56 F. Supp. 3d 1259
S.D. Fla.2014Background
- Carles Construction was a subcontractor on two condominium projects (Quantum on the Bay; Brickell on the River) and claimed ~$4.5M unpaid from general contractor Facchina; Facchina counterclaimed ~$16M for defects/delay.
- Travelers issued performance bonds naming Carles as principal; St. Paul had issued payment bonds naming Facchina as principal. Travelers appears to have assumed control of claims for both sides (possible corporate relationship/merger with St. Paul).
- Travelers assumed defense/prosecution roles, retained counsel, obtained its own expert, and participated in mediations that resulted in Travelers paying Facchina $3.55M and Carles receiving nothing; Travelers also paid Shore/Form $214K earlier.
- Carles sued Travelers alleging breach of surety obligations, conspiracy, and bad-faith settlement conduct; Travelers counterclaimed for indemnity under a General Agreement of Indemnity signed by Carles and its principals.
- The Indemnity Agreement gave Travelers broad discretion to settle claims and to demand collateral; Plaintiffs contend Travelers acted under an irreconcilable conflict and in bad faith by favoring Facchina (a significant premium-paying customer) and abandoning Carles’s recoveries.
- The court found genuine disputes of material fact about Travelers’ role, its relationship with St. Paul, the conduct and fairness of the settlement, and whether Travelers acted under a disqualifying conflict, and therefore denied summary judgment for all claims and refused to strike Carles’s affidavit or exclude mediation communications.
Issues
| Issue | Carles' Argument | Travelers' Argument | Held |
|---|---|---|---|
| Whether Travelers breached surety duties by settling claims without regard to Carles’ interests | Travelers acted in bad faith and under a conflict (favored Facchina), extinguishing Carles’ valid claims | Travelers had contractual authority and acted reasonably to settle based on total exposure and expert analyses | Denied summary judgment — factual disputes (conflict, conduct, reasonableness) preclude resolution on paper |
| Admissibility of Carles’s affidavit containing mediation statements | Testimony about mediation is necessary to show Travelers’ conduct and alleged waiver of confidentiality | Mediation communications are confidential under Fla. Stat. §44.405 and should be struck | Denied motion to strike; court allowed mediation-related evidence given Travelers injected settlement conduct into dispute and exceptions/waiver issues exist |
| Travelers’ entitlement to indemnification under the General Agreement of Indemnity | Carles asserts indemnity defense due to Travelers’ bad faith and conflict when settling | Travelers asserts indemnity contract obligates Plaintiffs to reimburse amounts it paid in good faith | Denied summary judgment on indemnity/counterclaims — whether payments were made in good faith and without conflict is a disputed factual issue |
| Whether Plaintiffs stated a civil conspiracy claim | Carles alleges Travelers and Facchina conspired to eliminate Carles’s claims and used economic influence | Travelers denies improper motive or conspiracy; says settlement was reasonable and within discretion | Denied summary judgment — factual questions (economic influence, agreement, overt acts, harm) remain for jury/trier of fact |
Key Cases Cited
- Maddox v. Stephens, 727 F.3d 1109 (11th Cir. 2013) (summary judgment standard and burden shifting)
- Augusta Iron & Steel Works, Inc. v. Employers Ins. of Wausau, 835 F.2d 855 (11th Cir. 1988) (summary judgment—view evidence in the light most favorable to nonmovant)
- Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 483 F.3d 1265 (11th Cir. 2007) (obligee may have bad-faith claim against surety; good-faith duty analogized to insurer duties)
- Auto-Owners Ins. Co. v. Southeast Floating Docks, Inc., 571 F.3d 1143 (11th Cir. 2009) (bad-faith and reasonableness of a surety’s investigation and settlement decisions are fact questions for the jury)
- Liberty Mut. Ins. Co. v. Aventura Eng’g & Constr. Corp., 534 F. Supp. 2d 1290 (S.D. Fla. 2008) (surety may settle claims even if liability is unclear; good-faith settlement inquiry depends on facts)
- GAB Bus. Servs., Inc. v. Syndicate 621, 809 F.2d 755 (11th Cir. 1987) (party injecting reasonableness of settlement into litigation may waive related privileges)
- Leigh v. Warner Bros., 212 F.3d 1210 (11th Cir. 2000) (conclusory allegations without specific supporting facts lack probative value)