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UNITED STATES EX REL. DMI, INC. v. DARWIN CONSTR.

October 12, 1990

UNITED STATES OF AMERICA, For the Use and Benefit of DMI, INC., Plaintiff,
v.
DARWIN CONSTRUCTION COMPANY, JOAN B. ROBINSON, and LESTER J. ROBINSON, Defendants



The opinion of the court was delivered by: HARRIS

 STANLEY S. HARRIS, UNITED STATES DISTRICT JUDGE

 This action is before the Court on plaintiff's motion to stay proceedings pending arbitration, and on defendants' motion for summary judgment. For the reasons set forth below, plaintiff's motion to stay is denied. Defendants' motion for summary judgment is denied in part and granted in part.

 Background

 This case arises under the Miller Act. 40 U.S.C. § 270a et seq. That Act requires that before any contract for construction of any public United States building is awarded, a performance bond and a payment bond shall be furnished to the United States, and that those bonds shall become binding upon the award of the contract. *fn1" Defendants Joan and Lester Robinson are the principal shareholders of defendant Darwin Construction Company (Darwin), a Maryland company. Darwin contracted with the United States government in September 1987 to renovate the South Building of the United States Department of Agriculture in Washington, D.C. Darwin provided a payment bond, as required by the Miller Act, but plaintiff challenges the validity of that bond.

 In November 1987, Darwin subcontracted with DMI, a Maryland company, to perform demolition and disposal of a concrete deck. The price of the subcontract was $ 78,000. DMI completed what it considered to be its full responsibilities under the agreement before signing and returning the formal written contract to Darwin. DMI and defendants disagree about what the subcontracting agreement originally included.

 At the start of the project, DMI had to revise its demolition plans in response to new restrictions placed on equipment use. As a result, DMI incurred costs well beyond its original expectations. It submitted several change order estimates to Darwin to be presented to the government for approval, each totalling around $ 75,000. According to DMI, Darwin represented that if DMI would break down its change order claims into two parts, one for demolition and the other for disposal, the government would more readily agree to the proposals. Darwin also allegedly represented that it would timely negotiate in good faith with the government to coordinate those claims. DMI accordingly split its change order claims as directed, one claim totalling $ 41,660 and the other totalling $ 34,680. Darwin subsequently settled with the government for $ 40,136 in total change order costs. It never conferred with DMI on this settlement, nor did it communicate the settlement to DMI.

 Sutton returned to Robinson's office on August 16, 1988, to collect payment. Robinson claims he offered Sutton a check for $ 28,000 on the condition that it satisfied all remaining debts to DMI, including contract price and change orders. Sutton obtained possession of the check and left the premises without signing the release Robinson had prepared. DMI denies that the $ 28,000 check settled its claim against Darwin.

 The United States brought this action on behalf of DMI, pursuant to the Miller Act, to recover money allegedly still owed by Darwin. Plaintiff charges defendants with breach of contract, default on the payment bond, coercion, and fraud. After extensive discovery and pretrial activity, plaintiff now moves to stay proceedings pending arbitration. Defendants oppose such a stay and move for summary judgment as to all of plaintiff's claims.

 Stay Pending Arbitration

 Plaintiff moves to stay the case pending arbitration, relying on an arbitration clause in the original contract between Darwin and DMI. Defendants argue that plaintiff can no longer enforce the arbitration clause because DMI has substantially invoked the litigation machinery, thereby waiving any right to arbitration. The Court agrees with defendants, and therefore denies plaintiff's motion to stay.

 According to the Federal Arbitration Act, a party to a written arbitration agreement contained in a contract involving interstate commerce may obtain a stay of a suit "providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3. Various jurisdictions have adopted conflicting standards for determining what amounts to waiver of an arbitration right. *fn2" However, the court in National Foundation for Cancer Research v. A.G. Edwards & Sons clearly laid out the rule in this Circuit: "The right to arbitrate, like any contract right, can be waived. . . . The essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right." 821 F.2d 772, 774 (D.C. Cir. 1987) (citing Cornell and Co. v. Barber and Ross Co., 123 U.S. App. D.C. 378, 360 F.2d 512, 513 (D.C. Cir. 1966)). The court further stated that "one example of conduct inconsistent with the right to arbitrate is active participation in a lawsuit." Nat'l Foundation for Cancer Research, 821 F.2d at 775.

 In the present case, plaintiff actively participated in this lawsuit for two full months before seeking to invoke the arbitration clause. It filed eight motions in this Court, requesting preliminary relief and attempting to manipulate discovery boundaries. It argued a motion for a preliminary injunction and filed a motion to compel discovery. Both parties had conducted fairly extensive discovery, and the discovery deadline had passed. Plaintiff had moved to change the trial date. The revised trial date was only two months away when plaintiff filed the motion to stay. These actions are inconsistent with an intent to enforce an ...


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