Companion Property Casualty Insurance Company v. Apex Service Inc

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
COMPANION PROPERTY & )
CASUALTY INSURANCE CO., )
)
Plaintiff, )
)
v. ) Civil Action No. 13-436 (RWR)
)
APEX SERVICE, INC., et al., )
)
Defendant. )
______________________________)
MEMORANDUM OPINION
Companion Property & Casualty Insurance Co. (“Companion”)
filed a complaint and action of interpleader to determine the
proper distribution of the proceeds of payment bond number
00010501 (the “Payment Bond”) among Apex Service, Inc. (“Apex”)
and all other potential claimants. Compl. at 4, 7, 10. The
matter was referred to Magistrate Judge Alan Kay, who issued a
report and recommendation finding that Companion should be
discharged from the action, Companion should receive attorneys’
fees and costs, and the remaining sum of the Payment Bond should
be disbursed to Apex. Report and Recommendation (“R&R”) at 16.
Because no party has objected to the report and recommendation,
Companion appropriately filed this action of interpleader as a
disinterested stakeholder, the recommended award of fees and
costs is fair, and Apex is the sole remaining interpleader
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defendant, Magistrate Judge Kay’s recommendations will be
adopted. 1
BACKGROUND
Apex entered into a construction contract with the District
of Columbia Department of Real Estate Services, Contracting and
Procurement Division for expansion of the Emergency Operations
Center at the Unified Communication Center. R&R at 2. Apex
then entered into a subcontract with Niyyah Electrical
Contractors, LLC (“Niyyah”) to furnish labor, materials, and
equipment for certain electrical work on the project. Id. As a
condition of the subcontract, and under D.C. Code § 2-201.01, on
August 1, 2011, Niyyah obtained the Payment Bond from Companion
with a total value of $289,972.00. 2 Id. at 2-3.
On March 29, 2012, Apex terminated Niyyah’s subcontract as
a result of a dispute that arose regarding performance of
Niyyah’s subcontract work, payment of laborers, and payment for
certain equipment, materials, and supplies. Id. at 3. Apex
asserted a claim against the Payment Bond as a result of
payments it made to Niyyah employees, subcontractors, and
1
Apex requests a hearing on the R&R. That request will be
denied as moot.
2
Footnote five of the R&R contains a typographical error
stating that the total value of the Payment Bond is $292,972.00.
R&R at 6 n.5. However, the remainder of the R&R correctly
reflects that the total value is $289,972.00 and all derivative
calculations are correctly made in relation to the correct total
value.
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suppliers for work completed or materials provided prior to the
subcontract’s termination. Id. Companion also received claims
from a number of sub-subcontractors and suppliers. Id.
Because of multiple outstanding and anticipated claims
against the Payment Bond totaling at least $499,534.18,
Companion requested an order for interpleader and deposited the
value of the Payment Bond in the Court’s registry. Id. at 10.
Companion also asked that the defendants be enjoined from
bringing an action against it under the Payment Bond. Id.
Branch Group, Inc. t/a Rexel (“Branch”) filed an answer to
the complaint on May 1, 2013, claiming it is owed $38,300.42 for
“outstanding invoices incurred by Niyyah[.]” Branch Answer
at 5. Additionally, Lawrence D. Scott, a former Niyyah
employee, filed a pro se motion for unpaid wages on January 10,
2014, seeking approximately $14,500.00 3 of the Payment Bond
funds. Scott Mot. Unpaid Wages at 1. On December 26, 2013,
Companion and Apex filed a stipulation agreeing that Companion
should be discharged from liability under the Payment Bond, that
Companion should be reimbursed $12,000.00 for attorneys’ fees
and expenses, and that Apex should be awarded the remainder of
3
The motion states that Scott received $7,800.00 but that
the total should have been about $25,000. Scott Mot. Unpaid
Wages at 1. The motion thus asks for Scott to receive about
$17,200.00. Id. However, at oral argument before Magistrate
Judge Kay, Scott stated that he was paid $10,500.00. R&R at 2.
The magistrate judge therefore concluded that Scott requests
only $14,500.00. Id. at 15.
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the Payment Bond funds. Companion & Apex Stipulation at 1. The
magistrate judge found that all potential claimants who have
filed answers except for Apex, Scott, and Branch have settled or
otherwise relinquished their claims to the Payment Bond funds.
R&R at 2.
DISCUSSION
A district judge may designate a magistrate judge to
conduct hearings and submit findings of fact and recommendations
for the disposition of pretrial motions. 28 U.S.C.
§ 636(b)(1)(B) (2014); LCvR 72.3(a) (2014); see Elgin v. Dep’t
of Treasury, 132 S. Ct. 2126, 2138 (2012)(noting that Congress
has vested “reviewable factfinding authority” in magistrate
judges by authorizing them to “make findings of fact relevant to
dispositive pretrial motions”). Absent clear error, if no party
has made an objection to the magistrate judge’s recommendation
within fourteen days, a district court judge may accept, reject,
or modify, in whole, or in part, the findings or
recommendations. 28 U.S.C. § 636(b)(1)(C); LCvR 72.3(b); see
Powell v. Bureau of Prisons, 927 F.2d 1239, 1248 (D.C. Cir.
1991) (finding that it is appropriate for a district court judge
to adopt a magistrate judge’s report and recommendation under a
clear error standard of review if no objections were received).
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I. FEDERAL INTERPLEADER UNDER 28 U.S.C. § 1335
The magistrate judge found that Companion should be
discharged from liability because the court has jurisdiction to
hear the case and Companion is a disinterested stakeholder. R&R
at 5-6. The magistrate judge acknowledged that jurisdiction
exists under 28 U.S.C. § 1335 because “‘the value of the
property exceeds $500, two or more claimants are diverse, and
Companion has deposited the property into the registry of the
court.’” Id. at 5 (quoting 7/17/2013 Order at 1); see 28 U.S.C.
§ 1335 (2014) (providing the requirements for district court
jurisdiction over interpleader actions). A plaintiff-
stakeholder may be discharged from liability if it is
disinterested and it meets the statutory requirements of 28
U.S.C. § 1335. R&R at 4-5; see Star Ins. Co. v. Cedar Valley
Express, LLC, 273 F. Supp. 2d 38, 40 n.2 (D.D.C. 2002) (noting
that if “a court determines that interpleader is appropriate
[under § 1335], it may discharge the stakeholder-plaintiff from
the action if it is disinterested in the distribution of the
[interpleader funds]”). The magistrate judge found that
Companion is a disinterested stakeholder because it does not
make a claim to the Payment Bond funds, except for attorneys’
fees and costs, which do not make an “otherwise disinterested
stakeholder an interested stakeholder.” R&R at 5-6 (citing
Orseck, P.A. v. Servicios Legals De Mesoamerica S. De R.L., 699
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F. Supp. 2d 1344, 1349 (S.D. Fla. 2010); WRIGHT & MILLER, Federal
Practice and Procedure § 1719 (3d. ed. 2013)). The magistrate
judge correctly concluded that, as a disinterested stakeholder
in a properly submitted interpleader action, Companion should be
discharged from further liability with prejudice. That portion
of the report and recommendation will be adopted.
II. EQUITABLE DISTRIBUTION OF INTERPLEADER FUNDS
A. Interpleader defendants
In its complaint, Companion named as defendants Apex,
Branch, District of Columbia Department of Employment Services,
Graybar Electric Co., Inc., “Jane Doe, Inc., A-Z,” United
Rentals (North America), Inc. (“United Rentals”), UR Merger Sub
Corporation, 4 “John Doe, A-Z,” 5 Michael Garrett, Kevin Maloy,
Derrick Manigualt, Jeffery Norwood, Lawrence Scott, Robert
Stroman, Reginald Thomas, Yull Travers, and Kenneth Williams.
Compl. at 1-4.
The magistrate judge found that only Apex, Branch, and
Scott continue to make a claim against the interpleader funds.
R&R at 7. Graybar Electric Co, Inc. and former Niyyah employees
4
UR Merger Sub Corporation was the former name of United
Rentals, Companion Mem. Supp. Mot. Discharge at 3, so this
entity will be referred to as United Rentals.
5
“John Doe, A-Z” and “Jane Doe, Inc., A-Z” were included to
account for “any remaining unknown claimants[,] which
[Companion] properly informed of the action via public notice.”
R&R at 7.
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Garrett, Maloy, Manigualt, Norwood, Scott, Stroman, Thomas,
Travers, and Williams signed documents releasing Companion from
liability in exchange for payments from Apex. Companion Mem.
Supp. Mot. Discharge at 10-11. United Rentals forfeited its
right to make a claim against the funds because it defaulted
when it failed to file any responsive pleading. R&R at 14; see
Fed. R. Civ. P. 12(a)(1)(A)(i), 55(a) (2014) (providing a
defendant 21 days to serve an answer and indicating that “the
clerk must enter the party’s default[]” when “failure [to serve
an answer] is shown by affidavit or otherwise”); Companion Mem.
Supp. Mot. Discharge at 11 n.6 (“United Rentals’ Payment Bond
claim is also forfeited because it failed to file a responsive
pleading[.]”). Finally, the District of Columbia Department of
Employment Services was dismissed from the case by joint
stipulation. Joint Stipulation of Dismissal at 1.
Although Scott signed a release on August 30, 2013,
Companion Mot. Discharge, Ex. E at 6; R&R at 14 n.15, he filed a
motion for unpaid wages on January 10, 2014. Scott Mot. Unpaid
Wages at 1. Additionally, Branch continues to assert a claim of
$38,300.42 against the interpleader funds. Branch Opp’n to Mot.
to Strike at 3. Apex asserts that it should receive the total
value of the payment bond, less Companion’s attorneys’ fees and
costs. Companion & Apex Stipulation at 1.
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1. Lawrence D. Scott
Scott signed a document releasing any future claim on the
interpleader funds and the magistrate judge noted that Scott’s
motion for unpaid wages did not provide any reason why the
release would be “invalid or inapplicable.” R&R at 14. As a
contract, the release binds Scott to its terms unless an
essential element is missing. See Henke v. United States Dep’t
of Commerce, 83 F.3d 1445, 1450 (D.C. Cir. 1996) (stating that
the “essential elements” of a contract are “competent parties,
lawful subject matter, legal consideration, mutuality of assent
and mutuality of obligation.”); Wolcott v. Ginsburg, 697 F.
Supp. 540, 544 (D.D.C. 1988) (confirming that, when determining
whether the terms of a release are binding, “releases are to be
treated as contracts, and general contract principles apply.”).
Scott does not address the release or assert that it is missing
any of the elements of a valid contract. Thus, the magistrate
judge’s recommendation to deny Scott’s motion for unpaid wages
and to grant Apex’s motion to strike Scott’s motion will be
adopted. 6
6
After Scott failed to respond to Apex’s motion to dismiss
within the allotted time, Apex filed a second motion to strike
Scott’s motion. See Apex Mot. to Strike or Dismiss Scott Mot.
at 2. The magistrate judge correctly concluded that the second
motion could be denied as moot because Apex’s first motion to
strike should be granted. R&R at 15.
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2. Branch
The terms of the Payment Bond required any action asserting
a claim against the Bond to be filed within one year of when
“the last labor or service was performed by anyone or the last
materials or equipment were furnished by anyone under the
Construction Contract.” Compl., Ex. 1 at 3; see R&R at 9-10.
Under the terms of the Payment Bond, the “Construction Contract”
is the subcontract between Niyyah and Apex. Compl., Ex. 1 at 1,
3; see R&R at 9. Further, the subcontract between Niyyah and
Apex was terminated on March 29, 2012, so Branch had to initiate
its suit by March 29, 2013. 7 See R&R at 9-10. By Branch’s own
admission, the suit was initiated when Companion filed the
interpleader action on April 4, 2013. Id. at 12. The
magistrate judge correctly concluded that Branch’s claim against
the interpleader funds is time-barred, and that Apex’s motion to
7
Also, the magistrate judge determined that under D.C. Code
§ 2-201.02, any action had to be initiated within one year of
when “the last labor or material was supplied by the claimant.”
R&R at 12. Branch was a subcontractor to Niyyah, so it could no
longer perform labor under the contract after Niyyah’s contract
was terminated on March 29, 2012. Id. Thus, a suit had to be
brought by March 29, 2013 under D.C. Code § 2-201.02 as well as
under the Payment Bond. Accordingly, D.C. Code § 2-201.02 is
immaterial because the terms of the Payment Bond apply, absent
any conflict with local law. Id. at 11 n.11; see McDonald v.
Thompson, 184 U.S. 71, 74 (1902) (finding that the distinction
between whether an obligation was incurred by statute or under a
contract was immaterial when both required that an action be
initiated within four years).
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dismiss Branch’s claim should be granted. R&R at 11, 16. That
portion of the Recommendation will be adopted.
3. Apex
The magistrate judge found that Apex is the sole remaining
interpleader defendant and Apex has already paid other
interpleader defendants from its own money. See id. at 13, 16.
He concluded that Apex should receive at least the remaining
interpleader funds, less Companion’s attorneys’ fees and costs.
Id. The total payment bond value is $289,972.00 and Companion
has requested $12,000.00 in attorneys’ fees and costs. Id.
at 16. Therefore, Apex would receive either $277,972.00 or, if
Companion were not awarded attorneys’ fees and costs, the full
$289,972.00 Payment Bond value. Id. As is explained below,
Companion will be awarded attorneys’ fees and costs, leaving
$277,972.00 for Apex.
B. Companion
Companion moved to be discharged from further liability on
the Payment Bond and sought an award of $18,822.50 in attorneys’
fees and $2,441.04 in costs. Companion Mem. Supp. Mot.
Discharge at 9. Companion & Apex later stipulated to a $12,000
award of attorneys’ fees and costs to Companion. Stipulation
between Companion & Apex at 1.
A court may “award attorneys’ fees and costs [from the
interpleader funds] to [a disinterested] plaintiff stakeholder
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in an interpleader action[] whenever it is fair and equitable to
do so.” Id. (citing Aaron v. Mahl, 550 F.3d 659, 667 (7th Cir.
2008); Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999); WRIGHT
& MILLER at § 1719). Under the circumstances, the magistrate
judge fairly concluded that $12,000.00 is a reasonable amount to
award in attorneys’ fees and costs to Companion, especially
where Apex and Companion agreed to it, and Apex is the sole
remaining interpleader defendant. R&R at 6; Stipulation between
Companion & Apex at 1; see Discussion supra Part II(A); cf.
Immigration & Naturalization Service v. Jean, 496 U.S. 154, 155,
160 (1990) (acknowledging that parties can stipulate to the
amount received in reasonable attorneys’ fees under the Equal
Access to Justice Act). Accordingly, the magistrate judge’s
recommendation that Companion be awarded $12,000.00 in
attorneys’ fees and costs and that Apex receive the remaining
$277,972.00 will be adopted.
CONCLUSION
No party objected to the report and recommendation.
Companion is a disinterested stakeholder and the recommended
award of attorneys’ fees and costs is fair. Apex, as the sole
remaining claimant, is entitled to the remaining Payment Bond
value. Therefore, Magistrate Judge Kay’s report and
recommendation is adopted in full. An appropriate final order
accompanies this Memorandum Opinion.
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SIGNED this 29th day of December, 2014.
/s/
____________________________
RICHARD W. ROBERTS
Chief Judge
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
COMPANION PROPERTY & )
CASUALTY INSURANCE CO., )
)
Plaintiff, )
)
v. ) Civil Action No. 13-436 (RWR)
)
APEX SERVICE, INC., et al., )
)
Defendant. )
______________________________)
FINAL ORDER
For the reasons set forth in the accompanying Memorandum
Opinion, it is hereby
ORDERED that Companion’s motion [47] for discharge,
attorneys’ fees and costs, and distribution be, and hereby is,
GRANTED as follows: Companion is discharged from further
liability under the Payment Bond with prejudice and is awarded
$12,000 in attorneys’ fees and costs from the Payment Bond
funds. The remainder of the Payment Bond funds shall be
disbursed to Apex in the amount of $277,972.00. It is further
ORDERED that Lawrence Scott’s motion [50] for unpaid wages
be, and hereby is, DENIED. It is further
ORDERED that Apex’s motion [51] to strike or, in the
alternative, to dismiss the claim of Lawrence Scott be, and
hereby is, GRANTED. It is further
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ORDERED that Apex’s motion [52] for entry of an order
striking or dismissing Lawrence Scott’s motion for unpaid wages
and to direct court disbursement of registry funds be, and
hereby is, DENIED as moot. It is further
ORDERED that the stipulation [49] between Companion and
Apex be, and hereby is, APPROVED. It is further
ORDERED that Apex’s motion [53] to strike or, in the
alternative, to dismiss the claim of Branch be, and hereby is,
GRANTED. It is further
ORDERED that Apex’s request [57] for a hearing be, and
hereby is, DENIED as moot.
This is a final, appealable Order.
SIGNED this 29th day of December, 2014.
/s/
____________________________
RICHARD W. ROBERTS
Chief Judge