United States District Court, D. Maryland
UNITED STATES OF AMERICA EX. REL. DEBRA'S GLASS INC., Plaintiff,
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, et al., Defendants.
Xinis United States District Judge.
United States of America, for the use of subcontractor
Debra's Glass, Inc. (“DGI”) on a federal
contract, filed this action against Defendant surety, The
Insurance Company of the State of Pennsylvania
(“AIG”) pursuant to the Miller Act, 40 U.S.C.
§§ 3131- 34. ECF No. 1. AIG moved to stay the
action pending the outcome of ongoing arbitration between the
subcontractor DGI and its prime contractor on the federal
project, SEMI USA (“SEMI”). ECF No. 10. The issue
is fully briefed, and the Court now rules pursuant to Local
Rule 105.6 because no hearing is necessary. For the reasons
below, AIG's Motion to Stay Pending Arbitration is
as the prime contractor for the NASA Flight Projects Building
36 at the Goddard Space Center in Greenbelt, Maryland, had
subcontracted with DGI for glass installation and curtainwall
assemblies for the project, and then later for the
installation of terracotta tiles. ECF No. 1 at ¶¶ 8
10, 11-12. AIG was the project surety. Id. The
subcontracts between SEMI and DGI require that “any
disputes between Contractor and Subcontractor not resolved
under Paragraph 29.2 shall be finally determined by binding
arbitration in accordance with the current Construction
Industry Rules of the American Arbitration Association by one
or more arbitrators selected in accordance with said
Rules.” ECF No. 10 at 6.
the construction work was completed, a payment dispute arose
between DGI and SEMI. DGI alleges that SEMI has not paid DGI
for its work, while SEMI alleges that DGI failed to perform
the work in accordance the subcontract's terms. ECF No.
10 at 3. On May 11, 2017, SEMI filed a demand for arbitration
with the American Arbitration Association
(“AAA”), to which DGI responded with an answering
statement and counterclaim on May 30, 2017. Id.
Thereafter, on November 30, 2017, DGI filed the Complaint in
this case against the surety, AIG, to obtain prompt
collection of payments as required under the Miller Act. ECF
No. 1 at ¶ 1. DGI alleges that SEMI owes DGI $ 581,
933.38 for work performed on the subcontracts, id.
at ¶ 21, and $1, 151, 191.73 of additional
“overrun” damages arising from the related delay
in construction. Id. at ¶ 32. On January 25,
2018, AIG filed a motion to stay this case pending
arbitration. See ECF No. 10.
Motion to Stay Pending Arbitration
district court has broad discretion to stay proceedings as
part of its inherent power to control its own docket.
Landis v. North American, 299 U.S. 248, 254 (1936).
When considering a motion to stay, the Court balances
judicial economy, hardship to the moving party, and potential
prejudice to the non-moving party. American Home
Assurance Co. v. Vecco Concrete Constr. Co., 629 F.2d
961, 964 (4th Cir. 1980). The Court must “weigh
competing interests and maintain an even balance.”
Landis, 299 U.S. at 255. “[A]ny doubts
concerning the scope of arbitrable issues should be resolved
in favor of arbitration.” U.S. ex rel. MPA Const.,
Inc. v. XL Specialty Ins. Co., 349 F.Supp.2d
934, 940 (D. Md. 2004). The Federal Arbitration Act
(“FAA”) directs that this Court shall stay its
own case where the parties have agreed in writing to
arbitrate claims. See 9 U.S.C. § 3. (“If
any suit or proceeding be brought in any of the courts of the
United States upon any issue referable to arbitration under
an agreement in writing for such 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
the Subcontract's mandatory arbitration provision is
subject to the Federal Arbitration Act. See 9 U.S.C.
§ 3; XL Specialty Ins. Co., 349 F.Supp.2d at
940; accord Developers Sur. and Indem. Co. v.
Resurrection Baptist Church, 759 F.Supp.2d 665, 669-70
(D.Md. 2010). AIG has moved for a stay of this case pending
the outcome of the ongoing arbitration proceedings between
SEMI (the principal in AIG's payment bond) and Defendant
DGI. ECF No. 10 at 1. DGI contends that AIG's motion
amounts to a bald attempt to delay litigation and runs
counter to the requirements and spirit of the Miller Act,
which demand timely payment by a surety. ECF No. 12 at 2. DGI
relies heavily on this Court's decision in United
States for use & benefit of Tusco, Inc. v. Clark Constr.
Grp, LLC, 235 F.Supp.3d 745 (D. Md. 2016). See
generally ECF Nos. 12 & 16. The Court disagrees with
Tusco, the surety moved to stay the litigation,
invoking a clause in the subcontract that required exhaustion
of specific dispute resolution procedures. Id. The
Court denied the motion, finding that such an argument
“ignore[d] established case law to the effect that
‘the principal's and the surety's liability are
only coextensive to the extent permitted by the terms of the
Miller Act.' ” Tusco, 235 F.Supp.3d at
758. DGI argues that Tusco is yet one example in a
“developing national trend disfavoring the invocation
of stays by sureties to enforce payment clauses in Miller Act
cases.” See ECF No. 12 at 4.
however, neither Tusco nor any of the cases upon
which DGI relies have addressed the enforcement of
arbitration provisions governed by the Federal Arbitration
Act in the context of Miller Act claims. See Tusco,
235 F.Supp.3d at 758 (denying a stay until the parties
exhausted alternative dispute resolution proceedings);
U.S. v. Zurich American Ins. Co., 99 F.Supp.3d 543,
549-50 (E.D. Pa. 2015) (denying stay through completion of
the primary contract's dispute resolution process);
U.S. ex rel Kitchens To Go v. John C. Grimberg Co.,
283 F.Supp.3d 476, 487-88 (E. D. Va. 2017) (denying stay for
the completion of alternative dispute resolution proceedings
between the primary contract parties); U.S. v.
Continental Casualty Co., ELH-16-3047, 2017 WL 3642957,
at *15 (D. Md. Aug. 24 2017) (finding that the Contracts
Dispute Act did not support a stay of the
case). In failing to recognize this important
distinction, DGI “ignores a long history of Miller Act
cases which resolve the tension between the Miller Act and
the Federal Arbitration Act (FAA) by staying the Miller Act
claim pending arbitration of the underlying dispute.”
U.S. ex rel. MPA Const., Inc. v. XL Specialty Ins.
Co., 349 F.Supp.2d 934, 941 (D. Md. 2004) (quoting
U.S. ex rel. Tanner v. Daco Constr., Inc., 38
F.Supp.2d 1299, 1304-05 (N.D. Okla. 1999)); see also U.S.
ex rel. Milestone Tarant, LLC v. Fed. Ins. Co., 672
F.Supp.2d 92, 104 (D.D.C. 2009) (citing cases); U.S. ex
rel. Harbor Constr. Co., Inc. v. T.H.R. Enterprises,
Inc., No. 4:17-CV-146, 2018 WL 1999538, at *7 (E.D. Va.
Apr. 26, 2018).
in weighing the considerations of the Miller Act and the FAA
on a surety's motion to stay, courts have routinely found
it necessary to prioritize the FAA. See, e.g. XL
Specialty Ins., 349 F.Supp.3d at 941; Harbor Constr.
Co., 2018 WL 1999538, at *6-*7; U.S. ex rel. Vining
Corp. v. Carothers Const., Inc., No. CAR-09-438, 2010 WL
1931100, at *4-*5 (M.D. Ga. May 12, 2010); U.S. v. Sundt
Const., Inc., No. PHX-LOA-07-673, 2007 WL 1655976, at
*2-*3 (D. Az. June 7, 2007). To hold otherwise would render a
subcontract's FAA arbitration provision
“meaningless, and, in every public works project where
the subcontractor agree[d] to a similar clause, the
subcontractor could circumvent the arbitration provision by
suing the surety.” Harbor Constr. Co., 2018 WL
1999538, at *7 (quoting Tanner, 38 F.Supp.2d at
this action also makes good sense, and so the Court will
exercise its discretion in staying the case pending the
outcome of arbitration. See Landis v. North
American, 299 U.S. 248, 254 (1936). The common questions
of fact between this action and the arbitration proceedings,
as well as the risk of inconsistent outcomes, weigh heavily
in favor of a stay. This is especially so when considering
that a stay will not result in unfair delay because
arbitration is already “well underway” and formal
proceedings begin this month. See ECF No. 13 at 3-6.
Accordingly, the Court grants AIG's motion and stay this
action through the completion of arbitration proceedings.
reasons stated in the foregoing Memorandum Opinion, it is
this 13th day of June, 2018, by the United States District