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United States on Behalf of Kitchens to Go. v. John C. Grimberg, Co., Inc.

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

October 19, 2017

UNITED STATES ON BEHALF OF KITCHENS TO GO, Plaintiff,
v.
JOHN C. GRIMBERG CO., INC., et al., Defendants.

          MEMORANDUM OPINION

          T. S. Ellis, III United States District Judge

         In this breach of contract and Miller Act[1] case, plaintiff, a subcontractor on a government contract sued the prime contractor and that contractor's surety to recover payment for work performed on a federal construction project, including for costs incurred as a result of a delay not attributable to the subcontractor. After this action was filed, the prime contractor paid the subcontractor for work performed on the construction project, but not for the costs incurred by the subcontractor relating to delay. The subcontractor now seeks partial summary judgment against the surety for its delay damages. At issue on this partial summary judgment motion are the following questions:

(1) Does the Miller Act preclude the surety from relying on a no-damages-for-delay provision in the subcontract to deny reimbursement of delay costs to the subcontractor?;
(2) Can the surety rely on a dispute resolution clause in the subcontract requiring the subcontractor to await completion of the dispute resolution proceeding between the prime contractor and the owner before bringing a Miller Act suit?; and
(3) Is summary judgment on the amount of delay damages appropriate where, as here, the surety has filed a Rule 56(d) affidavit establishing that further discovery is required to arrive at the amount of delay damages?

         As the motion for partial summary judgment has been fully briefed and argued, it is now ripe for disposition.

         I. [2]

         Plaintiff, Kitchens-to-Go (“Subcontractor”), is an Illinois Limited Liability Company that supplies temporary kitchen facilities. Defendant John C. Grimberg Co., Inc. (“Prime Contractor”) is a general contractor serving the Washington D.C. area. Defendant Hartford Accident and Indemnity (“Surety”) is an insurance company that has served as surety for the Prime Contractor on federal construction projects.

         In 2012, the United States Department of the Navy (“Government Owner”) awarded Navy Contract No N40080-10-D-0492 TO #006 (“Prime Contract”) to the Prime Contractor to design and complete improvements on Building 9 at the FBI Academy in Quantico, Virginia. The Surety served as the Prime Contractor's surety for the project, issuing payment and performance bonds pursuant to the Miller Act.

         The Prime Contractor then entered into Subcontract No. 834-2-1220 (“Subcontract”) with the Subcontractor to furnish, install, lease and remove a temporary kitchen facility for the project. Article 9 of the Subcontract's Standard Terms and Conditions contains a “no-damages-for-delay” clause, which provides that the Prime Contractor shall not be liable for delays beyond its control and that the Subcontractor is “entitled only to reimbursement for any damages for delay actually recovered from the Owner.”[3]

         Further, Article 15 of the Subcontract's Standard Terms and Conditions incorporates by reference the dispute resolution procedures in the Prime Contract, providing specifically that “disputes arising out of Owner acts, omissions, or responsibilities shall be resolved in accordance with the disputes procedures in the Prime Contract.” Although the Subcontract originally required the Subcontractor to work at Quantico for a period of 13 months and 5 days from March 1, 2013 through April 5, 2014, due to start date delays and other extensions, the project was ultimately extended through June 27, 2015.

         On May 18, 2015, the Prime Contractor submitted a cost worksheet to the Government Owner detailing costs in the amount of $686, 818 attributable to the extended rental and use of the Subcontractor's temporary kitchen facilities for the delay period from February 2, 2015 through June 1, 2015. A little more than one year later, the Government Owner's Contracting Officer responded to the Prime Contractor's cost worksheet stating:

“The Navy does not hold the contract with your subcontractor for these trailers and so the lease extension is a matter between Grimberg and your sub, Kitchens-To-Go (KTG). Maintaining kitchen/cafeteria function space until the permanent kitchen/cafeteria achieves [Beneficial Occupancy Date] is Grimberg's contractual responsibility.” (Doc. 27-8 Ex. H at 2).

         The Government Owner's Contracting Officer further noted that “all costs associated with lease extensions of the temporary kitchen trailers remain Grimberg's responsibility.” Id. at 3.

         On August 2, 2016, the Subcontractor submitted an Application for Payment to the Prime Contractor requesting $734, 496. The Application included requests for (i) $127, 275 for use of the kitchen from August 2014 to September 2014 (Subcontract Balance claim); and (ii) $ 607, 221 for the extended rental of the kitchen from February 2015 through June 2015 (Extended Lease claim). On the same day-August 2, 2016-the Subcontractor filed this complaint under the Miller Act against the Prime Contractor for breach of the Subcontract and against the Surety for recovery of this amount due pursuant to the payment bond. At the time the Subcontractor filed this complaint, the Prime Contractor had more than 60 payment proposals pending with the Government Owner. Accordingly, in January 2017, the Prime Contractor moved to extend discovery until June 30, 2017. And, on January 9, 2017, an order issued extending discovery and granting a stay until June 30, 2017. On June 26, 2017, the stay was lifted to allow the Subcontractor to file the partial summary judgment motion at issue here.

         The Subcontractor filed this motion for partial summary judgment against the Surety on both the Subcontract Balance and Extended Lease claims. With respect to the Subcontract Balance claim, the Subcontractor filed a notice on August 16, 2017 stating that the Prime Contractor intended to make a payment to the Subcontractor in the amount of $127, 275. Because the Prime Contractor has agreed to pay the amount in question, this claim is moot and the Subcontractor's motion for summary judgment on this point must be denied. Accordingly, the only remaining amount in question is the Subcontractor's claim for the delay damages associated with the Extended Lease claim. With respect to the Extended Lease claim, the Subcontractor argues there is no genuine dispute of material fact that the Subcontractor provided a temporary kitchen facility during the delay period (February 2015 through June 2015) for which it was not paid and thus is entitled to payment for this on the Miller Act bond. The Subcontractor further contends that the Surety has no valid defenses under the Subcontract because a surety is not entitled to enforce a no-damages-for-delay clause under the Miller Act, and the dispute resolution clause in the Subcontract cannot be construed as a waiver of the Subcontractor's Miller Act rights.

         The Surety opposes the Subcontractor's motion, arguing that the no-damages-for-delay provision of the Subcontract provides that the Subcontractor is entitled only to reimbursement for delay costs actually recovered from the Government Owner. Because the Government Owner has thus far rejected the Prime Contractor's request for payment on the Extended Lease claim, the Subcontractor has not established an amount due under the Subcontract and thus has not stated a Miller Act claim. Furthermore, the Surety argues that the case should be stayed pending completion of the dispute resolution proceedings between the Prime Contractor and the Government Owner. Finally, the Surety contends that because discovery has not yet concluded, the Surety has not had the opportunity to determine whether a genuine issue of material fact remains as to the amount owed to the Subcontractor. These arguments are addressed in turn.

         II.

         The standard for review on summary judgment motion is too well-settled to warrant extended discussion. Under Rule 56, Fed. R. Civ. P., summary judgment is appropriate only where there is “no genuine dispute as to any material fact” such that the moving party “is entitled to judgment as a matter of law.” Celotex v. Catrett, 477 U.S. 317, 322 (1986). A genuine dispute exists if “there is sufficient evidence on which a reasonable jury could return a verdict in favor of the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating this question, courts ...


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