The opinion of the court was delivered by: Irenas, District Judge.
Presently before the Court is defendant Harleysville Insurance
Company's ("Harleysville") motion for partial summary judgment. The Court
has subject matter jurisdiction over this case because plaintiff is
asserting claims under the Miller Act, 40 U.S.C. § 270 (a) et seq.
See 28 U.S.C. § 1331. The Court has supplemental jurisdiction over
plaintiff's state law claims pursuant to 28 U.S.C. § 1367. For the
reasons set forth below, this motion is denied.
Defendant Atul Construction Company ("Atul") was hired by the United
States of America to replace water lines at Fort Dix, New Jersey. The
project was known as the "Garden Terrace, Water Line Replacement Project."
(Complaint, ¶ 4). On or about November 27, 1997, Atul contracted
with plaintiff Don Siegel Construction Company ("plaintiff" or "Siegel")
to provide labor on the project. (Id. at ¶ 7). In accordance with
this contract, Atul was to provide plaintiff with all necessary
Plaintiff brought this suit pursuant to the Miller Act,
40 U.S.C. § 270a et seq. The Miller Act "governs the payment rights
of persons who supply labor and material for the construction of most
Federal construction projects." U.S. ex rel New Deal Plumbing Supp. Co.
v. Nazon, No.Civ.A. 98-2083, 1999 WL 988729, at *2 (D.N.J. Oct.22,
1999). Under the Act, a prime contractor having a contract in excess of
$25,000.00 must post a payment bond with a surety. The purpose of the
bond is to ensure that all persons supplying labor and material to the
prime contractor are paid for their services. The Act has been construed
liberally "to protect those whose labor and materials go into public
projects." J.W Bateson Co. v. United States ex ret. Bd. of Trustees of
Nat. Automatic Sprinkler Indus. Pens. Fund; 434 U.S. 586, 594, 98 S.Ct.
873, 55 L.Ed.2d 50 (1978). In this case, in accordance with the Miller
Act, Atul purchased surety bonds from defendant Harleysville. (Compl.,
According to plaintiff, Atul has refused to pay $83,347.95 it owes
plaintiff for contract work performed on the Fort Dix project. (Id. at
¶¶ 13-14). On or about August 28, 1998, plaintiff filed with
Harleysville and Atul a written bond claim notice of monies due and owed
on the project. (Id. at ¶ 5). On January 25, 1999, plaintiff filed
the instant complaint seeking, inter alia, recovery of the $83,347.95 for
subcontract work performed. To date, Harleysville has not paid plaintiff
on the payment bond.
"[S]ummary judgment is proper `if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)).
In deciding a motion for summary judgment, the Court must construe the
facts and inferences in a light most favorable to the non-moving party.
Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir.
1986). The role of the court is not "to weigh the evidence and determine
the truth of the matter, but to determine whether there is a genuine
issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The question of whether a subcontractor can, sue a surety for bad faith
conduct has yet to be considered by the New Jersey Supreme Court.*fn2 In
fact, an extensive search by this Court has failed to produce any New
Jersey cases dealing with this precise issue. In the absence of relevant
state caselaw, our task is to predict how New Jersey's highest court
would resolve this question. Gares v. Willingboro Township, 90 F.3d 720,
725 (3d Cir. 1996).
In arguing that the New Jersey Supreme Court would not recognize such a
cause of action, defendant Harleysville relies heavily on a case from the
Eastern District of Tennessee. In In re Technology for Energy Corp.,
123 B.R. 979 (Bkrtcy. E.D.Tenn. 1991), the Tennessee Bankruptcy Court
concluded that bad faith damages were not available in an action by a
subcontractor against a surety under New Jersey law. In that case, the
defendant Technology for Energy Corp. ("TEC") agreed to build a radiation
monitoring system for a nuclear power plant that plaintiff, Bechtel
Enginerring Co., was building in New Jersey. The surety, American
Insurance Company ("American"), provided a combination payment and
performance bond on behalf of TEC. Following TEC's declaration of
bankruptcy, Bechtel brought suit against TEC and American to recover on
the bond. American refused to pay any amount of money beyond the amount
of the bond. Bechtel then sought damages for American's alleged bad faith
refusal to make such payments.