U.S. for Use and Benefit of General Rock & Sand Corp. v. Chuska Development Corp.

• Decision Date: 19 May 1995
• Docket Number: No. 94-4106,94-4106
• Citation: 55 F.3d 1491
• Parties: The UNITED STATES FOR the USE AND BENEFIT OF GENERAL ROCK & SAND CORPORATION, an Arizona corporation, Plaintiff-Appellant, v. CHUSKA DEVELOPMENT CORPORATION, a New Mexico corporation; Perry Construction, Inc., a Utah corporation; Zions First National Bank, a National Banking Association; Kelly Fischer and Jane Doe Fischer, husband and wife; Carl Broadbent and Jane Doe Broadbent, husband and wife; Leo Pledger and Jane Doe Pledger, husband and wife, dba Construction Co-op., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1491

55 F.3d 1491

The UNITED STATES FOR the USE AND BENEFIT OF GENERAL ROCK &amp SAND CORPORATION, an Arizona corporation Plaintiff-Appellant, v. CHUSKA DEVELOPMENT CORPORATION, a New Mexico corporation Perry Construction, Inc., a Utah corporation; Zions First National Bank, a National Banking Association; Kelly Fischer and Jane Doe Fischer, husband and wife; Carl Broadbent and Jane Doe Broadbent, husband and wife; Leo Pledger and Jane Doe Pledger, husband and wife, dba Construction Co-op., Defendants-Appellees.

No. 94-4106.

United States Court of Appeals, Tenth Circuit.

May 19, 1995.

Kevin John Witasick and William C. Knoche, Kevin John Witasick & Associates, Phoenix, AZ, for plaintiff-appellant.

Jesse C. Trentadue and Dahnelle Burton, Suitter Axland & Hanson, Salt Lake City, UT, for defendants-appellees Chuska Development Corp. and Perry Const., Inc.

T. Richard Davis, Callister Nebeker & McCullough, Salt Lake City, UT, for defendant-appellee Zions First National Bank.

Before HENRY, McKAY, and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

Plaintiff General Rock & Sand Corp. brought suit to recover sums allegedly due for labor and materials it had furnished as a subcontractor on a Navajo reservation housing project. The complaint's stated basis for jurisdiction was the Miller Act, 40 U.S.C. Secs. 270a-270d. From the sparse record before us, it appears the Navajo Housing Authority (NHA), an agency of the Navajo Nation, refused to certify some of plaintiff's work, a condition for release of funds under the letter of credit provided to NHA for the project by defendant Zions First National Bank (Zions). The letter of credit was issued on the account of Perry Construction Company, Inc. (Perry). Perry was the partner or agent of Chuska Development Corporation (Chuska), the general contractor on the project. Named defendants in the suit were Chuska, Perry, Zions, and several individuals doing business as Construction Co-Op--another subcontractor on the project to whom plaintiff supplied materials. No attempt was made to name either NHA or the Navajo Nation as a defendant.

Responding to defendants' joint motion to dismiss under Fed.R.Civ.P. 12(b)(1) & (6), the district court issued a brief order stating that "Plaintiff's Complaint in this matter is hereby dismissed on the grounds that this Court lacks jurisdiction to hear this matter, and defers this mat[t]er to the tribal court of the Navajo Nation." App. at A-85. Plaintiff timely appealed. ¹

A federal action may be abated or dismissed without prejudice to enable pursuit of tribal court remedies. National Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845, 857, 105 S.Ct. 2447, 2454, 85 L.Ed.2d 818 (1985). But because the exhaustion rule is one of comity and not jurisdictional limitation, dismissal of such an action for lack of subject matter jurisdiction would be inappropriate. Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 19-20, 107 S.Ct. 971, 978-79, 94 L.Ed.2d 10 (1987). Thus, we read the district court's dismissal order as one for lack of subject matter jurisdiction over the claims asserted, and its reference to deferring to the Navajo tribal courts as gratuitous.

We review the question of federal subject matter jurisdiction de novo. Redmon ex rel. Redmon v. United States, 934 F.2d 1151, 1155 (10th Cir.1991). If the case does not clear that threshold, any issue as to whether the claims asserted should have been exhausted first in the tribal courts is academic. See Stock West Corp. v. Taylor, 964 F.2d 912, 917 (9th Cir.1992) (in banc) (holding court "must resolve this dispute [over diversity jurisdiction] before we can consider the [tribal exhaustion] issues raised in this appeal ... [, because] [i]f the district court did not have subject matter jurisdiction, it lacked the power to enter an abstention order"). Because, as explained below, we agree with the district court's dismissal of this action on jurisdictional grounds, we affirm without reaching the issue of tribal court exhaustion. ²

I

Plaintiff contends that it properly brought suit in federal court to recover on the Zions letter of credit pursuant to the substantive and jurisdictional provisions of the Miller Act. The Miller Act directs that contractors "shall furnish to the United States" performance and payment bonds in connection with "any contract, exceeding $25,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States." 40 U.S.C. Sec. 270a(a). The payment bond is intended "for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract." Id. Sec. 270a(a)(2). In furtherance of this objective, the Act affords these suppliers "the right to sue on [the] payment bond for the amount ... unpaid at the time of institution of such suit," id. Sec. 270b(a), and grants the federal district courts exclusive jurisdiction over such actions, id. Sec. 270b(b).

To establish jurisdiction under the Miller Act, plaintiff must convince us that (1) the letter of credit qualifies as the "payment bond" within the meaning of the Act, (2) the letter issued here expressly on behalf of NHA was "furnish[ed] to the United States," and (3) a low-income housing project owned by a tribal housing authority is a "public work of the United States." A further and more fundamental hurdle arises from statutory developments regarding the inapplicability of the Miller Act to tribal contracts generally and low-income Indian housing in particular.

The parties cite only two cases, and we have found no others, on the status of letters of credit under the Miller Act. Midstates Excavating, Inc. v. Farmers & Merchants Bank & Trust, 410 N.W.2d 190 (S.D.1987), rejected a Miller Act claim for reasons pertinent here, but not because the letter of credit sued on failed to qualify as a "bond," see id. at 194. ³ United States ex rel. Anderson v. Challinor, 620 F.Supp. 78 (D.Mont.1985), recognized the viability of a Miller Act claim premised on a letter of credit, but in doing so relied heavily on the fact that "[t]he regulation (41 C.F.R. Sec. 1-10.204-2 (1984)) under which the letter of credit was issued clearly indicates that the letter of credit is to be in lieu of the bond." Id. at 79. The cited regulation provided that "[a]ny person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of depositing a certified or cashier's check, a bank draft, a Post Office money order, currency, or an irrevocable letter of credit, in an amount equal to the penal sum of the bond." That regulation was revised in late 1983 to delete the letter-of-credit reference while retaining all of the other options. See 48 Fed.Reg. 42,290 (1983) (initially codified at 48 C.F.R. Sec. 28.203-2, now at 48 C.F.R. Sec. 28.204-2 (1994)).

The other questions regarding Miller Act jurisdiction turn on the central role played by NHA in the direction and funding of the housing project. It is debatable whether such a project, owned and directed by an Indian housing authority, could be deemed a "public work of the United States" under the Act. Cf. United States ex rel. Romero v. Douglas Constr. Co., 531 F.2d 478, 481-82 (10th Cir.1976) (remanding for determination whether low-rent Indian housing was "Federal project," governed by Miller Act through 42 U.S.C. Sec. 1416 (1970) (now repealed), when undeveloped record left court "unable to determine the actual relationship between [the government] and [the Indian housing authority]"). Moreover, in keeping with the transfer of authority from the federal government to Indian housing authorities under the Indian Self-Determination and Education Assistance Act (Self-Determination Act), especially its 1988 amendments, see generally S.Rep. No. 274, 100th Cong., 2d Sess. 5 (1988), reprinted in 1988 U.S.C.C.A.N. 2620, 2624, Zions issued its letter of credit expressly on behalf of NHA (although drafts drawn thereon required the written concurrence of the Department of Housing and Urban Development). As noted, the Miller Act refers to bonds furnished to the United States government. See Midstates, 410 N.W.2d at 194 (holding Miller Act inapplicable under similar circumstances because, among other reasons, "the letters of credit were furnished ... to the ... Tribe, not the United States").

The most formidable obstacle to Miller Act jurisdiction, however, is raised not by the restrictive language of the Act itself, but by exclusionary references to the Act in other legislative/administrative contexts of immediate import here. In particular, consistent with the diminished federal role in Indian organization affairs contemplated by the Self-Determination Act, at the time applicable to the instant case, 25 U.S.C. Sec. 450j(a) provided that "in the discretion of the appropriate Secretary" tribal contracts executed thereunder "may be negotiated without [federally mandated] advertising and need not conform with the provisions of sections 270a to 270d of Title 40 [i.e., the Miller Act]." Implementing this statutory exclusion of Miller Act requirements, the regulations governing Indian housing programs included their own particularized set of payment-assurance options. See 24 C.F.R. Sec. 905.170(a)(1) (1994). These clearly diverged from their Miller Act counterparts--by, for example, expressly permitting letters of credit. See id. at Sec. 905.170(a)(1)(iii) & (iv). ⁴ Such considerations underlie and support the primary holding in Midstates, that the present federal scheme "removes contracts with tribes from the Miller Act irrespective of the fact that the [ultimate] money source is federal funds." Midstates, 410 N.W.2d at 193-94. We have found no authority to the contrary.

Plaintiff attempts to deflect this analysis by arguing that the Miller Act exclusion in Sec. 450j was qualified by the reference to "the discretion of the appropriate Secretary." Even assuming this to be...