Opinion
Civil Action No. 03-5659.
May 6, 2004
ORDER
AND NOW, this 6th day of May, 2004, upon consideration of defendant's motion for summary judgment (docket entry # 10), plaintiffs' opposition thereto, plaintiffs' motion for reconsideration, defendant's opposition thereto, plaintiffs' reply to defendant's opposition to the motion for reconsideration, plaintiffs' supplemental memorandum, defendant's response thereto, plaintiffs' motion to file reply to defendant's response to the supplemental memorandum (docket entry # 26), plaintiffs' motion to amend the complaint (docket entry # 23), and defendant's response thereto, and the Court finding that:
(a) Since 1998, plaintiff Kevin Farrell has been an employee — specifically, an Executive Vice President — of JHE, Inc. ("JHE"), Farrell Decl. of Feb. 26, 2004 ¶ 3;
(b) On November 17, 1998, Washington International Insurance Company ("WIIC") executed Labor and Material Bond No. S-700 0368 (the "Bond"), thereby assuming joint and several liability (up to $2,268,000.00) with JHE to JHE's subcontractors on SEPTA's Overbrook Station Rehabilitation Project (the "Overbrook project"), see Def.'s Mem. Supp. Summ. J. Ex. 4;
(c) On August 22, 2003, Farrell filed a complaint against WIIC in which he sought to recover under the Bond;
(d) Under Pennsylvania law, a plaintiff must commence "[a]n action upon a bond given as security by a party" within one year, see 42 Pa. Cons. Stat. § 5523(2) (2003), unless "a shorter time which is not manifestly unreasonable is prescribed by written agreement," see 42 Pa. Cons. Stat. § 5501(a) (2003);
In this diversity action, we apply Pennsylvania law because Pennsylvania has the most significant contacts with the issues involved in this case. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941) ("The conflict of laws rules to be applied by the federal court [sitting in diversity jurisdiction] must conform to those prevailing in . . . courts [of the state where the federal court sits]."); see also In re Estate of Agostini, 457 A.2d 861, 871 (Pa.Super. 1983) (explaining that Pennsylvania choice-of-law rules "call for the application of the law of the state having the most significant contacts or relationships with the particular issue"). Pennsylvania has the most significant contacts here because WIIC issued the Bond to encourage sub-contractors to perform work in Pennsylvania. Moreover, the parties implicitly concede that Pennsylvania law applies because their briefs rely almost exclusively on it.
(e) The Bond states that "[n]o suit or action shall be commenced hereunder by any claimant . . . [a]fter the expiration of one (1) year following the date on which Principal ceased Work on said Contract," and we find that this limitation is not manifestly unreasonable;
The "Principal" was JHE. Def.'s Mem. Supp. Summ. J. Ex. 4 at 1.
The "Contract" was a written agreement dated November 17, 1998 between SEPTA and JHE for the Overbrook Station Rehabilitation Project (General Construction). Def.'s Mem. Supp. Summ. J. Ex. 4 at 1.
(f) According to JHE's President, SEPTA terminated its Contract with JHE in October, 2001, see Eccleston Decl. of Feb. (undated), 2004, at ¶ 5, and JHE "did not perform any further construction work or supply any further materials at the Overbrook Station Project for SEPTA after October of 2001 with either its own forces or through any subcontractor," Eccleston Decl. of Dec. 16, 2003, at ¶ 3;
(g) Farrell claims, however, that JHE continued to "Work" on the Overbrook project until at least October of 2002 because he, on JHE's behalf, leased storage space for SEPTA property that had been removed temporarily from the Overbrook project to facilitate construction, see Farrell Decl. of Apr. 9, 2004;
(h) In fact, Farrell assumed personal responsibility for the lease agreement and did not purport to execute it on JHE's behalf, see id. Ex. A, so the storage arrangement is not evidence that JHE continued working on the Overbrook project after October of 2001;
(i) Even if Farrell had executed the lease agreement on JHE's behalf, the storage arrangement was not "Work" within the meaning of the Bond because JHE's storage of SEPTA property did not advance completion of the Overbrook project after SEPTA terminated the Contract with JHE;
The record contains no evidence that SEPTA permitted JHE to keep its property after SEPTA had terminated the contract. Without such permission, JHE lacked any right to retain the property. We decline to countenance Farrell's attempt to use JHE's unauthorized retention of SEPTA's property to postpone the running of the statute of limitations. Were this attempt to succeed, JHE could delay the onset of the statute of limitations indefinitely merely by refusing to return property which it was no longer entitled to possess.
(j) Because Farrell has submitted no evidence that JHE "ceased Work" on the Overbrook project after October 31, 2001, no reasonable finder of fact could infer that JHE continued work after October 31, 2001;
(k) Although JHE "ceased Work," within the meaning of the Bond, on or before October 31, 2001, Farrell argues that WIIC should be estopped from relying on a statute of limitations defense because WIIC led him to believe that it would pay a claim that he first submitted on October 1, 2002, see Pls.' Supplemental Mem. at 2-7; Pls.' Mot for Recons. ¶ 6; Pls.' Mem. Opp'n Summ. J. at 15-19; see also Farrell Aff. of Nov. 17, 2003 Ex. D;
(l) To receive the protection of the doctrine of fraudulent concealment, Farrell must point to at least one of WIIC's "affirmative and independent act[s] of concealment that would divert or mislead" him, Bohus v. Beloff, 950 F.2d 919, 925 (3rd Cir. 1991) (emphasis added);
(m) Putting aside WIIC's alleged failure to respond to his letters, which is not an affirmative act, Farrell points to several alleged acts of concealment, see Pls.' Supplemental Mem. at 2-4 (listing eight alleged acts of concealment), but most of these acts were taken by JHE, JHE's agents, or Farrell himself — not by WIIC, see id. ¶¶ A, C, D, E, F, G, H, I;
(n) Farrell does assert that WIIC's request for documentation of his claim was an affirmative act that caused him "to relax his vigilance or deviate from the right of inquiry," see Bohus, 950 F.2d at 925 (quotation and citation omitted), but the request explicitly advised Farrell not to construe it "as an admission of liability or a promise to pay [his] claim in whole or in part," Farrell Decl. of Nov. 17, 2003 Ex. E;
(o) In view of the explicit disclaimer in WIIC's request for documentation, no reasonable factfinder could conclude that it was an affirmative act of WIIC that caused Farrell to relax the pursuit of his claim against WIIC;
(p) Because the doctrine of fraudulent concealment does not toll the statute of limitations, the Bond's statute of limitations expired on October 31, 2002, nearly ten months before Farrell filed his complaint;
(q) If Pennsylvania's "default" statute of limitations, 42 Pa. Cons. Stat. § 5523(2), is shorter than the Bond's statute of limitations, then it had also expired by the time Farrell filed his complaint;
(r) If the default statute of limitations is longer than the Bond's statute of limitations, then the Bond's statute of limitations controls, see 42 Pa. Cons. Stat. § 5501(a);
(s) Thus, WIIC is entitled to summary judgment on Count II because Farrell asserted his claim after the statute of limitations had expired;
(t) Even if WIIC were not entitled to summary judgment on statute of limitations grounds, Farrell can only recover under the Bond if he is a "claimant" — that is, "one having a direct contract with the Principal or with a Subcontractor of the Principal for labor, material, or both, used or reasonably required for use in the performance of the Contract," see Def.'s Mem. Supp. Summ. J. Ex. 4 at 2;
(u) Because the record contains no evidence that Farrell had "a direct contract" with JHE or its subcontractors, Farrell is not a "claimant," and WIIC is entitled to summary judgment;
Farrell claims that the "Declaration of JHE's president, John Eccleston, clearly states that JHE and Kevin Farrell entered into an agreement whereby Plaintiff Farrell would supply goods/services/material and the like by purchasing same with his own funds for the benefit of JHE in its completion of the Overbrook Project." Pls.' Mem. Opp'n Summ. J. at 6. In fact, Eccleston never mentioned any agreement between JHE and Farrell.See Eccleston Decl. of Feb. (undated), 2004.
Farrell also argues that WIIC admitted that Farrell was a "claimant," within the meaning of the Bond, by supplying information about his claim to an expert that JHE hired to prepare a report on the damages that it sustained from SEPTA's termination of the Contract. See Pls.' Mem. Opp'n Summ. J. at 6; see also Eccleston Decl. of Feb. (undated), 2004 ¶ 9. The inclusion of Farrell's claim in the information that WIIC supplied to the expert does not constitute an admission that Farrell was a "claimant," within the meaning of the Bond. At most, it establishes that Farrell submitted a claim to WIIC, not that WIIC considered him a "claimant" whose claim should be paid.
(v) Farrell also seeks leave to file an amended complaint that includes breach of contract claims on three additional bonds;
(w) The Supreme Court has emphasized that district courts should grant permission to amend a complaint "freely," except in cases of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment," Foman v. Davis, 371 U.S. 178, 182 (1962); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) ("Among the grounds that could justify a denial of leave to amend are undue delay, bad faith, dilatory motive, prejudice, and futility."); and
(x) Farrell has unduly delayed his request to amend because he offers no explanation for why claims based on the three additional bonds were not included in his original complaint, so we shall deny Farrell's motion to amend the complaint;
Farrell attempts to argue that the claims on the three additional bonds were always part of the original complaint because its exhibits referenced those bonds. This argument ignores that the complaint itself asserted a breach of contract claim based solely on the bond for the Overbrook project. Moreover, although some of the exhibits to the original complaint refer to the additional bonds, all of the exhibits refer to the Overbrook project bond. We hold, therefore, that the original complaint contained a claim based on the Overbrook project bond, but no claims based on the three additional bonds. Farrell has offered no reason for waiting to seek leave to add new claims to the complaint until after the issues presented in the motion for summary judgment had been exhaustively briefed.
It is hereby ORDERED that:
1. Plaintiffs' motion to file reply to defendant's response to the supplemental memorandum is GRANTED;
2. Defendant's motion for summary judgment is GRANTED;
3. Plaintiffs' motion to amend the complaint is DENIED; and
4. The Clerk shall CLOSE this civil action statistically.
JUDGMENT
AND NOW, this 6th day of May, 2004, pursuant to Fed.R.Civ.P. 56(b) and 58(a), and in accordance with the accompanying Order, JUDGMENT IS ENTERED in favor of defendant Washington International Insurance Company and against plaintiffs Kevin Farrell and EF Ventures, Inc. on Count II of the complaint.