Opinion
Case No. 2:11-CV-00213-KJM-CKD
09-11-2012
TRUCKEE DONNER PUBLIC UTILITY DISTRICT, Plaintiff, v. GREGORY LEE HUNT, dba HUNT'S EXCAVATING; UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE; LABOR COMMISSIONER OF THE STATE OF CALIFORNIA - DIVISION OF LABOR STANDARDS ENFORCEMENT; and FIRST NATIONAL INSURANCE COMPANY OF AMERICA, Defendants.
PORTER SIMON Brian C. Hanley Attorneys for Plaintiff TRUCKEE DONNER PUBLIC UTILITY DISTRICT KATHRYN KENEALLY Assistant Attorney General Richard A. Schwartz Trial Attorney, Tax Division U.S. Department of Justice Attorneys for Defendant UNITED STATES OF AMERICA BENJAMIN B. WAGNER United States Attorney Of counsel WOLKIN • CURRAN, LLP James D. Curran Attorneys for Defendant FIRST NATIONAL INSURANCE COMPANY OF AMERICA, as Surety and Assignee of the rights and claims of the Labor Commissioner of the State of California - Division of Labor Standards Enforcement
James D. Curran, Esq. (SBN 126586)
Shashauna Szczechowicz, Esq. (SBN 249102)
Wolkin • Curran, LLP
Attorneys for Defendant
FIRST NATIONAL INSURANCE COMPANY OF AMERICA
STIPULATION FOR DISCHARGE AND ORDER OF PAYMENT OF
INTERPLEADER CLAIMS; AND ORDER
The foregoing Stipulation is entered by and between the following Parties, by and through their respective counsel: Plaintiff TRUCKEE DONNER PUBLIC UTILITY DISTRICT ("District"); Defendant UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE (the "United States"); and Defendant FIRST NATIONAL INSURANCE COMPANY OF AMERICA ("First National"), as surety for Defendant GREGORY LEE HUNT, dba HUNT'S EXCAVATING ("Hunt") and as assignee of the rights and claims of Defendant LABOR COMMISSIONER OF THE STATE OF CALIFORNIA - DIVISION OF LABOR STANDARDS ENFORCEMENT ("DLSE").
FACTS AND PROCEDURAL HISTORY
In March 2009, the District entered into two separate contracts with Hunt to perform certain work on the project known as the Pipeline Replacement - 2008 - Contract A and Contract B (the "District Contracts").
First National, as surety, issued certain public works performance and payment bonds (the "Bonds") on behalf of Hunt in connection with the District Contracts.
At the completion of the District Contracts, the District withheld $206,903.83 in remaining contract funds (the "Contract Funds") due to be paid for Hunt's performance of the District Contracts.
The District alleges that it withheld the Contract Funds because it received multiple and conflicting demands from the United States, the DLSE and First National concerning the Contract Funds, and on that basis filed an interpleader complaint in the Superior Court of the State of California, in and for the County of Nevada (the "Interpleader Complaint").
On January 21, 2011, the Interpleader Complaint was removed from the California state court to this Court by the United States pursuant to 28 U.S.C. 1442(a)(1). (Document 1, Court's Docket.)
On February 4, 2011, the DLSE filed an answer to the Interpleader Complaint in this action and asserted its rights to the Contract Funds on the grounds that the DLSE issued and served upon Hunt and the District a Civil Wage and Penalty Assessment ("the Assessment") for Hunt's violations of the California prevailing wage law, specifically California Labor Code section 1720, et seq. The Assessment was based on Hunt's failure to pay prevailing wages on the District Contracts. (Document 7, Court's Docket, ¶¶ 4-16.)
On February 18, 2011, the United States filed an answer to the Interpleader Complaint in this action and asserted its rights to the Contract Funds on the grounds that a duly authorized delegate of the Secretary of Treasury made assessments against Action Construction Co., d/b/a Hunt's Excavation, for unpaid outstanding employment taxes (Form 941) for the tax period ending September 30, 2009 and for unpaid outstanding unemployment taxes (Form 940) for the tax period ending December 31, 2009. The United States filed Notices of Federal Tax Liens with respect to these assessments as early as December 30, 2009. (Document 8, Court's Docket, ¶¶ 15-19.)
On March 30, 2011, the District filed a First Amended Complaint in Interpleader (hereafter, "Amended Interpleader Complaint"), naming First National as an additional defendant. (Document 14, Court's Docket.) The District subsequently deposited the Contract Funds with the Registry of the Court.
On April 2, 2011, the United States filed an answer to the Amended Interpleader Complaint in this action and asserted its rights to the Contract Funds on the same grounds as asserted in its initial answer. (Document 17, Court's Docket, ¶¶ 27-32.)
On June 13, 2011, First National filed an answer to the Amended Interpleader Complaint in this action and asserted its rights to the Contract Funds on the grounds that Hunt executed a General Agreement of Indemnity for Contractors in favor of First National as partial consideration for First National issuing surety bonds on behalf of Hunt. First National alleged that it filed a UCC-1 Financing Statement, thereby perfecting its security interest in the Contract Funds. Further, First National asserted that it was subrogated to the claims by Hunt's laborers, subcontractors and materialmen paid by First National under its Bonds and was entitled to a superior equitable lien against the Contract Funds pursuant to Pearlman v. Reliance Insurance Co., 371 U.S. 132, 141 (1962). (Document 22, Court's Docket, ¶¶ 34-36, 42-46.)
On June 6, 2011, Hunt filed a Voluntary Petition under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of California, Case No. 11-34096 (the "Bankruptcy Action"). Hunt received a general discharge under section 727 of Title 11, United States Code on November 15, 2011. Neither Hunt nor the Chapter 7 Trustee appointed in the Bankruptcy Action appeared or filed an answer in this action, and therefore, Hunt and the Chapter 7 Trustee have waived all rights or claims they have against the District with respect to the Contract Funds.
First National represents that it has all right, title and interest of Hunt in the Contract Funds, including all claims that Hunt has to the Contract Funds in this action, under its General Agreement of Indemnity and other agreements with Hunt and by virtue of First National's equitable lien rights.
On December 1, 2011, First National received an assignment of all of the DLSE's claims, rights, title and interests to the Contract Funds in this action. A true and correct copy of the Assignment of the Claims is attached hereto as Exhibit 1. Further, on August 19, 2010, the DLSE obtained a judgment against Hunt on the Assessment in the amount of $293,399.90 (the "DLSE Judgment"). First National also received an assignment of the DLSE Judgment. A true and correct copy of the Assignment of DLSE's Judgment is attached hereto as Exhibit 2.
By virtue of these assignments, First National represents that the DLSE transferred to First National all of the DLSE's claims, rights, title and interests to the Contract Funds, including all claims that the DLSE has against the District for the Contract Funds in this case.
The District incurred more than $14,000 in costs and attorney's fees as a result of these proceedings, which expenditure of funds benefitted all Parties by filing this action and bringing all Parties before the Court to resolve their competing claims to the Contract Funds, and for which it seeks partial reimbursement from the Contract Funds interpleaded in this action as an innocent stakeholder as authorized by federal law.
First National (as surety for Hunt and as assignee of the rights and claims of the DLSE in this action) and the United States both assert they have superior rights to the Contract Funds vis-à-vis each other.
The Parties agree that it is in the best interests of all Parties and judicial economy to settle the issues regarding priority rights to the Contract Funds and stipulate to the proposed distribution as set forth herein.
The Parties now desire to resolve all claims, demands and causes of action they may have against each other, arising out of or relating to the Amended Interpleader Complaint without incurring the additional costs and disruption of litigation.
STIPULATION
NOW, THEREFORE, IT IS HEREBY STIPULATED by and between the District, the United States, and First National (as surety of Hunt and as assignee of the DLSE), by and through their respective attorneys of record, as follows:
1. The foregoing Facts and Procedural History set forth above is hereby incorporated by this reference as though fully set forth herein.
2. The District interpleaded the Contract Funds totaling $206,903.83, which constitute all contract funds owing by the District to Hunt. The District is an innocent stakeholder and benefitted all Parties by filing this interpleader to allow all Parties to resolve their competing claims to the Contract Funds. The District is, therefore, entitled to disbursement of the monies set forth in Paragraph 3 below in partial reimbursement of the District's attorney's fees as authorized by federal law.
3. The Parties agree and stipulate to a proposed distribution of the Contract Funds as follows:
a. The District shall receive NINE THOUSAND DOLLARS ($9,000) from the Contract Funds interpleaded;
b. The United States shall receive FIFTEEN THOUSAND DOLLARS ($15,000) from the Contract Funds interpleaded; and
c. First National shall receive the remaining amount of the Contract Funds interpleaded, plus any and all accrued interest.
4. The Parties stipulate and agree that upon entry of the Order by the Court approving this Stipulation, no person or entity, including, without limitation, First National (as surety of Hunt and as assignee of the DLSE), the United States, Hunt (or anyone claiming through Hunt), or the DLSE, shall be permitted to institute or further prosecute any other proceedings against the District in any court affecting the rights and obligations to the Amended Interpleader Complaint, this action, or the Contract Funds, all such claims being hereinafter forever released and discharged.
5. The Parties stipulate and agree that upon entry of the Order by the Court approving this Stipulation, District shall be completely discharged of any further liability to any claims, lawsuits, liabilities, demands or obligations respecting the Amended Interpleader Complaint, this action, or the Contract Funds.
6. The Parties stipulate and agree that upon entry of the Order by the Court approving this Stipulation, this action shall be dismissed, with prejudice, each party to bear their own costs and expenses, including attorney's fees.
IT IS SO STIPULATED.
PORTER SIMON
By______________________
Brian C. Hanley
Attorneys for Plaintiff
TRUCKEE DONNER PUBLIC UTILITY
DISTRICT
KATHRYN KENEALLY
Assistant Attorney General
By: ______________________
Richard A. Schwartz
Trial Attorney, Tax Division
U.S. Department of Justice
Attorneys for Defendant
UNITED STATES OF AMERICA
BENJAMIN B. WAGNER
United States Attorney
Of counsel
WOLKIN • CURRAN, LLP
By: ______________________
James D. Curran
Attorneys for Defendant
FIRST NATIONAL INSURANCE COMPANY
OF AMERICA, as Surety and Assignee of the
rights and claims of the Labor Commissioner of the
State of California - Division of Labor Standards
Enforcement
ORDER
The Court, having reviewed and considered the Stipulation For Discharge and Order of Payment of Interpleader Claims (the "Stipulation") entered by and between the following Parties, by and through their respective counsel: Plaintiff TRUCKEE DONNER PUBLIC UTILITY DISTRICT ("District"); Defendant UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE (the "United States"); and Defendant FIRST NATIONAL INSURANCE COMPANY OF AMERICA ("First National"), as surety for Defendant GREGORY LEE HUNT, dba HUNT'S EXCAVATING ("Hunt") and as assignee of the rights and claims of Defendant LABOR COMMISSIONER OF THE STATE OF CALIFORNIA - DIVISION OF LABOR STANDARDS ENFORCEMENT ("DLSE"), and for good cause appearing, HEREBY ORDERS:
1. The Stipulation is approved and incorporated by reference herein.
2. The funds interpleaded by the District into the Registry of the Court, in the amount of $206,903.83 shall be paid by the Clerk of the Court to the Parties as follows:
a. The sum of NINE THOUSAND DOLLARS ($9,000) shall be paid to TRUCKEE DONNER PUBLIC UTILITY DISTRICT;
b. The sum of FIFTEEN THOUSAND DOLLARS ($15,000) shall be paid to UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE; and
c. The remaining funds shall be paid to FIRST NATIONAL INSURANCE COMPANY OF AMERICA, plus any and all accrued interest.
3. No person or entity, including, without limitation, First National (as surety of Hunt and as assignee of the DLSE), the United States, Hunt (or anyone claiming through Hunt), or the DLSE, shall be permitted to institute or further prosecute any other proceedings against the District in any court affecting the rights and obligations to the Amended Interpleader Complaint, this action, or the Contract Funds, all such claims being hereinafter forever released and discharged.
4. The District shall be completely discharged of any further liability as to any claims, lawsuits, liabilities, demands or obligations by any parties in this litigation, including, without limitation, First National (as surety of Hunt and assignee of the DLSE), the United States, Hunt (or anyone claiming through Hunt), or the DLSE, relating to or arising from the Amended Interpleader Complaint, this action, or the funds interpleaded in this action.
5. The District's Amended Interpleader Complaint (Document 14, Court's Docket) filed in this action shall be dismissed, with prejudice, each party to bear their own costs and expenses, including attorney's fees.
IT IS SO ORDERED.
______________________
UNITED STATES DISTRICT JUDGE
EXHIBIT 1
Assignment of Claims
EXHIBIT 2