United States v. Travelers Cas. & Sur. Co. of Am.

• Citation: 55 F.Supp.3d 852
• Decision Date: 23 September 2014
• Docket Number: Civil Action No. 1:13CV240.
• Parties: UNITED STATES of America f/u/b/o Kogok Corporation, Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Federal Insurance Company, Fidelity & Deposit Company of Maryland, Zurich American Insurance Company, Liberty Mutual Insurance Company and the Continental Insurance Company, Defendants.
• Court: U.S. District Court — Northern District of West Virginia

55 F.Supp.3d 852

UNITED STATES of America f/u/b/o Kogok Corporation, Plaintiff

v.TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Federal Insurance Company, Fidelity & Deposit Company of Maryland, Zurich American Insurance Company, Liberty Mutual Insurance Company and the Continental Insurance Company, Defendants.

Civil Action No. 1:13CV240.

United States District Court, N.D. West Virginia.

Signed Sept. 23, 2014.

Adam C. Harrison, Eli Robbins, Harrison Law Group, Towson, MD, Charles M. Johnstone, II, Johnstone, Gabhart & Prim, LLP, Charleston, WV, for Plaintiff.

C. David Morrison, Steptoe & Johnson PLLC, Bridgeport, WV, Richard O. Wolf, Moore & Lee, LLP, McLean, VA, Robert D. Windus, Braude & Margulies, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION TO STAY ALL PROCEEDINGS

FREDERICK P. STAMP, JR., District Judge.

I. Procedural History

The plaintiff, United States of America f/u/b/o Kogok Corporation (“Kogok”) filed this action against the defendants pursuant to the Miller Act, 40 U.S.C. § 3133, to recover payment for labor and materials it rendered to the FBI Biometric Technology Center, New Office Building and Central Utilities Plant Expansion (the “project”) located in Clarksburg, West Virginia. Specifically, the complaint seeks a declaratory judgment from this Court finding that each defendant is liable to Kogok in the amount of $1,920,177.02.

After the defendants filed an answer and this Court entered a scheduling order in this matter, the defendants filed a motion for partial summary judgment and to stay all proceedings. The defendants seek summary judgment against Kogok with respect to: (1) all claims that arose on or before October 31, 2013; (2) Kogok's claims for damages for delay; and (3) Kogok's claim for damages allegedly resulting from labor inefficiency. In support of their motion for partial summary judgment, the defendants argue that: (1) Kogok executed sworn releases and waivers where it expressly released all claims for damages arising from labor and materials relating to the project up to and including October 31, 2013; (2) Kogok expressly waived all claims for damages arising from delay to its performance; and (3) because Kogok admits that it is still both performing labor on the project and incurring labor inefficiency damages, it fails to comply with the Miller Act, which requires Kogok to provide notice of its labor inefficiency within ninety days after the last date it performed services. In addition to seeking partial summary judgment, the defendants also seek a stay of all proceedings until Kogok completes the work that underlies its claims and complies with its contractual obligations to support its claims.

Kogok filed a response in opposition arguing that: (1) the releases are invalid to release claims and proposed change orders submitted under the contract; (2) the “no damages for delay” clause should not be enforced against Kogok, especially when both Turner Construction Company (“Turner”) and Bell Constructors, LLC (“Bell”) caused the delays and the government will compensate Turner for delays on the project; (3) Kogok's claim for labor inefficiencies is not premature; and (4) this case should not be stayed. The defendants filed a timely reply wherein they reasserted their arguments and countered Kogok's arguments.

For the reasons stated below, this Court grants the defendants' motion for partial summary judgment and denies the defendants' motion to stay proceedings.¹

II. Facts²

Turner Construction Company and the United States entered into a construction contract, in which Turner agreed to construct the project. Under the construction contract and Miller Act, Turner executed a labor and material payment bond with the defendants as joint and several sureties, which Turner delivered to the United States. After entering into the contract with the United States, Turner subcontracted the mechanical work on the project to Bell. Bell then entered into a subcontract agreement with Kogok, in which Kogok agreed to provide sheet metal, duct work, and related HVAC services for the project. Kogok was to provide such material and services for the price of $3.22 million.

The subcontract has several provisions at issue. First, Bell required Kogok to submit a “[o]n a monthly basis, [Kogok] shall submit to Bell its payment applications.” ECF No. 29 Ex. 1, B. These payment applications, called “Release and Waiver Forms,” provided the following:

In consideration of the payment herewith made, the Undersigned [Kogok] does fully and finally release and waive any and all claims, causes of action, and/or lien rights against the Contractor [Bell] ... for all costs, expenses, or losses of any nature or description which have arisen or are in any manner related to any aspect of the Work items from the date the Work items originally commenced to the date payment is made hereunder. This Release and Waiver applies to all claims, disputes, and other matters through the date this payment is made, including all claims for direct and indirect costs, productivity losses, delays, accelerations, ripple effects, field and home office overhead, equipment costs, and all other consequential and incidental costs, losses, and/or damages.

ECF No. 29–5 Ex. 1, D1. This language was contained in every Release and Waiver form Kogok filed monthly for payment. It consecutively filed these waivers twenty-six times, with the above language appearing in all of them.

Second, in addition to the payment provision, the contract also contained a Change Order provision and Disputes provision. The Change Order provision provided for if either party sought to amend the contract or project specifications. The Change Order provision states in relevant part that if Kogok and Bell are unable to agree on adjustments to the contract by change orders, “Kogok shall proceed with the change as directed by Bell and preserve its right to an equitable adjustment hereto pursuant to the Disputes provision set forth herein. The Subcontractor shall be bound by Bell's adjustments if the Subcontractor fails to strictly comply with the Disputes provision.” ECF No. 29 Ex. 1, B. Third, as referenced in the Change Order provision, the contract also maintains a Disputes provision that states, “[Kogok] shall give Bell written notice of all claims involving Bell for time extensions and additional costs within seven (7) days of the event giving rise to the claim; otherwise, such claim(s) shall be deemed forever waived.”

Finally, the contract contained a “no damages for delay” clause, which states

The clause states in relevant part:

NO DAMAGES FOR DELAY: The Subcontractor [Kogok] expressly agrees not to make, and hereby waives, any and all claims for damages on account of any delay, obstruction, or hindrance for any cause whatsoever, including but not limited to the aforesaid cause, and agrees that its sole right and remedy in the case of any delay, obstruction or hindrance shall be an extension of time fixed for completion of the Work [unless and to the extent that Bell recovers delay damages from the Owner which are directly allocable to the Subcontractor [Kogok]].

ECF No. 29 Ex. 1, B. Bell and Kogok agreed to the contract with the above terms and conditions. No accusations or facts indicating foul play exist regarding the parties' agreement.

However, as the project progressed and Kogok rendered its services, the government unilaterally extended the project deadline to February 27, 2015, citing issues with Turner's production of information and paperwork.

As a result of the delay, Kogok asserts that it is currently in the process of rendering the labor and materials for the project required under the subcontract, but it has received no payment for such work. Specifically, Kogok asserts that unpaid amounts for labor and materials exist for November 2012, December 2012, February 2013, and May 2013. Further, Kogok asserts that Bell has not paid it for additional labor and materials rendered for the project outside of the contract's scope of work that it had submitted requests for change orders. In total, Kogok is seeking recovery from the defendants in the amount of $1,920,177.02, asserting that it is entitled to payment of this sum under the payment bond and the Miller Act.

III. Discussion

A. Motion for Partial Summary Judgment

The defendants argue that summary judgment should be granted on three of Kogok's claims. Specifically, they seek partial summary judgment against Kogok with respect to: (1) all Kogok's claims that arose on or before October 31, 2013; (2) Kogok's claim for damages for delay; and (3) Kogok's claim for labor inefficiency.

Under Rule 56(c) of the Federal Rules of Civil Procedure,

A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ... admissions, interrogatory answers, or other materials; or

(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial burden of showing the absence of any genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “The burden then shifts to the nonmoving party to come forward with facts sufficient to create a triable issue of fact.” Temkin v. Frederick County Comm'rs, 945 F.2d 716, 718 (4th Cir.1991), cert. denied, 502 U.S. 1095, 112 S.Ct. 1172, 117 L.Ed.2d 417 (1992) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). However, as the United States Supreme Court noted in Anderson, “Rule 56(e) itself provides that a party...