SLOAN & COMPANY V. LIBERTY MUTUAL INSURANCE COMPANY 653 F.3d 175 (2011) CASE BRIEF

SLOAN & COMPANY V. LIBERTY MUTUAL INSURANCE COMPANY

653 F.3d 175 (2011)

NATURE OF THE CASE: Liberty (D) appealed from judgments over the interpretation of a subcontract claiming that under the contract general contractor's obligation to pay Sloan (P), subcontractor, was conditioned on receipt of payment from the owner.

FACTS: IOC owned and developed waterfront condominiums. Shoemaker contracted with IOC to build the project. Shoemaker then lined up various subcontractors that included P, who agreed to perform drywall and carpentry work. Payment for the subcontractors' work was insured by a surety bond issued by Liberty Mutual (D). At the project's completion, IOC refused to pay Shoemaker nearly $6.5 million owed under the prime contract. Of that amount, $5 million was due the subcontractors. IOC claimed it was withholding money for several reasons, one of which was that some of the subcontractors' work was untimely and deficient. Shoemaker then refused to pay P the full amount of the remaining balance P claimed was due under their subcontract-$1,074,260. Shoemaker sued IOC to recover the balance on the prime contract. P then made a claim against D for payment on the surety bond. D denied the claim wherein Paragraph 6.f, conditioned P's right to payment on Shoemaker's receipt of payment from IOC. P filed a complaint against D. P moved for summary judgment in the amount of $1,074,260.09, plus interest and taxable costs. Shoemaker learned that IOC's financial situation made it unable to satisfy a judgment for the entire claim even if one were awarded to Shoemaker. It settled with IOC for $1 million. Shoemaker then offered its subcontractors their pro rata shares of amounts owed in exchange for a release of claims. P refused a compromise. The District Court granted partial summary judgment for $785,067. The Court granted a second partial summary judgment for $145,895. With a third judgment of an additional amount of $179,876 P got all but $91,790 of its initial claim of $1,074,260. D appealed. P cross appealed for the shortfall.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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