Construction professionals at work

I’ve come across a decision from the United States 5th Circuit Court of Appeal that is interesting for construction lawyers helping clients who work on federal projects. In Richard A. Arena Jr d/b/a Water-Tite Roofing v. Graybar Electric Company, Inc., et al, the 5th Circuit held that a federal court does not have jurisdiction over a construction dispute on a federal project unless a Miller Act Bond was actually present.

As every lawyer knows, a claim cannot be filed in federal court unless the court has jurisdiction over the claim. One type of jurisdiction is “diversity jurisdiction,” and another is “federal question jurisdiction.” Click on the links for these terms for the Wikipedia definition, as I will not be explaining it here :).

In this case, the plaintiff originally asserted jurisdiction in federal court based upon a Miller Act Claim it made on the federal project. However, the claim was quickly dismissed because there were no bonds on the project, as the project, for one reason or another (probably b/c it was a military project) was exempt from the Miller Act requirements.  Without a bond, the 5th Circuit reasoned, there was no federal question jurisdiction.

To me, what is most interesting about this case is that the court distinguished federal projects when a bond is placed from those projects when there isn’t bond. In reading this, realize I’m not talking about a difference between a timely and complete bond claim and a failure to make a bond claim. Federal question jurisdiction apparently has no relation to whether a claim was actually made, but instead, goes back to whether a bond was posted for the project.

To help explain this, let’s look to the opinion and the argument of the parties.  The plaintiff relied on Use of American Bank v. CIT Construction Inc. of Texas, 944 F.2d 253 (5th Cir. 1991). In this case, the federal court found federal question jurisdiction over the construction dispute even though the plaintiff had failed to timely file its Miller Act claim enforcement suit, and therefore, lost its claim over the bond.  Despite the plaintiff not having any claim against the bond, the 5th Circuit found jurisdiction because “Congress had supplied [the district court] with ‘express statutory jurisdiction’ over any ‘action on a bond executed under [a] law of the United States.”  The one year statute of limitation for filing the claim was “limitational and not jurisdictional,” and so the federal court had subject matter jurisdiction, and the question became whether the federal court had any supplemental jurisdiction over the remaining claims.

The  5th Circuit, however, refused to connect the circumstances in American Bank with the circumstances in this present case.  The reason why?  Because the project at controversy in this case never had a bond.  No bond = no jurisdiction.

Interesting decision, and something for construction lawyers to keep in mind if they have clients with federal projects. While they usually can get federal question jurisdiction on these projects, beware of those rare occasions like this, when perhaps you can’t.

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