United States of America v. Western Surety Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

UNITED STATES OF AMERICA CIVIL ACTION

FOR THE USE AND BENEFIT OF

INDUSTRIAL ROOFING AND CONSTRUCTION,

LLC

VERSUS CASE NO. 23-2119

WESTERN SURETY COMPANY et al. SECTION: “G”(1)

ORDER AND REASONS

Before the Court are Defendant Western Surety Company’s (“Western Surety”) Motion to

Dismiss Pursuant to Rule 12(b)(3)1 and Defendant Pontchartrain Partners, LLC’s

(“Pontchartrain”) Motion to Dismiss Pursuant to Rule 12(b)(3).2 In this litigation, Plaintiff

Industrial Roofing and Construction, LLC (“Industrial”) seeks to recover payments for work it

performed but which Western Surety and Pontchartrain allegedly did not tender.3 Western Surety

and Pontchartrain move to dismiss Industrial’s claims under Rule 12(b)(3) because of a mediation

and arbitration clause in the Subcontract between Industrial and Pontchartrain.4 Industrial opposes,

contending that the Subcontract does not apply to its Miller Act claims against Western Surety.5

Having considered the motions, the memoranda in support and in opposition, the record, and the

applicable law, the Court grants the motions to the extent that they request that the Court compel

1 Rec. Doc. 12.

2 Rec. Doc. 13.

3 Rec. Doc. 4.

4 Rec. Docs. 12, 13.

5 Rec. Doc. 14.

arbitration of Industrial’s claims against Pontchartrain. The Court denies the motions to the extent

that they request that the case be dismissed and instead stays the case pending arbitration.

I. Background

On June 20, 2023 Industrial filed a Complaint against Defendant Western Surety in this

Court.6 On July 14, 2023, Industrial filed an Amended Complaint, adding Pontchartrain as a

Defendant.7 Industrial seeks to recover damages for work it allegedly performed but was not paid

for as a subcontractor on a federal construction project (“Project”) in New Orleans, Louisiana.8

Industrial alleges that as part of Pontchartrain’s obligations as a general contractor under the Miller

Act, Pontchartrain obtained a payment bond issued by Western Surety.9

Industrial alleges that on or around November 20, 2020, it entered into a $12,986,320

subcontract (“Subcontract”) with Pontchartrain.10 Industrial alleges that Pontchartrain “routinely

breached this Subcontract by failing to render payment to Industrial in a timely manner” and that

eventually “Pontchartrain stopped paying Industrial” in December 2022.11 Industrial further

alleges that Pontchartrain last tendered payment on May 19, 2023 and that Pontchartrain owes it

$1,119,470.90.12 Industrial brings a Miller Act claim against Pontchartrain and Western Surety.13

6 Rec. Doc. 1.

7 Rec. Doc. 4.

8 Id. at 1, 4–5.

9 Id. at 1.

10 Id. at 2.

11 Id. at 3.

12 Id. at 4.

13 Id. at 5.

Industrial also brings a breach of contract claim, a Louisiana Prompt Pay Act claim, an unjust

enrichment claim, and a quantum meruit claim against Pontchartrain.14

Industrial pleads that jurisdiction and venue are proper in this Court pursuant to 40 U.S.C.

§ 3131(b)(3) for the Miller Act claims and that the Court has supplemental jurisdiction over the

state law claims under 28 U.S.C. § 1367(a).15 Industrial also alleges that the Court has jurisdiction

over this dispute despite a mediation and arbitration clause in the Subcontract because

Pontchartrain has waved its rights to those alternative dispute mechanisms by refusing to “engage

in mediation in a timely manner. . . .”16

The Subcontract between Pontchartrain and Industrial contains a mediation and arbitration

clause, providing in part that “any dispute of any type or nature whatsoever between Subcontractor

and Contractor (past, present or future) . . . shall first be submitted to mediation, and, if not settled

at mediation, to binding arbitration pursuant to the Federal Arbitration Act. . . .”17 “Mediation shall

be conducted before a mediator jointly selected by both Contractor and Subcontractor” and if “the

parties cannot agree on a mediator, then the mediator shall be selected by the American Arbitration

Association (“AAA”) . . . .”18 Similarly, “[t]he parties shall agree on a single arbitrator and, in the

event they cannot agree on an arbitrator, a court of competent jurisdiction shall appoint one.”19

The mediation and arbitration clause further provides that “[d]etermination of the arbitrability of

14 Id. at 5–9.

15 Id. at 2.

16 Id.

17 Rec. Doc. 4-2 at 18.

18 Id.

19 Id. at 18–19.

any dispute shall be made by the arbitrator. . . .”20 The mediation and arbitration provision also

contains limiting language that “[t]his Article shall not be deemed a limitation of rights or remedies

which the Subcontractor may have under Federal law, or under . . . applicable labor or material

payment bonds, unless such rights or remedies are expressly waived by the Subcontractor and its

surety.”21

On September 12, 2023, Western Surety filed a motion to dismiss pursuant to Rule 12(b)(3)

because of the mediation and arbitration clause in the Subcontract.22 On September 22, 2023,

Pontchartrain filed a motion to dismiss pursuant to Rule 12(b)(3) and also joined Western Surety’s

motion.23 On September 26, 2023, Industrial filed a response opposing Western Surety and

Pontchartrains’s motions.24 On October 11, 2023, Western Surety filed a reply to Plaintiff’s

response.25 On October 17, 2023, Pontchartrain filed a reply to Plaintiff’s response.26

II. Parties’ Arguments

A. Western Surety and Pontchartrains’s Arguments in Support of the Motions

Western Surety argues that Industrial’s Amended Complaint should be dismissed because

the Subcontract between Pontchartrain and Industrial contains a mediation and arbitration clause.27

Western Surety contends that it may invoke this mediation and arbitration clause because

20 Id. at 18.

21 Id. at 19.

22 Rec. Doc. 12.

23 Rec. Doc. 13.

24 Rec. Doc. 14.

25 Rec. Doc. 18.

26 Rec. Doc. 21.

27 Rec. Doc. 12.

Louisiana law allows them to do so as the surety of Pontchartrain.28 Western Surety notes that the

Federal Arbitration Act strongly favors arbitration.29 Western Surety also notes that the Supreme

Court has held a presumption of arbitrability exists when there is a contract containing an

arbitration clause.30 Western Surety also argues that contrary to Industrial’s allegations, Western

Surety has not waived its mediation and arbitration rights.31 Western Surety notes that the

Subcontract requires the American Arbitration Association to select a mediator if the parties cannot

agree on a mediator, but Industrial has not followed this process for obtaining a mediator.32

In its motion to dismiss under Rule 12(b)(3), Pontchartrain adapts and incorporates the

arguments Western Surety made in its motion.33

B. Industrial’s Response Opposing the Motion

In its response opposing the motions, Industrial argues that its claims against Pontchartrain

are bound by the mediation and arbitration clause in the Subcontract, but that Pontchartrain has

waived mediation and arbitration through its inaction.34 In addition, Industrial argues that its Miller

Act claim against Western Surety is not bound by the Subcontract and should not be dismissed.35

28 Rec. Doc. 12 at 1 (citing La. Civ. Code art. 3046) (“The surety may assert against the creditor any defense

to the principal obligation that the principal obligor could assert except lack of capacity or discharge in bankruptcy of

the principal obligor.”).

29 Rec. Doc. 12-1 at 2 (citing 9 U.S.C. § 1, et seq.).

30 Id. (citing AT&T Tech., Inc. v. Comm. Workers of Am., 475 U.S. 643, 650 (1986); Moses H. Cone Mem’l

Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25 (1983)).

31 Id. at 3.

32 Id.

33 Rec. Doc. 13-1.

34 Rec. Doc. 14 at 1, 4.

35 Id. at 1 (citing United States ex rel. Portland Constr. Co. v. Weiss Pollution Control Corp., 532 F.2d

1009, 1011–12 (5th Cir. 1976)).

First, Industrial reasons that if it is not allowed to bring its Miller Act claims against

Western Surety before mediation and arbitration with Pontchartrain has been completed, then it

would be unlikely to bring these claims by the time the one year statute of limitations from “the

day on which the last of the labor was performed” runs out under the Miller Act.36 Industrial points

to the Fifth Circuit’s decision in Weiss in support of its contention that “a subcontractor may file

suit against a surety in advance of a final determination in the dispute with the general

contractor.”37 Industrial notes that participation in mediation and arbitration does not toll the one

year statute of limitations.38

Second, Industrial points to United States v. Citi Approved Enterprise, LLC, where a judge

in the Western District of Louisiana applied Weiss and held that absent express intent, courts will

not apply an arbitration provision to a non-party to the contract.39 Industrial contends that

Pontchartrain and Industrial did not expressly intend for the mediation and arbitration clause to

apply to Western Surety as a non-party to the Subcontract.40 Industrial further contends that, to the

contrary, the Subcontract provides that the dispute resolution provision “shall not be deemed a

limitation of rights or remedies which [Industrial] may have under Federal law, or under state

mechanics’ lien laws under applicable labor or material payment bonds, unless such rights or

remedies are expressly waived by [Industrial] and its surety.”41

36 Id. at 2 (citing 40 U.S.C. § 3133(b)(4)).

37 Id. (citing Weiss, 532 F.2d at 1012–13)

38 Id. (citing Weiss, 532 F.2d at 1012–13).

39 Id. at 3 (citing United States v. Citi Approved Enter. LLC, No. 21-386, 2021 WL 4076579, at *2, (W.D.

La. Aug. 10, 2021) (Hanna, M.J.), report and recommendation adopted, 2021 WL 4070929, at *1 (W.D. La. Sept. 7,

2021) (Summerhays, J.)).

40 Id.

41 Id. at 3–4 (citing Rec. Doc. 4-2 at 19).

Third, Industrial reasons that Pontchartrain has waived its right to mediation and arbitration

because of its inaction in engaging with Industrial to select a mediator and arrange a mediation

date.42 Industrial contends that as of the date of its filing of this response, Pontchartrain has not

followed through with the selection of a mediator.43

C. Western Surety’s Reply

In its reply, Western Surety argues in the alternative that this matter should be stayed

pending the outcome of mediation and arbitration.44 Western Surety notes that Weiss and Citi,

which Plaintiff cites, stayed at least the Miller Act claims while the other claims bound by an

arbitration clause were sent to arbitration.45 Western Surety also argues that it has not waived

mediation and arbitration because Industrial sent Pontchartrain a letter initiating mediation on June

14, 2023, but filed the complaint in this matter six days later on June 20, 2023.46

D. Pontchartrain’s Reply

In its reply, Pontchartrain first argues that it has not waived its rights to mediate and

arbitrate in the Subcontract because Industrial “has failed to establish that it would be prejudiced

by mediation or arbitration of this matter. . . .”47 Pontchartrain notes that the Fifth Circuit has held

that “[a] party waives its right to arbitration only when participation in the litigation has been so

substantial that compelling arbitration would prejudice the other party.”48 Pontchartrain reasons

42 Id. at 4.

43 Id.

44 Rec. Doc. 18 at 2.

45 Id. at 1 (citing Weiss, 532 F.3d at 1013; Citi, 2021 WL 4070929, at *1).

46 Id. at 2.

47 Rec. Doc. 21 at 1.

48 Id. (citing Cargill Ferrous Int’l v. SEA PHOENIX MV, 325 F.3d 695, 700 (5th Cir. 2003)).

that Industrial has not been prejudiced because Industrial did not attempt mediation until seven

months after it stopped receiving payment from Pontchartrain in November 2022.49 Second,

Pontchartrain argues that this issue of whether arbitration has been waived is to be decided by an

arbitrator because the Subcontract provides that the arbitrability of a dispute shall be determined

by the arbitrator and that the Supreme Court has upheld these clauses requiring an arbitrator to

determine the arbitrability of a dispute.50

III. Legal Standard

A. Rule 12(b)(3) Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(3), claims may be dismissed for improper

venue.51 The Supreme Court has held that “[a]n agreement to arbitrate before a specified tribunal

is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but

also the procedure to be used in resolving the dispute.”52 The Fifth Circuit has held that Rule

12(b)(3) is a proper method for seeking dismissal in favor of arbitration.53 Thus, the enforceability

of an arbitration agreement may be analyzed under Rule 12(b)(3).

Although the Fifth circuit has not decided which party bears the burden on a Rule 12(b)(3)

motion, “most district courts within the Fifth Circuit have imposed the burden of proving that

venue is proper on the plaintiff once a defendant has objected to the plaintiff’s chosen forum.”54

49 Id. at 2.

50 Id (citing Moses H. Cone Mem’l Hosp, 460 U.S. at 24–25).

51 Atl. Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S. 49, 54–55 (2013).

52 Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974).

53 Gezu v. Charter Commc’ns., 17 F.4th 547, 554 n.7 (5th Cir. 2021); Noble Drilling Servs., Inc. v. Certex

USA, Inc., 620 F.3d 469, 472 n.3 (5th Cir. 2010); Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 902 (5th

Cir. 2005).

54 Galderma Laboratories, L.P. v. Teva Pharms., 290 F.Supp.3d 599, 605 (N.D. Tex. 2017) (citing Broadway

Nat’l Bank v. Plano Encryption Techns., LLC, 173 F.Supp.3d 469, 473 n.2 (W.D. Tex. 2016); Graham v. Dynorp

Intern., Inc. 973 F.Supp.2d 698, 700 (S.D. Tex. 2013); Asevedo v. NBC Universal Media, LLC, 921 F.Supp.2d 573,

589 (E.D. La. 2013); Praetorian Specialty Ins. Co. v. Aguillard Const. Co., Inc., 829 F.Supp.2d 456, 470 (W.D. La.

When deciding a Rule 12(b)(3) motion, the Court must accept as true all allegations in the

complaint and resolve all conflicts in favor of the plaintiff.55 The Court may consider evidence in

the record beyond the facts alleged in the complaint and its proper attachments.56

IV. Analysis

Western Surety and Pontchartrain assert that Industrial’s claims should be dismissed

pursuant to Rule 12(b)(3) because they are subject to mediation and arbitration.57 Western Surety

argues in the alternative that this matter should be stayed pending the outcome of mediation and

arbitration.58 Industrial argues that Pontchartrain has waived mediation and arbitration by failing

to engage in those processes and that its Miller Act claim against Western Surety is not bound by

the arbitration clause.59

The Federal Arbitration Act (“FAA”) was enacted in 1924 to “allow[] a party to . . . an

arbitration agreement to petition any United States district court for an order directing that such

arbitration proceed in the manner provided for in such agreement.”60 In Iberia Credit Bureau, Inc.

v. Cingular Wireless LLC, the Fifth Circuit explained that the FAA was “in large part motivated

by the goal of eliminating the courts’ historic hostility to arbitration agreements.”61 The Fifth

2010); EnviroGLAS Products, Inc. v. EnviroGLAS Products, LLC, 705 F.Supp.2d 560, 566 (N.D. Tex. 2010); AETN

Intern. Co. Ltd v. Emine Techn. Co., Ltd., 261 F.R.D. 112, 120 (E.D. Tex. 2009)).

55 Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 Fed. Appx. 612, 615 (5th Cir. 2007) (per curiam).

56 Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009) (citations and internal quotations

omitted)).

57 Rec. Docs. 12, 13, 18, 21.

58 Rec. Doc. 18.

59 Rec. Doc. 14.

60 Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989) (internal

quotation marks omitted).

61 Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 166 (5th Cir. 2004).

Circuit further explained that “Section 2 of the FAA puts arbitration agreements on the same

footing as other contracts.”62 This means that, “as a matter of federal law, arbitration agreements

and clauses are to be enforced unless they are invalid under principles of state law that govern all

contracts.”63

There is a strong presumption in favor of arbitrability.64 Any doubts about the arbitrability

of a dispute should be resolved in favor of arbitration.65 To overcome this presumption, there must

be clear evidence that the parties did not intend the claim to be arbitrable.66 The Fifth Circuit has

established a two-step inquiry to determine if an arbitration clause is enforceable.67 First, a court

determines whether the parties agreed to arbitrate.68 This involves determining both whether there

was a valid agreement to arbitrate and whether the dispute in question falls within the scope of the

arbitration clause.69 Second, a court determines whether any legal constraints external to the

agreement foreclose the arbitration of claims.70 “The duty to arbitrate is one of contract; a court

cannot compel parties to arbitrate issues they have not agreed to submit to arbitration.”71

Although there is strong language in the case law regarding the presumption in favor of

arbitrability, the Fifth Circuit has held that “the right to arbitration, like any contractual right, may

62 Id.

63 Id.

64 See E.E.O. C. v. Waffle House, 534 U.S. 279, 289 (2002).

65 See Moses H. Cone Mem'l Hosp, 460 U.S. at 24–25.

66 Harvey v. Joyce, 199 F.3d 790, 793 (5th Cir. 2000).

67 Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002).

68 Id.

69 Id.

70 Id.

71 Tuttle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006).

be waived.”72 The Fifth Circuit has further held that a party will be found to have waived the right

to arbitration when the party seeking arbitration “substantially invokes the judicial process to the

detriment or prejudice of the other party.”73 “The question of whether the movant’s participation

in the litigation has been substantial enough to constitute waiver is fairly strict: waiver of an

arbitration right will not be lightly inferred without some showing of prejudice.”74

A. Industrial’s Claims Against Pontchartrain

Industrial’s claims against Pontchartrain are subject to arbitration because the arbitration

clause in the Subcontract is enforceable and this litigation is within the scope of the arbitration

clause. First, the arbitration clause is enforceable and has not been waived. Although Industrial

argues that Pontchartrain has waived arbitration by failing to engage them in the mediation and

arbitration process outlined in the subcontract, Pontchartrain has not “substantially invoke[d] the

judicial process to the detriment or prejudice of” Industrial.75 Aside from filing the instant motion

to dismiss, Pontchartrain has not utilized the judicial process instead of the mediation and

arbitration process. Filing this motion to dismiss does not prejudice Industrial, as Pontchartrain

only seeks to enforce the arbitration clause in the Subcontract.

Industrial notes that Pontchartrain still has not provided the names of mediators after

Industrial sent its demand letter on June 14, 2023.76 However, the Subcontract requires the AAA

to appoint a mediator if the parties cannot agree on a mediator and Industrial has not indicated that

72 Price v. Drexel Burnham Labert Inc., 791 F.2d 1156, 1158 (5th Cir. 1986).

73 Id.

74 Cargill, 325 F.3d at 700 (internal quotations and citation omitted).

75 Price, 791 F.2d at 1158.

76 Rec. Doc. 14-2 at 2.

it has communicated with the AAA to do so.77 Therefore, the arbitration clause has not been

waived. Second, Industrial’s claims against Pontchartrain fall within the scope of the arbitration

agreement, as Industrial’s claims against Pontchartrain arise out of the construction work the

parties contracted to.78 Because there is an enforceable arbitration clause that applies to Industrial’s

claims against Pontchartrain, Industrial’s claims against Pontchartrain are subject to arbitration.

The Court must next determine whether to dismiss or stay Industrial’s claims against

Pontchartrain pending arbitration. According to Pontchartrain, all of Industrial’s claims should be

referred to arbitration and the case should be dismissed.79 Plaintiff argues that a stay, not dismissal,

is appropriate pending arbitration.80

Section 3 of the FAA provides that when claims are properly referable to arbitration, that

upon application of one of the parties, the court shall stay the trial of the action until

the arbitration is complete.81 In Alford v. Dean Witter Reynolds, Inc., the Fifth Circuit stated that

77 Rec. Doc. 4-2 at 18.

78 See U.S. for Use and Benefit of EWS Tex., Inc. v. Robins & Morton Grp., No. 23-cv-288, 2023 WL

6350362, at *2 (M.D. Al. Sept. 28, 2023) (rejecting subcontractor’s arguments that the Miller Act prohibited the

arbitration of claims between the subcontractor and the principal contractor because “courts have overwhelmingly

concluded that Section 3133(c) of the Miller Act does not prohibit enforcement of an arbitration agreement executed

before the subcontractor has furnished labor or material for use in the performance of the contract” and granting the

principal contractor’s motion to compel arbitration of all claims against it, including the subcontractor’s Miller Act

claims) (citations omitted); U.S. for Use and Benefit of Capolino Sons, Inc. v. Electronic & Missile Facilities, Inc.,

364 F.2d 705, 708 (2d. Cir. 1966) ("the United States Arbitration Act … quite clearly is broad enough to include

Miller Act suits within its scope …”); Electronic & Missile Facilities, Inc. v. U.S. for Use of Moseley, 306 F.2d 554,

556–57 (5th Cir. 1962) (“First, there is absolutely nothing in the language or legislative history of the Miller Act which

indicates that Congress meant to prohibit a laborer or materialman from voluntarily substituting the procedure of

arbitration for his right to litigate in a federal court. On the other hand, the United States Arbitration Act expressly and

unequivocally gave the parties the right to provide for the arbitration of all disputes arising under their contracts.”)

(rev'd on other grounds sub nom. Moseley v. Electronic & Missile Facilities Inc., 374 U.S. 167, 171–72 (1963)

(holding that the Court does not reach the issue of arbitrability because the issue of fraud needed to be reached before

arbitrability.).

79 Rec. Doc. 17-1 at 17.

80 Rec. Doc. 19 at 9.

81 9 U.S.C. § 3.

“[t]he weight of authority clearly supports dismissal of the case when all of the issues raised in the

district court must be submitted to arbitration.”82 In later cases, however, the Fifth Circuit clarified

the language in the Alford opinion. Indeed, in Apache Bohai Corp. LDC v. Texaco China, B.V.,

the Fifth Circuit stated that “Alford held merely that dismissal was not an abuse of discretion” and,

moreover, Alford “did not hold that dismissal was required” when all of a party’s claims are subject

to arbitration.83 Instead, the district courts also have discretion to stay the case.84 As discussed in

more detail below, Industrial’s claims against Western Surety are not subject to arbitration.

Therefore, the Court exercises its discretion and stay Industrial’s claims against Pontchartrain

pending arbitration.

B. Industrial’s Claims Against Western Surety

The Miller Act imposes certain obligations on the general contractor on any “contract of

more than $100,000 . . . for the construction, alteration, or repair of any public building or public

work of the Federal Government. . . .”85 The Miller Act accords a subcontractor the right to file

suit in federal court against a surety issuing a bond to a general contractor on a federal construction

project for recovery of payments owed by the general contractor.86 Although a subcontractor may

waive these rights by contract, the subcontractor’s intent to do so must be express, written, signed

by the subcontractor, and executed after the subcontractor has furnished labor or material for use

82 975 F.2d 1161, 1164 (5th Cir. 1992).

83 330 F.3d 307, 311 n.9 (5th Cir. 2003).

84 Id.; see also Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 676 (5th Cir. 1999) (stating that “district courts

have discretion to dismiss cases in favor of arbitration,” but not implying any obligation to do so).

85 40 U.S.C. § 3131(b).

86 Id. at § 3133.

in the performance of the subcontract.87

In Weiss, the Fifth Circuit considered whether a subcontractor’s Miller Act claims against

a surety are bound by the arbitration clause in the subcontract between the subcontractor and the

principal contractor.88 The subcontract between the subcontractor, Portland, and the general

contractor, Weiss, contained an arbitration clause requiring “any controversy or claim arising out

of, or related to any provision of [the] subcontract” to be settled by arbitration.89 Portland then

sought to compel arbitration of its state law claims against Weiss and also brought Miller Act

claims against the surety, Argonaut, in federal court.90 Weiss and Argonaut sought dismissal of

Portland’s Miller Act suit, contending that Portland had waived its right to pursue the Miller Act

claims because Portland sought arbitration of the state law claims.91 The district court dismissed

Portland’s Miller Act suit, but the Fifth Circuit reversed, finding that “[b]y demanding arbitration

in Michigan, Portland did not waive its right to pursue its Miller Act remedy.”92 The Fifth Circuit

further reasoned that because “Argonaut, the surety, was not a party to the subcontract that

provided for arbitration and could not be joined as a party in the arbitration proceedings … Portland

may avail itself of its Miller Act remedy against Argonaut only by way of a Miller Act suit in

federal court.”93 The Fifth Circuit concluded that “to find a waiver in these circumstances would

87 Id. at § 3133(c) (“A waiver of the right to bring a civil action on a payment bond required under this

subchapter is void unless the waiver is – (1) in writing; (2) signed by the person whose right is waived; and (3) executed

after the person whose right is waived has furnished labor or material for use in the performance of the contract.”);

JS&H Const. Co. v. Richmond Cnty. Hosp. Auth., 473 F.2d 212, 216 (5th Cir. 1973) (citation omitted).

88 Weiss, 532 F.2d at 1010–11.

89 Id. at 1010.

90 Id. at 1010–11.

91 Id. at 1011.

92 Id. at 1012.

93 Id. (citation omitted).

totally deprive Portland of the cause of action conferred by the terms of the Miller Act.”94

Just as the Fifth Circuit in Weiss recognized that “the surety[] was not a party to the

subcontract that provided for arbitration and could not be joined as a party in the arbitration

proceedings,” Western Surety was not a signatory to the subcontract between Industrial and

Pontchartrain that contained the mediation and arbitration clause. There is otherwise no other

indication Industrial waived its right to bring a Miller Act claim against Western Surety in federal

court, as there is no express written waiver of this right. The Subcontract between Industrial and

Pontchartrain contains limiting language that preserves Industrial’s rights under federal law

relating to labor or material payment bonds and requires these rights to be “expressly waived by

[Industrial] and its surety.”95 The Fifth Circuit in Weiss recognized that a dismissal of the Miller

Act claim against the surety “would not only be inimical to the underlying purpose of the Miller

Act, it would hinder parties from arbitrating their disputes.”96 Following Weiss, the Court will stay

Industrial’s Miller Act claims against Western Surety pending the arbitration of Industrial’s state

law claims against Pontchartrain.97

94 Id.

95 Id. at 19.

96 Weiss, 532 F.3d at 1013. Although Western Surety cites to La. Civ. Code art. 3046 for the proposition that

a surety can stand in the place of the principal and assert the same defenses, this Louisiana statute is not specific to

Miller Act claims and as the Fifth Circuit in Weiss and other courts have recognized “suits against Miller Act sureties

must be adjudicated in federal court.” U.S. for the Use and Benefit of Capital Elec. Const. Co., Inc. v. Pool and

Canfield, Inc., 778 F.Supp. 1099, 1091 (W.D. Mo. 1991) (citing Weiss, 532 F.3d at 1012 (“Argonaut, the surety, was

not a party to the subcontract that provided for arbitration and could not be joined as a party in the arbitration

proceedings. Portland may avail itself of its Miller Act remedy against Argonaut only by way of a Miller Act suit in

federal court”)). Nor has Western Surety cited a case applying art. 3046 to a Miller Act case where the surety seeks to

dismiss Miller Act claims based on an arbitration clause in the subcontract.

97 Id. Courts have stayed the Miller Act claim against the surety when the general contractor or surety brings

a motion to dismiss based on an arbitration provision in the subcontract between the general contractor and the

subcontractor. See Citi, 2021 WL 4070929, at *1 (staying Miller Act claims against surety but compelling arbitration

of the claims against the general contractor after general contractor filed motion to compel arbitration, or alternatively

to dismiss or stay); U.S. ex. rel. Peake Const., L.L.C. v. Crown Roofing Servs., Inc., No. 9-6619, 2010 WL 1416673,

at * 1 (E.D. La. Mar. 31, 2010) (Lemmon, J.) (compelling arbitration of the subcontractor’s state law claims against

the general contractor but staying the Miller Act claim against the surety, rather than dismissing the claims “because

V. Conclusion

For the reasons discussed above, Industrial’s claims against Pontchartrain are subject to

arbitration. Therefore, the Court will stay this litigation pending arbitration.

Accordingly,

Peake’s Miller Act claim against Hartford is not referable to arbitration”) (citing Alford v. Dean Witter Reynolds, Inc.,

975 F.2d 1161, 1164 (5th Cir. 1992) (“The weight of authority clearly supports dismissal of the case when all of the

issues raised in the district court must be submitted to arbitration.”)); United States for Use of Top Flight Steel, Inc. v.

Enter. Precast Concrete of Texas, LLC et al., No. 22-142, 2023 WL 4553629, at *1 (E.D. Tex. June 15, 2023) (Baxter,

M.J.) (denying motion to compel arbitration of Miller Act claims and staying the Miller Act claims pending the

arbitration of the non-Miller Act claims), report and recommendation adopted, 2023 WL 4552286, at *1 (E.D. Tex.

July 14, 2023) (Shroeder III, J.)).

IT IS HEREBY ORDERED that Western Surety’s Motion to Dismiss Pursuant to Rule

12(b)(3)* is GRANTED IN PART and DENIED IN PART. The Motion is GRANTED IN

PART to the extent Western Surety moves the Court to stay this litigation pending arbitration. The

Motion is DENIED IN PART to the extent Western Surety moves this Court to compel arbitration

of the claims pending against it or to dismiss the claims against it.

IT IS FURTHER ORDERED that Pontchartrain’s Motion to Dismiss Pursuant to Rule

12(b)(3)”” is GRANTED IN PART and DENIED IN PART. The Motion is GRANTED IN

PART to the extent Pontchartrain moves the Court to compel arbitration. The Motion is DENIED

IN PART to the extent Pontchartrain moves this Court to dismiss Industrial’s claims against it.

IT IS FURTHER ORDERED that the above-captioned matter is STAYED and

ADMINISTRATIVELY CLOSED to be reopened upon motion of a party at the conclusion of

the arbitration proceedings.

NEW ORLEANS, LOUISIANA, this Ist day of December, 2023.

DM arrette job. Boro

NANNETTE JOLYVETTE BROWN

CHIEF JUDGE

UNITED STATES DISTRICT COURT

8 Rec. Doc. 12.

° Rec. Doc. 13.

17