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. The plaintiff is the United States of
America f/u/b/o Aarow Electrical Solutions, LLC
(“Aarow”). Pursuant to a subcontract agreement
entered in December 2013, Aarow provided labor and materials
to Grunley Construction Company, Inc.
(“Grunley”), the general contractor for a
construction project (the “Project”) at the
Social Security Administration complex in Woodlawn, Maryland.
See ECF 1, ¶ 8; ECF 1-2.
maintains that it has not been paid in full for the labor and
materials it contributed to the Project. See ECF 1.
Therefore, pursuant to the Miller Act, plaintiff filed suit
against Grunley's sureties, Continental Casualty Company
(“Continental”) and Liberty Mutual Insurance
Company (“Liberty”) (collectively, the
“Sureties”), to recover on the payment bond that
the Sureties had issued for the Project. Id. It
seeks $246, 093.00, plus interest and costs. Id. at
intervened as a defendant. See ECF 14 (“Motion
to Intervene”); ECF 37 (Order of August 24, 2017,
granting Motion to Intervene). In addition, Grunley filed a
counterclaim against Aarow for breach of contract (Count I)
and damages related to Aarow's alleged overcharging on
the Project (Count II). ECF 46 (Amended Counterclaim).
motions are pending. First, Aarow has moved to dismiss Count
I of Grunley's Amended Counterclaim, for breach of
contract. ECF 51. Aarow's motion is supported by a
memorandum of law. ECF 55 (collectively, “Motion to
Dismiss”). Grunley opposes the Motion to Dismiss. ECF
56. Aarow replied. ECF 59.
Aarow moved for summary judgment in its favor on its Miller
Act claim and as to Count II of Grunley's Amended
Counterclaim. ECF 60. The motion for summary judgment is
supported by a memorandum of law (ECF 60-1) (collectively,
“Aarow Motion”) and several exhibits. Defendants
oppose the Aarow Motion (ECF 64) and have submitted several
exhibits. Aarow replied. ECF 68.
same day that the Aarow Motion was filed, defendants filed a
motion for partial summary judgment. ECF 61. Defendants'
motion is supported by a memorandum of law (ECF 61-1)
(collectively, “Defendants' Motion”) and
numerous exhibits. Aarow opposes Defendants' Motion (ECF
65) and defendants replied. ECF 67.
hearing is necessary to resolve the motions. See
Local Rule 105.6. For the reasons that follow, I shall grant
the Motion to Dismiss. And, I shall grant the Aarow Motion
and Defendants' Motion in part and deny them in part.
Factual and Procedural Background
October 2013, Grunley entered into a Prime Contract with the
General Services Administration (“GSA, ” the
“United States, ” or the
“Government”) in connection with a construction
project at the Social Security Administration headquarters in
Woodlawn, Maryland. ECF 61-2 (Declaration of B.H. Scott, II),
¶ 3. As a condition of the Prime Contract, Grunley
delivered to the Government, as Owner, a labor and material
payment bond (the “Bond”), with Liberty and
Continental as the joint and several Sureties. Id.
¶ 4; ECF 1-1 (Bond). On or about December 26, 2013,
Grunley entered into a subcontract agreement with Aarow by
which Aarow was to perform electrical work for the Project.
Id. ¶ 5; see also ECF 1-2 (the
“Subcontract”). Some of Aarow's work could
only occur during scheduled power outages at the site of the
Project. ECF 61-2, ¶ 6. Two of these planned outages
(“Outage 1” and “Outage 3”) were
rescheduled by GSA, which delayed Aarow's work on the
result of these delays, in December 2014, Aarow and Grunley
submitted several change order requests to GSA, seeking
additional time and compensation for the delays. Id.
¶¶ 7-8. In total, the change order requests sought
$349, 606 in additional compensation from GSA, with $252, 101
of that amount for Aarow. Id. ¶ 8. GSA granted
the requests only in part, and issued a unilateral contract
modification to Grunley, increasing the contract price by
$143, 882. Id. ¶¶ 9-10. Of this amount,
Grunley passed through $103, 235 to Aarow. Id.
April 2015, GSA declared that the Project had reached
“substantial completion” on March 9, 2015.
See ECF 61-8 at 4 (Aarow's claim for
compensation after substantial completion). Aarow's work
on the Project was fully completed by May 16, 2016.
Id. According to Aarow, it incurred further
delay-related damages after the date of substantial
completion. Id. at 9-11. However, Aarow also signed
partial releases dated April 30, 2015, and December 31, 2015,
in exchange for payments from Grunley. See ECF 61-2,
¶ 14; see also ECF 61-7 at 1 (April 2015
Release); id. at 2 (December 2015 Release). Under
the terms of the partial releases, Aarow waived and released
any unauthorized claims against Grunley or the Sureties as of
the dates of the releases. See ECF 61-7 at 1, 2.
15, 2016, Aarow submitted a claim to Grunley, seeking
additional compensation for the delays, in the amount of
$246, 093. ECF 61-2, ¶ 15; see also ECF 61-8
(“Aarow Claim”). Grunley submitted a claim to
GSA, seeking the amount requested by Aarow, plus roughly
$100, 000 in other payments. ECF 61-2, ¶ 16; ECF 61-9
(“Grunley Claim”). This suit by Aarow followed on
September 1, 2016. ECF 1.
on March 30, 2017, GSA denied the Grunley Claim, and instead
sought $43, 194.15 in repayment from Grunley. ECF 61-2,
¶ 17; see ECF 61-10 (“Government
Claim”). The Government Claim consisted of a demand for
$26, 778.78 in liquidated damages and $16, 415.37 for
“labor overcharging.” ECF 61-2, ¶ 17.
Grunley appealed the denial to the U.S. Civilian Board of
Contract Appeals (“CBCA”) on June 26, 2017.
Id. ¶ 18. On November 27, 2017, Grunley and GSA
settled both the Grunley Claim and the Government Claim with
a payment of $105, 000 from GSA to Grunley. Id.
¶ 23. According to Grunley, Aarow's share of this
recovery is $25, 957, minus Aarow's pro rata share of the
costs of the claim. Id.
noted, Aarow filed this suit against the Sureties on
September 1, 2016. ECF 1. In January 2017, Grunley moved to
intervene (ECF 14, “Motion to Intervene”) and
concurrently moved to stay the case pending the resolution of
its appeal before the CBCA. ECF 16 (“Motion to
Stay”). One of the central arguments of Grunley's
Motion to Stay was that the Subcontract contained two clauses
that Grunley asserted would limit Aarow's recovery.
particular, the Subcontract provided, in regard to payments
due to Aarow, ECF 1-2, ¶ 6: “Payment from the
Owner [i.e., the Government] is a specific condition
precedent to the Contractor's obligation to pay the
Subcontractor . . . .” This clause is known as a
“pay-if-paid” or “pay-when-paid”
clause. Furthermore, the Subcontract also specified,
id. ¶ 12:
The Contractor shall not be independently liable to
Subcontractor for any unforeseeable delay or interference
occurring beyond the Contractor's control or for delay or
interference caused by Owner or other subcontractors or
suppliers. Subcontractor shall only be entitled to
reimbursement for any damages for delays recovered on its
behalf by the Contractor from the Owner or others.
clause is known as a “no-damages-for-delay”
argued in its Motion to Stay that the case must be stayed
while Grunley's appeal with the Government was pending
because, under these clauses of the Subcontract, “Aarow
has no damages unless and until Grunley recovers the sum from
the Government.” ECF 16 at 11.
Memorandum Opinion (ECF 36) and Order (ECF 37) of August 24,
2017, this Court granted the Motion to Intervene but denied
the Motion to Stay. The Court ruled that, if a stay were
granted and the Subcontract clauses in question were
enforced, Aarow could be effectively denied its rights under
the Miller Act. See ECF 36 at 24-26. As a result,
the Court concluded that “Grunley may not rely on the
conditional payment clauses of the Subcontract to delay the
Miller Act suit against its sureties.” Id. at
Choice of Law
maintain that the Subcontract is governed by Virginia law.
ECF 61-1 at 15; see also ECF 1-2, ¶ 39
(providing that “[t]his Agreement shall be governed by
the laws of the Commonwealth of Virginia”). Aarow
appears to agree. See ECF 65 at 10. Where the
question is one of contract interpretation and not the
construction of the Miller Act itself, courts look to state
law. See United States for Use & Benefit of Shields,
Inc. v. Citizens & S Nat. Bank of Atlanta,
Ga., 367 F.2d 473, 477 (4th Cir. 1966); see also
United States v. Hartford Accident & Indem. Co., 168
F.Supp.3d 824, 832 (D. Md. 2016).
Maryland, choice of law provisions in contracts are
enforceable unless the choice of law jurisdiction has no
substantial relationship to the transaction, or there is a
fundamental policy difference in the laws of another
jurisdiction with a more substantial interest in the parties
or the transaction.” United States for use &
benefit of Tusco, Inc. v. Clark Constr. Grp., LLC, 235
F.Supp.3d 745, 753 (D. Md. 2016). Observing no such
considerations here, I shall apply Virginia law to the
“[f]ederal law, not state statute or common law
principles, controls in Miller Act suits.”
Tusco, 235 F.Supp.3d at 756 n.13; see also F. D.
Rich Co. v. U.S. for Use of Indus. Lumber Co., 417 U.S.
116, 127 (1974) (“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.”). As a result, for all
questions relating to the interpretation and application of
the Miller Act, I shall apply federal law.
noted, Aarow has moved to dismiss Count II of Grunley's
Amended Counterclaim. ECF 51. A defendant may test the legal
sufficiency of a complaint, or a counterclaim, by way of a
motion to dismiss under Rule 12(b)(6). In re
Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines
v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th
Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393,
408 (4th Cir. 2010), aff'd sub nom. McBurney v.
Young, 569 U.S. 221 (2013); Edwards v. City of
Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule
12(b)(6) motion constitutes an assertion by a defendant that,
even if the facts alleged by a plaintiff are true, the
complaint fails as a matter of law “to state a claim
upon which relief can be granted.”
Whether a complaint states a claim for relief is assessed by
reference to the pleading requirements of Fed.R.Civ.P.
8(a)(2). That rule provides that a complaint must contain a
“short and plain statement of the claim showing that
the pleader is entitled to relief.” The purpose of the
rule is to provide the defendant with “fair
notice” of the claims and the “grounds” for
entitlement to relief. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-56 (2007).
survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint
must contain facts sufficient to “state a claim to
relief that is plausible on its face.”
Twombly, 550 U.S. at 570; see Ashcroft v.
Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in
Twombly expounded the pleading standard for
‘all civil actions' ..... (citation omitted));
see also Willner v. Dimon, 849 F.3d 93, 112 (4th
Cir. 2017). But, a plaintiff need not include “detailed
factual allegations” in order to satisfy Rule 8(a)(2).
Twombly, 550 U.S. at 555. Moreover, federal pleading
rules “do not countenance dismissal of a complaint for
imperfect statement of the legal theory supporting the claim
asserted.” Johnson v. City of Shelby, Miss.,
U.S., 135 S.Ct. 346, 346 (2014) (per curiam).
the rule demands more than bald accusations or mere
speculation. Twombly, 550 U.S. at 555; see
Painter's Mill Grille, LLC v. Brown,716 F.3d 342,
350 (4th Cir. 2013). If a complaint provides no more than
“labels and conclusions” or “a formulaic
recitation of the elements of a cause of action, ” it
is insufficient. Twombly, 550 U.S. at 555. Rather,
to satisfy the minimal requirements of Rule 8(a)(2), the
complaint must set forth “enough factual matter (taken
as true) to suggest” a cognizable cause of action,
“even if . . . ...