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United States v. Morris, Inc.

United States District Court, D. South Dakota, Southern Division

August 18, 2016

UNITED STATES OF AMERICA, for the use and benefit of Ash Equipment Co., Inc., and ASH EQUIPMENT CO., INC., a Maryland corporation, d/b/a American Hydro, Plaintiffs,
MORRIS, INC., a South Dakota corporation; UNITED FIRE AND CASUALTY COMPANY, an Iowa corporation; and RED WILK CONSTRUCTION, INC., a South Dakota corporation, Defendants.



         Defendant Morris, Inc. (Morris), the general contractor on a construction project at the Fort Randall dam, asks for a summary judgment ruling that the indemnity provision of its subcontract with Defendant Red Wilk Construction, Inc. (Red Wilk), entitles it to indemnity for the attorney's fees it is expending in defending this lawsuit brought against it by American Hydro.


         The general contractor for the project at the Fort Randall dam is Defendant Morris, a South Dakota corporation with its principal place of business in Pierre, South Dakota. On September 17, 2013, Morris entered into the Prime Contract for the Fort Randall dam project with the United States Army Corps of Engineers (US ACE). Morris obtained a Miller Act payment bond on September 18, 2013, from Defendant United Fire and Casualty Co. in the amount of $7, 472, 670.25 as required by U.S. ACE. On October 8, 2013, Morris contracted with Red Wilk to complete certain work, including the concrete removal using hydrodemolition methods as required by USACE in its project plans and specifications. Red Wilk is a South Dakota corporation with its principal place of business in Huron, South Dakota. The President of Red Wilk, Red Wilk, and Mark Morris, Secretary of Morris, signed the subcontract. The subcontract signed by Wilk and Morris contains an indemnity provision which states that Red Wilk agrees:

To pay for all materials, skill, labor and instrumentalities used in, or in connection with the performance of this Subcontract when and as bills for claims therefore become due, and to save and protect the Project, the Owner, and the Contractor from all claims and mechanics' liens on account thereof, and to furnish satisfactory evidence to the Contractor when and if required, that he has complied with the above requirements.

(Subcontract § II, Doc. 49-2.)

         On April 9, 2014, Red Wilk contracted with American Hydro to provide the labor, equipment and other facilities for concrete removal by hydrodemolition. American Hydro began the concrete hydrodemolition work in May, 2014. American Hydro removed its equipment and labor forces from the work site as of August 25, 2014.

         American Hydro filed the summons and complaint in this lawsuit on August 22, 2014, alleging that it has been paid for some but not all of the work it provided. Red Wilk contends that American Hydro failed to perform some work in accordance with the contract specifications and failed to complete other work required by the contract. Red Wilk asserts that any amounts allegedly owed to American Hydro above and beyond what has been paid are completely offset because Red Wilk had to hire others to correct or complete the hydrodemolition work on the project. Both parties seek damages for the other's breach of the contract.

         In the Complaint, American Hydro alleges a claim for Quantum Meruit against Morris. Morris brought a cross-claim for indemnification against Red Wilk, asserting that American Hydro's only claims against Morris result from the alleged breach of contract by Red Wilk. (Doc. 9 at p. 7.) On June 3, 2015, Morris' lawyer sent a letter to Red Wilk's attorney formally tendering the defense of American Hydro's claims against Morris to Red Wilk. (Doc. 58-5.) In the pending motion for summary judgment, Morris acknowledges that liability has not yet been determined in the lawsuit, but requests a ruling that the indemnity provision of its subcontract with Red Wilk requires Red Wilk to pay for Morris' attorneys' fees incurred in defending American Hydro's claims against Morris.


         Standard of Review

         Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In ruling on a motion for summary judgment, the Court is required to view the facts in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). Once the moving party has met its burden, the non-moving party may not rest on the allegations of its pleadings but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 257; City of Mt. Pleasant v. Associated Elec. Coop., Inc., 838 F.2d 268, 273-74 (8th Cir. 1988). All facts presented to the district court by the non-moving party are accepted as true if properly supported by the record. See Beck v. Skon, 253 F.3d 330, 332-33 (8th Cir. 2001).

         General Rule that Each Party Bears the Cost of Their Own Attorneys

         In diversity proceedings, state law governing the provision of attorney's fees is generally considered "substantive" and thus controlling for purposes of the Erie doctrine. Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786, 796 (8th Cir. 2005); see also Lamb Eng'g & Const. Co. v. Neb. Pub. Power Dist., 103 F.3d 1422, 1434 (8th Cir. 1997). "South Dakota generally follows the 'American Rule' on attorney's fees, under which each party usually bears the cost of their own attorneys." Hewitt v. Felderman, 841 N.W.2d 258, 264 (S.D. 2013). "There are two exceptions to this rule: 'first[, ] when a contractual agreement between the parties entitles the prevailing party to attorney fees, and second [, ] when an award of attorney fees is authorized by statute.'" Eagle Ridge Estates Homeowners Ass'n, Inc. v. Anderson, 827 N.W.2d 859, 867 (S.D. 2013) (alterations in original). Even if attorney's fees are recoverable, the award of such fees must always be reasonable in light of the services rendered. Id.

         Indemnification for Attorney ...

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