Paige International, Inc. v. Xl Speciality Insurance Company

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PAIGE INTERNATIONAL, INC.,
Plaintiff,
v. Civil Action No. 14-1244 (JEB)
XL SPECIALTY INSURANCE CO., et al.,
Defendants.
MEMORANDUM OPINION
The law of construction suretyships is a subject that aspiring lawyers might happen
across in studying for the bar exam but then quickly forget. This case against three surety
companies has been more enduring. It involves Plaintiff Paige International, Inc.’s suit against
Defendants XL Specialty Insurance Company and its related entities for unpaid sums incurred in
completing construction work at Washington’s Marriott Marquis Hotel. After longstanding
litigation and a multi-day bench trial, the Court held that Defendants were liable pursuant to a
Payment Bond and awarded Plaintiff $463,092.50 in proven damages.
Not satisfied with this recovery, Paige now seeks to revisit the damages calculation, tack
on pre-judgment interest, and add an award of attorney fees. It finds success on only the middle
request.
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I. Background
Before addressing the substance of Paige’s Motions, the Court offers an overview of its
suit against the three surety companies. In doing so, the Court primarily relies on its own oral
findings of fact, supplemented where necessary with the parties’ post-trial briefing and trial
exhibits. See April 27, 2017, Hearing Transcript; ECF Nos. 57 (Plaintiff’s Post-Trial
Memorandum), 58 (Defendants’ Post-Trial Memorandum). This section first synopsizes the
overarching contracting scheme before discussing the outcome of the recent bench trial.
The present lawsuit involves a Russian-nesting-doll setup of construction contractors.
Occupying the outermost layer is HQ Hotel, LLC, which owns the Marriott Marquis Hotel
connected to the D.C. Convention Center. See Pl. Mem. at 1; Def. Mem. at 3. In October 2010,
HQ Hotel and Hensel Phelps Construction Company entered into a Prime Contract worth around
$400 million to build that hotel. See Tr. at 3:4-8; Pl. Exh. 1.1 (Hensel Phelps Prime Contract).
Hensel Phelps then divvied up individual components of that task among various entities and, as
relevant here, entered into a Subcontract with Truland Systems Corporation to set up different
electrical systems. See Tr. at 3:12-14; Pl. Exh. 1.2 (Truland Subcontract). Truland, in turn,
further split up its portion of the project by executing additional contracts, including a Sub-
subcontract with Plaintiff for telecommunications and security-systems work. See Tr. at 3:19-
4:10; Pl. Mem. at 1; Def. Mem. at 5; Pl. Exh. 1.7 (Paige Sub-subcontract).
Now this setup involved some risk for Hensel Phelps. Its Prime Contract with HQ Hotel
provided that the Marriott was to open on May 1, 2014, and that it would incur substantial
monetary penalties for delay. See Tr. at 4:11-13; Pl. Mem. at 3. More specifically, if any of
Hensel Phelps’s various subordinate companies faltered and if construction halted, then it would
be on the hook for upward of $100,000 per day and $13 million in total liquidated delay
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damages. See Pl. Mem. at 3; Prime Contract, arts. 6.15(i), 6.16(c), 6.17(c). Mishap might come
in many forms, but relevant here was the possibility that subcontractors might fail to pay their
own laborers and suppliers, thus throwing a wrench into the project. To insulate itself from this
risk, Hensel Phelps required that Truland guarantee its downstream payment obligations by
furnishing a payment bond, executed by a surety company. See Truland Subcontract, § D, art.
34(a). As Hensel Phelps was the protected party, the Subcontract specified that that the Bond
“shall be drawn in favor of the [Prime] Contractor” “for the full amount of this Subcontract,”
roughly $40 million. Id., § C.
Truland indeed obtained such a Payment Bond from Defendants XL and two related
surety companies (Greenwich Insurance Company and XL Reinsurance America, Inc.). See Pl.
Exh. 1.4 (Payment Bond). The Court will need to delve into the details of this Bond later. For
now, it suffices to say that the instrument came into effect if Truland did not “promptly make
payment” to its sub-subcontractors (e.g., Paige), in which case those lower-tier companies could
file claims with XL to be paid “amounts due for labor, material or equipment used or reasonably
required for use in the performance of the [Truland] Subcontract.” Id., pmbl. & ¶ 5. As a result,
Hensel Phelps could rest assured that the project would continue apace and that it would not
itself need make further payments to Truland’s sub-subcontractors.
As any pessimist would anticipate, all did not proceed as planned. To begin, in June
2013, Tropical Storm Andrea hit Washington, requiring Paige to rack up expenditures associated
with remediating water damage from the squall. See Tr. at 4:14-20. If that were not enough, the
hotel project also suffered other delays, and so Plaintiff bore costs from accelerating its work to
fit a tighter timetable. Id. at 4:21-24. To top it off, Truland went bankrupt, leaving Paige (and
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others) in the lurch, as several of Paige’s proposed change orders for additional work to the
defunct Subcontractor were left pending, unsigned and unpaid. Id. at 5:1-4, 7:20-21.
With Truland out of the picture, Paige filed a claim under the Payment Bond and then
immediately brought the present lawsuit against XL to recover those amounts left due and
owing. XL, conversely, believed that Paige’s claims were insufficiently documented and not
necessarily in excess of the already-paid contract price. The case thus proceeded to a bench trial,
after which the Court ruled that Defendants were indeed liable for sums related to Plaintiff’s
storm remediation, acceleration of work, and pending change orders. Id. at 8:12-15. Paige
claimed around $1.3 million in damages, but because it could not adequately show that all those
dollars went to performing duties over and above the base Sub-subcontract and because its
recordkeeping was so shoddy, the Court discounted the award by 50% and also deducted other
amounts that XL had already paid Paige or its own subcontractors. Id. at 15:3-14. In total, the
Court determined that Defendants owed Plaintiff $463,092.50 in damages. Id.
Plaintiff now raises three separate issues with the award. It first seeks to amend two
aspects of the damages calculation, and it also demands pre-judgment interest as well as attorney
fees. See ECF Nos. 59 (Motion for Attorney Fees & Motion for Pre-judgment Interest), 60
(Motion to Amend Damages). The Court analyzes each question in turn.
II. Analysis
A. Calculation of Damages
In its initial effort to increase its recovery, Paige takes issue with two features of the
Court’s $463,092.50 award. First, it assails the Court’s 50% reduction of certain claimed
charges. While “Paige accepts [the 50%] discount as reasonable as to its breach of duty claim,”
it contends that such discount “was erroneously applied . . . to the pending PCOs and Storm
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Andrea damage claim.” Damages Mot. at 3. Second, Plaintiff believes that the Court
improperly credited XL with money saved from the insurance company’s direct settlement with
SPL, a Paige subcontractor. Id. at 9-12.
The Court held a six-day bench trial, heard from multiple witnesses, and considered
hundreds of exhibits. It also reviewed lengthy post-trial submissions from each side on both
factual and legal questions in dispute. As explained in its ultimate oral verdict, determining the
appropriate measure of damages was no easy feat. Paige’s lack of records was the principal
culprit in the Court’s struggle to fashion a just award. In settling on the 50% discount figure, the
Court, as the finder of fact, selected what it considered the fairest figure. In seeking to limit that
percentage reduction, Paige raises no new issues not already contemplated by the Court and
incorporated in the verdict. For example, Plaintiff has not demonstrated that more than 50% of
its additional PCO and storm-remediation work was performed over and above what would have
been required under the base contract. Similarly, the Court sees no basis to revisit its
determination on the SPL credit and believes that its prior damages finding on that issue remains
valid.
Other factfinders could well have come to different conclusions on these and myriad
other disagreements between the parties, but this Court’s determination on the final sum
represents its best effort under the facts and law presented.
B. Pre-judgment Interest
The Court turns next to the issue of pre-judgment interest, to which Plaintiff claims it is
entitled. As a general matter, there are two forms of interest to compensate a plaintiff for losses
from a breach of contract: pre-judgment and post-judgment. The former runs “from the time the
claim accrues until judgment is entered,” West Virginia v. United States, 479 U.S. 305, 310-11
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n.2 (1987), while the latter “runs from the date of the entry of judgment” until payment by the
defendant. Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835-36 (1990).
Only pre-judgment interest is at issue here. While Paige believes that it is owed such interest on
the Court’s full damages award, XL retorts that pre-judgment interest is unwarranted because
Plaintiff’s poor recordkeeping made it impossible for XL to ever know the appropriate damages
amount owed. The Court concludes that Paige has the better of the argument here.
Both sides agree that D.C. Code § 15-109 governs whether pre-judgment interest is owed
in this case. That provision states, as relevant here:
In an action to recover damages for breach of contract the judgment
shall allow interest on the amount for which it is rendered from the
date of the judgment only. This section does not preclude the jury,
or the court, if the trial be by the court, from including interest as an
element in the damages awarded, if necessary to fully compensate
the plaintiff.
This statute thus “expresses the general rule that damages for an unliquidated claim run only
from the date of judgment, [but] it also contains an exception where an award of interest is
necessary to fully compensate the plaintiff.” House of Wines, Inc. v. Sumter, 510 A.2d 492, 499
(D.C. 1986) (quotation omitted).
Over time, D.C. courts have interpreted § 15-109 as granting a court “broad discretion in
awarding pre-judgement interest.” Id.; Winder v. District of Columbia, 555 F. Supp. 2d 103, 111
(D.D.C. 2008), aff’d sub nom. Winder v. Erste, 566 F.3d 209 (D.C. Cir. 2009); see Fed. Mktg.
Co. v. Virginia Impression Prod. Co., 823 A.2d 513, 532 (D.C. 2003) (“[T]he court has ample
discretion to include prejudgment interest.”). Courts now balance the “equities in [each] case” to
determine whether pre-judgment interest is appropriate. Law Office of G.A. Lambert & Assocs.
v. Davidoff, 72 F. Supp. 3d 110, 119 (D.D.C. 2014). Relevant considerations in this calculus
include (1) “whether the plaintiff has been deprived of the use of the money withheld,” (2)
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“whether he timely commenced suit,” and (3) “the certainty of the amount due.” Winder, 555 F.
Supp. 2d at 111.
Here, the parties do not disagree that the first two factors strongly favor the award of pre-
judgment interest. Because Plaintiff successfully sought “reimbursement for expenses already
incurred, it has [plainly] been deprived of the money withheld by [Defendant].” Lanny J. Davis
& Assocs. LLC v. Republic of Equatorial Guinea, 962 F. Supp. 2d 152, 164 (D.D.C. 2013).
Likewise, Paige commenced this suit before the construction project had even finished
XL contends, however, that the final prong weighs in its favor because it could not have
repaid Paige before the judgment in this case given Plaintiff’s own shoddy record-keeping. The
Court agrees that this equitable factor weighs against Paige’s recovery of interest. Weighing all
the equities together, the Court nevertheless believes that Plaintiff has done enough to show it
ought to be made whole for its work on the hotel. See Fed. Mktg., 823 A.2d at 531-32(describing certainty of amount owed as “less important consideration” than first two). XL,
moreover, knew from the start that Paige was owed at least some money for its additional
expenditures on the project, and the Payment Bond setting out its liability unequivocally
provides that it would pay the claims of laborers and suppliers. See Payment Bond, ¶ 5. There
can thus be no question that Paige has since been denied access to these sums for many years,
diminishing its opportunity to enjoy the fruits of its labor or to invest in other projects. See
Cobell ex rel. Cobell v. Jewell, No. 96-1285, 2017 WL 1319710 (D.D.C. Apr. 10, 2017)
(awarding interest where first two factors cut for plaintiff, despite fact that amount owed was
“anything but ‘easily ascertainable’”).
The Court, accordingly, will award prejudgment interest to Paige at the 6% statutory rate
provided by D.C. Code § 28-3302. While that provision is silent as to whether this interest
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should be calculated on a simple or compounded basis, “[a]bsent a contractual provision
providing for compounded interest, ‘neither prejudgment nor judgment interest is compounded’
in contract actions.” Id. at *7 (quoting Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d
1293, 1304 (D.C. 1979)). The Court will thus apply simple interest at a 6% annual rate.
The sums flow as follows. Following the recent bench trial, the Court awarded
$463,092.50 to Paige. The amount of time between the date that Paige filed suit (July 22, 2014)
and today (July 28, 2017) is 3.016438 years. The total interest calculated on a simple 6% annual
basis on the above sum for that time period is $83,813.40. Adding that to the initial award
means that Paige is entitled to a total award of $546,905.90.
C. Attorney Fees
The final item on Plaintiff’s invoice involves not the merits of the case, but the perennial
question of what comes after — namely, attorney fees. “The so-called ‘American Rule’
governing the award of attorneys’ fees in litigation in the federal courts is that attorneys’ fees
‘are not ordinarily recoverable in the absence of a statute or enforceable contract providing
therefor.’” F. D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 126 (1974)
(quoting Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 (1967)). When
fees are requested, the “applicant bears the burden of establishing entitlement to an award.”
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). While the parties had previously batted around
the possibility of contractual fees in a pre-trial evidentiary motion, see ECF Nos. 43, 46, 51, it
was not until after the bench trial concluded that the Court directed Paige to make a formal
request.
The homework was as follows. The Court first instructed that, in this suit between Paige
and XL, “the [P]ayment [B]ond rather than the [Paige] [Sub-sub]contract likely governs,” but
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noted that the former instrument was not pellucid. See Tr. at 15:22-24. In other words, “given
the [B]ond’s ambiguity,” there could be “a reasonable reading of the [P]ayment [B]ond
provision[s] that would permit attorney fees.” Id. at 15:24-16:1, 16:5. The Court, in sum,
directed Paige to brief “its affirmative case as to why the structure [and] text of the [B]ond
awards fees.” Id. at 16:7-8 (emphases added).
Paige has turned in a different assignment altogether. It merely cites a single definitional
clause of the Payment Bond to elucidate its structure and text. See Fees Mot. at 1-9. Plaintiff
instead posits a general theory that XL’s liability must necessarily be “coextensive” to what
Truland’s would have been under the Paige Sub-subcontract, which appears to award prevailing-
party attorney fees in a scenario where Truland or Paige sues the other. Id.; see Paige Sub-
subcontract, ¶ 15 (“Should either party to this agreement have to employ counsel to enforce any
provision of this agreement or breach thereof, the prevailing party shall be entitled to
reimbursement of reasonable attorney’s fees.”). Paige draws out this liability principle by
relying primarily on cases involving statutorily mandated payment bonds. Id. at 7.
This argument fails to achieve passing marks. To see why, however, involves walking
through a three-part rubric. The Court begins by explaining what type of payment bond it is
dealing with, proceeds to discussing the applicable rules of construction, and finishes by
analyzing the present Bond.
Type of Payment Bond
Payment bonds come in many shapes and sizes, some being required by statute and
others being private contracts. A “threshold consideration” is the precise nature of this Payment
Bond, as both “the scope of a surety’s liability” and the applicable interpretive rules vary
depending on the typology. See Kevin L. Lybeck, et al., The Law of Payment Bonds 5 (2d ed.
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2011). For example, while “[c]ourts construe bonds pursuant to . . . statutes in favor of laborers
and material suppliers and strictly against the surety” by referencing “the terms of the statute
applicable to the bond,” they “construe a surety’s obligations under a common law bond in light
of the specific bond language” “subject to the applicable law of contracts.” Id. at 17, 19.
Paige here wants to have it both ways. On the one hand, the company concedes that the
Payment Bond is “a private, common law bond.” Fees Reply at 3 (quoting Fees Opp. at 3). On
the other, Plaintiff asserts that decades-old “case decisions involving Miller Act bonds” — i.e.,
bonds pursuant to a federal statute governing public works — that sometimes recognize attorney
fees “apply equally to non-statutory payment bonds.” Fees Mot. at 7-8.
This patchwork is poorly quilted. Those statutory-bond decisions are not binding on this
common-law Payment Bond, as the Miller Act provides a special route to attorney fees that is not
present here. A brief primer on that statute demonstrates this. Since 1935, the Act has required
that private contractors hired by the federal government to construct, alter, or repair a public
work must furnish a payment bond “for the protection of all persons supplying labor and material
in carrying out the work.” 40 U.S.C. § 3131(b)(2); see Act of Aug. 24, 1935, ch. 642, § 1, 49
Stat. 793, 793; United States ex rel. Sherman v. Carter, 353 U.S. 210, 216 (1957) (giving Act
“liberal construction to effectuate its protective purposes”). For many decades, until 2002, the
statute gave persons working for contractors on those projects “the right to sue on such payment
bond for the amount” of “labor or material” left “unpaid” and also, as a final clause, the right to
“prosecute the action to final execution and judgment for the sum or sums justly due him.” 40
U.S.C. § 270b(a) (2000).
Courts interpreted the latter “sums justly due” language to cover all amounts — including
attorney fees — that would otherwise be due laborers and suppliers under their respective
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contracts. See United States ex rel. Maddux Supply Co. v. St. Paul Fire & Marine Ins. Co., 86
F.3d 332, 336 (4th Cir. 1996) (“[A]ttorney’s fees are recoverable if they are part of the contract
between the subcontractor and supplier.”); United States ex rel. Pertun Constr. Co. v. Harvesters
Grp., Inc., 918 F.2d 915, 916 n.1 (11th Cir. 1990) (holding that fees could “constitute ‘sums
justly due’ under the Miller Act”); United States ex rel. Carter Equip. Co. v. H.R. Morgan, Inc.,
554 F.2d 164, 166 (5th Cir. 1977) (allowing attorney fees “to the supplier of a subcontractor”).
Put another way, even absent language in the contractor–surety payment bond (e.g., the Truland–
XL Payment Bond), the Miller Act gave lower-tier laborers and suppliers (e.g., Paige) an
actionable right to recover on their individual agreements (e.g., the Paige Sub-subcontract). See
Sherman, 353 U.S. at 215-16 (“The surety’s liability on a Miller Act bond must be at least
coextensive with the obligations imposed by the Act if the bond is to have its intended effect.”);
see also GE Supply v. C & G Enters., Inc., 212 F.3d 14, 19 (1st Cir. 2000) (relying on “invoices
contain[ing] a fee-shifting provision”).
Although Congress has since updated the terminal statutory clause to endow a right to
“prosecute the action to final execution and judgment for the amount due,” Revision of Title 40,
United States Code, “Public Building, Property, and Works,” Pub. L. No. 107-217, 116 Stat.
1062 (2002) (codifying amendments at 40 U.S.C. § 3133(b)(1)), that amendment was “not meant
to substantively change the statute.” United States ex rel. Tenn. Valley Marble Holding Co. v.
Grunley Constr., 433 F. Supp. 2d 104, 116 n.3 (D.D.C. 2006) (noting that change was to “achieve
uniformity” or “conform to common contemporary usage”); accord United States ex rel. SCCB,
Inc. v. P. Browne & Assocs., Inc., 751 F. Supp. 2d 813, 819 (M.D.N.C. 2010); H.R. Rep. No.
107-749, at 2 (2002). Were the Marriott a public building and the Miller Act thus to apply, it
would mean that Paige could sue XL for fees that would have been due on its Sub-subcontract.
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The problem with giving statutory-bond cases binding effect is that the common-law
Bond in this case incorporates neither a “sums justly due” or an “amount due” catchall in
addition to the payment right to “labor or material,” 40 U.S.C. § 270b(a) (2000); id.
§ 3133(b)(2), nor an explicit “protective purpose[]” toward laborers and suppliers. Sherman, 353
U.S. at 216; see 40 U.S.C. § 3131(b)(1); Technica LLC ex rel. United States v. Carolina Cas. Ins.
Co., 749 F.3d 1149, 1153 (9th Cir. 2014) (distinguishing “rights established by the Miller Act”
from “application of the substantive law of contracts”). By contrast, it grants only the more
modest purely contractual right to recover “amounts due for labor, material or equipment used or
reasonably required for use.” Payment Bond, ¶ 5 (emphasis added). In other words, the
entitlement to “amounts due,” here, is explicitly limited. Whatever persuasive force that Miller
Act cases might have generally, they do not dictate the outcome of the fees inquiry here. The
Court thus proceeds to analyze the Bond as a common-law instrument. In doing so, it begins
with the rules of construction.
Rules of Construction
In analyzing how a payment bond should be construed, the Court first lays out the
language of suretyships while explaining basic interpretive rules, and it then deconstructs a
further one that Paige offers.
a. Suretyship-Interpretation Basics
Understanding the rules of bond interpretation requires the Court to begin with some of
the relevant lingo. Earlier on, the Court recapped the downstream contracting scheme whereby
Hensel Phelps (the Prime Contractor) hired Truland (the Subcontractor), which retained Paige
(the Sub-subcontractor). Suretyship law further complicates this setup, since the primary legal
duty flows in the other direction. In other words, Truland is the Principal Obligor that owes an
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upstream obligation to Hensel Phelps as the Obligee, and XL (the Surety) serves as the fallback
Secondary Obligor in the event that the Principal falters. See Payment Bond, pmbl.; see also
Restatement (Third) of Suretyship & Guaranty § 1 (1996) (defining relevant circumstances of
suretyship and labeling Surety also as “Secondary Obligor”). The point of the Bond is to protect
Hensel Phelps from mishap. See Payment Bond, ¶ 1 (noting “purpose is, in part, to indemnify
Hensel Phelps”). This makes sense: If Truland defaulted as to its sub-subcontractors, Hensel
Phelps would need to make sure that they were paid so that construction on the project as a
whole could proceed without stoppage.
The relevant “obligation,” here, is that Truland, via its Subcontract, expressly promised
Hensel Phelps to pay lower-tier laborers and suppliers who worked on the hotel. See Truland
Subcontract, art. 13. XL then guaranteed this obligation via the Bond. See Payment Bond,
pmbl. Being one of those laborers or suppliers, Paige fits in as a third-party Claimant that may
enforce the Bond’s guarantee of the Subcontract if Truland does not fulfill that obligation. See
Payment Bond, ¶ 4; District of Columbia v. Campbell, 580 A.2d 1295, 1302 (D.C. 1990); see
also Restatement § 69 cmt. c (“If . . . the secondary obligor promises the obligee by a ‘payment
bond’ that the contractor’s duty to pay laborers and suppliers of materials will be fulfilled, the
laborers and suppliers . . . may enforce it against the secondary obligor.”). In other words, Paige
could sue XL if Truland did not, as it had promised Hensel Phelps, make good on its payments.
The question of interpretation is how to construe a surety’s responsibility to such third
parties — i.e., how to interpret what XL as Surety owes Paige as Claimant. To start, because that
duty arises from the Bond, the scope of liability “must be measured by the conditions stated in
the bond.” Goldberg, Marchesano, Kohlman, Inc. v. Old Republic Sur. Co., 727 A.2d 858, 860
(D.C. 1999) (quoting Bevard v. New Amsterdam Casualty Co., 132 A.2d 157, 159 (D.C. 1957));
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see 3 Philip L. Bruner & Patrick J. O’Connor, Jr., Construction Law § 8:152 (2016) (stating
claimant is “entitle[d] recovery within the coverage of the bond”).
In parsing those conditions, “[g]eneral rules of contract interpretation apply.” Purcell v.
Thomas, 28 A.3d 1138, 1144 (D.C. 2011). “This jurisdiction adheres to an ‘objective’ law of
contracts, meaning ‘the written language embodying the terms of an agreement will govern the
rights and liabilities of the parties.’” Dyer v. Bilaal, 983 A.2d 349, 354-55 (D.C. 2009) (quoting
DSP Venture Grp., Inc. v. Allen, 830 A.2d 850, 852 (D.C. 2003)).
Specific to suretyship law, there is also “a rule of construction which holds that when the
language of the contract is ambiguous and the surety is a company, the surety bond should be
construed liberally in favor of the beneficiary.” Goldberg, 727 A.2d at 861 n.1. In this case,
both Hensel Phelps and various Claimants are beneficiaries of the Payment Bond. See Payment
Bond, ¶¶ 3, 5; see also Standard Acc. Ins. Co. v. Simpson, 64 F.2d 583, 590 (4th Cir. 1933)
(applying liberal-construction maxim to bond claimants); Restatement § 69 (commenting that a
third-party claimant is also an “intended beneficiary”).
b. Coextensive-Liability Interpretation Rule
In addition to these principles, Paige offers one more. There is purportedly a “general
rule of construction” that “‘the surety [is] bound to the same extent the principal is bound.’”
Fees Mot. at 4-5 (quoting United States v. Maloney, 4 App. D.C. 505, 511 (1894)) (citing United
States ex rel. District of Columbia v. Bayly, 39 App. D.C. 105, 113 (1912)). Plaintiff pushes this
interpretive rule because Truland (the Principal) is bound by its Paige Sub-subcontract, which
includes a fees provision. See Paige Sub-subcontract, ¶ 15. In other words, Paige asks the Court
to construe the XL Bond in light of each particular Claimant’s sub-subcontract.
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Applying this interpretive rule to a surety’s third-party liabilities goes too far. While the
language of these hoary D.C. Court of Appeals cases is that sureties are liable to the “same
extent” as their principals, see Bayly, 39 App. D.C. at 113; Maloney, 4 App. D.C. at 511, Plaintiff
misunderstands the scope of this interpretive rule.
That language must instead be situated in the context of suretyship law. To repeat, at the
epicenter of any such arrangement is the principal obligor’s obligation to an obligee, which the
surety guarantees. Here, that tripartite relationship is among Truland, Hensel Phelps, and XL,
respectively, and the obligation is thus Truland’s Subcontract with Hensel Phelps (not Paige’s
Sub-subcontract with Truland). See Payment Bond, pmbl.; Truland Subcontract, art. 13.
The structure then informs the rule. The essential undertaking is to have the surety stand
squarely in the shoes of the principal (Truland) vis-à-vis the obligee (Hensel Phelps). Because of
this basic structure, it is with respect to that obligation — again, the Truland Subcontract — that
courts presume the surety to adopt the principal’s liabilities to the “same extent.” See 74 Am.
Jur. 2d Suretyship § 21 (2017) (advising that “liability of the surety is ordinarily measured by the
liability of the principal” on its “obligation”). Put differently, the surety’s bond guarantee is
generally “coextensive with the obligations of the contract” between the principal and obligee on
which the “guaranty was made.” Benjamin v. Hillard, 64 U.S. (23 How.) 149, 162 (1859); see
Tri-State Emp’t Servs., Inc. v. Mountbatten Sur. Co., 295 F.3d 256, 263 (2d Cir. 2003) (“[A]
surety bond attaches to the principal contract and must be construed in conjunction with it.”)
(quoting Carrols Equities Corp. v. Villnave, 395 N.Y.S. 2d 800, 803 (App. Div. 1977)). Each of
Plaintiff’s common-law bond cases sits in this context. Maloney involved a suit by the United
States, as obligee, against two sureties, and the Court of Appeals held that each surety was bound
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to the obligee to the degree that the principal was. See 4 App. D.C. at 506, 511. The same goes
for Bayly, where the District was the obligee. See 39 App. D.C. at 106-07, 109.
A surety’s duties to third parties, on the other hand, are not essential to the suretyship
structure. A surety arrangement need not include any third-party beneficiaries at all. That is, it
is entirely optional that bonds allow for laborers and suppliers as claimants. See Restatement
§ 69 cmt. c (“In many construction contracts, while the contractor agrees to furnish labor and
materials and may agree to complete the work free of liens, the contractor does not promise the
owner to pay laborers and suppliers of materials. [There,] the laborers and suppliers of materials
have no rights against the secondary obligor because the secondary obligor has not promised to
fulfill the contractor’s duty to them.”). Because the existence of a surety’s responsibilities to
third parties rises and falls on bargained-for provisions of the given bond and not the
fundamental nature of suretyships, the Court can only rely on the contract-interpretation
principles outlined previously in analyzing this Payment Bond. See 3 Bruner & O’Connor,
Construction Law § 8:15; see also Tri-State Ins. Co. v. United States, 340 F.2d 542, 544 (8th Cir.
1965) (“In general, a surety is liable to third persons only when his obligation to the principal
obligor contains a promise which may be reasonably and clearly interpreted for the claimant's
benefit.”).
Application to Payment Bond
This brings the Court, finally, to the question that it asked the parties to brief: whether the
structure or text of the Payment Bond allows attorney fees. Plaintiff does not carry its burden in
demonstrating that it indeed deserves fees. See Hensley, 461 U.S. at 437.
A brief examination reveals that the Payment Bond clearly articulates which sums it
covers. It first defines a Claimant as “one supplying labor, material and/or equipment, used or
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reasonably required for use in the performance of the [Truland] Subcontract.” Payment Bond, ¶
4. An unpaid Claimant may then recover from XL “amounts due for labor, material or
equipment used or reasonably required for use in the performance of the [Truland] Subcontract.”
Id., ¶ 5. To state the obvious, attorney fees are neither labor nor materials nor equipment. The
Court cannot remunerate Paige if the recovery provision “says nothing about attorney fees.”
Purcell v. Thomas, 28 A.3d 1138, 1145 (D.C. 2011); see Dist. Contractors, Inc. v. N. Am.
Specialty Ins. Co., 281 F. Supp. 2d 204, 206, 208-09 (D.D.C. 2003) (holding that provision “for
labor or material, or both, used or reasonably required” does not allow attorney fees).
Plaintiff’s only textual hook is that the somewhat general definition of Claimant — “one
supplying labor, material, and/or equipment” —requires reference to each Claimant’s sub-
subcontract to spell out whether it indeed falls under that definition. See Fees Mot. at 3 (quoting
Payment Bond, ¶ 4). Paige’s Sub-subcontract then provides for prevailing-party attorney fees.
See Paige Sub-subcontract, ¶ 15.
This is a perplexing point. While the Sub-subcontract would indeed underscore how
Paige is a company that supplies “labor, material, or equipment,” Plaintiff offers no reason why
the Court would need to look at that agreement’s attorney-fee provision to elucidate those three
words. See Dist. Contractors, 281 F. Supp. 2d at 208-09. This backdoor insertion of the fee
terms into the Bond is far too unnatural. “Nothing can be clearer, both upon principle and
authority, than the doctrine that the liability of a surety is not to be extended, by implication,
beyond the terms of his contract.” Estate of Dickson, 736 A.2d 1007, 1010 n.7 (D.C. 1999)
(quoting Miller v. Stewart, 22 U.S. (9 Wheat.) 680, 702-03 (1842)).
Paige repeats, however, that the definitional provision is quite similar to that found in
present-day Miller Act bonds. See Fees Mot., Exh. 2 (Miller Act Payment Bond) at 1 (applying
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to “all persons having a direct relationship with the Principal or a subcontractor of the Principal
for furnishing labor, material or both in the prosecution of the work provided for in the contract
identified above”); see also Fees Mot. at 2-3, 7. This horseshoe also lands far from the stake. As
the Court explained previously, that language is not what gives rise to attorney fees in Miller Act
cases. Instead, it was the broad statutory right to payment for the “sums justly due” or “amount
due” that opened the fees door. See 40 U.S.C. § 270b(a) (2000); id. § 3133(b)(1). Left with no
other arguments, Plaintiff’s fees request thus falls flat.
Notably, too, despite explicit invitation by this Court, Paige makes no effort to quote,
cite, or even reference the conditions of the Bond that do mention costs and expenses. The Court
thus considers those possible arguments forfeited. In any event, those clauses are not so
obviously helpful to Plaintiff’s case. If a Claimant sues Hensel Phelps, the instrument requires
XL to indemnify the latter Prime Contractor for “all legal expenses.” Payment Bond, ¶ 1. And if
a Claimant sues XL, the Bond states that “Hensel Phelps shall not be liable for the payment of
any costs or expenses that may be incurred by a Claimant.” Id., ¶ 5 (emphasis added). Read
together, these two provisions doubly protect Hensel Phelps from attorney-fees claims (whether
in a direct suit or following a case against XL). This aligns with the underlying purpose of the
Suretyship to protect the Obligee. See id., ¶ 1 (noting “purpose of this Bond is, in part, to
indemnify Hensel Phelps”). The conditions of the Bond do not, however, say that Claimants
hold any recovery right against XL for fees. See Dickson, 736 A.2d at 1010 n.7 (rejecting
liability by implication).
As Paige has not provided any illumination, the Court declines to explore any other dark
recesses of suretyship law. For instance, while the Bond explicitly incorporates the Truland
Subcontract — although not the Paige Sub-subcontract — that agreement has gone unmentioned
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despite the Court’s indicating the various contracts’ “complexity” at the last hearing. See Tr. at
16:6-7; see also Payment Bond, pmbl. Seeing as Paige has made no effort to identify any fees
provisions in the Subcontract, let alone the Payment Bond — despite spending years on this case
and surely accruing substantial sums — it fails to carry its burden of establishing any contractual
entitlement.
III. Conclusion
For these reasons, the Court will deny Plaintiff’s Motion to Amend Damages, grant its
Motion for Prejudgment Interest, and deny its Motion for Attorney Fees. A separate Order so
stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: July 28, 2017
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