Trustees of Bricklayers Local No. 3 v. Reeco

• Decision Date: 10 September 1990
• Docket Number: No. CV-S-82-345-RDF(RJJ).,CV-S-82-345-RDF(RJJ).
• Parties: TRUSTEES OF the BRICKLAYERS AND ALLIED CRAFTSMEN LOCAL NO. 3 HEALTH AND WELFARE TRUST, et al., Plaintiffs, v. REYNOLDS ELECTRICAL & ENGINEERING CO., INC., et al., Defendants. And All Related Cross-Claims. And all Related Third-Party Claims.
• Court: U.S. District Court — District of Nevada

747 F. Supp. 606

TRUSTEES OF the BRICKLAYERS AND ALLIED CRAFTSMEN LOCAL NO. 3 HEALTH AND WELFARE TRUST, et al., Plaintiffs, v. REYNOLDS ELECTRICAL & ENGINEERING CO., INC., et al., Defendants And All Related Cross-Claims And all Related Third-Party Claims.

No. CV-S-82-345-RDF(RJJ).

United States District Court, D. Nevada.

September 10, 1990.

Lionel Sawyer & Collins, Las Vegas, Nev. by Evan J. Wallach, for plaintiffs.

Arthur L. Williams, Jr., Las Vegas, Nev., for Reynolds Elec. & Engineering.

John R. Lusk, Las Vegas, Nev., for Structures Mideast Corp.

Wright, Shinehouse & Stewart, Las Vegas, Nev. by Monte M. Stewart, for defendant 3rd party defendant, Ins. Co. of North America.

Jim Mahan, Las Vegas, Nev., for USG Interiors.

AMENDED ORDER

ROGER D. FOLEY, District Judge.

Reynolds Electrical and Engineering Co. (Reeco) seeks Summary Judgment (# 168) on its Second Amended Cross-Claim (# 154) against Cross-Defendant USG Interiors (Interiors). Interiors received two extensions of time to file an Opposition with the last extension making the Opposition due on October 9, 1989. (# 175) Interiors missed this October deadline, however, and instead filed its Opposition and a Counter-Motion for Summary Judgment on November 15, 1989. (# 179) Reeco seeks to strike this Opposition (# 180) and opposes Interior's Counter-Motion for Summary Judgment. (# 182)

Also, Insurance Corporation of North America (INA) seeks Summary Judgment (# 178) on Reeco's Third Party Complaint (# 93), which Reeco opposes. (# 184).

This court heard oral argument on these motions on May 16, 1990. At that time, all parties agreed that a judgment in this case may be decided on motion rather than by trial. Although Structures Mideast Corporation (SME) is not a party to these motions, SME was represented at the hearing by Attorney John Lusk.

On June 26, 1990, this court notified SME that Reeco's Cross-Claim against SME would be decided by this court sua sponte. (Doc. 205). SME filed a response stating that Summary Judgment should be granted in favor of SME because Reeco released SME from all contract claims except those based upon the warranty clause.¹ (Doc. 206)

FACTS

Reeco is a cost-plus-fixed-fee contractor for the United States Government, acting through the Department of Energy. In this capacity, Reeco manages, operates and maintains the facilities at the Nevada Test Site in Tonopah, Nevada (Test Site). In order to carry out its duties, Reeco entered into labor agreements with the Plaintiffs, Trustees of the Bricklayers and Allied Craftsmen Local No. 3, et al. (hereafter referred to as the Trustees).

On November 10, 1980, Reeco entered into a contract² with Structures Mideast Corporation (SME) to construct the sleeping quarters, cafeteria, and recreation facilities for personnel assigned to Tonopah, Nevada. This contract required SME to (1) comply with the labor agreements between Reeco and the Unions³ and (2) to acquire a performance and payment bond with the United States and Reeco as joint-obligee.

SME was unable to obtain the required bonds from INA, the surety, and solicited D.A.B. Holding Corporation's (DAB) assistance. In a letter to INA, SME and DAB represented themselves as being in a joint venture in order for SME to obtain the necessary bonds for its contract with Reeco.⁴ However, other agreements and events seem to limit DAB's liabilities to that of an indemnifier rather than those of a joint venturer.⁵ On November 20, 1980, INA issued the payment and performance bonds after relying on the bond applications in which DAB and SME signed as indemnitors, agreeing to be jointly and severally liable. (Doc. 168) The actual bonds, however, did not list DAB. Instead, the bonds listed SME as the principal, INA as the surety and the United States and Reeco as joint-obligee.

On January 15, 1981, SME subcontracted some of the work at the Test Site to W.T. W.T., Inc. (WTWT). Under the terms of this subcontract, WTWT agreed to abide by the labor agreements entered into between Reeco and the Unions. During March and April of 1981 WTWT failed, however, to remit contractually provided pension contributions to the Trustees.⁶

On October 2, 1981, the Trustees filed a claim against WTWT in the Eighth Judicial District Court of the State of Nevada for contributions and other amounts owed. On November 9, 1981, a default judgment was entered in favor of the Trustees.⁷ On February 18, 1982, the Trustees made demand on INA to recover the unpaid pension funds under the bonds.⁸ (Doc. 187) Later, in order to collect the judgment against WTWT, the Trustees made demand on SME and Reeco to pay the judgment; both refused to do so. Therefore, in June of 1982, the Trustees filed a complaint against Reeco and SME in state court based on Nev.Rev.Stat. § 608.150⁹.

On July 2, 1982, Reeco removed this case to federal court under 29 U.S.C. § 185, 40 U.S.C. § 270a and 28 U.S.C. § 1441(b). After removal, this court allowed the Plaintiff to file an Amended Complaint alleging jurisdiction under ERISA, 29 U.S.C. § 1132(g)(2) and 29 U.S.C. § 1132(e) and to name INA as a defendant¹⁰. Additionally, Reeco filed a Cross-Claim against SME and a Third-Party Complaint against INA¹¹. On April 15, 1985, this court granted a Motion for Summary Judgment for the Trustees and found SME and Reeco jointly and severally liable for the amount of $120,235.21.¹² Reeco subsequently paid this judgment and now seeks to collect the money it paid.

SME¹³ is allegedly without assets to pay Reeco. However, on June 16, 1988, Reeco learned for the first time that SME and DAB entered into a joint venture agreement in 1980 relating to the contract between Reeco and SME for work at the Test Site.¹⁴ Although Reeco would like to collect from DAB, DAB merged into USG Interiors, Inc., (Interiors) in April of 1986.¹⁵ Therefore, Reeco now seeks to collect this money from Interiors.¹⁶

Interiors brings a Counter-Motion for Summary Judgment and argues that (1) a joint venture did not exist between DAB and SME and (2) that Reeco's claim against Interiors is barred by the statute of limitations. (Doc. 179)

INA, the surety, also brings a Motion for Summary Judgment and argues that judgment is warranted in its favor because (1) Reeco's Third-Party Amended Complaint fails to allege the requisite facts to state a claim under the Miller Act; (2) Reeco's cause of action is exclusively governed by the Miller Act and a claim under the performance bond or the payment bond is barred by the Miller Acts one-year statute of limitations; and (3) even if Reeco has a claim against INA, Reeco released or discharged INA to the extent of $159,099.05 pro tanto when Reeco disbursed $159,099.05 to SME knowing that claims were being asserted by the Trustees for unpaid contributions to the pension fund.¹⁷

DISCUSSION

A motion for summary judgment will be granted "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." Fed.R.Civ.P. 56(c). The moving party has the initial burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), cert. denied, 484 U.S. 1066, 108 S.Ct. 1028, 98 L.Ed.2d 992 (1988). The nonmoving party has the burden of "showing that there is a genuine issue for trial" by presenting specific facts beyond the pleadings. Fed.R. Civ.P. 56(c); Celotex, 477 U.S. at 324, 106 S.Ct. at 2553.

The court may grant summary judgment for the non-moving party if the non-movant is so entitled. 6 Moore's Federal Practice, § 56.12 (1988). "Rule 54(c) gives the court the power to enter the final judgment to which the prevailing party is entitled, even if the party has not demanded such relief in his pleadings." Id.

Additionally, the court may dispose of claims sua sponte. When a case is disposed of sua sponte, the "litigant is entitled to reasonable notice that the sufficiency of his or her claim will be in issue." Portsmouth Square, Inc. v. Shareholders Protective Committee, 770 F.2d 866 (9th Cir. 1985).

I. DOES SME HAVE A CONTRACTUAL DUTY TO INDEMNIFY REECO?

There are three reasons why SME is liable to Reeco for the unremitted trust funds. First, this court held that SME was jointly and severally liable with Reeco for the delinquent trust funds in a previous judgment. (Doc. 57) Second, the contract between SME and Reeco has a "Save Harmless" clause, making SME liable for "any claim ... commenced by any third person against the Government or the Contractor on account of or arising out of operation under this subcontract." (Doc. 184 Ex. 14 Clause 36).

Third, SME's contract with Reeco required SME "to pay the exact amounts listed in said Labor Agreements for hourly wages, fringe benefits, and subsistence ... (and) to comply strictly with all other terms and conditions of said Labor Agreements." (Doc. 184—Rider 9) SME's failure to pay the delinquent trust funds owed by WTWT is a breach of that agreement. "A failure, without justification, to perform all or any part of what is promised in a contract, is a breach thereof." Restatement of Contracts, § 314 (1932). Because of these agreements and the judgment, SME is liable to Reeco for the delinquent trust funds.

The undertaking of INA as surety on the performance and payment bonds was limited to SME's fulfilling the requirements of the contract. Since this court finds that SME failed to fulfill its agreements with Reeco, INA may be held liable also.

II. IS REECO'S CLAIM AGAINST INA A CLAIM UNDER THE MILLER ACT?

A. Who is the Prime Contractor for Miller Act purposes?

The relationship between Reeco and the United States government at the Nevada Test Site is a novel situation. Although Reeco is an independent contractor, Reeco sometimes acts as an agent of the United States. In this situation, the...