United States of America et al v. KAR Contracting, LLC et al

Filing 20

MEMORANDUM OPINION AND ORDER granting in part and denying in part Defendants' 8 Motion to Dismiss Complaint; granting in part as to Count IV and denying in part as to Counts I, II, and III, the statute of limitations defense, and Plaintiffs' claims for attorneys' fees. Signed by Judge Robert C. Chambers on 6/11/2015. (cc: attys; any unrepresented parties) (mkw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION

UNITED STATES OF AMERICA, for the use of
ASPHALT CONTRACTORS, & SITE WORK, INC.,
a Kentucky corporation,,
Plaintiff,
v.

CIVIL ACTION NO. 3:14-27451

KAR CONTRACTING, LLC,
a West Virginia limited liability company and
GREAT AMERICAN INSURANCE COMPANY,
an Ohio corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Motion to Dismiss Complaint (ECF No. 8). For
the reasons set forth below, Defendants’ Motion is GRANTED IN PART and DENIED IN
PART.
I.

Background

Defendant KAR Contracting, LLC (“KAR”) was the prime contractor on a project
completed in Huntington, WV for the United States Department of Veterans Affairs (“VA”).
ECF No. 1. Defendant Great American Insurance Company (“Great American”) is the surety on
the prime contract between KAR and the government. Id. According to the Complaint, KAR
subcontracted with Plaintiff Asphalt Contractors & Site Work, Inc. (“Asphalt”) “to perform,
among other things, asphalt resurfacing, construction of a new haul road, concrete steps, and
demolition of an existing pump station.”

Id.

Asphalt alleges that it fully performed all

obligations under the subcontract but that KAR has failed to pay for some of the work, labor, and

materials provided by Asphalt under the contract. Id. Specifically, Asphalt states that more
asphalt was required than was initially estimated and included in the subcontract. Id. Asphalt
claims that KAR and the VA agreed to additional amounts of asphalt and labor, but KAR has
refused to pay for these additional amounts under the altered subcontract. Id. Asphalt alleges
that it billed KAR $118,274.05, which KAR has refused to pay. Id. As a result, Asphalt sued
KAR and Great American for breach of contract, breach of payment bond pursuant to the Miller
Act, quantum meruit, and violation of the Prompt Payment Act. Id. KAR and Great American
moved to dismiss the complaint. ECF No. 8.
II.

Standard of Review

To overcome a motion to dismiss under Rule 12(b)(6), a complaint must be plausible.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 546 (2007). This standard requires a plaintiff to set
forth the “grounds” for an “entitle[ment] to relief” that is more than mere “labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (internal
quotation marks and citations omitted). To survive a motion to dismiss, a complaint must contain
“sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

Facial

plausibility exists when a claim contains “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation
omitted).
Accepting the factual allegations in the complaint as true (even when doubtful), the
allegations “must be enough to raise a right to relief above the speculative level . . . .” Id.
(citations omitted). If the allegations in the complaint, assuming their truth, do “not raise a claim
of entitlement to relief, this basic deficiency should . . . be exposed at the point of minimum

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expenditure of time and money by the parties and the court.” Id. at 558 (internal quotation marks
and citations omitted). “Finally, “[a]lthough for the purposes of a motion to dismiss we must take
all of the factual allegations in the complaint as true, we ‘are not bound to accept as true a legal
conclusion couched as a factual allegation.’” Id. (quoting Twombly, 550 U.S. at 555).
III.

Discussion

A. Statute of Limitations
Defendants first argue that Plaintiff failed to file its complaint within the applicable statute
of limitations for claims arising under the Miller Act. ECF No. 9. “[T]he statute of limitations as
a bar to plaintiffs’ cause of action constitutes an affirmative defense and may be raised by motion
pursuant to Fed. R. Civ. P. 12(b)(6), if the time bar is apparent on the face of the complaint.”
Dean v. Pilgrim’s Pride Corp., 395 F.3d 471, 474 (4th Cir. 2005). If it is not clear from the
complaint itself that the statute of limitations has run, the Court may not properly dismiss the case
on this ground. See Goodman v. Praxair, Inc., 494 F.3d 458, 466 (4th Cir. 2007) (“[W]e conclude
that the face of the complaint does not allege facts sufficiently clear to conclude that the statute of
limitations had run, and the district court therefore erred in dismissing the complaint on that basis
under Rule 12(b)(6).”).
The Miller Act is a statute that provides a cause of action for a subcontractor who supplies
labor and materials for a project but is not timely paid under its contract. See 40 U.S.C. § 3133
(2012). The Miller Act provides: “An 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.” Id. § 3133(b)(4). The statute of limitations begins
to run after the last day on which any material or labor was provided for the project, not the last day
on which the material or labor in dispute was provided. See GE Supply v. C & G Enterprises,

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Inc., 212 F.3d 14, 18 (1st Cir. 2000).
Defendants argue that Plaintiff filed the instant suit outside of the one year statute of
limitations. ECF No. 9. According to Defendants, the invoice for services and materials
attached to Plaintiff’s complaint, dated September 10, 2013, represents the last day that labor was
performed or material was supplied for the project. Id. The instant suit was filed on October 31,
2014, over a year after the September 10 invoice was created. ECF No. 1. It is not clear from the
face of the complaint, however, that the date on this invoice represents the last day that Plaintiff
provided labor or materials for the project. The complaint does not indicate as much. Rather,
the complaint refers to the invoice only as evidence of the principal sum that Plaintiff billed to
Defendant KAR. ECF No. 1. Thus it is not clear from the face of the complaint that the statute
of limitations ran before Plaintiff filed its complaint. Defendants’ motion is DENIED as to the
statute of limitations defense.
B. Count I: Breach of Contract
Defendants next maintain that Plaintiff’s claim for breach of contract should be dismissed
because Defendant KAR paid Plaintiff $461,873.00, the entire amount due under the contract.
ECF No. 9. Defendants argue that Plaintiff’s complaint does not allege that the written contract
was altered to increase the amount of paving required or the amount due to Plaintiff. ECF No. 12.
Thus, Defendants conclude, they do not owe Plaintiff any additional amount under the contract.
Plaintiff responds that, in its complaint, it alleges that KAR and the VA acknowledged the need for
more asphalt and labor and agreed to pay for the extra materials and services. ECF No. 11.
Although the complaint does not precisely state the manner in which the contract was
altered, Plaintiff does allege that KAR and the VA acknowledged that the contract did not cover all
of the asphalt needed and agreed to pay for the amount of asphalt and paving that was actually

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necessary to complete the job. ECF No. 1. Plaintiff also alleges that KAR owes Plaintiff an
additional $118,274.05 “[i]n accord with the subcontract.” Plaintiff’s complaint concludes that
“KAR’s refusal to pay the amounts due and owing under the subcontract constitutes a material
breach of contract.” ECF No. 1. Plaintiff has sufficiently alleged that the contract between itself
and KAR was amended and that under the current contract, KAR is obligated to pay Plaintiff
$118,274.05, which it has refused to do. ECF No. 1. Plaintiff has thus alleged enough facts to
survive a motion to dismiss. Defendant’s motion is DENIED as to Plaintiff’s claim for breach of
contract.
C. Count II: Breach of Payment Bond
Defendants have also moved to dismiss Plaintiff’s claim under the Miller Act for breach of
the payment bond. ECF No. 8. The Miller Act requires any contractor that has a construction
contract with the federal government of more than $100,000 to insure that contract with a payment
bond. 40 U.S.C. § 3131 (2012). The Act further provides that any subcontractor who has
furnished labor or materials under such a contract and has not been paid within ninety days after its
work is complete may bring a civil action on the payment bond to recover the amount due. 40
U.S.C. § 3133 (2012). Thus “a plaintiff properly pleads a Miller Act claim where it alleges (1) it
has furnished labor or material in carrying out work provided for in a contract for which a payment
bond is furnished under section 3131; and (2) it has not been paid in full within 90 days.” Oldcastle
APG Northeast, Inc. v. Suffolk Const. Co., No. 1:12cv148, 2012 WL 5868897 (E.D. Va. Oct. 21,
2012) (internal quotations omitted).
Defendants claim that Plaintiff has no cause of action under the Miller Act. They again
argue that the original subcontract was not amended to include any additional materials or services
that Plaintiff provided beyond those initially agreed upon in the contract. ECF No. 9. Defendant

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KAR also maintains that it timely paid Plaintiff the entire amount owed under the contract and
does not owe Plaintiff the extra $118,274.05, thus the defendants have not breached the payment
bond. ECF No. 9. As explained in the preceding section, Plaintiff has adduced sufficient facts to
allege that the subcontract was amended to include additional services and materials, and thus
additional compensation to Plaintiff. Plaintiff has also alleged that it was not paid this additional
compensation, in the amount of $118,274.05, within ninety days of performing the work and still
has not been paid. See ECF No. 1; ECF No.1, Ex. B. Plaintiff has thus properly pleaded a claim
for breach of the payment bond under the Miller Act. Defendants’ motion to dismiss is DENIED
as to Plaintiff’s claim for breach of payment bond.
D. Count III: Quantum Meruit
Plaintiff’s complaint also sets out a claim for quantum meruit to recoup the reasonable
value of the materials and services it provided to KAR and the VA. ECF No. 1. Defendants
argue that Plaintiff cannot state a claim for quantum meruit for two reasons. First, Defendants
argue that KAR has not retained any of Plaintiff’s materials and services. Rather, the VA, the
owner of the property, received the benefit of Plaintiff’s work. The VA is not a party to this case.
Thus, Defendants conclude, they are not responsible for any money that may be owed to Plaintiff
beyond what was owed under the contract. ECF No. 9. This argument is without merit.
Defendant KAR contracted with Plaintiff for Plaintiff’s materials and services.

KAR was

responsible for paying Plaintiff for its work. Although the VA is the ultimate beneficiary of this
work, Plaintiffs extra labor and materials allowed KAR to complete its project for the VA. KAR
thus received the benefit of Plaintiff’s services and materials. These facts are sufficient to set out
a claim for quantum meruit against Defendants.
Second, Defendants maintain that Plaintiff cannot claim both breach of contract and

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quantum meruit, because an express contract and implied contract covering identical work cannot
coexist. ECF No. 9. Although the Court agrees with this proposition, Defendant’s conclusion is
incorrect. Plaintiff may not recover for both breach of contract and quantum meruit for the same
exact work. Plaintiff could, however, recover for quantum meruit instead of breach of contract in
the event that there is no express contract covering the extra services and materials. U.S. v.
Algernon Blair, 479 F.2d 638, 641 (4th Cir. 1973) (“A plaintiff may join a claim for quantum
meruit with a claim for damages from breach of contract.”). Thus, as an alternative theory to
breach of contract, Plaintiff’s claim for quantum meruit is permissible. Defendants’ motion to
dismiss is DENIED as to Plaintiff’s claim for quantum meruit.
E. Count IV: Prompt Payment Act
In its fourth cause of action, Plaintiff claims that the Prompt Payment Act (“PPA”) requires
a contractor to “make prompt payment to its subcontractors on Federal Construction Projects.”
ECF No. 1. Defendants move to dismiss this claim, arguing that the PPA does not provide a
private cause of action. ECF No. 9. Furthermore, Defendants note that the PPA governs
government agencies, not private companies. ECF No. 9.
The PPA is a federal statute governing the payment of vendors and contractors by federal
agencies. See 31 U.S.C. §§ 3901–3907 (2012). Although the Act generally applies only to
federal agencies, Section 3905 of the PPA does set out several indirect requirements for any
private contractor awarded a contract by a federal agency. Specifically, Section 3905 requires
federal agencies to include in their contracts with prime contractors a clause that requires such
contractors to insert language from the statute into their subcontracts. 31 U.S.C. § 3905(b). The
required subcontract language sets out the time for contractors to pay subcontractors and creates an
interest penalty for failure to make timely payments. Id.

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Nothing in the PPA states that subcontractors have a separate cause of action, beyond
common law breach of contract, for violations of the required subcontract language. See id.
Moreover, the statute directs federal agencies to include specific clauses in their contracts, and
only indirectly requires action on the part of contractors. Plaintiff did not respond to these
arguments in its response to Defendants’ motion to dismiss and has not provided the Court with
any authority for the proposition that the PPA creates a private cause of action. Although
authority is scant, courts that have faced the issue have generally held that the PPA does not create
a private cause of action for subcontractors. See W&W Steel, LLC v. BSC Steel, Inc., 944 F. Supp.
2d 1066, 1080 (D. Kan.) (“Courts . . . have repeatedly rejected the argument that the FPPA
contains either an explicit or implied private cause of action in favor of unpaid subcontractors.”).
Accordingly, Plaintiff does not have a separate cause of action for payment under the PPA.
Defendants’ motion to dismiss is GRANTED as to Plaintiff’s claim under the Prompt Payment
Act.
F. Attorneys’ Fees
Finally, Defendants move to dismiss Plaintiff’s claim for attorneys’ fees. Defendants
argue that attorneys’ fees are not recoverable under the Miller Act or any other cause of action in
the complaint. ECF No. 9. As a general rule, parties bear their own fees absent a fee-shifting
statute. F.D. Rich Co. v. U.S. ex rel. Indus. Lumber Co., 417 U.S. 116, 128-29 (1974); Sally-Mike
Properties v. Yokum, 365 S.E.2d 246, 246 (W. Va. 1986). Defendants are correct that neither the
Miller Act nor applicable West Virginia law have created fee-shifting provisions applicable to
Plaintiff’s causes of action. Plaintiff may, however, argue that the bad-faith exception to the
general rule of attorneys’ fees applies. Both federal and West Virginia law permit courts to award
attorneys’ fees to a successful plaintiff who proves that the defendant “acted in bad faith,

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vexatiously, wantonly, or for oppressive reasons.” F.D. Rich, 417 U.S. at 129; Sally-Mike, 365
S.E.2d at 246. Whether this exception applies in present case cannot be determined at this stage
of litigation. Accordingly, Defendants’ motion to dismiss is DENIED as to Plaintiff’s claims for
attorneys’ fees.
Conclusion
For the foregoing reasons, Defendants’ Motion to Dismiss Complaint (ECF No. 8) is
GRANTED IN PART, as to Count IV, and DENIED IN PART, as to Counts I, II, and III, the
statute of limitations defense, and Plaintiffs’ claims for attorneys’ fees. The Court DIRECTS the
Clerk to send a copy of this Order to counsel of record and any unrepresented parties.

ENTER:

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June 11, 2015