The opinion of the court was delivered by: O'neill, J.
Who is entitled to $768,674.00 -- an amount determined by a panel of arbitrators to be the receivables due to defendant Davis Giovinazzo Construction Co., Inc. from plaintiff Domus, Inc. and deposited by Domus with this Court on June 1, 2010? Domus filed this interpleader action to answer that question. Domus also seeks confirmation of the arbitration award and a declaratory judgment declaring that, by its release of the interpled fund, it has discharged all liability for monies owed to DGC. Following dismissal of certain defendants from the action for either having disclaimed their interest in the interpled fund or having failed to state an interest in the interpled fund, I held a bench trial to resolve the competing claims of the remaining defendants. The remaining defendants are DGC, Ira Davis, Bruce Patterson, Edward J. Morris, P.C., Susquehanna Bank, the City of Philadelphia, Philadelphia Laborers' District Council Benefit Funds (incorrectly designated as Laborers' International Union Local #332)*fn1 , and intervenor defendant Great American Insurance Company.
Pursuant to Federal Rule of Civil Procedure 52(a) and after review of the evidence presented and the applicable law, I make the following findings of fact and conclusions of law.
The claims now before me arise out of certain debts of DGC. Although no articles of dissolution have been filed to dissolve the company, Trans. 162:16-163:1, DGC is no longer actively in business. Id. 116:9, 116:21-24.
I. Domus, DGC and the Arbitration Award
Domus, a prime contractor, hired DGC as a masonry subcontractor to work on a number of projects including the Roberts Vaux Middle School project, the Martin Luther King Plaza project and the Schuylkill Falls Housing Development project. Id. 19:22-24; SB Exs. 16, 17, 18. Domus' contracts for the Vaux, Schuylkill Falls and Martin Luther King projects were contingent on minority contractor participation and it hired DGC as a certified minority contractor for each project. Trans. 49:16-50:8, 89:17-23.
As the Vaux project drew to a close, Domus became aware of problems with the management of DGC. Id. 21:22-22:8, 24:24, 25:8. Entities began contacting Domus regarding money that DGC owed to them and Domus was joined as a garnishee in certain lawsuits against DGC. Id. 22:12-15, 25:2-10; Domus Exs. 3, 4. Given growing uncertainty regarding DGC's status and at the request of Patterson, DGC's Secretary, Domus began to deposit the money it owed to DGC into an escrow account rather than make direct payments to DGC. Trans. 22:16-22.
Seeking to collect the money Domus owed to DGC, on June 5, 2008, DGC, represented by Peter J. Norman of Klehr Harrison Harvey Branzburg & Ellers LLP,*fn2 filed a demand for AAA arbitration pursuant to the arbitration provision in the subcontract for the Vaux project. SB Ex.
11. The demand stated the following:
NATURE OF THE DISPUTE Claimant [DGC] is a subcontractor on the Robert Vaux School Project (the "Project") and brings this action against the Respondent Domus, Inc., the prime contractor on the Project. Domus has breached its contract with DGC and has failed to promptly pay DGC for work performed by DGC on the Project. DGC makes a claim for breach of contract and violation of the PA, [sic] Contractor & Subcontractor Payment Act. DGC is owed $899,525 under the Contract, as well as $175,000 for authorized extra work.
The arbitration demand made no reference to the Martin Luther King or Schuylkill Falls projects. SB Ex. 11. However, James Wyatt, a principal at Domus, testified that as a part of the arbitration process he "prepared [an] accounting of monies that were due on the Roberts Vaux School and change orders and listed the Schuylkill Falls and Martin Luther King separately at the bottom of the page," Trans. 79:3-10, and that at the arbitration he submitted evidence of the amounts due on all three projects. Id. 36:5-7; see also Domus Ex. 9. Charles Hillis, a founder of Domus, testified that he understood that the arbitration proceeding would resolve all of the claims against Domus for DGC's receivables. Trans. 86:15-87:16.
On April 5, 2010, a panel of arbitrators found that "[t]he amount due [DGC] under its subcontract with Domus is $738,045.00" and they awarded DGC $19,129.00 in interest. Domus Ex. 11; SB Ex. 15. Accordingly, the panel issued the following award: "Domus shall pay to [DGC] the net sum of Seven Hundred Fifty Seven Thousand One Hundred Seventy Four Dollars and No Cents ($757,174.000). Domus was also ordered to reimburse DGC $11,500 of the arbitrators' administrative fees, for a total amount of $768,674.00. Id.
No appeals were taken from the arbitration award. Trans. 7:14-16, 12:21-25. Instead, on April 14, 2010, alleging that multiple parties had claimed priority to the monies owed to DGC under the arbitration award, Domus filed this action seeking confirmation of the arbitration award, asserting a claim for statutory interpleader pursuant to 28 U.S.C. § 1335 and requesting a declaratory judgment limiting its liability to any creditors of DGC. On June 1, 2010, Domus deposited $768,674.00 into the registry of this Court.
II. Status of Minority Control of DGC
DGC operated as a certified Minority-Owned Business Enterprise necessitating that control of the company be vested in a minority. Trans. 24:22-25, 130:16-131:1. Davis, a minority, served as president and CEO of DGC and held 55 percent of its common stock. Id. 127:11-19. Frank Giovinazzo, who is not a minority, was a 45 percent owner. Id. 127:20-23. Patterson, as Secretary of DGC, assumed the role of making decisions as the minority in control of DGC between 2001 and 2007, when Davis, suffering from cancer, gave Patterson a power of attorney to control his share of the stock. Id. 131:2-10. At the same time, John Giovinazzo, Frank Giovinazzo's son, bore the power of attorney for his father's forty-five percent interest. Id. 131:11-15.
In April of 2007, the City of Philadelphia recertified DGC as a Minority-Owned Business Enterprise, citing reciprocity from DGC's "certification from the New Jersey Commerce & Economic Growth Commission Office of Development for Small Business & Women & Minority Businesses." Morris D2 at 1. The recertification letter noted that in the event of "a material change to the ownership and control" of DGC, it should "promptly notify this office, in writing, for a review of the changed circumstances." Id. at 2.
Patterson testified that in late 2007, his paychecks and benefits stopped and he ultimately ceased participating in the day to day operations of DGC. Trans. 138:18-140:11. After Patterson's departure, John Giovinazzo remained at Domus and ran the company's day to day operations. Id. 113:22-24, 114:19-21, 141:17-23. Although he was no longer being paid, Patterson testified that he continued to return to the office to "check on things and to see how things were going" and that although no minorities continued to participate in the day-to-day operations of DGC, he saw that his "rubber stamp was still there and [his] name was still being signed on things and notices were being served." Id. 140:2-24.
After Patterson's departure from DGC, Domus was not made aware of any changes to the control or ownership of DGC that might have affected DGC's ability to meet the minority business enterprise certification requirements. Id. 51:23-52:2. There was no testimony as to whether or not the office of Minority Owned Business Enterprises was ever made aware of a Patterson's departure from DGC.
III. Susquehanna's Loans to DGC
On May 16, 2006, Susquehanna*fn3 entered into a loan transaction with DGC, dismissed- defendants General Masonry and Davis Giovinazzo Masonry, Co., Inc. and non-party Tri-State Masonry (collectively, the DG Obligors). Susquehanna agreed to lend the DG Obligors $2,250,000, SB Ex. 2, and to extend them a line of credit of up to $6,000,000. SB Ex. 3. The ...