Pacific Western Inc. v. Liberty Mutual Insurance Company et al
ORDER granting 30 Motion to Dismiss for Failure to State a Claim. For the reasons set forth in the attached Memorandum and Order, defendants' motion to dismiss is granted and plaintiff's claims are dismissed with prejudice to filing a fourth amended complaint in this Court. The clerk of the Court is directed to close this case. Ordered by Judge Denis R. Hurley on 5/5/2016. (Kaley, Regina)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
THE UNITED STATES FOR THE USE AND
BENEFIT OF PACIFIC WESTERN INC.
AND PACIFIC WESTERN INC.,
MEMORANDUM AND ORDER
14 CV 4977 (DRH) (AYS)
- against LIBERTY MUTUAL INSURANCE COMPANY
and E & A RESTORATION INC.,
Attorneys for Plaintiffs
320 Carleton Ave., Suite 6400
Central Islip, NY 11722
Karl J. Silverberg, Esq.
FORCHELLI, CURTO, DEEGAN, SCHWARTZ, MINEO & TERRANA, LLP
Attorneys for Defendants
333 Earle Ovington Blvd., Suite 1010
Uniondale, NY 11553
John Michael Comiskey, Esq.
HURLEY, Senior District Judge:
The United States for the Use and Benefit of Pacific Western Inc. and Pacific Western
Inc. (“plaintiff” or “Pacific”) 1 bring this action against Liberty Mutual Insurance Company
(“Liberty Mutual”) and E&A Restoration Inc. (“E&A”), (collectively “defendants”) asserting a
claim pursuant to 40 U.S.C. § 3131 et seq., “the Miller Act,” as well as a state law claim based
Although the action is technically brought on behalf of the United States for the Use and
Benefit of Pacific Western and Pacific Western, the Court will refer to plaintiff in the singular.
on consignee liability. 2 Presently before the Court is defendants’ motion to dismiss these claims
as alleged in plaintiff’s Third Amended Complaint (“TAC”) pursuant to Federal Rule of Civil
Procedure (“Rule”) 12(b)(6). For the reasons set forth below, defendants’ motion is granted.
The Court assumes familiarity with the facts as set forth in its Order on defendants’
motion to dismiss plaintiff’s Second Amended Complaint (the “June Order”) (DE 25, June 10,
2015). To the extent supplemental facts are relevant, they will be introduced as part of the
Standard of Review for Motion to Dismiss
In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court
should “draw all reasonable inferences in Plaintiff['s] favor, assume all well-pleaded factual
allegations to be true, and determine whether they plausibly give rise to an entitlement to relief.”
Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks
omitted). The plausibility standard is guided by two principles. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)); accord Harris v. Mills, 572
F.3d 66, 71–72 (2d Cir. 2009). First, the principle that a court must accept all allegations as true
is inapplicable to legal conclusions. Thus, “threadbare recitals of the elements of a cause of
action supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.
Although “legal conclusions can provide the framework of a complaint, they must be supported
Although in the TAC plaintiff asserted that there was subject matter jurisdiction over
the consignee liability claim pursuant to the Carmack Amendment, 49 U.S.C. § 14706, in its
opposition brief it “requests supplemental jurisdiction over this [claim] and concedes lack of
direct subject matter jurisdiction,” thereby acknowledging that it is purely a state law claim.
(Pl.’s Mem. in Opp’n at 13.)
by factual allegations.” Id. at 679. A plaintiff must provide facts sufficient to allow each named
defendant to have a fair understanding of what the plaintiff is complaining about and to know
whether there is a legal basis for recovery. See Twombly, 550 U.S. at 555. Second, only
complaints that state a “plausible claim for relief” can survive a motion to dismiss. Iqbal, 556
U.S. at 679. “A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
The plausibility standard is not akin to a ‘probability requirement,’ but asks for more than a sheer
possibility that defendant acted unlawfully. Where a complaint pleads facts that are “merely
consistent with” a defendant's liability, it ‘stops short of the line between possibility and
plausibility of ‘entitlement to relief.’ ” Id. at 678 (quoting Twombly, 550 U.S. at 556–57)
(internal citations omitted); see In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007).
Determining whether a complaint plausibly states a claim for relief is “a context specific task
that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal,
556 U.S. at 679; accord Harris, 572 F.3d at 72.
Plaintiff’s Miller Act Claim
As in the previous complaint, Pacific Western claims in the TAC that it “is entitled to
payment [for its shipping charges] from Liberty Mutual under the payment bond provided to
E&A Restoration under the Miller Act . . . in the amount of $13,100 plus interest and attorneys’
fees, as allowed for under Pacific Western’s contract with Soil Stabilization [(“SSP”)].” (TAC ¶
As noted in the Court’s June Order, “[t]he Miller Act . . . requires a prime contractor of a
federal project to furnish a payment bond to insure payment to individuals who supply labor
and/or materials for federal projects.” U.S. for the Use and Benefit of Conveyor Rental & Sales
Co. v. Aetna Casualty & Surety Co., 981 F.2d 448, 450 (9th Cir. 1992) (internal quotation marks
and citations omitted); see also U.S. ex rel. Krol v. Arch Ins. Co., 46 F. Supp. 3d 347, 351
(S.D.N.Y. 2014) (“The Miller Act requires any contractor performing on a ‘contract of more than
$100,000 ... for the construction, alteration, or repair of any public building or public work of the
Federal Government’ to furnish a ‘payment bond with a surety satisfactory to the [contracting
federal] officer for the protection of all persons supplying labor and material in carrying out the
work provided for in the contract.’ 40 U.S.C. §§ 3131(a)-(b).”). “Although the Miller Act is to
be construed liberally, it is limited by a proviso that the payment bond protects only those
persons who have a contractual agreement with a prime contractor or subcontractor engaged in a
federal project. Persons supplying labor or material to a mere materialman are not protected.”
Conveyor Rental & Sales, 981 F.2d at 450 (internal citations omitted).
Here, Pacific Western had a contractual relationship with SSP to transport the
NaturalPAVE. However, it is entitled to protection under the Miller Act only if SSP was a
subcontractor of E&A Restoration. Thus, the main issue in dispute is whether or not plaintiff has
adequately alleged that SSP was a subcontractor of E&A Restoration, rather than a materialman.
In the June Order, the Court found that plaintiff had not adequately alleged as such. Looking at
the additional facts presented in the TAC, plaintiff still has not sufficiently alleged that SSP was
a subcontractor such that plaintiff is entitled to Miller Act protection.
As with the first motion to dismiss, both parties cite a Ninth Circuit case, United States
for the Use and Benefit of Conveyor Rental & Sales Co. v. Aetna Casualty & Surety Co., 981
F.2d 448 (9th Cir. 1992) for the factors a court should consider in determining whether an entity
is a subcontractor. In that case, the court found that the following factors weigh in favor of a
(1) the product supplied is custom fabricated; (2) the product
supplied is a complex integrated system; (3) a close financial
interrelationship exists between the companies; (4) a continuing
relationship exists with the prime contractor as evidenced by the
requirement of shop drawing approval by prime contractor or the
requirement that the supplier's representative be on the job site; (5)
the supplier is required to perform on site; (6) there is a contract
for labor in addition to materials; (7) the term “subcontractor” is
used in the agreement; (8) the materials supplied do not come from
existing inventory; (9) the supplier's contract constitutes a
substantial portion of the prime contract; (10) the supplier is
required to furnish all the material of a particular type; (11) the
supplier is required to post performance bond; (12) there is a
backcharge for cost of correcting supplier's mistakes; and (13)
there is system of progressive or proportionate fee payment.
981 F.2d at 451-52. On the other hand, the court noted that the following factors weigh in favor
of a materialman relationship:
(1) a purchase order form is used by the parties; (2) the materials
come from preexisting inventory; (3) the item supplied is relatively
simple in nature; (4) the contract is a small percentage of the total
construction cost; and (5) sales tax is included in the contract price.
Id. at 452.
In attempting to establish the custom nature of the NaturalPAVE, plaintiff alleged in the
prior complaint that SSP’s “sales representative stated on a phone call that [SSP] generally
custom fabricates NaturalPAVE orders and does not supply NaturalPAVE from an existing
inventory.” (Sec. Amend. Compl. ¶ 17.) Additionally, it alleged that “[a]ccording to [SSP’s]
proposal to E&A Restoration, ‘[t]here is a prepayment and lead time associated with accessing
the special aggregate materials and preparation of the custom aggregate blend for this specific
pavement mix formulation.’ ” (Id. ¶ 18.) The Court found that those allegations were not
sufficient to suggest that the NaturalPAVE was custom made for purposes of the Miller Act.
Now in addition to those facts, plaintiff alleges that “NaturalPAVE is customized pursuant to an
architect’s specification; the architect creates specifications for the NaturalPAVE’s color and
texture; an architect designs the NaturalPAVE’s color and texture to integrate the NaturalPAVE
into the project’s surrounding landscape composition, including local soil type and color,
surrounding landscape vegetation, and architectural structures present at the site.” (TAC ¶
30(b).) Moreover, plaintiff alleges that “the specifications for the NaturalPAVE used at the
Sagamore Hill Project called for [SSP] to create an architect’s specified NaturalPAVE mix that
met specific color and texture requirements for purposes of creating a unique NaturalPAVE
design that would integrate into the distinct landscape and architectural features present at the
Sagamore Hill National Historic Site.” (Id. ¶ 31.)
These additional allegations, taken as true, however, do not support plaintiff’s claim that
SSP was a subcontractor. As defendants point out, the allegations suggest a situation similar to
that in Conveyor Rental & Sales Company. In that case, the court found that gravel
specifications were “relatively uncomplicated,” “merely descriptive of what was to be
furnished,” and “necessary whether the supplier [was] a subcontractor or only a material
supplier.” Id. 981 F.2d at 453 (internal quotation marks and citation omitted). As a result, it
found that the evidence presented tended to support a materialman relationship. Despite
plaintiff’s additional allegations, the simple color and texture specifications alleged here are
dissimilar to the “highly intricate customized fabrications” found in cases where a subcontractor
relationship was found. Id. (citing Miller Equipment Co. v. Colonial Steel Iron Co., 383 F.2d
669, 674 (4th Cir. 1967) (where contract “called not for the mere supply of materials but for the
custom fabrication of massive girders and their accessories, key and integral components of [a]
bridge, designed and fabricated to mesh precisely in their final assembly on the job-site”); U.S.
for the Use of Wellman Engineering Co. v. MSI Corp., 350 F.2d 285, 287 (2d Cir. 1965) (finding
that a district court “properly placed the case on the subcontractor side of the line” where
subcontractor produced a “[m]echanism built to the prime contract specifications, for the unique
task of rapid movement of . . . heavy concrete roofs of missile launchers”)).
Regarding the fifth subcontractor factor, the Court found that the previous complaint did
not allege that anyone from SSP actually came to the site or the type of work performed on site.
Plaintiff now attempts to rectify this in alleging that according to SSP’s president, SSP “had a
‘technical advisor’ at the Sagamore Hill Project site for about one and [a] half days who provided
guidance as necessary for the NaturalPAVE’s installation.” (TAC ¶ 30(c).) Thus, according to
the TAC, some on site work was performed, however, plaintiff has not alleged that SSP was
“required” to perform any work on site pursuant to the agreement with E&A or that there was
any separate labor agreement between SSP and E&A.
Plaintiff has not provided any other new allegations suggesting that SSP is a
subcontractor. Regarding plaintiff’s allegations repeated from the previous complaint, for the
same reasons discussed in the June Order, plaintiff has not sufficiently alleged that the
NaturalPAVE is a complex product or that E&A back-charged SSP. Moreover, as noted in the
June Order, even assuming as true plaintiff’s allegations that E&A Restoration and SSP had an
agreement calling for a progressive system of fee payments in that SSP required “a 50%
prepayment of the order for mobilization,” (TAC ¶ 19) and that according to the contract, “[t]he
sales prices of the [NaturalPAVE] [did] not include any taxes,” (Id. ¶ 20), these allegations are
insufficient as a matter of law to support the conclusion that SSP was a subcontractor. See
Conveyor Rental & Sales, 981 F.2d at 456 (dismissing Miller Act claim where “only factor
tending to show a subcontractor relationship was . . . progressive, rather than fixed, form of
payment”); Aetna Casualty & Surety Co. v. U.S. for Use and Benefit of Gibson Steel Co., 382
F.2d 615, 618 (5th Cir. 1967) (dismissing Miller Act claim where several factors weighed in
favor of subcontractor relationship, including that materialman carried no inventory and was
backcharged by general contractor). Moreover, plaintiff’s conclusory allegation that the contract
between SSP and E&A Restoration “did not look like [a] purchase order,” (TAC ¶ 21), is simply
too vague to support a conclusion that SSP was a subcontractor. As a result, the TAC does not
plausibly state a claim under the Miller Act, and that claim is dismissed. 3
Plaintiff’s Consignee Liability Claim
Having found that plaintiff’s Miller Act claim is dismissed, there is no longer any
independent basis for federal jurisdiction in this action. Although the Court has discretion to
exercise supplemental jurisdiction over plaintiff’s state consignee liability claim, it declines to do
so given the history of the case. See 28 U.S.C. § 1367(c)(3) (“The district courts may decline to
exercise supplemental jurisdiction over [state law claims] if . . . the district court has dismissed
all claims over which it has original jurisdiction.”) Therefore, plaintiff’s consignee liability
claim is dismissed.
For the foregoing reasons, defendants’ motion to dismiss is granted and plaintiff’s claims
are dismissed with prejudice to filing a fourth amended complaint in this Court. The clerk of the
Court is directed to close this case.
Defendants also argue that plaintiff’s Miller Act claim should be dismissed because the
statute of limitations for such a claim, which is one year beginning to run on “the day on which
the last of the labor was performed or material was supplied by the person bringing the action,”
40 U.S.C. § 3133(b)(4), has expired. According to the TAC, Pacific’s second and final delivery
of NaturalPAVE occurred on September 6, 2013. Defendants argue that plaintiff’s TAC filed on
June 20, 2015 was untimely. In response, plaintiff argues that the TAC should be deemed timely
pursuant to the doctrine of equitable tolling. However, given that the Court has already
dismissed the Miller Act claim, it need not reach this issue.
Dated: Central Islip, New York
May 5, 2016
Denis R. Hurley
Unites States District Judge
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