HITT Contracting, Inc. v. Coastal Environmental Group, Inc. et al

Filing 18

ORDER denying 13 the Defendants' Motion to Stay Litigation, by Judge Richard P. Matsch on 5/19/2014.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-00211-RPM
THE UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF
HITT CONTRACTING, INC.,
Plaintiff,
vs.
COASTAL ENVIRONMENTAL GROUP, INC., and
AEGIS SECURITY INSURANCE COMPANY,
Defendants.

ORDER DENYING MOTION TO STAY LITIGATION

This action arises under the Miller Act, 40 U.S.C. § 3131 et seq., for work done at the
Florissant Fossil Bed National Monument Visitor Education & Museum Research Facility, near
Florissant, Colorado (the Project).
Coastal Environmental Group, Inc. (Coastal) was the prime contractor for the Project
pursuant to a contract with the National Park Service.
As required by the Miller Act, Coastal obtained a payment bond from Aegis Security
Insurance Company (Aegis).
The payment bond provides that Coastal (as the Principal) and Aegis (as the surety)
agreed to be “firmly bound to the United States of America) ... in the penal sum of
$2,469,435.00.” (Ex. A to the compl.). The bond ensures Coastal’s prompt payment to all
persons having a direct relationship with Coastal or a subcontractor of Coastal for furnishing

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labor, material or both in the prosecution of the work provided in the prime contract and any
authorized modifications. (Id.)
HITT Contracting, Inc. (HITT) provided labor and materials for the Project, pursuant to a
subcontract with Coastal (the Subcontract). (¶12 & Ex. B to the compl.).
Article 6 of the Subcontract between Coastal and HITT provides:
6.1 Any controversy or claim between the Contractor and the Subcontractor
arising out of or related to this Subcontract, or the breach thereof, shall be settled
by arbitration, which shall be conducted in the same manner and under the same
procedure as provided in the Prime Contract with respect to claims between the
Owner and Contractor, except that a decision by the Architect shall not be a
condition precedent to arbitration. If the Prime Contract does not provide for
arbitration or fails to specify the manner and procedure for arbitration, it shall be
conducted in accordance with the Construction Industry Arbitration Rules of the
American Arbitration Association currently in effect unless the parties mutually
agree otherwise.
6.2 This article 6 shall not be deemed a limitation of rights or remedies which the
Subcontractor may have under Federal law, under state mechanic’s lien law, or
under applicable labor or material payment bonds unless such rights or remedies
are expressly waived by the Subcontractor.
(Ex. B at p. 5 of 9).
On March 14, 2014, HITT filed this civil action against Coastal and Aegis to recover
$341,241.13 for labor and materials that HITT provided for the Project. The complaint alleges
three claims for relief: (1) a Miller Act claim against Coastal and Aegis; (2) a state law claim of
breach of contract against Coastal, and (3) a state law claim of quantum meruit against Coastal
and Aegis. Supplemental jurisdiction for the plaintiff’s state law claims is provided by 28
U.S.C. § 1367.
Coastal and Aegis (the defendants) moved to compel binding arbitration and to stay this
litigation. Specifically, the defendants request orders (1) compelling the plaintiff to arbitrate its

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state law claims against Coastal and (2) staying litigation of the Miller Act claim, pending
arbitration of the underlying dispute between HITT and Coastal. (Defs.’ mot. at 6-7; Defs.’
reply at 11). The defendants argue that Article 6.1 of the Subcontract encompasses the
plaintiff’s state law claims against Coastal and arbitration of those claims is required by
Colorado’s Uniform Arbitration Act, C.R.S. §§ 13-22-201 through -230.
Article 6.2 of the Subcontract expressly reserves HITT’s rights under federal law,
including its rights and remedies under the Miller Act. The arbitration provision of Article 6.1
has no application to the plaintiff’s Miller Act claim.
The defendants urge this court to follow United States ex rel. Tanner v. Daco
Construction, Inc., 38 F.Supp.2d 1299 (N.D. Okla. 1999), a similar case. In Tanner, the district
court held that the underlying dispute between the prime contractor and the subcontractor was
subject to arbitration and stayed litigation of the subcontractor’s Miller Act claim against the
surety, pending the outcome of the arbitration.
Tanner is neither binding nor persuasive. Both Coastal and Aegis are subject to liability
under the Miller Act.
The purpose of the Miller Act is to provide subcontractors with a federal forum for a
prompt recovery of payment on federal projects, by using the fiction that it is a claim of the
national government. That purpose would be thwarted by granting the defendants’ motion to
stay.
It is not clear that the state law claims must be arbitrated by applying Colorado law.
Assuming that they are, the arbitration should be stayed pending the adjudication of the Miller
Act claims.

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Accordingly, it is
ORDERED that the defendants’ motion to stay [#13] is denied.
Dated: May 19, 2014
BY THE COURT:
s/Richard P. Matsch

Richard P. Matsch, Senior District Judge

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