Service Steel Warehouse Co. v. McDonnel Group, L.L.C.

Case: 16-30989 Document: 00514037565 Page: 1 Date Filed: 06/16/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-30989 FILED
June 16, 2017
Lyle W. Cayce
SERVICE STEEL WAREHOUSE COMPANY, L.P., Clerk
Plaintiff - Appellant
v.
MCDONNEL GROUP, L.L.C.; ARCHER WESTERN CONTRACTORS,
L.L.C., formerly known as Archer Western Contractors, Limited;
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA;
LIBERTY MUTUAL INSURANCE COMPANY; MCDONNEL GROUP,
L.L.C. ARCHER WESTERN CONTRACTORS, L.L.C., a Joint Venture,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:14-CV-1416
Before DAVIS, JONES, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Service Steel Warehouse Company, L.P. (“Service
Steel”) appeals the district court’s interlocutory order granting in part and
denying in part cross-motions for summary judgment filed by Service Steel and
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 16-30989
by Defendants-Appellees The McDonnel Group, LLC (“McDonnel”), Archer
Western Contractors, LLC (“Archer”), Travelers Casualty and Surety
Company of America (“Travelers”), and Liberty Mutual Insurance Company
(“Liberty Mutual”). For the reasons set out below, we affirm.
McDonnel and Archer formed a joint venture (“McDonnel-Archer”) and
contracted with the Law Enforcement District of the Parish of Orleans (“Law
Enforcement District”) to build administrative buildings in New Orleans. On
July 28, 2011, McDonnel-Archer obtained a Labor and Material Payment Bond
underwritten by Travelers and Liberty Mutual for $144,929,000.00, which was
issued pursuant to the Louisiana Public Works Act (“LPWA”), La. Rev. Stat.
§ 38:2241, et seq. McDonnel-Archer was named the principal on the bond.
The bond provided, in relevant part:
[I]f Principal shall promptly make payment to all claimants as
hereinafter defined, for all labor and material used or reasonably
required for use in the performance of the Contract, then this
obligation shall be void, otherwise it shall remain in full force and
effect, subject, however, to the following conditions:
1. A claimant is defined as one having a direct contract with the
Principal or with a Subcontractor of the Principal for labor,
materials, or both, used or reasonably required for use in the
performance of the Contract . . .
2. The above named Principal and Surety hereby jointly and
severally agree with the Owner that every claimant as herein
defined, who has not been paid in full before the expiration of a
period of ninety (90) days after the date on which the last of such
claimant’s work or labor was done or performed, or materials were
furnished by such claimant, may sue on this bond for the use of
such claimant, prosecute the suit to final judgment for such sums
as may be justly due claimant, and have execution thereon. The
owner shall not be liable for the payment of any costs or expenses
of such suit.
McDonnel-Archer employed H&H Steel Fabricators (“H&H”) as a
subcontractor to fabricate steel for this project. In turn, H&H purchased steel
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from a distributor, Service Steel Warehouse Company (“Service Steel”). H&H
and Service Steel’s relationship existed prior to the building project. In 2007,
H&H and Service Steel entered into an agreement providing that all past due
amounts would bear simple interest at a rate of 18% per year and that H&H
would pay Service Steel’s reasonable attorneys’ fees incurred during collection.
The same terms and conditions were sent with each invoice to H&H for the
construction of the project.
Service Steel informed McDonnel-Archer that it was concerned with
being paid for its steel for the building project, and as a result, McDonnel-
Archer had Travelers and Liberty Mutual execute a rider to the bond, which
recognized Service Steel as a claimant under the bond. The rider provided, in
relevant part: “Delta and Service Steel will be considered Claimants, as that
term is defined in Paragraph 1 of the Bond, as of the date of this rider.”
Service Steel later delivered the steel and H&H failed to pay. On June
18, 2014, Service Steel filed suit against McDonnel-Archer and the insurers,
claiming that it was not paid fully for the steel it had provided to H&H.
Service Steel and Defendants-Appellees filed cross-motions for partial
summary judgment on the issue of whether or not Service Steel could recover
18% interest and attorneys’ fees under the bond. In a well-reasoned opinion,
the district court granted in part and denied in part both parties’ motions,
concluding that (a) Service Steel is entitled to some type of remedy under the
bond’s ambiguous language, but (b) the LPWA should be considered in
interpreting the obligations under the bond, serving to preclude interest and
restrict Service Steel’s attorneys’ fees to ten percent of the amount recovered.
More fully, the district court found that the phrase “sums as may be
justly due” in the bond was ambiguous on its face. It also found that the
traditional canons of statutory interpretation failed to clarify McDonnel-
Archer’s obligation to Service Steel. Thus, the court construed this ambiguous
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language against Defendants-Appellees as the drafters and held that Service
Steel is entitled to recovery in the form of limited attorneys’ fees, as discussed
below. We concur with the court’s assessment.
Service Steel contends that the bond’s language unambiguously includes
both interest and attorneys’ fees, and that by executing the rider, Defendants-
Appellees became sureties to fulfill H&H’s entire obligation to Service Steel
under the agreement between Service Steel and H&H, including 18% interest
and reasonable attorneys’ fees. Defendants-Appellees argue that they only
intended to bind themselves to pay for obligations under the bond itself, not
the separate agreement between Service Steel and H&H.
We agree with the district court that the bond language is ambiguous
and should be construed against the drafters, Defendants-Appellees. Thus, we
conclude that Service Steel is entitled to some type of remedy under the bond
itself. We find no basis in the law or the record, however, for looking beyond
the terms of the bond for the terms of the interest and attorneys’ fees
obligations. Thus, we reject Service Steel’s claim that it is entitled to 18%
interest and attorneys’ fees pursuant to its agreement with H&H.
The district court also held that Service Steel’s recovery under the bond
must be limited by the LPWA because the bond itself was issued pursuant to
the LPWA. Applying the LPWA’s restrictions, the court held that Service Steel
could not recover interest and was limited to recovering attorneys’ fees of ten
percent of the amount recovered. We agree. We find no basis in the record for
concluding, as Service Steel argues, that the parties intended to convert the
statutory bond, which is subject to the LPWA’s restrictions, into a contractual
bond, which is not subject to those restrictions.
The district court’s opinion in this case goes into much more detail on all
of the above, and we find no reason in the law or the record to change the result.
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Accordingly, we AFFIRM, essentially for the reasons set out by the district
court.
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