Washington Metropolitan Area Transit Authority ex rel. Noralco Corp. v. Norair Engineering Corp.

553 F.2d 233, 180 U.S. App. D.C. 88
CourtCourt of Appeals for the D.C. Circuit
DecidedApril 6, 1977
DocketNo. 76-1094
StatusPublished
Cited by5 cases

This text of 553 F.2d 233 (Washington Metropolitan Area Transit Authority ex rel. Noralco Corp. v. Norair Engineering Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Washington Metropolitan Area Transit Authority ex rel. Noralco Corp. v. Norair Engineering Corp., 553 F.2d 233, 180 U.S. App. D.C. 88 (D.C. Cir. 1977).

Opinion

Opinion For The Court Per Curiam

PER CURIAM:

The Washington Metropolitan Area Transit Authority (WMATA) contracted with Norair Engineering Corporation (Norair) for construction in connection with a Metro subway line. Norair in turn subcontracted with Noralco Corporation for certain demolition work required by the prime contract. Norair posted a payment bond to ensure the payment of Noralco and other subcontractors.

A number of problems arose in the course of performance of Noralco’s subcontract, as a result of which Noralco concluded that it was entitled to additional compensation from Norair. In Noralco’s view, some of the claims called for additional compensation from WMATA, while others rested solely on the subcontract between Norair and Noralco.

The prime contract provided an administrative dispute-resolution process requiring submission of disputes first to the WMATA contracting officer and then to the Army Corps of Engineers Board of Contract Appeals. The subcontract, however, contained no express administrative disputes procedure. Nevertheless, a number of Noralco’s demands were submitted to the contracting officer and several were resolved to Noralco’s satisfaction. A number of Noralco’s claims are still pending in the administrative process. At least two have never been submitted.

Notwithstanding the existence of the administrative procedure, on May 9, 1975, Noraclo filed a 21-count suit in diversity against Norair and its surety. As is customary in analogous Miller Act suits, the plaintiff was styled as WMATA for the use and benefit of Noralco.

Norair moved for dismissal and, in the alternative, for a stay of the judicial proceeding pending resolution of the administrative claims. The district court, in a one-page order filed November 24, 1975, denied both motions. Rehearing was denied on February 19, 1976. Appeal was noted only from denial of the stay. The narrow question thus presented for review is whether the district court correctly concluded that the prime contract disputes clause is inapplicable to the present disputes between the prime and subcontractor.

Norair argues that various clauses of the subcontract incorporated by reference the terms of the prime contract, including its disputes clause. Clause one of the subcontract referred to the prime contract and stated that all work under the subcontract was to be performed

in accordance with the terms and provisions of said Contract including all Contract Documents forming a part of such Contract, and which are now made a part of the Subcontract Agreement insofar as they apply, and are hereby incorporated by reference.

In clause two the subcontractor certified that he had examined the prime contract and contract documents, and agreed that

[t]he Subcontractor and his Subcontractors will be and are bound by any and all parts of said documents insofar as they relate in any way or in any part to the work undertaken herein. .

The subcontract also stated:

19. It is understood and agreed by and between the parties hereto that the work included in this Subcontract is to be done under the direction of the Owner, and that its decisions or those of its designated representative as to the true construction and meaning of the plans and specifications shall be final.
If this contract is being performed under a prime contract with the United States Government, directions and decisions hereunder will be made by the Contracting Officer or his designated representative. The Subcontractor agrees to immediately perform all work directed to [90]*90be performed by the Contracting Officer or his designated representative. The Subcontractor agrees to be bound by any decision of the Contracting Officer affecting this subcontract. .
33. No suit or other action shall be brought by the Subcontractor against the Contractor’s bond for monies due, but being withheld by reason of the terms of this Subcontract. The Contractor agrees to waive the statute of limitations for commencement of any suit brought under its bond for monies due but not payable under the Subcontract .

J.A. 44-51. Norair contends that this language made Noralco’s recourse to the prime contract disputes mechanism mandatory and a precondition to suit.

The district court apparently concluded that the language in the subcontract was insufficiently specific to incorporate by reference the prime contract’s disputes clause. As the district court correctly held, this case is controlled by John W. Johnson, Inc. v. Basic Construction Co., 139 U.S.App.D.C. 85, 95-97, 429 F.2d 764, 774-76 (1970). In that case this court, faced with a similar argument by a prime contractor, held that in the absence of “clear contractual language” it would not find that a subcontract had incorporated the prime contract disputes clause by reference. Similar conclusions have been reached by other circuits in cases involving federal contracts subject to the Miller Act, 40 U.S.C. §§ 270a-270b (1970). See, e.g., H. W. Caldwell & Son, Inc. v. United States for use of John H. Moon & Sons, Inc., 407 F.2d 21, 23 (5th Cir. 1969); United States for use of B’s Co. v. Cleveland Elec. Co. of South Carolina, 373 F.2d 585, 588 (4th Cir. 1967). But this is not a Miller Act case.

The payment bond in the Miller Act cases is posted as a result of a statutory provision. It is conceded in the present case that the bond was not in response to a specific statute, although the parties to the compact creating WMATA, the District of Columbia, State of Maryland and Commonwealth of Virginia, each have statutes imposing a bond requirement for public works contracts similar to that of the Miller Act. See D.C.Code § l-804a (1973); Md. Real Property Code Ann. § 9-112 (1974), Va. Code § 11-23 (1973). Nevertheless, the policy considerations in each of these cases is the same. It is to be noted that the bond in John W. Johnson, supra, did not depend on a statute. The policy underlying both the statutes and the nonstatutory bonds is to protect subcontractors who may provide substantial amounts of labor or materials in connection with a prime contract for the construction of public facilities that are not subject to attachment and sale to satisfy the subcontractors’ claims for payment. In the absence of express contractual language, it cannot be assumed that the subcontractor intended to forfeit or condition his right to recover on the bond. The speculative judicial economy that may result if the claims are satisfactorily resolved through the administrative process does not override this consideration.

In the light of this proper conclusion of law, we do not find the district court’s reading of the contract to be in error.

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Bluebook (online)
553 F.2d 233, 180 U.S. App. D.C. 88, Counsel Stack Legal Research, https://law.counselstack.com/opinion/washington-metropolitan-area-transit-authority-ex-rel-noralco-corp-v-cadc-1977.