Pro Lawns, Inc. v. Fidelity and Deposit Company of Maryland et al

Filing 24

MEMORANDUM OPINION AND ORDER granting 15 MOTION to Intervene; further ORDERED that on or before 1/30/2015, Pro Lawns shall SHOW CAUSE, if any there be, why the attendant 16 & 17 motions to compel arbitration and to stay the case should not be granted. Signed by Chief Judge William Keith Watkins on 1/23/2015. (wcl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
EASTERN DIVISION
PRO LAWNS, INC.,
Plaintiff,
v.
FIDELITY AND DEPOSIT
COMPANY OF MARYLAND,
et al.,
Defendants.
W. G. YATES & SONS
CONSTRUCTION COMPANY,
Movant.

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CASE NO. 3:14-CV-408-WKW
[WO]

MEMORANDUM OPINION AND ORDER
Before the court is W. G. Yates & Sons Construction Company’s (“Yates”)
contested motion to intervene in this action. (Doc. # 15.) Defendants Fidelity and
Deposit Company of Maryland and Travelers Casualty and Surety Company of
America support Yates’s motion to intervene (Doc. # 22), while Plaintiff opposes it
(Doc. # 21). Accompanying and dependent upon the motion to intervene are a
motion to compel arbitration (Doc. # 16) and motion to stay the case pending
arbitration (Doc. # 17). Upon consideration of the parties’ arguments and relevant
law, the court finds that the motion to intervene is due to be granted.

I. JURISDICTION AND VENUE
The court exercises diversity subject-matter jurisdiction pursuant to 28
U.S.C. § 1332(a)(1).1 Personal jurisdiction and venue are uncontested.
II. BACKGROUND
In April 2012, Yates entered a contract with Auburn University to serve as
general contractor on a large campus improvement project named South Donahue
Hall (“the Project”). Alabama’s “little Miller Act,” see Ala. Code § 39-1-1(a)2,
required Yates to execute a payment bond to Auburn University for the protection
of persons supplying labor and materials in the prosecution of work on the Project.
(Doc. # 16-2, at 11–12). Defendants are the co-sureties of the statutorily required

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Yates is a citizen of Mississippi (Doc. # 16-2, at 2), and there is no argument that
Yates’s joinder to this suit would destroy diversity subject-matter jurisdiction and Plaintiff’s
choice of federal forum. Pro Lawns is a citizen of Alabama and Defendants are citizens of
Illinois and Connecticut.
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Subsection (a) of the statute provides:

Any person entering into a contract with an awarding authority in this state for the
prosecution of any public works shall, before commencing the work, execute a
performance bond, with penalty equal to 100 percent of the amount of the contract
price. In addition, another bond, payable to the awarding authority letting the
contract, shall be executed in an amount not less than 50 percent of the contract
price, with the obligation that the contractor or contractors shall promptly make
payments to all persons supplying labor, materials, or supplies for or in the
prosecution of the work provided in the contract and for the payment of
reasonable attorneys’ fees incurred by successful claimants or plaintiffs in civil
actions on the bond.
The “little Miller Act” is so called because it is modeled after the federal Miller Act,
which requires that contractors on federal public works projects obtain both payment and
performance bonds for contracts exceeding $100,000. See 40 U.S.C. § 3131(b).
2

bonds that they and Yates executed and delivered to Auburn University in April
2012.
Yates subcontracted landscaping and irrigation work on the Project to
Plaintiff Pro Lawns, Inc. (See Doc. # 16-1 (“the Subcontract”).) The Subcontract
contemplated payment to Pro Lawns in the amount of $238,800. Pro Lawns claims
that during the course of its performance of the Subcontract, “certain
circumstances beyond [its] control . . . required [it] to submit various change orders
to Yates” totaling $37,906. (Doc. # 1, at ¶ 10.) Pro Lawns additionally complains
that due to Yates’s errors during the course of the project, Pro Lawns had to submit
additional invoices for $25,803.16. Pro Lawns has been paid $111,249. Yates has
refused to pay the balance Pro Lawns claims Yates owes because Yates says Pro
Lawns failed to follow the Subcontract when it submitted change orders that were
either not signed by Yates’s authorized representative or that were not supported
by adequate documentation.

Yates also asserts that it has supplemented Pro

Lawns’s work on the Project at an expense of $87,763.43, which Yates counts
against the amount Pro Lawns claims it is owed.
Pro Lawns made demand against the bonds on March 24, 2014, and
Defendants declined to make payment to Pro Lawns on May 16, 2014, citing the
dispute between Pro Lawns and Yates. (Doc. # 21-1, at 3 (Letter from Zurich
Surety and Financial Claims).) Plaintiff initiated this action against Defendants on
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June 3, 2014. Defendants answered the complaint on July 11, 2014. A uniform
scheduling order was entered on August 1, 2014.
On August 25, 2014, Yates, who is represented by the same counsel as
Defendants, filed a motion to intervene as a defendant (Doc. # 15) and a motion to
compel arbitration (Doc. # 16) pursuant to the Subcontract with Pro Lawns.3
Defendants filed their consent to Yates’s intervention (Doc. # 22) and a motion to
stay proceedings pending arbitration (Doc. # 17). Pursuant to the court’s directive,
Pro Lawns has filed a response to the motion to intervene only, contending that
Yates is not entitled to intervene under Rule 24(a) and should not be allowed to
intervene under Rule 24(b). (Doc. # 21.) Yates has replied. (Doc. # 23.)
III. RULE 24(b) STANDARD OF REVIEW
In federal court, if a would-be intervenor “has a claim or defense that shares
with the main action a common question of law or fact” and he makes his request
for intervention in a “timely motion,” Fed. R. Civ. P. 24(b)(1)(B), then intervention
is within the court’s discretion, Athens Lumber Co. v. Fed. Election Comm’n, 690

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(See Doc. # 16-1, at Article XIV, Paragraph 14.1 (“Claims, disputes, and other matters
in controversy between the Contractor [Yates] and the Subcontractor [Pro Lawns] . . . arising out
of or relating to this Subcontract shall be decided by binding arbitration in accordance with the
current and applicable Construction Industry Rules and procedures of the American Arbitration
Association . . . .”).)
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F.2d 1364, 1367 (11th Cir. 1982); cf. Fed. R. Civ. P. 24(a).4 The intervenor’s
“motion must state the grounds for intervention and be accompanied by a pleading
that sets out the claim or defense for which intervention is sought.” Fed. R. Civ. P.
“In exercising its discretion, the court must consider whether the

24(c).

intervention will unduly delay or prejudice the adjudication of the original parties’
rights.” Fed. R. Civ. P. 24(b)(3); see also Chiles v. Thornburgh, 865 F.2d 1197,
1213 (11th Cir. 1989) (requiring the court, when evaluating the movant’s
“timeliness,” to consider (1) the length of any period of purposeful delay
attributable to the movant, (2) the extent of prejudice to the existing parties that
resulted from the movant’s purposeful delay, (3) the extent of prejudice to the
movant if the motion is denied, and (4) the existence of unusual circumstances that
weigh for or against a finding of timeliness).
IV. DISCUSSION
A.

Common Question of Law or Fact Requirement
Yates and Defendants assert that Defendants will not be liable to Pro Lawns

until it is adjudicated that Yates is liable to Pro Lawns. See Fed. Ins. Co. v. I.
Kruger, Inc., 829 So. 2d 732, 736 (Ala. 2002) (“The contractor must be liable for
some claim . . . before the surety can be liable.”). Therefore, Yates and Defendants

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Although Yates framed its motion in terms of Rule 24(a) or (b), Yates has conceded in
its reply brief that it cannot satisfy the heavier burden of showing entitlement to intervene as of
right under Rule 24(a). (Doc. # 23, at ¶ 1.) The court appreciates the honest concession.
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argue that intervention is permissible under Rule 24(b) because Yates’s dispute
with Pro Lawns has common questions of law and fact when compared with Pro
Lawns’s complaint against Defendants. Pro Lawns does not dispute that potential
claims and defenses between Pro Lawns and Yates are factually common to the
issues to be litigated between Pro Lawns and Defendants. The court agrees and
finds that this prong of the Rule 24(b) standard for permissive intervention is easily
satisfied.
B.

Timeliness Requirement and Length of Time
Pro Lawns cites the almost seven-week delay between Defendants’ answer

and Yates’s motion to intervene as a factor militating against a finding that Yates’s
motion was timely filed.

However, as Yates points out, there has been no

substantial progress in this case since it was filed in June, and Pro Lawns does not
dispute that the parties have yet to engage in discovery. While it is unclear why
Yates did not move more promptly to intervene, the court cannot conclude that a
prejudicial amount of time has passed, rendering Yates’s motion untimely.
Consequently, the court will not deny the motion as untimely filed.
C.

Satisfaction of 24(c) Pleading Requirement
Pro Lawns contends that Yates’s motion is due to be denied because there is

no “pleading” accompanying the motion to intervene “that sets out the claim or
defense for which intervention is sought.” Fed. R. Civ. P. 24(c). Pro Lawns cites
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Rule 7(a)’s list of recognized “pleadings,” Fed. R. Civ. P. 7(a), notes that an
attached motion to compel arbitration is not a “pleading,” and further contends that
the motion to compel lacks “notice of [Yates’s] legal claims and defenses.” (Doc.
# 21, at 10–11.)
Yates responds that courts have been lenient with respect to Rule 24(c)’s
attached pleading requirement, “particularly where there is not actual prejudice to
the opposing party” or where “an intervenor is not seeking to become a party to
th[e] litigation.” (Doc. # 23, at 4 citing, among other cases, U.S. ex rel. Frank M.
Sheesley Co. v. St. Paul Fire & Marine Ins. Co., 239 F.R.D. 404, 412 (W.D. Pa.
2006) (“Though no pleading – as that term is strictly defined in Fed. R. Civ. P. 7 –
accompanies [the movant’s] motion [to intervene], [the movant] has included its
Motion to Compel and Stay, and the purpose of the intervention and the [movant]’s
conduct that the parties can expect going forward are quite clear.”).) 5 Yates notes
that the Eleventh Circuit has chosen “to disregard nonprejudicial technical defects”
related to Rule 24. Piambino v. Bailey, 757 F.2d 1112, 1121 (11th Cir. 1985).6
In the absence of direct instruction from this Circuit, the most apt guidance
comes from the Sheesley decision, where a district court concluded that the
5

Yates cites several other cases liberally construing Rule 24(c), but only Sheesley is
squarely on point.
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A review of Piambino and cases from the courts in the Eleventh Circuit which have
cited Piambino reveals that no court has been faced with the situation of a would-be intervenor
seeking intervention only to compel arbitration.
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movant’s failure to attach a pleading to its motion to intervene was not a fatal
defect. Relying on case law from several circuits, the court reasoned that Rule
24(c)’s requirement is “simply to notice the parties as to the [movant’s] position
and argument,” and that the defect is excusable where the motion to intervene is
otherwise meritorious and where no party suffers any prejudice from the defect.
239 F.R.D. at 411. With respect to prejudice to the plaintiff, the court reasoned as
follows:
[The movant] does not seek to intervene for the purpose of advancing
its own claims against an existing party, but to compel the arbitration
to which it contends [the plaintiff] is obliged to resort. Thus, to insist
that [the movant] accompany its Motion to Intervene with a proper
pleading would be to command that [it] needlessly expend resources.
It would not help efficiently resolve the dispute sub judice to require
that [the movant] file a third-party complaint so that it may
immediately seek a stay of its claims in favor of the arbitration
proceedings for which it intervened in the first place. To the extent
that judicial economy is a consideration in intervention analysis, it
makes little sense for the Court, at the expense of parties who could
face extensive litigation over strongly related issues, to bind itself to
language few judges have found intractable. To do so would make of
Rule 24(c) a classic elevation of form over substance.
Id. at 412.
Upon consideration of the persuasive reasoning in Sheesley, the court finds
that Yates’s non-inclusion of a pleading pursuant to Rule 24(c) is not a prejudicial
defect and is therefore not a grounds for denying intervention. It is apparent that
Yates intends to intervene in order to compel arbitration of its liability to Pro

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Lawns, and therefore, Yates is excused from attaching a true “pleading” to its
motion to intervene.
D.

Undue Prejudice or Delay to the Existing Parties or the Movant
The remaining arguments before the court relate to prejudice. Although

some courts have considered prejudice to the existing parties as a factor impacting
a motion’s timeliness, see Chiles, 865 F.2d at 1213, undue prejudice is a Rule
24(b) factor to be considered independently of timeliness. Fed. R. Civ. P. 24(b)(3)
(“In exercising its discretion, the court must consider whether the intervention will
unduly delay or prejudice the adjudication of the original parties’ rights.”). The
court may also consider prejudice to the moving party should its motion be denied,
Chiles, 865 F.2d at 1213, but Yates has not argued that it will be prejudiced if the
motion to intervene is denied – only that Pro Lawns will not be prejudiced if the
motion is granted (Doc. # 23, at 5).
Pro Lawns argues that it had a right to choose to sue Defendants as the bond
sureties, and there is no prejudice to Yates because Yates expressly agreed, under
the terms of the Payment Bond, to allow a claimant like Pro Lawns to choose to
sue it, the sureties, or both it and the sureties. Indeed, the Payment Bond allows a
“claimant [to] bring a civil action . . . on th[e] Bond against the Contractor and the

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Surety, or either of them, . . . .” (Doc. # 16-2, at 12 (Payment Bond ¶ 4) (emphasis
added).)7
Pro Lawns invokes Coltin Electric, Inc. v. Continental Casualty Co., No.
12–0532–KD–B, 2013 WL 1150920 (S.D. Ala. Mar. 19, 2013) (DuBose, J.), in
support of its request that this court credit the language in the bond permitting it to
sue Defendants instead of Yates.

In Coltin, a general contractor hired a

subcontractor to furnish labor, materials, and supplies for electrical work on a
dormitory at the University of South Alabama. Id. at *1. The contractor arranged
a payment bond in compliance with Alabama’s little Miller Act, and, like the bond
at issue in this litigation, the bond provided that a subcontractor-claimant could sue
the surety alone, the contractor alone, or both the surety and the contractor. Id.
at *2. The subcontractor chose to sue the surety alone.
The contractor filed a motion for permissive intervention under Rule 24(b).
If intervention had been allowed, the contractor would have answered as a
defendant, filed a counterclaim against the subcontractor and a third-party
complaint against another subcontractor. The court denied the motion for two
reasons, the first of which relates to Pro Lawns’s position before this court.
Interpreting the governing bond document, the court noted that payment bonds
under Alabama law are construed under general principles of contract
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The language of the Payment Bond is identical, except for variations in capitalization of
particular words, to the little Miller Act. See Ala. Code § 39-1-1(c).
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interpretation.

Id.

The court found the bond unambiguously allowed a

subcontractor to sue the surety alone. Id. It reasoned that because the contractor,
which had chosen the terms of its bond document, “intended for [the
subcontractor] to have the right to decide whom to sue, [the contractor] will not be
prejudiced by the denial of its motion to intervene. On the other hand,” the court
explained, “[the subcontractor]’s right under the contract to make such an election”
of who to sue “would be prejudiced should [the contractor] be allowed to
intervene.”

Id.

The nature of the prejudice to the plaintiff-subcontractor is

unstated, but the prejudice is implicitly that the subcontractor was denied his right
to choose to sue the surety alone.
Thus, Coltin supports a conclusion that an Alabama federal court should not
allow a contractor to intervene into a subcontractor’s lawful suit under the little
Miller Act against a bond surety if intervention will prejudice the original parties.
Id. at *2. Yates distinguishes Coltin by noting that opinion’s additional analysis
that permitting intervention would have destroyed diversity subject-matter
jurisdiction and defeated the plaintiff’s choice of federal forum, (Doc. # 23, at 3),
but the distinction does not address Coltin’s analysis regarding the subcontractor’s
choice to sue the sureties alone.
A more significant distinction is the absence of the Coltin plaintiff’s strategy
for avoiding arbitration with a general contractor. Unlike the present case, that
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plaintiff’s decision to sue the surety alone was not intermingled with its desire not
to arbitrate. Arbitration is a non-factor in Coltin. The presence of the arbitration
variable in this case raises the question of whether a plaintiff’s tactical avoidance
of arbitration is a legitimate goal to be protected when weighing the impact of
prejudice to the existing parties under Rule 24(b). Yates encourages the court to
consider the principles of judicial economy, the prevention of multiple actions, and
the strong federal policy in favor of enforcing arbitration agreements. (Doc. # 23,
at 2–3 (citing Frank M. Sheesley Co., 239 F.R.D. at 415–16).)
Again, the Sheesley decision persuasively supports Yates’s position. There,
the court was faced with a situation nearly identical to the case sub judice, except
that the payment bond at issue was required by the federal Miller Act rather than
Alabama’s similar law. See id. at 407. The agreement between the contractor (the
moving intervenor) and subcontractor (plaintiff) similarly required arbitration of
disputes.

Id.

The opinion does not cite the bond language entitling the

subcontractor to sue the sureties alone, but the fact that the subcontractor sued the
sureties alone without objection that the contractor must be joined makes evident
that the subcontractor had the right under the payment bond to sue only the sureties
without joining the contractor.
Agreeing with the contractor’s arguments in favor of permissive intervention
under Rule 24(b), the court reasoned that Rule 24 “is meant to prevent the kind of
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multiplicity of suits” threatened by the facts of the case. Id. at 415. The court
found that allowing intervention (and subsequently staying the original suit
pending arbitration between the contractor and subcontractor) promoted judicial
economy and would likely achieve a faster resolution of the dispute at less cost to
all parties. Id. (“Any potential for undue delay is likely to be mitigated, not
exacerbated, by arbitration.” (citing U.S. ex rel. MPA Const., Inc. v. XL Specialty
Ins. Co., 349 F. Supp. 2d 934, 939 (D. Md. 2004)).)8 9
Upon consideration of the parties’ arguments, the court declines to follow
Coltin as persuasive authority and instead finds Sheesley to be the more
appropriate persuasive precedent.

Although Pro Lawns is entitled to sue

Defendants alone without joining Yates, it is also contractually bound to arbitrate
the same underlying factual disputes with Yates.10

Granting the motions to

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The district court in MPA Construction, Inc. reached the same result as the Sheesley
court and permitted a contractor’s request to intervene under 24(b). 349 F. Supp. 2d at 939.
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The Sheesley court went on to address the subcontractor’s objection that the sureties
would not be bound by the outcome of a compelled arbitration and would relitigate issues in the
federal case, thereby defeating the benefit of judicial economy. (No similar objection has been
raised in this case.) The court surveyed the law of the federal circuits and concluded that the
prevailing view among the circuits protected similarly situated subcontractors from relitigating
after arbitration where the litigating sureties’ interests were directly related or congruent to the
arbitrating contractor’s interests. Id. at 417–19 (citing Isidor Paiewonsky Assocs., Inc. v. Sharp
Properties, Inc., 998 F.2d 145, 155 (3d Cir. 1993)). Another district court has adopted
Sheesley’s research and allowed Rule 24(b) intervention in spite of similar objections by a
subcontractor-plaintiff. See A.A. Bellucci Const. Co. v. U.S. Sur. Co., No. 4:09-CV-1755, 2010
WL 456775, at *1–2 (M.D. Pa. Feb. 2, 2010).
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The court has examined the Payment Bond and the Subcontract to see whether either
references or incorporates the other. Neither does. While it has not been argued, it is notable
that the Subcontract contains language resolving any “ambiguity, inconsistency, or conflict in
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intervene, compel arbitration, and stay will not unduly prejudice Pro Lawns’s
rights or delay final resolution of the dispute.

To the contrary, permitting

intervention will promote judicial economy.
V. CONCLUSION
In accordance with the foregoing analysis, it is ORDERED that Yates’s
motion to intervene (Doc. # 15) is GRANTED.
It is further ORDERED that on or before January 30, 2015, Pro Lawns shall
SHOW CAUSE, if any there be, why the attendant motions to compel arbitration
and to stay the case (Docs. # 16, 17) should not be granted.
DONE this 23rd day of January, 2015.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

payment or other provisions between or among the Prime Contract, th[e] Subcontract, any bond,
and/or other agreement or instrument” in favor of the Subcontract. (Doc. # 16-1, at 5 (“[T]his
Subcontract shall govern.”).)
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