REPAIRING ONE’S OWN WORK AND THE ONE YEAR STATUTE OF LIMITATIONS TO SUE A MILLER ACT PAYMENT BOND

shutterstock_516982177When it comes to Miller Act payment bond claims, repairing one’s own work does NOT extend the one year statute of limitations to file suit on a Miler Act payment bondBelonger Corp., Inc. v. BW Contracting Services, Inc., 2018 WL 704379, *3 (E.D. Wisconsin 2018) (“The courts that have considered this question tend to agree that, once a subcontractor completes its work under the subcontract, repairs or corrections to that work do not fall within the meaning of ‘labor’ or ‘materials’ and, as such, do not extend the Miller Act’s one-year statute of limitations.”).

 

Well, what if the subcontractor was repairing its own work due to an issue caused by another subcontractor? 

 

This was the situation in Belonger Corp. where a plumber was asked to unclog a plumbing line that had concrete in the line (caused by another subcontractor)  months after the plumber had completed its contractual scope of work.  Before the subcontractor did this work, it smartly sent an e-mail stating that it needs an e-mail acknowledgement that this additional work is authorized and a change order will be forthcoming.  The contractor responded, “Yes, please proceed with repair work on a T&M [time and materials] basis….”   Sure enough, the subcontractor unclogged the line and a change order was never issued.

 

The subcontractor filed a Miller Act payment bond claim for unpaid contract work plus change order work, such as unclogging the line.  The subcontractor based its last day for purposes of the statute of limitations on the work associated with unclogging the line and not on the day it completed its contractual scope of work.  If it was determined that the subcontractor’s last day / final furnishing date was when it fully completed its contractual scope of work, its Miller Act payment bond lawsuit would be untimely / barred by the one year statute of limitations to sue on a Miller Act payment bond.  

 

The issue was whether the subcontractor’s remedial work to its own plumbing line extended its final furnishing date.  The trial court found this to be a question of fact because this arguably was change order work that amended the subcontract to include this additional work.  The fact that the subcontractor sent an e-mail before doing this work and the fact that the contractor responded helped the subcontractor create a question of fact that its payment bond claim was not untimely because unclogging its own plumbing line due to an issue caused by another trade subcontractor was additional subcontractual work that extended its final furnishing date.

 

If you are in this situation, the best bet is not to bank on this type of argument.  File your Miller Act payment bond claim within one-year of finishing your contractual work.  With that said, if you don’t, the argument raised by the subcontractor here that repairing its own work due to an issue caused by another subcontractor was additional work that modified the terms of the subcontract and extended its final furnishing date is a creative argument helped by the e-mail this subcontractor smartly sent.

 

For more information on the Miller Act, check out this ebook.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUICK NOTE: NOTICE OF CONTEST OF CLAIM AGAINST PAYMENT BOND

imagesOn private jobs where the general contractor has an unconditional payment bond, subcontractors, sub-subcontractors and suppliers need to serve a notice of nonpayment to preserve payment bond rights.

 

Just like an owner can record a Notice of Contest of Lien to shorten a lienor’s statute of limitations to foreclose the lien to 60 days, a general contractor can record a Notice of Contest of Claim Against Payment Bond.  See Fla. Stat. s. 713.23(e).  When a contractor records a Notice of Contest of Claim Against Payment Bond, the contractor is contesting the notice of nonpayment and shortening the claimant’s period to sue on the payment bond to 60 days from the date of service of the notice.  

 

This tool is used less frequently than the Notice of Contest of Lien; however, it can be a very successful tool for a contractor to use when receiving a notice of nonpayment.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

VENUE FOR SUING PUBLIC PAYMENT BOND

shutterstock_96191135Public payment bonds (excluding FDOT payment bonds) are governed under Florida statute s. 255.05.  As it pertains to venue—the location to sue a public payment bond–the statute provides in relevant portion:

 

 

(5) In addition to the provisions of chapter 47, any action authorized under this section may be brought in the county in which the public building or public work is being construction or repaired.

 ***

(1)(e) Any provision in a payment bond…which restricts venue of any proceeding relating to such bond…is unenforceable.

 

Now, what happens if a subcontractor sues only a payment bond but its subcontract with the general contractor contains a mandatory venue provision?  For example, what if the general contractor is located in Lee County and the subcontract contains a venue provision for Lee County, the project is located in Collier County, the subcontractor is located in Miami-Dade County, and the surety issues bonds in Miami-Dade County? Does venue have to be in Lee County per the mandatory venue provision?

 

According to the decision in Travelers Casualty and Insurance Co. of America v. Community Asphalt Corp., 42 Fla. L. Weekly D1318a (Fla. 3d DCA 2017), a claimant can sue a public payment bond anywhere where venue is permitted irrespective of a mandatory venue provision in a subcontract.  In this case, the project was in Collier County and the subcontract contained a mandatory venue provision for Lee County.  However, the subcontractor sued the public payment bond in Miami-Dade County.   The Third District held that the subcontract’s venue provision could not be read into the bond because it would be unenforceable since Florida Statute s. 255.05 renders such language that restricts venue unenforceable

 

The Third District, however, did importantly note that this ruling may likely have been different if the subcontractor also sued the general contractor in the lawsuit.  Because the subcontractor only sued the public payment bond, the venue provision in the subcontract did not apply.

 

Strategically, there are reasons why a payment bond claimant (e.g., subcontractor) does not want to sue the general contractor.  One such reason is venue, as in the instant case.  The subcontractor did not want to sue in Lee County and had a strong argument to sue the public payment bond in Miami-Dade County, a more preferable and convenient venue to it, and was able to do so notwithstanding the venue provision in the subcontract.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

PRESERVING YOUR RIGHTS TO SECURE PAYMENT ON CONSTRUCTION PROJECTS (WITH EXAMPLES)

shutterstock_330137966All participants across the construction industry should understand what efforts they should take to maximize and collateralize payment.  No one wants to work for free and, certainly, no one in the construction industry wants to work without ensuring there is some mechanism to recover payment in the event they remain unpaid.   Being proactive and knowledgeable can go a long way when it comes to recovering your money.

 

Your Contract – It starts with the contract.  You should understand those risks that are allocated to you and those that are allocated to another party.  And, you should understand the contractual mechanism to resolve claims and disputes and whether your contract has a prevailing party attorney’s fees provision. In addition to contractual rights, there are tools for you to maximize your collection efforts.

 

Construction Liens – Construction liens apply to private projects, not public projects.  This is a very valuable tool as they allow you to collateralize nonpayment against real property.  It is really important you know what you need to do to preserve your construction lien rights.  Construction liens are a creature of statute and the failure to properly preserve and perfect your construction lien rights can be fatal to your lien claim.  

 

Example 1.   I am a general contractor on a private condominium project.  I am owed $1,000,000 from the developer.    As the general contractor, I can record a construction lien within 90 days from my final furnishing on the project exclusive of punchlist and warranty work.   (This is good for one year from recording unless the developer takes steps to shorten the limitations period to foreclose the lien.)  I serve a copy of the lien on the developer (and others that may be listed in the Notice of Commencement) within 15 days of the recording of the lien.  At least 5 days before filing suit to foreclose on the lien, I need to serve a Contractor’s Final Payment Affidavit on the developer.

***

Example 2.  I am a subcontractor on a private condominium project.  I am owed $1,000,000 from the general contractor.   Since I am not in privity with the owner/developer, I need to serve a Notice to Owner within 45 days of my initial furnishing on the owner and general contractor (and others listed in the Notice of Commencement).  I need to record my construction lien within 90 days from my final furnishing and furnish a copy on the owner within 15 days from the recording of the lien.  Also, since I am not in privity with the owner/developer, I do not need to serve a Contractor’s Final Payment Affidavit.  I need to sue on the lien within 1 year from the recording of the lien (unless efforts are taken to shorten the limitation period).

-

 

Payment Bonds (Private Projects) – There can be statutory payment bonds on private projects.   The Notice of Commencement will attach a copy of the payment bond, if one exists.  If one is not referenced and attached, then that means the claimant has lien rights.  It is really important you know what you need to do to preserve your payment bond rights on private projects – they are not necessarily the same as preserving payment bond rights on public projects.   Preserving your bond rights allows you to pursue your claim for nonpayment against a surety bond.

 

Example 3.  I am a subcontractor on a private condominium project. I am owed $1,000,000 from the general contractor.  I know from the Notice of Commencement that the general contractor furnished an unconditional payment bond.  Since I am in privity with the general contractor, I do not need to serve a Notice of Intent to look to the Bond on the contractor.   But, within 90 days of final furnishing, I need to serve the general contractor and payment bond surety with a Notice of Non-Payment.  I then need to sue on the payment bond within 1 year from my final furnishing.

  

Payment Bonds (Public Projects)—There are statutory payment bonds on Florida public projects and Federal projects.  There are different procedures to preserve rights depending on the type of public project and it is important to know what steps you need to take to preserve your rights.  Preserving your bond rights allows you to pursue your claim for nonpayment against a surety bond.

  

Example 4.  I am a subcontractor on a Florida school public project. I am owed $1,000,000 from the general contractor.  I know that since I am in privity with the general contractor, I do not need to serve a Notice of Intent to look to the Bond on the contractor.  I also know since I am in privity with the general contractor, I do not need to serve a Notice of Non-Payment on the general contractor and surety.  (Note, this is different than if this were a private project).   I need to sue on the payment bond within 1 year from my final furnishing. 

 ***

Example 5.  I am a supplier to a subcontractor on a Florida school public project.  I am owed $1,000,000 from the subcontractor. Since I am not in privity with the general contractor, I need to serve a Notice of Intent to look to the Bond within 45 days of my initial furnishing.  Also, since I am not in privity with the general contractor, I need to serve a Notice of Non-Payment on the general contractor and surety within 90 days of my final furnishing.  I need to sue on the payment bond within 1 year from my final furnishing.

 ***

Example 6.  I am a sub-subcontractor on an FDOT public transportation project.  I am owed $1,000,000 from the subcontractor.  Since I am not in privity of contract with the general contractor, I need to serve a Notice of Intent to look to the Bond on the general contractor within 90 days of my initial furnishing. (Note, this is different than other public projects.)   Also, since I am not in privity with the general contractor, I need to serve a Notice of Non-Payment within 90 days of my final furnishing on the general contractor and surety. I then need to sue on the payment bond within 365 days of the final acceptance of the contract and work by the FDOT.  (Note, this is different than other public projects.)

 ***

Example 7.  I am a subcontractor to a prime contractor on a federal project.  I am owed $1,000,000 from the prime contractor.   Since this is a federal project, there is no preliminary notice requirement.  (Note, this is different than other public projects.)  Since I am in privity with the general contractor, I do not need to serve a Notice of Non-payment on the prime contractor within 90 days of my final furnishing. I need to sue on the payment bond within 1 year from my final furnishing.

 ***

Example 8.  I am a supplier to a subcontractor on a federal project.  I am owed $1,000,000 from the subcontractor.  Since this is a federal project, there is no preliminary notice requirement.   Also, since I am not in privity with the prime contractor, I need to serve a Notice of Non-Payment only on the prime contractor within 90 days of my final furnishing.  (Note, this is different than other public projects.)  I need to sue on the payment bond within 1 year from my final furnishing.

 

 

As reflected from the examples, preserving and perfecting construction lien and payment bond rights is nuanced and depends on the type of project.   Know your rights.  Be proactive when it comes to preserving and perfecting your rights.  And, make sure to utilize the services of a construction attorney that can help you maximize your collection efforts correctly

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.