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Rock Roofing LLC v. Travelers Casualty and Surety Company of America

United States District Court, D. New Mexico

September 16, 2019

ROCK ROOFING, LLC, an Arizona limited liability company, Plaintiff,



         This lawsuit requires the Court to determine whether a non-signatory surety may enforce the arbitration provision in a subcontract entered into between a subcontractor and a prime contractor, where the subcontractor has brought suit against the surety pursuant to a payment bond that provides for a right to bring a lawsuit in the event of nonpayment. The Court finds that under the facts of this case, the surety may enforce the arbitration agreement under a theory of equitable estoppel and that the arbitration provision must be exercised before the subcontractor can bring suit pursuant to the payment bond, as the right to bring suit is derived from the terms of the subcontract.

         I. Factual Background [1]

         In June 2016, Spring River Apartments Limited Partnership LLLP (Spring River) contracted with ICON Professional Building Co., LLC dba ICON Builders Southwest (ICON) to construct the Spring River Apartments (the Spring River Contract). (Doc. 13 (Am. Compl.) ¶ 12; see also Doc. 20-1.) Travelers Casualty and Surety Company of America (Defendant), a Connecticut corporation (Am. Compl. ¶ 2), issued a payment bond to ICON “in the amount of $15, 579, 521.00 to cover [ICON's] obligation to ‘pay for labor, materials, and equipment' furnished for use in the performance of the Spring River Contract.” (Id. ¶ 13 (quoting Doc. 13-1 at 2).)

         In August 2016, ICON entered into a subcontract with Rock Roofing, LLC (Plaintiff), an Arizona limited liability company (id. ¶ 1), “to furnish the labor, materials, and equipment required to roof the Spring River Apartments.” (Id. ¶ 16 (citing Doc. 13-2).) Plaintiff alleges that ICON has failed to pay it pursuant to the subcontract and several change orders. (See Id. ¶¶ 18-35; see also Docs. 13-2; 13-3.) Plaintiff filed a Mechanic's Claim of Lien with the County Clerk of Chaves County, New Mexico on December 1, 2017. (Am. Compl. ¶ 44; see also Doc. 13-4.) On December 11, 2017, ICON filed a Petition to Cancel Lien in the state district court. See ICON Prof'l Bldg. Co. v. Rock Roofing, LLC, No. D-504-CV-2017-01205, Pet. (5th Jud. Dist. Ct. Dec. 11, 2017). The state district court granted ICON's petition on December 20, 2017, and ordered ICON to deposit one and one-half times the Lien amount into the state court's registry as a security bond. (Am. Compl. ¶¶ 46-47; see also Doc. 13-5.) Defendant issued the Bond to Release Mechanic's Lien as required. (Am. Compl. ¶ 48 (citing Doc. 13-6).) Plaintiff asserts that it is owed $971, 183.55 plus interest and “is entitled to have the Bond foreclosed against ICON and the proceeds thereof applied in payment of the amount due” pursuant to N.M. Stat. Ann. § 48-2-9(C). (Id. ¶¶ 49-50.)

         Plaintiff filed suit in this Court on December 18, 2018. (Doc. 1.) Plaintiff asserted that the Court has jurisdiction over the lawsuit pursuant to the Miller Act, 40 U.S.C. §§ 3131-3134. (Id. ¶ 4.) It filed an Amended Complaint on March 1, 2019, and added an allegation that the Court also has diversity jurisdiction. (See Am. Compl. ¶¶ 1-3, 5.) Plaintiff asserts two claims: (1) that it is entitled, pursuant to the Miller Act, to collect on the payment bond (id. ¶¶ 36-42); and (2) that it is entitled, pursuant to N.M. Stat. Ann. § 48-2-9(C), to have the Bond to Release Mechanic's Lien foreclosed and the proceeds applied to the amount it is owed from ICON (id. ¶¶ 43-50).

         Defendant moves to dismiss Count I on the basis that Plaintiff has failed to state a claim under the Miller Act. (See Doc. 10 at 4-5.) It also moves the Court to dismiss the Amended Complaint or for an order staying and compelling arbitration. (See Id. at 5-9.) ICON moves, pursuant to Federal Rule of Civil Procedure 24(a)(2), to intervene in the lawsuit. (See Doc. 24.)

         II. The Court will grant Defendant's motion to dismiss Count I.

         A. Motion to Dismiss Standard

          In reviewing a motion to dismiss under Rule 12(b)(6), the Court “must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff.” In re Gold Res. Corp. Sec. Litig., 776 F.3d 1103, 1108 (10th Cir. 2015) (citation omitted). To survive a motion to dismiss, the complaint does not need to contain “detailed factual allegations, ” but it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)).

         “[W]hile ordinarily, a motion to dismiss must be converted to a motion for summary judgment when the court considers matters outside the complaint, see Fed. R. Civ. P. 12(d), matters that are judicially noticeable do not have that effect . . . .” Genesee Cty. Emps.' Ret. Sys. v. Thornburg Mortg. Sec. Tr. 2006-3, 825 F.Supp.2d 1082, 1122 (D.N.M. 2011) (citing Duprey v. Twelfth Judicial Dist. Court, 760 F.Supp.2d 1180, 1192-93 (D.N.M. 2009)).

Exhibits attached to a complaint are properly treated as part of the pleadings for purposes of ruling on a motion to dismiss. . . . [F]acts subject to judicial notice may be considered in a Rule 12(b)(6) motion without converting the motion to dismiss into a motion for summary judgment. This allows the court to take judicial notice of its own files and records, as well as facts which are a matter of public record. However, the documents may only be considered to show their contents, not to prove the truth of matters asserted therein.

Id. at 1122-23 (quoting Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006)). Thus, the Court may consider the exhibits Plaintiff attached to and referenced in its Amended Complaint. (See Docs. 13; 13-1-13-6.)

         The Court may also consider the Spring River Contract that Plaintiff attached to its response brief, as the contract “is referred to in the complaint and is central to the plaintiff's claim . . . .” Radian Asset Assurance Inc. v. Coll. of the Christian Bros. of N.M., No. CIV 09-0885 JB/DJS, 2011 WL 10977180, at *17 (D.N.M. Jan. 24, 2011) (quotation and subsequent citations omitted); see also Raja v. Ohio Sec. Ins. Co., 305 F.Supp.3d 1206, 1238 n.9 (D.N.M. 2018). Plaintiff cites to the Spring River Contract throughout the Amended Complaint (see Am. Compl. ¶¶ 12-15, 37-39, 42), and Defendant does not dispute its authenticity (see Doc. 21).

         B. Plaintiff has not sufficiently alleged a claim under the Miller Act.

         Plaintiff brings its first claim for collection on the payment bond under the Miller Act, 40 U.S.C. § 3131(b)(2). (Am. Compl. ¶ 37.) Defendant argues that Plaintiff has not alleged facts sufficient to maintain a claim under the Miller Act. (See Doc. 10 at 2.) “The Miller Act, 40 U.S.C. § 3131 et seq., requires that before a contract of more than $100, 000 is awarded for construction, alteration or repair of any public building or public work of the U.S. Government, a performance bond and payment bond must be supplied, which become binding once the contract is awarded.” United States for use of Sundance Roofing, Inc. v. HDR Enters., LLC, No. CIV 09-00441-MV-WDS, 2010 WL 11626653, at *2 (D.N.M. Mar. 30, 2010) (citing 40 U.S.C. § 3131). The Miller Act “provide[s] a remedy for suppliers of labor and material to a ...

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