Guarantee Company of North America USA v. Mercon Construction Company et al

Filing 58

ORDER granting 47 Motion to dismiss counterclaims. Signed by Judge Gregory A. Presnell on 4/12/2012. (ED)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
THE GUARANTEE COMPANY OF
NORTH AMERICA USA,
Plaintiff,
-vs-

Case No. 6:11-cv-1400-Orl-31DAB

MERCON CONSTRUCTION COMPANY,
MEHRDAD MORADI, RAANA
GHANADPOUR, and LYNSON E. ROZAR,
Defendants.
______________________________________

ORDER
This matter comes before the Court on the Motion to Dismiss Counterclaim (Doc. 47) filed
by the Plaintiff, The Guarantee Company of North America USA (“Guarantee”), and the response
in opposition (Doc. 54) filed by Defendants Mercon Construction Company, Inc. (“Mercon”),
Mehrdad Moradi (“Moradi”), and Raana Ghanadpour (“Ghanadpour”).
Guarantee, as surety, issued performance bonds on behalf of Mercon, and the Defendants
agreed to indemnify Guarantee if it was obligated to make payment on the bonds. Eventually,
Guarantee made settlement payments to the obligee on the bond. In this diversity action,
Guarantee seeks, among other things, to recover the amount of those payments from the
indemnitors. By way of the instant motion, Guarantee seeks dismissal of two counterclaims filed
by Defendants Mercon, Moradi, and Ghanadpour (henceforth, the “Counterclaimants”) – one for
common law bad faith, and one for breach of the indemnity agreement.

Guarantee contends that Florida law does not recognize a claim for bad faith against a
surety (as opposed to an insurer). The Counterclaimants cite two cases that, they assert,
demonstrate that such claims are “alive and well”. (Doc. 54 at 3). However, in those cases –
Auto-Owners Ins. Co. v. Southeast Floating Docks, Inc., 571 F.3d 1143, 1146 (11th Cir. 2009) and
Liberty Mutual Insurance Company v. Aventura Engineering & Construction Corp., 534
F.Supp.2d 1290, 1316 (S.D.Fla. 2008) – the surety’s alleged bad faith in settling a disputed claim
was raised as an affirmative defense rather than a separate cause of action.1 The bad faith
counterclaim will be dismissed with prejudice.
In their second counterclaim, the Counterclaimants assert that Guarantee breached the
indemnity agreement by settling Mercon’s claim against a payment bond issued on behalf of the
obligee on Guarantee’s performance bonds. In particular, Mercon argues that Article 7 of the
indemnity agreement only gives Guarantee the right to settle claims upon bonds executed by
Guarantee, while the payment bond at issue was issued by Travelers Casualty and Surety Company
of America. (Doc. 40 at 19). In the instant motion, Guarantee argues that Article 12, not Article 7,
provided it with the right to settle whatever claim Mercon might have possessed in regard to the
payment bond. Article 12 of the indemnity agreement – which was attached to the complaint –
assigned certain collateral to Guarantee upon the occurrence of an event of default, and this
collateral included all of Mercon’s contract rights and causes of action. (Doc 1 at 5). In their
response, the Counterclaimants do not dispute this interpretation of Article 5, instead reiterating
their arguments about Article 7. The Counterclaimants do argue that the settlement of its payment

1

In the instant case, the Counterclaimants have asserted two affirmative defenses based on
alleged bad faith on the part of Guarantee.
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bond claim was inconsistent with the expressed “purpose” of the assignment provision of the
indemnity agreement. As described in Article 12 itself, the purpose of the assignment provision
was to enable Guarantee “to take immediate possession of and to use any COLLATERAL upon
the happening of an EVENT OF DEFAULT to complete the performance obligations of the
UNDERSIGNED under a BONDED CONTRACT and to make payment obligations incurred by
the UNDERSIGNED in the performance a BONDED CONTRACT.” (Doc. 6 at 19) (emphasis in
original). Contrary to the Defendants’ implicit argument, the indemnity agreement does not limit
the use of the assigned collateral to only these purposes. Even if it did, the Defendants have not
made a persuasive argument as to how using the collateral to settle the claims arising from
Mercon’s alleged failure to perform is inconsistent with this purpose.
Finally, the Court notes that, even if Article 12 did not give Guarantee the right to settle
Mercon’s claim against the payment bond, doing so would not have constituted a breach of the
indemnity agreement. Rather, it would probably mean that Guarantee had breached the settlement
agreement with the obligee by promising something Guarantee could not legally deliver. But there
is no provision of the indemnity agreement that would have been breached by Guarantee’s attempt
to dispose of claims it did not control.
For all these reasons, the second counterclaim will also be dismissed with prejudice.
In consideration of the foregoing, it is hereby

-3-

ORDERED that on the Motion to Dismiss Counterclaim (Doc. 47) filed by the Plaintiff,
The Guarantee Company of North America USA, is GRANTED, and both counts of the
Defendants’ counterclaim are DISMISSED WITH PREJUDICE.

DONE and ORDERED in Chambers, Orlando, Florida on April 12, 2012.

Copies furnished to:
Counsel of Record
Unrepresented Party

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