United State ex rel. J&L Paving LLC v. Rockford Corp.
| Decision Date | 03 May 2019 |
| Docket Number | 3:18-CV-00156 JWS |
| Court | U.S. District Court — District of Alaska |
| Parties | UNITED STATES OF AMERICA for the use of J&L PAVING LLC, Plaintiff, v. ROCKFORD CORPORATION and LIBERTY MUTUAL INSURANCE COMPANY, Defendants. |
[Re: Motions at dockets 36, 37 & 46]
I. MOTIONS PRESENTED
At docket 36 Plaintiff J&L Paving, LLC (J&L) moves for summary judgment on its claims for payment under a subcontract against Defendants Rockford Corporation (Rockford) and Liberty Mutual Insurance Company.1 Defendants respond at docket 38 and submit a cross-motion for summary judgment at docket 37. Plaintiff replies at docket 41 and responds to the cross-motion at docket 40. Defendants reply to their cross motion at docket 45. Oral argument was requested at docket 46, but argument would not be of assistance to the court.
II. BACKGROUND
This case is a payment dispute between a general contractor, Rockford, and its subcontractor, J&L, for paving work J&L performed as part of a government contract Rockford had with the United State Army Corps of Engineers to replace the existing military fueling station at Tinker Air Force Base in Oklahoma (the Prime Contract). Under Rockford's subcontract with J&L (the Subcontract), Rockford agreed to pay J&L $274,620 to complete the paving work required under the Prime Contract.2 The work required both the application of pre-asphalt bituminous coating and the laying of asphalt. Rockford asserts that J&L materially breached the Subcontract in both its application of the bituminous coating and in the laying of the asphalt, causing damages to Rockford in amounts that almost equal the value of the Subcontract. Although Rockford has received payment from the government pursuant to the Prime Contract for completion of the fueling station project, including the paving work, it has not paid J&L.3 Rockford believes it is entitled to offset the damages it incurred against payments to J&L under the Subcontract.
J&L moves for summary judgment on its contractual claims, arguing it is entitled to be paid the full amount under the Subcontract. The issue it asks the court to resolve as a matter of law, however, is not whether it breached the Subcontract, but rather whether Rockford can withhold payment from J&L after applying for payment and being paid by the government under the Prime Contract. J&L argues that regardless of any breaches on its part, Rockford is required to pay the full Subcontract price because it certified to the government, pursuant to the Prompt Payment Act, that J&L would be paid for its satisfactory work under the Subcontract. J&L asserts that Rockford's certifications constitute a waiver of any right to claim and offset damages or at least bar such a defense under the doctrine of quasi-estoppel.
In its response to Rockford's cross motion, J&L also asks that the court strike or disregard the affidavit of Lonny Rhude, which Rockford included as evidence supporting its motion. J&L argues that Rhude's affidavit is not based on his personal knowledge of events and contains legal conclusions and impermissible characterizations of the contents of business documents and communications attached to his affidavit. Rhude's affidavit is admissible to authenticate the attached business records and to establish certain facts that are within his knowledge. The court did not rely on any legal conclusions or characterizations of evidence offered by Rhude.
III. STANDARD OF REVIEW
Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."4 The materiality requirement ensures that "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment."5 Ultimately, "summary judgment will not lie if the . . . evidence is such that a reasonable jury could return a verdict for the nonmoving party."6 However, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."7
The moving party has the burden of showing that there is no genuine dispute as to any material fact.8 Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, the moving party need not present evidence to show that summary judgment is warranted; it need only point out the lack of any genuine dispute as to material fact.9 Once the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.10 All evidence presented by the non-movant must be believed for purposes of summary judgment, and all justifiable inferences must be drawn in favor of the non-movant.11 However, the non-moving party may not rest upon mere allegations or denials but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties' differing versions of the truth at trial.12
IV. DISCUSSION
The Subcontract with J&L to perform a portion of work required under Rockford's Prime Contract with the government was subject to the Prompt Payment Act13 and the Act's implementing regulations. Pursuant to these statutes and regulations, when requesting a progress payment from the government under a prime contract, the contractor is required to itemize work performed by its subcontractors.14 The contractor must make certain representations concerning its subcontractors' work—namely, that the requested amount is for work performed in accordance with specifications of the contract; that all payments due to subcontractors under previous payment requests have been made and payments will be made to subcontractors for work itemized under the current request; and that the payment request "does not include any amounts which the prime contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of the subcontract."15 The contractor is also allowed to assert that the certification "is not to be construed as final acceptance of a subcontractor's performance."16
The contractor cannot request payment from the government for deficient work.17 If a contractor makes a payment request to the government certifying that no payments have been withheld and receives payment for work completed by a subcontractor but then discovers that the work is not in fact satisfactory, it must notify the subcontractor and government and pay the government interest on the amount received from the government but withheld.18
Rockford requested payment from the government for J&L's work on March 20, 2017, after J&L had finished the paving work. The total amount requested was $234,882.70, which is about $40,000 less than the amount owed to J&L under the Subcontract.19 Rockford contends that it deducted this amount from what was owed J&L under the Subcontract through a change order and that it did so in order to cover the costs it incurred to remediate an environmental hazard allegedly caused by J&L's application of pre-asphalt coating before a forecasted rain event.20 The record shows that there had been communications between J&L and Rockford about the clean up and that J&L knew that Rockford believed J&L was responsible for clean-up costs.21
One day after Rockford submitted its March payment application, government engineers informed Rockford that J&L's work did not met project specifications. J&L submitted a proposal as to how to correct the deficiencies in its work and eventually completed the rework in early August of 2017.22
In October of 2017, Rockford submitted another payment application. This one included a request for the balance of the J&L subcontract, which was about $40,000 (the amount they had not asked for in the previous application).23 As described above, in order to obtain payment, Rockford had to itemize its subcontractors' work for which it sought payment and certify that such work was completed according to the specifications of the contract. It also had to certify that payments due to subcontractors under previous payment requests had been made and that it did not intend to withhold any payments. Despite this certification, Rockford had not yet paid J&L from the proceeds of the prior payment request and intended to withhold the balance that it was asking for in the current payment request.
The parties do not dispute that Rockford failed to comply with the required withholding procedures and that its October certification was incorrect. Rockford, however, asserts that its noncompliance is an issue between it and the government and does not have any bearing on this contractual dispute between private entities. Rockford has since informed the government of its errors.24 While J&L concedes that it cannot enforce the provisions of the Prompt Payment Act through this lawsuit, it nonetheless argues that Rockford's false certifications and its failure to provide the required notice affect the equities of this contractual dispute. J&L believes Rockford's false representations and inconsistent positions as to J&L's performance and the withholding now bar Rockford from denying full payment to J&L.
J&L asserts that Rockford's actions amount to a waiver of its right to deny J&L payment based on performance when it averred to the government that J&L's performance met contractual standards and would not be subject to withholdings. Waiver may "be implied from a party's conduct" if that conduct is "clear and unambiguous."25 "An implied waiver arises where the course of conduct pursued evidences an intention to waive a right, or is inconsistent with any other intention than a waiver, or where neglect to insist upon the right results in prejudice to another party."26 Conduct that could be a result of a mistake, negligence, or...
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