The Miller Act is a common topic of discussion on the blog. The basics of the Miller Act are simple: due to the extra complexities created by public and private entities entering into construction agreements, the Miller Act requires general contractors to provide payment and performance bonds. Payment bonds give subcontractors, suppliers, and other parties down the line a pile of money on which they can make a claim when payment disputes arise. Because public property cannot be encumbered by mechanics liens, this extra leverage is crucial for those down the chain workers on federal projects. Performance bonds insure that a contractor will complete the work it was hired to do. The Miller Act has even inspired state level acts (Little Miller Acts) that mirror the federal statute on state and local levels.
Because the Miller Act was designed to protect awarding authorities, subcontractors, and suppliers, general contractors don’t receive much protection. When something goes awry on a public project, the prime contractor’s only recourse is to sue on the contract. But what about when a contractor is defending itself from a Miller Act claim? Can general contractors recover attorney fees when a subcontractor unsuccessfully sues for payment? A recent case from a federal appellate court determined that if the underlying contract contemplates the payment of attorney fees, general contractors may recover fees on a failed Miller Act claim.
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Can a General Contractor Recover?
When subcontractors successfully sue under the Miller Act, it’s not uncommon for an award of attorney fees. The Miller Act does not specifically mention attorney fees, but they may be recovered when an award of attorney fees is contemplated in the contract. However, when going in the other direction, the issue becomes less clear.
There is no precedent regarding the issue of a surety or general contractor’s attempt to recover attorney fees on a suit under the Miller Act after a subcontractor voluntarily dropped the suit. For that reason, the trial court in RMP Capital Corp. v. Turner Construction Co. decided not to award Turner Construction attorney fees when RMP Capital dropped their suit. Because there was no precedent on the subject, and because the Miller Act was instituted, in large part, to protect subcontractors and suppliers rather than general contractors, the court found that a general contractor (or surety) should not be able to recover attorney fees.
Turner appealed, and the appellate court was much more receptive. According to the appellate court, “the district court erred in deriving a broad principle from this absence of precedent.” The court continues, “Like all other parties to contracts, general contractors on federal projects and their sureties can recover attorney’s fees where a contract allocates attorney’s fees to them.”
The decision does not state that contractors will automatically be entitled to attorney fees in this situation. However, the appellate court did open the door for recovery. The Miller Act is decidedly pro-subcontractor and supplier, as evidenced by the fact that Miller Act claims are not easily tossed aside. However, following this decision, a contractual provision granting attorney fees will be given its due weight when the general contractor or surety prevails.
The statutory language and case precedent under the Miller Act are very generous to subcontractors, and deservedly so. It is now clear, though, that when a general contractor prevails against Miller Act claims, an award for attorney fees may be proper if previously contemplated in the contract. While the purpose of the Miller Act is to protect the public and down the chain laborers, it seems fair that a general contractor might be able to recover attorney fees when a Miller Act claim fails.