Capitol Indemnity Corporation v. United States

In the United States Court of Federal Claims

No. 18-916 C

(Filed: October 04, 2022)

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CAPITOL INDEMNITY CORP., *

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Plaintiff, *

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v. *

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THE UNITED STATES, *

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Defendant. *

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Ian M. McLin, Langley & Banack, Inc., of San Antonio, TX, for Plaintiff.

Matthew J. Carhart, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.

Department of Justice, with whom were Deborah A. Bynum, Assistant Director, Martin F.

Hockey, Jr., Acting Director, and Brian M. Boynton, Acting Assistant Attorney General, all of

Washington, D.C., for Defendant, and Major Tarik Downie, General Litigation Branch, U.S.

Army Legal Services Agency, Department of the Army, of Fort Belvoir, VA, of counsel.

OPINION AND ORDER

SOMERS, Judge.

This case concerns Plaintiff Capitol Indemnity Corporation’s (“Capitol”) claims for

damages it allegedly incurred as surety for a contractor, Redstick, Inc. (“Redstick”), that was

hired by the U.S. Army (“Army”) to renovate a fitness facility at Fort Hood in Texas. Following

Redstick’s termination for default by the Army, Plaintiff completed the remaining work on the

contract, paid Redstick’s subcontractors, and subsequently filed claims against the Army for

payment—including for allegedly improper progress payments the Army issued to Redstick; for

certain allegedly unpaid additional work undertaken by Redstick; and for subsequent costs

Plaintiff incurred for having to correct Redstick’s work on the gym floor—all of which the Army

denied. Plaintiff thereafter filed suit in this Court seeking damages under the theories of

equitable subrogation and equitable adjustment, and under the Contract Disputes Act (“CDA”).

In February 2020, the previously assigned judge in this matter granted in part and denied

in part the government’s motion to dismiss. See Capitol Indem. Corp. v. United States, 147 Fed.

Cl. 371 (2020). This opinion concerns Plaintiff’s claims that survived dismissal, which are now

before the Court on cross-motions for summary judgment. For the reasons that follow, the Court

denies Plaintiff’s motion for partial summary judgment and grants the government’s motion for

summary judgment on all counts.

BACKGROUND AND PROCEDURAL HISTORY

A. Contract Award, Bond Agreements, and Progress Payments to Redstick

On September 27, 2014, the Army awarded a contract (W91151-14-C-0061) to Redstick

for the renovation of the Iron Horse Gym at Fort Hood, which, after amendments, had a total

contract price of over $2.3 million. ECF No. 63 ¶ 11 (“Pl.’s Partial Summ. J. Mot.”); ECF No.

68 at 2 (“Gov.’s Cross-Mot. Summ. J.”). The contract period-of-performance (“POP”) had an

end-date of September 30, 2015. Pl.’s Partial Summ. J. Mot. ¶ 12; Gov.’s Cross-Mot. Summ. J.

at 2. The purpose of the contract was

to repair building 37017, Iron Horse Gym, and renovate it to better meet the needs

of the users as a “functional fitness” facility. This includes, but is not limited to,

repairing any damage left by the current occupants, replacing/repairing finishes

throughout the facility, fully replacing existing ceilings, insulating the entire

envelope, furring out walls, reconfiguring of latrines to accommodate ABA

guidelines, various other aesthetic alterations, full replacement of windows

throughout the facility, complete replacement of HVAC systems, and electrical

work to support the new layout. Also included are various repairs and

reconfigurations of the site to include sidewalks and parking lot.

Gov.’s Cross-Mot. Summ. J. at 2 (citing ECF 68-2 at 8 (government’s “A86”)).

The contract, bonded pursuant to the Miller Act, 40 U.S.C. § 3131, required Redstick to

provide performance and payment bonds. Pl.’s Partial Summ. J. Mot. ¶ 13; Gov.’s Cross-Mot.

Summ. J. at 2–3. Accordingly, Redstick sought—and on October 2, 2014, Plaintiff issued—

performance and payment bonds, requiring Plaintiff as the surety “to either perform any contract

work that Redstick does not complete, or pay for that uncompleted work . . . and a payment

bond, requiring it to pay subcontractors for labor and materials if Redstick fails to do so.” Gov.’s

Cross-Mot. Summ. J. at 2–3 (record citations omitted); see also Pl.’s Partial Summ. J. Mot. ¶ 13.

Plaintiff “executed and issued the Bonds based upon the terms and conditions set forth in the

Contract and the General Indemnity Agreement.” Id. ¶ 13. The “General Indemnity

Agreement,” an agreement between Redstick and Plaintiff executed approximately two weeks

before Plaintiff was awarded the contract, purported to “assign[] to Capitol all rights in

Redstick’s property, including all contracts,” id. ¶ 9, in the event of Redstick’s default on a

contract for which Plaintiff had issued a bond, ECF No. 23 ¶ 6 (“Amend. Compl.”). See also

Pl.’s Partial Summ. J. Mot. ¶ 10.

The contract awarded to Redstick incorporated by reference several provisions within the

Federal Acquisition Regulation (“FAR”), two of which in particular concern the contracting

officer’s authority to make progress payments throughout the term of the contract to the

contractor. See generally id. ¶¶ 14–20; Gov.’s Cross-Mot. Summ. J. at 7–8. First, the contract

incorporated by reference FAR 52.232-5, see ECF No. 68-2 at 12 (government’s “A90”),

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concerning “Payments under Fixed-Price Construction Contracts,” which provides in relevant

part that “[t]he Government shall make progress payments monthly as the work proceeds, or at

more frequent intervals as determined by the Contracting Officer, on estimates of work

accomplished which meets the standards of quality established under the contract, as approved

by the Contracting Officer.” FAR 52.232-5(b). Furthermore, the section provides that “if

satisfactory progress has not been made, the Contracting Officer may retain a maximum of 10

percent of the amount of the payment until satisfactory progress is achieved.” FAR 52.232-5(e).

Second, the contract incorporated FAR 52.232-16, see ECF No. 68-2 at 25–26 (government’s

“A103–A104”), concerning “Progress Payments,” which provides in relevant part that “[t]he

total amount of progress payments shall not exceed 80 percent of the total contract price.” FAR

52.232-16(a)(6). The contract also contained a provision titled “Eligibility for

Payment/Construction Contract Progress Payment Requests,” which provides that “[n]o progress

payments are authorized above 80% of the contract value.” ECF No. 23-2 at 48–49 (Plaintiff’s

“Exhibit ‘B’”).

It is undisputed that, over the course of the project, Redstick experienced difficulties with

contract performance. See, e.g., Gov.’s Cross-Mot. Summ. J. at 3; Pl.’s Partial Summ. J. Mot.

¶ 21. Redstick did not complete performance by the POP end-date of September 30, 2015. Pl.’s

Partial Summ. J. Mot. ¶ 26. Nor, allegedly, did Redstick fulfill obligations to pay its

subcontractors. Id. ¶ 25; Gov.’s Cross-Mot. Summ. J. at 4. Nonetheless, the government

continued making progress payments to Redstick through January 29, 2016, when it issued the

ninth and final progress payment that Redstick would receive. Gov.’s Cross-Mot. Summ. J. at

10; Pl.’s Partial Summ. J. Mot. ¶ 78. Ultimately, on March 28, 2016, the government declared

Redstick to be in default and terminated the original contract after Redstick abandoned

performance. Pl.’s Partial Summ. J. Mot. ¶ 55; Gov.’s Cross-Mot. Summ. J. at 14.

The briefing, as well as an opinion in this matter issued by Judge Firestone on the

government’s motion to dismiss, contain a multitude of factual allegations and competing

narratives—dating back to September 2015—regarding who-knew-what (and when) about

Redstick’s difficulties. See, e.g., Capitol Indem. Corp., 147 Fed. Cl. at 375–76; Pl.’s Partial

Summ. J. Mot. ¶¶ 21–48; Gov.’s Cross-Mot. Summ. J. at 4–14. However, as detailed more fully

below, the remaining dispute in this case largely concerns the propriety of the government

issuing Redstick the ninth progress payment rather than retaining it for the benefit of Plaintiff,

given Redstick’s failure to complete performance. See Capitol Indem. Corp., 147 Fed. Cl. at

380–81 (“Capitol alleges that the Army’s actions after December 30, 2015, when taken together,

are sufficient to state a claim for equitable subrogation for the ninth progress payment. . . .

Capitol’s allegations of the communications between the Army and Capitol that preceded the

ninth progress payment are tantamount to Capitol acknowledging that Redstick had defaulted

and that Capitol was responsible. The court concludes that this is enough to trigger Capitol’s

equitable subrogation rights.”) (citations and footnote omitted). Accordingly, the Court briefly

restates here only those factual allegations relating to the period on or after December 30, 2015.

See Gov.’s Cross-Mot. Summ. J. at 8 n.3 (“[Judge Firestone] dismissed Capitol Indemnity’s

claims related to progress payments prior to progress payment number nine. Capitol Indemnity’s

motion nevertheless spends almost four pages describing progress payment number five through

progress payment number eight.”).

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On December 30, 2015, the Army responded to an email inquiry from Plaintiff’s

representative concerning “job completion status,” wherein the Army informed Plaintiff’s

representative that, while Redstick’s work on the project was progressing “satisfactorily,” the

project completion date was “[u]nknown,” the “[c]ontractor and subcontractor (HVAC) are

performing minimal work,” and the “[s]ubcontractor claims he has not been paid.” Id. at 11; see

also Pl.’s Partial Summ. J. Mot. ¶ 29 (citing ECF No. 63-2 at 37–38 (“Capitol3278–79”)).

Next, on January 4, 2016, the Army’s contracting officer emailed Redstick’s

representative, stating in relevant part that “I have received your spreadsheets for overhead you

claim is owed to you in light of the government’s suspension of work under [the contract].” ECF

No. 63-2 at 39 (“Capitol3289”)). According to Plaintiff, this email establishes that, “[a]lthough

Redstick . . . was suspended by the Government on or before January 4, 2016, Redstick still

submitted its Request for Progress Payment No. 9 (‘Pay Request 9’), dated January 7, 2016,

seeking payment of $230,792.86 for work allegedly done between November 30 and December

25, 2015.” Pl.’s Partial Summ. J. Mot. ¶ 43 (footnote omitted). According to the government,

however, Plaintiff’s assertion “is based on the complaint’s misreading of an email relating to

Redstick’s request for an equitable adjustment for a previous suspension of Redstick that is not at

issue in this case.” Gov.’s Cross-Mot. Summ. J. at 32 (citations omitted) (emphasis in original).

On January 13, 2016, Plaintiff’s representative emailed the Army, stating in relevant part

that “[w]e have received payment bond claims from [Redstick’s subcontractors]. Is it possible,

going forward, to issue joint checks payable to both Redstick and their subcontractors?” ECF

No. 63-2 at 34 (“Capitol3264”). The same day, the Army responded that “[t]hat would have to

be a DFAS action and will require an Assignment of Claims from Redstick Inc to CapSpecialty

to allow DFAS to pay the surety so you could make the payments to the subcontractors and

Redstick. At this point, I don’t know that Redstick would do that.” Id. There is nothing in the

record suggesting that any further follow-up occurred between the parties on this question. See,

e.g., ECF No. 72 ¶ 59 (“Pl.’s Resp. & Reply”); Gov.’s Cross-Mot. Summ. J. at 31.

On January 29, 2016, the government issued the ninth progress payment to Redstick.

Gov.’s Cross-Mot. Summ. J. at 10; Pl.’s Partial Summ. J. Mot. ¶ 78. Weeks later, on February

18, 2016, Plaintiff’s representative emailed the Army asking “[a]re there any updates on the

completion of this project?” ECF No. 68-1 at 63–64 (government’s “A61–62”). 1

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Plaintiff begins its responsive brief by objecting to the government’s summary judgment

evidence, including the documents (such as the Army contracting officer’s own emails) submitted by the

government in connection with the declaration of Neta Singley, the contracting officer on the instant

contract. See Pl.’s Resp. & Reply ¶¶ 4–7. Plaintiff’s generic objections—perhaps offered in hopes of not

having to rebut the government’s factual allegations in its cross-motion for summary judgment—are

without merit. See Marine Indus. Constr., LLC v. United States, 151 Fed. Cl. 349, 359 (2020) (“The

documents plaintiff objects to do not risk, ‘as a matter of reasonable probability,’ misidentification and

adulteration, and plaintiff failed to specifically dispute the content of any of the documents or assert

where or how the documents were adulterated.” (citations omitted)). Plaintiff’s objections even include

one to an email that Plaintiff itself used in support for its own motion for summary judgment. See id.

(“Plaintiff used one of the disputed documents . . . in its summary judgment briefing, where it did not

raise any question or dispute as to the [] content.”) (internal quotation removed). Specifically, in its

response and reply brief, Plaintiff “objects to the [government’s] Declaration of Neta Singley

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Finally, on March 3, 2016, Plaintiff asked the Army to stop distributing progress

payments to Redstick, Pl.’s Resp. & Reply ¶ 66 (citing ECF No. 68-1 at 49 (government’s

“A47”) (“We ask that no further contract funds or retention be released to Redstick without

Capitol Indemnity’s express written permission.”)), and on March 28, 2016, the contracting

officer terminated the contract for default after Redstick abandoned performance, Gov.’s Cross-

Mot. Summ. J. at 14. By the time of Redstick’s termination, the Army’s nine progress payments

to Redstick totaled 90% of the contract price, leaving a contract balance of $230,792.85. Gov.’s

Cross-Mot. Summ. J. at 14; see also Pl.’s Partial Summ. J. Mot. ¶ 32.

B. Takeover Agreement

On April 7, 2016, the government called upon Plaintiff, as Redstick’s surety, “to take

over and complete the project in fulfillment of its Performance Bond obligations.” ECF No. 63-

2 at 23 (Plaintiff’s “Capitol2758”); see also Gov.’s Cross-Mot. Summ. J. at 15. Formalizing the

arrangement, Plaintiff and the government executed a takeover agreement (“Takeover

Agreement”) on May 13, 2016. ECF No. 68-2 at 78–84 (government’s “A156–62”). Therein,

the government agreed to release to Plaintiff the $230,792.85 contract balance upon Plaintiff’s

successful completion of the work. Id. at 79 (government’s “A157”). The Takeover Agreement

provides that Plaintiff

hereby undertakes to cause the performance of the Work, including correcting

patent defects, a list of which is set forth in Exhibit ‘A’ of this Agreement, and any

latent defects in the work performed by [Redstick], to be completed in accordance

with each and every one of the terms, covenants and conditions of the Original

Contract, including all modifications thereto, and agrees to be bound thereby.

Id. at 78 (government’s “A156”). It also states that Plaintiff “does not agree that any of the items

on Exhibit ‘A’ constitute patent defects and shall have the right to have items removed from the

list that it demonstrates are not patent defects, by mutual consent of the parties to this

Agreement.” Id. As to the gym floor, Exhibit A of the Takeover Agreement provides that the

“[f]loor surface below rubber flooring will be floated to ensure a flat, smooth look. Remove

rubber flooring, float floor, and re-install rubber flooring.” Id. at 85 (government’s “A163”).

Furthermore, paragraph 13 of the Takeover Agreement provides as follows:

(‘Declaration’) because she is not a proper custodian of records to authenticate documents,” “the

Declaration contains hearsay statements, factual conclusions, and legal conclusions which do not

constitute proper summary judgment evidence,” and “the Declaration contains statements violating the

parol evidence rule which, again, do not constitute proper summary judgment evidence.” Pl.’s Resp. &

Reply ¶ 4. Therefore, Plaintiff “objects to . . . Exhibits A through P attached to the Declaration all as

hearsay.” Id. ¶ 7. Yet, the government’s “Exhibit F,” see ECF No. 68-1 at 30, one of the many

documents to which Plaintiff objects, includes a copy of the very same January 4, 2016, Singley email

that Plaintiff submitted as evidence of notice to the government of Redstick’s default, see ECF No. 63-2

at 39 (“Capitol3289”).

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(a) Surety expressly reserves all prior rights, equitable liens and subrogation rights

under the contract, performance bond, payment bond, at law or in equity, as well as

the Surety’s own rights dating back to the execution of the bond, to include, but not

be limited to, those rights and remedies that accrued prior to former Contractor’s

Termination, Contractor’s default, and those rights and remedies that may accrue

during the completion of the contract, including any and all claims of overpayment

and/or payments in violation of the terms of the Contract to the Contractor arising

under the subject Contract. No waiver of such rights is agreed to or implied,

regardless of any provisions of this Agreement to the contrary and Owner

acknowledges Contractor’s assignment of such claims and causes of action to

Surety.

(b) To the extent necessary, if Surety elects to pursue any claims of former

contractor arising under the contract in its own name and for its own benefit, Owner

hereby acknowledges and consent [sic] to the assignment of all of former

contractor’s claims to Surety under the contract, to the extent permitted by law,

including but not limited to, the right of Surety to assert, in its own name and for

its own benefit, all of former Contractor’s and any of Contractor’s subcontractor’s

claims for equitable adjustment to the Contract Price or time under the subject

Contract, whether arising prior to or after the default.

Id. at 82 (government’s “A160”).

C. Plaintiff’s Certified Claim to the Contracting Officer

On March 22, 2017, following completion of performance on the contract, Plaintiff

submitted a claim to the contracting officer for $693,569.92. Pl.’s Partial Summ. J. Mot. ¶ 61;

ECF No. 68-2 at 91 (government’s “A169”). The claim consisted of three components. First,

Plaintiff sought $463,657.13, reflecting the amount Plaintiff believed the government overpaid to

Redstick after the government allegedly had notice of Redstick’s failure to pay its

subcontractors. ECF No. 68-2 at 92–97 (government’s “A170–75”). Second, Plaintiff sought a

$135,065.69 adjustment for costs associated with fixing the gym floor, after the Army allegedly

failed to stop Redstick’s work on the floor even though the Army deemed it unacceptable. Id. at

97–101 (government’s “A175–79”). Third, Plaintiff sought $94,847.10, reflecting the amount

Plaintiff believed the government owed to one of Redstick’s subcontractors—and thus, now

owes to Plaintiff as Redstick’s purported assignee—for additional HVAC work that was

allegedly directed by the contracting officer’s representative. Id. at 102–04 (government’s

“A180–82”).

On July 24, 2017, the contracting officer denied Plaintiff’s claim in its entirety. See id. at

192–96 (government’s “A467–71”). Plaintiff appealed to the Armed Services Board of Contract

Appeals, but Plaintiff and the government (which had moved to dismiss for lack of jurisdiction)

subsequently entered a joint stipulation of dismissal without prejudice. Id. at 205 (government’s

“A480”).

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D. Plaintiff’s Complaint, Partial Dismissal, and the Pending Cross-Motions for

Summary Judgment

On June 26, 2018, Plaintiff filed its two-count complaint in this Court and thereafter filed

its first amended complaint on May 29, 2019. In Count I, Plaintiff alleges it is entitled under the

theory of equitable subrogation to the fifth-through-ninth progress payments the Army paid

Redstick after the Army allegedly had notice of Redstick’s default, which Plaintiff argues was as

early as September 30, 2015, the POP end-date. Amend. Compl. ¶¶ 29, 48–51. Furthermore,

Plaintiff alleges that the contracting officer made these progress payments to Redstick in

violation of the contract’s terms and incorporated FAR provisions, including the provision

prohibiting progress payments in excess of 80% of the contract price. Id. ¶¶ 52–60. Plaintiff

claims the Army “overpaid Redstick to the detriment of CAPITOL in amount of at least

$463,657.13,” for which Plaintiff claims entitlement under equitable subrogation. Id. ¶ 60.

Under the same count, Plaintiff seeks an “equitable adjustment” for costs associated with

correcting and reinstalling Redstick’s deficient work on the gym floor, for which Plaintiff claims

the Army should have issued a stop work order but instead accepted and paid Redstick. Id. ¶¶

61–62.

In Count II, Plaintiff alleges a breach of contract claim under the CDA, as Redstick’s

purported assignee via the General Indemnity Agreement, asserting that the Army “demanded

and directed changes and/or modifications to the work and/or scope of the work on the Project by

the HVAC subcontractor failing to pay for the same and obtaining a release without

consideration from Redstick . . . .” Id. ¶ 65. This “additional work,” in Plaintiff’s view,

“constituted a constructive change in that Redstick performed work beyond the contractual

requirements,” which “was ordered, expressly or impliedly, by Defendant.” Id. Plaintiff alleges

that the government acknowledged and consented in the Takeover Agreement to the assignment

of this claim by Redstick to Plaintiff. Id. ¶ 64.

On February 21, 2020, the previously assigned judge in this matter, Judge Firestone,

granted in part the government’s motion to dismiss Plaintiff’s amended complaint. See Capitol

Indem. Corp., 147 Fed. Cl. 371. Judge Firestone dismissed Plaintiff’s equitable subrogation

claims for progress payments prior to the ninth progress payment (payments five through eight),

reasoning that “where the alleged facts show that (1) Capitol did not assert its surety rights and

(2) Redstick was still working with the government to resolve its problems with contract

performance, the government did not have ‘knowledge of the default’ under the Bonds between

September and December 2015. Thus, Capitol’s equitable subrogation rights were not

triggered.” Id. at 380.

Judge Firestone denied the government’s motion to dismiss the portions of the amended

complaint alleging that Plaintiff was entitled under the theory of equitable subrogation to

progress payment number nine; that Plaintiff was entitled to an equitable adjustment for work it

did to repair and reinstall the gym floor; and that Plaintiff was entitled to recover for “additional

work” that Redstick did on the HVAC system. As to progress payment number nine, Judge

Firestone concluded that three factual allegations Plaintiff made in its amended complaint, if

proved, “are tantamount to Capitol acknowledging that Redstick had defaulted and that Capitol

was responsible,” which “is enough to trigger Capitol’s equitable subrogation rights.” Id. at 380-

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81 (footnote omitted). Judge Firestone, thus, allowed Plaintiff’s claim to the ninth progress

payment to move forward, citing “the Army’s actions starting on December 30, 2015, when the

Army informed Capitol that Capitol ‘should be receiving Payment Bond claims,’ when the Army

then ‘suspended Redstick’ on January 4, 2016, and when the Army received Capitol’s January

13, 2016 request that the Army issue checks payable to both Redstick and the subcontractors.”

Id. at 380.

As to Plaintiff’s equitable adjustment claim related to its work on the gym floor, the

government had argued it was precluded by the Takeover Agreement, but Judge Firestone held,

“taking Capitol’s allegations to be true, that Capitol has stated a claim for $135,065.69 based on

the theory of a contract adjustment.” Id. at 381. Judge Firestone continued, “[t]he government’s

argument that the Takeover Agreement precludes Capitol’s claim is contradicted by Capitol’s

factual allegations that Capitol was not relinquishing a claim for reinstalling the gym floor after

Capitol learned that the gym floor work had been accepted and paid for by the Army while

Redstick was performing.” Id. (emphasis in original).

Finally, as to Plaintiff’s equitable adjustment claim under the CDA for Redstick’s

“additional work” on the HVAC system, the government argued that the claim was released by

Redstick; that it was not validly assigned from Redstick to Capitol; and that Redstick did not

provide notice of the claim as required by FAR 52.243-4. Id. Judge Firestone concluded that the

government’s arguments were challenges to the facts presented in Plaintiff’s amended complaint

and, therefore, could not appropriately be decided on a motion to dismiss. Id.

On August 29, 2021, Plaintiff moved for partial summary judgment on the two claims it

brings under an equitable subrogation theory but did not seek summary judgment on its HVAC

claim. See generally Pl.’s Partial Summ. J. Mot. The government cross-moved for summary

judgment on all three of Plaintiff’s claims. See generally Gov.’s Cross-Mot. Summ. J. The

parties’ respective arguments are detailed in the Court’s analysis below. On March 17, 2022, the

Court held oral argument on the pending motions, which are now ripe for consideration.

DISCUSSION

A. Legal Standard

1. Summary Judgment

Rule 56(a) of the Rules of the United States Court of Federal Claims (“RCFC”) provides

that the Court “shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” RCFC

56(a). The party moving for summary judgment “always bears the initial responsibility of

informing the . . . court of the basis for its motion” and must identify the portions of the record

that “it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986) (citing former version of Fed. R. Civ. P. 56(c)).

“[T]he mere existence of some alleged factual dispute between the parties will not defeat

an otherwise properly supported motion for summary judgment; the requirement is that there be

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no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48

(1986) (emphasis in original). Material facts are those that “might affect the outcome of the suit

under the governing law . . . .” Id. at 248. For a dispute over a material fact to be genuine, the

evidence must be “such that a reasonable [factfinder] could return a verdict for the nonmoving

party.” Id. “A party asserting that a fact cannot be or is genuinely disputed must support the

assertion by . . . citing to particular parts of materials in the record” or “showing that the

materials cited do not establish the absence or presence of a genuine dispute . . . .” RCFC

56(c)(1)(A)–(B).

The judge’s function at the summary judgment stage “is not himself to weigh the

evidence and determine the truth of the matter but to determine whether there is a genuine issue

for trial,” Anderson, 477 U.S. at 249, bearing in mind that “[t]he evidence of the non-movant is

to be believed, and all justifiable inferences are to be drawn in his favor,” id. at 255 (citing

Adickes v. S. H. Kress & Co., 398 U.S. 144, 158–59 (1970)). “Where the record taken as a

whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine

issue for trial,’” thus making summary judgment appropriate. Matsushita Elec. Indus. Co., Ltd.

v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat. Bank of Ariz. v. Cities Serv.

Co., 391 U.S. 253, 289 (1968)).

The foregoing also applies in cases, as here, in which the parties have cross-moved for

summary judgment. See Marriott Int’l Resorts, L.P. v. United States, 586 F.3d 962, 968–69

(Fed. Cir. 2009). “[E]ach motion is evaluated on its own merits and reasonable inferences are

resolved against the party whose motion is being considered.” Id. (citing Mingus Constructors,

Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987)). “To the extent there is a genuine

issue of material fact, both motions must be denied.” Id. at 969.

2. Equitable Subrogation

“The doctrine of equitable subrogation entitles a surety that ‘takes over contract

performance’ or ‘finances completion of the defaulted contract’ to ‘succeed to the contractual

rights of a contractor against the government.’” Fireman’s Fund Ins. Co. v. England, 313 F.3d

1344, 1351 (Fed. Cir. 2002) (“Fireman’s Fund”) (quoting Ins. Co. of the W. v. United States, 243

F.3d 1367, 1370 (Fed. Cir. 2001)). In that sense, equitable subrogation can permit “sureties to

sue the United States under government contracts to which they were not a party.” Id. (citing

Balboa Ins. Co. v. United States, 775 F.2d 1158, 1160 (Fed. Cir. 1985) (“Balboa”) and

Transamerica Ins. Co. v. United States, 989 F.2d 1188 (Fed. Cir. 1993)).

Equitable subrogation “is based on the view that the triggering of a surety’s bond

obligation gives rise to an implied assignment of rights by operation of law whereby the surety

‘is subrogated to the [principal obligor’s] property rights in the contract balance.’” Lumbermens

Mut. Cas. Co. v. United States, 654 F.3d 1305, 1312 (Fed. Cir. 2011) (“Lumbermens”) (quoting

Balboa, 775 F.2d at 1161 (emphasis omitted)). “Equitable subrogation can be used to recover

improper payments to a principal obligor only if made after the obligee received notice of the

principal obligor’s default (i.e., notice that the bond obligation has been triggered and an implied

assignment of the contract rights to the surety has occurred).” Id. More succinctly, “equitable

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subrogation permits a surety to recover improper payments only if made after the obligee was on

notice of the principal obligor’s default.” Id. at 1313 (emphasis added).

B. Analysis

1. Plaintiff’s Claim, as Equitable Subrogee, to the Ninth Progress Payment

The Court first analyzes Plaintiff’s claim that it is entitled, as Redstick’s equitable

subrogee, to the money it spent in satisfying the payment bond claims. 2 Plaintiff asserts that it

received payment bond claims from Redstick’s subcontractors that totaled $736,793.19 and paid

those claims pursuant to the payment bond. Pl.’s Partial Summ. J. Mot. ¶ 76. Plaintiff claims

that had the government withheld the ninth progress payment, as it was allegedly required to do,

that money would have been available to Plaintiff to offset some of the cost of the payment bond

claims it paid. See id. Although the ninth progress payment is insufficient to offset fully the

payment bond claims, as discussed above, Judge Firestone dismissed Plaintiff’s equitable

subrogation claims to progress payments preceding the ninth progress payment, finding that

Plaintiff had not alleged sufficient facts to support its claims to such payments. See Capitol

Indem. Corp., 147 Fed. Cl. at 380. Accordingly, in terms of equitable subrogation, all that is

potentially left for Plaintiff is $230,792.86, the amount of the ninth progress payment.

Therefore, the question now before the Court is whether Plaintiff was equitably subrogated to

Redstick prior to the ninth progress payment, such that the government’s payment to Redstick of

the ninth progress payment may have been improper.

Plaintiff, citing Judge Firestone’s opinion, contends that “[t]his Court has already held

that Capitol is entitled to equitable subrogation regarding its payment of such subcontractor

claims, at least to the extent of the value of the ninth progress payment that the Government

made to Redstick after having notice of Redstick’s default or impending default.” Pl.’s Partial

Summ. J. Mot. ¶ 76. Plaintiff asserts that it “has argued, and this Court has agreed, that

[Plaintiff’s] equitable subrogation rights were triggered by the Government’s (Army’s) actions

starting on December 30, 2015, when (a) the Government (Army) informed Capitol that it

‘should be receiving Payment Bond claims’; (b) the Government (Army) then ‘suspended

Redstick’ on January 4, 2016; and (c) the Government (Army) received Capitol’s January 13,

2016, request that the Government (Army) issue checks payable to both Redstick and the

subcontractors.” Id. ¶ 77 (citing Capitol Indem. Corp., 147 Fed. Cl. at 380). 3 Moreover,

2

The Court must first determine whether Plaintiff was equitably subrogated to the ninth progress

payment, and, if so, the Court might only then need to consider whether the government abused its

discretion in making that payment to Redstick instead of Plaintiff. In other words, if the Court does not

find equitable subrogation, the Court need not determine whether the government improperly paid any

progress payments—whether in violation of the FAR or otherwise.

3

Instead of weaving together in its argument section the factual predicates for such an apparent

‘entitlement,’ Plaintiff declares that “[t]his Court has already held that Capitol is entitled to equitable

subrogation . . . .” Id. ¶ 76 (emphasis added). Plaintiff then matter-of-factly states “that the ninth

progress payment made to Redstick was in the amount of $230,792.86,” as if it were showing up here

merely to cash its check. Id. (citing Capitol Indem. Corp., 147 Fed. Cl. at 380–81). Plaintiff mistakes

what Judge Firestone “held.” Id. The issue(s) before Judge Firestone was the government’s motion to

10

Plaintiff “allege[s] that these events occurred before the Government (Army) paid Redstick’s

ninth progress payment (Pay Request 9) on January 29, 2016, and that Capitol, therefore, is

entitled to the ninth progress payment under the doctrine of equitable subrogation.” Id. ¶ 78

(citing Capitol Indem. Corp., 147 Fed. Cl. at 380–81) (emphasis omitted).

As these factual allegations/bases—and only these bases—permitted Plaintiff’s equitable

subrogation claim as to the ninth progress payment to survive dismissal under RCFC 12(b)(6),

the Court weighs each allegation in turn. In weighing each of these allegations, the Court is

guided by the Federal Circuit’s instruction in Lumbermens that “[e]quitable subrogation can be

used to recover improper payments to a principal obligor only if made after the obligee received

notice of the principal obligor’s default (i.e., notice that the bond obligation has been triggered

and an implied assignment of the contract rights to the surety has occurred).” 654 F.3d at 1312;

see also Fireman’s Fund Ins. Co. v. United States, 909 F.2d 495, 499 (Fed. Cir. 1990) (“Only

when the surety may be called upon to perform, that is, only when it may become a party to the

bonded contract, should the government owe it any duty. The surety knows best when this may

occur; consequently, only notice by the surety triggers the government’s equitable duty.”). In

other words, in order for Plaintiff to demonstrate that it is entitled to the ninth progress payment

under equitable subrogation, it must demonstrate that the government was on notice that

Redstick was in default.

a. Plaintiff’s first ground for triggering equitable subrogation—the government

informed Plaintiff that it “should be receiving Payment Bond claims”

Plaintiff has not met its burden of showing that its first alleged basis for asserting that the

government was on notice of Redstick’s default—that “the Government (Army) informed

Capitol that it ‘should be receiving Payment Bond claims,’” Pl.’s Partial Summ. J. Mot. ¶ 77—

was a legally sufficient notice of default; therefore, this “notice” is insufficient to trigger

Plaintiff’s equitable subrogation rights. Plaintiff’s argument on this theory stems from the

allegation that “as of December 30, 2015,” the government—via Roy Cantrell, a “contracting

specialist” on the instant contract, Gov.’s Cross-Mot. Summ. J. at 3—“notified Capitol that it

would be receiving Payment Bond claims from Redstick’s unpaid subcontractors.” Pl.’s Partial

Summ. J. Mot. ¶ 29 (citing ECF No. 63-2 at 84 (Plaintiff’s “Capitol4484”)). Plaintiff alleges

that, because “these events occurred before the Government (Army) paid Redstick’s ninth

progress payment (Pay Request 9) on January 29, 2016,” Plaintiff “is entitled to the ninth

progress payment under the doctrine of equitable subrogation.” Id. ¶ 78 (emphasis omitted); see

also id. ¶ 48 (“Capitol’s request [for payment of joint checks] provided the Government further

notice of Redstick’s default although—in light of all that had already occurred, including without

limitation the Government’s having put Capitol on notice of Redstick’s default and of impending

dismiss pursuant to RCFC 12(b)(1) and RCFC 12(b)(6), not a motion for summary judgment. Judge

Firestone was not entering final judgment on Plaintiff’s claims—except in dismissing those claims for

which Plaintiff had failed to allege sufficient facts—and, in fact, closed her opinion by ordering the

parties to file a joint status report and proposed discovery schedule “regarding the ninth progress

payment,” which survived the government’s motion to dismiss. Capitol Indem. Corp., 147 Fed. Cl. at

382. Plaintiff’s allegations may be “enough to trigger [its] equitable subrogation rights,” and thus survive

dismissal under RCFC 12(b)(6), but Plaintiff still must demonstrate that it is entitled to a judgment as a

matter of law on such allegations at the summary judgment stage. Id. at 381.

11

Payment Bond claims—adequate notice had already been provided.” (footnote omitted)

(emphasis added)).

The government counters that Plaintiff “resurrects theories squarely rejected in the

Court’s decision on our motion to dismiss.” Gov.’s Cross-Mot. Summ. J. at 32. 4 On this point,

the Federal Circuit’s analysis in Fireman’s Fund is especially apt:

Fireman’s Fund did not notify the government of Westech’s failure to pay its

subcontractors and suppliers or ask that payments to Westech be withheld until

December 22, 1983, almost five months after the government had fully released the

retainage which Fireman’s Fund now claims. That some subcontractors and

suppliers had informed the government of Westech’s payment deficiencies prior to

the release of the retainage does not substitute for notice by the surety and does not

trigger the government’s equitable duty to act with reasoned discretion toward it.

Fireman’s Fund simply cannot rely on Westech’s subcontractors or the government

to protect its interests. By definition and agreement the surety protects the

government’s interest, not the other way around.

We see no reason to impose on the government a duty toward the surety whenever

a subcontractor or supplier complains of late or nonpayment by the contractor. . . .

Only when the surety may be called upon to perform, that is, only when it may

become a party to the bonded contract, should the government owe it any duty. The

surety knows best when this may occur; consequently, only notice by the surety

triggers the government’s equitable duty.

909 F.2d at 499 (emphasis added).

The Court need not beat around the bush on this first alleged ground for equitable

subrogation, over which there is no dispute of material fact. As Judge Firestone already made

clear in this matter, “knowledge of a contractor’s failure to make subcontractor payments alone

does not constitute adequate notice to establish a claim for equitable subrogation . . . .” Capitol

Indem. Corp., 147 Fed. Cl. at 380 (citing Fireman’s Fund Ins. Co., 909 F.2d at 499). To any

extent this alleged ground could be more fruitful for Plaintiff if viewed in conjunction with

Plaintiff’s two other allegations, the Court considers (and disposes of) that theory further below.

See infra Section B.1.d.

4

The government also cites FAR 28.106-7 in support of its argument that the subcontractor

payment bond claims did not constitute notice of default. See id. at 4 (“[E]ven when the Government

substantiates complaints from subcontractors about payment, the FAR does not permit the Government to

withhold progress payments on this basis during contract performance.”); id. at 32. The intended

inference appears to be that, for the sheer fact that FAR 28.106-7 prohibits the withholding of contract

payments on account of unpaid subcontractors, the unpaid subcontractors in the instant case cannot

possibly evince a notice of default. The government, however, cites no case standing for that kind of

catch-all, FAR-specific proposition.

12

b. Plaintiff’s second ground for triggering equitable subrogation—the

government “suspended Redstick” on January 4, 2016

Plaintiff asserted in its motion for summary judgment that its equitable subrogation rights

“were triggered by the Government’s (Army’s) actions starting on December 30, 2015, when . . .

the Government (Army) then ‘suspended Redstick’ on January 4, 2016 . . . .” Pl.’s Partial

Summ. J. Mot. ¶ 77. The problem with this assertion, however, is that the Army did not in fact

suspend Redstick’s performance under the contract on January 4, 2016. For reasons explained in

a separate opinion following an order instructing Plaintiff’s counsel to show cause why RCFC 11

sanctions should not be issued, see ECF No. 83, Plaintiff moved to withdraw—and the Court

permitted withdrawal of—its factual allegations concerning a suspension of Redstick’s work on

the contract “on or before January 4, 2016.” See ECF No. 81 at 9–10; see also RCFC 11(b) (“By

presenting to the court a . . . written motion, or other paper—whether by signing, filing,

submitting, or later advocating it—an attorney . . . certifies that to the best of the person’s

knowledge, information, and belief, formed after an inquiry reasonable under the circumstances .

. . the factual contentions have evidentiary support or, if specifically so identified, will likely

have evidentiary support after a reasonable opportunity for further investigation or discovery . . .

.”). Therefore, the Court need not address this basis (nor may it serve as a basis) for the

government allegedly being on notice of Redstick’s default.

c. Plaintiff’s third ground for triggering equitable subrogation—the

government’s receipt of Plaintiff’s January 13, 2016, request for checks to be

made payable to both Redstick and Redstick’s subcontractors

Plaintiff also fails to meet its burden to show that its third alleged basis put the

government on notice of Redstick’s default—that “the Government (Army) received Capitol’s

January 13, 2016, request that the Government (Army) issue checks payable to both Redstick

and the subcontractors.” Pl.’s Partial Summ. J. Mot. ¶ 77. This argument centers around a

January 13, 2016, email from Patricia Framke, “a Claims Specialist for Cap Specialty, which is a

trade name under which Plaintiff Capitol Indemnity Corporation (‘Capitol’) does business,” ECF

No. 63-2 at 1 (Plaintiff’s “Exhibit ‘2’”), to contracting specialist Roy Cantrell. The email itself

is undisputed, and both parties cite to the same, which in relevant part states:

Hi Roy,

Thank you for the update. I will contact Redstick and see if I can motivate them to

get this moving forward.

Could you provide us with a copy of the last approved payment application?

We have received payment bond claims from CWS Services and Dakin Applied.

Is it possible, going forward, to issue joint checks payable to both Redstick and

their subcontractors?

Thank you,

Pat

13

ECF No. 63-2 at 34 (“Capitol3264”); ECF No. 68-1 at 64 (government’s “A62”). Thus, all that

remains in dispute is whether this email constitutes notice of default as a matter of law.

Taking the parties’ arguments in turn, Plaintiff asserts that “[b]efore the Government

issued payment pursuant to Pay Request 9, Capitol asked that joint checks be issued to ensure

proper payment of Redstick’s obligations under the Contract,” and that “Capitol’s request

provided the Government further notice of Redstick’s default although—in light of all that had

already occurred, including without limitation the Government’s having put Capitol on notice of

Redstick’s default and of impending Payment Bond claims—adequate notice had already been

provided.” Pl.’s Partial Summ. J. Mot. ¶ 48 (footnote omitted). The government counters that

Plaintiff “did not assert any right to this payment, ask that it be withheld, or object after it learned

that it had been disbursed”; that Plaintiff’s “representative instead asked about the possibility of

issuing joint checks to Redstick and subcontractors, without proposing any way of facilitating

these joint checks, and without any record of following up after the email exchange”; and that

“in this same email correspondence, [Plaintiff’s] representative promised to reach out to Redstick

to encourage it to work faster, demonstrating that [Plaintiff] intended to continue to rely upon

Redstick to complete performance.” Gov.’s Cross-Mot. Summ. J. at 31.

Reviewing the undisputed content of the January 13 email, the Court finds that Plaintiff’s

argument borders on the absurd. 5 Plaintiff points to no case law supporting the proposition that a

surety merely inquiring whether it is “possible . . . to issue joint checks payable to both [the

principal obligor] and their subcontractors”—and not to the surety itself in any fashion—satisfies

the standard for notice by the surety of default and an assertion of rights. Rather, the cases on

which Plaintiff relies signal the opposite. For example, the Federal Circuit, in National

American Ins. Co. v. United States, upheld Judge Allegra’s finding of equitable subrogation in a

case in which the surety had “notified the government that no additional payments were to be

made . . . and requested that all remaining contract funds be held for [the surety’s] benefit.” 498

F.3d 1301, 1303 (Fed. Cir. 2007); see also id. at 1305–06 (“[I]n Balboa, under facts similar to

the present case, we held that a payment bond surety could sue the United States for damages

occasioned when the government made progress payments to a contractor, despite having been

notified by the surety that it had made payments to subcontractors . . . and that payment should

not be made without the surety’s consent.” (emphasis added)). In Balboa, after the Claims Court

granted summary judgment in favor of the government, the circuit remanded, for further

5

The undersigned recognizes that, at the motion to dismiss stage of this litigation, Judge

Firestone was compelled to “accept as true all factual allegations in the complaint and . . . make all

reasonable inferences in favor of the plaintiff.” Capitol Indem. Corp., 147 Fed. Cl. at 378 (citing cases).

Accordingly, she took Plaintiff at its word in its amended complaint that Plaintiff had “requested the

issuance of joint checks to ensure proper payment of obligations under the Contract thereby notifying

Defendant of Redstick’s default,” and that “Defendant refused . . . and inexplicably paid Redstick

directly.” Amend. Compl. ¶ 31. Now, at the summary judgment stage, Plaintiff’s clever draftsmanship is

more apparent, with the undisputed email reflecting that Plaintiff’s representative inquired only about the

possibility of joint checks “to both Redstick and their subcontractors,” not to Plaintiff itself as surety.

ECF No. 63-2 at 34 (“Capitol3264”); ECF No. 68-1 at 64 (government’s “A62”); see also ECF No. 24

at 7 (government’s renewed motion to dismiss noting that “Capitol omits [from its amended complaint]

that it requested that the Army issue ‘joint checks’ to Redstick and its subcontractors, not to Redstick and

Capitol or to Capitol and Redstick’s subcontractors”).

14

consideration, a surety’s claim for equitable subrogation where the surety “addressed a letter . . .

to the Contracting Officer . . . demanding that no further contract funds be released without its

consent. A Government check in the amount of $23,163.50 was issued and disbursed to [the

contractor] . . . nevertheless.” 775 F.2d at 1160 (emphasis added). Furthermore, the circuit’s

analysis in Fireman’s Fund is equally instructive, finding that the surety “did not notify the

government of Westech’s failure to pay its subcontractors and suppliers or ask that payments to

Westech be withheld until December 22, 1983, almost five months after the government had fully

released the retainage which Fireman’s Fund now claims.” 909 F.2d at 499 (emphasis added).

Here, it is undisputed that Plaintiff did not direct the government to withhold payments to

Redstick until at least March 3, 2016, more than a month after the ninth progress payment. In

fact, Plaintiff itself says as much: “the record shows that on March 3, 2016, Capitol asked

Defendant to stop distributing progress payments to Redstick.” Pl.’s Resp. & Reply ¶ 66; see

also ECF No. 68-1 at 49 (government’s “A47”) (March 3, 2016, email from Framke to Cantrell

stating, “[w]e ask that no further contract funds or retention be released to Redstick without

Capitol Indemnity’s express written permission”).

Based on the above cited case law, it is clear that a surety asking the government to

continue making payments to the principal obligor, Redstick—as Plaintiff did on January 13,

2016—is not notifying the government “of the principal obligor’s default (i.e., notice that the

bond obligation has been triggered and an implied assignment of the contract rights to the surety

has occurred).” Lumbermens, 654 F.3d at 1312 (emphasis added). 6 If Redstick had defaulted

such that an implied assignment of contract rights to Plaintiff had or should have occurred,

Redstick would no longer have an expectation of continued progress payments from the

government. Thus, asking the government to continue paying Redstick (even with the potential

modification of joint checks to Redstick and its subcontractors) is legally insufficient to put the

government on notice that Redstick was in default. Plaintiff’s request “made clear that it did not

believe the funds should be distributed to Capitol Indemnity.” ECF No. 76 at 3 (“Gov.’s

Reply”); see also id. at 5 (“[Plaintiff’s] email asking about the possibility of issuing joint checks

to Redstick and subcontractors did not provide notice that [Plaintiff’s] bond obligations had been

triggered. To the contrary, . . . this email chain made clear that [Plaintiff] was not seeking the

6

Throughout its briefing, Plaintiff places much weight on Judge Firestone’s opinion denying in

part the government’s motion to dismiss. See supra, note 3. It should be noted, however, that even Judge

Firestone’s opinion casts substantial doubt on Plaintiff’s request-for-joint-checks theory, now that the

undisputed content of the email—and its clear lack of any demand to withhold payment—is before the

Court as evidence on summary judgment. For example, in salvaging Plaintiff’s claim as to the ninth

progress payment, Judge Firestone directed the reader to:

See Balboa Ins. Co., 775 F.2d at 1160 (treating notice that the principal “was in financial

straits and would not be able to fulfill its payment and performance obligations” and

“demanding that no further contract funds be released without its consent” as sufficient

notice of potential default); Am. Fid. Fire Ins. Co. v. United States, 513 F.2d 1375, 1377

n.1, 1380-81 (Ct. Cl. 1975) (finding a letter stating, “please consider this letter formal

demand that any monies due under the above contract be forthwith distributed to and placed

with [the surety]” as sufficient notice of default).

Capitol Indem. Corp., 147 Fed. Cl. at 380 (alteration in original) (emphasis added).

15

funds disbursed in progress payment number nine.” (citation omitted)). But default by Redstick

would mean that Plaintiff was stepping into Redstick’s shoes and thus Plaintiff, and not Redstick,

would be entitled to payment from the government. Plaintiff’s question to the government

regarding the possibility of issuing joint checks simply is not notice to the government of

Redstick’s default. This is especially the case given that elsewhere in the “notice” Plaintiff

informs the government that Plaintiff is going to continue to push Redstick to perform. See ECF

No. 63-2 at 34 (“Capitol3264”) and ECF No. 68-1 at 64 (government’s “A62”) (“I will contact

Redstick and see if I can motivate them to get this moving forward.”).

The Court also observes that Plaintiff is in rather familiar territory. Years before the

instant matter, in a separate contract dispute, Judge Firestone dismissed a claim by Capitol

Indemnity for equitable subrogation, finding that it “had not explicitly notified the government of

any default by [the principal obligor] at the time that the government made the [disputed]

progress payments,” even though a clause in the bonds at issue expressly directed that progress

payments be made to an escrow company rather than the principal obligor. Capitol Indem. Corp.

v. United States, 71 Fed. Cl. 98, 103 (2006). Plaintiff there cited Transamerica Premier Ins. Co.

v. United States, 32 Fed. Cl. 308 (1994)—as it also does here, see Pl.’s Partial Summ. J. Mot.

¶ 72—in support of its claim for equitable subrogation. In denying Plaintiff’s claim, Judge

Firestone reasoned that “plaintiff’s reliance on [two other cases and] Transamerica Premier

Insurance Co. v. United States . . . is misplaced,” because, in contrast to Capitol Indemnity’s

allegations, “[i]n all three of those decisions, the surety, either itself or through the contractor,

had explicitly notified the government of the contractor’s default and had requested that

payments be made to the surety.” Capitol Indem. Corp., 71 Fed. Cl. at 104 (citation omitted)

(emphasis added); see also id. (“Until the surety undertakes to protect itself by notifying the

government of default and requesting that progress payments be withheld, the government is

under no duty . . . to protect the surety’s interests.” (emphasis added) (citing Fireman’s Fund Ins.

Co., 909 F.2d at 498)).

In the instant case, the undisputed content of the January 13th email—and even Plaintiff’s

formulation of its own argument—reflects that Plaintiff’s representative asked that payments be

made “to both Redstick and their subcontractors.” See Pl.’s Partial Summ. J. Mot. ¶ 77. To

paraphrase Judge Firestone’s observation in 2006, Plaintiff has not established that it “explicitly

notified the government of the contractor’s default [and/or] requested that payments be made to

the surety” prior to the ninth progress payment. 7 Capitol Indem. Corp., 71 Fed. Cl. at 104

(emphasis added).

For all these reasons, Plaintiff has not established, in light of the undisputed facts, that the

communication of January 13, 2016, satisfies the legal threshold for notice to the government of

the principal obligor’s default or an assertion of the surety’s rights to the contract. Therefore, it

is not entitled to summary judgment based on the January 13th email.

“It was not until approximately six weeks later that [Framke] would ask that no additional

7

payments be disbursed to Redstick—which shows that Capitol Indemnity knew how to ask that progress

payments be withheld, when it wanted to.” Gov.’s Cross-Mot. Summ. J. at 31 (citing ECF No. 68-1 at 49

(government’s “A47”)).

16

d. Even taken together, Plaintiff’s bases for triggering equitable subrogation are

insufficient

Finally, the Court must note that to the extent Plaintiff asserts that the totality of these

two bases constitutes legally sufficient notice of Redstick’s default, the Court finds such an

assertion equally unavailing. See, e.g., Pl.’s Partial Summ. J. Mot. ¶ 48 (“Capitol’s request [that

joint checks be issued] provided the Government further notice of Redstick’s default . . . .”

(emphasis added)). First and foremost, the Court will not adopt a rule whereby two “wrongs”

(i.e., two independently insufficient grounds for equitable subrogation), when viewed together,

create a “right” (to subrogation) at summary judgment. And Plaintiff points to no case law in

support of such a scenario.

It is true that Judge Firestone in this matter held that “Capitol has alleged more than a

failure to pay subcontractors. Rather, Capitol alleges that the Army’s actions after December 30,

2015, when taken together, are sufficient to state a claim for equitable subrogation for the ninth

progress payment.” Capitol Indem. Corp., 147 Fed. Cl. at 380 (emphasis added). In other

words, Plaintiff’s bare allegations, taken together, were “substantial enough to raise the right to

relief ‘above the speculative level,’” thus defeating dismissal. Id. at 378 (quoting Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007)). Yet, the undisputed facts at the summary judgment

stage demonstrate that up until, and even after, the ninth progress payment was issued to

Redstick, Plaintiff still operated as if it was not asserting its rights as the surety. Quite the

opposite, in fact. Plaintiff’s own summary judgment evidence—offered as proof that Plaintiff

had “asked that joint checks be issued to ensure proper payment of Redstick’s obligations under

the Contract,” Pl.’s Partial Summ. J. Mot. ¶ 48—reflects a surety still operating very much

outside the role of principal obligor. See ECF No. 63-2 at 34 (“Capitol3264”) (January 13, 2016,

email from Capitol’s Framke to contracting specialist Cantrell stating, “I will contact Redstick

and see if I can motivate them to get this moving forward” (emphasis added)); see also ECF No.

68-1 at 63–64 (government’s “A61–62”) (Plaintiff’s representative, on February 18, 2016,

emailed the Army asking “[a]re there any updates on the completion of this project?”). These

undisputed facts, along with Plaintiff’s withdrawal of its contention concerning the January 4,

2016, email, do not support Plaintiff’s grounds for summary judgment on the ninth progress

payment, even when “taken together.”

Accordingly, Plaintiff has not shown that it is entitled to judgment as a matter of law on

any of the factual allegations that permitted Plaintiff’s equitable subrogation claim to the ninth

progress payment to survive dismissal. 8 Moreover, as there remains no material fact in dispute

8

The Court generally concurs with the government, see Gov.’s Cross-Mot. Summ. J. at 35–36,

that, at least as to Plaintiff’s assertions that the government overpaid Redstick in contravention of the

contract and the FAR, see, e.g., Pl.’s Partial Summ. J. Mot. ¶ 46 (“[T]he payment of Pay Request 9

exceeded the 80% cap on progress payments imposed by the express terms of the Contract and of FAR

clauses incorporated by reference or by full text into the Contract.”), Plaintiff does not appear to move for

summary judgment thereon. See Pl.’s Partial Summ. J. Mot. ¶¶ 76–86 (Plaintiff’s arguments in support of

summary judgment say nothing of an 80% cap on progress payments or anything of the sort). Nor does

Plaintiff make clear what theory of liability it would even move on had it done so. See Lumbermens, 654

F.3d at 1314–15 (“While pro tanto discharge, as the government admits, may be asserted as a defense to a

17

as to whether Plaintiff provided sufficient notice to the government of Redstick’s alleged default,

the government is entitled to judgment as a matter of law on Plaintiff’s equitable subrogation

claim to the ninth progress payment.

2. Plaintiff’s Claim, as Equitable Subrogee, for an Equitable Adjustment for

Reinstalling the Gym Floor

Plaintiff next contends that, as Redstick’s equitable subrogee, it is entitled to an

“equitable adjustment” of $135,065.69 “for having to reinstall the Gym floor after the

Government had already accepted and paid for Redstick’s installation of that same floor . . . .”

Pl.’s Partial Summ. J. Mot. ¶¶ 82, 84; see also id. at 28 (“As Redstick’s equitable subrogee,

Capitol is entitled to recover, as an equitable adjustment to the contract, the money it had to

expend in reinstalling the gym floor.”) (capitalization removed; emphasis added). In ruling on

the government’s RCFC 12(b)(6) motion as to this count, Judge Firestone reasoned,

taking Capitol’s allegations to be true, that Capitol has stated a claim for

$135,065.69 based on the theory of a contract adjustment. The government’s

argument that the Takeover Agreement precludes Capitol’s claim is contradicted

by Capitol’s factual allegations that Capitol was not relinquishing a claim for

reinstalling the gym floor after Capitol learned that the gym floor work had been

accepted and paid for by the Army while Redstick was performing.

Capitol Indem. Corp., 147 Fed. Cl. at 381. Accordingly, she denied dismissal of the gym floor

claim, leaving the factual debate for the summary judgment stage. See id. In so doing, however,

Judge Firestone observed in a footnote that “Capitol’s gym floor claim is raised under the

doctrine of equitable subrogation rather than the CDA because it occurred after Redstick’s

default but prior to the Takeover Agreement.” Id. at 381 n.9 (emphasis added). 9 For reasons

explained below, this distinction is an important one.

As an initial matter, it is important to identify exactly what money Plaintiff is bringing

this equitable subrogation claim against. Said differently, the first question is: from what

contract, agreement, or theory does Plaintiff derive its claim for an equitable adjustment related

to the gym floor? This is important to establish, because, as a general matter, “equitable

subrogation is based on the view that the triggering of a surety’s bond obligation gives rise to an

government claim asserted under a bond, the problem here is that Lumbermens is asserting the theory of

impairment of suretyship not as a defense, but as an affirmative cause of action. . . . [T]he United States

has not waived sovereign immunity as to such claims.”).

9

The government appears to partially dispute Judge Firestone’s choice of wording, suggesting

that “any [gym floor] claim Capitol Indemnity had arose no later than January 28, 2016, when the United

States informed Redstick that its work on the gymnasium floor was nonconforming.” Gov.’s Cross-Mot.

Summ. J. at 28 n.4. Nonetheless, the government agrees that “[e]ven if a claim had arisen after Redstick

was terminated, there would be no basis to recover under a theory of equitable subrogation, as the United

States did not disburse any money to Redstick after progress payment number nine. As a result, there

would be no money for Capitol to recover.” Id. Thus, Plaintiff, the government, and Judge Firestone all

agree that Plaintiff brings its equitable adjustment claim as one arising out of its alleged status as

Redstick’s equitable subrogee, rather than as one in direct contractual privity with the government (such

as via the Takeover Agreement).

18

implied assignment of rights by operation of law whereby the surety ‘is subrogated to the

[principal obligor’s] property rights in the contract balance.’” Lumbermens, 654 F.3d at 1312

(quoting Balboa, 775 F.2d at 1161) (alteration in original) (emphasis added). Relatedly,

“equitable subrogation permits a surety to recover improper payments[, but] only if made after

the obligee was on notice of the principal obligor’s default.” Id. at 1313 (emphasis added); see

also Balboa, 775 F.2d at 1161 (“When a contractor defaults under the contract, the obligation of

the surety then arises under its performance and payment bonds. When the surety then finances

the contract to completion, it is subrogated to the contractor’s property rights in the contract

balance.” (citing cases)).

In other words, there is only a limited right of recovery against the government by a

surety that is equitably subrogated to a contractor. This makes sense, because “under the

doctrine of equitable subrogation, the surety ‘step[s] into the shoes of [the] government

contractor’ and may bring suit under the Tucker Act based on the contractor’s privity with the

United States under the . . . contract.” Lumbermens, 654 F.3d at 1312 (quoting Ins. Co. of the

W., 243 F.3d at 1369, 1374–75) (alterations in original) (emphasis added). In short, as an

equitable subrogee, the surety takes on the rights of the contractor—nothing more. See Hartford

Fire Ins. Co. v. United States, 108 Fed. Cl. 525, 534 (2012) (“It is . . . a general principle of

equitable subrogation that ‘one cannot acquire by subrogation from another, rights which that

person did not have.’”) (quoting Ram Constr. Co., Inc. v. Am. States Ins. Co., 749 F.2d 1049,

1055 (3d Cir.1984)); see also Colonial Sur. Co. v. United States, 108 Fed. Cl. 622, 634 (2013)

(“A surety that is equitably subrogated to the rights of a contractor can seek to recover from the

government either ‘contract funds still held by the Government as retainage’ or ‘contract funds

[that] had been disbursed to the contractor after the surety notified the Government of the

contractor’s default.’” (quoting Ins. Co. of the W., 83 Fed. Cl. at 538) (emphasis added)).

This means that beyond the contract retainage, or an improperly disbursed progress

payment, there is little else recoverable solely under the theory of equitable subrogation. For

instance, in Universal Sur. Co. v. United States, Judge Bruggink wrestled with the “novel”

question of: “does a surety have the right to assert, independently of the contractor, claims

against the government for amounts other than the ‘contract price?’” Universal Sur. Co. v.

United States, 10 Cl. Ct. 794, 794 (1986). In that case, the government argued that “since the

doctrine of subrogation is limited to claims against retained funds, plaintiff has no right to make

claims for a price adjustment in the construction contract.” Id. at 796. Relying on Balboa and

other cases, Judge Bruggink reasoned that “if plaintiff were asserting an interest only in amounts

retained by the government from the contract price, it would be clear that it has the right to

proceed before this court . . . under a theory of equitable subrogation,” and “[s]imilarly, it would

have the right to seek to recover the amount of a progress payment alleged to have been

improperly paid.” Id. at 797 (citing cases).

Later, in Transamerica Ins. Co. v. United States, the Federal Circuit further summarized

Universal Sur. Co. as follows, highlighting the possibility that an adjustment claim sought first

by the contractor before default might pass to the surety as equitable subrogee:

In Universal Surety, the surety brought an action in the [Claims Court] against the

government. The surety, after fulfilling its obligations (under performance or

19

payment bonds or both) when the contractor became financially unstable, tried to

claim not only funds retained by the government from the contract price, but also

additional expenses from the government in excess of the contract price. However,

there was no written agreement allowing the surety to take over the project, and the

contractor in fact stayed on the job and completed its work. Moreover, the

contractor never sought an adjustment to the contract price for the additional

expenses incurred by the surety. The [Claims Court] held that the surety was

entitled to the contract funds retained by the government, but that, absent a claim

by the contractor for an adjustment to the contract price, the surety was not entitled

to subrogation of the right of the contractor to seek an adjustment to the contract

price for extra expenses incurred.

989 F.2d at 1193–94 (emphasis added) (citations omitted). It is also true that “excess costs” have

been found awardable to a completing surety, though such costs were specifically provided for as

extra work in a “written agreement between the surety and the defendant . . . .” Carchia v.

United States, 202 Ct. Cl. 723 (1973); Universal Sur. Co., 10 Cl. Ct. at 799 (“[In Carchia], the

Court of Claims allowed a completing surety to claim payment for extra work beyond that

contemplated in the original contract price.” (emphasis added)).

With all the above in mind, the Court grapples with the allegations contained in

Plaintiff’s somewhat muddled briefing. Lest it need repeating, Plaintiff brings its gym floor

equitable adjustment claim under the theory of equitable subrogation; it does not allege that it

brings its claim for an adjustment via the CDA. See, e.g., Pl.’s Partial Summ. J. Mot. ¶ 2

(“Capitol asserts inter alia two equitable subrogation claims: (a) a claim for damages for the

Government’s improper release of progress payments to Redstick . . . ; and (b) a claim for

equitable adjustment under FAR 252.243-7002, for Capitol’s having to reinstall flooring in the

Iron Horse Gym Building . . . at the Fort Hood in Killeen, Texas (‘Fort Hood’). Capitol also

seeks damages pursuant to the Contract Disputes Act (‘CDA’) . . . for Redstick’s additional work

on the Gym’s heating, ventilating, and air conditioning (‘HVAC’) systems, for which Redstick

was not paid.” (footnotes omitted) (emphasis added)). This was, perhaps, by deliberate choice.

See Lumbermens, 654 F.3d at 1321 (“[A] surety does become a ‘contractor’ within the meaning

of the CDA when it enters into a takeover agreement, and the CDA applies to any post-takeover

claims arising out of that agreement.”); see also Gov.’s Cross-Mot. Summ. J. at 38 n.7

(“Although Capitol Indemnity purports to bring [the gym floor] claim under a theory of equitable

subrogation, a claim related to ‘additional work’ would also be barred if it were brought under

the CDA. The claim is barred both under the election doctrine and because it was not assigned

from Redstick to Capitol Indemnity, as would be required to assert a CDA claim.”). But while a

hypothetical equitable adjustment claim pursuant to the CDA may or may not have proved

successful for Plaintiff, its claim for an adjustment on the theory of equitable subrogation falls

flat, because Plaintiff has not established that it can prosecute its equitable adjustment claim

solely in its capacity as an alleged equitable subrogee. Plaintiff’s claim for additional work is

neither based on a right obtained by stepping into Redstick’s shoes nor pled as a contractual

dispute (i.e., CDA) over the Takeover Agreement. See Capitol Indem. Corp., 147 Fed. Cl. at 381

n.9 (“Capitol’s gym floor claim is raised under the doctrine of equitable subrogation rather than

the CDA because it occurred after Redstick’s default but prior to the Takeover Agreement.”).

20

Unlike the scenario contemplated in Transamerica Ins. Co. and Universal Sur. Co., there

is no allegation here that the contractor, Redstick, made a claim for an adjustment—it could not

have, as the repair work was performed after Redstick was terminated. Thus “the surety [is] not

entitled to subrogation of the right of the contractor to seek an adjustment to the contract price

for extra expenses incurred.” Transamerica Ins. Co., 989 F.2d at 1193–94 (summarizing

Universal Sur. Co.) (citations omitted). Stated differently, Plaintiff has not pointed to any

controlling precedent in which a surety as equitable subrogee could successfully maintain an

equitable adjustment claim against the government for amounts above and beyond the contract

price that was neither (1) first pursued by the contractor itself prior to default, nor (2) derived

from a constructive change in or assigned by a takeover agreement itself, and thus, brought

pursuant to the CDA. The “additional work,” Pl.’s Resp. & Reply ¶ 73, completed by Plaintiff

did not occur until after it had assumed responsibility for completing the project; therefore, it

could not be a Redstick claim for adjustment that Plaintiff might now prosecute under an

equitable subrogation theory. While case law may, in limited circumstances, leave room for

equitable subrogation to claims beyond just improper payments and contract retainage, Plaintiff

certainly cannot proceed on a claim as equitable subrogee to which it was not equitably

subrogated.

To the extent that Plaintiff’s equitable adjustment claim can be construed as being tied to

its pursuit of the ninth progress payment, Plaintiff has similarly failed to establish that it is so

entitled. See, e.g., Gov.’s Cross-Mot. Summ. J. at 27 (“Capitol Indemnity brings two claims

based on the doctrine of equitable subrogation. Although Capitol Indemnity’s briefing does not

acknowledge this, both claims are based on the same premise: that Capitol Indemnity had

priority over Redstick to progress payment number nine at the time it was disbursed. . . . [T]he

funds disbursed in progress payment number nine are the only funds Capitol Indemnity can seek

through the doctrine of equitable subrogation.”). In the preceding section, the Court determined

that Plaintiff is not entitled to summary judgment on its equitable subrogation claim to the ninth

progress payment.

Furthermore, it is undisputed that, at the time of the Takeover Agreement, the contract

balance was $230,792.85, “which is 10% of the Original Contract,” ECF No. 68-2 at 79

(government’s “A157”), and that Plaintiff received this remaining contract balance after it

completed the remaining work on the project, see Gov.’s Cross-Mot. Summ. J. at 28 (“[T]he

takeover agreement provided for Capitol Indemnity to recover the entire contract balance of

$230,792.85 upon completing the project, which it did.”) (citing ECF No. 68-1 at 5

(government’s “A3”) and ECF No. 68-2 at 79 (government’s “A157”)); Gov.’s Reply at 2

(“Capitol Indemnity cites nothing to dispute the evidence indicating that Capitol Indemnity

received the contract balance that remained after progress payment number nine was

disbursed.”). Accordingly, there is nothing left for Plaintiff to claim by way of equitable

subrogation. See Gov.’s Cross-Mot. Summ. J. at 28 (“Besides progress payment number nine,

the only amounts that Capitol Indemnity does not already possess that it could conceivably seek

under the equitable subrogation doctrine would be prior progress payments—but the Court

21

dismissed claims related to those prior progress payments in response to our motion to dismiss.”

(emphasis added)). 10

Finally, by its own pleadings and motion, it is clear that Plaintiff does not seek its

equitable adjustment via the Takeover Agreement. See, e.g., Amend. Compl. ¶ 38 (“[T]he

Takeover Agreement was specifically negotiated to permit the assignment and reservation of

claims arising prior to the default of Redstick for the benefit of CAPITOL.” (emphasis added)).

Rather, Plaintiff pursues its “equitable adjustment to the contract” via its alleged status “as

Redstick’s equitable subrogee.” See Pl.’s Partial Summ. J. Mot. at 28 (capitalization removed);

see also id. ¶ 52 (“Capitol removed the rubber Gym flooring that Redstick had previously

installed, re-floated the entire concrete floor over which the rubber flooring had previously been

installed, reinstalled the rubber flooring, and did whatever else was required to make the floor

satisfactory to the Government. Capitol incurred costs of $135,065.69 in doing this work, which

constituted an equitable adjustment to the Contract.” (emphasis added)). But Plaintiff could only

successfully make such a claim if it could further prove that the Army accepted Redstick’s work

on the gym floor and then later required an adjustment to that work. In other words, for this

claim, Plaintiff stands in Redstick’s shoes—if Redstick would not have a claim for the gym floor

work, then neither does Plaintiff. And Redstick could not have a claim for an equitable

adjustment for costs incurred in repairing its own deficient work. See also ECF No. 68-2 at 85

(government’s “A163”) (Takeover Agreement’s Exhibit A, concerning patent defects, provides

that the “[f]loor surface below rubber flooring will be floated to ensure a flat, smooth look.

Remove rubber flooring, float floor, and re-install rubber flooring.”).

The Court finds that Plaintiff has not established that the Army “accepted” Redstick’s

work, nor has it established a dispute of material fact on the question. Although Plaintiff began

with an argument that the government “had already accepted and paid for Redstick’s installation

of [the gym] floor,” Pl.’s Partial Summ. J. Mot. ¶ 82, it did not in its reply brief rebut any of the

government’s factual assertions that Plaintiff’s “claim is based upon the false premise that the

Government accepted Redstick’s work on the gymnasium floor, and then required Capitol

Indemnity to re-do this already accepted work,” Gov.’s Cross-Mot. Summ. J. at 37 (emphasis

added). For example, Plaintiff raises no evidence contesting the government’s assertion in its

cross-motion that Neta Singley was “the only Government employee with authority to accept the

installation of the gymnasium floor,” nor any evidence contesting the government’s assertion

that Singley did not accept Redstick’s work on the gym floor. Id. Acceptance is directly

relevant to Plaintiff’s adjustment claim, Amend. Compl. ¶ 32 (“Defendant accepted the

installation of the floor . . . . Thereafter, the Defendant complains that such work was deficient

and seeking to compel the performance of such work by CAPITOL without paying for the same.”),

and yet Plaintiff offers nothing to dispute the government’s factual assertions of non-acceptance.

See Gov.’s Reply at 10 (“Capitol Indemnity’s opposition does not contest our showing that the

10

The Court suggests that Plaintiff’s equitable subrogation claim for an equitable adjustment for

its own work on the gym floor perhaps should have, in fact, been dismissed at the motion to dismiss

stage. Plaintiff did not allege that Redstick was entitled to an equitable adjustment for work on the gym

floor, and the Court will not string together Plaintiff’s other allegations to backfill its failure to do so.

Perhaps, Plaintiff might have had some claim to an adjustment that would have survived a motion under

RCFC 12(b)(6) (i.e., a claim for an equitable adjustment to the Takeover Agreement pursuant to the

CDA), but Plaintiff has not alleged such a claim here.

22

Government never accepted Redstick’s work. As a result, it is unable to prevail on the [equitable

adjustment] theory that survived our motion to dismiss.”).

Moreover, to the extent Plaintiff alleges that “Defendant should never have approved

payment of Contract funds to compensate Redstick for the work it did on the Gym floor,” Pl.’s

Resp. & Reply ¶ 94, or that “Defendant should have issued a Stop Work Notice before the rubber

flooring was installed by Allied Products,” id. ¶100—allegations that did not appear in its motion

for summary judgment—Plaintiff cites nothing in support of its assertions. In other words, while

it might have been prudent for the Army to withhold payment or issue a stop work order,

Plaintiff has not shown that the government’s alleged failure to do so creates a remediable injury

to Plaintiff. In fact, its allegations hew most closely to a claim of pro tanto discharge, for which

there is no jurisdiction in this Court as an affirmative cause of action. See Lumbermens, 654

F.3d at 1314–15 (“While pro tanto discharge, as the government admits, may be asserted as a

defense to a government claim asserted under a bond, the problem here is that Lumbermens is

asserting the theory of impairment of suretyship not as a defense, but as an affirmative cause of

action. . . . [T]he United States has not waived sovereign immunity as to such claims.”).

In sum, Plaintiff’s claim for an equitable adjustment for the gym floor work is without a

leg on which to stand. Plaintiff has not established there is any money from which to subrogate

this claim, and, even if such remaining contract funds existed, Plaintiff has not disputed the

government’s factual showing that the gym floor work was never accepted (and thus that

Redstick had a claim for which Plaintiff could step into Redstick’s shoes as an equitable

subrogee). Accordingly, the government is entitled to judgment as a matter of law on Plaintiff’s

gym floor claim. 11

3. Plaintiff’s CDA Claim for an Equitable Adjustment for HVAC Work

Finally, Plaintiff asserts a breach of contract claim under the CDA against the United

States for $94,847.10, Am. Compl. ¶¶ 63–68, arguing that “[t]he Contracting Officer demanded

and directed changes and/or modifications to the work and/or scope of the work on the Project by

the HVAC subcontractor failing to pay for the same and obtaining a release without

consideration from Redstick,” id. ¶ 65. See also Pl.’s Partial Summ. J. Mot. ¶ 2 (“Capitol also

seeks damages pursuant to the [CDA] for Redstick’s additional work on the Gym’s heating,

ventilating, and air conditioning (‘HVAC’) systems, for which Redstick was not paid.”).

Plaintiff, however, did not move for summary judgment on its HVAC claim, because, according

to Plaintiff, “that claim involves disputed fact issues requiring trial on the merits.” Pl.’s Partial

Summ. J. Mot. ¶ 7. Plaintiff alleges that the HVAC claim was assigned to it by Redstick, via the

General Indemnity Agreement, and that the government assented to this assignment in the

Takeover Agreement. See Amend. Compl. ¶ 38 (“CAPITOL specifically negotiated and executed

the Takeover Agreement to preserve all rights arising under the Contract and afforded to both

CAPITOL, but also to Redstick; i.e., the Takeover Agreement was specifically negotiated to

permit the assignment and reservation of claims arising prior to the default of Redstick for the

benefit of CAPITOL.”).

11

The government is correct that even if the facts supported Plaintiff’s theory that a change

occurred to the contract, any equitable adjustment claim that arose after the Takeover Agreement would

have to be brought under the CDA, not under equitable subrogation. Gov.’s Reply at 11.

23

The government, in its cross-motion, seeks summary judgment on this claim, arguing that

it “suffers from two procedural defects: (1) Capitol Indemnity has failed to establish that this

claim was validly assigned to it,” thus allegedly running afoul of the Anti-Assignment Act, 31

U.S.C. §§ 3727(a)(1) and (b), and “(2) Capitol Indemnity has failed to provide a credible excuse

for the belated submission of the notice [of the claim] required by FAR 52.243-4.” Gov.’s

Cross-Mot. Summ. J. at 39. 12 In denying the government’s motion to dismiss the HVAC claim,

Judge Firestone reasoned that

[t]he legality of any assignment to Capitol from Redstick and thus whether this

court has jurisdiction to hear Capitol’s claim is properly construed as a challenge

to the facts alleged in the complaint that the Army assented to the assignment of

Redstick’s claims. In addition, whether Redstick complied with the FAR and

preserved a claim for payment or released the claim for additional HVAC work

requires the court to consider evidence outside the complaint including the releases

themselves. As with Capitol’s claim regarding the gym floor, these are matters that

cannot be resolved on this motion to dismiss and the government’s argument is

appropriate only in a motion for summary judgment. Finally, the government’s

argument that Capitol failed to state a claim because there is no allegation that

Redstick provided notice within the requisite time period under FAR 52.243-4 is

unpersuasive at this stage of the litigation. Here, Capitol has alleged that the Army

waived the notice requirement because it explicitly told subcontractors that a claim

for the additional HVAC work could be brought at a later time.

Capitol Indem. Corp., 147 Fed. Cl. at 382 (citations and footnote omitted). It is undisputed that

the work was performed while Redstick (not Plaintiff) was in privity with the government, see,

e.g., Pl.’s Resp. & Reply ¶ 110, and as Plaintiff brings this claim pursuant to the CDA, the Court

first examines the “legality of the assignment” to Plaintiff, as Judge Firestone observed.

“[T]he Assignment of Claims Act, 31 U.S.C. § 3727(a)(1)-(b) is generally read in

conjunction with the Assignment of Contracts Act, 41 U.S.C. § 6305(a) (formerly 41 U.S.C. §

15(a)). Taken together, these two statutes—referred to collectively as the ‘Anti–Assignment

Acts’—bar the assignment of a claim against the government, a government contract, or some

lesser or future interest in a government contract, subject to certain exceptions.” Anchor Sav.

Bank, FSB v. United States, 121 Fed. Cl. 296, 323–24 (2015) (citing Fireman’s Fund, 313 F.3d

at 1349). Subsection (b) of § 3727 provides:

An assignment may be made only after a claim is allowed, the amount of the claim

is decided, and a warrant for payment of the claim has been issued. The assignment

shall specify the warrant, must be made freely, and must be attested to by 2

witnesses. The person making the assignment shall acknowledge it before an

official who may acknowledge a deed, and the official shall certify the assignment.

12

The government raises two other grounds in opposition to Plaintiff’s HVAC claim: that the

claim is barred by the election doctrine, and that Redstick released the claim. Id. at 41–44. Because the

Court determines that the claim, if there even was one, was not validly assigned, the Court does not reach

the government’s other grounds supporting dismissal of the HVAC claim.

24

The certificate shall state that the official completely explained the assignment

when it was acknowledged. An assignment under this subsection is valid for any

purpose.

31 U.S.C.A. § 3727(b). There is no allegation in the instant case that the alleged assignment

“[was] allowed, the amount of the claim [was] decided, and a warrant for payment of the claim

ha[d] been issued.” Id. Accordingly, to defeat the government’s cross-motion for summary

judgment on the HVAC claim, Plaintiff must at least raise a dispute of material fact concerning

whether the government waived the Act’s general prohibition against—or assented to—the

assignment of a claim. See Delmarva Power & Light Co. v. United States, 542 F.3d 889, 893

(Fed. Cir. 2008) (“We see no valid reason why the government should not also be able to waive

the Anti–Assignment Act’s prohibition in section 3727(a) against the assignment of claims.”).

Plaintiff asserts that the Anti-Assignment Act does not bar its HVAC claim, because: (1)

of “the unambiguous terms of the Takeover Agreement, to which Defendant consented, and from

which Defendant benefitted,” Pl.’s Resp. & Reply ¶ 112; (2) “Defendant . . . acknowledged inter

alia that Capitol is entitled to all of Redstick’s rights, title, and interests arising under the

Contract, as if Capitol had been an original party to the Contract,” id. ¶ 114; and (3) the

Takeover Agreement’s “reference to ‘all of former Contractor’s . . . claims for equitable

adjustment to the Contract price or time under the subject Contract, whether arising prior to or

after the default,’ clearly encompasses the claims for Redstick’s work on the Gym’s HVAC

system, for which Redstick was never paid,” id. ¶ 115. 13 The question, therefore, is whether

these allegations create a dispute of material fact to defeat summary judgment in favor of the

government.

13

Similarly, Plaintiff’s amended complaint asserts:

The provisions of the Anti-Assignment Act do not bar recovery by CAPITOL because:

a. Defendant has clearly and unambiguously assented to the assignment of claims

by novation under the same terms of the Contract to CAPITOL in the execution of

contract no. W91151-14 C-0042 to CAPITOL for completion of the Project;

b. Defendant has clearly and unambiguously assented to the assignment of claims

by execution of the Takeover Agreement and incorporation of paragraph 13

which specifically reserves all rights of CAPITOL and Redstick as acknowledged

by Defendant, and provided that the Defendant consented to the assignment of

Redstick’s claims to CAPITOL; and

c. Assignment occurs by operation of law as CAPITOL is the completing surety

entitled and is therefore equitably subrogated to all rights arising under the

Contract.

Amend. Compl. ¶ 64. Furthermore, Plaintiff alleges that “[i]t was further represented to CWS Services

and Redstick that a claim could be submitted at a later date for the [HVAC-related] ‘Additional Work[.]’”

Id. ¶ 65.

25

In support of summary judgment on the HVAC claim, the government cites two cases,

United Pac. Ins. Co. v. Roche, 380 F.3d 1352 (Fed. Cir. 2004), and Tuftco Corp. v. United States,

222 Ct. Cl. 277 (1980), for the proposition that Plaintiff has not shown the language in the

Takeover Agreement to be sufficient for purposes of the government recognizing an assignment

of the HVAC claim from Redstick to Plaintiff. See Gov.’s Cross-Mot. Summ. J. at 39–40;

Gov.’s Reply at 12.

Tuftco “involv[ed] the assignment to plaintiff of contracts for the purchase of mobile

homes by the Department of Housing and Urban Development (HUD),” and the government,

“though it was aware of and recognized assignment of the contracts from the original contractor

to plaintiff, nevertheless wrongfully forwarded some of the payments due under the contracts to

the original contractor, resulting in plaintiff’s loss.” 222 Ct. Cl. at 279 . The government therein

tried to hide behind the Anti-Assignment Act (specifically, the former 41 U.S.C. § 15),

contending that the contracting officer did not have the authority to recognize the assignments.

The Court of Claims, however, reiterated the “long-recognized principle that ‘[d]espite the bar of

the Anti-Assignment statute (41 U.S.C. § 15), the Government, if it chooses to do so, may

recognize an assignment.’” Id. at 285 (citing cases). In assessing the validity of the assignment

(or, in other words, a waiver of the Anti-Assignment Act), the Court of Claims focused on

“whether in this case the actions of the Government, manifested primarily by the contracting

officer . . . indicated its consent to and recognition of the assignments.” Id. The court ultimately

found a waiver of the Anti-Assignment Act, as the facts “provide[d] ample support for the

conclusion the Government was aware of, assented to, and recognized the assignments.” Id.

(emphasis added). For example, prior to each assignment, representatives for the assignor and

assignee contacted the contracting officer “for his advice on the validity of the proposed

assignments. They were assured by [the contracting officer] that despite the Anti-Assignment

Act, the assignments were proper and would be recognized by HUD, with payment going to

Winchester as contemplated.” Id. Subsequently, the representatives sent written notification of

the assignment to the contracting officer, and the contracting officer wrote “[a]ssignment

acknowledged” on another piece of correspondence. Id. at 287. The Court, accordingly, found

assent to the assignment, opining that “[a]ny doubts on this score are dispelled by the

Government’s actions consistent with its demonstrated awareness and acknowledgement of the

assignments.” Id. Furthermore, “the totality of the circumstances presented to the court

establishes the Government’s recognition of the assignments by its knowledge, assent, and action

consistent with the terms of the assignments.” Id.

More recently, in Roche, a surety that issued performance and payment bonds to, and

ultimately completed performance on behalf of, a defaulting construction contractor sought an

equitable adjustment from the government at the Armed Services Board of Contract Appeals

(“Board”). 380 F.3d at 1354. Prior to the contractor’s default, the surety and contractor had

“executed an indemnity agreement in which [the contractor] assigned to [the surety], in case of

[the contractor’s] default, all of its ‘rights . . . [and] claims . . . arising from or out of’ the

construction contract, including ‘all moneys due’ thereunder.” Id. The Board held that it did not

have jurisdiction over most of the surety’s equitable adjustment claims, in light of the Federal

Circuit’s decision in Fireman’s Fund, and the circuit affirmed. Id. at 1355; see also id. at 1356

(“In this case, the only contract between [the surety] and the government was the takeover

agreement. Prior to that agreement, there was no contract between [the surety] and the

26

government, and [the surety’s] present claims cannot have arisen under such a contract. Stated

differently, the Board had no jurisdiction over [the surety’s] claims that were based upon events

that occurred prior to the takeover agreement.”). Particularly compelling here, the circuit

reasoned that:

[The surety] argues . . . that [the contractor’s] assignment in the indemnity

agreement of all claims arising under the construction contract in case of default

included the claim of contract illegality it now asserts. Fireman’s Fund held that

the Anti–Assignment Act covered and invalidated such assignment of claims to a

surety. 313 F.3d at 1349–50. [The surety] invokes an exception to that Act for

situations where the “Government . . . chooses to . . . recognize an assignment.”

Tuftco Corp. v. United States, 222 Ct. Cl. 277, 614 F.2d 740, 745 (1980) (internal

quotation marks omitted). It asserts that the government recognized the assignment

when it entered into the takeover agreement with [the surety]. Without discussing

the issue in detail, it suffices to say that we discern nothing in the takeover

agreement that shows a government recognition of the assignment in the earlier

indemnity agreement between [the contractor] and [the surety], to which the

government was not a party.

Roche, 380 F.3d at 1357 (emphasis added).

In similar fashion here, the Court finds nothing in the Takeover Agreement that “shows a

government recognition of the assignment in the earlier indemnity agreement” between Plaintiff

and Redstick. To be sure, the Takeover Agreement in this matter provides the following:

Owner hereby acknowledges and consent [sic] to the assignment of all former

contractor’s claims to Surety under the contract, to the extent permitted by law,

including but not limited to, the right of Surety to assert, in its own name and for

its own benefit, all of former Contractor’s and any of Contractor’s subcontractor’s

claims for equitable adjustment to the Contract price or time under the subject

Contract, whether arising prior to or after the default.

See Pl.’s Partial Summ. J. Mot. ¶ 59; see also Gov.’s Cross-Mot. Summ. J. at 15 (citing ECF No.

68-2 at 82 (government’s “A160”)). Plaintiff, in its reply brief, contends that “[t]he reference to

‘all of former Contractor’s . . . claims for equitable adjustment to the Contract price or time

under the subject Contract, whether arising prior to or after the default,’ clearly encompasses the

claims for Redstick’s work on the Gym’s HVAC system, for which Redstick was never paid.”

Pl.’s Resp. & Reply ¶ 115. However, as a matter of law and consistent with the circuit’s

decision regarding an analogous situation in Roche, the Court does not find that this boilerplate

language—sweeping in scope as it may be—overcomes the default statutory prohibition against

the assignment of claims against the government or interests in a government contract. Nor does

it track with the cited circumstances in which cases in this Court and the Federal Circuit have

previously found a government waiver of the Anti-Assignment Act.

To begin with, the language in the Takeover Agreement itself recognizes that only those

assignments “permitted by law” are contemplated. Generally, assignments of interests in a

27

government contract are not “permitted by law,” as 41 U.S.C § 6305(a) makes abundantly clear:

“The party to whom the Federal Government gives a contract or order may not transfer the

contract or order, or any interest in the contract or order, to another party.” To the extent that the

circuit has recognized the ability of the government to waive the prohibition(s) of claim or

contract assignment, the Court in this instance sees no such waiver—or at least one that comports

with the type of knowing waiver or acknowledgment in the above-cited case law. 14 And Plaintiff

has pointed the Court in no other direction.

Comparing Plaintiff’s allegations with those in Tuftco reveals a rather stark contrast.

Recall, in Tuftco, the parties were in communication with the contracting officer specifically

regarding the validity of their purported assignment, on which the contracting officer expressly

signed off. 222 Ct. Cl. at 286–87. Here, however, Plaintiff points only to the boilerplate

language in the Takeover Agreement, which itself does not acknowledge with any degree of

specificity any of Plaintiff’s alleged rights to seek an equitable adjustment on behalf of Redstick.

See Gov.’s Cross-Mot. Summ. J. at 40–41 (“The Federal Circuit has rejected the argument that

boilerplate such as this is sufficient to recognize the assignment of a claim. . . . Like the takeover

agreement that did not effect an assignment of the contractor’s claims in Roche, the takeover

agreement at issue here did not mention the indemnity agreement . . . and did not identify the

HVAC-system-related claim . . . .”). Nor has Plaintiff attempted to rebut the government’s

factual assertion that “the contracting officer did not learn that Capitol believed this claim had

been assigned to it until she received Capitol’s certified claim.” Id. at 41.

Moreover, Plaintiff has made no attempt to show that the alleged assignment in the

indemnity agreement—which predates Redstick’s work on the project—was even valid itself.

See Fireman’s Fund Ins. Co., 313 F.3d at 1349 (“The assignment by Summit of ‘all of their

rights under the contracts’ violated the prohibition in 41 U.S.C. § 15(a) against the transfer of

‘any interest’ in any contract involving the United States. At the time the assignment of the

claims was made, no claims had been allowed. Indeed, any claims against the United States

arising from a default in the construction contract had not even arisen. Under Section

3727(a)(1)(b), the assignment of those claims in the General Indemnity Agreement was

invalid.”). The Court notes that the General Indemnity Agreement between Plaintiff and

Redstick was executed on September 12, 2014—some fifteen days before Redstick was even

awarded the contract. See Pl.’s Partial Summ. J. Mot. ¶¶ 9, 11. Accordingly, what “claims”

might Redstick have possibly assigned to Plaintiff?

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Although not mentioned or cited in any of Plaintiff’s briefing on summary judgment, Plaintiff’s

amended complaint alleges that, “[i]n negotiating the Takeover Agreement, counsel for CAPITOL

specifically advised counsel for Defendant that CAPITOL sought to ‘. . . reserve any rights . . .’ by

correspondence dated April 21, 2016. Counsel for the Defendant responded, ‘Got It!’ on the same date.”

Amend. Compl. ¶ 39. Even accepted as true, the government’s rather flippant response is quite unlike the

detailed correspondence in Tuftco that was held sufficient for a waiver of the Anti-Assignment Act. And

even if it were, by failing to raise any argument related to this correspondence in its summary judgment

briefing, Plaintiff has waived this argument. See Novosteel SA v. U.S., Bethlehem Steel Corp., 284 F.3d

1261, 1274 (Fed. Cir. 2002) (“[A] party does not waive an argument based on what appears in its

pleading; a party waives arguments based on what appears in its brief.”).

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Suffice it to say, the Court finds no dispute of material fact on the question of whether

Redstick’s claim was validly assigned, or whether its otherwise prohibited assignment was

waived by the government. When pressed, Plaintiff, instead, merely reiterates its earlier

allegations, see, e.g., Pl.’s Resp. & Reply ¶ 113; however, “a party opposing a properly

supported motion for summary judgment may not rest upon the mere allegations or denials of his

pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.”

Anderson, 477 U.S. at 248 (internal quotation marks omitted). Plaintiff has shown no genuine

issue for trial. Accordingly, the government is entitled to summary judgment on Plaintiff’s

HVAC claim.

CONCLUSION

For the foregoing reasons, the Court concludes that Plaintiff has failed to establish that it

is entitled to summary judgment on any of its alleged grounds. Accordingly, the Court DENIES

in its entirety Plaintiff’s motion for partial summary judgment. Furthermore, the Court

concludes that there remains no dispute of material fact as to any of Plaintiff’s claims on which

the government seeks summary judgment. Accordingly, the Court GRANTS the government’s

cross-motion for summary judgment. The Clerk is DIRECTED to enter judgment accordingly.

IT IS SO ORDERED.

s/ Zachary N. Somers

ZACHARY N. SOMERS

Judge

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