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Arbitration clauses in a construction contract are commonplace, but what effect do these clauses have when litigating a Miller Act Claim, which may entitle you to a cause of action against the Miller Act Surety, who is not a party to your contract and not subject to the arbitration clause?

In most federal jurisdictions, the law on this is quite clear, and we were reminded of that two weeks ago in a case from the US District Court in Maine captioned United States v. Consigli Constr. Co.

In that case, a miller act claim was made against the general contractor where the claimant’s contract with the general contractor required the parties submit any disputes to arbitration. As required in these Miller Act suits, the lawsuit was filed against both the general contractor and the general contractor’s surety, Federal Insurance Company (FIC).

The court brushed the case off its docket and mandated that the parties arbitrate their dispute in arbitration, pursuant to the arbitration clause. Of course, FIC and the claimant didn’t have any arbitration obligations between them, so would the court allow the claim to stay in federal court and be pursued independently against the surety?  The clear answer is no:

The majority of federal courts that have held that an arbitration award binds a Miller Act surety. See e.g. U.S. f/u/b/o WFI Georgia, Inc. v. Gray Ins. Co., 701 F. Supp. 2d 1320, 1327-29 (N.D. Ga. 2010)…Consigli has elected to arbitrate its dispute with Maverick and will be bound by the results of that arbitration. Judgment upon the award may be entered in this Court. The Court accepts FIC’s representation that its liability is coextensive with Consigli’s. Maverick will not need to relitigate its claims against FIC following arbitration with Consigli. It would be duplicative and risk inconsistent adjudications to allow Maverick to pursue its Miller Act claim against FIC in this Court simultaneously with its claims against Consigli in arbitration.

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