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Tower Ins. Co. of New York v. Davis/Gilford

United States District Court, District of Columbia

September 6, 2013

TOWER INSURANCE COMPANY OF NEW YORK, Plaintiff,
v.
DAVIS/GILFORD, A JOINT VENTURE, Defendant

Page 73

For TOWER INSURANCE COMPANY OF NEW YORK, Plaintiff: Barbara G. Werther, OBER KALER GRIMES & SHRIVER, PC, Washington, DC.

For DAVIS/GILFORD, A JOINT VENTURE, Defendant: Stephen M. Seeger, LEAD ATTORNEY, SEEGER, FAUGHNAN, MENDICINO, P.C., Washington, DC; Jesse Spencer Keene, SEEGER, PC, Washington, DC.

OPINION

Page 74

MEMORANDUM OPINION

REGGIE B. WALTON, United States District Judge.

This case arises from a dispute between the plaintiff, Tower Insurance Company of New York (" Tower" ), and the defendant,

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Davis/Gilford, A Joint Venture (" Davis/Gilford" ), regarding Tower's purported obligations under a performance bond issued by Tower guaranteeing work performed under a subcontract executed between Davis/Gilford and Punch Out Specialist Team. Complaint (" Compl." ) ¶ ¶ 13-15, 21. On March 13, 2013, Davis/Gilford instituted arbitration of the parties' dispute. Id. ¶ 19. Tower's Motion to Stay Arbitration (" Pl.'s Mot." ) and Davis/Gilford's Motion for Summary Judgment, or In the Alternative, Motion to Dismiss (" Def.'s Mot." ) are currently before the Court. After careful consideration of the parties' submissions,[1] the Court concludes that it must deny Tower's motion to stay arbitration and grant Davis/Gilford's motion for summary judgment.

I. BACKGROUND

The following facts are undisputed unless otherwise noted. Davis/Gilford is the general contractor for the construction of a project known as the Residences at Progression Place, located in the District of Columbia. Pl.'s Mem. at 4 ¶ 1; Def.'s Mem. at 3 ¶ 1. On May 25, 2011, Davis/Gilford entered into a subcontract with Punch Out Specialist Team (" POST" ) to perform certain work on the project for the amount of $2,281,400.00. Pl.'s Mem. at 4 ¶ 3; Def.'s Mem. at 3 ¶ 2; see also Pl.'s Mem., Exhibit (" Ex." ) 1 (Subcontract Agreement between Davis/Gilford, A Joint Venture and POST (" Subcontract" )) at 1. The Subcontract contained the following provision (" Disputes Clause" ):

Disputes arising out of Owner acts, omissions, or responsibilities shall be resolved in accordance with the disputes procedures in the Prime Contract. Subcontractor shall have the right to exercise those rights at its sole cost and shall be bound thereby. DAVIS/Gilford, a Joint Venture shall have no direct liability except to give Subcontractor opportunity to exercise rights in the Prime Contract. Disputes with DAVIS/Gilford, a Joint Venture shall be resolved by arbitration in accordance with the rules of the American Arbitration Association and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Disputes shall not interfere with the progress of the job. Work shall proceed as ordered, subject to claim.

Pl.'s Mem. at 11 ¶ 33; Def.'s Mem. at 4 ¶ 3; see also Pl.'s Mem., Ex. 1 (Subcontract) at 4.

On or about June 1, 2012, Tower issued a performance bond guaranteeing POST's work on the project in the amount of $2,281,400.00. Pl.'s Mem. at 10 ¶ 26; Def.'s Mem. at 4 ¶ 6; see also Pl.'s Mem., Ex. 5 (Performance Bond) at 1, 3. The Performance Bond states that the " Subcontract [between Davis/Gilford and POST] is hereby referred to and made a part hereof." Pl.'s Mem. at 12 ¶ 36; Def.'s Mem. at 4 ¶ 7; Pl.'s Mem., Ex. 5 (Performance Bond) at 1. In the event of POST's default on the Subcontract, the Performance Bond provides that " the Surety shall

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within thirty (30) calendar days after notice of default from the Contractor, notify the Contractor in writing of its election either to promptly proceed to remedy the default or promptly proceed to complete the work of the Subcontract in accordance with and subject to its terms and conditions." Pl.'s Mem., Ex. 5 (Performance Bond) at 2; Def.'s Mem. at 5 ¶ 11. Tower now contends that this Performance Bond was obtained through fraud. Pl.'s Mem. at 12 ¶ 37.

On August 13, 2012, Davis/Gilford terminated POST for defaulting on the Subcontract and subsequently notified Tower of POST's default. Pl.'s Mem. at 10 ¶ 28; Def.'s Mem. at 4 ¶ ¶ 9-10. Tower ultimately elected to complete the work under the Subcontract, Pl.'s Mem. at 11 ¶ 29; Def.'s Mem. at 5 ¶ 12, and the parties subsequently negotiated a written agreement memorializing Tower's election,[2] see Def.'s Opp'n at 9-11 ¶ ¶ 14-26; Pl.'s Reply, Ex. 1 (Takeover Agreement); see also Pl.'s Opp'n at 7 ¶ 15. The agreement states that " Tower is taking over the Subcontract as if it were the original contracting party and is responsible for, and shall perform all the obligations required by, the Subcontract in accordance with its terms and conditions." Pl.'s Reply, Ex. 1 (Takeover Agreement) at 1. It also provides that " [t]he terms of the Subcontract are incorporated into this Agreement by reference [and that n]othing in this Agreement affects any of the rights and obligations of [Davis/Gilford] or Tower under the terms of the Subcontract or the Performance Bond." Id. at 3. The parties exchanged final drafts of the agreement for signature, but never completed executed copies of the agreement. See Def.'s Opp'n at 11-12 ¶ ¶ 25-30.

Davis/Gilford filed a Demand for Arbitration against Tower with the American Arbitration Association on March 13, 2013. Pl.'s Mem. at 11 ¶ 30. Tower has participated in the ongoing arbitration proceedings subject to a reservation of its objection to the arbitral tribunal's jurisdiction. Pl.'s Mem. at 11 ¶ ¶ 31-32.

Tower instituted this suit on May 29, 2013, seeking a declaration from this Court that it " is not required to arbitrate its personal surety claims or defenses of alleged fraud in the inducement in connection with issuance of the performance bond or payment bond" and an injunction " directing Davis/Gilford to refrain from continuing with the [American Arbitration Association] arbitration which purports to determine Tower's alleged fraud in the inducement claims." Compl. ¶ ¶ 30-41. Tower filed a Motion to Stay Arbitration and a Request for Expedited Hearing that same day. The Court denied Tower's Request for Expedited Hearing, finding that it had not satisfied, or even pled, the requirements for showing entitlement to expedited injunctive relief. ECF No. 7 at 1-2. In conjunction with filing its opposition to Tower's Motion to Stay Arbitration, Davis/Gilford moved for summary judgment or, in the alternative, for dismissal.

II. LEGAL STANDARD

A motion to compel arbitration pursuant to ยง 4 of the ...


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