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Western Surety Co. v. U.S. Engineering Co.

United States District Court, District of Columbia

September 30, 2016

WESTERN SURETY COMPANY, Plaintiff,
v.
U.S. ENGINEERING COMPANY Defendant.

          TANYA S. CHUTKAN UNITED STATES DISTRICT JUDGE

          MEMORANDUM OPINION

         Plaintiff Western Surety Company brought this suit for declaratory and injunctive relief seeking to enjoin Defendant U.S. Engineering Company from compelling arbitration proceedings against Plaintiff and making a claim on a surety bond issued by Plaintiff. Defendant has filed a motion to dismiss under Rule 12(b)(6), arguing that the parties are contractually bound to arbitrate their dispute over the bond. Plaintiff responded by filing a motion for partial summary judgment solely on the issue of whether it must arbitrate its dispute with the Defendant. For the reasons stated herein, Defendant's motion will be DENIED, and Plaintiffs motion will be GRANTED

         I. BACKGROUND

         On January 25, 2012, Turner Construction and Defendant entered into a contract for Defendant to perform construction and renovation work at the South African Embassy in Washington, D.C. (ECF No. 16, Pl. Statement of Facts ("SOF") ¶ 1). Defendant then awarded a subcontract for sheet metal work on the project to United Sheet Metal, Inc. (Id. ¶ 2). The subcontract contains the following provisions that are pertinent for the pending motions:

• The introductory paragraph identifies U.S. Engineering as the "Contractor" for purposes of the contract, who enters into a "subcontract" with United Sheet Metal.
• Paragraph 26, which is entitled "Arbitration, " states:
Any controversy or claim of Contractor against Subcontractor or Subcontractor against Contractor shall be resolved by arbitration pursuant to the Construction Industry Arbitration Rules of the American Arbitration Association in effect on the date on which the demand for arbitration is made
• Paragraph 31, the Merger Clause, integrates the prior communications and representations "between Contractor and Subcontractor, " and notes that the subcontract is the "final and complete agreement between Contractor and Subcontractor."

(Pl. Ex. 1).

         After entering into the subcontract with Defendant, United Sheet Metal negotiated with Plaintiff to issue a surety bond for $585, 000. (Pl. Ex. 2). Under the terms of the surety bond:

• United Sheet Metal is named as the "Contractor, " Plaintiff is the "Surety, " and Defendant is the "Owner." (Pl. Ex. 2 at p. 1).
• "The Contractor and Surety [Plaintiff], jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the Owner [Defendant] for the performance of the Construction Contract, which is incorporated herein by reference." (Id. § 1).
• "Any proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located . .

(Pl. Ex. 2, §§15, 1, 11.)

         In early 2013, a dispute over the performance of the subcontract arose between Defendant and United Sheet Metal, which led to Defendant terminating the subcontract. (Pl. SOF ¶¶ 11-12). Defendant hired a replacement subcontractor to finish the sheet metal work, and United Sheet Metal sought to compel arbitration, seeking $331, 242 in damages. (Id. ¶¶ 13-14). Defendant filed a counterclaim for $417, 379 in damages. (Id. ¶ 14). The arbitration proceedings between Defendant and United Sheet Metal have not concluded. (Id. ¶ 15).

         On June 9, 2014, Plaintiff received a letter from Defendant stating that it had terminated United Sheet Metal's performance of the subcontract, and that Defendant intended to make a claim under the surety bond. (Id. ¶ 16). On March 4, 2015, Defendant filed a request to join Plaintiff as a party in Defendant's arbitration proceedings with United Sheet Metal. (Id. ΒΆ 18). Plaintiff refused ...


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