When Is The Surety Liable For Attorneys Fees
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When Is The Surety Liable For Attorneys Fees

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This paper examines both attorneys’-fees and interest awards against sureties on Miller Act payment-bond claims. It also suggests several policy arguments against imposing attorneys’ fees and ...

This paper examines both attorneys’-fees and interest awards against sureties on Miller Act payment-bond claims. It also suggests several policy arguments against imposing attorneys’ fees and interest awards on sureties.
By: Daniel R. Hansen and William H. Sturges

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When Is The Surety Liable For Attorneys Fees When Is The Surety Liable For Attorneys Fees Document Transcript

  • When is the Surety Liable for Attorneys’ Fees and Interest on Miller Act Payment-Bond Claims? by William H. Sturges and Daniel R. HansenI. INTRODUCTION The Federal Miller Act1 Subcontractors and suppliers who furnish labor or materials directly to acontractor, or directly to a subcontractor of the subcontractor, enjoy payment-bond rights. Clifford F. MacEvoy Co. v. United States ex rel. Calvin TompkinsCo., 322 U.S. 102, 64 S. Ct. 890 (1944). Consequently, a second-tiersubcontractor can claim on the contractor’s payment bond due to the second-tiersubcontractor’s subcontract with the first-tier subcontractor, but third-tier andlower subcontractors and suppliers cannot. J.W. Bateson Company, Inc. v.United States ex rel. National Auto. Sprinkler Indus. Pension Fund, 434 U.S. 586,98 S. Ct. 873 (1978). Though the Miller Act is clear about who may recover, it isunclear about what may be recovered. Its old codification simply stated that theclaimant could recover “sums justly due.” The present codification says simplythat claimants “may bring a civil action on the payment bond for the amountunpaid [and] may prosecute the action . . . for the amount due.” 40 U.S.C.§ 133(b)(1) (emphasis added). And like its predecessor, the present codificationsays nothing about attorneys’ fees and interest. This paper examines both attorneys’-fees and interest awards againstsureties on Miller Act payment-bond claims. It also suggests several policyarguments against imposing attorneys’ fees and interest awards on sureties. As explained in Section II, “Attorneys’ Fees,” federal courts in most circuitshave case law derived from the U.S. Supreme Court case F.D. Rich v. U.S. exrel. Industrial Lumber, 417 U.S. 116, 94 S. Ct. 2157 (1974), addressingrecoverability of attorneys’ fees in Miller Act payment-bond claims. Not allcircuits, however, are consistent in how they interpret F.D. Rich. Some requirethe federal court to look in part to state law to determine whether attorneys’ feesare recoverable. Most do not. It used to be that sureties could take a narrow view of F.D. Rich and arguethat attorneys’ fees were never available to payment-bond claimants under theMiller Act. This view, however, has been under attack since the 1974 F.D. Richdecision. It is now more likely that payment-bond claimants can recoverattorneys’ fees so long as they have a clause in their subcontract or supplyagreement allowing them. The danger and important lesson for sureties is that1 40 U.S.C. § 3131 et seq. Formerly, the Miller Act was codified under § 40 U.S.C § 270aet seq., and several of the cases cited in this paper refer to the old sections.
  • they usually issue payment bonds for federal projects having seen only thecontract between the owner/obligee and the general contractor. But if asubcontract or second-tier subcontract (which the surety likely has never seen)contains an attorneys’-fees clause, the surety may be liable for attorneys’ fees. As explained in Section III, “Interest,” courts usually look to the relevantstate law to determine whether interest is recoverable. See, e.g., United Statesex rel. Pratt Farnsworth, Inc. v. Talley, 294 F. Supp. 1345 (E.D. La. 1969) (statelaw in Miller Act claims controls interest rate and time when it accrues). But asthis paper demonstrates, federal courts may omit this step and rely solely onwhat can only be described as federal common law when awarding interest. Section IV offers several policy arguments that surety counsel could useto resist the modern trend of holding sureties liable for attorneys’ fees andinterest.II. ATTORNEYS’ FEES Analyzing an attorneys’-fees claim in a Miller Act payment-bond actionbegins with the F.D. Rich case. In F.D. Rich a second-tier subcontractor/suppliersued the general contractor and its surety on a Miller Act payment-bond claim.The High Court refused, however, to allow the second-tier subcontractor’s claimfor attorneys’ fees against the general contractor and surety. 417 U.S. at 121,94. S. Ct. at 2161. The Court followed the “American Rule” governing attorneys’-fees awards: “attorneys’ fees are not ordinarily recoverable in the absence of astatute or enforceable contract providing therefore.” Id. at 126, 94 S. Ct. at 2163.Since the Miller Act, the F.D. Rich case, and many of the cases cited throughoutthis paper, make clear that there is no federal statute concerning attorneys’-feesawards in Miller Act payment-bond claims; thus, the operative part of the“American Rule” seems to be “enforceable contract providing [for attorneys’fees].” In other words, if the payment-bond claimant can show there is anenforceable attorneys’-fees clause in its contract, then the modern trend is tohold the surety liable for attorneys’ fees. But where should the court look to decide whether an attorneys’-feescontract clause is enforceable? One could argue that the federal courts may notlook to state law. For instance, the F.D. Rich Court explained unequivocally that“the scope of the remedy [under the Miller Act] as well as the substance of therights created thereby is a matter of federal, not state law.” Id. at 127, 94 S. Ct.at 2164. The High Court went on to explain that there is no “evidence ofCongressional intent to incorporate state law to govern such an importantelement of the Miller Act litigation as liability for attorneys’ fees.” Id. Indeed, theCourt feared that turning to state law could potentially create 50 differentattorneys’-fees rules, and in the case of federal projects that are in more thanone state, could lead to conflicting and confusing attorneys’-fees standards:SLK_CHA: #350559v1 2
  • Many federal contracts involve construction in more than one state, and often, as here, the parties to Miller Act litigation have little or no contact, other than the contract itself, with the state in which the federal project is located. The reasonable expectations of such potential litigants are better served by a rule of uniform national application. . . . We think it better to extricate the federal courts from the morass of trying to divine a ‘state policy’ as to the award of attorneys’ fees in suits on construction bonds. [Id. at 127-28, 94 S. Ct. at 2164] Consequently, the Court seemed to favor a bright-line rule that attorneys’fees are not at all controlled by state law. If such a rule is contrary toCongressional intent, then Congress could change the Miller Act: Congress is aware of the issue. Thus, whatever the merit of arguments for a further departure from the American Rule in Miller Act commercial litigation, those arguments are properly addressed to Congress. [Id. at 131, 94 S. Ct. at 2166] Since the F.D. Rich case makes clear that the Miller Act does not addressattorneys’ fees and since the federal courts should not look to state law, it couldbe argued that payment-bond claimants in Miller Act cases should not be allowedto recover attorneys’ fees—at least not from the surety or parties with whom theclaimant did not have a contract.2 The modern trend seems to be that federal courts are willing to awardattorneys’ fees—and interest for that matter—whenever the bond claimant has acontract clause allowing for them. Often these courts do not rely on the F.D.Rich decision. Accordingly, and disturbingly for sureties, more and more casesare being decided that simply say a bond claimant may recover attorneys’ feesagainst the surety if there is an attorneys’-fees clause in the bond claimant’scontract. There may be no or little analysis as to whether this decision is allowedunder the Miller Act itself or the F.D. Rich decision. Many circuits make nodetermination about whether the attorneys’-fees contract clause is even2 Indeed, these authors made such an argument on behalf of a surety in a recent federaldistrict court case in North Carolina. Despite apparent absent authority from F.D. Rich, thecourt ruled against the surety and awarded attorneys’ fees to a second-tier subcontractorsimply because there was Fourth Circuit precedent allowing such a recovery when thebond claimant had a contract clause allowing attorneys’ fees. See United States ex rel.SCCB, Inc. d/b/a Stewart Construction Co. v. P. Browne & Assoc., 2010 WL 4644438(M.D.N.C. Nov. 9, 2010). Though the SCCB court found that Fourth Circuit precedentdisposed the issue and did not require examining state law on attorneys’-fees clauseenforceability, the court held that the attorneys’-fees contract clause at issue would havebeen enforceable under North Carolina law.SLK_CHA: #350559v1 3
  • enforceable. See, e.g., United States ex rel. Maddux Supply Co. v. St. Paul Fire& Marine Ins., 86 F.3d 332 (4th Cir. 1996). In contrast, some circuits may requirethe bond claimant to establish that the attorneys’-fees clause is enforceableunder state law. See, e.g., United States ex rel. Reed v. Callahan, 884 F.2d1180 (9th Cir. 1989), cert. denied 493 U.S. 1094 (1990). The Maddux decision is typical of the “modern trend” cases and deservescloser attention. In Maddux, a supplier of a subcontractor on a federalconstruction project sued the general contractor and its surety under the MillerAct. Id. at 334. The supplier and subcontractor had conducted business underthe terms of a credit application for several years before the subcontractorentered into a contractual relationship with the general contractor. Id. at 334 &336. The credit application contained a clause requiring the subcontractor to payall costs of collecting any outstanding amount owed to the supplier, including“reasonable attorneys’ fees.” Id. at 334. After a bench trial, the district courtawarded damages to the supplier, including attorneys’ fees, and the FourthCircuit Court of Appeals affirmed the entire award. Id. The Maddux Court had little analysis of the attorneys’-fees issue, and thecourt did not address F.D. Rich. Instead, the court reasoned that the attorneys’-fees award was proper for two reasons. The first was simply that other circuitshad done the same thing in similar Miller Act cases—the Eleventh Circuit inUnited States ex rel. Southeast Mun. Supply Co. v. National Union Fire Ins. Co.of Pittsburgh, 876 F.2d 92, 93 (11th Cir. 1989), the Fifth Circuit in United Statesex rel. Carter Equip. Co. v. H.R. Morgan, Inc., 554 F.2d 164, 165-66 (5th Cir.1977),3 and the Ninth Circuit in United States ex rel. Reed v. Callahan, supra (butfailing to note that in the Reed case, the court analyzed whether the contractclause was enforceable under state law). Aside from the “everyone else is doing it” argument, the Maddux court’ssecond reason was that payment-bond claimants are entitled to recover “sumsjustly due.” This is probably the payment-bond claimants’ most persuasiveargument. In other words, the purpose of the Miller Act is to protect payment-bond claimants and pay them everything that they are contractually entitled torecover so that they receive the benefit of their bargain. Accordingly, the Madduxcourt concluded:3 The Southeast Municipal Supply case remains the law in the Eleventh Circuit. In that case thecourt simply cited to a Fifth Circuit case, the Carter Equipment case, and held that sureties are liablefor a second-tier supplier’s attorneys’ fees simply because there was “a contractual provisionbetween [the] supplier . . . and [the] subcontractor . . . for the recovery of attorneys’ fees.” 876 F.2d93. The Carter Equipment case is still good Fifth Circuit law having been cited at least twice since theFifth and Eleventh Circuits split in 1981. See United States ex rel. American Bank v. C.I.T. Constr. OfTexas, 944 F.2d 253, 256 (5th Cir. 1991) and United States ex rel. Howell Crane Serv., 861 F.2d 110, 114(5th Cir. 1988). The court in Carter Equipment found the surety liable because (1) attorneys’ feeswould be considered “sums justly due,” which the Miller Act at that time permitted a claimant torecover, and (2) the Miller Act does not expressly prohibit awarding fees against the surety orgeneral contractor. 554 F.2d at 165-66.SLK_CHA: #350559v1 4
  • The rationale of those [Eleventh, Fifth, and Ninth Circuit] decisions—that attorneys’ fees and interest may be ‘sums justly due’ under the Miller Act—is consistent with this court’s rulings that contractors and their sureties are obligated to pay amounts owed by their subcontractors to suppliers . . . . Accordingly, if [the supplier] was entitled to interest and attorneys’ fees under its contract with [the subcontractor], it may recover interest and fees from [the general contractor] and its [surety]. [86 F.3d at 336 (internal citations omitted)] Even though the Miller Act’s recodification eliminated the phrase “sums justly due,” courts continue to rely on this concept to award fees and interest against sureties. See, e.g., SCCB, Inc., 2010 WL 4644438 at *5.III. INTEREST The Miller Act is silent as to the recovery of interest, and therefore, federal courts will look to state law. United States v. American Manufacturers Mut. Cas. Co., 901 F.2d 370, 372-73 (4th Cir. 1990); SCCB, Inc., 2010 WL 4644438 at *8. Accordingly, the surety should look to the relative state law to determine whether it is liable for pre- or postjudgment interest and to determine when such interest begins to run. Typically, the state-law analysis results in the surety being liable for interest from the date that the bond-claimant’s subcontract was breached. See J.F. White Engineering v. U.S. ex rel. Pittsburgh Plate Glass, 311 F.2d 410 (10th Cir. 1962). But even if the surety appears to have a good argument to avoid paying interest or have the interest calculation begin at a favorable date, the surety must beware of “sweeping” circuit-court decisions that award interest (usually along with attorneys’ fees) with little or no analysis. See, e.g., Maddux, 86 F.3d at 334. In Maddux, the subcontractor’s credit application with the supplier stated that “a 1½% monthly service charge will be added to all accounts not paid within 30 days after due date.” Id. Applying the same reasoning it had used for attorneys’ fees, the court held that since the supplier was entitled to interest from the subcontractor under the credit application, it could recover this interest from the general contractor and surety as a “sum justly due” under the Miller Act. Id. The Maddux court, however, did not specifically analyze state law to determine whether interest was recoverable against a surety, and if so, when that interest began to run. In the SCCB, Inc. case, the surety’s lawyers pointed this out to the court while presenting arguments that under North Carolina statutory law, a surety cannot be liable for interest until the date of judgment against the surety, and only then, postjudgment interest would be capped at the statutory SLK_CHA: #350559v1 5
  • rate of eight percent.4 The SCCB, Inc. court refused to entertain the surety’sargument that state law prohibited prejudgment interest against the surety,instead holding that since the Maddux court awarded interest to the bondclaimant against the surety as a “sum justly due,” it would do the same. The Maddux and SCCB cases notwithstanding, not all is gloom and doomfor the surety. If the bond claimant unjustifiably delayed notifying the surety of itsbond claim, courts usually will award interest against the surety only from thedate the surety gets notice. See, e.g., American Auto Ins. v. U.S. ex rel. Luce,269 F.2d 406 (1st Cir. 1959). Also, if the bond claimant’s damages were truly notknown or reasonably calculable (often described as “not liquidated”) prior to suitbeing filed, then there may be no prejudgment interest award against any party,including the surety. See, e.g., United States ex rel. W.A. Rushlight Co. v.Davidson, 71 F. Supp. 401 (D.C. Idaho 1947). Or, if prejudgment interest isallowed in such a case, the surety’s liability commences only from the date suitwas commenced. United States ex rel. Belmont v. Mittry Bros. Constr., 4 F.Supp. 216 (D.C. Idaho), aff’d in part, 75 F.2d 79 (1933). So what is the lesson for sureties? On the one hand, the authorities referthe courts to state law to decide interest awards. But on the other hand, theymay very well simply cite to a federal-court decision awarding interest withoutany state-law analysis. In fairness to the latter courts, those courts may simplylook to state law to decide whether a contract rate of interest is enforceable. Andif it is enforceable, then they may simply award that rate against the surety,regardless of whether the surety has other state-law arguments against payinginterest. In spite of the unfavorable decision in SCCB, a surety should vigorouslyoppose or limit interest awards by whatever state-law means are available,especially if the state contains a penal-bonds statute like North Carolina. Examples of some state-law interest rules are as follows:4 North Carolina appears to except penal bonds from prejudgment interest and allowspostjudgment interest only at the legal rate. See N.C. Gen. Stat. § 24-5. The relevantlanguage is as follows: (a) Actions on Contracts. In an action for breach of contract, except an action on a penal bond, the amount awarded on the contract bears interest from the date of breach. . . . (a1) Actions on Penal Bonds. In an action on a penal bond, the amount of the judgment, except the costs, shall bear interest at the legal rate from the date of entry of judgment under G.S. 1A-1, Rule 58, until the judgment is satisfied. [N.C. Gen. Stat. § 24-5(a) & (a1) (emphasis added)]. Thus, a payment-bond claimant cannot recover prejudgment interest on its payment-bond claim. The claimant also could recover only postjudgment interest at the 8% legalrate and not at the higher rate stated in the lower-tier subcontract.SLK_CHA: #350559v1 6
  • North Carolina • Legal rate 8% pre- and postjudgment. N.C. Gen. Stat. § 24-1. • Interest accrues when the contract is breached. Id. at § 24-5(a). • Contract interest rates are enforceable, but contract rates apply postjudgment only if the contract specifically states that the rate applies postjudgment. Id. • The above notwithstanding, prejudgment interest is not collectible on “penal bonds,” and postjudgment interest on penal bonds is capped at the legal rate of 8%. Id. at 24-5(a1). South Carolina • Legal rate 8.75% prejudgment. S.C. Code Ann. § 34-31-20(A). • Postjudgment interest rate is the prime rate as ordered by the state Supreme Court each year, plus four percentage points. Id. at 34- 31-20(B). • Interest accrues when a sum certain becomes “demandable.” Welding Works v. K&S Constr., 332 S.E.2d 102 (S.C. App. 1985). • Contract rates are enforceable if the contract identifies rates that differ from the legal rates. Burnett Dubose Co. v. Starnes, 324 S.E.2d 651 (S.C. App. 1984). Georgia • Legal rate 7% prejudgment. Ga. Code Ann. § 7-4-2. • Postjudgment interest rate is the prime rate plus three percentage points. Id. at § 7-4-12. • Interest accrues when a party becomes legally bound to pay its obligation. Id. at § 7-4-15. • Contract rates are enforceable if the contract identifies rates that differ from the legal rates. Id. at § 7-4-2 & 7-4-12. • Sureties can be made to pay interest up to 25% of their bond obligations if they fail to pay their bond obligations in bad faith, and within 60 days that such obligations became due. Id. at § 10-7-30. Alabama • Legal rate 6% prejudgment. Ala. Code § 8-8-10. • Postjudgment interest rate is 12%. Id. • Interest accrues when the contract is breached and the amount owed is liquidated. Id. • Contract interest rates are generally enforceable, but certain statutory caps may apply. Id. at § 8-8-1.SLK_CHA: #350559v1 7
  • IV. PUBLIC POLICY ARGUMENTS AGAINST HOLDING SURETIES LIABLE FOR SUBCONTRACTOR/SUPPLIERS’ ATTORNEYS’ FEES AND INTEREST There are several policy arguments against allowing a subcontractor/supplier to recover attorneys’ fees from the surety. Policy arguments, however, may find little support in the federal courts. For example, the Maddux court upheld the attorneys’-fees award even though the attorneys’- fees clause was not in the supplier’s subcontract but was contained in a credit application that the supplier had entered into three years before the federal project. 86 F.3d at 336. These authors have not found court decisions where the policy arguments offered here have been analyzed. 1. The Surety Lacks Privity With or Knowledge of the Subcontractor/Supplier Principal among policy arguments for the surety is that the surety may not be aware that lower-tier subcontractors/suppliers even exist. When the surety agrees to issue a payment bond for a project, the only contract it may see is the one between the owner/obligee and the general contractor. It may not know which subcontractors the general contractor is going to hire. It certainly will not know which sub-subcontractors and lower-tier subcontractors/suppliers may be hired. So the result of Maddux and similar decisions is that a surety could be liable for attorneys’ fees without privity of contract, without some form of equitable or constructive knowledge of a contract, and with no practical way to predict potential contract liability going forward. How can this be? One could understand such a rule if there were a federal statute providing it. But we know that the Miller Act does not address the issue. Thus, there seems to be an evolving federal common law that is coming down decidedly against the sureties.5 5 In Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817 (1938), Justice Brandeis famously, and perhaps prematurely, wrote that “except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State. . . . There is no federal common law.” Id. at 78, 58 S. Ct. at 822. As the esteemed federal-practice treatise writers Wright and Miller point out, Justice Brandeis’ “statement is not completely accurate.” 19 Charles A. Wright, et al., Federal Practice and Procedure § 4514 (2d ed. 1996). Courts continue to create federal common law, but the practice of doing so is not “common.” Nevertheless, there are certain areas that tend to invite federal common law, and one of those is where a statute addresses the area of law at issue but is missing some detail that is needed to fully adjudicate the dispute—sometimes referred to as “filling the interstices.” Id. at § 4516. In Miller Act cases, there is a statute that addresses most aspects of a payment-bond claim in a federal project. But the statute is silent on interest and attorneys’ fees. Yet the statute has historically expressed a purpose to compensate the claimant for all sums “justly due.” Thus, decisions such as Maddux, may be needed interstitial federal common law. SLK_CHA: #350559v1 8
  • 2. The Surety is “Darned” if it Pays the Claimant and “Darned” if it Contests the Claim A surety is a secondary obligor in Miller Act construction cases. If thecontractors fail to pay their subcontractors and suppliers, then thosesubcontractors and suppliers have a secondary source to look to for payment.That secondary source is the payment bond. But just because a payment-bondclaimant makes a claim does not mean the claimant is entitled to be paid. Theclaimant’s work may be defective or incomplete. These possibilities justify thesurety and its principal contesting the claim. On the other hand, fearing interestat a high contract rate and attorneys’ fees, the surety may be inclined to pay theclaim, even if it is suspect. By paying the claim, however, the surety risks losingits right to be indemnified by the bond principal and other indemnitors. This isbecause the surety issues a bond on a construction job knowing that it is not aninsurer, but merely lending its credit and promising to pay if its principal fails to doso. Once the surety makes a payment, it has a right of indemnity against itsprincipal and indemnitors to be completely reimbursed. Accordingly, the suretyusually enters into general indemnity agreements with its principal andindemnitors to assure its right to be reimbursed if the surety ever has to pay apayment-bond claim. But if the surety pays the claim when its principal believesthe claim should not have been paid because the claimant’s work was defectiveor incomplete, the principal and indemnitors can use that argument to resistindemnifying the surety. Sometimes this is called the “payment in bad faith”defense. Thus, a surety is in a nearly irreconcilable dilemma or “catch-22.” If thesurety could be liable for a high contract rate of interest or attorneys’ fees that itnever agreed to, the surety will have incentive to pay dubious payment-bondclaims and risk being unable to get reimbursed by its principal and indemnitors.This is another reason why taking the narrow view of the F.D. Rich holding – thatattorneys’ fees should never be recoverable – makes sense. It is also a logicalreason why the North Carolina legislature, for example, would relieve penalbonds from prejudgment interest and contract rates of interest in § 24-5 (a1). Ifthe United States were to amend the Miller Act to allow attorneys’ fees andprejudgment interest against sureties, then sureties could adjust their premiumsand underwriting practices accordingly to plan for such potential extra liability.3. A Surety’s Liability for Prejudgment Interest and Attorneys’ Fees is Unfair to Other Bond Claimants. There is also a substantial public-policy purpose to limit payment-bondclaims to amounts equal to labor and materials. Payment bonds are penal bondsand have a cap on liability. The cap is the estimated total cost for labor andmaterials on the project. It does not include amounts for interest and attorneys’fees. Thus, in allowing claims for attorneys’ fees and interest under the MillerAct, there may not be a sufficient amount of bond funds to cover all claims. LaterSLK_CHA: #350559v1 9
  • claimants would not get paid for their labor and materials if earlier claimantsreceive not only their labor and materials, but also attorneys’ fees and interest.4. Recovering Attorneys’ Fees Against the Surety for Litigation Between the Second-Tier Subcontractor/Supplier and First-Tier Subcontractor is Unfair Making the surety liable for a second-tier subcontractor/supplier’sattorneys’ fees is fair only if the attorneys’ fees are incurred in litigation betweenthe second-tier subcontractor and the surety. But logic and litigation experiencesuggest that a high percentage of a second-tier subcontractor’s attorneys’ feeswas incurred in the legal battle and discovery exchanges with the first-tiersubcontractor. Only a small percentage of the second-tier subcontractor’sattorneys’ fees, if any, would concern litigating against the surety or its principal,the general contractor. In any event, it would be difficult to separate the amountof attorneys’ fees attributable to litigation between the second-tier subcontractorand first-tier subcontractor versus litigation between the second-tiersubcontractor and the surety/principal. Thus, awarding attorneys’ fees againstthe surety is both unfair and hard to measure.V. CONCLUSION The modern trend is to award attorneys’ fees against the surety wheneverthe bond claimant’s contract contains an attorneys’-fees clause. In a minority ofdistricts, the court might examine state law to determine whether the attorneys’-fees clause is enforceable. But in spite of the narrow view of F.D. Rich—thatattorneys’ fees should not be recoverable—many districts will readily findprecedent for awarding attorneys’ fees without determining whether thecontract’s attorneys’-fees clause is enforceable. These district courts simply“assume” the clause is enforceable or they are applying an emerging federalcommon-law principle. The same federal common law has crept into federaldecisions that now seem to routinely award interest against sureties.Nevertheless, interest is still largely state-law driven, and sureties should be onthe look out for state laws that either eliminate interest against sureties orcalculate interest at terms more favorable to sureties than other parties.SLK_CHA: #350559v1 10
  • BIOGRAPHY OF DANIEL R. HANSENDANIEL R. HANSEN is a partner in the litigation practice group in the Charlotte,North Carolina office of Shumaker, Loop & Kendrick, LLP. His principal areas ofpractice are commercial and business litigation, construction law, fidelity andsurety law, and wrongful-death and severe personal injury litigation.Mr. Hansen has extensive experience in representing businesses of all sizes in avariety of legal disputes and commercial transactions. He devotes approximatelyfifty percent of his practice to construction and surety law, representingcontractors, owners, sureties and construction materials manufacturers. Mr.Hansen has extensive experience representing window manufacturers incommercial and residential claims, both in federal and state courts throughoutthe Southeast. He also has substantial experience in shareholder disputes,broker-dealer litigation, non-compete litigation, insurance bad-faith litigation,coverage disputes, representation of local governments and non-profitorganizations and high-value wrongful-death and personal-injury claims.REPRESENTATIVE ARTICLES• Co-Author, “Men Behaving Badly: What are the Surety’s Defenses to theObligee’s Latent-Defect Claims When the Principal and Obligee’s Employees ActFraudulently?” Northeast Surety Conference, September 23-25, 2009, AtlanticCity, New Jersey, and Southeast Surety Conference, April 14-16, 2010,Charleston, South Carolina.• Co-Author, "North Carolina," in Performance Bond Manual of the 50 States,District of Columbia, Puerto Rico and Federal Jurisdictions 429-56 (L. Lerner & T.Baum eds. 2006).• Co-Author, "The Employers Guilty Plea as a Possible Bar to Fidelity BondClaims," 16th Annual Northeast Surety and Fidelity Claims ConferenceProceedings, sect. 11, pp. 1-11 (September 2005).• "Do We Need the Bar Examination? A Critical Evaluation of the Justificationsfor the Bar Examination and Proposed Alternatives," 45 Case Western Res. L.Rev. 1191, 1995.• Co-Author, "The Hasty Embrace of Critical Thinking by Business LawEducators," 9 J. Legal Stud. Educ. 515, 1991.• Co-Author, "Critical Thinking is Distinct from Thinking Like a Lawyer," inSelected Papers of the American Business Law Association NationalProceedings 169-284 (D. Herron ed. 1990).SLK_CHA: #350559v1 11
  • PRESENTATIONS• "The Fundamentals of Construction Contracts: Understanding the Issues inNorth Carolina," Lorman Education Services Seminar, Asheville, North Carolina,December 11, 2008.• "The Fundamentals of Construction Contracts: Understanding the Issues inNorth Carolina," Lorman Education Services Seminar, Charlotte, North Carolina,July 22, 2008.• Co-Author and Lecturer, "Update on Civil Practice Basics," MecklenburgCounty Bar Association, February 2005.• Co-Author and Lecturer, "Litigation: Basics A to Z," Mecklenburg County BarAssociation, December 2003.SETTLEMENTS, VERDICTS AND REPORTED DECISIONS• 2010. Excluded experts and obtained summary judgment in multi-milliondollar products-liability case. Snoznik v. JELD-WEN, INC., 2010 WL 1924483(W.D.N.C. May 12, 2010)• 2008. Negotiated $4 million settlement for traumatic-brain injury victim (detailsconfidential).• 2007. Achieved $2.64 million settlement with taverns for wrongful-deathvictims even though there were no eye-witnesses who would testify that they sawthe drunk driver being served alcohol while intoxicated. http://www.slk-law.com/pdf/nc-lawyers-weekly-article.pdf.• Oct. 2, 2007. Overturned summary judgment in reported decision: Park EastSales, LLC v. Clark-Langley, Inc., 186 N.C. App. 198, 651 S.E.2d 235 (2007),rev. denied, 362 N.C. 360, 661 S.E.2d 736 (2008).http://www.aoc.state.nc.us/www/public/coa/opinions/2007/pdf/061496-1.pdf.• Dec. 1, 2000. Obtained highest soft-tissue injury jury verdict in county history,per judge presiding in: Dr. Stephen R. Byrd v. Moddassir M. Ali, Davidson CountySuperior Court, case no. 99-CVS-2352.EDUCATION• Case Western Reserve University 1995, J.D., magna cum laude, Order of theCoif, law review• Bowling Green State University 1990, B.A., summa cum laude, Phi Beta KappaSLK_CHA: #350559v1 12
  • BIOGRAPHY OF WILLIAM H. STURGESWILLIAM H. STURGES has extensive experience representing fidelity and suretycompanies in all types of litigation. He has been a trial attorney for over 30years, has a Martindale-Hubble Rating of AV, and has been repeatedly selectedas a North Carolina Super Lawyer and for inclusion in Best Lawyers of America.He has taught trial advocacy for the National Institute of Trial Advocacy at theirregional programs for over 20 years. Mr. Sturges has written numerous articleson surety and fidelity law and is co-author of the North Carolina Section of thePerformance Bond Manual published by the ABA in 2005. He is a Member of theNorth Carolina Bar and is admitted to the federal courts in North Carolina andFourth Circuit Court of Appeals. He received his Juris Doctorate from WakeForest University (cum laude) and his BA from Washington & Lee University(cum laude).SLK_CHA: #350559v1 13