vice president we think the court for their first time this morning i know that the court has carefully reviewed the papers that we've submitted and i would like to note that i have with the court's permission reserved five minutes for a bottle and i just want to emphasize a few points that we think are very important for the court to keep in mind in deciding this appeal that there is not any dispute in this matter that michigan law governs this dispute and there's also not any dispute that the court follows the decisions of the state's highest court when the cour addressed the relevant issue and we cited case law to that effect in our brief and we believe that proper application of michigan law in this case mandates a reversal in the key and primary issue was the court undoubtedly as well where is whether or not there's an issue of fact with respect to a great american my client's surety on the subject project whether there's an issue of fact that they settled my client one point five million dollar claims for three hundred fifty eight thousand dollars without any notice to my client what from what source do you derive the obligation to give because  here your client had contractually othar has great american to conclude the settlement your honor i think it's implied in michigan law this good face standard it's also noted  mutual insurance case it's one thousand nine hundred eighty six michigan supreme court case and that stands for the proposition that essentially bad faith in the insurance context is less than a fraud standard and we went on to talk about that would seem to equate a failure to give notice with bad that day but where do you get the implicit d to notify the commercial union case with a number of factors your honor twelve separate factors that should be more dead in terms of his good faith standard one of them is keeping the insured informed of settlement offers and informed of the progress of any settlement offers we cited cases from other jurisdictions there's not a lot of case law directly on point as far as  to notice so this case is indeed to speak to the situation where under the contract there's the party who's in the position is right america is authorized to it's the new amsterdam versus long quiz case which i cited which we cited on page twenty one of our primary brief in the citation to that your honor is one ninety eight northwest second five forty three of minnesota case from one thousand nine hundred seventy two and i'm quoting from the the court in that case quote in determining the good faith of the insurer an important question is whether the insurer informed the insured of all proceedings in the court went on to including communication of settlement offers and that was at page five fifty one and on the surety case it is a surety k sure honor and the court went on to state this rule was extended further on page twenty two this is another minnesota case in liberty liberty mutual insurance company versus ne concrete products that seventy six some sorry seven five six northwest second ninety three it's a two thousand eight minnesota case in that case the surety went to extensive lengths to keep the indemnity tore it vised of the status of negotiations and an ultimate settlement in that case the court said that the surety had complied with its obligation of good faith and we think that case is helpful to us because it's so distinguishable from what happened here  question that it would have been it would have been well it extends beyond not yes but you know i mean it would have been better under the circumstances probably but i'm just not sure that the failure to give notice when the right to settle has been contract contractually given to grad merican i'm not sure that that get establishing bad well i think that your honor when you combine it with what we contend is again we think that under michigan law the standard in this context is less than fraud and we think that there was a duty on behalf of great american to conduct a reasonable investigation into the claims that my client asserted against the state of michigan and again with michigan law controlling we submitted before the district court the affidavit of our construction claims expert and he had prepared a very detailed analysis of multiple binders approximately several hundred pages your honor and he opined that billy's claims were worth at least a million dollars he had studied the past through point to where the extra half million dollars in other words passed through claims from billy subcontractors for claimed extra cost an extra and he opined that virtually all of the delays and virtually all of the delays on the critical path of the schedule were the state's responsibility that evidence alone we think supports a conclusion that great american did not conduct a reasonable investigation or the minimum with the suggestion of the arbitrator that you were your client with two hundred twenty thousand dollars to resolve the all of the cross clintons i think you're referring to the spittal report your honor in just by way of background that was a non binding process that was set forth in the contract between bailey in the state and mr spitzer was the state's representative this is the state picked him in any event our point on they had is is again under michigan law if there is mutual responsibility for the delays if the contractor is not solely responsible for the delays then the liquidated damages provision is known void our position on spitler is if you take his analysis as the gold standard as the bible if you will is we believe great american did if you take that analysis and apply michigan law his numbers are about three hundred thousand dollars off because under his analysis he says there's mutual responsibility for the delays so contractor is so only responsible for the ways the liquidated damages provisions don't avoid the contractor gets the money here no division what exactly it exactly exactly although there's case law that would suggest that the tria and is to is to divide rather than have someone who delayed three days and someone who delight a year and and there be no division of the liquid damage i think that is true that it does seem to be that the trend is reflected in the case law of other states supports that position your honor but in michigan the law is just sent to the contractor gets everything there is a case in great american cited at the in re construction they cited in a page thirty seven of their brief in re construction diversified that's a federal case that applied michigan law and they did apportion it but we believe that's at best persuasive authority in the binding authority is still the michigan just in general because i thought the mediator advance abstention completion three hundred sixty eight days i'm not sure where the four hundred twenty five figure comes from the four hundred twenty five figure comes from the amount that was that was withheld is essentially the contract balance your honor and at the time that the mediation was done the project was not completed so in terms of a contract balance analysis four hundred twenty five thousand is the number that's a multiply thousand dollars a day by the number of days and i know i'm good judge drainage i haven't figured out where that where that for twenty fat comes from given the way one's got to calculate the liquidated damages under your theory and i thought there were some evidence of the state withheld two hundred for two hundred twenty five days which would be two hundred twenty five completion having been found to have occurred three hundred sixty eight that it's like if you assume if you assume and it's three hundred sixty eight days your honor the changes slightly  should still be awarded three hundred sixty eight thousand dollars because the delays were not soley my client's responsibility so that would still adjust the number of spinners analysis if you apply michigan law properly to b would be entitled to even if you accept that is true we don't but even if you accept it is true that still gets bailey's number to about five hundred thirty thousand dollars which is close to two hundred thousand dollars more than the settlement amount they did not properly investigate michigan laws to this claim at a minimum under their contractual right have settled for any figure except the figure that you klein's did go to the contract not give them some discretion in resolving the klein but the i think to answer your question yes your honor within the good faith limitations that they had to conduct a reasonable investigation into war claims what was that number what was the threshold i don't know but we think it's clear it was significantly higher than three hundred fifty eight thousand dollars and their position was the sort of evidence are virtually the sole evidence that they contend supports their position that they did conduct reasonable investigation is spit were they said will spit words to twenty and were three fifty eight therefore were reasonable no spit was not to twenty if you apply michigan last bit more said at least five hundred thousand dollars even if you going to take three hundred sixty eight days as  my place of course i'm lawrence moment on behalf of the great american company and i have with me a percentage of the great american insurance company and the court i would like to focus my remarks on what i believe is the central issue in this case is the failure of bailey to post a lateral that was required under the indemnity agreement and was requested on numerous occasions by great america the district court in its ruling and this is on page nineteen of its transcript made the following findings said if bailey had been all paid up with the sub contractors then great american here would have had no standing at all but once great american is paying bailey's on bailey's behead the great american guest to protect their interests by being substituted in this project so therefore according to the district court whose money was being used to satisfy this sub contractors claim that is a failure understanding and not and i'll see how that fits within the argument of this case the the difficulty in what you're opposing counsel says it's that the reason it was unable to post that collateral was because the state  in it's basically in its architectural its design plans and it was those errors that created the entire problem so they say from day it you should have an understanding standing in your own shoes having to pay out the money yourself with a somewhat can join the interest because both of you want the most money that you can get but yet you still have the difficulty or the duty or responsibility to understand what the rights of the person for whom you are substituting and there klein is that our rights were significantly larger than than the importan that you allocated to them because the state does money because it was their errors that created all the cost yes last week we submitted to this court a supplemental authority and it's a ruling issued by the eastern district of michigan in june of this year sic a subliterate the mutual versus the beer construction where that particular issue was raised a sure it was asking for an order requiring the pledging of collateral  contractor said it had break claims under the contract and the district court said that does not relieve the contractor from paying the sub contractor claims they should use the contractors money not is money and then the contractor has a right to try to recruit it spawns on its claims against the owner and that course aided the decision a safe call vs all plan excavating which was cited in our brief and  consistent with judge tanos ruling in this case so the law is very clear that there's an obligation under the indemnity agreement for the contractors to post collateral just because they think question that's raised here it is not the collateral and should i think that there is clear agreement that that is their responsibility under the contract the question is when they did not in your client took over that if i can address that the agreement that was negotiated with the state and was disclosed in september of two thousand and thirteen was just a contingent claim it would require a great american to go into court and up tain a ruling and unprovable order finding that great american had the right to release bailey's claim if great american could not obtain that order then that settlement agreement was nolen void and so we preserved the right of bailey to go into court and object to our settlement would also like to add that in two thousand and two we made a demand for collateral of one point four million dollars in november of two thousand and thirteen two months after this tentative settlement great american reduce the collateral amount to six hundred fifty three thousand dollars which was almost exactly the amount of the sub contractor claims bailey had eighteen months from when we reduce that the demand for collateral to the hearing which was in may of two thousand and fifteen to come up with a collateral and according to judge tarnal if they had come up with that collateral he would have found that the great american did not have standing to release the claim the settlement agreement would have been  have the right to fully pursue its claim against the state i think that's a finding of good faith we reduce the collateral demand we give them an opportunity to cure their default and to be heard before judge t ations if you look at the emails it was on one week before it was i'm supposed to where the state offered to settle for three hundred thirteen thousand dollars we had been in discussions with the state but mainly to achieve final completion of the project which is an obligation under our performance by the settlement agreement is very lengthy as to how the final completion will going to be completed cheap we had to complete the site work was not completed there was defective work there was issues of warranties and so has all this and it were too we were too busy i'm sorry that to boil this down is the answer we were too busy during that we know we rejected that offer i understand that's not the fattal settlement of that it just seemed like we were getting into a lot of stuff that it madded to do we didn't get around to it and i'm asking you to cut the bottom all deals are off do you do you do you can see that you had an obligation to note of what was going on now we believe that we had no duty because that claim was assigned to us and we had listened to what bailey said about their claims consider all the information that they gave to us consider their case law liquidated damages which we did not believe was actually reflect what the michigan courts would do in view of more recent cases saying that once a contractor is soley responsible for delays than there can be as is susman of liquid damages at least it was said exposure and as spitler found out saw there was about ninety days of delay caused by the state but two hundred seventy days a delay caused by barely which was not being interfered with by the state and we also had the issue is the court has pointed out about liquidated damages after final completion which we're continuing to run plus we also had concerns about the cost of achieving final completion completing the work the defect construction defects and so on so all of this was being trying to be worked out and when we did notification the case also says that if a contractor fails to post collateral there can be no bad faith claims asserted against a surety because they own the claims here are the only prejudice the other side so don't because you still have the ability to go against badly for the remaining money doesn't that entitle a good faith to inform them of your settlement well we did advise them of our settlement during the course of its completion i'm september eleventh we advise them of the settlement and gave them an opportunity to object in the court or to post collateral and cure their default so that they could take over the claim and we also reduced our collateral demand to made it easier for them to satisfy our candidate the man the history of what's going on this is september eleventh you're telling them about the settlement and what's what what should they have done under your theory and when to day we have done it ok they should have come up with collateral to satisfy their obligations under the indemnity you cream and pay the six hundred fifty three thousand dollars that was requested two months later and if they had come up with their collateral then as judge carnel stated we would no longer have standing to release their claim they would then own that claim but because they did not come up with the clan role and creat american had the incentive to recover as much as it possibly could to obtain from the state because this is still of just a fraction of the total loss and so based upon all the circumstances the bailey claims the great american didn't do sufficient investigation of the merits of bailey's client what they allege that but they put nothing in the record as to what was the nature and extent of great americans investigation and judge tarnal made their finding there was no evidence of that investigation and we didn't even raise it is shoe in response to our motion for summary judgment so we had no opportunity to put all the materials a box full of material submitted by bailey we settled negotiated and settled sixteen claims by sub contractors we knew everything about the case none of those sub contractors supported bally's claims they never presented an affidavit from any of their subcontractors supporting their position we also had negotiations with the state with respect to achieving final completion negotiate we had investigated this issue the entire project for a period about a year and a half before we settled with the state to do employ an additional a different contractor to complete the projects that the contracting to complete the site work and also when we reached settlements with the sub contractors if there was defective work or warranty issues we first found the had to find out from the state what they would require for final completion and the state did give us some concessions you know some reductions as to what as bill drawings won't warranty is what defective work needed be completed and then we could go back to the subcontractors and before we settle with them saying this is what the state requires so it all had to be tied together ok i mean the others no evidence in the record of what was or was not in your position in response to the argument is that you could not have acted in great americans own self interest without adequately investigating in order to properly resolve the exactly we have a surety has an obligation to do an independent investigation of all claims whether it's under a payment bond by the sub contractors or performance bond claim by the owner and as a result of that there was a lot of lawsuits filed and as a result of this great american sell everything and achieve final completion for the state and did what was required of the surety under their bonds and so your position is that there is a unity of interests between you and value because in the and bailey may not pay the difference and you may have to pay yourself so you want to get the most you can get out of it on the on the very practical possibility that you might be paying that also that is exactly correct we were the real party and interest as consistent with judge tar knows finding that whoever ended up having to pay the subcontractors would be the real party and interest so of bailey paid the sub contractors they could pursue the claims against the state on november first of two thousand and thirteen and the hearing before judge tarnal was may fifteenth two thousand and fifteen eighteen months they do end up having the fun the great american have to fund the deficit or did you a kook at all from bailey what's the status of that no we have not recovered anything from bailey as far as i know we had to fund all the expanse to satisfy the sub contractor claims and to achieve final completion the only money that we have recovered to date was the three hundred fifty thousand dollars that we recovered from the state and we are at that amount plus the attorney suggests that the michigan supreme court would now apportion liquidated which is as opposed to refusing based upon the one case that construction diversification which they apply  that is the law in most jurisdictions now plus the concept of fairness is that if an owner delays a project for five days that this isn't give the contractor to delay the project for a thousand days without some consequence company and edward bailey your honor us to a little bit about the background of this my client realized early on in this project that the state was mistreating it very very badly we filed a lawsuit originally against the state of michigan in two thousand only happen when the project was still ongoing in the court of claims there were two parties but only in the state of michigan the state of michigan with all due respect they will have lived in my home like they're masters of delay in these kinds of cases they moved to stay the case because of this administrative mediation that was purported to be set forth in the bailey state contract that mediation didn't take place till about ten months later in the interim my client hired claims consultant who put together three binders of material supporting its claims in preparation for this mediation and under the contract the state was entitled to pick the mediator so we didn't think we were going to get that far in the interim because my client was not paid by the state of michigan we were unable to pay our subcontractors all of the sub contracts that issue for this project had a pay if paid or pay when paid provision which under michigan law my client pays it subcontractors they didn't have the money to pay them so during this ten month period sub contractors understandably haven't been paid they start filing lawsuits there's eight or nine lawsuits filed in a separate court because they couldn't join particularly with respect to some of these design flaws that it's on them so we believe that there is sufficient evidence in the record to show that the state has at a minimum at a minimum joint responsibility for these d milly this mediation with mr spitler he makes his recommendation it's unacceptable to us there's all these sub contractor cases pending in a separate court our case alternately ends up getting transferred to the watching all county cases unable to provide the requested collateral and it does not change great americans obligation to investigate our claims in there is evidence in the record your honor their primary reliance if not sole reliance for the adequacy of their investigation is the spit will report and we brief this in the spittal report if he is right his number is wrong his number is close to two hundred thousand dollars you didn't submit until the oral argument it was it was written was raised in our response brief your honor and we hedged their bets because we did not believe because the settlement agreement had not was not signed into laughter the courts here  up until the date of the settlement agreement our claims were still against the state of michigan we did not believe our claims against great american were right so we hedged our best but we did present evidence of the hoffman report the hawkman affidavi of the evidence of the state's failures the spittal report and we argued we argued this issue with the hearing and it was incorporated into the court's ruling and we fully briefed that on appeal doesn't go out great americans what gr american undertook to investigate the case well we think it does in the sense of a head to head they properly investigated their conduct they never would have settled for the amount that they settled for in a minimum there's an issue of fact and