractors provided performance and payment bonds in favor of East Beach as Obligee. 37. East Beach contracted directly with the Lighthouse Owner Direct Contractors, and was provided performance and payment bonds by each of the Lighthouse Owner Direct Contractors, to reduce the penal sum of the Lighthouse Bonds and the related premium payments from Coastal Builders and, therefore, East Beach. 38. Upon information and belief, the contract entered into by East Beach and the Lighthouse Owner Direct Contractors contained a waiver and release of any right, claim or 7

8 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 8 of 16 cause of action against [Coastal Builders] that may arise out of Contractor s performance of any work on the [Lighthouse Project]. 39. Because Travelers obligations under the Lighthouse Bonds can be no broader than the obligations of Coastal Builders, its principal, a waiver and release of Coastal Builders operates as a waiver and release of Travelers. 40. In correspondence dated May 1, 2007, Mr. Brackin insist[ed] that [Travelers] give immediate attention to obtaining a release of the Mechanics and Materialmen s Liens that have been filed on the [Lighthouse Project]. A copy of this correspondence is attached hereto as Exhibit G. 41. In correspondence dated May 7, 2007 Mr. Brackin informed Travelers that East Beach and Travelers were each named defendants in a lawsuit filed by Bagby in the Baldwin County, Alabama Circuit Court. A copy of this correspondence is attached hereto as Exhibit H. A copy of Bagby s lawsuit is attached hereto as Exhibit I. 42. Paragraph 7 of Exhibit I alleges that Bagby entered into a contract directly with East Beach regarding work to be performed on the Lighthouse Project. Bagby is therefore a Lighthouse Owner Direct Contractor and is not a valid Claimant under the Lighthouse Payment Bond. 43. In correspondence dated May 9, 2007, Travelers re-stated its position previously asserted in Exhibit F. Travelers also informed Mr. Brackin that it will take immediate action to resolve any claim asserted by a valid Claimant, as that term is defined in the Lighthouse Payment Bond. A copy of this correspondence is attached hereto as Exhibit J. 44. Travelers has paid or in the process of paying approximately $336, under the Lighthouse Payment Bond for proper and valid claims asserted by proper and valid 8

9 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 9 of 16 Claimants. Each of the foregoing Claimants paid by Travelers under the Lighthouse Payment Bond contracted directly with Coastal Builders or a subcontractor of Coastal Builders. 45. In addition, Travelers paid $150, under the Lighthouse Payment Bond to A-1 Glass to satisfy a claim asserted by A-1 Glass. This payment was based upon a notarized statement from A-1 Glass in which it mistakenly identified that it contracted directly with Coastal Builders, and upon a representation from Coastal Builders indicating that the A-1 Glass claim amount was valid. 46. In exchange for the $150, payment under the Lighthouse Payment Bond, A-1 Glass executed a Release and Assignment that assigned Travelers all rights, title, and interest in and to said claim. A copy of the Release and Assignment is attached here as Exhibit K. 47. Subsequent to paying $150, under the Payment Bond to A-1 Glass, Travelers has learned that A-1 Glass was a Lighthouse Owner Direct Contractor who contracted directly with East Beach. 48. A-1 Glass did not contract directly with Coastal Builders or a subcontractor of Coastal Builders. A-1 Glass therefore is not a valid Claimant under the Lighthouse Payment Bond. If Travelers was aware that A-1 Glass was a Lighthouse Owner Direct Contractor and not a valid Claimant, it would have denied the claim of A-1 Glass. 49. Travelers has no obligation, under the Lighthouse Bonds or otherwise, with respect to any claims asserted by Lighthouse Owner Direct Contractors. The San Carlos Project 50. On or about December 9, 2004 Coastal Builders (as Contractor) and Holiday Development, LLC ( Holiday ) (as Owner) executed a Standard Form of Agreement Between 9

10 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 10 of 16 Owner and Contractor construction contract (the San Carlos Construction Contract ) in relation to a construction project known as San Carlos Condominiums (the San Carlos Project ). A copy of the San Carlos Construction Contract is attached hereto as Exhibit L. 51. Pursuant to the terms of the San Carlos Construction Contract, Coastal Builders was to be paid $15,226, Pursuant to Section of the San Carlos Construction Contract, the parties agreed that the San Carlos Project is a Multiple Prime Contract Project. 53. On or about September 2, 2004 Coastal Builders (as Construction Manager) and Holiday (as Owner) executed a Standard Form of Agreement Between Owner and Construction Manager contract in relation to the San Carlos Project (the San Carlos Construction Manager Contract ). A copy of the San Carlos Construction Manager Contract is attached hereto as Exhibit M. 54. Travelers, as surety, issued Performance and Payment Bond number (the San Carlos Bonds ), in the penal sum of $15,226,382.00, in conjunction with the San Carlos Project and the San Carlos Construction Contract. The San Carlos Bonds named Coastal Builders as principal, Holiday as Obligee, and AmSouth Bank as Dual-Obligee. A copy of the San Carlos Bonds is attached hereto as Exhibit N. 55. The San Carlos Bonds were issued solely in relation to the San Carlos Construction Contract, and assured performance solely of the San Carlos Construction Contract. 56. Travelers did not issue any bonds in conjunction with the San Carlos Construction Manager Contract. 57. Travelers has no obligation, under the San Carlos Bonds or otherwise, with respect to the San Carlos Construction Manager Contract. 10

11 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 11 of The San Carlos Construction Contract calls for a specific scope of construction work to be performed that is narrower than the scope of work for the entire San Carlos Project. 59. The amount of the San Carlos Construction Contract was less than the total cost of the San Carlos Project. 60. Travelers obligations under the San Carlos Payment Bond are limited to claims asserted by valid Claimants, as that term is defined in the San Carlos Payment Bond. 61. Section 15.1 of the San Carlos Payment Bond defines a Claimant as An individual or entity having a direct contract with the Contractor or with a subcontractor of the Contractor to furnish labor, materials or equipment for use in the performance of the Contract. 62. The Owner Direct Contractors in relation to the San Carlos Project are Alpha, Jennings, and Kone (collectively, the San Carlos Owner Direct Contractors ). 63. Certain of the San Carlos Owner Direct Contractors have asserted a claim against the San Carlos Payment Bond. 64. Travelers has denied the San Carlos Payment Bond claims asserted by any person or entity that was not a valid Claimant as that term is defined in the San Carlos Payment Bond. 65. Upon information and belief, each of the San Carlos Owner Direct Contractors provided performance and payment bonds in favor of Holiday as Obligee. 66. Holiday contracted directly with the San Carlos Owner Direct Contractors, and was provided performance and payment bonds by each of the San Carlos Owner Direct Contractors, to reduce the penal sum of the San Carlos Bonds and the related premium payments. 67. Upon information and belief, the contract entered into by Holiday and the San Carlos Owner Direct Contractors contained a waiver and release of any right, claim or cause of 11

12 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 12 of 16 action against [Coastal Builders] that may arise out of Contractor s performance of any work on the [San Carlos Project]. 68. Because Travelers obligations under the San Carlos Bonds can be no broader than the obligations of Coastal Builders, its principal, a waiver and release of Coastal Builders operates as a waiver and release of Travelers. 69. Travelers has paid $369, for proper and valid claims asserted by proper and valid Claimants who contracted directly with Coastal Builders or a subcontractor of Coastal Builders. 70. Travelers has no obligation, under the San Carlos Bonds or otherwise, with respect to any claims asserted by the San Carlos Owner Direct Contractors. 71. Travelers continues to reserve any all rights, remedies, and defenses at law, in equity, and under the Lighthouse Bonds and the San Carlos Bonds in relation to the claims asserted (or that may be asserted) by the Lighthouse Owner Direct Contractors and the San Carlos Owner Direct Contractors. 72. Travelers filing of this First Amended Complaint is not intended to waive any limitation or defense to the claims asserted (or that may be asserted) by the Lighthouse Owner Direct Contractors and the San Carlos Owner Direct Contractors. COUNT I DECLARATORY JUDGMENT 73. Travelers hereby incorporates by reference the allegations contained in Paragraph 1-72 of this First Amended Complaint as if set forth fully herein. 74. Only those entities that contracted directly with Coastal Builders or the subcontractors of Coastal Builders to furnish labor, materials, or equipment in relation to the Lighthouse Project are valid Claimants under the Lighthouse Payment Bond. 12

13 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 13 of Only those entities that contracted directly with Coastal Builders or the subcontractors of Coastal Builders to furnish labor, materials, or equipment in relation to the San Carlos Project are valid Claimants under the San Carlos Payment Bond. 76. Those entities that contracted directly with East Beach to furnish labor, materials, or equipment in relation to the Lighthouse Project are not valid Claimants under the Lighthouse Payment Bond. 77. Those entities that contracted directly with Holiday to furnish labor, materials, or equipment in relation to the San Carlos Project are not valid Claimants under the San Carlos Payment Bond. 78. Travelers is entitled to a judicial declaration that it has no obligation under the Lighthouse Payment Bond or the San Carlos Payment Bond except to valid Claimants. 79. Because those entities that contracted directly with East Beach to furnish labor, materials, or equipment in relation to the Lighthouse Project are not valid Claimants, Travelers is entitled to a judicial declaration that it has no obligation under the Lighthouse Payment Bond for the claims of Lighthouse Owner Direct Contractors. 80. Because those entities that contracted directly with Holiday to furnish labor, materials, or equipment in relation to the San Carlos Project are not valid Claimants, Travelers is entitled to a judicial declaration that it has no obligation under the San Carlos Payment Bond for the claims of San Carlos Owner Direct Contractors. 81. Travelers obligations under the Lighthouse Bonds and the San Carlos Bonds can be no broader than the obligations of Coastal Builders, as principal. 82. The waiver and release executed by the Lighthouse Owner Direct Contractors and the San Carlos Owner Direct Contractors in favor of Coastal Builders in relation to the 13

14 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 14 of 16 performance of any work on the Lighthouse Project and the San Carlos Project, respectively, operates as a waiver and release of Travelers, as surety. 83. Because the Lighthouse Owner Direct Contractors and the San Carlos Owner Direct Contractors waived and released Travelers of any obligation or liability arising from the performance of any work on the Lighthouse Project and the San Carlos Project, Travelers is entitled to a judicial declaration that it has no obligation under the Lighthouse Bonds or the San Carlos Bonds for the claims of the Lighthouse Owner Direct Contractors or the San Carlos Owner Direct Contractors. COUNT II INDEMNITY AND REIMBURSEMENT 84. Travelers hereby incorporates by reference the allegations contained in Paragraph 1-72 of this First Amended Complaint as if set forth fully herein. 85. Based upon the inaccurate information from A-1 Glass, Travelers paid $150, under the Lighthouse Payment Bond to A-1 Glass. 86. After making payment to A-1 Glass in the amount of $150,090.25, Travelers discovered that A-1 Glass is a Lighthouse Owner Direct Contractor and not a valid Claimant under the Lighthouse Payment Bond. 87. Pursuant to the doctrine of equitable subrogation, Travelers is entitled to payment from East Beach in the amount of $150, resulting from Travelers $150, payment to A-1 Glass under the Lighthouse Payment Bond. 88. Pursuant to the common law doctrine of indemnity, Travelers is entitled to payment from East Beach in the amount of $150, resulting from Travelers $150, payment to A-1 Glass under the Lighthouse Payment Bond. 14

15 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 15 of Pursuant to its right of assignment, as evidenced in Exhibit K, Travelers is entitled to payment from East Beach in the amount of $150, resulting from Travelers $150, payment to A-1 Glass under the Lighthouse Payment Bond. WHEREFORE, PREMISES CONSIDERED, Travelers respectfully requests the following relief: 1. That the proper process issue and that the Defendants be required to answer this Complaint in the time prescribed to them by law; 2. For an Order declaring that Travelers has no obligation, under the Lighthouse Bonds, the San Carlos Bonds, or otherwise, with respect to the claims or liens asserted by Lighthouse Owner Direct Contractors or the San Carlos Owner Direct Contractors; 3. For an Order declaring that Travelers has no further obligation under the Lighthouse Payment Bond or the San Carlos Bonds except as to those claims asserted by valid Claimants; 4. For judgment against East Beach in the amount of $150,090.25; and 5. For such further relief as this Court deems just and proper. Respectfully submitted, /s/ Michael C. Quillen Michael C. Quillen Walston Wells & Birchall, LLP One Federal Place 1819 Fifth Ave. North, Suite 1100 Birmingham, AL (Phone) (Fax) mquillen@walstonwells.com and 15

16 Case 1:07-cv B Document 7 Filed 05/30/2007 Page 16 of 16 Sam H. Poteet, Jr. Tennessee Jeffrey S. Price Tennessee Justin D. Wear Tennessee Manier & Herod, P.C. 150 Fourth Avenue North, Suite 2200 Nashville TN (Phone) (Fax) Motion to Practice Pro Hac Vice Forthcoming Attorneys for Travelers 16