CEC Controls Company, INC. v. H&H Electric, INC.

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

CENTRAL DIVISION

CEC CONTROLS COMPANY, INC. PLAINTIFF

v. Case No. 4:21-CV-00125-LPR

H & H ELECTRIC, INC., and

AUTO-OWNERS INSURANCE COMPANY DEFENDANTS

and

UNITED STATES for the Use of THIRD-PARTY PLAINTIFF

H & H ELECTRIC, INC.

v.

HUFFMAN CONSTRUCTION, LLC, and

FIDELITY AND DEPOSIT COMPANY

OF MARYLAND/ZURICH AMERICAN

INSURANCE COMPANY THIRD-PARTY DEFENDANTS

ORDER

This case arises from the termination of a public-works contract concerning the

construction of a pumping station. The contract was between the United States Army Corps of

Engineers and its principal (or general) contractor for the project—Huffman Construction, LLC.

As one might expect, the termination of this contract resulted in a bunch of downstream contract

terminations. A number of these downstream contract terminations are at issue in the case at bar.

Presently pending before the Court is a fairly limited Motion for Partial Summary

Judgment from H & H Electric, Inc.1 After being sued by its subcontractor, H & H filed a Third-

Party Complaint against Huffman and Huffman’s surety, Zurich American Insurance Company.2

The Third-Party Complaint sets out claims against both entities for breach of contract and a

1 H & H’s Mot. for Summ. J. (Doc. 43).

2 The party’s full name is Fidelity and Deposit Company of Maryland/Zurich American Insurance Company, but, for

ease of reading, the Court will refer to it as Zurich.

violation of the Miller Act. However, H & H is only asking for summary judgment on its breach-

of-contract claims. Further, H & H is only asking for summary judgment as to the existence and

scope of liability, not the calculation of damages.

For the reasons explained below, H & H’s Motion for Partial Summary Judgment is

GRANTED in part and DENIED in part. H & H is entitled to summary judgment against Huffman

on the breach-of-contract claim. However, its breach-of-contract claim against Zurich is a non-

starter. In the circumstances of this case, if Zurich has any liability to H & H, that liability would

be exclusively under the Miller Act.

BACKGROUND

We are at the summary-judgment stage. This Background Section thus relies heavily on

undisputed facts. Where there are genuine disputes of fact, the Court adopts the most pro-

defendant version of such facts that a rational juror could accept.3 Accordingly, the facts set forth

in this Background Section are good for purposes of this Partial Summary Judgment Motion only.

I. The Contractual Relationships at Issue in this Case

The Army Corps of Engineers hired Huffman, a Missouri corporation,4 to be the general

construction contractor for the Grand Prairie Pump Station Project (“the Project”) in DeValls

Bluff, Arkansas.5 The Army Corps of Engineers, the owner of the Project, solicited Huffman for

construction of “the GPPS Superstructure (Base) and Installation of the final section of Discharge

Pipes from pipeline station 13+50 to station 22+00.”6

3 The Defendants are the nonmovants here.

4 H & H’s Compl. (Doc. 24) ¶ 2; Huffman’s Answer to H & H’s Compl. (Doc. 29) ¶ 2.

5 Ex. 1 (The General Contractor Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-1).

6 Id. at 1.

The General Contractor Agreement between Huffman and the Army Corps of Engineers

recognized that the Corps could terminate that agreement for cause:

If the contractor refuses or fails to prosecute the work or any separable part, with

the diligence that will insure its completion within the time specified in this contract

including any extension, or fails to complete work within this time, the Government

may, by written notice to the Contractor, terminate the right to proceed with the

work (or the separable part of the work) that has been delayed.7

The General Contractor Agreement further provided that, in the case of termination, Huffman must

immediately “[t]erminate all subcontracts to the extent they relate to the work terminated.”8

Among other things, that agreement required Huffman to obtain a payment bond.9 This

requirement is statutorily mandated by the Miller Act, which provides:

Before any contract of more than $100,000 is awarded for the construction . . . of

any . . . public work of the Federal Government, a person must furnish to the

Government . . . [a] payment bond with a surety satisfactory to the officer for the

protection of all persons supplying labor and material in carrying out the work

provided for in the contract for the use of each person.10

The Supreme Court has explained the purpose of such a payment bond:

Ordinarily, a supplier of labor or materials on a private construction project can

secure a mechanic’s lien against the improved property under state law. But a lien

cannot attach to Government property, so suppliers on Government projects are

deprived of their usual security interest. The Miller Act was intended to provide an

alternative remedy to protect the rights of these suppliers.11

On September 15, 2014, Zurich issued a payment bond to the United States with

Huffman as Principal for $25,414,000.12 (For purposes of this case, Zurich is what we call

a “Miller Act surety.”) The Payment Bond reads as follows:

7 Id. at 192–93.

8 Id. at 190.

9 Id. at 1, 22.

10 40 U.S.C. § 3131(b).

11 F.D. Rich Co., Inc. v. United States ex rel. Indus. Lumber Co., Inc., 417 U.S. 116, 122 (1974) (citation omitted).

12 Ex. 2 (Zurich Bonds) to H & H’s Compl. (Doc. 24) at 27–28.

We, the Principal and Surety(ies), are firmly bound to the United States of America

. . . in the above penal sum [$25,414,000]. For payment of the penal sum, we bind

ourselves, our heirs, executors, administrators, and successors, jointly and

severally. . . . The above obligation is void if the Principal promptly makes payment

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 General Contractor Agreement], and any authorized

modifications of the contract that subsequently are made.13

On November 20, 2014, Huffman subcontracted with H & H.14 Under the agreement, H

& H would provide certain electrical work on the Project, and Huffman would pay $3,387,961 for

this work.15 There are two portions of this Huffman-H & H Agreement that feature heavily in the

parties’ arguments on the instant Motion. The Court lays these two portions out in full. The first

portion of the Huffman-H & H Agreement is made up of Sections 8.2 (Progress Payments) and

8.3 (Final Payment):

8.2 PROGRESS PAYMENTS[.]

8.2.1 APPLICATIONS[.] The Subcontractor's applications for payment shall be

itemized and supported by substantiating data as required by the Subcontract

Documents. If the Subcontractor is obligated to provide design services pursuant

to Paragraph 3.8, Subcontractor's applications for payment shall show the

Designer's fee and expenses as a separate cost item. The Subcontractor's

application shall be notarized if required and if allowed under the Subcontract

Documents may include properly authorized Subcontract Construction Change

Directives. The Subcontractor's progress payment application for the Subcontract

Work performed in the preceding payment period shall be submitted for approval

of the Contractor in accordance with the schedule of values if required and

Subparagraphs 8.2.2, 8.2.3, and 8.2.4. The Contractor shall incorporate the

approved amount of the Subcontractor's progress payment application into the

Contractor's payment application to the Owner for the same period and submit it

to the Owner in a timely fashion. The Contractor shall immediately notify the

Subcontractor of any changes in the amount requested on behalf of the

Subcontractor.

8.2.2 RETAINAGE[.] The rate of retainage shall be (as per USAGE

requirements) percent (as per USAGE requirements %), which is equal to the

13 Id. at 27.

14 Ex. 2 (Huffman-H & H Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-2) at 2.

15 Id. at 2, 13.

percentage retained from the Contractor's payment by the Owner for the

Subcontract Work. If the Subcontract Work is satisfactory and the Subcontract

Documents provide for reduction of retainage at a specified percentage of

completion, the Subcontractor's retainage shall also be reduced when the

Subcontract Work has attained the same percentage of completion and the

Contractor's retainage for the Subcontract Work has been so reduced by the

Owner.

8.2.3 TIME OF APPLICATION[.] The Subcontractor shall submit progress

payment applications to the Contractor no later than the fifteenth (15th) day of

each payment period for the Subcontract Work performed up to and including the

fifteenth (15th) day of the payment period indicating work completed and, to the

extent allowed under Subparagraph 8.2.4, materials suitably stored during the

preceding payment period.

8.2.4 STORED MATERIALS[.] Unless otherwise provided in the Subcontract

Documents, applications for payment may include materials and equipment not

yet incorporated in the Subcontract Work but delivered to and suitably stored on-

site or off-site including applicable insurance, storage and costs incurred

transporting the materials to an off-site storage facility. Approval of payment

applications for such stored items on or off the site shall be conditioned upon

submission by the Subcontractor of bills of sale and required insurance or such

other procedures satisfactory to the Owner and Contractor to establish the

Owner's title to such materials and equipment, or otherwise to protect the Owner's

and Contractor's interest including transportation to the site.

8.2.5 TIME OF PAYMENT[.] Receipt of payment by the Contractor from the

Owner for the Subcontract Work is a condition precedent to payment by the

Contractor to the Subcontractor. The Subcontractor hereby acknowledges that it

relies on the credit of the Owner, not the Contractor for payment of Subcontract

Work. Progress payments received from the Owner for the Subcontractor for

satisfactory performance of the Subcontract Work shall be made no later than

seven (7) Days after receipt by the Contractor of payment from the Owner for the

Subcontract Work.

8.2.6 PAYMENT DELAY[.] If the Contractor has received payment from the

Owner and if for any reason not the fault of the Subcontractor, the Subcontractor

does not receive a progress payment from the Contractor within seven (7) Days

after the date such payment is due, as defined in Subparagraph 8.2.5, or, if the

Contractor has failed to pay the Subcontractor within a reasonable time for the

Subcontract Work satisfactorily performed, the Subcontractor, upon giving seven

(7) Days' written notice to the Contractor, and without prejudice to and in addition

to any other legal remedies, may stop work until payment of the full amount

owing to the Subcontractor has been received. The Subcontract Amount and Time

shall be adjusted by the amount of the Subcontractor's reasonable and verified

cost of shutdown, delay, and startup, which shall be effected by an appropriate

Subcontractor Change Order.

8.2.7 PAYMENTS WITHHELD[.] The Contractor may reject a Subcontractor

payment application in whole or in part or withhold amounts from a previously

approved Subcontractor payment application, as may reasonably be necessary to

protect the Contractor from loss or damage for which the Contractor may be liable

and without incurring an obligation for late payment interest based upon:

8.2.7.1 the Subcontractor's repeated failure to perform the Subcontract Work as

required by this Agreement;

8.2.7.2 loss or damage arising out of or relating to this Agreement and caused

by the Subcontractor to the Owner, Contractor or others to whom the Contractor

may be liable;

8.2.7.3 the Subcontractor's failure to properly pay for labor, materials,

equipment or supplies furnished in connection with the Subcontract Work;

8.2.7.4 rejected, nonconforming or defective Subcontract Work which has not

been corrected in a timely fashion;

8.2.7.5 reasonable evidence of delay in performance of the Subcontract Work

such that the Work will not be completed within the Subcontract Time, and that

the unpaid balance of the Subcontract Amount is not sufficient to offset the

liquidated damages or actual damages that may be sustained by the Contractor,

as a result of the anticipated delay caused by the Subcontractor;

8.2.7.6 reasonable evidence demonstrating that the unpaid balance of the

Subcontract Amount is insufficient to cover the cost to complete the

Subcontract Work;

8.2.7.7 third party claims involving the Subcontractor or reasonable evidence

demonstrating that third party claims are likely to be filed unless and until the

Subcontractor furnishes the Contractor with adequate security in the form of a

surety bond, letter of credit or other collateral or commitment which are

sufficient to discharge such claims if established. No later than seven (7) Days

after receipt of an application for payment, the Contractor shall give written

notice to the Subcontractor, at the time of disapproving or nullifying all or part

of an application for payment, stating its specific reasons for such disapproval

or nullification, and the remedial actions to be taken by the Subcontractor in

order to receive payment. When the above reasons for disapproving or

nullifying an application for payment are removed, payment will be promptly

made for the amount previously withheld.

No later than seven (7) Days after receipt of an application for payment, the

Contractor shall give written notice to the Subcontractor, at the time of

disapproving or nullifying all or part of an application for payment, stating its

specific reasons for such disapproval or nullification, and the remedial actions to

be taken by the Subcontractor in order to receive payment. When the above

reasons for disapproving or nullifying an application for payment are removed,

payment will be promptly made for the amount previously withheld.

8.3 FINAL PAYMENT[.]

8.3.1 APPLICATION[.] Upon acceptance of the Subcontract Work by the Owner

and the Contractor and receipt from the Subcontractor of evidence of fulfillment

of the Subcontractor's obligations in accordance with the Subcontract Documents

and Subparagraph 8.3.2, the Contractor shall incorporate the Subcontractor's

application for final payment into the Contractor's next application for payment

to the Owner without delay, or notify the Subcontractor if there is a delay and the

reasons therefor.

8.3.2 REQUIREMENTS[.] Before the Contractor shall be required to incorporate

the Subcontractor's application for final payment into the Contractor's next

application for payment, the Subcontractor shall submit to the Contractor:

8.3.2.1 an affidavit that all payrolls, bills for materials and equipment, and other

indebtedness connected with the Subcontract Work for which the Owner or its

property or the Contractor or the Contractor's surety might in any way be liable,

have been paid or otherwise satisfied;

8.3.2.2 consent of surety to final payment, if required;

8.3.2.3 satisfaction of required closeout procedures;

8.3.2.4 other data, if required by the Contractor or Owner, such as receipts,

releases, and waivers of liens to the extent and in such form as may be required

by the Subcontract Documents;

8.3.2.5 written warranties, equipment manuals, startup and testing required in

Paragraph 3.28; and

8.3.2.6 as-built drawings if required by the Subcontract Documents.

8.3.3 TIME OF PAYMENT[.] Receipt of final payment by the Contractor from

the Owner for the Subcontract Work is a condition precedent to payment by the

Contractor to the Subcontractor. The Subcontractor hereby acknowledges that it

relies on the credit of the Owner, not the Contractor for payment of Subcontract

Work. Final payment of the balance due of the Subcontract Amount shall be made

to the Subcontractor:

.1 upon receipt of the Owner's waiver of all claims related to the Subcontract

Work except for unsettled liens, unknown defective work, and non-compliance

with the Subcontract Documents or warranties; and

.2 within seven (7) Days after receipt by the Contractor of final payment from

the Owner for such Subcontract Work.

8.3.4 FINAL PAYMENT DELAY[.] If the Owner or its designated agent does

not issue a certificate for final payment or the Contractor does not receive such

payment for any cause which is not the fault of the Subcontractor, the Contractor

shall promptly inform the Subcontractor in writing. The Contractor shall also

diligently pursue, with the assistance of the Subcontractor, the prompt release by

the Owner of the final payment due for the Subcontract Work. At the

Subcontractor's request and expense, to the extent agreed upon in writing, the

Contractor shall institute reasonable legal remedies to mitigate the damages and

pursue payment of the Subcontractor's final payment including interest.

8.3.5 WAIVER OF CLAIMS[.] Final payment shall constitute a waiver of all

claims by the Subcontractor relating to the Subcontract Work, but shall in no way

relieve the Subcontractor of liability for the obligations assumed under

Paragraphs 3.21 and 3.22, or for faulty or defective work or services discovered

after final payment, nor relieve the Contractor for claims made in writing by the

Subcontractor as required by the Subcontract Documents prior to its application

for final payment as unsettled at the time of such payment.16

The second portion of the Huffman-H & H Agreement is Section 10.4:

TERMINATION BY OWNER[.] Should the Owner terminate its contract with the

Contractor or any part which includes the Subcontract Work, the Contractor shall

notify the Subcontractor in writing within three (3) business Days of the termination

and upon written notification, this Agreement shall be terminated and the

Subcontractor shall immediately stop the Subcontract Work, follow all of

Contractor’s instructions, and mitigate all costs. In the event of Owner termination,

the Contractor’s liability to the Subcontractor shall be limited to the extent of the

Contractor’s recovery on the Subcontractor’s behalf under the Subcontract

Documents, except as otherwise provided in this Agreement. The Contractor

agrees to cooperate with the Subcontractor, at the Subcontractor’s expense, in the

prosecution of any Subcontractor claim arising out of the Owner termination and

to permit the Subcontractor to prosecute the claim, in the name of the Contractor,

for the use and benefit of the Subcontractor, or assign the claim to the

Subcontractor. In the event Owner terminates Contractor for cause, through no

fault of the Subcontractor, Subcontractor shall be entitled to recover from the

16 Id. at 15–17.

Contractor its reasonable costs arising from the termination of this Agreement,

including overhead and profit on Work not performed.17

Whether and how these two portions of the Huffman-H & H Agreement interact with each

other is in dispute in this case and in this Motion.

II. The Termination of the General Contractor Agreement and the Downstream Effects

The Project was plagued with delays. The Army Corps of Engineers repeatedly expressed

its dissatisfaction with Huffman’s work on the Project.18 On December 26, 2019, the Corps asked

Huffman to “show cause as to whether there were any excusable delays or other pertinent facts

and circumstances impacting [its] failure to perform . . . on time.”19 On March 11, 2020, the Corps

sent a letter to Huffman stating that “Huffman Construction, LLC has failed to complete the work

within the specified times, failed to diligently prosecute the work, and failed to remedy deficient

work.”20 The letter scheduled a pre-termination meeting to give Huffman a “final opportunity . . .

to show cause how the failures to perform are due to unforeseeable causes beyond your control

and without fault or negligence on your part.”21

On March 13, 2020, Huffman responded that the delays were caused entirely by the

Government because the Government-furnished pumps were out of level, and the “pump

manufacturer ha[d] fully exonerated Huffman from any responsibility . . . .”22 On March 18, 2020,

Huffman had its pre-termination meeting with the Government.23 On March 20, 2020, Huffman

17 Id. at 23.

18 Ex. 6 (Army Corps’s March 11, 2020 Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-6) at 1; Ex. 4

(Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4).

19 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 1 (referencing

a previously sent letter).

20 Ex. 6 (Army Corps’s March 11, 2020 Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-6) at 1.

21 Id.

22 Ex. 7 (Huffman’s March 13, 2020 Letter to Army Corps) to H & H’s Mot. for Summ. J. (Doc. 43-7) at 1.

23 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 2.

sent another letter that (1) asserted that the pump issues were the cause of delay and (2) demanded

an extension.24 On March 23, 2020, Army Corps personnel visited the site and found that Huffman

had “substantially abandoned” the Project.25

Finally, on March 31, 2020, the Corps sent Huffman a letter detailing a number of

Huffman’s shortcomings and terminating the General Contractor Agreement.26 (In other words,

the contract was terminated “for cause.”27) Among other things, the letter explained that Huffman

was “in default of both the non-pump-and-motor and pump-and-motor related work” and therefore

“in default of the entire Contract.”28 Further, the letter stated that Huffman was unable to

substantiate any of its assertions regarding the defective equipment.29 In addition to formally

terminating the General Contractor Agreement, the letter directed Huffman to “immediately . . .

[s]top all work, including work performed by subcontractors and vendors, . . . except for work . . .

necessary to . . . [c]orrect existing safety violations[,] [a]void damage to work in place[,] or

[p]revent any other undue loss to the Government.”30 The letter also directed Huffman to

immediately “[f]urnish notice of termination to each immediate subcontractor and supplier that

24 Ex. 8 (Huffman’s March 20, 2022 Letter to Army Corps) to H & H’s Mot. for Summ. J. (Doc. 43-8).

25 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 1.

26 Id. at 1–5.

27 Ex. 3 (Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-3) ¶

9.

28 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 2. The letter

also stated that Huffman’s suspension of work was in “direct violation of subparagraph (i) of Contract clause 52.233-

1 DISPUTES.” Id. Subparagraph (i) of the Disputes Clause states that “[t]he Contractor shall proceed diligently with

performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under

the contract, and comply with any decision of the Contracting Officer.” Ex. 1 (The General Contractor Agreement)

to H & H’s Mot. for Summ. J. (Doc. 43-1) at 148.

29 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 2. None of the

correspondence between Huffman and the Army Corps, including the termination letter, mentioned H & H or even

hinted that the termination was through any fault of H & H. Ex. 5 (Huffman’s Answers to H & H’s Second Requests

for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-5) ¶ 11. And no party suggests such a thing in the litigation

at bar.

30 Ex. 4 (Army Corps’s Termination Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 3.

will be affected by this termination.”31 Such notice had to include “instructions to stop all work,

make no further shipments, place no further orders, and terminate all subcontracts under the

contract,” and had to “[r]equest that similar notices and instructions be given to its immediate

subcontractors.”32

The termination of the General Contractor Agreement caused a ripple effect down the chain

of subcontractors. Most relevant here, Huffman had to terminate its contract with its subcontractor,

H & H. On April 6, 2020, Huffman sent H & H a termination letter, stating:

The Corps of Engineers . . . has terminated the . . . project in its entirety. Stop all

work, make no further shipments, place no further orders, and terminate all

subcontractors and material suppliers under your contract with Huffman

Construction, except for work as necessary to . . . [c]orrect existing safety

violations[,] . . . [a]void damage to work in place[,] . . . [or] [p]revent any other

undue loss to the Government. Furnish notice to each immediate subcontractor and

material supplier under your contract with Huffman Construction that will be

affected by this termination.33

There is nothing in the record to suggest that H & H expressly responded to Huffman. There is

nothing to suggest that H & H provided any bills or invoices to Huffman after termination.34 There

is nothing to suggest that H & H made any type of post-termination demand for payment prior to

filing its Third-Party Complaint.

The downstream ripple didn’t end with H & H. In connection with the work H & H had

been performing for Huffman, H & H ordered (between 2014 and 2019) a significant amount of

goods, materials, and services from CEC Controls Company, Inc.35 According to CEC, H & H

31 Id.

32 Id.

33 Ex. 9 (Huffman’s Termination Notice to H & H) to H & H’s Mot. for Summ. J. (Doc. 43-9).

34 Huffman admits that it “failed to pay H & H’s invoice numbers 10381 and 9995 that H & H submitted to Huffman.”

Ex. 3 (Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-3) ¶ 38.

However, nothing in the record tells us whether those invoices were submitted prior to or after termination.

35 Ex. 1 (Purchase Order and Proposal) to CEC’s Compl. (Doc. 4).

never paid CEC for most of that work and those materials even though CEC provided them to H

& H.36 CEC alleges H & H still owes it $278,904.11 for work and materials related to the Project.37

So, CEC initiated the instant lawsuit against H & H.38 And this, in turn, led to H & H’s Third-

Party Complaint against Huffman and Zurich for breach of contract and violation of the Miller

Act. H & H denies that it owes any monies to CEC. H & H says that, “[b]ecause H & H fully

compensated CEC for the work it performed, CEC is not owed any additional money from H &

H.”39 Alternatively, H & H says that, “[i]f, however, it is determined that CEC is owed additional

money by H & H, Huffman would be liable to H & H for those amounts because of the delays and

setbacks it caused to the Project and because Huffman caused the Project to be terminated early.”40

H & H’s pending Motion for Partial Summary Judgment is limited to the breach-of-contract

claims and further limited to the issue and scope of liability. H & H seeks a partial judgment from

this Court that finds, with respect to the breach-of-contract claims, that Huffman and Zurich are

“liable to H & H . . . for H & H’s reasonable costs, including overhead and profit on work not

performed . . . .”41 H & H specifically says it is not moving for summary judgment on its Miller

Act claims.42 H & H also specifically says it is not moving for summary judgment with respect to

the calculation of damages.43

36 CEC’s Compl. (Doc. 4) ¶¶ 5, 6, 8.

37 Id. ¶ 8.

38 CEC also sued Auto-Owners Insurance Company. Id. Auto-Owners had issued a bond with H & H as Principal for

coverage of H & H’s work on the Project. Ex. 8 (Auto-Owners Bond) to CEC’s Compl. (Doc. 4). As opposed to the

bond issued by Zurich, this bond was not a Miller Act bond. Thus, it was not mandated by federal law and offered no

protection to the Government.

39 H & H’s Compl. (Doc. 24) ¶ 19.

40 Id.

41 H & H’s Mot. for Partial Summ. J. (Doc. 43) ¶ 1.

42 H & H’s Reply to Huffman’s Resp. to H & H’s Mot. for Partial Summ. J. (Doc. 64) at 3.

43 H & H’s Mot. for Partial Summ. J. (Doc. 43) ¶ 1.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when “there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.”44 Conversely, if the nonmoving party

can present specific facts “showing the existence of a genuine issue for trial,” then summary

judgment is not appropriate.45 The moving party has the burden of showing that (1) there is an

absence of a genuine dispute of material fact on at least one essential element of the nonmoving

party’s case and (2) the absence means that a rational juror could not possibly find for the

nonmoving party on that essential element of the nonmoving party’s case.46 If the moving party

meets that burden, the burden then shifts to the nonmoving party to show that there is a genuine

dispute of material fact.47 The nonmoving party meets this burden by designating specific facts in

affidavits, depositions, answers to interrogatories, admissions, or other record evidence that shows

“there is a genuine issue for trial.”48 The Court must view the evidence in the light most favorable

to the nonmoving party and give the nonmoving party the benefit of all reasonable inferences.49

DISCUSSION

The analysis of the two breach-of-contract claims at issue in this Motion are strikingly

dissimilar. The Court first addresses the claim against Huffman, and then moves on to the claim

against Zurich.

44 Fed. R. Civ. P. 56(a).

45 Grey v. City of Oak Grove, 396 F.3d 1031, 1034 (8th Cir. 2005).

46 Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).

47 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585–87 (1986); Torgerson v. City of Rochester,

643 F.3d 1031, 1042 (8th Cir. 2011) (en banc).

48 Celotex Corp., 477 U.S. at 322–24.

49 Pedersen v. Bio-Med. Applications of Minn., 775 F.3d 1049, 1053 (8th Cir. 2015).

I. The Breach-of-Contract Claim Against Huffman

H & H argues that Huffman breached the Huffman-H & H Agreement. This claim arises

under Missouri common law.50 The elements for breach of contract in Missouri are “(1) a contract,

(2) the parties had rights and obligations under the contract, (3) breach, and (4) damages.”51 The

parties do not dispute the first two elements. And while there is a dispute concerning damages—

which the Court resolves later in this Section—that dispute does not really strike at the heart of the

damages element. The principal elements dispute in this case centers on element three: breach.

That is, the parties hotly dispute whether Huffman breached the Huffman-H & H Agreement by

terminating it.

A. Huffman Committed a Breach by Terminating the Huffman-H & H Agreement

H & H says that Huffman was in breach of their contract the moment Huffman terminated

that contract.52 Huffman argues that the termination was allowed by, and thus not a violation of,

the Huffman-H & H Agreement.53 In this vein, Huffman notes that termination was specifically

contemplated in Section 10.4 of the Huffman-H & H Agreement.54 Huffman’s point is that

termination alone cannot be a breach. Instead, according to Huffman, proving a breach of contract

in these circumstances requires, at the very least, that H & H establish (1) it had submitted a request

for “reasonable costs, including overhead and profit on work not performed,” and (2) Huffman

50 The Huffman-H & H Agreement designates Missouri in a choice-of-law provision. See Ex. 2 (Huffman-H & H

Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-2) at 25. All parties to this Motion agree that Missouri law

applies. Sept. 12, 2022 Hr’g Tr. (Rough) at 24, 44.

51 Roe v. St. Louis Univ., 746 F.3d 874, 885–86 (8th Cir. 2014) (citing Kieffer v. Icaza, 376 S.W.3d 653, 657 (Mo.

2012) (en banc) (applying Missouri law)).

52 H & H’s Reply to Huffman’s Resp. to H & H’s Mot. for Partial Summ. J. (Doc. 64) at 8–9; Sept. 12, 2022 Hr’g Tr.

(Rough) at 62.

53 Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 6–7; Sept. 12, 2022 Hr’g Tr. (Rough) at

27–28.

54 See Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 7; Sept. 12, 2022 Hr’g Tr. (Rough)

at 27–28.

had rebuffed or ignored the request.55 Because (according to Huffman) H & H never submitted

such a request to Huffman, Huffman does not believe it had an obligation to pay H & H some

“nebulous, undefined, and unsupported sum of money . . . .”56 Thus, Huffman argues, Huffman

has not failed to perform any obligation under the contract and is not in breach.57

H & H has the better of the argument. As a general matter, Missouri common law hews to

the traditional principle that a contract breach occurs when one party to a contract prevents another

party to that contract from fully performing that contract.58 Huffman admits that H & H’s work

on the Project was not yet complete, and that the termination prevented further performance by H

& H.59 The record is clear that the termination of the Huffman-H & H Agreement was the direct

result of the General Contractor Agreement being terminated “for cause” by the Corps. The record

is also clear that H & H was not at fault in any way for the termination of either agreement.60 The

Court has little difficulty concluding that Huffman’s prevention of H & H completing the contract

falls within the traditional concept of contract breach.

Of course, in a breach-of-contract case, general principles and concepts aren’t necessarily

controlling. Rather, it is the joint intention of the parties that must be given effect in interpreting

55 See Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 7.

56 Id.

57 Id. at 7–8.

58 E.g., Chapman v. Kansas City, C. & S. Ry. Co., 48 S.W. 646, 648 (Mo. 1898) (“[W]here a party is engaged in the

performance of his contract, and is notified by the other party to proceed no further, the party so notified is fully

justified in quitting the work, and suing for damages for breach of contract.”); State ex rel. Fletcher v. Blair, 352 Mo.

476, 481 (Mo. 1944).

59 Ex. 5 (Huffman’s Answers to H & H’s Second Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-5)

at ¶ 4; Ex. 3 (Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-

3) at ¶ 15.

60 Ex. 5 (Huffman’s Answers to H & H’s Second Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-5)

at ¶¶ 4, 8.

an agreement.61 And, as Missouri courts make clear, the best (and often only) evidence of the

parties’ joint intention is the plain, ordinary meaning of the language used in an agreement.62 But

this does not make things better for Huffman. If anything, the language of Section 10.4 confirms

that our case falls within the general common law principle just discussed.

It is true that Section 10.4 contemplates early termination of the Huffman-H & H

Agreement as a downstream effect of termination of the General Contractor Agreement. But it is

just as true that Section 10.4 contemplates that the termination of the Huffman-H & H Agreement

would give rise to “liability” on the part of Huffman.63 And, in certain circumstances, Section

10.4 contemplates that termination of the Huffman-H & H Agreement would make H & H “entitled

to recover” lost profits (in addition to other reasonable costs) from Huffman.64 That certainly

sounds like an acknowledgment that early termination gives rise to a breach-of-contract claim.

The language of Section 10.4 does not somehow immunize Huffman from a breach-of-contract

suit in the event of early termination of the Huffman-H & H Agreement—even where this is a

downstream effect of the termination of the General Contractor Agreement. Instead, as relevant

here, Section 10.4 merely explains the extent of breach damages that H & H can recover depending

on the circumstances of the termination. 65

61 E.g., Chochorowski v. Home Depot U.S.A., 404 S.W.3d 220, 226 (Mo. 2013) (en banc) (“[T]he primary rule of

contract interpretation is that courts seek to determine the parties’ intent and give effect to it.”).

62 Id. at 226–27 (“The parties’ intent is presumed to be expressed by the plain and ordinary meaning of the language

of the contract,” and that intent will be gathered from the contract alone “[w]hen the language of [the] contract is clear

and unambiguous.”).

63 Ex. 2 (Huffman-H & H Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-2) at 23.

64 Id.

65 Id.

Moreover, nothing in the language of Section 10.4 conditions Huffman’s “liability” or H

& H’s “entitle[ment] to recover” on some type of pre-suit demand for payment by H & H.66 That

suggests the termination alone is the breach. Huffman attempts to bolster its argument that a

request for payment was required by pointing to Sections 8.2 and 8.3 of the Huffman-H & H

Agreement, which govern “Progress Payments” and “Final Payment,” respectively.67 Unlike

Section 10.4, which has no specific requirement for an application, these Sections require H & H

to submit a pay application to Huffman before Huffman is required to pay.68 But these Sections

are inapplicable to the situation at bar. The “Progress Payments” Section only applies to “[w]ork

performed in the proceeding payment period . . . .”69 How could such a section possibly govern

post-termination claims for “profit on [w]ork not performed”?70 It couldn’t. As for the “Final

Payment” Section, it only applies “[u]pon acceptance of the Subcontract Work by the Owner and

Contractor and receipt from the Subcontractor of evidence of fulfillment of the Subcontractor’s

obligations . . . .”71 But, as Huffman concedes, H & H was unable to fulfill its obligations.72

At the Motion hearing, Huffman’s counsel all but conceded that Sections 8.2 and 8.3 do

not, by their terms, apply to terminations under Section 10.4.73 Counsel invited the Court to

consider the “spirit” of Sections 8.2 and 8.3 in determining whether a similar requirement should

66 Id.

67 Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 7–8.

68 Ex. 2 (Huffman-H & H Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-2) at 15–17.

69 Id. at 15.

70 Id. at 23.

71 Id. at 16.

72 Ex. 5 (Huffman’s Answers to H & H’s Second Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-5)

¶ 4; Ex. 3 (Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-3)

¶ 15.

73 The Court noted that termination is different from a progress payment or a final payment, and asked counsel whether

that was a problem. Counsel agreed that “[i]t is something different” but argued that, “materially[,] it’s the same thing

as a final payment.” Sept. 12, 2022 Hr’g Tr. (Rough) at 29.

be imported to Section 10.4.74 The Court declines that invitation. Huffman’s early termination of

the Huffman-H & H Agreement constituted a breach of that agreement. A rebuffed post-

termination demand for payment was not necessary.75

B. Huffman is Liable to H & H for Reasonable Costs Arising from the Termination,

Including Overhead and Profit on Work not Performed

Huffman argues that H & H’s recovery under Section 10.4 of the Huffman-H & H

Agreement is limited to Huffman’s recovery against the Corps.76 Under this theory, since Huffman

has not recovered anything—at this point—from the Corps, H & H can’t recover from Huffman.

Huffman’s argument can be construed in two different ways. Neither carries the day.

Huffman could be saying it hasn’t committed a breach of contract because it hasn’t failed

to pay money it actually owes to H & H. To the extent this is Huffman’s argument, it is another

version of the argument that the Court already addressed above in Discussion Section I.A. And it

fails for the same reasons as the Court already explained in that Section. Specifically, the breach

occurred the moment Huffman terminated the contract; the payment or non-payment of monies

under Section 10.4 is irrelevant to the element of breach.

It is more likely, however, that Huffman is arguing something different. On this read, the

argument is that, even if one assumes Huffman breached the Huffman-H & H Agreement by

terminating it early, H & H can only recover monies from Huffman that Huffman recovers from

74 The Court asked Huffman’s counsel where, outside of Section 8, Huffman believed the Huffman-H & H Agreement

required H & H to submit a detailed payment demand to recover costs associated with termination. Counsel responded

that not requiring H & H to submit such a demand “would be against—I hate to use the word ‘spirit’ of the contract .

. . [but] it is against the obvious intention of the parties.” Id. at 32.

75 Even if a rebuffed post-termination demand for payment was necessary to show a breach of the Huffman-H & H

Agreement, that has occurred. H & H’s Third-Party Complaint is sufficient to constitute a demand for payment. H

& H’s Compl. (Doc. 24). And Huffman’s Answer, which included a blanket denial of owing money to H & H, is

sufficient to constitute a rebuffing of that demand. Huffman’s Answer to H & H’s Compl. (Doc. 29) at ¶ 37. Unlike

standing, which is judged at the point of the filing of a complaint, the merits of a claim are not forever frozen at the

moment of filing.

76 Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 7–8.

the Corps. There are at least two problems with this version of Huffman’s argument. The first

problem is that the argument concerns the calculation of damages, not liability. Huffman’s point

is that, whatever categories of damages H & H might theoretically be entitled to, H & H’s recovery

must be capped by what Huffman recovers from the Corps. But H & H has made clear that they

are not moving for summary judgment as to a damages calculation. The second, and more

fundamental, problem is that the argument runs headlong into the language of Section 10.4 of the

Huffman-H & H Agreement.

As already explained above, Section 10.4 discusses the liability arising from a termination

of the Huffman-H & H Agreement due to the Corps’s termination of the upstream General

Contractor Agreement with Huffman. Section 10.4 provides that, “[i]n the event of [the Corps’s]

termination, [Huffman’s] liability to [H & H] shall be limited to the extent of [Huffman’s] recovery

on [H & H’s] behalf under the [Huffman-H & H Agreement], except as otherwise provided in this

Agreement.”77 While the first part of the quoted sentence aligns with Huffman’s position, the

second portion does not. Indeed, it explicitly indicates that the agreement may make exceptions

to this general limitation of liability. And lo and behold, later in this same paragraph, we find such

an exception: “In the event [the Corps] terminates [Huffman] for cause, through no fault of [H &

H], [H & H] shall be entitled to recover from [Huffman] its reasonable costs arising from the

termination of this Agreement, including overhead and profit on [w]ork not performed.”78

It is not hard to understand what is going on here. If the Corps terminates the upstream

General Contractor Agreement for its convenience (meaning not “for cause”), then Section 10.4

of the Huffman-H & H Agreement makes sure that Huffman is not ultimately on the hook for

77 Ex. 2 (Huffman-H & H Agreement) to H & H’s Mot. for Summ. J. (Doc. 43-2) at 23.

78 Id.

downstream damages that were really caused by the Corps. If, on the other hand, the Corps

terminates the General Contractor Agreement for cause (e.g., Huffman’s delays and

abandonment), and that cause has nothing to do with H & H, then Section 10.4 of the Huffman-H

& H Agreement significantly expands Huffman’s potential liability because Huffman (not the

Corps or H & H) was the cause of the downstream damages.

Huffman takes a contrary view. Huffman suggests that the language allowing a

subcontractor to recover reasonable costs (including overhead and profit on work not performed)

is not an exception to the general limitation of liability contained in the same paragraph. Instead,

Huffman posits that the recovery-of-reasonable-costs language simply opens up a new category of

damages for H & H to pursue in certain defined circumstances. But, according to Huffman, this

category too is subject to the more general limitation of liability.

Huffman’s position would make the recovery-of-reasonable-costs language a mere mirage.

The only time that language is triggered is when the Corps terminates Huffman for cause and this

termination requires Huffman to terminate its agreement with H & H. But if Huffman was

terminated for cause by the Corps, then presumably Huffman would not be able to recover anything

from the Corps. Certainly, Huffman would not be able to recover anything approaching H & H’s

profits on work not performed. If H & H’s recovery against Huffman was limited to Huffman’s

recovery against the Corps, then H & H would get nothing or close to nothing. It certainly wouldn’t

ever be able to get profits on work not performed.

At the Motion hearing, Huffman’s counsel conceded that this was the logical outcome of

Huffman’s position.79 He sought to characterize this as a “harsh outcome” that nonetheless must

79 Sept. 12, 2022 Hr’g Tr. (Rough) at 39.

be enforced as the arms-length bargain between two sophisticated parties.80 The Court does not

see things the same way. The problem with Huffman’s position is not the potentially harsh result

for H & H. The problem is that (1) the more natural reading of Section 10.4 establishes the

recovery-of-reasonable-costs language as an exception to the same Section’s general limitation of

liability, and (2) Huffman’s reading would render illusory all or most of the recovery-of-

reasonable-costs language in Section 10.4. Together, these two points establish quite clearly that

Huffman is promoting the wrong understanding of Section 10.4.81

H & H argues that, pursuant to Section 10.4 of the Huffman-H & H Agreement, H & H

should receive “reasonable costs arising from the termination of this Agreement, including

overhead and profit on [w]ork not performed.”82 H & H argues that this recovery should not be

limited by the recovery that Huffman does or does not get from the Corps. H & H asserts that this

relief was triggered because, “through no fault of H & H,” the General Contractor Agreement

between the Corps and Huffman was terminated “for cause” by the Corps.83 H & H is right.

Accordingly, H & H’s Motion for Partial Summary Judgment for breach of contract is GRANTED

against Huffman. Huffman breached its agreement with H & H by terminating it, and Huffman

80 Id.

81 Huffman also argues that the recovery-of-reasonable-costs provision is not triggered because the Corps was wrong

to terminate Huffman for cause. Huffman’s Br. in Opp’n to H & H’s Partial Mot. for Summ. J. (Doc. 53) at 8; Ex. 1

(Complaint with Armed Services Board of Contract Appeals) to Huffman’s Resp. to H & H’s Statement of Facts (Doc.

54-1); Ex. 3 (Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-

3) ¶ 9. But the relevant language of Section 10.4—“[i]n the event the [Corps] terminates [Huffman] for cause”—is

describing a verifiable historical fact. Currently, there is no question that Huffman was terminated “for cause.” Ex. 3

(Huffman’s Answers to H & H’s First Requests for Admission) to H & H’s Mot. for Summ. J. (Doc. 43-3) ¶ 9. If

Huffman is asking for the Court to review the propriety of the Corps’s “for cause” determination, that is a non-starter.

There are two avenues for appealing such determinations: either (1) appealing to the agency board of contract appeals,

or (2) bringing an action directly in the United States Court of Federal Claims. Ex. 4 (Army Corps’s Termination

Letter to Huffman) to H & H’s Mot. for Summ. J. (Doc. 43-4) at 4. Neither avenue is in this Court. As things currently

stand, there was a “for cause” determination and no subsequent reversal.

82 H & H’s Mot. for Summ. J. (Doc. 43) ¶ 7.

83 Id.

owes H & H “reasonable costs arising from the termination of this Agreement, including overhead

and profit on [w]ork not performed.”84 The Court wishes to emphasize, however, that it is not in

any way deciding what constitutes “reasonable costs,” “overhead,” or “profit on [w]ork not

performed.” That decision will come at a later stage of this litigation.

II. The Breach-of-Contract Claim Against Zurich

H & H has also moved for partial summary judgment against Zurich, Huffman’s Miller

Act surety. While the Miller Act provides H & H with a cause of action against Zurich, and H &

H has such a claim in its Third-Party Complaint, H & H has only moved for summary judgment

against Zurich on its breach-of-contract claim.

The Eighth Circuit has not spoken on whether a subcontractor can bring a standalone

breach-of-contract claim against a Miller Act surety. Outside of the Eighth Circuit, there appears

to be a growing consensus among courts that actions brought against a surety on the payment bond

itself must be litigated under the Miller Act.85 H & H has not pointed to a single case where a

84 Given the Court’s conclusion here, it has no trouble concluding that H & H has provided evidence that would require

a rational juror to conclude Huffman’s breach caused at least some damages (e.g., lost profits) to H & H. Huffman’s

last pay application on February 12, 2020, shows that H & H still had a balance to finish of $201,545.70. Ex. 1

(Application and Certificate for Payment) to Zurich’s Statement of Facts (Doc. 57-1) at 1. So, while it was not

specifically at issue in the parties’ arguments, the Court notes that the fourth element of a breach-of-contract claim

under Missouri law (the existence of damages) is met too.

85 Miller Equip. Co. v. Colonial Steel & Iron Co., 383 F.2d 669, 673 (4th Cir. 1967) (noting that the only liability

against the Miller Act surety was under the Miller Act); Bernard Lumber Co., Inc. v. Lanier-Gervais Corp., 560 So.2d

465, 467 (La. Ct. App. 1990) (noting that the Miller Act “is the exclusive remedy available to a supplier against a

surety . . . on a Miller Act payment bond”); Cajun Constructors Co. v. Fleming Constr. Co., 951 So.2d 208, 219–20

(La. Ct. App. 2006) (holding that the Miller Act is the only basis for assertion of a claim against a surety on a Miller

Act payment bond); United States ex rel. Varco Pruden Bldgs. v. Reid & Gary Strickland Co., 161 F.3d 915, 919 (5th

Cir. 1998) (“[R]ecovery on the bond must be under the Miller Act.”); United States ex rel. Metric Elec., Inc. v.

Enviroserve, Inc., 301 F. Supp. 2d 56, 71–74 (D. Mass. 2003) (state-law claims against a Miller Act surety are

preempted by the Miller Act); Am. Auto. Ins. Co. v. United States ex rel. Luce, 269 F. 2d 406, 408 (1st Cir. 1959) (“It

is obvious that the obligation of a surety on a bond furnished under the Miller Act must be determined by federal law

. . . .”); accord United States ex rel. Cal’s A/C and Elec. v. Famous Constr. Corp., 220 F.3d 326, 329 (5th Cir. 2000);

Am. Creosote Works, Inc. v. Caltoman Contractors, Inc., 160 So.2d 310, 312 (La. Ct. App. 1964); United States ex

rel. Great Wall Constr., Inc. v. Mattie & O’Brien Mech. Contracting Corp., Inc., 2001 WL 127663 (D. Me. 2001);

see also K-W Indus., Ltd. v. Nat’l Sur. Corp., 855 F.2d 640, 643 (9th Cir. 1988); U.S. Fidelity & Guar. Co. v. Ernest

Const. Co., 854 F. Supp. 1545, 1556 (M.D. Fla. 1994) (allowing a breach-of-contract claim by a subcontractor against

a Miller Act surety to go to trial, but noting that the claim was “not derivative of the payment bond”).

subcontractor was able to bring a standalone breach-of-contract claim against a Miller Act surety.86

Here, H & H’s claims against Zurich are based entirely on the payment bond. H & H is not alleging

that Zurich acted in bad faith or otherwise committed some sort of independent tort during its

dealings with H & H.87 Rather, H & H is merely seeking to enforce the payment bond that Zurich

issued to the Government on behalf of Huffman. That enforcement is specifically governed by the

Miller Act.

The rationales provided by other courts for not allowing subcontractors to bring state-law

claims against Miller Act sureties on the payment bond fall generally into two camps. The first

camp merely states that the Miller Act is the exclusive remedy—without further explanation.88

The second camp argues that the Miller Act preempts state law, and that the Miller Act should be

the sole remedy in these cases in order to promote uniformity and to ensure that Miller Act sureties

are held to consistent standards nationally.89 To be fair, neither of these rationales are completely

satisfying. While the Court ultimately comes to the same result that these courts have reached, it

takes a slightly different analytical route to get there.

86 At the hearing, the Court asked H & H’s counsel what case, if any, supports bringing such a claim. Counsel

responded that “support for that would be the Consolidated Electric case from the Eighth Circuit.” Sept. 12, 2022

Hr’g Tr. (Rough) at 65. Counsel was referring to Consolidated Electrical & Mechanicals, Inc. v. Biggs General

Contracting, Inc., 167 F.3d 432 (8th Cir. 1999). That case is inapposite because it focuses on a subcontractor’s non-

Miller Act remedies against a general contractor, not against a surety. Id. Biggs held that the subcontractor needed

to plead a breach-of-contract claim in addition to a Miller Act claim if it wanted to recover contract damages. Id. at

435. While this suggests that a subcontractor can tack on a breach-of-contract claim to its Miller Act claim against a

general contractor, it says nothing about bringing a standalone breach-of-contract claim against a Miller Act surety.

87 The Ninth Circuit, in K-W Industries, allowed a subcontractor to bring a tort claim against a Miller Act surety for

bad faith in refusing to pay the subcontractor’s claim until after the subcontractor filed suit, but noted that this was not

a suit on the bond itself. 855 F.2d at 643.

88 E.g., Miller Equip. Co., 383 F.2d at 673; Cal’s A/C and Elec., 220 F.3d at 329; Bernard Lumber Co., Inc., 560 So.

2d at 467; Varco Pruden Bldgs., 161 F.3d at 919; Cajun Constructors Co., 951 So. 2d at 219–20.

89 E.g., Am. Auto. Ins. Co., 269 F. 2d at 408; Enviroserve, Inc., 301 F. Supp. 2d at 71–74.

By way of the Miller Act, the United States requires general contractors on federal projects

of over $100,000 to furnish a payment bond (through a surety) to the United States.90 Also by way

of the Miller Act, the United States then grants subcontractors a right of action to sue on its behalf

under the required bond.91 So, the Miller Act both requires the bond in the first place and gives

subcontractors the ability to sue on behalf of the Government to enforce the bond. That’s not

surprising. Because the bond is issued to the Government, the Government would seemingly need

to authorize any bond-related action on its behalf. And while it has authorized actions by a

subcontractor, it has only done so within the confines of the Miller Act.92 Thus, the Miller Act

both creates the bond and provides the stand-in-the-shoes-of-the-Government remedy for

enforcing the creature it created. In these circumstances, there is enough to conclude that the

Miller Act remedy is the exclusive way to proceed against a surety on a Miller Act payment bond.

In the case at bar, Zurich has issued a payment bond to the Government on Huffman’s

behalf under the Miller Act. Zurich’s involvement with these entities is mandated and governed

entirely by the Miller Act. Consequently, H & H’s ability to sue on the Government’s behalf is

limited to the right of action the Government has provided under the Miller Act. H & H’s Motion

for Partial Summary Judgment on its breach-of-contract claim against Zurich is DENIED.93

90 40 U.S.C. § 3131.

91 Id. at § 3133.

92 Id.

93 Even if the Court is wrong—meaning a breach-of-contract claim is theoretically viable against Zurich— any damage

remedy exceeding what would be authorized by the Miller Act would be preempted. See United States ex rel. Walton

Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1206 (9th Cir. 2002) (holding that a Miller Act surety’s liability is

“coextensive with the contractual liability of the principal only to the extent it is consistent with the rights and

obligations created under the Miller Act”); United States ex rel. T.M.S. Mech. Contractors, Inc. v. Craftsmen, 942

F.2d 946, 953 (5th Cir. 1991) (citation omitted) (“A claim for profit [against a Miller Act surety] does not involve

actual outlay and thus ‘falls outside both the letter and the spirit of the [Miller] Act.’”); Great Wall Constr., 2001 WL

127663 at *2 (holding that additional state-law claims could not be brought against Miller Act surety because they

would expand the Miller Act remedies). Because H & H still can proceed on its Miller Act claim against Zurich, there

would be no practical harm flowing from the Court’s hypothetical error on the breach-of-contract claim.

CONCLUSION

H & H’s Motion for Partial Summary Judgment on its breach-of-contract claim against

Huffman is GRANTED as set forth in Discussion Section I of this Order. H & H’s Motion for

Partial Summary Judgment on its breach-of-contract claim against Zurich is DENIED as set forth

in Discussion Section II of this Order.

IT IS SO ORDERED this 28th day of September 2022.

LEE P. RUDOFSKY

UNITED STATES DISTRICT JUDGE

25