United States v. Hirani Engineering & Land ( 2023 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 13, 2022 Decided January 31, 2023
No. 19-7010
UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF
AMERICAN CIVIL CONSTRUCTION, LLC,
APPELLEE
v.
HIRANI ENGINEERING & LAND SURVEYING, PC,
APPELLEE
COLONIAL SURETY COMPANY,
APPELLANT
Consolidated with 19-7011, 19-7015
Appeals from the United States District Court
for the District of Columbia
(No. 1:14-cv-00745)
Michael C. Delaney argued the cause for appellants/cross-
appellees. With him on the supplemental brief were Laurence
Schor and Karen L. Dowd.
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Herman M. Braude argued the cause and filed the
supplemental brief for appellee/cross-appellant.
Before: SRINIVASAN, Chief Judge, HENDERSON, Circuit
Judge, and ROGERS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
ROGERS.
ROGERS, Senior Circuit Judge: This case returns to the
court after a limited remand of the record to the district court.
United States ex rel. Am. Civ. Constr., LLC v. Hirani Eng’g &
Land Surveying, PC, 26 F.4th 952, 954 (D.C. Cir. 2022)
(“Hirani IV”), amending 962 F.3d 587 (D.C. Cir. 2020). Upon
consideration of the original and the supplemental briefs, and
the post-remand oral argument, there remain three issues
before this court: The surety (“Colonial”) for the prime
contractor (“Hirani”) challenges the district court’s award of
quantum meruit damages on the Miller Act claim of the
subcontractor (“ACC”), and the district court’s award as
double recovery for the subcontractor. The subcontractor
continues to challenge the district court’s denial of recovery
under the Miller Act for the reasonable value of its
superintendent’s services at the job site. For the following
reasons, the court affirms the district court’s judgment except
to remand for the district court to expressly address whether
there would be impermissible double recovery for the
subcontractor.
I.
The surety has withdrawn the statute of limitations
defense. Colonial Suppl. Br. 1 (Aug. 4, 2022). It has also
withdrawn the hearsay objections to daily reports on when the
subcontractor last furnished labor or materials. Oral Arg.
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Recording 2:10-2:17 (Oct. 13, 2022). Therefore, only two of
its contentions remain before the court.
A.
First, the surety contends that the district court erred as a
matter of law in granting the subcontractor quantum meruit
recovery on its Miller Act claim where there is an express
contract from which damages could be calculated and the
award exceeded that against the prime contractor. Colonial
Br. 28-37 (July 19, 2019); Colonial Suppl. Br. 1-5 (Aug. 4,
2022). But the surety has likely misread this court’s denial of
quantum meruit on the subcontractor’s D.C. breach-of-contract
claim against the prime contractor to preclude the surety’s
liability on a quantum meruit theory under the Miller Act.
Hirani IV, 26 F.4th at 960; Colonial Suppl. Br. 2 (Aug. 4,
2022). This court affirmed the district court’s grant of
“restitution,” which it had viewed to reflect the subcontractor’s
claim. Hirani IV, 26 F.4th at 960. Even if D.C. contract law
caps the subcontractor’s restitution recovery against the prime
contractor to expectation damages and does not permit
recovery in quantum meruit where there is an express contract,
no such limit applies to the claim against the surety under the
Miller Act.
The scope of Miller Act remedies is a matter of federal
law. F.D. Rich Co. v. United States ex rel. Indus. Lumber Co.,
417 U.S. 116, 127 (1974). In United States ex rel. Heller
Electric Co. v. William F. Klingensmith, Inc., 670 F.2d 1227(D.C. Cir. 1982), a subcontractor sought to recover delay
damages under the Miller Act from its prime contractor’s
surety. The “possible complication” of the subcontractor’s
claim was that delay damages “represent the value of material
and services provided at the particular time they were provided,
as opposed to the time the parties initially expected them to be
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provided” as reflected by the contract price. Id. at 1232.
Relying on “cases decided under the Miller Act that allow
quantum meruit recovery against a surety,” id., the court
explained that “[a]ny other interpretation would undermine the
security interest that Congress intended to provide
subcontractors on government projects, particularly in times of
generally rising prices,” id. at 1233. Indeed, in Continental
Casualty Co. v. Allsop Lumber Co., 336 F.2d 445, 455 (8th Cir.
1964), see Colonial Br. 33 (July 19, 2019), that court
recognized the permissibility of recovery under the Miller Act
in quantum meruit where there was a breach of an express
contract. See also United States ex rel. Susi Contracting Co. v.
Zara Contracting Co., 146 F.2d 606, 610 (2d Cir. 1944).
The Supreme Court has interpreted the Miller Act broadly
in view of its “highly remedial” nature. Clifford F. MacEvoy
Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102,
107 (1944). The Court explained that the Act is “entitled to a
liberal construction and application in order properly to
effectuate the Congressional intent to protect those whose labor
and materials go into public projects.” Id. Other courts have
heeded that instruction, see Glassell-Taylor Co. v. Magnolia
Petroleum Co., 153 F.2d 527, 529-30 (5th Cir. 1946)
(collecting cases), and this court will too.
Second, this court need not resolve the surety’s contention
that the district court awarded the subcontractor double
recovery. “If we do not decide it now, we may never need to.”
Nat’l Treasury Emps. Union v. United States, 101 F.3d 1423,
1431 (D.C. Cir. 1996).
According to the subcontractor, it sought damages it could
not recover against the prime contractor because such recovery
on its D.C. breach-of-contract claim was limited by contract
expectancy, while its quantum meruit claim for recovery
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against the surety arises under the Miller Act and includes work
beyond the subcontract. It relies on Heller Electric Co., 670
F.2d at 1232-33. In that case, this court cited United States ex
rel. Mariana v. Piracci Constr. Co., 405 F. Supp. 904 (D.D.C.
1975), and United States ex rel. Otis Elevator Co. v. Piracci
Constr. Co., 405 F. Supp. 908 (D.D.C. 1975), in awarding the
subcontractor the value of services and materials that it
provided including delay damages representing the value of
material and services which were different than what the
parties initially expected. Heller Electric Co., 670 F.2d at
1232. Here the district court too relied on Heller Electric’s
holding. United States ex rel. Am. Civ. Constr., LLC v. Hirani
Eng’g & Land Surveying, P.C., 263 F. Supp. 3d 99, 115
(D.D.C. 2017) (“Hirani I”).
The subcontractor had sought the same amount of
damages against the surety and its principal, the prime
contractor, based on quantum meruit recovery, arguing that
because of “the piecemeal adverse uncontemplated
performance of 25 months versus the eight months the parties
originally contemplated, the judgment should be the same
against both defendants, although the judgment could only be
collected once.” ACC Br. 74 (Oct. 11, 2019). Moreover,
according to the subcontractor, “there would be no double
recovery as Hirani is probably insolvent and judgment proof
[having] . . . assigned all of its assets under a standard
indemnity agreement to Colonial.” ACC Reply Br. 1 n.1 (Feb.
11, 2020).
The district court acknowledged that the subcontractor’s
Miller Act claim seeks both “monetary compensation for work
performed beyond what the Subcontract called for” and “also
. . . the unpaid amounts that [it] claims it is owed for work
performed under the Subcontract,” which it described as
“contract damages.” Hirani I, 263 F. Supp. 3d at 115 n.7. The
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district court did not indicate whether any (or what part) of the
Miller Act award against the surety is only for work performed
beyond that specified in the subcontract. On remand the
district court can clarify whether there would be any
impermissible double recovery in light of the subcontractor’s
revision, if any, to its damages calculation of December 10,
2018.
B.
The subcontractor renews its contention that the district
court erred in denying recovery for its superintendent’s on-site
labor. ACC Br. 64-66 (Oct. 11, 2019); ACC Reply Br. 2-9
(Feb. 11, 2020).
Miller Act payment bonds cover “[e]very person that has
furnished labor or material in carrying out work provided for
in a contract.” 40 U.S.C. § 3133(b)(1). The Act does not define
the term “labor,” and the issue is one of first impression for this
court. The district court and the parties agree that “labor” can
include “skilled professional work which involves actual
superintending, supervision, or inspection at the job site.”
Colonial Reply Br. 26 (Dec. 18, 2019) (quoting United States
ex rel. Olson v. W.H. Cates Constr. Co., 972 F.2d 987, 990 (8th
Cir. 1992)); see United States ex rel. Am. Civ. Constr., LLC v.
Hirani Eng’g & Land Surveying, P.C., 345 F. Supp. 3d 11, 50
(D.D.C. 2018) (“Hirani II”); ACC Br. 66 (Oct. 11, 2019). The
subcontractor maintains that this is the end of the inquiry:
“[L]abor” includes work by “an actual superintendent or
supervis[or] at the job site, and excludes off-site professionals
such as an architect or engineer.” ACC Br. 66 (Oct. 11, 2019).
The surety challenged the notion that mere on-site presence
constituted “labor” by a superintendent. Colonial Reply Br. 26
(Dec. 18, 2019). The district court essentially agreed, ruling
that “the on-site supervisory work of a project manager falls
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within the purview of the Miller Act if such a superintendent
did some physical labor at the job site.” Hirani II, 345 F. Supp.
3d at 50 (quoting W.H. Cates, 972 F.2d at 991).
Both the subcontract and government quality control
standards for the Project required the preparation of daily
reports certifying the work’s progress. Subcontract at ¶ 16.1
(Suppl. App. 2402 (Oct. 11, 2019)); Contractor Quality Control
Plan at ¶ 7.2 (Suppl. App. 2494-95 (Oct. 11, 2019)). The daily
form submitted by the subcontractor pursuant to the
subcontract required “verif[ication]” of the “manpower and
equipment . . . present at [the] site” and “confirm[ation of] . . .
the work performed at [the] site.” See, e.g., Daily Manpower,
Equipment, and Field Overhead Tracking Form for Field
Verification (Feb. 21, 2013) (“Form”). The subcontractor
explained that because “construction activities have to be
continuously supervised, inspected and ultimately certified as
being in conformance with the contract requirements,” ACC
Reply Br. 7-8 (Feb. 11, 2020), its superintendent had to be on-
site to account for, among other things, hours worked by crew
members, usage and standby hours for each piece of
equipment, materials delivered, weather throughout the day,
and all work performed, see Form. These on-site
responsibilities reflected the government’s quality control
standards, under which the superintendent as “the most senior
site manager at the project, is responsible for the overall
construction activities at the site . . . includ[ing] all quality,
workmanship, and production of crews and equipment.”
Contractor Quality Control Plan at ¶ 4.4 (Suppl. App. 2478-79
(Oct. 11, 2019)). The superintendent is therefore required to
“maintain a physical presence at the project site at all times”
and “may only be absent from the project for short periods of
time.” Id. In addition, the superintendent supervised the traffic
flow along 17th Street adjacent to the work site. Trial Tr. at
102:23-103:3 (Mar. 7, 2018 AM). At trial, the subcontractor
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also presented expert testimony that the reasonable value of the
superintendent’s services was $3,000 per week, for a total of
$306,000 over the course of the project. See id. at 100:9-13;
ACC’s Proposed Findings of Fact & Conclusions of Law 58,
ECF No. 82 (Apr. 13, 2018).
The surety challenged this evidence, asserting that the
subcontractor offered nothing to show that the superintendent
performed “labor” within the meaning of the Miller Act,
Colonial’s Proposed Findings of Fact & Conclusions of Law
51-54, ECF No. 83 (Apr. 13, 2018), and that the
subcontractor’s expert’s calculation of the value of the
superintendent’s services was “grossly unreasonable,”
exceeding weekly rates for superintendents across the United
States, id. at 53. The district court noted the objection to the
reasonableness of the weekly rate, Hirani II, 345 F. Supp. 3d
at 49, but in denying recovery relied on the absence of evidence
the superintendent performed physical on-site labor, id. at 50.
Other courts have taken into account the nature of a
superintendent’s oversight responsibilities in concluding that a
superintendent’s cost was compensable “labor.” Referencing
the trend in other courts, the Eighth Circuit concluded that “the
on-site supervisory work of a project manager falls within the
purview of the Miller Act if such a superintendent did some
physical labor at the job site or might have been called upon to
do some on-site manual work in the regular course of his job.”
W.H. Cates, 972 F.2d at 991 (emphasis added); see id. at 990-
91 (citing cases from the Third, Fourth, Fifth, and Ninth
Circuits). That is, “only certain professional supervisory work
is covered by the Miller Act, namely, ‘skilled professional
work which involves actual superintending, supervision, or
inspection at the job site.’” Id. at 990 (quoting United States
ex rel. Naberhaus-Burke, Inc. v. Butt & Head, Inc., 535 F.
Supp. 1155, 1160 (S.D. Ohio 1982)). The Eighth Circuit
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acknowledged that the term labor generally includes physical
rather than professional work but distinguished those
professionals who superintend on-site as performing labor. Id.(citing United States ex rel. Farwell, Ozmun, Kirk & Co. v.
Shea-Adamson Co., 21 F. Supp. 831, 837 (D. Minn. 1937)
(relying on state and federal cases)).
Given that the construction work at issue had to be
supervised and inspected for conformance with the subcontract
and other requirements, such as government quality control
standards, the superintendent’s on-site supervisory work
constitutes “labor” within the meaning of the Miller Act. In
Mining Co. v. Cullins, 104 U.S. 176 (1881), the Supreme Court
interpreted “labor” under a territorial mechanic’s lien law to
include the work of an on-site superintendent. Id. at 177. Such
a construction is consonant with the Miller Act’s remedial
purpose. MacEvoy, 322 U.S. at 107.
Accordingly, the court affirms the judgment of the district
court in part but reverses and remands in part to allow the
district court to determine whether there is any impermissible
double recovery and to award the reasonable value of the
superintendent’s on-site services under the Miller Act.