Sub-subcontractors and suppliers to subcontractors working on federal projects NEED to know what they need to do to preserve Miller Act payment bond rights. Prime contractors need to know too so that they know what defenses to raise against the unwary sub-subcontractor/supplier that asserts a claim against their Miller Act payment bond. The Miller Act requires:
“A person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the [prime] contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made. The action must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. The notice shall be served–
(A) by any means that provides written, third-party verification of delivery to the contractor at any place the contractor maintains an office or conducts business or at the contractor’s residence; or
(B) in any manner in which the United States marshal of the district in which the public improvement is situated by law may serve summons.
40 U.S.C. s. 3133 (b)(2)
In U.S. f/u/b/o Columbus Fire & Safety Equipment Co., Inc. v. Anderson Electric Co., Inc., 2014 WL 931262 (M.D. GA 2014), a supplier to a subcontractor was not paid on a federal project. The supplier notified the Miller Act surety and prime contractor of the non-payment. However, the supplier appeared to only notify the surety of the specific amount it claimed it was due which the surety communicated to the prime contractor. When the supplier remained unpaid, it instituted a Miller Act lawsuit. The surety and prime contractor moved for summary judgment arguing that the supplier failed to provide proper notice to the prime contractor pursuant to the Miller Act. Specifically, the surety and prime contractor argued that the supplier failed to notify the prime contractor of the amount the supplier claimed to be due as required by the Miller Act.
Under the Miller Act, “If a subcontractor fails to pay a supplier of materials on such a project, that supplier can sue on the bond by giving written notice to the general contractor within ninety days of last supplying the material for which the claim is made.” Anderson Electric, supra, at *2 citing 40 USC s. 31333(b)(2).
The question in this case was whether the prime contractor was on sufficient notice of the supplier’s claim since it was not provided with direct notice from the supplier of the amount the supplier claimed it was owed. The Middle District of Georgia noted that courts typically allow flexibility concerning the method notice is given. However, the notice must be sufficiently specific to place the prime contractor on notice of the claim that the supplier is asserting. “The purpose of the notice requirement of the Miller Act is to alert a general contractor that payment will be expected directly from him, rather than from the subcontractor with whom the materialman [supplier] dealt directly.” Anderson Electric, supra, at *3 quoting United States ex rel. Jinks Lumber Co. v. Fed. Ins. Co., 452 F.2d 485, 487 (5th Cir.1971). Regarding the notice requirement, the Middle District of Georgia stated:
“That notice does not, however, have to be entirely in one writing for it to comply with the Miller Act. Written notice may be considered in conjunction with other writings or even oral statements to determine whether the general contractor was adequately informed, expressly or impliedly, that the supplier is looking to the general contractor for payment so that it plainly appears that the nature and state of the indebtedness was brought home to the general contractor.” Anderson Electric, supra, at *3 (internal quotations omitted and citation omitted).
Here, there was no evidence that the supplier notified the prime contractor of the amount it claimed it was owed. However, there was evidence that the supplier notified the surety of the amount it claimed it was due and the surety notified the prime contractor of this amount within the 90-day deadline. For this reason, the Middle District of Georgia denied the summary judgment and found that “communication between the…claimant, the contractor’s surety, and the general contractor can be considered by the jury in its determination of whether the general contractor received sufficient notice, that the supplier is looking to the general contractor for payment of some specific amount of a specific subcontractor’s indebtedness.” Anderson Electric, supra, at *4.
This opinion illustrates the importance of a supplier or sub-subcontractor giving the prime contractor on a federal project proper notice of its claim for non-payment within 90 days of their final furnishing date. Not doing so can be fatal to their Miller Act claim. A prime contractor that is aware of this will raise this as a defense and move for summary judgment on this point. In this case, it appeared that the surety assisted the supplier by notifying the prime contractor of the supplier’s claimed amount within the supplier’s 90 day deadline. Also, due to the flexibility of the notice requirements, the supplier/sub-subcontractor may have arguments to survive a summary judgment, especially if it notified the surety and the surety notified its principal-prime contractor within 90 days of the supplier/sub-subcontractor’s final furnishing date. But, it should not even get to this point as the notice requirements of the Miller Act should absolutely be met to ensure Miller Act payment bond rights are timely preserved.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.