United States v. Leebcor Servs.
| Docket Number | CIVIL ACTION NO. 4:20cv179 |
| Decision Date | 18 August 2022 |
| Parties | UNITED STATES of America, FOR the USE AND BENEFIT OF McKENNEY'S, INC., Plaintiff and Counterclaim Defendant, v. LEEBCOR SERVICES, LLC, Defendant and Counterclaim Plaintiff, and The Cincinnati Insurance Company, Defendant, and Leebcor Services, LLC, Third-Party Plaintiff, v. The Hartford Accident and Indemnity Company, Third-Party Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
Counsel for Plaintiff, Counterclaim Defendant, and Third-Party Defendant: Jordan Anton Hutcheson, Shelly Lynn Ewald, Watt, Tieder, Hoffar & Fitzgerald, LLP, 1765 Greensboro Station Place, Suite 1000, McLean, VA 22101, CharCretia V. Di Bartolo, Watt, Tieder, Hoffar & Fitzgerald, LLP (MA-NA), 175 Federal Street, Suite 1225, Boston, MA 02110.
Counsel for Defendants, Counterclaim Plaintiff, and Third-Party Plaintiff: Thomas Andrew Coulter, Brian Winslow Stolarz, Norton, Rose, Fulbright, US LLP, 799 9th
Street NW, Suite 1000, Washington, DC 20001, Katherine Garamendi Connolly, Norton, Rose, Fulbright, US LLP (CANA), 555 California Street, Suite 3300, San Francisco, CA 94104-1609, Patrick Donald Houston, Whiteford, Taylor & Preston, LLP, Two James Center, 1021 E Cary Street, Suite 1700, Richmond, VA 23219.
This suit concerns a dispute among entities involved in a federal construction project at Fort Benning, Georgia (the "Project"). A subcontractor on the Project, McKenney's, Inc. ("McKenney's"), and the general contractor, Leebcor Services, LLC ("Leebcor"), both claim that they were damaged by the other's breach of the contract they executed (the "Subcontract" (PX258 or "Subc.")). McKenney's also argues that Leebcor's payment bond surety, the Cincinnati Insurance Company ("Cincinnati"), is liable for the damages caused by Leebcor's alleged breaches of the Payment Bond (DX8 ( )) it issued pursuant to the Miller Act, 40 U.S.C. §§ 3131-3134. Similarly, Leebcor alleges that McKenney's performance bond surety, the Hartford Accident and Indemnity Co. ("Hartford"), is liable for McKenney's breaches under the Performance Bond it issued.
The evidence received in this case demonstrates the dynamic nature of complicated construction projects. At every step, the details matter, and coordination and cooperation among the companies tasked with performing the job is essential. Thankfully, as even this case shows, most disagreements that arise as projects evolve are handled during construction, far away from a courthouse, by the professionals who know best how to achieve the ultimate goal of a completed project.
However, once litigation begins, the terms of a written agreement - usually drafted by attorneys - become the measure of success. Here, neither Leebcor nor Cincinnati lived up to the letter of the documents that governed their relationship as it pertained to the Project. For this reason, and as explained in detail below, the court finds that neither party is entitled to damages related to delays allegedly caused by the other, although McKenney's is entitled to receive payment for its Subcontract balance for work performed.
McKenney's filed suit against Leebcor and Cincinnati on May 8, 2020. ECF No. 1. On December 9, 2020, Leebcor filed its Answer, ECF No. 49, and Counterclaim, ECF No. 50, arguing that McKenney's is not owed the amounts claimed, and instead that McKenney's owes Leebcor under the Subcontract due to its deficient and untimely work. Cincinnati answered the same day, contending that it was not required to indemnify Leebcor under the Miller Act, and that even if it was, Leebcor does not have a duty to pay McKenney's, meaning that there is no valid claim for Cincinnati to indemnify. ECF No. 50.
On March 2, 2021, Leebcor submitted a claim with Hartford against the Performance Bond for expenses Leebcor alleges McKenney's deficient Subcontract performance caused. ECF No. 85 at 3. On March 26, 2021, Leebcor moved for leave to file a third-party claim against Hartford for McKenney's allegedly deficient work. ECF No. 59. On April 16, 2021, while this motion was pending, Leebcor filed a separate lawsuit against Hartford, alleging that Hartford was responsible for compensating Leebcor for damages allegedly caused by McKenney's. ECF No. 225 Ex. A ("Stipulation of Undisputed Facts" ( )) ¶ 28. The court ultimately granted Leebcor's Motion for Leave to File a Third-Party Complaint on May 7, 2021. ECF No. 85. Leebcor subsequently dismissed its separate suit and filed its Third-Party Complaint against Hartford on September 3, 2021. Stip. Facts ¶ 28; ECF No. 167. Hartford answered on October 21, 2021. ECF No. 178.
A bench trial in this case began on June 15, 2022. The parties presented evidence and argument over eight (8) trial days, concluding on June 27, 2022. That day, the court took all outstanding issues under advisement. In accordance with the court's direction, the parties filed post-trial proposed findings of fact and conclusions of law, based upon the evidence actually received at trial. ECF No. 264 (Leebcor and Cincinnati); ECF No. 265 (McKenney's and Hartford). The court resolves all outstanding claims with this Opinion and Order.
Federal law creates the cause of action for McKenney's Miller Act claim against the Payment Bond, establishing the court's original jurisdiction over the matter pursuant to 28 U.S.C. § 1331. See Gunn v. Minton, 568 U.S. 251, 257, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). The parties remaining claims all allege breach of contract, over which the court exercises its diversity jurisdiction pursuant to 28 U.S.C. § 1332. Such jurisdiction is proper as the parties are completely diverse, and the amount in controversy exceeds the statutory threshold of $75,000. See id. Venue is proper in the Newport News Division of the Eastern District of Virginia because Leebcor's headquarters sits within this Division. See 28 U.S.C. § 1391(b); Local Civ. Rule 3(C).
Federal law provides the cause of action for McKenney's Miller Act claim. However, state substantive law governs the remaining breach of contract claims.
"A federal court hearing a diversity claim must apply the choice-of-law rules of the state in which it sits." Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Accordingly, the court applies Virginia's choice-of-law principles to determine the applicable substantive law for the parties' breach of contract claims. "[W]here parties to a contract have expressly declared that the agreement shall be construed as made with reference to the law of a particular jurisdiction," Virginia courts "will recognize such agreement and enforce it, applying the law of the stipulated jurisdiction." Paul Bus. Sys., Inc. v. Canon U.S.A., Inc., 240 Va. 337, 397 S.E.2d 804, 807 (1990) (collecting cases).
The Subcontract provides that Virginia law governs disputes arising under it. See Subc. § 24. In addition, the Performance Bond incorporates the Subcontract terms, including its choice-of-law clause, by reference. See ECF No. 167-1; Granite Re, Inc. v. N. Lines Contracting, Inc., 478 F. Supp. 3d 772, 778 (D. Minn. 2020) (). Because neither party has shown that the Subcontract's choice-of-law provision is "unfair or unreasonable," or was "affected by fraud or unequal bargaining power," the court will enforce it, and apply Virginia law to resolve the claims for breach of contract before the court. See Paul Bus. Sys., Inc., 397 S.E.2d at 807.1
"The elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George, 267 Va. 612, 594 S.E.2d 610, 619 (2004) (collecting cases). "The remedy for breach of contract is intended to put the injured party in the same position in which it would have been had the contract been performed." Marefield Meadows, Inc. v. Lorenz, 245 Va. 255, 427 S.E.2d 363, 366 (1993) (citing Appalachian Power Co. v. Walker, 214 Va. 524, 201 S.E.2d 758, 767 (1974)).
"The guiding light in the construction of a contract is the intention of the parties as expressed by them in the words they have used, and courts are bound to say that the parties intended what the written instrument plainly declares." W.F. Magann Corp. v. Virginia-Carolina Elec. Works, Inc., 203 Va. 259, 123 S.E.2d 377, 381 (1962). Therefore, "[w]hen a contract is clear and unambiguous, it is the court's duty to interpret the contract, as written." Palmer & Palmer Co. v. Waterfront Marine Constr., Inc., 276 Va. 285, 662 S.E.2d 77, 80 (2008) (citing Winn v. Aleda Constr. Co., 227 Va. 304, 315 S.E.2d 193, 194 (1984)).
"Proof of damages is an essential element of a breach of contract claim, and failure to prove that element warrants dismissal of the claim." Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 671 S.E.2d 132, 136 (2009) (citing Filak, 594 S.E.2d at 614-15). "When a plaintiff has proved a breach of contract, the burden of proof regarding damages does not then shift to the defendant," but instead "remains with the plaintiff to prove with reasonable certainty the measure of damages sustained." Id. at 137.
"Damages based on uncertainties, contingencies, or speculation cannot be recovered." Shepherd v. Davis, 265 Va. 108...
To continue reading
Request your trial