STUART C IRBY COMPANY v. EASTWAY ELECTRIC LLC et al, No. 4:2014cv00047 - Document 36 (M.D. Ga. 2015)
Court Description: ORDER granting 28 Motion for Summary Judgment and denying 29 Motion for Summary Judgment. Ordered by US DISTRICT JUDGE CLAY D. LAND on 6/15/2015 (tlf).
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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA COLUMBUS DIVISION UNITED STATES OF AMERICA ex rel. STUART C. IRBY CO., * * Plaintiff, * vs. CASE NO. 4:14-CV-47 (CDL) * PRO CONSTRUCTION, INC., and WESTERN SURETY CO., * Defendants. * O R D E R Defendant Pro Construction, Inc. was awarded a federal contract to build a gas station on Fort Benning, Georgia. Construction subcontracted Eastway Electric, L.L.C. the electrical work to Pro Defendant Eastway failed to pay its materialman, Plaintiff Stuart C. Irby Company (“Irby”). The United States for the use and benefit of Irby brought suit against Eastway for breach of contract and against Defendants Pro Construction and Western Surety Co. for payment under the Miller Act, 40 U.S.C. § 3131 et seq. Default judgment was entered against Eastway. Irby has now filed a motion for summary judgment (ECF No. 28) on its claims against Pro Construction and Western Surety Co., arguing that it is entitled to recover on its Miller Act claim as a matter of law. Pro Construction and Western Surety Co. respond with a summary judgment motion of their own (ECF No. 29), contending that the undisputed evidence establishes that Irby did not timely notify Pro Construction of its claim and did not have a good faith belief that the materials it supplied were for the work specified in the applicable contract, and thus Irby cannot prevail on its Miller Act claim. For the reasons set forth below, Irby’s motion for summary judgment is granted and Defendants’ motion is denied. SUMMARY JUDGMENT STANDARD Summary judgment may be granted only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Civ. P. 56(a). In determining whether a genuine Fed. R. dispute of material fact exists to defeat a motion for summary judgment, the evidence is viewed in the light most favorable to the party opposing summary judgment, drawing all justifiable inferences in the opposing party’s favor. 477 U.S. 242, 255 (1986). Anderson v. Liberty Lobby, Inc., A fact is material if it is relevant or necessary to the outcome of the suit. Id. at 248. A factual dispute is genuine if the evidence would allow a reasonable jury to return a verdict for the nonmoving party. Id. The Court will consider each party’s motion on its own merits, resolving all reasonable inferences under consideration. against the party whose motion is Am. Bankers Ins. Gr. v. United States, 408 F.3d 1328, 1331 (11th Cir. 2005). 2 FACTUAL BACKGROUND In 2012, the Service awarded United States Defendant Army and Air Force Exchange Pro Construction a contract to construct a gas station/convenience store on Fort Benning (“the Project”). Pro Construction furnished a payment bond in connection with the Project, which identified Pro Construction as the principal and Defendant Western Surety as the surety. Pro Construction entered a subcontract with Defendant Eastway Electric, under material, and which equipment Eastway for was to electrical provide work Plaintiff Irby sells electrical materials. all on the labor, Project. Eastway established an open account with Irby in August 2012, allowing Eastway to purchase materials from Irby on credit. pay Irby for the materials. Irby Eastway did not fully is owed an outstanding principal amount of $39,594.08 on sixteen invoices it issued to Eastway pursuant to the open account. The agreement between Eastway and Irby imposed a 1.5% per month service charge on outstanding amounts of any invoice not paid by its due date. Eastway ordered materials March 2013 through June 2013. from Irby from approximately Each of Irby’s invoices indicated that the materials Eastway ordered were to be shipped to “Job Patton Village,” the name by which the Project was designated in Irby’s accounting system. Eastway on June 13, 2013. Irby last furnished materials to On or about August 28, 2013, Irby 3 served a “Claim Against Payment or Lien Bond” whereby claimed that it is owed $39,545.50 on the Project. Irby Defendants received the Notice of the Claim on September 6, 2013. Notice (i) identifies the Project, (ii) states that The Eastway failed to pay Irby for materials Irby supplied for the Project, (iii) states the principal amount owed to Irby with sufficient specificity, (iv) identifies Pro as the general contractor and Western as the surety, (v) demands payment, and (vi) states that Irby will file suit to recover the amount owed if it is not paid. Irby initiated this action on February 24, 2014 asserting its claims under the bond against Defendants. Of the sixteen invoices at issue, three cover materials supplied to Eastway after May 19, 2013, the date Defendants allege Eastway certified to Pro Construction that it completed its work on the Project. Irby argues that Eastway’s work on the Project continued well after that date. Two invoices cover materials supplied to Eastway on or after June 10, 2013, the date the Project was turned over to its owner. Irby argues that work continued on the Project after that date. Irby supplied addresses. 2013, to Eastway were shipped to The materials five different For the invoices dated June 1, June 10, and June 11, Eastway instructed Irby to deliver the products Eastway’s corporate offices instead of the Project site. to While Eastway was working on the Project, it was working on two other 4 projects Eastway including with one products at Fort Benning, and for those projects while products to Eastway for the Project. Irby it supplied supplied The parties agree that Eastway failed to pay Irby for materials for the Project and that Irby is owed an outstanding balance. The parties disagree, however, on whether Irby satisfied each element of its Miller Act claim such that Defendants are responsible under the payment bond for the amount Eastway owed Irby. DISCUSSION The Miller Act requires a general contractor that is awarded a federal construction contract to furnish a payment bond to protect persons supplying labor and material for the project. 40 U.S.C. § 3131(b)(2); United States ex rel. Krupp Steel Prods., Inc. v. Aetna Ins. Co., 831 F.2d 978, 980 (11th Cir. 1987). “A person having a direct contractual relationship with a subcontractor . . . may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person . . . supplied the last of the material for which the claim is made.” § 3133(b)(2). 40 U.S.C. Irby argues that Pro Construction and Western Surety are liable under the payment bond’s terms and the Miller Act for the outstanding principal Eastway. 5 balance Irby is owed by I. Irby’s Motion for Summary Judgment For Irby to recover under the Miller Act, it must prove “1) that materials were supplied for work in the particular contract at issue; 2) that [it] is unpaid; 3) that [it] had a good faith belief that the materials were for the specified work; and 4) that jurisdictional requisites are met.” Krupp, 831 F.2d at 980. Irby argues that the current record establishes each of these elements. Defendants respond that the present record demonstrates that Irby did not have a good faith belief that all of the materials for which it seeks payment were provided for the Fort Benning jurisdictional claims. A job and requirement plain of reading that Irby providing of the has timely present not met notice record of the its refutes Defendants’ arguments. A. Miller Act’s Good Faith Requirement As long as Irby had a good faith belief the materials it supplied to Eastway were for the specified work in the contract at issue, “delivery to the job site or actual use in the prosecution of the work is immaterial to a right of recovery.” Id. The present record reveals that Irby had a practice of ensuring that its accounting systems reflect the correct project for which its customers order materials, and each invoice for which it now seeks payment indicates that the materials were for “Job Patton Village,” the Project’s 6 designation in Irby’s accounting system. Pl.’s Mot. for Summ. J. Ex. A., McCan Decl. ¶¶ 23-26, ECF No. 28-3. Each invoice also reflects delivery to either the Project site or Eastway’s offices. Id. ¶ 20; McCan Decl. Ex. 3, Invoices and Proof of Delivery, ECF No. 28-3 at 958. The record also shows that Pro Construction agreed that Irby believed the materials were for use on the Project. See id. Ex. B, Hutchinson Dep. 55:4-7, ECF No. 28-4 (“Q: [I]s it Pro’s position that Irby knew that Eastway was allegedly using these materials on other projects? A: No.”). Defendants rely on the following to establish that Irby did not have a good faith belief that the materials were being used for the project in question or that a genuine factual dispute exists on this issue. First, the Project was turned over and accepted as complete on June 10, 2013, Hutchinson Dep. 15:5-7, and two of Irby’s invoices show materials shipped to Eastway on or after that date. McCan Decl. Ex. 5, ECF No. 28-3. Second, Irby shipped products to Eastway after May 19, 2013, which is the date it argues Eastway completed its scope of work on the Project. No. Hutchinson Dep. Ex. 16, Application for Payment, ECF 29-18. Third, Eastway simultaneously worked on other projects with Irby serving as its supplier, and those projects were not completed on June 10, 2013. McCan Dep. 27:16-23. Fourth, Eastway instructed Irby to ship materials to multiple addresses that were different from the original shipment address 7 for the Project. Fifth, several McCan Dep. Ex. 22 at 3, 9, 32, 34, & 38. shipments included materials been incorporated into the Project. that had already For example, one invoice described ballasts for fluorescent light fixtures, but the light fixtures for included. the Project came preassembled Hutchinson Dep. 44:2-9. with ballasts Defendants argue that the item would already have been installed at the Project before the date Irby shipped it to allegedly Hutchinson Dep. 51:10-20. be used for the Project. Sixth, Irby would have learned that the principals of Eastway had a history of financial problems if it had investigated Eastway’s and/or its principals’ business practices. that Justen Aff. ¶ 7, ECF No. 31-1. Irby failed Eastway’s bank references. to seek a reference, personal or to guarantee, check McCan Dep. 14:24-17:15. Defendants allege to Eastway’s contact business Seventh, Irby admitted that it has no direct evidence that its products went to the Project, but rather stated that it was relying on the “trust” of Eastway. McCan Dep. 66:7-14. These facts are not inconsistent with Irby’s good faith belief that the materials it supplied to Eastway were being used on the project in question. admitted Irby’s good faith Significantly, Defendants arguably belief under Local Rule 56. Furthermore, Pro Construction testified that Irby did not know that Eastway was allegedly using 8 the materials on other projects. It is also noteworthy that Defendants’ speculation about Irby’s belief is based on four invoices totaling $479.20. Its arguments do not even apply to the vast majority of the invoices for which Irby seeks payment. Whether Irby evaluated Eastway’s credit risk also does not support any inference that it did not appropriate Eastway with believe the project. materials And the fact were being that used Irby on the was supplying materials for other projects does not raise an inference that Irby believed the materials were for those other projects considering Patton Village.” that each invoice here was marked “Job Moreover, as to the timing of the shipments and the invoices, Defendants admit that work continued after June 10, working 2013 after application. on it the Project and allegedly Hutchinson Dep. that submitted 74:8-11; Eastway its 95:3-9. was final on site payment Delivery of materials to different locations including Eastway’s corporate office also does not suggest that Irby knew the materials were being used for other projects given the uncontradicted testimony from Irby’s corporate representative that changes in delivery location are common for construction on military bases and that delivery to a contractor’s offices is routine for smaller items that can get overlooked at a busy job site. 25. McCan Dep. 38:15- Finally, shipment of materials already incorporated into the Project does not show that Irby knew the items were for a 9 different project, particularly in light of the fact that Eastway indicated that the original lighting fixtures did not work due to architectural changes. Even viewing the facts in McCan Dep. 40:9-41:5. the light most favorable to Defendants as is required in analyzing Irby’s motion for summary judgment, Defendants have not shown a genuine factual dispute exists as to whether Irby had a good faith belief that the materials it supplied were for use in the Project. The record clearly establishes that this element of its Miller Act claim has been met. B. Miller Act’s Notice Requirement The Miller Act requires a supplier with a “direct contractual relationship” with a subcontractor to give written notice to the prime contractor within ninety days from the date on which the supplier “supplied the last of the material for which such claim is made.” 40 U.S.C. § 3133(b)(2). Irby produced evidence that it mailed its Notice on September 3, 2013 and that it was received by Pro Construction on September 6, 2013. It is undisputed that Irby last supplied materials to Eastway on June 13, 2013 and that it gave Defendants written notice of its claim within ninety days of that date. maintain, however, that because Irby supplied Defendants materials to Eastway on an open account basis, it was required to provide notice of its claim within ninety days of each invoice, which 10 Irby did not do. Although some district courts have adopted Defendants’ position, no circuit court that has considered the issue has done so. The Court today sides with the circuit courts. See, e.g, Ramona Equip. Rental, Inc. v. Carolina Cas. Ins. Co., 755 F.3d 1063, 1068 (9th Cir. 2014) (“[W]hen there is an open account, a ninety-day notice is timely even when it includes material furnished more than ninety days before the notice.”). Irby’s notice was timely as a matter of law. C. Accrued Service Charges, Prejudgment Interest, PostJudgment Interest, and Attorneys’ Fees Irby seeks summary judgment for the undisputed principal amount that Eastway owed on its account plus accrued service charges, pre-judgment interest, and attorneys’ fees. argue that the service charges Defendants that Irby seeks are actually interest charges, and therefore, to prevent a double recovery, Irby cannot recover those charges in addition to prejudgment interest. In support of its argument, Defendants rely on a district court decision from the Northern District of Georgia. See Consol. Container Co. LP v. Package Supply & Equip. Co., Inc., No. 1:09-CV-01478, 2009 WL 3365949, * 2 (N.D. Ga. Oct. 19, 2009) The situation here is distinguishable. statements interest. make it clear that the service Irby’s account charge is not The “Sales Terms” that are part of Eastway’s credit 11 application provide that the customer agrees that the service charge is “to reimburse [Irby] for the additional cost of carrying his delinquent account [] and further, that such charge is not an interest charge . . . .” McCan Decl. Ex. 1, Terms and Conditions of Sale ¶ 3, ECF 28-3. Eastway clearly agreed that the service charge here was not interest. It was designed to cover the cost of having to maintain a delinquent account, and not for the cost outstanding balance. of being deprived of the benefit of the Awarding pre-judgment interest in addition to the agreed upon service charge does not result in a double recovery. Moreover, Defendants have pointed to no authority that would support ignoring the parties’ agreement, particularly given the commercial nature of the transaction. The agreement between Eastway and Irby also provided for the recovery of attorneys’ fees. that where a contractual The Eleventh Circuit has held provision between a supplier and subcontractor provides for the recovery of attorneys’ fees, the provision is enforceable under the Miller Act as against the general contractor and the surety. United States ex rel. Se. Mun. Supply Co., Inc. v. Nat’l Union Fire Ins. Co., 876 F.2d 92, 93 (11th Cir. 1989), reh’g denied, 886 F.2d 1322 (11th Cir. 1989). fees. Therefore, Irby is entitled to recover its attorneys’ The court will determine the amount of fees recoverable and whether O.C.G.A. § 13-1-11 limits the amount of those fees 12 when the Court considers Irby’s post-judgment motion for attorneys’ fees. D. Irby’s Mitigation of Damages Defendants argue that Irby is not entitled to recover the amount it seeks because it failed to mitigate its damages. Court finds that Irby this argument should have unpersuasive. checked the Defendants business The complain history and operations of Eastway and its principals; that it failed to follow its own policy for new accounts because it did not obtain personal guarantees from Eastway’s owners; and that it should have requested a joint check arrangement with Pro Construction as it had with general contractors on other jobs. But as Irby points out, an obligation to mitigate arises after a contract is breached. Defendants do not explain how alleged failures before the breach here give rise to a mitigation of damages defense. Defendants materials default. to also Eastway complain even that after Irby continued Eastway’s to account ship was in Irby required Eastway to pay its invoices by the end of the month following the month in which the invoice was sent. McCan Dep. 22:10-16. Eastway failed continued to ship products to Eastway. to do so, but Irby McCan Dep. 23:4-24:12. Irby received payment from Eastway on June 5th, 2013 for all of its March outstanding invoices. invoices McCan are Dep. dated 13 21:17-22:3. April 5th through The current June 11th, 2013. The earliest invoice did not become due until May 31st, 2013. Only three of the at-issue invoices were invoiced after that date, and the last was issued less than two weeks after that date. Moreover, Eastway had previously invoices two months after they were invoiced. paid its March The Court finds that this conduct does not preclude Irby’s recovery. Based judgment entitled on is to outstanding the foregoing, granted. It recover the principal Plaintiff’s is undisputed following balance motion of that from $39,594.08; for summary Plaintiff Defendants: accrued is the service charges of $14,489.68; prejudgment interest of $3,076.46; postjudgment interest at the legal rate; and reasonable attorneys’ fees and costs to be determined after review of Irby’s postjudgment motion. II. Defendants’ Motion for Summary Judgment Based on the same rationale supporting the Court’s granting of Plaintiff’s motion for summary judgment, the Court denies Defendants’ motion for summary judgment. CONCLUSION Irby’s Motion for Summary Judgment (ECF No. 28) is granted, and Defendants’ Motion for Summary Judgment (ECF No. 29) is denied. The Clerk shall enter judgment in favor of Stuart C. Irby Co. and against Pro Construction, Inc. and Western Surety Co., jointly and severally, as follows: 14 (i) the principal balance of $39,594.08, (ii) accrued service charges of $14,489.68, (iii) prejudgment interest of $3,076.46, and (iv) post-judgment interest that will accrue at the legal rate. Plaintiff is also entitled to recover its attorneys’ fees and shall file its motion for attorneys’ fees pursuant to the Court’s Local Rules and other applicable law. IT IS SO ORDERED, this 15th day of June, 2015. _S/Clay D. Land CLAY D. LAND CHIEF U.S. DISTRICT COURT JUDGE MIDDLE DISTRICT OF GEORGIA 15
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