The UNITED STATES OF AMERICA for the use and benefit of VT Milcom Inc. v. PAT USA, INC. et al
Filing
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MEMORANDUM OPINION & ORDER granting in part and denying in part 51 MOTION for Summary Judgment filed by The UNITED STATES OF AMERICA for the use and benefit of VT Milcom Inc. Signed by District Judge Elizabeth K. Dillon on 7/14/17. (kld)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
HARRISONBURG DIVISION
THE UNITED STATES OF AMERICA
For the use and benefit of VT MILCOM,
INC.,
Plaintiff,
v.
PAT USA, INC., et al.,
Defendants.
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Civil Action No. 5:16-cv-00007
By: Elizabeth K. Dillon
United States District Judge
MEMORANDUM OPINION AND ORDER REGARDING SUMMARY JUDGMENT
This case arises from a subcontract between PAT USA, Inc., and VT Milcom, Inc.,
whereby VT Milcom was to provide labor and materials for the installation of
telecommunications systems in Qatar for a United States Army Corps of Engineers project. VT
Milcom brings its action under the Miller Act and asserts three claims: a breach of contract claim
against PAT USA, a claim for breach of a surety obligation contract against PAT USA, Gerald
Dinkins, Sr., and First Mountain Bancorp (FMB),1 and a claim for quantum meruit against all
three defendants.
The case was initially filed in the Eastern District of Virginia but was transferred to this
court. VT Milcom timely moved for summary judgment with many of the facts stipulated by the
1
PAT USA is the principal under the payment bond, Dinkins is the surety, and FMB provides the
Irrevocable Trust Receipt.
parties.2 PAT USA and FMB filed a brief in opposition,3 and Dinkins filed no response.4 Before
addressing the summary judgment motion, though, the court turns to a preliminary issue—
whether it has personal jurisdiction over the defendants.
In their opposition brief, PAT USA and FMB argued that this court lacked personal
jurisdiction over them. All defendants filed a 12(b)(2) motion challenging personal jurisdiction
when they first responded to the complaint, but they never requested a hearing in this court or
submitted the issue to the court without a hearing. Instead, defendants PAT USA and FMB
engaged in discovery, amended the scheduling order, entered into stipulations, and only
mentioned the issue again in their memorandum in opposition to VT Milcom’s motion for
summary judgment. Local Rule 11(b) requires a party to set a hearing or advise the court that a
hearing is not needed within 60 days after the motion is filed; otherwise, the motion is deemed
withdrawn. W.D. Va. Civ. Rule 11(b). Here, defendants’ motion is deemed withdrawn, and in
any event defendants have waived any challenge to personal jurisdiction. See, e.g., Ins. Corp. of
Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704–05 (1982) (“The actions of the
defendant may amount to a legal submission to the jurisdiction of the court, whether voluntary or
not.”); United States ex rel. Combustion Sys. Sales, 112 F.R.D. 685, 687 (M.D.N.C. 1986)
(noting that waiver of a personal jurisdiction defense “has been inferred in a wide variety of
2
By separate order (Dkt. No. 72), many of VT Milcom’s requests for admission have been deemed
admitted by the defendants. Regardless of these admissions, the court would reach the same conclusion because it
relies upon the joint stipulation of the parties and other undisputed facts in making its decision on summary
judgment.
3
PAT USA and FMB, with their joint opposition to VT Milcom’s motion for summary judgment,
purported to move for summary judgment as well. (See Defs.’ Mem. Opp’n, Dkt. No. 57.) However, that motion
was filed two weeks after the deadline to file dispositive motions (see Order, Dkt. No. 34), so the court will not
consider it. W.D. Va. Civ. R. 56(a).
4
Even though Dinkins filed no opposition to the motion for summary judgment, the court must still
determine whether VT Milcom is entitled to summary judgment against him. Custer v. Pan Am. Life Ins. Co., 12
F.3d 410, 416 (4th Cir. 1993).
2
situations, even when the defense has been formally raised in an answer, by conduct and
inaction, such as . . . participating in . . . discovery”).
I. BACKGROUND
A. The Prime Contract and Subcontract
In October 2013, the United States Army Corps of Engineers (USACE) awarded PAT
USA a contract (the Prime Contract) for minor military construction projects on United States
facilities in Qatar. As a requirement of that contract, PAT USA provided a payment bond that
identified defendant Gerald Dinkins, Sr. as the surety. PAT USA also provided an Irrevocable
Trust Receipt issued by defendant FMB. On February 22, 2014, PAT USA entered into a
subcontract with VT Milcom (the Subcontract, Compl. Ex. C, Dkt. No. 1), under which VT
Milcom agreed to provide labor and materials for the installation of telecommunications systems
on the project site in Qatar.5 After one change order, the total Subcontract fixed-price amount
was $485,684.73. VT Milcom subsequently performed work and furnished materials for the
project as directed by PAT USA, including shipping materials to Qatar.
On January 29, 2015, PAT USA informed VT Milcom that the Prime Contract was on
hold and that USACE was not allowing work on the project. (Compl. ¶ 28; Answer ¶ 28, Dkt.
No. 15.) Unbeknownst to VT Milcom and by letter dated January 30, USACE terminated PAT
USA for default and for reasons not involving VT Milcom. (Stipulation ¶ 6, Dkt. No. 45.) By
email dated January 31, PAT USA arranged for delivery of the balance of the materials by VT
5
The parties agree that “VT Milcom’s general scope of work as detailed in the [Subcontract] consisted of
the labor and materials to install telecommunications cabling secure and unsecure LAN systems, including the
purchasing and shipment of all required materials to the project site at Al Udeid Air Base, Qatar.” (Compl. ¶ 10,
Dkt. No. 1; Answer ¶ 10, Dkt. No. 15.)
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Milcom to Qatar.6 (Pl.’s Br. Ex. A, at 20; Req. for Adm. No. 70, Dkt. No. 43-1; Order, Dkt. No.
72.) Then, by letter dated February 2, PAT USA informed VT Milcom of the Prime Contract
termination and terminated the Subcontract, wrongly claiming that VT Milcom had defaulted
upon its performance obligations.7 VT Milcom invoiced PAT USA a total of $208,727.48 for
work performed and materials furnished; however, PAT USA only paid VT Milcom $91,617.16.
The amount paid constituted 20% of the fixed price. According to PAT USA, that amount is all
it owes because Schedule D of the Subcontract lists the payment milestone for material purchase
as 20%. VT Milcom subsequently filed this suit, seeking to recover the remaining $117,110.32
invoiced to PAT USA. After discovery and a stipulation by the parties to the majority of the
above-stated facts, VT Milcom moved for summary judgment. (Pl.’s Mot. Summ. J., Dkt. No.
51.)
B. Subcontract Provisions
The parties rely upon the following provisions of the Subcontract.
SECTION SIX - SUBCONTRACT AMOUNT
As full compensation for performance of this Agreement, Contractor agrees to
pay Subcontractor . . . subject to all applicable provisions of the Subcontract:
a. The fixed-price of US Dollars Four hundred Eighty two thousand and One
Hundred Ninety five and 60/100 only ($ 482,195.60) subject to additions as
provided for in the Subcontract Documents.
b. Time and material rates and prices in accordance with the attached Schedule
of Labor and Material Costs which is incorporated by reference and identified as
Schedule C.
6
There is no information in the record as to why PAT USA arranged for delivery of the materials after the
Prime Contract had been terminated. Defendants’ counsel, at the hearing, said that PAT USA must not have
received the letter from USACE yet. (Hr’g Tr. 29–30.)
7
Pursuant to the Subcontract, PAT USA had three days to notify VT Milcom of USACE’s termination.
(Subcontract § 10.)
4
The fixed-price, unit prices and/or time and material rates and prices are referred
to as the Subcontract Amount.
....
SECTION EIGHT - PAYMENT
The Subcontractor shall, as a condition to payment, provide a schedule of values
satisfactory to the Contractor not more than five (5) business days from the date
of execution of this Agreement.
....
APPLICATION AND PAYMENTS
The Subcontractor shall submit progress payment applications . . . to Contractor
no later than the 20th day of each payment period for the value of the Subcontract
Work performed up to and including the last day of the payment period indicating
work completed and, to the extent allowed under this Agreement, materials
suitably stored during the preceding payment period. Payments will be made to
the Subcontractor no later than 3 business days after receipt of payment from the
owner for each application period. All payments to the Subcontractor are to be
made only equivalent to payments the Contractor receives from the Owner. The
Contractor’s receipt of payment from the Owner is a condition precedent to the
Contractor’s obligation to pay the Subcontractor. Contractor and subcontractor
share risk of owner payment. Subcontractor’s preferred terms for receipt of
payment is [sic] Net 30.
....
SECTION 10 - CONTRACTOR’S RIGHT TO PERFORM
SUBCONTRACTOR’S RESPONSIBILITIES AND TERMINATION OF
AGREEMENT
....
TERMINATION BY OWNER Should the Owner terminate its contract with
the Contractor or any part which includes the Subcontract Work, the contractor
shall notify the Subcontractor in writing within three (3) calendar days of the
termination and upon written notification, this Agreement shall be terminated and
the Subcontractor shall immediately stop the Subcontract Work, follow all of
Contractor’s instructions, and mitigate all costs. In the event of Owner
termination, the contractor’s liability to the Subcontractor shall be limited to the
extent of the Contractor’s recovery on the Subcontractor’s behalf. The Contractor
agrees to cooperate with the Subcontractor, at the Subcontractor’s expense, in the
prosecution of any Subcontractor claim arising out of the Owner termination and
to permit the Subcontractor to prosecute the claim, in the name of the Contractor,
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for the use and benefit of the Subcontractor, or assign the claim to the
Subcontractor.
TERMINATION OF SUBCONTRACTOR If the Subcontract Work has been
stopped for thirty (30) calendar days because the Subcontractor has not received
progress payments or has been abandoned or suspended for an unreasonable
period of time not due to the fault or neglect of the Subcontractor, then the
Subcontractor may terminate this Agreement upon giving the Contractor seven (7)
calendar days’ written notice. Upon such termination, Subcontractor shall be
entitled to recover from the Contractor payment for all Subcontract Work
satisfactorily performed but not yet paid for, including reasonable overhead, profit
and attorneys’ fees, costs and expenses. The Contractor’s liability for any other
damages claimed by the Subcontractor under such circumstances shall be
extinguished by the Contractor pursuing said damages and claims against the
Owner, on the Subcontractor’s behalf.
....
SCHEDULE C – Price Schedule (Assigned at a later time)
Price schedule
Pricing listed is for the providing and installing materials for the projects
communications systems as outlined within this proposal:
VTM’s Base Bid Firm Fixed Price (FFP)
$329,923.57
Performance and Payment Bond (if required) ADD
Pricing Break Out:
C-17 Spare Parts Facility
Cryogenics Facility
ELRS Storage Facility
Fuel Truck Parking
Base Fuels Laboratory
C-130 aircraft maintenance Unit (inside 5ft line)
OSP Cabling (100 pair from C-130 Bldg)
Pricing Break Out does not include P&P Bond cost.
$30,202.96
$35,618.43
$30,615.30
$41,051.43
$37,003.26
$146,925.65
$ 8,506.54
Add Alternate Option 1:
VTM is providing an ADD Firm Fixed Price Proposal (FFP) to provide and install
the project PDS system in accordance with NSTISSI 7003.
VTM (FFP) Add Alternate (PDS System)
Performance and Payment Bond (if required) ADD
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$152,272.03
The Total Fixed Price, including Add Alternate Option 1, if selected:
$482,195.60.
SCHEDULE D – Accounting Procedures, Payment Terms and Purchase
Order Procedures
1. Invoicing/payment shall be in accordance with stated milestone objections and
completion.
2. Payments to be made within 30 days from the date of submitted invoice.
3. Payment milestone as follows – 20% Upon Material Purchase
60% upon I.T.C.
20% Upon Final Acceptance & handing over
II. DISCUSSION
A. Standard of Review
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “[W]hen a court considers a summary judgment motion, ‘[t]he evidence of the
non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.’”
Greater Baltimore Ctr. for Pregnancy Concerns, Inc. v. Mayor & City Council of Baltimore, 721
F.3d 264, 283 (4th Cir. 2013) (en banc) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 255
(1986)). Here, the parties stipulate to the majority of the relevant facts, but offer competing
interpretations of the Subcontract.
The Subcontract specifies, and the parties agree, that Michigan law governs its
interpretation. Where “[t]he contract provisions are not disputed” and “[o]nly their interpretation
and effect . . . are in question,” summary judgment is appropriate. Burroughs Corp. v. Detroit,
171 N.W.2d 678, 680 (Mich. Ct. App. 1969). Pursuant to Michigan law, the court looks to the
parties’ intent by examining “the language in the contact, giving it its ordinary and plain meaning
if such would be apparent to a reader of the instrument.” Reardon v. Kelly Servs., Inc., 210 F.
App’x 456, 458–60 (6th Cir. 2006) (citing Wilkie v. Auto-Owners Ins. Co., 664 N.W.2d 776,
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780–81 n.11 (Mich. 2003)). The court should also read the contract as a whole and review “the
entirety of the contractual text whenever construing any portion of a contract.” Wilkie, 664
N.W.2d at 781 n.11. Ambiguity in a contract does not prevent the award of summary judgment
as the court may consider extrinsic evidence and grant summary judgment if it “supports only
one of the conflicting interpretations.” United Rentals (N. Am.), Inc. v. Keizer, 355 F.3d 399,
409–10 (6th Cir. 2004) (citing GenCorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 818 (6th
Cir. 1999)); see also Washington Metro. Area Transit Auth. v. Potomac Inv. Prop., 476 F.3d 231,
234–35 (4th Cir. 2007) (noting that where a contract is unambiguous or is ambiguous but can be
interpreted using extrinsic evidence, summary judgment is appropriate) (applying Maryland
law).
B. Breach of Contract
It is undisputed that VT Milcom provided $117,110.32 in labor and materials to the
Project at the direction of PAT USA without payment for the same. It is further undisputed that
PAT USA’s prime contract was terminated for reasons other than VT Milcom’s performance and
that PAT USA’s actions prohibited VT Milcom from reaching other payment milestones and
completing the Subcontract. Relying on these undisputed facts, VT Milcom argues that PAT
USA breached the Subcontract by not paying VT Milcom $117,110.32. It contends that PAT
USA cannot hide behind the payment milestones or ignore the Termination by Subcontractor
provision because PAT USA deprived VT Milcom of the opportunity to reach another milestone
and to invoke the Termination by Subcontractor provision. PAT USA, in response and in part,
relies upon the Termination by Owner provision of the Subcontract and the limited remedies
afforded VT Milcom in that provision.
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While there are many provisions of the Subcontract cited by the parties and some that
seem to conflict with each other, the Termination by Owner provision applies to the facts here, is
clear, and states as follows:
TERMINATION BY OWNER Should the Owner terminate its contract with
the Contractor or any part which includes the Subcontract Work, the contractor
shall notify the Subcontractor in writing within three (3) calendar days of the
termination and upon written notification, this Agreement shall be terminated and
the Subcontractor shall immediately stop the Subcontract Work, follow all of
Contractor’s instructions, and mitigate all costs. In the event of Owner
termination, the contractor’s liability to the Subcontractor shall be limited to
the extent of the Contractor’s recovery on the Subcontractor’s behalf. The
Contractor agrees to cooperate with the Subcontractor, at the Subcontractor’s
expense, in the prosecution of any Subcontractor claim arising out of the Owner
termination and to permit the Subcontractor to prosecute the claim, in the name of
the Contractor, for the use and benefit of the Subcontractor, or assign the claim to
the Subcontractor.
(Subcontract § 10 (emphasis added).)
Here, the Owner (USACE) terminated PAT USA’s contract, part of which
includes the work by VT Milcom, on January 30, 2015. PAT USA notified VT Milcom
in writing on February 2, 2015. Thus, it is undisputed that this notification was timely.
The only issue is VT Milcom’s remedy. On this issue, the provision specifically provides
that, “In the event of Owner termination, the contractor’s liability to the Subcontractor
shall be limited to the extent of the Contractor’s recovery on the Subcontractor’s behalf.”
VT Milcom has been paid $91,617.16. Although it claims an additional $117,110.32,
there is no evidence that PAT USA has recovered $117,110.322 from the Owner on VT
Milcom’s behalf.8 So VT Milcom may not recover those funds.
VT Milcom might wish that the provision included terms that allow VT Milcom
to recover for all of its work at the time of termination, particularly since it was not at
8
PAT USA’s counsel represented at the hearing that PAT USA appealed its termination for default to the
United States Court of Federal Claims, but there is no evidence in the record to that effect. (Hr’g Tr. 25–26, Dkt. No.
68.)
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fault and PAT USA told it to go ahead with that work, but the Termination by Owner
provision does not include those terms. VT Milcom also would like the court to interpret
the provision to apply only to a termination that occurs for the convenience of the
government and not for default, but again the Subcontract does not distinguish between
these two types of termination. Moreover, Section Ten’s Termination by Subcontractor
provision simply does not apply here, and there is no evidence before this court that VT
Milcom gave seven days written notice to PAT USA as required by the provision. VT
Milcom is bound by the terms of the contract it signed, and under that contract, it is not
entitled to the recovery it seeks.
If the court were to base its decision on whether a party had acted
unprofessionally towards another party, had misled another party (whether intentionally
or not), or had wrongly accused another party of failing to perform under a contract, then
the court would find that PAT USA owed VT Milcom $117,110.32. But the court must
look to the terms of the parties’ contract, and, on summary judgment, VT Milcom has not
shown a breach of the Subcontract by PAT USA.9
C. The Miller Act Claim under the Payment Bond
Construction and application of the Miller Act are governed by federal law. F.D.
Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 127 (1974). The
Miller Act is “given a liberal construction in order to properly effectuate the
Congressional intent to protect those whose labor and materials go into public projects.”
United States ex rel. Sunbelt Pipe Corp. v. U.S. Fid. & Guarantee Co., 785 F.2d 468, 470
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Given this ruling, it is not necessary for the court to consider VT Milcom’s quantum meruit claim. As
VT Milcom concedes, quantum meruit is only appropriate “[s]hould the Court find that the provisions of the
subcontract do not address how VT Milcom should be paid for work performed and materials provided where its
general contractor was default terminated.” (Pl.’s Mot. Summ. J. 20, Dkt No. 51.)
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(4th Cir. 1986). Protection is needed for persons supplying labor and material for these
public construction projects because liens are not available on these projects. United
States ex rel. Global Bldg. Supply, Inc. v. WNH Ltd. P’ship, 995 F.2d 515, 518 (4th Cir.
1993). A person who provides labor and materials has a cause of action under the Act
“for the amount due,” 40 U.S.C. § 3133(b)(1), or “for the sum or sums justly due him,”
40 U.S.C. § 270(b)(1) (2001).10 The Act thus allows a remedy without a lien by
providing for a payment bond.
Liability under the payment bond, pursuant to the Miller Act, is not determined by
looking only at whether the principal is liable under the underlying contract. Rather, “[i]t is clear
that ‘the surety’s liability on a Miller Act bond must be at least coextensive with the obligations
imposed by the Act if the bond is to have its intended effect.’” United States ex rel. Walton
Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1206 (9th Cir. 2002) (quoting United States
ex rel. Sherman v. Carter, 353 U.S. 210, 215–16 (1957)).
The parties disagree as to whether there is a sum or sums justly due to VT Milcom and
rely in large part upon Walton. In Walton, the Ninth Circuit Court of Appeals distinguished
between contractual provisions regarding the measure of recovery and provisions regarding the
timing of recovery or right of recovery. The court determined that “[w]here subcontract terms
effect [sic] the timing of recovery or the right of recovery under the Miller Act, enforcement of
such terms to preclude Miller Act liability contradict [sic] the express terms of the Miller Act.”
Walton, 290 F.3d at 1207. There, the contractor failed to pay its subcontractor rent for the
subcontractor’s equipment. The subcontract had been modified by a settlement agreement that
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The term “sums justly due” appeared in a prior version of the Miller Act, and so many of the cases
discuss that term. But the two terms are interchangeable because the amendments made no substantive changes.
United States ex rel. Acoustical Concepts, Inc., v. Travelers Cas. & Surety Co., 635 F. Supp. 2d 434, 439 n.6 (E.D.
Va. 2009) (citations omitted).
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provided that any further payment to the subcontractor for rental fees “shall only be made when
and if paid by the Navy and only to the extent paid by the Navy.” Id. at 1203. The surety argued
that the pay-when-and-if-paid provision had not been satisfied, so no liability attached. Id. at
1204. In other words, there was no sum justly due under the Miller Act to the subcontractor
because the contractor had not been paid by the Navy. The Ninth Circuit disagreed. It held that
the surety and its principal could not rely on the pay-when-and-if-paid provision to avoid liability
under the Act. Id. at 1205. The court reasoned that allowing the pay-when-paid provision to
supplant the subcontractor’s rights under the Miller Act would effectively allow the surety to
avoid liability on that basis. Id. at 1206. And because the pay-when-paid provision was a timing
or right of recovery provision and not a measure of recovery provision, recovery under the Miller
Act was required. Id. at 1207–1209.
VT Milcom contends that, like the pay-when-paid provision in Walton, the “20% upon
material purchase” provision of its Subcontract is a timing of recovery provision and not a
measure of recovery provision, so, under the reasoning of Walton, it is entitled to recover under
the payment bond.
Defendants counter that the 20% upon material purchase provision is a measure of
recovery provision. Thus, they argue it determines the “sums justly due” under the Subcontract
and limits the liability under the Miller Act to the twenty percent of the fixed price already paid
to VT Milcom because the provision involves the measure of recovery. They also urge, as the
defendants did in Walton, that this case is similar to two cases discussed by the Walton court—
United States ex rel. Woodington Electric Co. v United Pacific Insurance, 545 F.2d 1381 (4th
Cir. 1976), and Taylor Construction, Inc., v. ABT Service Corp., 163 F.3d 1119 (9th Cir. 1998).
Although those cases ultimately allowed recovery under the Miller Act, defendants cite them for
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the proposition that this court must look to the underlying contract to determine the sums justly
due to the subcontractor. Walton, 290 F.3d at 1206–07. Defendants contend that the Schedule D
provision regarding payment milestones with “20% Upon Material purchase” is a measure of the
sums justly due and limits liability under the Miller Act. Stated otherwise, they posit that VT
Milcom is only justly due 20% of the contract price because it never reached the next payment
milestone.
In Woodington, the Fourth Circuit determined, by looking at the underlying contract, that
sums justly due could include compensation measured by a share of the profits rather than labor
and material cost, and so it allowed the recovery under the Miller Act. 545 F.2d at 1382–1384.
In Taylor, the Ninth Circuit also looked to the underlying contract to determine the sums justly
due where the contract allowed for a percentage of project savings in addition to labor and
material costs. The court there allowed recovery of the entire amount under the Miller Act. 163
F.3d at 1120–23. In discussing these cases, the Walton court explained that the amounts justly
due in those cases could be determined by reference to contract terms because the contract terms
set forth measures of recovery. By contrast, “[w]here subcontract terms effect [sic] the timing of
recovery or the right of recovery under the Miller Act,” courts should not enforce such terms to
preclude Miller Act liability because doing so “contradict[s] the express terms of the Miller Act.”
Walton 290 F.3d at 1207. The when-and-if-paid provision was clearly a provision not involving
the measure of recovery and thus could not be used to avoid liability under the Miller Act. Id. at
1208.
Defendants here argue that the underlying Subcontract provisions limit VT Milcom’s
measure of recovery to 20% of the fixed price as the sum justly due. Defendants’ conclusory
argument, however, ignores the other terms of the Subcontract. Section Six of the Subcontract
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sets forth the Subcontract Amount and includes the fixed-price and time and material rates and
prices referenced in Schedule C. Schedule C states that “Pricing listed is for the providing and
installing materials for the projects communications systems as outlined within this proposal”
and includes a pricing breakout for the various facilities. Shipping and materials are not listed
separately in Schedule C. Indeed, Schedule A specifically states that “[s]hipping cost is
dispersed proportionately across the task.” Most notably, Section Six, regarding the Subcontract
Amount, makes no reference whatsoever to a 20% limitation and makes no reference whatsoever
to Schedule D—the only portion of the contract that sets forth the payment milestones.
Section Eight regarding Payment provides for progress payment applications “no later
than the 20th day of each payment period for the value of the Subcontract Work performed up to
and including the last day of the payment period indicating work completed and, to the extent
allowed under this Agreement, materials suitably stored during the preceding payment period.”
The Payment Section notes that “receipt of payment from the Owner is a condition precedent to
the Contractor’s obligation to pay the Subcontractor,” but then in direct contradiction states,
“Contractor and subcontractor share risk of owner payment.” Schedule D, entitled Accounting
Procedures, Payment Terms and Purchase Order Procedures, states that: “1) Invoicing/payment
shall be in accordance with stated milestone objections [sic] and completion. 2) Payments to be
made within 30 days from the date of submitted invoice. 3) Payment milestone as follows: 20% Upon Material purchase, 60% upon I.T.C [installation, testing, and commissioning], 20%
Upon Final Acceptance & handing over.”
Given the terms of the Subcontract, the 20% payment milestone is clearly a timing of
payment provision and not a measure of recovery provision. Just like the pay-when-paid
provision in Walton, the payment milestone cannot be enforced to limit Miller Act liability under
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the payment bond. To suggest otherwise ignores the Subcontract terms regarding the
Subcontract Amount and ignores Schedule C entirely, which the court will not do. See
Armstrong v. United States, 7 F. Supp. 2d 758, 766–67 (W.D. Va. 1998); TravCo v. Ward, 736
S.E.2d 321, 325 (Va. 2012); Klapp v. United Ins. Grp. Agency, Inc., 663 N.W.2d 447, 453
(Mich. 2003).
Defendants do not dispute the amount in question—$117,110.32, and VT Milcom is
entitled to summary judgment as to its Miller Act claim under the payment bond.
D. Attorneys’ Fees and Costs
VT Milcom seeks its attorneys’ fees and costs and, citing to the Miller Act and United
States ex rel. Maddux Supply Co. v. St. Paul Fire & Marine Insurance Co., 86 F.3d 332, 336 (4th
Cir. 1996), notes that they are recoverable “if they are part of the contract with the Miller Act
claimant.”11 (Pl.’s Mot. Summ. J. 21.) That fees and costs may be recovered in certain
circumstances is not in dispute; however, as noted by PAT USA and FMB, the underlying
Subcontract only provides for an award of attorneys’ fees and costs pursuant to Section Ten’s
Termination by Subcontractor provision, which, as the court has already determined, does not
apply here. So, the court will not award the requested attorneys’ fees and costs.
III. CONCLUSION
For the foregoing reasons, the court hereby GRANTS IN PART and DENIES IN PART
VT Milcom’s motion for summary judgment. The motion is GRANTED as to VT Milcom’s
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By agreement of the parties and order of the court (Dkt. No. 39), the issue of the amount of any
attorneys’ fees and costs was bifurcated. Thus, the only issue currently before the court is whether attorneys’ fees
and costs can be awarded as part of the Subcontract.
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claim under the payment bond in the undisputed amount of $117,110.32 and DENIED in all
other respects.
Entered: July 14, 2017.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge
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