United States District Court, D. Maryland
UNITED STATES OF AMERICA f/u/b/o AAROW ELECTRICAL SOLUTIONS, LLC Plaintiff,
CONTINENTAL CASUALTY COMPANY, et al., Defendants.
Lipton Hollander United States District Judge.
case arises under the Miller Act, 40 U.S.C. § 3131,
et seq. Plaintiff, the United States of America
f/u/b/o Aarow Electrical Solutions, LLC
(“Aarow”), a subcontractor, alleges that it
provided labor and materials to Grunley Construction Company,
Inc. (“Grunley”), the general contractor, for a
project at the Social Security Administration complex in
Woodlawn, Maryland, for which Aarow has not been paid in
full. ECF 1. Therefore, on September 1, 2016, pursuant to the
Miller Act, Aarow filed suit to recover on the payment bond
issued by Grunley's sureties, Continental Casualty
Company and Liberty Mutual Insurance Company. Id.
months later, on January 19, 2017, Grunley filed a motion to
intervene as a defendant, pursuant to Fed.R.Civ.P. 24(a) and
(b). ECF 14 (“Motion to
Intervene”).Defendants join in the motion. ECF 21.
Aarow opposes the Motion to Intervene (ECF 19,
“Opposition”), and Grunley has replied. ECF 23
(“Reply”). In addition, Grunley filed a motion to
stay the case, “pending the outcome of the Government
claims and appeals process.” ECF 16 (“Motion to
Stay”). Defendants consent to the motion (ECF 22) but
Aarow opposes it (ECF 20, “Opposition to Stay”).
Grunley has replied. ECF 24 (“Reply-Stay”).
hearing is necessary to resolve the motions. See
Local Rule 105.6. For the reasons that follow, I shall grant
the Motion to Intervene but I shall deny the Motion to Stay.
as general contractor,  entered into a construction contract
("Prime Contract") with the United States, by and
through the General Services Administration
(“Owner” or the "Government") to
perform electrical and other work at the Social Security
Administration complex in Woodlawn, Maryland (the
"Project"). ECF 1 ¶ 6. As a condition of the Prime
Contract, and pursuant to section 3131(b) of the Miller Act,
Grunley obtained “a labor and material payment
bond” (the “Bond”), secured jointly and
severally by Continental Casualty Company and Liberty Mutual
Insurance Company (collectively, "Sureties").
Id. ¶ 7; see also ECF 1-1 (Bond).
about December 26, 2013, Grunley entered into a subcontract
("Subcontract") with Aarow. Among other things,
Aarow agreed to perform certain electrical, fire alarm, and
security work for the Project for the “lump sum
price” of $3, 945, 743.00. ECF 1, ¶ 8; see
also ECF 1-2 (Subcontract.).
claims that it remains unpaid for certain work it performed
on the Project. ECF 1. In particular, Aarow contends:
“In order to perform some of its electrical work on the
Project, the Government, Grunley and Aarow scheduled a number
of power outages so that the new electrical equipment and
systems could be brought online and integrated into the
existing systems. However, for reasons unrelated to Aarow,
and in some cases unknown to Arrow, the Government cancelled
and rescheduled some of the power outages.”
Id. ¶ 9. Aarow alleges that, “[a]s a
result of the cancelled and rescheduled power outages,
Aarow's work on the Project was delayed by a total of 115
days, ” and it incurred additional costs in the amount
of $272, 756.00. Id. ¶ 10. Aarow also claims
that it incurred additional costs of $76, 572.00 as a result
of certain rescheduled fire alarm outages. Id.
¶ 14; see also Id. ¶ 13.
to Aarow, “through Grunley” it “requested
compensation from the Government for the additional time and
costs incurred as a result of the cancelled and rescheduled
power outages.” Id. ¶ 11. Then, by letter
dated February 10, 2015, the Government “unilaterally
increased” the Prime Contract price by $143, 000.00,
and “unilaterally increased the Project time by 112
calendar days, ” so as “to compensate Grunley
(and Aarow) for the additional time and costs incurred as a
result of the cancellation and rescheduling of the power
outages.” Id. Of the $143, 000.00 awarded to
Grunley by the Government, Grunley attributed $103, 235.00 to
Aarow's additional costs and paid that sum to Aarow.
Id. ¶ 12. According to Arrow, a total of $246,
093.00 remains due and owing for labor and materials that it
provided, “relating to the power and fire alarm outages
. . . after providing credit for the partial payment of $103,
235.00.” Id. ¶ 15.
letter dated June 15, 2016, “Aarow submitted its
detailed narrative, proposal, and backup information relating
to the additional monies due and owing to it for the labor
and materials it rendered to the Project relating to the
power and fire alarm outages (the ‘Claim').”
Id. ¶ 16. Two days later, by letter dated June
17, 2016, “Grunley elected to mark up Aarow's Claim
and submitted Aarow's Claim to the Government.”
Id. ¶ 16. A copy of Grunley's
“Certified Claim and Request for Final Decision”,
dated June 17, 2016, is docketed at ECF 1-3.
discussed, infra, the Government's claims and
appeals process is conducted pursuant to the Contract
Disputes Act, 41 U.S.C. 7101, et seq. However, the
Government has not yet reached a decision regarding the
facts are included in the Discussion.
The Miller Act
addressing the parties' arguments, it is helpful to
review the Miller Act.
Miller Act, 40 U.S.C. § 3131 et seq., imposes
certain obligations on the prime contractor on any
“contract of more than $100, 000 ... for the
construction, alteration, or repair of any public building or
public work of the Federal Government.” 40 U.S.C.
§ 3131(b). Of import here, the Miller Act requires the
contractor to furnish a payment bond, through a satisfactory
surety, “for the protection of all persons supplying
labor and material in carrying out the work provided for in
the contract.” Id. § 3131(b)(2).
F.D. Rich Co., Inc. v. United States f/u/o Indus. Lumber
Co., Inc., 417 U.S. 116, 122 (1974), the Supreme Court
explained that, ordinarily, a supplier of labor or materials
on a private construction project could obtain a
mechanic's lien, but such a lien “cannot attach to
Government property.” (Citing Illinois Surety Co.
v. John Davis Co., 244 U.S. 376, 380 (1917)). Because
suppliers on government projects “are deprived of their
usual security interest, ” the Miller Act “was
intended to provide an alternative remedy to protect the
rights of these suppliers.” F.D. Rich Co.,
Inc., 417 U.S. at 122. And, in U.S. for Benefit
& on Behalf of Sherman v. Carter, 353 U.S.
210, 216-17 (1957), the Supreme Court explained:
The Miller Act represents a congressional effort to protect
persons supplying labor and material for the construction of
federal public buildings in lieu of the protection they might
receive under state statutes with respect to the construction
of nonfederal buildings. The essence of its policy is to
provide a surety who, by force of the Act, must make good the
obligations of a defaulting contractor to his suppliers of
labor and material. Thus the Act provides a broad but not
achieve these purposes, the Miller Act authorizes any
“person that has furnished labor or material in
carrying out work” under a Miller Act contract and who
“has not been paid in full within 90 days after the day
on which the person did or performed the last of the labor
furnished or supplied the material” to bring “a
civil action on the payment bond.” 40 U.S.C. §
3133(b)(1). Such a civil action must be filed “in the
name of the United States for the use of the person bringing
the action.” Id. § 3133(b)(3)(A). An
action brought under 40 U.S.C. § 3133(b) “must be
brought no later than one year after the day on which the
last of the labor was performed or material was supplied by
the person bringing the action.” Id. §
law, not state statute or common law principles, controls in
Miller Act suits.” United States for use &
benefit of Tusco, Inc. v. Clark Constr. Grp., LLC, 235
F.Supp.3d 745, 756, n. 13 (D. Md. 2016); see F.D. Rich
Co., Inc., 417 U.S. at 127 (“The Miller Act
provides a federal cause of action, and the scope of the
remedy as well as the substance of the rights created thereby
is a matter of federal not state law.”).
Motion to Intervene
noted, Grunley seeks intervention under Rule 24, which
governs intervention. It provides, in relevant part:
(a) Intervention of Right. On timely motion, the court must
permit anyone to intervene who:
(1) is given an unconditional right to intervene by a federal
(2) claims an interest relating to the property or
transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical
matter impair or impede the movant's ability to protect
its interest, unless existing parties adequately represent
(b) Permissive Intervention.
(1) In General. On timely motion, the court may
permit anyone to intervene who:
(A) is given a conditional right to intervene by a federal
(B) has a claim or defense that shares with the main action a
common question of law or fact.
(2) Delay or Prejudice. In exercising its
discretion, the court must consider whether the intervention
will unduly delay or prejudice the adjudication of the
original parties' rights.
Intervention of Right In Stuart v. Huff, 706 F.3d
345 (4th Cir. 2013), the Fourth Circuit explained the
standard for intervention of right under Rule 24(a)(2). It
said, id. at 349-50 (quoting Teague v.
Bakker, 931 F.2d 259, 260-61 (4th Cir. 1991)):
[A] district court must permit intervention as a matter of
right if the movant can demonstrate “(1) an interest in
the subject matter of the action; (2) that the protection of
this interest would be impaired because of the action; and
(3) that the applicant's interest is not adequately
represented by existing parties to the litigation.”
addition to the three factors articulated in Stuart,
“timeliness is [also] a ‘cardinal
consideration' of whether to permit intervention . . .
.” Houston Gen. Ins. Co. v. Moore, 193 F.3d
838, 839 (4th Cir. 1999) (citation omitted). When assessing
the timeliness of a motion to intervene, the court “is
obliged to assess three factors: first, how far the
underlying suit has progressed; second, the prejudice any
resulting delay might cause the parties; and third, why the
movant was tardy in filing its motion.” Alt v. U.S.
EPA, 758 F.3d 588, 591 (4th Cir. 2014). “The
determination of timeliness is committed to the sound
discretion of the trial court and will not be disturbed on
appeal absent an abuse of that discretion.”
order to intervene as of right, a movant's interest in
the action must be “‘significantly
protectable'” and a movant must “stand to
gain or lose by the direct legal operation.”
Teague, 931 F.2d at 261 (quoting Donaldson v.
United States, 400 U.S. 517, 531 (1971)). “With
respect to the [adequacy] requirement [of Rule 24(a)(2)], the
Fourth Circuit has indicated that an intervenor's burden
of showing inadequacy of representation is
‘minimal.'” First Penn-Pac. Life Ins. Co.
v. William R. Evans, Chartered, 200 F.R.D. 532, 536 (D.
Md. 2001) (quoting Commonwealth of Virginia v.
Westinghouse Elec. Corp., 542 F.2d 214, 216 (4th
Cir.1976); alterations added). But, “[w]hen the party
seeking intervention has the same ultimate objective as a
party to the suit, a presumption arises that its interests
are adequately represented, against which the [movant] must
demonstrate adversity of interest, collusion, or
nonfeasance.” Virginia v. Westinghouse Elec.
Corp., 542 F.2d 214, 216 (4th Cir. 1976) (alteration
added); see also Stuart, 706 F.3d at 350.
the existing party has a legal obligation to represent the
interests of the intervenor, then the intervenor has the
“‘onerous'” burden of making a
“‘compelling showing of inadequate
representation.'” See In re Richman, 104
F.3d 654, 660 (4th Cir.1997) (quoting In re
Thompson, 965 F.2d 1136, 1142 (1st Cir.1992)) (emphasis
in In re Thompson). Indeed, “ “courts
now presume that the principal is adequately represented by
its surety because they both have the ‘same ultimate
objective, ' i.e., to avoid liability on the
payment bond.” Atl. Refinishing & Restoration,
Inc. v. Travelers Cas. & Sur. Co. of Am., 272 F.R.D.
26, 30 (D.D.C. 2010).
contends that it has satisfied all of the requirements of
Rule 24(a). ECF 14 at 3. Grunley posits that its Motion to
Intervene is timely, because the Court's Scheduling Order
of October 20, 2016 (ECF 12) set January 20, 2017, as the
deadline for motions to join additional parties. ECF 14 at 3;
see also ECF 12 at 1. Further, Grunley claims that
it “has a direct and substantial interest in this
action because if its Sureties are found liable to Aarow, the
Sureties will tum to Grunley for indemnification.” ECF
14 at 3 (citing US. ex rel. MPA Canst., Inc. v. XL
Specialty Ins. Co., 349 F.Supp.2d 934, 937 (D. Md.
2004)). With respect to the remaining factors, Grunley states
that its “ability to protect its interest may be
impaired if not allowed to intervene in the case.” ECF
14 at 3. Grunley explains, id.: “While the
Sureties may defend against Aarow's claims, given
Grunley's indemnification obligations to its Sureties,
Grunley is effectively the party ultimately responsible for
payment of the claims. The Sureties cannot adequately
represent Grunley's interests. While the Sureties and
Grunley have a common interest in defending Aarow's
claims, the two parties' interests are not fully
coextensive.” Aarow concedes that Grunley timely
submitted its Motion to Intervene and that it has an interest
in the transaction at issue. ECF 19 at 2. However, Aarow
contends that “Grunley's interests are well
represented by the Defendants, who have a vested interest in
defending Aarow's claim as best as possible to ensure
that they will be able to recover any monies awarded to Aarow
from Grunley under their indemnity agreements. In fact, the
Defendants are legally obligated by the surety's good
faith obligations to its principal to adequately represent
Grunley's interests.” Id. at 3. In
addition, Aarow argues that Grunley's proposed breach of
contract counterclaim lacks merit because to the extent that
certain provisions of the Subcontract bar Aarow from filing a
Miller Act case, they are “void as a matter of law, and
are unenforceable.” Id. at 5.
Chasanow's analysis in United States ex rel. MPA
Construction, Inc. v. XL Specialty Insurance Co., 349
F.Supp.2d 934 (D. Md. 2004), a Miller Act case, is
instructive. In that case, the “National Institute for
Health” (“NIH”) awarded a contract to
Jowett, Inc. (“Jowett”), a general contractor.
Id. at 935. Pursuant to 40 U.S.C. § 3131(b),
Jowett obtained a payment bond from Defendant XL Specialty
Insurance Co. (“XL”). Id. at 935-36.
Jowett subsequently entered into a subcontract with MPA
Construction, Inc. (“MPA”) for work on the
federal project. Id. at 936. Thereafter, MPA filed
suit against XL, pursuant to the Miller Act, alleging that it
remained unpaid for certain work it performed on the project.
moved to intervene as a defendant. Judge Chasanow determined:
“[Jowett]…clearly has a ‘direct and
substantial interest' in the transaction, because XL, if
held liable, will turn to [Jowett] for
indemnification.” Id. at 937. However, she
observed that “[w]hether [Jowett's] interests would
be impaired and whether [Jowett's] interests are
adequately represented by XL are closer questions”,
id., in part because of XL's “good faith
obligation as surety” to “defend in the present