417 F. App'x 366
4th Cir.2011Background
- Aarow sued Travelers under the Miller Act payment bond on Syska’s project at Fort Belvoir after Syska withheld payments and Aarow sought payment for pond work.
- Pond work was performed by Aarow without a formal change order or prime-contract modification, but Syska directed the work and later sought to reclassify it as finishing work.
- Syska instructed Aarow to bill the pond work in a way that avoided triggering a change order, and the government ultimately paid Syska, including Aarow’s amount, under a billing scheme.
- The government later deemed the pond work within the prime contract, prompting denial of Syska’s modification request and withholding payments to Syska.
- Syska terminated Aarow for default under Section 12.1 of the subcontract; Aarow claimed wrongful termination and sought damages under the bond.
- The district court granted summary judgment to Travelers, holding the pay-when-paid clause barred Aarow and that termination was proper; the Fourth Circuit vacated and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prevention doctrine bars pay-when-paid defense | Aarow | Travelers | Prevention doctrine may defeat pay-when-paid defense |
| Whether Syska materially contributed to government nonpayment | Aarow | Travelers | Jury could find material contribution by Syska; not entitled to summary judgment |
| Whether pay-when-paid clause defeats Aarow’s claim as a matter of law | Aarow | Travelers | Not dispositive; issues for jury on prevention and conduct |
Key Cases Cited
- Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717 (4th Cir. 2000) (prevention doctrine applies to pay-when-paid disputes)
- Evans v. Metro. Life Ins. Co., 358 F.3d 307 (4th Cir. 2004) (preservation of arguments raised in district court for appeal)
- Universal Concrete v. Turner Construction Co., 595 F.3d 527 (4th Cir. 2010) (pay-when-paid provisions can be valid defenses when unambiguous)