Powercom, Inc., V. Valley Electric Co. Of Mt. Vernon, Inc. ( 2024 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
POWERCOM, INC., a Washington No. 85120-9-I
corporation,
DIVISION ONE
Appellant,
v.
VALLEY ELECTRIC CO. OF MT.
VERNON, INC., a Washington
corporation; ARGONAUT INSURANCE
COMPANY, a foreign insurer (Bond
No. SUR0043723-00); CLARK
CONSTRUCTION GROUP, LLC, a
foreign limited liability company;
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA, a PUBLISHED OPINION
foreign insurer; FIDELITY AND
DEPOSIT COMPANY OF
MARYLAND, a foreign insurer;
FEDERAL INSURANCE COMPANY, a
foreign insurer, and ZURICH
AMERICAN INSURANCE CO., a
foreign insurer (Bond Nos. 106308203/
82298673/09190971 and Bond Nos.
106356881/82298695/09207256); and
PORT OF SEATTLE, a Washington
State municipal corporation,
Respondents.
BOWMAN, J. — PowerCom Inc., a subcontractor on a renovation project at
the Seattle-Tacoma International Airport, appeals the trial court’s stay of its pass-
through claims against the Port of Seattle (Port), its prime contractor Clark
Construction Group LLC (Clark), and their sureties pending the final resolution of
Clark’s lawsuit against the Port. PowerCom argues the trial court’s stay violated
No. 85120-9-I/2
its right to sue under chapter 39.08 RCW, Washington’s “Little Miller Act.”
Because the plain language of PowerCom’s subcontract explicitly waives its right
to sue under the Little Miller Act pending resolution of pass-through claims, we
affirm.
FACTS
In 2015, the Port hired Clark to renovate the “International Arrivals Facility
South Satellite Corridor” at Seattle-Tacoma International Airport. The Port and
Clark executed a design-build contract under which Clark was the prime
contractor (Main Contract). In 2017, Clark executed a subcontract with Valley
Electric Co. of Mt. Vernon Inc. (Valley) to install electric security, surveillance,
and monitoring systems. And in 2018, Valley subcontracted with PowerCom to
provide, install, and test certain electrical cables within Valley’s scope of work.1
All three contracts contain dispute resolution provisions. The Main
Contract has a multistep dispute resolution process. First, the Port and Clark
must meet to try to resolve any claims. If they do not resolve their dispute, they
must submit the claim to a dispute resolution board. If they still cannot resolve
their claim, the Port and Clark must mediate the claim under the voluntary
construction mediation rules of the American Arbitration Association. And finally,
having exhausted those avenues, the Port or Clark may file a lawsuit to resolve
the claim.
1
Clark and Valley each posted bonds with surety companies to ensure payment
to laborers, subcontractors, and material suppliers as required for public works contracts
under RCW 39.08.010.
2
No. 85120-9-I/3
The Main Contract applies to claims not only between the Port and Clark
but also to claims Clark “assert[s] on behalf of [a] Subcontractor, Sub-
subcontractor, or Supplier.” Claims asserted by Clark for subcontractors are
called “pass-through claims.” The contract between Clark and Valley
incorporates the dispute resolution procedures of the Main Contract for any pass-
through claims but authorizes arbitration of non-pass-through claims “at Clark’s
sole option.”
The subcontract between Valley and PowerCom provides different
processes for dispute resolution depending on the type of claim. For all pass-
through claims, the contract binds PowerCom to “the procedure and final
determination as specified in the Main Contract.” And PowerCom agreed that
it will not take, or will suspend, any other action or actions with
respect to any such claims and will pursue no independent litigation
with respect thereto, pending final determination of any dispute
resolution procedure between [the Port] and [Clark].
All other claims—that is, non-pass-through claims—“shall be decided by
arbitration.”2
PowerCom began its electrical work in late 2018, but between March 2020
and October 2021, it experienced delays because of the COVID-193 protocols
that the Port, Clark, and Valley implemented at the project site. In October 2021,
PowerCom submitted a pass-through claim to Valley, seeking payment of
2
For non-pass-through claims, the contract also requires the parties to attend at
least four hours of mediation before arbitration. And if PowerCom’s subcontract and the
Main Contract conflict, PowerCom’s subcontract controls.
3
Coronavirus disease 2019.
3
No. 85120-9-I/4
$1,306,250 for its total increased costs from the COVID-19 restrictions.4 Valley
passed PowerCom’s and their own COVID-19-related claims to Clark. Clark then
submitted both claims along with its own COVID-19-related claims to the Port.
The Port disputed the claims, so the Port and Clark engaged in the
dispute resolution process described in the Main Contract. That process failed to
resolve the claims. So, in December 2022, Clark sued the Port for recovery of
its, Valley’s, and PowerCom’s losses.
On October 19, 2022, PowerCom sued the Port, Clark and its sureties,
and Valley and its sureties, seeking compensation for its COVID-19-related costs
and costs associated with its non-pass-through claims. It asserted claims of
breach of contract; breach of the covenant of good faith and fair dealing; violation
of the Prompt Payment Act, chapter 39.76 RCW; unjust enrichment; and
payment for its “account stated.” PowerCom also sought foreclosure on Clark’s
and Valley’s sureties’ bonds under the Little Miller Act.
In January 2023, PowerCom moved to compel arbitration of its claims
against all parties. PowerCom argued that the arbitration clause in its
subcontract applies to both pass-through and non-pass-through claims and
asked that the claims be arbitrated together. It also asked for a stay pending that
arbitration. Clark agreed to stay and arbitrate PowerCom’s non-pass-through
claims. But it argued that the trial court should stay PowerCom’s COVID-19-
related claim pending resolution of its lawsuit against the Port.
4
PowerCom also submitted non-pass-through claims to Valley for extra work and
unpaid change orders. In total, PowerCom sought a judgment of $2,643,330 plus sales
tax and prejudgment interest.
4
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The court granted PowerCom’s motion to compel arbitration for its non-
pass-through claims against Clark but denied it as to the pass-through claims.
The court stayed PowerCom’s COVID-19-related claim “pending resolution of
Clark’s lawsuit against [the] Port” because that “lawsuit includes [PowerCom]’s
pass-through COVID-19 claim.”
PowerCom appeals.5
ANALYSIS
PowerCom argues the court erred by staying its pass-through COVID-19-
related claim “pending resolution of Clark’s lawsuit against [the] Port.” According
to PowerCom, the court’s stay “indefinitely postponed” its ability to recover
payment on its claim in violation of the Little Miller Act. Clark argues that
PowerCom contractually waived by “ ‘clear and explicit’ language” its right to
recover under the Little Miller Act pending resolution of Clark’s lawsuit against
the Port.6 We agree with Clark.
A trial court has inherent power to stay its proceedings where the interest
of justice so requires. King v. Olympic Pipeline Co., 104 Wn. App. 338, 350, 16
P.3d 45 (2000). We review a trial court’s stay of proceedings for an abuse of
discretion. Id. at 348. A trial court abuses its discretion if its ruling is manifestly
5
The Port and Clark filed response briefs to PowerCom’s appeal. We issued a
letter instructing Valley to also file a response brief. Valley responded, joining the Port
and Clark’s arguments. PowerCom moved to strike Valley’s joinder, arguing that it
“attempts to raise new issues and arguments for the first time on appeal” and that it is
“not [a] respondent[ ] or necessary part[y] to PowerCom’s appeal under RAP 5.3(i).” We
deny PowerCom’s motion to strike Valley’s response, which was submitted at the
direction of this court and raised no new issues.
6
PowerCom argues that we should refuse to consider Clark’s waiver argument
because it did not argue the theory below. But the record shows that Clark did argue
below that PowerCom waived its right to sue under the Little Miller Act.
5
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unreasonable or based on untenable grounds or reasons. Id. A court’s decision
is manifestly unreasonable if, despite applying the correct legal standard to the
supported facts, the court adopts a view that no reasonable person would take.
Mayer v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P.3d 115 (2006). A trial court
bases its decision on untenable grounds or untenable reasons if it relies on
unsupported facts or applies the wrong legal standard. Id.Washington’s Little Miller Act requires contractors to obtain bonds on
public works projects. 3A Indus., Inc. v. Turner Constr. Co., 71 Wn. App. 407,
411, 869 P.2d 65 (1993); RCW 39.08.010. The act is intended to “ ‘provide
security for those who furnish labor and material in the performance of
government contracts’ ” where liens are unavailable. Wash. State Major League
Baseball Stadium Pub. Facilities Dist. v. Huber, Hunt & Nichols-Kiewit Constr.
Co., 176 Wn.2d 502, 523-24, 296 P.3d 821 (2013) (quoting Fanderlik-Locke Co.
v. United States ex rel. Morgan, 285 F.2d 939, 942 (10th Cir. 1960)). The Little
Miller Act also provides subcontractors “a right of action in their own name
against the bond for work done or materials or goods furnished in the project.”
3A Indus., 71 Wn. App. at 411; RCW 39.08.030(1)(a).7
A subcontractor may waive its right to sue under the Little Miller Act. H.
W. Caldwell & Son, Inc. v. United States ex rel. John H. Moon & Sons, Inc., 407
7
Washington’s Little Miller Act is similar to the federal “Miller Act,” 40 U.S.C. §§
3131 to 3134. The Miller Act provides security for subcontractors who furnish labor and
material under government contracts by requiring prime contractors to secure a payment
bond. 40 U.S.C. § 3131. It then grants a civil right of action to those subcontractors to
recover unpaid labor or material costs from the payment bond. 40 U.S.C. § 3133.
Because the Little Miller Act generally parallels the federal Miller Act, Washington courts
rely on Miller Act cases to interpret the Little Miller Act. See 3A Indus., 71 Wn. App. at
411, 418.
6
No. 85120-9-I/7
F.2d 21, 23 (5th Cir. 1969); see 3A Indus., 71 Wn. App. at 411, 418-19 (language
of subcontract bound subcontractor to arbitration at contractor’s demand
despite its right to sue under the Little Miller Act). But courts do not favor finding
that a subcontractor has contractually abandoned its rights under the Little Miller
Act. H. W. Caldwell, 407 F.2d at 23; see 3A Indus., 71 Wn. App. at 418 (vague
references to dispute resolution processes are not enough to waive a
subcontractor’s right to sue under the Little Miller Act); see also United States ex
rel. Walton Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1205 (9th Cir.
2002) (courts liberally construe the Miller Act “ ‘to effectuate the Congressional
intent to protect those whose labor and materials go into public projects’ ”)
(quoting United States ex rel. Sherman v. Carter, 353 U.S. 210, 216, 77 S. Ct.
793, 1 L. Ed. 2d 776 (1957)). A subcontractor waives its right to sue under the
Little Miller Act only where a subcontract explicitly contains such a waiver. H. W.
Caldwell, 407 F.2d at 23; see 3A Indus., 71 Wn. App. at 418-19 (subcontractor’s
“explicit agreement” to arbitration bound it to that remedy). The waiver must be
“ ‘manifest by [the] plain language’ of the contract.” 3A Indus., 71 Wn. App. at
4138 (quoting Fanderlik-Locke, 285 F.2d at 943).
Citing Fanderlik-Locke, PowerCom argues it did not explicitly waive its
right to sue under the Little Miller Act. In that case, a subcontractor sued the
prime contractor and the bondsman under the federal Miller Act for the value of
labor performed and materials installed beyond that provided for in the
subcontract. Fanderlik-Locke, 285 F.2d at 941. The prime contractor argued the
8
Internal quotation marks omitted.
7
No. 85120-9-I/8
subcontractor could not sue until it followed an exhaustive dispute resolution
process provided in the prime contract that was incorporated by reference in the
subcontract. Id. at 941-42. The subcontract provided that the subcontractor was
bound to the contractor by the “ ‘general conditions’ ” of the prime contract, but it
did not specifically reference the settlement of disputes or the subcontractor’s
right to sue under the Miller Act. Id. The court determined that the language did
not amount to an explicit waiver of the subcontractor’s right to sue under the
Miller Act. Id. at 943.
This case is different than Fanderlik-Locke. PowerCom’s contract does
more than just incorporate by reference a dispute resolution process in the Main
Contract. It notifies PowerCom that its claims against the Port will pass through
to Clark to be resolved with the Port on its behalf. And it states that for those
pass-through claims, PowerCom is “bound by the procedure and final
determination as specified in the Main Contract.” Finally, the plain language of
PowerCom’s contract states that it will surrender its right to independently sue for
recovery of those claims pending resolution of any dispute between Clark and
the Port:
[PowerCom] agrees that it will not take, or will suspend, any other
action or actions with respect to any such claims and will pursue no
independent litigation with respect thereto, pending final
determination of any dispute resolution procedure between [the
Port] and [Clark].
This language explicitly manifests PowerCom’s agreement to relinquish the right
to resolve pass-through claims in the first instance to Clark and to pursue no
independent litigation until that process is complete.
8
No. 85120-9-I/9
PowerCom argues the language in its contract does not amount to an
explicit waiver of its right to immediately sue under the Little Miller Act because it
does not specifically reference that act. But the language says PowerCom
relinquishes its right to sue or pursue any independent litigation for pass-through
claims pending resolution of “any dispute” between Clark and the Port. This
unambiguous language clearly includes claims under the Little Miller Act.
Indeed, federal courts have concluded that similar language amounts to a
waiver of a subcontractor’s Miller Act rights. For example, in United States for
Use and Benefit of Trans Costal Roofing Co. v. David Boland, Inc., 922 F. Supp.
597, 598 (S.D. Fla. 1996),9 aff’d, 226 F.3d 646 (11th Cir. 2000), the court held
that a subcontractor waived its right to a Miller Act remedy where the subcontract
provided that
the “[s]ubcontractor shall first pursue and fully exhaust [the
procedures set forth in the standard disputes clause of the primary
contract] before commencing any other action against Contractor
for any claims it may have arising out of its performance of the
Work herein.”
The court determined that the language “clearly encompasses both the Miller Act
and common law claims.” Id.; see also United States ex rel. R. Rudnick & Co. v.
Daniel, Urbahn, Seelye & Fuller, 357 F. Supp. 853, 860-62 (N.D. Ill. 1973)10
(language in a subcontract that “ ‘any dispute concerning a question of fact
arising under this Subcontract which is not disposed of by agreement shall be
decided by [an alternative dispute process]’ ” bars suit under the Miller Act).
9
Emphasis added; alterations in original.
10
Emphasis added.
9
No. 85120-9-I/10
The language in PowerCom’s subcontract consists of a waiver of its right
to sue under the Little Miller Act pending a final determination of Clark’s pass-
through claims against the Port. The trial court did not abuse its discretion by
staying PowerCom’s pass-through COVID-19-related claim.11
We affirm.
WE CONCUR:
11
Because we conclude PowerCom waived its right to sue under the Little Miller
Act as to its pass-through claim pending resolution of the lawsuit between Clark and the
Port, we do not reach PowerCom’s argument that the trial court erred by refusing to
compel arbitration on that claim.
10