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United States v. Alacran Contracting, LLC

United States District Court, N.D. Illinois, Western Division

March 13, 2018

The United States of America, for the use and benefit of Alliance Mechanical, Inc., et al., Plaintiffs,
Alacran Contracting, LLC, et al., Defendants.



         It is this Court's Report and Recommendation that Plaintiff's complaint be dismissed as untimely. It is further this Court's recommendation that Liberty Mutual Insurance Company's Motions in Limine [297] [298] be denied. Any objection to this Report and Recommendation must be filed by March 27, 2018. Failure to object may constitute a waiver of objections on appeal. See Provident Bank v. Manor Steel Corp., 882 F.2d 258, 260 (7th Cir. 1989).


         I. Background

         Plaintiff, Alliance Mechanical, Inc. (“Alliance”), brings this action against Defendants, Alacran Contracting, L.L.C. (“Alacran”) (as assignee of Weatherproofing Technologies, Inc. (“WTI”))[1] (Counts I & II) and Liberty Mutual Insurance Co. (“Liberty”) (Count I only). Liberty is the surety under a payment bond (“Bond”) which Alacran was required to provide under the Miller Act as the prime contractor on a project to renovate the Bachelor Officers' Quarters at Fort McCoy, Wisconsin (“the Project”). WTI was a subcontractor on the Project. Alliance was a plumbing subcontractor to WTI on the Project.

         The Miller Act provides that on any contract of more than $100, 000 for “the construction, alteration, or repair of any public building or public work of the Federal Government” the contractor must supply “[a] payment bond with a surety satisfactory to the officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person.” 40 U.S.C. § 3131(b)(2). A payment bond, in the penal sum of $1, 313, 429.60 was supplied for the Project with Alacran as principal and Liberty as surety, binding both principal and surety jointly and severally. In Count I of its Second Amended Complaint, Alliance seeks to recover from Liberty under the payment bond for sums Alliance claims are due from Alacran for labor and materials supplied on the Project prior to April 7, 2009. See Alliance's Second Amended Complaint at 3, Dkt. 56-1.

         On April 7, 2015, Judge Reinhard entered an order of default against Alacran. Apr. 7, 2015 Court order, Dkt. 163. On July 18, 2016, Judge Reinhard ruled on the remaining parties' cross-motions for summary judgment. See July 18, 2016 Court Order, Dkt. 248. Judge Reinhard denied Alliance's and Liberty's cross-motions. Id. Judge Reinhard found that Liberty presented evidence suggesting Alliance's claim was untimely filed, but determined there was a genuine issue of material fact as to the date labor or materials were last supplied. Id. Judge Reinhard encouraged the parties to reevaluate the possibility of settlement or proceed with an evidentiary hearing to determine whether the action was timely filed. Id. The parties were unable to resolve this case with a settlement. Accordingly, Judge Reinhard referred this case to the undersigned for an evidentiary hearing on the issue of timeliness. Feb. 3, 2017 Minute Entry, Dkt. 263.

         On October 11, 2017, the Court held the evidentiary hearing. Alliance and Liberty submitted trial briefs before the hearing and several exhibits were admitted during the hearing. Alliance's Trial Brief, Dkt. 268; Alliance's Exhibits, Dkt. 270; Liberty's Trial Brief, Dkt. 271; Liberty's Exhibits, Dkt. 301. Alliance stood on the evidence it presented in a related case in which another subcontractor (Sunlee) on the same Project similarly sought to recover from Alacran. See Case No. 10 CV 50067.[2] Specifically, Alliance relies on the affidavit of Ryan Cole (Sunlee's general manager) with attachments that included subcontractor invoices, and the deposition testimony of Fort McCoy employee Mary Purpus with attached contract progress reports and contract inspection forms for the Project.[3] Alliance's Exhibit List, Dkt. 270.[4] Liberty called Ryan Cole, Dai Bui (Alacran's owner), and James Kocourek (Sunlee's former construction administrator) during the hearing.

         II. Discussion

         On March 17, 2010, Alliance filed its original complaint for damages under the Miller Act, 40 U.S.C. §§ 3131-34. The Miller Act requires that “[a]n action brought under this subsection must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.” 40 U.S.C. § 3133(b)(4). “The [Act] is remedial and to be liberally construed, but the giving of notice and bringing of suit within the prescribed time is a condition precedent to the right to maintain the action.” United States ex rel. Material Serv. Div. of Gen. Dynamics Corp. v. Home Indem. Co., 489 F.2d 1004, 1005 (7th Cir. 1973). Accordingly, to be timely filed on March 17, 2010, the last labor performed or material supplied by Alliance must have occurred by March 17, 2009.

         As Judge Reinhard previously determined, Alliance has the burden to prove that its action was timely filed. See July 18, 2016 Court Order at 3, Dkt. 248; see also Nov. 22, 2016 Court Order at 2, Dkt. 258 (upholding that finding after a motion to reconsider). Moreover, to collect under the Miller Act, Alliance must prove the following elements: (1) that labor and materials were supplied for work in the particular contract at issue; (2) that the supplier is unpaid; (3) that the supplier had a good faith belief that the labor and materials were for the specified work; and (4) that the jurisdictional requirements were met, namely that Alliance filed the instant complaint within the one year statute of limitations period. See United States ex rel. Aldridge Electric Co. v. Pickus Construction & Equipment Co., 98 C 3261, 2000 U.S. Dist. LEXIS 1511, at *8 (N.D. Ill. Feb. 7, 2000), remanded by 249 F.3d 664 (7th Cir. 2001); United States ex rel. Allied Roofers Supply Corp. v. Blinderman Construction Co., No. 86 C 5655, 1986 U.S. Dist. LEXIS 16257, at *4 (N.D. Ill.Dec. 18, 1986). The parties' dispute is limited to the fourth element.

         Alliance argues that it provided labor and materials to the Project as late as April 7, 2009, [5] the date it was terminated from the Project.[6] In contrast, Liberty argues that Alliance's last day was March 6, 2009, the date Liberty contends that Alliance abandoned the Project. Accordingly, the Court must determine whether Alliance furnished labor or materials through March 17, 2009, one year before it filed suit, or whether it abandoned the Project earlier as asserted by Liberty.

         It was Alliance's burden at the hearing to show that it performed labor or supplied materials on March 17, 2009 or later. Alliance claims to have presented “irrefutable evidence establishing that subcontractors were indeed working and supplying materials or equipment rentals on and after March 17, 2009, making the complaint timely as a matter of law.” Alliance's Trial Brief at 2, Dkt. 268. Alliance asserts that in determining the last day of work on the Project, “the Court must consider any work performed by any subcontractors.” Id. (emphasis added). Accordingly, Alliance focuses on the work of Sunlee's subcontractors to satisfy the statute of limitations.

         In advance of the hearing, Alliance provided an affidavit from Ryan Cole stating that seven Sunlee subcontractors provided labor and/or materials to the Project through March 25, 2009. Ryan Cole's Affidavit dated Jan. 5, 2016, Dkt. 270-4. Attached to the affidavit were invoices from the seven subcontractors. Exhibits A-H, Dkt. 270-4.[7] Ryan Cole averred that the subcontractor invoices “are all records made and kept in the course of Sunlee's regularly conducted business activity, are records that are routinely made or received and kept in the course of Sunlee's business, in the [sic] Sunlee's usual practice, were made or received at or near the time of the event that they record, and were made or received by a person with knowledge, or from information transmitted by a person with knowledge, and who reported such knowledge in the regular course of business.” Ryan Cole's Affidavit dated Jan. 5, 2016, Dkt. 270-4 at 4.

         Liberty filed two Motions in Limine to bar the majority of Ryan Cole's affidavit and the attached invoices as either irrelevant or inadmissible hearsay. Liberty's Motions in Limine, Dkts. 297-298. The Court took these matters under advisement until after development of a factual record during the hearing.

         The Court rejects Liberty's first argument that this evidence is irrelevant under Federal Rules of Evidence 401 and 402. See Liberty's Motion in Limine, Dkt. 298. The Miller Act requires that “[a]n action brought under this subsection must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.” 40 U.S.C. § 3133(b)(4) (emphasis added). Furthermore, the labor and materials must by furnished “in carrying out work provided for in a contract.” 40 U.S.C. § 3133(b)(1). In this case, Alliance, not Sunlee, had a subcontract with WTI for work on the Project. See United States ex rel. Am. Civil Construction, LLC v. Hirani Engineering, 263 F.Supp.3d 99, 111 (D.D.C. 2017) (finding that “the statute of limitations begins to run when the subcontractor bringing suit ‘last' performed labor or supplied materials for ‘work provided for' in the subcontract”).

         Nevertheless, Alliance presented evidence during the parties' summary judgment briefing that Sunlee and Alliance had a cooperative agreement wherein they agreed to share personnel for work performed on the Project. Ryan Cole's Affidavit dated Nov. 16, 2015 at 3, Dkt. 206-11; see also Exhibit 1 (Cooperative Agreement), Dkt. 206-12. However, Sunlee and Alliance remained separate entities, and Sunlee did not have a contract with WTI. See July 18, 2016 Court Order at 5, 7, Dkt. 248. Accordingly, Judge Reinhard previously determined that “Sunlee was providing labor and supplies to the project through its cooperative agreement with Alliance not through any direct relationship with WTI.” Id. Therefore, although not explained at the evidentiary hearing, the Court finds this evidence sufficient for Alliance to rely on the work of Sunlee when determining timeliness. The Court recommends denying Liberty's Motion in Limine to bar the evidence.

         As to Liberty's argument about hearsay, at the hearing, Ryan Cole testified that Sunlee received the attached invoices, but that he relied on the subcontractors to provide proper billing and invoicing. Ryan Cole further testified that he called most of the subcontractors sometime in March 2009. Ryan Cole testified that he typically spoke with the owner of the business or someone in their accounting department, but for these calls was unsure whom he spoke with. He also did not ask the subcontractors how they prepare their invoices or records and did not recall what specific invoices he spoke with the subcontractors about. He testified that subcontractors generally send an invoice within 30 days of service, sometime sooner, but he never testified that he confirmed any of the work or materials on these seven subcontractors' invoices was performed or provided on or after March 17, 2009.

         Pursuant to Federal Rule of Evidence 902(11), Ryan Cole's affidavit relating to the attached invoices must meet the requirements set forth in Federal Rule of Evidence 803(6)(A)-(C), “as shown by certification of the custodian or another qualified person” that:

“(A) the record was made at or near the time by-or from information transmitted by-someone with knowledge;
(B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or ...

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