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United States v. Federal Insurance Co.

December 10, 2009

UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF MILESTONE TARANT, LLC, AND HIGHLAND ORNAMENTAL IRON WORKS, INC., PLAINTIFFS,
v.
FEDERAL INSURANCE COMPANY, DEFENDANT.
MILESTONE TARANT, LLC, AND HIGHLAND ORNAMENTAL IRON WORKS, INC., PLAINTIFFS,
v.
MANHATTAN CONSTRUCTION COMPANY DEFENDANT.



The opinion of the court was delivered by: Royce C. Lamberth Chief Judge United States District Court

MEMORANDUM OPINION

This matter is before the Court on several separate motions in two related actions which the Court will consider together for the sake of expediency. In Milestone Tarant, LLC v. Federal Insurance Company, Civ. No. 08-2186(or "Miller Act case"), Milestone Tarrant, LLC/Highland Ornamental Iron Works, Inc., a Joint Venture ("Joint Venture")filed suit against surety bond issuer Federal Insurance Company ("FIC") under the Miller Act, 40 U.S.C. § 3133 et seq. In that action, Joint Venture seeks $7,791,475 that is allegedly owed to it by the Manhattan Construction Corporation ("Manhattan") for work Joint Venture engaged in to enhance the Capitol Visitor Center in Washington, D.C. Manhattan later filed for arbitration with the American Arbitration Association ("AAA") and served its demand on Joint Venture. In Milestone Tarant, LLC v. Manhattan Construction Co., Civ. No. 09-1941, Joint Venture filed a motion for a preliminary injunction against Manhattanto halt the parties' arbitration [#2]. In response, Manhattan filed a motion to compel arbitration [#7] and a motion to dismiss Joint Venture's complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) [#11]. Subsequent to Manhattan's demand for arbitration, FIC moved for a stay in the Miller Act case pending the resolution of arbitration between Manhattan and Joint Venture [#8]. Upon consideration of the motions, the oppositions thereto, and the records of these cases, the Court concludes that Manhattan's motions to dismiss and compel arbitration and FIC's motion to stay must be granted and Joint Venture's motion for a preliminary injunction must be denied as moot.

I. FACTUAL BACKGROUND

In 2003, Manhattan awarded a subcontract to Joint Venture for the fabrication and installation of bronze railings, windows, and doors at a construction project known as the "Capitol Visitor's Center." 2008 Compl. ¶ 5, 7, Ex. 2 at 1-3 (Subcontract).*fn1 Earlier that year, FIC had issued a payment bond naming Manhattan as the principal and the United States as the obligee. 2008 Compl. ¶ 6, Ex. 1 at 1 (Bond). Under the payment bond and pursuant to the Miller Act, FIC agreed to compensate any subcontractor for labor and materials furnished for the subcontract in the event Manhattan was unable to pay. Id.

The payment due to Joint Venture under the original contract was $8.3 million, and the work was to be completed by December of 2005. 2008 Compl. ¶ 7-8, Ex. 2 at 1, 7 (Subcontract). For reasons that are disputed and not relevant to resolving the motions currently before the Court, the project was not completed until late in 2008. 2008 Compl. ¶ 8. In total, Joint Venture alleges that it spent over $16 million in completing the project as a result of the delay, id. ¶ 13, but has only been paid $11 million by Manhattan, id. ¶ 14.

In December 2008, Joint Venture initiated a lawsuit against FIC pursuant to its rights under the Miller Act. In Milestone Tarant, LLC v. Federal Insurance Company, Joint Venture seeks to recover from FIC the reasonable value of its services performed but not yet paid by Manhattan, 2008 Compl. ¶ 19, and has asked for a jury trial. Neither party has sought to join Manhattan, the general contractor, to the case. Both parties have engaged in limited discovery since the inception of the suit roughly 11 months ago.

On September 30, 2009, Manhattan, pursuant to what it contends were its rights under the subcontract with Joint Venture, filed for arbitration with the AAA and served its demand on Joint Venture. In its demand for arbitration, Manhattan asserts that Joint Venture's delays and defective performance constituted a breach of the subcontract, and that they are owed "no less than $3 million" by Joint Venture. The "Settlement of Disputes" section of the subcontract between Manhattan and Joint Venture contains the following provision:

All other disputes between the parties shall be resolved by litigation, in a court of competent jurisdiction, except that Manhattan may, at its sole option, require that any dispute be submitted to arbitration pursuant to the Construction Industry Rules of the American Arbitration Association except that all arbitrators shall be attorneys with at least ten (10) years experience in construction law. The election by Manhattan shall be made no later than thirty (30) days following receipt of service of process of any such litigation from Subcontractoror, if the claim is asserted by Manhattan, shall be made upon the filing of a demand for arbitration by Manhattan. Notwithstanding the above, Manhattan shall not be deemed to have waived any right it may have to arbitrate its dispute with Subcontractor by the filing of litigation against Subcontractor and its surety.

Def.'s Mot. to Stay at 4, Ex. A at 5, § 3.5 (Subcontract).

Subsequent to Manhattan's demand for arbitration, FIC moved for a stay in Milestone Tarant, LLC v. Federal Insurance Company pending the resolution of arbitration between Manhattan and Joint Venture. Joint Venture then filed suit against Manhattan on October 14, 2009, seeking to stay the arbitration with Manhattan. 2009 Compl. at 9. On the same day, Joint Venture filed a motion for a preliminary injunction against Manhattan to halt the parties' arbitration. Manhattan thereafter filed a motion to compel arbitration on October 22, 2009 and a motion to dismiss the complaint on October 28, 2009. Joint Venture seeks to resolve the contract dispute through its Miller Act suit against FIC. Manhattan and FIC both seek to resolve the dispute through arbitration between Manhattan and Joint Venture.

II. LEGAL STANDARD

When considering "a motion to stay proceedings and/or compel arbitration, the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions" pursuant to Federal Rule of Civil Procedure 56(c). Brown v. Dorsey & Whitney, LLP, 267 F. Supp. 2d 61, 67 (D.D.C. 2003) (internal quotation marks omitted). Therefore, it is appropriate to grant such motions when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

The party seeking to compel or stay arbitration bears the initial responsibility of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining whether there is a genuine issue of material fact sufficient to preclude summary judgment, the non-movant's statements should be accepted as true and all inferences should be drawn in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The non-moving party, however, must establish more than the "mere existence of a scintilla of evidence" in support of its position. Id. at 252. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (internal citations omitted).

II. MANHATTAN's MOTION TO COMPEL ARBITRATION*fn2

A. Legal Standard for Motion to Compel ...


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