Atlas Copco Compressors LLC v. RWT LLC et al
Filing
55
ORDER DENYING PLAINTIFF'S MOTION FOR RECONSIDERATION AND GRANTING PLAINTIFF'S MOTION FOR INTERLOCUTORY APPEAL AND STAY PENDING THAT APPEAL re 51 MOTION for Reconsideration re 50 Order. Signed by JUDGE ALAN C. KAY on 07/ 13/2017. This action is STAYED pending the Ninth Circuit's decision on whether to accept the interlocutory appeal. Should the Ninth Circuit permit such appeal, this action is further STAYED pending the issuance of a d ispositive order on Plaintiff's interlocutory appeal.The Court DIRECTS Plaintiff to inform the Court within 7 days of the Ninth Circuit's decision on whether to permit an appeal, and if applicable, the Ninth Circuit's ultimate reso lution of the interlocutory appeal. (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).
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 PLAINTIFF’S MOTION FOR RECONSIDERATION AND
GRANTING PLAINTIFF’S MOTION FOR INTERLOCUTORY APPEAL AND STAY
PENDING THAT APPEAL
For the reasons set forth below, the Court denies
Plaintiff’s Motion for Reconsideration, ECF No. 51.
The Court
grants Plaintiff’s Motion for Interlocutory Appeal and Stay
Pending that Appeal, ECF No. 51.
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.
The alleged violation was based on a
subcontract in which Plaintiff agreed to supply RWT four
compressors and two air dryers (the “equipment”) for a U.S.
Department of Defense project at Pearl Harbor.
On May 17, 2017, the Court issued an Order denying
1
Defendants’ Motion for Summary Judgment and denying Plaintiff’s
Motion for Summary Judgment (“the May 17, 2017 Order”).
50.
ECF No.
The Court incorporates the procedural and factual
background as well as the defined terms of the May 17, 2017
Order.
On May 30, 2017, Plaintiff filed a Motion for
Reconsideration or Alternatively for Interlocutory Appeal and
Stay Pending that Appeal (“Motion”) pursuant to Federal Rule of
Civil Procedure 59(e), Local Rule 60.1, and 28 U.S.C. § 1292(b).
ECF No. 51.
In the May 17, 2017 Order, the Court held that
Plaintiff did not meet the requirements necessary to establish
its Miller Act claim.
May 17, 2017 Order at 21.
Plaintiff’s
Motion for Reconsideration recasts the central issue to be
whether the inspection and force majeure provisions in the
General Terms and Conditions of Sale in the Purchase Order
constituted a waiver of Plaintiff’s Miller Act rights.
Defendants filed a Memorandum in Opposition to
Plaintiff’s Motion for Reconsideration (“Opposition”) on June
13, 2017.
ECF No. 53.
On June 27, 2017, Plaintiff filed its
Reply to Defendants’ Opposition (“Reply”).
ECF No. 54.
Pursuant to Local Rule 7.2(d), this matter is suitable for
disposition without a hearing.
2
STANDARD
I.
Reconsideration
A party may ask the court to reconsider and amend a
previous order pursuant to Federal Rule of Civil Procedure
59(e).
White v. Sabatino, 424 F. Supp. 2d 1271, 1274 (D. Haw.
2006) (Kay, J.).
Rule 59(e) offers “an extraordinary remedy, to
be used sparingly in the interests of finality and conservation
of judicial resources.”
Carroll v. Nakatani, 342 F.3d 934, 945
(9th Cir. 2003) (internal quotation marks and citation omitted).
In the Ninth Circuit, a successful motion for reconsideration
must accomplish two goals.
First, “a motion for reconsideration
must demonstrate some reason why the court should reconsider its
prior decision.”
Na Mamo O ‘Aha ‘Ino v. Galiher, 60 F. Supp. 2d
1058, 1059 (D. Haw. 1999).
Second, it “must set forth facts or
law of a strongly convincing nature to induce the court to
reverse its prior decision.”
Id.
Courts have established three grounds justifying
reconsideration: (1) an intervening change in controlling law;
(2) the availability of new evidence; and (3) the need to
correct clear error or prevent manifest injustice.
Allstate
Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir. 2011); Mustafa
v. Clark County Sch. Dist., 157 F.3d 1169, 1178-79 (9th Cir.
1998).
The District of Hawaii has implemented these standards
in Local Rule 60.1.
3
Mere disagreement with a previous order is an
insufficient basis for reconsideration.
See Leong v. Hilton
Hotels Corp., 689 F. Supp. 1572, 1573 (D. Haw. 1988) (Kay, J.).
In addition, a Rule 59(e) motion for reconsideration may not
present evidence or raise legal arguments that could have been
presented at the time of the challenged decision.
See Kona
Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.
2000).
“Whether or not to grant reconsideration is committed to
the sound discretion of the court.”
Navajo Nation v.
Confederated Tribes and Bands of the Yakama Indian Nation, 331
F.3d 1041, 1046 (9th Cir. 2003).
II.
Interlocutory Appeal
Certification for interlocutory appeal is appropriate
where: (1) the order involves a controlling question of law; (2)
a substantial ground for difference of opinion exists; and (3)
an immediate appeal from the order may materially advance the
ultimate termination of the litigation.
28 U.S.C. § 1292(b).
A movant seeking an interlocutory appeal has a heavy
burden to show that “exceptional circumstances justify a
departure from the basic policy of postponing appellate review
until after the entry of a final judgment.”
Coopers & Lybrand
v. Livesay, 437 U.S. 463, 475 (1978) (internal quotation marks
and citation omitted); see also James v. Price Stern Sloan,
Inc., 283 F.3d 1064, 1067 n. 6 (9th Cir. 2002) (“Section 1292(b)
4
is a departure from the normal rule that only final judgments
are appealable, and therefore must be construed narrowly.”).
Section 1292(b) is only to be used “in exceptional situations in
which allowing an interlocutory appeal would avoid protracted
and expensive litigation.”
In re Cement Antitrust Litig., 673
F.2d 1020, 1026 (9th Cir. 1982) (citation omitted).
“A court
has substantial discretion whether to grant a party’s motion for
certification.”
Pitts v. Sequeira, Civil No. 11-00281 LEK/RLP,
2014 WL 346523, at *2 (D. Haw. Jan. 29, 2014) (citation
omitted).
DISCUSSION
I.
Motion for Reconsideration
Plaintiff moves for reconsideration to correct clear
errors in the Court’s May 17, 2017 Order and prevent manifest
injustice that would result from those errors.
Motion at 1.
a. Clear Error
Specifically, Plaintiff claims that the Court made the
following errors: (1) failing to find Comment to Section 2.5.1
in the Proposal, as opposed to the General Terms and Conditions
of Sale in the Purchase Order, controlling as a matter of law;
and (2) failing to find United States ex rel. Walton Tech., Inc.
v. Weststar Eng’g, Inc., 290 F.3d 1199 (9th Cir. 2002)
controlling authority.
However, in making these arguments, Plaintiff simply
5
rehashes the same arguments—albeit with a different “spin”—that
it initially presented.1
The Ninth Circuit has made clear that a
motion for reconsideration is properly denied when it presents
arguments that were already raised in the prior motion.
See
Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985); see
also United States v. Westlands Water Dist., 134 F. Supp. 2d
1111, 1131 (E.D. Cal. 2001) (stating that a motion for
reconsideration is not a vehicle to rehash arguments previously
presented).
To the extent that Plaintiff’s arguments can be
construed as not previously raised, the Court still cannot grant
Plaintiff’s Motion because “[a] Rule 59(e) motion may not be
used to raise arguments . . . for the first time when they could
reasonably have been raised earlier in the litigation.”
1
Kona
See Plaintiff’s Reply Memorandum on its Motion for Summary
Judgment (ECF No. 45) at 1-2 (“Through its Proposal . . . Atlas
Copco stated the terms under which it would be supplying the air
compressors and air dryers to RWT . . . RWT accepted those terms
. . . the express provision said that RWT would be receiving
certificates of Atlas Copco’s ‘standard factory performance
test’ for each compressor.”); id. at 11-12 (“For a contractual
provision in a subcontract/supply contract to prevent a
subcontractor or supplier from pursuing its Miller Act remedy .
. . for a completed delivery of materials or equipment, the
subject provision must amount to a ‘clear and explicit waiver of
the subcontractor/supplier’s Miller Act rights.’ Such is not
the case here.” (citing United States ex rel. Walton Tech.,
Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199 (9th Cir. 2002);
United States ex rel. Youngstown Welding & Eng’g, Co. v.
Travelers Indem. Co., 802 F.2d 1164 (9th Cir. 1986))).
6
Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.
2000) (emphasis in original); see Carroll v. Nakatani, 342 F.3d
934, 945 (9th Cir. 2003) (holding that it is improper to present
new legal theories in a motion for reconsideration for the first
time when they could reasonably have been raised earlier in the
litigation); Reliance Ins. Co. v. Doctors Co., 299 F. Supp. 2d
1131, 1154 (D. Haw. 2003), aff’d sub nom. Reliance Ins. Co. v.
Doctors Co., 132 F. App’x 730 (9th Cir. 2005) (“A motion for
reconsideration is not a proper mechanism for presenting new
legal theories that the movant failed to raise with respect to
the underlying motion for summary judgment.”).
Plaintiff fails
to offer any reason why the arguments it offers could not have
been raised before.
Therefore, the Court denies Plaintiff’s
Motion because the arguments it presents were previously raised
or could have been raised earlier.
In addition, even if the
Court were to consider these arguments, as discussed in detail
herein, Plaintiff’s Motion still fails.
i.
Whether Comment to Section 2.5.1 of the
Proposal Controls
First, Plaintiff argues that the Comment to Section
2.5.1 of the Proposal, rather than the General Terms and
Conditions of the Purchase Order, controls because between
boiler plate terms and the specific terms of the Proposal, the
latter should control as a matter of contract law.
7
Plaintiff
cites to two cases—Bank of Commerce v. Hoffman, 829 F.3d 542
(7th Cir. 2016) and Aramony v. United Way of Am., 254 F.3d 403,
413-14 (2d Cir. 2001)—to support this proposition.
In Hoffman,
the court examined one settlement agreement that had conflicting
terms.
On the one hand, a provision in the settlement agreement
absolved defendant of liability arising from some but not all of
the properties at issue.
829 F.3d at 546-47.
On the other
hand, the same agreement had a provision that released defendant
from all liabilities.
Id. at 547.
The court held that the
contract was ambiguous and examined extrinsic evidence and the
rules of construction to determine the contract’s specific
meaning.
Id. at 547-549.
The court, following Illinois state
law, ultimately held that where general language is inconsistent
and conflicts with specific language, the specific language
controls.
Id. at 548-49.
In Aramony, defendant argued that the district court
erred in interpreting the terms of an ERISA-governed pension
plan as ambiguous.
254 F.3d at 410.
The court examined the
general provision set forth in Article I under the caption
“Purpose of the Plan,” which said that the purpose was “to
provide a mechanism for securing the pension benefit promises
made to . . . highly compensated key employees who may receive
relatively smaller retirement benefits under the existing
pension arrangement than rank and file employees will receive as
8
a result of limitations imposed by the Internal Revenue Code . .
.”
Id. at 412.
The court held that this general purpose clause
did not create ambiguity in the contract because of another more
specific section of the plan.
Id. at 412-13.
The court drew
upon, inter alia, the “fundamental rule of contract construction
that ‘specific terms and exact terms are given greater weight
than general language.’”
Id. at 413 (citing Restatement
(Second) of Contracts § 203(c) (1981)).
The court further held
that even where there is no “true conflict” between two
provisions, “‘specific words will limit the meaning of general
words if it appears from the whole agreement that the parties’
purpose was directed solely toward the matter to which the
specific words or clause relate.’”
Id. at 413-14 (citing 11
Richard A. Lord, Williston on Contracts § 32:10, at 449 (4th ed.
1999)).
“Contracts would offer very little protection to their
signatories if ambiguities of the sort found in the purpose
clause could take precedence over carefully spelled out terms.”
Id. at 413.
The Court finds neither Hoffman nor Aramony persuasive
here for several reasons.
First, and most important, differing
from Hoffman, there is no conflict between the two provisions in
the contracts in the present case.
Comment to Section 2.5.1 of
the Proposal states that, “Atlas Copco is offering its standard
factory performance test with certificate for each compressor.”
9
Plaintiff CSF, Ex. F (ECF No. 33-10) at 17.2
The General Terms
and Conditions of Sale in the Purchase Order provide that RWT
“shall have a reasonable time after receipt of [the equipment]
and before payment to inspect [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.”
(ECF No. 43-2) at 3.3
Def. Opp. CSF, Ex. 2
The force majeure clause says, “neither
party shall be liable for any failure to perform . . . caused by
circumstances beyond its control . . . including . . .
government action.”
Def. Opp. CSF, Ex. 2 (ECF No. 43-2) at 3.
The terms in Comment to Section 2.5.1 in the Proposal,
therefore, relate to Plaintiff’s inspection and testing of the
2
Plaintiff also discusses Section 7.3 in the Proposal,
which discusses Plaintiff’s testing obligations. Plaintiff CSF,
Ex. F (ECF No. 33-10) at 23.
3
In Section I.A of its Motion, Plaintiff states that it
provided the equipment in conformity with the contract
requirements. To support this assertion, Atlas discusses terms
in the Proposal, the government specifications of the Project,
and performance certificates that Plaintiff provided to RWT,
which are discussed by Plaintiff’s Expert, John R. Fessler, in
his declaration.
However, none of what Plaintiff discusses demonstrates that
RWT has had an opportunity to inspect the equipment and
therefore accept it. As discussed herein, the Proposal terms
and performance certificates relate to Plaintiff’s inspection
and testing of the equipment before RWT received it, whereas the
inspection provision in the General Terms and Conditions of Sale
in the Purchase Order relates to whether RWT has run an adequate
test to determine whether the equipment conforms to
specifications after they received it.
10
equipment before RWT received it, whereas the General Terms and
Conditions of Sale in the Purchase Order relate to whether RWT
has run an adequate test to determine whether the equipment
conforms to specifications after RWT received it.4
Second, the contract at issue here is for the sale of
goods, which is governed by the UCC rather than common law
principles of contract interpretation.5
See Utah Code § 70A-2-
102 (“Unless the context otherwise requires, this chapter
applies to transactions in goods . . .”); Hilsen v. Am. Sleep
All., LLC, No. 2:15-CV-00714-DBP, 2016 WL 3948065, at *3 (D.
Utah July 19, 2016) (applying Utah law and stating that the UCC
4
Because, as discussed herein, the Court does not find
Plaintiff’s argument regarding Comment to Section 2.5.1 of the
Proposal persuasive, it need not address Defendants’ argument
regarding the UCC’s battle of the forms. Opposition at 11-13.
The Court, however, notes that Defendants’ argument
regarding Section 2-207 of the UCC is not applicable here
because the circumstances that invoke Section 2-207 are not
present. See Timothy Davis, UCC Section 2-207: When Does an
Additional Term Materially Alter a Contract?, 65 Cath. U.L. Rev.
489, 493-95 (2016) (describing contractual behavior that invokes
Section 2-207). The evidence before the Court does not
demonstrate that the parties’ exchanged form contracts or
conveyed different terms in their offer and acceptance. Rather,
RWT sent Plaintiff a purchase order, which attached General
Terms and Conditions of Sale, which Plaintiff and RWT signed and
accepted. Def. Opp. CSF, Ex. 2 (ECF No. 43-2) at 2. The
purchase order said that Plaintiff “is to provide the following
list of materials in accordance with the plans, specifications,
RFI’s, amendments, and Atlas Copco quote #23880365/0 dated
3/13/2014.” Def. Opp. CSF, Ex. 2 (ECF No. 43-2) at 1.
Plaintiff then manufactured and shipped the equipment.
5
Utah law governs the terms of the Purchase Order. See
Def. Opp. CSF, Ex. 2 (ECF No. 43-2) at 1, 3-4.
11
applies to contracts for the sale of goods); see also Prime
Start Ltd. v. Maher Forest Prod., Ltd., 442 F. Supp. 2d 1113,
1121 (W.D. Wash. 2006) (applying Washington law and stating that
“[t]he Uniform Commercial Code applies to sales of goods, while
the common law of contracts governs services agreements”).6
Neither of the contracts in Hoffman or Aramony was for the sale
of goods.
Third, none of the provisions at issue here feature
the broad language discussed in Aramony.
Fourth, the cases
Plaintiff cites involve different provisions in one contract,
whereas the provisions here are in two agreements.
Last,
neither of the cases Plaintiff cites involves boilerplate
provisions.
Therefore, the Court did not commit clear legal
error in finding that the inspection provision in the Purchase
Order applied.7
6
See also Sung v. Hamilton, 676 F. Supp. 2d 990, 1001 (D.
Haw. 2009) (“In a contract for goods and services, courts look
to the primary purpose of the contract in order to determine
whether or not to apply the common law or the UCC.”); TK Power,
Inc. v. Textron, Inc., 433 F. Supp. 2d 1058, 1061 (N.D. Cal.
2006) (“The UCC applies to transactions in goods . . . The UCC
does not apply to transactions involving service. Complications
arise when the transaction involves both goods and services.
The courts have held application of the UCC in these instances
turns on the essence of the agreement.” (internal quotation
marks and citations omitted)).
7
Plaintiff also argues that the Court’s decision to apply
the inspection and force majeure clauses instead of the Comment
to Section 2.5.1 is “no different from the choice the Court
implicitly made when it ruled on the one-year statute of
(continued . . . )
12
ii.
Whether Weststar Eng’g Controls
Second, Plaintiff argues that the Court erred in
limitations” because “despite the disparity between the
shipment/delivery terms of the Proposal and the Purchase Order,
the course of conduct disclosed the parties’ true contractual
intentions . . . [for] the terms of the Proposal [to] prevail
over RWT’s General Terms and Conditions.” Motion at 13-14.
In making this argument, however, Plaintiff makes several
misstatements and mischaracterizations of the Court’s May 17,
2017 Order. First, the Court did not determine that either the
terms of the Purchase Order or the terms of the Proposal
prevailed over the other when it ruled on the statute of
limitations issue. In fact, the Court did not primarily look at
the parties’ contract to determine the statute of limitations
issue. May 17, 2017 Order at 10. Instead, the Court held that
“the issue before the Court is . . . a question of the Miller
Act’s statutory construction.” Id. at 11. After the Court
analyzed the Miller Act’s plain meaning and related case law,
the Court then also held that contract provisions supported its
interpretation. Id. at 15.
Second, Plaintiff states that the Court ruled that the oneyear statutory period began on May 11, 2015, when RWT’s trucking
company took possession of the equipment. Motion at 13-14.
However, the May 17, 2017 Order stated that the earliest the
equipment was supplied was when RWT’s trucking company took
delivery of the equipment on May 11, 2015. May 17, 2017 Order
at 9, 15.
Third, Plaintiff states that there was a disparity between
the contract terms in the Proposal and the contract terms in the
Purchase Order. However, the provisions Plaintiff discusses do
not involve the same issue. The terms in the Proposal involve
Plaintiff’s “delivery obligations,” whereas the terms in the
Purchase Order involve when title to the goods passes to RWT and
where the goods should be shipped.
Fourth, Plaintiff states that in making a choice between
the “disparity” previously discussed, the Court found that the
parties’ course of conduct disclosed their true contractual
intentions. The Court’s May 17, 2017 Order, however, did not
look at the parties’ course of conduct to determine the parties
true contractual intentions when examining the statute of
limitations issue. As previously discussed, the Court primarily
examined the Miller Act’s statutory construction. Accordingly,
because of these misstatements and mischaracterizations, the
Court does not find Plaintiff’s argument convincing.
13
failing to find Weststar Eng’g controlling here.
In Atlas’s
Reply Memorandum on its Motion for Summary Judgment, Atlas
argued, “For a contractual provision in a subcontract/supply
contract to prevent a subcontractor or supplier from pursuing
its Miller Act remedy . . . for a completed delivery of
materials or equipment, the subject provision must amount to a
‘clear and explicit waiver of the subcontractor/supplier’s
Miller Act rights.’
Such is not the case here.”
ECF No. 45 at
11-12 (citing United States ex rel. Walton Tech., Inc. v.
Weststar Eng’g, Inc., 290 F.3d 1199 (9th Cir. 2002); United
States ex rel. Youngstown Welding & Eng’g, Co. v. Travelers
Indem. Co., 802 F.2d 1164 (9th Cir. 1986)).
In the Court’s May 17, 2017 Order, the Court held that
“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.”
May 17, 2017 Order at 23.
Given Plaintiff’s reliance on Weststar Eng’g in the
instant Motion, the Court discusses the case in more depth here
than it did in the May 17, 2017 Order.
In Weststar Eng’g,
Weststar was a subcontractor on a federal project.
14
290 F.3d at
1201.
Weststar subcontracted with Walton to rent a fabric and
frame shroud called the sail system to cover a crane.
1202.
Id. at
Although the rental period was originally scheduled to
end in September 1996, various delays prevented Weststar from
completing the project on schedule.
Id.
By the end of October
1996, Walton claimed that Weststar was delinquent on rental fees
and payment for other services in the amount of $108,000 and
filed a breach of contract action, alleging that Weststar had
breached the subcontract in the purchase order by failing to
make timely payment.
Id.
Shortly thereafter, Weststar and
Walton entered into settlement negotiations.
Id.
In January 1997, the parties entered into a settlement
agreement which provided for, inter alia, the continuation of
the rental period for the sail system under the original
purchase order subcontract and payment for settlement of all
disputes and lawsuits existing at the time of the agreement’s
execution.
Id. at 1203.
The settlement agreement also provided
the terms under which Weststar would be obligated to make future
payments to Walton.
Id.
Future payment would be subject to the
following provision, “Any further payment to Walton for the
framing and fabric rental shall only be made when and if paid by
the Navy and only to the extent paid by the Navy . . .”
(emphasis in original).
Id.
The parties also affirmed their
continuing rights under the original purchase order, except as
15
modified by their settlement agreement.
Weststar paid Walton for rental fees for January 1997
but made no further payments even though it continued to use the
sail system until the end of December 1997.
Weststar
disassembled the Sail System and shipped it back to Walton at
the end of January and beginning of February 1998.
Id.
In
April 1998, Walton filed an action under, inter alia, the Miller
Act against Weststar and its surety for the unpaid rental fees
through the end of December 1997.
Id.
Defendants argued that
they were not liable to pay Walton under the Miller Act because
the “pay when and if paid” clause contained in the Settlement
Agreement had not been satisfied because they had not been paid
by the Navy and there were no sums justly due for which Walton
was required to recover under the Miller Act.
Id. at 1204.
The Ninth Circuit held that the unsatisfied “paid when
and if paid” clause contained in the settlement agreement could
not serve as a defense to liability on the Miller Act claim
because “to permit a Miller Act surety and its principal to
avoid liability on this basis would prevent a subcontractor from
exercising its Miller Act rights in the absence of a ‘clear and
explicit’ waiver of those rights.”
Id. at 1204-05.
The Court
further held that “where subcontract terms effecting the timing
of recovery or the right of recovery under the Miller Act,
enforcement of such terms to preclude Miller Act liability
16
contradict the express terms of the Miller Act.”
Id. at 1207
(citing U.S. ex rel. T.M.S. Mech. Contractors, Inc. v. Millers
Mut. Fire Ins. Co. of Texas, 942 F.2d 946, 949 n.6 (5th Cir.
1991) (holding that a “paid-when-paid” clause does not preclude
a subcontractor’s right of recovery under the Miller Act payment
bond because “[t]he federal legislation conditions payment of
the subcontractor not on payment by the government to the
contractor, but rather on the passage of time from completion of
the work or provision of materials”)).
The Ninth Circuit reasoned that a subcontractor’s
right on a Miller Act payment bond accrues ninety days after the
subcontractor has completed its work, not “when and if” the
prime contractor is paid by the government.
Id. at 1208.
The
Ninth Circuit stated:
Walton has performed its obligations under
the subcontract and waited the requisite
ninety days. Permitting Defendants to avoid
liability on the Miller Act payment bond
based on the unsatisfied “pay if and when
paid” clause in the Subcontract Agreement
would prevent Walton from exercising its
rights in accordance with the express terms
of the Miller Act. It would, in effect,
transform Walton’s agreement concerning
Weststar’s contractual obligations into an
implied waiver of Walton’s rights under the
Miller Act. Thus, the validity of
Defendants’ defense depends on whether the
“pay when and if paid” clause constitutes a
valid waiver of Walton’s Miller Act rights.
Id.
The Ninth Circuit ultimately held that the “paid when and
17
if paid” clause did not constitute a valid waiver of Walton’s
Miller Act rights because, inter alia, it did not feature a
clear and explicit waiver of the supplier’s Miller Act rights.
Id. at 1208-09.
Weststar Eng’g is distinguishable from the present
case for the following reasons.
First, the subcontract terms
here do not directly affect the timing or right of recovery
under the Miller Act as the “paid when and if paid” clause did
in Weststar Eng’g.
The inspection provision does not directly
controvert the Miller Act’s terms or discuss the timing or right
of recovery.
The provision does not discuss when or whether a
party can bring a claim.
Instead, as previously discussed, the
inspection provision provides that RWT shall have a reasonable
time after it receives the equipment to inspect it for
conformity with the parties’ agreement, and Plaintiff’s
performance shall not be deemed accepted until RWT has run an
adequate test to determine whether the equipment conforms to the
agreement’s specifications.
See Def. Opp. CSF, Ex. 2 (ECF No.
43-2) at 3.
Second, the contract clause at issue here relates to
the core of the parties’ agreement—whether the equipment has
been accepted.
On the contrary, the “paid when and if paid”
clause structures payment for the materials after they had been
accepted and used.
Third, as the Court previously stated in its
18
May 17, 2017 Order, the question at issue in the present case
does not concern whether the contract language constituted a
waiver of the right to bring a Miller Act Claim.
Order at 23.
May 17, 2017
Instead, the question at issue on Plaintiff’s
Motion for Summary Judgment was “whether Plaintiff can establish
Miller Act liability, even though Defendants have been unable to
accept the materials.”
Id. at 21.
The Court again relies on its legal conclusions and
the line of case law provided in its May 17, 2017 Order to
explain why Plaintiff cannot establish such liability.
See id.
at 18 (“[U]nder 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 & 19 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
19
his contract”).”).8
The Court notes that the Ninth Circuit’s broad
language in Weststar Eng’g regarding contract terms effecting
the “right of recovery” can potentially be read to apply to the
current case.9
However, for the reasons previously discussed,
including the difference between the contract provision at issue
in Weststar Eng’g (which conditioned payment to a subcontractor
upon the prime contractor first being paid) and the contract
provisions at issue here (which conditioned the prime
8
Plaintiff also argues that Defendants were required to
submit a declaration stating that installation was the only way
to determine that the air compressors conformed to the contract.
Defendants, however, provided such declaration from its expert
Arthur Faherty. See Faherty Decl. (ECF No. 42-2) ¶ 10. In
addition, under the holding in the previous excerpt from the
Court’s May 17, 2017 Order, Plaintiff must establish proof of
compliance with contract terms to establish Miller Act
liability. Plaintiff has not provided evidence for the Court to
conclude that RWT had an opportunity to inspect the equipment
and therefore accept it after they received it. Evidence that
Plaintiff gave Defendants test certificates is insufficient
pursuant to this provision, which states that RWT must have the
opportunity to inspect the equipment after receipt.
9
The Court specifically is referring to the previously
discussed language in Weststar Eng’g which states, “where
subcontract terms effecting the timing of recovery or the right
of recovery under the Miller Act, enforcement of such terms to
preclude Miller Act liability contradict the express terms of
the Miller Act.” Weststar Eng’g, 290 F.3d at 1207 (citing U.S.
ex rel. T.M.S. Mech. Contractors, Inc. v. Millers Mut. Fire Ins.
Co. of Texas, 942 F.2d 946, 949 n.6 (5th Cir. 1991) (holding
that a “paid-when-paid” clause does not preclude a
subcontractor’s right of recovery under the Miller Act payment
bond because “[t]he federal legislation conditions payment of
the subcontractor not on payment by the government to the
contractor, but rather on the passage of time from completion of
the work or provision of materials”)).
20
contractor’s acceptance of the equipment upon the prime
contractor receiving the equipment and being able to test and
inspect the equipment), the Court does not find any reason why
it would.
Furthermore, neither of the parties has presented and
the Court is unaware of a case applying the rule in Weststar
Eng’g in a context similar to the present case.
Therefore, the
Court, again, does not find Weststar Eng’g persuasive here.10
Accordingly, the Court did not commit clear legal error in
finding that Weststar Eng’g was not controlling.
b. Manifest Injustice
Plaintiff argues that the Court’s application of the
10
Plaintiff discusses United States v. Zurich Am. Ins. Co.,
99 F. Supp. 3d 543 (E.D. Pa. 2015) for the proposition that
under the Miller Act, a subcontractor can waive its Miller Act
rights only after it has furnished labor or material for use in
the performance of the contract. In Zurich, the court denied
Defendants’ motion to dismiss, holding that a provision in the
parties agreement to pursue any claims through an administrative
dispute resolution process set forth in the prime contractor’s
contract with the government prior to bringing suit on the bond
was not a waiver of Plaintiff’s Miller Act rights. Id. at 54649. Given the difference in procedural posture and the
different contract provisions at issue, the Court finds this
case distinguishable.
The Court also does not find Plaintiff’s argument regarding
United States ex rel. DDC Interiors, Inc. v. Dawson Const. Co.,
895 F. Supp. 270 (D. Colo. 1995), aff’d, 82 F.3d 427 (10th Cir.
1996) convincing. In Dawson, the Court, inter alia, held that a
“paid when and if paid” clause was not a waiver of a Miller Act
claim. Id. at 274. However, as previously discussed, the Court
does not find the “paid when and if paid” authority controlling
in the present case. The Court also does not find Plaintiff’s
argument regarding Dawson’s discussion of the Miller Act’s
legislative history and purpose persuasive in the present case
for those same reasons.
21
inspection and force majeure clauses will result in manifest
injustice because Plaintiff has been waiting nearly two years
for full payment of the purchase price for the goods it supplied
and has been forced to saddle the risk of the suspension of work
order.
Motion at 15.
Plaintiff, however, has received a
payment of the vast majority of the amount due—$1.749 million of
the approximate $2 million purchase price.
Plaintiff’s suit is
for the remaining balance of $281,785.52.
In addition, Defendants have stated 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 work.
Defendants’
Memorandum in Opposition to Plaintiff’s Motion for Summary
Judgment (ECF No. 42) at 8 n.2.
The most recent suspension of
work provided to the Court states that the period of suspension
will end on July 31, 2017.
Def. Opp. CSF, Ex. 5 (ECF No. 43-5).
Defendants state that if the equipment passes inspection, they
will accept it and issue the remaining balance due under the
contract.
Defendants’ Memorandum in Opposition to Plaintiff’s
Motion for Summary Judgment (ECF No. 42) at 8 n.2.
Accordingly,
the Court does not find that Plaintiff has demonstrated that
manifest injustice will result from its May 17, 2017 Order.
II.
Motion for Interlocutory Appeal
As an alternative to reversal of the court’s prior
22
holding, Plaintiff seeks certification for an interlocutory
appeal pursuant to 28 U.S.C. § 1292(b) and a stay pending that
appeal.
Because the Court denies Plaintiff’s Motion for
Reconsideration, it next discusses Plaintiff’s Motion for
Interlocutory Appeal.
Defendants did not oppose Plaintiff’s
Motion for Interlocutory Appeal.
Certification for
interlocutory appeal is appropriate where (1) the order involves
a controlling question of law; (2) a substantial ground for
difference of opinion exists; and (3) an immediate appeal from
the order may materially advance the ultimate termination of the
litigation.
28 U.S.C. § 1292(b).
The Court discusses whether
each element has been met in turn.
a. Whether the Order Involves a Controlling Question of
Law
Plaintiff argues that the order involves a controlling
question of law—“whether a supplier to a federal project may be
forced to bear the risk of a suspension of work on that project
by contractual clauses such as inspection and force majeure
provisions in the subcontract or supply contract.”
Motion at
16-17.
A question of law is controlling if the resolution of
the issue on appeal could “materially affect the outcome of
litigation in the district court.”
In re Cement Antitrust
Litig., 673 F.2d 1020, 1026 (9th Cir. 1981).
23
A question of law
under § 1292(b) means a “pure question of law” rather than a
mixed question of law and fact or the application of law to a
particular set of facts.
Chehalem Physical Therapy, Inc. v.
Coventry Health Care, Inc., No. 09-CV-320-HU, 2010 WL 952273, at
*3 (D. Or. Mar. 10, 2010) (collecting cases); see also McFarlin
v. Conseco Servs., LLC, 381 F.3d 1251, 1259 (11th Cir. 2004)
(Section “1292(b) appeals were intended, and should be reserved,
for situations in which the court of appeals can rule on a pure,
controlling question of law without having to delve beyond the
surface of the record in order to determine the facts”); Oliner
v. Kontrabecki, 305 B.R. 510, 529 (N.D. Cal. 2004) (“Because the
alleged ‘controlling questions of law’ raised by Kontrabecki are
inextricably intertwined with the bankruptcy court’s factual
findings, an interlocutory appeal is not appropriate.”); In re
Bridgestone/Firestone, Inc., Tires Prods. Liab. Litig., 212 F.
Supp. 2d 903, 907 (S.D. Ind. 2002) (stating that a question of
law is one that presents an abstract legal issue that can be
decided quickly and cleanly without having to study the record).
Questions of law appropriate for interlocutory appeal
include “‘the determination of who are necessary and proper
parties, whether a court to which a cause has been transferred
has jurisdiction, or whether state or federal law should be
applied.’”
In re Cement Antitrust Litig., 673 F.2d at 1026
(quoting United States v. Woodbury, 263 F.2d 784, 787 (9th Cir.
24
1959)).
The Court finds that Plaintiff’s proposed question of
law—“whether a supplier to a federal project may be forced to
bear the risk of a suspension of work on that project by
contractual clauses such as inspection and force majeure
provisions in the subcontract or supply contract”—is unclear and
imprecise.
In addition, this question seems to be a broader
question of public policy relating to the Court’s May 17, 2017
Order and the Miller Act rather than a legal question.
Therefore, the Court finds that Plaintiff has failed to meet the
heavy burden necessary to warrant an interlocutory appeal based
on this question.
However, the Court finds that a controlling question
of law exists from Plaintiff’s Motion for Reconsideration.
As
previously discussed, Plaintiff presents two main legal issues
in his Motion for Reconsideration: (1) whether Comment to
Section 2.5.1 in the Proposal, as opposed to the General Terms
and Conditions of Sale in the Purchase Order, control as a
matter of law; and (2) whether Weststar Eng’g is controlling
authority in the present case.
The first issue is not a
controlling question of law because the Ninth Circuit has held
that the interpretation of contract terms is a mixed question of
law and fact.
See Klamath Water Users Protective Ass’n v.
Patterson, 204 F.3d 1206, 1210 (9th Cir. 1999) (“The
25
interpretation of a contract is a mixed question of law and fact
. . .”).
However, the Court finds that whether the holding in
Weststar Eng’g can be extended to apply to the inspection and
force majeure clauses in the General Terms and Conditions of
Sale in the Purchase Order at issue here is a controlling
question of law.
The determination of such issue will impact
the ultimate disposition of the case.
Notwithstanding new
factual developments and legal theories that have not been
presented to the Court, Plaintiff will be able to proceed to a
money judgment and the case may end if the Ninth Circuit were to
extend Weststar Eng’g’s holding to the present case.
On the
contrary, if the Ninth Circuit agrees with the Court and
declines to extend Weststar Eng’g in the present case, Plaintiff
would be unable to prove its Miller Act claim until such time as
the Navy permits work to be resumed and RWT is able to perform
an adequate test to determine whether the equipment conforms to
the contract specifications and thereby accept the equipment.
The Ninth Circuit would not need to delve beyond the
surface of the record to determine the facts.
Rather, this
question presents an abstract legal issue that can be decided
quickly and cleanly without the Ninth Circuit having to study
the record.
The Ninth Circuit would not need to resolve any
factual disputes.
The Ninth Circuit would merely need to
26
examine the inspection and force majeure clauses and the factual
context in which they are relevant here, and determine whether
its holding in Weststar Eng’g extends to this context.
Accordingly, the Court finds that Plaintiff has satisfied the
first element required to grant an interlocutory appeal.
b. Whether a Substantial Ground for Difference of
Opinion Exists
There is a “substantial ground for difference of
opinion” if “there is a genuine dispute over the question of law
that is the subject of the appeal.”
Litig., 673 F.2d at 1026.
In re Cement Antitrust
Such a dispute exists, for example,
if the circuits are in disagreement and the court of appeals in
which the district court sits has not decided the issue, the
issue involves complicated questions of foreign law, or the
issue is a novel and difficult one of first impression.
v. Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010).
Couch
“However,
just because a court is the first to rule on a particular
question or just because counsel contends that one precedent
rather than another is controlling does not mean” that
sufficient grounds exist.
Id.
Put another way, a substantial ground for difference
of opinion exists when novel legal issues are presented, on
which reasonable minded jurists might reach contradictory
conclusions.
Reese v. BP Exploration (Alaska) Inc., 643 F.3d
27
681, 688 (9th Cir. 2011).
“A party’s strong disagreement with
the Court’s ruling is not sufficient for there to be a
‘substantial ground for difference’; the proponent of an appeal
must make some greater showing.”
Kowalski v. Anova Food, LLC,
958 F. Supp. 2d 1147, 1154 (D. Haw. 2013).
That settled law
might be applied differently does not establish a substantial
ground for difference of opinion.
Couch, 611 F.3d at 633.
As previously discussed, neither of the parties has
presented and the Court is unaware of a case applying the rule
in Weststar Eng’g in a context similar to the present case.
Therefore, whether Weststar Eng’g’s holding can be extended to
apply to the facts of the current case is a novel legal issue.
In addition, despite the Court’s holding that Weststar Eng’g is
distinguishable here for the reasons previously discussed, the
Court finds that given the broad language from Weststar Eng’g,
which states that “where subcontract terms effecting the timing
of recovery or the right of recovery under the Miller Act,
enforcement of such terms to preclude Miller Act liability
contradict the express terms of the Miller Act,” reasonable
minded jurists might reach a contradictory conclusion.
The
Court, therefore, finds that Plaintiff has met the second
element necessary to establish that an interlocutory appeal is
warranted.
28
c. Whether the Proposed Interlocutory Appeal Will
Materially Advance the Ultimate Termination of the
Litigation
A district court generally should not permit an
interlocutory appeal where it would prolong litigation rather
than advance its resolution.
Fenters v. Yosemite Chevron, 761
F. Supp. 2d 957, 1005 (E.D. Cal. 2011).
Courts within the Ninth
Circuit have held that resolution of a question materially
advances the termination of litigation if it “facilitate[s]
disposition of the action by getting a final decision on a
controlling legal issue sooner, rather than later [in order to]
save the courts and the litigants unnecessary trouble and
expense.”
See United States v. Adam Bros. Farming, Inc., 369 F.
Supp. 2d 1180, 1182 (C.D. Cal. 2004); see also In re Cement
Antitrust Litig., 673 F.2d at 1026 (stating that § 1292(b) is
used “only in exceptional situations in which allowing an
interlocutory appeal would avoid protracted and expensive
litigation”).
Plaintiff argues that the proposed interlocutory
appeal will materially advance the litigation, either by
“allowing [Plaintiff] to proceed to a money judgment or by
encouraging the parties to settle (whether before or after the
appellate ruling and regardless of who might prevail on
appeal).”
Motion at 18.
The Court agrees.
An appeal at this
juncture might also prevent a later retrial of Plaintiff’s
29
Miller Act claim.
The Court notes that the Navy has suspended work on
the Project, and Plaintiff states that there is no indication
when, if ever, the Navy will lift the suspension.
Motion at 15.
The unique circumstances of this case, therefore, leaves
Plaintiff in a predicament in which it is unclear when Plaintiff
will be able to appeal this Court’s order—if it is not allowed
an interlocutory appeal.
Accordingly, having found that all three requirements
for an interlocutory appeal are met, the Court grants
Plaintiff’s unopposed Motion for Interlocutory Appeal.
The
Court grants certification of an interlocutory appeal based on
the following question: whether Weststar Eng’g’s holding can be
extended to apply to the inspection and force majeure clauses in
the General Terms and Conditions of Sale in the Purchase Order
at issue here.
III.
Stay of Proceedings Pending Interlocutory Appeal
The Court has authority to stay proceedings during
interlocutory appeal pursuant to 28 U.S.C. § 1292(b), both under
§ 1292(b) itself, see Watson v. Yolo Cty. Flood Control and
Water Conservation Dist., No. 2:06-cv-1549 FCD DAD, 2007 WL
4107539, *2 (E.D. Cal. Nov. 16, 2007), and its inherent
authority to manage its docket.
See Asis Internet Servs. v.
Active Response Grp., No. C07 6211 TEH, 2008 WL 4279695, at *3
30
(N.D. Cal. Sept. 16, 2008).
Plaintiff’s Motion to Stay the
Action pending Interlocutory Appeal is unopposed.
When considering a stay pending appeal pursuant to §
1292(b), the Court has “broad discretion to decide whether a
stay is appropriate to ‘promote economy of time and effort for
itself, for counsel, and for litigants.’”
Ass’n of Irritated
Residents v. Fred Schakel Dairy, No. 1:05-CV-00707 OWW SMS, 2008
WL 2899912, *11 (E.D. Cal. July 22, 2008) (quoting Filtrol Corp.
v. Kelleher, 467 F.2d 242, 244 (9th Cir. 1972)); see
Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458,
1465 (9th Cir. 1983) (“A trial court may, with propriety, find
it is efficient for its own docket and the fairest course for
the parties to enter a stay of an action before it, pending
resolution of independent proceedings which bear upon the case.”
(internal quotation marks and citation omitted)).
To determine whether to grant a stay, the court must
weigh the following factors: (1) the possible damage which may
result from the granting of a stay; (2) the hardship or inequity
which a party may suffer in being required to go forward; and
(3) the orderly course of justice measured in terms of the
simplifying or complicating of issues, proof, and questions of
law which could be expected to result from a stay.
Rollins v.
Dignity Health, No. 13-CV-01450-TEH, 2014 WL 6693891, at *4
31
(N.D. Cal. Nov. 26, 2014).11
First, the Court finds that any harm to Defendants
from granting a stay is minimal.
Defendants will merely suffer
continued uncertainty in the litigation.
Second, given the
quickly approaching trial date, which is currently scheduled for
September 6, 2017, an interlocutory appeal makes little sense
without a stay of proceedings.
If the case goes forward while
an appeal is pending, both parties may undergo unnecessary time
and expense in preparing for trial or in engaging in settlement
discussions over a claim that may be resolved on appeal.
Therefore, moving forward with this action would largely thwart
the purpose of the grant of interlocutory appeal.
Third, the current interlocutory appeal will allow the
Ninth Circuit to conclusively establish the requirements for
Plaintiff’s Miller Act claim and allow for the orderly course of
justice.
Accordingly, the Court grants Plaintiff’s motion to
stay the case pending the interlocutory appeal.
11
The Court notes that there is a division in the Ninth
Circuit regarding the appropriate standard by which a district
court is to exercise its discretion in whether to grant a stay
pending an interlocutory appeal. See Finder v. Leprino Foods
Co., CASE NO. 1:13-CV-02059-AWI-BAM, 2017 WL 1355104, at *2
(E.D. Cal. Jan. 20, 2017) (explaining the standards applied by
district courts in the Ninth Circuit in determining whether to
grant a stay pending the resolution of an interlocutory appeal).
The Court notes that application of the different tests would
not result in a different outcome here.
32
CONCLUSION
For the foregoing reasons, the Court DENIES
Plaintiff’s Motion for Reconsideration, ECF No. 51.
The Court
GRANTS Plaintiff’s Motion for Interlocutory Appeal and Stay
Pending that Appeal, ECF No. 51.
This action is STAYED pending the Ninth Circuit’s
decision on whether to accept the interlocutory appeal.
Should
the Ninth Circuit permit such appeal, this action is further
STAYED pending the issuance of a dispositive order on
Plaintiff’s interlocutory appeal.
The Court DIRECTS Plaintiff to inform the Court within
7 days of the Ninth Circuit’s decision on whether to permit an
appeal, and if applicable, the Ninth Circuit’s ultimate
resolution of the interlocutory appeal.
IT IS SO ORDERED.
DATED:
Honolulu, Hawaii, July 13, 2017
________________________________
Alan C. Kay
Sr. United States District Judge
Atlas Copco Compressors LLC v. RWT LLC et al., Civ. No. 16-00215, Order
Denying Plaintiff’s Motion for Reconsideration and Granting Plaintiff’s
Motion for Interlocutory Appeal and Stay Pending that Appeal
33
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