United States District Court, E.D. Virginia, Alexandria Division
O'Grady United States District Judge.
matter comes before the Court on Defendant Ikhana, LLC's
Motion to Stay the proceedings in this matter, Dkt. No. 24,
and a Motion for Summary Judgment brought by the Plaintiff,
The Guarantee Company of North America USA
("GCNA"). This matter arises out of a failed
contract between Defendants and the United States Government
(the "Government") to construct an access road and
screening facility at the Pentagon in Arlington, Virginia.
Defendant entered into an indemnity agreement with Plaintiff
who acted as a surety on the Government contract. Third-Party
Defendant Ed Lawrence Construction Company
("ELCCO") was a subcontractor for the Defendant.
For the reasons set forth below, the Court GRANTS
Defendant's Motion to Stay and DENIES Plaintiffs Motion
for Summary Judgment. Plaintiff may renew its motion at die
conclusion of the stay.
about September 28, 2013, Defendant entered into a contract
with the United States of America for the construction of a
Secured Access Lane and Remote Screening Facility at the
Pentagon in Arlington, Virginia (the "Project"). On
or about February 12, 2014, ELCCO and Defendant entered into
a subcontract agreement for the Project. Plaintiff issued
Miller Act payment and performance bonds for the Project.
consideration of Plaintiff s issuance of the bonds, Defendant
Ikhana, together with the other named Defendants, entered
into the Indemnity Agreement with the Plaintiff The Indemnity
Agreement provided that in the event Defendants defaulted on
their obligations as defined in the Agreement, Plaintiff
could, among other actions:
[A]ssert and prosecute any right or claim hereby assigned,
transferred or otherwise conveyed in the name of the
[Defendant] and to compromise and settle any such right or
claim on such terms as it considers reasonable under the
circumstances in its sole and absolute discretion, subject
only to the requirement that it act in good faith, which
shall be defined as the absence of deliberate or willful
Dkt. No. 28, at 6, ¶ 16.
Project encountered substantial delays and slipped more than
a year off schedule. In October 2015. Defendant submitted
numerous claims to the Army Corps of Engineers
("COE") who oversaw the project on behalf of the
United States Government. Following submission of the claims,
the COE issued a Cure Notice to Defendant. The next month,
the COE issued a Show Cause Notice to Defendant. Finally, in
December 2015, the COE terminated Defendant's contract
for default and made a claim on Plaintiffs performance bond.
Due to Defendant's termination and pursuant to the
Government's demand on the performance bond, Plaintiff
accepted a bid from Turtle Associates, LLC to perform and
complete the remaining scope of Defendant's work on the
Project. Plaintiff also made payments to three bond claimants
who were suppliers and subcontractors to Defendant.
termination of the contract spawned numerous legal
challenges. On March 29, 2016, Defendant filed an appeal with
the Armed Services Board of Contract Appeals. ASBCA Nos.
60462, 60463, 60464, and 60465. Dkt. No. 25, Exh. 1. The
appeal alleges that the COE's termination of the contract
for default was wrongful and should be construed as a
termination for convenience. The ASBCA appeal is currently
set to for a "trial" on June 21, 2017.
addition, two bond claimants filed lawsuits against Plaintiff
in this court. On March 15, 2016, suit was filed as
United States of America f/u/o Long Fence Company, Inc.
v. Guarantee Company of North America and Ikhana, LLC,
Civil Action No. 1:16-CV-283. On October 14, 2016 suit was
filed as United States of America f/u/o Ed Lawrence
Construction Company v. Guarantee Company of North America
and Ikhana, LLC, Civil Action No. 1:16-CV-1301. The
Clerk's office entered a default judgment against
Defendant Ikhana in Long Fence. l:i6-CV-283, Dkt.
"No. 17, The Court subsequently vacated the default and
dismissed the case with prejudice because the parties had
resolved their issues. l:16-CV-283, Dkt.No. 21. The latter
case, 1:16-CV-130I, is still pending before Judge Ellis. A
scheduling order has been entered in the matter with a
discovery cutoff of July 14, 2017. l:16-CV-1301, Dkt. No. 16.
two and a half months after Defendant filed the ASBCA appeal.
Plaintiff made a demand for collateral against Defendant
pursuant to the Indemnity Agreement. Plaintiff did not comply
with the demand. On September 30, 2016, Plaintiff invoked its
powers under the Indemnity Agreement (articulated above) to
enter into a settlement agreement with the Government and
dismiss Defendant's ASBCA appeal. See Dkt. No.
28, at 6, ¶ 16.
November 30, 2016, Plaintiff filed a two-count Complaint in
this Court for Indemnity (Count I) and Declaratory Judgment
(Count II). Plaintiff seeks a declaration from the Court that
it had the authority under the Indemnity Agreement to settle
Defendant's dispute with the Government and dismiss the
ASBCA appeal. Dkt. No. 1. Defendant filed an answer and a
counterclaim for breach of the Indemnity Agreement. Dkt. No.
12. Defendant also filed a third-party complaint against
ELCCO for breach of contract and indemnity. Dkt. No. 13. On
April 11, 2017, Defendant moved to stay this action until the
conclusion of the ASBCA proceedings. Dkt. No. 24. On April
14, 2017, Plaintiff moved for Summary Judgment on its
declaratory judgment claim and Defendant's counterclaim.
Dkt. No. 27.