United States District Court, W.D. Virginia, Danville Division
ELIZABETH K. DILLON, District Judge.
Pending before the court are two motions seeking the release of funds previously deposited into the court's registry by the Danville Redevelopment & Housing Authority (DRHA): (1) the motion of the Western Virginia Water Authority (WVWA), which seeks the entire amount of deposited funds, up to the judgment owed by Carnell Construction Corporation (Carnell) to WVWA in the amount of $85, 823.33 (Dkt. No. 811); and (2) the motion of Selco Construction Services, Inc. (Selco), seeking $18, 448.25 plus interest at the rate of one per cent per month from December 10, 2010, together with costs and attorney's fees (Dkt. No. 813).
For the reasons set forth below, the court will sever the two pending motions and all proceedings related to the deposited funds from this case and direct the opening of a new civil action in which the court can determine the proper distribution of the deposited funds. In this new action, the court will require Carnell to provide notice of the deposited funds, this opinion, and the attached order to all of its known creditors so that all known, possible claimants have notice of the pending motions and the opportunity to file their own petitions or claims and object to the two already filed. The motions will be addressed after all briefing on any such petitions or claims is complete.
The claims in this lawsuit arise from work performed by Carnell Construction Corporation (Carnell) on a large public housing venture in Danville, Virginia, in which Carnell contracted with DRHA to conduct certain site preparation work for the project. DRHA eventually assigned its interest in the contract to Blaine Square, LLC (Blaine). After the contractual relationship soured, this lawsuit ensued. At the last trial, held in August 2012 before Chief United States District Judge Glen E. Conrad, Carnell and the two defendants asserted breach of contract claims against each other. Carnell, a "minority-owned" corporate contractor, also asserted claims of race discrimination and retaliation against DRHA.
The jury returned a verdict in DRHA's favor on the race and retaliation claims, and in Carnell's favor on the contract claims. As relevant here, the court entered final judgment in favor of Carnell as to its claim that the defendants breached the parties' contract by removing Carnell from the project without just cause. (Dkt. No. 763.) The total amount of damages awarded on that claim was $72, 490.00, consisting of $12, 000 in lost profits and $60, 490.00 retainage. (Dkt. Nos. 761, 763.) On appeal, the United States Court of Appeals for the Fourth Circuit affirmed the $72, 490 judgment in favor of Carnell on that breach of contract claim, although it reversed and remanded for a new trial on the merits of Carnell's race discrimination claims and for damages on two of Carnell's contract claims for unpaid extra work. (Dkt. No. 799.) The Fourth Circuit denied the parties' petitions for rehearing, no party filed a petition for writ of certiorari with the Supreme Court of the United States, and the mandate issued on April 16, 2014.
On April 18, 2014, DRHA moved the court for permission, pursuant to Rule 67 of the Federal Rules of Civil Procedure, to deposit into the court's registry the $72, 490 it owed Carnell on the one contract claim. In its motion, DRHA stated that it had been served with notices of liens against Carnell's recovery of the judgment entered in the case, and that it was aware of other judgment creditors of Carnell. (Dkt. No. 807 at 2-3.) It explained that because of these claims and liens, which exceeded the amount of the affirmed judgment, Carnell's interest in the monies was disputed, and that "DRHA and Blaine Square [would] face the risk of multiple claims and/or liability for the same fund or property if the relief requested [were] not granted." (Dkt. No. 807 at 3.)
The court granted the motion and allowed the funds to be deposited. (Dkt. No. 808.) The court's order noted that, "[u]pon deposit [of the $72, 490.00 and post-judgment interest accrued thereon to date], the post-judgment accrual of interest shall halt, and the judgment in favor of Carnell on this count of Carnell's complaint shall be deemed satisfied." (Id. ) On November 7, 2014, DRHA deposited $72, 689.00. (Dkt. No. 809.) The two pending motions followed.
WVWA claims a right to the funds based on an October 30, 2012 judgment in the amount of $85, 823.33, which it obtained against Carnell in a case captioned International Fidelity Ins. Co. v. Western Virginia Water Authority, No. 7:11-cv-441 (W.D. Va.), Dkt. No. 72 (judgment); id., Dkt. No. 77 (abstract of judgment); id., Dkt. Nos. 76, 78 (November 5, 2014 and October 8, 2014 writs of execution on the judgment). Selco claims a portion of the deposited monies based on a state court suit it filed against Carnell in the Circuit Court of Washington County, Selco Constr. Servs., Inc. v. Carnell Constr. Corp., Case No. 191CL1100546-00, in which it obtained a default judgment against Carnell on July 25, 2011, in the amount of $18, 448.25, plus costs of $136 and interest. ( See Dkt. No. 813-2, copy of judgment.)
Carnell does not dispute that it owes the money sought by either WVWA or Selco. It nonetheless opposes the disbursement of funds on two primary grounds. First, Carnell asserts that it is "not clear who are the rightful owners of the $72, 490." (Dkt. No. 831 at 2.) Carnell notes that there are a number of companies to whom Carnell owes money "because of DRHA's wrongful conduct" and that some of those entities "have valid monetary claims that predate the claims asserted by the WVWA." (Id. ) Second, Carnell claims that the court should wait to disburse any funds because Carnell may obtain a larger judgment upon retrial of the case, and then it could resolve all the claims of its creditors upon receipt of those additional funds. (Dkt. No. 831 at 2.)
WVWA has filed a response in opposition to Selco's request for funds, but other than that and Carnell's response, there have been no responses to WVWA's or Selco's petitions.
DRHA deposited the funds at issue pursuant to Rule 67 of the Federal Rules of Civil Procedure, which allows a party, with leave of court, to deposit money with the clerk of court in satisfaction of a money judgment. Fed.R.Civ.P. 67(a). "Money paid into court under this rule must be deposited and withdrawn in ...