U.S. for Use of Light. & Power v. Interface Const.

• Decision Date: 29 January 2009
• Docket Number: No. 07-3678.,07-3678.
• Citation: 553 F.3d 1150
• Parties: UNITED STATES of America FOR the USE OF LIGHTING AND POWER SERVICES, INC., Plaintiff-Appellee, v. INTERFACE CONSTRUCTION CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

553 F.3d 1150

UNITED STATES of America FOR the USE OF LIGHTING AND POWER SERVICES, INC., Plaintiff-Appellee, v. INTERFACE CONSTRUCTION CORPORATION, Defendant-Appellant.

No. 07-3678.

United States Court of Appeals, Eighth Circuit.

Submitted: June 12, 2008.

Filed: January 29, 2009.

Joshua Michael Avigad, Michael P. Stephens, St. Louis, MO, for appellant.

Joseph C. Blanner, St. Louis, MO, for appellee.

Before LOKEN, Chief Judge, COLLOTON, Circuit Judge, and PIERSOL,^* District Judge.

LOKEN, Chief Judge.

When the government awarded Interface Construction Corp. ("Interface") a substantial contract to renovate portions of a federal building in St. Louis, the Miller Act required that Interface obtain a payment bond "for the protection of all persons supplying labor and material in carrying out the work provided for in the contract." 40 U.S.C. § 3131(b)(2). Interface subcontracted electrical work to Henderson Electrical Systems, LLC ("Henderson"), which in turn contracted with Lighting and Power Services, Inc. ("LPS"), to perform that work. When Interface and Henderson ignored LPS's repeated demands for unpaid progress payments, LPS stopped work and commenced this action against Interface, Henderson, and Western Surety Company, which had issued the payment bond to Interface, to recover the amount allegedly due LPS for unpaid labor and materials furnished for the Interface contract. Interface moved to compel arbitration and now appeals the district court's¹ denial of that motion, an interlocutory appeal expressly authorized by the Federal Arbitration Act. See 9 U.S.C. § 16(a)(1)(B). We affirm.

I. Background

Interface presented its motion to compel arbitration as a Rule 12(b)(1) motion to dismiss on a limited record. Thus, our cupboard of facts is relatively bare. We know that, on April 12, 2006, Henderson submitted a proposal to Interface to provide electrical work for $237,760. The proposal stated, "This Proposal is to be made an Attachment to the Sub-contract." On April 17, LPS submitted to Henderson a proposal identical in all material respects to Henderson's proposal to Interface, including the contract amount and the statement, "This Proposal is to be made an Attachment to the Sub-contract." On April 21, Interface entered into the Prime Contract with the United States. That same day, Western Surety issued the Payment Bond required by the Miller Act in favor of "all persons having a direct relationship with [Interface] or a subcontractor of [Interface] for furnishing labor, material or both in the prosecution of the work provided for in the [Prime Contract]."

On April 27, Henderson gave LPS written notice "to proceed with providing labor for electrical work" on the project. On May 5, Interface and Henderson signed a Standard Form of Agreement Between Contractor and Subcontractor (AIA Document A401-1997) (the "Subcontract"), presumably for the work and on the terms set forth in Henderson's April 12 proposal (that portion of the Subcontract was not included in the record on appeal). So far as we know, the Subcontract did not refer to LPS or to its April 27 contract with Henderson to perform the electrical work, nor was LPS's April 17 proposal attached to the Subcontract.

LPS stopped work on the project after its demands for the unpaid balance of $98,516.04 in progress payments went unheeded. LPS then commenced this action, asserting a claim under the Miller Act to recover that amount under the Western Surety bond. The Miller Act creates a federal cause of action "separate and distinct from state law breach of contract actions." United States ex rel. Consol. Elec. & Mechs., Inc. v. Biggs Gen. Contracting, Inc., 167 F.3d 432, 435 (8th Cir. 1999); see Lighting & Power Servs., Inc. v. Roberts, 354 F.3d 817, 822 (8th Cir.2004).² "[T]he substance of the rights created thereby is a matter of federal not state law." F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 127, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974); see 40 U.S.C. § 3133(b).

This appeal concerns only whether LPS must arbitrate its Miller Act claim. As arbitration is a matter of contract, "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quotation omitted). Here, Western Surety's bond contains no agreement to arbitrate, and there is no written agreement between LPS and Henderson containing an agreement to arbitrate. But the Subcontract between Interface and Henderson does contain an agreement to arbitrate claims in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. This section of the Subcontract further provides: "Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Subcontract shall include ... any person or entity not a party to the Subcontract."

LPS argues that it never agreed, and may not be compelled, to arbitrate its Miller Act claim. Interface argues that LPS is subject to the agreement to arbitrate in the Subcontract because the statement in its proposal to Henderson, "This Proposal is to be made an Attachment to the Sub-contract," incorporated the terms of Henderson's Subcontract with Interface by reference. Moreover, Interface argues, LPS is equitably estopped to claim benefits under the Subcontract and yet refuse to arbitrate in accordance with its terms. We review these issues de novo. See Nitro Distrib., Inc. v. Alticor, Inc., 453 F.3d 995, 998 (8th Cir.2006).

II. Who Decides Arbitrability?

Interface argues that the issue of arbitrability must be determined by an arbitrator, not by the court. We disagree. "A dispute ... over whether the parties agreed to arbitrate [ ] will be resolved by the district court `[u]nless the parties clearly and unmistakably provide otherwise.'" Express Scripts, Inc. v. Aegon Direct Mktg. Servs., Inc., 516 F.3d 695, 701 (8th Cir.2008) (citation omitted). "Any other rule would `too often force unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide.'" McLaughlin Gormley King Co. v. Terminix Int'l Co., 105 F.3d 1192, 1194 (8th Cir.1997), quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Here, the Subcontract—the only document containing an agreement to arbitrate—was silent on this question. Accordingly, the question whether non-party LPS is bound by the Subcontract's agreement to arbitrate is for the court, not for an arbitrator, to decide. See Liberty Mut. Ins. Co. v. Mandaree Pub. Sch. Dist. # 36, 503 F.3d 709, 713 (8th Cir.2007). Interface's reliance on Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), is misplaced. Buckeye expressly distinguished between the issue whether a contract is valid—which is for the arbitrator—and the issue whether a valid contract contains an enforceable agreement to arbitrate a particular dispute—which is for the court. Id. at 444 & n. 1, 126 S.Ct. 1204. Here, no party challenges the validity of the Subcontract, only the scope of its agreement to arbitrate.

III. Arbitrability of the Miller Act Claim

Interface's principal argument turns on two premises—that LPS's Complaint asserted a breach of contract claim against Interface, and that the only possible basis for this contract claim is the Subcontract. Therefore, Interface argues, LPS is bound by the arbitration provision in the Subcontract, either because LPS stated that its proposal was to be "made an Attachment to the Sub-contract," or by reason of equitable estoppel. We conclude that the first premise is faulty because LPS's Complaint asserted only a Miller Act claim to recover under the Western Surety bond. Interface asserts that "hidden within the Complaint [is] a breach of contract claim" against Interface. In support, it cites an allegation in paragraph 11: "Defendants Interface and Henderson breached their contract with [LPS]." But the Complaint did not allege a breach of contract cause of action. Rather, the paragraph alleging breach of a contractual obligation to LPS was an integral part of LPS's Miller Act claim for unpaid labor and material "provided for in a contract for which a payment bond is furnished." 40 U.S.C. § 3133(b)(1). Whether the alleged payment default was committed by Henderson or by Interface may become an issue, but it seems unlikely to affect whether LPS may recover under the Miller Act.

LPS as bond obligee could have asserted its Miller Act claim against only the bond issuer, Western Surety, without joining Interface and Henderson, as the obligee did in AgGrow Oils, L.L.C. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 242 F.3d 777 (8th Cir.2001).³ However, it is not uncommon for an obligee to join the bond obligor and the bond issuer as defendants in a Miller Act claim. See generally United States ex rel. Morris Constr., Inc. v. Aetna Cas. Ins. Co., 908 F.2d 375 (8th Cir.1990) (applying predecessor statute). That decision is understandable here, because LPS as Miller Act plaintiff may be required to prove its claim under 40 U.S.C. § 3133(b)(2) if the facts show that it had "a direct contractual relationship with a subcontractor [Henderson] but no contractual relationship, express or implied, with the contractor furnishing the payment bond [Interface]."

When LPS as bond obligee chose to join both obligor Interface and subcontractor Henderson as defendants in its Miller Act claim under the Western Surety bond, it could have joined state law breach of contract claims with its Miller Act claim. See United States ex rel. Consol. Elec. & Mechs., Inc. v. Biggs Gen. Contracting, Inc., 167 F.3d 432, 435 (8th Cir.1999); United States ex rel. Newton v. Neumann Caribbean Int'l, Ltd., 750 F.2d 1422, 1425-26 (9th Cir.1985). But the plain language of...