Anthony Allega Cement Contractor, Inc. et al v. Johnson Controls Federal Systems/Versar, LLC et al

Filing 36

MEMORANDUM OPINION. Signed by Judge Sherry R. Fallon on 4/24/2019. (lih)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
)
)
)
)
)
)
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Plaintiffs,
)
V.
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JOHNSON CONTROLS FEDERAL
)
SYSTEMSNERSAR, LLC, and VERSAR, )
)
INC., and WESTCHESTER FIRE
INSURANCE COMPANY,
)
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Defendants.
)
ANTHONY ALLEGA CEMENT
CONTRACTOR, INC. and UNITED
STATES OF AMERICA, by and for the
Benefit of Anthony Allega Cement
Contractor, Inc.,

Civil Action No. 18-875-SRF

MEMORANDUM OPINION
I.

INTRODUCTION 1

Presently before the court in this breach of contract action is a motion filed by defendants
Johnson Controls Federal SystemsNersar, LLC (the "Joint Venture"), Versar, Inc. ("Versar"),
and Westchester Fire Insurance Company ("Westchester") (collectively, "defendants") to dismiss
for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(l) and
failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil
Procedure 12(b)(6), or alternatively to stay or transfer venue. 2 (D.I. 10) The court has
jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332(a), and 1367(a). For the following reasons,
defendants' 12(b)(l) motion is denied, defendants' 12(b)(6) motion is granted-in-part and

1

The parties consented to the jurisdiction of a magistrate judge to conduct all proceedings in this
matter through final judgment and the case was assigned to the undersigned judicial officer on
July 20, 2018. (D.I. 15)
2
Defendants' opening brief in support of its motion is D .I. 11, plaintiffs' answering brief is D .I.
17, and defendants' reply brief is D.I. 19.

denied-in-part, defendants' motion to transfer venue is denied, and defendants' motion to stay is
granted for a limited period.

II.

BACKGROUND
A. Procedural History

On June 13, 2018, plaintiffs Anthony Allega Cement Contractor, Inc. ("Allega") and the
United States of America (collectively, "plaintiffs") originally filed this action against multiple
defendants for money damages and a declaratory judgment. (D.I. 1) On July 18, 2018,
defendants filed their pending motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(l) and
12(b)(6), or, in the alternative, to stay or transfer venue. (D.I. 10)

B. Factual Background
The Joint Venture was the prime contractor to the Department of Air Force Installation
Contracting Agency ("the Government") on a public improvement project in Delaware at Dover
Air Force Base, Project FJXT031005 (the "Project"). (D.I. 1 at ,r 2) Versar was the Joint
Venture's subcontractor on the Project. (Id.) Allega was a second-tier subcontractor and cement
supplier to Versar. (D.I. 11 at 2) Westchester provided the required Miller Act surety bond with
a penal sum of $98,299,269.39 that the Joint Venture furnished to the Government. (D .I. 1 at ,r
24)
On November 14, 2014, Versar and Allega executed Subcontract Agreement No. 009300
(the "Subcontract"). (D.I. 1 at ,r 1) Pursuant to the Subcontract, Allega was to demolish and
replace a 9,600 foot long, 150 foot wide runway, "adjoining taxiways, airfield lighting,
NAVAIDs, 3 incidental related work, and repair instrumental landing system (ILS) and runway

3

"NAVAID" is an acronym for "navigational aid." Navigational Aid (NA VAID) Data Form,

FEDERAL AVIATION ADMINISTRATION,

2

approach lighting" at the Dover Air Force Base. (D.I. 11, Ex. A at 9; D.I. 1 at ,r 20) Following
the award of the Subcontract to Allega, the Project experienced repeated significant delays and
Allega incurred costs as it attempted to get the Project back on schedule. (D.I. 1 at ,r,r 28-29, 37,
39-41) Allega notified Versar of the problems with delays and expenses. (Id. at ,r 43) Allega
avers in the complaint that the Joint Venture and Versar have not paid Allega additional unit
costs for labor, equipment, and services. (Id. at ,r,r 46, 54)

C. The Subcontract
Article 29(a) of the Subcontract includes a provision regarding disputes that mandates
alternative dispute resolution ("ADR") in accordance with the prime contract's provisions, 4 as
the plaintiffs' sole remedy "[t]o the extent a claim, dispute or controversy arises out of, or relates
to, problems caused by Client5 or for which Client is responsible." (D.I. 11, Ex. A at 29) 6 For
disputes or controversies "not arising out of, or relating to, problems caused by Client or for
which Client is responsible," Article 29(b) of the Subcontract states that:
Seller [Allega] and Buyer [Versar] will first attempt to resolve such claim, dispute
or controversy at the field level through discussions between Buyer's
Representative and Seller's Representative. If a claim, dispute or controversy
cannot be resolved through Buyer's Representative and Seller's Representative,
Buyer's Senior Representative and Seller's Senior Representative, upon the
request of either party, shall meet as soon as conveniently possible, but in no case
later than thirty (30) days after such a request is made, to attempt to resolve such
claim dispute or controversy. Prior to any meetings between the Senior

https ://www.faa.gov/air_traffic/flight_info/aeronav/Aero_Data/7900 .2D-NAV AID/ (last visited
Apr. 24, 2019).
4
The prime contract was an agreement between the Joint Venture and the Government. (D.I. 11,
Ex. A at 30-31; Ex. B)
5
"Client" as defined by the Subcontract is the Department of Air Force Installation Contracting
Agency. (D.I. 11, Ex. A at 1) The Subcontract was "in support of a United States Government
funded prime contract from [the Client]." (Id.)
6
Citations to the Subcontract reference page numbers as they appear in the Subcontract.
3

Representatives, the parties will exchange relevant information that will assist the
parties in resolving the claim, dispute or controversy. 7
(Id. at 29-30)

The Subcontract includes a forum selection clause that provides that any disputes arising
from or regarding the Subcontract "will be litigated in a court of jurisdiction in the
Commonwealth of Virginia." (Id. at 7, 28, 30)
Finally, the Subcontract includes a "pay-if-paid" provision, which provides that:
[i]f Client shall order any changes, including additions, reductions or deletions, in
the work to be performed, [Allega] shall only be entitled to adjustments in its
Subcontract Sum and the times for completion of the Work attributable to such
Client directed changes and then only to the extent [Versar] actually receives such
adjustments from Client.
(Id. at 18)

D. Related Litigation
On May 22, 2017, the Joint Venture filed suit against the Government in the United
States Court of Federal Claims (the "Government Action"), seeking delay costs in connection
with a six month delay in the Project "[d]ue to the contract changes directed by the Air Force." 8
(D.I. 11, Ex.Bat ,i,i 14, 34-37) On June 6, 2016, the Joint Venture submitted a request for
equitable adjustment to recover its delay costs from the Government, which the Government
rejected. (Id. at ,i 16) On October 5, 2016, the Government issued a final offer of $7,549,967,
which the Joint Venture rejected. (Id. at ,i,i 17-18) On November 18, 2016, after negotiations,
the Government issued a unilateral modification, Modification 7 ("Mod 7"), in the same amount
as its final offer and extended the period of performance by six months. (Id. at ,i,i 19-20)

7

For ease ofreference, the court adopts the label the parties associate with this Subcontract
provision as the "ADR" provision.
8
Only the Joint Venture is a plaintiff in the Government Action. (See D.I. 11, Ex. B)

4

According to the complaint in the Government Action, the Government has not explained how it
calculated the amount paid under Mod 7. (Id. at ~ 21)
The Joint Venture alleges, "[u]pon completion of the Phase 1 and Phase 2, total Delay
Costs incurred by [the Joint Venture] and its subcontractors totaled $13,119,015.40. Since [Mod
7] paid out $7,549,967.00, [the Joint Venture's] unpaid Delay Costs total $5,569,048.40." (Id. at
~

23) Thus, the Joint Venture seeks to recover the difference between the actual delay costs

incurred and the adjustment received under Mod 7. (Id. at~~ 35-37) The Government Action
remains pending and whether the Joint Venture may recover additional delay costs has not yet
been determined. (Id.)
E. Subcontract Forum Selection

The Subcontract mandates that "all disputes arising out of or related to [the Subcontract]
shall be governed by the laws of the Commonwealth of Virginia without regard to its conflict of
law principles that would apply the law of another jurisdiction .... " (D.I. 11, Ex. A at 28)
Therefore, Virginia law is applicable to the resolution of contractual disputes in the instant case.
See Pyatt-Boone Elecs. Inc. v. IRR Trust for Donald L. Fetterolf Dated Dec. 9, 1997, 918 F.
Supp. 2d 532, 537 (W.D. Va. 2013).
III.

LEGAL STANDARD
A. Federal Rule of Civil Procedure 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a complaint for lack of
jurisdiction over the subject matter, or if the plaintiff lacks standing to bring its claim. Motions
brought under Rule 12(b)(l) may present either a facial or factual challenge to the court's subject
matter jurisdiction. See Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015)
(quoting Common Cause of Pa. v. Pennsylvania, 558 F.3d 249,257 (3d Cir. 2009)). In

5

reviewing a facial challenge under Rule 12(b)( 1), the standards relevant to Rule 12(b)( 6) apply.
In this regard, the court must accept all factual allegations in the complaint as true, and the court
may only consider the complaint and documents referenced in or attached to the complaint. See
Church of Universal Bhd. v. Farmington Twp. Supervisors, 296 F. App'x 285,288 (3d Cir.

2008); Gould Elec., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing a
factual challenge to the court's subject matter jurisdiction, the court is not confined to the
allegations in the complaint. See Mortensen v. First Fed. Sav. & Loan Ass 'n, 549 F.2d 884, 891
(3d Cir. 1977). Instead, the court may consider evidence outside the pleadings, including
affidavits, depositions and testimony, to resolve any factual issues bearing on jurisdiction. See
Gotha v. United States, 115 F.3d 176, 179 (3d Cir. 1997). Once the court's subject matter

jurisdiction over a complaint is challenged, the plaintiff bears the burden of proving that
jurisdiction exists. See Lincoln, 800 F.3d at 105; Mortensen, 549 F.2d at 891.
B. Federal Rule of Civil Procedure 12(b )(6)

Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim
upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6)
motion to dismiss, the court must accept as true all factual allegations in the complaint and view
them in the light most favorable to the plaintiff. Umland v. Planco Fin. Servs., 542 F.3d 59, 64

(3d Cir. 2008).
To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint
must contain a "short and plain statement of the claim showing that the pleader is entitled to
relief." Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the
complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that
is plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft

6

v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations
allow the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.
When determining whether dismissal is appropriate, the court must take three steps. 9 See

Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify
the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject
conclusory allegations. Id. at 678. Third, the court should assume the veracity of the wellpleaded factual allegations identified under the first prong of the analysis, and determine whether
they are sufficiently alleged to state a claim for relief. Id.; see also Malleus v. George, 641 F.3d
560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on
[the court's] experience and common sense." Iqbal, 556 U.S. at 663-64; see also Fowler v.

UPMC Shadyside, 578 F.3d 203,210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal,
"where the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to
relief."' Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

C. Transfer Venue
Section 1404(a) of Title 28 of the United States Code grants district courts the authority
to transfer venue "[f]or the convenience of parties and witnesses, in the interests of justice ... to
any other district or division where it might have been brought." 28 U.S.C. § 1404(a).

9

Although Iqbal describes the analysis as a "two-pronged approach," the Supreme Court
observed that it is often necessary to "begin by taking note of the elements a plaintiff must plead
to state a claim." 556 U.S. at 675, 679. For this reason, the Third Circuit has adopted a threepronged approach. See Santiago v. Warminster Twp., 629 F.3d 121, 130 n.7 (3d Cir. 2010);
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
7

"[F]orum selection clauses are presumptively valid and enforceable absent a showing by
the resisting party that enforcement of the clause would be unreasonable under the
circumstances." Asphalt Paving Sys., Inc. v. Gannon, 2015 WL 3648739, at *3 (D.N.J. June 11,
2015) (citing MIS Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972)). In the Third Circuit,
when facing a valid forum selection clause, a district court modifies its analysis three ways:
First, no weight is given to the plaintiffs choice of forum. Second, the court does
not consider arguments about the parties' private interests. Instead, 'a district
court may consider arguments about public-interest factors only.' Third, 'when a
party bound by a forum-selection clause flouts its contractual obligation and files
suit in a different forum, a§ 1404(a) transfer of venue will not carry with it the
original venue's choice-of-law rules - a factor that in some circumstances may
affect public-interest considerations.'
In re McGraw-Hill Global Education Holdings LLC, 909 F.3d 48, 57 (3d Cir. 2018) (internal

citations omitted) (quoting Atlantic Marine Contr. Co. v. US. District Court for the Western
Dist. ofTexas, 571 U.S. 49, 63-64 (2013)). "Because [public interest factors] will rarely defeat a

transfer motion, the practical result is that forum-selection clauses should control except in
unusual cases." Atlantic Marine, 571 U.S. at 64.
D. Stay
A court has discretionary authority to grant a motion to stay. 454 Life Scis. Corp. v. Jon
Torrent Sys., Inc., C.A. No. 15-595-LPS, 2016 WL 6594083, at *2 (D. Del. Nov. 7, 2016) (citing

Cost Bros., Inc. v. Travelers Indem. Co., 760 F.2d 58, 60 (3d Cir. 1985)). Courts consider three

factors in deciding how to exercise this discretion: (1) whether a stay will simplify the issues for
trial; (2) the status of the litigation, particularly whether discovery is complete and a trial date
has been set; and (3) whether a stay would cause the non-movant to suffer undue prejudice from
any delay or allow the movant to gain a clear tactical advantage. Id. (citing Advanced

8

Microscopy Inc. v. Carl Zeiss Microscopy, LLC, C.A. No. 15-516-LPS-CJB, 2016 WL 558615,
at *1 (D. Del. Feb. 11, 2016)).

IV.

DISCUSSION
A. Sufficiency of the pleading with respect to satisfaction of conditions
precedent

Plaintiffs allege claims for breach of subcontract (Count I), unjust enrichment (Count II),
violation of the Prompt Payment Act (Count III), declaratory judgment (Count IV), and violation
of the Miller Act (Count V). (D.I. 1 at ,r,r 56-98) Defendants move to dismiss all five counts of
the complaint and argue that this action was brought prematurely, as plaintiffs have not engaged
in an ADR process nor alleged satisfaction of compliance with the Subcontract's dispute
resolution requirements, a condition precedent to commencing litigation. (D.I. 11 at 8-9; Ex. A
at 29)
"Courts disagree about whether Rule 9(c) imposes an affirmative duty to plead conditions
precedent, or whether Rule 9(c) merely sets the standard for alleging performance of conditions
precedent if such performance is pleaded." Eskenazi v. Rural Community Hospitals ofAmerica,

LLC, 2018 WL 6436266, at *3 n.4 (W.D. Mo. Dec. 7, 2018) (internal citations omitted). The
Fourth Circuit has not expressly ruled on this issue. See Chesapeake Square Hotel, LLC v.

Logan's Roadhouse, Inc., 995 F. Supp. 2d 512, 516-19 (E.D. Va. 2014). The Third Circuit, in
Hildebrandv. Allegheny County, 757 F.3d 99 (3d Cir. 2014), concluded that "[t]he pleading of
conditions precedent is governed by Rule 9(c), not Rule 8(a)." Hildebrand, 757 F.3d at 112.
i. ADR
Here, defendants argue that plaintiffs have failed to perform or allege satisfaction of the
condition precedent, namely, the ADR provision. Defendants argue that plaintiffs have failed to
allege that they completed the mandatory ADR process agreed to in the Subcontract. (D.I. 11 at

9

9) Plaintiffs, however, contend that the complaint sufficiently alleges compliance with the ADR
provision, and specifically point to paragraphs 21 and 66 in the complaint, which allege that
Allega "satisfied all conditions precedent to payment under the Subcontract." (D.1. 17 at 7-8;
D.I. 1 at ,i,i 21, 66) Plaintiffs argue that such allegations are sufficient under Rule 9(c), which
states that "[i]n pleading conditions precedent, it suffices to allege generally that all conditions
precedent have occurred or been performed." (D.I. 17 at 7-8) See Fed. R. Civ. P. 9(c).
Defendants aver that these paragraphs do not allege that Allega satisfied all conditions precedent

to filing suit, but only allege satisfaction of all conditions precedent to payment. (D.I. 19 at 1)
Defendants' distinction between pleading all conditions precedent to filing suit versus
pleading all conditions precedent to payment is insubstantial. Under Rule 9(c), plaintiffs have
adequately pleaded this condition precedent by "track[ing] the language of Rule 9(c) by
generally alleging in [the] complaint that all conditions precedent have occurred or been
performed." Chesapeake Square Hotel, LLC, 995 F. Supp. 2d at 516 (internal quotation marks
omitted). The complaint states "Allega substantially performed its obligations under the
Subcontract, including all conditions precedent to payment." (D.I. 1 at ,i,i 66, 21) Furthermore,
the Joint Venture and Westchester cannot rely on the Subcontract's ADR provision as a basis for
dismissal because they are not parties to the Subcontract. (See D.I. 11, Ex. A) Therefore, the

court rejects defendants' argument on this point.
Even if defendants were correct in their assertion that ADR has not occurred, the failure
to satisfy this condition precedent does not divest this court of subject matter jurisdiction. 10 "The

10

Plaintiffs argue that defendants assert a factual attack on the complaint, and therefore they are
allowed to introduce evidence outside of the pleadings. (D .I. 17 at 4 n. l) On this basis,
plaintiffs rely on correspondence between Allega and Versar to argue that Allega repeatedly
requested a meeting pursuant to the Subcontract, which Versar rebuffed for several months, until
a meeting occurred on April 24, 2017. (D.I. 17 at 3) However, the court finds it unnecessary to
10

Court's power to hear a contractual dispute is unaffected by whether the parties have complied
with that contract." Dominion Transmission, Inc. v. Precision Pipeline, Inc., 2013 WL 5962939,
at *2 (E.D. Va. Nov. 6, 2013). The court in Dominion addressed a similar issue, where the
defendant argued lack of subject matter jurisdiction because of plaintiffs failure to pursue
contractually mandated ADR prior to filing suit. Id. at * 1-2. The court concluded that
"[noncompliance with a condition precedent] impairs [plaintiff's] right to access the courts; it has
no such effect on the Court's jurisdiction. The court has the power to hear the parties'
contractual dispute, regardless of whether the parties themselves have complied with the terms of
the ADR provision." Id. at *3 (emphasis in original). Furthermore, while dismissal is not
warranted, the appropriate remedy would be a dismissal without prejudice with leave to arnend. 11
Therefore, defendants' motion to dismiss is denied.
ii.

"Pay-if-Paid" Provision

Defendants assert that the Subcontract's "pay-if-paid" clause presents another condition
precedent that bars Allega's breach of contract claim. (D.I. 11 at 10-11) (citing Universal

Concrete Prods. v. Turner Constr. Co., 595 F.3d 527, 529-31 (4th Cir. 2010) (upholding motion
for summary judgment because of an unambiguous pay-when-paid clause that conditioned any
payments to the subcontractor on the contractor's first receiving payment)). Defendants assert

that because the Government Action is ongoing, it is clear that Versar and the Joint Venture have
not yet been paid, and Allega's potential entitlement to additional compensation has not been

consider matters outside the pleadings because plaintiffs have met the requirements of pleading
compliance with conditions precedent under Rule 9(c). Whether the complaint is challenged on
its face under Rule 12(b)(1) or for failure to state a claim under Rule 12(b)( 6), the allegations of
the complaint must be accepted as true.
11
Additionally, no prejudice to the defendants would result from staying the case for a limited
period of time so that the parties may engage in an ADR process. This is addressed more fully in
Section (IV)(G), infra.
11

triggered as a result. (Id. at 11) However, defendants' argument speaks to the merits of the
claim, which the court does not consider at this stage in the proceedings.
Conversely, plaintiffs assert that "pay-if-paid" provisions are invalid under both
Delaware 12 and Virginia law. (D.I. 17 at 11) See also Del. Code Ann. tit. 6 § 3507(e)(2)-(3);
Va. Cide Abb, § 11-4.1: 1. Plaintiffs argue that, under Virginia law, "[a] provision that waives or
diminishes a subcontractor's, lower-tier subcontractor's, or material supplier's right to assert
payment bond claims or his right to assert claims for demonstrated additional costs in a contract
executed prior to providing any labor, services, or materials is null and void." Va. Code Ann.§
11-4.1: 1.
However, the Subcontract was executed in 2014, while Va. Code Ann. § 11-4.1: 1 was
effective as of July 1, 2015. "[S]tatutes in Virginia are 'always construed to operate
prospectively unless a contrary legislative intent is manifest .... "' US. ex rel. Manganaro

Midatlantic LLC v. Grimberg/Amatea JV, 2017 WL 6492719, at *5 (D. Md. Dec. 19, 2017).
However, the court need not decide the validity and effect of the "pay-if-paid" provision at this
stage of the proceedings when only the sufficiency of the pleading is at issue.
The complaint alleges that "Allega substantially performed its obligations under the
Subcontract, including all conditions precedent to payment." (D.I. 1 at~ 66) The court in US.

ex rel. Tusco, Inc. v. Clark Construction Group, LLC, 235 F. Supp. 3d 745 (D. Md. 2016)
concluded that failure to plead satisfaction of a pay-if-paid clause did not warrant granting a
motion to dismiss. US. ex rel. Tusco, Inc., 235 F. Supp. 3d at 753 ("In a contract dispute,
plaintiffs are not required to expressly plead satisfaction of a condition precedent to allege a

12

In view of the choice of law provision in the Subcontract, Virginia law is applicable to the
breach of contract allegations of the complaint. (D.I. 11, Ex. A at 28)
12

breach of contract claim - an allegation is sufficient if it alleges that the claimant 'has at all times
performed all its proper and legitimate duties and obligations under its contract."'). Therefore,
plaintiffs can plausibly state a claim for breach of contract without expressly pleading that the
"pay-if-paid" provision has been satisfied. Furthermore, only Versar can rely on the "pay-ifpaid" clause as a basis for dismissal because the Joint Venture and Westchester are not parties to
the Subcontract. (See D.I. 11, Ex. A)
Accordingly, defendants' motion to dismiss this count is denied.
B. Count II - Unjust Enrichment

Pursuant to Virginia law, "a plaintiff alleging unjust enrichment must establish the
following elements: (1) a benefit conferred on the defendant by the plaintiff; (2) knowledge on
the part of the defendant of the conferring of the benefit; and (3) acceptance or retention of the
benefit by the defendant in circumstances that render it inequitable for the defendant to retain the
benefit without paying for its value." Firestone v. Wiley, 485 F. Supp. 2d 694, 704 (E.D. Va.
2007) (quoting Nossen v. Hoy, 750 F. Supp. 740, 744-45 (E.D. Va. 1990)).
Here, plaintiffs allege that "the Joint Venture has benefitted from and been unjustly
enriched by virtue of Allega's performance of the Subcontract work and extra work, and
Allega's incurring acceleration and additional Project completion costs." (D.I. 1 at ,r 72) The
complaint states that Allega "substantially completed all of the Subcontract Work." (Id at ,r 22)
Plaintiffs allege that the Joint Venture knew of and accepted the benefit of Allega' s performance.
(Id. at ,r 73) Therefore, plaintiffs have adequately alleged a claim for unjust enrichment against

the Joint Venture.
Defendants argue that plaintiffs' unjust enrichment claim fails as a matter of law because
Allega has a contractual remedy. (D.I. 11 at 11-12) The Subcontract expressly details the

13

process through which Allega could be compensated for additional work, and equitable relief is
not available. (D.I. 11, Ex. A at 18-19) Defendants note that plaintiffs have not alleged that the
Subcontract is unenforceable or invalid. (D.I. 11 at 12) Furthermore, defendants contend that
because the Subcontract concerns the same subject matter as the unjust enrichment claim, Allega
"cannot recover on a theory of unjust enrichment for services it rendered under a valid contract .
. . even though the services provided a benefit to a third party ... with whom [it] had no
contract." (D.I. 19 at 4-5) (quoting Fed. Sav. & Loan Ins. Corp. v. Quality Hotels & Resorts,

Inc., 1991 WL 30211, at *4 (4th Cir. 1991)).
Plaintiffs do not dispute defendants' assertion that the Subcontract bars equitable relief.
(D.I. 17 at 12-13) Instead, plaintiffs assert that they have adequately pleaded an unjust
enrichment claim against the Joint Venture and Westchester because Allega does not have a
contract with the Joint Venture and Westchester's liability is derivative of the Joint Venture's
liability. (Id.) Moreover, plaintiffs argue that they are entitled to plead the unjust enrichment
claim against Versar as an alternative claim for relief under Fed. R. Civ. P. 8(d)(2)-(3). Fed. R.
Civ. P. 8(d)(2) states that "[a] party may set out 2 or more statements of a claim or defense
alternatively or hypothetically, either in a single count or defense or in separate ones. If a party
makes alternative statements, the pleading is sufficient if any one of them is sufficient." Fed. R.
Civ. P. 8(d)(2). However, "[w]hile [a plaintiff] need not use particular words to plead in the
alternative, it must use a formulation from which it can be reasonably inferred that this [is] what
the plaintiff was doing." Azko Nobel Coatings Inc. v. Pearl Avenue USA, Ltd., 2010 WL
11564918, at *3 (E.D. Va. Feb. 23, 2010) (internal quotation marks omitted). In this instance,
the pleading is sufficient to set forth plaintiffs' unjust enrichment claims against the Joint
Venture. However, the court grants in part the motion to dismiss in favor of Westchester and

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Versar because the court agrees that the pleading fails to adequately state the plaintiffs' theory of
liability against each defendant nor provide notice to Versar that plaintiffs are pleading an
alternate, non-contractual theory of liability. However, it is a deficiency that may be cured by
amendment of the complaint.
Therefore, defendants' motion to dismiss Count II should be granted-in-part without
prejudice only with respect to defendants Westchester and Versar.

C. Count III - Prompt Payment Act
Defendants argue that Allega lacks standing to bring a claim under the Prompt Payment
Act ("PPA"), 31 U.S.C.A. § 3901, et seq. (D.I. 11 at 12) Defendants note that courts have
interpreted 31 U.S.C.A. § 3905(i) and determined that the PPA does not confer a private right of
action upon subcontractors for performance of government contracts. (Id.) Because Allega was
a second-tier subcontractor and supplier, defendants conclude that Allega lacks the ability to sue
under the PPA. (Id. at 13) Plaintiffs cite no contrary authority that would permit this claim to
survive dismissal. (D.I. 17 at 13)
The PPA was enacted "in an effort to provide the federal government with an incentive to
pay government contractors on time by requiring agencies to pay penalties - in the form of
interest- on certain overdue bills." US. ex rel. JES Commer., Inc. v. Continental Ins. Co., Inc.,
814 F. Supp. 2d 1, 2 (D.D.C. 2011). The PPA was later amended to include provisions
applicable to subcontractors. See id. Under the PPA, prime contractors with the federal
government are required to include "a payment clause which obligates the prime contractor to
pay the subcontractor for satisfactory performance under its subcontract within 7 days out of
such amounts as are paid to the prime contractor by the agency under such contract." 31 U.S.C.
§ 3905(b)(1 ). Furthermore, the PPA requires prime contractors to insert "an interest penalty

15

clause which obligates the prime contractor to pay to the subcontractor an interest penalty on
amounts due in the case of each payment not made in accordance with the payment clause
included in the subcontract pursuant to paragraph (1) of this subsection." Id. at§ 3905(b)(2).
"Absent from the PP A is any explicit provisions for subcontractor enforcement if the prime
contractor fails to make timely payment." Continental Ins. Co., 814 F. Supp. 2d at 2.
The PP A does not grant subcontractors a separate cause of action, "beyond common law
breach of contract, for violations of the required subcontract language." US. ex rel. Asphalt

Contractors, & Site Work, Inc. v. KAR Contracting, LLC, 2015 WL 3651279, at *5 (S.D. W. Va.
June 11, 2015) (citing 31 U.S.C.A. § 3905(b)). Plaintiffs misread US. ex rel. JES Commer., Inc.

v. Continental Ins. Co., Inc., 814 F. Supp. 2d 1 (D.D.C. 2011), which expressly granted the
defendant's motion to dismiss plaintiffs PPA claim because the PPA does not state any explicit
provisions for subcontractors to bring a private cause of action. Continental Ins. Co., 814 F.
Supp. 2d at 3-4. The court stated, "it makes little sense to assume, as a default, that statutory
directives create private rights of action because doing so could diminish legislators' enthusiasm
for creating standards for improved conduct . . . . [T]his court finds that the PPA does not create
an implied right of action." Id. at 4. Accordingly, plaintiffs lack standing to bring a PPA claim.
Plaintiffs argue that even if the court were to dismiss their PPA claim, Allega would still
be permitted to recover under "contractual remedies ordinarily available to [it]." (DJ. 17 at 13)
(quoting US. ex rel. Virginia Beach Mech. Servs., Inc. v. SAMCO Constr. Co., 39 F. Supp. 2d
661,677 (E.D. Va. 1999)). Additionally, plaintiffs cite US. ex rel. McFadden Mech., Inc. v.

FSEC, Inc., 2001 U.S. Dist. LEXIS 24201 (E.D. Pa. Dec. 6, 2001) to support plaintiffs' ancillary
argument that the court may still award prejudgment interest on the underlying amounts
allegedly owed. (D.I. 17 at 14) However, plaintiffs' damages argument is not appropriate at this

16

stage in the proceedings and plaintiffs' cited authority does not otherwise support plaintiffs'
contention that they properly pleaded a PPA claim. Accordingly, defendants' motion to dismiss
Count III is granted with prejudice with respect to all defendants.

D. Count IV - Declaratory Judgment
Defendants argue that Count IV should be dismissed because the court lacks subject
matter jurisdiction over the matter, and therefore, the court cannot preside over a declaratory
judgment action without "another independent basis for jurisdiction." (D.I. 11 at 10) (quoting

Washington v. Donley, 802 F. Supp. 2d 539, 554 (D. Del. 2011)). The court concluded that
subject matter jurisdiction exists in section (IV)(A) supra. Therefore, defendants' motion to
dismiss is denied with respect to Count IV.

E. Count V - Miller Act
"The purpose of the Miller Act is to protect persons supplying labor and material for the
construction of federal public buildings in lieu of the protection they might receive under state
statutes with respect to the construction of nonfederal buildings." Howell Crane & Rigging, Inc.

v. Naylor Cos., LLC, 2014 U.S. Dist. LEXIS 191994 (W.D. Tex. Apr. 14, 2014) (quoting Arena
v. Graybar Elec. Co., 669 F.3d 214,220 (5th Cir. 2012)). "The Act gives suppliers and
subcontractors the right to sue a prime contractor in U.S. district court for the amount owed to
them . . . . This statutory scheme was created to protect parties such as subcontractors or
suppliers who work on federal projects as state-law liens cannot be applied against federallyowned property and traditional state-law remedies are unavailable." Arena, 669 F.3d at 220.
Defendants provide three arguments to support their motion to dismiss the Miller Act
claim asserted in Count V of the complaint. The court will address each in turn.

17

i.

Westchester's derivative liability

Defendants argue that Westchester's liability is derivative of the liability of the Joint
Venture and Versar with respect to Allega. (D.I. 11 at 14) Defendants conclude that because
neither the Joint Venture or Versar is liable for some or all of Allega's claims in this matter,
Allega has no valid claim against Westchester. (Id.)
Plaintiffs argue that Versar is not Westchester's bonded principal. (D.I. 17 at 14) Rather,
Westchester's liability is derivative of the liability of its bonded principal, the Joint Venture.
Plaintiffs contend, therefore, that the dismissal of claims against Westchester is inappropriate
regardless of the outcome of the motions to dismiss plaintiffs' claims against Versar. (Id.)
Defendants' arguments as to whether defendants are liable to plaintiffs is improper at this stage
in the proceedings, where the court accepts as true all well pleaded factual allegations contained
within the complaint.

ii.

Sufficiency of pleading compliance with the mandatory
notice requirement under the Miller Act

Additionally, defendants aver that Allega has failed to plead compliance with the
mandatory notice requirement under the Miller Act. (D.1. 11 at 14-15) (citing 40 U.S.C. §
3133(b)(2)) Section 3133(b)(2) requires a second-tier subcontractor that has a contractual
relationship with a subcontractor, but no contractual relationship with the contractor furnishing
the payment bond, to provide "written notice to the contractor within 90 days from the date on
which [the second-tier subcontractor] did or performed the last of the labor or furnished or
supplied the last of the material for which the claim is made." 40 U.S.C. § 3133(b)(2).
Plaintiffs argue that defendants are cognizant of Allega's compliance with the 90-day
notice requirement under the Miller Act because of correspondence and a proof-of-claim form
plaintiffs submitted to defendants in February and March 2017. (D.I. 17 at 15; D.I. 18 at Ex. B)

18

When determining a motion to dismiss pursuant to Rule 12(b)(6), the court generally
"may not consider matters extraneous to the pleadings. However, an exception to the general
rule is that a document integral to or explicitly relied upon in the complaint may be considered
without converting the motion [to dismiss] into one for summary judgment." In re Burlington
Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (internal quotation marks and

citations omitted) (emphasis in original). The exhibits plaintiffs attached to their answering brief
were not attached to the complaint or unambiguously relied upon by the complaint, as in In re
Burlington. (See D.I. 1) Therefore, they will not be considered.

The averment in the pleading relevant to notice under the Miller Act is as follows: "[t]he
Joint Venture and/or Versar had actual and constructive notice of the impact of the changes,
delays, and hindrances on Allega's planned construction sequence and Project schedule" and that
"Allega provided the Joint Venture and/or Versar with timely notice of the problems caused by
[schedule delays]." (D.I. 1 at ,i,i 44, 51) Therefore, plaintiffs have adequately pleaded that they
satisfied the requirement of providing timely notice under the Miller Act. Defendants' motion to
dismiss is denied. 13
iii.

Sufficiency of the pleadings with respect to Allega's claims
against Westchester

To sufficiently state a Miller Act claim, a plaintiff must allege that: "(1) it has furnished
labor or material in carrying out work provided for in a contract for which a payment bond is
furnished under section 3131; and (2) it has not been paid in full within 90 days." Oldcastle

13

Even if the court would find persuasive the opinion relied upon by defendants, US. ex rel.
Howell Crane & Rigging, Inc. v. Naylor Cos., LLC, 2014 U.S. Dist. LEXIS 191994 (W.D. Tex.
Apr. 14, 2014), dismissal is not warranted. Any deficiency in pleading compliance with the
Miller Act's notice provision could be cured by amendment without prejudice to defendants. See
US. ex rel. Howell Crane & Rigging, Inc., 2014 U.S. Dist. LEXIS 191994, at *8.
19

APG Northeast, Inc. v. Suffolk Constr. Co., Inc., 2012 WL 5868897, at *4 (E.D. Va. Oct. 31,
2012) (internal quotations omitted) (quoting US. ex rel. Thyssenkrupp Safivay, Inc. v. Tessa
Structures, LLC, 2011 WL 1627311 (E.D. Va. Apr. 27, 2011)). Defendants contend that Allega
has not alleged that Westchester agreed to bond any additional scope of work under Mod 7 or
any other modifications. (D.I. 11 at 16) Therefore, defendants argue, work performed under
Mod 7 was not covered by the payment bond and Westchester cannot be liable under the bond
for that additional work. (Id.) Plaintiffs aver that Westchester waived its right to notice of any
modifications to the Subcontract and agreed to bond any additional scope of work, such as Mod
7. (D.I. 17 at 16)
Consideration of the merits of Westchester's alleged liability under the bond is
inappropriate at the pleadings stage. To the extent defendants' arguments attack the sufficiency
of the pleadings with respect to plaintiffs' allegations that Westchester agreed to bond any
additional scope of work, the appropriate remedy is amendment of the pleading. Accordingly,
defendants' motion to dismiss Count Vis granted without prejudice.
F. Transfer of Venue

Defendants proffer an alternative argument that the case must be transferred to the
Eastern District of Virginia if it is not dismissed. Defendants' argument rests solely on their
contention that the forum selection clause in the Subcontract trumps the Miller Act's venue
provision. 14 (D.I. 11 at 19-20; Ex. A at 7, 28, 30)
Under 28 U.S.C. § 1404(a), a district court may transfer a civil action "to another district
where the case might have been brought, or to which the parties have consented, for the

14

See 40 U.S.C.A. § 3133(b)(3)(B) ("A civil action brought under this subsection must be
brought ... in the United States District Court for any district in which the contract was to be
performed and executed, regardless of the amount in controversy.").
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convenience of the parties and witnesses and in the interest of justice." In re McGraw-Hill, 909
F.3d at 57. The party moving to transfer venue under section 1404(a) bears the burden of
persuasion. See id.
In 2013, the Supreme Court held that a traditional balancing test is modified in three
ways when a forum selection clause applies to a dispute. See Atlantic Marine, 571 U.S. at 63.
First, the court does not weigh the plaintiffs choice of forum. See id. Additionally, the court
does not consider the parties' private interests, but only considers arguments about public interest
factors. 15 See id. at 64. Finally, in the face of a valid forum selection clause, a section 1404(a)
transfer of venue will not carry the original venue's choice oflaw rules. See id.
Federal law controls the question of whether to enforce a forum selection clause. See In

re McGraw-Hill, 909 F.3d at 58. According to the Third Circuit, the "scope" of a forum
selection clause is determined by state law. Id. The scope is '"whether the claims and parties
involved in the suit are subject' to the clause." Id. (quoting Collins v. Mary Kay, Inc., 874 F.3d
176, 180 (3d Cir. 2017)). Thus, state law "typically governs ... whether the clause applies to a
non-signatory as an intended beneficiary or closely related party." 16 Id.
The Subcontract includes a choice of law provision specifying that disputes under the
Subcontract are governed by law of the State of Virginia. (D.I. 11, Ex. A at 28)

15

"The public interests have included: the enforceability of the judgment; practical
considerations that could make the trial easy, expeditious, or inexpensive; the relative
administrative difficulty in the two fora resulting from court congestion; the local interest in
deciding local controversies at home; the public policies of the fora; and the familiarity of the
trial judge with the applicable state law in diversity cases." Jumara v. State Farm Ins. Co., 55
F.3d 873, 879 (3d Cir. 1995) (internal citations omitted).
16
Neither defendants nor plaintiffs engage in an analysis of the scope of the forum selection
clause in dispute.
21

In their opening brief, defendants fail to address the basis for allowing the Joint Venture
and Westchester, non-parties to the Subcontract, to exercise the forum selection clause.
Plaintiffs acknowledge that the only defendant who could arguably exercise the forum selection
clause is Versar. (D.I. 17 at 19-20) Plaintiffs focus on the public interest factors in the transfer
analysis, arguing that the public policy of Delaware and considerations of judicial economy
compel maintaining the action in the present forum. (Id. at 19) (citing Del. Code Ann. tit. 6 §
3507(e)(5)) Moreover, plaintiffs argue that the Joint Venture and Westchester are not so
"closely related" to the Subcontract that it is foreseeable that they should be bound by the forum
selection provision to litigate the dispute in the Eastern District of Virginia. (Id. at 20)
Defendants' only attempt to address the availability of the forum selection clause to the
Joint Venture and Westchester appears in the reply brief. (D.I. 19 at 8-10) It is undisputed that
the Joint Venture and Westchester are not intended third party beneficiaries. As to Westchester,
defendants argue that it can invoke the forum selection clause because its alleged liability to
Allega "is derivative ofVersar's liability." (Id. at 9) Defendants fail to cite any authority for the
argument, nor do they accurately acknowledge that the bonded principal is the Joint Venture, not
Versar individually. As to the Joint Venture, defendants argue that it was foreseeable that it
would exercise the forum selection clause because its conduct is so "closely related" to the
Subcontract and Allega's claims that the Joint Venture was unjustly enriched by the additional
work that Allega performed. (Id. at 10)
"In determining whether a non-signatory is closely related to a contract, courts consider
the non-signatory's ownership of the signatory, its involvement in the negotiations, the
relationship between the two parties and whether the non-signatory received a direct benefit from
the agreement." In re McGraw-Hill, 909 F.3d at 63 (quoting Carlyle Inv. Mgmt. LLC v.

22

Moonmouth Co. SA, 779 F.3d 214,219 (3d Cir. 2015)). Defendants have not addressed any of

these factors concerning the Joint Venture and Westchester other than in conclusory fashion.
(D.I. 11 at 19-20; D.I. 19 at 8-10) See Huberman v. Interval Leisure Grp., Inc., 2015 WL
3889431, at *4 (E.D. Pa. June 24, 2015). Therefore, no basis exists for the court to find the Joint
Venture and Westchester are so closely related to the Subcontract that they can invoke its forum
selection clause.
Practical considerations must guide the court's transfer analysis when a contractual forum
selection provision is unavailable to all defendants in the case. The court in ABC Medical
Holdings, Inc. v. Home Medical Supplies, Inc., 2015 WL 5818521 (E.D. Pa. Oct. 6, 2015)

contemplated the issue of a forum selection provision binding some, but not all the parties. "A
situation where only some of the parties are bound to the forum selection clause 'implicat[es]
concerns attending parallel lawsuits not present in Atlantic Marine."' ABC Medical Holdings,
Inc., 2015 WL 5818521, at *9 (quoting In re Rolls Royce Corp., 775 F.3d 671,679 (5th Cir.

2014)). Furthermore, "the need- rooted in the valued public interest in judicial economy- to
pursue the same claims in a single action in a single court can trump a forum selection clause."
Id. (quoting In re Rolls Royce Corp., 775 F.3d at 679). Here, the court concludes that it would

be inappropriate and inefficient to fragment this action such that the contractual claims against
Versar are transferred, while the claims against the Joint Venture and Westchester remain in the
District of Delaware. Doing so "would result in inefficient and duplicative litigation." Id.
Therefore, the court denies defendants' alternative motion to transfer venue to the Eastern
District of Virginia.

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G. Stay
Defendants argue, alternatively, that indefinitely staying the present action until the
resolution of the Government Action will simplify issues for trial and avoid the risk of
inconsistent results. (D.I. 11 at 17-18) Additionally, a stay would allow the parties to engage in
the ADR process required by the Subcontract. (Id. at 16-17) Plaintiffs oppose a stay and argue
that a stay of a Miller Act claim is against public policy. (D .I. 17 at 16-18) Indeed, courts have
found that staying Miller Act claims during the pendency of disputes between the primary
contractor and the Government "contravene[s] the rights afforded to subcontractors under the
Miller Act." US. ex rel. Tusco, Inc. v. Clark Constr. Grp., LLC, 235 F. Supp. 3d 745, 758 (D.
Md. 2016); see also US. v. Zurich Am. Ins. Co., 99 F. Supp. 3d 543,551 (E.D. Pa. 2015).
However, given the ADR provisions in the Subcontract, the court finds it reasonable to exercise
its discretion to grant a sixty-day stay so the parties to the Subcontract may engage in ADR. 17 If
ADR is unsuccessful, then the parties shall submit a joint status report to the court with a joint
proposed scheduling order due one week following the termination of ADR proceedings. The
proposed scheduling order shall include a deadline for amendment of pleadings.

17

A mediation referral has been made to Magistrate Judge Christopher J. Burke (D.I. 22) and all
parties, not just the contracting parties, are encouraged to meaningfully pursue court assisted
ADR.
24

V.

CONCLUSION

For the foregoing reasons, defendants' 12(b)(l) motion is denied, 12(b)(6) motion is
granted-in-part and denied-in-part, motion to transfer venue is denied, and motion to stay is
granted for a limited period. An Order consistent with this Memorandum Opinion shall issue.

Dated: April ~ ~ , 2019

25