Companion Property Casualty Insurance Company v. Apex Service Inc

• Court: District Court, District of Columbia
• Decided: December 29, 2014
• Docket: Civil Action No. 2013-0436
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

______________________________ ) COMPANION PROPERTY & ) CASUALTY INSURANCE CO., ) ) Plaintiff, ) ) v. ) Civil Action No. 13-436 (RWR) ) APEX SERVICE, INC., et al., ) ) Defendant. ) ______________________________)

MEMORANDUM OPINION

Companion Property & Casualty Insurance Co. (“Companion”)

filed a complaint and action of interpleader to determine the

proper distribution of the proceeds of payment bond number

00010501 (the “Payment Bond”) among Apex Service, Inc. (“Apex”)

and all other potential claimants. Compl. at 4, 7, 10. The

matter was referred to Magistrate Judge Alan Kay, who issued a

report and recommendation finding that Companion should be

discharged from the action, Companion should receive attorneys’

fees and costs, and the remaining sum of the Payment Bond should

be disbursed to Apex. Report and Recommendation (“R&R”) at 16.

Because no party has objected to the report and recommendation,

Companion appropriately filed this action of interpleader as a

disinterested stakeholder, the recommended award of fees and

costs is fair, and Apex is the sole remaining interpleader -2-

defendant, Magistrate Judge Kay’s recommendations will be

adopted. 1

BACKGROUND

Apex entered into a construction contract with the District

of Columbia Department of Real Estate Services, Contracting and

Procurement Division for expansion of the Emergency Operations

Center at the Unified Communication Center. R&R at 2. Apex

then entered into a subcontract with Niyyah Electrical

Contractors, LLC (“Niyyah”) to furnish labor, materials, and

equipment for certain electrical work on the project. Id. As a

condition of the subcontract, and under D.C. Code § 2-201.01, on

August 1, 2011, Niyyah obtained the Payment Bond from Companion

with a total value of $289,972.00. 2 Id. at 2-3.

On March 29, 2012, Apex terminated Niyyah’s subcontract as

a result of a dispute that arose regarding performance of

Niyyah’s subcontract work, payment of laborers, and payment for

certain equipment, materials, and supplies. Id. at 3. Apex

asserted a claim against the Payment Bond as a result of

payments it made to Niyyah employees, subcontractors, and

1 Apex requests a hearing on the R&R. That request will be denied as moot. 2 Footnote five of the R&R contains a typographical error stating that the total value of the Payment Bond is $292,972.00. R&R at 6 n.5. However, the remainder of the R&R correctly reflects that the total value is $289,972.00 and all derivative calculations are correctly made in relation to the correct total value. -3-

suppliers for work completed or materials provided prior to the

subcontract’s termination. Id. Companion also received claims

from a number of sub-subcontractors and suppliers. Id.

Because of multiple outstanding and anticipated claims

against the Payment Bond totaling at least $499,534.18,

Companion requested an order for interpleader and deposited the

value of the Payment Bond in the Court’s registry. Id. at 10.

Companion also asked that the defendants be enjoined from

bringing an action against it under the Payment Bond. Id.

Branch Group, Inc. t/a Rexel (“Branch”) filed an answer to

the complaint on May 1, 2013, claiming it is owed $38,300.42 for

“outstanding invoices incurred by Niyyah[.]” Branch Answer

at 5. Additionally, Lawrence D. Scott, a former Niyyah

employee, filed a pro se motion for unpaid wages on January 10,

2014, seeking approximately $14,500.00 3 of the Payment Bond

funds. Scott Mot. Unpaid Wages at 1. On December 26, 2013,

Companion and Apex filed a stipulation agreeing that Companion

should be discharged from liability under the Payment Bond, that

Companion should be reimbursed $12,000.00 for attorneys’ fees

and expenses, and that Apex should be awarded the remainder of

3 The motion states that Scott received $7,800.00 but that the total should have been about $25,000. Scott Mot. Unpaid Wages at 1. The motion thus asks for Scott to receive about $17,200.00. Id. However, at oral argument before Magistrate Judge Kay, Scott stated that he was paid $10,500.00. R&R at 2. The magistrate judge therefore concluded that Scott requests only $14,500.00. Id. at 15. -4-

the Payment Bond funds. Companion & Apex Stipulation at 1. The

magistrate judge found that all potential claimants who have

filed answers except for Apex, Scott, and Branch have settled or

otherwise relinquished their claims to the Payment Bond funds.

R&R at 2.

DISCUSSION

A district judge may designate a magistrate judge to

conduct hearings and submit findings of fact and recommendations

for the disposition of pretrial motions. 28 U.S.C.

§ 636(b)(1)(B) (2014); LCvR 72.3(a) (2014); see Elgin v. Dep’t

of Treasury, 132 S. Ct. 2126, 2138 (2012)(noting that Congress

has vested “reviewable factfinding authority” in magistrate

judges by authorizing them to “make findings of fact relevant to

dispositive pretrial motions”). Absent clear error, if no party

has made an objection to the magistrate judge’s recommendation

within fourteen days, a district court judge may accept, reject,

or modify, in whole, or in part, the findings or

recommendations. 28 U.S.C. § 636(b)(1)(C); LCvR 72.3(b); see

Powell v. Bureau of Prisons, 927 F.2d 1239, 1248 (D.C. Cir.

1991) (finding that it is appropriate for a district court judge

to adopt a magistrate judge’s report and recommendation under a

clear error standard of review if no objections were received). -5-

I. FEDERAL INTERPLEADER UNDER 28 U.S.C. § 1335

The magistrate judge found that Companion should be

discharged from liability because the court has jurisdiction to

hear the case and Companion is a disinterested stakeholder. R&R

at 5-6. The magistrate judge acknowledged that jurisdiction

exists under 28 U.S.C. § 1335 because “‘the value of the

property exceeds $500, two or more claimants are diverse, and

Companion has deposited the property into the registry of the

court.’” Id. at 5 (quoting 7/17/2013 Order at 1); see 28 U.S.C.

§ 1335 (2014) (providing the requirements for district court

jurisdiction over interpleader actions). A plaintiff-

stakeholder may be discharged from liability if it is

disinterested and it meets the statutory requirements of 28

U.S.C. § 1335. R&R at 4-5; see Star Ins. Co. v. Cedar Valley

Express, LLC, 273 F. Supp. 2d 38, 40 n.2 (D.D.C. 2002) (noting

that if “a court determines that interpleader is appropriate

[under § 1335], it may discharge the stakeholder-plaintiff from

the action if it is disinterested in the distribution of the

[interpleader funds]”). The magistrate judge found that

Companion is a disinterested stakeholder because it does not

make a claim to the Payment Bond funds, except for attorneys’

fees and costs, which do not make an “otherwise disinterested

stakeholder an interested stakeholder.” R&R at 5-6 (citing

Orseck, P.A. v. Servicios Legals De Mesoamerica S. De R.L., 699 -6-

F. Supp. 2d 1344, 1349 (S.D. Fla. 2010); WRIGHT & MILLER, Federal

Practice and Procedure § 1719 (3d. ed. 2013)). The magistrate

judge correctly concluded that, as a disinterested stakeholder

in a properly submitted interpleader action, Companion should be

discharged from further liability with prejudice. That portion

of the report and recommendation will be adopted.

II. EQUITABLE DISTRIBUTION OF INTERPLEADER FUNDS

A. Interpleader defendants

In its complaint, Companion named as defendants Apex,

Branch, District of Columbia Department of Employment Services,

Graybar Electric Co., Inc., “Jane Doe, Inc., A-Z,” United

Rentals (North America), Inc. (“United Rentals”), UR Merger Sub

Corporation, 4 “John Doe, A-Z,” 5 Michael Garrett, Kevin Maloy,

Derrick Manigualt, Jeffery Norwood, Lawrence Scott, Robert

Stroman, Reginald Thomas, Yull Travers, and Kenneth Williams.

Compl. at 1-4.

The magistrate judge found that only Apex, Branch, and

Scott continue to make a claim against the interpleader funds.

R&R at 7. Graybar Electric Co, Inc. and former Niyyah employees

4 UR Merger Sub Corporation was the former name of United Rentals, Companion Mem. Supp. Mot. Discharge at 3, so this entity will be referred to as United Rentals. 5 “John Doe, A-Z” and “Jane Doe, Inc., A-Z” were included to account for “any remaining unknown claimants[,] which [Companion] properly informed of the action via public notice.” R&R at 7. -7-

Garrett, Maloy, Manigualt, Norwood, Scott, Stroman, Thomas,

Travers, and Williams signed documents releasing Companion from

liability in exchange for payments from Apex. Companion Mem.

Supp. Mot. Discharge at 10-11. United Rentals forfeited its

right to make a claim against the funds because it defaulted

when it failed to file any responsive pleading. R&R at 14; see

Fed. R. Civ. P. 12(a)(1)(A)(i), 55(a) (2014) (providing a

defendant 21 days to serve an answer and indicating that “the

clerk must enter the party’s default[]” when “failure [to serve

an answer] is shown by affidavit or otherwise”); Companion Mem.

Supp. Mot. Discharge at 11 n.6 (“United Rentals’ Payment Bond

claim is also forfeited because it failed to file a responsive

pleading[.]”). Finally, the District of Columbia Department of

Employment Services was dismissed from the case by joint

stipulation. Joint Stipulation of Dismissal at 1.

Although Scott signed a release on August 30, 2013,

Companion Mot. Discharge, Ex. E at 6; R&R at 14 n.15, he filed a

motion for unpaid wages on January 10, 2014. Scott Mot. Unpaid

Wages at 1. Additionally, Branch continues to assert a claim of

$38,300.42 against the interpleader funds. Branch Opp’n to Mot.

to Strike at 3. Apex asserts that it should receive the total

value of the payment bond, less Companion’s attorneys’ fees and

costs. Companion & Apex Stipulation at 1. -8-

1. Lawrence D. Scott

Scott signed a document releasing any future claim on the

interpleader funds and the magistrate judge noted that Scott’s

motion for unpaid wages did not provide any reason why the

release would be “invalid or inapplicable.” R&R at 14. As a

contract, the release binds Scott to its terms unless an

essential element is missing. See Henke v. United States Dep’t

of Commerce, 83 F.3d 1445, 1450 (D.C. Cir. 1996) (stating that

the “essential elements” of a contract are “competent parties,

lawful subject matter, legal consideration, mutuality of assent

and mutuality of obligation.”); Wolcott v. Ginsburg, 697 F.

Supp. 540, 544 (D.D.C. 1988) (confirming that, when determining

whether the terms of a release are binding, “releases are to be

treated as contracts, and general contract principles apply.”).

Scott does not address the release or assert that it is missing

any of the elements of a valid contract. Thus, the magistrate

judge’s recommendation to deny Scott’s motion for unpaid wages

and to grant Apex’s motion to strike Scott’s motion will be

adopted. 6

6 After Scott failed to respond to Apex’s motion to dismiss within the allotted time, Apex filed a second motion to strike Scott’s motion. See Apex Mot. to Strike or Dismiss Scott Mot. at 2. The magistrate judge correctly concluded that the second motion could be denied as moot because Apex’s first motion to strike should be granted. R&R at 15. -9-

2. Branch

The terms of the Payment Bond required any action asserting

a claim against the Bond to be filed within one year of when

“the last labor or service was performed by anyone or the last

materials or equipment were furnished by anyone under the

Construction Contract.” Compl., Ex. 1 at 3; see R&R at 9-10.

Under the terms of the Payment Bond, the “Construction Contract”

is the subcontract between Niyyah and Apex. Compl., Ex. 1 at 1,

3; see R&R at 9. Further, the subcontract between Niyyah and

Apex was terminated on March 29, 2012, so Branch had to initiate

its suit by March 29, 2013. 7 See R&R at 9-10. By Branch’s own

admission, the suit was initiated when Companion filed the

interpleader action on April 4, 2013. Id. at 12. The

magistrate judge correctly concluded that Branch’s claim against

the interpleader funds is time-barred, and that Apex’s motion to

7 Also, the magistrate judge determined that under D.C. Code § 2-201.02, any action had to be initiated within one year of when “the last labor or material was supplied by the claimant.” R&R at 12. Branch was a subcontractor to Niyyah, so it could no longer perform labor under the contract after Niyyah’s contract was terminated on March 29, 2012. Id. Thus, a suit had to be brought by March 29, 2013 under D.C. Code § 2-201.02 as well as under the Payment Bond. Accordingly, D.C. Code § 2-201.02 is immaterial because the terms of the Payment Bond apply, absent any conflict with local law. Id. at 11 n.11; see McDonald v. Thompson, 184 U.S. 71, 74 (1902) (finding that the distinction between whether an obligation was incurred by statute or under a contract was immaterial when both required that an action be initiated within four years). -10-

dismiss Branch’s claim should be granted. R&R at 11, 16. That

portion of the Recommendation will be adopted.

3. Apex

The magistrate judge found that Apex is the sole remaining

interpleader defendant and Apex has already paid other

interpleader defendants from its own money. See id. at 13, 16.

He concluded that Apex should receive at least the remaining

interpleader funds, less Companion’s attorneys’ fees and costs.

Id. The total payment bond value is $289,972.00 and Companion

has requested $12,000.00 in attorneys’ fees and costs. Id.

at 16. Therefore, Apex would receive either $277,972.00 or, if

Companion were not awarded attorneys’ fees and costs, the full

$289,972.00 Payment Bond value. Id. As is explained below,

Companion will be awarded attorneys’ fees and costs, leaving

$277,972.00 for Apex.

B. Companion

Companion moved to be discharged from further liability on

the Payment Bond and sought an award of $18,822.50 in attorneys’

fees and $2,441.04 in costs. Companion Mem. Supp. Mot.

Discharge at 9. Companion & Apex later stipulated to a $12,000

award of attorneys’ fees and costs to Companion. Stipulation

between Companion & Apex at 1.

A court may “award attorneys’ fees and costs [from the

interpleader funds] to [a disinterested] plaintiff stakeholder -11-

in an interpleader action[] whenever it is fair and equitable to

do so.” Id. (citing Aaron v. Mahl, 550 F.3d 659, 667 (7th Cir.

2008); Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999); WRIGHT

& MILLER at § 1719). Under the circumstances, the magistrate

judge fairly concluded that $12,000.00 is a reasonable amount to

award in attorneys’ fees and costs to Companion, especially

where Apex and Companion agreed to it, and Apex is the sole

remaining interpleader defendant. R&R at 6; Stipulation between

Companion & Apex at 1; see Discussion supra Part II(A); cf.

Immigration & Naturalization Service v. Jean, 496 U.S. 154, 155,

160 (1990) (acknowledging that parties can stipulate to the

amount received in reasonable attorneys’ fees under the Equal

Access to Justice Act). Accordingly, the magistrate judge’s

recommendation that Companion be awarded $12,000.00 in

attorneys’ fees and costs and that Apex receive the remaining

$277,972.00 will be adopted.

CONCLUSION

No party objected to the report and recommendation.

Companion is a disinterested stakeholder and the recommended

award of attorneys’ fees and costs is fair. Apex, as the sole

remaining claimant, is entitled to the remaining Payment Bond

value. Therefore, Magistrate Judge Kay’s report and

recommendation is adopted in full. An appropriate final order

accompanies this Memorandum Opinion. -12-

SIGNED this 29th day of December, 2014.

/s/ ____________________________ RICHARD W. ROBERTS Chief Judge UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

______________________________ ) COMPANION PROPERTY & ) CASUALTY INSURANCE CO., ) ) Plaintiff, ) ) v. ) Civil Action No. 13-436 (RWR) ) APEX SERVICE, INC., et al., ) ) Defendant. ) ______________________________)

FINAL ORDER

For the reasons set forth in the accompanying Memorandum

Opinion, it is hereby

ORDERED that Companion’s motion [47] for discharge,

attorneys’ fees and costs, and distribution be, and hereby is,

GRANTED as follows: Companion is discharged from further

liability under the Payment Bond with prejudice and is awarded

$12,000 in attorneys’ fees and costs from the Payment Bond

funds. The remainder of the Payment Bond funds shall be

disbursed to Apex in the amount of $277,972.00. It is further

ORDERED that Lawrence Scott’s motion [50] for unpaid wages

be, and hereby is, DENIED. It is further

ORDERED that Apex’s motion [51] to strike or, in the

alternative, to dismiss the claim of Lawrence Scott be, and

hereby is, GRANTED. It is further -14-

ORDERED that Apex’s motion [52] for entry of an order

striking or dismissing Lawrence Scott’s motion for unpaid wages

and to direct court disbursement of registry funds be, and

hereby is, DENIED as moot. It is further

ORDERED that the stipulation [49] between Companion and

Apex be, and hereby is, APPROVED. It is further

ORDERED that Apex’s motion [53] to strike or, in the

alternative, to dismiss the claim of Branch be, and hereby is,

GRANTED. It is further

ORDERED that Apex’s request [57] for a hearing be, and

hereby is, DENIED as moot.

This is a final, appealable Order.

/s/ ____________________________ RICHARD W. ROBERTS Chief Judge