United States for the Use and Benefit of J.H. Lynch & Sons, Inc. v. Travelers Casualty & Surety Company of America et al
Filing
20
ORDER AND OPINION denying 6 Motion to Dismiss; denying 7 Motion to Consolidate Cases; terminating 10 Motion for Extension of Time ; terminating 10 Motion for Extension of Time to File Response/Reply ; terminating 10 Motion for Extension of Time to File. So Ordered by Judge William E. Smith on 4/22/11. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
DISTRICT OF RHODE ISLAND
___________________________________
)
UNITED STATES OF AMERICA,
)
For The Use and Benefit of
)
J.H. LYNCH & SONS, INC.,
)
)
Plaintiff,
)
)
v.
)
C.A. No. 10-366 S
)
TRAVELERS CASUALTY & SURETY
)
COMPANY OF AMERICA and HONEYWELL
)
BUILDING SOLUTIONS SES CORP.,
)
)
Defendants.
)
___________________________________)
ORDER AND OPINION
WILLIAM E. SMITH, United States District Judge.
In this suit brought under the Miller Act, 40 U.S.C. §
3133,
1
use Plaintiff J.H. Lynch & Sons, Inc. (“Lynch”) seeks
payment from Defendants Travelers Casualty & Surety Company of
America
and
Honeywell
Building
Solutions
SES
Corporation
(collectively, “Defendants”) for Lynch’s work on a project at
the Naval Station in Newport.
1
The Miller Act, 40 U.S.C. § 3133(b)(2) states:
A person having a direct contractual relationship with
a subcontractor but no contractual relationship,
express or implied, with the contractor furnishing the
payment bond may 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.
Defendants move to dismiss the action, pursuant to Fed. R.
Civ. P. 12(b)(6).
to
declare
determined
In the alternative, Defendants ask the Court
Defendants’
to
be
due
to
liability
Lynch
limited
in
the
to
Navy’s
the
amount
resolution
of
Honeywell’s request for an equitable adjustment (“REA”) of the
underlying contract price, and to stay the litigation pending
resolution
of
the
REA
process.
Defendants
also
move
to
consolidate the matter with a related case, United States ex
rel. Arden Eng’g Constructors, LLC v. Honeywell Bldg. Solutions
SES and Travelers Cas. & Sur. Co., C.A. No. 10-365 S.
I.
Background
The following facts are gleaned from the complaint.
July
10,
2008,
the
Navy
awarded
Honeywell
a
federal project at the Navy Station in Newport.
contract
On
on
a
To meet the
requirements set forth in the Miller Act, Honeywell obtained a
payment bond from Travelers as surety.
In the payment bond,
Honeywell and Travelers agreed to be bound jointly and severally
for
the
payment
of
contractors
and
subcontractors
furnishing
labor and materials on the project in the event Honeywell failed
to make prompt payment.
In August 2009, Honeywell contracted with Arden Engineering
Constructors, LLC to provide labor, materials, and equipment in
connection with the project (the “Honeywell-Arden Contract”).
Arden in turn subcontracted with Lynch on August 26, 2009 to
2
furnish
labor,
materials,
“Arden-Lynch Contract”).
and
equipment
on
the
project
(the
Lynch completed its work on June 23,
2010, but alleges that it is still owed $575,002.74 under its
contract, plus interest and costs.
On September 3, 2010, Lynch brought this suit pursuant to
the
Miller
Act,
alleging
that
it
is
entitled
to
payment
by
Defendants under the payment bond.
II.
Discussion
A.
Motion to Dismiss
When ruling on a motion to dismiss, a court must accept
“the truth of all well-pled facts” on the face of the complaint,
and draw all reasonable inferences in favor of the plaintiff.
Giragosian
v.
Ryan,
547
F.3d
59,
63
(1st
Cir.
2008).
A
complaint will survive a motion to dismiss if it “contain[s]
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”
Tasker v. DHL Ret.
Savings Plan, 621 F.3d 34, 39 (1st Cir. 2010) (quoting Ashcroft
v. Iqbal, 129 S.Ct. 1937, 1949 (2009)) (internal quotation and
citation omitted).
In
addition
complaint,
the
to
Court
the
may
well-pled
also
facts
consider
on
the
face
of
the
the
exhibits
to
the
complaint, see Trans-Spec Truck Serv., Inc. v. Caterpillar Inc.,
524 F.3d 315, 321 (1st Cir. 2008), and the Honeywell-Arden and
Arden-Lynch Contracts attached to Defendants’ motion to dismiss.
3
The Contracts are “explicitly relied upon in the complaint, even
though [they are] not attached” thereto, id. (quoting Shaw v.
Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)), and
therefore may properly be considered.2
In ruling on this motion to dismiss, the Court will not
consider Exhibit B to Defendants’ motion to dismiss, nor convert
the instant motion into a motion for summary judgment.
Exhibit
B comprises a purported e-mail from counsel for Honeywell to
counsel
for
attachments.
Reale
Arden
and
an
incomplete
set
of
the
e-mail’s
(See E-mail from Steven R. Lindemann to Joseph
(Sept.
5,
2010,
Dismiss, ECF No. 6.)
13:53
EST),
Ex.
B
to
Defs.’
Mot.
to
Appended to the e-mail are a letter from a
representative at Honeywell to a contracting officer with the
Navy
and
an
spreadsheet.
excerpt
Lynch
of
does
an
not
“Equitable
rely
on
the
Cost
Adjustment”
e-mail
and
its
attachments in its complaint, and they do not fall within the
limited scope of the Court’s consideration of the motion to
dismiss.
See Gargano v. Liberty Int’l Underwriters, Inc., 572
F.3d 45, 47 n.1 (1st Cir. 2009) (noting that while a court’s
consideration is generally confined to the complaint on a Rule
2
While Lynch refers to the Contracts attached to the motion
to dismiss as the “purported contracts,” (Pl.’s Obj. to Defs.’
Mot. to Dismiss & Mot. to Stay 4), Lynch also refers back to
them in its objection and does not argue that they are not
authentic, just that one of the appended copies is unsigned.
Therefore, the Court deems it appropriate to consider the
contracts here.
4
12(b)(6) motion, courts make “narrow exceptions for documents
the authenticity of which are not disputed by the parties; for
official public records; for documents central to plaintiffs’
claim;
or
for
documents
sufficiently
referred
to
in
the
complaint” (quoting Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir.
1993))).
In support of their motion, Defendants argue that while
Lynch may have a right to initiate a Miller Act claim within one
year
of
Lynch’s
last
date
of
work
on
the
project,
other
provisions in Lynch’s subcontract waive this right until the
Navy decides the REA.
For the reasons set forth below, the
Court concludes that, viewing the complaint and the contracts in
the light most favorable to Lynch, Lynch has pled a plausible
claim for relief under the Miller Act; that it is premature to
render
a
conclusive
determination
as
to
whether
Defendants’
liability is limited to the outcome of the Navy’s resolution of
the REA; and therefore, a stay in the instant litigation is not
warranted.
Defendants point to contractual provisions in the ArdenLynch and Honeywell-Arden Contracts that purportedly bind Lynch
to the outcome of the Navy’s decision on the pending REA.
(See
Defs.’ Mot. to Dismiss 3, 6-10 (citing Honeywell-Arden Contract
¶ 12.3.1; Arden-Lynch Contract ¶ 5.3.2.))
At this point it is
not clear what, if any, effect these provisions may have on
5
Lynch’s claim under the Miller Act.
The provisions appear to
refer only to delay claims, and nowhere in the complaint does
Lynch state that it seeks payment in connection with a delay
claim.
Discovery may shed more light on the issue, but looking
only to the allegations set forth in the complaint and to the
two contracts, these contractual provisions do not appear to
impair Lynch’s right to recover from Defendants under the Miller
Act.3
Defendants
also
contend
that
certain
provisions
in
the
Arden-Lynch Contract limit Arden’s obligation to pay Lynch for
completed work.
Contract,
Paragraphs 8.2.5 and 8.3.3 of the Arden-Lynch
generally
referred
to
as
“pay-when-paid”
clauses,
state that Arden does not have to pay Lynch for subcontract work
3
Defendants also argue that the Arden-Lynch Contract
requires Lynch to partake in the Navy REA resolution process.
Article 11, Paragraph 4 states:
The parties agree that to the extent permitted by
Subcontract Document all parties necessary to resolve
a claim shall be parties to the same dispute
resolution proceeding. To the extent disputes between
the Contractor [Arden] and Subcontractor [Lynch]
involve in whole or in part disputes between the
Contractor [Arden] and the Owner [Honeywell], disputes
between the Subcontractor [Lynch] and the Contractor
[Arden] shall be decided by the same tribunal and in
the same forum as disputes between the Contractor
[Arden] and the Owner [Honeywell].
(Arden-Lynch Contract ¶ 11.4.)
However, the preceding paragraph of the contract, ¶ 11.3,
states that “[n]othing in [Article 11] shall limit any rights or
remedies not expressly waived by [Lynch] which [Lynch] may have
under lien laws or payment bonds.” (Emphasis added.) Thus, the
Court does not read ¶ 11.4 as limiting Lynch’s rights or
remedies under the Miller Act.
6
until Arden first receives payment from Honeywell.
Along the
same
that
lines,
adjustment
the
to
Arden-Lynch
the
contract
subcontract
price
also
states
for
unknown
any
physical
conditions discovered during Lynch’s work is “limited to the
adjustment
[Lynch].”
[Arden]
receives
from
[Honeywell]
on
behalf
of
(Arden-Lynch Contract ¶ 7.3)
Defendants argue that the “pay-when-paid” clauses and the
price-adjustment
premature.
clause
render
Lynch’s
Miller
Act
claim
In other words, they argue that because Arden has
not yet been paid, under the pay-when-paid and price-adjustment
clauses, Lynch does not have a claim to payment.
Lynch brings this suit under the Miller Act, which provides
a cause of action for a subcontractor to recover payment from a
general
contractor
relationship.
with
whom
it
has
no
See 40 U.S.C. § 3133(b)(2).
direct
contractual
The Supreme Court
has noted that the Miller Act is “highly remedial in nature,”
and should be construed and applied liberally to “effectuate the
Congressional intent to protect those whose labor and materials
go
into
Carter,
public
353
projects.”
U.S.
citation omitted).
clause
in
the
210,
216
United
States
(1957)
ex
(internal
rel
Sherman
quotations
v.
and
It is well established that a pay-when-paid
circumstances
at
bar
does
not
foreclose
a
subcontractor’s right to bring suit for payment under the Miller
Act against a general contractor and its surety.
7
See United
States ex rel Walton Tech., Inc. v. Weststar Eng’g, Inc., 290
F.3d
1199,
1209
(9th
Cir.
2002)
(“A
subcontractor
that
has
performed as agreed need not await the Government’s payment of
the contractor before initiating an action under the Miller Act
against the contractor or the surety.”); see also United States
ex rel. T.M.S. Mech. Contractors, Inc. v. Millers Mut. Fire Ins.
Co. of Tex., 942 F.2d 946, 949 n.6 (5th Cir. 1991) (holding that
a pay-when-paid clause does not preclude a subcontractor from
recovering
under
the
Miller
Act);
United
States
ex
rel.
McKenney’s, Inc. v. Gov’t Tech. Servs., LLC, 531 F. Supp. 2d
1375,
1379
(N.D.
Ga.
2008)
(same);
United
States
ex
rel.
Straightline Corp. v. Am. Cas. Co. of Reading, C.A. No. 5:0600011,
(same).
2007
WL
2050323,
at
*4
(N.D.
W.
Va.
Jul.
12,
2007)
Indeed, common sense dictates that it would defeat the
policy underlying the Miller Act to read a pay-when-paid clause
as
precluding
a
subcontractor
from
bringing
suit
until
its
contractor receives payment.4
4
Defendants contend that Jefferson Constr. Co. v. United
States ex rel. Bacon, 283 F.2d 265, 267 (1st Cir. 1960), demands
a different result. But Jefferson is not inconsistent with the
Court’s position here. Jefferson holds that the Miller Act does
not furnish a use plaintiff with an action for quantum meruit in
derogation of the express terms of its contract.
Id. at 267.
In so holding, the First Circuit distinguished Jefferson, in
which the plaintiff argued that his contract was of no
consequence to his suit, from other cases where courts had held
that pay-when-paid clauses were not enforceable because they
were contrary to the policy underlying the Miller Act. Id. The
facts here are more closely aligned to those latter cases.
8
Defendants argue that if the complaint is not dismissed,
under this Court’s decision in United States ex rel. D’Ambra
Constr. Co. v. St. Paul Mercury Ins. Co., 24 F. Supp. 2d 218
(D.R.I.
1998),
they
are
entitled
to
a
ruling
that
their
liability is limited to that determined by the Navy during the
REA process.
In D’Ambra, the subcontract agreement between the
general contractor and D’Ambra, the subcontractor, contained a
pay-when-paid
clause,
limiting
D’Ambra’s
payment
to
what
government paid the general contractor for its work.
222.
Id. at
After a number of adverse events, D’Ambra filed suit in
federal court under the Miller Act in search of payment.
219.
Id. at
While the suit was pending, the parties participated in an
administrative claims process, which ended in settlement.
at
the
220.
Evidently
unsatisfied
D’Ambra pursued its federal suit.
contract
between
the
parties
with
Id.
limited
the
settlement
Id.
payment,
The Court held that the
D’Ambra’s
administrative process it had already received.
claim
to
the
Id. at 222.
D’Ambra can be distinguished from the instant case on a
number of grounds; most notably, D’Ambra was decided on a motion
for summary judgment after the parties had participated in an
administrative claim process.
Here, there are no facts in the
complaint or the two contracts suggesting that the REA process
is underway (let alone complete).
It very well may be that the
price-adjustment clause (¶ 7.3 of the Arden-Lynch Contract) will
9
serve to limit Lynch’s claim against Defendants at some point,
but it is premature for the Court to make such a ruling at this
time.
Lynch’s
Miller
Act
claim
is
cognizable,
regardless
of
whether the Court is able to determine the amount Defendants owe
Lynch at this time.
Perhaps discovery will reveal the amount of
payment, if any, due to Lynch.
Because Lynch has stated a
plausible claim for relief under the Miller Act, the Court must
deny Defendants’ motion to dismiss.
B.
Request to Stay Litigation
As an alternative to dismissal, Defendants request that the
Court stay the matter pending resolution of the Navy’s decision
on the REA.
Defendants argue that the case is not ripe and that
Lynch
not
would
be
prejudiced
by
a
stay
of
the
litigation
because a decision by the Navy is a prerequisite to Lynch’s
receipt of payment.
The Court declines to stay the action at this time.
The
Court has some concern that having disputes over payment for
this project pending in three places--namely, this Court, the
related Honeywell-Arden arbitration, and the Navy’s REA process—
will result in wasted resources; however, given the uncertainty
surrounding the expected length of the REA process, the Court is
not satisfied that Lynch would not be subject to undue prejudice
10
if
this
litigation
were
stayed
indefinitely
pending
that
outcome.
C.
Motion to Consolidate
Defendants have also moved to consolidate 5 this action with
the
related
case,
United
States
ex
rel.
Arden
Eng’g
Constructors, LLC v. Honeywell Bldg. Solutions SES and Travelers
Cas.
&
Sur.
suit”).
Co.,
The
C.A.
Arden
No.
10-365
suit
was
S
(hereinafter
brought
against
the
“Arden
these
same
Defendants in connection with this same project.
In an Opinion and Order filed in the Arden suit, this Court
denied Defendants’ motions to dismiss and to consolidate the
Arden suit with the instant suit.
No. 10-365 S, Jan. 31, 2011.)
and
Honeywell
dispute.
are
currently
(See Opinion and Order, C.A.
To the Court’s knowledge, Arden
arbitrating
the
merits
of
their
Lynch, however, is not required to arbitrate, and thus
the Court believes it is more appropriate to maintain these
suits
as
separate
actions
in
order
to
prevent
prejudice
to
Lynch.
There is no question that the two cases do involve some
common issues of fact and law, and there may be a time in the
future when consolidating the suits would make good sense, but
for now, the Court denies Defendants’ motion to consolidate.
5
Under Fed. R. Civ. P. 42(a), a court may consolidate two
actions if they “involve a common question of law or fact.”
11
III. Conclusion
For these reasons, Defendants’ motion to dismiss, request
to stay, and motion to consolidate are DENIED.
IT IS SO ORDERED.
/s/ William E. Smith
William E. Smith
United States District Judge
Date: April 22, 2011
12
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