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City of Olympia v. Travelers Casualty and Surety Company of America

United States District Court, W.D. Washington, Tacoma

January 3, 2020

CITY OF OLYMPIA, a municipality, Plaintiff,
v.
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Defendant.

          ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT, DKT. ## 10, 13

          Ronald B. Leighton United States District Judge

         INTRODUCTION

         THIS MATTER is before the Court on the parties' Cross-Motions for Summary Judgment.[1] Dkt. # 10. This case arises from Defendant Travelers Casualty and Surety Company of America's refusal to pay an attorney fees and costs award obtained by the City of Olympia against NOVA Contracting, Inc.-Olympia's former contractor and Travelers's assured. Travelers contends that it has no obligation to pay because the fees were awarded pursuant to a Washington statute, rather than a contractual provision. For the following reasons, the Court GRANTS the City of Olympia's Motion and DENIES Travelers's Motion.

         BACKGROUND

         In May 21, 2014, Olympia and NOVA entered a Contract to construct a culvert associated with the Olympia Woodland Trail Improvements Project. NOVA Contract, Dkt. # 12-7, at 25. The one-page document provides, among other things, that NOVA would be liable for liquidated damages for late completion of the project. Id. However, it also incorporates and binds NOVA to the 2012 Washington State Standard Specifications for Road, Bridge, and Municipal Construction (“WSDOT Specs”). Id. Section 1-07.1 of the WSDOT Specs state that the contractor (in this case NOVA) “shall always comply with all Federal, State, tribal, or local laws, ordinances, and regulations that affect Work under the Contract.” 2012 WSDOT Specs, Washington State Department of Transportation, § 1-07.1 (Dec. 27, 2019), available at: https://www. wsdot.wa. gov/publications/manuals/fulltext/M41-10/SS2012.pdf.

         As the principal on a public works project, NOVA was legally required to obtain a performance bond with a surety company guaranteeing that NOVA would “faithfully perform all provisions of [the] contract.” RCW 39.08.010(1)(a). NOVA obtained such a Bond from Travelers. Dkt. # 12-1. The Bond guarantees performance of “all obligations under the Contract” and only becomes void once those obligations have been “well and faithfully perform[ed].” Id.

         On September 19, 2014, Olympia terminated its Contract with NOVA for the latter's default. NOVA then sued Olympia on December 4, 2014, with Olympia counterclaiming for liquidated damages. On March 27, 2015, Olympia offered to accept payment in the amount of $25, 000 from NOVA as settlement of all claims. Dkt. # 12-6. This settlement offer (which NOVA rejected) was made pursuant to RCW 39.04.240, which expands the attorney fees award provisions of RCW 4.84.250-280 for actions arising out of a public works contracts. Id. Under RCW 4.84.260, a party is deemed to have “prevailed” for purposes of an attorney fee award “when the recovery, exclusive of costs, is as much as or more than the amount offered in settlement by the [party].” The parties do not dispute that Olympia's September 19 settlement offer met the requirements of RCW 39.04.240 and RCW 4.84.250-280.

         Olympia prevailed in the litigation with NOVA and received a judgment for $42, 140.70 in liquidated damages, $55, 150.00 in attorney fees, and $257.00 in costs. Dkt. # 12-10 at 4. Olympia attempted to tender the judgment to Travelers for payment, but Travelers would only agree to pay the liquidated damages. Dkt. # 12-11. Meanwhile, NOVA appealed the trial court's decision and lost, further increasing the amount of attorney fees and costs awarded to Olympia. Olympia now seeks $119, 467.20 plus interest from Travelers to cover its fees and costs from the litigation with NOVA. Complaint, Dkt. # 1-1 at 7-9.

         DISCUSSION

         1. Legal Standard

         Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Anderson Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52. The moving party bears the initial burden of showing that there is no evidence which supports an element essential to the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant has met this burden, the nonmoving party then must show that there is a genuine issue for trial. Anderson, 477 U.S. at 250. If the nonmoving party fails to establish the existence of a genuine issue of material fact, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323-24.

         2. Attorney Fees and Costs Award under RCW 39.04.240

         This case turns on one legal issue: whether the Performance Bond obligates Travelers' to pay the attorney fees and costs awarded to Olympia pursuant to RCW 39.04.240. Travelers argues that, because the Bond only guarantees NOVA's performance of “all obligations under the Contract, ” Dkt. # 12-1, Travelers is not required to pay fees and costs that were awarded pursuant to a statute not referenced in the Contract. Olympia responds that RCW 39.04.240 is incorporated into the Contract with NOVA as a matter of law, making the state court's award guaranteed under the Bond.

         Performance bonds are “in the nature of insurance contracts” and “subject to the rules applicable to simple contract law.” Colorado Structures, Inc. v. Ins. Co. of the W., 161 Wash.2d 577, 586 (2007) (internal quotations omitted). “If unambiguous, [a bond] should be construed in accordance with the parties' plain intent, [but] [i]f ambiguous, it should be construed in favor of liability of the surety.” Id. at 588 (internal quotation omitted). A bond and the underlying contract between the contractor and the obligee should be considered together to ascertain the obligation assumed by the ...


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