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Safeco Insurance Company of America v. Jaaat Technical Services, LLC

United States District Court, E.D. Virginia, Richmond Division

June 23, 2015

SAFECO Insurance Company of America, Plaintiff,
v.
JAAAT Technical Services, LLC, Defendant. JAAAT Technical Services, LLC, Third-Party Plaintiff,
v.
Tetra Tech Tesoro, Inc. Third-Party Defendant.

OPINION

JOHN A. GIBNEY, Jr., District Judge.

This matter comes before the Court on the motion of the third-party plaintiff, JAAAT Technical Services, LLC, for a preliminary injunction against Tetra Tech Tesoro, Inc. ("TTT"), the third-party defendant. During the briefing of this matter, the Court learned for the first time of related ongoing litigation among the parties in this case in numerous forums. Earlier, Safeco and JAAAT submitted to the Court an agreed preliminary injunction, but they did not tell the Court that another court had already issued an injunction covering some of the matters in the consent injunction. Based upon the Court's concerns regarding comity, Rooker-Feldman issues, and the parties' overall lack of candor to the Court, the Court vacated the previous injunction and DENIED JAAAT's motion for a preliminary injunction against TTT. This opinion explains the reasons for the Court's actions.

I. Background

This case involves a construction project, surety bonds, and undisclosed litigation in many other courts.

Safeco issued performance and payment bonds on behalf of JAAAT for federal construction projects. The agreement between Safeco and JAAAT imposed numerous obligations on JAAAT; this suit seeks to enforce some of those duties. Safeco issued over $55 million in surety bonds covering five federal construction projects. These five government contracts required JAAAT to perform construction work at Fort Benning, Georgia; Fort Gordon, Georgia; and Fort Bragg, North Carolina, where JAAAT had three separate contracts for three different jobs. Things went sour on the projects: work was allegedly not completed, and subcontractors were allegedly not paid. This led to bond claims against Safeco. Safeco then filed this action to enforce an indemnity agreement. Part of the relief sought by Safeco is a preliminary injunction freezing JAAAT's assets.

JAAAT ultimately signed a consent order agreeing to an injunction. The injunction provided that Safeco would essentially exercise control over all funds JAAAT received from the government on the five bonded projects. In fact, the injunction restrained JAAAT from selling, transferring, encumbering, or disposing of any assets without Safeco's consent.[1] As relevant to this decision, the injunction required JAAAT to forward directly to Safeco, or an escrow controlled by Safeco, its receipts on the various contracts, including the contracts for work in North Carolina.

TTT was the main subcontractor on all five jobs, and was apparently responsible for essentially all the work. JAAAT entered into five separate subcontracts with TTT for the projects. As JAAAT's prime subcontractor and project manager for each project, TTT was responsible for management, scheduling, and timely performance of the work. The contracts did not work out as planned, spawning a number of lawsuits, including this case.

On May 14, 2015, JAAAT filed its third-party complaint against TTT. The same day, JAAAT moved for a preliminary injunction against TTT. The preliminary injunction would require TTT to defer to Safeco's instructions on where government payments should go. The third-party complaint led to the unearthing of information that resulted in the undoing of this Court's agreed preliminary injunction.

When they submitted the agreed preliminary injunction, JAAAT and Safeco neglected to tell this Court about the other lawsuits arising from the projects.[2] In three cases in North Carolina Superior Court, TTT sought relief against JAAAT for contractual and tort claims arising from the Fort Bragg projects. Judge Mary Ann Tally, a North Carolina Superior Court Judge, consolidated the three North Carolina actions for the purpose of deciding TTT's motion for a temporary restraining order and preliminary injunction. On January 5, 2015, Judge Tally granted a preliminary restraining order, which matured into a preliminary injunction on May 6, 2015. The North Carolina Injunction requires JAAAT not to spend any of its money received from the North Carolina projects on anything or any entity except TTT. In contradiction of the North Carolina Injunction, the agreed injunction submitted to this Court directed JAAAT to give all its funds, including those controlled by the North Carolina Injunction, to Safeco. Thus, these injunctions are directly at odds with each other.

Obviously trying to get around the North Carolina Injunction, neither JAAAT nor Safeco told the Court that the North Carolina case even existed, much less had resulted in an injunction governing JAAAT's funds.[3] This is a quintessential material omission.

But that is not JAAAT and Safeco's only material omission. They neglected to tell the Court that JAAAT had already filed a suit in the Circuit Court of Hopewell, Virginia. The Hopewell case sought a declaratory judgment that the North Carolina Court did not have jurisdiction to hear the JAAAT/TTT litigation. Understandably, the Hopewell Court held that it would not issue a judgment telling the North Carolina Court what its jurisdiction is.

Unsuccessful in the Hopewell case, JAAAT tried to evade the effect of the North Carolina Injunction by filing suit against TTT in this Court, without telling the Court about the other litigation.

The chronology of the related cases shows the extent of JAAAT's forum shopping:

• First, on December 8, 2014, TTT moved in North Carolina for an order restraining JAAAT's use of funds paid for the North Carolina projects.
• Then on December 10, 2014, two days later, JAAAT filed the Hopewell case asking the Circuit Court to declare that the North Carolina Court lacked jurisdiction over the case pending there.
• On January 5, 2015, Judge Tally in North Carolina enjoined JAAAT from disposing of payments on the North Carolina projects for ...

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