United States of America for the Use of Asphalt Surfacing v. Design-Build

Background

Ahtna Design-Build, Inc. (ADB) was the prime contractor on a contract with the U.S. Army Mission Installation Contracting Command–Fort McCoy concerning maintenance of asphalt roads at Fort Hunter Liggett. ADB engaged Asphalt Surfacing, Inc. (ASI) as a subcontractor. The subcontract contained a forum-selection clause stating that disputes arising from the subcontract would be resolved by a court of competent jurisdiction in Anchorage, Alaska.

On October 14, 2021, ADB sued ASI and United Fire & Casualty Company in the U.S. District Court for the District of Alaska, alleging that ASI breached the subcontract. On November 3, 2021, ASI filed this action against ADB and Great American Insurance Group, alleging that ADB breached the subcontract, including by terminating ASI’s performance. ASI also asserted a claim under the Miller Act.

First-to-File Rule

ADB moved to dismiss, transfer, or stay this case under the first-to-file rule. That rule gives a court discretion to dismiss, transfer, or stay a later-filed case when an earlier case in another court involves substantially similar parties and issues. The court considers the lawsuits’ filing order, the similarity of the parties, and the similarity of the issues.

The court found that the Alaska Action was filed first. It also found that the parties and issues were substantially similar, even though the two cases named different sureties. ADB and ASI were parties in both actions, and both cases involved alleged breaches of the subcontract. The court noted that portions of ASI’s complaint were identical to portions of its counterclaim in the Alaska Action.

Miller Act Venue and Forum Selection

ASI argued that the Miller Act’s venue provision required the litigation to proceed in the Northern District of California because the contract was performed there. The Miller Act protects people who supply labor and materials for federal construction and public-works projects by requiring the prime contractor to provide payment and performance bonds. Its venue provision allows Miller Act claims to be brought in the district where the contract was to be performed and executed.

The court held that the subcontract’s forum-selection clause overrode the Miller Act’s venue provision. It relied on decisions treating the Miller Act provision as a venue requirement that may be waived through a valid contractual forum-selection agreement. The court also rejected ASI’s arguments that the clause was invalid, unenforceable, or permissive. The court stated that ASI had not met the high burden required to show that enforcement would be unreasonable or unjust, or that the clause resulted from fraud or overreaching.

Disposition

The court concluded that the first-to-file rule applied and considered whether to dismiss, transfer, or stay the case. It determined that a stay was appropriate because the deadline for venue or jurisdiction motions in the Alaska district court had not yet passed and the parties in the two cases were not identical.

The court stayed this action under the first-to-file rule in light of the earlier-filed Alaska Action. It ordered the parties to file a joint status report by July 26, 2022. The order did not decide whether either party breached the subcontract or whether ASI was entitled to relief under the Miller Act.