Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-19-07033/USCOURTS-caDC-19-07033-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 9, 2020 Decided April 7, 2020

No. 19-7033

WESTERN SURETY COMPANY,

APPELLEE

v.

U.S. ENGINEERING CONSTRUCTION, LLC,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 1:15-cv-00327)

Stephen B. Sutton, pro hac vice, argued the cause for 

appellant. With him on the briefs were Adam S. Caldwell and 

Patrick J. Curran, Jr. 

Thomas J. Moran argued the cause and filed the brief for 

appellee.

Before: PILLARD and KATSAS, Circuit Judges, and 

SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

SENTELLE.

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 1 of 12
2

SENTELLE, Senior Circuit Judge: Western Surety

Company (“Western Surety”) brought this action against U.S. 

Engineering Construction, LLC (“U.S. Engineering”) in the 

district court seeking declaratory and injunctive relief 

regarding its potential liability under a construction 

performance bond. Western Surety moved for summary 

judgment asserting that its obligations under the bond were 

discharged because U.S. Engineering failed to comply with a 

condition precedent, thereby relieving Western Surety of any 

liability. The district court granted Western Surety’s motion. 

U.S. Engineering filed the instant appeal. For the following 

reasons, we affirm the district court’s grant of summary 

judgment.

I.

Turner Construction Company (“Turner”), not a party to 

this action, contracted with the Republic of South Africa to 

construct a new South African embassy in Washington, D.C. 

On January 25, 2012, Turner and U.S. Engineering, the 

appellant in this case, entered into a subcontract in which U.S. 

Engineering would complete a range of work on the embassy. 

On February 15, 2012, U.S. Engineering and United Sheet 

Metal, also not a party to this action, entered into a subcontract 

in which United Sheet Metal would complete work on the 

embassy related to the installation of sheet metal. 

The contract price for the U.S. Engineering and United 

Sheet Metal subcontract was $585,000. U.S. Engineering also 

paid $7,940 in premiums to obtain a construction performance 

bond from Western Surety, the appellee in this case, in which 

Western Surety and United Sheet Metal jointly and severally 

bound themselves to ensure the work under the U.S. 

Engineering and United Sheet Metal subcontract was 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 2 of 12
3

completed. This performance bond is the subject of the 

underlying dispute.

By agreement of the parties, the bond form used was the

American Institute of Architects (“AIA”) Document A312-

2010 bond form, a standardized form commonly used in the 

construction industry. The bond refers to United Sheet Metal 

as the “Contractor,” U.S. Engineering as the “Owner,” and 

Western Surety as the “Surety.” J.A. 144. 

Section 3 of the bond outlines what must occur to trigger 

Western Surety’s obligations in the event that United Sheet 

Metal is in default and the subcontract is terminated. Under 

section 3.1, U.S. Engineering must first provide notice to 

United Sheet Metal and Western Surety that it is considering 

declaring United Sheet Metal in default. If U.S. Engineering 

fails to provide such notice, section 4 excuses that failure 

except to the extent that Western Surety demonstrates actual 

prejudice. Under section 3.2, if U.S. Engineering officially 

decides to end its contractual relationship with United Sheet 

Metal, it must 

declare[] a Contractor Default, terminate[] the 

Construction Contract and notif[y] the Surety. 

J.A. 145. Section 3.3 provides that U.S. Engineering must also 

agree to pay the balance of the contract price to Western Surety 

or to a contractor selected to perform the subcontract.

Under section 5,

[w]hen the Owner has satisfied the conditions 

of Section 3, the Surety shall promptly and at 

the Surety’s expense take one of the following 

actions: 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 3 of 12
4

§ 5.1 Arrange for the Contractor, with the 

consent of the Owner, to perform and complete 

the Construction Contract; 

§ 5.2 Undertake to perform and complete the 

Construction Contract itself, through its agents 

or independent contractors; 

§ 5.3 Obtain bids or negotiated proposals from 

qualified contractors acceptable to the Owner

for a contract for performance and completion 

of the Construction Contract . . . and pay to the 

Owner the amount of damages as described in 

Section 7 in excess of the Balance of the 

Contract Price incurred by the Owner as a result 

of the Contractor’s Default; or

§ 5.4 Waive its right to perform and complete, 

arrange for completion, or obtain a new 

contractor and with reasonable promptness 

under the circumstances:

.1 After investigation, determine the 

amount for which it may be liable to 

the Owner and, as soon as practicable 

after the amount is determined, make 

payment to the Owner; or

.2 Deny liability in whole or in part and 

notify the Owner, citing the reasons 

for denial.

J.A. 145.

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 4 of 12
5

While working to complete the embassy, the parties began 

to encounter problems caused by United Sheet Metal. On 

February 6, 2013, Turner sent a formal notice to U.S. 

Engineering stating that any additional costs incurred from 

delays caused by U.S. Engineering and its subcontractors—

namely, United Sheet Metal—would be back charged to U.S. 

Engineering. Turner highlighted that United Sheet Metal 

“lack[ed] materials, manpower, and completely ignore[d] 

direction given to them by U.S. Engineering Company or 

Turner.” J.A. 201. 

U.S. Engineering forwarded those concerns to United 

Sheet Metal in a “formal ‘notice to correct’” letter, advising 

United Sheet Metal that it had “failed to comply with its 

obligations under the Subcontract” and that the company had 

“72 hours [to] demonstrate performance improvement.” J.A. 

202. Nevertheless, the problems persisted. Finally, on 

September 9, 2013, U.S. Engineering formally terminated its 

subcontract with United Sheet Metal. 

The parties do not dispute that U.S. Engineering declared 

United Sheet Metal in default and terminated the subcontract. 

Nor do they dispute that U.S. Engineering failed to notify 

Western Surety that it was considering declaring United Sheet 

Metal in default and terminating the subcontract. In fact, the 

record is clear that U.S. Engineering did not notify Western 

Surety of the default and termination until June 9, 2014, when 

it sent a notice of claim against the bond, nearly nine months 

after the termination occurred. On June 13, 2014, Western 

Surety acknowledged receipt of the letter. 

In the meantime, United Sheet Metal and U.S. Engineering 

began arbitration to settle various disputes related to the 

termination of the subcontract. On March 4, 2015, U.S. 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 5 of 12
6

Engineering attempted to join Western Surety in that dispute. 

In response, Western Surety brought this action in the district 

court. In Count I, Western Surety sought declaratory relief that 

it was “not required to arbitrate any disputes or controversies 

regarding its rights, liabilities, or obligations under the Bond.” 

Complaint at 11, W. Sur. Co. v. U.S. Eng’g Co., No. 

15-cv-0327-TSC (D.D.C. Mar. 6, 2015). In Count II, it sought

injunctive relief “prohibiting U.S. Engineering from 

participating in any arbitration proceedings which purport to 

determine or affect Western Surety’s rights, liabilities, or 

obligations under the Bond.” Id. Finally, in Count III, it sought

declaratory relief that its obligations under the Bond had been 

discharged, “rendering the bond null and of no further force or 

effect.” Id. On this third count, Western Surety specifically 

maintained that U.S. Engineering did not have a right to make 

a claim under the bond because of its “extreme delay in 

providing notice to Western Surety of United Sheet Metal’s 

alleged default and termination.” Id. at 10.

Western Surety moved for summary judgment on the first 

two counts. The district court granted the motion, leaving only 

the question of whether Western Surety’s obligations under the 

bond had been discharged by U.S. Engineering’s failure timely 

to comply with the notice provision of section 3.2. U.S. 

Engineering then filed its answer, asserting that section 3.2 

required it only to provide notice of the default and termination

without any specific time limitation. U.S. Engineering thus 

argued that Western Surety was obligated to perform under 

section 5 of the bond.

On March 2, 2017, Western Surety filed a new motion for 

summary judgment on its remaining claim and U.S. 

Engineering’s counterclaims. The district court granted 

Western Surety’s motion on all claims. The court held that, 

“although Section 3.2 [of the bond] does not explicitly state 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 6 of 12
7

that U.S. Engineering must notify Western Surety within a 

certain amount of time, the explicit grant to Western Surety of 

a right to remedy the default necessarily implies that timely

notice is required to trigger Western Surety’s obligation under 

the Bond because Section 5 operates only if timely notice is 

given.” W. Sur. Co. v. U.S. Eng’g Co., 375 F. Supp. 3d 1, 6

(D.D.C. 2019) (emphasis added). Specifically, the district

court relied on this court’s decision in Hunt Construction 

Group v. National Wrecking Corporation, 587 F.3d 1119 (D.C. 

Cir. 2009), in which we held that a party’s failure to provide 

notice to the surety of default and termination before 

completing the work through other subcontractors was a failure 

of a condition precedent and discharged the surety’s 

obligations under a similar AIA bond. See id. at 1121–22. As 

the district court noted in this case, “[we] reasoned that 

sureties’ options to remedy the default would be ‘nonsensical’ 

without the inference that the sureties should be given timely 

notice of the declaration of default.” W. Sur. Co., 375 F. Supp. 

3d at 6 (quoting Hunt Constr. Grp., 587 F.3d at 1121).

The district court also held that Western Surety only had 

to prove actual prejudice in the event of U.S. Engineering’s

failure to provide notice to Western Surety that it was 

considering declaring United Sheet Metal in default under 

section 3.1, not in the event of U.S. Engineering’s failure to 

provide notice that it had actually declared United Sheet Metal 

in default and terminated the subcontract under section 3.2. 

U.S. Engineering filed the instant appeal challenging both 

holdings.

II.

We review the district court’s grant of summary judgment 

de novo. Mayo v. Reynolds, 875 F.3d 11, 19 (D.C. Cir. 2017).

Summary judgment is appropriate if, viewing the facts in the 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 7 of 12
8

light most favorable to the nonmoving party, there is no 

genuine dispute as to any material fact. Fed. R. Civ. P. 56. The 

parties agree that D.C. law applies. 

A.

U.S. Engineering primarily argues that the plain language 

of the bond simply requires notice of default and termination, 

not notice sufficiently early to enable every potential option to 

cure, to trigger Western Surety’s obligations under the bond. 

In the alternative, it argues that if the bond’s language is 

ambiguous as to whether timely notice is required, the court 

should construe any ambiguous language with due regard for 

the bond’s purpose to protect U.S. Engineering from United 

Sheet Metal’s default and to avoid a forfeiture.

Like the district court, we conclude that Hunt is 

controlling. Hunt involved AIA Document A311, which 

expressly provides that, if the contractor is declared to be in 

default, the surety has an opportunity to “promptly remedy” 

that default. Hunt Constr. Grp., 587 F.3d at 1120. It also 

allows the owner to remedy the default on its own terms “after 

reasonable notice” to the surety. Id. The owner in that case 

declared the contractor in default and terminated the 

construction contract but did not notify the surety of the default 

and termination until five months later. Id. In the meantime, 

the owner employed another contractor to finish the remaining 

work without consulting the surety. Id. Construing the A311 

bond, we determined that timely notice was a condition 

precedent to the surety’s obligations under the bond. Id. at 

1120–22. As the district court noted in this case, we explained

that accepting Hunt’s contrary argument “would gut rights 

specifically afforded the surety”—namely, the bond’s “explicit 

grant to the surety of a right to remedy the default itself.” Id.

at 1121–22.

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 8 of 12
9

The A312 bond at issue in this case states that, in order to 

trigger Western Surety’s obligations under the bond, U.S. 

Engineering must declare a United Sheet Metal default, 

terminate the subcontract, and notify Western Surety. Similar 

to the A311 bond, the A312 bond provides four alternative 

methods by which the surety can respond to the default. By 

unilaterally completing United Sheet Metal’s remaining 

contract obligations before notifying Western Surety, U.S. 

Engineering deprived Western Surety of its contractually 

agreed-upon opportunity to participate in remedying United 

Sheet Metal’s default. 

To be sure, under several provisions of the bond, Western 

Surety could not have responded to the default without U.S. 

Engineering’s consent. But even so, that limitation did not give

U.S. Engineering the right to address the situation without 

consulting Western Surety and then recover under the bond 

nine months later. In other words, despite the bond’s lack of 

an explicit timely notice requirement, the performance bond is 

properly read as requiring U.S. Engineering to notify Western 

Surety of the default before engaging in self-help remedies. 

Otherwise, “the explicit grant to the surety of a right to remedy 

the default itself would be operative only if the obligee chose 

to give it notice,” thereby rendering the options in section 5 

“nearly meaningless.” Id. at 1121. Accordingly, because the 

bond expressly provides the surety with the opportunity to 

participate in curing the subcontractor’s default, we hold that it 

is a condition precedent to the surety’s obligations under the 

bond that the owner must provide timely notice to the surety of 

any default and termination before it elects to remedy that 

default on its own terms. In light of U.S. Engineering’s failure 

to provide such timely notice, Western Surety was not 

obligated to perform under the bond. 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 9 of 12
10

We note separately that at least one other court construing 

the A312 bond reached a similar conclusion. Although not 

dealing with a failure of notice under section 3.2, the Eleventh 

Circuit determined that if an obligee hires a new subcontractor 

before the surety has an opportunity to respond to the 

termination, the surety’s obligations under the bond are

discharged. Int’l Fid. Ins. Co. v. Americaribe-Moriarty JV, 681 

F. App’x 771, 776–77 (11th Cir. 2017). The Eleventh Circuit 

emphasized that such an action “thwart[s] [the surety’s] ability 

to choose among the options it had for remedying [the 

subcontractor’s] default under § 5 of the bond.” Id. 

Because we do not conclude that the bond is ambiguous, 

we need not address U.S. Engineering’s arguments that surety 

bonds should be construed liberally in favor of the beneficiary 

and to avoid a forfeiture. See, e.g., St. Paul Fire & Marine Ins. 

Co. v. VDE Corp., 603 F.3d 119, 123 (1st Cir. 2010) 

(“Although ‘[t]he prevailing doctrine is that [a surety bond] 

should be liberally interpreted in favor of its beneficiary,’ that 

principle ‘is not a blank check to the judicial power to rule out 

the pacts and agreements between the parties.’” (alterations in 

original) (quoting Citibank v. Grupo Cupey, Inc., 382 F.3d 29, 

31–32 (1st Cir. 2004))); Wash. Props., Inc. v. Chin, Inc., 760 

A.2d 546, 549 (D.C. 2000) (“As a general rule of contract 

interpretation, there is a presumption in favor of construing 

doubtful language in a contract as language of promise rather 

than as language of condition.” (emphasis added)).

B.

U.S. Engineering also contends that section 4 of the bond 

requires Western Surety to demonstrate actual prejudice in 

order to avoid liability under the bond if there is a failure to 

provide notice under any section. It argues that section 4 

expressly referenced a failure to give notice only under section 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 10 of 12
11

3.1 because that was the only notice requirement the parties 

intended to include in the bond. To the extent the court implies 

a timely notice requirement under section 3.2, U.S. 

Engineering asserts that the requirement to demonstrate actual 

prejudice to avoid liability under the bond should equally apply 

to any such implied condition. 

Section 4 states, “Failure on the part of the Owner to 

comply with the notice requirement in Section 3.1 shall not 

constitute a failure to comply with a condition precedent to the 

Surety’s obligations, or release the Surety from its obligations, 

except to the extent the Surety demonstrates actual prejudice.” 

J.A. 145 (emphasis added). By its plain language, the 

requirement to demonstrate actual prejudice clearly applies to 

a failure to give notice only under section 3.1. There is no 

similar requirement when U.S. Engineering fails to give timely 

notice of the default and termination under section 3.2. U.S. 

Engineering’s assertion that the parties intended section 3.1 to 

be the only notice requirement in the bond makes little, if any,

sense. By its express terms, section 3.2 clearly provides that 

U.S. Engineering must “notify” Western Surety of the default 

and termination in order to trigger Western Surety’s obligation

to act under section 5. J.A. 145. Accordingly, we conclude 

that the plain language of the bond is unambiguous that the 

surety is not required to demonstrate actual prejudice to avoid 

liability under the bond if the obligee fails to provide notice of 

default and termination under section 3.2.

Even assuming we agreed with U.S. Engineering that 

Western Surety must demonstrate actual prejudice to avoid 

liability in this situation, it would not change the outcome. By 

failing to provide notice under section 3.2, U.S. Engineering 

robbed Western Surety of its contractually agreed-upon 

opportunity to participate in the mitigation process entirely. 

Although not necessary to our opinion, it would seem that is 

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 11 of 12
12

inherently prejudicial. Thus, even if we required Western 

Surety to demonstrate actual prejudice, it would not be liable 

under the bond due to the inherent prejudice it suffered.

Again, another court interpreting the A312 bond agrees

with our interpretation. The Nevada district court determined 

that “failure to comply with section 3.2 is a condition precedent 

to [the surety’s] obligations arising under the bond, and the 

parties contractually agreed that [the surety] need not show 

prejudice from that failure to relive it of its obligations.” 

United States ex rel. Agate Steel, Inc. v. Jaynes Corp., No. 

2:13-CV-01907-APG-NJK, 2016 WL 8732302, at *7 (D. Nev. 

June 17, 2016).

III.

Because U.S. Engineering failed to comply with the 

condition precedent to provide timely notice of default and 

termination under section 3.2, Western Surety was not 

obligated to perform under the bond. Additionally, the bond is

clear that Western Surety is not required to demonstrate actual 

prejudice to avoid liability under these circumstances. We thus 

affirm the district court’s grant of summary judgment.

USCA Case #19-7033 Document #1837024 Filed: 04/07/2020 Page 12 of 12