We talk about the Miller Act and Little Miller Acts regularly on the blog. These laws are integral in protecting subcontractors and suppliers on public projects. Unlike their counterparts on private projects, subs and suppliers involved in public works projects do not have the protection of a mechanics lien. Because public property may not be encumbered by a private party, mandating that contractors provide payment bonds provides subs and suppliers with leverage against parties up the chain. Further, subcontractors and suppliers are typically only under contract with the prime contractor. Because no contractual relationship exists with the state or federal government, subs and suppliers may only go after the prime contractor with claims such as breach of contract. These remedies may prove useless in the event that a contractor has found itself in financial trouble.
The Miller Act created this requirement on federal construction projects, and states followed by passing their state-level versions known as Little Miller Acts. The District of Columbia has its own Little Miller Act as well, which was put to task recently in Strittmatter Metro v. Fidelity and Deposit Company of Maryland. Ultimately, this case just illustrated why Little Miller Acts are necessary, and the act served its purpose by providing recourse to an unpaid contractor.
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The Case
Let’s set the stage: The District of Columbia hired CHJV as prime contractor to build a school. CHJV then hired Strittmatter as a subcontractor/supplier. After a significant amount of work had taken place, payment disputes arose between CHJV and the District, and in turn also arose between CHJV and Strittmatter. CHJV took its claims to mediation, as required by contract, and Strittmatter filed a claim against CHJV’s sureties Fidelity and Deposit Company of Maryland and Zurich American Insurance Company (Sureties). The case at hand arose out of Strimatter’s claims against the Sureties.
In the District’s contract with CHJV, a provision bound CHJV to pursue all disputes through non-binding mediation before taking to the courts. Strittmatter had no such provision in its subcontract. The subcontract did, however, purport to fully integrate the terms of the prime contract into the subcontract. On this basis, the Sureties attempted to dismiss Strittmatter’s claims. According to the Sureties, Strittmatter had a duty to exhaust mediation efforts with the District. If those efforts would prove to be unfruitful, the Sureties claimed, Strittmatter could then take the matter to court. Alternatively, the Sureties claimed that the court should wait until CHJV’s claims against the District had been resolved to move further. The court disagreed.
The court noted that while the subcontract was written to integrate all terms of the prime contract into the agreement, the prime contract between the District and CHJV did the opposite. The prime contract explicitly stated that all subcontractors working on the contract were not in privity with the District, and that subcontractors may not seek compensation directly from the District. The prime contract also declared that all subcontracts must include a provision noting that relationship. Because the District had contemplated and explicitly provided for this situation, the court found it improper to demand Strittmatter attempt recovery from the District. The court explained that Strittmatter had a right to file a claim against the Sureties under the District’s Little Miller Act, and that situations like this one are the very reason the act is necessary.
Regarding the Sureties’ contention that Strittmatter should be barred from acting until CHJV’s dispute with the District was settled, the court found that the subcontractor had no duty to wait until the conclusion of the contractor’s claims. Among other reasons, the court explained that if a subcontractor were to delay filing a claim until after a contractor’s dispute has been resolved, the subcontractor would be at risk- its claims under the Little Miller Act could expire. Considering how strict courts are with time restraints on Miller Act claims, this is a very real issue.
Takeaway
Ultimately, the Sureties’ attempts to block or delay Strittmatter’s bond claims were unsuccessful. While it is unclear whether CHJV will recover its own unpaid sums from the District, that is a moot point. The subcontractor went unpaid by the prime contractor and was entitled to file a claim on the contractor’s bond. The Sureties’ argument that Strittmatter must first attempt to recover through mediation with the District sort of flies in the face of the whole point of Little Miller Acts. Subcontractors and suppliers on public projects have no contractual relationship with the awarding authority, and because of this, their interests are protected by the institution of payment bonds by the prime contractor.
For more on the Miller Act, check out our Miller Act FAQs. We have also provided the full text of nationwide Little Miller Acts. For more on Washington DC, head over to our Washington DC Lien Law FAQs.
