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United States v. David Boland, Inc.

United States District Court, D. Hawaii

June 28, 2019

UNITED STATES for the use and benefit of KINGSTON ENVIRONMENTAL SERVICES, INC., a Missouri corporation, Plaintiff,
v.
DAVID BOLAND, INC., WESTERN SURETY COMPANY, GRANITE PRECASTING & CONCRETE, INC., and HAWAII GEOPHYSICAL SERVICES, LLC, Defendants, and UNITED STATES for the use and Benefit of DAVID BOLAND, INC. Counterclaim Plaintiff,
v.
KINGSTON ENVIRONMENTAL SERVICES, INC. and BERKELY REGIONAL INSURANCE COMPANY, Counterclaim Defendants.

          ORDER GRANTING PLAINTIFF'S MOTION TO LIFT STAY

          Derrick K. Watson, Judge

         INTRODUCTION

         Plaintiff Kingston Environmental Services, Inc. (“Kingston”) moves to lift the stay of its action against Defendants Western Surety Company and David Boland, Inc. (“Boland” and together with Western Surety, the “Defendants”). Kingston is Boland's subcontractor on a military construction project on Oahu. Pursuant to this Court's August 2017 Order granting Defendants' Motion to Stay, over the course of the past two years, Kingston has pursued contractually-mandated administrative remedies for its breach of contract claims, obtaining contracting officer final decisions (COFDs) regarding the extent of the government's liability for those claims. Finding that Kingston has satisfied its contractual obligation to exhaust administrative remedies prior to proceeding with its civil action against Boland, the Court GRANTS Plaintiff's Amended Motion to Lift Stay (Dkt. No. 169).

         BACKGROUND

         I. The Project and Subcontract

          Boland is the prime contractor (Contract No. W9128A-12-C-0009 or “Prime Contract”) on an infrastructure construction project for the United States Army Corps of Engineers (“USACE”) at Wheeler Army Airfield, Oahu, Hawaii (the “Project”). Defendant Western Surety issued performance and payment bonds on behalf of Boland for the Project. Complaint, Dkt. No. 1, ¶¶ 10-11. Boland subcontracted with Kingston to provide labor, materials, equipment, and services (“Subcontract”).[1]

         Kingston contends that Boland mismanaged the Project, which had an original completion date of approximately May 2015. Boland acknowledges that the Project was behind schedule, and that its management of the Project may have been “below average” due to its “strained relationship” with the government but asserts that the majority of the issues forming the basis for Kingston's claims against Boland are issues for which the USACE is or may be responsible. Kingston Ex. A, 7/19/17 Hildebrandt Dep. at 83-85; Dkt. No. 134-1.

         Kingston filed this action on April 29, 2016 seeking payment from Western Surety of its bonds under the Miller Act, 40 U.S.C. § 3133 et seq., (Count I) and alleging that Boland breached the Subcontract (Count II). Complaint ¶¶ 38-50.

         II. The Stay

         At the time it initiated this action, Kingston had not submitted requests to Boland to sponsor or submit to the government all claims for which the USACE might be responsible for Kingston's losses. See Order Granting in Part Defendants' Motion for Partial Summary Judgment and Staying Case (2017 Order), Dkt. No. 145, August 30, 2017. The parties disputed whether Kingston could pursue the claims asserted here prior to exhausting the remedial procedure specified in the Subcontract, as Kingston had done previously with other claims. Id.

         On June 16, 2017, Defendants filed a Motion for Summary Judgment, which argued that Kingston failed to comply with the contractually-mandated remedial procedure in Subcontract Paragraph 13A, which is a condition precedent to the present civil action. See Dkt. No. 115. Defendants moved to stay this action and enforce the administrative remedies outlined in Subcontract Paragraph 13A, which provides that any claims by Kingston against Boland for which the USACE “may be responsible” must be pursued first by Boland on behalf of Kingston through the remedial procedures set forth in the Prime Contract between Boland and the USACE. Paragraph 23 of the Subcontract, entitled “Waivers and Stays, ” provides that Kingston agrees to stay any action pending the completion of the Prime Contract's remedial procedure as required by Paragraph 13. Finding that Kingston was contractually obligated to exhaust claims for which the USACE might bear responsibility, this Court stayed proceedings.

         Since August 2017, Kingston has pursued its claims administratively, submitting the following seven claims to the contracting officer:

1. CP-141.7 Cost Overrun Claim
2. CP-141.1 UXO Claim
3. CP-141.2 FPVC ...

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