Datastaff Technology Group v. Centex Const. Co.
| Decision Date | 11 December 2007 |
| Docket Number | Civil Action No. 1:07cv450. |
| Citation | 528 F.Supp.2d 587 |
| Parties | DATASTAFF TECHNOLOGY GROUP, INC., Plaintiff, v. CENTEX CONSTRUCTION COMPANY, INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
Richard Murray, William Carl Groh, III, Pompan Murray & Werfel PLC, Alexandria, VA, for Plaintiff.
Christopher Michael Anzidei, Watt Tieder Hoffar & Fitzgerald LLP, McLean, VA, for Defendants.
Plaintiff, a second-tier subcontractor on A federal construction project, brings this suit against the prime contractor and the issuer of the performance and payment bond for the project to recover for work performed on the project pursuant to a contract with a defaulting first-tier subcontractor. Plaintiff asserts (i) an untimely Miller Act1 claim against both defendants, (ii) constructive fraud claims against both defendants, and (iii) a quantum meruit claim against the prime contractor. At issue on defendants' motion for summary judgment are the following questions:
1. Whether the undisputed facts preclude plaintiff from relying on equitable estoppel to rescue its untimely Miller Act claim;
2. Whether the undisputed factual record demonstrates that plaintiff cannot show the reasonable reliance required to establish its claims for constructive fraud; and
3. Whether plaintiff can recover in quantum meruit from the prime contractor when the plaintiff also had an express contract covering the subject matter with the first-tier subcontractor.
For the reasons that follow, summary judgment must be granted in part and denied in part.
On September 28, 2004, Plaintiff, Datastaff, Inc. ("Datastaff') entered into a contract with Accutronics Datacom, Inc. ("Accutronics") to provide personnel for several projects, including 4 federal construction project at the Defense Threat Reduction Center, located in Fort Belvoir, Virginia (the "Project"). Accutronics had earlier entered into a subcontract with defendant Centex Construction Company, Inc. ("Centex"), the prime contractor on the Project, to complete telecommunications work on the Project. Accutronics's subcontract with Centex provided that the day-to-day administration of the subcontract would be handled by Centex's electrical subcontractor, Dynaelectric Company ("Dynaelectric"), but reserved Centex's right to administer any part of the subcontract. Work on the Project was se cured by a performance and payment bond between Centex and Travelers Casualty and Surety Company of America ("Travelers").
As these undisputed facts reflect, Accutronics was a "first-tier" subcontractor, while Datastaff was a "second-tier" subcontractor. So-called "first-tier" subcontractors refer to the first level of subcontractors below the prime contractor, namely those subcontractors in privity with the prime contractor. The "second-tier" subcontractors are those in privity with a "first-tier" subcontractor. Second-tier subcontractors are typically referred to as sub-subcontractors. "Third-tier" subcontractors are in privity only with a "second-tier" subcontractor. These classifications are important in determining eligibility to sue on the bond: First- and second-tier subcontractors are covered by the bond, while third-tier subcontractors are not. 40 U.S.C. § 3133(b)(2).
The record reflects that by the summer. of 2005, Accutronics was in default on its obligation to pay Datastaff for work on the Project. Accordingly, in July or August 2005, Datastaff's President, Keith Ricks, called Centex and threatened to stop work on the Project.3 James Anderson, Centex's Project Executive, assured Ricks that the Project was properly bonded and that Datastaff would be compensated for its services in the event that Accutronics did not pay Datastaff. According to Datastaff, Anderson also told Ricks that the project would be "crippled" if Datastaff pulled its employees. After this conversation, Datastaff continued work on the Project which it completed on August 28, 2005. Datastaff then promptly obtained counsel to resolve its payment dispute with Accutronics.
On September 21, 2005, in response to further inquiries by Datastaff, Anderson stated that Accutronics was "under" Dynaelectric, which was "under" Centex. This conversation apparently led Datastaff s counsel to believe that Datastaff was a third-tier subcontractor on the Project behind Dynaelectric and Accutronics, and hence ineligible to sue on the bond. On October 18, 2005, because Accutronics had not fully paid for Datastaff's services, Datastaff submitted a claim on the bond to Travelers in which Datastaff, allegedly relying on Anderson's representations,4 stated that Datastaff was "a third tier subcontractor under ... Accutronics." Travelers responded on October 24, 2005, requesting additional information, including an Affidavit of Claim form to be executed by Datastaff. Datastaff returned the completed form on November 28, 2005. Then, on December 2, 2005, Travelers notified Datastaff that it was denying the claim on the ground that, "[i]n reviewing the support ... received from Data Staff Technology Group, Inc. and Centex Construction Company, Inc. it appears that Data Staff Technology Group, Inc. is a 3rd tier contractor and therefore not protected by this bond." Despite indicating that she had used information from Centex in arriving at this conclusion, Inez Meyerholz, the Travelers agent who investigated the claim and wrote the letter, admitted later that she based her statement that Datastaff was a third-tier subcontractor solely on Datastaff's October 18, 2005 letter stating that it believed itself to be a third-tier subcontractor. Significantly, the letter also stated that Travelers was open to considering "evidence to the contrary," and invited Datastaff to provide additional information that might have been overlooked. Datastaff chose not to respond, even though by this time it had retained counsel to pursue this claim. Indeed, Travelers received no further correspondence from Datastaff on this matter until January 19, 2007.
On December 13, 2005, Centex sent a separate response to Datastaff, regarding Datastaff's October 18, 2005 claim submitted to Travelers. The letter stated that Centex had forwarded Datastaff's claim to Acstar Insurance Company, Accutronics's surety, because Centex believed Accutronics was the proper party to whom Datastaff s claim should be addressed. Notwithstanding Travelers's earlier denial of Datastaff's claim, Centex stated that it was investigating Datastaff's claim and requested that. Datastaff submit further documentation in support of its claim within seven days.5 Datastaff apparently never responded to this request.
Meanwhile, Centex pursued a suit against both Accutronics and its surety, Acstar, alleging Accutronics's breach of its subcontract with Centex. The complaint was filed in the U.S. District Court for the Eastern District of Virginia on January 17, 2006, and on February 2, 2006, Centex forwarded a copy of the complaint to Datastaff. Eight days later, pursuant to its subcontract with Accutronics, Datastaff initiated arbitration proceedings against Accutronics. Datastaff prevailed in this arbitration, winning an award against Accutronics, which Accutronics refused to pay. Then, Datastaff, on the basis of the arbitration award, obtained a judgment against Accutronics in North Carolina Superior Court on November 14, 2006 and thereafter domesticated this judgment in Virginia on or about January 23, 2007. Accutronics has failed or otherwise refused to satisfy this judgment.
On August 24, 2006, a memorandum opinion and order issued in Centex's suit against Accutronics and Acstar, ruling that Centex had a valid claim against Accutronics notwithstanding Centex's partial assignment of the subcontract to Dynaelectric.6 Datastaff's counsel received a copy of the opinion and order at or about this time. Sometime later, in September or October 2006, Datastaff's counsel read the opinion and order and realized, for the first time, that Datastaff was a second-tier subcontractor, rather than a third-tier subcontractor, as previously believed. Yet, not until January 19, 2007 did Datastaff communicate this view to Travelers and request payment for the amount of the judgment Datastaff had obtained against Accutronics. Travelers denied Datastaff's request on February 15, 2007, on the ground that the Miller Act's limitation period had expired.
Finally, on May 3, 2007, Datastaff filed the complaint in this action against Centex and Travelers, alleging four causes of action: (i) that the Miller Act afforded Datastaff substantive rights under the bond as a second-tier contractor (Count 1); (ii) that Datastaff conferred a material benefit upon Centex for which it has not been compensated and, therefore, is entitled to quantum meruit recovery (Count 2); and (iii) that both Centex and Travelers committed constructive fraud by making false representations on which plaintiff detrimentally relied (Counts 3 and 4). Defendants moved to dismiss, which motion was converted into a motion for summary judgment. See Rule 12(b) and Rule 56, Fed. R.Civ.P. Following focused discovery, defendants' motion was fully briefed and argued and is now ripe for disposition.
The summary judgment standard is too well-settled to require elaboration here. In essence, summary judgment is appropriate only where, on the basis of undisputed material facts, the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). And importantly, the non-moving party may not rest upon a "mere scintilla" of evidence to defeat summary judgment, but must set forth specific facts showing a genuine issue for trial. Id. at 324, 106 S.Ct. 2548; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
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