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Schneider Elec. Bldgs. Critical Systems, Inc. v. Western Surety Co.

United States District Court, D. Maryland

April 14, 2015



JAMES K. BREDAR, District Judge.

Pending before the Court is the petition of Schneider Electric Buildings Critical Systems, Inc. ("Schneider"), to compel Respondent Western Surety Company ("Western") to engage in binding arbitration. (ECF No. 1.) Also pending is Western's motion for leave to file surreply. (ECF No 13.) The Court has considered the various filings of the parties (ECF Nos. 8, 12, 13, 14, 15, and 16) and finds no hearing is necessary, Local Rule 105.6 (D. Md. 2014). The motion for leave to file surreply will be granted, and the petition will be dismissed.

I. Background

As recounted in the petition, the United States Army Corps of Engineers entered into a contract on August 14, 2009, with Clark Construction Group, LLC ("Clark"), "to build the USAMRICD facility" (the "Project") at Aberdeen Proving Ground in Maryland. (Pet. ¶ 15.) On October 30, 2009, Clark entered into a subcontract with Schneider "to perform building critical systems controls work on the Project" ("Schneider Subcontract"). (Id. ¶ 16.) On May 25, 2010, Schneider entered into a subcontract with National Control Services, Inc. ("NCS"), "to provide some of the labor and materials for Schneider's work on the Project" ("NCS Subcontract"). (¶¶ 1, 17.)

The contract documents in the NCS Subcontract included the "Subcontract, " "Attachment 1: Scope of Work, " the "Contractor's Contract" (referring to the Schneider Subcontract), the "Master Subcontract Agreement" between Schneider and NCS, and other documents not at issue in this case. (Pet. Ex. 1, Ex. 2.) Under the Subcontract (¶ 4), NCS was required to furnish a performance bond for 100% of the Subcontract value, which was $2, 050, 000. (Id. Ex. 1.) NCS arranged with Western for the Performance Bond. (Id. Ex. 3.) In the first paragraph of the Performance Bond, it states:

The Contractor [NCS] and the Surety [Western], jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the Owner [Schneider] for the performance of the Construction Contract [NCS Subcontract], which is incorporated herein by reference.

The Performance Bond also provided in part,

Any proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located and shall be instituted within two years after Contractor Default or within two years after the Contractor ceased working or within two years after the Surety refuses or fails to perform its obligations under this Bond, whichever occurs first.

(Id. ¶ 9.)

The petition indicates that on August 30, 2013, NCS stopped working on the Project; at that point, approximately 70% of the NCS Subcontract had been performed. (Pet. ¶ 2.) At the same time, NCS claimed entitlement "to payment of approximately $50, 000 for an August 2013 requisition and that it was entitled to additional payments of approximately $360, 000 for claims and changes." (Id. ¶ 3.) Schneider did not agree that NCS was due to receive those payments. (Id. )

Correspondence was exchanged by counsel for Schneider and counsel for NCS, and a conference call was held in September 2013, which also included Western, but Schneider and NCS did not resolve their dispute. (Pet. Ex. 4 - Ex. 6.) Thereafter, on November 12, 2013, Schneider notified NCS and Western of the termination for cause of the NCS Subcontract and demanded Western take remedial action under the Performance Bond. (Id. Ex. 7, Ex. 8.) Further correspondence was exchanged in January 2014 between Schneider's counsel and Western's counsel, highlighting their points of disagreement as to whether Western had been relieved of its obligations under the Performance Bond based upon Schneider's actions. (Id. Ex. 9.)

On February 18, 2014, Schneider filed with the American Arbitration Association ("AAA") a demand for arbitration, naming NCS as the only respondent. (Resp.'s Opp'n Ex. 1.) On April 10, 2014, Schneider filed an amended demand for arbitration, naming both NCS and Western as respondents. (Pet. Ex. 10.) Schneider has taken the position that Western is subject to the Master Subcontract Agreement's provision requiring Schneider and NCS to arbitrate disputes between them. (Pet. ¶¶ 44-47, 67-69.) Western has refused to arbitrate, contending no arbitration agreement exists between Schneider and Western. (Resp.'s Opp'n 1.)

On April 24, 2014, Western filed a petition in the Circuit Court for Howard County, Maryland, seeking a stay of arbitration and declaratory relief ("State Court Petition"). Western Surety Co. v. Schneider Electric Buildings Critical Systems Inc., No. 13C14098703, (last visited Apr. 10, 2015). See also Petition to Stay Arbitration and for Declaratory Judgment. (Pet. Ex. 12.) On the same day, Western filed with the AAA an objection to Schneider's amended demand for arbitration. (Pet. Ex. 11.) Western's State Court Petition was filed pursuant to the Maryland Uniform Arbitration Act ("MUAA"), Md. Code Ann., Cts. & Jud. Proc. §§ 3-208, 3-406, 3-409 (LexisNexis 2013). Schneider filed a motion to dismiss for improper venue; Western opposed the motion, but consented to a transfer of the case to Harford County Circuit Court. (Resp.'s Opp'n 7 n.3.) The order of transfer was signed July 24, 2014, No. 13C14098703 docket entry 6/0, and the case was transferred on August 6, 2014, Harford County Circuit Court No. 12C14002396 docket entry 1/0. On September 3, Western filed a motion for partial summary judgment. Id. docket entry 6/0. Schneider filed its answer to Western's State Court Petition on September 4 and its opposition to Western's motion for partial summary judgment on September 26. Id. docket entries 1/1, 6/1. According to Western, Schneider's September 4 answer included a request that the state court compel Western to arbitrate. (Resp.'s Status Report 1, ECF No. 15.) The state court held a hearing October 20 and conducted another motions hearing December 11, taking the matter sub curia. No. 12C14002396 docket entries 10/0, 11/0, 12/0. On February 20, 2015, the state court judge ruled no agreement to arbitrate existed between Western and Schneider and granted Western's motion for partial summary judgment as to count I of the State Court Petition. Mem. Op. and Order (Status Report Ex. A, ECF No. 15). The judge specifically ruled, "Western will not be compelled to participate in arbitration regarding the dispute between the parties to this case." Mem. Op. 12.

While the State Court Petition was pending, Schneider filed the instant federal court petition to compel arbitration on June 11, 2014. Western filed its answer on July 11. (ECF No. 8.) In a conference call with counsel, the Court ascertained that the parties did not desire or need discovery and set a date for Schneider to file its reply memorandum, which occurred on August 18. (ECF Nos. 11, 12.) Thereafter, on September 11, Western filed its motion for leave to file a surreply. (ECF No. 13.) Schneider responded on ...

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