Opinion
Civil No. CCB-03-3200.
July 23, 2004
MEMORANDUM
The parties in this government contracting case have filed cross-motions for summary judgment on the plaintiff's Miller Act claim (docket nos. 6, 10). The plaintiff, the United States suing for the benefit of East Coast Contracting, Inc. ("ECC"), claims the defendant owes ECC $146,057.08 for demolition and concrete work in connection with a family housing improvement project on Andrews Air Force Base in Maryland It says there is no genuine issue of material fact, as there is no dispute that ECC performed the work and was not paid for it. The defendant, United States Fidelity and Guarantee Company ("USFG"), which provided a surety bond in connection with the contract as required by 40 U.S.C. § 3131(b), argues that the plaintiff's claim is untimely under the Miller Act's one year statute of limitations, id. § 3133(b)(4). Though the plaintiff maintains it performed work on the contract less than a year before filing this lawsuit, USFG claims that the work in question was not "labor" of the sort that would cause the limitations period to accrue. The plaintiff also argues that promissory estoppel bars USFG's limitations defense, but USFG disputes that its representations gave ECC reasonable grounds to delay filing its claim. For the reasons that follow, I agree with the defendant on both issues and hold that the plaintiff's Miller Act claim is time-barred.
As I will explain below, the plaintiff has asserted a claim to some $146,000 under a Miller Act payment bond, as well as a claim to $660 owed directly by the defendant. Captioned a motion for "partial summary judgment," the defendant's motion appears to relate only to the former, more substantial claim.
BACKGROUND
The dispute in this case relates to a construction contract awarded to Maryland K.C., Inc., also known as K.C. Industries ("KCI"), on approximately July 19, 2000. The defendant, USFG, acted as surety for both performance and payment under the contract. The contract was Contract No. N62477-00-C-0080, and the payment and performance bonds were both numbered 400KE8755. In September 2000, KCI hired ECC to perform work including the installation of concrete slabs, footings, pads, and sidewalks and associated grading and demolition. ECC was to provide all the necessary labor and materials for $350,000.
The complaint indicates it was September 11, 2000, but the plaintiff's Memorandum in Support of Motion for Summary Judgment says the date was September 18, 2000.
An affidavit signed by ECC's president indicates that ECC worked on the project between October 2000 and July 2002. (Def.'s Mem. in Supp. of Partial Summ. J. Ex. 2.) According to the Complaint, ECC "deleted certain work and performed additional work at [KCI's] request," bringing KCI's total debt to ECC to $522,735.77. (Compl. ¶ 7.) The plaintiff alleges that KCI has paid ECC only $377,338.69, leaving a balance of $145,397.08. In addition, the Complaint alleges that ECC performed another $660.00 worth of work "at the behest of USFG." ( Id.)
On about October 22, 2002, KCI filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the District of Maryland On November 13, 2002, the Bankruptcy Court permitted KCI to reject certain contracts, including the Andrews Air Force Base project. Acting as the surety, USFG then retained Hitt Contracting, Inc. ("Hitt"), to complete the contract. On March 20, 2003, ECC representatives visited the work site, apparently at Hitt's request, to inspect damaged concrete. In a letter to Hitt included in the record, ECC's president indicated that ECC felt the damage occurred after ECC's completion of its contract work. (Def.'s Opp'n Ex. 8.) The letter also stated, however, that ECC was willing to enter an agreement to "complet[e] and repair" the damage, if Hitt was interested. ( Id.) It appears that Hitt did not accept ECC's offer, as there is no indication in the record that ECC did the repair work.
While ECC was exploring the repair job, the company was also working to secure payment of the remaining balance on its bill to KCI. On August 27, 2002, ECC had sent a letter to Roxanne Kasten at St. Paul Surety (apparently an affiliate of USFG) advising her of ECC's intent to pursue a claim against the surety and requesting a copy of the payment bond. (Def.'s Opp'n Ex. 2.) On September 4, 2002, Ms. Kasten wrote back requesting that ECC complete an "Affidavit of Claim." ( Id. Ex. 3.) ECC did so on September 6, 2002. ( Id. Ex. 4.) On September 23, 2002, Ms. Kasten acknowledged receipt of the Affidavit of Claim and indicated that the materials were being forwarded to KCI "so that we may determine its position with regard to your claim." ( Id. Ex. 5.) On October 11, 2002, ECC's attorney, Anthony DiPaula, wrote to Ms. Kasten to inquire about the status of the claim and request a copy of the payment bond, which apparently had not been delivered. ( Id. Ex. 6.) Some three months later, a different USFG/St. Paul Surety official, Elizabeth Adams, wrote back. She apologized for the delayed response and indicated that USFG had undertaken the "time consuming" process of reviewing the rejected contract "to determine who has successfully completed work, what needs to be remediated, and what is yet to be performed." ( Id. Ex. 7.) Ms. Adams asked for Mr. DiPaula's "continued patience during this process," which she hoped would "assist us in the evaluation of your client's claim, as well as other payment bond claims." ( Id.) On April 10, 2003, Ms. Adams requested additional information ( id. Ex. 9), which Mr. DiPaula sent on May 8, 2003 ( id. Ex. 10). In her April 10 letter, however, as in the previous letters, Ms. Adams also stated that the request was made "with the express reservation of all rights and defenses that may be available to the surety or its principal . . . [including] defenses available pursuant to any notice and suit limitation provisions." ( Id. Ex. 9.) Accordingly, on August 7, 2003, USFG denied ECC's claim on grounds that it was timebarred. ( Id. Ex. 11.) While acknowledging that ECC's Affidavit of Claim indicated that labor or materials were last supplied in July 2002, Ms. Adams's letter stated that "the individual receipts do not indicate that labor or performance was supplied to the project beyond June 2002." ( Id.) On August 20, 2003, Ms. Adams finally forwarded to Mr. DiPaula a copy of the payment bond. ( Id. Ex. 12.)
On November 4, 2003, ECC filed this lawsuit against USFG, seeking recovery of the $145,397.08 KCI debt as well as the alleged $660 direct liability. Both parties have filed motions for summary judgment, which have been fully briefed, making oral argument unnecessary. See Local Rule 105.6.
STANDARD OF REVIEW
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The Supreme Court has clarified that this does not mean that any factual dispute will defeat the motion:
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).
ANALYSIS
The key issue raised by the parties' motions is whether the plaintiff's claim is time-barred. The Miller Act requires federal building and public works contracts valued at more than $100,000 to carry a surety bond guaranteeing both payment and performance. 40 U.S.C. § 3131. Unpaid subcontractors who have "furnished labor or material" under the contract have a federal cause of action under the Act to collect on the bond, id. § 3133(b)(1), but their claim is subject to a limitations period that runs for "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 parties in this case dispute, first, when ECC performed "the last of the labor," and second, whether promissory estoppel bars USFG from asserting the limitations defense. I will address each of these issues in turn.
I.
ECC's claim is timely under the Miller Act's one-year statute of limitations only if ECC's inspection of the damaged concrete on March 20, 2003 qualified as the "last of the labor" under that provision. See 40 U.S.C. § 3133(b)(4). ECC's previous work — whether completed in June 2002, as USFG suggests, or July 2002, as ECC maintains — occurred more than one year before ECC instituted this lawsuit on November 4, 2003.
The Fourth Circuit's interpretation of the Miller Act's "last of the labor" language turns on a distinction between performance of the contract, on the one hand, and correction or repair, on the other. See United States ex rel. Magna Masonry, Inc. v. R.T. Woodfield, Inc., 709 F.2d 249, 251 (4th Cir. 1983); see generally United States ex rel. Hussmann Corp. v. Fidelity Deposit Co. of Md., 999 F. Supp. 734, 742-45 (D.N.J. 1998) (identifying a split in circuits on this issue and characterizing the Woodfield approach as the "majority view"). "[T]he applicable legal test is whether the work was performed and the material supplied as a part of the original contract or for the purpose of correcting defects, or making repairs following inspection of the project"; contract work sets the starting-point for the limitations period, whereas corrections and repairs do not. Woodfield, 709 F.2d at 251 (internal quotations and alterations omitted). In this case, it is clear that ECC's visit on March 20, 2003 was not a "part of the original contract." ECC performed no new construction during the visit; it simply inspected the job site for damage caused by other parties. Indeed, ECC did not even undertake repairs or corrections of the damage; it maintained, rather, that its work under the contract was "completed and punched out," with the consequence that further work would necessitate a new "agreement" with Hitt. (Def.'s Opp'n Ex. 8.) Given that ECC itself did not regard the March 20, 2003 inspection as integral to its obligations under the contract, it is impossible to conclude that the visit to the job site on that day restarted the limitations clock under the Fourth Circuit's standard.
The minority view, under which the statute begins to run upon "substantial completion" of the work, see Hussman Corp., 999 F. Supp. at 744, is less favorable to the plaintiff.
Arguing for a contrary result, the plaintiff cites several cases, but all are distinguishable. Neither Hussmann Corp. nor Trinity Universal Insurance Co. v. Girdner, 379 F.2d 317 (5th Cir. 1967), applied the Fourth Circuit's contract or repair test, and in any event these cases involved more substantial work than ECC's March 20, 2003 visit. See Hussmann Corp., 999 F. Supp. at 745-46 (provision of operation and maintenance manuals valued at $5,000 and called for in the contract); Trinity Universal, 379 F.2d at 318 (replacement of seals and pipe insulation "on the demand of the government inspector, who refused to approve the original work"). Steenberg Construction Co. v. Prepakt Concrete Co., 381 F.2d 768 (10th Cir. 1967), based the Miller Act accrual date on the removal of "supplies, material and equipment" following contractually required work, see id. at 774 — something that ECC presumably did after it completed its work for KCI in June or July of 2002 — and United States ex rel. Pippin v. J.R. Youngdale Construction Co., 923 F.2d 146 (9th Cir. 1991), concluded simply that leased equipment left on a job site during a work suspension was "material . . . supplied," 40 U.S.C. § 3133(b)(4), to the contractor within the meaning of the Miller Act's limitations provision, Pippin, 923 F.2d at 149-50; nothing comparable has been alleged here. Furthermore, other cases demonstrate that ECC's March 20, 2003 inspection falls short of the Woodfield standard. In United States ex rel. Interstate Mechanical Contractors, Inc. v. International Fidelity Insurance Co., 200 F.3d 456 (6th Cir. 2000), the Sixth Circuit held that the testing of heaters that were replaced because of defects did not restart the limitations clock. See id. at 460-61. "[T]ests of remedial or corrective work," the court explained, interpreting the Woodfield standard, "do not qualify as `labor' for purposes of the Miller Act." Id. at 461. In United States ex rel. Automatic Elevator Co. v. Lori Construction, 912 F. Supp. 398 (N.D. Ill. 1996), the Northern District of Illinois concluded, also following Woodfield, that the performance of work under warranty provisions of a construction contract "did not re-trigger the commencement of the [Miller Act's] one-year limitations period." See id. at 400-01. By comparison, ECC's work in this case — which did not even involve the performance of a repair, but merely inspection with a view to possible repairs — can only be less appropriate as a triggering event for the Miller Act limitations period.
Thus, ECC's claim to collect on the USFG payment bond accrued in June or July of 2002, more than one year before this litigation commenced.
II.
Faced with the June or July 2002 accrual date, the plaintiff's fall-back contention is that promissory estoppel bars USFG's limitations defense. USFG, the argument goes, lulled ECC into complacency with its requests for documentation and assurances that it was investigating the claim. Having thus induced ECC's delay, the plaintiff argues, USFG cannot evade payment on grounds that the claim was untimely.
While the Fourth Circuit recognizes promissory estoppel in the Miller Act context, see United States v. Humble Oil Ref. Co. v. Fidelity Cas. Co. of N.Y., 402 F.2d 893, 897-98 (4th Cir. 1968), this case unfortunately does not satisfy the doctrine's strict requirements. In contrast to the defendant in Humble Oil, see 402 F.2d at 896, USFG never promised to pay ECC's claim; instead, Ms. Adams simply counseled "patience" with USFG's ongoing investigation (Def.'s Opp'n Ex. 7). See United States ex rel. J. Bobby Currin Sons v. JW Builders, Inc., 17 F. Supp. 2d 462, 465-66 (M.D.N.C. 1996) (distinguishing Humble Oil where there was no representation "upon which [the plaintiff] could reasonably rely that [the defendant] was waiving the statute of limitations"); United States ex rel. BB Welding, Inc. v. Reliance Ins. Co. of N.Y., 743 F. Supp. 129, 133 (E.D.N.Y. 1990) (also declining to find promissory estoppel where the defendant made "no representations or promises which might reasonably be expected to have induced [the plaintiffs'] reliance"). Nor did ECC promise to forbear filing suit, as the plaintiff did in Humble Oil, see 402 F.2d at 896; to the contrary, Mr. DiPaula's letters repeatedly hinted at the possibility of litigation ( see Def.'s Opp'n Ex. 6 ("in the event it becomes necessary to file suit . . ."); id. Ex. 10 ("If this matter were to be litigated . . .")). See Currin, 17 F. Supp. 2d at 466 (finding no promissory estoppel under Humble Oil in part because the plaintiff "did not expressly state that it would forbear from bringing suit"). Furthermore, each letter from St. Paul Surety or USFG regarding ECC's claim included a disclaimer such as the following, which appeared in Ms. Kasten's September 4, 2002 correspondence and all three of Ms. Adams's letters:
This correspondence, our delivery of the Affidavit of Claim and all prior or subsequent communications and/or investigative efforts are made with the express reservation of all rights and defenses that may be available to the surety or its principal, whether at law, in equity or under the terms and provisions of the bond and the contract documents. This reservation includes, without limitation, defenses available pursuant to any notice and suit limitation provisions.
(Def.'s Opp'n Ex. 3, 7, 9, 11.) It was not reasonable to expect payment on untimely claims in the face of such a reservation of Miller Act rights. See BB Welding, 743 F. Supp. at 131, 133 (rejecting a promissory estoppel claim where correspondence from the defendant included a similar reservation). The fact that ECC was represented by counsel at the time adds weight to this conclusion, see Currin, 17 F. Supp. 2d at 466 ("[T]he fact that [the plaintiff] had counsel prior to expiration of the limitations period is a factor for the court to consider with regard to the element of justifiable reliance." (citing Humble Oil, 402 F.2d at 900 n. 9)), as does the fact that ECC waited nearly three months to seek legal redress after USFG finally denied its claim, see BB Welding, 743 F. Supp. at 133 (noting that a six-month delay in bringing suit weakened the plaintiff's promissory estoppel theory). Simply put, ECC waited more than a year to press its claim against USFG but lacked reasonable grounds for doing so. Accordingly, its Miller Act cause of action is time barred.
ECC emphasizes that USFG did not send ECC a copy of the payment bond until August 20, 2003, but it is not clear why it was necessary to receive a copy of the bond before commencing a lawsuit.
III.
While this ruling disposes of the claims against the payment bond, ECC appears to be asserting an additional claim for $660 against USFG directly. It is not apparent what work ECC did to establish this liability, nor why USFG, as opposed to KCI or Hitt, would have engaged ECC's services in connection with the project; the Complaint alleges only that "ECC performed further work, with a value of $660.00 at the behest of USFG." (Compl. ¶ 7.) In addition, it is unclear what legal theory entitles ECC to relief based on this work. The theory cannot derive from the Miller Act because ECC's cause of action under that statute relates only to "work provided for in a contract for which a payment bond is furnished under [the Miller Act]," 40 U.S.C. § 3133(b)(1), and the work at issue here was presumably ancillary to the contract if it was ordered by USFG rather than KCI or Hitt. Because the factual and legal basis for this claim is not apparent from the record, I will dismiss the claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, but I will do so without prejudice. ECC may replead the claim with further supporting allegations if it so chooses.
CONCLUSION
For the reasons stated above, the plaintiff's motion for summary judgment will be denied, and the defendant's motion for partial summary judgment will be granted. In addition, ECC's claim for $660.00 from USFG will be dismissed without prejudice.
A separate Order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby Ordered that:1. the plaintiff's Motion for Summary Judgment (docket no. 10) is DENIED;
2. the defendant's Motion for Partial Summary Judgment (docket no. 6) is GRANTED;
3. the plaintiff's claim against Payment Bond No. 400KE8755 is DISMISSED;
4. the plaintiff's claim to $660.00 from the defendant United States Fidelity Guarantee Co. is DISMISSED WITHOUT PREJUDICE;
5. copies of this Order and the accompanying Memorandum shall be sent to counsel of record; and
6. the clerk of the court shall CLOSE this case.