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United States of America for the Use and Benefit of E&H Steel Corp. v. C. Pyramid Enterprises

September 1, 2006

UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF E&H STEEL CORPORATION, PLAINTIFF(S),
v.
C. PYRAMID ENTERPRISES, INC., FIDELITY & DEPOSIT INSURANCE COMPANY OF MARYLAND AND ZURICH AMERICAN INSURANCE COMPANY DEFENDANT(S)



The opinion of the court was delivered by: Honorable Robert B. Kugler

OPINION & FINDINGS

INTRODUCTION

How much does a steel fabricator have to do to qualify as a "subcontractor" under the Miller Act, 40 U.S.C. §3133(b)? On that seemingly simple question rides plaintiff's claims for $565,125.40. The Act does not define the terms. The parties vigorously contest the issue.

Here, a general contractor (the defendant) hired a steel fabricator to provide all the steel on a large government building. That fabricator, in turn, hired the plaintiff to do some of the steel work. As might be suspected, the defendant paid the original fabricator for the work, but that party failed to pay the plaintiff in full before declaring bankruptcy. If the original fabricator is indeed a "subcontractor," the plaintiff can recover under the defendant's bond. If not, then the plaintiff gets nothing. As will be demonstrated, the defendants prevail in this difficult case.

After the Court denied cross-motions for summary judgment, the parties proceeded to a non-jury trial on June 7, June 8, June 9, and June 12, 2006. Post trial briefing concluded on July 28, 2006. The following represents the court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52. Jurisdiction is based on the Miller Act.

FINDINGS OF FACT

A. Background

1. On September 12, 2002, C. Pyramid Enterprises, Inc. ("CPE") was awarded a contract by the United States Army Corps of Engineers to design and build a C-17 Maintenance Hangar and Aircraft Maintenance Shops at McGuire Air Force Base in New Jersey (hereinafter "the Project"). The original contract price was $24,119.450.00. Stipulated Fact No. 1.

2. As required by the Miller Act, 40 U.S.C. §3131(b)(2), CPE issued a payment bond in the penal sum of $24,119,450.00, with defendants, F & D and Zurich, as sureties, whereby CPE and its sureties, jointly, and severally, obligated themselves to pay "all persons having a direct relationship with [CPE] or a subcontractor of [CPE] for furnishing labor, material or both in the prosecution of the work provided for in the contract . . . ." Stipulated Fact No. 2.

3. CPE contracted with LZA & Associates ("LZA") to assist CPE with the design of the Project, including the design of the structural steel frame. Stipulated Fact No. 3.

4. The Project houses and provides service to the Boeing C-17 Globemaster and McDonald Douglas/Boeing KC-10A aircraft and consists of an enclosed 22,000 square meter, "column-free" aircraft service bay (203' wide x 213' long x 77' high) with maintenance shops and offices, supported by a structural steel superstructure, consisting of long span jumbo roof trusses (203 feet long) designed by LZA Associates/Thornton-Tomasetti Group ("LZA"), as CPE's structural engineer, and fabricated for CPE by Havens and E&H. Stipulated Fact No. 4.

5. On June 5, 2003, CPE sent its standard form "purchase order" to Havens Design Build ("Havens") which stated that Havens would provide the structural steel for the Project ("the Purchase Order"). Stipulated Fact No. 5.

6. The Purchase Order, as drafted by CPE (printed and typed portions) and as revised by Havens (handwritten portions and the attached July 14, 2003 letter), obligated Havens, in pertinent part, to provide the described services and materials for a total contract price of $2,230,000.00. Stipulated Fact No. 6.

7. As required by the Purchase Order, the structural steel shop drawings were prepared by Havens' detailers. Stipulated Fact No. 7.

8. Shop drawings graphically depict for the structural steel fabricator each member of steel, (including the member's exact size, shape and dimensions) for the fabricator's use in fabricating each piece of steel to 1/16th of one inch. Stipulated Fact No. 8.

9. Havens' detailers also prepared erection drawings. Stipulated Fact No. 9.

10. The shop drawings were submitted by Havens to CPE and LZA for submission to the Army Corps of Engineers for review and approval prior to fabrication to ensure that the structural steel complied with the contract specifications. Stipulated Fact No. 10.

11. Havens' detailers used 3-D modeling on this Project, however, this was not required by the Purchase Order. Stipulated Fact No. 11.

12. In addition to the preparation of shop drawings, the Purchase Order also obligated Havens to prepare the steel-to-steel connections and calculations ("connection design"). Stipulated Fact No. 12.

13. As part of the connection design, Havens suggested and CPE and LZA accepted bolted (rather than welded) connections of steel members. Stipulated Fact No. 13.

14. After Havens received the approved shop drawings, the steel could be fabricated. Stipulated Fact No. 14.

15. On November 21, 2003, Havens entered into an agreement with E&H for E&H to supply all labor, paint, material and trucking required to fabricate, paint, and deliver F.O.B. to the jobsite all girts, purlins and columns in sequence 14, 15, and 18, based upon steel materials and shop drawings furnished by Havens Design-Build. Ex. P.15. The E&H purchase order refers to ...


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