Summary judgment denied on Miller Act claim

Where a prime contractor and its insurer argued a subcontractor’s claim for delay damages was foreclosed by the government’s decision, but the prime contract allowed the prime contractor to appeal that decision and seek additional compensation from the government for the initial delay, the argument was rejected.

Background

In 2016, Leebcor Services LLC entered into the prime contract with the United States Army Corps of Engineers, or USACE. To comply with the requirements of the Miller Act, Leebcor secured its payment obligations on the project with a payment bond from The Cincinnati Insurance Company.

Leebcor then entered into a subcontract with McKenney’s Inc. under which McKenney’s agreed to complete the plumbing, HVAC and direct digital controls systems requirements for the project.

McKenney’s sued Leebcor and Cincinnati. McKenney’s argues that it is entitled to payment of an additional $220,347.50, plus interest, which it claims represents the remaining subcontract balance. All parties filed partial motions for summary judgment. The magistrate judge’s report and recommendation concluded that disputes of material fact existed concerning all relevant claims and recommended that the court deny the motions. Defendants filed objections to the report and recommendation.

McKenney’s motion

The magistrate judge recommended that the court deny plaintiff’s motion “because reasonable jurors could conclude that [plaintiff] breached its subcontract,” and therefore plaintiff “cannot establish as a matter of law that the sums withheld are ‘payments owed by’ Leebcor under the subcontract.” Plaintiff did not object to this recommendation and the court does not find any clear error on the face of the record.

Defendants’ joint motion

Defendants contend that plaintiff’s “claim for damages from the Government-caused delay at the outset of the project is barred by clear (subcontract] language that binds [plaintiff] to any decision that the Government makes on this issue.” However, a reasonable juror could find that the USACE’s decision concerning initial delay damages is not “binding upon” Leebcor because Leebcor retains the ability to appeal the decision and seek additional compensation from the government for the initial delay. This issue alone precludes summary judgment.

Second, defendants argue that plaintiff’s “claim for compensation for allegedly out-of-scope work to protect its own ductwork fails because that work is clearly within the scope of the project.” The magistrate judge recommended that the court deny defendants’ joint motion in its entirety. Judge Miller concluded that reasonable jurors could find that protecting the ductwork in the manner prescribed by Leebcor fell outside the original subcontract scope, and therefore constituted compensable additional work.

The court agrees with this reasoning and ultimate conclusion. Reasonable jurors could conclude that no subcontract language, or language explicitly incorporated into the subcontract, required plaintiff to wrap duct before it was transported to the jobsite.

Cincinnati’s motion

Cincinnati argues that the Miller Act claim is “barred by the Miller Act’s one-year statute of limitations . . . .” Judge Miller recommended denying summary judgment on this issue, concluding that “the record contains sufficient evidence for a reasonable juror to conclude that McKenney’s provided base subcontract work after May 8, 2019, and thus timely filed its Miller Act claim against Cincinnati.” Defendants’ objections do not mention, much less identify any error in, the recommendations concerning the statute-of-limitations issue. The court finds no error on the face of the record, and therefore adopts and approves the magistrate judge’s conclusion on this issue.

Second, Cincinnati contends that it “is entitled to summary judgment on [plaintiff’s Miller Act] claim to the extent that [plaintiff] seeks damages not permitted by the Miller Act.” The magistrate judge recommended denying summary judgment on this issue, concluding that “Cincinnati [did] not identif[y] specific components of [plaintiff’s] damages that are conclusively outside the Miller Act.”

The court agrees with these findings. Cincinnati argues that plaintiff’s damages calculation for the initial delay, other delays, out-of-scope work and outstanding invoices incorporate costs which are not recoverable under the Miller Act. However, Cincinnati does not specify which costs within each of these categories a reasonable juror must find exceed the “amount unpaid,” and are therefore beyond the Miller Act’s scope.

Plaintiff’s motion for partial summary judgment denied. Defendants’ motion for partial summary judgment denied.

McKenney’s Inc. v. Leebcor Services LLC, Case No. 4:20-cv-179, Jan. 12, 2022. EDVA at Newport News (Smith). VLW 022-3-013. 22 pp.