The United States of America for the Use and Benefit of TSI Tri-State Painting, LLC v. Federal Insurance Company

Filing 26

ORDER denying Defendant Federal Insurance Company's 8 Motion to Dismiss, or in the Alternative, to Stay this Action. Signed by Chief Judge Lisa G. Wood on 12/20/2016. (ca)

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THE

UNITED

FOR

THE

STATES

USE

AND

OF

AMERICA

BENEFIT

OF

TSI TRI-STATE PAINTING, LLC,

Plaintiff,

CV 216-113

V.

FEDERAL INSURANCE COMPANY,
Defendant.

ORDER

Before the

Court is

Defendant

Federal Insurance

Company's

(^'Federal") Motion to Dismiss or, in the Alternative, to Stay
this

Action

(Dkt.

No.

8).

For

the

reasons

stated

below.

Federal's motion is DENIED.
BACKGROUND

The facts

stated

herein are

taken solely from

Plaintiff

Tri-State Painting, LLC's (^^TSI") Complaint and are assumed to

be true, pursuant to Rule 12(b)(6).
limited

liability

corporation

Georgia.
provides

A0 72A

(Rev. 8/82)

Dkt. No. 1 % 1.
surety

bonds

TSI is a New Hampshire

licensed

to

do

business

in

Federal is an insurance company which
to

companies

entering

construction

contracts with the federal government.

% 2.

not a party to the contract at issue here.

Federal was

Instead, Federal

acted as a surety to the primary contractor, Sauer Incorporated
C'Sauer").

Sauer, in turn, entered into a primary contract with

Naval Facilities Engineering Command SE {the ^^Government").

TSI

was a subcontractor to this primary contract.
On or about June 24, 2011, the Naval Facilities Engineering

Command SE issued a Request for

Proposal.

M. H

6.

On

September 23, 2011, the Government and Sauer entered into a
contract

for

the

rehabilitation

of

Wharf

2

at

the

Naval

Submarine base in Kings Bay, Georgia (the '"Project") at a price

of $28,126,400.00.

M. f 7.

One element of the Project was

paint removal and refinishing within Wharf 2.

H 8.

The

Project represented that only a limited area contained leadbased paint.

In

spring

2012,

Sauer

executed

a

subcontract

Coatings for paint removal and replacement.

with

CL

TSI alleges that CL

Coatings refused to execute the subcontract because lead paint
existed in more areas than stated in the contract.

Id. H 13.

Subsequently, Sauer entered into a subcontract with TSI (the
"Contract") to replace CL Coatings.

TSI alleges, however, that

it was never informed that lead-based paint existed in areas

beyond those stated in the original contract.

f 15.

Sauer and TSI executed the Contract on June 15, 2012.

H 18.

Id.

During the start of work, TSI discovered lead paint in

the air in worksites beyond those stated in TSI's contract with

Sauer.

HH 19-22.

Sauer then directed TSI to stop work and

informed the Government of the problem.

accept the result.

However, additional testing revealed high

lead levels in the air.

results

and

work

The Government did not

Ultimately, the Government accepted the

stopped.

renegotiate the Contract.

Sauer

and

TSI

Dkt. No. 1 p. 11.

then

began

to

Changes to the re

negotiated contract included the purchasing of new equipment and
containment

systems

necessary

associated with the lead paint.

to

mitigate

the

problems

lA. at pp. 11-12.

Work on the Project re-commenced with the new systems in

place on July 12, 2013.

Id. H 43.

On or about August 15, 2013,

the containment systems failed due to high winds, and TSI was

forced to stop work.

H 46.

Work restarted, but further

delays occurred because containment systems were not ready for

additional equipment.

H 50.

On September 20, 2013, the Government modified the contract
to

include

an

additional

$6,843,906.88,

with

$4,586,874.70

designated for subcontractor lead-paint work, and an additional

384 days beyond the original contract date.

H 51.

Sauer

reserved its rights against the Government because it claimed
that this amount was insufficient to cover the additional cost.

Id. H 53.
to TSI.

equipment,

Sauer, however, did not pass this time extension on
Nor did Sauer provide any additional funds for new

which

Additional

was required due to the lead contamination.

problems

with

the

containment

systems

occurred.

Eventually, TSI notified Sauer that it could not effectively
work under such conditions.

H 53.

On December 31, 2013, TSI requested an additional 141 days

to complete the Project, but Sauer did not respond.

H 64.

Additional delays and mismanagement occurred in 2014-15.

ultimately stopped work.
TSI refused.

TSI

Sauer ordered TSI to restart work and

TSI alleges that Sauer's

series of

missteps added additional costs to its work.

delays and

]^. at pp. 17-24.

On or about March 23, 2016, TSI submitted a certified claim to

Sauer in the amount of $14,254,752.
Federal

acts

as

Sauer's

certified claim to Federal.

any sum to TSI.

H 85.

surety.

TSI

also

submitted

a

Neither Sauer nor Federal has paid

TSI now brings a claim against Federal for a

Breach of Payment under the Miller Act.

Id.

DISCUSSION

The Miller Act provides that all persons contracting ''for

the construction, alteration, or repair of any public building

or

public

work

of

the

United

States"

at

a

cost

exceeding

$100,000 shall provide a payment bond "for the protection of all

persons supplying labor and material."

40 U.S.C. §§ 3131(b),

3131(b)(2).

The Miller Act allows any person who has furnished

labor or material for the construction of a ^'public building or

public work" and who has not been paid in full to bring a civil
action on the payment bond in federal district court.

§§

3133(b)(1), 3133(b)(3).

Federal does not dispute that the Miller Act applies to
this case.

Instead, Federal argues that TSI's claims must be

dismissed because the Contract bars recovery on TSI's claims for

delay, disruption, or interference under the Miller Act.

No. 14 p. 2-4.

Dkt.

Alternatively, Federal argues that this action

should be stayed pending renegotiation of the agreement between
Sauer

and

the

Government.

Dkt.

No.

8-1

p.

11.

The

Court

addresses each argument in turn.
I.

Federal's Motion to Dismiss

The

Court

first

addresses

Federal's

Motion

to

Dismiss.

When ruling on a Rule 12(b)(6) motion to dismiss, a district
court must accept as true the facts set forth in the complaint
and

draw

all

reasonable

inferences

in

the

plaintiff's

Randall v. Scott, 610 F.3d 701, 705 (11th Cir. 2010).

favor.

Although

a complaint need not contain detailed factual allegations, it
must contain

relief

above

sufficient factual material

the

speculative

level."

Twombly, 550 U.S. 544, 555 (2007).
should

''contain

either

direct

^'to

raise

Bell

a

Atl.

right to

Corp.

v.

At a minimum, a complaint
or

inferential

allegations

respecting all

the

material

elements

necessary to

recovery under some viable legal theory."

sustain a

Fin. Sec. Assurance,

Inc. V. Stephens, Inc., 500 F.3d 1276, 1282-83 (11th Cir. 2007)

(per curiam) (quoting Roe v. Aware Woman Ctr. for Choice, Inc.,
253 F.3d 678, 683 (11th Cir. 2001)).

Federal argues that Paragraph 3 of the Contract provides it
an affirmative defense against TSI's claims.

Dkt. No. 14 p. 2.

Paragraph 3 waives all damages for delays under the condition
that no extension was requested.

Dkt. No. 1-3.

Federal argues

that Paragraph 3 warrants dismissal of any action based upon
delay because 1) Paragraph 3 applies regardless of whether a
time extension was actually granted by Sauer and 2) delays in

the Project were within the parties' contemplation.

Dkt. No. 14

p. 4-6.

Although this action was brought under the Miller Act, this
is effectively a contract case, and the law of the state in
which

the

governs.

agreement

was

executed

and

was

to

be

performed

U.S. f/u/b/o Seminole Sheet Metal v. SCI, Inc., 828

F.2d 671, 675 (11th Cir. 1987).

Therefore, Georgia contract law

governs this case, despite the federal cause of action.
Under Georgia law, ^'no-damages-for-delays" provisions like
Paragraph

3

are

enforceable.

L

&

B

Enters., 482 S.E.2d 279, 280 (Ga. 1997).

Constr.

Co.

v.

Ragan

No-damages-for-delay

clauses may be unenforceable, however, if subject to a condition

precedent which does not occur.

United States f/u/b/o Pertun

Constr. Co. v. Haarvesters Grp., Inc., 918 F.2d 915, 919 (11th
Cir. 1990).

Part one of Paragraph 3 plainly prevents TSI from obtaining
damages for delay:
Sauer shall not be liable to Subcontractor for any delay,

disruption or interference to Subcontractor's Work caused
by . . . (10) unexpected soil or other physical
conditions . . . (13) any other cause
direct control; provided, however, Sauer
with Subcontractor in submitting against

beyond Sauer's
will cooperate
the Owner any

just claim arising from any such delay that is permitted
by the General Contract.

Dkt. No. 1-3 1 3.

However,

part

two

subjects

this

clause

to

a

condition

precedent:

Should

the

Subcontractor's

Work

be

delayed,

disrupted or

interfered with solely as a result of the acts or omissions
of Sauer or anyone employed by Sauer on the Project, then
Subcontractor shall receive an extension of time equal to

the

actual

delay

to

critical

path

activities

caused

by

these delays, as determined by Sauer. . . . An extension of
time,

as

determined

extension

of

time

Subcontractor's

sole

by

Sauer,

shall

be

remedy

or

the

decision

allowed,

for

that

shall

delay.

In

be

no
the

exchange.

Subcontractor expressly waives the right to bring against
Sauer any claim for damage for delay, inefficiency,
disruption,
acceleration,
interference,
extra
work
resulting
from
such
delay,
extended
overhead,
wage
escalation, overtime wage provisions, lost opportunity or
lost profit or financial impact on Subcontractor's other
projects.
Id.

Federal

condition

argues

precedent,

that

subpart

rather

than

(13)

part

of

part

two.

one

is

the

Specifically,

Federal reads part one to mean that Sauer need only '''cooperate"
with TSI in a claim against the Government in order for the nodamage-for-delay

clause

However,

interpretation

this

paragraph,

to

take

effect.
ignores

Dkt.
the

No.

14

entire

p.

5.

second

which creates a condition precedent to the first.

Furthermore, it is plausible subpart (13) is one of thirteen
scenarios in which Sauer is not liable for delay—not a condition

precedent to the other twelve.

Regarding the second part. Federal concedes that it creates
a condition precedent to the no-damages-for-delay clause.

No. 14 p. 6.

Dkt.

Federal asserts, however, that "an extension of

time or the decision that no extension of time" was TSI's only

remedy

under

the

Contract.

However,

TSI

alleges

decision regarding an extension of time was ever made.
54, 64.

that

no

Dkt. 1

Therefore, even if an extension of time or a decision

regarding one was TSI's only remedy, TSI alleges that neither
occurred.

Federal

also

alleges

that

the "delays

in

question" were

within the contemplation of the parties and that the parties
agreed

that "Sauer

omissions."

the

parties'

would

not

Dkt. No. 14 p. 6.

contemplation

could delay the Project.

be

liable

for

its

own

acts

or

Paragraph 3 does indeed indicate

that

some

"unexpected"

Dkt. No. 1-3 f 3.

condition

However, in order

to be free from delay-damage liability, Sauer needed to either

provide an extension or make a decision regarding whether one
would be given.

Again, TSI alleges that Sauer gave no such

extension and made no such decision.

whether

a

delay

was

contemplated,

Therefore, regardless of

Paragraph

3's

effectiveness

relies on the factual question of whether Sauer gave notice of
an

extension

or

not—which

cannot

be

decided

on

a

motion

to

dismiss.

Finally, the Court notes that while Federal relies heavily
on

subsection

assumption:

(13),

that

its

the

reliance

delays

is

due

to

''beyond Sauer's direct control."
that Sauer in fact knew

about

based

excess

on

a

key

lead

factual

levels

were

TSI's complaint alleges

the

excess

lead

levels from

its

previous contract with CL Coatings and, therefore, may have been

able to prevent TSI's delays.

Dkt. No. 1 HH 13, 15.

It is

certainly plausible that Sauer knew about the excess lead paint
issue

and

failed

allegations

as

to

true,

notify

the

TSI.

Court

Therefore,

denies

taking

Federal's

all

Motion

to

Dismiss.

Federal repeatedly points to a "TSI Claims" document from
TSI which appears to indicate the extent of TSI's damages for
various claims in this case.

TSI argues that the Court should

disregard

it

Complaint.
documents

this

document

as

The Court agrees.
attached

to

a

is

not

"central"

to

TSI's

At the motion-to-dismiss stage,

motion

to

dismiss

are

not

properly

considered

by

the

court

unless

(1)

they

are

plaintiff's claim, such as a contract in a

central

to

the

breach-of-contract

action, and (2) their authenticity is not challenged.

Horsley

V. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002).

Essentially, the Plaintiff's Complaint must be ^^based on"
the TSI Claims document in order for the Court to consider it at

this stage.

Carter v. HSBC Mortg. Servs., Inc., 622 F. App'x.

783, 787 (11th Cir. 2015).

This is plainly not the case here.

TSI's Complaint is based on the Contract and its provisions, not
the TSI Claims document.

Dkt. No. 1.

Regardless, the

Court

finds that the TSI Claims document is non-dispositive at this

stage.

The TSI Claims document does nothing to establish that

Sauer is not liable for breach of
believe

that the

those damages.

Government could

contract—only that TSI may
be

responsible

for some

of

This is an insufficient basis for the Court to

grant a motion to dismiss.
II.

Motion to Stay

Federal
stayed

alternatively

pending

argues

negotiation

between

regarding additional compensation.

that

this

Sauer

and

case

should

the

be

Government

Dkt. No. 8-1 p. 10.

The

Court should not exercise its power to stay proceedings lightly.
^^When confronted with a motion to stay, the district court must
consider

caseload,

its

and

own

interests

the

parties'

in

an

orderly

competing
10

disposition

interests

in

of

its

the

two

actions."

Markel Int^l Ins. Co.

1374, 1376

{S.D.

Ga. 2008)

v.

O^Quinn, 566 F. Supp. 2d

(citation omitted).

The power to

stay a proceeding is ''incidental to the power inherent in every
court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for

litigants."

Landis v. N. Am. Co., 299 U.S. 248, 254 (1936).

district court therefore

determining

whether

a

has

broad

stay

is

A

discretionary authority in

appropriate.

CTI-Container

Leasing Corp. v. Uiterwyk Corp., 685 F.2d 1284, 1288 (11th Cir.
1982); see also Chudasama v. Mazda Motor Corp., 123 F.3d 1353,
1366 (11th Cir. 1997) ("[D]istrict courts enjoy broad discretion

in deciding

making

its

how

best to manage the case

determination,

a

court "must

before them.").

In

. . . examine

the

relative prejudice and hardship worked on each party if a stay
is or is not granted."

Pise v. Express Marine, Inc., 2008 WL

2163920, at *3 (S.D. Ala. May 19, 2008).
The

stayed.

Miller

Act

controls

whether

this

action

should

be

The Miller Act provides a federal cause of action for

subcontractors
involving

the

completing

seeking

payment

government.

its

judgment on the

work,

a

If

in
not

construction
paid

subcontractor

surety bond.

within

may

sue

90
and

contracts
days

of

collect

40 U.S.C. § 3133(b)(1).

The

Miller Act is "highly remedial in nature" and "entitled to a
liberal

construction

and

application
11

in

order

to

properly

effectuate the Congressional intent to protect those whose labor
and material go into public projects."
Sherman

v.

Carter,

353

U.S.

210,

216

United States ex rel.
(1957)

(references

and

citations omitted).

However,

waived

where

the

the

subcontractors'

Miller

Act

rights

subcontract contains a provision

may

making

be

the

disputes clause of the primary contract expressly applicable to
the subcontract, and where the subcontract contains an express
waiver of the subcontractor's Miller Act remedy.

United States

V. David Boland, Inc., 922 F.Supp. 597 (S.D. Fla. 1996).

Thus,

the Court looks to the four corners of the contract to determine
if both conditions have been met.

Federal argues that the Contract binds TSI to any dispute
resolution Sauer engages in with the Government.

12.

TSI argues

that the

Contract does

Dkt. No. 22 p.

not require

dispute

resolution between TSI and the Government, but only between TSI

and Sauer.

Id. at p. 13.

It is undisputed that Sauer has not

requested that TSI engage in arbitration with it.

Therefore,

the only question before the Court is whether it should stay
this

case

while

Sauer

negotiates

its

contract

with

the

Government.

Federal

points

to

Paragraphs 3, 9, and 14.

three

provisions

in

the

Contract:

However, the Court finds that only

Paragraph 14, '^Claims; Dispute Resolution" is relevant:
12

If Sauer and [TSI] have a dispute arising under or relating
to the Agreement or its breach, which involves the
correlative rights or duties of Owner, such dispute shall
be decided in accordance with the General Contract. . . .

[TSI] and its surety, if any, shall be bound to Sauer to
the same extent that Sauer is bound to Owner by the terms

of

the

General

determinations

Contract,

made

under

and
the

by

any

General

decisions

Contract

by

or
any

authorized person, board, court, or other tribunal.
Federal urges the

Court to compare

Paragraph 14

to the

contract provision in a similar case. United States v. David
Boland, Inc., 922 F. Supp. 597 (S.D. Fla. 1996).

As is the case

here, Boland involved a subcontractor's claim against a general
contractor under the Miller Act.

presented

before

the

Boland

Id. at 598.

court,

like

the

The question

one

here,

was

whether the subcontractor's claims should be stayed pending the

resolution of the prime contract between the government and the

primary contractor.
finding

that

the

The Court found in the affirmative,
contract

contained '"clear

and

unambiguous"

language indicating that the subcontractor's action was to be

stayed.
language

at 599.
here.

However, the Court finds no such clear

Where

the

provision

in

Boland

expressly

indicated that the subcontractor agreed to a stay in the event
of mediation between the prime contractor and the government, no

such language is present in this case.

In fact, the word "stay"

is plainly absent from the above provision.
Furthermore,

would

effectively

the

be

Court

is

wary

indefinite.
13

of

granting

The

Eleventh

a stay

Circuit

that

has

previously

indicated

disfavor

regarding

indefinite

stays.

Ortega Trujillo v. Conover & Co. Commc^nS/ 221 F.3d 1262 (11th
Cir. 2000); King v.

Cessna Aircraft Co.,

505 F.3d 1160 (11th

Cir. 2007).

Federal has provided no compelling reasons why this

case

be

should

stayed indefinitely,

nor

does

the

contractual

language indicate mandatory waiver of TSI's Miller Act rights.
Thus,

the

Court

denies

Federal's

request

to

stay

these

proceedings.
CONCLUSION

For the reasons set forth above, it is hereby ordered that

Defendant Federal Insurance Company's Motion to Dismiss or, in
the Alternative, to Stay this Action (Dkt. No. 8) is DENIED.

SO ORDERED, this 20th day of December, 2016.

LISA GODBEY WOOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

14