United States of America for the use and benefit of John A. Weber Company v. Milcon Construction

District Court, D. Hawaii·Decided February 25, 2021·No. 1:19-cv-00637·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

UNITED STATES OF AMERICA for CIVIL NO. 19-00637 JAO-WRP the use and benefit of JOHN A. WEBER COMPANY, a Hawaii limited liability ORDER GRANTING IN PART AND company, DENYING IN PLAINTIFF’S MOTION TO CONFIRM Plaintiff, ARBITRATION CONSENT vs. AWARD AND RELIEVE JOHN A. WEBER COMPANY FROM ANY MILCON CONSTRUCTION, a Texas FURTHER OBLIGATIONS TO limited liability company; HANOVER DEFENDANTS MILCON INSURANCE GROUP, a Virginia CONSTRUCTION, LLC AND corporation; and DOES 1 – 10, HANOVER INSURANCE GROUP

Defendants.

ORDER GRANTING IN PART AND DENYING IN PLAINTIFF’S MOTION TO CONFIRM ARBITRATION CONSENT AWARD AND RELIEVE JOHN A. WEBER COMPANY FROM ANY FURTHER OBLIGATIONS TO DEFENDANTS MILCON CONSTRUCTION, LLC AND HANOVER INSURANCE GROUP Plaintiff United States of America for the use and benefit of John A. Weber Company (“Plaintiff”), a subcontractor on a federal construction project, brought this action to collect amounts due under its subcontract with the prime contractor, Defendant Milcon Construction, LLC (“Milcon”), and Milcon’s surety, Defendant Hanover Insurance Group (“Hanover”) (collectively, “Defendants”). Plaintiff moves to confirm a consent award reached in arbitration between Plaintiff and Milcon against both Defendants. See ECF No. 18 (“Motion”). Plaintiff further seeks a ruling that it has no further obligations to Defendants under the settlement agreement that precipitated the arbitration consent award. See id. Plaintiff’s

Motion is GRANTED IN PART AND DENIED IN PART for the following reasons. I. BACKGROUND

A. Facts1 In September 2015, Milcon entered into a contract with the United States of America through the Expeditionary Contracting Command of the Department of the Army (the “Army”) in connection with a construction project at the Pohakuloa

Training Area located in Hilo, Hawai‘i (the “Project”). ECF No. 1 ¶ 6. Pursuant to 40 U.S.C. §§ 3131, et seq. (the “Miller Act”), Milcon obtained a payment bond from Hanover in order to assure the Army of payment of all persons supplying

labor, equipment, materials, and services to the Project. Id. ¶ 7. In March 2016, Milcon contracted with Plaintiff to complete the “folding doors complete” scope of work on the Project. Id. ¶ 10. Milcon completed its scope of work aside from certain punch list items. Id. ¶ 11. Milcon refused to

tender payment to Plaintiff, resulting in a principal balance due of $200,000.00,

1 These facts are based on the allegations in the Complaint, ECF No. 1. The purpose of this summary is simply to provide background context for the Court’s rulings. The Court need not — and does not — take the allegations in the Complaint as true for purposes of this Order. despite receiving payment from the Army of 95% of the labor, materials, equipment, and services that Plaintiff furnished for the Project. Id. ¶¶ 14, 16.

B. Procedural History Plaintiff commenced this action on November 26, 2019 by filing its Complaint, ECF No. 1, asserting the following claims: First Claim for Relief —

Miller Act Payment Bond (against all defendants); Second Claim for Relief — Breach of Contract (against Milcon); and Third Claim for Relief — Unjust Enrichment (against Milcon). Plaintiff prays for monetary damages, attorneys’ fees and costs of suit, and pre-judgment and post-judgment interest. Id. at 7–8.

On January 8, 2020, Milcon filed an unopposed Motion to Compel Arbitration and to Stay Litigation Pending Arbitration. ECF No. 11. On January 10, 2020, the Court issued an Order compelling arbitration between Plaintiff and

Milcon and staying this action pending the completion of arbitration proceedings. ECF No. 12. On September 28, 2020, Plaintiff, Milcon, and Hanover executed a Settlement Agreement regarding the claims Plaintiff asserted in this action and in

arbitration. ECF No. 18-3. Defendants agreed to the entry of a Consent Award in the arbitration in the amount of $282,500.00 in favor of Plaintiff, with $100,000.00 due on September 29, 2020 and the balance due on November 24, 2020. Id. at 2.

The Settlement Agreement provided that interest shall accrue at the rate of ten percent on the settlement sum, accruing from September 30, 2020, in the event that Defendants failed to pay the settlement sum by November 24, 2020. Id. at 3. The

parties further agreed that Plaintiff would order replacement parts for the Project upon receipt of the first settlement payment and return to the Project by October 9, 2020 to perform additional tasks. Id. Finally, the parties executed a Rule 11

Forbearance Agreement, which was attached as an exhibit to the Settlement Agreement and incorporated by reference. Id. at 2, 8–13. The Rule 11 Forbearance Agreement provided that Defendants, jointly and severally, would pay Plaintiff the settlement sum set forth in the Settlement Agreement by the deadlines

established therein. Id. at 9–10. Upon finalization of the Settlement Agreement, the Arbitrator entered a Consent Award, which stated: “Having reviewed the Settlement Agreement

executed by the Parties on the 30th day of September 2020, Milcon is ordered to pay to [Plaintiff] a total sum of $282,500.00 in accordance with the terms and conditions of the Settlement Agreement.” ECF No. 18-1 at 2. Plaintiff and Milcon, along with their respective counsel, signed the Consent Award. Id. at 3–5.

On November 25, 2020, Plaintiff’s counsel sent Defendants’ counsel a Notice of Default of Milcon Construction, LLC and 7-Day Notice to Cure to Hanover Insurance Group demanding payment of the second installment of

$182,500.00 under the Settlement Agreement along with $6,107.05 to compensate Plaintiff for the costs it incurred in completing the additional work under the Settlement Agreement. ECF No. 18-4 at 1–2.

Plaintiff maintains that it performed its obligations under the Settlement Agreement. ECF No. 18 at 8. Defendants, however, argue that Plaintiff failed to perform its obligations under the Settlement Agreement in accordance with the

deadlines stated therein. ECF No. 21 at 17–24; ECF No. 25 at 11–20. On December 17, 2020, Plaintiff filed the Motion, seeking confirmation of the Consent Award against both Defendants and an order stating that Plaintiff “is excused from all further performance of work and obligations to Milcon and

Hanover.” ECF No. 18 at 11–12. Notably, Plaintiff has not yet sought to reduce the Consent Award to a judgment. On January 8, 2021, Hanover filed its Opposition to the Motion. ECF No.

21. Milcon filed its Opposition on January 15, 2021. ECF No. 25. Plaintiff filed its Replies to Hanover and Milcon’s Oppositions on January 15, 2021 and January 21, 2021, respectively. ECF Nos. 24, 28. The Court held a hearing on February 5, 2021. ECF No. 32.

II. LEGAL STANDARD The Federal Arbitration Act (“FAA”) provides for confirmation of an arbitration award as follows:

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United States of America for the use and benefit of John A. Weber Company v. Milcon Construction, (D. Haw. 2021).

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