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Paige International, Inc. v. XL Speciality Insurance Co.

United States District Court, District of Columbia

May 25, 2016

PAIGE INTERNATIONAL, INC., Plaintiff,
v.
XL SPECIALTY INSURANCE CO., et al., Defendants.

          MEMORANDUM OPINION

          JAMES E. BOASBERG United States District Judge

         Plaintiff Paige International and Defendants XL Specialty Insurance Company and its related entities are locked in a heated dispute concerning costs associated with the construction of the Marriott Marquis hotel in Washington, D.C. Paige was a subcontractor on the project, working under Truland Systems Corporation, itself a subcontractor to the prime contractor. When Truland subsequently became insolvent, it ceased work and also stopped paying Paige. Prior to Truland’s insolvency, it took out a bond with Defendants to insure against its failure to pay its subcontractors (including Paige). This suit against the insurers seeks payment under that bond.

         XL’s primary argument in defense of full payment is that it has already paid out substantial sums to the prime contractor under a separate performance bond, including reimbursement to cover costs for incomplete and shoddy work by Truland, Paige, and other subcontractors. Defendants thus argue that these costs should be subtracted from what Paige is owed under the payment bond. Determining who owes what to whom is no easy feat, as the overarching construction contract was worth well north of $370 million. To this end, XL has identified an expert, Donald Harrington, to testify at trial concerning completion-related construction costs in the hopes of reducing Paige’s recovery.

         Evidently not content to wait until trial, Paige has now fired off four separate Motions to Strike Harrington’s Report on account of dozens of alleged flaws in his methodology. While these combined Motions are quite lengthy, they can be reduced to the core contention that the contents of the Report fall short of the standard for expert testimony under Federal Rule of Evidence 702. While Plaintiff may certainly challenge Harrington’s testimony at trial, the Court does not believe that his Report should be stricken at this stage of the litigation. It will thus deny the Motions.

         1. Background

         Plaintiff Paige International, Inc. is a Washington, D.C.-based corporation that was one of many subcontractors involved in the construction of the Marriot Marquis hotel, built next to the District of Columbia Convention Center. See Compl., ¶ 2; Mot. to Strike I (ECF No. 18) at 2. As with most large construction projects, the prime contractor, Hensel Phelps Construction Company, subcontracted portions of its work, including electrical, fire alarm, security, audio visual, and telecommunications, to a subcontractor, Truland Systems Corporation. See Compl., ¶¶ 7-8; Def. Opp. (ECF No. 27) at 4. Truland, in turn, subcontracted a portion of its work - involving security, audio-visual, and telecommunications - to Paige. See Compl., ¶ 9; Opp. at 4.

         Truland purchased a payment bond from XL and its co-Defendants, pursuant to which Defendants, as sureties, pledged to make payments to those persons under contract with Truland who supplied labor, material, and equipment to the project in the event it ever failed to pay. See Comp., ¶ 10. Truland also obtained a performance bond, which similarly provided Hensel Phelps with a guarantee as to compensation in the event Truland failed to perform. See Mot. to Strike I at 2. When Truland later became insolvent and stopped performing on its contract, it also ceased making payments to its lower-tier subcontractors such as Paige. See Mot. to Strike I at 3. As a result of its failure to meet its contractual obligations, Truland was terminated by Hensel for default and subsequently filed for liquidation in bankruptcy. Id.

         Paige’s Complaint here alleges that it “provided labor, materials and equipment to Truland in partial satisfaction of Truland’s subcontract obligations to Hensel Phelps, and is hence a proper claimant under the [payment] Bond.” Compl., ¶ 11. Paige thus seeks payment for contract work completed on behalf of Truland in the amount of $1, 854, 830, id., ¶¶ 18-20; for extra work performed by Paige in accordance with proposed change orders in the amount of $462, 147, id., ¶¶ 22-23; and for additional costs incurred by Paige resulting from Truland’s breach of its implied duty of cooperation and non-interference, to the tune of $762, 768. Id., ¶¶ 26-28.

         What complicates Paige’s pursuit of reimbursement under the payment bond is that Hensel - as the prime contractor - has already sought to be made whole on the performance bond. After Truland was terminated for default, Hensel demanded that XL and co-Defendants, as sureties, honor their obligation under the performance bond to cover the costs of hiring a replacement subcontractor to complete the electrical portion of the project. See Mot. to Strike I at 3-4. XL claims it ultimately paid Hensel $3, 550, 000 under the performance bond to cover those additional costs. See Opp. at 4. As a result, XL’s defense is that payments it made under its performance bond associated with completing (and cleaning up after) Paige’s electrical work should be deducted from any payments XL makes to Paige under its payment bond.

         In preparing this likely defense, XL relies in part on the contents of an expert report completed by Donald Harrington pursuant to Fed.R.Civ.P. 26(a)(2), which governs expert witness reports disclosures. See Opp. at 2. Harrington is a senior consultant for Sage Consulting Group, which provides consulting and expert-witness services within the construction industry. See Aff. of Donald Harrington (ECF No. 27), Attach. 2, ¶ 1. Harrington’s Report assesses and allocates responsibility for specific costs associated with finishing the work Truland - and Paige - started but failed to complete.

         Seeking to exclude Harrington’s Report, Paige has filed four separate Motions to Strike, each relating to a particular aspect of the dispute:

1. Cleanup/Trash Removal Claim, see Mot. to Strike I (ECF No. 18);
2. Dry[w]all and Painting Claim, see Mot. to Strike II ...

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