375 F. Supp. 3d 1
D.C. Cir.2019Background
- Turner Construction contracted with U.S. Engineering; U.S. Engineering subcontracted sheet-metal work to United Sheet Metal ("Sheet Metal").
- Western Surety issued a $585,000 performance bond naming U.S. Engineering as owner and Sheet Metal as contractor; Bond Sections 3–5 set notice and remedies for owner-declared default.
- Sheet Metal's performance problems culminated in U.S. Engineering terminating the subcontract on September 9, 2013 and completing the work with others without notifying Western Surety.
- U.S. Engineering notified Western Surety of its claim nine months after termination and after completion of the work; Western Surety refused payment and sought declaratory relief.
- Western Surety moved for summary judgment seeking a declaration it had no obligation under the Bond; U.S. Engineering moved to reconsider the court's striking of a supplemental arbitration award and opposed summary judgment.
Issues
| Issue | Plaintiff's Argument (Western Surety) | Defendant's Argument (U.S. Engineering) | Held |
|---|---|---|---|
| Whether Section 3.2 notice is a condition precedent to Surety liability | Section 3.2 requires notice before Surety's obligations arise; timely notice is implied to permit Surety to cure | Section 3.2 does not specify a time requirement; U.S. Eng. fulfilled obligations by declaring default and notifying Surety eventually | Court: Section 3.2 creates a condition precedent; notice must be timely; U.S. Eng.'s notice was untimely |
| Whether Surety must show actual prejudice from late notice under Section 3.2 | No prejudice showing is required for Section 3.2 because Section 4's prejudice clause applies only to Section 3.1 | Surety must prove actual prejudice to be released from liability | Court: Prejudice is not required under Section 3.2; Bond language and structure limit Section 4's prejudice requirement to Section 3.1 |
| Whether the Arbitration Award submitted as supplemental authority should be considered | (n/a) — Surety moved to strike the award from the record | The arbitration award proves Sheet Metal's liability and damages and undermines Surety's prejudice claim | Court: Denied Surety's motion to strike; considered the award but found it immaterial to Bond interpretation and outcome |
| Whether the court should reconsider striking U.S. Eng.'s earlier filing re: supplemental authority | (n/a) — Surety had sought strike for untimeliness | U.S. Eng. obtained plaintiff's consent to extend its response time and inadvertently failed to notify the court | Court: Granted U.S. Eng.'s motion for reconsideration and reinstated consideration of the submission |
Key Cases Cited
- Hunt Construction Group, Inc. v. National Wrecking Corp., 587 F.3d 1119 (D.C. Cir. 2009) (timely notice to surety required so surety can exercise contractual cure options)
- Conesco Industries, Ltd. v. Conforti & Eisele, Inc., 627 F.2d 312 (D.C. Cir. 1980) (late notice may discharge surety only upon a showing of prejudice where bond language does not make notice to surety a condition precedent)
- Washington Properties, Inc. v. Chin, Inc., 760 A.2d 546 (D.C. 2000) (definition and effect of a condition precedent under District of Columbia law)
- Steele Foundations, Inc. v. Clark Construction Group, Inc., 937 A.2d 148 (D.C. 2007) (contract interpretation requires giving meaning to all provisions)
- Mergentime Corp. v. Washington Metropolitan Area Transit Authority, 775 F. Supp. 14 (D.D.C. 1991) (surety discharge for contract modification is evaluated based on prejudice)