Of the Seventh Circuit, sitting by designation. *

United States Court of Appeals

For the First Circuit

No. 07-1999

FIDELITY AND GUARANTY INSURANCE COMPANY,

Plaintiff, Appellee,

v.

STAR EQUIPMENT CORPORATION; CHARLENE R. FORAN; JOHN J. FORAN,

Defendants, Appellants,

TOWN OF SEEKONK,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

Before

 Torruella, Cudahy, and Lipez, Circuit Judges. *

Eric H. Loeffler, with whom Bradford R. Carver and Hinshaw &

Culbertson LLP, were on brief, for appellee Fidelity & Guaranty

Insurance Company.

James S. Timmins for appellants.

August 27, 2008
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LIPEZ, Circuit Judge. This diversity case arises out of

a dispute over a construction contract and an attempt to mediate

that dispute through the district court's alternative dispute

resolution program. Appellee Fidelity and Guaranty Insurance

Company ("Fidelity") executed, as surety, a performance bond on

behalf of Appellant Star Equipment Company ("Star") for work on a

water main installation project that Star was to perform for

Appellee Town of Seekonk, Massachusetts ("Seekonk"). Appellants

Charlene and John Foran ("the Forans"), the principals of Star,

executed a General Agreement of Indemnity, promising to reimburse

Fidelity for any losses, costs, and expenses, including attorney's

fees, incurred by Fidelity as a result of the performance bond

issued to Star.

After Seekonk declared Star to be in default on its

construction contract with the town, Fidelity filed a declaratory

judgment action to determine the rights and obligations of the

parties under the performance bond. The parties entered mediation

and emerged with a Settlement Memorandum of Understanding, signed

by all the parties and their attorneys. When Star and the Forans

refused to go forward with the settlement, Fidelity and Seekonk

filed a motion to enforce the memorandum as a settlement of all

claims in the case except the claim of Fidelity against Star and

the Forans for indemnification, which had been explicitly reserved

in the settlement agreement. The district court granted that
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motion, and subsequently granted Fidelity's motion for summary

judgment on the indemnification claim. After a damage hearing, the

court found that Star and the Forans were liable to Fidelity for

$111,313.43, plus costs and interest. Star and the Forans appeal

the enforcement of the settlement agreement, the summary judgment

ruling, and the amount of the damage award. We affirm.

I.

On June 24, 2003, Star entered into a contract with

Seekonk to install replacement water mains in the town. Fidelity

executed a performance bond and a labor and materials payment bond

on behalf of Star, guaranteeing Star's contractual obligations to

Seekonk.

These bonds were issued in reliance on a General

Agreement of Indemnity ("GAI"), executed by Star and the Forans on

June 28, 2002, indemnifying Fidelity in connection with any bonds

issued on behalf of Star for its construction projects. This

agreement provided that Star and each of the Forans, in their

personal capacities (the "Indemnitors"), would indemnify Fidelity

and "hold it harmless from and against all claims, damages,

expenses, losses, costs, professional and consulting fees,

disbursements, interests and expenses of every nature . . . which

[Fidelity] may sustain, incur or become liable for by reason of

having executed or procured the execution of any Bond." The

agreement stated that Fidelity "may settle or compromise any claim,
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liability, demand, suit or judgment upon any Bond or Bonds executed

or procured by it, and any such settlement or compromise shall be

binding upon the [Indemnitors]." 

Shortly after commencing work in July 2003 on the Seekonk

water main project, Star encountered site conditions that were

materially different from its expectations. John Foran advised

Seekonk of these difficulties and sought a contract adjustment to

account for the greater time and costs involved in completing the

work. Although Seekonk's engineer told him that he would look into

it, he asked Star to continue working and it did. Three weeks

later, on August 8, Seekonk officials met with the Forans and

representatives from Fidelity. All parties had lawyers present at

the meeting. The parties agreed that Star would leave the job,

Seekonk would pay Star for work completed, and the contract between

the parties would be "void without further recourse." Fidelity

encouraged Star to accept this agreement. Star then left the job,

but Star and Seekonk could not agree on the amount the town owed

the company for the work it had completed. Star claims the amount

owed at the time it left the job was approximately $40,000.

On September 11, 2003, Seekonk sent a letter to Fidelity,

notifying it that Star was in default of its contractual

obligations and demanding payment under the performance bond. Star

denied that it was in default. On February 5, 2004, Fidelity filed

this declaratory judgment action against Star, the Forans, and
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Seekonk, seeking to clarify its obligation under the performance

bond. Star brought a cross-claim against Seekonk asserting a right

to payment for the work it had already performed at the time it

left the job. Seekonk, in turn, asserted a cross-claim against

Star for breach of contract. The parties agreed to submit the case

to mediation through the court's alternative dispute resolution

program.

The mediation took place on April 4, 2006, with all of

the parties and their counsel present. At the close of the

session, the mediator drafted a hand-written document entitled,

"Settlement Memorandum of Understanding." It stated in full:

1. Fidelity and Guaranty Ins. Co. ("Fidelity")

will pay to the Seekonk Water District/Town of

Seekonk, Mass., the sum of Fifty Thousand

dollars ($50,000.00);

2. The parties hereto agree to Release all

claims asserted in the action entitled

Fidelity & Guaranty Ins. Co. v. Star Equipment

Corp., et al., #1:04-cv-10250-EFH (D. Mass.)

except that Star, Charlene Foran & John Foran

and Fidelity do not release claims & defenses

they have against each other.

3. This settlement is conditioned upon:

(a)Approval by appropriate municipal

authorities; and

(b) Execution of customary releases and

settlement agreement.

The document was signed by each of the parties, their counsel, and

the mediator. The mediator reported to the court that "significant

progress was made towards full settlement of this matter."
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Subsequently, Seekonk obtained the requisite municipal

approvals and the releases were drafted and their language approved

by Star's counsel. However, the Forans asserted that no binding

settlement agreement had been reached and refused to execute the

releases, claiming that their agreement to settle with Seekonk was

contingent on a satisfactory resolution of the indemnification

dispute with Fidelity. Fidelity and Seekonk then filed a Joint

Motion to Enforce Settlement Agreement, which the Indemnitors

opposed. The court initially denied this motion without

explanation or hearing. Fidelity and Seekonk then filed a Joint

Motion for Reconsideration. On November 28, 2006, the court held

a hearing on the motion for reconsideration. It then entered an

order, on November 29, granting the motion and enforcing the

"Settlement Memorandum of Understanding" as a settlement agreement.

Fidelity paid Seekonk $50,000 pursuant to the terms of the

agreement.

On March 5, 2007, Fidelity filed a motion for summary

judgment on its indemnification claim against Star and the Forans.

The Indemnitors filed an opposition to the motion, asserting bad

faith on the part of Fidelity as a defense to the indemnification

agreement. On March 26, 2007, the court entered an order granting

Fidelity's motion for summary judgment, concluding that "the

defendants ha[d] failed to present any material facts which would
These payments included the $50,000 paid to Seekonk under the 1

agreement, $37,084.38 in attorney's fees, and a $24,229.05 payment

made to Public Works Supply Company, a claimant on the payment

bond. The Indemnitors did not object to Fidelity's payment to

Public Works Supply Company.

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give rise to a factual dispute as to a 'want of good faith' on the

part of [Fidelity]."

The court then held a hearing on damages on April 2,

2007. Fidelity and the Indemnitors stipulated that the amount of

loss payments Fidelity had made pursuant to the performance and

payment bonds, including Fidelity's attorney's fees, was

$111,313.43. The Indemnitors argued, however, that Fidelity's 1

damage award should be reduced by $41,000 to account for the value

of the Indemnitors' cross-claim against Seekonk. The district

court rejected this argument, explaining that the cross-claim could

not be used to offset Fidelity's damages because the Indemnitors

had agreed to drop that claim against Seekonk in the Settlement

Memorandum of Understanding. Accordingly, on April 10, 2007, the

court issued a judgment in favor of Fidelity against the

Indemnitors for $111,313.43, plus costs and interest. 

The Indemnitors filed this timely appeal, contesting the

enforcement of the settlement agreement, the grant of summary

judgment, and the refusal to reduce the damage award by the amount

of the cross-claim.
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II.

In this diversity case, we apply Massachusetts contract

law. Rodi v. S. New Eng. Sch. of Law, 532 F.3d 11, 15 (1st Cir.

2008). The district court's determination that an enforceable

settlement agreement existed is a mixed question of fact and law,

which we review on "a sliding scale standard of review under the

label of clear error review." Quint v. A.E. Staley Mfg. Co., 246

F.3d 11, 14 (1st Cir. 2001) (reviewing the district court's

enforcement of a settlement agreement). In other words, "[t]he

more the district court's conclusions are characterized as factual

conclusions, the more our review of those facts is for clear error;

the more the district court's conclusions are conclusions of law,

the more independent review we give." Id. 

Settlement agreements enjoy great favor with the courts

"as a preferred alternative to costly, time-consuming litigation."

Mathewson Corp. v. Allied Marine Indust., Inc., 827 F.2d 850, 852

(1st Cir. 1987). Thus, a party to a settlement agreement may seek

to enforce the agreement's terms when the other party refuses to

comply. Malave v. Carney Hosp., 170 F.3d 217, 220 (1st Cir. 1999).

Where, as here, the settlement collapses before the original suit

is dismissed, the party seeking to enforce the agreement may file

a motion with the trial court. Id. The trial court may summarily

enforce the agreement, provided that there is no genuinely disputed

question of material fact regarding the existence or terms of that
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agreement. Id. When a genuinely disputed question of material

fact does exist, the court should hold a hearing and resolve the

contested factual issues. Id.

On appeal, the Indemnitors argue that they were entitled

to an evidentiary hearing as to whether the Settlement Memorandum

of Understanding should be enforced as a settlement agreement.

They claim that the Settlement Memorandum of Understanding was not

binding because it had not settled all of the issues in the case.

They explain that they signed the memorandum because of "explicit

representations of Fidelity's representative at the mediation that

she would 'work with the Forans' to resolve the Fidelity-Foran

dispute in a manner that would be palatable to them; and, that

their cooperation in the mediation would go a long way toward a

favorable outcome in that resolution." However, these assertions

are not sufficient to generate a genuine disputed question of

material fact, entitling the Indemnitors to an evidentiary hearing.

The Forans' subjective belief that the agreement was not "final"

does not bar enforcement in the face of their assent – in writing

– to the memorandum's unambiguous terms. See Bandera v. City of

Quincy, 344 F.3d 47, 52 (1st Cir. 2003) (applying Massachusetts

law) ("Bandera's asserted subjective beliefs regarding the

settlement likely do not bar enforcement (absent coercion or a

valid side agreement) . . . .").
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The Indemnitors attempt to marshal the terms of the

agreement in their favor on appeal, pointing to paragraph 3 of the

memorandum, which states that the settlement was conditioned upon

"[e]xecution of customary releases and settlement agreement." They

argue that this paragraph reflected an understanding that no

enforceable agreement would exist until an agreement settling all

issues in the case, including the indemnification dispute, had been

reached. However, the plain language of the memorandum does not

support this interpretation. See Hiller v. Submarine Signal Co.,

91 N.E.2d 667, 669 (Mass. 1950) ("The parties are bound by the

plain terms of their contract."). Paragraph 2 of the memorandum

explicitly states that the parties had agreed to settle all the

claims in the case except those involving the indemnification

agreement. Thus, the agreement reflects that the other issues in

the case had been definitively settled, subject only to conditions

in paragraph 3 – municipal approval and the execution of "customary

releases and settlement agreement." A settlement of the

indemnification dispute cannot be what is contemplated by those

boilerplate conditions, given the language in paragraph 2 expressly

excluding the indemnification claim from the scope of the

agreement.

Moreover, the fact that the hand-written agreement

contemplated execution of a more formal agreement does not preclude

enforcement of the hand-written agreement. Bandera, 344 F.3d at
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52. As we explained in Bandera, "[a]n agreement to make a further

more detailed agreement could in some instances not be intended as

a binding contract, or might be too indefinite; but neither is

necessarily or even ordinarily so." Id. at 52 n.2. Here, the

language of the memorandum reflects a present intent by all the

parties to settle all of the claims except the indemnification

dispute. The terms of this settlement are clear and unambiguous.

They are not contingent on the successful outcome of further

negotiations to resolve the indemnification issue. Indeed, the

Indemnitors do not argue that terms of the agreement were ambiguous

or indefinite, nor do they claim that they were coerced into

signing the agreement or that their counsel settled their claim

without authority to do so. Accordingly, we find no error in the

district court's order enforcing the Settlement Memorandum of

Agreement as a settlement agreement that disposed of all the claims

in the case except the indemnification dispute.

III.

We review the district court's grant of summary judgment

de novo. Iverson v. City of Boston, 452 F.3d 94, 98 (1st Cir.

2006). Summary judgment is appropriate where the record, construed

in the light most favorable to the nonmovants (here, the

Indemnitors), "discloses 'no genuine issue of material fact' and

demonstrates that 'the moving party is entitled to judgment as a

matter of law.'" Id. (quoting Fed. R. Civ. P. 56(c)). "The
The Indemnitors also contend that Star was not actually 2

liable to Seekonk, and that, as a result, it should not be

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nonmovant may defeat a summary judgment motion by demonstrating,

through submissions of evidentiary quality, that a trialworthy

issue persists." Id.

The terms of the General Agreement of Indemnity, signed

by the Indemnitors, require them to pay Fidelity for its losses and

expenses incurred as a result of the bonds it executed as surety on

Star's behalf. Interpreting similar indemnity agreements,

Massachusetts courts have held that a surety seeking

indemnification based on such an agreement is entitled to judgment

as a matter of law provided that it acted in good faith in

incurring the expenses for which it seeks indemnity. See Am.

Employers' Ins. Co. v. Horton, 622 N.E.2d 283, 285 (Mass. App. Ct.

1993); Hartford Accident & Indem. Co. v. Millis Roofing & Sheet

Metal, Inc., 418 N.E.2d 645, 647 (Mass. App. Ct. 1981). In this

context, "[w]ant of good faith involves more than bad judgment,

negligence or insufficient zeal. It carries an implication of a

dishonest purpose, conscious doing of wrong, or breach of duty

through motive of self-interest or ill will." Hartford Accident &

Indem., 418 N.E.2d at 647.

The Indemnitors assert that summary judgment was

inappropriate because a factual dispute exists regarding whether

Fidelity acted in good faith. On appeal, they explain that "they 2
obligated to indemnify Fidelity for its payments to Seekonk. The

merits of Star's contention that it was not liable to Seekonk are

entirely irrelevant to the indemnification dispute. The

Indemnitors are obligated by the indemnity agreement to reimburse

Fidelity for its expenditures, provided that they were made in good

faith. See Hartford Accident & Indem., 418 N.E.2d at 646-47

(noting that the merits of the underlying dispute are not material

to the indemnification claim).

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involved Fidelity from the inception of the underlying dispute;

and, after receiving its endorsement to leave the job, they should

not now be held accountable to pay for Fidelity's decision to make

a payment and settle the 'dispute.'" They explain that "Fidelity

played a role in the actions of Star and the Forans in leaving the

Seekonk job." They complain that "as trial approached, Fidelity

disavowed its role, settled with Seekonk because it was financially

expedient to do so, and left the Forans to face a tab that Fidelity

ran up." They characterize this course of action by Fidelity as "a

breach of duty through motive of self-interest" and argue that it

represents "at the least – a 'want of good faith.'" We disagree.

Regardless of Fidelity's role in the initial discussions

surrounding Star's decision to leave the Seekonk job, Fidelity's

subsequent decision to settle with Seekonk "because it was

financially expedient to do so" cannot suggest a "want of good

faith" in the circumstances of this case. Fidelity was a party to

an agreement (the Settlement Memorandum of Understanding) that

obligated them to make this payment. The Indemnitors also

expressly signed on to this settlement and, as we explained above,
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they have no legally cognizable defense to its enforcement. That

being so, the Indemnitors cannot charge Fidelity with bad faith for

making a payment that the Indemnitors agreed Fidelity should make.

Fidelity is entitled to indemnification. 

Although the district court's explanation of its decision

to grant summary judgment was brief, it said all there was to say:

"The defendants have failed to present any material facts which

would give rise to a factual dispute as to a 'want of good faith'

on the part of [Fidelity]." We affirm the grant of summary

judgment.

IV.

Finally, the Indemnitors argue that the district court

erred in refusing to consider the value of its cross-claim against

Seekonk as an offset against Fidelity's award. We need not linger

over this contention. The district court's order enforcing the

settlement agreement disposed of the cross-claim. Accordingly,

that claim has no effect on the amount Fidelity is entitled to

recover from the Indemnitors pursuant to the indemnification

agreement.

Affirmed.