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Pinnacle Crushing and Construction LLC v. Hartford Fire Insurance Co.

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

April 20, 2018

PINNACLE CRUSHING AND CONSTRUCTION LLC, et al., Plaintiffs,
v.
HARTFORD FIRE INSURANCE COMPANY, et al., Defendants.

          ORDER DENYING MOTION TO DISMISS OR STAY

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the court is Defendants Hartford Fire Insurance Company (“Hartford”) and Cherokee General Corporation's (“Cherokee”) (collectively, “Defendants”) motion to dismiss or stay. (MTD (Dkt. # 34).) Plaintiffs United States of America for the Use and Benefit of Pinnacle Crushing and Construction, LLC; Pinnacle Crushing and Construction, LLC (collectively, “Pinnacle”); United States of America for the Use and Benefit of SCI Infrastructure, LLC; and SCI Infrastructure, LLC (collectively, “SCI”) (collectively, “Plaintiffs”) oppose the motion. (Pinnacle Resp. (Dkt. # 43); SCI Resp. (Dkt. # 45).) The court has considered the motion, the parties' submissions in support of and in opposition to the motion, [1] the relevant portions of the record, and the applicable law. Being fully advised, [2] the court DENIES the motion for the reasons set forth below.

         II. BACKGROUND

         This case arises from Plaintiffs' work on a United States Army Corps of Engineers (“the Corps”) construction project. Plaintiffs performed work “for the construction project known as ‘USACE-S YTC Repair Selah Airstrip, Yakima WA, W912DW-14-D-1002 0012, ' at the United States Army's Yakima Training Center” (“the Project”).[3](Pinnacle Compl. (Dkt. # 1) ¶ 2); see also SCI Infrastructure, LLC v. Cherokee Gen. Corp., No. C17-3181SMJ, Dkt. # 1 (“SCI Compl.”) ¶ 2 (E.D. Wash.). “The Project involved demolishing the existing airfield, expanding the airstrip[, ] and reconstructing the airway and taxiway as well as other incidental work.” (Line Decl. (Dkt. # 34-1) ¶ 2.) Cherokee was the prime contractor for the Corps-the owner of the Project. (Pinnacle Compl. ¶ 3); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶ 2. SCI was a subcontractor for Cherokee, and Pinnacle was, in turn, a subcontractor for SCI. (Pinnacle Compl. ¶ 3); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶ 3. Hartford was the “compensated surety and bonding company for Cherokee.” (Pinnacle Compl. ¶ 4); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶ 4. Cherokee and Hartford provided a payment bond-Bond No. 52BBCSHH7744 (“the Bond”)-to the United States of America. SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶ 5, Ex. A.

         On October 11, 2016, Cherokee and SCI entered into a subcontract (“the Cherokee-SCI Subcontract”) governing SCI's work on the Project. (Line Decl. ¶ 3, Ex. A (“SCI Sub.”) (Dkt. # 35-1) at 1.) The Cherokee-SCI Subcontract “incorporates by reference . . . all relevant and applicable clauses of the Prime Contract [the contract between the Corps and Cherokee], as well as all clauses under the Federal Acquisition Rules (“FARs”) required by the Prime Contract.” (Id.) The parties further agreed that the dispute provisions of the Prime Contract would apply to any disputes arising from the Cherokee-SCI Subcontract. (Id. at 3.) Cherokee agreed to “present to the [Corps] . . . all of [SCI's] claims for additional monetary compensation . . . and to further invoke, on behalf of [SCI], those provisions in the Prime Contract for determining disputes.” (Id.) SCI agreed to be “bound by the procedure and final determinations as specified in any such Disputes clause.” (Id. at 3-4.)

         Pinnacle and SCI also entered into a subcontract (“the SCI-Pinnacle Subcontract”). (Line Decl. ¶ 4, Ex. B (“Pinnacle Sub.”).) The SCI-Pinnacle Subcontract also contains a disputes provision that calls for Cherokee to “pass through” Pinnacle's claims to the Corps. (See Id. at 12.) Specifically, the parties agreed to be bound “by the terms of the Main Contract and by any and all procedures and resulting decisions, findings, determinations, or awards made thereunder by the person so authorized in the Main Contract, or by an administrative agency, board, [or] court of competent jurisdiction or arbitration.” (Id.) Pinnacle further agreed that “it will not take, or will suspend, any other actions”-including Miller Act, 40 U.S.C. § 3131, et seq., claims- “and will pursue no independent litigation with respect thereto, pending final determination of any dispute resolution procedure between” Cherokee and the Corps. (Id.)

         On June 7, 2017, the Corps terminated Cherokee's contract and withheld certain payments. (Line Decl. ¶ 7, Ex. C (“Letter”)). The Corps contends that Cherokee “fail[ed] to make progress” on the Project, “fail[ed] to provide and adhere to schedules, ” and “fail[ed] to provide adequate quality control.” (Id. at 1.) Cherokee contends that it “encountered differing site conditions that delayed the work and increased the cost of performance.” (Line Decl. ¶ 5.) Cherokee disputes the Corps' actions and submitted a claim pursuant to the Prime Contract. (Id. ¶ 8.) Plaintiffs also provided Cherokee with their claims, which Cherokee passed to the Corps. (Id. ¶ 9.)

         SCI and Pinnacle also brought suit under the Miller Act. (Pinnacle Compl. ¶ 5); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶¶ IV.1-3. Plaintiffs assert that they performed their obligations under the subcontracts but Cherokee has not paid them. (Pinnacle Compl. ¶ 11); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶¶ 10-14. Plaintiffs contend that Cherokee owes Pinnacle $1, 057, 597.95[4] and SCI $2, 595, 116.96. (Pinnacle Compl. ¶ 14); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶ 14. Plaintiffs each bring a claim to recover those amounts on the Bond.[5] (Pinnacle Compl. ¶¶ 15-17); SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶¶ IV.1-3. SCI additionally brings claims for breach of contract; violation of the Prompt Payment Act, 31 U.S.C. § 3901, et seq.; unjust enrichment and quantum meruit; promissory estoppel; and negligent misrepresentation. SCI Infrastructure, No. C17-3181SMJ, SCI Compl. ¶¶ V-IX.

         On February 9, 2018, Defendants moved to dismiss or stay the case.[6] (See MTD.) Defendants first argue that Plaintiffs' claims against Hartford are “entirely contingent” on Cherokee's liability, and Hartford is therefore not liable because “the damages SCI and Pinnacle have alleged are the responsibility of [the Corps] and are being resolved through the Contract Disputes Act process.”[7] (Id. at 7.) Defendants further argue that Plaintiffs' claims are unripe-and the court therefore lacks subject matter jurisdiction-because “the parties are in the process of pursuing their claim[s] administratively using the subcontracts' ‘pass-through' mechanisms.”[8] (Id. at 7-8.) In the alternative, Defendants request that the court stay the case pending resolution of the administrative process. (Id. at 10-17.)

         Plaintiffs oppose the motion, contending that any contractual provisions requiring them to wait before pursuing their Miller Act claims are invalid waivers of their rights under the Act. (See Pinnacle Resp. at 7-8; SCI Resp. at 2, 15.) They also argue that a stay would be prejudicial because “the upstream dispute resolution process will possibly take years to complete.” (SCI Resp. at 17; see also Pinnacle Resp. at 3, 6.) The court now addresses Defendants' motion.

         III. ANALYSIS

         A. Ripeness

         Defendants bring their motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), which concerns the court's subject matter jurisdiction. (See MTD at 8); Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004); see also Oregon v. Legal Servs. Corp., 552 F.3d 965, 969 (9th Cir. 2009) (“An objection that a federal court lacks subject matter jurisdiction may be raised at any time.”); Salois v. Medifast, Inc., No. 17cv1810-GPC (NLS), 2018 WL 108346, at *3 (S.D. Cal. Feb. 28, 2018) (citing Gemtel Corp. v. Cmty. Redevelopment Agency, 23 F.3d 1542, 1544 n.1 (9th Cir. 1994)) (stating that Rule 12(b)(1) is the proper procedural vehicle for raising a ripeness challenge). They ...


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