Atlas Copco Compressors LLC v. RWT LLC et al

Filing 50

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT re 32 Motion for Summary Judgment re 35 Motion for Summary Judgment. Signed by JUDGE ALAN C. KAY on 05/17/2017. (eps, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Docket Text Modified on 5/17/2017 (eps, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
___________________________________
)
UNITED STATES OF AMERICA, ex rel. )
ATLAS COPCO COMPRESSORS LLC
)
)
Plaintiff,
)
)
v.
) Civ. No. 16-00215 ACK-KJM
)
RWT LLC and ARCH INSURANCE COMPANY )
)
Defendants.
)
___________________________________)
ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND
DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
For the reasons set forth below, the Court DENIES
Defendants’ Motion for Summary Judgment and Plaintiff’s Motion
for Summary Judgment.
PROCEDURAL BACKGROUND
On May 4, 2016, Plaintiff Atlas Copco Compressors LLC
(“Plaintiff”) filed a Complaint against RWT LLC (“RWT”) and Arch
Insurance Company (“Arch,” and together with RWT, “Defendants”).
Plaintiff alleged that Defendants violated the Miller Act, 40
U.S.C. §§ 3131, 3133.
Both parties have moved for summary judgment and have
filed memorandum, concise statements of fact, responses, and
replies in support of their position.1

1

The Court held a hearing

Plaintiff’s filings include its motion for summary
judgment (“Pl. Motion”) (ECF No. 32); its separate and concise
(continued . . . )
1

on both motions on May 15, 2017.
FACTUAL BACKGROUND
On February 24, 2014, RWT was awarded a contract by
the United States Department of Defense (the “Contract”).
CSF, Ex. 1; Pl. Opp. CSF, Ex. C.

Def.

The Contract required RWT to

“provide all labor, materials, supervision, tools, equipment,
supplies and transportation necessary to Construct P-089 LPA
Satellite Compressor Plant” for a project at the Pearl Harbor
Navy Shipyard (the “Project”).

Id.

On February 25, 2014, RWT provided a payment bond
issued by Arch.

Def. CSF, Ex. 2; Pl. Opp. CSF, Ex. D.

the principal and Arch was the surety on the bond.

Id.

RWT was
The

bond provided, inter alia, that both RWT and Arch were bound

statement of material facts in support (“Pl. CSF”) (ECF No. 33);
its memorandum in opposition to Defendants’ motion for
summary judgment (“Pl. Opp.”) (ECF No. 39); its separate and
concise statement of material facts in opposition (“Pl. Opp.
CSF”) (ECF No. 40); its reply memorandum in support of its
motion for summary judgment (“Pl. Reply”) (ECF No. 45); and its
supplemental concise statement of facts in support of its reply
(Pl. Supp. CSF) (ECF No. 46).
Defendants’ filings include their motion for summary
judgment (“Def. Motion”) (ECF No. 35); their separate and
concise statement of material facts in support (“Def. CSF”) (ECF
No. 36); their memorandum in opposition to Plaintiff’s motion
for summary judgment (“Def. Opp.”) (ECF No. 42); their separate
and concise statement of material facts in opposition (“Def.
Opp. CSF”) (ECF No. 43); and their reply memorandum in support
of their motion for summary judgment (“Def. Reply”) (ECF No.
44).
2

“jointly and severally . . . for the payment or the sum shown
opposite the name of the Surety.”

Id.

On March 11, 2014, RWT notified Plaintiff that it
would be receiving the subcontract for the four air compressors
and two air dryers (“compressors and air dryers” or “equipment”)
that were specified for the Project.

Pl. Opp. CSF, Ex. E.

On

March 13, 2014, Plaintiff provided RWT with a proposal (the
“Proposal”), which included a price quotation for the specified
equipment and Plaintiff’s standard conditions of sale.
CSF, Ex. 4; Pl. Opp. CSF, Ex. F.

Def.

On July 29, 2014, RWT issued a

purchase order (the “Purchase Order”), which included general
terms and conditions of sale, to Plaintiff to supply compressors
and air dryers for the Project in accordance with the Proposal.
Def. CSF, Ex. 3.
On August 28, 2014, Plaintiff’s Vice President
initialed the bottom of each page of the Proposal.

Def. Opp.

CSF, Ex. 3; Pl. CSF, Kiser Decl. ¶ 6; Pl. CSF, Ex. F.

In

September 2014, RWT’s Project Manager initialed the bottom of
each page of the Proposal.

Id.

Plaintiff then began

manufacturing the compressors and air dryers at their facility
in Belgium to meet RWT’s purchase order.

Pl. CSF, Callow Decl.

¶ 5.
In early March 2015, Plaintiff made arrangements for
the shipment of the compressors and air dryers from Belgium to
3

Honolulu, Hawaii.

Id. ¶ 6.

On April 23, 2015, the compressors

and air dryers were discharged from the shipment vessel in
Honolulu, Hawaii and were ready for pickup on April 24, 2015.
Def. CSF, Ex. 5.

When the equipment arrived in Honolulu, RWT

arranged and paid for its delivery from the port to Pearl
Harbor.

Def. CSF, Raas Decl. ¶¶ 9-10.

On May 11, 2015, RWT’s

trucking company, Island Movers, took delivery of the
compressors and air dryers.

Pl. CSF, Callow Decl. ¶ 6.

On May 12, 2015, Plaintiff issued invoices totaling
$2,030,794.52.

Pl. CSF, Ex. G.

On October 30, 2015, RWT

tendered a check to Plaintiff for $1,749,009.00, leaving an
unpaid principal balance of $281,785.52.

Pl. CSF, Gogic Decl. ¶

3.
On November 23, 2015, the U.S. Department of Defense
suspended work on the Project until February 2016.
CSF, Ex. 4.

Def. Opp.

On March 20, 2017, the work was further suspended

until July 2017.

Def. Opp. CSF, Ex. 5.

In Defendants’ Opposition, Defendants state that they
cannot pay the remaining balance until the equipment has been
inspected, and consequently accepted, by RWT pursuant to the
terms of the Purchase Order.

Def. Opp. at 8 n.2.

Defendants

state that RWT will install the equipment and conduct a test to
verify that it operates in conformity with the contract
specifications as soon as the government lifts the suspension of
4

work.

Id.

Defendants state that if the equipment passes

inspection, they will accept it and issue the remaining balance
due under the contract.

Id.
STANDARD

Summary judgment is proper where there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law.

Fed. R. Civ. P. 56(a).

Rule 56(a)

mandates summary judgment “against a party who fails to make a
showing sufficient to establish the existence of an element
essential to the party’s case, and on which that party will bear
the burden of proof at trial.”

Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986); see also Broussard v. Univ. of Cal. at
Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
“A party seeking summary judgment bears the initial
burden of informing the court of the basis for its motion and of
identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
material fact.”

Soremekun v. Thrifty Payless, Inc., 509 F.3d

978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323); see
also Jespersen v. Harrah’s Operating Co., 392 F.3d 1076, 1079
(9th Cir. 2004).

“When the moving party has carried its burden

under Rule 56 [(a)] its opponent must do more than simply show
that there is some metaphysical doubt as to the material facts
[and] come forward with specific facts showing that there is a
5

genuine issue for trial.”

Matsushita Elec. Indus. Co. v. Zenith

Radio, 475 U.S. 574, 586-87 (1986) (citation and internal
quotation marks omitted); see also Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986) (stating that a party cannot
“rest upon the mere allegations or denials of his pleading” in
opposing summary judgment).
“An issue is ‘genuine’ only if there is a sufficient
evidentiary basis on which a reasonable fact finder could find
for the nonmoving party, and a dispute is ‘material’ only if it
could affect the outcome of the suit under the governing law.”
In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing
Anderson, 477 U.S. at 248).

When considering the evidence on a

motion for summary judgment, the court must draw all reasonable
inferences on behalf of the nonmoving party.

Matsushita Elec.

Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille
Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating
that “the evidence of [the nonmovant] is to be believed, and all
justifiable inferences are to be drawn in his favor”).
DISCUSSION
I.

The Miller Act
The Miller Act, 40 U.S.C. §§ 3131 et seq., requires

that before a contract in excess of $100,000 for the
construction of a federal project is awarded, the contractor
must provide a payment bond “for the protection of all persons
6

supplying labor and material in carrying out the work provided
in the contract . . .”

40 U.S.C. § 3131(b).

The Miller Act

further provides:
[e]very person that has furnished labor or
material in carrying out work provided for
in a contract for which a payment bond is
furnished . . . and that has not been paid
in full within 90 days after the day on
which the person did or performed the last
of the labor or furnished or supplied the
material for which the claim is made may
bring a civil action on the payment bond for
the amount unpaid . . .
40 U.S.C. § 3133(b)(1).

A claim under the Miller Act must be

brought “no later than one year after the day on which the last
of the labor was performed or material was supplied by the
person bringing the action.”

40 U.S.C. § 3133(b)(4).

The

Miller Act is “highly remedial in nature” and therefore
“entitled to a liberal construction and application in order
properly to effectuate the Congressional intent to protect those
whose labor and materials go into public projects.”

Clifford F.

MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322
U.S. 102, 107 (1944); see United States ex rel. Air Control
Techs., Inc. v. Pre Con Indus., Inc., 720 F.3d 1174, 1178 (9th
Cir. 2013).
II.

Defendants’ Motion for Summary Judgment
Defendants assert that Plaintiff’s allegation was not

brought within the statute of limitations required by the Miller

7

Act.

Plaintiff filed its Complaint on May 4, 2016.

For

Plaintiff’s suit to be timely, Defendants must have supplied
material on or after May 4, 2015.
In their Motion, Defendants argue that the equipment
was supplied at the latest on April 23, 2015.2

Defendants

provide two pieces of evidence to support this assertion.
First, Defendants state that Plaintiff’s Standard Conditions of
Sale in the Proposal provide that “[p]roducts shipped from
outside the United States are delivered F.O.B. point of entry”
and that for risk of loss “delivery shall be deemed to be
complete upon delivery to a private or common carrier or upon
moving into storage, whichever occurs first . . . at the point
of entry for Products shipped outside the continental United
States.”

Def. CSF, Ex. 4 at 27.

To show that the equipment was

shipped from outside the United States, Defendants cite to the
Declaration of Paul Callow, Plaintiff’s employee, which states
that the equipment was manufactured in Belgium and shipped from
Belgium to Honolulu.

Pl. CSF, Callow Decl. ¶¶ 5-6.

Second, Defendants provide the Matson current vessel
reminder which shows that the equipment was discharged from the
2

In their Reply, Defendants alter their initial argument,
stating that the equipment was supplied on May 3, 2015 at the
latest, which is the last date that the equipment was available
for pickup without incurring storage fees. Def. Reply at 7.
They point to the Matson current vessel reminder to support this
assertion. See Def. CSF, Ex. 5.
8

shipment vessel on April 23, 2015 at 9:48 a.m. and ready for
pickup on April 24, 2015.

Def. CSF, Ex. 5.

Defendants note

that when the equipment arrived in Honolulu, RWT arranged and
paid for its delivery from the port to Pearl Harbor.3
Raas Decl. ¶¶ 9-10.

Def. CSF,

Notably, however, in their Motion,

Defendants provide no legal authority to support their assertion
that the materials were supplied when they were delivered to the
port in Honolulu.

Defendants provide no authority regarding the

meaning of “supplied” under the Miller Act or the meaning of key
terms related to the equipment’s delivery in the parties’
agreement.4
Plaintiff does not dispute these underlying facts.
However, Plaintiff argues that Defendants have failed to meet
their burden to show that the materials were supplied when they
were delivered to the port in Honolulu.

Plaintiff instead

asserts that the earliest the materials were supplied was when
RWT’s trucking company took delivery of the equipment on May 11,
2015.

The Court agrees.
In its Opposition, Plaintiff states that the Court

must follow the parties’ contract terms, as interpreted

3

On May 11, 2015, RWT’s trucking company, Island Movers,
took delivery of the compressors and air dryers. Pl. CSF,
Callow Decl. ¶ 6.
4
In their Reply, Defendants discuss the meaning of the term
F.O.B. in the parties’ agreement.
9

according to the provisions of the Uniform Commercial Code
(“U.C.C.”), to determine whether its claim is time-barred.5

In

their Reply, Defendants use the parties’ contract terms and the
U.C.C. to rebut Plaintiff’s arguments.

The Standard Conditions

of Sale in the Proposal has a provision related to delivery and
risk of loss, which discusses when delivery is deemed complete
under the agreement.

However, neither of the contracts

implicated here—the Standard Conditions of Sale in the Proposal
nor the General Terms and Conditions of Sale in the Purchase
Order—have a provision relating to when a good is “supplied” or
when a claim under the agreement can be filed.

Def. CSF, Exs.

3, 4.
Although the issues are somewhat similar, the question
of when the equipment was delivered under the parties’ agreement
is not the same as the question of when the equipment was
supplied according to the Miller Act.

Cf. United States ex rel.

Suard Barge Servs., Inc. v. Weeks Marine, Inc., No. CIV. A. 991006, 1999 WL 412429, at *3 (E.D. La. June 17, 1999) (examining
the parties’ contract which stated that the vessel would be

5

The Court notes that neither of the parties has provided
and the Court is unaware of case law discussing the U.C.C. to
interpret the meaning of “supplied” under the Miller Act. The
Court further notes that the parties have not presented and the
Court is unaware of a means for tolling the statute of
limitations based on Defendants’ partial payment.
10

“supplied” until it was returned to Plaintiff’s dock to
determine the limitations period under the Miller Act).
Therefore, the issue before the Court is not one of
contract interpretation but instead a question of the Miller
Act’s statutory construction.

See United States ex rel.

Henderson v. Nucon Const. Corp., 49 F.3d 1421, 1423 (9th Cir.
1995) (“[D]efendants argue Arizona law controls the question of
whether the general contractor is an indispensable party . . .
because we apply state contract law to interpret contracts
underlying Miller Act claims.

This argument misses the mark.

The issue before us is not one of contract interpretation.

We

are called upon to interpret the Miller Act.” (internal
citations omitted)); see also F.D. Rich Co. v. United States ex
rel. Indus. Lumber Co., 417 U.S. 116, 127 (1974) (“The Miller
Act provides a federal cause of action, and the scope of the
remedy as well as the substance of the rights created thereby is
a matter of federal not state law.”).
Neither party discusses the central legal issue
related to Defendants’ Motion: when a good is “supplied” under
the Miller Act’s statute of limitations provision.

The word

“supplied” is not defined in the Miller Act and therefore is
entitled to its ordinary meaning.

See Ramona Equip. Rental,

Inc. ex rel. United States v. Carolina Cas. Ins. Co., 755 F.3d
1063, 1069 n.5 (9th Cir. 2014); see also FDIC v. Meyer, 510 U.S.
11

471, 476 (1994) (“In the absence of [a definition in the
statute], we construe a statutory term in accordance with its
ordinary or natural meaning.”).

In the context of this

provision, the Court finds that the plain meaning of “supply” is
to provide or furnish someone with something and to put
something into someone’s possession for use or consumption.

The

Court also notes that the dictionary definition of “supply” is
to provide or furnish with.

Webster’s Third New International

Dictionary 2297 (2002).
The parties have not presented and the Court is
unaware of legislative history or case law discussing the
meaning of “supplied” under Miller Act’s statute of limitations
in regard to the specific issue before the Court.6

6

However, the

The Court notes that the most similar case addressing the
issue relates to whether goods can be “furnished” under the
Miller Act when they were tendered and accepted but not actually
delivered. In United States ex rel. Dragone Bros. Inc. v.
Moniaros Contracting Corp., Defendants argued that the materials
were supplied on the last date they were delivered to the
jobsite in November 1992. 882 F. Supp. 1267, 1271-72 (E.D.N.Y.
1995). Plaintiff, however, discussed case law which says that
actual delivery to the jobsite is not essential to recovery
under the Miller Act. Id. Under this authority, Plaintiff
argued that the statute of limitations did not begin to run
until December 1992 and January 1993 when delivery of the
remaining materials was tendered and Defendants accepted the
materials and made delivery arrangements. Id. at 1272–73.
The court agreed with Plaintiff, citing authority for the
proposition that the materials do not have to be delivered to
the jobsite to be supplied. Id. The court also found that its
holding was a liberal interpretation of the Miller Act, in
keeping with the Act’s broad remedial scope. Id. at 1273.
(continued . . . )
12

Court finds that principles developed in case law interpreting
the notice provision of the Miller Act shed light on this issue.7
See United States ex rel. Pippin v. J.R. Youngdale Const. Co.,
923 F.2d 146, 149 (9th Cir. 1991) (examining principles
developed in cases which have considered when the Miller Act’s
notice period commences to decide when the Miller Act’s
limitations period begins “because the language in the notice
provision is substantially similar to the language relating to
the limitations period”).

The Court finds that this case differs from Moniaros
Contracting Corp. because the issue is not whether the goods
were supplied when they were delivered to the jobsite, and
Defendants never accepted the goods when delivery was tendered.
The Court also finds that a liberal interpretation of the Miller
Act requires a different result here.
7
The notice provision requires:
A person having a direct contractual
relationship with a subcontractor but no
contractual relationship . . . with the
contractor furnishing the payment bond 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 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). Plaintiff states that it was the
subcontractor to the prime contractor, as opposed to a mere
supplier to a subcontractor, and therefore was not required to
give notice under the Miller Act. Pl. Motion at 14. Plaintiff
also states that it gave notice of its claim as a precautionary
measure on July 2, 2015. Id.
13

The only case discussing a similar issue under the
notice provision of the Miller Act held that materials are
supplied, inter alia, “at some point where title to the
materials passes from the seller to the purchaser.”

United

States ex rel. Eng’g & Equip. Co. v. Wyatt, 174 F. Supp. 260,
261 (N.D. Fla. 1959).

Recognizing the dearth of controlling

precedent and that the Miller Act should receive a liberal
construction to effectuate its purpose, the court looked to
notice provisions in mechanics lien statutes to determine the
meaning of “furnished or supplied” under the Miller Act.

Id.

The Court finds this analysis proper because “[t]he Miller Act
simply provides the equivalent of a mechanic’s lien.”

K–W

Indus., a Div. of Assocs. Tech., Ltd. v. Nat’l Sur. Corp., 855
F.2d 640, 643 (9th Cir. 1988); see also J. W. Bateson Co. v.
U.S. ex rel. Bd. of Tr. of Nat’l. Automatic Sprinkler Indus.
Pension Fund, 434 U.S. 586, 602 (1978) (stating that the Miller
Act “stands in lieu of the mechanic’s lien statute” for projects
constructed by governmental agencies).
The Court further finds that under the facts of this
case, expanding the date for when a good is supplied provides a
“liberal construction and application” of the Miller Act and
“properly . . . effectuate[s] the Congressional intent to
protect those whose labor and materials go into public
projects.”

Technica LLC ex rel. United States v. Carolina Cas.
14

Ins. Co., 749 F.3d 1149, 1152 (9th Cir. 2014); see also Ramona
Equip. Rental, Inc. ex rel. United States v. Carolina Cas. Ins.
Co., 755 F.3d 1063, 1069 (9th Cir. 2014) (“‘[T]he purpose of the
overall statute . . . is to provide recovery for suppliers who
have provided materials but not received compensation.’”
(quoting United States ex rel. Water Works Supply Corp. v.
George Hyman Const. Co., 131 F.3d 28, 34 (1st Cir. 1997))).
Thus, under the Court’s interpretation of the
statute’s plain meaning and the related case law, the earliest
the goods were supplied was May 11, 2015, when RWT’s trucking
company took delivery of the shipment.

Pl. CSF, Callow Decl. ¶

6; Pl. Opp. CSF, Supp. Callow Decl. ¶ 7.

The General Terms and

Conditions of Sale in the Purchase Order support this
conclusion.

The terms state, “Title of Goods shall pass to

[RWT] upon receipt by it of the Goods at the designated
destination.”

Def. CSF, Ex. 3 at 3.

The risk of loss provision in Plaintiff’s Standard
Conditions of Sale also supports the Court’s conclusion.

Under

that provision, “delivery shall be deemed to be complete upon
delivery to a private or common carrier or upon moving into
storage, whichever occurs first . . . at the point of entry for
Products shipped outside the continental United States.”
CSF, Ex. 4 at 27.

Def.

Given that neither party has provided

evidence that the equipment was moved into storage, delivery
15

would not be complete until RWT’s trucking company took delivery
of the equipment at the port on May 11, 2015.

In addition,

Plaintiff did not issue invoices for the equipment until May 12,
2015, a day after RWT’s trucking company took delivery of the
shipment.

Pl. CSF, Ex. G.

This indicates that payment was not

due, and therefore the equipment was not supplied, until
Defendants took delivery of it.

Accordingly, the Court finds

that the statute of limitations does not bar Plaintiff’s Miller
Act claim.8
III. Plaintiff’s Motion for Summary Judgment
a. Whether Plaintiff Has Satisfied the Elements of a
Miller Act Claim
Plaintiff moves for summary judgment on the basis that
it has satisfied the elements of its Miller Act claim.

To

establish a Miller Act claim, Plaintiff must demonstrate: (1)
8

In their Opposition to Plaintiff’s Motion, Defendants
state that the first element of a Miller Act claim requires that
“the materials were supplied in prosecution of the work provided
for in the contract.” Def. Opp. at 4 (citing United States ex
rel. Martin Steel Constructors, Inc. v. Avanti Constructors,
Inc., 750 F.2d 759, 761 (9th Cir. 1984)). Defendants then state
that the “goods must be both delivered and accepted” to
establish that they were “supplied.” Id. at 5 (citing Avanti
Constructors, 750 F.2d at 761).
As discussed herein, the Court does not agree with
Defendants’ interpretation of Avanti Constructors. However, the
Court notes that in making this argument, Defendants essentially
concede their statute of limitations argument. Under
Defendants’ interpretation of the meaning of “supplied,” the
equipment still has not been “supplied” to Defendants because it
has not been accepted and therefore the limitations period has
not yet started to run.
16

the materials were supplied in prosecution of the work provided
for in the contract; (2) Plaintiff has not been paid; (3)
Plaintiff had a good faith belief that the materials were
intended for the specified work; and (4) the jurisdictional
requisites were met.

United States ex rel. Hawaiian Rock Prod.

Corp. v. A.E. Lopez Enterprises, Ltd., 74 F.3d 972, 975 (9th
Cir. 1996); United States ex rel. Martin Steel Constructors,
Inc. v. Avanti Constructors, Inc., 750 F.2d 759, 761 (9th Cir.
1984).

Defendants do not dispute that Plaintiff has established

the second and third elements of its Miller Act claim.9
Defendants argue that the fourth element has not been met solely
on the basis that Plaintiff’s claim is untimely.

As discussed

above, the Court finds that Plaintiff’s claim is timely.
In regard to the first element, Defendants, based on
their interpretation of Avanti Constructors, argue that the
goods must be both delivered and accepted to satisfy that they
were “supplied” under the first element of a Miller Act claim.
Def. Opp. at 5.

Defendants argue that they have not accepted

the equipment because they have not had an opportunity to
inspect it as required under the contract between the parties.
9

For the second element, Defendants state that they have
not paid the remaining $281,785.52 under the contract. Def.
Opp. at 4. For the third element, Plaintiff had a good faith
belief that the materials were intended for the specified work
as they were manufactured specifically for the Project. Pl.
CSF, Kiser Decl. ¶ 8.
17

The Court does not agree with Defendants’ interpretation of
Avanti Constructors.

The Ninth Circuit does not directly state

or imply that the goods must be both delivered and accepted to
establish that they were “supplied” under the first element of a
Miller Act claim.

Avanti Constructors, 750 F.2d at 761.

Therefore, the Court finds that Plaintiff has satisfied the
first element.

Apart from Defendants argument based on Avanti

Constructors, there is no suggestion that Plaintiff did not
supply the equipment for the Project.

In fact, Defendants’

partial payment demonstrates Defendants’ belief that the
compressors and air dryers were supplied.
Although there is a dearth of case law regarding
whether the materials must be accepted to establish Miller Act
liability, the Court finds that under the circumstances of this
case, pursuant to the parties’ contract, Plaintiff must
demonstrate that the contract provision regarding inspection of
the equipment has been satisfied to establish a Miller Act
claim.

Cases have required proof of compliance with contract

terms to establish Miller Act liability.

See, e.g., Jefferson

Const. Co. v. United States ex rel. of Bacon, 283 F.2d 265, 267
(1st Cir. 1960) (holding that failure to plead or prove
compliance with the underlying contract and fulfillment of
conditions precedent therein precluded summary judgment); United
States ex rel. Purity Paint Products Corp. v. Aetna Casualty &
18

Surety Co., 56 F. Supp. 431, 432 (D. Conn. 1944) (holding that a
supplier of paint to a subcontractor “must prove not only that
he furnished [material] but also that the [material] furnished
was in accordance with his contract”).10
In addition, to hold that Plaintiff is entitled to
recover under the Miller Act, even though Defendants have not
had an opportunity to inspect and accept the equipment, would
result in an outcome that the Court does not think Congress
intended under the Miller Act.

Such a ruling could encourage

suppliers to provide materials that do not meet the
specifications of the contract and still be able to bring suit
on the bond and could render the prime contractor’s right to
inspect and accept the materials meaningless.
As set forth in the General Terms and Conditions of
Sale in the Purchase Order, RWT “shall have a reasonable time
after receipt of [the equipment] and before payment to inspect

10

The Court notes that contrary authority exists. See U.S.
ex rel. Patton Contractors, Inc. v. Innovative Performance
Contracting, Inc., No. 3:13-CV-2198-D, 2014 WL 4798449, at *7
(N.D. Tex. Sept. 26, 2014) (holding that while failure to
satisfy condition precedent is a state-law defense to a breach
of contract claim, it cannot be used to avoid liability under
the Miller Act). However, the Court finds Innovative
Performance Contracting distinguishable because the condition
precedent involved an arbitration clause, which precluded the
subcontractor from being able to bring a legal claim before a
decision from an arbitrator. Here, the inspection provision is
not a condition precedent and does not directly involve when and
whether Plaintiff can bring a claim.
19

[it] for conformity hereto, and performance shall not be deemed
accepted until [RWT] has run an adequate test to determine
whether the [the equipment] conform[s] to the specifications
hereof.”11

Def. Opp. CSF, Ex. 2 at 3.

Plaintiff has not

disputed that RWT would have to install the equipment before it
could inspect it and that RWT has not had an opportunity to
inspect and test the equipment after its receipt.12
Because the Department of Defense issued suspension of
work orders at the Project, RWT has been prevented from
inspecting and testing the equipment and therefore has been
unable to accept the compressors and air dryers.13
CSF, Exs. 4-5.

Def. Opp.

Under the force majeure provision, “neither

party shall be liable for any failure to perform . . . caused by
circumstances beyond its control . . . including . . .
government action.”

Def. Opp. CSF, Ex. 2 at 3.

11

Under this

The inspection provision further states, “If performance
tendered does not wholly conform with the provisions hereof,
[RWT] shall have the right to reject such performance.
Nonconforming goods will be returned to [Atlas] . . . and risk
of loss will pass to [Atlas] upon [RWT’s] delivery to the common
carrier.” Def. Opp. CSF, Ex. 2 at 3.
12
Plaintiff argues that the test certificates it provided
to Defendants were sufficient to meet this provision’s
requirements.
13
Atlas has not provided evidence for the Court to conclude
that RWT had an opportunity to install the equipment and test it
during the time between when the equipment was delivered and the
first suspension order and any potential time between the two
suspension orders.
20

provision, therefore, Defendants should not be held accountable
for their inability to inspect the equipment.
Furthermore, Defendants have not otherwise accepted
the goods since they received them.

Contrary to Plaintiff’s

argument, Defendants’ partial payment of $1.749 million does not
constitute acceptance pursuant to the General Terms and
Conditions of Sale in the Purchase Order.

See Def. Opp. CSF,

Ex. 2 at 2 (“Payment shall not constitute acceptance.”).
Defendants have stated that they will tender payment as soon as
they are able to install the equipment and verify that it
operates in conformity with the contract specifications.
Opp. at 8 n.2.

Def.

Therefore, the Court finds that Plaintiff has

not met its burden to establish Defendants’ liability under the
Miller Act.
In its Reply, Plaintiff argues that applicable law
under the Miller Act may supersede specific contractual
provisions.

First, Plaintiff argues that a supplier may recover

under the Miller Act even when the material it supplied has not
been incorporated into the project.

Although this proposition

is “well-established . . . [in] Miller Act cases,” it does not
address the issue here: whether Plaintiff can establish Miller
Act liability, even though Defendants have been unable to accept
the materials.

United States ex rel. Carlson v. Cont’l Cas.

Co., 414 F.2d 431, 433 (5th Cir. 1969).
21

Second, Plaintiff argues that a contractual provision
in a subcontract can only prevent a subcontractor from pursuing
a Miller Act remedy for a completed delivery of materials when
the provision amounts to a clear and explicit waiver of the
subcontractor’s Miller Act rights.

Plaintiff cites two cases to

support this proposition: United States ex rel. Walton Tech.,
Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199 (9th Cir. 2002) and
United States ex rel. Youngstown Welding & Eng’g, Co. v.
Travelers Indem. Co., 802 F.2d 1164 (9th Cir. 1986).
In Weststar Eng’g, defendants contended that because
the “pay when and if paid” clause in the parties’ settlement
agreement had not been satisfied, since the Navy had not paid
the prime contractor, there were no “sums justly due” for which
plaintiff was entitled to recover under the Miller Act.
F.3d at 1205.

209

The court held that the “paid when and if paid

clause” was invalid because it would impact the timing of
recovery and therefore preclude a subcontractor from exercising
its rights in accordance with the express terms of the Act.
at 1207.

Id.

The Court further held that parties could not preclude

a subcontractor’s rights under the Miller Act absent of a “clear
and explicit” waiver of those rights.

Id. at 1208-09.

In Travelers Indem., the court examined whether
language in the parties’ contract constituted a waiver of the
supplier’s rights to bring a claim under the Miller Act.
22

802

F.2d at 1165-66.

However, neither of these cases addresses the

specific issue here, which as previously discussed, does not
concern a “paid when and if paid” clause or whether the contract
language constituted a waiver of the supplier’s right to bring a
Miller Act claim.

Furthermore, in this case, the inspection

provision does not directly controvert the Miller Act’s terms or
discuss the timing of recovery.
Third, Plaintiff argues that under the agreement the
risk of loss has been transferred to Defendants and any
inability to complete the installation constitutes a loss that
Defendants should bear.

However, the risk of loss provision

does not apply to the circumstances here.

Neither of the

parties claims that the compressors or air dryers were lost,
stolen, damaged, or destroyed.

The Court, therefore, does not

find this argument persuasive.

Accordingly, the Court finds

that under the facts of this case, delivery and acceptance of
the equipment is required to establish Plaintiff’s Miller Act
claim.14

14

Because the Court denies Plaintiff’s Summary Judgment
Motion, the Court declines to address the following issues: (1)
whether Plaintiff is entitled to prejudgment interest; and (2)
whether Plaintiff is entitled to attorneys’ fees.
23

CONCLUSION
For the foregoing reasons, Defendants’ Motion for
Summary Judgment is DENIED, and Plaintiff’s Motion for Summary
Judgment is DENIED.

IT IS SO ORDERED.
DATED:

Honolulu, Hawai’i, May 17, 2017.

________________________________
Alan C. Kay
Sr. United States District Judge

Atlas Copco Compressors LLC v. RWT LLC et al., Civ. No. 16-00215, Order
Denying Defendants’ Motion for Summary Judgment and Denying Plaintiff’s
Motion for Summary Judgment

24