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AMERICAN STRUCTURES, INC. v. FIDELITY & DEPOSIT CO

August 19, 1982

AMERICAN STRUCTURES, INC., JAMES H. GRAVES and LOUIS TABOR
v.
FIDELITY & DEPOSIT COMPANY OF MARYLAND, UNITED STATES FIDELITY & GUARANTY COMPANY, AETNA CASUALTY & SURETY COMPANY



The opinion of the court was delivered by: BECHTLE

 BECHTLE, District Judge.

 This antitrust action was brought by plaintiffs, American Structures, Inc. ("American") and two of its principal officers and shareholders, James H. Graves and Louis C. Tabor, against three defendant surety companies, the Fidelity and Deposit Company of Maryland ("F&D"), the United States Fidelity & Guaranty Company ("USF&G") and Aetna Casualty and Surety Company ("Aetna"). Plaintiffs contend that defendant surety companies conspired to boycott the plaintiffs in violation of Section 1 of the Sherman Act, 15 U.S.C. § by denying American bonding for certain heavy construction projects. Second, plaintiffs contend that defendant surety companies acted in violation of their civil rights by refusing to provide bonding for bids by American on certain public contracts in alleged violation of 42 U.S.C. § 1983. Finally, plaintiffs contend that defendants have acted in violation of state law and have included various pendent state law claims in their complaint. Presently before the Court are defendants' motions for summary judgment. For the reasons which follow, defendants' motions will be granted.

 I. Facts

 American, a heavy construction contractor, was founded in 1964. American specializes in tunneling and underground construction. James Graves and Louis Tabor are its two principal officers and two of its principal shareholders. From 1971 until 1976, American secured bid, payment and performance bonds from F&D with respect to various government contracts and was never refused bonding by that surety.

 In 1974, American was awarded a $5,348,276.00 contract by the City of Baltimore to construct an interstate highway drainage tunnel. F&D provided American with bonding on this project. American encountered unanticipated soil conditions which greatly increased its costs. American continued to work on this project at the original price but attempted to negotiate a price adjustment under the "changed conditions" clause of the contract. The City of Baltimore refused to compensate American for its increased costs and suit was filed by American in September, 1975. In May of 1976, American stopped work on the project.

 On September 16, 1976, American, F&D, and the First National Bank of St. Paul ("Bank"), entered into an agreement in an attempt to keep American financially secure during the pendency of the Baltimore litigation. Under this agreement, the Bank agreed to increase American's available borrowings from $1.8 million to $4 million, of which $800,000.00 would be covered by a guarantee by the surety, F&D. The Bank took a perfected first lien on all of the equipment owned by American and a perfected first lien on 79.8 percent of the outstanding shares of American stock, which was owned in equal proportions by Louis G. Tabor and James H. Graves, as collateral for the increased borrowings and other indebtedness owed by American. Under the agreement, F&D agreed to pay all of the outstanding labor and material claims with respect to the Baltimore project and received an assignment of the unpaid contract balance in return. In addition, F&D agreed to provide a continuing line of bonding credit as follows:

 Agreement of September 16, 1976, Section II, paragraph B (emphasis added).

 Pursuant to the September 16, 1976 agreement, the Bank increased American's available borrowings from $1.8 million to $4 million. The money was used by American to maintain its office, retain its personnel, and carry its overhead expenses from September, 1976 to December, 1978. During this time period, however, F&D refused to bond American on certain heavy construction joint venture projects, but allowed bonding for certain subcontracts or work to be performed by American under management agreements. See Deposition of James H. Graves, at 41-47.

 In December, 1978, the Baltimore litigation was terminated and settled. Immediately thereafter, American, F&D, and the Bank entered into a settlement agreement in which the funds to be paid by the City of Baltimore were assigned to the Bank to reduce the amount of American's indebtedness. In addition, F&D agreed to pay the sum of $100,000.00 to the Bank to release F&D from its guarantee of the $800,000.00 line of credit extended to American by the Bank following the September 16, 1976 agreement. The $100,000.00 payment was credited to the indebtedness owed by American to the Bank.

 On January 4, 1979, a mutual release and settlement was entered into by Baltimore, American, F&D, and the Bank. Baltimore paid $3.5 million to the Bank in settlement of all of American's claims. The dollar amount of the settlement was not disclosed in the general release because of a confidentiality provision contained in that agreement. Nevertheless, it was provided that disclosure of the settlement terms could be made

 
. . . to the extent that Louis G. Tabor (with respect to American Structures, Inc.), Robert D. Carnaghan (Vice-President of Fidelity and Deposit Company or any successor in the position he now holds), Edward Wallerman (with respect to the First National Bank of St. Paul), and Ambrose T. Hartman (on behalf of the Mayor and City Council) may deem necessary in the ordinary course of the business of their parties.

 Mutual General Release and Settlement of All Claims, at 4 (January 4, 1979) (emphasis added).

 Following the termination of the Baltimore litigation, F&D claimed losses as a result of its dealings with plaintiffs in excess of $200,000.00: $100,000.00 paid to the Bank, $35,000.00 in unreimbursed payments to American's subcontractors, and $83,000.00 in legal fees and expenses for the litigation with Baltimore. F&D reported its $100,000.00 payment to the Bank as a loss to the Excess & Casualty Reinsurance Association ("ECRA"), a consortium of insurance companies which reinsured surety risks. From ...


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