Paige International, Inc. v. Xl Speciality Insurance Company

CourtDistrict Court, District of Columbia
DecidedMay 25, 2016
DocketCivil Action No. 2014-1244
StatusPublished

This text of Paige International, Inc. v. Xl Speciality Insurance Company (Paige International, Inc. v. Xl Speciality Insurance Company) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Paige International, Inc. v. Xl Speciality Insurance Company, (D.D.C. 2016).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

PAIGE INTERNATIONAL, INC.,

Plaintiff, v. Civil Action No. 14-1244 (JEB)

XL SPECIALTY INSURANCE CO., et al.,

Defendants.

MEMORANDUM OPINION

Plaintiff Paige International and Defendants XL Specialty Insurance Company and its

related entities are locked in a heated dispute concerning costs associated with the construction

of the Marriott Marquis hotel in Washington, D.C. Paige was a subcontractor on the project,

working under Truland Systems Corporation, itself a subcontractor to the prime contractor.

When Truland subsequently became insolvent, it ceased work and also stopped paying Paige.

Prior to Truland’s insolvency, it took out a bond with Defendants to insure against its failure to

pay its subcontractors (including Paige). This suit against the insurers seeks payment under that

bond.

XL’s primary argument in defense of full payment is that it has already paid out

substantial sums to the prime contractor under a separate performance bond, including

reimbursement to cover costs for incomplete and shoddy work by Truland, Paige, and other

subcontractors. Defendants thus argue that these costs should be subtracted from what Paige is

owed under the payment bond. Determining who owes what to whom is no easy feat, as the

overarching construction contract was worth well north of $370 million. To this end, XL has

1 identified an expert, Donald Harrington, to testify at trial concerning completion-related

construction costs in the hopes of reducing Paige’s recovery.

Evidently not content to wait until trial, Paige has now fired off four separate Motions to

Strike Harrington’s Report on account of dozens of alleged flaws in his methodology. While

these combined Motions are quite lengthy, they can be reduced to the core contention that the

contents of the Report fall short of the standard for expert testimony under Federal Rule of

Evidence 702. While Plaintiff may certainly challenge Harrington’s testimony at trial, the Court

does not believe that his Report should be stricken at this stage of the litigation. It will thus deny

the Motions.

I. Background

Plaintiff Paige International, Inc. is a Washington, D.C.-based corporation that was one

of many subcontractors involved in the construction of the Marriot Marquis hotel, built next to

the District of Columbia Convention Center. See Compl., ¶ 2; Mot. to Strike I (ECF No. 18) at

2. As with most large construction projects, the prime contractor, Hensel Phelps Construction

Company, subcontracted portions of its work, including electrical, fire alarm, security, audio

visual, and telecommunications, to a subcontractor, Truland Systems Corporation. See Compl.,

¶¶ 7-8; Def. Opp. (ECF No. 27) at 4. Truland, in turn, subcontracted a portion of its work –

involving security, audio-visual, and telecommunications – to Paige. See Compl., ¶ 9; Opp. at 4.

Truland purchased a payment bond from XL and its co-Defendants, pursuant to which

Defendants, as sureties, pledged to make payments to those persons under contract with Truland

who supplied labor, material, and equipment to the project in the event it ever failed to pay. See

Comp., ¶ 10. Truland also obtained a performance bond, which similarly provided Hensel

Phelps with a guarantee as to compensation in the event Truland failed to perform. See Mot. to

2 Strike I at 2. When Truland later became insolvent and stopped performing on its contract, it

also ceased making payments to its lower-tier subcontractors such as Paige. See Mot. to Strike I

at 3. As a result of its failure to meet its contractual obligations, Truland was terminated by

Hensel for default and subsequently filed for liquidation in bankruptcy. Id.

Paige’s Complaint here alleges that it “provided labor, materials and equipment to

Truland in partial satisfaction of Truland’s subcontract obligations to Hensel Phelps, and is hence

a proper claimant under the [payment] Bond.” Compl., ¶ 11. Paige thus seeks payment for

contract work completed on behalf of Truland in the amount of $1,854,830, id., ¶¶ 18-20; for

extra work performed by Paige in accordance with proposed change orders in the amount of

$462,147, id., ¶¶ 22-23; and for additional costs incurred by Paige resulting from Truland’s

breach of its implied duty of cooperation and non-interference, to the tune of $762,768. Id.,

¶¶ 26-28.

What complicates Paige’s pursuit of reimbursement under the payment bond is that

Hensel – as the prime contractor – has already sought to be made whole on the performance

bond. After Truland was terminated for default, Hensel demanded that XL and co-Defendants,

as sureties, honor their obligation under the performance bond to cover the costs of hiring a

replacement subcontractor to complete the electrical portion of the project. See Mot. to Strike I

at 3-4. XL claims it ultimately paid Hensel $3,550,000 under the performance bond to cover

those additional costs. See Opp. at 4. As a result, XL’s defense is that payments it made under

its performance bond associated with completing (and cleaning up after) Paige’s electrical work

should be deducted from any payments XL makes to Paige under its payment bond.

In preparing this likely defense, XL relies in part on the contents of an expert report

completed by Donald Harrington pursuant to Fed. R. Civ. P. 26(a)(2), which governs expert

3 witness reports disclosures. See Opp. at 2. Harrington is a senior consultant for Sage Consulting

Group, which provides consulting and expert-witness services within the construction industry.

See Aff. of Donald Harrington (ECF No. 27), Attach. 2, ¶ 1. Harrington’s Report assesses and

allocates responsibility for specific costs associated with finishing the work Truland – and Paige

– started but failed to complete.

Seeking to exclude Harrington’s Report, Paige has filed four separate Motions to Strike,

each relating to a particular aspect of the dispute:

1. Cleanup/Trash Removal Claim, see Mot. to Strike I (ECF No. 18);

2. Dry[w]all and Painting Claim, see Mot. to Strike II (ECF No. 19);

3. Management Costs, see Mot. to Strike III (ECF No. 20); and

4. Electrical Work Completion Costs. See Mot. to Strike IV (ECF No. 21).

The four Motions collectively exceed 100 pages and include dozens of exhibits. Defendants do

not exaggerate in lamenting that “Paige is effectively attempting to litigate this entire case

through the Motions.” Opp. at 1. Despite the length of these Motions, Harrington himself

examined them and, consequently, revised some of the findings of his original Report. He then

generated a Supplemental Report, which supersedes the original and will be the document at all

times considered here. See Opp. (ECF No. 27), Exh. A (Supplemental Harrington Report of

April 15, 2016). Because Paige has filed its Motions to Strike pursuant to Federal Rule of

Evidence 702 and the legal principles enunciated by Daubert v. Merrell Dow Pharmaceuticals,

Inc., 509 U.S. 579 (1993), the Court will focus on the admissibility of the Report’s conclusions,

rather than on the factual disputes Paige raises.

4 II. Legal Standard

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