United States of America et al v. Cannon Management Group, LLC et al

Filing 18

OPINION AND ORDER granting 13 Motion to Stay Pending Arbitration. Signed by Magistrate Judge Terence P Kemp on 8/21/2013. (kk2)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
United States of America,
et al.,
Plaintiffs,
v.

Case No.

Cannon Management Group, LLC,
et al.,

2:12-cv-881

Magistrate Judge Kemp

Defendants.
OPINION AND ORDER
This action involves a dispute that arose between a project

contractor and a construction company in the course of their work
on a construction project located at a Veteran’s Affairs facility
in Chillicothe, Ohio.

Plaintiff N.R. Lee is the construction

company, and it brought this action against the project

contractor, Cannon Management Group, LLC (“Cannon”), as well as
Cannon’s surety on the project, American Contractors Indemnity
Company, asserting claims for breach of contract, violation of
the Miller Act, 40 U.S.C. §3131 et seq., and reformation of
contract.

The complaint also alleges that the “Contracts contain

an arbitration clause and a case has been filed at the American
Arbitration Association,” and asserts that the case should be
stayed pending the arbitration.

Defendants filed a motion to dismiss for lack of

jurisdiction, arguing that N.R. Lee failed to set forth a valid
Miller Act claim because it failed to sue within the time

proscribed by the Act, and that without that claim this Court
lacked subject-matter jurisdiction over the action.

Subsequently, N.R. Lee filed a motion to stay this case pending
the outcome of an arbitration scheduled to take place on August

13, 2013 before the American Arbitration Association.

In their

opposition to the motion to stay, Defendants argue primarily that
the Court cannot rule on the motion to stay because it lacks
subject matter jurisdiction.

The Court will first turn to the

question of whether it has subject-matter jurisdiction over this
matter.

I.
A federal court is a court of limited jurisdiction; that is,

not every lawsuit which alleges a legal claim can be filed in a
federal court.

Rather, this court may hear cases only if the

kind of case a plaintiff wishes to bring is described in Article

III of the United States Constitution and if Congress has granted
the Court the authority to hear the case.

Cases falling outside

the jurisdiction of the federal courts can be filed in a court of
general jurisdiction, such as the state court.

The complaint alleges that the basis of this Court’s

jurisdiction is the Miller Act, 40 U.S.C. §§3131 et seq. (Compl.
at ¶3.)

Defendants argue that this Court lacks jurisdiction

because the Miller Act provides that “[a]n action brought under

this subsection must be brought no later than one year after the
day on which the last of the labor was performed or material was
supplied by the person bringing the action,” 40 U.S.C.

§3133(b)(4), and this action was brought outside of that time
period.

N.R. Lee argues that the time limitation is not

jurisdictional.

The Supreme Court has considered the question of whether

certain statutory requirements are jurisdictional or merely
essential ingredients of a federal claim for relief:

On the subject-matter jurisdiction/ingredient-of-claimfor-relief dichotomy, this Court and others have been
less than meticulous. “Subject matter jurisdiction in
federal-question cases is sometimes erroneously
conflated with a plaintiff's need and ability to prove
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the defendant bound by the federal law asserted as the
predicate for relief-a merits-related determination.” 2
J. Moore et al., Moore's Federal Practice § 12.30[1],
p. 12-36.1 (3d ed.2005) (hereinafter Moore). Judicial
opinions, the Second Circuit incisively observed,
“often obscure the issue by stating that the court is
dismissing ‘for lack of jurisdiction’ when some
threshold fact has not been established, without
explicitly considering whether the dismissal should be
for lack of subject matter jurisdiction or for failure
to state a claim.” Da Silva [v. Kinsho Intern. Corp],
229 F.3d [358], at 361 [(2nd Cir. 2000)]. We have
described such unrefined dispositions as “drive-by
jurisdictional rulings” that should be accorded “no
precedential effect” on the question whether the
federal court had authority to adjudicate the claim in
suit. Steel Co. [v. Citizens for a Better Environment],
523 U.S. [83], at 91, 118 S.Ct. 1003 [(1998)].
Arbaugh v. Y&H Corp., 546 U.S. 500, 511 (2006).

The consequences

of classifying a provision as jurisdictional rather than as an
element of a claim for relief are significant:

First, “subject-matter jurisdiction, because it
involves a court's power to hear a case, can never be
forfeited or waived.” . . . Moreover, courts, including
this Court, have an independent obligation to determine
whether subject-matter jurisdiction exists, even in the
absence of a challenge from any party. . . .
Second, in some instances, if subject-matter
jurisdiction turns on contested facts, the trial judge
may be authorized to review the evidence and resolve
the dispute on her own. . . . If satisfaction of an
essential element of a claim for relief is at issue,
however, the jury is the proper trier of contested
facts. . . .
Third, when a federal court concludes that it lacks
subject-matter jurisdiction, the court must dismiss the
complaint in its entirety. . . . In contrast, when a
court grants a motion to dismiss for failure to state a
federal claim, the court generally retains discretion
to exercise supplemental jurisdiction, pursuant to 28
U.S.C. § 1367, over pendent state-law claims.
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Id. at 514 (citations omitted).

Because of the importance of this determination, the Supreme

Court adopted a “readily administrable bright line” articulated
as follows: “when Congress does not rank a statutory limitation
on coverage as jurisdictional, courts should treat the
restriction as nonjurisdictional in character.”

Id. at 516

(holding that “the threshold number of employees for application

of Title VII is an element of a plaintiff’s claim for relief, not
a jurisdictional issue”).

More recently, the Supreme Court has

provided some further guidance on discerning Congress’s intent:
Congress, of course, need not use magic words in order
to speak clearly on this point. “[C]ontext, including
this Court's interpretation of similar provisions in
many years past, is relevant.” . . . When “a long line
of this Court's decisions left undisturbed by
Congress,” . . . has treated a similar requirement as
“jurisdictional,” we will presume that Congress
intended to follow that course.
Henderson ex rel. Henderson v. Shinseki, 131 S. Ct. 1197, 1203,
179 L. Ed. 2d 159 (2011) (citations omitted).

The provision at issue here is the Miller Act’s time

limitation on filing actions.

Typically “rules that seek to

promote the orderly progress of litigation by requiring that the

parties take certain procedural steps at certain specified times”
are considered “claim-processing rules” and should not be
considered jurisdictional.

(citations omitted).

Henderson, 131 S. Ct. at 1203

“Filing deadlines . . . are quintessential

claim-processing rules.”

Id.

The Supreme Court has noted that

language making a time limit emphatic is not the same as language
designating a time limit as jurisdictional.

Arbaugh, 546 U.S.

at 510 (“this Court and others have occasionally described a

nonextendable time limit as ‘mandatory and jurisdictional.’ . . .
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But in recent decisions, we have clarified that time

prescriptions, however emphatic, ‘are not properly typed
“jurisdictional.”’)(citations omitted).

Indeed, in Henderson the

Court held that a statute providing that a veteran seeking

Veterans Court review of the Department of Veterans Affairs'
determination of disability benefits “shall file a notice of
appeal ... within 120 days” was not jurisdictional.
at 1204 (quoting 38 U.S.C. § 7266(a)).

131 S.Ct.,

Instead the Court held

that “the language of § 7266 provides no clear indication that
Congress wanted that provision to be treated as having
jurisdictional attributes.”

Henderson, 131 S. Ct. at 1205.

Indeed, because of the history of treating filing deadlines as
non-jurisdictional, there must be a clear indication that

Congress intends for such limitations to be jurisdictional for
them to be treated as such.

Sebelius v. Auburn Reg'l Med. Ctr.,

133 S. Ct. 817, 825, 184 L. Ed. 2d 627 (Jan. 22, 2013).

In light of these rulings, the Ninth Circuit held that the

time limitation in the Miller Act is not jurisdictional:

A proper analysis of the Miller Act's statute of
limitations makes clear that it is a claim-processing
rule, not a jurisdictional requirement. As a statute of
limitations, § 3133(b)(4) of the Miller Act is cloaked
in a presumption of non jurisdictional status that may
be stripped only if there is an “exceptional” reason
for doing so, Auburn Reg'l, 133 S.Ct. at 825 (citations
omitted), and the relevant factors all indicate there
is nothing exceptional about § 3133(b)(4). It is,
instead, a “run-of-the mill statute of limitations.”
See Holland v. Florida, ––– U.S. ––––, 130 S.Ct. 2549,
2561, 177 L.Ed.2d 130 (2010).
For one, § 3133(b)(4) “does not speak in jurisdictional
terms.” Auburn Reg'l, 133 S.Ct. at 824 (internal
quotation marks omitted). Neither the word “courts” nor
“jurisdiction” appears in the section, which implies
that § 3133(b)(4) is “a restriction on the rights of
plaintiffs to bring suit, rather than [ ] a limitation
on the power of the federal courts to hear the suit.”
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Payne v. Peninsula Sch. Dist., 653 F.3d 863, 869 (9th
Cir. 2011) (en banc).
Nor is § 3133(b)(4) located in a provision granting
federal courts jurisdiction over Miller Act claims. See
Reed Elsevier, 130 S.Ct. at 1245–46. Federal courts
have subject matter jurisdiction over Miller Act claims
pursuant to 28 U.S.C. § 1331, and § 1331 does not
“condition[ ] its jurisdictional grant” on whether the
plaintiff files his claim within the one year
limitations period in § 3133(b)(4) of the Miller Act.
See id. at 1246.
There is also not a “century's worth of precedent and
practice in American courts” holding that the Miller
Act's statute of limitations is a jurisdictional
requirement. See Auburn Reg'l, 133 S.Ct. at 825
(internal quotation marks omitted). Since Arbaugh, the
Supreme Court has twice held, despite the presumption
against it, that a filing deadline was jurisdictional,
see Bowles v. Russell, 551 U.S. 205, 208, 127 S.Ct.
2360, 168 L.Ed.2d 96 (2007) (notice of appeal); John R.
Sand & Gravel v. United States, 552 U.S. 130, 133, 128
S.Ct. 750, 169 L.Ed.2d 591 (2008) (statute of
limitations for suits filed in the Court of Federal
Claims), but both decisions hinged on the fact that the
Supreme Court itself had long held those deadlines were
jurisdictional, Bowles, 551 U.S. at 210–12, 127 S.Ct.
2360 (cases dating back to 1848); John R. Sand &
Gravel, 552 U.S. at 134, 128 S.Ct. 750 (cases dating
back to 1883); see also Reed Elsevier, 130 S.Ct. at
1250–51 (Ginsburg, J., concurring) (explaining Bowles
and John R. Sand & Gravel in light of Arbaugh's bright
line rule). In contrast, the Supreme Court has never
held that the Miller Act's statute of limitations is a
jurisdictional requirement, nor is there uniformity
among the circuit courts on the issue. See Highland
Renovation Corp. v. Hanover Ins. Grp., 620 F.Supp.2d
79, 81–82 (D.D.C.2009) (compiling cases).
Lastly, the Miller Act “was intended to be highly
remedial,” and the Supreme Court has stated that courts
must construe the Miller Act's provisions with this
highly remedial purpose in mind. Fleisher Eng'g &
Constr. Co. v. United States ex rel. Hallenbeck, 311
U.S. 15, 17–18, 61 S.Ct. 81, 85 L.Ed. 12 (1940). It is
unlikely Congress intended the Miller Act's statute of
limitations to be a jurisdictional requirement given
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the Act's highly remedial purpose. See Henderson, 131
S.Ct. at 1202–05 (in analyzing a filing deadline for an
appeal to the Veteran's Court, noting that, given “the
solicitude of Congress for veterans,” Congress would
not have intended the filing deadline at issue to be
jurisdictional due to the potentially “drastic”
consequences of such a label).
U.S. ex rel. Air Control Technologies, Inc. v. Pre Con Indus.,

Inc., 11-56230, 2013 WL 3242673, *3-4 (9th Cir. June 28, 2013).
The Court finds this reasoning persuasive.

In arguing that the provision at issue is jurisdictional,

Defendants cite to decisions that pre-date Arbaugh.

One of the

decisions that Defendants cite, U. S., for Use of Celanese

Coatings Co. v. Gullard, 504 F.2d 466 (9th Cir. 1974), has now

been expressly overruled by Air Control Technologies, Inc.,1
which stated, “[b]ecause Celanese Coatings is clearly

irreconcilable with intervening higher authority, we overrule it
and hold the Miller Act's statute of limitations is a

claim-processing rule, not a jurisdictional requirement.”
Control Technologies, Inc., 2013 WL 3242673 at *4.

Air

Accordingly,

the Court concludes that the time limitation in the Miller Act is
not jurisdictional.

As a result, the Court may proceed to

consider the motion for stay pending arbitration.
II.

N.R. Lee has moved to stay this action pending the

arbitration.

Under the Federal Arbitration Act, “[i]f a court

determines that the cause of action is covered by an arbitration
clause, it must stay the proceedings until the arbitration
process is complete.”

Fazio v. Lehman Bros., Inc., 340 F.3d

386, 392 (6th Cir. 2003) (citing 9 U.S.C. § 3).

N.R. Lee has

The Court recognizes that Air Control Technologies, Inc.
was decided after the briefs in this case were filed.
1

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attached three contracts to the complaint, each of which is

between N.R. Lee and Cannon, and each of which indicates that the
parties have agreed to binding arbitration in the event that any
claims are not resolved by mediation.

Defendants do not dispute

that the disputes between N.R. Lee and Cannon are “subject to
arbitration under the contractual provisions agreed between
them.”

(Doc. No. 15 at 4.)

Defendants note that American

Contractors Indemnity Co. is not a party to any of the contracts.
(Id.)

However, Defendants recognize that they could be bound by

the arbitration if the Miller Act claim survives.

(Id.)

sureties on Miller Act subcontracts are bound by ensuing

Indeed,

arbitration proceedings even if the sureties were not named
parties in the arbitration as long as they had constructive
notice of the proceeding.

U.S. for Use & Benefit of Skip

Kirchdorfer, Inc. v. M.J. Kelley Corp., 995 F.2d 656, 661 (6th
Cir. 1993).

Here American Contractors Indemnity Co. has been

named as a party to the arbitration proceeding.
Exh. B.)

(Doc. No. 13,

The only argument Defendants have made against the stay

is that the Court lacks subject-matter jurisdiction to rule on
the motion because of the jurisdictional nature of the time
requirement in the Miller Act.

Having found that argument to be

meritless, the Court determines that a stay is appropriate here.
III.
For the foregoing reasons, the Motion of N.R. Lee for Stay

Pending Arbitration (Doc. No. 13) is granted.

/s/ Terence P. Kemp
UNITED STATES MAGISTRATE JUDGE

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