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U.S. EX REL. DON SIEGEL CONSTRUCTION v. ATUL CONT.

March 1, 2000

UNITED STATES OF AMERICA FOR THE USE OF DON SIEGEL CONSTRUCTION CO., INC., PLAINTIFF,
V.
ATUL CONSTRUCTION CO., AND HARLEYSVILLE INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Irenas, District Judge.

OPINION

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.

I.

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 materials. (Id.)

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., ¶ 5).

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.

II.

"[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).

III.

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.


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