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Stellar J. Corporation v. Argonaut Insurance Co.

United States District Court, W.D. Washington, Tacoma

April 16, 2014

STELLAR J. CORPORATION, a Texas corporation, Plaintiff,
v.
ARGONAUT INSURANCE COMPANY, an Illinois corporation, Defendant. and UNISON SOLUTIONS, INC., an Iowa corporation, Defendant and Third-Party Plaintiff,
v.
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA; XCHANGER, INC., a Minnesota corporation; and RHODE BROTHERS, INC., a Wisconsin corporation, Third-Party Defendants.

ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [DKT# 72]

RONALD B. LEIGHTON, District Judge.

I. Introduction

THIS MATTER is before the Court on Defendant Argonaut's motion for Summary Judgment. Argonaut issued a performance Bond, guaranteeing Stellar J that a subcontractor, Unison, would fulfill its agreement to supply materials to a large power-generating project in Klickitat County.

The project did not go as planned, and Unison ended up walking away without performing. Stellar J sued, seeking payment on Argonaut's bond. Argonaut claims that this lawsuit is timebarred by the terms of that bond. Because it is not, the Motion for Summary Judgment is DENIED.

II. Background

In 2008, Klickitat Public Utility District No. 1 hired Applied Filter Technology, Inc. (AFT) to build a Gas Generation Expansion Project and LFG Cleaning and Compression Package at the H.W. Hill Landfill. This work would draw methane from the landfill, compress the gas, filter out impurities, and convert it to usable energy. Because AFT could not obtain the required bonding, it assigned the agreement to Stellar J. Corporation, which could get a bond. On May 18, 2009, AFT contracted with Unison Solutions, Inc. to deliver some of the materials required for the project. This agreement-the Material Contract- required Union to obtain a bond guaranteeing its performance. Unison obtained a supply bond (Bond) from Argonaut, which guaranteed both Stellar J. and AFT that Unison would perform.

The terms of the purchase are set out in the Material Contract. Unison was obligated to deliver the materials between December 1, 2009 and January 15, 2010. The materials included a heat exchanger package, a glycol chiller package, a gas compression package, a SAG Siloxane removal package, a PLC control panel and a components common for mechanical packages with certain performance requirements. But Unison's obligations under the contract did not end with delivery. Indeed, it would not even be paid the last 10% of the price until its materials had undergone "successful testing."

Argonaut's Bond included a two-part suit limitation. It required Stellar J. to sue within a year of the date that Unison was to deliver the materials, or within a year of the date that Unison "defaulted" under the Material Contract-whichever came first:

[A]ny suit by the Obligee under this bond must be instituted before the earlier of: (a) the expiration of one year from the date the Principal was obligated under the Material Contract to deliver the materials to the Obligee; or (b) the expiration of one year from the date of any other default by the Principal under the Material Contract.

[DKT #80 at 7]. The Bond also provides that, if the suit limitation is void, then the minimum limitation period allowed by the State will apply and accrue at the earlier of the date of delivery or the date of breach:

If the limitation set forth in this bond is void, prohibited by law or unenforceable for any reason, the minimum period of limitation available to sureties as a defense in the jurisdiction of the suit shall be applicable, and said period of limitation shall be deemed to have accrued and shall commence to run no later than the earlier of (y) the date the [Unison] was obligated under the Material Contract to deliver the materials to the Obligee, or (z) the date of any other default by the [Unison] under the Material Contract.

Id. On April 10, 2012, Stellar J submitted a Proof of Claim to Argonaut, seeking payment on the Bond for the losses caused by Unison's default. Stellar J filed suit against Argonaut and Unison on November 14, 2012. Stellar claims this action accrued in March 2012, when Unison breached its obligation to perform by failing to provide a chiller unit with the proper capacity per the Material Contract. The Bond indisputably covered all terms and conditions of the Material Contract.

Argonaut argues the one year suit limitation period expired on January 15, 2011, one year from the date of delivery. Stellar J argues[1] that the suit limitation violates public policy because Argonaut's reading ...


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