ARTISTIC STONE CRAFTERS INC. v. SAFECO Ins. Co. of America

• Decision Date: 27 July 2010
• Docket Number: Action No. 2:10CV45.
• Citation: 726 F.Supp.2d 595
• Parties: ARTISTIC STONE CRAFTERS, INC., Plaintiff, v. SAFECO INSURANCE COMPANY OF AMERICA, and Tesoro Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

726 F.Supp.2d 595

ARTISTIC STONE CRAFTERS, INC., Plaintiff,

v.SAFECO INSURANCE COMPANY OF AMERICA, and Tesoro Corporation, Defendants.

Action No. 2:10CV45.

United States District Court,E.D. Virginia, Norfolk Division.

July 27, 2010.

COPYRIGHT MATERIAL OMITTED.

Marshall A. Winslow, Jr., Esq., for Plaintiff.

Neil S. Lowenstein, Esq., for Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on the motion for summary judgment filed by defendants Tesoro Corporation (“Tesoro”) and Safeco Insurance Company of America (“Safeco”) (collectively “Defendants”). The Court, finding oral argument to be unnecessary, GRANTS summary judgment to the defendants, and the complaint is DISMISSED WITH PREJUDICE.

I. Facts and Procedural History

A. Factual History

Tesoro served as the general contractor for the renovation of a cafeteria at the Federal Law Enforcement Training Center located in Glynco, Georgia. (G. DeFelicibus Dep. 8-9, 14.) Pursuant to the requirements of the Miller Act, 40 U.S.C. §§ 3131-34, Tesoro obtained a $4,929,292 surety payment bond from Safeco, which bound Safeco to reimburse Tesoro's subcontractors on the renovation project in the event that Tesoro failed to make prompt payments to them. (Compl. ¶ 7.) Tesoro then contracted with several subcontractors for labor, materials, and equipment for the cafeteria renovation project.

On July 11, 2007, Tesoro entered into a subcontract (“Subcontract”) with Artistic Stone Crafters, Inc. (“Artistic”) in which Artistic agreed to replace tile in the cafeteria floor in exchange for $135,000, such amount to be paid by Tesoro in periodic installments. (Subcontract ¶¶ 4, 5.1, Mot. Summ. J., Ex. B, Docket No. 14.) The Subcontract between Artistic and Tesoro provided that, in order to obtain payment for additional amounts in excess of the $135,000 subcontract price, Artistic must give Tesoro written notice of such claims (Subcontract ¶ 12.), and that such claims would not be valid unless authorized by a written change order. ( Id.) James Hopkins, Jr. (“Hopkins”), Artistic's owner and manager, was aware of and understood the written change order requirement. (J. Hopkins Dep. 51.)

The Subcontract further required that Artistic submit a lien waiver to Tesoro as a condition precedent to any payment by Tesoro. (Subcontract ¶ 5.2.) Additionally, the Subcontract provided that “Final Payment shall constitute a waiver of all claims by [Artistic] relating to [Artistic's] work.” (Subcontract ¶ 6.3.)

Artistic commenced the tiling job on July 16, 2007 and continued work through November 2, 2007, on which date Artistic left the job because it had not received the payments that are the subject of this lawsuit. (J. Hopkins Dep. 63-64.) During that period, Tesoro issued two written change orders to Artistic. The first written change order, signed by S.E. Perritt, Tesoro's Vice President, on August 31, 2007, was for $12,840. (Mot. Summ. J., Ex. C.) The second written change order, signed by S.E. Perritt on November 2, 2007, was for $10,593.46. (Mot. Summ. J., Ex. E.)

Tesoro made periodic payments to Artistic that totaled $158,433.46. (Def. St. Mat. Facts ¶ 25, Docket No. 14; Pl. St. Mat. Facts ¶ 25., Docket No. 25.) This amount represented the original subcontract amount of $135,000 plus the two written change orders of $12,840 and $10,593.46. (Mot. Summ. J., Ex. E.) However, Artistic contends that Tesoro owes Artistic an additional $75,703.

Artistic claims that the $75,703 it seeks in this suit represents unanticipated costs incurred by Artistic in reliance on oral promises of Tesoro's representatives to reimburse Artistic for such costs. In support of its claim, Artistic asserts that Hopkins repeatedly telephoned E.G. Gonzalez, Tesoro's Operations Manager, to request written change orders for the unanticipated costs incurred by Artistic. (J. Hopkins Dep. 24-25.) Artistic further alleges that Gonzalez told Hopkins that office “clerical problems” had prevented Tesoro from generating the written change orders, but orally authorized Artistic to incur the costs and promised that Tesoro would eventually reimburse Artistic for such costs. ( Id.)

B. Procedural History

On October 21, 2008, Artistic filed a complaint (Docket No. 1.) in the United States District Court for the Southern District of Georgia seeking $75,703, plus attorney's fees and costs. Artistic asserted breach of contract and quantum meruit claims against Tesoro, and a Miller Act claim against Safeco. On June 8, 2009, the defendants filed a motion for summary judgment (Docket No. 14.) and a motion to dismiss, or in the alternative transfer, for improper venue (Docket No. 13.). Pursuant to a forum-selection clause in the Subcontract, the action was transferred to the United States District Court for the Eastern District of Virginia on January 25, 2010. (Order, Docket No. 34.)

II. Standard of Review

[1] [2] Summary judgment “should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). Stated another way, summary judgment is appropriate “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 judgment as a matter of law.” Holland v. Washington Homes, Inc., 487 F.3d 208, 213 (4th Cir.2007). 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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Furthermore, only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be considered by a court in its determination. Id. at 248, 106 S.Ct. 2505.

Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute of fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). At that point, “the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505. In doing so, the judge must construe the facts in the light most favorable to the non-moving party, and may not make credibility determinations or weigh the evidence. Id. at 255, 106 S.Ct. 2505; Holland, 487 F.3d at 213. However, there must be “sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (citations omitted).

III. Discussion

A. Genuine Issue as to Material Fact

Artistic asserts two genuine issues of material fact related to the “Subcontractor Final/ Partial Waiver of All Claims for and Right of Lien” that was signed by Hopkins on November 2, 2007. First, Artistic states that there is a factual dispute as to “whether Tesoro knew that [Artistic] contested the amount being paid despite the signed release.” (Pl. St. Mat. Facts. ¶ 20; Pl. Resp. 9.) However, even if Tesoro knew that Artistic contested the amount it was being paid by Tesoro at the time Artistic signed the release, such knowledge is irrelevant if an authorized Artistic representative signed a valid release waiving Artistic's right to bring claims against Tesoro. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505 (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”). ¹ Because Artistic does not dispute Tesoro's assertion that an authorized representative signed the release, there is no genuine issue of material fact on this point.

Second, Artistic asserts that there is a question of fact as to whether Hopkins, its owner and manager, was told that he had to sign the waiver in order to be paid. (Pl. Resp. 9.) However, this fact is not in dispute, as the Defendants do not deny that Tesoro required Artistic to submit a waiver of claims prior to receiving payment.

Having reviewed the pleadings, depositions, and affidavits submitted by the parties, and for the reasons stated above, the Court determines that there is no genuine issue as to any material fact. Therefore, based upon the material facts not in dispute, the Court will consider whether the Defendants are entitled to judgment as a matter of law.

B. Choice of Law

[3] As this action concerns the interpretation of contractual provisions, the Court begins by determining which state law governs such interpretation. Here, the Subcontract between Tesoro and Artistic contains a choice-of-law clause providing that “all disputes under this Subcontract shall be determined and interpreted pursuant to the laws of the Commonwealth of Virginia.” (Mot. Summ. J., Att. A ¶ 13.3, Docket No. 14.) The enforceability of such choice-of-law provisions depends on the applicable choice-of-law rules.

Jurisdiction in the instant lawsuit is based on both the statute conferring exclusive jurisdiction on federal courts in Miller Act claims, 40 U.S.C. § 3133, and the statute conferring jurisdiction on federal courts in cases involving diversity of citizenship, 28 U.S.C. § 1332. Where an action has been brought under both federal question and diversity jurisdiction, courts have analyzed the choice-of-law question according to the rules appropriate to diversity jurisdiction cases. See Totalplan Corp. of...