We are a supplier for a subcontractor. Can someone we buy supplies/labor from file a prelim on the job?

Materials suppliers are permitted to serve a preliminary notice and if unpaid will have lien rights. 

Waivers and Releases of lien rights are controlled by statutes found in Civil Code Sections 8132 through 8138. On progress payments, subcontractors and materials suppliers should provide a Conditional Waiver and Release on Progress Payment (Civil Code 8132) with each application for payment. After payment is received they should submit an Unconditional Waiver and Release on Progress Payment (Civil Code 8134) being careful to make the "through date" back to the last day of work covered by the payment application. If you have questions about which release forms should be submitted, you should retain a qualified construction attorney.  Feel free to email me at nate@thegreenlawgoup.com to set up a free legal consultation. 

A supplier of a supplier for a project does not have lien rights in California. But it makes sense that the GC would want a waiver based on the fact that DMG filed a prelim, whether or not they would actually have enforceable lien rights. 

So while DMG should not have filed a prelim for this job, because they have, the easiest solution is to obtain a lien waiver from them. The alternative would be to convince the GC that no release is necessary because no lien would be enforceable. 

 Other than using a different supplier, there isn't really much you can do to prevent DMG from sending a preliminary notice, even though that notice will not ultimately result in enforceable lien rights. 

Yes, a sub or supplier of any tier, so long as it has served a 20-day prelim., which the supplier did here, can record a lien. The GC is right to request the waiver.