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U.S. v. PINNACLE ELECTRONICS

June 15, 2005.

UNITED STATES OF AMERICA, ex rel. RJE TELECOM, Plaintiff,
v.
PINNACLE ELECTRONICS; UNITED STATES FIDELITY & GUARANTY; ST. PAUL FIRE & MARINE INSURANCE CO.; TRAVELERS PROPERTY CASUALTY; and XL SURETY, Defendants. PINNACLE ELECTRONIC SYSTEMS, Third Party Plaintiff, v. BELL JUSTICE FACILITIES; HOWARD ORGANIZATION INC.; UNITED STATES FIDELITY & GUARANTY; ST. PAUL FIRE & MARINE INSURANCE CO.; TRAVELERS PROPERTY CASUALTY; and XL SURETY, Third Party Defendants.



The opinion of the court was delivered by: JAMES MUNLEY, District Judge

MEMORANDUM

Presently before the Court for disposition are three motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6): (1) Defendant XL Surety's ("XL") motion to dismiss Count II of Plaintiff RJE Telecom's ("RJE") amended complaint; (2) United States Fidelity and Guaranty ("USF&G") and St. Paul Fire & Marine Insurance Co.'s ("St. Paul") joint motion to dismiss Counts II and IV of Pinnacle Electronic System's ("Pinnacle") Third Party Complaint; and (3) Bell Justice Facility's ("Bell") motion to dismiss Counts II and III of Pinnacle's Third Party Complaint. These matters have been fully briefed and are ripe for disposition. For the following reasons, we will: (1) grant XL's motion in part; 2) grant USF&G and St. Paul's motion to dismiss as to Count II but deny it as to Count IV; and 3) deny Bell's motion in its entirety.

Background*fn1

  The instant suit arises from wire installation work in the construction of a federal penitentiary in Canaan, Pennsylvania. Bell was the prime contractor for the construction of the penitentiary ("the project"). Bell subcontracted security installations work to Howard Organization, Inc. ("Howard"). Bell subcontracted fiber optic installations to Pinnacle. Howard subcontracted copper wire installation work to Pinnacle.

  On March 7, 2002, Pinnacle subcontracted the communications installations work to RJE, pursuant to its subcontract with Bell. A significant portion of RJE's duties pursuant to this subcontract was to install fiber-optic cable in an underground duct system constructed by others. On June 19, 2002, RJE and Pinnacle amended the March 7 subcontract by means of Change Order # RJE-001, which expanded RJE's duties to include the installation of copper cable in the duct system. Pinnacle subcontracted the installation of the copper cable pursuant to its subcontract with Howard, who subcontracted to Pinnacle pursuant to its subcontract with Bell. Thus, regarding the fiber-optic cable installation, RJE was a subcontractor to Pinnacle and a second-tier subcontractor to Bell. Regarding the copper cable installation, RJE was a subcontractor to Pinnacle, a second-tier subcontractor to Howard, and third-tier subcontractor to Bell.

  As surety on the project, Bell obtained payment bonds from Defendants USF&G and St. Paul. Howard purchased a $9.35 million performance bond from CGU Insurance, whose bond business was thereafter purchased by Defendant XL Surety. Pinnacle procured a labor and materials bond from Reliance Insurance, whose bond business was subsequently purchased by Defendant Travelers Property Casualty ("Travelers").

  When RJE began to perform the cable installations in the duct system, it found that the system deviated from Pinnacle's specifications and contractual representations. The deviations caused RJE to incur unanticipated costs in performing its obligations. RJE informed Pinnacle of the difficulties it encountered and the potential damages these difficulties may cause the prison's security system. Additionally, RJE warned Pinnacle that it would not provide any guaranty or warranty for its work and that it would seek an equitable adjustment to the contract. In response, Pinnacle terminated RJE and hired a replacement contractor.

  On September 14, 2004, RJE filed an amended complaint*fn2 advancing the following six counts: 1) breach of contract against Pinnacle; 2) violation of the Miller Act, 40 U.S.C. § 3131 et seq., and payment bond claims against USF&G, St. Paul, Travelers, and XL; 3) unjust enrichment/quantum meruit against Pinnacle; 4) breach of good faith and fair dealing against Pinnacle; 5) violation of the Pennsylvania Contractor and Subcontractor Payment Act, 73 PA. CONS. STAT. ANN. §§ 501 et seq. and/or the Federal Prompt Pay Act, 31 U.S.C.A. § 3902 et. seq. against Pinnacle; and 6) negligent misrepresentation against Pinnacle.

  On November 19, 2004, Pinnacle filed an amended third party complaint*fn3 asserting the following four claims: 1) breach of contract against Bell and Howard; 2) common law indemnity against Bell, Howard, USF&G, St. Paul, and XL; 3) negligent misrepresentation against Bell and Howard; and 4) Miller Act claims against USF&G, St. Paul, Travelers, and XL.

  Presently, XL seeks to dismiss Count II of RJE's complaint, USF&G and St. Paul seek to dismiss Counts II and IV of Pinnacle's third party complaint, and Bell seeks to dismiss counts II and III of Pinnacle's third party complaint.

  Jurisdiction

  Since a federal question is before the court under 40 U.S.C. §§ 3131 et seq. and 31 U.S.C. §§ 3902 et seq., this court has jurisdiction over this dispute pursuant to 28 U.S.C. § 1331.*fn4 This court also has supplemental jurisdiction over the plaintiff's claims that arise under state law, pursuant to 28 U.S.C. § 1367(a), as these claims are "part of the same case or controversy" as the plaintiff's federal claims.

  Standard

  When a 12(b)(6) motion is filed, the sufficiency of a complaint's allegations are tested. The issue is whether the facts alleged in the complaint, if true, support a claim upon which relief can be granted. In deciding a 12(b)(6) motion, the court must accept as true all factual allegations in the complaint and give the pleader the benefit of all reasonable inferences that can fairly be drawn therefrom, and view them ...


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