917 So.2d 368 (Fla.App. 5 Dist. 2005), 5D05-322, ZP No. 54 Ltd. Partnership v. Fidelity and Deposit Co. of Maryland

Docket Nº:5D05-322.
Citation:917 So.2d 368, 31 Fla. L. Weekly D 118
Party Name:ZP NO. 54 LIMITED PARTNERSHIP, et al., Appellant, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Appellee.
Case Date:December 30, 2005
Court:Florida Court of Appeals, Fifth District
 
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Page 368

917 So.2d 368 (Fla.App. 5 Dist. 2005)

31 Fla. L. Weekly D 118

ZP NO. 54 LIMITED PARTNERSHIP, et al., Appellant,

v.

FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Appellee.

No. 5D05-322.

Florida Court of Appeal, Fifth District

December 30, 2005

Appeal from the Circuit Court for Orange County, Renee A. Roche, Judge.

Page 369

Stephen M. Reams and Robert L. Crewdson of Alston & Bird, LLP, Atlanta, GA and Darryl M. Bloodworth of Dean, Mead, Egerton, Bloodworth, Copouano & Bozarth, P.A., Orlando, for Appellant.

Matthew C. Bothwell and John E. Hilser of Harry R. Blackburn & Associates, P.C., Melbourne, for Appellee.

MONACO, J.

Appellants, ZP No. 54 Limited Partnership, ZP No. 52 Limited Partnership, and ZP No. 56 Limited Partnership, each owned by Jeffrey Zimmer (collectively referred to as "Zimmer"), brought suit against Fidelity and Deposit Company of Maryland for damages arising from a construction performance bond contract, as well as for three alternative torts: aiding and abetting a fraud, gross negligence and negligent misrepresentation. Fidelity and Deposit Company acquired Mountbatten Surety Company (collectively, "Mountbatten"), after the occurrence of the events

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that gave rise to this suit. Zimmer alleges that Mountbatten's involvement in issuing performance and payment bonds to Arlen Group, Inc. ("Arlen Group"), assisted the Arlen Group in successfully perpetrating a bid-rigging scheme against Zimmer. Although the contract count on the bond remains in effect, the trial court granted a summary judgment on the three tort claims pled by Zimmer. Zimmer appeals the summary judgment. We have jurisdiction pursuant to Rule 9.110(k), Florida Rules of Appellate Procedure.

Zimmer planned to build three shopping centers in the Orlando area, and assigned their employee, Frank Grzandziel, to oversee the contractor bidding process. Through the efforts of Mr. Grzandziel, Zimmer contracted with the Arlen Group to be its general contractor in connection with the construction of the three projects. According to the complaint, Mr. Grzandziel in exchange for substantial kickbacks conspired with the Arlen Group to rig the bidding process in order to inflate the prices of the projects and consequently to pocket large sums of money for themselves. In order to win the contracts for the Zimmer projects, Zimmer alleges that the Arlen Group was required to obtain performance and payment surety bonds. Mountbatten eventually provided the Arlen Group with the bonds, naming Zimmer as the obligee on each bond.

Zimmer contends, more specifically, that its designated representative on the projects, Frank Grzandziel, cooked up the bid-rigging scheme in order to defraud Zimmer. Instead of bidding out the work competitively, Mr. Grandziel is alleged to have negotiated vastly inflated prices on the projects with the Arlen Group in exchange for kickbacks. In point of fact, Mr. Grzandziel eventually pled guilty to wire fraud 1 in federal court, and acknowledged his role in the defrauding of Zimmer in an amount not more than two million dollars.

The Grzandziel/Arlen Group scheme began to fall apart when during the prosecution of the work, disputes arose between Zimmer and the contractor, resulting in the Arlen Group's ceasing work on the projects. The projects at that point were at various stages of completion. Zimmer contends creatively that in addition to liability under the terms of the performance bonds issued by Mountbatten, the surety also has tort liability arising out of its underwriting and ultimate decision to issue the bonds.

Zimmer alleges, more particularly, that when Mountbatten issued the bonds, it knew or should have known that the Arlen Group was a sham construction contractor, not licensed in Florida, or any other state for that matter, and not at all bondable. The Arlen Group's activities allegedly left tell-tale "red flags," which should have revealed the fraudulent nature of its business to Mountbatten. According to Zimmer, Mountbatten failed to perform its underwriting investigation in a thorough manner prior to issuing the performance bonds to the general contractor. In the language of legal theory, Zimmer asserts that Mountbatten aided and abetted the fraud perpetrated on Zimmer by issuing the bonds upon which Zimmer relied in awarding the three contracts to the Arlen Group.

In support of its position, Zimmer submitted to the trial court the affidavit of an expert in underwriting, one George Beutner. Mr. Beutner concluded that a reasonable underwriter would not have bonded the Arlen Group. His review of the underwriting files of Mountbatten and the depositions of various employees of Mountbatten

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and the Arlen Group caused him to opine that Mountbatten was "grossly negligent in its underwriting of Arlen." He concluded, as well, that the underwriting did not meet the standard of care typically employed by surety underwriters, and that several "red flags" should have tipped off Mountbatten to the fraudulent activity afoot. Pointedly, although Mr. Beutner accuses Mountbatten of gross negligence and even reckless behavior in the underwriting, he does not say...

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