JSI Communications v. Travelers Cslty & Surety Co. , 807 F.3d 725 ( 2015 )


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  •      Case: 15-60251   Document: 00513294749     Page: 1   Date Filed: 12/04/2015
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    No. 15-60251                  United States Court of Appeals
    Fifth Circuit
    FILED
    JSI COMMUNICATIONS,                                            December 4, 2015
    Lyle W. Cayce
    Plaintiff - Appellant                                    Clerk
    v.
    TRAVELERS CASUALTY & SURETY COMPANY OF AMERICA,
    Defendant - Appellee
    Appeal from the United States District Court
    for the Southern District of Mississippi
    Before JOLLY, HAYNES, and COSTA, Circuit Judges.
    HAYNES, Circuit Judge:
    Plaintiff JSI Communications appeals the district court’s grant of
    summary judgment in favor of Defendant Travelers Casualty & Surety
    Company of America on JSI’s payment bond and bad faith claims.                        We
    REVERSE and RENDER in part, REVERSE and REMAND in part, and
    VACATE and REMAND in part.
    I. Background
    McMillan-Pitts Construction Company, LLC was selected as the prime
    contractor on a public project to construct the New Stoneville Office Building,
    Mississippi State University Delta Research and Extension Center, located in
    Stoneville, Mississippi (the “Project”). McMillan-Pitts was required to procure
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    No. 15-60251
    payment and performance bonds as surety for the Project, and McMillan-Pitts
    obtained these bonds from Travelers. Under their agreement, McMillan-Pitts
    and Travelers were jointly and severally liable for the covenants in the bonds.
    The agreement further specified that the bonds were “governed by and shall
    be construed in accordance with Mississippi law. Any inconsistency with these
    Bonds and any provision of Mississippi law shall be remedied by deleting the
    inconsistent portion of these Bonds and leaving the remaining consistent
    portions in full force and effect.”
    Tackett Electric Company LLC was a subcontractor to McMillan-Pitts
    on the Project, and Tackett subcontracted with JSI to install and test voice and
    data cabling as well as fiber optic cabling. JSI completed its work on the
    Project on July 31, 2012, and invoiced Tackett for $36,346.09. It is uncontested
    that JSI has not been paid this sum.
    JSI is apparently not the only entity to which Tackett owes money. In
    March 2012, a Tackett creditor unrelated to the Project served a writ of
    garnishment on McMillan-Pitts, seeking access to any funds McMillan-Pitts
    owed Tackett. In response, McMillan-Pitts commenced an interpleader action
    in Mississippi chancery court, which named as defendants Tackett, the
    unrelated Tackett creditor, and two Tackett subcontractors (not JSI) on the
    Project with which McMillan-Pitts and Tackett had joint check agreements.
    According to the complaint for interpleader, McMillian-Pitts believed these
    four defendants were “the only persons who may be interested in the subject
    proceeds or who may assert claims to the proceeds of McMillan-Pitts’[s]
    contract with Tackett.” In connection with the interpleader action, McMillan-
    Pitts tendered $19,445.16, the amount of money it still owed Tackett for its
    work on the Project, into the court’s registry. On August 30, 2012, McMillan-
    Pitts obtained a judgment releasing it from any further liability on its
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    subcontract with Tackett, on the two joint check agreements, and on the writ
    of garnishment.
    On or about October 3, 2012—shortly after McMillan-Pitts obtained this
    judgment in the interpleader action—JSI notified both McMillan-Pitts and
    Travelers that it was seeking payment under the Project’s payment bond due
    to Tackett’s nonpayment of JSI’s invoice. On October 25, 2012, McMillan-Pitts
    amended its complaint for interpleader to include JSI and “all persons or
    entities supplying materials and/or labor to Tackett” on the Project. That same
    day, McMillan-Pitts obtained an amended judgment extending the previous
    release of liability to “any claim made by any other claimant made a party to
    this action for sums due and owing from [Tackett] for materials, supplies
    and/or labor provided to [Tackett] on the [Project].”
    On November 8, 2012, Travelers denied JSI’s claim on the bond on the
    grounds that McMillan-Pitts had received a judgment releasing it of any
    obligations under its subcontract with Tackett. 1 JSI and Travelers exchanged
    further correspondence regarding JSI’s bond claim, but were unable to resolve
    the issue. Accordingly, JSI sued Travelers in state court, seeking payment
    under the bond, punitive damages, and attorneys’ fees. Travelers removed the
    case on the basis of diversity jurisdiction, and both parties moved for summary
    judgment. The district court granted summary judgment in favor of Travelers
    and denied JSI’s subsequent motion for reconsideration. JSI timely appealed.
    II. Standard of Review
    We review the district court’s grant of summary judgment de novo and
    construe all facts and inferences in the light most favorable to the nonmoving
    1Travelers initially also denied the claim on the grounds that JSI did not timely notify
    McMillian-Pitts of the claim within 90 days of completing the work, as required under
    Mississippi’s Little Miller Act. See MISS. CODE. ANN. § 31-5-51(3). Travelers eventually
    dropped this defense during briefing on the cross-motions for summary judgment.
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    party. See EEOC v. Chevron Phillips Chem. Co., 
    570 F.3d 606
    , 615 (5th Cir.
    2009). Summary judgment is appropriate when “there is no genuine dispute
    as to any material fact and the movant is entitled to judgment as a matter of
    law.” FED. R. CIV. P. 56(a).
    III. Discussion
    Because public property is not subject to private liens for nonpayment,
    Mississippi law requires contractors on public projects to procure bonds to
    ensure payment to those who work on the project. MISS. CODE. ANN. § 31-5-51;
    Key Constructors, Inc. v. H & M Gas Co., 
    537 So. 2d 1318
    , 1321 (Miss. 1989);
    Aetna Cas. & Sur. Co. v. Doleac Elec. Co., 
    471 So. 2d 325
    , 327 (Miss. 1985).
    Mississippi’s so-called Little Miller Act is premised on the federal Miller Act,
    which requires both a payment and a performance bond on federal projects
    worth more than $100,000. Key 
    Constructors, 537 So. 2d at 1321
    ; 40 U.S.C.
    § 3131(b). Like the federal Miller Act, Mississippi’s Little Miller Act protects
    both subcontractors and sub-subcontractors. 40 U.S.C. § 3133(b)(2); MISS.
    CODE. ANN. § 31-5-51(3). Those protected under Mississippi’s Little Miller Act
    “shall have a right of action upon the . . . payment bond upon giving written
    notice to [the] contractor within ninety (90) days from the date on which such
    person did or performed the last of the labor or furnished or supplied the last
    of the material for which such claim is made . . . .” MISS. CODE. ANN. § 31-5-
    51(3). Furthermore, “the Mississippi Supreme Court has found federal court
    decisions interpreting the Federal Miller Act instructive and persuasive when
    interpreting Mississippi’s Little Miller Act.” Younge Mech., Inc. v. Max Foote
    Constr. Co., 
    869 So. 2d 1079
    , 1082 (Miss. Ct. App. 2004) (citing Key
    
    Constructors, 537 So. 2d at 1321
    ).
    Travelers maintains that it is no longer liable to JSI on the bond because
    “McMillan-Pitts’[s] liability to JSI was extinguished” by the chancery court
    judgment. The exact source of McMillan-Pitts’s liability to which Travelers is
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    referring is unclear. To the extent Travelers is arguing that its bond obligation
    to JSI was discharged because McMillian-Pitts is no longer liable on its
    contract with Tackett, we disagree. Under Mississippi’s Little Miller Act,
    second-tier contractors—like JSI—can sue on a payment bond absent a direct
    contractual relationship with the contractor. MISS. CODE. ANN. § 31-5-51(3)
    (“Any person having direct contractual relationship with a subcontractor but
    no contractual relationship express or implied with the contractor furnishing
    said payment bond shall have a right of action upon the said payment
    bond . . . .”). Accordingly, that McMillan-Pitts has been released of liability to
    Tackett under the subcontract has no effect on JSI’s ability to recover under
    the bond. See Ill. Sur. Co. v. John Davis Co., 
    244 U.S. 376
    , 380 (1917) (noting
    under the federal Miller Act’s predecessor statute that “he who has supplied
    [labor and materials] to a subcontractor may claim under the bond, even if the
    subcontractor has been fully paid”); cf. Key 
    Constructors, 537 So. 2d at 1323
    –
    24 (noting that contractor was liable on the payment bond to a second-tier
    subcontractor even though the contractor had a valid defense against the first-
    tier subcontractor).
    To the extent Travelers is arguing that its bond obligation was
    discharged under the chancery court judgment, we must construe the effect, if
    any, of that judgment 2 on the Travelers bond obligation. We conclude that it
    has no effect on the bond liability. Our interpretation of the chancery court
    judgment begins by examining the very nature of interpleader proceedings.
    McMillan-Pitts interpleaded the funds in the chancery court in accordance
    with Mississippi Rule of Civil Procedure 22. In an interpleader action, the
    court must determine what entities are entitled to the property at issue, known
    2 We do not address the troubling concept of amending a judgment to address a party
    added that day.
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    as the “stake.” See First Nat’l Bank of Vicksburg v. Middleton, 
    480 So. 2d 1153
    ,
    1155–57 (Miss. 1985); Md. Cas. Co. v. Sauter, 
    344 F. Supp. 433
    , 436–37 (N.D.
    Miss. 1972). The discharge of liability the interpleader receives is defined by
    the scope of the funds interpleaded. See MISS. R. CIV. P. 22(b) (“Any party
    seeking interpleader . . . may deposit with the court the amount claimed, . . .
    and the court may thereupon order such party discharged from liability as to
    such claims and the action shall continue as between the claimants of such
    money or property.” (emphasis added)); Lee v. W. Coast Life Ins. Co., 
    688 F.3d 1004
    , 1011 (9th Cir. 2012) (“The stake marks the outer limits of the
    stakeholder’s potential liability where the respective claimants’ entitlement to
    the stake is the sole contested issue; however, where the stakeholder may be
    independently liable to one or more claimants, interpleader does not shield the
    stakeholder from tort liability, nor from liability in excess of the stake.” (citing
    State Farm Fire & Cas. Co. v. Tashire, 
    386 U.S. 523
    , 535 (1967))). 3
    According to the amended complaint for interpleader, the stake in the
    interpleader action was the “proceeds of [the] contract between McMillan-Pitts
    and Tackett”—$19,445.16. 4           Any funds relating to McMillan-Pitts’s bond
    obligation (and that of Travelers) were clearly not included in the interpleader
    action. This obligation is separate and distinct from any obligation McMillan-
    Pitts and Travelers had on the Tackett subcontract. 5 Because Mississippi law
    3 Because Mississippi’s rules are generally modeled after the Federal Rules of Civil
    Procedure, Mississippi courts often find federal authority persuasive when considering
    similar Mississippi rules. BB Buggies, Inc. v. Leon, 
    150 So. 3d 90
    , 96 (Miss. 2014); 
    Middleton, 480 So. 2d at 1156
    .
    4JSI’s claim on the payment bond is for $36,346.09. Even if JSI were entitled to all
    of the money that McMillan-Pitts interpleaded, which is unlikely, it would still be due
    $16,900.93. Under Travelers’s interpretation of the chancery court judgment, JSI would have
    no recourse to recover this remaining sum.
    5 That the chancery court judgment had no effect on Travelers’s bond obligation is
    underscored by the fact that Travelers does not maintain that JSI’s claim is precluded under
    res judicata or collateral estoppel. Res judicata would not apply because the bond was not
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    defines the release the interpleader receives by the scope of the stake, the
    interpleader action does not shield Travelers (a non-party) from liability that
    arises from its bond obligation.
    The original judgment releasing McMillan-Pitts was limited to specific
    sources of liability: the Tackett subcontract, the joint check agreements, and
    the writ of garnishment. When the judgment was amended to extend the
    release to additional claimants, 6 there is no indication that the chancery court
    intended the extension to operate as a release of an entirely separate obligation
    owed by an unnamed party that was never at issue in the interpleader action,
    namely the statutorily mandated payment bond. This payment bond was not
    referenced in the amended judgment, nor did McMillan-Pitts mention the
    existence of the bond in its amended complaint. Construing the chancery court
    judgment in light of what sources of liability were before the court, we do not
    interpret the judgment as having any effect on obligations under the payment
    bond.
    This construction of the judgment also comports with the policies
    underlying the Little Miller Act. To permit the chancery court to sub silentio
    nullify Travelers’s bond obligation would be contrary to the very purpose of
    Mississippi’s Little Miller Act, which is to provide protection to subcontractors
    in the absence of lien rights. See Aetna Cas. & 
    Sur., 471 So. 2d at 327
    ; see also
    the subject matter (or necessarily part of the same set of operative facts) of the interpleader
    action. See Dunaway v. W.H. Hopper & Assocs., Inc., 
    422 So. 2d 749
    , 751 (Miss. 1982).
    Collateral estoppel is also not a bar to recovery because the parties did not litigate the bond
    obligation. See 
    id. The exact
    effect of the chancery court’s release of liability vis-à-vis JSI is unclear,
    6
    given that McMillan-Pitts appears to have no contractual obligation to pay JSI in the event
    of Tackett’s nonpayment. Any obligation on the part of McMillan-Pitts arose from the
    payment bond, which, from the pleadings, was not at issue in the chancery court case. Given
    our determination that the chancery court judgment does not release Travelers from the
    bond, we need not determine its effect on any other obligations.
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    United States ex rel. Martin Steel Constructors, Inc. v. Avanti Constructors,
    Inc., 
    750 F.2d 759
    , 761 (9th Cir. 1984) (“The purpose of the [Miller Act] is to
    protect persons supplying materials and labor for federal projects, and it is to
    be construed liberally in their favor to effectuate this purpose.” (quoted by Key
    
    Constructors, 537 So. 2d at 1322
    )).
    Travelers draws our attention to the indemnification agreement between
    it and McMillan-Pitts. Under this agreement, if JSI recovered on its bond
    claim against Travelers, Travelers would seek indemnification from McMillan-
    Pitts. According to Travelers, requiring McMillan-Pitts to indemnify Travelers
    would “circumvent the effect and purpose” of the chancery court judgment.
    Mississippi law does not require the contractor to indemnify its surety. Rather,
    Travelers and McMillan-Pitts entered into this agreement between themselves
    and likely priced their bond agreement in accordance with the existence of the
    indemnification clause.      That McMillan-Pitts might have to indemnify
    Travelers is irrelevant and has no bearing on our decision regarding
    Travelers’s bond obligation to JSI under Mississippi’s Little Miller Act.
    We thus conclude that Travelers remains liable to JSI on the payment
    bond, requiring reversal of the summary judgment granted to Travelers on this
    claim. We then turn to whether summary judgment should have been granted
    to JSI on its cross-motion.     To prevail on its payment bond claim under
    Mississippi’s Little Miller Act, JSI must provide “(1) written notice of the claim,
    (2) within ninety days from the date on which [JSI] last performed labor or
    furnished or supplied the materials, and (3) [state] the amount of the claim
    with substantial accuracy.” Younge 
    Mech., 869 So. 2d at 1083
    . The evidence
    submitted at summary judgment established that JSI satisfied these
    requirements. Travelers has offered no basis, other than those rejected above,
    for its failure to pay. Accordingly, we conclude that JSI is entitled to recovery
    under the bond and summary judgment on liability for the invoiced amount
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    should have been granted in the amount of $36,346.09. JSI also requested
    attorneys’ fees and other sums. We remand those matters to the district court
    for ruling in the first instance.   JSI also sought bad faith damages from
    Travelers. The district court’s summary judgment in favor of Travelers on this
    claim was based upon its erroneous determination that Travelers was not
    liable to JSI on the bond. Thus, we vacate the grant of summary judgment and
    remand for reconsideration in light of our opinion herein.
    Accordingly, we (1) REVERSE the district court’s grant of summary
    judgment in favor of Travelers on the bond claim; (2) RENDER judgment in
    favor of JSI on the issue of Travelers’s liability under the bond in the amount
    of $36,346.09; (3) REMAND for the district court to consider the other fees and
    costs relevant to JSI’s bond claim; and (4) VACATE the summary judgment on
    the bad faith claim and REMAND for reconsideration of JSI’s bad faith claim
    in light of this opinion.
    9