STUART C IRBY COMPANY v. EASTWAY ELECTRIC LLC et al
Filing
36
ORDER granting 28 Motion for Summary Judgment and denying 29 Motion for Summary Judgment. Ordered by US DISTRICT JUDGE CLAY D. LAND on 6/15/2015 (tlf).
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
UNITED STATES OF AMERICA ex
rel. STUART C. IRBY CO.,
*
*
Plaintiff,
*
vs.
CASE NO. 4:14-CV-47 (CDL)
*
PRO CONSTRUCTION, INC., and
WESTERN SURETY CO.,
*
Defendants.
*
O R D E R
Defendant
Pro
Construction,
Inc.
was
awarded
a
federal
contract to build a gas station on Fort Benning, Georgia.
Construction
subcontracted
Eastway Electric, L.L.C.
the
electrical
work
to
Pro
Defendant
Eastway failed to pay its materialman,
Plaintiff Stuart C. Irby Company (“Irby”).
The United States
for the use and benefit of Irby brought suit against Eastway for
breach of contract and against Defendants Pro Construction and
Western Surety Co. for payment under the Miller Act, 40 U.S.C.
§ 3131 et seq.
Default judgment was entered against Eastway.
Irby has now filed a motion for summary judgment (ECF No.
28) on its claims against Pro Construction and Western Surety
Co., arguing that it is entitled to recover on its Miller Act
claim as a matter of law.
Pro Construction and Western Surety
Co. respond with a summary judgment motion of their own (ECF No.
29), contending that the undisputed evidence establishes that
Irby did not timely notify Pro Construction of its claim and did
not have a good faith belief that the materials it supplied were
for the work specified in the applicable contract, and thus Irby
cannot prevail on its Miller Act claim.
For the reasons set
forth below, Irby’s motion for summary judgment is granted and
Defendants’ motion is denied.
SUMMARY JUDGMENT STANDARD
Summary judgment may be granted only “if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).
In determining whether a
genuine
Fed. R.
dispute of
material fact exists to defeat a motion for summary judgment,
the evidence is viewed in the light most favorable to the party
opposing summary judgment, drawing all justifiable inferences in
the opposing party’s favor.
477 U.S. 242, 255 (1986).
Anderson v. Liberty Lobby, Inc.,
A fact is material if it is relevant
or necessary to the outcome of the suit.
Id. at 248.
A factual
dispute is genuine if the evidence would allow a reasonable jury
to return a verdict for the nonmoving party.
Id.
The Court
will consider each party’s motion on its own merits, resolving
all
reasonable
inferences
under consideration.
against
the
party
whose
motion
is
Am. Bankers Ins. Gr. v. United States, 408
F.3d 1328, 1331 (11th Cir. 2005).
2
FACTUAL BACKGROUND
In 2012, the
Service
awarded
United States
Defendant
Army and Air Force Exchange
Pro
Construction
a
contract
to
construct a gas station/convenience store on Fort Benning (“the
Project”).
Pro
Construction
furnished
a
payment
bond
in
connection with the Project, which identified Pro Construction
as the principal and Defendant Western Surety as the surety.
Pro Construction entered a subcontract with Defendant Eastway
Electric,
under
material,
and
which
equipment
Eastway
for
was
to
electrical
provide
work
Plaintiff Irby sells electrical materials.
all
on
the
labor,
Project.
Eastway established
an open account with Irby in August 2012, allowing Eastway to
purchase materials from Irby on credit.
pay
Irby
for
the
materials.
Irby
Eastway did not fully
is
owed
an
outstanding
principal amount of $39,594.08 on sixteen invoices it issued to
Eastway pursuant to the open account.
The agreement between
Eastway and Irby imposed a 1.5% per month service charge on
outstanding amounts of any invoice not paid by its due date.
Eastway
ordered
materials
March 2013 through June 2013.
from
Irby
from
approximately
Each of Irby’s invoices indicated
that the materials Eastway ordered were to be shipped to “Job
Patton Village,” the name by which the Project was designated in
Irby’s
accounting
system.
Eastway on June 13, 2013.
Irby
last
furnished
materials
to
On or about August 28, 2013, Irby
3
served
a
“Claim
Against
Payment
or
Lien
Bond”
whereby
claimed that it is owed $39,545.50 on the Project.
Irby
Defendants
received the Notice of the Claim on September 6, 2013.
Notice
(i)
identifies
the
Project,
(ii)
states
that
The
Eastway
failed to pay Irby for materials Irby supplied for the Project,
(iii) states the principal amount owed to Irby with sufficient
specificity, (iv) identifies Pro as the general contractor and
Western as the surety, (v) demands payment, and (vi) states that
Irby will file suit to recover the amount owed if it is not
paid.
Irby initiated this action on February 24, 2014 asserting
its claims under the bond against Defendants.
Of the sixteen invoices at issue, three cover materials
supplied to Eastway after May 19, 2013, the date Defendants
allege Eastway certified to Pro Construction that it completed
its work on the Project.
Irby argues that Eastway’s work on the
Project continued well after that date.
Two invoices cover
materials supplied to Eastway on or after June 10, 2013, the
date the Project was turned over to its owner.
Irby argues that
work continued on the Project after that date.
Irby
supplied
addresses.
2013,
to
Eastway
were
shipped
to
The materials
five
different
For the invoices dated June 1, June 10, and June 11,
Eastway
instructed
Irby
to
deliver
the
products
Eastway’s corporate offices instead of the Project site.
to
While
Eastway was working on the Project, it was working on two other
4
projects
Eastway
including
with
one
products
at
Fort
Benning,
and
for
those
projects
while
products to Eastway for the Project.
Irby
it
supplied
supplied
The parties agree that
Eastway failed to pay Irby for materials for the Project and
that Irby is owed an outstanding balance.
The parties disagree,
however, on whether Irby satisfied each element of its Miller
Act claim such that Defendants are responsible under the payment
bond for the amount Eastway owed Irby.
DISCUSSION
The
Miller
Act
requires
a
general
contractor
that
is
awarded a federal construction contract to furnish a payment
bond to protect persons supplying labor and material for the
project.
40 U.S.C. § 3131(b)(2); United States ex rel. Krupp
Steel Prods., Inc. v. Aetna Ins. Co., 831 F.2d 978, 980 (11th
Cir. 1987).
“A person having a direct contractual relationship
with a subcontractor . . . may bring a civil action on the
payment bond on giving written notice to the contractor within
90 days from the date on which the person . . . supplied the
last of the material for which the claim is made.”
§ 3133(b)(2).
40 U.S.C.
Irby argues that Pro Construction and Western
Surety are liable under the payment bond’s terms and the Miller
Act
for
the
outstanding
principal
Eastway.
5
balance
Irby
is
owed
by
I.
Irby’s Motion for Summary Judgment
For Irby to recover under the Miller Act, it must prove “1)
that materials were supplied for work in the particular contract
at issue; 2) that [it] is unpaid; 3) that [it] had a good faith
belief that the materials were for the specified work; and 4)
that jurisdictional requisites are met.”
Krupp, 831 F.2d at
980.
Irby argues that the current record establishes each of
these
elements.
Defendants
respond
that
the
present
record
demonstrates that Irby did not have a good faith belief that all
of the materials for which it seeks payment were provided for
the
Fort
Benning
jurisdictional
claims.
A
job
and
requirement
plain
of
reading
that
Irby
providing
of
the
has
timely
present
not
met
notice
record
of
the
its
refutes
Defendants’ arguments.
A.
Miller Act’s Good Faith Requirement
As long as Irby had a good faith belief the materials it
supplied to Eastway were for the specified work in the contract
at
issue,
“delivery
to
the
job
site
or
actual
use
in
the
prosecution of the work is immaterial to a right of recovery.”
Id.
The present record reveals that Irby had a practice of
ensuring that its accounting systems reflect the correct project
for which its customers order materials, and each invoice for
which it now seeks payment indicates that the materials were for
“Job
Patton
Village,”
the
Project’s
6
designation
in
Irby’s
accounting system.
Pl.’s Mot. for Summ. J. Ex. A., McCan Decl.
¶¶ 23-26, ECF No. 28-3.
Each invoice also reflects delivery to
either the Project site or Eastway’s offices.
Id. ¶ 20; McCan
Decl. Ex. 3, Invoices and Proof of Delivery, ECF No. 28-3 at 958.
The record also shows that Pro Construction agreed that
Irby believed the materials were for use on the Project.
See
id. Ex. B, Hutchinson Dep. 55:4-7, ECF No. 28-4 (“Q: [I]s it
Pro’s position that Irby knew that Eastway was allegedly using
these materials on other projects?
A: No.”).
Defendants rely on the following to establish that Irby did
not have a good faith belief that the materials were being used
for the project in question or that a genuine factual dispute
exists on this issue.
First, the Project was turned over and
accepted as complete on June 10, 2013, Hutchinson Dep. 15:5-7,
and two of Irby’s invoices show materials shipped to Eastway on
or after that date.
McCan Decl. Ex. 5, ECF No. 28-3.
Second,
Irby shipped products to Eastway after May 19, 2013, which is
the date it argues Eastway completed its scope of work on the
Project.
No.
Hutchinson Dep. Ex. 16, Application for Payment, ECF
29-18.
Third,
Eastway
simultaneously
worked
on
other
projects with Irby serving as its supplier, and those projects
were
not
completed
on
June
10,
2013.
McCan
Dep.
27:16-23.
Fourth, Eastway instructed Irby to ship materials to multiple
addresses that were different from the original shipment address
7
for the Project.
Fifth,
several
McCan Dep. Ex. 22 at 3, 9, 32, 34, & 38.
shipments
included
materials
been incorporated into the Project.
that
had
already
For example, one invoice
described ballasts for fluorescent light fixtures, but the light
fixtures
for
included.
the
Project
came
preassembled
Hutchinson Dep. 44:2-9.
with
ballasts
Defendants argue that the
item would already have been installed at the Project before the
date
Irby
shipped
it
to
allegedly
Hutchinson Dep. 51:10-20.
be
used
for
the
Project.
Sixth, Irby would have learned that
the principals of Eastway had a history of financial problems if
it had investigated Eastway’s and/or its principals’ business
practices.
that
Justen Aff. ¶ 7, ECF No. 31-1.
Irby
failed
Eastway’s
bank
references.
to
seek
a
reference,
personal
or
to
guarantee,
check
McCan Dep. 14:24-17:15.
Defendants allege
to
Eastway’s
contact
business
Seventh, Irby admitted
that it has no direct evidence that its products went to the
Project, but rather stated that it was relying on the “trust” of
Eastway.
McCan Dep. 66:7-14.
These facts are not inconsistent with Irby’s good faith
belief that the materials it supplied to Eastway were being used
on the project in question.
admitted
Irby’s
good
faith
Significantly, Defendants arguably
belief
under
Local
Rule
56.
Furthermore, Pro Construction testified that Irby did not know
that
Eastway
was
allegedly
using
8
the
materials
on
other
projects.
It is also noteworthy that Defendants’ speculation
about Irby’s belief is based on four invoices totaling $479.20.
Its arguments do not even apply to the vast majority of the
invoices for which Irby seeks payment.
Whether Irby evaluated
Eastway’s credit risk also does not support any inference that
it
did
not
appropriate
Eastway with
believe
the
project.
materials
And
the
fact
were
being
that
used
Irby
on
the
was
supplying
materials for other projects does not
raise an
inference that Irby believed the materials were for those other
projects
considering
Patton Village.”
that
each
invoice
here
was
marked
“Job
Moreover, as to the timing of the shipments
and the invoices, Defendants admit that work continued after
June
10,
working
2013
after
application.
on
it
the
Project
and
allegedly
Hutchinson
Dep.
that
submitted
74:8-11;
Eastway
its
95:3-9.
was
final
on
site
payment
Delivery
of
materials to different locations including Eastway’s corporate
office also does not suggest that Irby knew the materials were
being used for other projects given the uncontradicted testimony
from Irby’s corporate representative that changes in delivery
location are common for construction on military bases and that
delivery to a contractor’s offices is routine for smaller items
that can get overlooked at a busy job site.
25.
McCan Dep. 38:15-
Finally, shipment of materials already incorporated into
the Project does not show that Irby knew the items were for a
9
different
project,
particularly
in
light
of
the
fact
that
Eastway indicated that the original lighting fixtures did not
work due to architectural changes.
Even
viewing
the
facts
in
McCan Dep. 40:9-41:5.
the
light
most
favorable
to
Defendants as is required in analyzing Irby’s motion for summary
judgment, Defendants have not shown a genuine factual dispute
exists as to whether Irby had a good faith belief that the
materials it supplied were for use in the Project.
The record
clearly establishes that this element of its Miller Act claim
has been met.
B.
Miller Act’s Notice Requirement
The
Miller
Act
requires
a
supplier
with
a
“direct
contractual relationship” with a subcontractor to give written
notice to the prime contractor within ninety days from the date
on which the supplier “supplied the last of the material for
which
such
claim
is
made.”
40
U.S.C.
§
3133(b)(2).
Irby
produced evidence that it mailed its Notice on September 3, 2013
and that it was received by Pro Construction on September 6,
2013.
It is undisputed that Irby last supplied materials to
Eastway on June 13, 2013 and that it gave Defendants written
notice of its claim within ninety days of that date.
maintain,
however,
that
because
Irby
supplied
Defendants
materials
to
Eastway on an open account basis, it was required to provide
notice of its claim within ninety days of each invoice, which
10
Irby did not do.
Although
some
district
courts
have
adopted
Defendants’
position, no circuit court that has considered the issue has
done so.
The Court today sides with the circuit courts.
See,
e.g, Ramona Equip. Rental, Inc. v. Carolina Cas. Ins. Co., 755
F.3d
1063,
1068
(9th
Cir.
2014)
(“[W]hen
there
is
an
open
account, a ninety-day notice is timely even when it includes
material furnished more than ninety days before the notice.”).
Irby’s notice was timely as a matter of law.
C.
Accrued Service Charges, Prejudgment Interest, PostJudgment Interest, and Attorneys’ Fees
Irby seeks summary judgment for the undisputed principal
amount that Eastway owed on its account plus accrued service
charges, pre-judgment interest, and attorneys’ fees.
argue that
the service
charges
Defendants
that Irby seeks are actually
interest charges, and therefore, to prevent a double recovery,
Irby cannot recover those charges in addition to prejudgment
interest.
In support of its argument, Defendants rely on a
district court decision from the Northern District of Georgia.
See Consol. Container Co. LP v. Package Supply & Equip. Co.,
Inc., No. 1:09-CV-01478, 2009 WL 3365949, * 2 (N.D. Ga. Oct. 19,
2009)
The situation here is distinguishable.
statements
interest.
make
it
clear
that
the
service
Irby’s account
charge
is
not
The “Sales Terms” that are part of Eastway’s credit
11
application provide that the customer agrees that the service
charge
is
“to
reimburse
[Irby]
for
the
additional
cost
of
carrying his delinquent account [] and further, that such charge
is not an interest charge . . . .”
McCan Decl. Ex. 1, Terms and
Conditions of Sale ¶ 3, ECF 28-3.
Eastway clearly agreed that
the service charge here was not interest.
It was designed to
cover the cost of having to maintain a delinquent account, and
not
for
the
cost
outstanding balance.
of
being
deprived
of
the
benefit
of
the
Awarding pre-judgment interest in addition
to the agreed upon service charge does not result in a double
recovery.
Moreover, Defendants have pointed to no authority
that would support ignoring the parties’ agreement, particularly
given the commercial nature of the transaction.
The agreement between Eastway and Irby also provided for
the recovery of attorneys’ fees.
that
where
a
contractual
The Eleventh Circuit has held
provision
between
a
supplier
and
subcontractor provides for the recovery of attorneys’ fees, the
provision is enforceable under the Miller Act as against the
general contractor and the surety.
United States ex rel. Se.
Mun. Supply Co., Inc. v. Nat’l Union Fire Ins. Co., 876 F.2d 92,
93 (11th Cir. 1989), reh’g denied, 886 F.2d 1322 (11th Cir.
1989).
fees.
Therefore, Irby is entitled to recover its attorneys’
The court will determine the amount of fees recoverable
and whether O.C.G.A. § 13-1-11 limits the amount of those fees
12
when
the
Court
considers
Irby’s
post-judgment
motion
for
attorneys’ fees.
D.
Irby’s Mitigation of Damages
Defendants argue that Irby is not entitled to recover the
amount it seeks because it failed to mitigate its damages.
Court
finds
that
Irby
this
argument
should
have
unpersuasive.
checked
the
Defendants
business
The
complain
history
and
operations of Eastway and its principals; that it failed to
follow its own policy for new accounts because it did not obtain
personal guarantees from Eastway’s owners; and that it should
have requested a joint check arrangement with Pro Construction
as it had with general contractors on other jobs.
But as Irby
points out, an obligation to mitigate arises after a contract is
breached.
Defendants do not explain how alleged failures before
the breach here give rise to a mitigation of damages defense.
Defendants
materials
default.
to
also
Eastway
complain
even
that
after
Irby
continued
Eastway’s
to
account
ship
was
in
Irby required Eastway to pay its invoices by the end
of the month following the month in which the invoice was sent.
McCan
Dep.
22:10-16.
Eastway
failed
continued to ship products to Eastway.
to
do
so,
but
Irby
McCan Dep. 23:4-24:12.
Irby received payment from Eastway on June 5th, 2013 for all of
its
March
outstanding
invoices.
invoices
McCan
are
Dep.
dated
13
21:17-22:3.
April
5th
through
The
current
June
11th,
2013.
The earliest invoice did not become due until May 31st,
2013.
Only three of the at-issue invoices were invoiced after
that date, and the last was issued less than two weeks after
that date.
Moreover, Eastway had
previously
invoices two months after they were invoiced.
paid its March
The Court finds
that this conduct does not preclude Irby’s recovery.
Based
judgment
entitled
on
is
to
outstanding
the
foregoing,
granted.
It
recover
the
principal
Plaintiff’s
is
undisputed
following
balance
motion
of
that
from
$39,594.08;
for
summary
Plaintiff
Defendants:
accrued
is
the
service
charges of $14,489.68; prejudgment interest of $3,076.46; postjudgment interest at the legal rate; and reasonable attorneys’
fees and costs to be determined after review of Irby’s postjudgment motion.
II.
Defendants’ Motion for Summary Judgment
Based on the same rationale supporting the Court’s granting
of Plaintiff’s motion for summary judgment, the Court denies
Defendants’ motion for summary judgment.
CONCLUSION
Irby’s Motion for Summary Judgment (ECF No. 28) is granted,
and Defendants’ Motion for Summary Judgment (ECF No. 29) is
denied.
The Clerk shall enter judgment in favor of Stuart C.
Irby Co. and against Pro Construction, Inc. and Western Surety
Co., jointly and severally, as follows:
14
(i)
the principal balance of $39,594.08,
(ii)
accrued service charges of $14,489.68,
(iii) prejudgment interest of $3,076.46, and
(iv)
post-judgment interest that will accrue at the legal
rate.
Plaintiff is also entitled to recover its attorneys’ fees
and shall file its motion for attorneys’ fees pursuant to the
Court’s Local Rules and other applicable law.
IT IS SO ORDERED, this 15th day of June, 2015.
_S/Clay D. Land
CLAY D. LAND
CHIEF U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA
15
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