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United States v. Lexon Insurance Co.

United States District Court, S.D. Florida, Miami Division

August 14, 2019

UNITED STATES OF AMERICA on behalf of SALT ENERGY, LLC, a Florida Limited Liability Company, Plaintiff,



         THIS CAUSE came before the Court upon Defendant's Motion to Dismiss for Improper Venue, or in the Alternative, to Transfer, filed on March 7, 2019. The Court has considered the motion, the response in opposition, the reply, the pertinent portions of the record, and is otherwise fully advised in the premises. Based on the reasoning below, and pursuant to 28 U.S.C. § 1406(a), [1]it is ADJUDGED that the motion to transfer is GRANTED. Accordingly, the instant action is transferred to the United States District Court for the Eastern District of Virginia.

         I. BACKGROUND

         On February 5, 2019, Salt Energy, LLC filed a Miller Act complaint pursuant to 40 U.S.C. § 3133(b) against Lexon Insurance Company for failure to repay certain sums owed under a payment bond. Salt Energy, whose principal place of business is in Florida, alleged that on September 29, 2016, Montage, Inc. and the United States entered into a prime contract in which Montage promised to design and construct a solar powered system for the United States Embassy parking garage in Ouagadougou, Burkina Faso. According to the prime contract, Montage was to, among other obligations, "provide design and construction services for a new parking canopy structure completely covering all parking spaces within the staff parking area [of the United States Embassy], as well as a photovoltaic (PV) renewable power generation system integrated into the canopy." Montage's principal place of business is in Washington, D.C.

         Consistent with federal law, before executing the prime contract, Montage furnished the United States with "[a] payment bond with a surety satisfactory ... for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person." 40 U.S.C. § 3131(b)(2). The amount of the bond was $2, 295, 000, "[t]he amount.. . equal [to] the total amount payable by the terms of the contract." Id. The bond listed Lexon Insurance as the surety, which "b[ound] itself, jointly and severally with the Principal [Montage], for the payment of the sum." Lexon Insurance's principal place of business is in Tennessee.

         After executing the payment bond and prime contract, Montage entered into a subcontract agreement with Salt Energy on December 20, 2016. Salt Energy, as subcontractor, promised to furnish and install the PV renewable power generation system and parking canopy structure, as well as "provide material, tools, supervision and labor" for the project. According to the complaint, Salt Energy completed the project on October 10, 2018, but is still owed approximately $515, 800. Now, Salt Energy is suing for those sums and attorney's fees and costs. Salt Energy notes that it sent a letter to Lexon Insurance notifying the company of the amount due, but to date, neither Montage nor Lexon Insurance have paid it.

         In response to the complaint, Lexon Insurance filed a motion to dismiss, or in the alternative, transfer. Its main argument is that Salt Energy filed suit in the wrong district, failing to establish a sufficient nexus between the prime contract at issue and this Court. Under the relevant venue provision of the Miller Act, the plaintiffs residence, for venue purposes, is irrelevant. Instead, what matters is the location of the government project itself, and, if that project occurs abroad, either the location of the defendant's residence or wherever a substantial part of the events or omissions giving rise to the claim occurred. For the latter reason, Lexon Insurance seeks transfer to the United States District Court for the Eastern District of Virginia.

         The Court now reviews Lexon Insurance's motion to dismiss or transfer venue.


         Lexon Insurance brings forth its motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3), and, in the alternative, requests transfer pursuant to 28 U.S.C. § 1406(a). "On a motion to dismiss based on improper venue [under Rule 12(b)(3)], the plaintiff has the burden of showing that venue in the forum is proper." Wai v. Rainbow Holdings, 315 F.Supp.2d 1261, 1268 (S.D. Fla. 2004); see also United States ex rel. Crux Subsurface, Inc. v. TK Constr. US, LLC, No. 15-cv-01777-LTB, 2015 WL 8759330, at *2 (D. Colo. Dec. 15, 2015) (applying the standard with respect to a Miller Act complaint). When evaluating a motion to dismiss, "[t]he court must accept all allegations of the complaint as true, unless contradicted by the defendants' affidavits, and when an allegation is so challenged the court may examine facts outside of the complaint to determine whether venue is proper." Rainbow Holdings, 315 F.Supp.2d at 1268. "The court must draw all reasonable inferences and resolve all factual conflicts in favor of the plaintiff." Id.

         However, if the court determines that venue is improper, it "shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a). In applying section 1406(a), "the decision whether to transfer a case is left to the sound discretion of the district court and is reviewable only for an abuse of that discretion." Roofing & Sheet Metal Servs., Inc. v. La Quinta Motor Inns, Inc., 689 F.2d 982, 985 (11th Cir. 1982). "Generally, the interests of justice require transferring a case to the appropriate judicial district rather than dismissing it." Simpson v. Fed. Bureau of Prisons, 496 F.Supp.2d 187, 194 (D.D.C. 2007); see also Spherion Corp. v. Cincinnati Fin. Corp., 183 F.Supp.2d 1052, 1059-60 (N.D. 111. 2002) ("Transfer is ordinarily in the interest of justice because dismissal of an action that could be brought elsewhere is time consuming and may be justice-defeating." (internal quotation marks omitted)); Yurman Designs, Inc. v. A.R. Morris Jewelers, LLC, 60 F.Supp.2d 241, 246 (S.D.N.Y. 1999) ("Dismissal is a severe penalty, and courts will ordinarily transfer a case when proper venue can be determined." (internal quotation marks omitted)).

         III. ANALYSIS

         A. Under the Miller Act, Venue Is Typically Proper in the Final Location of the Government Project Site as Identified by the Prime Contract

         Upon review of the filings, the Court ultimately agrees that Salt Energy has filed suit in the wrong district, and that the case should be transferred to the United States District Court for the Eastern District of Virginia. By way of background, "the Miller Act establishes the general requirement of a payment bond to protect those who supply labor or materials to a contractor on a federal project." F.D. Rich Co. v. United States ex rel. Indus. Lumber Co.,417 U.S. 116, 121-22 (1974). Under the statute, such subcontractors and suppliers sue on the payment bond to recover amounts unpaid by general contractors. See 40 U.S.C. § 3133(b)(1). The general contractors furnish the bond to the United States before executing the prime contract to ensure that those working on the project will receive payment. See 40 U.S.C. § 3131(b). The Miller Act dictates the location of where a subcontractor or supplier can enforce the bond, stating that venue is proper wherever the prime contract is to be "performed and executed." 40 U.S.C § 3133(b)(3)(B). The relevant language of the provision ...

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