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Hunt Construction Group, Inc. v. Cobb Mech. Contractors, Inc.

United States District Court, W.D. Texas, Austin Division

May 18, 2017




         Before the Court are Defendant Liberty Mutual Insurance Company's Opposed Emergency Motion to Compel Access to Construction Project (Dkt. No. 16); Hunt's Response (Dkt. No. 20); Liberty Mutual's Reply (Dkt. No. 23); Liberty Mutual's Post-hearing Brief (Dkt. No. 27); Hunt's Response (Dkt. No. 29); and Liberty Mutual's Reply (Dkt. No. 30). The Court held a hearing on May 2, 2017, where it considered the arguments of the parties. The parties were also permitted to submit post-hearing supplemental briefing.

         I. Background

         Hunt Construction Group Inc. is the general contractor for the Fairmont Austin Hotel construction project. Hunt's contract with the owner of the Fairmont project currently requires that the hotel will be substantially complete by August 2017. On July 20, 2015, Hunt entered into a subcontract with Cobb Mechanical Contractors, Inc., for the project's plumbing, piping, and HVAC work on the podium and tower portions of the project, for the fixed sum of $30, 938, 190. Pursuant to the subcontract, Cobb obtained a performance bond from Liberty Mutual Insurance Company in the principal sum of $30, 938, 190, with Hunt as the obligee. The purpose of the performance bond was to provide for completion of the subcontractor's scope of work in the event the subcontractor defaults.

         Starting In July 2016, Hunt issued a series of default notices to Cobb, and on November 18, 2016, Hunt terminated Cobb's subcontract with regard to the podium portion of the project, while leaving in place the subcontract on the tower portion. At the same time, Hunt notified Liberty of the termination and stated that it intended to arrange for another contractor to perform the remainder of Cobb's obligations on the podium and to correct Cobb's defective work on the podium.

         Beginning in early September 2016, prior to Cobb's partial termination, Liberty and its consultant, Lin Heath, began visiting the project site to gather information, as a result of Hunt's notices of default. Based on a report provided to Liberty's counsel by Heath, which attributed fault for the delays to Hunt, not Cobb, Liberty denied Hunt's claim under the performance bond. Given that the claim on the bond was denied, Hunt notified Liberty that it would no longer permit Liberty unrestricted access to the site, and set significant conditions on any visits by Liberty. Liberty did not agree that its access should be so restricted and has not sent its representatives to visit the site since Hunt imposed these conditions. Instead, it filed the motion now before the Court.

         Liberty Mutual contends that it is entitled to access to the construction site because Hunt has continued to send Cobb notices contending that Cobb is in default under its subcontract with regard to Cobb's continuing work on the tower, and Liberty argues that it must be allowed to investigate those allegations. It further asserts that Hunt is blocking access to the site to hamper Liberty's investigations and hide Hunt's mistakes. Liberty Mutual further contends that it has requested access on specific days and for specific purposes, and that Hunt has still denied access. Hunt's position is that allowing Liberty daily unfettered access to the site is dangerous, and unwarranted. It further argues that it has not made a demand on the performance bond with regard to Cobb's work on the tower, and that Liberty's demand for unsupervised daily access to the job site is unprecedented, particularly in light of the fact that there is now litigation pending.[1]

         II. Analysis

         This case is in its preliminary stages, with the parties having not even commenced discovery yet. Further, Liberty Mutual is demanding access to the construction site through this motion, yet it has not served a formal discovery request upon Hunt seeking that access. While it is true that Hunt allowed Liberty Mutual virtually unfettered access to the project in January and February 2017, that was prior to Liberty's denial of Hunt's claim, and prior to the lawsuit having been filed. When the Court pressed Liberty Mutual for the legal support for its demand for access to the site, it pointed to Rule 34 and also asserted that there was an implied right of access that derives from the surety bond. The only authority it cites for this latter argument, however, is an article in the Bond Default Manual; it cites no case law. See Dkt. No. 27 at 5. Further, as Liberty Mutual itself notes, any implied right of access is premised on the surety's need to investigate to decide how to respond to a claim on its bond. Here, Hunt granted Liberty Mutual generous access to the site to allow Liberty Mutual to investigate Hunt's claim on the bond. As Hunt notes, once Liberty Mutual denied Hunt's claim, Liberty Mutual's rationale for needing access to adjust the claim disappeared. Further, though Hunt has apparently sent many letters to Cobb regarding Cobb's work on the tower, to date Hunt has not made a claim on the bond with regard to that work, so Liberty Mutual cannot yet justify a demand for access to the tower on those letters, as they do not amount to a demand on the bond.

         Thus, the only valid legal basis for Liberty Mutual's demand for access would have to stem from a discovery request related to this lawsuit. The pertinent rule is Rule 34, which provides in relevant part:

(a) In General. A party may serve on any other party a request within the scope of Rule 26(b)
(2) to permit entry onto designated land or other property possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it.

         Notably, Liberty Mutual has not served on Hunt a request for access to the site pursuant to Rule 34, so it is questionable whether the matter presented in ...

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