U.S. v. P. Browne & Associates Inc.

• Decision Date: 09 November 2010
• Docket Number: No. 1:08CV260.,1:08CV260.
• Citation: 751 F.Supp.2d 813
• Court: U.S. District Court — Middle District of North Carolina
• Parties: UNITED STATES of America, for the use and benefit of SCCB, INC. d/b/a Stewart Construction Company, Plaintiff,v.P. BROWNE & ASSOCIATES, INC., The Broadband Companies, LLC, Broadband Construction Services, LLC, and Arch Insurance Company, Defendants.

751 F.Supp.2d 813

UNITED STATES of America, for the use and benefit of SCCB, INC. d/b/a Stewart Construction Company, Plaintiff,

v.P. BROWNE & ASSOCIATES, INC., The Broadband Companies, LLC, Broadband Construction Services, LLC, and Arch Insurance Company, Defendants.

No. 1:08CV260.

United States District Court, M.D. North Carolina.

Nov. 9, 2010.

William R. Sparrow, Bugg & Wolf, P.A., Durham, NC, for Plaintiff.

John Gary Eichelberger, Jr., Wood Jackson PLLC, Raleigh, NC, Dwayne M. Green, Ian S. Ford, Green & Ford LLC, Nicholas James Voelker, Bradley Arant Boult Cummings, LLP, William H. Sturges, Shumaker, Loop & Kendrick, LLP, Charlotte, NC, Eric A. Frechtel, Pro Hac, Vice, Robert J. Symon, Pro Hac, Vice, Bradley Arant Boult Cummings, LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.

Before the court is the post-trial motion for interest and attorneys' fees by Plaintiff SCCB, Inc., d/b/a Stewart Construction Company (“SCCB”). (Doc. 95.) Defendants The Broadband Companies, LLC, Broadband Construction Services, LLC (collectively “Broadband”),¹ P. Browne & Associates, Inc. (“P. Browne”), and Arch Insurance Company (“Arch”) (collectively “Defendants”) all oppose the motion. (Docs. 97–99.) For the reasons below, the motion is granted.

I. BACKGROUND

This case arose out of the construction of a metal building and tactical van pad for the United States Navy at the Naval Reserve Center in Greensboro, North Carolina. Defendant P. Browne was the prime contractor with the Navy on the project. Pursuant to the Miller Act, 40 U.S.C. § 3131 et seq., P. Browne, as principal, and Defendant Arch, as surety, issued a payment bond for the protection of persons supplying labor and materials. Defendant Broadband was a subcontractor on the project and subsequently contracted part of its work to Plaintiff SCCB (the “SCCB–Broadband subcontract”). SCCB contended that it had performed under the contract but had been wrongfully terminated, and it sought recovery of money damages for amounts allegedly owed.

Though SCCB initially brought several claims against Defendants, the case was narrowed during a jury trial that began on July 12, 2010. Only SCCB's breach of contract claim against Broadband and related claim against Arch and P. Browne under the Miller Act were submitted to the jury. The jury found that Broadband's termination of its subcontract with SCCB constituted a material breach and awarded damages of $260,267.10. The jury also found P. Browne and Arch liable to SCCB on the payment bond in the same amount.

Now the court must determine whether SCCB may recover attorneys' fees and interest and, if so, in what amounts and against whom.

II. ANALYSISA. Attorneys' Fees

The SCCB–Broadband subcontract provides in part: “If collection of any amount due requires any legal counsel or procedures, owner [Broadband] agrees to pay reasonable attorney's fees, which shall not be less than fifteen percent (15%) of the principal and interest then due, and all other costs of collection.” (Doc. 96 at 3.) The Defendants contend that this provision is unenforceable under North Carolina law. Arch and P. Browne raise two additional arguments: First, even if the provision is enforceable under state law against Broadband, federal case law prohibits awards of attorneys' fees to successful Miller Act claimants. Second, North Carolina law does not make nonparties, such as P. Browne and Arch, liable under a contract between two other parties. These arguments will be addressed in turn.

1. North Carolina Statutory Authority

Under North Carolina law, attorneys' fees may not be awarded, even pursuant to an unambiguous contractual agreement, without statutory authority. Stillwell Enters., Inc. v. Interstate Equip. Co., 300 N.C. 286, 289, 266 S.E.2d 812, 814–15 (1980). By statute, however, “[o]bligations to pay attorneys' fees upon any note, conditional sale contract or other evidence of indebtedness” are valid and enforceable. N.C. Gen.Stat. § 6–21.2. The dispute in this case focuses on whether a construction contract is “evidence of indebtedness.” SCCB argues that North Carolina case law answers this question in the affirmative, relying on Stillwell, the leading North Carolina decision on this subject.

In Stillwell, the North Carolina Supreme Court upheld an award of attorneys' fees upon a contract for the lease of a push loading road scraper. 300 N.C. at 287–88, 294–95, 266 S.E.2d at 813, 818. In interpreting section 6–21.2, the court noted that the statute became effective on the same date as the North Carolina Uniform Commercial Code and “was intended to supplement those principles of law generally applicable to commercial transactions.” Id. at 293, 266 S.E.2d at 817. The court concluded that “G.S. 6–21.2 clearly validates a new form of contractual remedy” and that, “being remedial, [it] ‘should be construed liberally to accomplish the purpose of the Legislature and to bring within it all cases fairly falling within its intended scope.’ ” Id. (quoting Hicks v. Albertson, 284 N.C. 236, 239, 200 S.E.2d 40, 42 (1973)). The court determined that “evidence of indebtedness” refers to “any printed or written instrument, signed or otherwise executed by the obligor(s), which evidences on its face a legally enforceable obligation to pay money.” Id. at 294, 266 S.E.2d at 817. Applying this definition, the court held that the parties' lease agreement was “obviously an ‘evidence of indebtedness,’ ” because the contract recognized a “legally enforceable obligation by plaintiff-lessee to remit rental payments to defendant-lessor as they become due, in exchange for the use of the property which is the subject of the lease.” Id. at 294, 266 S.E.2d at 818.²

Nothing in Stillwell's analysis or its broad definition of “evidence of indebtedness” suggests any exception for construction contracts or provides any basis for distinguishing between lease agreements and construction contracts. The SCCB–Broadband subcontract recognized a legally enforceable obligation by Broadband to remit payments to SCCB as they became due, in exchange for SCCB's construction services. Thus, the subcontract appears to fall within Stillwell's definition of “evidence of indebtedness.”

Defendants rely principally upon a pre- Stillwell decision by the North Carolina Court of Appeals, Yeargin Construction Co. v. Futren Development Corp., 29 N.C.App. 731, 225 S.E.2d 623 (1976). In Yeargin, the court held that a written contract to construct condominiums was not “evidence of indebtedness” under section 6–21.2, reasoning that “while all questions of public policy are for the determination of the Legislature, a statute will not be construed to alter established principles of public policy founded on good morals unless that intent is clearly and unequivocally expressed in the statute.” Id. at 734, 225 S.E.2d at 625. Defendants point out that Stillwell cited Yeargin without expressly overruling it, see Stillwell, 300 N.C. at 290, 292 n. 2, 266 S.E.2d at 815, 816 n. 2, which they argue implies that there remain certain categories of contracts that are not “evidence of indebtedness,” including simple construction contracts.

It is true that the Supreme Court in Stillwell cited Yeargin, but the context of the citations casts doubt on Defendants' argument. Stillwell cited Yeargin twice—the first time only for the basic proposition that contractual agreements to pay attorneys' fees cannot be founded in the common law but must rather find statutory authorization. 300 N.C. at 290, 266 S.E.2d at 815. More importantly, in assessing the meaning of “evidence of indebtedness,” the Stillwell court observed in a footnote that the North Carolina Court of Appeals had rendered conflicting decisions: some decisions apparently adopted a broad view of section 6–21.2, while others adopted a narrower interpretation. Id. at 292 n. 2, 266 S.E.2d at 816 n. 2. Stillwell cited Yeargin as an example of the latter. See id. Insofar as Stillwell ultimately adopted a broad definition of “evidence of indebtedness” and reversed the court of appeals which had relied partly on Yeargin, however, it is unlikely that the Supreme Court intended Yeargin' s holding to survive the Stillwell ruling.

This conclusion is buttressed by the fact that since the Stillwell decision in 1980, the North Carolina Supreme Court has never cited Yeargin again, nor has the court of appeals cited Yeargin for its holding on section 6–21.2. Moreover, Defendants do not mention the sole articulated reasoning underlying Yeargin's holding: the need to strictly construe a statute that strays from “established principles of public policy founded on good morals.” 29 N.C.App. at 734, 225 S.E.2d at 625. Stillwell, on the other hand, held that section 6–21.2 must be “construed liberally.” 300 N.C. at 293, 266 S.E.2d at 817. Thus, the only basis upon which Yeargin's holding rested is inconsistent with Stillwell's articulated rationale.

Defendants also point to two recent court of appeals decisions, Delta Environmental Consultants of North Carolina v. Wysong & Miles Co., 132 N.C.App. 160, 510 S.E.2d 690 (1999), and Forsyth Municipal Alcoholic Beverage Control Board v. Folds, 117 N.C.App. 232, 450 S.E.2d 498 (1994), purportedly showing that “evidence of indebtedness” excludes construction contracts. Neither is on point.

In Delta, the court refused to award attorneys' fees upon a contract between sophisticated parties to formulate and implement an environmental cleanup plan. The court simply applied the principle that attorneys' fees will not be awarded without statutory authority, and it held that this situation did not warrant an exception to that principle. 132 N.C.App. at 167–68, 510 S.E.2d at 695. Whether recovery was warranted under section 6–21.2 does not appear to have been raised, “evidence of indebtedness” was not discussed by the court, and Stillwell was mentioned only in passing for the uncontroverted...