United States. v. Phila. Idemnity Ins. Co.

1

THE UNITED STATES OF AMERICA by and for the use of TECHNIQUEX SPECIALTY FLOORING, INC., Plaintiff v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant

No. 3:21cv286

United States District Court, M.D. Pennsylvania

October 22, 2024

MEMORANDUM

JULIA K.MUNLEY JUDGE UNITED STATES DISTRICT COURT

This is an action filed by Plaintiff Technique/ Specialty Flooring Inc. (“Technique/”) pursuant to the Miller Act 40 U.S.C. §§ 3131-34, for breach of a payment bond issued by Defendant Philadelphia Indemnity Insurance Company (“PI IC”).^[1] Before the court is a motion for summary judgment filed by the defendant. Having been fully briefed and argued, this motion is ripe for disposition.

Background

This dispute involves a construction project to renovate the Mission Operation Facility at the Tobyhanna Army Depot in Tobyhanna, Pennsylvania.^[2] (Doc. 41-5, Subcont. Agreement, ECF p. 27). To proceed with the renovation of this 210,000 square foot building, the United States Department of the Army executed a prime contract with Benaka, Inc. (“Benaka”) and Benaka served as the prime contractor for the project. (Id.; Doc. 41-22, SOF ¶ 1).

On September 29, 2014, and pursuant to the Miller Act, PI IC issued a payment bond for the project on behalf of Benaka. (Doc. 41-22, SOF ¶ 2). Among other things, the bond obligated defendant as the surety to pay persons furnishing labor and materials to the project in the event Benaka failed to do so. (Id. ¶ 3).

Thereafter pursuant to the prime contract, Benaka executed a subcontract with Techniquex. (Id. ¶ 1). Techniquex and Benaka agreed that the plaintiff would furnish epoxy flooring work for the project as required by the subcontract. (Id.) Work on the project was broken into six (6) phases: Phases A, B, C, D, E(a), and E(b). (Id. ¶ 4). Techniquex completed Phases A, B, and C on the project on or before October 15, 2017. (Id. ¶ 5).

Under the subcontract, Techniquex would submit periodic payment applications to Benaka as the project moved forward. (See id. ¶ 6). Per Technique/, a dispute arose in April 2017, where Benaka reduced an invoice payment by appro/imately $95,000. (Doc. 45, B. Adelmann Deci. ¶ 3). Nonetheless, work on the floors of the Mission Operation Facility continued. On August 18, 2017, Technique/ submitted Payment Application No. 7 for work on the project. (Doc. 41-22, SOF ¶ 6). Technique/ also e/ecuted a waiver that was attached to Payment Application No. 7. (Doc. 45, B. Adelmann Deci. ¶ 2). PI IC advances that Benaka approved and paid this application subject to waiver and release language that forecloses part of Technique/'s claim. Technique/ takes the position that Payment Application No. 7 underbilled Benaka for labor and materials supplied in the amount of $241,316, which plaintiff attempted to recoup in later payment applications. (Id. ¶¶ 3, 8). Technique/ asserts that it has not waived its claim to this amount.

On October 25, 2017, Technique/ submitted Payment Application No. 8 for work on the project. (Doc. 41-22, SOF ¶ 8). Benaka rejected this application on November 9, 2017. (Id. ¶ 9).

In November 2017, Benaka informed Technique/ that work on the project was temporarily suspended due to delays unrelated to epo/y flooring. (Doc. 45, B. Adelmann Deci. ¶ 7). Technique/ removed its employees from the project and did not commence work on Phases D, E(a), and E(b). (Id. ¶¶ 6-7).

Techniquex then filed a bond claim with PIIC on January 4, 2018. (Doc. 4122, SOF ¶ 10). PIIC rejected the bond claim. (Id. ¶ 11). Techniquex admits that it decided not to pursue this 2018 bond claim or litigation at that time. (Doc. 46, CSOF ¶ 13). Techniquex advances that it operated under an assumption that it would remobilize and complete work later. (Doc. 41-8, Techniquex 30(b)(6) Dep., B. Adelmann 167:1-168:3).

The project apparently languished for various reasons. But on June 11, 2020, Benaka contacted Techniquex to resume flooring work. (Doc. 41-22, SOF ¶ 14). On September 10, 2020, after COVID-19 interruptions, Techniquex's vice president, Caleb Wilhelm, travelled to the Tobyhanna Army Depot to meet with representatives from the depot and Benaka to walk the site, discuss the remaining scope of work, and schedule Techniquex's remobilization. (Doc. 45, B. Adelmann Deci. ¶ 11).

During this site visit, Wilhelm discovered dozens of epoxy containers in various sizes, which had been on the job site since 2017. (/d. ¶¶ 12-13; Doc. 4423, PI. Ex. 22, Photographs). At that time, Techniquex took the position that the materials were expired and needed to be removed and replaced as part of resuming work. (Id.) In reporting back to Techniquex in an email, Wilhelm indicated that the job site was “too much of a mess to dig through[.]” (Id., C. Wilhelm Email 09/17/2020). Per Techniquex, over the course of several hours, Wilhelm manually lifted and carried the epoxy containers and placed them back on pallets. (Doc. 45, Deci, of B. Adelmann, Deci. ¶ 13).

The expired materials and other issues eventually soured the relationship between Technique/ and Benaka. On November 4, 2020, Benaka terminated Technique/ from the project. (Doc. 41-22, SOF ¶ 16).

After it was terminated, Technique/ resubmitted Payment Application No. 8 to Benaka on December 17, 2020 and simultaneously provided PIIC with notice of its second payment bond claim. (Id. ¶ 17). Per Technique/, the resubmitted payment application and bond claim concerned the amount of $401,756.95, which included: 1) unpaid retainage of appro/imately $64,048.93; 2) the amount billed in the original Payment Application No. 8 in the amount of $96,391.31, and 3) $241,316.00 in underbilled items from Payment Application No. 7. (Doc. 45, Deci, of B. Adelmann ¶ 9).

On February 17, 2021, Technique/ filed this instant action seeking recovery of $401,756.95 from the payment bond issued by PIIC. (Doc. 1, Compl.). After a period of discovery, PIIC filed the instant motion for summary judgment. This matter is ripe for a decision.

Jurisdiction

Because this case is brought pursuant to the Miller Act, the court has jurisdiction pursuant to 28 U.S.C. § 1331. (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”).

The court also has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. Techniquex is a corporation organized under the laws of the State of Arizona with its principal place of business in Arizona. (Doc. 1, Compl. ¶ 2). PIIC is a corporation organized under the laws of the Commonwealth of Pennsylvania with its principal place of business in Pennsylvania. (Id. ¶ 4, Doc. 22, Answer, ¶4). Additionally, the amount in controversy exceeds $75,000. Because complete diversity of citizenship exists among the parties and the amount in controversy exceeds $75,000, the court has an additional basis for jurisdiction over this case. See 28 U.S.C. § 1332 (“district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different states[.]”).

Standard of Review

PIIC has filed a motion for summary judgment. Granting summary judgment is proper “ ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' ” See Knabe v. Boury Corp., 114 F.3d 407, 410 n. 4 (3d Cir. 1997) (quoting FED. R. CIV. P. 56(C)).

“[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

In considering a motion for summary judgment, the court must examine the facts in the light most favorable to the party opposing the motion. I nt'I Raw Materials, Ltd, v. Stauffer Chern. Co., 898 F.2d 946, 949 (3d Cir. 1990). The burden is on the moving party to demonstrate that the evidence is such that a reasonable jury could not return a verdict for the non-moving party. Anderson, 477 U.S. at 248. A fact is material when it might affect the outcome of the suit under the governing law. Id. Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by showing that the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant's burden of proof at trial. Celotex Corp, v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies its burden, the burden shifts to the nonmoving party, who must go beyond its pleadings, and designate specific facts by the use of affidavits, depositions, admissions, or answers to interrogatories showing that there is a genuine issue for trial. Id. at 324.

Analysis

The Miller Act governs construction projects for the federal government. Pursuant to the statute, “[b]efore any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government” a performance bond and a payment bond, “which become binding when the contract is awarded.” 40 U.S.C. § 3131(b). The performance bond protects the government. See 40 U.S.C. § 3131(b)(1). The payment bond protects “all persons supplying labor and material in carrying out the work provided for in the contract,” i.e., subcontractors. 40 U.S.C. § 3131(b)(2). As the prime contractor for the...