W&W Steel, LLC v. BSC Steel, Inc. et al

Filing 174

MEMORANDUM AND ORDER granting 135 Motion for Partial Summary Judgment of APAC-Kansas, Inc., Judgment shall be entered for APAC-Kansas, Inc. and against W & W Steel, LLC and Liberty Mutual Insurance Company on Count VI of APAC-Kansas, Inc.'s c omplaint in intervention in the amount of $275,756.35 plus prejudgment interest of $155,292.61 along with continuing interest and attorney's fees. ; denying 142 Motion for Partial Summary Judgment of W & W Steel, LLC and Liberty Mut ual Insurance Company; denying 152 APAC-Kansas, Inc.'s Motion for Hearing; denying 159 Motion for Partial Summary Judgment by W & W Steel, LLC and Liberty Mutual Insurance; granting 161 Motion for Summary Judgment of APAC-Kansas, Inc., Judgment shall be entered for APAC-Kansas, Inc. and against BSC Steel, Inc., in the amount of #275,756.35 in principal, plus $155,292.61 in prejudgment interest which continues to accumulate daily, plus costs and attorney's fees; granting [ 163] Motion for Partial Summary Judgment of American Riggers Supply, Inc., Judgment shall be entered for American Riggers Supply, Inc and against BSC Steel, Inc.; W & W Steel, LLC and Liberty Mutual Insurance Company on Count VI of American Riggers Supply, Inc.'s complaint in intervention in the amount of $170,572.00. Signed by District Judge Richard D. Rogers on 2/26/15. (meh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
APAC-KANSAS, INC.,
Intervenor Plaintiff,
v.
BSC STEEL INC.; W & W STEEL,
LLC; and LIBERTY MUTUAL
INSURANCE CO.;
Intervenor Defendants.
________________________________

Case No. 11-2613-RDR

AMERICAN RIGGERS SUPPLY, INC.,
Intervenor Plaintiff,
v.
BSC STEEL INC.; W & W STEEL,
LLC; and LIBERTY MUTUAL
INSURANCE CO.;
Intervenor Defendants.

MEMORANDUM AND ORDER

This

matter

is

presently

before

the

court

upon

the

following motions for partial summary judgment: (1) APAC-Kansas,
Inc. (APAC) against W & W Steel, LLC (W&W) and Liberty Mutual
Insurance Company (Liberty Mutual) (Doc. # 135); (2) W&W and
Liberty Mutual against APAC (Doc. # 142); (3) W&W and Liberty
Mutual against American Riggers Supply, Inc. (American Riggers)
1

(Doc. # 159); (4) APAC against BSC Steel, Inc. (BSC) (Doc. #
161); and (5)

American Riggers against BSC, W&W and Liberty

Mutual (Doc. # 163).

APAC has also filed a motion for oral

argument on the motion for partial judgment filed against W&W
and

Liberty

partial

summary

judgment filed by W&W and Liberty Mutual against it.1

Having

carefully

Mutual

reviewed

and

the

the

cross-motion

pending

for

motions,

the

court

is

now

prepared to rule.
I.

Factual Background
This case arises out of the construction of the Irwin Army

Community

Hospital

located

on

Fort

Riley,

Kansas.

Balfour-

Walton Joint Venture (BWJV) served as the general contractor on
the project (Project). BWJV contracted a portion of the work to
W&W.

W&W agreed to perform the steel erection of the general

contract work on the project.

W&W then subcontracted some of

its work to Materials Management, Inc. (MMI).
into

a

Mutual,

contract
as

with

surety,

BSC

issued

for
a

the

steel

payment

bond

MMI then entered

erection.
(Payment

Liberty
Bond)

in

connection with the subcontract between BWJV and W&W for sums
1

APAC-Kansas, Inc. seeks oral argument on these motions pursuant to D.Kan. Rule 7.2. Rule 7.2 states that A[t]he
court may set any motion for oral argument ... at the request of a party ...@ The discretion to schedule oral argument lies with the
court. The court does not find oral argument necessary here. The court shall deny APAC-Kansas, Inc.=s request for oral
argument.

2

due on the project in the amount of $12,640,000.
APAC entered into a series of lease agreements with BSC in
which APAC agreed to furnish BSC with certain equipment and
associated

labor.

APAC

furnished

and

supplied

all

of

the

equipment, services and associated labor as required under the
lease

agreements.

APAC

provided

BSC

with

several

invoices

seeking payment for the equipment, services and labor.

The

invoice terms provided in part that finance charges of 1.5% per
month would accrue on all unpaid invoices.
has not made full payment.

BSC admits that it

APAC sought payment from W&W for the

amounts owed by BSC, but W&W has made no payment to APAC.

In

this case, APAC seeks the value of the equipment and services
provided to BSC which amounts to $275,756.35 plus prejudgment
interest

of

$155,292.61

attorney=s fees and costs.

plus

additional

continuing

interest,

APAC seeks to recover these amounts

from the Payment Bond issued by Liberty Mutual.
American Riggers provided material and services to BSC for
use by BSC in performance of BSC=s subcontract with MMI.

BSC

owes American Riggers the principal amount of $170,572.00 for
the material and services.

American Riggers sought payment from

W&W and Liberty Mutual for this amount, but they have made no
payments

to

American

Riggers.

American

Riggers

now

seeks

judgment in the amount of $170,572.00, as well as interest at 10
3

percent under K.S.A. 16-201.
II. Procedural Background
APAC filed a motion for summary judgment on Count VI of its
complaint in intervention.

APAC sought payment from W&W and

Liberty Mutual under the Payment Bond for equipment and services
it provided to BSC.

APAC asserts that payment has not been made

by W&W or Liberty Mutual after they received notice of APAC=s
bond claim.

In response, W&W and Liberty Mutual argued (1) APAC

has no standing to bring claim under the Payment Bond because
APAC is not a proper claimant; (2) APAC is not entitled to
payment under the Payment Bond because it has not shown, as
required by the subcontract between BWJV and W&W, that W&W has
been

paid

by

BWJV

for

the

work

of

APAC;

(3)

W&W

has

been

discharged from any liability to APAC because W&W has satisfied
its responsibilities under the Apay-when-paid@ obligations of its
subcontract with BWJV by paying $163,500.00 to BSC for work
performed by APAC; (4) APAC failed to provide W&W with timely
notice of its claim and W&W has been prejudiced by that failure;
and (5) APAC has failed to show its charges are correct and that
its charges were actually forwarded to W&W.
W&W and Liberty Mutual filed a cross-motion for partial
summary judgment on Count VI of APAC=s complaint in intervention
after it filed a response to APAC=s motion for summary judgment
4

on that claim.

In this motion, W&W and Liberty Mutual raised

one of the arguments raised in their earlier response.

They

contended that APAC is not a proper claimant under the Payment
Bond and, therefore, lacks standing to bring a claim under it.
APAC has also filed a motion for summary judgment against
BSC.

In this motion, APAC seeks summary judgment on the breach

of contract claims asserted in Counts II, III and IV of its
complaint for intervention against BSC.

BSC has indicated to

the court that it does not intend to file a response to APAC=s
motion.
W&W and Liberty Mutual have also filed a motion for partial
summary judgment on American Riggers= claim against them under
the Payment Bond.

They raise the same argument that they raised

concerning the claim made by APAC under the Payment Bond.

They

contend that American Riggers is not a proper claimant under the
Payment Bond and, therefore, lacks standing to bring a claim
under it.
American Riggers has filed a motion for summary judgment
against BSC, W&W Steel and Liberty Mutual.

American Riggers

seeks summary judgment against BSC for payment for the materials
and services that it provided to BSC for the Project.

BSC has

indicated

file

response

to
to

the

court

American

that

Riggers=

it

does

motion.
5

not

intend

American

to

Riggers

a

also

seeks summary judgment against W&W and Liberty Mutual under the
Payment Bond for materials and services provided on the Project.
In response, W&W and Liberty Mutual contend (1) American Riggers
is not a proper claimant under the Payment Bond and, thus, lacks
standing to recover under the Bond; (2) American Riggers is not
entitled to payment under the Payment Bond because it has not
shown, as required by the subcontract between BWJV and W&W, that
W&W has been paid by BWJV for the work of American Riggers; (3)
American Riggers failed to provide W&W with timely notice of its
claim and W&W has been prejudiced by that failure; (4) American
Riggers has failed to show its charges are correct and that its
charges were actually forwarded to W&W; and (5) the amount of
damages owed to American Riggers remains in dispute.
III.

Summary Judgment Standards
Summary

judgment

is

appropriate

if

the

moving

party

demonstrates Athat there is no genuine dispute as to any material
fact@ and that it is Aentitled to judgment as a matter of law.@
Fed.R.Civ.P. 56(a).
the

evidence

and

In applying this standard, the court views
all

reasonable

inferences

light most favorable to the nonmoving party.

therefrom

in

the

City of Herriman

v. Bell, 590 F.3d 1176, 1181 (10th Cir. 2010). AThere is no
genuine issue of material fact unless the evidence, construed in
the light most favorable to the non-moving party, is such that a
6

reasonable jury could return a verdict for the non-moving party.@
Bones v. Honeywell Int=l, Inc., 366 F.3d 869, 875 (10th Cir.
2004)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
255

(1986)).

A

fact

is

Amaterial@

if,

under

the

applicable

substantive law, it is Aessential to the proper disposition of
the claim.@

Wright ex rel. Trust Co. of Kan. v. Abbott Labs.,

Inc., 259 F.3d 1226, 1231B32 (10th Cir. 2001)(citing Adler v.
WalBMart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).

An

issue of fact is Agenuine@ if Athere is sufficient evidence on
each side so that a rational trier of fact could resolve the
issue either way.@

Adler, 144 F.3d at 670 (citing Anderson, 477

U.S. at 248).
The

moving

party

initially

must

show

the

absence

of

a

genuine issue of material fact and entitlement to judgment as a
matter of law.
904 (10th
Celotex

Spaulding v. United Transp. Union, 279 F.3d 901,

Cir. 2002), cert. denied, 537 U.S. 816 (2002)(citing
Corp.

v.

Catrett,

477

U.S.

317,

322B23

(1986)).

In

attempting to meet this standard, a movant that does not bear
the ultimate burden of persuasion at trial need not negate the
non-movant=s claim; rather, the movant need simply point out to
the court a lack of evidence for the nonmovant on an essential
element of the nonmovant’s claim.

Adams v. Am. Guar. & Liab.

Ins. Co., 233 F.3d 1242, 1246 (10th

Cir. 2000)(citing Adler, 144

7

F.3d at 671); see also Kannady v. City of Kiowa, 590 F.3d 1161,
1169 (10th Cir. 2010).
Once the movant has met the initial burden of showing the
absence of a genuine issue of material fact, the burden shifts
to the nonmoving party to Aset forth specific facts showing that
there is a genuine issue for trial.@

Anderson, 477 U.S. at 256;

Celotex, 477 U.S. at 324; Spaulding, 279 F.3d at 904 (citing
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986)). The nonmoving party may not simply rest upon its
pleadings to satisfy its burden.

Anderson, 477 U.S. at 256;

accord Eck v. Parke, Davis & Co., 256 F.3d 1013, 1017 (10th Cir.
2001). Rather, the nonmoving party must Aset forth specific facts
that would be admissible in evidence in the event of trial from
which a rational trier of fact could find for the nonmovant.@
Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1197B98 (10th
Cir. 2000)(quoting Adler, 144 F.3d at 670B71); see Kannady, 590
F.3d at 1169.
The defendant has the burden of proof on an affirmative
defense,

and

thus

in

moving

for

summary

judgment

on

the

affirmative defense, A[t]he defendant. . .must demonstrate that
no

disputed

material

fact

exists

regarding

the

affirmative

defense asserted.@ Hutchinson v. Pfeil, 105 F.3d 562, 564 (10th
Cir. 1997). Once the defendant makes this initial showing, Athe
8

plaintiff must then demonstrate with specificity the existence
of a disputed material fact.@ Id.
viewed

in

the

light

most

If after the evidence is

favorable

to

the

plaintiff,

the

plaintiff cannot meet this burden, Athe affirmative defense bars
his

claim,

and

the

defendant

is

then

entitled

to

summary

judgment as a matter of law.@ Id.
Finally, summary judgment is not a Adisfavored procedural
shortcut@;

on

the

contrary,

Adesigned

to

secure

the

it

is

just,

an

important

speedy

and

procedure
inexpensive

determination of every action.@ Celotex, 477 U.S. at 327 (quoting
Fed.R.Civ.P. 1). In responding to a motion for summary judgment,
Aa party cannot rest on ignorance of facts, on speculation, or on
suspicion and may not escape summary judgment in the mere hope
that something will turn up at trial.@ Conaway v. Smith, 853 F.2d
789, 794 (10th Cir. 1988). When examining the underlying facts of
the

case,

the

court

is

cognizant

that

it

may

credibility determinations or weigh the evidence.

not

make

Matsushita,

475 U.S. at 587.
IV.

Applicable Law/Analysis
This case is based on diversity jurisdiction.

Thus, the

court applies the substantive law of the forum state, including
its choice-of-law rules.
state=s

choice-of-law

Here, the court must look to the forum

rules

to
9

determine

the

effect

of

a

contractual

choice-of-law

clause.

The

BWJV/W&W

Subcontract,

which is specifically incorporated by reference into the Payment
Bond, states that the Alaws of the State in which the project is
located will be applied in resolving the dispute.@

The project

was located in Kansas and, therefore, Kansas law applies.
With

the

exception

of

the

claims

of

APAC

and

American

Riggers against BSC, the remaining motions involve the claims of
APAC

and

American

Riggers

based

upon

the

Payment

Bond.

As

correctly pointed out by APAC and American Riggers, the court is
not considering any claims under the Miller Act, 40 U.S.C. ' 3131
et seq., which mandates that, when awarding a federal contract
for

construction

of

public

building

or

public

work

of

the

federal government, a contractor must furnish a bond to the
federal

government

in

order

to

ensure

that

payment

of

all

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

40 U.S.C. ' 3131(b)(2).

Here,

BWJV required that W&W execute a Payment Bond for the Project.
It is that common law bond that the court considers here.
AA

surety

bond

is

to

be

construed

in

the

light

of

the

circumstances in which it is given, so as to effectuate its
purpose.@

Local No. 1179 v. Merchants Mut. Bonding Co., 228 Kan.

226, 613 P.2d 944, 946 (1980).

But it is also well established

in Kansas law that Athe obligation of a bond is to be measured by
10

the

bond

itself

enlarged

by

contract.@
(1973).

and

may

not

construction

be

beyond

extended
the

terms

by

implication

of

the

or

executed

In re Smith=s Estate, 211 Kan. 397, 507 P.2d 189, 192

Moreover, A[t]he primary rule for interpreting written

contracts is to ascertain the parties= intent. If the terms of
the contract are clear, the intent of the parties is to be
determined from the language of the contract without applying
rules of construction.@ Osterhaus v. Toth, 291 Kan. 759, 249 P.3d
888, 896 (2011).

But, a bond will be construed favorably to the

bonded, if such construction is consistent with the object for
which the bond was made.

Farmer v. Rutherford, 136 Kan. 298, 15

P.2d 474, 477-78 (1932); State v. Mass. Bonding & Ins. Co., 91
Kan. 74, 136 P. 905, 908 (1913)
A.

Proper Claimants under the Payment Bond
W&W and Liberty Mutual contend in their motions for summary

judgment that American Riggers and APAC are not proper claimants
under

the

Payment

Bond.

Thus,

they

contend

that

APAC

and

American Riggers lack standing to make a claim based upon the
Payment Bond.
The

relevant

portion

of

the

Payment

bond

provides

follows:
NOW THEREFORE, the condition of this obligation
is such that if the Contractor shall make payment to
all claimants for all costs and expenses resulting
11

as

from the performance of this Subcontract and for all
labor, materials, equipment, supplies, services, and
the like, used or reasonably required for use in the
performance of this Subcontract, for all or any part
of which the Contractor and Owner is liable, failing
which such claimants shall have a direct right of
action against the Subcontractor and Surety under this
obligation, subject to the Contractor=s priority, shall
have the right to bring an action against the
Subcontractor
and
Surety
on
behalf
of
unpaid
claimants, then this obligation shall be null and
void, otherwise, it shall remain in full force.
The arguments of W&W and Liberty Mutual have changed during
the course of the debate on the instant motions for summary
judgment. Initially they contended, relying upon the language in
the aforementioned clause Ato whom the Contractor and Owner is
liable,@ that American Riggers and APAC were not proper claimants
under the Payment Bond because they could not establish that the
Contractor

(BWJV)

and

the

Owner

(the

United

States)

were

directly liable to them for their claims.
After APAC and American Riggers pointed out that based upon
that interpretation of the clause no one would qualify as a
claimant because there is no one to whom both BWJV and the
United States could directly be liable, W&W and Liberty Mutual
changed their argument to rewrite the Payment Bond to change
AContractor and Owner@ to AContractor or Owner.@

In support of

this argument, they pointed to a variety of cases where courts
have interpreted Aand@ to mean Aand/or.@
12

The court finds no merit to the arguments offered by W&W
and Liberty Mutual.

The court believes that the appropriate

construction of the phrase Afor all or any part of which the
Contractor and Owner is liable@ is a general reference to the
costs of constructing the project.
under

the

Payment

Bond

only

if

Claimants can seek recovery
they

are

seeking

costs

and

expenses for labor and materials used in the performance of a
subcontract
liable.

for

which

BWJV

and

the

United

States

would

be

See United States ex rel. Wheeling-Pittsburgh Steel

Corp. v. Algernon Blair Inc., 329 F.Supp. 1360, 1364 (D.S.C.
1971)(court construed same clause in a payment bond and found
that

materialman

who

provided

material

to

subcontractor

is

entitled to benefit of the payment bond due to the language
providing for direct action by all claimants).
in harmony with the purpose of the Payment Bond.

This reading is
Moreover, such

an interpretation does not require rewriting the bond language
as suggested by W&W and Liberty Mutual.

Finally, this reading

is consistent with the rule that a bond must be construed in
favor of the claimant and against the surety.
B.

Pay-When-Paid
W&W and Liberty Mutual next contend that even if APAC and

American Riggers are proper claimants, they are not entitled to
summary judgment on their claims because they have not shown
13

that either BWJV or W&W has been paid for their work.

Thus,

they argue that subcontractors APAC and American Riggers can
only recover after they show that an upper-tier contractor has
been paid for the work or supplies sought by them.
The pay-when-paid argument articulated by W&W and Liberty
Mutual is more complicated than either party has acknowledged.
In

MidAmerica

Construction

Management,

Inc.

v.

MasTec

North

America, Inc., 436 F.3d 1257, 1261-62 (10th Cir. 2006), the Tenth
Circuit explained such provisions in construction contracts as
follows:
Construction contracts often contain provisions
referred
to
as
Apay-when-paid@
and
Apay-if-paid@
clauses. See Robert F. Carney & Adam Cizek, Payment
Provisions in Construction Contracts and Construction
Trust
Fund
Statutes:
A
FiftyBState
Survey,
24
Construction Law. 5 (2004). Courts have not uniformly
applied these terms. See id. (ASome courts refer to
both provisions as >pay-when-paid= clauses....@). Still,
the terms Apay-when-paid@ and Apay-if-paid@ refer to
distinct types of contractual clauses:
A typical Apay-when-paid@ clause might
read: AContractor shall pay subcontractor
within seven days of contractor's receipt of
payment from the owner.@ Under such a
provision in a construction subcontract, a
contractor's
obligation
to
pay
the
subcontractor is triggered upon receipt of
payment from the owner. Most courts hold
that this type of clause at least means that
the contractor's obligation to make payment
is suspended for a reasonable amount of time
for the contractor to receive payment from
the
owner.
The
theory
is
that
a
Apay-when-paid@
clause
creates
a
timing
mechanism only. Such a clause does not
14

create
a
condition
precedent
to
the
obligation to ever make payment, and it does
not expressly shift the risk of the owner's
nonpayment to the subcontractor....
A typical Apay-if-paid@ clause might
read: AContractor's receipt of payment from
the owner is a condition precedent to
contractor's obligation to make payment to
the
subcontractor;
the
subcontractor
expressly assumes the risk of the *1262
owner's nonpayment and the subcontract price
includes this risk.@ Under a Apay-if-paid@
provision
in
a
construction
contract,
receipt of payment by the contractor from
the owner is an express condition precedent
to the contractor's obligation to pay the
subcontractor. A Apay-if-paid@ provision in a
construction subcontract is meant to shift
the risk of the owner's nonpayment under the
subcontract from the contractor to the
subcontractor. In many jurisdictions, courts
will enforce a Apay-if-paid@ provision only
if that language is clear and unequivocal.
Judges
generally
will
find
that
a
Apay-if-paid@ provision does not create a
condition precedent, but rather a reasonable
timing provision, where the Apay-if-paid@
provision is ambiguous.
Id. at 5B6 (footnotes omitted).
Two
considered

Kansas

cases,

both

from

this

issue.

In

Shelley

the

federal

Electric,

court,
Inc.

v.

have
U.S.

Fidelity & Guaranty Co., 1992 WL 319654 (D.Kan. Oct. 16, 1992),
Judge Kelly noted that at that time no Kansas case had ever
considered the question of the proper interpretation of Apaidwhen-paid@ contract provisions.

1992 WL 319654 at * 2.

He

examined the construction contract and found it involved a Apaywhen-paid@ clause rather than a Apaid-if-paid@ clause.
15

Id. at *3.

He noted that there was no language indicating the existence of
a condition precedent and no express condition.
Subsequently,

in

Faith

Technologies,

Id.

Inc.

v.

Fidelity

&

Deposit Co. of Md., 2011 WL 251451 (D.Kan. Jan. 26, 2011), Judge
Belot found that the subcontract there contained a Apay-if-paid@
clause.

2011

WL

252451

at

*3.

He

relied

upon

language

contained in the subcontract that provided payment by the owner
to

the

subcontractor

was

a

condition

precedent

subcontractor=s liability for payment to others.

for

the

Id.

In this case, the subcontracts (the contract between W&W
and

MMI

and

the

contract

between

MMI

and

BSC)

provide

pertinent part:
(a) . . . .Contractor shall be obligated to pay
Subcontractor only when Contractor receives payment
from the Owner or General Contractor, as the case may
be, with such payments to be made within ten (10) days
after receipt thereof by Contractor. Contractor shall
not be obligated to make any payments (progress, final
or otherwise) to Subcontractor until the Owner or
General Contractor pays Contractor for the work
performed by the Subcontractor.
(b)
Upon
receipt
of
payment
from
Contractor,
Subcontractor
shall
promptly
pay
each
of
its
subcontractors, materialmen, suppliers and any other
party the amount to which said person is entitled.
Subcontractor shall receive each payment in trust, and
as bailee, for the express use and purpose of paying
for all labor, materials, equipment and services
(including all taxes, fees and assessments thereon)
and other items and things used by subcontractor in
the performance of its work; and title to such
payments or any part thereof shall not vest in
16

in

Subcontractor
until
all
obligations
incurred
by
Subcontractor have been first paid in full and the
work
to
be
done
under
this
Subcontract
is
satisfactorily completed.
Contractor shall have the
right, but not the obligation, at all times to contact
Subcontractor=s
subcontractors,
materialmen
and
suppliers to ensure that the same are being promptly
paid by Subcontractor for labor, materials, equipment
and
services
furnished
for
use
in
performing
Subcontractor=s work.
(c) As an express condition precedent to payment by
Contractor to Subcontractor of any sums due and owing
under this Subcontract, Subcontractor shall provide or
have provided Contractor: (i) A description of work
performed during such preceding payment period, (ii) A
list of all bills for supplies, materials, equipment,
and fixtures incorporated in the work (in detail
reasonably sufficient to allow Contractor to determine
where each item is incorporated) and labor performed
(in detail reasonably sufficient to allow Contractor
to determine where and on what portion of the work the
labor was performed, including, but not limited to,
certified weekly labor payrolls with names, dates,
hours and rates) in connection with the work, together
with copies of the actual bills to be paid; (iii) such
certificates of insurance as required herein; (iv)
lien releases, in forms satisfactory to Contractor,
for Subcontractor and any of its sub-subcontractors,
suppliers, or vendors related to the work for which
payment is requested; and (v) any other information or
documentation as Contractor may reasonably require to
substantiate
Subcontractor=s
request
for
payment.
Subcontractor
understands
and
agrees
that
Subcontractor=s billing must be received by Contractor
no later than the 15th of each month. Failure to
timely submit billing may result in Subcontractor=s
payment being delayed until the following month.
As noted in MidAmerica, many jurisdictions enforce Apay-ifpaid@ provisions only if the language is clear and unequivocal.
These

courts

refuse

to

shift
17

the

risk

of

the

owner=s

nonperformance from the general contractor to the subcontractor
unless the language clearly indicates that the parties intended
to do so.
A review of the language here does not evidence that the
parties intended to shift the risk of the owner=s nonperformance
from the general contractor to the subcontractor with sufficient
clarity to qualify as a condition precedent.

The language of

the subcontracts suggests that the parties agreed to a Apay-whenpaid@ arrangement, not a Apay-if-paid@ arrangement.

The language

contained in paragraphs (a) and (b) could be interpreted only as
timing provisions.

It is not necessarily indicative of the

parties= intent to make the subcontractor=s obligation to pay its
subcontractors dependent upon the subcontractor first being paid
by

the

contractor

or

owner.

This

is

particularly

so

considered in light of the provisions of paragraph (c).

when
There

the parties created a condition precedent for the timely payment
of payments by the contractor to the subcontractor.
sentence

illustrates

that

the

parties

condition precedent if they so desired.

knew

how

to

The first
create

a

That they did not use

such unambiguous language in paragraphs (a) and (b) prevents
this

court

from

construing

that

language

as

a

condition

precedent to the right to payment by APAC and American Riggers.
The language contained here is closer to the language used in
18

the contract in Shelley than that used in the contract in Faith
Technologies.
suggested

by

Therefore,
W&W,

that

there

APAC

are

and

no

requirements,

American

Riggers

had

as
to

establish that (1) W&W had been billed by BSC, through MMI, for
the labor, services and equipment APAC and American Riggers; or
(2) W&W had been paid by BWJV for the work of APAC and American
Riggers for which they make claims.

Accordingly, the court does

not find that the argument of W&W concerning the Apay-when-paid@
provisions of the subcontracts precludes summary judgment for
APAC and American Riggers on Count VI of their complaints in
intervention.
C.

Discharged from Liability Due to Payment
W&W

also

contends

that

it

has

been

discharged

for

any

liability under the Payment Bond for the claims asserted by APAC
because it paid BSC and MMI certain monies that represented work
performed by APAC.

In support of this argument, W&W notes that

in April 2011, BSC, through MMI, submitted certain invoices to
it

for

work

BSC

performed by APAC.
June 2011.
by APAC.

and

MMI

performed

and

this

included

work

W&W paid these amounts to BSC and MMI in

This amount included $163,500.00 for work performed
Accordingly, W&W contends that (1) it discharged its

obligations under the subcontract when it made this payment; and
(2) it had no further liability to APAC for any other monies
19

because it never received any other payments from BWJV that were
withheld from BSC and APAC.

Thus, W&W argues that APAC has no

claim against it under the Payment Bond.
The arguments of W&W are based upon language contained in
the subcontracts.

W&W attempts to piece together various parts

of the subcontracts to support its contentions.

In a nutshell,

W&W contends that it has satisfied its obligations under the
subcontracts because it paid BSC/MMI when it received payment
for the charges that contained the APAC claims.

And, it has no

further obligations to APAC because it has never received any
additional payments from BWJV that involved charges for BSC or
APAC.
In

making

this

argument,

W&W

has

failed

consider the language of the Payment Bond.
the

Payment

obligations
Payment

Bond
of

Bond

the

are

not

conditioned

incorporated

provides

that

are

properly

The obligations of
upon

subcontracts.

claimants

to

the

payment

Rather,

entitled

to

the
sue

directly on the Payment Bond when they have not been paid for
Aall costs and expenses resulting from the performance of this
Subcontract and for all labor, materials, equipment, supplies,
services, and the like, used or reasonably required for use in
the performance of this Subcontract.@

Because APAC was not paid

for the equipment and services it provided to the Project, APAC
20

is covered under the Bond.

Accordingly, the court finds no

merit to the contention raised by W&W.
D.

Notice Requirement
W&W and Liberty Mutual next argue that American Riggers and

APAC did not give timely notice of their claims to W&W.

W&W

indicates that APAC waited almost four months to provide notice
that BSC had not paid for services APAC provided to the Project.
W&W notes that American Riggers did not provide formal notice to
it of BSC=s alleged nonpayment until eight months after American
Riggers first sold BSC material for use in the performance of
the subcontract.
Requirements

as

to

notice

of

loss

are

essentially

contractual, unless the legislature has enacted statutes on the
issue.
loss,

Thus, when a policy makes no reference to notice of
either

expressly

or

by

incorporation

of

a

statutory

provision, there is no specific requirement that such notice be
given, even in the case of the principal=s default on a bond
guaranteeing

payment

for

labor

and

material.

See

Board

of

Public Instruction of Sarasota County v. Fidelity & Cas. Co. Of
N.Y., 184 So.2d 491, 494 (Fla.Dist.Ct.App. 1966); Phoenix Ins.
Co. v. Lester Bros., Inc., 203 Va. 802 127 S.E.2d 432, 436
(1962).
any

Here, W&W and Liberty Mutual have failed to point to

requirement

of

notice

in

the
21

Payment

Bond.

They

have

further

failed

to

show

that

Kansas

or

notice under the circumstances here.

federal

law

requires

As a result, the court

finds no merit to the argument raised by W&W and Liberty Mutual
that either APAC or American Riggers failed to provide to notice
here.
E.

Amount of Damages
In their motions for summary judgment, APAC and American

Riggers

indicated

that

it

provided

BSC

services and repairs for the Project.
owed

the

principal

$155,292.61.

amount

of

certain

materials,

APAC asserts that it is

$275,756.35

plus

interest

of

American Riggers states that BSC owes American

Riggers the principal amount of $170,572 for these materials and
services.

In support of these statements, APAC and American

Riggers rely upon the affidavit of Robert Bartley.
W&W

and

Liberty

Mutual

contend

that

Bartley=s

affidavit

cannot be used to support the statements that BSC has agreed to
the

charges

asserted

by

APAC

and

American

Riggers

because

Bartley last worked for BSC in October 1981 and he is not a
current employee or agent of BSC.

The court finds no merit to

this contention for a number of reasons.
The

uncontroverted

evidence

before

Bartley is an authorized agent of BSC.

the

court

shows

that

Jay D. Patel, an officer

of BSC, has stated in an affidavit that Bartley was authorized
22

to speak on BSC=s behalf.

In addition, APAC has pointed out that

Bartley is currently an officer of BSC, the Secretary, and has
been since at least 2011.
W&W

and

Liberty

Mutual

Accordingly, the challenges made by

to

Bartley=s

declarations

are

without

merit.
Finally, W&W contends that the amount of American Riggers=
damages remains in dispute and must be decided by a finder of
fact.

W&W

contends

that

the

amount

of

damages

claimed

by

American Riggers (1) does not account for the offset of certain
returned items; and (2) fails to consider that it has already
paid BSC for the amount requested by BSC.
The court finds no merit to the arguments raised by W&W
concerning the amount sought by American Riggers.

In fact, the

court is perplexed by the contentions made by W&W.

W&W and

Liberty Mutual have stipulated in the Pretrial Order that BSC
owes American Riggers $170,572.00.

Thus, the argument by W&W

that the amounts owed to American Riggers are in dispute are
contradicted by the stipulation and admission it made in the
Pretrial Order.
Moreover,

W&W

has

failed

to

raise

a

genuine

issue

of

material fact concerning any contention that it is entitled to a
setoff for the return of certain items.
contention

concerning

a

possible
23

setoff,

For support of its
W&W

points

to

an

affidavit of Glenn A. VanEnk, who served as W&W=s Project Manager
for

the

Project.

He

has

stated

in

his

affidavit

that

the

invoices provided by American Riggers fail to provide a setoff
for equipment returned to American Riggers after BSC stopped
work

on

the

project.

However,

as

correctly

pointed

out

by

American Riggers, there is no evidence in the record that any
items were returned to it.

American Riggers has provided an

affidavit of Jennifer Hughes, its Office Manager, in which she
states that no items for which American Riggers seeks payment
were returned to it.
W&W has also argued that it may have already paid MMI and
BSC for some material or services provided by American Riggers.
Thus,

W&W

contends

that

it

would

be

not

liable

to

American

Riggers under the Payment Bond for any amount that it has paid
to MMI and BSC for materials or services provided by American
Riggers.

The court has already considered and rejected this

argument when it was directed at the claim asserted by APAC.

We

must do so again.
In U.S. ex rel. Quality Trust, Inc. v. Cajun Contractors,
Inc.,

486

F.Supp.2d

1255,

1267

(D.Kan.

2007),

Judge

Crow

explained that in order to be successful on a claim under a
Miller Act payment bond, a party must prove that it was not paid
for the equipment it provided, the work it performed or the
24

supplies it furnished to the project.

Although Quality Trust

dealt with a payment bond under the Miller Act, this court is
confident that the elements necessary for success on a common
law payment bond are the same as those for a claim under the
Miller Act, especially when neither party has cited a Kansas
case on the issue.

See Lexicon, Inc. v. Safeco Ins. Co. Of

America, Inc., 436 F.3d 662, 668 n. 3 (6th Cir. 2006).
noted

above,

APAC

and

American

Riggers

have

shown

As
by

the

undisputed facts that each provided equipment, labor or services
to the Project, and each was not paid.
court

has

Liberty

rejected

Mutual,

all

APAC

of

and

the

defenses

American

Accordingly, since the
asserted

Riggers

are

by

W&W

entitled

and
to

summary judgment against W&W and Liberty Mutual on their claims
based upon the Payment Bond.
F.

Claims Against BSC
APAC seeks summary judgment on all its claims against BSC.

APAC asserts causes of action on account and breach of contract
against BSC.

APAC argues that the undisputed facts show that

BSC rented equipment for the Project and that BSC has failed to
pay for that equipment, even though BSC approved APAC=s invoices.
APAC notes that BSC has not asserted any defenses.
As previously noted, BSC has indicated that it does not
intend to respond to APAC=s motion for summary judgment against
25

it.

In

the

pretrial

order,

BSC

has

acknowledged

provided the equipment as set forth in their invoices.

that

APAC

BSC does

not dispute the invoices or the amounts in those invoices.

BSC

asserts no defenses to the claims made by APAC.
Given the admissions of BSC, the court finds that APAC=s
motion for summary judgment must be granted.

Accordingly, the

court shall grant judgment to APAC and against BSC in the amount
of

$275,756.35

in

principal,

plus

prejudgment

interest

of

$155,292.61 which continues to accumulate daily plus its costs
and attorney’=s fees.
IT IS THEREFORE ORDERED that the motion for partial summary
judgment

of

W

&

W

Steel,

LLC

and

Liberty

Mutual

Insurance

Company (Doc. # 142) be hereby denied.
IT IS FURTHER ORDERED that the motion for partial summary
judgment

of

W

&

W

Steel,

LLC

and

Liberty

Mutual

Insurance

Company (Doc. # 159) be hereby denied.
IT IS FURTHER ORDERED that APAC-Kansas, Inc.=s motion for
oral argument (Doc. # 152) be hereby denied.
IT IS FURTHER ORDERED that the motion for partial summary
judgment of APAC-Kansas, Inc. (Doc. # 135) be hereby granted.
Judgment shall be entered for APAC-Kansas, Inc. and against W &
W Steel, LLC and Liberty Mutual Insurance Company on Count VI of
APAC-Kansas, Inc.=s complaint in intervention in the amount of
25

$275,756.35 plus prejudgment interest of $155,292.61 along with
continuing interest and attorney’s fees.
IT IS FURTHER ORDERED that the motion for summary judgment
of APAC-Kansas, Inc. (Doc. # 161) be hereby granted.

Judgment

shall be entered for APAC-Kansas, Inc. and against BSC Steel,
Inc. in the amount of $275,756.35 in principal, plus $155,292.61
in

prejudgment

interest

which

continues

to

accumulate

daily,

plus costs and attorney’s fees.
IT IS FURTHER ORDERED that the motion for partial summary
judgment of American Riggers Supply, Inc. (Doc. # 163) be hereby
granted.

Judgment shall be entered for American Riggers Supply,

Inc. and against BSC Steel, Inc.; W & W Steel, LLC and Liberty
Mutual Insurance Company on Count VI of American Riggers Supply,
Inc.=s complaint in intervention in the amount of $170,572.00.
IT IS SO ORDERED.
Dated this 26th day of February, 2015, at Topeka, Kansas.

s/RICHARD D. ROGERS
Richard D. Rogers
United States District Judge

26