K-W Industries, a Division of Associates Technologies, Ltd., a Corporation v. National Surety Corporation

Appellee National Surety Corporation (“National”) was the surety on a payment bond executed in compliance with the Miller Act, 40 U.S.C. § 270a, et seq., guaranteeing payment to suppliers of labor and materials for a federal construction project at Fort Peck, Montana. Appellant K-W Industries (“K-W”) alleges that after the general contractor refused to pay for materials K-W delivered for use on the Fort Peck project, K-W made a claim against National on the bond for payment. When National allegedly refused to pay the claim, K-W sued National in the United States District Court for the District of Montana.

After K-W and National settled the federal court action, K-W instituted the present action against National in Montana state court. K-W alleges that National acted in bad faith in refusing to pay K-W’s claim and in forcing it to bring the federal court action, and seeks compensatory and punitive damages under Montana’s unfair insurance claims practices law. Mont. Code Ann. § 33-18-201 . After National removed to federal district court on the basis of diversity jurisdiction, see 28 U.S.C. § 1441 (a), the district court sua sponte dismissed the action for lack of subject matter…