Miller Act Claims get the job done, and that’s not really open for interpretation. Claimants may lament the fact that you can’t relate back under the Miller Act. However, they should celebrate that Miller Act claims are not easily tossed aside, that pay if paid provisions won’t slow down a Miller Act claim, and that rights under the Act are not easily waived. Sure, there are some questions – like what exactly do the terms “furnish” and “labor” mean under the Act, but it has gone a long way to provide protection on federal projects, and it inspired Little Miller Acts in every state.
Having said that, it’s still important to track cases that interpret our beloved Miller Act. Typically, this is where a James Bond/payment bond pun would come into play. However, this suit resulted from work done at the FBI Academy, not MI6. The project was to construct a new kitchen and cafeteria.
Sorry M16 and FBI, but our favorite secret agent is the Notice of Intent to Foreclose.
Miller Act Claims Mean Business
This post won’t speak to the specifics of recovery under the Miller Act – you can find that information here or prepare your claim through Levelset here. Instead, let’s look at the facts of the case then at how Miller Act claims stand in the face of contractual terms that conflict with the Act.
Kitchens-to-Go (“the Subcontractor”) was hired by John C. Brimberg Co. (“the Contractor”) to provide temporary kitchen and cafeteria services for the Navy at at the FBI Academy in Quantico, Virginia. As the contract exceeded $100,000, the Miller Act required that the Contractor provide a payment bond.
As the project progressed, delays began adding up (and, naturally, so did costs). The Subcontractor billed the Contractor for the extra work, and the Contractor billed the contracting official on the project. However, the payment was denied to the Contractor. As a result, the Contractor failed to pay the Subcontractor. This eventually resulted in the Subcontractor filing a claim under the Miller Act and Hartford Accident and Indemnity (“the Surety”) came into the fold.
The Subcontractor’s claim was simple – payment was due and owing, and the Contractor was denying payment. Eventually, the Contractor agreed to pay some of the Subcontractor’s claim, but refused to pay delay damages. According to the Contractor and the Surety, payment was not actually owed. They claimed that, because the contract between the Contractor and the Subcontractor contained a “no-damages-for-delay” clause (more on those here), those amounts could not be due to the Subcontractor since the Contractor was not paid. If you think that sounds a lot like a “pay if/when paid” argument, you and the court agree…
Just as with pay if paid contracts (and, really, any contracts that conflict with the Miller Act), the court was not open to arguments claiming that contractual terms limited any rights to make Miller Act claims. The full opinion can be found here, but some of the more insightful quotes have been pasted below. I’m not sure I could say it any better than the Court anyway – this was a very concise, pointed, and fair opinion.
“…the Miller Act text clearly makes the 90-day provision the only condition for an action on the payment bond. Thus, a no-damages-for-delay clause contradicts this plain statutory text by adding a condition to the action on the payment bond that a subcontractor can only bring a Miller Act claim if the owner has paid the prime contractor for the delays.”
“In sum, the no-damages-for-delay clause at issue here contravenes the text and purpose of the Miller Act because, like pay-when-paid or pay-if-paid clauses, this no-damages-for-delay clause affects both the timing and the right of recovery.”
The case also had a dispute resolution clause-kicker, which the court was not a fan of, either.
“Finally, the dispute resolution clause contravenes the purpose of the Miller Act by needlessly delaying the Subcontractor’s recovery while denying the Subcontractor a forum in which to adjudicate its rights.”
Summed up neatly:
“(1) the Surety may not rely on the no-damages-for-delay clause in the Subcontract to limit its Miller Act liability; and (2) the Subcontractor need not await the completion of the dispute proceedings between the Prime Contractor and the Government Owner to show an amount due under the Subcontract.”