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United States v. Pond Constructors, Inc.

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

October 11, 2016

UNITED STATES OF AMERICA For the use and benefit of DUNCAN TELCOM, INC., Plaintiff,
v.
POND CONSTRUCTORS, INC., and BERKLEY REGIONAL INSURANCE CO., Defendants.

          MEMORANDUM OPINION

          JAMES C. CACHERIS UNITED STATES DISTRICT COURT JUDGE

         This case is before the Court on Defendants' motion to stay litigation pending binding arbitration. Defendants have also filed a motion for extension of time to file responsive pleadings.

         I. Background

         The facts upon which the Court relies are taken primarily from Plaintiff's Complaint. (See Compl. [Dkt. 1] (“SOF”)). They are undisputed unless otherwise noted.

         Plaintiff Duncan Telcom, Inc. (“Duncan”) is a data communication services firm incorporated and having its principal place of business in Virginia. Defendant Pond Constructors, Inc. (“Pond”) is a Georgia corporation, with its principal place of business also in Georgia. Pond provides professional engineering services. Defendant Berkley Regional Insurance Company (“Berkley”) is a Delaware corporation, with its principal place of business in Connecticut. Berkley underwrites insurance policies.

         In September 2013, Pond entered into a contract (the “Prime Contract”) with the United States Army Corps of Engineers (“Corps”) to provide labor and supply materials to make fueling system improvements on United States facilities in Fort Lee, Virginia. (SOF ¶¶ 4, 14.) As a requirement of the Prime Contract, Pond provided a payment bond (the “Payment Bond”), identifying itself as the principal and Berkley as the surety. (Id. ¶ 5.) On March 28, 2014, Pond then subcontracted a portion of its work to Duncan, through Duncan's division of Duncan Energy Systems. (Id. ¶ 5.) The first subcontract agreement (the “Subcontract”) stated that Pond would pay Duncan $371, 868.00 to provide labor and materials. (Id. ¶ 17.) On May 14, 2014, Pond submitted “Subcontract Change Order No. 1” to Duncan, asking for Duncan to provide a 4500 gallon temporary storage tank for a maximum of four weeks. (Id. ¶ 19.) This increased the amount that Pond owed Duncan by $2, 480.00, for a revised payment of $374, 348.00. (Id.)

         On June 21, 2016, an underground tank “floated, ” or rose completely out of the ground, independent of the actions of any workers on-site. (Id. ¶ 21.) This caused extensive damage to the project site and had to be repaired in order to complete the work outlined in the Prime Contract. (Id.) Thus, Pond submitted Subcontract Change Order No. 2 and No. 3 in September 2014, increasing the total amount owed to Duncan to $392, 600.56. (Id. ¶¶ 25-27.) Duncan alleges that neither subcontract change fully compensated it for the costs of labor or materials to repair the floating underground tank. (Id. ¶ 28.) Two additional subcontract change orders were submitted in May 2015, bringing the total owed by Pond to Duncan to $478, 091.56. (Id. ¶¶ 30-32.) Duncan completed its subcontract work in September 2015. (Id. ¶ 33.)

         Following the completion of its work, Duncan alleges that it submitted seven Subcontractor's Applications for Payment to Pond. (SOF ¶ 37.) Duncan also submitted separately all payroll, invoices, and daily activity reports related to all labor and materials provided by Duncan to repair the floating underground tank. (Id. ¶ 36.) Duncan alleges that Pond continues to owe $351, 376.03 for the costs of labor and materials provided by Duncan to Pond to carry out the Prime Contract. (Id. ¶¶ 38, 41, 43.)

         On August 23, 2016, Duncan filed a complaint in this court, alleging: (1) breach of contract against Pond; (2) breach of surety obligation/contract against Pond and Berkley; and (3) quantum meruit against Pond and Berkley. (See Compl. [Dkt. 1] at 8-9.) On September 19, 2016, Pond and Berkley jointly filed a motion to stay litigation pending binding arbitration. [Dkt. 6.] They also filed a motion for extension of time to reply. [Dkt. 8.] Duncan filed a response to both motions on September 30, 2016. [Dkt. 10, 11.] Defendants submitted a response regarding the motion to stay litigation on October 4, 2016. [Dkt. 12.] These motions are now ripe for disposition.

         II. Standard of Review

         Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., a court must enforce an arbitration agreement that meets the following requirements: (1) is part of a written contract between the parties “if the contract or transaction involves interstate commerce;” (2) pertains to the specific dispute at issue; and (3) is “valid under general principles of contract law.” Hendrick v. Brown & Root, Inc., 50 F.Supp.2d 527, 531-32 (E.D. Va. 1999) (citing 9 U.S.C. § 2). Section 3 of the FAA requires that:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement[.]

Id. at 532 (quoting 9 U.S.C. § 3).

         Stated differently, a presumption exists in favor of arbitration. See AT&T Techs, Inc. v. Communications Workers, 475 U.S. 643, 650 (1986) (“An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.'”) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)). Despite this presumption, the party requesting the stay bears the burden of proving that the claim is “referable to arbitration under the contract.” Hendrick, 50 F.Supp.2d at 532 (citing Carson v. Giant Food, Inc., 175 F.3d 325, 331 (4th Cir. 1999)). To determine whether the claim can be referred, “[o]rdinary state law” contract-formation principles control. Id. at 533 (citations and quotations omitted). The party requesting the stay “‘must [also] justify it by clear and convincing circumstances ...


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