Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00673/USCOURTS-azd-2_07-cv-00673-4/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 40:270 Miller Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America, for the Use and

Benefit of First Call Mechanical, Inc., a

California corporation, 

Plaintiff, 

vs.

Sundt Construction, Inc., a California

corporation; Fidelity and Deposit

Company of Maryland, a Maryland

corporation; and Federal Insurance

Company, a New Jersey Corporation, 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-07-673-PHX-LOA

ORDER

This matter is before the Court on the motion of defendant Sundt Construction,

Inc. ("Sundt") and its Miller Act sureties, Federal Insurance Company ("Federal") and

Fidelity and Deposit Company of Maryland ("Fidelity") to stay the proceedings and compel

plaintiff First Call Mechanical, Inc. ("First Call") to proceed with mediation and/or

arbitration. (docket # 10) Plaintiff First Call opposes this motion. All parties to this action

have previously consented to magistrate judge jurisdiction pursuant to Title 28 U.S.C. §

636(c). (docket # 27)

I. Background

On or about March 9, 2004, Sundt was awarded a contract with the United States

of America acting through the Department of the Air Force, Andrews Air Force Base, to

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 1 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

complete contract F41622-02-D-0001/TG21, Project TG21 - Andrews AFB FY04 Replace

MFH at Andrews Air Force Base, Maryland (the "Contract"). (docket # 1 at 3) Because the

Contract was for work on a federal facility and exceeded $100,000 in value, section 3131(b)

of the Miller Act, 40 U.S.C. § 3131(b), required Sundt to furnish a payment bond. Sundt

obtained the payment bond from Federal and Fidelity as sureties. 

On or about February 22, 2005, Sundt entered into a subcontract agreement (the

"Subcontract") with First Call pursuant to which First Call agreed to provide all labor,

materials, equipment, and services necessary to supply piping, insulation, the HVAC systems

and related materials and work. (docket # 1 at 3) 

The Subcontract provides that all disputes must initially be submitted to

mediation. The Subcontract further provides that if mediation is unsuccessful, then disputes

must be decided by arbitration in accordance with the Construction Industry Arbitration

Rules of the American Arbitration Association. Section 32 of the Subcontract provides in

relevant part:

Dispute Resolution: Contractor and Subcontractor shall first use their best 

efforts to amicably settle all claims, disputes, and other matters relating to 

this Agreement, supplements or Work Order(s) arising out of or relating to

payments or performance thereunder or breach thereof ("Disputes"). It not

successful, Contractor and Subcontractor shall attempt to settle such Disputes

through mediation under the Construction Industry Mediation Rules of the 

American Arbitration Association then in effect, unless they mutually agree

otherwise, before recourse to arbitration. All such disputes not resolved 

through mediation shall be decided by arbitration in the City of the Contractor's

home office in accordance with the Construction Industry Arbitration Rules

of the American Arbitration Association ("AAA") as set forth below, unless

the parties to this Agreement mutually agree otherwise, and provided that 

such arbitration shall take place between 90 days of the initial demand for 

same. This agreement to arbitrate . . . shall be specifically enforceable under

the prevailing arbitration rules or law in force in the state of the Contractor's

home office at the time arbitration is initiated with the exception of the choice

of law provision(s) . . . Neither party shall be deemed to have violated this

provisions by filing suit, provided:

(a) The party files suit in order to prevent the running of the statute of 

limitations . . . ; and 

(b) The party commencing the suit agrees to stay court proceedings pending

arbitration under this Agreement. 

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 2 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Civil actions brought under the Miller Act must be brought "in the name of the

United States for the use of the person bringing the action." 40 U.S.C. § 3133(b)(3)(A).

Thus, the Plaintiff in this action is the United States of America, for the use and benefit of

the First Call. However, for convenience, the Court refers to First Call as Plaintiff. 

- 3 -

(docket # 10 at 2-3)

First Call alleges that the sum of $78,511.68 remains unpaid under the

Subcontract. (docket # 1 at 4-5) Accordingly, on March 26, 2007, the United States of

America for the use and benefit of First Call,1

 filed this action pursuant to the Miller Act, 40

U.S.C. §270(a)-270(d), for payment on the bond. (docket # 1) Thereafter, Sundt requested

that First Call stipulate to stay this lawsuit pending arbitration pursuant to the terms of the

Subcontract. First Call allegedly never responded to this request. (Id.) Sundt now moves

for an order staying this action and compelling arbitration under section 3 of the Federal

Arbitration Act, 9 U.S.C. § 3. For the reasons set forth below, the Court grants Sundt's

motion and directs First Call to initiate arbitration pursuant to the subcontract's arbitration

clause. 

II. Stay Pending Arbitration

Sundt argues that under section 3 of the Federal Arbitration Act, 9 U.S.C. § 3

("FAA"), the Court should stay the pending proceedings and compel arbitration. 

The Federal Arbitration Act provides, in pertinent part, that:

If any suit or proceeding be brought in any of the courts of the United

States upon any issue referable to arbitration under an agreement in 

writing for such arbitration, the court in which such suit is pending, 

upon being satisfied that the issue involved in such suit or proceeding

is referable to arbitration under such an agreement, shall on application

of one of the parties stay the trial of the action until such arbitration has

been had in accordance with the terms of the agreement, providing the

applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. 

The FAA reflects Congress' intent to "move the parties to an arbitrable dispute

out of court and into arbitration as quickly and easily as possible." Moses H. Cone Mem'l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983). Under the FAA, the "district court

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 3 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

must order arbitration if it is satisfied that the making of the agreement for arbitration is not

in issue. Therefore, the district court can determine only whether a written arbitration

agreement exists, and if it does, enforce it in accordance with its terms." Simula, Inc. v.

Autoliv, Inc., 175 F.3d 716, 720 (9th Cir. 1999)(citations omitted). Whether an issue is

"referrable to arbitration" is determined with a "healthy regard for the federal policy favoring

arbitration . . . [and] any doubts concerning the scope of arbitrable issues should be resolved

in favor of arbitration, whether the problem at hand is the construction of the contract

language itself or an allegation of waiver, delay or a like defense to arbitrability." Cone, 460

U.S. at 24-25. 

"[A]n arbitration agreement must be enforced notwithstanding the presence of

other persons who are parties to the underlyling dispute but not to the arbitration agreement."

Cone, 460 U.S. at 20 (referring to a possible indemnitor). Additionally, when the issues

before the district court are not "issue[s] referable to arbitration," the court, while not

required to stay the litigation, has the discretion to do so. American Recovery Corp. v.

Computerized Thermal Imaging, 96 F.3d 88, 97 (4th Cir. 1996)(stating that "the decision to

stay the litigation of non-arbitrable claims or issues is a matter largely within the district

court's discretion to control its docket."). 

Nothing in the Miller Act prevents the enforcement of an arbitration clause

between a general contractor and a subcontractor on a federal contract. United States ex rel.

Capolino Sons, Inc. v. Electronic & Missile Facilities, Inc., 364 F.2d 705 (2nd Cir. 1966);

United States ex rel. Industrial Engineering & Metal Fabricators, Inc. v. Eric Elevator

Corp., 214 F.Supp. 947 (D.Mass. 1963) (stating that provisions of the FAA apply to suits

under the Miller Act.) Indeed, federal courts routinely stay Miller Act lawsuits pending

arbitration to determine the contractor's liability. United States ex rel. MPA Construction,

Inc. v. XL Speciality Insurance Co., 349 F.Supp.2d 934 (D. Md. 2004) (holding that issues

between general contractor and subcontractor were referable to arbitration.) 

In this case, the Subcontract arbitration clause applies to "all claims, disputes and

other matters relating to this Agreement, supplements or Work Order(s) arising out of or

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 4 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

relating to payments or performance thereunder or breach thereof." The issue in this case,

whether First Call is owed money under the Subcontract, is subject to the Subcontract's

arbitration clause. "[W]hen a general contractor requests a stay of a Miller Act action by a

subcontractor against both the general contractor and the surety, '[t]here can be no question

that, under the language of [9 U.S.C. § 3], defendants were entitled to the stay asked.'" MPA,

349 F.Supp.2d at 940 (quoting Agostini Bros. Bldg. Corp. v. United States, 142 F.2d 854,

855 (4th Cir. 1944)). The sureties in this matter, although not parties to the Subcontract, have

agreed to arbitration. (docket # 24, Exhs. A, B) Moreover, the arbitration agreement must

be enforced notwithstanding the presence of other persons who are parties to the underlying

dispute but not to the arbitration agreement. Cone, 460 U.S. at 20. 

Based on the foregoing, the Court will grant Defendants' Motion to Stay and will

compel First Call to proceed with mediation or arbitration. Defendant Sundt is hereby

informed that it may waive its right to proceed to mediation or arbitration by, among others,

unreasonably failing to participate in, or unreasonably delaying, mediation or arbitration.

Fisher v. A.G. Becker Paribas, Inc., 791 F.2d 691, 694 (9th Cir. 1986); Britton v. Co-op

Banking Grp., 916 F.2d 1405, 1412 (9th Cir. 1990).

Accordingly,

IT IS ORDERED that the motion of Sundt Construction, Inc. and its Miller Act

sureties, Federal Insurance Company and Fidelity and Deposit Company of Maryland to stay

the proceedings and compel plaintiff First Call Mechanical, Inc. ("First Call") to proceed

with mediation or arbitration (docket # 10) is GRANTED. This case is hereby STAYED

in this District Court until further order of the Court.

IT IS FURTHER ORDERED that First Call shall demand mediation or

arbitration against Sundt in accordance with the terms of the Subcontract on or before June

22, 2007.

IT IS FURTHER ORDERED that Plaintiff shall file a Joint Status Report on

or before November 9, 2007, setting forth the status of the mediation or arbitration, the due

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 5 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 28 U.S.C. §471 et seq. The Civil Justice Reform Act of 1990 (“CJRA”) provides

that each United States District Court must develop a civil justice expense and delay

reduction plan which facilitates the deliberate adjudication of civil cases on the merits,

monitors discovery, improves litigation management, and ensures just, speedy, and

inexpensive resolutions of civil disputes. The CJRA mandates the early and on-going

judicial management of the pretrial process including controlling the extent of and timing for

discovery. 28 U.S.C. §473(a)(2). Under the mandate, "[f]ederal trial courts are now required,

by statute, to implement techniques and strategies designed to dispose of cases in an efficient

and inexpensive manner." Schwarzkopf Technologies Corp. v. Ingersoll Cutting Tool Co.,

142 F.R.D. 420, 423 (D.Del.1992). 

- 6 -

diligence exercised by the parties since the entry of this Order, and good cause, if any exists,

why the stay of this lawsuit should remain in effect.

Because of the Court’s responsibilities as a result of the Civil Justice Reform

Act,2

 Plaintiff is hereby informed that this case may dismissed pursuant to Rule 41(b)(lack

of prosecution), FED.R.CIV.P., and Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992)

(trial courts have the inherent power to control their dockets and in the exercise of that power

they may impose sanctions including, where appropriate, dismissal of a case) unless Plaintiff

demonstrates that it has exercised due diligence in prosecuting its claim in mediation or

arbitration and it has timely filed its Joint Status Report. Any party may ask the Court to

schedule an informal status conference before the Joint Status Report deadline to inform the

Court of any problems existing in the mediation or arbitration or other issues in this case.

 Dated this 6th day of June, 2007. 

 

Case 2:07-cv-00673-LOA Document 31 Filed 06/07/07 Page 6 of 6