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United States v. Integrated Construction Technology Corp.

September 28, 2007

UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF COUNTRYSIDE INDUSTRIES, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
INTEGRATED CONSTRUCTION TECHNOLOGY CORPORATION, MOTA CONSTRUCTION COMPANY, INTEGRATED/MOTA JOINT VENTURE, SAFECO INSURANCE CO. OF AMERICA, AND CONTINENTAL CASUALTY CO., DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Countryside Industries, Inc. ("Countryside") has brought this action against Defendants Integrated Construction Technology Corporation ("Integrated"), Mota Construction Company ("Mota"), Integrated/Mota Joint Venture ("IMJV"), Safeco Insurance Co. of America ("Safeco"), and Continental Casualty Co. ("Continental") to enforce rights under the Miller Act.

40 U.S.C.A. § 3131. Invoking the court's supplemental jurisdiction, Countryside also asserts a breach of contract claim against Integrated, Mota, and IMJV, or, in the alternative, a quantum meruit and unjust enrichment claim against these same parties. Before this Court is Defendants' Motion to Stay Pending Mediation. Because Defendants have not demonstrated the existence of an agreement to mediate, the Motion is denied.

Factual Background

In early 2005, the United States Department of the Navy awarded IMJV, a joint venture between Integrated and Mota, a contract to make various improvements to the Great Lakes Naval Station in Great Lakes, Illinois (the "Naval Station"). (Pl.'s Cplt. ¶ 9.) In accordance with the provisions of the Miller Act,*fn1 IMJV secured bonds from Safeco and Continental for the project. Id. at ¶ 10. IMJV also solicited bids from commercial landscaping companies to supply the various landscaping materials and services that would be required. Id. at ¶ 11.

On June 29, 2005, Countryside submitted a bid to IMJV for certain landscaping work at the Naval Station. (Gabler Decl. at ¶ 3, attached as Exh. 1 to Pltf.'s Opposition to Mtn. to Stay.) In response to a request from IMJV, Countryside submitted a new bid on July 1, 2005. IMJV responded to the new bid with a Letter of Intent dated July 13, 2005 (the "July 13 Letter") that notified Countryside of IMJV's intent to enter into a subcontract with the firm for certain landscaping work at the Naval Station. The July 13 Letter stated that it was "solely a Letter of Intent of award of a contract to your firm, and not a contract as such." (July 13 Letter, Exh. C to Gabler Decl.) The July 13 Letter further advised that "[t]here is no obligation on the part of Integrated/Mota J.V. unless a subcontract agreement is signed by both parties." Id.

Countryside began work on the landscaping work at the Naval Station on July 18, 2005. (Eichhorn Decl. at ¶ 2, attached as Exh. A to Def.'s Reply.) Subsequently, on July 25, 2005, IMJV sent its proposed version of the subcontract agreement (the "Subcontract Agreement") to Countryside. Id. at ¶ 3. Countryside received the Subcontract Agreement approximately one week later -- on or about August 1, 2005. (Gabler Decl. ¶ 6.)

Upon review, Countryside determined that several aspects of the Subcontract Agreement did not accurately reflect the terms of the bid it had submitted to IMJV. Id. Accordingly, Countryside did not sign and return the Subcontract Agreement; instead, Countryside modified the subcontract to indicate, among other things, that the turf that Countryside was to provide to IMJV would not be covered under warranty. Id. at ¶ 7. Edward Gabler, Countryside's Vice President of Operations, initialed each change that Countryside made to the Subcontract Agreement. Id. at ¶ 6. In a letter dated August 17, 2005, Countryside itemized these changes and stated that: "[t]he following changes/additions need to be accepted by you prior to execution & return of contract. Please indicate your acceptance and fax back. . . so that we may attach these changes to the contract." (Exh. D to Gabler Decl.) On August 22, 2005, Countryside sent this letter and the revised pages of the Subcontract Agreement to IMJV via Federal Express. (Pl.'s Compl. at ¶ 15 and Exh. A thereto; Gabler Decl. at ¶ 7.) IMJV did not return a signed copy of the modified contract to Countryside. For its part, IMJV maintains that it has no record of ever having received Countryside's proposed modifications. (Eichhorn Aff. at ¶ 4.)

During the course of roughly the next year, IMJV executed and delivered to Countryside seven separate change orders calling for work outside the original scope of the project. (Cplt. at ¶ 18; Pl.'s Resp. in Opp'n to Def.'s Mot. to Stay at Ex. 3). As of September, 1 2006, Countryside contends that IMJV was in default for failure to pay invoices when due and refused to process the necessary paperwork for change orders relating to extra work that IMJV had previously authorized and that Countryside had completed. (Cplt. at ¶ 22).

In early September of 2006, a dispute arose between the Navy and IMJV regarding IMJV's obligations under its contract with the Navy. (Pl.'s Compl. at ¶ 23.) In particular, the Navy demanded that IMJV provide sod at certain locations at the Great Lakes Naval Station as opposed to the less expensive hydroseeding that Countryside had already delivered and installed. Id. IMJV asked Countryside to submit a proposal for the delivery and installation of sod. Id. at ¶ 24. Countryside advised IMJV that it would not submit any proposals for additional work until IMJV cured its payment defaults and processed the necessary paperwork with respect to the change order work that Countryside had already performed. Id.

In a letter to Countryside, dated September 5, 2006, IMJV stated that the Navy had not accepted the condition of the turf that Countryside had installed and additionally that Countryside had refused to remedy this "unacceptable" turf. Id. at ¶ 25. On September 6, 2006, Countryside notified IMJV, Integrated, and Mota of its claims and the amount owed for work on the project. Id. at ¶ 29. Countryside also provided written notice to Safeco and Continental detailing its claim and the money it believed IMJV owed to the firm as a result of its prior work. Id. at ¶ 30. Neither Safeco or Continental paid any portion of Countryside's claim. Id. at ¶ 42.

On May 9, 2007, Countryside filed the this action seeking damages under: (1) the Miller Act; (2) for breach of contract; and (3) under a quantum meruit / unjust enrichment theory. On June 19, 2007, the Defendants filed a Motion to Stay Pending Mediation. In support of their motion, Defendants point to the Subcontract Agreement, which agreement contains a mediation provision requiring that:

Any controversy except those covered by the insurance required herein, arising out of or relating to this Agreement or the breach thereof shall be subject to mediation before any other legal proceedings can be initiated. . . . Any mediation shall include at the discretion of INTEGRATED/MOTA JOINT VENTURE, the Owner, any other applicable subcontractor, or any other party. (Def.'s Mtn. to Stay, Exh. A thereto at ΒΆ 10.7.) Defendants argue that this case arises ...


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