Friday, January 25, 2008

Contractors Equip. Maint. Co., Inc. v. Bechtel Hanford, Inc.

Jan 24: In the U.S. Court of Appeals, Ninth Circuit, Case No. 06-35310. United Coastal Insurance Company (UCIC) appeals the district court’s order granting Bechtel Hanford, Inc.’s (Bechtel’s) motion for judgment on a supersedeas bond.

The case is the product of a breach of contract dispute in an environmental remediation project. Bechtel contracted with the United States Department of Energy (DOE) to perform environmental clean-up work at the Hanford Nuclear Reservation in Washington. P.W. Stephens Contractors, Inc. (PWS) entered a subcontract with Bechtel to work under Bechtel’s prime contract with DOE and obtained a performance bond from Acstar Insurance Co. (Acstar). When PWS defaulted on the subcontract, Contractors Equipment Maintenance Company, Inc., a second-tier subcontractor, sued Bechtel, PWS and Acstar. Bechtel subsequently filed cross-claims against PWS and Acstar.

Bechtel was awarded a judgment in 2004 against Acstar and PWS. Acstar obtained a supersedeas bond from UCIC and appealed the judgment against it. After the Ninth Circuit affirmed in part and reversed in part, Bechtel moved to collect the entire 2004 judgment from UCIC. The district court concluded that the supersedeas bond covered the judgment against both Acstar and PWS and granted Bechtel’s motion, ordering UCIC to pay the entire underlying judgment.

On appeal, UCIC claims that the bond secured only Bechtel’s judgment against Acstar. The Appeals Court said it agreed with UCIC that the bond secures only Acstar’s obligations on the underlying judgment and therefore reversed the district court decision. The Appeals Court said, "Because Acstar’s liability has been satisfied, we direct entry of judgment in favor of UCIC."

Access the complete opinion (
click here).