     Case: 13-30934      Document: 00512613754         Page: 1    Date Filed: 04/30/2014




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                         United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
                                    No. 13-30934                            April 30, 2014
                                  Summary Calendar
                                                                           Lyle W. Cayce
                                                                                Clerk
JEMS FABRICATION, INCORPORATED, USA for use and benefit of,

                                                 Plaintiff - Appellee
v.

FIDELITY & DEPOSIT COMPANY OF MARYLAND; ZURICH AMERICAN
INSURANCE COMPANY,

                                                 Defendants - Appellants




                   Appeal from the United States District Court
                      for the Eastern District of Louisiana
                             USDC No. 2:12-CV-393


Before WIENER, OWEN, and HAYNES, Circuit Judges.
PER CURIAM:*
       Fidelity and Deposit Company of Maryland (“Fidelity”) and Zurich
American Insurance Company (“Zurich,” and collectively with Fidelity, the
“Sureties”) appeal the district court’s entry of a final judgment in favor of
JEMS Fabrication, Inc. (“JEMS”) on its claim under the Miller Act, 40 U.S.C.
§§ 3131–3134. We AFFIRM.



       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                   No. 13-30934
                              I.    Background
      The United States Army Corps of Engineers (the “Corps”) contracted
with Benetech, LLC (“Benetech”), a construction contractor, to renovate and/or
redevelop pumping stations at various sites located on the Mississippi River
(the “JSP-05 Project”). Thereafter, the Sureties issued a payment bond (the
“Payment Bond”) pursuant to the Miller Act on behalf of Benetech to protect
subcontractors on the JSP-05 Project against the risk of non-payment by
Benetech. Benetech then entered into a subcontract (the “Contract”) with
JEMS in which JEMS agreed to provide certain custom-fabricated structural
steel for the JSP-05 Project in exchange for a payment of $2,350,000. This
figure included $202,432 for shop drawings, $1,316,584 for materials, and
$830,984 for labor. Benetech and JEMS subsequently approved a change order
for additional materials, increasing the total contract amount to $2,379,739.60.
Later, JEMS and Benetech agreed to a modification of the Contract to permit
Benetech to provide the on-site labor going forward in order to satisfy certain
self-performance requirements of the Corps. Although this modification was
not memorialized in writing, JEMS thereafter terminated its on-site labor
force although it continued to incur certain labor-related expenses.
      JEMS delivered all of the drawings required by the Contract. JEMS also
delivered many of the materials required by the Contract. However, JEMS did
not deliver one building required by the Contract (the “Hero Building”);
instead, Benetech and JEMS agreed that Benetech would purchase the Hero
Building directly from a subcontractor for $54,000. During its performance
under the Contract, JEMS did not submit periodic invoices to Benetech.
Rather, JEMS delivered shipping tickets to Benetech of materials provided and
Benetech provided periodic payments to JEMS over the course of the Contract.
However, the shipping tickets did not indicate the price of the materials
delivered and Benetech’s periodic payments did not detail which shipping
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tickets were being paid. In total, Benetech paid JEMS $996,882.14 for its work
on the Contract. 1 However, Benetech claimed that JEMS was not entitled to
the remainder of the payment due under the Contract, because JEMS had
failed to deliver all of the materials required by the Contract.
       Thereafter, JEMS filed the instant federal action, alleging Miller Act
claims against Benetech, Fidelity, and Zurich, as well as a breach of contract
claim and a Louisiana state law claim against Benetech. After a two-day trial,
the district court entered a final judgment in favor of JEMS, ordering that
Benetech, Fidelity, and Zurich were jointly and severally liable to JEMS in the
amount of $497,873.46, plus interest. The Sureties timely appealed. 2
                               II.   Standard of Review
       We review a district court’s conclusions of law de novo. See J.D. Fields
& Co., Inc. v. Gottfried Corp., 272 F.3d 692, 696 (5th Cir. 2001). However, we
review a district court’s findings of fact for clear error. See id.; see also FED. R.
CIV. P. 52(a)(6). A finding of fact is clearly erroneous when “although there is
evidence to support it, the reviewing court on the entire evidence is left with
the definite and firm conviction that a mistake has been committed.” Anderson
v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985) (quotations omitted).
Therefore, “[w]here there are two permissible views of the evidence, the
factfinder’s choice between them cannot be clearly erroneous.” Id. at 574.
                                     III.    Discussion
       The Miller Act requires that a general contractor on a federal project post
a bond for the purpose of protecting the suppliers of materials for the project.
See Arena v. Graybar Elec. Co., Inc., 669 F.3d 214, 220 (5th Cir. 2012). It


       1Specifically, Benetech paid JEMS the following lump sums over the course of the
Contract: $50,000, $300,000, $396,882.14, $150,000, and $100,000.

       2 Benetech did not appeal the district court’s entry of final judgment and is not a party
to this appeal.
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provides suppliers and subcontractors with the right to sue a prime contractor
to recover on the bond for the amounts owed to them.             See 40 U.S.C.
§ 3133(b)(1). This statutory scheme “was created to protect parties such as
subcontractors or suppliers who work on federal projects as state-law liens
cannot be applied against federally-owned property and traditional state-law
remedies are unavailable.” Arena, 669 F.3d at 220. The Miller Act is “highly
remedial in nature” and “is entitled to a liberal construction and application in
order properly to effectuate the Congressional intent to protect those whose
labor and materials go into public projects.” Clifford F. MacEvoy Co. v. U.S.
for Use & Benefit of Calvin Tomkins Co., 322 U.S. 102, 107 (1944).
      The elements of a Miller Act claim are:        (1) the plaintiff supplied
materials in prosecution of the work provided for in the contract; (2) the
plaintiff has not been paid; (3) the plaintiff had a good faith belief that the
materials were intended for the specified work; and (4) the plaintiff meets the
jurisdictional requisites of timely notice and filing. See U.S. for Use & Benefit
of Carlson v. Cont’l Cas. Co., 414 F.2d 431, 433 (5th Cir. 1969); U.S. for Use &
Benefit of Martin Steel Constructors, Inc. v. Avanti Constructors, Inc., 750 F.2d
759, 761 (9th Cir. 1984).
      First, the Sureties argue that the district court erred in entering
judgment in favor of JEMS because JEMS failed to demonstrate at trial either:
(1) that it supplied materials to Benetech in prosecution of the JSP-05 Project;
or (2) that it had a good faith belief that the materials supplied to Benetech
were intended for the JSP-05 Project. See Carlson, 414 F.2d at 433; see also
United States v. C. J. Elec. Contractors, Inc., 535 F.2d 1326, 1328–29 (1st Cir.
1976).     Specifically, the Sureties assert that JEMS supplied materials to
Benetech for other unrelated projects that were not covered by the Payment
Bond at the same time as it supplied materials to Benetech for the JSP-05
Project.    The Sureties argue that JEMS failed to demonstrate that the
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                                      No. 13-30934
materials it supplied were intended for the JSP-05 Project, not other projects,
or that it had a good faith belief that the supplied materials were intended for
the JSP-05 Project, not other projects.
       However, the Sureties never argued to the district court that JEMS’
claim included materials supplied to Benetech for other projects.                  Absent
extraordinary circumstances not present here, we do not consider arguments
not previously raised before the district court. See Vogel v. Veneman, 276 F.3d
729, 733 (5th Cir. 2002).
       Second, the Sureties assert that the district court erred in entering final
judgment in favor of JEMS because the shop drawings prepared by JEMS for
Benetech are not compensable labor under the Miller Act. The district court
court concluded that “Benetech already paid for the [shop] drawings . . .
because Benetech’s payments of $996,882.14 covered the amount JEMS was
owed for the [shop] drawings.” The Sureties contend that the district court
erred in concluding that Benetech’s payment of $996,882.14 covered the cost of
the shop drawings. Specifically, the Sureties assert that, under Louisiana’s
law of imputation, the district court should have imputed Benetech’s payment
of $996,882.14 to the cost of the materials, not the cost of the shop drawings.
See La. Civ. Code Ann. art. 1868 (providing that payments must be imputed to
secured debts in preference to unsecured debts where the debts are
simultaneously incurred). 3 The Sureties failed to raise this argument before
the district court. In fact, the district court noted that “the Sureties provide no
justification as to why the amount due for the drawings should be deducted



       3 The Sureties maintain that the cost of the materials is a secured debt and the cost
of the shop drawings is an unsecured debt because materials, but not shop drawings, are
compensable under the Miller Act. We need not resolve the question of whether shop
drawings are compensable labor under the Miller Act because Louisiana’s law of imputation
does not apply here.

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from the top of the remainder of the Contract Price owed to JEMS, rather than
attributed to the amounts already paid by Benetech.” We thus decline to
consider this argument. See Vogel, 276 F.3d at 733. 4
       Third, the Sureties argue that the district court erred in entering final
judgment in favor of JEMS because the Sureties were entitled to a setoff in the
amount of $408,759.13. Specifically, the Sureties assert that JEMS failed to
deliver all of the materials required by the Contract and that, as a result,
Benetech was forced to procure additional materials for the JSP-05 Project
from other suppliers at a cost of $408,759.13. The district court concluded both
that “JEMS delivered the material required by the Contract” and that
Benetech was not entitled to deduct any expenditures in excess of the $54,000
attributable to the Hero Building because “Benetech failed to provide JEMS
with notice of any deficiency and an opportunity to cure [pursuant to the
Contract] before incurring the[se] additional expenses.”




       4 Even if we did consider it, Louisiana’s law of imputation only applies where “[a]n
obligor . . . owes several debts to an obligee.” La. Civ. Code Ann. art. 1864; see also
Delesdernier v. Delesdernier, 95 So. 3d 588, 595 (La. App. 5 Cir. 2012) (“Because spousal
support is a single obligation, the law of imputation does not apply.”). Here, Benetech
incurred a single lump-sum debt to JEMS pursuant to the Contract and therefore Louisiana’s
law of imputation does not apply. After reviewing the evidence presented at trial, the district
court found that JEMS completed all of the shop drawings required by the Contract and
further found that Benetech’s payment of $996,882.14 covered the cost of the shop drawings.
Even if we considered this argument, and even if we concluded that the debts were separable
and applied Louisiana’s law of imputation, we would nevertheless conclude that the district
court did not err in imputing Benetech’s payment of $996,882.14 to the cost of the shop
drawings. JEMS introduced evidence at trial indicating that it prepared the shop drawings
first and the materials second, and the Sureties do not challenge this factual finding on
appeal. Under such circumstances, Louisiana’s law of imputation requires that the district
court impute payment to the earlier incurred debt. See La. Civ. Code Ann. art. 1868 (“When
the parties have made no imputation, payment must be imputed to the debt that is already
due.”); see also Hattiesburg Mfg. Co. v. Pepe, 140 So. 2d 449, 456 (La. App. 1 Cir. 1962)
(“[P]ayments on a single account must be imputed to the oldest items thereon.”). The Sureties
have failed to establish any grounds upon which we could conclude that these factual findings
were clearly erroneous. See FED. R. CIV. P. 52(a); Anderson, 470 U.S. at 573–74.

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                                       No. 13-30934
       The Sureties maintain that, unlike Benetech, it is not bound by the
“notice and cure” provisions of the Contract and that it should not be precluded
from obtaining a setoff on that basis. However, while a Miller Act surety is not
a party to a contract between a subcontractor and a contractor, see U.S. for &
on behalf of Portland Constr. Co. v. Weiss Pollution Control Corp., 532 F.2d
1009, 1012 (5th Cir. 1976), it nonetheless stands in the shoes of the contractor
and is bound by its dealings for these purposes, see U.S. for Benefit & on Behalf
of Sherman v. Carter, 353 U.S. 210, 217–18 (1957); see also Hous. Fire & Cas.
Ins. Co. v. E. E. Cloer Gen. Contractor, 217 F.2d 906, 910 (5th Cir. 1954).
Therefore, the Sureties, like Benetech, are bound by the terms of the Contract,
including its “notice and cure” provisions. The Sureties do not dispute that
Benetech failed to comply with these provisions. As a result, we conclude that
the district court did not err in concluding that neither Benetech nor the
Sureties were entitled to a setoff for these additional expenses. 5
       Moreover, JEMS introduced substantial evidence at trial indicating that
it had supplied all of the materials, with the exception of the Hero Building,
required by the Contract, including testimony from several witnesses, shipping
tickets, and bills of lading. Although Benetech introduced evidence indicating


       5 The Sureties also argue that they should have been credited $147,000 for the
purchase of the Hero Building, not $54,000. At trial, JEMS introduced evidence that it had
contracted with a subcontractor to purchase the Hero Building for $54,000. Benetech and
JEMS subsequently agreed that Benetech would purchase the Hero Building directly from
the subcontractor. Benetech claimed that thereafter it spent $147,000 to purchase the Hero
Building due to changes in the building specifications for the Hero Building made by the
Corps requiring the purchase of additional materials. The district court concluded that
Benetech failed to comply with the “notice and cure” provisions of the Contract before
incurring these additional expenses and could not therefore claim them as a setoff at trial.
The Sureties do not dispute that Benetech failed to comply with these provisions. The district
court also concluded that, to the extent these additional expenses were incurred due to
subsequent changes in the building specifications imposed by the Corps, “the expenses do not
fall within the scope of JEMS’ work.” The Sureties do not challenge this conclusion. We
therefore conclude that the district court did not err in crediting Benetech and the Sureties
$54,000, and not $147,000, for the cost of the Hero Building.
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that it purchased materials for the JSP-05 Project, it did not introduce evidence
directly linking the invoices for its purchases with specific materials that
should have been delivered by JEMS under the Contract. As a result, we
conclude that the district court did not clearly err in concluding that “JEMS
delivered the material required by the Contract.” See FED. R. CIV. P. 52(a)(6);
Anderson, 470 U.S. at 573–74.
      AFFIRMED.




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