### F I LE D U. S . COURT OF AP PE ALS E LEVE NTH CI RCUI T Se pt e m be r 13, 2004 T HOM AS K. KAHN C L E RK

Honora ble David D. D owd, Jr. United States District Judge f or the Nor

thern District of * Ohio, sitti ngby

designation. [ P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 03- 13540

________________________ D. C . Do c k e tNo . 0 1 - 0 8 2 8 7 - C V- DT KH D A D E L A N D D E P O T , I N C ., D A D E L A N D S T A T I O N A S S O C I A T E S , L T D ., P la in tif f s - A p p e lla n ts , v ersu s S T . P A U L F I R E A N D M A R I N E I N S U R A N C E C O ., A M E R I C A N H O M E A S S U R A N C E C O M P A N Y , D e f e n d a n ts - A p p e lle e s .

_______________________ A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f orthe S outhe rn D i s tr i c tof F l or i da

_________________________ ( S e p t e m b e r 13, 2004) B ef ore B IR C H and W IL S O N , C i rc ui tJudg es , and D O W D , D i stri ctJudg e. * B IR C H , C i rc ui tJudg e:2

P l a i nt i f f - appe l l a nt , D a de l a nd S t a t i on A s s oc i a t e s ( “ D a de l a nd” ) appe a l s the di s m i s s a l of

the i rc l a i m a ga i ns tde f

e nda nt s - appe l l e e s , S t . P a ul F i r e a nd M a r i ne Insura nce C o. and A m er i ca n H om e A ss urance Co . (c ol l ec t i vel y, “ S uret i es ”) for bad fai th i n ref

usi ng t o sett l e c l ai m s i nv ol vi ng the performance bon d they i ss ued o n the contra ct or of on e of D adel and’ s busi ness devel op m ent s. T he di stri ct c our tdi s m i s s e d D a de l a nd’ s c l a i m f ortw o pr i m a ry r e a s ons : ( 1) D a de l a nd di d not s a t i s f y the c ondi t i ons pr e c e de ntf orbr i ngi ng aba d- f

a i th c l a i m a nd ( 2) D a de l a nd w as b arred fro m b ri n g i n g th i s cl ai m u n d er p ri n ci p l es o f res j u d i cat a b ecau se D ad el an d co u l d h av e i n cl u d ed th i s cl ai m i n i t s p ri o r arb i trat i o n p ro ceed i n g s ag ai n st th e S u r e tie s . B e c a u s e w e f in d th a t th is c a s e tu rn s o n im p o r ta n t q u e s tio n s o f s ta te l a w f orw hi c h the r e i s no c ontr ol l i ng pr e c e de nt , w e de f e rourde c i s i on pe ndi ng ce rt i fi ca t i on of these qu es t i on s t o the S up re m e C ou rtof F l ori da. I . B AC KG RO UN D D a de l a nd l e a s e s a nd m a na ge s c om m e r c i a l pr ope r t i e s i n F l or i da . I n 1995, D a de l a nd e nt e r e d i nt o ac ontr a c tw i th W a l br i dge C ontr a c t i ng, I nc . , f orthe c o n s tru c tio n o f

D a d e la n d S ta tio n , as h o p p in g c e n te rlo c a te din M ia m i, F lo r id a . M i a m i - D a de C ounty ow ns the pr ope r ty a nd i s the l e s s orof the l a nd on w hi c h the proj ec ti s s i tuat ed. In conn ec t i on w i th thatproj ec t , the S uret i es i ss ued a st andard perf orm ance bo nd i n the am ou ntof $2 6, 50 0, 00 0. 00 . D adel and i s the ob l i gee,3

re fe rr ed t o as the “ O w ner” on the bo nd ; W al bri dg e i s the pri nci pal , re fe rr ed t o as the “ C on tra ct or”; and the defendanti nsurance com pani es ar e the S uret i es . U nd er the t e rm s of

the bond, D a de l a nd m us ti nf orm the C ontr a c t ora nd the S ur e t i e s i f the c ontr a c t orha s f

a i l e d t o c om pl e t e pe r f

orm a nc e unde rthe c ons truc t i on c ontr a c t , a nd th e S u r e tie s a r e o b lig a te d to ta k e c e r ta in s te p s to e n s u r e th a t th e c o n s tru c tio n is c o m p le te d . W a l br i dge s t a r t e d w ork on D a de l a nd S t a t i on i n S e pt e m be rorO c t obe rof 1 9 9 5 . T h e p r o

je c t w a s c o m p le te d , o p e n e d , a n d le a s e d to c o m m e r c ia l te n a n ts in N ove m be rof

1996. A f

t e rthe pr oj e c tw a s ope ne d a nd the t e na nt s ha d m ove d i n, h o w e v e r , D a d e la n d ’s c o n s u ltin g e n g in e e ra d v is e d th e p la in tif f s ab o u t c e r ta in c ons truc t i on de f

e c t s a nd ur ge d the m t o ha ve the pr oj e c ti ns pe c t e d. D a de l a nd b r o u g h t th e s e d e f

e c ts to W a lb r id g e ’s a tte n tio n . S ho rt l y there af

t er , M etropo l i t an D ade C ou nty bui l di ng offi ci al s det erm i ned th a t th e D a d e la n d S ta tio n p r o je c t v io la te d an u m b e ro f p r o v is io n s o f

th e S o u th F l ori da B ui l di ng C od e. D adel and and C ou nty off i ci al s then ent er ed i nt o an a g r e e m e n t, w h ic h s e t f

o r th atim e tab le o f

ta s k s th a t D a d e la n d w a s r e q u ir e d to pe r f orm t o br i ng the pr oj e c ti nt o c om pl i a nc e w i th the bui l di ng c ode . D a de l a nd as ked W al bri dg e t o repai r the defec t i ve w ork. W al bri dg e, ho w ever , as se rt ed that c e r ta in d e s ig n d e f

e c ts w e r e th e f

a u lt o f D a d e la n d S ta tio n ’s s tru c tu r a l e n g in e e ro rits4

ar chi t ec tand thathe w ou l d n otre pai r def ec t s thatw er e the faul tof others or w er e o u ts id e th e s c o p e o f

its r e s p o n s ib ility . O n 24 S e pt e m be r1997, D a de l a nd’ s a tt orne y w r ot e t o W a l br i dge a nd the S u r e tie s s ta tin g th a t D a d e la n d h a d r e a s o n to b e lie v e th a t W a lb r id g e f a ile d to perf orm i t s obl i gat i on s und erthe construct i on contra ct . D adel and i nform ed W a lb r id g e a n d th e S u r e tie s th a t it w a s c o n s id e r in g d e c la r in g ac o n tr a c to rd e f a u lt a nd r e que s t e d ac onf

e r e nc e t o di s c us s r e pa i ri s s ue s . O n 22 O c t obe r1997, re pres ent at i ves f

or D adel and, W al bri dg e, and the S uret i es att ended the confere nce a t w h ic h W a lb r id g e a g r e e d to m a k e c e r ta in r e p a ir s to th e p r o je c t w ith in ac e r ta in t i m e pe r i od. O n 18 M a r c h 1998, D a de l a nd’ s a tt orne y not i f i e d W a l br i dge a nd the S uret i es thatW al bri dg e had fai l ed t o p er form any of the agree d repai rs and that

“ [ D a de l a nd] i nt e nds t o pr oc e e d w i th a rbi tr a t i on a nd t o m a ke a rr a nge m e nt s t o ha ve a n o th e rc o n tr a c to rm a k e th e n e c e s s a ry r e p a ir s .” R 2 - 7 1 , E x . 1 2 a t 2 . I n its subsequentarbi tra t i on com pl ai nt , D adel and al l eged thatW al bri dg e w as re qu i re d unde rthe c ons truc t i on c ontr a c tt o s ubm i tf i na l a s - bui l tdr a w i ngs t o D a de l a nd a nd D a de C ounty of

f i c i a l s , butf

a i l e d t o do s o. D a de l a nd a l s o a l l e ge d tha tW a l br i dge w rong ful l y f

ai l ed and refuse d t o p er form al l bu ta s m al l po rt i on of the needed r e pa i r s , a nd tha tthe S ur e t i e s ha d f a i l e d t o t a ke a ny a c t i on t o c orr e c tthe de f i c i e nc i e s . D a de l a nd r e que s t e d appr oxi m a t e l y $4. 4 m i l l i on i n da m a ge s r e s ul t i ng5

f r om e xpe ndi tur e s i tm a de f orr e pa i r s , s e c ur i ty , l e ga l f e e s , e ngi ne e r i ng f

e e s , a nd ad m i n i strat i v e co st s. O n 20 N ove m be r1998, D a de l a nd’ s a tt orne y a ga i n not i f i e d W a l br i dge a nd the S ur e t i e s tha tW a l br i dge w a s notpe r f orm i ng r e pa i rw ork i tha d pr om i s e d t o do w i thi n a re as on abl e t i m e f ra m e. D adel and request ed thatW al bri dg e provi de a w ork schedul e by 25 N ov em ber 199 8, bu ti tdi d n otre spon d. O n 1 4 D ec em ber 1 9 9 8 , D a d e la n d in f

o rm e d W a lb r id g e a n d th e S u r e tie s o f its d e c is io n to f

o rm a lly de c l a r e ac ontr a c t orde f a ul ta nd t e rm i na t e W a l br i dge ’ s r i ghtt o c om pl e t e the c ontr a c torpe r f

orm c orr e c t i ve w ork on the pr oj e c t . D a de l a nd de m a nde d tha tthe S u r e tie s ta k e a c tio n to c o rr e c t W a lb r id g e ’s m is ta k e s in a c c o r d a n c e w ith th e s u r e ty bond, buta l s o i ndi c a t e d tha ti tw oul d nota gr e e t o c ont i nue t o us e W a l br i dge a s the contra ct or. T om G r os e c l os e , aS t . P a ul bond c l a i m s s pe c i a l i s t , r e s ponde d on be ha l f of the S ur e t i e s , a nd s t a t e d tha tthe S ur e t i e s w e r e c onduc t i ng a n i nve s t i ga t i on. F our da y s l a t e r , D a de l a nd i nf orm e d G r os e c l os e tha tthe S ur e t i e s ha d nott a ke n a c t i on w i thi n the t i m e per i od re qu i re d u nd erthe bo nd and m ade a n add i t i on al dem and that th e S u r e tie s p e r f

o rm th e iro b lig a tio n s . S te v e n G ru n s f e ld , a n o th e rs u r e ty r e pr e s e nt a t i ve , r e s ponde d tha tthe S ur e t i e s ha d pe r f orm e d a s r e qui r e d by the contra ctdo cum ent s. G runsfe l d al so st at ed that , w i th res pectt o any defec t i ve w ork6

fo r w h i ch W al b ri d g e an d th e su b co n tract o rs m ay h av e h ad resp o n si b i l i ty,

“ W a l br i dge ha s e i the rha d the appr opr i a t e s ubc ontr a c t or s c orr e c tthe w ork or r e m a i ns w i l l i ng t o ha ve the m do s o. H ow e ve r , W a l br i dge i s notr e s pons i bl e f orthe num e r ous de f

e c t s on thi s pr oj e c t . ” I d. , E x. 20 a t1. W h ile D a d e la n d h a d e a r lie rin d ic a te d th a t it in te n d e d to te rm in a te its r e la tio n s h ip w ith W a lb r id g e , it n e v e r th e le s s p e rm itte d W a lb r id g e to p r o c e e d w ith re pai rs t o the proj ec t . A tthe sa m e t i m e, D adel and fi l ed sui tagai nsti t s e ng i neer , w hos e l i abi l i ty i ns ur e rs e tt l e d the c a s e f orappr oxi m a t e l y $900, 000. 00. D a de l a nd d id n o t f ile s u it a g a in s t th e a r c h ite c t. W he n thi s c a s e f

i na l l y w e ntt o a rbi tr a t i on, the a rbi tr a t i on pr oc e e di ngs i nv ol ved 3 5 d ay s of hea ri ng s, ov er1, 00 0 exh i bi t s, and 2 5 w i tness es . In an order da t e d 15 M a y 2000, the a rbi tr a t i on pa ne l f ound tha ta l l pa r t i e s , i nc l udi ng the e ngi ne e r , the a r c hi t e c t , D a de C ounty , D a de l a nd, a nd W a l br i dge , w e r e l i abl e f orthe defi ci entconstruct i on of D adel and S t at i on . T he arbi tra t i on panel ent er ed an aw ar d w he r e by W a l br i dge ow e d D a de l a nd $1, 417, 842 f ori t s de f e c t i ve w ork a nd D a de l a nd ow e d W a l br i dge $261, 036 f orc ontr a c tba l a nc e s a nd e xtr aw ork. T he panel then st at ed thatthe S uret i es w er e “ bo un d t o thi s a w ar d t o the ext entthat [ W a l br i dge ] i s obl i ga t e d unde rthe a w a r d a nd i t s de f e ns e s a r e de ni e d. ” I d. , E x. . 23 a t5.7

O n 2 8 F ebruary20 01 , D adel and fi l ed thi s a ct i on i n the F i ft ee nth Jud i ci al C i r c ui tof

F l or i daa l l e gi ng tha tthe S ur e t i e s , the i s s ue r s of the pe r f orm a nc e bond, ha d e nga ge d i n ba d- f

a i th r e f us a l s t o pe r f

orm the i rdut i e s unde rthe bond. D a de l a nd a lle g e d th a t, a s ar e s u lt o f th e S u r e tie s ’ a c tio n s , it s u s ta in e d d a m a g e b y h a v in g to r e p a irin a d e q u a te w o rk p e r f o rm e d a n d h a v in g to p r e s e n t th e irc la im s to a rb itr a tio n . T h e S u r e tie s r e m o v e d th e c a s e to f e d e r a l c o u r t. T he di s tr i c tc our ti nt e rpr e t e d D a de l a nd’ s c l a i m a s be i ng both ac l a i m f or bad-fai th ref

usal t o sett l e und erF l a. S t at . §§ 62 4. 15 5(1)(b)(1) and 62 6. 95 41 (1)( a) (199 9), and a breac h o f c on tra ctcl ai m for the S uret i es ’ fa i l ure t o t i m el y per form th e i rc o n tr a c tu a l d u t i e s . T h e d i s tr i c tc o u r tth e n f o u n d th a tb o th c l a i m s f

a i l e d . As for the bad-fai th cl ai m , the di stri ctcourtfoun d thati tfa i l ed because D adel and h ad n o t a lle g e d th a t th e r e h a d b e e n ap r io rd e te rm in a tio n th a t th e S u r e tie s w e r e liab le f o rac la im o n th e b o n d . T h e d is tr ic t c o u r t a ls o f o u n d th a t th e b a d - f

a ith c la im f a ile d b e c a u s e F lo r id ala w r e q u ir e d e v id e n c e th a t th e S u r e tie s ’ u n f a irc la im sett l em en tp ract i ces w ere freq u en ten o u g h t o b e co n si d ered th ei r g en eral b u si n ess prac t i ce . A s f

or the breac h o f c on tra ctcl ai m , the di stri ctcourthel d thati tw as ba rr e d by r e s j udi c a t abe c a us e D a de l a nd c oul d ha ve br oughtthe c l a i m i n the a rb itr a tio n p r o c e e d in g . D a d e la n d ap p e a ls th e d is tr ic t c o u r t’s d e c is io n .. I I . DI S CUS S I ONAlthough th edis tric t c ourt did no t makea

determina

tio n o n this i ssue , w ea dd re ss it 1 herebeca use it is a threshold issue and be causeDade land raises it in it s brief. 8 D a de l a nd a r gue s on appe a l tha tthe di s tr i c tc our tc om m i tt e d f i ve e rr or s . T he f i r s ttw o of

i t s a r gum e nt s r e l a t e t o the di s tr i c tc our t ’ s i nt e rpr e t a t i on of F l or i da s t a tut ory l a w . T he s e a r gum e nt s a r e : ( 1) tha tdi c t ai n the di s tr i c tc our t ’ s opi ni on, w hi c h s ugge s t s tha tF l a . S t a t . § 624. 155( 1) ( b) ( 1) doe s notpr ovi de ac a us e of a c t i on agai nstsure t i es , i s i ncorrec t ; and (2) thatF l ori da l aw do es no tre qu i re proo f of a 1 g en er al b u sin es s p ra ctice to b rin g a c laim o f b ad -f aith re fu sa l t o se tt le. D ad elan d ’s r e m a i ni ng thr e e a r gum e nt s r e l a t e t o the e f f e c tof the a rbi tr a t i on a w a r d on the pr e s e ntl i t i ga t i on. T he s e a r gum e nt s a r e : ( 1) tha tthe a rbi tr a t i on pr oc e e di ngs sat i sfi ed th e co n d i t i o n p reced en tth atth ey h av e a p ri o r j u d g m en to f th e S u ret i es’ liab ility b e f

o r e b r in g in g ab a d - f

a ith r e f u s a l- to - s e ttle c la im ; ( 2 ) th a t D a d e la n d c o u ld notha ve br oughtthi s c l a i m i n the a rbi tr a t i on pr oc e e di ng a nd, a s ar e s ul t , the arbi tra t i on ca nn othave a re s j ud i ca t a e ff ec ton thi s c as e; and (3) thatthe di stri ct c our te rr e d i n f

i ndi ng tha tthe a rbi tr a t i on pr oc e e di ngs di d notc ol l a t e r a l l y e s t op the S uret i es fr om ra i si ng the sa m e a ff i rm at i ve defense s i n thi s c as e a s w er e ra i se d— and rej ec t ed— i n the arbi tra t i on . W e di sc uss D adel and’ s a rgum ent s i n turn a nd w e c e r t i f

y que s t i ons t o the S upr e m e C our tof F l or i dat o gui de ourhol di ng on ea ch i ss ue. A . I s s ue s of

S t a tut ory I nt e rpr e t a t i on9

1 . D o es F l o ri d a l aw p ro v i d e fo r a b ad -fai th act i o n ag ai n stsu ret i es? F la . S ta t. § 6 2 4 .1 5 5 ( 1 ) ( b ) ( 1 ) s ta te s th a t a n y p e r s o n m a y b r in g ac iv il s u it a g a i n s ta n i n s u r e rw h e n th e i n s u r e rd o e s n o ta c t“ i n g o o d f a i th t o s e tt l e c l a i ms w hen, un der a l l the ci rc um st ance s, i tcoul d and shou l d h ave don e s o, had i tac t ed fa i rl y a nd ho nest l y t ow ar d i t s i nsured and w i th d ue re gard for her or hi s i nt er es t s. ” D a d e la n d a r g u e s th a t th e p la in la n g u a g e o f th is s ta tu te in d ic a te s th a t as u r e ty is s ubj e c tt o aba d- f

a i th s ui tbe c a us e i tappl i e s t o a c t s of a n i ns ur e ra nd the F l or i da le g is la tu r e h a s d e f

in e d in s u r e rto in c lu d e s u r e tie s . S e e F la . S ta t. § 6 2 4 .0 3 . H ow e ve r , the F l or i daS upr e m e C our tha s a l s o s t a t e d tha t§ 624. 155( 1) ( b) ( 1) p erm i t s act i o n s o n l y b y i n su red s— th e p erso n o r en t i ty t o w h o m th e i n su rer o w es a d u ty . S ta te F a rm F ir e & C a s . C o . v . Z e b r o w s k i, 7 0 6 S o . 2 d 2 7 5 , 2 7 7 ( F la . 1 9 9 7 ) . T he S uret i es po i ntou tthatnei ther the F l ori da court s nor the F l ori da l egi sl ature has s pe c i f i c a l l y s t a t e d w he the rthe obl i ge e of as ur e ty bond i s c ons i de r e d a n “ i ns ur e d” for purpo se s of bri ng i ng sui tun der thi s s t atut e. T here fore , before w e c an d e te rm in e w h e th e rth is c a s e w a s p r o p e r ly d is m is s e d , w e m u s t f ir s t d e te rm in e if

th is s ta tu te p r o v id e s ar ig h t o f a c tio n f o ro b lig e e s to s u e th e irs u r e tie s f o rb a d f a ith . T hu s, w e c ert i fythe fol l ow i ng qu es t i on t o the S up re m e C ou rtof F l ori da:

I S TH E O BLI G EE O F A SU RETY CO N TRA CT C ON S I DE R E D A N “ I NS UR E D” S UC H T HA T T HE OB L I GE E HA S T HE R I GH T T O S UE T HE S UR E T Y F OR B AD - F AI T H R E F US AL T O S E T T L E C L A IM S U N D E R § 6 24 . 15 5(1)(b)(1)?This particular issue appea

rs to involve Dade land’s claim under § 626.9541(1) (i) only . 2 The Sureties, in their brief, admit that claims brought under § 624.155(1) (b) do not re quire proof of a g eneral business prac tice. 10 2. I s pr oof

of age ne r a l bus i ne s s pr a c t i c e r e qui r e d? If the S up re m e C ou rtof F l ori da answ er s the fi rs tqu es t i on i n the af fi rm at i ve, w e m us tthe n a s k w he the rthe s t a tut e r e qui r e s the pl a i nt i f f i n aba d- f

a i th r e f us a l - t ose tt l e c l ai m t o p rove thatthe defendant s e ng age i n u nfai r s ett l em entprac t i ce s fr equent l y e no ug h for the behavi or t o b e c on si dere d a general bu si ness prac t i ce . In order t o ful l y e xp l ai n thi s i ss ue, som e pre l i m i narydi sc ussi on of F l ori da’ s s t atut ory sch em e i s n ecessary. D a d e la n d ’s c o m p la in t s ta te s th a t it is b r in g in g its b a d - f a ith c la im u n d e rb o th § 6 2 4 .1 5 5 ( 1 ) ( b ) ( 1 ) a n d § 6 2 6 .9 5 4 1 ( 1 ) ( i) . S e c tio n 6 2 6 .9 5 4 1 ( 1 ) ( i) e x p lic itly 2 r e qui r e s pr oof

of age ne r a l bus i ne s s pr a c t i c e . H ow e ve r , the r i ghtof a c t i on t o s ue ba s e d on avi ol a t i on of

§ 626. 9541( 1) ( i ) i s f

ound i n § 624. 155( 1) ( a ) ( 1) , a nd § 624. 155( 1) ( b) ( 3) s t a t e s , “ [ n] otw i ths t a ndi ng the pr ovi s i ons of the above t o the contra ry , a per son p ursui ng a r em edy und erthi s s ec t i on need no tprov e thatsuch ac tw as com m i tt ed or performed w i th such fre qu encyas t o i nd i ca t e ageneral bu si ness prac t i ce . ” D a d e la n d a r g u e s th a t th is la n g u a g e ap p lie s to § 6 2 4 .1 5 5 in its e n tir e ty11

because of the l angu age “ a per son p ursui ng a r em edy und erthi s s ec t i on . ” M or e ove r , D a de l a nd a r gue s tha t§ 626. 9541 i s the onl y s t a tut e i nc orpor a t e d i nt o § 6 2 4 .1 5 5 th a t r e q u ir e s p r o o f o f ag e n e r a l b u s in e s s p r a c tic e a n d , th u s , § 62 4. 15 5(1)(b)(3) i s m ea ni ng l es s i f i tdo es no tappl y t o cl ai m s broug htun der § 626. 9541 thr ough § 624. 155( 1) ( a ) . T he S ur e t i e s , on the othe rha nd, a r gue tha tthe l a ngua ge i n § 624. 155( 1) ( b) ( 3) appl i e s onl y t o s ubs e c t i on ( b) of § 624. 155 a nd no tt o sub se ct i on (1)( a) . T here fore , the S uret i es cont end thata c l ai m brou gh tun der § 6 2 6 . 9 5 4 1 th ro u g h § 6 2 4 . 1 5 5 (1 )(a) st i l l req u i res p ro o f o f a g en eral b u si n ess prac t i ce . B ecau se th i s i ssu e h as n o tyetb een ad d ressed b y th e F l o ri d a co u rt s, w e al so ce rt i fythe fol l ow i ng qu es t i on t o the S up re m e C ou rtof F l ori da:

DO ES THE L AN GU AG E I N § 6 2 4 . 1 5 5 ( 1 ) ( b ) ( 3 ) EL I M I NA TE § 6 2 6 . 9 5 4 1 ' s R E QU I R E ME NT OF P R OO F OF A G E NE R AL B US I NE S S P R AC T I C E WHE N T HE P L AI NT I F F I S P UR S UI NG A § 6 2 6 . 9 5 4 1 C L AI M T HR OU GH T HE R I GH T OF AC T I ON P R O V I D E D I N § 624. 155? O n ce w e h av e est ab l i sh ed th e req u i rem en t s o f th e st atu t e, w e m u stth en ask w h a t th e e f

f e c t o f th e a rb itr a tio n p r o c e e d in g w a s o n D a d e la n d ’s r ig h t to b r in g th is a c t i on. T he f

i r s ttw o que s t i ons i nvol vi ng the e f f e c tof the a rbi tr a t i on pr oc e e di ngs a r e s uf f i c i e nt l y i nt e r tw i ne d tha tw e a r e c e r t i f y i ng one , tw o- pa r tque s t i on t o the S u p rem e C o u rto f F l o ri d a th ati n co rp o rat es b o th i ssu es. T h erefo re, w e d i scu ss12

both i s s ue s be f

or e s t a t i ng the que s t i on. B . E f f e c tof A rbi tr a t i on P r oc e e di ngs 1 . D id th e a rb itr a tio n p r o c e e d in g s a tis f y D a d e la n d ’s c o n d itio n p r e c e d e n t? T o br i ng aba d- f

a i th r e f us a l - t o- s e tt l e c l a i m , F l or i dar e qui r e s , a s ac ondi t i on pr e c e de nt , tha tthe pl a i nt i f f “ c a n a l l e ge tha tthe r e ha s be e n ade t e rm i na t i on of the i ns ur e d’ s da m a ge . ” T a l a tE nt e r s . , I nc . v. A e tnaC a s . & S ur . C o. , 952 F . S upp. 773, ( M . D . F l a . 1996) , a f

f’ d, 217 F . 3d 1318 ( 11th C i r . 2000) . S e e a l s o B l a nc ha r d v. S ta te F a rm M u t. A u to . I n s . C o ., 5 7 5 S o . 2 d 1 2 8 9 , 1 2 9 1 ( F la . 1 9 9 1 ) . D a d e la n d c o n te n d s th a t th e a rb itr a tio n a w a r d ’s f in d in g th a t “[ t]h e S u r e ty is bo un d t o [the arbi tra t i on ] aw ar d t o the ext entthat[W al bri dg e] i s obl i gat ed un der the a w a r d a nd i t s de f

e ns e s a r e de ni e d, ” R 2- 71, E x. 23 a t5, s a t i s f i e s thi s c ondi t i on pr e c e de nt . D a de l a nd a r gue s tha tthe di s tr i c tc our t ’ s a na l y s i s i gnor e s the purpos e of th e c o n d itio n p r e c e d e n t: to p r o v id e e v id e n c e th a t th e in s u r e d h a d av a lid c la im ag ai n stth e i n su rer, w h i ch th e i n su rer sh o u l d h av e sett l ed w h en th e cl ai m w as fi rst m a de . S e e B r ooki ns v. G oods on, 640 S o. 2d 110, 112 ( F l a . D i s t . C t . A pp. 1994) ( not i ng tha tthe purpos e of r e qui r i ng the c ondi t i on pr e c e de nti s “ t o s how tha tthe in s u r e d h a d av a lid c la im ” ) . D a d e la n d a s s e r ts th a t th e a rb itr a tio n a w a r d s e rv e s th is purpos e be c a us e i ts how s tha tD a de l a nd ha d ava l i d c l a i m a ga i ns tthe s ur e ty f or re pai rs m ade nece ss ary by W al bri dg e’ s def i ci enci es . T he di stri ctcourtdi sa gree dHo wever, weno tethat th epurp os eof thesurety

bo nd is to p ro videprote c tio n ag ains t 3 breaches by

the contractor, Walbridg e, not ag ainst breaches by the surety . The Sureties’ primary d uty un d er th eb o n d i s t o s e tt l ec l ai m s re s u l ti n gf ro mW alb ri dg e ’ s l i a

b i l i ty. Mo resp e c if

ic ally, D a de land

argue s th at th eSure tie s b re a c he d th e ir duty to s e ttl ein 4 g ood faith by

not adequately

investigating Dadeland’ s claims ag ainst the bond.

13 a nd f ound tha tthe a rbi tr a t i on pr oc e e di ng w a s notapr i ora dj udi c a t i on be c a us e the a rb itr a to rd id n o t m a k e as p e c if ic f in d in g th a t th e s u r e ty h a d b r e a c h e d its d u ty unde rthe bond. 3 2 . D o e s th e a rb itr a tio n p r o c e e d in g b a rth is la w s u it? N e ve r the l e s s , the di s tr i c tc our tdi d f i nd the a rbi tr a t i on t o be c om pl e t e e nough to b e r e s ju d ic a ta , c o m p le te ly b a rr in g D a d e la n d f r o m b r in g in g th is b a d - f a ith c la im . T h e d is tr ic t c o u r t d e te rm in e d th a t D a d e la n d ’s c la im s w e r e n o t r e a lly b a d - f a ith c la im s , b u t w e r e a c tu a lly c la im s f o rb r e a c h o f

th e S u r e tie s ’ c o n tr a c tu a l d u ty to t i m el y s ett l e val i d cl ai m s. A s abrea ch of contra ctcl ai m , the di stri ctcourtre as on ed tha tD a de l a nd c oul d ha ve a nd s houl d ha ve r a i s e d thi s c l a i m i n i t s a rbi tr a t i on c o m p la in t. T h u s , b y n o t r a is in g it th e r e , th e d is tr ic t c o u r t c o n c lu d e d th a t th e c la im w a s w a i ve d. D a d e la n d a r g u e s th a t th e d is tr ic t c o u r t w a s in c o rr e c t in its a s s e s s m e n t th a t its cl ai m s w er e r ea l l y bre ac h o f c on tra ctcl ai m s and po i nt s outthatthe on l y s t atut ory b asi s fo r th ei r cl ai m s l i st ed i n th ei r co m p l ai n tare th e F l o ri d a b ad -fai th st atu t es. 4 D a d e la n d th e n a r g u e s th a t it c o u ld n o t p o s s ib ly h a v e a s s e r te d its b a d - f a ith c la im s in14

i t s a rbi tr a t i on c om pl a i ntbe c a us e , a tthe t i m e of the a rbi tr a t i on, D a de l a nd di d not ha ve a n a dj udi c a t i on i n i t s f a vors how i ng tha ti tha d ava l i d c l a i m a ga i ns tthe S ur e t i e s . D a de l a nd s t a t e s tha tone purpos e of the a rbi tr a t i on w a s t o s a t i s f y the c o n d i t i o n p r e c e d e n tt o b r i n g i n g th i s c l a i m. G i ven the confusi on as t o the ef fe ctof thi s a rbi tra t i on proceedi ng , w e c ert i fy the fol l ow i ng qu es t i on s t o the S up re m e C ou rtof F l ori da: 1 . I S T HE AR B I T R AT OR ’ S F I ND I NG T HA T A S UR E T Y’ S P R I NC I P AL HA S B RE ACHED I TS DU TY TO THE OBL I GEE, AN D THA T T HE SURE TY I S B OU ND TO THE ARB I TR ATI ON AW ARD TO THE EXTE NT THAT I TS P R I NC I P AL I S B OU ND , S UF F I C I E NT T O S AT I S F Y T HE C ON DI T I ON P R E C E D E N T T O A L A T E R B A D -F A IT H R E F U S A L -T O -S E T T L E C L A IM TH A T TH ERE BE A PRI O R A D J U D I CA TI O N TH A T TH E PLA I N TI FFS W ERE EN TI TLED TO A PA Y M EN T O F A CLA I M FRO M TH E SU RETI ES? 2 . I F NO T , I S T HA T AR B I T R AT OR ’ S DE C I S I ON R E S J UD I C AT A, THUS BARR I NG DA DELAND ’ S L ATER CL AI M AG AI NST T HE SURE TI ES FOR B AD - FAI TH RE FUSAL T O SET TL E? 3 . D O ES TH E A RBI TRA TO R’ S D I SM I SSA L O F TH E SU RETI ES’ AF F I R MAT I VE DE F E NS E S C OL L AT E R AL L Y E S T OP T HE M F R OM RAI SI NG THE S AM E DEF ENSE S I N THI S S UI T? F i nal l y, D adel and argues thatthe di stri ctcourterre d w hen i tdeni ed D a de l a nd’ s m ot i on f

orpa r t i a l s um m a ry j udgm e ntw i th r e s pe c tt o tw o of the s ur e t i e s ’ a f

f i rm a t i ve de f

e ns e s : ( 1) tha tD a de l a nd “ f a i l e d t o c om pl y w i th the prov i si on s of the performance bon d” and (2) thatthe S uret i es ar e “ [d] i sc harged f r om l i abi l i ty unde rthe pe r f orm a nc e bond t o the e xt e nttha t[ D a de l a nd] m a deFor example, the Sureties argue that their proof would be diff erent in the two 5 proce eding s with respec t to the defense that Dadeland f ailed to comply

with the notice provisions of the bond: In the bre ach of

contract ac tion, the affir

mative def

ense w ould show that [Dade land ’s ] failureto c omp ly . . . e xcu se d [th eSure tie s] f ro m perf or mingthe ir obligations under the bond. In the bad f aith case , however, the sameaff irmative defense would show [that the Sureties] reasonably relied on thefac t that [Dadeland] did not properly decla re a contractor de fault under

the bond. Appellee ’s B r. at 22. 15 paym ent s t o W al bri dg e f or the w ork p er form ed un der the construct i on contra ct . ” R 1-36 at4. D adel and argues thatthese ar e e qu i val entt o the defense s the S uret i es r a is e d in th e a rb itr a tio n p r o c e e d in g , a n d w h ic h th e a rb itr a to rr e je c te d . A s ar e s u lt, D ad el an d co n t en d s th atth e S u ret i es are co l l at eral l y est o p p edfro m rai si n g th ese s a m e d e f e n s e s in th is c a s e . A tf i r s tgl a nc e , D a de l a nd appe a r s t o be c orr e c ttha tthe de f e ns e s a r e the s a m e . I n th e a rb itr a tio n , th e S u r e tie s a r g u e d th a t “D a d e la n d ’s F a ilu r e to C o m p ly W i th the T erm s of the B on d B ar s I t s C l ai m ” a nd that“ D adel and’ s I m prop er P ay m ent s t o W al bri dg e B aror L i m i tD adel and’ s c l ai m A gai nst[the S uret i es ] . ” R 2- 66, E x. . A a t4, 11. H ow e ve r , the S ur e t i e s a r gue tha tthe s e de f e ns e s f unc t i on di ff er ent l y i n thi s c as e bec ause thi s i s abad-fai th cl ai m ra ther than a breac h-ofc ontr a c tc l a i m , a s w a s a ti s s ue i n the a rbi tr a t i on pr oc e e di ng. 5 B ecau se w e are u n su re o f th e effects of the p ri o r arb i trat i o n o n th i s case un der F l ori da l aw , w e a l so ce rt i fythi s quest i on t o the S up re m e C ou rtof F l ori da:

WI L L AN AR B I T R AT OR ’ S DE NI AL OF T HE16

DE F E ND AN T ’ S AF F I R MAT I VE DE F E NS E S I N A B R E AC H O F C O N T R A C T C L A I M C O L L A T E R A L L Y E S T O P T H E S A ME DE F E ND AN T S F R OM R AI S I NG T HE S AME DE F E NS E S I N A S U B S E Q U E N T B A D -F A IT H R E F U S A L -T O -S E T T L E C L A IM A G A I N ST TH E SA M E PLA I N TI FF? I I I . CONCL US I ON B e c a us e thi s i s a n a r e ae nt i r e l y c ontr ol l e d by F l or i dal a w , a nd be c a us e the F l or i dac our t s ha ve y e tt o a ddr e s s the s e i s s ue s , w e c e r t i f y the f ol l ow i ng que s t i ons t o the S up re m e C ou rtof F l ori da: 1 . I S TH E O BLI G EE O F A SU RETY CO N TRA CT C ON S I DE R E D A N “ I NS UR E D” S UC H T HA T T HE OB L I GE E HA S T HE R I GH T T O S UE T HE S UR E T Y F OR BA D - FA I TH REFU SA L TO SETTLE CLA I M S U N D ER § 62 4. 15 5(1)(b)(1)? 2. I F S O , D O E S T H E L A N G U A G E I N § 624. 155( 1) ( b) ( 3) ELI M I N A TE § 6 2 6 . 9 5 4 1 ' s REQ U I REM EN T O F PRO O F O F A G EN ERA L BU SI N ESS PRA CTI CE W H EN TH E PLA I N TI FF I S P UR S UI NG A § 6 2 6 . 9 5 4 1 C L AI M T HR OU GH T HE R I G H T O F A C T I O N P R O V I D E D I N § 624. 155? 3 . IS A N A R B IT R A T O R ’S F IN D IN G T H A T A S U R E T Y ’S P R I NC I P AL HA S B R E AC HE D I T S DU T Y T O T HE OB L I GE E , AN D T HA T T HE S UR E T Y I S B OU ND T O T HE ARBI TR ATI ON AW ARD TO THE EXTE NT THAT I TS P R I NC I P AL I S B OU ND , S UF F I C I E NT T O S AT I S F Y T HE COND I TI ON PR EC EDENT T O A LATE R B AD - FAI TH R E F US AL T O S E T T L E C L AI M T HA T T HE R E B E A P R I OR A D J U D I CA TI O N TH A T TH E PLA I N TI FFS W ERE E NT I T L E D T O A P AY ME NT OF A C L AI M F R OM T HE SU RETI ES? 4 . I F NOT, I S T HA T ARB I TR ATOR’ S DEC I SI ON RE S JU D IC A T A B A R R IN G D A D E L A N D ’ S L A T E R C L A IM AG AI NST T HE SURE TI ES FOR B AD - FAI TH RE FUSAL T O SE TT LE ?17

5 . WI L L AN AR B I T R AT OR ’ S DE NI AL OF T HE D EFEN D A N T’ S A FFI RM A TI V E D EFEN SES I N A BREA CH OF C ON T R AC T C L AI M C OL L AT E R AL L Y E S T OP T HE S A ME D E F E N D A N T S F R O M R A I S I N G T H E S A ME DE F E NS E S I N A S UB S E QU E NT B AD - F AI T H R E F US AL TO SETTLE CLA I M A G A I N ST TH E SA M E PLA I N TI FF? I n or de rt o a s s i s tthe F l or i daS upr e m e C our t ' s c ons i de r a t i on of the c a s e , the e n tir e r e c o r d , a lo n g w ith th e b r ie f s o f th e p a r tie s , s h a ll b e tr a n s m itte d to th e c o u r t. QU E S T I ON S C E R T I F I E D.