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United States v. A.C. Dellovade Inc.

United States District Court, W.D. Oklahoma

August 28, 2019

A.C. DELLOVADE, INC., et al., Defendants.



         Now before the Court is Defendant Liberty Mutual Insurance Company’s (“Liberty”) Motion to Dismiss Plaintiff’s Fifth Claim for Relief (Dkt. No. 29) and Plaintiff’s Response thereto (Dkt. No. 33). Liberty did not file a Reply and the motion is now at issue.

         I. Introduction[1]

         In 2017, Plaintiff agreed to supply Defendant A.C. Dellovade, Inc. (“Dellovade”) with materials pursuant to Dellovade’s subcontract related to a construction project on Tinker Air Force Base. (Dkt. No. 12, p. 3.) Liberty acted as surety for Dellovade to protect Plaintiff, among others, against non-payment by issuing a bond in the amount of $4,898,377.00 on September 14, 2017. (Id.) Plaintiff subsequently provided the requisite materials to Dellovade, but has yet to receive payment. (Id. at 4.) Plaintiff thereafter unsuccessfully attempted to collect payment from Liberty as well. (Id.) Plaintiff’s suit now before the Court thus revolves around these uncollected funds.

         Plaintiff advances two claims against Liberty: The first is breach of contract and the Miller Act, 40 U.S.C. § 3133, and the second is bad faith. (Id. at 7-9.) Liberty now moves to dismiss the bad faith claim, arguing that federal law preempts it and that it is insufficiently pled. (See generally Dkt. No. 29.) Plaintiff disagrees and believes that its bad faith claim is neither preempted nor inadequately pled.

         II. Dismissal

         Standard Regarding the standard for determining whether to dismiss a claim pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be granted, the United States Supreme Court has held:

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted). Further, “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief.” 679 (internal quotation marks and citations omitted). Additionally, “[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertion[s] devoid of further factual enhancement.” Id. at 678 (internal quotations and citations omitted). Finally, “[a] court reviewing the sufficiency of a complaint presumes all of plaintiff’s factual allegations are true and construes them in the light most favorable to the plaintiff.” Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991).

         III. Analysis

         a. Preemption

         Liberty first contends that federal law-specifically, the Miller Act-preempts Plaintiff’s bad faith claim. More specifically, Liberty believes that because the Miller Act is intended to be Plaintiff’s sole avenue of relief regarding the non-payment of federal construction contracts, Plaintiff’s state-law bad faith claim must be dismissed. (Dkt. No. 29, pp. 4-6.) Plaintiff, for its part, maintains that the Miller Act does not preempt state law, but it alternatively seeks leave to amend its breach of contract claim and eliminate all references to the Miller Act and only pursue its claim under state law. (Dkt. No. 33, p. 4.) However, federal law can preempt state law regardless of whether it is affirmatively pleaded.[2] Omitting the Miller Act from its complaint would not benefit Plaintiff by somehow negating any preemption of state law.

         Liberty’s preemption argument is primarily grounded in F.D. Rich Co., Inc. v. United States ex rel. Indus. Lumber Co., Inc., 417 U.S. 116 (1974)-where the Court held that an award of attorneys’ fees granted to a claimant under the Miller Act was improper. There, the claimant, recognizing that the Miller Act did not permit it to collect attorneys’ fees, sought to recover attorneys’ fees pursuant to its state’s public policy-despite not bringing a state law claim for recovery. Id. The Court found this to be improper, declaring that the “Miller Act provides a federal cause of action, and the scope of the remedy as well as the substance of the rights created thereby is a matter of federal not state law.” Id. at 127.

         Subsequent case law has diverged regarding whether F.D. Rich established that the Miller Act preempts state law in this context-thereby precluding these alternative forms of recovery.[3] Most importantly, though, the Tenth Circuit has briefly spoken on this question as well. See United States ex rel. Sunworks Div. of Sun Collector Corp. v. Ins. Co. of N. Am., 695 F.2d 455, 458 (10th Cir. 1982). In its view, the Miller Act does not preclude alternative forms of recovery under state law. Id. at 457 (“Recovery under the Miller Act is not a supplier’s exclusive remedy against a general contractor.”). The facts before the Court there were slightly different-the supplier was seeking to recover against the general contractor, rather than, as here, where the supplier is seeking to ...

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