Court Opinion

ID: 41345
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:02:20+00
Date Added: 2024-06-11T17:16:42.847280
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS
                                                               FILED
                    FOR THE ELEVENTH CIRCUIT   U.S. COURT OF APPEALS
                      ________________________   ELEVENTH CIRCUIT
                                                           JAN 15, 2010
                             No. 09-13528                   JOHN LEY
                         Non-Argument Calendar            ACTING CLERK
                       ________________________

                     D. C. Docket No. 07-00038-CV-5

ARCH INSURANCE COMPANY,

                                                            Plaintiff-Counter-
                                                          Defendant-Appellee,

                                  versus

DOUGLAS ASPHALT COMPANY,
JOEL SPIVEY,
KYLE SPIVEY,

                                                         Defendants-Counter-
                                                        Claimants-Appellants.

                       ________________________

                Appeal from the United States District Court
                   for the Southern District of Georgia
                     _________________________

                            (January 15, 2010)

Before DUBINA, Chief Judge, CARNES and ANDERSON, Circuit Judges.
PER CURIAM:

      The Georgia Department of Transportation (“GDOT”) contracted with

Douglas Asphalt Company (“Douglas”) to perform work on interstate construction

projects. Arch Insurance Company (“Arch”) executed performance and payment

bonds in connection with Douglas’s work on the projects, and Douglas, along with

Joel Spivey and Kyle Spivey (“the Spiveys”), executed an indemnification

agreement in favor of Arch for all losses sustained as a result of having issued

bonds on behalf of Douglas. In August 2006, GDOT determined that Douglas was

in default on three projects known collectively as the “Southern Triangle” projects,

all of which were bonded by Arch, and Arch became responsible for remedying

Douglas’s default. After the GDOT determined that Douglas was in default on a

number of other Arch-bonded projects, on February 2, 2007, Arch exercised its

right under the indemnification agreement and ordered Douglas to cease work on

all Arch-bonded projects.

      Arch filed suit against the Appellants, Douglas and the Spiveys, to recover

its losses. Following a four-day bench trial, the district court entered a judgment in

favor of Arch in the amount of $88,892,128.15 plus post-judgment interest. The

district court also ordered Douglas to comply with the collateral deposit clause of

the indemnification agreement and immediately deposit another $40,000,000.00 in

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collateral.

       The Appellants appeal the Bench Trial Ruling and the judgment entered in

favor of the Appellee, Arch, by the district court. The Appellants contend that the

district court erred by failing to find that they were relieved from their duty to

indemnify Arch based on Arch acting in bad faith in paying claims under the

performance and payment bonds it issued on behalf of Douglas. We affirm.

       This court reviews the district court’s conclusions of law de novo. Fischer v.

S/Y Neraida, 508 F.3d 586, 592 (11th Cir. 2007). The district court’s findings of

fact, including determinations of the credibility of witnesses and weight of the

evidence, are reviewed for clear error. Id.

       The parties agree that the indemnification agreement is enforceable absent

the Appellants demonstrating that Arch exhibited bad faith in paying the claims

under the performance and payments bonds. See Nguyen v. Lumbersmen Mut.

Case. Co., 261 Ga. App. 553, 555 (2003). Under Georgia law, a finding of bad

judgment or negligence is generally not enough to show bad faith. Id. Bad faith

“imports a dishonest purpose or some moral obliquity, and [it] implies conscious

doing of wrong, and means breach of known duty through some motive of interest

or ill will.” Id. (alteration in original). The Appellants assert three examples of

Arch acting in bad faith: First, Arch completed the bonded projects at a cost well

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above the amount which the Appellants claim that they could have performed the

work. Second, Arch failed to contest Douglas’s default and bond obligations.

Finally, Arch did not allow Douglas to remain involved in the projects following

its default.

        Arch’s completion of the projects at a higher cost does not demonstrate bad

faith. The district court factually found that Douglas was invited to all meetings

between Arch and construction company being considered to complete projects,

but that Douglas failed to send representatives to the meetings. Arch also hired a

consulting firm to assist in evaluating and soliciting competitive bids on the

projects and only considered other construction companies after determining that

Douglas would not be able to complete the projects. The district court specifically

found the testimony regarding Arch’s good faith efforts in seeking competitive

bids credible. Further, the Appellants have not presented any evidence to show

that the costs were unreasonable, except to claim that they could have done it for

less.

        Second, the Appellants have not demonstrated that Arch acted in bad faith

by failing to contest the defaults. Under the indemnification agreement, Arch had

full discretion in determining whether to defend, settle or pay claims against its

bonds. The agreement also provided that if the Appellants wanted Arch to defend

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a claim, they were required to deposit collateral to pay any judgment rendered in

the course of contesting the default plus interests, costs and attorneys fees. The

Appellants have not pointed to any default they properly requested Arch to defend

that was not defended by Arch.

      Arch’s failure to allow Douglas to remain involved in the projects is

likewise not evidence of bad faith. The district court made the factual finding that

Douglas was involved in the projects through January 2007, and was only excluded

following a series of events indicating that Douglas was not financially equipped to

complete the projects. Those events included Douglas’s default on seven

additional GDOT projects bonded by Arch, Douglas’s announcement that it was

having trouble funding its payroll, and Douglas’s failure to post any collateral with

Arch, despite its contractual obligation to post $40,000,000.00 in collateral to

match the amount of reserve established by Arch. Arch also hired a consulting

company to investigate the financial condition of Douglas, and Douglas failed to

respond to requests to provide plans to demonstrate that it was capable of

completing the projects. Thus, the district court did not err in concluding that

Arch’s decision to exclude Douglas was not made in bad faith. Accordingly, we

find no error and affirm the district court’s judgment.

      AFFIRMED.

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