United States ex rel. TBI Invs., Inc. v. BrooAlexa, LLC

Decision Date10 August 2015
Docket NumberCivil Action No. 2:14–cv–29074.
Parties UNITED STATES of America, for the use of TBI INVESTMENTS, INC., Plaintiff, v. BROOALEXA, LLC et al., Defendants.
CourtU.S. District Court — Southern District of West Virginia

Charles M. Johnstone, II, Johnstone & Gabhart, Charleston, WV, for Plaintiff.

David A. Barnette, James Eric Whytsell, Vivian H. Basdekis, Jackson Kelly, Charleston, WV, for Defendants.


THOMAS E. JOHNSTON, District Judge.

Pending before the Court is Defendants' Motion to Dismiss, or in the Alternative, to Stay Action and Compel Arbitration (the "Motion"). (ECF No. 7.) For the reasons discussed herein, the Court GRANTS IN PART and DENIES IN PART the Motion.

I. Background

This case arises out of a contractual dispute between the prime contractor and subcontractor on a federal construction project. Defendant BrooAlexa, LLC ("BrooAlexa") was the prime contractor "for the construction of the project identified as FCI McDowell West Virginia Staff Training Building" (the "Project"), (ECF No. 7, Ex. A, art. I(A); id., Ex. B, art. I(A)), "for the United States Federal Bureau of Prisons" (the "FBP") "under US–8A–DOJ–FBP–2013–11SC," (ECF No. 1 ¶ 7). Defendant American Contractors Indemnity Company ("American Contractors") "is ... the Surety for [Defendant] BrooAlexa, and has furnished to the United States a payment bond as required by the" contract between Defendant BrooAlexa and the FBP relating to the Project "and pursuant to 40 U.S.C. §§ 3131 to 3134." (Id. ¶ 8; see also id., Ex. A (constituting a payment bond executed on May 23, 2013, with the principal listed as Defendant BrooAlexa and the surety listed as Defendant American Contractors).)

Defendant BrooAlexa "[s]ubcontracted with [Plaintiff] to perform various portions of the site work for the [Project]." (Id. ¶ 9.) Plaintiff and Defendant BrooAlexa executed two contracts relating to Plaintiff's subcontracting work on the Project (the "Contracts"). (See ECF No. 7, Ex. A; id., Ex. B.) The first agreement provides that Defendant BrooAlexa agrees to pay Plaintiff $300,000.00 for its work on the Project, (id., Ex. A, art. I(B)(3)), while the second states that Defendant BrooAlexa agrees to pay Plaintiff $218,350.00 for this work, (id., Ex. B, art. I(B)(3)). The two Contracts are otherwise materially identical, for purposes of the present Motion. (Compare id., Ex. A, with id., Ex. B. But see id., Ex. B, at 7 (providing a "Telephone Quote Sheet" attached to the second agreement, which is not attached to the first agreement).) Both Contracts were signed by Lindsey Ray—the President of Plaintiff—on May 31, 2013, and countersigned by Gene Brooks—the President of Defendant BrooAlexa—on June 5, 2013. (ECF No. 7, Ex. A, at 6; id., Ex. B, at 6.)

On the sixth and final page of the Contracts, the agreements both include the following identical "Alternative Dispute Resolution Process" clause (the "ADR Clause") directly above the signature lines:

The Subcontractor and the Contractor covenant and agree in the event of any claim, dispute or other matter in question arising out of or relating to this Agreement or breach thereof, the Subcontractor and the Contractor shall continue to perform (except to the extent performance is otherwise excused pursuant to the Contract Documents) all obligation[s] as required under the Contract notwithstanding the existence of such dispute(s)and [sic] that either party may seek such relief as may be permitted in accordance with the following terms and conditions:
Subcontractor and Contractor agree to negotiate, in good faith, in an attempt to resolve any dispute(s) for a period of at least sixty (60) business days following the receipt of written notice from either party to the other which shall set forth, in specifics, the nature and description of the dispute(s), the action or inaction of the other party which caused the dispute(s), and the relief or remedy requested by the notifying party.
Should Subcontractor and Contractor be unable to resolve said dispute(s) through mediation, any and all dispute(s), at the sole discretion of Contractor, shall be settled by the American Arbitration Association in accordance with it [sic] Construction Industry Arbitration Rules (including the Emergency Interim Relief Procedures). The award rendered by the arbitrators in accordance with this provision shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof, but the arbitrator (2) [sic] shall have no jurisdiction, power or authority to decide or award punitive damages. All arbitration proceeding[s] or hearings shall be conducted in a location designated by the Contractor. The arbitrator(s) shall exclusively and in all respects apply West Virginia law.
Contractor may join any other party in the arbitration proceeding[s] that Contractor determines is necessary to reach a complete adjudication of any disputes arising under the terms if [sic] this Agreement, and/or dispute arising under the terms of any other agreement or contract entered into between Contractor and any other party performing work on the Project. All disputes not resolved by arbitration pursuant to the terms of this provision will be resolved by litigation in any court having jurisdiction thereof, utilizing West Virginia law.
Subcontractor expressly agrees to be joined in any litigation filed by the Owner of the Project against the Contractor in either the State courts or the U.S. District Courts in the jurisdiction where the Project is located, to the extent Subcontractor's Work is relevant to Owner's and/or Contractor's claims.

(ECF No. 7, Ex. A, art. XVI; id., Ex. B, art. XVI. See generally id., Ex. A, at 1 (defining Plaintiff as the "Subcontractor," Defendant BrooAlexa as the "Contractor," and the FBP as the "Owner"); id., Ex. B, at 1 (same).)

The Complaint alleges that Plaintiff's "original quote for the Subcontract work was $954,500.00," but Defendant "BrooAlexa informed [Plaintiff] that its quote was too high and had to be lowered substantially." (ECF No. 1 ¶ 10.) The Complaint avers that, "[i]n order to arrive at the final ... amount of $518,350.00, by express agreement by and between [Defendant] BrooAlexa and [Plaintiff], the purchase of materials as well as any costs for potentially encountering, excavating, removing and/or replacing rock or other differing site conditions were removed from the scope of the work." (Id. ). The Complaint further alleges that the parties "expressly agreed and made part of the [Contracts] that [Plaintiff] would be compensated for all costs incurred in dealing with rock and other differing site conditions through change orders to the [Contracts]." (Id.; cf. id. ¶ 11 ("The revised scope of the [Contracts] did not include any costs for addressing subsurface rock or other differing site conditions nor did the [Contracts] contain any sums for the purchase of materials, which were to be purchased by [Defendant] BrooAlexa.").)

The Complaint avers that, "[a]lmost immediately after the site-work began, [Plaintiff] encountered a substantial amount of rock and other differing site conditions." (Id. ¶ 12.) According to the Complaint, "[Plaintiff] immediately notified [Defendant] BrooAlexa and requested that a change order be issued," "[Defendant] BrooAlexa agreed that a change order would and should be executed," but "no such change order was ever finalized." (Id. ) The Complaint alleges that, "[Defendant] BrooAlexa requested that [Plaintiff] submit its actual and estimated costs that it had and would incur in dealing with the rock and other differing site conditions," and that "[Plaintiff] promptly complied and requested an additional amount of $432,832.05 for work, equipment and labor associated with the rock and other differing site conditions." (Id. ¶ 13.) The Complaint also asserts that, "[d]uring the remainder of the project, [Plaintiff] submitted additional ... claims for extra/additional work to [Defendant] BrooAlexa." (Id. ¶ 16.) The Complaint alleges that, despite these additional claims, "[Defendant] BrooAlexa failed and refused to pay" Plaintiff for work related to differing site conditions, the "extra/additional work," or an amount from the Contracts that "[Defendant] BrooAlexa alleges that it paid for materials for [Plaintiff's] work." (Id. ¶¶ 14–17.) The Complaint alleges that "[Plaintiff] filed a claim under the applicable payment bond with [Defendant] American Contractors but its claim [was] rejected." (Id. ¶ 20.)

On November 26, 2014, Plaintiff filed the Complaint "in the name of the United States of America pursuant to 40 U.S.C. § 3133." (Id. ¶ 2.) The Complaint includes the following four claims: (1) Count I is a breach of contract claim against Defendant BrooAlexa, (id. ¶¶ 21–24); (2) Count II is a breach of payment bond claim under the Miller Act against Defendant American Contractors, (id. ¶¶ 25–28); (3) Count III is a quantum meruit claim against both Defendants, (id. ¶¶ 29–34); and (4) Count IV is a claim under the federal Prompt Payment Act against both Defendants, (id. ¶¶ 35–41). The Complaint requests a "judgment against [Defendants] jointly and severally ... in the amount of at least $683,337.94 representing the past-due principal amount plus extended general conditions, extended home office overhead, lost profits, lost business opportunities and other compensable damages as well as applicable interest, costs and attorney's fees." (Id. at 8.) The Complaint does not reference the ADR Clause and Plaintiff did not attach the Contracts to the Complaint. (See ECF No. 1.)

On January 15, 2015, Defendants filed the Motion, in which they argue that some of Plaintiff's claims are arbitrable under the ADR Clause and request that the Court compel arbitration as to those claims and dismiss or, alternatively, stay this case pending the arbitration proceedings. (ECF No. 7.) Defendants attached the ...

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