## Facts

- Star Equipment Corp. contracted with the Town of Seekonk, Massachusetts to install replacement water mains.
- Fidelity and Guaranty Insurance Company issued a performance bond and a labor-and-materials payment bond guaranteeing Star’s obligations.
- Star and its principals, Charlene R. Foran and John J. Foran, had executed a General Agreement of Indemnity (GAI) requiring them to indemnify Fidelity for losses, costs, and fees arising from the bonds.
- Seekonk declared Star in default, and Fidelity filed a federal diversity declaratory judgment action regarding obligations under the performance bond.
- During court-connected mediation, the parties signed a handwritten “Settlement Memorandum of Understanding” providing that Fidelity would pay Seekonk $50,000 and that the parties would exchange releases, while expressly reserving Fidelity’s indemnity dispute with Star and the Forans.
- The memorandum listed written conditions of town approval and execution of customary settlement documents.
- After mediation, Star and the Forans contended no binding settlement existed, asserting it was contingent on later resolving Fidelity’s indemnity claim; Fidelity and Seekonk moved to enforce the memorandum.
- Fidelity pursued indemnity under the GAI for amounts expended due to Star’s default, including completion-related costs and attorney’s fees.

## Issues

1. Whether the signed mediation “Settlement Memorandum of Understanding,” conditioned on town approval and execution of customary releases, constituted a binding settlement of all claims except the expressly reserved indemnity dispute.
2. Whether Fidelity was entitled to summary judgment under the GAI for losses, costs, and attorney’s fees arising from Star’s default and Fidelity’s bond-related expenditures.
3. Whether the district court erred in the amount of the indemnity damages awarded.

## Decision

- The First Circuit affirmed enforcement of the settlement memorandum as a binding agreement resolving all claims other than the reserved indemnity dispute.
- The court affirmed summary judgment for Fidelity on its indemnity claim against Star and the Forans under the GAI.
- The court affirmed the damages award of $111,313.43, plus costs and interest.

## Legal Principles

- Under Massachusetts contract law, a settlement is enforceable when the parties objectively manifest intent to be bound and agree on material terms, even if they contemplate later, more formal documentation.
- Conditions such as governmental approval and execution of customary releases generally do not negate present assent when the memorandum otherwise fixes the essential exchange and scope of releases.
- Where a settlement writing expressly reserves a specific dispute, a party cannot add an unwritten condition that the reserved dispute be resolved before the settlement becomes binding.
- Broad surety indemnity agreements may require indemnitors to reimburse the surety for bond-related losses and for professional fees and litigation expenses, including attorney’s fees.
- On summary judgment in a surety indemnity action, once the surety supports its claimed losses as within the indemnity contract and not shown to be in bad faith, indemnitors must produce specific evidence creating a genuine dispute (e.g., bad faith or unreasonableness) to avoid judgment.

## Conclusion

The First Circuit held that the mediation memorandum was an enforceable settlement of all claims except the expressly reserved indemnity dispute, and it upheld summary judgment and a damages award in favor of the surety based on the broad indemnity obligations undertaken by the contractor and its principals.


Fidelity & Guaranty Ins. Co. v. Star Equip. Corp., 541 F.3d 1 (1st Cir. 2008)