United States ex rel. McKenney’s, Inc. v. Leebcor Servs., LLC, 2022 U.S. Dist. LEXIS 6576, 2022 WL 122367 (E.D. Va. Jan. 12, 2022)
The United States Army Corps of Engineers (“USACE”) and Leebcor Services, LLC (“Leebcor”) entered into an agreement (the “Prime Contract”) for Leebcor to renovate barracks at Fort Benning, Georgia (the “Project”). Leebcor obtained a payment bond from The Cincinnati Insurance Company (“Cincinnati” and with Leebcor, the “Defendants”). On June 22, 2017, Leebcor and McKenney’s, Inc. (“McKenney”) entered into a subcontract (the “Subcontract”) for McKenney to complete the Project’s plumbing, HVAC, and direct digital controls (“DDC”) systems. McKenney filed its Complaint on May 8, 2020.
Leebcor paid McKenney $9,943,622 under the Subcontract. McKenney claimed it was owed an additional $220,347.50 under the Subcontract. The Court denied McKenney’s Motion for Summary Judgment because reasonable jurors could conclude that McKenney breached the Subcontract and that the sums withheld were not owed by Leebcor under the Subcontract.
The Court denied the Defendants’ Motion for Summary Judgment on McKenney’s claim for damages relating to the initial delay of work on the Project (the “Initial Delay”). Under the Subcontract, McKenney was only bound by the USACE’s decisions that satisfy 3 requirements: (1) the decision must relate to both the Prime Contract and Subcontract; (2) McKenney must have been allowed to provide any required or supporting documentation on the basis of the USACE’s decision; and (3) the decision must be binding upon Leebcor under the Prime Contract. As to the third requirement, a reasonable juror could find that the USACE’s decision concerning the Initial Delay damages was not binding upon Leebcor because Leebcor retained the ability to appeal the decision and seek additional compensation from the government for the Initial Delay.
The Court denied the Defendants’ Motion for Summary Judgment on McKenney’s claim for compensation for additional cleaning and wrapping of ductwork during delivery and installation. The Subcontract included a section on Construction Indoor Air Quality (“IAQ”) that listed 3 requirements, none of which required plastic sheeting. Per the expresio unius cannon, a reasonable juror could conclude that the IAQ’s plastic sheeting requirement did not apply because it was not one of the listed requirements.
The Court denied Cincinnati Motion for Summary Judgment based on the Miller Act’s 1-year statute of limitations. Cincinnati failed to properly object to the magistrate’s recommendation and the Court found no error in the magistrate’s conclusion that the record contained sufficient evidence for a reasonable juror to conclude that McKenney provided base Subcontract work after May 8, 2019.
The Court denied Cincinnati Motion for Summary Judgment related to McKenney’s claimed damages because Cincinnati did not specify which cost for the Initial Delay, other delays, out-of-scope work, and outstanding invoices exceeded the amount unpaid and were, therefore, beyond the Miller Act’s scope. Summary judgment is appropriate to bar certain categories of damages, but Cincinnati did not identify which of McKenney’s damages fell outside the Miller Act. Under the Miller Act, a subcontractor may recover the entire subcontract price for work actually performed, but may not recover for work that it was to perform but did not actually complete due to the prime contractor’s breach. Subcontractors may also recover damages related to project delays, but only for additional or increased costs actually expended in furnishing the labor or material in the prosecution of the work provided for in the contract and attributable to the delay (i.e. out-of-pocket costs of delay). Under the Miller Act, ‘labor’ requires ‘physical toil,’ but work involving superintending, supervision, or inspection of the job site is covered. ‘Material’ includes things incorporated into the project itself as well as expendable and other things reasonably expected to be consumed, or substantially consumed, in the performance of the work. A thing reasonably expected to be removed by the contractor and used in subsequent jobs does not qualify as material.
