No: 03-4354 FIRST INDEMNITY OF AMERICA INSURANCE COMPANY v. Herbert J. Tiedeken, Jr.; Sarah Ann Tiedeken; Keystone State Painting Company, Inc

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No: 03-4354
FIRST INDEMNITY OF AMERICA INSURANCE COMPANY
v.
HERBERT J. TIEDEKEN, JR.; SARAH ANN TIEDEKEN;
KEYSTONE STATE PAINTING COMPANY, INC.,
Appellants
______________________________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 99-cv-01887)
District Judge: Petrese B. Tucker
Submitted Under Third Circuit LAR 34.1(a)
on September 27, 2004
Before: ROTH, BARRY and GARTH, Circuit Judges
(Filed: July 11, 2005)
OPINION
_______________
ROTH, Circuit Judge:
Herbert J. Tiedeken, Jr., Ann Tiedeken, and Keystone State Painting Company,
Inc. (collectively “Tiedeken”), appeal those portions of an order of the District Court

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The DePaul Project involved painting work that Muratone was to perform under1
subcontract for Tony DePaul and Sons, Inc.
The Cornell Project involved painting work that Muratone was to perform under2
subcontract for Cornell and Company.
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holding (1) that Tiedeken is liable to First Indemnity of America Insurance Corporation
(“FIA”) for the attorneys’ fees FIA incurred in defending a claim brought by Cornell and
Company against FIA and (2) that the Settlement Agreement (“SA”) between Tiedeken
and FIA precludes Tiedeken from bringing its counterclaim. Tiedeken also asks us to
reverse, or in the alternative vacate and remand, the attorneys’ fee-award for the current
litigation because the award was not properly apportioned. We will affirm the District
Court’s Order with regard to the attorneys’ fee-award in the Cornell lawsuit and the
dismissal of Tiedeken’s counterclaim. We will also affirm the award of attorneys’ fees
incurred in the current litigation.
I. Facts and Procedural Background
Tiedeken entered into an Indemnity Agreement (“IA”) with FIA. Under the IA,
FIA was to issue surety bonds to Tiedeken’s businesses, including Muratone Company,
Inc., for painting projects on which those businesses were subcontractors. This case
involves two of those projects: the DePaul Project and the Cornell Project.1 2
In the DePaul Project, FIA settled with several subcontractors that had sued FIA
for labor and equipment for which Muratone failed to pay. Tiedeken entered a
settlement agreement with FIA to resolve FIA’s claim against Tiedeken for

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FIA also sued Tiedeken to recover (1) the legal fees it incurred in suing Tiedeken to3
enforce the SA; (2) the legal fees it incurred in monitoring Muratone’s bankruptcy
proceedings; and (3) the costs of the lawsuit FIA brought against DePaul to recover
monies DePaul owed Muratone. As the parties have failed to raise any issues regarding
these rulings of the District Court, we will not address them.
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indemnification of FIA’s cost of settlement with the subcontractors. The SA called for
Tiedeken to make installment payments to FIA totaling $100,000.
In the Cornell Project, FIA successfully defended a cause of action brought by
Cornell for losses Cornell incurred when it terminated Muratone as a subcontractor. A
Bankruptcy Court found that Cornell did not have the right to enforce the suretyship
agreement against FIA because Cornell never accepted the surety bonds issued by FIA.
See First Indem. of Am. Ins. Co. v. Tiedeken, No. 99-1887, slip op. at 12-13 (E.D. Pa.
July 17, 2001) (citing Cornell & Co., Inc. v. First Indem. of Am. Ins. Co., No. 95-CV-
5782 (E.D. Pa. July 11, 1996)). FIA then brought this suit against Tiedeken in District
Court, claiming that Tiedeken must indemnify FIA for the costs of defending the Cornell
lawsuit. Tiedeken brought a counterclaim for wrongful failure to satisfy and release the3
mortgage on Tiedeken’s Tennis Avenue property, in violation of 21 P.S. § 681 (2004).
The District Court found that Tiedeken must indemnify FIA for the cost of the
Cornell lawsuit and that the SA precluded Tiedeken’s counterclaim. The District Court
also held that Tiedeken was liable to FIA for the attorneys’ fees FIA incurred in this
case. In a July 17, 2001, Order, the District Court required FIA to submit sworn
affidavits that set forth the fees incurred in the current litigation. Tiedeken appealed.

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The October 10, 2003, Order also states that Tiedeken is to pay FIA $7,693.58 for4
attorneys’ fees and costs that FIA incurred in defending Tiedeken’s untimely appeal of
the July 17, 2001, Order,plus $7,253.01 in interest.
Contract construction occurs when a court determines the legal effect that a contract5
has on an unforeseeable event. See Ram Constr. Co., Inc. v. Am. States Ins. Co., 749
F.2d 1049, 1053 (3d Cir. 1984). In this case, the District Court gave legal effect to the
IA, holding that the fact that Cornell failed to accept the surety bonds issued by FIA did
not effect the indemnity agreement between FIA and Tiedeken. The District Court held
that Tiedeken was still responsible for reimbursing FIA for its legal costs in defending
Cornell’s lawsuit against it because that lawsuit stemmed from the fact that FIA issued
surety bonds to Muratone. The issue was whether Tiedeken had an obligation to FIA if
the obligee did not accept the bonds. Such a determination gave legal effect to the IA in
an unforeseeable event.
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We dismissed Tiedeken’s appeal because the July 17 Order was not a final one. On
October 10, 2003, the District Court held that Tiedeken was liable to FIA for attorneys’
fees in this case in the amount of $33,160.13. Tiedeken again appealed.4
II. Jurisdiction and Standard of Review
The District Court had diversity jurisdiction over this case pursuant to 28 U.S.C. §
1332. The parties were completely diverse and the amount in controversy exceeded the
$75,000 requirement. We have appellate jurisdiction pursuant to 28 U.S.C. §§ 1291 and
1294.
The attorneys’ fee-award claim in the Cornell lawsuit involved the District
Court’s construction of the IA. We give plenary review to a trial court’s construction of5
a contract. See Ram Constr. Co., Inc. v. Am. States Ins. Co., 749 F.2d 1049, 1053 (3d
Cir. 1984). The District Court’s determination that the SA precluded Tiedeken’s

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There is a distinction between contract interpretation and contract construction. See6
Ram Constr., 749 F.2d at 1052-53. Contract interpretation occurs when a court gives
meaning to the words of a contract. See id. at 1052. In this case, the District Court
determined that the counterclaims that Tiedeken raised in the two civil actions which the
SA resolved were the same counterclaim that Tiedeken raised in the present litigation.
Further, the District Court interpreted the language of the SA to preclude such
counterclaims because the SA expressly released “all claims and causes of action
‘including . . . all claims asserted by the Tiedekens against FIA in Civil Action Nos. 93-
2407 and 94-2620.’” Tiedeken, No. 99-1887, slip op. at 21. The District Court gave
meaning to these terms of the SA.
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counterclaim involved the interpretation of the SA. We review a trial court’s6
interpretation of a contract for clear error. See id. The standard of review applied to a
district court’s attorneys’ fee-award is one of discretion. See Pawlak v. Greenawalt, 713
F.2d 972, 977 (3d Cir. 1983) (quoting Lindy Bros. Bldrs., Inc. of Phila. v. Am. Radiat. &
Stand. Sanitary Corp., 540 F.2d 102, 115-16 (3d Cir. 1976) (Lindy II)).
III. Discussion
A. Attorneys’ Fees in the Cornell Lawsuit
Tiedeken claims that the doctrine of collateral estoppel prevents FIA from
bringing a claim for attorneys’ fees for the Cornell lawsuit because the Bankruptcy Court
that adjudicated the Cornell lawsuit held that a suretyship relationship never existed. See
Cornell & Co., Inc. v. First Indem. of Am. Ins. Co. (In re Muratone Co., Inc.), Bankr.
No. 93-10439F, slip op. at 21 (Bankr. E.D. Pa. Aug. 9, 1995). The doctrine of collateral
estoppel requires, inter alia, that “the issue decided in the prior adjudication must be
identical with the one presented in the later action.” Witkowski v. Welch, 173 F.3d 192,

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Tiedeken acknowledged that FIA “unquestionably ‘issued’” surety bonds to7
Muratone. See Tiedeken, No. 99-1887, slip op. at 21 (citing First Indem. of Am. Ins. Co.
v. Tiedeken, No. 93-CV-2407 (E.D. Pa. 1993)).
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199 (3d Cir. 1999). The Bankruptcy Court only addressed whether Cornell could
enforce the suretyship agreement against FIA. See Tiedeken, No. 99-1887, slip op. at
12-13. The Bankruptcy Court was never presented with the issue of whether FIA could
enforce the IA against Muratone. Therefore, the doctrine of judicial estoppel does not
apply to FIA’s claim against Muratone for attorneys’ fees in the Cornell lawsuit.
In the alternative, Tiedeken claims it is not required to reimburse FIA because no
suretyship agreement existed with respect to the Cornell Project. Tiedeken is wrong.
Under Pennsylvania law, a surety contract between the principal and the surety is not
dependent upon the acceptance of the surety bonds by the obligee. See Trident Corp. v.
Reliance Ins. Co., 504 A.2d 285, 290 (Pa. 1986) (“[T]he surety contract is formed at the
time the surety’s offer is accepted by the principal, it may not be enforced by the obligee
against the surety unless accepted by the intended obligee within a reasonable time.”).
While a surety relationship did not exist between FIA, Muratone and Cornell, see In re
Muratone, Bankr. No. 93-10439F, slip op. at 21, FIA did issue surety bonds to Muratone,
which Muratone accepted. Upon Muratone’s acceptance of the bonds, a surety contract7
was formed between Muratone and FIA. Under the IA, Muratone was required to
indemnify FIA for any expenses incurred as a result of FIA issuing surety bonds to
Muratone. Therefore, Tiedeken is liable for FIA’s attorneys’ fees in the Cornell lawsuit.

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Even if the District Court had not determinated that Tiedeken had previously brought8
its counterclaim in the prior civil actions, the SA would still preclude Tiedeken’s
counterclaim. Under Pennsylvania law, a mortgagee must satisfy and discharge a
mortgage upon receiving full satisfaction and payment of all monies due on that
mortgage. See 21 P.S. § 681. But statutory protections can be waived through contract.
See Ramadan v. Chase Manhattan Corp., 229 F.3d 194, 203 (3d Cir. 2000). The SA
clearly states that Tiedeken released any claim or cause of action arising in connection
with the any surety bonds issued by FIA to Muratone. FIA held a mortgage in the Tennis
Avenue property as collateral for Tiedeken’s obligation to indemnify FIA. See Tiedeken,
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B. The Tiedeken’s Counterclaim
Based on Tiedeken’s Answers in Civil Action Numbers 93-2407 and 94-2620, we
conclude that the District Court’s decision was not clearly erroneous with regard to the
preclusion of Tiedeken’s counterclaim. The SA expressly precluded Tiedeken from
bringing any claim or cause of action that it brought previously in Civil Action Numbers
93-2407 and 94-2620. The District Court determined that Tiedeken could not bring its
counterclaim in the current litigation because Tiedeken had brought the same
counterclaim in the above stated civil actions. See Tiedeken, No. 99-1887, slip op. at
21-22. In its Answers to FIA’s Complaints in Civil Action Numbers 93-2407 and 94-
2620, Tiedeken asserted counterclaims against FIA, claiming that FIA failed to satisfy
the mortgage on the Tennis Avenue property. The SA precludes Tiedeken from bringing
claims raised in the prior civil actions. In those prior civil actions, Tiedeken raised
claims for satisfaction of the Tennis Avenue mortgage. In the current litigation,
Tiedeken raises a claim for satisfaction of the Tennis Avenue mortgage. Therefore, the
District Court’s conclusion that the SA precluded such claims was not clearly erroneous.8

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No. 99-1887, slip op. at 20 (“FIA obtained a mortgage lien on the Tennis Avenue
property as collateral for all bonds issued under the IA, including bonds for the Cornell
and DePaul projects.”). Tiedeken’s counterclaim that FIA wrongfully failed to satisfy
and release the Tennis Avenue mortgage is a claim that arose in connection with the
bonds issued by FIA to Muratone. Therefore, under the terms of the SA, Tiedeken is
precluded from bringing its counterclaim.
Tiedeken relies on the Bankruptcy Court’s finding that FIA had a security interest in9
the Tennis Avenue property in the event that FIA had to make “proper payments” in
connection with the surety bonds, and was then entitled to indemnification from
Tiedeken. Tiedeken argues that FIA could not make “proper payments” in connection
with the surety bonds because Cornell never accepted the bonds.
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Tiedeken also argues that it has no obligation to indemnify FIA because Cornell
never accepted the surety bonds. Without an obligation to FIA, Tiedeken argues that9
satisfaction and release of the mortgage is required. As previously indicated, Cornell’s
failure to accept the surety bonds does not void the surety contract between FIA and
Muratone. Under the IA, Tiedeken must indemnify FIA for the attorneys’ fees FIA
incurred in the Cornell lawsuit. FIA held the Tennis Avenue mortgage as security for
indemnification of these fees. Because Tiedeken has not indemnified FIA for FIA’s
attorneys’ fees, FIA has not received full satisfaction and payment of all monies due on
the mortgage.
C. Apportionment of Attorneys’ Fees
The correct criteria for determining an attorneys’ fee-award are
the number of hours spent on the litigation; the nature of the
services involved; the value of the attorneys’ time based on a
reasonable hourly rate; the contingent nature of success in
the litigation; and “the extent, if any, to which the quality of
an attorney’s work mandates increasing or decreasing the

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amount to which the court has found the attorney reasonably
entitled.”
Pawlak, 713 F.2d at 977 (quoting Lindy I, 487 F.2d at 168). In this case, the District
Court was presented with detailed information supporting FIA’s request for attorneys’
fees and the District Court was also very familiar with the lengthy and complex
proceedings in this matter. We conclude, therefore, that the award was not an abuse of
discretion.
IV. Conclusion
For the foregoing reasons, we will affirm the judgment of the District Court.

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