Tarmac America, LLC v. Pro Way Paving Systems, LLC et al

Filing 82

ORDER: Defendant Ullico Casualty Company and Intervenor-Plaintiff R.A. Connelly's Motion for a Permanent Stay of Proceedings 79 is DENIED. The Clerk is directed to LIFT THE STAY and to return this case to active status. The Clerk is directed to enter an Amended Case Management and Scheduling Order extending the deadlines for this action and setting this case for the August 2014 trial term. Signed by Judge Virginia M. Hernandez Covington on 10/15/2013. (LRM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
UNITED STATES FOR USE OF
TARMAC AMERICA, LLC,
Plaintiff,
v.

Case No. 8:12-cv-867-T-33EAJ

PRO WAY PAVING SYSTEMS,
LLC, ET AL.,
Defendants.
___________________________/
ORDER
Now

before

the

Court

is

Defendant

Ullico

Casualty

Company and Intervenor-Plaintiff R.A. Connelly’s Motion for
a Permanent Stay of Proceedings. (Doc. # 79). Defendant /
Cross-Plaintiff Pro Way Paving Systems, LLC and Defendant
Robert Vollmer responded to the Motion on August 26, 2013.
(Doc. # 81). Plaintiff, United States for Use of Tarmac
America, LLC failed to respond to the Motion, and the time
for such a response has now passed. For the reasons that
follow, the Court denies the Motion.
I.

Background and Procedural History
In September of 2010, R.A. Connelly, Inc. contracted

with the Department of the Air Force 6th Mobility Wing for
multiple construction projects at MacDill Air Force Base.

(Doc. # 35-1). Connelly obtained two payment bonds from
Ullico Casualty Company on September 23, 2010. (Doc. ## 331, 35-3). Pro Way, Vollmer, and Tarmac allege that the
bonds were executed pursuant to 40 U.S.C. § 3131, known as
the Miller Act. (Doc. ## 33 at 2, 36 at 7-8). Connelly
subcontracted with Pro Way for a portion of the work at the
base. (Doc. # 35-2). Pro Way,

in turn, contracted with

Tarmac

Pro

to

supply

materials

to

Way

for

use

on

the

MacDill projects. (Doc. ## 33-2, 33-3, 33-4). Vollmer, Pro
Way’s manager (Vollmer Aff. Doc. # 41-1 at ¶ 1), signed the
credit agreement between Tarmac and Pro Way (Doc. # 33-2)
and guaranteed Pro Way’s payment obligation to Tarmac (Doc.
# 33 at ¶ 14).
Tarmac initiated this action against Pro Way, Vollmer,
and Ullico on April 20, 2012 (Doc. # 1), and filed an
Amended Complaint against the same on August 15, 2012 (Doc.
# 33). The Amended Complaint alleged five counts: Count I
was

brought

stated

against

against

Pro

Ullico;
Way;

Counts

II,

IV,

Count

III

alleged

and

and

V
a

were
claim

against Vollmer. (Id.).
Tarmac filed a Motion for Summary Final Judgment on
October

4,

2012

(Doc.

#

38),

and

on

December

5,

2012,

Tarmac filed a notice of voluntary dismissal with prejudice

2

of its claims against Ullico (Doc. # 45). However, Pro Way
has

filed

a

cross-claim

against

Ullico

(Doc.

#

36),

therefore Ullico is still a party in this action. The Court
granted

Connelly’s

Unopposed

Motion

to

Intervene

as

Plaintiff on December 11, 2012. (Doc. # 48). Connelly filed
his intervener’s Complaint against Pro Way on December 11,
2012.

(Doc.

#

49).

Pro

Way

answered

the

intervener

Complaint and counterclaimed against Connelly on December
24, 2012. (Doc. # 52).
On

January

18,

2013,

the

Court

granted

Tarmac’s

Motion for Summary Judgment and declined to certify the
judgment as final under Federal Rule of Civil Procedure
54(b). (Doc. # 54). On March 4, 2013, the Court granted
attorneys’ fees and costs to Tarmac (Doc. # 59), and on May
9, 2013, the Court denied Defendants Pro Way and Vollmer’s
Amended Motion to Modify Order Granting Motion for Fees
(Doc. # 75).
On March 22, 2013, Ullico, Connelly, Vollmer, and Pro
Way filed a joint Motion to Stay Proceedings or in the
Alternative,

Motion

for

Leave

to

Propose

Modified

Scheduling Order, stating:
1.
On March 11, 2013, the Court of Chancery of
the State of Delaware in the case entitled State
of Delaware ex rel v. Ullico Casualty Company,

3

Case Number 8392-VCG entered a Rehabilitation and
Injunction Order . . . , which declared, inter
alia, that Defendant Ullico Casualty Company is
“impaired insolvent, in unsound condition, and in
such
condition
as
to
render
its
further
transaction
of
insurance
presently
or
prospectively hazardous to its policyholders.”
See Exhibit A.
2.
The Order further states, in Para. 10, that
“all officers, directors, agents, servants, and
employees of [Defendant Ullico Casualty Company],
and all other persons and entities having notice
of these proceedings or of this Order, are hereby
prohibited
from
instituting
or
further
prosecuting any action at law or in equity or in
other
proceedings
against
[Defendant
Ullico
Casualty Company], . . . or from obtaining
preferences, judgments, attachments, or other
like liens or encumbrances, or foreclosing upon
or making any levy against [Defendant Ullico
Casualty Company] or the Assets, or exercising
any right adverse to the right of [Defendant
Ullico Casualty Company] to or in the Assets . .
. .” Id.
(Doc. # 65 at ¶¶ 1-2) (quoting Doc. # 65-1 at ¶¶ 1, 10).
Ullico, Connelly, Vollmer, and Pro Way further noted that
“By virtue of the [Rehabilitation and Injunction] Order,
counsel for Defendant Ullico . . . is effectively enjoined
from further participation in this action” at this time.
(Id. at ¶ 3).

On May 9, 2013, the Court granted the joint

Motion to Stay Proceedings and directed the Clerk to stay
and administratively close the case “until such a time as
the

Insurance

Commissioner

for

the

State

of

Delaware

provides permission for Defendant Ullico Casualty Company

4

to proceed with this matter or until there is a revision of
the Rehabilitation and Injunction Order . . . entitling
Defendant Ullico Casualty Company to prosecute this claim.”
(Doc. # 76 at 8). The parties were further directed to file
status reports with the Court every ninety days. (Id. at
9).
In a status report dated August 7, 2013, the parties
notified

the

Court

that

“following

the

March

27,

2013,

Rehabilitation and Injunction Order, the Court of Chancery
of

the

State

of

Delaware

issued

a

Liquidation

and

Injunction Order with Bar Date, dated May 30, 2013, with
respect to Ullico.” (Doc. # 77 at ¶ 1) (emphasis added).
Pointing

to

Injunction

paragraph

Order,

the

eleven
parties

of

the

state

Liquidation

that

“the

and

Chancery

Court of the State of Delaware has permanently enjoined all
parties

and

their

counsel

in

the

instant

action

from

further prosecuting any claims against Ullico.” (Id. at ¶
3)

(emphasis

“[b]y

virtue

Injunction
enjoined
action
further

of

Similarly,

Paragraph

Order,

all

from

added).

the

parties
making

directed

Chancery
and

any

that

13

the
of

parties
the

Court

claim

Liquidation
of

Delaware

their

counsel

in

claims

against

Ullico

any

such

5

claims

be

the

made

that
and
has

instant
and

has

in

the

liquidation
Chancery

proceedings

Court.”

of

(Id.

at

Ullico
¶

5).

pending
Finally,

before
the

the

parties

informed the Court that pursuant to “Paragraph 14 of the
Liquidation [and Injunction] Order, each and every surety
bond

issued

by

Ullico

which

might

be

relevant

to

the

instant action were cancelled and terminated as of June 30,
2012.” (Id. at ¶ 10).
In

light

of

the

parties’

representation

that

all

claims against Ullico – including the federal Miller Act
claim

–

are

permanently

barred

from

proceeding

in

this

Court, the Court directed the parties to “advise the Court
as to how they wish to proceed in this action.” (Doc. #
78). Ullico and Connelly responded by filing the instant
Motion for a Permanent Stay of Proceedings. (Doc. # 79).
Pro

Way

and

Vollmer

responded

to

the

Court’s

Order

on

August 16, 2013, stating that they wished to “proceed in
this

Court

with

the

claims

against

.

.

.

Connelly,”

although “the Delaware court’s injunction has the effect of
removing Ullico as a party.” (Doc. # 80 at 1, 2). Pro Way
and Vollmer make similar statements in their response to
the Motion for a Permanent Stay of Proceedings, filed on
August 26, 2013. (Doc. # 81). Plaintiff United States for

6

Use of Tarmac America, LLC failed to respond to either the
Court’s Order or Ullico and Connelly’s Motion.
II.

Discussion
Pursuant to 18 Del. C. §§ 5905, 5906, and 5910(b), the

Insurance Commissioner of the State of Delaware, in her
capacity as the Receiver of Ullico, requested the entry of
the

Liquidation

and

Injunction

Order

as

to

Ullico

and,

pursuant to its power under the same statutes, the Delaware
Court of Chancery entered the requested Order. (Doc. # 792). As summarized by Ullico and Connelly, “the Liquidation
Order (1) enjoined all parties and their counsel in the
instant action from making any claims against Ullico; (2)
directed that any such claims be made in the liquidation
proceedings of Ullico pending before the Chancery Court;
and (3) cancelled and terminated each and every surety bond
issued by Ullico which might be relevant to the instant
action as of June 30, 2013. (Doc. # 79 at 4-5).
While this Court does not dispute the Delaware Court
of

Chancery’s

ability

to

“direct[]

the

Commissioner

to

liquidate the business of a domestic insurer” under 18 Del.
C. § 5906, the claims central to this action are federal
Miller Act claims. Federal district courts have exclusive
jurisdiction over Miller Act claims. See 40 U.S.C. § 3133.

7

As such, despite the instructions in the Liquidation and
Injunction Order, the Miller Act claims involving Ullico
may not be brought in the liquidation proceedings pending
before the Delaware Court of Chancery.
In United States, for the use and benefit of ACCA
Construction Services, LLC v. F.A.S. Development Co., Inc.,
304 F. Supp. 2d 1359 (N.D. Ga. 2004), a district court in
the

Northern

District

of

Georgia

considered

factual

and

procedural circumstances very similar to those now before
this Court. In ACCA Construction, a construction company
brought a Miller Act suit seeking to recover on a payment
bond issued by a surety for a development company. Id. at
1360.

After

the

suit

was

filed,

the

North

Carolina

Insurance Commissioner took control of the surety pursuant
to

a

statutory

rehabilitation

process.

Id.

The

North

Carolina statute governing rehabilitation and liquidation
of insurance companies prohibited the further prosecution
of actions against the surety, and the General Court of
Justice,

Superior

Court

Division,

Wake

County,

North

Carolina issued an order of rehabilitation and preliminary
injunction

providing

that

“any

and

all

pending

actions

against [the surety] are hereby stayed effective the date
of this Order.” Id.

8

Considering

a

motion

to

stay

the

proceedings,

the

district court in ACCA Construction noted that there are a
“number of cases in which federal courts have honored state
court

injunctions

when

the

state

courts

are

engaged

in

insurance liquidation proceedings.” Id. However, only a few
cases

address

Construction

the
and

precise
the

issue

instant

presented

cause,

in

“where

both
the

ACCA

action

pending in federal court is a claim pursuant to the Miller
Act.” Id. The ACCA Construction court considered several
such

cases:

U.S.

ex

rel.

Bernard

Lumber

Co.,

Inc.

v.

Lanier–Gervais Corp., 896 F.2d 162 (5th Cir. 1990), U.S. ex
rel. Safeway Steel Products, Inc. v. PI Construction Corp.,
No. CIV. A. 01-0117, 2002 WL 818075 (E.D. La. Apr. 26,
2002),

and

U.S.

ex

rel.

Pittman

Mechanical

Contractors,

Inc. v. Irvine & Assocs., Inc., 645 F. Supp. 845 (E.D. Va.
1986). An examination of those cases may be summarized as
follows:
Though the decisions cited by the parties reach
different conclusions, they agree on at least two
essential principles: federal district courts
have exclusive jurisdiction over Miller Act
claims, and at some point, a federal district
court must decide such a claim. Yet the courts
diverge as to when the Miller Act proceeding
should take place in a way that cannot be
reconciled. Following Pittman, the Court would
conclude
that
the
rehabilitation
court's
injunction can be ignored, and this case can

9

proceed without delay. Following Safeway, the
Court would conclude that consideration should be
given to the rehabilitation proceeding such that
the rehabilitator would be given an opportunity
to consider lifting the injunction for the Miller
Act proceeding. Safeway leaves open the question
of what action this Court should take if the
rehabilitator elects not to lift the injunction.
Following Bernard, the Court would conclude that
the rehabilitation court's injunction should be
given full faith and credit, and this action
should be stayed until the liquidation proceeding
is completed. However, the procedure suggested by
Bernard leaves even more unanswered questions
than Safeway.
ACCA Construction, 304 F. Supp. 2d at 1363.
Ultimately, the court in ACCA Construction held that
“wise judicial administration require[d] that th[e] case be
permitted to proceed” at that time. Id. The court reasoned
that

“[a]llowing

the

case

to

proceed

permits

[the

p]laintiff to have its Miller Act claim adjudicated in the
only forum authorized to do so.” Id.
This Court is in agreement with the court’s rationale
in ACCA Construction. Claims brought pursuant to the Miller
Act

must

reason,

be

resolved

staying

consideration

of

would, in effect,

in

the
the

federal

courts

proceedings
Delaware

and,

for

that

permanently

in

liquidation

proceedings

bar the Miller Act claims from being

adjudicated at all. A permanent stay of the claims against
Ullico would result in a de facto dismissal of the claims

10

against Ullico. Although the Court certainly encourages the
parties to cooperate with one another and, if possible, to
reach an agreement regarding the claims, the Court declines
to permanently stay or tacitly dismiss proceedings which
may only take place in a federal district court. “If the
Court stayed this action . . . the parties would still have
to litigate these issues before this Court as was required
in Bernard” and contemplated in ACCA Construction, or they
would have to forsake the claims entirely. Id. at 1364.
Furthermore,

the

Court

also

finds

that

denying

the

Motion for a Permanent Stay of Proceedings does not violate
notions of comity or federalism. The Court need only decide
“the issue that must be decided by this Court, the amount
of [the Miller Act] claim.” Id. As such, these proceedings
will not “invade the province of the rehabilitator who must
decide on the proper distribution of the assets of” Ullico.
Id. Instead, the “[e]stablishment of [the Miller Act] claim
should

facilitate

the

liquidation

process.

The

rehabilitator will have the benefit of [the] claim being an
established amount rather than a contested amount which the
liquidator is not empowered to resolve.” Id. Accordingly,
the Court will lift the stay on this case and return it to
active status.

11

The Case Management and Scheduling Order (Doc. # 19)
for this action was issued before Pro Way filed its Miller
Act cross claim against Ullico, Connelly intervened in this
action (Doc. # 49), or Pro Way asserted its cross claims
against Connelly (Doc. # 52). Additionally, the September
2013

trial

term

originally

anticipated

by

the

Case

Management and Scheduling Order has now passed. For those
reasons, an Amended Case Management and Scheduling Order
will be issued in this case. The Court is cognizant that
declining

to

regarding

what

violating the

stay

this

actions

matter
the

may

parties

result
can

in

questions

take

Delaware Liquidation and Injunction

without
Order.

Recognizing this dilemma, and in the interests of comity,
the Court will set this case for the August 2014 trial
term, thus allowing Ullico to attempt to obtain authority
to pursue settlement negotiations or to prepare for trial
on the Miller Act claim.
Accordingly, it is now
ORDERED, ADJUDGED, and DECREED:
(1)

Defendant

Ullico

Casualty

Company

and

Intervenor-

Plaintiff R.A. Connelly’s Motion for a Permanent Stay
of Proceedings (Doc. # 79) is DENIED.

12

(2)

The Clerk is directed to LIFT THE STAY and to return
this case to active status.

(3)

The

Clerk

Management

is
and

directed

to

Scheduling

enter
Order

an

Amended

Case

extending

the

deadlines for this action and setting this case for
the August 2014 trial term.
DONE and ORDERED in Chambers, in Tampa, Florida, this
15th day of October, 2013.

Copies:

All Counsel of Record

13