Under Florida’s Lien Law, there’s an affirmative defense or affirmative claim known as a “fraudulent lien.” The fraudulent lien defense or claim is set out in Florida Statute s. 713.31. This defense also extends to payment bond claims, whether under a private statutory payment bond (Florida Statute s. 713.23) or a public payment bond (Florida Statute s. 255.05), as it pertains to the notice of nonpayment. A notice of nonpayment needs to be served within 90 days from final furnishing to preserve a claimant’s rights against the bond. However, there really has not been a case, until now, that discusses a “fraudulent notice of nonpayment.”
In K&M Electric Supply, Inc. v. Brown Electrical Solutions, LLC, 51 Fla.L.Weekly D672a (Fla. 4th DCA 2026), a prime contractor and surety prevailed at the trial level on their fraudulent notice of nonpayment defense based on a supplier’s notice of nonpayment and action against a public payment bond (under Florida Statute s. 255.05).
A fraudulent notice of nonpayment defense is as follows:
A notice of nonpayment is fraudulent if the claimant has willfully exaggerated the amount unpaid, willfully included a claim for work not performed or materials not furnished for the subject improvement, or prepared the notice with such willful and gross negligence as to amount to a willful exaggeration. However, a minor mistake or error in a notice of nonpayment, or a good faith dispute as to the amount unpaid, does not constitute a willful exaggeration that operates to defeat an otherwise valid claim against the bond.
K&M Electric Supply quoting Fla.Stat. s. 255.05(2)(a)(2).
The prime contractor and its surety argued the notice of nonpayment was fraudulent because (1) the supplier’s claim of nonpayment was significantly higher than the subcontract of the subcontractor (that procured the materials); (2) the claim and notice contained legal fees and charges not allowed to be claimed: and (3) the claim and notice contained items not covered by the subcontract or fell outside of the scope of the subcontract. The trial court found the notice of nonpayment and payment bond claim fraudulent. The appellate court affirmed, with a worthy discussion as to why it was affirming that the notice of nonpayment and payment bond claim were fraudulent:
[S]ection 255.05(2)(a)2. says a claim is fraudulent if the claimant does any one of three things: (1) willfully exaggerated the amount unpaid, (2) willfully included a claim for work not performed or materials not furnished for the subject improvement, or (3) prepared the notice with such willful and gross negligence as to amount to a willful exaggeration. § 255.05, Fla. Stat. (2022); see Sprinkler Fitters & Apprentices Local Union No. 821, U.A. v. F.I.T.R. Serv. Corp., 461 So. 2d 144, 151 nn. 3, 6 (Fla. 3d DCA 1984) (noting “Section 255.05, Florida Statutes[ ] was patterned after the Miller Act . . . and relied on cases decided under this federal counterpart,” and explaining that under the Miller Act, “[a]ny lien asserted . . . in which the lienor has willfully exaggerated the amount for which such lien is claimed . . . or in which the lienor has compiled his claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.”). Section 255.05(2)(a)2. also says that “a minor mistake or error in a notice of nonpayment, or a good faith dispute as to the amount unpaid, does not constitute a willful exaggeration that operates to defeat an otherwise valid claim against the bond.” Id.
Here, [supplier] did not, before noticing the bond claim, conduct any investigation whatsoever into the amount it was actually entitled to claim on the bond, which is the amount of materials “actually incorporated” into the project. Aquatic Plant Mgmt., Inc., 977 So. 2d at 603. [Supplier] instead claimed every dollar billed to the project by [the subcontractor that hired it]. Of the roughly $123,000 claimed, only about (at most) $56,000 was actually incorporated into the project and therefore properly subject to the claim.
Accordingly, the third prong of the fraudulent lien test — that the claimant “prepared the notice with such willful and gross negligence as to amount to a willful exaggeration” — is met given the undisputed record in this case. No reasonable trier of fact could find otherwise: “the combined body of evidence presented by the two parties relevant to the material fact” is such that Appellees “would be entitled to a directed verdict at trial.” Fitzpatrick, 2 F.3d at 1116. And no reasonable trier of fact could find the error — the bulk of the claim — was “a minor mistake.”
Multiple errors existed in the notice — claiming (1) disallowable expenses, (2) items not within the subcontract’s scope, (3) an amount above the entirety of the subcontract’s value, and (4) items that were not “actually incorporated” into the project. Perhaps any of these errors could have, standing alone, led to some genuine dispute of material fact about whether the notice was prepared with such willful and gross negligence as to amount to a willful exaggeration, or to a genuine dispute about whether the errors were a “minor mistake.”
But the upshot of this case is that without even the most basic investigation as to what [supplier] was entitled to claim, [supplier] claimed $123,000 on a bond that it now acknowledges could pay out, at most, about $56,000. The trial court did not err in finding that the more than 100% discrepancy met prong (3) of the “fraudulent” test. That discrepancy was not a “minor mistake.” It was gross negligence. Given the record in this case, the claim was “fraudulent” as a matter of law.
K&M Electric Supply, supra.
Whether fair or unfair, the issue largely focused on the fact that the supplier could not prove the materials were actually incorporated into the project. And, very little due diligence was done to confirm this important point before serving the 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.