Opinion ID: 201061
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: 20 Summary judgment is appropriate when the evidence before the court shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). For the purposes of summary judgment, `genuine' means that `the evidence is such that a reasonable jury could return a verdict for the nonmoving party', and a `material fact' is one which `might affect the outcome of the suit under the governing law.' Hayes v. Douglas Dynamics, Inc., 8 F.3d 88, 90 (1st Cir.1993)(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). We review de novo the district court's grant of summary judgment, viewing the facts and making all reasonable inferences in favor of Greenfield, the nonmoving party. Rodríguez v. Smithkline Beecham, 224 F.3d 1, 5 (1st Cir.2000). We may affirm on any ground supported by the record. Id. 21 The parties agree that Greenfield complied with the notice requirements regarding ICC's default provided by Paragraph 3 of the performance bond. Seaboard argues, however, that Greenfield failed to provide notice of Seaboard's default before terminating Seaboard's involvement, as required by Paragraph 5. Greenfield contends that Seaboard had previously breached the performance bond by failing to take prompt action following ICC's default as required by Paragraph 4 and that Greenfield's communications with Seaboard complied with Paragraph 5's notice requirements. 1 22 We find it unnecessary to address Seaboard's compliance with Paragraph 4. The district court examined the evidence on the issue and denied Greenfield's motion for summary judgment because the Court cannot find as a matter of law that Seaboard committed a material breach of the terms and conditions of the Bond by failing to promptly select and undertake action under paragraph 4. Seaboard Sur. Co., 266 F.Supp.2d at 195. The district court opinion ultimately rests, however, on Greenfield's failure to comply with Paragraph 5. The district court concludes that Greenfield's Paragraph 4 claims against Seaboard necessarily fail ... due to Greenfield's material breach of the Bond, and describes Greenfield's breach thus: Because a clear and direct default notice was not served pursuant to Paragraph 5, the Court finds that Greenfield was in material breach of the Bond when it ceased its dealings with Seaboard and hired another company to complete the Project. Id. at 198. The district court therefore concludes that Greenfield's refusal to allow Seaboard to complete the Project renders the Bond null and void and discharges Seaboard from any and all liability under the Bond. Id. (citing St. Paul Fire & Marine Ins. Co. v. City of Green River, 93 F.Supp.2d 1170 (D.Wyo.2000), aff'd, 6 Fed. Appx. 828 (10th Cir.2001)). 23 We agree with the district court's conclusion that Greenfield's compliance with Paragraph 5 is dispositive of both parties' claims. Even assuming that Seaboard failed to provide the prompt response to contractor default required by Paragraph 4, the surety default provision of Paragraph 5 constitutes an important contractual right of the surety. Paragraph 5 provides the surety fifteen days during which it may attempt to cure the alleged breach prior to default and thus to minimize its economic exposure. Failure to provide this notice constitutes a material breach of the bond. School Bd. of Escambia Cty. v. TIG Premier Ins. Co., 110 F.Supp.2d 1351, 1353 (N.D.Fla.2000)([F]ailure to adhere to a performance bond notification requirement is a material breach, resulting in the loss of an obligee's rights under the bond.); St. Paul, 93 F.Supp.2d at 1178 (Courts have consistently held that an obligee's action that deprives a surety of its ability to protect itself pursuant to performance options granted under a performance bond constitutes a material breach, which renders the bond null and void.); cf. Dragon Constr., Inc. v. Parkway Bank & Trust, 287 Ill.App.3d 29, 222 Ill.Dec. 648, 678 N.E.2d 55, 58 (Ill.App.Ct.1997)(owner's failure to provide adequate notice of [contractor's] termination... stripped [surety] of its right to limit its liability and constituted a material breach of contract which rendered the surety bonds null and void.). 24 Greenfield seeks refuge in the contention that under Massachusetts law compensated sureties ... ought not to be relieved from their obligations on merely technical grounds, not affecting substantially the character of the undertaking which they assumed. Bayer & Mingolla Constr. Co, Inc. v. Deschenes, 348 Mass. 594, 205 N.E.2d 208, 211 n. 4 (1965)(quoting Maryland Cas. Co. v. Dunlap, 68 F.2d 289, 291 (1st Cir.1933)). While it is true that Massachusetts courts have held that lack of prompt notice to the compensated surety of a contractor's default (as required by a Performance Bond) does not discharge the surety if it is not harmed, notice requirements exist [] precisely to provide the surety an opportunity to protect itself against loss by participating in the selection of the successor contractor to ensure that the lowest bidder is hired and damages mitigated. Enterprise Capital, Inc. v. San-Gra Corp., 284 F.Supp.2d 166, 177 (D.Mass.2003) (citations omitted). In the context of surety default, the notice provision similarly provides an opportunity for the surety to cure the breach and thus mitigate damages. As the court concluded in Enterprise Capital, even if [Seaboard] must show injury, loss, or prejudice, it meets this hurdle, given its deprivation of mitigation opportunities. Id. 25 We must therefore determine whether the record creates a triable issue of fact as to Greenfield's compliance with Paragraph 5 of the performance bond. Paragraph 5 provides that: 26 If the Surety does not proceed as provided in Paragraph 4 with reasonable promptness, the Surety will be deemed to be in default on this Bond fifteen days after receipt of an additional written notice from the Owner to the Surety demanding that the Surety perform its obligations under this Bond, and the Owner shall be entitled to enforce any remedy available to the Owner. 27 Greenfield contends that several letters it sent to Seaboard, and particularly two letters dated November 15th, constituted an additional written notice ... demanding that the surety perform its obligations in compliance with Paragraph 5 and that Seaboard was thus properly deemed in default fifteen days thereafter and prior to Greenfield's December 11th decision to hire Baybutt to complete the project. 28 We describe and quote these letters at some length, as our decision rests on whether a reasonable jury could find them to constitute the additional written notice required by Paragraph 5. The first, dated September 26, 2000, responds in detail to Seaboard's requests for documentation regarding ICC's termination and concludes thus: 29 Lastly, the Building Committee is formally asking the surety to undertake to perform and complete the construction contract itself, or through its agents or independent contractors as set forth in the surety contract, paragraph 4.2. Please be further advised that owner believes that they will require a decision by the surety no later than October 20, 2000 so that work may begin in earnest to move forward on the project by November 4, 2000. 30 Two additional letters were sent to Seaboard's counsel on November 15th. The first informs Seaboard that Greenfield Middle School Building Committee (GMSBC) has presented a proposal to obtain additional funding in case Seaboard declines to complete. It then discusses a report prepared by Baybutt indicating that work must commence by early December in order for the school to be ready for the 2001 school year. The pertinent paragraphs read: 31 The GMSBC believes Seaboard has substantial financial exposure to the Town. It would appear that one way for Seaboard to minimize that financial exposure would be to assume performance and complete the contract. The alternative to completion by Seaboard is completion by the GMSBC through a totally different construction team, possibly after receipt of competitive bids. If the GMSBC must obtain competitive proposals, the completion costs could rise even higher than Baybutt's estimate. 32 The Greenfield Town Council is scheduled to vote on the GMSCB's $4.35 million request for additional funding on November 21, 2000. The GMSBC has asked that Seaboard provide me with a statement of Seaboard's intentions by Monday, November 20, 2000. 33 The second letter of November 15th begins thus: Seaboard Surety Co. must soon decide if it will honor its obligations to the Greenfield Middle School Building Committee ... under the performance bond and complete the project. It explains the GMSBC's insistence that Seaboard respond promptly: 34 The GMSBC must now decide how it will complete the project. It is still the GMSBC's preference to have Seaboard complete. Seaboard has been aware of the problems with ICC for several years and Seaboard has had two and one half months since ICC's termination to assess and determine its position on completion. The time for Seaboard to make a decision is here. 35 The GMSBC is concerned by Seaboard's indecision regarding completion of the Project and is concerned that Seaboard may be giving too much credit to ICC's explanations and excuses as to what went wrong on the project. The GMSBC asks that Seaboard undertake an objective review of the facts that culminated in the GMSBC's decision to terminate ICC, before it decides if it will honor its performance bond. 36 The letter then presents a detailed explanation of Greenfield's decision to terminate ICC. It concludes thus: 37 The critical issue, at this time, is to determine how the project will be completed. The GMSBC believes it is in the best interests of the Town and Seaboard to work together to complete the Project since a mutual effort will be required to get the school opened as quickly as possible. If there are differences in our positions that cannot immediately be resolved, the GMSBC will entertain the adoption of solutions that will allow the parties to agree to disagree over those differences, as long as construction progresses. If Seaboard assumes completion of the Project and adheres to a reasonable construction schedule, the GMSBC's consultants believe that the Project can still be completed before the September 2001 school opening. If, however, the GMSBC is compelled to develop new bid packages and receive competitive proposals to complete, the increases in project cost and the delay in completion could be even more severe than the GMSBC's current projections. 38 Should Seaboard decide to honor its performance bond, there will be a substantial amount of work that will need to be completed in a timely manner. Seaboard will need an experienced project management team on site to carefully direct the work. 39 Please ask Seaboard to give this matter its immediate and careful consideration. The GMSBC has asked that Seaboard provide it with an indication of its intentions by November 20, 2000, since an important vote in the Town government on financing the completion of the work, has been scheduled for November 21, 2000. 40 The final letter is dated November 22, 2000, and begins thus: 41 The [GMSBC] is somewhat encouraged by your November 20, 2000 correspondence indicating [Seaboard's] position on completing the Project. The GMSBC wants Seaboard to complete the Project and is anxious to get the work underway. However, the GMSBC has concerns with Seaboard's position that the GMSBC must pay for all the costs to remedy the floor damage ... In addition to resolving the question of who between Seaboard and the GMSBC pays what portion of the floor remediation work, the GMSBC has a number of additional concerns that must be satisfactorily addressed in a takeover agreement. 42 The letter proceeds to describe the GMSBC's position on the floor remediation costs and proposes that Seaboard and the GMSBC split the costs, reserving their rights against one another and against ICC, until the allocation of responsibility is determined in court. The letter then lists and discusses seven other key issues that must be satisfactorily addressed in any takeover agreement. It concludes thus: 43 Please contact me at your earliest opportunity, to discuss Seaboard's position regarding the above issues. The GMSBC would like to be able to reach a general agreement on the issues to be covered in the takeover agreement by the end of the day on November 27, 2000, with a written takeover agreement to follow a few days thereafter. Should we be able to successfully negotiate a takeover agreement, construction representatives of all parties should be prepared to meet on short notice at the site.... 44 Time is truly of the essence in negotiating a takeover agreement and commencing the completion of the work. The GMSBC has targeted December 1, 2000 as the date by which work on the completion of the contract should commence. The GMBSC is prepared to do what is necessary to meet that date. If the takeover agreement cannot be reached, the GMSBC will be compelled to proceed with its other completion options. 45 The district court found that none of the letters, taken together or separately, constituted the additional written notice required by Paragraph 5 of the bond, because the letters do not demand performance in a manner sufficient to alert Seaboard to a presumed default, nor do they indicate that Seaboard was in material breach for failing to choose or to undertake performance with reasonable promptness, nor do they reference the Paragraph 5 default provisions or warn that Seaboard will be deemed in default in fifteen days. Seaboard Sur. Co., 266 F.Supp.2d at 197. We agree. 46 In the context of contractor default, courts have found that [a] declaration of default sufficient to invoke the surety's obligations ... must be made in clear, direct, and unequivocal language. L & A Contracting Co. v. S. Concrete Serv., Inc., 17 F.3d 106, 111 (5th Cir.1994)(finding insufficient notice of default when owner's letters never mentioned the word default); Elm Haven Constr. Ltd. P'ship v. Neri Constr., LLC, 281 F.Supp.2d 406 (D.Conn.2003) (insufficient notice when letters only complained about performance and financial status); Balfour Beatty Constr., Inc. v. Colonial Ornamental Iron Works, Inc., 986 F.Supp. 82, 86 (D.Conn.1997) (insufficient notice when letters only mention delay in performance). The district court applied this standard in the related context of surety default before us and concluded that Greenfield's letters failed to provide a clear and direct default notice to Seaboard. Seaboard Sur. Co., 266 F.Supp.2d at 198. 47 While the standard for sufficiency of notice applied by the district court comports with the general standard that [n]otice must be clear, definite, explicit, and unambiguous, 58 Am.Jur.2d Notice § 2, there is no dispute that the performance bond at issue here is governed by Massachusetts law. Although neither party before us nor the decision below suggests that Massachusetts law provides a relevant standard for sufficiency of notice meaningfully distinct from that applied by the district court, we must address the issue. In introducing the clear, direct and unequivocal standard, the district court states, citing Comm'r of Corps. & Taxation v. Springfield, 321 Mass. 31, 35, 71 N.E.2d 593 (1947), that [l]ikewise, contractually required notices must always be clear and unambiguous in order to fulfill their intended purpose. Seaboard Sur. Co., 266 F.Supp.2d at 196. Comm'r of Corps., however, states the requirement under Massachusetts law that [n]otices required by law or by contract to be given by one party to the other in order to establish rights or obligations must state with reasonable certainty the essential facts required by law or by contract. Comm'r of Corps., 321 Mass. at 35, 71 N.E.2d 593. This principle has been applied to suggest that the form [of notice] is not important but it must convey with reasonable certainty the information reasonably needed to serve the statutory purpose. Carey v. Planning Bd. of Revere, 335 Mass. 746, 748, 141 N.E.2d 895 (1957). In both Carey and Comm'r of Corps., the notice in question was found to be insufficient because it failed to supply the information necessary to serve the purpose of the statutory notice provision at issue. Carey, 335 Mass. at 747, 141 N.E.2d 895; Comm'r of Corps., 321 Mass. at 35, 71 N.E.2d 593. 48 As discussed earlier, the purpose of the notice provision in Paragraph 5 of the performance bond is to provide the surety with a fifteen-day period during which it might attempt to cure the alleged breach prior to default. As Greenfield's letters to Seaboard did not alert Seaboard to a presumed default, nor indicate that Seaboard was in material breach, nor refer to Paragraph 5, nor warn that Seaboard would be deemed in default in fifteen days, no reasonable jury could find that Greenfield's letters convey[ed] with reasonable certainty the information reasonably needed to serve the purpose of Paragraph 5's notice requirement. Carey, 335 Mass. at 748, 141 N.E.2d 895. Therefore, as Greenfield's letters to Seaboard fail to create a triable issue of fact under this threshold standard for sufficiency of notice under Massachusetts law, we need not explore the question further. Paragraph 5 of the performance bond provided Seaboard with a fifteen-day period during which it might attempt to cure the alleged breach. No reasonable jury could find that Greenfield's letters put Seaboard on notice that this fifteen-day period had commenced. 2