Argued December 13, 2013.
Petition for certiorari filed at, 08/06/2014
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:11-cv-02020 -- Elaine E. Bucklo, Judge.
For Hanover Insurance Company, Plaintiff - Appellee: Eric B. Kjellander, Watt Tieder Hoffar & Fitzgerald, Llp, Chicago, IL.
For Northern Building Company, Thomas Vanduinen, Defendants - Appellants: Michael R. Behan, Schram, Behan & Behan, Okemos, MI.
Before EASTERBROOK, KANNE, and ROVNER, Circuit Judges.
Kanne, Circuit Judge .
This is a breach of contract action brought before us pursuant to our diversity jurisdiction. In 2008, Northern Building Company (" Northern" ), operated by Thomas VanDuinen out of his home in Alpena, Michigan, won a contract to do various work at Midway International Airport in Chicago under the supervision of a project manager. Hanover Insurance Company (" Hanover" ) served as Northern's bonding agent for the project, issuing surety bonds on Northern's behalf. In exchange, Hanover required Northern to enter into an Indemnity Agreement (" the Agreement" ) outlining Northern's obligations with respect to any claims asserted against those bonds.
After a dispute arose between the project manager, Northern, and two of Northern's subcontractors, claims were asserted against the bonds issued by Hanover. Hanover resolved those claims in a manner explicitly permitted by the Agreement, a salient fact which Northern's attorney conceded at oral argument. Hanover sought indemnity from Northern, which was also explicitly permitted by the Agreement, but Northern refused to cooperate. Hanover brought a breach of contract action in the Northern District of Illinois, hoping to compel Northern to do what it was clearly obligated to do. The parties filed cross-motions for summary judgment, and Hanover's was granted. Northern appeals. The Agreement is unambiguous. Northern breached it, and Hanover is entitled to contractual damages. We affirm.
At all relevant times, Northern, operated by Thomas VanDuinen, was in the business of performing general contracting services related to public construction projects. State and federal law required
Northern to obtain surety bonds for such projects to secure both Northern's performance of the work and its payment of any amounts owed to subcontractors and suppliers. Hanover was Northern's bonding agent. In consideration for its issuance of the surety bonds, Hanover required Northern to enter into an Indemnity Agreement, which VanDuinen signed in his individual capacity and in his capacity as President of Northern.
The Midway International Airport Project (" the Project" ) was financed by the Federal Aviation Association (" FAA" ) and managed by Parsons Infrastructure & Technology Group, Incorporated (" Parsons" ). In 2008, Northern won the bid for the Project, and began contracting with various subcontractors to perform the work required. Not long thereafter, things went awry. Beginning in 2009, certain subcontractors hired to upgrade the fire alarm systems at Midway--McDaniel Fire Systems (" McDaniel" ) and Rex Electric--began to complain that Northern had failed to pay them in accordance with the surety bonds and contract documents for the Project. The dispute between Northern and its subcontractors meant that the work was halted, which led to a separate complaint, from Parsons, that Northern was failing to complete the Project as required. The FAA opted to retain possession of the remaining contract funds, totaling $127,086.00, pending resolution of the various disputes and completion of the work required.
Ultimately, Hanover received two types of claims against the surety bonds: (1) claims for payment from subcontractors McDaniel (for $127,452.78) and Rex Electric (for $78,495.00) and (2) a claim for performance from the project manager, Parsons. Hanover demanded collateral from Northern, as was its right under the Agreement. Northern refused to post collateral or to indemnify Hanover in any respect. Hanover hired counsel to assist with investigating the claims against the bonds and with enforcing the Agreement against Northern.
On September 9, 2009, McDaniel filed for bankruptcy relief in the Northern District of Indiana. On March 2, 2010, the bankruptcy trustee brought suit against Hanover seeking the amount McDaniel claimed it was owed for work already performed. On September 22, 2012, Hanover paid the bankruptcy trustee $127,452.78 to resolve both McDaniels's and Rex Electric's payment claims against the bond.
Around the same time, Hanover agreed to resolve Parson's bond claim for performance by stepping into Northern's previous role as general contractor and arranging for completion of the Project. In exchange, in July 2011, Parsons paid Hanover the $127,086.00 of contract funds the FAA had withheld from Northern due to the failure of Northern and its subcontractors to complete the Project.
In March 2011, Hanover filed this lawsuit against Northern and VanDuinen to force compliance with the Agreement. Specifically, Hanover sought to settle its right to the $127,086.00 of contract funds initially withheld by the FAA--Northern still believed it had a right to payment of those funds--and to recoup attorney ...