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project had not been completed, and the District had paid
National $3,732,732 of the original $8,144,300 contract price.
F&D contracted with Crossland Construction Co. to demolish
defective construction performed by National and to complete the
project in accordance with the specifications under the
construction contract.
F&D’s counsel and National (through its chairman, petitioner
Steven Nienke) exchanged, during 1999, several letters in an
attempt to resolve the controversy over the parties’ obligations
under the performance bond and the indemnity agreement. In a
June 30, 1999, letter, F&D’s counsel demanded that the
indemnitors pay $1 million in costs incurred by F&D and notified
National that F&D expected to incur approximately $8 million in
additional costs, without considering any payments that might be
received from the District under the contract. On July 12, 1999,
National acknowledged that F&D was expecting a $4 million
performance bond loss, but National also asserted defenses that
might obviate its payment of damages. National (and the other
indemnitors) also proposed to settle any dispute with F&D for $1
million.
On July 26, 1999, F&D rejected the proposed settlement and
made a counterproposal to settle for $3 million, plus interest
and any additional unpaid losses. On October 18, 1999, National
acknowledged it had obligations under the parties’ agreement and
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