United States District Court, D. Maryland
UNITED STATES OF AMERICA for the use and benefit of BALTIMORE STEEL ERECTORS, LLC
THE HANOVER INSURANCE COMPANY
DEBORAH K. CHASANOW UNITED STATES DISTRICT JUDGE
pending and ready for resolution is Defendant's motion to
compel arbitration and stay action. (ECF No. 7). The issues
are fully briefed and the court now rules, no hearing being
deemed necessary. Local Rule 105.6. For the following
reasons, Defendant's motion will be denied.
following facts are undisputed except where otherwise noted.
The United States awarded a construction contract
(“prime contract”) to ARGO Systems, LLC
(“ARGO”) as general contractor on or about June
27, 2016. (ECF No. 1 ¶ 6). The prime contract was for
the construction of the Fort Meade Department of Public Works
Building, Fort George C. Meade, Hanover, Maryland.
(Id. ¶ 5). Because the prime contract was
awarded for the construction of a federal building and
exceeded $100, 000 in value (see Id. ¶ 7), ARGO
was required by § 3131(b) of the Miller Act, 40 U.S.C.
§ 3131(b), to furnish the United States with a payment
bond. “ARGO, as [p]rincipal, and [Hanover
Insurance Company (‘Defendant' or
‘Surety')], as surety, issued [a payment bond] in
the penal sum of $6, 900, 000.00 . . . to assure payment to
subcontractors and materialmen who performed work and/or
provided labor, materials[, ] and services . . . in
connection with the work required by the subcontract.”
(ECF No. 1 ¶ 7). ARGO, thereafter, awarded Plaintiff,
Baltimore Steel Erectors, LLC (“Plaintiff” or
“Baltimore Steel”), a subcontract for steel
fabrication and erection services. (ECF Nos. 1 ¶ 8; 7-1).
Article 14 of the subcontract states, in pertinent part:
“All claims, disputes, and matters in question arising
out of or relating to this Agreement or the breach thereof .
. . shall be decided by arbitration[.]” (ECF No. 7-1, at
6). Plaintiff alleges that ARGO has yet to pay Plaintiff
$153, 846.13 for its completed work, labor, materials, and
services under the subcontract. (ECF No. 1 ¶ 10).
timely filed this Miller Act suit against Defendant on August
20, 2018 to recover on the payment bond. Plaintiff seeks
damages totaling $153, 846.13, plus interest, attorney's
fees and the costs of these proceedings. (ECF No. 1, at 4).
Defendant filed a motion to compel arbitration and stay
action on October 23, 2018. (ECF No. 7). Plaintiff responded
in opposition to Defendant's motion on November 19, 2018.
(ECF No. 9).
the Miller Act, a subcontractor may sue the surety alone
without inclusion of the contractor as a defendant.
United States ex rel. Hudson v. Peerless Ins. Co.,
374 F.2d 942, 945 (4th Cir. 1967) (noting that the
Miller Act confers a right to sue on the payment bond
“independent of any right to sue the
contractor”); United States ex rel. Henderson v.
Nucon Constr. Corp., 49 F.3d 1421, 1423 (9th
Cir. 1995) (“[A]ll courts to consider the question have
concluded that a surety alone may be sued by a subcontractor
under the Miller Act.”). Sureties are not entitled to
enforce certain contract provisions “despite the fact
that ‘the general rule of suretyship law' is that a
‘surety's liability is coextensive with that of the
principal.'” United States ex rel. Tusco, Inc.
v. Clark Constr. Grp., LLC, 235 F.Supp.3d 745, 756-57
(D.Md. 2016) (quoting United States ex rel. Walton Tech.,
Inc. v. Weststar Eng'g, Inc., 290 F.3d 1199, 1205-06
(9th Cir. 2002)). “In Miller Act cases, the
liability of sureties is ‘at least coextensive with the
obligations imposed by the Act.'” Id. at
757 (quoting Walton Tech., 290 F.3d at 1206).
timely sued Defendant, the contractor's surety, for money
owed under the payment bond, thus satisfying the Miller Act.
Further, a surety cannot enforce an arbitration agreement
between the subcontractor and contractor in this
circumstance. See United States ex rel. N.U., Inc. v.
Gulf Ins. Co., 650 F.Supp. 557, 559 (S.D.Fl. 1986)
(“[A]n arbitration clause in a Subcontract between the
subcontractor and the contractor [is] ineffective as to the
contractor's surety.”) (citing United States ex
rel. Portland Constr. Co. v. Weiss Pollution Control
Corp., 532 F.2d 1009, 1012 (5th Cir. 1976));
see also Progressive Cas. Ins. Co. v C.A. Reaseguradora
Nacional De Venezuela, 991 F.2d 42, 48 (2d
Cir. 1993) (incorporated arbitration provision bound only the
“contracting parties” to arbitrate). Defendant is
not a contracting party to the relevant arbitration clause,
nothing in the record indicates that arbitration is ongoing
between Plaintiff and ARGO, and Defendant provides no
analogous case supporting its request to stay this action.
Moreover, the competing discretionary factors weigh against a
stay, as the only hardship Defendant may face is fulfilling
its purpose under the Miller Act - to “make good the
obligations of a defaulting contractor to his suppliers of
labor and material.” United States ex rel. Sherman
v. Carter, 353 U.S. 210, 216-17 (1957); see Gulf
Ins. Co., 650 F.Supp. at 559 (rejecting contention that
surety would be subject to inconsistent results because
claims under alternate dispute resolution clauses in
subcontracts have “no effect on a subcontractor's
Miller Act claim.”); United States ex rel. Pembroke
Steel Co. v. Phoenix Gen. Constr. Co., 462 F.2d 1098,
1099 (4th Cir. 1972) (finding that a subcontractor
need not submit Miller Act disputes to an agreed-upon
alternate dispute resolution process unless it waived
“the right to sue the prime contractor . . . ‘by
clear and express provisions' in the subcontract”).
Accordingly, Defendant's motion will be denied.
foregoing reasons, Defendant's motion to compel
arbitration and stay action will be denied. A separate order
 40 U.S.C. § 3131(b) states, in
relevant part: “Before any contract of more than $100,
000 is awarded for the construction . . . of any public
building or public work of the Federal Government, a person
must furnish to the Government . . . [a] payment bond with
surety satisfactory . . . equal[ing] the total amount payable
by the terms of the contract[.]”
 As required by 40 U.S.C. §
3133(b)(3)(A), Miller Act recovery suits are “brought .
. . in the name of the United States for the use of the
person bringing the action.” However, as this action is
being brought for the use and benefit of Baltimore ...