VENUE FOR MILLER ACT PAYMENT BOND WHEN PROJECT IS OUTSIDE OF US

The proper venue for a Miller Act payment bond claim is “in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy.” 40 U.S.C. s. 3133(b)(3)(B).

Well, there are a number of federal construction projects that take place outside of the United States.  For these projects, where is the correct venue to sue a Miller Act payment bond if there is no US District Court where the project is located?  A recent opinion out of the Southern District of Florida answers this question.

In U.S. ex. rel. Salt Energy, LLC v. Lexon Ins. Co., 2019 WL 3842290 (S.D.Fla. 2019), a prime contractor was hired by the government to design and construct a solar power system for the US Embassy’s parking garage in Burkina Faso.  The prime contractor hired a subcontractor to perform a portion of its scope of work.

The subcontractor remained unpaid in excess of $500,000 and instituted a Miller Act payment bond claim against the payment bond surety in the Southern District of Florida, Miami division.  The surety moved to transfer venue to the Eastern District of Virginia arguing that the Southern District of Florida was an improper venue.  The court agreed and transferred venue.  Why?

Initially, because the project is outside of the US, the subcontractor could NOT sue the surety where the project is located.  Under the Miller Act, the venue provision was enacted for the benefit of the prime contractor and surety and, therefore, “the final site of the government project is dispositive of the [venue] matter.”  US ex. rel. Salt Energy, LLC, 2019 WL at *4 (rejecting the subcontractor’s argument that venue for a Miller Act payment bond claim can be at a venue independent of jobsite activities.)

Therefore, to determine the appropriate venue provision (as the venue set forth under the Miller Act would be inapplicable to a project outside of the US), the Court had to look at general venue standards governing federal courts.  The Court adopted the general venue provision in 28 U.S.C. s. 1391 finding that appropriate venue would be “wherever any defendant resides or wherever a substantial part of the events or omissions giving rise to the claim occurred.” U.S. ex. rel. Salt Energy, LLC, 2019 WL at *4.

The surety resided in Tennessee.  However, the surety did not attempt to transfer the case to an applicable District Court in Tennessee, but instead, moved to transfer to the Eastern District of Virginia. The surety argued, and the Court agreed, that the Eastern District of Virginia is appropriate because this is where the government executed the prime contract, where the awarding agency is located, where invoices were sent, and where the prime contractor submitted deliverables.  The subcontractor countered that a substantial portion of its work occurred in the Southern District of Florida where it is located, making the Southern District of Florida an appropriate venue.  Unfortunately for the subcontractor, the Court was not buying this argument because the activities the subcontractor claimed it performed in the Southern District of Florida were in relation to its subcontract, not the prime contract, and were largely administrative or ministerial in nature – substantial performance did not occur in the Southern District of Florida.

The surety would have been able to transfer venue to the appropriate district court in Tennessee (where it resided) or Virginia (where a substantial part of the events giving rise to the claim at issue took place).

The subcontractor’s argument to keep venue in the Southern District of Florida was a worthy argument. However, the Court perceived many of the activities the subcontractor performed in the Southern District (coordinating, billing, phone calls, etc.) were not a substantial part of the events giving rise to the claim.  The Court was more focused on activities in relation to the prime contract, and because the prime contract and awarding agency were in the Eastern District of Virginia, that was a more appropriate venue.

Venue is an important consideration in any dispute, including a Miller Act payment bond dispute when a foreign project is involved and the venue provision in the Miller Act does not apply.

 

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.

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