The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.
Hicks & Warren LLC ("HW") brings this action against Liberty Mutual Insurance Company ("Liberty"), claiming surety liability on a performance bond for $8,246,517.61 awarded to HW in arbitration and confirmed by the Supreme Court of the State of New York, County of New York, against the bond's principal, White Rose Contracting, Inc. and The Stegla Group, Inc., Joint Venture (collectively, "Stegla"). Liberty now moves for partial summary judgment as to the $4,038,270 in attorneys' fees and $161,016.17 in administrative costs and arbitrators' fees awarded to HW in the arbitration against Stegla, which HW now seeks to recover from Liberty as surety. For the reasons stated below, summary judgment is denied.
On October 12, 2002, HW, as owner-developer, and Stegla, as contractor, entered into a contract (the "Contract") for the construction of a residential complex in Brooklyn, for the guaranteed maximum price of $13,556,824.*fn1 Article 4.6.2 of the General Conditions of the Contract requires that "any claim arising out of or related to the contract . . . shall be subject to arbitration."*fn2 Paragraph 29 of the Rider to the General Conditions of the Contract for Construction expressly attaches to the arbitration clause at 4.6.2 and stipulates: "In any arbitration brought under this Article, the prevailing party shall be entitled to an award of its costs and reasonable attorney's fees."*fn3
Paragraph 59 of the Rider to the General Conditions further requires Stegla to furnish performance and payment bonds "covering faithful performance of the Contract and payments of the Contractor's obligations arising thereunder."*fn4
Pursuant to Paragraph 59, Stegla secured from Liberty a modified AIA (American Institute of Architects) A312 performance bond (the "Performance Bond") naming HW as obligee, Liberty as surety, and Stegla as principal.*fn5 Paragraph 1 of the Performance Bond provides that Stegla and Liberty "jointly and severally" bind themselves to HW for the "performance of the Construction Contract," which is "incorporated [t]herein by reference."*fn6 Paragraph 6 of the Performance Bond, concerning Liberty's liability in the event of Stegla's default, provides in relevant part:
To the limit of the amount of this Bond, but subject to the commitment by [HW] of the Balance of the Contract Price to mitigation of costs and damages on the Construction Contract, [Liberty] is obligated without duplication for:
6.1 The responsibilities of the Contractor for correction of defective work and completion of the Construction Contract;
6.2 Additional legal, design professional and delay costs resulting from [Stegla's] default.*fn7
After modifying the terms of the Contract numerous times, HW eventually terminated the Contract with Stegla on February 17, 2005.*fn8 Shortly thereafter, HW contacted Liberty requesting "fulfillment of its obligations under the Performance Bond," and also commenced arbitration against Stegla seeking damages of $10,000,000.*fn9 Liberty initiated an investigation of HW's claim, ultimately denying the claim in a letter dated July 20, 2006.*fn10 In response, and to avoid the expiration of the statute of limitations, HW filed a claim in this Court against Liberty on August 18, 2006, which was then dismissed without prejudice pursuant to a tolling agreement pending the outcome of the arbitration.*fn11
Arbitration between HW and Stegla continued until May 12, 2009, when the arbitrators found that HW's termination of the Contract with Stegla was untimely though not wrongful.*fn12 The arbitrators awarded HW cost-of-completion damages in the amount of $2,797,060, interest on its damages in the amount of $398,581, and $4,199,286.17 in attorneys' fees and costs incurred in the arbitration.*fn13 Subsequently, HW moved to confirm the award in state court. The court confirmed the award of damages, and attorneys' fees and costs, with statutory interest, rendering a judgment on November 3, 2010 for $8,246,517.61.*fn14
After Liberty denied liability for the arbitration award, HW commenced this action on December 20, 2010, seeking to recover from Liberty as surety the award rendered in arbitration on the ...