JSI Commc'ns v. Travelers Cas. & Sur. Co. of Am.

• Citation: 807 F.3d 725
• Decision Date: 04 December 2015
• Docket Number: No. 15–60251.,15–60251.
• Parties: JSI COMMUNICATIONS, Plaintiff–Appellant v. TRAVELERS CASUALTY & SURETY COMPANY OF AMERICA, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

807 F.3d 725

JSI COMMUNICATIONS, Plaintiff–Appellant

v.TRAVELERS CASUALTY & SURETY COMPANY OF AMERICA, Defendant–Appellee.

No. 15–60251.

United States Court of Appeals, Fifth Circuit.

Dec. 4, 2015.

Christopher Solop, Biggs, Ingram & Solop, P.L.L.C., Jackson, MS, for Plaintiff–Appellant.

David J. Krebs, Esq., Attorney, Krebs, Farley & Pelleteri, P.L.L.C., New Orleans, LA, Justin Wade Sweat, Alec Michael Taylor, Krebs, Farley & Pelleteri, P.L.L.C., Jackson, MS, for Defendant–Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before JOLLY, HAYNES, and COSTA, Circuit Judges.

HAYNES, Circuit Judge:

Plaintiff JSI Communications appeals the district court's grant of summary judgment in favor of Defendant Travelers Casualty & Surety Company of America on JSI's payment bond and bad faith claims. We REVERSE and RENDER in part, REVERSE and REMAND in part, and VACATE and REMAND in part.

I. Background

McMillan–Pitts Construction Company, LLC was selected as the prime contractor on a public project to construct the New Stoneville Office Building, Mississippi State University Delta Research and Extension Center, located in Stoneville, Mississippi (the "Project"). McMillan–Pitts was required to procure payment and performance bonds as surety for the Project, and McMillan–Pitts obtained these bonds from Travelers. Under their agreement, McMillan–Pitts and Travelers were jointly and severally liable for the covenants in the bonds. The agreement further specified that the bonds were "governed by and shall be construed in accordance with Mississippi law. Any inconsistency with these Bonds and any provision of Mississippi law shall be remedied by deleting the inconsistent portion of these Bonds and leaving the remaining consistent portions in full force and effect."

Tackett Electric Company LLC was a subcontractor to McMillan–Pitts on the Project, and Tackett subcontracted with JSI to install and test voice and data cabling as well as fiber optic cabling. JSI completed its work on the Project on July 31, 2012, and invoiced Tackett for $36,346.09. It is uncontested that JSI has not been paid this sum.

JSI is apparently not the only entity to which Tackett owes money. In March 2012, a Tackett creditor unrelated to the Project served a writ of garnishment on McMillan–Pitts, seeking access to any funds McMillan–Pitts owed Tackett. In response, McMillan–Pitts commenced an interpleader action in Mississippi chancery court, which named as defendants Tackett, the unrelated Tackett creditor, and two Tackett subcontractors (not JSI) on the Project with which McMillan–Pitts and Tackett had joint check agreements. According to the complaint for interpleader, McMillan–Pitts believed these four defendants were "the only persons who may be interested in the subject proceeds or who may assert claims to the proceeds of McMillan–Pitts'[s] contract with Tackett." In connection with the interpleader action, McMillan–Pitts tendered $19,445.16, the amount of money it still owed Tackett for its work on the Project, into the court's registry. On August 30, 2012, McMillan–Pitts obtained a judgment releasing it from any further liability on its subcontract with Tackett, on the two joint check agreements, and on the writ of garnishment.

On or about October 3, 2012—shortly after McMillan–Pitts obtained this judgment in the interpleader action—JSI notified both McMillan–Pitts and Travelers that it was seeking payment under the Project's payment bond due to Tackett's nonpayment of JSI's invoice. On October 25, 2012, McMillan–Pitts amended its complaint for interpleader to include JSI and "all persons or entities supplying materials and/or labor to Tackett" on the Project. That same day, McMillan–Pitts obtained an amended judgment extending the previous release of liability to "any claim made by any other claimant made a party to this action for sums due and owing from [Tackett] for materials, supplies and/or labor provided to [Tackett] on the [Project]."

On November 8, 2012, Travelers denied JSI's claim on the bond on the grounds that McMillan–Pitts had received a judgment releasing it of any obligations under its subcontract with Tackett.¹ JSI and Travelers exchanged further correspondence regarding JSI's bond claim, but were unable to resolve the issue. Accordingly, JSI sued Travelers in state court, seeking payment under the bond, punitive damages, and attorneys' fees. Travelers removed the case on the basis of diversity jurisdiction, and both parties moved for summary judgment. The district court granted summary judgment in favor of Travelers and denied JSI's subsequent motion for reconsideration. JSI timely appealed.

II. Standard of Review

We review the district court's grant of summary judgment de novo and construe all facts and inferences in the light most favorable to the nonmoving party. See EEOC v. Chevron Phillips Chem. Co., 570 F.3d 606, 615 (5th Cir.2009). Summary judgment is appropriate when "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).

III. Discussion

Because public property is not subject to private liens for nonpayment, Mississippi law requires contractors on public projects to procure bonds to ensure payment to those who work on the project. MISS.CODE ANN. § 31–5–51 ; Key Constructors, Inc. v. H & M Gas Co., 537 So.2d 1318, 1321 (Miss.1989) ; Aetna Cas. & Sur. Co. v. Doleac Elec. Co., 471 So.2d 325, 327 (Miss.1985). Mississippi's so-called Little Miller Act is premised on the federal Miller Act, which requires both a payment and a performance bond on federal projects worth more than $100,000. Key Constructors, 537 So.2d at 1321 ; 40 U.S.C. § 3131(b). Like the federal Miller Act, Mississippi's Little Miller Act protects both subcontractors and sub-subcontractors. 40 U.S.C. § 3133(b)(2) ; MISS.CODE ANN. § 31–5–51(3). Those protected under Mississippi's Little Miller Act "shall have a right of action upon the ... payment bond upon giving written notice to [the] contractor within ninety (90) days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made...." MISS.CODE ANN. § 31–5–51(3). Furthermore, "the Mississippi Supreme Court has found federal court decisions interpreting the Federal Miller Act instructive and persuasive when interpreting Mississippi's Little Miller Act." Younge Mech., Inc. v. Max Foote Constr. Co., 869 So.2d 1079, 1082 (Miss.Ct.App.2004) (citing Key Constructors, 537 So.2d at 1321 ).

Travelers maintains that it is no longer liable to JSI on the bond because "McMillan–Pitts'[s] liability to JSI was extinguished" by the chancery court judgment. The exact source of McMillan–Pitts's liability to which Travelers is referring is unclear. To the extent Travelers is arguing that its bond obligation to JSI was discharged because McMillan–Pitts is no longer liable on its contract with Tackett, we disagree. Under Mississippi's Little Miller Act, second-tier contractors—like JSI—can sue on a payment bond absent a direct contractual relationship with the contractor. MISS.CODE ANN. § 31–5–51(3) ("Any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upon the said payment bond...."). Accordingly, that McMillan–Pitts has been released of liability to Tackett under the subcontract has no effect on JSI's ability to recover under the bond. See Ill. Sur. Co. v. John Davis Co., 244 U.S. 376, 380, 37 S.Ct. 614, 61 L.Ed. 1206 (1917) (noting under the federal Miller Act's predecessor statute that "he who has supplied [labor and materials] to a subcontractor may claim under the bond, even if the subcontractor has been fully paid"); cf. Key Constructors, 537 So.2d at 1323–24 (noting that contractor was liable on the payment bond to a second-tier subcontractor even though the contractor had a valid defense against the first-tier subcontractor).

To the extent Travelers is arguing that its bond obligation was discharged under the chancery court judgment, we must construe the effect, if any, of that judgment² on the Travelers bond obligation. We conclude that it has no effect on the bond liability. Our interpretation of the chancery court judgment begins by examining the very nature of interpleader proceedings. McMillan–Pitts interpleaded the funds in the chancery court in accordance with Mississippi Rule of Civil Procedure 22. In an interpleader action, the court must determine what entities are entitled to the property at issue, known as the "stake." See First Nat'l Bank of Vicksburg v. Middleton, 480 So.2d 1153, 1155–57 (Miss.1985) ; Md. Cas. Co. v. Sauter, 344 F.Supp. 433, 436–37 (N.D.Miss.1972). The discharge of liability the interpleader receives is defined by the scope of the funds interpleaded. See MISS. R. CIV. P. 2 2(b) ("Any party seeking interpleader ... may deposit with the court the amount claimed, ... and the court may thereupon order such party discharged from liability as to such claims and the action shall continue as between the claimants of such money or property." (emphasis added)); Lee v. W. Coast Life Ins. Co., 688 F.3d 1004, 1011 (9th Cir.2012) ("The stake marks the outer limits of the stakeholder's potential liability where the respective claimants' entitlement to the stake is the sole contested issue; however, where the stakeholder may be independently liable to one or more claimants, interpleader does not shield the stakeholder from tort liability, nor from liability in excess of the stake." (citing State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 535, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967) )).³

According to the amended complaint for interpleader, the stake in the interpleader action was the ...