Daniel Lund III | Phelps Dunbar
You (can’t) just keep me hangin’ on!
In federal court proceedings in Colorado against a Miller Act surety as a follow-up to an arbitration award rendered against the surety’s principal, the surety was tagged with paying the attorney’s fees incurred by the plaintiff obligee in the court action. The surety objected and asked that the federal court judgment be revised on the point.
The surety’s pitch to the court was that, although the Miller Act allows for recovery of attorney’s fees against a Miller Act surety if the bonded contract contains an attorney’s fees clause, the plaintiff had already been awarded fees against the principal in the arbitration. The court disagreed, noting that the action in court against the surety was separate and distinct and that the fees incurred in that matter were not “duplicative” of fees recovered in the arbitration.
The court went further, though. Under Colorado law, attorney’s fees may be recoverable even in the in the absence of contractual provision or independent statutory basis therefor if a litigant’s approach to the case is deemed by the court to be “vexatious.” “A vexatious claim or defense is one brought or maintained in bad faith. Bad faith may include conduct that is arbitrary, vexatious, abusive or stubbornly litigious….”
The federal court noted that the surety “requested to stay this case pending arbitration, represented to the Court that its liability ‘coincides with the liability of [its principal],’ and argued that a stay was necessary to ‘prevent the duplication of litigation and the possibility of inconsistent decisions.’… Yet, after the final award issued in [the obligee’s] favor, [the surety} reneged on its earlier positions and disputed the validity and enforceability of the arbitration award. … [This] Court rejected [the surety’s] arguments as ‘inconsistent,’ ‘without merit,’ and ‘plainly unfair to [the obligee] and to the judicial process.’… As such, the Court concluded that [the surety] was judicially estopped from contesting the arbitration award… . For these reasons… [the surety] engaged in bad faith by improperly defending the claim after the final arbitration award entered and [the obligee] is therefore entitled to attorney fees.”
United States v. Intact Ins. Grp. USA, LLC, 2023 U.S. Dist. LEXIS 61940 (D. Colo. Apr. 7, 2023)
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