United States of America v. International Fidelity Insurance Company et al

Filing 163

FINDINGS OF FACT AND CONCLUSIONS OF LAW signed by Judge Dale S. Fischer. (SEE ORDER FOR SPECIFICS). (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

UNITED STATES OF
AMERICA, FOR THE USE
AND BENEFIT OF NASATKA
BARRIER, INCORPORATED
D/B/A NASATKA SECURITY,
Plaintiff,

CV 16-8064-DSF-(AGRx)
Order re Findings of Fact and
Conclusions of Law

v.
INTERNATIONAL FIDELITY
INSURANCE COMPANY, et
al.,
Defendants.

This case involves a dispute between Plaintiff United States of
America for the use and benefit of Nasatka Barrier, Inc., d/b/a
Nasatka Security (Nasatka) and Third-Party Defendant North
American Specialty Insurance Company and Defendants and
cross-claimants International Fidelity Insurance Company,
Insight Environmental Engineering & Construction, Inc. (IFIC),
Cesight Joint Venture, and Everest Re-Insurance Company
(together, Defendants).
In 2013, the United States of America, acting through the Army
Corps of Engineers, entered into a written contract (the Prime
Contract) with Cesight for an Access Control Point (ACP) at Joint
Base Lewis-McChord in Washington. The Prime Contract was

entered into between the local government agency USACE-Seattle
and Cesight. Cesight then subcontracted with Insight to perform
certain duties under the Prime Contract. In turn, Insight
subcontracted with Nasatka (the Nasatka Contract) to provide
labor and materials to complete aspects of the ACP, which
included completing the Active (wedge) and Passive (cable) vehicle
barriers with full controls and chain link fencing services.
Nasatka brought breach of contract claims and claims under
the Miller Act for the following: (1) the unpaid contract balance
under the Nasatka Contract, (2) costs associated with work
performed beyond the scope of the Nasatka Contract after it
completed the cinch-rampart controller, and (3) unpaid service call
invoices. 1
After reviewing the evidence presented at trial and the parties’
closing briefs, the Court finds that Plaintiff failed to meet its
burden on any of its claims. Regarding its claims for the
remaining payment under the Nasatka Contract, Plaintiff did not
show it complied with the Nasatka Contract. Instead, the
evidence demonstrates that Plaintiff failed to comply with both
substantive and procedural requirements under the Nasatka
Contract, including the Project’s specifications, submittal
processes, and required lines of communication. Nasatka also
failed to demonstrate that USACE-Omaha had ultimate approval
authority over Nasatka’s work on the Project, despite the fact that
the Prime Contract was entered into by USACE-Seattle. Because
Nasatka failed to show it complied with the Nasatka Contract, its
breach of contract claim for the unpaid balance under the Nasatka
Contract necessarily fails. Likewise, because Nasatka did not

In the alternative, Nasatka sought equitable relief under quantum meruit.
The Court addresses this issue further below.

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perform the work as requested, it cannot seek recovery under the
Miller Act. 2
In addition, Nasatka may not recover for its work to remedy the
cinch-rampart controller to align with the Nasatka Contract’s
specifications. Under the Nasatka Contract, Nasatka was
required to bear the costs of such work.
Nasatka also failed to prove that its unpaid service invoices
were not warranty-related services required under the Nasatka
Contract because the work performed did not meet the Nasatka
Contract’s project specifications. Nasatka therefore may not
recover for such services.
In the alternative, Nasatka sought recovery under a theory of
quantum meruit. The theory of “[q]uantum meruit (or quasicontract) is an equitable remedy implied by the law under which a
plaintiff who has rendered services benefiting the defendant may
recover the reasonable value of those services when necessary to
prevent unjust enrichment of the defendant.” In re De Laurentiis
Entm’t Grp., Inc., 963 F.2d 1269, 1272 (9th Cir. 1992). Nasatka
Nasatka’s argument that Everest and IFIC are liable under the Miller Act
despite Nasatka failing to perform the work requested is unavailing.
Nasatka does not provide any binding or relevant authority supporting its
contention that a subcontractor may seek payment under the Miller Act from
the surety, despite not performing the work it agreed to perform, because the
surety posted the bond before the contracting parties entered into the
subcontract. Adopting Nasatka’s viewpoint would permit a subcontractor to
run afoul of contractual obligations and require the surety to pay. This
argument goes against the purpose and scope of the Miller Act, an act that is
remedial in nature and that ensures subcontractors are properly
compensated for labor and materials provided for in conjunction with work
requested by a contractor, even if the contractor is not ultimately paid by the
federal government. The Miller Act does not permit subcontractors to
circumvent contractual obligations and still receive payment.

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may not recover under quantum meruit because it failed to prove
that any services rendered went beyond the specifications of the
Nasatka Contract. Requiring what was contractually agreed to
does not give rise to the equitable claim of quantum meruit.
Defendants are ordered to submit proposed findings of fact
and conclusions of law (Findings) relating to this judgment (as a
Word document) no later than noon on March 21, 2019. Each fact
or conclusion should be listed in a numbered paragraph.
Generally, there should be only a single fact or conclusion of law
contained in each paragraph. Each fact must contain a reference to
the trial transcript or an exhibit admitted into evidence. Each
conclusion should contain a citation to a statute, case, etc.
No later than April 3, 2019, Nasatka may submit a copy of
Defendants’ proposed Findings, marked as follows: (a) strike
through those portions Nasatka disputes; and
(b) underline those portions Nasatka admits but considers
irrelevant.
Nasatka need not make a uniform determination as to an
entire proposed finding or conclusion. Nasatka may agree with a
portion, dispute another portion, and consider a portion irrelevant.
Nasatka may submit objections or alternative findings no later
than noon on April 3, 2019. Nasatka need not submit a marked
copy of the findings, objections or alternative findings and
conclusions, but failure to submit at least one of these will result
in the Court concluding that Nasatka agrees with the Findings.
IT IS SO ORDERED.
Date: March 5, 2019

___________________________
Dale S. Fischer
United States District Judge

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