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District of Columbia v. Fidelity And Deposit Co. of Maryland

United States District Court, District of Columbia

September 20, 2016

District of Columbia, for the use and benefit of STRITTMATTER METRO, LLC, Plaintiff
v.
FIDELITY AND DEPOSIT COMPANY OF MARYLAND, et al. Defendants

          MEMORANDUM OPINION AND ORDER

          COLLEEN KOLLAR-KOTELLY United States District Judge.

         In this case brought under the District of Columbia's Little Miller Act (“DCLMA”), D.C. Code § 2-201.02 et seq., Plaintiff Strittmatter Metro, LLC (“Strittmatter”) seeks to collect against the payment bond guaranteed by Defendants Fidelity and Deposit Company of Maryland (“Fidelity”) and Zurich American Insurance Company (“Zurich”) for the labor, materials, and/or equipment that Strittmatter furnished as a subcontractor on a construction project owned by the District of Columbia at Ballou Senior High School. Compl. ¶¶ 5-9. Before the Court is Defendants' [6] Motion to Dismiss or, in the Alternative, Stay Proceeding. Defendants contend that Plaintiff must first exhaust the dispute resolution procedure set out in the primary contract between the District and the prime contractor, Chiaramonte-Hess, a Joint Venture (“CHJV”) before it may seek recourse under the DCLMA. Strittmatter has opposed the motion, but Defendants have not filed a reply. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court DENIES Defendants' [6] Motion to Dismiss or, in the alternative, to Stay Proceedings.

         I. BACKGROUND

         A. The District of Columbia's Little Miller Act

         A brief review of the operation and purpose of the DCLMA is instructive at the outset in framing the analysis of Defendants' instant motion. Although the DCLMA itself has been the subject of little judicial interpretation, because it is a statute very closely modeled on the Federal Miller Act, 40 U.S.C. § 3131, it is appropriate to look to the persuasive authority of those cases interpreting its federal counterpart. See Castro v. Fidelity & Deposit Co. of Md., 39 F.Supp.3d 1, 4-5 (D.D.C. 2014) (noting the paucity of judicial analysis of the DCLMA and looking to the persuasive authority of the Federal Miller Act); Hartford Accident & Indem. Co. v. District of Columbia, 441 A.2d 969, 972 (D.C. 1982) (adopting the interpretation of the Federal Miller Act by this District in United States ex rel. Mariana v. Piracci Constr. Co., Inc., 405 F.Supp. 904 (D.D.C. 1975), in finding the DCLMA to allow a subcontractor to recover “delay damages”). See also Campbell v. Cumbari Assocs., Inc., No. 3817-84, 1987 WL 114846, at *2 (D.D.C. July 6, 1987) (“Because the District and Federal provisions are virtually in haec verba, the Court may look to cases decided under the federal law for guidance in interpreting the local statute.”).

         The DCLMA, like the Federal Miller Act, seeks to address the precarious position in which subcontractors on government projects find themselves. See, e.g., Castro, 39 F.Supp.3d at 5. In contrast to subcontractors on a private construction project, the subcontractor on a government project is generally unable to protect itself from losses occasioned by default by the prime contractor by placing a lien on the property. Id. The DCLMA seeks to fill this gap, providing protection for subcontractors such as Strittmatter by requiring the prime contractor to secure a payment bond, upon which the subcontractor may recover in the event of default by the prime contractor. Id. (reviewing the history and purpose of the Federal Miller Act and the DCLMA). See also F. D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 122 (1974) (explaining that in the absence of the traditional protection of a lien upon which subcontractors on government projects can rely, “[t]he Miller Act was intended to provide an alternative remedy to protect the rights of these suppliers”); Hartford Accident, 441 A.2d at 972 (rejecting a more limited application of the DCLMA and finding its provisions to extend to delay damages based on the guiding principle that the DCLMA's payment bond “was designed to protect subcontractors supplying labor and materials to a government project”).

         Like the Federal Miller Act, the DCLMA was fashioned with the particular purpose of providing aggrieved subcontractors with a mechanism for promptly recovering compensation. See United States v. Zurich Am. Ins. Co., 99 F.Supp.3d 543, 548 (E.D. Pa. 2015). Indeed, the Federal Miller Act was promulgated as a revision of the Heard Act and shortened the period between the completion of work by the subcontractor and accrual of the cause of action from six months to 90 days. It was Congress' intent in making this revision to remedy the “resultant hardships” to the subcontractor who, under the Heard Act, could be required to wait years following the completion of its work before he could recover the full payment due. Id. (quoting United States v. Daniel, Urbahn, Seelye & Fuller, 357 F.Supp. 853, 859 (N.D. Ill. 1973). Similarly, under the DCLMA, for a first-tier subcontractor such as Strittmatter (that is, a contractor who has contracted directly with the prime contractor), a cause of action accrues under the DCLMA 90 days following the completion of work or delivery of materials, allowing it to seek recovery from the payment bond secured by the prime contractor with no additional procedural requirements imposed by the statute. D.C. Code § 2-201.02(a). The subcontractor must bring this action within the one year of the final day of its work or delivery of materials on the government project. D.C. Code § 2-201.02(b). This clear Congressional objective of providing a speedy remedy for an aggrieved subcontractor must be borne in mind when interpreting the interplay between the Miller Act (and the District's Little Miller Act) and any dispute resolution procedures set out in the prime contract. United States ex rel. Straightline Corp. v. American Cas. Co. of Ready, Pa., No. 5:06-00011, 2007 WL 2050323, at *3 (N.D. W.Va. 2007) (“The Act ‘should receive a liberal construction to effectuate its protective purposes.'” (quoting United States ex rel. Sherman v. Carter, 353 U.S. 210, 216 (1957))).

         B. Factual Background

         The District of Columbia entered into a contract with CHJV as the general or prime contractor for construction work on Ballou Senior High School. Compl. ¶ 5. In undertaking the project, CHJV thereafter contracted with Strittmatter, a subcontractor who was to furnish materials and/or equipment and render labor on the Ballou Senior High School project. Id. ¶¶ 7, 8. In January 2013, CHJV and Strittmatter executed both a Master Subcontract Agreement for a Stipulated Sum and a Subcontract Agreement Rider, which set out the initial price of Strittmatter's services and materials at $4.9 million, with provisions allowing for an expansion of the scope of work as the project progressed. Id. ¶ 7. Strittmatter claims to have duly performed but to have received only partial payment; Strittmatter seeks to recover additional payment in excess of $1.2 million. Id. ¶ 10.

         In accordance with the District's Little Miller Act, D.C. Code § 2-201.01(a)(2) et seq., CHJV secured a payment bond, thereby securing payment to subcontractors such as Strittmatter. Compl. ¶ 6. It is upon this bond that Strittmatter seeks to collect payment in this action before the Court, with the case having been removed from the Superior Court for the District of Columbia.

         At issue before the Court in the instant motion are the provisions of the Prime Contract that govern the recourse available to CHJV as the prime contractor in the event of a dispute with the District of Columbia, and which dispute resolution procedures Defendants argue also bind Strittmatter. In short, absent agreement to the contrary, any dispute arising between CHJV and the District must first be referred to non-binding mediation, and, where mediation fails, all disputes must be brought before the District of Columbia Board of Contract Appeals. Defs.' Mot. to Dismiss at 4 (citing Article 12 of the Prime Contract). CHJV has indeed initiated the mediation process with respect to its claims against the District and has included Strittmatter's claims together with its own and on Strittmatter's behalf. Defs.' Mot. to Dismiss at 4. Strittmatter, by contrast, has sought recourse under the DCLMA in the instant action.

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint on the grounds that it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “[A] complaint [does not] suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). Rather, a complaint must contain sufficient factual allegations that, if accepted as true, “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. In deciding a Rule 12(b)(6) motion, a court may consider “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, ” or “documents upon which the ...


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