United States v. Irvine & Associates, Inc.

• Decision Date: 15 October 1986
• Docket Number: Civ. A. No. 86-56-NN.
• Citation: 645 F. Supp. 845
• Court: U.S. District Court — Eastern District of Virginia
• Parties: UNITED STATES of America as Use Plaintiff for PITTMAN MECHANICAL CONTRACTORS, INC., Plaintiff, v. IRVINE & ASSOCIATES, INC. and Allied Fidelity Insurance Co., Defendants.

645 F. Supp. 845

UNITED STATES of America as Use Plaintiff for PITTMAN MECHANICAL CONTRACTORS, INC., Plaintiff, v. IRVINE & ASSOCIATES, INC. and Allied Fidelity Insurance Co., Defendants.

Civ. A. No. 86-56-NN.

United States District Court, E.D. Virginia, Newport News Division.

October 15, 1986.

Benjamin A. Hubbard, Outland, Gray, O'Keefe & Hubbard, Chesapeake, Va., for plaintiff.

Abraham J. Dere, Cantor & Cantor, Richmond, Va., for Irvine & Assoc.

Benjamin C. Ackerly, Dennis T. Lewandowski, Hunton & Williams, Richmond, Va., for Allied Fidelity Ins. Co.

Allison McKee, Laura Rublee, Hunton & Williams, Norfolk, Va., for Allied Fidelity.

ORDER

DOUMAR, District Judge.

Plaintiff, Pittman Mechanical Contractors, Inc., brings this action under the Miller Act, 40 U.S.C. § 270a (1982), to recover money allegedly owed as a result of a subcontract between plaintiff and Irvine & Associates, Inc., with Allied Fidelity Insurance Company as surety. In September of 1984, Irvine & Associates entered into a construction contract with the United States Coast Guard. Pursuant to the Miller Act, Irvine & Associates, as principal, and Allied Fidelity, as surety, executed a standard Government form payment bond, and bound themselves jointly and severally to pay all persons supplying labor and material to the project. On October 4, 1984, Irvine & Associates entered into a subcontract with the plaintiff, Pittman Mechanical, under which plaintiff was to supply materials, labor and equipment. Plaintiff filed suit on May 1, 1986, alleging that Irvine & Associates breached the subcontract. Plaintiff seeks $20,326.21 in damages, plus interest and prejudgment costs.

On March 5, 1986, eight weeks before this suit was filed, Allied Fidelity became the subject of rehabilitation proceedings in Indiana, its domiciliary state. On that date, the Insurance Commissioner of the State of Indiana, as Rehabilitator, took possession of all the assets of Allied, and was ordered to administer the assets under the supervision of the Indiana Circuit Court in Marion County. On March 18, the Rehabilitation Court enjoined all persons from commencing any action "wherein the matter in controversy is, or is alleged to be, in excess of the value of $10,000." Eakin v. Allied Fidelity Insurance Co., Docket No. C86-0469 (Ind.Cir.Ct. March 18, 1986).

Defendant Allied Fidelity has filed a Motion to Abstain, claiming that the Indiana proceedings preclude the action against Allied under the principles of full faith and credit and comity. Allied Fidelity has also filed a Motion to Dismiss for Failure to Join an Indispensable Party. Allied Fidelity maintains that although the Indiana Rehabilitator is an indispensable party to this action, he cannot be joined because this Court lacks personal jurisdiction and because the plaintiff has not received leave to sue from the Rehabilitation Court. For the reasons stated herein, both motions are DENIED. This Court will order that the Indiana Rehabilitator be joined as a party defendant. Fed.R.Civ.P. 19(a).

I. The Indiana Proceedings.

Defendant Allied Fidelity maintains that the doctrine of full faith and credit requires this Court to honor the injunction issued by the Rehabilitation Court. This argument is without merit. It is true that the Full Faith and Credit Clause, U.S. Const., Art. IV, § 1, as well as the federal Full Faith and Credit statute, 28 U.S.C. § 1738 (1982), require state and federal courts to give effect to judgments entered in any state court having jurisdiction over the subject matter and the parties. Nevada v. Hall, 440 U.S. 410, 421, 99 S.Ct. 1182, 1188, 59 L.Ed.2d 416 (1979). However, a state court judgment is not entitled to full faith and credit as to any party not subject to its jurisdiction. Western Union Telegraph Co. v. Pennsylvania, 368 U.S. 71, 75, 82 S.Ct. 199, 201, 7 L.Ed.2d 139 (1961). See also Williams v. North Carolina, 325 U.S. 226, 65 S.Ct. 1092, 89 L.Ed. 1577 (1945). Therefore, this Court will not enforce the Rehabilitation Court's injunction against the plaintiff unless that court had jurisdiction over the plaintiff.

In order to demonstrate that the Rehabilitation Court had jurisdiction over the plaintiff, Allied Fidelity must show that Pittman Mechanical had "certain minimum contacts" with the State of Indiana, so that subjecting the plaintiff to the Indiana court's jurisdiction would not "offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Here, Allied Fidelity alleges only that Pittman Mechanical "chose to accept a surety company domiciled in the State of Indiana, and as a result, submitted themselves sic to that extent to the laws of that jurisdiction." Defendant's Brief at 6. Even assuming that Pittman Mechanical, and not the United States government, selected Allied Fidelity as surety, such an allegation falls far short of establishing the minimum contacts required by International Shoe. A corporation's contract with an out-of-state party, by itself, clearly is insufficient to confer jurisdiction upon the corporation's home state courts. Chung v. Nana Development Corp., 783 F.2d 1124, 1127-28 (4th Cir.1986). Nor has the defendant alleged any factors, such as prior negotiations, contemplated future consequences, or the parties' course of dealing, which might indicate that the Indiana court had jurisdiction over Pittman Mechanical. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 2186, 85 L.Ed.2d 528 (1985). Absent such proof, plaintiff is not bound by the Indiana injunction.¹ Insurance Affiliates, Inc. v. O'Connor, 522 F.Supp. 703, 705 (D.Colo.1981).

Defendant contends in the alternative that this Court should defer to the Indiana proceedings and dismiss this action as a matter of comity. On this point, defendant relies on Commonwealth of Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed. 841 (1935). In Williams, the Supreme Court held that the District Court should discharge federal receivers appointed for a Pennsylvania savings and loan association. The Court ordered that the company assets be surrendered to the state officers responsible for dissolving the company. Id. at 185-86, 55 S.Ct. at 385. Defendant maintains that Williams requires this Court also to relinquish jurisdiction to Indiana's statutory rehabilitation procedures.

The Supreme Court holding in Williams is inapposite to this case. In Williams, the federal receiver's ability to provide relief was no greater than that of the state officer. The Court noted that "there is no allegation or contention that the state dissolution procedure thus provided is inadequate." Id. at 183, 55 S.Ct. at 384. In contrast, the relief sought by the plaintiff in this case cannot be obtained in the Indiana rehabilitation proceedings. Plaintiff brings this suit under the Miller Act, 40 U.S.C. § 270a (1982). Jurisdiction of claims pursued under the Miller Act rests exclusively with the federal courts. Koppers Co. v. Continental Casualty Co., 337 F.2d 499, 506 (8th Cir.1964); United States for Use and Benefit of Bryant Electric Co. v. Aetna Casualty and Surety Co., 297 F.2d 665, 667 (2d Cir.1962). Thus, it simply is not true that "the plaintiff is free to file its claim in Allied Fidelity's rehabilitation proceeding in Indiana." Defendant's Brief at 13. Because the United States District Court is the only forum which can provide the plaintiff with appropriate Miller Act relief, this Court will not defer to the Indiana rehabilitation proceeding.

This holding is consistent with the Fourth Circuit ruling in Safeway Trails, Inc. v. Stuyvesant Insurance Co., 316 F.2d 234 (4th Cir.1963). In that case, the court required certain insureds to file their reinsurance claims in the Florida receivership proceedings of the insurer, and disallowed the declaratory judgment action filed in the North Carolina District Court. Id. at 234-35. The court predicated its ruling on the assumption that the insured's claims could be heard in the Florida court. The court further noted that "should plaintiffs not be permitted to file their claims ... in the Florida court, they may apply to this court for further hearing." Id. at 235.

The plaintiff in this case cannot file its Miller Act claims in the Indiana Rehabilitation Court. Accordingly, this Court will hear the plaintiff's claim.

II. The Indiana Rehabilitator

Allied Fidelity maintains that the Insurance Commissioner of the State of Indiana, as Rehabilitator of Allied Fidelity, is a necessary if not indispensable party to this action. This Court agrees, and holds that the Indiana Rehabilitator is an indispensable party under Rule 19 of the Federal Rules of Civil Procedure. See Kemper v. American Broadcasting Companies, Inc., 365 F.Supp. 1272 (S.D. Ohio 1973); In re Penn Central Securities Litigation, 335 F.Supp. 1026, 1038 (E.D.Penn.1971).

Defendant asserts that the Rehabilitator cannot be joined as a defendant in this action for two reasons. First, defendant maintains that because the Rehabilitator is a resident of Indiana, he is beyond the jurisdiction of this Court and is not subject to process in this action. That is not correct. By...