Ariosa & Company LLC v. All State Construction, Inc. et al

Filing 18

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 6/12/14. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
United States of America for
the use and benefit of ARIOSA & :
COMPANY, LLC
:
v.

:

Civil Action No. DKC 13-3560

:
ALL STATE CONSTRUCTION, INC.,
et al.

:

MEMORANDUM OPINION
Presently pending and ready for resolution in this case
arising under the Miller Act is a motion to dismiss filed by
Defendant SEI Group, Inc. (“SEI”).

(ECF No. 7).

The relevant

issues have been briefed and the court now rules pursuant to
Local Rule 105.6, no hearing being deemed necessary.

For the

reasons that follow, the motion will be denied.
I.

Background
A.

Factual Background

The following facts are set forth in the complaint.
No. 1).

(ECF

On or about October 22, 2012, SEI entered into a

contract with the United States government for the construction
of a “Helium Recovery Plant” in Gaithersburg, Maryland (“the
project”).

(Id. at ¶ 14).

As required under the Miller Act,

SEI furnished performance and payment bonds to the government
naming

Defendant

The

Guarantee

Company

of

North

America

USA

(“Guarantee”) as the surety on the project.1

The payment bond

provided that SEI and Guarantee were “jointly and severally”
liable for the penal sum of the bond.

(ECF No. 1-8, at 3).

SEI subcontracted with Defendant All State Construction,
Inc.

(“All

subcontract

State”),
with

which,

Plaintiff

in

turn,

Ariosa

&

entered

Company,

into
LLC,

a
“for

subthe

performance of work and the furnishing of labor and materials
for completion of the installation of [a] mechanical component
(ECF No. 1 ¶ 9).2

structure” of the project.

According to the

complaint, Plaintiff fulfilled its obligations under the subsubcontract,
extras

and

“provid[ing]
change

all

orders,

.

labor
.

.

and
in

materials,
a

safe,

workmanlike manner . . . at substantial expense.”
10).

including

careful

and

(Id. at ¶

At some point, however, “[t]he project was stopped as a

1

The complaint names the surety as “The Guaranty Company of
North America USA,” but the attached bonds indicate the proper
name is “The Guarantee Company of North America USA.” (ECF No.
1-8, at 2).
Performance bonds required under the Miller Act
“protect the government if the contractor fail[s] to complete a
contract,” while payment bonds “protect ‘all persons supplying
labor and material in carrying out the work provided for in the
contract.’” In re ESA Environmental Specialists, Inc., 709 F.3d
388, 391 n. 1 (4th Cir. 2013) (quoting 40 U.S.C. § 3131(b)).
2

Civil actions brought under the Miller Act must be brought
“in the name of the United States for the use of the person
bringing the action.”
40 U.S.C. § 3133(b)(3)(A).
The actual
plaintiff in this case is, therefore, the United States of
America for the use and benefit of Ariosa & Company, LLC. For
ease of exposition, the court refers to Ariosa as Plaintiff
throughout.
2

result of [SEI’s] attempts to supply equipment not compliant
with

the

specifications

required

by

the

United

States

government, namely a helium liquefier and associated equipment
manufactured within the United States.”

(Id. at ¶ 17).

result,

costs

which

Plaintiff

included

materials”

it

subcontract.

“incurred

“heating,
had

substantial

cooling,

purchased

(Id. at ¶ 19).

in

and

and

related

accordance

As a

expenses,”

equipment
with

the

and
sub-

Plaintiff asserts that it has “not

been paid the monies due and owing for its performance” and that
there

is

“a

contractual

balance

due

of

$72,326.00,

plus

additional demobilization costs, lost profits, other damages and
expenses totaling $65,280.00, for a total amount of loss of
$137,515.00.”
B.

(Id. at ¶ 20).

Procedural Background

Plaintiff

commenced

this

action

on

November

25,

2013,

bringing separate counts against All State, SEI, Guarantee, and
CNA Surety, d/b/a Western Surety Company – the surety on bonds
furnished by All State – asserting jurisdiction under the Miller
Act, 40 U.S.C. §§ 3131 et seq., and seeking a judgment against
all

defendants

in

the

amount

attorneys’ fees and costs[.]”

of

“$137,515.00

plus

(ECF No. 1 ¶ 12).

interest,

On February

28, 2014, SEI filed the pending motion to dismiss the second
count of the complaint, the sole count against it, pursuant to
Fed.R.Civ.P. 12(b)(6).

(ECF No. 7).
3

Plaintiff filed a response

in opposition on March 21 (ECF No. 15) and SEI filed a reply on
April 7 (ECF No. 16).
II.

Standard of Review
The purpose of a motion to dismiss under Rule 12(b)(6) is

to test the sufficiency of the complaint.
Charlottesville,

464

F.3d

480,

483

Presley v. City of

(4th

Cir.

2006).

A

plaintiff’s complaint need only satisfy the standard of Rule
8(a), which requires a “short and plain statement of the claim
showing that the pleader is entitled to relief.”
8(a)(2).

Fed.R.Civ.P

“Rule 8(a)(2) still requires a ‘showing,’ rather than

a blanket assertion, of entitlement to relief.”
v. Twombly, 550 U.S. 544, 555 n. 3 (2007).

Bell Atl. Corp.

That showing must

consist of more than a “formulaic recitation of the elements of
a cause of action” or “naked assertion[s] devoid of further
factual enhancement.”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (internal quotation marks omitted).
At this stage, the court must consider all well-pleaded
allegations in a complaint as true, Albright v. Oliver, 510 U.S.
266, 268 (1994), and must construe all factual allegations in
the

light

most

favorable

to

the

plaintiff,

see

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th

Cir.

1993)).

The

court

unsupported legal allegations.

need

not,

however,

accept

Revene v. Charles Cnty. Comm’rs,
4

882 F.2d 870, 873 (4th Cir. 1989).

Nor must it agree with legal

conclusions couched as factual allegations, Ashcroft v. Iqbal,
556 U.S. 662 (2009), or conclusory factual allegations devoid of
any reference to actual events, United Black Firefighters v.
Hirst,

604

F.2d

844

(4th

Cir.

1979);

see

also

Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009).

Francis

v.

“[W]here the

well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has alleged,
but it has not ‘show[n] . . . that the pleader is entitled to
relief.’”
8(a)(2)).

Iqbal,

556

U.S.

at

679

(quoting

Fed.R.Civ.P.

Thus, “[d]etermining whether a complaint states a

plausible claim for relief will . . . be a context-specific task
that

requires

the

reviewing

experience and common sense.”

court

to

draw

on

its

judicial

Id.

III. Analysis
The Miller Act requires a general contractor on a federal
construction project of more than $100,000 to furnish, inter
alia,

a

payment

bond

“for

the

protection

of

all

persons

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

40 U.S.C. § 3131(b)(2).

“The Act further

provides that any person who furnishes labor or materials for
such a bonded project and has not been paid may sue on the bond
for the amount due,” but recovery is limited “to first- and
second-tier subcontractors.”

Datastaff Technology Group, Inc.
5

v. Centex Const. Co., Inc., 528 F.Supp.2d 587, 592-93 (E.D.Va.
2007) (citing 40 U.S.C. § 3133).

Pursuant to § 3133(b)(2), a

second-tier subcontractor is required to provide written notice
to the general contractor within ninety days of the date it last
performed the labor or supplied the materials that form the
basis of its Miller Act claim.
To state a claim under the Miller Act, the plaintiff must
set forth facts showing that “(1) it has furnished labor or
material in carrying out work provided for in a contract for
which a payment bond is furnished[;] . . . and (2) it has not
been paid in full within 90 days.”

U.S. ex rel. Tenn. Valley

Marble Holding Co. v. Grunley Constr., 433 F.Supp.2d 104, 114
(D.D.C.

2006)

statute

is

construed
those

to

whose

(internal

“highly

remedial

“effectuate
labor

citation

and

the

in

and

marks

nature”

Congressional

materials

go

into

omitted).

and

is

intent
public

The

liberally
to

protect

projects.”

Clifford F. MacEvoy, Co. v. U.S. for Use & Benefit of Calvin
Tomkins Co., 322 U.S. 102, 107 (1944).
SEI argues that dismissal is warranted because it “does not
have any contractual obligations to Plaintiff by virtue of the
contract by and between All State and Plaintiff.”
at 4).

(ECF No. 7-1,

In other words, SEI suggests that it could only be

liable under the Miller Act if it were in direct contractual
privity

with

Plaintiff.

This
6

argument

is

belied

by

the

statutory

language,

which

expressly

authorizes

“[a]

person

[i.e., Plaintiff] having a direct contractual relationship with
a

subcontractor

[i.e.,

All

State]

but

no

contractual

relationship, express or implied, with the contractor furnishing
the payment bond [i.e., SEI] [to] 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).

There appears to be no dispute that Plaintiff is a second-tier
subcontractor; thus, assuming it provided the requisite notice
and filed its claim in a timely manner, it has a right to
recover

labor

and

material

costs

expended

under

the

sub-

subcontract.
Insofar as the statute permits an action to be brought “on
the payment bond,” courts generally agree that a surety may be
sued directly and that a general contractor, such as SEI, is not
an indispensable party.

See United States ex rel. Henderson v.

Nucon Contr. Corp., 49 F.3d 1421, 1423 (9th Cir. 1995) (citing
United States ex rel. Hudson v. Peerless Ins. Co., 374 F.2d 942,
945 (4th Cir. 1967)).

The specific basis of liability as to a

general contractor is somewhat less clear.

Some courts have

simply relied on the fact that “nothing [in the Miller Act]
prevents

a

sub-subcontractor

from
7

also

suing

the

prime

contractor or the subcontractor,” U.S. ex rel. Polied Envtl.
Servs.,

Inc.

v.

Incor

Grp.,

Inc.,

238

F.Supp.2d

456,

460

(D.Conn. 2002); see also U.S. ex rel. Thyssenkrupp Safway, Inc.
v.

Tessa

Structures,

LLC,

No.

1:10cv512

(JCC/JFA),

2011

WL

1627311, at *3 (E.D.Va. Apr. 27, 2011), while others have cited
language in the payment bond establishing that the principal and
surety are jointly and severally liable, see United States ex
rel. Apex Roofing and Insulation, Inc. v. Union Indemnity Ins.
Co., 865 F.2d 1226, 1227 (11th Cir. 1989).

As noted, the payment

bond in this case provides that Guarantee and SEI are jointly
and severally liable for payment of the penal sum.
8, at 3).

(ECF No. 1-

Thus, the record supports that SEI was properly named

as a defendant.
On the other hand, to the extent that Plaintiff sought to
bring a common law tort or third party beneficiary claim, as
suggested
support

in

its

opposition

liability.

To

papers,

state

a

the

claim

complaint
for

does

not

negligence,

the

plaintiff must allege that the defendant owed a duty of care,
see Iodice v. United States, 289 F.3d 270, 281 (4th Cir. 2002)
(“a negligence claim must disclose that each of the elements is
present

in

order

to

be

sufficient”),

asserted in Plaintiff’s complaint.

and

no

such

duty

is

Plaintiff also suggests that

SEI’s conduct amounted to fraud, but a fraud claim is subject to
the heightened pleading standard of Fed.R.Civ.P. 9(b) and the
8

plaintiff must assert that the defendant knowingly made a false
representation of, or concealed, a material fact for the purpose
of

defrauding

it.

See

SpinCycle,

Inc.

v.

Kalender,

186

F.Supp.2d 585, 590 (D.Md. 2002) (quoting Alleco, Inc. v. Harry &
Jeanette Weinberg Foundation, Inc., 340 Md. 176, 195 (1995)).
Plaintiff’s

complaint

does

not

identify

any

alleged

misrepresentation or omission by SEI, let alone set forth facts
supporting a fraudulent intent.

Finally, Plaintiff cannot show

that it was an intended third party beneficiary of the SEI/All
State subcontract.

“To prevail on a third party beneficiary

theory, the [third party] ‘must allege and prove that the intent
of the [parties to the contract] to benefit the [third party]
was

a

direct

purpose

of

the

transaction

or

relationship.”

Fields v. Walpole, Civ. No. DKC 11-100, 2011 WL 2669401, at *4
(D.Md. July 6, 2011) (quoting Flaherty v. Weinberg, 303 Md. 116,
130 (1985)).

Plaintiff does not allege that the SEI entered

into the All State subcontract for its benefit, nor could it do
so under these facts.
liability

under

a

tort

Thus, the complaint does not support
or

third

party

beneficiary

theory.

Because Plaintiff does state a valid claim under the Miller Act,
however, SEI’s motion will be denied.

9

IV.

Conclusion
For the foregoing reasons, the motion to dismiss filed by

SEI Group, Inc. (ECF No. 7), will be denied.

A separate order

will follow.

________/s/_________________
DEBORAH K. CHASANOW
United States District Judge

10