United States District Court, D. Maryland
L. Russell, III United States District Judge
MATTER is before the Court on Defendants' Motion to
Dismiss Amended Complaint (ECF No. 18). The Motion is fully
briefed and ripe for disposition. No hearing is necessary.
See Local Rule 105.6 (D.Md. 2016). For the reasons that
follow, the Court will deny the Motion.
action arises out of a surety arrangement between Plaintiff
American Southern Insurance Company (“ASIC”) and
Defendants. ASIC is a “national surety company engaged
in the business of construction and surety bonding.”
(Am. Compl. ¶ 1, ECF No. 15). ASIC requires indemnity
from all parties seeking bonding. (Id. ¶ 10).
In September 2004, Defendants William R. Luther, Jr., Sharon
L. Babcock, and Brian E. Fromme (the “Original
Indemnitors”) sought bonding from ASIC and executed a
General Agreement of Indemnity in favor of ASIC (the
“2004 GAI”) in exchange for ASIC issuing surety
bonds on behalf of Defendant DLM, LLC (“DLM”).
2005, DLM executed two public works agreements (the
“Agreements”) with the Department of Public Works
of Cecil County, Maryland (“Cecil County”).
(Id. ¶¶ 11, 12). In the first, DLM agreed
to build roads and storm drains for the Mendenhall Square
development (the “Construction Agreement”).
(Id. ¶ 11). In the second, DLM agreed to
inspect and maintain storm water management facilities at
Mendenhall Square (the “Inspection and Maintenance
Agreement”). (Id. ¶ 12). To secure
performance of the Agreements, ASIC issued two surety bonds
(the “Bonds”) on behalf of DLM (the
“principal”), naming Cecil County as the
“obligee.” (Id. ¶¶ 13- 15).
November 2008, in exchange for ASIC renewing and continuing
the Bonds, Defendants Bluffs at Big Elk II, LLC, DLM, Vickie
E. Luther, and the Original Indemnitors (collectively, the
“Indemnitors” or “Defendants”)
executed a separate indemnity agreement (the “2008
GAI”). (Id. ¶ 16). The terms of the 2008
GAI are identical to those of the 2004 GAI. (Id.);
(compare ECF No. 1-5 at 2-6 with ECF No. 1-5 at 7-13). Both
the 2004 and 2008 GAI (the “GAIs”) require the
Indemnitors to “indemnify and save [ASIC] harmless from
and against every claim, demand, liability, cost, charge,
suit, judgment and expense which [ASIC] may pay or incur in
consequence of having executed, or procured the execution of
[the Bonds].” (ECF No. 1-5 at 2, 7). Under the GAIs,
the Indemnitors agreed that if Cecil County asserted breach,
delay, or default under the Agreements, ASIC had the right
“to take possession of any part or all of the work
under [the Agreements], and at the expense of the . . .
Indemnitors to complete or arrange for the completion of the
same.” (Id. at 4, 9). The Indemnitors further
agreed that if ASIC completed or arranged for the completion
of work under the Agreements, the Indemnitors would pay for
ASIC's losses and expenses. (Id. at 4, 9).
November 2009, DLM and other related entities sought
protection under Chapter 11 of the United States Bankruptcy
Code. See In re Gemcraft Homes, Inc., No. 09-31696-NVA
(Bankr.D.Md. closed June 30, 2011). In September 2010, the
United States Bankruptcy Court for the District of Maryland
(the “Bankruptcy Court”) confirmed DLM's
Third Amended Joint Plan of Reorganization (the
“Reorganization Plan”). (See ECF No. 18-2). The
Reorganization Plan provided that with the exception of the
liabilities under the contracts that DLM expressly agreed to
assume, all liabilities that arose before the Bankruptcy
Court confirmed the Reorganization Plan were deemed
“fully satisfied, discharged, waived and
released.” (Id. at 14, 22). DLM expressly
agreed to assume continued liability for the Bonds and the
Agreements -- but not the GAIs. (See ECF No. 18-3 at 5).
November 2014, Cecil County notified ASIC that DLM defaulted
under the Agreements by failing to build roads and storm
drains and inspect private storm water facilities at
Mendenhall Square. (Am. Compl. ¶¶ 22, 23). In
response, ASIC engaged a construction consultant and an
attorney to investigate the outstanding construction work at
Mendenhall Square. (Id. ¶ 26). Following the
investigation, ASIC paid Cecil County $511, 265.80 in
exchange for full release and exoneration of the Bonds.
(Id. ¶ 27). ASIC then notified Defendants of
the payment to Cecil County and demanded that Defendants
indemnify ASIC. (Id. ¶ 28). Defendants failed
to indemnify ASIC. (Id. ¶ 29).
initiated this action on November 3, 2016, invoking the
Court's diversity jurisdiction. (ECF No. 1). In their
original Complaint, ASIC brought only one claim against
Defendants: contractual indemnity under the GAIs (the
“Indemnity Claim”). (Compl. ¶¶ 33-39,
ECF No. 1). On December 16, 2016, Defendants moved to dismiss
the Complaint in its entirety, arguing that when the
Bankruptcy Court confirmed the Reorganization Plan, it
discharged DLM's indemnity obligations. (ECF No. 12-1 at
2). On January 6, 2017, before responding in opposition to
Defendants' Motion, ASIC filed a timely First Amended
Complaint. (ECF No. 15). In its amended pleading, ASIC
removes DLM from the Indemnity Claim and adds a new claim
against DLM only for breach of the Agreements (the
“Subrogation Claim”). (See ECF No. 15-1). ASIC
asserts that it “is equitably subrogated to the rights
of Cecil County to assert its rights against DLM for
DLM's breaches” of the Agreements. (Am. Compl.
February 3, 2017, Defendants filed the present Motion to
Dismiss Amended Complaint. (ECF No. 18). ASIC responded on
March 3, 2017 (ECF No. 20), and Defendants replied on March
17, 2017 (ECF No. 21).
Standard of Review
Defendants move to dismiss under Federal Rule of Civil
Procedure 12(b)(6). “The purpose of a Rule 12(b)(6)
motion is to test the sufficiency of a complaint, ” not
to “resolve contests surrounding the facts, the merits
of a claim, or the applicability of defenses.”
Edwards v. City of Goldsboro, 178 F.3d 231, 243-44
(4th Cir. 1999) (quoting Republican Party v. Martin,
980 F.2d 943, 952 (4th Cir. 1992)). A complaint fails to
state a claim if it does not contain “a short and plain
statement of the claim showing that the pleader is entitled
to relief, ” Fed.R.Civ.P. 8(a)(2), or does not
“state a claim to relief that is plausible on its face,
” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
is facially plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550
U.S. at 556). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Id. (citing Twombly,
550 U.S. at 555). Though the plaintiff is not required to
forecast evidence to prove the elements of the claim, the
complaint must allege sufficient facts to establish each
element. Goss v. Bank of Am., N.A., 917 F.Supp.2d
445, 449 (D.Md. 2013) (quoting Walters v. McMahen,
684 F.3d 435, 439 (4th Cir. 2012)), aff'd sub nom.,
Goss v. Bank of Am., NA, 546 F.App'x 165 (4th Cir.
considering a Rule 12(b)(6) motion, a court must examine the
complaint as a whole, consider the factual allegations in the
complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff. Albright v.
Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of
Comm'rs of Davidson Cty., 407 F.3d 266, 268 (4th
Cir. 2005) (citing Scheuer v. Rhodes, 416
U.S. 232, 236 (1974)). But, the court need not accept
unsupported or conclusory factual allegations devoid of any
reference to actual events, United Black Firefighters v.
Hirst, 604 F.2d 844, 847 (4th Cir. 1979), or legal
conclusions couched as factual allegations, Iqbal,
556 U.S. at 678.
a court may not consider extrinsic evidence when resolving a
Rule 12(b)(6) motion. See Chesapeake Bay Found., Inc. v.
Severstal Sparrows Point, LLC,794 F.Supp.2d 602, 611
(D.Md. 2011). But a court may consider documents attached to
the complaint. See Fed.R.Civ.P. 10(c). If those attached
documents conflict with the “bare allegations of the
complaint, ” the attached documents