United States v. Philadelphia Indemnity Insurance Company

Background

Schindler Elevator Corporation brought the action in the name of the United States and for its use and benefit under the Miller Act. Schindler claims that Philadelphia Indemnity Insurance Company, the surety for Integrated Construction Enterprises Inc. (ICE), owes Schindler money for elevator repair and maintenance work at the Thurgood Marshall United States Courthouse.

ICE intervened and asserted counterclaims against Schindler for fraud and unjust enrichment. ICE alleges that Schindler submitted inflated invoices and false certified payrolls—records identifying the hours worked by employees—and received payment for work that was not performed. The alleged examples included invoices and payroll records for work in April, November, and March 2022, duplicate payroll records for August 2022, and allegedly false records for December 2022.

Schindler moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss ICE’s amended counterclaims for failure to state a legally sufficient claim.

Rule 15 Issue

Schindler argued that ICE improperly amended its counterclaims without obtaining Schindler’s consent or the court’s permission. The court rejected that argument. It found that ICE filed the amended counterclaims 21 days after Schindler filed its initial Rule 12(b)(6) motion, making the amendment timely under Rule 15(a).

Fraud Counterclaim

Under New York law, fraud requires a material misrepresentation or omission, knowledge that the statement was false, an intent to defraud, reasonable reliance, and resulting damage. Federal Rule of Civil Procedure 9(b) also requires fraud to be pleaded with particularity, meaning that the pleading generally must identify the who, what, when, where, and how of the alleged fraud.

The court held that ICE met this standard. Although some allegations were general, ICE also identified particular invoices, dates, amounts, certified payrolls, employees, and reasons the reported work allegedly was not performed. The court found that these allegations supplied sufficient detail about the alleged misrepresentations.

The court also held that ICE adequately alleged knowledge and intent. It reasoned that the allegations concerning Edward Agnew, Schindler’s Field Superintendent and Project Manager, and his repeated submission of certified payrolls containing allegedly false information provided strong circumstantial evidence of at least recklessness, if not intentional misconduct, by Agnew and Schindler.

The court further found that ICE adequately alleged reasonable reliance. ICE alleged that its Project Manager relied on Schindler’s certified payrolls when authorizing payments. The court rejected Schindler’s argument that ICE should have discovered the alleged inaccuracies itself, explaining that a later investigation is not necessarily required when a party receives written representations that stated facts are true.

The court therefore denied Schindler’s motion to dismiss ICE’s fraud counterclaim.

Unjust-Enrichment Counterclaim

Under New York law, an unjust-enrichment claim requires allegations that the defendant benefited, that the benefit came at the plaintiff’s expense, and that fairness requires repayment. Schindler argued that the claim was unavailable because a valid contract governed the parties’ dispute and that it duplicated ICE’s fraud claim.

The court rejected both arguments at this stage. It found that the parties disputed the material terms and validity of the purported contract because ICE alleged that some documents governing payment were fraudulently produced and that ICE relied on them in making payments. Accordingly, the court would not treat the alleged contract as barring unjust enrichment on a motion to dismiss.

The court also held that the unjust-enrichment claim was not duplicative of the fraud claim. The claims have different elements: fraud requires an intent to defraud, while unjust enrichment does not. Thus, ICE could potentially prevail on unjust enrichment even if it failed to prove fraud.

Disposition

Judge John G. Koeltl denied Schindler’s motion to dismiss. Both ICE’s fraud counterclaim and its unjust-enrichment counterclaim remained pending. The court directed Schindler to answer ICE’s amended counterclaims by July 30, 2025. The opinion does not state that the motion was granted or denied with prejudice.