Aug 2011 , Vol. VI, No.1

Federal District Court Enforces Strict Notice Requirements of the Miller Act

Authored by attorney Maggie Finnegan

The Miller Act (40 U.S.C. Sections 3131-3134) requires contract surety bonds on federal construction projects.  Under the law, before a contract that exceeds $100,000 in amount for the construction, alteration, or repair of any building or public work of the United States is awarded to a contractor, that contractor is required to post two bonds: a performance bond and a labor and materials payment bond. The performance bond must be in an amount regarded by the federal contracting officer as adequate to protect the federal government, while the payment bond is intended to protect suppliers of labor and materials on the project.
 

The Miller Act payment bond covers first-tier subcontractors and suppliers of material who have direct contracts with the prime contractor. The payment bond also covers second-tier subcontractors and material suppliers who have contracts with a subcontractor, but who do not have a direct contractual relationship with the prime contractor. Both first and second-tier subcontractors may file a lawsuit on the payment bond, if the subcontractor filing the claim has not been paid within 90 days after the day on which it performed the last of the labor or on which it last furnished the materials for which the claim is made.  However, a second-tier subcontractor is also required to give written notice to the prime contractor within ninety days from the date on which it last performed work or supplied the last of the material for which the claim is made. 
 

The United States District Court for the Eastern District of Virginia (Alexandria Division) recently decided U.S. ex rel Capitol Bldg. Supply, Inc. v. Clark Realty, LLC (2010), in which it upheld the notice requirement for second-tier claimants.  In that case, the prime contractor, Clark Realty, furnished a payment bond for a federal project to construct housing for military personnel at Fort Belvoir.  Clark Realty subcontracted with Smitty’s Building Supply, Inc. to provide building materials on the project.  In turn, Smitty’s subcontracted with Capitol Building Supply, Inc. to provide certain materials.  Thus, Capitol was a second-tier subcontractor.  All materials provided by Capitol were delivered no later than September 16, 2008.  On January 5, 2009, Clark Realty received a bond claim from Capitol.  Capitol alleged that it had not been paid for the materials it provided on the Project.
The Eastern District of Virginia held that Capitol could not recover under the Miller Act because it did not provide Clark Realty with timely written notice.  Clark Realty did not receive written notice of Capitol’s claim until January 5, 2009, well past ninety days from September 16, 2008, the last day the material was provided by Capitol.  The Court noted that “[w]hile some other aspects of the Miller Act may be ‘liberally construed,’ timely notice is a strict condition precedent to a claimant’s right to recovery.”

Authored by attorneys, these articles are meant to bring awareness to these topics and are not intended to be used as legal advice.
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