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Travelers Casualty and Surety Company of America v. A.G. Cullen Construction

July 24, 2009


The opinion of the court was delivered by: Nora Barry Fischer United States District Judge


I. Introduction

This matter comes before the Court on Plaintiff Travelers Casualty and Surety Company of America's ("Travelers") Memorandum in Support of Proposed Case Management Orders filed in the related actions at Civ. A. No. 07-765 and Civ. A. No. 08-1238 (07-765, Docket No. 119; 08-1238, Docket No. 43) and argument thereon held on July 20, 2009 (07-765, Docket No. 120; 08-1238, Docket No. 45). Travelers filed its memorandum objecting to the Court's proposed case management orders for the two actions, which were circulated to counsel for the parties in both cases and to which counsel for A.G. Cullen Construction, Inc., Arlene Cullen and Paul Cullen ("the Cullens") and County of Butler ("Butler) had no objections. Specifically, Travelers requests that the Court permit Travelers' indemnity claim against the Cullens in the 07-765 case to run parallel with the Cullens tort claims against Travelers in the action at 08-1238, thereby giving Travelers the opportunity to have the indemnity issue decided prior to the completion of discovery on the construction issues in 07-765.

II. Factual Background and Procedural History*fn1

A. Relevant Facts from the Two Cases

1. Case at No. 07-765

Travelers is the surety on two bonds for performance and payment issued to the Cullens, in connection with a general construction contract between the Cullens and Butler. (07-765, Docket No. 82 at 1-2). The subject bonds covered a construction project for the Butler County Prison (the "Project"), to which the Cullens agreed to be the general contractor on January 25, 2006, and they covered a project in the East Allegheny School District, for Logan Middle School (the "Logan Project"). (Id. at 2, 4; Docket No. 50 at 3s). Travelers and the Cullens also entered into a General Agreement of Indemnity ("GAI"), by which Arlene and Paul Cullen are the individual indemnitors under the bonds and the GAI, while A.G. Cullen Construction, Inc. stands as both Travelers' principal and indemnitor. (Id. at 3; 07-765, Docket Nos. 50-1, 50-2, 50-3).

In the spring of 2007, after construction began, the Cullens served Butler with several notices demanding payment, and threatened to walk off the Project if they were not paid within seven days.(07-765, Docket No. 82 at 4). In response, Butler threatened to find the Cullens in default of the contract and file a claim against the performance bond. (Id; See Docket No. 50-8 at 3). After said claim was filed against the performance bond, Travelers filed suit in this Court against the Cullens on June 6, 2007, claiming, inter alia, that the Cullens refused to deposit funds in a trust account in violation of the GAI. (07-765, Docket No. 82 at 4). On August 1, 2007, the Court denied Travelers' Emergency Motion for Temporary Restraining Order and Motion for Preliminary Injunction. (Id. at 6; Docket No. 40). Travelers' motions had requested that the Court order the Cullens to deposit funds received in connection with the Butler Project into the trust account, in adherence with the GAI, and to prohibit any withdrawals from the trust account without the express consent of Travelers. (Id.).

The parties attempted to mediate their claims before a neutral approved by this Court, the Honorable Joseph Del Sole, on August 27, 2007. (Id. at 4). Consequently, they reached an agreement regarding the day to day operation and procedures of the trust fund account. Specifically, the parties agreed that all funds relating to the Butler Project would be deposited into the account, and any withdrawal by the Cullens was prohibited unless it was with the written consent of Travelers. (Id.). In accordance with the agreed upon procedures regarding the account, Travelers used the deposited funds to make payments to subcontractors and suppliers on the Butler Project, in addition to releasing funds to the Cullens to pay its own employees and expenses. (Id.).

In December of 2007, the Cullens claimed that payment on the Project was overdue and declared Butler to be in material breach of the construction contract. (Id.). They terminated the contract and refused future performance. (Id. at 4-5). In response, on or about January 17, 2008, Butler claimed that the Cullens were in breach for failure to continue their work and terminated the contract. (Id. at 5; see also Docket No. 50-7). By letter dated the same day, Butler declared the Cullens to be in default and made a demand upon Travelers to perform its duties under the performance bond.*fn2 (Id; see also Docket No. 50-7). Travelers then notified the Cullens that, pursuant to the indemnification obligation in the GAI, it was necessary for the Cullens to deposit funds in the trust account in an amount Travelers estimated would be sufficient to protect Travelers from any losses, including any expenses associated with Travelers' investigation of the allegations made by Butler against the Cullens. (Id.; Docket No. 50-8 at 2-3). Travelers claims that the Cullens have not deposited any of these requested funds which were spent in fulfilling its obligations under the bonds. (Id.).

2. Case at No. 08-1238

On September 5, 2008, Travelers removed to this Court the Cullens' claim against it and its attorneys, Shawn Pikas, David Dreifuss, Joann Bonacci, and Dreifuss, Bonacci, and Parker, for malicious use of civil proceedings, originally filed in the Court of Common Pleas of Butler County. (08-1238, Docket No. 1). In this action, the Cullens contend that Travelers and its lawyers' request for a temporary restraining order and preliminary injunction at 07-765, which they claim was terminated in their favor, was sought in a grossly negligent manner, without probable cause, and without a legitimate purpose. (08-1238, Docket No. 23 at 7). Specifically, the Cullens claim that Travelers' concerns in seeking this relief, namely that the Cullens were allegedly wrongfully dissipating funds, were based on "unsubstantiated rumors" that the Cullens planned to flee to St. Maarten. (Id.). They further claim that Travelers and its attorneys maliciously published false rumors with the intent to harm the Cullens. (Id.). On February 13, 2009, the Court denied Travelers' Motion to Dismiss the Cullens' claim for malicious prosecution, finding that the Cullens are entitled to discovery on this claim, while permitting the Cullens to amend their complaint to more specifically plead a claim for abuse of process. (Id. at 31). On June 15, 2009, after granting three extensions of time to the Cullens, they filed their Second Amended Complaint. (08-1238, Docket No. 37). On July 9, 2009, the parties filed a stipulation for extension of time for Travelers to respond to the Cullens' Second Amended Complaint, making Travelers' answer due by July 31, 2009. (Id.; Docket No. 41).

B. Mediation Process

On September 22, 2008, the parties agreed to attempt to mediate both cases, along with the related cases in state court, and to contact a proposed mediator to inquire as to fees and scheduling. (07-765, Docket No. 76). On October 17, 2008, the parties chose John Madden, Esquire*fn3 to serve as a co- mediator with the Court; Mr. Madden accepted the appointment. (Id.; Docket No. 81). On November 19, 2008, the Court, the parties, and Mr. Madden convened a telephone conference to discuss the parameters of the mediation, the role the Court would play, and the scheduling of the pre-mediation session and mediation session(s). (Id.; Docket No. 85). The parties, Mr. Madden and the Court had a pre-mediation conference on December 18, 2008. (Id.; Docket No. 91). In anticipation of the mediation sessions held during the third week of February of 2009, the parties engaged in extensive document production and each party prepared mediation statements for Mr. Madden. While the ...

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