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Structural Group, Inc. v. Liberty Mutual Insurance Co.

March 5, 2009

STRUCTURAL GROUP, INC., PLAINTIFF
v.
LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT
LIBERTY MUTUAL INSURANCE COMPANY, THIRD-PARTY PLAINTIFF
v.
LYONS CONSTRUCTION SERVICES, INC. THIRD-PARTY DEFENDANT



The opinion of the court was delivered by: Chief Judge Kane

MEMORANDUM

Before the Court is Defendant Liberty Mutual Insurance Company's motion to dismiss count two of Plaintiff Structural Group, Inc.'s complaint (Doc. No. 11). For the reasons that follow, the motion will be granted.

I. BACKGROUND

Plaintiff Structural Group, Inc. ("Structural") initiated the above-captioned action on

October 1, 2007, by filing a two-count complaint against Defendant Liberty Mutual Insurance Company ("Liberty Mutual"). (Doc. No. 1.) In the complaint, Structural alleges that Liberty Mutual breached the terms of a payment bond (the "Bond") when Liberty Mutual failed to remit payment to Structural for foundation work performed at the Shippensburg University Student Recreation Center (the "Project") pursuant to a subcontract (the "Subcontract") with Lyons Construction Services, Inc. ("Lyons"), the Project's prime contractor. (Doc. No. 1.) In count two of the complaint, Structural seeks an award of interest, penalty payments, and attorneys' fees pursuant to the Commonwealth's Contractor and Subcontractor Payment Act, 62 Pa. Cons. Stat. Ann. §§ 3931--3939.*fn1 (Doc. No. 1 at 6--10.) Nine days after the filing of Structural's complaint, the State System of Higher Education ("SSHE"), the Project's owner, filed a claim against Liberty Mutual and Lyons with the Pennsylvania Board of Claims (the "Board"). See State Sys. of Higher Educ. v. Lyons Constr. Servs., Inc., Board of Claims Docket No. 3916.

Lyons filed an answer and counterclaim with the Board on November 28, 2007. Id. That same day, Lyons and Structural entered into a litigation cooperation agreement (the "Agreement") pursuant to which Structural agreed to "investigate, prepare, and assemble its own claims and defenses [against the SSHE] and present the same [by and through Lyons] in an ex rel fashion to the Pennsylvania Board of Claims." (Doc. No. 23-4 at 17.) As the Agreement explains:

Both Lyons and Structural claim that they are entitled to additional compensation for delays, inefficiency, certain extra work, and other costs due to, inter alia, the differing site conditions encountered during Structural's work on the Project. In addition, both Lyons and Structural claim that they are entitled to the lost profit and other costs due to the wrongful termination of their respective contracts. . . .

Additionally, Structural claims that it is entitled to payment of monies owed under the Subcontract, including payments of monies owed for work performed pursuant to a Change order dated September 14, 2006. . . . Neither Lyons nor its surety, Liberty Mutual Insurance Company, have made payment to Structural for the Subcontract balance and Change Order at issued based on [SSHE's] wrongful termination of the Prime Contract. (Id. at 15--16.)

On December 3, 2007, Liberty Mutual moved to dismiss Count II of Structural's complaint (Doc. No. 11) and filed a brief in support thereof (Doc. No. 12). Structural timely filed a brief in opposition (Doc. No. 13), to which Liberty Mutual timely filed a brief in reply (Doc. No. 14).

II. DISCUSSION

A. Standard of Review

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) is properly granted when, accepting all factual allegations and inferences as true, the moving party is entitled to judgment as a matter of law. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). Although the moving party bears the burden of showing that no claim has been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2007), the complaint must allege facts sufficient to "raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)," Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (citations omitted). Moreover, in order to satisfy federal pleading requirements, a plaintiff's obligation "to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (brackets and quotation marks omitted) (quoting Twombly, 127 S.Ct. at 1964--65).

B. Liberty Mutual's Motion to Dismiss

Liberty Mutual has moved to dismiss count two of Structural's complaint in which Structural seeks an award of interest, penalty payments, and attorneys' fees pursuant to the Commonwealth's Contractor and Subcontractor Payment Act, 62 Pa. Cons. Stat. Ann. §§ 3931--3931 (the "Act"). (Doc. No. 1 at 6--10.) In general, Liberty Mutual contends that neither the Act nor the Commonwealth Procurement Code (the "Code"), 62 Pa. Cons. Stat. Ann. § 101 et seq., of which the Act is a part, apply to sureties. (Doc. No. 12 at 3--4.) Accordingly, Liberty Mutual maintains that there is no legal basis for Structural's claim against Liberty Mutual in its capacity as Lyons's surety. In its brief in opposition, Structural counters that, "[s]ince Liberty Mutual was 'standing in the shoes' of Lyons when it refused to honor the terms of the Payment Bond, Liberty Mutual is likewise bound to act in good faith pursuant to the Code." (Doc. No. 13 at 7.) In essence, Structural maintains that Liberty Mutual, as Lyons's surety, must satisfy Lyons's liabilities ...


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