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KBW Associates, Inc. v. Jaynes Corporation, Inc.

United States District Court, D. Nevada

February 13, 2015

KBW ASSOCIATES, INC., Plaintiff,
v.
JAYNES CORPORATION, INC., et al., Defendants.

ORDER

C. W. HOFFMAN, Jr., Magistrate Judge.

This matter is before the Court on Defendants' Motion to Stay Litigation (#31), filed June 2, 2014; Plaintiff/Counterdefendant KBW Associates, Inc. and Third-Party Defendant International Fidelity Insurance Company's Response (#35), filed June 18, 2014; and Defendants' Reply (#38), filed July 3, 2014.

BACKGROUND

The complaint in this matter was filed on September 26, 2013. (#1). The allegations are straightforward. In 2009, Defendant Jaynes Corporation, Inc. ("Jaynes") contracted with the United States Army Corps of Engineers ("COE") to construct additions to existing buildings at Creech Air Force Base, located in Indian Springs, Nevada. The construction project was initially scheduled to begin in 2009, with completion scheduled for early 2011. Plaintiff KBW Associates, Inc. ("KBW") began negotiating to construct the metal framing and outer shell of the buildings with Jaynes in May 2011, and entered into a subcontract for the construction of the same on August 11, 2011. See Compl. (#1) at ¶¶ 7-10.

KBW alleges that during the negotiation of the contract Jaynes represented that the contracted work would be performed during the time period of November 2011 through April 2012. Compl. (#1) at ¶ 13. Shortly after entering into the contract, KBW alleges that it procured shop drawings for Jaynes review and approval, but the work was delayed by Jaynes failure to promptly review and approve the shop drawings. Once approved, KBW alleges that it promptly ordered the materials necessary to begin construction but, upon commencement of construction, was delayed by various conditions imposed by Jaynes that were contrary to the terms of the contractual agreement. Id. at ¶¶ 14, 15. The resulting delay is characterized as a "pattern of mismanagement" evidenced by (1) failure to timely approve work, (2) unilateral imposition of work beyond the contractual requirements, and (3) improper work scheduling. Id. at ¶ 16. KBW seeks damages for (1) breach of contract, (2) unjust enrichment, and (3) breach of the implied covenant of good faith and fair dealing. Id. at ¶¶ 20-40.

Jaynes acknowledges that it entered into a contract with the COE for work to be performed at Creech Air Force Base, and that it subcontracted with KBW on the project. (#8) at ¶¶ 7-10. Jaynes denies all allegations that it mismanaged the project or that KBW is entitled to damages or proceeds from the bond. Jaynes asserts several affirmative defenses and has filed counterclaims for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, and (3) unjust enrichment. The affirmative defenses and counterclaims are based generally on allegations that KBW failed to perform material requirements of the contract, failed to meet construction schedules, failed to perform as directed by the contract, failed to cure deficient work, failed to warranty work, and abandoned the project prior to completion. Jaynes also filed a third-party complaint against International Fidelity Insurance Company ("International Fidelity"), alleging that it issued a performance bond in favor of Jaynes and is obligated to remedy KBW's default and breach, perform KBW's outstanding scope of work, or pay all amounts incurred by Jaynes to remedy the alleged breach.[1]

On December 20, 2013, Jaynes filed a proposed discovery plan and scheduling order requesting an additional six months beyond the standard deadlines to complete discovery. The additional time being necessary to allow Jaynes to negotiate a dispute with the COE regarding a liquidated damages assessment under the prime contract.[2] Though initially approved, the scheduling plan was later withdrawn and the parties instructed to submit a new plan. The parties disagreed on the length of discovery, Jaynes seeking a twelve-month discovery period and KBW seeking the standard six-month discovery period. After consideration of the parties respective positions, the Court adopted the standard time periods for discovery as measured from the date the proposed plan was filed.

Approximately four months after entry of the scheduling order, the parties submitted a stipulation to extend the discovery deadlines. (#29). The basis for the requested extension was the continued attempts to resolve the dispute between Jaynes and the COE. The parties indicated that they were attempting to reach an agreement on a stay to accommodate the ongoing dispute with the COE. Other than initial disclosures made pursuant to Rule 26(a)(1), the parties had not engaged in any substantive discovery at the time the stipulation was filed. The requested extension was approved. (#30).

Shortly thereafter, Jaynes filed its motion to stay the litigation pending resolution of its dispute with the COE. In the motion, the primary basis for the stay is identified as the contract between KBW and Jaynes.[3] Jaynes notes that KBW has asserted a Miller act claim against it and that the COE has asserted claims of delay and assessed liquidated damages of approximately $410, 000.00 against Jaynes in separate litigation ("Corps litigation"). Jaynes argues that KBW is, at least in part, responsible for some of the delay that resulted in the liquidated damages assessment and asserts that this litigation should be stayed pending resolution of Corps litigation. Because Jaynes is actively contesting the liquidated damages assessment in the Corps litigation, it claims that KBW is contractually obligated to agree to a stay. Jaynes represents that if the Corps litigation is "resolved" in its favor, this litigation can continue. However, if the Corps litigation is not "resolved" in Jaynes favor, the decision will likely be appealed and "Jaynes does not and cannot know how long the appeals process will likely take to be resolved." (#31) at 6:19-21. Jaynes asserts that the claims of this litigation and the Corps litigation are so "intimately woven" together that "[t]o attempt to litigate and resolve these actions separately would be an unnecessary use of judicial resources, and cause the parties' to incur unnecessary time, expense, and effort." Lastly, Jaynes suggests that to allow this litigation and the Corps litigation to continue simultaneously would increase the "risk of inconsistent verdicts" creating potentially conflicting liabilities.

KBW opposes the motion claiming it is based on nothing more than an incorrect, unilateral interpretation of the subcontract. (#35) at 2:22-23. Setting aside the allegedly improper reliance on an allegedly inapplicable contractual provision, KBW asserts that Jaynes did not meet its burden to show that a stay is appropriate. According to KBW, Jaynes is using the Corps litigation as leverage in this dispute without providing any substantive support that the two are related. KBW further asserts that a stay in this litigation in favor of the Corps litigation would be unfairly prejudicial, as KBW is not permitted to participate in the Corps litigation and the request for stay is untimely. Lastly, KBW asserts that there is no basis for a fee award based on the alleged breach of contract.

In reply, Jaynes reiterates its position that KBW is contractually obligated to agree to a stay. Jaynes continues to characterize this litigation and the Corps litigation as "concurrent actions, " and argues that KBW's claims will be directly impacted by the outcome in the Corps litigation, which addresses the liquidated damages assessment against Jaynes. The two actions are intertwined, according to Jaynes, because (1) KBW's delays and misconduct in performance of the contract are the reason for the liquidated damages assessment from the COE and (2) KBW's delay damages, if any, were caused by the COE, not Jaynes. Thus, permitting this litigation to continue without a stay would result in the avoidable expenditure of unnecessary and duplicative time, expense, and effort. Whereas, granting the stay would eliminate the potential for conflicting liabilities and damages because Jaynes liability to KBW, if any, cannot be determined until a final determination is made in the Corps litigation. Jaynes does not dispute that it has withheld payment to KBW while awaiting determination of a liquidated damages assessment. Even if the contractual provision to agree to a stay does not apply, Jaynes argues a stay is appropriate as "KBW has not identified any cognizable harm or prejudice from a stay" in permitting the Corps litigation to be resolved before the claims of KBW, a lower-tiered subcontractor, are adjudicated.

DISCUSSION

A court has broad discretionary authority to control its own docket, which extends to the issuance of a stay. See Landis v. North American Co., 299 U.S. 248, 254 (1936).[4] This power to stay is "incidental to the power inherent in every court to control the disposition of the causes of action on its docket with economy of time and effort for itself, for counsel, and for litigants." Id. The moving party bears the burden of demonstrating that a stay is warranted. See Clinton v. Jones, 520 U.S. 681, 708 (1997). In evaluating whether a stay should be granted, courts consider the competing interests at stake, including (1) the possible damage which may result from a stay, (2) the hardship or inequity which a party may suffer in being required to go forward, and (3) "the orderly course of justice measured in terms of simplifying or complicating the issues, proof, and questions of law which could be expected to result from a stay." Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005). The Ninth Circuit has held that a stay pending resolution of an independent proceeding which bears upon the case is appropriate regardless of whether the separate proceedings are judicial administrative, or arbitral in nature. Leyva ...


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