Kamphuis Pipeline Co. v. Lake George Regional Sewer Dist.

• Decision Date: 30 November 2001
• Docket Number: No. 00-4013,00-4013
• Citation: 273 F.3d 732
• Parties: (7th Cir. 2001) Kamphuis Pipeline Co., Plaintiff-Appellant, v. Lake George Regional Sewer District, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 732

273 F.3d 732 (7th Cir. 2001)

Kamphuis Pipeline Co., Plaintiff-Appellant, v. Lake George Regional Sewer District, Defendant-Appellee.

No. 00-4013

In the United States Court of Appeals For the Seventh Circuit

Argued November 1, 2001

Decided November 30, 2001

Appeal from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. 1:99-CV-363William C. Lee, Chief Judge.

Peter L. Gustafson (argued), Warner, Norcross & Judd, Grand Rapids, MI, for Appellant.

Cathleen M. Shrader (argued), Barrett & McNagny, Fort Wayne, IN, for Appellee.

Before Flaum, Chief Judge, and Manion and Kanne, Circuit Judges.

Flaum, Chief Judge.

Plaintiff-Appellant Kamphuis Pipeline Co. ("Kamphuis") sued the Lake George Regional Sewer District ("Lake George") under Indiana's Municipal Public Works Statute. The district court granted Lake George's motion for summary judgment because Kamphuis failed to comply with the statute's notice provisions, and Kamphuis appeals. For the reasons stated herein, we affirm.

I. Background

Lake George is a municipal corporation created to construct a sewer system in Lake George, Indiana. Lake George contracted with Civil Constructors, Inc. ("Civil"), who served as general contractor. Indiana law obligates public works contractors to purchase a labor and material bond to secure payment of potential claimants, including subcontractors. Civil purchased a bond pursuant to this law from Capitol Indemnity Corporation ("Capitol"), which acted as surety and underwrote the bond.

Civil subcontracted certain aspects of the project to Kamphuis, which performed more than $1.7 million in work. Kamphuis Vice President Russell DeJonge monitored progress throughout Kamphuis's work on the project. DeJonge visited the site on numerous occasions and attended meetings held by the Lake George Regional Sewer District Board ("the Board"), which was comprised of neighborhood residents who owned homes on Lake George. At the meetings, the Board identified Richard Fox as the Board's attorney and instructed meeting attendees to forward all correspondence regarding non-payment to Mr. Fox.

Civil ultimately refused to pay Kamphuis. In late April 1997, DeJonge informed Arashdeep Pannu, the project en gineer's field representative, that Civil had failed to pay a substantial amount of money to Kamphuis. On that same day, Abe Munfah, another employee of the project engineer, forwarded a letter to Lake George recommending that the Board release payment to Civil for work completed through March 24, 1997.

DeJonge learned that Lake George continued to pay Civil despite the fact that Civil owed subcontractors substantial sums of money. Accordingly, Kamphuis mailed a letter to Capitol (the project surety) notifying Capitol of Civil's failure to pay and itemizing the amounts due. The letter, dated May 9, 1997, advised Capitol that Kamphuis sought recovery on the "Payment and Performance Bonds" that Capitol had issued. Kamphuis forwarded copies of the letter to three additional sources: (1) Richard Fox, Lake George's attorney and contact representative; (2) Abe Munfah, a representative of the project engineer; and (3) Thomas LaCosse, an employee at Civil.¹

In August 1997, having received no payment, Kamphuis sued both Civil and Capitol for breach of contract in the United States District Court for the Western District of Michigan. Immediately before the case proceeded to trial, Kamphuis and Capitol settled. Under the agreement, Capitol paid Kamphuis $1.2 million, and Kamphuis released Capitol from all liability under the payment bond. The district court ultimately entered judgment in favor of Kamphuis for approximately $1.7 million. On September 15, 1998, Civil filed for bankruptcy protection under Chapter 7.

Kamphuis then filed suit against Lake George in the Northern District of Illinois under the Indiana Municipal Public Works Statute ("MPWS") for $479,955.01, which represents the difference between the judgment and the amount received from Kamphuis's settlement with Capitol. Both parties moved for summary judgment before thedistrict court, which granted Lake George's motion. The district court held that Kamphuis failed to comply with the notice provisions of the MPWS, which are a prerequisite to recovery under Indiana law. Kamphuis had argued that its May 9 letter addressed to Capitol--and copied to Lake George, Civil, and the project engineer--constituted adequate notice under the act. The district court rejected this argument as wholly inconsistent with the MPWS's plain language. Kamphuis appeals.

II. Discussion

We review de novo the district court's grant of summary judgment, see Feldman v. American Memorial Life Ins. Co., 196 F.3d 783, 789 (7th Cir. 1999), and draw all reasonable inferences in favor of the nonmoving party. Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001). Moreover, in this diversity action, Indiana law governs all substantive disputes, while federal law applies to procedural matters. Allen v. Cedar Real Estate Group, LLP, 236 F.3d 374, 380 (7th Cir. 2001).

The Indiana Municipal Public Works Statute is a remedial statutory scheme intended to secure payment for subcontractors, laborers, materialmen, and service providers who perform public works construction projects. See Dow-Par, Inc. v. The Lee Corp., 644 N.E.2d 150, 153 (Ind. App. 1995). The MPWS requires public works boards² to withhold final payment from the general contractor until all subcontractors, laborers and materialmen have been paid. In the event of non-payment, the MPWS creates alternative statutory remedies: a subcontractor may proceed either against the public works board, or against the surety that underwrites the labor and materials bond. See Indiana Carpenters Central and Western Indiana Pension Fund v. Seaboard Surety Co., 601 N.E.2d 352, 357-58 (Ind. App. 1992).

The first remedy, which is at issue in this case, allows subcontractors to recover directly from the board by petitioning the board to impound funds. To receive payment under this remedy,

(b) the subcontractor . . . shall file their claims with the board within sixty (60) days after the last labor performed, last material furnished, or last service rendered by them, as provided in section 13 of this chapter.

(e) A claim form must be signed by an individual from the political subdivision or agency who is directly responsible for the project and who can verify:

(1) the quantity of a purchased item; or

(2) the weight or volume of the material applied, in the case of a road, street, or bridge project.

Ind. Code sec. 36-1-12-12(b), (e) (emphasis added) ("Section 12"). Section 12 refers explicitly to Section 13, which serves two functions relevant to this appeal. First Section 13 describes the...