Category Archives: Miller Act

RECOVERING DELAY RELATED DAMAGES FROM PUBLIC PAYMENT BOND

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imagesOne of the advantages to subcontractors of public payment bonds issued under the Federal Miller Act (or even the Little Miller Act) is that there is an argument for the recovery of unexecuted change orders and, and as it particularly pertains to this article, impact-related costs (whether delay or inefficiency / lost productivity). This should not be overlooked although language in the governing subcontract, etc. could dilute these arguments. However, having the argument and opportunity to recover impact-related costs from a payment bond is a huge upside.

 

If a subcontractor is owed money for inefficiency or delay, etc., and there is a public payment bond in place, it should not automatically forego pursuing these claims against the bond. Unlike a lien where these types of costs / damages are not lienable and could render an otherwise valid lien fraudulent in Florida, these are damages that could be pursued against a public payment bond. The subcontractor should carefully craft its argument in furtherance of maximizing its best chance to recover these types of damages.

 

For example, in the opinion of Fisk Elec. Co. v. Travelers Cas. and Sur. Co., 2009 WL 196032 (S.D.Fla. 2009), a subcontractor sought inefficiency / lost productivity damages against a payment bond surety that appeared to be issued under Florida Statute s. 255.05 (also known as Florida’s Little Miller Act). The payment bond surety moved to dismiss the subcontractor’s complaint arguing that these types of damages are not recoverable under the bond. The Southern District, relying on federal cases interpreting the Federal Miller Act, found that a subcontractor can pursue such damages against the payment bond for its out-of-pocket unreimbursed expenses. See, e.g, U.S. f/u/b/o Pertun Const. Co. v. Harvesters Group, Inc., 918 F.2d 915, 918 (11th Cir. 1990) (finding that subcontractor could recover under Federal Miller Act bond for out-of-pocket expenses resulting from prime contractor’s delay).

 

To maximize the recoverability for impact-related costs, the costs should be supportable costs that the subcontractor actually incurred in the performance of its contract work. Organizing the back-up supporting these costs and theory of the impact is critical and the subcontractor looking to pursue these costs from a public payment bond should consult counsel to best position its arguments to support recovery.  On the other hand, the prime contractor should ensure that its subcontract has contractual provisions that will make it challenging and provide hurdles for the subcontractor to recover such damages.

 

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.

 

ARGUMENTS TO RECOVER ATTORNEYS’ FEES AGAINST A MILLER ACT PAYMENT BOND

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UnknownFor those subcontractors and suppliers providing labor, services, or materials to federal construction projects, understanding your rights under the Federal Miller Act (40 USC s. 3131 et seq.) is important. Among other things, the Miller Act advises what a subcontractor and supplier need do to preserve a right against the prime contractor’s payment bond, from providing the prerequisite notice of nonpayment to the surety within 90 days from final furnishing / performance (if there is no privity of contract with the prime contractor) to ensuring suit is filed in federal court within a year from final furnishing / performance. Obtaining a copy of the payment bond and understanding these timeframes is critical to an unpaid subcontractor or supplier; otherwise, their claim will be barred against the payment bond.

 

One of the downsides to Miller Act bond claims is that there is no statutory right to the recovery of attorneys’ fees under the Federal Miller Act. This means that every dollar spent on lawyers is potentially reducing the amount in recovery because there is no avenue to recoup those attorneys’ fees under the Miller Act.  Unless this claim is significant, this downside often demotivates a supplier or subcontractor from filing suit in federal court against a Miller Act payment bond.

 

There are, however, arguments to recover attorneys’ fees in a Miller Act action.  The first argument is if there is an underlying contract involving the claimant relating to the project that provides for attorneys’ fees (such as the contract between the subcontractor and prime contractor), the claimant can recover its attorneys’ fees.  See, e.g., U.S. f/u/b/o Southeastern Mun. Supply Co., Inc. v. National Union Fire Ins. Co. of Pittsburg, 876 F.2d 92 (11th Cir. 1989) (finding that attorneys’ fees provision in contract between supplier and subcontractor was enforceable to enable supplier to recover attorneys’ fees against Miller Act surety).

 

There is also a second argument that attorneys’ fees should be recoverable in Florida against a Miller Act bond under a 1968 Fifth Circuit Court of Appeal’s decision in United States Fidelity and Guaranty Co. v. Hendry Corp., 391 F.2d 13, 20-21 (5th Cir. 1968). This case analyzed Florida law to fill in the gap to determine whether attorneys’ fees were recoverable under the Miller Act (since the Act is silent on the issue). In doing so, the Fifth Circuit analyzed Florida’s Insurance Code and maintained that provisions in Florida’s Insurance Code (still in effect today) allow for the recoverability of attorneys’ fees in a Miller Act bond dispute.

 

Parties pursuing Miller Act actions for Florida-based federal projects should plead for attorneys’ fees whether through a contractual provision and/or the Fifth Circuit’s ruling in Hendry Corp.  Now, it is uncertain whether the Fifth Circuit’s ruling would still apply today; however, it is an argument that should still be pursued in furtherance of trying to recover attorneys’ fees in an action against a Miller Act payment bond, especially if there is not an underlying contract that provides for attorneys’ fees.

 

 

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.