Under the Miller Act, a party is limited to a one year period to file suit against a payment bond to recover payment. This one year period may be extended for very limited circumstances. The reason for these limited circumstances is because to allow an extension of the one year period alters the risk profile of sureties and general contractors. Recently, a subcontractor in a Miller Act suit attempted to extend the one year period through the application of a procedural rule, the relating-back doctrine.
The Relating-Back Doctrine
Before we get into the actual case, it may be good to review the relating-back doctrine to better understand what is going on. This is a procedural argument in civil litigation. The doctrine is rooted in the Federal Rules of Civil Procedure Rule 15(c). This rule states that if an individual amends their complaint to aid other legal theories or another cause of action, the date of filing relates back to the original date of filing. This procedural rule is used to avoid statute of limitations bars. The catch is that the remedy sought has to derive out of the same general set of facts. The issue, then, is whether this tool could be used to technically “extend” the one year limitation period for a Miller Act claim.
Need to file a Bond Claim?
We’re the Bond Claim experts. With us it’s fast, easy, affordable, and done right.
The Case
In Insurance Company of the State of Pennsylvania v. Afghan ICT Solution et al, 1:14 cv 05786 (S.D.NY) (“Afghan ICT”), the subcontractor tried this procedural tactic to validate its Miller Act claim. The case actually involved multiple contractors. The general contractor was fired from the construction project on September 25, 2013, so this was the date on or around when the last worked was done on the project by subcontractors and suppliers. The surety filed an interpleader and posted a bond on July 28, 2014 with the court. Most of the subcontractors filed a timely counterclaim to the posted bond, essentially claiming a piece of the piece.
Fast forward to March 23, 2015, another subcontractor on the project filed a claim against the pile of money posted by the surety. Since the last day of work was about September 25, 2013, that would be that the Miller Act one year limitation period would invalidate any claim made after about September 25, 2014. This was over 18 months after the last day of work, but the subcontractor had a trick up its sleeve. It claimed that the filing of the interpleader on July 28, 2014 was essentially of the same general facts (essentially the original claim) and that its counterclaim derived out of that. Therefore, the actual date of filing should be counted as July 28, 2014 making it a timely filing.
The Real Story
The one year period cannot be extended through the doctrine. To begin, this use of the relating-back doctrine “failed.” I say “failed” because in a legal sense, the New York court rejected this argument and declared the counterclaim not timely and invalid. Actually, the majority of jurisdictions, leave three, agree with this decision and believe the relating-back doctrine does not apply to Miller Act claims. The one year period cannot be extended through the doctrine.
End of story, right? No, of course not. The practical use of this claim of the doctrine forces parties to the case (the surety and other subcontractors) to make a decision: pay them a piece of the pie or spend money fighting them in court. Is the argument likely to lose if claimed? Almost entirely, but everything boils down to money. As a partial matter, at times it may be cheaper to give these claimants a piece of the pie rather than fight them.
