plaintiff initiated the present action in this Court, show plaintiff's clear intent to litigate in this Court.
The Court need not find any prejudice to defendants in order to find a waiver of an arbitration right. The court in National Foundation for Cancer Research explicitly found that while prejudice to the opposing party may be a relevant factor in determining whether the movant acted inconsistently with the right to arbitrate, it is not an essential element in showing waiver. Nat'l Found. for Cancer Research, 821 F.2d at 777. Nevertheless, the Court finds that allowing a stay of proceedings pending arbitration would prejudice defendants to a degree. When plaintiff filed the motion to stay, defendants had answered the complaint and begun discovery, demonstrating their own intent to pursue litigation in this Court rather than arbitration. They could no longer enforce the arbitration provision because they had acted inconsistently with an intent to arbitrate. Cornell, 360 F.2d at 513. Because defendants committed to resolution of the dispute in this Court, and accordingly prepared for a trial here, they would be prejudiced by compelled arbitration. This prejudice further indicates the inconsistency of plaintiff's actions with an intent to arbitrate.
This case is distinguishable from Davis Corp. v. Interior Steel Equipment Co., in which a subcontractor did not waive his right to arbitration by filing an action in federal court to protect against the statute of limitations, or by participating in minimal discovery. Davis Corp., 669 F. Supp. 32 (D.D.C. 1987). The Davis court specifically distinguished its facts from those in National Foundation for Cancer Research, stating that the subcontractor " consistently maintained that the dispute should be submitted to arbitration." Davis Corp., 669 F. Supp. at 33 (emphasis in original). In the present record, that simply is not the case. The plaintiff first mentioned arbitration after filing numerous motions with the Court, conducting discovery, and setting trial dates.
Therefore, because plaintiff has acted inconsistently with a right to arbitrate, plaintiff has waived the right to arbitration. Accordingly, the motion to stay pending arbitration is denied. The next issue before the Court is defendants' motion for summary judgment.
Choice of Law
The Court first must decide what law applies to plaintiff's substantive claims. Although the parties do not address this issue in their briefs, each alternately cites Maryland, District of Columbia, and Virginia law, thus indirectly raising the choice of law issue. The District of Columbia has long adhered to a "governmental interests analysis" approach to choice of law. Stutsman v. Kaiser Health Found., 546 A.2d 367 (D.C. 1988). This principle requires the Court to decide "which jurisdiction's policy would be most advanced by having its law applied to the facts of the case under review." Id. at 373. In this case, all parties are Maryland residents or Maryland corporations. The contract concerns a project in the District of Columbia, but that project has been substantially completed. Because the issues in the case concern the payment terms of the contract, the District of Columbia's interest in proper construction of its buildings and property is relatively insubstantial. Its policies on breach of contract and fraud do not further its interests in this case. On the other hand, Maryland's interest in enforcing contract agreements between its own citizens is comparatively strong, as is its interest in protecting its own citizens from fraud. Therefore, because Maryland has a stronger interest in the application of its laws to this case than does the District of Columbia, the Court applies Maryland law to the substantive issues.
Breach of Contract and Bond Claims
Defendants argue that an accord and satisfaction occurred when DMI accepted the "settlement" check. Accordingly, they contend that the Court should grant defendants' motion for summary judgment as to plaintiff's breach of contract and bond claims because defendants have no further obligations to DMI. The Court finds that issues of material fact remain concerning whether a valid accord and satisfaction occurred.
The Maryland Court of Appeals has used the definition of accord and satisfaction provided in Corpus Juris Secundum :
Accord and satisfaction is a method of discharging a contract or cause of action, whereby the parties agree to give and accept something in settlement of the claim or demand of the one against the other, and perform such agreement, the 'accord' being the agreement, and the 'satisfaction' its execution or performance.
Jacobs v. Atlantco Ltd. Partnership, 36 Md. App. 335, 373 A.2d 1255, 1258 (1977) (citing C.J.S. Accord & Satisfaction, § 1 (1936 & Supp. 1976)). Such an agreement, like any contract, is enforceable only if supported by consideration. Auto Trade Ass'n of Maryland v. Harold Folk Enterprises, Inc., 301 Md. 642, 484 A.2d 612, 624 (1984). Thus, if a creditor's claim is for a liquidated or undisputed sum, and the debtor offers a lesser sum in full settlement of the claim, no accord and satisfaction occurs, because no additional consideration supports the agreement. However, if a creditor's claim is for an unliquidated or disputed sum, the debtor's promise not to press the disputed claim may act as consideration in return for relinquishment of the remainder of the debt. Air Power, Inc. v. Omega Equipment Corp., 54 Md. App. 534, 459 A.2d 1120 (1983). In order for the debtor's abstention to be adequate consideration, it must involve forgoing a claim which is asserted in good faith. Thus, if defendants can successfully argue that their debts to plaintiff were disputed in good faith, their promise not to press the dispute to determine a fixed price may constitute adequate consideration to support an accord and satisfaction. However, material issues of fact remain as to whether defendants can make such a good faith argument.
The base contract price for DMI's work was $ 78,000. In August 1988, Darwin had paid $ 45,000 to DMI, leaving a remaining balance of $ 33,000. Darwin claims that, when DMI refused to remove a weather-proofing membrane, it legitimately discounted the original contract price by $ 20,000. Therefore, Darwin claims that the remaining balance on the base contract price was $ 13,000 rather than $ 33,000. However, a question of fact remains as to whether Darwin can make such a claim in good faith, as required to establish an unliquidated claim. It is unclear whether removal of the weather-proofing membrane was included in the original agreement. It is also unclear whether Darwin made DMI aware of its intent to discount the base contract price, or whether $ 20,000 appropriately reflected the cost of removal. Therefore, a material issue of fact exists concerning whether the balance remaining on the base contract was an unliquidated sum. If it was a liquidated sum of $ 33,000, DMI's acceptance of $ 28,000 does not constitute accord and satisfaction, but rather partial payment of a known debt.
In addition, Darwin received $ 40,136 from the government for extra costs claimed by DMI. That sum was based on change orders DMI submitted to Darwin when a change in demolition procedures became necessary. Of the $ 40,136 defendants claimed and received from the government, Darwin had set aside $ 34,750 for DMI. DMI never received those funds. Therefore, because Darwin received money from the government to cover DMI's costs, it is unclear whether defendants can make a good faith argument that they did not owe DMI the $ 34,750 originally set aside for it.
Thus, a factual dispute exists as to whether $ 54,750 -- the $ 20,000 deducted from the base contract price plus the $ 34,750 set aside for change order costs -- is a liquidated sum owed DMI. A resolution of disputed facts is necessary to determine whether the $ 28,000 settlement check was partial payment towards a calculable sum or was accord and satisfaction. Therefore, summary judgment is denied as to defendants' breach of contract and bond claims.
Plaintiff's third claim, that of coercion or economic duress, also depends on resolution of a factual dispute, and therefore summary judgment is improper as to this claim. Under Maryland law, duress consists of a wrongful act or threat that precludes the complaining party from exercising his free will or judgment. Meredith v. Talbot County, 80 Md. App. 174, 560 A.2d 599, 603 (1989). Further, in the case of economic duress, the defendant must also be responsible for complainant's circumstances. Shillman v. Hobstetter, 249 Md. 678, 241 A.2d 570, 578 (1968). In the present case, defendant allegedly wrongfully withheld money due DMI until it believed DMI's debt left it no choice but to accept a settlement. However, as discussed above, it is unclear whether a settlement actually occurred. In addition, questions of fact remain as to whether Darwin committed wrongful acts or threats by withholding DMI's payment. Because these issues of fact remain, summary judgment is denied as to the duress claim.
Plaintiff's fraud claim does not survive defendants' motion for summary judgment. Plaintiff first argues that defendants committed statutory fraud pursuant to Md. Real Prop. Code Ann. §§ 9-201 to 204, by withholding funds they received in trust from the government. However, as the court pointed out in United States v. Federal Insurance Company :
The Maryland Construction Trust Statute, Md. Real Prop. Code Ann. §§ 9-201 to -204 (1988 & Supp. 1989), applies only to state-financed buildings and to those subject to the Maryland mechanics' lien statute. See id. § 9-204. Of course, federal construction projects such as this are not subject to the Maryland mechanics' lien statute, which is why the Miller Act was enacted in the first place.