Archive: June 12, 2008

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Trial Court Erred in Granting Summary Judgment in Favor of School District on Claims Stemming from Completion Contract
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Sureties Are Not Necessary Parties under FRCP

Trial Court Erred in Granting Summary Judgment in Favor of School District on Claims Stemming from Completion Contract

Los Angeles Unified Sch. Dist. v. Great Am. Ins. Co., 163 Cal. App. 4th 944 (2008)

In this case, the District had contracted with a construction company to build a new elementary school for approximately $10.1 million.  Unsatisfied with the work, the District adopted a declaration of emergency under Public Contract Code § 20113, allowing the District to enter into a completion contract without inviting bids.  Defendant Hayward Construction Company was awarded the contract and Great American Insurance Company issued a performance bond for $4.5 million.  In the completion agreement, Hayward guaranteed that the maximum amount payable by the District for the cost of the work plus the contractor’s fee would not exceed $4.5 million.  Hayward’s scope of work included items listed on two “pre-punch lists,” identifying the remaining work to be completed or corrected.

Hayward subsequently informed the District that unforeseen circumstances concerning work that was not included in either of the pre-punch lists required an increase of the contract price beyond the contract maximum.  Payment was made to Hayward under a separate agreement preserving the District’s right to recover the money from all responsible parties, including Hayward and its surety.  When Hayward and its surety refused the District’s demand for return of more than $1 million, the District filed a complaint for breach of contract, breach of performance bond and declaratory relief.  Hayward cross-claimed for breach of contract, rescission and declaratory relief. Read More

Sureties Are Not Necessary Parties under FRCP

D&D Assocs., Inc. v. N. Plainfield Bd. of Educ., 2008 WL 2277121 (D.N.J. June 2, 2008)

In this case, the court addressed whether a surety company was a necessary party under Fed. R. Civ. P. 19(a) and whether a motion to amend the pleadings to include the surety was untimely, prejudicial and futile.  D&D Associates had sued the Board of Education to recover the contract balances owed in connection with work on a school construction project.  Almost five years after commencing the lawsuit, the Board sought to amend their answer to join the surety, American Motorists Insurance Company, to the litigation.  The court denied the motion on the grounds that sureties are not necessary parties, and because it was untimely, prejudicial, wasteful and futile to join the party at such a late stage of litigation.

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