United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey, United States District Judge
case concerns a single claim for breach of contract asserted
by Plaintiff James McHugh Construction Company against
Defendant International Fidelity Insurance Company. [1-1]. At
the settlement conference held on November 3, 2017, the
parties agreed to a bench trial on the issue of IFIC's
statute of limitations defense, and requested a ruling
addressing whether McHugh may recover attorney fees arising
from this action as part of any potential damages. [170,
172]. That issue has now been fully briefed. [177, 178, 181,
182]. This Court finds that the terms of the performance bond
and subcontract upon which McHugh sues authorize the recovery
of attorney fees incurred in this action.
Court incorporates by reference its opinion denying the
parties' previous motions for summary judgment [81, 164],
as well as the findings of fact issuing from the bench trial.
No additional findings of fact are necessary for the
resolution of this purely legal question of contract
construction, but the Court provides the attorney fee
provisions of the subcontract and performance bond at
23 of the subcontract between McHugh and Builders
Architectural Products (BAP) provides in relevant part:
Any dispute between Subcontractor and Contractor shall, at
Contractor's sole option, be decided (1) by arbitration .
. . or (2) by litigation in any appropriate court located in
Chicago, Illinois. . . . In the event of any dispute, whether
decided by arbitration or litigation, the prevailing party
shall be entitled to recover its reasonable attorney's
fees and other costs from the non-prevailing party. In any
dispute for monetary damages, the party seeking the monetary
damages shall be deemed the non-prevailing party unless it
recovers 75% or more of the original amount sought.
[61-9] at 11.
performance bond issued by IFIC, naming BAP as the principal
and McHugh as obligee, states in relevant part:
[If] the above bounded Principal shall well and truly perform
all of the undertakings, covenants, terms, conditions, and
agreements of said Subcontract . . . and during the life of
any guaranty required under said Subcontract, and shall also
well and truly perform all the undertakings, covenants,
terms, conditions, and agreements of any and all duly
authorized modifications of said Subcontract that may
hereafter be made, and shall indemnify and save harmless said
Obligee of and from any and all loss, damage, and expense,
including costs and attorney's fees, which the said
Obligee may sustain by reason of and failure to do so, then
this obligation shall be null and void; otherwise it shall
remain in full force and effect.
[61-10] at 3.
question before this Court is whether McHugh may recover
attorney fees incurred in this litigation as part of its
potential damages. See [177, 178, 181, 182]. The
disagreement stems largely from the differing provisions in
BAP's subcontract and IFIC's performance bond. McHugh
argues that the broad language of the bond entitles it to
recover attorney fees,  at 1, 8, while IFIC argues that
neither document entitles McHugh to attorney fees arising
from this suit,  at 2, 5-6.
Illinois, performance bonds are contracts subject to
principles of contract interpretation. Solai &
Cameron, Inc. v. Plainfield Cmty. Consol. Sch. Dist. No.
22, 871 N.E.2d 944, 953 (Ill.App.Ct. 2007). Surety
contracts are to be “strictly construed, ” and
Illinois courts place great weight on the plain meaning of
their text. People ex rel. Ryan v. Envtl. Waste Res.,
Inc., 782 N.E.2d 291, 296 (Ill.App.Ct. 2002); Solai
& Cameron, 871 N.E.2d at 953. A performance bond
that-like the bonds at issue here-conditions the surety's
obligation “on its principal's failure” to
fulfill the terms of the underlying agreement incorporates
that agreement by reference. Fisher v. Fidelity &
Deposit Co. of Md., 466 N.E.2d 332, 338 (Ill.App.Ct.
1984). When the bond “incorporates by reference the
construction contract, the provisions of the contract are
provisions of the bond.” Id. Thus, both the
performance bond and the underlying contract apply to the
surety and this Court reads the two together.
courts determine whether contracts authorize the recovery of
attorney fees, the rule requiring strict construction becomes
even more demanding. In Illinois, attorney fees are
ordinarily not recoverable “absent a statute or a
contractual agreement” stating otherwise. Kerns v.
Engelke, 390 N.E.2d 859, 865 (Ill. 1979). Illinois
courts apply this standard exactingly, so that attorney fees
must be “specifically authorized” by a contract.
State of Ill. Capital Dev. Bd. v. G.A. Rafel &
Co., 493 N.E.2d 348, 354 (Ill.App.Ct. 1986). References
to “costs” or “expenses” are not
specific enough to permit recovery of attorney fees. See
Prudential Ins. Co. of Am. v. Curt Bullock Builders,
Inc., 626 F.Supp. 159, 170 (N.D. Ill. 1985) (citing
Singleton v. County of Cook, 369 N.E.2d 227, 229
(Ill.App.Ct. 1977) (“loss, damage, or expense”
does not cover attorney fees); Reese v. Chi., Burlington
& Quincy R.R., 283 N.E.2d 517, 522
(“costs” does not cover attorney fees)).
the performance bond issued by IFIC and the underlying
subcontract both reference attorney fees expressly. [61-9] at
11; [61-10] at 3. They therefore do not run afoul of the rule
barring recovery when contracts lack the phrase
“attorney fees.” See Capital Dev. Bd.,
493 N.E.2d at 354; cf. Prudential Ins. Co., 626
F.Supp. at 170. Rather, this Court's task is to read the
bond and the subcontract together to determine the extent of
IFIC's liability for any of McHugh's attorney fees.
performance bond provides that McHugh will be indemnified and
held harmless “of and from any and all loss, damage,
and expense, including costs and attorney's fees”
that McHugh may sustain by reason of BAP's failure to
perform its obligations under the subcontract. [61-10] at 3.