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United States v. Yack Construction, Inc.

United States District Court, D. Nevada

September 25, 2019

UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF AMERICAN GENERAL CONSTRUCTION, INC., and AMERICAN GENERAL CONSTRUCTION, INC. d/b/a AGC, INC., Plaintiffs,
v.
YACK CONSTRUCTION, INC., MERCHANTS BONDING COMPANY MUTUAL, and PAE APPLIED TECHNOLOGIES, LLC, Defendants.

          ORDER

          MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE.

         I. SUMMARY

         This is a contractual dispute between construction companies. Defendant Yack Construction, Inc. (“Yack”) was hired to construct a hangar at Creech Air Force Base (“the Project”) and subcontracted with Plaintiff American General Construction, Inc. (“AGC”) to carry out a portion of the Project. AGC completed part of its work, but then its relationship with Yack deteriorated. Yack terminated AGC and hired one of AGC’s former subcontractors to complete the work. Yack has refused to pay AGC, contending that AGC violated the contractual agreement that governed their relationship.

         The following motions are pending before the Court: (1) Defendants Yack and Merchants Bonding Company (Mutual)’s (“Merchants”) motion for summary judgment (ECF No. 47) and (2) Plaintiffs United States of America for the Use and Benefit of American General Construction, Inc. and AGC’s motion for partial summary judgment (ECF No. 48). The Court has reviewed the parties’ responses (ECF Nos. 51, 52) and replies (ECF Nos. 53, 54). The Court also held a hearing on the pending motions on September 24, 2019 (“the Hearing”). (ECF No. 59.) For the following reasons, the Court denies the parties’ motions.

         II. BACKGROUND

         The following facts are undisputed unless otherwise indicated.

         The United States Air Force entered into a Range Support Services Agreement with PAE Applied Technologies, LLC (“PAE”) in 2002. (ECF No. 52-4 at 2.) Under that agreement, PAE “provides a broad array of services to the Government at multiple locations on the Nevada Test and Training Range . . . [including] Creech Air Force Base.” (Id.) One of the services PAE provided was overseeing the construction of the Project. (Id. at 3.)

         PAE solicited proposals for the Project on October 6, 2016. (Id.) The request for proposals “expressly required bidders to obtain a Performance and Payment bond, as required under the Miller Act.” (Id.) PAE entered into an agreement with Yack on January 30, 2017 that made Yack primarily responsible for the Project and required Yack to obtain the bond required under the Miller Act.[1] (Id.) Yack obtained a bond in the amount of $3, 168, 122 from Merchants on April 5, 2017. (Id.)

         AGC submitted a proposal (“Proposal”) on December 22, 2016 to Yack to carry out certain aspects of the Project. (See ECF No. 48-1 at 1.) The Proposal contains pricing for a regular schedule, accelerated schedule, payment terms, and exclusions. (See Id . at 2-5.) Yack’s agent signed the Proposal on January 6, 2017, agreeing to the regular schedule pricing and the following payment term: “Balance upon invoicing. Net 30 days.” (Id. at 4.) The Proposal also bears the signature of AGC’s agent. (See Id . at 5.) The Proposal references additional forthcoming agreements between the parties, indicating that it “will need to be added . . . to any Ownership Contract Agreements.” (Id. at 1.)

         AGC contacted Yack on January 25, 2017 to ask whether a draft subcontract agreement was ready for review. (ECF No. 48-4 at 2.) Yack instructed AGC two days later to proceed with the work under the Proposal even though the subcontract agreement was not ready for review because Yack was “behind on [its] contracts.” (Id. at 4.) AGC commenced work on the Project sometime after that.[2] (ECF No. 52 at 4-5; see also ECF No. 52-5 at 6-7 (email dated January 27, 2017 stating: “Rodney, we will have the door loads need [sic] in order to continue with the foundation work later today.”).)

         Yack provided a draft subcontract agreement (“Subcontract Agreement”) to AGC on February 13, 2017. (ECF No. 52-11.) The Subcontract Agreement stated that upon receipt of a copy for signature, if AGC “commences work on the site prior to signing, ” such commencement would be “deemed to be acceptance” of the Subcontract Agreement. (Id. at 4 (Section 2.1).) AGC returned the Subcontract Agreement to Yack with numerous changes. (See ECF No. 52-12 (draft with notations); ECF No. 52-13 (email correspondence regarding changes to the Subcontract Agreement); ECF No. 52-10 at 20-21 (describing redline edits).) Yack did not agree to all changes, and AGC refused to sign. (ECF No. 52-13 (email exchange in which Yack refused to change the Subcontract Agreement); ECF No. 52-10 at 20-21 (deposition testimony of AGC’s agent that “we never came to terms”).) In fact, AGC never signed the Subcontract agreement. (ECF No. 52-10 at 20-21; see also ECF No. 52-14 at 3 (email from AGC’s agent stating that “[t]hese are ‘Agreements’ not ‘take it or leave it’ documents”).)

         AGC entered into a subcontract agreement with Central Concrete Company of Ohio (“CCCO”) on February 14, 2017 for CCCO to perform certain work on the Project. (See ECF No. 52-18.) AGC contends that certain failures on the part of Yack delayed this work:

[T]he presence of a hole near the pad where AGC’s Scope of Work was to be performed, Yack’s failure to ensure a complete pad was poured prior to AGC’s arrival, Yack’s failure to clear the site of dirt piles or to pour the concrete so that AGC and CCCO could proceed in a prompt manner, Yack’s refusal to approve necessary change orders, and Yack’s failure to create a master schedule to the Project.

(ECF No. 52 at 7-8 (citing ECF No. 52-19; ECF No. 52-10 at 5, 19; ECF No. 52-20 at 3-6).)

         Yack’s representatives complained about CCCO’s efforts in March 2017 and began to encourage AGC to terminate CCCO. (ECF No. 52 at 8; see also, e.g., ECF No. 52-19 at 4 (“CCC did not show . . . . AGC needs to get control of their subcontractor[‘]s actions.”), 5 (“CCC is still a problem for AGC.”), 6 (“CCC’s performance is lacking and the crew doesn’t seem motivated.”); ECF No. 52-10 at 29-31.) AGC ultimately provided CCCO with a notice of termination on April 4, 2017. (ECF No. 52-25 at 2.) CCCO refused to return to the Project site on April 17, 2017, and Yack notified AGC that AGC would be terminated for failure to provide ...


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